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EUROBANK ERGASIΑS
SERVICES AND HOLDINGS S.A.
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 2021
According to
Article 4 of the Law 3556/2007
Table of Contents
I.
Statements of the members of the Board of Directors
(according to the article 4, par. 2 of l. 3556/2007)
ΙΙ.
Report
of
the
Directors
and
Corporate
Governance
Statement
III
Ιndependent Auditor’s
Report (on
the Consolidated Financial
Statements)
IV.
Consolidated Financial Statements of the Company for the
year ended 31 December 2021
V.
Ιndependent Auditor’s Report (on the Financial Statements
of the Company)
VI.
Financial Statements οf the Company for the year ended 31
December 2021
VII.
Website Address for Information on consolidated non-listed
companies of the Company
I.
Statements of the members of the Board of Directors
(according to the article 4, par. 2 of l. 3556/2007)
Statements
of Members of the Board of Directors
(according to the article 4 par. 2 of the Law 3556/2007)
We declare that to the best of our knowledge:
●
the annual
financial
statements
for the
year
ended 31
December 2021,
which
have been
prepared in accordance with the applicable accounting standards,
present fairly the assets,
liabilities, equity
and annual
results of Euroba
nk Ergasias
Services and Holdings
S.A. and
the companies included in the consolidation,
and
●
the annual report
of the Board
of Directors presents fairly
the development, the performance
and the position of the
Eurobank Ergasias Services and Holdings S.A
and of the companies
included in
the consolidation,
including the
description
of the
main risks
and uncertainties
they face.
Athens, 5 April 2022
Georgios P.
Zanias
I.D. No AI – 414343
CHAIRMAN
OF THE BOARD OF
DIRECTORS
Fokion C. Karavias
I.D. No ΑΙ - 677962
CHIEF EXECUTIVE
OFFICER
Stavros E. Ioannou
I.D. No AH - 105785
DEPUTY
CHIEF EXECUTIVE
OFFICER
II.
Report of the Directors and Corporate Governance Statement
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
REPORT OF THE DIRECTORS
1
|
Page
€ = Euro
m = million
bn = billion
The directors present their report
together with the financial statements
for the year ended 31 December 2021.
General information
Eurobank Ergasias
Services and
Holdings S.A.
(the Company
or Eurobank
Holdings) is
the parent
company
of Eurobank
S.A.
(the
Bank),
which
resulted
from
the
demerger
of
Eurobank
Ergasias
S.A. through
its
banking
sector’s
hive
down
that
was
completed in
March 2020.
The Company
holds the 100%
of the share
capital of
the Bank and
has maintained
activities that
are mainly related to the strategic planning of the administration of non-performing loans and the provision of services to the
Group companies and third parties.
Financial Results Review and Outlook
1
2021
was
a
year
of
strong
recovery,
as
the
economy
in
Greece
and
the
other
countries,
in
which
the
Company
and
its
subsidiaries
(the
Group)
have
a
substantial
presence,
reclaimed
most
of
its
pandemic-inflicted
losses.
The
Group
has
outperformed on all of the key
targets for 2021
in terms of core profitability,
asset quality and capital adequacy,
while at the
same
time
it
handled
successfully
the
persistent
challenges
related
to
Covid-19
pandemic,
ensuring
its
uninterrupted
operation and the employees’ safety.
As
at
31
December
2021
total
assets
increased
by
€10.2bn
to
€77.9bn
(Dec.
2020:
€67.7bn)
with
gross
customer
loans
amounting to €40.8bn (Dec. 2020: €40.9bn) and investment
securities reaching €11.3bn (Dec. 2020: €8.4bn). Out of the total
loan portfolio, €26.5bn has
been originated from Greek
operations (Dec. 2020: €29.3bn),
€9.2bn from international operations
(Dec. 2020: €8.1bn) and €5.1bn refer to senior and mezzanine notes of the Pillar, Cairo and Mexico securitizations (Dec. 2020:
€3.5bn). Business (wholesale and small business) loans stood at €22.4bn (Dec. 2020: €22.3bn) and accounted for 55% of total
Group
loans,
while loans
to
households,
mainly
due to
the
derecognition
of
a mixed
portfolio
consisting
primarily
of
NPE
(project “Mexico”), decreased by €1.8bn to €13.3bn (Dec. 2020: €15.1bn), of
which 76% is the mortgage portfolio and the
rest
are consumer loans. Group deposits reached €53.2bn (Dec. 2020:
€47.3bn) with deposits from Greek operations increasing by
€2.8bn to
€37bn (Dec. 2020:
€34.2bn), while
international operations
added €3.1bn totalling
€16.2bn (Dec. 2020:
€13.1bn).
As a result, the (net) loan–to–deposit (L/D) ratio further improved to 73.2% for the Group (Dec.
2020: 79.1%) and to 80.1% for
Greek
operations
(Dec.
2020:
86.6%).
Furthermore,
the
borrowing
from
ECB’s
TLTROs
amounted
to
€11.7bn
(Dec.
2020:
€8.0bn) (note 31 of the consolidated financial statements),
while during the year,
the Group returned to international
capital
markets
with
the
Bank’s
issuance
of
two
(MREL-eligible)
senior
preferred
bonds
of
€500m
each
in
April
and
September
respectively (notes
4 and 34
of the consolidated
financial statements).
The rise in
high quality liquid
assets of the
Group led
the respective Liquidity Coverage ratio
(LCR) to 152% (31 December 2020: 124%).
The pre-provision
Income (PPI)
decreased to
€1,024m or
€1,028m excluding
the €5m
derecognition loss
on “Mexico”
loans
(2020:
€1,531
2
m
or
€1,303
2
m
excluding
the
€218
2
m
gain
on
disposal
of
Financial
Planning
Services
S.A.
(FPS)
and
€9m
derecognition gain on “Cairo” loans), while the
core pre-provision income (Core PPI) increased by 4.1%
year-on-year to €900m
(2020: €865m). Net interest income (NII) receded
by 2.1% to €1,321m (2020: €1,349m), carrying the negative
effect from the
lower income
from NPE,
and bonds
and the
decline in
business loan
spreads which
are partially
offset by
the benefit
from
ECB’s TLTROs
facilities. Net interest margin
(NIM) stood at 1.84% (2020: 2.03%) with
the fourth quarter reaching 1.70%.
Fees
and
commissions
expanded by
19% to
€456m (2020:
€384m) mainly
due to
the increased
fees from
network,
asset under
management and lending activities
as well as
the higher rental income
from investment properties. Trading and other activities
recorded
net income
of €123m
(2020: €667
2
m income,
including the
gain on
disposal of
FPS), of
which a)
€94m gains
from
investment
bonds at
FVOCI, net
of hedging
effect, b)
€32m gain
from changes
in fair
value in
investment
properties, and
c)
€5m derecognition
loss on
"Mexico" loans.
Operating
expenses increased
at a
Group
level to
€876m (2020:
€869m) and
in
Greece
remained
stable
to
€643m
(2020:
€643m),
as
the
lower
staff
costs
were
offset
mainly
by
the
increased
IT
&
communication
expenses.
The
cost
to
income
(C/I)
ratio
for
the
Group
reached
46%
(2020:
40%),
while
the
international
operations C/I ratio stood
at 47.5% (2020: 47.6%).
As
at
31
December
2021,
following
the
completion
of
the
project
“Mexico”
(sale
of
95%
mezzanine
and
junior
“Mexico”
securitization
notes)
and
the
subsequent
derecognition
of
the
underlying
securitized
loan
portfolio
of
€3.1bn
(consisting
primarily of
NPE) in combination
with other
actions, the
Group’s
NPE were
reduced to
€2.8bn (31
December 2020: €5.7bn)
driving the NPE ratio to 6.8%
(31 December 2020: 14%),
while the NPE coverage ratio amounted to 69.2% (31
December 2020:
61.8%). During the year, the NPE formation was positive by €44m (fourth quarter: €41m positive), (2020: €94m negative). The
loan
provisions
(charge)
reached
€490m
or
€418m
excluding
the
impairment
loss
of
€72m
on
project
“Mexico”
and
corresponded to 1.11% of average
net loans (2020: €2,081m or €572m, excluding the
impairment loss of €1,509m on project
“Cairo”,
corresponded to 1.52% of average
net loans).
1
Definitions of the selected financial ratios
and the source of the financial data
are provided in the Appendix
.
2
The comparative information
has been restated
due to change in accounting
policy following the IFRIC
agenda decision for attributing
benefit to periods of service (IAS
19).
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
REPORT OF THE DIRECTORS
2
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Page
€ = Euro
m = million
bn = billion
Furthermore, the Group
recognised in 2021
other impairment losses,
restructuring costs
and provisions amounting
to €77m
(2020: €350
2
m), of which a)
€17m impairment and
valuation losses on
real estate
properties, b) €31m
impairment losses on
software and
provisions for
litigations and
other operational
risk events,
c) €10m cost
for Voluntary
Exit Schemes (VES)
and
related
costs,
d)
€4m
impairment
losses
on
investment
bonds
mainly
attributable
to
purchase
transactions,
and
e)
€15m
restructuring costs
mainly related to
the Bank’s
transformation plan
and the merger of
Eurobank a.d. Beograd
with Direktna
Banka a.d. Finally,
in February 2022, Eurobank decided
to launch a new VES for
eligible units in Greece, which will
be offered
to employees over
a specific age limit. The estimated
cost of the new
VES amounts to ca.
€41m (note 35 of the
consolidated
financial statements).
Profit or Loss
Overall, in
2021, the
profit attributable
to shareholders
amounted to
€328m (2020: €1,215
2
m loss,
including the
loss of the
Cairo transaction
of €1,502m,
the gain
(after tax)
of FPS disposal
of €173m,
the write-down
of DTA
by €160m,
the goodwill
impairment of €160m and the
restructuring costs
(after tax) of €104
2
m), as set out in
the consolidated income statement
on
page 2. The adjusted net profit, excluding the loss of the Mexico transaction of €77m and the restructuring costs (after tax)
of
€19m
amounted
to
€424m
(2020:
€538
2
m)
for
the
Group,
of
which
€148m
(2020:
€128m)
was
related
to
international
business.
Going forward, the Group, amid
widespread uncertainties in macroeconomic environment posed by
the geopolitical upheaval,
pursues its objectives set
out in
the plan for the
period 2022-2024, which
includes the further
increasing its profitability, aiming
at
the
achievement
of
10%
Return
on
Tangible
Book
Value
(RoTBV),
solid
organic
capital
generation
and
the
initiation
of
dividend distribution out of
2022 earnings, subject
to regulatory approval, mainly through the following initiatives
and actions:
a)
Further balance sheet clean-up leading to a NPE ratio of 5.8% in 2022 and 4.8%
in 2024,
b)
Cost of risk decline following the material decrease of NPEs,
c)
Completion in
the first
half of
2022 of
the binding
agreement with
Worldline
B.V.
for the
sale of
Eurobank’s
merchant
acquiring business,
d)
Growth
of
fee
and
commission
income
in
a number
of
fee
business
segments
such
as
the network
and assets
under
management activities, bancassurance, new lending and capital
markets,
e)
Organic increase of
Group’s
performing loans mainly through
accelerating new lending of
viable and cooperative
clients
both in Greece and abroad,
f)
Address surplus liquidity cost through funding cost
rationalisation,
g)
Initiatives
for
pursuing
further
operating
efficiency,
cost
containment
and
proceeding
with
further
simplification
and
digitalisation in Greece and abroad,
h)
Major transformation initiatives introduced
in the context of the Group’s
transformation plan “Eurobank
2030”,
i)
Support the
green
transition
and financial
inclusion through
the adoption
of the
Environment,
Social and
Governance
(ESG) criteria in all Group’s
activities and processes.
Recent
geopolitical
risks
and
the
derivative
inflationary
pressures,
mainly
related
with
energy
prices
and
agrofood,
set
a
number
of
challenges
to
the
achievement
of
Group’s
2022-2024
Business
Plan,
mainly
related
with
asset
quality,
fee
and
commission income and
operating costs.
It is early to
quantify the impact
of the current
crisis on the economy
and Business
Plan,
after a
year of
impressive
recovery
and being
ready to
embark on
a cycle
of sustained
growth.
However,
headwinds
coming from the geopolitical upheaval
are likely to be mitigated
by:
a)
Coordinated measures at the European level,
as per the pandemic precedent,
b)
The efficient mobilization of the already approved
EU funding, mainly through Recovery and Resilience Facility
(RRF),
c)
The accumulated
liquidity in
the economy
mainly related
with the
extensive
state
support measures
of the
pandemic
period,
d)
The decrease of unemployment to the lowest
levels of the last ten
years,
e)
The potential upside, related with the interest
rates’ increase impact on the profitability
of the Group.
(see also further information in the section “Macroeconomic
Outlook and Risks”)
Capital adequacy
As
at
31
December
2021,
following
the
successful
completion
of
projects
“Mexico”
and
“Wave”
I
&
II,
the
Group’s
Total
Regulatory Capital
amounted to €6.4bn
(31 Dec 2020: €6.6bn)
and accounted
for 16.1% (total
CAD) of Risk
Weighted Assets
(RWA)
(Dec.
2020:
16.3%),
compared
to
the
CAD
Overall
Capital
Requirements
(OCR)
ratio
of
14.06%
3
.
Respectively,
the
Common Equity Tier 1 (CET1) stood
at 13.7% of RWA (Dec.
2020: 13.9%) compared to CET1 OCR
ratio of 9.25%
3
. At the same
date, the fully loaded CET 1 ratio (based
on the full implementation of the Basel III rules in 2025) would
be 12.7% (Dec. 2020:
3
The ‘Overall capital requirement
(OCR)’ is the sum of the total SREP capital
requirement (TSCR) and the combined
capital buffer requirement.
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
REPORT OF THE DIRECTORS
3
|
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€ = Euro
m = million
bn = billion
12.0%). Pro-forma
with the completion
of the sale
of Eurobank’s
merchant acquiring
business (project
“Triangle”), the
total
CAD and CET1 ratios would be 16.8% and 14.5% respectively.
According to the 2021 SREP decision, for
2022, the Group is required to
meet a Common Equity Tier 1 Ratio of at least
9.50%
and
a
Total
Capital
Adequacy
Ratio
of
at
least
14.31%
(Overall
Capital
Requirements
or
OCR)
including
Combined
Buffer
Requirement of 3.31%.
In response to the covid-19 outbreak, on 12 March 2020, the ECB announced a number of
measures to ensure that its directly
supervised institutions
can continue
to fulfil
their role
in funding
the real
economy.
Specifically,
banks are
allowed, among
others, to operate below the level of capital defined by the Pillar 2 Guidance and, without prejudice to the restrictions set out
in CRD
IV,
the Combined
Buffer
Requirement
until at
least the
end of
2022. Banks
are also
allowed
to partially
use capital
instruments that do not qualify as CET1 capital, (i.e. Additional Tier 1 or Tier 2 instruments) to meet the Pillar 2 Requirements
(P2R). On 10 February 2022, the ECB
announced that banks are expected to operate above the level of capital defined by their
Pillar 2 Guidance from 1 January 2023.
In October
2021 as
part of
EU’s
Banking Package
for 2021,
the European
Commission (EC)
adopted legislative
proposals
to
amend a) Regulation 575/2013 (CRR) aiming to implement the Basel IV
reform in the EU and b) Directive 2013/36/EU (CRD IV)
introducing, among others, explicit rules on the management of Environmental
Social and Governance (ESG) risks. The Group
will monitor developments
on the aforementioned
proposals until their
expected adoption
by the European
Parliament and
the Council of the EU (note 4 of the consolidated financial statements).
Pursuant to the Regulation (EU) No 575/2013 (CRR), the deferred tax assets (DTAs) that rely on future profitability and exceed
certain limits shall be deducted in the calculation of the CET1 capital. This deduction should be applied gradually by 2025. The
enactment of
the article 27A
of Law
4172/2013, as in
force, provided
for the
Greek credit
institutions that
the eligible DTAs
are accounted
on a) the losses
from the Private
Sector Involvement
(PSI) and the
Greek State
Debt Buyback Program
and b)
on the
sum of
(i) the
unamortized part
of the crystallized
loan losses
from write-offs
and disposals,
(ii) the
accounting debt
write-offs and (iii) the remaining accumulated provisions
and other losses in general due to credit risk recorded up to 30 June
2015 and can be
converted into directly enforceable claims (tax credits) against the Greek State, provided that
the Bank’s after
tax accounting result for the period is
a loss. This legislative
provision enabled the Greek credit institutions, including
the Bank,
not to deduct the eligible DTAs
from CET1 capital but recognise
them as a 100% weighted
asset, with a positive effect
on the
capital
position.
As
at
31
December
2021,
the
Bank’s
eligible
DTAs
for
conversion
to
tax
credits
amounted
to
€3,547m
(Dec.2020: €3,691m) (note 13 to the consolidated
financial statements).
A potential change in the regulatory treatment of eligible
DTAs as tax credits may have an adverse effect in the Group’s capital
position.
Synthetic Securitization transactions
(“Wave” I & II)
In December 2021, Eurobank announced the successful completion of two
Synthetic Securitization transactions of performing
SME and Large Corporate loans’
portfolio (Projects “Wave”
I & II), which resulted in a total
risk weighted assets release of ca.
€1.1bn. As at 31 December 2021, the Wave transactions, that
were performed in the context of the Group’s
initiatives for the
optimization of its regulatory capital, resulted in a capital benefit of 40 bps (note 20 of the consolidated financial statements).
Eurobank Merchant Acquiring business classified as held for
sale -Project ‘Triangle’
On 7 December 2021, the Company
announced that its subsidiary Eurobank S.A.
(“Eurobank”) has signed a binding agreement
with Worldline
B.V.
(“Worldline”) that
includes: a)
the sale
of 80%
of Eurobank’s
merchant acquiring
business (“PayCo”)
to
Worldline with Eurobank maintaining the remaining 20%, subject to a combination
of call and put options, and b) a long term
agreement for the exclusive
distribution of PayCo products
in Greece through Eurobank’s
sales network.
Eurobank’s merchant acquiring unit is a
leading acquirer in
the Greek market with 21%
share of transaction volumes processed
in Greece. It currently employs ca.40 employees and manages payments for 123,000 physical and online merchants with over
€7bn value of transactions. The agreement
values 100% of PayCo at
€320m, subject to customary adjustments
as of the date
of completion of the Transaction. The transaction also entails an additional conditional payment, referral fees from PayCo and
customary minority protection rights.
Following the
above, as
at 31
December 2021,
Eurobank
Merchant
Acquiring business,
has been
classified as
held for
sale.
Consequently,
the associated assets
with a carrying amount
of €28m (mainly relating
to due from
banks) and the
associated
liabilities with a carrying amount of €37m
(mainly relating to credit card
transactions under settlement),
have been classified
as held for sale. The Transaction is expected to be completed by the second quarter of 2022, subject to obtaining the relevant
regulatory approvals and to
contribute ca. 80 bps to the Group’s
CET I ratio.
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2021 Eurobank Stress Test
Results
On 30
July 2021,
the Company
announced that
Eurobank Holdings
Group successfully
completed
the 2021
SSM Stress
Test
(ST), which was coordinated and conducted by the European Central
Bank (ECB). Under the adverse scenario, as at the end of
2023, the capital
depletion in terms
of the Fully
Loaded (FL) CET1
ratio amounts
to 433 bps
and the CET1
ratio stands
at 8%
on a transitional basis.
The Group’s
performance in
the ST confirmed
its resilience and
ability to withstand
a significant downturn,
especially under
the severe
assumptions of
the adverse
scenario. In
addition, the
results of
ST will
be used
to determine
the Pillar
2 capital
recommendation (“Guidance”) in the context
of the SREP (note 4 of the consolidated financial statements).
Project “Mexico” – loans’ derecognition
In line
with the
regulatory frame
work and
Single Supervisory Mechanism
(SSM) requirements
for the
non-performing loans
(NPE) management, the Group contemplated another significant NPE securitization transaction (project “Mexico”)
in order to
decrease further its NPE ratio
and strengthen its balance sheet
de-risking. The project ‘’Mexico’’
represents the continuation
of the Group’s
NPE reduction plan that was successfully completed
in 2020, where NPE are transferred
to Eurobank Holdings
(parent company), the group company
responsible for the overall
management and supervision of
the Group’s NPE. The Group
included
project
‘’Mexico’’
under
the
Hellenic Asset
Protection
Scheme
(HAPS)
thus
became
entitled
to
the
Greek
State’s
guarantee which was subject to the accounting derecognition
of the underlying loan
portfolio from the Group’s balance sheet.
In
particular,
in
May
2021,
the
Bank,
through
its
special
purpose
financing
vehicle
‘Mexico
Finance
Designated
Activity
Company’ (SPV), issued senior (Class A), mezzanine (Class B) and junior (Class C) notes of total
nominal amount of ca. €5.2bn,
via a securitization of a
mixed portfolio comprising primarily NPE of
total principle amount due
of ca. €5.2bn and
gross carrying
amount of
ca. €3.2bn, which
were fully retained
by the Bank.
The control
of the SPV
resides with
the majority holder
of the
Class B notes. Accordingly, the Group, being the sole holder of the issued notes, controlled the SPV and the
related real estate
company ‘Mexico Estate Single Member S.A.’,
and continued recognizing the underlying loan portfolio on its balance sheet on
the basis that it retained substantially
all risks and rewards of the portfolio’s
ownership.
On 1 June 2021, the General Shareholders’ Meeting of the Bank (GM), following the relevant decision of its Board of Directors
(BoD), approved the distribution of the 95% of the mezzanine and junior notes of Mexico securitization to its parent company
through
the decrease
in
kind
of
the
Bank’s
share
capital.
The aforementioned
GM’s
approval
for
the
Bank’s
share
capital
reduction and the relevant amendment
of its articles of association were subject to the
regulator’s approval.
In August 2021,
the Bank was granted the required
regulatory approval by the European
Central Bank (ECB) and the relevant
amendments of
its articles
of association
were subsequently
approved by
the Ministry
of Developments
and Investments
and registered
to
the General Electronic Commercial Registry
(G.E.MI.).
In August
2021, a
commitment letter
was signed
between Eurobank
Holdings, Eurobank
and doValue
S.p.A. for
the sale
of
95%
of
mezzanine
and
junior
notes
of
Mexico
securitization
that
were
distributed
to
Eurobank
Holdings,
subject
to
the
fulfilment of
certain conditions,
including the
settlement
of the
mezzanine and
junior notes’
distribution
from the
Bank to
Eurobank Holdings, that was completed in September 2021, as
well as the issuance of
the Ministerial Decision on the inclusion
of
the
Mexico
securitization
under
HAPS
and
the
regulatory
approval
by
the
SSM
for
the
significant
risk
transfer
of
the
underlying loan portfolio that were received
in December 2021.
In September
2021, the
BoD of
Eurobank
Holdings approved
to proceed
with the
sale of
95% of
the mezzanine
and junior
notes of Mexico securitization and the ongoing servicing of
the portfolio by doValue Group. The aforementioned BoD decision
clearly demonstrated Management’s commitment to a
specific plan for
the notes’ disposal
as a last
step of the
project ‘Mexico’
and
eventually
to
the
underlying
loan
portfolio’s
de-recognition
from
the
Group’s
balance
sheet.
Accordingly,
as
at
30
September 2021,
the Group
proceeded with
the re-measurement
of the
portfolio’s
expected credit
losses, considering
the
estimated date
for the Mexico loan
portfolio’s derecognition
from its balance sheet, in accordance
with its accounting policy
for the impairment of financial
assets and recognized an impairment loss
of €72m in
the third quarter of 2021.
The impairment
loss was calculated by reference to the sale price of the
mezzanine and junior notes. Furthermore, the Group classified as held
for
sale assets
the underlying
loan portfolio
of
carrying
amount
€1,514m, comprising
loans with
gross
carrying
amount
of
€3,046m which
carried an
impairment allowance
of €1,532m
after the
recognition of
the aforementioned
impairment loss,
the related
securitization’s
receivables and
payables
of €69m
and €31m
respectively,
and the
impairment allowance
of the
letters of guarantee
of €1m included in the underlying portfolio.
The transaction with doValue Group for the sale of the 95% of the mezzanine and junior notes retained by Eurobank Holdings
was concluded
in December
2021, after
the fulfilment
of all
conditions and
having received
all appropriate
approvals.
As a
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result
of
the
aforementioned
sale,
the
Group
ceased
to
control
the
SPV
as
well
as
the
related
real
estate
company
and
derecognized the
underlying loan
portfolio from
its balance sheet,
on the
basis that
it transferred
substantially all
risks and
rewards
of the portfolio’s
ownership and
ceased to have
control over
the securitized
loans, which resides
with the majority
stake of Class B noteholders. In addition, the Group recognized
the retained notes on its balance sheet i.e. 100% of the senior
and 5% of the mezzanine and junior notes. The derecognition of the underlying loan portfolio from the Group’s balance sheet
resulted in a derecognition
loss of € 5 million, which is presented
in ‘other income / expenses’
(note 20.1 of the consolidated
financial statements).
International Activities
The
Group
has
a
significant
presence
in
four
countries
apart
from
Greece.
In
Cyprus
it
offers
Corporate
Banking,
Private
Banking, International
Business Banking,
and Shipping
services through
a network
of 8
business centres.
In Luxembourg
it
provides Private
Banking and Corporate Banking
services. Additionally, the subsidiary
bank in Luxembourg operates
a branch
in London. In Bulgaria
and Serbia, it operates
in Retail and Corporate
Banking, Wealth Management
and Investment
Banking
through a network of 337 branches and business centres.
On 1 July 2021, Eurobank S.A.
announced that it has concluded
an agreement with the shareholders and principals of
Direktna
Banka a.d.
Kragujevac
(“Direktna”), for
the merger
of Direktna
with Eurobank’s
subsidiary in
Serbia, Eurobank
a.d. Beograd
(“Eurobank Serbia”) (the “Transaction”),
with absorption of Direktna by Eurobank
Serbia. In December 2021, the Transaction
was
concluded,
following
the
receipt
of
the
relevant
customary
approvals
by
the
competent
regulatory
and
supervisory
authorities.
Following
the
completion
of
the
transaction
Eurobank
controls
70%
of
the
combined
bank,
while
Direktna’s
shareholders
own the
remaining 30%.
Part of
the Transaction
was the
dividend distribution
and capital
return to
Eurobank
Group of
ca €232m,
after tax,
in total.
The combined
bank “Eurobank
Direktna a.d.”
becomes the
seventh largest
in Serbia
with
a
strong
capital
and
liquidity
position
and
a
market
share
of
6.5%
in
customer
loans.
The
Transaction
is
in
line
with
Eurobank’s strategy to further strengthen its position in the countries where
the Group maintains a presence
and grow further
with targeted acquisitions and friendly mergers
(note 23.2 of the consolidated financial statements).
On 23 July
2021, Eurobank S.A.
announced the acquisition
of a 9.9%
holding in Hellenic
Bank Public Company Limited
(“Hellenic
Bank”) and the entering
into a share
purchase agreement with
Third Point
Hellenic Recovery Fund
L.P.
for the acquisition
of
an additional
2.7%, which
was completed
on 28
December 2021
following the
receipt of
the relevant
regulatory approvals.
Hellenic Bank is one of the
largest financial institutions
in Cyprus, active in personal,
business and international
banking. The
above
investment
is aligned
with the
overall
strategy
of the
Group
to further
strengthen
its presence
in all
key
markets
in
which retains a strategic interest
(note 22 of the consolidated financial statements).
Risk management
The
Group
acknowledges
that
taking
risks
is
an
integral
part
of
its
operations
in
order
to
achieve
its
business
objectives.
Therefore,
the Group’s
management sets
adequate
mechanisms to
identify those
risks at
an early
stage and
assesses their
potential impact on the achievement of these objectives.
Due
to
the
fact
that
economic,
industry,
regulatory
and
operating
conditions
will
continue
to
change,
risk
management
mechanisms are set in a manner that enable the Group to identify and deal with
the risks associated with those changes. The
Bank’s structure, internal processes and existing control mechanisms ensure
both the independence
principle and the exercise
of sufficient supervision.
The Group's
Management considers
effective risk
management
as a
top priority,
as well as
a major
competitive advantage,
for
the
organization.
As
such,
the
Group
has
allocated
significant
resources
for
upgrading
its
policies,
methods
and
infrastructure,
in order
to ensure
compliance with
the requirements
of the
European
Central
Bank (ECB)
and of
the Single
Resolution
Board
(SRB),
the
guidelines
of
the
European
Banking
Authority
(EBA)
and
the
Basel
Committee
for
Banking
Supervision and
the best
international banking
practices. The
Group
implements a
well-structured
credit approval
process,
independent credit
reviews and
effective risk
management policies
for credit,
market, liquidity
and operational
risk, both in
Greece
and
in
each
country
of
its
international
operations.
The
risk
management
policies
implemented
by
the
Group
are
reviewed mainly annually.
The Group
Risk and Capital
Strategy,
which has been
formally documented,
outlines the Group’s
overall direction
regarding
risk and capital management issues,
the risk management mission and
objectives, risk definitions, risk management
principles,
risk
appetite
framework,
risk
governance
framework,
strategic
objectives
and
key
management
initiatives
for
the
improvement of the risk management framework
in place.
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The maximum amount of risk which the Group
is willing to assume in the pursuit of its strategic
objectives is articulated via a
set of
quantitative
and qualitative
statements
for
specific risk
types,
including specific
tolerance
levels
as described
in the
Group’s Risk Appetite Framework. The objectives are
to support the Group’s business growth,
balance a strong capital
position
with higher
returns on
equity and to
ensure the Group’s
adherence to
regulatory requirements.
Risk appetite
that is
clearly
communicated
throughout
the Group
determines risk
culture and
forms the
basis on
which risk
policies and
risk limits
are
established at Group and regional level. Within the context of its
Risk Appetite Framework, the Bank has further enhanced
the
risk identification process and the risk materiality
assessment methodology.
The
identification
and assessment
of
all
risks
is the
cornerstone
for
the
effective
Risk
Management.
The
Group
aiming to
ensure a collective
view on the risks
linked to the
execution of its
strategy,
acknowledges the new
developments at an
early
stage and assesses the potential impact. In this content, the Bank recognizing climate change risk as a
material risk and, based
on its
supervisory guidelines, is
in the process
of adapting its
policies and
methodologies for
identifying and
monitoring the
relevant risks.
The Board Risk Committee (BRC) is a committee of the Board of Directors (BoD) and its task is to assist the BoD to ensure that
the Group has a well-defined
risk and capital strategy
in line with its business plan and an
adequate and robust risk
appetite.
The BRC assesses the Group’s
risk profile, monitors
compliance with the approved
risk appetite and risk tolerance
levels and
ensures
that
the
Group
has
developed
an
appropriate
risk
management
framework
with
appropriate
methodologies,
modelling tools, data sources and sufficient and
competent staff to identify, assess, monitor and mitigate risks. Moreover, BRC
is conferred with certain
approval authorities for credit
proposals, debt forgiveness and write
-offs. The BRC consists of six (6)
non-executive directors, meets at least on a monthly basis and
reports to the BoD on a
quarterly basis and on ad
hoc instances
if it is needed.
The Management
Risk Committee
(MRC) is
a management
committee established
by the
Chief Executive
Officer (CEO)
and
operates
as
an
advisory
committee
to
the
BRC.
The
main
responsibility
of
the
MRC
is
to
oversee
the
risk
management
framework
of the
Group.
As part
of its
responsibility,
the MRC
facilitates
reporting
to the
BRC on
the range
of risk-related
topics under its
purview. The
MRC ensures that
material risks are
identified and prompt
ly escalated to
the BRC and
that the
necessary policies and procedures are in place to prudently
manage risks and to comply with regulatory requirements.
The
Group’s
Risk
Management
General
Division
which
is
headed
by
the
Group
Chief
Risk
Officer
(GCRO),
operates
independently
from
the
business
units
and
is
responsible
for
the
monitoring,
measurement
and
management
of
credit,
market, operational and liquidity
risks of the
Group. It comprises
of the Group
Credit General Division,
the Group Credit
Control
Sector (GCCS),
the Group
Credit Risk
Capital Adequacy
Control Sector
(GCRCACS), the
Group Market
and Counterparty
Risk
Sector
(GMCRS),
the
Group
Operational
Risk
Sector,
the
Group
Model
Validation
and
Governance
Sector,
the
Group
Risk
Management
Strategy
Planning
and
Operations
Division,
the
Supervisory
Relations
and
Resolution
Planning
Sector
(dual
reporting also to the Group Chief Financial Officer), Climate
Risk Division and the Risk Analytics Division.
As part
of its overall
system of
internal controls,
Eurobank Ergasias
Services and Holdings
SA has
engaged in
a Service Level
Agreement (SLA) with Eurobank S.A.
(the Banking subsidiary of the
Group) in order to receive supporting and
advisory services
in all areas of risk management (credit, market,
liquidity and operational risks) undertaken
by the Group.
The most important types of risk that are addressed
by the risk management functions of the Group are:
Credit Risk
Credit risk
is the
risk that
a counterparty
will be
unable to
fulfill its
payment obligations
in full
when due.
Credit risk
is also
related with
country risk
and settlement
risk. Credit
risk arises principally
from the
wholesale and
retail lending
activities of
the Group, as well as from credit enhancements provided, such as financial guarantees and letters of credit. The Group is also
exposed
to
credit
risk
arising
from
other
activities
such
as
investments
in
debt
securities,
trading,
capital
markets
and
settlement activities. Taking into account
that credit risk is the primary risk the Group is
exposed to, it is very closely managed
and monitored by specialised risk units, reporting to the GCRO.
The credit
review
and approval
processes are
centralized
both in
Greece and
in the
International
operations
following the
“four-eyes”
principle
and
specific guidelines
stipulated
in
the
Credit
Policy
Manual
and the
Risk
Appetite
Framework.
The
segregation
of
duties
ensures
independence
among
executives
responsible
for
the
customer
relationship,
the
approval
process
and
the
loan
disbursement,
as
well
as
monitoring
of
the
loan
during
its
lifecycle.
The
credit
approval
process
in
Corporate
Banking
is
centralized
through
the
establishment
of
Credit
Committees
with
escalating
Credit
Approval
Levels,
which assess and limit to the extent
possible the corporate credit risk. Rating
models are used in order to calculate
the credit
rating
of
corporate
customers,
reflecting
the
underlying
credit
risk.
The
most
significant
ones
are
the
MRA
(Moody’s
Risk
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
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Analyst)
applied
for
companies
-mostly-
with
industrial
and
commercial
activity
and
the
slotting
rating
models,
used
for
specialised lending portfolios (shipping,
real estate and
project finance) with ring fenced
transactions. Credit risk
assessment
is performed by Group Credit
General Division (GCGD), which assesses the credit requests
submitted by the Business Units, a
procedure including
the evaluation
of the operational
and financial profile
of the customer,
the validation
of the borrower’s
rating
and the identification of potential risk factors
for the Bank.
The credit
review and
approval processes
for loans
to Small
Businesses (turnover
up to
€5m) are
also centralised
following
specific guidelines and applying the ‘four
-eyes’ principle. The assessment is primarily
based on the analysis of the borrower's
operational
characteristics
and financial
position. The
same applies
for
Individual Banking
(consumer and
mortgage loans)
,
where the credit risk assessment
is based on criteria related to
the characteristics of the retail
portfolio, such as the
financial
position of the borrower,
the payment behaviour,
the existence of real estate property and the type and quality of securities.
The ongoing monitoring of the portfolio quality and of any deviations that
may arise, lead to an immediate adjustment of the
credit policy
and procedures,
when deemed
necessary.
The quality
of the
Group’s
loan portfolios
(business, consumer
and
mortgage in Greece
and abroad) is
monitored and assessed by
the Group Credit
Control Sector (GCCS)
via field, desktop and
thematic reviews
in order
to timely
identify emerging
risks, vulnerabilities,
compliance to
credit policies
and consistency
in
underwriting.
Moreover,
GCCS
regularly
reviews
the
adequacy
of
provisions
of
all
loan
portfolios.
GCCS
operates
independently from all the business units of the Bank and reports directly
to the GCRO.
The measurement,
monitoring and
periodic reporting
of the
Group’s
exposure
to counterparty
risk (issuer
risk and
market
driven
counterparty
risk), which
is the
risk
of
loss
due
to
the customer’s
failure
to
meet
its
contractual
obligations
in
the
context of treasury positions, such as debt securities, derivatives, repos, reverse repos, interbank placings, etc. are performed
by the Group
Market and Counterparty
Risk Sector (GMCRS). The
Group sets limits
on the level of
counterparty risk
that are
based
mainly
on
the
counterparty’s
credit
rating,
as
provided
by
international
rating
agencies,
the
product
type
and
the
maturity of
the transaction
(e.g. control
limits on
net open
derivative positions
by both
amount and
term, sovereign
bonds
exposure,
corporate
securities, asset
backed securities,
etc.). GMCRS
maintains
and updates
the limits’
monitoring systems
and
ensures the
correctness
and
compliance
of
all financial
institutions
limits with
the
Bank’s
policies as
approved
by the
Group’s relevant
bodies. The utilization of the abovementioned limits, any
excess of them, as well as the aggregate
exposure
per Group’s
entity,
counterparty and
product type are
monitored by
GMCRS on a
daily basis. The Group
applied in 2021 the
new regulatory framework for
the counterparty risk from derivatives (SA-CCR).
Market Risk
The
Group
has
exposure
to
market
risk,
which
is
the
risk
of
potential
financial
loss
due
to
an
adverse
change
in
market
variables. Changes
in interest
rates, foreign
exchange rates,
credit spreads,
equity prices and
other relevant
factors, such
as
the implied volatilities, can affect the Group’s income or the fair value of its financial instruments. The market risks, the
Group
is exposed
to, are
monitored, controlled
and estimated
by GMCRS.
GMCRS is
responsible for
the measurement,
monitoring
control
and reporting
of the
exposure
on
market
risks
including the
Interest
Rate
Risk in
the Banking
Book (IRRBB)
of
the
Group.
The
Sector
reports
to
the
GCRO.
The
exposures
and
the
utilisation
of
the
limits
are
reported
to
the
Board
Risk
Committee.
Market risk in Greece and International Subsidiaries is managed and
monitored mainly using Value at Risk (VaR) methodology,
Sensitivity and stress test
analysis. Information from International operations is also
presented separately, as it originates from
different economic
environments with different
risk characteristics. VaR
is a methodology used in measuring financial risk
by
estimating the
potential negative
change in
the market
value of
a portfolio
at a
given confidence
level and
over a
specified
time horizon. The
VaR that
the Group measures
is an estimate
based upon a
99% confidence level
and a holding
period of 1
day
and the
methodology used
for
the calculation
is Monte
Carlo simulation
(full re-pricing
of the
positions is
performed).
Since
VaR
constitutes
an
integral
part
of
the
Group's
market
risk
control
regime,
VaR
limits have
been
established
for
all
portfolios (trading
and
investment) measured
at fair value
and actual exposure
is reviewed
daily by management.
However,
the use of this approach does not prevent losses outside of these limits in the event of extraordinary
market movements. For
that reason the
Group uses additional
monitoring metrics such
as: Stressed VaR,
Expected Shortfall and
Stress Tests.
Finally,
the Group
prepared in
2021 the
required
systems
and procedures
for the
application of
the new
regulatory
framework
for
market risk (FRTB) according to the regulatory plan. In the case of IRRBB, the Group monitors the risk on earnings and the
EVE
sensitivity using, the regulatory guideline. The relevant
limits are monitored periodically.
Liquidity Risk
The Group
is exposed
on a daily
basis to
liquidity risk due
to deposits
withdrawals,
maturity of
medium or
long term notes,
maturity of
secured or
unsecured funding
(interbank repos
and money
market takings),
collateral
revaluation
as a
result of
market movements,
loan draw-downs
and forfeiture
of guarantees. The
Board Risk Committee
sets liquidity limits to
ensure
that sufficient funds are available to meet such contingencies.
The Group monitors on a continuous basis the level of liquidity
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
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risk using regulatory
and internal metrics
and methodologies
(LCR, NSFR, buffer
analysis, cash
flow analysis,
short-term and
medium-term stress test etc.).
BRC role is
to approve
all strategic liquidity
risk management decisions
and monitor the
quantitative and
qualitative aspects
of liquidity risk. Group
Assets and Liabilities
Committee (G-ALCO) has the mandate
to form and implement the
liquidity policies
and guidelines
in conformity
with Group's
risk appetite,
and to
review at
least monthly
the overall
liquidity position
of the
Group. Group
Treasury
is responsible for
the implementation
of the Group's
liquidity strategy,
the daily management
of the
Group’s
liquidity
and
for
the
preparation
and
monitoring
of
the
Group’s
liquidity
budget,
while
GMCRS
is
responsible
for
measuring, monitoring and reporting the liquidity of the Group.
Operational Risk
Operational
risk
is
embedded
in
every
business
activity
undertaken
by
the
Group.
The
primary
aim
of
operational
risk
management
is
to
ensure
the
integrity
of
the
Group’s
operations
and
its
reputation
by
mitigating
its
impact.
To
manage
operational risk more efficiently, the Group operates an
Operational Risk Management Framework, which
defines its approach
to identifying, assessing, monitoring and reporting operational risks.
Governance responsibility
for operational
risk management stems
from the
Board of Directors
(BoD), through
the Executive
Board
and
Senior
Management,
and passes
down
to
the
Heads
and
staff
of
every
business
unit.
The
BoD
establishes
the
mechanisms used
by the
Group to
manage operational
risk, by
setting
the tone
and expectations
at top
management
and
delegating relevant responsibility.
The Board Risk Committee and the Audit Committee monitor
the operational risk level and
profile, including the level of operational losses, their
frequency and severity.
The Heads of each Business Unit (the
risk owners) are primarily responsible for the day-today management of operational risk
and the adherence to relevant controls.
To
this end, every business unit:
a.
Identifies, evaluates and monitors
its operational
risks, and implements risk mitigation controls and
techniques.
b.
Assesses the efficiency of control mechanisms.
c.
Reports all relevant issues.
d.
Has access and uses
the methods and
tools introduced by
the Group Operational
Risk Sector,
to facilitate
in identifying,
evaluating and monitoring operational
risks.
Each
Business
Unit
has
appointed
an
Operational
Risk
Partner
(OpRisk
Partner)
or
an
Operational
Risk
Management
Unit
(ORMU)
depending
on
the
size
of
the
business
unit
who
is
responsible
for
coordinating
the
internal
operational
risk
management
efforts
of
the
business
unit
while
acting
as
a
liaison
to
the
Group
Operational
Risk
Sector
and
the
local
Operational Risk Unit.
Climate related risk
The Bank has
recognized climate change as a
material risk and, based
on its supervisory
guidelines, is in
the process of
adapting
its policies and methodologies for identifying and monitoring the relevant
risks.
Climate-related and environmental
risks are commonly understood to
comprise two main risk drivers:
a.
Physical risk refers
to the financial
impact of a
changing climate, resulting
mainly from more
frequent extreme
weather
events and gradual changes in climate, and
b.
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.
The Bank is establishing
an effective
oversight of
climate related
& environmental
(CR&E) risks with the
design and approval
of a governance
structure on the
process for the allocation
of roles and
responsibilities with regard to
climate risk management
(both for
transition risk
and physical
risk) across
its three
lines of
defense (i.e.
Corporate,
Retail,
Risk, Compliance,
Internal
audit functions).
In that context, in line with the Bank’s approved governance structure, a dedicated Climate
Risk Division for the integration of
CR&E risks into the Bank’s risk management framework has been established. The Climate Risk Division will operate as Project
office for
the implementation
of the Climate
related and
Environmental
risks roadmap,
with a coordinating
and supervisory
role
on
all
related
project
streams
to
ensure
alignment
with
the
Bank’s
business
strategy
and
the
regulatory
authorities’
expectations.
Moreover,
in
2021,
Eurobank
established
a
bank-wide
program,
aiming
to
integrate
Environmental
Social
Governance
(‘ESG’)
and
climate
risks,
including
Taxonomy
related
considerations
in
the
organization’s
strategy,
risk
management procedures, products/
financings and operating model.
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In January 2022, the
European Central Bank (ECB) launched a supervisory
climate risk stress test to assess how
prepared banks
are for dealing with financial and economic shocks stemming from climate risk. The exercise will
be conducted in the first half
of 2022 after which the ECB will publish aggregate results
(note 4 to the consolidated financial statements).
Eurobank is adopting a strategic approach towards
sustainability and climate change risk identification and risk management,
signifying the great importance
that is given in
the risks and opportunities
arising from the transitioning
to a low-carbon
and
more circular economy.
Eurobank applies the elements of the Three Lines Model for the management
of all types of risk.
a)
Line 1 ‐ Own and manage risk and controls. The front
line business and operations are accountable
for this responsibility
as they own the rewards and are the primary risk generators.
b)
Line 2 ‐ Monitor risk and controls in support of Executive Management, providing oversight, challenge, advice and group‐
wide direction. Risk and Compliance are the basic Units of Line 2,
c)
Line 3 ‐ Provide independent assurance to the Board and Executive Management concerning the effectiveness of risk and
control management. This refers
to Internal Audit.
Further information
on the Group’s
financial risk management
objectives and
policies, including the
policy for
hedging each
major type of transaction
for which hedge accounting
is used is set out
in the notes 2,
5 and 22 to the
consolidated financial
statements for the year
ended 31 December 2021.
Non Performing Exposures (NPEs) management
The Group, following
the strategic partnership
with doValue
S.p.A. and the successful transition
to the new operating
model
for the management
of NPEs, realizes the
NPE Strategy Plan
through its implementation
by doValue
Greece for the
assigned
portfolio and the successful securitization transactions.
Troubled Assets
Committee
The Troubled
Assets Committee
(TAC)
is established
according to
the regulatory provisions
and its main
purpose is to
act as
an
independent
body,
closely
monitoring
the
Bank’s
troubled
assets
portfolio
and
the
execution
of
its
NPE
Management
Strategy.
Remedial and Servicing Strategy (RSS)
Eurobank,
established
Remedial
Servicing &
Strategy
Sector
(RSS)
with
the
mandate
to
devise
the
NPE
reduction
plan,
to
closely monitor
the overall
performance of
the NPE
portfolio as
well as
the relationship
of the
Bank with
doValue
Greece.
Furthermore,
following
Eurobank’s
commitments
against
the
significant
risk
transfer
(SRT)
monitoring
regulatory
requirements pertaining to Bank’s concluded transactions, RSS
has a pivotal
role in ensuring
that relevant process is
performed
smoothly
and
in
a
timely
manner
and
that
any
shortcomings
are
appropriately
resolved,
while
providing
any
required
clarifications or
additional material required
by the regulatory
authorities. The Head
of RSS reports
to the General
Manager
of Group Strategy.
In this context, RSS has been assigned inter
alia with the following responsibilities:
a)
Develop and actively monitor the NPE targets
and reduction plan
b)
Set the strategic principles, priorities, policy framework
and KPIs under which doValue Greece is servicing the portfolio
c)
Closely
monitor
the
execution
of
the
approved
strategies,
as
well
as
all
contractual
provisions
under
the
relevant
contractual
agreements for
Eurobank’s
portfolio assigned
to doValue
Greece including
the securitized
portfolio of
ERB
Recovery DAC
d)
Monitoring of the performance of the senior notes of the securitizations in collaboration
with Group Risk so as to ensure
compliance to significant risk transfer
(SRT) and to the Hellenic Asset Protection Scheme (HAPS)
e)
Budget and monitor the Bank’s expenses
and revenues associated with the assigned portfolio
f)
Cooperate closely with doValue
Greece on a daily basis in achieving the Group’s
objectives
g)
Maintain supervisory dialogue
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NPE Management Strategy and Operational
targets
The Group utilized
all Greek State measures
(“Gefyra” programs)
and designed solutions that will
lead its clients gradually
to
pre Covid-19
payment
schedules. In
this respect
and in
line with
the regulatory
framework
and SSM
requirements
for NPE
management, the
Group submitted
in March 2022
its NPE Management
Strategy for
2022-2024, along with
the annual NPE
stock targets at both Bank and Group level. The
plan has taken into account the successfully implemented, by the
end of 2021,
“Mexico” securitization of gross carrying amount of ca.
€3.1bn (consisting primarily of NPE) and
envisages the decrease of NPE
ratio at 5.8% in 2022 and below 5% in 2024.
Legal Framework
In October 2021, the eligible
borrowers with a loan secured by a
prime residence received a 3-month subsidy extension, under
“Gefyra I” (Law 4842/2021).
Macroeconomic Outlook and Risks
2021 was
a year
of strong
recovery,
as the
Greek economy
reclaimed most
of its
pandemic-inflicted
losses. The
significant
progress of vaccination programs allowed the gradual relaxation of containment measures and the reopening of the economy
that led to the
strengthening of consumption
and the recovery
of the tourism sector
providing substantial
boost to real GDP
growth.
According
to provisional
data
available
by the
Hellenic Statistical
Authority (ELSTAT),
Greek
real
GDP increased
by
8.3% in 2021 (9% decrease
in 2020), posting annual
growth rates of
11.4% and 7.7% in the
third and fourth
quarters of 2021
respectively.
The European Commission (EC), in its winter economic forecasts (February
2022), estimates the real GDP growth rate at
4.9%
and 3.5%
in 2022
and 2023
respectively,
driven by
increased consumption
and a
continued recovery
of the
tourism sector.
The contribution of
investments is also
expected to be
significant, boosted by
the Recovery and
Resilience Facility (RRF)-funded
projects. In particular,
Greece shall receive European Union
(EU) funds of more than €30.5bn (€17.8bn in grants
and €12.7bn
in loans) up to 2026
to finance projects and initiatives laid down
in its National Recovery and Resilience Plan
(NRRP). The NRRP
provides that the aforementioned amount will be supplemented by an additional €26.5bn of private funds. A pre
-financing of
€4bn was disbursed
in August 2021, while
on 28 February
2022 the EC preliminarily
endorsed Greece’s
payment request
for
the
first
RRF
installment,
amounting
to
€3.6bn.
Greece
has
been
also
allocated
about
€40bn
through
EU’s
Multiannual
Financial
Framework
(MFF)
2021–2027,
out
of
which
close
to
€21bn
will
fund
investments
and
initiatives
under
its
new
Partnership Agreement for
the Development Framework (ESPA
2021–2027).
Inflation,
as
measured
by
the
12-month
average
Harmonized
Index
of
Consumer
Prices
(HICP),
closed
at
0.6%
in
2021,
returning to a positive territory after a 1.3%
decline in 2020. According to ELSTAT data, the HICP increased by 6.3% in February
2022 compared to
-1.9% in February 2021.
According to the
EC winter economics
forecasts, inflation
will increase to
3.1% in
2022 due to
increased energy
and fuel costs,
before receding
to 1.1% in
2023. Provisional Bank
of Greece (BoG)
data shows
that residential real
estate prices had
increased by 7.1% in 2021,
and commercial real estate
prices had increased by
1.1% in
the first half of 2021, compared to
their end-2020 levels. According to the latest ELSTAT data, the average unemployment rate
in
2021 decreased
to
14.7%,
from
16.3%
in
2020, while
the
seasonally
adjusted
unemployment
rate
dropped
to
12.8%
in
December
2021
(December
2020:
16.3%).
In
its
Interim
Monetary
Policy
Report
(December
2021),
the
BoG
expects
unemployment to drop to 14.3% on average
in 2022, and further to 12.8% in 2023.
On the fiscal
front, according to 2022
State Budget, the general government’s primary balance
in European System of Accounts
(ESA2010)
terms
in 2021
and 2022
is expected
to
register
deficits of
7.0% and
1.4% of
GDP respectively
as a
result
of the
implementation of public support measures of
€16.9bn in 2021, and
€3.3bn in 2022
aiming to address the economic
and social
effects of
the Covid-19 pandemic.
These supplement
a package of
€23.1bn injected
into the economy
in 2020 bringing
total
government-backed
pandemic support
to €43.3bn.
Nevertheless,
owing to
the strong
economic recovery,
the gross
public
debt is estimated at 197.1%
of GDP at
the end of
2021, and to
189.6% at the end
of 2022, from 206.3%
in 2020. These
forecasts
take
into
account
the
public
support
measures
aiming
to
alleviate
the
impact
of
increased
energy
and
fuel
costs
in
2021
(€0.9bn), but not the
additional and more encompassing
measures announced in
2022 (an additional
€2.8bn as of 17
March
2022). However,
since a large
part of these measures
will be covered
by funds earmarked
especially for this
purpose as well
as additional government proceeds,
their fiscal impact
will be significantly
smaller than the
above amount. Upside
risks remain,
however,
as disruptions
due to
potential
new Covid-19
variants,
and the
mounting pressure
of energy
costs
on household
budgets
may prompt
additional government
measures. The
deviation from
the Enhanced
Surveillance (ES)
primary surplus
target of 3.5% of GDP
in 2021 and 2022 are not considered
a violation of Greece’s
commitments under the ES framework,
as
in March 2020 EC activated the general escape clause, allowing
for non-permanent deviations from the agreed fiscal paths
of
the
member-states
due
to
the
extraordinary
health
and
economic
distress
caused
by
the
pandemic,
while
the
clause
is
expected to be deactivated in 2023. In the context of the ES scheme,
the first thirteen consecutive quarterly reviews had been
successfully completed by
February 2022. Greece received
€4.77bn from the ES
financial envelope in six disbursements
until
December 2021.
On the monetary policy front,
the European Central Bank (ECB) announced
on 16 December 2021
that it would cease
net bond
purchases under its Pandemic Emergency Purchase Programme (PEPP) at the end of March 2022, as
scheduled. Reinvestment
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
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of principal from maturing securities will, however, continue at least until the end of 2024, allowing explicitly for the purchase
of Greek
Government Bonds
(GGBs) over
and above
rollovers of
redemptions. As
of 31
January 2022,
ECB net
purchases of
GGBs under PEPP amounted to €36.9bn.
On 23
April 2021,
Standard &
Poor’s
upgraded its
rating for
Greece to
BB from
BB-, maintaining
its positive
outlook. On
14
January 2022, Fitch affirmed its BB rating,
but upgraded its outlook to positive. On 18 March
2022, DBRS upgraded the rating
of Greece to
BB (high) with
stable outlook from
BB with positive
outlook. Although Greece’s
sovereign credit
rating remains
below the investment
grade, the aforementioned
developments signal that
the rating agencies’
view on the sustainability
of
Greece’s
fiscal position
keeps improving
despite the
uncertain economic
environment
worldwide. The
progress
made from
2018 onwards, the inclusion of GGBs in PEPP and the favourable macroeconomic environment
led to the improvement of the
yield of
the Greek
10-year bonds
to a
historical
low of
0.53% on
5 August
2021. Subsequently,
however,
amid widespread
uncertainty,
rising
inflation,
and
expectations
of
interest
rate
hikes,
GGB
yields
bounced
back
over
the
2%
threshold
in
February 2022.
In 2021, the Greek State proceeded with the issuance of six bonds of various maturities. In particular, on 27 January 2021, the
Public Debt Management
Agency (PDMA) issued a
10-year bond of €3.5bn
at a yield of
0.807%, on 17 March
2021 a 30-year
bond of €2.5bn
at a yield
of 1.956%, on
5 May 2021
a 5-year bond
of €3.0bn at
a yield of
0.172%, on 9
June 2021 a
10-year
bond of
€2.5bn at
a yield
of 0.888%,
and on
1 September
2021 a
5-year bond
of €1.5bn
at a
yield of
0.020% and
a 30-year
bond of
€1.0bn at
yield of
1.675%. More
recently,
on 19
January 2022, PDMA
issued a
10-year bond
of €3.0bn
at a
yield of
1.836%.
According to BoG data, the stock of credit to the private sector dropped to €109.2bn at the end of 2021,
from €141.4bn at the
end of 2020, registering
a gross annual decrease of
22.8%. A significant part
of this deleveraging was
due to the reduction of
the banks’
non-performing
exposures
stock through
the “Hercules
II” scheme.
Adjusted
for write
-offs, reclassifications
and
foreign
exchange
fluctuations,
domestic
credit
increased
by 1.4%
annually.
On the
other
side of
the ledger,
private
sector
domestic deposits amounted to
€180bn at the end of 2021 from
€163.2bn at the end of 2020, registering
an annual increase
of 10.3%. This
significant increase in
deposits comes mainly
as a result
of increased savings
by households, both
involuntary
(due to the
Covid-19 containment
measures) and voluntary
(due to the
uncertainty created
by the pandemic
environment),
but also of the government support measures to the
private sector,
especially firms.
In 2021 the majority
of the CESEE countries
returned to their pre
-Covid-19 levels of economic
activity as the region
posted a
GDP growth rate of above 5% in 2021 from -4% in 2020. The economic momentum is expected to last throughout 2022 as the
EU Next Generation funds are deployed more vigorously.
The main risk stems from the inflationary outlook which is expected
to remain
challenging in
2022 as
price pressures,
affected
to a
great extent
from global
energy prices,
are not
expected to
ease earlier than second half of
2022 and as such, monetary tightening
is expected to continue throughout
first half of 2022.
In this context, major regional Central
Banks continue so far in 2022 their restrictive monetary policy
adopted from mid-2021
onwards
by increasing
the key
policy rates,
given the
broad
view that
inflationary
pressures
do not
just stem
from energy
prices but are also evident in core inflation as well.
In the same context with the entire CESEE region, Bulgaria has finally started
to show signs of decompression from the fourth
and most severe wave
since the beginning of the Covid-19 pandemic.
The economy is slightly
away from returning
to its pre-
pandemic levels of activity as in
2020 the real GDP contracted
by 4.4% and in 2021 it rebounded
by 4.2%. The full recovery
is
expected
in
2022,
assisted
by
the
sizeable
amount
of
ca.
€29bn
the
country
is
entitled
to
under
the
NGEU
and
the
MFF
programmes. Additional progress
is expected from the country’s
potential to join the Eurozone
in 2024, after having entered
the ERM-II
and the
Banking Union
in 2020.
According
to EC’s
winter
economic forecasts
(February
2022), the
positive real
growth economic momentum is foreseen to last up to 2023 with the real GDP growth rate expected at
3.7% and 3.9% in 2022
and
2023
respectively.
Rising
inflation
could
emerge
as
a
point
of
concern
as
it
could
erode
the
disposable
income
for
consumption and undermine the competitiveness of the economy.
Specifically, inflation
closed at 3.3% in 2021, compared to
1.7% in 2020, while in January 2022 increased to 9.1%.
The Covid-19 pandemic’s economic impact has so far turned out
less severe than initially anticipated despite the Cyprus’s high
sensitivity as
a small,
open, and
services-oriented economy.
After a
5.2% recession
in 2020,
the economy
grew by
5.7% in
2021. Looking
ahead,
the
solid economic
momentum
is expected
to
last
up
to
2023, assisted
by
demand
for
tourism
and
investments through the RRF.
The RRF effect is expected to
be material from mid-2022 onwards
taking into account the time
needed for some of the projects
to mature. The Cypriot plan provides for a
total of €1.2bn (€1bn in grants and
€0.2bn in loans)
and the Ministry
of Finance estimates
that these resources
will mobilize an
additional amount of
€1.4bn in private
funds. In
this
context,
real
GDP growth
of 4.1%
is expected
in 2022
and
3.5% in
2023, according
to
EC’s
winter
economic forecasts
(February 2022). The EC forecasts inflation
to remain elevated in 2022 at 2.6% from 2.5% in 2021 and will decrease to 1.2% in
2023, as oil
prices are expected to normalise
by then. The
medium-term outlook depends heavily
on the ability
of the economy
to adapt to the post-Covid-19 environment
challenges while also addressing the remaining legacies of the past.
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The economy of Serbia has
largely exceeded its pre-Covid-19
output level as it grew by 7.5%
in 2021, after having contracted
by only 1.0%
in 2020, placing the
country among the
top performers
in EU and
CESEE in terms
of real GDP
growth rate.
The
solid path
of economic
growth so
far will
most probably
lead to
the abatement
of the fiscal
support measures
in 2022,
and
thus to improved
fiscal figures, following
the support packages at
play in the last
two years. In this
context, the fiscal deficits
decreased from 8.0% in 2020 to 4.2% in 2021, the economy
is expected to undergo some fiscal consolidation
that will lead to
milder fiscal deficits in the next two years that will not exceed the
level of 3% of the projected
GDP.
The strong economic pace
is expected to continue
in the
medium-term, according to the
EC’s autumn economic forecasts (November
2021), the economy
is forecast
to expand
by 4.3%
in both
2022 and
2023. The
key downside
risk stems
from the
inflationary
outlook as
global
energy prices and soft commodities have increased inflation
to 4.1% in 2021 from 1.6% in 2020.
Regarding the outlook
for the next 12 months
the major macroeconomic
risks and uncertainties
in Greece are as follows:
(a)
the
geopolitical
conditions
in
the
near
or
in
broader
region,
especially
the
ongoing
Russian
invasion
in
Ukraine,
and
its
ramifications
on the
regional and
global stability
and security,
the European
and Greek
economy,
and the
energy sector
in
particular, (b) a prolongation and/or exacerbation of the ongoing inflationary pressure, especially in the energy sector and the
supply chain,
and its
impact on
economic growth,
employment, public
finances, household
budgets,
and firms’
production
costs, (c) further increase in the
interest rates worldwide, and in the Euro Area in particular, that may exert upwards pressures
on sovereign and private
borrowing costs, (d) the actual
size and duration of
the current and potentially
new fiscal measures
aimed
at
alleviating
the
impact
of
rising
energy
and
food
prices,
and
their
impact
on
the
long-term
sustainability
of
the
country’s public debt,
(e) the impact of the
withdrawal of the
temporary support measures
on growth, employment
and the
continual
service of
household
and
corporate
debt,
(f) the
prospect
of
the
so-called
“twin
deficits”
(i.e.
fiscal
and
current
account deficit) becoming more structural, although currently they appear to be more a repercussion of the pandemic, (g)
the
absorption capacity of the NGEU and MFF
funds and the attraction of new investments in the country, (h) the implementation
of the reforms
and privatizations’
agenda in order to
meet the ES and EC’s
Recovery and Resilience
Facility (RRF) targets
and
milestones, (i) the evolution
of the health
crisis and the
probability of emergence of
new Covid-19 variants that
could adversely
impact economic recovery
and bring about new
movement restrictions and
fiscal support measures
and (j) the exacerbation
of natural disasters due to the
climate change and their effect on GDP,
employment and fiscal balance.
Materialization
of
the above
risks
including
those related
to
increased
energy
prices
and inflation,
would
have
potentially
adverse effects on the fiscal planning of the Greek government, as it could decelerate the pace
of expected growth and on the
liquidity,
solvency and
profitability of
the Greek
banking sector,
as well
as on the
realization of
its NPE reduction
plans. The
Russian invasion
of Ukraine
poses uncertainties
in global
economy and
international
trade with
far-reaching
and long-term
consequences. As the events are still unfolding, any assessment of their impact is premature. However,
the risks coming from
geopolitical upheaval
could be potentially
mitigated with
coordinated measures
at the European
level, as per
the pandemic
precedent.
In this
context,
the Group
holds
non
significant
exposure
in
Russian
assets
and is
continuously
monitoring
the
developments on the
macroeconomic and geopolitical
fronts and has increased
its level of readiness,
so as to accommodate
decisions, initiatives and policies to protect its capital and liquidity standing as
well as the fulfilment, to the maximum possible
degree, of its strategic and business goals
for the quarters ahead, focusing primarily on the support
of its clients to overcome
the
challenging
juncture,
the
protection
of
its
asset
and
capital
base
and
the
resilience
of
its
pre-provision
profitability.
Furthermore, the decisive
implementation of
the reforms
agreed in the context
of the ES and
RRF,
the efficient mobilization
of EU funding via
RRF and MFF
to support domestic investment and job creation, the
attraction of foreign and domestic capital
and
the
adoption
of
an
extrovert
economic
development
model
will
improve
confidence
in
the
prospects
of
the
Greek
economy and contribute
to the further stabilization
of the domestic economic
environment, which
are necessary conditions
for the return of the country to a strong
and sustainable growth path.
Share Capital
As at 31 December 2021:
a)
The total
share capital
of Eurobank
Holdings amounted
to €816,015,607.44 divided
into 3,709,161,852
common voting
shares of nominal value of €0.22
each. All shares are registered,
listed on the Athens Stock
Exchange and incorporate
all
the rights and obligations set by the Greek legislation.
b)
The number
of Eurobank
Holdings shares
held by
the Group’s
subsidiaries in
the ordinary
course of
their business
was
784,540 (31 December 2020: 2,433,987) (note 37 to the consolidated
financial statements).
c)
The percentage
of the
ordinary voting
shares of
Eurobank Holdings
held by
the Hellenic
Financial Stability
Fund (HFSF)
amounted to 1.40%. It is noted that, according
to the Law 3864/2010 as in force, the HFSF has restricted
voting rights
4
.
4
Information regarding
HFSF’s rights
as owner of
Eurobank Holdings’ ordinary
shares, according to
Law 3864/2010 and
the Tripartite Relationship
Framework Agreement (TRFA), is included in Corporate Governance Code and Statement.
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
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Share options
The Annual General Meeting of the shareholders
of Eurobank Holdings held on 28 July 2020 approved the establishment
of a
five year shares award plan, starting from 2021, in
the form of share options rights by
issuing new shares with a
corresponding
share capital increase, in accordance
with the provisions of
article 113 of
law 4548/2018, awarded to executives and
personnel
of Eurobank
Holdings and its
affiliated companies
according to
article 32 of
law 4308/2014. The
maximum number
of rights
that can
be approved
was set
at 55,637,000
rights, each
of which
would correspond
to one
new share
(1.5% of
the current
paid share capital).
The exercise price
of each new share
would be equal to
its nominal value i.e. €
0.23. The Annual General
Meeting authorized the Board
of Directors of Eurobank Holdings
to define the eligible
staff and determine the remaining
terms
and conditions of the plan.
In June
and July
2021, the
Board of
Directors
approved
the final
terms and
the implementation
of the
share options
plan,
which is
a forward
-looking long-term
incentive aiming
at the
retention
of key
executives.
In this
respect, 12,374,561
stock
options were allocated to key executives at an
exercise price of €
0.23, with grant date
in July 2021.
The options are exercisable
in portions, annually during the period from 2022 to 2025. Each portion may be exercised wholly or partly and converted into
shares at
the employees’
option, provided
that they remain
employed by the
Group until
the first
available exercise
date. A
retention period
of 1 year applies
to the first
portion of the share
options vesting 1
year after the
grant date.
The corporate
actions that adjust
the number and the
price of shares
also adjust accordingly
the share options.
In addition, the
exercise of
6,844,524
of
the
aforementioned
share
options
allocated
to
certain
key
executives
who
are
subject
to
variable
and/or
accumulated annual remuneration
restrictions of Law
3864/2010 is conditional on
the amendment of the
specific provisions
of the law during
the exercise period, so that
the respective restrictions are lifted, or
the exit of the
HFSF from the share capital
of the Company.
Further information is provided in note 39 to consolidated
financial statements.
Dividends
Based
on
the
2021
accounts,
pursuant
to
the
Company
Law
4548/2018,
the
distribution
of
dividends
is
not
permitted.
Furthermore, under
the provisions
of the Tripartite
Relationship Agreement
between Eurobank
Holdings, Eurobank
and the
HFSF
(signed
on
23
March
2020
and
amended
on
3
February
2022)
and
article
10
par.3
of
Law
3864/2010
for
the
“establishment
of
a
Hellenic
Financial
Stability
Fund”,
for
as
long
the
HFSF
participates
in
the
share
capital
of
Eurobank
Holdings, the amount
of dividends that
may be distributed
to shareholders
of either Eurobank
Holdings or Eurobank
cannot
exceed 35% of the profits as provided
in article 161 par.
2 of Company Law 4548/2018.
Major Shareholders
Based on the most recent notifications that Eurobank Holdings has received from shareholders controlling
5 per cent or more
of Eurobank Holdings’ voting rights, such significant shareholders
are the following:
a)
“Fairfax
Financial
Holdings
Limited”,
controlling
33.00%
of
Eurobank
Holdings’
total
number
of
voting
rights,
corresponding
to
1,224,002,259
voting
rights
of
Eurobank
Holdings’
ordinary
shares.
Excluding
the
52,080,673
voting
rights held by the HFSF, the aforementioned
percentage is formed to 33.47% (the reporting date for the aforementioned
is the July 14th, 2021).
b)
“The Capital
Group Companies, Inc”, controlling 5.06% of
Eurobank Holdings’ total number
of voting rights,
corresponding
to 187,812,291
voting rights
of Eurobank
Holdings’ ordinary
shares. Excludi
ng the
52,080,673 voting
rights held
by the
HFSF,
the aforementioned
percentage
is formed
to 5.14%
(the reporting
date for
the aforementioned
is the December
1st, 2020).
Finally,
reflecting
the
HFSF’s
status
as
a
shareholder
of
Eurobank
Holdings
(it
currently
owns
1.4%
of
Eurobank
Holdings’
shares, which
corresponds to
52,080,673 ordinary
shares with
voting rights
out of
total 3,709,161,852
ordinary shares
with
voting rights issued by Eurobank Holdings), and
following the completion of the demerger of
Eurobank Ergasias S.A., Eurobank
Holdings, Eurobank
and the HFSF
are parties
to a Tripartite
Relationship Framework
Agreement (TRFA)
signed on
23 March
2020 and
amended on
3 February
2022. The
TRFA
allows the
HFSF to
enforce
against
Eurobank
all the
rights which
it had
against the former Eurobank Ergasias S.A.
under an earlier
Relationship Framework Agreement (RFA) between it and Eurobank
Ergasias S.A. Moreover,
the provisions of article 7a par.
2, 3 and 6 of Law 3864/2010 (HFSF Law) are
applicable on the above-
mentioned ordinary shares of HFSF (restricted
voting rights). According to the
HFSF Law and the TRFA, the
HFSF has the right
to vote
at the
General
Meetings of
Eurobank
Holdings only
for decisions
concerning
(i) the
amendments
of the
Articles of
Association of Eurobank
Holdings, including the increase or
reduction of the capital
or the corresponding authorisation
to its
Board, (ii) mergers, divisions, conversions,
revivals, extension of term
or dissolution of Eurobank Holdings, (iii) the transfer
of
assets (including the sale of
subsidiaries) or (iv) any
other issue requiring increased
majority as provided for
in the Greek law
on Sociétés Anonymes.
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
REPORT OF THE DIRECTORS
14
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Board of Directors
The Board of Directors (BoD) was elected by the Annual General Meeting (AGM) of the Shareholders held on 23 July 2021, for
a three years term of office that
will expire on 23 July 2024, prolonged
until the end of the period the AGM for the year
2024
will take place.
The BoD of Eurobank Holdings is set out in note
47 to the consolidated financial statements.
Personal details of the Directors
are available on the website of Eurobank
Holdings (www.eurobankholdings.gr).
Sundry information required under Law 3556/2007 (article 4,
par.7)
By derogation of the ordinary shares held by HFSF which carry special rights and restrictions under the legislation in force and
the TRFA signed between Eurobank Holdings, the Bank and the HFSF on 23 March 2020 (note
45 to the consolidated financial
statements), according to
the Articles of Association:
a)
there are no restrictions on the transfer
of the Eurobank Holdings’ shares
b)
there are no shares with special controlling
or voting rights
c)
there are no restrictions on voting rights
d)
the
rules
related
to
the
appointment
and
replacement
of
directors
as
well
as
to
the
amendment
of
the
Articles
of
Association are in accordance with the provisions
of company law.
The Eurobank Holdings is not aware of any shareholders’ agreements resulting
in restrictions in the transfer of its shares or in
the exercise
of the shares’
voting rights. There
are no significant
agreements that
enter into
force, are
amended or expire
if
there
is
change
in
the
control
of
the
Eurobank
Holdings
following
a
public
offer.
There
are
no
agreements
between
the
Eurobank Holdings and the Directors or the
staff for compensation in the event
of departure
as a result of a public offer.
Information required under Law 4548/2018 (article 97, par.1
(b))
According to article 97 par. 1 (b) of Law 4548/2018 the BoD members owe to disclose in a timely and adequate manner to the
other members of
the BoD their
own interests, which may arise
from the company's transactions, which
fall within their
duties,
as well as any conflict
of their interests
with those of the company
or its related companies.
In such case and in
line with the
provisions
of article
97 par
3 of
the same
law,
the member
of the
BoD is
not entitled
to vote
on issues
in which
there is
a
conflict of intere
st with his
own company or
persons with whom he
is a related
party.
In these cases, decisions
are taken
by
the other BoD members.
For the
purposes of
decisions related
to the
remuneration
adjustment of
the Chief
Executive
Officer (CEO),
the CEO
Mr.
F.
Karavias
was not
entitled to
vote, according
to the
provisions of
par.
3 of
art. 97
of the
Law 4548/2018,
due to
conflict of
interest. For the purposes of decisions related to a legal case (against Eurobank’s officers by a debtor of Eurobank a subsidiary
of Eurobank Holdings),
the Deputy CEO
Mr.
K. Vassiliou
was not entitled
to vote, according
to the provisions
of par.
3 of art.
97 of the Law 4548/2018, due to conflict
of interest. For the purposes of decisions relating to the implementation of the Stock
Options plan approved
by the Annual General
Meeting of Shareholders
in July 2021, the CEO
Mr.
F.
Karavias and the
Deputy
CEOs Messrs. S.
Ioannou, K. Vassiliou
and A. Athanasopoulos
were not entitled
to vote, according
to the provisions
of par.
3
of art. 97 of the
Law 4548/2018, due to
conflict of interests.
For the purposes of
decisions related to
the CEO's performance
evaluation for
2020 and his financial
and non-financial objective
s
for 2021, the
CEO Mr.
F.
Karavias was
not entitled to
vote,
according to the provisions of par.
3 of art. 97 of the Law 4548/2018, due to conflict of interest.
For the purposes
of decisions for
the conclusion of
a Service Agreement
between Eurobank
Ergasias Leasing
Single Member
Societe
Anonyme
(Eurobank
Leasing),
a
subsidiary
of
Eurobank
(Bank),
and
subsequently
a
subsidiary
of
the
Eurobank
Holdings, as a parent company of the Bank and Grivalia Management Company S.A. (Grivalia ManCo), which is a related party
both to Eurobank within
the meaning of paragraph
2 (b) of article 99 of Greek
Law 4548/2018 and to
the Eurobank Holdings
within
the meaning
of
paragraph
2 (a)
of
article 99
of
Greek Law
4548/2018,
the BoD’s
approval
was
granted
based on
a
fairness opinion report provided by a
certified auditor in accordance
with article 101
of Law 4548/2018, while
all the necessary
disclosure
procedures
were
adhered
to
as
provided
for
in
articles
100
par.
3
and
101
par.
2
and
3
of
Law
4548/2018.
Furthermore,
for the
same issue,
the Vice
Chairman of
the BoD
Mr.
G. Chryssikos,
also Vice
Chairman and
CEO of
Grivalia
ManCo holding 68% of
its share capital, was not entitled
to vote according to the provisions of
par. 3 of Art. 97 of the
Company
Law 4548/2018 due to conflict of interest.
External Auditors
The Eurobank Holdings’
Shareholders Annual
General Meeting held
on 23 July 2021
approved the
appointment of KPMG,
as
statutory auditor for the financial statements
(standalone and consolidated) for the year
ending 31 December 2021.
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
REPORT OF THE DIRECTORS
15
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During
2021, the
Audit Committee
reviewed
KPMG’s
independence
and effectiveness,
along
with
its annual
audit plan.
In
addition,
the
Audit
Committee
ensured
on
a
quarterly
basis
that
a)
the
non-audit
services
assigned
to
KPMG,
have
been
reviewed and approved
as required and b)
there is a proper
balance between the audit
and non-audit fees paid
to KPMG, in
accordance with the relevant provisions of
the Group’s Policy on External Auditors’ Independence
(note 46 of the
consolidated
financial statements).
Non financial information
Business model
Eurobank offers
a wide range
of financial services to
the Group’s
retail and corporate
clients. Eurobank
has a strategic
focus
in
Greece
in
fee-generating
activities,
such
as
asset
management,
private
banking,
equity
brokerage,
treasury
sales,
investment
banking,
leasing,
factoring,
real
estate,
trade
finance
and
bancassurance.
Eurobank
is
also
among
the
leading
providers
of
banking
services
and
credit
to
SMEs,
small
businesses
and
professionals,
large
corporates
and
households,
concentrating its
efforts on financing
the growth cycle
of the Greek
economy and the
other countries of
presence, including
an
instrumental
participation
in
Recovery
and
Resilience
Facility
(RRF)
funds.
The
Group
has
an
international
significant
presence in four countries outside Greece (see further
information in the section “International Activities”).
Eurobank’s diversified business model through business line, geography and customer, helps enhance its resilience to changes
in the
external environment.
Its strategy
aims at
optimizing the
financial performance,
maintaining a
strong capital
base as
well as contributing
to the economy and society in a holistic manner.
In conducting its
business activities, the
Group considers
the particular and
diverse needs of
its stakeholders
and focuses on
creating value
for them. In
this context,
the Group a)
makes appropriate
use of available
funds for
supporting its customers
and
financing
the
economies
in
which
operates,
mainly
in
Greece
and
in
Southeastern
Europe,
b)
relies
on
the
skills
and
expertise of its human resources for the implementation
of its business strategy including the improvements
of products and
services to customers;
for this purpose,
it enhances staff
engagement by
strengthening the
knowledge and experience
of its
employees
through
training
and development
programmes
and providing
a safe
and productive
work
environment
and c)
invests
in
IT
infrastructures
and
digital
transformation
for
achieving
in
operating
efficiency
and
improving
customer
experience.
Having
built
a
flexible,
sustainability-oriented
operational
model,
the
Group
adapted
it
immediately
to
address
Covid-19
pandemic by strengthening of existing digital
channels infrastructure to support its customers,
business and households.
Group’s approach
towards sustainable development
The Group is committed in investing
in sustainable development and for planning actions
to improve its performance related
to the Environmental
Social Governance spectrum. The
Group aims to support
long-term prosperity by
financing sustainable
development,
by
delivering
value
to
all
stakeholder
groups
and
by
creating
positive
economic,
social
and
environmental
impacts through all aspects
and areas of the Bank’s activities.
In this context, Eurobank is
redesigning its strategy both
in terms of
its financing and
other products, and
in terms of
its internal
environment and how it is organised and operates.
To
this end, it redefines sustainable development actions and goals, taking
into
consideration
the
Principles
for
Responsible
Banking
and
other
international
agreements
and
trends.
Eurobank
is
a
Founding Signatory
Bank of the Responsible
Banking Principles of UNEP-FI,
committed to
an active contribution
towards the
United Nations Global Sustainable
Development Goals (SDGs) and the
Paris Agreement on Climate
Change. Within the scope
of
this
commitment,
Eurobank
issued
its
first
18-month
Self-Assessment
Report
on
March
2021
(available
on
the
Group
website
www.eurobankholdings.gr)
documenting
the
progress
made
towards
implementing
the
Principles for
Responsible
Banking.
A
major
first
step
was
to
analyse
the
Bank’s
portfolio,
aiming
to
identify
positive
and/or
negative
impact
areas
stemming from
the Bank’s
operations.
To
conduct this analysis, the
Bank used the Portfolio
Impact Analysis Tool,
which was
developed
by the
UNEP
FI to
guide Banks
through
a holistic
impact
analysis
of their
portfolio.
Furthermore,
the
Bank has
developed an implementation roadmap
for the next three years.
Eurobank actively participates at globally renowned ESG ratings, aiming to continuously improve its environmental, social and
governance performance, to enhance its related disclosures and to further enhance the trust of the investment community in
the Bank. In 2021, Eurobank posted significant improvements in important ratings
such as Sustainalytics and was included for
the first time in the ATHEX
ESG Index and the Bloomberg Gender Equality Index.
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
REPORT OF THE DIRECTORS
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Groups’s implementation
of the EU Taxonomy
Regulation
The EU Taxonomy
(Regulation (EU) 2020/852
of the European Parliament
and of the Council) is
a green classification
system
that
translates
the
EU’s
climate
and
environmental
objectives
into
criteria
for
specific economic
activities
for
investment
purposes. The
Taxonomy
Regulation is
a key
component of
the European
Commission's action plan
to redirect
capital flows
towards
a more
sustainable
economy.
The primary
aim of
the Taxonomy
is to
prevent
greenwashing
and help
companies
to become more climate friendly.
The Regulation came into effect
on 1 January 2022.
For an economic activity to be defined as environmentally
sustainable under the Taxonomy,
and thereby classified as aligned
with the Taxonomy,
it must meet the following criteria:
a)
making a substantial contribution to at
least one environmental objective
b)
doing no significant harm to any other environmental
objective
c)
complying with minimum social safeguards
d)
complying with the technical screening criteria
The Taxonomy
is currently
limited to the
classification of
environmentally
sustainable economic
activities. However,
work is
ongoing at
the EU
level to
review whether
the Taxonomy
will be expanded
to classify
e.g. social sustainability
and activities
that could cause significant harm to the environment.
Integration of the Taxonomy
in the business strategy and operating
model
The Group recognizes the significance of the
impact of its activities in society and the environment. It
places high importance
on
the
effective
integration
of
Sustainability
principles
and
ESG
aspects
throughout
the
activities
of
the
organization,
the
governance model and related commitments.
Moreover, the Bank’s BoD has assigned an executive
member as the
responsible
BoD member for climate-related and environmental
risks. As part of its duties, the member responsible will update the Board
Risk Committee
(BRC) (in alignment
with the BRC
Terms
of Reference)
and the Board
of Directors
of Eurobank Holdings
and
Eurobank on climate change and environmental
related risks at least on a semi - annual basis.
The Bank has also established the
ESG Management Committee, chaired
by the BoD member responsible for
climate-related
and environmental
risks. As part of
its duties, the committee,
among other,
oversights ESG
reporting and relevant
activities,
reviews
and
submits
for
approval
ESG
related
frameworks/policies
and
also
provides
strategic
guidance
for
sustainable
development initiatives.
Integration of the Taxonomy
in the Group’s products
and customers
Committed to being transparent about
its ESG approach and to ensure that the decision-making is in line with environmental
protection
and
sustainability,
the
Group
developed
its
Sustainable
Finance
Framework
in
accordance
with
internationally
recognized industry guidelines and principles. Indicatively,
such guidelines are:
a)
International Capital Market
Association (ICMA) and Loan Market Association (LMA) principles
b)
The EU Taxonomy
Climate Delegated Act
Through
its
Sustainable
Finance
Framework,
the
Group
classifies
sustainable
lending
solutions
offered
to
its
customers,
specifying the
applied
classification
approach
and the
activities defined
as
eligible to
access
sustainable
financing
(eligible
green and social assets).
The Sustainable Finance Framework scope encompasses
a wide range of
sustainable lending products
covering both
Wholesale and
Retail banking
portfolios. Moreover,
Eurobank has
established and
published the
Green Bond
Framework. The framework was prepared in accordance with global best practices and standards and considers EU
Taxonomy
eligibility criteria to classify
potential investments as green. Furthermore, the Green
Bond Framework has undergone a
Second
Party Opinion (process and a positive letter
has been issued).
Disclosures relating to Article 8 of the Taxonomy
Regulation for 2021
The
EU
Taxonomy
Regulation
sets
mandatory
requirements
on
disclosure,
with
the
aim
of
providing
transparency
on
environmental
performance.
Financial and
non-financial
undertakings
and/or groups
that
fall under
the scope
of the
Non-
Financial Reporting Directive (NFRD), i.e.
undertakings that are obliged
to publish non-financial information pursuant to
Article
19a or
29a of
Directive 2013/34/EU,
will have
to disclose
to what
extent their
activities meet
the criteria
set out
in the
EU
Taxonomy.
The
Group,
upon
reviewing
its
business
activities,
to
align
taxonomy
reporting
with
its
core
activities,
provides
the
key
performance indicators
(KPIs) and other disclosure
requirements related
to its dominant
financial undertakings as
laid down
in Article
10 of
the Art.
8 Delegated
Act. For
financial undertakings/groups,
according to
the Art.
10 of the
Art. 8
Delegated
Act, the transitional rules for the
period from 1 January 2022
until 31 December 2023
are limited to the reporting of
the extent
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to which their customers and counterparties’
activities are Taxonomy
-eligible as well as information on assets that cannot
be
assessed under the Taxonomy
Regulation.
According
to
the
EBA’s
recommendations
and
the
European
Commission’s
FAQs,
the
primary
data
sources
used
in
the
calculation of EU Taxonomy
metrics is the EBA’s
Financial Report (FINREP) and the Group’s
internal information systems.
The
total assets in
the KPIs table below
are presented at
their gross amounts
according to EU
Taxonomy
methodology. Based
on
the European Commission’s FAQs and on
a conservative approach, the
Group has not
used estimates to identify
the proportion
of eligible assets in the mandatory EU Taxonomy
disclosures.
The reported KPIs are included in the table below.
Assets
Amounts
(in € million)
Taxonomy
KPIs
(% of total assets)
1.
Taxonomy
-eligible assets
10,658
13.36%
2.
Taxonomy
non-eligible assets
60,670
76.07%
of which non-NFRD counterparties
29,119
36.51%
of which derivatives, hedge accounting
1,949
2.44%
of which on-demand interbank loans
26
0.03%
3.
Assets to central governments,
central banks, supranational issuers
8,310
10.42%
4.
Trading portfolio
119
0.15%
Total assets
(1+2+3+4)
79,757
100%
Impairment for debt instruments at amortized
cost and other adjustments
according to EU Taxonomy
methodology
(1,905)
Total assets
according to the Consolidated balance sheet as at 31/12/2021
77,852
Clarification of Taxonomy
-related KPIs:
Taxonomy
-eligible assets
The Group will base disclosures for the taxonomy-eligible assets on actual information.
The Group’s corporate
counterparties
that
are
defined
as
NFRD
companies
will
disclose
the
proportion
of
their
Taxonomy
eligible
and
Taxonomy
non-eligible
economic
activities
for
the
first
time
for
2021.
Since
this
information
is
not
yet
available,
the
Group
does
not
report
its
exposures to counterparties in the mandatory EU Taxonomy disclosures. Regarding
retail exposures, ownership of immovable
property
is
considered
as
a
Taxonomy-eligible
economic
activity.
For
this
reason,
loans
to
households
collateralized
by
residential immovable property and repossessed
real estate collaterals are assessed
as Taxonomy-eligible up to their full
value.
Taxonomy
non-eligible assets
Due to the data limitations described above, exposures
to corporate counterparties
have been assessed as 100% non-eligible
in the mandatory EU
Taxonomy disclosures. All the retail exposures excluding mortgages are considered as non-eligible assets.
Assets to counterparties not subject to NFRD
The Group shall report on the proportion in their total assets of the exposures to companies not subject to
NFRD (“non-NFRD
companies”). In order to identify NFRD
and non NFRD counterparties, the Group uses
internal sizing classification information,
that is data collected directly
by Group’s database
or publicly available information,
adopting a conservative approach taking
into consideration data
limitations.
On
demand
inter-bank
loans,
central
governments,
central
banks
and
supranational
issuers,
as
well
as
derivatives
hedge
accounting and trading portfolio
These assets are excluded from being reported
as Taxonomy
-aligned. However,
when the Green Asset Ratio (GAR) KPI will be
on force
from 1 January
2024, derivatives
and derivatives used
for hedge
accounting, will be included
in the covered
assets,
while exposures to central governments,
central banks, supranational issuers and trading
portfolio will be fully excluded.
Materiality Analysis
As
part
of
the
Annual
Business
and
Sustainability
reporting
process,
Eurobank
conducts
a
Materiality
Analysis
through
a
stakeholder engagement
process.
For 2021
Annual Business
& Sustainability
Report, the
Materiality Analysis
process was
conducted taking
into consideration
regulatory
frameworks, the
UN Sustainable
Development Goals,
Sustainability Reporting
Standards such
as GRI,
ATHEX
ESG
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Index requirements
and voluntary
initiatives such
as UNEP
FI PRB
and UN
Global Compact.
Materiality
was conducted
in 3
Phases:
a)
Identification
of ESG
topics relevant
to
the Bank’s
operation
and financing
services, based
on ESG
related
Regulatory,
sectoral
and
Eurobank’s
specific
priorities
and
cross
sector
megatrends
and
global
accords.
The
20
topics
identified
included, for the first time in 2021, both the operational
and financed impact of the Bank.
b)
Prioritization
of
the identified
ESG
topics
through
stakeholder
engagement
(questionnaire
survey).
In this
survey,
the
stakeholders
were called to
assess Eurobank’s
identified ESG topics
according to
two factors:
Influence on Stakehol
ders
and Impact for the Company.
c)
Validation
of the prioritized
ESG topics from
the ESG Management
Committee for
embedding the respective
content of
the 2021 Annual Business & Sustainability Report.
Following the review of the Materiality Analysis
findings, the Top Material
issues for 2021 were identified as following:
a)
Responsible information and protection
for clients
b)
Direct economic value creation and financial performance
c)
Innovation and digital economy
d)
Corporate governance, strategy,
compliance, and risk management
e)
Diversity,
equity & inclusion
f)
Customer privacy and data security
g)
Contribution in the mitigation of socio-economic challenges for
the nation’s future
h)
Operational environmental
impact
i)
Economic Inclusion
j)
Climate Impact
An
integral
part
of
Eurobank's
approach
to
Sustainability
is
the
fostering
of
strong
relationships,
cooperation
and
mutual
benefit
with
all
stakeholders
affected
directly
or
indirectly
by
its
activities.
In
this
context,
Eurobank
promotes
two-way
communication
and
develops
an
ongoing
dialogue
with
stakeholders,
so
as
to
be
able
to
offer
tangible
responses
to
the
expectations,
concerns
and
issues
raised
by
all
its
stakeholders.
In
this
context,
the
Materiality
Analysis,
Sustainability
Indicators per
the GRI Standards
and information
regarding the
Banks’s
initiatives across
the ESG spectrum
are described
in
the 2021 Annual Business & Sustainability Report edition, which will be published
on www.eurobankholdings.gr.
Response to the impact of the covid-19 crisis
Eurobank
is committed
in
mitigating
risk
of
business
disruption
due
to
Covid-19
imminent
threat,
in
order
to
preserve
its
reputation, safeguard revenues, protect its workforce, serve its
clients and sustain both
a stable financial
market and customer
confidence.
Through
an
established
governance
framework,
an
action
plan
aligned
with
its
strategic
goals,
as
well
as
the
necessary agility,
Eurobank plans and prepares
for large-scale outbreaks
of dangerous diseases that
can potentially affect
its
operations for months and threaten the workforce directly. In this context, the
Group has immediately adapted its
operational
model to address Covid-19 pandemic in order to protect
the health and safety of its employees and customers,
to ensure the
Business
Continuity
of
critical
banking
operations,
to
invest
further
in
digitalization
promoting
actively
the
utilization
of
advanced electronic transaction channels and to support its customers, business and households. The main actions/initiatives
undertaken by the Group were
the following:
Customer support measures
During the pandemic crisis, the Group has launched a series of initiatives, aiming to actively support
its customers (Corporate,
Small/Medium enterprises and Individuals).
Covid-19 relief measures (‘moratoria’)
In the last
two years, the Group
took all appropriate actions
to address liquidity
difficulties of businesses
and individuals caused
by the limited or suspended
operations of businesses due to the
Covid-19 pandemic. Information regarding the Covid-19 relief
measures activated
by the Group
as well as
the respective borrowers’
eligibility criteria is
provided in note
5.2.1.2 (e) of
the
consolidated
financial statements
for
the year
ended 31
December 2020.
As at
31 December
2021, the
Group’s
moratoria
relief measures had expired (31 December 2020: gross
carrying amount of €2.8bn).
Government support measures
In addition to the relief measures activated by the Group,
the governments, in the countries where the Group operates,
have
initiated various programs in order to stimulate liquidity and
economic activity and to
alleviate the consequences of the
Covid-
19 outbreak. As at 31 December 2021, the gross
carrying amount of loans under government
support measures enacted as a
response
to
Covid-19
pandemic
in
the
countries
that
the
Group
operates
amounts
to
€303m.
The
main
programs
to
be
extended to eligible borrowers in Greece are provided in note 5.2.1.2 (e) of the consolidated financial statements for the year
ended 31 December 2021.
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Operational capacity and utilization
of digital and provision of covid-19 focused products
and services
Leveraging on
its capabilities,
the Group
has been
proactive and
hands-on to
addressing all
issues at
an early
stage, and
in
particular, to adjust its strategy and to improve its operating capacity in order to effectively deal with the increasing credit
and
operational risk
as a result
of the pandemic.
To
this end, the Group
has designed and
implemented a broad
set of initiatives
covering all major areas. In particular,
the Group, among others, deployed sufficient IT resources and
completed additional IT
projects in
order to
enable the
uninterrupted
access to
the Group’s
IT systems
and to
ensure the
continuous monitoring
of
the Group’s portfolios,
to accurately and timely identify and classify customers
affected by the pandemic, and to fully comply
with regular and ad-hoc regulatory requests.
In addition,
the Group
proceeded with
the strengthening
of existing
digital channels
infrastructure
to continuously
support
increasing customer volumes with the relevant
provision of several services to its customers.
In particular, the Group,
among
others, provides
remote access to
all its customers
via e-Banking, dedicated
Mobile Apps, as well
as a V-Banking
channel for
Corporate
and Personal
Banking customers,
including a
dedicated
telephone line
to facilitate
customers
for
remote
access
(Digital
Onboarding).
Furthermore,
the
Bank
completed
in
eurobank.gr
the
possibility
for
the
customers
to
book
on
appointment in the branches at their convenience
and servicing more than 1,500 customers per week.
Employees protection measures
In line with authorities’
instructions and recommendations, the Group is
taking all the required measures to
protect the health
and safety
of its employees
and customers
in the
first priority.
Towards
this direction,
the following
actions, among
others,
have been taken: (a) prohibition of large meetings and bans on business travel abroad and opting instead, where possible, for
teleconferencing
or
videoconferencing,
(b)
enhancement
of
remote
work
capabilities
(teleworking),
(c)
all
buildings
were
preventively
disinfected,
staff
were
provided
with
all
required
protective
supplies
(e.g.
masks,
disinfectants,
etc.)
while
continuous, intensified
and thorough
cleaning of workplaces
(especially the branch
network) was
carried out
and (d) return
to normality and relaxation of measures
in a gradual and cautious manner,
always in line with government decisions.
Employee Engagement
Group’s
employees
constitute
its
greatest
asset
as
far
as
development
and
sustainability
are
concerned.
Starting
from
its
recruitment process, the Group aims to establish a long-term and mutually beneficial relationship
with every employee. As of
31 December 2021, the Group employed
11,935 (Dec.2020: 11,501) employees of which
5,275 (Dec.2020: 4,737) abroad. On
Group level, the average
employee age is below 45 years, while female
employees represent 64% of the total
headcount.
To
ensure
equal
and
fair
opportunities
to
all
employees,
the
Group
implements,
in
Greece
and
abroad,
several
policies
regarding
Compensation
&
Benefits,
Recruitment,
People
&
Talent
Development,
Performance
Management,
Learning,
Engagement
&
Communication,
Kinship
and
Health
&
Safety.
The
Group
respects
human
rights,
equal
opportunities,
and
diversity vis à vis clients, suppliers and employees while the Group’s objective is to recruit and retain its employees regardless
of
race,
religion,
age,
gender,
sexual
orientation
or
disability.
The
Group
strives
to
ensure
that
its
workforce
reflects
the
communities in which it operates and the international profile of
the organization. The Group recognizes that diversity is a key
component of
a responsible
business strategy
in support of
its international
operations. Related
matters
were addressed
in
the updated 2020 Code of Conduct & Ethics for the Group.
The Bank is constantly revising its compensation
and benefits policies taking into account market trends
and aiming to create
a competitive offering
that will attract,
engage and retain
its employees while at
the same time comply
to all regulatory
and
legal
requirements.
As a
result,
the basic
principles of
the compensation
and benefits
framework
which ensure
alignment
between individual objectives and
the Bank’s business
strategy,
as well as the long-term
value creation for
the shareholders,
are the following:
a)
Ensure gender-neutral compensation policies
b)
Safeguard that total reward
is sufficient for retaining and attracting
executives with high skill and expertise
c)
Ensure internal equity between Business Units
d)
Avoid taking excessive risks,
including direct and indirect sustainability risk
e)
Link compensation with long-term performance
Furthermore, the Bank sets up the Eurobank
Group's Occupational Pension Fund, seeking to
provide long-term support to all
its employees, while committing
to strong ESG
standards. The estab
lishment of the Occupational
Pension Fund (OPF), acting
as an
additional pillar
of a
modern Retirement
Scheme, allows
all Eurobank
Group employees
to participate
on a
voluntary
basis. Following a written agreement
between the employees and the employer,
the OPF is set up as a Private Legal Entity
to
work in tandem and complement the mandatory Public Pension
System.
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Learning, Personal and Professional
Development
Building
and
strengthening
professional
expertise
with
updated
skills and
capabilities,
as
well
as
providing
an
umbrella
of
modern
learning curriculums
and methodologies
constitutes
a major
priority
for
the digital
transformation
strategy
of the
Group.
The leading
Learning Management
System
SAP
Success Factors
offers
new enhanced
self-service
capabilities
to
all
employees, to
redefine and
upgrade
the knowledge
and skills
needed in
the workplace
(reskilling
& upskilling).
The size
of
investment in learning for 2021 is reflected
briefly in the following indicators:
a)
The total number of participations in training reached
238,360, on Group
level.
b)
The total number of training hours exceeded
530,000 (313,000 hours for employees working
in Greece).
c)
Over 99%
of the
learning employee
activity working
in Greece
takes
place online
or through
virtual classrooms
and is
adapted to the recent conditions which have
been created due to COVID -19.
Upgrading of
digital skills,
capitalizing on
technology and
learning certifications
constitute the
axes of
the strategic
learning
framework in Eurobank. More specific:
a)
LinkedIn Learning
Solutions: The
strategic
partnership with
LinkedIn Learning
allows all
Eurobank employees
in Greece
access the platform’s
online training courses, and highlights
Eurobank’s actual commitment
to addressing current needs
of the digital era
and helping its people
further develop their skills.
In addition, The Group
extends its partnerships
with
other internationally recognized learning platforms such as Coursera,
Interskill, and Pluralsight, offering more than 5,000
courses on cutting-edge technologies.
b)
Digital Accelerator:
In 2021
the Group
designed and
kicked off
an innovative
program,
aiming to
help local
employees
upgrade their digital skills.
The program consists of six
training paths in accordance with
the European Digital Competence
Framework, DigComp.
c)
Leadership and Team
Management skills in
view of the new
Remote Working
Model. Eurobank’s
Top
Management and
the Heads
of Eurobank’s
subsidiaries get
the latest
information
from
the world
of business
while, through
a series
of
monthly executive
master classes, they
get the opportunity to
connect and communicate
online about the latest
trends
in strategic
leadership transformation.
Moreover,
we designed
a hybrid
learning program
to assist
all Managers
of our
Organization usher their teams in the new
phygital era.
d)
Role-specific
certification
of
knowledge
and
skills. The
Group
supports
its
employees
acquire
all the
professional
and
regulatory certifications
required by
their role
within the organization,
offering web-based
seminars and
virtual classes
to help them prepare for their certification
exams.
In 2021, one additional functionality -
Career Development - has been added
to Eurobank's SAP SuccessFactors platform. With
the guidance of
their manager, all employees can
now design their
personal Development and Improvement
Plan. In
particular,
through
a set
of specific
training
and development
activities, this
new functionality
aims to
support all
employees
further
develop their
skills and behaviors,
bolstering their
profile to
match either
their current
role or a
different
one in the
future.
The Development Plan aims to immediately improve performance,
in terms of skills and behaviors required by an employee's
current function, through a set of specific, short-term actions
and clear implementation steps.
To
fully meet employees’
and Group’s
learning needs, the
Group implements
policies and procedures
certified according
to
the
ISO
9001
standard.
At
the
same
time
and
since
2015
the
Bank
holds,
the
ACCA
Approved
Employer
(Professional
Development Stream) distinction, documenting
the high training
standards of its employees.
Aimed at empowering
employees
on more demanding roles
and enhance leadership capabilities,
the Bank designs and implements
specialized programs,
such
as Development & Succession planning, Talent
Development & Management, Career Development
& Planning, Knowledge &
Experience Sharing (mentoring & reverse mentoring).
Development and Performance Evaluation
System - “Axiopoio”
The
Group’s
Performance
Management
process
in
Greece
and
Cyprus
is
based
on
a
tailor-made
employee
development
system named “Axiopoio” whose two main pillars
streamline employee performance with Group strategy and
culture. In 2020,
the “Axiopoio”
process was
upgraded (“Axiopoio
New Edition”) and
integrated
into the SAP
SuccessFactors
HRMS platform.
With the new
edition, employees can
configure, monitor,
and adjust their
priorities, in collaboration
with their Manager,
as
well as give and receive feedback continuously, inside and outside of their unit. “Axiopoio New Edition” focuses on the impact
the employees have on the Group results, as well as on the level of cooperation
within their team, through the priorities they
set and
the behaviors
they display.
With access
from every
"smart" device,
performance appraisal
becomes a
modern tool
that supports the dynamic way of working today.
Improving Employee Experience
Eurobank, through the investment in the SAP SuccessFactors upgrades the working environment and expands the possibilities
of cooperation.
As part of
the project,
which will continue
in 2022, the
basic technological
infrastructure
was enriched
with
modern applications related
to the acquisition of "talent"
(talent acquisition) and performance
appraisal. The applications
of
the
SAP
SuccessFactors
platform
improve
the
daily
communication
in
the
Group,
increase
the
degree
of
autonomy
and
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mobility of the users while managers can monitor and manage their teams. More particularly, the functions that are available
both from the office space and on all the "smart" devices, the users, among
others:
a)
Have access, wherever they are,
to their personal profiles and contact
details of their colleagues,
b)
Register and manage with self-service process,
license requests and change of personal data,
c)
Have access to learning
and training planning
for themselves and their
teams, can attend
online courses and connect
to
online libraries that are available (Learning
Management System),
d)
Have access to a modern evaluation and continuous
feedback application.
Strengthening Dialogue & Information
Employees
are
systematically
kept
informed
on
a series
of
issues
of
interest
and/or
corporate
issues
through
a variety
of
means including print,
interpersonal and
online ways.
In 2018, the
Group in Greece
launched its new
Intranet Portal
named
“Connected” and social network Yammer, providing timely corporate and work-related information to all employees. Through
intranet, employees can access
information on social
issues, on physical or
virtual visits of
the management team,
on corporate
functions, on interviews given by Eurobank's management to printed and digital media etc. In
2020, a special Covid-19 section
was created on the intranet's landing page, hosting useful material
and announcements. This section is regularly
updated with
the
latest
developments
and
information
regarding
health
protocols
and
current
preventative
measures.
In
addition,
information
about
the
Medical
Help
Line
and
the
Telephone
Support
Line
was
placed
in
a
prominent
place,
so
that
the
employees could have immediate access. For the dissemination of the strategy and the two-way communication between the
Management of the Bank
and the employees, the program
"Breakfasts with the
Management" was deployed
through digital
means with the participation
of employees from
all Units. In addition,
the initiative "Executive
Meetings" took place
with an
extended participation from members of the management
team. At the same time,
the top management conducted a
number
of "Virtual Visits"
to regional markets
throughout Greece, an
initiative that
started during the
pandemic crisis and
continues
all along, with the aim to strengthen an "open line"
of communication with Network employees across Greece, facilitating the
exchange of views and the discussion of challenges
and opportunities.
Support at work - HR4U
The call
center “HR4U”
supports
the employees
of the
Bank and
responds daily
at each
employee’s
request,
taking all
the
necessary actions for their best service. In 2021, more than 35,000 requests were seen to HR4U. Topics
cover a wide range of
questions
about
benefits
and programs,
as
well
as
urgent
needs,
such
as
blood
or
platelets
for
employees
and
/
or
their
families, as well as Covid-19 related issues.
Recognition and Reward Policy
As
part
of
the
Employee
Recognition
and
Reward
policy,
Eurobank
implemented
the
“Transformation
Challenge
Box”,
to
enable all
employees
offer
their ideas,
proposals,
and solutions
for
all aspects
of banking
operations,
and make
their own
contribution to the transformation
of the bank. Over a period
of 9 weeks, a total
of 171 original ideas - on all
transformation
pillars - found their way through the Transformation
Challenge Box. The top-3 of them were selected after an internal vote of
the
employees,
as
well
as
a
discussion
and
a
vote
by
the
Transformation
Operating
Committee
members.
In
addition,
recognizing long-term
loyalty,
the bank
is awarding
Group employees
after 15
and 25
years of
service. In
the last
19 years,
Eurobank
has
recognized
and
rewarded
over
2,780
secondary
and
higher
education
students,
through
the
“Awarding
Excellence” initiative. Through this program, the Bank is investing in the younger generation and is recognizing the children of
employees that
have
outperformed at
their school.
The program
also covers
all bank
employees that
have undergone
and
topped
in
postgraduate
degrees
during
their
tenure
in
the
organization.
The
Bank
traditionally
designs
and
implements
initiatives that support the employees and
their families. In 2021, the
bank offered 12-month gift vouchers to more than
2,500
children
of employees.
In a
spirit of
giving back
to our
community,
Eurobank
has established
and supports
the “Team
Up”
initiative.
This
is
an
employee
volunteerism
program
that
has
been
up
and
running
since
2018.
Until
2021,
nearly
900
employees have
joined the program,
implementing a total
of 18 events
and offering
more than
1,400 hours
of volunteering
services. Due to the Covid-19 pandemic in 2019-2020, no activities took place.
Labour Unions
The Group
respects
employees’
constitutional
right to
membership
in Labour
Unions. Six
such Unions
are
currently
active
within the Bank, representing 87.4%
of the staff,
i.e. 5,539 employees. The most multitudinous of
these Unions is recognized
as
the
official
representative
Union
in
labour
negotiations
with
the
Bank’s
Management.
All
employees
of
the
Bank
are
employed full-time and
covered by
collective labour agreements
(industry-wide and enterprise-level),
while labour relations
are regulated by the current laws and
the Bank’s Statute of Internal Service. Furthermore, the
Bank's Management cooperates
with
the
labour
unions
and
supports
the
scheduled
working
meetings
to
strengthen
the
dialogue
and
to
monitor
the
developments in the working environment.
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Corporate Social Responsibility
Since its
formation,
Eurobank has
embraced social
responsibility activities,
which address
the concerns
of society
and local
communities. In this context, corporate
social responsibility is based in the following pillars:
Addressing the demographic challenge
In 2021,
Eurobank launched
‘Moving Family
Forward’,
a new
Corporate Social
Responsibility programme
for addressing
the
country’s demographic challenge. As the rate of births in Greece is decreasing year by year and population is constantly aging,
‘Moving Family Forward’ aims at providing young families with incentives
for making the decision to have a child or one more
child.
The
Programme
focuses
on
the
eastern
borders
of
Greece
–
Prefecture
of
Evros,
North
Aegean
islands
and
the
Dodecanese, areas
of outstanding
national gravity
and several
problems and
limitations compared
to other
locations closer
to the
Capital. The
Programme is
organised in
five pillars,
including collaborations
with non-governmental
organisations for
supporting future and
young parents, banking
products with beneficial terms
for customers
of those geographical
areas and
a number of actions for setting the demographic challenge
higher in the agenda of public dialog.
Supporting the society
Following the catastrophic
fires of Attika,
Evvoia and the Peloponnese
in August 2021, Eurobank
committed to contribute
to
the State’s
efforts to reconstruct
the affected areas
by donating €1m. More
specifically, the
Bank announced its intention
to
design and execute
an integrated Programme
for restoring, in a sustainable
manner,
forests that were
destroyed, facilitating
fire prevention
and protection,
as well
as educating
local communities
and especially
younger students,
towards
the same
direction. Moreover,
Eurobank announced its
intention to sponsor
premises renovation
at Sotiria Thoracic
Diseases Hospital
of Athens, recognising
its central role in
fighting Covid-19 since the beginning
of the pandemic crisis. Also, the
Bank supports
a significant number
of non-governmental organizations and institutions
supporting mainly children
and vulnerable population
groups. Additionally,
the Eurobank actively promotes cultural and
athletic events throughout the country.
Education and excellence
Education
significantly
shapes society
and the
economy
both through
establishing
moral
standards
and providing
the new
generation with
knowledge and setting
competencies. In this
context, Eurobank
has been running
since 2003, a
programme
entitled, ‘Moving Education Forward’ in which
the top high school
graduates from all over the
country are awarded every year.
By 2021, the 19th year of its operation Eurobank
has awarded more than 20,000 top pupils throughout
the country.
Access to financial services for all /Financial inclusion
Eurobank collaborates with Action
Finance Initiative “AFI”
within the framework of the programme
EaSI for employment and
social innovation,
to provide
micro-credit facilities
(up to
€12,500) to
support the
long-term unemployed,
vulnerable social
groups
and
business
people
with
limited
access
to
bank
loans,
giving
them
the
opportunity
to
create
their
own
job
(self-
employment) or develop small businesses and create
new jobs. Eurobank has offered
financing to 438 businesses amounting
€4.4m in total,
in cooperation with
AFI. The financing
is used to
meet working capital
needs, capital
for investments
in fixed
assets, as well as capital for investments
in intangible fixed assets.
Digital literacy and inclusion
Eurobank launched “Eurobank Digital Academy for Business”, a resource center on digital skills for Greek companies that treat
technology as a key enabler and digital transformation
as a growth strategy and a source of competitive
edge. Since 2019, 16
events have
been held
with 662
participations. Eurobank
has created
a special
service line
for access
to its
digital channels
dedicated to digitally illiterate
elder groups.
Supporting entrepreneurship and innovation
Eurobank actively
contributes to
economic growth
and recognizes
the importance
of entrepreneurship
as a
major lever
for
the expansion
of the
Greek economy.
It focuses
on supporting
the extroversion
of Greek
businesses and
encouraging
new
business initiatives.
In this
context, Eurobank
has developed
the operation
of Exportgate,
an international
trade portal
that
promotes the business networking of Greek and
Cypriot companies worldwide.
Eurobank, in strategic partnership with Banco
Santander for Global Trade, has joined the
“Trade Club Alliance”, the First Global
Digital Business
Interconnection Network
that is
supported by
14 international
banking groups.
The network,
using, among
other
things,
artificial
intelligence
technology,
connects
more
than
22,300
businesses
in
more
than
60
countries.
All
participating banks follow audits to ensure
network integrity.
Since 2016, Eurobank, in partnership with
Grant Thornton, established the
Growth Awards to award
business excellence as a
growth leverage of
the Greek economy.
Up to now,
the 5 Growth Awards
ceremonies have awarded
32 of the most dynamic
Greek enterprises. More than 2,000 guests attend the award ceremony every year,
5 internationally renowned speakers have
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
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been hosted,
and around 80 enterprises
apply every year.
The Award Committee
is consisted of
20 distinguished individuals
from the Greek business and academic arena.
In the area of innovative youth
entrepreneurship, the Bank, in collaboration with Corallia developed the
“egg-enter•grow•go”
(“egg”), a comprehensive
business incubation and
acceleration program.
Since 2013 “egg” is continuously
helping the Greek
startup community to improve competitiveness in
a challenging global
market, under three main
pillars extroversion, financing
and
business
networking
and
it
has
been
playing
a
crucial
role
in
shaping
the
Greek
startup
scene,
boosting
innovative
entrepreneurship
through the
egg Start-Up
(incubator)
and egg
Scale-Up (accelerator)
platforms.
In particular,
its business
and social footprint is reflected in the
following:
a)
1,000 business people have been hosted into
programme egg
b)
275 startups have been integrated
in it
c)
150 startups formed a legal entity
and 92 of these had a combined turnover of €12 million
d)
36 companies have applied for patents
e)
68 businesses have travelled to
the largest technology ecosystems
worldwide
f)
€12m have been invested in egg accelerator
by Eurobank
g)
€3.2m is Eurobank financing to 49 egg startups
h)
€25.3m in equity funding have been received by 36 businesses
i)
€75k have been distributed by Eurobank
as cash prizes to the egg startups
j)
€89k have been donated to NGOs by the egg startups
In this
context, Corporate
Social Responsibility
actions are
described in
the Annual
Business and Sustainability
Report 2021,
which will be published on www.eurobankholdings.gr.
Protection of environment
The Group
is committed
to minimizing
its environmental
footprint and
to promoting
a green
economy.
In this
context,
the
Group implements a Sustainability Policy, an Environmental
Policy and an Energy Management Policy, towards the protection
of the environm
ent in all
aspects of its
operations. Furthermore,
the Group
within the framework
of the implementation
of
the
Environmental
Policy,
has
established
a
Green
Procurement
Policy,
aiming
to
evaluate
and
select
suppliers
based
on
environmental criteria.
In
the
context
of
these
policies,
the
Group
implements
certified
management
systems,
in
accordance
with
International
Standards, such as a Quality Management System
(ISO 9001), an Environmental Management System
(ISO 14001, EMAS) and
an Energy Management
System (ISO 50001).
The implementation
of these management
systems is supported
by relevant e-
learning
training
programs.
Additionally,
for
the integration
of the
Environmental
and Social
(E&S)
issues
into
its business
model, the Group
implements an Environmental
and Social Management
System (ESMS)
in accordance,
among others, with
the requirements and expectations
of Group’s institutional
investors, shareholders and
other stakeholders.
The environmental
performance, with respect
to the improvement
of the operational environmental
footprint, is monitored
through specific
environmental
indicators
and associated
targets
in order
to identify
any deviations
and corrective
actions,
and
is included
in the
Annual Business
& Sustainability
Report
and
in the
Environmental
Report
(EMAS). Both
reports
are
assured by independent third
parties. With regards to
monitoring of environmental impacts,
the Bank pays
particular attention
to
water
conservation,
implementing
measures
such
as
installing
special
systems
for
water
flow
control
in
water
supply
facilities. In 2021,
the water
consumption amounted
to 62,322m
3
(2020: 54,691 m
3
, 2019:
74,973m
3
), which represents
an
increase
of
13.95
% compared
to 2020.
Τhe increase
is attributed
to the
greater presence
of staff
in the
workplace in
2021
compared with 2020. In the context of reducing its waste, the Bank
addresses the reduction of paper consumption in line with
digitalization of its operations. As a result of these efforts
in 2021, the paper supply amounted to 209.2 tons and represented
a reduction of 15.35% compared to 2020 (attaining the set target of 225
tons for 2021), while the corresponding consumption
per employee decreased
by 5.01%. In
addition, the increase
in the use of
the e-statement
service was significant
in 2021, as
more
than
228,000
additional
e-Banking
users
chose
e-statements,
resulting
in
the
additional
savings
of
560,000
physical
statements.
The Bank's
financial savings
from the
discontinuation of
physical statements
are also
substantial, amounting
to
more than
€23m since
the service became
available. The
Annual Business
and Sustainability
Report and
the Environmental
Report
(EMAS)
for
2021
will
be
available
at
the
Group
and
Bank
websites
respectively
(www.eurobankholdings.gr
and
www.eurobank.gr).
The
Group
is
actively
involved
in
a
series
of
International
and
European
Initiatives
for
environmental
protection
and
sustainability,
such as the EU Eco-Management
and Audit Scheme (EMAS),
the Energy Efficiency
Financial Institutions Group
(EFFIG). The Group
participates at
the Sustainable
Development Committee
of the Hellenic Bank
Association,
the UN Global
Compact Network Hellas and as an ambassador at the Sustainable Greece 2020 Initiative. In 2021, the Bank was distinguished
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
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for the
"Supplier Evaluation
for the
Bank and
Eurobank Group”
at the
Bravo
Sustainability Awards
and was
included in
the
Sustainability Performance Directory
2021 companies, rated as one of Greece’s
Most Sustainable Companies.
Energy and Emissions Management
The Bank applies energy and emissions management practices in
line with the obtained certification for Energy Management
System
(ISO
50001).
The
Bank
relies
on
the
international
Greenhouse
Gas
(GHG)
Protocol,
to
monitor
and
mitigate
its
environmental footprint,
by reducing greenhouse gas emissions.
Direct GHG Emissions
(Scope 1) result
from the
Bank’s
consumption of
natural gas
and heating oil
to heat
buildings and the
use of fuel for the Bank’s own vehicles. It also includes the data on fluorinated gases (F-gases) released by the air conditioning
installations of the Bank (fugitive emissions).
Regarding
electric energy
use (Scope
2), the
Bank applies
the market
-based method
using annual
CO
2
emission coefficients
from electrical power providers. This methodology provides a framework for recording and allocating energy consumption, as
well as for
calculating direct
and indirect
greenhouse gas
emissions. Electric energy
consumption are
accounted for
Indirect
GHG Emissions (Scope 2).
The
Bank
discloses
the
outcomes
of
climate-related
policies
by
providing
information
on
specific
indicators
and
the
performance
on
such
indicators,
in
consistency
with
pre-defined
targets.
In
this
context,
in
2021
the
total
electricity
consumption was at 41,395 ΜWh decreased by 5.22% compared to 2020, while the indirect greenhouse gas emissions (scope
2)
in
carbon
equivalents
was
at
16,169
tCO
2
e
5
n
2021
decreased
by
5.56%
i,
compared
to
2020
(17,120
tCO
2
e).
This
performance was in line with the environmental
management targets set for
2021 at 5% reduction in electricity compared to
2020
and
at
5%
reduction
of
indirect
greenhouse
gas
emissions
(scope
2)
for
2021
compared
to
2020.
Overall,
in
2021
compared to 2020, the total energy
consumption and total greenhouse
gas emissions (all energy sources for
Scopes 1 & 2) in
tCO2e were decreased by 5.53% and 5.27% respectively.
For 2021, 96.71%
of total electricity
consumed was sourced by
Renewable Energy Sources (RES),
certified through “Guarantees
of Origin”, while the same process will continue for
2022. Compared to 2020, this indicator was improved by 3.01%. The Bank
monitors
the
energy
intensity
ratio
which
expresses
the
absolute
energy
consumption
of
the
Bank
for
all
its
operational
revenue
and
serves
in
monitoring
energy
performance
in
relation
its
scale
of
activities.
In 2021
the
intensity
ratio
was
at
29.71ΜWh/€m (2020: 30.99 ΜWh/€m) reduced by 4.13% compared
to 2020.
Finally,
the Bank has certified
19 buildings with the
third party green
building certification methods
of “Leadership in
Energy
and Environmental
Design - LEED” (level:
gold & platinum) and
“Building Research Establishment
Environmental Assessment
Method – BREEAM”
(scale: good, very
good & excellent),
thus demonstrating
Eurobank’s
excellent working
environment. In
2022,
the
Bank
plans
to
expand
its
Energy
&
Emissions
monitoring
to
include
Scope
3
emissions,
in
line
with
regulatory
obligations and its Climate Risk Strategy
as well as with applicable international best practice.
Actions against corruption and bribery incidents
The Group is committed to pursuing the fundamental values of
integrity, transparency and accountability.
It is also committed
to safeguarding its reputation
and client base.
The Group
follows best
business practices,
having accepted
and integrated
in its culture
the ten principles
of the UN
Global
Compact.
The
10th
principle
on
Anti-Corruption
states
that
“Businesses
should
work
against
corruption
in
all
its
forms,
including extortion and bribery”. The
Group has adopted a
zero tolerance approach against all
types of fraud,
including bribery.
In accordance
with the relevant
legislation, the Group
prohibits bribery in
any form
either direct or
indirect (through a
third
party). The principle
of zero
tolerance applies
to all staff
and prohibits all
forms of bribery,
whether active
or passive, direct
or indirect and is
also reflected in contractual
documents adopted when
entering into relationships
with third parties, either
natural
or legal.
The principle
of zero
tolerance
also applies
to
clients of
the Group,
as the
Organisation
for
Economic
Co-
operation and Development (OECD) anti
-bribery convention is followed.
In this context, the
Group has adopted
the following policies
and procedures to govern
the treatment of
bribery and corruption
cases encountered:
a)
Code of Conduct and Ethics
b)
Anti Bribery & Corruption Policy
c)
Policy for Reporting Unethical Conduct
d)
Management of Sponsorships and Donations
5
The 2020 data has been restated
based on the use of new CO2 conversion
factors according to
NIR Greece and DEPEEP data.
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
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Recognizing that any involvement in cases of bribery not only constitutes a crime, but also reflects adversely on its reputation
and client base, the Group takes the following
measures aimed at limiting its exposure to bribery:
a)
Setting out a clear approach to deal with the risk of bribery.
b)
Establishing a robust system
of internal controls that does not tolerate
bribery and corruption.
Group Compliance is responsible for issuing policies and
procedures to combat bribery and corruption cases.
Each unit of the
Bank is
responsible
for
complying with
the existing
policies. The
Market
& Internal
Conduct Division
of Group
Compliance
carries out risk assessment exercises on anti-bribery and anti-corruption issues and performs specialized monitoring exercises
for
potential
violations.
The
Forensic
Audit
Division
of
Internal
Audit
investigates
all
cases
of
suspected
internal
fraud
/
corruption.
Related party transactions
As at 31 December 2021,
the Group’s outstanding balances of the transactions and the relating net income /
expense for 2021
with (a)
the key
management
personnel
(KMP) and
the entities
controlled
or jointly
controlled
by KMP
are: compensation
€8.5m, receivables €5.1m, liabilities €23.9m, guarantees received €0.01m, guarantees issued €0.01m, net expense €15.5m, of
which €0.5m expense
relating with equity settled
share based payments, (b)
the Fairfax group are:
receivables €0.4m, liabilities
€0.2m, net income
€6.2m and (c) the associates
and joint ventures
are: receivables €102.6m,
liabilities €121.5m, guarantees
issued €4.7m net expense €89.5m.
At the
same date,
the Company’s
outstanding balances
of the
transactions and
the relating
net income
/ expense
for 2021
with (a) KMP are:
compensation €0.2m that is referring mainly to KMP services provided by Eurobank
S.A. in accordance with
the relevant agreement, (b) the Fairfax
group refer to receivables
of €0.3m related to financial consulting services and
(c) the
subsidiaries are: receivables €1,012m, liabilities €0.3m and net
income €123.9m.
In addition, as
at 31 December
2021, the Bank’s subgroup outstanding balances
of the transactions and
the relating net income
/
expense
for
2021
with
(a)
the
KMP
and
the
entities
controlled
or
jointly
controlled
by
KMP
are:
compensation
€8.3m,
receivables €5.1m, liabilities €23.9m,
guarantees received €0.01m,
guarantees issued €0.01m, net
expense €15.5m, of which
€0.5m ex
pense relating
with
equity
settled
share
based payments
(b) the
Fairfax
group
are: receivables
€0.05m, liabilities
€0.2m,
net
income
€6.2m,
(c)
the
associates
and
joint
ventures
are:
receivables
€102.6m,
liabilities
€121.5m,
guarantees
issued €4.7m
net expense
€89.5m and
(d) the
Eurobank
Holdings S.A.:
receivables
€0.3m, liabilities
€1.016m, net
expense
€69m.
All transactions
with related
parties are
entered
into the
normal course
of business
and are
conducted
on an
arm's length
basis. Further
information
is provided
in the
note 45
to the
consolidated
financial statements
,
note 45
to the
consolidated
financial statements of Eurobank S.A. and note 21 to
the financial statements of the Company.
Corporate Governance Statement
In
compliance
with
the
art.
17
of
the
L.4706/2020
for
the
listed
companies
(effective
from
18.7.2021
onwards),
which
stipulates
that listed
companies should
adopt and
implement a
corporate
governance code,
prepared
by a
recognized
and
reputable body,
and following
a relevant
resolution of
the Board
of Directors
of Eurobank
Holdings on
29 September
2021,
Eurobank Holdings has adopted and implements the Hellenic Corporate
Governance Code (Code). The Code has been posted
on Eurobank Holdings’ website (https://www.eurobankholdings.gr
).
The Corporate
Governance Statement
for the
year 2021, attached
herewith, is an
integral part
of the Directors’
Report, and
outlines how the
principles stipulated
by the Code
were applied, during
2021, to Eurobank
Holdings and to
Eurobank (100%
subsidiary of Eurobank Holdings).
Georgios Zanias
Fokion Karavias
Chairman
Chief Executive Officer
5 April 2022
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
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APPENDIX
Definition
of
Alternative
Performance
Measures
(APMs)
in
accordance
with
European
Securities
and
Markets
Authority
(ESMA) guidelines, which are included in the Report of Directors/Financial
Statements:
a)
Loans to Deposits
ratio:
Loans and advances
to customers
at amortised cost
divided by due
to customers
at the end of
the reported period,
b)
Pre-Provision Income
(PPI):
Profit from
operations before
impairments, provisions
and restructuring
costs as
disclosed
in the financial statements for
the reported period,
c)
Core
Pre-provision
Income (Core
PPI):
The total
of net
interest
income, net
banking
fee
and commission
income and
income from non banking services minus the operating expenses
of the reported period,
d)
Net
Interest
Margin
(NIM):
The
net
interest
income
of
the
reported
period,
annualised
and
divided
by
the
average
balance
of
continued
operations’
total
assets
(the
arithmetic
average
of
total
assets,
excluding
those
related
to
discontinued operations’,
at the end of the reported period, at the end of
interim quarters and at the end of the previous
period),
e)
Fees and
commissions:
The total
of net
banking fee
and commission
income and
income from
non banking
services of
the reported period,
f)
Income from
trading and
other activities
: The
total of
net trading
income, gains
less losses from
investment
securities
and other income/ (expenses) of the reported period,
g)
Cost to Income ratio:
Total
operating expenses divided by total operating
income,
h)
Adjusted net profit:
Net profit/loss from continuing operations after deducting restructuring costs, goodwill impairment,
gains/losses related to the transformation
plan and income tax adjustments,
i)
Non-performing
exposures
(NPE):
Non
Performing
Exposures
(in
compliance
with
EBA
Guidelines)
are
the
Group’s
material exposures which are more than 90 days
past-due or for which the debtor
is assessed as unlikely to pay its credit
obligations in full
without realization of
collateral, regard
less of the existence
of any past
due amount or the
number of
days past
due. The
NPE, as reported
herein, refer
to the
gross loans
at amortised cost
except for
those that
have been
classified as held for sale,
j)
NPE ratio:
NPE divided by gross loans and advances to customers
at amortised cost at the end of the reported period,
k)
NPE formation:
Net increase/decrease of
NPE in the reported
period excluding the
impact of write offs,
sales and other
movements,
l)
NPE Coverage
ratio:
Impairment
allowance for
loans and
advances to
customers
and impairment
allowance for
credit
related commitments (off balance sheet items),
divided by NPE at the end of the reported period,
m)
Provisions (charge) to
average net
loans ratio (Cost
of Risk):
Impairment losses relating
to loans and advances
charged
in the reported period, annualised and
divided by the average balance
of loans and advances to customers
at amortised
cost
(the
arithmetic
average
of
loans
and
advances
to
customers
at
amortised
cost,
including
those
that
have
been
classified as held for sale, at the end of the reported period, at the end of interim quarters and at the end of the previous
period),
n)
Return on tangible book value (RoTBV):
Adjusted net profit divided by average tangible book value. Tangible
book
value
is the total equity excluding preference shares, preferred
securities and non controlling interests minus intangible assets,
o)
Texas
Ratio:
Non-performing
exposures
(NPE) divided
by the
sum of
impairment allowance
for loans
and advances
to
customers and Common Equity Tier 1.
Definition of capital and other selected ratios
in accordance with the regulatory framework,
which are included in the Report
of Directors/Financial Statements:
a)
Total
Capital Adequacy
ratio:
Total
regulatory capital
as defined
by Regulation
(EU) No 575/2013
as in force,
based on
the transitional
rules for
the reported
period, divided
by total
Risk Weighted
Assets (RWA).
The RWA
are the
Group’s
assets and off-balance-sheet exposures, weighted according to risk factors based on Regulation (EU) No 575/2013, taking
into account credit, market
and operational risk,
b)
Common Equity Tier 1 (CET1):
Common Equity Tier I regulatory
capital as defined by
Regulation (EU) No
575/2013 as in
force, based on the transitional rules for
the reported period, divided by total RWA,
c)
Fully loaded Common Equity
Tier I (CET1):
Common Equity Tier I
regulatory capital as defined by Regulation No
575/2013
as in force, without the application of the relevant
transitional rules, divided by total RWA,
d)
Liquidity Coverage
Ratio (LCR):
The total amount
of high quality liquid
assets divided by
the net liquidity
outflows for
a
30-day stress period.
