JEUVK5RWVJEN8W0C9M24 2022-01-01 2022-12-31 JEUVK5RWVJEN8W0C9M24 2022-12-31 JEUVK5RWVJEN8W0C9M24 2021-12-31 JEUVK5RWVJEN8W0C9M24 2021-01-01 2021-12-31 JEUVK5RWVJEN8W0C9M24 2020-12-31 JEUVK5RWVJEN8W0C9M24 2021-12-31 ifrs-full:IssuedCapitalMember JEUVK5RWVJEN8W0C9M24 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember JEUVK5RWVJEN8W0C9M24 2022-12-31 ifrs-full:IssuedCapitalMember JEUVK5RWVJEN8W0C9M24 2021-12-31 ifrs-full:SharePremiumMember JEUVK5RWVJEN8W0C9M24 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember JEUVK5RWVJEN8W0C9M24 2022-12-31 ifrs-full:SharePremiumMember JEUVK5RWVJEN8W0C9M24 2021-12-31 ERB:ReservesAndRetainedEarningsMember JEUVK5RWVJEN8W0C9M24 2022-01-01 2022-12-31 ERB:ReservesAndRetainedEarningsMember JEUVK5RWVJEN8W0C9M24 2022-12-31 ERB:ReservesAndRetainedEarningsMember JEUVK5RWVJEN8W0C9M24 2021-12-31 ifrs-full:NoncontrollingInterestsMember JEUVK5RWVJEN8W0C9M24 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember JEUVK5RWVJEN8W0C9M24 2022-12-31 ifrs-full:NoncontrollingInterestsMember JEUVK5RWVJEN8W0C9M24 2020-12-31 ifrs-full:SharePremiumMember JEUVK5RWVJEN8W0C9M24 2021-01-01 2021-12-31 ifrs-full:SharePremiumMember JEUVK5RWVJEN8W0C9M24 2020-12-31 ERB:ReservesAndRetainedEarningsMember JEUVK5RWVJEN8W0C9M24 2021-01-01 2021-12-31 ERB:ReservesAndRetainedEarningsMember JEUVK5RWVJEN8W0C9M24 2020-12-31 ifrs-full:NoncontrollingInterestsMember JEUVK5RWVJEN8W0C9M24 2021-01-01 2021-12-31 ifrs-full:NoncontrollingInterestsMember JEUVK5RWVJEN8W0C9M24 2020-12-31 ERB:OutstandingShareCapitalMember JEUVK5RWVJEN8W0C9M24 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember iso4217:EUR iso4217:EUR xbrli:shares
ANNUAL
FINANCIAL
REPORT
FOR THE YEAR ENDED
31 DECEMBER 2022
According to
Article 4 of the Law 3556/2007
Table
of Contents
A.
Corporate Governance
I.
Statements of the members of
the Board of Directors
II.
Report of the Directors and Corporate
Governance Statement
Appendix: Audit Committee Activity Report
B.
Auditor’s Reports and Financial Statements
I.
Ιndependent Auditor’s Report
(on the Consolidated Financial Statements)
II.
Consolidated Financial Statements of the Company
for the year
ended 31 December 2022
III.
Ιndependent Auditor’s Report
(on the Financial Statements of the
Company)
IV.
Financial Statements οf the Company
for the year
ended 31 December 2022
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 2022,
which
have been
prepared in accordance with the applicable accounting standards,
present fairly the assets,
liabilities, equity
and annual
results of Eurobank
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, 6 April 2023
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
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
1
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€ = Euro
m = million
bn = billion
The directors
present their report
together with
the financial statements
for the
year ended 31 December 2022.
General information
Eurobank Ergasias Services and Holdings S.A. (the Company or Eurobank Holdings) is a holding company listed
on the Athens Exchange, owning 100% of the share
capital of Eurobank S.A. (the Bank). Eurobank
Holdings and
its
subsidiaries
form
a
group
(Group),
consisting
mainly
of
Eurobank
Group,
that
being
the
Bank
and
its
subsidiaries. The Company’s operations principally relate to the
strategic planning of the non-performing loans
management and the provision
of services to the
Group entities and third
parties.
Financial Results Review and Outlook
1
In
2022,
the
economic activity
remained
strong
in Greece
and
the
other
countries
in which
the
Group
has
a
substantial presence, despite the negative impact of increased geopolitical volatility, disruption in supply chains
and persistent inflationary pressures. In
this environment, the Group exceeded its targets in
terms of profitability,
asset quality and capital strength,
expanded its loan portfolio
and improve
d
further its
liquidity position.
As at
31 December
2022 total
assets increased
by €3.6bn
to €81.5bn
(Dec. 2021:
€77.9bn)
with gross
customer
loans amounting to €43.5bn (Dec.
2021: €40.8bn) and investment securities reaching €13.3bn
(Dec. 2021: €11.3bn).
Out of the total loan portfolio, €28.2bn has been
originated from Greek operations (Dec. 2021: €26.5bn), €10.4bn
from international
operations
(Dec. 2021: €9.2bn)
and €4.9bn
refer
to senior and
mezzanine notes
of the
Pillar,
Cairo
and
Mexico
securitizations
(Dec.
2021:
€5.1bn).
Business
(wholesale
and
small
business)
loans
stood
at
€25bn
(Dec.
2021:
€22.4bn)
and
accounted
for
57%
of
total
Group
loans,
while
loans
to
households
reached
€13.6bn
(Dec.
2021:
€13.3bn),
of which
75% is
the
mortgage
portfolio
and the
rest
are
consumer
loans.
Group
deposits
reached
€57.2bn
(Dec.
2021:
€53.2bn)
with
those
from
Greek
operations
increasing
by
€2.6bn
to
€39.6bn
(Dec. 2021:
€37bn), while
international
operations
added €1.5bn
totalling €17.7bn
(Dec. 2021:
€16.2bn).
As a result, the (net) loan–to–deposit (L/D) ratio stood at 73.1%
for the Group (Dec. 2021: 73.2%) and at 79.5%
for
Greek
operations
(Dec.
2021:
80.1%).
The
funding
from
the
targeted
long
term
refinancing
operations
of
the
European Central Bank (ECB)–
TLTRO III programme
decreased by €2.9bn amounting to €8.8bn as at December
2022 (Dec. 2021:
€11.7bn). During the
year,
in the context
of the
implementation of
its medium-term
strategy
to
meet the Minimum Requirements for Eligible Own Funds and Eligible Liabilities (MREL), the Bank proceeded with
the issuance of a preferred senior note of €500m at a coupon of 4.375%
and maturity date on 9 March 2025
and
the Company
completed the
issuance of a
Tier 2
debt instrument of
€300m at a
coupon of 10% which
matures
in December 2032. More recently, in January
2023, the Bank completed the issuance of
a €500m senior
preferred
note at a
coupon of
7% which
matures in January
2029 (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
173% (31
December 2021: 152%).
Pre-provision
Income
(PPI)
increased
to
€2,218m
or
€1,893m
excluding
the
€325m
gain
on
sale
of
Bank’s
merchant acquiring business (project “Triangle”) (2021: €1,024m or €1,028m excluding
the €5m derecognition loss
on “Mexico” loans), while core pre-provision income (Core PPI) increased by 30.6% year-on-year to €1.176m (2021:
€900m). Net interest
income (NII) grew
by 17.4%
to €1,550m (2021: €1,321m), mainly driven by
the higher
interest
rates,
the organic
loans growth
and the
increased income
from investment
bonds partly
offset by
higher
debt
issued and deposits cost. Net
interest margin (NIM) stood at 1.94% (2021: 1.84%) with the fourth quarter reaching
2.28%.
Fees
and
commissions
expanded
by
19.1%
to
€543m
(2021:
€456m),
of
which
banking
fees
and
commissions
by
25.4%
to
€449m
(2021:
€358m),
mainly
due
to
the
increased
fees
from
network
operations,
lending
activities
and
credit/debit
cards
business.
Fees
and
commission
accounted
for
68bps
of
total
assets
(2021:
64bps).
Operating
expenses
increased
by
4.7%
to
€917m
(2021:
€876m)
due
to
higher
costs
from
international
operations
amounting to
€273m (2021:
€234m), partly
attributed
to the
merger
of Eurobank
a.d.
Beograd with
Direktna Bank
in Serbia,
while in Greece
slightly increased
by 0.3% to
€645m (2021: €643m).
The
cost to
income (C/I)
ratio
for
the
Group
reached
32.6%, excluding
the
€325m gain
on project
“Triangle”
(2021:
46%),
while
the
international
operations
C/I
ratio
stood
at
46.1%
(2021:
47.5%).
Furthermore,
the
cost
to core
income
2
ratio for the Group reached
43.8% (2021: 49.3%), while the international operations cost to core income
2
ratio stood at
45.6% (2021: 47.4%).
Trading
and other
activities recorded net
income of €1,042m (2021:
€123m income) including
a) €550m realised
gains
from
the
unwinding
of
interest
rate
swaps,
following
the
reassessment
of
Group’s
hedging
strategies,
which are
mainly related
with the
upward movement
of the
euro interest
rate curve
in 2022 (notes
9 and 19
of
the
consolidated
financial
statements),
b)
€70m
gains
from
portfolio
hedging
of
interest
rate
risk
(macro
hedging) (notes
9 and 19 of the
consolidated financial statements),
c) €107m gains from
short positions in debt
instruments
entered
into
in
the
context
of
Group’s
economic
hedging
strategies
(notes
9
and
35
of
the
consolidated
financial
statements),
d)
€325m
gain
from
the
completion
of
project
“Triangle”
(note
30
of
the
consolidated financial
statements), e)
€34m gains from
changes in fair
value of investment
properties,
f) €34m
gain on
sale of
5.1%
shareholding
in Group’s
joint venture
Grivalia Hospitality
S.A. and
from the
measurement
of the retained
interest as a financial
asset at FVTPL (note 24
of the consolidated
financial statements), and
g)
€76m
loss
from
the
recyclement
of
currency
translation
losses,
previously
recognized
in
other
comprehensive
income,
to
income
statement
due
to
liquidation
of
ERB
Istanbul
Holding
A.S.
(note
23.1
of
the
consolidated
financial statements).
1
Definitions of the selected financial ratios and the source of the financial data are provided in the Appendix.
2
Total operating expenses divided by total
core income.
International Operations: Operating expenses: €273m, (2021:
€234m), Core income:
€598m (2021: €493m).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
2
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€ = Euro
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bn = billion
As at 31 December
2022, following
the classification
of project “Solar”
underlying loan portfolio
as held for
sale
(note
20
of
the
consolidated
financial
statements)
and
other
initiatives,
the
Group’s
NPE
stock
amounted
to
€2.3bn
(31
December
2021:
€2.8bn)
driving
the
NPE
ratio
to
5.2%
(31
December
2021:
6.8%),
while
the
NPE
coverage
ratio
stood at
74.6% (31
December
2021: 69.2%).
During the
year,
the NPE
formation
was positive
by
€46m (fourth
quarter:
€35m positive)
(2021: €44m
positive).
The
loan provisions
(charge)
reached
€291m and
corresponded
to 0.72%
of average
net
loans
(2021:
€418m
excluding
the
impairment
loss
of
€72m
on project
“Mexico” which corresponded
to 1.11% of average
net loans).
Furthermore,
the Group
recognised in 2022 other
impairment losses and provisions
amounting to €108m (2021:
€52m),
which
are
analysed
in
a)
€21m
on
investment
bonds,
including
€7m
loss
attributable
to Russian
debt
exposures
b)
€15m
on
real
estate
properties
c)
€23m
on
computer
hardware
and
software
and
d)
€49m
for
litigations and
other
operational
risk events.
In addition,
it recorded
restructuring costs
of €102m (2021:
€25m)
consisting of
a) €60m
cost for
Voluntary
Exit Schemes
(VES) and
related
costs, mainly
referring
to the
scheme
that was launched in February
2022 for eligible units in Greece
and b) €42m costs mainly related to the
merger
and the
integration
thereafter
of Eurobank
a.d. Beograd
with Direktna
Banka in Serbia,
as well
as the
Group’s
transformation
project (note 12 of the
consolidated financial statements).
Profit or Loss
Overall,
in 2022,
the
profit
attributable
to shareholders
amounted to
€1,330m (2021:
€328m), as
set out
in the
consolidated
income
statement.
The
adjusted
net
profit,
excluding
the
€230.5m
gain
(after
tax)
on
project
“Triangle”
and the
€75m restructuring
costs (after
tax), amounted
to €1,174m
for
the
Group
(2021: €424m),
of
which €224m (2021: €148m)
was related to
international business.
After deducting the
significant trading
gains
of €727m (€516m after tax) stated above for
2022 (gains on derivatives and short bond positions), the
return on
tangible book value grew to 11.4% (2021: 8.2%).
Going forward,
the
Group, pursues
its objectives
set out
in the
business plan
for
the
period
2023-2025,
which
includes
targets
for
a)
loans
organic
growth,
b)
the
further
strengthening
of
the
core
profitability
(EPS
and
RoTBV),
c) improvement
of the asset quality ratios,
d) solid organic capital generation
adequate to support the
business
growth,
and
e)
the
initiation
of
dividend
distribution
in
the
form
of
cash
dividends
and/or
share
buybacks, subject to regulatory approval,
mainly through the
following initiatives
and actions:
a)
Higher NII
mainly driven by
the positive
effect
of the
interest rates’
increase and
the sustainable
growth
in
loan volumes and
the increase, at
a relatively lower
pace, of customer deposits
,
b)
Organic increase of Group’s
performing loans mainly through
business lending,
c)
Growth of
fee and commission
income in a number
of fee business
segments such as
lending, network and
assets under management activities,
bancassurance,
card’s issuing and investment
property rentals,
d)
Initiatives
for
pursuing
further
operating
efficiency,
cost
containment
of
“run
the
bank”
activities,
and
proceeding
with
further
simplification
and
digitalisation
in
Greece
and
abroad,
maintaining
the
annual
increase of the operating expenses at a low to mid-single digit %,
considering the inflationary pressures and
the “grow
the bank” needs,
e)
Maintaining low
NPE ratios
with high
coverage
levels in
all core
markets in
which the
Group has
presence,
which
may
be
challenged
by
the
higher
interest
rates
and
inflationary
pressures'
impact
on
households
disposable income and corporate
profit margins,
f)
Strengthening
core
markets
presence
and
increasing
earnings
contribution
by
international
activities
through organic
growth and the
exploration of potential
market opportunities.
g)
Major
transformation
initiatives
introduced
in
the
context
of the
Group’s
transformation
plan
“Eurobank
2030”,
h)
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.
The
geopolitical
and macroeconomic
risks, mainly
related
with the
prolongation
of the
inflationary
wave
and
the
impact
of
interest
rate
hikes
on
both
households
and
businesses,
combined
with
potential
political
uncertainty in Greece,
set a number of challenges
to the achievement
of the Group’s
2023-2025 Business Plan,
mainly
related
with
growth
potential,
lending
margins,
deposit
rates,
asset
quality
and
operating
costs.
The
headwinds
coming
from
the
geopolitical
upheaval
and
the
macroeconomic
environment
are
likely
to
be
mitigated by:
a)
The
efficient
mobilization
of
the
already
approved
EU
funding,
mainly
through
Recovery
and
Resilience
Facility (RRF),
b)
The substantial pipeline
of new investments,
c)
The accumulated
liquidity in the
economy mainly related
with the
extensive state
support measures
of the
pandemic period,
d)
The decrease
of the unemployment
rate in 2022 to its lowest
level in the
last twelve years,
e)
The positive
developments in the
tourism sector and the strong
investment inflows,
f)
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”)
The
Group
Management
and Board,
mindful
of the
recent
banking
turmoil across
some
markets,
has
done
a
proactive
internal
review
to
re-assure
itself
of
the
continued
resilience
of
Eurobank
business
model
to
such
possible external shocks and is pleased to report that
this model is well supported by sound business
practices,
diversified
activities and prudent
risk management
approaches.
The
resulting stability
of the
Group’s
business
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
3
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€ = Euro
m = million
bn = billion
operating
model
and
the
strength
of
its
financial
position
is
also
further
well-reflected/
supported
by
the
following significant
aspects:
a)
an increased level of high-quality liquid assets
connected, inter alia, with the resilience of retail deposits and
with the
debt issued
to wholesale markets,
leading to an
LCR of
173%, well
above
the regulatory
minimum
(100%),
b)
the wide and diversified
deposit mix, displaying a significant deposit base from retail,
which accounts for c.
70% of total deposits (Bank level),
c)
a well-managed debt securities portfolio, accounting for 16% of total assets mostly invested in
EU Sovereign
Bonds and
on investment
grade
securities. This
portfolio
is to
a great
extent hedged
for
the
interest
rate
risk,
d)
low interest
rate
risk exposure
on its core
banking book,
since the
vast majority of
assets are
floating rate
loans, which bear immaterial interest rate risk and fixed rate loans, with their interest rate risk being hedged
to a large extent,
e)
the strong capital
adequacy, the
earnings generation
capacity and the
high NPE coverage
ratio,
f)
the MREL ratio, which, at the end of 2022 amounted to 23.1% and, proforma
with the €500m senior issuance
in January 2023, to 24.3%, exceeding the
non-binding January 1st 2024 MREL target of 22.9%,
g)
a
robust
internal
risk
management
and
governance
framework
for
effectively
monitoring
and
mitigating
risks
as
well
as
a
high
level
of
Board
engagement
for
the
alignment
of
business
model
with
sound
risk
management and control
functions,
h)
the comprehensive
regulatory and supervisory EU framework
applicable even to small-sized
banks.
Capital adequacy
As at
31 December
2022, the
Group’s
Total
Regulatory
Capital
amounted to
€8bn (31
Dec
2021: €6.4bn)
and
accounted for 19.2%
(total CAD) of Risk Weighted Assets (RWA)
(Dec. 2021: 16.1%), compared
to the CAD Overall
Capital Requirements (OCR) ratio of 14.39%
3
. Respectively, the Common Equity Tier 1 (CET1) stood at 16% of
RWA
(Dec.
2021:
13.7%)
compared
to
the
CET1
OCR
ratio
of
9.57%
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
15.2% (Dec. 2021: 12.7%).
Pro-forma with
the completion of project
“Solar”, the total CAD
and CET1 ratios would
be 19% and 16% respectively.
In the context of the Group’s initiatives for the optimization
of its regulatory capital, in December 2022 the Bank
proceeded with
the execution of the
third synthetic
risk transfer
transaction (project
“Wave III”)
in the form
of a
financial guarantee,
providing
credit protection
over
the
mezzanine loss
of a
portfolio
of performing
shipping
loans amounting
to $1.7bn,
which resulted
in a capital
benefit of
40 bps (note
20 of
the consolidated
financial
statements).
As at 31 December 2022, the Bank’s MREL ratio
at consolidated level stands at
23.07% of RWAs, higher
than the
interim binding MREL target
for 2022 of 18.21%
but also than
the interim non-binding MREL target from 1
January
2023 of 20.48% (note
4 of the
consolidated financial statements).
According to the
2022 SREP decision, for
the
first quarter of
2023, the
Group is required
to meet a Common Equity
Tier 1
Ratio of at
least 9.75%
and a Total
Capital Adequacy
Ratio
of at
least 14.45%
(Overall
Capital Requirements
or OCR)
including Combined
Buffer
Requirement of 3.70%.
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
2022, the
Bank’s eligible
DTAs
for
conversion
to tax
credits
amounted
to
€
3,402m
(Dec.2021:
€3,547m)
(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.
Climate risk stress test
The
Group participated
in the
ECB supervisory
climate risk
stress test,
which was
conducted in
the first
half of
2022. The
2022 climate risk
stress test assessed
how well banks
are set up
to deal with
climate-related risks.
A
total
of
104
significant
banks
participated
in
the
test
consisting
of
three
modules,
in
which
banks
provided
information
on their: (i)
own climate stress
-testing capabilities,
(ii) reliance on carbon
-emitting sectors, and (iii)
performance
under different
scenarios
over
several
time horizons.
The
test, which
was part
of the
ECB’s wider
climate roadmap, was not a capital adequacy exercise but rather a learning one for banks and
supervisors alike,
aiming at identifying vulnerabilities and best practices and
providing guidance to banks for the green transition.
In this context, the Group
has successfully completed the
2022 climate risk stress test exercise.
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
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In July 2022, the ECB published the climate risk stress test
aggregated results, showing that banks must improve
their
focus
on
climate
risk.
Furthermore,
all
participating
entities,
including
the
Group,
received
individual
feedback and are expected to take action
accordingly, in line with
the set of good practices
for climate-related
and environmental
risk management
that the
ECB published in
November
2022 along with
the good
practices
for climate stress
testing published in December
2022. The results
showed that the
Group has made significant
progress
in incorporating
a climate
risk stress
testing framework,
with an
overall
performance
in line
with the
average
score
of European
Banks. The
Group
continues
to work
in order
to implement
its climate
risk action
plan, to further
integrate climate risks into its business strategy
and risk management practices
and to support
its clients towards climate transition
and sustainable business growth.
2023 EU – wide stress test
In January 2023, the European
Banking Authority (EBA) launched
the 2023 EU-wide stress test exercise
which is
designed
to provide
valuable input
for
assessing
the
resilience
of the
European
banking
sector in
the
current
uncertain and changing macroeconomic
environment.
This exercise
is coordinated by the
EBA in cooperation
with the ECB and national
supervisory authorities and is
conducted
according
to
the
EBA’s
methodology.
It
is
carried
out
on
the
basis
of
year-end
2022
figures
and
assesses
the
performance
of
EU
banks
under
a
baseline
and
adverse
macroeconomic
scenario,
covering
the
period
from
2023
to
2025.
The
baseline
scenario
for
EU
countries
is
based
on
the
projections
from
the
EU
national
central
banks of
December
2022. The
adverse
scenario,
although unlikely
to unfold,
is used
to assess
the resilience
of banks to a hypothetical
severe
scenario of a significant
deterioration
in the overall
outlook for
the economy and financial markets in the
next three years. The
narrative
depicts an adverse scenario related
to
a
hypothetical
worsening
of
geopolitical
developments
leading
to
a
severe
decline
in
GDP
with
persistent
inflation and
high interest
rates. In
terms of GDP
decline, the
2023 adverse
scenario is the
most severe
used in
the EU wide stress up to now.
Eurobank Holdings
Group is participating
in the EBA-led stress test.
In parallel, the ECB will
conduct its own stress
test for a number of
medium sized- banks that it supervises directly
and that are not included
in the EBA-led stress test sample.
The EBA expects to publish the
results of the exercise
at the end of July 2023. The
stress test results will be used
to update each bank’s Pillar
2 Guidance in the
context of the SREP,
while qualitative findings
on weaknesses in
banks’ stress testing practices
could also affect their
Pillar 2 Requirements.
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 306 branches
and business centres.
In December 2021, the merger of the Bank’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.
On 2
March 2023,
the
Bank
announced
that
it
has
signed
binding
agreement
(share
purchase
agreement)
with
AIK
Banka
a.d.
Beograd
(“AIK”)
for
the
sale
of
Eurobank
Direktna,
the
Bank’s
subsidiary
in
Serbia
(the
“Transaction”).
The
Transaction
values 100%
of Eurobank
Direktna
at
€280m and
is consistent
with
Eurobank’s
strategy
to direct
capital
to opportunities
with
more compelling
RoTBV
and to
further
enhance
its presence
in its
core markets.
The
Transaction
is expected
to contribute ca.
50 bps to
Eurobank’s
CET1 ratio
(based on
third quarter
of 2022
ratio),
reflecting
the
release
of
related
RWAs.
It
is
expected
to
be
completed
within
year
2023,
subject
to
customary regulatory and other
approvals.
On 30 December 2022, the
Bank announced the
acquisition of a 3.2% holding in Hellenic
Bank Public Company
Limited (“Hellenic Bank”) thus increasing
its shareholding to 15.8%
in Hellenic Bank. Furthermore,
on 1 December
2022, the
conclusion of
a share
purchase agreement
(“SPA”)
with Wargaming
Group
Limited was
announced,
according
to which
the
Bank has
agreed
to acquire
an additional
13.41%
holding
in Hellenic
Bank,
subject
to
regulatory
approvals.
On
4
April
2023,
following
the
receipt
of
the
relevant
regulatory
approvals,
the
above
acquisition
was
completed,
and
the
Bank’s total
holding
in Hellenic
Bank reached
29.2%.
Following
that,
the
investment in Hellenic Bank
will be
accounted for as a
Group’s associate in the consolidated financial
statements
as of the second quarter of 2023. The said investment is aligned with the overall strategy
of the Group to further
strengthen
its presence
in its core
markets in which
retains a strategic
interest (further
information
is provided
in note 22 to consolidated financial statements).
Furthermore,
the
implementation
of the
new banking
system in
Cyprus (Temenos)
is progressing
according
to
plan. The
project is key
for the
technological transformation
of Eurobank
Cyprus, which in turn aims to enhance
functionality
and to
improve
efficiency
thus ensuring
the
best experience
for
the customers,
in the
new digital
era.
On 9
December
2022, Eurobank
Holdings announced
that
it had
reached
an agreement
for
the
acquisition of
BNP Paribas Personal Finance
Bulgaria (the “Business”) by
Eurobank’s subsidiary in Bulgaria, Eurobank
Bulgaria
A.D. (“Postbank”).
The
transaction is
in line with
the Group’s
strategy
to further
strengthen
Postbank’s position
in
the
Bulgarian
retail
sector
and
is
expected
to
burden
the
Group’s
regulatory
capital
ratios
by
ca.
25
bps,
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
5
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reflecting mainly the increase
in the Group’s
Risk Weighted Assets. The
completion of the
transaction is subject
to approvals by all competent
regulatory authorities (further information
is provided in note 23.1 to consolidated
financial statements).
The positive
prospects remain
valid despite the
war in Ukraine. Although
International Operations
do not have
a
direct
exposure
in
these
two
countries,
the
deterioration
of
the
key
macroeconomic
indicators,
both
at
European
and
global
level,
will
have
an
impact
on
the
local
economies.
International
Operations
solid
fundamentals though, allow for absorbing potential shocks and
safeguarding their profitability while supporting
the local communities.
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
and
maintaining
its
policies,
methods
and
infrastructure
up
to
date,
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
as
well
as
the
best
international banking
practices. The
Group implements
a well-structured
credit approval
process, independent
credit reviews
and effective
risk management policies
for all material
risks it is exposed
to, both in
Greece and
in each
country of
its international
operations.
The
risk management
policies
implemented
by
the
Group
are
reviewed
on a regular basis.
The
Group
Risk
and
Capital
Strategy
outlines
the
Group’s
overall
direction
regarding
risk
and
capital
management issues,
the risk
management mission
and objectives,
risk definitions, risk
management principles,
risk governance framework,
strategic objectives and key management initiatives for
the improvement
of the risk
management framework
in place.
Risk
culture
is
a
core
element
of
the
organisation.
Risk
management
function
provides
the
framework,
procedures and guidance
to enable all employees to proactively
identify, manage and monitor the
risks in their
own areas
and improve
the control
and co-ordination
of risk taking
across their
business. Ongoing
education,
communication and awareness takes place via dedicated learning programs,
monthly meetings, sharing of best
practices
and other
initiatives.
The
Group
has also
a policy
in place
to address
any risks
associated
with
the
introduction, significant
modifications and periodic
monitoring of its products and services.
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.
The 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
the
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
order
to
strengthen
further
the
existing
Operational
Risk
Framework
according
to
increased
regulatory
expectations as
defined in the:
i) EBA Guidelines
on Internal Governance
(2021) under
Directive
2013/36/EU, (ii)
BCBS Revisions to the
Principles for the
Sound Management of Operational
Risk (2021), (iii) BCBS Principles
for
Operational Resilience, and (iv) EBA
Guidelines on ICT
and security risk
management EBA/GL/2019/04, the Group
had
decided
to
move
towards
managing
Non-Financial
Risks
(NFRs)
holistically,
whereas
NFRs
include
all
operational
risks as
well as
specific additional
risks such
as strategic
and reputational
risk. NFR
management
comprises
risk
identification,
assessment,
and
mitigation
while
employing
independent
oversight
and
an
effective
risk culture to
ensure that
business objectives
are met
within the
NFR appetite that
is reflected in
the
Group’s Policies
and Guidelines.
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 framework.
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
a
risk
management
framework
with
appropriate
methodologies,
modelling tools,
data
sources
as well
as
sufficient
and
competent
staff
to
identify,
assess,
monitor
and
mitigate
risks.
Moreover,
BRC
is
conferred
with
certain
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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approval authorities. The
BRC consists of five (5) 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
its
main
responsibility
is
to
oversee
the
risk
management
framework
of
the
Group.
As
part
of
its
responsibilities, the
MRC facilitates
reporting to
the
BRC on the
range of
risk-related
topics under
its purview.
The MRC supports
the Group
Chief Risk Officer
to identify material risks, to promptly
escalate them
to the BRC
and to ensure that the
necessary policies and procedures
are in place to prudently manage risks and to comply
with regulatory requirements.
In the
context of the
climate risk
stress testing
process,
the MRC
is responsible
to review,
challenge and
agree
on the
material climate
risks identified
in the
risk identification
process
as well
as the
transition scenarios
and
physical
risk
events
developed
in
the
scenario
design
process.
Further
to
MRC’s
clearance,
appropriate
management actions are proposed to the Executive Board Committee (“ExBo”) and consequently to the BRC for
review,
challenge and approval.
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 identification, assessment, monitoring,
measurement
and
management
of
the
risks
that
the
Group
is
exposed
to.
It
comprises
of
the
Group
Credit
General
Division
(GCGD),
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 (GORS),
the Group Model Validation and Governance Sector (GMVGS), the Group Risk
Management
Strategy
Planning
and
Operations
Division
(GRMSPO),
the
Supervisory
Relations
and
Resolution
Planning
Sector (SRRPS), the Group
Climate Risk Division (GCRD) and the
Risk Analytics Division (RAD).
As part of its overall system
of internal controls, Eurobank
Ergasias Services and Holdings
S.A. 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 undertaken
by the Group.
The most important types of
risk that are addresse
d
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 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. Furthermore,
the
GCCS assumes
oversight
and
supervisory
responsibilities
for
proper
operation
of
corporate
rating
and
impairment
models.
Moreover,
GCCS regularly reviews the adequacy of provisions of all loan portfolios. Finally, the
sector formulates
Group’s
credit
policies
while at
the
same time
it monitors
regulatory
developments
proposing
relevant
policy
updates
when
necessary.
GCCS
operates
independently
from
all
the
business
units
of
the
Bank
and
reports
directly to the GCRO.
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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 from 2021 applies 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 GMCRS 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.
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
has
the required systems and procedures
for the application
of the new regulatory framework
for market risk (FRTB)
according to the regulatory
plan.
Interest Rate Risk in the
Banking Book (IRRBB)
The IRRBB
is defined as
the current
and the
prospective
risk of a negative
impact to the
institution’s economic
value
of
equity,
or
to
the
institution’s
net
interest
income,
taking
market
value
changes
into
account
as
appropriate, which arise from
adverse movements
in interest rates
affecting interest
rate sensitive instruments,
including gap risk, basis risk and option risk.
GMCRS is the
unit responsible
for the
monitoring, control,
reporting and estimation
of IRRBB on
a group
level.
Both
the
Economic
Value
of
Equity
(EVE)
and
NII
sensitivity
to
a
number
of
stresses
on
interest
rates
are
estimated on a
periodic basis
and are compared
with the
approved
by BRC limits. The
Group is now
using the
recently established
Asset and Liability
Management (ALM)
tool for
a significant
part of the
analysis on a
solo
level. The
plan is to further
increase the
use of the
ALM tool for
any analysis related
to IRRBB on a
group level.
The
policy
for
the
management
of
IRRBB
as
approved
by
BRC
and
BoD
provides
a
clear
description
of
the
methodologies, governance,
limits that are used for
the management of IRRBB.
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
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,
control, monitoring
and
reporting the liquidity
of the Group.
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Operational
Risk
Operational
risk is defined as the
risk of loss resulting from inadequate
or failed internal processes,
people and
systems or from
external events.
This definition
includes legal
risk, but excludes
strategic and
reputational
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.
OpRisk Partners
and ORMUs
form
the
link
between Line 1 and
Line 2 of
the Three Lines of Defense Model for all
operational risk matters. In addition, OpRisk
Partners also exist at Units
that are part of Line 2
and Line 3
to ensure the appropriate operational risk oversight
in those functions.
Group Operational Risk Sector (GORS) has
been positioned as
an overlaying framework coordinator for all Non-
Financial
Risks
(NFRs).
The
GORS
overlaying
responsibilities
aim
to
harmonize
Two
Lines
of
Defense
(2LoD)
activities across the Group and to holistically ensure the effective,
consistent application of the NFR Framework.
2LoD
Units maintain
their
responsibilities
for
specific
Risk Theme(s)
owned.
NFR
management
comprises
risk
identification,
assessment, and
mitigation while
employing independent
oversight
and an effective
risk culture
to ensure that
business objectives
are met within
the NFR appetite
that is reflected
in the Group’s
Policies and
Guidelines. The update
and implementation of the
NFR Management Framework
is in progress.
Climate related risk
The
Group has
recognized climate
change as
a material
risk and based
on supervisory
guidelines, is
adapting
its policies and methodologies
for identifying and monitoring the
relevant risks.
Specifically,
climate
risk
is
the
risk
deriving
from
potential
loss
or
negative
impact
to
the
Group,
including
loss/damage
to physical
assets, disruption
of business
or system
failures,
from
the
adverse
effects
of climate
change and natural disasters.
Climate-related and environmental
risks are commonly understood to include the
following risks:
a)
Physical
risk, which
refers
to the
financial impact
of a
changing climate,
including more
frequent
extreme
weather
events and gradual changes in climate, as well as of environmental degradation,
such as air, water
and land pollution, water
stress, biodiversity
loss and deforestation,
b)
Transition
risk, which
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
Group is
adopting a
strategic
approach towards
sustainability,
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.
In this context, the Bank is in the
process of finalizing
its Financed Impact Strategy,
which will focus on:
a)
Clients’ engagement and awareness
to adapt their business so as to address
climate change challenges,
b)
Actions
for
supporting
customers
in
their
transition
efforts
towards
a
more
ESG-friendly
economic
environment,
c)
Enablers and tools such as frameworks
and products to underpin
Sustainable Financing,
d)
The risk assessment
of climate-related material
exposures.
In
line
with
good
practices
identified
by
the
ECB,
the
Financed
Impact
Strategy
of
the
Bank
will
focus
on
sustainable
financing
targets
/
commitments.
In
particular,
the
Bank
identified
total
portfolio
and
sectoral
targets
with
regards
to
financing
the
green
transition
of
its
clients.
To
facilitate
the
classification
of
sustainable/green
financing
opportunities
in
a
structural
manner,
the
Bank
has
developed
its
Sustainable
Finance
Framework
(SFF).
Through
its
SFF,
the
Bank
classifies
sustainable
lending
solutions
offered
to
its
customers,
specifying
the
applied
classification
approach
and
the
activities
defined
as
eligible
to
access
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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sustainable financing (eligible
green and social
assets). Similar initiatives for the establishment of
SFF framework
is under way in the subsidiaries.
Furthermore,
the
Group
has
updated
its
governance
structure
by
introducing
and
defining
the
roles
and
responsibilities in relation
to climate related
and environmental
(CR&E) risks, embedding
regulatory guidelines
and market practices.
The
CR&E Risk
Governance
involves
various
key
stakeholders
(i.e. Business
functions,
Units, and
Committees).
The Group applies a model of defined roles and responsibilities regarding the management of CR&E risks
across
the 3 Lines of Defense.
The Group Climate Risk Division (GCRD) has the overall
responsibility for overseeing, monitoring, and managing
CR&E risks. Specifically,
the GCRD operates
as Project office
responsible 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.
In
this
context, GCRD ensures the implementation of environmental
and sustainability initiatives (frameworks,
policies,
procedures and products)
and compliance with existing and upcoming sustainability-related regulations,
under
an ongoing bank-wide program, in alignment with the supervisory agreed roadmap, which is accelerated
where
possible.
Also,
GCRD
is
responsible
for
the
co-ordination
with
Business
and
Risk
Units,
the
preparation
and
submission for
approval of
the Financed
Impact Strategy,
as well as monitors
its implementation.
Furthermore,
the
GCRD leads
the 2nd
Line of
Defense independent
sustainable lending
re-assessment
process.
Specifically,
in the
context of implementing
the approved
Sustainable Finance
Framework
(SFF), the
Division is responsible
to
assess
the
sustainability
features
of
new
loans
and
products
according
to
the
criteria
set
within
the
SFF.
Further information
on ESG risk is provided in the
Consolidated Pillar 3 Report on the
Company’s website.
The Group applies the elements of the
Three Lines of Defense Model for the management of all types of risk. The
Three
Lines
of
Defense
Model
enhances
risk
management
and
control
by
clarifying
roles
and
responsibilities
within the organization. Under the oversight
and direction of the Management Body, the responsibilities of each
of these lines of defense
are:
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,
Line 2
- Monitor
risk and
controls
in support
of Executive
Management,
providing
oversight,
challenge, advice
and group-wide direction.
These mainly include the
Risk and Compliance Units,
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 19 to
the consolidated
financial statements for
the year ended 31 December
2022.
Non Performing Exposures
(NPE) management
The
Group,
following
the
strategic
partnership
with
doValue
S.p.A.
and
the
transition
to
the
new
operating
model
for
the
management
of
NPE,
realizes
the
NPE
Strategy
Plan
through
its
implementation
by
doValue
Greece for
the assigned portfolio
and the 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)
Remedial
Servicing
&
Strategy
Sector
(RSS)
has
the
mandate
to
devise
the
NPE
reduction
plan
and
closely
monitor the overall performance of the NPE portfolio as well as
the relationship of the Bank
with doValue Greece.
Furthermore,
following
Bank’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
Ιn
line
with
the
regulatory
framework
and
Single
Supervisory
Mechanism’s
(SSM)
requirements
for
Non-
Performing
Exposures’ (NPE) management,
in March 2023,
the Group
submitted its NPE Management
Strategy
for 2023-2025,
along with the
annual NPE stock targets
at both
Bank and Group
level. The
plan envisages the
decrease of the Group’s
NPE ratio at 5.2% at
the end of 2023 and at 4.5% in 2025.
In the
context of
its NPE
management strategy,
the
Group has
initiated, jointly
with the
other
Greek systemic
banks,
an
NPE
securitization
transaction
of
a
wholesale
portfolio
consisting
of
common
borrower
exposures
(project ‘Solar’). The
Group targets to the prudential
and accounting derecognition of the
underlying corporate
loan
portfolio
from
its
balance
sheet
by
achieving
a
Significant
Risk
Transfer
(SRT)
and
including
‘Solar’
securitization
under
the
Hellenic
Asset
Protection
Scheme
(HAPS),
with
the
senior
note
of
the
securitization
becoming
entitled
to
the
Greek
State’s
guarantee.
In
parallel,
the
Management
along
with
the
other
participating
banks
have
initiated
actions
towards
the
disposal
of
the
majority
stake
of
the
mezzanine
and
junior
notes
to
be
issued
in
the
context
of
the
above-mentioned
securitization
(note
20
to
the
consolidated
financial statements).
Macroeconomic Outlook
and Risks
2022 was marked by the war
in Ukraine, which gave rise
to a global –but
predominantly European–
energy crisis,
added
to
the
mounting
inflationary
pressures,
and
led
to
widespread
economic
uncertainty
and
increased
volatility in the
global economy and financial markets.
Nevertheless,
the post-pandemic recovery
continued for
a second consecutive year in
Greece, with its GDP growth overperforming that of most of its EU
peers. According
to
the
Hellenic
Statistical
Authority
(ELSTAT)
provisional
data,
the
Greek
economy
expanded
by
5.9%
on
an
annual
basis
in
2022
driven
by
strong
increases
in
household
consumption,
fixed
investment,
and
exports
of
services, with the European
Commission (EC) estimating the full-year
2022 growth rate at 5.5% and 1.2% in 2023
in its winter
economic forecast
(February
2023). The
inflation rate,
as measured
by the
change in the
12-month
average
Harmonized Index of Consumer Prices (HICP), increased
to 9.3% in 2022 according to ELSTAT,
primarily
as a result of supply-side
shocks (including the hikes in energy, food and other raw material prices, the
continued
disruptions in
the supply
chain and
the rising
nominal wages),
alongside the
steep post-pandemic
recovery
of
domestic and
external demand.
The
EC expects that
the inflation
rate
will decline
to 4.5% in
2023, and
further
de-escalate to 2.4% in 2024.
Moreover,
provisional ELSTAT
data shows that the average monthly unemployment
in
2022
decreased
to
12.4%,
from
14.8%
in
2021,
while
the
Organisation
for
Economic
Co-operation
and
Development (OECD)
in its latest report (January 2023) expects unemployment
to decline to 11.5% in 2023.
A significant boost to growth in Greece and in
other countries of presence is expected from European Union (EU)
funding,
mainly
under
the
Next
Generation
EU
(NGEU)
instrument
and
the
Multiannual
Financial
Framework
(MFF) 2021–2027,
EU’s long-term budget. Greece shall receive
EU funds of more than €30.5bn (€17.8bn
in grants
and €12.7bn
in loans)
up to
2026 from
NGEU’s Recovery
and Resilience
Facility
(RRF) to
finance
projects
and
initiatives laid down in its
National Recovery and Resilience Plan (NRRP) titled “Greece 2.0”.
The NRRP estimates
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, and the first two regular payments of €3.6bn each in April 2022
and January
2023 respectively.
Greece
has been
also allocated
about €40bn
through
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).
On the monetary policy front, although net
bond purchases under the temporary Pandemic Emergency Purchase
Programme (PEPP) ended in March 2022, as scheduled, the ECB will continue to reinvest principal from maturing
securities at least until
the end of 2024,
including purchases of Greek
Government Bonds (GGBs) over and above
rollovers
of redemptions. As
of 31 January 2023,
ECB net purchases
of GGBs under PEPP amounted
to €37.8bn.
Furthermore, the
Governing Council of the ECB, in line with its strong commitment
to its price stability mandate,
has proceeded with six rounds of interest rate hikes (in July, September,
October, December
2022, February and
in March 2023), raising the three
key ECB interest rates by 350 basis points in aggregate.
Moreover,
it approved
a
new
instrument
(the
“Transmission
Protection
Instrument”
–
TPI)
aimed
at
preventing
fragmentation
in the
sovereign
bonds
market.
Finally,
following
the
expiration
of the
special
terms
and conditions
applying
to the
TLTRO
III (Targeted
Longer-Term
Refinancing Operations)
on 23
June 2022,
the
ECB will
keep
assessing how
targeted lending operations
are contributing to its monetary policy stance.
On
the
fiscal
front,
the
general
government
balance
was
to
post
a
primary
deficit
of
1.6%
of
GDP
in
2022
according to
the 2023
Budget (latest
outlook point to
a primary
deficit of ca.
1% of GDP
or even
lower),
and a
primary surplus
of 0.7%
of GDP
in 2023
(2021: deficit
of 5%).
The
deviation
from
the
primary surplus
target of
3.5%
of
GDP
in
2022
shall
not
be
considered
a
violation
of
the
country’s
commitments
under
the
Enhanced
Surveillance (ES) framework, as in March 2020
the EC activated the so-called
general escape clause, which allows
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. The EC has proposed that the clause should be
extended
through 2023 and be deactivated in 2024. Greece
exited the ES regime in August 2022, following
the successful
completion of
the
fourteenth
and final
quarterly review
(May 2022).
The
total benefit
between 2018
and 2023
exceeds €6.1bn
(disbursements of €5.1bn
and interest reductions
of €1bn). The gross
public debt-to-GDP ratio
is
expected
to
decline
to
168.9%
and
159.3%
in
2022
and
2023
respectively
(2021:
194.5%)
owing
to
the
robust
economic recovery
and the
effect
of the
sharp price
level
increase on
nominal GDP.
The
above
forecasts
may
change in case
of potential adverse international developments that could affect energy and other goods
prices,
interest rates,
external and domestic demand, and bring about the need for additional fiscal
support measures.
Regarding sovereign
rating
changes in
the past
12 months,
DBRS Morningstar
upgraded
the rating
of Greece
to BB (high)
with stable
outlook fro
m
BB with
positive
outlook on
18 March
2022. Similarly,
Standard &
Poor’s,
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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on
22
April
2022,
and
Fitch
Ratings,
on
27
January
2023,
upgraded
their
rating
for
Greece
to
BB+
from
BB,
changing
their
outlook
to
stable.
Although
Greece’s
sovereign
credit
rating
remains
one
notch
below
the
investment grade according
to three of the four External Credit
Assessment Institutions (ECAIs) accepted by the
Eurosystem, the aforementioned
upgrades signal that the rating agencies’ view on the sustainability of Greece’s
fiscal
position
keeps
improving
despite
the
uncertain
economic
environment.
In
2022,
the
Greek
State
proceeded with
the issuance
of nine bonds of various
maturities (5-year,
10-year,
15-year and 20-year)
through
the Public Debt Management Agency (PDMA), raising
a total of €8.3bn from international financial markets.
On
17 January 2023, the PDMA issued a 10-year bond of €3.5bn at a yield of 4.279%
and more recently, on 29 March
2023, issued a 5-year
bond of €2.5bn at a yield
of 3.919%.
As of end 2022, the
cash reserves
of the Greek
State
stood in excess
of €30bn, and
as of early
February
2023, its
sovereign
rating
was one
notch below
investment
grade by
three of the
four ECAIs
accepted by
the Eurosystem
(DBRS Morningstar: ΒΒ (high);
S&P Ratings, Fitch
Ratings: BB+).
According to Bank of Greece (BoG) data, the stock of
credit to the non-financial private sector stood at €107.1bn
at the
end of
2022, from
€102.6bn at
the
end of
2021, marking
an annual
gross
increase
of 4.4%
in spite
of a
significant deleveraging
of non-performing
exposures through
the “Hercules
II” scheme. Adjusted
for write-offs,
reclassifications
and
foreign
exchange
fluctuations,
domestic
credit
to
the
non-financial
sector
increased
by
6.2%
in
2022.
On
the
other
side
of
the
ledger,
domestic
non-financial
private
sector
deposits
amounted
to
€185.1bn
at the end of 2022 from €175.5bn at
the end of 2021, increasing by 5.5%. This
significant annual growth
follows
the
sharp increase
in nominal GDP
and the
effect
of the
government’s
energy
crisis support
measures.
Provisional
BoG
data
shows
that
residential
real
estate
prices
increased
by
10.2% in
the
first nine
months
of
2022, and commercial
real estate prices
increased by 2.4%
in the first
half of 2022 compared
to their end-2021
levels.
In
2022,
the
geopolitical
turmoil
caused
by
the
war
in
Ukraine
has
resulted
in
the
deterioration
of
the
macroeconomic outlook in Central,
Eastern and Southeastern Europe
(CESEE) countries.
However,
the economic
downturn
in CESEE
region
has
not
been
that
sharp
as
formerly
anticipated,
given
the
resilience
the
regional
economies have
demonstrated
towards
the
war fallout.
Looking
ahead,
the
main risks
continue to
stem from
the lingering
geopolitical upheaval
and the inflationary
outlook. Prospects
over
inflation in the
region for
2023
have broadly
improved on the
back of energy prices
de-escalation. In this context,
regional Central Banks
have
embarked since mid-2021 to tightening monetary cycles by increasing the key
policy rates throughout 2022 and
with some of those not having
terminated yet the
restrictive policy.
In tandem with
the entire
CESEE region,
the Bulgarian
economy expanded
by 3.4%
in 2022 (2021:
7.6%),
based
on data from the
National Statistical
Institute of Bulgaria, supported by strong
growth in exports and by
wage
and social
transfer increases that compensated for increasing consumer prices, while inflation averaged at 15.3%
in 2022 (2021: 3.3%). According to EC’s winter economic forecasts (February 2023), real GDP is expected to grow
by 1.4% in
2023 and 2.5% in 2024
mainly due to the
implementation of
the Recovery
and Resilience Plan
which
is considered as the main factor behind the
expected rebound of investment growth,
while the HICP is expected
at 7.8%
in 2023.
In Cyprus,
according to
the EC’s
winter economic
forecasts
(February
2023) the
real GDP
growth
is forecasted
at 5.8% in 2022 and 1.6% in 2023 (2021:
6.6%) mainly based on stronger household consumption underpinned
by
government
measures
to compensate
for
high energy
prices, and
higher
exports of
services,
mainly in tourism
and transport,
which were
the main
growth
drivers in
the previous
three quarters.
Despite the
negative
effects
from
the
war
in
Ukraine,
the
tourism
revenues
expanded
by
63.2%
year
on
year
during
the
period
January-
November
2022, thus
the
role of
the
tourism sector
was dominant
for
economic growth
in 2022.
Respectively,
the
Consumer
Price
Index
(CPI)
is
estimated
at
8.1%
in
2022
and
4%
in
2023
(2021:
2.3%)
mainly
due
to
a
deceleration
in energy
and commodity
prices. Implementation
of the
Recovery
and Resilience
Plan and
much
stronger activity in the
Tourism sector in 2022 are
expected to boost investments in 2023.
Regarding the
outlook for
the next
12 months the
major macroeconomic
risks and uncertainties
in Greece
and
our
region
are
as
follows:
(a)
the
ongoing Russia
- Ukraine
war
and
its
ramifications
on regional
and
global
stability and security,
as well as the
European and Greek
economy, (b) a
potential prolongation
of the ongoing
inflationary
wave and
its impact
on economic growth,
employment,
public finances,
household budgets,
firms’
production
costs,
external
trade
and
banks’
asset
quality,
as
well
as
any
potential
social
and/or
political
ramifications
these
may
entail,
(c)
the
ongoing
and
potential
upcoming
central
bank
interest
rate
hikes
worldwide,
and
in
the
euro
area
in
particular,
that
may
exert
upwards
pressures
on
sovereign
and
private
borrowing
costs,
especially
those
of
highly
indebted
borrowers,
deter
investments,
increase
volatility
in
the
financial markets and lead
economies to slow down
or even a temporary recession, (d) the recent banking sector
turmoil to
continue and
expand in
the
euro
area, affecting
customers’
confidence,
with a
potential impact
on
assets under management levels and on liquidity, (e) the
impact of a potential curtailment or discontinuation of
the government energy support measures on growth, employment and the servicing of household and corporate
debt,
(f)
the
persistently
large
current
account
deficits
and
the
prospect
of
them
becoming
once
again
a
structural
feature
of the
country’s growth
model, (g)
the absorption
capacity of
the NGEU
and MFF funds
and
the
attraction
of
new
investments
in
the
country,
(h)
the
effective
and
timely
implementation
of
the
reform
agenda
required
to
meet
the
RRF
milestones
and
targets
and
to
boost
productivity,
competitiveness,
and
resilience, (i) a
delay in the
implementation of
planned reforms,
projects and the
budget’s fiscal agenda due
to
the
possibility of
the 2023
national elections
resulting in
an inability
or delay
to form
a government
with solid
Parliament majority,
(j) the geopolitical
developments in
the near region,
(k) the evolution
of the pandemic and
the
probability
of
emergence
of
new
Covid-19
variants
that
could
further
impact
economic
growth,
fiscal
balances
and
international
trade
by
prolonging
the
disruptions
in
the
global
supply
chain,
and
(l)
the
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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exacerbation of natural disasters due to the climate change
and their effect on GDP, employment, fiscal balance
and sustainable development
in the long run.
Materialization
of the
above
risks 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, asset quality, solvency
and
profitability of the
Greek banking sector. In this
context, the Group holds
non-significant exposure in Russian or
Ukrainian
assets
and
in
the
banks
that
have
recently
faced
solvency
or
liquidity
difficulties,
is
continuously
monitoring the
developments
on the
macroeconomic,
financial and geopolitical
fronts as
well as the
evolution
of its asset quality and
liquidity KPIs 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 in accordance with
the business plan for
2023–2025.
Share Capital
As at 31 December 2022:
a)
The
total
share
capital
of
Eurobank
Holdings
amounted
to
€816,349,051.76
divided
into
3,710,677,508
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 260,036 (31 December
2021: 784,540) (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%.
On 21 July
2022, the Annual General Meeting (AGM) of the shareholders of Eurobank Holdings approved, among
others,
the
offsetting
of a)
the
total of
the
account “Corporate
law Reserves”
amounting to
€6,919.3m
and b)
part
of
the
account
“Share
Premium”
amounting
to
€6,894.4m
with
accumulated
losses
of
equivalent
value
amounting to €13,813.7m,
included in the
account “Retained earnings/(losses)”. The
above offsetting,
which was
approved
by the
competent supervisory
authorities in
October
2022, does
not affect
the Company’s
own and
regulatory capital.
By decision of the Board of Directors dated 30.08.2022, the share capital increased
by €333,444.32, through the
issue of 1,515,656
new shares
of a nominal value
of €0.22 each. This
increase was effected
through the
exercise
of stock options
granted to key
executives of the
Group at
the price
of €0.23 per share.
The total
issue price of
the above
shares, amounting
to €348,600.88,
was fully paid
up in cash.
The
total difference
above
par (before
directly attributable expenses), which amounts to €15,156.66,
was credited into the “Share
premium” account.
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.
The exercise
price of each new
share would
be equal
to €
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.
The
options are
exercisable
in portions,
annually during
a period
from
one to
five
years.
Each portion
may be
exercised wholly
or partly and converted
into shares at the
employees’ option,
provided they
remain employed
by the Group until the first available exercise date. The share options also comply with the restrictions regarding
remuneration
of Law 3864/2010, as each
time in force.
In
this
context,
the
BoD approved
the
final
terms
and
the
implementation
of
the
2nd
series
of
the
plan
and
11,654,117
share
options
were
awarded
to
executives
and
personnel
of
the
Group
in
December
2022
at
an
exercise price of € 0.23.
Further information
is provided in note 39 to
consolidated financial statements.
Dividends
Pursuant to the provisions
of the Company Law 4548/2018, companies are
required to pay dividends of at least
35% of
after-tax profit,
after necessary
deductions for
the formation
of the
statutory reserve
and other
credit
balances in the income
statement that
do not arise from realized
earnings.
For the financial year 2022, Eurobank Holdings has no profits and
therefore
will not distribute minimum
dividend.
Furthermore,
in 2023
the
Group
has
announced
that
the
amount earmarked
for
dividend
distribution
will be
used in an optimal way to bid for the
1.4% HFSF stake through
a share buyback scheme.
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
32.99% 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
33.46%
(the
reporting date
for the
aforementioned
is on 14
July 2021, while
the percentage
calculation is
based on the
new total company’s listed shares that are tradeable on the Athens Stock Exchange, following the last share
capital increase due to the
exercise of stock option rights),
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
13
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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. Excluding
the 52,080,673
voting rights
held by
the
HFSF,
the
aforementioned
percentage
is formed
to 5.13%
(the
reporting date
for
the
aforementioned
is
on
1
December
2020,
while
the
percentage
calculation
is
based
on
the
new
total
company’s listed
shares that
are tradeable
on the
Athens Stock
Exchange, following
the last
share capital
increase due to the exercise
of stock option rights),
c)
The
“Helikon
Investments
Limited”,
controlling
5.01%
of
Eurobank
Holdings’
total
number
of
voting
rights,
corresponding to 185,957,220
voting rights of Eurobank
Holdings’ ordinary shares.
Excluding the 52,080,673
voting rights
held by
the HFSF,
the aforementioned
percentage
is formed
to 5.08%
(the reporting
date for
the aforementioned
is on 25 January 2023).
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
3,710,677,508
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.
Accordingly,
the TRFA,
among other
matters, specifies
the way
HFSF’s rights, as
derived
from the
provisions
of
Law
3864/2010
(“HFSF
Law”),
were
to
be
implemented,
in
particular
on
issues
relating
to
the
corporate
governance
of
Eurobank
Holdings
and
the
Bank
and
the
implementation
of
the
Bank’s
NPEs
management
framework.
However,
the
HFSF Law
has been
recently
amended by
the
Law 4941/2022
(Government
Gazzette
A’113/16.06.2022)
and
a
number
of
provisions
of
the
TRFA
either
do
not
arise
from
the
HFSF
Law
or
directly
contradict
with
it,
therefore
the
TRFA
has
become
out
of
date.
In
particular,
under
the
current
HFSF
Law
as
amended by Law 4941/2022, the HFSF no longer has the right to
carry out evaluations of Eurobank Holdings and
the
Bank’s
corporate
governance
framework
or
the
right
to
establish
evaluation
criteria
for
their
Board
members.
In
addition,
the
HFSF
representative
no longer
has
the
right
to convene
a
General
Assembly
or to
approve the
CFO or to veto any resolution of the Board which may jeopardise depositors' interests or materially
affect
liquidity,
solvency or,
in general,
the prudent
and orderly
operation
of Eurobank
Holdings and
the
Bank.
Moreover,
the facilitation
of the
management of the
Bank’s NPEs has also
been removed
from the
remit of the
HFSF which
has been
modified in
such a
way as
to explicitly
and visibly
envisage the
effective
disposal of
the
shares
it
owns
in
Eurobank
Holdings,
based
on
a
divestment
strategy,
with
a
specific
time
horizon
until
31
December
2025.
However,
under
the
current
HFSF Law,
the
HFSF has
the
right to
appoint one
Director
to the
Board
and this
representative
has the
right to
veto any
Board
resolutions
relating
to corporate
changes that
can
significantly
affect
HFSF’s
participation
to
Eurobank
Holdings
share
capital
(anti-dilution
protection).
Regarding the
right of the
HFSF’s representative
to veto any
Board resolution
related to dividend
distributions
or the remuneration
policy and proposed
bonuses to Board members
and General
Managers or their
deputies,
the current
HFSF Law provides
that this is
applicable to credit
institutions whose ratio
of non-performing
loans
to total loans exceeds 10%. Moreover,
the representative
of the HFSF has the right to request Eurobank Holdings
or the Bank’s Board to be convened
or any Board meeting to be adjourned for
up to 3 business days.
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, 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
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BoD is not entitled to vote on issues in which there is a conflict of interest 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 2022, the
following issues
were noted
in which there was a conflict of interest
with Eurobank
Holdings:
For
the
purposes of
decisions related
to the
conclusion of
a Share
Purchase Agreement
(SPA)
as well
as of
an
Amended
and
Restated
Shareholders’
Agreement
(SHA)
related
to
the
Bank’s
participation
in
the
company
”Grivalia
Hospitality
S.A”
(Grivalia
Hospitality
οr
GH)
between
the
Bank
and
1)
the
companies
“DEBT
INVESTMENT
OPPORTUNITIES
III
DESIGNATED
ACTIVITY
COMPANY”
(DOF
III)
and
“DEBT
INVESTMENT
OPPORTUNITIES
IV DESIGNATED
ACTIVITY
COMPANY”
(DOF IV)
(controlled
by
M&G), 2)
the
company
under
the corporate
name “GRIVALIA
MANAGEMENT COMPANY
SOCIETE ΑΝΟΝΥΜΕ”
(GRIVALIA),
which is a
related
party to both the
Bank within the meaning
of paragraph 2 (b)
of article
99 of
Greek Law 4548/2018
and Eurobank
Holdings within the
meaning of paragraph
2 (a) of article 99 of
Greek Law 4548/2018,
since the
Vice Chairman
of the
Board of Directors
of Eurobank
Holdings and the
Bank Mr.
Georgios Chryssikos
holds the
majority (68%)
of the shares of GRIVALIA and is
an executive member of the board of
directors of GRIVALIA and 3) the company
under
the
corporate
name
“Eurolife
FFH Life
Insurance
Single Member
Société Anonyme”
(Eurolife),
which is
a
related party of Eurobank Holdings within the
meaning of paragraph 2 (a) of article 99 of Greek Law 4548/2018,
as
a
related
party
of
Eurobank
Holdings
according
to
IAS
24,
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, a)
the
Vice
Chairman of
the
BoD Mr.
Chryssikos
also Vice
Chairman and
Chief Executive
Officer
of GRIVALIA
holding 68%
of its
share capital
and b)
the
member
of the
BoD Mr. Martin also Vice
Chairman of Strategic Investments
at Fairfax (a company that
holds the 33.47% of the
shares of Eurobank
Holdings), which controls
Eurolife’s
parent company “Eurolife
FFH Insurance
Group Holdings
Société Anonyme” and indirectly Eurolife
itself were note entitled to vote according
to the provisions of par.
3 of
Art. 97 of the Company Law 4548/2018 due
to conflict of interest.
For the
purposes of decisions related to the
conclusion of a Share Purchase Agreement
(SPA), which pertains
to
the
participation
of
“Eurobank
S.A.”
(Eurobank
or
Bank)
in
the
company
“Grivalia
Hospitality
S.A.”
(Grivalia
Hospitality οr GH)
between the Bank and “Eurolife FFH
Life Insurance Single Member Société Anonyme” (Eurolife),
which
is
a
related
party
of
the
parent
company
of
the
Bank,
“Eurobank
Ergasias
Services
and
Holdings
S.A.”
(Eurobank Holdings),
within the meaning
of paragraph
2 (a) of article 99 of Greek Law 4548/2018, according
to
IAS 24,
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
BoD member
Mr.
Martin also
is Vice
Chairman of
Strategic
Investments
at Fairfax,
which holds
32.99%
of the
shares
of
Eurobank
Holdings,
and
also
controls
Eurolife’s
parent
company,
“Eurolife
FFH
Insurance
Group
Holdings Société Anonyme”,
and indirectly Eurolife
itself, 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.
For
the
purposes
of
decisions
relating
to
the
Stock
Options
plan
(1st
series
exercise
and
2nd
series
implementation) 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.
External Auditors
The Eurobank
Holdings’ Shareholders
Annual General Meeting
held on 21 July 2022 approved
the appointment
of KPMG, as
statutory auditor
for the
financial statements
(separate
and consolidated)
for the
year ending
31
December 2022.
During
2022,
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
The
Eurobank
Holdings Group
(the
Group)
offers
a wide
range
of financial
products
and services
in retail
and
business
banking
and
has
a
significant
international
presence
in
four
countries
outside
Greece
(see
further
information
in the
section “International
Activities”).
It is
among the
leading providers
of banking services
and
credit
to large
corporates,
SMEs, small
businesses,
professionals
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. In addition,
the Group has a strategic
focus in fee-
generating
activities, such as asset management, private banking,
equity brokerage,
treasury sales, investment
banking, factoring, real
estate, trade finance
and bancassurance.
The Group has a diversified (through business line, geography and customer) and resilient business model,
which
is based
on three
revenue
streams i.e.
the
Greek
banking operations,
the
international
activities and
the
real
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estate
business.
Its
strategy
aims
at
optimizing
its
financial
performance,
maintaining
a
strong
capital
and
liquidity base, rewarding its
shareholders as well as contributing
to the economy
and society in
a holistic manner.
The Group
continues to implement the Transformation
Program “Eurobank
2030”, which is a material enabler in
achieving
the
bank’s
strategic
objectives
and
enhancing
its
competitive
position,
as
it
focuses
on
business
growth, sustained
operational resilience,
constantly improving operational
efficiencies and, ultimately,
ensuring
increased
customer
value
and
satisfaction.
