ANNUAL REPORT 2014 BANKA CELJE, d.d., AND THE BANKA

Transcription

ANNUAL REPORT 2014
BANKA CELJE, d.d.,
AND THE BANKA CELJE GROUP
Celje, March 2015
Banka Celje, d.d., and the Banka Celje Group
Annual Report 2014, prepared in accordance with
International Financial Reporting Standards, as adopted by the European Union.
Content
A WORD BY THE MANAGEMENT BOARD OF BANKA CELJE, D.D. .......................................................... 3
REPORT OF THE SUPERVISORY BOARD OF BANKA CELJE, D.D. .......................................................... 5
I BUSINESS REPORT ................................................................................................................................... 13
1 HIGHLIGHTS ......................................................................................................................................................... 13
2 PRESENTATION ................................................................................................................................................... 14
3 ACTIVITIES AIMED AT RAISING CAPITAL, STATE AID AND TRANSFER OF BAD ASSETS TO THE BAMC ..... 16
4 SINGNIFICANT EVENTS IN 2014 AND EVENTS AFTER REPORTING DATE ..................................................... 17
5 INFORMATION ON THE MEASURES AND PROCEDURES PERTAINING TO CLAIMS ...................................... 18
6 THE BANK’S OPERATIONAL PLAN FOR 2015 ..................................................................................................... 18
7 THE ECONOMIC AND BANKING ENVIRONMENT IN 2014 .................................................................................. 19
7.1 The economic environment in 2014 .............................................................................................................................. 19
7.2 Banking environment in 2014 ....................................................................................................................................... 20
8 REPORT ON OPERATIONS IN 2014..................................................................................................................... 21
8.1 Financial results............................................................................................................................................................ 21
8.2 Financial position .......................................................................................................................................................... 22
8.3 Operations according to key sectors ............................................................................................................................. 24
8.4 Assuming and managing banking risks ........................................................................................................................ 30
8.5 Internal organisation and human resources .................................................................................................................. 37
8.6 Information technology ................................................................................................................................................. 39
8.7 Sustainable development and social responsibility ....................................................................................................... 40
8.8 Marketing communications ........................................................................................................................................... 41
8.9 The operations of the Internal Audit .............................................................................................................................. 41
9 MANAGING BODIES OF THE BANK ..................................................................................................................... 44
10 ORGANISATIONAL STRUCTURE OF THE BANK .............................................................................................. 45
11 STATEMENT OF CORPORATE GOVERNANCE ................................................................................................ 46
12 STATEMENT OF MANAGEMENT’S RESPONSIBILITIES .................................................................................. 54
13 AUDITOR’S REPORT .......................................................................................................................................... 55
II FINANCIAL STATEMENTS ......................................................................................................................... 61
1 INCOME STATEMENT .......................................................................................................................................... 61
2 STATEMENT OF OTHER COMPREHENSIVE INCOME ....................................................................................... 62
3 STATEMENT OF FINANCIAL POSITION .............................................................................................................. 63
4 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY................................................................................ 64
5 STATEMENT OF CASH FLOWS ........................................................................................................................... 66
NOTES TO THE FINANCIAL STATEMENTS ........................................................................................................... 68
1 GENERAL INFORMATION ............................................................................................................................................. 68
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES............................................................................................... 68
2.1 Basis for the preparation of financial statements .......................................................................................................... 68
2.2 Comparative figures ..................................................................................................................................................... 71
2.3 Subsidiary..................................................................................................................................................................... 71
2.4 Consolidation ................................................................................................................................................................ 72
2.5 Foreign currency translation ......................................................................................................................................... 72
2.6 Interest income and expenses ...................................................................................................................................... 72
2.7 Fee and commission income ........................................................................................................................................ 73
2.8 Dividend income ........................................................................................................................................................... 73
2.9 Financial instruments .................................................................................................................................................... 73
2.10 Impairment of financial assets .................................................................................................................................... 76
2.11 Offsetting .................................................................................................................................................................... 78
2.12 Sale and repurchase agreements ............................................................................................................................... 78
2.13 Cash and cash equivalents ......................................................................................................................................... 78
2.14 Accounting for leases ................................................................................................................................................. 78
2.15 Investment property .................................................................................................................................................... 79
2.16 Property and equipment ............................................................................................................................................. 79
2.17 Intangible assets......................................................................................................................................................... 80
2.18 Inventories .................................................................................................................................................................. 80
2.19 Taxes.......................................................................................................................................................................... 80
2.20 Employee benefits ...................................................................................................................................................... 81
2.21 Loans taken, deposits and debt securities issued ....................................................................................................... 81
3
2.22 Provisions ................................................................................................................................................................... 81
2.23 Financial and performance guarantees....................................................................................................................... 82
2.24 Share capital .............................................................................................................................................................. 82
2.25 Segment reporting ...................................................................................................................................................... 82
2.26 Critical accounting estimates and judgements ............................................................................................................ 83
3 NOTES TO THE INCOME STATEMENT ............................................................................................................... 84
3.1 Net interest and similar income .................................................................................................................................. 84
3.2 Dividend income ........................................................................................................................................................ 84
3.3 Net fee and commission income ................................................................................................................................ 85
3.4 Gains less losses from financial assets and liabilities not classified at fair value through profit or loss ...................... 85
3.5 Gains less losses from financial assets and liabilities held for trading ....................................................................... 85
3.6 Gains less losses from financial assets and liabilities designated at fair value through profit or loss ......................... 86
3.7 Changes in fair value from hedge accounting ............................................................................................................ 86
3.8 Gains less losses from foreign exchange differences ................................................................................................ 86
3.9 Net other operating (loss) .......................................................................................................................................... 87
3.10 Administrative expenses ............................................................................................................................................ 87
3.11 Amortisation and depreciation ................................................................................................................................... 88
3.12 Provisions .................................................................................................................................................................. 88
3.13 Impairment charges ................................................................................................................................................... 88
4
NOTES TO STATEMENT OF FINANCIAL POSITION .............................................................................................. 89
4.1 Cash and balances with the Central Bank and demand deposits with banks ............................................................. 89
4.2 Held for trading financial assets ................................................................................................................................. 89
4.3 Available for sale financial assets .............................................................................................................................. 90
4.4 Loans and advances to banks (excluding demand deposits) ..................................................................................... 90
4.5 Loans and advances to customers ............................................................................................................................ 91
4.6 Other financial assets ................................................................................................................................................ 92
4.7 Hedging derivatives ................................................................................................................................................... 93
4.8 Property and equipment ............................................................................................................................................ 93
4.9 Investment property ................................................................................................................................................... 94
4.10 Intangible assets ........................................................................................................................................................ 95
4.11 Investments in subsidiaries, associates and joint ventures ........................................................................................ 95
4.12 Income tax assets ...................................................................................................................................................... 95
4.12.1 Deferred tax assets ................................................................................................................................................. 95
4.13 Other assets .............................................................................................................................................................. 96
4.14 Financial liabilities designated at fair value through profit or loss ............................................................................... 97
4.15 Financial liabilities at amortised cost – deposits from banks and central banks ......................................................... 97
4.16 Financial liabilities at amortised cost – due to customers........................................................................................... 98
4.17 Financial liabilities, measured at amortised cost – borrowings from banks and central banks ................................... 99
4.18 Financial liabilities at amortised cost – borrowing from customers ............................................................................. 99
4.19 Debt securities ........................................................................................................................................................... 99
4.20 Other financial liabilities ........................................................................................................................................... 100
4.21 Provisions ................................................................................................................................................................ 100
4.22 Other liabilities ......................................................................................................................................................... 101
4.23 Share capital............................................................................................................................................................ 101
4.24 Dividend per share .................................................................................................................................................. 102
4.25 Contingent liabilities and commitments .................................................................................................................... 102
4.26 Cash and cash equivalents ...................................................................................................................................... 103
4.27 Related party transactions ....................................................................................................................................... 104
4.28 Information on the results of organisational units abroad ......................................................................................... 108
4.29 Events after reporting date ...................................................................................................................................... 108
5
RISK MANAGEMENT.............................................................................................................................................. 108
5.1 Credit risk ................................................................................................................................................................ 108
5.2 Market risk ............................................................................................................................................................... 124
5.3 Liquidity risk ............................................................................................................................................................. 129
5.4 Capital and capital adequacy ................................................................................................................................... 131
5.5 Fair value of financial assets and liabilities .............................................................................................................. 132
6
SEGMENT REPORTING ......................................................................................................................................... 135
III DISCLOSURES OF BANKA CELJE, D.D. ............................................................................................... 143
1 GENERAL INFORMATION .................................................................................................................................. 143
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (ARTICLE 435 OF THE CRR REGULATION)............................. 143
3 SCOPE OF APPLICATION (ARTICLE 436 OF THE CRR REGULATION) ..................................................................... 159
4 OWN FUNDS - CAPITAL (ARTICLE 437 OF THE CRR REGULATION) ........................................................................ 160
5 CAPITAL REQUIREMENTS (ARTICLE 438 OF THE CRR REGULATION) ................................................................... 164
6 EXPOSURE TO COUNTERPARTY CREDIT RISK (ARTICLE 439 OF THE CRR REGULATION) ................................. 166
7 CREDIT RISK ADJUSTMENTS (ARTICLE 442 OF THE CRR REGULATION) .............................................................. 168
8 UNENCUMBERED ASSETS (ARTICLE 443 OF THE CRR REGULATION) .................................................................. 176
9 USE OF ECAIS (ARTICLE 444 OF THE CRR REGULATION) ........................................................................................ 176
4
10 EXPOSURE TO MARKET RISK (ARTICLE 445 OF THE CRR REGULATION) ........................................................... 178
11 OPERATIONAL RISK (ARTICLE 446 OF THE CRR REGULATION) ........................................................................... 178
12 EXPOSURES IN EQUITIES NOT INCLUDED IN THE TRADING BOOK (ARTICLE 447 OF THE CRR REGULATION)
................................................................................................................................................................................ 178
13 EXPOSURE TO INTEREST RATE RISK ON POSITIONS NOT INCLUDED IN THE TRADING BOOK (ARTICLE 448
OF THE CRR REGULATION) ........................................................................................................................................ 179
14 REMUNERATION POLICY (ARTICLE 450 OF THE CRR REGULATION) ................................................................... 179
15 USE OF CREDIT RISK MITIGATION TECHNIQUES (ARTICLE 453 OF THE CRR REGULATION) ............................ 183
List of abbreviations used
ALCO – Assets and Liabilities Committee
ATM – Automated teller machine
BAMC – Bank Asset Management Company
Bank – Banka Celje d.d., Celje
CDs – certificates of deposit
CIR – Cost Income Ratio
CISA – Certified Information System Auditor
COREP – Common Reporting
CRD IV – Capital Requirements Directive IV
CRR – Capital Requirements Regulation
EBA – The European Banking Authority
EBA-DPM – The European Banking Authority Data Point Model
EBITDA – Earnings before Interest, Taxes, Depreciation and Amortization
EC – European Commission
ECAI – External Credit Assessment Institutions
ECB – European Central Bank
EU – European Union
EWS – Early warning system
FINREP – Financial Reporting
FX – Forex
GDP – Gross domestic product
Group – Skupina Banke Celje
IAS – International Accounting Standards
IASC – International Accounting Standards Committee
ICAAP – The Internal Capital Adequacy Assessment Process
ICR – Increased credit risk monitoring system
IFRIC – International Financial Reporting Interpretations Committee
IFRS – International Financial Reporting Standards
IRB – Internal Rating Based Approach
IRS – Interest Rate Swap
IT – Information Technology
LCR – Liquidity Coverage Ratio
MRA – Master Restructuring Agreement
MT – Monitoring Trustee
NPL – non-performing loans
NSFR – Net Stable Funding Ratio
NSVS – National housing savings scheme
SEE – South East Europe
SEPA – Single Euro Payments Area
SISBON – Slovene Information System on the Rating of Retail Clients
SMEs – Small and medium-sized enterprises
Subsidiary – Posest d.o.o., Celje
VAT – value added tax
ZBan-1 – Banking Act
5
ZDavP-2 – Tax Procedure Act
ZGD-1 – Companies Act
ZTFI – Market in Financial Instruments Act
ZUKSB – Bank Stability Measures Act
6
A WORD BY THE MANAGEMENT BOARD OF BANKA CELJE, d.d.
This past year was a very active and intense year for the Bank, we were faced with one of the most
significant challenges in its 150-year history. In addition to continuing to provide banking services
and maintaining high liquidity reserves, we were faced with the need to reduce the capital deficit and
ensure long-term stability of the Bank’s capital adequacy. In an otherwise difficult 2014, the Bank
also successfully repositioned itself and focused on its primary, regional market.
We had already begun activities aimed at increasing capital at the General Meeting of Shareholders
in 2013. After the publication of stress test results at the end of 2013, we intensified these activities.
We conducted interviews with major owners of the Bank then, spoke to representatives of Slovenian
banks in foreign ownership and were looking for a potential investor outside of Slovenia. In the search
for a strategic partner we cooperated with a foreign consulting company, which completed the project
after testing the market. Unfortunately, the conditions in the first quarter of 2014 were too demanding
for satisfactory interest in recapitalization to be expressed by potential investors.
In accordance with the order by the regulator a recapitalization General Meeting of Shareholders
was held in April 2014, while a program for the acquisition of state aid was being prepared
simultaneously. The Bank was namely ordered to submit a detailed plan of measures for its
reorganisation and to ask for the implementation of measures pertaining to state aid, should the
recapitalization General Meeting of Shareholders prove unsuccessful. After the increase of capital
from existing shareholders, the holders of subordinated capital instruments and other interested
investors was not accomplished, we asked for state aid in the form of a transfer of certain assets to
the Bank Asset Management Company (BAMC) and a capital increase at the end of April. During
the deliberations on the submitted plan, the Government of the Republic of Slovenia added an
additional covenant, namely that it would proceed with merger activities with Abanka in the event it
acquires a majority share in Banka Celje. Based on this we prepared and submitted to the European
Commission (EC) in October the restructuring program of the merged Banka Celje and Abanka.
In parallel we continued searching for an option to increase the Bank’s share capital through private
investors, which is why due diligence was being performed on the Bank during this period. At the
end of the due diligence procedure, the private investor only exhibited interest to participate in a later
phase of consolidation in the Slovenian banking system.
With the objective to on again ensure conditions for the Bank’s long term operational success, taking
into account the merger with Abanka and the preservation of the stability of the financial system in
the Republic of Slovenia, we obtained the Decision on emergency measures by the Bank of Slovenia
of 16 December. Based on the Decision all of the Bank’s qualified liabilities were written off and
capital was increased in the amount of EUR 190 million. The state became the sole owner of the
bank. With the increase of share capital, minimum capital requirements were also met and long term
capital adequacy was ensured.
In spite of the processes that took place at the Bank, the Bank was able to preserve the trust of its
customers, which is reflected in the growth of retail and private entrepreneur deposits. In total it
granted EUR 213 million of new loans to corporate customer, to private entrepreneurs and to retail.
Loans to customer did however decrease as compared with the year before, also as a consequence
of the transfer of bad assets to the BAMC, based on the state aid received. The decrease in lending,
recorded in the whole banking system, is also the result of weak creditworthiness of companies,
reflected in bankruptcy proceedings begun and the removals from the register of companies due to
bankruptcies.
In 2014 the Bank made a profit before impairments and provisions in the amount of EUR 38.7 million.
After the transfer of bad assets to the BAMC and the creation of impairments and provisions in the
amount of EUR 64.4 million, a loss in the amount of EUR 21.1 million was made after tax.
At the Bank we provided an undisturbed, seamless banking service to the customers, implemented
new services and prepared special offers. In line with the modified business policy, we focused on
offering traditional banking products, with lower use of capital, thus supporting small and medium
sized enterprises and retail, which became the strongest segment in the Bank’s lending operations.
The amended business model and the approved financial plan, compliant with the restructuring
program of the merged bank, is being implemented in 2015 as well. In addition to focusing on the
regional market and lending to small and medium sized enterprises and retail, the Bank will increase
product placement activities and cross selling to customers, continue upgrading the risk
management process and improving operational efficiency. As a trustworthy business partner it will
continue to be socially responsible toward all of the participants in its environment and weave the