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
REPORT OF THE DIRECTORS
27
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€ = Euro
m = million
bn = billion
The following
table presents
the components
of the calculation
of the
above APMs,
which are
derived from
the Company’s
consolidated financial statements
for the year ended 31 December 2021 and for the year ended 31 December 2020:
Components of Alternative Performance Measures
€ million
FY21
FY20
Net Interest Income ⁽²⁾
1,321
1,349
Fees and commissions
456
384
Total
Operating income ⁽¹⁾
1,900
2,400
Total
Operating income, excluding the gain
on FPS disposal and the derecognition
gain / (loss) on "Mexico" and “Cairo” loans⁽³⁾
1,904
2,172
Total
Operating expenses ⁽⁴⁾
(876)
(869)
Pre-provision income (PPI)⁽¹⁾
1,024
1,531
Pre-provision income (PPI), excluding
the gain on FPS disposal and the derecognition
gain/(loss) on "Mexico" / “Cairo” loans
1,028
1,303
Core Pre-provision income (Core PPI)
900
865
Net profit/(loss) from continued operations⁽¹⁾
328
(1,215)
Impairment loss on projects "Mexico" and “Cairo”
(72)
(1,509)
Derecognition gain/(loss) on "Mexico" / “Cairo”
loans, after tax
(5)
7
Gain on disposal of FPS (before tax)
-
218
Gain on disposal of FPS (after tax)
-
173
Restructuring costs, after tax
(19)
(104)
Goodwill impairment loss
-
(160)
Tax adjustments
-
(160)
Adjusted net profit
424
538
Impairment losses relating to loans and advances
(490)
(2,081)
Impairment losses for loans, excluding the loss
on projects Cairo and Mexico
(418)
(572)
Non performing exposures (NPE)
2,775
5,724
NPE formation ⁽⁷⁾
44
(94)
Due to customers
53,168
47,290
Gross Loans and advances to customers
at amortized cost
40,815
40,874
Impairment allowance for loans and advances to
customers
(1,872)
(3,477)
Impairment allowance for credit related
commitments
(48)
(66)
Due to customers (Greek operations)
37,016
34,189
Gross Loans and advances to customers
at amortized cost (Greek operations)
31,259
32,829
Impairment allowance for loans and advances to
customers (Greek operations)
(1,606)
(3,227)
Common Equity Tier 1 (CET1)
5,436
5,604
Average balance of continued operations’
total assets ⁽¹⁾
71,677
66,549
Average balance of loans and advances to
customers at amortised cost
⁽⁵⁾
37,826
37,539
Average balance of tangible book
value⁽¹⁾
⁽⁶⁾
5,139
5,658
(1)
The comparative information has
been restated due
to change in
accounting policy following
the IFRIC agenda
decision for attributing
benefit to
periods of service (IAS 19).
(2)
4Q2021 NIM: Net interest
income of the fourth
quarter 2021 (€321m),
annualised, divided by the
average balance of continued
operations’ total
assets (€75,613m).
(3)
International Operations: Operating
income: €492m (2020:
€474m). Greek operations:
Operating income: €1,412m, excluding
the derecognition loss
on “Mexico” loans of €5m (2020: €1,698m, excluding the gain on FPS disposal of €218m and the derecognition gain on ”Cairo”’ loans of €9m).
(4)
International Operations: Operating expenses: €234m (2020: €226m). Greek operations:
Operating expenses: €643m (2020: €643m).
(5)
The average
balance of
loans and
advances to
customers measured
at amortized cost,
has been
calculated as
the arithmetic average
of their
balances
at the end of the reporting period (31 December 2021: €38,943m), at the end of interim quarters (30 September 2021: €37,780m, including “Mexico”
senior notes of €1,621m
and excluding “Mexico” loss of
€72m, 30 June 2021:
€37,490m and 31 March
2021: €37,522m), and at
the end of the previous
period (31 December 2020 €37,397m).
(6)
The average balance of tangible book value, has been calculated as the arithmetic average of the total equity minus the intangible assets and non
controlling interests
at the
end of
the reporting
period (31
December 2021:
€5,270m) and
at the
end of
the previous
period (31
December 2020:
€5,008m).
(7)
NPEs formation has been
calculated as the
decrease of NPE
in 2021 (€2,949m),
after deducting the impact
of write-offs €475m,
securitizations /
sales €2,720m and other movements (€202m).
EUROBANK ERGASIAS SERVICES and HOLDINGS S.A.
REPORT OF THE DIRECTORS
28
|
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€ = Euro
m = million
bn = billion
Source of financial Information
The Directors’ Report includes financial data
and measures as derived from the Company’s
consolidated financial statements
for the year
ended 31 December
2021 and for
the year ended
31 December 2020, which
have been prepared
in accordance
with
International
Financial
Reporting
Standards
(IFRS).
In
addition,
it
includes
information
as
derived
from
internal
information
systems,
consistent
with
the
Group’s
accounting
policies,
such
as
the
selected
financial
information
for
the
Group’s
two main
reportable
segments a)
Greek Operations,
which incorporate
the business
activities originated
from the
Company,
the
Bank
and
the
Greek
subsidiaries
and
b)
International
Operations,
which
incorporate
the
business
activities
originated from the banks and the local subsidiaries operating in Bulgaria, Serbia,
Cyprus and Luxembourg (as described at the
relevant section on page 5).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
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CORPORATE GOVERNANCE STATEMENT
2021
1.
Adoption of the Hellenic Corporate Governance Code
In compliance with art. 17 of L.4706/2020 for
the listed companies (effective from 18.7.2021 onwards), which
stipulates that
listed companies should adopt and implement a corporate governance code, prepared by
a recognized and reputable body
and
following
a
relevant
resolution
of
Eurobank
Ergasias
Services
and
Holdings
S.A.
(Company,
Eurobank
Holdings,
Holdings
or
HoldCo)
Board
on
29.9.2021,
Eurobank
Holdings
has
adopted
and
implements
the
Hellenic
Corporate
Governance Code (the Code).
The
Code
which
is
available
on
Eurobank
Holdings’
website
(https://www.eurobankholdings.gr/en/corporate-
governance/corporate-governance-principles/), has been issued by the Hellenic Corporate Governance Council (HCGC) in
June 2021 and entered into force from 18.7.2021 onwards.
Given
that
the
Eurobank
Holdings
Group
(the
Group)
consists
mainly
of
Eurobank
S.A.
(Eurobank
or
Bank)
and
its
subsidiaries (the Eurobank group),
the present
Corporate Governance Statement
outlines how the principles
stipulated by the
Code were applied to both Eurobank Holdings and Eurobank
during 2021. The Eurobank Board has approved the adoption
and implementation of the Code on 30.09.2021.
2.
Board of Directors
6
2.1
General
The HoldCo is managed by a Board of Directors (Board or BoD) which is collectively responsible for the long-term success
of the HoldCo. The Board exercises its responsibilities in
accordance with the Greek legislation, international best practices
and the Bank’s
and HoldCo’s contractual obligations
to the HFSF under the
Tripartite Relationship Framework
Agreement
(TRFA) signed between
the HoldCo, the Bank and the Hellenic
Financial Stability Fund (HFSF), as well
as with its Articles
of Association and the shareholders’ General Meeting’s legitimate decisions.
The Board's role is to provide entrepreneurial
leadership to the Group within a framework of
prudent and effective controls
which enables risk to
be assessed and managed.
The Board sets the
Group's strategic goals, ensures that
the necessary
financial and human resources are
in place for the
Group to pursuit its
purpose and reviews management
performance. The
Board sets the Group's values and standards
and ensures that its obligations to
its shareholders and others are understood
and met.
All Directors must
act in what
they consider to
be the
best interests of
the Group, consistent
with their statutory
duties.
2.2
Composition of the Board
The
members
of
the
Board
are
elected
by
the
HoldCo’s
and
Eurobank’s
General
Meeting,
which
determines
the
exact
number of
the directors,
within the
limits of
the law
and of
the HoldCo’s
and Eurobank’s
Articles of
Association and
their
term of office and also designates the independent non-executive directors.
The
HoldCo’s
and
Eurobank’s
BoD
by
its
decision
dated
28
January
2021,
appointed
Ms.
Efthymia
Deli
as
the
new
representative of the HFSF to Eurobank Holdings and Eurobank BoDs in replacement of the resigned Mr. Dimitrios Miskou
and for an equal term to his remaining term, according to the provisions of Law 3864/2010 and the TRFA.
In
addition,
on
23.7.2021,
due
to
the
expiration
of
the
tenure
of
the
BoDs,
the
Annual
General
Meeting
(AGM)of
the
Shareholders of HoldCo
and Eurobank appointed
the new Board
of Directors with
three years term
(that in any
case extends
until the
date when
the Annual
General Meeting
for the
year 2024
will take
place) and
designated the
independent non-
executive members of the Board.
The new BoDs,
in their meeting
of 23.7.2021, decided
on their
constitution, on the
appointment of the
Chief Executive Officer
and Deputy Chief Executive Officers and on the determination of its executive and non-executive Directors.
It is noted that, for efficiency reasons, HoldCo’s BoD has the same composition as Eurobank’s BoD.
6
Information regarding the Board’s composition is also included
in relevant note of the consolidated accounts of
HoldCo and Eurobank
respectively
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
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Following the above,
the current
Board, as of
the date
of approval of
the here-in Statement,
consists of thirteen
(13) Directors
of whom, four
(4) executives, three
(3) non-executives, five
(5) independent non-executives
and one (1)
representative of
the HFSF, who has been appointed (as non-executive Director) in accordance with relevant legal requirements, as outlined
below:
Eurobank Holdings
Eurobank
First
appointment
End of
Term
First
appointment
End of
Term
Georgios P. Zanias
Chairperson, Non-Executive Director
Mar. 2019
2024
Mar. 2020
2024
Georgios K. Chryssikos
Vice-Chairperson, Non-Executive Director
Jun. 2014
2024
Mar. 2020
2024
Fokion C. Karavias
Chief Executive Officer
Jun. 2014
2024
Mar. 2020
2024
Stavros E. Ioannou
Deputy Chief Executive Officer
Apr. 2015
2024
Mar. 2020
2024
Konstantinos V. Vassiliou
Deputy Chief Executive Officer
July 2018
2024
Mar. 2020
2024
Andreas D. Athanassopoulos
Deputy Chief Executive Officer
Dec. 2020
2024
Dec. 2020
2024
Bradley Paul L. Martin
Non-Executive Director
Jun. 2014
2024
Mar. 2020
2024
Rajeev K. L. Kakar
Non-Executive Independent Director
July 2018
2024
Mar. 2020
2024
Jawaid A. Mirza
Non-Executive Independent Director
Jun. 2016
2024
Mar. 2020
2024
Alice K. Gregoriadi
Non-Executive Independent Director
Apr. 2020
2024
Apr. 2020
2024
Irene C. Rouvitha-Panou
Non-Executive Independent Director
Apr. 2020
2024
Apr. 2020
2024
Cinzia V. Basile
Non-Executive Independent Director
Dec. 2020
2024
Dec. 2020
2024
Efthymia
P.
Deli
Non-Executive Director,
HFSF Representative
Jan. 2021
2024
Jan. 2021
2024
The
short
CVs
of
the
HoldCo
and
Eurobank
Board
members
as
summarized
below
are
evidence
that
the
Boards’
composition reflects the knowledge, skills
and experience required for the execution of
their duties, in accordance with the
Board Nomination Policy and the HoldCo’s/Bank’s business model and strategy.
It is also noted that the directorships of the HoldCo and Eurobank Board members as at 31.12.2021 are outlined in Section
2.7, “Directorships of Board members”.
Georgios Zanias
Chairperson, Non-Executive Director
Membership in Board Committees:
Nomination Committee – Member
Strategic Planning Committee – Chairman
Year of birth: 1955
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
Dr. Zanias is a Professor of Economics of the Athens
University of Economics and
Business. He has extensive
research and scientific experience, with many
articles
published in books, collected works and international
scientific journals.
Dr. Zanias has served, among others, as a Board
Chairman of Piraeus Real Estate
SA (November 2017 – March 2019),
PICAR SA (February 2017 – March
2019) and
National
Bank
of
Greece
(2012-2015)
and
as
a
Board
Vice-Chairman
of
ETVA
Industrial Zones
SA (October 2018
– March 2019.
In addition,
Dr. Zanias has
served
as a Board member of American-Greek Chamber of
Commerce (since June 2019),
CHIPITA
SA
(June
2015
–
March
2019),
Hellenic
Exchanges
(2000-2001)
and
Geniki Bank (1996-1997).
In
the
past, Dr.
Zanias
had
also the
following significant
posts:
Chairman of
the
Board
in
the
Hellenic
Banking
Association
(HBA)
(2012-2015),
Member
of
the
Board
of
European
Banking
Federation
(2012-2015),
Member
of
the
Institute
International
d’
Etudes
Bancaires
(2012-2015),
Member
of
Monetary
Policy
Committee,
Bank
of
Greece
(May
2012
–
June
2012),
Minister
of
Finance,
Government
of
Greece
(May
2012
– July
2012),
Board
member
of
European
Financial Stability
Fund (2010-2012),
Board member
of Public
Debt Management
Office
(2009-2012),
Governor of Black
Sea Trade
and Development
Bank (2003-
2004),
alternate Governor of
European Bank
of Reconstruction and
Development
(2002-2004),
member
of
European
Securities
Committee
(2001-2002),
General
Secretary of the Ministry of Economy and Finance (2001-2004) and Chairman and
Scientific Director of National Economic Institute
(KEPE) (1998-2001).
He has
studied Economics
at the
Athens University
of Economics
and Business
(1978) and holds
a Master’s in Agricultural
Economics from University
of Reading
(1980) and a PhD in Economics from Oxford University
(1983).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
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Georgios Chryssikos
Vice Chairman, Non-Executive Director of the BoD
Membership in Board Committees:
Strategic Planning Committee – Member
Year of birth: 1972
Nationality: Hellenic
Number of shares in Eurobank Holdings:
2.880.000
Mr.
Chryssikos
is
the
Founder
and
Managing
Partner
of
Grivalia
Management
Company SA and also serves as Chairman of the
BoD of Grivalia Hospitality.
In the past, Mr.
Chryssikos had also the following significant posts:
Non-Executive
Director
of
the
BoD,
MYTILINEOS
(2017-2019),
Member
of
the
BoD,
Praktiker
Hellas
(2014-2019), Member
of the
BoD and
General Secretary,
British Hellenic
Chamber
of
Commerce
(2014-2017),
CEO,
Executive
Director
of
the
BoD
and
Chairman
of
the
Investment
Committee,
Grivalia
Properties
REIC
(2013-2019),
Non-Executive Director of
the BoD,
Lamda Hellix (2013-2017),
General Manager,
Executive Director of the BoD and
Chairman of the Investment Committee, Grivalia
Properties
REIC
(2008),
Investment
Manager
and
Member
of
the
Investment
Committee, Grivalia Properties REIC (2006).
He holds
an MBA
in Corporate
Finance &
Strategy from
the Columbia
Business
School,
USA,
an
MSc
in
Engineering
&
Construction
Management
from
UC
Berkeley, USA, as well as a MEng in Civil Engineering from the National Technical
University of Athens.
Fokion Karavias
Chief Executive Officer (CEO)
Membership in Board Committees:
Strategic Planning Committee – Member
Year of birth: 1964
Nationality: Hellenic
Number of shares in Eurobank Holdings:
7.569
Mr.
Karavias
joined
Eurobank
in 1997
and
served,
inter
alia,
as
Senior
General
Manager,
Group Corporate
& Investment
Banking and
Capital Markets
& Wealth
Management (2014-2015)
and Executive
Committee Member
(2014-2015), General
Manager and
Executive Committee
Member (2005-2013),
Deputy General
Manager
and Treasurer
(2002-2005), Head
of fixed
income and
derivative product
trading
(1997).
In
the
past,
Mr.
Karavias
had
also
the
following
significant
posts:
Treasurer
of
Telesis
Investment Bank (2000), Head of fixed
income products and derivatives in
Greece
of
Citibank,
Athens
(1994)
and
has
also
worked
in
the
Market
Risk
Management Division of JPMorgan NY (1991).
He
holds
a
PhD
in
Chemical
Engineering
from
the
University
of
Pennsylvania,
Philadelphia, USA and
an MA in
Chemical Engineering
from the same
university, as
well as a Degree in Chemical
Engineering from the National Technical University of
Athens. He has published articles on topics related
to his academic research.
Stavros Ioannou
Deputy Chief Executive Officer (CEO), Group Chief
Operating Officer (COO) & International Activities
Membership in Board Committees:
Strategic Planning Committee – Member
Board Digital and Transformation Committee -
Member
Year of birth: 1961
Nationality: Hellenic
Number of shares in Eurobank Holdings: 1.528
Mr. Ioannou holds
several other
posts in the
Eurobank Group
as member
of the BoD
of Eurobank
AD Beograd,
Serbia (since
November 2010),
Eurobank Bulgaria
AD
(since October 2015), Eurobank Cyprus
Ltd (since November 2015) and
is also the
Chairman of the BoD, BE-Business Exchanges SA (since
January 2014).
He is
currently the
Chairman of
the Executive
Committee in
the Hellenic Banking
Association (since June 2020) and
Non-Executive Director of Grivalia
Management
Company S.A.(since September 2019).
In the
past, Mr.
Ioannou had
also the
following significant
posts: Vice
Chairman,
Cardlink
SA
(2013-2015), Member
of
the BoD,
Millennium Bank,
responsible for
Retail, Private Banking and Business Banking
(2003), Head at Barclays Bank
PLC,
responsible for Retail Banking, Private Banking and Operations
(1990-1997).
He holds
an MA
in Banking
and Finance
from the
University of
Wales, UK
and a
Bachelor Degree in Business Administration from
the University of Piraeus.
Kostas Vassiliou
Deputy
Chief
Executive
Officer
(CEO),
Head
of
Corporate & Investment Banking
Membership in Board Committees:
Strategic Planning Committee – Member
Year of birth: 1972
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
Mr. Vassiliou
holds several other posts in the Eurobank
Group as Chairman of the
BoD of
Eurobank Factors Single
Member SA
(since December 2018),
Member of
the
BoD
of
Eurobank
Equities
Single
Member
SA
(since
March
2015).
He
also
serves as Vice-Chairman of the BoD of Eurolife
FFH Insurance Group Holdings SA
(since January 2021), Eurolife FFH Life Insurance SA (since
December 2020) and
Eurolife FFH General Insurance SA (since December
2020).
In the past, Mr. Vassiliou had also the following significant posts: Country Manager
for
Greece,
Cyprus
and
the
Balkans,
Mitsubishi
UFJ
Financial
Group,
London
(2000-2005)
and
Senior
Relationship
Manager,
Mitsubishi
UFJ
Financial
Group,
London (1998-2000).
He holds an
MΒΑ from Boston
University, USA and a BA
in Business Administration
from the Athens University of Economics and
Business.
Andreas Athanasopoulos
Deputy
Chief
Executive
Officer,
Group
Chief
Transformation Officer, Digital & Retail
Membership in Board Committees:
Strategic Planning Committee – Member
Board
Digital
and
Transformation
Committee
-
Member
In
the past,
Mr.
Athanasopoulos had
the following
significant posts:
Group Chief
Customer Officer
&
CEO Financial
services, Dixons
Carphone, UK
(2018-2020),
CEO
and
Vice
President,
Dixons
Carphone,
Greece
(Kotsovolos)
(2013-2018),
General Manager Retail Βanking, National Bank of Greece (2008-2013),
Chairman
of NBG Asset Management (2011-2013), Deputy
General Manager Small Business
Banking,
Eurobank
(Greece
&
New
Europe)
(2003-2008),
Consumer
Credit
Director, Piraeus Bank (Greece) (2000-2003).
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Year of birth: 1966
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
He holds a Postdoc on Decision
Sciences from the London Business
School, UK, a
PhD in Industrial and
Business Studies from the
University of Warwick, UK, an
MSc
in Statistics and Operational
Research from the University
of Essex, UK, a
BSc in
Applied Mathematics from the University of Patras, Greece. He has also served as
a
Professor
in
Financial
Services
of
the
Athens
Graduate
School
of
Business
(ALBA) (1997-2001)
and a
Senior Lecturer
of the
Warwick
Business School,
UK
(1992-1996) and has
published 35 scholarly
reviewed papers in top
rated academic
journals.
Alice Gregoriadi
Independent Non-Executive Director
Membership in Board Committees:
Board Risk Committee – Member
Remuneration Committee – Member
Nomination Committee – Member
Board Digital
and Transformation
Committee –
Vice
Chairman
Year of birth: 1968
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
In
the
past,
Mrs.
Gregoriadi
had
also
the
following
significant
posts:
Hellenic
Corporation
of
Assets
&
Participations
(HCAP),
Greece,
Non-Executive
Board
member,
Audit
Committee
member,
Corporate
Governance
and
Nominations
Committee
member
(February
2017
–
February
2021),
JPMorgan,
London,
UK,
various
posts
as
Managing
Director
(February
2010
–
May
2015),
IBOS
Board
Director (April 2010
– August 2014), ABN
Amro Bank, Amsterdam, Netherlands &
London, UK,
various
posts as
Managing /
Executive Director
(November 2001
–
December 2009), Citibank
NA, London,
UK, various
Senior Executive
Director posts
(February
1994
–
August
2001)
,
Clearing
House
Automated
Payments
System
(CHAPS), UK, Board Director (June 1997 – July 2000).
She
holds
an
MBA
from
the
Manchester
Business
School,
UK
(1991-1993),
including
an
MBA
international
exchange
program
from
the
E.J.Cox
School
of
Management, Texas,
USA –
(1992), an
Execuring Certification
on Blockchain
for
business
from
University
College
London
(2019),
an
Executive
Certification
on
eCommerce from the
Darden School of Buisness,
Virginia University,
USA (2000)
and
a
BSc
in
Business
Administration
from
the
The
American
College,
Athens,
(1987-1990).
Rajeev Kakar
Independent Non-Executive Director
Membership in Board
Committees:
Audit Committee – Member
Board Risk Committee – Chairman
Remuneration Committee – Vice Chairman
Board
Digital
and
Transformation
Committee
–
Member
Year of birth: 1963
Nationality: Indian
Number of shares in Eurobank Holdings: -
Mr.
Kakar
served
for
11
years
in
Fullerton
Financial
Holdings,
a
fully
owned
subsidiary of
Temasek Holdings, Singapore,
as: Global
Founder Member, Executive
Vice-President
(EVP),
Founder
Global
Management
Board
Member,
Executive
Vice-President
(EVP),
Global
Head
of
Consumer
Banking
and
Regional
Chief
Executive Officer (CEO) for
the Central & Eastern
Europe, Middle East and
Africa
(CEEMEA).
In the
past Mr.
Kakar has
also served
as: Founder,
Managing Director
and CEO
of Dunia Finance LLC,
UAE (2006-2018),
Chairman of the
BoD, Fullerton Securities
& Wealth Advisors,
based in New Delhi,
India (2008-2017), Member of
the Board of
Commissioners, Adira Dinamika Multi
Finance Tbk,
subsidiary of Bank
Danamon,
Jakarta,
Indonesia
(2010-2013)
and
he
also
held
several
senior
management
positions at the Citigroup.
He holds an
MBA from
the Indian
Institute of
Management Ahmedabad,
India (1985-
1987) and a
Bachelor of Technology
and Mechanical Engineering from
the Indian
Institute of Technology Delhi, New Delhi, India (1980-1985).
Bradley Paul Martin
Non-Executive Director
Membership in Board Committees:
Audit Committee – Member
Board Risk Committee – Member
Remuneration Committee – Member
Nomination Committee – Vice Chairman
Year of birth: 1959
Nationality: Canadian
Number of shares in Eurobank Holdings:
122.500
Mr. Martin
also serves as a
Vice Chairman in
Strategic Investments of the
Fairfax
Financial Holdings, where he has been a senior executive
since 1998.
In
the past
Mr.
Martin
has
also served
as: Member
of
the BoD,
Bank
of
Ireland
(2013-2017),
Chief
Operating
Officer
(COO),
Fairfax
Financial
Holdings
(2006-
2012) and Partner, Torys LLP law firm (before 1998).
He holds
a ΒΑ
from Harvard
University,
USA and
an LLB
from the
University of
Toronto, Canada.
Jawaid Mirza
Independent Non-Executive Director
Membership in Board Committees:
Audit Committee – Chairman
Board Risk Committee – Member
Nomination Committee – Member
Board
Digital
and
Transformation
Committee
–
Chairman
Year of birth: 1958
Nationality: Canadian
Number of shares in Eurobank Holdings:
-
In the
past, Mr
Mirza was
the Lead
Director for
9 years
with Commercial
International
Bank – Egypt as well as
Non-Executive Director with
South Africa Bank of Athens –
Johannesburg.
He
also
served
Commercial
bank
of
Egypt
(CIB)
as
Managing
Director & CEO Consumer Banking group and Group COO.
Mr Mirza also worked
with
ABN
AMRO
in
the
Netherlands for
15 years
as
Corporative Executive
Vice
President
in
senior
positions
in
the
Netherlands
and
Hong
Kong.
Mr
Mirza
also
worked with
Citibank from
1989-1993 and
he has
also served
as Non-Executive
Director
of
Atlas
Mara
(Sub
Saharan
African
financial
services
group
in
7
sub-
Saharan countries) where he chaired the Audit, Risk
and Compliance committee.
His
education
includes
programmes
as
"Executive
Development
Program"
from
Queens
University,
Kingston,
Canada,
"Director’s
Consortium"
from
Stanford
University Graduate School of
Business- USA and courses from
Wharton School of
Business.
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Rena Rouvitha Panou
Independent Non-Executive Director
Membership in Board Committees:
Nomination Committee – Chairperson
Audit Committee – Vice Chairperson
Remuneration Committee – Member
Year of birth: 1958
Nationality: Cypriot
Number of shares in Eurobank Holdings:
-
In
the
past,
Mrs.
Rouvitha
Panou
had
also
the
following
significant
posts:
Chairperson of the Board of The
Cyprus Telecommunications Authority CYTA (July
2016-July 2021),
Chairperson of
the
Management Committee
of the
Pensions &
Grants Fund of
the Personnel of
CYTA
(January 2019-July 2021), Board
Member
of
the
Cyprus
Employers
and
Industrialists
Federation
(May
2020-July
2021),
Independent Non-Executive
Director of Alpha
Bank Group subsidiaries
(Alpha Bank
Romania, Alpha Leasing in Greece, Alpha Bank Cyprus) and Chairperson/Member
of
Audit,
Risk,
Remuneration
Board
Committees
(November
2014-April
2020),
Chairperson of the Board of
The Cyprus Development Bank
(September 2008-April
2014), Manager/Group Divisional Director/Group General Manager/Board Member
at
The
Cyprus
Popular
Bank,
including
Managing
Director
of
Laiki
Bank
SA
in
Greece (October 1991-November 2006).
She holds a Master of Science in Management from the Massachusetts Institute of
Technology,
USA (Fulbright Scholar), an M.Phil.
Economics from the University of
Cambridge,
UK
and
a
BSc
Economics
(Honours)
from
the
London
School
of
Economics, UK
(Metcalfe Scholar).
Since May
2020 she
is a
Member of
the Advisory
Council of the School of Economics and Management,
University of Cyprus.
Cinzia Basile
Independent Non-Executive Director
Membership in Board Committees:
Audit Committee – Member
Board Risk Committee – Vice Chairman
Remuneration Committee – Chairman
Year of birth: 1971
Nationality:
Italian
Number of shares in Eurobank Holdings:
-
In the past, Mrs. Basile had also the following significant posts: she set up
and ran
Credit Suisse AG’s Investment Bank multi-asset
investment management business
(Custom Markets) in
the UK,
Ireland and Luxembourg,
Non-Executive Member of
the BoD and Chair
of the Operating and
Risk Committee of Credit Suisse
Custom
Markets, a sponsored management
company of Credit Suisse located
Luxembourg
(August 2011 – August 2017), Non-Executive Member of the BoD and Chair of the
Operating
of
Custom
Markets
plc
and
Custom
Markets
QIAF,
sponsored
management companies of Credit Suisse located in
Ireland (August 2011 – August
2017),
Non-Executive Member
of
the
BoD
and
Chair
of
the
Operating
and
Risk
Committee of Custom
Markets QIAF a subsidiary
of Credit Suisse
located in Ireland
(August 2011 – August 2017).
She holds a Juris
Doctor Degree from the
University of Rome “La Sapienza”,
Italy
and she was
awarded a
Thesis Scholarship
(derivative instruments),
London School
of Economics, UK.
Efthymia Deli
Non-Executive Director, Representative of the
Hellenic Financial Stability Fund under Law
3864/2010
Membership in Board Committees:
Audit Committee – Member
Board Risk Committee – Member
Remuneration Committee – Member
Nomination Committee – Member
Board Digital and Transformation Committee –
Member
Year of birth: 1969
Nationality: Greek
Number of shares in Eurobank Holdings:
-
In the past, Mrs. Deli had also the following
significant posts: Project Management
Office, New Hellenic Postbank (merged with Eurobank Ergasias)
(January 2014 –
August 2015), Deputy General Manager at Hellenic
Postbank (February 2012 –
December 2013), Interim Chief Executive Officer (CEO) at
T Bank (former Aspis
Bank) (July 2011 – December 2011), Deputy General Manager at Hellenic
Postbank (March 2008 – July 2011), Director, Strategic Analysis Division, (Marfin)
Egnatia Bank (September 2004 – March 2008), Director, Customer
Relationship
Management Division, Egnatia Bank (May 2002 –
September 2004), Senior
Advisor to the Management, Strategic Planning and
Economic Research Division,
National Bank of Greece (1999 – March 2002).
She holds a MSc in Analysis, Design and Management
Information Systems (MIS)
from the London School of Economics and Political
Science (LSE), UK and a BSc
in Statistics from the Athens University of Economics
and Business.
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The short CV of the Secretary to the BoD is the following:
Ioannis Chadolias
Secretary
to
the
BoD,
Head
of
Group
Company
Secretariat Sector
Secretary to the following
Board Committees:
Remuneration Committee
Nomination Committee
Strategic Planning Committee
Board Digital and Transformation Committee
Year of birth: 1970
Nationality: Hellenic
Number of shares: -
Mr. Chadolias is responsible to provide
effective company secretarial support
to the
Board and
Board Committees
of Eurobank
and Eurobank
Holdings as
well as
to
their most
important Executive
Committees, and
to safeguard
the integrity
of the
corporate governance framework of these companies.
Mr.
Chadolias has
served within
Eurobank Group
as Deputy
Company Secretary
(September 2016 – January 2021), Head of Group Corporate Governance
Division
(September
2009
–
August
2016)
and
Subsidiaries
Control
and
Compliance
Manager (December 2006 – September 2009).
He holds a Master of Science (MSc) in Project
Analysis, Finance and Investment
from the University of York (United Kingdom), a Bachelor Degree in Economics
from the Economic University of Athens (Greece) and
several professional
qualifications.
There are no
restrictions in the
re-election and cessation
of Directors in
the HoldCo’s and
Eurobank’s Articles of
Association.
In
all
cases
of
members
whose
membership
has
lapsed,
the
Board
is
entitled
to
continue
the
management
and
representation of the
HoldCo and Eurobank,
without being obliged
to replace the
lapsed members, provided
that the number
of
the
remaining
members
exceeds
half
of
the
number
of
the
members
prior
to
the
event
that
led
to
the
lapse
of
their
membership and, in any case, is not less than three (3).
According to the
HoldCo’s and
Eurobank’s Articles of
Association, in
compliance with
Law 4548/2018,
the Board
may consist
of three
(3) to fifteen
(15) members, while,
under the TRFA,
this range has
been specifically set
to be between
seven (7)
and fifteen (15) members (including the representative of the HFSF). In addition,
according to the TRFA, (a) the
number of
the Board’s
members must
always be odd,
(b) the
majority of the
directors must be
non
-
executive members
with at
least
half of the
non
-
executive members (rounded to
the nearest integer) and
in any case not
less than three (3)
(excluding the
representative
of
the
HFSF),
being
independent
non
-
executive
members,
in
accordance
with
the
provisions
of
Law 4706/2020 on corporate governance and the Joint ESMA and EBA
Guidelines on the “Assessment of the suitability of
members of
the management body
and key
function holders”
and (c)
the Board
should include
at least
two (2)
executive
members.
For
any
differentiations
from
TRFA’s
provisions
the
HFSF’s
prior
consent
should
be
received.
Furthermore,
according to
the HFSF corporate
governance review
criteria developed
as per
the relevant provisions
of Law
3864/2010,
the target size of the Board should be up to thirteen (13) members.
2.3
HFSF and Tripartite Relationship Framework Agreement (TRFA)
The
first
economic
adjustment
programme
for
Greece
required
the
establishment
of
the
HFSF,
funded
by
the
Greek
government out
of the
resources made
available by
the IMF
and the
EU, to
ensure adequate
capitalisation of
the Greek
banking system. The HFSF
was established in July
2010 and its duration,
originally set until 30
June 2017, was extended
until 30
June 2020
and most
recently until
31 December
2022, although
this may
be further
extended by
the Minister
of
Finance if the extension is necessary to enable the HFSF to achieve its objectives.
In Eurobank’s case,
the support provided
to it
by the HFSF
was through the
issuance of new
ordinary shares covered
entirely
by the
HFSF with the
contribution of
bonds issued by
the EFSF
and owned
by the
HFSF,
as resolved
by the
Eurobank’s
Extraordinary General meeting on 30 April 2013.
Reflecting the HFSF’s status as a
shareholder of Eurobank Holdings (it
currently owns 1.4% of Eurobank
Holdings’ shares),
and
following
the
completion
of
the
demerger,
Eurobank
Holdings,
the
Bank
and
the
HFSF
are
parties
to
a
Tripartite
Relationship Framework Agreement (TRFA) signed on
23 March 2020 and
amended on 3
February 2022. The TRFA allows
the HFSF to enforce against the Bank all the
rights which it had against the former
Eurobank Ergasias S.A. under an earlier
Relationship
Framework Agreement
(RFA)
between it
and Eurobank
Ergasias
S.A.Accordingly,
the TRFA,
among other
matters:
●
regulates the corporate governance of the Bank;
●
monitors the implementation of the Bank’s non-performing loan management framework; and
●
monitors the Bank’s performance in relation to non-performing loan resolution.
The TRFA also (i) deals with the material obligations of Eurobank Holdings and the
Bank under the RFA, and the switch of
the restricted
voting rights
that the
HFSF currently
has in
Eurobank Holdings
to full
voting rights
if those
obligations are
breached, (ii)
requires the
Bank’s risk
profile to
be monitored
against the
approved Group
Risk and
Capital Strategy,
(iii)
requires
the
Bank
to
obtain
the
HFSF’s
prior
written
consent
for
its
Group
Risk
and
Capital
Strategy
and
for
its
Group
Strategy,
Policy and
Governance (relating
to the
management of
the Bank’s
arrears and
non-performing loans)
and (iv)
establishes the duties, rights and obligations of HFSF’s Representative in the Board of each of Eurobank Holdings and
the
Bank (see
further below). The
TRFA and
the L. 3864/200
(HFSF Law) do
not preclude, reduce
or impair the
ability of the
management of
each of
Eurobank Holdings
and the
Bank to
continue to
determine independently,
among other
matters,
their respective commercial strategy and policy and to manage the Bank’s day-to-day operations.
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According to the HFSF Law and the TRFA, the HFSF has the following rights:
●
the right to vote at the General Meetings of Eurobank Holdings only for decisions concerning (i) the amendments of the
Articles
of
Association of
Eurobank Holdings,
including the
increase
or
reduction
of
the capital
or
the corresponding
authorisation
to its
Board, (ii)
mergers, divisions,
conversions, revivals,
extension of
term or
dissolution of
Eurobank
Holdings, (iii) the transfer
of assets (including the
sale of subsidiaries) or
(iv) any other
issue requiring increased majority
as provided for in the Greek law on Sociétés Anonymes;
●
the right to
appoint one director (the
“HFSF representative”) to the
Board of each of
Eurobank Holdings and the
Bank,
to appoint the HFSF representative to their respective Audit, Risk, Nomination and Remuneration Committees and also
to appoint
an observer
in the
Board and
in the
Audit, Risk, Nomination
and Remuneration
Committees with
no voting
rights of each of Eurobank Holdings and the Bank;
●
free access to the
books and records of
each of Eurobank Holdings
and the Bank for
the purposes of HFSF
Law, with
executives or consultants of its choice;
●
to review the annual self-assessment of the Board and the Committees of
each of Eurobank Holdings and the Bank for
the
purpose
of
identifying
weaknesses
and
improving
working
methods
and
effectiveness
and
the
responsibility
to
perform, assisted
by an independent
consultant of
international reputation,
an evaluation of
their respective
corporate
governance framework, Board and committees, as well as their respective members; and
●
the right
to monitor
the implementation
of the
Bank’s non-performing
loan management
framework and
of the
Bank’s
performance on non-performing loans resolution.
The HFSF representative has a number of rights, including to:
●
to call a Board meeting, a meeting of any Board committee of each of Eurobank Holdings
and the Bank he is a member
of and
a general
meeting of
shareholders of
Eurobank Holdings
and to
include items
on the
agenda of
any of
those
meetings;
●
to veto any resolution of the Board of each
of Eurobank Holdings and the Bank (i) related
to dividend distributions or the
remuneration policy and
proposed bonuses to Board
members and General
Managers or their deputies
(ii) which may
jeopardise depositors' interests or materially affect liquidity, solvency or, in general, the prudent and orderly operation of
the Bank (such as business strategy and asset/liability management), (iii) concerning
corporate actions resulting in any
matter for which
the HFSF would
have full voting
rights in a shareholder
meeting which may materially
impact HFSF’s
participation in
the share
capital of
Eurobank Holdings,
or (iv)
any decision
related to
any other
veto right
each time
provided by the HFSF Law;
●
to request the
postponement of a
Board meeting of each
of Eurobank Holdings
and the Bank or
the discussion of
any
item in order to receive HFSF’s Executive Board’s instructions or in case the notification of the date of a relevant Board
meeting, including the agenda and the relevant material, data or information and all supporting documents with respect
to the items of the agenda, are not sent at least three business days prior to such Board meeting;
●
to request an
adjournment of any
Board meeting of each
of Eurobank Holdings
and the Bank or
the discussion of
any
item by
up to
three business
days, if
it finds
that the
material, data
or information
and the
supporting documents
submitted
to the HFSF pursuant to the items of the agenda of the forthcoming relevant Board meeting are not sufficient; and
●
to approve the Chief Financial Officer (“CFO”) of each of Eurobank Holdings and the Bank.
In exercising these
rights, the HFSF
representative should take
into account the
business autonomy of
each of Eurobank
Holdings and the Bank.
Finally, the HFSF Law as in force, has introduced certain minimum requirements with respect to
the size, the structure and
the members
of the Board
and the Board
Committees of the
companies whose corporate
governance framework may
be
assessed by the
HFSF according to
the relevant provisions
of HFSF. In particular, Board
members must (i)
have a minimum
of ten
years of
experience as
senior executives
in banking,
auditing, risk
management or
management of
risk-bearing assets,
with
three years
of
experience, with
respect to
the non-executive
members,
as
board members
of
a credit
institution,
a
financial sector enterprise
or an international
financial institution, (ii)
not serve or
have been entrusted
during the last
four
years with
prominent public
functions, such
as heads
of state
or of
government, senior politicians,
senior government,
judicial
or military officials or prominent
positions as senior executives of
state owned corporations or
political party officials, and (iii)
have declared
any economic connections
with the
credit institution
prior to their
appointment. In addition,
the Board must
comprise
at
least:
(i)
three
experts
as
independent
non-executive
directors,
with
sufficient
knowledge
and
international
experience of at
least 15 years
with financial institutions
of which at
least three years
as members of
an international banking
group which is not
active in the Greek market
unrelated to any Greek credit
institution during the past
decade, which shall
chair all board committees, and (ii) one member with
at least five years of international experience and
specialisation in risk
or
NPL
management,
who
shall
be
responsible
for
NPL
management
at
board
level
and
shall
chair
any
special
board
committee for NPL management. Furthermore,
and based on the provisions
of article 10, par. 6 of the
HFSF Law, the HFSF
with the
assistance of
an independent
consultant has
developed additional
criteria as
to the
eligibility of
individual Board
members.
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2.4
Division of responsibilities
There is
a clear
division of
responsibilities at
the head
of the
HoldCo and
the Bank
between the
proper operation
of the
Board, attributed to the
Chairperson, and the day-to-day management and
control of the HoldCo’s and the
Bank’s business,
attributed to the CEO and the Deputy CEOs. The roles of Chairperson and CEO are not exercised by the same person.
Chairperson
The Chairperson of HoldCo/Bank’s
Board is a Non-Executive
Director and does not serve
as Chairperson of either the
Risk
or Audit Committees.
The Chairperson, who is
elected unanimously by all
the Board members
(including the Independent
Non-Executives) as per the L. 4548/2018 and the Articles of Association, chairs the Board and is responsible for the overall
effective and efficient operation and organization of its meetings.
The Chairperson is responsible to:
●
organize and coordinate the work of the Board
●
set the Board’s agenda and ensure that adequate time is available for discussion
of all agenda items, in particular
strategic issues
●
promote a culture of open-mindedness and constructive dialogue
●
facilitate and promote
the establishment of
good and
constructive relationships between
the members of
the Board
and the effective contribution of all non-executive members
●
ensure that
the Directors
receive accurate,
timely and clear
information and
that their
developmental needs
are
met, with the view of enhancing the effectiveness of the Board as a team
●
ensure continuous and clear
communication with the representatives
of the Ministry of
Finance, the BoG, the
HFSF
and of other public authorities
●
ensure that the Board as a whole has a satisfactory understanding of the views of the shareholders
●
ensure effective communication with all shareholders as well as the
fair and equitable treatment of their interests
and the development of constructive dialogue with them in order to understand their positions
●
work closely with the CEO and Corporate Secretary to prepare the BoD and to fully inform its members
The Board has also
elected a Vice-Chairperson. The
Vice-Chairperson who is a
Non-executive Director,
supports the Chair
and acts as a liaison between the Chair and the members of the Board.
It is noted that the Board has not appointed a Senior Independent Director.
CEO
The HoldCo/Bank’s
CΕΟ is accountable
for and manages
strategy development and
implementation in line
with the vision
of the Group. He is responsible for leading the organisation to the achievement of its objectives.
Executive Directors
The HoldCo/Bank’s Executive Directors (i.e. the HoldCo/Bank’s
CEO and Deputy CEOs) have responsibilities for the day-to-
day management
and control
of the Group
and the
implementation of
its strategy
defined by
the Board. In
addition, the
HoldCo/Bank’s
Executive
Directors
are
responsible
to
a)
consult
regularly
with
the
non-Executive
Directors
on
the
appropriateness of
the implemented
strategy,
b) to
provide updates
to the
Board (in
collaboration with
the other
senior
managers of HoldCo/Bank)
regarding the market
and any
other developments
that affect the
HoldCo/Bank and c)
inform
the Board without delay in writing,
either jointly or separately, by submitting a report with their estimates and
proposals, of
situations of crises or risks that are expected to influence the financial situation of HoldCo/Bank.
The HoldCo’s/Bank’s
CEO and Deputy
CEOs exercise their
responsibilities as these
are defined in
the HoldCo’s
and Bank’s
Internal Governance
Control Manuals
(IGCMs) which
are approved
by the
respective HoldCo’s/Bank’s
Board. The
HoldCo
and Bank IGCMs
which meet
the legal
and regulatory
requirements on
corporate governance
issues, describe
the overall
framework by which Eurobank Holdings and Bank are directed and controlled.
Non-Executive Directors
The non-Executive
Directors are
responsible for
the overall
promotion and
safeguarding
of the
HoldCo’s
and the
Bank’s
interests. In addition, the non-Executive Directors monitor and examine the strategy and its implementation, as well as the
achievement of the objectives, ensure effective
supervision of the executive members, including monitoring and
control of
their performance,
examine and
express opinions
on the
proposals submitted
by the
Executive
Directors on
the basis
of
existing information and approve, revise and oversee the implementation of the remuneration policy at Group level.
The non-Executive Directors may
request, in accordance with
HoldCo’s/Bank’s established,
internal procedures, to contact
the
executives
of
the
company’s
senior
management
through
regular
presentations
by
the
heads
of
departments
and
services.
The
non-Executive
Directors
meet
at
least
annually,
or
exceptionally
when
judged
appropriate
without
the
presence
of
executive members in order to discuss the performance of the latter. At these meetings the non-Executive Directors do not
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act as
a de
facto
body or
a committee
of the
Board. In
2021, the
HoldCo/ Bank
non-Executive
Directors met
twice, on
12.04.2021 and 25.06.2021.
The HoldCo and the
Bank encourage the non-executive
Directors to take care
of their information regarding
all the issues
that the respective Board deals with.
The
Independent
non-Executive
Directors
have
the
duty,
to
submit,
each
one
of
them
or
jointly,
to
the
Annual
or
Extraordinary General Meeting of Shareholders, their own reports other than those of the Board.
2.5
Operation of the Board
The way that the Board operates, including the manner in which it
meets and takes decisions and the procedures it follows,
taking into
account the
relevant provisions
of the
HoldCo’s/Bank’s Articles of
Association and
the mandatory legal
provisions,
is described in the HoldCo’s/Bank’s
IGCM, which is approved by the respective HoldCo’s/Bank’s
Board and is drawn up in
compliance with legal and regulatory requirements on corporate governance issues.
Board Meetings
The Board meets regularly every quarter and on an ad hoc basis, whenever the law or
the HoldCo’s and the Bank’s needs
necessitate it.
For each calendar
year and within
the 3rd Quarter
of the preceding
year, the Board adopts
an annual calendar
of Board and Board Committees meetings
and an annual action plan, which
is revised according to the developments and
needs, in order to ensure the correct, complete
and timely fulfilment of its tasks,
as well as the examination of all
matters on
which it
takes decisions.
All updates
/ amendments
in the
adopted annual
calendar of
Board and
Board Committees
are
promptly communicated to Board and Board Committees’ members so that they make the necessary planning.
The Board
meetings take
place given
at least
two (2)
business days’ notice
or at
least five
(5) business
days’ notice,
if a
specific
meeting
is
held
outside
the
HoldCo/Bank’s
registered
office,
as
per
Company
Law
4548/2018
provisions.
The
invitation must
also mention with
clarity the agenda
subjects, otherwise
a decision
is taken only
when all members
of the
Board are
present or
represented and
nobody objects
to the
convocation of
the meeting
and to
the taking
of decisions.
Submissions to the Board are normally circulated together with the agenda.
In
addition,
according
to
the
TRFA
provisions
the
Board
informs
the
HFSF’s
Representative
and
the
Observer
on
the
activities
and
the
decisions
of
the
Board
and
to
that
end
it
shall
notify
to
them
the
agenda
together
with
the
relevant
supporting
material
at
least
three
(3)
business
days
prior
to
the
Board
meeting,
otherwise,
unless
an
emergency
case
unforeseeable by
the HoldCo/Bank
exists, the
HFSF Representative
is entitled
to request
a postponement
of the
Board
meeting which shall be resumed the
earliest after three (3) business
days, provided that the aforementioned documents
are
provided to him/her
on time. In
case where an
item on the
agenda requires, as
per TRFA provisions, the
prior HFSF consent,
the HoldCo/Bank should not
submit it for approval
to the Board before
HFSF consent is granted,
unless otherwise agreed
between the
HoldCo/Bank and
HFSF.
For urgent
matters, the
Board may
approve matters
subject to
subsequent HFSF
consent.
Dissemination of Information
The Board utilises technological tools
with the necessary security specifications
for real-time information and to
facilitate the
connection and information of members.
The Chief Executive and senior management shall ensure that any information necessary for
the performance of the duties
of the members of the Board of Directors is available to them at any time.
Quorum in the Board Meetings
The
Board
is considered
to
be
in
quorum
and
meets
validly
when
at
least
half plus
one of
its members
are
present or
represented. The number of
the present or represented
members is not allowed
to be less than
three (3). For defining the
quorum any
resulting fraction
is omitted.
Decisions of
the Board
are taken
by absolute
majority of
the Directors
that are
present or represented. In case of parity of votes, the vote of the Chairperson of the Board does not prevail.
Board Decisions and Minutes
Decisions are taken following
discussions which exhaust the
agenda items to the
satisfaction of all members
present. Board
meetings minutes are
kept by the
Company Secretary of
the Board, are
approved at subsequent
Board meetings and
signed
by all members present.
Finally, the drawing up and signing of minutes by all the members
of the Board of Directors or their
representatives is equal to a decision of the Board of Directors, even if no meeting has preceded.
Company Secretary
The HoldCo/Bank
Board is
supported by
a competent,
qualified and
experienced Company
Secretary in
order to
comply
with
internal
procedures
and
policies,
relevant
laws
and
regulations
and
to
operate
effectively
and
efficiently.
The
HoldCo/Bank Company
Secretary is
a senior
management officer
who is
appointed and
dismissed
by the
Board on
the
proposal of the Chair.
The Company Secretary
is the head
of the Group
Company Secretariat which
is a sector
of the Bank.
Among others, the
Company Secretary is
responsible, in consultation
with the Chair,
for ensuring immediate,
clear and complete
information
of the Board and Board Committees, the inclusion of new members, the organisation
of General Meetings of Shareholders,
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the
facilitation of
communication of
shareholders
with
the Board
and the
facilitation
of communication
of the
Board with
senior management.
In addition, the
Company Secretary is
responsible for advising
the Board through
the Chairperson on
all governance matters
and ensuring that the Board procedures are complied with.
All members should have access to the advice and
services of the Company Secretary, who is responsible to facilitate their
induction and assist them with their professional development.
2.6
Attendance of Board members in the Board and Board Committees
In accordance with HoldCo and
Bank Board and Board Committees’
Attendance Policy,
the Board members are expected
to attend all Board and Board Committees’ meetings to which they are appointed.
It
is
accepted,
though,
that
the
Board
members
may
be
unable
to
attend
some
meetings
due
to
conflicts
with
other
commitments
or
other
unforeseen
circumstances.
In
this
context
and
in
line
with
the
TRFA,
a
mandatory
minimum
attendance of not less than 85% for each member should be achieved every
calendar year. Individual meetings up to 15%
can be missed only if a valid excuse is provided.
In addition, according to the L. 4706/2020, in case of unjustified absence
of a Board member in at least two (2) consecutive
meetings of
the Board,
this member
shall be
considered as resigned.
This resignation
is established
by a
decision of
the
Board of Directors, which replaces the member, in accordance with the procedure provided by the Law.
During 2021 the average Directors’ of HoldCo and Eurobank Board attendance was as follows:
Company
Meetings
Average ratio of
Directors’ attendance
2021
2020
2021
2020
HoldCo
19
23
99.6%
98%
Bank (from 20.3.2020)
20
22
99%
99%
During 2021, at individual level, the attendance of all the Directors to the Board, stood above
the 85% threshold. Moreover,
in all the cases of
missed Board attendances in the
period, representation proxies have been
provided, leading to an overall
attendance (physical and under representation) of 100%.
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In particular, the Directors’ attendance rates at the Board meetings in 2021 were the following:
Eurobank Holdings Board
Eurobank Board
Eligible
to attend
Attended in person
(# and %)
Eligible
to attend
Attended in person
(# and %)
Georgios Zanias,
Chairperson, Non-Executive Director
19
19
100%
20
20
100%
Georgios Chryssikos,
Vice-Chairperson, Non-Executive Director
2
19
19
100%
20
19
95%
Fokion Karavias,
Chief Executive Officer
3
19
18
95%
20
19
95%
Stavros Ioannou,
Deputy Chief Executive Officer
19
19
100%
20
20
100%
Konstantinos Vassiliou,
Deputy Chief Executive Officer
19
19
100%
20
20
100%
Andreas Athanassopoulos,
Deputy Chief Executive Officer
19
19
100%
20
20
100%
Bradley Paul Martin,
Non-Executive Director
19
19
100%
20
20
100%
Rajeev Kakar,
Non-Executive Independent Director
19
19
100%
20
20
100%
Jawaid Mirza,
Non-Executive Independent Director
19
19
100%
20
20
100%
Alice Gregoriadi,
Non-Executive Independent Director
19
19
100%
20
20
100%
Irene Rouvitha-Panou,
Non-Executive Independent Director
19
19
100%
20
20
100%
Cinzia Basile,
Non-Executive Independent Director
19
19
100%
20
20
100%
Efthymia Deli,
Non-Executive Director, HFSF Representative
1
18
18
100%
20
20
100%
Dimitris Miskou,
Non-Executive Director, HFSF Representative
1
1
1
100%
-
-
-
1
Mrs. Efthymia Deli was appointed as HoldCo and
Eurobank Board member, in replacement of Mr. Dimitrios Miskou, on 28.01.2021
2
Mr. Chryssikos provided representation proxy for the missed
meeting in Eurobank
3
Mr. Karavias provided representation proxies for the missed
meetings in Eurobank Holdings and Eurobank
The average Director’s attendance rates to HoldCo and Eurobank Board Committees, along with the individual attendance
rates per
Board Committee
are presented
separately, under the
subsection of
the present
Corporate Governance
Statement,
referring to the Board Committees.
2.7
Directorships of Board members
The
directorships
of
the
Board members
(including
significant
non-executive
commitments
to
companies
and
non-profit
organisations)
are
notified
before
their
appointment
to
the
Nomination
Committee
Chairperson
and/or
the
Nomination
Committee in accordance
with the HoldCo
and Bank External
Engagements Policy.
In parallel, the
Board members notify
changes regarding their directorships to the Bank Group Company Secretariat as soon as they occur.
The number of directorships which may be held
by the Board members at the same time comply
with the provisions of art.
83
of
the
Law
4261/2014
(Law),
according
to
which
the
Directors
shall
not
hold
more
than
one
(1)
of
the
following
combinations of directorships at
the same time: a)
one (1) executive directorship
with two (2) non-executive
directorships;
and b) four (4) non-executive directorships. This restriction is not applied to directorships within the Group. Bank of Greece
(BoG) as the
competent authority may
allow Board members
to hold one
(1) additional non-executive
directorship. Based
on their declared information, all members are compliant with the provisions of Law 4261/2014.
In addition, it is noted that directorships in organizations, which do not pursue predominantly commercial objectives, do not
count for regulatory purposes.
In the
context of
Board’s overall
effectiveness assessment
through which
the Nomination
Committee (NomCo)
assesses
annually the knowledge, skills, experience
and contribution of individual Board
members and of the Board
collectively and
reports to the Board accordingly,
the Board members’ directorships were also
reviewed. The relevant review revealed that
all Board members are compliant with the Law’s provisions.
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HoldCo
and
Eurobank
Board
Members’
Directorships
(including
Directorships
within
Eurobank
Group)
as
at
31.12.2021
Georgios Zanias -
Chairperson, Non-Executive Director
Foundation for Economic and Industrial Research (IOBE) –
Board Member
1
American – Hellenic Chamber of Commerce – Board Member
1
Georgios Chryssikos -
Vice-Chairperson, Non-Executive Director
Grivalia Management Company S.A. –
Executive Director
Grivalia Hospitality S.A. –
Non-Executive Director
Fokion Karavias -
Chief Executive Officer
Hellenic Bank Association (HBA) –
BoD Member
1
Eurobank Private Bank Luxembourg S.A -
Non-Executive Director
2
Stavros Ioannou
- Deputy Chief Executive Officer
Grivalia Management Company S.A. -
Non Executive Director
Be-Business Exchanges S.A. of Business Exchanges Networks and Accounting and Tax Services -
Chairman
Eurobank Direktna a.d. Beograd -
Non-Executive Director
2
Eurobank Cyprus Ltd -
Non-Executive Director
2
Eurobank Bulgaria AD -
Non-Executive Director, Supervisory Board
2
Konstantinos Vassiliou
- Deputy Chief Executive Officer
Hellenic Exchanges – Athens Stock Exchange S.A. -
Non-Executive Director
Marketing Greece S.A. -
Non-Executive Director
1
Eurolife FFH General Insurance Single Member S.A -
Vice Chairman, Non-Executive Director
3
Eurolife FFΗ Life Insurance Single Member S.A. -
Vice Chairman, Non-Executive Director
3
Eurolife FFH Insurance Group Holdings S.A.
- Vice Chairman, Non-Executive Director
3
Eurobank Equities Investment Firm Single Member S.A. -
Non-Executive Director
2
Eurobank Factors Single Member S.A. -
Chairman
2
Andreas Athanassopoulos
- Deputy Chief Executive Officer
Praktiker Hellas Trading Single Member S.A –
BoD Member
Bradley Paul Martin -
Non-Executive Director
Blue Ant Media Inc.-
Non-Executive Director
Resolute Forest Products Ltd –
Non-Executive Director
AGT Food and Ingredients Inc –
Non-Executive Director
Rajeev Kakar -
Non-Executive Independent Director
Gulf International Bank, Bahrain -
Non-Executive Director
4
Gulf International Bank, Kingdom of Saudi Arabia -
Non-Executive Director
4
Commercial International Bank (CIB) -
Non-Executive Director
UTI Asset Management Co. Ltd (UTIAMC) -
Non-Executive Director
Jawaid Mirza -
Non-Executive Independent Director
AGT Food and Ingredients Inc –
Non-Executive Director
Alice Gregoriadi -
Non-Executive Independent Director
Hellenic Blockchain Hub
-
Non-Executive Director
1
Cinzia Basile -
Non-Executive Independent Director
Creditis Servizi Finanziari S.p.A. -
Non-Executive Director
Brent Shrine Credit Union (trading name My Community Bank) -
Non-Executive Chair of the Board
1
Zenith Service S.p.A. -
Non-Executive Director
Nikko Europe Asset Management -
Non-Executive Director
Irene Rouvitha-Panou -
Non-Executive Independent Director
None
Efthymia P.
Deli -
Non-Executive Director, HFSF Representative
None
1
Organization that does not pursue predominantly commercial
objectives
2
Company that belongs to Eurobank Group and
along with directorships in HoldCo, Eurobank
and the other companies of the Group is considered
as 1
(one) directorship for each Board member
3
Company that belongs to Eurolife FFH Group
and along with directorships in the other companies of
that group, is considered as 1 (one) directorship
for
each Board member
4
Company that belongs to Gulf International Bank Group
and along with directorships in the other companies
of that group, is considered as 1 (one)
directorship for each Board member
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2.8
Conflicts of interest
The Group, based on the “Conflicts of Interest Policy”, which is approved by HoldCo’s and Eurobank’s BoD, has adopted a
series of Policies, procedures, systems and controls for identifying, preventing and managing conflicts of interest situations
arising from the business activities of the Group.
To
avoid
situations
of
conflict
of
duties,
the
Group
has
procedures
which
segregate
executive
and
non-executive
responsibilities of the members of the Board of Directors, including
the division of the responsibilities of the Chairperson
of
the Board of Directors with
the executive responsibilities of the
CEO. More specifically, by adopting appropriate procedures,
effective
segregation
of
duties
is
ensured,
so
as
to
avoid
cases
of
incompatible
roles,
conflicts
of
interest
between
the
members of the Board of Directors, Management and Executives and between the Group, its transacting parties
and/or the
malicious use of inside information or assets.
The Group should be able to identify whether an actual or potential conflict of interest exists
to an extent that would impede
the Board members’
ability to perform
their duties
independently and objectively
(independence of
mind) and, if
so, to assess
its materiality in order to be able to proceed with mitigating measures.
The Board members:
●
must comply with
the high standards
and principles of
professional ethics in
the performance of
their duties, apply
the
principles of the “Conflicts of Interest Policy” and refrain from any activity or conduct that is inconsistent with it.
●
according
to
article
97
par.
1
of
Company
Law
4548/2018,
are
prohibited
from
pursuing
personal
interests
that
run
counter to the interests of the Holdings (or the
Group) and must timely and adequately disclose to the
other members of
the Board of
Directors any personal/own
interests that may arise
from the Holdings’
transactions which fall
within their
line
of
responsibility,
as
well
as
any
other
potential,
perceived
or
actual
conflict
of
interests
that
may
exist
between
Holdings or
its affiliated
undertakings (under article
32 of
Law 4308/2014) and
themselves. Furthermore, they
have to
disclose to the
other members of
the Board, any
conflicts of interest
between Holdings and
their associated parties
under
article
99 par.
2
of the
Company Law
4548/2018.
Adequate disclosure
on behalf
of
the Board
members, as
per
the
above, is considered the one that includes a description of both the transaction and the own interests.
●
must ensure
the privacy
and the
confidentiality of
non-publicly available
information and
refrain from behaviors
that would
constitute market abuse and conflict of interest.
To
assist
with
this
framework,
Board
members
are
required
to
disclose,
on
an
ongoing
basis,
any
engagements,
directorships or interests they hold
with any legal entities outside the
Group and to provide the Group
with any information
(on a “best of
their knowledge” basis) that
may be required. Board
members are required to
disclose any issue which, taking
into consideration the Board’s agendas, may create a conflict of interest.
Board Members
are committed
to inform
the Group,
on an
ongoing basis
during their
tenure, for
any new
facts that
may
affect the initial assessment of the conflict of interest and independence of mind criterion.
All actual or potential conflicts of
interest at the Board level should
be adequately communicated, discussed, documented,
decided on
and duly
managed/mitigated by
the Group.
A member of
the Board should
abstain from
voting on
any matter
where the member has an identified conflict of interest.
2.9
Remuneration
Eurobank Holdings
has established
a Board
of Directors’
Remuneration
Policy
(Remuneration
Policy)
in line
with
related
requirements
of
the
Law
4548/2018
(the
Law)
(latest
version
of
the
Policy
approved
by
the
AGM
on
23.7.2021).
The
Remuneration Policy has been
created to satisfy the pertinent terms
of the Law (articles 109, 110, 111,
112 and 114) and
it also complies with relevant stipulations of the TRFA between Eurobank Holdings, Eurobank and the HFSF.
The Remuneration Policy
describes the key
components and
considerations of the
remuneration framework for
the members
of the Board and
its objective is to
safeguard that remuneration
is reasonable, gender neutral
and sufficient to retain
and
attract directors with appropriate skills and experience to develop and implement the Eurobank Holdings’ business strategy
and ensure its long-term interests and sustainability, while avoiding
excessive risk taking.
In addition, regarding the Remuneration Policy, it is noted that:
●
The process of its development is characterised by objectivity and transparency.
●
The
Board members
exercise
independent judgment
and discretion
when
approving and
recommending to
the
General Meeting its approval and generally when approving any remuneration, taking into account both individual
performance and the performance of the company.
Eurobank
Holdings
produces,
for
each
financial
year,
a
Remuneration
Report
concerning
the
remuneration
and
other
financial benefits
paid to each
Executive and
Non-Executive Directors
of the
Board during
the reporting
financial year,
in
line
with
the
requirements
of
Article
112
of
the
Law.
The
Eurobank
Holdings
Remuneration
Report
for
2020
(
https://www.eurobankholdings.gr/-/media/holding/omilos/grafeio-tupou/etairikes-anakoinoseis/2021/etairiki-anakoinosi-
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02-07-21/ekthesi-apodoxon-2020-en.pdf
) has
been approved
by the
AGM on
23.7.2021
and for
reasons of
transparency
and efficient information,
presents clearly the additional remuneration of the Board members participating in committees.
The remuneration of the executive Directors,
as well as the senior management of the company,
are related to the size of
the company, the extent of their
responsibilities, the corporate strategy, the company's objectives
and their realisation,
with
the ultimate goal of
avoiding excessive risk taking including
with respect to direct or
indirect sustainability risks and
creating
long-term value in the company.
In addition, regarding the remuneration of the executive Directors, it is noted that:
●
The Stock Options
that are provided
to them are
completely matured after
four (4) years
from the date
of granting.
●
They have not received
bonus during 2021, therefore
there was no need
for the Board to
examine the refund of
all or part of the bonus awarded to them, due to breach of contractual terms or incorrect financial statements.
Due to same
composition of the
Board of the
Eurobank Holdings with
the Board of
its subsidiary Eurobank
and since
the
Directors are
paid solely
by one
of the two,
that being the
Bank, any reference
to the remuneration
and /or the
benefits
payable to the Directors of Eurobank Holdings, applies to the relevant remuneration they receive as Directors
of the Bank.
The
2021
Board
and
key
management
remuneration
disclosure
is
included
in
note
45
of
the
consolidated
accounts
of
Eurobank Holdings and in compliance with the provisions of the Company Law 4548/2018 and
in order to ensure adequate
transparency
to
the
market
of
the
remuneration
structures
and
the
associated
risks,
is
uploaded
at
website
www.eurobankholdings.gr
.
2.10
Board Role and Responsibilities
The principal duties and responsibilities of the HoldCo / Bank’s Board are to:
●
review,
guide and
approve the
strategy (including
the revision
of opportunities
and risks
related to
the
strategy), major plans of action, risk policy, business and restructuring plans, set performance objectives,
monitor
performance,
oversee
and
approve
major
capital
expenditures,
acquisitions,
divestitures
and
formation of new entities including creation of special purpose vehicles
●
ensure
the existence
of
the necessary
financial
and
human resources,
as
well as
the
existence of
an
internal control system
●
approve the annual budget and monitor its implementation on a quarterly basis
●
approve the three-years business plan and monitor its implementation
●
review and
approve at
least annually
the risk
strategy and
risk appetite
and ensure
that it
is consistent
with the overall business strategy, capital plan, funding plan, restructuring plan and budget
●
receive and
discuss at
least on a
quarterly basis comprehensive
risk reports covering
all the main
risks
and providing an overview of the key changes in the risk profile versus risk targets and risk appetite
●
develop and
deliver the
objectives in
the agreed
restructuring plan
under the
HFSF Law
and for
taking
any action necessary to that effect
●
provide oversight to senior management
●
along with
the strategic
orientation, approve
corporate governance
practices and
corporate values
and
monitor their effectiveness and compliance with them, making changes as needed
●
along with
senior management,
set the
standard that
shape the
corporate culture
(which is
in line
with
values and strategic planning) and use tools and techniques for the integration of the desired culture into
the systems, policies, procedures, practices and
behaviors within the company at all levels.
●
approve the risk and capital strategy and regularly monitor that the CEO and the Executive
Board pursue
its implementation effectively
●
approve the organization chart and any amendments
●
approve
Board
and
Board
Committees
related
policies
and
other
policies,
as
required
by
legal
or
regulatory requirements or internal processes
●
ensure
that
rigorous
and
robust
processes
are
in
place
to
monitor
organizational
compliance
with
the
agreed strategy and risk appetite and with all applicable laws and regulations
●
select,
compensate,
monitor
and
when
necessary,
replace
key
executives
and
oversee
succession
planning
●
align key executive and board remuneration with the longer term interests of Group and its shareholders
●
ensure a formal and transparent board nomination and election process
●
monitor,
manage
and
approve
where
required
potential
conflicts
of
interest
of
management,
board
members and shareholders, including misuse of corporate assets
and abuse in related party transactions
●
ensure the
integrity of
accounting and
financial reporting
systems, including
the independent
audit, and
that appropriate systems of control are in place, in particular, systems for risk management, financial and
operational control and compliance with the law and relevant standards
●
review and monitor on a regular basis the Non-Performing Loans (NPL)
and Non-Performing Exposures
(NPE) performance against set targets
●
oversee the process of disclosure and communications
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●
determine the appropriate
level of remuneration
of the Board
and Board Committees’
members, both at
Company and Group level, pending final ratification by the respective General Assemblies
●
bind and monitor the executive administration on matters relating to new technologies and environmental
issues
●
identify the stakeholders that
are important, in
accordance with its
characteristics and strategy
and ensure
that mechanisms
are in
place for
the knowledge
and understanding
of their
interests and
the way
they
interact with Group strategy and also monitor their effectiveness
●
where necessary for the achievement
of the corporate objectives
and in accordance with the
company’s
strategy,
ensure the
timely and
open dialogue
with stakeholders
and the
usage of
different channels
of
communication for
each group of
stakeholders, with a
view to flexibility
and facilitation of
understanding
of the interests of both parties
2.11
Main issues the Board dealt with during 2021
In 2021, the HoldCo’s/Bank’s Board
has reviewed the corporate strategy,
the main risks to the business and the system of
internal controls;
In more detail, in discharging its responsibilities for 2021 the main issues Holdco’s/Bank’s BoDs dealt with related to:
Eurobank Holdings
Bank
a)
Governance:
●
appointment
of
the new
Board of
Directors
due to
the expiration of the
previous Board and approval
of
the Board Committees’ composition
●
preparation
and
convocation
of
the
Shareholders
General Meetings
●
annual
evaluation
of
the
Board
and
the
Board
Committees
●
review of
the attendance
of Directors
to the
Board
and Board Committees
●
CEO’s
performance
evaluation
for
2020
and
approval of
his financial
and non-financial
objectives
for 2021
●
approval of the Board Nomination Policy, the Board
and
Board Committees
Evaluation Policy,
the Key
Function Holders Selection and Appointment Policy
and the Conflict of Interest Policy
●
approval
and
further
submission
to
the
Annual
General
Meeting
for
approval,
of
the
'Board
and
Board
Committees'
fees
for
Non-Executive
Directors, the Remuneration Policy for
the Directors
and the Remuneration
Report for the financial
year
2020
●
approval of a stock option plan implementation
●
approval
of
HoldCo’s
Internal Governance
Control
Manual
●
update
on
HFSF’s
Evaluation
of
the
Board
of
Directors
●
approval of
the adoption
of the
Hellenic Corporate
Governance
Code
(legal
requirement
under
L.
4706/2020)
●
regular update on Board Committees’ matters
●
update on Company Secretary’s Report 2021
●
approval of Board and
Board Committees calendar
for 2022,
●
various remuneration issues
●
approval
and
further
submission
to
the
Annual
General
Meeting,
of
the
proposal
for
the
amendment
of
the
Tripartite
Relationship
Framework
Agreement
(TRFA)
allowing
for
the
extension of the
External Auditors tenure up
to five
(5) years.
a) Governance:
●
appointment
of
the new
Board of
Directors due
to
the expiration of the
previous Board and approval
of
the Board Committees’ composition
●
approval
of
the
Terms
of
Reference
of
the
Board
Risk Committee,
●
approval of the revised Group
Company Secretariat
Mandate
●
preparation
and
convocation
of
the
Bank’s
Shareholders General Meeting
●
annual
evaluation
of
the
Board
and
Board
Committees
●
review of
the attendance
of Directors
to the
Board
and Board Committees
●
CEO’s
performance
evaluation
for
2020
and
approval of
his financial
and non-financial
objectives
for 2021
●
approval
of
the
Board
Nomination
Policy,
the
Remuneration
Policy,
the
Group
Subsidiary
Board
Remuneration
Policy,
the
Board
and
Board
Committees
Evaluation
Policy,
the
Conflict
of
Interest
Policy
and
the
AML/CFT
and
Sanctions
Policy
●
approval
and
further
submission
to
the
Annual
General
Meeting
for
approval,
of
the
'Board
and
Board
Committees'
fees
for
Non-Executive
Directors
●
approval of
Eurobank Internal
Governance Control
Manual
●
update
on
HFSF’s
Evaluation
on
the
Board
of
Directors
●
update on Senior Executives succession plan
●
approval of
the adoption
of the
Hellenic Corporate
Governance Code
●
regular update on Board Committees’ matters
●
update on Company Secretary’s Report 2021
●
approval of Board and
Board Committees calendar
for 2022
●
various remuneration issues,
●
approval
and
further
submission
to
the
Annual
General
Meeting,
of
the
proposal
for
the
amendment
of
the
Tripartite
Relationship
Framework
Agreement
(TRFA)
allowing
for
the
extension of the
External Auditors tenure
up to five
(5) years
●
Approval
of
the
appointment
of
the
Outsourcing
officer
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●
Update from its international banking subsidiaries.
b)
Environmental, Social & Governance (ESG) issues:
●
update
on
the ESG
project
and on
the status
of
ESG initiatives
●
approval of the Board member
responsible for the
climate risk
b)
Environmental, Social & Governance (ESG) issues:
●
discussed the climate related risk roadmap
●
approval of the Board member responsible for the
climate risk
c)
Corporate and other actions:
●
approval of the sale
of 95% of
mezzanine and junior
notes of Mexico securitization (Project Mexico)
c)
Corporate and other actions:
●
●
approval of the merger of Eurobank A.D. Beograd
with Direktna Banka (Project Unison)
●
approval of the
Covered Bond
Issuance Programme
of the Bank of an amount of up to €5 billion
●
approval
of
the
Draft
Demerger
Agreement
of
“Eurobank
Ergasias
Leasing
Single
Member
Societe Anonyme” through
absorption and with
the
establishment of a new company
●
approval
of
the
sale
of
distressed
corporate
loans
(project Kalypso)
●
approval
of the
final agreement
for the
sale of
the
Merchant Acquiring Business (Project Triangle)
●
approval of the Hellinikon project (Project E).
d)
Capital adequacy:
●
approval
of
the
2021
Internal
Capital
&
Liquidity
Adequacy Statements
(CAS &
LAS) in
the context
of
the
Internal
Capital
&
Liquidity
Adequacy
Assessment Process (ICAAP & ILAAP 2021),
d)
Capital adequacy:
●
approval
of
the
securitization
of
the
Bank’s
receivables
from
portfolios
of
business
and
other
loans.
e)
Business monitoring:
●
approval
of
the
2020
annual
financial
statements
and the 2021 interim financial statements
●
approval
of
the
Annual
Budget
2022
and
the
3-
Years Business Plan for the period 2022-2024
●
discussion of business developments and liquidity.
e)
Business monitoring:
●
approval of
the 2020
annual consolidated
financial
statements
and
the
2021
interim
consolidated
financial statements
●
approval
of
the
Annual
Budget
2022
and
the
3-
Years Business Plan for the period 2022-2024
●
approval of the Group’s NPE Targets
for the period
2021-2023 and the
NPE management Strategy
●
update
on
significant
subsidiaries
activities
and
strategic priorities
●
review of business developments and liquidity.
f)
Risk Management and Internal Control:
●
update on
the Independent
Triennial
Evaluation of
System of Internal Controls (SIC)
per BoG Act 2577
●
update on significant audit and compliance issues
●
approval of
Group Risk
and Capital
Strategy,
Risk
Appetite Framework and Risk Appetite Statements
●
approval
of
the
2020
consolidated
Pillar
3
Report
(capital and risk management disclosures)
●
regular briefing on Audit Committee’s matters
●
update
on
significant
risk
issues,
including
the
Group
Chief
Risk
Officer’s
Annual
Report
for
the
year 2020
●
update
on
the
2020
Annual
Activity
Report
of
the
Audit
Committee
(as
per
L.
4548/2018)
before
submission to the Annual General Meeting
●
approval of new or
revised policies as per the
legal
or regulatory framework and internal processes
●
approval of the 2021 Group Recovery Plan.
f)
Risk Management and Internal Control:
●
update on
the Independent
Triennial
Evaluation of
System of Internal Controls (SIC)
per BoG Act 2577
●
briefing on the assessment on Internal
Audit Group
and Group Compliance annual regulatory reports
●
update on significant audit issues
●
update
on significant
compliance
issues,
including
AML end-to-end project status update
●
update on significant risk issues
●
approval of amendments relevant to
the Group Risk
and Capital Strategy and Risk Appetite Statements
●
approval
of
the
2020
consolidated
Pillar
3
Report
(capital and risk management disclosures)
●
update
on
credit
and
NPE
related
issues
through
various reports
●
regular
briefing
on
Board
Risk
and
Audit
Committees’ matters
●
update
on
the
2020
Annual
Activity
Report
of
the
Audit
Committee
(as
per
L.
4548/2018)
before
submission to the Annual General Meeting
●
approval
of
policies
as
per
the
legal
or
regulatory
framework and internal processes.
g)
Transformation Project:
●
discussed and reviewed the transformation plan
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●
discussed
various
issues
relevant
to
digitalization
and transformation project
Board Strategy Day in 2021
Following
the
Board
self-evaluation
for
the
year
2018,
the
BoD
decided
in
2019,
apart
from
the
annual
meeting
on
Eurobank’s
annual budget
and its
3-year business
plan, a
strategy
meeting, outside
the formal
confines of
the BoD
(no
formal minutes are kept),
to also take place
(on an annual basis),
so as the BoD
members to have ample
time for discussion
and deliberation on the top strategic initiatives that are relevant to Eurobank’s growth and its standing among its peers. For
this
purpose,
the
BoD Chairman
proposed
to
establish
the Board
Strategy
Day
and
the
BoD
members
agreed
with
his
proposal.
The Board Strategy Day in 2021 was divided in 2 days (on 30.09.2021 and 1.10.2021) and focused on Transformation and
Deep dives on key transformation streams.
2.12
Board and Board Committees Evaluation and Individual Evaluations
Board and Board Committees Evaluation conducted internally
In accordance with the HoldCo/Bank Board and Board Committees Evaluation policy (Evaluation Policy), the HoldCo/Bank
Nomination Committee (NomCo) has
the overall responsibility to assess
the structure, size, composition and
performance
of the
Board and
the Board
Committees and
make recommendations
to the
Board with
regard to
any changes
deemed
necessary. Therefore, it is NomCo’s responsibility to design and
coordinate the self-evaluation of the
Board’s and the Board
Committees’ effectiveness (Internal Evaluation).
The Internal
Evaluation is
based on
a self-evaluation
questionnaire. The
content of
the questionnaire
and the
evaluation
process can
be designed
and managed
by the
Chair of
the NomCo.
Alternatively,
the NomCo
may assign
this task
to a
member of the Bank’s personnel (for example the Group Company Secretary) and/or to an external consultant.
In this
context, the
2021 Internal
Evaluation was
carried out
using the
Board self-assessment
questionnaires as
primary
input. The input includes
the anonymized responses of
Board members to the questionnaires,
delivered through Diligent’s
secure web-based platform (Questionnaires module). In accordance with the Evaluation Policy, these questionnaires cover
the following areas:
●
Board’s performance in setting and monitoring strategy (including the business plan),
●
Board’s performance in overseeing, engaging with, evaluating, incentivizing and retaining key management personnel,
●
Board’s performance in overseeing risk management and internal control,
●
adequacy of the Board’s profile and composition,
●
adequacy of Board dynamics and functioning,
●
role and performance of the Board Chairperson,
●
adequacy of Board secretarial support,
●
effectiveness of Board Committees.
Regarding
the evaluation
of the
HoldCo/Bank
Board Committees,
it
is
noted
that the
Board members
responded
to the
questions of the Board self-assessment questionnaires
assigned to the particular Board Committee(s),
they are members.
Only the Bank Strategic Planning Committee (SPC) was excluded from the Internal Evaluation process and was
performed
through a separate process, as provided for in the SPC’s Terms
of Reference.
The results
of the
Internal Evaluation
which, overall,
concluded that
the HoldCo/Bank
Boards continued
to function
effectively
in 2021
as in
2020, were
reviewed by
NomCo which
updated accordingly
the Board.
In addition, the
results will
be taken
into account in
its work on
the composition, the
plan for the
inclusion of new
members, the development
of programs and
other
relevant
issues
of
the
Board.
NomCo
will
follow
up
on
any
corrective
actions
resulting
from
key-evaluation
findings/recommendations and will update the Board.
The
results
and
the
proposed
corrective
actions
for
strengthening
the
effectiveness
of
the
Board
focused
on
the
enhancement of the strategic overview of the BoD, by adding more strategic issues to the Board agendas and on the more
detailed and frequent oversight over Environmental, Social and Governance (ESG) matters.
Assessment
of
the
knowledge,
skills
and
experience
(KSE)
of
the
Board
collectively
as
well
as
the
KSE
and
contribution of individual Board members.
The NomCo has
also the responsibility
to assess the
knowledge, skills and
experience (KSE) of
the Board collectively
as
well as the KSE and contribution of individual Board members and to report to the Board accordingly.
Individual Evaluations
The individual evaluations (i.e. the assessment of the Board Chairperson, the assessment of NEDs and the assessment of
the
Executive
Directors)
take
into
account
the
status
of
the
member
(executive,
non-executive,
independent),
the
participation in committees, the
undertaking of specific responsibilities
/ projects, the time
devoted, the behavior and
the use
of knowledge and experience.
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A. Assessment of the Board Chairperson
The
Board
Chair’s evaluation
is
part
of
the
Internal
Evaluation
(mentioned
above)
and
is
conducted
by
all
other
Board
members via the Questionnaire for the self-evaluation of the Board’s and the Board Committees’ effectiveness.
The HoldCo/Bank Board Chair’s evaluation in 2021 remained very strong (similarly to the respective evaluation in 2020.
B. Assessment of the Non-Executive Directors’ (NEDs), excluding the Chairperson, contribution to the Board
The Board Chair
is responsible to
conduct the assessment
of the NEDs’
contribution to the
Board and present
the results
to
the NomCo.
The assessment of the NEDs’ contribution to the Board is performed in the following discrete steps:
●
The NomCo approves the NEDs self-evaluation questionnaire.
●
The questionnaire is distributed to
the NEDs. Responses are
strictly confidential and can only
be sent
to the Board Chair and/or those expressly mandated to assist in the task by him/her
●
The Board Chair holds confidential one-on-one interviews with each NED, using the individual NEDs
self-evaluation Questionnaire as an input.
●
The Board Chair presents an overall report on his findings to the NomCo.
●
The Board Chair’s views on NEDs performance and contribution of knowledge, skills and experience
are
presented
and
discussed
at
the
NomCo
also
during
the
process
of
developing
the
NomCo’s
proposals for discussing the (re)appointment / succession planning of individual Board members.
In
accordance
with
the
procedure
described
above,
the
2021
annual
assessment
of
the
NEDs’
contribution
to
the
HoldCo/Bank Board was
directed by the
Board Chair with
the use of
an individual self-evaluation
questionnaire consisted
of 10
questions aiming
to identify
the strengths
and areas
for improvement
of individual
Directors across
the following
5
areas:
●
Contribution to overall Board profile skillset
●
Board participation and quality of contributions to Board deliberations
●
Punctuality and attendance
●
Team
Spirit and demeanor
●
Independent Thinking and Constructive Challenge
The 2021 annual assessment of the NEDs’
contribution to the HoldCo/Bank Board demonstrated that the
NEDs adequately
meet expectations for effectively accomplishing their role as Directors of the HoldCo/Bank.
C. Executive Directors’ Performance Evaluation
The Executive
Directors’ Performance
Evaluation (i.e
CEO and
Deputy CEOs)
is conducted
through a
separate process,
involving the
CEO and
the Nomination
and the
Remuneration Committees,
annually,
on the
basis of
the qualitative
and
quantitative Key Performance Indicators, as these are approved every year by the Non-Executive Directors.
Regarding the
Evaluation of
the CEO,
in accordance
with the
TRFA,
the Remuneration
Committee proposes
to the
Non-
Executive Directors
of the
HoldCo’s/Bank’s
BoD for
their approval
the Key
Performance Indicators
(KPIs) relevant
to the
remuneration of the Bank’s
CEO and evaluate the CEO’s
performance in light of these
KPIs. The results of the
evaluation
are communicated to the Chief Executive and taken into account in determining his remuneration.
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Board Profile Matrix
The Board Profile
Matrix (BPM) is
an instrument to identify
the specific characteristics
the Board needs
on the basis
of its
strategic objectives and risk management priorities, purposed to track the current profile of the
Board against the desirable
KSEs, through the assessment of the existing KSEs of all Board members (Executives and Non-Executives Directors).
The BPM includes
a collective set of
each Board member’s
skills, work experience,
geographic and industry
expertise which
are organized via the following
profile attributes:
a) Banking and financial industry expertise:
Recent experience as senior
executives, executive committee or executive board members of banks, other financial institutions
or international financial
institutions., b) Legal, regulatory and governance understanding:
Possession of an understanding of the banking regulatory
environment (including European regulation)
and prudential supervision framework;
corporate governance matters; and
of
HoldCo’s, Bank’s and their Boards’ legal responsibilities,
c) Strategic perspective: Ability to
analyze the prevailing economic
context
and
trends,
offering
a
long-term
strategic
perspective
to
guide
business
planning,
d)
Financial
expertise:
Solid
understanding of auditing procedures and financial
accounting issues, e) Risk management:
Ability to identify,
assess and
monitor the
main categories
of risk
facing the
HoldCo and
the Bank,
with a
particular emphasis
on the
management and
restructuring of non-performing exposures
, f) Leadership and
organization experience:
Solid practical experience
in leading
and
managing
change
in
large
organizations,
demonstrating
an
understanding
of
performance
management,
talent
development
and
compensation
issue,
g)
International
experience:
An
international
perspective
on
economic
and
geo-
political developments and
global banking trends,
which may potentially
impact the HoldCo’s
and Bank’s business
across
its geographic markets
of operation, h)
Information Technology
and Security:
Ability to understand information
technology
practices, digital technologies,
digitized data, trends,
issues and
challenges and to
detect and manage
the information/digital
security risks, i) Environmental, Social and Governance (ESG):Ability to understand ESG issues, including management of
Eurobank’s carbon footprint,
secure that
there are
systems in
place which
ensure accountability
as well
as in
order to
identify,
assess and monitor the risks of any
negative financial impact stemming from impacts of
ESG factors. (j) Gender:
As per the
Board of Directors Diversity Policy and
k) Independence:
As per
the "independence" definition provided in local
regulations,
in
the
European
Commission
recommendations
(2005/162/EC)
and
in
the
Joint
ESMA
and
EBA
Guidelines
on
the
assessment of
suitability of members
of the management
board and
key function holder
under Directive
2013/36/EU and
Directive 2014/65/EU (Joint ESMA and EBA Guidelines).
In February 2022, the
HoldCo/Bank NomCo reviewed the
BPM and concluded that
the desired KSEs of
HoldCo/Bank Board
are overall met in all categories. Subsequently the HoldCo/Bank Board was updated accordingly.
Externally Facilitated Evaluation
In accordance with the
HoldCo/Bank Board and Board
Committees Evaluation policy,
at least once every
three years, the
Evaluation
may
be
conducted
through
an
external
consultant
appointed
to
facilitate
the
process
(Externally
Facilitated
Evaluation),
taking
also
into
consideration
the
relevant
legal
and
regulatory
requirements.
The
HoldCo/Bank
NomCo
is
responsible to appoint
the Consultant following
a transparent selection
process. In addition,
among others, the
NomCo is
responsible
to
review
the
external
consultant’s
report
which
shall
contain
findings
and
detailed
recommendations
and
present its assessment to the Board.
In accordance
with the
art. 10
of L.
3864/2010 as
in force,
the HFSF
is also
entitled to
perform its
own evaluation
of the
corporate governance arrangements and
of the Board and
its Committees, through independent
consultants of international
reputation and
established experience
and expertise.
The evaluation
involves the
size, organization,
structure, and
allocation
of tasks
and responsibilities
within the
Board and
its Committees
in view
of the
business needs
of the
Bank/HoldCo and
extends also to
the individual members
of the Boards
and its Committees.
In addition, the evaluation
is carried out
based
on
the
criteria
set
out
by
Greek
Law
3864/2010,
the
TRFA,
as
well
as
on
criteria
that
the
HFSF
establishes
with
the
assistance of the independent consultant and are
updated at least every two years or
more often if there material change in
the financial potion of HoldCo/Bank.
Based
on
this
evaluation,
HFSF
develops
specific
recommendations
for
improvements
and
changes,
if
needed,
in
the
corporate governance
of HoldCo /
Bank. The Board
members cooperate with
the HFSF and
its consultants in
conducting
the review and provide necessary information for the purposes of the review.
Within the context of HFSF’s
3rd Corporate governance review of
the Greek systemic banks and evaluation
of their Board
of Directors,
the HFSF conducted
in early
2021, with the
facilitation of Fidelio
Partners, an external
Board evaluation,
the
overall result of which was positive and the key areas for further focus were the following: a)
the strengthening of the BoD’s
oversight on the strategic
transformation, b) the enhancement
of the succession planning,
c) the BoD Committees’
structure
and further effectiveness, d)
the demonstration of the process for
challenge and debate in the
BoD and its Committees, e)
the
BoD’s
oversight
on
the
shareholders
and
stakeholders
engagement
and
f)
the
reinvigoration
of
the
BoD
learning
programme. The results of the evaluation and Fidelio’s recommendations will be taken
into account for the enhancement of
the overall governance framework.
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2.13
Directors’ Induction and Continuous Professional Development Process
All new Board members appointed during 2021)
have received a full and formal Induction Program
whose main objectives
were to (a) communicate
HoldCo/Bank’s vision and culture,
(b) communicate practical
procedural duties, (c)
reduce the time
taken for
them to
become productive
in their
duties, d)
assimilate them
as welcomed
members of
the Board,
e) become
familiar with the HoldCo/Bank’s organizational structure and f) give them an understanding of HoldCo/Bank’s business and
strategy
and
the
markets
in
which
it
operates,
a
link
with
the
HoldCo/Bank’s
people
and
an
understanding
of
its
main
relationships. Also, the new Board
members, upon their appointment received
a Manual of Obligations towards
Supervisory
Authorities and the
HoldCo/Bank, aiming to
inform them on
their main obligations
under the local
regulations and the
Board's
procedures, while meetings and presentations were arranged with the HoldCo/Bank’s Key
Executives, in order for the new
Directors to acquire a real overview of the HoldCo/Bank.
Furthermore, given
that the
HoldCo/Bank acknowledges
the need
to provide
resources for
developing and
refreshing the
knowledge
and
skills
of
the
Directors,
during
2021
and
in
the
framework
of
its
Continuous
Professional
Development
program, all the Board members a) received formal training on ESG Transformation in Financial Services and on AML/CTF
and Sanctions issues, b) received regular
updates, including reports and presentations, from
senior management regarding
the operations
and strategic
targets of
business units
and c)
were updated
on a
regular basis
on risk,
audit, compliance,
financial, human resources,
legal and
regulatory issues,
and d)
received regular
and ad-hoc
research and
economic bulletins
prepared by Eurobank’s Economic Analysis and Financial Markets Research Division.
3.
Board Committees
The Boards of HoldCo/Bank are assisted in carrying out
their duties by Board Committees to whom they delegate some of
their responsibilities. In addition, the Boards approve their terms
of reference, receive regular and ad hoc reports from them
and assess their performance as per the provisions of the Board and Board Committees Evaluation Policy.
According
to
the
TRFA,
the HFSF
appoints
its
Representative
as
well
as
its
Observer
(who
has
no
voting
rights
in
the
Board’s
Committees)
or
replaces
them
with
a
written
request
addressed
to
the
Chairperson
of
the
Board
and
their
appointment is
completed immediately
from the
receipt by
the HoldCo/BoD
of the
HSFS’s written
request and
no further
procedures
are
required.
Pursuant
to
the
TRFA,
the
HFSF
Representative
has
the
right
to
participate
in,
request
the
convocation of, and
include items on
the agendas of
the Audit Committee,
Board Risk Committee,
Remuneration Committee
and Nomination
Committee. In
addition, HFSF
is entitled
to the
assistance by
an independent
consultant of
international
reputation and established experience
and expertise, to perform
its own evaluation of
the Board Committees, in
accordance
with the article 10 of L. 3864/2010 as in force.
According to the
TRFA provisions, the
members of the
Audit, Board Risk,
Remuneration and
Nomination Committees should
be at
least three
(3) and should
not exceed 40%
(rounded to the
nearest integer) of
the total number
of Board members,
excluding the representative of the
HFSF.
The Committees’ Chairpersons should be
independent non-executive members
and shall meet the requirements provided for in Law 3864/2010. The Committees’ members should be non-executives
with
the majority of them, excluding
the representative of the HFSF, independent non-executives, except for
the Audit and Board
Risk Committees
where 75% and
1/3, respectively, of their
members
(excluding the representative
of the
HFSF and rounded
to
the
nearest
integer)
should
be
independent
non-executives.
For
any
deviations
from
the
TRFA
provisions,
the
prior
consent of HFSF should be received.
Following the incorporation into the Greek legal framework
of the new Directive (EU) 2019/878 (known as
CRD V), as well
as the licensing of the
HoldCo as a financial
holding company by the
ECB, the HoldCo has
scheduled to establish the
Board
Risk Committee and the Remuneration Committee
in 2022. To be noted that since the demerger of
Eurobank Ergasias S.A.
on 20.3.2020, there was no regulatory requirement neither a business need for the establishment of those committees.
3.1
Audit Committee
7
The primary function of the Audit Committee (AC) is
to assist the Board in discharging its oversight
responsibilities primarily
relating to:
●
the review
of the
adequacy of
the Internal
Control and
Risk Management
systems and
the compliance
with rules
and
regulations monitoring process,
●
the review of the financial reporting process and satisfaction as to the integrity of the HoldCO’s Financial Statements,
●
the External Auditors’ selection, performance and independence,
●
the effectiveness and performance of the Internal Audit and of the Compliance function.
In addition,
in the
context of
AC’s responsibility
to safeguard
External Auditors’
independence, the
AC ensures
that the
nature of non-audit services, prior to their being undertaken by the External Auditors, has been reviewed and approved
as
required and that there is proper balance between audit and non-audit work in accordance with Group’s / Bank’s policy on
External Auditors’ Independence.
7
HoldCo/Bank’s
Audit
Committees’
Terms
of
Reference
may
be
found
at
the
HoldCo/Bank
websites
(
www.eurobankholdings.gr
&
www.eurobank.gr
).
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According to
article 44
of the
Law 4449/2017,
as recently
amended by
Law 4706/2020,
the AC
could be
either a
Board
Committee, or a mixed Committee consisted
of Board members and third parties,
or an independent Committee consisted
exclusively from third parties. The type of the
Committee, the tenure, the number and the qualifications of
its members are
decided by
the Shareholders’
General Meeting.
In case
the AC
is a
Board Committee,
its composition
is decided
by the
Board.
In
all
other
cases
(mixed
or
independent
Committee),
the
members
are
decided
by
the
Shareholders’
General
Meeting.
AC Membership/Composition
The
HoldCo/Bank’s
Audit Committees
are Committees
consisted exclusively
by
Board members
and their
compositions
have been approved by the General Meeting
of the Shareholders (as per the legal
framework prior to the provisions of the
new
Law
4706/2020),
following
the
recommendation
of
the
Nomination
Committees
to
the
Boards.
The
tenure
of
the
Committee members
coincides with
the tenure
of the
HoldCo/Bank’s Boards,
with the
option to
renew their
appointment,
but
in
any
case
the
service
in
the
Committee
should
not
be
more
than
nine
(9)
years
in
total.
The
Chairperson
of
the
Committees
is
appointed
by
the
members
of
the
Committee,
while
the
Committee’s
members
may
also
appoint
a
Vice
Chairperson.
The HFSF appointed an Observer in the Audit Committees, in line with the requirements of the TRFA.
All AC members have sufficient knowledge
in the field of HoldCo/Bank’s activities and the
necessary skills and experience
to
carry
out
their
duties.
The
Chairperson
of
the
Audit
Committees
and
one
(1)
more
member
are
the
appointed
financial/audit/risk expert members.
The
Audit
Committees
consist
of
six
(6)
non-executive
Directors,
four
(4)
of
whom
are
independent,
including
the
Chairperson. One
(1) of
the Audit
Committee members
is the
HFSF Representative.
In particular,
the HoldCo/Bank’s
AC
composition is outlined below:
AC Chairperson:
Jawaid Mirza,
Non-Executive Independent Director of the Board
AC Vice-Chairperson:
Irene Rouvitha-Panou,
Non-executive Independent Director of the Board
AC Members:
Bradley Paul Martin,
Non-Executive director of the Board
Rajeev Kakar,
Non-Executive Independent Director of the Board
Cinzia Basile,
Non-Executive Independent Director of the Board
Efthymia Deli,
Non-executive Director of the Board, HFSF Representative
It is noted that:
a) On 28.1.2021, following NomCo’s recommendations,
the BoD decided Ms. Efthymia Deli,
new HFSF Representative and
Non-Executive member of the Board, to be appointed as AC member, in replacement of the resigned Mr. Dimitrios Miskou,
and
b) On 23.7.2021, taking into consideration the provisions of article 44 of law 4449/2017,
as amended and currently in force,
and further
to a)
the decision
of the
AGM of
Shareholders as
of 23.07.2021
regarding the
type, composition
and term
of
office
of
the
AC
and
b)
the
Board
decision
of
23.07.2021
regarding
the
membership
of
the
AC
following
a
relevant
recommendation by the NomCo of 23.06.2021, the AC decided on its constitution
and on the appointment of its Chairman.
Compared to the previous AC
composition the following amendments in
the composition of the
AC took place: 1)
Ms. Cinzia
Basile
was
appointed
as
AC
member,
2)
Ms.
Irene
Rouvitha-Panou,
previous
AC
member,
was
appointed
as
Vice-
chairperson,
in
replacement
of
Mr.
Bradley
Paul
Martin,
previous
AC
Vice-chairperson
and
3)
Mr.
Bradley
Paul
Martin
remained AC member.
AC Meetings
The Audit Committee of the Bank
meets at least four (4) times
per year or more frequently, while HoldCo’s Audit Committee
meets at least eight
(8) times or more
frequently, as
circumstances require, report to
the Board on a
quarterly basis on its
activities, submits the minutes of its meetings to the Board and submits annually
an Activity Report of the Audit Committee
to the Board.
Quorum in the AC Meetings
The Audit
Committee’s meeting
is in
quorum and
meets validly
when half
of its
members plus
one are
present or
represented,
provided
that
at
least
three
(3),
including
the
Chairperson
or
the
Vice
Chairperson,
are
present.
Each
member
of
the
Committee may validly represent only one of
the other Committee members. Representation in the Committee may
not be
entrusted to persons other than the members thereof.
AC Decisions
The Audit Committee
resolutions are
validly taken by
an absolute majority
of the members
who are
present and represented.
In case
of a
tie of
votes, the Chairperson
and in
case of
his/her absence
the Vice
Chairperson has
the casting
vote. The
Board is informed whenever a decision of the Audit Committee is not reached unanimously.
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Attendance to the AC Meetings
During 2021 the attendance details for the Audit Committee were as follows:
Company
Meetings
Average ratio of
Directors’ attendance
2021
2020
2021
2020
HoldCo
11
9
95%
98%
Bank (from 20.3.2020)
12
6
95%
97%
The Directors’ individual attendance rates at the AC meetings in 2021 were the following:
Eurobank Holdings AC
Eurobank AC
Eligible
to attend
Attended in person
(# and %)
Eligible
to attend
Attended in person
(# and %)
Jawaid Mirza,
AC Chairperson
11
11
100%
12
12
100%
Irene Rouvitha-Panou,
AC member until 23.7.2021 and AC Vice-
Chairperson afterward
11
11
100%
12
12
95%
Bradley Paul Martin, AC
Vice-Chairperson
until 23.7.2021 and
simple AC member afterward
11
9
82%
12
10
83%
Rajeev Kakar,
AC member
11
10
91%
12
11
92%
Cinzia Basile,
AC member since 23.7.2021
5
5
100%
6
6
100%
Efthymia Deli,
AC member since 28.1.2021
11
11
100%
12
12
100%
It is noted
that Mr.
Bradley Paul Martin and
Mr. Rajeev
Kakar provided representation proxies
for each missed meeting
in
HoldCo/Bank AC, leading their overall attendance rate (physical and under representation) at 100% in HoldCo/Bank AC.
AC Secretary and Minutes
The
Audit
Committee
appoints
its
Secretary,
who
reports
to
the
Group
Company
Secretariat
and
cooperates
with
the
Chairperson
of
the
Committee.
The
Secretary
is
responsible
to
minute
the
proceedings
and
decisions
of
all
Audit
Committees’
meetings, including
the names
of those
present and
in attendance
and the
action plans
and follow
ups for
assignments,
as well as for the issuance of extracts. Decisions, actions and follow ups are disseminated to the responsible
parties, as required.
AC Terms of Reference (ToR)
The
Audit
Committee’s
ToR
are
reviewed
every
two
(2)
years
and
revised
if
necessary,
unless
significant
changes
necessitate earlier revision. The ToR
are approved by the Board.
AC’s Performance Evaluation
The
Committee’s
performance
is
evaluated
annually
according
to
the
provisions
of
HoldCo/Bank
Board
and
Board
Committees Evaluation
Policy.
According to
the Committee’s
2021 self-evaluation
it was
determined that
the Committee
continuous
to
function
effectively,
especially
in
the
areas
of
leadership,
and
AC
Chairperson’s
contribution
in
organizing/coordinating meetings and encouraging critical discussions in meetings.
AC’s Activity in 2021
For 2021, NomCo has amongst others:
Eurobank Holdings
Bank
●
reviewed
and
discussed
reports
with
information
relating
mainly
to
the
Internal
Audit
and
Compliance
issues,
●
acknowledged
the
independent
triennial
evaluation
of
the
System
of
Internal
Controls
(SIC)
per
BoG
Act
2577/2006,
●
proposed
to
the
BoD
for
approval
the
Internal
Governance Control Manual,
●
approved the revised Compliance Mandate,
●
reviewed,
approved
and
further
submitted
to
the
BoD
the revised Conflict of Interest Policy,
●
reviewed and approved the
Anti-Bribery and Corruption
Policy and the Antitrust Policy,
●
discussed
with
Management,
Internal
Audit
and
External Auditors issues relating
to the financial results,
●
reviewed
and
cleared
the
financial
statements
and
other financial reports and trading updates prior to their
release,
●
discussed
with
Management
the
implementation
of
corrective
actions
to
recommendations
made
by
Internal
and
External
Auditors
and
Regulatory
Authorities,
●
reviewed
and
discussed
reports
with
information
relating
to
the
System
of
Internal
Controls,
including
quarterly
reports
from
Internal
Audit
Group,
Compliance, Operational Risk Sector, Clients Relations
Office, etc.,
●
ensured
that
an
annual
evaluation
of
the
System
of
Internal
Controls has
been performed,
by the
Internal
Audit Group for the
year 2020. Results are
documented
in the latter’s report
of the System of
Internal Controls.
The Audit Committee has
prepared its own
assessment
report on Internal Audit Group’s evaluation.
The reports
were further submitted to the Board and
the BoG in line
with the BoG Act 2577/2006,
●
proposed
to
the
BoD
for
approval
the
Bank's
Action
Plan
to
address
the
SREP
2020
findings
re
internal
governance and risk management
●
acknowledged
the
independent
triennial
evaluation
of
the
System
of
Internal
Controls
(SIC)
per
BoG
Act
2577/2006,
●
proposed
to
the
BoD
for
approval
the
Internal
Governance Control Manual,
●
approved the revised Group Compliance Mandate,
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●
assessed
the
effectiveness
of
the
External
Auditors,
their
objectivity
and
independence,
discussed
results
with
Management
and
Internal
Audit
and
communicated
final
results
to
the
Board
and
to
the
External Auditors,
●
reviewed
and
approved
the
External
Auditors’
Independence
Policy
and
the
External
Auditors’
Tendering
Policy and Procedure,
●
approved the remuneration of External Auditors,
●
monitored,
in
line
with
the
External
Auditor’s
Independence
Policy,
the non-audit
services provided
by the External Auditor in 2021, proposed
to the Board
/ Annual General meeting for approval the extension of
KPMG’s
tenure
up
to
5yrs
(starting
from
2023)
as
statutory auditors for the Eurobank Holdings Group,
●
assessed the performance of the Internal Auditor,
●
approved the annual Plans of Internal Audit Group and
of Group Compliance and monitored their progress,
●
received updates on
the progress
of the
Annual Budget,
●
in
accordance
with
the
provisions
of
Law
2533/1997,
the
Audit
Committee
reviewed
reports
on
substantial
stock
transactions
of
the
HoldCo’s
Directors
and
General
Managers
which
meet
the criteria
set
in Law
2533/1997 and notified the Board,
●
approved and notified the Board
for further submission
to the Annual
General Meeting, the
annual AC Activity
Report for 2020.
●
focused particularly
on the
AML function
and received
regular updates on the AML issues
●
discussed
and
further
submitted
to
the
BoD
the
AML
and Compliance Risk Assessment,
●
reviewed
the
annual
Group
Compliance
Sector’s
reports over AML and compliance activities of the Bank
for
the
year
2020
and
prepared
its
own
assessment
report
thereon.
The
reports
were
further
submitted
to
the Board and the BoG, in line with the BoG Governors
Act 2577/2006,
●
reviewed,
approved
and further
submitted
to
the
BoD
the revised Group
AML/CFT and Sanctions
Policy and
the revised Conflict of Interest Policy,
●
reviewed
and
approved
the
revised
Anti-Bribery
and
Corruption Policy, the Antitrust
Policy, the revised Order
Execution
Policy
and
the
revised
MiFID
II
Product
Governance Policy,
●
discussed
with
Management,
Internal
Audit
and
External Auditors issues relating
to the financial results,
●
reviewed
and
cleared
the
consolidated
financial
statements,
●
discussed
with
Management
the
implementation
of
corrective
actions
to
recommendations
made
by
Internal
and
External
Auditors
and
Regulatory
Authorities,
●
discussed
with
the
Audit
Committee
Chairpersons
of
Eurobank Serbia, Eurobank
Bulgaria, Eurobank Cyprus
and Eurobank Private
Bank Luxembourg the
key audit
issues of the International Subsidiaries,
●
assessed
the
effectiveness
of
the
External
Auditors,
their
objectivity
and
independence,
discussed
results
with
Management
and
Internal
Audit
and
communicated
final
results
to
the
Board
and
to
the
External Auditors,
●
reviewed
and
approved
the
External
Auditors’
Independence Policy,
●
approved the remuneration of External Auditors,
●
monitored,
in
line
with
the
External
Auditor’s
Independence
Policy,
the non-audit
services provided
by the External Auditor in 2021,
●
proposed
to
the
Board
/
Annual
General
meeting
for
approval
the
extension
of
KPMG’s
tenure
up
to
5yrs
(starting
from
2023)
as
statutory
auditors
for
the
Eurobank Holdings Group,
●
assessed the performance of the
Head of Internal Audit
and the Head of Group Compliance Sector,
●
approved the annual Plans of Internal Audit Group and
of Group Compliance and monitored their progress,
●
monitored the memberships
and the modus
operandi of
the Audit
Committees of
the subsidiaries,
as required,
and reviewed their Activity Reports,
●
in
accordance
with
the
provisions
of
Law
2533/1997,
the
Audit
Committee
reviewed
reports
on
substantial
stock transactions of the Bank’s
Directors and General
Managers which meet the
criteria set in Law
2533/1997
and notified the Board,
●
approved and notified the Board
for further submission
to the Annual
General Meeting, the
annual AC Activity
Report for 2020.
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3.3
Board Risk Committee
8
As mentioned
previously,
following the
incorporation into
the Greek
legal framework
of the
new Directive
(EU) 2019/878
(known as
CRD V),
as well
as the
licensing of
the HoldCo
as a
financial holding
company by
the ECB,
the HoldCo
has
scheduled to establish the Board
Risk Committee in 2022. To
be noted that after the demerger
of Eurobank Ergasias S.A.
on 20.3.2020
and until
the approval
of the
HoldCo as
a financial
holding company,
there was
no regulatory
requirement
neither a business need for the establishment of a BRC.
As regards the Bank’s Board Risk Committee’s (BRC), its purpose is to assist the Board
in the following risk-related issues:
●
to advise and support
Eurobank’s BoD regarding the
monitoring of Eurobank’s overall actual
and future risk appetite
and
strategy,
taking
into
account
all
types
of
risks
to
ensure
that
they
are
in
line
with
the
business
strategy,
objectives,
corporate culture and values of the institution,
●
to provide
Eurobank’s BoD
with recommendations
on necessary
adjustments to
the risk
strategy resulting
from, inter
alia,
changes
in
the
business
model
of
Eurobank,
market
developments
or
recommendations
made
by
the
risk
management function,
●
to assist Eurobank’s BoD in overseeing the implementation
of Eurobank’s risk strategy and the corresponding
limits set,
●
to oversee the implementation
of the strategies for
capital and liquidity management
as well as for
all other relevant risks
of Eurobank,
such as
credit and
market risks
as well
as non-financial
risks such
as operational,
reputational conduct,
legal, cyber, outsourcing climate
and environmental, in
order to assess
their adequacy against
the approved risk
appetite
and strategy,
●
to oversee the progress
of the Bank to
enhance its resolvability in
accordance with the requirements
of the Resolution
Authorities,
●
to review
a number
of possible
scenarios, including
stressed scenarios,
to assess
how Eurobank’s
risk profile
would
react to external and internal events,
●
to oversee the alignment between all material financial products and services offered to clients and the business model
and
risk
strategy
of
Eurobank.
The
BRC
should
assess
the
risks
associated
with
the
offered
financial
products
and
services and take into account the alignment between the
prices assigned to and the profits gained from those
products
and services,
●
to provide advice on
the appointment of external consultants
that Eurobank’s BoD
may decide to engage
for advice or
support,
●
to
assess
the
recommendations
of
internal
or
external
auditors
and
follow
up
on
the
appropriate
implementation
of
measures taken,
●
to ensure
that the Eurobank
Group has
developed an appropriate
risk management framework
which is embedded
in
the decision making process
(e.g. new products and
services introduction, risk adjusted
pricing, internal risk models,
risk
adjusted performance measures and capital allocation) throughout the Eurobank Group,
●
to define the
Eurobank Group risk
management principles and
ensure that Eurobank
has the
appropriate methodologies,
modeling tools, data sources and sufficient and competent staff to identify, assess, monitor and mitigate risks, and
●
to set, approve and oversee
the implementation of the institution’s
risk culture, core values and expectations
regarding
credit risk.
BRC Membership/Composition
The BRC members are appointed by the BoD, following the recommendation of the
Nomination Committee, in accordance
with the legal
and regulatory framework
where applicable. The
Chairperson qualifies as
independent member with
a solid
experience in commercial banking
and preferably risk and/or
Non-Performing Exposures management and
is familiar with
the Greek and international
regulatory framework. The appointment
of the Chairperson and
the Vice-Chairperson shall
go
through
the
Nomination
Committee’s
proposal
process
and
approved
by
the
Board.
The
tenure
of
the
BRC
members
coincides with the tenure of the Bank’s Board, with the option to renew their appointment, but in any
case the service in the
BRC should not be more than nine
(9) years in total.
HFSF appointed an Observer in the BRC,
in line with the requirements
of the TRFA.
The BRC consists of six (6) non-executive Directors, four (4) of whom are independent, including the Chairperson. One (1)
of the BRC members is the HFSF Representative. In particular, the BRC composition is outlined below:
BRC Chairperson:
Rajeev Kakar,
Non-Executive Independent Director of the Board
BRC Vice-Chairperson:
Cinzia Basile,
Non-executive Independent Director of the Board
Members:
Bradley Paul Martin,
Non-Executive Director of the Board
Jawaid Mirza,
Non-Executive Independent Director of the Board
Alice Gregoriadi,
Non-Executive Independent Director of the Board
Efthymia Deli,
Non-executive Director of the Board, HFSF Representative
8
Bank’s Board Risk Committee’s Terms of Reference may be found at the Bank website (
www.eurobank.gr
)
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It is noted
that during 2021
and following NomCo’s recommendations,
the BoD decided
the following amendments
on BRC’s
composition:
a) On
28.1.2021, Ms.
Efthymia Deli,
new HFSF Representative
and Non-Executive
member of
the Board,
was appointed
BRC member, in replacement of the resigned Mr.
Dimitrios Miskou and
b)
On 23.7.2021
and in
replacement
of
Bradley
Paul Martin,
previous
BRC’s
Vice-chairperson,
Ms.
Cinzia
Basile,
Non-
Executive Independent Director of the Board and previous member of the
BRC, was appointed new BRC Vice-chairperson.
Mr. Bradley Paul Martin remained BRC member.
BRC Meetings
The BRC meets
at least on
a monthly basis
and the Chairperson
updates the BoD
members on the
material matters covered
by the Committee during the previous period (if any) at the quarterly meetings of the BoD.
Apart from the
BRC members, the
Audit Committee’s members
may also attend
BRC sessions when
common issues are
discussed (i.e. on operational
risk matters, on IT
security and cyber risks).
The Chairperson of the
BRC may also invite
to
the meetings other executives of the Group or external advisors or experts, as deemed appropriate.
Quorum in the BRC Meetings
Quorum requires the majority of members (half plus one) to be present or represented, provided that no less than three (3)
Committee members, including the Chairperson or the Vice Chairperson, are
present.
Each member of the Committee may
validly
represent only
one
of
the
other Committee
members.
Representation
in
the
Committee may
not be
entrusted
to
persons other than
the members thereof.
In determining the
number of members
for the quorum,
fractions, if any,
will not
be counted.
BRC Decisions
The BRC
resolutions require
a majority
vote of
the members
who are
present or
represented. In
case of
a tie,
the Chairperson
and in case of
his/her absence the Vice
Chairperson has the casting vote.
In case of non-unanimous
decisions, the views
of the minority are also minuted. The Board is informed of the BRC’s minutes.
Attendance to the BRC Meetings
During 2021, the BRC held fourteen (14) meetings with 99% attendance,
The Directors’ individual attendance rates at the BRC meetings in 2021 were the following:
Eurobank BRC
Eligible
to
attend
Attended
in person
(# and %)
Rajeev Kakar,
BRC Chairperson
14
14
100%
Cinzia Basile,
BRC member until 23.7.2021 and BRC Vice-Chairperson
afterward
14
14
100%
Bradley Paul Martin,
BRC Vice-Chairperson
until 23.7.2021 and
simple AC member afterward
14
13
93%
Jawaid Mirza,
BRC member
14
14
100%
Alice Gregoriadi,
BRC member
14
14
100%
Efthymia Deli,
BRC member since 28.1.2021
13
13
100%
Dimitrios Miskou,
BRC member until 28.1.2021
1
1
100%
It is noted that Mr. Bradley Paul L. Martin provided representation
proxy for the missed meeting in BRC, leading his overall
attendance rate (physical and under representation) at 100% in BRC.
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BRC Secretary and Minutes
The BRC appoints its
Secretary, who reports to the Group Company
Secretariat and cooperates with
the Chairperson of the
Committee
and
the
Group
Chief
Risk
Officer
(“GCRO”).
The
Secretary
is
responsible
to
minute
the
proceedings
and
resolutions of
all BRC meetings,
including the names
of those present
and in
attendance and the
action plans
and follow
ups for assignments, as well
as for issuance of extracts.
Decisions, actions and follow ups
are disseminated to the
Bank’s
responsible Units, as required.
BRC Terms of Reference (ToR)
BRC’s
ToR
were approved
by the
Board in
March 2020,
when Eurobank
was established,
and will
be reviewed
at least
every two
(2) years
and revised,
if necessary,
unless significant
changes in
the role,
responsibilities, organization
and/or
regulatory requirements necessitate earlier revision.
BRC’s Performance Evaluation
The
Committee’s
performance
is
evaluated
annually
according
to
the
provisions
of
the
Board
and
Board
Committees
Evaluation Policy of the Bank. According to
the Committee’s self-evaluation, it was determined
that it continues to function
effectively,
especially in
the areas
of leadership
and BRC
Chairperson’s contribution
in organizing/coordinating
meetings
and encouraging critical
discussions in meetingsand
should focus on
new and emerging
risks, including Non-Financial
Risks
(NFRs) and Climate Risk governance.
BRC’s Activity in 2021
For 2021, the BRC has, amongst others:
●
monitored qualitative and quantitative aspects of credit, market, liquidity and operational risks,
●
updated the Board on the adequacy of the risk management policy and risk appetite framework,
●
recognized material risks, including the aforementioned risks,
●
monitored the
progress of
regulatory projects such
as the New
Definition of
Default project, the
Retail new origination
application scorecards project, etc.
●
approved, among others, the following regulatory and other reports, including risk policies and frameworks
-
SRB’s Working Priorities for 2021 and Eurobank’s Resolvability Work Programme (Bail in playbook, etc.)
-
Resolution
Planning
working
priorities
for
2022:
Minimum
Requirement
for
Own
Funds
and
Eligible
Liabilities
(MREL) issuance plan, targets and Resolution planning priorities
-
MREL Issuance plan & Targets
-
Non-performing Exposures (NPE) Reduction Plan 2021-2023: Summary report, impairments and key risk metrics
-
Internal Capital & Liquidity Adequacy Assessment processes (ICAAP/ILAAP) 2021:
◾
Macroeconomic, liquidity and operational risk scenarios and assumptions
◾
Capital Adequacy Statements, Liquidity Adequacy Statements
◾
Group Risk and Capital Strategy
and Risk Appetite Framework as
well as Risk Appetite Statements incl.
RAS
dashboard
-
2021 Group Recovery Plan
-
Group CRO’s Annual Risk report for 2020
Effect of Covid 19
sensitivity analysis on
corporate loan portfolios,
Covid 19 related
bank’s policies/ relief measures
for Retail and Corporate borrowers, and Covid 19 post moratoria credit Strategy
●
approved the Post Moratoria Remedial Strategy for Retail and Corporate clients
●
discussed the Bank’s Feedback letter on the Eurobank’s response to the ECB letter (COVID-19 credit risk identification
and measurement)
●
reviewed and approved Mexico Project: new SRT Securitisation
●
reviewed and approved the Project Wave: synthetic securitisation of corporate loans (SRT application to SSM)
●
monitored the EBA/ECB Stress Test
2021
●
reviewed the Compliance Roadmap for Climate-related and Environmental Risks
●
approved the Early Warning Models (EWS) for Small Business & Corporate
●
reviewed the Outsourcing alignment project update
3.4
Remuneration Committee
9
As mentioned
previously,
following the
incorporation into
the Greek
legal framework
of the
new Directive
(EU) 2019/878
(known as
CRD V),
as well
as the
licensing of
the HoldCo
as a
financial holding
company by
the ECB,
the HoldCo
has
scheduled to
establish the
Remuneration Committee
(RemCo) in
2022. To
be noted
that after the
demerger of
Eurobank
Ergasias S.A. on
20.3.2020 and until
the approval of
the HoldCo as
a financial holding
company,
there was no
regulatory
requirement neither a business need for the establishment of a RemCo.
As regards the Bank’s remuneration Committee, the
Board has delegated to it
the responsibilities (a) to provide
specialized
and independent advice for matters relating to remuneration policy and its implementation at Bank and Group level and for
the
incentives
created
while managing
risks, capital
and
liquidity,
(b)
to
safeguard
the
proper
exercise
of
its duties
and
responsibilities, the
efficient alignment
of the
personnel’s remuneration
with the
risks the
Bank undertakes
and manages
and the required
alignment between the
Bank and the Group,
and (c) to
approve or propose
for approval all exposures
of
9
RemCo ToRs may be found at the Bank website (
www.eurobank.gr
)
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Key
Management
Personnel
10
and
their
relatives
(spouses,
children,
siblings).
The
Non-Executive
Directors
have
the
responsibility to approve
and periodically review
Bank’s remuneration
policy and oversee
its implementation both
at Bank
and Group level.
The implementation
of the
remuneration policy
is in
line with
the provisions
of Laws
3864/2010, 4261/2014
and Bank
of
Greece Governor’s Act 2650/2012.
The RemCo is also responsible to:
●
to determine the remuneration system for the members of the Board of Directors and the senior executives and to
make
a
relevant
recommendation
on
them
to
the
Board
of
Directors,
which
decides
on
them
or
to
make
recommendations to the General Meeting, where required.
●
propose to the
Non-Executive Directors of
the Bank’s BoD
for their approval
the goals and objectives
relevant to
the Bank’s CEO remuneration and evaluate the CEO’s performance in light of these goals and objectives.
●
guide and monitor the external remuneration consultant (if hired) and ensure that it
receives appropriate reporting
from him/her. In addition, RemCo ensures that the
external consultant is referred in
the Bank’s annual report of the
year hired and/or completed his/her work, together
with a statement of any possible relationship between
him/her
and the Bank or with members of the Board individually.
RemCo Membership/Composition
The RemCo members are appointed by the Board. One (1) of the RemCo members is the HFSF Representative, while the
HFSF appointed an Observer in the RemCo, in line with the requirements of the TRFA.
In
the
event
that
the
Chairperson
of
the
Bank’s
Board
is
a
member
of
the
RemCo,
she/he
cannot
participate
in
the
determination of his/her remuneration.
The tenure
of the
RemCo members
coincides with
the tenure
of the
Bank’s Board,
with the
option to
renew their
appointment,
but in any case, the service in RemCo should not be more than nine (9) years in total.
The
RemCo
consists
of
six
(6)
non-
executive
Directors
four
(4)
of
whom
are
independent
Directors,
including
the
Chairperson. In particular, the RemCo composition is outlined below:
RemCo Chairperson:
Cinzia Basile,
Non-executive Independent Director of the Board
RemCo Vice-Chairperson:
Rajeev Kakar,
Non-Executive Independent Director of the Board
Members:
Bradley Paul Martin,
Non-Executive Director of the Board
Rena Rouvitha Panou,
Non-Executive Independent Director of the Board
Alice Gregoriadi,
Non-Executive Independent Director of the Board
Efthymia Deli,
Non-executive Director of the Board, HFSF Representative
It
is
noted
that
during
2021
and
following
NomCo’s
recommendations,
the
BoD
decided
the
following
amendments
on
RemCo’s composition:
a) On
28.1.2021, Ms.
Efthymia Deli,
new HFSF Representative
and Non-Executive
member of
the Board,
was appointed
RemCo member, in replacement of the resigned Mr. Dimitrios Miskou and
b) On 23.7.2021, i) Ms. Rena Rouvitha Panou was appointed new RemCo member,
ii) Ms. Cinzia Basile, previous RemCo
member, was appointed as RemCo’s Chaireperson, in replacement
of Mr. Rajeev Kakar, and c) Mr. Rajeev Kakar, previous
RemCo’s Chairperson, was appointed
RemCo’s Vice-Chairperson, in replacement
of Mr. Bradley Paul Martin
who remained
in RemCo as a RemCo member.
In accordance with
the TRFA,
the Chairperson of
the NomCo is
a Non-executive Independent director
and has served on
the NomCo as a member for eight (8) months.
RemCo meetings
RemCo meets at least twice a year and minutes are kept.
Quorum in RemCo meetings
RemCo is in quorum and meets validly
when half of its members plus one
(1) are present or represented (fractions, if
any,
are
not counted),
provided
that no
less than
three (3)
members,
including the
Chairperson
or the
Vice
Chairperson are
present.
Each member of RemCo may validly represent only one of the other RemCo members. Representation
in RemCo
may not be entrusted to persons other than the members thereof.
RemCo Decisions
RemCo’s resolutions are
validly taken by an absolute
majority of the members who
are present or represented.
In case of
a tie, the Chairperson and
in case of his/her absence
the Vice Chairperson of
RemCo shall have the casting
vote. In case
10
Key Management Personnel includes: Bank’s Executive and Non-Executive
BoD members, Executive Board (ExBo) members,
General
Managers non-members of the ExBo and the Heads
of Group Internal Audit, Group Compliance,
Group Risk Management.
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of non-unanimous
decisions, the
views of
the minority
should also
be minuted.
The Board
shall be
informed whenever
a
decision of the Committee is not reached unanimously.
Attendance to the RemCo meetings
During
2021,
RemCo
held
eight
(8)
meetings
and
the
ratio of
attendance
was
100%,
while,
during
2020
and
since
the
establishment of Eurobank in March 2020, RemCo held seven (7) meetings and the ratio of attendance was 100% as well.
RemCo Secretary and Minutes
RemCo
appoints
its
Secretary,
who
reports
to
the
Group
Company Secretariat
and
cooperates
with
the
Chairperson of
RemCo and the
Group Human
Resources Deputy
General Manager. The
Secretary is
responsible to
minute the
proceedings
and resolutions of all RemCo’s meetings, including the names of those present and in attendance and the action plans and
follow ups for
assignments, as well
as for issuance
of extracts. Decisions,
actions and follow
ups are disseminated
to the
Bank’s responsible Units, as required.
RemCo Terms of Reference (ToR)
RemCo’s ToR
were approved by the Board
in March 2020, when Eurobank
was established, and will be
reviewed at least
once every two
(2) years
and revised
if necessary, unless significant
changes in
the role,
responsibilities, organization
and/or
regulatory requirements necessitate earlier revision.
RemCo’s Performance Evaluation
RemCo’s performance
is evaluated
annually according
to the
provisions of
the Board
and Board
Committees Evaluation
Policy of the Bank. According to RemCo’s
self-evaluation, it was determined that RemCo continues
to function effectively in
all areas..
RemCo’s Activity in 2021
For 2021 and since the establishment of Eurobank in March 2020,
RemCo has amongst others:
●
reviewed and proposed to the Non-Executive Directors for approval the Remuneration Policy of the Bank,
●
discussed the remuneration policy implementation at Bank and Group level,
●
approved the Benefits Policy of the Bank,
●
proposed to
the Board
for approval
the Board
and Board
Committees’ Fees
2021 for
Non-Executive Directors
of the
Bank,
●
approved the remuneration framework of Eurobank Bulgaria,
●
proposed to the BoD for approval the Group Subsidiary Board Remuneration Policy,
●
proposed to the Non-Executive Directors of the Bank for approval the CEO’s Performance
Evaluation for 2020 & CEO’s
Financial and Non-Financial objectives for 2021,
●
reviewed the implementation of the Board and Board Committees’ attendance policy,
●
reviewed
and
further
submitted
to
the
Board
for
information
the
Group
Subsidiary
Board
Remuneration
Policy
implementation during 2020 and 2021,
●
approved the Remuneration Disclosures for 2020,
●
received updates on the implementation of the Voluntary Exit Scheme and proposed to the Non-Executive Directors for
approval a Small Perimeter Exit Scheme (VES) and received updates on its implementation,
●
depending on the case, approved or proposed to
the BoD / Non-Executive Directors for approval
various remuneration
increases and incentive schemes.
3.5
Nomination Committee
11
Eurobank Holdings and the Bank’s Boards have delegated
to the Nomination Committees (NomCo) the responsibilities (a)
to
lead
the
process
for
Board
and
Board
Committees
appointments,
including
the
identification,
nomination
and
recommendation of candidates
for appointment to the
Board and (b)
to consider matters
related to the
Board’s adequacy,
efficiency and effectiveness.
NomCo, in carrying out its duties, is accountable to the Board.
In particular, among others, the NomCo is responsible:
●
At least annually and in accordance with Board and Board Committees Evaluation Policy,
to assess the structure,
size, composition and performance of the BoD and make recommendations to the
BoD with regard to the need for
its renewal and/or any other changes it considers appropriate.
●
At least annually
and in accordance
with Board and
Board Committees Evaluation
Policy, to assess the
knowledge,
skills, experience and contribution of
individual Board members and of
the Board collectively and report
to the BoD
accordingly.
●
In
the
context
of
Board
and
Board
Committees
Evaluation
Policy
implementation,
to
determine
the
evaluation
parameters based
on best
practices and
ensure the
effectiveness
of the
evaluation of
the Board,
the individual
evaluation
of Non-Executive
Directors, including
the Chair,
the
succession plan
of the
Chief Executive
and the
members of
the Board,
the targeted
composition of
the Board
of Directors
in relation
to the
strategy and
Board
Nomination Policy.
●
To
play a
leading role
in the
nomination process
and the
design of
the succession
plan for
the members
of the
Board and senior management.
●
To
review at least once every two years and recommend for the approval of the BoD the BoD Nomination Policy.
11
HoldCo/Bank’s Nomination Committees’ Terms of Reference may be found at the HoldCo/Bank websites
(
www.eurobankholdings.gr
&
www.eurobank.gr
)
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●
To
ensure that
the nomination
process, as
this
is defined
in the
BoD Nomination
Policy,
is clearly
defined and
applied in a transparent manner and in a way that ensures its effectiveness
●
To
ensure
that
there
is
adequate,
step-wise
succession
planning
for
Board
members
so
as
to
maintain
an
appropriate level of continuity
and organizational memory
at Board level, especially
when dealing with sudden
or
unexpected absences or departures of Board members.
●
To
monitor the Board succession planning in order to ensure the smooth succession of the members of the Board
with their gradual replacement in order to avoid the lack of management.
●
To
ensure that the succession framework takes into account the findings of the evaluation of the Board in order to
achieve the necessary changes in composition or skills and
to maximise the effectiveness and collective suitability
of the Board.
●
In accordance with
the CEO Succession
Planning Policy, to review
at least annually
and always before
the initiation
of the
CEO succession
process the
qualifications required
for the
position of
the CEO,
to ensure
that there
is a
viable pool of internal and external candidates and also to ensure that the CEO is involved in all the areas of CEO
Succession Plan, including the assessment of the nominees for his/her position, as he deems appropriate.