In
tandem,
the
Bank
is
investing
in
the
People
–
Technology
–
Sustainability
three-fold,
by
combining
cutting
edge
technology
and
the
expertise
of
its
highly
trained
staff,
using best practices to contribute
to the effort
for sustainable development
for all.
Its operating model evolves
around the following
key pillars:
a)
Financing
landmark
projects
and
investments
of
large
and
medium
size
businesses,
mainly
through
investments based on ESG criteria,
b)
Fully supporting SMEs, in combination with
the major funding potential
available through European
and/or
Greek programmes for
small businesses, aiming to boost their competitiveness, gain access to international
markets, create jobs
and thus distribute the benefits
of growth across
society,
c)
Sustaining a leading position in Retail Banking by
offering
high quality services and innovative
products to
distinct client segments leveraging on advanced multi-channel strategies and tailored to customer evolving
needs,
d)
Developing a people-centred
‘phygital’ model, a hybrid of physical and digital, that combines state-of-the-
art technological
infrastructure
with the
Group’s
human resources,
offering
simple, fast,
personalised, and
secure services.
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)
designs and offers savings and investment
products to its depositors and investors; makes
appropriate use
of available funds for supporting
households and businesses to realise
their plans, financing the
economies
in which it operates,
b)
deploys a client-centric orientation
with segmental approach
and relationship-based management,
c)
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,
where
diversity,
equity
and inclusion are strongly promoted,
d)
invests
in IT
infrastructures
and digital
transformation
to systemically
address
the
evolving
technological
developments and continuously
improve its business
and operational
model,
e)
has
established
a
system
of
internal
controls
that
is
based
on
international
good
practice
and
aims
to
minimize the
possibility of error
or financial loss,
to protect
the interest
of shareholders
and depositors, as
well as to ensure that the
requirements of the relevant
regulatory authorities are complied with at all times,
f)
uses natural resources
for its operation,
while being committed to minimizing its environmental footprint by
adopting environmentally friendly practices and promoting a green
economy. Green procurement
practices
are applied, embedding environmental
specifications and guidance
for selection of products
and suppliers,
g)
develops
an ongoing
dialogue
with stakeholders
and supports
society and
local
communities. The
Group
monitors
and
reviews
information
related
to
its
stakeholders
and
their
requirements,
shaping
a
specific
framework
of cooperation
and approach to communication
in each case.
The corporate
governance
principles of transparency,
credibility, social
responsibility and accountability define
the framework
for the achievement
of the Group’s objectives, govern
the organization, operations
and activities
and reflect
its values,
safeguarding
the
interests
of shareholders
and of
all other
stakeholders.
The
corporate
values of empathy, drive, cooperation, innovation and trust support
a strong yet adaptive business
culture, which
enables
the
Group
to provide
top quality
services
to every
client, household
or business,
to support
inclusive
growth and to create
sustainable prosperity for
all the communities it serves.
Impact Materiality Analysis
Materiality analysis is the key process used to define
the content of the Annual
Report - Business &
Sustainability
and
is
conducted
through
stakeholder
engagement
(including
an
electronic
survey
targeted
at
internal
and
external stakeholders).
Adopting the
new methodology
of the
GRI Standards
(2021), the
Bank has
proceeded
with
the
identification,
assessment,
prioritization
and validation
of the
positive
and negative
effects
that
the
Bank creates or may create on the
environment, society and the
economy.
An
integral
part
of
the
Bank’s
approach
towards
Sustainable
Development
is
the
fostering
of
strong
relationships, cooperation
and mutual benefit with all
stakeholders affected
directly or indirectly by its
activities.
In
this
context,
the
Bank
promotes
two-way
communication
and
develops
an
ongoing
dialogue
with
stakeholders.
The overall
Bank’s Materiality Analysis methodology,
the validated Material Topics,
Sustainability Indicators per
the
GRI
Standards
and
information
regarding
initiatives
across
the
ESG
spectrum
along
with
ESG
data
submitted by the Group’s
subsidiaries are included in the Annual Report 2022 – Business & Sustainability, which
is published on
www.eurobankholdings.gr.
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Group’s approach
towards sustainable development
The
Group
is constantly
committed to
investing
in sustainable
development
and to
consistently designing
its
actions to improve
its environmental performance,
social responsibility and corporate
governance. Its strategic
objective
is
to
adapt
its
business
and
operation
in
a
way
that
addresses
climate
change
challenges,
to
accommodate social
needs within
its banking business
model, and to
safeguard
prudent governance
for itself
and
its
counterparties,
in accordance
with
supervisory
initiatives
and
following
international
standards/
best
practices.
Committed to actively
contributing to the
achievement
of the
United Nations Sustainable
Development
Goals
(SDGs) and the
2030 Agenda
goals, the
Bank is a
signatory of
the UN
Global Compact
since 2008.
According
to the commitment to the UNEP FI Principles for Responsible Banking (PRB)
since 2019,
in line with the SDGs and
the Paris Agreement on Climate Change, the Bank issued its 2nd Progress Report which was incorporated in the
Annual Report 2021 –
Business & Sustainability. According to UNEP FI individual feedback report on the 2nd PRB
Progress
Report,
Bank’s
strengths
were
highlighted
(Impact
analysis,
Sustainable
finance
and
green
bond
frameworks,
employee
training
and integrated
reporting)
and the
way forward
for
full implementation
of the
Principles for
Responsible Banking
was set
through
the
identification
of the
two areas
the
Bank has
the
most
significant impacts, performance
measurement and pertinent
target
setting.
A dedicated Group
-wide programme
to address the requirements
of the ESG ecosystem
The Group
launched an initiative,
namely “Program
Field”, with an
aim to implement
its sustainability strategy,
integrate
climate risks,
fulfil its
UNEP FI
signatory commitments
as well
as to
ensure
readiness
to comply
with
upcoming
sustainability-related
regulations
(i.e.
“EU
Green
Deal”,
ECB
Guide
on
climate-related
and
environmental
risks, EU
Taxonomy
Regulation,
etc.). Through
this initiative,
the
Group
has identified,
assessed
and implements
climate-related and environmental
(CR&E) risk action plans within the
three Lines of Defence.
Group ESG Strategy
The
Bank is finalizing
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.
The ESG Strategy
will include targets and commitments classified in two
key dimensions:
A.
Operational
Impact Strategy: targets
related to the ESG operational
footprint of the
Bank
B.
Financed Impact Strategy: targets
and commitments related to financed impact resulting
from lending
and investing activities to specific sectors and clients.
A. Operational
Impact Strategy
The Bank’s Operational
Impact Strategy will focus
on three strategic
axes:
●
Environmental impact
(operational
net zero, paperless
banking, circular economy),
●
Social and business impact (sustainable procurement,
socio-economic effect,
transparency),
●
Employer impact
(diversity and inclusion,
wellbeing culture, innovative
environment).
B. Financed Impact Strategy
The Bank’s Financed
Impact Strategy
will focus on:
●
Clients’
engagement
and
awareness
to
adapt
their
business
so
as
to
address
climate
change
challenges,
●
Actions
for
supporting
customers
in
their
transition
efforts
towards
a
more
ESG-friendly
economic
environment,
●
Enablers and tools such as frameworks
and products to underpin Sustainable
Financing,
●
The risk assessment
of climate-related material
exposures.
The
ESG Strategy,
through
a set
of actions
with measurable
targets, indicates
the Group’s
vision in
the
short,
medium and long term in relation
to the environment,
its social footprint,
with focus
on its people, and the ESG
impact in the market
and its portfolio.
Progress against targets
for 2022
The
Group
is
committed
to
specific
ESG
Financed
Impact
targets
which
include
both
quantitative
and
qualitative elements. More
specifically,
the relevant targets
for 2022 for
the Bank included the
following:
1.
The
operationalization
of the
Sustainable Finance
Framework
(SFF) in
terms of
policies,
procedures,
and
processes.
2.
The expansion
of data collection capabilities
for climate risk related
data.
3.
The increase
of penetration of ESG products.
4.
The
assurance
that
at
least
20%
of
the
annual
gross
new
corporate
disbursements
are
green
/
environmentally sustainable.
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Based
on actual
performance
the
Bank has
successfully
managed
to accomplish
all 2022
Impact
targets,
as
follows:
1.
Operationalized
the SFF.
In particular:
a)
Has
developed
a
web-based
SFF
Assessment
Tool
for
the
Corporate
Portfolio,
to
underpin
the
classification
and evaluation
of sustainable/ green
financing opportunities
in a structural
manner.
The
SFF
Assessment
Tool
automates
the
process
of
assessing
the
Bank’s
financings
against
the
criteria
defined in the SFF,
b)
Has completed
the roll
-out of
the SFF
as part
of its loan
origination process,
while the
SFF is currently
being localized to international
subsidiaries,
c)
Is assessing
a series
of new proposed
Retail SFF-aligned
products, also
taking into account
upcoming
Greek Government
Initiatives (ongoing / recurring
initiatives),
d)
Is examining (ongoing / recurring
initiatives) solutions
for converting
other
climate mitigation
products
into SFF-eligible products.
2.
Enhanced its capabilities for
the collection of climate
risk data
The
Bank is continuously
enhancing its capabilities
for the
collection of
climate-related
and environmental
risk
data, through
integration
of additional
information
requirements
in the
credit process
as well
as cooperation
with third party data
providers.
3.
Increased ESG product offerings
and designed additional SFF-aligned products
The Bank received
the Silver Awards
for Sustainable Financing for Tourism
in the Green Awards 2022 and going
forward, it aims to develop
additional ESG dedicated products
for the Retail
portfolio.
4.
Achieved its target for over
20% of the annual gross new corporate disbursements to be classified as green/
environmentally sustainable.
More specifically,
as regards Sustainable Financing Targets
in the Corporate Portfolio,
for 2022, new green SFF-
aligned disbursements
in the
Corporate
Investment
Banking (CIB)
portfolio
of the
Bank constituted
more than
20% of
the
total disbursements
in the
CIB
portfolio,
indicating
the
Bank's dedication
to the
support of
green
transition
of its
clients’ operations.
The
total outstanding
balance
of existing
green exposures
was more
than
€1,5bn as
of 31
December
2022, indicating
a year-on-year
growth
in green
financing of
over
60%. Specifically,
more than
€900mn are
attributed to
Renewable Energy
Sources (RES)
projects, while
over
€400mn have
been
allocated to Sustainability Linked Loans,
supporting clients’ sustainable transition.
Further
information
on the
Bank’s 2023 ESG
targets and
commitments is
provided
in the
Consolidated Pillar
3
Report on the Company’s website.
ESG Governance
The
Group
has updated
its governance
structure
by introducing
and defining
the
roles
and responsibilities
in
relation to climate related
and environmental risks, embedding regulatory
guidelines and market practices.
The
updated
governance
structure
aims
to
further
enhance
the
effective
oversight
of
climate
related
and
environmental risks at
management/ board level,
both for transition
and physical risks.
The
CR&E Risk
Governance
involves
various key
stakeholders
(i.e., Business
functions,
Units, and
Committees).
The Group applies a model of defined roles and responsibilities regarding the management of CR&E
risks across
the 3 Lines of Defense.
Moreover,
the 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 updates the Board
Risk Committee
(BRC),
in
alignment
with
the
BRC
Terms
of
Reference,
and
the
BoDs
of
Eurobank
Holdings
and
the
Bank
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:
•
Provides strategic
direction on ESG initiatives
•
Reviews the
ESG Strategy prior to approval,
•
Integrates the
elements of the ESG Strategy
into the Bank’s business model and operations,
•
Regularly measures and analyses the
progress of the
ESG goals and performance
targets
•
Ensures the proper
implementation of ESG-related
Policies and Procedures
•
Reviews and approves
ESG-related reports and ensures
that are in accordance
with related standards
and guidelines.
ESG Data quality
The
Group
has
established
processes
and
policies
to
ensure
the
data
quality
for
data
related
to
both
operational
and financed impacts.
The
ESG
Division
is
responsible
for
the
collection,
calculation
and
review
of
data
related
to
the
operational
impact in line with the
associated certified management
systems (ISO 14001/EMAS, ISO 50001, ISO 14064).
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The
Group Climate
Risk Division
is responsible
for
establishing internal
reporting and
disclosure
processes
for
the
financed
impact
as well
as
the
oversight
of the
associated
data
collection,
in
line
with
the
Group’s
data
governance framework.
Internal and external ESG awareness
and capacity building
The Group
is placing great emphasis in building capacity
among its employees to be
able to support its clients
on their
sustainability plan and
their green
transition. To
this end, the
Bank implements
an ESG upskilling
plan
for its
employees as
well as launching
ESG awareness
initiatives for
its clients. The
internal awareness
sessions
regarding ESG and CR&E matters cover both members of the
management body and other stakeholders
across
the Bank
(e.g. Business
Units). Additionally,
the Bank
has offered
trainings to
stakeholders
from all
Three
Lines
of Defense
(i.e., Business
Units, Risk
Management
Units, Internal
Audit function)
regarding
the
SFF in
order
to
enhance their understanding
of sustainable financing criteria.
ESG ratings
The Bank actively participates in internationally renowned ESG ratings to highlight the continuous improvement
in its environmental, social and governance
performance, upgrade
the relevant disclosures and further
enhance
investor confidence in its practices. In 2022, the Bank posted improvements
compared to 2021 in important ESG
ratings such as Sustainalytics (from
15.3 to 12.1, maintaining the
“Low Risk” mark), Vigeo Eiris - Moody’s (from
38
to 50,
improving
from “Limited”
to “Robust”
mark), S&P
(from 48
to 50)
and Refinitiv
(from 69
to 79).
Specially
with respect to Sustainalytics, the Bank achieved the international “ESG Industry Top Rated” distinction and has
been added in the “Sustainalytics' Top
-Rated ESG Companies List”.
In the context of
networking with
market for
sustainable development
issues,
the Bank participates
in the ESG
Coordinating
Committee
of
the
Hellenic
Bank
Association,
the
Corporate
Responsibility
Committee
of
the
American-Hellenic Chamber
of Commerce and
the Greek Network
of the UN Global Compact.
Group’s implementation
of the EU Taxonomy
Regulation
The
EU Taxonomy
(Regulation
(EU) 2020/852
of the
European
Parliament
and of
the
Council) was
adopted in
2020 by the
European Parliament
and represents
an important step for
the EU to achieve
the Paris
Agreement
climate
neutrality
goals.
It
sets
out
the
criteria
to
establish
a
common
classification
system
for
sustainable
economic activities. The
EU Taxonomy
Regulation determines
whether
an economic activity
is environmentally
sustainable and obligates
financial and non-financial
entities subject to
the Non-Financial
Reporting Directive
(NFRD) to disclose the
alignment of their
activities. Separate
reporting requirements
and extensive criteria
are
established
for
financial
and
non-financial
undertakings
under
the
Art.8
Delegated
Act
of
EU
Taxonomy
Regulation.
The
key
indicator
of alignment
for
credit
institutions is
the
Green Asset
Ratio
(GAR), which
companies will
be
required
to
publish
starting
in
2024.
It
determines
the
extent
to
which
activities
comply
with
the
criteria
of
Taxonomy.
It
is
the
ratio
of
a
company's
taxonomy-aligned
assets
to
covered
assets
(total
assets
excluding
exposure to sovereigns,
central banks and the
trading portfolio).
For the
years 2021 and
2022, financial undertakings
subject to NFRD are
required to disclose
the proportion
of
taxonomy-eligible
and
taxonomy
non-eligible
activities
related
to
the
environmental
objectives
of
climate
change adaptation and
climate change mitigation.
The following
four additional
environmental objectives
are
expected to be adopted in 2023:
a)
Sustainable use and protection
of water and marine resources,
b)
Transition
to a circular economy,
c)
Pollution control
and prevention,
and
d)
Protection and restoration
of biodiversity and ecosystems.
The EU is also working on
a Social Taxonomy to classify economic activities that significantly contribute to
social
goals in the EU, as well
as an Extended Environmental
Taxonomy,
that will focus on
supporting environmentally
sustainable transitions
of different
categories
of economic
activities. However,
it is
more likely
that
these
new
taxonomies will not be prioritized
in the immediate
future.
Integration of Taxonomy
in the Group’s
business strategy,
operating model, products
and customers
The Group recognizes the significance
of the impact of its activities to
the 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.
Further information
about ESG
Governance and the
way that the Bank has integrated ESG and Climate risks in its operating
model is provided
in “ESG Governance”
in the section “Group’s
approach towards sustainable
development”. Moreover,
it is noted
that, as
part of regulatory
expectations, the
Bank has fully
integrated
climate related
and environmental
risks
through the
Three Lines of Defense,
embedding regulatory guidelines and market
practices. The
Group Climate
Risk Division (GCRD) is working towards the advancement of Program
Field, covering the implementation
of the
Climate Risk Roadmap, implementing the
Bank’s CR&E risk strategy and ensuring compliance
with existing and
upcoming sustainability-related regulations. In this context, within 2023, GCRD will monitor the implementation
of the Financed impact
strategy and definition of the
approach and data requirements
for portfolio
alignment.
The
Group strives
to invest in
sustainable development
with the
aim of improving
its impact on
environmental
sustainability, social
responsibility,
and corporate
governance.
The Bank
is gradually integrating
ESG practices
and aspects within its operations and services and will continue to do so as the ESG elements and requirements
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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evolve.
The
Bank’s
Sustainable
Investment
Framework
(SIF)
outlines
the
potential
sustainable
investment
approaches/strategies,
the
selection
of
eligible
investments
and
the
monitoring
frequency
of
the
sustainable
portfolio
(the
sustainable
portfolio
is
part
of
the
Bank’s
investment
portfolio).
The
Framework
specifies
the
respective
criteria
that
are utilized
in the
Bank’s banking
books investment
strategy,
along with
the
selection
process of eligible sustainable investments.
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
(SFF) 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 and b) The EU
Taxonomy
Climate Delegated Act.
Through its SFF, 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
SFF
scope
encompasses
a
wide
range
of
sustainable
lending
products
covering
both
Wholesale
and Retail
banking
portfolios.
Moreover,
the
Bank 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).
The Group aims to further align the SFF with the EU Taxonomy requirements,
that will underpin the identification
of exposures aligned with the EU Taxonomy,
the calculation of Green Asset Ratio
(GAR) and supplementary key
performance
indicators.
GAR
constitutes
the
key
indicator
of
alignment
for
credit
Institutions
under
the
EU
Taxonomy
Regulation. The latter
will be disclosed with reference date of 31 December 2023 in line with the Pillar
III timeframe.
Aiming
to
integrate
the
SFF
into
its
core
operations,
the
Bank
has
developed
governance
structures
and
functions as
well as
a digital tool
(Sustainable Finance
Framework
assessment tool)
that facilitate
the day-to-
day implementation of the
SFF.
The
SFF assessment
tool automates
the process
of assessing the
financings against
the criteria
defined in
the
SFF and incorporates both the internal criteria defined by the Bank (and verified by an independent third party),
as
well
as
the
assessment
steps
and
criteria
defined
by
the
EU
Taxonomy
regulation.
Through
the
SFF
assessment
tool,
users
categorize
financing
to
the
applicable
eligible
activity
and
are
guided
through
the
assessment
steps
which
involve
substantiating
alignment
with
the
criteria
of
each
step,
including
Taxonomy
alignment
assessment
(Technical
Screening
Criteria,
Do
Not
Significant
Harm
criteria,
Minimum
Social
Safeguards).
Central element of the Bank’s ESG strategy
and the SFF is to support the net zero transition
of its clients. To this
end, the
Bank achieved
its 2022 goal,
with greater
than 20%
of its annual
gross new
corporate
disbursements
being
classified
as
Green/
Environmentally
sustainable.
Further
information
is
provided
in
“Financed
Impact
Strategy”
in the section “Group’s
approach towards
sustainable development".
Going forward, the Bank’s key
priorities include the development
of a strong and realistic roadmap towards net
zero transition and the
increasing client support towards climate transition and sustainable financing. The
Bank
also aims to disclose its
financed impact targets at portfolio and sectoral level and further
integrate climate risk
regulatory requirements
into its business strategy and
risk management framework.
Disclosures relating to Article 8 of the
Taxonomy
Regulation for
2022
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 abovementioned
article, the transitional
rules for the
period from 1 January 2022 until 31 December
2023
are limited to the reporting of the
extent to which their customers
and counterparties’ activities are
Taxonomy-
eligible as well as information
on assets that cannot
be assessed under the Taxonomy
Regulation.
The Group
as a financial institution is required to use clients' concrete
eligibility information
in order to disclose
their
own
taxonomy
eligible
ratio.
In the
case
of corporate
clients,
credit
institutions
are
only allowed
to use
actual
information
that
has
been
disclosed
by
clients
reporting
under
the
Non-Financial
Reporting
Directive
(NFRD).
Last
year,
such
reported
information
was
not
yet
available.
However,
NFRD
companies
have
now
published
their
eligibility
percentages
for
2021
based
on their
revenues,
capital
expenditure
and
operational
expenditure.
Companies
may
disclose
additional
information
on
a
voluntary
basis.
The
Group
has
opted
to
voluntarily disclose additional information under ‘EU Taxonomy voluntary disclosures’. Voluntary
reporting under
the Taxonomy
Regulation can
enable non-financial
and financial
entities to provide
more explanation
of their
activities.
The
preparation
of
mandatory
reporting
of
Taxonomy
eligibility
as
well
as
the
aforementioned
voluntary
disclosures
which are
presented below,
are based
on the
consolidation
for
the
Group,
in accordance
with the
supervisory
reporting
of
institutions
according
to
the
Commission
Implementing
Regulation
(EU)
2021/451
(FINREP).
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Specifically, data
of the Group’s
internal systems is used for reporting the
assets while Taxonomy
eligibility KPIs
of
NFRD
counterparties
are
collected
based
on
the
latest
published
annual
reports.
The
identification
of
companies subject to
NFRD and companies
not subject
to NFRD has
been carried
based on internal
customer
segmentation data
used for FINREP purposes.
Lastly,
it
is
noted
that
the
Complementary
Delegated
Act,
which
entails
economic
activities
related
to
the
nuclear
and
gas
industries,
was
adopted
by
the
European
Commission
in
2022
and
entered
into
force
on
1
January 2023.
Consequently,
the
Group's
assessment
of the
eligibility of
assets for
the
financial year
2022 is
based on the
latest available eligibility KPIs
and these
KPIs do not include
activities under the
Complementary
Delegated Act mentioned
above.
The data as of 31 December
2022 have been prepared based
on a best effort basis to adhere
to the applicable
regulations and will evolve
in the future
as further
information becomes
available from counterparties
and new
regulatory
developments.
During
2022,
the
Group
continued
its
work
on
implementing
the
EU
taxonomy
requirements
and
further
enhancing
its
reporting
methodology.
Information
about
the
Group’s
processes
to
ensure
data
quality
is
provided
in
“ESG
data
quality”
in
the
section
“Group’s
approach
towards
sustainable
development".
The reported
KPIs are included in the table below:
31 December 2022
Assets
Amount
(in €
million)
% of total
assets
⁽
²
⁾
1.
Taxonomy
-eligible assets
⁽
¹
⁾
11,937
14.36%
2. Taxonomy
non-eligible assets
62,138
74.76%
of which corporate exposures to non-NFRD counterparties
30,719
36.96%
of which derivatives, hedge accounting
1,022
1.23%
of which on-demand interbank loans
30
0.04%
3.
Assets to central governments,
central banks, supranational
issuers
8,912
10.72%
4.
Trading
portfolio
134
0.16%
Total
assets (1+2+3+4)
⁽
²
⁾
83,121
100%
Impairment for debt
instruments at amortized cost and other
adjustments according to EU Taxonomy
methodology
(1,661)
Total
assets according to the
Consolidated balance sheet
as at
31/12/2022
81,460
(1)
The Taxonomy
-eligible assets
of the Group using
only the Turnover KPI of
the non-financial counterparties
subject to
NFRD amount
to €11,637m,
that is
the 14%
of the
total assets and
the Taxonomy
non-eligible assets amount to
€62,437m, that
is the
75% of the
total assets.
(2)
The
total assets
in the
KPIs above
are presented
at
their
gross
amounts (except
for
collateral
obtained
by taking
possession
included
in
Taxonomy
eligible
and
non-eligible
assets,
which
is
presented
in
carrying
amount),
according
to
EU
Taxonomy
methodology.
Clarification of Taxonomy
-related KPIs
The Taxonomy
-eligible assets presented in the table above include the reported
eligibility for exposures to non-
financial companies subject to NFRD based on
the average
of the Turnover
and capital expenditure (CapEx) KPI
published by
the counterparties,
while the
percentage
based on
their
turnover
is included
in the
footnote.
The
Taxonomy
KPI
operating
expenses
(OpEx) is
not
used
for
assessing
taxonomy-eligible
activities.
For
financial
undertakings subject
to NFRD, the
Group’s
exposures have
been weighted
to the
counterparty’s proportion
of
Taxonomy
-eligible
assets.
Furthermore,
no
distinction
between
general
purpose
loans
and
specific
purpose
loans is made.
In order
to determine
which companies
are subject
to the
NFRD and
calculate
the taxonomy
eligible KPIs,
an
assessment
is
carried
out in
order
to determine
that
all of
the
following
criteria
are
met:
a) if
the
country
of
incorporation of the
counterparty is in the EU, and b) whether
the enterprise is either
a listed company, a credit
institution, or
an insurance
company,
and c)
whether
the entity’s
net revenue
exceeds €40m
or its
total assets
exceed €20m
and d)
the counterparty
has over
500 employees.
Financial and
non-financial undertakings
that
do not meet the
aforementioned
requirements are
identified as non-NFRD.
Undertakings that are not required
to report under the EU Taxonomy
regulation (non-NFRD) are not included in
the calculation of eligible assets since
estimations in mandatory reporting are not
allowed. Therefore,
assets on
the Group’s
balance sheet to non-NFRD undertak
ings are not assessed for
taxonomy eligibility.
In accordance with the
instructions set out in Annex V of Delegated Regulation,
the exposures to be included in
the
numerator
encompass
banking
book
exposures
in
gross
carrying
amounts
in
respect
of
NFRD-relevant
counterparties and households. Regarding household exposures, ownership of immovable property and vehicles
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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is considered
as a
Taxonomy
-eligible economic
activity.
For
this reason,
loans to
households
collateralized
by
residential
immovable
property,
vehicle
loans
and
repossessed
real
estate
collaterals
are
assessed
as
Taxonomy
-eligible, whereas any other type of household exposures are currently not considered to
be taxonomy
eligible.
Assets
of
non-NFRD
counterparties,
derivatives,
hedge
accounting
and
on-demand
interbank
loans
are
not
included in the calculation of Taxonomy-eligible assets and presented separately in the share of Taxonomy
non-
eligible assets. The mandatory
metrics are based on the
denominator total assets.
EU Taxonomy
voluntary disclosures
Along
with
mandatory
disclosures,
the
Group
implemented
increased
information
with
a
breakdown
of
Taxonomy eligible and non-eligible assets on a
voluntary basis. The purpose is to enhance transparency, provide
additional information
of the metrics and present
the eligibility proportion
of its assets.
31 December 2022
Assets
Amount
(in €
million)
% of total
covered
assets
⁽
¹
⁾
% of total
assets
⁽
¹
⁾
1. Taxonomy
-eligible assets
⁽
²
⁾
11,937
16.11%
14.36%
of which exposures to households
10,545
14.24%
12.69%
of which corporate exposures to undertakings under the NFRD
827
1.12%
0.99%
of which collateral obtained by taking possession: residential and
commercial immovable properties
565
0.76%
0.68%
2. Taxonomy
non-eligible assets
62,138
83.89%
74.76%
of which exposures to households
3,100
4.18%
3.73%
of which corporate exposures to undertakings under the NFRD
3,963
5.35%
4.77%
of which exposures to regional governments or local authorities
25
0.03%
0.03%
of which corporate exposures to non-NFRD counterparties
30,719
41.47%
36.96%
of which derivatives and hedge accounting
1,022
1.38%
1.23%
of which on-demand interbank loans
30
0.04%
0.04%
of which other assets
23,279
31.43%
28.01%
Total
covered assets
⁽
¹
⁾
74,075
100%
89.12%
3. Assets to central
governments,
central banks, supranational
issuers
8,912
10.72%
4. Trading
portfolio
134
0.16%
Total
assets
⁽
¹
⁾
83,121
100%
Impairment for debt
instruments at amortized cost and other
adjustments according to EU Taxonomy
methodology
(1,661)
Total
assets according to the
Consolidated balance sheet
as
at 31/12/2022
81,460
(1)
The total assets and total covered assets in the KPIs above are presented at their gross amounts (except from collateral obtained
by taking possession, which is presented in carrying amount), according to EU Taxonomy
methodology.
(2)
In terms of eligible
assets, a breakdown of the Group’s activities shows
that 12.69% stem from lending
to households (vehicle loans
and lending
with collateral
in real
estate which
are Taxonomy
-eligible in
their
entirety), while
lending to
undertakings subject
to
NFRD represents 0.99%
and repossessed collaterals
represent 0.68%.
The voluntary
metrics are
based both
on the denominator
total assets and total
covered
assets. Total
covered
assets amount to
€74,075m, excluding exposures to
sovereigns and the trading portfolio. The share of taxonomy-
eligible assets to total assets is 14.36% while the share
of taxonomy-eligible assets to total covered
assets rises
to 16.11%
.
Protection of environment
The
Group is
committed to
minimizing its
environmental
footprint
and to
promoting
a green
economy.
In this
context,
the
Bank
implements
an
Environmental
Policy,
an
Energy
Management
Policy
and
a
Water
Management Policy,
towards the protection
of the environment in all aspects of its operations.
In the context of
implementing these policies, the Group applies 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).
Furthermore,
the
Bank,
has
established
sustainability
practices
in
procurement,
in
order
to
select,
where
possible,
environmentally
and
socially
responsible goods
and suppliers.
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
&
Social
Management
System
(ESMS)
in
accordance, among others,
with the requirements
and expectations of institutional investors,
shareholders and
other
stakeholders.
The
environmental
performance,
with
respect
to
the
improvement
of
the
operational
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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environmental
footprint,
is
monitored
through
specific
environmental
indicators
in
order
to
identify
any
deviations and take
corrective
actions and is included in the
Annual Report – Business & Sustainability and
the
Environmental
Report
(as
per
EMAS
Regulation).
Both
reports
are
assured
by
independent
parties
and
are
available
on
the
Group’s
and
the
Bank’s
websites
(www.eurobankholdings.g
r
and
www.eurobank.gr
respectively).
Environmental
performance
data
are
monitored
at
Group
level
(specifically
for
energy,
water
and
waste).
However,
the
related
Management
Systems
(ISO
14001/EMAS,
ISO
50001
and
ISO
14064)
and
corresponding
certification
scopes apply only at Bank level and therefore
environmental performance
is assured and reported
only
at
Bank
level.
In
this
context,
the
Bank
has
implemented
an
integrated
action
plan
to
reduce
paper
consumption and fully digitize its operations.
As a result of these efforts
in 2022, the paper supply amounted to
129.9
tons and
represented
a reduction
of 37.94%
compared
to 2021
(set target
for
2022: 196
tons). Also,
the
corresponding
consumption
per
employee
decreased
by
36.23%
to
20.82
Kg/employee
for
2022
from
32.65
Kg/employee
in 2021. In
addition, the
increase in the
use of the
e-statement service
was significant in
2022, as
more than 222,000 additional e-Banking users
chose e-statements, resulting in the additional savings
of 501,000
physical
statements.
The
Bank’s
financial
savings
from
the
discontinuation
of
physical
statements
are
also
substantial,
amounting
to
€30m
since
the
service
became
available.
The
Bank
has
established
a
Water
Management Policy with
the aim of responsibly managing the
use of water resources
and efforts
for savings. In
2022, the water consumption
amounted to 54,460m
3
, which represents a decrease of 12.62% compared
to 2021
(62,322 m
3
).
The Group
is actively involved
in a series of International and European
initiatives for
environmental protection
and Sustainable Development, such as
the EU Eco-Management and
Audit Scheme (EMAS) and
the Mastercard’s
Priceless
Planet Coalition
global
initiative.
2022 was
a year
of significant
distinctions for
the
Bank in
terms of
Energy
Management
with
a
Gold
Award
at
the
“Facility
Management
Awards”
and
a
Silver
Award
at
the
“Environmental Awards”,
while at the “Hellenic Responsible
Business Awards”
and in the “Green Buildings / Built
Environment” category
it was granted with the
Gold Award.
Energy and Emissions Management
The
importance
of
Climate
Change
makes
energy
consumption
monitoring
one
of
the
most
important
environmental
priorities
of
the
Bank.
The
Bank
implements
a
certified
Energy
Management
System
(EMS)
in
accordance with the
ISO 50001 standard, with the purpose of responsible
energy management in all the
Bank’s
facilities (it concerns all the Bank’s Administration
Buildings / Branches and covers 100% of its operations), which
aims to
minimize energy
cost, the
environmental
impact
of harmful
greenhouse
gas emissions,
as well
as the
depletion
of
fossil
fuels.
In
accordance
with
the
applicable
legislative
requirements
(Greek
Climate
Law
4936/2022) and
international
best
practices,
the
Bank was
certified
according
to the
International
Standard
ISO 14064 for
the quantification
and reporting of
greenhouse gas emissions
(Category 1-7), with
the aim of
the
reduction
of
greenhouse
gas
emissions
and
its
environmental
footprint.
The
Bank
also
maintains
the
corresponding
matching
in
line
with
the
methodology
of
the
“GHG
Protocol
Corporate
Accounting
and
Reporting Standard” (Scope 1, 2 & 3).
Direct
Green
House Gases
(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 for
transportation within
the Attica
region. It also includes the data on fluorinated gases (F-gases) released by the air conditioning installations and
automatic
fire
extinguishing
systems
of
the
Bank
(fugitive
emissions).
Also,
in
2022,
the
greenhouse
gas
emissions from the
use of leased company cars by the
Bank’s employees were
included.
Regarding
electric energy
use (indirect
emissions -
Scope
2), the
Bank calculates
its emissions
using both
the
location-based
and market-based
methods, using
national annual CO
2
emission conversion
factors. The
Bank,
demonstrating
a
long-term
commitment
to
environmental
and
energy
management,
displayed
remarkable
reflexes, during the current unprecedented
energy crisis. Specifically, in September 2022, it announced a specific
set of measures
to further
save energy
with large-scale
actions, but also initiatives
concerning the
daily energy
behaviour of employees.
In this
context, in 2022
the total
electricity consumption
was at
38,314 ΜWh decreased
by 7.44%
compared to
2021, while the indirect
greenhouse gas emissions
(scope 2) in
carbon equivalents was
at 12,824
tCO
2
e decreased
by
20.69%,
compared
to 2021
(16,169
tCO
2
e).
Furthermore,
in 2022,
the
total
energy
consumption
(all
energy
sources) was decreased by
7.4%
compared to 2021 and respectively
the total greenhouse
gas emissions (Scope
1 & 2)
were decreased by 14.1%. This performance
exceeded the environmental management targets set for 2022
of 4% reduction in electricity and
indirect greenhouse gas emissions (scope 2) compared to
2021. The Bank, since
the
beginning
of
the
Energy
Management
System
implementation
in
2014,
has
reduced
electricity
and
greenhouse gas emissions by
42.4% and 73.2% respectively.
The Bank is
further
intensifying the effort
to reduce
electricity consumption with the
aim of further 10% saving,
cumulative for
the years 2022 – 2023.
For 2022, 97.90%
of total electricity
consumed was sourced by
Renewable Energy Sources (RES), certified through
“Guarantees
of
Origin”,
while the
same
process
will continue
for
2023.
Compared
to 2021,
this
indicator
was
improved
by
0.5%.
The
Bank
monitors
the
energy
intensity
ratio,
which
expresses
the
absolute
energy
consumption
of
the
Bank
for
all
its
operational
revenue
and
at
the
same
time,
assists
energy
performance
monitoring in relation
to its scale of activities.
In 2022, the energy
intensity ratio
was at 15.26ΜWh/€m reduced
by
48.62%
compared
to 2021
(29.71
ΜWh/€m). Accordingly,
the
carbon
intensity index
(GHG, scope
1 &
2) for
2022 is of value 5.66tCO
2
e/m€ and displays a decrease of 49.75%
compared to 2021 (11.26 tCO
2
e/m€).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
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Regarding scope 3 emissions, the Bank is currently finalizing calculations related to financed emissions, business
travel,
employees’ commuting
and waste generated.
The respective
scope 3 figures will be
disclosed as part
of
the
Annual
Report
2022
-
Business
&
Sustainability.
Moreover,
enhanced
disclosures
regarding
financed
emissions (i.e. emissions intensity and emissions
per sector) will be disclosed in the Bank’s Climate
Report 2022.
Finally, the Bank has certified 18 buildings with the green building certification
methods of “Leadership in Energy
and Environmental
Design -
LEED” and
“Building Research
Establishment Environmental
Assessment Metho
d
–
BREEAM”,
thus
demonstrating
the
Bank’s
excellent
working
environment.
Within
2022,
the
N.
Ionia
building
complex was
also certified,
where
the
Data
Center building
received
LEED Gold
certification,
while the
rest of
the building complex LEED Silver.
Supply Chain
The
Bank has established
and implements a
Procurement
Policy which
defines the
general
principles and rules
governing the procurement of goods and services. Through its implementation, the transparency, objectivity and
integrity of the execution
of procurement
are ensured, while at
the same time,
compliance of suppliers with
the
applicable
local,
national
and
international
legislative
and
regulatory
requirements
is
secured
through
appropriate
mechanisms, as
a condition
of starting
and maintaining
a professional
relationship
with them.
In
addition, the establishment of an Outsourcing Policy ensures the efficient monitoring of third party relationships
under their associated
risks.
The
Bank operates
with a centralized
and upgraded
model for
the administration
of procurement
requests for
goods and
services and the management of
contracts which facilitates approval flows, while achieving
efficiency
in the
execution of
purchases based
on the
principle of
the final
lowest
bidder,
as well
as in
the finalization
of
new
assignments
or
renewals
and
contracts.
In
addition,
aiming
at
the
minimization
of
its
environmental
footprint and efficiency, the Bank uses an electronic invoicing system, in
cooperation with specific suppliers while
at the same time,
for the supply of some
types of goods and services, e-auctions
are held.
Group Procurement Sector evaluates
the Bank’s suppliers based on qualitative and quantitative criteria, aiming
at the
assessment of risks
such as for
the quality
of services, financial
status/business continuity of
the supplier
and its legal/regulatory compliance. Specifically,
on an annual basis it measures and weighs all the key financial
data from
the
balance
sheets of
the
suppliers, while
complementing
the
evaluation
with qualitative
data, like
ISO certifications,
through
specific targeted
questionnaires
to qualified
evaluators from
various business
units
of the Bank together
with Group Procurement
evaluators. In the end, a weighted
objective score is obtained for
each supplier that reveals
the continuation of the cooperation
between the Bank and the supplier.
Furthermore,
for
reasons
of
transparency
and
safeguarding
the
Group's
interests,
the
Bank
adheres
to
the
Due
Diligence
procedure
for the
integration
of a new
supplier into the
Bank. Based on the
above
procedure,
the new
entrant
supplier is required, among other
prerequisites, to provide
published financial statements and
all the necessary
financial data over
a period of three
years, information
on the legal
form of the
company, its beneficial
owners
and legal representatives,
as well as regulatory certifications
it holds.
On an annual basis,
the Bank
carries
out an assessment
for IT
suppliers, consulting,
technical and
construction
services, as well as
for other goods and services, maintaining for
quality reasons, specific indicators that measure
the
degree
of dependence
of suppliers
and the
Bank on
the
relationship
between
them
in terms
of the
total
turnover
of
each
party.
In
addition,
the
Procurement
Committee
that
has
been
established,
ensures
the
observance
and safeguarding
of the
procedures
in line
with
the
Bank’ procurement
policy,
both
in relation
to
the necessity of the
procurement and for
the containment of operating
costs, together
with the approval
of the
tender results presented. In addition, in the context
of implementing Sustainable Procurement, ESG criteria have
been
established
for
the
tendering
processes
of
non-IT
goods,
in
accordance
with
the
provisions
of
a
the
tendering procedure
.
Factors related
to the
impact of
a product/
service/ project
on Environment
and Society,
as well as Governance issues of the company/supplier,
are taken into consideration.
As such, contribution to the
protection of environment,
green development
and local society are considered
to have a positive effect.
Furthermore,
regarding
governance
factors,
certifications
are
requested
from
suppliers
(e.g.
ISO
9001,
14001,
50001),
if
any,
as
well
as
disclosures
in
relation
to
their
operational
footprint,
ESG
Ratings
results
and
Sustainability
Report.
In
alignment
with
the
applied
procedure,
these
criteria
are
embedded
in
a
specified
section on
tenders’
Requests of
Proposals (RFP)/
Requests of
Quotation
(RFQ), and
are considered
during the
technical evaluation conducted.
The overall
objective is to select, where
possible, environmentally and socially
responsible goods from suppliers
that
are
aligned
with
those
principles.
Procurement
processes
are
part
of
the
Bank’s
certified
Management
Systems in
accordance
with the
international
standards
ISO 9001,
ISO 14001
and ISO
50001. The
Bank mainly
works with suppliers who operate
and are registered or have an office in Greece,
promoting and supporting the
local economy.
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
2022,
the
Group
employed
11,328
(Dec.2021:
11,935)
employees of which 5,060
(Dec.2021: 5,275) abroad.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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To
ensure
equal
and
fair
opportunities
to
all
employees,
the
Group
follows
several
guidelines
surrounding
Compensation &
Benefits, Recruitment,
People & Talent
Development,
Performance
Management,
Kniship and
Health & Safety,
Learning, Engagement & Communication.
In 2022, the Bank launched
three new policies
on C-
Level
Succession
Planning,
Diversity,
Equity
&
Inclusion
and
Workplace
anti-Violence
&anti-Harassment.
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
mentioned above
are also addressed in the
2020 Code of Conduct & Ethics for the
Group.
The Group
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 complies 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
Group’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 has
set 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
establishment
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.
Internal Job Market (IJM)/ Internal
Mobility
The
Bank
focuses
on
deploying
its
existing
workforce
to
meet
internal
staffing
needs,
according
to
their
qualifications.
In
this
context,
the
Bank
actively
promotes
equal
opportunities
for
all
employees
to
fully
participate
in IJM,
regardless
of role,
level
and
general
division.
In 2022,
66 Job
openings were
published
in
Internal Job Market, 353 internal
candidates applied and 40% of job vacancies
in Greece were
filled internally.
Learning
Building
and
strengthening
professional
expertise
with
updated
skills
and
capabilities,
as
well
as
providing
modern learning
curriculums
and methodologies
constitute a
major priority
for the
transformation
strategy
of
the
Group.
The
Group’s
leading Learning
Management
System offers
enhanced
self-service
capabilities
to all
employees that
boost learner engagement,
while redefining and upgrading the
knowledge and skills needed in
the
workplace
(reskilling
&
upskilling).
The
size
of
investment
in
learning
for
2022
is
reflected
briefly
in
the
following indicators:
a)
The total
number of learning participations reached
369,027,
on Group level,
b)
The total
number of training hours exceeded
790,000 (530,000 hours for
employees working in Greece)
,
c)
Over
97%
of
the
learning
activity
regarding
employees
working
in
Greece
takes
place
online
or
through
virtual classrooms.
Upskilling,
capitalizing
on technology
and
learning certifications
constitute
the
axes of
the
strategic
learning
framework
of the Group.
More specifically:
a)
LinkedIn Learning Solutions: The
strategic partnership with
LinkedIn Learning allows all Group employees
in
Greece
to access
the platform’s
online learning
courses and
highlights the
Group’s
actual commitment
to
addressing current
needs of
the
current
era
and helping
its people
further
develop
their
skills. In
addition,
The
Group has
extended its
partnerships
with other
internationally
recognized
learning platforms
such as
Interskill,
Skillsoft,
Microsoft
LxPand
and
Pluralsight,
offering
thousands
of
courses
on
cutting-edge
technologies.
b)
Digital Accelerator:
In 2021-2022
the
Group
implemented
an innovative
program,
in accordance
with the
European
Digital
Competence
Framework,
(DigComp)
aiming
to
upgrade
the
digital
skills
of
all
its
employees.
c)
Leadership
skills: The
Group’s
Top
Management
and the
Heads of
the
Group’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,
the
“Remote
Work
Bootcamp”,
a
blended
learning
experience
to
support
Managers of the Organization
in the new “phygital”
era was launched.
d)
Anti-
money
laundering
(AML)
Virtual
Workshops:
in
collaboration
with
ICA
(Internal
Compliance
Association),
highly
practical
and
interactive
workshops,
addressing
more
than
1,200 managers
in Retail,
Corporate and Private
Banking Networks, as well as all AML related
central units.
e)
“PROSPER –
Class of
2022”:
a customized
talent development
program
aiming to
equip our
talent pools
with future
-proof leadership
skills and state
of the
art knowledge
and experiences
in numerous
fields such
as ESG, Innovation and Strategy.
f)
ESG Thinking:
a 3-module digital
learning program
with the
aim to increase
awareness on
all ESG related
matters, as well as familiarize
all employees on the
Group’s strategic
priorities around the
ESG agenda.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
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g)
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
courses and virtual classes to help them
prepare for
their certification
exams.
To
fully
meet
employees’
and
the
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 learning
standards
provided to its employees. Aimed at empowering
employees on more demanding roles
and enhance leadership
capabilities,
the
Group
Human
Resources
Division
designs
and
implements
specialized
programs,
such
as
Development
&
Succession
planning,
Talent
Development
&
Management,
Career
Development
&
Planning,
Knowledge & Experience Sharing
(mentoring & reverse
mentoring).
Talent
Management Programme
In 2022 the
Bank continued
the implementation
of the
bank-wide Talent
Management Programme,
aiming at
the
identification,
development,
retention
and
effectively
utilization
of
a
robust
talent
pipeline.
A
Talent
Management policy
is being
designed and
will launch
in 2023
to set
out the
guidelines and
process
of Talent
Management within the
Bank and to ensure the talent retention
and utilization.
Performance
Management
Performance
Management
in
the
Group
has
a
transparent,
consistent
and
effective
framework
concerning
continuous improvement
of the
employees and
aligning with
the strategic
objectives and
values of the
Group.
Its
framework
translates
the
Group’s
strategy
into
tangible
quantitative
business
goals
(“what”)
for
all
employees
and supports
a common
culture
by driving
the
Group’s
organizational
capabilities
and qualitative
competencies
(“how”)
throughout
the
organization.
Performance
Management
is
grounded
on
two
main
systems, implemented
in Greece
& Cyprus.
Along with
Axiopoio
which is
the
main Performance
Management
system, the Performance
Feedback
for Senior Management was launched
in 2022 in SAP SuccessFactors, which
is
based
on
the
360°
Feedback
methodology.
Both
systems
have
a
developmental
focus
and
continuous
feedback on their
core.
Career Development
Career
Development
i
s
of
great
importance
for
the
Group.
In
this
context,
in
2022
the
Group
utilized
the
Development
Plans, giving
value to
a wide
range
of functionalities
like Learning
and Career
Development.
On
that basis,
employees can
design their
personal Development
and Improvement
Plan being supported by
their
manager, and through relevant training and development activities, to further develop their
skills and behaviors,
bolstering their
profile to match either
their current
role or a different
one in the future.
C-Level Succession
Planning
The
Bank’s
C-Level
Succession
Planning
framework
is
assessed
annually
following
a
structured
and
comprehensive
process,
according
to
the
guidelines
of
the
Bank’s
Nomination
and
Corporate
Governance
Committee and the BoD of the
Bank. In 2022, the C-Level
Succession Planning Policy
was launched.
Diversity,
Equity & Inclusion
In 2022, the Bank implemented the Women
in Banking (WiB) - Leadership Acceleration
Program with the
aim to
empower talented
women in the
Bank to showcase
their unique qualities
as leaders and actively
participate in
shaping a more
people-centric culture
and inclusive leadership.
The program
has a 6-month
duration,
offering
valuable knowledge, experiences
and skills through
mentoring women
with successful
career paths
in the Bank,
as well as through
interactive learning
programs.
WiB Season 1
success was marked
by 3 Awards:
1 Gold Award
in Women
Empowerment
Awards,
1 Silver Award
in the
“Effective
Use of
Coaching-Mentoring”
category
in HR
Awards
and
1 Bronze
Award
in Gender
Equality
Awards powered
by the Diversity
Charter in Greece.
In 2022, the Bank was included in the Bloomberg Gender Equality Index (GEI). This distinction reflects the Bank’s
commitment to support responsible development
without discrimination and its commitment in the application
of Diversity,
Equity & Inclusion criteria and more generally
of ESG in all aspects of the Group's
operations.
Improving Employee
Experience
The Group,
through the
investment in the
SAP SuccessFactors upgrades
the working environment
and expands
the possibilities
of cooperation.
As part of the
project, the
basic technological infrastructure
has been 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
mobility of the users,
while managers can monitor and manage their
teams. More
particularly,
the
functions
are available
both
from
the
office
space
and "smart"
devices
and 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.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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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. The
Group,
through
its Intranet
Portal named
“Connected”, provides
timely corporate
and work
-related
information
to all
its employees
in Greece.
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 the
Group's management to printed and digital media etc.
In 2022
Connected acquired a new
interface, in order to meet the needs
of the modern era. For the dissemination
of the
strategy
and the
two-way
communication
between
the
Group’s
Management
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.
Remote Working
In 2022, the Group introduced the new Hybrid Work Model becoming the first banking group in
Greece to launch
a combination
of working
at home
and working
at the
office
(work @
home |
work
on premises),
on a
regular
basis,
for
its
staff.
Responding
to
a
new,
modern,
social
and
labor
market
reality
and
capitalizing
on
the
successful
experience
from
deploying
remote
working
at
a
large
scale
during
the
pandemic,
the
Group
announced
its
new,
innovative,
remote
working
policy.
The
new
initiative
aims
at
ensuring
its
employees’
personal
life
balance
while
reducing
the
Group’s
environmental
footprint
by
limiting
transportation
of
employees and energy
consumption.
Recognition and Reward Policy
As part
of its
Employee
Recognition and
Reward
policy,
the
Group
in 2022
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
Group. The
top-3 among
a total
of
408 original ideas
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
Group
awards
its
employees
after
15
and
25
years
of
service.
In
the
last
20
years,
the
Group
has
recognized
and
rewarded
over
3,162
secondary
and
higher
education
students,
through
the
“Awarding
Excellence”
initiative.
Through
this
program,
the
Group
is
investing
in
the
younger
generation
and
is
recognizing
the
children
of
employees
that
have
outperformed
at
their
school.
The
program
also covers
all
Group
employees
that
have
undergone and topped in postgraduate degrees during their tenure in the organization. The
Group traditionally
designs and implements initiatives that support the employees and their fami
lies. In 2022, the Group offered 12-
month gift vouchers
to more than
2,000 children
of employees.
In a spirit
of giving back
to our community,
the
Group
has established
and supports
the
“Team
Up” initiative.
This
is an
employee
volunteerism
program
that
has been up and running since 2018. Until the end of 2022, nearly 900 employees have joined the program
(22%
higher
than
2021).
In
2022
11
events
have
taken
place
and
705
employees
offered
more
than
3,250
hours
of
volunteering services.
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 2022,
more than
39,000
requests were
seen to HR4U.
Topics include
a wide range of questions about benefits
and programs,
as well as urgent needs.
Labour Unions
The
Group
respects
employees’
constitutional
right
to
membership
in
Labour
Unions.
Six
such
Unions
are
currently active
within the Bank, representing
86.4% of the staff,
i.e. 5,258 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.
Corporate Social Responsibility
Driven by
its sense of responsibility
and commitment
to giving back
to society,
the Group
has made corporate
responsibility
one
of
the
foundations
of
its
strategic
planning,
which
is
directly
linked
to
the
UN
Sustainable
Development
Goals
(SDGs).
Through
its
corporate
responsibility
strategy,
and
responding
to
the
needs
of
today’s
ever-changing
environment,
the
Group
aims
to
actively
contribute
to
improving
the
economy
and
society where it operates,
by adopting responsible practices
that promote transparenc
y
and business ethics.
The
Bank has
a
solid
framework
of
procedures
for
the
implementation
of
its
Corporate
Social
Responsibility
(CSR) strategy,
aiming at maximizing the
value created by
CSR initiatives and
shielding the
Organization from
the
possibility
of
corruption,
conflict
of
interest
and
money
laundering.
The
annual
Corporate
Social
Responsibility
action
plan
is
approved,
as
part
of
the
Marketing
&
Corporate
Communication
budget
formulation process,
by the Communication Committee (COMCOM) in which the
CEO, the deputy CEOs and the
Group General
Manager of Marketing
& Corporate
Communication participate.
Finally, all
expenses related
to
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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sponsorships,
donations
and
other
Corporate
Social
Responsibility
actions
are
subject
to
approval
levels
depending on the amount but also the
criticality and importance for
the Bank and their
recipients.
Corporate social responsibility
is based on the following
pillars:
Education
Education is a key pillar
of the Bank's
corporate responsibility strategy.
In this context,
in 2003 the Bank
launched
Moving Education
Forward,
according
to which
awards are
provided
to high-school
graduates
across
Greece
who achieve top marks in the annual national university entrance exams. In the last 20
years it has been running,
a
total
of
21,536
students
have
been
awarded,
many
of
whom
have
gained
recognition
in
the
economic,
academic and scientific life of Greece.
The Bank awarded
975 top graduates during the
2021-2022 school year.
Supporting the Society
Moving
Family
Forward
is
a
corporate
social
responsibility
initiative,
aiming
to
address
the
country’s
demographic
challenge, by providing
young families
with incentives
for
taking the
decision to
have children.
It
focuses on the eastern borders
of Greece - Prefecture of Evros, North Aegean islands and the
Dodecanesee and
includes collaborations
with non-governmental
organisations (NGOs) for
supporting future and young parents,
offering
banking
products
with
favourable
terms
for
customers
in
those
areas
and
a
number
of
actions
for
setting the demographic
challenge higher in the
agenda of public dialogue.
The
Bank has announced
that it
will contribute directly
and significantly
to the
long-term initiatives
to protect
Greek forests from fires and restore the country's natural wealth, which is currently threatened by the new global
reality of
climate change.
In this
context, after
the devastating
wildfires in
the summer
of 2021 and
along with
several
notable NGOs, The Bank restored
the greater
area of ancient Olympia
by planting trees in the affected
forest
area. Moreover,
the Bank has
once more responded
to the ever
-increasing needs
of the National
Health
System by renovating the Special Respiratory Infections Unit of the Sotiria Thoracic Diseases Hospital of Athens.
In 2022 the
Bank supported 50 NGOs
and institutions operating
across Greece,
which mainly support children
and
vulnerable
social
groups,
with
the
amount
of
€280,000.
In
addition,
it
has
been
steadily
supporting
the
important
work
of the
PNOE –
Friends of
Children's
Intensive
Care
non-profit
association,
helping
it meet
its
objective,
which
is
to
create
and
equip
paediatric
Intensive
Care
Units
(ICUs)
and
to
support
children
hospitalised in ICUs and their parents.
In particular,
in 2000 the Bank launched
the EuroLine
card and has since
been donating 0.20% of the total value
of transactions carried
out by EuroLine cardholders
to this cause.
Access to financial services
for all /Financial inclusion
As
part
of
the
EaSI
programme
for
employment
and
social
innovation,
the
Bank
has
been
working
with
the
Action Finance Initiative (AFI), providing micro
-credit facilities (up to €12,500 per individual) to support the long-
term unemployed,
vulnerable
social groups
and businesspeople
with limited
access to
bank loans.
This
way,
it
offers
them the
opportunity to create
their own job
(self-employment) or
establish small businesses resulting
in
the creation of new jobs.
In 2022, through the AFI,
107 entities
have been provided with credit
facilities amounting
in total to € 1.22m, with favourable
terms, which are guaranteed
by the EIF.
Digital literacy and inclusion
The
Bank has
launched the
“Eurobank
Digital Academy
for
Business”, a
resource
hub on
digital skills for
Greek
companies
that
treat
technology
as
a
key
enabler,
and
digital
transformation
as
a
growth
strategy
and
a
competitive edge.
Since 2019,
19 events
have been
held with
1,685 participations,
of which
3 events
with 1,023
participants
in 2022.
In addition,
the
Bank has
created a
dedicated
hotline for
digitally illiterate
elder groups
who wish to access its digital channels.
Supporting entrepreneurship and
innovation
The
Bank
actively
contributes
to
economic
growth
and
recognises
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,
the
Bank
has
launched
Exportgate,
an
international trade
portal that promotes
the business networking
of Greek and Cypriot companies
worldwide.
In a strategic partnership with Banco Santander for Global Trade,
the Bank has joined the “Trade Club Alliance”,
the first
Global Digital Business
Interconnection
Network, supported
by 13 international
banking groups.
Using
artificial intelligence
and other
technologies, the
network
connects more
than 22,700
businesses in
more than
60 countries. All participating banks follow
audits to ensure network integrity.
In
2016
the
Bank,
in
partnership
with
Grant
Thornton,
established
the
Growth
Awards
to
award
business
excellence
as a
growth
lever
of the
Greek economy.
To
date,
the 6
Growth
Awards
ceremonies
have
awarded
38 of the most robust
Greek enterprises.
In the area
of innovative youth
entrepreneurship, the
Bank has established
the egg-enter•grow•go
initiative, a
comprehensive
business incubation
and acceleration
programme,
in partnership
with
Corallia.
Since
2013 the
egg
has
been
continuously
helping
the
Greek
startup
community
to
improve
its
competitiveness
within
a
challenging
global
market,
under
3
main
pillars
extroversion,
financing
and
business
networking.
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
includes, among other
:
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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a)
More than
€12m has been
invested in the
egg accelerator
by the
Bank, €3.2m
which has been
provided
by
the
Bank
as
financing
to
49
egg
startups,
and
€43.4m
in
equity
funding,
which
has
been
drawn
by
65
businesses,
b)
310 startups
which have
been created
through
the egg,
171 startups
which have
become businesses,
92 of
which with a combined
turnover
of €12m.
Specifically,
during 2022, 35 startups
have been created
through
the egg and 21 startups have
become businesses.
The Corporate Social Responsibility actions are described in the Annual
Report 2022 – Business
& Sustainability,
which is published on www.eurobankholdings.gr.
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 (policy statement
is posted on the Group’s
website),
c)
Policy for
Reporting Unethical Conduct,
d)
Management of Sponsorships and Donations.
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,
c)
Establishing mechanisms for
monitoring potential incidents of bribery,
d)
Providing
confidential reporting
mechanisms and
encouraging
their
use by
both staff
and third
parties by
providing protection
to individuals who report in good faith,
e)
Providing
ongoing
training
and
briefing
to
staff
on
the
prevention
and
identification
of
bribery
and
corruption incidents.
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
Internal
Conduct
&
Ethics
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.
Actions against Money Laundering
(ML) and Terrorist
Financing (TF)
Money Laundering
(ML) and
Terrorist
Financing (TF)
activities are
threats
against the
integrity and
stability of
the international financial system that may cause significant economic losses and reputational damages for the
Group. The
Group has responsibility towards
its customers, shareholders
and authorities to conduct business in
a lawful and ethical way.
Based on
the implementation of the Anti-money laundering/ combating the financing
of terrorism and Sanctions
Policy (the
Policy) the
Group aims at achieving
the following
objectives:
a)
Maintaining its integrity, credibility
and reputation,
b)
Implementing internationally
accepted best practices,
c)
Implementing and complying with all the
legal and regulatory requirements
that govern
its operations,
d)
Ensuring that
its business,
channels, products
and services
are not
used, intentionally
or unintentionally,
to
facilitate ML and/or TF,
e)
Ensuring that sanctions measures
and controls assist in applying effectively
applicable regulation,
f)
Ensuring that adequate processes, systems and controls are in place, up to date and fit for purpose, in
order
to detect, prevent and
deter any activities related to ML/ TF and Sanctions violations.
The
requirements
set forth
in the
Policy apply
to the
Group,
including all its
staff,
all its functions
and units,
as
well as third parties
who are given access to Group’s
information and premises.
The Group’s
AML/CFT and Sanctions Control
Framework
has two main components:
a)
AML/CFT and Sanctions Program
and
b)
Governance
and Control Framework.
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The
Group’s
AML/CFT
and Sanctions
Control
Framework
includes
policies,
guidelines
for
conducting
business
activity consistent with legal and regulatory requirements and the AML Compliance Risk Appetite. AML/CFT and
Sanctions
Governance
Structure,
determines
Roles
and
Responsibilities
that
are
allocated
among
the
Three
Lines of Defense, including the
role and responsibilities
of the Money Laundering
Reporting Officer
(MLRO) and
Group
MLRO,
together
with
ongoing
training
necessary
to
support
effective
execution
of
their
roles
and
responsibilities.
Related party transactions
In
January
2022,
an
occupational
insurance
fund
(“Institution
for
occupational
retirement
provision-
occupational insurance
fund Eurobank’s
Group personnel” henceforth
“the Fund”) was established
as a not-for-
profit legal entity under Law 4680/2020, for
the benefit of the employees
of the Company, the
Bank and certain
other
Greek entities
of the
Group,
which constitute
the
sponsoring employers
of the
Fund. Accordingly,
in line
with IAS 24 Related Parties, the
Fund is considered to be related party
to the Group.
As at
31 December
2022, the
Group’s
outstanding balances
of the
transactions
and the
relating
net income
/
expense for 2022 with (a) the
key management personnel
(KMP) and the entities controlled
or jointly controlled
by KMP are: compensation
€8.8m, receivables €5.7m,
liabilities €24m, guarantees
received €0.01m,
net expense
€17.1m,
of
which
€1.9m
expense
relating
with
equity
settled
share
based
payments,
(b)
the
Fairfax
group
(excluding Eurolife FFH Insurance Group Holdings S.A., which is also
a Group’s associate) are: receivables €73.8m,
liabilities
€116.3m,
guarantees
issued
€2m,
net
income
€8.3m,
(c)
the
associates
and
joint
ventures
are:
receivables €87.2m,
liabilities €209.3m, net expense
€66.7m (d) the
Fund are: liabilities €1m.
At
the
same
date,
the
Company’s
outstanding
balances
of
the
transactions
and
the
relating
net
income
/
expense for
2022 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
and
operating income
of €0.4m related to financial consulting services,
(c) the subsidiaries are: receivables
€1,334m,
liabilities €0.6m
and net
income €63.9m
and (d)
the
Group’s
associate Eurolife
FFH Insurance
Group
Holdings
S.A. are: operating
income of €0.1m.
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
and
note 19 to the financial statements
of the Company.
Corporate Governance
Statement
In
compliance
with
the
art.
17
of
the
Law
4706/2020
for
the
listed
companies
(effective
from
18
July
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
(www.eurobankholdings.gr
).
The Corporate
Governance Statement
for the year
2022, attached herewith,
is an integral part of the Directors’
Report, and outlines how the principles stipulated by the Code were applied, during 2022, to Eurobank
Holdings
and to Eurobank S.A. (100% subsidiary
of Eurobank Holdings).