values of tradition, know-how and expertise in the fabric of its operations.
REPORT OF THE SUPERVISORY BOARD OF BANKA CELJE, d.d.
The framework of the Supervisory Board's operations and its responsibilities as well as its obligations
is determined by the applicable legislation (the Banking Act, the Companies Act, the Regulation on
the diligence of members of the management and supervisory boards of banks and savings banks)
and the Bank's internal acts (the Articles of Association and the Rules of procedure related to the
operations of the Supervisory Board and its committees) as well as other legal norms, which pertain
to the Bank's operations. In its decision-making process during 2014, the Supervisory Board was
supported by the Audit Committee, the Remuneration Committee and the Personnel Committee.
Operations of the Supervisory Board
The Supervisory Board of Banka Celje, d.d., was appointed at the 26th General Meeting of
Shareholders on 24 May 2011. In 2014 it comprised: Jure Peljhan, Ph.D., as President, Barbara
Smolnikar, M.Sc., as Vice-President, with the following members, namely: Tomaž Subotič, Ph.D.,
Melita Malgaj, Zdenko Zanoški, M. Sc., and Bojan Šrot.
The Supervisory Board met at ten regular meetings in 2014, where it dealt with 104 items on the
agenda and also held five correspondent sessions, where it addressed 11 agenda items. At its
meetings the Supervisory Board acquainted itself with the Bank's interim results on the basis of
reports prepared by the Management Board.
It devoted extra attention to the consideration of measures that the Bank received from the Bank of
Slovenia, together with the information on the Bank's activities addressing the identified irregularities.
It kept itself constantly appraised of the activities taken in relation to the Bank’s recapitalization and
the consolidation procedure of Banka Celje and Abanka in great detail.
It reviewed and approved the audited annual report of the Bank and the Group for 2013, after the
explanation of the auditor’s report by a certified auditor. The Supervisory Board was acquainted with
all the key elements of the Bank's and the Group's Annual Report 2014 on an ongoing basis.
The Supervisory Board acquainted itself with the Bank’s measures pertaining to the improvement of
risk management (with special focus on credit risk) and gave consent to the Bank’s risk management
policies and strategies and the risk profile for 2014. It also adopted the business policy and the
Bank’s financial plan for 2014, while also monitoring the operations of the Internal Audit. At the
initiative of the Supervisory Board an external contractor conducted a special review of the granting
of loans to several significant customers of the Bank currently in default, from 2008 onwards; the
findings of the review and the Bank’s activities aimed at improvement were presented to the
members of the Supervisory Board in detail at several meetings. The Supervisory Board also
approved the Policy of assessing the suitability of management and supervisory body members at
Banka Celje, while also acquainting itself with the Policy on the suitability of key function holders at
Banka Celje, d.d.
The President of the Supervisory Board was in constant contact with the Management Board, which
allowed for the Supervisory Board to constantly supervise the operations of the Management Board.
The Supervisory Board invited the authorised auditor to its regular meetings, thus making it possible
for the auditor to present it with findings related to audit of the Bank.
The Supervisory Board ascertains that in 2014 its' members were not subject to conflict of interest
and have performed their duties as Supervisory Board members autonomously and independently.
The members attended the Supervisory Board meetings regularly, based on which it was able to
meet in full composition, with all members actively participating in the creation of decisions by taking
part in discussions related to individual items on the agenda.
Based on the scope of activities performed in 2014 the Supervisory Board deems its own operations
in 2014 were performed with all due diligence, to the fullest extent possible in accordance with the
Corporate Governance Code, without any deviation from good practice.
Operations of the Audit Committee, the Remuneration Committee and the Personnel
Committee
The Audit Committee, comprising Tomaž Subotič, Ph.D., as President, Melita Malgaj as VicePresident, Barbara Smolnikar, M.Sc. as member and Blanka Vezjak, M.Sc., certified auditor, as the
external independent member, met 8 times in 2014. It dealt with 67 items on the agenda. The
materials it reviewed pertained to the adoption of the plan of the Audit Committee’s operations in
2014, to the report on the operations of the Internal Audit for 2013 and to the plan of the operations
of the Internal Audit for 2014 as well as the report on the operations of the Internal Audit during the
first half of 2014, the information on the audit by the Bank of Slovenia (ICAAP process) and all of the
other open items toward the Bank of Slovenia, the risk management strategy and policies, the trading
strategy and the Bank’s risk profile – all for 2015. In July it acquainted itself with the offers for the
selection of the auditors and proposed the naming of the auditors for 2014 to the Supervisory Board.
It monitored the Bank's interim results, the Bank's exposure to credit risk (on a quarterly basis), its
five-year development plan and its business policies and financial plan for 2014. It actively (at every
meeting) discussed the activities related to the process of the restructuring of receivables to 15
largest corporate customers, with the potential to survive. It reviewed reports on the legal options for
the filing of claims (damages, criminal charges or other procedures) pertaining to loans granted
during the 2004 – 2010 period in Slovenia and abroad. It was presented with the Agreement on the
Audit of the Bank's Operations in 2014, with the findings of the external auditor after the completion
of the initial phase of the audit for 2014 and with the report on the operations of Posest, d.o.o.
The President of the Audit Committee kept the Supervisory Board informed of the Committee's
activities on a regular basis through reports at the Supervisory Board meetings. The Committee was
successful in the execution of all planned assignments in 2014, all the while offering the Supervisory
Board advisory support in the areas for which it was established.
The Remuneration Committee met at twice in 2014 and acquainted itself with the guidelines of the
European Banking Authority on assessing the suitability of the members of management or
supervisory bodies. It also discussed the Policy of assessing the suitability of management and
supervisory body members at Banka Celje and agreed with its content.
The Human Resources Committee met twice in 2014 and discussed and approved the criteria for
the selection of the Bank’s President of the Management Board. It also considered the offers of
human resource agencies and selected the agency to carry out the process of selecting the new
President of the Management Board. With the Supervisory Board’s decision to suspend the process
of selecting a new President of the Management Board, the Human Resources Committee
concluded its tasks in 2014.
BUSINESS REPORT
Banka Celje d.d. and the Banka Celje Group
Business Report 2014
I BUSINESS REPORT
1 HIGHLIGHTS
2014
1
1. Statement of financial position (on 31 December)
Total assets
Total deposits from the non-banking sector
- companies
- private individuals
Total amount of loans to the non-banking sector
- companies
Total equity
Impairment of financial assets and provisions
Commitments and contingent liabilities
2. Income statement (from 1 January to 31 December)
Net interest and similar income
Net non-interest income
Regular expenses
Restructuring costs
Depreciation and amortisation
Impairment and provisions
Loss before income tax
Income tax expense
3. Statement of comprehensive income
Other comprehensive income
Income tax relating to other comprehensive income
4.
Number of customers
- companies
5.
Number of employees (on 31 December)
6.
Shares
Number of shareholders
Number of shares
Nominal share value (in EUR)
Book value per share (in EUR)
7.
Ratios in %
Capital
Capital adequacy ratio
Asset quality
Impairment charges on financial assets, measured at
amortised cost, and provisions for guarantees and
commitments / classified balance and off-balance
sheet asset items
Profitability
Interest margin
Financial mediation margin
Return on assets - before tax
Return on equity - before tax
Return on equity - after tax
Operational costs
Operational expenses / average assets
Bank
2013
2
- amounts in thousands of EUR
Index
2012
4=1:2
5=2:3
3
1,711,982
1,251,321
580,748
670,573
891,629
600,212
291,417
201,581
162,997
360,701
1,815,228
1,274,152
616,295
657,857
1,240,057
930,480
309,577
40,758
360,139
524,980
2,270,076
1,416,899
716,570
700,329
1,590,853
1,265,826
325,027
157,943
166,432
551,939
94
98
94
102
72
65
94
495
45
69
80
90
86
94
78
74
95
26
216
95
39,012
32,022
(28,688)
(1,052)
(2,593)
(64,352)
(25,651)
4,550
37,291
94,680
(30,610)
(2,891)
(214,054)
(115,584)
(10,673)
46,589
24,714
(31,848)
(3,392)
(63,600)
(27,537)
2,553
105
34
80
383
3
90
30
22
(43)
96
85
337
420
(418)
(8,135)
(279)
8,478
586
1,844
(265)
(96)
(48)
460
(221)
127,766
6,596
132,735
6,936
136,144
7,423
96
95
97
93
468
500
508
94
98
1
5,000,000
10
38
706
508,629
33
80
709
508,629
33
311
983
100
48
100
100
100
26
18.22
2.49
13.01
732
19
13.01
21.61
7.96
60
271
2.35
4.28
(1.27)
(45.76)
(37.64)
1.73
6.13
(5.87)
(81.59)
(89.12)
1.93
2.95
(1.03)
(15.37)
(13.95)
136
70
22
56
42
90
208
570
531
639
1.95
1.56
1.46
125
107
Source: Methodologies for the calculation of operational indicators from 1 January 2014 and The instructions on changes from 10
December 2014.
Loans to and deposits from the non-banking sector also include private entrepreneur data, which is included in retail in
subsequent statements.
13
2 PRESENTATION
The Bank holds a 100% ownership stake in the company Posest, d.o.o, Celje (the Subsidiary), which
is fully consolidated. The Subsidiary is immaterial with regard to the scope of its operations, with the
significant items in its balance sheet presented in detail in the financial statements.
About the Bank
The beginnings of the Bank’s operations reach as far back as year 1864, when the Hranilnica mestne
občine Celje (the Celje Municipal Savings Bank) was established. As Kreditna banka Celje (Celje
Credit Bank) it joined Ljubljanska banka in 1971. It was converted into a joint-stock company at the
end of 1989 and remained part of the Ljubljanska banka system as a subsidiary until 1994.
Since 15 June 1994, the Bank has been operating independently under the name it holds today,
namely Banka Celje, d.d. In line with the strategy of extending its operations outside the Celje region,
the Bank acquired Banka Noricum, d.d., Ljubljana in 1996 and converted it into its main branch in
Ljubljana, named Glavna Podružnica Ljubljana and then into a business unit in 2014. The Bank also
acquired Hmezad banka, d.d., Žalec in 1998 and first converted it into a branch, namely Podružnica
Hmezad (Hmezad branch), later making it a business unit at the start of 2011. In 1999 the Bank
signed a Strategic partnership and business cooperation agreement with Nova Ljubljanska banka,
d.d., thus becoming an associated member of its banking group.
In February 2011, the consortium of the Bank's owners decided to offer the Bank's shares publicly,
based on which due diligence of the Bank's operations was performed in May 2011 by a potential
buyer. The owners then stopped the sale temporarily.
In December 2014 the Bank obtained state aid due to the capital shortfall and after permission by
the European Commission and committed to merging with Abanka by 1 January 2016 at the latest.
In 2014 the Bank celebrated its 150th anniversary, which was represented to the public using the
slogan “With you through generations, year by year, for 150 years”.
Profile
Name
Headquarters
Transaction account
IBAN
SWIFT
Tax number
VAT ID number
Registration number
Share capital
District Court of Celje Entry No.
Telephone
Telefax
Homepage
E-mail address
Facebook
Banka Celje, d.d.
Vodnikova 2, 3000 Celje
01000-0000600028
SI56 0100 0000 0600 028
SBCESI2X
89734912
SI89734912
5026121
50,000,000.00 EUR
Srg.3053/94
+386 3 422 10 00
+386 3 422 11 00
http://www.banka-celje.si
info@banka-celje.si
Banka Celje
14
Scope of operations
The Bank is an independent financial institution, established as a joint-stock company to execute all
banking and other financial services. Based on the authorisations it holds, it is licensed to perform
the following mutually recognised financial services in accordance with Article 10 of the Banking Act
(ZBan-1):
- accepting deposits;
- lending that also includes: consumer loans, mortgage loans, factoring with or without recourse,
financing of commercial transactions, including forfeiting;
- payment services;
- issuing and administering other payment instruments (for example, traveller's cheques and
bankers' drafts) insofar as this activity is not covered by services referred to in point 3;
- issuing guarantees and other commitments;
- trading for own account or for the account of customers in: foreign exchange, including currency
exchange transactions, financial futures and options, exchange and interest-rate instruments;
- trading for own account in: money market instruments, transferable securities.
The Bank may also perform the following other financial services in accordance with Article 11 of the
ZBan-1:
- insurance brokerage in accordance with the act governing insurance business;
- marketing of mutual funds, sale of investment coupons or mutual fund shares;
- tied agent services.
The Bank complements the range of services it offers with the services offered through its specialist
subsidiary company Posest, d.o.o., Celje, which was established in 1991 as a limited liability
company.
About the Group
As at 31 December 2014 the Banka Celje Group (the Group) comprises: Banka Celje d.d. (the Bank)
as the mother company and Posest, d.o.o., Celje (the Subsidiary). The Bank holds a 100%
ownership stake in the Subsidiary.
Subsidiary profile
Name
Headquarters
Transaction account
VAT ID number
Registration number
Share capital
Telephone
Telefax
Homepage
E-mail address
Posest d.o.o. Celje
Vrunčeva ulica 1, 3000 Celje
06000-0004429610 open with Banka Celje
SI72078537
5509327
2,124,486.00 EUR
+386 3 428 25 50
+386 3 428 25 52
http://www.posest.si
info@posest.si
The company Posest was established on 6 September 1991, with its full name being: Posest,
Podjetje za trgovino, inženiring in posredovanje, d.o.o., Celje.
Subsidiary’s scope of operation
The company is registered to perform a number of different types of activities, with its core business
comprising:
- marketing of real estate owned by the Subsidiary and the Bank;
- property and equipment appraisals;
- supervision of the purposeful use of loans granted to investors;
- recovery activities pertaining to the Bank's bad debt;
15
-
property leasing;
owned and other property engineering;
advisory services to the Bank regarding real estate property financing.
3 ACTIVITIES AIMED AT RAISING CAPITAL, STATE AID AND TRANSFER OF BAD ASSETS
TO THE BAMC
Due to the ascertained capital shortfall, at the end of January 2014 the Bank submitted to the
regulator a plan of activities aimed at reducing or covering the shortfall by 2015. At the same time
the Bank also selected a consulting company for the recapitalization and started actively searching
for private strategic investors. The two-stage process of looking for a prospective buyer ended as
the commitments given were not sufficiently strong.
After receiving the Order by the Bank of Slovenia on additional measures to increase share capital
in April 2014, a recapitalization General Meeting of Shareholders was called, however a capital
increase was not realized in the required period.
After having unsuccessfully attempted to raise capital from private investors at the end of April 2014
the Bank applied for state aid in the form of the transfer of certain assets to the BAMC and the
increase of share capital in accordance with the Bank Stability Measures Act (ZUKSB) and state aid
rules.
In order to obtain state aid the Bank prepared its own independent restructuring program, which
was forwarded to the European Commission in April. In October, the European Commission was
sent a new restructuring program, prepared for the merged Abanka and Banka Celje. The state aid
approval by the European Commission was granted on 16 December 2014 provided a merger with
Abanka take place no later than 1 January 2016 and the merged be sold by 2019.
On 16 December 2014 the Bank received the Decision on emergency measures issued by the
Bank of Slovenia, on the basis of which all of the Bank's qualified liabilities, which were incurred
up until the issue date of the Decision and represented the Bank's share capital and subordinated
financial instruments, were written down at the same time increasing the Bank's capital.
After the decrease of share capital to EUR zero (0), the Bank's capital increased by EUR 190 million
at the same time, with the state becoming the Bank's sole owner. After the capital increase, the
Bank's capital amounts to EUR 50 million and is divided into EUR 5 million of ordinary no par value
shares at EUR 10, with the issue amount of a share at EUR 38. Half of the capital was increased
with cash, with the receipt of government bonds representing the other.
The consent of the European Commission for state aid was prerequisite for the transfer of bad
assets to the BAMC. The transfer value of assets was set at EUR 369,092 thousand and includes
the transfer of loans, financial investments and other related claims. For the assets it transferred, the
Bank received government guaranteed BAMC bonds in the amount of EUR 125,795 thousand.
The condition for the issue of the European Commission permission was the compliance with
commitments, which the Bank must meet and which will be monitored by the Monitoring Trustee
(MT) on an ongoing basis. The Bank's commitments pertain mostly to the improvement of cost
efficiency, risk management, to the withdrawal of the Bank from high-risk markets and investments
and to the improvement of corporate governance. In January 2015 a special work group was
established to coordinate operations in connection with the fulfilment of commitments.
16
4 SINGNIFICANT EVENTS IN 2014 AND EVENTS AFTER REPORTING DATE
Significant events in 2014
- preparation and submission of the plan of activities to decrease and cover for the capital
shortfall until 2015 to the Bank of Slovenia in compliance with the requirement from the order
issued on 17 January 2014;
- the Bank’s cooperation with a foreign consulting company aimed at finding a strategic partner;
- due diligence by a private investor, who upon completion, exhibited interest to cooperate in later
phases of the consolidation of the Slovenian banking system;
- receipt of the Order on the elimination of violations with additional measures, which the
Bank of Slovenia issued on 11 March 2014, with a request for the convening of the
recapitalization Meeting of Shareholders;
- the Decision by the Government of the Republic of Slovenia from 19 March 2014, stating the
Bank meets the requirements for the implementation of stability strengthening measures
(based on the ZUKSB) and that the Government of the Republic of Slovenia will act on its
commitment to increase the Bank’s capital and transfer part of its risk bearing assets to the
BAMC, should the recapitalization by private investors prove unsuccessful;
- recapitalization meeting of shareholders was held on 11 April 2014 and the decision on
increasing share capital with cash in an amount of EUR 160 million by 25 April 2014 was adopted;
recapitalization was not successful, none of the invited investors paid in new shares;
- the Bank’s independent restructuring program reviewed at the Ministry of Finance and at the
Bank of Slovenia Council in April and submitted to the European Commission with subsequent
amendments;
- receipt of the Decision and the Verdict of the Celje High Court in the dispute regarding the
payment of remuneration due to inability of use pertaining to the headquarter building at
Vodnikova 2, which was returned to its owners in the denationalization process and the
payment of EUR 5 million to the denationalization beneficiaries on 30 September 2014, the Bank
continues its activities in the procedure for the payment of remuneration in relation to the stated
procedure;
- preparation and submission of the restructuring program of the merged Abanka and Banka
Celje to the European Commission on 15 October 2014;
- receipt of the Order on special supervision measures by the Bank of Slovenia issued on
19 November 2014, based on which the payment of principal and interest from the Bank’s
subordinated bonds was withheld pending the European Commission decision on state aid;
- receipt of the Bank of Slovenia Decision on emergency measures issued on 16 December
2014, aimed at reinstating conditions for Bank’s operational viability in the long-term, taking into
account its merger with Abanka, and the preservation of the financial system stability in the
Republic of Slovenia.
Events after reporting date
- establishment of a work group for the coordination with the Monitoring Trustee on 12
January 2014, with its key tasks being the monitoring and reporting on the implementation of the
commitments made to the European Commission;
- within the scope of activities in connection with the merger of Abanka and Banka Celje, in
February the banks selected a company to carry out advisory services in relation to the merger;
- the conclusion of the Bank’s cooperation with the Financial Administration of the Republic of
Slovenia in relation to horizontal monitoring with the implementation of amended legislation in
April 2015 and the transfer to formal tax treatment of the Bank’s operations in accordance with
the provisions of the Tax Procedure Act (ZDavP-2);
- in the merger process with Abanka Aleksander Vozel, M.Sc., will, after acquiring a licence from
the Bank of Slovenia and after a new member of the Banka Celje Management Board has been
named, join the Management Board of Abanka, where he will continue working on the merger of
both banks.
17
5 INFORMATION ON THE MEASURES AND PROCEDURES PERTAINING TO CLAIMS
To protect its interests and to recover its reputation the Bank is obligated to file claims pursuant to
the order of the Bank of Slovenia in relation to compensation, labour and other relevant procedures,
where this is legally possible, and claim damages and any benefits obtained in the violation of the
applicable regulations. It is required to publicly disclose aggregated information.
On the basis of the above, during the period from 1 January to 31 December 2014, the Bank in
cooperation with external legal advisors notified of 43 suspicions of offences or brought criminal
charges against 31 private individuals and 12 legal entities. A total of 32 property claims amounted
to EUR 32.6 million in damages sought. At the same time, during the first half of 2014 external
auditors carried out a review of the granting, monitoring and recovery activities related to loans to
selected customers in terms of compliance with the statutory banking regulation, the Bank’s internal
acts and international banking practices.
6 THE BANK’S OPERATIONAL PLAN FOR 2015
In November 2014, the Bank presented its Supervisory Board with bases for its planning, with the
final document for 2015 presented after the adoption of the restructuring program at the European
Commission and the acquisition of state aid. The strategic document in use for the period up to 2019
will be the restructuring program of the merged Banka Celje and Abanka.
The Bank’s operational policies along with the financial plan for 2015 is based on the restructuring
program of Banka Celje and Abanka, which was drawn up with the assistance of an external advisory
company and sent to the EC on 15 October 2014 as part of the permitted state aid assessment
process. The plan also adheres to the commitments the Bank made to the EC.
In forming the business objectives and the financial plan for 2015, the Bank took into account:
- ensuring long-term stability of capital adequacy;
- the capital received;
- the preservation of independent operations in 2015, with the target date for the merger of Banka
Celje and Abanka being 1 January 2016;
- macroeconomic forecasts and changes in legislation.
The Bank’s business plan for 2015 includes the following key objectives:
- focus on the regional market and lending to small and medium sized enterprises (SMEs) and to
retail;
- increased level of product placement to customers – cross selling;
- upgraded risk management processes;
- further improvements in operational efficiency.
The Bank’s core market is Slovenia, especially the regions, where it is already present with through
business units and branch offices. With an aim of increasing diversification, the Bank will promote
lending to SMEs and to retail in 2015.
Based on the planned marketing activities and the anticipated changes its sales processes the Bank
plans to increase the average product placement to customers. The increased level of cross selling
is to be carried out in all key segments in retail customer operations.
In relation to risk management, 2015 will see the Bank upgrade its internal rating system of debtor
classification and the setting of limits, set up an early increased risk warning system (EWS), upgrade
liquidity risk management and stress testing to measure exposure to individual risk types.
18
7 THE ECONOMIC AND BANKING ENVIRONMENT IN 2014
7.1 The economic environment in 2014
The economic activity continued to recover in Slovenia during 2014. According to the initial
assessment the real growth of the 2014 GDP (Gross domestic product) was 2.6%. The major share
of the growth came from external demand and gross investments.Traditionally, exports are the major
contributor, increasing by 6.3% in 2014, with imports gaining as well. In 2014 imports reached 4.1%,
which should, in addition to the cooling economies of the main trade partners, result in a smaller
contribution of net exports to the economic growth in the future. The main increase in investments
pertains to infrastructure at the local level partially financed with the use of European funds. In total
these increased by 3.6% in 2014.
With the improving economic conditions in the country, 2014 saw a gradually decreasing
unemployment rate. End 2014 there was 119,460 unemployed persons, with the unemployment rate
recorded at 13.0%. A year ago the unemployment rate was 13.5%, with the number of unemployed
persons exceeding 124,000.
The annual inflation rate, measured by the harmonised index of consumer prices, was a negative
0.1% in Slovenia in 2014, with deflation mainly being the consequence of lower energy prices, as
well as food and consumer durables. The average 12-month price increase was 0.4% and was 1.5
percentage points lower than it was in 2013. In the European Monetary Union member states the
annual inflation rate according to the data from November amounted to 0.3% on average, while the
European Union (EU) member states average was 0.4% and 0.1% in Slovenia.
GROSS DOMESTIC PRODUCT real growth rates in %
3,0
2,6
2,0
1,0
0,0
assessment 2014
2013
2012
-1,0
-1,0
-2,0
-2,6
-3,0
Source: Economic mirror, January 2015, Institute of macroeconomic analysis and development
19
7.2 Banking environment in 2014
The shrinking of total assets in the banking system continued in 2014 for the fifth year in a row,
however it came at a slower pace in comparison to prior two years. The assets side of the bank
balance sheet saw loans and advances to customers decrease the most, while less profitable
investments to the more liquid asset classes and securities increased.
Loans to the corporate sector within loans and advances to customers decreased due to the transfer