●
To
ensure that the CEO is involved in the succession planning process of the senior executives
at the level of the
CEO minus one, including the assessment of nominees for the said positions.
As
far
as Nomination
Committees of
subsidiaries are
concerned, neither
the HoldCo
NomCo nor
the Eurobank
NomCo
replace them. However, the
Eurobank NomCo has the overall responsibility to oversee
that the Nomination Committees of
subsidiaries comply with its standards, modus operandi and governance framework.
NomCo Membership/Composition
NomCo members are appointed by the Board. The tenure of NomCo members coincides with the tenure of the Board, with
the option to renew their appointment, but in any case the service in NomCo should not be
more that nine (9) years in total.
The BoD Chairman is a member of NomCo, while one (1) of the NomCo members is the HFSF Representative. The HFSF
appointed an Observer in the NomCo, in line with the requirements of the TRFA.
The NomCo
as of
the date
of approval
of the
here-in Statement,
consists of
six (6)
non-executive Directors,
three (3)
of
whom are
independent Directors,
including the
Chairperson who
may not
serve as
the Chairperson
of the
Remuneration
Committee.
The NomCo composition is outlined below:
NomCo Chairperson:
Irene C. Rouvitha-Panou,
Non-Executive Independent Director of the Board
NomCo Vice-Chairperson:
Bradley Paul L. Martin,
Non-executive Director of the Board
Members:
Georgios P.
Zanias,
Chairperson of the Board, Non-executive director of the Board
Jawaid A. Mirza,
Non-Executive Independent Director of the Board
Alice K. Gregoriadi,
Non-Executive Independent Director of the Board
Efthymia P.
Deli,
Non-executive Director of the Board, HFSF Representative
It
is
noted
that
during
2021
and
following
NomCo’s
recommendations,
the
BoD
decided
the
following
amendments
on
NomCo’s composition:
a) On
28.1.2021, Ms.
Efthymia Deli,
new HFSF Representative
and Non-Executive
member of
the Board,
was appointed
NomCo member, in replacement of the resigned Mr. Dimitrios Miskou and
b)
On 23.7.2021
and in
replacement
of Mr.
Rajeev Kakar,
previous
NomCo’s
Chaireperson, Ms.
Alice
Gregoriadi, Non-
Executive Independent
director of
the Board,
was appointed
new NomCo
member and
Ms. Irene
Rouvitha-Panou, Non-
Executive Independent director of the Board and previous NomCo member, was appointed NomCo’s Chairperson.
NomCo Meetings
NomCo meets at least twice a year and minutes are kept.
Quorum in the NomCo Meetings
NomCo is in quorum and meets validly
when half of its members plus one
(1) are present or represented (fractions, if any,
are
not counted),
provided
that no
less than
three (3)
members,
including the
Chairperson
or the
Vice
Chairperson are
present.
Each member
of
NomCo may
validly
represent only
one
of
the other
NomCo members.
Representation
in
the
NomCo may not be entrusted to persons other than the members thereof.
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NomCo Decisions
NomCo’s resolutions are
validly taken by an absolute
majority of the members who
are present or represented.
In case of
a tie, the Chairperson and
in case of his/her absence
the Vice Chairperson of
NomCo shall have the casting
vote.
In case
of non-unanimous
decisions, the
views of
the minority
should also
be minuted.
The Board
shall be
informed whenever
a
decision of the Committee is not reached unanimously.
Attendance to the NomCo meetings
During 2021 the attendance details for the Nomination Committee were as follows:
Company
Meetings
Average ratio of
Directors’ attendance
2021
2020
2021
2020
HoldCo
7
9
98%
98%
Bank (from 20.3.2020)
7
8
98%
100%
The Directors’ individual attendance rates at the NomCo meetings in 2021 were the following:
Eurobank Holdings
NomCo
Eurobank NomCo
Eligible to
attend
Attended
in person
(# and
%)
Eligibl
e to
attend
Attended
in person
(# and
%)
Irene Rouvitha-Panou,
NomCo member until 23.7.2021 and NomCo
Chairperson
afterward
7
7
100
%
7
7
100
%
Bradley Paul Martin,
NomCo Vice-Chairperson
7
6
86%
7
6
86%
Rajeev Kakar,
NomCo Chairperson until 23.7.2021
5
5
100
%
5
5
100
%
Georgios Zanias,
NomCo member
7
7
100
%
7
7
100
%
Jawaid Mirza,
NomCo member
7
7
100
%
7
7
100
%
Alice Gregoriadi,
NomCo member since 23.7.2021
2
2
100
%
2
2
100
%
Efthymia Deli,
NomCo member since 28.1.2021
6
6
100
%
6
6
100
%
Dimitrios Miskou,
NomCo member until 28.1.2021
1
1
100
%
1
1
100
%
It is noted that
Mr. Bradley Paul L. Martin provided
representation proxies for each
missed meeting in HoldCo/Bank
NomCo,
leading his overall attendance rate (physical and under representation) at 100% in HoldCo/Bank NomCo.
NomCo Secretary and Minutes
NomCo
appoints
its
Secretary,
who
reports
to
the
Group
Company Secretariat
and
cooperates
with
the
Chairperson of
NomCo. The
Secretary is
responsible to
minute the
proceedings and
resolutions of
all NomCo’s
meetings, including
the
names of those present
and in attendance and the
action plans and follow ups
for assignments, as well
as for issuance of
extracts. Decisions, actions and follow ups are disseminated to the responsible parties, as required.
NomCo Terms of Reference (ToR)
NomCo’s
ToR
are
reviewed at
least
once every
two
(2) years
(last review
performed in
March
2020, to
incorporate the
necessary adjustments following the Demerger
of Eurobank Ergasias) and revised,
if necessary, unless significant changes
in the role, responsibilities, organization and/or regulatory requirements necessitate earlier revision. The ToR are approved
by the Board.
NomCo’s Performance Evaluation
NomCo’s performance
is evaluated
annually according
to the
provisions of
the Board
and Board
Committees Evaluation
Policy.
According to NomCo’s self-evaluation, it
was determined that NomCo continues
to function effectively,
it should be
involved
in
succession
planning
processes
(incl.
the
CEO)
and
ensure
improvement
of
gender
diversity
at
senior
management level.
NomCo’s Activity in 2021
For 2021, NomCo has amongst others:
Eurobank Holdings
Bank
●
Reviewed
for
further
update
of
the
Board,
the
Board
and
Board
Committees
2020
self-evaluation
and
the
Board’s overall effectiveness assessment
●
proposed to the Board
for approval the appointment
of
a new
representative of
the HFSF
as a
non-executive
member of the Board and the Board Committees
●
Reviewed
for
further
update
of
the
Board,
the
Board
and
Board
Committees
2020
self-evaluation
and
the
Board’s overall effectiveness assessment
●
Proposed to the Board for approval
the appointment of
a
newrepresentative
of
the
HFSF
as
a
non-executive
member of the Board and the Board Committee
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●
proposed to the Board for
approval a) the appointment
of the
new Board
due to
the expiration
of its
term and
b) the composition of the Board Committees
●
reviewed
and
proposed
to
the
Board
for
approval
the
Key
Function
Holders
Selection
and
appointment
policy, the Board Nomination Policy and the Board and
Board Committees Evaluation Policy
●
reviewed
and
proposed
to
the
Board
for
approval
the
revised Organizational Chart
●
proposed to the Board
for approval the Board
member
responsible for the climate risk
●
approved
the
external
engagements
of
the
Executive
Board members
●
reviewed the number of
directorships outside Eurobank
Group of an Independent Non-Executive Director
●
reviewed
the
independence
of
the
Independent
Non-
Executive directors
●
reviewed the attendance
of Directors to
the Board and
Board Committees.
●
proposed to the Board for
approval a) the appointment
of the new Board
due to the expiration
of its term and
b)
the composition of the Board Committees
●
reviewed
and
proposed
to
the
Board
for
approval
the
Key
Function
Holders
Selection
and
appointment
policy, the Board Nomination Policy and the Board and
Board Committees Evaluation Policy
●
reviewed
and
proposed
to
the
Board
for
approval
the
revised Organizational Chart
●
proposed to the Board
for approval the Board
member
responsible for the climate risk
●
approved
the
selection
of
candidates
as
members
of
the
Board
of
Directors
of
Group’s
significant
subsidiaries
●
reviewed and
updated
the Board on
Senior Executives
succession plan
●
approved
the
external
engagements
of
the
Executive
Board Members
●
reviewed
the
external
engagements
of
a
Senior
Manager
●
reviewed the number of
directorships outside Eurobank
Group of an Independent Non-Executive Director
●
reviewed
the
independence
of
the
Independent
Non-
Executive directors
●
reviewed the attendance
of Directors to
the Board and
its Committees.
Board of Directors Diversity Policy
The Board of Directors Diversity
Policy (“Policy”) sets out the
approach to diversity on the Board
and it is in accordance with
international best practices and the applicable legal framework
12
.
As declared in
the Policy,
the Board’s diversity
is one of
the factors which,
according to the
Board Nomination Policy,
the
Committee shall
consider when
examining composition
and structure
of the
Board. A
diverse Board
includes and
makes
good use of
variety in the
skills, educational and
professional background, geographical
provenance (nationality), gender,
age and other qualities of Directors.
NomCo members
discuss and
agree all
measurable objectives
for achieving
diversity on
the Board
during the
review process
of
the
Board
profile
matrix
according
to
the
Board
Nomination
Policy and
for
proposing
the
(re)appointment/succession
planning
of
individual
Board
members
according
to
the
Board
and
Board
Committees
Evaluation
Policy,
taking
into
consideration the balance of all diversity aspects mentioned in
the Policy. At any given time the Board may seek to improve
one or more aspects of its diversity and measure progress accordingly.
According to the Policy,
NomCo’s priority is to ensure that the Board continues
to have strong leadership and the right mix
of
skills
to deliver
the business
strategy.
Within this
context and
in regard
to
the less
represented
gender in
the Board,
NomCo’s target is that the percentage of the female gender representation in Board shall be at
least 25% calculated on the
total Board size
(rounded to the
nearest integer) in
the next 3
years, with the
aim the actual
percentage to be
maintained
above the said minimum
target at all times,
also considering industry trends and
best practices. As of
31 December 2021,
the representation of the female gender in the Board stood at 31%.
Senior Management Diversity
The Bank/HoldCo
have acknowledged
the need
to facilitate
career growth
for women
executives, in
order to
create a
pipeline
of
eligible
female
professionals
that
could
participate
in
the
Executive
Committee
and/or
Board.
For
that
purpose,
the
representation of
female executives
that have
been identified
during the
annual Succession
Planning exercise
(reviewed
and approved at
Board level) has
been enhanced, ensuring
a 42% increase of
women successors’ participations
in the pool,
in absolute terms.
In a more long-term perspective, the Bank has launched “Women In Banking” program, a Women Leadership Acceleration
Mentoring
program, aiming
to focus
on and
support career
growth for
high
potential women
that are
currently in
middle
management roles, in order to create the context for their transition to top executive roles in the future.
The Bank’s Human Resources
General Division is
currently in the
process of examining
further actions for
enhancing Senior
and/or Senior Management diversity within Bank/HoldCo.
Board Nomination Policy
12
The Board of Directors Diversity Policy may be
found at the HoldCo/Bank’s website
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The Board Nomination Policy
sets out the guidelines
and formal process for
the identification, selection and
nomination of
candidates for the Board. The Policy ensures
that such appointments are made: (a)
in accordance with legal and regulatory
requirements; (b)
with due
regard to
the expectations
of the
major shareholders,
(c) in
line with
the HoldCo’s
and Bank’s
contractual obligations with the HFSF and (d) on the basis of individual merit and ability, following a best practice process.
The primary objectives of the Policy are to:
●
Define the general principles
which guide the Nomination
Committee (the “NomCo”) as
it discharges its role
across
all stages of the nomination process.
●
Devise the specific criteria and requirements for Board nominees.
●
Establish a transparent, efficient and fit-for-purpose nomination process.
●
Ensure that
the structure
of the
Board (including
the succession
planning) meets
high ethical
standards, has
optimal
balance of knowledge, skills and experience and is aligned with the current regulatory requirements.
The Board supported by NomCo shall nominate candidates who meet the following nomination criteria:
●
Reputation along with honesty, integrity and trust
a)
Reputation: Sufficiently
good repute,
high social
esteem and
adherence to
the reputation,
honesty,
and integrity
criteria of the applicable regulatory framework
b)
Honesty,
integrity
and
trust:
Demonstration
of
the
highest
standards
of
ethics,
honesty,
integrity,
fairness,
and
personal discipline, through personal history, professional track record or other public commitments
●
Knowledge, skills, experience (KSE) and other general suitability requirements
a)
Understanding of the HoldCo/Bank: Sufficient KSE
for the development of a
proper understanding of the business,
culture, supervisory
and regulatory
context, product
and geographic
markets of
operations, and
stakeholders of
the HoldCo and its subsidiaries
b)
Seniority: Several
years of
experience in a
generally recognised position
of leadership
in the candidate’s
field of
endeavour
c)
Independent mind-set and ability to challenge: Ability of
forming and expressing an independent judgement on all
matters that reach the Board
and candour to challenge
proposals and views on these
matters by management and
other candidates
d)
Collegiality,
team skills
and leadership:
Ability to
contribute constructively
and productively
to Board
discussions
and decision making along with ability of leading such discussions as
chair or vice-chair of specific committees or
the Board as a whole
e)
Additional
criteria
for
the
nomination
of
Executive
Directors:
Proven,
through
current
and
previous
executive
positions,
knowledge,
skills,
experience
and
character
to
lead
the
HoldCo/Bank
and
its
subsidiaries
in
the
achievement of strategic
objectives, along with
willingness to enter
into full time
employment with the
HoldCo/Bank.
●
Conflicts of interest and independence of mind
NomCo
examines
the
personal,
professional,
financial,
political
and
any
other
possible
interests
and
affiliations
of
candidates, ensuring that the candidates do not have actual, potential or perceived conflicts of interest which cannot be
prevented, adequately mitigated
or managed under
the written policies
of the HoldCo/Bank,
that would impair
their ability
to represent the
interests of all
shareholders of the
HoldCo/Bank, fulfil
their responsibilities as
Directors and make
sound,
objective and independent decisions (act with independence of mind).
In particular, NomCo shall
ensure that candidates are not linked to borrowers with an exposure above
EUR 1 million or
any exposures in arrears. NomCo shall also
examine relevant direct and indirect monetary interests and non-monetary
interests, including those arising from affiliations with and membership in other organisations.
●
Time commitment
NomCo ensures that
all nominees are
able to commit
the time
necessary to effectively
discharge their responsibilities
as Directors, including regularly attending and participating in meetings of the Board and its Committees.
●
Collective suitability
The Target Board Profile Matrix is updated in accordance with the strategic
objectives and risk management priorities of
the HoldCo/Bank, assisting in identifying the desirable KSE of the members to ensure collective suitability.
Among others, in overseeing the
nomination process, the NomCo shall
ensure that there is
adequate, step-wise succession
planning for Board members so as to maintain an appropriate level of continuity and organizational memory at Board level,
especially when dealing with sudden or unexpected
absences or departures of Board members.
In this respect, the NomCo
shall:
●
Monitor
the
tenures of
Board members
and make
its nomination
proposals in
such
a
manner as
to
encourage
staggered
appointments/retirements
on
the
Board,
wherever
possible.
The
reappointment
of
current
Board
members shall be based on continuing adherence to the criteria established in this Policy;
●
Ensure that there is an appropriate
level of presence of relevant
KSEs on the Board, without
undue reliance on the
expertise of a few Directors;
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●
Review whether
there are sufficient
Board members
who are
capable of
serving as
Board Chair and
Committee
Chairs, if necessary;
●
Periodically monitor as required the availability of candidates who could address
the Board’s succession planning
needs.
The Board
Nomination Policy
is approved
by the
Board and
reviewed at
least once
every two
(2) years
by
NomCo and
revised if necessary, unless material changes, regulatory or other,
necessitate earlier revision.
Succession Planning of the CEO
The HoldCo/Bank CEO Succession
Planning Policy (Policy)
sets out the guidelines
and formal process for
the identification,
selection and nomination of candidates for the succession of the Chief Executive Officer (the “CEO”) of Eurobank Ergasias
Services and Holdings S.A. (Eurobank Holdings or HoldCo) and Eurobank S.A. (the “Bank”).
In accordance with the Policy,
NomCo defines the qualifications required
for the position of the CEO,
ensures that there is
a
viable
pool
of
internal
and external
candidates,
reviews at
least
annually
and
always before
the
initiation
of
the
CEO
succession process the qualifications required for the position of the CEO and the
pool of candidates and also ensures that
the CEO is involved in
all the areas of CEO
Succession Plan, including the assessment
of the nominees for his/her
position,
as he deems appropriate.
Finally, the Policy sets
the principles for
an emergency succession
plan to cover
the case of
an unscheduled CEO
departure.
3.6
Strategic Planning Committee
13
As
regards
Eurobank
Holdings,
since
the
demerger
of
Eurobank
Ergasias
S.A.
on
20.3.2020
(and
even
after
the
incorporation into the Greek
legal framework of the
new Directive (EU) 2019/878
(known as CRD
V), as well as
the licensing
of the HoldCo as
a financial holding company
by the ECB), there
hasn’t been a regulatory requirement
neither a business
need for
a Strategic
Planning Committee.As
regards the
Bank, its
Strategic Planning
Committee (SPC)
is established
by
the Board and its purpose is to:
a)
assist the Board’s Executive Officers in planning, developing and implementing the Group’s Strategy and
b)
recommend to the Board certain initiatives in relation to the Group’s Strategy.
Key tasks and responsibilities of SPC
The key tasks and responsibilities of the SPC are:
●
to ensure that
the Group develops
a well-defined planned medium-term
strategy in line
with the Board’s
guidance and
its approved business plan,
●
to review,
within the
framework of which
the Executive
Board draws up
the annual budget
and the
business plan,
the
key objectives and goals contained therein
and review major business initiatives, before
their submission for approval to
the Board.
●
to review,
analyze and
deliberate issues
concerning the
Group’s strategic
choices (e.g.
strategic partnerships,
share
capital increase, issuing convertibles and/or launching debt issuance programs, mergers, acquisitions
or disposals, the
formation of joint ventures,
creation or dissolution
of special purpose vehicles,
dividend distribution and all
other major
investments or disinvestments by the Group etc.), ensuring these being in line with the approved Group’s strategy.
The
SPC shall formulate relevant proposals to the Board, if:
a)
the issue under discussion exceeds € 40 million, while for lower amounts approval will be provided by the Executive
Board;
b)
a decision of the Board is obligatory by Law or by the Bank’s contractual commitments;
c)
it is
deemed necessary
by the
SPC, taking
into account
the complexity
and nature
of the
strategic choices
under
discussion.
●
to submit to
the Board
for approval
proposals relating
to the
strategy and
the budget
of the
Property Portfolio
as described
in the Service Level Agreement between Eurobank and Grivalia Management Company.
●
to submit to the
Board for approval proposals for
the acquisition and disposal of
assets other than repossessed assets
(as these are
defined in the
Service Level Agreement
between Eurobank and
Grivalia Management Company)
with book
value above € 10 million.
●
to submit to the Board
for approval proposals for the disposal of repossessed
assets (as these are defined
in the Service
Level Agreement between Eurobank and Grivalia Management Company) with gross book value above € 20 million.
●
to maintain
and take
all necessary
actions on
regulatory and
internal capital
required to
cover all
types of
risks (incl.
strategic and reputational risks, as well as other non-quantifiable risks) and
to ensure that capital requirements are met
at all times,
●
to review and evaluate all major Group’s initiatives aiming at transforming the business and operating model,
●
to monitor
on a
regular basis
the strategic
and the
key performance
indicators of
the Group,
including the
segmental
view,
●
to review and, as needed, make proposals to the Board on all other issues of strategic importance to the Group.
13
SPC ToRs may be found at the Bank website.
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SPC Membership / Chairmanship
The SPC members
are appointed by
the Board, on
the recommendation of
its Chairperson, following
the proposal by
the
Nomination Committee.
The Committee is chaired by the Chairperson
of the Board and in case
of absence or impediment of the Chairperson
by the
Vice-Chairperson of the Board and is composed of the following members with voting rights:
- The Chairperson of the Board
- The Vice-Chairperson of the Board
- The Chief Executive Officer (CEO)
- The Deputy CEOs
- The Group Chief Risk Officer
- The Group Chief Financial Officer
The General Manager Group Strategy participates in the Committee as a permanent attendee with no voting rights.
The Committee may delegate
specific responsibilities and authorities
within the purview
of its responsibilities and
authorities
to one (1) or more individual Committee members.
SPC Meetings
The SPC meets biweekly or ad hoc when necessary, keeps minutes of its meetings and reports to the Board on a quarterly
basis and as required.
SPC Attendance Rate
During 2021 the
SPC held
forty-seven (47)
meetings and the
ratio of attendance
was 96% (versus
thirty-seven (37) meetings
and attendance ratio 99% during 2020 and since the establishment of Eurobank in March 2020).
Quorum in SPC
The Committee is
in quorum and
meets validly when
half of its
members plus one,
including the Chairperson
or the Vice-
Chairperson and the CEO, are present.
SPC Decisions
Resolutions of the Committee are reached unanimously by the members who are present.
SPC Secretary and Minutes
The SPC appoints its Secretary, who reports to
the Group Company Secretariat
and cooperates with the Chairperson
of the
Committee.
The
Secretary
is
responsible
to
minute
the
proceedings
and
resolutions
of
all
SPC
meetings,
including
the
names
of
those
present
and
in
attendance
and
the
action
plans
and
follow
up
assignments,
as
well
as
for
issuance
of
extracts. Decisions, actions
and follow ups
are disseminated to
the Bank’s
responsible Units, as
required. The minutes
of
the SPC are submitted to the Board on a quarterly basis.
SPC ToRs
The
Terms
of
Reference
(ToR)
of
the
Committee
were
approved
by
the
Board
in
March
2020,
when
Eurobank
was
established, and will be
reviewed once every three
(3) years and revised
if necessary, unless significant changes in
the role,
responsibilities, organization and / or regulatory requirements necessitate earlier revision.
SPC’s Performance Evaluation
The
Committee evaluates
its performance
at
least annually
and establishes
criteria for
such evaluation.
The results
are
submitted to
the Nomination
Committee, so
that the
latter makes
proposals to
the Board,
as required.
SPC performance
evaluation for
2021 demonstrated
that the
SPC’s performance
is consistently
rated as
strong among
all areas
of assessment,
i.e. profile and composition, organization and administration and key tasks and responsibilities.
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3.8
Board Digital & Transformation Committee
14
On 15 September
2020, following the
recommendation of
the Bank’s NomCo,
the Bank’s Board
established the
Board Digital
& Transformation
Committee (BDTC). The
BDTC is a
consultative body that
makes proposals
to the BoD
on the Group’s
digital, innovation, transformation and cybersecurity
matters in order to
contribute in achieving the vision
and strategic goals
of the Bank. The BDTC, in carrying out its duties, is accountable to the Board.
BDTC Membership / Chairmanship
The BDTC members are appointed by the Board.
The tenure of the BDTC members coincides with
the tenure of the Bank’s
Board, with
the option to
renew their appointment,
but in any
case the service
in BDTC should
not be more
than nine
(9)
years in total. The HFSF appointed an Observer in the BDTC, in line with the requirements of the TRFA.
The BDTC
consists of
six (6)
Directors of
whom two
(2) executives,
three (3)
independent non-executives,
one (1)
non-
executive who is also the representative of the HFSF.
The BDTC composition is outlined below:
BDTC
Chairperson:
Jawaid A. Mirza,
Non-Executive Independent Director of the Board
BDTC Vice-
Chairperson:
Alice Gregoriadi,
Non-executive Independent Director of the Board
Members:
Rajeev Kakar,
Non-executive Independent Director of the Board
Stavros Ioannou,
Executive Director of the Board / Deputy CEO, Group Chief Operating Officer (COO) &
International Activities, Eurobank SA
Andreas Athanasopoulos,
Executive Director of the Board / Deputy Chief Executive Officer, Group Chief
Transformation Officer,
Digital & Retail, Eurobank SA
Efthymia P.
Deli,
Non-executive Director of the Board, HFSF Representative
BDTC Meetings
BDTC meets at least twice a year and as each time required, also considering that the annually held Strategy Away Day is
a
forum
in
which
relevant
digital and
transformation
strategic matters
are
also
discussed,
while
minutes
are kept
for
all
meetings.
Quorum in BDTC
BDTC is in
quorum and meets
validly when half
of its members
plus one (1)
are present or
represented (fractions, if
any,
are not counted), provided that no less than three (3) members,
including the Chairperson or the Vice Chairperson and one
non
‐
executive director are present.
At all times, the Chairperson or the Vice
Chairperson are present and the total number
of non
‐
executive (incl. independent nonexecutive) directors should be the majority of the members present or represented.
Each member
may
validly
represent only
one of
the
other BDTC
members
and
representation may
not be
entrusted to
persons other than the Committee members.
BDTC Decisions
BDTC’s resolutions are validly taken by
an absolute majority of the members who
are present or represented. In case of
a
tie, the Chairperson
and in case
of his/her absence
the Vice Chairperson
of BDTC shall
have the casting
vote.
In case of
non-unanimous
decisions,
the
views
of
the
minority
should
also
be
minuted.
The
Board
shall
be
informed
whenever
a
decision of the BDTC is not reached unanimously.
BDTC Attendance Rate
During
2021,
BDTC
held
two
(2)
meetings
and
the
ratio
of
attendance
was
83%,
while
during
2020
and
since
the
establishment of BDTC, BDTC held two (2) meetings and the ratio of attendance was 100%.
BDTC Secretary and Minutes
BDTC appoints its
Secretary, who reports to the
Group Company Secretariat
and cooperates with
the Chairperson of
BDTC.
The Secretary
is responsible
to minute
the proceedings
and resolutions
of all
BDTC’s meetings,
including the
names of
those present and
in attendance and
the action plans
and follow ups
for assignments, as
well as for
issuance of extracts.
Decisions, actions and follow ups are disseminated to the Bank’s responsible Units, as required.
BDTC Terms of Reference (ToR)
The BDTC ToR are reviewed at least once every two (2) years and revised if necessary,
unless
significant
changes
in
the
role,
responsibilities,
organization
and/or
regulatory
requirements
necessitate
earlier
revision. The ToR are
approved by the Board.
BDTC Performance Evaluation
BDTC’s
performance
is
evaluated
annually
according
to
the
provisions
of
the
Board
and
Board
Committees
Evaluation
Policy.
BDTC’s performance has
been evaluated for the
first time in 2021
and it was revealed
that although the
BCTCo is
relatively new, so far has been effective in giving to the Management the Committee’s view and direction
and has created a
healthy challenging
culture within
the Committee.
The evaluation
highlighted the
need to
further calibrate
the mandate
of
the
BDTC,
to
focus
more
on
its
advisory
role
towards
the
following
matters
among
others:
collaboration
with
strategic
14
BDTC ToR may be found at the Bank’s website (www.eurobank.gr).
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external partners (e.g. Fintechs), new types of technologies and schemes that fit with Eurobank’s digital strategy (including
cloud driven efficiency), unbundling Eurobank’s operating model, review of skillset needs on IT and Digital.
BDTC’s Activity
For 2021 BDTC has discussed mainly the Eurobank 2030 Transformation.
4.
Management Committees
Given that there is no relevant regulatory requirement neither a business
need, the CEO has not established committees at
HoldCo level.
As
regards
the
Bank,
the
CEO
establishes
committees
to
assist
him,
as
required,
in
discharging
his
duties
and
responsibilities. The
most important
Committees established by
the CEO are
the Executive Board,
the Management Risk
Committee, the Group
Asset and
Liability Committee,
the Central
Credit Committees (I
& II),
the Troubled Assets
Committee,
the Products and Services Committee
(PSC) and the Environmental,
Social & Governance (ESG)
Management Committee.
Executive Board
The Composition of the Executive Board and short biographical details of its members are summarized below:
Fokion Karavias
Chief Executive Officer (CEO)
Membership in Board Committees:
Strategic Planning Committee – Member
Year of birth: 1964
Nationality: Hellenic
Number of shares in Eurobank Holdings:
7.569
Mr.
Karavias
joined
Eurobank
in 1997
and
served,
inter
alia,
as
Senior
General
Manager,
Group Corporate
& Investment
Banking and
Capital Markets
& Wealth
Management (2014-2015)
and Executive
Committee Member
(2014-2015), General
Manager and
Executive Committee
Member (2005-2013),
Deputy General
Manager
and Treasurer
(2002-2005), Head
of fixed
income and
derivative product
trading
(1997).
In
the
past,
Mr.
Karavias
had
also
the
following
significant
posts:
Treasurer
of
Telesis
Investment Bank (2000), Head of fixed
income products and derivatives in
Greece
of
Citibank,
Athens
(1994)
and
has
also
worked
in
the
Market
Risk
Management Division of JPMorgan NY (1991).
He
holds
a
PhD
in
Chemical
Engineering
from
the
University
of
Pennsylvania,
Philadelphia, USA and
an MA in
Chemical Engineering
from the same
university, as
well as a Degree in Chemical
Engineering from the National Technical University of
Athens. He has published articles on topics related
to his academic research.
Stavros Ioannou
Deputy Chief Executive Officer (CEO), Group Chief
Operating Officer (COO) & International Activities
Membership in Board Committees:
Strategic Planning Committee – Member
Board Digital and Transformation Committee -
Member
Year of birth: 1961
Nationality: Hellenic
Number of shares in Eurobank Holdings:
1.528
Mr. Ioannou holds
several other
posts in the
Eurobank Group
as member
of the BoD
of Eurobank
AD Beograd,
Serbia (since
November 2010),
Eurobank Bulgaria
AD
(since October 2015), Eurobank Cyprus
Ltd (since November 2015) and
is also the
Chairman of the BoD, BE-Business Exchanges SA (since
January 2014).
He is
currently the
Chairman of
the Executive
Committee in
the Hellenic Banking
Association (since June 2020) and
Non-Executive Director of Grivalia
Management
Company S.A. (since September 2019).
In the
past, Mr.
Ioannou had
also the
following significant
posts: Vice
Chairman,
Cardlink
SA
(2013-2015), Member
of
the BoD,
Millennium Bank,
responsible for
Retail, Private Banking and Business Banking
(2003), Head at Barclays Bank
PLC,
responsible for Retail Banking, Private Banking and Operations
(1990-1997).
He holds
an MA
in Banking
and Finance
from the
University of
Wales, UK
and a
Bachelor Degree in Business Administration from
the University of Piraeus.
Kostas Vassiliou
Deputy
Chief
Executive
Officer
(CEO),
Head
of
Corporate & Investment Banking
Membership in Board Committees:
Strategic Planning Committee – Member
Year of birth: 1972
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
Mr. Vassiliou
holds several other posts in the Eurobank
Group as Chairman of the
BoD of
Eurobank Factors Single
Member SA
(since December 2018),
Member of
the
BoD
of
Eurobank
Equities
Single
Member
SA
(since
March
2015),
Vice-
Chairman of the BoD of Eurolife FFH Insurance
Group Holdings SA (since January
2021), Eurolife
FFH Life
Insurance SA
(since December
2020) and
Eurolife FFH
General Insurance SA (since December 2020).
In the past, Mr. Vassiliou had also the following significant posts: Country Manager
for
Greece,
Cyprus
and
the
Balkans,
Mitsubishi
UFJ
Financial
Group,
London
(2000-2005)
and
Senior
Relationship
Manager,
Mitsubishi
UFJ
Financial
Group,
London (1998-2000).
He holds an
MΒΑ from Boston
University, USA and a BA
in Business Administration
from the Athens University of Economics and
Business.
Andreas Athanasopoulos
Deputy
Chief
Executive
Officer,
Group
Chief
Transformation Officer, Digital & Retail
Membership in Board Committees:
In the
past, Mr.
Athanassopoulos had the
following significant posts:
Group Chief
Customer Officer
&
CEO Financial
services, Dixons
Carphone, UK
(2018-2020),
CEO
and
Vice
President,
Dixons
Carphone,
Greece
(Kotsovolos)
(2013-2018),
General Manager Retail Βanking, National Bank of Greece (2008-2013),
Chairman
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Strategic Planning Committee – Member
Board
Digital
and
Transformation
Committee
-
Member
Year of birth: 1966
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
of NBG Asset Management (2011-2013), Deputy
General Manager Small Business
Banking,
Eurobank
(Greece
&
New
Europe)
(2003-2008),
Consumer
Credit
Director, Piraeus Bank (Greece) (2000-2003).
He holds a Postdoc on Decision
Sciences from the London Business
School, UK, a
PhD in Industrial and
Business Studies from the
University of Warwick, UK, an
MSc
in Statistics and Operational
Research from the University
of Essex, UK, a
BSc in
Applied Mathematics from the University of Patras, Greece. He has also served as
a
Professor
in
Financial
Services
of
the
Athens
Graduate
School
of
Business
(ALBA) (1997-2001)
and a
Senior Lecturer
of the
Warwick
Business School,
UK
(1992-1996) and has
published 35 scholarly
reviewed papers in top
rated academic
journals.
Christos Adam
General
Manager,
Group
Risk Management,
Group
Chief Risk Officer (Group CRO), Eurobank SA
Year of birth: 1958
Nationality: Hellenic
Number of shares: 577
Mr.
Adam
has
served
within
the
Eurobank
Group
as
Deputy
General
Manager
(2005-2013), Head of Group
Credit Control Sector (1998-2013)
and Senior Account
Officer & Senior Manager, Corporate Division (1990-1997).
He holds an MBA in Finance from
the University of Michigan, Ann Arbor, USA, with
full scholarship from the Fulbright Foundation and a Degree in Economics from the
School of Economics & Political Sciences, University
of Athens.
Thanasis Athanasopoulos
General
Manager
–
Head
of
Group
Compliance
General Division of Eurobank SA
Year of birth: 1973
Nationality: Hellenic
Number of shares: -
In the past, Mr.
Athanasopoulos has served as Chief
Audit Executive of the
Alpha
Bank Group
and Vice President - Audit & Risk Review of the Mellon Financial
Corporation.
He holds a BSc, Business Administration from the Athens University of Economics
and Business,
a MSc,
Banking from
the University
of Reading,
a MSc,
Economic
History
from
the
London
School
of
Economics
and
he
is
certified
as
a
Fellow
Chartered Accountant of ICAEW and a Certified
Director (IDP) by INSEAD.
Iakovos Giannaklis
General Manager, Retail Banking, Eurobank SA
Year of birth: 1971
Nationality: Hellenic
Number of shares: 1.756
In the past Mr Giannaklis
has also served within the
Eurobank Group as Member of
the
BoDs
of
Eurobank
FPS
Loans
and
Credits
Claim
Management
Société
Anonyme, Eurobank
Household Lending
Services SA
(2016-2018), Eurobank
Asset
Management MFMC
(2014-2017), Head
of Branch Network
General Division (2014-
2016), Head of Branch Network Commercial Development Sector (2014), Member
of the BoD, Eurobank Business
Services (2009-2017) and Head
of Branch Network
Sector (2009-2014).
He holds
an MBA
from the
University of Indianapolis,
USA and
a BA
in Business
Administration, from the City University of Seattle,
USA.
Tasos Ioannidis
General Manager Global Markets, Eurobank SA
Year of birth: 1968
Nationality: Hellenic
Number of shares: -
In the past Mr.
Ioannidis has served as General Manager, Head
of Global Markets
&
Treasury
(April
2015
-
July
2019),
Deputy
General
Manager,
Head
of
Global
Markets & Treasury (October
2013 - March 2015),
Deputy General Manager, Group
Treasurer (April
2009 -
October 2013),
Deputy General
Manager, Group
Head of
Trading
(March 2007
- April
2009).
He has
also served
as Member
of the
BoD,
Eurobank Asset Management MFMC
(May 2015 - September
2017), Chairman of
the
BoD,
Eurobank
ERB
MFMC,
former
TT
ELTA
MFMC
(February
2014
-
September 2015), Member of the
BoD, Global Asset Management
SA (June 2006 -
December 2009),
and Member
of the
BoD, Portfolio
Investment SA
(June 2002
-
April 2003).
He
holds
a
MSc
in
Shipping,
Trade
and
Finance
from
Cass
Business
School,
London,
UK
and
a
BSc,
School
of
Mechanical
Engineering
from
the
National
Technical University of Athens.
Apostolos Kazakos
General Manager, Group Strategy, Eurobank SA
Year of birth: 1972
Nationality: Hellenic
Number of shares: -
Mr.
Kazakos has
also served as
Deputy CEO,
Eurobank Equities, the
investment
banking
and
brokerage
arm
of
Eurobank
Group
(May
2010
–
August
2013),
Assistant
General
Manager,
Head
of
Group
Strategy
&
Investment
Relations,
National Bank of Greece (August
2014 – March 2015), General
Manager and Head
of
the Investment
Banking, Restructuring
&
Capital Investment
Division, General
Bank,
Piraeus
Group
(September
2013
–
July
2014),
Head
of
the
Investment
Banking Division, Eurobank Equities
and Telesis Bank (January 1998 – May 2010).
He holds an MSc in International Securities, Investment and Banking, International
Securities
Market
Association
(ISMA) from
the
University of
Reading, UK
and
a
Degree in Accounting, Faculty of Administration &
Finance from the Technological
Educational Institute of Central Macedonia.
Harris Kokologiannis
General
Manager,
Group
Finance,
Group
Chief
Financial Officer (Group CFO), Eurobank SA
Year of birth: 1967
Mr. Kokologiannis joined Eurobank in January 2008
as Head of Group Finance
and
Control until his appointment as Group CFO
in July 2013.
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Nationality: Hellenic
Number of shares: -
He has served as Audit Supervisor, Deloitte (Tax, Audit, Management Consultant),
Group CFO
(Lafarge Cement
- Heracles
General Cement
Company), Director
of
Finance and Control (L’Oreal Hellas), Group Financial Manager (PLIAS
Group).
He
is
a
Chartered
Accountant
in
UK,
member
of
the
Chartered
Institute
of
Management Accountant
(C.I.M.A.), UK.
He holds
an MBA
from the
University of
Warwick (UK) and
a BA in
Business Management
and Organization
from the
School
of Economics and Business Science (ASOEE).
Michalis Louis
Head
of
International
Activities
General
Division
&
Group Private Banking
Year of birth: 1962
Nationality: Cypriot
Number of shares: -
Mr. Louis
also serves as CEO,
Eurobank Cyprus Ltd (since
2007), Member of the
BoD, Eurobank
Private Bank
Luxembourg SA
and Member
of the
Supervisory Board
(SB) of Eurobank Bulgaria AD and of Eurobank-Direktna.
He
holds
a MSc
in
Corporate Finance
&
Accounting from
the
London School
of
Economics
and
Political
Sciences,
UK
and
a
Degree
in
Accounting
from
Ealing
College, UK.
Natassa Paschali
General Manager, Head of Group Human Resources
General Division, (Group CHRO), Eurobank SA
Year of birth: 1972
Nationality: Greek
Number of shares: -
Mrs.
Paschali
is
the
Group
Chief
Resources
Officer
(Group
CHRO),
since
June
2018. In
the past
she has
served within
the Eurobank
Group as
Head of
People
Engagement
(January
2017
–
June
2018),
Head of
HR, Eurobank
Private Bank
Luxembourg SA (parallel assignment), Luxembourg
(May 2014 – May 2017), Head
of HR Line Management, Wholesale Banking (2008-2016).
She
holds
a
MSc
in
Industrial
Relations
and
Personnel
Management
from
the
London School of
Economics and
Political Science (1995-1996)
and a BA
in English
Language and Literature
from the University
of Athens, School
of Philosophy (1991-
1995).
Mrs. Veronique Karalis,
Deputy Group Company Secretary, serves as the Secretary of the ExBo.
The ExBo manages
the implementation of
Group’s strategy,
as developed by
the SPC, in
line with the
Board’s guidance.
The functioning of ExBo is subject
to the provisions of the
TRFA.
The ExBo is established by
the CEO and its members
are
appointed
by the
CEO. The
ExBo meets
on a
weekly basis
or
ad hoc
when necessary.
Other
executives of
the Group,
depending on the subject to be discussed, may be invited to attend.
The ExBo is in quorum and meets validly when half of its members plus one are present or represented. In
determining the
number of
members for
the quorum, fractions,
if any,
shall not
be counted.
The ExBo
resolutions require a
majority vote.
The ExBo appoints
its Secretary,
who reports to
the Group Company
Secretariat and cooperates
with the Chairperson
of
the Committee. The Secretary is responsible to minute the proceedings and resolutions of all ExBo meetings, including the
names of those present
and in attendance and the
action plans and follow ups
for assignments, as well as
for issuance of
extracts. Decisions, actions and follow ups are disseminated to the Bank’s responsible Units, as required. The
ExBo Terms
of Reference (ToR) are
approved by the CEO, and revised as appropriate.
The ExBo’s key tasks and responsibilities are to:
●
manage the implementation of the Group’s strategy as developed by the SPC, in line with the BoD’s guidance
●
draw up the annual budget and the business plan.
The SPC reviews the key objectives and the
goals contained therein,
as well as the major business initiatives, and submits them to the Board for approval,
●
approve issues concerning the Group’s strategic choices (e.g. partnerships, share capital increase, issuing convertibles
and/or launching debt issuance programs,
mergers, acquisitions or disposals, the
formation of joint ventures,
creation or
dissolution of special purpose vehicles,
dividend distribution and all other investments
or non-material disinvestments
15
by the Group etc.), ensuring these being in line with the approved Group’s strategy, if the issue under discussion is less
than or equal to €40 million. In case though:
a)
the issue under discussion exceeds € 40 million;
b)
a decision of the Board is obligatory by Law or by the Bank’s contractual commitments;
c)
it is
deemed necessary
by the
SPC, taking
into account
the complexity
and nature
of the
strategic choices
under
discussion;
the issues concerning the
Group’s strategic choices are
approved by the Board
following a relevant proposal
by the SPC
(as per its Terms of
Reference),
●
to
perform its
duties according
to
the Bank’s
policies, Service
Level Agreements
(SLAs) and
Reverse Service
Level
Agreement (RSLAs) as approved by ExBo, BoD Committees and BoD. In particular, following the Amended & Restated
SLA of August 2020 between Eurobank and Grivalia Management Company S.A., the Executive Board is responsible:
o
To
approve any decision to acquire any single Asset to be classified as a Grivalia Asset with an
acquisition price
exceeding € 10 million, and
up to € 40 million,
following a recommendation by the
Real Estate Committee (REC).
For Assets exceeding € 40 million the decision is approved by the BoD following a
recommendation by the SPC,
which will have received a recommendation by the REC.
o
To
approve any
decision to
divest any
single Asset
classified as
a Grivalia
Asset or
included in
the Eurobank
Greek Portfolio with a book value exceeding € 10 million, and up
to € 40 million, following a recommendation by
15
As specified in the Divestment Policy
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the REC. For any Asset with a book value exceeding € 40 million, the decision is approved by the BoD following
a recommendation by the SPC, which will have received a recommendation by the REC.
o
To
approve any decision to divest a group of 10 Assets or more “Portfolio Sale” for which the total book value of
the Assets exceeds €
5 million and up
to € 40 million,
following a recommendation
by the Real Estate
Committee.
For a Portfolio Sale for which
the total book value of Assets
exceeds € 40 million, the decision
is approved by the
BoD following a recommendation by the SPC, which will have received a recommendation by the REC.
o
To
approve any decision to lease an asset of the Grivalia Assets and Eurobank Greek Portfolio other of than the
Eurobank REO
Portfolio or
Eurobank to lease
from a
third party,
for rental contracts
with a value
exceeding
€
300 thousand per month following a recommendation by the Real Estate Committee.
●
in case that the Real Estate Strategic Committee cannot
reach an unanimous decision for a matter,
as described by its
ToR,
such matter shall be referred to the ExBo or the SPC, as required.
●
monitor the performance of each business unit
and country against budget and
ensure corrective measures are in place
wherever required,
●
decide on all
major Group’s initiatives
aiming at transforming
the business and
operating model, enhancing
the operating
efficiency and cost rationalization, improving organizational and business structure,
●
ensure that adequate systems of internal controls are properly maintained,
●
review and
approve Bank’s Policies
(other than
Credit Policies
that are approved
by Management
Risk Committee
and/or
Troubled
Assets Committee
and/or BRC)
that are
related to
its responsibilities
and/or are of
critical importance
to the
Bank, including but not limited to those requiring BoD approval as per the TRFA,
●
review the
performance of
any Committee
and /or
individuals to
whom it
has delegated
part of
its responsibilities,
as
approved,
●
ensure adequacy of Resolution Planning governance, processes and systems
●
hire and retain external consulting firms in its sole
judgment, and approve their compensation and terms of engagement
in accordance with Bank’s policies and procedures,
●
hire
and
retain
investment
banking
advisors,
in
its
sole
judgment,
and
approve
their
compensation
and
terms
of
engagement, in accordance with Bank’s policies and procedures, where applicable.
Management Risk Committee
16
The Management Risk
Committee (MRC) oversees the
risk management framework
of Eurobank. The MRC
ensures that
material risks are identified and promptly escalated to the BRC
and that the necessary policies and procedures are in place
to prudently manage risk and
to comply with regulatory
requirements. The MRC members should
have the ability to
identify,
assess and manage the Group’s risks.
As part of its mandate, the MRC:
●
reviews
the
Bank’s
and
its
subsidiaries’
risk
profile
vis-à-vis
its
declared
risk
appetite
and
examines
any
proposed
modifications to the risk appetite,
●
reviews and approves the methodology, the parameters and the results of the Bank’s stress testing programme,
●
determines
appropriate
management
actions
which
are
discussed
and
presented
to
the
ExBo
for
information
and
submitted to the BRC for approval, and maintains
at all times a pro-active approach to Risk Management, understands
and
evaluates
risks,
addresses
escalated
issues,
provides
oversight
to
the
Group’s
risk
management
framework
–
including the implementation of risk policies – and informs the BRC of the Group’s risk profile
●
assists
the
BRC
in
defining
risk
management
principles
and
methodologies
thereby
ensuring
that
the
Group’s
Risk
Management Framework contains processes for identifying, measuring, monitoring, mitigating and reporting the current
risk profile against its risk appetite, limits, and performance targets.
The MRC does not conflict with the GCRO or the Risk Management General Division’s responsibilities for
Risk governance
as prescribed under
the HFSF Relationship
Framework Agreement or the
Bank of Greece’s
Governor Act no. 2577/2006.
The CEO serves as the Chairperson
of the MRC and the GCRO
as the Vice Chairman. They have responsibility
to escalate
material risks and issues to the BRC and to update ExBo on material risks and issues on a periodical basis.
The MRC is in quorum and meets
validly when half of its members,
including the Chairperson or the Vice-Chairperson, plus
one are present or represented. Selected attendees
can be invited to the MRC meetings, when
the topics for discussion fall
under their
remit or they
have the
requisite expertise
to constructively
participate. The
finalized minutes are
distributed to
16
Information
regarding
current
composition
and
short
biographical
details
of
its
members
may
be
found
at
the
Bank’s
website
(www.eurobank.gr).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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68
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the BRC, SPC and ExBo members,
as prepared by the committee’s secretary
and approved by its Chairperson. Abstracts
of resolutions reached and actions to be taken are provided to Management, SPC and/or ExBo members, as necessary.
Resolutions of the
MRC are decided
based on
a simple
majority and in
case of a
tie vote,
the Chairman or
the Vice-Chairman
in the
case of
Chairman’s absence,
has the
casting vote.
The opinion
of the
minority is
recorded in
the meeting
minutes
whenever a decision of the MRC is not reached unanimously, and the BRC is informed accordingly.
Changes to
the ToR
of the
MRC are
reviewed by
the MRC
at least
every two
(2) years
and revised
if necessary,
unless
significant changes
in the
composition, role,
responsibilities, organization
and /
or regulatory
requirements necessitate
earlier
revision and are approved by the CEO. The ToR
of MRC are also submitted to the BRC for information purposes.
Group Asset and Liability Committee (G-ALCO)
17
G-ALCO’s primary mandate is
to i) review, approve, formulate,
implement and monitor
- as may
be appropriate -
the Group’s
a) liquidity
and funding strategies
and policies, b)
interest rate guidelines
and interest rate
risk policies, c)
Group’s capital
investments, as well
as FX exposure
and hedging strategy, and
d) Group’s business
initiatives and/or investments
that affect
the Bank’s
market and
liquidity risk
profile, ii)
approve at
a first
stage and
recommend to
the BRC
for final
approval the
respective country limits (with special
attention given for the
approval / monitoring of the
limits for countries where Eurobank
has a
local presence)
and iii)
approve or
propose –as
the case
may be
- changes
to these
policies that
conform to
the
Bank’s risk appetite and levels of exposure as determined by the BRC & Management while complying with the framework
established by regulatory authorities and/or supervising bodies.
G-ALCO convenes once a month and/or whenever
required. Other executives or managers of the
Group, depending on the
subject to be discussed, may be invited to attend as required.
Required
quorum
for
G-ALCO
meetings
to
be
effective
is
six
members.
In
order
to
have
a
quorum
the
presence
of
its
Chairperson
and
a
minimum
of
three
(3)
SPC
members
is
required.
Decisions
on
issues
are
taken
by
majority
and
communicated
to the
relevant /
affected
business areas,
while meetings
are minuted
by the
Committee’s
Secretary and
distributed to G-ALCO members, the CEO, the Board’s Chairman and the Single Supervisory Mechanism (SSM).
Central Credit Committees
Central Credit Committee I
The main objective of Central
Credit Committee I (CCCI) is
to ensure the objective credit
underwriting of relevant exposures
of Greek
corporate performing
and private
banking clients,
in accordance
to the
Risk Appetite
Framework and
the Credit
Policy Manual of the Bank and in a way that balances credit risk and return on equity.
The CCCI is chaired by
an independent to Business
and Risk Professional, convenes
at least once a week
and all meetings
are
minuted.
Decisions
are
taken
unanimously.
If
unanimity
is
not
achieved,
the
credit
request
is
escalated
by
the
Chairperson to the next (higher) approval level
requiring a unanimous decision. In case of non-unanimity
the final decision
lies with the Management Risk Committee (MRC), by majority voting.
The main
duty and
responsibility of
the CCCI is
to assess
and approve
all credit
requests for clients
in the
Greek related
corporate
performing
and
private
banking
portfolio
of
a
total
exposure
above
€50mio
and
unsecured
exposure
above
€35mio.
For
total
exposure
exceeding
€75mio
and
unsecured
exposure
exceeding
€50mio,
additional
approval
by
the
GCRO is
required, while
for total
exposure exceeding
€150mio and
unsecured exposure
exceeding
€100mio, additional
approval by
the CEO
is required.
Furthermore, for
exposures higher
than 10%
(or 20%
for selected
borrowers where
no
single
risk exists)
of
the Bank’s
regulatory capital
the additional
approval
of the
Management Risk
Committee (MRC)
is
required.
Subsequently,
the consent
of
Hellenic Financial
Stability Fund
(HFSF)
is necessary,
whereas
final approval
is
granted by the Board Risk Committee (BRC).
Central Credit Committee II
The main objective of the Central Credit Committee II (CCCII) is the same as for the CCCI for lower levels of exposure.
The CCCII convenes at least
once a week and all
meetings are minuted. Decisions are
taken unanimously.
If unanimity is
not achieved, the request is escalated by the Chairperson to the next approval level.
The
main
duty
and
responsibility
of
CCCII
is
to
assess
and
approve
all
credit
requests
for
clients
in
the
Greek
related
corporate performing
and private banking
portfolio for total
exposure from
€20mio up to
€50mio and unsecured
exposure
from €10mio up to €35mio and retail exposures for total limits above €3mio.
17
Information
regarding
current
composition
and
short
biographical
details
of
its
members
may
be
found
at
the
Bank’s
website
(
www.eurobank.gr
).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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Troubled Assets Committee
18
The Troubled
Assets Committee (TAC)
is established according
to the regulatory provisions.
The main purpose
of TAC
is
to act
as an
independent oversight
body,
closely monitoring
the Bank’s
troubled assets
portfolio and
the execution
of its
NPE Management Strategy.
The
Committee
meets
at
least
once
per
month
and/or
whenever
required
if
the
majority
of
the
members,
including
the
Chairperson, are present. Decisions are taken by majority, are minuted and circulated as appropriate. The Chairman has a
casting vote.
TAC
informs the
Board or
its competent
Committees on
the results
of its
activities, at
least quarterly.
TAC
cooperates with Group Risk Management Division in order to develop and to be fully aligned with regard to the appropriate
methodologies
applied
for
the evaluation
of
the
risks
inherent
in
every
type
of
modification
and
delinquency
bucket,
by
portfolio. TAC’s
reports to
the BoD
or its
competent Committees
are also
submitted to
Group Risk
Management General
Division.
TAC’s main responsibilities:
●
review internal reports regarding troubled assets management under the regulatory provisions;
●
approve
the
available
forbearance,
resolution
and
closure
solutions
by
loan
sub-portfolio,
and
monitor
their
performance through Key Performance Indicators (KPIs);
●
define the criteria to assess
the sustainability of credit and collateral
workout solutions through the design and
use of
“decision trees”;
●
approve, monitor and assess pilot modification programmes; and
●
supervise
and
provide
guidance
and
know-how
to
the
respective
troubled
assets
units
of
Eurobank’s
subsidiaries
abroad.
Products & Services Committee (PSC)
19
Products
&
Services
Committee
(PSC)
is
responsible
for
creating
and
supervising
the
governance
framework
for
the
products and services offered to Eurobank’s clients in Greece through the physical
and alternative channels, in accordance
with
the
supervisory
and
regulatory
requirements.
PSC
has
established
a
governance
framework
for
the
products
and
services,
under
its
responsibilities,
throughout
their
lifecycle,
according
to
which
financial
and
non-financial
risks
are
assessed,
taking also
into account
their
financial performance.
The Committee
implements
also
a
periodic
review of
all
products and services to determine their continuation, modification or discontinuation.
PSC convenes
once a
month and/or
whenever required.
Other executives
or managers
of the
Group, depending
on the
subject to be discussed, may be invited to attend as required.
The PSC is in quorum and meets validly when half of its members plus one are present (fractions are excluded from the
computation). For quorum, the Chairperson should be also present.
Decisions
are
taken
unanimously
and
are
recorded
in
the
meeting’s
minutes.
In
case
of no
reaching
a
decision
due
to
disagreement of Members, the issue under discussion is escalated to the Executive Board (ExBo).
Environmental, Social & Governance (ESG) Management Committee - ESG ManCo
20
The primary mandate of
the ESG ManCo is
to i) provide strategic
direction on ESG initiatives,
ii) review the ESG
Strategy
prior to approval,
iii) integrate the
elements of the
ESG strategy into
the Bank’s business
model & operations,
iv) approve
eligible
assets
of
Green
Bond
Frameworks,
v)
regularly
measure
and
analyze
the
progress
of
the
ESG
goals
and
performance targets, and vi) ensure the proper implementation of ESG related policies and procedures, in accordance with
supervisory requirements and voluntary commitments.
ESG ManCo convenes four times a year and/or ad hoc when necessary. Other Bank employees, depending on the subject
to be discussed, may be invited as deemed appropriate.
Required quorum for ESG ManCo meetings to
be effective is seven members. In order
to have a quorum, the presence of
its Chairperson and
a minimum of six
(6) members is required.
Decisions on issues are
taken by majority.
In case of a
tie
vote, the
Chairperson has
the casting
vote. Whenever
a decision
of the
ESG ManCo
is not
reached unanimously,
this is
recorded in the minutes along with
the opinion of the minority.
All meetings and decisions are minuted
by the Committee’s
Secretary and distributed to ESG ManCo members.
18
Information
regarding
current
composition
and
short
biographical
details
of
its
members
may
be
found
at
the
Bank’s
website
(www.eurobank.gr).
19
Information
regarding
current
composition
and
short
biographical
details
of
its
members
may
be
found
at
the
Bank’s
website
(www.eurobank.gr).
20
I
nformation regarding current composition and short
biographical details of its members may be found
at the Bank’s website
(www.eurobank.gr).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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70
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The Terms
of Reference of the ESG
ManCo will be reviewed at
least every two (2) years
and revised if necessary,
unless
significant changes
in the
composition, role,
responsibilities, organization
and /
or regulatory
requirements necessitate
earlier
revision.
5.
Key Control Functions
As part
of its
overall system
of internal
controls, HoldCo
has established
a number
of dedicated
control functions
whose
main responsibility
is to
act as independent
control mechanisms thus
reinforcing the control
structure of
the HoldCo.
The
most important functions and their key responsibilities are described below.
5.1
Internal Audit
Eurobank Holdings
Internal Audit (“IA”) is an independent, objective assurance and consulting function designed to add value and improve the
operations of
Eurobank Holdings.
IA has
adequate organisation structure
and appropriate resources
to ensure
that it can
fulfil its roles and responsibilities.
IA also maintains a quality assurance and improvement programme, which covers all aspects of the IA activities, to ensure
the consistent application of the methodology in accordance with the IIA Standards.
In order to safeguard its independence, IA reports functionally to the
Audit Committee and administratively to the CEO. The
Board has delegated
the responsibility
for monitoring the
activity of the
IA to
the Audit Committee
of the
HoldCo. IA
is headed
by the Chief
Internal Auditor
(CIA) who
is appointed by
the Audit
Committee. The
latter also
assesses the
CIA’s performance.
The mission of
IA is to
enhance and protect organisational
value by providing
risk-based and objective assurance,
advice
and insight. The key assurance and consulting responsibilities of IA are to:
●
provide
reasonable
assurance,
in
the
form
of
an
independent
opinion,
as
to
the
adequacy
and
effectiveness
of
the
internal control framework of the HoldCo.
,
●
assist Management on the prevention and detection of fraud or defalcation (unethical practices etc.),
●
assist Management
in enhancing
the system
of internal
control by
making recommendations
to address
weaknesses
and improve existing policies and procedures,
●
follow-up to ascertain that appropriate action is taken on reported audit findings within agreed deadlines,
●
participate in HoldCo’s projects in an assurance or consulting capacity.
Eurobank
Internal
Audit Group
(“IAG”) is
an
independent,
objective assurance
and consulting
function designed
to add
value
and
improve the
operations of
Eurobank and
its subsidiaries.
IAG has
adequate organisation
structure and
appropriate resources
to ensure that it can fulfil its roles and responsibilities.
IAG comprises the “Internal Audit Sector”, the “Forensic Audit Division”, the “International Audit Division” and
the “Business
Monitoring
and
Organisational
Support
Division”.
IAG
also
has
a
Quality
Assurance
function
(QAF),
to
assess
the
effectiveness
of
the
Group’s
internal
audit
activities
and
conformance
with
IIA
Standards.
QAF
operates
as
Centre
of
Excellence
for
Audit
Standards
&
Methodology,
acting
as
an
advisor
to
IAG
Management
in
topics
related
to
quality
improvement and methodology.
In order
to safeguard
its independence,
IAG reports
functionally to
the Audit
Committee and
administratively to
the CEO.
The Board has delegated the responsibility for monitoring the activity of the IAG to the Audit Committee of the Bank. IAG is
headed by the Group
Chief Audit Executive (CAE) who
is appointed by the
Audit Committee. The latter also
assesses the
CAE’s performance.
The key assurance and consulting responsibilities of IAG are to:
●
provide
reasonable
assurance,
in
the
form
of
an
independent
opinion,
as
to
the
adequacy
and
effectiveness
of
the
internal control framework of the Bank and its subsidiaries.
In order to form an opinion, IAG establishes and carries out
a programme of audit work (based on the risk assessment of the audit universe),
●
assist
and
advise
Management
on
the
prevention
and
detection
of
fraud
or
defalcation
or
unethical
practices
and
undertake such special projects as required,
●
assist Management
in enhancing
the system
of internal
control by
making recommendations
to address
weaknesses
and improve existing policies and procedures,
●
follow-up to ascertain that appropriate action is taken on reported audit findings within agreed deadlines,
●
carry
out
any
other
specific
duties
required
by
the
Regulatory
Authorities
and/or
participate
in
bank
wide
projects
undertaken by the Bank,
●
participate in Bank projects in an assurance or consulting capacity
●
assess the performance of the Group’s internal audit functions, which have a direct reporting line to IAG.
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5.2
Risk Management
Eurobank Holdings
As part of its overall system of internal controls HoldCo has engaged in a Service Level Agreement (SLA) with Eurobank in
order to receive supporting
and advisory services in all
areas of risk management
(credit, market, liquidity and operational
risks) undertaken
by the
Group. The
most important
services provided
through the
above mentioned
SLA are
described
below:
●
Provision of advice on:
-
Identification, evaluation and monitoring of credit risk
-
Ensuring policy and instructions (strategy and products) recommended by business owners and Servicers are
aligned to applicable credit policy manual and regulatory guidelines
-
Standardization of procedures and guidelines
-
Update and maintenance of the risk strategic framework master document
-
Participation in systemic bank consultation committees
●
Review new remedial products and initiatives prior submission to TAC or approval
●
Coordination of NPE related regulatory reporting
●
Provision of input for SSM submission and 3-year business plan, monthly MIS actual data (including Greek and
International subsidiaries)
●
Advising on identification, support/advise, recording and evaluation of liquidity risks and financial monitoring
●
Advising in the identification, assessment, recording and monitoring of operational risks (e.g. RCSA, events capture,
outsourcing etc.)
●
Advising in the identification, assessment, recording and monitoring of climate risk
Eurobank
The Group Risk Management
General Division, which
is headed by the
Group Chief Risk Officer
(GCRO), is independent
from the business units and has full
responsibility for monitoring credit, market, liquidity
and operational risks undertaken by
the Eurobank Group.
It comprises the Group
Credit General Division, the
Group Credit Control Sector,
the Group Credit Risk
Capital Adequacy
Control
Sector,
the
Group
Market
&
Counterparty
Risk
Sector,
the
Group
Operational
Risk
Sector,
the
Group
Model
Validation & Governance Sector,
the Group Risk Management Strategy Planning & Operations Division, the Risk Analytics
Division and the Supervisory Relations & Resolution Planning Sector
21
.
The GCRO serves
as a pivotal point
for the risk management
functions of the Group
and he is responsible
for developing
the
Risk
Appetite
Framework
and
overseeing
and
coordinating
the
development
and
implementation
of
adequate
risk
measurement and management policies in relation to credit, market, liquidity, and operational risks.
The GCRO reviews
the credit policies prepared
by the responsible Risk
Units before their submission
for final approval
to
the BRC
or to the
BoD and oversees
their implementation thereafter.
The GCRO promptly
reports any deviation
from the
credit policy or potential conflict with the approved risk strategy and risk appetite to the Board Risk Committee.
The GCRO
is responsible
to provide
to the
Board Risk
Committee, on
a monthly
basis, adequate
information so
that the
Committee
can
properly
oversee
and
advise
the
BoD
on
the
Bank's
risk
exposures
/
profile
and
future
risk
strategy.
Additionally, the
GCRO oversees compliance with approved Risk Appetite Limits, included in the Risk Appetite Framework
(RAF) and reports compliance status as well as any deviations to the Board Risk Committee.
Eurobank
has
a
well-established
strategy
and
clear
risk
management
objectives
that
has
to
deliver
through
core
risk
management processes and methodologies. At a strategic level, the risk management objectives are to:
●
Identify Eurobank’s material risks (credit, market/liquidity, operational);
●
Ensure that business plan is consistent with Eurobank’s risk appetite;
●
Optimize
risk/return
decisions
by
taking
them
as
closely
as
possible
to
the
business,
while
establishing
strong
and
independent review;
●
Ensure that business growth plans are properly supported by effective risk infrastructure;
●
Manage risk
profile to
ensure that
specific financial
deliverables remain
possible under
a range
of adverse
business
conditions;
●
Assist senior executives improve the control and co-ordination of risk taking across their businesses;
●
Embed
risk
management
into
the
Bank’s
culture
and
existing
processes
and
raise
awareness
of
risk
management
throughout the Bank;
●
Provide the framework, procedures and guidance to enable all employees to manage risk in their own areas across the
Business and back-office Units.
●
Advise and
support Eurobank
Holdings in
risk management
according to
the agreed
Service Level
Agreement (SLA)
between Eurobank Holdings and Eurobank.
21
The Supervisory Relations & Resolution
Planning Sector has a dual reporting line
to both the GCRO & the Group Chief
Financial Officer
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5.3
Compliance
Eurobank Holdings
Eurobank
Holdings
Compliance
is
established
with
the
approval
of
the
Board
of
Directors
and
the
Audit
Committee
of
Eurobank Holdings. It is
a permanent function and
independent from Eurobank Holdings’
business activities so that
conflicts
of interests are avoided. In order to safeguard its independence, Eurobank Holdings Compliance reports functionally to the
Audit Committee of Eurobank Holdings and for administrative purposes to the CEO.
Its
mission
is
to
promote,
within
Eurobank
Holdings,
an
organizational
culture
that
encourages
ethical
conduct,
and
a
commitment to compliance with laws and regulations as well as global governance standards.
The main
objective of
Eurobank Holdings
Compliance is
to ensure
that Eurobank
Holdings has
established an
adequate
system of
internal controls
that allows
it to
operate in
accordance with
the ethical
set of
values contained
in its
"Code of
Conduct
and
Ethics" and
in compliance
with applicable
laws, regulations
and internal
policies. More
specifically,
for
the
regulatory topics within its scope of responsibilities, Eurobank Holdings Compliance is mandated to:
●
raise compliance awareness in Eurobank Holdings
●
advice the
Board of
Directors and
Senior Management
on Eurobank
Holdings compliance
with applicable
laws, rules
and standards and keeping them informed of related developments
●
issue,
as
necessary,
policies
and
other
documents,
in
order
to
provide
guidance
to
staff
on
the
appropriate
implementation
of
applicable
laws,
rules
and
standards
as
well
as
to
assist
the
business to
develop
and implement
regulatory compliant policies and procedures
●
review new high-risk activities and advise on potential compliance risks
●
ensure that staff is adequately trained about compliance issues
●
provide support and challenge, if
required, the business line management regarding
the effectiveness of the compliance
risk management activities
●
monitor whether
staff applies effectively
the internal
processes and
procedures aimed
at achieving
regulatory compliance
●
monitor through appropriate procedures
staff adherence to
internal policies and the "Code
of Conduct and Ethics"
and
identify fraudulent activity
●
monitor timely submission of reports to Competent Authorities and report any delays
and fines for any alleged breaches
of regulations to the AC
●
fulfil any statutory responsibilities and liaise with regulators and external bodies on compliance issues.
Eurobank
Group Compliance is established
with the approval of
the Board of Directors
and the Audit Committee
of Eurobank. It is
a
permanent function and independent
from the Bank’s business
activities so that conflicts of
interests are avoided. In
order
to
safeguard
its
independence,
Group
Compliance
reports
functionally
to
the
Audit
Committee
of
the
Bank
and
for
administrative purposes to the CEO.
The Audit Committee in consultation
with the Nomination Committee proposes
to the
Board for approval
the appointment, replacement
or dismissal of
the Head of
Group Compliance. The
performance of the
Head of
Group Compliance is
assessed on
an annual basis
by the
AC.
The Head
of Group Compliance
attends all Audit
Committee’s
meetings
and
submits
quarterly
and
annual
reports
(per
regulatory
requirements)
summarising
Group
Compliance’s activity and highlighting the main compliance issues.
Its mission is to promote, within Eurobank and its subsidiaries (Eurobank group), an organizational culture that encourages
ethical conduct
through integrity
and a
commitment to
compliance with
laws and
regulations as
well as
the application
of
international governance standards.
The
main objective
of
Group Compliance
is to
ensure
that the
Eurobank group
has established
an
adequate system
of
internal controls that allows it to operate in accordance
with the ethical set of values contained in its “Code of
Conduct and
Ethics” and in compliance
with applicable laws, regulations
and internal policies, as
well as international best
practices. In
brief, for the regulatory topics within its scope of responsibilities, Group Compliance is mandated to:
●
raise compliance awareness throughout the Eurobank group
●
provide advice the Board of Directors and
Senior Management on compliance with applicable laws,
rules and standards
and keep them informed of related developments
●
issue policies, procedures
and other documents
such as compliance
manuals, internal codes
of conduct &
ethics and
practice guidelines in order to provide guidance to staff on the appropriate implementation of applicable laws, rules and
standards as well as to assist the business to develop and implement regulatory compliant policies and procedures
●
review new high-risk activities and advise on potential compliance risks
●
ensure that staff is adequately trained
and frequently updated about compliance issues by designing
training programs
and co-operating with HR for their implementation
●
ensure
the
development
of
a
robust
compliance
risk
identification
and
assessment
framework,
provide
support
and
challenge, if
required, the business
line management
regarding the
effectiveness of
the compliance
risk management
activities
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●
monitor and test
whether staff applies
effectively the internal
processes and procedures
aimed at achieving
regulatory
compliance and report
to the relevant
Business Units any
potential breaches in
order for the
latter to proceed
with the
required improvements
●
monitor staff
adherence to
internal policies
and the
"Code of
Conduct and
Ethics" and
identify potential
breaches or
fraudulent activity
●
monitor timely submission of reports to Competent Authorities and report any delays
and fines for any alleged breaches
of regulations to the AC
●
fulfil any statutory responsibilities and liaise with regulators and external bodies on compliance issues
●
supervise, monitor, coordinate and
evaluate the activities
of the Compliance
Officers of the
Bank’s local and
international
subsidiaries in order to ensure compliance with Eurobank group standards.
The scope of activities of Group Compliance covers the following regulatory topics:
●
Financial
Crime
including
laws
and
regulations
on
Anti
Money
Laundering
(AML)
and
Countering
the
Financing
of
Terrorism
(CFT) and
legislation aimed
at combatting
Tax
evasion such
as FATCA
and CRS.
The scope
includes the
provision of
timely and
accurate responses
to requests
arising from
regulatory and
judicial authorities
for the
lifting of
banking secrecy or freezing
of assets and co-operation
with them. The Eurobank
Audit Committee in consultation
with
the Eurobank Nomination
Committee proposes to
the Board the
appointment of the
Anti-Money Laundering Reporting
Officer of Eurobank and his/her Deputy
●
Market Integrity related regulation regarding the provision
of investment products and services to clients including
laws
and regulations
on Market
Manipulation, Insider
Trading, Unlawful
disclosure of
inside information
and other
financial
crimes
●
Business and internal
conduct rules including
Conflict of interest
regulatory provisions, internal codes
of conduct, anti-
bribery and anti-corruption legislation and Antitrust and Competition laws and regulations
●
Consumer protection laws
and regulations (including,
inter alia, dormant
accounts legislation, BoG’s
Code of
Conduct
for loans, the Payment Services Directive and the Deposit Guarantee scheme)
●
Any
other
topic
for
which
there
is
a
law
/
regulation
explicitly
assigning
a
responsibility
to
the
Compliance
function,
including,
inter
alia,
the
monitoring
of
the
alignment
of
the
Bank’s
activities
with
legal
and
regulatory
requirements
concerning Environmental Social and Governance regulatory aspects and sustainability.
6.
System of Internal Controls
Principles of Internal Controls
The
Group
has
established
a
System
of
Internal
Controls
that
is
based
on
international
good
practices
and
COSO
terminology
and
is
designed
to
provide
reasonable
assurance
regarding
the
achievement
of
objectives
in
the
following
categories:
●
efficient and effective operations,
●
reliability and completeness of financial and management information,
●
compliance with applicable laws and regulations.
The key principles underlying the Group’s system of internal controls are described below:
Ø
Control Environment: The control
environment is the foundation
for all components of
Internal Control System, providing
discipline and structure and influencing the control consciousness
of employees. Integrity and high ethical values stem
from
management’s
philosophy
and
operating
style
and
appropriate
recruitment
and
training
policies
ensure
the
competence of the Group’s people. The
Group’s organisation structure is suitable
for its size and
complexity with clearly
defined responsibilities and reporting lines and clearly specified delegation of authority.
Ø
Risk
Management:
the
Group
acknowledges
that
taking
risks
is
an
integral
part
of
its
business.
It
therefore
sets
mechanisms
to
identify
those
risks
and
assess
their potential
impact on
the
achievement
of
the
Group’s
objectives.
Because economic, industry, regulatory
and operating
conditions will
continue to change,
risk management
mechanisms
in place shall be
set (and evolve)
in a manner that
enables to identify
and deal with
the specific and new
risks associated
with changes.
Ø
Control Activities: Internal control activities are documented in the
policies and detailed procedures that are designed to
ensure
that
operations
are
carried
out
safely
and
all
transactions
are
recorded
accurately
in
compliance
with
Management’s directives and regulations. They occur throughout the organisation and business processes, at
all levels
and in all
functions. One
of the
prime organisational measures
to ensure
control effectiveness in
the Group
is segregation
of
duties.
Functions
that
shall
be
separated
include
those
of
approval
(limits,
limit
excesses,
specific
transactions),
dealing,
administration
(administrative
input,
settlement,
confirmation
checks,
transaction
approval
check,
documentation check, file keeping, custody) and controlling (reconciliation,
limit monitoring, excess approval check, risk
management, compliance checks, physical counts).
Ø
Information and Communication:
Information must be
identified, captured and
communicated in a
form and timeframe
that enables
people to carry
out their responsibilities.
The Group
has set effective
communication channels to
ensure
that information is communicated down, across and up
within the organisation. Mechanisms are also in place to
obtain
appropriate
external
information
as
well
as
to
communicate
effectively
with
outside
parties
including
regulators,
shareholders and customers.
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Ø
Monitoring: the Group has established mechanisms for the ongoing monitoring of activities
as part of the normal course
of
operations.
These
include
regular
management
and
supervisory
activities
and
other
actions
personnel
take
in
performing their duties that assess
the performance of internal control
systems. There are also independent
evaluations
of the internal
control system by
the Internal Audit
function, the scope
and frequency of
which depend primarily
on an
assessment of risks and
the effectiveness of ongoing
monitoring procedures. Internal control
deficiencies are reported
upstream, with serious matters reported to top management,
the Audit Committee and the Board. Every three years
the
efficiency of the internal control system of HoldCo/Bank on
a solo and consolidated basis is independently
evaluated by
a third auditing firm, other than the
statutory auditor, as provided
for in BoG Governor’s Act 2577/2006. The evaluation
report, following
its assessment/acknowledgement
by HoldCo/Bank
competent bodies
(Audit Committee
and BoD)
is
further submitted to the BoG.
Characteristics of the System of Internal Controls (SIC)
HoldCo and Eurobank have indicative, and not restrictive, the following key characteristics of the SIC:
●
Code of Conduct and processes for monitoring its implementation.
●
Approved organisational
chart in
full development,
for all
levels of
hierarchy,
and with
distinction of
functions in
main and secondary, in which the area of responsibility per sector/department is clearly defined.
●
Composition and function of the Audit Committee.
●
Description of strategic planning, process of its development and implementation.
●
Long-term and
short-term action
plan per
important activity,
with a
corresponding report
and identification
of the
deviations on a periodic basis, as well as their justification.
●
Complete and
up-to-date Articles
of Association
which clearly identify
and reflect
the object of
exploitation, work
and the main objectives of the economic
operator.
●
Description of tasks of directorates, departments and job descriptions.
●
Recording
of
policies
and
procedures
of
important
operations
of
the
HoldCo/Bank
and
identification
of
internal
controls.
●
Processes for compliance with the applicable legal and regulatory framework (Regulatory Compliance).
●
Processes for risk assessment and management.
●
Processes for the integrity and reliability of financial information.
●
Processes for recruitment, training, delegation, targeting and evaluation of the performance of executives.
●
Processes for the security, adequacy and reliability of information systems.
●
Processes for safeguarding personnel and assets.
●
Description of reporting lines and communication channels within and outside the organisation.
●
Mechanism for monitoring and evaluating the efficiency and effectiveness of processes.
●
Process for periodic evaluation of the adequacy and efficiency of the SIC by an independent auditor.
●
Policies for the environmental management system and other environmental, social and governance issues (ESG
factors).
In the
context of
the implementation
of the
above, HoldCo
and Eurobank
have recorded
policies and
procedures for
the
operation of organisational
units. The procedures
include a clear
reference to the
internal controls established
to address
the risks they face and to the person responsible for each procedure and
are also assessed in the context of the corporate
governance system’s assessment.
Evaluation of the System of Internal Controls
The Bank AC, in
accordance with the Bank
of Greece Governor’s Act 2577/9.3.2006
and its Terms
of Reference, reviews
and evaluates the adequacy of the Internal Control System (ICS) of the Bank, as well as of the
Bank Subsidiaries annually,
on the basis of the relevant data and information of the Internal Audit Group (IAG) of the Bank, the findings and remarks of
external auditors and those of the supervisory
authorities. The AC relies on the oversight and
reporting mechanisms it has
established with the Audit Committees of the Group’s Subsidiaries.
Similarly,
the HoldCo AC,
in accordance with
its Terms
of Reference, reviews
and evaluates the
adequacy of the
Internal
Control System (ICS)
of the HoldCo,
on the
basis of the
relevant data
and information of
the Internal Audit
(IA) of the
HoldCo,
the findings and remarks of external auditors and those of the supervisory authorities.
Independent Evaluation of the HoldCo/Bank System of Internal Controls
In
March
2021,
PWC
presented
to
the
AC
members
the
scope,
findings
and
methodology
followed
by
PwC
for
the
Independent triennial
Evaluation of
the Holdco/Bank
System of
Internal Controls
(SIC) per
BoG Act
2577/9.3.2006 (BoG
Act).
Based on the procedures performed and the evidence obtained, there were no indications that the SIC, at the given time
of
the assessment, was not in compliance in all material aspects of the requirements of BoG Act.
Regarding the 26 observations
raised by PwC (25 observations
of low risk and 1
observation regarding the model
validation
of Eurobank Bulgaria of medium risk), Management agreed to take actions and address them by the end of 2021.
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7.
Sustainability
Approach towards sustainability
HoldCo/Bank has
placed sustainable development
as one of
the foundations of
its strategic planning,
which is
inexorably
linked to the UN Sustainable Development
Goals (SDGs). Responding to the needs of
today’s everchanging environment,
HoldCo/Bank, aims
to actively
contribute to
improving the
economic and
social environment
where it
operates, adopting
responsible practices that promote transparency and business ethics.
In this context, Bank is redesigning its strategy both in
terms of its financing and other products, and in terms of its internal
environment and
how it
is organised
and operates.
To
this end,
it redefines
sustainable development
actions and
goals,
taking into consideration the Principles for Responsible Banking and other international agreements and trends.
Bank has given priority to managing and mitigating
any underlying economic, environmental and social risks arising (when
developing business plans
or new products/services),
as well as
to complying with
all relevant legislation
and regulations.
Furthermore, Bank develops and improves mechanisms in order to identify,
measure and communicate impact, across the
full spectrum of its activities.
Sustainability Policies & Frameworks
Bank implemented
a Sustainability
Policy,
which has
been modelled on
the best
international sustainability
practices and
ensures
its
decision-making
is
in
line
with
environmental
protection
and
sustainability
and
has
also
implemented
its
Environmental Policy and
an Energy Management
Policy, depicting related commitments
and actions towards
the protection
of the environment and energy efficiency.
Moreover,
Bank
documented
and
approved
its
Sustainable
Finance
Framework,
which
will
support
the
identification
of
sustainable/green
financing
opportunities
(finance
the
transition
of
Bank’s
clients).
Bank
has
also
approved
and
made
publicly
available
its
Green
Bond
Framework.
The
Framework,
which
has
been
externally
reviewed
by
an
established
second-party opinion
provider,
facilitates the
financing of
projects that
will deliver
environmental benefits
to the
economy
and
support
Bank’s
business
strategy
and
vision.
The
above
mentioned
Frameworks
enable
Bank
to
pursue
economic
growth in line with ESG criteria.
Engaging with stakeholders
HoldCo/Bank
promotes
strong
relationships
of
trust,
loyalty
and
good
cooperation
with
its
stakeholders:
shareholders,
employees,
customers,
suppliers,
young
entrepreneurs,
business
community
organisations,
investment
analysts
and
investors, NGOs &
associations, government &
supervisory/regulatory authorities and
by promoting
two-way communication
and maintaining
open dialogue
with them.
This ongoing
communication allows
us to
listen to
stakeholders’ concerns
and
opinions, to
broaden our
view,
to identify
areas for
improvement
and to
share in
a transparent
way our
actions towards
meeting
expectations.
A
more
detailed
presentation
of
the
cooperation
framework,
expectations
and
means
of
communication is included in the Annual Report 2020 – Business & Sustainability.
Stakeholder consultation
is the
key process
for identifying,
prioritizing and
reporting on
HoldCo’s/Bank’s
material issues.
This process takes place on an annual basis
through dedicated communication channels for specific
stakeholder groups as
well as surveys/questionnaires
and its outcomes
inform the issue
prioritisation and provide
an in depth
understanding out
each stakeholder group’s concerns and expectations.
Further details regarding the aforementioned process and
its results
can be found in the Annual Report 2020 – Business & Sustainability.
Furthermore,
HoldCo/Bank
seeks
to
collaborate
and
partner
with
various
stakeholders
in
order
to
promote
sustainable
development and increase its positive impacts.
Governance
Bank has
approved a
governance structure
on the
process for
the allocation
of roles
and responsibilities
with regards
to
ESG and climate
risk management (both
for transition risk
and physical risk).
Moreover, the HoldCo/Bank BoD
has assigned
an executive member as the responsible
BoD member for climate-related and environmental
risks. As part of his duties,
the
member responsible will update the Board Risk Committee (BRC) (in alignment with the BRC Terms of Reference) and the
Board of
Directors of
HoldCo and
Bank on
climate change
and environmental
related risks
at least
on a
semi -
annually
basis.
Bank has
established the ESG
Management Committee, chaired
by the BoD
member responsible for
climate-related and
environmental risks. The
purpose of the
ESG Management Committee
is to provide
strategic direction on
ESG initiatives,
review
the
ESG
Strategy
prior
to
approval,
integrate
the
elements
of
the
ESG
strategy
into
Bank’s
business
model
&
operations, approve
eligible assets
of Green
Bond Frameworks,
regularly measure
and analyze
the progress of
the ESG
goals and performance
targets, ensure the
proper implementation of
ESG related policies and
procedures and to
validate
the Material Issues
reported in the
Annual Business & Sustainability
Report, in accordance with
supervisory requirements
and voluntary commitments.
Reporting and Transparency
HoldCo/Bank issue on
an annual basis
the Annual Report
2020 – Business
& Sustainability,
which provides stakeholders
with a holistic
view to its
ESG performance and
complies with the
Sustainability Reporting Guidelines
of the Global
Reporting
Initiative (GRI). Through
the Report, Euroban/HoldCo
provide full disclosure
on sustainability impacts
such as environmental
performance,
energy and
emissions, social
impact and
corporate governance,
while addressing
all material
stakeholder
interests across the
ESG spectrum.
The Annual
Report 2020 -
Business & Sustainability
is accessible
to all
interested parties
through the
corporate website. The
sustainability-related disclosures
in the report
are assured by
a competent assurance
provider
in
accordance
with
the
AA1000
Assurance
Standard
and
related
Principles
for
inclusivity,
materiality,
responsiveness and
impact, as
per the
independent auditor’s Limited
Assurance Report
which is
disclosed as
part of
the
Annual Report 2020 – Business & Sustainability.
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Moreover, Holdco/Bank closely cooperates with third-party international bodies to report the performance and ESG ratings.
HoldCo’s/Bank’s aim is to illustrate continuous progress against ESG commitments.
8.
Shareholders’ General Meeting
The
Shareholders’
General
Meeting
(“General
Meeting”)
is
the
supreme
body
of
the
HoldCo/Bank,
convened
by
the
respective Board and
entitled to resolve
upon any matter
concerning the HoldCo/Bank
and is the
only competent body
to
resolve on issues described in
article 117 of Company Law 4548/2018 (such as
amendments to the Articles
of Association).
All shareholders
have the
right to
participate and
vote at
the General
Meeting either
in person
or by
their legal
representatives
according to the proposed legal procedure each time in force.
The General Meeting is
in quorum and meets
validly when the
shareholders, present or represented,
represent at least 20%
(1/5) of the paid-in share capital that corresponds to the shares with voting rights (“share capital”). Resolutions are reached
by absolute
majority and
shall be
binding upon
absent and
dissenting shareholders
as well.
Exceptionally,
with regard
to
certain significant decisions
such as most
decisions related to
share capital, mergers
etc.(para 3, art.
130, Company Law
4548/2018),
the General Meeting is in quorum
and meets validly when the
shareholders, present or represented, represent
at least 50.00% (1/2) of the paid-in share capital. Resolutions on the aforementioned
issues are reached by two-thirds (2/3)
majority. If such quorum is not reached, the General Meeting is convened again in a repeat Meeting where lower
quorum is
required for all categories of resolutions.
The HFSF’s
Representative has
the right
to request
the convocation
of HoldCo’s/Bank’s
Shareholder’s General Meeting.
Such right was not exercised during 2021.
Based on
the present
1.4% stake
in HoldCo’s
share capital,
the HFSF,
under Law
3864/2010 as
in force
and the
TRFA
signed between the Bank, the HoldCo and the HFSF, exercises its voting rights in the General Meetings of HoldCo only for
decisions
concerning the
amendment of
the
HoldCo’s
Articles of
Association,
including
the
increase
or
reduction
of
the
capital or the
corresponding authorization to the
Board, the mergers, divisions,
conversions, revivals, extension
of term or
dissolution of the HoldCo,
the transfer of assets (including
the sale of subsidiaries),
or any other issue
requiring increased
majority as provided for in Company Law 4548/2018.
The Annual General
Meeting is held
every year before
the 10th of
September. An
Extraordinary General Meeting
may be
convened by the Board when it is deemed appropriate or necessary or when required by law.
The minutes of the General Meeting are signed by the Chairperson and the Secretary of the General Meeting.
Standard minority rights, as described in Company Law 4548/2018, apply.
Information about the Eurobank Holdings General Meetings
Requirements for calling and convening the General Meetings
All
persons appearing
as shareholders
of ordinary
shares of
the HoldCo
in the
registry of
the Dematerialized
Securities
System (DSS) managed by Hellenic
Central Securities Depository S.A. on the
Record Date, namely at the start
of the fifth
day before the General Meeting,
have the right to participate and vote in the HoldCo General Meeting.
The aforementioned
record date is applicable for the Repeat Meeting as well. The shareholders are informed on time about the agenda of each
General Meeting and new technologies are used to help them participate.
At
least
20
days
before
the
General
Meeting
date,
the
shareholders
are
informed
and
given
access
to
all
necessary
information, in compliance with the Greek Law. The Notice of General Meeting includes:
●
Date, time and place of the Meeting.
●
Items on the agenda.
●
Participation and voting rights with the relevant procedures.
●
Minority shareholder rights.
●
Relevant documents available.
All resolutions and information about each General Meeting are posted under Investor Relations on the Eurobank Holdings
website.
Participation and proxies
Shareholders are assisted to participate in HoldCo General Meetings. All
Eurobank Holdings shareholders have the right to
participate in person or appoint a proxy. Proxies must be appointed at least 48 hours before the General Meeting date.
To
the extent that shareholders' questions on items
on the agenda are not answered during
General Meeting, HoldCo has
a process for submitting the relevant answers.
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Annual General Meeting (AGM) of the shareholders
In the
Annual General
Meeting of
the HoldCo’s
shareholders, held
on July
23, 2021,
remotely via
teleconference in
real
time, participated shareholders representing 2,762,035,636
shares out of 3,709,161,852 shares,
corresponding to 75.53%
of the paid up share capital with voting rights
on the items of the agenda. It is noted
that, according to Law 3864/2010, as in
force, for the calculation
of the percentages of
quorum and majority of
the General Meeting, the
52,080,673 common shares
of the Company held
by the Hellenic
Financial Stability Fund were
not included. In
respect of the items
on the agenda, as
referred to on the invitation dated 02.07.2021, the General Meeting:
1.
Approved the Annual and Consolidated Financial Statements for
the financial year 2020, as well as the Directors’
and Auditors’ Reports.
2.
2. Approved
the overall
management for
the financial
year 2020
as well
as the
discharge of
the Auditors
for the
financial year 2020.
3.
Approved: a) the appointment of the firm KPMG
Certified Auditors S.A. (KPMG) as statutory auditor for
the Annual
and Consolidated Financial
Statements of the Company
for the financial year
2021 and b) KPMG’s
relevant fees
for the audit
of the Annual
and Consolidated Financial
Statements of the
Company for the
financial year 2021
to
amount to €0.2 m.
4.
Approved the amendment of the Remuneration Policy for Directors of the Company, which had been approved by
the Annual General Meeting of shareholders of the Company on 28.07.2020.
5.
Approved the remuneration
paid during the
financial year 2020
as well as
the advance payment
of remuneration
for
the
financial
year
of
2021
to
the
non-executive
Board
members
for
the
execution
of
their
duties
as
Board
members and as members of the Board Committees.
6.
Casted a positive vote on the Remuneration Report for the financial year 2020.
7.
Approved
the
final
appointment
of
Ms.
Cinzia
Basile
as
independent
non-executive
member
of
the
Board,
in
replacement of the resigned independent non-executive member of the Board Mr. George Myhal.
8.
Approved the Nomination Policy of the Directors of the Board
9.
Approved: a) The election of the following as Board members of the Company: 1. Andreas D. Athanassopoulos 2.
Konstantinos V. Vassiliou
3. Alice K. Gregoriadi, 4. George P. Zanias 5. Stavros E. Ioannou 6. Fokion C. Karavias
7. Irene K. Rouvitha Panou 8. George K. Chryssikos 9. Cinzia Basile 10. Rajeev Kakar 11.
Bradley Paul L. Martin
12. Jawaid A. Mirza 13. Efthymia P.
Deli, Representative of the HFSF.
The
term
of
office
of
the members
will expire
on
23.07.2024, prolonged
until
the end
of
the
period
the
Annual
General Meeting for the year 2024 will take place.
b)
The appointment
of Messrs.
Alice K.
Gregoriadi, Irene
K. Rouvitha
Panou,
Cinzia Basile,
Rajeev Kakar
and
Jawaid A. Mirza as independent non-executive Board members.
10.
Approved: a) The Audit Committee to function as Committee
of the Board consisting of members of the
Board. b)
The Audit Committee to consist of six (6) non-executive members of the Board, of which at least three (3) shall be
independent. c) The
term of office
of the members
of the Audit
Committee that will
be appointed by
the Board in
accordance with article 44, par.
1c of L. 4449/2017, as in force, to concise
with their term of office as members of
the Board of Directors, i.e. the
term of office of the Audit Committee
members will expire on 23.07.2024,
prolonged
until the end of the period the Annual General Meeting for the year 2024 will take place.
All
information
on
the
AGM
can
be
found
at
Eurobank
Holding’s
website
(
https://www.eurobankholdings.gr/en/investor-
relations/shareholders/general-meetings-pages/annual-general-shareholders-meeting-23-07-21
),
Information about the Eurobank General Meetings
The HoldCo, following
the demerger, constitutes the Eurobank’s
sole shareholder, who represents
100% of its share
capital.
According to article
121 par.
5 of Law
4548/2018, an
invitation to convene
a Eurobank general
meeting is
not required in
the event
that the
meeting is
attended or
represented by
shareholders representing
the entire
capital and
none of
them
objects to its holding and decision-making. In this context the following general meetings of Eurobank were held.
Annual General Meeting (AGM) of the shareholders
In the
Annual General
Meeting of
Eurobank’s shareholders,
held on
July 23,
2021 in
Athens, at
“Bodossakis Foundation
Building”
(“John
S. Latsis”
Hall), 20
Amalias
Avenue,
participated
the sole
shareholder Eurobank
Holdings representing
3,683,244,830 shares, corresponding to 100% of the paid up share capital with voting rights on the items of the agenda. In
respect of the items on the agenda, the General Meeting:
1. Approved
the Annual
and Consolidated
Financial Statements
for the
financial year
2020 as
well as
the Directors’
and
Auditors’ Reports.
2. Approved the overall management for the financial year 2020 and discharge of the Auditors for the financial year 2020.
3. Appointed “KPMG Certified Auditors S.A.” as Auditors for the financial year 2021
4. Approved the remuneration for the financial year 2020 and of the advance payment of the remuneration
for the Directors
for the financial year 2021.
5. (a) Approved the election of the following as
Board members of the Bank due to the expiration
of the term of the current
Board and designation of the independent non-executive members of the Board:
1.
Andreas
D.
Athanassopoulos
2.
Konstantinos
V.
Vassiliou
3.
Alice
K.
Gregoriadi,
4. George
P.
Zanias
5.
Stavros E.
Ioannou 6. Fokion C.
Karavias 7. Irene K. Rouvitha
Panou 8. George K. Chryssikos
9. Cinzia Basile 10. Rajeev
Kakar 11.
Bradley Paul L. Martin 12. Jawaid A. Mirza 13. Efthymia P.
Deli, Representative of the HFSF.
The
term of
office
of
the
members
will expire
on
23.07.2024,
prolonged
until
the
end
of the
period
the
Annual
General
Meeting for the year 2024 will take place.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
TO THE REPORT OF THE DIRECTORS
78
|
Page
b) The
appointment of
Messrs. Alice
K. Gregoriadi,
Irene K.
Rouvitha Panou,
Cinzia Basile, Rajeev
Kakar and Jawaid
A.
Mirza as independent non-executive Board members.
6. Approved:
a) The
Audit Committee to
function as
Committee of
the Board consisting
of members of
the Board. b)
The
Audit Committee to consist of six (6) non-executive members of the Board, of which at least three (3)
shall be independent.
c) The term of office
of the members of the Audit
Committee that will be appointed by
the Board in accordance with article
44, par.
1c of L.
4449/2017, as in
force, to concise
with their term
of office
as members of
the Board of
Directors, i.e. the
term of office of
the Audit Committee members will
expire on 23.07.2024, prolonged until
the end of the period
the Annual
General Meeting for the year 2024 will take place.
7. Approved the
Annual Activity Report of the Audit Committee for the financial year 2020.
8. Approved the repeal of transitional provisions of the Bank’s Articles of Association.
Extraordinary General Meeting of the Shareholders
In the
Annual General
Meeting of
Eurobank’s shareholders,
held on
June 1,
2021 in
Athens, at
“Bodossakis Foundation
Building”
(“John
S. Latsis”
Hall), 20
Amalias
Avenue,
participated
the sole
shareholder Eurobank
Holdings representing
3,683,244,830 shares, corresponding to 100% of the paid up share capital with voting rights on the items of the agenda. In
respect of the items on the agenda, the General Meeting
resolved on the:
1. a) Reduction in
kind of the share capital
of the Bank according
to par. 1
of article 31 of law
4548/2018 with reduction of
the nominal value of
each common registered share
of its issue by
0.0276957019308433 euros, in order
for the shareholder
to reach the
corresponding in value
by reducing the
capital of bonds of
the subsidiary company
"Mexico Finance Designated
Activity Company" and b) reduction of
share capital by reducing the nominal
value of each common registered share
of its
issue by 0.00230429806915667
with the formation
of, equal amount
of special reserve
according to par.
2 of article
31 of
law 4548/2018. Provision of authorizations and approval of the corresponding amendment of article 5 of the Bank's articles
of association.
2. Demerger
of "Eurobank Ergasias
Leasing Single Societe
Anonyme" ("Split")
by absorption
by the
Bank ("Benefiting by
Absorption") and
by setting
up a
new company
("Benefiting by
Establishment") and
approval of
the Plan.
Approval of
the
Articles of Association of the Beneficiary with Establishment. Provision of authorizations.
3.
Appointment of Mrs.
Cinzia Basile as
new independent non-executive member of the Board of Directors.
4.
Announcement of the election of Mr. Andreas D. Athanassopoulos as new executive member of the Board of Directors.
5. Announcement
of the
election of
Mrs. Efthymia
Deli as
new non-executive
member of
the Board
of Directors
and new
member of the Audit Committee.
9.
Other information required by Directive 2004/25/EU
●
Holders of securities with special control rights
The HFSF’s participation interest in the HoldCo’s share
capital, through the ordinary shares it possesses, confers to HFSF
the rights according
to the legislation
in force and
the TRFA
that has been
signed between the
HoldCo, the Bank
and the
HFSF.
●
Treasury Shares
The Shareholders’ General Meeting can authorize the Board, under article 49 of Company Law 4548/2018, to implement a
program of acquisition of treasury shares.
However, according to paragraph
1 of Article 16C of Law 3864/2010,
during the
period of
the participation
of the
HFSF in
the share
capital of
the HoldCo,
HoldCo is
not permitted
to purchase
treasury
shares without the approval of the HFSF (note 37 of the consolidated accounts).
For other information required by Directive 2004/25/EU
regarding the: a) Major shareholdings, b)
Authority to issue
new shares, and c) Restrictions of voting rights, please refer to the relevant sections of the Directors’ Report.
IΙΙ.
Ιndependent
Auditor’s
Report
(on
the
Consolidated
Financial
Statements)
KPMG Certified Auditors S.A.
3 Stratigou Tombra
Street
Aghia Paraskevi
153 42 Athens, Greece
Telephone:
+30 210 60 62 100
Fax:
+30 210 60 62 111
Email:
info@kpmg.gr
KPMG Certified Auditors S.A., a Greek Societe Anonyme and a member
firm of the KPMG global organization of independent member firms affiliated
with KPMG International Limited, a private English company limited by
guarantee.All rights reserved.
Certified Auditors
Independent Auditor
’s Report
To
the Shareholders of
Eurobank Ergasias Services and Holdings S.A.
Report on the Audit of the consolidated financial statements
Opinion
We have audited the accompanying consolidated financial statements
of Eurobank Ergasias
Services and Holdings SA (the “Company”)
which comprise the consolidated Balance
Sheet
as at 31 December 2021, the consolidated
statements of Income and Other Comprehensive
Income, Changes in
Equity and Cash Flows
for the year then
ended, and notes,
comprising
a summary of significant accounting policies and other
explanatory information.
In
our
opinion,
the
accompanying
consolidated
financial
statements
present
fairly,
in
all
material
respects,
the
consolidated
financial
position
of
Eurobank
Ergasias
Services
and
Holdings SA and its subsidiaries (the “Group”) as at 31
December 2021 and its consolidated
financial performance and its consolidated cash flows for
the year then ended, in accordance
with International Financial Reporting Standards as adopted
by the European Union.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (ISA), which
have been incorporated
in Greek legislation.
Our responsibilities
under those standards
are
further described
in the
Auditor’s Responsibilities
for the
Audit of
the consolidated
financial
statements section
of our
report. We
are independent
of the
Group in
accordance with
the
International
Ethics
Standards
Board
for
Accountants’
Code
of
Ethics
for
Professional
Accountants,
as
it
has
been
incorporated
into
Greek
legislation,
together
with
the
ethical
requirements that are relevant to the audit of
the consolidated financial statements in Greece
and we
have fulfilled
our ethical
responsibilities in
accordance with
the requirements
of the
applicable
legislation
and
the
aforementioned
Code
of
Ethics.
We
believe
that
the
audit
evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion
2
Key Audit Matters
Key audit matters are those matters, that, in our professional judgment,
were of most
significance in our audit of the
consolidated financial statements of the current period.
These matters
and the
relevant
significant
assessed
risks
of material
misstatement
were addressed in the context of
our audit of the consolidated financial statements as
a whole, and
in forming our
opinion thereon, and
we do not
provide a separate
opinion
on these matters.
Impairment allowance on loans and advances at amortised
cost including off-
balance sheet elements
Refer
to
Note
2.2.13
and
3.1
to
the
consolidated
financial
statements.
Total
impairment
charge
for
loans
and
advances
to
customers
for
the
year
amounted
to
EUR
490
million
(2020:
2
081
million).
Total
estimated
credit
losses
as
of
31 December 2021 amounted to EUR 1 872 million (2020: 3
477 million).
The key audit matter
How this matter was addressed in our
audit
The estimation of expected credit losses
(“ECL”) on loans and advances involves
significant judgment
and estimates. The
key
areas
where
we
identified
greater
levels
of
management
judgement
and
therefore increased levels
of audit focus
in the Group’s estimation of ECLs are:
—
Significant
Increase
in
Credit
Risk
(“SICR”)
–
The
identification
of
qualitative indicators for identifying
a
significant
increase
in
credit
risk
is
highly
judgmental
taking
also
into
account
the
current
economic
uncertainty because of COVID-19.
—
Model
estimations
–
Inherently
judgemental
modelling
and
assumptions
are
used
to
estimate
ECL
which
involves
determining
Probabilities of
Default (“PD”),
Loss
Given
Default
(“LGD”),
and
Exposures at Default (“EAD”). ECLs
may
be
inappropriate
if
certain
models
or
underlying
assumptions
do not accurately predict
defaults or
recoveries over time or
fail to reflect
the credit risk
of loans and
advances
to customers. In addition, the
Group
adopted
the
new
definition
of
Our
audit
procedures
included,
among
others:
Controls testing:
—
We
tested
the
relevant
manual,
general
IT
and
application
controls
over
key
systems
used
in
the
ECL
process.
—
Key
aspects
of
our
controls
testing
involved
evaluating
the
design
and
testing
the
operating
effectiveness
of
the key controls over the:
-
completeness and accuracy of
the
key
inputs
into
the
IFRS
9
impairment models;
-
application of the staging criteria;
-
model
validation,
implementation
and monitoring;
-
authorisation
and
calculation
of
management overlays.
Use of financial risk specialists:
Our own financial risk
specialists assisted
in the following:
3
default.
As
a
result,
certain
IFRS
9
models and
model assumptions
are
the
key
drivers
of
complexity
and
subjectivity
in
the
Group’s
calculation of the ECL estimate.
—
Individually
assessed
loans
–The
estimation
of
future
cash
flows,
valuation of collateral
and probability
weighting
of
scenarios
constitute
assumptions
with
high
estimation
uncertainty.
—
Management
overlays
–
Adjustments
to
the
model-driven
ECL
results
are
raised
by
management to address
any known
limitations
or
emerging
trends
as
well as
risks not
captured by models.
These
adjustments
are
inherently
uncertain
and
significant
management judgement
is involved
in
estimating
these
amounts
especially
in
relation
to
current
economic
uncertainty
such
as
COVID19.
—
Economic
scenarios
–
IFRS
9
requires
the
Group
to
measure
ECLs
on
an
unbiased
forward-
looking
basis
reflecting
a
range
of
future
economic
conditions.
Significant
management
judgement
is
applied
in
determining
the
forward-looking economic scenarios
used,
the
probability
weightings
associated
with
the
scenarios
and
the
complexity
of
models
used
to
derive
the
probability
weightings
applied
to
them
especially
when
considering
the
current
uncertain
economic environment.
Disclosures in the consolidated financial
statements
The
disclosures
regarding
the
Group’s
application
of
IFRS
9
are
key
to
explaining
the
key
judgements
and
material inputs to
the IFRS 9
ECL results
as well as to provide transparency of the
credit risk exposures of the Group.
—
evaluating
the
Group’s
impairment
methodologies
for
compliance
with
IFRS 9;
—
evaluating
the
risk
parameter
models
used
as
well
as
reperforming
the
calculation of
certain risk
parameters;
and
—
assessing
of
available
validation
reports
on
risk
parameters
and
macroeconomic
forward
looking
Information
—
Test of details:
Key
aspects
of
our
testing
in
addition
to
those set out above include the following:
—
We performed substantive procedures
on a
sample
basis in
order to
assess
the
application
used
for
the
SICR
assessment
for
corporate
and
retail
portfolios;
—
We assessed the reasonableness and
appropriateness
of
the
macroeconomic
variables’
forecasts,
scenarios,
weights,
and
models
applied.
—
We performed substantive procedures
to
assess
the
completeness
and
accuracy of
critical data
input used
in
the ECL models.
—
We
reperformed
ECL
calculations
for
lending
exposures
in
all
stages,
with
the
support
of
our
financial
risk
specialists, on
a sample
basis, where
appropriate.
—
We performed substantive procedures
to
assess
the
reasonableness
of
significant
assumptions
used
in
the
measurement
of
impairment
of
individually
assessed
credit
impaired
exposures,
including
valuation
of
collaterals
where
we
have
used
the
expertise of our real estate
specialists
as
well
as
assumptions
used
for
estimating
future
discounted
cash
flows.
4
Assessing disclosures:
We
evaluated
the
adequacy
and
appropriateness
of
the
disclosures
in
the
consolidated
financial
statements
that
address the uncertainty which
exists when
determining
the
ECL.
In
addition,
we
assessed
whether
the
disclosure
of
the
key
judgements
and
assumptions
were
sufficiently clear and explanatory.
Recognition of deferred tax assets
Refer
to
Note
2.2.16
to
the
consolidated
financial
statements.
Total
deferred
tax
recognized
as
of
31
December
2021
amounted
to
EUR
4
422
million
(2020:
EUR
4 519 million).
The key audit matter
How the matter was addressed in our
audit
The
recognition
and
carrying
value
of
deferred tax
assets is
considered a
key
audit matter
as it
depends on
estimates
of
future
profitability,
which
require
significant
management
judgement
and
include the risk of management bias.
Judgements
and
especially
complex
assumptions due
to their
forward-looking
nature
and
inherent
uncertainties
include:
—
Revenue
forecasts
which
are
also
impacted by
delivery of
the Group’s
Strategy.
—
Macroeconomic
and
model
assumptions
such
as
growth
rates
and macroeconomic scenarios.
Disclosures in the consolidated financial
statements
The
disclosures
in
the
consolidated
financial
statements
regarding
the
Group’s application of
IAS 12 are key
to
explaining
the
key
judgements
surrounding
the
recoverability
of
deferred tax assets.
Our audit
procedures
with the
assistance
of
our
tax
specialists
included,
the
following:
—
We
assessed
the
design
and
implementation
of
the
controls
relevant
to
the
recognition
and
recoverability
of
deferred
tax
assets
including
approval
of
business
plans
and
monitoring
of
actual
results
against budgeted.
—
We
evaluated
the
appropriateness
of
the
assumptions
used
by
management
in
the
approved
business
plan
by
comparing
the
revenue
and
growth
projections
to
industry
trends
and
ensuring
consistency with strategic plans.
—
We
assessed
the
historical
accuracy
of
management’s
assumptions
by
comparing
them
to
actual
results
reported.
Assessing disclosures:
We
evaluated
the
adequacy
and
appropriateness
of
the
disclosures
in
the
consolidated
financial
statements
that
address
the
deferred
tax
asset
recoverability.
In
addition,
we
assessed
whether
the
disclosures
of
the
key
judgements
and
assumptions
were
sufficiently clear and explanatory.
5
Use of IT systems relevant to the financial information
The key audit matter
How the matter was addressed in our
audit
The
Group’s
financial
reporting
processes
are
dependent
to
a
large
extent
on
information
produced
by
the
Group’s
Information
Technology
(IT)
systems, and
/ or
automated processes
and
controls
(i.e.,
calculations,
reconciliations)
implemented
in
these
systems.
The
above
is
a
key
audit
matter
as
the
Group’s financial
reporting systems
rely
heavily on complex information
systems
that
process
huge
number
of
transactions
that
function
based
on
the
operating
effectiveness
of
internal
controls
in
place
to
assure
the
completeness and
accuracy of
financial
information
and
security
information
of
the
Group
that
produce
the
financial
information.
We
have
evaluated
in
collaboration
with
our
IT
Audit
specialists
the
internal
controls
over
the
IT
systems,
databases
and applications that
support the financial
reporting of the Group.
For
this
purpose,
we
performed
procedures as follows:
—
We assessed
the information
security
resilience
of
the
Group
by
evaluating
the
design
of
key
IT
processes
and
controls over financial reporting.
—
We
evaluated
the
internal
controls
of
the
Group
relevant
to
the
administration
of
logical
access,
application
development
and
change
management
and
daily
IT
operations
for
key
layers
of
underlying
infrastructure
(i.e.,
application,
operating
system,
and
database)
for
the systems in
scope of the
audit and
tested
the
operating
effectiveness
of
the relevant controls.
Mexico transaction
Refer to Note 20.1 to the consolidated financial statements.
The key audit matter
How the matter was addressed in our
audit
The Group as part of the non performing
exposure
strategy
proceeded
in
the
derecognition of EUR 3.1 billion of loans
via
securitization,
known
as
‘Project
Mexico’.
The
complexity
of
the
terms
of
the
agreement,
the
magnitude
of
the
portfolio
as
well
as
the
assessment
of
other
criteria
to
justify
the
accounting
treatment
under
IFRS,
requires
significant judgement.
Our
audit
procedures
included
the
following:
—
We
examined
relevant
asset
transfer
agreements
and
other
related
legal
documents
to
ascertain
whether
the
derecognition
criteria
according
to
IFRS 9 are met.
—
We
analysed
the
contractual
terms
and conditions
to assess
if the
Group
retained
control
over
the
transferred
loans.
6
Disclosures in the consolidated financial
statements
The
disclosures
in
the
consolidated
financial
statements
regarding
the
Group’s application
of IFRS9
are key
to
provide clarity on the transaction.
—
We
reviewed
the
accounting
entries
related to this transaction.
Assessing disclosures:
We
evaluated
the
adequacy
and
appropriateness
of
the
disclosures
in
the
consolidated
financial
statements
that
address the
derecognition
of loans
under
Project
Mexico. In
addition,
we assessed
whether
the
disclosure
of
the
key
judgements
and
assumptions
were
sufficiently clear and explanatory.
Other Information
Management is
responsible for the
other information. The
other information comprises
the information included in the Board of
Directors’ Report for which reference is made
in the “Report on Other Legal and Regulatory Requirements”
and the Declarations of
the Members
of the
Board of
Directors and
any other
information either
required by
law or voluntarily
incorporated by
the Group
in its Annual
Financial Report
prepared
in accordance
with
Law 3556/2007,
but does
not include
the
consolidated
financial
statements and our Auditor’s Report thereon.
Our
opinion
on
the
consolidated
financial
statements
does
not
cover
the
other
information and we do not express any form of assurance conclusion
thereon.
In connection with
our audit of
the consolidated financial
statements, our responsibility
is
to
read
the
other
information
and,
in
doing
so,
consider
whether
the
other
information is materially inconsistent with the consolidated financial statements
or our
knowledge obtained
in the audit,
or otherwise appears
to be materially
misstated. 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 in this regard.
Responsibilities of Management and those charged with governance
for the consolidated financial statements
Management
is
responsible
for
the
preparation
and
fair
presentation
of
the
consolidated financial
statements in
accordance with
International Financial Reporting
Standards
as
adopted
by
the
European
Union,
and
for
such
internal
control
as
management
determines
is
necessary
to
enable
the
preparation
of
consolidated
financial statements that are free from material
misstatement, whether due to fraud or
error.
In
preparing
the
consolidated
financial
statements,
management
is
responsible
for
assessing the
Group’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 management
either intends
to liquidate
the Group
or to
cease operations,
or
7
has no realistic alternative but to do so.
The
Audit
Committee
of
the
Company
is
responsible
for
overseeing
the
Group’s
financial reporting process.
Auditor’s Responsibilities for the Audit of the consolidated
financial
statements
Our objectives
are to
obtain
reasonable
assurance
about whether
the consolidated
financial statements as
a whole are
free from material
misstatement, whether due
to
fraud or error,
and to issue
an auditor’s 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 which have
been incorporated in
Greek legislation 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 consolidated financial statements.
As part of an audit
in accordance with ISAs,
which have been incorporated
in Greek
legislation, we exercise
professional judgment
and maintain
professional scepticism
throughout the audit. We also:
—
Identify and assess
the risks of
material misstatement of
the consolidated financial
statements, whether
due to
fraud or
error,
design and
perform audit
procedures
responsive
to
those
risks,
and
obtain
audit
evidence
that
is
sufficient
and
appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting
from fraud
is higher
than for
one resulting
from error,
as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
—
Obtain an understanding of internal control relevant to the audit in
order to design
audit procedures
that are
appropriate in
the circumstances, but
not for
the purpose
of expressing an opinion on the effectiveness of
the Group’s internal control.
—
Evaluate the
appropriateness of accounting
policies used and
the reasonableness
of accounting estimates and related disclosures made by
Management.
—
Conclude
on
the
appropriateness
of
Management’s
use
of
the
going
concern
basis of
accounting and, based
on the
audit evidence
obtained, whether a
material
uncertainty exists
related to
events or
conditions that
may cast
significant doubt
on
the
Group’s
ability
to
continue
as
a
going
concern.
If
we
conclude
that
a
material uncertainty exists,
we are
required to
draw attention
in our
auditor’s report
to
the
related
disclosures
in
the
consolidated
financial
statements
or,
if
such
disclosures are inadequate, to modify our opinion.
Our conclusions are based on
the audit evidence obtained up to
the date of our auditors’ report. However, future
events
or
conditions
may
cause
the
Group
to
cease
to
continue
as
a
going
concern.
—
Evaluate
the
overall
presentation,
structure
and
content
of
the
consolidated
financial
statements,
including
the
disclosures,
and
whether
the
consolidated
financial statements represent
the underlying transactions
and events in
a manner
that achieves fair presentation.
8
—
Obtain sufficient appropriate audit evidence
regarding the financial information of
the entities or business activities within the Group to express an opinion on these
consolidated
financial
statements.
We
are
responsible
for
the
direction,
supervision and performance of the group
audit. We remain solely responsible for
our audit opinion.
We
communicate
with
those
charged
with
governance
regarding,
among
other
matters,
the
planned
scope
and
timing
of
the
audit
and
significant
audit
findings,
including
any
significant
deficiencies
in
internal
control
that
we
identify
during
our
audit.
We
also
provide
those
charged
with
governance
with
a
statement
that
we
have
complied
with
relevant
ethical
requirements
regarding
independence
and
communicate
with
them
all relationships
and
other matters
that
may reasonably
be
thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated
with those charged
with governance, we
determine
those matters that were of
most significance in the audit of
the consolidated financial
statements
of
the
current
period
and
are
therefore
the
key
audit
matters.
We describe these
matters in our
auditors’ report unless
law or regulation
precludes
public
disclosure
about
the
matter
or
when,
in
extremely
rare
circumstances,
we
determine
that
a
matter
should
not
be
communicated
in
our
report
because
the
adverse
consequences
of
doing
so would
reasonably
be
expected
to
outweigh
the
public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1.
Board of Directors’ Report
Taking
into consideration
that Management
is responsible
for the
preparation of
the
Board of Directors’ Report and the Corporate Governance
Statement that is included
in this report, pursuant to the provisions of paragraph 5 of Article 2 of Law 4336/2015
(part B), we note that:
(a)
The
Board
of
Directors’
Report
includes
a
Corporate
Governance
Statement
which provides the information set by Article 152 of L. 4548/2018.
(b)
In our opinion, the
Board of Directors’ Report
has been prepared in
accordance
with the applicable
legal requirements of
Articles 150-151 and
153-154 and of
paragraph
1
(cases
c
and
d)
of
article 152
of
L. 4548/2018
and
its
contents
correspond
with
the
accompanying
consolidated
financial
statements
for
the
year ended 31 December 2021.
9
(c)
Based
on
the
knowledge
acquired
during
our
audit,
relating
to
Eurobank
Ergasias Services and Holdings SA
and its environment, we have
not identified
any material misstatements in the Board of Directors’ Report.
2.
Additional Report to the Audit Committee
Our
audit
opinion
on
the
consolidated
financial
statements
is
consistent
with
the
Additional Report
to the
Audit Committee
of the
Company dated 5
April 2022,
pursuant
to the
requirements of
article 11
of the
Regulation 537/2014
of the
European Union
(EU).
3.
Provision of non Audit Services
We have not provided to the Company and its subsidiaries any prohibited non – audit
services referred to in article 5 of regulation (EU) 537/2014.
The
permissible
non-audit
services
that
we
have
provided
to
the
Company
and
its
subsidiaries during the year ended
31 December 2021 are disclosed in Note
46 of the
accompanying consolidated financial statements.
4.
Appointment of Auditors
We were
appointed for
the first
time as
Certified Auditors
of the Company
based on
the decision of the Annual
General Shareholders’ Meeting dated
10 July 2018. From
then onwards our appointment has been renewed uninterruptedly for a total period of
four years based on the annual decisions of the General
Shareholders’ Meeting.
5.
Operations Regulation
The Company has an Operations Regulation in accordance
with the content provided
by the provisions of the article 14 of Law 4706/2020.
6.
Assurance Report on the European Single Electronic Reporting
Format
We
examined
the
digital files
of Eurobank
Ergasias
Services
and Holdings
SA (the
“Company”)
and its
subsidiaries (the
“Group”), which
were prepared
in accordance
with
the
European
Single
Electronic
Format
(ESEF)
that
is
determined
by
the
Commission
Delegated
Regulation
(EU)
2019/815,
as
amended
by
the
Regulation
(EU)
2020/1989
(the
ESEF
Regulation)
that
include
the
consolidated
financial
statements of the
Group for the
year ended as
at 31 December
2021 in XHTML
format
(JEUVK5RWVJEN8W0C9M24-2021-12-31-en.xhtml)
and
also
the
XBRL
(JEUVK5RWVJEN8W0C9M24-2021-12-31-en.zip)
with
the
appropriate
mark
up
of
those consolidated financial statements.
10
Regulatory framework
The digital files of the European Single Electronic Format are prepared in accordance
with
the
ESEF
Regulation
and
the
2020/C
379/01
Commission
Interpretative
Communication
issued
on
10
November
2020,
as
required
by
the
L.
3556/2007
and
the
relevant
announcements
of
the
Hellenic
Capital
Markets
Commission and the Athens Stock Exchange (the “ESEF
Regulatory Framework”).
This Framework includes in summary,
among others, the following requirements:
—
All the annual financial reports must be prepared in XHTML
format.
—
With
respects
to
the
consolidated
financial
statements
based
on
International
Financial Reporting Standards (IFRS), the financial information that is included in
the Statement of
Comprehensive Income, the Statement
of Financial Position, the
Statement
of
Changes
in
Equity
and
the
Statement
of
Cash
Flows,
must
be
marked up with XBRL tags, in accordance
with the ESEF Taxonomy,
as in force.
The technical
requirements
for the
ESEF,
including
the
relevant
taxonomy,
are
included in the ESEF Regulatory Technical
Standards.
The
requirements
as
defined
in
the
ESEF
Regulatory
Framework
as
in
force
are
appropriate criteria in order to express a reasonable assurance
conclusion.
Responsibilities of management and those charged with governance
Management is responsible for the preparation and
filing of the consolidated financial
statements of the Group, for
the year ended as at 31
December 2021, in accordance
with the requirements
determined by the
ESEF Regulatory
Framework, and for
such
internal control as management determines is necessary
to enable the preparation of
digital files that are free from material misstatement, whether
due to fraud or error.
Auditors’ Responsibilities
Our responsibility is the
planning and the execution
of this assurance engagement
in
accordance
with
the
214/4/11-02-2022
Decision
of
the
Hellenic
Accounting
and
Auditing
Standards
Oversight
Board
and
the
Guidelines
for
the
assurance
engagement
and
report
of
Certified
Auditors
on
the
European
Single
Electronic
Reporting
Format
(ESEF)
of
issuers
with
shares
listed
in
a
regulated
market
in
Greece”,
as
these
were
issued
by
the
Institute
of
Certified
Public
Accountants
of
Greece
on
14/02/2022
(the
“ESEF
Guidelines”),
in
order
to
obtain
reasonable
assurance that
the consolidated
financial statements
of the Group
that are
prepared
by
the
management
of
the
Company
in
accordance
with
the
ESEF
comply
in
all
material respects with the ESEF Regulatory Framework
as in force.
Our work was performed in accordance with the International Ethics Standards Board
for
Accountants’
Code
of
Ethics
for
Professional
Accountants,
as
it
has
been
incorporated
into
Greek
legislation
and
we
have
also
fulfilled
our
independence
requirements, in accordance
with the L.
4449/2017 and the
Regulation (EU) 537/2014.
The assurance work
that we carried
out refers exclusively
to the ESEF
Guidelines and
was
conducted
in
accordance
with
the
International
Standard
on
Assurance
Engagements
3000,
“Assurance
Engagements
other
than
Audits
or
Reviews
of
Historical Financial Information
”. Reasonable assurance
is a high
level of assurance
11
but
is
not
a
guarantee
that
such
an
assurance
engagement
will
always
detect
a
material misstatement regarding
non-compliance with
the requirements of
the ESEF
Regulation.
Conclusion
Based
on
the
procedures
performed
and
the
evidence
obtained,
we
express
the
conclusion that the consolidated financial statements of the Group for the year ended
as of
31 December
2021
in
XHTML
format
JEUVK5RWVJEN8W0C9M24-2021-12-
31-en.xhtml),
and
the
XBRL
file
(JEUVK5RWVJEN8W0C9M24-2021-12-31-en.zip)
marked
up
with
respects
to
the
consolidated
financial
statements,
have
been
prepared, in
all material
respects, in
accordance with
the requirements
of the
ESEF
Regulatory Framework.
Athens, 6 April 2022
KPMG Certified Auditors S.A.
AM SOEL 114
Harry Sirounis, Certified Auditor
AM SOEL 19071
IV.
Consolidated Financial Statements of the Company for the year
ended 31 December 2021
EUROBANK ERGASIAS SERVICES AND
HOLDINGS S.A.
CONSOLIDATED
FINANCIAL
STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2021
8 Othonos Street, Athens 105 57
, Greece
www.eurobankholdings.gr,
Tel.: (+30)
214 40 61000
General Commercial
Registry No: 000223001000
.
.
Index to the Consolidated Financial Statements
..............................................................................................................................
Page
Consolidated Balance Sheet ................................................................................................................................................................
.....
1
Consolidated Income Statement ................................................................................................
..............................................................
2
Consolidated Statement of Comprehensive
Income ................................................................................................................................
3
Consolidated Statement of Changes in Equity ..........................................................................................................................................
4
Consolidated Cash Flow Statement .......................................................................................................................................................... 5
Notes to the Consolidated Financial Statements
1.
General information ................................................................................................
........................................................................
6
2.
Basis of preparation and principal accounting policies
................................................................................................................... 6
2.1
Basis of preparation .........................................................................................................................................................................
6
2.2
Principal accounting policies
.......................................................................................................................................................... 12
2.3
Impact of IFRIC agenda decision – Attributing Benefit to
Periods of Service (IAS 19)
...................................................................
39
3.
Critical accounting estimates and judgments
in applying accounting policies ..............................................................................
40
4.
Capital Management ................................................................................................................................
.....................................
49
5.
Financial risk management and fair value ................................................................................................
.....................................
52
5.2.1 Credit Risk ......................................................................................................................................................................................
54
5.2.2 Market risk
................................................................................................................................................................
.....................
89
5.2.3 Liquidity risk
................................................................................................................................................................
...................
93
5.2.4 Interest Rate Benchmark reform
-IBOR reform ..............................................................................................................................
97
5.2.5 Climate-related risk ................................
....................................................................................................................................... 98
5.3
Fair value of financial assets and liabilities ....................................................................................................................................
99
6.
Net interest income ..................................................................................................................................................................... 103
7.
Net banking fee and commission income ....................................................................................................................................
104
8.
Income from non banking services ..............................................................................................................................................
104
9.
Net trading income and gains less losses from investment
securities ........................................................................................ 104
10.
Other income/ (expenses) ........................................................................................................................................................... 105
11.
Operating expenses ..................................................................................................................................................................... 105
12.
Other impairments, restructuring costs and provisions ................................................................................................
..............
106
13.
Income tax ................................................................................................................................................................................... 107
14.
Earnings per share ................................................................................................................................................................
.......
112
15.
Cash and balances with central banks .........................................................................................................................................
112
16.
Cash and cash equivalents and other information
on cash flow statement
................................................................................
113
17.
Due from credit institutions
......................................................................................................................................................... 113
18.
Securities held for trading................................................................
............................................................................................
114
19.
Derivative financial instruments and hedge
accounting.............................................................................................................. 114
20.
Loans and advances to customers ............................................................................................................................................... 117
.
.
20.1. Mexico securitization – loans’ derecognition ................................................................................................
..............................
118
21.
Impairment allowance for loans and advances to
customers .....................................................................................................
122
22.
Investment securities
................................................................................................................................................................
...
124
23.
Group composition ......................................................................................................................................................................
127
23.1. Shares in subsidiaries
................................................................................................................................................................
...
127
23.2. Merger of Eurobank a.d. Beograd with Direktna
Banka a.d. .......................................................................................................
132
24.
Investments in associates and joint
ventures
.............................................................................................................................. 134
25.
Structured Entities .......................................................................................................................................................................
137
26.
Property and equipment ................................................................................................
.............................................................
140
27.
Investment property ....................................................................................................................................................................
141
28.
Intangible assets .......................................................................................................................................................................... 143
29.
Other assets
................................................................................................................................................................
.................
144
30.
Disposal groups classified as held for sale ................................................................................................................................... 144
31.
Due to central banks ....................................................................................................................................................................
146
32.
Due to credit institutions .............................................................................................................................................................
146
33.
Due to customers
................................................................................................................................................................
.........
147
34.
Debt securities in issue ................................................................................................................................................................
147
35.
Other liabilities ................................................................................................................................
............................................
149
36.
Standard legal staff retirement
indemnity obligations
................................................................................................................ 150
37.
Share capital, share premium and treasury shares ................................
.....................................................................................
151
38.
Reserves and retained earnings
................................................................................................................................................... 152
39.
Share options
................................................................................................................................................................
...............
153
40.
Transfers
of financial assets
......................................................................................................................................................... 154
41.
Leases ................................................................................................................................................................
..........................
155
42.
Contingent liabilities and other commitments ............................................................................................................................ 157
43.
Operating segment information .................................................................................................................................................. 158
44.
Post balance sheet events ................................................................................................
...........................................................
162
45.
Related parties
................................................................................................................................................................
.............
162
46.
External Auditors ................................................................................................................................................................
.........
164
47.
Board of Directors
................................................................................................................................................................
........
165
APPENDIX – Disclosures under Law 4261/2014 ................................................................
...................................................................
166
Consolidated Balance Sheet
.
1
|
Page
31 December 2021 Consolidated Financial Statements
31 December
2021
2020
Restated⁽¹⁾
Note
€ million
€ million
ASSETS
Cash and balances with central banks
15
13,515
6,637
Due from credit institutions
17
2,510
3,336
Securities held for trading
18
119
87
Derivative financial instruments
19
1,949
2,552
Loans and advances to customers
20
38,967
37,424
Investment securities
22
11,316
8,365
Investments in associates and joint ventures
24
267
276
Property and equipment
26
815
778
Investment property
27
1,492
1,459
Intangible assets
28
269
254
Deferred tax assets
13
4,422
4,519
Other assets
29
2,065
1,995
Assets of disposal groups classified as held for sale
30
146
39
Total assets
77,852
67,721
LIABILITIES
Due to central banks
31
11,663
7,999
Due to credit institutions
32
973
1,502
Derivative financial instruments
19
2,394
2,939
Due to customers
33
53,168
47,290
Debt securities in issue
34
2,552
1,556
Other liabilities
35
1,358
1,173
Liabilities of disposal groups classified as held for sale
30
109
-
Total liabilities
72,217
62,459
EQUITY
Share capital
37
816
815
Share premium
37
8,055
8,055
Reserves and retained earnings
38
(3,332)
(3,608)
Equity attributable to shareholders of the Company
5,539
5,262
Non controlling interests
23.2
96
0
Total equity
5,635
5,262
Total equity and liabilities
77,852
67,721
(1)
The comparative information has been restated
due to change in accounting policy (note 2.3).
Notes on pages
6
to
165
form an integral part of these consolidated financial statements.
Consolidated Income Statement
.