Georgios Zanias
Fokion
Karavias
Chairman
Chief Executive Officer
6 April 2023
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
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€ = Euro
m = million
bn = billion
APPENDIX
4
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 income:
The
total of
net interest
income,
net banking
fee
and commission
income
and income
from
non banking services,
d)
Core
Pre-provision
Income
(Core
PPI):
The
core
income
minus
the
operating
expenses
of
the
reported
period,
e)
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),
f)
Fees and commissions:
The total of net
banking fee and commission income and income
from non banking
services of the
reported period,
g)
Fees
and commissions
over assets
ratio:
The
Fees
and commissions
of the
reported period
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),
h)
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,
i)
Cost to Income ratio:
Total
operating expenses
divided by total operating
income,
j)
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,
k)
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, regardless 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,
l)
NPE
ratio:
NPE
divided
by
gross
loans
and
advances
to
customers
at
amortised
cost
at
the
end
of
the
reported period,
m)
NPE
formation:
Net
increase/decrease
of
NPE
in
the
reported
period
excluding
the
impact
of
write
offs,
sales and other
movements,
n)
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,
o)
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),
p)
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,
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.
4
Following the significant reduction of the
Group’s NPE, the APM “Texas ratio”
is no longer used as an assets quality metric.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
31
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€ = Euro
m = million
bn = billion
e)
Minimum
Requirements
for
Eligible
Own
Funds
and
Eligible
Liabilities
(MREL)
ratio:
The
sum
of
i)
total
regulatory
capital
(at
Eurobank
S.A. consolidated
level)
as
defined
by
Regulation
(EU)
No
575/2013
as
in
force,
based on the
transitional rules
for the
reported period
and ii) liabilities
issued by Eurobank
S.A. that
meet the MREL-eligibility criteria
set out in Regulation (EU) No 575/2013 as in force,
divided by RWA.
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 2022
and for
the year
ended 31
December 2021:
Components of Alternative Performance
Measures
€ million
FY 2022
FY 2021
Net Interest Income
⁽
¹
⁾
1,550
1,321
Fees and commissions
543
456
Total
Operating income
⁽
²
⁾
3,135
1,900
Total
Operating income,
excluding the gain on project
"Triangle"
⁽
²
⁾
2,811
1,904
Total
Operating expenses
⁽
³
⁾
(917)
(876)
Pre-provision
income (PPI)
⁽
¹
⁾
2,218
1,024
Pre-provision
income (PPI), excluding the
gain on project "Triangle"
1,893
1,028
Core Pre-provision
income (Core PPI)
1,176
900
Net profit/(loss) from continued
operations
⁽
¹
⁾
1,330
327
Gain on project "Triangle"
(before tax)
325
-
Gain on project "Triangle"
(after tax)
231
-
Restructuring costs, after tax
(75)
(19)
Impairment loss on project
"Mexico"
-
(72)
Derecognition gain/(loss) on
"Mexico" loans, after tax
-
(5)
Adjusted net profit
1,174
424
Impairment losses relating to
loans and advances
(291)
(490)
Impairment losses for
loans, excluding the loss on project
"Mexico"
(291)
(418)
NPE formation
⁽⁶⁾
46
44
Non performing exposures
(NPE)
2,257
2,775
Due to customers
57,239
53,168
Gross Loans and advances to
customers at amortized cost
43,450
40,815
Impairment allowance for
loans and advances to customers
(1,626)
(1,872)
Impairment allowance for
credit related commitments
(57)
(48)
Due to customers (Greek operations)
39,575
37,016
Gross Loans and advances
to customers at amortized cost (Greek
operations)
32,812
31,259
Impairment allowance for
loans and advances to customers
(Greek
operations)
(1,332)
(1,606)
Common Equity Tier 1 (CET1)
6,715
5,436
Average
balance of continued operations’
total assets
80,030
71,677
Average
balance of loans and advances to customers
at amortized cost
⁽⁴⁾
40,388
37,826
Average
balance of tangible book value
⁽⁵⁾
5,790
5,139
(1)
4Q2022
NIM:
Net
interest
income
of
the
fourth
quarter
2022
(€470m),
annualised,
divided
by
the
average
balance
of
continued
operations’
total
assets
(€82,449m).
The
average
balance
of
continued
operations’
total
assets,
has
been
calculated as the arithmetic average of their balances
at the end of the reporting period (31 December 2022: €81,460m) and
at the end of interim quarter (30 September 2022: €83,438m).
(2)
International
Operations:
Operating
income:
€592m
(2021:
€492m).
Greek
operations:
Operating
income:
€2,219m,
excluding the gain on project "Triangle" of €325m (2021:
€1,412m, excluding the derecognition loss on “Mexico” loans of €5m).
(3)
International
Operations:
Operating
expenses:
€273m
(2021:
€234m).
Greek
operations:
Operating
expenses:
€645m
(2021: €643m).
(4)
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 2022: €41,824m), at the end of interim
quarters (30
September 2022:
€41,390m, 30
June 2022:
€40,513m and
31 March
2022: €39,269m),
and at
the
end of
the
previous period (31 December 2021 €38,943m).
(5)
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 2022: €6,326m), at the
end
of interim quarters (30
September 2022: €6,038m,
30 June 2022: €5,934m
and 31 March 2022:
€5,380m) and at the
end of
the previous period
(31 December 2021: €5,270m).
(6)
NPEs formation
has been
calculated
as the
decrease
of NPE
in 2022
(€517m), after
deducting the
impact of
write-offs
€292m, sales €275m and other movements
(€4m).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
REPORT OF THE DIRECTORS
32
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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
2022 and
for
the
year
ended 31
December
2021,
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 4).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
TO THE REPORT OF THE DIRECTORS
33
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CORPORATE GOVERNANCE
STATEMENT
2022
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,
Eurobank
Ergasias
Services
and
Holdings
S.A.
(Company,
Eurobank
Holdings,
Holdings
or
HoldCo)
has
adopted
and
implements the Hellenic Corporate Governance
Code (the Code).
The Code
is available on Eurobank Holdings’ website
(https://www.eurobankholdings.gr/en/corporate -governance/corporate-
governance-principles/).
Given that the Eurobank
Holdings Group (the Group) consists mainly of Eurobank
S.A. (Eurobank or Bank) and its subsidiaries
(the
Eurobank
or Bank
Group),
the
present
Corporate Governance Statement
outlines how
the principles
stipulated by
the
Code were applied to both Eurobank
Holdings and Eurobank during 2022.
2.
Board of Directors
5
2.1
General
The HoldCo/Bank
are managed by
their respective
Boards of Directors (Board
or BoD), which are
collectively responsible
for
their long-term success. The
Boards exercise their responsibilities
in accordance with the Greek legislation,
international best
practices and
the HoldCo’s
and the Bank’s
contractual obligations
to the Hellenic
Financial Stability Fund (HFSF) under
the
Tripartite Relationship
Framework
Agreement (TRFA)
signed between the
HoldCo, the
Bank and the 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 and their term of office, within the
limits of the law and of the HoldCo’s and Eurobank’s Articles of Association
and also designates the independent non-executive directors.
The
current
Boards, as
of the
date of
approval
of the
here-in
Statement, consist
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 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
5
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
TO THE REPORT OF THE DIRECTORS
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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
31.12.2022, are
outlined in
Section
2.7,
“Directorships of Board members”.
Georgios Zanias
Chairperson, Non-Executive Director
Year of birth: 1955
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
George
P.
Zanias
joined
Eurobank
as
the
Chairman
of
the
Board
of
Directors
in
2019.
He
is
also
a
Professor
of
Economics
at
the
Athens
University of
Economics and
Business and
a Member
of the
Boards of
the
American-Greek Chamber of Commerce
and of IOBE.
In
the
past,
Mr
Zanias
has
served
as
the
Minister
of
Finance
(2012),
Chairman of the
Board of Directors
of the National
Bank of Greece (2012-
2015),
Chairman
of
the
Board
of
the
Hellenic
Banking
Association
(2012-
2015),
Member
of
the
Board
of
the
European
Banking
Federation
(2012-
2015), Member
of the
Intitute International
d’ Etudes Bancaires
(2012-2015
and
2019-today),
Chairman
of
the
Council
of
Economic
Advisors
at
the
Ministry
of
Finance
(2009-2012),
General
Secretary
of
the
Ministry
of
Economy and Finance (2001-2004), Chairman and Scientific Director
of the
National Economic Institute (KEPE) (1998-2001).
He has also
served as a Director
on the Boards of
Hellenic Exchanges (2000-
2001),
the
Public
Debt
Management
Office
(PDMA)
(2009-2012),
General
Bank (1997-1998), CHIPITA
SA (2015-2019), the
European Financial Stability
Mechanism
(EFSF/ESM)
(2010-2012).
Also:
Member
of
the
Board
of
Governors
of
the
Black
Sea
Trade
and
Development
Bank
(2003-2004),
Alternate
Governor
of
the
Board
of
Governors
of
EBRD
(2002-2004),
Member of the European Securities Committee (2001-2002), Member of the
Monetary
Policy
Committee
of
the
Bank
of
Greece
(May-July
2012),
Chairman of the Board of Directors of Piraeus
Real Estate SA and Picar SA
(2017-2019), Vice
Chairman of the
Board of ETVA
Industrial Zone SA (2018-
2019).
He holds a Doctorate
from Oxford
University, an
M.Sc. for the
University of
Reading and a B.Sc. from the Athens University
of Economics and Business.
George Chryssikos
Vice Chairman, Non-Executive Director of
the BoD
Membership in Board Committees:
Remuneration 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 & CEO 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)
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, 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 Diploma in
Chemical Engineering from
the National
Technical
University of
Athens.
He has
published articles
on topics related
to his academic research.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
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Stavros Ioannou
Deputy Chief Executive Officer (CEO), Group
Chief Operating Officer
(COO) &
International Activities
Membership in Board Committees:
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 Direktna
AD, Serbia (since November 2010), Eurobank
Bulgaria AD
(since
October
2015), Vice
-Chairman in
Eurobank
Cyprus Ltd
(since November
2022) and
is also
the Chairman
of the
BoD, BE-Business
Exchanges
SA
(since
January
2014).
He
has
also
been
appointed
as
the
responsible BoD
member of
Eurobank
Holdings and Eurobank
for climate-
related and environmental risks and for
the outsourcing function
He
is
currently
Non-Executive
Board
member
of
Grivalia
Management
Company S.A. (since September 2019).
In the past, Mr.
Ioannou had also the following
significant posts: Chairman
of
the
Executive
Committee
in
the
Hellenic
Banking
Association
(2020-
2022) where he had been member since 2013,
Vice Chairman at Cardlink SA
(2013-2015), Member of
the BoD in
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
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:
Board
Digital
and
Transformation
Committee - Member
Year of birth: 1966
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
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 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.
Alice Gregoriadi
Independent Non-Executive Director
Membership in Board Committees:
Board Risk Committee – Member
Remuneration Committee – Member
Board
Digital
and
Transformation
Committee – Chairwoman
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
Executive
Certification
on
Blockchain for business from University College London (2019), an Executive
Certification
on eCommerce
from
the
Darden
School of
Business, Virginia
University,
USA (2000)
and a
BSc in Business
Administration
from the
The
American College, Athens,
(1987-1990).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
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Rajeev Kakar
Independent Non-Executive Director
Membership in Board Committees:
Audit Committee – Member
Board Risk Committee – Chairman
Nomination
&
Corporate
Governance
Committee – Member
Board
Digital
and
Transformation
Committee – Vice Chairman
Year of birth: 1963
Nationality: Indian
Number of shares in Eurobank Holdings:
-
Mr. Kakar is a senior international banker with 35 years of financial services
experience,
and
currently
also
serves
as
a
board
member
of
several
Financial
Institutions-
including
Commercial
International
Bank
(Egypt),
Gulf
International
Bank
Group
Board
(Bahrain),
Gulf
International
Bank
(Saudi Arabia), UTI Asset
Management Company Ltd. (India),
and is also a
Global Advisory Board member at the University of Chicago’s Booth School
of
Business.
In
the
past
Mr.
Kakar
has
also
served
as
board
member
on
several
international
financial
institutions/bank
boards
-
eg.,
as
Board
Member
of
Visa
International
CEEMEA
(United
Kingdom
2004-2006),
Chairman
of
the
BoD, Fullerton
Securities &
Wealth
Advisors
(New
Delhi,
India 2008-2017),
board Member
of Fullerton
India Credit
Company (India
2009-2017), Member of
the Board
of Commissioners,
Adira Dinamika
Multi
Finance Tbk, subsidiary of Bank Danamon (Indonesia 2010-2013), etc.
Between 2006-2018, Mr. Kakar served as
the Global Co-Founder of Fullerton
Financial
Holdings
(Singapore)
-
a
wholly
owned
subsidiary
of
Temasek
Holdings, Singapore.
In this
role, he
also concurrently
served as
Fullerton’s
Global CEO of Consumer Banking, Regional
CEO for Central Europe, Middle
East and
Africa, and
also as
the Founder,
Managing Director
and CEO
of
Dunia Finance (Fullerton’s UAE subsidiary). Prior to 2016, he was at Citibank
for
20
years
working
across
various
countries
and
held
various
senior
management
positions,
including,
his
most
recent
Citibank
assignment
where
he
served
as
the
Regional
CEO
&
Division
Executive
for
Citibank-
Turkey,
Middle East and Africa until Jan 2006.
Mr.
Kakar holds
an MBA,
Finance &
Marketing from
the Indian
Institute of
Management,
Ahmedabad
(India)
and
a
Bachelor
of
Technology,
Mechanical Engineering from the
Indian Institute of Technology (India).
Bradley Paul Martin
Non-Executive Director
Membership in Board Committees:
Board Risk Committee – Member
Nomination
&
Corporate
Governance
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
Nomination
&
Corporate
Governance
Committee – Member
Board
Digital
and
Transformation
Committee – Member
Remuneration Committee – Vice
Chairman
Year of birth: 1958
Nationality: Canadian
Number of shares in Eurobank Holdings:
-
Mr Mirza is a strong proponent
and practitioner of
international corporate
governance and brings with him over 35 years of diversified experience and
a
solid
track
record
in
all
facets
of
financial
and
risk
management,
technology, mergers
and acquisitions, business turnarounds and operation
management.
In
the
past,
Mr
Mirza
was
also
the
lead
Director
with
Commercial
International Bank of Egypt, as well as Independent
Non-Executive Director
with
South
Africa
Bank
of
Athens
(Johannesburg).
He
also
served
Commercial Bank of Egypt (CIB) as Managing Director & CEO of Consumer
Banking and Group COO.
Over the years, Mr Mirza has
worked with global
institutions
like
Citibank and
ABN AMRO
Bank Ltd
where
he
held
several
senior
positions
as
CFO
European
Region,
Managing
Director
and
Chief
Operating Officer for
Global Private Banking, Asset Management and New
Growth
Markets,
Chief
Financial
Officer
for
Asian
region
including
Australia/New
Zealand
and
Middle
East.
Mr
Mirza
led
several
due
diligences for acquiring
banks in Europe, Asia,
and Latin America.
Mr Mirza
was also a member
of the Top
Executive Group
(TEG) of ABN
AMRO Bank
as well as member of the Group
Finance and Group COO Board.
Mr Mirza
also serves
as Non-Executive
Independent Director
of AGT
Food
& Ingredients (Canada), IDRF (Canada).
Mr
Mirza
holds
various
business
management
courses
from
reputable
institutions like Queens Business school, Wharton Business school, Stanford
Graduate
School
of
Business
and
is
also
a
member
of
the
Institute
of
Corporate Directors, Canada.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
TO THE REPORT OF THE DIRECTORS
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Irene Rouvitha Panou
Independent Non-Executive Director
Membership in Board Committees:
Nomination & Corporate Governance
Committee – Chairwoman
Audit Committee – Vice Chairwoman
Year of birth: 1958
Nationality: Cypriot
Number of shares in Eurobank Holdings: -
Mrs.
Rouvitha
Panou
is
Trustee
of
UK-based
Stelios
Philanthropic
Foundation
(since May
2022) and
Member of
the
Advisory Council
of The
School
of Economics
and Management
at
the
University
of
Cyprus (since
May 2020). In the past, she had the following
significant posts: Chair of the
Board
of
Cyta
(Cyprus’
leading
integrated
electronic
communications
provider)
for
two
consecutive
tenures
(July
2016-July
2021),
Chair
of
the
Pensions & Grants
Fund of the Personnel
of Cyta (January 2019-July 2021),
Board member of Τhe Cyprus Employers
and Industrialists Federation
(May
2020-July 2021)
and of Vassiliko
cement public
company in
Cyprus, where
she
was
Member
of
the
Board
Audit
Committee (February
2012-October
2014),
Independent
Non-Executive
Director
of
Alpha
Bank
Group
subsidiaries
(Alpha
Bank
Romania,
Alpha
Bank
Cyprus,
Alpha
Leasing
in
Greece),
where
she
was
Chair/Member
of
the
Board
Audit,
Risk
and
Remuneration
Committees (November
2014-April 2020).
She was
Chair of
the
Board
of
The
Cyprus
Development
Bank
following
the
Bank’s
privatisation
(September
2008-April
2014).
She
worked
at
Laiki
Group
(HSBC
associate
bank)
(October
1991-November
2006)
where
she
was,
among
others,
Group
General
Manager
(January
2000-November
2006)
and
Managing
Director
of
Laiki
Bank
Hellas
SA
(April
2002-November
2006),
also
serving
as
Director
on
the
Boards
of
Laiki
Group
and
its
subsidiaries in
Greece and
Australia. She
held senior
positions in
the field
of
management
and
financial
services
consulting
based
in
Boston,
USA
(June 1994-September 1991).
She graduated from the
London School of Economics, UK (B.Sc. Economics,
Metcalfe Scholar) and continued with postgraduate studies at University of
Cambridge,
UK
(M.Phil.
Economics)
and
the
Massachusetts
Institute
of
Technology,
USA (Master of Science in Management, Fulbright Scholar).
Cinzia Basile
Independent Non-Executive Director
Membership in Board Committees:
Board Risk Committee – Vice Chairwoman
Remuneration Committee – Chairwoman
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 & Corporate Governance
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.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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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 & Corporate Governance
Committee
Board Digital and Transformation
Committee
Year of birth: 1970
Nationality: Hellenic
Number of shares: 8.216
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
,
the European Commission Recommendation
2005/162/EC and the Joint ESMA and EBA Guidelines
on the
“Assessment
of the
suitability of members
of the
management body and
key function
holders” (EBA/GL/2021/06)
and
(c) the Board should include at least two
(2) executive members. For
2022, the NomCo at its meetings held
on 24.5.2022 and
14.12.2022 reviewed the independence criteria set
out above and
concluded that the five
Independent Non-Executive Members
continue to meet the
relevant independence criteria. 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
repeatedly
extended until 31 December 2025.
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, specifies the way HFSF’s rights, as derived from
the provisions of Law 3864/2010
(“HFSF Law”), were to be implemented, in particular on issues relating to the corporate governance
of Eurobank Holdings and
the Bank and the implementation
of the Bank’s NPEs management framework.
However,
the HFSF
Law has
been amended
by the
Law 4941/2022
(Government
Gazette A’113/16.06.2022)
and a
number of
provisions of the TRFA
either do not arise from the HFSF Law or directly contradict with it, therefore
the TRFA has become out
of date.
In
particular,
under
the
current
HFSF
Law
as
amended
by
Law
4941/2022,
the
HFSF
no
longer
has
the
right
to
carry
out
evaluations of Eurobank Holdings and the Bank’s corporate governance framework or the right to establish evaluation criteria
for their
Board members.
In addition,
the HFSF
representative
no longer
has the
right to convene
a General
Assembly or to
approve
the
CFO
or
to
veto
any
resolution
of
the
Board
which
may
jeopardise
depositors'
interests
or
materially
affect
liquidity,
solvency
or,
in
general,
the
prudent
and
orderly
operation
of
Eurobank
Holdings
and
the
Bank.
Moreover,
the
facilitation of the management of the Bank’s NPEs
has also been
removed from the remit of the HFSF which
has been modified
in such a way as to explicitly and visibly envisage the
effective disposal
of the shares it
owns in Eurobank Holdings,
based on
a divestment strategy,
with a specific time horizon until 31 December 2025.
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However,
under the current HFSF Law, the HFSF has the right to appoint one Director to the Board and this representative has
the
right to
veto
any Board
resolutions
relating
to corporate
changes that
can
significantly affect
HFSF’s participation
to
Eurobank Holdings share capital (anti-dilution protection). Regarding the right of the HFSF’s representative to veto any Board
resolution related to dividend distributions or the remuneration policy and proposed bonuses to Board members and General
Managers or
their deputies,
the current
HFSF Law
provides
that
this is
applicable to
credit institutions
whose ratio
of non-
performing loans to total loans
exceeds 10%. It
is noted that in
Eurobank’s case, this ratio stands at 5.6%
(Source: Press Release
of Financial Results for the Nine Months of 2022).
Moreover,
the representative
of the HFSF
has the right
to request Eurobank
Holdings or the
Bank’s Board to
be convened or
any Board meeting to be adjourned for up to 3 business days.
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 Chief Executive
Officer (CEO) and
the Deputy CEOs. The
roles of Chairperson and
CEO are not exercised
by
the same person.
Chairperson
The
Chairperson of
the HoldCo’s/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’s/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’s/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’s/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 the 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 the 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 2022, the
HoldCo’s/Bank’s non-Executive
Directors had scheduled
to
meet
twice,
on
30.06.2022
and
15.12.2022,
however
the
meeting
on
15.12.2022
took
place
on
26.01.2023
due
to
the
tight
schedule of the quarterly Board and Board
Committees’ meetings in December 2022.
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 corporat
e
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 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 the 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 facilitates
the
connection and information of members.
The
CEO
and
senior
management
shall
ensure
that
any
information
necessary
for
the
performance
of
the
duties
of
the
members of the Board
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 or their representatives
is equal to a decision of the Board, even if no meeting has
preceded.
Company Secretary
The HoldCo’s/Bank’s
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’s/Bank’s
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, 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.
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2.6
Attendance of Board members in the
Board and Board Committees
In accordance with HoldCo’s and Bank’s 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, 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
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,
which replaces the member,
in accordance with the procedure
provided by the Law.
During 2022 the average
Directors’ of HoldCo and Eurobank Board
attendance was as follows:
Company
Meetings
Average ratio of
Directors’ attendance
2022
2021
2022
2021
HoldCo
20
19
99.6%
99.6%
Bank
21
20
98%
99%
During 2022, 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%.
In particular, the Directors’
attendance rates at the
Board meetings in 2022 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
20
20
100%
21
21
100%
Georgios Chryssikos,
Vice-Chairperson, Non-Executive Director
20
20
100%
21
21
100%
Fokion
Karavias,
Chief Executive Officer
1
20
20
100%
21
19
90%
Stavros Ioannou,
Deputy Chief Executive Officer
20
20
100%
21
21
100%
Konstantinos Vassiliou,
Deputy Chief Executive Officer
20
20
100%
21
21
100%
Andreas Athanassopoulos,
Deputy Chief Executive Officer
20
20
100%
21
21
100%
Bradley Paul Martin,
Non-Executive Director
20
20
100%
21
21
100%
Rajeev Kakar,
Non-Executive Independent Director
2
20
19
95%
21
19
90%
Jawaid Mirza,
Non-Executive Independent Director
20
20
100%
21
21
100%
Alice Gregoriadi,
Non-Executive Independent Director
20
20
100%
21
21
100%
Irene Rouvitha Panou,
Non-Executive Independent Director
1
20
20
100%
21
20
95%
Cinzia Basile,
Non-Executive Independent Director
20
20
100%
21
21
100%
Efthymia Deli,
Non-Executive Director, HFSF Representative
20
20
100%
21
21
100%
1
Mr. Fokion
Karavias and Mrs. Irene Rouvitha Panou provided representation proxies for
the missed meetings in Eurobank
2
Mr. Rajeev Kakar provided representation
proxies for the missed meetings in Eurobank
Holdings and Eurobank
The average Director’s attendance rates to HoldCo’s and Eurobank’s 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
&
Corporate
Governance
Committee
(NomCo)
Chairperson and/or the NomCo 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
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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.
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
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.
HoldCo and Eurobank Board
Members’ Directorships (including Directorships within Eurobank
Group) as at 31.12.2022
Georgios Zanias –
Chairperson, Non-Executive Director
Foundation for
Economic and Industrial Research (IOBE) –
Board Member
1
Georgios Chryssikos –
Vice-Chairperson, Non-Executive Director
Grivalia Management Company S.A. –
Vice Chairman, Non-Executive Director
Grivalia Hospitality S.A. –
Chairman of the BoD, Chief Executive Officer
Fokion
Karavias –
Chief Executive Officer
Hellenic Bank Association (HBA) –
BoD Member
1
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
–
C
hairman
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
Worldline Merchant Acquiring Greece
S.A –
Vice Chairman, Non-Executive Director
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
6
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
5
Nikko AM Global Umbrella Fund
– Non-Executive Director
5
Fincentro Finance S.p.A
. – Non-Executive Director
6
Irene Rouvitha Panou –
Non-Executive Independent Director
Stelios Philanthropic Foundation
–
Member of the Board of Trustees
1
Efthymia P.
Deli –
Non-Executive Director, HFSF Representative
None
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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
5
Company that belongs to
Nikko Asset Management Group
and along with
directorships in the other companies
of that group, is considered
as 1 (one) directorship for each Board member
6
Company that belongs to Columbus HoldCo S.a.r.l Group and along with directorships in the other
companies of that group, is considered
as 1 (one) directorship for each Board member
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 situations that give, or may give,
rise to actual, potential or perceived conflicts of interest
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, including the division of the responsibilities of the Chairperson of the Board 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.
●
must ensure they act
with independence of mind
i.e. be able
to make their own sound,
objective and independent decisions
and judgments.
●
according to article 97 par. 1 of Company Law 4548/2018, are prohibited from pursuing personal interests that run counter
to the interests of 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 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 one that includes a
description of both the transaction
and their 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.
In line 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 Law 4548/2018 (the Law)
(latest version of the Policy
approved by the
AGM on 21.7.2022).
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.
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.
This
is
achieved
through
the
continuous monitoring of market trends and best
practices on domestic and global levels and the setting of the remuneration
framework
which
defines
the
salary
structure
and
ranges,
in
order
to
attract
and
retain
talented
individuals
accordingly.
External,
independently
produced
benchmarking
analysis
of
the
remuneration
of
the
employees
of
the
financial
and
the
banking sector
in Greece,
is used
in establishing
the
Policy,
as well
as the
remuneration
framework
of the
members
of the
Board.
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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
2021
(https://www.eurobankholdings
.gr/-/media/holding/omilos/grafeio
-tupou/etairikes-anakoinoseis/2022/etairiki-anakoinosi-
30-06-21/ekthesi-apodoxon-2021-eng.pdf)
has been approved
by the
Annual General
Meeting on 21.7.2022
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 2022,
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 2022 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 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
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●
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
●
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 effecti
veness
●
where necessary
for the
achievement of the
objectives and in accordance
with the 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 2022
In 2022,
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 2022 the main issues
Holdco’s/Bank’s BoDs dealt with related to:
Eurobank Holdings
Bank
a)
Governance:
●
approval
of
the
establishment
of
two
Board
Committees,
namely
the
Remuneration
Committee
and the Board Risk Committee and approval of their
Terms of Reference.
●
approval of the Board
Committees’ composition
●
approval
of
revised
Terms
of
Reference
of
the
Nomination and Corporate
Governance Committee
and the Audit Committee.
●
preparation
and
convocation
of
the
Shareholders
General Meeting
●
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
2021
and
approval
of
his
financial
and
non-financial
objectives for 2022
●
approval
of the
Board
of Directors
Diversity
Policy,
the
External
Engagements
Policy,
the
CEO
Succession
Planning
Policy,
the
Board
and
Board
Committees Evaluation Policy,
the Board and
Board
Committees
attendance
Policy,
the
Group
Compliance
Policy,
the
Group
Governance
Policy,
the
C-Suite
Succession
Planning
Policy,
the
Senior
Management Selection and Appointment Policy,
the
Dividend
Distribution
Policy
and
the
Conflicts
of
Interest Policy
●
approval
and
further
submission
to
the
Annual
General
Meeting
for
approval,
of
the
Board
Nomination Policy
●
approval
by
the
Non-Executive
Directors
of
the
Board of the Remuneration
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 2021
●
information on the on the tax
treatment of the Board
and Board Committees’ Fees
●
approval
of
the
2022
stock
option
plan
implementation
●
approval
by
the
Non-Executive
Directors
of
a
New
Voluntary Exit Scheme
(VES)
●
approval
by
the
Non-Executive
Directors
of
a
New
Variable Remuneration
Scheme
●
update on Senior Executives succession plan
●
approval
of
HoldCo’s
Internal
Governance
Control
Manual
a) Governance:
●
approval of the Board
Committees’ composition
●
approval
of
revised
Terms
of
Reference
of
the
Nomination and Corporate Governance Committee,
Remuneration
Committee,
Audit
Committee
and
Board Digital and Transformation
Committee
●
preparation
and
convocation
of
the
Shareholders
General Meetings
●
annual
evaluation
of
the
Board
and
Board
Committees and
the Strategic Planning Committee’s
self-assessment for 2021
●
review
of the
attendance
of Directors
to the
Board
and Board Committees
●
CEO’s
performance
evaluation
for
2021
and
approval of his
financial and
non-financial objectives
for 2022
●
approval
of
the
Board
Nomination
Policy,
the
Directors Diversity
Policy,
the External Engagements
Policy,
the
CEO
Succession
Planning
Policy,
the
Board and Board
Committees Evaluation Policy,
the
Board
and
Board
Committees
attendance
Policy,
the
Group
Compliance
Policy,
the
Group
Governance
Policy,
the C-Suite
Succession Planning
Policy,
the
Senior
Management
Selection
and
Appointment Policy,
the Dividend Distribution Policy
,the Conflicts of Interest Policy and the AML/CFT and
Sanctions Policy
●
approval
by
the
Non-Executive
Directors
of
the
Board of the Remuneration
Policy
●
approval
and
further
submission
to
the
Annual
General
Meeting
for
approval,
of
the
Board
and
Board Committees’ fees for
Non-Executive Directors
●
information on the on the tax
treatment of the Board
and Board Committees’ Fees
●
update
on
the
implementation
of
the
Group
Subsidiary
Board
Remuneration
Policy
through
the
Group during 2021
●
approval
by
the
Non-Executive
Directors
of
a
New
Voluntary Exit Scheme
(VES)
●
approval
by
the
Non-Executive
Directors
of
a
New
Variable Remuneration
Scheme
●
update on Senior Executives succession plan
●
approval
of
the
revised
Eurobank
Group
Organizational Chart
●
regular update on Board Committees’ matters
●
update on Company Secretary’s Report 2022
●
approval of
Board and Board
Committees calendar
for 2023
●
various
remuneration
issues,
including issues
of
the
international
subsidiaries
(performance
related
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●
approval
of
the
revised
HoldCo
Group
Organizational Chart
●
regular update on Board Committees’ matters
●
update on Company Secretary’s Report 2022
●
approval of
Board and Board
Committees calendar
for 2023,
●
various remuneration
issues
●
approval
(by
the
Non-Executive
Directors
of
the
Board)
of
the
proposal
concerning
the
annual
contributions
to
Eurobank’s
Group
Occupational
Fund
●
approval
and
further
submission
to
the
Annual
General Meeting for approval, of the appointment of
the auditors for the
financial Year 2022.
●
approval
of the
Corporate
Governance
Action Plan
of
recommendations
derived
from
various
reviews,
including
the
Supervisory
Review
and
Evaluation
Process
(SREP)
2021
and
the
BoD
and
BoD
Committees Self-Assessment 2021.
●
discussion
on
the
Preliminary
Supervisory
Review
and
Evaluation
Process
(SREP) assessment
of
2022
and updates for the relevant
decisions
●
update
on
the
new
HFSF
Law and
its effect
on
the
Internal
Governance
Framework
and
Directors’
eligibility criteria
●
approval
of
the
assignment
to
the
Bank
of
the
support of the
outsourcing function
of the Eurobank
Holdings.
variable
remuneration,
remuneration
adjustments
etc)
●
approval
(by
the
Non-Executive
Directors
of
the
Board)
of
the
proposal
concerning
the
annual
contributions
to
Eurobank’s
Group
Occupational
Fund
●
approval
and
further
submission
to
the
Annual
General
Meeting for
approval,
of
the appointment
of the auditors for the
financial Year 2022
●
approval
of the
Corporate
Governance
Action Plan
of
recommendations
derived
from
various
reviews,
including
the
Supervisory
Review
and
Evaluation
Process
(SREP)
2021
and
the
BoD
and
BoD
Committees Self-Assessment 2021
●
update
on
the
new
HFSF
Law and
its
effect
on the
Internal
Governance
Framework
and
Directors’
eligibility criteria
●
approval
of
the
undertaking
by
the
Bank
of
the
support of the
outsourcing function
of the Eurobank
Holdings
●
update from its international banking subsidiaries.
●
approval of credit facilities
to related parties.
b)
Environmental, Social & Governance
(ESG) issues:
●
update on the Group’s
position on ESG matters
●
Program Field II Update
●
update
by
the
responsible
BoD
member
for
climate-related and environmental risks
●
discussion
on
the
Climate
Risk Stress
Test
results
2022, including the Thematic Review.
b)
Environmental, Social & Governance
(ESG) issues:
●
update on Eurobank’s position on ESG matters
●
Program Field II Update
●
update by the
responsible BoD member for
climate-
related and environmental risks
●
discussion
on
the
Climate
Risk
Stress
Test
results
2022, including the Thematic Review.
c)
Strategic issues including Corporate and other
actions:
●
discussion of various strategy issues
●
approval
of the
sale of
stake in
Grivalia Hospitality
(related parties’ transactions)
●
approval of
the share
capital increase following
the
exercise
of
stock
option
rights
(stock
options)
and
amendment of article 5 of the Articles of Association
of the
Company according
to article
113 par.
3 of
l.
4548/2018.
c)
Strategic issues including Corporate and other
actions:
●
discussion of various strategy issues
●
approval
of the
sale of
stake in
Grivalia Hospitality
(related parties’ transactions)
●
approval
of the
merger
of the
Bank with
“HELLENIC
POST CREDIT SOCIETE ANONYME”
(POSTCREDIT)
●
approval
of
the
merger
of
the
Bank
with
“CLOUD
HELLAS SINGLE
MEMBER KTIMATIKI
S.A.” by
way of
its absorption by the Bank
●
approval
of
the
merger
of
the
Bank
with
“STANDARD
REAL
ESTATE
SOCIETE
ANONYME”
by
way of its absorption by the Bank
●
approval of
the sale of
real estate portfolio
(Project
Mart)
●
approval of the hive down of the Merchant Acquiring
Sector of the Bank (Project Triangle)
●
approval of the
acquisition of BNP Paribas Personal
Finance
S.A.
(ΒNPP)
branch
in
Bulgaria
(Project
Echos)
d)
Capital adequacy:
●
approval
of
the
2022
Internal
Capital
&
Liquidity
Adequacy Statements (CAS
& LAS) in the
context of
the
Internal
Capital
&
Liquidity
Adequacy
Assessment Process (ICAAP & ILAAP 2022).
●
approval of additional Baseline and Adverse Capital
Scenarios
in
the
context
of
the
Internal
Capital
Adequacy Assessment Process
(ICAAP) 2022, due to
the
ongoing
geopolitical
crisis
and
potential
adjustment to Capital Adequacy Statements (CAS)
●
approval of
ad-hoc data collection
on financial and
macroeconomic projections
d)
Capital adequacy:
●
approval
of
the
2022
Internal
Capital
&
Liquidity
Adequacy Statements (CAS
& LAS) in the
context of
the
Internal
Capital
&
Liquidity
Adequacy
Assessment Process (ICAAP & ILAAP 2022)
●
approval of additional Baseline and Adverse Capital
Scenarios
in
the
context
of
the
Internal
Capital
Adequacy Assessment Process
(ICAAP) 2022, due to
the
ongoing
geopolitical
crisis
and
potential
adjustment to Capital Adequacy Statements (CAS)
●
approval of
ad-hoc data collection
on financial and
macroeconomic projections
●
approval of
securitizations of the
Bank’s receivables
from portfolios
of business and other loans.
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e)
Business monitoring:
●
approval
of
the
2021
annual
financial
statements
and the 2022 interim financial statements
●
approval of the Annual Budget
2023 and the 3-Years
Business Plan for the period
2023-2025
●
discussion of 2022 performance versus
budget
●
discussion of business developments and liquidity.
e)
Business monitoring:
●
approval
of the
2021
annual
consolidated
financial
statements
and
the
2022
interim
consolidated
financial statements
●
approval of the Annual Budget
2023 and the 3-Years
Business Plan for the period
2023-2025
●
approval
of the
Group’s
NPE Targets
for the
period
2022-2024 and the
NPE management Strategy
●
update
on
significant
subsidiaries
activities
and
strategic priorities
●
discussion of 2022 performance versus
budget
●
review of business developments
and liquidity.
f)
Risk Management and Internal Control:
●
briefing on
the assessment
on Internal
Audit Group
and Group Compliance annual regulatory reports
●
update on significant internal audit and
compliance
issues
●
update on significant legal issue
●
approval of the Risk Appetite
Framework, Group Risk
and Capital Strategy and Risk Appetite Statements
●
approval
of
Risk
Identification
and
Materiality
Assessment (RIMA) framework
and reports
●
approval
for
the
Reversion
to
Standardised
Approach for the
Risk Weighted Assets calculation
●
approval of the consolidated Pillar
3 Reports
(capital
and risk management disclosures) for 2021, 3M2022,
6M2022 and 9M2022
●
regular
briefing
on
Board
Risk
and
Audit
Committees’ matters
●
update on significant risk issues, including the Group
Chief Risk Officer’s Annual Report for the
year 2021
●
update
on
the
2021
Annual
Activity
Report
of
the
Audit Committee
before
submission
to
the
Annual
General Meeting
●
approval
of new
or revised
policies as
per the
legal
and regulatory framework
and internal processes
●
approval of the 2022 Group
Recovery Plan
●
updates for the Russian-Ukraine crisis and sanctions.
f)
Risk Management and Internal Control:
●
briefing on
the assessment
on Internal
Audit Group
and Group Compliance annual regulatory reports
●
update on significant internal audit issues
●
update
on
significant
compliance
issues,
including
AML end-to-end project status update
●
update on significant legal issue
●
approval of the Risk Appetite Framework,
the Group
Risk
and
Capital
Strategy
and
Risk
Appetite
Statements
●
approval
of
for
the
Reversion
to
Standardised
Approach for the
Risk Weighted Assets calculation
●
approval of the
consolidated Pillar 3 Report (capital
and risk management disclosures) for 2021
●
update
on
credit
and
NPE
related
issues
through
various reports
●
regular
briefing
on
Board
Risk
and
Audit
Committees’ matters
●
update on significant risk issues, including the Group
Chief Risk Officer’s Annual Report for the
year 2021
●
update
on
the
2021
Annual
Activity
Report
of
the
Audit
Committee
before
submission
to
the
Annual
General Meeting
●
approval
of new
or revised
policies as
per the
legal
and regulatory framework
and internal processes.
●
updates for the Russian-Ukraine
crisis and sanctions
g)
Transformation
Project:
●
received
regular
updates
on
the
transformation
project,
including
the
Group
Compliance
Target
Operating Model.
g)
Transformation
Project:
●
received
regular
updates
on
the
transformation
project,
including
the
Group
Compliance
Target
Operating Model.
Board Strategy Day
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),
also takes
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 (the Board Strategy Day).
The
Board
Strategy
Day
took
place
on 30.09.2022
and focused
on Transformation
and deep
dives
on key
transformation
streams.
2.12
Board and Board Committees overall
effectiveness assessment
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
and
Corporate
Governance
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 2022 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
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web-based
platform
(Questionnaires
module).
In
accordance
with
the
Evaluation
Policy,
these
questionnaires
cover
the
following area
s:
●
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.
The
results of
the Internal
Evaluation reve
aled that
the HoldCo/Bank
Boards continued
to function
effectively
in 2022
as in
2021.
In particular, in the Strategy area,
the Board overall
has a positive impression with respect to the improving
role of the Board
on strategy, including the time devoted for
the review and approval of the business plan and budget and the frequency of the
updates provided by Management on performance
against strategic objectives and budgetary targets.
Referring to the relationship with Management, the Board has a positive view regarding the adequacy of senior management
performance against performance targets, including the frequency of the reporting it receives by Management at Board level.
On the
strategic
HR issues
and remuneration
front, the
Board considers
that the
remuneration
has improved
over
the past
years.
Regarding risk governance
and internal control,
the overall
impression is that
the Board
has a comprehensive
picture of the
Bank’s risk
profile,
exercises an
adequate oversight
of risk
management and
adequately discusses
Eurobank’s
risk appetite
framework
and
risk
appetite
statements
before
final
approval.
Also,
the
Board
is
satisfied
that
Eurobank
Group
has
appropriate policies and resources
to identify, assess, monitor and mitigate financial and non-financial risk.
Regarding
the
board
profile
and
composition,
the
Board’s
collective
knowledge,
skills,
experience
and
tenure
levels
are
perceived to
be generally adequate
by the Directors
and the Board is considered
to have adequate size and structure
which
allows
productive
discussions.
Additionally,
the
Board
has
diverse
profiles
that
ensure
productive
exchange
of
views
and
opinions that ensure effective
oversight.
Regarding
the
Board
functioning
and dynamics,
the
Board
meets
an adequate
number
of times
and
the
Board
members
generally
come to
the meetings
prepared. Also,
there
is good planning
of the
Board’s annual agenda,
ensuring coverage
of
all responsibilities.
The
Board discussions
appear to
show strong
and constructive
challenge. Members
acknowledged that
the number of items on the agenda is satisfactory
and permits meaningful discussions.
For the
role of the Board
Chairman, the Board’s view is that it clearly reflects
the leadership needs of the Board.
For the
Board’s secretarial support, the
Board considers that it is effective
in its role and continues to support
the Board and
the Board Committees adequately and
timely. The Board also considers that in general it receives the Board packs in
advance
of meetings allowing adequate
time for review, whereas the quality of the documents submitted by
Management to the Board
is generally perceived
as very good. As regards to the
Board’s minutes, these are considered to be of good quality.
Finally, the evaluation highlighted that further enhancements could be pursued, among others, in the areas of risk governance
and internal control (through
further analysis of the non-financial risks).
As regards the main conclusions of the Internal Evaluation
of the Board Committees, it is noted that they
have been included
in the relevant sections where
the Board Committees’ functioning
and operation is presented.
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.
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 2022 remained very strong (similarly to the
respective evaluation in 2021).
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.
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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
2022 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 2022
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.
Collective Suitability Assessment
During 2022,
further
to
the
aforementioned
evaluation
of
the
Board
of
Directors,
an
assessment
of
the
Board’s
collective
suitability in
terms of
knowledge, skills
and experience
based on
the Joint
ESMA/EBA Guidelines
on “the
assessment of
the
suitability of members of the management body and key function holders”
(EBA/GL/2021/06)
was conducted with the support
of the NomCo.
In particular,
the assessment
examined whether
the Board
of Directors
is collectively
suitable to understand
(i) the
business
model, strategy
and risks,
and (ii)
matters
of Governance,
Risk Management,
Compliance, Audit,
Management, Strategy
&
Decision making,
and concluded that
the Board
is collectively
suitable to understand
the aforementioned
areas. Within
the
positive
assessment,
the
evaluation
also
highlighted
that
the
Board’s
collective
suitability
could
take
benefit
through
continued
improvement
of
the
present
skillset
in
the
areas,
among
others,
of
audit,
risk
management,
technology
and
digitization.
2.13
Directors’ Induction and Continuous Professional
Development Process
All
new
Board
members
receive
a
full
and
formal
Induction
Program
whose
main
objectives
are
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 receive
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 are
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 2022 and
in the framework of its Continuous Professional Development program,
all the
Board
members
a) received
formal
training
on Blockchain
& Central
Bank Digital
Currency
in Financial
Services,
on
Artificial Intelligence
in Financial
Services,
on Anti-Money
Laundering (AML)
regulatory developments
and on Risk
Appetite
Framework (RAF) Communication, 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.
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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’s/Bank’s
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 and
Corporate Governance
Committee.
According
to
the
TRFA
provisions,
the
members
of
the
Audit,
Board
Risk,
Remuneration
and
Nomination
and
Corporate
Governance 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.
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.
3.1
Audit Committee
6
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.
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
Meetings of the Shareholders
(as per the
legal framework),
following the
recommendation of
the NomCos
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
Committees should not be more
than nine (9)
years in
total. The
Chairperson of
the Committees
is appointed
by the
members
of the
Committees, 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 and meet the
requirement of established knowledge and experience
in auditing and/or accounting.
The
Audit
Committees
consist
of
four
(4)
non-executive
Directors,
three
(3)
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:
Rajeev Kakar
,
Non-Executive Independent Director of the Board
Efthymia Deli,
Non-executive Director of the Board,
HFSF Representative
It is noted that in line with the provisions
of article 44 of law 4449/2017, as amended
and currently in force,
and further to the
decision of the HoldCo/Bank’s
Annual General Meetings of
Shareholders as of 21.07.2022
regarding the recomposition
of the
Audit
Committees
and
more
specifically
regarding
their
type,
composition
and
term
of
office;
and
the
BoDs’
decision
of
30.6.2022
and
21.07.2022
regarding
the
membership
of
the
ACs,
following
relevant
recommendations
by
the
NomCos
of
28.06.2022, the ACs decided on their constitution and on the
appointment of their Chairman. Compared to the previous
ACs’
composition and following
the recomposition
of the
ACs on 21.72022,
the ACs’
members were
decreased from
six (6) to four
(4) since Mr. Bradley
Paul Martin and Ms. Cinzia Basile ceased to be members of the Committee.
AC Meetings
The
HoldCo/Bank’s
Audit Committees
meet
at
least eight
(8) times
per
year
or more
frequently,
as circumstances
require,
report on their activities
to the HoldCo/Bank’s Boards
on a quarterly basis and submit the
minutes of their meetings
and the
annual
Activity
Reports
(before
their
submission
to
the
HoldCo/Bank
Shareholders’
Annual
General
Meeting)
to
the
HoldCo/Bank’s Boards.
6
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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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.
Attendance to the AC Meetings
During 2022 the attendance details for
the Audit Committee were as follows:
Company
Meetings
Average ratio of
Directors’ attendance
2022
2021
2022
2021
HoldCo
14
11
100%
95%
Bank
14
12
100%
95%
It is
noted that
in 2022,
all Directors
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
AC’s performance
is evaluated
annually according
to the
provisions
of the
Board and
Board Committees
Evaluation Policy.
According
to
AC’s
self-evaluation,
the
AC
members
are
satisfied
with
the
Committee’s
effectiveness
and
leadership.
They
believe that the AC
uses its time effectively
and there is a good planning and scheduling of the
meetings. The Chairperson of
the AC
is well
prepared for
the meetings
and helps
the Committee
to effectively
navigate through
its agenda, encouraging
critical discussion and ensuring that every
member can freely express
her/his views. The members
are also well prepared and
there is
high level of
participation on
all important discussions, showing
an adequate level
of challenge. The
evaluation also
highlighted
that
the
retention
of
qualified
and
experienced
staff
in
the
areas
of
audit
and
compliance
is
of
strategic
importance and should remain an area of focus, while the further enhancement
of the audit staff’s skillset in specialties of the
modern digital era such as Artificial Intelligence (AI) design, algorithm testing and digitalization
should be actively pursued.
AC’s Activity in 2022
For 2022, AC has amongst others:
Eurobank Holdings
Bank
●
proposed
to
the
BoD
for
approval
the
AC
Terms
of
Reference
●
reviewed
and
discussed
reports
with
information
relating
mainly
to
the
Internal
Audit
and
Compliance
issues,
including
quarterly
reports
from
Internal
Audit
and Compliance functions
●
ensured
that
an
annual
evaluation
of
the
System
of
Internal Controls
for the
year 2021
has been performed
and documented by
Internal Audit. The Audit
Committee
has
prepared
its
own
assessment
report
on
Internal
Audit’s evaluation. The reports were further submitted to
the
Board
and
the
BoG
in
line
with
the
BoG
Act
2577/2006
●
reviewed
the
annual
Compliance
Sector’s
reports
over
compliance activities for the
year 2021 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
for
approval
the
revised
Conflict of
Interest
Policy
and
the revised Compliance Policy
●
reviewed,
approved
and
further
submitted
to
the
BoD
for
information
the
revised
Insider
Dealing
Guideline
and the revised Market Abuse Policy
●
reviewed
and
approved
the
MiFID
II
Product
Governance
Policy
and
the
Policy
for
Reporting
Unethical Conduct
●
discussed with Management, Internal Audit
and External
Auditors issues relating to the financial results,
●
proposed
to
the
BoD
for
approval
the
AC
Terms
of
Reference
●
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 2021.
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
●
approved the
revised Group Compliance Mandate
●
focused
particularly
on
the
AML
function
and
received
regular updates on the AML issues
●
discussed
the
revised
Compliance
Risk
Assessment
Methodology
●
discussed
and
further
submitted
to
the
BoD
for
information
the Anti-Money
Laundering (AML)
Business
Risk Assessment
●
reviewed the annual Group Compliance Sector’s reports
over
AML and
compliance activities
of the
Bank for
the
year
2021
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
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●
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
●
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
●
approved the
remuneration of External
Auditors
●
proposed to the Board and the Annual General Meeting
of
Shareholders
for
approval
the
appointment
of
the
External Auditors for the financial year
2022
●
monitored,
in
line
with
the
External
Auditor’s
Independence Policy, the non-audit services provided by
the External Auditor in 2022,
●
assessed the performance
of the Internal Auditor,
●
approved
the
annual
Plans
of
Internal
Audit
and
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 2021.
●
reviewed,
approved
and
further
submitted
to
the
BoD
for approval
the revised
Group AML/CFT
and Sanctions
Policy,
the
revised
Compliance
Policy
and
the
revised
Conflict of Interest Policy
●
reviewed,
approved
and
further
submitted
to
the
BoD
for
information
the
revised
Insider
Dealing
Guideline
and the revised Market Abuse Policy
●
reviewed
and
approved
the
revised
Order
Execution
Policy,
the
revised
MiFID
II
Product
Governance
Policy,
the revised
Policy
for
Reporting Unethical
Conduct, the
revised
Safekeeping
Policy,
the
revised
MiFID
II
Customer
Categorization
Policy,
the
revised
Appropriateness
Assessment
Policy
and
the
revised
Suitability Assessment 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
●
discussed with
Management
and External
Auditors the
oversight,
the
potential
risks
and
the
proposed
mitigating
actions
of
the
merger
of
Eurobank
Serbia
with Direktna
●
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
●
approved the
remuneration of External
Auditors
●
proposed to the Board and the Annual General Meeting
of
Shareholders
for
approval
the
appointment
of
the
External Auditors for the financial year
2022
●
monitored,
in
line
with
the
External
Auditor’s
Independence Policy, the non-audit services provided by
the External Auditor in 2022
●
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 2021.
It is noted
that in
accordance with
the Law
4449/2017 as in
force,
the HoldCo/Bank
ACs submit
an annual activity
report to
their
Shareholders’
Annual General
Meeting on
the
issues dealt
with by
the
ACs
during the
previous
year,
also including
a
description of the sustainability policy followed
by each entity.
The 2022
HoldCo/Bank AC
Activity Reports which
are also
part of
the 2022
HoldCo/Bank Annual Financial
Reports, refer
to
the AC activity during 2022, the issues addressed
and the sustainability policy.
3.2
Board Risk Committee
7
The purpose of the HoldC/Bank’s
Board Risk Committee (BRC) is to assist the Board in the following
risk-related issues:
●
to advise and
support BoD regarding
the monitoring
of 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 BoD with recommendations
on necessary adjustments to the risk strategy
●
to assist BoD in overseeing the implementation
of risk strategy and the corresponding
limits set
7
HoldCo/Bank’s BRCs’ Terms of Reference
may be found at the HoldCo/Bank websites (
www.eurobankholdings.gr
&
www.eurobank.gr
).
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●
to oversee the implementation of the strategies for capital and liquidity management as well as
for all other relevant risks,
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 made to enhance resolvability
in accordance with the
requirements of the
Resolution Authorities
(for Bank BRC only)
●
to review a number
of possible scenarios, including
stressed scenarios, to assess
how the 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.
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
(for
Bank BRC only)
●
to provide advice on the appointment
of external consultants that 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
an
appropriate
risk
management
framework
has
been
developed
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)
●
to define the risk management principles and ensure that there
are 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
NomCo, 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
NomCo’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
five (5)
non-executive Directors,
three (3)
of whom
are independent,
including the
Chairperson and
the
Vice-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
Alice Gregoriadi,
Non-Executive Independent Director of the Board
Efthymia Deli,
Non-executive Director of the Board,
HFSF Representative
It
is
noted
that
during
2022
and
following
NomCos’
recommendations
for
the
recomposition
of
the
HoldCo/Bank’s
BoDs
Committees, the HoldCo/Bank’s BoDs decided on 21.7.2022,
Mr. Jawaid Mirza to cease to be member of the
BRCs.
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 me
mbers 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.
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Attendance to the BRC Meetings
During 2022, attendance details for the
Board Risk Committee were as foll
ows,
Company
Meetings
Average ratio of
Directors’ attendance
2022
2021
2022
2021
HoldCo
(since 31.3.2022)
10
n/a
95%
n/a
Bank
14
14
97%
99%
The Directors’ individual attendance
rates at the BRC meetings
in 2022 were the following:
Eurobank Holdings’ BRC
Eurobank BRC
Eligible to attend
Attended in person
(# and %)
Eligible
to
attend
Attended in
person
(# and %)
Rajeev Kakar,
BRC Chairperson
10
9
90%
14
13
93%
Cinzia Basile,
BRC Vice-Chairperson
10
9
90%
14
13
93%
Bradley Paul Martin,
BRC member
10
9
90%
14
14
100%
Jawaid Mirza,
BRC member until 21.7.2022
6
6
100%
9
9
100%
Alice Gregoriadi,
BRC member
10
10
100%
14
14
100%
Efthymia Deli,
BRC member
10
10
100%
14
14
100%
It is noted
that Mr. Rajeev Kakar, Ms. Cinzia Basile
and Mr. Bradley Paul L.
Martin provided representation proxies for all missed
meeting in HoldCo/Bank’s BRCs, leading their overall
attendance rates (physical and under representation)
at 100% in BRC.
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
are
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.
The ToR are approved
by the Board.
BRC’s Performance Evaluation
BRC’s performance
is evaluated annually according
to the provisions
of the Board
and Board Committees Evaluation
Policy.
According to
BRC’s self-evaluation,
the BRC
members are
satisfied with the
Committee’s effectiveness
and leadership. They
believe that
the BRC uses
its time effectively
and there
is a good
planning and scheduling
of the meetings.
The Chairperson
of the BRC is
well prepared for the meetings and helps the Committee
to effectively navigate through its agenda, encouraging
critical discussion and ensuring that every
member can freely express
her/his views. The members
are also well prepared and
there is
high level of
participation on
all important discussions, showing
an adequate level
of challenge. The
evaluation also
highlighted that BRC’s
planning and scheduling
of meetings should
continue to focus
on prioritizing the
most important risk
issues.
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BRC’s Activity in 2022
For 2022, the BRC has,
amongst others:
Eurobank Holdings
Bank
●
monitored
the
Group’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
Group
●
approved,
among
others,
the
following
regulatory
and
other reports, including risk policies and frameworks:
-
Internal Capital &
Liquidity Adequacy Assessment
processes ICAAP/ILAAP
-
Capital Adequacy Statements, Liquidity Adequacy
Statements
-
Risk Identification
and Materiality
Process
(RIMA)
Report
-
Group Recovery Plan
●
approved the
GCRO Annual Report
●
approved the Group
Risk and Capital Strategy and Risk
Appetite Framework as well as
Risk Appetite
Statements
incl. RAS dashboard
●
monitored
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
●
monitored
qualitative
and
quantitative
aspects
of
credit, market, liquidity and operational
risks,
●
reviewed
Information
and
Communication
Technology
(ICT)
Risk
and
Security
(incl.
Cyber
Security),
Physical
Security and Fraud
detection
●
reviewed
General
Data
Protection
Regulation
(GDPR)
and Payment Services Directive
2 (PSD2) status
●
approved,
among
others,
the
following
regulatory
and
other reports, including risk policies and frameworks
-
Single
Resolution
Board’s
(SRB’s)
Working
Priorities
and
Eurobank’s
Resolvability
Work
Programme (Bail in playbook, etc.)
-
Minimum Requirement for
Own Funds and Eligible
Liabilities (MREL) Issuance plan & Targets
-
Non-performing
Exposures
(NPE)
Reduction
Plan
2022-2024: Summary report, impairments and key
risk metrics
EBA Dashboard
●
reviewed and/or approved:
Climate Stress Test
2022 and Framework
External
3rd
Party
Benchmarking
of
the
Risk
Management Function
Early Warning System
Risk Parameters
monitoring
Outsourcing
reports
incl.
OSI
regarding
IT
Outsourcing
OSI – Internal Ratings Based
(IRB) for Loss given
Default (LGD)
Retail models
New SRT NPE Securitisations
ALM tool governance framework
guideline
●
approved
several
policies incl. market
risk, counterparty
risk, liquidity, credit, collection etc.
3.3
Remuneration Committee
8
The
HoldCo/Bank’s
Boards
have
delegated
to
the
respective
RemCos
the
responsibilities
(a)
to
provide
specialized
and
independent advice for
matters relating
to remuneration
policy and its implementation
at HoldCo/Bank 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
HoldCo/Bank
undertakes
and
manages and the
required alignment between
the HoldCo/Bank
and the Group,
and (c) to approve
or propose for
approval
all exposures
of Key
Management Personnel
9
and their
relatives
(spouses, children,
siblings).
The Non-Executive
Directors of
HoldCo/Bank have
the responsibility
to approve
and periodically
review HoldCo/Bank’s
remuneration
policy and
oversee its
implementation both at
Bank and Group level.
The implementation
of the
HoldCo/Bank remuneration
policy is in
line with the
provisions
of Laws 3864/2010,
4261/2014 and
Bank of Greece Governor’s Act 2650/2012.
The HoldCo/Bank RemCo is also responsible 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
HoldCo/Bank’s
BoD
for
their
approval
the
goals
and
objectives
relevant
to
the
HoldCo/Bank’s
CEO
remuneration
and
evaluate
his/her
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, HoldCo/Bank RemCo ensures that the external consultant is referred
in the HoldCo/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 HoldCo/Bank
or with members of the HoldCo/Bank’s
Board individually.
8
HoldCo/Bank’s Remuneration
Committees’ Terms
of Reference
may be
found
at the
HoldCo/Bank websites
(
www.eurobankholdings.gr
&
www.eurobank.gr
).
9
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.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
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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
HoldCo/Bank’s
Board,
with
the
option
to
renew
their
appointment, but in any case, the service in RemCos should not be more
than nine (9) years in total.
The RemCos consists of five (5)
non- executive Directors four (4) of
whom are independent Directors,
including the Chairperson
and the Vice-Chairperson. In particular,
the HoldCo/Bank RemCo composition is outlined below:
RemCo Chairperson:
Cinzia Basile,
Non-executive Independent Director of the Board
RemCo Vice-Chairperson:
Jawaid Mirza,
Non-Executive Independent Director of the Board
Members:
George Chryssikos,
Non-Executive 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 2022
and following
NomCo’s
recommendations,
the
HoldCo/Bank’s
BoDs on
21.7.2022
decided the
following amendments
on RemCos’ composition:
a)
Mr. Jawaid
Mirza was appointed
RemCos’ Vice-Chairperson
in replacement
of Mr.
Rajeev Kakar
who ceased to
be
member of the RemCos.
b)
Mr. George Chryssikos was appointed RemCos’ member,
and
c)
Mr. Bradley Paul
Martin and Ms. Irene Rouvitha Panou ceased to be members of the
RemCos.
RemCo meetings
HoldCo/Bank’s RemCo meets at least twice a year and minutes are kept.
Quorum in RemCo meetings
HoldCo/Bank’s
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 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 2022 the attendance details for
the Remuneration
Committees were as follows:
Company
Meetings
Average ratio of
Directors’ attendance
2022
2021
2022
2021
HoldCo
6
n/a
100%
n/a
Bank
8
8
100%
100%
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
are
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.
The ToR are approved by the Board.
RemCo’s Performance
Evaluation
RemCo’s
performance
is
evaluated
annually
according
to
the
provisions
of
the
Board
and
Board
Committees
Evaluation
Policy.
According
to
RemCo’s
self-evaluation,
the
RemCo
members
are
satisfied
with
the
Committee’s
effectiveness
and
leadership. They believe that the RemCo uses its time effectively and there is a good planning and scheduling of
the meetings.
The Chairperson of the
RemCo is well prepared for
the meetings and helps the
Committee to effectively navigate through
its
agenda, encouraging
critical discussion
and ensuring that
every member
can freely
express her/his
views. The
members are
also well prepared and
there is high level of
participation on all
important discussions, showing an
adequate level of challenge.
The
evaluation
also
highlighted that
while the
level
of remuneration
has improved,
it should
remain
an area
of focus
and
should be regularly assessed against relevant local and international benchmarking.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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RemCos' Activity in 2022
For 2022, RemCo has amongst others:
Eurobank Holdings
Bank
●
reviewed and proposed
to the Non-Executive Directors
for approval
the Remuneration
Policy of the
HoldCo
●
approved
the
Identification
Process
of
Material
Risk
Takers
(as part of the Remuneration
Policy)
●
discussed
the
remuneration
policy
implementation
at
Group level
●
discussed the
Remuneration
Policy Rev
iew – Follow
up
(for
the
Year
2020),
conducted
by
the
Internal
Audit
Group
●
proposed
to
the
Board
for
approval
the
Board
and
Board Committees’ Fees for
Non-Executive Directors of
the HoldCo
●
was
informed
on the
tax treatment
of
the
Board
and
Board Committees’ Fees
●
proposed to the
Board for
approval the
Remuneration
Report for the financial year 2021
●
proposed
to
the
Non-Executive
Directors
of
the
Bank
for approval the CEO’s Performance Evaluation for 2021
&
CEO’s
Financial
and
Non-Financial
objectives
for
2022
●
approved the
Remuneration Disclosures
for 2021
●
reviewed
and
proposed
to
the
BoD
for
approval
the
Board and Board Committees’ attendance policy
●
proposed to the
Board for approval
the Non-Executive
Directors’
remuneration
for
2023
onwards
(subject
to
AGM approval)
●
proposed
to the
Non-Executive Directors
for
approval
a New Variable Remuneration
Scheme
●
proposed
to
the
BoD
for
approval
the
2022
Stock
Option Plan Implementation
●
proposed
to the
Non-Executive Directors
for
approval
a
borrowing
request
of
a
member
of
a
Key
Management Personnel
●
reviewed and proposed
to the Non-Executive Directors
for
approval
a
proposal
concerning
the
annual
contributions to Eurobank’s Group
Occupational Fund.