of bad assets to the BAMC and also due to the weak creditworthiness of the sector itself. In 2014
bankruptcy proceedings began in 1,302 companies, while 850 companies were erased from the
Slovenian Register of Companies due to the completion of bankruptcy proceedings. Lending to the
retail sector was the only part on the increase, as it is considered less risky with the low rate of nonperforming loans. Due to the relatively low indebtedness the forecast is that even more bank
activities will be targeting the retail sector.
The lending activity of banks was also impacted by instable funding. The amount of short-term
funding is increasing and it represents a considerable limitation in funding long-term loans, which is
why banks have been partially investing these in securities. Even the European Central Bank (ECB)
funding is short-term and therefore suitable mainly for short-term liquidity management.
Foreign currency loans, where the majority is represented by the Swiss franc, amounted to less than
5% of total loans end 2014. More than two thirds of the foreign currency loans are retail loans, which
were mostly taken for residential purposes. The volume of Swiss franc loans decreased by about
60% as compared to its highest level in October 2008, mainly through debt redemption and swaps
into euro denominated loans.
Deposits from retail and the state increased in 2014, while bank liabilities from foreign funding
decreased further. The retail sector primarily increased demand deposits in 2014, while inversely
the state mainly increased short-term and long-term deposits. Liabilities to the ECB increased due
to the second auction of the targeted long-term refinancing operations at the end of 2014, remained
however significantly lower than in 2013.
With the markedly improved capital adequacy after the execution of recapitalization activities in 2013
and 2014, it should be taken into account that the decline in lending activity and the adjustment of
bank investment structure risk along with the related reduction of capital requirements is the
prevailing way of maintaining and improving capital adequacy. Due to the low interest rate
environment, the reduced volume of operations and the increased funding of foreign companies,
income risk is going to increase in Slovenian banks in the future, as they will be hard pressed to
generate sufficient income to cover for operational expenses and impairment costs. Credit growth
and the volume of bad loans in the loan structure will have a key impact on the level of profitability
risk in banks.
20
8 REPORT ON OPERATIONS IN 2014
8.1 Financial results
In 2014 the Bank made a profit before impairment charges and provisions in an amount of EUR
38,701 thousand. After deducting the additional impairment charges and provisions, the pre-tax
financial results were a negative by an amount of EUR 25,651 thousand.
INTEREST AND NON-INTEREST INCOME, OPERATIONAL EXPENSES AND IMPAIRMENT
CHARGES AND PROVISIONS in EUR thousands
94.680
100.000
70.000
40.000
39.012
37.291
32.022
10.000
-20.000
-50.000
Interest income
Non-interest
income
Expenses
-31.281 -33.501
-80.000
Impairment
charges and
provisions
-64.352
2014
2013
-110.000
-140.000
-170.000
-200.000
-230.000
-214.054
Net interest was EUR 1,721 thousand higher as compared with 2013, with income coming in lower
by EUR 21.120 thousand and expenses decreasing by EUR 22,841 thousand. The lower interest
income was impacted most by the decrease in the average amount of interest bearing investments
and lower interest rates. Mainly, the interest rates from purchased securities and loans to banks
were lower. Lower expenditures were also the result of lower average interest-bearing liabilities and
the lower deposit interest rates, while additionally less interest was paid for subordinated bonds and
certificates of deposit (CDs) due to the suspended payment of due liabilities from these instruments
and their write down after the Bank’s recapitalization by the state, in compliance with the decisions
adopted by the Bank of Slovenia.
The Bank’s interest margin amounted to 2.35% and was, due to the increase in net interest and a
lower balance sheet, thus higher than the year before, when it came in at 1.73%. It also surpassed
the interest margin attained by the banking system as a whole.
Non-interest income amounted to EUR 32,022 thousand and include net fees and commissions
and net gains from financial transactions.
At EUR 14,944 thousand net fees and commissions lagged the 2013 figure by 5.5%, with the ratio
net fees and commissions to operational expenses amounting to 46.2%. The Bank made most of its
fees and commissions from card operations, payment operations and account maintenance.
21
Financial transaction resulted in a gain of EUR 17,078 thousand, as compared with the 2013 figure
of EUR 78,862 thousand. In 2013 it was mainly the result of the valuation of issued subordinated
liabilities to fair value, while 2014 saw the majority of the gains come from the sale of investments in
shares and mutual funds and from the sale of the Republic of Slovenia bonds.
Regular expenses with depreciation and amortization accounted for EUR 31,281 thousand, thus
decreasing by EUR 2,220 thousand or by 6.6% as compared with 2013. Labour costs amounted to
EUR 15,062 thousand. The Bank continued decreasing the number of employees in accordance
with the plan, 32 employees in 2014, and discontinued paying supplementary pension insurance.
Cost of materials and services amounted to EUR 13,628 thousand, with the majority coming from IT
services and debit card costs. Depreciation and amortization decreased by 10.4% in 2014 and
amounted to EUR 2,593 thousand end of the year.
Restructuring costs amounted to EUR 1,052 thousand and represent a one-off expense in the
process of merger with Abanka in accordance with the commitments given to the European
Commission. 72.6% of the planned costs for 2014 were achieved and included severance pay, audit
and advisory services, costs of monitoring the restructuring process and the costs of moving from
the headquarters at Vodnikova street.
The Bank’s cost efficiency, measured by the share of operational costs in the average assets,
amounted to 1.95% in 2014, with the cost to income ratio (CIR) coming in at 45.52%.
Impairment charges and provisions amounted in total to EUR 64,352 thousand, being lower than
in the previous year. Impairment charges and provisions in an amount of EUR 58,133 thousand
pertain to credit risk, while impairment charges of EUR 5,761 thousand come from investments in
available for sale financial instruments and additional provisions of EUR 458 thousand from the
unresolved dispute related to the denationalization proceedings.
8.2 Financial position
The total volume of operations in the Bank decreased by EUR 103,246 thousand in 2014 or by 5.7%.
The Bank’s total assets amounted to EUR 1,711,982 thousand end of December 2014.
ASSETS in EUR thousands
Loans and
advances to
customers
1.240.057
891.629
338.856
Financial assets
2013
487.420
2014
Loans and
advances to
banks, cash
and balances…
Other assets
209.862
306.049
26.453
15.000
26.884
215.000
415.000
615.000
22
815.000
1.015.000
1.215.000
Net loans and advances to customers dropped by EUR 348,428 thousand or by 28.1% and
accounted for 52% of the assets with EUR 891,629 thousand. The largest drop came in December,
when bad assets were transferred to the BAMC. Net loans and advances to large corporate
customers decreased the most, namely by 40.6% or by EUR 155,349 thousand, with their share in
the Bank’s assets falling from 21% to 13%. Loans and advances to SMEs decreased by 31.1% or
by EUR 120,542 thousand, while loans and advances to other customers dropped by 36.0%, being
EUR 42,495 thousand. Retail loans and loans to private entrepreneurs decreased the least, namely
by 8.6% or by EUR 30,042 thousand. Holding at 19% of the assets, their share remained unchanged
and simultaneously became the strongest segment of the Bank’s lending activities.
Investments in financial assets amounted to EUR 487,420 thousand end December 2014 and
increased by 43.8% or a total of EUR 148,564 thousand during the year. In 2014 the Bank decreased
investments in held for trading financials assets and the existing investments in available for sale
financial assets. The increase mainly came as a result of the capital increase and the transfer to bad
assets to the BAMC in December. In the recapitalization the Bank obtained Republic of Slovenia
bonds in the amount of EUR 94,998 thousand, while also receiving government guaranteed BAMC
bonds after the transfer of bad assets to the BAMC equal to the amount of the transfer value.
Loans and advances to banks, cash and balances with the Central Bank increased by 45.8%
or by EUR 96,187 thousand in 2014 due to high operational liquidity and the liquidity reserve. The
increase is mainly down to the partial cash recapitalization in December, being EUR 95,002
thousand.
LIABILITIES in EUR thousands
Due to
customers
Capital
1.274.152
1.251.321
40.758
201.581
2013
Deposits and
borrowings
from banks…
347.502
Securities in
issue
Other liabilities
2014
137.044
134.841
106.776
17.975
15.260
10.000
210.000
410.000
610.000
810.000
1.010.000
1.210.000
Due to customers decreased by 1.8% or by EUR 22,831 thousand, with the share in total liabilities
increasing from 70% to 73%. Compared to 2013 deposits from large corporate customers fell the
most, namely by 36.9% or by EUR 33,076 thousand. Deposits from SMEs dropped by 4.6% or by
EUR 6,061 thousand, with deposits from other customers decreasing by 0.9% or EUR 3,197
thousand. Within the latter, more than half is represented by the deposits from the Ministry of
Finance, amounting to EUR 221,152 thousand in 2014. Retail deposits and deposits from private
entrepreneurs are the only segment that actually grew in 2014, namely by 2.9%, with the share of
these increasing in the structure of total liabilities from 38% to 41%.
23
The Bank followed the objective of ensuring an adequate ratio of loans to deposits from customers,
which decreased from 0.97 to 0.72 in 2014.
Deposits and borrowings from banks and the ECB fell by 60.6% amounting to EUR 137,044
thousand end December 2014. Most of the deposits and borrowings from banks are long-term. At
the end of 2014 the Bank recorded no liabilities in the form of borrowings from the ECB, as these
have been fully repaid in June.
Capital amounted to EUR 201,581 end December 2014, thus increasing by EUR 160,823 thousand
for the year. The existing share capital in the amount of EUR 16,980 thousand was decreased to
EUR zero (0) on 16 December 2014, followed by a recapitalization of the Bank in the amount of EUR
190 million. Further, the change in capital in 2014 was negatively impacted by a net loss in the
amount of EUR 21,101 thousand and the decrease of the revaluation reserve of available for sale
financial assets in the amount of EUR 8,413 thousand. An increase in the share premium from
simplified reduction of share capital by withdrawing shares in an amount of EUR 17,274 thousand
and the transfer EUR 9 thousand in unpaid dividends as well as the EUR 34 thousand of unpaid
bonuses to the members of the Supervisory Board from previous years to other profit reserves.
As all of the Bank’s qualified liabilities had been written down, it held no treasury shares as at 31
December 2014.
Liabilities from securities in issue dropped by 20.8% or by EUR 28,065 thousand. The change is
mainly the result of due certificates of deposit of different maturities and the payment of interest from
issued bonds.
8.3 Operations according to key sectors
8.3.1 Corporate banking
Corporate banking comprises three segments, being large enterprises, SMEs and other customers.
Other customers include the state and other financial organisations.
Loans and advances to corporate customers
Lending to corporates fell by 35.8% in 2014 or by EUR 318,386 thousand, amounting in total net to
EUR 570,411 thousand end 2014. The largest drop came in December when bad assets were
transferred to the BAMC.
Even though loans to all segments decreased in value, the share of loans to SMEs recorded the
smallest drop in the structure of the Bank’s assets and became the strongest segment of corporate
borrowers with a 15% share in line with the Bank’s operational goals.
In 2014 the Bank granted EUR 113,352 thousand new loans to corporates, while renewing a total of
EUR 97,756 thousand gross loans. At the same time gross loans to corporates became due in an
amount of EUR 726,032 thousand, wherein matured loans also include prepayments and the transfer
of assets to the BAMC.
24
NET CORPORATE LOANS in EUR thousands
400.000
378.461
370.568
350.000
300.000
250.000
262.432
214.436
31.12.2014
200.000
139.895
150.000
31.12.2013
93.542
100.000
50.000
0
Large enterprises
SMEs
Other customers
In 2014 the Bank approved a rescheduling of loans in a total amount over EUR 150 million, mainly
on the basis of legally binding forced settlements and commitments from agreements of financial
restructuring (MRA, Master Restructuring Agreement). It obtained a total of EUR 45 million in
repayment of claims from bad debtors.
Due to customers
Customer deposits went down by 7.2% or by EUR 42,334 thousand in value, reaching EUR 548,287
thousand end 2014. The share in total liabilities amounted to 32%.
The largest share within the item is represented by deposits from other customers, with deposits
from the Ministry of Finance. Other deposits from customers show the largest share of SMEs
deposits, coming in at EUR 125,566 thousand.
8.3.2 Retail operations and private entrepreneurs
The Bank puts great emphasis on retail operations and on operations with private entrepreneurs,
which is why it has a broad business unit and ATM (Automated teller machine) network in the Celje
region, which it uses to bring its services to as many customers as possible. The Bank will continue
to promote this segment of operations.
Loans to retail and private entrepreneurs
Loans to retail went down by 5.9% or EUR 18,160 thousand in 2014, amounting to EUR 291,417
thousand end 2014. In spite of the decrease their share in the asset structure increased by 17%,
thus remaining unchanged and becoming the strongest segment of the Bank’s credit operations at
the same time.
Loans to private entrepreneurs fell by 28.5% or by EUR 11,882 thousand to a total of EUR 29,801
thousand. To a large extent the decrease is the result of private entrepreneurs restructuring into
limited liability companies.
In 2014 the Bank granted EUR 99,676 thousand new loans to retail and private entrepreneurs, while
renewing a total of EUR 7,199 thousand gross loans. At the same time gross loans became due in
25
a total amount of EUR 133,790 thousand, wherein matured loans also include prepayments. Over
90% of all gross loans was granted to retail.
LOANS TO RETAIL in EUR thousands
180.000
164.172
170.269
160.000
140.000
120.000
102.893
100.000
91.914
31.12.2014
80.000
31.12.2013
60.000
35.330
40.000
36.415
20.000
0
Housing loans
Consumer loans
Other
Retail and private entrepreneur deposits
Retail and private entrepreneur deposits are the segment in the non-banking sector that grew in
2015, with their share in the structure of liabilities increasing from 38% to 41%. The increase in
deposits by 2.9% points to the fact the in spite of the protracted recapitalization process, the Bank
still enjoys the trust of the retail sector.
Savings from retail increased by 1.9% in 2014 to a total of EUR 672,071 thousand, with private
entrepreneur deposits going up by 26.4% to EUR 32,460 thousand. Even though demand deposits
from retail increased by 8.2% in 2014 and term deposits fell by 3.3% retail saving still remains the
strongest and most stable funding source for the Bank.
DEPOSITS FROM RETAIL in EUR thousands
370.000
358.008
360.000
350.000
345.458
340.000
330.000
326.613
31.12.2014
320.000
310.000
31.12.2013
301.983
300.000
290.000
280.000
270.000
Demand deposits
Term deposits
26
Introduction of new services and special offers
With the intention of promoting operations with retail, the Bank implemented new, commercially
interesting products and worked on improving the existing services on offer. The significant new
services of offer comprised:
- the introduction of lending to housing stocks;
- the introduction of the family loan;
- the introduction of progressive short-term savings;
- the ’’Right Choice’’ package, targeting new customers;
- the option of making domestic currency deposits using the online “Klik” application;
- the introduction of a special offer for the promotion of annuity savings with a more favourable
interest rate for new customers;
- the ’’Summer Package’’ special offer;
- the special housing loans offer, featuring an adjusted interest rate and lower loan approval costs.
Bancassurance
The Bank also provides its savers with alternative savings instruments. It has been marketing
insurance services for a number of years now, thus complementing the traditional banking and
financial transactions on offer. Within the scope of insurance services, it offers its clients a number
of different insurance types in cooperation with the following insurance companies based on the
licence for insurance brokerage it holds: NLB Vita, Zavarovalnica Maribor, Zavarovalnica Triglav,
Adriatic Slovenica and Zavarovalnica Tilia.
It also offers its customers insurance in the event of unemployment, an accident or permanent
disability, life insurance, accident insurance, property insurance, tourist insurance and card holder
insurance.
Modern services
In addition to classical counter services, the Bank has also been offering its clients more modern
services, comprising non-cash and self-service operations, e-banking, phone banking, bank letters
and transaction monitoring with the use of text messaging services.
In non-cash operations, the Bank offers a wide spectrum of card services. It issues payment cards
of the Maestro, MasterCard, Visa and Visa Electron brands. End 2014 the Bank had 165,753 cards
in issue, with Maestro being the most frequent, followed by MasterCard.
To promote deferred payment card use the Bank introduced a special offer, giving new deferred
payment card users free first year membership for the issue of a regular or gold payment card
Activa/MasterCard and/or Activa/Visa and free security text messages in the first year informing the
user of transactions done using one or all payment cards.
End of June 2014 the Bank outsourced it POS terminal network for card payments.
End 2014 the Bank added hotel bookings to its card services and the service of automatic cash
deposits, which allows customers immediate disposal over funds deposited in the transaction
account.
With regard to self-service operations, clients had at their disposal 79 ATMs at the end of 2014.
The Bank constantly monitors the safety of ATM operations and is working towards expanding the
applicability of these as well as on their accessibility. Users gain 24 hour a day access to cash
withdrawals, UPN payment orders, cash deposits, mobile phone account charging and also available
a mini print-out of transactions for the past 90 days.
27
Modern e-banking has been available to customers through “Klik” application for the past 15 years
and enables quick, safe and simple performance of most of the services offered by the Bank. Ebanking is constantly adapting to new technologies. Safety has been provided for with the use of the
most up-to-date online technologies. The Klik users have the option of performing electronic banking
using mobile phones and table PCs to review account activity and card transaction details as well
as operations with e-invoices.
8.3.3 Bank operations
Loans and advances to banks and balances with the central bank
Due to high operational liquidity and liquidity reserves loans and advances to banks increased by
EUR 137,336 thousand in 2014, coming up to EUR 155,203 thousand by the end of the year. The
increase is mainly the result of transaction account balances abroad and other short-term
investments in foreign banks.
Balances with the central bank on the other hand decreased, namely by EUR 41,588 thousand, as
the Bank redirected operational liquidity surpluses to the interbank market with the aim of improving
profitability.
Deposits and borrowings from banks and the ECB
Liabilities to banks decrease by 29.9% and amounted to EUR 137,044 thousand end December
2014. Interbank funding sources were acquired from the SID banka. In 2014 the Bank repaid loans
in the total amount of EUR 55 million, entered into a new loan agreement for the unused part of the
funding and thus acquired new long-term, five year dedicated funding. In June 2014 the Bank repaid
the total amount of funding taken from the ECB.
8.3.4 Financial instrument operations
Securities investments
Securities investments amounted to EUR 487,420 thousand end 2014, representing 28% of the
Bank’s total assets, having increased by 43.8% compared with 2013. In December 2014 the Bank
received state aid, half of which came in the form of bonds, and transferred bad assets to the BAMC,
receiving government guaranteed bonds in exchange.
End 2014 the Bank only held about 1 percent of investments in held for trading financial assets
totalling EUR 4,636 thousand, with the remaining part of EUR 482,784 thousand represented by
investments in available for sale financial assets.
28
SECURITIES INVESTMENTS in EUR thousands
482.784
500.000
450.000
400.000
350.000
327.895
300.000
250.000
31.12.2014
200.000
31.12.2013
150.000
100.000
50.000
4.636
10.961
0
Held for trading
Available for sale
In line with its business policies the Bank sold all investments in held for trading financial assets
in 2014. This category only showed receivables from derivatives in their fair value amounts.
Available for sale financial assets are used for the management of liquidity, currency and interest
rate risk. Investments in ECB eligible securities form part of the Bank’s liquidity reserves.
Equity securities investments amounted to EUR 3,350 thousand, being less than 1 percent of all
available for sale securities investments. The investments in shares dropped by 66.4% in 2014 due
to sales and the transfer to the BAMC.
Debt securities investments amounted to EUR 479,434 thousand end 2014, having increased by
EUR 161,513 thousand or by 50.8% compared with 2013. In addition to the receipt of recapitalization
bonds in the amount of EUR 95 million and BAMC bonds in the amount of EUR 125.8 million, the
Bank also invested in prime securities due to excess liquidity.
Securities in issue
Liabilities from securities in issue decreased by 20.8% in 2014, amounting to a total of EUR 106,776
thousand end 2014, representing 6% of the Bank’s liabilities. These comprised regular bonds and
regular certificates of deposit. Subordinated liabilities were revalued to fair value in 2013, being
completely eliminated at the Bank’s recapitalization by the state in December 2014 (The Decision
by the Bank of Slovenia on emergency measures).
At the end of 2014 the Bank held three regular bond issues, two maturing in 2015 and one that
matures in 2016. The Bank’s liabilities in this respect amounted to EUR 98,524 thousand and
decreased by EUR 761 thousand in the last year due to interest payments.
Liabilities from issued regular certificates of deposit amounted to EUR 8,253 thousand end 2014 and
dropped by EUR 26,304 thousand as compared with 2013. The Bank renewed a small part of the
due regular certificates of deposit in 2014 with the issue of new long-term certificates of deposit in
the amount of EUR 2,687 thousand.
29
8.3.5 Payments
The Bank continued monitoring and implementing the changes brought about by the legislation and
meeting its customers’ operational requirements in 2014 in relation to payment operations.
In the technological aspects of SEPA (Single Euro Payments Area) it implemented all requirements
in accordance with the Directive 260/2012, also fully implementing the ISO 20022 xml standard for
data exchange between the Bank and its customers.
Considering the fact that the banks are key in the development and processing of e-invoices, the
Bank performed numerous activities to that end in 2014. To promote the use of the product it
continued actively marketing it. Customers were provided with the option of manually entering einvoices, as the Bank is aware that some do not have their own capabilities for the issue of einvoices.
In spite of the diversity of services and the competitive prices offered by other Slovenian banks, the
Bank increased the number of open transaction accounts in 2014 by some 500 as compared to
2013. At the end of the year the Bank maintained 13,035 transaction accounts, representing a 5.7%
of accounts held with banks in Slovenia.
The Bank executed 12.5 million payment transactions totalling EUR 38,654 million for its customers
in 2014. Despite its somewhat lower share (3.44%) in the total number of outflow transactions from
Slovenia as compared with 2013 (3.47%), the total volume of payments still increased by 3%.
8.4 Assuming and managing banking risks
In its operations, the Bank is exposed to a number of different risks which is why it developed a
number of different procedures and methods for their management. The quality of assessing all risk
types and responding to them in a timely manner as well as decreasing exposure to risk are important
factors for the attainment of the Bank’s strategic goals. It has prepared a strategy of assuming and
managing risk together with nine policies, which feature detailed descriptions of procedures in
connection with identifying, measuring or assessing, managing and monitoring risk. The strategy
and policies of assuming and managing risk are updated annually, whereby environmental
conditions and their effect on the Bank’s operations are taken into consideration as well as the newly
acquired experience and know-how in the area of risk management.
In spite of the aforementioned risk types, the Bank also provides it is capable of managing all other
significant types of risk, which it assumes in the course of its operations. In the event of new risk
types being encountered, these are also included in comprehensive risk management activities.
The Bank’s largest exposure pertains to credit risk, followed by profitability, strategic, liquidity,
operational, reputation risk, interest rate and capital risk as well as market risk.
The Bank has prepared and implements the Banka Celje, d.d., Remuneration Policy to assess the
suitability of key personnel at Banka Celje, d.d., and the Policy of assessing the suitability of
Management and Supervisory Body members at Banka Celje, d.d.
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On January 1, 2014 a new capital accord came into force as a result of Basel III requirements. The
content of the new capital accord has been transferred to the European banking environment in the
form of two documents:
- Regulation (EU) No. 575/2013 of the European Parliament and of the Council of June 26,
2013 on prudential requirements for credit institutions and investment firms and amending
Regulation (EU) No. 648/2012 (hereinafter referred to as ‘’Regulation CRR’’ - Capital
Requirements Regulation);
- Directive 2013/36/EU of the European Parliament and of the Council of June 26, 2013 on the
access to the activity of credit institutions and the prudential supervision of credit institutions
and investment firms and amending Directive 2002/87/EC and repealing Directives
2006/48/EC and 2006/49/EC (hereinafter referred to as ‘’CRD IV’’ - Capital Requirements
Directive).
The new capital accord – Basel III, having been transferred to the banking environment through the
abovementioned directive and regulation, has been implemented in the operations of the Bank on 1
January 2014. All the activities pertaining to the implementation of the provisions from the new
legislation within the Bank are performed by the Basel II Project Group, with the goal of satisfying
the legal requirements with respect to reporting to the regulator and improving risk monitoring as a
basis for the further decision making process. The new legislation affects the area of capital and