2
|
Page
31 December 2021 Consolidated Financial Statements
Year ended 31 December
2021
2020
Restated⁽¹⁾
Note
€ million
€ million
Interest income
1,842
1,955
Interest expense
(521)
(606)
Net interest income
6
1,321
1,349
Banking fee and commission income
495
426
Banking fee and commission expense
(137)
(128)
Net banking fee and commission income
7
358
298
Income from non banking services
8
98
86
Net trading income/(loss)
9
(8)
3
Gains less losses from investment securities
9
101
430
Other income/(expenses)
10
30
234
Operating income
1,900
2,400
Operating expenses
11
(876)
(869)
Profit from operations before impairments,
provisions and restructuring costs
1,024
1,531
Impairment losses relating to loans and
advances to customers
21
(490)
(2,081)
Impairment losses on goodwill
28
-
(160)
Other impairment losses and provisions
12
(52)
(43)
Restructuring costs
12
(25)
(147)
Share of results of associates and joint ventures
24
26
21
Profit/(loss) before tax
483
(879)
Income tax
13
(156)
(336)
Net profit/(loss)
327
(1,215)
Net profit/(loss) attributable to non controlling interests
(1)
(0)
Net profit/(loss) attributable to shareholders
328
(1,215)
€
€
Earnings/(losses) per share
-Basic and diluted earnings/(losses) per share
14
0.09
(0.33)
(1)
The comparative information has been restated
due to change in accounting policy (note 2.3).
Notes on pages
6
to
165
form an integral part of these consolidated financial statements.
Consolidated Statement of Comprehensive Income
.
3
|
Page
31 December 2021 Consolidated Financial Statements
Year ended 31 December
2021
2020
Restated⁽¹⁾
€ million
€ million
Net profit/(loss)
327
(1,215)
Other comprehensive income:
Items that are or may be reclassified subsequently to
profit or loss:
Cash flow hedges
- changes in fair value, net of tax
36
(5)
- transfer to net profit, net of tax
1
37
(2)
(7)
Debt securities at FVOCI
- changes in fair value, net of tax (note 22)
(97)
216
- transfer to net profit, net of tax (note 22)
6
(91)
(340)
(124)
Foreign currency translation
- foreign operations' translation differences
(0)
(0)
(0)
(0)
Associates and joint ventures
- changes in the share of other comprehensive
income, net of tax (note 24)
(3)
(3)
(19)
(19)
(57)
(150)
Items that will not be reclassified to profit or loss:
- Gains/(losses) from equity securities at
FVOCI, net of tax
2
-
- Actuarial gains/(losses) on post employment
benefit obligations, net of tax
1
1
3
1
Other comprehensive income
(54)
(149)
Total comprehensive
income attributable to:
- Shareholders
274
(1,364)
- Non controlling interests
(1)
(0)
273
(1,364)
(1)
The comparative information has been restated
due to change in accounting policy (note 2.3).
Notes on pages
6
to
165
form an integral part of these consolidated financial statements
Consolidated Statement of Changes in Equity
.
4
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31 December 2021 Consolidated Financial Statements
Share
capital
Share
premium
Reserves and
retained
earnings
Preferred
securities
Non
controlling
interests
Total
€ million
€ million
€ million
€ million
€ million
€ million
Balance at 1 January 2020
852
8,054
(2,241)
2
0
6,667
Restatement due to change in
accounting policy (note 2.3)
-
-
17
-
0
17
Balance at 1 January
2020, as restated
852
8,054
(2,224)
2
0
6,684
Net profit/(loss)
(restated, note 2.3)
-
-
(1,215)
-
(0)
(1,215)
Other comprehensive
income (restated, note 2.3)
-
-
(149)
-
(0)
(149)
Total comprehensive income for
the
year ended 31 December 2020
-
-
(1,364)
-
(0)
(1,364)
Share capital decrease and capitalization of taxed
reserves (note 37)
(37)
-
(21)
-
-
(58)
Purchase/sale of treasury shares
0
1
(1)
-
-
0
Preferred securities' redemption and dividend paid,
net of tax
-
-
(0)
(2)
-
(2)
Changes in participating interests in subsidiary
undertakings
-
-
1
-
0
1
Other
-
-
1
-
-
1
(37)
1
(20)
(2)
0
(58)
Balance at 31 December 2020, as restated
815
8,055
(3,608)
-
0
5,262
Balance at 1 January 2021
815
8,055
(3,608)
-
0
5,262
Net profit/(loss)
-
-
328
-
(1)
327
Other comprehensive income
-
-
(54)
-
(0)
(54)
Total comprehensive income for
the year ended 31 December 2021
-
-
274
-
(1)
273
Changes in participating interests in subsidiary
undertakings (note 23.2)
-
-
1
-
97
98
Share-based payment:
- Value of employee
services (note 39)
-
-
2
-
-
2
Purchase/sale of treasury
shares (note 37)
1
0
0
-
-
1
Other
-
-
(1)
-
-
(1)
1
0
2
-
97
100
Balance at 31 December 2021
816
8,055
(3,332)
-
96
5,635
Note 37
Note 37
Note 38
Notes on pages
6
to
165
form an integral part of these consolidated financial statements.
Consolidated
Cash Flow Statement
.
5
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31 December 2021 Consolidated Financial Statements
Year ended 31 December
2021
2020
Restated⁽¹⁾
Note
€ million
€ million
Cash flows from operating activities
Profit/(loss) before income tax (note 2.3)
483
(879)
Adjustments for :
Impairment losses relating to loans and advances to customers
21
490
2,081
Impairment losses on goodwill
28
-
160
Other impairment losses, provisions and restructuring costs (note 2.3)
12
77
190
Depreciation and amortisation
11
114
109
Other (income)/losses οn investment securities
16
(76)
(398)
Valuation of investment property
27
(30)
(3)
Other adjustments (note 2.3)
16
(12)
(229)
1,046
1,031
Changes in operating assets and liabilities
Net (increase)/decrease in cash and balances with central banks
(193)
(51)
Net (increase)/decrease in securities held for trading
(32)
23
Net (increase)/decrease in due from credit institutions
588
(107)
Net (increase)/decrease in loans and advances to customers
(1,636)
(1,982)
Net (increase)/decrease in derivative financial instruments
36
39
Net (increase)/decrease in other assets
(22)
(79)
Net increase/(decrease) in due to central banks and
credit institutions
3,125
2,525
Net increase/(decrease) in due to customers
5,338
2,251
Net increase/(decrease) in other liabilities
(4)
(133)
7,200
2,486
Income tax paid
(33)
(29)
Net cash from/(used in) operating activities
8,213
3,488
Cash flows from investing activities
Acquisition of fixed and intangible assets
(129)
(281)
Proceeds from sale of fixed and intangible assets
35
26
(Purchases)/sales and redemptions of investment securities
(2,752)
(387)
Acquisition of subsidiaries, net of cash acquired
23
121
(47)
Acquisition of holdings in associates and joint ventures, participations
in capital increases
(8)
(16)
Disposal of subsidiaries, net of cash disposed
23
1
211
Disposal of holdings in associates and joint ventures
24
13
23
Dividends from investment securities, associates and
joint ventures
16,24
21
3
Net cash from/(used in) investing activities
(2,698)
(468)
Cash flows from financing activities
(Repayments)/proceeds from debt securities in issue
16
986
(850)
Repayment of lease liabilities
(34)
(38)
Redemption/ buy back of preferred securities
-
(2)
(Purchase)/sale of treasury shares
1
0
Net cash from/(used in) financing activities
953
(890)
Effect of exchange rate
changes on cash and cash equivalents
0
0
Net increase in cash and cash equivalents
6,468
2,130
Cash and cash equivalents at beginning of year
16
6,681
4,551
Cash and cash equivalents at end of year
16
13,149
6,681
(1)
The comparative information has been restated
due to change in accounting policy (note 2.3).
Notes on pages
6
to
165
form an integral part of these consolidated financial statements.
Notes to the Consolidated Financial Statements
.
6
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31 December 2021 Consolidated Financial Statements
1.
General information
Eurobank Ergasias Services and Holdings S.A. (the Company or Eurobank Holdings) is the parent company of Eurobank S.A. (the Bank),
which resulted from the demerger of Eurobank Ergasias S.A. (“Demerged entity”) through its banking sector’s hive down. In particular,
on 20 March 2020, the demerger of Eurobank Ergasias S.A. through the banking sector’s hive down and the establishment of a new
company-credit institution (“Demerger”) under the corporate name “Eurobank S.A” (“the Beneficiary”) as well as the Articles of
Association of the Beneficiary were approved by virtue of the decision of the Ministry of Development and Investments No
31847/20.03.2020, which was registered on the same day in the General Commercial Registry. At the aforementioned date the
Demerged Entity became the shareholder of the Beneficiary by acquiring all the shares issued by the Beneficiary and the Beneficiary
substituted the Demerged Entity, by way of universal succession, to all the transferred assets and liabilities, as set out in the
transformation balance sheet of the hived down sector as at 30 June 2019 and formed up to 20 March 2020, day of the Demerger’s
completion. In addition, the corporate name and the distinctive title of the Demerged Entity was amended to “Eurobank Ergasias
Services and Holdings S.A.” and “Eurobank Holdings” respectively.
The Company and its subsidiaries (the Group), consisting mainly of Eurobank S.A. Group, are active in retail, corporate and private
banking, asset management, treasury, capital markets and other services.
The Group operates mainly in Greece and in Central and
Southeastern Europe.
The Company is incorporated in Greece and its shares are listed on the Athens Stock Exchange.
These consolidated financial statements,
which include the Appendix, were
approved by the Board of
Directors on 5 April 2022.
The
Independent Auditor’s Report of the Financial Statements
is included in the section III of the Annual Financial Report.
2.
Basis of preparation and principal accounting policies
The consolidated financial statements of the Group have
been prepared on a going
concern basis and in
accordance with the principal
accounting policies set out below:
2.1
Basis of preparation
The
consolidated
financial
statements
of
the
Group
have
been
prepared
in
accordance
with
International
Financial
Reporting
Standards
(IFRS)
issued
by
the
IASB,
as
endorsed
by
the
European
Union
(EU),
and
in
particular
with
those
standards
and
interpretations, issued and effective or issued and early adopted as at
the time of preparing these consolidated financial statements.
The consolidated
financial statements
are prepared
under the
historical
cost basis
except
for the
financial assets
measured at
fair
value through
other comprehensive
income, financial
assets and
financial liabilities
(including derivative
instruments) measured
at
fair-value-through-profit-or-loss
and investment property measured
at fair value.
The accounting policies for the preparation of the consolidated financial statements have been consistently applied to the years 2021
and
2020,
after
taking
into
account
the
amendments
in
IFRSs
as
described
in
section
2.1.1
“New
and
amended
standards
and
interpretations” and the
amendments in the Group’s
accounting policies as described in sections
2.1.2 and 2.2.17.
The comparative
information
has been
restated
due to
change in
accounting policy
for
employee benefits
(note 2.3).
In addition,
where necessary,
comparative figures have
been adjusted to conform to
changes in presentation in the current year.
The preparation of financial
statements in accordance with IFRS
requires the use of
estimates and judgements that affect the
reported
amounts of
assets and liabilities
and disclosure
of contingent
liabilities at the
date of the
consolidated financial
statements,
as well
as
the
reported
amounts
of
revenues
and
expenses
during
the
reporting
period.
Although
these
estimates
are
based
on
management's best knowledge of current events
and actions, actual results ultimately may differ
from those estimates.
The Group’s presentation
currency is the Euro (€) being the functional currency of the parent company.
Except as indicated, financial
information presented in Euro
has been rounded to the nearest million. The figures
presented in the notes may not sum precisely to
the totals provided due to rounding.
Notes to the Consolidated Financial Statements
.
7
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31 December 2021 Consolidated Financial Statements
Going concern considerations
The annual financial
statements have been prepared on
a going
concern basis, as
the Board of
the Directors considered as
appropriate,
taking into consideration the following:
2021 was a
year of strong
recovery,
as the Greek
economy reclaimed
most of its
pandemic inflicted losses.
The significant progress
of vaccination programs
allowed the gradual relaxation
of containment measures
and the reopening of the
economy that led to
the
strengthening
of
consumption
and
the
recovery
of
the
tourism
sector
providing
substantial
boost
to
real
GDP
growth.
Based
on
Hellenic
Statistical
Authority’s
(ELSTAT)
provisional
data,
Greek
real
GDP
increased
by
8.3%
in
2021
(9%
decrease
in
2020),
the
seasonally
adjusted
unemployment
rate
dropped
to
12.8%
in
December
2021
(December
2020:
16.3%),
while
the
inflation,
as
measured by the 12-month average Harmonized Index of Consumer Prices (HICP), closed
at 0.6% in 2021, compared to -1.3%
in 2020.
According to ELSTAT,
the HICP increased by 6.3% in February 2022 compared to -1.9% in February 2021 mainly reflecting the current
rise in energy and fuel
costs.
The European Commission (EC), in
its winter economic forecasts (February 2022), estimates the real GDP
growth rate in Greece at 4.9%
and 3.5% in 2022
and 2023 respectively.
On the fiscal front, according
to 2022 State Budget,
the general
government’s primary
balance in European System
of Accounts (ESA2010) terms
in 2021 and 2022 is expected
to register deficits
of
7.0% and 1.4% of GDP respectively as a result of the
implementation of public support measures amounted
to € 16.9 billion in 2021,
and
€
3.3
billion
in
2022
aiming
to
address
the
economic
and
social
effects
of
the
Covid-19
pandemic.
The
gross
public
debt
is
estimated
at 197.1%
and 189.6%
of GDP
in 2021
and 2022
respectively (2020:
primary deficit
at 7.1%
and public
debt at
206.3%).
These forecasts
take into
account the
public support
measures aiming to
alleviate the
impact of increa
sed energy
and fuel costs
in
2021 (€0.9 billion),
but not the additional
and more encompassing
measures announced in
2022 (an additional
€2.8 billion as
of 17
March 2022).
However,
since a large
part of these
measures will be
covered by
funds earmarked
especially for this
purpose as well
as additional
government proceeds,
their fiscal
impact will
be significantly
smaller than
the above
amount. The
deviation from
the
Enhanced
Surveillance
(ES)
primary
surplus
target
of
3.5%
of
GDP
in
2021
and
2022
is
not
considered
a
violation
of
Greece’s
commitments
under
the
ES
framework,
as
in
March
2020
EC
activated
the
general
escape
clause,
allowing
for
non-permanent
deviations from
the agreed fiscal
paths of the
member-states
due to the
extraordinary health
and economic distress
caused by the
pandemic. According to the 2 June 2021 EC
press release, the clause shall remain
in force in 2022, and is expected
to be deactivated
in 2023. These forecasts
may change as a result
of the actual size of the
public sector’s support measures,
the impact of inflationary
pressure on economic growth,
and the repercussions of the energy price hikes
on public finances.
In
response
to
the
Covid-19 outbreak,
on 21
July
2020, the
European
Council agreed
on a
recovery
package
under the
EC’s
Next
Generation EU framework
to support the recovery
and resilience of the member states'
economies. In this context,
on 13 July 2021,
the Economic and Financial Affairs Council (ECOFIN)
approved the Greek National Recovery and Resilience Plan (NRRP),
titled “Greece
2.0”. Greece
shall receive European Union
(EU) funds of more than €30.5 billion (€17.8 billion in grants
and €12.7 billion in loans) up
to 2026 from the Recovery and
Resilience Facility (RRF) to finance projects
and initiatives laid down in its NRRP.
A pre-financing of €
4 billion was
disbursed in August
2021, while on
28 February 2022
the EC preliminarily
endorsed Greece’s
payment request
for the
first RRF instalment,
amounting to € 3.6 billion. Greece has been also allocated about € 40 billion through
EU’s Multiannual Financial
Framework (MFF) 2021-2027. Furthermore,
on 24 March 2020, the European
Central Bank (ECB) established
a temporary Pandemic
Emergency Purchase Programme (PEPP), with a financial envelope of € 1,850
billion since December 2020, out of
which ca € 37 billion
are available
for the
purchase of
Greek Government
Bonds (GGBs). On
16 December 2021,
the ECB
announced that
it would cease
net bond
purchases under
PEPP at
the end
of March
2022, as
scheduled. Reinvestment
of principal
from maturing
securities will,
however,
continue at
least until
the end of
2024, allowing explicitly
for the
purchase of
Greek Government
Bonds (GGBs) over
and
above rollovers of redemptions.
In 2021, the Greek State proceeded with the
issuance of six bonds of
various maturities,
(5-year, 10-year,
and 30-year) drawing a total
of €14 billion from international financial markets.
More recently, on 19 January 2022, the Public Debt
Management Agency (PDMA)
issued a 10-year bond of € 3 billion at a yield of 1.836%.
Regarding
the outlook
for
the next
12 months
the major
macroeconomic
risks
and uncertainties
in Greece
are
as follows:
(a) the
geopolitical conditions
in the near
or in broader
region, especially the
ongoing Russian invasion
in Ukraine,
and its ramifications
on
the regional and global
stability and security, the European and
Greek economy, and the energy sector in
particular, (b) a prolongation
and/or
exacerbation
of the
ongoing inflationary
pressure,
especially in
the energy
sector
and the
supply
chain, and
its impact
on
economic growth,
employment, public finances,
household budgets, and
firms’ production costs,
(c) further increase
in the interest
rates worldwide, and
in the Euro Area in particular,
that may exert
upwards pressures on
sovereign and private
borrowing costs, (d)
the actual size
and duration
of the current
and potentially new
fiscal measures aimed
at alleviating
the impact of
rising energy and
Notes to the Consolidated Financial Statements
.
8
|
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31 December 2021 Consolidated Financial Statements
food
prices, and
their impact
on the
long-term sustainability
of the
country’s
public debt,
(e) the
impact of
the withdrawal
of the
temporary support measures on growth, employment and the continual service of household and corporate debt,
(f) the prospect of
the so-called “twin
deficits” (i.e. fiscal
and current
account deficit)
becoming more
structural, although
currently they
appear to be
more a repercussion of the pandemic, (g) the absorption capacity of the NGEU and MFF funds and the attraction of new investments
in the
country,
(h) the
implementation
of the
reforms
and privatizations’
agenda
in order
to meet
the ES
and EC’s
Recovery
and
Resilience Facility
(RRF) targets and
milestones, (i) the evolution
of the health crisis and
the probability of
emergence of new Covid-
19 variants that could adversely impact economic recovery and bring about new movement restrictions
and fiscal support measures,
and (j) the exacerbation of natural disasters
due to the climate change and their effect on GDP,
employment and fiscal balance.
Materialization
of the
above risks
including those
related
to increased
energy prices
and inflation,
would have
potentially adverse
effects
on
the
fiscal planning
of the
Greek
government,
as
it could
decelerate
the
pace of
expected
growth
and on
the liquidity,
solvency and profitability of the Greek banking sector,
as well as on the realization of its NPE reduction plans. The Russian invasion in
Ukraine poses uncertainties in global economy and
international trade with far-reaching
and long-term consequences. As the events
are
still
unfolding,
any
assessment
of
their
impact
is
premature.
However,
the
risks
coming
from
geopolitical
upheaval
could
be
potentially mitigated
with coordinated
measures at
the European
level, as
per the
pandemic precedent.
In this
context, the
Group
holds
non-significant
exposure
in
Russian
assets
and
is
continuously
monitoring
the
developments
on
the
macroeconomic
and
geopolitical
fronts
and has
increased its
level
of readiness,
so as
to
accommodate
decisions, initiatives
and policies
to
protect
its
capital and
liquidity standing
as well
as the
fulfilment, to
the maximum
possible degree,
of its
strategic
and business
goals for
the
quarters ahead, focusing
primarily on the support of
its clients to overcome
the challenging juncture, the
protection of its asset
and
capital base and the resilience of its pre-provision
profitability.
As at 31 December 2021, following the completion of
the project “Mexico” (sale of 95% mezzanine and junior “Mexico”
securitization
notes) and the subsequent derecognition of
the underlying securitized loan
portfolio of € 3.1
billion (consisting primarily of NPE)
(note
20.1), the Group decreased significantly its NPE stock by € 2.9
billion to € 2.8 billion (31 December 2020:
€ 5.7 billion), driving the NPE
ratio
at 6.8%
(31 December
2020: 14%),
while the
NPE coverage
ratio
stood
at 69.2%
(31 December
2020: 61.8%).
The net
profit
attributable to shareholders
for the year ended 31 December 2021 amounted to
€ 328 million, of which € 143 million was related to
the international
operations. The adjusted
net profit, excluding
the loss of €
77 million from
“Mexico” project
and the restructuring
costs (after tax) of € 19 million,
amounted to € 424 million (2020:
€ 538 million profit). The Group’s Total Capital Adequacy (total CAD)
and
Common
Equity
Tier
1
(CET1)
ratios
stood
at
16.1%
(31
December
2020:
16.3%)
and
13.7%
(31
December
2020:
13.9%)
respectively as at 31 December 2021. Pro-forma with the completion of the sale
of Eurobank’s merchant acquiring business, the total
CAD and CET1 ratios would be 16.8% and 14.5% respectively.
In addition, the Group completed successfully the 2021 SSM stress test
(ST), which was coordinated and conducted
by the ECB (note 4).
In terms of liquidity, as at 31 December 2021, the Group deposits have increased by € 5.9 billion to € 53.2 billion (31 December 2020:
€ 47.3 billion),
leading the Group’s
(net) loans
to deposits
(L/D) ratio
to 73.2%
(31 December 2020:
79.1%), while the
funding from
the
targeted
long
term
refinancing
operations
of
the
European
Central
Bank
–
TLTRO
III
programme
reached
€
11.7
billion
(31
December 2020: € 8 billion) (note 31). During the year,
in the context of its medium-term strategy
to meet its MREL target, the Bank
proceeded with two
issues of preferred
senior debt with a
nominal value of
€ 500 million each,
in April and September
respectively
(note 34). The rise
in high quality liquid
assets of the Group
led the respective
Liquidity Coverage ratio
(LCR) to 152% (31
December
2020: 124%).
In the
context
of the
2021 ILAAP
(Internal
Liquidity
Adequacy Assessment
Process),
the liquidity
stress
tests
results
indicate that the Bank has adequate liquidity buffer to
cover the potential outflows that could occur in all scenarios both in the short
term (1 month horizon) and in the medium term (1 year
horizon).
Going concern assessment
The Board of Directors, acknowledging the geopolitical and macroeconomic
risks to the economy and the banking system
and taking
into
account
the
above
factors
relating
to
(a) the
strong
recovery
of
economic
activity
in 2021
and the
prospects
for
sustainable
growth
rates in Greece onwards, (b)
the Group’s pre-provision income generating capacity and
the adequacy of
its capital and
liquidity
position,
and (c) the significant improvement
of the NPE ratio
in 2021, has been satisfied
that the financial statements
of the Group
can be prepared on a going concern basis.
Notes to the Consolidated Financial Statements
.
9
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Page
31 December 2021 Consolidated Financial Statements
2.1.1
New and amended standards and interpretations
New and amended standards adopted by the Group as
of 1 January 2021
The
following
amendments
to
standards
as
issued
by
the
International
Accounting
Standards
Board
(IASB)
and
endorsed
by
the
European Union (EU), apply as of 1 January 2021:
Interest Rate Benchmark Reform
- Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
In the context of the
market-wide reform of several interest rate benchmarks (referred to as ‘’IBOR
reform’’), the IASB has undertaken
a two-phase
project to
address the
issues affecting
financial reporting
by the
IBORs’ replacement
and considered
any reliefs
to be
provided in order to
eliminate the resulted effects.
The Phase 1 amendments,
adopted by the Group
as of 1 January 2020, provided
temporary reliefs
from applying
specific hedge
accounting requirements
to the
hedging relationships
affected by
the IBOR
reform,
during the period before the replacement of an existing
interest rate benchmark
with an alternative risk-free interest
rate (“RFR”).
In August 2020, the IASB issued “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4
and IFRS 16”,
which addresses the issues that
affect financial reporting once an existing rate is
replaced with an RFR
and provides specific disclosure
requirements.
The
Phase
2
amendments
provide
key
reliefs
related
to
the
contractual
modifications
due
to
the
reform
and
the
hedging designations affected once the Phase
1 reliefs cease to apply.
More specifically, the amendments introduce
a practical expedient if a contractual change, or changes to cash flows, result “directly”
from the IBOR reform and occurs on an ‘economically equivalent’ basis. In these cases, changes will be
accounted for by updating the
effective
interest
rate
of
the
financial
instruments
subject
to
reform,
similar
to
the
changes
to
a
floating
interest
rate.
A
similar
practical expedient will apply under IFRS 16 ‘Leases’
for lessees when accounting for lease modifications required by the
IBOR reform.
In addition,
the Phase
2 amendments
permit changes,
as a
result of
the IBOR
reform,
to be
performed
to hedge
designations and
hedge documentation
without the
hedging relationship
being discontinued.
Permitted
changes include
redefining
the hedged
risk
and the description
of the hedging instruments
and/or the hedged
items to reflect
RFR as well as
amending the description
of how
an entity will assess the hedge effectiveness (under
IAS 39 only). An entity will apply the existing requirements
in IAS 39 or IFRS 9 for
qualifying fair value and cash
flow hedging relationships to account for any
changes in the fair
value of the hedged item
or the hedging
instrument
while any
resulting ineffectiveness
will be
recognized
in the
income statement.
Upon changing
the hedge
designation,
once the Phase 1 reliefs
cease to apply,
the amount accumulated in the
cash flow hedge reserve is
also assumed to be based on
the
RFR for the purpose of assessing whether the hedged future cash flows
are still expected to occur.
Based on the Phase 2 amendments, when performing a retrospective
hedge effectiveness assessment
under IAS 39, a company may
elect to reset the cumulative fair
value changes of the
hedged item and hedging instrument
to zero immediately after ceasing to apply
the
Phase
1 relief
on
a
hedge-by-hedge
basis.
The
Phase
2
amendments
clarify
that
changes
to
the
method
for
assessing
hedge
ineffectiveness due to the modifications
required by the IBOR reform, will not result
to the discontinuation of the hedge accounting.
As described
in note
2.2.3, the Group
elected, as
a policy
choice permitted
under IFRS
9, to
continue to
apply hedge
accounting in
accordance with IAS 39. Therefore,
for hedge accounting purposes, the Group applies
the Phase 2 amendments to IAS 39.
The amendments to
IFRS 4 are
designed to allow
insurers who are
still applying IAS
39 to obtain
the same reliefs
as those provided
by the amendments made to IFRS 9.
In addition, consequential amendments were made by the Phase 2 amendments to IFRS 7, to enable
users of financial statements to
understand the effect of interest
rate benchmark reform on
an entity’s financial instruments and risk management
strategy.
Upon transition, the adoption of the amendments had no material
impact on the consolidated financial statements.
The Group has set
up an IBOR transition program
to implement the transition
to alternative interest
rates that focuses
on key areas
of
impact
on
customers’
contracts,
systems
and
processes,
financial
reporting,
valuation,
capital
and
liquidity
planning
and
communication with counterparties (note
5.2.4).
IFRS 4, Amendment, Deferral
of IFRS 9
In June 2020, the IASB extended the fixed expiry date
of the temporary exemption from
applying IFRS 9 in IFRS 4 to annual reporting
periods
beginning
on
or
after
1
January
2023,
in
order
to
align
the
effective
dates
of
IFRS
9
Financial
Instruments
with
IFRS
17
Insurance Contracts.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The amendment is not relevant to the Group’s
activities, other than through its associate Eurolife FFH Insurance
Group Holdings S.A.
Amendment to IFRS 16 - Covid-19-Related Rent
Concessions beyond 30 June 2021
In March
2021, the
IASB extended
by one
year
the application
period of
the practical
expedient
in IFRS
16 ‘Leases’
that
provides
practical
relief
to
lessees
from
applying
the
IFRS
16
guidance
for
lease
modifications
to
rent
concessions
occurring
as
a
direct
consequence of the
covid-19 pandemic. In particular,
based on the aforementioned
extension of the
practical expedient,
the lessee
may account
for any reduction
in lease payments,
originally due on or
before 30 June
2022, as if they
were not lease
modifications.
The amendment is effective for
annual reporting periods beginning on or after 1 April 2021.
The Group has early adopted the practical expedient
to all rent concessions that meet the relevant
conditions.
The adoption of the amendment had no impact on the consolidated financial
statements (note 41).
New standards, amendments to standards
and interpretations not yet adopted
by the Group
A number of new
standards and amendments
to existing standards
are effective
after 2021, as they
have not yet
been endorsed by
the European Union (EU), or have not been early applied by the Group.
Those that may be relevant to the Group
are set out below:
IFRS 3, Amendments, Reference to
the Conceptual Framework (effective 1 January 2022)
The amendments
to IFRS
3 “Business Combinations”
updated the
reference
to the
current version
of Conceptual
Framework while
added a
requirement
that, for
obligations
within the
scope of
IAS 37
“Provisions, Contingent
Liabilities and
Contingent Assets”,
an
acquirer applies IAS 37 to
determine whether at
the acquisition date a present
obligation exists
as a result of past
events. For a levy
that would be within the scope of IFRIC 21 Levies, the acquirer applies IFRIC 21 to
determine whether the obligating event
that gives
rise to a liability to pay the levy has occurred by
the acquisition date.
In addition, the issued amendments
added a new paragraph
to IFRS 3 to clarify
that contingent
assets do not qualify for
recognition
in a business combination at the acquisition date.
The adoption of the amendments is not expected to impact the consolidated
financial statements.
Annual improvement to IFRSs 2018-2020 cycle: IFRS1,
IFRS9 and IFRS 16 (effective 1 January 2022)
The improvements
introduce changes
to several
standards. The
amendments that
are relevant
to the Group’s
activities are set
out
below:
The
amendments
to
IFRS
1
“First-time
Adoption
of
International
Financial
Reporting
Standards”
provides
additional
relief
to
a
subsidiary which becomes a first-time adopter later than its parent in respect of accounting for cumulative translation differences. As
a result, the amendments allow entities that have measured their assets and liabilities at carrying amounts recorded in their parent’s
books to
also measure any
cumulative translation
differences using
the amounts reported
by the parent.
This amendment will
also
apply to associates and joint ventures that
have taken the same IFRS 1 exemption.
The amendment to IFRS 9
“Financial Instruments” clarifies which fees should
be included in the
10% test for derecognition of financial
liabilities. The fees
to be included
in the assessment
are only those
paid or received
between the
borrower (entity)
and the lender,
including fees
paid or
received by
either the
borrower or
lender on the
other’s behalf.
The amendment
is applied
prospectively to
modifications and exchanges that occur
on or after the date the entity first applies the amendment.
The amendment to IFRS 16 “Leases”
removes the illustration of the reimbursement of leasehold improvements, in order to avoid any
potential confusion about the treatment
of lease incentives.
The adoption of the amendments is not expected to impact the consolidated
financial statements.
IAS 37, Amendment, Onerous Contracts – Costs of Fulfilling a
Contract (effective 1 January 2022)
The amendment to IAS 37
‘Provisions, Contingent Liabilities and Contingent Assets’
clarifies that the direct costs of fulfilling
a contract
include
both
the
incremental
costs
and
an
allocation
of
other
costs
directly
related
to
fulfilling
contracts’
activities.
General
and
administrative
costs do
not relate
directly to
a contract
and are
excluded
unless they
are explicitly
chargeable to
the counterparty
under the contract.
The adoption of the amendment is not expected to impact the consolidated
financial statements.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
IFRS 17, Insurance Contracts (effective
1 January 2023)
IFRS 17,
which supersedes
IFRS 4
“Insurance Contracts”
provides a
comprehensive
and consistent
accounting model
for insurance
contracts.
It
applies
to
insurance
contracts
issued,
all
reinsurance
contracts
and
to
investment
contracts
with
discretionary
participating features provided that the entity also issues insurance contracts.
Financial guarantee contracts are allowed to be within
the scope of IFRS 17 if the entity has previously asserted
that it regarded them as insurance contracts.
According to
IFRS 17 general
model, groups of
insurance contracts
which are managed
together and are
subject to similar risks,
are
measured
based
on
building
blocks
of
discounted,
probability-weighted
estimates
of
future
cash
flows,
a
risk
adjustment
and
a
contractual service
margin (“CSM”) representing
the unearned profit
of the contracts.
Under the model,
estimates are
remeasured
at each reporting period. A simplified measurement approach may be used if it is expected that doing so a reasonable approximation
of the general model is produced, or if the contracts
are of short duration.
Revenue is allocated
to periods in
proportion to the
value of expected
coverage and
other services that
the insurer provides
during
the period,
claims are
presented
when incurred
and any
investment
components
i.e. amounts
repaid to
policyholders
even if
the
insured event
does not occur,
are not included
in revenue
and claims. Insurance
services results are
presented separately
from the
insurance finance income or expense.
In June 2020, the IASB issued Amendments to IFRS 17 to
assist entities in its implementation.
The amendments aim to assist entities
to transition in order
to implement the
standard more easily, while they deferred the
effective date, so that entities
would be required
to apply IFRS 17 for annual periods beginning on or after
1 January 2023.
IFRS 17 is not relevant to the Group’s
activities, other than through its associate Eurolife
FFH Insurance Group Holdings S.A.
IAS 8, Amendments, Definition of Accounting Estimates (effec
tive 1 January 2023)
The amendments in IAS 8 “Accounting
Policies, Changes in Accounting Estimates
and Errors” introduced the definition
of accounting
estimates and
include other
amendments to
IAS 8 which
are intended
to help
entities distinguish
changes in
accounting estimates
from changes in accounting policies.
The amendments clarify
(a) how accounting
policies and accounting
estimates relate
to each other by
(i) explaining that
accounting
estimates are
used in applying accounting
policies and (ii) making
the definition of accounting
policies clearer and more
concise, (b)
that selecting an
estimation technique,
or valuation technique,
used when an
item in the
financial statements
cannot be measured
with precision, constitutes
making an accounting
estimate, and
(c) that, in applying
IAS 2 Inventories,
selecting the first-in, first
-out
(FIFO) cost formula or the weighted
average cost formula
for interchangeable inventories
constitutes selecting an accounting policy.
The adoption of the amendments is not expected to impact the consolidated
financial statements.
Amendments
to
IAS
1
Presentation
of
Financial
Statements
and
IFRS
Practice
Statement
2:
Disclosure
of
Accounting
policies
(effective 1 January 2023)
IASB issued
amendments to
IAS 1 “Presentation
of Financial Statements”
that require
entities to
disclose their
material accounting
policies rather than their significant accounting policies.
According
to
IASB,
accounting
policy
information
is
material
if,
when
considered
together
with
other
information
included
in
an
entity’s financial statements, it can reasonably be expected to
influence decisions that the primary users of general purpose financial
statements make
on the basis of those financial statements.
Furthermore, the amendments
clarify how an
entity can identify
material accounting
policy information,
while provide examples
of
when accounting
policy information
is likely to
be material. The
amendments to
IAS 1 also clarify
that immaterial
accounting policy
information need not be
disclosed. However, if it is disclosed,
it should not
obscure material accounting policy information. To support
these amendments
the Board
has also
developed guidance
and examples
to explain
and demonstrate
the application
of the ‘four-
step materiality
process’ described
in IFRS Practice
Statement 2
Making Materiality
Judgements to
accounting policy disclosures,
in
order to support the amendments to IAS 1.
The adoption of the amendments is not expected to impact the consolidated
financial statements.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
IAS 1, Amendments, Classification of Liabilities as Current or Non-Current
(effective 1 January 2023, not yet endorsed by EU)
The amendments, published in January 2020, affect only the presentation
of liabilities in the balance sheet and provide clarifications
over the definition of the
right to defer the settlement of a
liability, while they make clear that the classification of
liabilities as current
or non-current
should be based
on rights that
are in existence
at the
end of the
reporting period.
In addition, it
is clarified that
the
assessment for liabilities classification
made at the end of the reporting period is not affected
by the expectations about whether an
entity will exercise its right to defer settlement of a liability.
The Board also clarified that when classifying liabilities as current or non-
current, an entity can ignore only those conversion
options that are recognised as equity.
The adoption of the amendments is not expected to impact the consolidated
financial statements.
IAS 12, Amendments, Deferred Tax related
to Assets and Liabilities arising from a Single Transaction (effective 1 January 2023, not
yet endorsed by EU)
The amendments clarify that
the initial recognition
exemption set
out in IAS 12
‘Income Taxes’
does not apply for
transactions such
as leases and decommissioning
obligations that, on initial recognition, give
rise to equal amounts
of taxable and deductible temporary
differences. Accordingly,
for such transactions
an entity is required
to recognise the related
deferred tax asset
and liability,
with the
recognition of any deferred tax asset being subject to the recoverability criteria in IAS 12. The amendments apply to transactions that
occur on or after the beginning of the earliest comparative
period presented.
The adoption of the amendments is not expected to impact the consolidated
financial statements.
2.1.2 Other accounting developments
IFRIC agenda decision - Attributing Benefit to
Periods of Service (IAS 19)
In May 2021,
an IFRIC agenda
decision was published that
concludes about the periods
of service
over which an entity
should attribute
benefits under a specific retirement defined benefit plan based on the existing requirements of IAS 19. In particular,
according to the
above
decision, the
attribution
of the
benefit shall
not begin
from the
start of
the employment
date but
from the
date
when the
employee service
first
leads to
benefits under
the terms
of the
plan until
the date
when further
employee service
will lead
to no
material amount of further benefits.
The Group
implemented the
above agenda
decision in the
fourth quarter
of 2021 by
amending its accounting
policy for
‘Employee
benefits’ (note
2.2.17) and
accounted for
any resulting
adjustments retrospectively
in accordance
with IAS
8 ‘’Accounting
Policies,
Changes in Accounting
Estimates and
Errors’’.
The adjustments performed
due to the
retrospective application
of the IFRIC
agenda
decision are presented in note 2.3.
2.2
Principal accounting policies
2.2.1
Consolidation
(i) Subsidiaries
Subsidiaries are all entities controlled by the Group. The Group controls an entity when it is exposed, or has
rights to, variable returns
from
its
involvement
with
the
entity,
and
has
the
ability
to
affect
those
returns
through
its
power
over
the
entity.
The
Group
consolidates an entity only when all the above three elements
of control are present.
Power is considered
to exist when
the Group’s
existing rights give
it the current
ability to direct
the relevant
activities of the entity,
i.e. the activities
that significantly
affect the
entity’s returns,
and the Group
has the practical
ability to
exercise those
rights. Power
over
the
entity
may
arise
from
voting
rights
granted
by
equity
instruments
such
as
shares
or,
in
other
cases,
may
result
from
contractual arrangements.
Where voting
rights are
relevant,
the Group
is deemed
to have
control
where it
holds, directly
or indirectly,
more than
half of
the
voting rights over
an entity,
unless there is evidence
that another investor
has the practical
ability to unilaterally
direct the relevant
activities.
The
Group
may
have
power,
even
when
it
holds
less
than
a
majority
of
the
voting
rights
of
the
entity,
through
a
contractual
arrangement
with
other
vote
holders,
rights
arising
from
other
contractual
arrangements,
substantive
potential
voting
rights,
ownership of the largest
block of voting rights in a
situation where the remaining rights
are widely dispersed (‘de
facto power’), or a
Notes to the Consolidated Financial Statements
.
13
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31 December 2021 Consolidated Financial Statements
combination
of
the
above.
In assessing
whether
the
Group
has
de
facto
power,
it
considers
all
relevant
facts
and
circumstances
including
the
relative
size
of
the
Group’s
holding
of
voting
rights
and dispersions
of
holdings of
other
vote
holders
to
determine
whether the Group has the practical ability to direct
the relevant activities.
The Group is
exposed or has rights
to variable returns
from its involvement
with an entity when these
returns have the
potential to
vary as a result of the entity’s performance.
In assessing whether the
Group has the ability
to use its power
to affect
the amount of returns
from its involvement
with an entity,
the Group determines whether in
exercising its decision-making rights,
it is acting as an agent or
as a principal. The Group acts as an
agent when it is engaged
to act on behalf and
for the benefit of another
party, and as
a result does not control
an entity. Therefore,
in
such
cases,
the
Group
does not
consolidate
the
entity.
In making
the
above
assessment,
the
Group
considers
the scope
of
its
decision-making authority over the
entity, the
rights held by other
parties, the remuneration
to which the Group
is entitled from its
involvement, and its exposure
to variability of returns from other interests
in that entity.
The Group
has interests
in certain
entities which
are structured
so that
voting rights
are not
the dominant
factor
in deciding
who
controls the entity, such as when any voting rights
relate to administrative tasks only and the relevant activities are
directed by means
of contractual rights. In determining whether
the Group has control over such structured
entities, it considers the following factors:
-
The purpose and design of the entity;
-
Whether the Group has certain rights
that give it the ability to direct the relevant
activities of the entity unilaterally,
as a result
of existing contractual arrangements
that give it the power to govern the entity
and direct its activities;
-
In case another
entity is granted
decision making rights,
the Group
assesses whether this
entity acts as
an agent of
the Group
or another investor;
-
The existence of any special relationships
with the entity; and
-
The extent
of the Group’s
exposure to
variability of returns
from its involvement
with the entity,
including its exposure
in the
most subordinated securitized
notes issued by the entity as well as subordinated
loans or other credit enhancements that may
be granted to the entity,
and if the Group has the power to affect such variability.
Information about the Group’s
structured entities is set out in note 25.
The Group reassesses whether it
controls an entity if facts
and circumstances indicate that there are changes
to one or more
elements
of
control.
This
includes
circumstances
in
which
the
rights
held
by
the
Group
and
intended
to
be
protective
in
nature
become
substantive upon
a breach of
a covenant
or default on
payments in a
borrowing arrangement,
and lead to
the Group having
power
over the investee.
Subsidiaries are
fully consolidated
from the
date on
which control
is transferred
to the Group
and are
no longer consolidated
from
the
date
that
control
ceases.
Total
comprehensive
income
is
attributed
to
the
owners
of
the
parent
and
to
the
non-controlling
interests even if this results
in the non-controlling interests having
a deficit balance.
In determining the proportion of profit or loss and changes in equity allocated
to the Group and non-controlling interests,
the Group
takes
into
account
current
ownership
interests,
also
including
in-substance
current
ownership
interests,
after
considering
the
eventual exercise
of any potential
voting rights
and other derivatives
that currently
give the Group
access to the returns
associated
with an ownership interest.
Changes in the
Group's ownership
interest in
subsidiaries that do
not result in
a loss of control
are recorded
as equity transactions.
Any difference between the consideration
and the share of the new net assets acquired is recorded directly in equity. Gains or losses
arising from disposals of
ownership interests
that do not result
in a loss of contro
l
by the Group are
also recorded directly
in equity.
For disposals of ownership interests
that result in a loss of control, the Group derecognizes
the assets and liabilities of the subsidiary
and any related
non-controlling interest
and other components
of equity,
and recognizes gains
and losses in the
income statement.
When
the
Group
ceases to
have
control,
any
retained
interest
in
the former
subsidiary
is re-measured
to
its
fair
value,
with
any
changes
in the
carrying
amount recognized
in the
income state
ment.
The Group
considers
the eventual
exercise
of any
potential
voting
rights
and
other
derivatives
and
whether
they
currently
give
the
Group
access
to
the
returns
associated
with
a
retained
ownership interest, in determining
whether that ownership interest should
be derecognised or not.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Intercompany transactions,
balances and intragroup
gains on transactions between
Group entities are eliminated;
intragroup losses
are also eliminated unless the transaction provides
evidence of impairment of the asset transferred.
(ii) Business combinations
The purchase method of accounting is used to account for the acquisition of subsidiaries by the
Group. The consideration transferred
for an acquisition is measured at the fair value of the assets given,
equity instruments issued or exchanged and liabilities undertaken
at
the
date
of
acquisition,
including
the
fair
value
of
assets
or
liabilities
resulting
from
a
contingent
consideration
arrangement.
Acquisition related
costs are expensed
as incurred. Identifiable
assets acquired and
liabilities and contingent
liabilities assumed in a
business combination are measured initially at
their fair values at the
acquisition date irrespective of the
extent of any non-controlling
interest. Any previously held interest in
the acquiree is
remeasured to fair value
at the acquisition
date with any gain
or loss recognized
in the
income statement.
The Group
recognizes
on an
acquisition-by-acquisition basis
any non-controlling
interest
in the
acquiree
either at fair value or at the non-controlling
interest's proportionate share
of the acquiree's net assets.
The excess of the consideration
transferred, the
amount of any non-control
ling interest in the acquiree
and the acquisition-date fair
value of
any previous
equity interest
in the
acquiree over
the fair
value of
the identifiable
net assets
of the
subsidiary acquired,
is
recorded
as goodwill.
If this
is less
than the
fair value
of the
net assets
of the
acquiree, the
difference
is recognized
directly in
the
income statement.
If the
initial accounting
for a
business combination
is incomplete
by the
end of
the reporting
period in
which it
occurs, the
Group
reports
provisional
amounts
for
the
items
for
which
the
accounting
is
incomplete.
Those
provisional
amounts
are
adjusted
retrospectively
during
the
measurement
period
to
reflect
the
new
information
obtained
about
the
facts
and
circumstances
that
existed at
the acquisition
date that,
if known,
would have
affected the
amounts recognized
at that
date. The
measurement period
adjustments, as
mentioned above,
affect accordingly
the amount
of goodwill
that was
initially recognized,
while the
measurement
period cannot exceed one year from
the acquisition date.
Commitments to
purchase non-controlling
interests
through derivative
financial instruments
with the
non-controlling
interests,
as
part of
a business
combination
are
accounted
for
as a
financial liability,
with no
non-controlling
interest
recognized
for
reporting
purposes.
The
financial
liability
is
measured
at
fair
value,
using
valuation
techniques
based
on
best
estimates
available
to
management. Any difference
between the fair value of the financial liability upon initial recognition
and the nominal non-controlling
interest's share of net assets is recognized as part of goodwill. Subsequent revisions to the valuation of the
derivatives are recognized
in the income statement.
For
acquisitions
of
subsidiaries
not
meeting
the
definition
of
a
business,
the
Group
allocates
the
consideration
to
the
individual
identifiable assets and liabilities based
on their relative fair
values at the date of
acquisition. Such transactions or events
do not give
rise to goodwill.
Where necessary, accounting
policies of subsidiaries have been changed to ensure
consistency with the policies of the Group.
A listing of the Bank’s subsidiaries is set
out in note 23.
(iii) Business combinations involving entities under common control
Pursuant to
IAS 8 ‘Accounting
Policies, Changes
in Accounting
Estimates and
Errors’,
since business
combinations between
entities
under common
control
are excluded
from the
scope of
IFRS 3
‘Business Combinations’,
such transactions
are accounted
for in
the
Group’s financial statements by using the pooling of interests method (also known as merger accounting), with reference to the most
recent pronouncements of
other standard-setting bodies that
use a similar conceptual framework
and comply with the IFRS general
principles, as well as accepted industry practices.
Under the
pooling of
interests
method,
the Group
incorporates
the assets
and liabilities
of the
acquiree
at their
pre-combination
carrying amounts from the highest level of
common control, without any
fair value adjustments. Any difference
between the cost of
the transaction and the carrying amount of the net assets acquired
is recorded in Group's equity.
The Group accounts for the cost of such business combinations at the fair value of the consideration
given, being the amount of cash
or shares issued or if that cannot be reliably measured, the considerati
on received.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Formation of a new Group entity to effect a business combination
Common control transactions that involve the formation of a new Group entity to effect a business combination by bringing together
two or more previously
uncombined businesses under the new Group
entity are also accounted
for by using the pooling of
interests
method.
Other common control
transactions that involve
the acquisition of a single existing
Group entity or a single
group of businesses by a
new entity formed
for this purpose
are accounted
for as capital
reorganizations,
on the basis that
there is no business
combination
and no substantive
economic change in
the Group. Under
a capital reorganization,
the acquiring entity
incorporates the
assets and
liabilities of the acquired
entity at their carrying
amounts, as presented
in the books of
that acquired entity,
rather than those
from
the highest level
of common control.
Any difference
between the cost
of the transaction
and the carrying amount
of the net assets
acquired is
recognized
in the
equity of
the new
entity.
Capital reorganization
transactions do
not have
any impact
on the
Group’s
consolidated financial statements.
(iv) Associates
Investments
in associates are
accounted for
using the equity
method of
accounting in the
consolidated financial
statements. These
are undertakings over which the Group
exercises significant influence but which are
not controlled.
Equity accounting
involves recognizing
in the income
statement
the Group's
share of
the associate's profit
or loss for
the year.
The
Group's interest in the associate is carried
on the balance sheet at an amount that reflects its share of the net assets of the associate
and any
goodwill identified
on acquisition
net of any
accumulated impairment
losses. If the
Group's share
of losses of
an associate
equals or
exceeds its
interest
in the associate,
the Group
discontinues recognizing
its share
of further
losses, unless
it has incurred
obligations or made payments on behalf of the associate. Where necessary the accounting
policies used by the associates have been
changed to ensure consistency with the
policies of the Group.
When the Group obtains
or ceases to have
significant influence, any
previously held or retained
interest in the
entity is remeasured
to its fair value, with any change in the carrying amount recognized in the income statement,
except in cases where an investment in
associate becomes
an investment
in a joint
venture where
no remeasurement
of the interest
retained is
performed and
use of the
equity method continues to apply.
(v) Joint arrangements
A
joint
arrangement
is
an
arrangement
under
which
the
Group
has
joint
control
with
one
or
more
parties.
Joint
control
is
the
contractually agreed sharing of control and exists only when decisions about relevant activities require the unanimous consent of the
parties
sharing
control.
Investments
in
joint
arrangements
are
classified
as
either
joint
ventures
whereby
the
parties
who
share
control have rights
to the net assets of the arrangement
or joint operations where two
or more parties have rights to
the assets and
obligations for the liabilities of the arrangement.
The Group evaluates the contractual
terms of joint arrangements to determine
whether a joint arrangement is a joint operation
or a
joint venture. All joint arrangements
in which the Group has an interest are joint
ventures.
As
investments
in
associates,
the
Group's
interest
in
joint
ventures
is
accounted
for
by
using
the
equity
method
of
accounting.
Therefore, the accounting
policy described in note 2.2.1
(iv) applies also for joint
ventures. Where necessary the
accounting policies
used by the joint ventures have been changed
to ensure consistency with the policies of the Group.
When the Group ceases to have joint control over an entity, it discontinues the use of the equity method. Any retained interest in the
entity is
remeasured to
its fair
value, with
any change
in the
carrying amount
recognized in
the income
statement,
except in
cases
where an investment
in a joint venture becomes an
investment in an associate,
where no remeasurement
of the interest
retained is
performed and use of the equity method continues to
apply.
A listing of the Group's associates and joint ventures
is set out in note 24.
2.2.2 Foreign currencies
(i) Translation of foreign subsidiaries
Assets and liabilities of foreign
subsidiaries are translated
into the Group’s
presentation currency at
the exchange rates
prevailing at
each reporting
date whereas
income and expenses
are translated
at the average
exchange rates
for the
period reported.
Exchange
differences
arising from
the translation
of the
net investment
in a
foreign
subsidiary,
including exchange
differences
of monetary
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
items receivable or payable to the forei
gn subsidiary for which settlement is neither planned nor likely
to occur that form part of the
net investment in the foreign
subsidiaries, are recognized in other comprehensive
income.
Exchange
differences
from
the
Group’s
foreign
subsidiaries
are
released
to
the
income
statement
on
the
disposal
of
the
foreign
subsidiary while for monetary items that form part of the net investment in the foreign subsidiary, on repayment or when settlement
is expected to occur.
(ii) Transactions in foreign currency
Foreign
currency
transactions
are
translated
into
the
functional
currency
using
the
exchange
rates
prevailing
at
the
dates
of
the
transactions.
Foreign
exchange
gains
and
losses
resulting
from
the
settlement
of
such
transactions
are
recognized
in
the
income
statement.
Monetary assets
and liabilities denominated
in foreign
currencies are translated
into the
functional currency
at the
exchange rates
prevailing at each reporting
date and exchange
differences are recognized
in the income statement,
except when deferred
in equity
as qualifying cash flow or net investment hedges.
Non-monetary assets and liabilities are
translated into the
functional currency at the exchange
rates prevailing
at initial recognition,
except for non-monetary items denominated
in foreign currencies that are measured at fair value
which are translated at the rate of
exchange at the date the fair value
is determined. The exchange differences
relating to these items are treated
as part of the change
in fair
value and
are recognized
in the
income statement
or recorded
directly in
equity depending
on the
classification of
the non-
monetary item.
2.2.3 Derivative financial instruments and hedging
Derivative financial instruments,
including foreign exchange
contracts, forward currency
agreements and interest rate
options (both
written and
purchased), currency
and interest
rate swaps,
and other derivative
financial instruments,
are initially
recognized in
the
balance sheet at fair
value on the date
on which a derivative contract
is entered into and
subsequently are re-measured
at their fair
value. All derivatives are carried as
assets when fair value is positive and as liabilities when fair value
is negative.
Fair
values
of derivatives
are determined
based on
quoted market
prices, including
recent
market
transactions,
or by
using other
valuation
techniques,
as
appropriate.
The principles
for
the
fair
value
measurement
of
financial instruments,
including derivative
financial instruments, are described in notes 3.2 and 5.3.
Embedded derivatives
Embedded derivatives
are components
of hybrid
contracts
that also
include non-derivative
hosts with
the effect
that some
of the
cash flows of the combined instruments vary
in a way similar to stand-alone derivatives.
Financial
assets
that
contain
embedded
derivatives
are
recognised
in
the
balance
sheet
in
their
entirety
in
the
appropriate
classification category,
following instruments’
assessment of
their contractual
cash flows
and their
business model
as described
in
note 2.2.9.
On the other
hand, derivatives embedded in
financial liabilities, are
treated as separate derivatives when their
risks and characteristics
are not
closely related
to those
of the
host contract
and the
host contract
is not
carried at
fair value
through profit
or loss.
These
embedded derivatives are measured at
fair value with changes in fair value recognized
in the income statement.
The use of derivative financial instruments
is inherent in the Group’s
activities and aims principally at managing risk effectively.
Accordingly,
the Group,
as part of
its risk management
strategy,
may enter
into transactions
with external
counterparties to
hedge
partially or fully interest rate,
foreign currency,
equity and other exposures that are generated
from its activities.
The objectives of hedging with derivative financial instruments
include:
•
Reduction of interest rate
exposure that is in excess of the Group’s
interest rate limits
•
Efficient management of interest
rate risk and fair value exposure
•
Management of future variable cash flows
•
Reduction of foreign currency risk or inflation
risk
•
Management of credit risk
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Hedge accounting
The Group has elected,
as a policy choice permitted
under IFRS 9, to
continue to apply
hedge accounting in accordance
with IAS 39,
until the project of accounting of macro hedging activities
is completed by the IASB.
For hedge accounting
purposes, the Group forms
a hedging relationship between
a hedging instrument and
a related item
or group
of items
to be
hedged. A
hedging instrument
is a
designated
derivative
or a
designated
non-derivative
financial asset
or financial
liability whose fair value or cash flows are
expected to offset changes in the fair
value or cash flows of a designated hedged item.
Specifically,
the Group
designates certain
derivatives as:
(a) hedges of
the exposure
to changes in
fair value
of recognized
assets or
liabilities or unrecognized
firm commitments (fair
value hedge), (b) hedges
of the exposure to
variability in cash flows
of recognized
assets or
liabilities or
highly probable
forecasted
transactions (cash
flow hedge)
or,
(c) hedges
of the
exposure to
variability in
the
value of a net investment in a foreign operation which is associated with the translation
of the investment's net assets in the Group's
functional currency.
In
order
to
apply
hedge
accounting,
specified
criteria
should
be
met.
Accordingly,
at
the
inception
of
the
hedge
accounting
relationship, the Group documents the
relationship between hedging instruments
and hedged items, as well as its risk management
objective
and
strategy
for
undertaking
various
hedge
transactions,
together
with
the
method
that
will
be
used
to
assess
the
effectiveness of the hedging
relationship. The Group also
documents its assessment, both
at inception of
the hedge and
on an ongoing
basis, of whether the
derivatives that are
used in the hedging transactions
are highly effective
in offsetting
changes in fair
values or
cash flows
of hedged
items and
whether the
actual results
of each hedge
are within
a range
of 80-125%.
If a relationship
does not
meet
the
abovementioned
hedge
effectiveness
criteria,
the
Group
discontinues
hedge
accounting
prospectively.
Similarly,
if
the
hedging
derivative
expires
or
is
sold,
terminated
or
exercised,
or
the
hedge
designation
is
revoked,
then
hedge
accounting
is
discontinued prospectively. In addition, the Group
uses other derivatives, not
designated in a
qualifying hedge relationship, to
manage
its exposure
primarily to
interest
rate
and foreign
currency risks.
Non qualifying
hedges are
derivatives
entered
into
as economic
hedges of assets and liabilities for which
hedge accounting was not applied. The said derivative
instruments are classified along with
those held for trading purposes.
The method
of recognizing
the resulting
fair
value gain
or loss
depends on
whether the
derivatives
are designated
and qualify
as
hedging instruments, and if so, the nature of the item
being hedged.
Furthermore,
the
Group
may
designate
groups
of
items
as
hedged
items,
by
aggregating
recognized
assets
or
liabilities
or
unrecognized
but
highly
probable
transactions
of
similar
risk
characteristics
that
share
the
exposure
for
which
they
are
hedged.
Although
the
overall
risk
exposures
may
be different
for
the individual
items
in
the
group,
the
specific
risk
being
hedged
will be
inherent in each of the items in the group.
In 2020, the
Group has
applied the Phase
1 IBOR reform
amendments to
IFRS 9, IAS
39 and IFRS
7, issued
in September
2019, that
provide temporary reliefs
on hedging relationships during
the period before the
replacement of an existing
interest rate
benchmark
with an alternative risk-free
rate
(RFR).
Based on the reliefs, for
the purpose of determining whether a forecast
transaction is highly
probable, or a hedging relationship
is expected to be highly
effective, the Group
assumes that the benchmark interest
rate does not
change as a
result of the
IBOR reform. In addition,
the Group, is
not required to discontinue hedge
accounting if the hedge
falls outside
the 80–125% range during the period of uncertainty arising from the reform.
Furthermore, in case of hedges where the hedged item
or hedged risk is a non-contractually specified benchmark portion of
interest rate risk, following the IBOR reform reliefs, it is assumed
that the
designated risk
portion only
needs to
be separately
identifiable at
the inception
of the
hedging relationship
and not
on a
going basis.
The reliefs cease to apply once certain conditions are met
i.e. at the earlier of (a)
when the uncertainties arising from the IBOR
reform
are no
longer present
with respect
to the
timing and
the amount
of the
benchmark rate
-based cash
flows of
the hedged
items or
hedging instruments and (b) when the hedging relationships
to which the reliefs apply are discontinued.
As described
in note
2.1.1, the
Group has
applied the
Phase 2
IBOR reform
amendments to
IFRS 9/IAS
39, that
provide temporary
reliefs that allow the Group’s
hedging relationships to continue upon the replacement of an existing interest
rate benchmark with an
RFR. Specifically, the amendments introduce an exception to the existing requirements so that changes in the formal designation and
documentation of a hedge accounting relationship or to
the method for assessing hedge effectiveness due to modifications
required
by IBOR reform will not result in the discontinuation
of hedge accounting or the designation of a new hedging relationship.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
(i) Fair value hedge
The Group
applies fair
value hedging to
hedge exposures
primarily to changes
in the fair
value attributable
to interest
rate risk
and
currency risk.
The items that qualify
for fair value hedge accounting
include fixed rate debt securities
classified as FVOCI and
amortized cost financial
assets, fixed rate term deposits
or term loans measured at amortized cost,
as well as fixed rate debt securities in issue.
The interest rate and currency risk with respect to
the applicable benchmark rate may be hedged using interest
rate swaps and cross
currency swaps.
The Group uses the dollar-offset
method in order to
assess the effectiveness
of fair value hedges.
This is a quantitative
method that
involves the comparison of the change in
the fair value of the hedging
instrument with the change in the
fair value of the hedged item
attributable to
the hedged risk. Even
if a hedge is
not expected to
be highly effective
in a particular period,
hedge accounting is not
precluded if effectiveness is expected
to remain sufficiently high over the life of the
hedge.
Changes in
the fair
value of
derivatives that
are designated
and qualify as
fair value
hedges are
recorded in
the income
statement,
together with the changes in the fair value of the
hedged assets or liabilities that are attributable to
the hedged risk.
The Group
discontinues hedge
accounting prospectively
in case the
hedging instrument
expires or
is sold, terminated
or exercised,
the hedge no
longer meets the
qualifying criteria for
hedge accounting, or
designation is revoked.
In such cases,
any adjustment
to
the carrying
amount of
the hedged
item, for
which the
effective
interest
method is
applied, is
amortized to
profit or
loss over
the
period to maturity. If the
hedged item is
derecognised, the unamortised fair
value adjustment is recognised
immediately in the
income
statement
.
Hedge ineffectiveness
may arise
in case
of potential
differences
in the
critical terms
between the
hedged item
and the
hedging instrument such as maturity,
interest rate reset
frequency and discount curves.
(ii) Cash flow hedge
The Group applies cash flow hedging to hedge exposures to variability in cash flows primarily attributable to the interest rate risk and
currency risk associated with a recognized asset
or liability or a highly probable forecast transaction.
The items that qualify for cash flow hedging include recognized assets and liabilities such as variable rate
deposits or loans measured
at amortized cost, variable rate
debt securities in issue and foreign currency variable rate
loans. The interest rate risk with respect to
the applicable benchmark rate may
be hedged using interest
rate swaps and cross
currency swaps. The foreign
currency risk may be
hedged using currency forwards and
currency swaps.
Furthermore, cash
flow hedging is
used for
hedging highly probable
forecast transactions
such as the
anticipated future
rollover of
short-term
deposits
or
repos
measured
at
amortized
cost.
Specifically,
the
forecast
variable
interest
payments
of
a
series
of
anticipated
rollovers
of these
financial liabilities
are aggregated
and hedged
as a
group with
respect to
changes in
the benchmark
interest rates, eliminating cash flow variability.
In addition, cash flow hedging applies to
hedges of currency risk arising from probable
forecasted sales of financial assets or
settlement of financial liabilities in foreign currency.
If the
hedged item
is documented
as a
forecast
transaction, the
Group
assesses and
verifies that
there is
a high
probability of
the
transaction occurring.
In order to assess the
effectiveness of cash
flow hedges of interest
rate risk, the Group
uses regression analysis which demonstrates
that there is high
historical and expected future correlation between
the interest rate risk designated as
being hedged and
the interest
rate risk
of the hedging
instrument. For
assessing the effectiveness
of cash flow
hedges of currency
risk, the Group
uses the dollar-
offset method.
The effective
portion of changes
in the fair
value of derivatives
that are designated
and qualify as cash
flow hedges is recognized
in
other comprehensive income whereas the ineffective
portion is recognized in the income statement.
Amounts accumulated
in equity
are recycled
to the
income statement
in the
periods in which
the hedged
item will
affect profit
or
loss (for example, when the forecast
sale that is hedged takes place).
When a
hedging instrument
expires or
is sold,
or when
a hedge no
longer meets
the criteria
for hedge
accounting, the
cumulative
gain or loss existing in equity at that time remains
in equity until the forecast transaction
affects the income statement.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
When a forecast
transaction is
no longer
expected to
occur,
the cumulative
gain or
loss that was
reported in
equity is immediately
transferred to the
income statement.
(iii) Net investment hedge
The Group
applies net
investment
hedging to
hedge exposures
to variability
in the
value of
a net
investment
in foreign
operation
associated with the translation of the investment’s
carrying amount into the Group’s
presentation currency.
The Group invests in foreign subsidiaries, associates or other foreign operations with functional currencies different from the Group’s
presentation and
functional currency which
upon consolidation, their
carrying amount is
translated from
the functional currency to
the
Group’s
presentation
currency
and
any
exchange
differences
are
deferred
in
OCI
until
the
net
investment
is
disposed
of
or
liquidated, at which time they are recognized
in the profit or loss.
The item
that qualifies
for
net investment
hedge accounting
is the
carrying amount
of the
net investment
in a
foreign
operation,
including monetary items that form part of the net
investment.
The
foreign
currency
exposure
that
arises
from
the
fluctuation
in
spot
exchange
rates
between
the
net
investment’s
functional
currency and the Group’s presentation currency may be
hedged using currency swaps, currency
forward contracts and their economic
equivalents, as well as cash instruments.
The effectiveness of net investment
hedges is assessed with the Dollar-Offset Method
as described above for fair value hedge.
Hedges of
net investments
in foreign
operations
are accounted
for
similarly to
cash flow
hedges. Any
gain or
loss on
the hedging
instrument relating to
the effective portion of
the hedge is recognized
in equity; the gain or loss relating
to the ineffective portion
is
recognized in the income statement.
Gains and losses accumulated in equity are included in the income statement
when the foreign
operation is disposed of as part of the gain or loss on the disposal.
(iv) Derivatives not designated as hedging instruments for hedge accounting
purposes
Changes
in the
fair
value
of derivative
financial instruments
that
are
entered
into
for
trading purposes
or as
economic hedges
of
assets, liabilities
or net
positions in
accordance with
the Group’s
hedging objectives
that may
not qualify
for hedge
accounting are
recognized in the income statement.
The fair
values of
derivative instrumen
ts held
for trading,
including those
entered into
as economic
hedges, and
hedge accounting
purposes are disclosed in note 19.
2.2.4 Offsetting financial instruments
Financial
assets
and
liabilities
are
offset
and
the net
amount
is presented
in
the balance
sheet when,
and only
when,
the Group
currently has a legally enforceable right to set off the recognized amounts and intends
either to settle on a net basis, or to realize the
asset and settle the liability simultaneously.
2.2.5 Income statement
(i) Interest income and expense
Interest income and expense is recognized
in the income statement for
all interest bearing financial instruments
on an accrual basis,
using
the effective
interest
rate
(EIR)
method. The
effective
interest
rate
is the
rate
that
exactly
discounts
estimated
future
cash
payments or receipts through the
expected life of the financial
instrument or, when appropriate, a shorter period to
the gross carrying
amount of the financial asset or to the amortized
cost of a financial liability. When
calculating the EIR for financial instruments
other
than
purchased
or
originated
credit-impaired,
the
Group
estimates
cash
flows
considering
all
contractual
terms
of
the
financial
instrument
but does
not
consider
expected
credit
losses.
For
purchased
or originated
credit
impaired
(POCI) financial
assets,
the
Group
calculates
the
credit-adjusted
EIR,
which
is
the
interest
rate
that
upon
the
original
recognition
of
the
POCI
financial
asset
discounts the estimated future cash flows
(including expected credit losses) to the fair
value of the POCI asset.
The
amortized
cost
of
a
financial asset
or
liability
is
the
amount
at
which
it
is
measured
upon
initial
recognition
minus
principal
repayments, plus
or minus cumulative
amortization using
the EIR (as
described above)
and for
financial assets it
is adjusted
for the
expected credit loss allowance. The gross carrying amount of a
financial asset is its amortized cost before adjusting for ECL allowance.
Notes to the Consolidated Financial Statements
.
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The EIR
calculation includes
all fees
and points
paid or
received that
are an
integral part
of the
effective
interest
rate,
transaction
costs, and all other
premiums or discounts. Transaction costs include incremental costs that
are directly attributable to the
acquisition
or issue of a financial asset or liability.
The Group calculates interest
income and expense by applying the EIR
to the gross carrying amount
of non-impaired financial assets
(exposures in Stage 1 and 2) and to the amortized
cost of financial liabilities respectively.
For financial assets
that have
become credit-impaired
subsequent to
initial recognition (exposures
in Stage 3),
the Group calculates
interest income by applying the effective interest rate to the amortized cost of the financial asset (i.e. gross carrying amount adjusted
for the
expected credit
loss allowance).
If the
asset is no
longer credit-impaired,
then the EIR
is applied
again to
the gross
carrying
amount with the exception of POCI assets for
which interest income does not revert
to gross basis calculation.
For inflation-linked
instruments the
Group recognizes
interest
income and
expense by
adjusting the
effective interest
rate on
each
reporting period due
to changes in
expected future cash
flows, incorporating
changes in inflation
expectations over
the term of the
instruments.
The adjusted
effective
interest
rate
is applied
in order
to calculate
the new
gross carrying
amount on
each reporting
period.
The changes to
the basis for
determining the
financial instruments’
contractual cash
flows, required
in the context
of IBOR reform,
are accounted for as an update to
the instruments’ EIR.
Interest income and expense is presented separately in the income statement for all interest bearing financial instruments within net
interest income.
(ii) Fees and commissions
Fee and commission
received or paid
that are integral to
the effective interest rate on a
financial asset or
financial liability are
included
in the effective interest
rate.
Other
fee
and
commission
income
such
as
account
servicing
and
asset
management
fees
(including
performance
based
fees)
is
recognised
over
time
as
the
related
services
are
being
provided
to
the
customer,
to
the
extent
that
it
is
highly
probable
that
a
significant reversal
of the revenue
amount recognized
will not occur.
Transaction-based
fees such as
foreign exchange
transactions,
imports-exports, remittances,
bank charges and
brokerage
activities are recognised
at the point
in time when the
transaction takes
place. Other
fee
and
commission
expenses
relate
mainly
to
transaction
and service
fees,
which
are
expensed
as
the
services are
received.
In the case of a contract
with a customer that res
ults in the recognition of a
financial instrument in the Group’s
financial statements
which may
be partially
in the
scope of
IFRS 9
and partially
in the
scope of
IFRS 15,
the Group
first
applies IFRS
9 to
separate
and
measure the part of the contract that is in the scope of
IFRS 9 and subsequently applies IFRS 15 to the residual part.
2.2.6 Property, equipment and
Investment property
(i) Property and equipment
Property
and
equipment
are
stated
at
cost
less
accumulated
depreciation
and
accumulated
impairment
losses.
Cost
includes
expenditure that
is directly attributable
to the acquisition
of the asset. Subsequent
expenditure is recognized
in the asset's carrying
amount only
when it
is probable
that
future economic
benefits will
flow to
the Group
and the
cost
of the
asset can
be measured
reliably. All other repair
and maintenance costs are recognized
in the income statement as incurred.
Depreciation is calculated
using the straight-line method
to write down the cost
of property and equipment,
to their residual values
over their estimated useful life as
follows:
-
Land: no depreciation;
-
Freehold buildings: 40-50 years and up to 70 years
(for specific strategic properties constructed
or heavily renovated according
to the best practices and guidelines of sustainable construction
and renovation, using resilient materials
and designs);
-
Leasehold improvements: over the lease term
or the useful life of the asset if shorter;
-
Computer hardware and related
integral software: 4-10 years;
-
Other furniture and equipment: 4-20 years; and
-
Motor vehicles: 5-7 years.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
(ii) Investment property
Property
held
for
rental
yields and/or
capital
appreciation
that
is not
occupied by
the
Group’s
entities
is classified
as
investment
property.
Investment property is measured initially at its cost, including related transaction costs. Under fair value model of IAS 40 “Investment
property” after initial
recognition, investment
property is carried
at fair
value as determined
by independent
certified valuers,
with
any change therein
recognized in
income statement.
Investment property
under construction is
measured at fair
value only if it
can
be measured reliably.
Subsequent expenditure is charged to
the asset’s carrying amount only when it is probable that future
economic benefits associated
with the item will flow to the
Group and the cost of the item can be
measured reliably. Repairs and maintenance costs are recognized
to the income statement during the
financial period in which they are incurred.
Investment property is derecognised
when disposed or when it is permanently withdrawn
from use and there is no future economic
benefit expected from its disposal. Any
arising gain or loss (calculated as the difference
between the net proceeds from disposal and
the carrying amount of the asset) is recognized in income
statement.
If an
investment
property
becomes
owner-occupied,
it is
reclassified
as
property
and equipment
and its
fair
value
at
the date
of
reclassification becomes its deemed cost. If an item of property and equipment becomes an investment property because its use has
changed, any resulting
decrease between the
carrying amount and the
fair value of this
item at the date
of transfer
is recognized in
income statement
while any resulting
increase, to the extent
that the increase
reverses previous
impairment loss for
that property,
is
recognized
in
income
statement
while
any
remaining
part
of
the
increase
is
recognized
in
other
comprehensive
income
and
increases the revaluation surplus within equity.
If a
repossessed asset
becomes investment
property,
any difference
between the
fair value
of the
property at
the date
of transfer
and its previous carrying amount is recognized
in income statement.
Reclassifications among own used, repossessed assets and
investment properties may occur when there is
a change in the
use of such
properties. Additionally,
an investment property
may be reclassified to ‘non-current
assets held for sale’ category
to the extent that
the criteria described in note 2.2.25 are met.
2.2.7 Intangible assets
(i) Goodwill
Goodwill represents the excess of the aggregate of the fair value of the consideration
transferred, the amount of any non-controlling
interest
and the
acquisition date
fair value
of any
previously held
equity interest
in the
acquiree over
the fair
value of
the Group’s
share of net identifiable assets and contingent liabilities acquired. Goodwill
arising on business combinations is included
in ‘intangible
assets’ and is measured at cost less accumulated impairment
losses.
Goodwill arising on acquisitions of associates and
jointly controlled entities is neither disclosed nor
tested separately impairment, but
instead is included in ‘investments
in associates’ and ‘investments in jointly
controlled entities’.
(ii) Computer software
Costs
associated
with
the
maintenance
of
existing
computer
software
programs
are
expensed
as
incurred.
Development
costs
associated
with
the
production
of
identifiable
assets
controlled
by
the
Group
are
recognized
as
intangible
assets
when
they
are
expected to generate economic benefits and can be measured reliably. Internally
generated computer software assets are amortized
using the straight-line method over 4 years,
except for core systems
whose useful life may extend up to
20 years.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
(iii) Other intangible assets
Other
intangible
assets
are
assets
that
are
separable
or arise
from
contractual
or other
legal
rights
and are
amortized
over their
estimated useful lives. These include intangible
assets acquired in business combinations.
Intangible assets that have an indefinite
useful life are not subject to amortization
and are tested annually for impairment.
2.2.8 Impairment of non-financial assets
(i) Goodwill
Goodwill arising
on business combinations
is not amortized
but tested
for impairment
annually or more
frequently if
there are
any
indications
that
impairment
may
have
occurred.
The
Group’s
impairment
test
is
performed
each
year
end.
The
Group
considers
external
information
such
as
prevailing
economic
conditions,
persistent
slowdown
in
financial
markets,
volatility
in
markets
and
changes in levels of market and exchange risk, an unexpected decline in an asset’s market
value or market capitalization being below
the book value of
equity, together with a deterioration in internal performance indicators, in assessing
whether there is any indication
of impairment.
For the purpose of impairment testing,
goodwill acquired in a business combination
is allocated to each Cash
Generating Unit (CGU)
or
groups
of
CGUs that
are
expected
to
benefit
from
the synergies
of
the
combination.
Each
unit
or group
of units
to
which the
goodwill is allocated represents the lowest level within the Group at which goodwill is monitored for internal management purposes.
The Group monitors goodwill either at the separate legal entity level or group of legal entities consistent with the internal monitoring
of operating segments.
The Group impairment model compares the carrying
value of a CGU or
group of CGUs with its
recoverable amount. The carrying value
of a CGU
is based on
the assets and
liabilities of each
CGU. The
recoverable
amount is
determined on
the basis of
the value-in-use
which is the present value of the future cash flows expected to be derived from the CGU
or group of CGUs. The estimated future cash
flows are discounted
to their present
value using a pre
-tax discount
rate that reflects
current market
assessments of the time
value
of money and the risks specific to the asset or CGU and the countries
where the CGUs operate.
An impairment loss arises if the carrying amount of an asset or CGU exceeds its recoverable amount,
and is recognized in the income
statement.
Impairment
losses
are
not
subsequently
reversed.
Gains
and
losses
on
the
disposal
of
an
entity
include
the
carrying
amount of goodwill relating to the entity sold.
(ii) Other non-financial assets
Other non-financial assets, including property and equipment and other intangible assets, are assessed for indications of impairment
at each reporting date
by considering both external
and internal sources of information
such as a significant reduction
in the asset’s
value
and
evidence
that
the
economic
performance
of
the
asset
is
or
will
be
worse
than
expected.
When
events
or
changes
in
circumstances indicate
that the carrying amount may
not be recoverable,
an impairment loss is recognized
for the amount by which
the asset’s carrying
amount exceeds its recoverable
amount. The recoverable
amount is the higher of
an asset’s fair
value less costs
to
sell
and
value
in
use.
For
the
purposes
of
assessing
impairment,
assets
are
grouped
at
the
lowest
levels
for
which
there
are
separately
identifiable
cash
flows,
where
applicable.
Non-financial
assets,
other than
goodwill, for
which an
impairment
loss was
recognized in prior reporting periods, are
reviewed for possible reversal
of such impairment at each reporting date.
Impairment losses arising from the Group’s
associates and joint ventures are determined
in accordance with this accounting policy.
2.2.9 Financial assets
Financial assets - Classification and measurement
The
Group
classifies
financial
assets
based
on
the
business
model
for
managing
those
assets
and
their
contractual
cash
flow
characteristics. Accordingly, financial assets are classified into
one of the
following measurement categories: amortized cost, fair
value
through other comprehensive income or fair
value through profit or loss.
Purchases and
sales of
financial assets
are recognized
on trade
date, which
is the
date the
Group commits
to purchase
or sell
the
assets. Loans originated by the Group are recognized
when cash is advanced to the borrowers.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Financial Assets measured at Amortized Cost (‘AC’)
The Group classifies and measures
a financial asset at AC only
if both of the following conditions
are met and is not designated
as at
FVTPL:
(a) The
financial asset
is held within
a business model
whose objective
is to
collect contractual
cash flows
(hold-to-collect business
model) and
(b) The
contractual
terms of
the financial
asset give
rise on
specified dates
to cash
flows that
are solely
payments of
principal and
interest on the principal amount outstanding
(SPPI).
These financial
assets are
recognized initially
at fair
value plus
or minus direct
and incremental
transaction costs
and fees
received
that are attributable to the acquisition of these assets, and are subsequently measured at amortized cost, using the effective interest
rate (EIR) method (as described in note 2.2.5 above).
Interest
income, realized
gains and
losses on derecognition
,
and changes
in expected
credit losses
from assets
classified at
AC, are
included in the income statement.
Financial Assets measured at Fair Value through Other
Comprehensive Income (‘FVOCI’)
The Group classifies and measures a financial asset at FVOCI only if both of the following conditions
are met and is not designated as
at FVTPL:
(a) The financial asset
is held within a
business model whose objective
is achieved by both collecting
contractual cash flows and selling
financial assets (hold-to-collect-and-sell business
model) and
(b) The contractual terms of the financial asset give rise on
specified dates to cash flows that are SPPI.
Financial
assets
that
meet
these
criteria
are
debt
instruments
and
are
measured
initially
at
fair
value,
plus
or
minus
direct
and
incremental transaction costs
that are attributable to the acquisition of these assets.
Subsequent
to
initial recognition,
FVOCI
debt
instruments
are
re-measured
at
fair
value
through
OCI, except
for
interest
income,
related foreign exchange gains
or losses and expected credit losses, which are recognized in the income statement.
Cumulative gains
and losses previously recognized in OCI are transferred from OCI to the income statement when the debt instrument is derecognised.
Equity Instruments designated at FVOCI
The Group may make an irrevocable election to designate
an equity instrument at FVOCI.
This designation, if elected, is
made at initial
recognition
and on
an
instrument
by
instrument
basis.
Gains and
losses
on these
instruments,
including
when
derecognized,
are
recorded
in
OCI
and
are
not
subsequently
reclassified
to
the
income
statement.
Dividends
received
are
recorded
in
the
income
statement.
Financial Assets measured at Fair Value through Profit
and Loss (“FVTPL”)
The
Group
classifies
and
measures
all
other
financial
assets
that
are
not
classified
at
AC
or
FVOCI,
at
FVTPL.
Accordingly,
this
measurement category
includes debt instruments such as
loans and debt securities that are held
within the hold–to-collect (HTC)
or
hold-to-collect-and-sell
models (HTCS),
but fail
the SPPI
assessment, equities
that are
not designated
at FVOCI
and financial
assets
held for trading. Derivative financial instruments are measured
at FVTPL, unless they
are designated as effective hedging instruments,
in which case hedge accounting requirements
under IAS 39 apply.
Furthermore, a financial asset that meets the above conditions
to be classified at AC or FVOCI, may be irrevocably
designated by the
Group at
FVTPL at
initial recognition,
if doing
so eliminates,
or significantly
reduces an
accounting mismatch
that would
otherwise
arise.
Financial assets measured at FVTPL are initially recorded at fair value
and any unrealized gains or losses arising due to changes in fair
value are included in the income statement.
Business model
and contractual characteristics assessment
The business model assessment
determines how the
Group manages a
group of assets
to generate
cash flows. That
is, whether the
Group's objective
is solely
to collect
contractual
cash flows
from the
asset, to
realize cash
flows from
the sale
of assets,
or both to
Notes to the Consolidated Financial Statements
.
24
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31 December 2021 Consolidated Financial Statements
collect contractual cash flows and cash flows
from the sale of assets. In addition, the business model is determined after aggregating
the financial assets into groups (business lines) which
are managed similarly rather than at an individual instrument’s
level.
The business
model is
determined
by the
Group’s
key
management personnel
consistently
with the
operating
model, considering
how financial assets are managed in
order to generate cash flows, the objectives and how
performance of each portfolio is monitored
and reported and any available information
on past sales and on future sales’ strategy,
where applicable.
Accordingly,
in making
the above
assessment, the
Group
will consider
a number
of factors
including the
risks associated
with the
performance of
the business model
and how those
risks are evaluated
and managed, the
related personnel
compensation, and the
frequency, volume
and reasons of past sales, as well as expectations about future
sales activity.
Types of business models
The Group’s business
models fall into three categories, which
are indicative of the key strategies
used to generate returns.
The hold-to-collect (HTC) business model has the objective to hold the
financial assets in order to collect contractual cash flows. Sales
within
this
model
are
monitored
and
may
be
performed
for
reasons
which
are
not
inconsistent
with
this
business
model.
More
specifically, sales
of financial assets due to credit
deterioration, as well as, sales
close to the maturity are considered
consistent with
the objective of
hold-to-collect contractual
cash flows regardless
of value and
frequency.
Sales for other
reasons may
be consistent
with the HTC model such as liquidity
needs in any stress case scenario or sales
made to manage high concentration level of credit risk.
Such sales
are monitored
and assessed
depending on
frequency and
value to
conclude whether
they are
consistent
with the
HTC
model. Debt instruments
classified within this business
model include bonds, due
from banks and
loans and advances to
customers
including securitized notes issued by special purpose vehicles established by the Group and
recognized in its balance sheet, which are
measured at amortized cost, subject to
meeting the SPPI assessment criteria.
The
hold-to-collect-and-sell
business
model
(HTC&S)
has
the
objective
both
to
collect
contractual
cash
flows
and
sell
the
assets.
Activities such as liquidity management, interest
yield and duration are consistent with
this business model, while sales of assets are
integral to achieving the objectives of this business model. Debt instruments classified within this business model include investment
securities which are measured at FVOCI, subject to meeting
the SPPI assessment criteria.
Other business models
include financial assets
which are managed
and evaluated
on a fair
value basis as
well as portfolios
that are
held for trading. This is a residual category for financial assets not meeting the criteria of the business models of
HTC or HTC&S, while
the collection of contractual cash flows may
be incidental to achieving the business models’ objective.
The Group’s
business models
are
reassessed
at
least
annually or
earlier,
if there
is a
sales’ assessment
trigger or
if there
are
any
changes in the Bank’s strategy
and main activities, as evidenced by the Bank’s
business plan, budget and NPE strategy.
Cash flow characteristics assessment
For a financial
instrument to be
measured at AC
or FVOCI, its
contractual terms
must give rise
on specified dates
to cash flows
that
are solely payments of principal and interest
(SPPI) on the principal amount outstanding.
In assessing
whether the
contractual cash
flows are
SPPI, the Group
will consider
whether the contractual
terms of
the instrument
are consistent with a basic lending
arrangement i.e. interest includes only consideration for the time
value of money, credit risk, other
basic lending
risks
and a
profit margin.
On the
initial recognition
of a
financial asset,
an assessment
is performed
of whether
the
financial asset contains
a contractual
term that could
change the amount
or timing of
contractual cash
flows in a
way that
it would
not be consistent with the above condition. Where the contractual terms introduce exposure to risk or volatility that are inconsistent
with a basic lending
arrangement, the
related financial asset
is considered to
have failed
the SPPI assessment and
will be measured
at FVTPL.
For the purpose of the SPPI assessment, the Group considers
the existence of various features, including among others, contractually
linked terms, prepayment terms, deferred interest
-free payments, extension and equity conversion options and terms that introduce
leverage
including
index
linked
payments,
features
that
change
contractual
cash
flows
based
on
the
borrower
meeting
certain
contractually
specified environmental,
social and
governance
(ESG)
targets.
Moreover,
for
the securitized
notes
issued
by special
purpose vehicles and
held by the
Group, the cash
flow characteristics
of the underlying
pool of financial assets
as well as
the credit
risk inherent in
each securitization’s tranche compared to the
credit risk of
all of
the underlying pool
of financial assets,
are considered.
In case of
special lending arrangements such
as non-recourse loans,
in its assessment
of the SPPI
criterion, the Group considers
various
factors
such
as
the
nature
of
the
borrower
and
its
business,
the
pricing
of
the
loans,
whether
it
participates
in
the
economic
Notes to the Consolidated Financial Statements
.
25
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31 December 2021 Consolidated Financial Statements
performance of the
underlying asset and
the extent to
which the collateral
represents all
or a substantial
portion of the borrower’s
assets. Moreover,
for special purpose entities, the
Group takes into
consideration the borrower’s
adequacy of loss absorbing capital
by assessing jointly
the criteria of
equity sufficiency,
Loan to
Value ratio
(LTV),
the Average
Debt Service Coverage
ratio (ADSCR)
as
well as the existence of corporate
and personal guarantees.
In certain cases when
the time value of
money element is modified
in that the financial
asset’s interest
rate is periodically
reset but
the reset frequency
does not match
the tenor of
the interest
rate or when
a financial asset’s
interest rate
is periodically reset
to an
average of particular short-term and long-term
interest rates, a quantitative assessment is
performed (the “Benchmark Test”) in order
to determine whether the contractual
cash flows are SPPI.
In particular,
the Group
assesses the contractual
cash flows
of the
“real instrument”,
whose interest
rate is
reset with
a frequency
that does not match
the tenor of the
interest rate, and those of
the “benchmark instrument”, which are identical in
all respects except
that the tenor of
the interest rate
matches exactly the
interest period.
If the undiscounted cash
flows of the former
are significantly
different
from the
benchmark cash
flows due
to the
modified time value
of money
element, the
financial asset
does not
meet the
SPPI criterion. In its assessment, the Group considers
both the effect of the modified time value of money
element in each reporting
period
and
cumulatively
over
the
life
of
the
instrument.
This
is
done,
as
far
as
the
lifetime
of
the
instrument
is
concerned,
by
comparing
the
cumulative
projected
undiscounted
cash
flows
of
the
real
and the
benchmark
instrument,
and
for
each
quarterly
reporting period,
by comparing
the projected
undiscounted
cash flows
of the
two instruments
for that
quarterly reporting
period,
based on predefined thresholds.
In addition, for the
purposes of the SPPI
assessment, if a contractual feature could have
an effect that is de-minimis
on the contractual
cash flows of the
financial asset, it does not
affect its classification.
Moreover,
a contractual feature
is considered as not genuine
by
the
Group,
if it
affects
the
instrument’s
contractual
cash
flows
only
on
the
occurrence
of
an
event
that
is extremely
rare,
highly
abnormal and very unlikely to occur.
In such a case, it does not affect the instrument’s
classification.
The Group performs the SPPI assessment for its lending
exposures on a product basis for the
retail and part of the wholesale
portfolio
where contracts are of standardized form, whereas for the remaining wholesale portfolio, securitized notes issued by special purpose
vehicles established by the Group and debt securities the assessment
is performed on an individual basis.
Derecognition of financial assets
The
Group
derecognizes
a
financial
asset
when
its
contractual
cash
flows
expire,
or
the
rights
to
receive
those
cash
flows
are
transferred in an outright sale in which substantially all risks and rewards of ownership
have been transferred. In addition, a financial
asset is derecognized
even if rights
to receive cash
flows are retained
but at the same
time the Group
assumes an obligation
to pay
the received cash flows without a material delay (pass through agreement) or when substantially all the
risks and rewards are neither
transferred
nor retained
but the Group
has transferred
control of
the asset. Control
is transferred
if, and
only if,
the transferee
has
the practical ability to sell
the asset in its entirety to
unrelated third party and is able
to exercise that
ability unilaterally and without
imposing additional restrictions on the transfer.
The main transactions that are subject to the above
de-recognition rules are securitization transactions,
repurchase agreements and
stock lending
transactions. In
the case of
securitization transactions,
in order
to assess the
application of
the above
mentioned de-
recognition
principles,
the
Group
considers
the
structure
of
each
securitization
transaction
including
its
exposure
to
the
more
subordinated
tranches
of
the notes
issued
and/or
credit
enhancements
provided
to
the special
purposes
vehicles,
as
well
as
the
securitization’s
contractual terms that may indicate that the Group retains
control of the underlying assets. In the case of repurchase
transactions and stock lending, the assets transferred
are not derecognised since the terms of the transaction
entail the retention of
all their risks and rewards.
On derecognition of
a financial asset,
the difference
between the carrying
amount of the
asset and the
sum of (i) the
consideration
received
(including
any
new
asset
obtained
less
any
new
liability
assumed)
and
(ii)
any
cumulative
gain
or
loss
that
had
been
recognized
in OCI
for
financial assets
at FVOCI,
is recognized
in income
statement,
except
for
cumulative
gains or
losses of
FVOCI
equity instruments which are not reclassified from
OCI to income statement at the date
of derecognition.
Modification of financial assets that may result in derecognition
In addition,
derecognition of
financial asset
arises when
its contractual
cash flows
are modified
and the
modification is
considered
substantial enough so that the original asset is derecognized and a new one is recognised.
The Group records the modified asset as a
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
‘new’ financial asset at fair value and the
difference with the carrying amount of the existing one is
recorded in the income statement
as derecognition gain or loss.
The Group may
modify the contractual
terms of a lending exposure
either as a concession granted
to a client facing
or that is about
to
face
financial
difficulties
or
due
to
other
commercial
reasons
such
as
changes
in
market
conditions,
competition
or
customer
retention.
Modifications that may result in derecognition
include:
●
change in borrower,
●
change in the currency that the lending exposure is denominated,
●
debt consolidation features
where two or more consumer
unsecured lending contracts
are consolidated into a
single new secured
lending agreement,
●
the removal or addition
of conversion features
and/or profit sharing mechanisms
and similar terms which
are relevant to
the SPPI
assessment;
In addition,
the Group
may occasionally
enter,
in the
context
of loans’
modifications, into
debt-for-equity
transactions.
These are
transactions where the terms of a lending exposure
are renegotiated and as a result,
the borrower issues equity instruments (voting
or no
voting) in
order to
extinguish part
or all
of its
financial liability
to the
Group. Such
transactions
may include
also exercise
of
conversion rights embedded into
convertible or exchangeable bonds
and enforcement of shares held as collateral.
In debt-for-equity transactions, the modified loan is derecognized while the equity instruments received
in exchange are recognized
at their fair value, with any resulting
gain or loss recognized in the Group’s
income statement.
2.2.10 Reclassifications of financial assets
The Group reclassifies a financial
asset only when it changes its business
model for managing financial assets. Generally,
a change in
the business model is expected to be rare and occurs when the Group either begins or ceases to perform an activity that is significant
to its operations; for
example, when a business
line is acquired, disposed of or
terminated. In the rare
event when there is a
change
to the existing business
models, the updated assessment
is approved by the Group’s
competent Committees and
the amendment is
reflected appropriately in the Group’s
budget and business plan.
Changes
in intention
related
to particular
financial assets
(even in
circumstances
of significant
changes in
market
conditions), the
temporary disappearance of
a particular market for
financial assets or a transfer
of financial assets between parts of the
Group with
different business models, are not
considered by the Group changes in business model.
The reclassification
is applied
prospectively
from the
reclassification
date,
therefore
previously
recognized
gains,
losses (including
impairment losses) or interest are not restated.
2.2.11 Financial liabilities
Financial liabilities - Classification and measurement
The Group
classifies its
financial liabilities
in the
following
categories: financial
liabilities measured
at amortized
cost and
financial
liabilities measured at fair-value-through
-profit-or-loss (FVTPL).
Financial liabilities at
fair-value-through-profit-or-loss
comprise two sub
categories: financial liabilities
held for trading
and financial
liabilities designated at fair-value-through
-profit-or-loss upon initial recognition.
Financial liabilities
held for
trading, which
include short positions
of debt
securities (sold but
not yet
purchased), are
liabilities that
the Group
incurs principally
for
the purpose
of repurchasing
in the
near term
for
short term
profit
or in
the context
of economic
hedging strategies of groups
of assets and/or liabilities or net positions for which hedge accounting
is not applied.
The Group
may,
at initial
recognition,
irrevocably
designate financial
liabilities at
fair-value-through-profit-or-loss
when one
of the
following criteria is met:
●
the designation eliminates or significantly
reduces an accounting mismatch
which would otherwise arise from measuring assets
or
liabilities or recognising the gains and losses on them on different
bases; or
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
●
a group of financial liabilities
or financial assets and financial liabilities
is managed and its performance
is evaluated on a
fair value
basis in accordance with a documented risk management or
investment strategy; or
●
the financial liability contains one or more embedded derivatives as components of a hybrid contract which significantly modify the
cash flows that otherwise would be required by
the contract.
Financial liabilities held for trading or designated at FVTPL are initially recognized at fair value. Changes in fair value are recognized
in
the income statement,
except for
changes in fair
value attributable
to changes in
the Group’s
own credit risk,
which are recognised
in OCI and are
not subsequently reclassified to the
income statement upon derecognition of the liabilities.
However, if such treatment
creates or enlarges an accounting mismatch in the income statement,
all gains or losses of this financial liability, including the effects
of changes in the credit risk, are recognized
in the income statement.
Derecognition of financial liabilities
A
financial
liability
is
derecognized
when
the
obligation
under
the
liability
is
discharged,
cancelled
or
expires.
When
an
existing
financial liability of the Group is replaced by another from the same counterparty on substantially different
terms, or the terms of an
existing liability are
substantially modified,
such an exchange
or modification is
treated as
an extinguishment of
the original liability
and the recognition of a new liability and any difference
arising is recognized in the income statement.
The Group considers
the terms to be
substantially different,
if the discounted
present value of
the cash flows under
the new terms,
including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from
the discounted present value of the
remaining cash flows of the original financial liability.
If an
exchange
of debt
instruments
or modification
of terms
is accounted
for as
an extinguishment,
any costs
or fees
incurred are
recognized as part of
the gain or
loss on the
extinguishment. If the
exchange or modification is
not accounted for as
an extinguishment,
any
costs
or fees
incurred
adjust the
carrying amount
of the
liability and
are amortized
over the
remaining
term
of the
modified
liability.
Similarly,
when
the
Group
repurchases
any
debt
instruments
issued
by
the
Group,
it
accounts
for
such
transactions
as
an
extinguishment of debt.
2.2.12 Fair value measurement of financial instruments
Fair
value
of
financial
instruments
is the
price
that
would
be received
to
sell
an
asset
or paid
to
transfer
a liability
in
an
orderly
transaction between market participants at the measurement date under current
market conditions in the principal or, in its
absence,
the most advantageous
market to
which the Group
has access at
that date.
The fair value
of a liability
reflects its non-performance
risk.
When available, the
Group measures the fair
value of an instrument
using the quoted price
in an active market
for that instrument.
A market
is regarded
as active
if transactions
for
the asset
or liability
take
place with
sufficient
frequency
and volume
to provide
pricing
information
on
an
ongoing
basis.
If
there
is
no
quoted
price
in
an
active
market,
then
the
Group
uses
other
valuation
techniques that maximize
the use of relevant
observable inputs and minimize
the use of unobservable
inputs. The chosen valuation
technique incorporates all of the factors
that market participants would take
into account in pricing a transaction.
The Group has elected to use mid-market pricing as
a practical expedient for fair
value measurements within a bid-ask spread.
The best evidence
of the fair value
of a financial instrument
at initial recognition
is normally the transaction
price, i.e. the fair
value
of the consideration given
or received unless
the Group determines that
the fair value at
initial recognition differs from the
transaction
price. In this case,
if the fair value is evidenced
by a quoted price in
an active market for an identical asset
or liability (i.e. Level 1
input)
or based on
a valuation
technique that
uses only data
from observable
markets, a
day one
gain or
loss is recognized
in the
income
statement.
On the
other hand,
if the
fair value
is evidenced
by a
valuation
technique that
uses unobservable
inputs, the
financial
instrument is
initially measured
at fair
value, adjusted
to defer
the difference
between the
fair value
at initial
recognition and
the
transaction price (day
one gain or
loss). Subsequently the
deferred gain
or loss is amortized
on an appropriate
basis over the
life of
the instrument or released
earlier if a quoted
price in an active market
or observable market
data become available
or the financial
instrument is closed out.
All assets and liabilities for
which fair value is measured
or disclosed in the financial statements
are categorized
within the fair value
hierarchy based on the lowest
level input that is significant to the fair value
measurement as a whole (note 5.3).
Notes to the Consolidated Financial Statements
.
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For assets and
liabilities that are
measured at fair
value on a
recurring basis, the
Group recognizes
transfers
into and out
of the fair
value hierarchy levels at
the beginning of the quarter in which a financial instrument's transfer
was effected.
2.2.13 Impairment of financial assets
The
Group
recognizes
allowance
for
expected
credit
losses
(ECL)
that
reflect
changes
in
credit
quality
since initial
recognition
to
financial assets that are measured
at AC and FVOCI, including
loans, securitized notes issued by
special purpose vehicles established
by
the Group,
lease receivables,
debt
securities, financial
guarantee
contracts,
and loan
commitments.
No ECL
are
recognized
on
equity investments.
ECL are
a probability
-weighted
average
estimate
of credit
losses that
reflects the
time value
of money.
Upon
initial recognition
of the
financial instruments
in scope
of the
impairment
policy,
the Group
records
a loss
allowance equal
to 12-
month ECL,
being the ECL
that result
from default
events that
are possible
within the next
twelve months.
Subsequently,
for those
financial instruments that have
experienced a significant increase
in credit risk (SICR) since initial recognition,
a loss allowance equal
to lifetime
ECL is
recognized,
arising from
default
events that
are possible
over the
expected life
of the
instrument.
If upon
initial
recognition, the financial asset meets the definition of purchased or originated credit impaired (POCI), the loss allowance is based on
the change in the ECL over the life of the asset.
Loss allowances for
trade receivables
are always
measured at an
amount equal to
lifetime ECL. For
all other financial assets
subject
to impairment, the general three-stage
approach applies.
Accordingly,
ECL are recognized using a three
-stage approach based on the extent
of credit deterioration since origination:
•
Stage 1 – When
there is no
significant increase in
credit risk since initial
recognition of a
financial instrument, an amount
equal
to 12-months ECL is recorded. The 12 – month ECL represent a portion of lifetime losses, that result from default events that are
possible
within the
next
12 months
after
the reporting
date
and
is equal
to
the
expected
cash
shortfalls
over
the
life
of
the
instrument or group of instruments, due to loss events probable within the next
12 months. Not credit-impaired financial assets
that are either newly originated or purchased, as well as, assets recognized following a substantial modification accounted for as
a derecognition, are classified initially in Stage 1.
•
Stage 2 –
When a financial
instrument experiences
a SICR subsequent
to origination but
is not considered
to be in
default, it
is
included
in
Stage
2.
Lifetime
ECL
represent
the
expected
credit
losses
that
result
from
all
possible
default
events
over
the
expected life of the financial instrument.
•
Stage 3 – Financial
instruments that
are considered to
be in default
are included in this
stage. Similar to
Stage 2, the allowance
for credit losses captures the lifetime
expected credit losses.
•
POCI - Purchased
or originated
credit impaired
(POCI) assets are
financial assets that
are credit
impaired on
initial recognition.
They are
not subject
to stage
allocation and
are always
measured on
the basis
of lifetime
expected credit
losses. Accordingly,
ECL
are
only
recognized
to
the
extent
that
there
is
a
subsequent
change
in
the
assets’
lifetime
expected
credit
losses.
Any
subsequent favorable change
to their expected cash flows is recognized as impairment
gain in the income statement even if the
resulting expected
cash flows
exceed the
estimated cash
flows at
initial recognition.
Apart from
purchased assets,
POCI assets
may also
include financial instruments
that are
considered new
assets, following
a substantial
modification accounted
for as
a
derecognition (see section 2.2.9).
Definition of default
To
determine the risk of
default, the Group applies a
default definition for accounting purposes, which
is consistent with the
European
Banking Authority
(EBA) definition
for non-performing
exposure
and regulatory
definition of
default
as applied
by the
Group on
1
January 2021 (refer
to note
5.2.1.2 (a)). The
accounting definition
of default
is also consistent
with the
one used for
internal credit
risk management purposes.
A financial asset is
credit-impaired when
one or more events
that have
a detrimental impact
on the estimated
future cash flows
of
that exposure have occurred:
•
The borrower faces a significant difficulty
in meeting his financial obligations.
•
There has been a breach of contract, such as a default or unpaid amounts, above specified materiality thresholds,
for more than
90 consecutive days.
•
The Group,
for
economic or
contractual
reasons
relating
to the
borrower’s
financial difficulty,
has granted
to the
borrower
a
concession(s) that the Group would not otherwise consider.
•
There is a probability that the borrower
will enter bankruptcy or other financial re-organization.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
•
For
POCI
financial
assets,
a
purchase
or
origination
at
a
deep
discount
that
reflects
incurred
credit
losses
is
considered
a
detrimental
event.
The
Group
assesses
the
deep
discount
criterion
following
a
principle
-based
approach
with
the
aim
to
incorporate all reasonable and supportable
information which reflects market conditions that
exist at the
time of the
assessment.
For debt securities, the Group determines the risk of default using an internal credit rating scale. The Group considers debt securities
as credit impaired if the internal rating of the issuer/counterparty
corresponds to a rating equivalent to "C" (Moody's
rating scale) or
the external rating of the issuer/counterparty
at the reporting date is equivalent to “C” (Moody’s rating scale) and the internal rating
is not available.
Significant increase in credit risk (SICR) and staging allocation
Determining whether a loss
allowance should be based
on 12-month expected credit losses
or lifetime expected credit losses
depends
on whether
there has been
a significant
increase in credit
risk (SICR) of
the financial assets,
issued loan commitments
and financial
guarantee contracts,
since initial recognition.
At each reporting date, the Group performs an assessment
as to whether the risk of a default occurring over the remaining expected
lifetime of the exposure has increased significantly from the expected
risk of a default estimated at origination for
that point in time.
The
assessment
for
SICR
is
performed
using
both
qualitative
and
quantitative
criteria
based
on
reasonable
and
supportable
information
that is
available
without undue
cost or
effort
including forward
looking information
and macroeconomic
scenarios as
well as
historical
experience. Furthermore,
regardless
of the
outcome
of the
SICR assessment
based on
the above
indicators,
the
credit risk of a financial asset is deemed to have increased
significantly when contractual payments
are more than 30 days past due.
As a primary criterion
for SICR assessment, the Group compares
the residual lifetime probability of default (PD) at
each reporting date
to the residual lifetime PD for the same point
in time which was expected at the origination.
The Group may also consider
as a SICR indicator when the residual lifetime PD at each reporting date exceeds certain predetermined
values. The criterion may be applied in order to
capture cases where the relative
PD comparison does not result to the identification
of SICR although the absolute value of PD is at levels which
are considered high based on the Group’s
risk appetite framework.
For
a
financial
asset's
risk,
a
threshold
may
be
applied,
normally
reflected
through
the
asset's
forecasted
PD,
below
which
it
is
considered that no significant increase in credit risk compared
to the asset's expected PD at origination date has taken
place. In such
a case the asset is classified at Stage 1 irrespectively of whether other
criteria would trigger its classification at Stage 2. This criterion
primarily applies to debt securities.
Internal credit risk rating
(on a borrower basis) is also used
as a basis for the identification
of SICR with regards to
lending exposures
of the
Wholesale portfolio.
Specifically,
the Group
takes
into consideration
the changes
of internal
ratings
by a
certain number
of
notches. In
addition, a watchlist
status is
also considered
by the Group
as a trigger
for SICR
identification. Internal
credit risk rating
models include borrower specific information as
well as, forward-looking information regarding the prospects of
the industry in which
it operates.
Assessment of SICR for debt securities is performed on an individual basis
based on the number of notches downgrade in the internal
credit rating scale since the origination date.
Forbearance measures as monitored by the Group are considered as a SICR indicator
and thus the exposures are allocated into Stage
2 upon
forbearance,
unless they
are
considered
credit-impaired
or the
net present
value of
their
cash flows
before
and after
the
restructuring exceed the threshold of 1%, in which cases they are classified as stage 3. Furthermore, regardless of the outcome of
the
SICR assessment
based on
the above
indicators,
the credit
risk of
a financial
asset is
deemed to
have increased
significantly when
contractual payments are
more than 30 days past due.
Furthermore,
Management
may
apply
temporary
collective
adjustments
when
determining
whether
credit
risk
has
increased
significantly since initial
recognition on exposures
that share the same
credit risk characteristics
to reflect macro-economic
or other
factors which are
not adequately addressed by
the current credit risk models. These
factors may depend
on information such as the
type of the
exposure, counterparty’s
specific information
and the characteristics
of the financial instrument,
while their application
requires the application of significant judgment.
Notes to the Consolidated Financial Statements
.
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Transfers from Stage
2 to Stage 1
A financial asset,
which is classified to
Stage 2 due
to Significant
Increase in Credit
Risk (SICR), is reclassified
to Stage 1,
as long as
it
does not meet anymore any of the Stage
2 Criteria.
Where forbearance measures have been applied, the Group uses a probation period of two years,
in order to fulfill the requirements
for
a transfer
back to
Stage
1. If
at
the end
of that
period
the borrowers
have
made regular
payments
of
a significant
aggregate
amount, there are
no past due amounts
over 30 days and
the loans are neither credit
impaired, nor any other
SICR criteria are met,
they exit forborne status and are
classified as stage 1.
Transfers from Stage
3 to Stage 2
A financial
asset is
transferred
from Stage
3 to
Stage 2,
when the
criteria based
on which
the financial
asset was
characterized
as
credit impaired
are no
longer valid
and the
applicable probation
period for
the assets’
return in
non impaired
status, ranging
from
three to twelve months, has passed.
Criteria for grouping of exposures based on shared credit risk characteristics
The assessment
of loss allowance
is performed
either on an
individual basis or
on a collective
basis for
groups of similar
items with
homogeneous
credit
risk
characteristics.
The
Group
applies
the
same
principles
for
assessing
SICR
since
initial
recognition
when
estimating ECL on a collective or on an individual basis.
The
Group
segments
its
lending
exposures
on
the
basis
of
shared
credit
risk
characteristics
for
the
purposes
of
both
assessing
significant
increase
in
credit
risk
and
measuring
loan
loss
allowance
on
a collective
basis.
The
different
segments
aim to
capture
differences in PDs and in the rates
of recovery in the event of default.
The
shared
credit
risk
characteristics
used
for
the segmentation
of
exposures
include
several
elements
such
as: instrument
type,
portfolio
type,
asset
class,
product
type,
industry,
originating
entity,
credit
risk
rating,
remaining
term
to
maturity,
geographical
location of the borrower,
value of collateral to the financial asset, forbearance
status and days in arrears.
The Group
identifies individually
significant exposures
and performs
the ECL measurement
based on borrower
specific information
for both
retail and
wholesale portfolios.
This measurement
is performed
at a
borrower level,
hence the
criteria are
defined at
this
level, while both qualitative and quantitative
factors are taken
into consideration including forward
looking information.
For
the
remaining
retail
and
wholesale
exposures,
ECL
are
measured
on
a
collective
basis.
This
incorporates
borrower
specific
information,
collective
historical
experience
of
losses
and
forward-looking
information.
For
debt
securities
and
securitized
notes
issued by
special purpose
entities established
by the
Group, the
measurement of
impairment losses
is performed
on an
individual
basis.
Measurement of Expected Credit Losses
The measurement of ECL is an unbiased probability-weighted average estimate of credit losses that reflects the time value of money,
determined by
evaluating a
range of
possible outcomes.
A credit
loss is
the difference
between the
cash flows
that are
due to
the
Group in
accordance with
the contractual
terms of
the instrument
and the
cash flows
that the
Group
expects to
receive (i.e.
cash
shortfalls)
discounted
at
the
original
effective
interest
rate
(EIR)
of
the
same
instrument,
or
the
credit-adjusted
EIR
in
case
of
purchased
or
originated
credit
impaired
assets
(POCI).
In
measuring
ECL,
information
about
past
events,
current
conditions
and
reasonable
and
supportable
forecasts
of
future
conditions
are
considered.
For
undrawn
commitments,
ECL
are
calculated
as
the
present value
of the difference
between the contractual
cash flows due if
the commitment was
drawn and the
cash flows expected
to be received, while for financial guarantees ECL are measured
as the expected payments to reimburse the holder less any amounts
that the Group expects to receive.
The Group
estimates expected
cash shortfalls,
which reflect
the cash
flows expected
from all
possible sources,
including collateral,
guarantees
and other
credit enhancements
that are
part of
the contractual
terms and
are not
recognized
separately.
In case
of a
collateralized financial instrument,
the estimated expected cash flows related
to the collateral reflect the amount
and timing of cash
flows
that
are
expected
from
liquidation
less the
discounted
costs
of obtaining
and selling
the collateral,
irrespective
of
whether
liquidation is probable.
Notes to the Consolidated Financial Statements
.
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ECL are calculated
over the maximum contractual
period over which the
Group is exposed
to credit risk,
which is determined based
on the
substantive
terms of
the instrument,
or in
case of
revolving credit
facilities, by
taking into
consideration factors
such as the
Group’s expected
credit risk management actions to mitigate
credit risk and past practice.
Receivables from customers arising from the Group’s activities other than lending, are presented under Other
Assets and are typically
short term. Therefore, considering that usually
there is no
significant financing component, the
loss allowance for such
financial assets
is measured at an amount equal to the lifetime expected
credit losses under the simplified approach.
ECL Key Inputs
The ECL calculations are based on the term structures
of the probability of default (PD), the loss given default
(LGD), the exposure at
default (EAD) and
other input parameters
such as the credit conversion
factor (CCF) and the
prepayment rate.
Generally,
the Group
derives these parameters from internally
developed statistical models and observed point
-in-time and historical data, leveraging the
existing infrastructure development
for the regulatory framework
and risk management practices.
The
PD,
LGD
and
EAD
used
for
accounting
purposes
may
differ
from
those
used
for
regulatory
purposes.
For
the
purposes
of
impairment measurement,
PD is
a point-in-time
estimate whereas
for regulatory
purposes PD
is a
‘through-the-cycle’ estimate.
In
addition, LGD and
EAD for regulatory
purposes are based
on loss severity experienced
during economic downturn
conditions, while
for impairment purposes, LGD and EAD
reflect unbiased and probability-weighted estimates.
The PD
represents the
likelihood of
default assessed
on the
prevailing economic
conditions at
the reporting
date, adjuste
d
to take
into account estimates of future economic
conditions that are likely to impact
the risk of default, over a given time horizon.
The Group uses Point in Time (PiT) PDs in order to remove any bias towards historical data thus aiming to reflect management’s
view
of the future as at the reporting date, incorporating
relevant forward looking information
including macroeconomic scenarios.
Two types of PD are used for
calculating ECL:
•
12-month PD, which is the estimated probability of default occurring within the next
12 months (or over the remaining life of
the
financial asset if this is less than 12 months). It is used to calculate 12-month ECL
for Stage 1 exposures.
•
Lifetime PD,
which is the
estimated probability
of a default
occurring over the
remaining life
of the financial
asset. It is used
to
calculate lifetime ECL for Stage
2, Stage 3 and POCI exposures.
For debt securities,
PDs are obtained
by an international
rating agency using
risk methodologies that
maximize the use
of objective
non-judgmental variables and market data. The Group assigns internal credit ratings to each issuer/counterparty based on these PDs.
In case of counterparties for which no
information is available, the Group assigns PDs which
are derived from internal models.
The Exposure
at default
(EAD) is
an estimate
of the exposure
at a
future default
date, taking
into account
expected changes
in the
exposure after
the reporting date,
including repayments
of principal and interest
and expected drawdowns
on committed facilities.
The EAD includes both on and off balance sheet exposures. The on balance sheet exposure corresponds
to the total amount that has
been withdrawn and is due to be paid, which includes the outstanding
principal, accrued interest and any past
due amounts. The off
balance sheet exposure represents
the credit that is available to be withdrawn,
in excess of the on balance sheet exposure.
Furthermore, the CCF factor is used to convert the
amount of a credit facility and
other off-balance sheet amounts to an
EAD amount.
It is a modelled assumption
which represents a
proportion of any
undrawn exposure
that is expected to
be drawn prior
to a default
event occurring.
In
addition,
the
prepayment
rate
is
an
estimate
of
early
prepayments
on
loan
exposure
in
excess
of
the
contractual
repayment
according to the repayment schedule and is expressed as a percentage applied to the EAD at each period, reducing the latter amount
accordingly.
LGD represents the Group's expectation of the extent of loss on a
defaulted exposure and it is the difference between the contractual
cash flows due and
those that the Group
expects to receive including
any amounts from
collateral liquidation.
LGD varies by type
of
counterparty,
type and seniority of claim, availability of collateral or other credit support, and is usually expressed as a percentage of
EAD. The Group distinguishes
its loan portfolios into two
broad categories i.e. secured
and unsecured. The Group estimates
the LGD
component
using
cure
rates
that
reflect
cash
recoveries,
estimated
proceeds
from
collateral
liquidation,
estimates
for
timing
realization,
realization
costs,
etc.
Where
the
LGD’s
component
values
are
dependent
on
macro
–
economic
data,
such
types
of
dependencies are reflected by incorporating forward looking information, such as
forecasted price indices into the respective models.
Notes to the Consolidated Financial Statements
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The
estimation
of
the
aforementioned
component
values
within
LGD
reflects
available
historical
data
which
cover
a
reasonable
period, i.e. a full economic cycle.
For
debt
securities,
the
LGD
is
typically
based
on
historical
data
derived
mainly
from
rating
agencies’
studies
but
may
also
be
determined considering the existing and expected
liabilities structure of the obligor and macroeconomic environment.
Furthermore, the
seniority of
the debt
security,
any potential
collaterals
by the
obligor or
any other
type of
coverage is
taken
into
account for the calculation.
Forward-looking information
The
measurement
of
expected
credit
losses
for
each
stage
and
the
assessment
of
significant
increases
in
credit
risk
consider
information
about
reasonable
and
supportable
forecasts
of
future
events
and
macroeconomic
conditions.
The
estimation
and
application of forward-looking information
requires significant judgment.
The
Group
uses,
at
a
minimum,
three
macroeconomic
scenarios
(i.e.
base,
adverse
and
optimistic)
to
achieve
the
objective
of
measuring ECL in a way that reflects an unbiased and probability weighted outcome. The baseline scenario represents the most likely
scenario and is aligned with the information used by the Group for
strategic planning and budgeting purposes.
The scenarios
are reflected
in the
risk parameters,
and, namely
12-month PD,
Lifetime PD
and LGD,
hence 3
sets of
each of
these
parameters are used, in line with the scenarios developed.
The Group then
proceeds to the
calculation of weights
for each scenario,
which represent
the probability
of occurrence for
each of
these
scenarios.
These
weights
are
applied
on
the
3 sets
of
calculations
of
the
parameters
in order
to
produce
a single
scenario
weighted
risk
parameter
value
which
is
subsequently
used
in
both
SICR
assessment
and
ECL
measurement.
ECL
calculation
incorporates
forward-looking
macroeconomic
variables,
including
GDP
growth
rates,
house
price
indices,
unemployment
rates,
interest rates, etc. In order to capture material non – linearities in the ECL model, in the case of individually significant exposures, the
Group
considers
the
relevance
of
forward
looking
information
to
each
specific
group
of
borrowers
primarily
on
the
basis
of
the
business sector they belong and other drivers of credit
risk (if any). As such, different scenario weights
are determined per groups of
borrowers with the objective of achieving an
unbiased ECL amount which incorporates all relevant
and supportable information.
Modified Financial Assets
In
cases
where
the
contractual
cash
flows
of
a financial
asset have
been
modified
and the
modification
is considered
substantial
enough (for the
triggers of derecognition,
refer to
Derecognition of Financial
assets in section 2.2.9
above), the modification
date is
considered
to
be
the
date
of
initial
recognition
for
impairment
calculation
purposes,
including
for
the
purposes
of
determining
whether a significant increase in credit risk has occurred. Such a modified asset is typically
classified as Stage 1 for ECL measurement
purposes. However,
in some circumstances following a modification that results in derecognition of the original financial asset, there
may be evidence that the new financial asset is credit
-impaired at initial recognition, and thus, the financial asset
is recognized as an
originated credit-impaired financial asset (POCI).
In cases where the contractual
cash flows of a financial
asset have been modified
and the modification is not
considered substantial
enough, the Group recalculates the
gross carrying amount of the financial asset and
recognizes the difference
as a modification gain
or loss in the
income statement
and determines if
the financial asset’s
credit risk has
increased significantly
since initial recognition
by comparing the risk
of a default
occurring at initial recognition
based on the original
unmodified contractual ter
ms and the risk of
a default occurring at the reporting date, based
on the modified contractual terms.
Presentation of impairment allowance
For financial assets measured
at amortized cost,
impairment allowance is recognized
as a loss allowance reducing
the gross carrying
amount of the financial assets in the balance sheet. For debt instruments measured at
FVOCI, impairment allowance is recognized in
other comprehensive income and does not reduce the carrying amount of the debt instruments in the balance sheet. For off-balance
sheet financial items arising from lending activities, impairment allowance is presented in Other Liabilities. The respective ECL for the
above financial items is recognised within impairment
losses.
Write-off of financial assets
Where
the Group
has no
reasonable
expectations
of recovering
a financial
asset either
in its
entirety
or a
portion of
it, the
gross
carrying amount of that instrument is reduced directly,
partially or in full, against the impairment allowance. The amount written-off
Notes to the Consolidated Financial Statements
.
33
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31 December 2021 Consolidated Financial Statements
is considered
as derecognized.
Subsequent
recoveries
of amounts
previously
written
off decrease
the amount
of the
impairment
losses in the income statement.
Financial assets that
are written
off could
still be subject
to enforcement
activities in order
to comply with
the Group’s
procedures
for recovery of amounts due.
2.2.14 Sale and repurchase agreements, securities lending and borrowing
(i) Sale and repurchase agreements
Securities sold subject to repurchase
agreements (repos) continue
to be recorded in the
Group's Balance Sheet as the Group
retains
substantially all risks
and rewards of
ownership, while the counterparty
liability is included in amounts due
to other banks or due to
customers,
as appropriate.
Securities purchased
under agreements
to resell
(reverse repos)
are recorded
as loans and
advances to
other banks or
customers, as
appropriate. The
difference between
the sale and
repurchase price in
case of repos
and the purchase
and resale price in case of
reverse repos is recognized as interest and accrued over the period of the repo or
reverse repo agreements
using the effective interest
method.
(ii) Securities lending and borrowing
Securities lent
to
counterparties
are
retained
in the
financial statements.
Securities borrowed
are
recognized
as trading
liabilities
when sold to third parties and measured at fair value
with any gains or losses included in the income statement.
2.2.15 Leases
(i) Accounting for leases as lessee
When the
Group becomes
the lessee
in a
lease arrangement,
it recognizes
a lease
liability and
a corresponding
right-of-use
(RoU)
asset at the commencement of the lease term when the Group acquires
control of the physical use of the asset.
Lease liabilities are presented within Other liabilities and RoU assets within Property
and equipment and investment property.
Lease
liabilities are measured based on
the present value of the
future lease payments over the
lease term, discounted using an
incremental
borrowing rate. The interest
expense on lease liabilities is presented within net interest
income.
The lease liability is remeasured when there
is a change in future lease payments
arising from a change in an index or rate,
a change
in the Group’s estimate of
the amount expected to
be payable under a
residual value guarantee or if
the Group changes its
assessment
of
whether
it
will
exercise
a
purchase,
extension
or
termination
option.
When
the
lease
liability
is
remeasured
in
this
way,
a
corresponding
adjustment
is made
to the
carrying amount
of the
right-of-use
asset, or
is recorded
in profit
or loss
if the
carrying
amount of the right-of-use asset has been reduced to
zero.
The RoU asset
is initially recorded
at an amount
equal to the lease liability
and is adjusted
for rent prepayments,
initial direct costs,
or lease incentives
received. Subsequently,
the RoU
asset is depreciated
over the
shorter of
the lease term
or the useful
life of
the
underlying asset, with the depreciation presented
within operating expenses.
When a lease
contains extension
or termination options
that the Group
considers reasonably
certain to
be exercised,
the expected
future lease payments or costs of early termination
are included within the lease payments used to calculate
the lease liability.
As described in note 2.1.1, with respect to the rent
concessions that are a direct consequence of the COVID-19 pandemic,
the Group
has applied
COVID-19-Related Rent
Concessions
-
Amendment to
IFRS 16, which
provides a
practical expedient
allowing the Group
not to assess whether eligible rent concessions are lease modifications.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
(ii) Accounting for leases as lessor
At inception date of the lease, the Group, acting as a lessor,
classifies each of its leases as either an operating lease or a finance lease
based on certain criteria.
Finance leases
At commencement date,
the Group derecognizes
the carrying amount
of the underlying assets held
under finance lease, recognizes
a receivable at
an amount equal to
the net investment
in the lease and recognizes,
in income statement,
any profit or
loss from the
derecognition
of the
asset and
the recognition
of the
net investment.
The net
investment
in the
lease is
calculated as
the present
value of the future lease payments in the same wa
y
as for the lessee.
After
commencement
date,
the
Group
recognizes
finance
income
over
the
lease
term,
based
on
a
pattern
reflecting
a
constant
periodic rate of return on the lessor’s
net investment in the lease. The Group also recognizes income from variable payments that are
not included in the net
investment in the
lease. After lease commencement,
the net investment
in a lease is not
remeasured unless
the lease is modified or the lease term is revised.
Operating leases
The Group continues to recognize
the underlying asset and does not recognize a net
investment in the lease on the balance sheet or
initial profit (if any) on the income statement.
The Group recognizes
lease payments
from the lessees as
income on a
straight-line basis
or another systematic
basis considered as
appropriate.
Also it
recognizes
costs,
including depreciation,
incurred in
earning the
lease income
as an
expense. The
Group
adds
initial direct costs incurred in obtaining an operating
lease to the carrying amount of the underlying asset and recognizes those costs
as an expense over the lease term on the same basis as the lease income.
Subleases
The Group, acting as a
lessee, may enter into arrangements to sublease a
leased asset to a third
party while the original lease
contract
is in effect. The Group acts as both the lessee and lessor of the same underlying asset. The sublease is a separate lease agreement, in
which the intermediate lessor classifies the sublease as a finance lease or an operating
lease as follows:
-
if the head lease is a short-term lease, the sublease is classified as an operating
lease; or
-
otherwise,
the
sublease
is
classified
by
reference
to
the
right-of-use
asset
arising
from
the
head
lease,
rather
than
by
reference to the underlying asset.
2.2.16 Income tax
Income tax consists of current and
deferred tax.
(i) Current income tax
Income tax payable on profits, based on the applicable tax law in each jurisdiction, is recognized as an expense in the period in which
profits arise.
(ii) Deferred tax
Deferred
tax
is
provided
in
full,
using
the
liability
method,
on
temporary
differences
arising
between
the
tax
base
of
assets
and
liabilities and their carrying amounts in the consolidated
financial statements. Deferred
tax assets and liabilities are measured at
the
tax rates that are expected to apply to the period when the asset is realized or the liability is
settled, based on tax rates (and tax laws)
that
have
been
enacted
or
substantively
enacted
by
the
balance
sheet
date.
The
principal
temporary
differences
arise
from
impairment/valuation relating to loans,
Private Sector Initiative (PSI+) tax related
losses, losses from disposals and crystallized write-
offs of loans,
depreciation of property
and equipment, fair
value adjustment
of investment
property,
pension and other
retirement
benefit obligations, and revaluation
of certain financial assets and liabilities, including derivative financial instruments.
Deferred
tax
assets
are
recognized
where
it
is
probable
that
future
taxable
profit
will
be
available
against
which
the
temporary
differences can be utilized.
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
profits will be available
to allow all or part of the
asset to be recovered.
Any such
reduction is
reversed to
the extent
that it becomes
probable that
sufficient taxable
profit will be
available. The
Group recognises
a
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
previously unrecognised deferred tax asset to the extent that it
has become probable that future taxable profit will
allow the deferred
tax asset to be recovered.
Deferred
tax relat
ed to
investment
securities at
FVOCI and
cash flow
hedges is
recognized
to other
comprehensive
income, and
is
subsequently recognized in the income statement
together with the deferred gain
or loss.
The deferred
tax asset on
income tax losses
carried forward
is recognized as
an asset when it
is probable that
future taxable profits
will be available against which these losses can be utilized.
(iii) Uncertain tax positions
The Group determines and assesses all material tax positions taken, including all, if
any, significant uncertain positions, in all tax years
that are
still subject
to assessment
(or when
the litigation
is in
progress)
by relevant
tax authorities.
In evaluating
tax positions
in
various states,
local, and foreign
jurisdictions, the
Group examines
all supporting
evidence (Ministry
of Finance circulars,
individual
rulings,
case
law,
past
administrative
practices,
ad
hoc
tax/legal
opinions
etc.)
to
the
extent
they
are
applicable
to
the
facts
and
circumstances of the particular Group’s
case/ transaction.
In addition, judgments concerning
the recognition of a provision
against the possibility of
losing some of the tax
positions are highly
dependent on
advice received
from internal/
external legal
counselors. For
uncertain tax
positions with a
high level of
uncertainty,
the Group recognizes, on a transaction by transaction basis, or together as a group, depending
on which approach better predicts the
resolution of the uncertainty using an expected value (probabi
lity-weighted average)
approach: (a) a provision against tax receivable
which has been booked for the amount of
income tax already paid but further
pursued in courts or (b) a
liability for the amount which
is expected to be paid to the tax authorities. The Group presents in its balance sheet all uncertain tax balances as current or deferred
tax assets or liabilities.
The Group as a general
rule has opted to obtain
for the Group’s
Greek companies an ‘Annual
Tax
Certificate’,
which is issued after a
tax audit is performed by the same statutory auditor or audit firm that audits the annual financial statements.
Further information in
respect of the Annual
Tax
Certificate and the
related tax
legislation, as well as
the unaudited tax
years for
the Group’s
companies is
provided in note 13.
2.2.17 Employee benefits
(i) Short term benefits
Short term
employee benefits
are those
expected to
be settled wholly
before twelve
months after
the end of
the annual reporting
period in which the employees render the related
services and are expensed as these services are provided.
(ii) Pension obligations
The Group provides a number
of defined contribution pension plans
where annual contributions are invested and allocated
to specific
asset
categories.
Eligible
employees
are
entitled
to
the
overall
performance
of
the
investment.
The
Group's
contributions
are
recognized as employee benefit expense
in the year in which they are paid.
(iii) Standard legal staff retirement indemnity obligations (SLSRI)
and termination benefits
The Group operates
unfunded defined benefit plans
in Greece, Bulgaria and Serbia,
under broadly similar regulatory
frameworks. In
accordance
with the
local labor
legislation, the
Group
provides for
staff
retirement
indemnity obligation
for
employees which
are
entitled to a lump sum payment based on the number
of years of service, as of
the date when employee service first leads to benefits
under the
plan until
the date
when further
employee service
will lead
to no
material
amount of
further benefits,
and the
level of
remuneration at
the date
of retirement,
if they remain
in the employment
of the Group
until normal retirement
age. Provision
has
been made for the actuarial value of the lump
sum payable on retirement
(SLSRI) using the projected unit credit method.
Under this
method the cost of providing
retirement indemnities is charged
to the income statement
so as to spread the cost
over the period of
service of the employees, in accordance with the actuarial valuations
which are performed every year.
The
SLSRI
obligation
is
calculated
as
the
present
value
of
the
estimated
future
cash
outflows
using
interest
rates
of
high
quality
corporate bonds. In countries where
there is no deep market in such bonds,
the yields on government bonds are used. The currency
and term to
maturity of the
bonds used are
consistent with
the currency and
estimated term
of the retirement
benefit obligations.