●
proposed
to the
BoD for
approval
the
revised
RemCo
Terms of Reference
●
reviewed and proposed
to the Non-Executive Directors
for approval
the Remuneration
Policy of the Bank
●
approved
the
Identification
Process
of
Material
Risk
Takers
(as part of the Remuneration
Policy)
●
discussed
the
remuneration
policy
implementation
at
Bank and Bank Group level
●
discussed the
Remuneration
Policy Review
– Follow
up
(for
the
Year
2020),
conducted
by
the
Internal
Audit
Group
●
proposed
to
the
Board
for
approval
the
Board
and
Board Committees’ Fees for
Non-Executive Directors of
the Bank
●
was
informed
on the
tax treatment
of
the
Board
and
Board Committees’ Fees
●
proposed to the
Board for approval
the Non-Executive
Directors’
remuneration
for
2023
onwards
(subject
to
AGM approval)
●
approved
the
remuneration
framework
and
remuneration increase of Senior Managers of Eurobank
Cyprus
●
proposed
to
the
Non-Executive
Directors
of
the
Bank
for approval the CEO’s Performance Evaluation for 2021
&
CEO’s
Financial
and
Non-Financial
objectives
for
2022
●
proposed to the BoD for approval the Board and
Board
Committees’ attendance policy
●
reviewed
the implementation
of the
Board and
Board
Committees’ attendance policy,
●
discussed
and
further
submitted
to
the
Board
for
information
the
implementation
of
the
Group
Subsidiary
Board
Remuneration
Policy
through
the
Group during 2021
●
approved the
Remuneration Disclosures
for 2021
●
proposed
to the
Non-Executive Directors
for
approval
a New Voluntary Exit Scheme
(VES)
●
proposed
to the
Non-Executive Directors
for
approval
a New Variable Remuneration
Scheme
●
depending on
the
case,
approved
or proposed
to the
Non-Executive
Directors
for
approval
various
remuneration
issues
of
the
international
subsidiaries
(remuneration
framework,
performance
related
variable remuneration, remuneration
adjustments etc)
●
proposed
to the
Non-Executive Directors
for
approval
a
borrowing
request
of
a
member
of
a
Key
Management Personnel
●
received
and
reviewed
the
annual
updates
of
the
RemCo Chairpersons of Group’s banking subsidiaries
●
approved
the
appointment
of
RemCo
Chairperson
in
Eurobank Bulgaria
●
reviewed and prop
osed to the Non-Executive Directors
for
approval
a
proposal
concerning
the
annual
contributions to Eurobank’s Group
Occupational Fund.
3.4
Nomination and Corporate Governance
Committee
10
Eurobank Holdings and the Bank’s Boards have delegated to
the NomCos 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,
(b) to consider matters
related to the Board’s adequacy, efficiency and effectiveness
and (c)
review
the Group’s
corporate governance
policies, procedures
and arrangements.
The Committees were
renamed Nomination
and
Corporate Governance
Committees in order to accurately reflect their
expanded purpose.
The 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
10
HoldCo/Bank’s NomCos’ Terms of Reference
may be found at the HoldCo/Bank websites (
www.eurobankholdings.gr
&
www.eurobank.gr)
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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●
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
●
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
●
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 NomCos 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
NomCos 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 five (5) 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 Rouvitha Panou,
Non-Executive Independent Director of the Board
NomCo Vice-Chairperson:
Bradley Paul L. Martin,
Non-Executive Director of the Board
Members:
Jawaid Mirza,
Non-Executive Independent Director of the Board
Rajeev Kakar,
Non-Executive Independent Director of the Board
Efthymia Deli,
Non-Executive Director of the Board,
HFSF Representative
It is
noted
that
during 2022
and following
NomCos’
recommendations,
the
HoldCo/Bank’s
BoDs on
21.7.2022
decided the
following amendments
on NomCos’ composition:
a)
Mr. Jawaid Mirza was appointed NomCos’ member
and
b)
Mr. Georgios Zanias and Ms. Alice Gregoriadi
ceased to be members of the NomCos.
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.
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.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
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Attendance to the NomCo meetings
During 2022 the attendance details for
the NomCo were as follows:
Company
Meetings
Average ratio of
Directors’ attendance
2022
2021
2022
2021
HoldCo
6
7
97%
98%
Bank
7
7
98%
98%
The Directors’ individual attendance
rates at the NomCo meetings in 2022 were
the following:
Eurobank Holdings NomCo
Eurobank NomCo
Eligible to attend
Attended in
person
(# and %)
Eligible
to
attend
Attended in
person
(#
and %)
Irene Rouvitha Panou,
NomCo Chairperson
6
6
100%
7
7
100%
Bradley Paul Martin,
NomCo Vice-Chairperson
6
5
83%
7
6
86%
Rajeev Kakar,
NomCo member since 21.7.2022
2
2
100%
2
2
100%
Georgios Zanias,
NomCo member until 21.7.2022
4
4
100%
5
5
100%
Jawaid Mirza,
NomCo member
6
6
100%
7
7
100%
Alice Gregoriadi,
NomCo member since 23.7.2021
4
4
100%
5
5
100%
Efthymia Deli,
NomCo member
6
6
100%
7
7
100%
It is
noted that
Mr.
Bradley
Paul
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
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.
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,
the
NomCo
members
are
satisfied
with
the
Committee’s
effectiveness
and
leadership. They believe that the NomCo uses its time effectively and there is a
good planning and
scheduling of the meetings.
The Chairperson of the NomCo is well
prepared for the meetings
and helps the Committee to effectively navigate through
its
agenda, encouraging
critical discussion
and ensuring that
every member
can freely
express her/his
views. The
members are
also well prepared and
there is high level of
participation on all
important discussions, showing
an adequate level of
challenge.
The evaluation
also highlighted that
the NomCo
and the
BoD should continue overseeing
that strong
governance culture
is
maintained across Eurobank
and its subsidiaries.
NomCo’s Activity in 2022
For 2022, NomCo has amongst others:
Eurobank Holdings
Bank
●
Proposed
to
the
BoD for
approval
the
revised
NomCo
Terms of Reference
●
reviewed for further
update of the Board, the Board and
Board Committees 2021 self-evaluation and the Board’s
overall
effectiveness assessment
●
proposed
to
the
Board
for
approval
the
new
composition of the Board Committees
●
reviewed
and
proposed
to
the
Board
for
approval
the
Board of
Directors Diversity
Policy,
the CEO
Succession
Planning
Policy,
the
External
Engagements
Policy,
the
Board and
Board Committees
Evaluation Policy,
the C-
Suite
Succession
Planning
Policy,
the
Senior
Management
Selection
and
Appointment
Policy,
and
the Group Governance
Policy.
In addition, reviewed and
proposed to
the BoD
and AGM
for approval
the Board
Nomination Policy
●
reviewed
and
proposed
to
the
Board
for
approval
the
revised Organizational Chart
●
proposed
to
the
Board
for
approval
the
Internal
Governance Control
Manual
●
Proposed
to
the
BoD for
approval
the
revised
NomCo
Terms of Reference
●
reviewed for further
update of the Board, the Board and
Board Committees 2021 self-evaluation and the Board’s
overall
effectiveness
assessment
and
the
Strategic
Planning Committee’s self-assessment for 2021
●
proposed
to
the
Board
for
approval
the
new
composition of the Board Committees
●
reviewed
and
proposed
to
the
Board
for
approval
the
Board of
Directors Diversity
Policy,
the CEO
Succession
Planning
Policy,
the
External
Engagements
Policy,
the
Board and
Board Committees
Evaluation Policy,
the C-
Suite
Succession
Planning
Policy,
the
Senior
Management
Selection
and
Appointment
Policy,
the
Group
Governance
Policy
and
the
Board
Nomination
Policy
●
reviewed
and
proposed
to
the
Board
for
approval
the
revised Organizational Chart
●
approved the selection of candidates as members of the
Board of Directors of Group’s significant subsidiaries
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●
reviewed
and updated
the
Board
on Senior
Executives
succession plan
●
approved
the external
engagements of
three (3)
Board
members
●
reviewed
the
independence
of
the
Independent
Non-
Executive directors
●
reviewed
the attendance
of Directors
to the
Board and
Board Committees
●
reviewed
and
proposed
to
the
BoD
for
approval
the
Corporate Governance Action Plan of recommendations
derived
from
various reviews,
including the
Supervisory
Review and Evaluation Process (SREP) 2021 and the BoD
and BoD Committees Self-Assessment 2021.
●
approved
the
NomCo
Chairpersons
of
Eurobank
Bulgaria and Eurobank Direktna
●
approved the appointment of the Head of Group Digital
Banking
General
Division
and
the
appointment
of
General Managers
●
received
and
reviewed
the
annual
updates
of
the
NomCo Chairpersons of Group’s banking subsidiaries
●
reviewed
and updated
the
Board
on Senior
Executives
succession plan
●
reviewed
the
Succession
planning of
Key
Management
Personnel
(KMP)
of
significant
subsidiaries
Eurobank
Bulgaria and Eurobank Cyprus
●
was
updated
on
the
Group
Corporate
Governance
Arrangements
Guideline
implementation
status
by
Group’s banking subsidiaries
●
approved
the external
engagements of
three (3)
Board
Members
●
reviewed
the
independence
of
the
Independent
Non-
Executive directors
●
reviewed
the attendance
of Directors
to the
Board and
its Committees
●
reviewed
and
proposed
to
the
BoD
for
approval
the
Corporate Governance Action Plan of recommendations
derived
from
various reviews,
including the
Supervisory
Review and Evaluation Process (SREP) 2021 and the BoD
and BoD Committees Self-Assessment 2021.
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
11
.
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 three (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 31.12.2022, 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
The HoldCo/Banks’
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:
11
The Board of Directors Diversity Policy may be found at the
HoldCo/Bank’s website
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●
Define the
general
principles which
guide 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
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 Collective
Suitability Matrix of the Joint ESMA/EBA Guidelines 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
●
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
●
Take
into account the
findings of the HoldCo
and Bank BoD evaluations
in order to
achieve the
necessary changes
in composition or skills and to maximise the effectiveness
and collective suitability of the
HoldCo and Bank BoD
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.
CEO Succession Planning
The HoldCo/Banks’
CEO Succession Planning
Policy (Policy)
which is supplementary to the
HoldCo/Bank’s Board Nomination
Policy and HoldCo/Bank’s Board and Board
Committees Evaluation Policy,
sets out the guidelines and formal process
for the
identification, selection and nomination of candidates
for the succession
of the HoldCo/Bank’s CEO.
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In
accordance
with
the
Policy,
NomCo
defines,
in
collaboration
with
the
current
CEO,
the
qualifications
required
for
the
position
of
the
CEO, ensures
that
there
is
a viable
pool
of
candidates
who may
feet
the
required
profile,
reviews
at
least
annually and in any case before the initiation of the CEO succession process
the qualifications required for
the position of the
CEO and the
pool of candidates,
leads the selection
process, and
approves
a tailored to
the CEO induction
program, which
facilitates the smooth
transition.
3.5
Board Digital & Transformation
Committee
12
The
Bank’s Board
Digital &
Transformation
Committee (BDTC)
is a
consultative
body that
reviews
proposals
and gives
its
strategic advice and guidance on such proposals related to the Group’s digital, innovation, transformation
and cybersecurity,
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 Bank 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 twelve
(12)
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:
Alice Gregoriadi,
Non-Executive Independent Director of the Board
BDTC Vice-
Chairperson:
Rajeev Kakar,
Non-executive Independent Director of the Board
Members:
Jawaid Mirza
, Non-executive Independent Director of the Board
Stavros Ioannou, Executive Director of the
Board / Deputy Chief Executive Officer,
Group Chief
Operating Officer (COO) &
International Activities
Andreas Athanasopoulos,
Executive Director of the Board
/ Deputy Chief Executive Officer, Group
Chief
Transformation
Officer, Digital & Retail
Efthymia P.
Deli,
Non-executive Director of the Board, HFSF
Representative
It is noted that during 2022 and following the
recommendation of the Bank NomCo, the Bank’s BoD on 21.7.2022
decided the
following amendments
on BDTC’s Composition:
●
Ms.
Alice
Gregoriadi,
previous
BDTC
Vice-Chairperson,
was
appointed
BDTC
Chairperson,
in
replacement
of
Mr.
Jawaid Mirza who remained BDTC member.
●
Mr. Rajeev Kakar,
previous BDTC
member, was appointed BDTC
Vice-Chairperson.
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 2022, BDTC held two
(2) meetings and the ratio
of attendance was 100% (vs. 83% in 2021).
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 Ter
ms 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.
12
BDTC ToR
may be found at the Bank’s website (www.eurobank.gr).
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BDTC Performance
Evaluation
BDTC’s performance
is evaluated annually according to the provisions of the Board and Board Committees Evaluation Policy.
According to BDTC’s self-evaluation, the BDTC members are satisfied with the Committee’s effectiveness and leadership. They
believe that the BDTC
uses its time effectively and there
is a good planning and scheduling of the meetings. The
Chairperson
of
the
BDTC
is
well
prepared
for
the
meetings
and
helps
the
Committee
to
effectively
navigate
through
its
agenda,
encouraging critical
discussion and ensuring
that every
member can
freely express her/his
views. The
members are
also well
prepared
and there
is high
level
of participation
on all
important discussions,
showing an
adequate level
of challenge.
The
evaluation
also
highlighted that
BDTC’s
planning and
scheduling
of future
meetings
could be
enhanced further
by
having
more benchmarking and best practices items in the agenda rather
than items related to the current
state of the Bank.
BDTC’s Activity
For
2022
BDTC
has
discussed mainly
the
Eurobank
2030
Transformation,
including
deep
dives
in
various.
The
Committee
reviewed
among
others
the
IT strategy
to support
transformation
and
the
management
of
risk
within
the
transformation
governance and was also update on certain innovation deep dives (like existing collaboration with Fintechs, scanning for new
opportunities and program EGG). In addition, for
2022, BDTC proposed
to the BoD for approval
its revised ToR.
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
Strategic
Planning
Committee, 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)
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,
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
Diploma 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:
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
Direktna
AD,
Serbia
(since
November
2010),
Eurobank
Bulgaria AD
(since October
2015), Vice
-Chairman in
Eurobank
Cyprus Ltd (since
November 2022)
and is also
the Chairman of
the BoD,
BE-Business
Exchanges
SA
(since
January
2014).
He
has
also
been
appointed
as
the
responsible
BoD
member
of
Eurobank
Holdings
and
Eurobank
for
climate-related
and
environmental
risks
and
for
the
outsourcing function
He
is
currently
Non-Executive
Board
member
of
Grivalia
Management
Company S.A. (since September 2019).
In the past, Mr. Ioannou
had also
the following significant posts: Chairman
of
the
Executive
Committee
in
the
Hellenic
Banking
Association
(2020-
2022) where he
had been member since
2013, Vice
Chairman at Cardlink
SA (2013
-2015), Member
of
the
BoD in
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.
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Kostas Vassiliou
Deputy Chief Executive Officer
(CEO), Head of
Corporate & Investment Banking
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:
Board Digital
and Transformation
Committee
- Member
Year of birth: 1966
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
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 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 in Eurobank Holdings:
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).
In the
past
Mr.
Adam
worked
in ANZ
Grindlays Greek
Branch,
he
had the position of Account Manager in the
Corporate Division.
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 Eurobank Holdings:
-
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 in Eurobank Holdings:
1.756
He is also a member of the
BoDs in Eurolife FFH
Group Holdings, General
Insurance
and Life
insurance.
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
In the past Mr. Ioannidis has served
as General Manager,
Head of Global
Markets
&
Treasury
(April
2015
-
July
2019),
Deputy
General
Manager,
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General
Manager
Markets
&
Asset
Management, Eurobank SA
Year of birth: 1968
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
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 in Eurobank Holdings:
-
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), Senior
Executive and eventually 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 Kokologi
annis
General Manager, Group Finance, Group Chief
Financial Officer (Group
CFO), Eurobank SA
Year of birth: 1967
Nationality: Hellenic
Number of shares in Eurobank Holdings:
-
Mr.
Kokologiannis
joined
Eurobank
in
January
2008
as
Head
of
Group
Finance and Control until his appointment as Group
CFO in July 2013.
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
in
Eurobank
Holdings:
113.958
Mr.
Louis also serves
as CEO, Eurobank
Cyprus Ltd (since
2007), Member
of
the
BoD,
Eurobank
Private
Bank
Luxembourg
SA,
Member
of
the
Supervisory Board (SB) of Eurobank
Bulgaria AD and Member of the BoD
of
Eurobank-Direktna
(before
the
merger
of
Eurobank
Serbia
with
Direktna
on
December
2021,
he
was
serving
as
the
BoD
Chairman
of
Eurobank Serbia).
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 in Eurobank Holdings:
-
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.
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The ExBo manages the implementation of
Group’s strategy 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
13
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)
●
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
and approve
their compensation
and terms of
engagement in accordance
with
Bank’s policies and procedures
●
hire and retain
investment banking
advisors, and approve
their compensation
and terms of engagement,
in accordance
with Bank’s policies and procedures, where
applicable
●
To
review
the
quarterly report
of Group
Operational
Risk Sector
(GORS) before
submission to
the
BRC since
it entails
group wide operational
risk issues.
ExBo’s performance is evaluated annually
according to the
provisions of Bank’s Management
Committees’ Policy and
its Terms
of Reference. For 2022, ExBo performed its first self-evaluation. According to this evaluation, it was determined that its overall
performance and all the specific areas of evaluation i.e. the profile and composition, the organization and administration and
the
key
tasks
and
responsibilities,
are
strong.
Members
of
ExBo
suggested
the
following
areas
for
improving
ExBo’s
organization and administration: i) number of items in the agenda to be reduced to allow
for more meaningful discussions, ii)
submissions to be kept short to allow for more Questions & Answers and iii) supporting material to be shared well in advance
by business owners in order to allow
for better preparation.
Strategic Planning Committee
14
Until 20.7.2022,
the Bank's Strategic Planning Committee (SPC) was operating as a Board Committee, while on 21.7.2022,
the
Bank’s Board revoked
its mandate and terms of reference,
which ceased to be Board
Committee, on the understanding that
SPC will be reconstituted by the Bank’s CEO as a new Management Committee, with a new composition, mandate and terms
of reference approved
by the CEO.
The purpose of the SPC is to:
a)
assist Management in planning, developing and implementing the
Bank Group’s Strategy
and
b)
recommend to the Board
certain initiatives in relation to
the Bank Group’s Strategy.
13
As specified in the Divestment Policy
14
Information
regarding
current
composition
and
short
biographical
details
of
its
members
may
be
found
at
the
Bank’s
website
(www.eurobank.gr).
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The key tasks and responsibilities of the
SPC are:
●
within the framework
of which the Executive
Board draws
up the annual budget
and the business
plan, to review
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 Bank Group’s
strategic choices (e.g. strategic
partnerships, share
capital
increase,
issuing
convertibles
and/or
launching
debt
issuance
programs,
mergers/demergers,
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 Bank
Group etc.), ensuring
these being in
line with the
approved
Bank
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 Bank 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 Bank Group,
including the segmental
view
●
to review and, as needed, make proposals
to the Board on all other
issues of strategic importance to the Bank Group
Until
20.7.2022
that
the
SPC
was
operating
as
a
Board
Committee,
its
members
were
appointed
by
the
Board,
on
the
recommendation of its Chairperson, following the
proposal by the NomCo. The Committee was 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 was 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.
Following
the reconstitution
of the
SPC as
a new
Management Committee
by the
Bank’s CEO,
the SPC
is composed
of the
following members
with voting rights:
-
The Chief Executive Officer
(CEO)
-
The Deputy CEOs
-
The Group Chief Risk Officer
-
The Group Chief Financial Officer
The Chairman of the Board, the Vice-Chairman of the Board and the General Manager Group Strategy
participate in the SPC
as a permanent attendees with no voting rights.
The
SPC is
chaired
by
the
CEO
and
in case
of
absence
or
impediment
of
the
CEO, by
the
longest
serving
Deputy CEO
in
attendance.
Since 21.7.2022, the SPC meets on a
weekly basis or ad
hoc, when necessary, and keeps
minutes of its
meetings (until 20.7.2022,
SPC met on a biweekly basis and reported to the Board
on a quarterly basis and as required).
During
2022,
the
SPC
held
forty
(40)
meetings
twenty
four
(24)
as
Board
Committee
and
sixteen
(16)
as
Management
Committee) and the ratio
of attendance was 93% (94% as Board Committee and 92% as a Management Committee).
The
SPC is
in quorum
and meets
validly when
a) half
of its
members
plus one
are present
(fractions
are excluded
from
the
computation), provided that at least three members are present and b) SPC’s Chairperson or the longest serving Deputy CEO
in attendance,
entitled to chair the Committee, is present.
The resolutions
of the
SPC require a
majority vote.
In case of
a tie of
votes, SPC’s
Chairperson has the
casting vote.
If SPC’s
Chairperson is absent, the longest serving Deputy CEO in attendance, entitled to chair the Committee, has the
casting vote.
In the
context of
providing
support to
the
Chairperson for
ensuring the
smooth
and proper
operation
of the
SPC, 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 maintain an annual calendar of the scheduled meetings, which may be
revisited depending on
unforeseen circumstances,
following
the approval
of SPC’s Chairperson.
In addition, the
Secretary is responsible
to organize
meeting
details
(including
venues),
record
the
attendance
of
members
and
other
attendees/invitees,
ensure
that
quorum
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requirements
are met,
minute the
proceedings
and resolutions
of all
Committee meetings,
issue true
copies/extracts
of the
SPC’s minutes and
notify the
responsible managers
regarding any issue
discussed by the
SPC and is
relevant to them
or on
which they need to take action.
The SPC Terms
of Reference (ToR)
are approved by
the CEO and revised as appropriate.
SPC’s
performance
is
evaluated
annually
according
to
the
provisions
of
Bank’s
Managements
Committees’
Policy
and
its
Terms
of Reference.
According to
SPC’s self-evaluation
for 2022,
it was determined
that its
overall
performance
and all the
specific
areas
of
evaluation
i.e.
the
profile
and
composition,
the
organization
and
administration
and
the
key
tasks
and
responsibilities, are strong.
Management Risk Committee
15
The main responsibility of Management Risk Committee (MRC) is
to oversee the risk management framework of the Bank. 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.
As part of its responsibility, the MRC, facilitates
reporting to the BRC on the range of risk-related
topics under its purview.
As part of its mandate, the MRC:
●
reviews
the
Group’s
risk
profile
vis-à-vis
its
declared
risk
appetite,
examines
any
proposed
modifications
to
the
risk
appetite,
●
reviews and approves
the stress testing programme
results,
determines appropriate management actions
which are discussed and presented to the ExBo for information
and submitted
to the BRC for approval
The MRC maintains at all times a pro
-active approach to Management.
The
MRC understands
and evaluates
risks, addresses
escalated issues,
provides
oversight
of the
Group’s
risk management
framework
– including the
implementation of risk
policies – and informs
the BRC of the
Group’s
risk profile. The
Group CRO
updates the
ExBo on
material risks
and issues
on a
periodical
basis. Furthermore,
the
MRC 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. Specific responsibilities
performed by the
MRC are described below:
●
revises and presents to the BRC for approval
the risk strategy and the risk appetite, the
risk limits and the measures
for monitoring both financial and non-financial risks, in conjunction
with the Board’s approval of the annual business
plan / strategy
●
monitors :
a) current
risk exposures
at
a Group
level,
b) company-wide
compliance
with
the
risk limits,
c) Bank’s
overall
risk assessment processes and d) Bank's capability to identify and manage new risk types as they
emerge
●
performs risk escalation and remediation
by reviewing and reporting on any material breaches of risk limits and the
adequacy of proposed specific actions to address them
●
reviews the Stress
Testing Programme
with regards to:
o
its effectiveness and robustness
o
material risks
developed in
the risk
identification process
and scenarios
developed in
the scenario
design
process
o
key modelling assumptions and the stress testing results
before the submission
to the BRC
●
reviews at least on an annual basis the followi
ng reports:
o
the Group ICAAP and ILAAP
o
the Group Recovery
Plan
in compliance with the regulatory requirements
and guidelines before final submission to the
BRC.
●
Regarding
the
Resolution
Planning,
the
MRC
reviews
and
approves
the
Bank’s
rolution
planning
initiatives
to
enhance its resolvability material/documents
requested by the Resolution Authorities (SRB).
The MRC does
not conflict with the
GCRO or the Risk Management General
Division’s responsibilities for
Risk governance as
prescribed under
the Bank
of Greece’s
Governor
Act no.
2577/2006.
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
which meets
on a monthly
basis prior
to the
BRC meeting or
more frequently
on an ad-hoc
basis, if
required, 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
the BRC,
SPC and
15
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.
ATTACHMENT
TO THE REPORT OF THE DIRECTORS
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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.
The MRC’s
performance
is evaluated annually according
to the provisions
of Bank’s Management Committees
Policy and its
Terms
of
Reference.
For
2022,
the
Committee
performed
its
first
self-evaluation
and
it
was
determined
that
its
overall
performance and all the specific areas of evaluation i.e. the profile and composition, the organization and administration and
the key
tasks and responsibilities, are
strong. Members suggested the
following
areas for improving
MRC’s organization and
administration: i) number of items in the agenda to be reduced to allow for more meaningful discussions and ii)
more sessions
to be scheduled in order to reduce the material
submitted for the meetings.
Group Asset and Liability Committee (G-ALCO)
16
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).
G-ALCO’s performance
is evaluated annually
according to the
provisions
of Management Committees’
Policy and
its Terms
of Reference.
According
to G-ALCO’s
self-evaluation
for
2022, it
was determined
that:
i) its
members’
engagement
is well
appropriate, ii)
the
G-ALCO
continues to
function
effectively
in relation
to its
mandate
and responsibilities,
with members
engaging in critical discussions during
meetings on key
risk issues, iii) in light of the
increasing complexity and importance of
issues arising,
the
evolution
of the
regulatory
framework
and emergence
of additional
risk considerations,
G-ALCO
should
improve its organizational and operational efficiency with increasing frequency and/or length of meetings as may be required
to remain as effective.
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
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.
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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Central
Credit
Committees’
performance
is
evaluated
annually
according
to the
provisions
of
Managements
Committees’
Policy and its Terms
of Reference. The
Central Credit Committee’s self-evaluation
for 2022 is currently in progress.
Troubled Assets Committee
17
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
cooperates
with
Group
Risk
Management
Division
to
reach
a
mutual
understanding
and
develop
an
appropriate methodology
for the evaluation
of the risks inherent
in the portfolio
management. TAC’s
propositions regarding
NPE policy updates are submitted to the Board Risk Committee.
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
TAC
conducted a self-evaluation
for 2022
in compliance with
the provisions
of the
Management Committees’
Policy and
its
Terms of Reference. The evaluation concluded that the committee
operates effectively,
in the areas
of Profile and
Composition,
Organization & Administration as well as regarding
the Key Tasks and Responsibilities. However, the evaluation also identified
that
while
the
overall
quality
and
quantity
of
information
submitted
related
to
the
proposals
for
assessment
by
the
TAC
members is
adequate, there
is room
for further
enhancement on
providing more
details on the
quantification of
the impact
of the proposed for
approval actions. Such enhancement will benefit TAC
members to make more informed
decisions.
Products & Services Committee (PSC)
18
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.
A governance
framework
assessing financial and non-financial risks is in place. The
PSC approves all new products & services as
well as significant modifications in existing
ones. The Committee also implements
a periodic review
of all products
and services, according
to their risk
profile to determine
their continuation,
modification or
discontinuation. The
products and
services of
Remedial &
Servicing Sector
are excluded
and are
under the
responsibility of
TAC (Troubled
Assets Committee).
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 require,
as a
minimum, a
majority vote
of 50%+1
of the
members present
in the
meeting and
are recorded
in the
meeting’s minutes.
In case
of a
tie vote,
the
Chairperson has
the
casting
vote.
All members
of the
PSC have
equal voting
rights.
In case
of
no
reaching
a
decision
due
to disagreement
of
Members,
the
issue
under
discussion
is
escalated
to
the
Executive Board (ExBo).
Additionally,
decisions may
be taken
by circulation,
which is
equal to
a decision
of the
Committee, even
if no
meeting has
preceded.
The Committee’s
performance
is evaluated
annually according
to the
provisions
of the
Management Committees’
Policy
of
the Group
and its Terms
of Reference.
According to
the Committee’s
2022 self-evaluation,
its performance
was assessed as
very strong, it was determined that the Committee’s operation
is continuously improving and that it functions very effectively,
especially
in
the
areas
of
leadership
and
PSC
Chairperson’s
contribution
in
organizing/coordinating
meetings
and
encouraging critical discussions in meetings.
Environmental, Social & Governance
(ESG) Management Committee - ESG ManCo
19
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.
17
Information
regarding
current
composition
and
short
biographical
details
of
its
members
may
be
found
at
the
Bank’s
website
(www.eurobank.gr).
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).
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
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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.
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.
ESG ManCo’s performance
is evaluated annually according
to the provisions
of the Management
Committees Policy
and Its
Terms
of Reference.
ESG ManCo’s performance
has been evaluated for
the first time
in 2023, for
the 2022 performance,
and
it was revealed that, as the ESG ManCo is new,
Business Units should better embrace the Committee and support its efficient
and effective operation.
According to
the self-evaluation,
it was determined
that ESG ManCo
functions satisfactorily
in areas such
as reviewing
ESG
Action Plans and
ESG Rating results, runs
effectively with respect to Secretary
duties and members appreciate
the ESG ManCo
Chairperson’s contribution for
encouraging a constructive dialogue in meetings.
The evaluation
highlighted the
need for
improved
attendance by
some members.
Improvements
are identified
with respect
to
the
extent
of
the
Agenda
and
the
time
allowance
per
item.
Members
raise
the
need
to
improve
focus
on
strategic
discussions and allowing time for the
appropriate detail, as well as the
need in raising further initiatives
for ESG training and
awareness.
As
a
way
forward
for
2023
and
following
the
experience
acquired
during
the
first
year
of
the
ESG
ManCo,
it
is
deemed
appropriate to revisit the
Terms of Reference
of the Committee.
Ethics Co
20
The task of the Ethics
Committee is to ensure that the Bank’s Code of Ethics is observed,
to interpret and constantly enrich it,
as well as
to contribute, generally, to the formulation of a
code of
values with which
the behaviour of the officers and personnel
of the Bank, as
well as that
of third persons that
regularly collaborate
with the Bank,
must comply.
Adherence to
the rules of
ethics contributes, on
the one hand,
to the protection
of dignity and personality
of the personnel,
and on the
other hand,
to
the good reputation and the
protection of the interests
of the Bank.
The Ethics Committee convenes once a month,
if there are issues to be discussed or,
exceptionally, more frequently,
in case of
an emergency, in a place and time that are stated in the
agenda. The Ethics Committee may convene either with the
physical
presence of its members, or by electronic
means. The Committee shall act unanimously.
The Ethics Committee’s performance
is evaluated annually according to the provisions
of Management Committees’ Policy.
Ethics Committee’s performance
was evaluated for
the first time
in 2022 and it was determined
that it continues to function
effectively,
especially in the
areas of
Profile &
Composition as well
as Organization
& Administration.
The Ethics
Committee
encourages critical discussion and a healthy
challenging culture.
5.
Key Control Functions
As part of
its overall system of internal
controls, HoldCo/Bank have 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/Bank.
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 including improvement of 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.
20
Information
regarding
current
composition
and
short
biographical
details
of
its
members
may
be
found
at
the
Bank’s
website
(www.eurobank.gr).
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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 including improvement of 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
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, recor
ding 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,
operational
and climate 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
Sector,
the Risk
Analytics Division,
the
Group Climate Risk 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,
operational and climate 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,
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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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,
climate)
●
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
●
Cultivate a robust risk culture throughout the Bank, encouraging
a positive attitude towards risk management, regulatory
compliance and
the internal
control
framework,
through
strong risk
awareness and
ownership, where
all staff
members
consider risk management as an integral part of their everyday
responsibilities
●
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
Risk
Management
along
with
Compliance
and
other
Units
are
involved
in
the
assessment
of
all
products
and
services
throughout their lifecycle.
The Group
applies the elements
of the Three
Lines of Defense Model
for the
management of risk. The
Three Lines of
Defense
Model
enhances
risk
management
and
control
by
clarifying
roles
and
responsibilities
within
the
organization.
Under
the
oversight and
direction of the
Management Body,
three separate
groups within
the organization
are necessary for
effective
risk management. The responsibilities of each of these
groups or lines of defense are:
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.
Line 2 - Monitor risk and
controls in support of Executive Management, providing oversight, challenge, advice and group-wide
direction. These include the
Risk and Compliance Units, among others.
Line 3
- Provide
independent assurance
to the
Board
and Executive
Management concerning
the
effectiveness
of risk
and
control management. This
refers to Internal Audit.
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.
The Audit Committee in consultation with
the NomCo, proposes to the Board for approval the appointment, replacement or dismissal of the Head of Eurobank Holdings
Compliance. The
performance
of the
Head of Eurobank
Holdings Compliance is
assessed on an
annual basis by
the AC.
The
Head
of
Compliance
attends
all
AC
meetings
and
submits
quarterly
and
annually
reports
(per
regulatory
requirements)
summarising Compliance’s activity and highlighting the main compliance issues.
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
●
provide
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 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
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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 NomCo 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 to 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 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
●
coordinate compliance risk management actions performed
by other business units
●
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 core
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 (tax compliance). 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
NomCo
proposes
to
the
Board
for
approval
the
appointment,
replacement,
or
dismissal
of
the
Anti-Money
Laundering Reporting Officer
of Eurobank,
who may be
the same
person as the
Head of Group
Compliance, and his/her
Deputy
●
Market Conduct
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
●
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 conduct
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 assigning a
responsibility to the Compliance
function, including, inter
alia, the high level monitoring of the alignment
of the Bank’s activities with legal and regulatory requirements concerning
personal data protection
and corporate governance
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.
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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.
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 indicati
ve, 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)
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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.
7.
Sustainability
Sustainability Approach
Eurobank
recognizes the
significance of
the impact
of its activities
in society and
the environment.
Thus, high
importance is
placed on the effective
integration of Sustainability principles and ESG aspects throughout the activities of the
organization,
its governance model and related commitments.
Furthermore,
Eurobank
acknowledges
its
important
role
in
creating
sustainable
value
for
its
stakeholders.
The
approach
towards
Sustainability
focuses
on
the
continued
efforts
as
a
financial
institution,
an
employer
and
a
corporate
citizen
to
address
environmental
and
societal
challenges.
Eurobank
develops
its
approach
across
the
Environmental,
Social
and
Governance
spectrum
(ESG)
and
balances
objectives
in
the
ESG
Strategy,
in
line
with
the
Bank’s
corporate
Purpose
(“Prosperity Needs Pioneers”)
and across two distinct levels of impact:
Ø
Financed Impact Strategy:
Impact resulting
from the
Bank’s lending and investing
activities to specific sectors
and
clients.
Ø
Operational Impact Strategy:
Impact arising from the Bank’s operational
activities and footprint.
Bank has
given priority
to managing
and mitigating
any underlying
economic, environmental
and social
risks arising
as an
integral part of developing products
and services, while complying with the applicable regulatory
framework.
Furthermore, aiming
to balance Purpose and Impact,
Bank develops and improves
mechanisms in order to
identify, measure
and communicate impacts, direct and indirect, across the
full spectrum of its activities.
Sustainability Policies & Frameworks
Eurobank
has taken
action towards
updating its
Sustainability Policy
Framework,
to outline
the approach
for adherence
to
applicable regulatory
requirements
and voluntary
initiatives
as well
as adopted
standards and
guidelines, thus
enabling a
contemporary
and
continuously
updated
approach
to
Sustainability,
in
line
with
international
best
practices.
The
Sustainability
Policy
Framework
sets
the
foundation
towards
integration
of
ESG
into
Eurobank’s
business
model
and
operations.
Focusing
on
the
social
aspect
of
ESG,
Eurobank
has
taken
actions
that
outline
its
corporate
values,
principles
and
commitments by
issuing the Human
Rights Statement, the
Diversity,
Equity and Inclusion Policy
as well as
the Policy
against
Harassment and Violence in Workplace. This approach outlines zero-tolerance for various types of
violation and discrimination
as well as for the equal opportunities with fairness and meritocracy and irrespective
of gender, nationality,
age or other traits
throughout the entire employee life cycle (i.e recruitment and
selection, learning, performance, talent and
career development,
reward management).
Moreover,
Bank
approved
and
implements
its
Sustainable
Finance
Framework
(SFF),
which
supports
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. Furthermore,
Bank approved
its Sustainable Investment
Framework,
which specifies the
respective criteria that are utilized
in the Bank’s
banking books investment strategy, along with
the selection process of eligible
sustainable investments. The above
mentioned Frameworks
enable Bank to pursue economic growth in line with ESG criteria.
These
frameworks
are complemented
by
the
Environmental
Policy
and Energy
Management Policy
that
were
issued in
the
past
depicting
related
commitments
and
actions
towards
the
protection
of
the
environment
and
energy
efficiency,
and
updated accordingly,
incorporating recent
regulatory developments.
These
policies constitute
part of
Eurobank’s
system of
internal controls
and were
supplemented by
the newly
developed Water
Management Policy
outlining Bank’s approach
on
an appropriate water management with
a focus on continuous improvement
of its operational footprint.
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Engaging with stakeholders
An
integral
part
of
Eurobank's
approach
to
Sustainability
is
the
fostering
of
strong
relationships
of
trust,
loyalty,
good
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 open dialogue
with its stakeholders in order to account
for their concerns
A more
detailed presentation
of the
cooperation
framework,
expectations
and means
of communication
is included
in the
Annual Report 2021 – Business & Sustainability.
Stakeholder
consultation
is the
key
process
for
identifying, prioritizing,
validating
and
reporting
on
Bank’s prioritized
ESG
impacts / material issues. This process takes place on an annual basis through dedicated communication channels for specific
stakeholder
groups
as well
as surveys/questionnaires.
Further
details regarding
the
aforementioned
process
and its
results
are embedded in the Annual Report 2021 – Business & Sustainability.
In
alignment
with
the
latest
update
of
the
GRI
standards,
the
Bank
shall
focus
the
2022
Materiality
Analysis
on
impacts/outcomes
instead of
topics/outputs, prioritizing
them
for
reporting
based on
their
significance
(4 step
approach),
assess
both
negative
and
positive
impacts,
as
well
as
actual
and
potential
impacts.
In
the
context
of
the
new
impact
identification
process,
the
identification
of impacts
will take
place through
diverse
internal
and external
sources,
including
engaging internal stakeholders with significant
role in ESG implementation.
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). In
that
context,
a dedicated
Group
Climate
Risk
Division has
been established
supporting the
integration
of Climate related
and Environmental
(CR&E) risks into
the Bank’s
risk management framework, 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,
the HoldCo/Bank
BoD has assigned
an
executive member
as the
responsible BoD
member for
climate-related and
environmental
risks, ensuring
that material
ESG
issues are taken into account
in the decision-making process. As part of
his duties, the member responsible updates 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,
established
by
the
Bank
CEO
who
appoints
its
members, is to provide strategic direction on
ESG initiatives, review the ESG
Strategy prior to approval, integrate the elements
of
the
ESG
strategy
into
the
Bank’s
business
model
and
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
prioritized
ESG impacts
/ Material
Issues reported
in the
Annual
Report - Business & Sustainability, in accordance with supervisory requirements
and voluntary commitments.
Bank established
a dedicated
unit called
ESG Division,
which succeeded
the former
Group Sustainability
/ Environmental
&
Social Affairs
Division, with an updated, comprehensive
mandate regarding ESG. The
Division reports to Deputy CEO, Group
COO and International
Activities and undertakes
a central
role in
coordinating ESG
activities across
the Bank.
The Head
of
the ESG Division acts as secretary to the ESG Management
Committee.
Reporting and Transparency
HoldCo/Bank
issue on
an
annual
basis
the
Annual Report
– 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,
information
regarding
the
Bank’s initiatives,
while addressing all material
stakeholder interests across
the ESG spectrum. The Annual Report
- 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
(version
3)
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 – Business
& Sustainability.
In addition, the
Holdco/Bank reports
disclosures
as required by the EU Taxonomy (Regulation (EU) 2020/852 of the European Parliament and of the Council). Specifically, 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. Furthermore, in the
context of Pillar III disclosures on ESG risks, Holdco/Bank will disclose ESG risk information
with reference date
31/12/2022.
Furthermore,
the
Bank’s
environmental
and
energy
management
performance,
with
respect
to
the
improvement
of
its
operational
footprint,
is monitored
through
specific indicators
and associated
targets
disclosed also
in the
Environmental
Report (EMAS). This constitutes an environment and energy
monitoring and self-improvement
tool, in line with commitments,
regulated by
applicable standards,
audited &
verified by
independent third
party.
Within
the
EMAS Report
framework,
the
Bank discloses the Green House Gas emissions record in line with the ISO14064 standard, as verified by external independent
party and in line with the provisions
of the national Climate Law.
Moreover,
Holdco/Bank
actively
participates
in
internationally
recognized
ESG
ratings,
aiming
to
continuously
improve
its
environmental,
social
and
governance
performance,
enhance
its
related
disclosures
and
further
build
the
trust
of
the
investment community in the Bank.
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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.
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 without limitation.
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 par
ticipate.
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.
Annual General Meeting (AGM) of the
shareholders
In the
Annual General
Meeting of the
HoldCo’s shareholders,
held on
July 21, 2022,
remotely via teleconference
in real
time,
participated shareholders representing 2,768,461,395
shares out of 3,709,161,852
shares, corresponding to 74.64% of the paid
up share capital
with voting
rights on the
items of the
agenda. In respect
of the
items on the
agenda, as referred
to on the
invitation dated 30.06.2022, the General
Meeting:
1.
Approved,
with
a
majority
exceeding
the
minimum
required
by
the
law,
the
Annual
and
Consolidated
Financial
Statements for the
financial year 2021, as well as the Directors’
and Auditors’ Reports. Profit sharing.
2.
Approved, with a majority exceeding the
minimum required by the law,
the offsetting “Corporate law Reserves”
and
“Share
Premium”,
with
accumulated
losses
amounting
to
€13,813,713,430.07
from
the
account
“Retained
earnings/losses”.
3.
Approved,
with a
majority exceeding
the
minimum required
by the
law,
the
overall
management for
the
financial
year 2021 as well as the discharge of the Auditors
for the financial year 2021.
4.
Approved, with a majority exceeding the
minimum required by the law:
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 2022;
b) KPMG’s relevant fees
for the audit
of the Annual and Consolidated
Financial Statements of the
Company for the
financial year 2022 to amount to €0.2 m; and
c) the
amendment
of the
Tripartite
Relationship Framework
Agreement
between the
HFSF,
the Company
and the
Bank, for
the incorporation
of the
provisions
of article
28 par.
2 of
L. 4701/2020,
in order
to offer
the possibility
to
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extend the
duration of
the audit
assignment to the
same statutory auditor
(in this case,
KPMG) even after
the end
of the initial 5 years’ engagement (2018-2022) for
a period not exceeding a total of 10 years.
5.
Approved,
with a majority
exceeding the
minimum required
by the
law, the
remuneration
paid during the
financial
year 2021, as well as the advance
payment of remuneration for the financial year of 2022 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
2021.
7.
Approved, with a majority exceeding the
minimum required by the law,
the amendment of the Nomination
Policy of
the Directors of the Board.
8.
Approved, with a majority exceeding the
minimum required by the law:
a) The Audit Committee to function as Committee of the
Board consisting of members of the Board.
b) The Audit Committee to consist of 4 non-executive members of the
Board of which at least 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 coincide with their
term of office as members
of the Board, 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/el/enimerosi
-ependuton/enimerosi-metoxon-eurobank
-holdings/genikes-suneleuseis-
pages/taktiki-geniki-suneleusi-metoxon-21-07-2022)
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 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
21, 2022 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
2021
as well
as the
Directors’
and
Auditors’ Reports.
2.
Approved the
overall
management for the financial year
2021 and discharge of the Auditors for the
financial year 2021.
3.
Appointed “KPMG Certified Auditors S.A.” as Auditors for the financial year 2022 and b)
approved the amendment of the
Tripartite
Relationship Framework
Agreement
between the
HFSF,
the
Company and
the Bank,
for
the incorporation
of
the
provisions
of article
28 par.
2 of
L. 4701/2020,
in order
to offer
the
possibility to
extend the
duration
of the
audit
assignment to the same statutory auditor
(in this case, KPMG)
even after the end of
the initial 5 years’ engagement
(2018-
2022) for a period not exceeding a total
of 10 years.
4.
Approved
the
remuneration
for
the
financial year
2021 and
of the
advance payment
of the
remuneration
for
the
non-
executive Board Directors for the
financial year 2022.
5.
Approved the
recomposition of the Audit Committee.
6.
Approved the
Annual Activity Report of the Audit Committee for the
financial year 2021.
Extraordinary General
Meeting of the Shareholders
In the Extraordinary General
Meeting of Eurobank’s shareholders, held on June 14, 2022 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 sole item on the agenda, the
General Meeting resolved
on the:
Approval of the hive
-down of the merchant
acquiring sector of the Bank by way of its absorption by CARDLINK ONE and the
Draft Demerger Deed
– Granting of authorisations.
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.
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APPENDIX AUDIT COMMITTEE ACTIVITY REPORT FOR THE YEAR 2022
Purpose
1.
In accordance with the
Law 4449/2017
as amended, the Audit
Committee (AC) of
Eurobank Ergasias Services and Holdings
S.A. (Eurobank
Holdings or
HoldCo or
Company) should
submit an
annual report
to the
Shareholders’
Annual General
Meeting
on
the
issues
dealt
with
by
the
AC
during
the
previous
year,
also
including
therein
a
description
of
the
sustainability policy followed
by the entity.
2.
The current
2022 AC Activity
Report of Eurobank
Holdings which is also part
of the 2022 Annual
Financial Report, refers
to the AC activity during 2022 and the issues addressed. In addition, it
describes Eurobank Holdings’ sustainability policy.
3.
No deviations from the
AC’s Terms
of Reference (ToR)
have been identified.
AC Composition / Membership
4.
In line with the provisions of article 44 of law 4449/2017,
as amended and currently in force, and further
to the decision of
the HoldCo’s Annual General
Meeting of Shareholders as of 21.07.2022
regarding the recomposition of the
AC and more
specifically
regarding
its
type,
composition
and
term
of
office
and
the
BoD’s
decision
of
30.6.2022
and
21.07.2022
regarding the membership of the AC, following relevant recommendation
by the Nomination and Corporate Governance
Committee of
28.06.2022, the
AC
decided on
21.07.2022
on its
constitution
and on
the
appointment
of
its Chairman.
Compared to the
previous AC
composition, Mr.
Bradley Paul
Martin and Ms. Cinzia
Basile ceased to be
members of the
Committee.
5.
Following the
above, the AC consist exclusively
of BoD members, four (4) in total, all of which are non-executive, of whom
the three (3) are independent according to the
provisions of article 9 of L. 4706/2020, including the AC
Chairman among
the independent members, as follows:
1. Jawaid Mirza (Chairman of the Audit
Committee, independent non-executive
BoD member),
2. Irene
Rouvitha-Panou (Vice
-Chairwoman of
the Audit
Committee, independent non-executive
BoD
member),
3.
Rajeev
Kakar
(independent
non-executive
BoD
member),
and
4.
Efthymia
Deli
(Representative
of
the
Hellenic Financial Stability Fund (HFSF) - non-executive BoD member).
6.
All AC members have sufficient knowledge in the field
of HoldCo activities and
the necessary skills and experience to
carry
out their duties and meet the requirement
of established knowledge and experience in auditing and/or accounting.
7.
Information
regarding
current
AC
composition
and
short
biographical
details
of
its
members
may
be
found
at
the
HoldCo’s website (www.eurobankholdings.gr).
Meetings Held During the Period
& Attendance
8.
During 2022, the Audit Committee held fourteen (14) meetings
vs eleven (11) in 2021.
9.
The average
ratio of attendance
at the meetings by
the AC members
stood at 100% (2021: 95%). It is noted that
in 2021,
for
the
cases
of
missed
in
person
attendances,
representation
proxies
have
been
provided,
leading
to
an
overall
attendance of 100%.
10.
Due
to
the
covid-19
pandemic,
only
two
(2)
quarterly
meetings
were
attended
in
person
and
the
rest
were
held
via
conference calls.
This practice is allowed
by the AC ToR
and is consistent across all HoldCo’s BoD Committees.
11.
The submissions for
the AC meetings have become
available to all BoD members through the
Diligent platform.
12.
The BoD Chair has regularly attended the AC meetings. In addition, all meetings were attended by the Internal Audit (IA),
while the General Manager of Group Compliance
was attending the meetings
depending on the subject
under discussion.
13.
The External Auditor of 2022 financial statements (i.e. KPMG) has been invited and attended meetings as required.
14.
The
AC
Chair updated
the
Board
members,
at
the
quarterly
meetings
of
the
Board,
on
the
material
matters
covered
during the AC meetings.
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Highlights of Issues of Importance during 2022
Internal Controls System and
Risk Management
15.
The AC,
in accordance
with its Terms
of Reference,
review
s the
adequacy of the
Internal Control
and Risk Management
systems and the compliance with rules and regulations of the
monitoring process.
16.
Throughout the year
2022:
●
the AC
Members received
update by
IA and
Compliance, covering
matters of
the System
of Internal
Controls,
Risk Management and Compliance with rules and regulations.
●
significant weaknesses
in internal controls
and the progress
of actions taken
to address them,
were presented
in the Internal Audit
Activity Report and
several pending issues (including External
Auditors’ Management Letter)
were discussed with Management and the
AC ensured that the time
plans and deadlines will be followed up.
●
the
AC
acknowledged
the
annual
Internal
Audit
Evaluation
Report
of
the
System
of
Internal
Controls,
a
requirement
of the
Bank of
Greece Act
2577/9.3.2006.
The said
report along
with the
AC’s own
assessment of
the evaluation was further
submitted to the BoD and subsequently to BoG in June 2022.
●
In accordance with the
provisions
of Law 2533/1997,
the AC reviewed
reports on substantial stock transactions
performed by the
Company’s Directors and General Managers in listed securities and notified
the Board.
Internal Audit (IA)
17.
The Internal
Audit (IA) function
of HoldCo is
independent (Internal Audit has
a functional reporting
line to the
AC and a
dotted
reporting
line
for
administrative
matters
to
the
CEO),
adequately
organized,
has
unrestricted
access
to
any
pertinent information and operates efficiently and effectively in compliance with the Standards of the Institute of
Internal
Auditors.
18.
During 2022, the AC:
●
received confirmation from
the Chief Internal Auditor (CIA) regarding IA’
s
independence for 2021.
●
discussed the performance
of the IA Annual Plan for 2021.
●
approved and furth
er submitted to the BoD for information
the IA Annual Plan for 2023.
●
monitored the progress
of the IA Audit Plan for 2022 through
the Activity Reports.
●
at the Quarterly AC meetings,
discussed the key highlights of the IA Activity Reports (including the follow
-up of
the external auditors’ Management Letter points).
●
Carried out the assessment of the
Chief Internal Auditors’ performance
for 2021.
Compliance
19.
The Compliance of HoldCo is a permanent and independent function (the Head of Compliance
reports functionally to the
AC
and
for
administrative
purposes
to
the
CEO
of
Holdings)
adequately
organized,
has
unrestricted
access
to
any
pertinent information and operates
efficiently and effectively.
20.
During 2022, the AC:
●
approved and further
submitted to the BoD for information
the 2023 Compliance Annual Plan.
●
at the Quarterly AC meetings, discussed
the key highlights of the Compliance
Activity Reports.
●
approved and proposed to the BoD
for information the revised Insider Dealing Guideline and
the revised Market
Abuse Policy and
approved and proposed to the BoD
for approval the revised Compliance Policy and
the revised
Conflicts of Interest Policy. In addition, the AC
approved the revised MiFID II Product Governance
Policy and the
revised Policy for
Reporting Illegal or Unethical Conduct.
●
In line with the BoG requirements, received
the Annual Group Compliance Report as per BoG
Act 2577/9.3.2006
(including
MiFID report)
for
acknowledgement.
The
said
report
along
with
the
AC’s
assessment
was
further
submitted to the BoD and subsequently to the BoG in June 2022.
Financial reporting
21.
The
AC,
in
accordance
with
its
Terms
of
Reference,
monitors
the
financial
reporting
process
and
submits
recommendations
and
proposals
to
ensure
its
integrity.
In
addition,
it
supervises
and
assesses
whether
the
internal
controls
related
to financial
reporting are
adequate and
effective
and that
these
controls
are
adjusted to
reflect any
major changes in the risk profile of Holdings.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
TO THE REPORT OF THE DIRECTORS
82
|
Page
22.
During the AC meetings in 2022:
●
the
AC,
among
others,
reviewed
and
approved
the
quarterly
results,
semi-annual
and
annual
Accounts
and
Financial Statements, Annual General Meeting (AGM) matters and matters of the External auditors. In addition,
the AC reviewed
and proposed to the BoD for
approval the Consolidated
Pillar III report.
●
Group
Finance
made
presentations
on
issues
such
as
accounting
policies,
critical
accounting
estimates,
significant
one-off
items
impacting
the
Financial
Statements,
major
variations
between
periods,
important
disclosures,
significant issues with tax authorities, as well as Group Control
issues.
●
IA performed
a high level
review of
material submitted to
the AC
for the
clearance of
the financial
results and
reported significant items to the AC Chairman for
his attention.
●
With
regards
to the
monitoring of
the
Actual vs
Budget Report,
the
AC received
quarterly updates
by Group
Finance which were subsequently presented to the
BoD.
External Auditors
23.
The AC, in accordance with its Terms
of Reference, is responsible for the
selection, performance and independence of the
External
Auditors,
KPMG.
In
addition,
the
AC
reviews
the
scope
of
audit
work
and
audit
approach
and
assesses
the
process for identifying and responding
to key audit and internal control risks.
24.
During the AC meetings in 2022:
●
KPMG presented its 2022 Audit
Plan to the AC.
The AC
has also, in line with
its ToR,
reviewed the
Engagement
letter for the 2022 Statutory Audit of the
Company.
●
KPMG presented and discussed with the
AC members a summary of
audit work done, major findings, including
a summary of unadjusted differences, and other
issues of importance.
25.
The
AC
has
received
the
2021
KPMG
Management
Letter
(ML)
and
has
discussed
the
issues
raised
with
KPMG
and
Management.
26.
The annual assessment
of the External Auditors for
the 2021 audit was discussed by
the AC members
and Management.
At the
same AC
meeting, the
AC decided
to propose
to the
BoD for
approval
and subsequent recommendation
to the
Annual
General
Meeting
of
shareholders
for
approval,
the
reappointment
of
KPMG
as
statutory
auditors
for
the
standalone and consolidated Financial Statements of Eurobank
Holdings for the financial year
of 2022.
27.
The AC has discussed and approved
the Global Group
Audit and assurance Fees of 2022.
28.
The
AC
has received
the
External
Auditors’
Independence Letter,
while it
monitored
the
independence
of the
External
Auditors through the
Auditors independence monitoring tool submitted quarterly by
Group Finance, depicting the
value
of non-audit services provided as compared to the
limits set by the Group External Auditor’s Independence Policy.
In line
with the Group
External Auditor’s Independence Policy,
the AC
in 2022 reviewed
all non-audit services nclding
the audit
assurance related work re Fairfax
Financial Holdings (FFH) annual requirement on the reconciliation of IFRS consolidated
Total
Equity and
Profit
& Loss
to U.S.
GAAP,
for
the
year
ending 31.12.2021,
ensuring that
the
independence limits
are
complied with.The AC met with the External
Auditors (with and without Management present) to discuss all of the above,
in addition
to any
significant changes
required to
the External
Auditors’ audit
plan. Also,
the AC
reviewed
the External
Auditor’s Report and the Report on Key Audit Issues.
AC’s Evaluation
29.
The
AC’s
performance
is
evaluated
annually
according
to
the
provisions
of
HoldCo’s
Board
and
Board
Committees
Evaluation
Policy.
According
to
the
AC’s
2022
self-evaluation,
the
AC
members
are
satisfied
with
the
Committee’s
effectiveness and leadership. The
Committee uses its time effectively and there
is a good planning and scheduling of the
meetings.
The
Chairman is
well
prepared
for
Committee’s
meetings
and
helps
the
Committee to
effectively
navigate
through its agenda, encouraging critical discussion
and ensuring that every Committee
member can freely express her/his
views
Other AC Matters
30.
In 2022, the AC reviewed
and proposed to the BoD for
approval its Terms
of Reference.
31.
The AC
has approved
and notified the
Board for
further
submission to the
Annual General
Meeting, the
annual Activity
Report for 2021.
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
ATTACHMENT
TO THE REPORT OF THE DIRECTORS
83
|
Page
Sustainability Overview
32.
The Group
is constantly committed to
investing in sustainable development
and to consistently designing its
actions to
improve its impact on environmental sustainability, social responsibility
and corporate governance. Its strategic objective
is to adapt its business and operation in a way that addresses climate change challenges, to
accommodate social needs
within its banking business model,
and to safeguard prudent governance
for itself and its
counterparties, in accordance
with supervisory initiatives and following
international standards/ best practices.
33.
Committed to
actively contributing
to the
achievement
of the
United Nations
Sustainable Development
Goals (SDGs)
and the 2030 Agenda
goals, Eurobank is a signatory
of the UN Global
Compact since 2008. According
to the commitment
to the
UNEP FI
Principles for
Responsible Banking
(PRB) since
2019,
in line
with the
SDGs and
the Paris
Agreement
on
Climate Change, Eurobank issued its 2
nd
Progress Report which was incorporated in the www.eurobank.gr
.
34.
Eurobank
has
established
its
Sustainability
Policy
Framework,
to
outline
the
approach
for
adherence
to
applicable
regulatory
requirements
and
voluntary
initiatives
as
well
as
adopted
standards
and
guidelines,
thus
enabling
a
contemporary
and
continuously
updated
approach
to
Sustainability
in
line
with
international
best
practice.
The
Sustainability
Policy
Framework
sets
the
foundation
towards
integration
of
ESG
into
Eurobank’s
business
model
and
operations.
35.
The Sustainability Policy Framework
is available on Eurobank Holdings website
www.eurobankholdings.gr
.
36.
Eurobank is finalizing its
Strategy both in terms
of its
financing and
other products, and in
terms of its
internal environment
and
how
it
is
organized
and
operates.
ESG
Strategy
integration
has
two
distinct
pillars
of
impact:
Financed
and
Operational.
Key drivers
are the
compliance with the
regulatory guidelines and
expectations, including the
ECB’s Guide
on
climate-related
and
environmental
risks
and
the
ECB’s
good
practices
for
climate-related
and
environmental
risk
management.
37.
In 2022, the
project of designing ESG
Operational
Impact Strategy has
been concluded. It is directed
on environmental
impact (operational
net zero,
paperless banking, circular
economy), employer
impact (diversity
and inclusion, wellbeing,
innovative environment), and social and
business impact (sustainable
procurement, socio-economic effect, transparency).
The Operational
Impact Strategy,
through
a set of
actions with
measurable
targets, indicates
the Bank’s
vision for
the
current
and forthcoming
decade
in relation
to environment,
its social
footprint,
with focus
on its
people, and
the
ESG
impact in the market.
38.
The Financed
Impact Strategy,
applicable to
all lending portfolios,
leverages
on the
identified ESG and
climate related
opportunities and by assessing relevant risks aims to mitigate ESG & climate related risks for the
Group’s portfolios.
39.
The Financed
Impact Strategy
is also directed
on clients’ engagement
and awareness
to adapt their
business in a
way
to address climate
change challenges, actions
for supporting customers
in their transition
efforts
towards a
more ESG-
friendly economic environment, enablers and tools such as
frameworks
and products to underpin Sustainable Financing,
as well as on climate-related material exposures.
40.
Climate Risk
– The
Group has
recognized climate
change as a
material risk
and based
on its supervisory
guidelines, is
adapting its policies and methodologies for
identifying and monitoring the relevant risks.
41.
Adopting
a
strategic
approach
for
the
management
of
risks
and
the
identification
of
opportunities
in
relation
to
sustainability
and
climate
change, the
Bank
follows,
and
accelerates
where
possible,
a
detailed roadmap
prioritizing
actions for
the effective
management of
climate-related &
environmental (CR&E)
risk in alignment
with the
supervisory
expectations included at the ECB Guide on Climate-Related and Environmental Risks. Also, the IA is
informed and follows
up the Climate Risk
Roadmap, which has been agreed
with the
supervisor. The
respective developments
are considered
in IA risk-based audit
approach. With regard to the banking activity of
HoldCo (i.e. Eurobank S.A. or
the Bank), the Internal
Audit Group of the Bank issued in 2022 two consulting reports in the area (Climate Risk Stress Test
2022 and a Guide on
ESG Reporting).
42.
The
Group
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)
within the
3 Lines
of Defense.
Moreover,
the HoldCo/Bank BoD has assigned an executive member as the
responsible BoD member for climate
-related
and
environmental
risks.
The
same
member
chairs
the
Eurobank
ESG
Management
Committee,
established
by
the
Eurobank CEO.As part of his duties, the member responsible updates 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.
43.
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 and implements its Sustainable Finance Framework in
accordance with international recognized industry
guidelines and principles.
Eurobank has also established
and published
its
Green
Bond
Framework,
to
support
issuance
of
Green
Bonds.
Furthermore,
Eurobank
approved
its
Sustainable
Investment Framework,
which is applicable to the Bank’s banking book bond portfolio.
Jawaid Mirza
AC Chairman
Athens, March 2023
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 Auditors’ 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 S.A. (the
“Company”) which comprise
the Consolidated Balance
Sheet as at 31
December
2022, the Consolidated
Statements of Income,
Comprehensive Income, Changes in
Equity and Cash
Flow
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 S.A. and
its subsidiaries
(the “Group”)
as
at 31
December
2022 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), as incorporated in
Greek
legislation.
Our
responsibilities
under
those
standards
are
further
described
in
the
Auditors’
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
International Code
of Ethics
for Professional
Accountants, as
incorporated
in Greek
legislation, and
the
ethical requirements that are relevant to the audit of the consolidated
financial statements in Greece, and
we have
fulfilled our
other ethical
responsibilities
in accordance
with the
requirements
of the
applicable
legislation. 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
See Notes 2.2.13, 3.1 and 20 and 21 to the Consolidated Financial
Statements.
Total
estimated credit
losses as
of 31
December 2022
amounted to
EUR 1
626 million
(2021:
EUR 1
872 million).
The key audit matter
How the matter was addressed in our audit
The
estimation
of
expected
credit
losses
(“ECL”) on
loans and
advances
at amortised
cost
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 ECL are:
●
Significant
Increase
in
Credit
Risk
(“SICR”) –
The identification
of qualitative
indicators
for
identifying
a
significant
increase
in
credit
risk
for
staging
classification
is
highly
judgmental
taking
also
into
account
the
current
macroeconomic
and
geopolitical
uncertainty.
●
Model estimations –
Inherently judgmental
modelling
and
assumptions
are
used
to
estimate ECL
which involves
determining
Probabilities of Default (“PD”), Loss Given
Default (“LGD”), and Exposures at Default
(“EAD”).
ECL
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.