liquidity risk management the most with significant changes in credit risk management as well.
The following includes definitions of individual bank risk types.
Credit risk
Credit risk, representing the risk of loss resulting from a debtor's inability to meet its obligation to the
Bank, is considered one of the most important banking risks.
The aim of assuming and managing credit risk is for the Bank to ensure up-to-date management and
assessment of debtor risk or the risk related with investments and the credit portfolio. The Bank
measures the risk associated with a debtor prior to granting a loan as accurately as possible and
measures the exposure to credit risk for the entire duration of the credit relationship thereafter. It
directs investments toward debtors with a high rating and toward less risky sectors and regions. It
builds the risk associated with the investment into the interest rate and ensures the best possible
collateral. The Bank limits portfolio concentration by setting up limits toward debtors or toward groups
of related entities, by setting limits in connection with portfolio structure (according to sector, region,
type of transaction and activity). Most of the transactions are entered into within the Republic of
Slovenia, with treasury transactions being performed in other EU members, while decreasing
exposure to the SEE region (South East Europe).
The Bank has set up a system of early increased credit risk detection and is actively working on
recovery of receivables past due. It approaches the restructuring of funding, where the company
exhibits a sustainable model and sufficient cash flow to repay the loans under the new, restructured
conditions. In the event of objective evidence on increased credit risk, the Bank assesses loss from
credit risk and recognises impairment charges and provisions in line with international financial
reporting standards (IFRS), while ensuring their adequacy on an ongoing basis later on.
The Bank calculates credit risk capital requirements using the standardised approach. It also
calculates an internal assessment of capital requirements to cover for unexpected loss from credit
risk on a quarterly basis. It estimates the assessed internal capital requirements based on external
factors and performs stress tests as well, while also measuring the effect that extraordinary, but
probable, events have on profit and the Bank’s financial position.
31
In 2014 the transfer of claims to the BAMC resulted in a decrease in exposure to credit risk. Nonperforming loans and loans to sectors with higher risk (real estate, financial brokerage, professional,
scientific and sales activities) decreased significantly. The share of debtors in rating classes A and
B (investment grade classes) increased to 67.20% (2013: 57.12%), rating class C (substandard)
decreased to 10.97% (2013: 11.39%), while the share in the rating classes D and E (bad debtors or
non-performing loans) decreased to 21.83% (2013: 31.49%). In 2014 the Bank applied additional
impairment charges and provisions to cover for losses from credit risk in the amount of EUR 58,591
thousand (2013: EUR 207,897 thousand). The impairment charges for the year resulted from the
new insolvency proceedings and the preventive corporate restructuring proceedings, decreased fair
values of collateral, lengthy recovery procedures, further negative events effecting debtors, toward
which the bank had restructured its claims.
The new capital accord (Regulation CRR and Directive CRD IV) introduces changes in the field of
credit risk management pertaining to capital requirement for credit risk, with an aim to limit
investments in exposures with a higher rate of risk and directing these into retail banking, especially
into SMEs, where an additional incentive of decreased capital requirements has been introduced. It
determines a unified definition of default and the standards for the monitoring of defaulting
exposures. The definition of restructured exposures has also been unified and requirements set
regarding their monitoring after restructuring has been done. Thus, the goal is to achieve more
transparency in banking operations and a higher level of comparability between banks.
In 2015 credit risk remains one of the more significant risks the Bank faces, which is why it will
continue to carefully monitor the exposure to it and implement measures to mitigate losses. Slovenia
remains the target market, which is why the Bank will continue to decrease exposure to companies
abroad, while maintaining its operations with foreign banks from lower risk markets.
Market risk
Market risk is the risk of loss due to changes in interest rates, currency rates and market prices of
financial instruments. The most significant risk type within market risk is positional risk in equity and
debt financial instruments and derivatives. Exposure to currency risk is low.
In trading with financial instruments, the Bank is predominantly active in the financial market of the
EU (securities transactions with prime banks and sovereigns in order to ensure an adequate liquidity
reserve). The Bank defines investments and trading in financial instruments by applying limits to a
number of different factors (according to issuer, transaction type, region, etc.), which the Bank
constantly adjusts to take into account the conditions in the financial markets and its own business
strategy. Additionally, it has also adopted stop-loss limits.
The Bank enters into transactions with foreign currency and interest rate derivatives. Its basic policy
in connection with derivatives trading is entering into transactions for the purpose of hedging own
positions and client positions, whereby the latter transactions are hedged with counter positions.
Transactions are entered into with prime foreign banks, thus allowing for low exposure to market risk
from these instruments.
In relation to foreign currency risk, the Bank’s policy is that of a closed position across individual
foreign currencies. Managing the open foreign exchange positions is performed through prompt
transactions and with the use of foreign exchange derivatives in line with the limits set. Limits are
low and are meant for the management of open foreign exchange positions within the scope of
regular operations, not intended for speculative trading. The Bank calculates market risk capital
requirements using the standardised approach.
In 2015 the Bank will purchase financial instruments with the sole purpose of managing interest rate
and liquidity risk.
32
Interest rate risk
The risk of change in interest rates pertains to the exposure of the Bank’s financial balances to
fluctuations in interest rates, mainly due to the mismatch between the maturities of investments and
the Bank's funding sources or to the mismatch between the type of interest rate or period, in which
the interest rate is fixed. Exposure to interest rate risk may influence the amount of the Bank's net
interest income as well as the economic value of its capital.
To decrease interest rate risk, the Bank uses traditional balance sheet transactions, such as lending,
securities purchases, deposit taking, issue of securities etc. In addition to these traditional banking
transactions, it also enters into interest rate derivative transactions, not for speculative purposes, but
to hedge for individual operations. In accordance with the IFRS the Bank measures such interest
rate derivatives at fair value, which may have a significant impact on the income statement. This is
why it introduced hedge accounting, which decreases the instability of operational results caused by
adjustments in the fair value of derivatives intended for hedging.
On a quarterly basis, the Bank calculates internal capital requirement estimates to cover for
unexpected loss from banking book interest rate risk in line with internal methodologies.
With the use of the above measures, the Bank was successful in decreasing exposure to interest
rate risk. It will continue to close interest rate gaps using balance sheet instruments and interest
derivative agreements in 2015, mitigating the effects on the income statement with hedge
accounting.
Liquidity risk
Liquidity risk is the risk type that includes the risk of providing liquidity funding, when the Bank is
unable to settle all of its due obligations or is forced to obtain sources of liquidity at significantly
higher costs. It also includes market liquidity risk, pertaining to positions in financial instruments
which cannot be sold or replaced in a short period of time without significantly affecting the market
price. From the aspect of time, liquidity risk management is separated into operational liquidity
management and structural liquidity management.
The Bank provides for efficient management of operational and structural liquidity, representing the
management of cash flows in a chosen time frame while taking into consideration the liquidity of
available assets and the stability of asset sources. Operational and structural liquidity cash flow
management is based on simulations done in relation to the maturity of asset sources and the
maturity of assets according to their capacity for prompt realisation.
For the purposes of operational liquidity the Bank has at its disposal an adequate amount of liquidity
reserves, which enable it to settle matured liabilities in the shortest possible period in cases when
usual liquidity sources are not available, or when these do not provide for the adequate liquidity
required.
For structural liquidity, the Bank provides for an adequate liquidity ratio in accordance with the
Decision on minimal requirements for ensuring adequate liquidity for banks and savings banks, thus
ensuring required reserves in the form of the structural liquidity surplus.
In accordance with the Decision on risk management and the implementation of internal capital
adequacy for banks and savings banks, the Bank performs quarterly stress test scenarios pertaining
to liquidity. Based on the results of these stress tests, it defines target ratios and liquidity risk
management limits. The tests allow it to determine the structure and minimal amount of the liquidity
reserve. It also defines a contingency plan for the Bank to follow at the onset of the first signs of a
liquidity crisis.
33
By employing a system of limits, the Bank also follows the objective of maximising funding source
diversification. By maximising the diversification of liquidity sources with an emphasis on long-term
liquidity, the Bank works towards the objective of an optimal liquidity gap, being the difference
between assets and liquidity sources in a certain time interval.
In 2014, the Bank managed liquidity risk in line with adopted policies, however the conditions in
relation to accessing liquidity changed. The Bank did not have any problem with operational liquidity,
as it provided for sufficient liquidity reserves (highly liquid assets, which are also eligible to be
pledged as collateral for obligations toward the ECB and in the interbank repo market) to manage
the required level of operational liquidity.
More of its activities were aimed at providing adequate diversification of liquidity sources, which
allowed it to follow the objective of an optimal structure of these, while emphasising stable liquidity
sources. It also followed its objective of an adequate ratio of loans to the non-banking sector with
deposits from the non-banking sector.
The Regulation on prudential requirements for credit institutions and investment firms in the area of
liquidity risk introduces the following new features: meeting the Liquidity Coverage Ratio (LCR), the
Net Stable Funding Ratio (NSFR) and additional liquidity monitoring metrics. In 2014 the Bank
reported a set of items for the LCR and the NSFR, while reporting liquidity metrics will be introduced
within the year 2015.
Operational risk
Operational risk pertains to the risk of loss as a consequence of the inadequate or unsuccessful
execution of internal processes, the actions of individual persons or the functioning of systems, or
due to external factors. Due to its fast development and the characteristics of the financial system,
the importance of operational risk is growing. It requires the setting up of a solid and reliable system
for assuming and managing this risk type. In defining the way it assumes and manages operational
risk, the Bank takes into consideration its size and development as well as the nature and complexity
of its business activities. It has prepared a comprehensive review of its potential exposure to
operational risk according to business processes, which is based on exposure according to category
of operational risk, the frequency of an event occurring, the risk impacts and control environment.
The Bank has prepared a list of operational processes, which served as the basis for the preparation
of a profile pertaining to potential exposure to operational risk according to individual processes, for
the Bank as a whole, for the preparation of a catalogue of all operational risk it identifies and for the
preparation of a matrix of links between organisational units within the business processes.
It calculates operational risk capital requirements according to the basic indicator approach. The
calculation of the internal capital assessment and the capital requirements to cover unexpected loss
from operational risk is done in line with adopted methodologies on a quarterly basis.
Continuous operation of the Bank is regulated by the rulebook defining procedures, activities and
processes of operation and organisation in the event of a crisis, which are part of operational risk.
The purpose of the plan for continuous operation is to ensure the safety of employees and clients
and to set up the smooth operation of key business processes in the shortest possible time at the
existing and at an alternate location. All business processes performed by the Bank have plans in
place for their performance in the event of non-functional IT. The goal of organised operations is to
reduce operating and financial damage, which would materialise should activities and procedures
defined in the continuous operation plans for the Bank and in the recovery plan be suspended.
34
Capital and capital adequacy
In its operations, the Bank must always have at its disposal an adequate amount of capital, which
depends on the volume and types of services the Bank provides and its strategy. An adequate capital
base represents a contingency reserve pertaining to different risk types, which the Bank is exposed
to in its operations. To cover unexpected loss, the capital of any bank must always amount to at least
the sum of the capital requirements for the credit, market and operational risk, while capital
adequacy, representing the ratio between capital and the sum of risk-weighted items, must always
amount to at least 8%. The management of capital and capital adequacy within the Bank is based
on adopted policies of assuming and managing capital risk and is in line with annual business plans,
also expressed in the need for adequate regulatory capital.
With the intention of assessing the capacity for assuming risk, the Bank prepares projections of the
dynamics of capital and capital requirements as well as projections of the internal capital assessment
and capital requirements for a period of five years in line with its restructuring plan.
The Bank provides for a decrease in investments with higher capital expenditure (in the area of credit
and market risk capital requirements), while also decreasing credit risk capital requirements by
including property (residential and commercial) into the calculation of risk-weighted exposure.
In 2014 the Bank continued with the activities aimed at decreasing capital risk and was successful
in increasing capital. With the increase of its share capital, the Bank has provided for long-term
capital adequacy. As at 31 December 2014 the Bank’s capital adequacy after the capital increase
amounts to 18.22%.
More details are included under item 5.4 in Financial Statements.
The Bank calculates an internal estimate of capital requirements on a quarterly basis to cover for
unexpected losses from capital risk in accordance with the adopted methodologies.
Profitability risk
Profitability risk pertains to an inadequate structure or to the Bank’s inability to provide ample and
constant levels of profitability.
The methodology of assessing profitability risk is based on determining the adequacy of the structure
of the statement of financial position, the income statement items, the interest margin, cost efficiency,
the profitability of new business and the return on assets and capital. This is why the Bank prepares
monthly quantitative and qualitative analyses of the statement of financial position, the income
statement, the statement of comprehensive income and the statement of cash flows, with the findings
taken into account in the operational decision-making process.
In line with the Bank’s risk profile, profitability risk is one of the more significant risk types it faces,
for which capital requirements are calculated in accordance with the prescribed methodology.
Strategic risk
The objective of strategic risk management is to reduce the risk of loss from erroneous operational
decisions, the inappropriate implementation of decisions made or due to insufficient responsiveness
to the changes in the operating environment.
In accordance with the adopted commitment on the merger with Abanka, the Bank has only prepared
strategic policies for the year 2015, while the strategy for the following four years has been prepared
for the merged bank. The implementation of these strategic policies will be regularly monitored with
the aim of adopting the right operational decisions and to recognise increased risk on time. These
35
strategic policies are implemented across all levels within the Bank and are adequately supported
with all the required calculations and human and technological resources.
Reputation risk
Reputation risk represents the risk of loss due to a negative image, which the Bank has in the eyes
of its clients, business partners, owners, investors and supervisors.
To ensure the reputation of the Bank, as perceived by the interested public, is adequate for the
attainment of operational goals, the management of its reputation is a strategic task for the Bank as
a whole, not only its respective parts. The utmost attention is paid to operations with customers and
to the contacts with supervisory institutions, potential investors and other public groups.
The Bank manages reputation risk by ensuring safe and stable high quality operations, by having
the Management Board and Supervisory Board conduct themselves in accordance with professional
prudence and the highest ethical standards of management, by providing transparent operations,
monitoring its media image, systematically communicating with various public groups, managing its
human resources with the utmost care and by being socially responsible. It pays special attention to
communicate to its customers, business partners, owners, investors and other interested groups.
ICAAP process
The Bank has set up a process of assessing adequate internal capital (the ICAAP process), which:
- is based on the identification, measurement and assessment of risk, the preparation of an
aggregate risk estimate and the monitoring of significant risk types;
- allows for ensuring adequate internal capital levels in relation to the risk profile of the Bank;
- is appropriately included in the management process (decision-making, risk management, etc.).
For the purpose of assessing internal capital, the Bank calculates internal capital requirement
estimates for risks it deems significant on the basis of its risk profile or it determines through the
procedure of risk identification, measurement or assessment, management and monitoring that
these might significantly impact its operations, thus requiring it to ensure appropriate capital levels.
The Bank calculates the internal capital assessment and capital requirements on a quarterly basis,
with the calculation being confirmed at the Risk Committee and then forwarded for consideration and
approval at the ALCO (Assets and Liabilities Committee).
The Bank re-assessed the level of exposure to individual risk types in major business lines and the
quality of the control environment. It calculated the Bank’s risk profile and prepared a risk matrix.
Based on the risk profile, prepared in December 2014, the Bank is mostly exposed to credit risk,
followed by profitability, strategic, liquidity, operational risk, reputation risk, interest rate rand capital
risk and market risk. The risk profile deterioration trend stopped in 2014, however the calculated risk
profile still deviates from the desired risk profile, as defined in the Strategy of assuming and
managing risk. In spite of the positive economic trends the merger with Abanka Vipa, d.d., planned
for the coming year, brings with it a certain level of uncertainty and risk.
36
8.5 Internal organisation and human resources
The Bank has taken care to develop further during the entire course of its operation by investing in
efficient IT support systems, its business network and in its human resource potential.
Internal organisation
Organisational structure
The Bank is organised into a comprehensive organisational system. There are for main decisionmaking levels in place, namely the Managemet Board, both executive directors, the general
managers of divisions and the heads of services, business units and departments.
Its well-developed business network allows it to be present in all the major towns in the Celje region
as well as in Ljubljana, being the financial centre of Slovenia, in Maribor and in Koper. End 2014
there were 8 branch offices with 20 agencies for individuals and 5 branch offices for corporates
(micro, SMEs) and private entrepreneurs in operation within the Bank’s 9 business units.
Organisational changes
In 2014, organisational changes mainly adhered to the restructuring plan, which was submitted to
the European Commission. To unburden the business network a separate department was formed
for direct support activities to sales operations. An independent support department was formed for
marketing, the development of products and services, which took over the development and
marketing assignments in relation to sales. With an aim of cutting down on the managerial levels
and the Main Branch in Ljubljana and the Maribor Business Unit were also reorganised to achieve a
greater focus on sales. The telephone switchboard was outsourced.
Job systematisation
To provide for a more efficient performance of business processes jobs within the business network
were unified with the aim of forming the post of a universal personal banking advisor. The condition
for the placement of staff to the new post was a successfully passed internal test, which was passed
by 27 of the 45 potential candidates.
Document management
In 2014 the Bank also introduced an electronic document management system. During the initial
stage activities were carried out in relation to the payment of invoices and the receipt of court mail
and judicial enforcements in electronic form. Both processes were implemented in February 2015.
Property management
Due to discontinued operations at some of its business units during the past few years, the Bank is
in the process of selling the empty offices. In December 2014 it sold its offices in Prebold. It acquired
energy performance certificates for all the offices it leases or which are being sold. By the end of
2014 the energy performance certificates were also fitted in most of the other properties held by the
Bank, with a few put in place by the end of March 2015 at the latest.
Human resources
Number of employees
Human resources adjusted to the operational environment in 2014. The number of employees
decreased gradually, going down 6.4% in comparison with 2013. On 31 December 2014 the Bank
employed a staff of 468, with the average complement for the year being 497. There were 33
employment terminations in 2014, 29 of those were permanent basis and 4 temporary employment
contracts. A new employee was hired on a temporary employment basis. Most of the causes for the
37
termination of employment were operational. The fluctuation rate was 6.25% in 2014, being 1.53
percentage points above the 2013 figure.
Employees according to age and gender
The average age at the Bank was 46.6 years in 2014, having increased in comparison with 2013
when it was 46.0. The age group of 51 to 55 years was dominant. The high average age is due to
the Bank’s long tradition on the one hand and the result of restrictive human resource policy in recent
years. The average length of service at the Bank was 21.4 years, with the average total employment
period being 24.5 years.
Women are dominant according to gender structure, representing 78% of all employees in 2014.
The gender structure has not changed in any significant way during the past few years.
Employee education structure
The Bank puts a great deal of emphasis on knowledge and education, also shown in the fact that
4.9% of employees have completed their post-graduate studies and 60.7% have been educated at
post-secondary school level at least. The Bank promotes improvement of the education structure by
partly funding educational studies and providing the possibility of placing employees to posts that
allow for further personal and professional development after they have completed their chosen
studies. Compared with 2013 the share of employees holding higher education degrees increased
by 2.8%.
Employees with disabilities
The share of employees with disabilities (category II. and III. disabled persons) is 2.1% and has gone
down by 1.3 percentage point compared with 2013, mainly due to termination of employment. Two
thirds of the employees with limited work abilities work in the retail network. The funds from
exemptions and benefits in payment of contributions due to employment of people with disabilities
are used to cover part of the cost of salaries paid to the employees with disabilities.
Employee monitoring, development and promotion
Annual interviews were performed in 2014, serving as the basis for the assessment of an individual’s
development potential, the determination of key personnel and for the preparation of an educational
plan, for the individual employees as well as for employee groups. Based on the assessment of
annual performance about 2% of employees were promoted (both vertically and horizontally).
Employee testing was also performed with the objective of career potential assessment and the
building of a human resource data base for the placement of employees to suitable posts. Testing
included 10% of the employees. Based on the assessed personnel potential and the assessment of
past performance about 1% of employees were promoted, while part of the employees were
reassigned to different posts.
Based on internal governance and in accordance with requirements from the European Banking
Authority (EBA) guidelines policies for the assessment of the suitability of management and
supervisory body members as well as key function holders were adopted during the past year.
Employee training
In 2014 employees attended 147 internally organised and external training programs. The Bank
promoted internal training more to facilitate tailor-made know-how transfer between employees, as
this meant more employees were able to participate. Training sessions featured know-how pertaining
to products on offer, software skills, legislation, finance as well as practical skills.
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Motivation and reward
The Bank’s internal documents also feature a policy on employee rewarding. The salary system
includes a fix and a variable part. The variable part is intended for rewarding employees’ above
average performance. It is performed every month on the basis of employee assessment in line with
the criteria defined in the internal documents (quality, quantity, resource efficiency, inventiveness,
diligence).