Actuarial gains and
losses that arise
in calculating the
Group’s SLSRI obligations are recognized directly in
other comprehensive income
in the period in which they occur and are not reclassified to the income statement
in subsequent periods.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Interest on the staff
retirement indemnity obligations
and service cost, consisting of
current service cost, past service cost
and gains
or losses on settlement are
recognized in the income statement. In calculating the
SLSRI obligation, the Group also
considers potential
separations before normal retirement
based on the terms of previous voluntary exit
schemes.
Termination
benefits are payable when employment is terminated by the Group before
the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for
these benefits (including those in the context of the Voluntary Exit Schemes
implemented by the Group). The Group recognizes termination
benefits at the earlier of the following dates: (a) when the Group can
no longer withdraw the offer of
those benefits; and (b) when
the Group recognizes costs for a restructuring that involves the
payment
of termination
benefits. In
the case
of an
offer
made to
encourage
voluntary
redundancy,
the termination
benefits are
measured
based on the number of employees expected to accept
the offer. Termination
benefits falling due more than 12 months after the
end
of the reporting period are discounted to
their present value.
In the
fourth quarter
of 2021,
the Group
implemented the
IFRIC agenda
decision and
changed its
accounting policy
regarding
the
attribution
of
benefit,
arising
from
defined
benefit
plans
(note
2.1.2).
In
accordance
with
IAS
8
“Accounting
policies,
changes
in
accounting
estimates
and
errors”,
the
above
change
in
the
Group’s
accounting
policy
for
employee
benefits
was
applied
retrospectively as of 1 January 2020 (note 2.3).
(iv) Performance-based cash payments
The Group's Management awards high performing employees with bonuses in cash, from time to time, on a discretionary basis. Cash
payments
requiring only
Management approval
are recognized
as employee
benefit expenses
on an
accrual basis.
Cash payments
requiring General
Meeting approval
as distribution of
profits to staff
are recognized
as employee benefit
expense in the
accounting
period that they are approved by the Group’s
shareholders.
(v) Share-based payments
The Group’s Management awards
employees with bonuses in the form of shares and share options on a discretionary basis and after
taking into account the current
legal framework. Non-performance
related shares vest in the
period granted. Share based payments
that are contingent upon the achievement
of a performance and service condition, vest only if both conditions
are satisfied.
The fair value of the share options granted
is recognized as an employee benefit expense
over the vesting period, with no impact on
the Group’s equity.
The amount ultimately recognised as an expense is based on the number of awards that meet the related service
and non-market performance conditions
at the vesting date.
The fair
value of the
share options
at grant
date is determined
by using
an adjusted
option pricing model
which takes
into account
the
exercise
price,
the
exercise
dates,
the
term
of
the
option,
the
share
price
at
grant
date
and
expected
price
volatility
of
the
underlying share,
the expected
dividend yield
and the
risk-free
interest
rate
for the
term of
the options.
The expected
volatility is
measured at the grant date of the optio
ns and is based on the historical volatility of the share price.
For share-based
payment awards
with non-vesting
conditions, the fair
value of the
share-based payment
at grant
date also reflects
such conditions and there is no true-up for differences
between expected and actual outcomes.
When the options
are exercised
and new shares
are issued, the
proceeds received
net of any
directly attributable
transaction costs
are credited to share capital
(par value) and share premium.
2.2.18 Repossessed properties
Land and buildings repossessed
through an auction
process to recover
impaired loans are,
except where
otherwise stated, included
in ‘Other Assets’. Assets acquired from an auction process are held temporarily for liquidation and are valued at the lower of cost and
net realizable value, which is the estimated
selling price, in the ordinary course of business, less costs
necessary to make the sale.
In cases where the Group makes use of repossessed
properties as part of its operations, they may be reclassified to
own occupied or
investment properties, as appropriate.
Any gains or losses on liquidation are included in the income statement.
Notes to the Consolidated Financial Statements
.
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2.2.19 Related party transactions
Related parties of the Group include:
(a) an entity that has control over the Group and
entities controlled, jointly controlled or significantly influenced by this entity, as well
as members of its key management personnel
and their close family members;
(b) an entity that has significant influence over the
Group and entities controlled by this entity,
(c) members of key
management personnel of the Group,
their close family members and
entities controlled or jointly
controlled by
the abovementioned persons;
(d) associates and joint ventures of the Group;
and
(e) fellow subsidiaries.
Transactions
of similar
nature are
disclosed on
an aggregate
basis. All
banking transactions
entered into
with related
parties are
in
the normal course of business and are conducted on an arm's length
basis.
2.2.20 Provisions
Provisions are recognized when
the Group has a present legal
or constructive obligation as a result
of past events, it is probable that
an outflow of resources embodying economic benefits will be required
to settle the obligation, and reliable estimates
of the amount
of the obligation can be made.
The
amount
recognized
as
a
provision
is
the
best
estimate
of
the
expenditure
required
to
settle
the
present
obligation
at
each
reporting date, taking into account
the risks and uncertainties surrounding the amount of such expenditure.
Provisions
are reviewed
at
each reporting
date
and adjusted
to
reflect
the current
best
estimate.
If,
subsequently,
it is
no longer
probable that an outflow
of resources embodying economic
benefits will be
required to settle the
obligation, the provision is
reversed.
2.2.21 Operating segment
An operating
segment is
a component
of the
Group that
engages in
business activities
from which
it may
earn revenue
and incur
expenses within
a particular
economic environment.
Operating segments
are identified
on the
basis of
internal reports,
regarding
operating results, of components of the
Group that are regularly reviewed
by the chief operating decision maker
in order to allocate
resources
to the
segment
and to
assess its
performance.
The chief
operating
decision maker
has been
identified
as the
Strategic
Planning Committee that is
responsible for strategic decision making.
Segment revenue, segment expenses and
segment performance
include
transfers
between
business
segments.
Such
transfers
are
accounted
for
at
competitive
prices
in
line
with
charges
to
unaffiliated customers
for similar services.
2.2.22 Share capital
Ordinary shares and preference
shares are classified as equity.
Incremental
costs directly
attributable
to the
issue of
new shares
or
options are shown in equity as a deduction from the proceeds, net
of tax.
Dividend
distribution
on
shares
is
recognized
as
a
deduction
in
the
Group’s
equity
when
approved
by
the
General
Meeting
of
shareholders
and the
required
regulatory
approvals,
if any,
are
obtained.
Interim
dividends are
recognized
as
a deduction
in
the
Group's equity when approved by the Board
of Directors.
Intercompany
non-cash
distributions
that
constitute
transactions
between
entities
under
common
control
are
recorded
in
the
Group’s equity by reference
to the book value of the assets distributed.
Where any Group entity purchases the Company’s equity share capital (treasury shares), the consideration paid including any
directly
attributable incremental
costs (net
of income taxes),
is deducted
from shareholders’
equity until the
shares are
cancelled, reissued
or disposed of. Where such
shares are subsequently sold or reissued, any consideration
received is included in shareholders’ equity.
2.2.23 Preferred securities
Preferred securities issued by the
Group are classified as equity when there
is no contractual obligation
to deliver to the holder cash
or another financial asset.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Incremental costs directly attributable to the issue of new preferred securities are shown in equity as a deduction from the proceeds,
net of tax.
Dividend distribution on preferred
securities is recognized as a deduction in the Group’s
equity on the date it is due.
Where
preferred
securities,
issued
by
the
Group,
are
repurchased,
the
consideration
paid
including
any
directly
attributable
incremental costs (net of income
taxes), is deducted from shareholders’ equity. Where such securities are
subsequently called or sold,
any consideration received is included
in shareholders’ equity.
2.2.24 Financial guarantees and commitments to
extend credit
Financial guarantees
Financial guarantee
contracts are
contracts that
require the issuer
to make
specified payments to
reimburse the
holder for a
loss it
incurs because
a specified
debtor fails
to make
payments when
due, in
accordance with
the terms
of a
debt instrument.
Financial
guarantees granted by
the Group to banks, financial institutions and other bodies on behalf of customers
to secure loans, overdrafts
and other banking facilities, are initially recognized
at fair value, being the premium received. Subsequent
to initial recognition, such
guarantees are measured
at the higher of the amount of
the ECL allowance, and the
amount initially recognised less any
cumulative
amortization of the fee earned, where appropriate.
Financial guarantees purchased
by the Group that
are considered as integral
to the contractual
terms of the guaranteed
instrument
are not accounted for separately and
the cash flows from
the guarantee are taken into account
in the measurement of
the guaranteed
instrument’s expected credit losses, whereas any fees paid or transaction costs incurred for the acquisition of the financial guarantee
are considered as part of the guaranteed
asset’s effective interest
rate.
On the
other hand,
financial guarantees
purchased that
are not
considered as
integral to
the contractual
terms of
the guaranteed
instruments are accounted for separately where a reimbursement asset is recognized and included in Other
Assets once is its
virtually
certain that, under the terms and conditions of the guarantee, the Group will be reimbursed for the credit loss incurred.
The changes
in the carrying
amount of the
above reimbursement
asset arising from
financial guarantees,
entered into
to mitigate
the credit risk
of lending exposures measured at amortized
cost, are recognized under ‘Impairment
losses’ in the Group’s income statement.
Commitments to extend credit
Commitments represent
off-balance sheet items
where the
Group commits,
over the
duration of
the agreement,
to provide
a loan
with
pre-specified
terms
to
the
customer.
Such
contractual
commitments
represent
commitments
to
extend
credit
and
standby
letters and they are part of the normal lending
activities of the Group, for which an ECL allowance is recognised
under IFRS 9.
ECL allowance for off-balance sheet exposures
(financial guarantees granted
and commitments) is included within Other Liabilities.
2.2.25 Non-current assets classified as held for sale and discontinued
operations
Non-current
assets are
classified as
held for
sale if
their carrying
amount will
be recovered
through a
sale transaction
rather tha
n
through
continuing
use.
For
a non
-
current
asset
to
be classified
as
held
for
sale, it
is available
for
immediate
sale
in
its
present
condition, subject to terms that are usual
and customary for sales of such assets, and the
sale is considered to be highly probable. In
such cases, management
is committed to
the sale and actively markets
the property for
sale at a price that
is reasonable in relation
to the
current
fair value.
The sale
is also
expected to
qualify for
recognition
as a
completed sale
within one
year from
the date
of
classification. Before their classification as
held for sale,
assets are remeasured in
accordance with the
respective accounting standard.
Assets held for sale are subsequently remeasured at the lower of their carrying amount and
fair value less cost to sell. Any loss arising
from the above measurement is recorded in
profit or loss and can
be reversed in the future. When
the loss relates to a disposal
group,
it is allocated to the assets within that disposal group.
The Group presents discontinued operations in a
separate line in the
consolidated income statement if a Group entity
or a component
of a Group entity has been disposed of or is classified as held for sale and:
(a) Represents a separate
major line of business or geographical area of operations;
(b) Is part of a single coordinated plan to dispose of a separate
major line of business or geographical area of operations;
or
(c) Is a subsidiary acquired exclusively with a view
to resale.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Profit or
loss from
discontinued operations
includes the
profit or
loss before
tax from
discontinued operations,
the gain
or loss
on
disposal
before
tax
or
measurement
to
fair
value
less
costs
to
sell
and
discontinued
operations
tax
expense.
Intercompany
transactions
between
continuing
and
discontinued
operations
are
presented
on
a
gross
basis
in
the
income
statement.
Upon
classification of a Group entity as a discontinued operation,
the Group restates prior periods in
the consolidated income statement.
2.2.26 Cash and cash equivalents
Cash and cash equivalents include
cash in hand, unrestricted deposits
with central banks, due from
credit institutions and other short-
term highly liquid investments with original maturities
of three months or less.
2.2.27 Government grants
Government grants
are transfers
of resources
to the Group
by a government
entity such as
government, government
agencies and
similar bodies whether local,
national or international,
in return for
compliance with certain past
or future conditions related
to the
Group’s operating
activities.
Government grants are recognized when there is reasonable assurance that the grant will be
received and the Group will comply with
the conditions
attached to
it. The
grants
are recognized
in the
income statement
on a
systematic
basis to
match the
way that
the
Group
recognizes
the
expenses
for
which
the
grants
are
intended
to
compensate.
In
case
of
subsequent
changes
in
the Group’s
expectations
of
meeting
the
conditions
attached
to
the
government
grants,
the
effect
of
such
changes
is
recognised
in
income
statement.
2.2.28 Fiduciary activities
The Group provides
custody,
trustee, corporate
administration, investment
management and advisory
services to third
parties that
result
in
the
holding
or
investing
of
assets
on
behalf
of
its
clients.
This
involves
the
Group
making
allocation,
purchase
and
sale
decisions in relation to
a wide range of
financial instruments. The Group
receives fee income for providing these
services. Those assets
that are
held in a
fiduciary capacity are
not assets of
the Group and
are not recognized
in the financial
statements.
In addition, the
Group does not guarantee these investments
and as a result it is not exposed to any credit risk in relation
to them.
2.3 Impact of IFRIC agenda decision – Attributing Benefit to Periods of Service (IAS
19)
The tables below present
the impact from the application
of the IFRIC agenda decision regarding
the employee benefits’ attribution
over the period of service that was applied by the Group retrospectively
as change in accounting policy (note 2.2).
In
particular,
the
below
adjustments
refer
to
the
individual
line
item
affected
as
at
1
January
2020,
31
December
2020
and
31
December 2021. The line items that were not affected
by the changes have not been included.
31 December 2020
1 January 2020
Consolidated Balance Sheet
As
published
Restatement
Restated
As
published
Restatement
Restated
€ million
€ million
€ million
€ million
€ million
€ million
ASSETS
Deferred tax assets
4,526
(7)
4,519
4,766
(7)
4,759
Total assets
67,728
(7)
67,721
64,761
(7)
64,754
LIABILITIES
Other liabilities
1,197
(24)
1,173
1,191
(25)
1,166
Total liabilities
62,483
(24)
62,459
58,094
(25)
58,069
EQUITY
Reserves and retained earnings
(3,625)
17
(3,608)
(2,241)
18
(2,223)
Total equity
5,245
17
5,262
6,667
18
6,685
Total equity and liabilities
67,728
(7)
67,721
64,761
(7)
64,754
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
31 December 2020
Consolidated Income Statement
As published
Restatement
Restated
€ million
€ million
€ million
Other income/(expenses) (note 10)
235
(1)
234
Operating income
2,401
(1)
2,400
Profit from operations before impairments,
provisions and restructuring costs
1,532
(1)
1,531
Restructuring costs (note 12)
(145)
(2)
(147)
Profit/(loss) before tax
(876)
(3)
(879)
Income tax
(337)
1
(336)
Net profit/(loss)
(1,213)
(2)
(1,215)
Net profit/(loss) attributable to shareholders
(1,213)
(2)
(1,215)
€
€
€
Earnings/(losses) per share
-Basic and diluted earnings/(losses) per share
(0.33)
(0.00)
(0.33)
31 December 2020
Consolidated Statement of
Comprehensive Income
As
published
Restatement
Restated
€ million
€ million
€ million
Net profit/(loss)
(1,213)
(2)
(1,215)
- Actuarial gains/(losses) on post employment
benefit obligations, net of tax
(1)
2
1
Other comprehensive income
(151)
2
(149)
Total comprehensive income
(1,364)
(0)
(1,364)
3.
Critical accounting estimates and judgments in applying accounting policies
In the process
of applying the Group’s
accounting policies, Management
makes various
judgments, estimates and
assumptions that
may affect
the reported
amounts of
assets and
liabilities, revenues
and expenses
recognized in
the financial
statements within
the
next financial year
and the accompanying
disclosures. Estimates and
judgments are continually
evaluated and
are based on current
conditions, historical experience
and other factors, including
expectations of future
events that are believed
to be reasonable under
the
circumstances.
Revisions
to
estimates
are
recognized
prospectively.
The
most
significant
areas
in
which
the
Group
makes
judgments, estimates and assumptions in applying its accounting
policies are set out below:
3.1
Impairment losses on loans and advances to customers
Expected Credit Loss (ECL) measurement
The ECL measurement requires Management to apply judgment, in
particular, the estimation of the amount and timing
of future cash
flows
and collateral
values
when determ
ining impairment
losses and
the assessment
of a
significant
increase in
credit risk.
These
estimates are driven by a number of factors, changes in which
can result in significant changes to the
timing and amount of allowance
for credit loss to be recognized.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The Group’s ECL calculations are
outputs of complex
models with a
number of underlying
assumptions regarding the choice
of variable
inputs
and
their
interdependencies.
In
addition,
temporary
adjustments
may
be
required
to
capture
new
developments
and
information available, which are not
reflected yet in the ECL calculation through
the risk models.
As of 1
January 2021, the
Group adopted the new
Definition of Default (DoD),
according to the EBA
guideline (Article 178
of Regulation
(EU)
No
575/2013),
the
Commission
Delegated
Regulation
(EU)
2018/171
and
European
Banking
Authority
(EBA)
Guidelines
(EBA/GL/2016/07). Information on the new DoD as implemented
by the Group is provided in note 5.2.1.2 (a).
The elements of the ECL models that are considered
significant accounting judgments and estimates include:
Determination of a significant increase of credit risk
IFRS 9
does not
include a definition
of what
constitutes a
significant increase
in credit
risk (SICR). An
assessment of
whether credit
risk has increased
significantly since initial
recognition is performed
at each reporting
period by considering
primarily the change
in
the risk of default occurring over the
remaining life of the financial instrument. The Group assesses
whether a SICR has occurred since
initial
recognition
based
on
qualitative
and
quantitative
reasonable
and
supportable
forward-looking
information
that
includes
significant management judgment.
More stringent criteria could
significantly increase the number
of instruments migrating to
stage
2.
In the
second quarter
of 2021,
the Group
revisited the
segregation
of its
lending exposures
that was
performed at
year end
2020,
depending on whether the respective borrowers were affected
by the Covid-19 pandemic or not. The above segregation was applied
in order
to address
the fact
that the
borrowers
were not
equally affected
by the
pandemic and
the effect
of moratoria
and other
government support measures were
not fully captured in the macroeconomic variables
applied in the IFRS9 models. In particular,
as
of the second quarter of 2021, given the actual evolution of the projected macroeconomic
variables in 2021 as well as the expiration
of
the
majority
of
the
moratoria
relief
measures
provided
by
the
Group,
Management
assessed
that
the
above-mentioned
segmentation
of
its
lending
exposures
is no
longer
required.
Accordingly,
the
Group
returned
to
its
standard
IFRS
9
approach
in
performing both the SICR assessment and ECL
measurement.
Retail lending
For retail
lending exposures
the primary criterion
is the change in
the residual cumulative
lifetime Probability
of Default (PD)
above
specified thresholds.
These thresholds
are set
and vary per
portfolio, modification
status (modified/non-modified),
product type as
well as per origination PD level. In general, thresholds for lower
origination PDs are higher than those assessed for higher origination
PDs.
As at 31 December 2021 and 2020, the range of lifetime PD thresholds based on the above segmentation,
that triggers the allocation
to stage
2 for
Greece’s
retail exposures
are set
out below.
It is noted
that the
application of
the new
Definition of
Default and
the
results from the recalibration
of retail portfolios PD scorecards
did not impact the SICR thresholds:
Retail exposures
Range of SICR thresholds
Mortgage
30%-50%
Home Equity
10%-80%
SBB
10%-65%
Consumer
60%-100%
Wholesale lending
For wholesale lending exposures,
the origination PD curves and the residual lifetime PD curves at each reporting date are mapped to
credit rating
bands. Accordingly,
SICR thresholds
are based
on the
comparison of
the origination
and reporting
date credit
ratings,
whereby rating downgrades represent changes in residual lifetime PD. Similar to retail
exposures, the Group segments the wholesale
lending exposures based
on asset class, loan
type and credit rating
at origination.
In addition, for securitized
notes issued by special
purpose entities established by
the Group, the
SICR assessment is
performed by considering the
performance of the
underlying assets.
As at
31 December
2021, the
credit
rating
deterioration
thresholds,
as these
were reformed
following
the application
of the
new
definition of default and the resulting recalibration
of the corporate rating models, that
trigger allocation to stage 2 per rating bands
for Greece’s
wholesale lending exposures
are set out
in the tables
below.
In particular,
as per the
Group’s
updated SICR policy,
any
downgrade to
rating band
6 or
high-risk rating
bands (7,8
or 9)
is considered
as SICR
event to
all corporate
lending portfolios.
The
Notes to the Consolidated Financial Statements
.
42
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31 December 2021 Consolidated Financial Statements
changes introduced by the updated SICR policy affected mainly the SME loans, where downgrades to credit rating up to 5
is no longer
considered as a SICR event. The respective thresholds
that were applicable as of 31 December 2020 are also provided:
31 December 2021
Wholesale internal rating bands
SICR threshold range
1
Five notches
2
Four notches
3
Three notches
4
Two notches
5-8
One notch or more
31 December 2020
Wholesale internal rating bands
SICR threshold range
1-2
Two to Three notches
3-4
Two notches or more
5-8
One notch or more
Determination of scenarios, scenario weights and macroeconomic factors
To
achieve the objective of measuring ECL, the Group evaluates
a range of possible outcomes in line with the requirements
of IFRS 9
through the application of a minimum three macroeconomic scenarios, i.e. baseline, adverse and optimistic,
in a way that reflects an
unbiased and probability weighted
outcome. Each of the scenarios is based
on Management’s assumptions
around future economic
conditions in the
form of macroeconomic,
market and
other factors.
As at 31 December
2021 and 2020,
the probability weight
s
for
the above mentioned scenarios applied by the Group
in the ECL measurement calculations are 50% for the baseline
scenario and 25%
for the adverse and optimistic scenarios.
The key assumptions underlying in each macroeconomic scenario
are provided below:
●
Baseline scenario
The baseline scenario
assumes the continuation
of the economy’s
recovery in 2022,
driven mainly by
(a) the expected
investments,
as a result of the initiation
of the main bulk of the Resilience and
Recovery Facility projects,
the positive effect of
structural reforms,
and the efficient use of the EU budget funds,
and (b) the external demand, as a result of the increased exports
of goods and services
(mainly tourism
revenues).
The impact
of the
most recent
covid
19 variant
(Omicron), is
expected
to be
limited compared
to the
similar experience of previous years (2020-2021).
●
Optimistic scenario
The optimistic scenario assumes a quicker recovery of the economic activity
during 2022, as a result of higher than expected tourism
revenues, the vaccination proceeding according to the optimistic
end of estimates both domestically and
abroad, as well as the
better
absorption of EU budget funds and related
initiatives.
●
Adverse scenario
The
adverse
scenario
assumes
a
sporadic
re-enactment
of
the
lockdowns
throughout
2022,
as
a
result
of
the
Covid-19
variant
(Omicron) and the vaccination aversion observed in
a significant part of
the population. This results
to a slower resumption to
positive
economic
growth
in
2022,
the
destruction
of
productive
capabilities
and
the
continuation
of
inflationary
pressures
well
into
the
second half of 2022. This scenario also considers inadequate budget funding funds conditional on the continuation of the lockdowns,
while it expects also further delays in the flows of ava
ilable EU budget funds and related initiatives.
Forward-looking information
The Group ensures that impairment
estimates and macroeconomic forecasts,
as provided by Economic Analysis
& Financial Markets
Research Division,
applicable for business
and regulatory purposes
are fully consistent.
Accordingly,
the IFRS 9 probability
weighted
scenario applied in the ECL calculation coincides with the one used for ICAAP and business planning. In addition, relevant
experience
gained from the stress tests
imposed by the regulator,
has been taken into account in the process of developing
the macroeconomic
scenarios, as well as impairments for stress testing
purposes have been forecasted
in line with IFRS 9 ECL methodology.
Notes to the Consolidated Financial Statements
.
43
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31 December 2021 Consolidated Financial Statements
In
terms
of
macroeconomic
assumptions,
the
Group
assesses
a
number
of
indicators
in
projecting
the
risk
parameters,
namely
Residential and
Commercial Property
Price Indices, unemployment,
Gross Domestic
Product (GDP), Greek
Government Bond
(GGB)
spread over Euribor and inflation as well as interest
and FX rates.
The arithmetic averages of the scenarios’ probability
-weighted annual forecasts for
the next four year period following the reporting
date,
used
in
the
ECL
measurement
of
Greek
lending
portfolios
for
the
year
ended
31
December
2021
and
2020,
are
set
in
the
following table:
Key macroeconomic indicator
31 December 2021
31 December 2020
Average (2022-2025)
annual forecast
Average (2021-2024)
annual forecast
Gross Domestic Product growth
3.27%
3.36%
Unemployment rate
12.60%
16.57%
Residential property prices' index
5.55%
3.13%
Commercial property prices' index
5.75%
4.08%
Changes in the
scenarios and weights,
the corresponding
set of macroeconomic
variables and
the assumptions made
around those
variables for
the forecast
horizon would
have a significant
effect on
the ECL amount.
The Group independently
validates all models
and
underlying
methodologies
used
in
the
ECL
measurement
through
competent
resources,
who are
independent
of
the
model
development process.
Development of ECL models, including the various formulas,
choice of inputs and interdependencies
For the purposes
of ECL measurement
the Group performs
the necessary model parameterization
based on observed point
-in-time
data on
a granularity
of monthly intervals.
The ECL calculations
are based
on input parameters,
i.e. exposure
at default
(EAD), PDs,
loss
given
default
(LGD),
credit
conversion
factors
(CCFs)
etc.
incorporating
Management’s
view
of
the
future.
The
Group
also
determines the
links between
macroeconomic scenarios
and, economic inputs,
such as unemployment
levels and collateral
values,
and the effect on PDs, EADs and LGDs.
Furthermore,
the
PDs
are
unbiased
rather
than
conservative
and
incorporate
relevant
forward
looking
information
including
macroeconomic
scenarios.
The
forecasting
risk
parameters
models
incorporate
a
number
of
explanatory
variables,
such
as
GDP,
unemployment
etc. which
are used
as independent
variables for
optimum predictive
capability.
The models
are
based on
logistic
regressions
and
run
under
the
different
macroeconomic
scenarios
and
relevant
changes
and
shocks
in
the
macro
environment
reflected accordingly in a non-linear manner.
In the context of the New DoD application (note 5.2.1.2 (a)), the Group proceeded with
the recalibration of its ECL models.
Segmentation of financial assets when their ECL is assessed on a collective
basis
The Group segments
its exposures on
the basis of shared
credit risk characteristics
upon initial recognition
for the purposes of
both
assessing significant
increase in
credit risk
and measuring
loan loss
allowance on
a collective
basis. The
different
segments aim
to
capture differences
in PDs
and in the
rates of
recovery in
the event
of default.
On subsequent
periods, the
Group re-evaluates
the
grouping
of
its
exposures
at
least
on
an
annual basis,
in
order
to
ensure
that
the groups
remain
homogeneous
in
terms
of
their
response
to the
identified
shared credit
risk characteristics.
Re-segmentation
reflects
management’s
perception
in respect
to
the
change of credit
risk associated with the particular exposures compared
to initial recognition.
Modeling and Management overlays / adjustments
A number
of sophisticated
models have
been developed
or modified
to calculate
ECL, while
temporary
management
adjustments
may be required to
capture new developments and information
available, which are not yet
reflected in the ECL
calculation through
the risk models.
Internal counterparty
rating changes,
new or revised
models and data
may significantly
affect ECL.
The models are
governed by
the Group’s
validation framework,
which aim to
ensure independent
verification, and
are approved
by the Board
Risk
Committee (BRC).
In the
fourth quarter
2021, Management
revisited
the temporary
adjustment formed
in 2020
to reflect
existing
risk factors
in the
Covid-19
environment
not
fully
captured
in the
modelled
results
and decided
that
the
modelled
ECL
is
no
longer
required
to
be
amended in the light of the
continued improvement of the macroeconomic and lending portfolios’ outlook. In particular, considering:
(a)
the
on-going
recovery
of
the
economic
conditions
in
the
countries
in
which
the
Group
operates
as
supported
by
the
actual
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
evolution of the macroeconomic variables
and, (b) the credit quality of the Group’s
lending exposures that remained
solid (after the
expiration of
the moratoria
relief measures
and the gradual
phase out of
the government
support measures), the
abovementioned
temporary
adjustment
has
been
incorporated
in
the
standard
procedures
of
ECL
outputs
and
calculations
and
allocated
to
the
portfolios as per the Group’s
ECL policy.
The Group continues to monitor closely and constantly re-assesses all available information for the Covid-19
pandemic, the prospects
of the economies in
which the Group
operates, the
nature, size and
effectiveness of the
government support
measures, in order
to
revise its estimates and assumptions applied to
the assessment of impairment losses as appropriate.
Sensitivity analysis on lending portfolios
The sensitivity analysis when performed on certain key parameters can provide meaningful information
only for portfolios where the
risk parameters have a significant
impact on the overall credit risk of a lending portfolio, particularly where such sensitivities are also
used for internal credit risk management purposes. Otherwise, a sensitivity analysis on certain combinations of some risk
parameters
may not produce
meaningful results, as
in reality there
are interdependencies
between the various
economic inputs, rendering
any
changes in the parameters, changes correlated
in other factors.
The sensitivity analysis presented in the tables below was performed assuming a favorable and an adverse shift in scenario weighting
as at 31 December 2021 and 2020. The former assumes an increase in the
weighting of the optimistic scenario at 75% and a decrease
in the weighting of the baseline scenario at 25%,
while the latter assumes an increase in the weighting of the
adverse scenario at 75%
and a
decrease in
the weighting
of the
baseline scenario
at 25%
compared to
the scenario
weighting
applied by
the Group
in ECL
measurement. Based on the above scenario weighting variations, a re-estimation of all key macroeconomic indicators linked to these
variations, namely GDP growth, unemployment rate
and property indices, was performed.
The tables below
present the estimated
effect in the
Group’s
ECL measurement
(including off-balance sheet
items) per stage,
upon
potential reasonable
combined changes
of forecasts
in key
macroeconomic indicators
over the
next 5
years (2022-2026
and 2021-
2025, respectively):
As at 31 December 2021
As at 31 December 2020
Sensitivity scenario
Sensitivity scenario
Key macroconomic
indicators
Combined change %
Key macroconomic
indicators
Combined change %
Positive
change
Adverse
change
Positive
change
Adverse
change
GDP growth
20%
-20%
change of annual forecasts
GDP growth
12%
-15%
change of annual forecasts
Unemployment
Rate
-11%
11%
change of annual forecasts
Unemployment
Rate
-3%
4%
change of annual forecasts
Property indices
(RRE/CRE)
3%
-3%
change of
index adjusted
real estate collateral market
values
Property indices
(RRE/CRE)
3%
-3%
change of
index adjusted
real estate collateral market
values
Estimated effect per stage as at 31 December 2021
Positive change
Adverse change
12-month
ECL - Stage 1
Lifetime ECL
- Stage 2
Lifetime ECL
credit-impaired
31 December
2021
12-month
ECL - Stage 1
Lifetime ECL
- Stage 2
Lifetime ECL
credit-impaired
31 December
2021
Ιmpact in
€ million
(9)
(24)
(28)
(61)
6
30
34
70
Ιmpact in
% allowance
-5.06
-7.57
-1.98
-3.20
3.47
9.39
2.37
3.64
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Estimated effect per stage as at 31 December 2020
Positive change
Adverse change
12-month
ECL - Stage 1
Lifetime ECL
- Stage 2
Lifetime ECL
credit-impaired
31 December
2020
12-month
ECL - Stage 1
Lifetime ECL
- Stage 2
Lifetime ECL
credit-impaired
31 December
2020
Ιmpact in
€ million
(9)
(25)
(39)
(73)
14
30
43
88
Ιmpact in
% allowance
-4.39
-5.52
-1.35
-2.06
6.72
6.80
1.50
2.48
The
Group
updates
and
reviews
the
reasonability
and
performs
back-testing
of
the
main
assumptions
used
in
its
methodology
assessment for
SICR and ECL measurement,
at least on an
annual basis or earlier,
based on facts and
circumstances. In this
context,
experienced and dedicated staff within the
Group’s Risk Management function monitor the
risk parameters applied for the
estimation
of ECL. Furthermore, as part of the well-defined governance framework,
any revisions to the methodology used are approved
by the
Group competent committees and
ultimately the Board Risk Committee (BRC).
3.2
Fair value of financial instruments
The fair
value of financial
instruments is
the price that
would be received
to sell an
asset or paid
to transfer
a liability in
an orderly
transaction
between market
participants in
the principal
(or most
advantageous)
market
at the
measurement
date
under current
market
conditions
(i.e. an
exit price)
regardless
of whether
that
price is
directly
observable
or estimated
using another
valuation
technique.
The fair
value of financial
instruments that
are not quoted
in an active
market are
determined by
using other
valuation techniques
that
include
the
use
of
valuation
models.
In
addition,
for
financial
instruments
that
trade
infrequently
and
have
little
price
transparency,
fair value is less objective and requires varying degrees of judgment depending on liquidity, concentration, uncertainty
of market factors,
pricing assumptions and other risks
affecting the specific instrument.
In these cases, the fair values
are estimated
from observable data in respect of similar financial
instruments or using other valuation techniques.
The valuation models used include
present value methods and other models based
mainly on observable inputs and
to a lesser extent
to non-observable inputs, in order to maintain
the reliability of the fair value measurement.
Valuation models are used
mainly to value over-the-counter
derivatives and securities measured at fair
value.
Where valuation
techniques are used
to determine the
fair values
of financial instruments
that are
not quoted in
an active market,
they are validated
and periodically reviewed by
qualified personnel independent of the
personnel that created
them. All models are
certified before they are used, and are calibrated to ensure that outputs reflect actual data and comparative market
prices. The main
assumptions and estimates, considered by
management when applying a valuation model include:
●
the likelihood and expected timing of future
cash flows;
●
the selection of the appropriate discount rate, which is based on an assessment of what a market participant would regard as an
appropriate spread of the rate
over the risk-free rate;
and
●
judgment to determine what model to use in order
to calculate fair value.
To
the extent practicable, models use
only observable data, however areas such
as credit risk (both
own and counterparty), volatilities
and correlations require
the Management to
make estimates
to reflect uncertainties
in fair values
resulting from the
lack of market
data inputs. Inputs
into valuations
based on unobservable data
are inherently uncertain
because there is little
or no current market
data available. However, in most cases there will be
some historical data on
which to base
a fair value measurement and
consequently
even when unobservable inputs are used, fair values
will use some market observable inputs.
Information in respect of the fair valu
ation of the Group’s financial assets
and liabilities is provided in note 5.3.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
3.3
Classification of financial instruments
The Group applies significant judgment in assessing the classification
of its financial instruments and especially,
in the below areas:
Business model assessment
Judgment is
exercised in
order to
determine the
appropriate level
at which
to assess the
business model. In
assessing the business
model of financial instruments, these are aggregated into groups (business lines) based on their characteristics, and the way they are
managed in order
to achieve the Group’s
business objectives. In
general, the assessment
is performed at
the business unit level
for
lending
exposures
including
securitized
notes
issued
by
special
purpose
entities
established
by
the
Group
and
debt
securities.
However,
further disaggregation may be performed
by business strategy/ region, etc.
In assessing the business model for financial
instruments, the Group performs a past sales evaluation of the
financial instruments and
assesses their expected evolution in the future. Judgment is
exercised in determining the effect of sales to a “hold
to collect” business
model depending on their objective and their acceptable level and
frequency.
Contractual cash flow characteristics test
(SPPI test)
The
Group
performs
the
SPPI
assessment
of
lending
exposures
including
securitized
notes
issued
by
special
purpose
entities
established by the Group and debt securities by
considering all the features which
might potentially lead to SPPI failure.
Judgment is
applied by the
responsible Business Units when
considering whether certain contractual features significantly affect
future cash flows.
Accordingly, for
non-recourse financial assets, the Group assesses jointly criteria such as the adequacy of equity,
LTV (Loan-to-Value)
and
DSCR (Debt-Service-Coverage
-Ratio)
ratios
as well
as the
existence
of corporate
and personal
guarantees.
For
the securitized
notes issued by special purpose vehicles and held by the Group, the cash
flow characteristics of the notes and the underlying pool of
financial assets as well
as the credit risk
inherent in each securitization’s
tranche compared to
the credit risk of
all of the underlying
pool of financial assets,
are assessed.
Furthermore, in order
to assess whether
any variability in
the cash flows
is introduced by the
modified time
value of
money element,
the Group
performs a
quantitative
assessment (as
described in
note 2.2.9).
Moreover,
the
Group evaluates
certain cases on whether the
existence of performance-related
terms exposes the Group
to asset risk rather
to the
borrower's credit risk.
The Group has established a robust framework to perform the necessary assessments in accordance with Group’s
policies in order to
ensure
appropriate
classification
of
financial
instruments,
including
reviews
by
experienced
staff
for
lending
exposures
and
debt
securities.
3.4
Assess control over investees
Management exercises
judgment in order
to assess if the
Group has
control over
another entity including
structured entities based
on the control elements set out in note 2.2.1 (i).
(a)
Subsidiaries
The Group
holds more
than half of
the voting
rights in
all subsidiaries,
except from
Hellenic Post
Credit S.A.
Further information
in
respect of the control assessment for
the said subsidiary is provided in note 23.
(b)
Structured entities
As part
of its
funding activity
and non-performing
loans’ management
strategy,
the Group
sponsors certain
securitization vehicles,
the
relevant
activities
of
which
have
been
predetermined
as
part
of
their
initial
design
by
the
Group.
The
Group
is
exposed
to
variability of returns from these
vehicles through the holding of debt
securities issued by them or by providing
credit enhancements
in accordance with the respective contractual terms. In assessing whether it has
control, the Group considers whether it manages the
substantive decisions that could
affect these vehicles’ returns. Accordingly,
the Group assesses on a case-by-case basis the structure
of securitization transaction, including the respective
contractual arrangements, in order to
conclude if it controls these vehicles.
Furthermore,
the
Group
is
involved
in
the
initial
design
of
various
mutual
funds
in
order
to
provide
customers
with
investment
opportunities. The
Group primarily
acts as
an agent
in exercising
its decision
making authority
as it
is predefined
by the
applicable
regulated framework.
As a result, the Group has concluded that it does not control
these funds.
Further information in respect of the structured
entities the Group is involved, either consolidated
or not, is provided in note 25.
Notes to the Consolidated Financial Statements
.
47
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31 December 2021 Consolidated Financial Statements
3.5
Income tax
The Group is subject to income taxes
in various jurisdictions and estimates are required
in determining the liability for income taxes.
The Group
recognizes
liabilities
for
anticipated
tax
audit issues
based on
estimates
of whether
additional taxes
will be
due or
for
anticipated
tax disputes.
Where the
final tax
outcome of
these matters
is different
from the
amounts that
were initially
recorded,
such differences will impact the income tax and deferred
tax in the period in which such determination is made. Further information
in relation to the above is provided
in note 13.
In addition,
the Group
recognizes deferred
tax assets
to the
extent that
it is probable
that sufficient
taxable profit
will be available
against
which
unused
tax
losses
and
deductible
temporary
differences
can
be
utilized.
Recognition
therefore
involves
judgment
regarding the
future financial performance
of the particular Group
legal entity in which
the deferred tax
asset has been recognized.
Particularly,
in order to determine the amount of deferred
tax assets that can be recognized,
significant management judgments are
required regarding the likely timing
and level of
future taxable profits. In
making this evaluation,
the Group has
considered all available
evidence, including management’s projections
of future taxable income and the tax
legislation in each jurisdiction.
The most significant judgment exercised by Management relates to the recognition of deferred tax assets in respect of losses realized
in Greece. In the event that, the Group assesses that it
would not be able to recover any portion of the
recognized deferred tax assets
in
the
future,
the
unrecoverable
portion
would
impact
the
deferred
tax
balances
in
the
period
in
which
such
judgment
is made.
Further
information
in respect
of the
recognized
deferred
tax assets
and the
Group’s
assessment for
their recoverability
as of
31
December 2021 is provided in note 13.
3.6
Retirement benefit obligations
The present
value of
the retirement
benefit obligations
depends on
a number
of factors
that are
determined on
an actuarial
basis
using a number of assumptions, such
as the discount rate
and future salary increases. Any
changes in these assumptions will impact
the carrying amount of pension obligations.
The Group determines
the appropriate discount
rate used to
calculate the present
value of the estimated
retirement obligations,
at
the end
of each
year based
on interest
rates
of high
quality corporate
bonds. In
countries where
there is
no deep
market
in such
bonds,
the
yields
on
government
bonds
are
used.
The
currency
and term
to
maturity
of
the
bonds
used
are
consistent
with
the
currency and estimated average
term to maturity of the retirement benefit
obligations. The salary rate increase assumption
is based
on future inflation estimates reflecting also
the Group's reward structure
and expected market conditions.
Other
assumptions
for
pension obligations,
such as
future
inflation
estimates,
are
based
in part
on current
and expected
market
conditions.
For information in respect of the sensitivity analysis of the Group’s
retirement benefit obligations to
reasonably possible, at the time
of preparation of these financial statements,
changes in the abovementioned key actuarial assumptions,
refer
to note 36.
3.7
Investment properties
Investment property
is carried at fair value,
as determined by external, independent,
certified valuators on
an annual basis, or more
frequently if deemed appropriate upon assessment
of any relevant circumstances.
The main factors underlying the
determination of fair value are
related with rental income from current leases
and assumptions about
rental income
from future leases
in the light
of current market
conditions, future vacancy
rates and
periods, discount rates
or rates
of return, the terminal values as well as the level of future
maintenance and other operating costs.
Additionally,
where
the
fair
value
is
determined
based
on
market
prices
of
comparable
transactions
those
prices
are
subject
to
appropriate adjustments, in order to reflect current economic
conditions and management’s best estimate regarding the future trend
of properties market based on advice received from
its independent external valuers.
Further
information
in respect
of the
fair
valuation
of the
Group’s
investment
properties
and the
remaining
uncertainties
due to
Covid-19 pandemic is provided in note 27.
3.8
Provisions and contingent liabilities
The Group
recognizes
provisions
when it
has a
present legal
or constructive
obligation, it
is probable
that an
outflow of
resources
embodying economic benefits will be required to
settle the obligation and a reliable estimate
can be made of its amount.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
A provision is not
recognized and a contingent liability
is disclosed when
it is not
probable that an outflow
of resources will be
required
to settle the
obligation, when the
amount of the obligation
cannot be measured reliably
or in case that
the obligation is
considered
possible and is subject to the occurrence or non -occurrence of one or more uncertain
future events.
Considering the
subjectivity and
uncertainty
inherent
in the
determination
of the
probability and
amount of
the abovementioned
outflows, the Group takes into account a number of factors
such as legal advice, the stage of the matter and historical evidence from
similar cases. In
the case of
an offer made
within the context of
the Group’s voluntary exit scheme,
the number of
employees expected
to accept the abovementioned
offer along with
their age cluster is
a significant factor
affecting the measurement
of the outflow for
the termination benefits.
Further information in relation to
the Group’s provisions
and contingent liabilities is provided in notes 35 and 42.
3.9
Share-based payments
The
Group
grants
shares
and
share
options
to
the
employees
as
a
common
feature
of
employee
remuneration.
IFRS
2
requires
recognition
of an
expense for
those shares
and share
options at
the fair
value on
the grant
date (equity-settled
plans). For
shares
granted to employees, the fair value is measured directly
at the market price of the entity’s shares, adjusted
to take into account the
terms and conditions upon which the shares were granted. For share
options granted to employees, in many cases market
prices are
not available because the options granted
are subject to terms and conditions that do not apply to
traded options. If this is the case,
the Group estimates
the fair value of
the equity instruments
granted using a valuation
technique, which is consistent
with generally
accepted valuation methodologies.
The valuation method
and the inputs
used to measure
the share options
granted to
employees of the
Group are presented
in Note
39
3.10
Leases
The Group, as a lessee, determines the lease term as the non-cancellable term of
the lease, together with any periods covered
by an
option to extend the
lease if it is reasonably certain
to be exercised,
or any periods covered
by an option to terminate
the lease, if it
is reasonably certain not to be exercised.
The Group
applies judgement
in evaluating
whether it is
reasonably certain
or not to
exercise an
option to
renew or
terminate the
lease, by
considering all
relevant
factors
and economic
aspects that
create an
economic incentive.
The Group
reassesses the
lease
term if
there is
a significant
event or
change in
circumstances
that is
within its
control
that affects
its ability
to exercise
or not
to
exercise the
option to
renew or to
terminate, such
as significant leasehold
improvements or
significant customization
of the leased
asset.
In measuring
lease liabilities,
the Group
uses the
lessees’ incremental
borrowing
rate
(‘IBR’) when
it cannot
readily determine
the
interest rate implicit in
the lease. The IBR is the rate of interest
that the Group would have to
pay to borrow over a similar term,
and
with
a
similar
security,
the
funds
necessary
to
obtain
an
asset
of
a
similar
value
to
the
right-of-use
asset
in
a
similar
economic
environment.
Therefore,
estimation is
required when
no observable
rates are
available
(such as
for subsidiaries
that do
not enter
into financing
transactions) or when
they need to
be adjusted to
reflect the terms
and conditions of
the lease. The Group
estimates the IBR
using
observable inputs (such as government bond yields)
as a starting point when available, and
performs certain additional entity-specific
adjustments,
such as
credit spread
adjustments
or adjustments
to reflect
the lease
terms and
conditions. For
the Bank
and Greek
subsidiaries,
the
IBR
is
derived
from
the
estimated
covered
bonds
yield
curve,
which
is
constructed
based
on
observable
Greek
Government
Bond
yields,
while
for
international
subsidiaries
the
IBR
is
determined
on
a
country
basis,
taking
into
consideration
specific local conditions.
3.11
Other accounting estimates and judgments
Information in respect of other estimates
and judgments that are made by the Group is provided
in notes 20, 30 and 31.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
4.
Capital Management
The Group’s capital
adequacy position is presented in the following table:
2021
2020⁽¹⁾
€ million
€ million
Equity attributable to shareholders
of the Company
5,539
5,245
Add: Adjustment due to IFRS 9 transitional arrangements
528
849
Add: Regulatory non-controlling interests
57
-
Less: Goodwill
(2)
(1)
Less: Other regulatory adjustments
(686)
(489)
Common Equity Tier 1 Capital
5,436
5,604
Total Tier 1 Capital
5,436
5,604
Tier 2 capital-subordinated debt
950
950
Total Regulatory
Capital
6,386
6,554
Risk Weighted Assets
39,789
40,237
Ratios:
%
%
Common Equity Tier 1
13.7
13.9
Tier 1
13.7
13.9
Total
Capital Adequacy Ratio
16.1
16.3
1)
The capital adequacy ratios for the year ended 31 December 2020 have not been adjusted following the change in accounting policy (note 2.3).
Notes:
a) The profit of
€ 328 million for
the year ended 31
December 2021 (31 December
2020: loss of €
1,213 million as published)
has been included in
the calculation
of the above capital ratios.
b) The Group has elected to
apply the phase-in approach for mitigating the
impact of IFRS 9 transition on the
regulatory capital, according to the
Regulation
(EU) 2017/2395 (providing a 5-year transition period to
recognize the impact of IFRS
9 adoption) and the Regulation 2020/873
(CRR quick fix). The transition
effect is included in the regulatory capital as of the first quarter of each year.
c) The implementation of the new
Definition of Default from 1
January 2021 (note 5.2.1.2) had a
negative impact on the regulatory capital
by increasing the
Internal Ratings Based (IRB) approach shortfall, which is presented above within other regulatory adjustments.
d) The
Group’s
CET1 as
at 31
December 2021,
based on
the full
implementation of
the Basel
III rules
in 2025
(fully loaded
CET1), referring
mainly to
the
completion of the aforementioned IFRS 9 transitional arrangements, would be 12.7% (31 December 2020: 12%).
(e) The pro-forma Common Equity
Tier 1 and Total
Capital Adequacy ratios as at 31
December 2021 with the completion
of the sale of Eurobank’s
merchant
acquiring business (note 30) would be 14.5% and 16.8%, respectively.
The Group
has sought
to
maintain
an actively
managed
capital
base to
cover
risks
inherent
in the
business.
The adequacy
of the
Group's
capital
is
monitored
using,
among
other
measures,
the
rules
and
ratios
established
by
the
Basel
Committee
on
Banking
Supervision (BIS rules/ratios) which have been incorporated in the European Union (EU)
legislation through the Directive 2013/36/EU
(known
as CRD
IV) as
in force,
along with
the Regulation
No 575/2013/EU
(known
as CRR)
as in
force.
Directive
2013/36/EU
was
transposed into Greek legislation by
Law 4261/2014. In
May 2021, Law
4261/2014 was amended
by Law 4799/2021,
which introduced
Directive 2019/878
(CRD V) into
Greek law.
Supplementary to
that, in the
context of
Internal Capital
Adequacy Assessment Process
(ICAAP), the Group
considers a
broader range
of risk types
and the Group’s
risk management capabilities.
ICAAP aims ultimately
to
ensure that the Group has sufficient capital
to cover all material risks that it
is exposed to, over a three-year horizon.
Based on Council Regulation No 1024/2013, the European Central Bank (ECB) conducts annually a Supervisory Review and Evaluation
Process (SREP) in order
to define the prudential
requirements of the
institutions under its supervision.
The key purpose
of the SREP
is
to
ensure
that
institutions
have
adequate
arrangements,
strategies,
processes
and
mechanisms
as
well
as
capital
and
liquidity
to ensure a sound management and coverage of their risks, to which they are or
might be exposed, including those revealed by stress
testing and risks the institution
may pose to the financial system.
Taking into account the 2020 SREP decision, for 2021, the Group was required to meet
a Common Equity Tier 1 Ratio
of at least 9.25%
and a Total Capital
Adequacy Ratio of at least 14.06% (Overall Capital Requirement or OCR), including Combined Buffer
Requirement
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
of 3.06% which is covered with CET1 capital and sits on
top of the Total SREP Capital Requirement (TSCR). However as of March 2020,
based on the ECB’s
measures announced in response
to the Covid-19 outbreak,
banks are allowed,
among others, to operate
below
the level of capital defined
by the Pillar 2 Guidance and, without prejudice to
the restrictions set out in CRD IV,
the Combined Buffer
Requirement (i.e.
Capital Conservation
Buffer,
Countercyclical Capital
Buffer,
Other Systemically
Important Institutions
Buffer) until
at least the end of 2022. According to the FAQs published by the ECB (last updated 10 February 2022), the above allowance provided
to
banks
to
operate
below
the
combined
buffer
requirement
results
in
the
ECB
taking
a
flexible
approach
to
approving
capital
conservation plans that banks
are legally required
to submit if they breach
that requirement. Banks
are also allowed to
partially use
capital instruments
that do not qualify
as CET1 capital
(i.e. Additional Tier 1
or Tier 2 instruments)
to meet the Pillar
2 Requirement
(P2R). On 10 February 2022, the ECB announced that banks are expected
to operate above Pillar 2 Guidance from
1 January 2023.
The breakdown of the Group’s
CET1 and Total
Capital requirements is presented below.
31 December 2021
CET1 Capital
Requirements
Total Capital
Requirements
Minimum regulatory requirement
4.50%
8.00%
Pillar 2 Requirement (P2R)
1.69%
3.00%
Total SREP Capital Requirement
(TSCR)
6.19%
11.00%
Combined Buffer Requirement (CBR)
Capital conservation buffer
(CCoB)
2.50%
2.50%
Countercyclical capital buffer
(CCyB)
0.06%
0.06%
Other systemic institutions buffer
(O-SII)
0.50%
0.50%
Overall Capital Requirement (OCR)
9.25%
14.06%
According to
the 2021 SREP decision,
for 2022, the
Group is required
to meet a
Common Equity Tier
1 Ratio of at
least 9.50% and a
Total
Capital Adequacy
Ratio of
at least
14.31% (Overall
Capital Requirements
or OCR)
including Combined
Buffer
Requirement
of
3.31% (Capital conservation
buffer of 2.5%,
Countercyclical capital
buffer of 0.06%
and Other Systemically
Important Institution
(O-
SII) buffer of 0.75%).
Furthermore,
the Regulation
2020/873 (CRR
quick fix)
that was
adopted
by the
Council of
the European
Union and
the European
Parliament in June 2020, introduced
some changes in the CRR to maximize
the ability of banks to continue
lending during the Covid-
19 pandemic. These changes include among others:
-Extension by two
years of the transitional
arrangements for
IFRS 9 and further
relief measures, allowing
banks to add back
to their
regulatory capital
any increase in
new provisions for
expected losses that they
recognize in 2020
and 2021 for their
financial assets,
which have not been defaulted. Accordingly,
the relief applied for 2022 is 75%, for 2023 50% and for
2024 25%.
-Earlier application
of the revised
supporting factors
for loans to
SMEs and certain
infrastructure
projects’ companies, which
allows
for a more favorable
prudential treatment of these exposures.
-A preferential
treatment of
exposures to
public debt
issued in
the currency
of another
Member State
and flexibility
regarding the
large exposures limit.
In October 2021, as part of EU’s Banking Package
for 2021, the European Commission (EC) adopted legislative proposals
to amend a)
Regulation
575/2013 (CRR)
aiming to
implement the
Basel IV
reform
in the
EU and
b) Directive
2013/36/EU (CRD
IV) introducing,
among
others,
explicit
rules
on
the
management
of
Environmental
Social
and
Governance
(ESG)
risks.
The
Group
will
monitor
developments on the aforementioned proposals until their expected adoption by the European Parliament and the Council
of the EU.
Further disclosures regarding
capital adequacy in
accordance with the
Regulation 575/2013, including
the regulatory developments
and relief measures introduced with
CRR quick fix, are provided in the Consolidated Pillar 3 Reports on the Company’s
website.
2021 EU – wide stress test
In January 2021, the EBA launched the 2021 EU-wide stress test exercise which provided valuable input for assessing the resilience of
the European banking sector,
notably its ability to absorb shocks under adverse
macroeconomic conditions.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
This exercise was
coordinated by the EBA
in cooperation with the ECB
and national authorities, and was conducted
according to the
EBA’s
methodology,
which was published
in November 2020.
It was
carried out on
the basis of
year-end 2020 figures
and assessed
the resilience of EU banks
under a common macroeconomic
baseline scenario and a
common adverse scenario,
covering the period
of 2021-2023. The baseline
scenario for EU countries
was based on the
projections from the national central banks
of December 2020,
while the adverse scenario assumed the materialisation
of the main financial stability risks that had
been identified by the European
Systemic
Risk Board
(ESRB) and
which the
EU banking
sector is
exposed to.
The adverse
scenario also
reflected
ongoing concerns
about the possible
evolution of the Covid-19
pandemic coupled with a
potential strong drop in confidence
and was designed to
ensure
an adequate level of severity across all EU
countries.
In parallel,
the ECB also
conducted its
own stress
test for
the banks it
directly supervises but
that were
not included in
the EBA-led
stress
test
sample. This
exercise
was consistent
with the
EBA’s
methodology
and applied
the same
scenarios, while
also including
proportionality
elements as
suggested by
the overall
smaller size
and lower
complexity
of these
banks. Eurobank
Holdings Group
participated in the ECB-led stress test.
2021 Eurobank Stress Test
Results
On 30 July 2021,
the Company announced that Eurobank Holdings
Group successfully completed the 2021 SSM Stress
Test (ST), which
was coordinated
and conducted by the
ECB. The starting point
of the ST exercise
was the financial and
capital position of the Group
as at 31 December 2020 and the ST horizon covered
the period until the end of 2023.
Under the baseline scenario, the Group is capital accretive by 290 bps over
the three-year ST horizon, reaching, on a fully loaded (FL)
basis, total CAD ratio of 17.5%, and CET1 ratio
of 14.9%, as at the end of 2023.
Under the adverse
scenario, the capital
depletion in
terms of FL
CET1 ratio
amounts to
433 bps as
at the end
of 2023. Accordingly,
the FL CET1 ratio stands at 7.6% as at the
end of 2023. On a transitional basis, the CET1 ratio at the end
of 2023 stands at 8%.
The Group’s performance in the ST
confirmed its resilience and
ability to withstand a
significant downturn, especially under
the severe
assumptions of
the adverse
scenario. In
addition, the
results
of ST
will be
used to
determine
the Pillar
2 capital
recommendation
(“Guidance”) in the context of the SREP.
Minimum Requirements for Eligible Own Funds and Eligible Liabilities (MREL)
Under the Directive 2014/59 (Bank
Recovery and Resolution
Directive or BRRD), as amended by
Directive 2019/879 (BRRD II), which
was transposed
into the
Greek legislation
pursuant
to Law
4799/2021 amending
Law 4335/2015,
European
banks are
required
to
meet
the
minimum
requirement
for
own
funds
and
eligible liabilities
(MREL).
The
Single
Resolution
Board
(SRB)
has
determined
Eurobank S.A. as the Group’s
resolution entity and a Single Point
of Entry (SPE) strategy
for resolution purposes.
Based on the latest
official SRB’s decision, the fully calibrated MREL (final target) to be met by Eurobank S.A.
on a consolidated basis until the end
of 2025
is set at ca 26.87% of its total risk weighted assets (RWAs), including a fully-loaded combined buffer
requirement (CBR) of 3.56%. The
interim binding MREL target to be met at
1 January 2022 was set at 17.82% of its total RWAs,
including a CBR of 3.31%.
In the year ended 31
December 2021, in the context
of its medium-term strategy
to meet its MREL target,
the Bank proceeded with
two issues of preferred senior debt with a nominal value of € 500
million each (note 34). As a result, at 31 December
2021,
the Bank’s
MREL ratio
at consolidated
level stands
at 18.47% (including
profit for
the year
ended 31 December
2021), which is
well above
the
aforementioned interim binding MREL target.
The final MREL target is updated by the SRB on an annual
basis.
Post balance sheet event
In January 2022,
the European Central
Bank (ECB) launched
a supervisory climate
risk stress
test to
assess how prepared
banks are
for dealing
with financial and
economic shocks
stemming from
climate risk.
The exercise
will be
conducted in
the first
half of 2022
after which
the ECB
will publish
aggregate
results. The
results will
feed into
the Supervisory
Review and
Evaluation
Process (SREP)
from a qualitative point of view
and could have an indirect potential impact
on Pillar 2 requirements through the
SREP scores, without
however directly impacting capital through
Pillar 2 guidance.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
5.
Financial risk management and fair value
5.1
Use of financial instruments
By
their
nature
the
Group's
activities
are
principally
related
to
the
use
of
financial
instruments
including
derivatives.
The
Group
accepts deposits from
customers, at both
fixed and floating
rates, and
for various periods
and seeks to
earn above average
interest
margins by investing these funds in high quality assets. The Group seeks to increase these margins by consolidating
short-term funds
and lending for longer periods at higher rates,
while maintaining sufficient liquidity to meet all claims that might
fall due.
The
Group
also
seeks
to
raise
its
interest
margins
by
obtaining
above
average
margins,
net
of
provisions,
through
lending
to
commercial and retail borrowers within a range of credit standing. Such exposures include both on-balance sheet loans and advances
and off-balance sheet guarantees and other commitments
such as letters of credit.
The Group also trades in financial instruments where it
takes positions in traded and over the counter financial instruments, including
derivatives, to take
advantage of short-term
market movements in the equity and bond markets
and in currency and interest rates.
5.2
Financial risk factors
Due to its activities,
the Group is
exposed to several
financial risks, such as
credit risk, market
risk (including currency,
interest rate
,
spread, equity and volatility risk), liquidity and operational risks. The Group's overall risk management strategy seeks to minimize any
potential adverse effects
on its financial performance, financial position and cash flows.
Risk Management objectives and policies
The Group
acknowledges that
taking risks
is an integral
part of its
operations in
order to
achieve its business
objectives. Therefore,
the Group’s
management sets adequate
mechanisms to identify those
risks at an
early stage and
assesses their potential impact
on
the achievement of these objectives.
Due to the fact that
economic, industry,
regulatory and operating conditions
will continue to change,
risk management mechanisms
are set
in a
manner that
enable the
Group to
identify and
deal with
the risks
associated with
those changes.
The Bank’s
structure,
internal processes and existing
control mechanisms ensure both
the independence principle
and the exercise of
sufficient supervision.
The Group's
Management considers
effective risk
management as
a top priority,
as well as
a major
competitive advantage,
for the
organization. As such, the Group has allocated significant resources for upgrading its policies, methods and infrastructure,
in order to
ensure compliance with the requirements of
the European Central Bank (ECB)
and of the
Single Resolution Board (SRB), the
guidelines
of
the
European
Banking
Authority
(EBA)
and
the
Basel
Committee
for
Banking
Supervision
and
the
best
international
banking
practices.
The
Group
implements
a
well-structured
credit
approval
process,
independent
credit
reviews
and
effective
risk
management
policies
for
credit,
market,
liquidity
and
operational
risk,
both
in
Greece
and
in
each
country
of
its
international
operations. The risk management policies implemented
by the Group are reviewed
mainly annually.
The Group Risk and Capital
Strategy,
which has been formally documented,
outlines the Group’s
overall direction regarding
risk and
capital management
issues, the risk
management mission and
objectives, risk definitions,
risk management principles,
risk appetite
framework,
risk
governance
framework,
strategic
objectives
and
key
management
initiatives
for
the
improvement
of
the
risk
management framework in place.
The maximum amount
of risk which the
Group is willing
to assume in the
pursuit of its strategic
objectives is articulated
via a set of
quantitative
and
qualitative
statements
for
specific risk
types,
including
specific tolerance
levels
as
described
in
the
Group’s
Risk
Appetite Framework. The objectives are to support the
Group’s business growth, balance a strong capital position with higher
returns
on equity and to ensure the Group’s
adherence to regulatory requirements.
Risk appetite that is
clearly communicated throughout
the Group, determines
risk culture and forms
the basis on which
risk policies
and risk limits
are established
at Group
and regional level.
Within the context
of its Risk
Appetite Framework,
the Bank has
further
enhanced the risk identification process and the risk materiality
assessment methodology.
The identification
and assessment
of all
risks is
the cornerstone
for the
effective
Risk Management.
The Group
aiming to
ensure a
collective view on the risks linked to the
execution of its strategy, acknowledges the new developments at an early stage and assesses
the potential
impact. In
this conte
xt, the
Bank has
recognized
climate
change risk
as a
material
risk and
based on
its supervisory
guidelines, is in the process of adapting its policies and methodologies for identifying
and monitoring the relevant risks (note 5.2.5).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Board Risk Committee (BRC)
The Board Risk Committee (BRC)
is a committee of
the BoD and its
task is to assist the
BoD to ensure that
the Group has a
well-defined
risk and capital strategy in line with
its business plan and an adequate and robust risk appetite.
Τhe BRC assesses the Group’s risk profile, monitors
compliance with the approved risk appetite and risk tolerance levels and ensures
that the
Group has
developed an
appropriate risk
management framework
with appropriate
methodologies, modelling
tools, data
sources and
sufficient and
competent staff
to identify,
assess, monitor
and mitigate
risks.
Moreover,
BRC is
conferred
with certain
approval authorities for credit proposals,
debt forgiveness and write-offs.
The BRC consists of six (6) non-executive directors,
meets at least on a monthly basis and reports to the BoD on a quarterly basis and
on ad hoc instances if it is needed.
Management Risk Committee
The Management Risk Committee (MRC) is a management committee established by the
CEO and operates as an advisory committee
to the BRC.
The main responsibility of the MRC is to oversee the risk management framework of the Group.
As part of its responsibility, the MRC
facilitates reporting to the BRC
on the range of
risk-related topics under its purview. The MRC ensures
that material risks are identified
and promptly
escalated
to the
BRC and
that
the necessary
policies and
procedures
are in
place to
prudently
manage risks
and to
comply with regulatory requirements.
Group Risk Management General Division
The Group’s Risk Management General Division which
is headed by
the Group Chief Risk
Officer (GCRO), operates independently from
the business units and is responsible for
the monitoring, measurement and management
of credit, market, operational
and liquidity
risks of the
Group. It comprises
of the Group
Credit General Division,
the Group Credit
Control Sector (GCCS),
the Group Credit
Risk
Capital Adequacy
Control Sector
(GCRCACS), the
Group Market
and Counterparty
Risk Sector (GMCRS),
the Group
Operational Risk
Sector, the Group
Model Validation and Governance Sector,
the Group Risk Management Strategy Planning and Operations
Division,
the
Supervisory
Relations
and
Resolution
Planning
Sector
(dual
reporting
also
to
the
Group
Chief
Financial
Officer),
Climate
Risk
Division
and the Risk Analytics Division.
Non-Performing Exposures (NPEs) management
The Group, following
the strategic partnership
with doValue S.p.A.
and the successful transition
to the new operating
model for the
management of
NPEs, realizes
the NPE
Strategy Plan
through its
implementation by
doValue Greece
for the
assigned portfolio
and
the successful securitization transactions.
Troubled Assets Committee
The
Troubled
Assets
Committee
(TAC)
is
established
according
to
the
regulatory
provisions
and
its
main
purpose
is
to
act
as
an
independent body,
closely monitoring the Bank’s troubled
assets portfolio and the execution of its NPE Management
Strategy.
Remedial and Servicing Strategy (RSS)
Eurobank
established
Remedial
Servicing
&
Strategy
Sector
(RSS)
with
the
mandate
to
devise
the
NPE
reduction
plan,
to
closely
monitor
the overall
performance of
the NPE
portfolio
as well
as the
relationship
of the
Bank with
doValue
Greece.
Furthermore,
following Eurobank’s commitments against the significant risk transfer (SRT) monitoring regulatory requirements pertaining to Bank’s
concluded transactions,
RSS has a
pivotal role
in ensuring that
relevant process
is performed smoothly
and in a
timely manner and
that any
shortcomings are
appropriately resolved,
while providing
any required
clarifications or additional
material required
by the
regulatory authorities.
The Head of
RSS reports to the
General Manager of Group Strategy.
In this context, RSS
has been assigned
inter alia with
the following
responsibilities:
●
Develop and actively monitor the NPE targets
and reduction plan
●
Set the strategic principles, priorities, policy framework
and KPIs under which doValue Greece is servicing the portfolio
●
Closely monitor the execution of the
approved strategies, as well as all
contractual provisions under the relevant contractual
agreements for Eurobank’s
portfolio assigned to doValue Greece
including the securitized portfolio of ERB Recovery
DAC
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
●
Monitoring of
the performance
of the
senior notes
of the securitizations
in collaboration
with Group
Risk so
as to
ensure
compliance to significant risk transfer
(SRT) and to the Hellenic Asset Protection Scheme (HAPS)
●
Budget and monitor the Bank’s expenses
and revenues associated with the assigned portfolio
●
Cooperate
closely with doValue Greece on a daily basis in achieving the
Group’s objectives
●
Maintain supervisory dialogue
NPE Management Strategy and Operational
targets
The Group utilized all Greek State measures (Gefyra programs) and designed solutions that will lead its clients gradually to pre Covid-
19 payment
schedules. In
this respect and
in line
with the
regulatory framework
and SSM requirements
for NPE
management, the
Group submitted in
March 2022 its NPE Management
Strategy for 2022-2024,
along with the annual NPE
stock targets at
both Bank
and Group level. The plan has taken
into account the successfully implemented,
by the end of 2021, “Mexico” securitization
of gross
carrying amount of
ca. €3.1bn (consisting
primarily of NPEs) and
envisages the decrease
of NPE ratio
at 5.8% in 2022
and below 5%
in 2024.
5.2.1 Credit Risk
Credit risk
is the risk
that a
counterparty will
be unable
to fulfill
its payment
obligations in
full when due.
Credit risk
is also related
with country risk and settlement risk, specified below:
a)
Country risk
is the
risk of
losses arising
from cross
-border lending
and investment
activities and
refers
to the
uncertainty
associated
with exposure
in a
particular country.
This uncertainty
may relate
to a
number of
factors
including the
risk of
losses following nationalization, expropriation,
debt restructuring and foreign exchange
rates’ movement.
b)
Settlement
risk
is
the
risk
arising
when
payments
are
settled,
for
example
for
trades
in
financial
instruments,
including
derivatives
and currency
transactions.
The
risk
arises
when
the
Group
remits
payments
before
it
can
ascertain
that
the
counterparties’ payments have
been received.
Credit
risk
arises
principally
from
the
wholesale
and
retail
lending
activities
of
the
Group,
as
well
as
from
credit
enhancements
provided, such as financial guarantees and
letters of credit. The Group
is also exposed to credit risk arising from other
activities such
as investments in debt securities, trading, capital markets and settlement activities. Taking
into account that credit risk is the primary
risk the Group is exposed to, it is very closely managed and
monitored by specialised risk units, reporting to the GCRO.
(a) Credit approval process
The credit approval
and credit review
processes are centralized
both in Greece and
in the International operations.
The segregation
of
duties
ensures
independence
among
executives
responsible
for
the
customer
relationship,
the
approval
process
and
the
loan
disbursement, as well as monitoring of the loan during its lifecycle.
Credit Committees
The credit
approval process
in Corporate
Banking is centralized
through establishment
of Credit
Committees with
escalating Credit
Approval Levels. Main Committees of the Bank
are considered to be the following:
●
Credit Committees
(Central and
Local) authorized
to approve
new financing,
renewals or
amendments for
domestic groups
in
the existing credit limits, in accordance with their credit approval
authority, depending on total limit amount
and customer risk
category (i.e. high, medium or low), as well as the value and type of security;
●
Special Handling Credit Committees authorized to
approve credit requests and take
actions for distressed clients;
●
International Credit
Committees (Regional
and Country)
established for
the wholesale borrowers
of the Group’s
international
bank subsidiaries, authorized to approve new limits, renewals
or amendments to existing limits, in accordance with their credit
approval authority,
depending on total customer exposure and risk category (i.e. high, medium or low), as well as the value and
type of security; and
●
International Special Handling Committees established for
handling distressed wholesale borrowers of the
Group’s international
bank subsidiaries.
The Credit Committees meet on a weekly basis or more frequently,
if needed.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Group Credit General Division (GCGD)
Within an
environment of
increased risk
challenges, Group
Credit General
Division (GCGD)
mission is to
safeguard the
banks’ asset
side, by evaluating credit
risk and making
recommendations, so that borrowers’
credit exposure is
acceptable and within
the approved
Risk Appetite
Framework.
GCGD is
headed by
the Group
Chief Credit
Officer (GCCO)
with direct
reporting
to the
Group Chief
Risk
Officer (GCRO).
GCGD
operations
are
comprised
of
two
functions,
i.e.
the
Corporate
Credit
Risk,
including
both
the
domestic
and
the
foreign
underwriting activities (the latter
only for Global Clients
and material exposures
of International Subsidiaries),
and Retail Credit
Risk
respectively,
covering the underwriting
needs of the SBB
portfolio and the
individuals (mortgage, consumer
loans, auto-moto loans
and credit cards).
1.
Corporate Credit Risk
(a) Domestic and Greek related portfolio: the underwriting function includes the review of
credit requests originating from Corporate
Units handling
large and
medium scale
corporate
entities of
every risk
category and
specialised lending
units such
as Shipping
and
Structured
Finance
(Commercial Real
Estate,
Hotel &
Leisure, Project
Finance) and
Private
Banking. Major
tasks of
the respective
workstream and involved
credit units pertain to the following:
●
Evaluation of credit applications and
issuance of an independent Risk Opinion, which
includes:
(i)
assessment
of
the
customer
credit
profile
based
on
the
qualitative
and
quantitative
risk
factors
identified
(market,
operational, structural and financial )
(ii)
recommendations for the formulation
of bankable, well-secured and well-controlled
transactions (credit facility), as well as
(iii) review and confirmation of the ratings
of each separate borrower to reflect
the risks acknowledged.
●
Participation with voting right in all credit committees
as per the Credit Approval procedures.
●
Active participation in
the regulatory audits
and major internal projects
of the Bank, providing
at the same
time credit related
knowledge, expertise and support to other divisions.
●
Preparation
of
specialised
reports
to
Management
on
a
regular
basis,
with
regards
to
the
Top
25
largest,
in
terms
of
total
exposure, borrower Groups,
statistics on the new approved
financings and leveraged transactions.
(b) International
Subsidiaries’ portfolio:
The GCGD
through its
specialized International
Credit Sector
(ICS) is responsible
to actively
participate
in
the
design,
implementation
and
review
of
the
credit
underwriting
function
for
the
wholesale
portfolio
of
the
International
Subsidiaries
covering
Bulgaria,
Cyprus,
Serbia, the
remaining
Romania
portfolio
and
portion
of the
loan portfolio
of
Luxemburg (including London Branch). Moreover,
the respective unit’s tasks and responsibilities
are highlighted below:
●
Participation right in all
International Committees (Regional and
Special Handling) with
voting right and
Country Risk Committees
(CRCs) without voting right;
●
Participation in
the sessions of
Special Handling Monitoring
Committees for
Bulgaria and
Serbia which monitor
and decide on
the strategy
of problematic
corporate relationships
with loan
outstanding exceeding
a certain
threshold, that
is jointly
set by
ICS and Country Troubled Asset
Groups;
●
Advice on best practices to the Credit Risk Units of International
Subsidiaries
●
Initiation
of,
or
participation
in,
non-recurring
credit
related
projects
involving
the
International
Subsidiaries,
such
as,
indicatively,
Wholesale Field Reviews, regulatory Asset
Quality Reviews, acquisition and/or sale of wholesale portfolios
etc.
GCGD
is
also
responsible
for
the
preparation
of
all
credit
committees’
agendas,
distribution
of
the
respective
material
and
maintenance of the respective Credit Committees’
minutes.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
2.
Retail Credit Risk
The scope of
the Retail Banking Credit Risk
& Underwriting Sector is
the assessment of
credit applications submitted by Retail Business
Units (domestic operations only),
in relation to Borrowers
of the retail credit portfolio
(SBB loans and Individuals’ banking) based on
thresholds, for which an assessment by GCGD is required
as per the provisions of the relevant Credit Approval
Procedures.
The tasks of Retail Credit Risk function
are outlined below:
●
Assess credit
requests in
alignment with
the credit
risk granting
criteria and
methodology provided
in the
appropriate
Credit
Policy Manual.
The evaluation
of the SBB
portfolio includes
the assessment of
the borrower's
financial position
and statistical
scorecards.
Regarding
the
Individual
Banking
(mortgage
and
consumer
loans),
the
credit
criteria
include
among
others
the
payment
behaviour,
financial
position
of
the
borrower,
the
existence
of
real
estate
property
and
the
type
and
quality
of
securities.
●
Analyze and evaluate risk factors
depending on the type of credit request.
●
Prepare
an
independent
Credit
Opinion
presenting
the
official
GCGD
opinion
on
the
credit
application
and
confirm,
where
required, the Borrower Rating for
each Borrower in its
portfolio ensuring that the
risks identified are dully
reflected in the Rating.
●
Participate
with
voting
rights
in
the
credit
committees
as
per
the
credit
approval
process,
according
to
the Approval
Levels
defined in the Credit Policy Manual.
(b)
Credit risk monitoring
Group Credit Control Sector
The
Group
Credit
Control
Sector
(GCCS)
monitors
and
assesses
the
quality
of
all
of
the
Group’s
loan
portfolios
and
operates
independently from the business units of the Bank. The GCCS reports directly
to the GCRO.
The main responsibilities of the GCCS are to:
●
supervise, support and maintain the credit rating and
impairment systems used to assess the wholesale lending customers;
●
monitor and review the performance of all of the Group’s
loan portfolios;
●
supervise and control the foreign subsidiaries’ credit
risk management units;
●
monitor on a
regular basis and
report on a
quarterly basis to
the Board of
Directors and
the BRC of
risk exposures,
along with
accompanying analyses;
●
monitor
and evaluate
the
efficiency
of
adopted
strategies
and
proposed
solutions
in terms
of
dealing
with
Non
Performing
Exposures
(NPEs)
and
the
achievement
of
targets
for
NPEs
reduction,
as
communicated
and
agreed
with
the
Supervisory
Authorities;
●
conduct field reviews
and prepare written
reports to the
Management on the
quality of all
of the Group’s
loan portfolios and
adherence with EBA prevailing regulations;
●
ensure that EBA classifications are made in accordance
with the relevant provisions and guidelines;
●
participate in the approval of new credit policies and
new loan products;
●
participate in the Troubled
Asset Committee;
●
attend meetings of Credit Committees and
Special Handling Committees, without voting right;
●
formulate the Group’s credit impairment policy and measure the provisions of the Greek loan portfolios along with the relevant
reporting to Management;
●
regularly review the adequacy of provisions of all of the Group’s
loan portfolios;
●
formulate, in collaboration
with the responsible lending Units the credit policy manuals for performing
borrowers;
●
provide guidance and monitor the process of designing and reviewing
credit policies before approved
by Management.
●
monitor the proper technical valuation of Real
Estate collaterals,
as per the Banks’ Collateral Valuation
policy and procedures;
●
monitor
the
supervisory,
regulatory
developments,
emerging
trends
and
best
practices
within
its
purview
in
order
to
keep
Management abreast and propose required
actions; and
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Group Credit Risk Capital Adequacy Control Sector
The
Group
Credit
Risk
Capital
Adequacy
Control
Sector
implements
and
maintains
the
Internal
Ratings
Based
(IRB)
approach
in
accordance with the Basel framework and the Capital Requirements Directive (CRD) and maintains the credit risk assessment models
for the loans portfolio of the Group. The Sector reports
directly to the GCRO.
Specifically, the main responsibilities
of the Group Credit Risk Capital Adequacy Control
Sector are to:
●
control, measure and monitor the capital requirements
arising from the Bank’s loan portfolio
along with the relevant reporting
to Management and regulators (ECB/SSM);
●
measure
and
monitor
the risk
parameters
(PD,
LGD,
EAD)
for
the
purposes
of
capital
adequacy calculations,
as
well
as,
the
estimation of risk related parameters
(such as forecast 12-m PD,
forecast lifetime PD) for
impairment calculation purposes;
●
review
the
grouping
of
lending
exposures
and
ensuring
their homogeneity
in
accordance
with
the
Group’s
IFRS
accounting
policies
●
re-assess and re-develop if required,
the significant increase in credit risk (SICR) thresholds
under IFRS9 standard;
●
prepare monthly capital adequacy calculations (Pillar
1) and relevant management, as
well as, regulatory reports
(COREPs, SREP)
on a quarterly basis;
●
participate in the preparation of the business
plan, the NPE targets plan and the recovery plan of the
Group in relation to asset
quality and
capital requirements
for the
loan book
(projected impairments
and RWAs),
as well
as participate
in the
relevant
committees;
●
perform stress tests, both internal
and external (EBA/SSM), and maintain the credit risk
stress testing infrastructure;
●
coordinate the stress testing
exercises for the loan portfolios at
Group Level;
●
monitor the regulatory
framework in relation
to the IRB framework
performing impact assessment
by initiating and
managing
relevant projects;
●
manage
the
models
development,
implementation,
monitoring
of
the
IRB
models
of
Probability
of
Default
(PD),
Loss
Given
Default (LGD) and Exposure at Default
(EAD) for evaluating credit risk;
●
prepare the credit risk analyses for Internal
Capital Adequacy Assessment (ICAAP)/ Pillar 2 purposes;
●
implement the IRB roll-out plan of the Group;
●
prepare the Basel Pillar 3 disclosures for credit
risk;
●
regularly
report
to
the
GCRO,
to
the
Management
Risk
Committee
and
to
the
Board
Risk
Committee
on:
risk
models
performance, risk parameters (PD, LGD, EAD), updates on regulatory
changes and impact assessment and asset quality reviews;
●
guide, monitor and supervise the Credit Risk divisions of the subsidiaries on modelling, credit stress testing and other credit risk
related regulatory issues.
●
monitor and guide Group’s
international subsidiaries on credit risk related
ICAAP,
stress testing and other regulatory credit risk
related issues, based on Group standards.
Review of local credit risk stress test
exercises;
●
support the
business units
in the
use of
credit risk
models in
business decisions,
for
funding purposes,
in the
capital
impact
assessment
of
strategic
initiatives
and the
development
and usage
of
risk related
metrics such
as risk
adjusted
pricing, Risk
Adjusted Return on Capital (RAROC) etc.; and
●
assist Remedial Servicing Strategy Sector in the
risk assessment and risk impact of various programs and products.
Group Model Validation and Governance Sector
The Group Model Validation
and Governance Sector was established in September
2018, with key mandates:
●
the establishment of a comprehensive model governance
and validation framework, and
●
the independent validation of
the technical and
operational completeness of all
models used by
the Group and
their parameters,
as well as their compliance with the provisions of the regulatory
framework.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
In more detail, the tasks of the Sector are outlined
as follows:
●
Prepare and update the Group’s Models Framework (to include model definition, roles involved per model, model classification
principles and methodology, model validation principles, materiality classifications and
thresholds, models’ registry governance,
etc.);
●
Establish and update the Group’s
Models Registry;
●
Review models’ classification, in accordance with the
methodology provided in the Group Models Framework;
●
Prepare
and
update
the
Group
Models
Validation
Framework,
while
providing
support
to
Group’s
subsidiaries
in
its
implementation;
●
Monitor changes in ECB guidelines on models’ validation;
●
Propose and escalate for approval
the quantitative thresholds, in order to
assess the results of the validation tests;
●
Conduct model validation tests in alignment with the Group
Model Validation Framework
and regulatory requirements;
●
Prepare detailed
reports of
the model valuation
results according
to the
specific requirements
of the
model validated,
if any,
which are communicated to BRC on an annual basis
along with any related proposed remediation
plan;
●
Disseminate models’ validation test results
within the Group’s BRC or MRC
following reporting to Group CRO,
as appropriate;
●
Prepare action plan for remediation actions, if any,
as a result of the model validation tests implemented, and escalate the plan
for its approval by the appropriate
Management Authority;
●
Participate in the approval process
of new models for assessing ratings’ system
accuracy and suitability; and
●
Monitor industry practices on the development
and use of models as well as related ECB guidelines and restrictions.
Group Market and Counterparty Risk Sector
Group Market
and Counterparty Risk Sector
(GMCRS) is responsible
for the measurement,
monitoring and periodic reporting
of the
Group’s exposure to counterparty risk (issuer risk and market driven counterparty risk), which is the risk of loss due to the
customer’s
failure
to
meet its
contractual
obligations
in the
context
of treasury
positions,
such as
debt securities,
derivatives,
repos,
reverse
repos, interbank placings, etc.
In addition,
GMCRS monitors,
controls
and regularly
reports country
limits, exposures
and escalates
breaches to
the Management
and to
Committees. GMCRS
uses a comprehensive
methodology approved
by the BRC,
for determining
the acceptable
country risk
level, including the countries in which the Group has a strategic
presence.
The
Group
sets
limits on
the level
of
counterparty
risk
that
are
based
mainly
on
the counterparty’s
credit
rating,
as
provided
by
international rating agencies, the product type and
the maturity of the
transaction (e.g. control limits on net
open derivative positions
by both amount and term, sovereign bonds exposure,
corporate securities, asset backed securities etc.).
GMCRS maintains and updates the limits’ monitoring systems and ensures the correctness and compliance of all financial institutions
limits with the Bank’s policies as approved
by the Group’s relevant
bodies.
The utilization of the abovementioned limits, any excess of them, as well as the aggregate
exposure per Group’s
entity, counterparty
and product type are monitored by GMCRS on a daily basis. Risk mitigation contracts are taken into account for the calculation of the
final exposure.
Also,
GMCRS
ensures
that
the
exposure
arising
from
counterparties
complies
with
the
approved
country
limits
framework.
The
GMCRS’s exposure measurement and reporting tool is
also available to the
Group’s subsidiaries treasury divisions, thus enabling
them
to monitor each counterparty’s exposure
and the limit availability.
Additionally,
for
the
banks’
corporate
bond
portfolio,
GMCRS
measures
and
monitors
daily
the
total
notional
limits,
the
sectoral
concentration
and the
maximum size
per issuer.
It uses
a measurement
tool for
monitoring any
downgrades and
any idiosyncratic
spread widening from purchase and any breach
is communicated to the Management
and to the relevant Committees.
GMCRS
implements
the
market’s
best
practices
and
safeguards
the
compliance
of
all
involved
parties
to
limits’
policies
and
procedures.
To
this
direction,
for
various
units
and
International
subsidiaries,
GMCRS
provides
support
and
guidance
for
implementation of the limits’ guidelines and policies.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Furthermore, GMCRS
prepares specialized
reports for
the Management/Committees
along with
regular reporting
that includes the
exposure
to the
Hellenic Republic
and a
report
that
is based
on the
calculation
of the
Lifetime
Expected
Losses for
the exposure
towards the Hellenic Republic (HR).
(c) Credit related commitments
The primary purpose of credit
related commitments is to ensure that funds are available to a
customer as agreed. Financial guarantee
contracts carry
the same credit
risk as loans
since they represent
irrevocable assurances
that the
Group will
make payments
in the
event that a customer
cannot meet its obligations
to third parties. Documentary
and commercial letters
of credit, which are written
undertakings by the Group
on behalf of a customer
authorizing a third party
to draw drafts
on the Group up
to a stipulated amount
under specific terms
and conditions,
are secured by
the underlying shipment
of goods to
which they relate
and therefore
carry less
risk than a loan. Commitments to extend credit
represent contractual commitments
to provide
credit under pre-specified terms and
conditions (note 42) in the form of loans, guarantees or letters of credit for which the
Group usually receives a commitment fee. Such
commitments are irrevocable over the
life of the facility or revocable only in response
to a material adverse effect.
(d) Concentration risk
The Group
structures the
levels of
credit risk
it undertakes
by placing
exposure limits
by borrower,
or groups
of borrowers,
and by
industry segments.
The exposure
to each
borrower is
further restricted
by sub-limits
covering on
and off-balance
sheet exposures,
and daily delivery risk limits in relation to trading items
such as forward foreign exchange
contracts.
Such risks are
monitored on a
revolving basis and are
subject to an
annual or more
frequent review. Risk concentrations are monitored
regularly
and
reported
to
the
BRC.
Such
reports
include
the
25
largest
exposures,
major
watch
list
and
problematic
customers,
industry analysis, analysis by rating/risk class, by delinquency bucket,
and loan portfolios by country.
(e) Rating systems
Rating of wholesale lending exposures
The Group has decided upon the differentiation of rating models for wholesale lending activities, in order to reflect appropriately the
risks
arising
from
customers
with
different
characteristics.
Accordingly,
the
Group
employs
the
following
rating
models
for
the
wholesale portfolio:
●
Moody’s
Risk
Analyst
model
(“MRA”
or
“Fundamental
Analysis”-“FA”)
is
used
to
assess
the
risk
of
borrowers
for
Corporate
Lending.
●
Internal Credit Rating model (“ICR”) is used for
those customers that cannot be rated
by MRA.
●
Transactional
Rating model (“TR”) has
been developed
in order to
assess the risk
of transactions taking
into consideration
their
collaterals/guarantees.
●
Slotting
rating
models
are
employed
in
view
of
assessing
the
risk
of
specialized
exposures,
which
are
part
of
the
Specialized
Lending corporate portfolio.
●
Finally, an assessment of the borrowers’ viability and the identification of impairment triggers is performed using the “Unlikely
to
Pay” (“UTP”) / impairment test.
MRA, ICR, Slotting and ”UTP” functions are supported by the CreditLens (“CL”)
computing platform provided
by an external provider
(Moody’s Analytics), while the TR is internally developed
and is being supported by the core applications of the Bank.
MRA follows
the Moody’s
fundamental analysis
(FA)
approach. The
FA
models belong
to a
family of
models defined
as Knowledge
Based Systems and rely on a
probabilistic reasoning approach. They use quantitative and qualitative information of
individual obligors
in order to assess their creditworthiness and
determine their credit rating. In particular,
MRA takes into account
the entity's balance
sheets, profit & loss accounts
and cash flow statements
to calculate key
ratios. Its ratio analysis
includes assessments of each ratio’s
trend across
multiple periods,
both in
terms of
the slope
and volatility
of the
trend. It
also compares
the value
of the
ratio for
the
most recent
period with the
quartile values
for a
comparable peer group.
Moreover,
MRA is supplied
with a commonly
used set of
qualitative
factors
relating to
the quality
of the
company’s
management,
the standing
of the
company
within its
industry and
the
perceived riskiness of the industry. MRA is used for the assessment of all legal entities with full accountancy tax books irrespective of
their legal form, and is calibrated
on the Greek corporate environment.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The MRA is
not employed
for certain
types of entities
that use different
accounting methods
to prepare
their financial statements,
such as Insurance companies and brokerage firms. Moreover,
entities such as start-ups that have not produced financial information
for at least
two annual accounting periods
are not rated
with MRA. In such cases, the
Internal Credit Rating
(“ICR”) is utilized, which
is
a
scorecard
consisting
of
a
set
of
factors
grouped
into
3
main
sections
corresponding
to
particular
areas
of
analysis:
Financial
Information,
Qualitative
Criteria,
and
Behavior
Analysis.
In
addition,
the
Group
performs
an
overall
assessment
of
wholesale
customers, based both on their rating
(MRA or ICR) and the collaterals and guarantees
regularly at every credit assessment. In 2021,
in
combination
with
the
application
of
the
new
Definition
of
Default,
the
Bank
calibrated
its
MRA
and
ICR
models,
which
were
approved by the regulatory authorities.
With reference to Specialized Lending portfolio (for which the Bank is using Slotting rating models) and in line with European Banking
Authority (EBA) definitions, it comprises types of
exposures towards entities specifically created to finance or operate physical assets,
where the primary source of
income and repayment
of the obligation lies directly
with the assets being financed. Accordingly,
three
of its
product lines
that are
included in
the Specialized
Lending exposure
class: Project
Finance (assessed
with the
Project Finance
Scorecard), Commercial Real Estate
(assessed with the CRE investor & CRE Developer
Scorecards) and Object Finance (assessed with
the Object Finance Scorecard tailored for
the Shipping portfolio).
In addition, the
Group has developed
an Unlikely to Pay/Impairment test.
Unlikeliness to pay refers to circumstances when
a Borrower
is assessed as unlikely
to pay its credit
obligations in full without
realization of collateral,
regardless of the existence
of any past due
amount or of the days past due (i.e. to exposures less than 90 dpd). The impairment test , which is performed to all borrowers during
every credit assessment is implemented in the CL platform
and includes clearly defined indicators of unlikeliness to
pay (UTP). These
indicators are separated
in “Hard” and “Soft” UTP triggers.
●
Hard
UTP
indicators
lead
directly
to
a
recognition
of
non-performing
(automatic
NPE
classification),
as
in
most
cases
these
events, by their very nature, directly fulfil the definition
of UTP and there is little room for interpretation.
●
Soft UTP triggers when applied, do
not automatically mean that an exposure is non-performing,
but that a thorough assessment
should be performed (assessment prior to NPE classification).
The Bank has further enhanced its wholesale credit risk assessment models linking risk parameters
estimation with macro-economic
factors allowing the forecasting
of rating transitions under different
macroeconomic scenarios (base, adverse and optimistic).
The rating systems described
above are an integral part of the wholesale banking decision-making
and risk management processes:
●
the credit approval or rejection, both at the origination
and review process;
●
the allocation of competence levels for
credit approval;
●
risk-adjusted pricing;
●
the calculation of Economic Value
Added (EVA) and internal capital
allocation; and
●
the impairment calculation (staging criteria and
subsequent ECL estimation of forecasted
risk parameters).
Rating of retail lending exposures
The Group
assigns credit
scores to
its retail
customers
using a
number of
statistically-based
models both
at the
origination and
on
ongoing basis
through behavioral
scorecards.
These models have
been developed
to predict,
on the
basis of available
information,
the probability of default, the loss given default and the exposure at default. They cover the entire spectrum of retail products (credit
cards, consumer lending, unsecured revolving credits,
car loans, personal loans, mortgages and small business loans).
The
Bank’s
models
were
developed
based
on
historical
data
and
credit
bureau
data.
Behavioral
scorecards
are
calculated
automatically on a monthly basis, thus ensuring that the credit risk
assessment is up to date.
The
models
are
applied
in
the
credit
approval
process,
the
credit
limits
management,
as
well
as
the
collection
process
for
the
prioritization of the accounts in
terms of handling. Furthermore,
the models are often
used for the risk
segmentation of the customers
and the
risk based
pricing of
particular segments
or new
products
introduced
as well
as in
the calculation
of the
Economic
Value
Added (EVA) and Risk Adjusted Return
on Capital (RaRoC) measures.
Notes to the Consolidated Financial Statements
.
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The rating systems employed
by the Bank meets the requirements
of the Basel III-Internal Ratings Based (IRB) approach.
The Bank is
IRB certified since 2008 for the Greek portfolios, both wholesale and retail (as detailed
in Basel III, Pillar 3 disclosures available at the
Bank’s website).
In the context of IFRS9 implementation, the Bank
has further enhanced its retail credit
risk assessment models linking risk
parameters
estimation with macro-economic factors allowing their
forecasting over one year and
lifetime horizon under different macroeconomic
scenarios (base, adverse and optimistic) and supporting the staging analysis and allocation to risk classes under homogeneous pools.
The
Group
Credit
Risk
Capital
Adequacy
Control
Sector
monitors
the
capacity
of
rating
models
and
scoring
systems
to
classify
customers
according
to
risk,
as well
as
to
predict
the probability
of
default
and loss
given default
and exposure
at default
on
an
ongoing basis.
The Group
Models Validation
and Governance
Sector implements
the Bank's
validation
policy which
complies with
international best practices
and regulatory requirements.
The Bank verifies the
validity of the rating
models and scoring systems
on
an annual basis and
the validation includes both quantitative and qualitative aspects.
The validation procedures are documented, and
regularly reviewed and reported to
the BRC.
The Group’s Internal Audit Division also independently reviews the validation process in wholesale and retail rating systems annually.
(f) Credit risk mitigation
A key component of the Group's business strategy is to reduce risk by utilizing various risk mitigating techniques. The most important
risk mitigating means are collaterals'
pledges, guarantees and master
netting arrangements.
Types of collateral commonly accepted
by the Group
The Group has internal
policies in place
which set out
the following types of
collateral that are usually accepted
in a credit
relationship:
●
residential real estate,
commercial real estate (offices, shopping malls, etc.),
industrial buildings and land;
●
receivables (trade debtors)
and post dated cheques;
●
securities, including listed shares and bonds;
●
deposits;
●
guarantees and letters
of support;
●
insurance policies; and
●
equipment, mainly, vehicles
and vessels.
A specific
coverage
ratio
is pre-requisite,
upon the
credit relationship’s
approval and
on ongoing
basis, for
each collateral
type, as
specified in the Group’s credit
policy.
For
exposures,
other than
loans to
customers
(i.e. reverse
repos,
derivatives),
the
Group
accepts as
collateral
only
cash or
liquid
bonds.
Valuation principles of collaterals
In defining
the maximum
collateral
ratio for
loans, the
Group considers
all relevant
information available,
including the
collaterals’
specific characteristics,
if market
participants
would
take
those into
account
when
pricing the
relevant
assets.
The valuation
and
hence eligibility is based on the following factors:
●
the collateral’s
fair value,
i.e. the
exit price
that would
be received
to
sell the
asset in
an orderly
transaction
under current
market conditions;
●
the fair value reflects market participants’ ability to generate economic benefits by using the asset in its highest and best use or
by selling it;
●
a reduction in the
collateral’s
value is considered
if the type, location
or condition (such as deterioration
and obsolescence) of
the asset indicate so; and
●
no collateral value is assigned if a pledge is not
legally enforceable.
Notes to the Consolidated Financial Statements
.
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The
Group
performs
collaterals’
valuation
in accordance
with its
processes
and policies.
With
the exception
of special
cases
(e.g.
syndicated
loans), the real
estate collaterals
of all units
are valued
by Cerved Property
Services S.A. (“CPS”)
who is the
successor of
the
Bank’s
former
subsidiary,
Eurobank
Property
Services S.A.
CPS is
regulated
by the
Royal
Institute
of
Chartered
Surveyors
and
employs internal
or external
qualified appraisers
based on predefined
criteria (qualifications
and expertise).
All appraisals
take into
account factors such as the region,
age and marketability of the
property, and are further reviewed and countersigned by experienced
staff.
The valuation
methodology employed
is based on
International Valuation
Standards (IVS),
while quality
controls are
in place,
such as reviewing mechanisms, independent sample reviews
by independent well established valuation
companies.
In order to monitor the valuation of residential property held as collateral, the Bank uses the Residential Property Index developed in
collaboration with
other major banks in
Greece. This methodology,
has been approved
by the Bank of Greece,
and its use enables a
dynamic monitoring of residential properties’ values and market trends, on an annual basis. The Residential Property Index is used in
combination with physical inspection and desktop
valuation, depending on the EBA status and the
balance of the loan.
For
commercial
real
estates,
the
Bank
uses
the
Commercial
Real
Estate
Index
developed
by
CPS.
This
index
is derived
through
a
combination of CPS & BoG CRE indices and it is based
on internationally accepted methodology. It constitutes a tool for the statistical
monitoring
of possible
changes of
the values
of the
commercial properties
as well
as for
the trends
in the
particular market.
It is
updated on an annual basis. The
Commercial Real Estate Index is used in combination with physical inspection and desktop valuation,
depending on the EBA status and the balance of the loan.
To ensure
the quality of the post-dated
cheques accepted as collateral, the Bank
has developed a pre-screening system,
which takes
into
account
a
number
of
criteria
and
risk
parameters,
so
as
to
evaluate
their
eligibility.
Furthermore,
the
post-dated
cheques’
valuation is monitored through
the use of advanced statistical
reports and through the review
of detailed information
regarding the
recoverability of cheques, referrals
and bounced cheques, per issuer broken down.
Collateral policy and documentation
Regarding collaterals, Group’s
policy emphasizes the need that collaterals and relevant processes are timely and prudently executed,
in
order
to
ensure
that
collaterals
and relevant
documentation
are
legally
enforceable
at
any
time. The
Group
holds the
right
to
liquidate collateral in the event
of the obligor’s financial
distress and can claim
and control cash proceeds
from the liquidation process.
Guarantees
The guarantees used as credit risk mitigation
by the Group are largely issued by central and
regional governments in the countries in
which
it
operates.
The
Hellenic
Development
Bank
(HDB)
and
similar
funds,
banks
and
insurance
companies
are
also
significant
guarantors of credit risk.
Management of repossessed properties
The
objective
of
the
repossessed
assets’
management
is
to
minimize
the
time
cycle
of
the
asset’s
disposal
and
to
maximize
the
recovery of the capital engaged.
To this
end, the management of repossessed assets
aims at improving rental
and other income from the
exploitation of such assets,
and at the
same time reducing
the respective holding and
maintenance costs. Additionally, the Group is
actively engaged in identifying
suitable potential buyers for its portfolio of repossessed assets (including specialized funds involved
in acquiring specific portfolios of
properties repossessed), both in Greece and abroad,
in order to reduce its stock of properties with a time horizon
of 3-5 years.
Repossessed assets are closely monitored based on technical and
legal due diligence reports, so that their market value
is accurately
reported and updated in accordance with market
trends.
Counterparty risk
The
Group
mitigates
counterparty
risk
arising
from
treasury
activities
by
entering
into
master
netting
arrangements
and
similar
agreements,
as
well
as
collateral
agreements
with
counterparties
with
which
it
undertakes
a
significant
volume
of
transactions.
Master netting arrangements do not generally result in
the offset of balance sheet
assets and liabilities, as
the transactions are usually
settled on
a gross basis.
However,
the respective credit
risk is reduced
through a
master netting
agreement to
the extent
that if an
event of default occurs, all amounts
with the counterparty are terminated
and settled on a net basis.
In the case of
derivatives, the Group
makes use of
International Swaps
and Derivatives Association
(ISDA) contracts,
which limit the
exposure
via
the
application
of
netting,
and
Credit
Support
Annex
(CSAs),
which
further
reduce
the
total
exposure
with
the
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
counterparty. Under these agreements, the total exposure with the counterparty is calculated on a daily
basis taking into account any
netting arrangements and collaterals.
The same
process is
applied in
the case
of repo
transactions where
standard
Global Master
Repurchase
Agreements
(GMRAs) are
used. The exposure
(the net difference
between repo
cash and the
market value
of the securities)
is calculated
on a daily basis
and
collateral is transferred
between the counterparties thus minimizing the exposure.
Following
the
European
Market
Infrastructure
Regulation
(EMIR),
the
Bank
performs
centrally
cleared
transactions
for
eligible
derivative contracts
through an EU
authorized European
central counterparty
(CCP), recorded
in trade
repositories. The
use of CCP
increases market transparency
and reduces counterparty credit and operational
risks inherent in derivatives markets.
The Bank uses a comprehensive
collateral management
system for
the monitoring of ISDA, CSAs
and GMRAs, i.e. the daily valuation
of the derivatives
and the market value
of the securities are used for
the calculation of each counterparty’s
exposure. The collateral
which should be posted or requested by the relevant
counterparty is calculated daily.
With
this
system,
the
Bank
monitors
and
controls
the
collateral
flow
in
case
of
derivatives
and
repos,
independently
of
the
counterparty. The effect of any market
movement that increases the Bank’s exposure is reported and the Bank proceeds to collateral
call accordingly.
5.2.1.1 Maximum exposure to credit
risk before collateral held
2021
2020
€ million
€ million
Credit risk exposures relating to on-balance sheet assets
are as
follows:
Due from credit institutions
2,511
3,337
Less: Impairment allowance
(1)
2,510
(1)
3,336
Debt securities held for trading
69
42
Derivative financial instruments
1,949
2,552
Loans and advances to customers at
amortised cost:
- Wholesale lending⁽¹⁾
23,716
21,340
- Mortgage lending
10,105
11,650
- Consumer lending
3,242
3,408
- Small business lending
3,753
4,476
Less: Impairment allowance
(1,872)
38,943
(3,477)
37,397
Loans and advances to customers measured
at FVTPL
23
27
Investment securities:
- Debt securities measured at amortised cost
4,672
2,789
Less: Impairment allowance
(6)
4,666
(5)
2,784
Debt securities measured at FVOCI
6,509
5,454
Investment securities at FVTPL
141
127
Other financial assets⁽²⁾
190
137
Less: Impairment allowance
(28)
162
(30)
107
Credit risk exposures relating to off-balance
sheet items (note 42):
- Loan commitments
5,139
4,586
- Financial guarantee contracts and
other commitments
1,702
1,125
Total
61,814
57,537
(1)
Includes loans to public sector.
(2)
Refers to financial assets subject to IFRS 9 impairment requirements, which are recognised within other assets.
The above table represents the Group’s
maximum credit risk exposure as at 31 December 2021 and
31 December 2020 respectively,
without taking
account
of any
collateral
held or
other credit
enhancements
that
do not
qualify for
offset
in the
Group's
financial
statements.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
For on-balance
sheet assets,
the exposures
set out above
are based
on the carrying
amounts as reported
in the balance
sheet. For
off-balance
sheet
items,
the
maximum
exposure
is
the
nominal
amount
that
the
Group
may
be
required
to
pay
if
the
financial
guarantee
contracts
and other
commitments are
called upon
and the
loan commitments
are drawn
down. Off-balance
sheet loan
commitments presented above, include
revocable commitments to extend
credit of € 3.6 billion (2020: € 3.4 billion) that are subject
to ECL measurement.
5.2.1.2
Loans and advances to customers
The section below provides an
overview of the Group’s exposure to credit risk arising
from its customer lending portfolios, in line
with
the guidelines
set by
the Hellenic
Capital
Markets
Commission and
the Bank
of Greece
(BoG) released
on 30
September 2013,
as
updated by the Group
in order to comply with
the revised IFRS 7 ‘Financial
Instruments: Disclosures’,
following the adoption of
IFRS
9
from
2018.
In
addition,
the
types
of
the
Group’s
forbearance
programs
are
in
line
with
the
BoG’s
Executive
Committee
Act
42/30.05.2014 and its amendments.
(a) Credit quality of loans and advances to customers
Loans and advances to customers carried
at amortised cost are classified depending on how ECL is measured.
Accordingly,
loans reported
as non-impaired
include loans
for
which a
‘12-month
ECL allowance’
is recognized
as they
exhibit
no
significant increase in credit risk since initial recognition and loans for which a ‘Lifetime ECL allowance’
is recognized as they exhibit a
significant increase in credit risk since initial recognition
but are not considered to be in default.
Credit impaired loans category includes loans that are considered to be in default, for which a loss allowance equal to a ‘Lifetime ECL’
is recognized,
and loans
classified as ’Purchased
or originated
credit impaired’
(POCI) which are
always measured
on the
basis of
a
‘Lifetime ECL’.
Loans
and
advances
to
customers
carried
at
FVTPL
are
not
subject
to
ECL
measurement
and
therefore
are
not
included
in
the
quantitative information provided in the below sections for loans and advances measured at amortised cost, except where indicated.
Definition of default
In accordance with its accounting policy 2.2.13 “Impairment of financial assets”, the Group applies a default definition for accounting
purposes,
which
is
consistent
with
the
European
Banking
Authority
(EBA)
definition
for
non-performing
exposure
and
regulatory
definition of default
as applied by the
Group on 1
January 2021. More specifically,
as of 1 January
2021, the Group
applied the new
definition
of
default
(DoD)
for
regulatory
purposes,
as
is set
in the
Article 178
of
Regulation
(EU)
No. 575/2013,
the Commission
Delegated Regulation (EU) 2018/171
and European Banking Authority (EBA) Guidelines (EBA/GL/2016/07).
The new DoD aims at the
harmonization of the
definition of defaulted
exposures across
institutions and jurisdictions
in the European Union
and introduced a
new set
of standards
with a
significant impact
on governance,
data, processes,
systems
and credit
models. In
particular,
the main
changes introduced by the new DoD guidelines specify that days past due are counted from the date that both materiality thresholds
are breached (an
absolute amount of the
total exposure
and a relative as
a percentage of
the exposure)
for more than 90
days past
due,
include
conditions
for
a
return
to
non-defaulted
status
(introduction
of
a
three
month
probation
period
for
non-forborne
exposures)
and
additional
unlikely
to
pay
triggers
such
us
the diminished
financial
obligation
criterion
for
restructured
loans
(ie.
difference between the net present
value of cash flows before and after
the restructuring exceeds the threshold of 1%).
The Group
applied the
new provisions
of DoD,
in order
to identify
defaulted
exposures
starting from
1 January
2021, consistently
across all its lending portfolios and subsidiaries, subject to local regulations and specific credit risk characteristics of each jurisdiction.
The effect from the implementation of the new DoD on the Group’s expected credit losses was neutral
since any negative effect, due
to introduction
of new DoD
to the lending
exposures’ probability
of default,
was almost
entirely off-set
by the improvement
of the
cure rates
as these
reflected in
the lending
exposures loss
given default.
Information
regarding
the impact
of the
new DoD
on the
Group’s regulatory
capital is provided in note 4.
Accordingly,
the
perimeters
of
the
credit
impaired
loans
under
IFRS9,
the
non-performing
exposures
under
EBA
guidelines
and
defaulted exposures for
regulatory purposes have been aligned.
The Group’s accounting
policy for impairment of financial assets is set out in note 2.2.13.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Quantitative information
The following tables present
the total gross carrying and nominal
amount, representing the maximum exposure
to credit risk before
the impairment
allowance, of
loans and
advances including
securitized notes
issued by
special purpose
vehicles established
by the
Group and credit related
commitments respectively,
that are classified as non-impaired
(stage 1 and stage
2) and those classified as
credit-impaired (stage 3
and POCI). They also present the impairment
allowance recognized in
respect of all loans and advances and
credit related
commitments, analyzed
into individually or
collectively assessed, based
on how the
respective impairment
allowance
has been calculated, the carrying amount of loans and advances,
as well as the value of collateral held to
mitigate credit risk.
Public Sector lending
exposures include exposures
to the central
government, local
authorities, state-linked
companies and entities
controlled and fully
or partially owned by the
state, excluding
public and private
companies with commercial activity.
For credit risk
management purposes, exposures to Public Sector
are incorporated in wholesale lending.
In addition, the value of collateral presented
in the tables below is capped to the respective gross loan
amount.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The
following
tables
present
information
about
the
credit
quality
of
the
gross
carrying
amount
of
loans
and
advances
to
customers
carried
at
amortised
cost,
the
nominal
exposure
of
credit
related
commitments and the respective impairment allowance
as well as the carrying amount of loans and advances to customers
carried at FVTPL:
31 December 2021
Impairment allowance
Lifetime ECL -
Stage 3 and POCI⁽¹⁾
Lifetime ECL -
Stage 3 and POCI⁽¹⁾
12-month ECL -
Stage 1
Lifetime ECL - Stage 2
Individually
assessed
Collectively
assessed
Total gross carrying
amount/nominal
exposure
12-month ECL -
Stage 1
Lifetime ECL - Stage 2
Individually
assessed
Collectively
assessed
Carrying amount
Value of
collateral
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Retail Lending
11,984
3,790
119
1,205
17,099
(102)
(235)
(73)
(581)
16,108
11,360
- Mortgage
6,871
2,735
54
444
10,105
(17)
(138)
(36)
(134)
9,780
Value of collateral
6,474
2,245
27
337
9,083
- Consumer
1,905
267
2
217
2,391
(35)
(31)
(1)
(136)
2,188
Value of collateral
107
1
2
3
112
- Credit card
667
45
0
138
850
(9)
(7)
(0)
(120)
714
Value of collateral
1
0
0
0
1
- Small business
2,540
744
63
406
3,753
(41)
(58)
(36)
(190)
3,427
Value of collateral
1,391
555
29
190
2,164
Wholesale Lending
20,564
1,668
1,168
282
23,681
(68)
(76)
(599)
(137)
22,802
16,118
- Large corporate
11,694
726
389
23
12,831
(39)
(37)
(183)
(13)
12,559
Value of collateral
6,474
478
255
9
7,217
- SMEs
3,764
941
779
259
5,744
(29)
(38)
(416)
(124)
5,137
Value of collateral
2,501
717
449
128
3,795
- Securitized notes⁽²⁾
5,106
-
-
-
5,106
(0)
-
-
-
5,106
Value of collateral
5,106
-
-
-
5,106
Public Sector
31
3
-
2
35
(1)
(0)
-
(1)
33
2
- Greece
30
2
-
1
33
(1)
(0)
-
(1)
31
Value of collateral
1
1
-
0
2
- Other countries
1
0
-
1
2
(0)
(0)
-
(0)
1
Value of collateral
0
-
-
-
0
Loans and advances to customers
at FVTPL
23
23
Total
32,578
5,461
1,287
1,489
40,815
(171)
(311)
(672)
(718)
38,967
27,503
Total value of collateral
22,055
3,998
762
666
Credit related commitments
6,397
393
32
19
6,841
(14)
(6)
(23)
(5)
Loan commitments
4,871
263
3
2
5,139
(9)
(3)
(1)
(0)
Financial guarantee contracts and
other commitments
1,526
130
29
17
1,702
(5)
(3)
(22)
(5)
Value of collateral
935
51
6
7
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
31 December 2020
Impairment allowance
Lifetime ECL - Stage 3 and POCI⁽¹⁾
Lifetime ECL - Stage 3 and POCI⁽¹⁾
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Individually
assessed
Collectively
assessed
Total gross carrying
amount/nominal
exposure
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Individually
assessed
Collectively
assessed
Carrying amount
Value of
collateral
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Retail Lending
11,511
4,425
334
3,265
19,534
(100)
(332)
(184)
(1,619)
17,299
12,968
- Mortgage
7,081
2,791
176
1,603
11,650
(24)
(152)
(94)
(571)
10,809
Value of collateral
6,469
2,286
122
1,219
10,096
- Consumer
1,606
377
2
553
2,538
(21)
(53)
(1)
(460)
2,003
Value of collateral
93
3
2
93
191
- Credit card
624
69
0
177
870
(20)
(8)
(0)
(157)
685
Value of collateral
1
0
0
0
1
- Small business
2,200
1,189
155
932
4,476
(35)
(119)
(90)
(431)
3,802
Value of collateral
1,249
793
96
543
2,681
Wholesale Lending
17,180
1,995
1,509
614
21,298
(82)
(107)
(741)
(310)
20,058
13,950
- Large corporate
10,821
997
587
43
12,447
(60)
(44)
(274)
(20)
12,049
Value of collateral
5,995
749
384
23
7,151
- SMEs
2,861
998
922
572
5,353
(22)
(63)
(467)
(291)
4,511
Value of collateral
1,797
705
518
280
3,301
- Securitized notes⁽²⁾
3,498
-
-
-
3,498
(0)
-
-
-
3,498
Value of collateral
3,498
-
-
-
3,498
Public Sector
24
17
-
2
42
(1)
(1)
-
(1)
40
2
- Greece
22
17
-
1
40
(1)
(1)
-
(1)
38
Value of collateral
1
1
-
0
2
- Other countries
1
-
-
1
2
(0)
-
-
(0)
2
Value of collateral
0
-
-
-
-
0
Loans and advances to customers
at FVTPL
27
27
Total
28,714
6,436
1,843
3,881
40,874
(183)
(439)
(925)
(1,930)
37,424
26,947
Total value of collateral
19,103
4,537
1,121
2,159
Credit related commitments
5,238
418
33
23
5,712
(32)
(7)
(21)
(6)
Loan commitments
4,292
289
3
2
4,586
(24)
(4)
-
(0)
Financial guarantee contracts and
other commitments
946
129
30
21
1,126
(8)
(2)
(21)
(6)
Value of collateral
431
44
5
7
(1)
As at 31
December 2021, total
gross carrying amount
of credit impaired
loans includes POCI
loans of €
44 million,
of which €
9.3 million arose
from the merger
of Eurobank A.D.
Beograd with Direktna Banka
a.d. (note 23.2)
and carry an
impairment allowance of € 6.4 million
(2020: € 43 million gross carrying amount and € 3.5 million impairment allowance).
(2)
It refers to the
senior notes of the
Pillar,
Cairo and Mexico securitizations
that are collateralized by
the underlying pool of loans
held by the respective
securitization vehicles (note 20).
The amount of the securitized
loan portfolios has been
capped to the gross carrying amount of the senior notes. In addition, the senior notes of the Cairo and
Mexico securitizations are guaranteed by the Hellenic Republic in the context of Hellenic Asset Protection Scheme (note 20).
Notes to the Consolidated Financial Statements
.
68
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31 December 2021 Consolidated Financial Statements
The Group assesses the credit quality of its loans and advances to customers
and credit related commitments that are subject to
ECL
using internal credit
rating systems
for the wholesale
portfolio, which
are based on
a variety of quantitative
and qualitative factors,
while the credit quality of the retail portfolio is based
on the allocation of risk classes into homogenous pools.
The following tables present the distribution
of the gross carrying amount of loans and advances and the nominal exposure
of credit
related commitments based on the credit quality
classification categories and stage allocation:
31 December 2021
31 December 2020
Internal credit rating
12-month ECL-
Stage 1
Lifetime ECL-Stage 2
Lifetime ECL -
Stage 3 and
POCI
Total gross
carrying
amount
12-month ECL -
Stage 1
Lifetime ECL - Stage
2
Lifetime ECL -
Stage 3 and
POCI
Total gross
carrying
amount
Retail Lending
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
- Mortgage
PD<2.5%
5,738
417
-
6,155
6,442
190
-
6,632
2.5%<=PD<4%
554
465
-
1,019
193
318
-
510
4%<=PD<10%
504
1,134
-
1,638
217
545
-
761
10%<=PD<16%
39
282
-
321
109
250
-
359
16%<=PD<99.99%
37
436
-
473
121
1,488
-
1,609
100%
-
-
498
498
-
-
1,779
1,779
- Consumer
PD<2.5%
131
13
-
144
761
12
-
774
2.5%<=PD<4%
805
22
-
827
577
18
-
594
4%<=PD<10%
903
83
-
987
247
97
-
344
10%<=PD<16%
50
12
-
62
11
56
-
67
16%<=PD<99.99%
15
137
-
152
10
193
-
203
100%
-
-
219
219
-
-
555
555
- Credit card
PD<2.5%
429
4
-
433
270
5
-
276
2.5%<=PD<4%
233
27
-
260
194
15
-
209
4%<=PD<10%
4
5
-
9
139
8
-
147
10%<=PD<16%
0
1
-
1
19
24
-
44
16%<=PD<99.99%
0
8
-
9
1
16
-
17
100%
-
-
139
139
-
-
177
177
- Small business
PD<2.5%
1,413
26
-
1,439
194
19
-
213
2.5%<=PD<4%
232
12
-
244
943
14
-
957
4%<=PD<10%
657
81
-
738
579
44
-
623
10%<=PD<16%
78
137
-
214
166
59
-
225
16%<=PD<99.99%
161
488
-
649
318
1,053
-
1,370
100%
-
-
469
469
-
-
1,087
1,087
Wholesale Lending
- Large corporate
Strong
7,417
16
-
7,434
6,654
139
-
6,793
Satisfactory
4,070
427
-
4,497
3,847
519
-
4,366
Watch list
206
283
-
489
320
339
-
659
Impaired (Defaulted)
-
-
411
411
-
-
629
629
- SMEs
Strong
1,049
20
-
1,069
1,325
69
-
1,393
Satisfactory
2,399
356
-
2,755
1,383
377
-
1,760
Watch list
316
565
-
882
154
552
-
706
Impaired (Defaulted)
-
-
1,039
1,039
-
-
1,494
1,494
- Securitized notes
Strong
5,106
-
-
5,106
3,498
-
-
3,498
Public Sector
All countries
Strong
22
-
-
22
1
-
-
1
Satisfactory
3
0
-
3
22
-
-
22
Watch list
6
2
-
8
1
17
-
18
Impaired (Defaulted)
-
-
2
2
-
-
2
2
Total
32,578
5,461
2,776
40,815
28,714
6,436
5,724
40,874
Notes to the Consolidated Financial Statements
.
69
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31 December 2021 Consolidated Financial Statements
31 December 2021
31 December 2020
Internal credit rating
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Lifetime ECL -
Stage 3 and
POCI
Total
nominal
amount
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Lifetime ECL -
Stage 3 and
POCI
Total
nominal
amount
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Credit Related
Commitments
Retail Lending
Loan commitments
PD<2.5%
1,479
5
-
1,484
938
6
-
944
2.5%<=PD<4%
845
45
-
890
777
40
-
817
4%<=PD<10%
415
96
-
511
723
85
-
808
10%<=PD<16%
39
10
-
49
210
34
-
244
16%<=PD<99.99%
0
6
-
6
11
31
-
42
100%
-
-
2
2
-
-
2
2
Financial guarantee
contracts and other
commitments
PD<2.5%
92
-
-
92
7
0
-
7
2.5%<=PD<4%
39
-
-
39
57
-
-
57
4%<=PD<10%
11
0
-
11
70
0
-
70
10%<=PD<16%
-
0
-
0
-
-
-
-
16%<=PD<99.99%
1
0
-
1
0
0
-
0
100%
-
-
1
1
-
-
0
0
Wholesale Lending
Loan commitments
Strong
1,145
34
-
1,179
943
37
-
980
Satisfactory
902
58
-
960
677
23
-
700
Watch list
47
9
-
56
13
33
-
45
Impaired
(Defaulted)
-
-
3
3
-
-
3
3
Financial guarantee
contracts and other
commitments
Strong
883
1
-
884
410
3
-
413
Satisfactory
466
64
-
530
309
59
-
368
Watch list
34
65
-
99
93
67
-
160
Impaired
(Defaulted)
-
-
45
45
-
-
51
51
Total
6,397
393
51
6,841
5,238
418
56
5,712
The table below depicts the internal credit rating
bands (MRA rating scale or equivalent)
for the wholesale portfolio that correspond
to the credit quality classification categories
presented in the above tables:
Wholesale Lending
Credit Quality classification
categories
Internal Credit Rating
Large Corporate
Internal Credit Rating
SMEs
Strong
1-4
1-3
Satisfactory
5-6
4-6
Watch list
7-9
7-9
Impaired (Defaulted)
10
10
The 2021 credit
quality classification
for the
retail portfolios
as depicted in
the above
table is
affected mainly
by two
factors which
have opposite effects on the
12m Probability of Default (PD):
a)
the positive impact from the improving macroeconomic environment;
and
b)
the negative
impact of the introduction
of new definition
of default (DoD)
on the PD.
However,
the overall
impact of new
DoD
on expected credit
loss (ECL) was neutral
since any negative
effect on the
PD was almost entirely
off-set by an improvement
of
Loss Given Default (LGD).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The combined effect of these factors
on each lending portfolio, along with portfolio-specific movements
differs as follows:
Mortgage
: The improving
macroeconomic effect
is largely
offset by
the new DoD
impact. In parallel,
the annual
repayments of
the
existing performing
loans exceed
the new
high credit
quality loan
originations, leading
to a
decrease of
loan balance
in the
low PD
segments as at 31 December 2021.
Consumer
: The negative
impact of the
new DoD supersedes
the improving macroeconomic
effect. In
particular,
the introduction
of
the new DoD had its highest impact among asset classes on the PD of consumer loans.
Credit cards
: the
Bank has
proceeded with
the calibration
of PD estimates
to incorporate
the high credit
quality effect
of accounts
with unutilized limits. For consistency purposes, the 2020 comparative
segmentation has been restated to reflect
the calibrated PDs.
Small
business
:
The
small
business
performing
portfolio
significant
improvement
in
the
credit
quality
segmentation
of
2021
is
explained by
the high
correlation
of the
specific exposures’
PD with
the GDP
evolution,
which exhibited
a strong
improving trend
during 2021, outweighing any negative impact from
the new DoD.
For Wholesale lending,
the 2021 segmentation
is mainly affected
by the recalibration
of the internal
credit rating
models that
took
place during the year and its consequent effects
on the population mix of each risk segment with the
notable reclassification of SME
population
with
credit
rating
4
from
the
strong
to
the
satisfactory
risk
segment.
In
this
context,
where
appropriate,
the
2020
comparative segmentation
has also been restated.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The following tables present the movement of the gross carrying
amounts for loans and advances to customers
by product line and stage and is calculated by reference
to the opening and closing balances
for the reporting years from 1 January
2021 to 31 December 2021 and 1 January 2020 to 31 December 2020:
31 December 2021
Wholesale
Mortgage
Consumer
Small business
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Lifetime ECL -
Stage 3 and
POCI
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Lifetime ECL -
Stage 3 and
POCI
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Lifetime ECL -
Stage 3 and
POCI
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Lifetime ECL -
Stage 3 and
POCI
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Gross carrying amount at 1
January
17,204
2,012
2,125
7,081
2,791
1,779
2,230
445
732
2,200
1,189
1,087
40,874
New loans and advances
originated or purchased
4,354
-
-
599
-
-
660
-
-
558
-
-
6,171
Arising from acquisition (note
23.2)
94
-
2
45
-
3
164
-
3
10
-
1
322
Securitized notes
1,621
-
-
-
-
-
-
-
-
-
-
-
1,621
Transfers
between stages
-to 12-month ECL
460
(441)
(20)
549
(540)
(9)
149
(144)
(5)
437
(433)
(4)
-
-to lifetime ECL
(600)
638
(39)
(748)
966
(218)
(141)
168
(28)
(152)
216
(64)
-
-to lifetime ECL credit-
impaired loans
(35)
(190)
225
(89)
(223)
312
(66)
(99)
165
(59)
(142)
202
-
Loans and advances
derecognised/ reclassified as
held for sale during the year
(30)
(34)
(529)
(24)
(220)
(1,255)
(3)
(14)
(336)
(5)
(81)
(637)
(3,167)
Amounts written-off⁽¹⁾
-
-
(166)
-
-
(73)
-
-
(145)
-
-
(85)
(469)
Repayments
(3,373)
(360)
(166)
(771)
(152)
(69)
(458)
(65)
(65)
(451)
(46)
(45)
(6,020)
Foreign exchange differences
and other movements
901
46
17
229
115
28
37
19
37
1
41
13
1,483
Gross Carrying amount at 31
December
20,594
1,670
1,452
6,871
2,735
498
2,572
311
358
2,540
744
469
40,815
Impairment allowance
(69)
(76)
(737)
(17)
(138)
(170)
(44)
(39)
(257)
(41)
(58)
(227)
(1,872)
Carrying amount at 31
December
20,526
1,595
715
6,854
2,597
328
2,529
273
101
2,499
685
242
38,943
Notes to the Consolidated Financial Statements
.
72
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31 December 2021 Consolidated Financial Statements
31 December 2020
Wholesale
Mortgage
Consumer
Small business
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Gross carrying amount at 1
January
13,660
1,802
4,644
6,980
3,129
3,873
2,297
389
1,152
2,268
931
3,281
44,406
New loans and advances
originated or purchased
3,809
-
-
468
-
-
521
-
-
814
-
-
5,612
Securitized notes
2,440
-
-
-
-
-
-
-
-
-
-
-
2,440
Transfers
between stages
-to 12-month ECL
272
(271)
(0)
779
(771)
(8)
76
(72)
(4)
114
(112)
(2)
-
-to lifetime ECL
(872)
899
(27)
(539)
842
(303)
(172)
218
(46)
(413)
496
(83)
-
-to lifetime ECL credit-
impaired loans
(57)
(251)
308
(38)
(149)
188
(41)
(51)
92
(31)
(57)
88
-
Loans and advances
derecognised/ reclassified as
held for sale during the year
(142)
(41)
(2,459)
(24)
(184)
(1,910)
(61)
(14)
(310)
(76)
(109)
(2,183)
(7,512)
Amounts written-off⁽¹⁾
-
-
(220)
-
-
(97)
-
-
(131)
-
-
(103)
(551)
Repayments
(1,838)
(174)
(93)
(663)
(109)
(52)
(308)
(39)
(33)
(217)
(66)
(36)
(3,628)
Foreign exchange differences
and other movements
(68)
48
(28)
118
32
88
(83)
14
14
(259)
106
126
107
Gross Carrying amount at 31
December
17,204
2,012
2,125
7,081
2,791
1,779
2,230
445
732
2,200
1,189
1,087
40,874
Impairment allowance
(83)
(108)
(1,052)
(24)
(152)
(665)
(41)
(61)
(617)
(35)
(119)
(520)
(3,477)
Carrying amount at 31
December
17,121
1,904
1,073
7,056
2,638
1,114
2,189
384
115
2,165
1,070
567
37,397
(1)
The contractual amount outstanding on lending exposures that were written off during the year ended 31 December 2021 and
that are still subject to enforcement activity is € 217 million (2020: € 503 million).
Note 1: Wholesale product line category includes also Public sector loans portfolio.
Note 2: “Loans and advances derecognised/ reclassified as held for sale during the year” presents loans derecognized during the year due to a) securitization and sale transactions,
b) substantial modifications of the loans’ contractual terms, c)
debt to equity transactions, consolidation of a newly acquired entity and those that have been
reclassified as held for sale during the year (notes 20 and 30).
Notes to the Consolidated Financial Statements
.
73
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31 December 2021 Consolidated Financial Statements
Credit impaired loans and advances to customers
The following
tables present
the ageing
analysis of
credit impaired
(Stage 3
and POCI)
loans and
advances by
product line
at their
gross carrying amounts, as well as the respective impairment
allowance and the value of collaterals held to
mitigate credit risk.
For denounced loans, the Group ceases to monitor the delinquency status and therefore the respective balances have
been included
in the ‘over 360 days’ time band, with the
exception of consumer exposures which continue to be monitored up to 360
days past due.
31 December 2021
Retail lending
Wholesale lending
Public sector
Lifetime ECL
credit-impaired
Mortgage
Consumer
Credit card
Small
business
Large
corporate
SMEs
Greece and
other countries
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
up to 90 days
208
74
24
127
208
341
0
981
90 to 179 days
49
26
7
26
1
4
-
113
180 to 360 days
88
42
9
45
0
44
0
228
more than 360 days
153
77
99
271
203
649
2
1,453
Total gross carrying
amount
498
219
139
469
411
1,039
2
2,776
Impairment allowance
(170)
(137)
(120)
(227)
(196)
(539)
(1)
(1,391)
Carrying amount
328
82
18
242
215
499
1
1,386
Value of Collateral
365
4
0
218
264
577
0
1,428
31 December 2020
Retail lending
Wholesale lending
Public sector
Lifetime ECL
credit-impaired
Mortgage
Consumer
Credit card
Small
business
Large
corporate
SMEs
Greece and
other countries
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
up to 90 days
541
79
23
228
218
305
-
1,393
90 to 179 days
48
26
8
28
21
53
-
184
180 to 360 days
56
32
17
18
4
78
-
205
more than 360 days
1,134
418
129
814
387
1,058
2
3,942
Total gross carrying
amount
1,779
555
177
1,087
629
1,494
2
5,724
Impairment allowance
(665)
(461)
(157)
(520)
(294)
(757)
(1)
(2,855)
Carrying amount
1,114
94
21
567
336
737
1
2,869
Value of Collateral
1,341
95
0
638
407
798
0
3,280
Note: As at 31 December 2021, total gross carrying amount of credit impaired loans includes POCI loans
of € 44 million (2020: € 43 million).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
(b) Collaterals and repossessed assets
Collaterals
The Loan-to-Value
(LTV)
ratio of
the mortgage
lending reflects
the gross
loan exposure
at the
balance sheet
date over
the market
value of the property held as collateral.