As
a
result,
certain
IFRS
9
models
and
model
assumptions
are
the
key
drivers
of complexity
and
subjectivity
Our audit procedures included, among others:
Controls testing:
We
tested
relevant
manual,
general
IT
and
automated
controls over key systems used in the ECL process.
Main 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.
●
Authorisation
and
calculation
of
management
adjustments.
Test
of details:
Key aspects of our testing included, among others:
●
We performed
substantive procedures
on a
sample
basis
in
order
to
assess
the
SICR
assessment
for
corporate and retail portfolios.
●
We
assessed
the
appropriateness
of
management
adjustments
to
the
model
driven
ECL
results,
by
considering the assumptions,
reviewing calculations
and
data
used
and
inspecting
the
governance
around these adjustments.
3
in
the
Group’s
calculation
of
the
ECL
estimate.
●
Management
adjustments
–
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
especially
in
relation
to
current
macroeconomic
and
geopolitical
uncertainty.
●
Macroeconomic
Forward
Looking
Information
scenarios
–
IFRS
9
requires
the
Group
to
measure
ECL
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.
●
Individually
assessed
loans
–The
estimation
of
future
cash
flows,
valuation
of
collateral
and
probability
weighting
of
scenarios
constitute
assumptions
with
high estimation uncertainty.
Disclosures
in
the
Consolidated
Financial
Statements.
The
disclosures
regarding
the
Group’s
application of IFRS 9
are key to explaining
the
significant judgements
and material
inputs
to
the IFRS
9 ECL
results as
well as
to provide
transparency
of
the
credit
risk
exposures
of
the Group.
●
We
assessed
the
reasonableness
and
appropriateness
of
the
macroeconomic
variables’
forecasts,
scenarios,
weights,
and
models
applied.
Our testing
included benchmarking
against external
sources.
●
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
and
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
real estate
valuation specialists
as well
as
assumptions
used
for
estimating
future
discounted cash flows.
Our financial risk specialists assisted with the:
●
Assessment
of
the
Group’s
impairment
methodologies for compliance with IFRS 9.
●
Evaluation of the risk
parameter models used as
well
as
reperforming
the
calculation
of
certain
risk
parameters.
●
Assessment
of
available
validation
reports
on
risk
parameters.
●
Assessment
of
the
methodological
coherence
and
mathematical
accuracy
of
management
adjustments, where needed.
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
See Note 2.2.16, 3.5 and 13 to the Consolidated Financial
Statements.
Total
deferred
tax
assets
as
of
31
December
2022
amounted
to
EUR
4 161
million
(2021: EUR 4 422 million).
The key audit matter
How the matter was addressed in our audit
4
The recognition and
measurement of deferred
tax assets is considered a key audit matter as
it depends
on estimates
of future
profitability,
which
requires
significant
judgement
and
includes the risk of management bias.
Significant judgement and especially complex
assumptions
and
method,
due
to
inherent
uncertainties relate to the following:
●
The extent
that
there
are
probable
future
taxable profits
that will
allow the
deferred
tax
asset
amount
to
be
recovered
in
the
foreseeable future.
●
Forecast
of future
taxable
profit,
which
is
mainly
impacted
by
macroeconomic
forward looking information.
Disclosures
in
the
Consolidated
Financial
Statements
The
disclosures
regarding
the
Group’s
application
of
the
Standards
in
this
area
are
key
to
explaining
the
key
judgements
surrounding the
recoverability of
deferred tax
assets.
Our
audit
procedures,
included,
among
others
the
following:
●
We assessed the design and implementation of
controls
relevant
to
the
recognition
and
recoverability
of
deferred
tax
assets
including
the
approval
of
three-year
business
plan
and
monitoring of actual results against budgeted.
●
We
evaluated
the
appropriateness
of
the
assumptions
used
by
management
in
the
approved
three-year
business
plan
by
comparing the
revenue and
growth projections
to industry
trends and
ensuring consistency
with
strategic
plans.
We
also
evaluated;
the
appropriateness
of
the
assumptions
used
and
the reasonableness of projections
for the period
that
lies
beyond
the
approved
three-year
business plan.
●
We assessed the accuracy of
forecasted future
taxable
profits
by
evaluating
the
accuracy
of
management’s
projections
of
prior
year
by
comparing them to actual results.
●
We
tested
the
accuracy
of
the
relevant
underlying
data
of
the
estimate,
including
the
conversion
of
future
accounting
profits
to
taxable profits.
●
Our
tax
specialists
assisted
to
confirm
the
completeness and
accuracy of
the relevant
tax
adjustments that produce the taxable results.
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
assumption
were
sufficiently
clear
and
explanatory.
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
We
have
evaluated
in
collaboration
with
our
IT
Audit
specialists
the
general
controls
over
the
IT
systems,
5
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
very
large
number
of
transactions.
These
IT
systems
function
based
on
the
operating
effectiveness
of
internal
controls
in
place
to
assure
the
completeness
and
accuracy
as
well
as
the
security
of
the
information
of
the
Group
that
produce
eventually
the
financial
information to be included in the
Consolidated
Financial Statements.
databases
and
applications
that
support
the
financial
reporting of the Group.
For this purpose, we performed procedures as follows:
●
We evaluated
the information
security resilience
of
the
Group
by
evaluating
the
design
of
key
IT
processes and controls over financial reporting.
●
We
evaluated
the
design
of
the
relevant
preventative and
detective general
IT
controls
over administration of
access to programs
and
data for the systems in
scope of our audit and,
we tested
the operating
effectiveness of
these
relevant controls.
●
We evaluated
the design
of the
relevant general
IT
controls
of
the
Group
over
program
development,
program
change
management
and
computer
operations
for
the
systems
in
scope of our audit and, we
tested the operating
effectiveness of these relevant controls.
Other Information
The
Board
of
Directors
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
but
does not include the Consolidated Financial Statements
and our Auditors’ 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 the Board of Directors and Those Charged with Governance
for the Consolidated Financial Statements
The Board of Directors
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
the
Board
of
Directors
determines
is
necessary
to
enable
the
preparation of consolidated financial statements that are free from
material misstatement, whether due to
6
fraud or error.
In preparing the consolidated financial statements, the Board of Directors 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 the
Board of Directors
either intends to liquidate
the Group or to cease operations, or 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 auditors’
report that includes our opinion. Reasonable assurance is
a high level of assurance but
is not a guarantee
that an
audit conducted
in accordance
with ISAs
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
skepticism 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 the Board
of Directors.
●
Conclude
on
the
appropriateness
of
the
Board
of
Directors’
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
auditors’
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.
●
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.
7
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
The
Board
of
Directors
is
responsible
for
the
preparation
of
the
Board
of
Directors’
Report
and
the
Corporate Governance Statement that is included in this report. Our
opinion on the consolidated financial
statements does not cover the Board
of Directors’ Report and we do
not express an audit opinion thereon.
Our responsibility is
to read the
Board of Directors’
Report and, in
doing so, consider
whether, based
on
our
consolidated
financial
statements
audit
work,
the
information
therein
is
materially
misstated
or
inconsistent with the
financial statements
or our audit
knowledge. Based
solely on
that work 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 2022.
c)
Based
on
the
knowledge
acquired
during
our
audit,
relating
to
Eurobank
Ergasias
Services
and
Holdings S.A. 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
7
April
2023,
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 Group any prohibited non-audit services referred
to in article 5 of Regulation
(EU) 537/2014.
8
The
permissible
non-audit
services
that
we
have
provided
to
the
Group
during
the
year
ended
31 December 2022 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
Group 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
five
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
S.A.
(the
Company
or/and
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 in force
(the ESEF Regulation)
that include
the Consolidated
Financial Statements
of the
Group for
the year
ended as
at 31 December
2022 in XHTML
format, and also
the file XBRL
(JEUVK5RWVJEN8W0C9M24-2022-12-31-en.zip) with the
appropriate
mark-up
of
the
those
consolidated
financial
statements,
including
of
the
notes
to
the
Consolidated Financial Statements.
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
consolidated
balance
sheet,
consolidated statements of income and comprehensive income, changes
in equity and cash flow,
as
well as in the notes
to the consolidated financial
statements,
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,
including of
the
notes to the consolidated financial statements.
The requirements
as
defined
in
the
ESEF Regulatory
Framework
as
in
force
are
appropriate
criteria
in
order to express a reasonable assurance conclusion.
9
Responsibilities of the Board of Directors and those charged with governance
The Board of Directors is
responsible for the preparation and filing
of the consolidated financial statements
of the
Group, for the
year ended as
at 31 December 2022,
in accordance with
the requirements determined
by the ESEF Regulatory Framework, and for
such internal control as the Board of
Directors 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 February
2022 (the
“ESEF Guidelines”), in
order to obtain
reasonable assurance
that the Consolidated
Financial Statements
of the Group that are prepared by
the the Board of Directors 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
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 2022
in XHTML
format
(JEUVK5RWVJEN8W0C9M24-2022-12-31-en.xhtml),
and
the
XBRL
file
(JEUVK5RWVJEN8W0C9M24-2022-12-31-en.zip) marked up with respects to
the Consolidated Financial
Statements,
including
the
Notes
to
the
Consolidated
Financial
Statements,
have
been
prepared,
in
all
material respects, in accordance with the requirements
of the ESEF Regulatory Framework.
Athens, 7 April 2023
KPMG Certified Auditors S.A.
AM SOEL 114
Harry Sirounis, Certified Auditor
AM SOEL 19071
CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2022
8 Othonos Str, Athens
105 57,
Greece
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
.......................................................................................................................................................... 11
3.
Critical accounting estimates and judgments
in applying accounting policies ..............................................................................
39
4.
Capital Management ................................................................................................................................
.....................................
48
5.
Financial risk management and fair value ................................................................................................
.....................................
50
5.2.1 Credit Risk ......................................................................................................................................................................................
52
5.2.2 Market risk
................................................................................................................................................................
.....................
84
5.2.3 Liquidity risk
................................................................................................................................................................
...................
88
5.2.4 Interest Rate Benchmark reform
-IBOR reform ..............................................................................................................................
92
5.2.5 Climate-related risk ................................
....................................................................................................................................... 93
5.3
Fair value of financial assets and liabilities ....................................................................................................................................
94
6.
Net interest income ....................................................................................................................................................................... 99
7.
Net banking fee and commission income ....................................................................................................................................
100
8.
Income from non banking services ..............................................................................................................................................
100
9.
Net trading income and gains less losses from investment
securities ........................................................................................ 101
10.
Other income/ (expenses) ........................................................................................................................................................... 101
11.
Operating expenses ..................................................................................................................................................................... 102
12.
Other impairments, restructuring costs and provisions ................................................................................................
..............
102
13.
Income tax ................................................................................................................................................................................... 103
14.
Earnings per share ................................................................................................................................................................
.......
106
15.
Cash and balances with central banks .........................................................................................................................................
107
16.
Cash and cash equivalents and other information
on cash flow statement
................................................................................
107
17.
Due from credit institutions
......................................................................................................................................................... 108
18.
Securities held for trading................................................................
............................................................................................
108
19.
Derivative financial instruments and hedge
accounting.............................................................................................................. 109
20.
Loans and advances to customers ............................................................................................................................................... 112
21.
Impairment allowance for loans and advances to
customers .....................................................................................................
117
.
.
22.
Investment securities
................................................................................................................................................................
...
119
23.
Group composition ......................................................................................................................................................................
122
23.1. Shares in subsidiaries
................................................................................................................................................................
...
122
23.2. Subsidiary with material Non Controlling Interest
...................................................................................................................... 127
24.
Investments in associates and joint
ventures
.............................................................................................................................. 127
25.
Structured Entities .......................................................................................................................................................................
130
26.
Property and equipment ................................................................................................
.............................................................
132
27.
Investment property ....................................................................................................................................................................
133
28.
Intangible assets .......................................................................................................................................................................... 135
29.
Other assets
................................................................................................................................................................
.................
136
30.
Disposal groups classified as held for sale ................................................................................................................................... 136
31.
Due to central banks ....................................................................................................................................................................
137
32.
Due to credit institutions .............................................................................................................................................................
137
33.
Due to customers
................................................................................................................................................................
.........
138
34.
Debt securities in issue ................................................................................................................................................................
138
35.
Other liabilities ................................................................................................................................
............................................
139
36.
Standard legal staff retirement
indemnity obligations
................................................................................................................ 140
37.
Share capital, share premium and treasury shares ................................
.....................................................................................
142
38.
Reserves and retained earnings
................................................................................................................................................... 143
39.
Share options
................................................................................................................................................................
...............
144
40.
Transfers
of financial assets
......................................................................................................................................................... 145
41.
Leases ................................................................................................................................................................
..........................
146
42.
Contingent liabilities and other commitments ............................................................................................................................ 148
43.
Operating segment information .................................................................................................................................................. 149
44.
Post balance sheet events ................................................................................................................................
...........................
152
45.
Related parties
................................................................................................................................................................
.............
152
46.
External Auditors ................................................................................................................................................................
.........
154
47.
Board of Directors
................................................................................................................................................................
........
155
APPENDIX – Disclosures under Law 4261/2014 ................................................................
...................................................................
156
Consolidated Balance Sheet
.
1
|
Page
31 December 2022 Consolidated Financial Statements
31 December
2022
2021
Note
€ million
€ million
ASSETS
Cash and balances with central banks
15
14,994
13,515
Due from credit institutions
17
1,329
2,510
Securities held for trading
18
134
119
Derivative financial instruments
19
1,185
1,949
Loans and advances to customers
20
41,677
38,967
Investment securities
22
13,261
11,316
Investments in associates and joint ventures
24
173
267
Property and equipment
26
775
815
Investment property
27
1,410
1,492
Intangible assets
28
297
269
Deferred tax assets
13
4,161
4,422
Other assets
29
1,980
2,065
Assets of disposal groups classified as held for sale
30
84
146
Total assets
81,460
77,852
LIABILITIES
Due to central banks
31
8,774
11,663
Due to credit institutions
32
1,814
973
Derivative financial instruments
19
1,661
2,394
Due to customers
33
57,239
53,168
Debt securities in issue
34
3,552
2,552
Other liabilities
35
1,701
1,358
Liabilities of disposal groups classified as held for sale
30
1
109
Total liabilities
74,742
72,217
EQUITY
Share capital
37
816
816
Share premium⁽¹⁾
37
1,161
8,056
Reserves and retained earnings⁽¹⁾
38
4,646
(3,333)
Equity attributable to shareholders of the Company
6,623
5,539
Non controlling interests
23.2
95
96
Total equity
6,718
5,635
Total equity and liabilities
81,460
77,852
(1)
The comparative information has been
adjusted due to change in the presentation
of treasury shares (note 37). As a result, “Share
premium” has increased by € 1 million against an equal decrease of “Reserves and retained
earnings”.
Notes on pages
6
to
155
form an integral part of these consolidated financial statements.
Consolidated Income Statement
.
2
|
Page
31 December 2022 Consolidated Financial Statements
Year ended 31 December
2022
2021
Note
€ million
€ million
Interest income
2,315
1,842
Interest expense
(765)
(521)
Net interest income
6
1,550
1,321
Banking fee and commission income
584
495
Banking fee and commission expense
(135)
(137)
Net banking fee and commission income
7
449
358
Income from non banking services
8
94
98
Net trading income/(loss)
9
727
(8)
Gains less losses from investment securities
9
(9)
101
Other income/(expenses)
10
324
30
Operating income
3,135
1,900
Operating expenses
11
(917)
(876)
Profit from operations before impairments,
provisions and restructuring costs
2,218
1,024
Impairment losses relating to loans and
advances to customers
21
(291)
(490)
Other impairment losses and provisions
12
(108)
(52)
Restructuring costs
12
(102)
(25)
Share of results of associates and joint ventures
24
18
26
Profit before tax
1,735
483
Income tax
13
(405)
(156)
Net profit
1,330
327
Net profit/(loss) attributable to non controlling interests
0
(1)
Net profit attributable to shareholders
1,330
328
€
€
Earnings per share
-Basic and diluted earnings per share
14
0.36
0.09
Notes on pages
6
to
155
form an integral part of these consolidated financial statements.
Consolidated Statement of Comprehensive Income
.
3
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31 December 2022 Consolidated Financial Statements
Year ended 31 December
2022
2021
€ million
€ million
Net profit
1,330
327
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
5
36
- transfer to net profit, net of tax
(5)
(0)
1
37
Debt securities at FVOCI
- changes in fair value, net of tax (note 22)
(547)
(97)
- transfer to net profit, net of tax (note 22)
222
(325)
6
(91)
Foreign currency translation
- foreign operations' translation differences
1
(0)
- transfer to net profit on the liquidation of
foreign subsidiary (note 23.1)
76
77
-
(0)
Associates and joint ventures
- changes in the share of other comprehensive
income, net of tax (note 24)
(32)
(32)
(3)
(3)
(280)
(57)
Items that will not be reclassified to profit or loss:
- Gains/(losses) from equity securities at
FVOCI, net of tax
24
2
- Actuarial gains/(losses) on post employment
benefit obligations, net of tax
4
1
28
3
Other comprehensive income
(252)
(54)
Total comprehensive
income attributable to:
- Shareholders
1,079
274
- Non controlling interests
(1)
(1)
1,078
273
Notes on pages
6
to
155
form an integral part of these consolidated financial statements
Consolidated Statement of Changes in Equity
.
4
|
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31 December 2022 Consolidated Financial Statements
Share
capital
Share
premium
Reserves and
retained
earnings
Non
controlling
interests
Total
€ million
€ million
€ million
€ million
€ million
Balance at 1 January 2021
815
8,055
(3,608)
0
5,262
Reclassification of treasury shares⁽¹⁾
1
1
(2)
-
-
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
-
-
1
97
98
Share options plan
-
-
2
-
2
Purchase/sale of treasury shares
-
-
1
-
1
Other
-
-
(1)
-
(1)
-
-
3
97
100
Balance at 31 December 2021⁽¹⁾
816
8,056
(3,333)
96
5,635
Balance at 1 January 2022⁽¹⁾
816
8,056
(3,333)
96
5,635
Net profit
-
-
1,330
0
1,330
Other comprehensive income
-
-
(251)
(1)
(252)
Total comprehensive income for
the year ended 31 December 2022
-
-
1,079
(1)
1,078
Offsetting of equity accounts (note 38)
-
(6,895)
6,895
-
-
Share options plan (note 39)
0
0
4
-
4
Purchase/sale of treasury
shares (notes 37 and 38)
-
-
1
-
1
0
(6,895)
6,900
-
5
Balance at 31 December 2022
816
1,161
4,646
95
6,718
Note 37
Note 37
Note 38
(1)
As of the
year ended 31
December 2022
the carrying amount
of treasury
shares, which was
previously deducted
from the “Share
capital”
and “Share
premium”,
is presented
within
“Reserves and
retained
earnings”.
Comparative information
has been
adjusted
accordingly (note 37).
Notes on pages
6
to
155
form an integral part of these consolidated financial statements.
Consolidated
Cash Flow Statement
.
5
|
Page
31 December 2022 Consolidated Financial Statements
Year ended 31 December
2022
2021
Note
€ million
€ million
Cash flows from operating activities
Profit before income tax
1,735
483
Adjustments for :
Impairment losses relating to loans and advances to customers
21
291
490
Other impairment losses, provisions and restructuring costs
12
210
77
Depreciation and amortisation
11
124
114
Other (income)/losses οn investment securities
16
(14)
(76)
Valuation of investment property
10
(34)
(30)
Other adjustments
16
(244)
(12)
2,068
1,046
Changes in operating assets and liabilities
Net (increase)/decrease in cash and balances with central banks
(169)
(193)
Net (increase)/decrease in securities held for trading
0
(32)
Net (increase)/decrease in due from credit institutions
1,095
588
Net (increase)/decrease in loans and advances to customers
(3,226)
(1,636)
Net (increase)/decrease in derivative financial instruments
868
36
Net (increase)/decrease in other assets
116
(22)
Net increase/(decrease) in due to central banks and
credit institutions
(2,048)
3,125
Net increase/(decrease) in due to customers
4,068
5,338
Net increase/(decrease) in other liabilities
147
(4)
851
7,200
Income tax paid
(45)
(33)
Net cash from/(used in) operating activities
2,874
8,213
Cash flows from investing activities
Acquisition of fixed and intangible assets
26,27,28
(169)
(129)
Proceeds from sale of fixed and intangible assets
26,27
121
35
(Purchases)/sales and redemptions of investment securities
(2,937)
(2,752)
Acquisition of subsidiaries, net of cash acquired
-
121
Acquisition of holdings in associates and joint ventures, participations
in capital increases
-
(8)
Disposal of subsidiaries and merchant acquiring business, net of cash disposed
23,30
281
1
Disposal of holdings in associates and joint ventures
24
26
13
Dividends from investment securities, associates and
joint ventures
16,24
21
21
Net cash from/(used in) investing activities
(2,657)
(2,698)
Cash flows from financing activities
(Repayments)/proceeds from debt securities in issue
16
1,059
986
Repayment of lease liabilities
41
(39)
(34)
(Purchase)/sale of treasury shares
and exercise of share options
37
1
1
Net cash from/(used in) financing activities
1,021
953
Effect of exchange rate
changes on cash and cash equivalents
1
0
Net increase in cash and cash equivalents
1,239
6,468
Cash and cash equivalents at beginning of year
16
13,149
6,681
Cash and cash equivalents at end of year
16
14,388
13,149
Notes on pages
6
to
155
form an integral part of these consolidated financial statements.
Notes to the Consolidated Financial Statements
.
6
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31 December 2022 Consolidated Financial Statements
1.
General information
Eurobank Ergasias Services and Holdings S.A.
(the Company
or Eurobank
Holdings), which
is the
parent
company of
Eurobank S.A.
(the
Bank)
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
, with
its registered
office at
Othonos Street, Athens 105 57
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 6 April 2023.
The
Independent Auditor’s Report of the Financial Statements
is included in the section B.I of the Annual Financial Report.
The website
address,
where the
annual
financial statements
of the
consolidated
non-listed
Company’s
subsidiaries are
uploaded,
along with the independent Auditors’ reports and the Board
of Directors’ Reports for these entities
is: www.eurobankholdings.gr.
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
International
Accounting
Standards
Board
(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 of the
Group have been
consistently applied to
the years
2022 and
2021, after
taking into
account the
amendments in
IFRSs as
described in
section 2.1.1
(a) “New
and amended
standards
adopted
by the
Group
as of
1 January
2022”.
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 conditions, 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.
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:
2022 was
marked
by
the
war
in Ukraine,
which gave
rise to
a global
- but
predominantly
European
- energy
crisis,
added
to
the
mounting
inflationary
pressures,
and led
to
widespread
economic uncertainty
and increased
volatility
in the
global economy
and
financial markets. Nevertheless, the post-pandemic recovery continued
for a second consecutive year in Greece, with its GDP growth
overperforming
that
of
most
of
its
EU
peers.
According
to
the
Hellenic
Statistical
Authority
(ELSTAT)
provisional
data,
the
Greek
economy expanded
by 5.9%
on an
annual basis
in 2022,
with the
European Commission
(EC) estimating
the full-year
2022 growth
rate at
5.5% and 1.2% in 2023
in its winter
economic forecast
(February 2023). The
inflation rate, as
measured by the change
in the
12-month average Harmonized
Index of Consumer Prices (HICP), increased to 9.3% in 2022 according to ELSTAT,
primarily as a result
of supply-side shocks (including the hikes in energy, food and other raw material prices, the continued disruptions in the supply chain
Notes to the Consolidated Financial Statements
.
7
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31 December 2022 Consolidated Financial Statements
and the rising
nominal wages), alongside
the steep post
-pandemic recovery of
domestic and
external demand.
The EC expects
that
the inflation rate will decline to 4.5% in 2023, and further de-escalate to 2.4% in 2024. Moreover, provisional ELSTAT
data shows that
the
average
monthly
unemployment
in
2022
decreased
to
12.4%,
from
14.8%
in
2021,
while
the
Organisation
for
Economic
Co-
operation
and Development
(OECD) in
its latest
report (January
2023) expects
unemployment to
decline to
11.5% in
2023. On
the
fiscal front, the general government primary balance was to post a
deficit of 1.6% of GDP
in 2022 according to the 2023
Budget (latest
outlook point
to a
primary deficit
of ca.
1% of
GDP or
even lower),
and a
surplus of
0.7% of GDP
in 2023
(2021: deficit
of 5%).
The
gross public debt-to-GDP ratio is expected to decline to 168.9% and 159.3% in 2022 and 2023 respectively (2021: 194.5%). The above
forecasts
may
change
in
case
of
potential
adverse
international
developments
that
could
affect
energy
and
other
goods
prices,
interest rates,
external and domestic demand, and bring about the need for additional fiscal
support measures.
The Bulgarian economy expanded by 3.4%
in 2022 (2021:
7.6%), based on data
from the National Statistical Institute of
Bulgaria, while
inflation averaged
at 15.3% in 2022
(2021: 3.3%). According
to the EC’s
winter economic
forecasts (February
2023), the real
GDP in
Bulgaria is expected to grow by 1.4% in 2023, while the HICP is expected at 7.8% in 2023. Respectively, in Cyprus the real GDP growth
is forecasted at 5.8% in 2022 and 1.6% in
2023 (2021: 6.6%), while the CPI is estimated at 8.1% in 2022 and 4% in 2023 (2021: 2.3%).
A significant
boost to
growth in
Greece and
in other
countries of
presence is
expected
from European
Union (EU)
funding, mainly
under
the
Next
Generation
EU
(NGEU)
instrument
and
the
Multiannual
Financial
Framework
(MFF)
2021–2027,
EU’s
long-term
budget. Greece shall receive EU funds
of more than € 30.5 billion (€ 17.8 billion in grants
and € 12.7 billion in loans) up to 2026 from
NGEU’s Recovery and Resilience Facility (RRF) to finance projects and initiatives laid down in
its National Recovery and Resilience Plan
(NRRP) titled “Greece
2.0”.
A pre-financing
of € 4
billion was
disbursed in
August 2021, and
the first
two regular
payments of
€ 3.6
billion each in April
2022 and January 2023
respectively.
Greece has been also
allocated about €
40 billion through
MFF 2021-2027.
On the monetary policy front, although net bond purchases under the temporary
Pandemic Emergency Purchase Programme
(PEPP)
ended in March
2022, as scheduled, the
European Central
Bank (ECB) will continue
to reinvest
principal from maturing
securities at
least
until
the
end
of
2024,
including
purchases
of
Greek
Government
Bonds
(GGBs)
over
and
above
rollovers
of
redemptions.
Furthermore, the Governing Council of the ECB, in line with its strong commitment to its price stability mandate, has proceeded with
six rounds
of interest
rate hikes
(in July,
September,
October,
December 2022,
February and
in March
2023), raising
the three
key
ECB
interest
rates
by
350
basis
points
in
aggregate.
Moreover,
it
approved
a
new
instrument
(the
“Transmission
Protection
Instrument” – TPI) aimed at preventing
fragmentation in the
sovereign bonds market.
Finally, following
the expiration of the
special
terms and
conditions applying
to the
TLTRO
III (Targeted
Longer-Term
Refinancing Operations)
on 23
June 2022,
the ECB
will keep
assessing how targeted lending operations
are contributing to its monetary policy stance.
In
2022, the
Greek State
proceeded
with
the
issuance of
nine bonds
of
various
maturities
(5-year,
10-year,
15-year
and 20-year)
through
the
Public
Debt
Management
Agency
(PDMA),
raising
a total
of
€ 8.3
billion
from
international
financial markets.
On 17
January 2023, the PDMA issued a 10-year bond of € 3.5 billion at a yield of 4.279% and more
recently, on 29 March
2023, issued a 5-
year
bond of € 2.5 billion at a yield of 3.919%. As of end
2022, the cash reserves of the Greek State stood in excess of € 30 billion, and
as of early February 2023, its sovereign rating was one
notch below investment grade by three of the four External Credit Assessment
Institutions (ECAIs) accepted by the Eurosystem
(DBRS Morningstar: ΒΒ (high); S&P Ratings,
Fitch Ratings: BB+).
Regarding
the outlook
for
the next
12 months
the major
macroeconomic
risks
and uncertainties
in Greece
and
our
region are
as
follows: (a) the ongoing Russia -
Ukraine war and its ramifications on regional
and global stability and security, as well
as the European
and Greek economy,
(b) a potential prolongation of the ongoing inflationary
wave and its impact on economic growth, employment,
public finances,
household budgets,
firms’ production
costs, external
trade and
banks’ asset
quality,
as well
as any
potential social
and/or political
ramifications
these may
entail, (c)
the ongoing
and potential
upcoming central
bank interest
rate hikes
worldwide,
and in
the euro
area in
particular,
that may
exert upwards
pressures on
sovereign and
private borrowing
costs, especially
those of
highly indebted borrowers,
deter investments,
increase volatility in
the financial markets
and lead economies to
slow down or even
a
temporary
recession,
(d)
the
recent
banking
sector
turmoil
to
continue
and
expand
in
the
euro
area,
affecting
customers’
confidence, with a potential impact on assets under
management levels and on liquidity,
(e) the impact of a potential curtailment or
discontinuation of the government
energy support measures on growth,
employment and the servicing of household
and corporate
debt, (f)
the persistently
large current
account deficits
and the
prospect
of them
becoming once
again a
structural
feature
of the
country’s growth model, (g) the
absorption capacity of the
NGEU and MFF
funds and the
attraction of new investments in the
country,
(h) the
effective
and timely
implementation
of the
reform
agenda required
to meet
the RRF
milestones
and targets
and to
boost
productivity,
competitiveness, and
resilience, (i) a
delay in
the implementation
of planned reforms,
projects and the
budget’s fiscal
agenda
due
to
the
possibility
of
the
2023
national
elections
resulting
in
an
inability
or
delay
to
form
a
government
with
solid
Parliament
majority,
(j) the geopolitical
developments
in the
near region,
(k) the
evolution of
the pandemic
and the
probability of
Notes to the Consolidated Financial Statements
.
8
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31 December 2022 Consolidated Financial Statements
emergence of new Covid-19 variants
that could further impact
economic growth, fiscal balances
and international trade by prolonging
the disruptions in the global supply
chain, and (l) the exacerbation
of natural disasters
due to the climate change
and their effect on
GDP,
employment,
fiscal balance and sustainable development
in the long run.
Materialization of the above risks, 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, asset quality, solvency and profitability of the Greek banking sector.
The
Group Management and Board,
mindful of the recent banking turmoil
across some markets, has done
a proactive internal review
to
re-assure itself of the continued resilience of Eurobank
business model to such possible external shocks and is pleased to report that
this
model
is
well
supported
by
sound
business
practices,
diversified
activities
and
prudent
risk
management
approaches.
The
resulting stability
of the Group’s
business operating
model is also further
well-reflected by,
among others, its
financial position and
performance
as analysed
below.
In this
context,
the Group
is continuously
monitoring the
developments
on the
macroeconomic,
financial and geopolitical fronts
as well as the evolution of
its asset quality and liquidity KPIs 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 in accordance with the business plan for
2023–2025.
For the year ended 31 December 2022, the net profit attributable to shareholders amounted
to € 1,330 million (2021: € 328 million),
of which € 212 million (2021:
€ 143 million) was related to the international operations. The adjusted net profit, excluding the € 230.5
million gain (after tax) on sale of Bank’s merchant acquiring business and the € 75 million restructuring costs (after tax), amounted to
€ 1,174 million (2021: € 424 million). As at 31 December
2022, the Group’s Total
Adequacy Ratio (total CAD) and Common Equity Tier
1 (CET1)
ratios
stood
at 19.2%
(31 December
2021: 16.1%)
and
16% (31
December 2021:
13.7%) respectively
(note 4).
In January
2023, the
European Banking
Authority (EBA)
launched the
2023 EU-wide
stress test
exercise
which is
designed to
provide valuable
input for assessing the resilience of
the European banking sector,
including the 4 Greek systemic banks,
in the current uncertain and
changing macroeconomic
environment, covering
the period of
2023-2025. The EBA
expects to publish
the results of
the exercise
at
the end of July 2023 (note 4).
With regards
to asset
quality,
the Group’s
NPE formation
was positive
by €
46 million
during the
year
(fourth quarter
2022: €
35
million positive), (31 December 2021: € 44 million positive). At 31 December 2022 the Group’s
NPE stock, following the classification
of project “Solar” underlying loan portfolio as held
for sale and other initiatives,
amounted to € 2.3 billion
(31 December 2021: € 2.8
billion), driving the
NPE ratio
to 5.2% (31
December 2021: 6.8%),
while the NPE
coverage ratio
stood at
74.6% (31 December
2021:
69.2%).The debt securities portfolio, which is to
a large extent hedged for
the interest rate risk, accounts for 16%
of total assets mostly
invested in EU Sovereign Bonds and on investment grade securities. The Group holds
non-significant exposure in Russian or Ukrainian
assets and in the banks affected by the
recent banking turmoil.
In terms
of liquidity,
as at
31 December
2022, the
Group
deposits
increased
to
€ 57.2
billion (31
December 2021:
€ 53.2
billion),
leading the Group’s (net) loans to deposits (L/D) ratio to 73.1% (31 December 2021: 73.2%), while the funding from the targeted long
term refinancing operations of the European Central Bank –
TLTRO III programme decreased by € 2.9 billion amounting to €
8.8 billion
(31 December 2021: € 11.7
billion) (note 31). During
the year,
the Bank proceeded with
the issuance of a preferred
senior note of €
500 million
and the
Company completed
the issuance
of a
Tier 2
instrument
of €
300 million.
More recently,
in January
2023, the
Bank successfully completed
the issue of a €
500 million senior preferred
note (note 34). As
at 31 December 2022, the
Bank’s MREL
ratio at consolidated
level stands at
23.07% of RWAs,
higher than the interim
binding MREL target
for 2022 of 18.21%
but also than
the
interim
non-binding
MREL
target
from
1
January
2023
of
20.48%.
The
rise
in
high
quality
liquid
assets
of
the
Group
led
the
respective
Liquidity Coverage
ratio
(LCR) to
173% (31
December 2021:
152%). In
the context
of the
2022 ILAAP
(Internal
Liquidity
Adequacy Assessment
Process), the
liquidity stress
tests results
indicated
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).
Information on the interest rate
and liquidity risk exposures of the Group is included in notes
5.2.2 and 5.2.3.
Going concern assessment
The Board of
Directors, acknowledging
the geopolitical,
macroeconomic and
financial risks to
the economy and
the banking system
and taking into account the above
factors relating to
(a) the idiosyncratic growth
opportunities in Greece and the region for
this and
the next years, also underpinned by the mobilisation of the
already approved EU funding mainly through the RRF, and (b) the Group’s
pre-provision income
generating capacity,
asset quality,
capital adequacy and liquidity
position, has been satisfied
that the financial
statements of the Group can be prepared
on a going concern basis.
Notes to the Consolidated Financial Statements
.
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2.1.1
New and amended standards and interpretations
(a) New and amended standards adopted by the Group as of
1 January 2022
The following amendments to standards
as issued by the IASB
and endorsed by the EU, apply as of 1 January 2022:
IFRS 3, Amendments, Reference to
the Conceptual Framework
The
amendments
to
IFRS
3 “Business
Combinations”
updated
a 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. In addition,
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 exists
at the acquisition date.
Moreover,
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 had no impact on the consolidated financial statements.
Annual improvement to IFRSs 2018-2020 cycle: IFRS1,
IFRS9 and IFRS 16
The improvements
introduce changes
to several
standards. The
amendments that
are relevant
to the Group’s
activities are set
out
below:
The
amendment
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 amendment allows entities that have elected to measure their assets and
liabilities at carrying amounts recorded in their
parent’s
books
to
also
measure
any
cumulative
translation
differences
using
the
amounts
reported
in
the
parent’s
consolidated
financial statements. This amendment also applies 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 had no impact on the consolidated financial statements.
IAS 37, Amendments, Onerous Contracts – Costs
of Fulfilling a Contract
The amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent
Assets’ clarify which costs to include in determining the
cost of fulfilling a contract when assessing whether
a contract is onerous. In particular,
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 amendments had no impact on the consolidated financial statements
(b) New and amended standards not yet adopted by the Group
A number of new
standards and amendments
to existing standards
are effective
after 2022, as
they have not
yet been endorsed
by
the EU or have not been early applied by the Group. Those that may
be relevant to the Group are set
out below:
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
all
types
of
insurance
contracts
as
well
as
certain
guarantees
and
financial
insurance
with
discretionary
participating features. 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
According to IFRS 17 core 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.
In December 2021, the IASB issued a narrow
-scope amendment to the transition requirements
of IFRS 17 for entities that
first apply
IFRS 17 and IFRS 9 at the same time.
The Group has
not issued contracts
within the scope
of IFRS 17; therefore,
the standard
is not expected
to impact the
consolidated
financial statements, other than through the
Group’s
share of the
results of its associate ‘’Eurolife FFH
Insurance Group Holdings S.A.’’
(“Eurolife”).
In particular,
as at 31 December 2022, the Group’s
share of the expected impact from
Eurolife’s
transition to IFRS 17
is estimated to
an increase in equity of ca. € 15 million, net of tax.
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 concise
and, (b)
that selecting an estimation or valuation technique
and choosing the inputs to be used constitutes making an accounting
estimate.
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.
IAS 1, Amendments, Classification of Liabilities as Current or Non-Current
(effective 1 January 2024, 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
Notes to the Consolidated Financial Statements
.
11
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31 December 2022 Consolidated Financial Statements
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.
In October 2022, the IASB
issued
Non-current Liabilities with Covenants
(Amendments to IAS 1)
with respect to the
classification (as
current or non-current), presentation and disclosures of
liabilities for which an
entity’s right to defer settlement for at
least 12 months
is subject to the
entity complying with conditions
after the reporting
period. The amendments to
IAS 1 specify that
covenants to be
complied with after the reporting date do not
affect the classification of debt as current or non-current at the
reporting date. Instead,
the amendments require a company to
disclose information about these covenants in the notes
to the financial statements.
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)
The amendments
clarify that
the exemption
on initial
recognition 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.
IFRS 16, Amendment, Lease Liability in a Sale and Leaseback (effective 1 January 2024, not yet
endorsed by EU)
The amendment requires a seller-lessee
to subsequently measure lease liabilities
arising in a sale and leaseback
transaction in a way
that it
does not
recognise any
amount of
the gain
or loss
that relates
to the
right of
use it
retains.
Any gains
and losses
relating to
the full
or
partial termination of a lease continue to be recognised when they occur. The amendment does not change the accounting for leases
unrelated to sale and leaseback transactions.
The adoption of the amendment is not expected to impact the consolidated
financial statements.
.
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
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 control
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 statement.
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.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
(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-controlling
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 differe
nce 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 consideration
received.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
items receivable or payable to the foreign
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 that mainly include foreign exchange
contracts, forward currency agreements, currency
and interest
rate options (both written and purchased), as well as currency and interest
rate swaps are initially recognized in the balance
sheet at
fair value,
on the date
on which the
derivative contracts
are 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 the 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 risks 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:
•
Reduce
interest rate exposure
that is in excess of the Group’s
interest rate limits;
•
Manage efficiently interest
rate risk by
hedging the changes to movements
of the benchmark interest
rates represented
by the
prevailing reference rates;
●
Reduce
variability arising from the fair value
changes of derivatives embedded in financial assets;
•
Manage future variable cash flows;
•
Reduce
foreign currency risk or inflation risk;
•
Reduce variability in the Group’s
equity arising from translating a foreign net
investment at different
exchange rates.
Notes to the Consolidated Financial Statements
.
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31 December 2022 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
or
group
of
hedging
instruments and a
related item or
group of items
to be hedged.
A hedging instrument
is a
designated derivative or group
of derivatives,
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
or group of
items. Specifically,
the Group designates
certain derivatives
as: (a)
hedges of the
exposure to
changes in fair
value of recognized
assets or liabilities
on a single
or portfolio
basis or unrecognized
firm
commitments (fair
value hedging),
(b) hedges of
the exposure to
variability in
cash flows of
recognized assets
or liabilities or
highly
probable forecasted
transactions (cash flow
hedging) 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 (net
investment hedging).
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 qualifying
hedge relationships, 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 is
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 is inherent in each of the items in
the group.
The Group has applied the Phase 1 and Phase 2 IBOR reform amendments to IFRS 9, IAS 39 and IFRS 7, 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
above 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.
Finally,
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.
(i) Fair value hedging
The Group applies
fair value hedging
to hedge exposures
primarily to changes
in the fair value
attributable to
interest rate
risk with
respect to the applicable benchmark rate
and currency risk.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Hedged items
The items that qualify for fair value hedge accounting
include financial assets and liabilities measured at amortized cost
such as:
•
fixed rate investment
securities, term deposits and debt securities in issue;
•
portfolios of floating-rate
loans and investment securities with embedded interest
rate options (such as purchased interest
rate floors);
•
portfolios of
fixed rate
amortizing loans (macro
hedging) including securitized
notes issued and
held by the
Group, as
well
as fixed rate investment
securities classified as FVOCI.
Hedge effectiveness assessment
The
Group
uses
the
dollar-offset
method
at
inception
(prospective
measurement)
and
on
an
ongoing
basis
(retrospective
measurement), in
order to
assess the effectiveness
of fair
value hedges
on a single
or portfolio
basis. 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. The above comparison constitutes
the dollar-offset ratio and
should be within the range of 80%
-125%
for
the
hedge
to
be
highly
effective.
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.
The Group
may also
use the
hypothetical
derivative
method, an
approach to
the dollar
offset method,
mainly applied
in portfolio
hedges that
carry embedded
derivatives,
where the
hedged risk
is modelled
through hypothetical
derivatives,
which replicate
the
embedded derivative.
The fair value
of the hypothetical
derivative is used
as a proxy
for the net present
value of the hedged
future
cash
flows
against
which
changes
in
value
of
the
actual
hedging
instrument
are
compared
to
assess
effectiveness
and
measure
ineffectiveness.
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 as well as differences
between expected
and actual cash flows.
In addition, for hedging relationships
where the critical terms
of the hedged item match
the ones of the hedging instrument
such as
coupon, maturity,
and payment
frequency,
it is presumed
that by
construction, effectiveness
is expected
to be
within the range
of
80% to 125%.
Fair value hedging adjustments and discontinuation of hedge
accounting
Changes in
the fair
value of
derivatives that
are designated
and qualify as
fair value
hedges are
recorded in
the income
statement,
under net
trading income
together with
the changes
in the
fair value
of the hedged
assets or
liabilities that
are attributable
to the
hedged risk
(fair value
hedging adjustments).
Fair value
hedging adjustments
to the
hedged items
measured at
amortised cost
are
recorded as
part of their
carrying value in
the balance sheet,
with the exception
of hedging adjustments
for portfolios
of fixed rate
assets in the context of macro-hedging (see below).
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
remaining period to maturity with
amortization commencing no later
than when the hedged item ceases to
be adjusted for changes
in its
fair value
attributable
to the
risk being
hedged. If
the hedged
item is
derecognised, the
unamortised fair
value adjustment
is
recognised immediately in the income statement
.
Portfolio hedging of interest rate risk (macro
-hedging)
With
reference
to
portfolio
hedging
of
interest
rate
risk,
a
dynamic
hedging
strategy
is
applied
according
to
which
the
Group
voluntarily designates
and de-designates
the hedge
relationship on
a monthly basis.
The Group
determines the
designated hedged
amount by
identifying portfolios
of homogenous
fixed rate
assets based on
their contractual
interest rates,
maturity and
other risk
characteristics. Assets within the identified portfolios
are allocated into repricing time
periods based on
their repricing/maturity dates
or interest
payment dates
with assumptions made for
expected prepayments
and capital repayments.
The hedging instruments
are
groups
of interest
rate
swaps replicating
in aggregate
the amortization
profile of
the assets
and designated
appropriately
to their
repricing time periods.
Following the above
allocation into time
buckets, the designated hedged
principal and the
resulting percentage
of the asset portfolio hedged (hedge ratio)
for each time bucket are determined.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
The dollar-offset
method also
applies to
portfolio hedging
of interest
rate
risk and
hedge effectiveness
is measured
on a
monthly
basis. For prospective effectiveness measurement,
the dollar-offset method involves
a comparison of the sensitivity of fair value to a
change of 1 basis point in interest
rates (Point Value
- PV01) between the hedging instruments and the
hedged assets. A PV01 offset
within the threshold
of 80% to
125% demonstrates
that the hedge
is expected
to be highly
effective. Retrospective
effectiveness
is
measured by comparing
fair value changes
of the designated portion
of the portfolio of
fixed-rate assets
attributable to the
hedged
risk, against the fair value changes of the derivatives,
to ensure that they are within an 80% to 125% range.
Fair Value hedging adjustments
do not affect the carrying amount of the hedged assets pool, but instead they form
part of loans and
advances to customers balance sheet line. Considering the designation and de-designation process
for a portfolio hedging of interest
rate risk is performed
on a monthly basis, the
hedging adjustments begin amortization
on the month they occur
over the expiration
of the designated time periods on a straight
line basis.
Furthermore, the pool of hedging instruments is managed
dynamically and therefore when
new derivatives are added in the pool
of
hedging instruments, they are included in the
next period’s hedge assessment and consequently the change in
fair value in the month
of their inception affects the P&L. Similarly,
when existing swaps are de-designated,
either to improve expected hedge
effectiveness
or to be liquidated, the respective change in fair value from de-designation up to the next designation
or liquidation date, affects the
P&L.
(ii) Cash flow hedging
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 as it is described in section (i) above.
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
under net trading income.
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.
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 hedging
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 instruments
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 them
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 are 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 future 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.
The EIR calculation includes fees and points paid
or received that are an integral part
of the effective interest rate,
transaction costs,
and 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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 are
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 results
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.
(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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 for 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.
(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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
with
changes
in
fair
value
recognized
in
the
income
statement, unless they are designated
as effective hedging instruments,
where 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
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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 entities 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 entities 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 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
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 non-recourse
loans, 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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
entities,
either established by the Group or third parties, and held 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
purpose
entities,
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
‘new’ financial asset at fair value plus any eligible transaction costs 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,
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
●
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
●
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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.
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
entities 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
Notes to the Consolidated Financial Statements
.
28
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31 December 2022 Consolidated Financial Statements
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-month 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.
•
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated 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,
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.
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,
where the
level of
their expected
cash flows
is compared
to the
carrying amount
of the
securitized notes. In addition, the 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.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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.
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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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, adjusted
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.
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.
Notes to the Consolidated Financial Statements
.
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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,
inflation,
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
terms 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
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.
Notes to the Consolidated Financial Statements
.
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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,
and measured
at
amortized
cost.
Securities purchased
under agreements
to
resell (reverse
repos)
are
recorded
as
loans
and
advances
to
other
banks
or
customers,
as
appropriate,
and
measured
at
amortized
cost.
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 against the receipt of
a fee continue to
be recognized 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
T
he Group enters into leases either
as a lessee or as a lessor.
At inception of a contract, the Group
assesses whether a contract is, or
contains,
a lease.
A contract
is, or
contains,
a lease
if the
contract
conveys
the right
to control
the use
of an
identified asset
for a
period of time in exchange for consideration.
(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.
The Group has
elected not to
recognise right-of-use
assets and lease
liabilities for
leases of low-value
assets and short-term
leases.
The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis
over the lease term.
With respect
to the rent
concessions that
were a direct
consequence of the
COVID-19 pandemic, the
Group has
applied COVID-19-
Related Rent
Concessions
-
Amendment to
IFRS 16, which
provided a practical
expedient allowing
the Group not
to assess whether
eligible rent concessions were lease modifications.
(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 whether the lease transfers
substantially all of the risks and
rewards incidental to the
ownership of the underlying asset. If
this is the case, then the
lease is a finance lease; if not,
then it is an operating
lease. As part of this assessment,
the Group considers
certain indicators such as whether the
lease is for the major part of the economic life of the asset.
Notes to the Consolidated Financial Statements
.
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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 way
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 and
the tax rate
enacted at the reporting
date, 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
and
accounting
write-offs
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
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.
Notes to the Consolidated Financial Statements
.
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Deferred
tax
related
to
debt
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 (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 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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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.
(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 an equal credit
in equity,
i.e.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 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.
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.
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,
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
(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;
(e) fellow subsidiaries;
(f) post-employment benefit plans established for the benefit
of the Group’s employees.
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.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
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 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.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
2.2.26 Cash and cash equivalents
Cash and
cash equivalents
include cash
in hand,
unrestricted
deposits with
central
banks,
due from
credit
institutions
that are
all
carried at amortised cost and other short-term highly liquid investments with original maturities of three months or
less that are held
for trading.
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.
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
In
2022,
the
geopolitical
and
economic
upheaval
caused
by
the
Russian
invasion
in
Ukraine,
along
with
the
persistent
-
albeit
decelerating
-
inflationary
pressures,
high
energy
prices
and
rising
borrowing
costs
affected
negatively
the
global
economic
environment,
worsened
the macroeconomic
outlook
of the
European
economies, which
are
now
confronted
with
a slowdown
in
growth and, accordingly,
exacerbated economic uncertainty in the regions
that the Group operates. In this volatile environment,
the
Greek economy has exhibited
notable resilience, mainly
driven by the
increase in consumption,
export of services,
strong performance
in tourism and further acceleration of new
investments supported
by the RRF funds, which is expected to continue,
at a slower pace
though (note 2).
On the back of the overall economic uncertainty mentioned above, the Group continued its robust performance, as evidenced by the
level of its credit quality
indicators at year
end 2022 that outperformed the
expected levels in terms
of NPE ratio and NPE coverage,
while it remains cautious towards the risks that may
eventually affect vulnerable corporate
borrowers (like those that operate
in the
food industry,
the energy sector,
the supply of raw
materials for the
construction sector etc.)
and erode the
disposable income and
the repayment capacity of retail customers.
In this context, in the fourth quarter of
2022, the Group revised the key macroeconomic
variables
incorporated
in
the
IFRS
9
expected
credit
losses’
models,
in
order
to
reflect,
to
the
extent
possible,
the
uncertainties
surrounding
the
economic
environment.
Furthermore,
the
Group
enhanced
the
use
of
industry
specific
variables
for
corporate
portfolio
as
well
as
the
monitoring
framework
of
vulnerable
corporate
borrowers
and
incorporated
inflation
and
interest
rates
movements
in the
retail
borrowers’
debt capacity
assessment,
so as
to better
capture
the impact
of the
macro
indicators
on the
performance of its loan portfolios.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 determining
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.
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.
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
(note
2.2.13).
More
stringent
criteria
could
significantly
increase
the
number
of
instruments
migrating to stage 2.
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 2022 and 2021, 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:
.
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
2022
and
2021,
the
credit
rating
deterioration
thresholds
per
rating
bands
for
Greece’s
wholesale
lending
exposures that trigger
allocation to stage
2 are set out
below. In
particular,
as per the Group’s
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:
.
Wholesale internal rating bands
Minimum SICR threshold range
1
Five notches
2
Four notches
3
Three notches
4
Two notches
5-8
One notch
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
2022 and 2021,
the probability weights
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
Baseline
scenario
assumes
no
escalation
of
the
war
in
Ukraine,
no
change
in
EU
sanctions
against
Russia
and
monetary
policy
trajectory as
well as stability
related to
the political cycle.
Core inflation
for Greece is
assumed to
gradually de-escalate,
increase in
post-Covid 19
employment is
assumed to
contribute to
lower unemployment
path, real
estate prices
continue their
upward trend,
while short-term prospects are supported by the: (a) strong tourist season
expected, (b) Recovery and Resilience Facility, Multiannual
Financial Framework and European Investment Bank funds, (c) ample
liquidity (deposits and state cash buffer) and (d)
fiscal measures
adopted to cushion energy.
In the Eurozone
front, the ECB is
expected to pause
its monetary policy tightening
in the first
quarter of
2023.
Optimistic scenario
The optimistic scenario assumes quicker recovery in 2022 and 2023, compared to the baseline scenario, as a result of: (a) higher than
expected
tourism
revenues,
(b)
no
negative
developments
with
respect
to
the
energy
crisis
(energy
prices
remain
unchanged
compared to
the baseline scenario),
and (c) no
escalation of
the war in
Ukraine. In
addition, it assumes
quick resolution
of political
uncertainty, formation
of a stable government with no need for a third round of elections and no negative
surprises from the flow of
EU funds.
Adverse scenario
The adverse scenario assumes a prolongation and escalation of the
war and economic sanctions, which leads to
a larger supply shock,
manifested in higher oil prices, and increase in domestic uncertainty as a
result of the political cycle / elections.
Therefore, higher and
more
persistent
inflation
(and
subsequent
erosion
of
incomes),
more
protracted
postponement
of
investment,
lower
external
demand but also more fiscal support measures, capped by the fiscal space of the country are expected. Also, negative
developments
are assumed on the RRF and structural reforms
fronts, while uncertainty around the Eurozone
growth outlook intensifies.
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
baseline
scenario
applied in the ECL calculation coincides with the one used for ICAAP
and business planning purposes. 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.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
2022
and
2021,
are
set
in
the
following table:
Key macroeconomic indicator
31 December 2022
31 December 2021
Average (2023-2026)
annual forecast
Average (2022-2025)
annual forecast
Gross Domestic Product growth
2.10%
3.27%
Unemployment rate
10.76%
12.60%
Residential property prices' index
3.71%
5.55%
Commercial property prices' index
3.46%
5.75%
Inflation rate
3.10%
1.57%
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 macroeconomic variables,
such as GDP,
unemployment etc. and
portfolio specific variables
such as seasonal flag etc.,
which are used as independent
variables for optimum
predictive capability.
In 2022,
the Group
proceeded with
the recalibration
of its
PD models,
by introducing
industry specific
macro
variables in corporate borrowers and applying interest
rate and inflation scalars in the estimation of retail customers’ debt to income
ratio. More
specifically,
in the
latter case,
the borrowers’
instalments were
estimated with
the use
of the
projected
interest
rates,
while the income model, also took into account the projected
inflation on top of the projected GDP and unemployment
ratio.
The ECL
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.
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. Accordingly,
considering the
macroeconomic conditions and geopolitical
backdrop linked
to the war in Ukraine,
Management incorporates
in ECL calculations
an estimation
of potentially
non modeled
risks
arising from its
corporate lending
portfolios,
representing 4% of ECL stock.
Management adjustments reflect in 2022 the sensitivity of the macroeconomic variability in
the risk
profile of
debtors.
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).
Notes to the Consolidated Financial Statements
.
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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 assumes a
favorable and
an adverse shift in the
scenario weighting, compared
to the one applied in the
ECL measurement. As at
31 December 2022, considering that
the prevailing macroeconomic
conditions, as
reflected
in
the
three
scenarios
incorporated
in
the
IFRS9
weighted
probability
scenario,
have
resulted
in
the
widening
of
the
differences
of
the
macro
variables’
levels
among
the
scenarios,
the
Group
rebalanced
the
scenario
weighting
used
in
the
ECL
sensitivity analysis in order to reflect a reasonable potential change
of key macroeconomic indicators. Accordingly,
the favorable shift
assumes an increase in the weighting of the optimistic
scenario at 50% and a stable weighting
of the baseline scenario at 50%, while
the adverse shift assumes an increase in the weighting of the adverse scenario at 50% and a stable weighting of the
baseline scenario
at 50%.
Correspondingly,
at year-end
2021, the
favorable
swift assumed
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
adverse swift assumed
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.
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 (2023-2027
and 2022-
2026, respectively):
As at 31 December 2022
As at 31 December 2021
Sensitivity scenario
Sensitivity scenario
Key macroconomic
indicators
Combined change %
Key macroconomic
indicators
Combined change %
Positive
change
Adverse
change
Positive
change
Adverse
change
GDP growth
41%
-41%
change of annual forecasts
GDP growth
20%
-20%
change of annual forecasts
Unemployment
rate
-11%
11%
change of annual forecasts
Unemployment
rate
-11%
11%
change of annual forecasts
Inflation rate
-2%
2%
change of annual forecasts
Inflation rate
1%
-1%
change of annual forecasts
Property indices
(RRE/CRE)
4%
-4%
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 2022
Positive change
Adverse change
12-month
ECL - Stage 1
Lifetime ECL
- Stage 2
Lifetime ECL
credit-impaired
31 December
2022
12-month
ECL - Stage 1
Lifetime ECL
- Stage 2
Lifetime ECL
credit-impaired
31 December
2022
Ιmpact in
€ million
(12)
(36)
(34)
(82)
10
43
35
88
Ιmpact in
% allowance
-7.08
-9.96
-2.93
-4.86
5.73
11.99
3.03
5.24
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
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.
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 valuation
of the Group’s financial assets and liabilities
is provided in note 5.3.
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
Notes to the Consolidated Financial Statements
.
45
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31 December 2022 Consolidated Financial Statements
lending
exposures
including
securitized
notes
issued
by
special
purpose
entities
established
by
the
Group
and
based
on
the
measurement category for 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
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 entities, either established by
the Group or third parties,
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 based on
the control
elements set
out in note 2.2.1 (i).
In particular, 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.
In
addition,
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.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
deferred
tax
assets recognized
by the
Group
and the
assessment
for
their recoverability
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
change in these assumptions impacts
the
carrying amount of the 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 and
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,
including CPI indexation, future vacancy rates and periods,
discount rates or rates
of return, 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 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.
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
its employees
as a
common feature
of employee
remuneration.
IFRS 2
requires the
recognition of
an expense for
those shares
and share options
at their
fair value
on the grant
date (equity-settled
plans). For shares
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 and 30.
.
Notes to the Consolidated Financial Statements
.
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4.
Capital Management
The Group’s capital
adequacy position is presented in the following table:
2022
2021
€ million
€ million
Equity attributable to shareholders
of the Company
6,623
5,539
Add: Adjustment due to IFRS 9 transitional arrangements
279
528
Add: Regulatory non-controlling interests
68
57
Less: Goodwill
(2)
(2)
Less: Other regulatory adjustments
(253)
(686)
Common Equity Tier 1 Capital
6,715
5,436
Total Tier 1 Capital
6,715
5,436
Tier 2 capital-subordinated debt
1,250
950
Add: Other regulatory adjustments
61
-
Total Regulatory
Capital
8,026
6,386
Risk Weighted Assets
41,899
39,789
Ratios:
%
%
Common Equity Tier 1
16.0
13.7
Tier 1
16.0
13.7
Total
Capital Adequacy Ratio
19.2
16.1
.
Notes:
a) The
profit of €
1,330 million attributable
to the
shareholders of the
Company for
the year
ended 31
December 2022 (31
December 2021: profit
of €
328
million) 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 –
see below). The
transition effect is included in the regulatory capital as of the first quarter of each year.
c) As of 31
March 2022, the Group
is applying the
temporary treatment specified
in Article 468 of
the CRR, amended
by the Regulation (EU)
2020/873, therefore
the Group’s
phased in
own funds
and capital
ratios reflect
the 60%
of unrealised
losses for
the period
1.1.2020 to
31.12.2022, accounted
for as
fair value
changes of debt instruments measured at
fair value through other comprehensive
income, corresponding to specific debt exposures, as
provided for in the said
article. The Group’s Common Equity
Tier 1 and Total
Capital Adequacy ratios, as if the temporary treatment of
the aforementioned unrealised losses had not
been applied, would be 15.8% % and 18.9% respectively.
d) The
Group’s
CET1 as
at 31
December 2022,
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 15.2% (31 December 2021: 12.7%).
e) The pro-forma Common Equity Tier 1 and Total
Capital Adequacy ratios as at 31 December 2022 with the completion of Project “Solar” (note 20) would be
16% and 19%, 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)
along with
the Regulation
No 575/2013/EU
(known as
CRR), as
they are
in force.
The above
Directive has
been
transposed into
Greek legislation
by Law 4261/2014
as in force.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
According to the
2021 SREP decision, for 2022,
the Group was required
to meet a Common Equity
Tier 1 Ratio of at
least 9.58% and
a Total
Capital Adequacy
Ratio of at
least 14.39%
(Overall Capital
Requirement or
OCR) including Combined
Buffer Requirement
of
3.39%, which is covered with CET1 capital and sits on top of the Total SREP Capital Requirement (TSCR). The ECB’s relief measures for
capital requirements, to address
the effects of Covid-19, ended at 31 December 2022.
The breakdown of the Group’s
CET1 and Total
Capital requirements is presented below.
31 December 2022
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)
0.14%
0.14%
Other systemic institutions buffer
(O-SII)
0.75%
0.75%
Overall Capital Requirement (OCR)
9.58%
14.39%
(1)
As of 1
st
of March 2022, the P2R is not applicable for the Bank in its separate financial statements.
According to
the 2022 SREP
decision, since January
2023 the P2R
for the
Group has been
reduced from
3.00% to 2.75%
in terms of
total capital (or from 1.69% to 1.55% in terms of CET1 capital), reflecting the improved Group’s financial position particularly in terms
of asset quality. Thus, for
the first quarter of 2023, the Group is required to meet a Common Equity Tier 1 Ratio of at least 9.75% and
a Total
Capital Adequacy Ratio
of at least
14.45% (Overall Capital
Requirements or
OCR) including Combined Buffer
Requirement of
3.70% (Capital conservation buffer of 2.50%, Countercyclical
capital buffer of 0.20% and Other Systemically
Important Institution (O-
SII) buffer of 1.00%).
Furthermore,
the Regulation
2020/873 (CRR
quick
fix) provides,
among others,
for
the 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 have recognized
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%.
Further disclosures regarding capital
adequacy in accordance with the Regulation 575/2013 are
provided in the Consolidated Pillar 3
Report on the Company’s website.
Minimum Requirements for Eligible Own Funds and Eligible Liabilities (MREL)
Under the Directive
2014/59 (Bank
Recovery and
Resolution Directive)
as in force,
which was
transposed into
the Greek legislation
pursuant to Law
4335/2015 as in force,
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
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
27.46% of its
total risk
weighted assets
(RWAs), including
a
fully-loaded combined buffer requirement (CBR) of 3.86%.
The final MREL
target is updated by the
SRB on an
annual basis. The
interim
binding MREL target, which is
applicable from 1 January 2022, stands
at 18.21% of RWAs,
including a CBR of 3.70%, while an interim
non-binding MREL target of 20.48%, including a CBR of 3.70%, applies from January
2023.
In
the
year
ended
31
December
2022,
in
the
context
of
the
implementation
of
its
medium-term
strategy
to
meet
its
MREL
requirements, the Bank proceeded with the issuance of an MREL-eligible senior preferred bond with a nominal value of € 500 million
and a
Tier 2
instrument of
€300 million
(note 34).
As at
31 December
2022, the
Bank’s
MREL ratio
at consolidated
level stands
at
23.07% of RWAs including profit for the year ended 31 December 2022 (31 December 2021: 18.47%), which is significantly above the
aforementioned interim MREL target
of 20.48%.
Post balance sheet event
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
In January 2023, the Bank
successfully completed the issue of
€ 500 million senior preferred
notes. The proceeds from
the issue will
support Eurobank Group’s strategy to
ensure ongoing compliance with its MREL requirement and will be used for Eurobank’s general
funding purposes (note 34).
.
2023 EU – wide stress test
.
In January 2023, the European Banking
Authority (EBA) launched the 2023
EU-wide stress test exercise
which is designed to provide
valuable
input for
assessing the
resilience
of the
European
banking sector
in the
current
uncertain
and changing
macroeconomic
environment.