The Bank rewards its best sales employees from the retail division in line with the model, which is
adapted to the Bank’s operations as well as the individual’s performance. Rewards are given on a
quarterly basis, with 16 employees receiving it on average in 2014. Project management and
participation in working groups is rewarded also.
Student and temporary work
5 employees, all for the retail division, were hired through an employment agency. Student work saw
an average of 7 students working at the Bank at any one time, mainly performing secretarial and
other administrative jobs.
’’Family friendly company’’ certificate
The Bank is proud of the fact it holds the ’’Family friendly company’’ certificate. This is why it focuses
its attention on families and the balancing of the employees’ family and work-life. Among the 15
measures it adopted, it emphasizes the children time bonus, New Year’s gifts for children and gifts
for the new-born.
Taking care of the employees
The Bank systematically monitors the health status of employees, which is a legal obligation as well.
In 2014 the periodical medical examination was passed by more than 40% of the employees.
This past year saw the preparation of instructions and criteria for granting solidarity aid to the
employees. It was awarded to 4 employees. In October an in-house collective agreement was signed
as well.
8.6 Information technology
The core objective of IT (Information Technology) is to ensure continuous IT support. Activities were
also directed at the programing of single new solutions, the cooperation on some of the larger
projects and the performance of upgrades and adaptations of the existing hardware and software
communications equipment.
Projects
The project of optimising the processes pertaining to card operations was completed in January
2015, with further development to be executed according to respective lines. Other major projects
included the setup of the COREP and FINREP reports in accordance with the EBA-DPM
methodology (European Banking Authority Data Point Model). The new reports have already been
successfully sent out. In compliance with the requirement by the Bank of Slovenia a new software
application was set up for liquidity flow reporting purposes. These too are being successfully reported
since 1 April 2014.
A new solution was set up for a more accurate record on real estate properties, including their
revaluation. A milestone development process with continuous testing is being implemented, with an
interactive data entry set as the goal. As a result, a comprehensive overhaul of the collateral
determination module was required in the data warehouse.
39
Due to the level of interest for including a larger number of e-invoice issuers, the support for the
receipt of e-invoices through multiple channels was set up in 2014.
Outsourcing of operations
Rationalisation of operations in 2014 meant that printing and enveloping was outsourced. Support
for the preparation and exchange of documents was set up for this purpose. The project was fully
completed mid-year. POS terminals were also.
IT risk mitigation activities
To mitigate IT risk regular monthly reports are being prepared on successful installation of security
patches on banking equipment, with regular weekly reporting also done on the disturbances in the
operation of key computing and communication systems with the announcement of the planned
interventions.
The Bank will continue introducing the monitoring system, which among other things provides direct
communication to the custodians in the event of a malfunction or an overload in the systems being
monitored.
8.7 Sustainable development and social responsibility
The sound foundations of successful banking operations, which the Bank laid almost one and a half
century ago, are a strong basis for its cooperation with its partners and the environment. In times
when the world is characterized by rapid change, strategically placed communication is key to
success in the market, which is why the Bank’s Management Board takes special care to actively
and transparently communicate with the interested public, while also having established all risk
management mechanisms.
Well thought out and quick decisions of the management with the professional and motivated
employees enable the Bank to meet all expectations. It adapts to the market conditions and the
different needs of individuals and companies. Simply a dependable banking service provider with a
broad network of offices and modern banking channels, providing a range of services that customers
expect.
Being part of the environment is an important component of successful operations, quality
development and progress for the Bank, which is why it is actively and responsibly involved in the
social environment. In accordance with its vision and strategy, it invests in the environment in which
it operates. It supports sports and culture with sponsorships, takes part in a number of charity
projects and is actively involved in social projects, as it deems its further efficiency and success to
be dependent on the support of its environment and the trust of different interest groups.
In addition to cooperating with various cultural, humanitarian and sports societies, the Bank also
supports the Muzej novejše zgodovine (Museum of Modern History) in Celje and its Hermanov Brlog
(Herman’s Den) project, the only Slovenian museum for children, the Pelikan Studio, while also being
a long-term supporter of the Slovensko ljudsko gledališče Celje (Slovenian People’s Theatre in Celje)
and of the Zavod Celeia (Celeia Institute) as well as other institutions and companies that organise
numerous cultural and sports events.
In its operations, it shows special concern for underprivileged customer classes, offering special
benefits to retirees, students and humanitarian and other organisations, while also still maintaining
savings at primary schools. In doing so it hopes to contribute to the development of banking related
values.
40
The Bank also helps its partners invest in environmental projects, construct waste water treatment
plants and carry out other socially responsible projects. It purchases environmentally safe materials,
separates waste, collects waste paper and ink cartridges and utilises a centrally controlled heating
system to use energy rationally.
8.8 Marketing communications
The Bank’s marketing activities in 2014 were marked by two key topics: the celebration of its 150th
anniversary and the intensified communication regarding its new strategic position in the second half
of the year.
Especially the second half of the year saw the Bank’s marketing activities aimed at the broader Celje
region, more specifically at the towns and the surroundings, where it holds business units, branch
offices and ATMs.
Most of the Bank’s activity was thus directed at the Savinjska region, where its recognition level and
market share are the highest. The shift of the focus to the regional area was even more prominent
in marketing, as the Bank’s promotional campaigns were aimed at the area with more intensity in
the second half of 2014.
Increased attention to the region was first and most clearly reflected through the changes in the
Bank’s corporate slogan – from ’’Traditionally well done’’ (emphasizing tradition, 150 years and
quality), to the new ’’Close to you’’, which completely changed the communication focus.
With the new slogan the Bank took to emphasizing its geographic proximity to customers, while at
the same time being able to externally and internally commit to changes and improvement, which
will bring its services even closer to the customer. There have been many, also internal,
communication activities, focusing on the desire and the will to change services, conditions and the
Bank’s behaviour in relations with customers. The new direction was supported by a marketing and
communications campaign in autumn.
Towards the end of the year the Bank started to intensify the addition of product messages with the
clear intention of informing customers, that is not only close to them geographically, it also intends
to improve its services and conditions.
8.9 The operations of the Internal Audit
Internal Audit performs its duties in accordance with the international standards of professional
practice in its capacity of an independent department reporting directly to the Management Board,
at the second level of management. It is in constant contact with the Audit Committee and the
Supervisory Board. When employees contribute opinions, assessments and recommendations, they
can rely on internationally established professional internal audit standards and operate
independently of other parts of the Bank.
It works in accordance with the internal audit code and the internal auditor’s professional ethics. The
latest assessment of the Internal Audit Service's compliance with standards was performed in the
period from November 2012 to January 2013 (the assessment period interval is 5 years). The
information on the assessment was made public at the Slovenian Audit Institute’s homepage.
The two basic planning documents of the Internal Audit for 2014 comprised the dynamic three-year
strategic plan and the annual operational program, which the Management Board adopts annually
41
with approval given by the Supervisory Board after due discussion at the Audit Committee. Both
documents are based on the Bank’s risk profile, its annual and development plan, it strategy and the
fundamental characteristics of the environment in which it operates.
The planned activities of the department are detailed in semi-annual operational plans, which the
Management Board adopts. To monitor the Internal Audit’s activities on an ongoing basis the
Management Board endorses semi-annual and annual reports on its activities, showing the activities
performed by it with emphasis given to the most significant findings, including an overview of the
recommendations issued and implemented. The Supervisory Board reviewed the reports and they
were considered at the Audit Committee, its advisory body, which was regularly kept appraised of
the department’s activities.
The Supervisory Board was regularly kept informed of the audits conducted by external supervisory
institutions and with the Bank’s activities based on the requirements by the Bank of Slovenia. The
annual Banka Celje, d.d., internal audit report, with the opinion of the Supervisory Board of Banka
Celje, d.d., is also reviewed at the Meeting of Shareholders.
The assignments of Internal Audit are defined by law and pertain to quality assessment in connection
with the management of all types of risk (including the setting up of an adequate system of internal
controls) and to the monitoring of compliance of the Bank’s operations with regulations and internal
rules as well as the principles of rational operations.
To monitor the implementation of recommendations after internal audits have been completed the
Bank’s Management Board is made aware on at least two levels: first after every internal audit has
been completed and after that a comprehensive annual report on the implementation of all the
recommendations is given. A framework system for comprehensive monitoring of implementation of
the annual operational programme has been set up comparing the plan and execution of internal
audits.
The Internal Audit also coordinates activities in connection with the selection of external auditors
(through the Management Board, the Audit Committee and the Supervisory Board) to be decided
upon at the General Meeting of Shareholders.
The indicative annual plan of operations envisaged auditing 22 business areas in the Bank and the
completion of four internal audits left over from 2013, under the assumption there will be no
extraordinary large scale tasks (a total of 26 internal audits). Emphasis was placed on the auditing
of credit and liquidity risks.
Actually, 17 planned internal audits were completed by end February 2015, the 4 internal audits
carried over from 2013 have been completed, with 6 extraordinary audits having been performed
also (a total of 27 audits); an internal audits is still running and one was not completed as the internal
audit employee’s employment was terminated in November and two were not performed, as the
execution made no sense due to the change in the circumstances of the Bank’s operations. An audit
of the implementation of new banking products is mandatory at their introduction, however there was
no new banking product introduced in 2014. The department also informally advised in 20 instances
with the intention of contributing to the better operations of the Bank.
The most significant areas of operation, which were audited in 2014 include: credit risk management
in its broadest sense, capital risk management, the quality of IT systems management from different
points of view and compliance with new, amended legislation.
In all internal audits and reviews, special emphasis was put on: the identification of procedures builtin for the management of risk, assessing the current situation as compared to the recorded data, the
42
quality of internal control systems, timely commencement of recovery procedures and the adequacy
of collateral, compliance of operations with legislation and internal rules, operational risks related to
IT and the possibilities for improving existing procedures; all aimed at further raising the quality of
the Bank’s operations, thus contributing to added value. In the performance of their duties internal
auditors frequently cooperated with the Compliance Department.
The Internal Audit’s tasks were performed by five employees until November 2014 (including the
department’s General Manager). End November an employment relationship with an employee with
the title of certified auditor was terminated. After the expiration of the term of office at the end of
2014, the post of the department’s General Manager was taken over on 1 January 2015 by a new
employee, with a Master of Science degree. One of the employees is a certified internal auditor,
another is a certified information systems auditor (CISA) and is a Master of Science. All five
employees have been educated at university level at least. Additionally, one employee holds an
insurance broker licence and two employees hold the European Banking Certificate. Education and
training of employees remained a constant in 2014, with additional knowledge being acquired in
internal auditing, banking operations, IT skills, anti-money laundering, risk management and
corporate governance.
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9 MANAGING BODIES OF THE BANK
GENERAL MEETING OF
SHAREHOLDERS
AUDIT COMMITTEE
SUPERVISORY BOARD
REMUNERATION COMMITTEE
MANAGEMENT BOARD
CREDIT COMMITTEE
LIQUIDITY COMMITTEE
MANAGEMENT COMMITTEE
ORGANISATIONAL UNITS
ASSETS AND LIABILITIES
COMMITTEE - ALCO
OTHER COMMITTEES AND
COUNCILS
44
10 ORGANISATIONAL STRUCTURE OF THE BANK
MANAGEMENT BOARD
President & CEO
Member of the Management Board
Davorin Leskovar
Aleksander Vozel, M.Sc
INTERNAL AUDIT
FINANCIAL MARKETS
DIVISION
AML&CTF Officer
Debt Restructuring Officer
IT Consultant
EXECUTIVE
DIRECTOR
EXECUTIVE
DIRECTOR
IT DIVISION
LEGAL AFFAIRS AND
COMPLIANCE
OPERATIONS DIVISION
CORPORATE DIVISION
ACCOUNTING DIVISION
GENERAL AFFAIRS
PERSONNEL AND
ORGANISATIONAL
SERVICES
MARKETING SUPPORT,
PRODUCT AND
SERVICES
DEVELOPMENT DEP.
RETAIL DIVISION
Celje Business Unit for
companies
Celje Business Unit for
private individuals
Slovenske Konjice
Business Unit
Hmezad Žalec Business
Unit
Šentjur Business Unit
Laško Business Unit
Rogaška Slatina
Business Unit
Koper Business Unit
Ljubljana Business Unit
45
RISK MANAGEMENT
DIVISION
PAYMENTS AND
OPERATIONAL
SUPPORT DIVISION
RESTRUCTURING
AND RECOVERY
DIVISION
11 STATEMENT OF CORPORATE GOVERNANCE
The Bank’s Corporate Governance statement is prepared in line with the provisions of the
Companies Act (ZGD-1) and pertains to the financial year 2014, while also featuring the significant
changes that have been recorded since the day of the signing of the statement. It includes the
Statement on compliance with the Corporate Governance Code made by the Management Board
and the Supervisory Board under item 11.1 and additional Notes in accordance with Paragraphs 5
and 6 of Article 70 of the ZGD-1 under item 11.2.
11.1 Statement of the Banka Celje, d.d., Management Board and Supervisory Board on
Compliance with the Corporate Governance Code
As a public company Banka Celje, d.d. (the Bank), which has bonds listed on the Ljubljana Stock
Exchange d.d., is compliant with the ZBan-1 and the ZGD-1 as well as the Market in Financial
Instruments Act (ZTFI) and the Rules of the Ljubljana Stock Exchange and with all the additional
general rules, dealing with topics that are dealt with in the Corporate Governance Code.
Corporate Governance Code is in the public domain, attainable at the Ljubljana Stock Exchange
website at http://www.ljse.si/ under “for issuers/downloads”.
The Bank complies with the Corporate Governance Code dated 8 December 2009 (the Code) with
the exception of some deviations or particularities, explained under individual items of the Code
below.
The Bank’s subsidiary, Posest, d.o.o., as a non-public company and as such not subject to the
provisions of the Code.
Clause 1
The Bank's goals are defined in its annual and development plan, both of which are approved by the
Supervisory Board and are not separately defined in its Articles of Association.
Clauses 2, 2.1 and 2.2
As of yet, the Bank has not prepared or adopted a Bank Management Policy as an independent
document, rather this area is regulated with different internal documents, as prescribed by European
banking legislation, the ZBan-1, the Bank of Slovenia operating procedures, the ZGD-1, the ZTFI
and other sector-specific legislation.
Clause 4.2
The Bank would like to see large and institutional shareholders inform the public of their management
policies pertaining to their investment in the Bank; this decision, however, is up to them. Since 16
December 2014 the Bank has a sole owner, the Republic of Slovenia, which does inform the
interested public of its investment status.
Clause 5.2 (second paragraph)
The Bank does not publish specific data on the costs it incurred from the collection of powers of
attorney; these are included in the cost of the organisation and execution of the annual General
Meeting of Shareholders. Since 16 December 2014 the Bank has a sole owner, the Republic of
Slovenia.
Clause 5.4
The Bank’s shares are currently not listed on the stock exchange.
46
Clause 5.5
The recent proposal to the General Meeting of Shareholders for the nomination of Supervisory Board
members includes all of the legally required data; the rest is public domain data.
Clause 5.6
The Bank, in line with general practice, as a rule, nominates the members of the Supervisory Board
collectively.
Clause 5.7
The remuneration policies concerning the Bank's Management Board are defined by the Supervisory
Board on the basis of a proposal by the Remuneration Committee.
Clause 5.8
The General Meeting of Shareholders of Banka Celje decides on the use of distributable profit
separately, however it decides on the discharge of the Management Board and the Supervisory
Board by single unified vote.
Clause 5.9
Financial statements form part of the annual report, which together with the auditor’s opinion is
presented to the General Meeting of Shareholders. A representative of the Bank’s authorised auditor
is not invited to the Meeting. Were, however, the Meeting authorised to adopt annual financial
statements, a representative of the authorised auditor would be invited.
Clause 8.12
In its report, the Supervisory Board includes all of the requirements from the decision of the Bank of
Slovenia pertaining to the due care and professional diligence of Management Board and
Supervisory Board members and endeavours to include as much information as possible to
represent adequately its activities during the year. The recommendations from Clause 8.12 of the
Code will be observed as much as possible.
Clause 11
In its operations until now the Supervisory Board has not yet nominated a secretary. In accordance
with the consensus between the Management Board and the Supervisory Board this job is performed
by the expert department within the Bank.
Clauses 16.5 and 16.6
The Bank has no option plan or comparable financial instruments in place which would provide for
variable reimbursement of the Management Board members.
Clause 20.2
Individual areas of communication have been regulated by individual internal acts until now, however
the Bank will endeavour to comply with this recommendation in the future.
Clause 20.3
The Bank has not had a special internal act in place in connection with the limitations and disclosures
pertaining to treasury share transactions until 16 December 2014. It holds no treasury shares.
Clause 20.4
In making significant shareholder and public announcements, the Bank considers statutory time
limits, which is why it does not prepare a calendar of significant announcements. It will endeavour to
comply with this recommendation in the future.
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Clause 22.2
The Bank does not prepare a separate sustainability report as this area forms part of the annual
report.
Clause 22.3
In line with the ZGD-1, the ZBan-1 and the ZTFI, the Bank informs the competent authorities on any
qualifying share acquisitions.
Clause 23
The Statement of Corporate Governance forms part of the annual report, which is published on the
Bank’s website.
11.2
Additional Notes in line with Paragraphs 5 and 6 of Article 70 of the ZGD-1
11.2.1 The main characteristics of internal controls and risk management in connection with
financial reporting
The Bank has always had a system of internal controls set up during its operations, as it is the duty
of the Bank's Management Board to conduct its operations in a manner ensuring an adequate risk
management system in relation to all the business partners, owners and supervisory institutions.
The system of internal controls is connected to a comprehensive whole in the sense of an umbrella
act, determining the total extent of monitoring activities.
The internal control system at the Bank must be set up in a way as to provide adequate assurances
on the following activities:
- the Bank's operations must be managed with great care and conducted on the basis of the
approved development plan as well as the Bank's approved annual policies and financial plan
aimed at ensuring profitable operations;
- all operational activities, with the potential of increasing the Bank's liabilities, must be approved
by the authorised person, with a segregation of responsibilities clearly defined;
- assets must be secured appropriately, claims collateralized, liabilities monitored;
- a strategy and risk management policies must be prepared, special care must be given to the
monitoring of the Bank's capital adequacy, liquidity and credit risk, interest rate and operational
risk, profitability and market risks;
- a system for the prevention of loss due to irregularities, especially in connection with early fraud
detection, abuse, anomalies or errors, must be set up;
- the system of financial records needs to provide reliable, timely, up-to-date and complete
information;
- a system for the transmission of reliable, timely, up-to-date and complete information for reporting
to owners and external institutions must be set up;
- a supervised system for the introduction of new financial services and new banking products as
well as entering new markets needs to be provided for.
11.2.2 Significant direct and indirect ownership of the Bank’s securities
Qualifying holdings, as defined by the law dealing with the market in financial instruments, in the
Bank's equity were held by three companies, namely:
- Nova Ljubljanska banka, holding 208,499 regular shares, thus having a 40.99% share in the
voting rights;
- Slovenska odškodninska družba, holding 47,592 regular shares, thus having a 9.36% share in
the voting rights;
- NFD1 Investicijski sklad, holding 46,820 regular shares, thus having a 9.21% share in the voting
rights.
48
The voting rights of the Bank's other owners did not exceed the qualifying shares as defined by the
act dealing with the market in financial instruments.
On 16 December 2014 the Republic of Slovenia acquired a 100% stake in the Bank and has been
the sole shareholder since the aforementioned date.
11.2.3 Holders of securities ensuring special rights of control
The Bank's shares do not give their holders any special rights of control.
11.2.4 Restrictions related to voting rights
The shareholder's voting right depends on the number of shares held and is not limited to a certain
share or a certain number of votes. Each share provides one vote at the Meeting of Shareholders.
Voting at the Meeting of Shareholders is a right given to shareholders - persons holding registered
shares with voting rights entered in the central register for book entry securities at the end of the
fourth day prior to the Meeting.
The convenor of the General Meeting may restrict the voting rights of an individual shareholder, who
acquired shares contrary to the regulations.
Agreements, which - with the Bank's cooperation - would mean financial rights based on shares
being separated from ownership of the shares, do not exist.
11.2.5 The Bank's rules on:
- appointment and replacement of the management or supervisory body members
- changes in the Articles of Association
The Bank's rules on appointment and replacement of the members of its management or supervisory
body and on the changes in the Articles of Association are defined in the Banka Celje, d.d., Articles
of Association and in the Working Rules on the Operations of the Supervisory Board of Banka Celje,
d.d.
In accordance with the Articles of Association, the Supervisory Board comprises seven members
appointed and discharged at the Meeting of Shareholders. To be appointed a Supervisory Board
member, one must meet membership conditions for bank supervisory boards as defined by the ZGD1, the ZBan-1 and other applicable legislation.
Supervisory Board members are appointed for a period of 4 years and may be re-appointed. The
term for Supervisory Board members expires on the day of the General Meeting held in the fourth
year after appointment.
In the event of an early termination of appointment of Supervisory Board members that have been
appointed at the General Meeting of Shareholders, replacements are appointed at the following
General Meeting. The replacement is appointed until the end of the originally appointed member's
term. Each member of the Supervisory Board may resign prior to the expiry of their term on giving
three months’ notice. A written letter of resignation must be sent to the President of the Supervisory
Board and in the event of the resignation of the President of the Supervisory Board, it must be sent
to his deputy and the Bank's Management Board.
49
At the General Meeting of Shareholders, individual members of the Supervisory Board - or the
Supervisory Board collectively - may be recalled early. Such a resolution shall be adopted with at
least a three-quarter majority of votes present at the Meeting.
Supervisory Board members appoint the Audit Committee, the Remuneration Committee and the
Human Resources Committee serving as the bodies of the Supervisory Board.
The president and members of the Bank's Management Board are appointed and discharged by the
Supervisory Board. Only a candidate who meets all the conditions for appointment as defined by the
ZGD-1 and the ZBan-1 may be appointed to the post of president or member of the Management
Board.
The President and Members of the Bank's Management Board are appointed for a term of five years
and may be re-appointed.
The President and Members of the Bank's Management Board may be recalled early in line with
legislation in force. Each member of the Bank's Management Board may resign prior to the expiry of
their term on giving six months’ notice. A written letter of resignation must be sent to the President
of the Supervisory Board.
The Articles of Association may be amended based on the decision made at the General Meeting of