The LTV ratio
of the mortgage portfolio is presented below:
2021
2020
€ million
€ million
Mortgages
Less than 50%
2,630
2,745
50%-70%
2,100
2,096
71%-80%
1,508
1,483
81%-90%
1,010
1,104
91%-100%
994
1,589
101%-120%
680
863
121%-150%
516
705
Greater than 150%
666
1,065
Total exposure
10,105
11,650
Average LTV
61.82%
69.25%
The breakdown of collateral
and guarantees for loans and advances to
customers at amortised cost is presented
below:
31 December 2021
Value of collateral received
Guarantees
received⁽¹⁾
Real Estate
Financial
Other
Total
€ million
€ million
€ million
€ million
€ million
Retail Lending
10,522
504
335
11,360
616
Wholesale Lending
4,795
1,139
10,184
16,118
376
Public sector
1
1
0
2
-
Total
15,318
1,644
10,519
27,480
992
31 December 2020
Value of collateral received
Guarantees
Received
Real Estate
Financial
Other
Total
€ million
€ million
€ million
€ million
€ million
Retail Lending⁽²⁾
12,202
480
286
12,968
516
Wholesale Lending
5,107
933
7,910
13,950
356
Public sector
1
1
0
2
-
Total
17,310
1,414
8,196
26,920
872
(1)
In addition to
the above presented
guarantees, in December
2021, the Group
has entered
into two
financial guarantees contracts
‘Wave I’
and ‘Wave
II’
related to the portfolios of performing SMEs and large corporate loans of € 1.7 billion (note 20).
(2)
Where appropriate, comparative information has been adjusted in order to align with current year’s presentation of collateral and guarantees received.
The collaterals
presented in
the above table
under category
“Other”, include
assigned receivables,
equipment, inventories,
vessels,
etc. They also include the amount of the securitized loans held by the securitizations vehicles that
issued the Pillar, Cairo and Mexico
senior notes. The amount of the securitized loans has been capped
to the gross carrying amount of the senior notes. In addition, the
senior notes of
the Cairo and
Mexico securitizations are guaranteed by
the Hellenic
Republic in the
context of Hellenic
Asset Protection
Scheme (note 20).
Notes to the Consolidated Financial Statements
.
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Repossessed assets
The Group recognizes
collateral assets
on the balance
sheet by taking
possession usually through
legal processes or
by calling upon
other credit enhancements. As at 31 December
2021, the carrying amount of repossessed assets
which are included in “Other assets”
amounted to € 572 million
(31 December 2020:
€ 586 million), note 29.
These assets are carried at the
lower of cost and net realizable
value (note 2.2.18).
The main
type of
collateral
that the
Group repossesses
against
repayment
or reduction
of the
outstanding
loan is
real estate
.
The
below
table
presents
the
movement
of
repossessed
real
estate
assets
during
the
year,
including
a)
those
transferred
to
the
appropriate category based on their use by the Group as part of its operations i.e. investment property or own-used (notes 2.2.6, 26,
and 27) and b) those reclassified to “held for sale” category
(notes 30).
2021
2020
Real estate
Real estate
Residential
Commercial
Total
Residential
Commercial
Total
€ million
€ million
€ million
€ million
€ million
€ million
Balance at 1 January
208
377
585
206
330
536
Additions⁽¹⁾
12
23
35
33
47
80
Transfers
to investment property
(1)
(2)
(3)
-
(2)
(2)
Disposals
(4)
(12)
(16)
(9)
(7)
(16)
Valuation losses
(2)
(3)
(5)
(3)
(9)
(12)
Held for Sale (note 30 )
(3)
(21)
(24)
-
-
-
Other
(1)
-
(1)
(19)
18
(1)
Balance at 31 December
209
362
571
208
377
585
(1)
The carrying amount
of the real
estate properties
obtained during the
year and held
at the year
ended 31
December 2021
amounted to €
34 million
(31
December 2020: € 80 million).
In addition, the Group
repossesses other types of
collaterals mainly referring
to equity positions due
to the participation
in debt for
equity transactions as part of
forbearance measures (see below
“Debt for equity swaps
”). The other types of collaterals
obtained by
the Group during
the year as
a result of
repossession and held
at the year
ended 31 December
2021 amounted
to € 2.9
million (31
December 2020: € 0.4 million).
(c) Geographical and industry concentrations
of loans and advances to customers
As
described
above
in
note
5.2.1,
the
Group
holds
diversified
portfolios
across
markets
and
countries
and
implements
limits
on
concentrations arising from the
geographical location or the
activity of groups
of borrowers that could
be similarly affected by
changes
in economic or other conditions, in order to mitigate
credit risk.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The following
tables break
down the
Group’s
exposure into
loans and
advances to
customers and
credit related
commitments at
their gross
carrying amount
and nominal
amount respectively
by stage,
product line, industry and geographical region
and impairment allowance by product line, industry and geographical
region:
31 December 2021
Greece
Rest of Europe
Other Countries
Gross carrying/nominal amount
Gross carrying/nominal amount
Gross carrying/nominal amount
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
Impairment
allowance
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
Impairment
allowance
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
Impairment
allowance
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Retail Lending
8,873
3,433
1,092
(812)
3,103
357
232
(178)
8
0
1
(1)
-Mortgage
5,300
2,609
403
(257)
1,565
126
95
(68)
6
0
1
(1)
-Consumer
850
125
135
(138)
1,054
142
84
(66)
2
0
0
(0)
-Credit card
566
34
132
(132)
101
11
7
(5)
0
0
0
(0)
-Small business
2,158
665
423
(286)
383
79
46
(40)
0
0
-
(0)
Wholesale Lending
8,365
1,104
1,204
(744)
9,369
551
223
(124)
2,830
13
22
(12)
-Commerce and services⁽²⁾
3,159
516
606
(384)
6,373
109
72
(49)
727
-
9
(7)
-Manufacturing
2,520
247
178
(147)
772
46
28
(15)
0
-
-
-
-Shipping
6
3
50
(49)
224
-
19
(15)
1,931
3
13
(4)
-Construction
952
80
142
(92)
477
31
20
(16)
65
8
-
(0)
-Tourism
975
248
224
(62)
274
128
18
(2)
-
-
-
-
-Energy
682
3
0
(5)
177
23
20
(5)
-
-
-
-
-Other
70
6
3
(5)
1,072
215
46
(22)
107
2
-
(0)
Public Sector
30
2
1
(2)
1
0
1
(0)
-
-
-
-
Total
17,268
4,539
2,298
(1,557)
12,473
908
456
(302)
2,838
14
23
(12)
Credit related
Commitments
4,125
271
46
(41)
2,073
120
5
(7)
199
2
0
(0)
-Loan commitments
3,085
168
2
(8)
1,591
94
3
(4)
196
2
0
(0)
-Financial guarantee
contracts and other
commitments
1,041
104
45
(33)
482
26
1
(2)
3
-
0
(0)
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
31 December 2020
Greece
Rest of Europe
Other Countries
Gross carrying/nominal amount
Gross carrying/nominal amount
Gross carrying/nominal amount
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
Impairment
allowance
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
Impairment
allowance
12-month ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
Impairment
allowance
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Retail Lending
8,954
4,080
3,306
(2,073)
2,548
345
292
(161)
9
0
1
(0)
-Mortgage
5,760
2,659
1,615
(779)
1,313
132
163
(62)
7
0
1
(0)
-Consumer
801
248
503
(485)
804
129
52
(49)
1
0
0
(0)
-Credit card
535
46
173
(180)
88
22
5
(4)
0
0
0
(0)
-Small business
1,858
1,127
1,016
(628)
342
62
71
(46)
0
0
-
(0)
Wholesale Lending
8,209
1,303
1,761
(1,056)
6,767
678
326
(158)
2,204
14
36
(26)
-Commerce and services⁽²⁾
3,415
495
980
(587)
4,301
96
119
(83)
443
0
20
(15)
-Manufacturing
2,396
312
292
(198)
573
81
27
(13)
-
-
-
-
-Shipping
7
3
50
(47)
199
-
18
(14)
1,589
4
16
(11)
-Construction
758
144
226
(118)
483
33
31
(20)
67
7
0
(0)
-Tourism
971
339
207
(91)
190
86
18
(2)
-
-
-
-
-Energy
641
5
1
(5)
180
20
18
(2)
-
-
-
-
-Other
21
5
4
(8)
841
362
96
(23)
105
2
-
(0)
Public Sector
22
17
1
(2)
1
-
1
(0)
-
-
-
-
Total
17,185
5,399
5,068
(3,131)
9,316
1,023
619
(320)
2,213
14
37
(26)
Credit related Commitments
3,428
307
52
(62)
1,741
93
4
(4)
69
18
0
(0)
-Loan commitments
2,853
206
1
(26)
1,373
80
3
(2)
66
2
0
(0)
-Financial guarantee
contracts and other
commitments
575
101
50
(35)
368
13
1
(2)
3
16
0
(0)
(1)
Includes POCI loans of € 44.1 million held by operations in Rest of Europe (2020: € 42.9 million in Rest of Europe).
(2)
The operations in Rest of Europe include € 5,106 million related to the notes of the Pillar, Cairo and Mexico securitizations (2020: € 3,498 million in Rest of Europe related to the notes of the Pillar and Cairo securitizations) .
As at 31 December 2021, the carrying amount of Group's loans measured at FVTPL of € 23 million (2020:
€ 27 million) were included in Wholesale lending portfolio, of which € 20 million (2020: € 16 million)
were held by operations in Greece, while € 3.5 million (2020: €
11 million) were held by operations in Rest
of Europe.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
(d) Forbearance practices on lending activities
Modifications
of
the
loans’
contractual
terms
may
arise
due
to
various
factors,
such
as
changes
in
market
conditions,
customer
retention and other factors as
well as due
to the potential
deterioration in the borrowers’ financial
condition. The Group
has employed
a range of forbearance
solutions in order to
enhance the management of
customer relationships
and the effectiveness
of collection
efforts, as well as to improve
the recoverability of cash flows
and minimize credit losses for both retail
and wholesale portfolios.
Forbearance practices’ classification
Forbearance practices
as monitored
and reported by
the Group, based
on the European
Banking Authority Implementing
Technical
Standards (EBA
ITS) guidelines,
occur only
in the
cases where
the contractual
payment terms
of a
loan have
been modified,
as the
borrower is considered unable to
comply with the existing loan’s
terms due to apparent financial difficulties, and
the Group grants a
concession by
providing more
favorable
terms and
conditions that
it would
not otherwise
consider had
the borrower
not been
in
financial difficulties.
All other
types of
modifications granted
by the
Group, where
there is
no apparent
financial difficulty
of the
borrower and
may be
driven by factors of a business nature
are not classified as forbearance measures.
Forbearance solutions
Forbearance solutions are granted following an assessment of the borrower’s ability and willingness to repay and can be of a short or
longer
term
nature.
The
objective
is to
assist
financially
stressed
borrowers
by rearranging
their
repayment
cash
outflows into
a
sustainable
modification,
and
at
the
same
time,
protect
the
Group
from
suffering
credit
losses.
The
Group
deploys
targeted
segmentation strategies
with the objective
to tailor different
short or long
term and sustainable
management solutions
to selected
groups of borrowers for
addressing their specific financial needs.
The nature and type of forbearance options
may include but is not necessarily limited to, one or more of the following:
●
arrears capitalization;
●
arrears repayment plan;
●
reduced payment above interest
only;
●
interest-only payments;
●
reduced payment below interest
only;
●
grace period;
●
interest rate reduction;
●
loan term extensions;
●
split balance and gradual step-up of installment
payment plans;
●
partial debt forgiveness/write-down;
●
operational restructuring; and
●
debt to equity swaps.
Specifically
for
unsecured
consumer
loans
(including
credit
cards),
forbearance
programs
(e.g.
term
extensions),
are
applied
in
combination with debt consolidation whereby all existing consumer balances are pooled together.
Forbearance solutions are applied
in
order
to
ensure
a
sufficient
decrease
on
installment
and
a
viable
solution
for
the
borrower.
In
selected
cases,
the
debt
consolidations may be combined with mortgage prenotations
to convert unsecured lending exposures
to secured ones.
In the case of mortgage loans, a decrease of installment
may be achieved through
forbearance measures such as extended
payment
periods, capitalization of arrears,
split balance and gradual step-up of installment
payment plans.
Wholesale exposures
are subject to
forbearance when
there are indications
of financial difficulties
of the borrower,
evidenced by a
combination of factors including the deterioration
of financials, credit rating downgrade, payment
delays and other.
During 2020 in response to the COVID-19 pandemic, the EBA published guidelines on payment
moratoria whereby the application of
a general payment
moratorium that meets
the requirements of the guidelines
would not in itself lead to a reclassification
under the
definition
of
forbearance.
However,
institutions
should
continue
to
categorize
the
exposures
as
performing
or non-performing
in
accordance with the
applicable requirements.
More precisely,
as a general
principle, before
granting a forbearance
measure, credit
Notes to the Consolidated Financial Statements
.
79
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31 December 2021 Consolidated Financial Statements
institutions should
carry out
an individual
assessment of
the repayment
capacity of
the borrower
and grant
forbearance measures
tailored to the specific circumstances of the
borrower in question.
Based on this,
and following the
internal process of individual
assessments the Bank
flagged as forbearance
measures certain payment
moratoria for accounts
in the hotel sector,
which were considered to have increased
financial difficulties.
Debt for equity swaps
For
wholesale
portfolios,
the Group
on
occasion
participates
in
debt
for
equity
transactions
as
part
of
forbearance
measures,
as
described in note 2.2.9.
In 2021, equity
positions acquired by the
Group and held as
of 31 December 2021
relate to a) the
participation
of 100% in Village Roadshow Operations Hellas S.A. for € 1 million and b) the participation of 29.48% in Intertech
S.A. – International
Technologies for
a cash consideration of € 1.9 million (note 30). Similarly in 2020, equity positions acquired by the Group and held as
of 31
December 2020 related
to the
participation of
18.9% in Perigenis
Business Properties
S.A. for €
9.1 million, a
special purpose
real estate company
which was established in the context of the debt
restructuring of a Bank’s corporate
customer.
i.
Classification of Forborne loans
Forborne loans are classified either as non-impaired (stage
2), or impaired (stage 3) by assessing their delinquency and credit quality
status.
Credit impaired
forborne loans enter
initially a probation
period of one
year where
the borrowers’
payment performance
is closely
monitored. If at
the end of the abovementioned
period, the borrowers
have complied with
the terms of the
program and there
are
no past due amounts and concerns
regarding the loans’ full
repayment, the loans are
then reported as non-impaired forborne
loans
(stage 2).
In addition,
non-impaired forborne
loans, including those
that were
previously classified
as credit impaired
and complied
with the
terms of
the program,
are monitored
over a
period of
two years.
If,
at the
end of
that period,
the borrowers
have made
regular payments
of a
significant aggregate
amount, there
are no
past due
amounts over
30 days
and the
loans are
neither credit
impaired nor any other SICR criteria are met they
exit forborne status and are classified as stage
1.
Particularly,
the category
of
credit
impaired
forborne
loans includes
those that
(a) at
the date
when
forbearance
measures
were
granted, were
more than
90 days
past due
or assessed
as unlikely
to pay,
(b) at
the end
of the one
year probation
period met
the
criteria of entering the
non -impaired status and
during the two years monitoring
period new forbearance
measures were extended
or became more than 30 days past
due, and (c) were initially classified as non-
impaired and during the two years
monitoring period
met the criteria for entering the credit impaired
status.
Furthermore,
forborne
loans
that
fail
to
perform
under
the
new
modified
terms
and
are
subsequently
denounced
cease
to
be
monitored as
part of the
Group’s
forbearance activities
and are reported
as denounced credit
impaired loans (stage
3) consistently
with the Group’s management
and monitoring of all denounced loans.
ii.
Impairment assessment
Where forbearance
measures are extended,
the Group performs
an assessment of
the borrower’s
financial condition and
its ability
to repay,
under the
Group’s
impairment policies,
as described
in notes
2.2.13 and
5.2.1. Accordingly,
forborne loans
to wholesale
customers,
retail
individually
significant
exposures
and
financial
institutions
are
assessed
on
an
individual
basis.
Forborne
retail
lending
portfolios
are
generally
assessed
for
impairment
separately
from
other
retail
loan portfolios
on a
collective
basis as
they
consist of large homogenous portfolio.
iii.
Loan restructurings
In
cases
where
the
contractual
cash
flows
of
a
forborne
loan
have
been
substantially
modified,
the
original
forborne
loan
is
derecognized
and a
new loan
is recognized.
The Group
records
the modified
asset as
a ‘new’
financial asset
at fair
value and
the
difference with the carrying amount of the existing
one is recorded in the income statement
as derecognition gain or loss.
In cases where
the modification as
a result of
forbearance measures
is not considered
substantial, the Group
recalculates the gross
carrying amount of
the loan and
recognizes the difference as a
modification gain or loss
in the income
statement. The Group continues
to monitor the modified forborne loan in
order to determine if the financial
asset exhibits significant increase in credit risk since
initial
recognition during the forbearance period.
As at 31 December
2021, the carrying
amount of Group's
forborne loans measured
at FVTPL amounted
to € 3.5
million (2020: € 3.5
million).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The following
tables present
an analysis
of Group’s
forborne activities
for loans
measured at
amortised cost.
In order
to align
with
the quantitative
information provided
in section (a) based
on revised IFRS
7 requirements,
the relevant
tables below are
presented
on a gross
carrying amount
basis, while cumulative
impairment allowance is
presented separately,
in line with
the Group’s
internal
credit risk monitoring and reporting.
The following table presents a summary of the types of the Group’s
forborne activities:
2021
2020
€ million
€ million
Forbearance measures:
Split balance
423
1,114
Loan term extension
1,468
2,184
Arrears capitalisation
183
224
Reduced payment below interest owed
112
111
Interest rate reduction
237
500
Reduced payment above interest owed
121
113
Arrears repayment plan
163
180
Interest only
33
39
Grace period
77
80
Debt/equity swaps
16
12
Partial debt forgiveness/Write-down
27
39
Operational restructuring
10
71
Other
75
160
Total gross carrying
amount
2,946
4,826
Less: cumulative impairment allowance
(465)
(1,078)
Total carrying amount
2,481
3,748
The following tables
present a summary of the credit quality of forborne loans and advances to
customers:
31 December 2021
Total loans &
advances at
amortised
cost
Forborne
loans &
advances
% of Forborne
loans &
advances
€ million
€ million
Gross carrying amounts:
12-month ECL-Stage 1
32,578
-
-
Lifetime ECL-Stage 2
5,461
1,926
35.3
Lifetime ECL-Stage 3 and POCI
2,776
1,021
36.8
Total Gross Amount
40,815
2,946
7.2
Cumulative ECL Loss allowance:
12-month ECL-Stage 1
(171)
-
Lifetime ECL-Stage 2
(311)
(103)
Lifetime ECL-Stage 3 and POCI of which:
(1,391)
(362)
- Individually assessed
(672)
(194)
- Collectively assessed
(718)
(168)
Total carrying amount
38,943
2,481
6.4
Collateral received
27,480
2,221
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
31 December 2020
Total loans &
advances at
amortised cost
Forborne loans
& advances
% of Forborne
loans &
advances
€ million
€ million
Gross carrying amounts:
12-month ECL-Stage 1
28,714
-
-
Lifetime ECL-Stage 2
6,436
2,974
46.2
Lifetime ECL-Stage 3 and POCI
5,724
1,852
32.4
Total Gross
Amount
40,874
4,826
11.8
Cumulative ECL Loss allowance:
12-month ECL-Stage 1
(183)
-
Lifetime ECL-Stage 2
(439)
(257)
Lifetime ECL-Stage 3 and POCI of which:
(2,855)
(821)
- Individually assessed
(925)
(312)
- Collectively assessed
(1,930)
(509)
Total carrying amount
37,397
3,748
10.0
Collateral received
26,920
3,399
The following table presents the movement
of forborne loans and advances:
2021
2020
€ million
€ million
Gross carrying amount at 1 January
4,826
7,461
Forbearance measures in the year⁽¹⁾
481
610
Forborne loans derecognised/ reclassified as held
for sale during the year ⁽²⁾
(1,128)
(1,621)
Write-offs of forborne loans
(33)
(35)
Repayment of loans
(260)
(241)
Loans & advances that exited forbearance status
⁽³⁾
(992)
(1,296)
Other
53
(51)
Less: cumulative impairment allowance
(465)
(1,078)
Carrying amount at 31 December
2,481
3,748
(1)
Forbearnce measures in the year depict loans to which forbearance measures were granted for the first time during the reporting
period.
(2)
“Forborne loans
derecognised/ reclassified
as held
for
sale during
the year”
presents loans
derecognized during
the year
due
to a)
securitization/ sale
transactions and b) substantial modifications of the loans’ contractual terms and those that have been reclassified as
held for sale during the year.
(3)
In 2021, an amount of € 48 million loans and advances that exited forbearance status refers to loans that were denounced (2020: € 188 million).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The following table presents the Group’s
exposure to forborne loans and advances by
product line:
2021
2020
€ million
€ million
Retail Lending
1,985
3,547
- Mortgage
1,358
2,381
- Consumer
123
238
- Credit card
47
58
- Small business
456
870
Wholesale Lending
961
1,279
-Large corporate
295
541
-SMEs
667
738
Total gross carrying
amount
2,946
4,826
Less: cumulative impairment allowance
(465)
(1,078)
Total carrying amount
2,481
3,748
The following table presents the Group’s
exposure to forborne loans and advances by
geographical region:
2021
2020
€ million
€ million
Greece
2,591
4,415
Rest of Europe
351
403
Other countries
5
8
Total gross carrying
amount
2,946
4,826
Less: cumulative impairment allowance
(465)
(1,078)
Total carrying amount
2,481
3,748
The
following
table
provides
information
on
modifications
due
to
forbearance
measures
on
lending
exposures
which
have
not
resulted
in
derecognition.
Such financial
assets
were
modified
while
they
had
a loss
allowance
measured
at
an
amount
equal
to
lifetime ECL.
2021
2020
Modified lending exposures
€ million
€ million
Loans modified during the year with loss allowance measured
at an amount equal to lifetime ECL
Gross carrying amount at 31 December⁽¹⁾
745
1,076
Modification gain / (loss)
18
(31)
Loans modified since initial recognition at a time when loss allowance was based on
lifetime ECL
Gross carrying amount at 31 December for which loss allowance has changed to 12-month
ECL measurement
614
778
(1)
Gross carrying amount at 31 December includes all loans modifications due
to forbearance during the year.
In
the
year
ended
31
December
2021,
the
gross
carrying
amount
of
loans
previously
modified
for
which
the
loan
allowance
has
reverted to being measured at an amount
equal to lifetime ECL amounted to
€ 504 million (2020: € 671 million).
(e) Covid-19 relief (‘moratoria’) and government
support measures
Covid-19 relief measures (‘moratoria’)
In the last
two years,
the Group took
all appropriate
actions to address
liquidity difficulties of
businesses and
individuals caused by
the limited or suspended operations of
businesses due to the Covid-19
pandemic. Information regarding the Covid-19 relief measures
activated
by
the
Group
as
well
as
the
respective
borrowers’
eligibility
criteria
is
provided
in
note
5.2.1.2
(e)
of
the
consolidated
Notes to the Consolidated Financial Statements
.
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financial
statements
for
the
year
ended
31
December
2020.
As
at
31
December
2021,
the
Group’s
moratoria
had
expired
(31
December 2020: gross carrying amount of € 2.8 billion).
Government support measures
In addition to the relief measures activated by the Group, the governments in the countries where the Group operates
have initiated
various programs, in order to
stimulate liquidity and economic activity and to alleviate the
consequences of the Covid-19 outbreak.
The main programs that have been available
to eligible borrowers in Greece include:
(I)
State participation (of 40% or 5%) on newly disbursed loans granted by the Bank that is zero-interest bearing, accompanied with
a government
-subsidy for
the interest
bearing part
of the
principal (of
60% or
95% respectively)
for the
first 2
years. As
at 31
December 2021, the Bank had utilized € 0.4 billion under the program,
(II)
State aid in the form of a guarantee
for the 80% of the principal and accrued interest
during a period of 90 consecutive days. As
at 31 December 2021, the Bank had utilized € 1.4 billion under the program,
(III)
‘’Gefyra I’’ subsidy program, applicable to
the Retail lending portfolio secured
with prime residence
collateral, involving 9-months
installments’
state
subsidy on
existing lending
exposures which
in October
2021 received
a 3
month extension
on the
subsidy
(Law 4842/2021) for the existing
eligible borrowers. As at 31
December 2021, the gross
carrying amount of the
lending exposures
under the program amounted to € 1.2 billion,
(IV)
“Gefyra
II”
subsidy
program
(Law
4790/2021)
activated
in
2021,
applicable
to
Covid-19
affected
eligible
small
business
professionals and legal entities, as well as
SMEs, involving 8-months state subsidy of up
to 90% of monthly installment on
existing
lending
exposures,
followed
by
a
probation
period
from
6
up
to
18
months,
depending
on
the
loan
performance.
As
at
31
December 2021, the gross carrying amount of the lending exposures under
the program amounted to € 0.8 billion,
(V)
In December 2020, the
Bank signed an agreement
with the European Investment
Bank (EIB) for the disbursement
of new loans
financed by EIB. As at 31 December 2021, no significant lending exposures
had been disbursed under the program,
(VI)
In December 2021, the
Bank entered into
Guarantee Agreements
with EIB and EIF
(European Investment
Fund) under the Pan-
European Guarantee Fund
(EGF), which was established
with the support of certain
member States of the EU
to respond to the
economic impact of the Covid-19 pandemic. The above programs
will be activated within 2022,
(VII)
A three-month, government interest subsidy program on existing corporate loans was initiated in February 2021, which could be
opted in combination with the other Covid-19 relief measures. The above interest subsidy program expired in the fourth quarter
of 2021.
It is noted that the credit
enhancement provided by the guarantee
programs mentioned above,
is not accounted for
separately as it
is integral to the loans’ terms and as such it is reflected
in the guaranteed loans’ ECL measurement.
As at 31 December 2021, the gross carrying amount of loans under government support measures enacted as a response to Covid-19
pandemic in the countries that the Group operates
amounted to € 303 million.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
5.2.1.3 Debt Securities
The following
tables present
an analysis
of debt
securities by
external
credit rating
agency designation
at 31
December 2021
and
2020, based on Moody's ratings or their equivalent:
31 December 2021
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Total
€ million
€ million
€ million
Debt securities at amortised cost
Aaa
636
-
636
Aa1 to Aa3
108
-
108
Lower than A3
3,928
-
3,928
Gross Carrying Amount
4,672
-
4,672
Impairment Allowance
(6)
-
(6)
Carrying Amount
4,666
-
4,666
Debt securities at FVOCI
Aaa
591
-
591
Aa1 to Aa3
271
-
271
A1 to A3
567
-
567
Lower than A3
4,899
9
4,908
Unrated
128
-
128
Carrying Amount
6,456
9
6,465
31 December 2020
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Total
€ million
€ million
€ million
Debt securities at amortised cost
Aaa
195
-
195
Aa1 to Aa3
105
-
105
A1 to A3
5
-
5
Lower than A3
2,484
-
2,484
Gross Carrying Amount
2,789
-
2,789
Impairment Allowance
(5)
-
(5)
Carrying Amount
2,784
-
2,784
Debt securities at FVOCI
Aaa
276
-
276
Aa1 to Aa3
435
-
435
A1 to A3
586
-
586
Lower than A3
4,070
10
4,080
Unrated
77
-
77
Carrying Amount
5,444
10
5,454
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
31 December 2021
Debt securities
held for trading
Debt securities
measured at
FVTPL
€ million
€ million
Debt securities at FVTPL
Aa1 to Aa3
-
1
Lower than A3
69
0
Carrying Amount
69
1
31 December 2020
Debt securities
held for trading
Debt securities
measured at
FVTPL
€ million
€ million
Debt securities at FVTPL
Aa1 to Aa3
-
2
Lower than A3
42
0
Carrying Amount
42
2
Securities rated lower than A3 include: € 5,322 million related to Greek sovereign debt (2020: € 4,038 million), €
1,246 million related
to Eurozone members
sovereign debt (2020: €
1,208 million) and € 763 million
related to sovereign
debt issued mainly by European
Union members and candidate members (2020: € 547 million).
The total
exposure of
the Group
on Russian
government and
corporate
debt securities
as at
31 December
2021 amounted
to €
48
million (carrying value).
The following tables present the Group's exposure in debt securities, as categorized by stage, counterparty's geographical
region and
industry sector:
31 December 2021
Greece
Other European
countries
Other countries
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
12-month ECL-
Stage 1
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Total
€ million
€ million
€ million
€ million
€ million
€ million
Debt securities at amortised cost
Sovereign
3,162
-
519
-
-
3,681
Banks
311
-
196
-
-
507
Corporate
-
-
299
185
-
484
Gross Carrying Amount
3,473
-
1,014
185
-
4,672
Impairment Allowance
(5)
-
(1)
(0)
-
(6)
Net Carrying Amount
3,468
-
1,013
185
-
4,666
Debt securities at FVOCI
Sovereign
2,149
-
1,859
615
-
4,623
Banks
166
-
311
-
-
477
Corporate
373
7
707
276
2
1,365
Carrying Amount
2,688
7
2,877
891
2
6,465
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
31 December 2020
Greece
Other European
countries
Other countries
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
12-month ECL-
Stage 1
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Total
€ million
€ million
€ million
€ million
€ million
€ million
Debt securities at amortised cost
Sovereign
1,951
-
527
-
-
2,478
Banks
106
-
161
2
-
269
Corporate
-
-
42
-
-
42
Gross Carrying Amount
2,057
-
730
2
-
2,789
Impairment Allowance
(4)
-
(1)
(0)
-
(5)
Net Carrying Amount
2,053
-
729
2
-
2,784
Debt securities at FVOCI
Sovereign⁽¹⁾
2,067
-
1,886
265
-
4,218
Banks
95
-
384
4
-
483
Corporate
149
6
406
188
4
753
Carrying Amount
2,311
6
2,676
457
4
5,454
(1)
Sovereign debt securities of other European countries include EFSF bonds of carrying amount of
€ 171 million.
31 December 2021
Greece
Other
European
countries
Other
countries
Total
€ million
€ million
€ million
€ million
Debt securities at FVTPL
Corporate
0
1
-
1
Carrying Amount
0
1
-
1
Debt securities held for trading
Sovereign
14
19
-
33
Corporate
-
23
13
36
Carrying Amount
14
42
13
69
31 December 2020
Greece
Other
European
countries
Total
€ million
€ million
€ million
Debt securities at FVTPL
Corporate
0
2
2
Carrying Amount
0
2
2
Debt securities held for trading
Sovereign
22
20
42
Carrying Amount
22
20
42
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
5.2.1.4 Offsetting of financial assets and financial liabilities
The disclosures set out in the tables below include financial assets and financial liabilities that:
(a) are offset in the Group's balance sheet according
to IAS 32 ‘Financial Instruments: Presentation’
criteria; or
(b) are subject
to enforceable master netting arrangements or
similar agreements that
cover similar financial
instruments, irrespective
of whether they are offset in balance sheet.
Regarding the
former,
financial assets and
financial liabilities are
offset and
the net amount
is reported
in the balance
sheet when,
there is a
legally enforceable
right to
offset the recognized
amounts and there
is an intention
to settle on
a net basis,
or realize the
asset and settle the liability simultaneously
(the offset criteria), as also set out in Group's accounting policy
2.2.4.
Regarding the latter, the International Swaps and Derivatives Association (ISDA) and similar
master netting arrangements do not meet
the criteria for offsetting
in the balance sheet, as they
create a right of
set-off that is
enforceable only following
an event of default,
insolvency or bankruptcy of the Group or the counterparties or following
other predetermined events. In addition, the Group and its
counterparties may not intend to
settle on a net basis or to realize the assets and settle
the liabilities simultaneously.
Similar
agreements
to
ISDA
include
derivative
clearing
agreements,
global
master
repurchase
agreements,
and
global
master
securities lending agreements.
Similar financial instruments
include derivatives,
repos and reverse
repos agreements
and securities
borrowing and lending agreements. Financial instruments such as loans
and deposits are not subject to
this disclosure unless they are
offset in the balance sheet.
The following
tables present
financial assets
and financial liabilities
that meet
the criteria
for offsetting
and thus are
reported on
a
net
basis
in
the
balance
sheet,
as
well
as
amounts
that
are
subject
to
enforceable
master
netting
arrangements
and
similar
agreements for
which the offset
criteria mentioned
above are not
satisfied. The latter
amounts, which mainly
relate to
derivatives,
repos
and reverse
repos,
are
not
set
off
in
the
balance
sheet.
In
respect
of
these
transactions,
the
Group
receives
and
provides
collateral in
the form of
marketable securities
and cash that
are included in
the tables below
under columns ‘financial
instruments’
and ‘cash collateral’
at their fair value.
31 December 2021
Related amounts not offset in the BS
Gross amounts
of recognised
financial assets
Gross amounts
of recognised
financial
liabilities offset
in the balance
sheet
Net amounts of
financial assets
presented in
the balance
sheet
Financial
instruments
(incl. non-cash
collateral)
Cash
collateral
received
Net
amount
€ million
€ million
€ million
€ million
€ million
€ million
Financial Assets
Reverse repos with banks
622
(591)
31
(31)
-
-
Derivative financial instruments
1,942
-
1,942
(1,803)
(40)
99
Oher financial assets
13
(13)
-
-
-
-
Total
2,577
(604)
1,973
(1,834)
(40)
99
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
31 December 2021
Related amounts not offset in the BS
Gross amounts of
recognised
financial
liabilities
Gross amounts of
recognised
financial assets
offset in the
balance sheet
Net amounts
of financial
liabilities
presented in
the balance
sheet
Financial
instruments (incl.
non-cash
collateral)
Cash
collateral
pledged
Net
amount
€ million
€ million
€ million
€ million
€ million
€ million
Financial Liabilities
Derivative financial
instruments
2,386
-
2,386
(695)
(1,642)
49
Repurchase agreements with
banks
861
(591)
270
(270)
-
-
Other financial liabilities
13
(13)
-
-
-
-
Total
3,260
(604)
2,656
(965)
(1,642)
49
31 December 2020
Related amounts not offset in the BS
Gross amounts
of recognised
financial assets
Gross amounts
of recognised
financial
liabilities offset
in the balance
sheet
Net amounts of
financial assets
presented in the
balance sheet
Financial
instruments
(incl. non-cash
collateral)
Cash
collateral
received
Net
amount
€ million
€ million
€ million
€ million
€ million
€ million
Financial Assets
Reverse repos with central banks
19
-
19
(19)
-
-
Reverse repos with banks
1,265
(1,065)
200
(200)
-
-
Derivative financial instruments
2,537
-
2,537
(2,385)
(17)
135
Oher financial assets
51
(51)
-
-
-
-
Total
3,872
(1,116)
2,756
(2,604)
(17)
135
31 December 2020
Related amounts not offset in the BS
Gross amounts of
recognised
financial liabilities
Gross amounts of
recognised
financial assets
offset in the
balance sheet
Net amounts
of financial
liabilities
presented in
the balance
sheet
Financial
instruments (incl.
non-cash
collateral)
Cash
collateral
pledged
Net
amount
€ million
€ million
€ million
€ million
€ million
€ million
Financial Liabilities
Derivative financial
instruments
2,932
-
2,932
(753)
(2,163)
16
Repurchase agreements with
banks
1,748
(1,065)
683
(683)
-
-
Other financial liabilities
51
(51)
-
-
-
-
Total
4,731
(1,116)
3,615
(1,436)
(2,163)
16
Financial assets and
financial liabilities are
disclosed in the above
tables at their
recognized amounts,
either at fair
value (derivative
assets and liabilities) or amortized cost (all other financial instruments),
depending on the type of financial instrument.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
5.2.2
Market risk
The Group takes on exposure to market risk, which is the risk of potential financial loss due to an adverse change in market variables.
Changes
in
interest
rates,
foreign
exchange
rates,
credit
spreads,
equity
prices
and
other
relevant
factors,
such
as
the
implied
volatilities, can affect the Group’s
income or the fair value of its financial instruments. The market
risks, the Group is exposed to, are
monitored,
controlled and estimated by Group
Market and Counterparty Risk Sector (GMCRS).
GMCRS is responsible
for the
measurement, monitoring
,
control and
reporting of
all market
risks, including
the interest
rate risk
in
the Banking Book (IRRBB) of the Group. The Sector reports to the GCRO
and its main responsibilities include:
●
Monitoring of all key market
& IRRBB risk indicators (VaR,
sensitivities, etc.)
●
Implementation of Stress Testing
methodologies for market risk and IRRBB (historical
and hypothetical),
●
Monitoring and reporting of market and IRRBB risk limits utilization.
●
Development, maintenance and expansion of risk management
infrastructure.
The market risks the Group is exposed
to,
are the following:
(a) Interest rate risk
The Group takes
on exposure to
the effects of
fluctuations in the
prevailing levels
of market interest
rates on its
cash flows and
the
fair
value
of
its financial
positions.
Cash flow
interest
rate
risk is
the risk
that
the future
cash flows
of
a financial
instrument
will
fluctuate because of
changes in market
interest rates.
Fair value interest
rate risk
is the risk that
the value of
a financial instrument
will fluctuate because of changes in market interest
rates. Fair value interest
rate risk is further split into ‘General’ and ‘Specific’.
The
former refers
to changes in the fair valuation
of positions due to the movements
of benchmark interest rates,
while the latter refers
to changes in the fair valuation of positions due to the
movements of specific issuer yields and credit spreads.
(b) Currency risk
The Group takes
on exposure to the
effects of fluctuations
in the prevailing foreign
currency exchange rates
on its financial position
and cash flows.
(c) Equity risk
Equity price risk is the risk
of the decrease of fair values as
a result of changes in the
levels of equity indices and the value
of individual
stocks. The equity risk that the Group undertakes
arises mainly from the investment portfolio.
(d) Implied volatilities
The Group carries limited implied volatility (vega)
risk, mainly as a result of open positions on options.
The Board’s Risk Committee
sets limits on the level of exposure to market
risks, which are monitored on a daily basis.
Market
risk
in
Greece
and
International
Subsidiaries
is
managed
and
monitored
mainly
using
Value
at
Risk
(VaR)
methodology.
Sensitivity and stress test
analysis is additionally performed.
Information from International
operations is also presented
separately,
as it originates from different
economic environments with different
risk characteristics.
(i) VaR
summary for 2021 and 2020
VaR is a
methodology used in measuring financial risk
by estimating the potential
negative change in the
market value of
a portfolio
at a
given confidence
level and
over a
specified time
horizon. The
VaR
that the
Group measures
is an
estimate based
upon a
99%
confidence level and a holding period of 1 day and the methodology used for the calculation is Monte Carlo simulation (full
re-pricing
of the positions is performed).
The VaR
models are designed
to measure
market risk
in a normal
market environment.
It is assumed
that any
changes occurring
in
the risk factors affecting the
normal market environment
will follow a normal distribution.
Although VaR
is an
important tool
for measuring
market risk,
the assumptions
on which
the model
is based
do give
rise to
certain
limitations. Given this, actual outcomes are
monitored regularly,
via back testing process, to test
the validity of the assumptions and
the parameters used in the VaR
calculation.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The
perimeter
of
the
VaR
analysis
in
2021
includes
Eurobank
Ergasias
Services
and
Holdings
S.A.,
Eurobank
S.A.
and
its
banking
subsidiaries, taking into account
the FVTPL, including
trading and FVOCI portfolios. Consequently, the potential
impact as it
is depicted
in the VaR figures would directly
affect Group’s
Capital (income statement or equity).
Since VaR
constitutes an
integral part
of the Group's
market risk
control regime,
VaR limits
have been
established for
all the above
operations
(trading
and
investment
portfolios
measured
at
fair
value)
and
actual
exposure
is
reviewed
daily
by
management.
However,
the use of this approach does not prevent losses outside of these limits in the
event of extraordinary market
movements.
VaR by risk type - Greece and International
Subsidiaries
(1)
2021
(Average)
2021
2020
(Average)
2020
€ million
€ million
€ million
€ million
Interest Rate Risk
14
14
70
12
Foreign Exchange Risk
1
1
0
1
Equities Risk
0
0
1
0
Total VaR
14
14
70
12
(1
)
Includes all portfolios measured at fair value.
The aggregate VaR of the interest
rate, foreign exchange and equities VaR
benefits from diversification effects. The largest portion
of
the Group’s Interest rate VaR
figures is attributable to the risk associated with interest rate and credit spread sensitive debt
securities
and derivatives. The average VaR
of 2021 is significantly reduced, compared to the average VaR of 2020, due to the smoothing out of
the Covid-19 extreme volatility observed in the
markets within 2020.
The following
tables
present the
Interest
Rate Repricing
analysis of
the securities,
debt issued,
securitization notes
and derivatives
contributing
to the Group’s Interest
Rate Risk exposure.
31 December 2021
less than 1
month
1-3 months
3-12 months
1-5
years
More than 5
years
€ million
€ million
€ million
€ million
€ million
Securities held for trading
-
-
1
33
31
-Fixed coupon bonds
-
-
1
33
31
-Variable coupon bonds
-
-
-
-
-
Investment securities & Senior Notes
461
403
1,530
6,472
5,600
-Fixed coupon bonds
302
174
769
3,466
3,961
-Variable coupon bonds
159
190
447
-
-
-Senior Notes (Cairo & Pillar & Mexico)
-
38
313
3,006
1,639
Debt issued (Third parties)
-
(553)
(1)
(52)
(1,950)
-Fixed coupon covered bonds
-
-
-
-
-
-Fixed coupon subordinated notes (Tier 2)
-
-
-
-
(950)
-Variable coupon securitisations
-
(553)
-
-
-
-EMTNs
-
-
(1)
(52)
(1,000)
Derivatives⁽¹⁾
885
204
1,430
1,539
(4,120)
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
31 December 2020
less than 1
month
1-3 months
3-12 months
1-5
years
More than 5
years
€ million
€ million
€ million
€ million
€ million
Securities held for trading
-
1
-
24
13
-Fixed coupon bonds
-
1
-
24
13
-Variable coupon bonds
-
-
-
-
-
Investment securities & Senior Notes
219
278
619
4,637
4,376
-Fixed coupon bonds
180
100
485
2,149
3,579
-Variable coupon bonds
39
143
-
-
2
-Senior
Notes (Pillar & Cairo)
-
35
134
2,488
795
Debt issued (Third parties)
-
(594)
(20)
(5)
(950)
-Fixed coupon covered bonds
-
-
-
-
-
-Fixed coupon subordinated
notes (Tier 2)
-
-
-
-
(950)
-Variable coupon securitisations
-
(594)
-
-
-
-EMTNs
-
-
(20)
(5)
-
Derivatives⁽¹⁾
410
(138)
1,407
1,306
(3,014)
(1)
For linear interest rate derivatives, notional amounts are shown in the appropriate time band, aggregated across all currencies. For non-linear interest rate
derivatives, delta equivalent notional amounts are shown in the appropriate time band, aggregated across
all currencies.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
(ii) Foreign exchange risk
The following tables
present the Group’s
exposure to foreign currency
exchange risk as at 31 December 2021 and 2020:
31 December 2021
USD
CHF
RON
RSD
BGN
OTHER
EUR
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
ASSETS
Cash and balances with
central banks
13
5
0
237
686
8
12,565
13,515
Due from credit
institutions
211
88
41
0
0
103
2,067
2,510
Securities held for trading
3
-
-
-
20
0
97
119
Derivative financial
instruments
39
1
-
0
0
0
1,908
1,949
Loans and advances to
customers
2,832
2,124
11
640
3,276
469
29,615
38,967
Investment securities
909
-
0
120
56
102
10,129
11,316
Other assets⁽¹⁾
23
1
8
103
179
2
9,015
9,330
Assets of disposal groups
classified as held for sale
(note
30)
-
-
-
-
-
-
146
146
Total Assets
4,029
2,219
59
1,100
4,218
684
65,543
77,852
LIABILITIES
Due to central banks and
credit institutions
27
1
0
26
11
16
12,556
12,636
Derivative financial
instruments
42
0
0
182
0
1
2,170
2,394
Due to customers
5,373
131
0
538
3,906
569
42,651
53,168
Debt securities in issue
38
-
-
-
-
-
2,514
2,552
Other liabilities
35
1
19
18
55
5
1,225
1,358
Liabilities of disposal
group classified as held for
sale (note
30)
-
-
-
-
-
-
109
109
Total Liabilities
5,515
133
19
764
3,972
590
61,224
72,217
Net on balance sheet
position
(1,485)
2,086
40
336
246
94
4,319
5,635
Derivative forward
foreign exchange position
1,280
(2,084)
(24)
(53)
20
(95)
(60)
(1,015)
Total Foreign
Exchange
Position
(205)
2
16
283
266
(1)
4,259
4,620
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
31 December 2020 restated
USD
CHF
RON
RSD
BGN
OTHER
EUR
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
ASSETS
Cash and balances with
central banks
8
6
0
211
498
7
5,907
6,637
Due from credit
institutions
296
30
24
0
0
104
2,882
3,336
Securities held for trading
0
-
-
-
21
0
66
87
Derivative financial
instruments
44
2
-
-
0
0
2,506
2,552
Loans and advances to
customers
2,116
2,518
18
464
2,856
350
29,102
37,424
Investment securities
737
-
0
45
5
18
7,560
8,365
Other
assets (note 2.3)⁽¹⁾
20
0
3
85
175
1
8,997
9,281
Assets of disposal groups
classified as held for sale
(note 30)
-
-
-
-
-
-
39
39
Total Assets
3,221
2,556
45
805
3,555
480
57,059
67,721
LIABILITIES
Due to central banks and
credit institutions
81
0
0
0
14
37
9,369
9,501
Derivative financial
instruments
61
0
0
0
0
1
2,877
2,939
Due to customers
4,370
104
0
328
3,240
410
38,838
47,290
Debt securities in issue
0
-
-
-
-
-
1,556
1,556
Other
liabilities (note 2.3)
27
3
23
8
66
6
1,040
1,173
Total Liabilities
4,539
107
23
336
3,320
454
53,680
62,459
Net on balance sheet
position
(1,318)
2,449
22
469
235
26
3,379
5,262
Derivative forward foreign
exchange position
1,117
(2,452)
(18)
3
0
(63)
(240)
(1,653)
Total Foreign
Exchange
Position
(201)
(3)
4
472
235
(37)
3,139
3,609
(1)
Other assets include Investments in associates and joint ventures, Property and equipment, Investment
property, Intangible assets, Deferred tax
assets and
Other assets.
The Bank has exposure on
Structural FX position, due to
its Subsidiary Bank in Serbia. Under the scenario
of 10% depreciation of the
RSD versus EUR, the
impact in Group’s equity as
of 31 December
2021 would stand at
€ 22 million
loss, significantly reduced compared
to EOY
2020 (31 December
2020: € 49
million loss), following
the Group’s
merger with Direktna
and the relevant
corporate actions
(note 23.2).
5.2.3
Liquidity risk
The Group
is exposed
to daily
calls on
its available
cash resources
due to
deposits withdrawals,
maturity of
medium or
long-term
notes,
maturity of
secured
or unsecured
funding (interbank
repos and
money market
takings), loan
drawdowns
and forfeiture
of
guarantees. Furthermore, margin calls on secured funding transactions (with ECB and the market), on risk mitigation contracts (CSAs,
GMRAs) and on
centrally cleared transactions
(CCPs) result in
liquidity exposure. The
Group maintains
cash resources to
meet all of
these needs. The Board Risk Committee sets liquidity limits to ensure
that sufficient funds are available to
meet such contingencies.
Past experience
shows that
liquidity requirements
to support
calls under
guarantees and
standby letters
of credit
are considerably
less than the amount
of the commitment. This is
also the case with credit
commitments where the outstanding
contractual amount
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
to extend
credit does
not necessarily
represent
future cash
requirements,
as many
of these
commitments will
expire or
terminate
without being funded.
The
matching
and
controlled
mismatching
of
the
maturities
and
interest
rates
of
assets
and
liabilities
is
fundamental
to
the
management of the
Group. It is
unusual for banks
to be completely
matched, as transacted
business is often
of uncertain term
and
of different types. An unmatched
position potentially enhances profitability,
but also increases the risk of losses.
The maturities of assets and liabilities and the ability to
replace, at an acceptable cost, interest
bearing liabilities as they mature, are
important factors in assessing the liquidity of the
Group.
Liquidity Risk Management Framework
The Group’s Liquidity Risk Policy
defines the following supervisory and control structure:
-
Board Risk
Committee's role
is to
approve
all strategic
liquidity risk
management decisions
and to
monitor the
quantitative and
qualitative aspects of liquidity risk;
-
Group Assets and Liabilities Committee has
the mandate to form and implement
the liquidity policies and
guidelines in conformity
with Group's risk appetite, and to review at
least monthly the overall liquidity position of the Group;
-
Group
Treasury
is responsible
for
the implementation
of the
Group's
liquidity
strategy,
the daily
management
of the
Group’s
liquidity and for the preparation and
monitoring of the Group’s liquidity
budget; and
-
Group Market and Counterparty Risk Sector is responsible for measuring, monitoring and
reporting the liquidity risk of the
Group.
The main items related to liquidity risk that are
monitored on a periodic basis as summarized as follows:
●
The analysis of liquidity buffer held on Group level
per asset type and per subsidiary;
●
Liquidity stress
test scenarios.
These scenarios
evaluate the
impact of
a number
of stress
events on
the Group's
liquidity
position;
●
Market sensitivities affecting liquidity;
●
The Liquidity Coverage Ratio (LCR) both in solo
and group level;
●
The Net Stable Funding Ratio (NSFR) both in solo and group level;
●
The Additional Liquidity Monitoring Metrics (ALMM) both in solo and group level;
●
The Asset Encumbrance (AE) both in solo and group level.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Maturity analysis of assets and assets held for managing liquidity risk
The following
tables present
maturity analysis
of Group
assets as
at 31
December 2021
and 2020,
based on
their carrying
values.
Loans without
contractual
maturities
are
presented
in the
‘less than
1 month’
time bucket.
The Group
has established
credit
risk
mitigation contracts with its interbank counterparties (ISDA/CSA). Under these contracts the Group has posted or received collateral,
which covers the corresponding net liabilities or net assets from derivative transactions.
The collateral posted is not presented in the
below tables. For derivative
assets not covered by ISDA/CSA
agreements the positive valuation
is presented at fair
value in the ‘over
1 year’ time bucket.
31 December 2021
Less than 1
month
1 - 3
months
3 months
to 1 year
Over 1
year
Total
€ million
€ million
€ million
€ million
€ million
- Cash and balances with central banks
13,515
-
-
-
13,515
- Due from credit institutions
484
-
-
140
624
- Loans and advances to customers
2,857
799
3,680
31,631
38,967
- Debt Securities
309
179
789
9,924
11,201
- Equity securities
-
-
-
234
234
- Derivative financial instruments
-
-
-
104
104
- Other assets⁽¹⁾
66
17
9
9,238
9,330
- Assets of disposal groups classified as held for sale (note 30)
-
6
140
-
146
Total
17,231
1,001
4,618
51,271
74,121
31 December 2020 restated
Less than 1
month
1 - 3
months
3 months
to 1 year
Over 1
year
Total
€ million
€ million
€ million
€ million
€ million
- Cash and balances with central banks
6,637
-
-
-
6,637
- Due from credit institutions
612
22
-
223
857
- Loans and advances to customers
2,890
961
3,602
29,971
37,424
- Debt Securities
207
84
491
7,500
8,282
- Equity securities
-
-
-
170
170
- Derivative financial instruments
-
-
-
148
148
- Other assets (note 2.3)⁽¹⁾
66
17
9
9,189
9,281
- Assets of disposal groups classified as held for sale
-
-
39
-
39
Total
10,412
1,084
4,141
47,201
62,838
(1)
Other assets include
Investments in associates and joint
ventures, Property, plant and equipment,
Investment property, Intangible assets, Deferred tax assets
and Other assets.
The
Group
holds
a
diversified
portfolio
of
cash
and
highly
liquid
assets
to
support
payment
obligations
and
contingent
deposit
withdrawals in a stressed market
environment. The Group's assets held for
managing liquidity risk comprise:
(a) Cash and balances with central banks;
(b) Eligible bonds and other financial assets for collateral
purposes; and
(c) Current accounts with banks and interbank
placings maturing within one month.
The unutilized assets, containing highly liquid and central banks eligible assets, provide
a contingent liquidity reserve of € 16.9 billion
as at 31 December
2021 (2020: € 12.0 billion).
In addition, the Group
holds other types of
liquid assets, as defined
by the regulator,
amounting to € 7.5 billion
(cash value) (2020: € 8.1 billion,
including € 6 billion previously included
in high liquid assets). It should be
noted that a part of ECB’s available collateral
of € 1.3 billion (cash value) (2020: € 4.1 billion) is held by Group’s subsidiaries for which
temporary local regulatory restrictions
are applied and currently limit the level of its transferability
between group entities.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Maturity analysis of liabilities
The amounts disclosed
in the
tables below are
the contractual undiscounted cash
flows for the
years 2021 and
2020. Liabilities without
contractual
maturities (sight
and saving
deposits) are
presented in
the ‘less
than 1 month’
time bucket.
The Group
has established
credit risk
mitigation
contracts with
its interbank
counterparties (ISDA/CSA).
Due to
these contracts
the Group
has already
posted
collateral which covers the valuation
of its net liabilities from interbank derivatives. For derivative liabilities not covered
by ISDA/CSA
agreements the negative valuation
is presented at fair value in the ‘less than
1 month’ time bucket.
It should be noted that this table represents the worst case scenario since it is based on the assumption that all liabilities will be paid
earlier than
expected (all
term deposits
are withdrawn
at their
contractual
maturity). The
recent experience
shows that
even in
a
period of a systemic financial crisis the likelihood
of such an event is remote.
31 December 2021
Gross nominal
Less than
1 - 3
3 months
Over
(inflow)/
1 month
months
to 1 year
1 year
outflow
€ million
€ million
€ million
€ million
€ million
Non-derivative liabilities:
- Due to central banks and credit institutions
442
23
2,756
9,301
12,522
- Due to customers
44,934
3,661
4,386
195
53,176
- Debt securities in issue
31
1
60
2,737
2,829
- Lease liabilities
3
6
27
221
257
- Other liabilities
416
456
239
-
1,111
- Liabilities of disposal group classified as held for sale (note 30)
-
-
109
-
109
45,826
4,147
7,577
12,454
70,004
Derivative financial instruments
16
-
-
-
16
Off-balance sheet items
Less than
Over
1 year
1 year
€ million
€ million
Credit related commitments
1,757
5,084
Contractual commitments⁽¹⁾
43
-
Total
1,800
5,084
31 December 2020 restated
Gross nominal
Less than
1 - 3
3 months
Over
(inflow)/
1 month
months
to 1 year
1 year
outflow
€ million
€ million
€ million
€ million
€ million
Non-derivative liabilities:
- Due to central banks and credit institutions
649
260
83
8,412
9,404
- Due to customers
37,203
4,262
5,541
296
47,302
- Debt securities in issue
-
166
131
1,717
2,014
- Lease liabilities
3
7
27
327
364
- Other liabilities (note 2.3)
286
406
261
-
953
38,141
5,101
6,043
10,752
60,037
Derivative financial instruments
10
-
-
-
10
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Off-balance sheet items
Less than
Over
1 year
1 year
€ million
€ million
Credit related commitments
1,538
4,173
Contractual commitments⁽¹⁾
40
-
Total
1,578
4,173
(1)
It refers to contractual commitments for the purchase of own used and investment property and intangible assets (note 42).
5.2.4
Interest Rate Benchmark reform – IBOR reform
Global
regulators
undertook
a
fundamental
review
of
major
interest
rate
benchmarks
and
convened
working
groups
in
various
jurisdictions
to
identify
and
promote
the
use
of
risk-free
reference
rates
based
on
liquid
underlying
market
transactions,
as
alternatives to the existing Interbank Offered
Rates (IBORs). In this context, the European Money Market
Institute, the administrator
of
EONIA
and
EURIBOR,
decided
the
permanent
cessation
of
EONIA
on
3
January
2022,
while,
the
regulatory
supervisor
of
ICE
Benchmark Administration, which is the
administrator of LIBOR, announced that all
non USD LIBOR
rates and the 1-week and
2-month
USD
LIBOR
rates
would
cease
to
be
published
on
31
December
2021.
The
remaining
USD
LIBOR
rates
will
permanently
cease
immediately
after
30
June
2023.
Moreover,
the
financial
instruments
referencing
EURIBOR
rate,
that
has
been
reformed
and
continues to be used, will not need to transition.
Following the
global regulators’
decision to
phase out
existing IBORs
and replace
them with
alternative
risk-free
rates
(new RFRs),
the
Group
has
established
an
internal
Benchmark
Reform
Working
Committee
(the
“Working
Committee”)
consisting
of
representatives
from
competent
business
units
across
the
Bank
(e.g.
Economic
Analysis
and
Research,
Group
Market
and
Counterparty Risk, Legal,
Group Organization
& Business Analysis, Group
Finance and IT) led by
the Global Markets
Unit, in order to
manage the transition to the new RFRs, mitigate
the operational impact and any financial and non-financial risks
associated with the
transition
and comply
with
the regulatory
requirements
of the
EU Benchmarks
Regulation.
During
2021, the
Working
Committee
continued working
towards the
Group’s
operational preparedness
to facilitate
benchmark
transition, with
a focus on
assessing the
Group’s
exposures to
the various
IBORs per
type of
financial instrument,
in order
to ensure
their successful
conversion
to the
RFR
rates
in advance
of the respective
IBORs cessation
date, as
well as
set the necessary
specifications in
its systems
and proceed
with
the amendment of the
contractual arrangements
with counterparties, when
required. Furthermore, the
Group, in cooperation
with
market
participants
ensured
the
successful
migration
to
RFR
rates
for
centrally
cleared
and
bilateral
derivative
transactions
and
adhered to the ISDA 2020 fallback protocol
with reference to the appropriate
fallback mechanisms.
As at 31
December 2021, the Group
has exposure to
financial instruments such
as derivatives held
for trading
or hedging purposes,
loans to customers and deposit contracts referencing
the IBOR rates that cease after 31 December 2021 (1W and 2M USD, CHF, GBP,
JPY,
Euro Libor rates) and will transition to the new RFRs on their first roll date in 2022. The remaining USD Libor legacy contracts will
transition to the new RFRs after 30
June 2023, the planned USD
Libor cessation date. Derivative contracts referencing the EONIA, that
are not part of hedge accounting relationships,
transitioned to €STR during 2021.
Moreover,
the Group is exposed to a number of interest rate benchmarks within its hedge accounting relationships that mature after
31 December
2021 or
30 June
2023 for
specific USD
LIBOR hedges.
The Group
considers that
the existing
hedge relationships
will
continue
to
qualify
for
hedge
accounting
and
has
identified
the
required
changes
in
the
hedging
documentation
to
reflect
the
amended hedge
designations
following
the transition
of IBOR
rates
to the
new RFRs.
Finally,
the IBOR
reform
transition
does not
necessitate any changes to the Group’s
risk management approach and strategy.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The table below presents
the Group’s
exposure to significant
interest benchmarks subject
to reform that
will transition to new RFRs
in 2022 or after 30 June 2023 for specific USD LIBORs at
31 December 2021. In addition, the table excludes
exposures to USD LIBORs
that have a contractual maturity
date before their planned cessation
date:
31 December 2021
Benchmark rates Impacted by IBOR reform
GBP Libor
USD
LIBOR
CHF LIBOR
JPY Libor
EURO Libor
€ million
€ million
€ million
€ million
€ million
Non-derivative financial assets ⁽¹⁾
Loans & Advances to customers
450
2,425
2,109
5
5
450
2,425
2,109
5
5
Non-derivative financial liabilities ⁽²⁾
Due to customers
-
45
-
-
-
-
45
-
-
-
Derivative financial instruments ⁽³⁾⁽⁴⁾
Derivatives designated in hedges
-
347
1,646
-
-
Trading derivatives
-
1,550
-
-
-
-
1,897
1,646
-
-
(1)
Balances provided are the gross carrying amounts (excl. ECL)
(2)
Balance provided is at amortized cost
(3)
Balances provided are the notional amounts
(4)
As at December 2021, the Group held certain currency swaps (1 month CHF Libor to 1 month USD Libor) subject to IBOR reform for which only the CHF Libor
leg will change after 31 December 2021. For these currency swaps, both legs are included in the
table.
5.2.5
Climate-related risk
The Bank
has recognized
climate change
as a
material risk
and based on
its supervisory guidelines,
is in
the process
of adapting
its
policies and methodologies for identifying and monitoring the relevant
risks.
Climate-related and environmental
risks are commonly understood to
comprise two main risk drivers:
•
Physical
risk refers
to
the financial
impact of
a changing
climate,
resulting
mainly from
more frequent
extreme
weather
events and gradual changes in climate;
and
•
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
The Bank
is establishing
an effective
oversight
of climate
related
& environmental
(CR&E) risks
with the
design and
approval
of a
governance structure on the process for the allocation of
roles and responsibilities with regard to climate risk management
(both for
transition risk and physical risk) across
its three lines of defense (i.e. Corporate,
Retail, Risk, Compliance, Internal Audit functions).
In that context,
in line with the Bank’s
approved governance structure,
a dedicated Climate Risk
Division for the integration
of CR&E
risks into
the Bank’s
risk management framework,
has been established.
The Climate Risk
Division will
operate as
Project office
for
the implementation of the Climate
related and Environmental
risks roadmap, with a coordinating
and supervisory role on all related
project streams to ensure alignment with the
Bank’s business strategy
and the regulatory authorities’ expectations.
Moreover,
in 2021,
Eurobank
established
a bank-wide
program,
aiming to
integrate
Environmental
Social Governance
(‘ESG’) and
climate
risks,
including
Taxonomy
related
considerations
in
the
organization’s
strategy,
risk
management
procedures,
products/
financings and operating model.
In January 2022,
the European Central
Bank (ECB) launched
a supervisory climate
risk stress
test to
assess how prepared
banks are
for dealing
with financial and
economic shocks
stemming from
climate risk.
The exercise
will be
conducted in
the first
half of 2022
after which the ECB will publish aggregate results
(note 4).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Eurobank
is
adopting
a
strategic
approach
towards
sustainability
and
climate
change
risk
identification
and
risk
management,
signifying the
great importance
that is
given in
the risks
and opportunities
arising from
the transitioning
to a
low-carbon
and more
circular economy.
5.3
Fair value of financial assets and liabilities
Fair value is
the price that
would be received
to sell an asset
or paid to
transfer a
liability in an orderly
transaction between market
participants in
the principal (or
most advantageous)
market at
the measurement
date under
current market
conditions (i.e. an
exit
price).
When
a
quoted
price
for
an
identical
asset
or
liability
is
not
observable,
fair
value
is
measured
using
another
valuation
technique that
is appropriate
in the
circumstances
and maximizes
the use
of relevant
observable inputs
and minimizes
the use
of
unobservable inputs. Observable inputs are developed
using market data, such as publicly available
information about actual events
or transactions, and reflect assumptions that market participants would
use when pricing financial
instruments, such as quoted prices
in active markets for similar instruments,
interest rates and yield curves,
implied volatilities and credit spreads.
The Group’s financial instruments measured at fair value or at amortized cost for which fair value is disclosed are
categorized into the
three levels of the fair value hierarchy
based on whether the inputs to the fair values are observable or
unobservable, as follows:
(a)
Level 1-Financial instruments measured based on quoted
prices (unadjusted) in active markets for identical financial
instruments
that the Group can access at the measurement date. A market is considered
active when quoted prices are readily and regularly
available
from
an
exchange,
dealer,
broker,
industry
group,
pricing
service,
or
regulatory
agency
and
represent
actually
and
regularly occurring
transactions.
Level 1
financial instruments
include actively
quoted
debt instruments
held or
issued by
the
Group,
equity
and
derivative
instruments
traded
on
exchanges,
as
well
as
mutual
funds
that
have
regularly
and
frequently
published quotes.
(b)
Level
2-Financial
instruments
measured
using
valuation
techniques
with
inputs,
other
than
level
1
quoted
prices,
that
are
observable
either directly
or indirectly,
such as:
i) quoted
prices for
similar financial
instruments
in active
markets,
ii) quoted
prices for
identical or
similar financial
instruments
in markets
that are
not active,
iii) inputs
other than
quoted prices
that are
directly
or
indirectly
observable,
mainly
interest
rates
and
yield
curves
observable
at
commonly
quoted
intervals,
forward
exchange
rates,
equity
prices,
credit
spreads
and
implied
volatilities
obtained
from
internationally
recognized
market
data
providers
and
iv)
other
unobservable
inputs
which
are
insignificant
to
the
entire
fair
value
measurement.
Level
2
financial
instruments
include over
the
counter
(OTC)
derivatives,
less liquid
debt
instruments
held
or issued
by the
Group
and equity
instruments.
(c)
Level
3-Financial
instruments
measured
using
valuation
techniques
with
significant
unobservable
inputs.
When
developing
unobservable
inputs,
best
information
available
is
used,
including
own
data,
while
at
the
same
time
market
participants'
assumptions
are
reflected
(e.g.
assumptions
about
risk).
Level
3
financial
instruments
include
unquoted
equities
or
equities
traded in markets that are not considered active, certain OTC
derivatives,
loans and advances to customers including securitized
notes of loan portfolios originated by the Group
and recognized in financial assets and debt securities issued by the Group
.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Financial instruments carried at fair value
The fair value hierarchy categorization of the
Group's financial assets and
liabilities measured at
fair value is presented in
the following
tables:
31 December 2021
Level 1
Level 2
Level 3
Total
€ million
€ million
€ million
€ million
Securities held for trading
119
-
-
119
Investment securities at FVTPL
78
16
47
141
Derivative financial instruments
0
1,949
0
1,949
Investment securities at FVOCI
6,212
297
-
6,509
Loans and advances to customers mandatorily
at FVTPL
-
-
23
23
Financial assets measured at fair value
6,409
2,262
70
8,741
Derivative financial instruments
1
2,393
-
2,394
Trading liabilities
43
-
-
43
Financial liabilities measured at fair value
44
2,393
-
2,437
31 December 2020
Level 1
Level 2
Level 3
Total
€ million
€ million
€ million
€ million
Securities held for trading
87
-
-
87
Investment securities at FVTPL
54
15
58
127
Derivative financial instruments
0
2,551
1
2,552
Investment securities at FVOCI
5,375
79
-
5,454
Loans and advances to customers mandatorily
at FVTPL
-
-
27
27
Financial assets measured at fair value
5,516
2,645
86
8,247
Derivative financial instruments
0
2,939
-
2,939
Trading liabilities
19
-
-
19
Financial liabilities measured at fair value
19
2,939
-
2,958
The Group
recognizes
transfers
into
and out
of the
fair value
hierarchy
levels at
the beginning
of the
quarter in
which a
financial
instrument's transfer was
effected. There were no material
transfers between
levels during the year ended 31 December 2021.
Reconciliation of Level 3 fair value measurements
2021
2020
€ million
€ million
Balance at 1 January
86
125
Transfers
into Level 3
0
3
Transfers
out of Level 3
(0)
(2)
Additions, net of disposals and redemptions⁽¹⁾
(18)
(32)
Total gain/(loss)
for the year included in profit or loss
3
(9)
Foreign exchange differences and other
(1)
1
Balance at 31 December
70
86
(1)
Including capital returns on equity instruments. In the comparative year it mainly refers to derecognized loans and advances to customers (note 20).
Group's valuation processes and techniques
The Group’s
processes and procedures
governing the
fair valuations
are established
by the Group
Market Counterparty
Risk Sector
in line
with the
Group’s
accounting policies.
The Group
uses widely
recognized
valuation
models for
determining the
fair value
of
common
financial
instruments
that
are
not quoted
in an
active market,
such as
interest
and cross
currency
swaps,
that
use only
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
observable market data
and require little management
estimation and judgment. Specifically,
observable prices or model inputs are
usually
available
in
the
market
for
listed
debt
and
equity
securities,
exchange-traded
and
simple
over-the-counter
derivatives.
Availability
of
observable
market
prices
and
model
inputs
reduces
the
need
for
management
judgment
and
estimation
and
also
reduces the uncertainty associated with determining
fair values.
Where valuation
techniques are used
to determine the
fair values
of financial instruments
that are not
quoted in an
active market,
they
are
validated
against
historical
data
and,
where
possible,
against
current
or
recent
observed
transactions
in
different
instruments,
and
periodically
reviewed
by
qualified
personnel
independent
of
the
personnel
that
created
them.
All
models
are
certified before
they are
used and models
are calibrated
to ensure
that outputs reflect
actual data
and comparative
market prices.
Fair values’
estimates obtained
from models
are adjusted
for any
other factors,
such as liquidity
risk or model
uncertainties, to
the
extent that market
participants would take
them into account in
pricing the instrument.
Fair values also reflect
the credit risk of the
instrument and include adjustments to take
account of the credit risk of the Group entity and the counterparty,
where appropriate.
Valuation
controls applied by
the Group may
include verification of
observable pricing, re-performance
of model valuations,
review
and approval process for new models and/or changes
to models, calibration and back-testing against observable market transactions,
where available, analysis of
significant valuation movements, etc.
Where third parties'
valuations are used for
fair value measurement,
these are reviewed in order to ensure
compliance with the requirements of IFRS 13.
The fair values of
OTC derivative financial
instruments are estimated
by discounting expected cash
flows using market
interest rates
at the measurement date.
Counterparty credit risk adjustments
and own credit risk
adjustments are applied to
OTC derivatives, where
appropriate. Bilateral
credit risk adjustments
consider the expected cash
flows between the Group
and its counterparties under
the
relevant terms
of the derivative
instruments and the
effect of the
credit risk on
the valuation of
these cash flows.
As appropriate in
circumstances,
the Group
considers also
the effect
of any
credit risk
mitigating arrangements,
including collateral
agreements and
master netting agreements on the calculation of
credit risk valuation adjustments (CVAs). CVA calculation uses probabilities of
default
(PDs) based
on observable
market data
such as
credit default
swaps (CDS)
spreads, where
appropriate, or
based on
internal rating
models.
The
Group
applies
similar
methodology
for
the
calculation
of
debit-value-adjustments
(DVAs),
when
applicable.
Where
valuation techniques
are based
on internal
rating models
and the
relevant
CVA is
significant to
the entire
fair value
measurement,
such
derivative
instruments
are
categorized
as
Level
3
in
the
fair
value
hierarchy.
A
reasonably
possible
change
in
the
main
unobservable input (i.e.
the recovery rate), used
in their valuation,
would not have
a significant effect on
their fair value measurement.
The Group
determines
fair values
for
debt securities
held using
quoted
market
prices in
active markets
for
securities with
similar
credit
risk,
maturity
and
yield, quoted
market
prices
in
non
active markets
for
identical
or
similar
financial
instruments,
or using
discounted cash flows method.
Unquoted equity instruments at FVTPL under IFRS 9 are estimated mainly (i)
using third parties' valuation reports based on investees'
net assets, where management does
not perform any further significant
adjustments, and (ii) net assets'
valuations, adjusted where
considered necessary.
Loans and advances
to customers
including securitized notes
of loan portfolios
originated by the
Group with contractual
cash flows
that do not represent
solely payments of principal and interest
(SPPI failures), are measured
mandatorily at fair value
through profit
or loss. Quoted market
prices are not available
as there are no active
markets where these
instruments are traded.
Their fair values
are estimated on an individual loan basis by discounting the future expected cash flows over the time period they are expected to
be
recovered, using an appropriate discount rate or by reference to other comparable assets of
the same type that have been
transacted
during
a
recent
time
period.
Expected
cash
flows,
which
incorporate
credit
risk,
represent
significant
unobservable
input
in
the
valuation and as such, the entire fair value
measurement is categorized as
Level 3 in the fair value hierarchy.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Financial instruments not measured at fair value
The fair value hierarchy
categorization of the
Group’s financial
assets and liabilities not measured
at fair value on the balance
sheet,
is presented in the following tables:
31 December 2021
Level 1
Level 2
Level 3
Fair value
Carrying
amount
€ million
€ million
€ million
€ million
€ million
Loans and advances to customers
-
-
38,369
38,369
38,943
Investment securities at amortised cost
2,824
1,489
-
4,313
4,666
Financial assets not measured at fair value
2,824
1,489
38,369
42,682
43,609
Debt securities in issue
962
1,028
549
2,539
2,552
Financial liabilities not measured at fair value
962
1,028
549
2,539
2,552
31 December 2020
Level 1
Level 2
Level 3
Fair value
Carrying
amount
€ million
€ million
€ million
€ million
€ million
Loans and advances to customers
-
-
37,071
37,071
37,397
Investment securities at amortised cost
1,724
930
-
2,654
2,784
Financial assets not measured at fair value
1,724
930
37,071
39,725
40,181
Debt securities in issue
-
947
592
1,539
1,556
Financial liabilities not measured at fair value
-
947
592
1,539
1,556
The assumptions and methodologies underlying the calculation of fair values
of financial instruments not measured at fair value
,
are
in line with those used to calculate the fair values for
financial instruments
measured at fair value. Particularly:
(a)
Loans and advances to customers including securitized notes of loan portfolios originated by the Group: quoted market prices are
not available
as there
are no
active markets
where these
instruments
are traded.
The fair
values are
estimated
by discounting
future expected cash flows
over the time period they are
expected to be recovered,
using appropriate risk-adjusted
rates. Loans
are grouped into homogenous assets
with similar characteristics, as monitored
by Management, such as product, borrower
type
and delinquency status, in order to improve the accuracy
of the estimated valuation outputs. In estimating future cash flows, the
Group makes assumptions on expected
prepayments, product spreads
and timing of collateral realization.
The discount rates for
loans to customers incorporate
inputs for expected credit losses and interest
rates, as appropriate;
(b)
Investment securities
measured at amortized
cost: the fair
values are determined
using prices quoted in
an active market
when
these are
available. In
other cases,
fair values
are determined
using quoted
market prices
for securities
with similar
credit risk,
maturity
and
yield,
quoted
market
prices
in
non
active
markets
for
identical
or
similar
financial
instruments,
or
by
using
the
discounted cash flows method; and
(c)
Debt securities in issue: the fair values are determined using quoted market prices,
if available. If quoted prices are not available,
fair values are determined based on third party
valuations, quotes for similar debt securities or by discounting the
expected cash
flows at a risk-adjusted rate, where the Group's own credit risk is
determined using inputs indirectly observable, i.e. quoted prices
of similar securities issued by the Group or other Greek issuers.
For other financial instruments,
which are short term or re-price at frequent intervals
(cash and balances with central banks, due
from credit
institutions, due
to central
banks, due
to credit
institutions and
due to
customers), the
carrying amounts
represent
reasonable approximations of fair values.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
6.
Net interest income
2021
2020
€ million
€ million
Interest income
Customers
1,234
1,335
- measured at amortised cost
1,232
1,334
- measured at FVTPL
2
1
Banks and other assets⁽¹⁾⁽³⁾
11
9
Securities
151
185
- measured at amortised cost
39
44
- measured at FVOCI
109
139
- measured at FVTPL
3
2
Derivatives (hedge accounting)
40
31
Derivatives (no hedge accounting)
406
395
1,842
1,955
Interest expense
Customers ⁽¹⁾
(50)
(105)
Banks ⁽¹⁾⁽²⁾⁽³⁾
35
(22)
Debt securities in issue ⁽¹⁾
(83)
(92)
Derivatives (hedge accounting)
(58)
(39)
Derivatives (no hedge accounting)
(362)
(345)
Lease liabilities - IFRS 16
(3)
(3)
(521)
(606)
Total
1,321
1,349
(1)
Measured at amortized cost.
(2)
For the year
2021, it includes
a benefit of
€ 91 million
that is attributable
to the targeted
longer-term refinancing operations (TLTRO
III) of the
European
Central Bank (2020: € 21.2 million) (note 31).
(3)
Interest from financial assets with negative rates is recorded in interest expense.
Interest income recognized
by quality of Loans and Advances and Product Line is further analyzed
below:
31 December 2021
Interest income
on non-impaired
loans and
advances
Interest
income on
impaired loans
and advances
Total
€ million
€ million
€ million
Retail lending
570
65
635
Wholesale lending⁽¹⁾
551
48
599
Total interest
income from customers
1,121
113
1,234
31 December 2020
Interest income
on non-impaired
loans and
advances
Interest
income on
impaired loans
and advances
Total
€ million
€ million
€ million
Retail lending
591
120
711
Wholesale lending⁽¹⁾
544
80
624
Total interest
income from customers
1,135
200
1,335
(1)
Including interest income on loans and advances to Public Sector.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
7.
Net banking fee and commission income
The
following
tables
include
net
banking
fees
and
commission
income
from
contracts
with
customers
in
the
scope
of
IFRS
15,
disaggregated by major type of services and operating
segments (note 43).
31 December 2021
Retail
Corporate
Global,
Capital
Markets &
Asset Mngt
International
Other and
Elimination
center
Total
€ million
€ million
€ million
€ million
€ million
€ million
Lending related activities
9
62
10
12
(0)
93
Mutual funds and assets under
management
16
1
40
9
7
73
Network activities and other⁽¹⁾
55
6
24
91
(7)
168
Capital markets
-
6
14
5
(2)
24
Total
80
75
88
117
(3)
358
31 December 2020
Retail
Corporate
Global, Capital
Markets &
Asset Mngt
International
Other and
Elimination
center
Total
€ million
€ million
€ million
€ million
€ million
€ million
Lending related activities
10
45
6
11
(0)
72
Mutual funds and assets under
management
13
1
28
8
6
55
Network activities and other ⁽¹⁾
37
5
21
75
(7)
131
Capital markets
-
5
30
4
0
40
Total
60
56
84
99
(1)
298
(1)
Including income from credit cards related services.
8.
Income from non banking services
Income from non banking services
includes rental income of € 95.9
million (2020: € 84.7
million) from real estate properties and other
income of € 1.9 million (2020: € 1.2 million) from IT services provided by the Group
entities.
9.
Net trading income and gains less losses from investment securities
2021
2020
€ million
€ million
Debt securities of which:
97
827
- measured at amortised cost⁽¹⁾
-
154
- measured at FVOCI
99
668
- measured at FVTPL
(2)
5
Equity securities measured at FVTPL
11
(9)
Gains/(losses) on derivative financial instruments (hedge
accounting)
22
(382)
Gains/(losses) on derivative financial instruments (no hedge
accounting)
(57)
3
Revaluation on foreign exchange
positions
20
(6)
Total
93
433
(1)
In 2020, following
a GGBs swap transaction
offered by the Public
Debt Management Agency, the Group
recognized a gain of €
139 million, net of
any hedging
effect. Further information is provided in note 22.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
10.
Other income/ (expenses)
2021
2020
restated
€ million
€ million
Gain/(loss) from change in fair value of investment
property (note 27)⁽¹⁾
32
8
Derecognition gain/(loss) on loans measured at
amortised cost (note 20)
(3)
11
Fee expense related to the deferred
tax credits (note 13)
(6)
(6)
Gain/ (loss) on the disposal/liquidation of subsidiaries and associates (notes 2.3,
23 and
24)
1
219
Dividend income
2
3
Gains/(losses) on loans at FVTPL
1
1
Other
3
(2)
Total
30
234
(1)
It includes
€ 1.7 million gain related to the remeasurement of the interest held in the Group’s former joint venture Value Touristiki S.A., (note 23.1).
Ιn the year ended 31 December 2020, the Group
had disposed of 80% of its former subsidiary Eurobank
FPS Loans and Credits Claim
Management S.A.
(renamed to doValue
Greece Loans and
Credits Claim Management
S.A.). Following the retrospective
application
of
the
IFRIC
agenda
decision
regarding
the
employee
benefits’
attribution
over
the
period
of
service
(note
2.3),
including
the
employees of Eurobank FPS, the
resulting gain on disposal
that was recognized in “Other income/(expenses)”
was restated/decreased
by c.
€ 1
million and
amounted to
€ 218
million before
tax (€
172 million
after tax).
The above
amount included
the costs
directly
attributable to the transaction and
the remeasurement of the retained interest
of 20% in the company.
11.
Operating expenses
2021
2020
€ million
€ million
Staff costs
(434)
(442)
Administrative expenses
(253)
(240)
Contributions to resolution and deposit guarantee
funds
(75)
(78)
Depreciation of real estate properties
and equipment
(40)
(38)
Depreciation of right of use assets
(38)
(38)
Amortisation of intangible assets
(36)
(33)
Total
(876)
(869)
For
the year
ended 31
December 2021,
the amount
of operating
expenses
(excluding
any
contribution
to
a deposit
guarantee
or
resolution fund) for the Group’s
Greek activities was € 583 million (2020: € 586 million).
Contributions to resolution and deposit guarantee funds
In 2016, the Single Resolution Mechanism (SRM),
which is one of the
pillars of the Banking Union in
the euro area alongside the Single
Supervisory Mechanism
(SSM), became
fully operational.
The Single
Resolution
Fund (SRF)
was established
by the
SRM Regulation
(EU) No
806/2014 in
order to
ensure uniform
practice in
the financing
of resolutions
within the SRM
and it
is owned
by the
Single
Resolution Board (SRB). The SRM provides that
the SRF will be built up over a period of eight years
with ‘ex-ante’
contributions from
the banking industry, which
may include irrevocable payment commitments
as a part of the total amount of contributions (note 42).
Notes to the Consolidated Financial Statements
.
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Staff costs
2021
2020
€ million
€ million
Wages, salaries and performance remuneration
(326)
(328)
Social security costs
(51)
(60)
Additional pension and other post employment costs
(17)
(15)
Other
(40)
(39)
Total
(434)
(442)
The average number of employees of the
Group during the year was 11,495 (2020: 12,624). As at
31 December 2021, the number of
branches and business/private banking centers
of the Group amounted to 668 (2020: 625).
12.
Other impairments, restructuring costs and provisions
2021
2020
restated
€ million
€ million
Impairment and valuation losses on real estate
properties
(17)
(14)
Impairment (losses)/ reversal on bonds
(4)
(9)
Other impairment losses and provisions⁽¹⁾
(31)
(20)
Other impairment losses and provisions
(52)
(43)
Voluntary exit schemes and
other related costs (notes 2.3 and 35)
(10)
(139)
Other restructuring costs
(15)
(8)
Restructuring costs
(25)
(147)
Total
(77)
(190)
(1)
Includes impairment losses on equipment and software, other assets and provisions
on litigations and other operational risk events.
For the year ended
2021, the Group recognized
€ 17 million impairment
and valuation losses on
real estate properties,
of which € 9
million relate to the properties’ portfolios
classified as held for sale (note 30).
Additionally,
during 2021, the Group recognized
€ 31 million other
impairment losses and provisions,
of which € 16 million
relate to
impairment losses on computer software and other intangible
assets (note 28).
Furthermore, for
the year
ended 31
December 2021,
the Group
recognized
€ 15
million restructuring
costs, of
which €
5.1 million
relate to
the merger
of Eurobank
a.d. Beograd
with Direktna
Banka a.d.
(note 23.2),
while the remaining
costs mainly
relate to
the
Bank’s
transformation
plan. For the
comparative period,
the Group recognized
restructuring costs
amounting to
€ 8 million,
mainly
related to the Bank’s
transformation plan.
Finally,
following
the retrospective
application
of the
IFRIC agenda
decision regarding
the employee
benefits’ attribution
over the
period
of
service (note
2.3),
including
the
employees
that
participated
in
voluntary
exit
schemes,
the
amount
of
“Voluntary
exit
schemes and other
related costs”
presented above
for the year
ended 31 December
2020, was restated/increased
by c. €
2 million
and reached € 139 million (related to the VESs
launched by the Group in September 2020 and in 2019).
Notes to the Consolidated Financial Statements
.
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13.
Income tax
2021
2020
restated
€ million
€ million
Current tax ⁽¹⁾
(40)
(42)
Deferred tax (note 2.3)
(116)
(294)
Total income tax
(156)
(336)
(1)
For the year ended 31 December 2021,
it includes € 5 million
reversal of provision for an uncertain tax position of
a Company’s subsidiary, following
a positive decision issued by the Supreme Court.
According
to
Law
4172/2013
currently
in
force,
the
nominal
Greek
corporate
tax
rate
for
credit
institutions
that
fall
under
the
requirements
of article
27A of
Law 4172/2013
regarding
eligible DTAs/deferred
tax credits
(DTCs)
against
the Greek
State
is 29%.
According to
Law 4799/2021
which was
enacted in May
2021 and amended
Law 4172/2013, the
Greek corporate
tax rate
for legal
entities other than the aforementioned credit institutions decreased from 24% to 22% from the tax year 2021 onwards. This resulted
to a reduction in the net deferred tax
liability by ca. € 1.6 million for the Company’s
Greek subsidiaries that has been recorded in the
income statement. In addition, the withholding
tax rate for dividends distributed, other than
intragroup dividends, is 5%. In
particular,
the intragroup dividends under certain preconditions
are relieved from both income and withholding tax.
The nominal corporate tax
rates applicable in the banking
subsidiaries incorporated in the
international segment of the Group
(note
43) are as follows: Bulgaria 10%, Serbia 15%, Cyprus
12.5% and Luxembourg 24.94%.
Tax certificate
and open tax years
The Company and
its subsidiaries, associates
and joint ventures,
which operate
in Greece (notes
23 and 24)
have in
principle 1 to
6
open tax years. For fiscal years starting from
1 January 2016 onwards, an ‘Annual Tax
Certificate’ on an optional basis, is provided for
the Greek entities, with annual financial statements audited compulsorily,
pursuant to the Law 4174/2013, which is issued after a tax
audit is performed
by the same
statutory auditor
or audit firm
that audits
the annual
financial statements.
The Company
and (as a
general rule) the Group’s
Greek companies will continue to obtain such
certificate.
In January 2021, the Company received two orders for a tax audit by
the tax authorities for the tax years 2015 and 2016. In
December
2021, the tax audit for 2015 was completed, while
for 2016 is still in progress.
The tax certificates,
which have been
obtained by the
Company and its
subsidiaries, associates and
joint ventures, which
operate in
Greece, are unqualified for
the open tax
years 2016-2020. For the
year ended 31
December 2021, the
tax audits from external
auditors
are in progress.
In accordance
with the
Greek tax
legislation and
the respective
Ministerial Decisions
issued, additional
taxes and
penalties may
be
imposed by
the Greek
tax authorities
following a
tax audit
within the applicable
statute
of limitations
(i.e. in principle
five years
as
from
the
end
of
the
fiscal
year
within
which
the
relevant
tax
return
should
have
been
submitted),
irrespective
of
whether
an
unqualified tax
certificate has
been obtained
from the
tax paying
company.
In light of
the above,
as a general
rule, the right
of the
Greek State to impose taxes
up to tax year 2015 (included) has been time-barred
for the Company and the Group’s
Greek entities as
at 31 December 2021.
The open
tax years
of the
foreign
banking entities
of the
Group
are as
follows:
(a) Eurobank
Cyprus Ltd,
2018-2021, (b)
Eurobank
Bulgaria A.D., 2016-2021, (c) Eurobank Direktna a.d.
(Serbia), 2016-2021, and (d)
Eurobank Private Bank Luxembourg S.A., 2017-2021.
The remaining
foreign
entities of
the Group
(notes 23
and 24),
which operate
in countries
where a
statutory
tax audit
is explicitly
stipulated
by law,
have 2
to 6
open tax
years in
principle, subject
to certain
preconditions of
the applicable
tax legislation
of each
jurisdiction.
In reference
to its total
uncertain tax
positions, the Group
assesses all relevant
developments (e.g. legislative
changes, case
law,
ad
hoc tax/legal opinions, administrative
practices) and raises adequate provisions.
Deferred tax
Deferred tax
is calculated
on all deductible
temporary differences
under the
liability method as
well as for
unused tax losses
at the
rate in effect at
the time the reversal is expected to take
place.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The net deferred tax is analyzed
as follows:
2021
2020
restated
€ million
€ million
Deferred tax assets (note 2.3)
4,422
4,519
Deferred tax liabilities
(26)
(21)
Net deferred tax
4,396
4,498
The movement on deferred tax
is as follows:
2021
2020
restated
€ million
€ million
Balance at 1 January
4,498
4,757
Restatement due to change in accounting policy (note 2.3)
-
(7)
Balance at 1 January, as restated
4,498
4,750
Arising from acquisitions⁽¹⁾
(1)
(8)
Income statement credit/(charge) (note
2.3)
(116)
(294)
Investment securities
at FVOCI
30
49
Cash flow hedges
(15)
3
Actuarial gains/(losses) (note 2.3)
(0)
(1)
Other
0
(1)
Balance at 31 December
4,396
4,498
(1)
For 2021, it
refers to
the acquisition of
Eurobank Direktna a.d
(note 23.2) and
Value Touristiki
S.A. (note 23),
while for 2020
it refers to
the acquisition of
Piraeus Port Plaza 2, Piraeus Port Plaza 3 and Tenberco Properties Development and Exploitation Single Member S.A. (note 23).
Deferred income tax (charge)/credit
is attributable to the following items:
2021
2020
restated
€ million
€ million
Impairment/ valuation relating to loans, disposals and write-offs⁽¹⁾
13
(191)
Unused tax losses
(1)
(1)
Tax deductible PSI+ losses
(50)
(50)
Carried forward debit difference of law 4831/2021
73
-
Change in fair value and other temporary differences (note 2.3)
(151)
(52)
Deferred income tax (charge)/credit
(116)
(294)
(1)
In 2020, it includes € 160 million write-down of deferred tax assets (DTA) on Bank’s
loan losses.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Deferred tax assets/(liabilities) are
attributable to the following items:
2021
2020
restated
€ million
€ million
Impairment/ valuation relating to loans and accounting write-offs⁽¹⁾
1,034
1,608
PSI+ tax related losses
1,001
1,051
Losses from disposals and crystallized write-offs of loans⁽¹⁾
2,365
1,778
Carried forward debit difference of law
4831/2021
73
-
Other impairments/ valuations through the income statement
(38)
156
Unused tax losses
0
1
Costs directly attributable to equity transactions
5
8
Cash flow hedges
5
20
Defined benefit obligations (note 2.3)
6
5
Real estate properties, equipment and intangible assets
(61)
(74)
Investment securities at FVOCI
(112)
(142)
Other⁽²⁾
118
87
Net deferred tax
4,396
4,498
(1)
The crystallization for tax purposes of impairment losses and write-offs relating to the
project “Mexico” (note 20.1) resulted in the significant increase of the
deferred tax on the category “Losses from disposals and crystallised write-offs of loans” against a decrease in the category “Impairment/valuation relating to
loans and accounting write-offs”.
(2)
It includes, among
others, DTA
on deductible temporary
differences relating to
a) operational risk
provisions and b)
as of 31
December 2021, the
leasing
operations following the completion of the demerger of Eurobank Ergasias Leasing Single Member
S.A. (note 23).
Further information, in relation to
the aforementioned categories of deferred
tax assets as at 31 December 2021, as follows:
(a)
€
1,034
million
refer
to
deductible
temporary
differences
arising
from
impairment/
valuation
relating
to
loans
including
the
accounting debt write-offs
according to the Greek
tax law 4172/2013, as
in force. These temporary
differences can be utilized
in
future periods with no specified time limit and according to current
tax legislation of each jurisdiction;
(b) € 1,001 million refer to losses resulted
from the Group’s
participation in PSI+ and the Greek’s
state debt buyback program
which
are subject to amortization for tax purposes over a thirty-year period, i.e. 1/30 of
losses per year starting from year 2012 onwards
(see below – DTCs section);
(c) € 2,365 million refer to the unamortized part of the crystallized tax losses arising from write-offs and disposals of loans, which are
subject to amortization over a twenty
-year period (see below – DTCs section);
(d) € 73
million refer
to the unutilized
part of the
amortization of the
aforementioned crystallized
tax losses
(debit difference)
that
can be carried forward for offsetting
over a twenty-year period according to
Law 4831/2021 (see below).
Assessment of the recoverability of deferred
tax assets
The recognition of the above presented deferred tax assets is based on management’s
assessment that the Group’s legal entities will
have sufficient
future taxable
profits, against which
the deductible temporary
differences and the
unused tax losses
can be utilized.
The deferred
tax assets
are determined
on the
basis of
the tax
treatment
of each
deferred
tax asset
category,
as provided
by the
applicable
tax
legislation
of each
jurisdiction
and the
eligibility of
carried
forward
losses for
offsetting
with future
taxable
profits.
Additionally,
the Group’s
assessment on the recoverability
of recognized deferred
tax assets is based
on (a) the future performance
expectations (projections of operating results) and growth opportunities
relevant for determining the expected future taxable profits,
(b) the
expected timing
of reversal
of the
deductible and
taxable temporary
differences, (c)
the probability
that the
Group entities
will have sufficient taxable profits in
the future, in
the same period
as the reversal of
the deductible and
taxable temporary differences
or
in
the
years
into
which
the
tax
losses
can
be
carried
forward,
and
(d)
the
historical
levels
of
Group
entities’
performance
in
combination with the previous years’
tax losses caused by one off or non-recurring events.
In
particular,
as
of
31 December
2021, the
deferred
tax
asset
(DTA)
recoverability
assessment
has been
based
on the
three-year
Business Plan that was
approved by the Board of
Directors in December 2021, for
the period up
to the end of
2024, and was
submitted
to
the
Single
Supervisory
Mechanism
(SSM).
For
the
years
beyond
2024,
the
forecast
of
operating
results
was
based
on
the
management
projections
considering
the
growth
opportunities
of
the
Greek
economy,
the
banking
sector
and
the
Group
itself.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Specifically,
the management projections
for the Group’s
future profitability
adopted in the
Business Plan, have
considered, among
others, (a) the macroeconomic
growth in Greece and
the region underpinned by
the Recovery and Resilience
Fund (RRF) grants
and
loans, (b) the increase in loan
volumes and investment securities, (c) the higher fee and commission
income mostly from assets under
management, bancassurance, network and capital markets, (d) the discipline
in operating expenses’ targets, (e) the gradual reduction
of cost of risk and (f) the expected sale in first half of 2022 of Eurobank’s merchant acquiring business (note 30). The major initiatives
introduced
in
the context
of
the Group’s
transformation
plan “Eurobank
2030”,
will contribute
to
the
achievement
of
the above
financial objectives.
In addition, Management
has taken
into account
Law 4831/2021 provisions
(see below) relating
to the DTA
on
loan losses.
The Group
closely monitors
and constantly
assesses the
developments
on the
macroeconomic and
geopolitical front
(note 2)
and
their effect on the
assumptions used in its plans and the
projections for future profitability
and will continue to update
its estimates
accordingly.
Deferred tax credit against the
Greek State and tax regime for
loan losses
As at 31 December 2021, pursuant to the Law 4172/2013, as in force, the Bank’s eligible DTAs/deferred
tax credits (DTCs) against the
Greek State
amounted to
€ 3,547 million (31
December 2020: €
3,691 million). The
DTCs are
accounted for
on: (a) the unamortised
losses from the Private
Sector Involvement (PSI)
and the Greek State Debt
Buyback Program, which are subject
to amortisation over
a thirty-year
period and
(b) on the
sum of (i)
the unamortized
part of the
DTC eligible
crystallized tax
losses arising
from write-offs
and disposals
of loans, which
are subject
to amortization
over a
twenty-year period,
(ii) the accounting
debt write-offs
and (iii) the
remaining
accumulated
provisions
and
other
losses
in
general
due
to
credit
risk
recorded
up
to
30
June
2015.
The
DTCs
will
be
converted into directly enforceable claims (tax credit) against
the Greek State provided that the Bank’s after tax accounting
result for
the year is a loss.
According to the Law 4831/2021 (article 125), which was enacted in
September 2021 and amended Law 4172/2013, the amortization
of the PSI tax related losses is deducted from the taxable income at a priority over that of the crystallized tax losses (debit difference)
arising from
write-offs and
disposals of
loans. In
addition, the
amount of
the annual
tax amortization
of the
above crystallized
tax
losses is limited to the amount of the annual taxable profits,
calculated before the deduction of such losses and following
the annual
tax deduction
of the PSI
tax related
losses. The
unutilized part
of the
annual tax
amortization of
the crystallized
loan losses
can be
carried forward
for offsetting
over a period
of 20 years.
If at the
end of the
20-year utilization
period, there are
balances that have
not been offset,
these will qualify as a tax loss, which is subject to the 5-year statute
of limitation. The above provisions apply as of 1
January 2021 and
cover the crystallized tax losses
that have arisen
from write-offs and disposals
of loans as
of 1 January
2016 onwards.
Taking into account the tax regime in force, including the above development in September 2021,
the recovery of the Bank’s deferred
tax
asset recorded
on loans
and advances
to customers
and the
regulatory
capital structure
are further
safeguarded,
contributing
substantially to the achievement of NPE management targets through write
-offs and disposals, in line with the regulatory framework
and SSM requirements (note 5.2).
According to tax Law 4172/2013 as in force, an
annual fee of 1.5% is
imposed on the excess amount of
deferred tax assets guaranteed
by the Greek
State, stemming
from the difference
between the current
tax rate
for the eligible
credit institutions
(i.e. 29%) and the
tax rate applicable on 30 June 2015 (i.e. 26%). For the year ended
31 December 2021, an amount of € 6.1
million has been recognized
in “Other income/(expenses)”.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Income tax reconciliation and unused tax losses
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the applicable tax rates as follows:
2021
2020
restated
€ million
€ million
Profit/(loss) before tax (note 2.3)
483
(879)
Tax at the applicable tax
rate (note 2.3)
(140)
255
Tax effect
of:
- income not subject to tax and non deductible expenses
(5)
5
- effect of different tax
rates in different countries
30
25
- change in applicable tax rate
1
0
- write-down of DTA on Bank's loan losses
-
(160)
- other⁽¹⁾
(42)
(461)
Total income tax
(156)
(336)
(1)
For 2020, it
relates primarily to
the effect
of Eurobank Holdings’s
current tax
losses (mainly relating
to losses arising
from the Cairo
transaction,
note 20) for which deferred tax asset has not been recognized.
As at 31 December
2021, the Company
and the Bank have
not recognised deferred
tax asset (DTA)
on unused tax losses
amounting
to € 517 million (2020: € 480
million). The analysis of unrecognized
DTA on
unused tax losses of the Company
and the Bank per year
of maturity of related tax losses is presented
in the table below:
Unrecognized
DTA
€ million
Year of maturity of unused tax losses
2023
44
2024
62
2025
399
2026
12
Total
517
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
14.
Earnings per share
Basic earnings per share is
calculated by dividing the net profit attributable to
ordinary shareholders by the weighted average number
of ordinary
shares in
issue during
the year,
excluding the
average
number of
ordinary shares
purchased
by the
Group and
held as
treasury shares.
The diluted
earnings per
share is
calculated
by adjusting
the weighted
average
number of
ordinary shares
outstanding
to assume
conversion of
all dilutive potential ordinary
shares. As at 31 December
2021, the Group’s
dilutive potential ordinary
shares relate to
the share
options that
were
allocated
to
key
executives
with grant
date
in July
2021 (note
39). The
weighted
average
number of
shares is adjusted for the share
options by calculating the number of shares
that could have been acquired at
fair value (determined
as the average market price of
the Company's shares for the
year). The number of
shares resulting from the above
calculation is added
to the weighted
average number
of ordinary shares
in issue in order to
determine the weighted
average number
of ordinary shares
used for the calculation of the diluted earnings per share.
Year ended 31 December
2021
2020
restated
Net profit/(loss) for the year attributable to ordinary shareholders
(note 2.3)
€ million
328
(1,215)
Weighted average number of ordinary
shares in issue for
basic earnings per share
Number of shares
3,707,975,186
3,707,564,194
Weighted average number of ordinary
shares in issue for diluted earnings
per share
Number of shares
3,708,992,794
-
Earnings/(losses) per share
- Basic and diluted earnings/(losses) per share
€
0.09
(0.33)
15.
Cash and balances with central banks
2021
2020
€ million
€ million
Cash in hand
478
388
Balances with central banks
13,037
6,249
Total
13,515
6,637
The
Bank
and
its
banking
subsidiaries
in
Eurozone
(Cyprus
and
Luxemburg),
are
required
to
hold
a
minimum
level
of
deposits
(minimum reserve requirement
- MRR) with their national
central bank on an
average basis
over maintenance periods
(i.e. six week
periods);
these deposits
are
calculated
as 1%
of certain
liabilities, mainly
customers’
deposits, and
can be
withdrawn
at any
time
provided that the MRR is met over the determined period of time. Similar obligations for the maintenance of minimum reserves with
their national central bank are also
applied to the banking
subsidiaries in Bulgaria and
Serbia. As at 31
December 2021, the mandatory
reserves (i.e. those that the Group
entities maintain in order to
meet the MRR) and collateral
deposits with central banks
amounted
to € 871 million (2020: € 624 million).
In 2019, the European Central Bank (ECB) decided to introduce a two-tier system for eligible credit institutions' reserve remuneration
which
exempts
part
of
excess
liquidity
holdings
(i.e.
reserve
holdings
in
excess
of
MRR)
from
negative
deposit
facility
rate.
The
exempted part is determined as a multiple of
an institution’s MRR (current
multiplier has been set at 6).
The excess liquidity
resulting, among others,
from the increase
in customers’
deposits and ECB funding
as well as the
medium-term
notes issued by the Bank (notes 33 ,31 and 34), contributed to the
increase in balances with central banks in 2021.
Notes to the Consolidated Financial Statements
.
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16.
Cash and cash equivalents and other information on cash flow statement
For the
purpose of
the cash
flow statement,
cash and
cash equivalents
comprise the
following balances
with original
maturities of
three months or less:
2021
2020
€ million
€ million
Cash and balances with central banks (excluding mandatory and collateral
deposits with
central banks) (note 15)
12,644
6,013
Due from credit institutions
505
667
Securities held for trading
-
1
Total
13,149
6,681
Other (income)/losses on investment securities presented
in operating activities are analyzed as follows:
2021
2020
€ million
€ million
Amortisation of premiums/discounts and accrued interest
26
36
(Gains)/losses from investment securities
(101)
(430)
Dividends
(1)
(4)
Total
(76)
(398)
In the
year ended
31 December
2020, other
adjustments of
€ 229 million
presented
in the
cash flow
statement
mainly comprise
€
218 million gain on the disposal of FPS (note 24).
Changes in liabilities arising from financing activities
During the year ended
31 December 2021,
changes in the Group’s liabilities arising
from financing activities, other
than lease liabilities
(note 41),
are attributable
to: a)
debt issuance
amounting to
€ 1,141
million (2020:
€ 303
million) (net
of issuance
costs),
b) debt
repayment
amounting
to
€
156
million
(2020:
€
1.153
million)
and
c)
accrued
interest
and
amortisation
of
debt
issuance
costs
amounting to € 10.4 million (2020: € 0.2 million).
17.
Due from credit institutions
2021
2020
€ million
€ million
Pledged deposits with banks
2,002
2,669
Placements and other receivables from banks
206
450
Current accounts and settlement balances with banks
302
217
Total
2,510
3,336
As at 31 December 2021,
the Group’s pledged deposits with banks mainly include: a)
€ 1,965 million cash collaterals on
risk mitigation
contracts for derivative transactions and repurchase agreements (CSAs, GMRAs) and b) € 37 million
cash collateral relating to the sale
of former Romanian subsidiaries.
The
Group's
exposure
arising
from
credit
institutions,
as
categorized
by
counterparty's
geographical
region,
is
presented
in
the
following table:
2021
2020
€ million
€ million
Greece
36
30
Other European countries
2,249
3,107
Other countries
225
199
Total
2,510
3,336
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
18.
Securities held for trading
2021
2020
€ million
€ million
Debt securities (note 5.2.1.3)
69
42
Equity securities
50
45
Total
119
87
19.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments
both for hedging and non-hedging purposes.
The table below presents the fair values of the Group’s derivative financial instruments by product type and hedge relationship along
with
their
notional
amounts.
The
notional
amounts
of
derivative
instruments
provide
a
basis
for
comparison
with
instruments
recognized on
the balance sheet
but do not
necessarily indicate the
amounts of future
cash flows involved
or the current
fair value
of the instruments and, therefore, are
not indicative of the Group’s
exposure at the reporting date.
31 December 2021
31 December 2020
Contract /
notional
amount
Fair values
Contract /
notional
amount
Fair values
Assets
Liabilities
Assets
Liabilities
€ million
€ million
€ million
€ million
€ million
€ million
Derivatives for which hedge
accounting is not applied/ held for
trading
- Interest rate swaps
29,758
1,738
1,352
28,957
2,473
2,020
- Interest rate options
3,599
41
97
4,440
37
109
- Cross currency interest
rate swaps
41
3
3
118
4
4
- Currency forwards/currency
swaps
3,038
50
22
2,921
16
50
- Currency options
644
3
3
1,155
8
5
- Commodity derivatives
16
1
0
308
7
6
- Credit default swaps
66
1
1
175
-
2
- Other (see below)
113
0
1
51
0
0
1,837
1,479
2,545
2,196
Derivatives designated as fair value
hedges
- Interest rate swaps
3,732
82
804
3,051
3
636
- Cross currency interest
rate swaps
-
-
-
4
0
0
82
804
3
636
Derivatives designated as cash flow
hedges
- Interest rate swaps
1,852
30
54
1,727
1
77
- Cross currency interest
rate swaps
1,632
0
57
1,682
3
30
30
111
4
107
Total derivatives
assets/liabilities
1,949
2,394
2,552
2,939
Other derivative contracts include warrants
and exchange traded equity options.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Information on the fair value measurement
and offsetting of derivatives is provided
in notes 5.3 and 5.2.1.4, respectively.
The
Group
uses
certain
derivatives
and
other
financial
instruments,
designated
in
a
qualifying
hedge
relationship,
to
reduce
its
exposure to market
risks. The hedging practices
applied by the Group,
as well as the
relevant accounting
treatment are disclosed
in
note 2.2.3. In particular:
(a) Fair value hedges
The Group hedges a proportion of its existing interest rate
risk resulting from any potential change in the fair value of
fixed rate debt
securities held
or fixed
rate
loans, denominated
both in
local and
foreign
currencies, using
interest
rate swaps
and cross
currency
interest rate swaps. In 2021, the
Group recognized a loss of
€ 60 million
(2020: € 140
million gain) from changes
in the carrying
amount
of the
hedging instruments,
used as
the basis
of recognizing
hedge ineffectiveness
and €
68 million
gain (2020:
€ 127
million loss)
from
changes
in
the
carrying
amount
of
the
hedged
items
attributable
to
the
hedged
risk.
The
amount
of
hedge
ineffectiveness
recognized for 2021 in income statement
was € 8 million gain (2020: € 13 million gain).
(b) Cash flow hedges
The Group hedges a proportion
of its existing interest rate and foreign currency risk
resulting from any cash flow variability
on floating
rate
performing customer
loans or
floating rate
deposits, denominated
both in
local and
foreign
currency,
or unrecognized
highly
probable forecast transactions
,
using interest rate and
cross currency interest rate
swaps. For the year ended 31 December 2021, an
amount of € 51 million gain was recognised in other comprehensive income in relation to derivatives
designated as cash flow hedges
(2020: €
12 million
loss). Furthermore,
in 2021,
the ineffectiveness
recognized
in the
income statement
that arose
from cash
flow
hedges was nil (2020: nil).
In addition, the Group
uses other derivatives,
not designated in a
qualifying hedge relationship,
to manage its exposure
primarily to
interest rate and foreign currency risks. Non
qualifying hedges are derivatives entered into
as economic hedges of
assets and liabilities
for which hedge accounting
was not applied. The said
derivative instruments are
monitored and have been
classified for accounting
purposes along with those held for trading.
The
Group's
exposure
in
derivative
financial
assets,
as
categorized
by
counterparty's
geographical
region
and
industry
sector,
is
presented in the following tables:
31 December 2021
Greece
Other
European
countries
Other
countries
Total
€ million
€ million
€ million
€ million
Sovereign
1,105
-
-
1,105
Banks
4
466
261
731
Corporate
109
0
4
113
Total
1,218
466
265
1,949
31 December 2020
Greece
Other
European
countries
Other
countries
Total
€ million
€ million
€ million
€ million
Sovereign
1,637
-
-
1,637
Banks
0
400
313
713
Corporate
142
56
4
202
Total
1,779
456
317
2,552
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
At 31 December 2021 and 2020,
the maturity profile of the nominal amount
of the financial instruments designated
by the Group in
hedging relationships is presented in the tables
below:
31 December 2021
Fair Value Hedges
Cash Flow Hedges
1 - 3
months
3 - 12
months
1-5 years
Over 5
years
Total
3 - 12
months
1-5 years
Over 5
years
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Interest rate swaps
39
13
500
3,180
3,732
19
728
1,105
1,852
Cross currency interest rate
swaps
-
-
-
-
-
48
1,584
-
1,632
Total
39
13
500
3,180
3,732
67
2,312
1,105
3,484
31 December 2020
Fair Value Hedges
Cash Flow Hedges
3 - 12
months
1-5 years
Over 5
years
Total
3 - 12
months
1-5 years
Over 5
years
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Interest rate swaps
100
470
2,481
3,051
-
647
1,080
1,727
Cross currency interest
rate swaps
-
4
-
4
461
1,090
131
1,682
Total
100
474
2,481
3,055
461
1,737
1,211
3,409
(a) Fair value hedges
The following
tables present
data relating
to the hedged
items under fair
value hedges
for the years
ended 31 December
2021 and
2020:
31 December 2021
Carrying
amount
Accumulated
amount of FV
hedge
adjustments
related to the
hedged item
Change in
value as the
basis for
recognising
hedge
ineffectiveness
€ million
€ million
€ million
Loans and advances to customers
470
16
(5)
Debt securities AC
2,208
531
179
Debt securities FVOCI
2,573
94
(105)
Total
5,251
641
69
31 December 2020
Carrying
amount
Accumulated
amount of FV
hedge
adjustments
related to the
hedged item
Change in
value as the
basis for
recognising
hedge
ineffectiveness
€ million
€ million
€ million
Loans and advances to customers
270
21
(2)
Debt securities AC
1,512
352
62
Debt securities FVOCI
2,472
199
(187)
Total
4,254
572
(127)
At 31
December 2021, the
accumulated amount
of fair
value hedge
adjustments remaining
in the balance
sheet for
any items
that
have ceased to be adjusted for hedging gains
and losses was € 190 million (2020: € 162 million).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
(b) Cash flow hedges
The cash flow hedge reserves for
continuing hedges as at 31 December 2021 were
€ 3 million gain (2020: € 48 million loss), of which
€ 4 million gain (2020: € 4 million gain) relates to loans and advances to customers and € 1 million loss to deposits (2020: € 52 million
loss).
As at 31 December 2021, the
balances remaining in the cash
flow hedge reserve from
any cash flow hedging
relationships for which
hedge accounting is no longer applied was € 19 million loss (2020: € 21 million loss).
The reconciliation of the components of Group’s
special reserves including cash flow hedges is provided in note 38.
20.
Loans and advances to customers
2021
2020
€ million
€ million
Loans and advances to customers at amortised cost
- Gross carrying amount
40,815
40,874
- Impairment allowance
(1,872)
(3,477)
Carrying Amount
38,943
37,397
Loans and advances to customers at FVTPL
23
27
Total
38,967
37,424
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The table below presents the carrying amount of loans and
advances to customers per business unit and per stage as at
31 December
2021:
31 December 2021
31 December 2020
12-month ECL-
Stage 1
Lifetime
ECL-
Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
Total amount
Total amount
€ million
€ million
€ million
€ million
€ million
Loans and advances to customers at
amortised cost
Mortgage lending:
- Gross carrying amount
6,871
2,735
498
10,105
11,650
- Impairment allowance
(17)
(138)
(170)
(325)
(842)
Carrying Amount
6,854
2,597
328
9,780
10,809
Consumer lending:
- Gross carrying amount
2,572
311
358
3,242
3,408
- Impairment allowance
(44)
(39)
(257)
(340)
(719)
Carrying Amount
2,529
273
101
2,902
2,688
Small Business lending:
- Gross carrying amount
2,540
744
469
3,753
4,476
- Impairment allowance
(41)
(58)
(227)
(326)
(674)
Carrying Amount
2,499
685
242
3,427
3,802
Wholesale lending:⁽²⁾⁽³⁾
- Gross carrying amount
20,594
1,670
1,452
23,716
21,340
- Impairment allowance
(69)
(76)
(737)
(881)
(1,242)
Carrying Amount
20,526
1,595
715
22,835
20,098
Total loans and advances to customers
at
AC
- Gross carrying amount
32,578
5,461
2,776
40,815
40,874
- Impairment allowance
(171)
(311)
(1,391)
(1,872)
(3,477)
Carrying Amount
32,408
5,150
1,386
38,943
37,397
Loans and advances to customers at FVTPL
Carrying Amount⁽⁴⁾
23
27
Total
38,967
37,424
(1)
As at 31 December
2021, POCI loans of €
44 million gross carrying amount
(of which € 42
million included in non performing exposures)
and € 6.4 million
impairment allowance are presented in ‘Lifetime ECL – stage 3 and
POCI’ (31 December 2020: € 43 million gross
carrying amount and € 3.5 million impairment
allowance).
(2)
Includes a) € 1,057 million related to the
senior note of the Pillar securitization and
b) € 2,429 million and € 1,621
million related to the senior notes of
the
Cairo and the Mexico securitizations respectively, which are under the Hellenic Asset Protection Scheme. The notes have been categorized in Stage 1.
(3)
Includes loans to public sector.
(4)
Includes € 9.9 million related to the mezzanine notes of the Pillar, Cairo and Mexico securitizations.
Loans and advances to customers – Project
Wave
In December 2021, the
Bank, proceeded with
the execution of
two synthetic
risk transfer
transactions (projects
‘Wave I’
and ‘Wave
II’),
in
the
form
of
a
financial
guarantee,
of
a
portfolio
of
performing
SMEs
and
large
corporate
loans
of
€
1.7
billion
(reference
portfolio).
The ‘Wave
I’ transaction
was
entered
with Magnetar
Capital,
guaranteeing
the mezzanine
loss of
a pool
of performing
SMEs
and
large
corporate
loans
of
€
1.0
billion,
whereas
the
Wave
II
transaction
was
entered
with
European
Investment
Fund,
guaranteeing the first loss of
a pool of performing SMEs and large corporate
loans of € 0.7 billion. Both transactions were accounted
for
as
purchased
financial
guarantee
contracts
that
are
not
integral
to
the
contractual
terms
of
the
reference
portfolio,
where
a
compensation
right resulting
from the
expected credit
losses of
the protected
loans is
recognized,
to the
extent
that it
is virtually
certain that
the Group will
be reimbursed
for the
credit losses incurred.
The reference
portfolio continued
to be recognised
on the
Group’s Balance Sheet.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
As at 31 December 2021, the Wave transactions, that were performed in the context of the Group’s initiatives for the optimization
of
its regulatory capital, resulted
in a capital benefit of 40 bps.
NPE securitizations – loans’ derecognition
The Group
in the
context
of the
achievement
of its
NPE reduction
targets
has entered
into the
securitization
of various
classes of
primarily NPE
through the
issue of senior,
mezzanine and
junior notes,
which resulted,
as described below,
in the derecognition
of
the underlying loan portfolios and the recognition of the retained
notes.
‘Cairo’ securitization
In June
2019, the
Group, through
the special
purpose financing
vehicles (SPVs)
‘Cairo No.
1 Finance
Designated Activity
Company’,
‘Cairo No. 2 Finance Designated
Activity Company’ and ‘Cairo No. 3 Finance Designated
Activity Company’,
issued senior,
mezzanine
and junior notes of total face value of ca. € 7.5 billion, via a securitizat
ion of a mixed portfolio consisting primarily of non-performing
loans (NPEs)
(“Cairo securitization”).
In December
2019, the
Group
announced that
it has
entered
into
a binding
agreement
with
doValue S.p.A. for the sale of 20% of the mezzanine
and 50.1% of the junior notes of “Cairo securitization”.
In the
context
of Law
4649/2019 (‘Hercules’
– Hellenic
Asset Protection
Scheme) voted
by the
Greek parliament
on 16
December
2019, the “Cairo” SPVs opted in for the state guarantee
scheme. Specifically, the applications submitted
by the Group to the Ministry
of Finance were approved on 23 July 2020 while the Guarantee
deed was signed on 25 February 2021.
In June 2020, the sale of the aforementioned notes for a cash consideration of € 14 million was completed and, as a result, the
Group
ceased to control the Cairo
SPVs on the basis that it does
not have the power to
direct their relevant activities. Furthermore,
in June
2020, Eurobank
Holdings, following
a decision of
the Board
of Directors
(BoD), proceeded
to the
contribution of
the retained
Cairo
notes, i.e.
75% of
the mezzanine
and 44.9%
of the
junior notes,
along with
an amount
of €
1.5 million
in cash
to its
Cyprus-based
subsidiary Mairanus Ltd, renamed to
‘Cairo Mezz Plc’,
in exchange for the newly-issued shares
of the aforementioned subsidiary
.
Following the above,
as at 30 June 2020,
the Group proceeded
with the re-measurement
of the portfolio’s
expected credit losses
in
accordance with its
accounting policy for
the impairment of
financial assets and recognized
an impairment loss of
€ 1,509 million in
the second quarter of 2020.
On 7 July 2020, the BoD of the Company proposed to the General
Shareholders’ Meeting the distribution of Cairo
Mezz Plc shares to
Eurobank Holding’s shareholders through the decrease in kind of
its share capital. The approval of the
General Shareholders’ Meeting
for the aforementioned corporate
action was granted on 28 July 2020 (note 37).
In September 2020,
following the completion
of the distribution
of the Cairo
Mezz Plc shares,
the underlying loan
portfolio and the
related assets and liabilities were derecognized
from the Group’s
balance sheet, on the basis that at that time the Group transferred
substantially all risks
and rewards of the portfolio’s
ownership and ceased to have
control over the securitized
portfolio. In addition,
the Group recognized
the retained notes
on its balance sheet,
i.e. 100% of the
senior notes, 5% of
mezzanine and junior
notes
with
carrying amount €
2,432
million at 31 December 2021
(31 December 2020: €
2,444
million). The above
mentioned derecognition of
the underlying portfolio resulted in a derecognition
gain of € 9 million, which was presented in “other
income/ expenses”.
‘Pillar’ securitization
In
June
2019, the
Group,
through
the special
purpose
financing vehicle
(SPV)
‘Pillar
Finance Designated
Activity
Company’ issued
senior,
mezzanine and junior notes
of total value
of ca. € 2 billion,
via a securitization of
residential mortgage
primarily NPENPEs. In
September 2019, the Group sold 95% of the above-mentioned mezzanine
and junior notes to Celidoria S.A R.L. Upon the completion
of the
sale, the
Group ceased
to control
the SPV
and derecognized
the underlying
loan portfolio
in its
entirety,
on the
basis that
it
transferred substantially
all the risks and rewards of the underlying loan portfolio’s
ownership. In addition, the Group recognized the
retained
notes, i.e.
100% of
the senior,
5% of
the mezzanine
and junior
notes, on
its balance
sheet with
carrying amount
€ 1,060
million at 31 December 2021 (31 December 2020: € 1,061 million).
20.1 Project “Mexico” – loans’ derecognition
In line
with the
regulatory
framework
and Single
Supervisory Mechanism
(SSM) requirements
for the
non-performing
loans (NPE)
management,
the
Group
contemplated
another
significant
NPE
securitization
transaction
(project
‘Mexico’)
in
order
to
decrease
further its
NPE ratio
and strengthen
its balance
sheet de-risking.
The project
‘’Mexico’’ represents
the continuation
of the
Group’s
NPE reduction plan that was successfully completed in 2020, where NPE are transferred to Eurobank
Holdings (parent company), the
Notes to the Consolidated Financial Statements
.
120
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31 December 2021 Consolidated Financial Statements
group company
responsible for the
overall management
and supervision of the
Group’s
NPE. The Group
included project ‘’Mexico’’
under the
Hellenic Asset
Protection Scheme
(HAPS) thus
became entitled
to the
Greek State’s
guarantee
which was
subject to
the
accounting derecognition of the underlying loan portfolio
from the Group’s balance sheet.
In particular,
in May
2021, the
Bank, through
its special
purpose financing
vehicle ‘Mexico
Finance Designated
Activity
Company’
(SPV),
issued
senior
(Class
A),
mezzanine
(Class
B)
and
junior
(Class
C)
notes
of
total
nominal
amount
of
ca.
€
5.2
billion,
via
a
securitization of a mixed
portfolio comprising primarily NPE
of total principle
amount due of
ca. € 5.2
billion and gross carrying
amount
of ca.
€ 3.2 billion,
which were
fully retained
by the
Bank (note
34). The
control
of the
SPV resides
with the
majority holder
of the
Class
B
notes.
Accordingly,
the
Group,
being
the
sole
holder
of
the
issued
notes,
controlled
the
SPV
and
the
related
real
estate
company
‘Mexico Estate
Single Member
S.A.’,
and continued
recognizing the
underlying loan
portfolio on
its balance
sheet on
the
basis that it retained substantially all risks
and rewards of the portfolio’s
ownership.
On 1 June 2021, the General Shareholders’ Meeting of the Bank (GM), following the relevant
decision of its Board of Directors (BoD),
approved the distribution
of the 95% of the
mezzanine and junior notes
of Mexico securitization
to its parent company
through the
decrease in kind
of the Bank’s share
capital. The aforementioned GM’s approval for the
Bank’s share capital reduction and
the relevant
amendment of its articles of association were subject to the regulator’s approval.
In August 2021, the Bank was granted the required
regulatory approval by the European Central Bank (ECB)
and the relevant amendments of
its articles of
association were subsequently
approved by the Ministry of Developments and Investments
and registered to the General Electronic
Commercial Registry (G.E.MI.).
The distribution in kind of the Bank to its
parent company though a share capital reduction constitutes a common control transaction
within the scope of IAS 32 ‘Financial Instruments: Presentation’.
However,
the above accounting standard does not shed
light on the
various
issues arising
in non
cash distributions,
such as
the amount
to
be recorded
in equity
as well
as whether
recording
of the
transaction
should
be
performed
in
fair
values
or
book
values.
On
the
other
hand,
IFRIC
17
‘Distributions
of
Non-cash
Assets
to
Owners’,
that specifies the use of fair values in specific types
of distributions, does not apply to common control
transactions, which
are
explicitly
excluded
from
its
scope.
Considering
the
scope
limitation
of
IFRIC
17,
the
Bank
applied
the
use
of
book
values
in
intercompany
distributions of
non-cash assets,
consistently with
the accounting
policies already
applied in
other types
of common
control transactions. Therefore,
the reduction of the Bank’s total
equity was determined by the book value of the assets distributed.
The settlement of
the aforementioned
distribution in kind, that
took place in September
2021, resulted in the
de-recognition of the
underlying loan portfolio and the related
assets and liabilities from the Bank’s
balance sheet, on the basis that the
latter transferred
substantially
all risks
and rewards
of the
portfolio’s
ownership and
relinquished its
control over
it. In
addition, the
Bank ceased
to
control the SPV and the related real estate
company, which resides
with the majority stake of Class B noteholders. At the same time,
Eurobank Holdings
accounted for
the distribution
in kind as
dividend, recognizing
in profit
and loss the
fair value
of the distributed
notes, ie. 95% of
the mezzanine and junior notes.
Moreover, Eurobank Holdings obtained the direct control of the SPV
and the related
real estate company.
The
distribution
of
the
notes
from
the
Bank
to
its
parent
company
under
a
share
capital
reduction,
as
analysed
above,
is
an
intercompany
transaction
thus, it
did not
affect
the
consolidation
of the
SPV
and the
related
real
estate
company
as well
as
the
recognition assessment of the underlying loan portfolio at Holdings
Group level, as at 30 September 2021, since the latter
continued
to retain the 100% of the issued notes.
In August
2021, a
commitment letter
was signed
between Eurobank
Holdings, Eurobank
and doValue
S.p.A. for
the sale
of 95%
of
mezzanine and junior notes
of Mexico securitization
that were distributed
to Eurobank Holdings, subject
to the fulfilment of
certain
conditions, including
the settlement
of the
mezzanine and
junior notes’
distribution from
the Bank to
Eurobank Holdings,
that was
completed in September 2021, as well as the issuance of the Ministerial
Decision on the inclusion of the Mexico securitization
under
HAPS and the
regulatory approval
by the SSM
for the
significant risk
transfer of
the underlying loan
portfolio that
were received
in
December 2021.
In September
2021, the BoD
of Eurobank
Holdings approved
to proceed
with the sale
of 95% of
the mezzanine
and junior
notes of
Mexico
securitization
and
the
ongoing
servicing
of
the
portfolio
by
doValue
Group.
The
aforementioned
BoD
decision
clearly
demonstrated
Management’s
commitment
to
a
specific
plan
for
the
notes’
disposal
as
a
last
step
of
the
project
‘Mexico’
and
eventually to the underlying loan portfolio’s
de-recognition from the Group’s
balance sheet.
Accordingly,
as
at
30
September
2021,
the
Group
proceeded
with
the
re-measurement
of
the
portfolio’s
expected
credit
losses,
considering the estimated date for the Mexico
loan portfolio’s derecognition from its balance sheet, in
accordance with its accounting
policy for the impairment of financial assets and recognized an impairment
loss of € 72 million in the third quarter of 2021 (note 21).
Notes to the Consolidated Financial Statements
.
121
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31 December 2021 Consolidated Financial Statements
The
impairment
loss
was
calculated
by
reference
to
the
sale
price
of
the
mezzanine
and
junior
notes.
Furthermore,
the
Group
classified as held for sale assets the underlying loan portfolio of carrying amount €
1,514 million, comprising loans with gross carrying
amount
of €
3,046 million
which carried
an impairment
allowance of
€ 1,532
million after
the recognition
of the
aforementioned
impairment loss, the
related securitization’s receivables and payables of €
69 million and
€ 31 million
respectively, and the impairment
allowance of the letters of guarantee
of € 1 million included in the underlying portfolio.
The transaction
with doValue
Group for
the sale of
the 95% of
the mezzanine
and junior notes
retained by
Eurobank Holdings
was
concluded in December
2021, after the
fulfillment of all conditions
and having received
all appropriate
approvals. As
a result of the
aforementioned sale, the Group ceased
to control the SPV as
well as the
related real estate company and derecognized the underlying
loan portfolio from
its balance sheet,
on the basis
that it transferred
substantially all
risks and rewards
of the portfolio’s
ownership
and ceased to have
control over
the securitized loans,
which resides with the
majority stake
of Class B noteholders.
In addition, the
Group
recognized
the retained
notes on
its balance
sheet i.e.
100% of
the senior
and 5%
of the
mezzanine
and junior
notes. The
derecognition of the underlying loan portfolio from the Group’s
balance sheet resulted in a derecognition loss of € 5 million, which is
presented in ‘other income/expenses’
(note 10).
Notes to the Consolidated Financial Statements
.
122
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31 December 2021 Consolidated Financial Statements
21.
Impairment allowance for loans and advances to customers
The following tables
present the movement of the impairment allowance
on loans and advances to customers
(expected credit losses – ECL):
31 December 2021
Wholesale
Mortgage
Consumer
Small business
12-month
ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
12-month
ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
12-month
ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
12-month
ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Impairment allowance as at 1 January
83
108
1,052
24
152
665
41
61
617
35
119
520
3,477
New loans and advances originated or
purchased
17
-
-
1
-
-
22
-
-
5
-
-
45
Transfers between stages
- to 12-month ECL
16
(11)
(5)
18
(15)
(2)
21
(17)
(4)
38
(37)
(2)
-
- to lifetime ECL
(6)
13
(7)
(7)
80
(73)
(3)
23
(20)
(3)
23
(20)
-
- to lifetime ECL credit-impaired loans
(1)
(22)
22
(1)
(16)
17
(3)
(16)
18
(3)
(19)
22
-
Impact of ECL net remeasurement
(35)
(10)
138
(15)
(26)
232
(31)
(12)
138
(30)
(5)
138
480
Recoveries from written - off loans
-
-
7
-
-
3
-
-
10
-
-
5
25
Loans and advances derecognised/
reclassified as held for sale during the
year⁽²⁾
(0)
(3)
(271)
(0)
(34)
(604)
(0)
(1)
(306)
(0)
(25)
(327)
(1,571)
Amounts written off⁽³⁾
-
-
(166)
-
-
(73)
-
-
(145)
-
-
(85)
(469)
Unwinding of Discount
-
-
(21)
-
-
(8)
-
-
(7)
-
-
(9)
(46)
Foreign exchange and other movements
(5)
1
(13)
(3)
(2)
12
(3)
0
(42)
(2)
3
(15)
(69)
Impairment allowance as at 31 December
69
76
737
17
138
170
44
39
257
41
58
227
1,872
Notes to the Consolidated Financial Statements
.