This exercise is coordinated
by the EBA in cooperation
with the ECB and national supervisory authorities
and is conducted according
to the EBA’s
methodology. It
is carried out on the basis
of year-end 2022 figures
and assesses the performance
of EU banks under a
baseline and
adverse
macroeconomic
scenario,
covering
the period
from
2023 to
2025. The
baseline scenario
for
EU countries
is
based on the projections from the EU national central banks
of December 2022. The adverse scenario, although unlikely to
unfold, is
used to
assess the
resilience of
banks to
a hypothetical
severe scenario
of a
significant deterioration
in the
overall
outlook for
the
economy and financial markets in the next three years. The narrative depicts an adverse scenario related to a hypothetical worsening
of geopolitical
developments
leading to
a severe
decline in
GDP with
persistent
inflation and
high interest
rates.
In terms
of GDP
decline, the 2023 adverse scenario is the most severe used in the EU wide stress up to now. Eurobank Holdings Group is participating
in the EBA-led stress test.
In parallel, the
ECB will conduct
its own stress
test for
a number of medium
sized-
banks that it
supervises directly and
that are not
included in the EBA-led stress test sample.
The EBA
expects to
publish the
results
of the
exercise
at the
end of
July 2023.
The stress
test results
will be
used to
update each
bank’s
Pillar 2 Guidance
in the context
of the SREP,
while qualitative findings
on weaknesses in
banks’ stress
testing practices
could
also affect their
Pillar 2 Requirements.
.
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 consolidat
ing 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 all material risks it is exposed to, 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,
outlines the
Group’s
overall direction
regarding
risk and
capital
management issues,
the risk
management mission
and objectives,
risk definitions,
risk management
principles, 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.
The
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 the
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
context,
the
Bank
has
recognized
climate
change
risk
as
a
material
risk
and
based
on
its
supervisory
guidelines,
is in
the process
of
continuing
adapting
its
policies and
methodologies for
identifying
and monitoring
the
relevant risks (note 5.2.5).
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 in
line with
regulatory requirements and an
adequate and robust
risk appetite
framework.
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 a risk management framework
with appropriate methodologies, modelling tools, and data
sources, as
well as sufficient and competent staff to
identify, assess, monitor and mitigate risks.
Moreover, BRC is conferred with certain approval
authorities.
The BRC consists of five (5) 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 its main responsibility of the MRC
is to oversee the risk management framework of the Group. As part of its responsibilities, the MRC facilitates reporting to the BRC on
the range of risk-related topics under
its purview. The MRC
supports the Group Chief
Risk Officer to
identify material risks, to
promptly
escalate them
to the
BRC and
to ensure
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 identification, assessment,
monitoring, measurement and management of the risks that
the Group is exposed to. It comprises
of the Group Credit General Division (GCGD),
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 (GORS), the Group Model Validation
and Governance Sector (GMVGS), the Group Risk Management Strategy
Planning and
Operations Division
(GRMSPO), the
Supervisory Relations
and Resolution
Planning Sector
(SRRPS), the
Group Climate
Risk Division (GCRD)
and the Risk Analytics Division (RAD).
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
●
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 Operational targets
Ιn line with the regulatory framework and Single Supervisory Mechanism’s (SSM) requirements
for Non-Performing Exposures’ (NPE)
management, in
March 2023,
the Group
submitted its
NPE Management
Strategy
for 2023-2025,
along with
the annual
NPE stock
targets
at both
Bank and
Group level.
The plan
envisages the
decrease of
the Group’s
NPE ratio
at 5.2%
at the
end of
2023 and
at
4.5% in 2025.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
(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.
Group Credit General Division (GCGD)
Within an
environment
of increased
risk requirements,
Group Credit
General Division’s
(GCGD) mission
is to
safeguard
the Banks’
asset side,
by evaluating
credit risk
and making recommendations,
so that borrower’s
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
Household Lending (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,
Hotels & Leisure,
Project Finance, M&A
Financing) 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
(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 ex-Romania
portfolio (Perimeter B)
and portion of the loan portfolio
of Luxemburg (and London). Moreover,
the respective unit’s tasks and responsibilities
are highlighted below:
●
Participation
with voting
right in
all International
Committees
(Regional
and Special
Handling) and
Country Risk
Committees
(CRCs);
●
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 TAG;
●
Advice on best practices to the Credit Risk Units of International
Subsidiaries
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.
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,
in
relation
to
Borrowers
of
the
retail
credit
portfolio
(SBB
loans
and
Household
loans)
based
on
thresholds,
for
which
an
assessment by GCGD is required as per the
provisions of the relevant Credit Approval Procedures.
The main tasks of Retail Credit Risk
function are outlined below:
●
Assess credit
requests in
alignment with
the credit
risk assessment
criteria and
methodology provided
in the
appropriate
Credit Policy Manual.
●
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 CPM.
●
Transfer
of credit knowledge and expertise, as well as support to Network
officers regarding credit matters.
(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;
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
●
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;
●
monitor the proper EBA classifications 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 application of
Real Estate collaterals’ valuation, 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;
Group Credit Risk Capital Adequacy Control Sector
The
Group
Credit
Risk
Capital
Adequacy
Control
Sector
develops
and
maintains
the
credit
risk
assessment
models
for
the
loans
portfolio of the Group, performs capital adequacy calculations and assessment for the loan portfolios of the group, conducts internal
& external stress test exercises
as well as well as forecasting of risk parameters.
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);
●
manage the models
development, implementation, monitoring of the
internal risk based
models and IFRS9
models of Probability
of Default (PD), Loss Given Default (LGD)
and Exposure at Default (EAD) for evaluating
credit risk
●
measure and monitor the
risk parameters (PD,
LGD, EAD) for
the purposes of internal capital
adequacy assessment, 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;
●
prepare the credit risk analyses for Internal
Capital Adequacy Assessment (ICAAP)/ Pillar 2 purposes;
●
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), forbearance
reporting, vintage analysis and default
/ redefault statistics;;
●
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;
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
●
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.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
●
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
company'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,
including the
company’s
transaction behavior towards the Bank, 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.
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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
●
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.
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.
Notes to the Consolidated Financial Statements
.
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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.
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 of the Bank
of Greece. The
index has been
created by
the Real Estate
Market Analysis
Section of BoG using
detailed information
collected from
all Credit
Institutions
and Real
Estate
Investment
Companies (REIC)
operating
in Greece.
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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
5.2.1.1 Maximum exposure to credit
risk before collateral held
2022
2021
€ million
€ million
Credit risk exposures relating to on-balance sheet assets
are as
follows:
Due from credit institutions
1,330
2,511
Less: Impairment allowance
(1)
1,329
(1)
2,510
Debt securities held for trading
87
69
Derivative financial instruments
1,185
1,949
Loans and advances to customers at
amortised cost:
- Wholesale lending⁽¹⁾
26,054
23,716
- Mortgage lending
10,201
10,105
- Consumer lending
3,353
3,242
- Small business lending
3,842
3,753
Less: Impairment allowance
(1,626)
41,824
(1,872)
38,943
Fair value changes of loans in portfolio hedging of
interest rate risk
(163)
-
Loans and advances to customers measured
at FVTPL
16
23
Investment securities:
- Debt securities measured at amortised cost
9,214
4,672
Less: Impairment allowance
(22)
9,192
(6)
4,666
Debt securities measured at FVOCI
3,828
6,509
Investment securities at FVTPL
241
141
Other financial assets⁽²⁾
202
190
Less: Impairment allowance
(23)
179
(28)
162
Credit risk exposures relating to off-balance
sheet items (note 42):
- Loan commitments
7,611
5,139
- Financial guarantee contracts and
other commitments
2,860
1,702
Total
68,189
61,814
(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 2022 and
31 December 2021 respectively,
without taking
account
of any
collateral
held or
other credit
enhancements
that
do not
qualify for
offset
in the
Group's
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 € 3.7 billion (2021: € 3.6 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
(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’.
From 1 January 2021 onwards, 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.
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.
The Group’s accounting
policy for impairment of financial assets is set out in note 2.2.13.
Quantitative information
The
following
quantitative
analysis
presents
information
about
the
total
gross
carrying
amount
of
loans
and
advances
including
securitization
notes
issued
by
special
purpose
entities
established
by
the
Group,
and
the
nominal
amount
of
credit
related
commitments, that are
classified as non-impaired (stage
1 and stage
2) and those classified as
credit-impaired (stage
3 and POCI). It
also presents
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
which is
capped
to
the respective
gross
loan
amount. In particular,
the following four tables for 2022 and
2021 provide:
●
a summary of the credit quality of lending exposures and credit related
commitments, presenting product line, stage
allocation,
respective impairment allowance and collateral
held
●
the classification of lending exposures and credit related
commitments into the internal credit rating
categories,
●
the movement of the gross carrying amounts for
loans and advances to customers by product line and
stage,
●
the ageing analysis of credit impaired (Stage 3 and
POCI) loans and advances to customers
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.
.
Notes to the Consolidated Financial Statements
.
64
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31 December 2022 Consolidated Financial Statements
The following tables present
summary information about the
credit quality (stage analysis,
impairment allowance and
collateral held per product
line) of loans
and advances to
customers carried at amortised
cost and
credit related
commitments.
In addition,
they include the
fair value
changes of
loans in
portfolio hedging
of interest
rate risk
and the loans
and advances
to customers
carried at
FVTPL for
the
purpose of reconciliation with the total carrying amount
of loan and advances to customers:
.
31 December 2022
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
12,169
3,992
105
1,131
17,396
(81)
(280)
(73)
(571)
16,392
11,598
- Mortgage
6,832
2,825
50
495
10,201
(21)
(160)
(41)
(188)
9,792
Value of collateral
6,563
2,378
22
385
9,348
- Consumer
2,028
357
0
214
2,599
(31)
(42)
(0)
(149)
2,376
Value of collateral
125
2
0
3
130
- Credit card
642
70
0
42
755
(6)
(6)
(0)
(37)
705
Value of collateral
0
0
0
0
0
- Small business
2,668
740
54
380
3,842
(23)
(72)
(32)
(197)
3,518
Value of collateral
1,347
550
25
198
2,120
Wholesale Lending
23,424
1,581
841
182
26,028
(68)
(75)
(368)
(109)
25,408
16,836
- Large corporate
14,865
794
284
19
15,961
(40)
(27)
(139)
(11)
15,744
Value of collateral
7,890
551
165
11
8,618
- SMEs
3,658
787
557
163
5,166
(28)
(48)
(228)
(99)
4,763
Value of collateral
2,238
601
387
91
3,317
- Securitized notes⁽²⁾
4,901
-
-
-
4,901
(0)
-
-
-
4,901
Value of collateral
4,901
-
-
-
4,901
Public Sector
25
0
1
0
26
(0)
(0)
(1)
(0)
25
0
- Greece
25
-
-
0
25
(0)
-
-
(0)
24
Value of collateral
0
-
-
0
0
- Other countries
0
0
1
-
1
(0)
(0)
(1)
-
1
Value of collateral
0
-
-
-
0
Fair value changes of loans in
portfolio hedging of interest rate
risk
(163)
Loans and advances to customers
at FVTPL
16
16
Total
35,618
5,573
946
1,313
43,450
(149)
(355)
(441)
(680)
41,677
28,450
Total value of collateral
23,065
4,082
599
688
Credit related commitments
10,129
289
36
17
10,471
(20)
(6)
(24)
(7)
Loan commitments
7,429
178
3
1
7,611
(12)
(5)
(1)
(0)
Financial guarantee contracts and
other commitments
2,701
110
33
16
2,860
(8)
(2)
(23)
(7)
Value of collateral
1,113
56
9
5
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
(1)
As at 31 December 2022, total gross carrying amount of credit impaired
loans includes POCI loans of € 43 million and carry an impairment
allowance of € 6.5 million
(2021: € 44 million gross carrying amount, of which € 9.3 million
arose from
the merger of Eurobank A.D. Beograd with Direktna Banka a.d. and € 6.4 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
.
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31 December 2022 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 2022
31 December 2021
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%
6,460
1,167
-
7,627
5,738
417
-
6,155
2.5%<=PD<4%
265
284
-
549
554
465
-
1,019
4%<=PD<10%
66
437
-
502
504
1,134
-
1,638
10%<=PD<16%
20
553
-
573
39
282
-
321
16%<=PD<99.99%
21
384
-
405
37
436
-
473
100%
-
-
545
545
-
-
498
498
- Consumer
PD<2.5%
287
8
-
294
131
13
-
144
2.5%<=PD<4%
707
34
-
742
805
22
-
827
4%<=PD<10%
964
133
-
1,097
903
83
-
987
10%<=PD<16%
46
11
-
57
50
12
-
62
16%<=PD<99.99%
23
172
-
194
15
137
-
152
100%
-
-
214
214
-
-
219
219
- Credit card
PD<2.5%
372
5
-
377
429
4
-
433
2.5%<=PD<4%
263
41
-
304
233
27
-
260
4%<=PD<10%
6
4
-
11
4
5
-
9
10%<=PD<16%
0
5
-
5
0
1
-
1
16%<=PD<99.99%
0
15
-
15
0
8
-
9
100%
-
-
42
42
-
-
139
139
- Small business
PD<2.5%
1,328
48
-
1,376
1,413
26
-
1,439
2.5%<=PD<4%
498
63
-
561
232
12
-
244
4%<=PD<10%
652
47
-
699
657
81
-
738
10%<=PD<16%
47
165
-
213
78
137
-
214
16%<=PD<99.99%
143
417
-
559
161
488
-
649
100%
-
-
434
434
-
-
469
469
Wholesale Lending
- Large corporate
Strong
10,572
0
-
10,572
7,417
16
-
7,434
Satisfactory
4,127
432
-
4,559
4,070
427
-
4,497
Watch list
165
362
-
527
206
283
-
489
Impaired (Defaulted)
-
-
303
303
-
-
411
411
- SMEs
Strong
1,090
9
-
1,098
1,049
20
-
1,069
Satisfactory
2,318
321
-
2,639
2,399
356
-
2,755
Watch list
250
458
-
708
316
565
-
882
Impaired (Defaulted)
-
-
720
720
-
-
1,039
1,039
- Securitized notes
Strong
4,901
-
-
4,901
5,106
-
-
5,106
Public Sector
All countries
Strong
25
-
-
25
22
-
-
22
Satisfactory
-
-
-
-
3
0
-
3
Watch list
-
0
-
0
6
2
-
8
Impaired (Defaulted)
-
-
1
1
-
-
2
2
Total
35,618
5,573
2,259
43,450
32,578
5,461
2,776
40,815
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
31 December 2022
31 December 2021
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%
1,455
14
-
1,469
1,479
5
-
1,484
2.5%<=PD<4%
1,025
62
-
1,088
845
45
-
890
4%<=PD<10%
541
30
-
571
415
96
-
511
10%<=PD<16%
33
3
-
37
39
10
-
49
16%<=PD<99.99%
1
13
-
14
0
6
-
6
100%
-
-
1
1
-
-
2
2
Financial guarantee
contracts and other
commitments
PD<2.5%
81
0
-
81
92
-
-
92
2.5%<=PD<4%
77
1
-
78
39
-
-
39
4%<=PD<10%
22
0
-
22
11
0
-
11
10%<=PD<16%
-
0
-
0
-
0
-
0
16%<=PD<99.99%
0
2
-
2
1
0
-
1
100%
-
-
1
1
-
-
1
1
Wholesale Lending
Loan commitments
Strong
3,126
0
-
3,126
1,145
34
-
1,179
Satisfactory
1,241
37
-
1,278
902
58
-
960
Watch list
6
18
-
24
47
9
-
56
Impaired
(Defaulted)
-
-
3
3
-
-
3
3
Financial guarantee
contracts and other
commitments
Strong
1,940
10
-
1,950
883
1
-
884
Satisfactory
552
36
-
588
466
64
-
530
Watch list
28
62
-
90
34
65
-
99
Impaired
(Defaulted)
-
-
48
48
-
-
45
45
Total
10,129
289
53
10,471
6,397
393
51
6,841
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
Notes to the Consolidated Financial Statements
.
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31 December 2022 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
2022 to 31 December 2022 and 1 January 2021 to 31 December 2021:
31 December 2022
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
20,594
1,670
1,452
6,871
2,735
498
2,572
311
358
2,540
744
469
40,815
New loans and advances
originated or purchased
6,986
-
8
809
-
-
840
-
-
725
-
-
9,368
Transfers
between stages
-to 12-month ECL
576
(575)
(1)
333
(318)
(15)
92
(82)
(10)
154
(143)
(12)
-
-to lifetime ECL
(802)
819
(17)
(506)
611
(105)
(272)
303
(31)
(183)
235
(52)
-
-to lifetime ECL credit-
impaired loans
(41)
(85)
125
(60)
(151)
210
(71)
(44)
115
(38)
(75)
113
-
Loans and advances
derecognised/ reclassified as
held for sale during the year
(2)
(2)
(276)
(2)
-
(0)
(0)
-
-
-
-
(1)
(282)
Amounts written-off⁽¹⁾
-
-
(87)
-
-
(10)
-
-
(141)
-
-
(53)
(290)
Repayments
(4,060)
(293)
(184)
(820)
(179)
(45)
(507)
(87)
(61)
(615)
(70)
(38)
(6,959)
Foreign exchange differences
and other movements
198
46
2
204
127
11
15
26
26
84
49
8
798
Gross Carrying amount at 31
December
23,448
1,581
1,024
6,832
2,825
545
2,669
427
257
2,668
740
434
43,450
Impairment allowance
(68)
(75)
(478)
(21)
(160)
(229)
(37)
(48)
(186)
(23)
(72)
(229)
(1,626)
Carrying amount at 31
December
23,380
1,506
546
6,810
2,665
316
2,633
379
70
2,645
668
205
41,824
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
31 December 2021⁽²⁾
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
4,978
-
-
642
-
-
663
-
-
558
-
-
6,840
Arising from acquisition
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
276
46
17
187
115
28
34
19
37
1
41
13
814
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
(1)
The contractual amount outstanding on lending exposures that were written off during the year ended 31 December 2022 and that are
still subject to enforcement activity is € 111 million (2021: € 217 million).
(2)
Comparative information has been adjusted in order to align with current year’s presentation.
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 due to a) substantial
modifications of the loans’ contractual terms,
b) securitization and sale transactions, c) debt
to equity
transactions and those that have been reclassified as held for sale during the year
(notes 20 and 30).
Notes to the Consolidated Financial Statements
.
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31 December 2022 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 2022
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
192
68
7
120
138
308
0
832
90 to 179 days
38
23
7
19
16
31
-
133
180 to 360 days
82
38
9
47
1
52
-
228
more than 360 days
233
86
20
248
149
329
1
1,066
Total gross carrying
amount
545
214
42
434
303
720
1
2,259
Impairment allowance
(229)
(149)
(37)
(229)
(150)
(327)
(1)
(1,121)
Carrying amount
316
65
5
205
153
393
0
1,138
Value of Collateral
407
3
0
223
177
478
0
1,287
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
Note: As at 31 December 2022, total gross carrying amount of credit impaired loans includes POCI loans
of € 43 million (2021: € 44 million).
(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.
Notes to the Consolidated Financial Statements
.
71
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31 December 2022 Consolidated Financial Statements
The LTV ratio
of the mortgage portfolio is presented below:
2022
2021
€ million
€ million
Mortgages
Less than 50%
2,881
2,630
50%-70%
2,373
2,100
71%-80%
1,524
1,508
81%-90%
1,042
1,010
91%-100%
825
994
101%-120%
604
680
121%-150%
437
516
Greater than 150%
516
666
Total exposure
10,201
10,105
Average LTV
57.30%
61.82%
The breakdown of collateral
and guarantees for loans and advances to
customers at amortised cost is presented
below:
31 December 2022
Value of collateral received
Guarantees
received⁽¹⁾
Real Estate
Financial
Other
Total
€ million
€ million
€ million
€ million
€ million
Retail Lending
10,760
443
396
11,598
721
Wholesale Lending
5,544
923
10,368
16,836
744
Public sector
0
0
0
0
-
Total
16,304
1,366
10,764
28,434
1,465
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
(1)
In addition to the above presented guarantees, from 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
€ 1.4 billion
as at 31
December 2022 (31
December 2021: €
1.7 billion) and
from
December 2022, into the financial guarantees contract ‘Wave III’ related to the portfolio of performing shipping loans of € 1.6 billion ($ 1.7 billion) (note 20).
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).
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
2022, the carrying amount of repossessed assets
which are included in “Other assets”
amounted to € 559 million
(31 December 2021: €
572 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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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).
2022
2021
Real estate
Real estate
Residential
Commercial
Total
Residential
Commercial
Total
€ million
€ million
€ million
€ million
€ million
€ million
Balance at 1 January
209
362
571
208
377
585
Additions⁽¹⁾
14
22
36
12
23
35
Transfers
to investment property
(3)
(8)
(11)
(1)
(2)
(3)
Disposals
(4)
(22)
(26)
(4)
(12)
(16)
Valuation losses
(4)
(9)
(13)
(2)
(3)
(5)
Held for Sale (note 30 )
-
-
-
(3)
(21)
(24)
Other
0
(0)
0
(1)
-
(1)
Balance at 31 December
212
345
557
209
362
571
(1)
The carrying amount
of the real
estate properties
obtained during the
year and held
at the year
ended 31
December 2022
amounted to €
32 million
(31
December 2021: € 34 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
Group during the year
has not obtained
other types of collaterals as a result of repossession
(31 December 2021: € 2.9 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 2022 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 2022
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
8,547
3,571
1,024
(807)
3,614
420
210
(197)
7
0
1
(1)
-Mortgage
4,978
2,677
463
(337)
1,848
147
81
(72)
6
0
1
(1)
-Consumer
835
177
126
(141)
1,191
180
88
(82)
1
0
0
(0)
-Credit card
543
51
36
(43)
98
19
6
(6)
0
0
0
(0)
-Small business
2,191
665
399
(286)
477
74
35
(38)
0
-
-
(0)
Wholesale Lending
10,579
1,001
804
(479)
9,676
572
207
(131)
3,169
8
12
(11)
-Commerce and services⁽²⁾
4,135
331
393
(242)
6,215
106
62
(47)
535
0
6
(6)
-Manufacturing
2,658
292
130
(96)
969
39
26
(16)
5
-
-
(0)
-Shipping
8
2
44
(44)
241
-
15
(16)
2,455
-
6
(5)
-Construction
1,279
51
57
(45)
616
62
17
(14)
65
8
-
(0)
-Tourism
962
308
176
(48)
228
118
44
(2)
-
-
-
-
-Energy
1,474
1
2
(3)
234
31
16
(8)
-
-
-
-
-Other
64
17
1
(0)
1,174
215
28
(28)
109
-
-
(0)
Public Sector
25
-
0
(0)
0
0
1
(1)
-
-
-
-
Total
19,151
4,572
1,829
(1,286)
13,291
992
418
(328)
3,176
9
13
(11)
Credit related
Commitments
7,352
175
48
(47)
2,489
114
4
(10)
288
0
0
(0)
-Loan commitments
5,493
109
2
(12)
1,654
70
2
(6)
281
0
0
(0)
-Financial guarantee
contracts and other
commitments
1,859
66
46
(35)
835
44
2
(4)
7
-
0
(0)
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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)
(1)
Includes POCI loans of € 8.3 million held by operations in Greece, € 34.3 million
held by operations in Rest of Europe and € 0.1 million held by operations in Other Countries (2021: € 44.1 million in
Rest of Europe).
(2)
The operations in Rest of Europe include € 4,901 million related to the notes of the Pillar, Cairo and Mexico securitizations (2021: € 5,106 million in Rest of Europe related to the notes of the Pillar, Cairo and Mexico securitizations).
As at 31 December 2022, the carrying
amount of Group's loans measured
at FVTPL of € 16 million (2021: €
23 million) was included in Wholesale
lending portfolio, which was
held by operations in Greece
(2021: € 20 million were held by operations in Greece and
€ 3.5 million were held by operations in Rest
of Europe).
Notes to the Consolidated Financial Statements
.
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31 December 2022 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
.
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31 December 2022 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 2022, equity positions acquired by the Group
and held as of 31 December 2022 relate to the participation
of 3%
in Kalogirou
S.A. for
trade of
footwear,
apparel and
leather goods
for a
nil consideration.
Similarly in
2021, equity
positions
acquired by the Group and
held as of
31 December 2021
related 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.
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 2022, the carrying amount of Group's forborne
loans measured at FVTPL was nil (2021: € 3.5 million).
Notes to the Consolidated Financial Statements
.
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31 December 2022 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:
2022
2021
€ million
€ million
Forbearance measures:
Split balance
234
423
Loan term extension
1,044
1,468
Arrears capitalisation
137
183
Reduced payment below interest owed
71
112
Interest rate reduction
136
237
Reduced payment above interest owed
111
121
Arrears repayment plan
109
163
Interest only
35
33
Grace period
55
77
Debt/equity swaps
8
16
Partial debt forgiveness/Write-down
1
27
Operational restructuring
14
10
Other
54
75
Total gross carrying
amount
2,012
2,946
Less: cumulative impairment allowance
(401)
(465)
Total carrying amount
1,611
2,481
The following tables present a summary of the credit
quality of forborne loans and advances to customers:
31 December 2022
Total loans &
advances at
amortised
cost
Forborne
loans &
advances
% of Forborne
loans &
advances
€ million
€ million
Gross carrying amounts:
12-month ECL-Stage 1
35,618
-
-
Lifetime ECL-Stage 2
5,573
1,138
20.4
Lifetime ECL-Stage 3 and POCI
2,259
874
38.7
Total Gross Amount
43,450
2,012
4.6
Cumulative ECL Loss allowance:
-
-
12-month ECL-Stage 1
(149)
-
Lifetime ECL-Stage 2
(355)
(80)
Lifetime ECL-Stage 3 and POCI of which:
(1,121)
(321)
- Individually assessed
(441)
(165)
- Collectively assessed
(680)
(156)
Total carrying amount
41,824
1,611
3.9
Collateral received
28,434
1,527
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
The following table presents the movement
of forborne loans and advances:
2022
2021
€ million
€ million
Gross carrying amount at 1 January
2,946
4,826
Forbearance measures in the year
299
481
Forborne loans derecognised/ reclassified as held
for sale during the year ⁽¹⁾
(56)
(1,128)
Write-offs of forborne loans
(22)
(33)
Repayment of loans
(233)
(260)
Loans & advances that exited forbearance status
⁽²⁾
(965)
(992)
Other
42
53
Less: cumulative impairment allowance
(401)
(465)
Carrying amount at 31 December
1,611
2,481
(1)
“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.
(2)
In 2022, an amount of € 88 million loans and advances that exited forbearance status refers to loans that were denounced (2021: € 48 million).
The following table presents the Group’s
exposure to forborne loans and advances by
product line:
2022
2021
€ million
€ million
Retail Lending
1,153
1,985
- Mortgage
751
1,358
- Consumer
106
123
- Credit card
16
47
- Small business
280
456
Wholesale Lending
859
961
-Large corporate
277
295
-SMEs
582
667
Total gross carrying
amount
2,012
2,946
Less: cumulative impairment allowance
(401)
(465)
Total carrying amount
1,611
2,481
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
The following table presents the Group’s
exposure to forborne loans and advances by
geographical region:
2022
2021
€ million
€ million
Greece
1,638
2,591
Rest of Europe
374
351
Other countries
0
5
Total gross carrying
amount
2,012
2,946
Less: cumulative impairment allowance
(401)
(465)
Total carrying amount
1,611
2,481
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.
2022
2021
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
449
745
Modification gain / (loss)
2
18
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
370
614
In
the
year
ended
31
December
2022,
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
€ 371 million (2021: € 504 million).
5.2.1.3 Debt Securities
The following
tables present
an analysis
of debt
securities by
external
credit rating
agency designation
at 31
December 2022
and
2021, based on Moody's ratings or their equivalent:
31 December 2022
12-month ECL-
Stage 1
Lifetime ECL-
Stage 2
Lifetime ECL-
Stage 3
Total
€ million
€ million
€ million
€ million
Debt securities at amortised cost
Aaa
2,617
-
-
2,617
Aa1 to Aa3
140
-
-
140
A1 to A3
133
-
-
133
Lower than A3
6,211
6
7
6,224
Unrated
74
-
26
100
Gross Carrying Amount
9,175
6
33
9,214
Impairment Allowance
(12)
(0)
(10)
(22)
Carrying Amount
9,163
6
23
9,192
Debt securities at FVOCI
Aaa
339
-
-
339
Aa1 to Aa3
212
-
-
212
A1 to A3
398
-
-
398
Lower than A3
2,605
121
-
2,726
Unrated
58
-
-
58
Carrying Amount
3,612
121
-
3,733
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 2022
Debt securities
held for trading
Debt securities
measured at
FVTPL
€ million
€ million
Debt securities at FVTPL
Lower than A3
86
0
Unrated
1
-
Carrying Amount
87
0
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
The carrying amount of debt securities
rated lower than A3 includes: a) €
5,413 million related to Greek sovereign debt (2021:
€ 5,322
million), b) €
921 million related
to Eurozone
members sovereign
debt (2021: €
1,246 million), c)
€ 841 million
related to
sovereign
debt
issued
mainly
by
European
Union
members
and
candidate
members
(2021:
€
763
million)
of
which
€ 517
million
issued
by
countries of Group’s presence (Bulgaria and Serbia) (2021: € 460 million)
and d) € 1,846 million
corporate and banks’ securities (2021:
€ 1,568 million) of which € 958 million refer to Greek issuers (2021:
€ 726 million) and € 701 million to other European issuers (2021:
€ 689
million). The
carrying amount
of unrated
debt securities
of €
152 million
(2021: €
128 million)
comprise €
133 million
Greek
corporate bonds (2021: € 128 million) and € 19 million Russian corporate
bonds (see below).
Following the
significant worldwide
restrictions and
sanctions introduced
against Russia,
resulting in
significant uncertainty
on the
ability of the Russian debt issuers to repay their obligations on foreign
currency-denominated bonds, as of 31 March 2022 the Group
has classified its Russian debt exposures as credit impaired. Following the repayment of a Russian government bond of carrying value
€
12
million
in
April
2022,
the
carrying
value
of
the
said
debt
exposures
was
€ 19
million
as
at
31 December
2022,
including
an
impairment allowance of € 7 million.
Notes to the Consolidated Financial Statements
.
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The following tables present the Group's exposure in debt securities, as categorized by stage, counterparty's geographical
region and
industry sector:
31 December 2022
Greece
Other European countries
Other countries
12-month
ECL-Stage 1
Lifetime ECL-
Stage 3
12-month
ECL-Stage 1
Lifetime ECL-
Stage 2
Lifetime ECL-
Stage 3
12-month
ECL-Stage 1
Lifetime ECL-
Stage 2
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Debt securities at amortised cost
Sovereign
4,379
-
756
-
-
1,165
-
6,300
Banks
736
-
276
-
-
-
-
1,012
Corporate
241
7
989
3
26
633
3
1,902
Gross Carrying Amount
5,356
7
2,021
3
26
1,798
3
9,214
Impairment Allowance
(9)
(3)
(3)
(0)
(7)
(0)
(0)
(22)
Net Carrying Amount
5,347
4
2,018
3
19
1,798
3
9,192
Debt securities at FVOCI
Sovereign
976
-
1,046
94
-
451
-
2,567
Banks
12
-
209
7
-
-
-
228
Corporate
163
-
475
15
-
280
5
938
Carrying Amount
1,151
-
1,730
116
-
731
5
3,733
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 2022 Consolidated Financial Statements
31 December 2022
Greece
Other
European
countries
Other
countries
Total
€ million
€ million
€ million
€ million
Debt securities at FVTPL
Corporate
0
-
-
0
Carrying Amount
0
-
-
0
Debt securities held for trading
Sovereign
63
23
-
86
Corporate
1
-
-
1
Carrying Amount
64
23
-
87
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
5.2.1.4 Offsetting of financial assets and financial liabilities
Financial assets and
financial liabilities are
offset according
to IAS 32
‘Financial Instruments
and the net
amount is presented
in the
balance sheet when, there is a legally enforceable right
to set off the recognized amounts and there
is an intention to settle on a net
basis, or to realize the asset and settle the liability simultaneously (the offsetting criteria), as also set out in Group's accounting policy
2.2.4.
In 2022,
following the
change in
the volume
and market
terms of
the Group’s
positions in
CCP (Central
Counterparty) cleared
OTC
derivative financial instruments, there was a
significant increase in the
balances of the
related cash accounts used for variation margin
purposes reaching ca. € 1 bn liability, as at 31 December 2022 (2021: ca. € 0.2 billion asset). The Group
has assessed the terms of the
clearing agreements
for these
derivatives entered
into with
Clearing Members,
as at 31
December 2022. The
Group has
concluded
that the offsetting
criteria are met,
as at 31 December
2022, in respect
of the cash
accounts used for
variation margin purposes
for
such derivatives,
which are
also used
for the
settlement
of all
payments
thereunder,
and accordingly
derivative
assets of
€ 1,376
million and derivative liabilities of
€ 444 million (note
19) were offset against € 932 million
cash collateral received (note 32). Financial
instruments
that
meet
the
offsetting
criteria
include
also
the
eligible
repos
and
reverse
repos
under
global
master
repurchase
agreements (GMRAs).
Financial instruments under
master netting
arrangements and
similar agreements that
do not meet the
criteria for offsetting
in the
balance
sheet
include
derivatives
(bilateral
agreements)
as
well
as
repos
and
reverse
repos,
for
which
a)
the
right
of
set-off
is
enforceable
only
following
an
event
of
default,
insolvency
or
bankruptcy
of
the
Group
or
the
counterparties
or
following
other
predetermined events and/or b)
the Group and its counterparties may not intend to settle
on a net basis or to realize the assets and
settle the liabilities simultaneously.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
The following tables
present financial assets
and financial liabilities that
meet the criteria for
offsetting and thus
are presented
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 offsetting
criteria mentioned above
are not satisfied.
In respect of
the latter,
the Group
may receive and
provide
collateral
in
the
form
of
marketable
securities
and
cash
that
are
included
in
the
tables
below
under
columns
‘financial
instruments’ and ‘cash collateral’.
31 December 2022
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
116
(114)
2
(2)
-
-
Derivative financial instruments
2,540
(1,376)
1,164
(685)
(232)
247
Other financial assets
9
(9)
-
-
-
-
Total
2,665
(1,499)
1,166
(687)
(232)
247
31 December 2022
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
2,043
(444)
1,599
(685)
(237)
677
Repurchase agreements with
banks
877
(114)
763
(763)
-
-
Other financial liabilities
9
(9)
-
-
-
-
Deposits from banks received
as collateral
1,226
(932)
294
(232)
-
62
Total
4,155
(1,499)
2,656
(1,680)
(237)
739
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
Other financial assets
13
(13)
-
-
-
-
Total
2,577
(604)
1,973
(1,834)
(40)
99
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
Derivative
financial assets
and liabilities
not under
master
netting arrangements
and similar
agreements
of carrying
value of
€ 21
million and € 62 million, respectively,
(2021: € 7 million and € 8 million, respectively) are not presented
in the above tables.
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.
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 respon
sible 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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.
(i) VaR
summary for 2022 and 2021
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.
The perimeter of the VaR
analysis 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
VaR by risk type - Greece and International
Subsidiaries
(1)
.
2022
(Average)
2022
2021
(Average)
2021
€ million
€ million
€ million
€ million
Interest Rate Risk
22
9
14
14
Foreign Exchange Risk
0
0
1
1
Equities Risk
2
4
0
0
Total VaR
23
11
14
14
(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 2022 is materially increased, as compared to the average VaR of 2021, due to
geopolitical tension
(i.e. war in Ukraine) and the relevant extreme volatility observed in the markets
(especially between March and May), along with the
market perception regarding Central Banks’ monetary policy in the following years. Equity Risk Var is also increased due to the Bank’s
investment in Hellenic Bank which is in line with the Group’s
strategy to further strengthen
its presence in its core markets.
(ii) Interest rate gap and sensitivity
The following
table provides
the interest
rate repricing
gap of
the Group,
which analyses
the structure
of interest
rate mismatches
within the balance sheet. The Group’s
financial assets/liabilities are included at their notional/outstanding
amounts and categorized
based on either (i) the next contractual repricing date if floating rate
or (ii) the maturity/call date (whichever is first) if fixed rate.
The
below analysis provides an approximation of the interest rate risk exposure since transactions with different
duration are aggregated
together per time bucket. The interest
rate gap analysis is prepared
from 31 December 2022 onwards.
.
31 December 2022
less than 1
month
1-3 months
3-12 months
1-5
years
More than 5
years
€ million
€ million
€ million
€ million
€ million
Balances with central banks
14,481
-
-
-
-
Due to credit institutions
1,012
64
27
-
-
Debt securities⁽¹⁾
390
215
371
5,513
5,797
Loans and advances to customers
18,658
10,244
8,034
2,536
2,538
34,541
10,523
8,432
8,049
8,335
Due to central banks
(8,872)
-
-
-
-
Due to credit institutions
(575)
(968)
(299)
(1)
(14)
Due to customers
(48,934)
(3,754)
(3,991)
(336)
(2)
Debt securities in issue
(2)
-
(5)
(1,916)
(1,700)
(58,383)
(4,721)
(4,295)
(2,253)
(1,716)
Derivative financial instruments
4,844
(155)
(471)
69
(4,360)
Interest rate gap
(18,998)
5,647
3,666
5,865
2,259
(1)
Including short positions in debt securities (note 35).
The Group performs a sensitivity analysis to assess
the impact on net interest
income (NII) and on other
comprehensive income (OCI),
to a hypothetical change in the market
interest rates.
.
Notes to the Consolidated Financial Statements
.
87
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31 December 2022 Consolidated Financial Statements
The impact
on NII is
calculated under
the scenario of
an instantaneous
parallel shift
of all interest
rates by
+/- 100bps,
for a 1-year
period, assuming a static balance sheet approach. As at 31 December 2022 the impact on NII, under the scenario of a parallel shift
in
the yield curves, stands at € 232 million (+100bps) and €-279 million (-100bps).
The
impact on
OCI is
calculated
as the
fair
value
movement
of
all financial
assets measured
at
FVOCI,
net of
hedging
and of
any
hedging instruments
designated in
qualifying cash flow
hedge relationships.
As at 31
December 2022 the
impact on OCI,
under the
scenario of a parallel shift in the yield curves, stands at €-49 million (+100bps) and
€ 51 million (-100bps).
.
(iii) Foreign exchange risk
The following tables present the Group’s
exposure to foreign currency
exchange risk as at 31 December 2022 and 2021:
31 December 2022
USD
CHF
RON
RSD
BGN
OTHER
EUR
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
ASSETS
Cash and balances with
central banks
29
4
0
375
472
9
14,105
14,994
Due from credit
institutions
330
20
33
0
0
63
883
1,329
Securities held for trading
0
-
-
-
18
0
116
134
Derivative financial
instruments
23
0
0
0
0
0
1,162
1,185
Loans and advances to
customers
3,068
1,999
8
616
3,975
555
31,456
41,677
Investment securities
1,743
-
-
99
81
264
11,074
13,261
Other assets⁽¹⁾
16
75
5
99
213
6
8,382
8,796
Assets of disposal groups
classified as held for sale
(note
30)
-
-
-
-
-
-
84
84
Total Assets
5,209
2,098
46
1,189
4,759
897
67,262
81,460
LIABILITIES
Due to central banks and
credit institutions
200
0
0
45
8
9
10,326
10,588
Derivative financial
instruments
21
1
0
129
0
1
1,509
1,661
Due to customers
5,929
95
1
666
4,313
604
45,631
57,239
Debt securities in issue
73
73
-
-
-
5
3,401
3,552
Other liabilities
25
1
18
20
51
3
1,583
1,701
Liabilities of disposal
group classified as held for
sale (note
30)
-
-
-
-
-
-
1
1
Total Liabilities
6,248
170
19
860
4,372
622
62,451
74,742
Net on balance sheet
position
(1,039)
1,928
27
329
387
275
4,811
6,718
Derivative forward
foreign exchange position
778
(1,927)
(15)
(54)
(0)
(281)
819
(680)
Total Foreign
Exchange
Position
(261)
1
12
275
387
(6)
5,630
6,038
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
(1)
Other assets include Investments in associates and joint ventures, Property and equipment, Investment
property, Intangible assets, Deferred tax
assets and
Other assets.
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 2022 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,
taking into account the latest funding plan
and for the daily management of the Group’s
liquidity;
-
Group Market
and Counterparty Risk Sector
is responsible for
measuring, controlling, monitoring
and reporting the
liquidity risk
of the Group.
The main items related to liquidity risk that are
monitored on a periodic basis are summarized as follows:
●
The analysis of liquidity buffer held on Group level
per asset type and per subsidiary;
●
The Liquidity Coverage Ratio (LCR) both in solo
and group level;
●
The Net Stable Funding Ratio (NSFR) both in solo and group level;
●
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 Additional Liquidity Monitoring Metrics (ALMM) both in solo and group level;
●
The Asset Encumbrance (AE) both in solo and group level;
●
Monitoring and implementation of the funding plan.
Notes to the Consolidated Financial Statements
.
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31 December 2022 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 2022
and 2021,
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 2022
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
14,994
-
-
-
14,994
- Due from credit institutions
398
28
-
167
593
- Loans and advances to customers
3,164
1,271
3,549
33,693
41,677
- Debt Securities
115
137
349
12,411
13,012
- Equity securities
-
-
-
383
383
- Derivative financial instruments
-
-
-
9
9
- Other assets⁽¹⁾
62
16
8
8,710
8,796
- Assets of disposal groups classified as held for sale (note 30)
-
-
84
-
84
Total
18,733
1,452
3,990
55,373
79,548
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
-
6
140
-
146
Total
17,231
1,001
4,618
51,271
74,121
(1)
Other assets include Investments in associates and joint ventures, Property 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 € 20.1 billion
as at
31 December
2022 (2021:
€ 16.9
billion). This
increase is
attributed
mainly to:
i) a
large inflow
of customer
deposits (annual
increase by € 4 billion)
and ii) new own debt issuances
(annual increase by € 1.1 billion).
In addition, the Group holds other
types of
liquid assets, as defined by the regulator,
amounting to € 7.5 billion (cash value) (2021: € 7.5 billion). It should be noted that a part of
the ECB available
collateral of €
3.8 billion (cash value)
(2021: € 1.3 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 2022 Consolidated Financial Statements
Maturity analysis of liabilities
The amounts disclosed
in the
tables below are
the contractual undiscounted cash
flows for the
years 2022 and
2021. 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
at maturity and they will
not be rolled over
(e.g. 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 2022
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
996
812
4,815
4,379
11,002
- Due to customers
49,755
3,220
4,038
250
57,263
- Debt securities in issue
37
7
141
4,395
4,580
- Lease liabilities
3
6
28
192
229
- Other liabilities
863
416
217
-
1,496
- Liabilities of disposal group classified as held for sale (note 30)
-
-
1
-
1
51,654
4,461
9,240
9,216
74,571
Derivative financial instruments
25
-
-
-
25
Off-balance sheet items
Less than
Over
1 year
1 year
€ million
€ million
Credit related commitments
4,898
5,573
Contractual commitments⁽¹⁾
46
-
Total
4,944
5,573
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
-
-
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
(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
During 2022, the Group’s
IBOR transition program
managed successfully the transition
of IBOR rates that
ceased after 31 December
2021 (CHF, GBP,
JPY,
1W and 2M USD and EUR Libor) to the new risk-free rates
(RFRs).
In particular,
the Group’s
financial instruments, referencing
the abovementioned
IBOR rates,
have transitioned
to the new
RFRs on
their first
repricing date
within 2022
for
loan and
deposit contracts
and through
the activation
of fallback
clauses for
derivatives.
Currently,
the
Group
focuses
on
the
exposures
referencing
the
remaining
USD
LIBOR
tenors
ahead
of
30
June
2023
scheduled
cessation date.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
As at 31
December 2022, the
Group’s
exposures
subject to transition
to the new
RFRs that mature
after the IBORs’
cessation dates
specified above are presented in the below table
:
.
31 December 2022
Benchmark rates
Impacted by IBOR
reform
USD
LIBOR ⁽⁴⁾
€ million
Non-derivative financial assets ⁽¹⁾
Loans & Advances to customers
1,943
1,943
Non-derivative financial liabilities ⁽²⁾
Due to customers
29
29
Derivative financial instruments ⁽³⁾
Derivatives designated in hedges
309
Trading derivatives
1,892
2,201
(1)
Balances provided are the gross carrying amounts (excl. ECL).
(2)
Balances
provided are at amortized cost
(3)
Balances provided are the notional amounts.
(4)
Excluding exposures to USD LIBORs that have a contractual maturity date before their planned cessation date.
5.2.5 Climate-related risk
The
Group
has
recognized
climate
change
as
a
material
risk
and
based
on
supervisory
guidelines,
is
adapting
its
policies
and
methodologies for identifying and monitoring the relevant
risks.
Specifically,
climate risk
is the
risk deriving
from potential
loss or
negative
impact to
the Group,
including loss/damage
to physical
assets, disruption of business or system failures,
from the adverse effects of climate
change and natural disasters.
Climate-related and environmental
risks are commonly understood to include the
following risks:
-
Physical risk,
which refers
to the financial
impact of
a changing climate,
including more
frequent extreme
weather events
and gradual changes in climate, as well as of environmental degradation, such as air,
water and land pollution, water stress,
biodiversity loss and deforestation.
-
Transition
risk,
which
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 Group is adopting a strategic approach towards
sustainability,
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. In
this context, the Bank is in the process of finalizing its Financed Impact Strategy,
which will focus on:
●
Clients’ engagement and awareness
to adapt their business so as to address climate change challenges
•
Actions for supporting customers in their transition
efforts towards a more ESG-friendly
economic environment
•
Enablers and tools such as frameworks and
products to underpin Sustainable Financing
•
The risk assessment of climate-related material
exposures
In line with good practices identified by the ECB, the Financed Impact Strategy
of the Bank will focus on sustainable financing targets
/ commitments. In particular,
the Bank identified total portfolio and sectoral targets
with regards to financing the green transition of
its clients. To facilitate
the classification of sustainable/green financing opportunities in a structural
manner, the Bank has developed
its Sustainable
Finance Framework
(SFF). Through
its SFF,
the Bank 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). Similar initiatives for the establishment
of SFF framework is under way in the subsidiaries.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Furthermore, the Group has updated its governance structure by introducing and defining the roles and responsibilities in relation to
climate related & environmental
(CR&E) risks, embedding regulatory guidelines and market
practices.
The CR&E
Risk Governance
involves various
key stakeholders
(i.e. Business
functions, Units,
and Committees).
The Group
applies a
model of defined roles and responsibilities regarding
the management of CR&E risks across the 3 Lines of Defense.
The
Group
Climate
Risk
Division
(GCRD)
has
the
overall
responsibility
for
overseeing,
monitoring,
and
managing
CR&E
risks.
Specifically,
the GCRD
operates as Project
office responsible 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.
In
this
context,
GCRD
ensures
the
implementation
of
environmental
and
sustainability initiatives
(frameworks, policies,
procedures and
products) and compliance
with existing and
upcoming sustainability-
related regulations,
under an ongoing
bank-wide program,
in alignment with the
supervisory agreed roadmap,
which is accelerated
where
possible. Also,
GCRD is
responsible
for
the co-ordination
with Business
and Risk
Units, the
preparation
and submission
for
approval
of
the
Financed
Impact
Strategy,
as
well
as
monitors
its
implementation.
Furthermore,
the
GCRD
leads
the
2nd
Line of
Defense
independent
sustainable
lending
re-assessment
process.
Specifically,
in
the
context
of
implementing
the
approved
Sustainable
Finance
Framework
(SFF),
the
Division
is
responsible
to
assess
the
sustainability
features
of
new
loans
and products
according to the criteria set within the SFF.
Climate risk stress test
The Group participated in the European Central Bank’s (ECB) supervisory climate risk stress test, which was conducted in the first half
of 2022. The
2022 climate risk
stress test assessed how
well banks are
set up to
deal with climate-related risks.
A total of
104 significant
banks participated in the test consisting
of three modules, in
which banks provided information on their:
(i) own climate stress-testing
capabilities, (ii) reliance on carbon-emitting sectors,
and (iii) performance under different scenarios over
several time horizons.
The test, which was part of the ECB’s wider climate roadmap, was not a capital adequacy exercise but rather a learning one for banks
and supervisors alike, aiming at identifying vulnerabilities and best
practices and providing guidance to banks for the green transition.
In this context, the Group has successfully completed
the 2022 climate risk stress test
exercise.
In July
2022, the
European
Central
Bank (ECB)
published the
climate
risk stress
test
aggregated
results,
showing that
banks must
improve their focus on climate risk. Furthermore,
all participating entities, including the Group, received individual
feedback and are
expected to
take action
accordingly,
in line with
the set of
good
practices for
climate-related and
environmental
risk management
that the ECB published in November
2022, along with the good practices for
climate stress testing published
in December 2022. The
results showed that the Group has made significant
progress in incorporating a climate
risk stress testing framework,
with an overall
performance in
line with the
average score
of European
Banks. The Group
continues to
work in order
to implement
its climate risk
action
plan, to
further integrate
climate
risks
into
its business
strategy
and risk
management
practices,
and to
support its
clients
towards climate transition
and sustainable business growth.
.
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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
certain debt securities held
or issued by
the Group.
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 2022
Level 1
Level 2
Level 3
Total
€ million
€ million
€ million
€ million
Securities held for trading
134
-
-
134
Investment securities at FVTPL
93
15
133
241
Derivative financial instruments⁽¹⁾
1
1,178
6
1,185
Investment securities at FVOCI
3,600
228
-
3,828
Loans and advances to customers mandatorily
at FVTPL
-
-
16
16
Financial assets measured at fair value
3,828
1,421
155
5,404
Derivative financial instruments⁽¹⁾
1
1,660
-
1,661
Trading liabilities
419
-
-
419
Financial liabilities measured at fair value
420
1,660
-
2,080
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
(1)
Amounts
are after offsetting € 1,376 million and € 444 million level 2 derivative financial assets and liabilities, respectively, against cash collateral
received
(note 5.2.1.4).
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.
During the year ended
31 December 2022, the Group
transferred OTC
derivative instruments
of
€ 9
million
from
Level
2 to
Level
3 following
the
assessment
on
the
significance of
the
CVA
adjustment
to
their entire
fair
value
measurement, calculated based on internal
rating models.
Reconciliation of Level 3 fair value measurements
2022
2021
€ million
€ million
Balance at 1 January
70
86
Transfers
into Level 3
9
0
Transfers
out of Level 3
(0)
(0)
Additions, net of disposals and redemptions (note 24) ⁽¹⁾
87
(18)
Total gain/(loss)
for the year included in profit or loss
(11)
3
Foreign exchange differences and other
0
(1)
Balance at 31 December
155
70
(1)
Including capital returns on equity instruments.
.
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
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,
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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.
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 2022
Level 1
Level 2
Level 3
Fair value
Carrying
amount
€ million
€ million
€ million
€ million
€ million
Loans and advances to customers
-
-
41,767
41,767
41,661
Investment securities at amortised cost
6,185
699
1,271
8,155
9,192
Financial assets not measured at fair value
6,185
699
43,038
49,922
50,853
Debt securities in issue
1,343
1,503
553
3,399
3,552
Financial liabilities not measured at fair value
1,343
1,503
553
3,399
3,552
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
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.
In addition, for certain high quality corporate bonds for which quoted prices are not available, fair
value
is determined
using
prices that
are
derived
from
reliable data
management
platforms
while
part
of them
is verified
by
market
participants
(e.g. brokers).
In certain
cases, prices
are
implied by
liquidity agreements
(e.g. repos,
pledges) with
other
financial institutions;
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 2022 Consolidated Financial Statements
6.
Net interest income
2022
2021
€ million
€ million
Interest income
Customers
1,394
1,234
- measured at amortised cost
1,393
1,232
- measured at FVTPL
1
2
Banks and other assets⁽¹⁾⁽³⁾
75
11
Securities
258
151
- measured at amortised cost
141
39
- measured at FVOCI
107
109
- measured at FVTPL
10
3
Derivatives (hedge accounting)
94
40
Derivatives (no hedge accounting)
494
406
2,315
1,842
Interest expense
Customers ⁽¹⁾
(93)
(50)
Banks ⁽¹⁾⁽²⁾⁽³⁾
(2)
35
Debt securities in issue ⁽¹⁾
(118)
(83)
Derivatives (hedge accounting)
(89)
(58)
Derivatives (no hedge accounting)
(460)
(362)
Lease liabilities - IFRS 16
(3)
(3)
(765)
(521)
Total
1,550
1,321
..
(1)
Measured at amortized cost.
.
.
(2)
For the year 2022, it includes net income of € 53 million that is attributable to the targeted longer-term refinancing operations (TLTRO
III) of the European
Central Bank (ECB) (2021: € 91 million) (note 31).
.
.
(3)
Interest from financial assets with negative rates, which were applied in 2021 and until June of 2022, was recorded
in interest expense.
. .
.
In 2022, the net
interest income
rose by 17.4%
to € 1,550
million, mainly driven
by higher interest
rates, the
organic loans growth
and the increased income from investment
bonds
partly offset by higher debt issued and deposits cost.
Interest income recognized
by quality of Loans and Advances and Product Line is further analyzed
below:
.
31 December 2022
Interest income
on non-impaired
loans and
advances
Interest
income on
impaired loans
and advances
Total
€ million
€ million
€ million
Retail lending
634
27
661
Wholesale lending⁽¹⁾
699
34
733
Total interest
income from customers
1,333
61
1,394
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
(1)
Including interest income on loans and advances to Public Sector.
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 2022
Retail
Corporate
Global
Markets &
Asset Mngt
International
Other and
Elimination
center
Total
€ million
€ million
€ million
€ million
€ million
€ million
Lending related activities
9
98
14
19
(0)
139
Mutual funds and assets under
management
13
1
41
11
5
71
Network activities and other⁽¹⁾
70
7
31
105
(1)
213
Capital markets
-
9
13
6
(3)
26
Total
92
115
99
141
1
449
31 December 2021
Retail
Corporate
Global
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
(1)
Including income from credit cards related services.
8.
Income from non banking services
Income from non banking services
includes rental income of € 92.4
million (2021: € 95.9
million) from real estate properties and other
income of € 2.0 million (2021: € 1.9 million) from IT services provided by the Group
entities.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
9.
Net trading income and gains less losses from investment securities
2022
2021
€ million
€ million
Net trading income/(loss)
Debt securities, including short positions
98
(2)
Derivative financial instruments (note
19)
628
(29)
Equity securities
(1)
3
Revaluation on foreign exchange
positions
2
20
Total
727
(8)
Gains less losses from investment securities
Debt securities measured at FVOCI ⁽¹⁾
(26)
93
Equity securities
17
8
Total
(9)
101
.
(1)
It includes termination fees from related derivatives amounting to € 4 million income (2021: € 6 million loss).
Trading results of € 98 million income related to
debt securities include € 9 million loss (2021: € 3 million loss) from trading securities
and € 107
million gain on
short positions on
debt instruments entered
into the context
of the Group's
economic hedging strategies
(note 35).
Gains from derivative financial instruments of € 628
million comprise mainly a) €
390 million realized gains from unwinding of interest
rate
swaps in
the context
of the
updated Group's
hedging strategy,
b) €
160 million
realised gains
from unwinding
of interest
rate
swaps
following
the mandatory
discontinuance
of certain
hedge accounting
relationships
and c)
€ 70
million
gains
from
portfolio
hedging of interest rate risk (macro hedging), of which € 20 million arising from hedge ineffectiveness and € 50 million
from fair value
changes of the hedging derivatives
that occur as part
of the dynamic management
of the pool of hedging instruments
on a monthly
basis, and include their fair value changes before
initial designation or after de-designation (notes 2.2.3i and
19).
10.
Other income/ (expenses)
2022
2021
€ million
€ million
Gain/(loss) from change in fair value of investment
property (note 27)⁽¹⁾
34
32
Sale of merchant acquiring
business - Project Triangle (note 30)
325
-
Derecognition gain/(loss) on loans measured at
amortised cost (note 20)
2
(3)
Fee expense related to the deferred
tax credits (note 13)
(6)
(6)
Gain/ (loss) on the disposal/liquidation of subsidiaries and
associates (notes 23 and 24)
(34)
1
Dividend income
2
2
Gains/(losses) on loans at FVTPL
3
1
Other
(2)
3
Total
324
30
(1)
It includes ca € 2
million gain from remeasurement of
real estate property transferred
to investment property
from repossessed
assets in 2022.
In 2021, 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).
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
11.
Operating expenses
2022
2021
€ million
€ million
Staff costs
(447)
(434)
Administrative expenses
(272)
(253)
Contributions to resolution and deposit guarantee
funds
(74)
(75)
Depreciation of real estate properties
and equipment
(46)
(40)
Depreciation of right of use assets
(40)
(38)
Amortisation of intangible assets
(38)
(36)
Total
(917)
(876)
For
the year
ended 31
December 2022,
the amount
of operating
expenses
(excluding
any
contribution
to
a deposit
guarantee
or
resolution fund) for the Group’s
Greek activities was € 590 million (2021: € 583 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).
Staff costs
2022
2021
€ million
€ million
Wages, salaries and performance remuneration
(335)
(326)
Social security costs
(50)
(51)
Additional pension and other post employment costs
(18)
(17)
Other
(44)
(40)
Total
(447)
(434)
The average number of employees of the
Group during the year was 11,615 (2021: 11,495). As at 31 December 2022,
the number of
branches and business/private banking centers
of the Group amounted to 616 (2021: 668).
12.
Other impairments, restructuring costs and provisions
2022
2021
€ million
€ million
Impairment and valuation losses on real estate properties
(15)
(17)
Impairment losses on bonds (note 5.2.1.3)
(21)
(4)
Other impairment losses and provisions
(72)
(31)
Other impairment losses and provisions
(108)
(52)
Voluntary exit schemes and other related costs
(note 35)
(60)
(10)
Other restructuring costs
(42)
(15)
Restructuring costs
(102)
(25)
Total
(210)
(77)
Notes to the Consolidated Financial Statements
.
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|
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31 December 2022 Consolidated Financial Statements
For the year ended 31
December 2022, the Group recognized €
72 million (2021:
€ 31 million) other impairment
losses and provisions,
of which € 49 million relate to impairment losses for receivables and provisions on litigations and
other operational risk events (2021:
€ 14 million), and € 23 million relate mainly to impairment
losses on computer hardware and software
(2021: € 16 million) (notes 26
and 28).
.
Furthermore, for
the year
ended 31 December
2022, the
Group recognized
€ 42
million restructuring
costs (2021:
€ 15 million),
of
which € 14 million
relate to
the merger of Eurobank
a.d. Beograd with
Direktna Banka
a.d. and the integration
initiatives thereafter
(2021: € 5 million),
while the remaining costs for both periods mainly relate
to the Group’s transformation
projects and initiatives.
13.
Income tax
2022
2021
€ million
€ million
Current tax
(45)
(40)
Deferred tax
(360)
(116)
Total income tax
(405)
(156)
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%. The
Greek corporate
tax rate
for legal entities
other than the aforementioned
credit institutions is
22%. 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 up to 6
open tax years. For fiscal years starting from 1 January
2016 onwards, pursuant to the Tax Procedure Code, an ‘Annual Tax Certificate’
on an optional basis, is provided for the Greek entities, with annual financial statements audited compulsorily,
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 have opted to obtain
such certificate.
Following the completion in 2022, of the tax audit of the Company by the
tax authorities for the tax year 2016, its open tax
years are
2017-2022, while
the Bank’s
open tax
years are
2020 -
2022. The
tax certificates
of the
Company,
the Bank
and the
other Group’s
entities, which operate
in Greece, are
unqualified for
their open tax
years until
2021.
In addition, for
the year ended
31 December
2022, 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 2016 (included)
has been time-barred
for the Group’s
Greek entities
as at 31
December
2022.
The open
tax years
of the
foreign
banking entities
of the
Group
are as
follows:
(a) Eurobank
Cyprus Ltd,
2018-2022, (b)
Eurobank
Bulgaria A.D., 2017-2022, (c) Eurobank Direktna a.d.
(Serbia), 2017-2022, and (d)
Eurobank Private Bank Luxembourg S.A., 2018-2022.
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 in
principle up to
6 open tax
years, 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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.
The net deferred tax is analyzed
as follows:
2022
2021
€ million
€ million
Deferred tax assets
4,161
4,422
Deferred tax liabilities
(31)
(26)
Net deferred tax
4,130
4,396
The movement on deferred tax
is as follows:
2022
2021
€ million
€ million
Balance at 1 January
4,396
4,498
Income statement credit/(charge)
(360)
(116)
Investment securities
at FVOCI
96
30
Cash flow hedges
(0)
(15)
Actuarial gains/(losses)
(1)
-
Other
(1)
(1)
Balance at 31 December
4,130
4,396
Deferred income tax (charge)/credit
is attributable to the following items:
2022
2021
€ million
€ million
Impairment/ valuation relating to loans, disposals and write-offs
(128)
13
Unused tax losses
(0)
(1)
Tax deductible PSI+ losses
(50)
(50)
Carried forward debit difference of law 4831/2021
(73)
73
Change in fair value and other temporary differences
(109)
(151)
Deferred income tax (charge)/credit
(360)
(116)
Deferred tax assets/(liabilities) are
attributable to the following items:
2022
2021
€ million
€ million
Impairment/ valuation relating to loans and accounting write-offs
1,030
1,034
PSI+ tax related losses
951
1,001
Losses from disposals and crystallized write-offs of loans
2,242
2,365
Carried forward debit difference of law 4831/2021⁽¹⁾
-
73
Other impairments/ valuations through the income statement
(120)
(38)
Cash flow hedges
5
5
Defined benefit obligations
5
6
Real estate properties, equipment and intangible assets
(78)
(61)
Investment securities at FVOCI
(15)
(112)
Other⁽²⁾
110
123
Net deferred tax
4,130
4,396
(1)
The unutilized part, as at 31 December 2021, of the carried forward crystallized tax
losses of loans, in accordance with the law 4831/2021 (see below), was
offset against taxable profit for the year ended 31 December 2022.
(
2)
It includes, among others, DTA on deductible temporary differences relating to operational risk provisions and the leasing operations.
Notes to the Consolidated Financial Statements
.
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Further information, in relation to
the aforementioned categories of deferred
tax assets as at 31 December 2022, is as follows:
(a)
€
1,030
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) €
951 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) € 2,242 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;
Assessment of the recoverability of deferred
tax assets
The recognition
of the 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
2022, 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 2022,
for the period up
to the end
of 2025, and
was submitted
to
the
Single
Supervisory
Mechanism
(SSM).
For
the
years
beyond
2025,
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.
Specifically,
the management projections
for the Group’s
future profitability
adopted in the
Business Plan, have
considered, among
others,
(a) the
interest
rates’
increase, (b)
the sustainable
increase in
loan volumes
and the
growth,
at a
relatively
lower
pace, of
customer
deposits,
(c)
the
increase
in
fee
and
commission
income
mostly
driven
by
assets
under
management,
bancassurance,
network and lending
related activities, cards’ issuing
and investment property rentals, (d)
the discipline
to operating expenses’ targets,
(e) the further decrease of NPE
ratio in line with the NPE
Management Strategy submitted to SSM (note 5.2), (f) the
cost of risk, which
is expected to carry the effect from the macroeconomic uncertainty and the inflationary
pressures’ impact on households’ disposable
income and (g) the fulfilment
of interim MREL targets
throughout the plan period.