Shareholders, such a decision having been adopted by a majority of at least three quarters of votes
present. The latest amendment to the Bank’s Articles of Association having been entered on 16
December 2014.
The General Meeting of the Bank's Shareholders may authorise the Supervisory Board to amend
the Articles of Association to harmonise the text with the adopted resolutions in effect.
11.2.6 Authorisations of the Management Board
Based on the amendment to the Articles of Association having been entered into the Court's
Companies Register on 12 June 2013 during a five year period following the entry, the Management
Board, under approval by the Bank's Supervisory Board, is authorised to increase share capital once
or multiple times by no more than EUR 16,979,769.65 (authorised capital) by issuing no more than
508,629 new shares.
The Bank may acquire and dispose of treasury shares in line with the ZGD-1. The Management
Board decides on the conditions of the acquisition and disposal of treasury shares and must report
treasury share transactions to the General Meeting.
11.2.7 Data on the activity of the General Meeting of the Bank’s shareholders, its key
responsibilities, description of shareholder rights and how these are exercised
The Bank's Management Board calls the Meeting of Shareholders. It convenes at least once a year.
The Supervisory Board calls the Meeting in the following cases:
- if the Management Board does not call it at least once a year;
- if the Management Board does not call it upon request of the minority as stipulated in the Articles
of Association and the ZGD-1.
The General Meeting of Shareholders passes decisions on:
- the use of distributable profit and the discharge to the Management Board and Supervisory
Board;
- the adoption of the annual report in cases as defined by the ZGD-1;
50
-
the appointment and recall of Supervisory Board members;
amendments to the Articles of Association;
measures taken to increase or decrease capital;
changes in status;
the winding up of the Bank;
the appointment of an auditor;
authorisation to the Management Board to acquire treasury shares in accordance with the ZGD1;
other matters within the scope of its competencies in accordance with the ZGD-1 and the ZBan1.
Shareholders holding 5% of the share capital in total may request, in writing, the General Meeting to
be convened. Such a request must include a reason for the Meeting to be convened and the matter
on which the Meeting is to pass a decision. In such an event, the Management Board is required to
call the Meeting no later than 2 months after receiving a written request.
Shareholders holding 5% of the share capital collectively may request, in writing, for a certain item
to be included in the agenda of the General Meeting of Shareholders after it has been announced.
The Bank's Management Board must accede to such a request, if it includes a prepared proposition
of a decision falling under the responsibilities of the General Meeting and if the request was made
in writing seven days after the call of the General Meeting at the latest, so that the item may be made
public at least 14 days before the General Meeting.
11.2.8 The composition and activities of management and supervisory bodies and their
committees
The Supervisory Board monitors and supervises the management of the Bank and its operations.
It conducts its assignment in accordance with the provisions of the statutory acts dealing with the
operations of banks and companies and in accordance with the Bank’s Articles of Association. At
the Meeting of Shareholders in May 2011, new Supervisory Board members were elected: Jure
Peljhan, Ph.D. as President, Zvonko Ivanušič, M.Sc. as Vice President, Uroš Čufer, Ph.D., Melita
Malgaj, Tomaž Subotič, Ph.D., Bojan Šrot, Zdenko Zanoški, M.Sc. In March 2013 Uroš Čufer, Ph.D.
resigned from his post and was replaced by Barbara Smolnikar, M.Sc., who was named to the post
of Supervisory Board member at the 29th General Meeting of Shareholders on 30 May 2013. On 27
November 2013 the Bank received a resignation from Zvonko Ivanušič, M.Sc., with Barbara
Smolnikar, M.Sc. stepping in as Vice President in December 2013.
In 2008, the Supervisory Board of Banka Celje, d.d., established a consulting body, namely the Audit
Committee of Banka Celje, d.d. At the inaugural meeting of the Supervisory Board on 8 June 2011,
new members of the Audit Committee were appointed, namely: Uroš Čufer, Ph.D., President, Tomaž
Subotič, Ph.D., Deputy and Zdenka Habe, Member, as an independent expert. The Audit Committee
continued to perform its activities in a slightly modified composition during 2013, these changes
remained in effect through 2014, with members Tomaž Subotič, Ph.D., President, Melita Malgaj and
Barbara Smolnikar, M.Sc. as members and Blanka Vezjak, M.Sc., as member and independent
expert. At its 3rd Meeting on 19 October 2011 the Supervisory Board named the Remuneration
Committee. It comprises Jure Peljhan, Ph.D., as President, Zvonko Ivanušič, M.Sc., as Vice
President, Tomaž Subotič, Ph.D., as member and Bojan Salobir, Executive Director, as the Bank's
representative with a standing invitation. The Committee remained unchanged in 2013 until
November, when Zvonko Ivanušič, M.Sc. resigned. In January 2014 the Supervisory Board
appointed Mrs. Melita Malgaj in his stead; the Committee then remained unchanged through 2014.
The Management Board represents and manages the Bank’s operations according to the principles
of joint and several liability. The Bank’s Management Board usually meets once a week and
51
considers materials from areas as defined by the ZBan-1 and the Banka Celje, d.d., Management
Board Working Rules at its meetings. According to the Articles of Association it comprises at least
two members, which in 2014 were: Davorin Leskovar as President of the Management Board and
Member of the Management Board, Aleksander Vozel, M.Sc.
Davorin Leskovar is a member of the Supervisory Board at The Bank Association of Slovenia, while
Aleksander Vozel, M.Sc. is a member of the supervisory board of NLB Prishtina.
The Credit Committee comprises eight members and defines the conditions and criteria for
acquiring and the placement of assets, makes decisions on lending and guarantee transactions and
decides on distribution in line with its operational rulebook. In 2014, it comprised: the President of
the Management Board at the post of President of the Credit Committee, the Vice President of the
Management Board at the post of Vice President of the Credit Committee and the following
members: the Executive Director for the Corporate Division and the Retail Division, the General
Manager of the Risk Management Division, the General Manager of the Retail Division, the General
Manager of the Financial Markets Division, the General Manager of the Corporate Division and the
General Manager of the Legal Affairs and Compliance Division. The President of the Credit
Committee may invite other General Managers to the Credit Committee meetings. The Head of the
Internal Audit and Authorised Representative of the Management Board holds a standing invitation.
Credit committee for debt restructuring and the monitoring of bad debt was established with
the aim of efficiently monitoring the operations of the Restructuring and Recovery Division on an
ongoing basis and to provide for efficient communication with the external public, operating in the
field of recovery activities (bankruptcies, execution proceedings) and debt restructuring. The nine
member committee was represented by: the President of the Management Board, member of the
Management Board, the Executive Director for the Corporate Division and the Retail Division,
Authorised Representative of the Management Board, the General Manager of the Restructuring
and Recovery Division, the General Manager of the Retail Division, the General Manager of the
Legal Affairs and Compliance Division, the General Manager of the Risk Management Division and
the General Manager of the Corporate Division, with the Head of the Internal Audit holding a standing
invitation. The Committee for debt restructuring and the monitoring of bad debt is chaired by the
member of the management board, who, in accordance with the functional division between the
Management Board members, covers the field of risk management, while the President of the
Management Board chairs the meetings in his absence.
The Liquidity Committee comprised five members in 2014: the General Manager of the Financial
Markets Division as Committee President and the President of the Management Board, the Vice
President of the Management Board, the Executive Director for the Corporate Division and the Retail
Division and the General Manager of the Risk Management Division as members. The Liquidity
Committee meets at least three times a week and supervises the Bank’s liquidity position. It performs
its duties in line with the Liquidity Committee Working Rules.
The Bank’s Management Committee operates as the Management Board’s advisory and
informative body. In 2014 it comprised the Bank's Management Board, the Executive Directors,
General Managers, Authorised Representative of the Management Board, the Heads of independent
functional organisational units, who, in accordance with their operative functions, answer directly to
the Management Board and the Director of the subsidiary company.
The Management Board may also appoint other attendees to the Management Committee’s
meetings. Operational rules are set with the Management Committee Working Rules and meetings
are usually held once a month and are intended for the presentation of the financial and income
position of the Bank as well as the consideration of project execution, all the while allowing for
discussion on other significant decisions to be made in relation to the Bank’s operations.
52
The Assets and Liabilities Committee – the ALCO monitors the conditions in the financial markets,
analyses the balances and changes in the Bank’s statements, and prepares decisions aimed at the
attainment of an adequate balance sheet structure. In line with the Working Rules on its operations,
the Committee meets once a month. The members were: the President of the Management Board
as President of the Committee, the Member of the Management Board, General Manager of the
Accounting Division, General Manager of the Risk Management Division and the General Manager
of the Financial Markets Division.
11.2.9 Structure of share capital, with special reference to:
- rights and obligations, provided by shares or shares from individual classes, and
- should multiple share classes exist, the proportion of share capital represented by an
individual class
The Bank's share capital is represented by 508,629 ordinary registered no par value shares until 16
December 2014, however it has been divided into 5,000,000 ordinary registered shares after the
recapitalization by the Republic of Slovenia on 16 December 2014. Shareholders exercise their rights
in the matters of the Bank's operations at the General Meeting of Shareholders. Regular shares are
voting right shares, whereby each share ensures one vote at the Meeting.
11.2.10 Share transfer restrictions, especially:
- restriction on security ownership and
- requirement to acquire permission from the company or other holders of securities for a
transfer
The Bank's shares are transferred in line with the regulations pertaining to dematerialised securities.
Current shareholders have priority, in proportion with their portion of the share capital, to subscribe
new shares from authorised capital (the right expires on 12 June 2018) in the event of
recapitalization. There are no other shareholding restrictions imposed by the Bank, whereas
acquiring a qualifying share requires the approval of the Bank of Slovenia. There is no requirement
to get the approval of the Bank or other shareholders to transfer shares.
11.2.11 Employee stock options
The Bank does not have an employee stock option scheme in place.
11.2.12 Shareholder agreements that could result in the restriction of the transfer of shares
or voting rights
Agreements between shareholders that could result in the restriction of the transfer of shares or
voting rights are not in force.
Celje, 20 March 2015
53
12 STATEMENT OF MANAGEMENT’S RESPONSIBILITIES
The Management Board herewith confirms the financial statements of the Bank and the Group for
the year ended 31 December 2014 on pages 61 through 67 and the accounting policies and notes
to the financial statements on pages 68 through 139 of the annual report.
The Management Board is responsible for the preparation of the annual report in a way as to be a
true and fair representation of the Bank’s assets and the Group's assets and the results of their
operations for the year ended 31 December 2014.
The Management Board additionally confirms that appropriate accounting policies were consistently
used and that the accounting estimates were prepared according to the principles of prudence and
good management. The Management Board furthermore confirms that the financial statements
together with the notes have been prepared on the basis of the assumption of continued operations
of the companies in the Group and in line with the applicable legislation in force and the IFRS, as
adopted by the EU.
The Management Board is also responsible for appropriate accounting practices, for the adoption of
appropriate measures for the insurance of property and for the prevention and identification of fraud
and other irregularities or unlawfulness.
The tax authorities may at any time within 5 years from the day of the tax charge examine the
operations of the company, which in turn may cause the obligation of an additional tax payment,
default interest payment and penalty from Corporate Income Tax or other taxes or duties.
Management Board:
54
13 AUDITOR’S REPORT
55
56
57
58
FINANCIAL STATEMENTS
Financial Statements 2014
(amounts in tables in thousands of euros)
II FINANCIAL STATEMENTS
1 INCOME STATEMENT
Bank
Note
Group
1 January to 31 1 January to 31 1 January to 31 1 January to 31
December 2014 December 2013 December 2014 December 2013
Interest and similar income
Interest and similar expense
3.1
3.1
3.1
67,159
(28,147)
39,012
88,279
(50,988)
37,291
67,131
(28,147)
38,984
88,232
(50,988)
37,244
Dividend income
3.2
346
387
346
387
Fee and commission income
Fee and commission expense
Net fee and commission income
3.3
3.3
3.3
16,438
(1,494)
14,944
17,344
(1,526)
15,818
16,437
(1,494)
14,943
17,343
(1,526)
15,817
3.4
18,466
55,224
18,466
55,224
3.5
(482)
(5,777)
(482)
(5,777)
3.6
3.7
12
31,430
34
12
31,430
34
3.8
(490)
(11)
(1,935)
(30,610)
(2,891)
(57)
(213,997)
562
174
(1,579)
(30,045)
(2,602)
(3,555)
(60,828)
(490)
6
(1,575)
(31,005)
(2,924)
(57)
(213,999)
Net gains from financial assets and liabilities not
classified at fair value through profit or loss
Net (losses) from financial assets and liabilities
held for trading
Net gains from financial assets and liabilities
designated at fair value through profit or loss
Changes in fair value from hedging
Foreign exchange translation net gains / (losses)
Net (losses) / gains from derecognition of assets
Net other operating (loss)
Administrative expenses
Depreciation and amortisation
Provisions
Impairment charges
3.9
3.10
3.11
3.12
3.13
562
(12)
(1,814)
(29,740)
(2,593)
(3,555)
(60,797)
(LOSS) BEFORE INCOME TAX
Income tax credit / (expense)
4.12
(25,651)
4,550
(115,584)
(10,673)
(25,604)
4,544
(115,685)
(10,673)
(21,101)
(126,257)
(21,060)
(126,358)
(LOSS) FOR THE YEAR
The Notes form an integral part of these Financial Statements.
61
2 STATEMENT OF OTHER COMPREHENSIVE INCOME
Bank
Group
1 January to 31 1 January to 31 1 January to 31 1 January to 31
December 2014 December 2013 December 2014 December 2013
(LOSS) FOR THE YEAR
(21,101)
(126,257)
(21,060)
(126,358)
(8,414)
9,064
(8,414)
9,064
ITEMS THAT WILL SUBSEQUENTLY NOT BE RECLASSIFIED
TO PROFIT OR LOSS
(91)
74
(91)
74
Actuarial net gains from pension plans, recognised in retained
(loss) / profit
(91)
74
(91)
74
(8,323)
8,990
(8,323)
8,990
(8,044)
4,318
(12,362)
8,404
2,471
5,933
(8,044)
4,318
(12,362)
8,404
2,471
5,933
(279)
586
(279)
586
(29,515)
(117,193)
(29,474)
(117,294)
OTHER COMPREHENSIVE INCOME AFTER TAX
ITEMS THAT MAY SUBSEQUENTLY BE RECLASSIFIED TO
PROFIT OR LOSS
Net gains from available for sale financial assets
Valuation gains taken to other comprehensive income
Recycled to income statement
Corporate income tax from items, that may be reclassified
subsequently to profit or loss
TOTAL COMPREHENSIVE INCOME FOR THE YEAR AFTER
TAX
62
3 STATEMENT OF FINANCIAL POSITION
Note
Cash and balances with Central banks and demand
deposits with commercial banks
Financial assets held for trading
Available for sale financial assets
Loans and advances
- loans and advances to banks (excluding demand
deposits)
- loans and advances to customers
- other financial assets
Derivatives - hedging
Property and equipment
Investment property
Intangible assets
Investments in subsidiaries, associates and joint
ventures
Income tax assets
- deferred tax assets
Other assets
TOTAL ASSETS
Financial liabilities held for trading
Financial liabilities designated at fair value through
profit or loss
Financial liabilities at amortised cost
- deposits from banks and central banks
- due to customers
- borrowings from banks and central banks
- borrowings from other customers
- debt securities in issue
- other financial liabilities
Provisions
Other liabilities
TOTAL LIABILITIES
Share capital
Share premium
Accumulated other comprehensive income
Profit reserves
Treasury shares
Retained net loss (including net loss of the current
financial year)
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Bank
31 December
2014
2013
Group
31 December
2014
2013
4.1
4.2
4.3
254,049
4,636
482,784
945,562
204,040
10,961
327,895
1,248,168
254,049
4,636
482,784
940,683
204,040
10,961
327,895
1,243,007
4.4
4.5
4.6
4.7
4.8
4.9
4.10
52,000
891,629
1,933
1,424
13,006
3,487
5,822
1,240,057
2,289
3,437
14,165
4,108
52,000
886,605
2,078
1,424
13,132
3,946
3,492
5,822
1,234,457
2,728
3,437
14,174
4,432
4,113
2,257
4,271
4,271
506
2,257
197
4,274
4,274
4,646
3
3
4,326
1,711,982
1,815,228
1,713,066
1,816,388
796
1,125
796
1,125
4.11
4.12
4.12.1
4.13
4.14
-
1,000
-
1,000
4.15
4.16
4.17
4.18
4.19
4.20
1,501,340
753
1,249,823
136,291
1,498
106,776
6,199
1,760,915
11,276
1,272,018
336,226
2,134
133,841
5,420
1,501,416
753
1,249,822
136,291
1,498
106,776
6,276
1,761,066
11,276
1,272,015
336,226
2,134
133,841
5,574
4.21
8,092
9,903
8,130
9,940
4.22
173
1,527
341
1,737
4.23
4.23
4.23
4.23
4.23
1,510,401
50,000
166,221
3,513
2,948
-
1,774,470
16,980
51,380
11,927
86,759
(31)
1,510,683
50,000
166,383
3,513
3,147
-
1,774,868
16,980
51,542
11,927
86,958
(31)
(21,101)
201,581
1,711,982
(126,257)
40,758
1,815,228
(20,660)
202,383
1,713,066
(125,856)
41,520
1,816,388
4.23
These Financial Statements have been approved for issue by the Management Board on 20 March
2015 and signed on its behalf by:
63
4 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Bank
Note
BALANCE AS AT 1 JANUARY 2013
Share
capital
Share
premium
Revaluation
reserve
Profit
reserves
Retained earnings
(including net profit Treasury
for the year)
shares Total equity
16,980
51,380
2,863
111,735
(24,984)
(31)
157,943
-
-
9,064
-
(24,984)
8
(126,257)
24,984
-
-
(117,193)
8
BALANCE AS AT 31 DECEMBER 2013
16,980
51,380
11,927
86,759
(126,257)
(31)
40,758
16,980
51,380
11,927
86,759
(126,257)
(31)
40,758
(16,980)
50,000
-
16,980
140,000
(42,433)
294
(8,414)
-
(31)
(83,824)
44
(21,101)
126,257
-
31
-
(29,515)
190,000
338
50,000
166,221
3,513
2,948
(21,101)
-
201,581
Comprehensive income for the year after tax
Coverage of loss brought forward
Other
Expropriation of shareholders
Subscription (paying-up) of fresh capital
Other
4.23
64
Group
Share
capital
Note
Share
premium
Revaluation
reserve
Profit
reserves
Retained earnings
(including net profit Treasury
for the year)
shares Total equity
16,980
51,542
2,863
111,936
(24,482)
(31)
158,808
-
-
9,064
-
(24,984)
6
(126,358)
24,984
-
-
(117,294)
6
16,980
51,542
11,927
86,958
(125,856)
(31)
41,520
16,980
51,542
11,927
86,958
(125,856)
(31)
41,520
(16,980)
50,000
-
16,980
140,000
(42,433)
294
(8,414)
-
(31)
(83,824)
44
(21,060)
126,257
(1)
31
-
(29,474)
190,000
337
50,000
166,383
3,513
3,147
(20,660)
-
202,383
Other
Expropriation of shareholders
Subscription (paying-up) of fresh capital
Other
4.23
65
5 STATEMENT OF CASH FLOWS
Bank
Group
1 January to
1 January to
1 January to
1 January to
31 Decem ber 31 Decem ber 31 Decem ber 31 Decem ber
2014
2013
2014
2013
A. CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Interest paid
Dividends received
64,904
77,598
64,876
77,551
(35,002)
(47,586)
(35,002)
(47,586)
346
387
346
387
Fee and commission received
16,866
17,294
16,865
17,293
Fee and commission paid
(1,497)
(1,522)
(1,497)
(1,522)
Realized gains from financial assets and financial
liabilities not classified as fair value through profit or loss
19,454
871
19,454
871
(8)
(235)
(8)
(235)
(470)
(6,917)
(470)
(6,917)
(29,718)
(30,731)
(30,023)
(31,125)
305
305
648
703
(7,268)
(2,311)
(7,283)
(2,349)
27,912
7,153
27,906
7,071
229,816
250,424
229,492
251,178
6,331
15,359
6,331
15,359
Realized (losses) from financial assets and financial
liabilities designated at fair value through profit or loss
(Losses) from financial assets and financial liabilities
held for trading
Payments to employees and suppliers
Operating income
Operating expenses
a) Cash flow s from operating activities before
changes in operating assets and liabilities
b) Decreases in operating assets
Net decrease in trading assets
Net decrease in financial assets, designated at fair value
through profit or loss
Net (increase) / decrease in available for sale financial
assets
-
4,887
-
4,887
(73,518)
81,184
(73,518)
81,184
Net decrease in loans and advances
295,299
145,421
294,986
145,785
Net decrease in hedging derivative financial assets
2,013
3,455
2,013
3,455
Net (increase) / decrease in other assets
(309)
118
(320)
508
(253,881)
(248,389)
(253,998)
(248,392)
(329)
(757)
(329)
(757)
(226,745)
(212,269)
(226,820)
(212,272)
(26,221)
(35,639)
(26,221)
(35,639)
(586)
276
(628)
276
3,847
9,188
3,400
9,857
-
-
-
-
3,847
9,188
3,400
9,857
c) (Decreases) in operating liabilities
Net (decrease) in financial liabilities held for trading
Net (decrease) in deposits and loans measured at
amortised cost
Net (decrease) of debt securities issued measured at
amortised cost
Net (decrease) / increase in other liabilities
d) Cash flow generated from operating activities
(a+b+c)
e) Incom e tax refund
f) Net cash flow from operating activities (d+e)
66
Bank
Group
1 January to 1 January to 1 January to 1 January to
31 Decem ber 31 Decem ber 31 Decem ber 31 Decem ber
Note
2014
2013
2014
2013
B.
a)
b)
c)
C.
a)
b)
c)
D.
E.
F.
G.
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts from investing activities
Proceeds from sale of property and equipment and
investment property
Redemption of held to maturity investments
Paym ents from investing activities
(Purchase of property and equipment and
investment property)
(Purchase of intangible assets)
(Purchase of held to maturity investments)
Net cash provided by investing activities (a-b)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from financing activities
Proceeds from issued shares and other equity
instruments
Expenditure from financing
(Dividends paid)
(Subordinated liabilities repayed)
Net cash used in financing activities (a-b)
EFFECTS OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS
NET INCREASE IN CASH AND CASH
EQUIVALENTS (Ae+Bc+Cc)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR
CASH AND CASH EQUIVALENTS AT END OF
YEAR (D+E+F)
4.26
111
91,265
615
91,566
111
(787)
93
91,172
(34,860)
615
(844)
394
91,172
(35,830)
(383)
(404)
(676)
(807)
(872)
(33,181)
56,405
(440)
(404)
(229)
(1,777)
(872)
(33,181)
55,736
95,000
-
95,000
-
95,000
(2,798)
(2,798)
92,202
(4,782)
(4,782)
(4,782)
95,000
(2,798)
(2,798)
92,202
(4,782)
(4,782)
(4,782)
814
(478)
814
(478)
95,373
60,811
95,373
60,811
209,862
149,529
209,862
149,529
306,049
209,862
306,049
209,862
67
NOTES TO THE FINANCIAL STATEMENTS
1 GENERAL INFORMATION
Banka Celje d.d. (the Bank) is a Slovene joint stock company, providing universal banking services.
The Banka Celje Group (the Group) comprises the Bank and its subsidiary, Posest, d.o.o., wherein
the Bank holds a 100% interest (the Subsidiary), conducting mainly banking services for retail and
corporate customers as well as other financial services.
The Bank is not a public joint stock company. End 2014 it had 468 employees (2013: 500). It was
managed in 2014 by a two-member Management Board, chaired by Mr Davorin Leskovar.
The address of the Bank's headquarters is Banka Celje, d.d., Vodnikova 2, Celje.
The beneficial owner of Banka Celje, d.d. is the Republic of Slovenia, being the sole shareholder as
at 31 December 2014 (as at 31 December 2013: Nova Ljubljanska banka d.d. - 40.99%, Slovenski
državni holding, d.d., Ljubljana - 9.36% and NFD 1 Delniški podsklad - 9.21%).
Based on permission issued by the regulator, the subsidiary company is not included in the
consolidated supervision in accordance with the decision by the Bank of Slovenia on Supervision of
Banks and Savings Banks on a Consolidated Basis, as from the aspect of the aim of the supervision,
the Subsidiary does not represent any significant effect. Notes to the financial statements refer to
the Bank and the Group in cases where consolidated amount exceed the amount in the Bank’s
financial statements by 5% or more.
The Bank’s Management Board approves standalone and consolidated financial statements.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies, used in the preparation of standalone and consolidated financial
statements are presented below and have been consistently applied to the presented years.
2.1 Basis for the preparation of financial statements
Standalone and consolidated financial statements have been prepared in accordance with the IFRS
as adopted by the EU and under the assumption of continued operations. Where required notes
have been added in line with the requirements of local legislation.
On the basis of the revised restructuring plan, prepared for the merged Abanka and Banka Celje,
the European Commission gave its consent to state aid on 16 December 2014. The merger is
planned by the end of 1 January 2016 at the latest. Taking into consideration the merger with
Abanka, in accordance with the approved merged restructuring plan of Abanka and Banka Celje and
the Bank’s recapitalization in December 2014, conditions for its long-term operations have been
established again. The Bank intends to remain independent in 2015, while activities for an
operational and financial merger with Abanka will continue until 1 January 2016.
The financial statements include: the income statement and the comprehensive income statement,
shown in two separate interlinked statements, the statement of financial position, the statement of
changes in shareholder equity, the cash flow statement and notes.
The statements are shown in euros, which are the functional and presentation currency of the Group.
All amounts in the financial statements are shown in thousands of euros.
68
Disclosures related to individual risks, the Group is exposed to in its operations, are shown in Chapter
5 Risk management.
In the process of using accounting policies the management must use its own judgement. Changes
in assumptions can have a significant effect on financial statements for the period of the change.
Management is convinced that the basic assumptions are suitable and that the Bank’s financial
statements therefore are a fair representation of its financial position and results. More complex
areas, which require a greater degree of judgement or areas where assumptions and estimates are
significant to the financial statements, are shown in Note 2.26.
2.1.1 Standards and interpretations applicable in 2014
For the current period the following standard, amendments to the existing standards and
interpretations issued by the International Accounting Standards Committee (IASC) and adopted by
the EU:

IFRS 10 'Consolidated Financial Statements’, endorsed by the EU on 11 December 2012
(effective for annual periods beginning on or after 1 January 2014),

IFRS 11 'Joint Arrangements', endorsed by the EU on 11 December 2012 (effective for annual
periods beginning on or after 1 January 2014),

IFRS 12 'Disclosure of Involvement with Other Entities', endorsed by the EU on 11 December
2012 (effective for annual periods beginning on or after 1 January 2014),

IAS 27 (amended in 2011) ‘Separate Financial Statements’, endorsed by the EU on 11
December 2012 (effective for annual periods beginning on or after 1 January 2014),

IAS 28 (amended in 2011) ‘Investments in Associates and Joint Ventures’, endorsed by the
EU on 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),

Amendments to IFRS 10 'Consolidated Financial Statements’, IFRS 11 'Joint
Arrangements' and IFRS 12 'Disclosure of Involvement with Other Entities' – Transition
guide endorsed by the EU on 4 April 2013 (effective for annual periods beginning on or after 1
January 2014),

Amendments to IFRS 10 'Consolidated Financial Statements’, IFRS 12 'Disclosure of
Involvement with Other Entities', and IAS 27 (amended in 2011) ‘Separate Financial
Statements’ – investment companies, endorsed by the EU on 20 November 2013 (effective for
annual periods beginning on or after 1 January 2014),

Amendments to IAS 32 ‘Financial Instruments: Presentation’ – Asset and liability
offsetting, endorsed by the EU on 13 December 2012 (effective for annual periods beginning
on or after 1 January 2014),

Amendments to IAS 36 ‘Impairment of Assets’ – Recoverable amount disclosures for nonfinancial assets, endorsed by the EU on 19 December 2013 (effective for annual periods
beginning on or after 1 January 2014),

Amendments to IAS 39 ‘Financial Instruments: Recognition and Measurement’ – Novation
of OTC derivatives and continuing designation for hedge accounting, endorsed by the EU on 19
December 2013 (effective for annual periods beginning on or after 1 January 2014).
69
The endorsement of these amendments to the existing standards did not result in any changes in
the accounting policies of the Group.
2.1.2 Standards and interpretation issued by the IASC and endorsed by the EU, not yet
effective
On the approval date of these financial statements, the following standards, amendments to existing
standards and interpretations issued by the IASC and endorsed by the EU, were issued, but not yet
in effect:

Amendments to different standards ‘IFRS Improvements (period 2010 – 2012)’, based on
the annual project for the improvement of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IFRS 16,
IFRS 24 and IFRS 38), with the purpose of removing inconsistencies and giving an interpretation
of the wording, which the EU endorsed on 17 December 2014 (effective for annual period
beginning on or after 1 February 2015),

Amendments to different standards ‘IFRS Improvements (period 2011 – 2013)’ based on
the annual project for the improvement of IFRS (IFRS 1, IFRS 3, IFRS 13 and IFRS 40), with the
purpose of removing inconsistencies and giving an interpretation of the wording, which the EU
endorsed on 18 December 2014 (effective for annual periods beginning on or after 1 February
2015),

Amendments to IAS 19 ‘Employee Benefits’ – Employee contributions to defined benefit
plans, endorsed by the EU on 17 December 2014 (effective for annual periods beginning on or
after 1 February 2015),

IFRIC 21 ‘Levies’, endorsed by the EU on 13 June 2014 (effective for annual periods beginning
on or after 1 February 2015).
2.1.3 Standards and interpretations issued by the IASC, not yet endorsed by the EU
Currently the IFRS, as endorsed by the EU, are not significantly different from the regulations
adopted by the IASC, with the exception of the following standards, amendments to the existing
standards and interpretations, which as at 31 December 2014 (the below stated dates of coming into
effect pertain to the entire IFRS) have not been endorsed by the EU:

IFRS 9 ‘Financial Instruments’ (effective for annual periods beginning on or after 1 January
2018),

IFRS 14 'Regulatory Deferral Accounts‘ (effective for annual periods beginning on or after 1
January 2016),

IFRS 15 'Revenue from Contracts with Customers‘‘ (effective for annual periods beginning
on or after 1 January 2017),

Amendments to IFRS 10 'Consolidated Financial Statements' and IAS 28 'Investments in
Associates and Joint Ventures' – Sales or contributions of assets between an investor and its
associate/joint venture (effective for annual periods beginning on or after 1 January 2016),

Amendments to IFRS 10 'Consolidated Financial Statements‘, IFRS 12 'Disclosure or
Interests in Other Entities’, and IAS 28 'Investments in Associates and Joint Ventures' –
Investment Entities: Applying the Consolidation Exception (effective for annual periods
beginning on or after 1 January 2016),
70

Amendments to IFRS 11 ‘Joint Arrangements' – Accounting for Acquisitions of Interests in
Joint Operations (effective for annual periods beginning on or after 1 January 2016),

Amendments to IAS 1 'Presentation of Financial Statements' – Disclosure Initiative
(effective for annual periods beginning on or after 1 January 2016),

Amendments to IAS 16 'Property, Plant and Equipment' and IAS 38 'Intangible Assets' –
Clarification of Acceptable Methods of Depreciation and Amortization (effective for annual
periods beginning on or after 1 January 2016),

Amendments to IAS 16 'Property, Plant and Equipment' and IAS 41 'Agriculture' –
Agriculture: Bearer Plants (effective for annual periods beginning on or after 1 January 2016),

Amendments to IAS 27 'Separate Financial Statements' – Equity Method in Separate
Financial Statements (effective for annual periods beginning on or after 1 January 2016),