123
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31 December 2021 Consolidated Financial Statements
31 December 2020
Wholesale
Mortgage
Consumer
Small business
12-month
ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
12-month
ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
12-month
ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
12-month
ECL
-Stage 1
Lifetime ECL
-Stage 2
Lifetime ECL -
Stage 3 and
POCI⁽¹⁾
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Impairment allowance as at 1 January
64
90
2,499
13
174
1,517
37
44
974
22
99
1,566
7,099
New loans and advances originated or
purchased
26
-
-
1
-
-
9
-
-
17
-
-
54
Transfers between stages
- to 12-month ECL
8
(8)
(0)
21
(20)
(0)
9
(7)
(3)
11
(11)
(1)
-
- to lifetime ECL
(16)
28
(12)
(1)
108
(107)
(3)
32
(29)
(2)
33
(30)
-
- to lifetime ECL credit-impaired loans
(1)
(18)
20
(0)
(9)
9
(1)
(6)
7
(0)
(5)
5
-
Impact of ECL net remeasurement
2
34
610
(3)
(18)
623
(9)
(1)
95
10
51
591
1,983
Recoveries from written - off loans
-
-
19
-
-
2
-
-
6
-
-
3
30
Loans and advances
derecognised/reclassified as held for sale
during the year⁽²⁾
(4)
(18)
(1,771)
(7)
(83)
(1,237)
(1)
(1)
(269)
(22)
(48)
(1,475)
(4,937)
Amounts written off⁽³⁾
-
-
(220)
-
-
(97)
-
-
(131)
-
-
(103)
(551)
Unwinding of Discount
-
-
(47)
-
-
(24)
-
-
(12)
-
-
(37)
(120)
Foreign exchange and other movements
4
0
(46)
1
0
(22)
(1)
0
(21)
(0)
0
2
(82)
Impairment allowance as at 31 December
83
108
1,052
24
152
665
41
61
617
35
119
520
3,477
(1)
The impairment allowance for POCI loans of € 6.4 million is included in ‘Lifetime ECL – stage 3 and POCI’ (2020: € 3.5 million).
(2)
It represents the impairment allowance of loans derecognized due to
a) securitization and sale transactions,
b) substantial modifications of the loans’ contractual terms,
c) debt to equity transactions, consolidation of a newly acquired entity
and those that have been reclassified as held for sale during the year (notes 20 and 30).
(3)
The contractual amount outstanding on lending exposures that were written off during the year ended 31 December 2021 and that
are still subject to enforcement activity is € 217 million (2020: € 503 million).
Notes to the Consolidated Financial Statements
.
124
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31 December 2021 Consolidated Financial Statements
The impairment losses relating
to loans and advances
to customers recognized
in the Group’s
income statement
for the year ended
31 December 2021
amounted to
€ 490 million,
including €
72 million loss
relating to
the project
Mexico (note
20.1) (2020: €
2,081
million, including € 1,509 million loss relating to the Cairo transaction)
and are analyzed as follows:
2021
2020
€ million
€ million
Impairment loss on loans and advances to customers
(525)
(2,037)
Modification gain / (loss) on loans and advances to customers
18
(31)
Impairment (loss)/ reversal for credit
related commitments
17
(13)
Total
(490)
(2,081)
22.
Investment securities
2021
2020
€ million
€ million
Investment securities at FVOCI
6,509
5,454
Investment securities at amortised cost
4,666
2,784
Investment securities at FVTPL
141
127
Total
11,316
8,365
Note: information on debt securities of the investment portfolio is presented in note 5.2.1.3
On 23 July
2021, Eurobank S.A. announced
the acquisition of
a 9.9% holding
in Hellenic
Bank Public Company Limited
(“Hellenic Bank”)
and the
entering into
a share
purchase agreement
with Third
Point Hellenic
Recovery Fund
L.P.
for the
acquisition of
an additional
2.7%, which was completed on 28 December 2021 following
the receipt of the relevant regulatory
approvals.
Hellenic Bank is one
of the largest
financial institutions in
Cyprus, active in
personal, business and
international banking.
The above
investment
is aligned with
the overall
strategy of
the Group to
further strengthen
its presence in
all key
markets in
which retains
a
strategic interest
and thus has been designated at FVOCI. Its fair value
as at 31 December 2021 amounted to € 44 million.
GGBs swap transaction
In December
2020, the
Public Debt
Management Agency
(PDMA)
proceeded to
an offer
to repurchase
specific Greek
government
bonds (GGBs) held
by the Bank
of face value
€ 1.2 billion
held at the
amortised cost portfolio,
against a
cash consideration
of € 1.5
billion equal to their market
value. At the same time, the PDMA proceeded to the re-opening of a GGB of face value € 0.5 billion that
was offered to the Bank against
cash consideration of € 0.8 billion, equal to its market
value.
Accordingly,
the original bonds were
derecognized from
the Group’s
balance sheet with a
resulting gain of
€ 139 million, net
of any
hedging effect. The new GGB was also classified within the
hold-to-collect portfolio measured at amortised cost.
In December 2021, the Hellenic Republic,
in the context of its Liability Management, invited all holders of specific Greek Government
Bonds (GGBs) issued under the PSI in
2012 with maturities ranging from
2023 to 2042 (“Designated
securities”) to offer to exchange
these securities for specified series
of GGBs ending in 2027, 2033, 2037
and 2042 (“Benchmark securities”), aiming
to substitute the
old PSI bonds
that presented
low trading
activity in the
market with
significantly liquid
GGBs that were
issued in the
context of
the
Hellenic Republic’s Liability Management
Exercise in 2017.
Pursuant to the above invitation, the Bank offered for exchange GGBs of face value
€ 108 million recognized under the amortised
cost
portfolio. The exchange
was accounted
for as a modification
of the Designated Securities with
no significant impact, as
the terms of
the Benchmark securities were not considered to be substantial
ly different than those of the Designated
Securities.
Notes to the Consolidated Financial Statements
.
125
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31 December 2021 Consolidated Financial Statements
22.1
Movement of investment securities
The tables below present the movement of the carrying
amount of investment securities per measurement
category and per stage:
31 December 2021
Debt securities at FVOCI
Investment
securities at
amortised cost
Investment
securities at
FVTPL
Equity
securities at
FVOCI
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
12-month ECL-
Stage 1
Total
€ million
€ million
€ million
€ million
€ million
€ million
Gross carrying amount at 1 January
5,444
10
2,789
127
-
8,370
Arising from acquisition (note 23.2)
78
-
-
0
-
78
Additions, net of disposals and redemptions
1,020
-
1,676
8
41
2,745
Transfers between stages
2
(2)
-
-
-
-
Net gains/(losses) from changes in fair value for
the year
(132)
1
-
4
3
(124)
Amortisation of premiums/discounts and
interest
(21)
(0)
(5)
0
-
(26)
Changes in fair value
due to hedging
-
-
179
-
-
179
Exchange adjustments and other movements
65
0
33
2
-
100
Gross carrying amount at 31 December
6,456
9
4,672
141
44
11,322
Impairment allowance
-
-
(6)
-
-
(6)
Net carrying amount at 31 December
6,456
9
4,666
141
44
11,316
31 December 2020
Debt securities at
FVOCI
Investment
securities at
amortised cost
Investment
securities at
FVTPL
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
12-month ECL-
Stage 1
Total
€ million
€ million
€ million
€ million
€ million
Gross carrying amount at 1 January
6,278
-
1,542
134
7,954
Additions, net of disposals and redemptions
(1,020)
-
1,170
(6)
144
Transfers between stages
(10)
10
-
-
-
Net gains/(losses) from changes in fair value for the year
301
1
-
(1)
301
Amortisation of premiums/discounts and interest
(51)
0
15
0
(36)
Changes in fair value due to hedging
-
-
62
-
62
Exchange adjustments and other movements
(54)
(1)
0
(0)
(55)
Gross carrying amount at 31 December
5,444
10
2,789
127
8,370
Impairment allowance
-
-
(5)
-
(5)
Net carrying amount at 31 December
5,444
10
2,784
127
8,365
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
22.2
Movement of ECL
The table below presents the ECL movement per portfolio,
including ECL movement analysis per stage:
31 December 2021
31 December 2020
Measured at
amortised cost
Measured at
FVOCI
Total
Measured at
amortised cost
Measured at
FVOCI
Total
€ million
€ million
€ million
€ million
€ million
€ million
Balance at 1 January
5
10
15
3
9
12
New financial assets purchased
8
8
16
6
5
11
- of which 12-month ECL-Stage 1
8
8
16
6
5
11
Transfers
between stages
- (from)/to 12-month ECL-Stage 1
-
0
0
-
(1)
(1)
- (from)/to lifetime ECL-Stage 2
-
(0)
(0)
-
1
1
Remeasurement due to change in
ECL risk parameters
(6)
(6)
(12)
(2)
(0)
(2)
- of which 12-month ECL-Stage 1
(6)
(6)
(12)
(2)
(0)
(2)
- of which lifetime ECL-Stage 2
-
(0)
(0)
-
(0)
(0)
Financial assets disposed during the
year
(0)
(1)
(1)
(2)
(3)
(5)
- of which 12-month ECL-Stage 1
(0)
(1)
(1)
(2)
(3)
(5)
Financial assets redeemed during the
year
(0)
(0)
(0)
(0)
(0)
(0)
Foreign exchange and other
movements
(1)
1
-
0
(1)
(1)
Balance as at 31 December
6
12
18
5
10
15
22.3
Equity reserve: revaluation of the investment
securities at FVOCI
Gains
and
losses
arising
from
the
changes
in
the
fair
value
of
investment
securities
at
FVOCI
are
recognized
in
a
corresponding
revaluation reserve in equity.
The movement of the reserve is as follows:
2021
2020
€ million
€ million
Balance at
1 January
415
557
Net gains/(losses) from changes in fair value
(128)
302
Tax (expense)/benefit
33
(86)
Revaluation reserve from associated undertakings, net of tax
(4)
(18)
(99)
198
Net (gains)/losses transferred to net profit on disposal
(99)
(666)
ECL transferred to net profit
3
4
Tax (expense)/benefit on net (gains)/losses transferred to net profit on disposal
28
191
Tax (expense)/benefit on ECL transferred to net profit
(1)
(1)
(69)
(472)
Net (gains)/losses transferred to net profit from fair value hedges
105
187
Tax (expense)/benefit
(30)
(55)
75
132
Balance at 31 December
322
415
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
23.
Group composition
23.1
Shares in subsidiaries
The following
is a listing
of the Company's
subsidiaries at
31 December 2021,
included in
the consolidated
financial statements
for
the year ended 31 December 2021:
Name
Note
Percentage
holding
Country of
incorporation
Line of business
Eurobank S.A.
g
100.00
Greece
Banking
Be Business Exchanges S.A. of Business Exchanges
Networks and Accounting and Tax Services
98.01
Greece
Business-to-business e-commerce,
accounting, tax and sundry services
Eurobank Asset Management Mutual Fund Mngt
Company Single Member S.A.
100.00
Greece
Mutual fund and asset management
Eurobank Equities Investment Firm Single Member
S.A.
100.00
Greece
Capital markets and advisory services
Eurobank Leasing Single Member S.A.
g
100.00
Greece
Leasing
Eurobank Factors Single Member S.A.
100.00
Greece
Factoring
Hellenic Post Credit S.A.
50.00
Greece
Credit card management and other
services
Herald Greece Single Member Real Estate
development and services S.A. 1
100.00
Greece
Real estate
Herald Greece Single Member Real Estate
development and services S.A. 2
100.00
Greece
Real estate
Standard Single Member Real Estate S.A.
h
100.00
Greece
Real estate
Cloud Hellas Single Member Ktimatiki S.A.
100.00
Greece
Real estate
Piraeus Port Plaza 1 Single Member Development S.A.
100.00
Greece
Real estate
(Under liquidation) Real Estate Management Single
Member S.A.
100.00
Greece
Real estate services
(Under liquidation) Anchor Hellenic Investment
Holding Single Member S.A.
100.00
Greece
Real estate
Vouliagmeni Residence Single Member S.A.
100.00
Greece
Real estate
Athinaiki Estate Investments Single Member S.A.
100.00
Greece
Real estate
Piraeus Port Plaza 2 Development S.A.
100.00
Greece
Real estate
Piraeus Port Plaza 3 Development S.A.
100.00
Greece
Real estate
Tenberco Properties Development and Exploitation
Single Member S.A.
100.00
Greece
Real estate
Value Touristiki S.A.
b
100.00
Greece
Real estate
Village Roadshow Operations Hellas S.A.⁽¹⁾
100.00
Greece
Cinema entertainment services
Eurobank Bulgaria A.D.
99.99
Bulgaria
Banking
IMO 03 E.A.D.⁽¹⁾
100.00
Bulgaria
Real estate services
IMO Property Investments Sofia E.A.D.
100.00
Bulgaria
Real estate services
ERB Hellas (Cayman Islands) Ltd
100.00
Cayman Islands
Special purpose financing vehicle
Berberis Investments Ltd
100.00
Channel Islands
Holding company
Eurobank Cyprus Ltd
100.00
Cyprus
Banking
ERB New Europe Funding III Ltd
100.00
Cyprus
Finance company
Foramonio Ltd
100.00
Cyprus
Real estate
NEU 03 Property Holdings Ltd
100.00
Cyprus
Holding company
NEU Property Holdings Ltd
100.00
Cyprus
Holding company
Lenevino Holdings Ltd
100.00
Cyprus
Real estate
Rano Investments Ltd
100.00
Cyprus
Real estate
Neviko Ventures Ltd
100.00
Cyprus
Real estate
Staynia Holdings Ltd
100.00
Cyprus
Holding company
Zivar Investments Ltd
100.00
Cyprus
Real estate
Amvanero Ltd
100.00
Cyprus
Real estate
Revasono Holdings Ltd
100.00
Cyprus
Real estate
Volki Investments Ltd
100.00
Cyprus
Real estate
Adariano Investments Ltd
100.00
Cyprus
Real estate
Elerovio Holdings Ltd
100.00
Cyprus
Real estate
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Sagiol Ltd
100.00
Cyprus
Holding company
Macoliq Holdings Ltd
100.00
Cyprus
Holding company
Senseco Trading Limited
b
100.00
Cyprus
Holding company
Eurobank Private Bank Luxembourg S.A.
100.00
Luxembourg
Banking
Eurobank Fund Management Company (Luxembourg)
S.A.
100.00
Luxembourg
Fund management
ERB Lux Immo S.A.
100.00
Luxembourg
Real estate
ERB New Europe Funding B.V.
100.00
Netherlands
Finance company
ERB New Europe Funding II B.V.
100.00
Netherlands
Finance company
ERB New Europe Holding B.V.
100.00
Netherlands
Holding company
ERB IT Shared Services S.A.
100.00
Romania
Informatics data processing
IMO Property Investments Bucuresti S.A.
100.00
Romania
Real estate services
IMO-II Property Investments S.A.
100.00
Romania
Real estate services
Eliade Tower S.A.
99.99
Romania
Real estate
Retail Development S.A.
99.99
Romania
Real estate
Seferco Development S.A.
99.99
Romania
Real estate
Eurobank Direktna a.d.
d
70.00
Serbia
Banking
ERB Leasing A.D. Beograd-in Liquidation
d
85.15
Serbia
Leasing
IMO Property Investments A.D. Beograd
100.00
Serbia
Real estate services
Reco Real Property A.D. Beograd
100.00
Serbia
Real estate
ERB Istanbul Holding A.S. in liquidation
i
100.00
Turkey
Holding company
ERB Hellas Plc
100.00
United Kingdom
Special purpose financing vehicle
Karta II Plc
-
United Kingdom
Special purpose financing vehicle
Astarti Designated Activity Company
-
Ireland
Special purpose financing vehicle
ERB Recovery Designated Activity Company
-
Ireland
Special purpose financing vehicle
(1)
The company has been classified as a held for sale subsidiary (note 30).
As at 31 December 2021,
the Group held half of
the voting rights of Hellenic
Post Credit S.A. which is fully consolidated. The
Bank with
the consent
of the
other shareholder
who held
the remaining
50% of
the share
capital, has
appointed the
majority of
the Board’s
directors and directs the current operations
that significantly affect the returns
of the company.
The following entities are not included in the consolidated
financial statements mainly due to immateriality:
(i) the Group’s
special purpose financing
vehicles and the
related holding
entities, which are
dormant and/or
are under liquidation:
Themeleion
III
Holdings
Ltd,
Themeleion IV
Holdings
Ltd,
Themeleion Mortgage
Finance Plc,
Themeleion
II Mortgage
Finance Plc,
Themeleion
III
Mortgage
Finance
Plc,
Themeleion
IV
Mortgage
Finance
Plc,
Themeleion
V
Mortgage
Finance
Plc,
Themeleion
VI
Mortgage Finance Plc, Anaptyxi APC Ltd,
Byzantium II Finance Plc and Maximus Hellas Designated Activity
Company.
(ii) the holding entity of Karta II Plc: Karta II Holdings
Ltd.
(iii) dormant entity: Enalios Real Estate
Development S.A.
(iv) entities controlled by the Group pursuant to the terms of the relevant share pledge agreements: Finas S.A., Rovinvest S.A., Provet
S.A. and Promivet S.A.
In 2021,
the changes
in the
Group
structure
due to:
a) acquisitions,
mergers
and establishment
of companies,
b) sales
and other
corporate actions,
which resulted in
loss of control,
c) transactions with
the non-controlling interests,
which did not result
in loss of
control and d) liquidations, are as follows:
(a) Grivalia New Europe S.A., Luxembourg
In January 2021, the liquidation of the company was completed.
(b) Senseco Trading Ltd,
Cyprus and Value Touristiki
S.A., Greece
In April
2021, the
Bank acquired
100% of
the shares
and voting
rights of
Senseco Trading
Limited for
a cash
consideration
of € 6.7
million.
The
acquisition
was
accounted
for
as
a
business
combination
using
the
purchase
method
of
accounting.
At
the
date
of
acquisition, the fair value
of the total net assets amounted
to € 6.4 million mainly referring
to 51% of the shares and voting
rights of
the Group’s joint venture Value Touristiki S.A. Accordingly, the resulting goodwill asset amounted to
€ 0.3 million.
Following the above
transaction, Value
Touristiki
S.A. became a
wholly owned
subsidiary of the
Bank. In accordance
with the
requirements for
business
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
combinations achieved in stages, the Group has remeasured
its previously held interest of 49% in Value Touristiki
S.A. at fair value of
€ 6.1 million, with a resulting gain of € 1.7 million that was recognized
in “Other income/(expenses)”.
(c) Special purpose financing vehicle for the securitization of Bank’s
loans and related real estate
company
In May 2021, in the context of the management of
the Group’s non performing exposures (NPE) the Bank, through its special purpose
financing
vehicle
Mexico
Finance
Designated
Activity
Company,
proceeded
with
the
securitization
of
a
mixed
assets
portfolio
of
primarily NPE
and established
the related
real estate
company
Mexico Estate
Single Member
S.A. In
September 2021,
the BoD
of
Eurobank Holdings approved
to proceed with the sale of
95% of the mezzanine and junior notes
of Mexico securitization
to doValue
Group subject to the fulfillment of certain conditions.
On 20 December 2021, following the completion of the
Mexico transaction, the
Group
ceased to
control
the special
purpose
financing
vehicle
Mexico
Finance Designated
Activity
Company
and the
related
real
estate company
Mexico Estate
Single Member S.A.,
and as a
result they were
not included in
the consolidated
financial statements
for the year ended 31 December 2021 (note 20.1).
(d) Eurobank A.D. Beograd and ERB Leasing A.D. Beograd
– In Liquidation, Serbia
In December
2021, the
merger of
Eurobank’s
subsidiary in
Serbia, Eurobank
a.d. Beograd
(“Eurobank Serbia”)
with Direktna
Banka
a.d. Kragujevac
(“Direktna”) was
completed,
after all
necessary approvals
from the
competent
authorities were
obtained and
the
combined Bank
was renamed
to Eurobank
Direktna a.d.
As a result
of the merger,
the Group’s
percentage holding
in its previously
wholly
owned
subsidiaries
Eurobank
Direktna
a.d.
and ERB
Leasing A.D.
Beograd
–
In
Liquidation
decreased
to
70%
and 85.15%,
respectively. Further
information is provided in note 23.2.
(e) Ragisena Ltd, Cyprus
In July 2021, Eurobank Cyprus Ltd
disposed its participation interest of 100% in Ragisena Ltd
to a third party for a cash
consideration
of € 0.8 million. The resulting gain on the disposal was immaterial.
(f) Eurobank Holding (Luxembourg) S.A. under liquidation, Luxembourg
In September 2021, the liquidation of the company was
decided and its dissolution was completed in December 2021.
(g) Demerger of Eurobank Ergasias Leasing Single Member S.A.
In June 2021, in the context of the
optimization of the Group’s
organizational structure
and the enhancement of its competitiveness
in
the
leasing
market,
the
Extraordinary
General
Shareholders’
Meetings
of
the
Bank
and
its
wholly
owned
subsidiary
Eurobank
Ergasias
Leasing
Single
Member
S.A.
resolved
the
approval
of
the
demerger
of
Eurobank
Ergasias
Leasing
Single
Member
S.A.
(“Demerged Entity”) through (i) the
transfer of part of its
assets and liabilities to
the Bank and (ii)
the establishment of a new
company
through the transfer of the remaining
part of the assets and liabilities of the Demerged Entity.
The aforementioned demerger was completed in October 2021, after receiving the required approvals by the competent Authorities,
while a
new company
“Eurobank Leasing
Single Member
S.A” was
established for
this purpose,
as described
above. Moreover,
the
deregistration
of the
demerged entity
“Eurobank Ergasias
Leasing Single Member
S.A.”
from the
General Commercial
Registry
was
completed.
In line
with the
Group’s
accounting policy
for
business combinations
involving
entities under
common control,
the transfer
of the
Demerged Entity’s
assets and liabilities to
the Bank was
performed at their
pre-combination carrying
amounts under the
pooling of
interests
method, while
the transfer
of the
Demerged
Entity’s
assets
and liabilities
to the
new company
was accounted
for
as an
internal
capital
reorganization,
thus
also
transferred
at
their
carrying
amounts.
The
demerger
had
no
impact
in
the
Group’s
consolidated financial statements.
(h) Standard Single Member Real Estate
S.A., Greece
In December
2021, the Bank
signed a shares
sale and purchase
agreement with
the other shareholder
of Standard
Real Estate
S.A.
for
the
acquisition
of
the
remaining
shares
(5.90%)
in
the
company
for
a
cash
consideration
of
€
0.1
million.
The
effect
of
the
transaction
was immaterial
and was
recognized
directly
in the
equity attributable
to the
shareholders
of Eurobank
Holdings. As
a
result, Standard
Real Estate
S.A. became a
wholly owned
subsidiary of
the Bank.
In January 2022,
following the
above transaction,
the name of the company was amended with the inclusion of the term “Single member”.
(i) ERB Istanbul Holding A.S. in liquidation, Turkey
In December 2021, the liquidation of the company was decided and accordingly its name was amended to ERB Instanbul Holding A.S.
in liquidation.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
In 2020, the changes in the
Group structure due to: a) the demerger of Eurobank Ergasias, b) acquisitions, mergers and establishment
of companies, c) sales
and other corporate actions, which
resulted in loss of
control, d) transactions with the
non-controlling interests,
which did not result in loss of control and e) liquidations, are
as follows:
(i)
Eurobank S.A., Greece
On 20 March
2020, Eurobank
Ergasias S.A. (“Eurobank
Ergasias” or
“the Demerged
Entity”) announced that
the demerger
of
Eurobank
Ergasias
through
banking
sector’s
hive
down
and
establishment
of
a
new
company-credit
institution
(“Demerger”) under the
corporate name
“Eurobank S.A.”
(“the Beneficiary”) was
approved. Following
the approval
of the
Demerger, the Demerged Entity, which as of 23 March 2020
was renamed to “Eurobank Ergasias Services
and Holdings S.A.”,
became the sole shareholder of the Beneficiary by
acquiring all of its issued shares. Further information
is provided in note
1.
(ii)
Eurobank FPS Loans and Credits Claim Management S.A., Greece
In June 2020, in the context
of the binding agreements that
Eurobank Ergasias S.A. had
entered into with
doValue S.p.A. in
December 2019, the Bank sold 80% of
its subsidiary then named Eurobank FPS
Loans and Credits Claim Management
S.A. -
project “Europe”.
(iii)
ERB Leasing Bulgaria EAD, Bulgaria
In February 2020,
the legal merger
of Eurobank
Bulgaria A.D.
and ERB Leasing Bulgaria
EAD, by
absorption of the
latter by
the former was announced.
(iv)
CEH Balkan Holdings Ltd,
Cyprus
The dissolution of the company was completed in
January 2020.
(v)
Special purpose financing vehicles for the securitization of Bank
loans and related real estate companies – Project “Cairo”
Οn 5 June 2020, the Company announced that the sale
of a portion of mezzanine and junior securitization notes of the € 7.5
billion multi-asset
NPE securitization
(project “Cairo”),
has been
completed (note
20). Following
the above,
the Company
ceased to have control over
the related special
purpose financing vehicles
(Cairo No. 1 Finance
Designated Activity Company,
Cairo No.
2 Finance Designated
Activity Company,
Cairo No.
3 Finance Designated
Activity Company)
and the
related real
estate companies (Cairo Estate I Single Member S.A., Cairo Estate II Single
Member S.A., Cairo Estate III Single Member S.A.),
and as a result they were not included in the consolidated
financial statements for the year ended 31 December 2020.
(vi)
ERB Hellas Funding Ltd, Channel Islands
In June 2020, the liquidation of the company was decided and its dissolution
was completed in December 2020.
(vii)
Adariano Investments Ltd and Elerovio
Holdings Ltd, real estate companies,
Cyprus
In the
context
of the
management of
its NPEs,
in the
second quarter
of 2020,
the Bank’s
subsidiary Eurobank
Cyprus Ltd
established the
wholly owned
subsidiaries, Adariano
Investments
Ltd and
Elerovio Holdings
Ltd, to
operate
as real
estate
companies in Cyprus.
(viii)
Cairo Mezz Plc, portfolio company,
Cyprus
In June
2020, the
Company acquired
100% of
the shares
of Mairanus
Ltd for
a cash
consideration of
€ 2 thousand.
In the
same month, the Company following the respective
decision by its Board of Directors, contributed
cash of € 1.5 million and
the retained Cairo notes of fair value
€ 56 million in exchange for newly-issued shares
of Mairanus Ltd, which in September
2020
was
renamed
to
Cairo
Mezz
Plc.
In
addition,
in
September
2020,
the
above
shares
were
distributed
to
Eurobank
Holdings shareholders, as the
last step of the Cairo
transaction (note 20) and as
a result Cairo Mezz Plc was
not included in
the consolidated financial statements
for the year ended 31 December 2020.
(ix)
ERB Recovery Designated Activity Company,
Ireland
In June 2020, the
Bank established ERB
Recovery Designated
Activity Company,
a special purpose financing
vehicle for the
securitization of a portfolio of mortgage,
consumer,
SME (small and medium enterprise) and corporate
loans.
(x)
Eurobank Finance S.A., Romania
The distribution of the company’s
surplus assets to its shareholders and its dissolution
were completed in July and October
2020, respectively.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
(xi)
Sagiol Ltd, Cyprus and Piraeus Port Plaza 2,
Greece
In July 2020, the
Bank acquired 100% of
the shares and
voting rights of
Sagiol Ltd for
a cash consideration
of € 9.1 million.
The
acquisition
was
accounted
for
as
a business
combination
using
the
purchase
method
of
accounting.
At
the
date
of
acquisition, the
fair value
of the total
assets amounted
to €
9.2 million referring
to 51%
of the shares
and voting rights
of
the Group’s joint
venture Piraeus Port Plaza
2, while total liabilities amounted to € 0.01 million.
The resulting gain of € 0.07
million had been recognized in “Other income/(expenses)”.
Following the above transaction, Piraeus Port Plaza
2 became a
wholly owned
subsidiary of the
Bank. In
accordance with
the requirements
for business
combinations achieved
in stages,
the Group
had remeasured
its previously
held interest
of 49%
in Piraeus
Port Plaza
2 at
fair value
of €
8.8 million,
with a
resulting gain of € 1.9 million that was recognized
in “Other income/(expenses)”.
(xii)
Macoliq Holdings Ltd, Cyprus and Piraeus Port Plaza
3, Greece
In October 2020, the Bank acquired 100% of the shares and voting rights of Macoliq Holdings Ltd for a cash consideration of
€ 12.5 million.
The acquisition was
accounted for
as a business
combination using
the purchase method
of accounting.
At
the date of
acquisition, the fair value
of the total
net assets amounted
to € 12.1 million
referring to
51% of the shares
and
voting rights of
the Group’s
joint venture Piraeus
Port Plaza 3.
Accordingly,
the resulting goodwill
asset amounted to
€ 0.4
million. Following the above transaction, Piraeus Port Plaza 3 became a wholly owned subsidiary of the Bank. In accordance
with the requirements for business combinations achieved in stages, the Group had remeasured
its previously held interest
of 49%
in Piraeus
Port Plaza
3 at
fair value
of €
11.6 million,
with a
resulting
gain of
€ 2.3
million that
was recognized
in
“Other income/(expenses)”.
(xiii)
(Under liquidation)
Real
Estate
Management
Single
Member
S.A. and
(Under liquidation)
Anchor Hellenic
Investment
Holding Single Member S.A., Greece
In December 2020, the liquidation of the companies was decided.
(xiv)
Tegea Holdings Ltd,
Tegea Plc,
Anaptyxi SME I Holdings Ltd and Anaptyxi SME I Plc, UK
In the fourth quarter of 2020, the liquidation of the special purpose financing
vehicles was completed.
(xv)
Tenberco Properties
Development and Exploitation Single Member S.A., Greece
In
December
2020,
the
Bank
acquired
100%
of
the
shares
and
voting
rights
of
Tenberco
Properties
Development
and
Exploitation Single
Member S.A. for
a cash
consideration of
€ 27.1 million.
At the
date of
acquisition, the fair
value of
the
total assets amounted to
€ 30.6 million, while total liabilities amounted
to € 1.4 million, mainly consisting
of a deferred tax
liability arising from the fair value measurement
of the assets acquired. Accordingly,
the effect of the transaction
was € 2.2
million gain, which had been recognized in “Other
income/(expenses)”.
(xvi)
Standard Single Member Real Estate S.A., Greece
In December
2020, following
the capitalization
of the company’s
finance lease liability,
the Group’s
percentage holding
in
the company’s share
capital decreased from 100% to
94.10%. The transaction resulted in
a) a gain of € 0.7 million that
was
recognized directly in the equity
attributable to the shareholders of Eurobank
Holdings and b)
the increase of
non controlling
interests by € 0.1 million.
Post balance sheet events
(Under liquidation) Real Estate Management
Single Member S.A., Greece
In February 2022, the liquidation of the company was completed.
Hellenic Post Credit S.A., Greece
In February 2022, the
Bank reached an agreement
with the other shareholder
for the acquisition of
the remaining 50% of
the share
capital of Hellenic Post Credit S.A.
Significant restrictions on the Group's ability to access or
use the assets and settle the liabilities of the Group
The Group does
not have any
significant restrictions
on its ability to
access or use its
assets and settle
its liabilities other than
those
resulting from regulatory,
statutory and contractual requirements,
set out below:
●
Banking and
other financial
institution subsidiaries
are subject
to regulatory
restrictions
and central
bank requirements
in the
countries
in
which
the
subsidiaries
operate.
Such
supervisory
framework
requires
the
subsidiaries
to
maintain
minimum
capital
buffers and
certain capital adequacy
and liquidity ratios,
including restrictions to
limit exposures and/or
the transfer
of funds to the
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Company
and
other
subsidiaries
within
the
Group.
Accordingly,
even
if
the
subsidiaries’
financial
assets
are
not
pledged
at
an
individual entity level, their transfer within the
Group may be restricted under the
existing supervisory framework. As at 31
December
2021, the
carrying
amount
of the
Group
financial institution
subsidiaries’
assets and
liabilities, before
intercompany
eliminations,
amounted to € 83.6 billion and € 76.9 billion, respectively,
including Eurobank S.A. (2020: € 74.3 billion and € 68 billion).
●
Subsidiaries
are
subject
to
statutory
requirements
mainly
relating
with
the
level
of
capital
and
total
equity
that
they
should
maintain, restrictions on the distribution of capital and special reserves, as well as dividend payments
to their ordinary shareholders.
Information relating to the Group’s
non-distributable reserves is provided in note
38.
●
The Group
uses its financial
assets as
collateral
for repo
and derivative
transactions, secured
borrowing from
central and
other
banks, issuances of covered bonds, as well
as securitizations. As a result of financial assets’ pledge,
their transfer within the Group
is
not permitted. Information relating
to the Group’s pledged
financial assets is provided in notes 17, 29 and 40.
●
The
Group
is
required
to
maintain
balances
with
central
banks
and
also
posts
cash
collaterals
for
obtaining
funding
from
Eurosystem. Information
relating to mandatory and collateral
deposits with central banks is provided in note
15.
23.2
Merger of Eurobank a.d. Beograd with Direktna Banka a.d.
On 1 July
2021, Eurobank S.A.
(“Eurobank”) announced that
it has concluded
an agreement with
the shareholders
and principals of
Direktna Banka a.d.
Kragujevac (“Direktna”),
for the merger of Direktna
with Eurobank’s
subsidiary in Serbia, Eurobank a.d.
Beograd
(“Eurobank Serbia”) (the “Transaction”), with absorption
of Direktna by Eurobank Serbia.
In
December
2021,
the
Transaction
was
concluded,
following
the
receipt
of
the
relevant
customary
approvals
by
the
competent
regulatory
and supervisory
authorities. Following
the completion
of the
transaction Eurobank
controls
70% of
the combined
bank,
while Direktna’s
shareholders
own the
remaining 30%.
Part of
the Tran
saction was
the dividend
distribution and
capital
return to
Eurobank Group of c. €232 million, after tax,
in total.
The merger
was accounted
in accordance
with the
IFRS 3
requirements
for transactions
for which
an acquirer
transfers
an equity
interest in a subsidiary as consideration in a business combination, but continues to have
a controlling interest in the subsidiary after
the transfer.
Accordingly,
the Transaction
was accounted
for a business
combination with the
recognition of
identifiable assets and
liabilities
at
their
provisional
values,
while
the
change
in
the
percentage
holding
in
the
combined
entity
constitutes
an
equity
transaction with a resulting gain of ca. € 1 million, which
was recorded directly in equity.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Upon the merger date, the provisional values of the assets and liabilities of Direktna and the resulting gain are presented
in the table
below.
€ million
ASSETS
Cash and balances with central banks
130
Due from credit institutions
52
Loans and advances to customers
322
Investment securities
78
Property and equipment
17
Investment property
2
Intangible assets
2
Other assets
4
Total assets ⁽¹⁾
607
LIABILITIES
Due to credit institutions
10
of which intercompany balances with the Group
7
Due to customers
483
Other liabilities
16
Total liabilities
509
Net assets of Direktna's acquired
98
Minus:
30% of combined
entity's NAV ⁽²⁾
97
Net effect on shareholders' equity
1
(1)
Includes cash and cash equivalents of € 128 million (third parties).
(2)
it includes
€
0.05 million referring
to non controlling
interest (indirectly transferred
equity interest) of
14.85% in the
Group’s entity “ERB Leasing
A.D. Beograd-
in Liquidation” as a result of the Transaction.
As at 31
December 2021, the combined
bank “Eurobank Direktna
a.d.” is
the only entity of
the Group with
material non-controlling
interests.
Financial information
regarding the
combined bank, which
is before
inter-company eliminations
with other companies
of
the Group, is provided in the table below.
2021
€ million
Total operating
income
66.6
Net profit
0.3
Other comprehensive income
(0.8)
Total comprehensive
income
(0.5)
Total comprehensive
income attibutable to non controlling
interests
(1.4)
Total assets
2,469
Total liabilities
2,150
Net assets
319
Net assets attributable to non controlling interests
96
Cash and cash equivalents at beginning of year
153
Cash and cash equivalents at end of year
224
Eurobank Direktna becomes the seventh largest bank in Serbia with a strong capital and liquidity position and a market share of 6.5%
in customer loans.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The Transaction
is in
line with
Eurobank’s
strategy to
further strengthen
its position
in the
countries where
the Group
maintains a
presence and grow further with targeted
acquisitions and friendly mergers.
24.
Investments in associates and joint ventures
The following is the listing of the Group’s
associates and joint ventures as at 31 December 2021:
Name
Note
Country of
incorporation
Line of business
Group's
share
Femion Ltd
Cyprus
Special purpose investment vehicle
66.45
(Under liquidation) Tefin S.A.
Greece
Dealership of vehicles and machinery
50.00
Sinda Enterprises Company Ltd
Cyprus
Special purpose investment vehicle
48.00
Global Finance S.A.⁽¹⁾
Greece
Investment financing
33.82
Rosequeens Properties Ltd⁽²⁾
Cyprus
Special purpose investment vehicle
33.33
Odyssey GP S.a.r.l.
Luxembourg
Special purpose investment vehicle
20.00
Eurolife FFH Insurance Group Holdings S.A.⁽¹⁾
Greece
Holding company
20.00
Alpha Investment Property Commercial Stores S.A.
Greece
Real estate
30.00
Peirga Kythnou P.C.
Greece
Real estate
50.00
Grivalia Hospitality S.A.⁽²⁾
Luxembourg
Real estate
25.00
Information Systems Impact S.A.
e
Greece
Information systems services
23.50
doValue Greece Loans and Credits Claim Management S.A.
b
Greece
Loans and Credits Claim Management
20.00
Perigenis Business Properties S.A.
Greece
Real estate
18.90
Intertech S.A. - International Technologies⁽³⁾
Greece
Trade - import of electrical and electronic
products
29.36
(1)
Eurolife Insurance group (Eurolife FFH Insurance Group Holdings S.A. and
its subsidiaries) and Global Finance group (Global
Finance S.A. and its subsidiaries)
are considered as the Group’s associates.
(2)
Rosequeens Properties Ltd (including its subsidiary Rosequeens
Properties SRL) and Grivalia Hospitality group
(Grivalia Hospitality S.A. and its subsidiaries)
are considered as the Group’s joint ventures.
(3)
The holding in the company has been classified as held for sale (note 30).
Omega Insurance
and Reinsurance
Brokers
S.A. in which
the Group
holds 26.05% is
not accounted
under the
equity method in
the
consolidated financial statements. The Group is
not represented in the
Board of Directors of
the company, therefore does not exercise
significant influence over it.
Femion Ltd.
is accounted
for as
a joint
venture of
the Group
based on
the substance
and the
purpose of
the arrangement
and the
terms of the
shareholder’s agreement which require the
unanimous consent of
the shareholders for significant
decisions and establish
shared control through the equal representation
of the shareholders in the management bodies of the company.
Perigenis Business Properties
S.A. is accounted
for as an
associate of the
Group based
on the Bank’s
representation
in the Board
of
Directors and the decision-making process as prescribed
in the company’s articles of association.
(a) Singidunum - Buildings d.o.o. Beograd, Serbia
In
March
2021,
the
Group’s
entity
ΙΜΟ
Property
Investments
A.D.
Beograd
signed
a
share
transfer
agreement
with
the
other
shareholder
of
Singidunum
-
Buildings
d.o.o
Beograd
for
the
disposal
of
its
participation
(20.01%)
in
the
company
for
a
cash
consideration of € 6.5 million. The transaction resulted
to a loss of € 42 thousand recognized in “Other
income/(expenses)”.
(b) doValue Greece Loans and Credits Claim Management
S.A., Greece
On 31
March 2021,
the Board
of Directors
of “doValue
Greece Loans
and Credits
Management S.A.”
(“doValue
Greece”) approved
the
draft
terms
of
the
merger
by
way
of
absorption
of
“doValue
Hellas
Credit
and
Loan
Servicing
S.A.”
by
doValue
Greece,
in
accordance
with
the
provisions
of
Law
4601/2019,
Law
4548/2018,
article
54
of
Law
4172/2013
and
article
16
par.
18
of
Law
2515/1997, as
in force.
The merger
was approved
by the
General Meetings
of the
shareholders of
each of
the merging
companies
and by the
competent authorities in
July and August
2021, respectively.
Upon completion of
the merger in
August 2021, and
based
on
the
exchange
ratio
agreed
by
the
merging
companies
pursuant
to
acceptable
valuation
methods,
doValue
SpA,
as
the
sole
shareholder
of doValue
Hellas, received
1,418,880 new
common shares
of doValue
Greece in
exchange
for
the shares
of doValue
Hellas. As a
result, the
Group’s
shareholding in
doValue Greece
was initially
reduced to
19.791% and was
subsequently restored
to
20% through the acquisition of 283,776 shares of the company.
Notes to the Consolidated Financial Statements
.
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Ιn the year ended 31 December 2020, the Group
had disposed of 80% of its former subsidiary Eurobank
FPS Loans and Credits Claim
Management S.A.
(renamed to doValue
Greece Loans and
Credits Claim Management
S.A.). The resulting
gain on disposal
that was
recognized in
“Other income/(expenses)”
amounted to
€ 218 million
(€ 172 million
after tax)
(note 10),
including the costs
directly
attributable to the transaction and
the remeasurement of the retained interest
of 20% in the company.
(c) Value Touristiki
S.A., Greece
As of April 2021, Value
Touristiki
S.A. ceased to be a Group’s
joint venture and became
a wholly owned subsidiary of
the Bank (note
23.1).
(d) Famar S.A., Luxembourg
Ιn the year ended 31 December 2021, the liquidation of Famar S.A. was completed.
(e) Information Systems Impact S.A., Greece
In November 2021, following
the exercise of a call
option, the Bank signed a
shares sale and purchase agreement
for the acquisition
of an additional 8.5% in the share
capital of Information
Systems Impact S.A. for
a cash consideration of
€ 1.05 million. The resulting
gain
of
€
0.5 million
was
recognized
in
“Other
income/(expenses)”.
Following
the
above
transaction
the
Group’s
shareholding
in
Information Systems Impact
S.A. was increased from 15% to 23.50%.
(f) Alpha Investment Property Kefalariou
S.A., Greece
In December 2021,
the Bank signed
a shares sale
and purchase agreement
for the
disposal of its
participation interest
of 41.67% in
Alpha
Investment
Property
Kefalariou
S.A. to
a third
party
for
a
cash
consideration
of
€ 6.35
million.
The
resulting
loss
from
the
transaction of € 1.2 million was recognized in “Other
income/(expenses)”.
Post balance sheet event
Grivalia Hospitality S.A.,
Luxembourg
On 24 March 2022 the Bank signed a Share Purchase
Agreement for the disposal of a 5.1% shareholding
in the Group’s joint venture
Grivalia Hospitality
S.A. for a
total consideration
of € 15.9
million. As a
result of the
transaction, the
Bank’s
shareholding in Grivalia
Hospitality S.A. decreased from 25% to 19.9% and in combination with the
terms of the revised Shareholders’ Agreement signed with
the other shareholders
on the same date,
the Bank ceased to
have joint control
over the entity and
hence has discontinued the
use
of the
equity method
of accounting.
Following the
aforementioned
sale, the retained
interest in
the entity
will be
carried at
FVTPL
with any change in the carrying amount to be recognized
in the income statement.
Associates and joint ventures material to
the Group
With regar
ds to
the Group’s
associates and
joint ventures,
Eurolife FFH
Insurance
Group
Holdings S.A.,
doValue
Greece Loans
and
Credits Claim Management S.A. and Grivalia Hospitality S.A. are considered individually material for the Group. Financial information
regarding those entities is provided
in the tables below:
Eurolife FFH Insurance Group Holdings S.A.
2021
2020
€ million
€ million
Current assets
3,451
3,383
Non-current assets
132
127
Total assets
3,583
3,510
Current liabilities
391
439
Non-current liabilities
2,491
2,331
Total liabilities
2,882
2,770
Operating income
129
193
Net profit
65
112
Other comprehensive income
(19)
(91)
Total comprehensive
income
46
21
Dividends paid to the Group
17
-
Notes to the Consolidated Financial Statements
.
136
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31 December 2021 Consolidated Financial Statements
doValue Greece Loans and Credits
Claim Management S.A.
2021
2020
€ million
€ million
Current assets
128
106
Non-current assets
361
309
Total assets
489
415
Current liabilities
157
114
Non-current liabilities
140
153
Total liabilities
297
267
Equity
192
148
Group's share in equity
38
30
Goodwill ⁽¹⁾
12
12
Group’s carrying amount of the investment
50
42
Operating income
77
90
Net profit
54
12
Total comprehensive
income
54
12
Dividends paid to the Group
3
-
(1)
it refers to
the positive difference
between the carrying amount
of the Group’s
investment in doValue
Greece (based on
the sale agreement with
doValue
S.p.A.), and the
Group’s share in the
entity’s net assets as
they both have
been adjusted with
the absorption of doValue Greece
Holding by the
entity (see above)
Grivalia Hospitality S.A.
2021
2020
€ million
€ million
Current assets⁽¹⁾
85
40
Non-current assets
339
326
Total assets
424
366
Current liabilities⁽²⁾
61
57
Non-current liabilities⁽³⁾
118
87
Total liabilities
179
144
2021
2020
€ million
€ million
Operating income/(loss)
19
(26)
Net profit/(loss)
10
(22)
Other comprehensive income/(loss)
1
(3)
Total comprehensive
income/(loss)
11
(25)
(1)
Includes cash and cash equivalents of € 44 million (2020: € 29 million).
(2)
Current financial liabilities excluding trade and other payables and provisions amount to € 24 million (2020: € 2 million).
(3)
Non-current financial liabilities excluding trade and other payables and provisions amount to € 108 million (2020: € 72 million).
Note:
The above
financial data
for
Grivalia
Hospitality
S.A. have
been
based on
the
available
information
by the
end of
the third
quarter of 2021 and 2020.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The carrying amount, in aggregate, of
the Group's joint ventures excluding Grivalia Hospitality S.A. as
at 31 December 2021
amounted
to
€
10
million
(2020:
€
15
million).
The
Group’s
share
of
profit
and
loss
and
total
comprehensive
income
of
the
above
entities
amounted to € 1 million (2020: € 4 million).
The
carrying
amount,
in
aggregate,
of
the
Group's
associates
excluding
Eurolife
FFH
Insurance
Group
Holdings
S.A.
and
doValue
Greece
Loans
and
Credits
Claim Management
S.A. which
is presented
above
(i.e. Global
Finance S.A.,
Alpha
Investment
Property
Commercial
Stores
S.A.,
Odyssey
GP
S.a.r.l.,
Information
Systems
Impact
S.A.
and
Perigenis
Business
Properties
S.A.)
as
at
31
December 2021 amounted to € 12 million (2020: € 25
million). The Group’s
share of profit and loss and total
comprehensive income
of the above entities was immaterial (2020: immaterial).
The Group has not recognized losses in relation
to its interest in its joint ventures,
as its share of losses exceeded its interest
in them
and no
incurred obligations
exist or
any payments
were performed
on behalf
of them. For
the year
ended 31
December 2021,
the
unrecognized
share of
losses for
the Group’s
joint ventures
amounted to
€ 2
million (2020: €
4 million).
The cumulative
amount of
unrecognized share of losses for
the joint ventures amounted to € 24 million (2020: € 22 million).
During
2020
and
2021,
the
Group’s
contractual
commitments
assumed
in
relation
to
the
acquisition
of
the
other
shareholders’
interest in
joint Ventures
Piraeus Port
Plaza 2, Piraeus
Port Plaza 3
and Value
Touristiki
S.A. were met and,
as a result, they
became
wholly owned subsidiaries of the Bank (note 23).
As
at
31
December
2021,
the
Group
has
no
unrecognized
commitments
in
relation
to
its
participation
in
joint
ventures
nor
any
contingent liabilities regarding its participation
in associates or joint ventures, which could result to
a future outflow of cash or other
resources.
The Group’s associate
Eurolife FFH Insurance Group Holdings S.A is subject to regulatory
and statutory restrictions and is required
to
maintain sufficient capital to satisfy
its insurance obligations.
Except
as described
above, no
significant restrictions
exist (e.g.
resulting
from loan
agreements, regulatory
requirements
or other
contractual arrangements) on the ability of associates or joint ventures to
transfer funds to the Group either as dividends or to repay
loans that have been financed by the Group.
25.
Structured Entities
The Group is involved in various types of structured
entities, such as securitization vehicles, mutual funds and private
equity funds.
A structured
entity is
an entity that
has been
designed so
that voting
or similar rights
are not the
dominant factor
in deciding who
controls the entity, such as when any voting rights
relate to administrative tasks only and the relevant activities are
directed by means
of contractual arrangements. A structured entity often has restricted activities, a narrow well-defined objective, insufficient equity to
permit it
to finance
its activities
without subordinated
financial support
and financing
in the
form
of multiple
contractually
linked
instruments to investors
that create concentrations
of credit or other risks.
An
interest
in
a
structured
entity
refers
to
contractual
and non-contractual
involvement
that
exposes
the
Group
to
variability
of
returns from
the performance
of the
structured
entity.
Examples of
interest
in structured
entities include
the holding
of debt
and
equity instruments, contractual arrangements,
liquidity support, credit enhancement, residual value.
Structured entities may be established
by the Group or by a third party and are
consolidated when the substance of the relationship
is such that the structured entities are controlled by the Group, as set out in note 2.2.1(i). As a result of the consolidation assessment
performed, the Group has involvement
with both consolidated and unconsolidated structured
entities, as described below.
Consolidated structured entities
The
Group,
as
part
of
its
funding activity,
enters
into
securitization
transactions
of
various
classes of
loans
(corporate,
small and
medium enterprise, mortgage, consumer loans, credit card and bond loans), which generally result in
the transfer of the above assets
to structured
entities (securitization
vehicles), which,
in turn
issue debt
securities held
by investors
and the
Group’s
entities.
The
Group monitors the credit quality of the securitizations’ underlying loans, as well as the credit ratings of the debt instruments issued,
when applicable,
and provides
either credit
enhancements to
the securitization
vehicles and/or
transfers
new loans
to the
pool of
their underlying assets, whenever necessary,
in accordance with the terms of the relevant
contractual arrangements in
force.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
A listing of the Group’s
consolidated structured entities is set out in note 23.
As at 31 December 2021, the face value of debt securities issued by the securitizations sponsored by the Group amounted
to € 5,916
million, of
which €
5,364 million
were held
by the
Bank (2020:
€ 11,147
million, of
which €
10,552 million
were held
by the
Bank)
(notes 20 and 34).
The Group did not provide any
non contractual financial or other support
to these structured entities, where applicable, and
currently
has no intention to do so in the foreseeable future.
Unconsolidated structured entities
The
Group
enters
into
transactions
with
unconsolidated
structured
entities,
which
are
those not
controlled
by
the Group,
in
the
normal course of business, in order
to provide fund management services or take
advantage of specific investment opportunities.
Moreover,
the Group in the context of
its NPEs reduction acceleration plan
entered into the securitization
of various classes of NPEs
through the issue of senior,
mezzanine and junior notes (Cairo, Pillar and Mexico
,
notes 20 and 34 ).
Group managed funds
The Group establishes
and manages structured
entities in order
to provide customers,
either retail or
institutional, with investment
opportunities.
Accordingly,
through
its subsidiaries
Eurobank
Asset Management
Mutual Fund
Mngt
Company
S.A. and
Eurobank
Fund Management
Company
(Luxembourg)
S.A., it
is engaged
with the
management
of different
types of
mutual funds,
including
fixed income, equities, funds of funds and money market.
Additionally,
the Group
is entitled to
receive management
and other
fees and
may hold
investments
in such mutual
funds for
own
investment purposes as well as for the benefit
of its customers.
The Group is involved in the initial design of the mutual funds and, in its capacity as fund manager, takes investment decisions on the
selection
of
their
investments,
nevertheless
within
a
predefined,
by
relevant
laws
and
regulations,
decision
making
framework.
Τherefore, the Group has determined
that it has no power over these funds.
Furthermore,
in its
capacity as
fund manager,
the Group
primary acts
as an
agent in
exercising
its decision
making authority
over
them. Based on the above, the
Group has assessed that it has no
control over these mutual funds and as a
result does not consolidate
them. The Group does not have any contractual obligation to provide financial
support to the managed funds and
does not guarantee
their rate of return.
Non-Group managed funds
The Group purchases and
holds units of
third party managed
funds including mutual
funds, private equity and
other investment funds.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Securitizations
The Group has interests in unconsolidated securitization vehicles by investing in residential
mortgage backed and other asset-backed
securities issued by these entities.
The
table
below
sets
out
the
carrying
amount
of
the
Group’s
interests
in
unconsolidated
structured
entities,
recognized
in
the
consolidated
balance
sheet
as
at
31
December
2021,
representing
its
maximum
exposure
to
loss
in
relation
to
these
interests.
Information
relating to
the total
income derived
from interests
in unconsolidated
structured entities,
recognized either
in profit
or
loss or
other comprehensive
income during
2021 is also
provided (i.e.
fees, interest
income, net
gains or
losses on revaluation
and
derecognition):
31 December 2021
Unconsolidated structured entity type
Securitizations
Group
managed funds
Non- Group
managed funds
Total
€ million
€ million
€ million
€ million
Group's interest-
assets
Loans and advances to customers⁽¹⁾
5,116
-
-
5,116
Investment securities
691
63
19
773
Other Assets
-
2
-
2
Total
5,807
65
19
5,891
Total
income from Group interests
64
70
3
137
31 December 2020
Unconsolidated structured entity type
Securitizations
Group
managed funds
Non- Group
managed funds
Total
€ million
€ million
€ million
€ million
Group's interest-
assets
Loans and advances to customers ⁽¹⁾
3,505
-
-
3,505
Investment securities
67
41
28
135
Other Assets
-
1
-
1
Total
3,572
42
28
3,642
Total
income from Group interests
31
49
1
81
(1)
Includes the senior and mezzanine notes of the Pillar,
Cairo and Mexico securitizations
(note 20).
For the
year ended
31 December
2021, total
income related
to the
Group’s
interests
from securitizations
mainly includes:
(i) €
62
million
and
€
1.1
million
interest
income
of
debt
securities
retained
by
the
Group
measured
at
amortized
cost
and
at
FVOCI
respectively and (ii)
€ 0.7 million from
gains or losses on
revaluation recognized
in other comprehensive
income. Total
income from
Group
interests
in
relation
to
Group
managed
funds
consists
of:
(i)
€
68
million
income
relating
to
management
fees
and
other
commissions for the management
of funds and (ii) € 1.9
million gains or losses
on revaluation or
from sale of the Group’s
holding in
funds recognized in profit or loss. In addition, total income in relation to non-Group managed funds consists
mainly of gains or losses
on revaluation or from sale of the Group’s
holding in funds and has been recognized in profit or loss.
As at 31
December 2021, the
total assets
of funds under
the Group’s
management as well
as the notional
amount of notes
in issue
by unconsolidated
securitization vehicles
amounted to
€ 3,303 million
(2020: € 2,303
million) and
€ 24,856
million (2020: €
12,685
million), respectively.
Notes to the Consolidated Financial Statements
.
140
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31 December 2021 Consolidated Financial Statements
26.
Property and equipment
31 December 2021
Land, buildings,
leasehold
improvements
Furniture,
equipment,
motor
vehicles
Computer
hardware,
software
Right of use
assets (RoU)⁽¹⁾
Total
€ million
€ million
€ million
€ million
€ million
Cost:
Balance at 1 January
685
198
477
274
1,634
Arising from acquisitions (note 23)
6
1
-
9
16
Transfers
(15)
(2)
12
-
(5)
Additions
14
9
27
10
60
Disposals, write-offs and adjustment to RoU ⁽²⁾
(12)
(8)
(8)
43
15
Impairment
(2)
(0)
(1)
(3)
Exchange adjustments
-
-
-
-
-
Held for sale (note 30)
(1)
-
-
-
(1)
Balance at 31 December
675
198
507
336
1,716
Accumulated depreciation:
Balance at 1 January
(216)
(157)
(411)
(72)
(856)
Transfers
2
1
-
-
3
Disposals, write-offs and adjustment to RoU ⁽²⁾
10
8
8
4
30
Charge for the year
(13)
(7)
(20)
(38)
(78)
Exchange adjustments
-
-
-
-
-
Held for sale (note 30)
0
-
-
0
0
Balance at 31 December
(217)
(155)
(423)
(106)
(901)
Net book value at 31 December
458
43
84
230
815
(1)
The respective lease liabilities are presented in “other liabilities” (note 35).
(2)
It refers to termination, modifications and remeasurements of RoU. It includes
the remeasurement from revised estimates of the lease term during
the year,
considering all facts and circumstances that affect the Group’s housing needs.
Notes to the Consolidated Financial Statements
.
141
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31 December 2021 Consolidated Financial Statements
As at
31 December
2021, the
RoU assets
amounting to
€ 230
million (31
December 2020:
€ 202
million) refer
to leased
office and
branch premises, ATM
locations, residential properties
of € 223 million (31 December 2020: € 194
million) and motor vehicles of € 7
million (31 December 2020: € 8 million).
31 December 2020
Land, buildings,
leasehold
improvements
Furniture,
equipment,
motor
vehicles
Computer
hardware,
software
Right of use
assets (RoU)⁽¹⁾
Total
€ million
€ million
€ million
€ million
€ million
Cost:
Balance at 1 January
681
195
454
211
1,541
Arising from acquisitions/merger (notes 23)
22
-
-
-
22
Transfers
(20)
(0)
1
-
(19)
Additions
12
8
24
26
70
Disposals, write-offs and adjustment to RoU⁽²⁾
(2)
(5)
(1)
37
29
Exchange adjustments
(0)
(0)
(1)
-
(1)
Held for sale (note 30)
(8)
-
-
-
(8)
Balance at 31 December
685
198
477
274
1,634
Accumulated depreciation:
Balance at 1 January
(207)
(154)
(397)
(37)
(795)
Transfers
3
1
1
-
5
Disposals, write-offs and adjustment to RoU⁽²⁾
1
4
1
4
10
Charge for the year
(15)
(8)
(17)
(39)
(79)
Exchange adjustments
-
-
1
-
1
Held for sale (note 30)
2
-
-
-
2
Balance at 31 December
(216)
(157)
(411)
(72)
(856)
Net book value at 31 December
469
41
66
202
778
(1)
The respective lease liabilities are presented in “other liabilities” (note 35).
(2)
It refers to termination, modifications and remeasurements of RoU. It includes
the remeasurement from revised estimates of the lease term during the year,
considering all facts and circumstances that affect the Group’s housing needs.
Leasehold improvements relate to
premises occupied by the Group for its own activities.
27.
Investment property
The
Group
applies
the
fair
value
model
regarding
the
measurement
of
Investment
Property
according
to
IAS
40
“Investment
property”.
The movement of investment property
is as follows:
2021
2020
€ million
€ million
Balance at 1 January
1,459
1,184
Additions
3
161
Arising from acquisition (note 23)
33
111
Transfers
from/to repossessed assets
3
2
Other transfers
13
18
Disposals
(31)
(20)
Net gain/(loss) from fair values adjustments
30
3
Held for sale (note 30)
(18)
-
Balance at 31 December
1,492
1,459
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
As at 31 December
2021, RoU assets
that meet the definition
of investment
property amount to
€ 14 million (31
December 2020: €
14 million). The respective lease liabilities are presented
in “other liabilities” (note 35).
Changes
in
fair
values
of
investment
property
are
recognized
as
gains/(losses)
in
profit
or
loss
and
included
in
the
"Other
Income/(expense)" (note 10). All gains/(losses) are unrealized.
During
the year
ended 31
December 2021,
an amount
of €
93 million
(2020: €
83 million)
was
recognized
as rental
income from
investment property
in income from
non banking services
(note 8). As
at 31 December
2021, the contractual
obligations in relation
to investment property amounted
to approximately € 5.5 million, of which € 4.2 million is associated
with property redevelopment.
The main classes of investment property have
been determined based on the nature, the characteristics
and the risks of the Group’s
properties. The
fair value
measurements of
the Group’s
investment property,
which are categorized
within level
3 of the
fair value
hierarchy,
are presented in the below table.
2021
2020
€ million
€ million
Residential
21
30
Commercial
1,420
1,381
Land Plots
35
25
Industrial
16
23
Total
1,492
1,459
The
basic
methods
used
for
estimating
the
fair
value
of
the
Group’s
investment
property
are
the
income
approach
(income
capitalization/discounted
cash flow
method), the
comparative
method and
the cost
approach, which
are also
used in
combination
depending on the class of property being valued.
The discounted cash
flow method is used
for estimating
the fair value
of the Group’s
commercial investment
property.
Fair value is
calculated through the projection of
a series of
cash flows using
explicit assumptions regarding the benefits
and liabilities of
ownership
(income and
operating
costs, vacancy
rates,
income growth),
including the
residual value
anticipated
at the
end of
the projection
period. To this projected
cash flows series, an appropriate, market
-derived discount rate is applied to
establish its present value.
Under
the
income
capitalization
method,
also
used
for
the
commercial
class
of
investment
property,
a
property’s
fair
value
is
estimated based on the
normalized net operating
income generated by
the property,
which is divided by the capitalization
rate (the
investor's rate of
return).
The comparative method is used for the residential, commercial and land plot classes of investment
property. Fair value
is estimated
based on data for
comparable transactions, by
analyzing either real transaction
prices of similar properties,
or by asking prices after
performing the necessary adjustments.
The cost approach is used
for estimating the fair value of
the residential and the industrial
classes of the Group’s investment property.
This approach refers to the
calculation of the
fair value based on
the cost of
reproduction/replacement (estimated construction costs),
which is then reduced by an appropriate rate
to reflect depreciation.
The Group’s
investment
property valuations
are performed
taking into
consideration the
highest and
best use
of each asset
that is
physically possible, legally permissible and financially feasible.
The main method used to estimate the fair value of Group’s Investment property portfolio as at 31 December 2021, is the
discounted
cash flow method. Significant unobservable inputs used in the fair value measurement of the
relevant portfolio are the rental income
growth and the discount
rate. Increase in
rental income growth
would result in increase
in the carrying amount while
an increase in
the discount rate would have the
opposite result. The discount rate used
ranges from 7% to 12%.
As at 31
December 2021, an increase
or decrease
of 5% in
the discount
rate used
in the DCF
analysis, would
result in
a downward
or upward
adjustment of
the carrying
value of the respective investment
properties of € 32 million and € 34 million, respectively.
The
Covid-19
outbreak
in
the
past
two
years
affected
significantly
the
economic
activity
in
Greece,
as
well
as
Internationally,
particularly the
sectors of
shopping centers,
high street
retail (excluding
hypermarkets)
and hospitality.
Even though
the pandemic
seems to come to an end, the full scope of its economic impact on the real
estate properties remains uncertain.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
However,
the activity shown during 2021 in some
real estate sectors,
such as grade A office buildings
in good locations, with several
transactions
taking
place,
has
resulted
in
a
sufficient
volume
of
comparative
data
that
have
been
considered
in
the
respective
properties’ valuations. On
the other hand, the retail
sector,
excluding big boxes
and supermarkets,
is still under pressure
due to the
pandemic, whereas the lack of sufficient data in
the market does not allow the quantification of
any effects relevant to the pandemic.
The Group’s
investment property portfolio
demonstrated significant
resilience to the pressures
from the covid-19 pandemic, mainly
due to its composition, as it primarily consists of office and big box/supermarket
properties, as well as its particular characteristics in
terms of the tenant’s
quality and the terms of
the lease contracts,
that were taken
into account by
the valuators in
determining the
fair value of the Group’s
investment properties.
Due to the lower levels of transactional activity in certain real estate
market classes, as mentioned above, a high degree of judgment
has been applied
in determining
the estimated
cash flows
used in
the assessment
of the fair
value of
investment
properties. Many
valuations therefore continue to be reported by professional valuators as being subject to ‘material valuation uncertainty’ in line
with
International Valuation
Standards, with a higher degree of caution attached
to them.
The Group will continue to monitor closely the
effect of the economic environment
on the valuation of its investment properties.
28.
Intangible assets
The movement of computer software
and other intangible assets which refer to
purchased and developed software is as follows:
2021
2020
€ million
€ million
Cost:
Balance at 1 January
539
484
Arising from acquisitions (note 23.2)
2
-
Transfers
(12)
1
Additions
77
76
Disposals and write-offs
(3)
(21)
Impairment
(16)
(1)
Balance at 31 December
587
539
Accumulated amortisation:
Balance at 1 January
(287)
(266)
Transfers
0
(2)
Amortisation charge for the year
(36)
(33)
Disposals and write-offs
3
14
Balance at 31 December
(320)
(287)
Net book value at 31 December
267
252
During the year
ended 31 December 2020,
the Group recognized
an impairment loss
of € 160 million against
the goodwill allocated
to the investment property segment
(note 43). As a result, the said goodwill asset was reduced to
nil and the carrying amount of the
Investment Property Segment was
reduced to its recoverable amount,
reflecting the fair value of the underlying assets.
As at
31 December
2021, the
Group’s
remaining carrying
amount of
goodwill amounts
to €
1.6 million
(31 December
2020: €
1.3
million), out of which € 0.9 million relates to ERB Lux Immo S.A.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
29.
Other assets
2021
2020
€ million
€ million
Receivable from Deposit Guarantee and Investment
Fund
706
708
Repossessed properties and relative prepayments
597
616
Pledged amount for a Greek sovereign risk financial guarantee
235
237
Balances under settlement⁽¹⁾
18
11
Deferred costs and accrued income
104
104
Other guarantees
128
111
Income tax receivable⁽²⁾
30
24
Other assets
247
184
Total
2,065
1,995
(1)
Includes settlement balances with customers and brokerage activity.
(2)
Includes withholding taxes, net of provisions.
As at 31 December 2021, other assets net of provisions, amounting to €
247 million include, among others, receivables related to (a)
prepayments to suppliers, (b) public entities,
(c) property management activities and (d) legal cases.
30.
Disposal groups classified as held for sale
2021
2020
€ million
€ million
Assets of disposal groups
Real estate properties
31
39
Village Roadshow Operations Hellas S.A. and
Intertech S.A. – International Technologies
81
-
IMO 03 E.A.D.
6
-
Credit card acquiring - project
Triangle
28
-
Total
146
39
Liabilities of disposal groups
Village Roadshow Operations Hellas S.A.
72
-
Credit card acquiring - project
Triangle
37
-
Total
109
-
Real estate properties
At
the end
of 2019,
the Group,
in the
context
of its
strategy
for
the active
management
of its
real
estate
portfolio
(repossessed,
investment properties
and own used properties)
classified as held for
sale (HFS) three
pools of real estate
assets of total value
ca. €
63 million, after their remeasurement in accordance
with IFRS 5 requirements.
The sale of the aforementioned
real estate properties,
along with certain additions of
real estate assets,
has been extended beyond
the
initially
estimated
period
due
to
the
extraordinary
conditions
related
to
Covid-19
pandemic
and
is
currently
expected
to
be
completed up to the
end of 2022. The Group remains
committed to its plan to
sell the aforementioned
assets, which continue to be
actively
marketed
for
sale,
while
a
number
of
sales
of
individual
items
within
the
portfolios
have
already
taken
place.
As
at
31
December 2021, the carrying amount of these assets amounted to
approximately € 22 million.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
In
addition,
in September
2021, the
Group
classified as
HFS
a real
estate
portfolio
consisting
primarily
of
repossessed,
as well
as
investment properties with a
total carrying amount of
€ 24 million,
after their remeasurement in
accordance with IFRS
5 requirements,
on the basis that their
disposal was determined to
be highly probable. The
portfolio’s remeasurement
resulted in the recognition
of
an impairment loss
of € 9 million,
which was included in
the income statement
line “Other impairment
losses and provisions” (note
12).
Following
the
sale
of
a
significant
bulk
of
real
estate
assets
included
in
this
portfolio,
its
carrying
amount
was
reduced
to
approximately
€ 9
million as
at 31
December 2021,
while the
sale of
the remaining
real esta
te assets
is expected
to be
concluded
within 2022.
The above
non-recurring fair
value measurements
were categorized
as Level 3
of the fair
value hierarchy
due to the
significance of
the unobservable inputs used, with no change occurring up to 31 December 2021.
Village Roadshow Operations Hellas S.A. and Intertech
S.A. – International Technologies
In the third quarter of 2021, the Bank acquired 100% of the shares and voting rights
of Village Roadshow Operations Hellas S.A. for a
cash consideration of € 1 million; and 29.48%
of the shares and voting rights of Intertech S.A. – International
Technologies for
a cash
consideration
of €
2 million.
The acquisitions
took place
following
the enforcement
of collaterals
on the
companies’ shares
under
Bank’s lending arrangeme
nts.
Village Roadshow Operations Hellas S.A. was accounted for
in accordance with the provisions of IFRS 5 for subsidiaries acquired with
a view to
sale. As at
31 December 2021,
the company’s
assets of €
79 million (net
of intragroup
cash deposit) have
been measured
based on a) the fair value of the identifiable liabilities of € 72 million (net of the carrying amount of the intragroup borrowing) and
b)
the fair value of the net assets less costs to
sell, determined at € 1 million by reference to
the transaction price.
The aforementioned
fair value measurement
for Village
Roadshow Operations
Hellas S.A has been
categorized as
level 3 of
the fair
value hierarchy based on the significance of the
unobservable inputs used.
Intertech S.A. –
International Technologies,
which is a listed
company in
Athens Stock Exchange,
has been classified
as held for
sale
as of the acquisition date.
In the fourth quarter
of 2021, the Bank’s
shareholding in the company
decreased from 29.48% to
29.36%
following the sale of shares through the Athens Stock Exchange.
As at 31 December 2021, the holding in the company was measured
at its carrying amount of € 1.9
million, which was lower than its fair value less
cost to sell based on the market value of the company’s
shares.
Eurobank Merchant Acquiring business classified as held for sale -Project
‘Triangle’
On 7 December 2021,
the Company announced
that its subsidiary Eurobank
S.A. (“Eurobank”) has signed
a binding agreement
with
Worldline B.V.
(“Worldline”) that includes: a) the sale of 80% of Eurobank’s
merchant acquiring business (“PayCo”) to Worldline
with
Eurobank
maintaining
the remaining
20%, subject
to a
combination
of call
and put
options and
b) a
long term
agreement
for
the
exclusive distribution of PayCo
products in Greece through Eurobank’s
sales network.
The
agreement
values
100%
of
PayCo
at
€
320
million,
subject
to
customary
adjustments
as
of
the
date
of
completion
of
the
Transaction.
The
transaction
also
entails
an
additional
conditional
payment,
referral
fees
from
PayCo
and
customary
minority
protection rights.
As
at
31
December
2021,
on
the
basis
of
the
binding
agreement
signed
between
the
Bank
and
Worldline,
Eurobank
Merchant
Acquiring business has
been classified as
held for sale
and measured
at the lower
of its carrying
amount and fair
value less
costs to
sell, in
accordance with
IFRS 5.
Consequently,
the associated
assets with
a carrying
amount of
€ 28
million (mainly
relating
to due
from banks)
and the
associated liabilities
with a
carrying amount
of €
37 million
(mainly relating
to credit
card transactions
under
settlement), have been classified as held for
sale.
The Transaction
is expected to
be completed
by the second
quarter of 2022,
subject to obtaining
the relevant
regulatory approvals
and to contribute ca. 80 bps to the Group’s
CET I ratio (note 4).
IMO 03 E.A.D. Bulgaria
In December 2021,
the Bank signed
an agreement
for the sale
of its participation
interest of
100% in IMO
03 E.A.D. to
a third party
for a cash
consideration of
€ 5.8 million.
The completion of
the transaction
was subject to
terms and conditions
provided for
in the
aforementioned agreement.
Notes to the Consolidated Financial Statements
.
146
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31 December 2021 Consolidated Financial Statements
Following the above, as of 31 December 2021, IMO 03 E.A.D. was classified as held
for sale and measured at the lower of its carrying
amount and
fair value
less costs
to sell
in accordance
with IFRS
5. Consequently,
the associated
assets with
a carrying amount
of €
5.8 million mainly relating to investment
property have been classified as held for sale.
Post balance sheet event
In February 2022, the sale of IMO 03 E.A.D. was completed.
Non-performing loan portfolios
In the second quarter
of 2021, Eurobank Bulgaria
A.D. entered into
an agreement for
the disposal of non-performing
corporate and
retail loans. Accordingly,
loans with gross carrying amount of
€ 18.2 million, which carried
an impairment allowance of € 4.6
million,
were classified as held for sale. The transaction was
completed in July 2021 with no effect in the Group’s
income statement.
In the first quarter of
2020, Eurobank Bulgaria A.D. entered into an agreement
for the disposal of non-performing corporate and retail
loans. Accordingly, loans with gross carrying
amount of € 19.2 million, which carried an impairment allowance of € 10.6 million, were
classified as held for sale. The transaction was completed
in April 2020 with no effect in the Group’s
income statement.
31.
Due to central banks
2021
2020
€ million
€ million
Secured borrowing from ECB
11,663
7,999
In the face of the Covid-19 pandemic’s outbreak, the European Central Bank (ECB) introduced a
number of modifications to the terms
of the targeted
longer-term refinancing
operations (TLTRO
III) in order to
support the continuous access
of households and firms
to
bank credit.
In particular, the
interest rate on TLTRO
III facilities was reduced to -0.50% for the period
from June 2020 to June 2021, while for the
banks subject
to meeting
the required
lending thresholds
for the
reference
period ended
31 March
2021, the
interest rate
for the
abovementioned
period
is capped
at
-1% (i.e.
the minimum
of the
average
deposit
facility
rate
minus 0.5%
and the
rate
of -1%).
Additionally, based on the ECB’s
decision in January 2021, the reduction of interest rate to -0.5% is extended to the period from June
2021 to June 2022 (also capped at -1%), provided
that certain net lending thresholds for
the additional observation period ended 31
December 2021 are met.
The Group increased the borrowing from the TLTRO
III- refinancing program by € 3.8 billion from 31 December 2020, reaching € 11.7
billion at the year end 2021.
The Group assessed
the terms of
the program and concluded
that TLTRO III contains a
significant benefit in
comparison to the
market’s
pricing for other similarly collateralized borrowings available to the Group and accounts this benefit as a government grant under IAS
20. Consequently,
the Group considers that the grant
is intended to compensate for
its funding costs incurred over the
term of each
TLTRO-III facility
and therefore, the benefit is allocated
systematically under interest
expense.
As at
31 December
2021, the
recognized
benefit from
TLTRO
III program
amounted to
€ 91
million, including
the benefit
resulted
from the program’s
more favorable interest
rates for which the Group has reasonable
assurance that it will receive it.
32.
Due to credit institutions
2021
2020
€ million
€ million
Secured borrowing from credit institutions
270
683
Borrowings from international financial and similar institutions
619
695
Current accounts and settlement balances with banks
81
87
Interbank takings
3
37
Total
973
1,502
Notes to the Consolidated Financial Statements
.
147
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31 December 2021 Consolidated Financial Statements
As at
31 December
2021, secured
borrowing
from credit
institutions refers
mainly to
transactions
with foreign
institutions, which
were conducted with collaterals government
– mainly Greek - corporate and bank securities (note 5.2.1.3). As at
31 December 2021,
borrowings from international
financial and similar institutions include borrowings
from European Investment
Bank, European Bank
for Reconstruction and Development
and other similar institutions.
33.
Due to customers
2021
2020
€ million
€ million
Savings and current accounts
40,601
31,663
Term deposits⁽¹⁾
12,367
15,427
Repurchase agreements
200
200
Total
53,168
47,290
(1)
Comparative figures include € 10 million senior medium term notes held by Bank’s
customers.
For the year
ended 31 December
2021, due to
customers for
the Greek and
International operations
amounted to
€ 37,016 million
and € 16,152 million, respectively (2020: € 34,190 million and € 13,100 million, respectively).
34.
Debt securities in issue
2021
2020
€ million
€ million
Securitisations
552
594
Subordinated notes (Tier 2)
948
947
Medium-term notes (EMTN) (note 33)
1,052
15
Total
2,552
1,556
Securitisations
On 22 February 2021 the Bank proceeded with the early termination
of the Maximus Hellas DAC securitization.
In addition, on 22 March 2021 the Bank proceeded with the restructuring of ASTARTI securitization upsizing the Class A notes held by
an international
institutional
investor
to €
250 million
while the
Class B
notes,
retained
by the
Bank,
were
decreased
from
€ 219
million to € 98 million.
The carrying value
of the class A
asset backed
securities issued by
the Bank’s
special purpose vehicle
Karta II plc
as at 31
December
2021, amounted to € 302 million.
In May
2021, the
Group, through
its special
purpose financing
vehicle (SPV)
‘Mexico Finance
Designated
Activity Company’
issued
asset backed
securities (notes)
of total
nominal value
of ca.
€ 5.2 billion,
collateralized
by a mixed
assets portfolio
of primarily non
performing
loans of
total principle
amount due
of ca
€ 5.2
billion and
gross carrying
amount of
ca €
3.2 billion.
The securitization
notes consisted of € 1,550 million senior issued at par,
€ 200 million mezzanine of issue price € 107 million and € 3,402 million junior
of issue price € 1.
In May 2021, in the context of Law
4649/2019 as currently in force (‘Hercules’ –
Hellenic Asset Protection Scheme), the SPV opted
in
for the
Greek state’s
guarantee scheme
by submitting
the relevant
application to
the Ministry
of Finance.
The relevant
Ministerial
Decision for the Greek state’s
guarantee on the Mexico senior note was
received in December 2021.
In December 2021, after the fulfillment of
all conditions and having received all appropriate approvals, the Group proceeded with the
sale of 95% of the mezzanine and junior notes to doValue
Group.
Further information for loans originated
by the Group is provided in note 20.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Tier 2 Capital instruments
In
January
2018,
Eurobank
Ergasias
S.A.
issued
Tier
2
capital
instruments
of
face
value
of
€
950
million,
in
replacement
of
the
preference shares which had been issued in the context of
the first stream of Hellenic Republic’s plan to support liquidity in the
Greek
economy under
Law 3723/2008.
The aforementioned
instruments, which
have a
maturity of
ten years
(until 17
January 2028)
and
pay fixed
nominal interest
rate of
6.41%, that
shall be payable
semi-annually,
as at 31
December 2021, amounted
to € 948
million,
including € 3 million unamortized issuance costs.
Covered bonds
During the year,
the Bank proceeded with covered bonds’ issues of net face
value of € 450 million, fully retained by the Bank.
Financial disclosures required by the Act 2620/28.08.2009 of
the Bank of Greece in
relation to the covered bonds issued, are available
at the Bank's website (Investor
Report for Covered Bonds Programs).
Medium-term notes (EMTN)
At the end of April 2021,
the Bank proceeded with the issue
of a preferred senior debt with a
nominal value of € 500 million.
The issue
was over-subscribed by more than two times, which
enabled the Bank to lower the interest rate
by 25 basis points, from the 2.375%
initially offered to the 2.125% re
-offer yield. The notes, which are listed
in the Luxembourg Stock Exchange’s
Euro MTF market, have
a maturity of six years and are callable at par
in five years, offering a coupon of 2% per annum that
is resettable on 5 May 2026.
The transaction marks Eurobank’s
return to international capital markets,
enhancing the diversification of the Group’s
investor base,
and is the first step on the medium
term strategy of the Bank
to meet its Minimum Required Eligible Liabilities (MREL
)
requirements
(note 4). Further
information about
the issue is provided
in the relevant
announcement published in the
Bank’s website
on 29 April
2021.
In September 2021, the
Bank proceeded with the
second consecutive € 500
million preferred
senior debt issue. The
issue was over-
subscribed by more
than 1.5 times, which
enabled Eurobank to
lower the interest
rate by
12.5 basis points, from
the 2.50% initially
offered to the 2.375% re-offer yield. The notes, which are listed on the Luxembourg Stock Exchange’s
Euro MTF market, mature in six
and a half years and are callable at
par in five and a half years, offering
a coupon of 2.25% per-annum that is resettable
on 14 March
2027.
This transaction
is another
step toward
s
the implementation
of Eurobank’s
medium term
strategy
to meet
its MREL
requirements
(note 4) and
reflects the Bank’s
ongoing commitment
to the protection
of depositors. The
new issue also contributes
to the further
development
of the
Issuer’s
yield curve
in the
secondary market.
Further information
about this
issue is
provided
in the
relevant
announcement published in the Bank’s
website on 8 September 2021.
The proceeds from both issues will be used for
Eurobank’s business purposes,
including the financing of environmental projects
that
promote the use of energy from renewable
sources.
In addition, during the year ended 31 December 2021, the Bank
proceeded with the issue of medium term notes of face value of € 48
million which were designated for Group’s
customers.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
35.
Other liabilities
2021
2020
restated
€ million
€ million
Lease liabilities
248
221
Balances under settlement⁽¹⁾
374
267
Deferred income and accrued expenses
157
134
Other provisions
95
93
ECL allowance for credit related commitments (note
5.2.1.2)
48
66
Standard legal staff retirement
indemnity obligations (notes 2.3 and 36)
23
22
Employee termination benefits
64
97
Sovereign risk financial guarantee
36
38
Acquisition obligation
10
15
Income taxes payable
15
10
Deferred tax liabilities (note 13)
26
21
Trading liabilities
43
19
Other liabilities
219
170
Total
1,358
1,173
(1)
Includes settlement balances relating to bank cheques and remittances, credit card transactions, other
banking and brokerage activities.
As
at
31
December
2021,
other
liabilities
amounting
to
€
219
million
mainly
consist
of
payables
relating
with
(a)
suppliers
and
creditors, (b) contributions to insurance
organizations, (c) duties and other taxes.
As at 31
December 2021, other
provisions amounting to €
95 million (2020:
€ 93 million)
mainly include:
(a) € 64
million for outstanding
litigations against
the Group
(note 42) and
(b) € 28
million for
other operational
risk events,
of which €
22 million is
relating to
the
sale of former Romanian subsidiaries.
The movement of the Group's other provisions,
is presented in the following table:
31 December 2021
Litigations and
claims in
dispute
Other
Total
€ million
€ million
€ million
Balance at 1 January
60
33
93
Arising from acquisition
2
2
Amounts charged during the year
9
3
12
Amounts used during the year
(5)
(4)
(9)
Amounts reversed during the year
(2)
(1)
(3)
Balance at 31 December
64
31
95
31 December 2020
Litigations and
claims in
dispute
Other
Total
€ million
€ million
€ million
Balance at 1 January
59
39
98
Amounts charged during the year
10
4
14
Amounts used during the year
(4)
(8)
(12)
Amounts reversed during the year
(4)
(3)
(7)
Foreign exchange and other movements
(1)
1
(0)
Balance at 31 December
60
33
93
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Post balance sheet event
In February 2022, Eurobank
decided to launch
a new VES
for eligible units
in Greece, which
will be offered to employees
over a specific
age limit.
The estimated
cost of
the new
VES, which
will be
implemented through
either lump-sum
payments
or long
term leaves
during which they will be receiving
a percentage of a
monthly salary,
or a combination thereof,
amounts to ca. € 41
million, pre-tax.
The estimated saving in personnel expenses amounts
to € 13 million on an annual basis.
36.
Standard legal staff retirement indemnity obligations
The Group provides for staff retirement indemnity obligation for its employees in Greece and abroad, who are entitled to a lump sum
payment
based on
the number
of years
of service
and the
level of
remuneration
at the
date
of retirement,
if they
remain in
the
employment of the Group until
normal retirement age, in accordance with the
local labor legislation. The
above retirement indemnity
obligations typically expose the Group to actuarial risks such as interest rate risk and salary risk. Therefore, a decrease in the discount
rate used to calculate
the present value of
the estimated future cash
outflows or an increase in
future salaries will increase the
staff
retirement indemnity obligations
of the Group.
The movement of the liability for standard
legal staff retirement
indemnity obligations is as follows:
2021
2020
restated
€ million
€ million
Balance at 1 January
22
52
Restatement due to change in accounting policy (note 2.3)
-
(25)
Balance at 1 January, as restated
22
27
Arising from acquisition (note 23.2)
0
-
Current service cost (note 2.3)
3
3
Interest cost (note 2.3)
0
0
Past service cost and (gains)/losses on settlements (note 2.3)
38
58
Remeasurements:
Actuarial (gains)/losses arising from changes in
financial assumptions (note 2.3)
(1)
1
Actuarial (gains)/losses arising from changes in demographic assumptions
0
(0)
Actuarial (gains)/losses arising from experience adjustments (note 2.3)
0
(0)
Benefits paid
(39)
(67)
Exchange adjustments
(0)
0
Balance at 31 December
23
22
The benefits paid
by the Group
during 2021, in the
context of the
Voluntary Exit
Scheme (VES) (note
35), amounted to
€ 39 million.
The provision for staff retirement
obligations of the staff that participated
in the above scheme, amounted to € 1 million.
The significant actuarial assumptions (expressed as weighted
averages) were as follows:
2021
%
2020
%
Discount rate
0.6
0.3
Future salary increases
1.6
2.2
As at 31 December 2021,
the average duration of the standard legal staff retirement indemnity obligation was 8 years (2020: 8 years).
A quantitative
sensitivity analysis
based on
reasonable
changes to
significant actuarial
assumptions as
at 31
December 2021
is as
follows:
An increase/(decrease) of the discount
rate assumed, by 50 bps/(50 bps),
would result in a (decrease)/increase of the
standard legal
staff retirement obligation
s
by (€ 0.8 million)/ € 0.8 million.
An increase/(decrease) of
the future salary
growth assumed, by
0.5%/(0.5%) would result
in an increase/(decrease)
of the standard
legal staff retirement
obligations by € 0.8 million/(€ 0.7 million).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The above sensitivity analysis is based on a change in an assumption while
holding all other assumptions constant. In practice,
this is
unlikely to occur,
and changes in some of the assumptions may be correlated.
The
methods
and
assumptions
used
in
preparing
the
above
sensitivity
analysis
were
consistent
with
those
used
to
estimate
the
retirement benefit obligation
and did not change compared to the previous year.
37.
Share capital, share premium and treasury shares
As
at
31 December
2021, the
par value
of the
Company's
shares is
€ 0.22
per
share
(2020: €
0.22).
All shares
are
fully paid.
The
movement of share capital, share premium
and treasury shares is as follows:
Share capital
Treasury
shares
Net
Share
premium
Treasury
shares
Net
€ million
€ million
€ million
€ million
€ million
€ million
Balance at 1 January 2020
853
(1)
852
8,056
(2)
8,054
Share capital decrease
(57)
-
(57)
-
-
-
Capitalization of taxed reserves
21
-
21
-
-
-
Purchase of treasury shares
-
(1)
(1)
-
(1)
(1)
Sale of treasury shares
-
1
1
-
2
2
Balance at 31 December 2020
816
(1)
815
8,056
(1)
8,055
Balance at 1 January 2021
816
(1)
815
8,056
(1)
8,055
Purchase of treasury shares
-
(0)
(0)
-
(2)
(2)
Sale of treasury shares
-
1
1
-
2
2
Balance at 31 December 2021
816
0
816
8,056
(1)
8,055
The following is an analysis of the movement in the number of shares
issued by the Company:
Number of shares
Issued
Shares
Treasury
Shares
Net
Balance at 1 January 2020
3,709,161,852
(2,815,312)
3,706,346,540
Purchase of treasury shares
-
(2,999,758)
(2,999,758)
Sale of treasury shares
-
3,381,083
3,381,083
Balance at 31 December 2020
3,709,161,852
(2,433,987)
3,706,727,865
Balance at 1 January 2021
3,709,161,852
(2,433,987)
3,706,727,865
Purchase of treasury shares
-
(3,083,564)
(3,083,564)
Sale of treasury shares
-
4,733,011
4,733,011
Balance at 31 December 2021
3,709,161,852
(784,540)
3,708,377,312
Decrease of the share capital in kind
On 7 July 2020, the Board
of Directors of the
Company proposed to
the General Shareholders’
Meeting the distribution of Mairanus
Ltd (renamed to Cairo Mezz Plc) shares
to the Company’s shareholders
through the decrease in kind of its share capital.
Following the above, on 28 July 2020, the Annual General Meeting of the Shareholders
of the Company approved among others:
(a)
the
decrease
of
the
share
capital
in
kind
with
the
decrease
in
the
nominal
value
of
each
ordinary
share
issued
by
the
Company by € 0.0155 and the distribution to its
shareholders of shares issued by Cairo Mezz Plc, with a
value corresponding
to
the
value
of
the
share
capital
decrease,
i.e.
309,096,821
common
shares
issued
by
Cairo
Mezz
Plc,
each
common
registered share of nominal value
€ 0.10, at a ratio of 1 share of Cairo
Mezz Plc for every 12 shares of the
Company already
held, and
(b)
the capitalization
of taxed
reserves amounting
to €
20,400,390.19 for
the purpose
of rounding
the new
nominal value
of
each ordinary share issued by the Company.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Following the
aforementioned
decision, the
Company’s
total share
capital amounted
to €
816,015,607.44 and
the total
number of
shares remained unchanged, i.e. 3,709,161,852 common voting shares
of a nominal value of € 0.22 each.
Treasury shares
In the
ordinary
course
of business,
the Company’s
subsidiaries, except
for
the Bank,
may
acquire
and dispose
of treasury
shares.
According to
paragraph 1
of Article 16c of
Law 3864/2010, during
the period of
the participation of
the HFSF in
the share capital
of
the Company,
the Company is not permitted to purchase treasury
shares without the approval of the HFSF.
In addition,
as at 31
December 2021 the
number of the
Company’s
shares held
by the Group’s
associates in
the ordinary
course of
their insurance and investing activities was
64,163,790 in total (2020: 64,763,790).
38.
Reserves and retained earnings/losses
Statutory
reserves
Non-taxed
reserves
Fair value
reserve
Other
reserves
Retained
earnings/(losses)
Total
€ million
€ million
€ million
€ million
€ million
€ million
Balance at 1 January 2020⁽¹⁾
395
827
557
7,998
(12,018)
(2,241)
Restatement due to change in accounting
policy (note 2.3)
-
-
-
-
17
17
Net profit/(loss) (note 2.3)
-
-
-
-
(1,215)
(1,215)
Transfers
between reserves ⁽¹⁾
1
4
-
228
(233)
-
Capitalization of taxed reserves (note 37)
-
-
-
(7)
(14)
(21)
Debt securities at FVOCI
-
-
(124)
-
-
(124)
Cash flow hedges
-
-
-
(7)
-
(7)
Foreign currency translation
-
-
-
(0)
-
(0)
Associates and joint ventures
-
-changes in the share of other
comprehensive income, net of tax
-
-
(18)
(1)
-
(19)
Actuarial gains/(losses) on post
employment benefit obligations, net of tax
-
-
-
-
1
1
Other
-
-
-
1
(0)
1
Balance at 31 December 2020⁽¹⁾
396
831
415
8,212
(13,462)
(3,608)
Balance at 1 January 2021⁽¹⁾
396
831
415
8,212
(13,462)
(3,608)
Net profit
-
-
-
-
328
328
Transfers
between reserves
15
(1)
-
148
(162)
0
Changes in participating interests in
subsidiary undertakings (note 23.2)
-
-
-
82
(81)
1
Debt securities at FVOCI
-
-
(91)
-
-
(91)
Cash flow hedges
-
-
-
37
-
37
Foreign currency translation
-
-
-
(0)
-
(0)
Gains/(losses) from equity securities at
FVOCI
-
-
2
-
-
2
Associates and joint ventures
-changes in the share of other
comprehensive income, net of tax
-
-
(3)
(0)
-
(3)
Actuarial gains/(losses) on post
employment benefit obligations, net of tax
-
-
-
-
1
1
Share-based payments:
- Value of employee services (note 39)
-
-
-
-
2
2
Other
-
-
(1)
0
-
(1)
Balance at 31 December 2021
411
830
322
8,480
(13,374)
(3,332)
(1)
Change in the presentation of the comparative information (see below).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
As of
31 December 2021,
the Group
has proceeded
to the
change in
the presentation
of certain
types of reserves
after taking
into
account their nature
and purpose in
accordance with the
applicable legal framework
in Greece. In
particular,
a) reserves of
€ 1,324
million (€
140 million
of which
were formed
in 2021)
mainly relating
to dividends
and gains
from the
sale of
participations, which
were
previously
included
within
retained
earnings
are
presented
in
category
“Other
reserves”
and
b)
€
117
million,
which
were
previously
included within
“Non-taxed
reserves” are
presented
in “Other
reserves”.
In addition,
the actuarial
gains/losses
on post
employment
benefit
obligations
that
were
previously
included in
other reserves
are
presented
in retained
earnings. Comparative
information
has
been
adjusted
in
order
to
align
with
the
aforementioned
changes
in
the
presentation
of
reserves
and
retained
earnings.
As
at
31
December
2021,
other
reserves
comprise,
among
others,a)
corporate
law
reserves
of
€
6,714
million,
pursuant
to
the
provisions
of the
Greek
company
law in
force
(of which
€ 5,579
million
according
to
article 31
of
law 4548/2018)
(2020: €
6,706
million), b)
€ 1,373
million reserves
relating to
dividends and
gains from
the sale
of participations
(2020: €
1,233 million),
c) €
203
million accumulated
loss relating
to foreign
operations’ translation
differences,
including €
27 million
accumulated gain
relating to
net investment
hedging - NIH
(2020: € 202
million accumulated
loss, including €
27 million gain
relating to
NIH) and d)
€ 12 million
accumulated loss from cash flow hedging (2020: € 49 million accumulated
loss).
Dividends
Based on the 2021 accounts,
pursuant to the Company
Law 4548/2018, the distribution of
dividends is not permitted.
Furthermore,
under the provisions of the Tripartite Relationship
Agreement between Eurobank Holdings, the Bank and the HFSF (signed 23.3.2020
and amended on
3.2.2022) and article 10
par.
3 of Law 3864/2010
for the “establishment
of a Hellenic Financial
Stability Fund”,
for
as
long
the
HFSF
participates
in
the
share
capital
of
the
Eurobank
Holdings,
the
amount
of
dividends
that
may
be distributed
to
shareholders of either Eurobank
Holdings or the Bank cannot exceed
35% of the profits as provided
in article 161 par.
2 of Company
Law 4548/2018.
39.
Share options
The Annual
General Meeting
of the
shareholders
of Eurobank
Holdings held
on 28
July 2020
approved
the establishment
of a
five
year shares
award
plan, starting
from 2021,
in the
form
of share
options rights
by issuing
new shares
with a
corresponding share
capital increase, in accordance with the provisions of article
113 of law 4548/2018, awarded to executives and personnel of Eurobank
Holdings and its affiliated companies according to article 32 of law 4308/2014. The maximum number
of rights that can be approved
was set at 55,637,000 rights, each of which would correspond to one new share (1.5% of the current paid share capital). The exercise
price of each new
share would be equal to
its nominal value i.e.
€ 0.23. The Annual
General Meeting authorized the Board of
Directors
of Eurobank Holdings to define the eligible staff
and determine the remaining terms and conditions of the plan.
In June and July 2021,
the Board of Directors
approved the final terms
and the implementation
of the share options plan,
which is a
forward-looking long-term incentive aiming
at the
retention of key executives. In
this respect, 12,374,561
stock options were allocated
to key executives
at an exercise price
of € 0.23, with grant date in
July 2021. The options are exercisable
in portions, annually during
the period from
2022 to 2025. Each
portion may be
exercised wholly
or partly and
converted into
shares at the
employees’ option,
provided that
they remain
employed by the
Group until the
first available
exercise date.
A retention
period of 1
year applies to
the
first portion
of the share options
vesting 1 year
after the grant
date. The corporate
actions that adjust
the number and the
price of
shares also adjust accordingly the share options. In addition, the
exercise of 6,844,524 of the aforementioned share options allocated
to
certain
key
executives
who
are
subject
to
variable
and/or
accumulated
annual
remuneration
restrictions
of
Law
3864/2010 is
conditional on the amendment of the specific provisions of the law
during the exercise period, so that the respectiv
e
restrictions are
lifted, or the exit of the HFSF from the share capital
of the Company.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The share options outstanding at the end of the period have
the following expiry dates:
Share options
Expiry date
31 December 2021
2022
3,607,200
2023
3,607,200
2024
4,634,321
2025
525,840
Weighted average remaining contractual
life of share options outstanding at the
end of the period
1.6
In accordance
with the
Group’s
accounting policy
on employees’
share based
payments, the
grant date
fair value
of the
options is
recognized as an expense with a corresponding
increase in equity over the vesting period.
The fair
value at
grant date
is determined
using an
adjusted form
of the
Black-Scholes
model for
Bermudan equity
options which
takes
into account
the exercise
price, the
exercise
dates, the
term of
the option,
the share
price at
grant
date and
expected price
volatility of the underlying share, the expected dividend
yield and the risk-free interest
rate for the term of the options.
Furthermore,
the
aforementioned
additional
condition
on
certain
share
options
granted
to
key
executives
subject
to
the
remuneration restrictions of
Law 3864/2010, is treated as a non-vesting
condition. Accordingly,
the fair value measurement at
grant
date of such share options takes into consideration the probability that
the relevant restrictions will be lifted, based on Management
judgement, and is not subsequently revised regardless
of whether the condition is eventually satisfied.
The weighted average
fair value of the share
options granted in July 2021
was € 0.42. The significant
inputs into the model were the
share
price of
€ 0.7823
at
the grant
date,
exercise
price of
€ 0.23,
annualized
dividend
yield of
3%, expected
average
annualized
volatility
of 68%,
the expected
option
life
ranging
from 1
to 4
years,
and the
risk-free
interest
rate
corresponding
to the
options’
maturities, based on
the EUR swap
yield curve. The expected
volatility is measured
at the grant
date of the options
and is based on
the average historical volatility
of the share price over the last one and a half year.
40.
Transfers
of financial assets
The Group
enters
into transactions
by which
it transfers
recognized
financial assets
directly to
third
parties or
to Special
Purpose
Entities (SPEs).
(a) The Group sells, in exchange
for cash, securities under an agreement
to repurchase them (repos)
and assumes a liability to repay
to the counterparty the cash received.
In addition, the Group pledges,
in exchange for cash, securities, covered bonds, as
well as loans
and receivables and assumes a liability to
repay to the counte
rparty the cash received. The Group
may also transfer securities under
securities lending agreements with no exchange of cash or pledging of other financial assets as collateral
.
For all the aforementioned
transactions, the
Group has
determined that
it retains
substantially all
the risks,
including associated
credit and
interest rate
risks,
and rewards of these financial assets and therefore has not derecognized them. As a result, the Group
is unable to use, sell or pledge
the transferred assets for the duration of the transaction. The related liability, where applicable, is recognized in Due to central banks
and credit institutions (notes 31 and 32), Due to customers
(note 33) and Debt securities in issue (note 34), as appropriate.
The Group
enters
into
securitizations
of various
classes of
loans
(corporate,
small and
medium enterprise,
consumer
and various
classes of non-performing loans), under which it assumes an obligation to pass on the cash flows from the loans to the holders of the
notes. The Group has determined that it retains substantially
all risks, including associated credit and interest rate risks,
and rewards
of these
loans and
therefore
has not
derecognized
them. As
a result
of the
above transactions,
the Group
is unable
to use,
sell or
pledge the
transferred
assets for
the duration
of their retention
by the
SPE. Moreover,
the note
holders' recourse
is limited
to the
transferred
loans. As at
31 December 2021,
the securitizations’
issues held by
third parties amounted
to € 552
million (2020: €
594
million) (note 34).
Notes to the Consolidated Financial Statements
.
155
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31 December 2021 Consolidated Financial Statements
The table below sets out the details of Group's financial assets that have been
sold or otherwise transferred, but which do not qualify
for derecognition:
Carrying amount
2021
2020
€ million
€ million
Securities held for trading
11
7
Loans and advances to customers
14,344
16,015
-securitized loans⁽¹⁾
4,232
6,740
-pledged loans under covered bond program
4,360
3,707
-pledged loans with central banks
5,545
5,357
-other pledged loans
207
211
Investment securities
6,930
6,076
Total
21,285
22,098
(1)
It includes securitized loans of issues held by the Bank, not used for funding
(b) The Group
may sell or
re-pledge any
securities borrowed
or obtained through
reverse repos
and has an
obligation to
return the
securities.
The
counterparty
retains
substantially
all
the
risks
and
rewards
of
ownership
and
therefore
the
securities
are
not
recognized by
the Group. As
at 31 December
2021, the Group
had obtained through
reverse repos
securities of face
value of €
598
million, of which € 60 million sold under repurchase
agreements and € 505 million pledged with
central banks (2020: € 1,154 million
face
value
of
which
€
1,038
million
sold
under
repurchase
agreements).
Furthermore,
as
at
31
December
2021,
the
Group
had
obtained Greek treasury
bills as collaterals
for derivatives transactions
with the Hellenic Republic
of face value
of € 1,400 million, of
which
€
324
million
sold
under
repurchase
agreements
(2020:
€
1,735
million
face
value
of
which
€
1,285
million,
sold
under
repurchase agreements).
As at 31 December 2021, the cash value of the assets transferred
or borrowed by the Group through securities lending, reverse
repo
and
other
agreements
(points
a
and
b)
amounted
to
€
13,583
million,
while
the
associated
liability
from
the
above
transactions
amounted to € 13,287
million, of which € 591
million repo agreements
offset in the balance
sheet against reverse
repo deals (notes
31, 32, 33, 34 and 5.2.1.4) (2020: cash value € 12,843 million
and liability € 10,558 million, of which € 1,065 million repo agreements
offset in the balance sheet).
In addition, the Group’s
financial assets pledged as collaterals
for repos, derivatives,
securitizations and
other transactions other than the financial assets presented
in the table above are provided in notes 17 and 29.
41.
Leases
Group as a lessee
The Group leases office and branch premises, ATM
locations, residential properties for the Group’s
personnel, and motor vehicles.
The majority of the Group’s property leases are under long term agreements (for a term of 12
years or more in the case of leased real
estate
assets),
with
options
to
extend
or
terminate
the
lease
according
to
the
terms
of
each
contract
and
the
usual
terms
and
conditions
of commercial
leases
applicable
in each
jurisdiction,
while motor
vehicles generally
have
lease terms
of up
to
4 years.
Extension options held by the Group are included in the lease term when it is reasonably certain that they will be exercised based on
its assessment.
For
contracts
having
an indefinite
remaining
life
as at
1 January
2021, the
lease term
has been
determined
at
an
average of 7 years for the Bank, after
considering all relevant facts and circumstances. Depending on the
terms of each lease
contract,
lease payments are
adjusted annually
in line with the
consumer Price Index,
as published by
the Greek Statistical
Authority,
plus an
agreed fixed percentage.
Information about the leases for which the Group
is a lessee is presented below:
Right-of-Use Assets
As at 31 December 2021, the right-of-use assets included in property plant and equipment amounted to €
230 million (31 December
2020: € 202 million) (note
26), while those that
meet the definition of
investment property
amounted to € 14
million (31 December
2020: € 14 million) (note 27).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Lease Liabilities
The
lease liability
included under
other
liabilities
amounted
to
€
248 million
as at
31 December
2021 (31
December 2020:
€ 221
million) (note 35). The
maturity analysis of lease
liabilities as at 31
December 2021, based on
the contractual undiscounted cash flows,
is presented in note 5.2.3.
Amounts recognised in profit or loss
Interest on lease
liabilities is presented
in note 6 and the
lease expense relating to
short term leases is
ca. € 3 million (31
December
2020: € 3 million).
The Group had total cash outflows for
leases of € 39 million in 2021 (2020: € 44 million).
Group as a lessor
Finance lease
The Group leases out certain real estate
properties and equipment under finance leases, in its capacity as a lessor.
The maturity analysis of finance lease
receivables, based on the undiscounted lease payments to be
received after the reporting date,
is provided below:
2021
2020
€ million
€ million
Not later than one year
18
18
1-2 years
14
13
2-3 years
11
10
3-4 years
7
7
4-5 years
5
5
Later than 5 years
11
13
Lease Payments:
66
66
Unguaranteed residual values
737
821
Gross investment in finance leases
803
887
Less: unearned finance income
(49)
(54)
Net investment in finance leases
754
833
Less: impairment allowance
(217)
(306)
Total
537
527
Operating Leases
The
Group
leases
out
its
investment
property
under
the
usual
terms
and
conditions
of
commercial
leases
applicable
in
each
jurisdiction.
When such
leases do
not transfer
substantially
all of
the risks
and rewards
incidental
to the
ownership
of the
leased
assets, the Group classifies these lease
as operating leases. Information relating to operating leases of investment property,
including
the rental income recognised by the Group
during the year,
is provided in note 27.
In the
context
of the
relief
measures
taken
in response
to
the Covid-19
outbreak,
the Group
as a
lessor has
granted
certain rent
concessions
to its
tenants
directly affected
by the
Covid-19 pandemic.
As at
31 December
2021, the
unamortized
balance of
the
above mentioned
rent concessions,
net of
the reimbursement
provided by
the Greek
government to
lessors in
2021, amounted
to
approximately € 11 million before tax
(2020: € 6 million), which will be gradually recognized in profit or loss over the remaining lease
term of the respective contracts.
For
the
year
ended
31
December
2021,
the
amount
of
the
rent
reduction
recognized
in
“Income
from
non-banking
services”
amounted to approximately
€ 3 million (2020: 1 million).
Rent concessions grante
d
to the Group as a lessee up to 31 December 2021, as direct
consequence of the Covid-19 pandemic,
were
not significant (2020: 1 million recognized in Other income/(expenses)
(note 10)).
Notes to the Consolidated Financial Statements
.
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The maturity
analysis of operating
lease receivables,
based on the
undiscounted lease
payments to
be received after
the reporting
date, is provided below:
2021
2020
€ million
€ million
Not later than one year
96
90
One to two years
89
85
Two to three years
82
79
Three to four years
75
72
Four to five years
70
62
More than five years
304
324
Total
716
712
42.
Contingent liabilities and other commitments
The Group
presents
the credit
related
commitments
it has
undertaken
within the
context
of its
lending related
activities into
the
following
three categories:
a) financial
guarantee
contracts,
which refer
to guarantees
and standby
letters
of credit
that carry
the
same credit risk
as loans (credit
substitutes), b) commitments to
extend credit, which comprise
firm commitments that are
irrevocable
over the life of the facility or revocable
only in response to a material adverse effect
and c) other credit related commitments, which
refer
to
documentary
and
commercial
letters
and
other
guarantees
of
medium
and
low
risk
according
to
the
Regulation
No
575/2013/EU.
Credit related commitments are analyzed
as follows:
2021
2020
€ million
€ million
Financial guarantee contracts
1,068
641
Commitments to extend credit
1,572
1,200
Other credit related commitments
634
484
Total
3,274
2,325
The credit
related
commitments
within the
scope of
IFRS 9
impairment requirements
amount to
€ 6.8
billion (2020:
€ 5.7
billion),
including revocable loan commitments
of € 3.6 billion (2020: € 3.4 billion), while
the corresponding allowance for
impairment losses
amounts to € 48 million (2020: € 66 million).
In addition, the Group has issued a sovereign risk financial guarantee of € 0.24 billion (31 December 2020: € 0.24 billion) for which an
equivalent amount has been deposited under the relevant
pledge agreement (note 29).
Other commitments
(a) The Bank has signed
irrevocable payment
commitment and collateral
arrangement agreements
with the Single Resolution Board
(SRB) amounting in total to € 20 million as at 31 December
2021 (2020: € 16 million), representing 15%
of its resolution contribution
payment obligation to the Single Resolution
Fund (SRF) for the years 2016-2021.
According
to the
agreements,
which are
backed
by cash
collateral
of an
equal amount,
the Bank
undertook to
pay
to the
SRB an
amount up
to the
above irrevocable
payment
commitment, in
case of
a call
and demand
for payment
made by
it, in
relation to
a
resolution action
taken for
another European
bank. The said
cash collateral
has been recognized
as a financial
asset in the
Group’s
balance sheet (note 29).
(b) As at 31 December 2021,
the contractual commitments for the acquisition of own used property, equipment and intangible assets
amounted to € 43 million (2020: € 40 million).
Legal proceedings
As at
31 December
2021, a
provision of
€ 64
million has
been recorded
for a
number of
legal proceedings
outstanding against
the
Group (31 December 2020: € 60 million). The
said amount includes € 34 million for an outstanding litigation related to the acquisition
of New TT Hellenic Postbank S.A. in 2013 (31 December 2020: € 34 million).
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
Furthermore, in the normal course of its business, the Group has been involved in a number of legal proceedings, which are either at
still a premature
or at an advanced trial
instance. The final settlement
of these cases may
require the lapse
of a certain time so that
the litigants
exhaust the
legal remedies
provided
for by
the law.
Management, having
considered the
advice of
the Legal
Services
General
Division, does
not expect
that
there
will be
an outflow
of resources
and therefore
does not
acknowledge
the need
for
a
provision.
Following the completion of the banking sector’s hive down of Eurobank Ergasias S.A. (Demerged entity) in 2020, the Beneficiary (i.e.
Eurobank
S.A., “Bank”)
substituted
the
Demerged
Entity
(currently
Eurobank
Holdings), by
way
of universal
succession,
to all
the
transferred
assets and liabilities
(note 1), while
pending lawsuits
where the Demerged
entity was an
involved party
and are related
to the hived down banking sector,
will continue ipso jure by the Bank or against it.
Against the
Bank various
legal remedies
and redresses
have been
filed amongst
others in
the form
of individual
lawsuits lodged
by
borrowers,
a class action
lodged by
consumer protection
unions, applications
for injunction
measures, motions
to vacate
payment
orders
and appeals
in relation
to the
validity
of clauses
for
the granting
of loans
in Swiss
Francs.
To
date
the vast
majority of
the
judgments issued by the first instance and the
appellate Courts have found in favour
of the Bank’s positions.
As to certain aspects of Swiss Francs loans there was a lawsuit before the Supreme Court (Areios Pagos) at plenary session which was
initiated from an individual lawsuit. The Decision issued on 18 April 2019 was in favour of the Bank. For the class action, the Supreme
Court issued
on 20 July
2021, a
decision in
favour
of the
Bank, rejecting
the petition
of cassation
filled by
the consumer
unions. In
addition, the European Court of
Human Rights has passed judgments
which confirmed the legality of
the loans in Swiss
Francs granted
by the Bank.
In any event,
the Management of the Bank
is closely monitoring the developments
to the relevant
cases so as to ascertain
potential
accounting implications in accordance with the Group’s
accounting policies.
43.
Operating segment information
Management has
determined the operating
segments based on
the internal reports
reviewed by
the Strategic
Planning Committee
that
are
used
to
allocate
resources
and
to
assess
their
performance
in
order
to
make
strategic
decisions.
The
Strategic
Planning
Committee considers the business both from a business unit and geographic perspective. Geographically, management considers the
performance of its business activities originated from Greece
and other countries in Europe (International).
Greece
is
further
segregated
into
retail,
corporate,
global,
capital
markets
&
asset
management
and
investment
property.
International
is monitored
and reviewed
on a
country basis.
The Group
aggregates
segments when
they exhibit
similar economic
characteristics and profile and are expected
to have similar long-term economic development.
In more detail, the Group is organized
in the following reportable segments:
-
Retail:
incorporating
customer
current
accounts,
savings,
deposits
and
investment
savings
products,
credit
and
debit
cards,
consumer loans, small business banking and mortgages.
-
Corporate:
incorporating current
accounts, deposits,
overdrafts,
loan and other
credit facilities,
foreign currency
and derivative
products to corporate entities,
custody,
cash management and trade services.
-
Global, Capital Markets & Asset Management:
incorporating investment banking services including corporate finance, merger and
acquisitions
advice,
financial
instruments
trading
and
institutional
finance
to
corporate
and
institutional
entities,
as
well
as,
specialized financial advice and intermediation
to private and large
retail individuals and to small
and large corporate
entities. In
addition, this
segment incorporates
mutual fund
and investment
savings products,
institutional asset
management
and equity
brokerage.
-
International: incorporating operations
in Bulgaria, Serbia, Cyprus, Luxembourg and Romania.
-
Investment
Property:
incorporating
investment
property
activities
(Bank,
Eurobank
Leasing
Single
Member
S.A.
and
former
Grivalia group)
relating to
a diversified
portfolio of
commercial assets,
with high
yield on prime
real estate
assets, in the
office,
retail, logistics, infrastructure
and hospitality sectors.
Other segment
of the
Group refers
mainly to
a) property
management (including
repossessed assets),
b) other
investing
activities
(including equities’ positions), c) private
banking services to medium and high net
worth individuals and the Group’s
share of results
of Eurolife Insurance
group and d) the results related
to the corporate transformation
plan, the notes of the Cairo,
Pillar and Mexico
Notes to the Consolidated Financial Statements
.
159
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31 December 2021 Consolidated Financial Statements
securitizations,
which
were
retained
by
the
Group,
and
the
Group’s
share
of
results
of
doValue
Greece
Loans
and
Credits
Claim
Management S.A.
The
Group's
management
reporting
is
based
on
International
Financial
Reporting
Standards
(IFRS)
as
adopted
by
the
EU.
The
accounting policies of the Group's operating segments
are the same with those described in the principal accounting policies.
Revenues from
transactions between business
segments are allocated
on a mutually agreed
basis at rates
that approximate
market
prices.
43.1
Operating segments
31 December 2021
Retail
Corporate
Global, Capital
Markets &
Asset Mngt
Investment
Property
International
Other and
Elimination
center
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Net interest income
436
317
217
(21)
375
(3)
1,321
Net commission income
80
75
88
1
117
(3)
358
Other net revenue
1
2
71
131
0
16
221
Total external revenue
518
394
376
110
492
10
1,900
Inter-segment revenue
22
40
(33)
2
(3)
(28)
-
Total revenue
540
434
343
112
489
(19)
1,900
Operating expenses
(412)
(126)
(59)
(38)
(240)
(2)
(876)
Impairment losses relating to loans
and advances to customers
(251)
(94)
-
-
(73)
(71)
(490)
Other impairment losses and provisions (note 12)
(5)
(1)
(6)
(3)
(9)
(28)
(52)
Share of results of associates and
joint ventures
(0)
0
0
2
(0)
24
26
Profit/(loss) before tax before restructuring costs
(128)
213
279
72
168
(95)
508
Restructuring costs (note 12)
(7)
(2)
(0)
-
(7)
(10)
(25)
Profit/(loss) before tax
(135)
211
279
72
161
(105)
483
Net profit/(loss) attributable to non controlling
interests
-
-
-
0
(1)
0
(1)
Profit/(loss) before tax attributable
to shareholders
(135)
211
279
72
163
(105)
484
31 December 2021
Retail
Corporate
Global, Capital
Markets & Asset
Mngt
Investment
Property
International
Other and
Elimination
center⁽¹⁾
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Segment assets
14,878
14,696
13,265
1,495
19,870
13,648
77,852
Segment liabilities
29,562
10,869
6,828
356
18,183
6,420
72,217
Notes to the Consolidated Financial Statements
.
160
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31 December 2021 Consolidated Financial Statements
The International segment is further analyzed
as follows:
31 December 2021
Bulgaria
Serbia
Cyprus
Luxembourg
Romania
Total
€ million
€ million
€ million
€ million
€ million
€ million
Net interest income
185
53
102
25
10
375
Net commission income
63
14
33
8
(2)
117
Other net revenue
(1)
1
1
0
(0)
0
Total external revenue
247
68
136
34
7
492
Inter-segment revenue
0
(0)
0
(3)
-
(3)
Total revenue
247
68
136
31
7
489
Operating expenses
(118)
(50)
(45)
(21)
(5)
(240)
Impairment losses relating to loans and
advances to customers
(43)
(11)
(4)
0
(15)
(73)
Other impairment losses and provisions
(3)
(4)
0
(0)
(1)
(9)
Share of results of associates and joint
ventures
-
(0)
-
-
(0)
(0)
Profit/(loss) before tax before restructuring
costs
83
3
87
9
(15)
168
Restructuring costs (note 12)
-
(5)
-
(1)
-
(7)
Profit/(loss) before tax
83
(2)
87
8
(15)
161
Net profit/(loss) attributable to non
controlling interests
0
(1)
-
-
-
(1)
Profit/(loss) before tax attributable to
shareholders
83
(1)
87
8
(15)
163
31 December 2021
Bulgaria
Serbia
Cyprus
Luxembourg
Romania
International
€ million
€ million
€ million
€ million
€ million
€ million
Segment assets⁽²⁾
7,159
2,404
8,027
2,231
159
19,870
Segment liabilities⁽²⁾
6,422
2,121
7,341
2,051
358
18,183
31 December 2020 restated
Retail
Corporate
Global, Capital
Markets &
Asset Mngt
Investment
Property
International
Other and
Elimination
center
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Net interest income
464
327
222
(19)
367
(12)
1,349
Net commission income
60
56
84
(0)
99
(1)
298
Other net revenue (note 2.3)
(3)
(1)
430
96
9
222
752
Total external revenue
522
382
736
76
474
210
2,400
Inter-segment revenue
16
44
(28)
2
(4)
(29)
-
Total revenue
537
426
708
78
470
180
2,400
Operating expenses
(419)
(131)
(59)
(33)
(232)
5
(869)
Impairment losses relating to loans and advances
to customers
(316)
(160)
-
-
(95)
(1,510)
(2,081)
Impairment losses on goodwill
-
-
-
(160)
-
-
(160)
Other impairment losses and provisions (note 12)
(8)
(3)
(8)
(0)
(6)
(18)
(43)
Share of results of associates and joint ventures
(0)
1
0
(3)
(2)
25
21
Profit/(loss) before tax before restructuring costs
(205)
133
642
(118)
135
(1,318)
(732)
Restructuring costs (note 2.3 and 12)
(36)
(4)
(1)
(0)
(1)
(105)
(147)
Profit/(loss) before tax
(241)
129
641
(118)
134
(1,423)
(879)
Net profit/(loss) attributable to non controlling
interests
-
-
-
0
0
(0)
(0)
Profit/(loss) before tax attributable to shareholders
(241)
129
641
(118)
134
(1,423)
(879)
Notes to the Consolidated Financial Statements
.
161
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31 December 2021 Consolidated Financial Statements
31 December 2020 restated
Retail
Corporate
Global, Capital
Markets &
Asset Mngt
Investment
Property
International
Other and
Elimination
center⁽¹⁾
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Segment assets (note 2.3)
16,745
13,377
12,309
1,444
16,694
7,153
67,721
Segment liabilities (note 2.3)
27,305
8,129
6,805
310
14,993
4,916
62,459
31 December 2020
Bulgaria
Serbia
Cyprus
Luxembourg
Romania
Total
€ million
€ million
€ million
€ million
€ million
€ million
Net interest income
181
54
102
23
7
367
Net commission income
53
13
27
8
(1)
99
Other net revenue
(2)
3
8
1
(1)
9
Total external revenue
232
69
137
32
5
474
Inter-segment revenue
0
(0)
0
(4)
-
(4)
Total revenue
232
69
137
27
5
470
Operating expenses
(116)
(47)
(43)
(20)
(6)
(232)
Impairment losses relating to loans and
advances to customers
(50)
(12)
(15)
(0)
(19)
(95)
Other impairment losses and provisions
(3)
(1)
(2)
(0)
(1)
(6)
Share of results of associates and joint
ventures
(0)
(2)
-
-
0
(2)
Profit/(loss) before tax before restructuring
costs
63
6
77
8
(20)
135
Restructuring costs
-
-
-
(1)
-
(1)
Profit/(loss) before tax
63
6
77
7
(20)
134
Net profit/(loss) attributable to non
controlling interests
(0)
(0)
-
-
-
(0)
Profit/(loss) before tax attributable to
shareholders
63
6
77
7
(20)
134
31 December 2020
Bulgaria
Serbia
Cyprus
Luxembourg
Romania
International
€ million
€ million
€ million
€ million
€ million
€ million
Segment assets⁽²⁾
6,010
1,691
6,852
1,892
301
16,694
Segment liabilities⁽²⁾
5,359
1,275
6,232
1,699
481
14,993
(1)
Interbank eliminations between International and the other Group’s segments are included.
(2)
Intercompany balances among the Countries have been excluded from the reported assets and liabilities of International segment.
43.2
Entity wide disclosures
Breakdown of the Group's revenue
for each group of similar products and services is as follows:
2021
2020
restated
€ million
€ million
Lending related activities
1,522
1,543
Deposits, network and asset management activities
(88)
(101)
Capital markets
339
643
Non banking and other services (note 2.3)
127
315
Total
1,900
2,400
Information on the Country by Country Reporting based
on Law 4261/2014 is provided in the Appendix.
Notes to the Consolidated Financial Statements
.
162
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31 December 2021 Consolidated Financial Statements
44.
Post balance sheet events
Details of post balance sheet events are provided
in the following notes:
Note 2.1 – Basis of preparation
Note 4 – Capital Management
Note 5 – Financial risk management and fair value
Note 23.1 – Shares in subsidiaries
Note 24 – Investments in associates and
joint ventures
Note 30 - Disposal groups classified as held for sale
Note 35 - Other liabilities
Note 38 - Reserves and retained earnings/losses
Note 45 – Related parties
45.
Related parties
Eurobank Ergasias Services and Holdings S.A. (the
Company or Eurobank Holdings) is the
parent company of Eurobank S.A. (the
Bank),
which resulted
from the
demerger of
Eurobank Ergasias
S.A. (“Demerged
Entity”) through
its banking
sector’s hive
down that
was
completed in March 2020 (note 1).
The Board
of Directors
(BoD) of Eurobank
Holdings is the
same as the
BoD of the
Bank and part
of the key
management personnel
(KMP) of the Bank
provides services to Eurobank Holdings
according to the terms
of the relevant agreement between
the two entities.
As at 31 December 2021,
the percentage of
the Company’s
ordinary shares with voting
rights held by the Hellenic Financial
Stability
Fund (HFSF) stands at 1.40%. The HFSF is considered to have significant influence over the Company pursuant to the provisions of the
Law 3864/2010, as in
force, and the
Tripartite
Relationship Framework
Agreement (TRFA)
between the Bank,
the Company and
the
HFSF signed
on 23
March 2020
and amended
on 3
February 2022.
Further information
in respect
of the
HFSF rights
based on
the
aforementioned framework
is provided in the section “Report of the Directors
and Corporate Governance Statement”
of the Annual
Financial Report for the year ended 31 December 2021.
Fairfax Group
is considered to have
significant influence over the Company.
In July 2021, Eurolife FFH Insurance
Group Holdings S.A.
(note 24) became a subsidiary of Fairfax and the percentage of Eurobank
Holdings voting rights held by Fairfax Group increased from
31.27% to 33%.
A number
of banking
transactions are
entered into
with related
parties in
the normal
course of
business and
are conducted
on an
arm's length basis.
These include loans,
deposits and guarantees.
In addition, as
part of its normal
course of business
in investment
banking activities, the Group at times may hold positions in debt and
equity instruments of related parties.
Notes to the Consolidated Financial Statements
.
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31 December 2021 Consolidated Financial Statements
The
outstanding
balances
of
the
transactions
with
(a)
Fairfax
group,
(b)
the
key
management
personnel
(KMP)
and
the
entities
controlled or jointly controlled by KMP and (c) the associates and joint ventures,
as well as and the relating income and expenses are
as follows:
31 December 2021
31 December 2020
Fairfax
Group⁽³⁾
KMP and Entities
controlled or jointly
controlled by KMP⁽¹⁾
Associates
and joint
ventures
Fairfax
Group
KMP and Entities
controlled or jointly
controlled by KMP⁽¹⁾
Associates
and joint
ventures
€ million
€ million
€ million
€ million
€ million
€ million
Loans and advances to
customers
0.01
4.95
26.52
9.02
4.69
28.94
Derivative financial
instruments - assets
-
-
-
0.10
-
-
Other assets⁽²⁾
0.37
0.19
76.04
1.92
0.27
65.33
Due to customers
0.24
21.90
80.68
0.15
22.29
114.06
Debt securities in issue
-
0.20
-
-
-
-
Other liabilities
-
0.32
40.86
0.01
0.96
19.82
Net interest income
0.21
-
(2.52)
0.14
(0.01)
(3.40)
Net banking fee and
commission income
-
0.16
14.74
-
0.03
12.49
Net trading income
-
-
0.45
-
-
(0.02)
Impairment losses relating to
loans and advances including
relative fees
0.02
-
(89.75)
(0.03)
-
(41.19)
Other operating
income/(expenses)
5.93
(14.99)
(12.44)
8.87
(14.11)
(15.02)
Guarantees issued
-
0.01
4.65
-
0.01
2.00
Guarantees received
-
0.01
-
-
0.02
-
(1)
Includes the key management personnel of the Group and their close family members.
(2)
For the year ended 31 December 2021, it includes € 0.2 million right of use assets (RoU) related to an entity controlled by KMP.
(3)
The balances with the Group’s
associate Eurolife FFH Insurance Group
Holdings S.A., which is also a member
of Fairfax Group are presented
in the column
associates and joint ventures.
For the year
ended 31 December 2021,
there were no
material transactions
with the HFSF.
In addition, following
the completion of
the project “Mexico” (note 20.1), as
at 31 December 2021
the loans, net of provisions, granted to
non consolidated entities controlled
by the Bank pursuant to the terms of the relevant
share pledge agreements have been derecognized
(2020: € 0.3 million).
For the year ended
31 December 2021,
an of impairment
of € 0.2
million (31 December 2020:
a reversal of impairment of
€ 0.4 million)
has
been
recorded
against
loan
balances
with
Group’s
associates
and
joint
ventures,
while
the
respective
impairment
allowance
amounted to € 0,4 million (31 December 2020: € 0.1 million).
Key management compensation (directors
and other key management personnel of the Group)
Key management personnel are entitled to compensation in the form of short-term employee benefits of € 7.35 million (2020: € 6.72
million) and long-term employee benefits
of € 1.17
million (2020: €
0.98 million). Additionally,
the Group has recognised €
0.52 million
expense
relating
with
equity
settled
share
based
payments
(note
39).
In
addition,
as
at
31
December
2021,
the
defined
benefit
obligation for the KMP amounts to € 1.48 million ((31 December 2020: € 1.41 million, as restated
due to change in accounting policy,
note 2.2.17)), while the respective
cost for the
year through the income statement
amounts to € 0.12 million
(31 December 2020: €
0.11 million as restated)
and the other comprehensive income (actuarial gains) amounts to € 0.05 million (31 December 2020: € 0.02
million loss as restated).
Notes to the Consolidated Financial Statements
.
164
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31 December 2021 Consolidated Financial Statements
Post balance sheet event
Grivalia Hospitality S.A.
Following the disposal of a 5.1% shareholding in the Group’s
joint venture Grivalia Hospitality S.A. (note 24) and the revised
terms of
the amended Shareholders’
Agreement signed with the
other shareholders on the same
date, the Bank ceased
to have joint
control
over the entity
and the retained interest
will be carried at
FVTPL. As a result, Grivalia
Hospitality will no longer
be a related party
to
the Group.
46.
External Auditors
The
Company
has
adopted
a Policy
on External
Auditors’
Independence which
provides
amongst
others,
for
the definition
of the
permitted
and non-permitted
services the
Group
auditors
may provide
further to
the statutory
audit. For
any
such services
to be
assigned to
the Group’s
auditors there
are specific
controlling
mechanisms in
order for
the Company’s
Audit Committee
to ensure
that a) the non-audit services
assigned to “KPMG Certified Auditors S.A.”, along with the KPMG network (KPMG), have been reviewed
and approved as required and b) there
is proper balance between audit and permitted
non-audit work.