The major initiatives introduced
in the context
of
the Group’s transformation
plan “Eurobank 2030”,
will contribute to meeting its financial objectives.
The Group closely
monitors and constantly assesses
the developments on
the macroeconomic and geopolitical
front (note 2) including
the inflationary
pressures
and their
potential
effect
on the
achievement
of its
Business Plan
targets
in terms
of asset
quality and
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 2022, pursuant to the Law 4172/2013, as in force, the Bank’s eligible DTAs/deferred
tax credits (DTCs) against the
Greek State
amounted to
€ 3,402 million (31
December 2021: €
3,547 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
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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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,
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.
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 2022, an amount of €
5.9 million has been recognized
in “Other income/(expenses)”.
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:
2022
2021
€ million
€ million
Profit/(loss) before tax
1,735
483
Tax at the applicable tax
rate
(503)
(140)
Tax effect
of:
- income not subject to tax and non deductible expenses
1
(5)
- effect of different tax rates
in different countries
44
30
- change in applicable tax rate
-
1
- other
53
(42)
Total income tax
(405)
(156)
As at 31 December
2022, the Company
and the Bank have
not recognised deferred
tax asset (DTA)
on unused tax losses
amounting
to € 470 million (2021: €
517 million). In particular, a part of the Bank’s carried forward tax losses was offset against the taxable profit
for
the year
ended 31
December 2022,
leading the
Group’s
respective
effective
tax
rate
to 23%
(32%
in the
comparative
period,
including
the
effect
of
the
non-recognition
of
DTA
on
the
impairment
loss
of
the
“Mexico”
loan
portfolio
in
Eurobank
Holdings
consolidated financial statements).
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
351
2026
12
2027
1
Total
470
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
2022, the Group’s
dilutive potential ordinary
shares relate to
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 weighted average
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
2022
2021
Net profit for the year attributable to ordinary shareholders
€ million
1,330
328
Weighted average number of ordinary
shares in issue for
basic earnings per share
Number of shares
3,708,988,032
3,707,975,186
Weighted average number of ordinary
shares in issue for diluted earnings
per share
Number of shares
3,714,564,870
3,708,992,794
Earnings per share
- Basic and diluted earnings per share
€
0.36
0.09
15.
Cash and balances with central banks
2022
2021
€ million
€ million
Cash in hand
504
478
Balances with central banks
14,490
13,037
Total
14,994
13,515
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 2022, the mandatory
reserves (i.e. those that the Group entities maintain in
order to meet the MRR) with central banks
amounted to € 1,040 million (2021:
€ 871
million). The
interest
rate
on the
main refinancing
operations
(MRO) was
applied for
MRR deposits
placed to
the European
Central Bank (ECB) until December 2022, and the deposit facility
rate (DFR) in force is applied thereafter.
Since
2019,
the
European
Central
Bank
(ECB)
had
decided
to
introduce
a
two-tier
system
for
eligible
credit
institutions'
reserve
remuneration which
exempted part
of excess
liquidity holdings
(i.e. reserve holdings
in excess
of MRR) from
the negative
DFR.
The
above two-tier system was lifted by ECB in September 2022, and the (positive) DFR in force is applied for the excess liquidity holdings
placed to ECB thereafter.
.
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:
2022
2021
€ million
€ million
Cash and balances with central banks (excluding mandatory and collateral
deposits with
central banks) (note 15)
13,954
12,644
Due from credit institutions
418
505
Securities held for trading
16
-
Total
14,388
13,149
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Other (income)/losses on investment securities presented
in operating activities are analyzed as follows:
2022
2021
€ million
€ million
Amortisation of premiums/discounts and accrued interest
(21)
26
(Gains)/losses from investment securities
9
(101)
Dividends
(2)
(1)
Total
(14)
(76)
In the year
ended 31 December
2022, other adjustments
of € 244
million presented
in the cash
flow statement
mainly include a)
€
325 million gain
resulting from the sale
of Eurobank’s merchant acquiring business to
Worldline (note 30), b)
€ 34 million
gain resulting
from
the disposal
of a 5.1%
shareholding in
the Group’s
former joint
venture Grivalia
Hospitality S.A. and
the measurement
on the
disposal date of the retained interest in the entity as a financial asset at FVTPL (note 24) and c)
€ 76 million loss from the recyclement
of currency translation reserves due to
liquidation of ERB Istanbul Holding A.S. (note 23.1).
Changes in liabilities arising from financing activities
During the year ended
31 December 2022,
changes in the Group’s liabilities arising
from financing activities, other
than lease liabilities
(note 41),
are attributable
to: a) debt
issuance amounting
to € 1,070
million (2021: €
1,141 million) (net
of issuance costs),
b) debt
repayment amounting to € 11 million (2021: €
156 million) and c) accrued
interest and amortisation of debt issuance costs amounting
to € 57.1 million (2021: € 10.4 million).
17.
Due from credit institutions
2022
2021
€ million
€ million
Pledged deposits with banks
911
2,002
Placements and other receivables from banks
196
206
Current accounts and settlement balances with banks
222
302
Total
1,329
2,510
As at
31 December
2022, the
Group’s
pledged deposits
with banks
mainly include:
a) €
873 million
mainly 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:
2022
2021
€ million
€ million
Greece
42
36
Other European countries
1,217
2,249
Other countries
70
225
Total
1,329
2,510
18.
Securities held for trading
2022
2021
€ million
€ million
Debt securities (note 5.2.1.3)
87
69
Equity securities
47
50
Total
134
119
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 2022
31 December 2021
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
35,481
1,778
1,372
29,758
1,738
1,352
- Interest rate options⁽¹⁾
3,616
74
96
3,599
41
97
- Cross currency interest
rate swaps
-
-
-
41
3
3
- Foreign exchange contracts⁽²⁾
3,686
62
71
3,682
53
25
- Other ⁽³⁾
154
2
2
195
2
2
1,916
1,541
1,837
1,479
Derivatives designated as fair value hedges
- Interest rate swaps
7,277
463
431
3,732
82
804
- Interest rate swaps/portfolio hedging
4,792
180
-
- Interest rate floors
7,791
-
55
-
-
-
643
486
82
804
Derivatives designated as cash flow hedges
- Interest rate swaps
-
-
-
1,852
30
54
- Cross currency interest
rate swaps
1,646
2
78
1,632
0
57
2
78
30
111
Offsetting (notes 5.2.1.4 and 32)
- Interest rate swaps
(1,376)
(444)
Total derivatives
assets/liabilities
1,185
1,661
1,949
2,394
(1)
Interest rate options include interest rate caps and floors and swaptions.
(2)
It includes currency swaps, forwards and options
(3)
It includes credit default swaps, warrants, commodity derivatives, futures and exchange traded equity options.
Information on the fair value measurement
and offsetting of derivatives is provided
in notes 5.3 and 5.2.1.4, respectively.
In response to the heightened market volatility,
and particular the increase in interest rate levels and bond yields since the beginning
of 2022,
the Group
discontinued certain
hedging relationships
designated as
fair value
and cash
flow hedging
of interest
rate risk,
which had been initiated in a low interest rate
environment and fulfilled to a significant extent
their hedging purpose. The derivative
positions were
gradually liquidated
over the first
quarter of 2022,
while in parallel
new economic hedges
were initiated
to manage
the Group’s
interest rate
exposures on
a portfolio
level. Such
economic hedges
were eventually
liquidated towards
the end
of the
second quarter of 2022, since Management, in the context of its updated hedging strategy
and risk management objectives, decided
to enter into new interest rate
swaps designated upon their inception as hedging instruments for which hedge accounting is applied.
The realized gains from the
aforementioned actions on the
Group’s hedging strategies, due to the
increase in interest rates, amounted
to approximately € 390 million (note
9).
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Furthermore, the significant movements in interest
and inflation rates, especially in longer tenors exacerbated
the ineffectiveness of
certain long-dated
hedging relationships
for which
different
discount
rates
apply to
the hedged
item and
hedging instrument.
For
these hedging relationships, the hedge ratio fell outside the designated range of 80%-125% allowed by IAS39, both prospectively and
retrospectively,
leading to the
mandatory discontinuance
of the hedge
accounting since
the relationships
no longer
met the hedge
accounting
criteria.
Accordingly,
the
Bank
proceeded
to
the
gradual
unwinding
of
the
related
interest
rate
swaps,
realizing
approximately
€ 160
million gains
(note 9),
while at
the same
time entered
into new
ones of
shorter tenor,
so as
to ensure
hedge
effectiveness going forward.
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
portion of
its existing
interest
rate risk
resulting from
any potential
change in
the fair
value of
fixed rate
debt
securities or fixed rate loans, denominated both in local and foreign
currencies, using interest rate
swaps and cross currency interest
rate swaps. In 2022, the Group recognized a gain of € 886 million (2021: € 60 million loss) from changes in the carrying amount of the
hedging instruments
and € 862 million loss
(2021: € 68 million
gain)
from changes in
the fair value
of the hedged items
attributable
to the
hedged risk. The
amount of hedge
ineffectiveness recognized
for 2022
in “Net trading
income/
(loss)” was
€ 24 million
gain
(2021: € 8 million gain).
(b) Fair value hedges – portfolios of assets
The Group hedges a portion of its existing interest rate risk resulting from any potential
change in the fair value of a portfolio of fixed
rate loans
including securitized notes
initially issued and subsequently
held by the Group
(macro-hedging), using a group
of interest
rate
swaps. The
Group
primarily designates
the change
in fair
value attributable
to changes
in the
benchmark interest
rate as
the
hedged risk including
also assumptions for
prepayment risk and,
accordingly,
enters into
interest rate
swaps whereby
the fixed legs
represent the economic risks of the hedged items. In 2022, the Group recognized a gain of € 180 million from changes in the carrying
amount of the hedging instruments and € 159 million loss from changes in the fair value of the designated hedged items attributable
to the hedged
risk. Accordingly,
the amount of
hedge ineffectiveness
recognized for
2022 in “Net
trading income/
(loss)” was €
21
million gain.
The Group also
hedges the variability
deriving from the
fair value changes
of purchased
interest rate
floors embedded
in portfolios
of floating rate loans and debt securities by writing the floors in the market. In 2022, the
Group recognized a gain of € 20 million from
changes in the carrying amount of the hedging instruments, and € 20 million loss from
changes in the fair value
of the hedged items
attributable to the hedged risk.
(c) Cash flow hedges
The Group hedges
a portion 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 2022, an
amount of € 19 million gain was recognised in other comprehensive income in relation to derivatives
designated as cash flow hedges
(2021: €
51 million
gain). Furthermore,
in 2022,
the ineffectiveness
recognized
in the
income statement
that arose
from cash
flow
hedges was nil (2021: 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 2022
Greece
Other
European
countries
Other
countries
Total
€ million
€ million
€ million
€ million
Sovereign
249
-
-
249
Banks
12
291
570
873
Corporate
51
12
-
63
Total
312
303
570
1,185
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
As at 31 December 2022,
the net carrying value
of the derivatives with
the Hellenic Republic amounted
to a liability of €
489 million
(31 December 2021: € 1,100 million asset).
At 31 December 2022 and 2021,
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 2022
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⁽¹⁾
255
24
2,884
4,114
7,277
-
-
-
-
Interest rate options
-
-
800
6,991
7,791
-
-
-
-
Cross currency interest rate
swaps
-
-
-
-
-
101
1,545
-
1,646
Total
255
24
3,684
11,105
15,068
101
1,545
-
1,646
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
(1)
Nominal amount
of interest rate swaps designated as fair value portfolio hedges is not included.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
(a) Fair value hedges
The following
tables present
data relating
to the hedged
items under fair
value hedges
for the years
ended 31 December
2022 and
2021:
31 December 2022
Carrying
amount/Exposure
designated as
hedged
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⁽¹⁾
12,693
(216)
(225)
Debt securities AC⁽¹⁾
3,978
(17)
(431)
Debt securities FVOCI
1,336
(157)
(266)
Debt securities in issue
2,373
(120)
(120)
Total
20,380
(510)
(1,042)
31 December 2021
Carrying amount/
Exposure
designated as
hedged
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⁽¹⁾
470
16
(5)
Debt securities AC
2,208
531
179
Debt securities FVOCI
2,573
94
(105)
Total
5,251
641
69
(1)
For loans
and advances
to customers
hedges and
debt securities
at amortised
cost
included in
portfolio hedges,
the exposure
designated as
hedged is
presented.
At 31 December
2022, the accumulated
amounts
of fair value
hedge adjustments
remaining in the balance
sheet for any
items that
have ceased to be adjusted for
hedging gains and losses were € 279 million assets for
debt securities held at AC, € 4 million liabilities
for debt issued and € 19 million liabilities for adjustments related to debt securities held at FVOCI (2021: € 190 million assets for debt
securities held at AC).
(b) Cash flow hedges
The cash
flow hedge
reserves for
continuing hedges
as at
31 December
2022 were
€ 4
million gain
(2021: €
3 million
gain), which
relate to loans
and advances to customers
(2021: € 4 million gain
relates to loans
and advances to
customers and €
1 million loss to
deposits).
As at 31 December 2022, the
balances remaining in the cash
flow hedge reserve from
any cash flow hedging
relationships for which
hedge accounting is no longer applied was € 20 million loss (2021: € 19 million loss).
The reconciliation of the components of Group’s
special reserves including cash flow hedges is provided in note 38.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
20.
Loans and advances to customers
2022
2021
€ million
€ million
Loans and advances to customers at amortised cost
- Gross carrying amount
43,450
40,815
- Impairment allowance
(1,626)
(1,872)
Carrying Amount
41,824
38,943
Fair value changes of loans in portfolio hedging of interest rate
risk
(163)
-
Loans and advances to customers at FVTPL
16
23
Total
41,677
38,967
The table below presents the carrying amount of loans and advances to customers
per product line and per stage as at 31 December
2022:
31 December 2022
31 December 2021
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
6,832
2,825
545
10,201
10,105
- Impairment allowance
(21)
(160)
(229)
(409)
(325)
Carrying Amount
6,810
2,665
316
9,792
9,780
Consumer lending:
- Gross carrying amount
2,669
427
257
3,353
3,242
- Impairment allowance
(37)
(48)
(186)
(271)
(340)
Carrying Amount
2,633
379
70
3,082
2,902
Small Business lending:
- Gross carrying amount
2,668
740
434
3,842
3,753
- Impairment allowance
(23)
(72)
(229)
(324)
(326)
Carrying Amount
2,645
668
205
3,518
3,427
Wholesale lending:⁽²⁾⁽³⁾
- Gross carrying amount
23,448
1,581
1,024
26,054
23,716
- Impairment allowance
(68)
(75)
(478)
(621)
(881)
Carrying Amount
23,380
1,506
546
25,432
22,835
Total loans and advances to customers
at
AC
- Gross carrying amount
35,618
5,573
2,259
43,450
40,815
- Impairment allowance
(149)
(355)
(1,121)
(1,626)
(1,872)
Carrying Amount
35,468
5,218
1,138
41,824
38,943
Fair value changes of loans in portfolio
hedging of interest rate risk
(163)
-
Loans and advances to customers at FVTPL
Carrying Amount⁽⁴⁾
16
23
Total
41,677
38,967
.
(1)
As at 31 December 2022,
POCI loans of € 43
million gross carrying amount (of
which € 41 million included in
non performing exposures) and €
6.5 million
impairment allowance are presented in ‘Lifetime ECL – stage 3 and
POCI’ (31 December 2021: € 44 million
gross carrying amount and € 6.4 million impairment
allowance).
(2)
Includes € 4,901 million related to the senior notes of Pillar, Cairo and Mexico securitizations, which 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Loans and advances to customers – Project Solar
In the context
of its NPE management strategy,
the Group has structured
another NPE securitization transaction
(project ‘Solar’), as
part
of
a joint
initiative
with
the
other
Greek
systemic
banks
initiated
since
2018,
in
order
to
decrease
further
its
NPE
ratio
and
strengthen
its
balance
sheet
de-risking.
In
addition,
the
Group
targets
to
the
prudential
and
accounting
derecognition
of
the
underlying
corporate
loan
portfolio
from
its
balance
sheet
by
achieving
a
Significant
Risk
Transfer
(SRT)
and
including
‘Solar’
securitization under the Hellenic Asset Protection Scheme (HAPS), thus
the senior note of the securitization to become
entitled to the
Greek State’s
guarantee.
In parallel,
the Management
along with
the other
participating banks
have
initiated
actions towards
the
disposal of the majority stake of the mezzanine
and junior notes to be issued in the context
of the above-mentioned securitization.
Accordingly, as of 30 June
2022, the Group
classified the underlying
corporate loan portfolio as
held for sale,
while the remeasurement
of the portfolio’s expected credit
losses, in accordance with the Group’s accounting
policy for the impairment of financial assets, had
no significant impact
in impairment losses from
loans and advances to
customers. The impairment
loss was calculated
by reference
to
the
estimated
fair
value
of
the
notes
to
be
retained
by
the
Group
upon
the
completion
of
transaction
and
the
expected
consideration
to
be
received
by
the
sale
of
mezzanine
and
junior
notes.
As
at
31
December
2022,
the
carrying
amount
of
the
aforementioned loan
portfolio reached €
69 million, comprising loans
with gross carrying
amount of € 268
million, which carried an
impairment allowance of € 199 million.
Furthermore, the impairment allowance of the letters of guarantee included in
the underlying
portfolio reached € 1 million and was presented
in “liabilities of disposal groups classified as held for sale” (note 30).
As at
31 December
2022, following
the classification
of project
“Solar” underlying
loan portfolio
as held
for sale,
the Group’s
NPE
stock amounted to €
2.3 billion (31 December 2021: € 2.8 billion) driving the
NPE ratio to 5.2% (31 December 2021:
6.8%), while the
NPE coverage ratio
stood at 74.6% (31 December 2021: 69.2%).
Loans and advances to customers – Project Wave
In December 2022, the Bank, proceeded with
the execution of the third
synthetic risk transfer
transaction (project “Wave
III”) in the
form
of
a
financial
guarantee,
providing
credit
protection
over
the
mezzanine
loss
of
a
portfolio
of
performing
shipping
loans
amounting to $ 1.7 billion (the reference
portfolio). Similarly to the previous
two synthetic risk transfer
transactions (projects ‘Wave
I’ and ‘Wave II’), that were executed
in December 2021 over a reference portfolio of performing
SMEs and large corporate loans of €
1.7
billion,
the
Wave
III
transaction
was
accounted
for
as
a
purchased
financial
guarantee
contract
that
is
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 portfolios of
Wave projects continued
to be recognised on the Group’s
Balance Sheet.
As at 31 December
2022, the Wave
III transaction, that
was performed in
the context of
the Group’s
initiatives for the
optimization
of its regulatory capital, resulted in a capital
benefit of 40 bps.
Securitizations of loan portfolios originated by the Group
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
‘Mexico’ securitization
In
May
2021, the
Bank, through
its
special purpose
financing
vehicle
(SPV)
‘Mexico
Finance
Designated
Activity
Company’ issued
senior,
mezzanine and
junior 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. The Group included ‘’Mexico” securitization
under the Hellenic Asset Protection Scheme (HAPS) thus the senior
note of
the securitization became entitled to the Greek State’s
guarantee.
In June 2021, the General Shareholders’ Meeting of
the Bank (GM),
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
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.
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 S.p.A. and the ongoing servicing of the portfolio by doValue Group. 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.
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,
with
carrying amount € 1,539 million at 31 December 2022 (31 December 2021: € 1,624 million).
The derecognition of the underlying loan
portfolio
from
the
Group’s
balance
sheet
resulted
in
a
derecognition
loss
of
€
5
million,
which
was
presented
in
‘other
income/expenses’.
‘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 securitization
of a mixed portfolio consisting primarily of non-performing
loans
(NPE)
(“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. The Group included
“Cairo”
securitization under
the Hellenic Asset
Protection Scheme
(HAPS) thus
the senior
note of
the securitization
became entitled
to the
Greek State’s
guarantee.
In June 2020,
the sale of
the aforementioned
notes 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.
In July 2020, the
General Shareholders’
Meeting of the Company
approved the distribution of Cairo
Mezz Plc shares to
Eurobank Holding’s shareholders through the decrease
in kind of its share capital.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 € 2,332 million at 31 December 2022 (31 December 2021: € 2,432
million).
‘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
NPE.
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
€ 1,039
million at 31 December 2022 (31 December 2021: € 1,060 million).
Notes to the Consolidated Financial Statements
.
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31 December 2022 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 2022
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
69
76
737
17
138
170
44
39
257
41
58
227
1,872
New loans and advances originated or
purchased
29
-
-
2
-
-
21
-
-
6
-
-
58
Transfers between stages
- to 12-month ECL
20
(20)
(0)
10
(9)
(1)
14
(8)
(5)
13
(10)
(3)
-
- to lifetime ECL
(12)
13
(1)
(4)
24
(20)
(8)
24
(15)
(7)
19
(12)
-
- to lifetime ECL credit-impaired loans
(6)
(8)
14
(1)
(9)
10
(5)
(7)
11
(2)
(7)
9
-
Impact of ECL net remeasurement
(35)
13
(1)
(3)
12
100
(25)
(0)
91
(30)
12
69
202
Recoveries from written - off loans
-
-
23
-
-
9
-
-
12
-
-
9
53
Loans and advances derecognised/
reclassified as held for sale during the
year⁽²⁾
-
(0)
(202)
-
-
(0)
-
-
-
-
-
(1)
(203)
Amounts written off⁽³⁾
-
-
(87)
-
-
(10)
-
-
(141)
-
-
(53)
(290)
Unwinding of Discount
-
-
(11)
-
-
(1)
-
-
(3)
-
-
(2)
(18)
Foreign exchange and other movements
4
1
5
(0)
3
(27)
(4)
1
(21)
2
1
(14)
(49)
Impairment allowance as at 31 December
68
75
478
21
160
229
37
48
186
23
72
229
1,626
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
(1)
The impairment allowance for POCI loans of € 6.5 million is included in ‘Lifetime ECL – stage 3 and POCI’ (2021: € 6.4 million).
(2)
It represents the impairment allowance of loans derecognized due
to a) substantial modifications of the
loans’ contractual terms, b) securitization and sale
transactions, c) debt to equity transactions 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 2022 and that
are still subject to enforcement activity is € 111 million (2021: € 217 million).
Notes to the Consolidated Financial Statements
.
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31 December 2022 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 2022
amounted to
€ 291
million (2021: €
490 million,
including €
72 million
loss relating
to the
project Mexico
(note
20)) and are analyzed as follows:
2022
2021
€ million
€ million
Impairment loss on loans and advances to customers
(261)
(525)
Net income / (loss) from financial guarantee contracts⁽¹⁾
(22)
-
Modification gain / (loss) on loans and advances to customers
2
18
Impairment (loss)/ reversal for credit
related commitments
(10)
17
Total
(291)
(490)
(1)
It refers to purchased financial guarantee contracts, not integral to the guaranteed loans (projects Wave).
22.
Investment securities
2022
2021
€ million
€ million
Investment securities at FVOCI
3,828
6,509
Investment securities at amortised cost
9,192
4,666
Investment securities at FVTPL
241
141
Total
13,261
11,316
Note: information on debt securities of the investment portfolio is presented in note 5.2.1.3
Ιn December 2022,
the Bank acquired
an additional 3.2%
holding in Hellenic
Bank Public Company
Limited (“Hellenic Bank”),
a financial
institution
located in
Cyprus, for
a consideration
of €
16.74 million.
Following
this transaction,
as at
31 December
2022, the
Bank
holds a 15.8%
participation in Hellenic
Bank. The said
investment is aligned with
the overall strategy of
the Group to
further strengthen
its presence
in its
core markets
in which
retains
a strategic
interest
and thus
has been
designated at
FVOCI. Its
fair value
as at
31
December 2022 amounted to € 94.6 million (2021: € 44.4 million).
In addition, on 1
December 2022, the Bank announced
that it has entered
into a share purch
ase agreement with Wargaming
Group
Limited, pursuant to which it has agreed
to acquire an additional 13.41% holding in Hellenic
Bank for a consideration of € 70
million.
The completion of the said acquisition was subject to the full fulfillment of the relevant
regulatory approvals.
Post balance sheet event
On
4
April
2023
the
Bank
announced
that,
following
the
receipt
of
the
relevant
regulatory
approvals,
the
above
acquisition
was
completed, and
its total
holding in Hellenic
Bank reached
29.2%. Following
that, the
investment
in Hellenic Bank
will be accounted
for as a Group’s
associate in the consolidated financial statements
as of the second quarter of 2023.
.
Notes to the Consolidated Financial Statements
.
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31 December 2022 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 2022
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
Lifetime ECL-
Stage 3
12-month
ECL-
Stage 1
Lifetime ECL-
Stage 2
Lifetime ECL-
Stage 3
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Gross carrying amount at 1
January
6,456
9
-
4,672
-
-
141
44
11,322
Additions, net of disposals and
redemptions
(1,979)
(6)
(14)
4,904
-
-
80
17
3,002
Transfers between stages
(131)
117
14
(40)
6
34
-
-
-
Net gains/(losses) from changes in
fair value for the year
(740)
3
-
-
-
-
16
34
(687)
Amortisation of
premiums/discounts and interest
(42)
(2)
-
64
-
2
0
-
22
Changes in fair value
due to hedging⁽¹⁾
-
-
-
(449)
-
(4)
-
-
(453)
Exchange adjustments and other
movements
48
(0)
-
24
-
1
4
-
77
Gross carrying amount at 31
December
3,612
121
-
9,175
6
33
241
95
13,283
Impairment allowance
-
-
-
(12)
(0)
(10)
-
-
(22)
Net carrying amount at 31
December
3,612
121
-
9,163
6
23
241
95
13,261
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
(1)
Changes in fair value due to continued hedging relationships amount to € 548 million, loss.
Notes to the Consolidated Financial Statements
.
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31 December 2022 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 2022
31 December 2021
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
6
12
18
5
10
15
New financial assets purchased
16
2
18
8
8
16
- of which 12-month ECL-Stage 1
16
2
18
8
8
16
Transfers
between stages
- (from)/to 12-month ECL-Stage 1
(6)
(11)
(17)
-
0
0
- (from)/to lifetime ECL-Stage 2
0
0
0
-
(0)
(0)
- (from)/to lifetime ECL-Stage 3
6
11
17
-
-
-
Remeasurement due to change in
ECL risk parameters
3
13
16
(6)
(6)
(12)
- of which 12-month ECL-Stage 1
(2)
9
7
(6)
(6)
(12)
- of which lifetime ECL-Stage 2
1
4
5
-
(0)
(0)
- of which lifetime ECL-Stage 3
4
-
4
-
-
-
Financial assets disposed during the
year
(3)
(4)
(7)
(0)
(1)
(1)
- of which 12-month ECL-Stage 1
(3)
(4)
(7)
(0)
(1)
(1)
Financial assets redeemed during the
year
-
(10)
(10)
(0)
(0)
(0)
- of which lifetime ECL-Stage 3
-
(10)
(10)
-
-
-
Foreign exchange and other
movements
(0)
(1)
(1)
(1)
1
-
Balance as at 31 December
22
12
34
6
12
18
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:
2022
2021
€ million
€ million
Balance at
1 January
322
415
Net gains/(losses) from changes in fair value
(702)
(128)
Tax (expense)/benefit
180
33
Revaluation reserve from associated undertakings, net of tax
(33)
(4)
(555)
(99)
Net (gains)/losses transferred to net profit on disposal
29
(99)
ECL transferred to net profit
4
3
Tax (expense)/benefit on net (gains)/losses
transferred to net profit on disposal
(7)
28
Tax (expense)/benefit on ECL
transferred to net profit
(1)
(1)
25
(69)
Net (gains)/losses transferred to net profit from
fair value hedges
270
105
Tax (expense)/benefit
(73)
(30)
197
75
Balance at 31 December
(10)
322
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
23.
Group composition
23.1
Shares in subsidiaries
The following is a listing of the Company's subsidiaries as at 31 December 2022, included in the consolidated financial statements
for
the year ended 31 December 2022:
Name
Note
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
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.
100.00
Greece
Leasing
Eurobank Factors Single Member S.A.
100.00
Greece
Factoring
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.
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) Anchor Hellenic Investment
Holding 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 Single Member Development S.A.
100.00
Greece
Real estate
Piraeus Port Plaza 3 Single Member Development S.A.
100.00
Greece
Real estate
Tenberco Real Estate
Single Member S.A.
100.00
Greece
Real estate
Value Touristiki Single Member Development S.A.
100.00
Greece
Real estate
Eurobank Bulgaria A.D.
99.99
Bulgaria
Banking
IMO Property Investments Sofia E.A.D.
100.00
Bulgaria
Real estate services
ERB Hellas (Cayman Islands) Ltd
k
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
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
Sagiol Ltd
j
100.00
Cyprus
Holding company
Macoliq Holdings Ltd
j
100.00
Cyprus
Holding company
Senseco Trading Limited
j
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
Notes to the Consolidated Financial Statements
.
123
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31 December 2022 Consolidated Financial Statements
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
Retail Development S.A.
99.99
Romania
Real estate
Seferco Development S.A.
99.99
Romania
Real estate
Eurobank Direktna a.d.
70.00
Serbia
Banking
ERB Leasing A.D. Beograd-in Liquidation
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 Hellas Plc
f
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
The following entities are not included in the consolidated
financial statements 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 and Byzantium
II Finance Plc.
(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. and
Promivet S.A.
In 2022,
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) IMO 03 E.A.D., Bulgaria
In February 2022,
the Bank disposed
of its
participation interest of 100%
in IMO 03
E.A.D. (which as
of 31
December 2021 was
classified
as held for sale) to a third party for a cash consideration
of € 5.8 million. The resulting loss on the disposal was immaterial.
(b) (Under liquidation) Real Estate Management
Single Member S.A., Greece
In February 2022, the liquidation of the company was completed.
(c) Hellenic Post Credit S.A., Greece
In February 2022, the Bank reached an agreement for the
acquisition of the remaining 50% of the
share capital of Hellenic Post Credit
S.A., settled
by offsetting
receivables it
held from
the other
shareholder of
the entity
(note 42).
In November
2022, after
receiving
the
required
approvals
from
the competent
authorities, the
merger
of
the
Bank and
Hellenic Post
Credit
S.A. was
completed,
by
absorption of the
latter by the former.
In line with the Group’s
accounting policy for
business combinations involving
entities under
common
control,
the
transfer
of
the
entity’s
assets
and
liabilities
to
the
Bank
was
performed
at
their
pre-combination
carrying
amounts under the
pooling of interests method (also
known as merger
accounting). The merger had no
impact in the
Group’s financial
statements.
(d) Staynia Holdings Limited, Cyprus
In February 2022, the
liquidation of the company
was decided. In June 2022,
the distribution of the
company’s surplus
assets to the
Bank
(its
sole shareholder)
was
completed
with
an immaterial
effect
on
the
Group’s
income statement,
while
its dissolution
was
completed in October 2022.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
(e) ERB Istanbul Holding A.S. in liquidation, Turkey
In
June
2022,
the
liquidation
of
the
company
was
completed.
The
Group
recognized
a)
€
76.3
million
loss
in
“Other
income/(expenses)”,
arising mainly
from the
recyclement of
foreign
currency losses
of €
75.9 million,
previously recorded
in other
comprehensive income, to the income statement
and b) € 2.5 million tax expense on the liquidation proceeds.
(f) ERB Hellas Plc, United Kingdom
In June 2022, the liquidation of the company was decided.
(g) Vouliagmeni Residence Single Member S.A., Greece
In
March
2022,
the
Bank
signed
an
agreement
for
the
sale
of
its
participation
interest
of
100%
in
Vouliagmeni
Residence
Single
Member S.A. to
a third party.
On the basis
of the said
agreement, the
company was
classified as held
for sale
since 31 March
2022
and an
impairment loss
of €
0.7 million
was recognised
in the
income statement
line “Other
impairment losses
and provisions”.
In
July 2022,
the sale
of the
company was
completed for
a cash
consideration
of €
9.7 million
with no
effect
on the
Group’s
income
statement.
(h) Eliade Tower S.A., Romania
In September
2022, the
Group decided
to proceed
with the
sale of its
participation interest
of 99.99% in
Eliade Tower
S.A. On this
basis, as at 30 September 2022 the company was classified as held for sale and
an impairment loss of € 1.5 million was recognized in
the income statement
line “Other impairment losses
and provisions”.
In October 2022, the
sale of Eliade Tower
S.A. was completed
for a cash consideration of € 4.4 million with an immaterial
effect on the Group’s
income statement.
(i) Village Roadshow Operations Hellas S.A., Greece
The Bank had acquired
“Village Roadshow Operations Hellas S.A.” in the
third quarter of 2021,
following the enforcement of collateral
on the company’s
shares under a
lending arrangement.
The company
since its acquisition
had been classified
as held for
sale. On 2
August 2022, in the context
of the Group’s
loan restructuring activities, the Bank signed
an agreement with a third party
for the sale
of its participation interest of 100% in the
company and the restructuring of its existing loan facilities
subject to certain preconditions,
which were
fulfilled in November
2022. Following
the completion of
the agreement,
the Group recognized
a) € 21.5
million benefit
due to the reversal
of loan provisions
in the Bank’s
accounts, in the income
statement line
“Impairment losses relating
to loans and
advances to customers” and b) € 2 million loss
from the disposal of the company’s
shares, including costs directly attributable
to the
agreement, in the income statement
line ”Other income/(expenses)”.
(j) Sagiol Ltd, Macoliq Holdings Ltd and Senseco Trading
Limited, Cyprus
In October 2022, the liquidation of the companies was decided.
(k) ERB Hellas (Cayman Islands) Ltd, Cayman Islands
In December 2022, the liquidation of the company was decided.
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:
(i)
Grivalia New Europe S.A., Luxembourg
In January 2021, the liquidation of the company was completed.
(ii)
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 combinations achieved in stages, the Group had 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)”.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
(iii)
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).
(iv)
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.
(v)
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.
(vi)
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.
(vii)
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 financial statements.
(viii)
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”.
(ix)
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
Istanbul
Holding A.S. in liquidation.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Agreement for the acquisition of BNP Paribas Personal Finance
Bulgaria by Eurobank Bulgaria A.D.
On 9 December
2022, Eurobank
Holdings announced that
it had reached
an agreement
for the
acquisition of
BNP Paribas
Personal
Finance Bulgaria
(the “Business”)
by Eurobank’s
subsidiary in
Bulgaria,
Eurobank
Bulgaria
A.D. (“Postbank”).
Specifically,
Postbank
had signed a put option letter for the benefit of BNP Paribas Personal Finance providing for
the sale of its Bulgarian branch, based on
the agreed
terms.
Pursuant
to the
above
agreement,
a consultation
process
with the
French
Labour
Council has
taken
place, the
conclusion of which led to the signing of a Business Transfer
Agreement in January 2023.
The
transaction
is in
line with
the
Group’s
strategy
to
further strengthen
Postbank’s
position in
the
Bulgarian
retail
sector
and is
expected to burden the Eurobank Holdings Group’s regulatory capital
ratios by c. 25bps, reflecting mainly the increase in the Group’s
Risk Weighted
Assets. As of
the end of
September 2022, BNP
Paribas Personal
Finance Bulgaria, which
operates through
a network
of 44 branches,
had total
assets of €
450 million, deposits
close to €
100 million and
a clientele of
more than
270 thousand clients.
The
completion
of
the
transaction
is
expected
to
take
place
in
the
first
semester
of
2023
subject
to
approvals
by
all
competent
regulatory authorities.
Other post balance sheet events
Retail Development S.A., Romania
In February
2023, the Bank
signed an agreement
for the
sale of its
participation interest
of 99.99% in
Retail Development
S.A. to a
third party.
Eurobank Direktna a.d., Serbia
On
2
March
2023,
the
Bank
announced
that
it
has
signed
a binding
agreement
(share
purchase
agreement)
with
AIK
Banka
a.d.
Beograd
(“AIK”)
for
the
sale
of
its
70%
shareholding
in
its
subsidiary
in
Serbia,
Eurobank
Direktna
a.d.
(the
“Transaction”).
Consequently,
the
subsidiary
will
be
classified
as
held
for
sale
and
its
results
will
be
presented
in
discontinued
operations.
The
Transaction is consistent with Eurobank’s
strategy to direct capital to opportunities with more compelling RoTBV (Return on Tangible
Book Value)
and to
further enhance
its presence
in its
core markets.
In this
context,
based on
the agreement,
100% of
Eurobank
Direktna was valued at €280 million.
The Transaction
is expected
to contribute
ca. 50
bps to
Eurobank Holdings
Group’s
CET1 ratio
(based on
the third
quarter of
2022
ratio), reflecting mainly the release of related
RWAs (Risk Weighted
Assets). It is expected to be completed within year 2023, subject
to customary regulatory and other approvals.
ERB Hellas (Cayman Islands) Ltd, Cayman Islands
In February 2023, the return of the company’s
share capital to the Bank, through the repurchase
of the whole of its own shares, was
completed.
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
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
2022, the
carrying
amount
of the
Group
financial institution
subsidiaries’
assets and
liabilities, before
intercompany
eliminations,
amounted to € 89.7 billion and € 80.3 billion, respectively,
including Eurobank S.A. (2021: € 83.6billion and € 76.9 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..
●
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
●
The Group is
required to maintain mandatory and
collateral deposits with central banks.
Information for these deposits
is provided
in note 15.
23.2
.
Subsidiary with material Non Controlling Interest
..
In December
2021, the
merger of
Direktna Banka
a.d. Kragujevac
(“Direktna”)
with Eurobank’s
subsidiary in
Serbia, Eurobank
a.d.
Beograd
(“Eurobank
Serbia”)
(the
“Transaction”)
was
concluded,
with
absorption
of
Direktna
by
Eurobank
Serbia.
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. € 232 million, after tax, in total.
As at 31 December
2022, 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.
.
2022
2021
€ million
€ million
Total operating
income
93.5
66.6
Net profit
0.4
0.3
Other comprehensive income
(4.2)
(0.8)
Total comprehensive
income
(3.8)
(0.5)
Total comprehensive
income attibutable to non controlling interests
(1.1)
(1.4)
Total assets
2,580
2,469
Total liabilities
2,265
2,150
Net assets
315
319
Net assets attributable to non controlling interests
95
96
Cash and cash equivalents at beginning of year
224
153
Cash and cash equivalents at end of year
208
224
24.
Investments in associates and joint ventures
.
.
As at 31 December 2022, the
carrying amount of the Group’s investments in associates and joint ventures amounted to € 173 million
(2021: € 267 million). The following is the listing of the Group’s
associates and joint ventures as at 31 December 2022:
.
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
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
doValue Greece Loans and Credits Claim Management S.A.
Greece
Loans and Credits Claim Management
20.00
Perigenis Business Properties S.A.
Greece
Real estate
18.90
(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 until December 2022) is considered as a Group’s joint venture.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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) 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, as of 31 March 2022, the
retained interest
in the entity has
been
measured
as
a financial
asset
at
FVTPL with
any
change in
the
carrying
amount
to
be recognized
in
the
income statement.
Accordingly,
the difference
between:
(i) the
fair
value
of
the retained
interest
on the
aforementioned
date,
amounting
to €
71.2
million and the proceeds received from the
said partial disposal and (ii) the previous carrying amount of the investment
in the entity
under the equity method amounting to € 54.2 million, resulted in a total gain of € 32.3 million, net of the recyclement of € 0.6
million
foreign
currency
translation
losses
(previously
recognized
in
other
comprehensive
income),
that
was
recognised
in
the
income
statement in “Other income/(expenses)”.
For the year ended 31 December 2022, the
above gain was
further adjusted to € 34 million.
(b) Information Systems Impact S.A., Greece
In July 2022, the
Bank disposed of its
participation interest in Information Systems Impact S.A. to a
third party for a cash consideration
of € 3.9 million. The resulting gain on disposal amounted to
€ 1.1 million and was recognized in “Other income/(expenses)”.
(c) Intertech S.A. – International Technologies,
Greece
In
September
2022,
the
Bank
disposed
of
its
participation
interest
in
Intertech
S.A.
–
International
Technologies
(which
since its
acquisition in the third quarter of 2021 was classified as held for sale) to a third party for a cash consideration of € 1.9 million with an
immaterial effect on the Group’s
income statement.
(d) Sinda Enterprises Company Ltd, Cyprus
In
October
2022,
the
Bank
disposed
of
its
participation
interest
in
Sinda
Enterprises
Company
Ltd
to
a
third
party
for
a
cash
consideration
of
€
3.2
million.
The
resulting
loss
on
disposal
amounted
to
€
1.1
million
and
was
recognized
in
“Other
income/(expenses)”.
(e) Rosequeens Properties Ltd, Romania
In December 2022,
the Group’s
joint venture
Rosequeens Properties
Ltd, disposed
of its subsidiary
Rosequeens Properties
SRL to a
third party.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Associates and joint ventures material to
the Group
With regards to the Group’s associates and joint ventures,
Eurolife FFH Insurance Group Holdings S.A. and doValue Greece Loans and
Credits Claim Management
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.
2022
2021
€ million
€ million
Current assets
3,148
3,451
Non-current assets
226
132
Total assets
3,374
3,583
Current liabilities
403
391
Non-current liabilities
2,410
2,491
Total liabilities
2,813
2,882
Equity
561
701
Group’s carrying amount of the investment
112
140
Operating income
169
129
Net profit
94
65
Other comprehensive income
(163)
(19)
Total comprehensive
income
(69)
46
Dividends paid to the Group
14
17
doValue Greece Loans and Credits
Claim Management S.A.
2022
2021
€ million
€ million
Current assets
90
128
Non-current assets
347
361
Total assets
437
489
Current liabilities
95
157
Non-current liabilities
121
140
Total liabilities
216
297
Equity
221
192
Group's share in equity
44
38
Goodwill and other adjustments ⁽¹⁾
1
12
Group’s carrying amount of the investment
45
50
Operating income⁽¹⁾
72
77
Net profit⁽¹⁾
53
54
Total comprehensive
income⁽¹⁾
53
54
Dividends paid to the Group
5
3
(1)
In the year ended
31 December 2022, other
adjustments of € 11
million (expense) refer mainly to
the elimination of the
Group’s share of the associate’s gains
relating to upstream transactions with the Bank.
The Group’s share of the associate’s
operating income, net profit and total comprehensive income, after the
above adjustments
amount to € 3 million,
€
0.5 million loss, €
0.5 million loss respectively.
.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
The carrying amount, in aggregate, of the Group's joint ventures as at 31 December 2022 amounted to € 6 million (2021: € 65 million
including Grivalia
Hospitality S.A).
The Group’s
share of
profit and
loss and
total comprehensive
income of
the above
entities was
immaterial (2021: € 1 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., Odyssey GP S.a.r.l.,
and Perigenis
Business Properties S.A.)
as at 31 December
2022 amounted
to € 9 million
(2021: € 12 million).
The Group’s
share of profit
and loss
and total comprehensive income of the above
entities was immaterial (2021: 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 2022,
the
unrecognized
share of
losses for
the Group’s
joint ventures
amounted to
€ 2 million
(2021: € 2
million). The cumulative
amount of
unrecognized share of losses for
the joint ventures amounted to € 4 million (2021: € 24 million).
As
at
31
December
2022,
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.
A listing of the Group’s
consolidated structured entities is set out in note 23.
As at 31 December 2022, the face value of debt securities issued by the securitizations sponsored by the Group amounted
to € 5,258
million, of which € 4,705 million were held by the Bank (2021: € 5,916 million, of which € 5,364 million were held by the Bank) (notes
20 and 34).
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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,
note 20).
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.
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
2022,
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
2022 is also
provided (i.e.
fees, interest
income, net
gains or
losses on revaluation
and
derecognition):
31 December 2022
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⁾
4,911
-
-
4,911
Investment securities
1,486
71
17
1,574
Other Assets
-
2
-
2
Total
6,397
73
17
6,487
Total
income from Group interests
77
48
2
127
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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
(1)
Includes the senior and mezzanine notes of the Pillar, Cairo and Mexico securitizations (note 20).
For the
year ended
31 December
2022, total
income related
to the
Group’s
interests
from securitizations
mainly includes:
(i) €
81
million, € 2 million
and € 0.7 million
interest income
of debt securities retained
by the Group measured
at amortized cost
,
at FVOCI
and FVTPL
respectively
and (ii)
€ 6.9
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)
€ 50.1 million income
relating to management
fees
and other commissions for
the management of funds
and (ii) € 2.5 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 2022, 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
€ 3,163 million
(2021: € 3,303
million) and
€ 33,227
million (2021: €
24,856
million), respectively.
26.
Property and equipment
31 December 2022
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
675
198
507
336
1,716
Transfers
(10)
0
6
-
(4)
Transfers
from/to repossessed assets
1
(2)
-
-
(1)
Additions
24
18
29
18
89
Disposals, write-offs and adjustment to RoU ⁽²⁾
(9)
(8)
(5)
(26)
(48)
Impairment
(6)
(0)
(11)
-
(17)
Held for sale (note 30)
1
-
-
-
1
Balance at 31 December
676
206
526
328
1,736
Accumulated depreciation:
Balance at 1 January
(217)
(155)
(423)
(106)
(901)
Transfers
1
0
-
-
1
Disposals, write-offs and adjustment to RoU ⁽²⁾
8
8
4
6
26
Charge for the year
(13)
(9)
(24)
(41)
(87)
Balance at 31 December
(221)
(156)
(443)
(141)
(961)
Net book value at 31 December
455
50
83
187
775
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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/merger
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)
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)
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.
As at
31 December
2022, the
RoU assets
amounting to
€ 187
million (31
December 2021:
€ 230
million) refer
to leased
office and
branch premises, ATM
locations, residential properties
of € 180 million (31 December 2021: € 223 million)
and motor vehicles of € 7
million (31 December 2021: € 7 million).
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:
2022
2021
€ million
€ million
Balance at 1 January
1,492
1,459
Additions
4
3
Arising from acquisition
-
33
Transfers
from/to repossessed assets
13
3
Other transfers
9
13
Disposals
(119)
(31)
Net gain/(loss) from fair values adjustments
32
30
Held for sale (note 30)
(21)
(18)
Balance at 31 December
1,410
1,492
As at 31 December
2022, RoU assets
that meet the definition
of investment
property amount to
€ 14 million (31
December 2021: €
14 million). The respective lease liabilities are presented
in “other liabilities” (note 35).
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
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 2022,
an amount
of €
88 million
(2021: €
93 million)
was
recognized
as rental
income from
investment property
in income from
non banking services (note
8). As at
31 December 2022,
the contractual
obligations in relation
to
investment
property
amounted
to
approximately
€
4
million,
and
are
associated
with
property
redevelopment,
repairs
and
maintenance.
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.
2022
2021
€ million
€ million
Residential
11
21
Commercial
1,358
1,420
Land Plots
32
35
Industrial
9
16
Total
1,410
1,492
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 2022, 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 2022, 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 by € 31 million.
In 2022, the Greek real
estate market
attracted significant
investment capital,
especially in the first
half, when
the pace of domestic
and
foreign
investment
activity returned
to
the
pre-Covid
19 pandemic
level.
However,
towards
the
end
of
the
year,
the rise
of
inflation
and
interest
rates,
as
well
as
the
increase
in
energy
and
construction
costs
as
a
result
of
the
Ukraine
war,
led
market
participants to become
more cautious and
selective in their investment
decisions. Nevertheless, the demand
for quality sustainable
properties outstrips current
market supply,
therefore the value
of these assets is expected
to demonstrate resilience
going forward,
even during an economic slowdown.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
In this
volatile economic
environment,
the diversification
of the Group’s
investment
property portfolio,
which primarily
consists of
office and big
box/supermarket
properties, has
proven to
be an effective
shield, as despite
the increase of
interest rates
in 2022, it
recorded
fair
value
gains
of c.
€34 million
mainly due
to
the increase
of the
value
of specific
offices leased
to
prime tenants
and
logistics (note 10).
In
particular,
the
characteristics
of
the
Group’s
investment
property
portfolio
in
terms
of
tenant’s
quality
(AAA
tenants)
and
sustainable lease
contracts that
were also favored
by CPI indexation,
as well as
the specifications
of the properties
were taken
into
account by the valuators in determining
the fair value of the Group’s
investment properties.
Moreover,
the
office
and
logistics
sectors
continue
to
exhibit
strong
supply/demand
fundamentals
in
Greece,
whereas
the
retail
sector,
considering
the
recovery
in
private
consumption
in
the
post-pandemic
environment,
is
experiencing
a
strong
leasing and
investment activity especially in big box retail
properties, although it lags in rental growth compared
to other sectors.
The Group will continue
to monitor closely the
effect of the economic
environment and
the trends that will be
demonstrated in the
investment real
estate market
in the upcoming
period on the valuation
of its investment
properties, while intensifying
its efforts
to
implement “green” energy investments
on its properties
.
28.
Intangible assets
The movement of computer software and
other intangible assets which refer to
purchased and developed software is as follows:
2022
2021
€ million
€ million
Cost:
Balance at 1 January
587
539
Arising from acquisitions
-
2
Transfers
(6)
(12)
Additions
94
77
Disposals and write-offs
(7)
(3)
Impairment
(10)
(16)
Balance at 31 December
658
587
Accumulated amortisation:
Balance at 1 January
(320)
(287)
Transfers
-
0
Amortisation charge for the year
(49)
(36)
Disposals and write-offs
7
3
Balance at 31 December
(362)
(320)
Net book value at 31 December
296
267
As at
31 December
2022, the
Group’s
remaining carrying
amount of
goodwill amounts
to €
1.6 million
(31 December
2021: €
1.6
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 2022 Consolidated Financial Statements
29.
Other assets
2022
2021
€ million
€ million
Receivable from Deposit Guarantee and Investment
Fund
495
706
Repossessed properties and relative prepayments
577
597
Pledged amount for a Greek sovereign risk financial guarantee
234
235
Balances under settlement⁽¹⁾
51
18
Deferred costs and accrued income
92
104
Other guarantees
215
128
Income tax receivable⁽²⁾
30
30
Other assets
286
247
Total
1,980
2,065
(1)
Includes settlement balances with customers and brokerage activity.
(2)
Includes withholding taxes, net of provisions.
In September 2022, the law 4370/2016 in respect of the deposit guarantee schemes of the Greek credit institutions was amended by
law 4972/2022. Pursuant to the
law’s amendments, the receivable from the
Hellenic Deposit and
Investment Guarantee Fund (HDIGF)
referring to the “Supplementary Deposit Cover Fund”
is refundable to the
Greek credit institutions in three equal
instalments, starting
three months after the
enactment of the
law and each
year thereafter, subject to the provisions of
the article 25a
of the law. Following
that, in December 2022 an amount of € 210 million was refunded to
the Bank by HDIGF.
As at 31 December 2022, other assets net of provisions, amounting to
€ 286 million include, among others, receivables related
to (a)
prepayments to suppliers, (b) public entities,
(c) property management activities (d) legal cases and e) project
Triangle (note 30).
30.
Disposal groups classified as held for sale
2022
2021
€ million
€ million
Assets of disposal groups
Real estate properties
15
31
Loans related to project Solar (note 20)
69
-
Village Roadshow Operations Hellas S.A. and
Intertech S.A. – International Technologies
-
81
IMO 03 E.A.D. (note 23)
-
6
Credit card acquiring - project Triangle
-
28
Total
84
146
Liabilities of disposal groups
Village Roadshow Operations Hellas S.A.
-
72
Credit card acquiring - project Triangle
-
37
Other liabilities related to project Solar (note 20)
1
-
Total
1
109
Real estate properties
Starting
from
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), has
gradually
classified as
held for
sale (HFS)
certain pools
of real
estate
assets of
total remaining
carrying amount
ca. €
15 million
as at
31 December
2022 (31
December 2021:
€ 31
million), after
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
their
remeasurement
in
accordance
with
the
IFRS
5
requirements.
The
Group
remains
committed
to
its
plan
to
sell
the
aforementioned assets, which is expected
to be completed within 2023, and undertakes
all necessary actions towards this direction.
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 2022.
Eurobank Merchant Acquiring business -Project ‘Triangle’
On 7 December 2021, the Company
announced that its subsidiary Eurobank
S.A. (“Eurobank”) had signed a binding
agreement with
Worldline B.V.
(“Worldline”) that included, among others, a) the sale of 80% of Eurobank’s
merchant acquiring business (“PayCo”) to
Worldline and b) a long term agreement for the
exclusive distribution of PayCo products in Greece through Eurobank’s sales network.
On the basis of the aforementioned agreement,
as of 31 December 2021 “PayCo” was classified as held for
sale.
On 30 June 2022, after receiving all necessary approvals, the
spin-off of the Bank’s merchant
acquiring business to Cardlink Payment
Institution S.A.
(“Cardlink One”),
a licensed payment
institution, and
the transfer
of 80% of
Cardlink One’s
shares to
Worldline was
completed
for
a
cash
consideration
of
€
254
million,
after
certain
adjustments.
Furthermore,
under
the
related
shareholders’
agreement,
the
remaining
20%
interest
in
“Cardlink
One”
is
subject
to
a
combination
of
call
and
put
options,
exercisable
after
approximately 3 years.
As a result
of the sale transaction
for the 80%
shareholding and based
on the terms of
the shareholders’
agreement in reference
to
the combination of options for the
20% shareholding, the Bank has
fully derecognised the merchant acquiring business, since
through
the combination of
options, access to substantially
all the returns
associated with the
remaining 20% ownership
interest is deemed
to be transferred to Wordline
at the time of the transaction.
On this basis, other than
the cash consideration, on 30 June 2022
the Bank recognised in other assets
a financial asset to be
measured
at
fair
value
through
profit
or loss
equal
to
€ 68.5
million,
representing
the present
value
of the
contractual
right
to
receive
the
options’ estimated exercise
price at the time of their execution.
In addition, on the same date, the Bank recognised in
other assets €
15.1 million deferred consideration
in accordance with the terms of the agreement.
Following the
above, the resulting
gain from
the transaction
that was
recognised in
“Other income/(expenses)”,
amounted to
ca. €
325 million before tax (ca. € 231 million after
tax), including the costs directly attributable
to the transaction.
...... .... .. ..
31.
Due to central banks
2022
2021
€ million
€ million
Secured borrowing from ECB
8,774
11,663
As at 31 December 2022, the Group had € 8.9
billion outstanding principal under the TLTRO
III refinancing program of the European
Central
Bank
(ECB),
following
the
maturity
of
€1.9
billion
and
the
early
repayment
of
1
billion
during
the
quarter,
whereas
the
respective net
income recognized
under interest
expense amounted
to €
53 million
(note 6).
On the
basis that
the Group
met the
required lending
thresholds, the above
income was
calculated under
the program’s
more favorable
interest rates
that provides
for
an interest
rate of
-1% for the special
interest period
from 24 June 2020
to 23 June
2022 and the average
deposit facility rate
(DFR)
as set by ECB’s decisions,
thereafter.
32.
Due to credit institutions
2022
2021
€ million
€ million
Secured borrowing from credit institutions
764
270
Borrowings from international financial and similar institutions
663
619
Deposits from banks received as collateral⁽¹⁾
294
27
Current accounts and settlement balances with banks
76
54
Interbank takings
17
3
Total
1,814
973
(1)
for 2022 the amount presented is after offsetting € 932 million against derivatives assets and liabilities (note 5.2.1.4)
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
As
at
31
December
2022,
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
2022
2021
€ million
€ million
Savings and current accounts
42,840
40,601
Term deposits
14,198
12,367
Repurchase agreements
201
200
Total
57,239
53,168
For the year
ended 31 December
2022, due to
customers for
the Greek and
International operations
amounted to
€ 39,575 million
and € 17,664 million, respectively (2021: € 37,016 million and € 16,152 million, respectively).
34.
Debt securities in issue
2022
2021
€ million
€ million
Securitisations
553
552
Subordinated notes (Tier 2)
1,259
948
Medium-term notes (EMTN)
1,740
1,052
Total
3,552
2,552
Securitisations
The carrying value
of the class A
asset backed
securities issued by
the Bank’s
special purpose entities
Karta II plc
and Astarti DAC
as
at 31 December 2022, amounted to € 303 million and € 250 million, respectively.
Tier 2 Capital instruments
On 30 November 2022, the Company announced the issuance of a € 300 million
subordinated Tier II debt instrument which matures
in
December
2032,
is
callable
in
December
2027
offering
a
coupon
of
10%
per
annum
and
is
listed
on
the
Luxembourg
Stock
Exchange’s
Euro
MTF
market.
On
the
same
date,
the
Bank
issued
a
subordinated
instrument
of
equivalent
terms,
held
by
the
Company.
The proceeds from
the issue will
support Eurobank
Holding’s group
strategy to
ensure ongoing
compliance with
its total
capital adequacy ratio requirements
and will be used for Eurobank S.A.’s
general funding purposes.
Further information about the issue is provided in the relevant
announcement published in the Company’s website
on 30 November
2022.
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 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.
Covered bonds
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)
In June 2022, the Bank proceeded with the issue of a preferred senior debt with a nominal value of € 500 million, of which € 7 million
were held by a Bank’s
subsidiary. The bond, which
is listed in the Luxembourg Stock Exchange’s
Euro MTF market, matures
in March
2025 and is callable at par in March 2024, offering a coupon
of 4.375% per annum.
This transaction
is another step
towards the
implementation of
Eurobank’s
medium-term strategy
to meet its
MREL requirements.
The proceeds from the issue will be used for Eurobank’s
general funding purposes.
Further information about the issue is provided in the relevant
announcement published in the Bank’s
website on 1 June 2022.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
During the year
ended 31 December 2022,
the Bank proceeded
with the issue of
medium term notes
of face value
of € 286 million,
which were designated for Group’s
customers.
Post balance sheet event
In January 2023, the Bank completed
the issue of a € 500 million
senior preferred note.
The bond, which is listed
in the Luxembourg
Stock
Exchange’s
Euro
MTF market,
matures
in January
2029 and
is callable
at
par in
January 2028,
offering
a coupon
of 7%
per
annum.
The proceeds from the issue will
support Group’s strategy to ensure ongoing compliance with its MREL requirements and will be
used
for the Bank’s general
funding purposes.
Further information about the issue is provided in the
relevant announcement published in the Bank’s
website on 20 January 2023.
35.
Other liabilities
2022
2021
€ million
€ million
Lease liabilities
205
248
Balances under settlement⁽¹⁾
444
374
Deferred income and accrued expenses
165
157
Other provisions
71
95
ECL allowance for credit related commitments (note
5.2.1.2)
57
48
Standard legal staff retirement
indemnity obligations (note 36)
19
23
Employee termination benefits
61
64
Sovereign risk financial guarantee
33
36
Income taxes payable
14
15
Deferred tax liabilities (note 13)
31
26
Trading liabilities
419
43
Other liabilities
182
229
Total
1,701
1,358
(1)
Includes settlement balances relating to bank cheques and remittances, credit card transactions, other
banking and brokerage activities.
As
at
31
December
2022,
other
liabilities
amounting
to
€
182
million
mainly
consist
of
payables
relating
with
(a)
suppliers
and
creditors, (b) contributions to insurance
organizations, and (c) duties and other taxes.
As at 31
December 2022, trading
liabilities amounting to
€ 419 million
(31 December 2021:
€ 43 million)
reflect the higher
levels of
short positions in debt
instruments, entered
into in the context
of the Group’s
economic hedging strategies,
aiming to manage on
a
pool basis
market
driven risks
that derive
from asset
positions. For
the year
ended 31
December 2022,
the gain
recognized
in net
trading income from the aforementioned
short positions amounted to € 107 million.
As at 31
December 2022, other
provisions amounting to €
71 million (2021:
€ 95 million)
mainly include:
(a) € 28
million for outstanding
litigations against
the Group
(note 42) and
(b) € 43
million for
other operational
risk events,
of which €
22 million is
relating to
the
sale of former Romanian subsidiaries.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
The movement of the Group's other provisions,
is presented in the following table:
31 December 2022
Litigations and
claims in
dispute
Other
Total
€ million
€ million
€ million
Balance at 1 January
64
31
95
Amounts charged during the year
13
12
25
Amounts used during the year
(46)
(1)
(47)
Amounts reversed during the year
(3)
(2)
(5)
Foreign exchange and other movements
-
3
3
Balance at 31 December
28
43
71
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
For the year ended 31
December 2022, an amount of
€ 48 million has
been recognised in the Group’s income statement for employee
termination benefits mainly in respect of the new
Voluntary Exit Scheme (VES) that
was launched by the Group in February
2022 for
eligible units
in Greece
and offered
to employees
over a
specific age
limit. The
new VES
is implemented
through either
lump-sum
payments
or
long-term
leaves
during
which
the
employees
will be
receiving
a
percentage
of
a
monthly
salary,
or
a
combination
thereof. The estimated
saving in personnel expenses amounts to € 16 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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
The movement of the liability for standard
legal staff retirement
indemnity obligations is as follows:
2022
2021
€ million
€ million
Balance at 1 January
23
22
Arising from acquisition
-
0
Current service cost
3
3
Interest cost
0
0
Past service cost and (gains)/losses on settlements
49
38
Remeasurements:
Actuarial (gains)/losses arising from changes in financial assumptions
(2)
(1)
Actuarial (gains)/losses arising from changes in demographic assumptions
(0)
0
Actuarial (gains)/losses arising from experience and other adjustments
(2)
0
Benefits paid
(52)
(39)
Exchange adjustments
0
(0)
Balance at 31 December
19
23
The benefits paid
by the Group
during 2022, in the
context of the
Voluntary Exit
Scheme (VES) (note
35), amounted to
€ 52 million.
The provision for staff retirement
obligations of the staff that participated
in the above scheme, amounted to € 2 million.
The significant actuarial assumptions (expressed as weighted
averages) were as follows:
2022
%
2021
%
Discount rate
3.4
0.6
Future salary increases
2.9
1.6
As at 31
December 2022, the
assumption for the price
inflation (weighted average) is 2.6%
(2021: 2%) and
has been taken into account
in determining the above actuarial assumptions for future
salaries increases.
As at 31 December 2022,
the average duration of the standard legal staff retirement indemnity obligation was 8 years (2021: 8 years).
A quantitative
sensitivity analysis
based on
reasonable
changes to
significant actuarial
assumptions as
at 31
December 2022
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 (€ 0.7 million)/ € 0.7 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 € 0.7 million/(€ 0.7 million).
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
37.
Share capital, share premium and treasury shares
As
at
31 December
2022, the
par value
of the
Company's
shares is
€ 0.22
per
share
(2021: €
0.22). All
shares
are
fully paid.
The
movement of share capital and share
premium is as follows:
Share capital
Share
premium
€ million
€ million
Balance at 1 January 2021
815
8,055
Reclassification of treasury shares
1
1
Balance at 31 December 2021
816
8,056
Balance at 1 January 2022
816
8,056
Offsetting of equity accounts (note 38)
-
(6,895)
Share capital increase following the exercise of share options
0
0
Balance at 31 December 2022
816
1,161
In the year ended 31 December 2022, the Group has decided to
proceed with the presentation of the issued share capital on the face
of the
balance sheet
instead of
the outstanding
share capital,
and changed
the presentation
of the
treasury shares
accordingly.