The total fees of the Group’s
principal independent auditor KPMG, for audit and other services provided are
analyzed as follows:
2021
2020
€ million
€ million
Statutory audit⁽¹⁾
(2.8)
(2.6)
Tax certificate
(0.4)
(0.4)
Other audit related assignments
(1.2)
(1.0)
Non audit assignments
(0.2)
(0.1)
Total
(4.6)
(4.1)
(1)
Includes fees for statutory audit of the annual standalone and consolidated financial statements.
It is noted that the
non-audit assignment fees of “KPMG Certified
Auditors S.A.”
Greece, statutory auditor of the Company, amounted
to € 0.15 million.
Notes to the Consolidated Financial Statements
.
165
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31 December 2021 Consolidated Financial Statements
47.
Board of Directors
The Board of Directors (BoD) was elected by the Annual General Meeting (AGM) of the Shareholders
held on 23 July 2021 for a three
years term of office that will expire
on 23 July 2024, prolonged until the end of the period the AGM for the year
2024 will take place.
Following the aforementioned AGM
decision, the BoD was constituted as a body at the BoD meeting of 23 July 2021, as
follows:
G. Zanias
Chairman, Non-Executive Member
G. Chryssikos
Vice Chairman, Non-Executive Member
F. Karavias
Chief Executive Officer
S. Ioannou
Deputy Chief Executive Officer
K. Vassiliou
Deputy Chief Executive Officer
A. Athanasopoulos
Deputy Chief Executive Officer
B.P.
Martin
Non-Executive Member
A. Gregoriadi
Non-Executive Independent Member
I. Rouvitha-
Panou
Non-Executive Independent Member
R. Kakar
Non-Executive Independent Member
J. Mirza
Non-Executive Independent Member
C. Basile
Non-Executive Independent Member
E. Deli
Non-Executive Member (HFSF representative
under Law
3864/2010)
Athens, 5 April 2022
Georgios P.
Zanias
Fokion C. Karavias
Harris V. Kokologiannis
I.D. No ΑI - 414343
I.D. No ΑΙ - 677962
I.D. No AN - 582334
CHAIRMAN
OF THE BOARD OF DIRECTORS
CHIEF EXECUTIVE OFFICER
GENERAL MANAGER OF GROUP FINANCE
CHIEF FINANCIAL OFFICER
Notes to the Consolidated Financial Statements
.
166
|
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31 December 2021 Consolidated Financial Statements
APPENDIX – Disclosures under Law 4261/2014
Country by Country Reporting
Pursuant to article 81 of Law 4261/2014, which incorporated article 89 of Directive
2013/36/EC into the Greek legislation, the Group
provides the following information
for each country in which it has an establishment:
(i)
Names, nature of activities and geographical location.
(ii)
The operating income (turnover), the
profit/(loss) before tax, the tax
on profit/ (loss) and the current tax
on a consolidated
basis for each country; intercompany
transactions among countries are eliminated
through the line ‘Intra-Group
amounts’.
The amounts disclosed are prepared on the same basis as
the Group’s financial statements for the year ended 31 December
2021.
(iii)
The number of employees on a full time equivalent basis.
(iv)
The public subsidies received.
For the listing of the
Bank’s subsidiaries
at 31 December 2021, the
country of their incorporation
and the line of their business
refer
to note 23.1.
The information per country is set out below:
Year ended 31 December 2021
Operating
income
Profit/(loss)
before tax
Tax on profit/(loss)
Current
tax
Number of
employees at 31
December
€ million
€ million
€ million
€ million
Greece
1,442
302
(121)
(4)
6,657
Bulgaria
247
87
(10)
(9)
2,983
Romania
(8)
(13)
(0)
(1)
17
Cyprus
112
66
(15)
(15)
435
Serbia
67
(0)
0
(0)
1,731
Luxembourg⁽¹⁾
40
16
(4)
(5)
112
Turkey
1
1
(4)
(4)
-
Netherlands
(0)
(2)
(2)
(2)
-
Intra-Group amounts
(1)
-
-
-
Total
1,900
457
(156)
(40)
11,935
(1)
The operations of Eurobank Private Bank Luxembourg S.A.’s branch in London are included within Luxembourg.
For the year ended 31
December 2021, a
benefit of € 91
million that is attributable to the
targeted longer-term refinancing operations
(TLTRO III) of the European
Central Bank has been recognised in the income statement
(note 31).
Article 82 of Law 4261/2014
For 2021, the Group’s
return on assets (RoA) was 0.46%. RoA is calculated
by dividing the net profit for the year ended 31 December
2021 by the Group’s average
total assets for the year.
V.
Ιndependent Auditor’s Report (on the Financial Statements of the
Company)
KPMG Certified Auditors S.A.
3 Stratigou Tombra
Street
Aghia Paraskevi
153 42 Athens, Greece
Telephone
+30 210 6062100
Fax
+30 210 6062111
Email:
info@kpmg.gr
KPMG Certified Auditors S.A., a Greek Societe Anonyme and a member
firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited, a private English company
limited by guarantee.All rights reserved.
Certified Auditors
Independent Auditors
’
Report
To
the Shareholders of
Eurobank Ergasias Services and Holdings SA
Report on the audit of the financial statements
Opinion
We
have
audited
the
accompanying
financial
statements
of
Eurobank
Ergasias
Services and Holdings
SA (the “Company”)
which comprise
the balance
sheet as
at
31 December
2021,
the
statements
of
income
and
other
comprehensive
income,
changes in
equity and
cash flows
for the
year then
ended, and
notes, comprising
a
summary of significant accounting policies and other explanatory
information.
In
our
opinion,
the
accompanying
financial
statements
present
fairly,
in
all
material
respects, the financial position of Eurobank Ergasias Services and Holdings SA as at
31 December 2021 and its financial
performance and its cash
flows for the year then
ended, in accordance with International Financial Reporting Standards as
adopted by
the European Union.
Basis for opinion
We conducted our audit in
accordance with International Standards on
Auditing (ISA),
which have
been incorporated
in Greek
legislation. Our
responsibilities under
those
standards are
further described
in the
Auditor’s Responsibilities
for the
Audit of
the
financial
statements
section
of
our
report.
We
are
independent
of
the
Company
in
accordance with
the International
Ethics Standards
Board for
Accountants’ Code
of
Ethics
for
Professional
Accountants,
as
it
has
been
incorporated
into
Greek
legislation, and the
ethical requirements that
are relevant to
the audit of the
financial
statements in Greece
and we have
fulfilled our ethical
responsibilities in accordance
with the
requirements
of the
applicable
legislation
and the
aforementioned
Code
of
Ethics.
We
believe
that
the
audit
evidence
we
have
obtained
is
sufficient
and
appropriate to provide a basis for our opinion.
2
Key Audit Matters
Key audit
matters are
those matters,
that, in
our professional
judgment, were
of most
significance in our audit of the financial statements of the current period. These matters
and the relevant significant assessed risks
of material misstatement 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.
Mexico transaction
Refer to Note 6.1 to the financial statements.
The key audit matter
How the matter was addressed in
our audit
The Company
as part
of
the non
performing
exposure
strategy
proceeded
in
the
derecognition
of
EUR
3.1
billion
loans
via
securitization, known as ‘Project Mexico’.
The complexity of
the terms of
the agreement,
the magnitude
of
the
portfolio
as well
as the
assessment
of
other
criteria
to
justify
the
accounting
treatment
under
IFRS,
requires
significant judgement.
Disclosures in the financial statements
The
disclosures
in
the
financial
statements
regarding
the
Company’s
application
of
IFRS9
are
key
to
provide
clarity
on
the
transaction.
Our
audit
procedures
included
the
following:
—
We
examined
relevant
asset
transfer
agreements
and
other
related
legal
documents
to
ascertain
whether
the
criteria
according to IFRS 9 are met.
—
We analysed
the contractual
terms
and
conditions
to
assess
if
the
Company retained
control
over the
transferred loans.
—
We reviewed the accounting entries
related to this transaction.
Assessing disclosures:
—
We
evaluated
the
adequacy
and
appropriateness
of
the
disclosures
in
the
financial
statements
that
address Project Mexico. In
addition,
we
assessed
whether
the
disclosure
of
the
key
judgements
and
assumptions
were
sufficiently
clear and explanatory.
3
Other Information
Management is
responsible for
the other
information. The
other information
comprises
the information
included
in the
Board
of Directors’
Report
and
the Declarations
of the
Members of the Board of
Directors but does not include the
financial statements and our
Auditor’s Report thereon.
Our opinion on the financial statements does not cover
the other information and we do
not express any form of assurance conclusion 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, 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
in this regard.
Responsibilities of Management and Those Charged with Governance
for
the financial statements
Management
is
responsible
for
the
preparation
and
fair
presentation
of
the
financial
statements in accordance
with International
Financial Reporting
Standards as
adopted
by
the
European
Union,
and
for
such
internal
control
as
Management
determines
is
necessary to
enable the
preparation of
financial statements
that are
free from
material
misstatement, whether due to fraud or error.
In
preparing
the
financial
statements,
management
is
responsible
for
assessing
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
management either intends
to liquidate the Company
or to cease operations,
or has no
realistic alternative but to do so.
The
Audit
Committee
of
the
Company
is
responsible
for
overseeing
the
Company’s
financial reporting process.
Auditor’s 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 auditor’s
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 which
have been incorporated
in Greek legislation
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.
As part
of
an
audit
in
accordance
with
ISAs,
which
have
been
incorporated
in
Greek
legislation,
we
exercise
professional
judgment
and
maintain
professional
scepticism
throughout the audit. We also:
—
Identify and
assess
the risks
of material
misstatement
of the
financial
statements,
whether due
to fraud
or error,
design and
perform audit
procedures
responsive
to
those risks, and obtain audit
evidence that is sufficient
and appropriate to provide a
basis for our
opinion. The risk of
not detecting a
material misstatement resulting from
fraud
is
higher
than
for
one
resulting
from
error,
as
fraud
may
involve
collusion,
forgery, intentional omissions, misrepresentations, or the override of
internal control.
4
—
Obtain an
understanding of
internal control
relevant to
the audit
in order
to design
audit procedures that
are appropriate in
the circumstances,
but not for
the purpose
of expressing an opinion on the effectiveness of
the Company’s internal control.
—
Evaluate the
appropriateness
of accounting
policies used
and the
reasonableness
of accounting estimates and related disclosures made
by Management.
—
Conclude on the
appropriateness of
Management’s use
of the going
concern basis
of
accounting
and,
based
on
the
audit
evidence
obtained,
whether
a
material
uncertainty exists related
to events or
conditions that may
cast significant doubt
on
the Company’s ability to continue as a going concern. If we conclude that a material
uncertainty
exists,
we
are
required
to
draw
attention
in
our
auditors’
report
to
the
related disclosures in the
financial statements or, if such disclosures are
inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date
of our auditor’s
report. However,
future events or
conditions may cause
the Company to cease to continue as a going concern.
—
Evaluate the overall presentation,
structure and content of
the financial statements,
including
the
disclosures,
and
whether
the
financial
statements
represent
the
underlying transactions and events in a manner that achieves fair
presentation.
We communicate with those charged
with governance regarding, among other
matters,
the planned
scope and
timing
of the
audit and
significant audit
findings,
including any
significant deficiencies in internal control that we identify
during our audit.
We also provide those
charged with governance with
a statement that we
have complied
with relevant ethical requirements regarding independence and communicate with them
all
relationships
and
other
matters
that
may
reasonably
be
thought
to
bear
on
our
independence, and where applicable, related safeguards.
From
the
matters
communicated
with
those
charged
with
governance,
we
determine
those matters
that were
of most
significance in
the audit
of the
financial statements
of
the current period and are therefore the key
audit matters. We describe these matters in
our auditors’ report unless
law or regulation precludes public
disclosure about the matter
or
when,
in
extremely
rare
circumstances,
we
determine
that
a
matter
should
not
be
communicated
in
our
report
because
the
adverse
consequences
of
doing
so
would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1.
Additional Report to the Audit Committee
Our audit opinion on the
financial statements is consistent
with the Additional Report
to
the Audit Committee
of the Company
dated 5 April
2022, pursuant to
the requirements
of article 11 of the
Regulation 537/2014 of the European Union (EU).
2.
Provision of non Audit Services
We have not provided to the Company any prohibited non – audit services referred to in
article 5 of regulation (EU) 537/2014.
The permissible
non-audit
services
that we
have provided
to the
Company
during the
year ended 31 December
2021 are disclosed
in Note 22
of the accompanying
financial
statements.
3.
Appointment of Auditors
5
We were appointed for the first
time as Certified Auditors of the Company
based on the
decision of
the Annual
General Shareholders’
Meeting dated
10 July
2018. From
then
onwards our appointment has been renewed uninterruptedly for a total
period of 4 years
based on the annual decisions of the General Shareholders’
Meeting.
4.
Operations Regulation
The Company has an
Operations Regulation in accordance with
the content provided by
the provisions of the article 14 of Law 4706/2020.
5.
Assurance Report on the European Single Electronic Reporting
Format
We
examined
the
digital
files
of
Eurobank
Ergasias
Services
and
Holdings
SA
(the
“Company”),
which were
prepared
in
accordance
with
the European
Single Electronic
Format
(ESEF)
that
is
determined
by
the
Commission
Delegated
Regulation
(EU)
2019/815, as
amended by
the Regulation
(EU) 2020/1989
(the ESEF
Regulation) that
include the financial statements of
the Company for the year
ended as at 31 December
2021 in XHTML format “JEUVK5RWVJEN8W0C9M24
-2021-12-31-en.xhtml”.
Regulatory framework
The digital
files of
the
European Single
Electronic Format
are prepared
in accordance
with
the
ESEF
Regulation
and
the
2020/C
379/01
Commission
Interpretative
Communication
issued
on
10
November
2020,
as
required
by
L.
3556/2007
and
the
relevant
announcements
of
the
Hellenic
Capital
Markets
Commission and the Athens Stock Exchange (the “ESEF
Regulatory Framework”). This
Framework includes
in summary,
among others,
that the
annual financial
reports must
be prepared in XHTML format.
The
requirements
as
defined
in
the
ESEF
Regulatory
Framework
as
in
force
are
appropriate criteria to express a reasonable assurance
conclusion.
Responsibilities of management and those charged with governance
Management is
responsible for
the preparation
and filing
of the
financial statements
of
the
Company,
for
the
year
ended
as
at
31
December
2021,
in
accordance
with
the
requirements
determined
by
the
ESEF
Regulatory
Framework,
and
for
such
internal
control as management determines is necessary to enable the preparation of digital files
that are free from material misstatement, whether due
to fraud or error.
Auditors’ Responsibilities
Our
responsibility
is
the
planning
and
the
execution
of
this
assurance
engagement
in
accordance with the 214/4/11-02-2022 Decision
of the Hellenic Accounting and Auditing
Standards Oversight Board
and the
Guidelines for the
assurance engagement and
report
of
Certified
Auditors
on
the
European
Single
Electronic
Reporting
Format
(ESEF)
of
issuers with shares listed in a regulated market
in Greece”, as these were issued by the
Institute
of
Certified
Public
Accountants
of
Greece
on
14/02/2022
(the
“ESEF
Guidelines”), in order to obtain reasonable
assurance that the financial statements of the
Company that are prepared by the management of the Company in accordance with the
ESEF comply in all material respects with the ESEF Regulatory
Framework as in force.
Our work was performed
in accordance with the
International Ethics Standards Board for
Accountants’
Code of
Ethics for
Professional Accountants,
as it
has been
incorporated
into
Greek
legislation
and
we
have
also
fulfilled
our
independence
requirements,
in
accordance with the L. 4449/2017 and the Regulation
(EU) 537/2014.
6
The assurance work
that we carried
out refers exclusively
to the ESEF
Guidelines and
was
conducted
in
accordance
with
the
International
Standard
on
Assurance
Engagements
3000,
“Assurance
Engagements
other
than
Audits
or
Reviews
of
Historical Financial Information”. Reasonable assurance is a high level of assurance
but
is
not
a
guarantee
that
such
an
assurance
engagement
will
always
detect
a
material
misstatement regarding non-compliance
with the requirements
of the ESEF Regulatory
Framework.
Conclusion
Based
on
the
procedures
performed
and
the
evidence
obtained,
we
express
the
conclusion
that
the
financial
statements
of
the
Company
for
the
year
ended
as
of
31
December
2021
in
XHTML
format
“JEUVK5RWVJEN8W0C9M24-2021-12-31-
en.xhtml”,
have
been
prepared,
in
all
material
respects,
in
accordance
with
the
requirements of the ESEF Regulatory Framework.
Athens, 6 April 2022
KPMG Certified Auditors S.A.
AM SOEL 114
Harry Sirounis, Certified Auditor
AM SOEL 19071
VΙ.
Financial Statements οf the Company for the year ended 31
December 2021
EUROBANK ERGASIAS SERVICES AND
HOLDINGS S.A.
FINANCIAL
STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2021
8 Othonos Street, Athens 105 57,
Greece
www.eurobankholdings.gr,
Tel.: (+30) 214 40 61000
General Commercial
Registry No: 000223001000
.
Index to the Financial Statements
.................................................................................................................................................. Page
Balance Sheet ........................................................................................................................................................................................ 1
Income Statement ................................................................................................................................................................
.................
2
Statement of Comprehensive Income ................................................................................................................................................... 3
Statement of Changes in Equity................................
............................................................................................................................. 4
Cash Flow Statement ............................................................................................................................................................................. 5
Notes to the Financial Statements
1.
General information ................................................................................................
.....................................................................
6
2.
Basis of preparation and principal accounting policies
................................................................................................................ 6
2.1
Basis of preparation
................................................................................................................................................................
......
6
2.2
Principal accounting policies
....................................................................................................................................................... 11
3.
Critical accounting estimates and judgments
in applying accounting policies ...........................................................................
21
4.
Financial risk management and fair value ................................................................................................
..................................
22
4.1
Financial risk factors and risk management................................................................
................................................................
22
4.2
Fair value of financial assets and liabilities .................................................................................................................................
23
5.
Net interest income .................................................................................................................................................................... 24
6.
Other income/(expenses) ........................................................................................................................................................... 24
6.1
Income resulting from distribution in kind– Project
‘Mexico’
.................................................................................................... 24
7.
Operating expenses .................................................................................................................................................................... 25
8.
Impairment allowance for loans and advances to
customers ....................................................................................................
25
9.
Income tax .................................................................................................................................................................................. 26
10.
Discontinued operations
............................................................................................................................................................. 26
11.
Investment securities
................................................................................................................................................................
..
27
12.
Shares in subsidiaries
................................................................................................................................................................
..
27
13.
Other assets
................................................................................................................................................................
................
27
14.
Debt securities in issue ............................................................................................................................................................... 27
15.
Other liabilities ................................................................................................................................
...........................................
27
16.
Share capital and share premium ............................................................................................................................................... 29
17.
Reserves and retained earnings/(losses) .................................................................................................................................... 30
18.
Share options
................................................................................................................................................................
..............
31
19.
Cash and cash equivalents ..........................................................................................................................................................
32
20.
Post balance sheet events ................................................................................................................................
..........................
32
21.
Related parties
................................................................................................................................................................
............
32
22.
External Auditors ................................................................................................................................................................
........
33
23.
Board of Directors
................................................................................................................................................................
.......
34
Balance Sheet
.
1
|
Page
31
December
2021
Financial
Statements
31 December
2021
2020
Note
€ million
€ million
ASSETS
Due from credit institutions
4.1
62
14
Investment securities
11
949
942
Shares in subsidiaries
12
4,093
4,091
Other assets
13
5
4
Total assets
5,109
5,051
LIABILITIES
Debt securities in issue
14
947
947
Other liabilities
15
2
1
Total liabilities
949
948
EQUITY
Share capital
16
816
816
Share premium
16
8,056
8,056
Corporate law reserves
17
6,919
6,919
Special reserves
17
1,004
1,004
Other Reserves
17
1,179
1,179
Retained earnings/(losses)
17
(13,814)
(13,871)
Total equity
4,160
4,103
Total equity and liabilities
5,109
5,051
Νοte:
Information for the change in presentation of reserves and retained earnings is provided in note 17
Notes on pages 6 to 34 form an integral part of these
financial statements.
Income Statement
.
2
|
Page
31
December
2021
Financial
Statements
Year ended 31 December
2021
€ million
2020
€ million
Note
Interest income
61
121
Interest expense
(61)
(58)
Net interest income/(expense)
5
(0)
63
Other income/(expenses)
6
57
(10)
Operating income
57
53
Operating expenses
7
(9)
(9)
Profit from operations before impairments
48
44
Impairment losses relating to loans and advances to customers
8
-
(1,508)
Other impairment losses
11
7
(7)
Profit/(Loss) before tax
55
(1,471)
Income tax
9
(0)
-
Net profit/(loss) from continuing operations
55
(1,471)
Net profit/(loss) from discontinued operations
10
-
(41)
Net profit/(loss)
55
(1,512)
Notes on pages 6 to 34 form an integral part of these
financial statements
Statement of Comprehensive Income
.
3
|
Page
31
December
2021
Financial
Statements
Year ended 31 December
2021
€ million
2020
€ million
Net profit/(loss)
55
(1,512)
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or loss:
Cash flow hedges
- changes in fair value, net of tax
-
8
- transfer
to net profit, net of tax
-
-
(1)
7
Debt securities at FVOCI
- changes in fair value, net of tax
-
(143)
- transfer to net profit, net of tax
-
-
(46)
(189)
-
(182)
Items that will not be reclassified to profit or loss:
-Actuarial gains/ (losses) on post employment benefit obligations, net of tax
(0)
(0)
Other comprehensive income
(0)
(182)
Total comprehensive
income
- from continuing operations
55
(1,471)
- from discontinued operations
-
(223)
55
(1,694)
Notes on pages 6 to 34 form an integral part of these
financial statements.
Statement of Changes in Equity
.
4
|
Page
31
December
2021
Financial
Statements
Share capital
Share
premium
Reserves and
Retained
earnings
Hybrid capital
Total
€ million
€ million
€ million
€ million
€ million
Balance at 1 January 2020 (note 15)
853
8,056
(3,054)
2
5,857
Net loss (note 15)
-
-
(1,512)
-
(1,512)
Other comprehensive income (note 15)
-
-
(182)
-
(182)
Total comprehensive income for
the year ended
31 December 2020 (note 15)
-
-
(1,694)
-
(1,694)
Share capital decrease and capitalization of taxed
reserves (note 16)
(37)
-
(21)
-
(58)
Hybrid capital's redemption
and dividend paid, net of tax
-
-
(0)
(2)
(2)
(37)
-
(21)
(2)
(60)
Balance at 31 December 2020
816
8,056
(4,769)
-
4,103
Balance at 1 January 2021
816
8,056
(4,769)
-
4,103
Net profit
-
-
55
-
55
Other comprehensive income
-
-
(0)
-
(0)
Total comprehensive income for
the year ended
31 December 2021
-
-
55
-
55
Share-based payment:
- Value of employee services (note 18)
-
-
2
-
2
-
-
2
-
2
Balance at 31 December 2021
816
8,056
(4,712)
-
4,160
Note 16
Note 16
Note 17
Notes on pages 6 to 34 form an integral part of these
financial statements.
Cash Flow Statement
.
5
|
Page
31
December
2021
Financial
Statements
Year ended 31 December
2021
2020
Note
€ million
€ million
Cash flows from continuing operating activities
Profit/(loss) before income tax from continuing operations
55
(1,471)
Adjustments for :
Impairment losses relating to loans and advances to customers
8
-
1,508
Other impairment losses
11
(7)
7
Depreciation and amortisation
0
0
Other (income)/losses relating to investing activities
6.1
(54)
-
Other adjustments
1
(3)
(5)
41
Changes in operating assets and liabilities
Net (increase)/decrease in due from credit institutions
-
2
Net (increase)/decrease in loans and advances to customers
-
(24)
Net (increase)/decrease in other assets
(1)
(7)
Net increase/(decrease) in other liabilities
0
3
(1)
(26)
Net cash from/(used in) continuing operating activities
(6)
15
Cash flows from continuing investing activities
(Purchases)/sales and redemptions of investment securities
6.1
54
-
Acquisition of subsidiaries and participation in
capital increases
-
(1)
Net cash from/(used in) continuing investing activities
54
(1)
Net increase in cash and cash equivalents from continuing operations
48
14
Net cash flows from discontinued operating activities
-
(74)
Net cash flows from discontinued investing activities
-
(903)
Net cash flows from discontinued financing activities
-
(8)
Net increase/(decrease) in cash and cash equivalents from discontinued operations
-
(985)
Cash and cash equivalents of hived down banking sector on 20 March 2020
-
(1,788)
Cash and cash equivalents at beginning of year
14
2,773
Cash and cash equivalents at end of year
19
62
14
Notes on pages 6 to 34 form an integral part of these
financial statements.
Notes to the Financial Statements
.
6
|
Page
31
December
2021
Financial
Statements
1.
General information
Eurobank
Ergasias
Services and
Holdings S.A.
(the Company
or Eurobank
Holdings) is
the parent
company
of Eurobank
S.A. (the
Bank), which resulted from the demerger of
Eurobank Ergasias S.A. (“Demerged entity”) through
its banking sector’s hive down. In
particular, on 20 March 2020,
the demerger of
Eurobank Ergasias S.A. through
the banking sector’s hive
down and the
establishment
of
a new
company-credit
institution
(“Demerger”) under
the corporate
name
“Eurobank
S.A”
(“the
Beneficiary”) as
well
as
the
Articles of Association of the Beneficiary
were approved by
virtue of the decision of the Ministry
of Development and Investments
No 31847/20.03.2020, which was registered
on the same day in the General Commercial Registry.
At the aforementioned date
the
Demerged Entity became the shareholder of the
Beneficiary by acquiring all
the shares issued by the
Beneficiary and the Beneficiary
substituted
the
Demerged
Entity,
by
way
of
universal
succession,
to
all
the
transferred
assets
and
liabilities,
as
set
out
in
the
transformation balance sheet of the hived down sector as at 30 June 2019 and formed up to 20 March 2020, day of the Demerger’s
completion. In addition,
the corporate
name and the
distinctive title of
the Demerged Entity
was amended to
“Eurobank Ergasias
Services and Holdings S.A.” and “Eurobank
Holdings” respectively.
Eurobank S.A.
(the Bank), along
with its subsidiaries
(Eurobank S.A. Group),
comprise the major
part of Eurobank
Holdings Group
(the Group)
(note 12).
The Company
operates
mainly in
Greece and
through the
Bank’s
subsidiaries in
Central and
Southeastern
Europe. Its main
activities relate to
the strategic planning of
the administration of non-performing
loans and the
provision of services
to
its
subsidiaries
and
third
parties,
while
the
Eurobank
S.A.
Group
is
active
in
retail,
corporate
and
private
banking,
asset
management, treasury,
capital markets and other services.
The Company is incorporated
in Greece and its shares are
listed on the
Athens Stock Exchange.
These financial statements were approved
by the Board of Directors on 5 April 2022. The Ιndependent Auditor’s
Report is included
in section V of the Annual Financial Report.
2.
Basis of preparation and principal accounting policies
The
financial
statements
of
the
Company
have
been
prepared
on
a
going
concern
basis
and
in
accordance
with
the
principal
accounting policies set out below:
2.1
Basis of preparation
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS)
issued by the IASB, as endorsed by the European Union (EU), and in particular with those standards and interpretations, issued and
effective or issued and early adopted
as at the time of preparing these financial statements.
The financial statements are
prepared under the historical cost
basis except for the financial assets measured
at fair value through
other comprehensive income and financial assets and financial liabilities measured
at fair-value-through-profit
-or-loss.
The accounting policies for the preparation of the financial statements have been consistently
applied to the years 2021 and 2020,
after taking into account the amendments in IFRSs as described in section 2.1.1 “New and amended standards and interpretations”
and the
amendments in
the Company’s
accounting policies
as described
in section
2.1.2 “Other
accounting developments”.
The
comparative
information
has
been restated
due to
change in
accounting
policy
for
employee
benefits
(note
2.1.2).
In
addition,
where necessary, comparative
figures have been adjusted to
conform to changes in presentation
in the current year.
The
preparation
of
financial
statements
in
accordance
with
IFRS
requires
the
use
of
estimates
and
judgements
that
affect
the
reported amounts of
assets and liabilities and
disclosure of contingent
liabilities at the date
of the financial statements,
as well as
the reported amounts of
revenues and expenses during the
reporting period. Although these
estimates are based on management's
best knowledge of current events
and actions, actual results ultimately may differ
from those estimates.
The Company’s presentation currency is the Euro (€). Except as
indicated, financial information presented in Euro has been
rounded
to the nearest million. The figures presented
in the notes may not sum
precisely to the totals provided due to
rounding.
Going concern considerations
The
Company’s
business
strategy
and
activities
are
linked
to
those
of
its
banking
subsidiary
Eurobank
S.A.
In
this
context,
the
directors monitor closely the
capital and liquidity
position of the
Bank as well
as the associated
risks, uncertainties and the
mitigating
factors affecting
its operations. The annual
financial statements have
been prepared on a
going concern basis, as the
Board of the
Directors considered as appropriate,
taking into consideration the following:
Notes to the Financial Statements
.
7
|
Page
31
December
2021
Financial
Statements
2021 was a year of strong recovery,
as the Greek economy reclaimed most of its pandemic inflicted losses. The significant
progress
of vaccination programs allowed the gradual relaxation of containment measures and the reopening of the economy that led to the
strengthening
of consumption
and the
recovery
of the
tourism sector
providing
substantial boost
to real
GDP growth.
Based on
Hellenic Statistical
Authority’s
(ELSTAT)
provisional
data,
Greek real
GDP
increased
by
8.3%
in
2021 (9%
decrease
in
2020),
the
seasonally
adjusted
unemployment
rate
dropped
to
12.8%
in
December
2021
(December
2020:
16.3%),
while
the
inflation,
as
measured by
the 12-month
average Harmonized
Index of
Consumer Prices
(HICP), closed
at 0.6%
in 2021,
compared to
-1.3% in
2020. According to ELSTAT,
the HICP increased by 6.3% in February 2022 compared to -1.9% in February 2021 mainly reflecting the
current rise
in energy and
fuel costs.
The European
Commission (EC), in
its winter
economic forecasts
(February 2022),
estimates
the real
GDP growth
rate in
Greece at
4.9% and
3.5% in
2022 and
2023 respectively.
On the
fiscal front,
according to
2022 State
Budget, the general government’s
primary balance in European System of Accounts
(ESA2010) terms in 2021 and 2022 is expected
to register deficits of 7.0% and 1.4% of GDP respectively as a result of the implementation of public support measures
amounted to
€ 16.9
billion in
2021, and
€ 3.3 billion
in 2022
aiming to
address the
economic and
social effects
of the
Covid-19 pandemic.
The
gross public debt is estimated at 197.1% and 189.6% of GDP in
2021 and 2022 respectively (2020: primary deficit at 7.1% and public
debt at 206.3%). These forecasts take
into account the public support measures
aiming to alleviate the impact of increased energy
and fuel
costs in
2021 (€0.9
billion), but
not the
additional and
more encompassing
measures announced
in 2022
(an additional
€2.8 billion as of 17 March 2022). However,
since a large part of these measures will be covered
by funds earmarked especially for
this purpose as well as additional government proceeds, their fiscal impact will be significantly smaller than the above amount. The
deviation from the Enhanced Surveillance (ES) primary surplus target of 3.5% of GDP in 2021 and 2022 is not considered a violation
of Greece’s
commitments
under the
ES framework,
as in
March
2020 EC
activated
the general
escape clause,
allowing
for
non-
permanent deviations
from the
agreed fiscal
paths of
the member-states
due to
the extraordinary
health and
economic distress
caused by the pandemic. According to the 2 June 2021 EC press release, the clause shall remain in force in 2022, and is expected to
be deactivated in 2023. These
forecasts may change as a result of
the actual size of the
public sector’s support measures, the impact
of inflationary pressure on economic growth,
and the repercussions of the energy price hikes on public
finances.
In response
to the
Covid-19 outbreak,
on 21
July 2020,
the European
Council agreed
on a
recovery
package under
the EC’s
Next
Generation EU framework to support the recovery and resilience of the member
states' economies. In this context, on 13 July 2021,
the
Economic
and
Financial
Affairs
Council
(ECOFIN)
approved
the
Greek
National
Recovery
and
Resilience
Plan
(NRRP),
titled
“Greece 2.0”.
Greece shall receive European Union (EU) funds of more than €30.5 billion (€17.8 billion in grants and €12.7 billion in
loans) up to
2026 from the
Recovery and
Resilience Facility
(RRF) to
finance projects
and initiatives
laid down in
its NRRP.
A pre-
financing of € 4
billion was disbursed
in August 2021,
while on 28 February
2022 the EC preliminarily
endorsed
Greece’s payment
request
for
the
first
RRF
instalment,
amounting
to
€3.6
billion.
Greece
has
been
also
allocated
about
€40
billion
through
EU’s
Multiannual Financial Framework (MFF) 2021-2027. Furthermore, on
24 March 2020, the European Central Bank (ECB) established
a temporary Pandemic
Emergency Purchase Programme
(PEPP), with a financial envelope
of € 1,850 billion since
December 2020,
out of
which ca
€ 37
billion are
available
for
the purchase
of Greek
Government
Bonds (GGBs).
On 16
December 2021,
the ECB
announced that it would cease net bond purchases
under PEPP at the end of March 2022, as
scheduled. Reinvestment of principal
from
maturing
securities
will,
however,
continue
at
least
until
the
end
of
2024,
allowing
explicitly
for
the
purchase
of
Greek
Government Bonds (GGBs) over and above rollovers
of redemptions.
In 2021, the
Greek State
proceeded with the
issuance of six
bonds of various
maturities, (5-year,
10-year,
and 30-year)
drawing a
total of €14
billion from international
financial markets. More
recently,
on 19 January 2022,
the Public Debt
Management Agency
(PDMA) issued a 10-year bond of € 3 billion at a yield of 1.836%.
Regarding
the outlook
for the
next 12
months the
major macroeconomic
risks and
uncertainties in
Greece are
as follows:
(a) the
geopolitical conditions in the near or in broader region, especially the ongoing
Russian invasion in Ukraine, and its ramifications
on
the
regional
and
global
stability
and
security,
the
European
and
Greek
economy,
and
the
energy
sector
in
particular
(b)
a
prolongation and/or exacerbation
of the ongoing inflationary pressure, especially in the energy sector and the supply chain, and its
impact on economic growth,
employment, public finances, household
budgets, and firms’ production
costs, (c) further increase
in
the
interest
rates
worldwide,
and
in
the
Euro
Area
in
particular,
that
may
exert
upwards
pressures
on
sovereign
and
private
borrowing costs, (d) the actual size and duration
of the current and potentially new fiscal measures aimed at alleviating
the impact
of rising energy and food prices, and their impact on the long-term sustainability
of the country’s public debt, (e) the impact of the
withdrawal of the temporary support
measures on growth, employment
and the continual
service of
household and corporate debt,
(f) the prospect of the so-called “twin deficits” (i.e. fiscal and current account deficit) becoming more structural, although currently
they appear to be more a repercussion of the pandemic, (g) the absorption capacity of the NGEU and MFF funds and the attraction
Notes to the Financial Statements
.
8
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Financial
Statements
of new investments
in the country,
(h) the implementation
of the reforms
and privatizations’
agenda in order
to meet the
ES and
EC’s
Recovery
and
Resilience
Facility
(RRF)
targets
and
milestones,
(i)
the
evolution
of
the
health
crisis
and
the
probability
of
emergence of
new Covid-19
variants that
could adversely
impact economic recovery
and bring about
new movement
restrictions
and
fiscal
support
measures
and
(j)
the
exacerbation
of
natural
disasters
due
to
the
climate
change
and
their
effect
on
GDP,
employment and fiscal balance.
Materialization of
the above risks including
those related to
increased energy prices and
inflation, would have
potentially adverse
effects
on the
fiscal planning
of the
Greek government,
as it
could decelerate
the pace
of expected
growth
and on
the liquidity,
solvency and profitability of the Greek banking sector,
as well as on the realization of its NPE reduction plans. The Russian
invasion
in Ukraine
poses uncertainties
in global
economy and
international
trade with
far-reaching and
long-term consequences.
As the
events are still unfolding, any assessment of their impact is premature. However,
the risks coming from geopolitical upheaval could
be
potentially
mitigated
with
coordinated
measures
at the
European
level,
as per
the pandemic
precedent.
In this
context,
the
Group holds
non-significant exposure
in Russian assets
and is continuously
monitoring the
developments on
the macroeconomic
and geopolitical fron
ts and has increased
its level of readiness,
so as to
accommodate decisions, initiatives
and policies to protect
its capital
and liquidity standing
as well
as the fulfilment,
to the
maximum possible
degree, of
its strategic
and business
goals for
the quarters ahead, focusing primarily on the support of its clients to overcome the challenging juncture, the protection of its asset
and capital base and the resilience of its pre-provision
profitability.
As
at
31
December
2021,
following
the
completion
of
the
project
“Mexico”
(sale
of
95%
mezzanine
and
junior
“Mexico”
securitization
notes)
and
the
subsequent
derecognition
of
the
underlying
securitized
loan
portfolio
of
€
3.1
billion
(consisting
primarily of NPE)
(notes 20.1 of
the Group’s
consolidated financial statements
and 6.1), the
Group decreased
significantly its NPE
stock by € 2.9 billion to € 2.8
billion (31 December 2020: €
5.7 billion), driving the NPE ratio at 6.8% (31
December 2020: 14%), while
the NPE coverage
ratio stood at
69.2% (31 December 2020: 61.8%).
At the Group
level, the net profit
attributable to shareholders
for the year ended
31 December 2021
amounted to € 328
million, of which
€ 143 million
was related to the international operations.
The
adjusted
net profit,
excluding
the loss
of
€ 77
million
from
“Mexico”
project
and the
restructuring
costs
(after
tax)
of €
19
million, amounted to € 424 million (2020: € 538 million profit). The net profit for the company equals to € 55 million (2020: € 1,512
million loss). The Group’s Total
Capital Adequacy (total CAD) and Common Equity Tier 1 (CET1) ratios stood at 16.1% (31 December
2020: 16.3%) and
13.7% (31 December
2020: 13.9%) respectively
as at 31
December 2021. Pro
-forma with
the completion
of the
sale of Eurobank’s merchant
acquiring business, the total CAD and CET1 ratios would be 16.8% and 14.5% respectively.
In addition,
the Group completed successfully the 2021 SSM stress
test (ST), which was coordinated
and conducted by the ECB.
In terms
of liquidity,
as at
31 December
2021, the
Group deposits
have increased
by €
5.9 billion
to €
53.2 billion
(31 December
2020: € 47.3 billion),
while the funding
from the targeted
long term refinancing
operations of the
European Central
Bank – TLTRO
III programme
reached € 11.7
billion (31 December
2020: € 8 billion).
During the year,
in the context
of its medium-term
strategy
to meet its MREL
target, the Bank
proceeded with two
issues of preferred
senior debt with a nominal
value of € 500
million each,
in April and
September respectively.
The rise in
high quality
liquid assets
of the Group
led the respective
Liquidity Coverage
ratio
(LCR) to 152% (31 December 2020: 124%).
Going concern assessment
The Board of Directors, acknowledging
the geopolitical and macroeconomic
risks to the economy
and the banking
system and taking
into account
the above
factors
relating to
(a) the
strong recovery
of economic
activity in
2021 and
the prospects
for sustainable
growth
rates
in
Greece
onwards,
(b)
the Group’s
pre-provision
income
generating
capacity
and
the adequacy
of
its
capital
and
liquidity
position,
and
(c)
the
significant
improvement
of
the
Group’s
NPE
ratio
in
2021,
has
been
satisfied
that
the
financial
statements of the Company can
be prepared on a going concern basis.
2.1.1
New and amended standards and interpretations
New and amended standards adopted by the Company
as of 1 January 2021
The following
amendments to
standards
as issued
by the
International
Accounting Standards
Board
(IASB) and
endorsed by
the
European Union (EU), that are relevant
to the Company,
apply from 1 January 2021:
Notes to the Financial Statements
.
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Interest Rate Benchmark Reform
- Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
In August 2020,
the IASB issued “Interest
Rate Benchmark Reform:
Phase 2 Amendments
to IFRS 9, IAS
39, IFRS 7, IFRS
4 and IFRS
16”,
which addresses
the issues that
affect financial
reporting once
an existing
rate is
replaced with
an RFR and
provides specific
disclosure requirements.
The Phase 2
amendments provide
key reliefs
related to
the contractual
modifications due to
the reform
and
the
hedging
designations
affected
by
the
reform.
In
addition,
Phase
2
amendments
introduce
additional
disclosure
requirements,
to enable
users of
financial statements
to understand
the effect
of interest
rate benchmark
reform on
an entity’s
financial instruments and risk management strategy.
The adoption of the amendments had no material impact on the financial statements.
New standards, amendments to standards
and interpretations not yet adopted
by the Company
A number of amendments to
existing standards are effective after 2021, as they
have not yet been endorsed by
the European Union
(EU), or have not been early applied by the Company.
Those that may be relevant to the
Company are set out below:
IFRS 3, Amendments,
Reference to the Conceptual Framework
(effective 1 January 2022)
The amendments to IFRS 3 “Business Combinations” updated
the reference to the current
version of Conceptual Framework while
added a requirement
that, for obligations
within the scope of IAS
37 “Provisions, Contingent
Liabilities and Contingent
Assets”,
an
acquirer applies IAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy
that would be within the
scope of IFRIC
21 Levies, the acquirer applies
IFRIC 21 to determine whether the
obligating event that gives
rise to a liability to pay the levy has occurred by
the acquisition date.
In addition, the issued amendments added a new paragraph to IFRS 3 to clarify
that contingent assets do not qualify for recognition
in a business combination at the acquisition date.
The adoption of the amendments is not expected to impact the financial statements.
Annual improvement to IFRSs 2018-2020 cycle: IFRS1,
IFRS9 and IFRS 16 (effective 1 January 2022)
The improvements
introduce changes to
several standards.
The amendments that
are relevant to
the Company’s
activities are set
out below:
The
amendments
to
IFRS
1
“First-time
Adoption
of
International
Financial
Reporting
Standards”
provides
additional
relief
to
a
subsidiary which becomes a first-time adopter
later than its parent in respect of accounting
for cumulative translation
differences.
As a
result, the
amendments allow
entities that
have measured
their assets
and liabilities
at carrying
amounts recorded
in their
parent’s books to also measure any cumulative translation
differences using the amounts reported by the parent. This amendment
will also apply to associates and joint ventures
that have taken the same IFRS 1 exemption.
The
amendment
to
IFRS
9
“Financial
Instruments”
clarifies
which
fees
should
be
included
in
the
10%
test
for
derecognition
of
financial liabilities, The fees to be included in
the assessment are only those paid or
received between the borrower (entity) and the
lender,
including
fees
paid
or
received
by
either
the
borrower
or
lender
on
the
other’s
behalf.
The
amendment
is
applied
prospectively to modifications and exchanges
that occur on or after the date the entity first
applies the amendment.
The amendment to
IFRS 16 “Leases”
removes the illustration
of the reimbursement
of leasehold improvements,
in order to
avoid
any potential confusion about the treatment
of lease incentives.
The adoption of the amendments is not expected to impact the financial statements.
IAS 37, Amendment, Onerous Contracts – Costs of Fulfilling a
Contract (effective 1 January 2022)
The
amendment
to
IAS
37
‘Provisions,
Contingent
Liabilities
and
Contingent
Assets’
clarifies
that
the
direct
costs
of
fulfilling
a
contract include both the incremental costs and an allocation
of other costs directly related to fulfilling contracts’ activities. General
and
administrative
costs
do
not
relate
directly
to
a
contract
and
are
excluded
unless
they
are
explicitly
chargeable
to
the
counterparty under the contract.
The adoption of the amendment is not expected to impact the financial statements.
Notes to the Financial Statements
.
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IAS 8, Amendments, Definition of Accounting Estimates (effective
1 January 2023)
The amendments in IAS
8 “Accounting Policies, Changes in Accounting Estimates and
Errors” introduced the definition of accounting
estimates and include other
amendments to IAS 8 which
are intended to help
entities distinguish changes in
accounting estimates
from changes in accounting policies.
The amendments clarify (a) how accounting policies and accounting estimates relate to each other by (i) explaining that accounting
estimates are used in applying accounting policies and (ii) making the definition of
accounting policies clearer and more concise, (b)
that selecting an estimation technique, or valuation technique, used when an item in the financial statements cannot
be measured
with precision, constitutes making an accounting estimate,
and (c) that, in applying IAS 2 Inventories, selecting the first-in, first-out
(FIFO) cost formula or the
weighted average cost formula for interchangeable inventories constitutes selecting an accounting policy.
The adoption of the amendments is not expected to impact the financial statements.
Amendments
to
IAS 1
Presentation
of
Financial
Statements
and IFRS
Practice
Statement
2:
Disclosure
of
Accounting
policies
(effective 1 January 2023)
IASB issued amendments to IAS 1 “Presentation
of Financial Statements” that require
entities to disclose their material accounting
policies rather than their significant accounting policies.
According
to IASB,
accounting policy
information
is material
if,
when considered
together
with other
information
included in
an
entity’s financial statements, it can
reasonably be expected to
influence decisions that
the primary users
of general purpose financial
statements make on the
basis of those financial statements.
Furthermore, the amendments clarify how an entity can identify material accounting policy information, while provide examples of
when accounting policy information is likely to be material. The amendments
to IAS 1 also clarify that immaterial accounting policy
information
need not
be disclosed.
However,
if it
is disclosed,
it
should not
obscure
material
accounting
policy
information.
To
support these
amendments the
Board has
also developed
guidance and
examples to
explain and
demonstrate
the application
of
the
‘four-step
materiality
process’
described
in
IFRS
Practice
Statement
2
Making
Materiality
Judgements
to
accounting
policy
disclosures, in order to support the amendments to
IAS 1.
The adoption of the amendments is not expected to impact the financial statements.
IAS 1, Amendments, Classification of Liabilities as Current or Non-Current
(effective 1 January 2023, not yet endorsed by EU)
The amendments, published in
January 2020, affect only
the presentation of liabilities in
the balance sheet and
provide clarifications
over the
definition of
the right
to defer
the settlement
of a
liability,
while they
make
clear that
the classification
of liabilities
as
current or non-current
should be based on rights
that are in existence
at the end of the
reporting period. In addition,
it is clarified
that the
assessment for
liabilities classification
made at the
end of the
reporting period
is not affected
by the expectations
about
whether an entity
will exercise its
right to defer
settlement of a liability.
The Board also clarified
that when classifying liabilities
as
current or non-current, an entity can ignore
only those conversion options that are
recognised as equity.
The adoption of the amendments is not expected to impact the financial statements.
IAS 12, Amendments,
Deferred Tax
related to
Assets and Liabilities
arising from a
Single Transaction
(effective 1
January 2023,
not yet endorsed by EU)
The amendments clarify that the initial recognition exemption set out in IAS 12 ‘Income Taxes’ does not apply for transactions such
as
leases
and
decommissioning
obligations
that,
on
initial
recognition,
give
rise
to
equal
amount
of
taxable
and
deductible
temporary
differences.
Accordingly,
for
such
transactions
an
entity
is
required
to
recognise
the
related
deferred
tax
asset
and
liability, with the recognition
of any deferred tax
asset being subject to the recoverability
criteria in IAS 12. The amendments apply
to transactions that occur on or after the beginning
of the earliest comparative period presented.
The adoption of the amendments is not expected to impact the financial statements.
Notes to the Financial Statements
.
11
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Financial
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2.1.2 Other accounting developments
IFRIC agenda decision - Attributing Benefit to
Periods of Service (IAS 19)
In
May
2021, an
IFRIC agenda
decision
was
published
that
concludes
about
the
periods
of
service over
which
an
entity
should
attribute
benefits
under
a
specific retirement
defined
benefit
plan
based
on
the
existing
requirements
of
IAS
19.
In
particular,
according to the above
decision, the attribution of the benefit
shall not begin from the start
of the employment date but
from the
date when
the employee service
first leads
to benefits
under the terms
of the plan
until the date
when further employee
service
will lead to no material amount of further benefits.
The
Company
implemented
the
above
agenda
decision
in
the
fourth
quarter
of
2021
by
amending
its
accounting
policy
for
‘Employee
benefits’
(note
2.2.14)
and
accounted
for
any
resulting
adjustments
retrospectively,
in
accordance
with
IAS
8
‘’Accounting
Policies, Changes in Accounting Estimates and Errors’’.
The adjustments performed due to the retrospective
application of the IFRIC agenda decision are presented
in note 15.
2.2
Principal accounting policies
2.2.1
Investments in subsidiaries
Investments
in subsidiaries, including
investments acquired
through common
control transactions,
are accounted
at cost
less any
impairment losses. Cost is
the fair value of
the consideration given
being the amount of
cash or shares issued,
or if that cannot be
determined reliably,
the consideration received together
with any directly attributable costs.
As an exception to the above measurement basis, when the Company transfers an existing Group entity or business sector to a
new
subsidiary
formed
for
this
purpose
in
a
share
for
share
exchange
that
does
not
have
commercial
substance,
the
Company’s
investment in that newly formed
subsidiary is recognized at the carrying amount
of the transferred entity.
A listing of the Company’s subsidiaries is set
out in note 12.
2.2.2 Foreign currencies
Foreign currency
transactions
are translated
into the
functional currency
using the
exchange
rates
prevailing
at the
dates of
the
transactions.
Foreign exchange
gains and
losses resulting
from the
settlement of
such transactions
are recognized
in the
income
statement.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency
at the exchange rates
prevailing at each reporting date and
exchange differences are
recognized in the income statement.
Non-monetary assets and liabilities are
translated into the functional currency at the
exchange rates prevailing at initial recognition.
2.2.3 Income statement
(i) Interest income and expense
Interest income and expense is recognized in
the income statement for all interest bearing financial
instruments on an accrual basis,
using the
effective
interest
rate (EIR)
method. The
effective
interest
rate is
the rate
that exactly
discounts estimated
future cash
payments
or receipts
through
the
expected
life
of
the
financial instrument
or,
when
appropriate,
a shorter
period to
the
gross
carrying
amount
of
the
financial
asset
or
to
the
amortized
cost
of
a
financial
liability.
When
calculating
the
EIR
for
financial
instruments, the Company estimates cash flows considering
all contractual terms of the financial instrument but does not consider
expected credit losses.
The EIR calculation
includes all fees
and points paid
or received that
are an integral
part of the effective
interest rate,
transaction
costs,
and
all
other
premiums
or
discounts.
Transaction
costs
include
incremental
costs
that
are
directly
attributable
to
the
acquisition or issue of a financial asset or liability.
The amortized
cost of
a financial
asset or
liability is
the amount
at which
it is
measured upon
initial recognition
minus principal
repayments, plus or minus cumulative amortization
using the EIR (as described above) and for financial assets it is adjusted
for the
expected
credit
loss
allowance.
The
gross
carrying
amount
of
a
financial
asset
is
its
amortized
cost
before
adjusting
for
ECL
allowance.
Notes to the Financial Statements
.
12
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2021
Financial
Statements
The Company
calculates interest
income and
expense by
applying the EIR
to the
gross carrying
amount of
non-impaired financial
assets (exposures in Stage 1 and 2) and to the
amortized cost of financial liabilities respectively.
For
financial
assets
that
have
become
credit-impaired
subsequent
to
initial
recognition
(exposures
in
Stage
3),
the
Company
calculates
interest
income by
applying the
effective
interest
rate
to the
amortized
cost
of the
financial asset
(i.e. gross
carrying
amount adjusted
for the expected
credit loss allowance).
If the asset is
no longer credit
-impaired, then the
EIR is applied again
to
the gross carrying amount.
Interest income
and expense is
presented separately
in the income statement
for all interest
bearing financial instruments
within
net interest income.
(ii) Fees and commissions
Fee and
commission received
or paid
that
are integral
to the
effective
interest
rate
on a
financial asset
or financial
liability are
included in the effective interest
rate.
Other fee and commission income is recognised over time as the related services are being provided to the customer, to the extent
that it
is highly
probable that
a significant
reversal
of the
revenue
amount recognized
will not
occur.
Transaction-based
fees are
recognised at the point in time when the transaction
takes place.
2.2.4 Property and equipment
Property
and
equipment
are
stated
at
cost
less
accumulated
depreciation
and
accumulated
impairment
losses.
Cost
includes
expenditure that is directly attributable to the acquisition of the asset. Subsequent expenditure is recognized in the asset's carrying
amount only when it is probable that future economic benefits will flow to the Company and the cost of the asset can be measured
reliably. All other repair and maintenance costs are
recognized in the income statement as incurred.
Depreciation is calculated using
the straight-line method to write down the cost of property and equipment, to their residual values over their estimated useful life.
2.2.5 Computer software
Costs
associated
with
the
maintenance
of
existing
computer
software
programs
are
expensed
as
incurred.
Development
costs
associated with the production of
identifiable assets controlled by
the Company are recognized
as intangible assets when they are
expected
to
generate
economic
benefits
and
can
be
measured
reliably.
Internally
generated
computer
software
assets
are
amortized using the straight-line method.
2.2.6 Impairment of subsidiaries
The Company assesses as
at each reporting
balance sheet date whether
there is any indication
that its investments
in subsidiaries
may be impaired by considering both external and internal sources of information,
such as the net assets compared to the carrying
value
of
each
entity,
as
well
as
forward
looking
developments
and/or
economy
sector
in
which
they
operate.
In
addition,
the
collection of dividends from
subsidiaries is also a potential
trigger that may indicate
that the respective investments
are impaired.
In particular,
when dividend
is received
from the
Company’s
subsidiaries, it
is also
examined whether
that dividend
exceeds
the
total
comprehensive
income
of
the
subsidiary
in
the
period
the
dividend
is
declared,
to
determine
whether
an
indication
of
impairment exists.
If any
indication of
impairment exists
at each
reporting date,
the Company
estimates the
recoverable
amount of
the investment,
being the higher of its fair value less costs to sell and
its value in use.
An impairment loss is recognized in profit
or loss when the recoverable amount of the investment
is less than its carrying amount.
Investments
in
subsidiaries
for
which
an
impairment
loss
was
recognized
in
prior
reporting
periods,
are
reviewed
for
possible
reversal of such impairment at each reporting
date.
2.2.7 Impairment of non-financial assets
Non-financial assets
are assessed
for indications
of impairment
at each
reporting date
by considering
both external
and internal
sources of information such as a significant reduction in the asset’s value and evidence that the economic performance of the asset
is
or
will
be
worse
than
expected.
When
events
or
changes
in
circumstances
indicate
that
the
carrying
amount
may
not
be
recoverable, an impairment loss is recognized for the
amount by which the
asset’s carrying amount exceeds its recoverable amount.
Notes to the Financial Statements
.
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Financial
Statements
The
recoverable
amount
is the
higher
of
an
asset’s
fair
value
less
costs
to
sell
and
value
in
use.
For
the
purposes
of
assessing
impairment, assets are
grouped at the lowest
levels for which there
are separately identifiable
cash flows, where
applicable. Non-
financial assets for
which an impairment
loss was recognized
in prior reporting
periods, are reviewed
for possible reversal
of such
impairment at each reporting date.
2.2.8 Financial assets
Financial assets - Classification and measurement
The Company
classifies financial
assets based
on the
business model
for
managing those
assets and
their contractual
cash flow
characteristics.
Accordingly,
financial assets
are classified
into one
of the
following measurement
categories: amortized
cost, fair
value through other comprehensive income (FVOCI)
or fair value through profit
or loss (FVTPL).
Financial Assets measured at Amortized Cost (‘AC’)
The Company classifies and
measures a financial asset at
AC only if both of the
following conditions are
met and is not designated
as at FVTPL:
(a) The financial asset is held within
a business model whose objective is
to collect contractual
cash flows (hold-to-collect business
model) and
(b) The contractual
terms of the financial
asset give rise on
specified dates to
cash flows that
are solely payments
of principal and
interest on the principal amount outstanding
(SPPI).
These financial assets
are recognized initially at
fair value plus
or minus direct
and incremental transaction costs
that are attributable
to the acquisition of these assets, and are subsequently
measured at amortized cost, using the effective
interest rate
(EIR) method
(as described in 2.2.3 above).
Interest income,
realized gains and
losses on derecognition, and changes
in expected credit losses from
assets classified at AC, are
included in the income statement.
Equity Instruments designated at FVOCI
The Company may make an irrevocable election to designate an equity instrument at FVOCI. This designation, if elected, is made at
initial recognition and on an instrument by instrument
basis. Gains and losses on these instruments, including when derecognized,
are recorded in OCI and are not subsequently reclassified
to the income statement. Dividends received
are recorded in the income
statement.
Financial Assets measured at Fair Value through Profit
and Loss (“FVTPL”)
The Company
classifies and
measures all
other financial
assets that
are not
classified at
AC or
FVOCI, at
FVTPL. Accordingly,
this
measurement category
includes financial instruments
that are held
within the hold–to
-collect (HTC)
but fail
the SPPI assessment,
equities
that
are
not
designated
at
FVOCI
and
financial
assets
held
for
trading.
Financial
assets
measured
at
FVTPL
are
initially
recorded at fair value and
any unrealized gains or losses arising due to
changes in fair value are included in the income statement.
Business model and contractual characteristics assessment
The business model assessment determines how the Company
manages a group of assets to generate
cash flows. That is, whether
the Company's
objective is solely
to collect contractual
cash flows from
the asset, to
realize cash
flows from the
sale of assets,
or
both to
collect contractual
cash flows
and cash
flows from
the sale of
assets. In addition,
the business
model is determined
after
aggregating the financial
assets into
groups (business lines)
which are managed
similarly rather
than at an
individual instrument’s
level.
The business model
is determined by
the Company’s key management personnel consistently with the
operating model, considering
how
financial
assets
are
managed
in
order
to
generate
cash
flows,
the
objectives
and
how
performance
of
each
portfolio
is
monitored and reported and any avai
lable information on past sales and on future sales’ strategy,
where applicable.
Accordingly, in making the above assessment, the Company will consider a number of
factors including the risks associated with the
performance of the business model and how those risks are evaluated and managed, the related personnel
compensation, and the
frequency, volume
and reasons of past sales, as well as expectations about future
sales activity.
Notes to the Financial Statements
.
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Types of business models
The Company’s
business models fall into two categories,
which are indicative of the key strategies
used to generate returns.
The hold-to-collect
(HTC) business
model has
the objective
to hold
the financial
assets in
order to
collect contractual
cash flows.
Sales within this model
are monitored and may be
performed for reasons which are not
inconsistent with this business model.
More
specifically, sales of financial assets due to credit deterioration, as well
as, sales close to the
maturity are considered consistent with
the objective of hold-to-collect contractual cash flows regardless of value and frequency.
Sales for other reasons may be consistent
with the HTC
model such as liquidity
needs in any
stress case scenario
or sales made to
manage high concentration
level of credit
risk. Such sales
are monitored
and assessed depending
on frequency and
value to
conclude whether they
are consistent
with the
HTC
model.
Other
business
models
include
financial
assets
which
are
managed
and
evaluated
on
a
fair
value
basis
as
well
as
portfolios that
are held
for trading.
The Company’s
business models are
reassessed at
least annually
or earlier,
if there is
a sales’
assessment trigger or if there are any changes in the Company
’s strategy
and main activities.
Cash flow characteristics assessment
For a financial instrument to be measured at AC, its contractual terms must give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on
the principal amount outstanding.
In
assessing
whether
the
contractual
cash
flows
are
SPPI,
the
Company
will
consider
whether
the
contractual
terms
of
the
instrument are
consistent with
a basic lending
arrangement i.e.
interest includes
only consideration
for the time
value of money,
credit risk, other
basic lending risks and
a profit margin. On
the initial recognition
of a financial asset,
an assessment is performed
of whether
the financial
asset contains
a contractual
term that
could change
the amount
or timing of
contractual cash
flows in
a
way that it would
not be consistent with
the above condition. Where the
contractual terms introduce
exposure to risk or
volatility
that are inconsistent with
a basic lending arrangement, the related
financial asset is considered to have failed
the SPPI assessment
and will be measured at FVTPL.
For
the
purpose
of
the
SPPI
assessment,
the
Company
considers
the
existence
of
various
features,
including
among
others,
contractually linked terms, prepayment terms, deferred interest-free payments, extension and equity conversion options and
terms
that
introduce
leverage
including
index
linked
payments.
In
addition,
for
the
purposes
of
the
SPPI
assessment,
if
a
contractual
feature could have an effect that is
de-minimis on the
contractual cash flows of the
financial asset, it does
not affect its classification.
Moreover,
a contractual feature
is considered as not
genuine by the Company,
if it affects the instrument’s
contractual cash flows
only on
the occurrence
of an
event that
is extremely
rare, highly
abnormal and
very unlikely
to occur.
In such
a case,
it does not
affect the instrument’s
classification.
Derecognition of financial assets
The Company
derecognizes
a financial
asset when
its contractual
cash flows
expire, or
the rights
to receive
those cash
flows are
transferred in an outright sale
in which substantially all
risks and rewards of
ownership have been transferred. In addition,
a financial
asset is derecognized
even if rights to
receive cash flows are
retained but at the
same time the Company assumes an
obligation to
pay the received cash
flows without a material
delay (pass through agreement)
or when substantially
all the risks and rewards
are
neither transferred
nor retained
but the
Company has
transferred
control
of the
asset. Control
is transferred
if,
and only
if,
the
transferee
has
the
practical
ability
to
sell
the
asset
in
its
entirety
to
unrelated
third
party
and
is
able
to
exercise
that
ability
unilaterally and without imposing additional restrictions
on the transfer.
On
derecognition
of
a financial
asset,
the difference
between
the
carrying
amount
of
the asset
and the
consideration
received
(including any new asset obtained less any
new liability assumed) is recognized in income statement.
Modification of financial assets that may result in derecognition
In addition, derecognition of
financial asset arises when its contractual
cash flows are modified and
the modification is considered
substantial enough so that the original asset is derecognized and a new one is recognised. The Company records the modified asset
as a
‘new’ financial asset
at fair
value and
the difference
with the
carrying amount
of the
existing one
is recorded
in the
income
statement as derecognition
gain or loss.
Notes to the Financial Statements
.
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2.2.9 Reclassifications of financial assets
The Company reclassifies a
financial asset only
when it changes
its business model
for managing financial assets.
Generally, a change
in the business
model is expected
to be rare
and occurs
when the Company
either begins or
ceases to perform
an activity that
is
significant to
its operations.
In the
rare event
when there
is a
change to
the existing
business model,
the updated
assessment is
approved by
the Company’s
competent Committees
and the amendment
is reflected
appropriately in
the Company’s
budget and
business plan.
Changes in
intention related
to particular
financial assets
(even in
circumstances of
significant changes
in market
conditions) and
the temporary
disappearance of a
particular market
for financial assets
, are not
considered by the
Company changes in
business
model.
The reclassification
is applied prospectively
from the reclassification
date, therefore
previously recognized
gains, losses (including
impairment losses) or interest are not restated.
2.2.10 Financial liabilities
Financial liabilities - Classification and measurement
The Company classifies its financial liabilities at amortized cost
category.
These
financial
liabilities
are
recognized
initially
at
fair
value
minus
transaction
costs
that
are
attributable
to
the
issue of
these
liabilities, and
are subsequently
measured at
amortized cost,
using the
effective interest
rate (EIR)
method (as
described in
2.2.3
above).
Derecognition of financial liabilities
A
financial
liability is
derecognized
when
the obligation
under
the liability
is discharged,
cancelled
or
expires.
When
an existing
financial liability of the Company is replaced by another
from the same counterparty on substantially
different terms, or the terms
of an existing
liability are substantially
modified, such an
exchange or
modification is treated
as an extinguishment
of the original
liability and the recognition of a new liability and any difference
arising is recognized in the income statement.
The Company
considers the
terms to
be substantially
different,
if the
discounted present
value of
the cash
flows under
the new
terms,
including any
fees
paid net
of any
fees
received
and discou
nted
using the
original effective
interest
rate,
is at
least 10%
different from the discounted
present value of the remaining cash flows
of the original financial liability.
If an exchange
of debt instruments
or modification of
terms is accounted
for as an
extinguishment, any
costs or fees
incurred are
recognized
as
part
of
the
gain
or
loss
on
the
extinguishment.
If
the
exchange
or
modification
is
not
accounted
for
as
an
extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortized
over the remaining term of
the modified liability.
Similarly,
when the
Company
repurchases
any
debt instruments
issued by
the Company,
it accounts
for
such transactions
as an
extinguishment of debt.
2.2.11 Fair value measurement of financial instruments
Fair
value of
financial instruments
is the
price that
would be
received to
sell an
asset or
paid to
transfer
a liability
in an
orderly
transaction
between
market
participants
at
the
measurement
date
under
current
market
conditions
in
the
principal
or,
in
its
absence, the most advantageous
market to which the Company
has access at that date. The fair
value of a liability reflects its non-
performance risk.
When
available,
the
Company
measures
the
fair
value
of
an
instrument
using
the
quoted
price
in
an
active
market
for
that
instrument. A market
is regarded as
active if transactions
for the asset
or liability take
place with sufficient
frequency and volume
to provide
pricing information
on an ongoing
basis. If there
is no quoted
price in an
active market,
then the Company
uses other
valuation techniques that maximize the use of relevant observable inputs and minimize the use of
unobservable inputs. The chosen
valuation technique incorporates
all of the factors that market
participants would take into
account in pricing a transaction.
The Company has elected to use mid-market pricing
as a practical expedient for fair
value measurements within a bid-ask spread.
Notes to the Financial Statements
.
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Financial
Statements
The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price, i.e. the fair value
of the
consideration
given or
received
unless the
Company
determines
that
the fair
value
at
initial recognition
differs
from the
transaction price.
In this case,
if the fair
value is
evidenced by
a quoted
price in an
active market
for an
identical asset
or liability
(i.e.
Level
1
input)
or
based
on
a
valuation
technique
that
uses
only
data
from
observable
markets,
a
day
one
gain
or
loss
is
recognized
in
the
income
statement.
On
the
other
hand,
if
the
fair
value
is
evidenced
by
a
valuation
technique
that
uses
unobservable inputs,
the financial instrument
is initially measured
at fair
value, adjusted
to defer
the difference
between the fair
value at initial
recognition and the
transaction price (day
one gain or
loss). Subsequently the deferred
gain or loss
is amortized on
an appropriate
basis over the
life of the
instrument or released
earlier if a quoted
price in an
active market
or observable market
data become available or the financial instrument
is closed out.
All assets and liabilities for which fair value is
measured or disclosed in the financial
statements are categorized within the fair value
hierarchy based on the lowest
level input that is significant to the fair value
measurement as a whole.
For assets and liabilities that
are measured at fair
value on a recurring basis,
the Company recognizes
transfers
into and out of the
fair value hierarchy
levels at the beginning of the quarter in which a financial instrument's transfer
was effected.
2.2.12 Impairment of financial assets
The Company recognizes allowance
for expected credit losses (ECL)
that reflect changes in credit quality since initial
recognition to
financial assets
that are
measured at
AC. ECL
are a
probability-weighted
average
estimate
of credit
losses that
reflects the
time
value of money.
Upon initial recognition
of the financial instruments,
the Company records
a loss allowance equal
to 12-month ECL,
being the ECL
that result from default events
that are possible within the next twelve months.
Subsequently, for
those financial instruments that
have
experienced
a
significant
increase
in
credit
risk
(SICR)
since
initial
recognition,
a
loss
allowance
equal
to
lifetime
ECL
is
recognized, arising from default
events that are possible over the expected
life of the instrument.
Loss allowances for
receivables presented
under Other Assets are
always measured
at an amount
equal to lifetime
ECL under the
simplified approach. For all other financial assets subject to impairment,
the general three-stage approach
applies.
Accordingly,
ECL are recognized using a three
-stage approach based on the extent
of credit deterioration since origination:
•
Stage 1 – When there is no significant increase in credit risk since initial recognition of a financial instrument, an amount equal
to 12-months ECL
is recorded. The
12 – month ECL
represent a portion
of lifetime losses,
that result from
default events
that
are possible within the next 12 months after the reporting date and is equal to the expected cash shortfalls
over the life of the
instrument or group of
instruments, due to loss
events probable within the
next 12 months. Not
credit-impaired financial assets
that are either newly originated or purchased, as well
as, assets recognized following a substantial
modification accounted for
as a derecognition, are classified initially in Stage 1.
•
Stage 2 – When a financial instrument experiences a SICR subsequent to
origination but is not considered to be in default, it is
included
in
Stage
2. Lifetime
ECL
represent
the expected
credit
losses
that
result
from
all possible
default
events
over
the
expected life of the financial instrument.
•
Stage 3 – Financial instruments that are considered to be in default are included in this stage. Similar to Stage 2, the allowance
for credit losses captures the lifetime
expected credit losses.
A financial asset is credit-impaired when one or more
events that have a detrimental
impact on the estimated future cash flows
of
that exposure have occurred:
•
The borrower faces a significant difficulty
in meeting his financial obligations.
•
There has been a breach of contract,
such as a default or past due event.
•
The Company,
for economic or contractual
reasons relating to the borrower’s
financial difficulty, has
granted to the borrower
a concession(s) that the Company would not otherwise consider.
•
There is a probability that the borrower
will enter bankruptcy or other financial re-organization.
For investment securities, the Company determines
the risk of default using an internal credit rating
scale. The Company considers
debt securities as credit
impaired if the internal
rating of the issuer/counterparty corresponds to a
rating equivalent to "C" (Moody's
rating scale) or
the external rating
of the issuer/counterparty
at the reporting date
is equivalent to
“C” (Moody’s rating scale)
and
the internal rating is not available.
Notes to the Financial Statements
.
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Financial
Statements
Significant increase in credit risk (SICR) and staging allocation
Determining
whether
a
loss
allowance
should
be
based
on
12-month
expected
credit
losses
or
lifetime
expected
credit
losses
depends on whether there has been a significant increase in credit
risk (SICR) of the financial assets since initial recognition.
At
each reporting
date,
the Company
performs
an assessment
as to
whether
the risk
of a
default
occurring over
the remaining
expected lifetime
of the
exposure has
increased significantly
from the
expected risk
of a default
estimated at
origination for
that
point in time.
Specifically,
the assessment of
SICR for investment
securities is performed
on an individual basis
based on the number
of notches
downgrade in the internal credit rating scale since the
origination date.
Transfers from Stage
2 to Stage 1
A financial asset, which is classified to Stage 2 due to Significant Increase
in Credit Risk (SICR), is reclassified to Stage 1, as long as it
does not meet anymore any of the Stage
2 Criteria.
Transfers from Stage
3 to Stage 2
A financial asset
is transferred
from Stage
3 to Stage
2, when the
criteria based on
which the financial
asset was
characterized as
credit impaired,
are no longer valid.
Measurement of Expected Credit Losses
The ECL calculations are
based on the
term structures of
the probability of
default (PD), the
loss given default
(LGD) and the
exposure
at
default
(EAD). Generally,
these parameters
are
based on
observed
point-in-time and
historical
data,
derived
by international
rating agencies.
For investment
securities, PDs
are obtained
by an
international rating
agency using
risk methodologies
that maximize
the use
of
objective non-judgmental variables and market data. The
Company assigns internal credit ratings to
each issuer/counterparty based
on these
PDs. In
case of
counterparties
for
which no
information
is available,
the Company
assigns PDs
which are
derived from
internal models.
The Exposure at default
(EAD) is an estimate
of the exposure at a
future default date,
taking into account
expected changes in the
exposure after the reporting date.
For investment securities, the LGD is typically based on historical data
derived mainly from rating agencies’ studies but may also be
determined considering the existing and expected
liabilities structure of the obligor and macroeconomic environment.
Furthermore, the seniority
of the debt security,
any potential collaterals
by the obligor or
any other type of
coverage is taken
into
account for the calculation.
Presentation of impairment allowance
For financial assets measured at amortized cost, impairment allowance is recognized as a
loss allowance reducing the gross carrying
amount of the financial assets in the balance sheet.. The respective ECL
is recognised within impairment losses.
Write-off of financial assets
Where the Company has no reasonable expectations of recovering
a financial asset either in its entirety or a portion of it, the gross
carrying amount of that
instrument is reduced directly,
partially or in full, against
the impairment allowance. The
amount written-
off is considered as derecognized. Subsequent recoveries of amounts
previously written off decrease the amount of
the impairment
losses in the income statement.
2.2.13 Income tax
Income tax consists of current and
deferred tax.
(i) Current income tax
Income tax payable on profits, based
on the applicable tax law,
is recognized as an expense in the period in which profits
arise.
Notes to the Financial Statements
.
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Financial
Statements
(ii) Deferred tax
Deferred
tax is
provided
in full,
using the
liability method,
on temporary
differences
arising between
the tax
base of
assets and
liabilities and
their carrying
amounts in
the financial
statements.
Deferred
tax assets
and liabilities are
measured at
the tax
rates
that are expected
to apply to the
period when the asset
is realized or
the liability is settled,
based on tax
rates (and tax
laws) that
have been enacted or substantively enacted
by the balance sheet date.
Deferred
tax
assets are
recognized
where
it is
probable
that
future taxable
profit
will be
available
against
which the
temporary
differences can be utilized. 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 profits will be available to allow all or part of the
asset to be recovered. Any such
reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available. The Company recognises
a previously
unrecognised
deferred
tax asset
to the
extent
that it
has become
probable
that future
taxable
profit will
allow the
deferred tax asset to be recovered.
The deferred tax asset on income tax losses
carried forward is recognized as an asset when it
is
probable that future taxable
profits will be available against which
these losses can be utilized.
(iii) Uncertain tax positions
The Company determines and assesses all material tax positions taken,
including all, if any, significant uncertain positions,
in all tax
years that are still subject
to assessment (or when
the litigation is in
progress) by relevant tax authorities. In
evaluating tax positions,
the
Company
examines
all
supporting
evidence
(Ministry
of
Finance
circulars,
individual
rulings,
case
law,
past
administrative
practices, ad hoc tax/legal opinions
etc.) to the
extent they are applicable
to the facts and
circumstances of the particular
Company’s
case/ transaction.
In addition, judgments concerning the recognition of a provision against the possibility of
losing some of the tax positions are highly
dependent on advice received from internal/
external legal counselors. For
uncertain tax positions with a high level of uncertainty,
the Company recognizes, on a
transaction by transaction basis,
or together as a
group, depending on
which approach better predicts
the
resolution
of
the
uncertainty
using
an
expected
value
(probability-weighted
average)
approach:
(a)
a
provision
against
tax
receivable which has been booked
for the amount of income tax
already paid but further pursued
in courts or (b) a liability for
the
amount which is expected to be paid to the tax authorities. The Company presents in its balance sheet all uncertain tax balances as
current or deferred tax
assets or liabilities.
The Company as a general rule has opted to obtain
an ‘Annual Tax
Certificate’,
which is issued after a tax audit is performed by the
same statutory
auditor or audit firm
that audits the
annual financial statements.
Further information
in respect of the
Annual Tax
Certificate and the related tax
legislation, is provided in note 9.
2.2.14 Employee benefits
(i) Short term benefits
Short term employee benefits are those
expected to be settled wholly before
twelve months after the end of the annual reporting
period in which the employees render the related
services and are expensed as these services are provided.
(ii) Pension obligations
The Company provides
a number of defined
contribution pension
plans where annual
contributions are invested
and allocated to
specific asset categories. Eligible
employees are entitled to the
overall performance of the investment. The
Company's contributions
are recognized as employee benefit
expense in the year in which they are paid.
(iii) Standard legal staff retirement indemnity obligations (SLSRI)
and termination benefits
The
Company
operates
unfunded
defined
benefit
plans,
under
the
regulatory
framework.
In
accordance
with
the
local
labor
legislation,
the
Company
provides
for
staff
retirement
indemnity
obligation
for
employees
which
are
entitled
to
a
lump
sum
payment based on the number of years of service, as of the date when employee service first leads to benefits under the plan until
Notes to the Financial Statements
.
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Financial
Statements
the date when
further employee service
will lead to
no material amount
of further benefits,
and the level
of remuneration
at the
date of
retirement, if
they remain
in the
employment of
the Company
until normal
retirement age.
Provision has
been made
for
the actuarial value
of the lump sum
payable on retirement
(SLSRI) using the projected
unit credit method.
Under this method the
cost of providing
retirement indemnities is charged
to the income statement
so as to spread the
cost over the period
of service of
the employees, in accordance with the actuarial valuations
which are performed every year.
The SLSRI
obligation
is calculated
as the
present
value of
the estimated
future cash
outflows using
interest
rates
of high
quality
corporate bonds. The currency and term to maturity of the bonds used are consistent
with the currency and estimated term of the
retirement benefit
obligations. Actuarial
gains and
losses that arise
in calculating
the Company’s
SLSRI obligations
are recognized
directly
in
other
comprehensive
income
in
the
period
in
which
they
occur
and
are
not
reclassified
to
the
income
statement
in
subsequent periods.
Interest on the staff retirement indemnity obligations and service cost, consisting of current service
cost, past service cost and gains
or losses
on settlement
are recognized
in the
income statement.
In calculating
the SLSRI
obligation,
the Company
also considers
potential separations before
normal retirement based on the terms of previous
voluntary exit schemes.
Termination benefits are payable when employment is
terminated by the Company
before the normal retirement date,
or whenever
an employee
accepts
voluntary
redundancy
in exchange
for
these benefits
(including those
in the
context
of the
Voluntary
Exit
Schemes implemented
by the
Company). The
Company recognizes
termination
benefits at
the earlier
of the
following dates:
(a)
when
the
Company
can
no
longer
withdraw
the
offer
of
those
benefits;
and
(b)
when
the
Company
recognizes
costs
for
a
restructuring that involves
the payment of termination
benefits. In the case of an
offer made to encourage
voluntary redundancy,
the termination benefits are
measured based on
the number of
employees expected to accept
the offer. Termination
benefits falling
due more than 12 months after the end of the reporting period are
discounted to their present value.
In the fourth
quarter of 2021,
the Company
implemented the
IFRIC agenda decision
Attributing
Benefit to
Periods of
Service (IAS
19)
and
changed
its
accounting
policy
regarding
the
attribution
of
benefit,
arising
from
defined
benefit
plans
(note
2.1.2).
In
accordance
with
IAS
8
“Accounting
policies,
changes
in
accounting
estimates
and
errors”,
the
above
change
in
the
Company’s
accounting policy for employee benefits was
applied retrospectively as of 1 January 2020(note 15).
(iv) Performance-based cash payments
The Company's Management awards high performing employees with bonuses
in cash, from time to time, on a discretionary basis.
Cash
payments
requiring
only
Management
approval
are
recognized
as
employee
benefit
expenses
on
an
accrual
basis.
Cash
payments requiring General
Meeting approval as distribution of
profits to staff
are recognized as
employee benefit expense in the
accounting period that they are approved
by the Company’s shareholders.
(v) Share-based payments
The Company’s Management awards
employees with bonuses in the form of shares and share options on a discretionary basis and
after taking
into
account the
current
legal framework.
Non-performance
related
shares
vest
in the
period granted.
Share based
payments
that
are
contingent
upon
the
achievement
of
a
performance
and
service
condition,
vest
only
if
both
conditions
are
satisfied.
The fair value
of the share
options granted
is recognized as
an employee benefit
expense over
the vesting period,
with no impact
on the Company’s equity. The amount ultimately recognised as an expense is based on the number
of awards that meet the related
service and non-market performance conditions
at the vesting date.
The fair value of the share
options at grant date
is determined by using an adjusted
option pricing model which takes
into account
the exercise
price, the
exercise
dates,
the term
of the
option, the
share
price at
grant
date
and expected
price volatility
of the
underlying share, the
expected dividend yield
and the risk-free
interest rate
for the term
of the options.
The expected volatility
is
measured at the grant date of the options
and is based on the historical volatility of the share price.
For share-based payment awards with non-vesting conditions, the fair
value of the share-based payment at grant date also reflects
such conditions and there is no true-up for differences
between expected and actual outcomes.
When the options are exercised and new shares are issued, the proceeds received net
of any directly attributable transaction costs
are credited to share capital
(par value) and share premium.
Notes to the Financial Statements
.
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Share
options
granted
by the
Company
to
employees
of
group
entities
are
treated
as
a contribution
by
the Company
to
these
entities, thus increasing the investment cost
in them.
2.2.15 Related party transactions
Related parties of the Company include:
(a) an entity tha
t
has control over
the Company and
entities controlled, jointly
controlled or significantly
influenced by this entity,
as well as members of its key management
personnel and their close family members;
(b) an entity that has significant influence over the
Company and entities controlled by this entity,
(c) members of key management personnel of
the Company,
their close family members and
entities controlled or jointly controlled
by the abovementioned persons;
(d) associates and joint ventures of the Company
;
and
(e) subsidiaries.
Transactions
of similar nature are disclosed
on an aggregate basis. All
banking transactions entered into
with related parties are in
the normal course of business and are conducted
on an arm's length basis.
2.2.16 Provisions
Provisions are recognized when the Company
has a present legal or constructive obligation
as a result of past events, it is probable
that an
outflow of resources
embodying economic
benefits will be
required to
settle the obligation,
and reliable estimates
of the
amount of the obligation can be made.
The amount
recognized
as a
provision
is the
best
estimate
of the
expenditure
required
to settle
the present
obligation
at each
reporting date, taking into account
the risks and uncertainties surrounding the amount of such expenditure.
Provisions are
reviewed at
each reporting
date and
adjusted to
reflect the
current best
estimate. If,
subsequently,
it is
no longer
probable
that
an
outflow
of
resources
embodying
economic
benefits
will
be
required
to
settle
the
obligation,
the
provision
is
reversed.
2.2.17 Share capital
Ordinary shares and preference
shares are classified as equity.
Incremental
costs directly attributable to the issue of new shares or
options are shown in equity as a deduction from the proceeds, net
of tax.
Dividend distribution
on shares
is recognized
as a
deduction in
the Company’s
equity when
approved by
the General
Meeting of
shareholders
and the
required regulatory
approvals,
if any,
are obtained.
Interim dividends
are recognized
as a
deduction in
the
Company's equity when approved by the Board
of Directors.
Intercompany
non-cash
distributions
that
constitute
transactions
between
entities
under
common
control
are
recorded
in
the
Company’s equity by reference
to the book value of the assets distributed.
Where the Company purchases own shares (treasury shares), the consideration paid including any directly attributable incremental
costs (net
of income
taxes), is
deducted from
shareholders’ equity
until the
shares are
cancelled, reissued
or disposed
of. Where
such shares are subsequently sold or reissued, any
consideration received is included in shareholders’
equity.
2.2.18 Hybrid capital
Hybrid capital issued by the Company is classified as equity
when there is no contractual obligation
to deliver to the holder cash or
another financial asset. Incremental costs directly attributable to the issue of new hybrid capital are shown in equity as a deduction
from the proceeds, net of tax.
Dividend distribution on hybrid capital is recognized
as a deduction in the Company's equity on the date it is due.
Where hybrid capital, issued by the Company,
is repurchased, the consideration paid including any directly
attributable incremental
costs
(net
of
income
taxes),
is deducted
from
shareholders’
equity.
Where
such
securities
are
subsequently
called
or
sold,
any
consideration received is included in shareholders’
equity.
Notes to the Financial Statements
.
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2.2.19 Non-current assets classified as held for sale and discontinued
operations
Non-current assets
are classified as
held for sale
if their carrying
amount will be
recovered through
a sale transaction
rather than
through
continuing use.
For a
non-
current asset
to be
classified as
held for
sale, it
is available
for
immediate sale
in its
present
condition, subject to terms
that are usual and
customary for
sales of such assets, and the
sale is considered to
be highly probable.
In
such cases,
management
is committed
to
the sale
and actively
markets
the property
for
sale at
a price
that
is reasonable
in
relation to the
current fair value.
The sale is also
expected to qualify
for recognition as
a completed sale within
one year from the
date of classification. Before their classification as
held for sale, assets are
remeasured in accordance with the
respective accounting
standard.
Assets held
for sale
are subsequently
remeasured
at the
lower of
their carrying
amount and
fair value
less cost
to sell.
Any loss
arising from
the above
measurement is
recorded
in profit
or loss
and can
be rever
sed in
the future.
When the
loss relates
to a
disposal group, it is allocated to the assets within that
disposal group.
The
Company
presents
discontinued
operations
in
a
separate
line
in
the
income
statement
if
a
component
of
the
Company’s
operations has been disposed of or is classified as held for sale and:
(a) Represents a separate
major line of business or geographical area of operations;
(b) Is part of a single coordinated plan to dispose of a separate
major line of business or geographical area of operations;
Profit or loss
from discontinued operations
includes the profit or
loss before tax
from discontinued operations,
the gain or loss on
disposal before tax
or measurement to
fair value less costs
to sell and discontinued
operations tax
expense. Upon classification
of
a
component
of
the
Company’s
operations
as
a
discontinued
operation,
the
Company
restates
prior
periods
in
the
income
statement.
2.2.20 Cash and cash equivalents
Cash and
cash equivalents
include cash
in hand,
unrestricted
deposits with
central banks,
due from
credit institutions
and other
short-term highly liquid investments
with original maturities of three months or less.
3.
Critical accounting estimates and judgments in applying accounting policies
In
the
process
of
applying
the
Company’s
accounting
policies,
the
Management
makes
various
judgments,
estimates
and
assumptions
that
may
affect
the
reported
amounts
of
assets
and
liabilities,
revenues
and
expenses
recognized
in
the
financial
statements
within the
next financial
year and
the accompanying
disclosures. Estimates
and judgments
are continually
evaluated
and
are
based
on
current
conditions,
historical
experience
and
other
factors,
including
expectations
of
future
events
that
are
believed to be reasonable under the circumstances.
Revisions to estimates are recognized
prospectively.
The most significant
areas in which the
Company makes
judgments, estimates and
assumptions in applying its
accounting policies
are set out below:
3.1
Impairment losses on investment securities
The expected
credit losses
(ECL) measurement
of the
Tier 2
subordinated
instrument
requires management
to apply
judgement
relating to the risk parameters used in the calculation
of the ECL and in assessing whether a significant increase of credit risk (SICR)
has
occurred
since
initial
recognition.
These
estimates
are
based
on
quantitative
and
qualitative
information
reasonable
and
supportable forward looking information. A degree of uncertainty is involved
in making estimations using assumptions that may be
subjective and sensitive to the risk factors.
Specifically, the assessment
of SICR is performed on an individual basis based on the number of notches
downgrade in the internal
credit
rating
scale since
the
origination
date
while
the PD
used
for
the ECL
measurement
is received
by
an
international
rating
agency using
risk methodologies
that
maximize
the use
of observable
variables
and market
data.
Furthermore,
the LGD
used is
based on historical data
derived from rating
agencies’ studies that present
the recoveries on such
instruments taking into
account
the seniority of the exposure.
Changes in the metrics applied and the assumptions
underlined would have a significant effect
on the ECL outcome. The Company
independently validates all ECL key inputs and underlying
assumptions used in the
ECL measurement through competent
resources.
Notes to the Financial Statements
.
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Financial
Statements
3.2
Impairment losses on investment in subsidiaries
The Company assesses
for impairment its
investment in subsidiaries
at each reporting
date as described
in note 2.2.6.
If an indication
of impairment exists, the
Company performs an impairment test
by comparing the carrying
value
of the investment in
the subsidiary
with its
estimated
recoverable
amount, determined
as the
higher of
its fair
value less
cost to
sell and
its value
in use,
based on
reasonable and supportable information. The calculation of the recoverable amount involves the exercise of judgement in selecting
the appropriate parameters,
such as the applicable discount and growth rates.
3.3 Income tax
The Company
is subject
to income
taxes
and estimates
are required
in determining
the liability
for
income taxes.
The Company
recognizes liabilities
for anticipated
tax audit issues
based on estimates
of whether additional
taxes will
be due or
for anticipated
tax
disputes.
Where
the
final
tax
outcome
of
these
matters
is
different
from
the
amounts
that
were
initially
recorded,
such
differences will impact the income tax in
the period in which such determination is made.
In addition, the
Company recognizes deferred tax assets to
the extent that it
is probable that
sufficient taxable profit will be
available
against
which unused
tax
losses and
deductible tempor
ary differences
can be
utilized.
Recognition
therefore
involves
judgment
regarding the future financial performance of the Company.
As at 31 December 2021, based on the Management’s assessment the
Company is not expected to have sufficient
future taxable profits, against
which the unused tax losses can be utilized (note 9).
3.4 Retirement benefit obligations
The present value
of the retirement benefit
obligations depends on
a number of factors
that are determined on
an actuarial basis
using a number of assumptions, such as
the discount rate and future salary increases. Any changes in these assumptions
will impact
the carrying amount of pension obligations.
The Company determines the appropriate discount rate used
to calculate the present value of
the estimated retirement obligations,
at the
end of each
year based
on interest
rates of
high quality
corporate bonds.
The currency
and term
to maturity
of the bonds
used are consistent with the currency and estimated average term to maturity of the retirement benefit obligations. The salary rate
increase assumption
is based
on future
inflation estimates
reflecting also
the Company's
reward
structure and
expected market
conditions.
Other assumptions
for pension
obligations,
such as
future inflation
estimates, are
based in
part on
current and
expected market
conditions.
For information in respect of the Company’s
retirement benefit obligations refer
to note 15.
3.5 Share-based payments
The Company
grants
shares and
share options
to its
employees as
well as
the employees
of the
Group’s
entities, as
a common
feature of employee remuneration.
For shares granted to employees, the fair value is measured directly at the market
price of the entity’s shares, adjusted to take into
account
the terms
and conditions
upon which
the shares
were granted.
For share
options granted
to employees,
in many
cases
market prices are not available because
the options granted are subject to
terms and conditions that do
not apply to traded
options.
If this
is the
case, the
Company estimates
the fair
value of
the equity
instruments granted
using a
valuation technique,
which is
consistent with generally accepted
valuation methodologies.
The
valuation
method
and the
inputs
used to
measure
the share
options
granted
to
employees
of
the
Company
and its
Group
entities are presented in note 18.
4.
Financial risk management and fair value
The Company is exposed to financial risks such as credit risk, market risk (including currency and interest rate
risk) liquidity risk and
operational risks.
4.1
Financial risk factors and risk management
As part of its overall system of internal controls the Company has engaged in a Service Level Agreement (SLA) with Eurobank S.A. in
order to receive supporting
and advisory
services in
all applicable areas
of risk management
(credit, market, liquidity and
operational
Notes to the Financial Statements
.
23
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December
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Financial
Statements
risks) undertaken by the Company.
The
Company’s
overall
risk
management
strategy
seeks
to
minimize
any
potential
adverse
effects
on
its
financial
performance,
financial position and cash flows.
The main financial risks to which the Company is exposed relate
to:
(a) Credit risk
The Company takes
on exposure to
credit risk which
is the risk that
a counterparty will
be unable to
fulfill its payment
obligations
in full when due. The Company is mainly exposed to a subordinated instrument (note 11) issued by its subsidiary Eurobank S.A. and
€
62
million
deposits
that
are
placed
with
the
latter.
Accordingly,
the
aggregate
carrying
amount
of
the
above
financial
assets
approximates the maximum credit
risk exposure of the Company.
(b) Market risk
The Company
takes
on exposure
to market
risk, which
is the
risk of
potential
financial loss
due to
an adverse
change in
market
variables, such as interest rates
and foreign exchange rates.
The Company’s interest
rate risk, which mainly arises from the position in the aforementioned
subordinated fixed rate
instrument,
is eliminated
by the Tier
2 subordinated
capital instrument
issued by the
Company,
which has equivalent
terms with those
of the
former.
The Company’s financial assets and liabilities are
in Euro, therefore, currency
risk is eliminated.
(c) Liquidity risk
The maturity
of the Company’s
main assets
and liabilities, which
relate to
the aforementioned
subordinated instruments,
match,
and the underlying cash flows are the same. Accordingly,
the Company’s liquidity or cash flow risk is substantially
eliminated.
4.2
Fair value of financial assets and liabilities
The Company’s financial instruments carried at amortized cost are categorised into the three levels of fair value hierarchy
based on
whether the inputs to their fair values are market
observable or unobservable, as follows:
●
Level 1
- Financial instruments
are measured
based on quoted
prices (unadjusted)
in active
markets for
identical financial
instruments that the Company
can access at the measurement
date. A market
is considered active when quoted
prices are
readily and
regularly available
from an
exchange, dealer,
broker,
industry group,
pricing service, or
regulatory agency
and
represent
actually and
regularly
occurring transactions.
None of
the Company’s
financial instruments
is categorised
into
Level 1 of the fair value hierarchy.
●
Level
2
–
Financial
instruments
are
measured
using
valuation
techniques
with
inputs
other
than
level
1
quoted
prices,
observable either directly or indirectly, such as (i)
quoted prices for similar financial instruments in
active markets (ii) quoted
prices for identical financial instruments in markets that are
not active, (iii) inputs other than quoted prices that are directly
or indirectly observable, mainly interest rates and yield curves observable at commonly quoted intervals,
forward exchange
rates, equity
prices, credit spreads
and implied volatilities
obtained from
internationally recognised
market data
providers
and (iv) other unobservable
inputs which are insignificant
to the entire fair value
measurement. Level 2 financial
instruments
include the
subordinated
instrument
(note 11)
issued by
its subsidiary
Eurobank
S.A. and
the Tier
2 subordinated
capital
instrument (note 14) issued by the Company.
●
Level
3
-
Financial
instruments
are
measured
using
valuation
techniques
with
significant
unobservable
inputs.
When
developing
unobservable
inputs,
best
information
available
is used,
including own
data,
while
at
the
same
time
market
participants’
assumptions
are
reflected
(e.g.
assumptions
about
risk).
The
Company’s
financial
instruments,
which
are
categorised into Level 3 of the fair
value hierarchy refer
mainly to the sight deposits with Eurobank S.A.
The
fair
value
of
the
Tier
2
capital
instrument
issued
by
the
Company
was
determined
by
using
quotes
for
identical
financial
instruments in non-active markets obtained from
Bloomberg and amounted to € 974 million (2020: € 932 million). The fair value of
the
subordinated
instrument
issued
by
the Company’s
subsidiary
Eurobank
S.A. was
determined
based
on the
aforementioned
instrument,
which
has
equivalent
terms,
therefore,
amounted
also
to
€
974
million.
Moreover,
the
carrying
amount
of
the
Company’s sight deposits with Eurobank
S.A. represents reasonable approximation of their
fair value.
Notes to the Financial Statements
.
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Financial
Statements
5.
Net interest income
2021
2020
€ million
€ million
Interest income
Customers
0
75
Securities
61
46
61
121
Interest expense
Debt securities in issue
(61)
(58)
(61)
(58)
Total from continuing operations
(0)
63
In the year ended 31 December 2021, interest expense amounting to € 61 million (2020: € 46 million continuing operations) relates
to the TIER 2
capital instruments issued
by the Company,
while interest
income of a similar
amount (2020: € 46
million) relates
to
the subordinated TIER 2 note issued by Eurobank
SA and held by the Company.
In the year ended 31 December
2020, interest expense
includes € 12.4 million for the
financial liability relating to the
Senior notes
of the Cairo
securitization contributed
to Eurobank S.A.
as of the hive
down date i.e.
20 March 2020
(note 1) and
interest income
from customers refers
to the underlying loan portfolio of the Cairo securitization until
its derecognition in June 2020 (note 8).
6.
Other income/(expenses)
In the year ended 31 December 2021,
other income/(expenses), amounting to €
57 million, consist of €54 million income resulting
from distribution
in kind
(note 6.1
below), €
2 million
income from
IT services
and €
1 million
income regarding
loan portfolio’s
related services provided to the Bank.
In
the
year
ended
31
December
2020,
other
income/(expenses),
amounting
to
€
10
million,
mainly
relate
to
a)
€
8
million
commission expense, which refers to
the administrative fees to Eurobank
FPS Loans and Credits Claim Management S.A. (renamed
to doValue
Greece Loans
and Credits
Claim Management
S.A.) for
the management
of the Cairo
loan portfolio
and b)
€ 3 million
foreign
exchange
losses
in
relation
to
the
said
loan
portfolio
which
was
derecognized
in
June
2020,
in
the
context
of
“Cairo”
transaction (note 8).
6.1 Income resulting from distribution in kind– Project ‘Mexico’
On 1
June 2021,
the General
Shareholders’ Meeting
(GM) of
Eurobank S.A
(Bank), following
the relevant
decision of
its Board
of
Directors (BoD),
approved the distribution
of the 95% of the
mezzanine and junior
notes of Mexico securitization
to the Company
through the decrease in kind of the Bank’s
share capital. The aforementioned
GM’s approval for
the Bank’s share capital reduction
and the relevant
amendment of its articles of association
were subject to the
regulator’s approval.
The initiation of the regulatory
approval process for the Bank’s share capital decrease
took place in early
July, while the required approvals were provided in
August
2021.
The settlement of the distribution
in kind took place in September
2021 and resulted in the recognition
of the distributed notes at
fair value in the Company’s balance-sheet. In
particular, the Company accounted for the distribution in kind as
dividend, recognizing
in profit
and loss the
fair value
of the distributed
notes of
€ 54 million.
The fair
value of the
distributed notes
was determined
by
reference
to
their
sale
price.
Moreover,
the
Company
obtained
the
direct
control
of
the
‘’Mexico
Finance
Designated
Activity
Company’’ (SPV) and the related real estate
company ‘’Mexico estate
single member S.A.’’.
In
August
2021,
a
commitment
letter
was
signed
between
the
Company,
Eurobank
and
doValue
S.p.A.
for
the
sale
of
95%
of
mezzanine
and
junior notes
of Mexico
securitization
that
were
distributed
to the
Company,
subject to
the
fulfilment
of
certain
conditions, including the settlement
of the mezzanine
and junior notes’ distribution
from the Bank to
Eurobank Holdings that
was
completed in September 2021, as well
as the issuance of
the Ministerial Decision on the
inclusion of the Mexico securitization under
HAPS and the regulatory approval
by the SSM for the significant risk
transfer of the underlying loan portfolio
that were received in
December 2021.
Notes to the Financial Statements
.
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Financial
Statements
In September 2021, the BoD
of the Company approved to proceed
with the sale of
95% of the mezzanine and
junior notes of Mexico
securitization and the ongoing servicing of the
portfolio by doValue Group. After the fulfilment of all conditions and
having received
all appropriate approvals, the aforementioned
sale transaction was concluded in December 2021.
Further information about the NPE securitisation transaction
(Project “Mexico”) is provided in the note 20.1 of the
consolidated
financial statements of the Company
for the year end 31 December 2021.
7.
Operating expenses
In the year
ended 31 December
2021, the operating
expenses of €
9 million mainly
refer to
a) € 3.7
million staff
cost (2020: €
3.7
million) and b) €
5.1 million other administrative expenses (2020:
€ 5.2 million). Administrative expenses include
€ 4.4 million (2020:
€ 4 million) insurance premiums relating to the
Group’s financial lines insurance,
including protection for professional
liability.
8.
Impairment allowance for loans and advances to customers
The impairment
losses relating
to loans
and advances
to customers
recognized
in the
Company’s
income statement
for the
year
ended 31 December 2020, related to Cairo securitization
and amounted to € 1,508 million, as analyzed below:
2020
€ million
Impairment loss on loans and advances to customers
(1,506)
Modification loss on loans and advances to customers
(2)
Total from continuing operations
(1,508)
Project “Cairo” – loans’ derecognition in the year 2020
In December 2019, Eurobank
Ergasias announced that
it has entered
into a binding
agreement with doValue
S.p.A. for the
sale of
20% of the mezzanine and 50.1%
of the junior notes of a securitization
of a mixed portfolio
consisting primarily of non-performing
loans (NPEs) of total face value of ca. € 7.5 billion (“Cairo
securitization”).
In June 2020, following the completion of the
sale of the aforementioned notes, the Company proceeded with the
re-measurement
of the loan portfolio’s
expected credit losses in accordance with its
accounting policy for the impairment of financial
assets and, as
a result,
an
impairment
loss
of €
1,506 million
was
recognised
in
the
income
statement.
Following
the
above,
the
Company
(i)
derecognized the
underlying loan portfolio
in its entirety
of carrying amount
€ 2,341 million (comprising
loans with gross
carrying
amount of €
7,259 million) and
the related net securitization
receivables of €
163 million, (ii)
derecognized from its financial liabilities
the obligations for the Cairo
notes transferred to Eurobank S.A. through
the hive down process,
i.e. 100% of senior, 5% of
mezzanine
and 5% of junior
notes, of carrying amount
€ 2,422 million and (iii)
recognized the
fair value of
the retained
mezzanine and junior
notes within
its financial assets,
i.e. 75% of
mezzanine and
44.9% of junior
notes of €
56 million as
well as the
cash consideration
received from doValue
S.p.A. of € 14 million.
Furthermore, in June 2020, Eurobank Holdings, following a decision of the Board of Directors
(BoD), proceeded to the contribution
of the retained
Cairo notes along with
an amount of €
1.5 million in cash to
its Cyprus-based subsidiary Mairanus
Ltd, renamed to
‘Cairo Mezz Plc’,
in exchange
for the newly-issued shares of the above
mentioned subsidiary.
On 7 July 2020, the BoD
of the Company proposed
to the General Shareholders’
Meeting the distribution of
Cairo Mezz Plc shares
to Eurobank
Holding’s shareholders
through the
decrease in
kind of
its share
capital. On
28 July
2020, the
General Shareholders’
Meeting approved the decrease in kind of the Company’s
share capital (note 16).
Notes to the Financial Statements
.
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Financial
Statements
9.
Income tax
According to Law 4799/2021 which
was enacted in May 2021 and
amended Law 4172/2013, the Greek corporate
tax rate for
legal
entities
other
than
credit
institutions
(i.e.
credit
institutions
that
fall
under
the
requirements
of
article
27A
of
Law
4172/2013
regarding
eligible
DTAs/deferred
tax
credits)
decreased
from
24%
to
22%
from
the
tax
year
2021
onwards.
In
addition,
the
withholding tax rate for dividends
distributed, other than intragroup dividends, is 5%. In particular,
the intragroup dividends under
certain preconditions are relieved from
both income and withholding tax.
Based on
the management’s
assessment the
Company is
not expected
to have
sufficient future
taxable profits
against which
the
unused tax losses can be utilized and accordingly, in the year ended 31 December 2021, no deferred tax has been recognized
in the
Income Statement.
Tax certificate
and open tax years
The Company, in accordance with
the general principles of the Greek tax legislation has 6 open tax years (i.e. five years as from
the
end of
the fiscal
year within
which the
relevant
tax return
should have
been submitted).
For fiscal
years starting
from 1
January
2016 onwards, an ‘Annual
Tax Certificate’
on an optional basis, is provided for
the Greek entities, with annual financial statements
audited compulsorily,
pursuant to the Law 4174/2013, which is issued after
a tax audit is performed by the
same statutory auditor
or audit firm that audits the annual financial statements.
The Company will continue to obtain such certificate.
In January 2021,
the Company received two
orders for a tax
audit by the
tax authorities for
the tax years 2015
and 2016. In
December
2021, the tax audit for 2015 was completed, while
for 2016 is still in progress.
The tax
certificates,
which have
been obtained
by the
Company
are unqualified
for the
open tax
years
2016-2020. For
the year
ended 31 December 2021, the tax audit from external auditor
is in progress.
In accordance with the Greek
tax legislation and the respective
Ministerial Decisions issued, additional
taxes and penalties
may be
imposed by the Greek tax authorities following a tax audit within the applicable/aforementioned statute of limitations,
irrespective
of whether an
unqualified tax certificate
has been obtained
from the tax
paying company.
In light of
the above, as
a general
rule,
the right of
the Greek State to
impose taxes up to
tax year 2015 (included)
has been time-barred for
the Company as at
31 December
2021.
In reference to its total uncertain tax positions, the Company assesses all relevant
developments (e.g. legislative changes, case law,
ad hoc tax/legal opinions, administrative
practices) and raises adequate provisions.
Unused tax losses
As at 31 December 2021, the Company has not
recognised deferred tax asset (DTA) on unused tax losses amounted to € 378 million
(2020: € 400
million). The
analysis of
unrecognized DTA
on unused
tax losses
of the Company
per year
of maturity
of related
tax
losses is presented in the table below:
Unrecognised
DTA
€ million
Year of maturity of unused tax losses
2023
44
2024
62
2025
260
2026
12
Total
378
10.
Discontinued operations
On
20
March
2020
the
demerger
of
Eurobank
Ergasias
S.A.
through
the
banking
sector’s
hive
down
was
completed.
In
the
comparative
period
the
loss
of
the
banking
sector,
which
comprised
the
major
part
of
the
demerged
company’s
operations,
amounted to € 41 million.
Notes to the Financial Statements
.
27
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2021
Financial
Statements
11.
Investment securities
As at 31 December
2021, the carrying amount
of the subordinated instrument held
by the Company and
categorised as at amortised
cost,
amounted
to
€ 949
million (31
December 2020:
€ 942
million), including
accrued interest
of €
0.2 million
and impairment
allowance of € 1.5 million (31 December 2020: € 8 million) (12-month ECL). In particular, during the year ended 31 December 2021,
the Company recognised
in the income statement
€ 6.8 million gain
in relation to
the reversal of
the aforementioned
impairment
allowance.
The
fair
value
of the
said
security was
determined
based on
quotes
for
the related
Tier
2 instrument
(note 14)
and
amounted to € 974 million (31 December 2020: € 932 million).
12.
Shares in subsidiaries
The following is a listing of the Company's subsidiaries held
directly at 31 December 2021:
Name
Percentage
holding
Country of
incorporation
Line of business
Eurobank S.A.
100.00
Greece
Banking
Be Business Exchanges S.A. of Business Exchanges Networks
and Accounting and Tax Services
98.01
Greece
Business-to-business e-commerce,
accounting, tax and sundry services
As at
31 December 2021,
in line
with the
Company’s
accounting policy
for the
impairment of
its investments
in subsidiaries,
and
considering the distribution in kind
of 95% of the
mezzanine and junior notes of
Mexico securitization that was settled in September
2021 (note 6.1),
the Company assessed
and concluded that
no indication of
impairment existed regarding its investment in
Eurobank
S.A.
13.
Other assets
As at
31 December 2021,
other assets
amounting to
€ 5.1 million
(31 December 2020:
€ 3.7 million)
primarily consist
of
(a) € 1.9
million (31 December
2020: € 2.1
million) prepaid
expenses mainly
for
insurance
premiums,
(b) € 1
million (31 December
2020: €
1.1 million) receivables for IT
services provided to the
Group companies and third
parties, (c) 1.4
million receivable from withholding
taxes (31 December 2020: nil) d) € 0.3 million receivables from Fairfax
Group relating to financial consulting services (31 December
2020: €0.1million) and e) € 0.07 million in relation to property and
equipment and intangible assets.
14.
Debt securities in issue
Tier 2 Capital instruments
In January 2018, Eurobank Ergasias issued Tier 2
capital instruments of face value of € 950 million, in
replacement of the preference
shares which had been issued in
the context of the first stream of Hellenic
Republic’s plan to support liquidity in the Greek economy
under Law 3723/2008.
The carrying amount
of the aforementioned instruments,
which have a
maturity of ten
years (until 17
January
2028) and pay
fixed nominal interest
rate
of 6.41%, that
shall be payable
semi-annually,
as at 31
December 2021, amounted
to €
947 million (31 December 2020: € 947 million), including € 2.6 million unamortized
issuance costs and 0.2 million accrued interest.
Their fair
value, which
was determined
by using
quotes for
identical financial
instruments
in non-active
markets, amounted
to €
974 million (31 December 2020: € 932 million).
15.
Other liabilities
As at 31 December 2021, other liabilities amounting to € 1.8 million (31 December 2020: € 1.6
million) primarily consist of (a) € 0.6
million (31 December 2020: € 0.6 million) accrued expenses,
(b) € 0.9 million (31 December 2020: € 0.5 million) current payables to
suppliers and (c) € 0.2 million (31 December 2020: € 0.4 million) Standard
legal staff retirement indemnity
obligations.
Standard legal staff retirement
indemnity obligations
The Company provides for staff
retirement indemnity obligation for
its employees, who are entitled to a lump sum payment based
on the number of years of service and the level of remuneration at the date of retirement, if they remain in the employment of the
Company until
normal retirement
age, in accordance
with the local
labor legislation.
The above
retirement indemnity
obligations
Notes to the Financial Statements
.
28
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31
December
2021
Financial
Statements
typically expose the Company
to actuarial risks such
as interest rate
risk and salary risk. Therefore,
a decrease in the discount
rate
used to
calculate the
present value
of the
estimated
future cash
outflows or
an increase
in future
salaries will
increase the
staff
retirement indemnity obligations
of the Company.
The movement of the liability for standard
legal staff retirement
indemnity obligations is as follows:
2021
2020
restated
€ million
€ million
Balance at 1 January
0.2
46
Restatement due to change in accounting policy related to
continued operations
-
(0.16)
Balance at 1 January, as restated
0.2
46
Current service and interest cost
(1)
, restated
0.03
1
of which continued operations, restated
-
0.02
Past service cost and (gains)/losses on settlements
-
2
Remeasurements:
Actuarial (gains)/losses arising from changes in financial
assumptions, restated
(0)
0
Actuarial (gains)/losses arising from experience adjustments,
restated
0
(0)
Benefits paid
-
(2)
Hive down banking sector
-
(47)
Balance at 31 December
0.2
0.2
(1)
For the year 2020, restated current service cost amounts to € 0.8 million and interest cost amounts € 0.05 million.
In the fourth quarter of 2021, the Company implemented the IFRIC agenda decision – Attributing Benefit to
Periods of Service - IAS
19. The said
ΙFRIC decision was
accounted for
as an accounting
policy change (note
2.1.2) and was
retrospectively applied for
the
Company’s
continued operations.
In particular,
the impact
on the
comparative
information
relating to
the Company’s
continued
operations was the net
decrease of “Standard legal
staff retirement
indemnity obligations” by
ca. € 0.2 million as at
31 December
2020 against
a)
€
0.16 million
increase
in
equity
as
of
1
January
2020, b)
€ 0.01
million
increase
of
loss
for
the
year
ended
31
December 2020 due to
revised current service
and interest
cost and c) €
0.05 million increase of
other comprehensive
income for
the year ended 31 December 2020 due to revised actuarial gains/losses
from remeasurements.
The significant actuarial assumptions (expressed as weighted
averages) were as follows:
2021
2020
%
%
Discount rate
0.5
0.1
Future salary increases
1.8
2.0
As at 31 December
2021, the average duration of the
standard legal staff retirement indemnity obligation was 9 years (31
December
2020: 8 years).
A quantitative
sensitivity analysis
based on reasonable
changes to significant
actuarial assumptions
as at 31
December 2021 is
as
follows:
An increase/(decrease)
of the
discount rate
assumed, by
50 bps/(50
bps), would
result in
a (decrease)/
increase of
the standard
legal staff retirement
obligations by (€ 0.01 million)/ € 0.01 million.
An increase/(decrease) of the future
salary growth assumed, by
0.5%/(0.5%), would result in
an increase /(decrease) of
the standard
legal staff retirement
obligations by € 0.01 million/ (€ 0.01 million).
Notes to the Financial Statements
.
29
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31
December
2021
Financial
Statements
The above sensitivity analysis is based
on a change in an assumption while holding
all other assumptions constant.
In practice, this
is unlikely to occur,
and changes in some of the assumptions may be correlated.
The methods
and assumptions
used in
preparing the
above sensitivity
analysis were
consistent
with those
used to
estimate the
retirement benefit obligation
and did not change compared to the previous year.
16.
Share capital and share premium
As at
31 December
2021, the
par value
of the
Company's shares
is €
0.22 per
share (2020:
€ 0.22).
All shares
are fully
paid. The
movement of share capital, share premium
and number of shares issued are as follows:
Share
capital
Share
premium
Number of
issued shares
€ million
€ million
Balance at 1 January 2020
853
8,056
3,709,161,852
Share capital decrease
(57)
-
-
Capitalization of taxed reserves
21
-
-
Balance at 31 December 2020
816
8,056
3,709,161,852
Balance at 31 December 2021
816
8,056
3,709,161,852
Decrease of the share capital in kind in the year 2020
On 7 July 2020, the Board of
Directors of the Company proposed to the General Shareholders’ Meeting the distribution of Mairanus
Ltd (renamed to Cairo Mezz Plc) shares
to the Company’s shareholders
through the decrease in kind of its share capital.
Following the above, on 28 July 2020, the Annual General Meeting of the Shareholders
of the Company approved among others:
(a)
the
decrease
of the
share
capital
in kind
with the
decrease
in
the nominal
value
of
each ordinary
share
issued by
the
Company
by
€
0.0155
and
the
distribution
to
its
shareholders
of
shares
issued
by
Cairo
Mezz
Plc,
with
a
value
corresponding to the value
of the share capital decrease, i.e.
309,096,821 common shares issued by
Cairo Mezz Plc, each
common registered share of
nominal value €
0.10, at a
ratio of 1
share of Cairo
Mezz Plc for
every 12 shares
of the Company
already held and
(b)
the capitalization
of taxed reserves
amounting to € 20,400,390.19
for the purpose
of rounding the new
nominal value of
each ordinary share issued by the Company.
Following the
aforementioned decision,
the Company’s
total share
capital amounts
to €
816,015,607.44 and
the total
number of
shares remains unchanged, i.e. 3,709,161,852 common voting shares
of a nominal value of € 0.22 each.
Treasury shares
According to paragraph 1 of
Article 16c of Law 3864/2010, during the period of the participation of the HFSF in the share
capital of
the Company,
the Company is not permitted to purchase treasury
shares without the approval of the HFSF.
Notes to the Financial Statements
.
30
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31
December
2021
Financial
Statements
17.
Reserves and retained earnings/(losses)
Corporate law
reserves
Special
reserves
Non-taxed
reserves
Other
reserves
Retained
earnings/(losses)
Total
€ million
€ million
€ million
€ million
€ million
€ million
Balance at 1 January 2020
(1)
6,919
1,004
770
837
(12,584)
(3,054)
Restatement due to change in accounting policy
(note 2.1.2)
-
-
-
-
0
0
Net profit
-
-
-
-
(1,512)
(1,512)
Capitalization of taxed reserves
(1)
(note 16)
-
-
-
(7)
(14)
(21)
Debt securities at FVOCI - discontinued operations
-
-
-
(189)
-
(189)
Cash flow hedges - discontinued operations
-
-
-
7
-
7
Actuarial gains/(losses) on post employment benefit
obligations, net of tax
-
-
-
-
(0)
(0)
Hybrid capital's dividend paid and buy back, net of
tax
-
-
-
-
(0)
(0)
Hive down banking sector
-
-
-
(239)
239
-
Balance at 31 December 2020
(1)
6,919
1,004
770
409
(13,871)
(4,769)
Balance at 1 January 2021
(1)
6,919
1,004
770
409
(13,871)
(4,769)
Net profit
-
-
-
-
55
55
Actuarial gains/(losses) on post employment benefit
obligations, net of tax
-
-
-
-
(0)
(0)
Share-based payment:
- Value of employee services (note 18)
-
-
-
-
2
2
Balance at 31 December 2021
6,919
1,004
770
409
(13,814)
(4,712)
(1)
Change in the presentation of the comparative information (see below).
As of 31
December 2021, the
Company has
proceeded to
the change in
the presentation
of certain types
of reserves after
taking
into
account their
nature and
purpose in
accordance with
the applicable
legal framework.
In particular,
a) reserves
of €
6,705.7
million, which
were previously
included within
other reserves,
are presented
in the
separate
category
“Corporate
law reserves”
(see below analysis), b) reserves of € 1,004 million relating to dividends from participations,
which were previously included within
retained earnings are presented in the separate category “Special reserves”,
c) other reserves of € 49 million (debit balance), which
were previously
included within
retained
earnings are
presented
in category
“Other reserves”,
and d)
reserves of
€ 117
million,
which were
previously
included within
“Non-taxed
reserves” are
presented
in category
“Other reserves”.
In addition,
a) the
fair
value reserve
(applicable in
2020 till
the hive
down of
banking sector)
is presented
within category
“Other reserves”
and b)
the
actuarial
gains/losses
on post
employment
benefit
obligations
that
were
previously
included in
other reserves
are
presented
in
retained
earnings.
Comparative
information
has
been
adjusted
in
order
to
align
with
the
aforementioned
changes
in
the
presentation of reserves and retained
earnings.
At the end of 2021
and 2020, corporate
law reserves comprise a) statutory
reserves of € 213.7 million, which
are not distributable
and b) other corporate law reserves
of € 6,705.7 million, pursuant to the provisions
of the corporate law in force (of
which € 5,579
million according to article 31 of law 4548/2018).
Dividends
Based on the 2021 accounts, pursuant to the
Company Law 4548/2018, the distribution of dividends
is not permitted. Furthermore,
under the
provisions of
the Tripartite
Relationship Agreement
between Eurobank
Holdings, the Bank
and the HFSF
(signed on
23
March 2020 as amended on
3 February 2022) and
article 10 par.3
of Law 3864/2010 for the
“establishment
of a Hellenic Financial
Stability Fund”,
for as
long the HFSF
participates in
the share
capital of
Eurobank Holdings,
the amount
of dividends
that may
be
distributed to shareholders of either Eurobank Holdings or the Bank cannot exceed 35%
of the profits as provided in article 161
par.
2 of Company Law 4548/2018
.
Notes to the Financial Statements
.
31
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31
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2021
Financial
Statements
18.
Share options
The Annual General
Meeting of the
shareholders of Eurobank
Holdings held on
28 July 2020 approv
ed the establishment
of a five
year shares
award plan,
starting from
2021, in the
form of
share options
rights by
issuing new shares
with a corresponding
share
capital
increase,
in
accordance
with
the
provisions
of
article
113
of
law
4548/2018,
awarded
to
executives
and
personnel
of
Eurobank Holdings and
its affiliated companies
according to article 32
of law 4308/2014. The
maximum number of rights
that can
be approved was set
at 55,637,000 rights,
each of which
would correspond to one
new share (1.5%
of the current
paid share capital).
The exercise
price of each
new share
would be equal
to its nominal
value i.e. €
0.23. The Annual
General Meeting
authorized the
Board of Directors of Eurobank Holdings
to define the eligible staff and determine
the remaining terms and conditions of the plan.
In June and July 2021,
the Board of Directors
approved the final terms
and the implementation
of the share options plan,
which is
a forward
-looking long-term
incentive
aiming at
the retention
of key
executives.
In this
respect, 12,374,561
stock
options
were
allocated
to
key
executives
at
an exercise
price of
€ 0.23,
with
grant
date
in July
2021. The
options
are
exercisable
in portions,
annually during
the period
from 2022
to 2025.
Each portion
may be
exercised
wholly or
partly and
converted
into shares
at the
employees’ option, provided
that they remain
employed by the Group
until the first
available exercise
date. A retention
period of
1 year
applies to
the first
portion of
the share
options vesting
1 year
after the
grant
date. The
corporate
actions that
adjust the
number
and
the
price
of
shares
also
adjust
accordingly
the
share
options.
In
addition,
the
exercise
of
6,844,524
of
the
aforementioned
share
options
allocated
to
certain
key
executives
who
are
subject
to
variable
and/or
accumulated
annual
remuneration
restrictions
of
Law
3864/2010
is
conditional
on
the
amendment
of
the
specific
provisions
of
the
law
during
the
exercise period, so that the respective
restrictions are lifted, or the exit of the HFSF from
the share capital of the Company.
The share options outstanding at the end of the period have
the following expiry dates:
Share options
Expiry date
31 December 2021
2022
3,607,200
2023
3,607,200
2024
4,634,321
2025
525,840
Weighted average remaining contractual
life of share options outstanding at the
end of the period
1.6
In accordance with the Company’s accounting
policy on employees’ share based payments, the grant
date fair value of the options
is recognized
as
an
expense
with
a corresponding
increase
in equity
over
the vesting
period. The
share
options
granted
by the
Company to employees
of group entities during
the year 2021, were
treated as a
contribution by the Company
to the Bank, being
their parent entity,
thus increasing the investment cost
of the Company in the latter.
The fair
value at
grant date
is determined using
an adjusted
form of the
Black-Scholes model
for Bermudan
equity options which
takes into
account the exercise
price, the exerci
se dates, the
term of the
option, the share
price at grant
date and expected
price
volatility of the underlying share, the expected dividend
yield and the risk-free interest
rate for the term of the options.
Furthermore,
the
aforementioned
additional
condition
on
certain
share
options
granted
to
key
executives
subject
to
the
remuneration restrictions of Law 3864/2010, is treated as
a non-vesting condition. Accordingly, the fair value measurement at grant
date of such
share options takes into consideration the
probability that the
relevant restrictions will be
lifted, based on
Management
judgement, and is not subsequently revised regardless
of whether the condition is eventually satisfied.
The weighted
average
fair value
of the
share options
granted in
July 2021 was
€ 0.42. The
significant inputs
into the
model were
the share price of € 0.7823 at the grant date, exercise price of € 0.23, annualized dividend yield of
3%, expected average annualized
volatility of
68%, the expected
option life
ranging from
1 to
4 years,
and the
risk-free
interest rate
corresponding to
the options’
maturities, based on the EUR swap yield curve. The expected volatility is measured at the grant date
of the options and is based on
the average historical volatility
of the share price over the last one and a half year.
Notes to the Financial Statements
.
32
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31
December
2021
Financial
Statements
19.
Cash and cash equivalents
For the
purpose of
the cash
flow statement,
cash and
cash equivalents
with original
maturities of
three months
or less,
as at
31
December 2021, amount to € 62 million (31 December 2020: € 14 million):
20.
Post balance sheet events
Details of post balance sheet events are provided
in the following notes:
Note 2.1 - Basis of preparation
Note 17- Reserves and retained earnings/(losses)
Note 21-Related parties
21.
Related parties
Eurobank
Ergasias
Services and
Holdings S.A.
(the Company
or Eurobank
Holdings) is
the parent
company
of Eurobank
S.A. (the
Bank), which resulted from the demerger of
Eurobank Ergasias S.A. (“Demerged Entity”) through its
banking sector’s hive down that
was completed in March 2020 (note 1).
The Board of Directors
(BoD) of Eurobank Holdings is the same
as the BoD of the Bank and part of
the key management
personnel
(KMP)
of
the
Bank provides
services to
Eurobank
Holdings
according
to
the terms
of
the relevant
agreement
between
the two
entities. As at 31 December 2021, the percentage of the Company’s ordinary shares with voting rights held by the
Hellenic Financial
Stability
Fund
(HFSF)
stands
at
1.40%.
The
HFSF
is
considered
to
have
significant
influence
over
the
Company
pursuant
to
the
provisions of the
Law 3864/2010, as in
force and the Tripartite
Relationship Framework
Agreement (TRFA)
between the Bank, the
Company and the HFSF signed on
23 March 2020, as amended
on 3 February 2022. Further
information in respect of the HFSF
rights
based on the aforementioned framework is provided in the section “Report of the
Directors and Corporate Governance Statement”
of the Annual Financial Report for the year ended 31 December 2021.
Fairfax Group is considered to have significant influence over the Company. In July 2021, Eurolife FFH
Insurance Group Holdings S.A.
became a subsidiary of Fairfax and the percentage of Eurobank Holdings voting rights held by Fairfax
Group increased from 31.27%
to 33%. As at 31 December 2021, the Company’s outstanding balances of the transactions with Fairfax group refer to receivables of
€ 0.33 million related to financial consulting services.
A number
of transactions
are entered
into with
related
parties in
the normal
course of
business and
are conducted
on an
arm's
length basis. The outstanding
balances of the
transactions with: (a)
the subsidiaries, (b) the
KMP and the
entities controlled
or jointly
controlled
by
KMP
and (c)
the
associates
and
joint
ventures,
as
well
as
the
relating
income
and
expenses
from
continuing
and
discontinued (for the comparative
period) operations are as follows:
31 December 2021
31 December 2020
Subsidiaries
(1)
Subsidiaries
KMP and Entities
controlled or jointly
controlled by KMP
Associates and
joint ventures
€ million
€ million
€ million
€ million
Due from credit institutions
62.39
14.39
-
-
Investment securities
948.63
941.85
-
-
Other assets
1.01
0.74
-
-
Other liabilities
0.29
0.37
-
-
Net interest income
60.87
34.32
-
(1.10)
Net banking fee and commission income
-
(3.52)
-
4.02
Net trading income
-
0.50
-
-
Other operating income/(expense) (note 6.1)
56.29
1.41
(3.12)
(4.84)
Other Impairment losses
6.78
(8.32)
-
-
Impairment losses relating to loans and
advances and collectors' fees
-
(3.63)
-
(0.17)
(1)
The expenses in relation
to KMP services
provided by the Company’s
subsidiary Eurobank S.A. are included
in Key management
compensation disclosed
below.
Notes to the Financial Statements
.
33
|
Page
31
December
2021
Financial
Statements
Key management compensation
In the year ended 31 December
2021, the Company recognized
Key management compensation
amounting to € 0.2 million
that is
referring mainly to KMP services provided by Eurobank S.A. in accordance with the relevant agreement (31 December 2020, mainly
referring
to
the
pre-hive
down period:
€
1.51
million
for
short
term
employee
benefits,
€ 0.24
million
for
long
term
employee
benefits and € 0.02 million cost recognised in the income statement
relating to the defined benefit obligation
for the KMP).
22.
External Auditors
The Company
has adopted
a Policy
on External
Auditors’ Independence
which provides
amongst others,
for the
definition of
the
permitted and non-permitted services the Company’s
auditors may provide further
to the statutory audit. For any
such services to
be assigned to
the Company’s
auditors there
are specific controlling
mechanisms in order
for the Company’s
Audit Committee to
ensure that a) the non-audit services assigned to
“
KPMG Certified Auditors S.A.”,
along with the KPMG network (KPMG), have been
reviewed and approved as required
and b) there is proper balance between audit and permitted
non-audit work.
The total
fees of the Company’s independent auditor
KPMG for audit and other services provided are analyzed as follows:
2021
2020
€ million
€ million
Statutory audit
(1)
(0.2)
(0.2)
Tax certificate
(0.0)
(0.0)
Other audit related assignments
(0.3)
(0.4)
Total
(0.5)
(0.6)
(1)
Includes fees for statutory audit of the Company’s annual financial statements.
It is noted that there are no
non-audit assignment fees of “KPMG Certified Auditors S.A.” Greece, statutory auditor of the Company.
Notes to the Financial Statements
.
34
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31
December
2021
Financial
Statements
Georgios P. Zanias
Fokion C. Karavias
Harris V. Kokologiannis
I.D. No AI -
414343
I.D. No ΑΙ -
677962
I.D. No AN -
582334
CHAIRMAN
CHIEF EXECUTIVE OFFICER
GENERAL MANAGER OF GROUP
FINANCE
OF THE BOARD OF
DIRECTORS
CHIEF FINANCIAL OFFICER
23.
Board of Directors
The Board
of Directors
(BoD) was
elected by
the Annual
General Meeting
(AGM) of
the Shareholders
held on
23 July
2021 for
a
three years term of office that will expire on 23 July
2024, prolonged until the end of the period the AGM for
the year 2024 will take
place.
Following the aforementioned AGM
decision, the BoD was constituted as a body at the BoD meeting of 23 July 2021, as follows:
G. Zanias
Chairman, Non-Executive Member
G. Chryssikos
Vice Chairman, Non-Executive Member
F. Karavias
Chief Executive Officer
S. Ioannou
Deputy Chief Executive Officer
K. Vassiliou
Deputy Chief Executive Officer
A. Athanasopoulos
Deputy Chief Executive Officer
B.P.
Martin
Non-Executive Member
A. Gregoriadi
Non-Executive Independent Member
I. Rouvitha-
Panou
Non-Executive Independent Member
R. Kakar
Non-Executive Independent Member
J. Mirza
Non-Executive Independent Member
C. Basile
Non-Executive Independent Member
E. Deli
Non-Executive Member (HFSF representative
under Law
3864/2010)
Athens, 5 April 2022
VΙΙ.
Website Address for Information on consolidated non-listed
companies of the Company
The
website
address,
where
the
annual
financial
statements
for
the
year
ended
31.12.2020 are uploaded, as well as
the independent Auditors’ reports and
the Board
of Directors’ Reports
of the
entities, which are
consolidated and not
listed and which
represent accumulatively more
than 5% of the consolidated turnover
or of the assets
of the consolidated
balance sheet
or of the
consolidated results
after subtracting
the
proportion of minority shares, is:
www.eurobankholdings.gr