In
particular,
the Group has
proceeded with the
reclassification of
the nominal value
of the treasury
shares and their
premium, which
were
previously
deducted
from
the
“Share
capital”
and
“Share
premium”
respectively,
within
“Reserves
and
retained
earnings”.
Comparative information has been adjusted, as of 1 January 2021, resulting in an increase of the share capital and share premium by
€ 1 million each against € 2 million decrease of “Reserves and
retained earnings”.
Share capital increase
Following the exercise
of share options
granted to key
executives of the
Group under the current
share options’ plan (note
39), and
by virtue
of the decision
of the Board
of Directors
of the Company
on 30 August
2022, the Company’s
share capital
increased by €
333,444.32 through the issue of 1,515,656 new common voting shares, of a nominal value of € 0.22 per share and exercise
price of €
0.23 per
share. The
difference
between the
exercise
price of
the new
shares and
their nominal
value, net
of the
expenses directly
attributable to the equity transaction,
amounted to € 2,136 and was recorded
in the account “Share premium”.
Following the above
increase,
as
at
31
December
2022,
the
share
capital
of
the
Company
amounts
to
€
816,349,051.76,
divided
into
3,710,677,508
common shares with a nominal value of € 0.22 each. The new shares were
listed on the Athens Exchange on 14 September
2022.
The following is an analysis of the movement in the number of the
Company’s shares outstanding:
.
Number of shares
Issued
Shares
Treasury
Shares
Net
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
Balance at 1 January 2022
3,709,161,852
(784,540)
3,708,377,312
Share capital increase following the exercise of share options
1,515,656
-
1,515,656
Purchase of treasury shares
-
(1,745,293)
(1,745,293)
Sale of treasury shares
-
2,269,797
2,269,797
Balance at 31 December 2022
3,710,677,508
(260,036)
3,710,417,472
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.
As at 31 December 2022,
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
the cost of
the treasury shares
presented above, which is
included in
other reserves (note
38), amounted to
€ 0.3 million
(31 December
2021: € 0.7 million).
In addition,
as at 31
December 2022 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 (2021: 64,163,790).
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 2021
396
831
415
8,212
(13,462)
(3,608)
Reclassification of treasury shares (note 37)
-
-
-
(2)
-
(2)
Net profit/(loss)
-
-
-
-
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 options plan
-
-
-
-
2
2
Purchase/sale of treasury shares
-
-
-
1
-
1
Other
-
-
(1)
0
-
(1)
Balance at 31 December 2021
411
830
322
8,479
(13,374)
(3,333)
Balance at 1 January 2022
411
830
322
8,479
(13,374)
(3,333)
Net profit
-
-
-
-
1,330
1,330
Transfers between reserves
73
(1)
-
195
(267)
-
Offsetting of equity accounts
(214)
-
-
(6,705)
13,814
6,895
Debt securities at FVOCI
-
-
(323)
-
-
(323)
Cash flow hedges
-
-
-
(0)
-
(0)
Foreign currency translation (note 23.1)
-
-
-
77
-
77
Gains/(losses) from equity securities at FVOCI
-
-
24
-
-
24
Associates and joint ventures
-changes in the share of other comprehensive
income, net of tax
-
-
(33)
1
(0)
(32)
Actuarial gains/(losses) on post employment
benefit obligations, net of tax
-
-
-
-
4
4
Share options plan (note 39)
-
-
-
-
4
4
Purchase/sale of treasury shares (note 37)
-
-
-
1
0
1
Other
-
-
-
(1)
-
(1)
Balance at 31 December 2022
270
829
(10)
2,047
1,511
4,646
As at 31 December 2022, other reserves comprise, among others, a) corporate law reserves of
€ 8 million, pursuant to the provisions
of the Greek company law in force
(2021: € 6,714 million) -
see below, b) € 1,568 million reserves relating to
dividends and gains from
the
sale
of
participations
(2021:
€
1,373
million),
c)
€
125
million
accumulated
loss
relating
to
foreign
operations’
translation
differences, including € 24
million accumulated gain
relating to net investment
hedging - NIH (2021: € 203
million accumulated loss,
including
€
27
million
gain
relating
to
NIH)
and
d)
€
12
million
accumulated
loss
from
cash
flow
hedging
(2021:
€
12
million
accumulated loss).
.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Offsetting of equity accounts
On 21 July
2022, the Annual
General Meeting (AGM) of
the shareholders of Eurobank
Holdings approved, among others,
the offsetting
of a) the total
of the account “Corporate
law Reserves” amounting
to € 6,919.3 million
and b) part of the
account “Share Premium”
amounting to € 6,894.4 million with accumulated losses of equivalent value amounting to € 13,813.7 million, included in the account
“Retained earnings/(losses)”.
The above offsetting,
which was approved by
the competent Supervisory
Authorities in October 2022,
did not affect the Company’s
own and regulatory capital.
Dividends
Pursuant to the provisions of the Company
Law 4548/18, companies are required to pay
dividends of at least 35% of after-tax
profit,
after necessary deductions for the formation
of the statutory reserve and other credit balances in
the income statement that
do not
arise from realized earnings.
For the
financial year
2022, Eurobank
Holdings has
no profits
and therefore
will not
distribute minimum
dividend. Furthermore,
in
2023 the
Group has
announced that
the amount
earmarked for
dividend distribution
will be used
in an
optimal way
to bid
for the
1.4% HFSF stake through
a share buyback scheme (note 45).
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. The exercise price of
each new share would be equal
to
€
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.
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,
are defined and approved annually by the Board of Directors
in accordance with the applicable legal and
regulatory framework, as well as the policies of the
Group.
The options
are exercisable
in portions,
annually during
a period
from one
to five
years. 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. The corporate
actions that adjust the number and the price of shares also adjust accordingly
the share options.
In addition, the share options also comply with the restrictions regarding
remuneration of Law 3864/2010, as each time in force.
The movement of share options during the period is analysed as follows:
Share options granted
2022
Balance at 1 January 2022
12,374,561
Options awarded during the year
11,654,117
Options cancelled during the year
(244,700)
Options exercised during the year
(1,515,656)
Balance at 31 December 2022
22,268,322
Notes to the Consolidated Financial Statements
.
145
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31 December 2022 Consolidated Financial Statements
The share options outstanding at the end of the period have
the following expiry dates:
Share options
Expiry date ⁽¹⁾
31 December 2022
2023
5,551,925
2024
7,131,580
2025
3,120,978
2026
2,595,139
2027
2,595,139
2028
1,273,561
Weighted average remaining contractual
life of share
options outstanding at the end of the period
24 months
(1)
Based on the earliest contractual exercise date.
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,
additional
conditions
on
certain
share
options
granted
to
key
executives
who
are
subject
to
any
remuneration
restrictions of Law 3864/2010 at the time of grant, are treated as non-vesting conditions. 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 December 2022 was € 0.63 (2021: € 0.42). The significant inputs into
the model were
a share price of €
1.021 (2021: € 0.7823) at
the grant date,
exercise price of
€ 0.23, annualized dividend
yield of 3%
(2021:
3%),
expected
average
volatility
of
38%
(2021:
68%),
expected
option
life
of
1-5
years,
and
a
risk-free
interest
rate
corresponding to the
options’ maturities, based
on the Euro 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 counterparty
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
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
transferred
loans. As at
31 December 2022,
the securitizations’
issues held by
third parties amounted
to € 553
million (2021: €
552
million) (note 34).
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
2022
2021
€ million
€ million
Securities held for trading
44
11
Loans and advances to customers
14,186
14,344
-securitized loans⁽¹⁾
3,411
4,232
-pledged loans under covered bond program
4,261
4,360
-pledged loans with central banks
6,309
5,545
-other pledged loans
205
207
Investment securities
3,027
6,930
Total
17,257
21,285
(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
2022, the Group
had obtained through
reverse repos
securities of face
value of €
134
million, of which € 15 million
sold under repurchase agreements and € 67 million pledged with
central banks (2021: € 598 million face
value of
which €
60 million
sold under
repurchase
agreements and
€ 505
million pledged
with central
banks). Furthermore,
in the
comparative
year,
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.
As at 31 December 2022, 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
€
10,512
million,
while
the
associated
liability
from
the
above
transactions
amounted to € 10,412
million, of which € 114 million
repo agreements offset
in the balance sheet against
reverse repo deals
(notes
31, 32, 33,
34 and 5.2.1.4)
(2021: cash value
€ 13,583 million
and liability €
13,287 million, of
which € 591
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
2022, 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 2022, the right-of-use assets included in property plant and equipment amounted to €
187 million (31 December
2021: € 230 million) (note
26), while those that
meet the definition of
investment property
amounted to € 14 million
(31 December
2021: € 14 million) (note 27).
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Lease Liabilities
The
lease liability
included under
other
liabilities
amounted
to
€ 205
million
as at
31 December
2022 (31
December 2021:
€ 248
million) (note 35). The
maturity analysis of lease
liabilities as at 31
December 2022, 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
2021: € 3 million).
The Group had total cash outflows for
leases of € 39 million in 2022 (2021: € 39 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:
2022
2021⁽¹⁾
€ million
€ million
Not later than one year
303
343
1-2 years
83
108
2-3 years
65
85
3-4 years
53
56
4-5 years
36
35
Later than 5 years
164
178
Lease Payments:
704
805
Gross investment in finance leases
704
805
Less: unearned finance income
(66)
(51)
Net investment in finance leases
638
754
Less: impairment allowance
(139)
(217)
Total
499
537
(1)
Comparative information has been adjusted in order to align with
current year’s presentation of the finance lease receivables.
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
The maturity
analysis of operating
lease receivables,
based on the
undiscounted lease
payments to
be received after
the reporting
date, is provided below:
2022
2021
€ million
€ million
Not later than one year
92
96
One to two years
85
89
Two to three years
78
82
Three to four years
70
75
Four to five years
64
70
More than five years
250
304
Total
639
716
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:
2022
2021
€ million
€ million
Financial guarantee contracts
1,807
1,068
Commitments to extend credit
3,898
1,572
Other credit related commitments
1,053
634
Total
6,758
3,274
The credit
related commitments
within the scope
of IFRS 9
impairment requirements
amount to
€ 10.5 billion
(2021: € 6.8
billion),
including revocable loan commitments
of € 3.7 billion (2021: € 3.6 billion), while
the corresponding allowance for
impairment losses
amounts to € 57 million (2021: € 48 million).
In addition, the Group has issued a sovereign risk financial guarantee of € 0.23 billion (31 December 2021: € 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 € 24.4
million as at 31 December
2022 (2021: € 20 million),
representing 15% of its resolution contribution
payment obligation to the Single Resolution
Fund (SRF) for the years 2016-2022.
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 2022,
the contractual commitments for the acquisition of own used property, equipment and intangible assets
amounted to € 46 million (2021: € 43 million).
Post balance sheet event
In February 2023, the Bank signed a binding pre-agreement with a third party for
the acquisition of a Cypriot holding company, which
indirectly owns a land plot to be developed into a modern office complex and proceeded with an advance payment of €15.2m, in line
with the agreement. The completion of the agreement is expected
to take place in 2024.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
Legal proceedings
In the
year ended
31 December
2022, the
Bank concluded
an agreement
for the
acquisition of
the remaining
50% of
Hellenic Post
Credit S.A share capital (note 23.1), settled by offsetting receivables it held from the other shareholder. As a result, related provisions
of €
34 million
which had
been recognized,
were used
to offset
the respective
receivables
,
leading to
a significant
decrease of
the
provisions for
legal proceedings
outstanding against
the Group,
which as at
31 December 2022
amounted to
€ 28 million
(note 35)
(31 December 2021: € 64 million).
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, is closely monitoring the developments to the relevant
cases
and
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.
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 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
and
clearing
services,
cash
management
and
trade
services
and
investment
banking
services including corporate finance, merger and
acquisitions advice.
-
Global Markets
& Asset Management:
incorporating financial
instruments trading,
services to institutional
investors,
as well as,
specialized financial
advice and intermediation.
In addition, this
segment incorporates
mutual fund products,
institutional asset
management and equity brokerage.
-
International: incorporating operations
in Bulgaria, Serbia, Cyprus, Luxembourg and Romania.
-
Investment
Property:
incorporating
investment
property
activities relating
to
a diversified
portfolio
of
commercial
real
estate
assets.
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, d) the
Group’s
share of results
of Eurolife Insurance group, e) the results related
to the Group’s transformation
projects and initiatives, the notes of Cairo, Pillar and
Mexico
securitizations,
which were
retained
by the
Group,
and the
Group’s
share of
results of
doValue
Greece Loans
and Credits
Claim Management S.A. and f) the effect of the liquidation of “ERB Istanbul
Holding A.S.” in June 2022 (note 23.1).
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.
Notes to the Consolidated Financial Statements
.
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31 December 2022 Consolidated Financial Statements
43.1
Operating segments
31 December 2022
Retail
Corporate
Global Markets &
Asset Mngt
Investment
Property
International
Other and
Elimination
center
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Net interest income
437
374
284
(12)
457
10
1,550
Net commission income
92
115
99
0
141
1
449
Other net revenue
324
2
703
183
(6)
(69)
1,136
Total external revenue
854
490
1,087
171
592
(58)
3,135
Inter-segment revenue
23
38
(36)
2
(2)
(24)
-
Total revenue
876
528
1,051
173
589
(83)
3,135
Operating expenses
(409)
(125)
(68)
(39)
(278)
0
(917)
Impairment losses relating to loans
and advances to customers
(223)
(18)
-
-
(32)
(17)
(291)
Other impairment losses and provisions (note 12)
(6)
(3)
(18)
(3)
(17)
(62)
(108)
Share of results of associates and
joint ventures
(0)
0
(0)
-
-
18
18
Profit/(loss) before tax before restructuring costs
239
383
965
132
262
(143)
1,837
Restructuring costs (note 12)
(24)
(1)
(1)
-
(14)
(62)
(102)
Profit/(loss) before tax
215
381
965
132
248
(205)
1,735
Profit/(loss) before tax attributable to non
controlling interests
-
-
-
-
0
(0)
0
Profit/(loss) before tax attributable
to shareholders
215
381
965
132
248
(205)
1,735
31 December 2022
Retail
Corporate
Global Markets &
Asset Mngt
Investment
Property
International
Other and
Elimination
center⁽¹⁾
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
Segment assets
14,817
16,522
13,088
1,445
21,704
13,884
81,460
Segment liabilities
30,535
12,441
5,568
308
19,736
6,154
74,742
The International segment is further analyzed
as follows:
31 December 2022
Bulgaria
Serbia
Cyprus
Luxembourg
Romania
Total
€ million
€ million
€ million
€ million
€ million
€ million
Net interest income
215
70
136
34
2
457
Net commission income
73
22
40
8
(1)
141
Other net revenue
(5)
1
1
0
(2)
(6)
Total external revenue
282
93
177
42
(2)
592
Inter-segment revenue
0
(0)
0
(3)
-
(2)
Total revenue
283
93
177
39
(2)
589
Operating expenses
(136)
(63)
(50)
(23)
(5)
(278)
Impairment losses relating to loans and
advances to customers
(37)
(14)
(1)
(0)
20
(32)
Other impairment losses and provisions
(5)
(4)
(1)
(0)
(7)
(17)
Share of results of associates and joint
ventures
-
-
-
-
0
0
Profit/(loss) before tax before restructuring
costs
105
11
125
15
6
262
Restructuring costs (note 12)
-
(14)
-
-
-
(14)
Profit/(loss) before tax
105
(3)
125
15
6
248
Profit/(loss) before tax attributable to non
controlling interests
0
0
-
-
-
0
Profit/(loss) before tax attributable to
shareholders
105
(3)
125
15
6
248
Notes to the Consolidated Financial Statements
.
151
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31 December 2022 Consolidated Financial Statements
31 December 2022
Bulgaria
Serbia
Cyprus
Luxembourg
Romania
International
€ million
€ million
€ million
€ million
€ million
€ million
Segment assets⁽²⁾
7,944
2,504
8,793
2,304
159
21,704
Segment liabilities⁽²⁾
7,146
2,217
8,031
2,112
230
19,736
31 December 2021
Retail
Corporate
Global 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
Profit/(loss) before tax 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 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
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
-
(5.11)
-
(1)
-
(7)
Profit/(loss) before tax
83
(2)
87
8
(15)
161
Profit/(loss) before tax attributable to non
controlling interests
0
(1)
-
-
-
(1)
Profit/(loss) before tax attributable to
shareholders
83
(1)
87
8
(15)
163
Notes to the Consolidated Financial Statements
.
152
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31 December 2022 Consolidated Financial Statements
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
(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:
2022
2021
€ million
€ million
Lending related activities
1,445
1,522
Deposits, network and asset management activities
323
(88)
Capital markets
950
339
Non banking and other services
417
127
Total
3,135
1,900
Information on the Country by Country Reporting based
on Law 4261/2014 is provided in the Appendix.
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 22 – Investment securities
Note 23.1 – Shares in subsidiaries
Note 34 - Debt securities in issue
Note 42 - Contingent liabilities and other commitments
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).
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 2022,
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, including the amendments under law 4941/2022,
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 2022.
In 2023, Eurobank
Holdings announced its intention
to submit an offer
for
the buyback of its 52.08
million shares (corresponding
to
a participation
of 1.4%),
presently owned
by the
HFSF,
subject to
the receipt
of the
required approvals
from the
regulator and
the
General Meeting of the Company’s
Shareholders.
Fairfax
Group,
which
holds
32.99%
of
Eurobank
Holdings
voting
rights
as
of
31
December
2022
(31
December
2021:
33%),
is
considered to have significant
influence over the Company.
Notes to the Consolidated Financial Statements
.
153
|
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31 December 2022 Consolidated Financial Statements
In
January
2022,
an
occupational
insurance
fund
(“Institution
for
occupational
retirement
provision-occupational
insurance
fund
Eurobank’s
Group personnel”
henceforth “the
Fund”) was established
as a not-for
-profit legal
entity under
Law 4680/2020, for
the
benefit of the
employees of the
Company,
the Bank and certain
other Greek entities
of the Group,
which constitute the
sponsoring
employers of the Fund. Accordingly,
in line with IAS 24 Related Parties, the Fund is considered to
be related party to the Group.
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.
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) other related parties, as well as the relating
income and expenses are as follows:
31 December 2022
31 December 2021
Fairfax
Group⁽²⁾ ⁽⁴⁾
KMP and Entities
controlled or jointly
controlled by KMP⁽¹⁾
Other Related
Parties⁽³⁾
Fairfax
Group⁽²⁾
KMP and Entities
controlled or jointly
controlled by KMP⁽¹⁾
Other Related
Parties⁽³⁾
€ million
€ million
€ million
€ million
€ million
€ million
Loans and advances to
customers
73.45
5.69
0.14
0.01
4.95
26.52
Other assets
0.39
-
87.07
0.37
0.19
76.04
Due to customers
34.22
20.98
97.50
0.24
21.90
80.68
Debt securities in issue
81.98
1.27
102.47
-
0.20
-
Other liabilities
0.13
0.20
10.35
-
0.32
40.86
Net interest income
(0.69)
0.01
(4.68)
0.21
-
(2.52)
Net banking fee and
commission income
0.02
0.11
10.89
-
0.16
14.74
Net trading income
-
-
0.01
-
-
0.45
Impairment losses relating to
loans and advances including
relative fees
(0.55)
-
(62.75)
0.02
-
(89.75)
Other operating
income/(expenses)
9.56
(15.18)
(10.17)
5.93
(14.99)
(12.44)
Guarantees issued
1.97
-
-
-
0.01
4.65
Guarantees received
-
0.01
-
-
0.01
-
(1)
Includes the key management personnel of the Group and their close family members.
(2)
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
other related parties.
(3)
Other related parties
include associates, joint
ventures and as
of the first
half of 2022
the aforementioned
Eurobank Group’s personnel
occupational insurance
fund. In particular,
as at 31 December
2022 the outstanding balances of
transactions with the Fund
refer mainly to
deposits of € 1
million received from the
Fund.
(4)
As of 24 March 2022, the Bank ceased to have joint
control over its former joint venture Grivalia Hospitality S.A. (note 24). In addition,
in the third quarter of
2022, Fairfax
Group obtained control
over Grivalia Hospitality
S.A. Hence, as
at 31
December 2022, the
company is
considered to be
a related party
of the
Group.
For the year ended 31 December 2022, there were no
material transactions with the HFSF.
For the year ended 31
December 2022, an impairment of €
0.8 million (2021: € 0.2 million) has been
recorded against
loan balances
with Group’s
associates
and joint
ventures,
while the
respective
impairment allowance
amounted
to €
0.02 million
(31 December
2021: € 0.4 million).
Notes to the Consolidated Financial Statements
.
154
|
Page
31 December 2022 Consolidated Financial Statements
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 € 7.52 million (2021: € 7.35
million) and long-term employee benefits
of € 1.24
million (2021: €
1.17 million). Additionally, the Group has recognised €
1.94 million
expense relating
with equity settled
share based payments
(2021: € 0.52 million)
(note 39). Furthermore
,
as at 31
December 2022,
the defined benefit
obligation for
the KMP amounts
to € 1.58
million (31 December
2021: € 1.48
million), while the
respective cost
for the
year through
the income
statement
amounts to
€ 0.12
million (2021:
€ 0.12
million) and
the other
comprehensive
income
(actuarial gain) amounts to € 0.07 million (2021: € 0.05 million actuarial gain).
46.
External Auditors
The
Group
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:
2022
2021
€ million
€ million
Statutory audit⁽¹⁾
(3.0)
(2.8)
Tax certificate
(0.4)
(0.4)
Other audit related assignments
(1.1)
(1.2)
Non audit assignments
(0.1)
(0.2)
Total
(4.6)
(4.6)
(1)
Includes fees for statutory audit of the annual separate and consolidated financial statements.
It is noted
that the non-audit
assignment fees
of “KPMG Certified
Auditors S.A.”
Greece, statutory
auditor of the
Group, amounted
to € 0.08 million.
Notes to the Consolidated Financial Statements
.
155
|
Page
31 December 2022 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, 6 April 2023
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
.
156
|
Page
31 December 2022 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
2022.
(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 2022, 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 2022
Operating
income
Profit/(loss)
before tax
Tax on profit/(loss)
Current
tax
Number of
employees at 31
December
€ million
€ million
€ million
€ million
Greece
2,632
1,561
(365)
(6)
6,265
Bulgaria
282
109
(12)
(12)
3,016
Romania
(3)
(9)
(0)
(1)
16
Cyprus
164
115
(21)
(20)
450
Serbia
92
(1)
0
(0)
1,477
Luxembourg⁽¹⁾
48
22
(6)
(6)
104
Turkey (note 23.1)
(79)
(79)
(1)
(1)
-
Netherlands
(0)
(1)
-
-
-
Intra-Group amounts
(1)
-
-
-
Total
3,135
1,717
(405)
(46)
11,328
(1)
The operations of Eurobank Private Bank Luxembourg S.A.’s branch in London are included within Luxembourg.
For
the
year
ended
31
December
2022,
net
income
of
€
53
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 2022, the Group’s
return on assets (RoA) was 1.66%. RoA is calculated
by dividing the net profit for the year ended 31 December
2022 by the Group’s average
total assets for the year.
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 S.A.
Report on the Audit of the Financial Statements
Opinion
We have audited
the accompanying Financial Statements
of Eurobank Ergasias
Services and Holdings
S.A.
(the
“Company”)
which
comprise
the
Balance
Sheet
as
at
31 December
2022,
the
Statements
of
Comprehensive Income, Changes in Equity and Cash Flow 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
S.A.
as
at
31 December
2022
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),
as incorporated
in
Greek
legislation.
Our
responsibilities
under
those
standards
are
further
described
in
the
Auditors’
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 International
Code
of Ethics
for Professional
Accountants, as
incorporated in
Greek legislation,
and the
ethical requirements
that are
relevant to
the audit
of the
financial statements
in Greece,
and we
have fulfilled
our other
ethical
responsibilities in accordance
with the requirements
of the applicable
legislation. 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.
Assessment of Impairment indicators of shares in
subsidiaries
See Notes 2.2.1, 2.2.6 and 10 to the Financial Statements.
Shares
in
subsidiaries
as
of
31
December
2022
amounted
to
EUR
4
097
million
(2021:
EUR
4
093 million).
The key audit matter
How the matter was addressed in our audit
The Company
records shares
in subsidiaries
at
amortised
cost
less
impairment.
In
accordance with
IFRS, management performs
impairment
tests
for
investments
in
subsidiaries when relevant indications exist.
The
assessment
of
whether
there
are
any
triggers
for
impairment
of
shares
in
subsidiaries
involves
significant
judgment
from
management
and
therefore
increased
levels of audit focus.
Disclosures in the Financial Statements
Disclosures
regarding
the
assumptions
and
the
methodology
used
for
the
calculation
of
any impairment
are important
to provide
clarity
to the financial statements.
Key aspects of our testing included, among others:
●
We
evaluated
management
assessment
of
whether
triggers
for
impairment
of
shares
in
subsidiaries exist.
Assessing disclosures:
We evaluated
the adequacy
and appropriateness
of the
disclosures
in
the
financial
statements
that
address
the
matters around the judgements.
3
Other Information
The
Board
of
Directors
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
but
does not include the Financial Statements and our Auditors’ 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 the Board of Directors and Those Charged with Governance
for the Financial Statements
The Board of Directors 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 the
Board of
Directors 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,
the Board of
Directors 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
the
Board
of
Directors
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
auditors’ report
that includes
our
opinion.
Reasonable
assurance
is
a
high
level
of
assurance
but
is
not
a
guarantee
that
an
audit
conducted in accordance
with ISAs 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
skepticism 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
4
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 Company’s internal
control.
●
Evaluate
the
appropriateness
of
accounting
policies
used
and
the
reasonableness
of
accounting
estimates and related disclosures made by the Board
of Directors.
●
Conclude
on
the
appropriateness
of
the
Board
of
Directors’
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
auditors’
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
7
April
2023,
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.
5
The
permissible
non-audit
services
that
we
have
provided
to
the
Company
during
the
year
ended
31 December 2022 are disclosed in Note 20 of the accompanying
Financial Statements.
3
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
five
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 S.A.
(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
in
force
(the
ESEF
Regulation)
that
include
the
Financial
Statements
of
the
Company
for
the
year
ended
as
at
31 December
2022
in
XHTML
format
(JEUVK5RWVJEN8W0C9M24-2022-12-31-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
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, that
all 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
in
order to express a reasonable assurance conclusion.
Responsibilities of the Board of Directors and those charged with governance
The
Board
of
Directors
is
responsible
for
the
preparation
and
filing
of
the
financial
statements
of
the
Company,
for the year
ended as at
31 December 2022,
in accordance with
the requirements determined
by the ESEF Regulatory Framework, and
for such internal control as the Board
of Directors 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
6
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 February
2022 (the
“ESEF
Guidelines”), in order
to obtain reasonable
assurance that the
Financial Statements
of the Company
that
are prepared
by the
the
Board
of Directors
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
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
Financial
Statements
of
the
Company
for
the
year
ended
as
of
31 December
2022
in
XHTML
format
(JEUVK5RWVJEN8W0C9M24-2022-12-31-en.xhtml),
have
been
prepared,
in
all
material
respects,
in
accordance with the requirements of the ESEF Regulatory
Framework.
Athens, 7 April 2023
KPMG Certified Auditors S.A.
AM SOEL 114
Harry Sirounis, Certified Auditor
AM SOEL 19071
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2022
8 Othonos Str, Athens
105 57,
Greece
eurobankholdings.gr,
Tel.: (+30) 214 40 61000
General Commercial
Registry No: 000223001000
.
Index to the Financial Statements
..................................................................................................................................................
Page
Balance Sheet ........................................................................................................................................................................................ 1
Statement of Comprehensive Income ................................................................................................................................................... 2
Statement of Changes in Equity................................
............................................................................................................................. 3
Cash Flow Statement ............................................................................................................................................................................. 4
Notes to the Financial Statements
1.
General information ................................................................................................
.....................................................................
5
2.
Basis of preparation and principal accounting policies
................................................................................................................ 5
2.1
Basis of preparation ......................................................................................................................................................................
5
2.2
Principal accounting policies
......................................................................................................................................................... 9
3.
Critical accounting estimates and judgments
in applying accounting policies ...........................................................................
19
4.
Financial risk management and fair value ................................................................................................
..................................
21
4.1
Financial risk factors and risk management................................
................................................................................................ 21
4.2
Fair value of financial assets and liabilities .................................................................................................................................
21
5.
Net interest income .................................................................................................................................................................... 22
6.
Other income/(expenses) ........................................................................................................................................................... 22
7.
Operating expenses .................................................................................................................................................................... 23
8.
Income tax .................................................................................................................................................................................. 23
9.
Investment securities
................................................................................................................................................................
..
24
10.
Shares in subsidiaries
................................................................................................................................................................
..
24
11.
Other assets
................................................................................................................................................................
................
24
12.
Debt securities in issue ............................................................................................................................................................... 24
13.
Other liabilities ................................................................................................................................
...........................................
25
14.
Share capital and share premium ............................................................................................................................................... 26
15.
Reserves and retained earnings/(losses) .................................................................................................................................... 26
16.
Share options
................................................................................................................................................................
..............
27
17.
Cash and cash equivalents ..........................................................................................................................................................
28
18.
Post balance sheet events ................................................................................................................................
..........................
28
19.
Related parties
................................................................................................................................................................
............
28
20.
External Auditors ................................................................................................................................................................
........
29
21.
Board of Directors
................................................................................................................................................................
.......
30
Balance Sheet
.
1
|
Page
31 December
2022 Financial
Statements
Notes on pages 5 to 30 form an integral part of these
financial statements.
Statement of Comprehensive Income
.
2
|
Page
31 December
2022 Financial
Statements
Notes on pages 5 to 30 form an integral part of these
financial statements
Statement of Changes in Equity
.
3
|
Page
31 December
2022 Financial
Statements
Notes on pages 5 to 30 form an integral part of these
financial statements.
Cash Flow Statement
.
4
|
Page
31 December
2022 Financial
Statements
Notes on pages 5 to 30 form an integral part of these
financial statements.
Notes to the Financial Statements
.
5
|
Page
31 December
2022 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
along with
its subsidiaries
(Eurobank S.A.
Group), comprise
the major
part of
Eurobank Holdings
Group (the
Group)
(note 10).
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, with its
registered office
at Othonos Street,
Athens 105 57 and its shares are listed on
the Athens Stock Exchange.
These financial statements were approved
by the Board of Directors on 6 April 2023. The Ιndependent Auditor’s Report
is included
in section B III 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 International
Accounting
Standards
Board
(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 of the Company have been consistently applied to the
years
2022 and 2021, after
taking into account
the amendments in IFRSs
as described in section
2.1.1 (a) “New and
amended standards
adopted by the Company as of 1 January 2022”.
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 conditions,
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:
2022 was
marked
by the
war in
Ukraine, which
gave
rise to
a global
- but
predominantly
European -
energy crisis,
added to
the
mounting inflationary
pressures, and
led to
widespread economic
uncertainty and
increased volatility
in the global
economy and
financial
markets.
Nevertheless,
the
post-pandemic
recovery
continued
for
a
second
consecutive
year
in
Greece,
with
its
GDP
growth overperforming
that of most
of its EU
peers. According
to the
Hellenic Statistical
Authority (ELSTAT)
provisional data,
the
Greek economy
expanded by
5.9% on
an annual basis
in 2022, with
the European
Commission (EC)
estimating the
full-year 2022
growth rate at 5.5% and 1.2%
in 2023 in
its winter economic forecast (February 2023). The inflation
rate, as measured by the
change
in the 12-month average Harmonized Index
of Consumer Prices (HICP), increased to 9.3% in 2022 according to ELSTAT,
primarily as
a result
of supply-side shocks
(including the hikes
in energy,
food and
other raw
material prices,
the continued
disruptions in the
supply chain and the rising nominal wages), alongside the steep post-pandemic recovery of domestic and external demand. The EC
expects that the
inflation rate will
decline to 4.5% in
2023, and further de-escalate
to 2.4% in 2024.
Moreover,
provisional ELSTAT
Notes to the Financial Statements
.
6
|
Page
31 December
2022 Financial
Statements
data shows that
the average
monthly unemployment in
2022 decreased to 12.4%,
from 14.8% in 2021,
while the Organisation
for
Economic Co-operation
and Development (OECD) in
its latest report
(January 2023) expects unemployment
to decline to 11.5% in
2023. On
the fiscal
front, the
general government
primary balance was
to post
a deficit
of 1.6%
of GDP
in 2022
according to
the
2023 Budget (latest outlook point to a primary deficit of
ca. 1% of GDP or even lower), and a surplus of 0.7% of GDP in 2023 (2021:
deficit of 5%). The gross public debt-to-GDP ratio is expected to decline to 168.9%
and 159.3% in 2022 and 2023 respectively (2021:
194.5%). The
above forecasts
may change
in case
of potential
adverse
international
developments
that could
affect
energy and
other goods prices, interest rates, external and domestic demand, and bring about the need for additional fiscal support measures.
The Bulgarian
economy expanded
by 3.4%
in 2022 (2021:
7.6%), based
on data
from the
National Statistical
Institute of
Bulgaria,
while inflation averaged
at 15.3% in 2022
(2021: 3.3%). According
to the EC’s
winter economic forecasts
(February 2023), the real
GDP in Bulgaria
is expected to
grow by
1.4% in 2023,
while the HICP
is expected
at 7.8% in
2023. Respectively,
in Cyprus
the real
GDP growth is forecasted at 5.8% in 2022 and 1.6% in 2023 (2021: 6.6%), while the CPI is estimated at 8.1% in 2022 and 4% in 2023
(2021: 2.3%).
A significant boost
to growth in
Greece and in
other countries of
presence is expected
from European
Union (EU) funding,
mainly
under
the Next
Generation
EU (NGEU)
instrument
and
the Multiannual
Financial
Framework
(MFF) 2021–2027,
EU’s
long-term
budget. Greece shall receive EU funds of more than €
30.5 billion (€ 17.8 billion
in grants and € 12.7 billion in loans)
up to 2026 from
NGEU’s
Recovery and
Resilience Facility
(RRF) to finance
projects and
initiatives laid down
in its National
Recovery and
Resilience
Plan (NRRP) titled “Greece
2.0”.
A pre-financing of
€ 4 billion was disbursed
in August 2021, and the
first two regular
payments of
€ 3.6 billion each in April 2022 and January 2023 respectively. Greece has been also allocated about € 40 billion through MFF 2021-
2027. On the monetary policy front, although net
bond purchases under the temporary Pandemic Emergency Purchase Programme
(PEPP)
ended
in
March
2022, as
scheduled,
the
European
Central
Bank
(ECB)
will
continue
to
reinvest
principal
from
maturing
securities
at
least
until
the
end
of
2024,
including
purchases
of
Greek
Government
Bonds
(GGBs)
over
and
above
rollovers
of
redemptions. Furthermore, the Governing Council of the ECB,
in line with its strong commitment to its price stability
mandate, has
proceeded with six rounds of interest rate hikes (in July, September, October,
December 2022, February and in
March 2023), raising
the
three
key
ECB
interest
rates
by
350 basis
points
in
aggregate.
Moreover,
it
approved
a new
instrument
(the “Transmission
Protection Instrument”
– TPI) aimed
at preventing
fragmentation in
the sovereign
bonds market.
Finally,
following the
expiration
of the special terms and conditions
applying to the TLTRO
III (Targeted
Longer-Term
Refinancing Operations) on
23 June 2022, the
ECB will keep assessing how targeted
lending operations are contributing to
its monetary policy stance.
In 2022,
the Greek
State proceeded
with the
issuance of
nine bonds
of various
maturities (5-year,
10-year,
15-year and
20-year)
through the
Public Debt
Management Agency
(PDMA), raising
a total
of €
8.3 billion
from international
financial markets.
On 17
January 2023, the PDMA issued a
10-year bond of € 3.5
billion at a yield of 4.279%
and more recently,
on 29 March 2023, issued a
5-year bond of € 2.5 billion at a yield of 3.919%. As of end 2022, the cash reserves of the Greek State stood in excess of € 30 billion,
and
as of
early
February
2023, its
sovereign
rating
was
one
notch
below
investment
grade
by three
of the
four
External
Credit
Assessment Institutions (ECAIs) accepted by the Eurosystem
(DBRS Morningstar: ΒΒ (high); S&P Ratings, Fitch Ratings: BB+).
Regarding
the outlook
for the
next 12
months the
major macroeconomic
risks and
uncertainties in
Greece and
our region
are as
follows:
(a)
the
ongoing
Russia
-
Ukraine
war
and
its
ramifications
on
regional
and
global
stability
and
security,
as
well
as
the
European and
Greek economy,
(b) a potential
prolongation of
the ongoing
inflationary wave
and its impact
on economic growth,
employment, public
finances, household
budgets, firms’
production costs,
external trade
and banks’
asset quality,
as well
as any
potential social
and/or political
ramifications these
may entail,
(c) the ongoing
and potential
upcoming central
bank interest
rate
hikes worldwide,
and in the
euro area
in particular,
that may
exert upwards
pressures on
sovereign and
private borrowing
costs,
especially those of highly indebted borrowers, deter investments, increase volatility
in the financial markets and lead economies to
slow down or even a temporary recession, (d) the recent banking sector turmoil to
continue and expand in the euro area, affecting
customers’ confidence,
with a potential
impact on assets
under management levels
and on liquidity,
(e) the impact
of a potential
curtailment or discontinuation of the
government energy support measures on growth,
employment and the servicing
of household
and corporate
debt, (f) the
persistently large
current account
deficits and the
prospect of them
becoming once again
a structural
feature
of
the
country’s
growth
model,
(g)
the
absorption
capacity
of
the
NGEU
and
MFF
funds
and
the
attraction
of
new
investments in the country,
(h) the effective and timely implementation of the reform agenda required to meet the RRF milestones
and targets and to
boost productivity, competitiveness, and resilience, (i)
a delay in
the implementation of
planned reforms, projects
and
the
budget’s
fiscal
agenda
due
to
the
possibility
of
the
2023
national
elections
resulting
in
an
inability
or
delay
to
form
a
government with solid Parliament
majority, (j) the geopolitical developments
in the near region, (k) the evolution
of the pandemic
Notes to the Financial Statements
.
7
|
Page
31 December
2022 Financial
Statements
and
the
probability
of
emergence
of
new
Covid-19
variants
that
could
further
impact
economic
growth,
fiscal
balances
and
international trade by prolonging the disruptions in the global supply chain, and (l) the exacerbation
of natural disasters due to the
climate change and their effect on GDP,
employment, fiscal balance and sustainable development
in the long run.
Materialization of the above risks, 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,
asset quality,
solvency and profitability
of the Greek
banking sector.
The
Group
Management
and Board,
mindful of
the recent
banking
turmoil
across
some markets,
has done
a proactive
internal
review to re-assure itself of the continued resilience of Eurobank business model to
such possible external shocks and is pleased to
report
that
this
model
is
well
supported
by
sound
business
practices,
diversified
activities
and
prudent
risk
management
approaches.
The
resulting
stability
of
the
Group’s
business
operating
model
is
also
further well-reflected
by,
among
others,
its
financial position and performance
as analysed below.
In this context,
the Group is continuously
monitoring the developments
on
the macroeconomic, financial and geopolitical fronts as well as the evolution of its asset quality
and liquidity KPIs 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 in accordance
with the business plan for
2023–
2025.
For the year ended 31 December
2022, at the Group level,
the net profit attributable
to shareholders amounted
to € 1,330 million
(2021: €
328 million),
of which
€ 212
million (2021:
€ 143
million) was
related
to the
international operations.
The adjusted
net
profit, excluding the € 230.5 million gain (after tax) on sale of Bank’s merchant acquiring business and the € 75 million restructuring
costs (after tax),
amounted to € 1,174
million (2021: € 424
million). The net loss
for the company
equals to € 8 million
(2021: € 55
million profit). The Group’s Total
Adequacy Ratio (total CAD) and Common Equity Tier 1 (CET1) ratios stood at 19.2% (31 December
2021: 16.1%)
and 16%
(31 December 2021:
13.7%) respectively
as at
31 December 2022.
In January
2023, the
European Banking
Authority
(EBA)
launched
the
2023
EU-wide
stress
test
exercise
which
is
designed
to
provide
valuable
input
for
assessing
the
resilience
of
the
European
banking
sector,
including
the
4
Greek
systemic
banks,
in
the
current
uncertain
and
changing
macroeconomic environment,
covering the period of
2023-2025. The EBA expects
to publish the results
of the exercise
at the end
of July 2023.
With
regards
to
asset
quality,
as
at
31
December
2022
the
Group’s
NPE
stock,
following
the
classification
of
project
“Solar”
underlying loan portfolio
as held for sale
and other initiatives, amounted
to € 2.3 billion
(31 December 2021: € 2.8
billion), driving
the NPE ratio to 5.2% (31 December 2021: 6.8%), while the NPE coverage
ratio stood at 74.6% (31 December 2021: 69.2%).
In terms
of liquidity,
as at
31 December 2022,
the Group
deposits increased
to €
57.2 billion (31
December 2021: €
53.2 billion),
while
the
funding
from
the
targeted
long
term
refinancing
operations
of
the
European
Central
Bank
–
TLTRO
III
programme
decreased by € 2.9 billion amounting
to € 8.8 billion (31 December 2021:
€ 11.7 billion). During the year,
the Bank proceeded with
the issuance of
a preferred
senior note of
€ 500 million
and the Company
completed the
issuance of a Tier
2 instrument
of € 300
million. More recently, in January 2023, the Bank successfully completed the issue of a € 500 million senior preferred note.
The rise
in high quality liquid assets of the Group led the respective Liquidity Coverage
ratio (LCR) to 173% (31 December 2021: 152%).
Going concern assessment
The Board of Directors, acknowledging the geopolitical, macroeconomic and financial risks to the economy and the banking system
and taking
into account
the above
factors
relating to
(a) the
idiosyncratic
growth opportunities
in Greece
and the
region for
this
and the next years,
also underpinned by the mobilisation
of the already approved
EU funding mainly through
the RRF,
and (b) the
Group’s pre-provision
income generating capacity,
asset quality, capital adequacy and liquidity position, 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
(a) New and amended standards adopted by the Company as
of 1 January 2022
The following amendments to standards
as issued by the IASB and endorsed by the EU, that are relevant
to the Company,
apply as
of 1 January 2022:
Notes to the Financial Statements
.
8
|
Page
31 December
2022 Financial
Statements
IFRS 3, Amendments,
Reference to the Conceptual Framework
The amendments
to IFRS
3 “Business
Combinations” updated
a 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.
In addition,
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 exists
at the acquisition date.
Moreover,
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 had no impact on the financial statements.
Annual improvement to IFRSs 2018-2020 cycle: IFRS 9 and IFRS
16
The improvements
introduce changes to
several standards.
The amendments that
are relevant to
the Company’s
activities are set
out below:
The
amendment
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 amendment allow
entities that have elected to
measure their assets and liabilities at carrying
amounts recorded in
their parent’s books to
also measure any
cumulative translation differences using the
amounts reported in
the parent’s consolidated
financial statements. This amendment also applies 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 had no impact on the financial statements.
IAS 37, Amendments, Onerous Contracts – Costs
of Fulfilling a Contract
The amendments
to IAS
37
‘Provisions, Contingent
Liabilities and
Contingent Assets’
clarify which
costs to
include in
determining
the cost
of fulfilling a
contract when
assessing whether
a contract
is onerous.
In particular,
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 amendments had no impact on the financial statements.
(b) New and amended standards not yet adopted by the Company
A number of amendments to existing standards are effective after 2022, as they have not yet been endorsed by the EU, or have not
been early applied by the Company.
Those that may be relevant to the
Company are set out below:
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 concise
and, (b)
that selecting an estimation or valuation technique
and choosing the inputs to be used constitutes making an accounting estimate.
The adoption of the amendments is not expected to impact the financial statements.
Notes to the Financial Statements
.
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31 December
2022 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 12, Amendments, Deferred Tax
related to Assets and Liabilities arising from a Single Transaction
(effective 1 January 2023)
The amendments clarify
that the exemption
on initial recognition
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 financial statements.
IAS 1, Amendments, Classification of Liabilities as Current or Non-Current
(effective 1 January 2024, 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.
In October 2022, the IASB issued
Non-current Liabilities with Covenants (Amendments to IAS 1)
with respect to the classification (as
current
or non-current),
presentation
and disclosures
of liabilities
for
which an
entity’s
right to
defer
settlement
for
at least
12
months
is
subject
to
the
entity
complying
with
conditions
after
the
reporting
period.
The
amendments
to
IAS
1
specify
that
covenants
to be
complied with
after
the reporting
date
do not
affect
the classification
of debt
as current
or non-current
at
the
reporting
date.
Instead,
the amendments
require
a company
to disclose
information
about these
covenants
in the
notes to
the
financial statements.
The adoption of the amendments is not expected to impact the financial statements.
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.
Notes to the Financial Statements
.
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Statements
A listing of the Company’s subsidiaries is set out
in note 10.
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 are
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
future cash
flows considering
all contractual
terms of
the financial
instrument but
does not
consider expected credit losses.
The EIR calculation includes fees and
points paid or received that
are an integral part of the
effective interest rate, transaction costs,
and 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.
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 are 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.
Notes to the Financial Statements
.
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31 December
2022 Financial
Statements
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.
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).
Notes to the Financial Statements
.
12
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31 December
2022 Financial
Statements
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 available
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.
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.
Notes to the Financial Statements
.
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31 December
2022 Financial
Statements
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,
features
that
change
contractual
cash
flows
based
on
the
borrower
meeting certain
contractually
specified environmental,
social and
governance (ESG)
targets.
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 plus any eligible transaction costs and the difference with
the carrying amount of the existing
one is recorded in the income statement
as derecognition gain or loss.
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
Notes to the Financial Statements
.
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Statements
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 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
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.
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.
Notes to the Financial Statements
.
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31 December
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Statements
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-month
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.
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/ECL Key Inputs
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.
Notes to the Financial Statements
.
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31 December
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Statements
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 and
the tax rate
enacted at the reporting
date, 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 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.
Notes to the Financial Statements
.
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31 December
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Statements
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 8.
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
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.
(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.
Notes to the Financial Statements
.
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31 December
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Statements
The fair
value of
the share
options granted
is recognized
as an
employee benefit
expense over
the vesting
period,
with an
equal
credit in equity
i.e. 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.
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 that
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
(e) subsidiaries; and
(f) post-employment benefit plans established for the benefit
of the Group’s employees.
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.
Notes to the Financial Statements
.
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31 December
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Statements
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.
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 reversed
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 and
due from credit
institutions that are
all carried at amortised cost.
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:
Notes to the Financial Statements
.
20
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2022 Financial
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3.1
Impairment losses on investment securities
The expected
credit losses
(ECL) measurement
of the Tier
2 subordinated
instruments 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)
event 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.
The
Company
independently
validates
all
ECL
key
inputs
and
underlying
assumptions
used
in
the
ECL
measurement
through
competent resources.
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 temporary
differences
can be
utilized.
Recognition
therefore
involves
judgment
regarding the future financial performance of the Company.
As at 31 December 2022, 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 8).
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 impact
the
carrying amount of the 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 13.
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.
Notes to the Financial Statements
.
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31 December
2022 Financial
Statements
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 16.
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
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 subordinated instruments (note 9) issued by its subsidiary Eurobank S.A. and €
57
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 instruments,
is eliminated by
the subordinated Tier
II debt instruments
issued by the Company,
which have 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
Notes to the Financial Statements
.
22
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31 December
2022 Financial
Statements
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
instruments
(note
9)
issued
by
its
subsidiary
Eurobank
S.A.
and
the
subordinated
Tier
II
debt
instruments (note 12) 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 subordinated
Tier II debt instruments
issued by the Company
(note 12) were
determined by using
quotes for
identical
financial
instruments
in
non-active
markets
obtained
from
Bloomberg
and
amounted
to
€
1,188
million
(2021:
€
974
million). The fair value of the subordinated
instruments issued by the Company’s subsidiary Eurobank
S.A. (note 9) and held by the
Company were determined
based on the aforementioned
instruments, which have equivalent
terms, therefore,
amounted also to
€ 1,188 million (2021: € 974 million).
Moreover,
the carrying amount of
the Company’s
sight deposits with Eurobank
S.A. represents reasonable
approximation of their
fair value.
5.
Net interest income
In the year ended
31 December 2022,
the interest expense that was recognised in
the income statement relates to the
subordinated
Tier II instruments
issued by the Company,
while the interest
income of a similar
amount relates
to the subordinated
Tier II notes
issued by Eurobank S.A. and held by the Company.
6.
Other income/(expenses)
In the year
ended 31 December
2022, other income/(expenses),
amounting to
€ 3 million,
consist of €
1.7 million income
from IT
services and € 1.6 million income regarding loan portfolio’s
related services provided to the Bank.
In the year ended 31
December 2021, other income/(expenses),
amounting to € 57 million,
consist of € 54.4 million
income
resulting from distribution in kind -Project
‘Mexico’,
€ 1.7 million income from IT services and € 1.5 million income regarding
loan portfolio’s related services provided to the Bank. Specifically, in the context of
Project ‘Mexico’, in June 2021 the General
Shareholders’ Meeting (GM) of Eurobank S.A (Bank) 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.
Following the
receipt of
the respective regulatory
approvals, 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.
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 of
the
consolidated
financial statements of the Company
for the year ended 31 December 2022.
Notes to the Financial Statements
.
23
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31 December
2022 Financial
Statements
7.
Operating expenses
In the year
ended 31 December 2022,
the operating
expenses of € 10
million (2021: €
9 million) mainly
consist of: a)
€ 4.1 million
staff
cost (2021:
€ 3.7
million) and
b) €
5.2 million
other administrative
expenses
(2021: €
5.1 million).
Administrative
expenses
include € 4.5 million (2021: € 4.4 million) insurance premiums relating to the Group’s
financial lines insurance, including protection
for professional liability.
8.
Income tax
According
to Law
4172/2013 currently
in force,
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) is
22%.
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.
Current
income
tax
for
the
year
ended
31
December
2022
amounted
to
€
5
thousand,
mainly
referring
to
non-recoverable
withholding
tax
for
IT
services provided
to
a Group’s
entity
(2021: €
1 thousand).
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 2022, no deferred tax
has been recognized in the income statement.
Tax certificate
and open tax years
For fiscal years starting from
1 January 2016
onwards, pursuant to the
Tax Procedure Code, an ‘Annual Tax Certificate’ on an
optional
basis, is provided
for the Greek
entities, with annual
financial statements
audited compulsorily,
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 has opted
to obtain
such certificate.
Following the completion
in 2022, of the
tax audit of
the Company by
the tax authorities
for the tax
year 2016, its
open tax
years
are 2017-2022. The
tax certificates,
which have been
obtained by the
Company are
unqualified for
the open tax
years until 2021,
while for the year ended 31 December 2022, 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 statute of limitations (i.e. 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 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 2022, the Company has not
recognised deferred tax asset (DTA)
on unused tax losses amounted to € 380 million
(2021: € 378
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:
Notes to the Financial Statements
.
24
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31 December
2022 Financial
Statements
9.
Investment securities
In November
2022, Eurobank
S.A. (the
Bank) issued
subordinated Tier
II debt
instruments of
equivalent terms
with those
of the
subordinated Tier II debt
instruments issued by
the Company (note 12),
which were fully subscribed
by the latter. As at 31
December
2022, the carrying amount of the said subordinated debt instruments held by the Company and categorised
at amortised cost, was
€ 297 million.
As at 31 December 2022, the total carrying amount of the subordinated debt instruments
held by the Company and categorised as
at amortised cost, amounted
to € 1,275 million (31 December
2021: € 949 million), including
accrued interest of
€ 32.8 million (31
December 2021:
€ 0.2 million)
,
€ 5.2
million unamortized
issuance costs
(31 December 2021:
nil) and
impairment allowance
of €
2.7 million
(31 December
2021: €
1.5 million)
(12-month ECL).
In particular,
in the
year ended
31 December
2022, the
Company
recognised in the income statement
€ 1.2 million loss, in relation to impairment allowance (2021: € 6.8 million gain).
The fair value
of the
said debt
instruments held
by the
Company,
that have
been issued
by the
Bank, was
determined based
on quotes
for the
related
subordinated
Tier II
debt instruments
issued by
the Company
(note 12)
and amounted
to €
1,188 million
(31 December
2021: € 974 million).
10.
Shares in subsidiaries
The following is a listing of the Company's subsidiaries held
directly at 31 December 2022:
11.
Other assets
As at 31 December 2022,
other assets amounting
to € 5 million (31 December
2021: € 5 million) primarily
consist of (a) € 2
million
(31 December 2021:
€ 1.9 million)
prepaid expenses mainly for
insurance premiums, (b)
€ 1.7 million
(31 December 2021:
€ 1 million)
receivables for
IT services provided
to the
Group companies
and third
parties, (c) €
0.4 million
(31 December 2021:
€ 0.3 million)
receivables from Fairfax Group relating to financial consulting services,
(d) € 0.4 million
(31 December 2021:
€ 0.2 million)
receivable
regarding
loan portfolio’s
related
services provided
to the
Bank and
(e) €
0.3 million
in relation
to property
and equipment
and
intangible assets (31 December
2021: € 0.07 million). In addition,
in the year ended 31
December 2022, the Company’s
receivable
from withholding taxes amounting to
€ 1.4 million, which was outstanding as of 31 December 2021, was settled
in cash.
12.
Debt securities in issue
In November
2022, the
Company announced
that it
had successfully
completed the
issuance of
€300 million
subordinated Tier
II
debt instruments.
The said
instruments, mature
in December
2032, are
callable in
December 2027
offering a
coupon of
10% per
annum and
are listed
on the
Luxembourg
Stock Exchange’s
Euro MTF
market.
Their carrying
amount was
€ 297
million, as
at 31
December 2022, including € 5.2 million unamortized issuance costs
and € 2.1 million accrued interest. Their fair
value, at the same
date, which was determined by using quotes
for identical financial instruments in non-active markets,
amounted to € 302 million.
The proceeds
from the
above issue
will support
Eurobank
Holdings’ Group
strategy
to ensure
ongoing compliance
with its
total
capital adequacy ratio requirements
and will be used for the Bank’s
general funding purposes.
In January 2018, Eurobank Ergasias
S.A. issued subordinated Tier II
debt instruments of face
value of € 950 million, in repla
cement
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 said
instruments,
mature in
January 2028
and pay
fixed nominal
interest
rate
of
6.41%, that shall be payable semi-annually.
Their carrying amount, as at 31 December 2022, was € 978 million (31 December 2021:
€ 947 million),
including € 2.2
million unamortized issuance costs
(31 December 2021:
€ 2.6 million)
and 30.6 million
accrued interest
(31 December 2021:
0.2 million).
Their fair
value, at
the same date,
which was
determined by
using quotes
for identical
financial
instruments in non-active markets, amounted
to € 886 million (31 December 2021: € 974 million).
Notes to the Financial Statements
.
25
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31 December
2022 Financial
Statements
13.
Other liabilities
As at
31 December
2022, other
liabilities amounting
to €
3 million
(31 December
2021: €
2 million)
primarily consist
of (a)
€ 0.8
million (31 December 2021:
€ 0.6 million) accrued
expenses,
(b) € 1 million
(31 December 2021: €
0.9 million) current
payables to
suppliers and (c) € 0.2 million (31 December 2021: € 0.2 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
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:
The significant actuarial assumptions (expressed as weighted
averages) were as follows:
As at
31 December
2022, the
assumption for
the price
inflation
(weighted
average)
is 2.6%
(2021: 2%)
and has
been taken
into
account in determining the above actuarial assumptions for
future salaries increases
As at 31 December
2022, the average duration of the
standard legal staff retirement indemnity obligation was 9 years (31
December
2021: 9 years).
A quantitative
sensitivity analysis
based on reasonable
changes to significant
actuarial assumptions
as at 31
December 2022 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).
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.
Notes to the Financial Statements
.
26
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31 December
2022 Financial
Statements
14.
Share capital and share premium
As at
31 December
2022, the
par value
of the
Company's shares
is €
0.22 per
share (2021:
€ 0.22).
All shares
are fully
paid. The
movement of share capital, share premium
and number of shares issued are as follows:
Share capital increase
Following the exercise of share options granted to key executives
of the Group under the current share options’ plan (note 16), and
by virtue of the decision of
the Board of Directors
of the Company on 30 August
2022, the Company’s share
capital increased by
€
333,444.32 through the issue of 1,515,656 new
common voting shares of a nominal
value of € 0.22 per share and
exercise price of
€ 0.23 per share. The difference between the exercise price of the new shares and their nominal value, net of the expenses directly
attributable to the equity transaction, amounted to €
2,136 and was recorded in
the account “Share premium”. Following the above
increase,
as
at
31 December
2022, the
share
capital
of the
Company
amounts
to
€ 816,349,051.76,
divided
into
3,710,677,508
common shares with a nominal value of € 0.22 each. The new shares were
listed on the Athens Exchange on 14 September
2022.
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.
15.
Reserves and retained earnings/(losses)
As of 31 December 2022 and 2021, ‘Special reserves’ of € 1,004 million relate to
dividends from participations.
Offsetting of equity accounts
On
21
July
2022,
the
Annual
General
Meeting
(AGM)
of
the
shareholders
of
Eurobank
Holdings
approved,
among
others,
the
offsetting of a) the total of the account
“Corporate law Reserves” amounting to
€ 6,919.3 million and b) part of the account “Share
Premium” amounting to
€6,894.4 million with accumulated losses
of equivalent value
amounting to €13,813.7 million, included
in
the account
“Retained earnings/(losses)”.
The above offsetting,
which was approved
by the competent
Supervisory Authorities in
October 2022, did not affect the Company’s
own and regulatory capital.
Notes to the Financial Statements
.
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31 December
2022 Financial
Statements
Share options
granted
2022
Balance at 1 January 2022
12,374,561
Options
awarded
during
the
year
11,654,117
Options
cancelled
during
the
year
(244,700)
Options
exercised
during
the
year
(1,515,656)
Balance at 31 December 2022
22,268,322
Share options
Expiry date ⁽¹⁾
31 December 2022
2023
5,551,925
2024
7,131,580
2025
3,120,978
2026
2,595,139
2027
2,595,139
2028
1,273,561
Weighted
average
remainingcontractual
life
of
share
options
outstanding
at
the
end
of the
period
24 months
Dividends
Pursuant to
the provisions
of the Company
Law 4548/2018,
companies are
required to
pay dividends
of at
least 35%
of after-tax
profit, after necessary deductions for the formation of the
statutory reserve and other credit balances in the
income statement that
do not arise from realized earnings.
For the financial year 2022,
Eurobank Holdings has no profits
and therefore will not
distribute minimum dividend. Furthermore,
in
2023 the Company
has announced that
the amount earmarked
for dividend
distribution will be
used in an
optimal way
to bid for
the 1.4% HFSF stake through
a share buyback scheme (note 19).
16.
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. The exercise price of each new share
would be equal to € 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.
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,
are defined
and approved
annually by the
Board of
Directors in
accordance with
the applicable
legal
and regulatory framework, as well as the policies of the
Company and the Group.
The options are
exercisable in
portions, annually during
a period from
one to five
years. 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. The corporate
actions that adjust the number and the price of shares also adjust accordingly
the share options.
In addition, the share options also comply with the restrictions regarding
remuneration of Law 3864/2010, as each time in force.
The movement of share options during the period is analysed as follows:
The share options outstanding at the end of the period have
the following expiry dates:
(1)
Based on the earliest contractual exercise date.
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 vesti
ng
period. The
share
options
granted
by the
Notes to the Financial Statements
.
28
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31 December
2022 Financial
Statements
Company to
employees of
Group entities,
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 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,
additional
conditions
on
certain
share
options
granted
to
key
executives
who
are
subject
to
any
remuneration
restrictions of Law 3864/2010 at the time of grant,
are treated as non-vesting
conditions. 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
December 2022 was
€ 0.63 (2021:
€ 0.42). The
significant inputs
into the model were
a share price of €
1.021 (2021: € 0.7823) at
the grant date,
exercise price of €
0.23, annualized dividend
yield
of 3%
(2021: 3%),
expected average
volatility of
38% (2021:
68%), expected
option life
of 1-5
years,
and a
risk-free
interest
rate
corresponding to the options’ maturities, based on the Euro 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.
17.
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 2022, amount to € 57 million (31 December 2021: € 62 million):
For the
year ended
31 December 2022,
changes in debt
securities in issue
arising from
accrued interest
and amortisation of
debt
issuance costs amount to
€ 33 million (31 December 2021:
€ nill). In addition, changes
in income/(losses) on investment
securities
arising from amortization of discounts and accrued
interest amount to € 33 million (31 December 2021: € nill).
18.
Post balance sheet events
Details of post balance sheet events are provided
in the following notes:
Note 2.1 - Basis of preparation
Note 19 - Related parties
19.
Related parties
Eurobank
Ergasias
Services and
Holdings S.A.
(the Company
or Eurobank
Holdings) is
the parent
company
of Eurobank
S.A. (the
Bank).
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 2022, 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,
including
the
amendments
under
law
4941/2022,
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 2022.
In 2023,
Eurobank Holdings
announced its
intention to
submit an
offer for
the buyback
of its
52.08m shares
(corresponding to
a
participation of
1.4%), presently
owned by
the HFSF,
subject to
the receipt
of the
required approvals
from the
regulator
and the
General Meeting of the Company’s
Shareholders.
Fairfax
Group,
which
holds
32.99%
of
Eurobank
Holdings
voting
rights
as
of
31
December
2022
(31
December
2021:
33%),
is
considered to have significant
influence over the Company.
In January
2022, an
occupational insurance
fund (“Institution
for
occupational retirement
provision-occupational
insurance fund
Eurobank’s Group
personnel” henceforth “the Fund”) was established
as a not-for-profit legal entity under Law 4680/2020, for the
benefit of the employees of the Company,
the Bank and certain other Greek entities of the Group, which constitute the sponsoring
Notes to the Financial Statements
.
29
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31 December
2022 Financial
Statements
employers of the Fund. Accordingly,
in line with IAS 24 Related Parties, the Fund is considered to
be related party to the Company.
For the year ended 31 December 2022, the Company has no related
party transactions with the Fund.
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 the Company’s
subsidiaries are as follows:
(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.
As
at
31
December
2022,
the
Company
has
recognised
receivables
and
operating
income
of
amount
€
0.35
million
related
to
financial consulting
services with
Fairfax
group (31
December 2021: €
0.33 million).
In addition,
for the
year ended
31 December
2022 the Company has recognized operating income of €
0.12 million (2021: €
0.09 million) related to the Group’s associate Eurolife
FFH Insurance Group Holdings S.A., which is also a member of Fairfax
Group.
Key management compensation
In the year ended 31 December
2022, 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
(2021: €0.2 million).
20.
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:
(1)
Includes fees for statutory audit of the Company’s annual 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 € 0.01 million.
Notes to the Financial Statements
.
30
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31 December
2022 Financial
Statements
21.
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, 6 April 2023