Amendments to different standards ‘IFRS Improvements (period 2012 – 2014), based on
the annual project for the improvement of IFRS (IFRS 5, IFRS 7, IFRS 19 and IFRS 34), with the
main aim of removing inconsistencies and giving an interpretation of the wording (effective for
annual periods beginning on or after 1 January 2016).
The Group anticipates that the adoption of these standards, amendments to the existing standards
and interpretations will not have a significant impact on its financial statements in the initial period of
use. At the same time hedge accounting in relation to the financial assets and liabilities portfolio, the
principles of which the EU has not yet endorsed, remains unregulated.
The Management of the Bank anticipates that the application of IFRS 9 in the future may have a
significant impact on amounts reported in respect of the Bank's financial assets and financial
liabilities (e.g. the Bank's investments in redeemable notes that are currently classified as availablefor-sale investments will have to be measured at fair value at the end of subsequent reporting
periods, with changes in the fair value being recognised in profit or loss). However, it is not
practicable to provide a reasonable estimate of the effect of IFRS 9 until a detailed review has been
completed.
2.2 Comparative figures
The standalone and consolidated financial statements feature data disclosed using comparative
figures. Due to the amendment in the Decision on books of account and annual reports by banks
and savings banks the Bank as at 31 December 2014 reclassified demand deposits from banks in
an amount of EUR 103,203 thousand from ‘’Loans and advances’’ to ‘’Cash and balances with
central banks and demand deposits with banks’’ in the statement of financial position (as at 21
December 2013 in the amount of EUR 12,045 thousand).
2.3 Subsidiary
In the separate financial statements, investment in the capital of the Subsidiary is accounted for at
cost. Dividends from the Subsidiary are recognised in the income statement, when the right to
receive cash flow is established.
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2.4 Consolidation
The financial statements of the Subsidiary, used for the preparation of consolidated financial
statements, were prepared as of the Bank’s reporting date. The consolidation principles remained
unchanged in comparison with the previous year.
The subsidiary has been fully consolidated since the day of the set-up and will be excluded from
consolidation on the date control is lost. Where necessary, accounting policies of the Subsidiary
have been adjusted to ensure consistency with the policies adopted by the Bank. In the process of
consolidation, all intercompany transactions, balances and unrealized gains have been eliminated.
2.5 Foreign currency translation
a) Functional and presentation currency
Items reported in these standalone and consolidated financial statements are measured using the
currency of the primary economic environment in which the Bank and the Group operate (the
functional currency). Assets and liabilities denominated in foreign currency, have been translated in
the financial statements using the ECB reference exchange rate, as published on by the Bank of
Slovenia on 31 December 2014 (for 2013 the ECB reference exchange rate from 31 December 2013
was used). The effects of the translation are shown in the income statement as net gains or losses
from exchange rate differences. The financial statements are reported in euros, which is the Bank’s
functional and presentation currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency according to the exchange
rates prevailing on the date of the transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement.
Translation differences resulting from changes in amortised costs of monetary items denominated
in foreign currency classified as available for sale financial assets are recognised in the income
statement.
Translation differences on non-monetary items, such as equities at fair value through profit or loss,
are reported as part of fair value gain or loss in the income statement. Translation differences on
non-monetary items, such as equities classified as available for sale, are included together with
valuation reserves at fair value within other comprehensive income.
Gains and losses from foreign exchange trading are shown in the income statement under “Net gains
/ (losses) from financial assets and liabilities held for trading”.
2.6 Interest income and expenses
Interest income and expenses are recognised for all debt instruments, measured at amortised cost,
using the effective interest rate method. The aforementioned method serves the calculation of
amortised cost of a financial asset or financial liability and distributes interest income and expenses
across the expected life of a financial instrument. Interest income includes interest from fixed income
investments and investments in securities held for trading and from discounts and premiums on
bonds. The effective interest rate calculation includes all fees paid between parties at the conclusion
of the transaction, as well as transaction costs, however excludes future losses due to credit risk.
Once a financial asset or a group of related assets is impaired, the interest revenue is recognised
on the basis of the interest rate used to discount future cash flows to calculate impairment.
72
2.7 Fee and commission income
Fees and commissions are generally recognised as the service is provided, in accordance with the
Tariff or based on contractual provisions as negotiated between the Bank and the customer. Fee
and commission income includes fees and commissions from guarantees to companies issued by
the Bank, from payment operations and foreign exchange as well as from credit card operations.
Fees and commissions included in the calculation of the effective interest rate are shown in interest
income and expenses.
2.8 Dividend income
Dividend income is recognised in the income statement when the Group’s right to receive payment
has been established. All dividend income is realised in Slovenia.
2.9 Financial instruments
2.9.1 Classification
The classification of financial instruments on initial recognition depends on the purpose of acquisition
and the instruments’ characteristics. The Group classifies financial instruments in the following
categories: financial instruments at fair value through profit or loss, loans and receivables, held to
maturity investments and available for sale financial assets.
a) Financial instruments at fair value through profit or loss
This category includes financial instruments held for trading and financial instruments designated at
fair value through profit or loss at inception. A financial asset is classified in the held for trading
category if acquired principally for the purpose of selling in the short-term or for the creation of shortterm profits.
Financial assets and liabilities are designated at fair value through profit or loss when the following
conditions are met:
- with such a classification the Group eliminates or significantly reduces measurement or
recognition inconsistencies that would arise from the valuation of financial assets and liabilities
on different bases; or
- a financial instrument contains one or more embedded derivatives, which may significantly
modify its cash flows.
Derivatives are always categorised as held for trading unless they are designated as hedging
instruments in the application of accounting rules for hedge accounting.
b) Loans and advances
Loans and advances are non-derivative financial assets with fixed or determinable payments, which
are not quoted in an active market, other than:
- those that the Group intends to sell immediately or in the short-term, which are classified as held
for trading, and those that the Group upon initial recognition designates as at fair value through
profit or loss;
- those that the Group upon initial recognition designates as available-for-sale; or
- those for which the holder may not recover substantially all of its initial investment, for reasons
other than the deterioration of creditworthiness.
c) Held to maturity investments
Held to maturity investments are non-derivative financial instruments with fixed or determinable
payments and a fixed maturity which do not meet the definition of loans and receivables and which
73
the Group intends to hold until maturity and is able to do so. The Bank does not hold any held to
maturity investments for 2014 or the comparable reporting period.
d) Available for sale financial assets
Available for sale financial assets are those non-derivative financial assets, designated as available
for sale or not classified into loans or receivables, hold to maturity investments or financial assets at
fair value through profit or loss.
As available for sale financial assets the Bank classifies those financial assets, which it intends to
hold for an indefinite period of time and which it may sell in response to liquidity needs or due to
changes in interest rates, exchange rates or prices of financial instruments.
2.9.2 Measurement and recognition
Financial assets, except for financial assets at fair value through profit or loss, are initially recognised
at fair value increased by transaction costs.
Financial instruments at fair value through profit or loss are initially recognised at fair value with
transaction costs recorded in the income statement.
Purchases and sales of financial instruments at fair value through profit or loss, held to maturity
investments and available for sale financial assets are recognised on trade date. Loans are
recognised when cash is advanced to the borrowers.
Financial assets at fair value through profit or loss and available for sale financial assets are
measured at fair value. Gains and losses from financial instruments at fair value through profit or
loss are included in the income statement in the period in which they arise. These are included in
other comprehensive income and are transferred to the income statement, when the asset is sold or
impaired, at which time the cumulative gain or loss, previously included in other comprehensive
income is transferred to the income statement. Interest calculated and foreign currency gains and
losses sale are recognised directly in the income statement. Dividends on available for sale equity
instruments are recognised in the income statement when the Group’s right to receive payment is
established.
Loans and held to maturity investments are carried at amortised cost.
2.9.3 Profit or loss at initial recognition
The best evidence of fair value at initial recognition is the transaction price, representing the fair
value of consideration given or received, unless where it is possible to prove fair value through other
comparable market transactions or on the basis of a valuation technique, whose variables are
exclusively based on market assumptions.
When the transaction price of a financial instrument on a non-active market differs from the price in
other observable current market transactions in the same instrument, or from the price ascertained
using a valuation technique whose variables include data from observable markets exclusively, the
Group immediately recognises the difference between the transaction price and the fair value in the
income statement.
If the entry data, required for valuation are not market based, the profit or loss at initial recognition is
not immediately recognised in the income statement. The decision on initial recognition of deferred
profit or loss is made on a case-to-case basis. In some, the initial profit or loss is transferred to the
income statement gradually through the life of the transaction, in others it is recognised the moment
that fair value is determinable, while in some it is only recognised at maturity or at redemption.
74
2.9.4 Reclassification
Financial assets that are eligible for classification as loans and advances can be reclassified out of
the held for trading category if they are no longer held for the purpose of selling or repurchasing
them in the near-term. Financial assets that are not eligible for classification as loans and receivables
may be transferred from the held for trading category only in rare circumstances. Additionally,
instruments designated at fair value through profit and loss cannot be reclassified.
2.9.5 Derecognition
Financial assets are derecognised when the contractual rights to receive cash flows from these
assets have ceased to exist, or the assets have been transferred in a transfer that meets the criteria
for derecognition. In line with its policy on financial asset write-offs, the Bank also derecognises a
financial asset in cases, where it assess in the recovery process that a financial asset measured at
amortised cost will not be reimbursed. In the stated cases the Bank, in line with the Decision on the
Amendment of the Decision on the assessment of credit risk losses in banks and savings banks
(Official Gazette of the Republic of Slovenia, 29/2012), derecognises the financial asset from the
statement of financial position and continues to record it off-balance sheet until it obtains legal
grounds to conclude recovery proceedings in the amount due. Financial liabilities are only
derecognised, when the contractual obligation has been met, is cancelled or it expires.
2.9.6 Fair value measurement principles
The fair value of financial instruments traded on active markets is based on the current best bid price
at the statement of financial position date, excluding transaction costs. If a market price is not
available, fair value is determined using discounted future cash flow or a pricing model.
When using discounted future cash flow models, these are determined based on the most probable
estimate and the discount rate is a market based rate of an instrument with similar characteristics
on the last day of the reporting period. If the pricing model is used, market data at the reporting date
is used.
The fair value hierarchy is disclosed under 5.5 b).
2.9.7 Derivative financial instruments and hedge accounting
Derivatives, including forwards, futures and swaps, are initially recognised in the statement of
financial position at fair value. Fair value is determined on the basis of a listed market price, the
model of discounted future cash flows and with the use of pricing models. The fair values are
recognised in assets (positive valuation) or liabilities (negative valuation) in the statement of financial
position. Interest accruals on interest rate derivatives are recorded separately from fair value
measurement in the income statement.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. The Group uses
derivatives to hedge the fair value of recognised assets and liabilities.
Hedge accounting is used provided certain criteria are met. When a hedge is introduced a formal
document is prepared, describing the relationship between hedged items and hedging instruments,
as well as its risk management purpose and strategy and the valuation methodology. The Group
also documents the effectiveness assessment of hedging instruments at exposure to changes in the
fair value of a hedged instrument, which are attributable to hedging. The Group assesses the
effectiveness of a hedge at its inception and then on an ongoing basis during the duration of the
hedge, where the hedge effectiveness must always fall within a range of 80 to 125 percent.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are
recognised in the income statement, together with any changes in the fair value of the hedged asset
75
or liability that are attributable to the hedged risk. Effective changes in fair value of hedging
instruments and the related hedged items are reflected in the income statement under ’’Changes in
fair value from hedging’’.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount
of a hedged item for which the effective interest method is used is transferred to profit or loss over
the period to maturity. The adjustment in the carrying amount of the hedged equity investment is
included in operating profit at the moment of sale.
Individual derivative financial instruments that provide effective economic hedges which, however,
do not qualify for hedge accounting under the specific accounting rules, are treated as derivatives
held for trading. Changes in the fair value of those derivative instruments are recognised immediately
in the income statement under “Net gains / (losses) from financial assets and liabilities held for
trading”.
2.10 Impairment of financial assets
2.10.1 Assets measured at amortised cost
The Group assesses impairments of financial assets individually for all individually significant assets
where there is objective evidence of impairment, while all other financial assets are impaired
collectively. According to the Regulation on credit risk loss assessment by the Bank of Slovenia, a
financial asset or off-balance sheet liability is individually significant if total exposure to the client
exceeds EUR 650 thousand or 0.5% of the Bank’s equity. The Bank defines individually significant
assets to be total exposures to banks and total exposures to other corporate customers, which are
classified A through C as well as the corporate customers classified D and E. If the Group determines
that no objective evidence of impairment exists in an individually significant financial asset, it includes
this asset in a group of financial assets with similar credit risk characteristics and collectively
assesses them for impairment.
At each reporting date of the statement of financial position, the Group assesses whether there is
objective evidence that an individually significant financial asset is impaired as a consequence of
one or more events that occurred after initial recognition of the asset and that event has an impact
on the asset’s future cash flows, which can be reliably estimated.
The criteria the Group uses to determine the existence of objective evidence on an impairment loss
pertaining to a financial asset or asset class include:
- late payment of contractual interest or principal;
- breach of other contractual provisions;
- debtor’s liquidity problems;
- financial restructuring of the debtor, with material losses recognised;
- start of bankruptcy or insolvency proceedings;
- deterioration in the value of collateral; and
- credit rating downgraded below investment grade.
The Group estimates that the period between the occurrence of problems, which prevent the client
from fulfilling his obligations to the Group, and identification of these problems by the Group typically
varies from between one to three months. Junior management determines the assessment period
on a case by case basis.
If there is objective evidence that an impairment loss on loans and advances or held to maturity
investment has been incurred, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows. The carrying amount
76
of the asset is reduced through an allowance account and the amount of the loss is recognised in
the income statement. The calculation of the present value of the estimated future cash flows of
collateralised financial assets reflects the present value of future cash flows from foreclosure, less
cost of obtaining and selling the collateral. Assumed off-balance sheet liabilities are also assessed
individually, and where necessary related provisions are recognised as liabilities.
For the purpose of collective impairment evaluation, the Group uses migration matrices, which
illustrate the expected migration of customers between internal rating classes. The probability of
migration is assessed on the basis of past experience, namely the annual migration matrices for
different types of customers. This data is then adjusted to the predicted future trends, since historic
experience does not necessarily reflect the actual economic conditions. The Bank includes the
estimates in the impairment percentages with an estimate of the general risk factor. Exposure to
private individuals is analysed additionally from the aspect of transaction type. For corporate clients,
impairments are assessed on the basis of expected client transitions and with it the migration of
good debt (A-C) to D and E rating classes and individually estimated average recovery rates from D
and E clients (bad debt class). The expected migrations for private individuals from good rating
classes to D and E are assessed for individual transaction types, the average recovery is
subsequently calculated on the basis of actual loss from bad debt per individual transaction type.
The amount of impairment loss is recorded in the allowance account. If the amount of the impairment
subsequently decreases due to an event occurring after the write down, the reversal of loss is
recognised as a reduction of an allowance for loan impairment.
When a loan becomes irrecoverable, it is written off with the use of a previously formed value
adjustment. Irrecoverable assets are written off after all recovery options have been attempted and
after the loss amount is set. Should a written off asset be subsequently repaid, the income is shown
in the income statement.
2.10.2 Assets available for sale
At the reporting date, the Group assesses whether there is any evidence of impairment for availablefor-sale financial assets. A significant or prolonged decrease in the fair value of an equity instrument
below its cost may provide objective evidence of impairment. If any such evidence exists for available
for sale assets, the cumulative loss is removed from other comprehensive income and recognised
in the income statement as an impairment loss. A reversal of impairment on an equity instrument is
not recognised through the income statement. A subsequent increase in its fair value is recognised
in other comprehensive income.
If, in a subsequent period, the fair value of a debt instrument increases and the increase can be
directly related to an event occurring after the impairment loss was recognized, the impairment loss
is reversed through the income statement.
The criteria the Group uses to determine whether a debt instrument is impaired:
- late payment of contractual interest or principal;
- issuer’s significant liquidity problems;
- breach of contract;
- start of bankruptcy proceedings at issuer;
- deterioration of the issuer’s competitive position;
- credit rating downgraded below investment grade.
Impairment losses recognised in the income statement are measured as the difference between the
carrying amount of the financial asset and its present fair value. The present fair value of the
instrument is its market price or discounted future cash flows, when the market price is not
obtainable.
77
2.10.3 Repossessed assets
The Group did not record any assets, received in payment of receivables through repossession of
assets pledged.
2.10.4 Renegotiated loans
Renegotiated loans are investments with amended initial repayment conditions, due to a
deterioration of the customer’s economic or financial position, which results in irregular repayment
of liabilities to the Bank. Renegotiated loans no longer represent receivables past due, rather these
are deemed to be new loans, designated as renegotiated. These continue to be measured in
accordance with the original effective interest rate. Loans, which have been renegotiated, the Group
derecognises. A new asset is recognised at fair value, when there has been a material change in
the risks and benefits of the renegotiated asset.
2.11 Offsetting
Financial assets and liabilities are offset when a legally enforceable right to offset the recognised
amounts exists and there is an intention to settle on a net basis, or realise the asset and settle the
liability simultaneously.
2.12 Sale and repurchase agreements
Securities sold under sale and repurchase agreements (repos) are retained in the financial
statements and the related liabilities are included in financial liabilities associated with the transferred
assets. Securities sold subject to sale and repurchase agreements are reclassified in the financial
statements as pledged assets when the counterparty has the right by contract to sell or re-pledge
the collateral. The difference between the sale and repurchase price is treated as interest and
accrued over the life of the repo agreements using the effective interest rate method.
2.13 Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise cash and
balances with the Central Banks and demand deposits with commercial banks, government debt
securities held for trading and loans to banks with an original maturity of less than 90 days.
2.14 Accounting for leases
A lease is an agreement whereby the lessor conveys to the lessee, in return for a payment or series
of payments, the right to use an asset for an agreed period of time. Lease agreements are accounted
for in accordance with their classification as finance leases or operating leases at the inception of
the lease. The key classification factor is the extent to which the risks and rewards incidental to
ownership of a leased asset lie with the lessor or lessee.
a) the Group is the lessee
Leases entered into by the Group are operating and financial leases. The total payments made under
operating leases are included in the income statement on a straight line basis over the period of the
lease and are recorded in administrative expenses. When an operating lease is terminated before
the lease period has expired, any payment required to be made to the lessor is recognised as an
expense for the period in which termination takes place.
A financial lease is a lease, in which the lessee takes on nearly all the risks and rewards of
ownership. Assets, acquired through a financial lease, are recognised at fair value or at present
value of the minimum lease payments, decreased by depreciation costs and loss due to impairment
charges. Lease payments are recognised as interest expenses. Leased assets are depreciated over
78
the useful life of the asset. If there is no reasonable certainty that the lessee will obtain ownership
by the end of the lease term, such assets are depreciated over the shorter of the lease term or the
useful life of the asset.
b) the Group is the lessor
In operational leasing, the Group transfers the right to use an asset for a contractually agreed amount
of time to the lessee in exchange for a payment or a string of payments.
Payments received under operating leasing are recognised as other operating income in the income
statement on a straight line basis over the period of the lease. Assets leased out under operating
leases are presented in the consolidated statement of financial position as investment property or
as property and equipment.
Assets are leased under a finance lease when the risks and rewards related to ownership of a leased
asset are transferred to the lessee. When assets are leased out under a finance lease, the present
value of the minimum lease payments is recognised as a receivable. Income from finance leasing
transactions is apportioned systematically over the lease period. Receivables from a finance lease
are shown as net investments in the finance lease including the unguaranteed residual value.
2.15 Investment property
Investment property includes buildings held for leasing and not occupied by the Group.
Investment property is initially recognised at cost. Direct transaction costs are included in the initial
measurement. Subsequently, it is measured at cost less accumulated depreciation and any
accumulated impairment loss. When there is a change in use, the Group makes transfers to or from
investment property.
Depreciation is provided for on a straight line basis using a depreciation rate of 1.0%.
2.16 Property and equipment
All property and equipment is initially recognised at cost. Subsequently, it is measured at cost less
accumulated depreciation and any accumulated impairment loss.
Each year the Group assesses whether there are any indications that assets may be impaired. If
such an indication exists, the Group estimates the recoverable amount. The recoverable amount is
the higher of the fair value less cost to sell and value in use. If the recoverable amount exceeds the
carrying value, the assets are not impaired. As at 31 December 2014 no property or equipment item
was impaired.
Depreciation is provided for on a straight line basis over their estimated useful lives. Assets in the
course of transfer or construction are not depreciated until they are available for use.
The following are approximations of the annual rates used:
Bank and Group
Buildings
Furniture and equipment
Computer equipment
Leasehold improvements
%
1.9 - 6.0
7.0 - 20.0
10.0 - 33.3
10.0 - 20.0
79
The assets' residual value and useful life are reviewed, and adjusted if appropriate, on each
statement of financial position date.
Gains and losses on disposal of property and equipment are determined as a difference between
the sale proceeds and their carrying amount and are recognised in the income statement.
Maintenance and repairs are charged to the income statement during the financial period in which
they are incurred. Subsequent costs that increase future economic benefits are recognised in the
carrying amount of a property and equipment item. Annual depreciation rates, shown in range, did
not change in 2014.
2.17 Intangible assets
Intangible assets comprise computer software and software licences. They are initially recognised
at cost, decreased by the accumulated amortisation and impairment losses.
Amortisation of intangible assets with a finite useful life is calculated on a straight-line basis at rates
designed to write down the cost of the intangible asset over its estimated useful life. Software and
licences are amortised over a period of three to ten years. Intangible assets begin to be amortised
when they are available for use.
2.18 Inventories
Inventories are measured at the lower of cost or net realisable value. The Group uses the weighted
average cost method to determine inventories.
2.19 Taxes
2.19.1 Corporate income tax
During the past four years the Bank made a loss. As at the income statement date during the past
years, it has estimated that the following years of operation are probable to ensure a sufficient
amount of profit to cover for tax loss and eliminate deferred tax assets. However, out of prudence
on the basis of its position, the Bank recognised impairment charges for the total amount of deferred
tax assets on 31 December 2013, while not forming deferred tax assets for the year 2013 at all.
Based on planned profits for the coming years, the Bank formed deferred tax assets from part of the
tax loss on 31 December 2014.
The Bank also records deferred tax liabilities related to fair value measurement of available for sale
investments, which is shown in other comprehensive income.
2.19.2 Balance sheet tax
The Bank's total asset tax liability is shown under net other operating gains / (losses) (Note 3.9) and
is calculated in accordance with Slovenian legislation. The tax liability is represented by the
difference between the tax base and the tax relief, where the tax base is calculated as 0.1% of the
Bank’s total assets in the current calculation period and is reduced by 0.1% of the loans granted to
non-financial companies and private entrepreneurs during the same period.
2.19.3. Financial services tax
The liability to pay financial services tax is recognised in net other operating gains / (losses) (Note
3.9). In accordance with the legislation financial services, which in accordance with the Value Added
Tax Act, are exempt from VAT payment, are taxed.
80
The basis for the financial services tax is the remuneration (fee or commission), which the Bank
receives in payment for a financial service it has provided.
2.20 Employee benefits
Employee benefits include: jubilee benefits and retirement indemnity bonuses. In accordance with
legislation, employees retire after 40 years of service and are entitled to a lump sum severance pay
out at such time, if certain conditions have been fulfilled. Employees are also entitled to long service
bonuses for every ten years of service at the Bank.
The valuation of the provisions for these obligations is carried out by independent qualified actuaries.
The significant assumptions used in the actuarial calculation for the Bank are:
Discount rate
Number of employees entitled to benefits
Wage growth based on inflation, promotions and seniority
2014
2013
2.60%
3.10%
469
494
2.00%
2.00%
All gains and losses arising from changes in assumptions are immediately recognised in the income
statement, except for actuarial gains in the amount of EUR 91 thousand based on severance pay,
which have been recognised in the revaluation reserve on the basis of IAS 19 The effect of the
amended IAS 19 on the recognition of changes in provisioning is immaterial, which is why the Bank
did not carry out a retrospective restatement. The Bank contributes to the State Pension Scheme
(8.85% of gross salaries) in accordance with Slovenian legislation. Once contributions have been
paid, the Bank has no further payment obligation. The regular contributions constitute net periodic
costs for the year in which they are due and are disclosed under labour costs in the income
statement.
2.21 Loans taken, deposits and debt securities issued
Loans taken, deposits and debt securities issued are initially recognised at fair value decreased by
the transaction costs. Loans and deposits are usually measured at cost, with the difference between
initial recognition and carrying value recognised in the income statement under interest income with
the use of the effective interest rate. A debt security issued is measured at cost or at fair value.
Purchases of own debt reduce the liabilities in the statement of financial position. The difference
between the carrying amount and the price of the own debt is shown in the income statement.
2.22 Provisions
Long-term provisions are recognised when the Group has a present legal or constructive obligation
as a result of past events and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation
can be made.
The Bank creates provisions for post-employment benefits, for commitments and contingent
liabilities, for legally unresolved claims and on the basis of the national housing savings scheme
(NSVS).
For instruments carrying off-balance sheet risk provisions are formed for estimated loss from the
items, which are based on similar criteria as those set for loans. To form provisions for legitimate
obligations from past events a reliable estimate of the obligation amounts is required.
81
2.23 Financial and performance guarantees
Financial guarantees are agreements that require the issuer to make specific payments to reimburse
the holder for a loss it incurs because a specific debtor fails to make payments when due, in
accordance with the terms of debt instruments at the initial or adjusted due date. Such financial
guarantees are given to banks, other financial institutions and other parties as a form of collateral on
loans, overdrafts and other banking facilities.
Performance guarantees are agreements, based on which the issuer is obligated to pay a
consideration, which compensates the holder for loss resulting from the contractor’s failure to fulfil
contractual obligations. Mainly these are issued to construction investors in the name of the
contractor, to secure the conditions, as defined in the agreement.
Financial and performance guarantees are initially recognised at fair value, which is recorded as the
amount of fees and commissions received. The fees are transferred to the income statement over
the contract term using the straight line method. The Group’s liabilities under guarantees are
subsequently measured at the greater of:
- the initial measurement, less amortisation calculated to recognise fee income over the period of
guarantee; or
- the best estimate of the expenditure required to settle the obligation.
2.24 Share capital
Ordinary shares and preference shares are both classified as equity.
a) Share issue costs
Costs, directly attributed to the issue of new shares are recognised in equity as a reduction in share
premium.
b) Dividends on shares
Dividends on shares are recognised in equity in the period in which they are approved by the Bank’s
owners.
c) Treasury shares
Should the Bank purchase treasury shares, the consideration paid is deducted from total
shareholder’s equity as treasury shares. In the event of a subsequent sale of the acquired treasury
shares, the amount is shown as an increase in share capital.
2.25 Segment reporting
The preparation of financial statements in accordance with the IFRS requires accounting policies,
assumptions and estimates, which affect the reported amount of assets and liabilities, the disclosure
of contingent liabilities and commitments at the reporting date and the amount of income and
expenses for the period ended on the reporting date. The estimates and assumptions are based on
the going concern principle, on past experience and other factors, including expectations related to
future events.
Estimates are used for: impairment of loans and receivables, impairment of available for sale
financial assets, the fair value of financial assets and liabilities, provisions for commitments and
contingent liabilities, the depreciation period of property and equipment and intangible assets,
deferred taxes and provisions for liabilities to employees.
Changes in impairment estimates have a significant impact on the financial position and on
operational performance. These may change in the future due to changes in economic conditions
82
and the changes in the repayment ability of debtors and due to changes in the value of collateral for
bad loans at their redemption.
2.26 Critical accounting estimates and judgements
All the estimates and judgements used represent the best judgements in accordance with IFRS,
made in line with the applicable standards and are based on the principles of an active company, on
past experience and other factors, including expectations with regard to future events.
a) Impairment losses on loans and advances
With the objective of determining impairment charges, the Bank and the Group review their credit
portfolio on a quarterly basis at the least. Prior to making the decision on recognising loss through
the income statement, they make judgements if any information exists which could signify a drop in
the estimated cash flows from loans. Such evidence includes the information on deterioration of
debtor creditworthiness or on deterioration of economic conditions and circumstances. Future cash
flows from financial assets are estimated on the basis of past experience and loss from credit risk
bearing assets. The estimated future cash flows reflect also the effects related to the current
circumstances. Individual estimations are prepared on the basis of projected future cash flows
including all relevant information in relation to the financial position and debtor creditworthiness as
well as collateral. The methodology and assumptions, used in estimating future cash flow are based
on regular reviews aimed at decreasing the differences between the estimated and actual losses.
Should the present value of future cash flows decrease by 1 percentage point, it would result in
additional impairment charges in the amount of EUR 1,576 thousand for the Bank (2013: EUR 2,080
thousand).
b) Fair value of financial instruments
The fair value of financial instruments traded on an organised market is determined using observable
market prices on the reporting date, being the price, representing the best bid for the financial
instrument.
Fair values of financial instruments not traded on organized markets are determined using valuation
models. These include comparisons with the prices from the most recent transactions, the use of
discounted future cash flows and other frequently used valuation methods. All models in use have
been verified to ensure that the results offer an adequate representation of actual market conditions,
including the relative liquidity of the market and the use of adequate market surpluses. Changes in
the estimates of these factors would impact the reported fair value of held for trading investments
and available for sale financial assets.
The fair values of derivatives are determined on the basis of market data, in line with the adopted
methodology of the valuation of financial instruments. Market foreign currency rates, market interest
rates, the yield curve and the volatility curves are used in the valuation.
c) Deferred tax assets
The recognised deferred tax assets represent tax amounts from deductible temporary differences
incurred in 2014, which will be chargeable to future taxable profit and reported in the statement of
financial position. Deferred tax assets are recognized to the extent that can be set-off against future
taxable profit. Future taxable profit and the amount of likely future tax benefits are based on the
medium term plan prepared by the Management Board. The medium-term financial plan is based on
management’s expectations, which are warranted in the given circumstances.
83
3 NOTES TO THE INCOME STATEMENT
3.1 Net interest and similar income
Interest and similar income
Loans and advances to customers
Loans and advances to banks
Securities
- held for trading
- financial assets designated at fair value
through profit or loss
- available for sale financial assets
- held to maturity investments
Deposits with Central Bank
Derivatives - interest rate swap
Interest and similar expense
Loans and advances from customers
Loans and advances from banks
Loans and deposits from Central Bank
Issued securities and CDs
Derivatives - interest rate swap
2014
2013
67,159
55,732
10
9,937
2,978
88,279
68,556
77
13,006
138
6,959
17
1,463
16
4,000
8,852
114
6,526
(28,147)
(16,139)
(4,393)
(153)
(6,311)
(1,151)
(50,988)
(30,999)
(5,844)
(660)
(12,126)
(1,359)
39,012
37,291
Under loans and advances to customers in the amount of EUR 55,732 thousand, the Bank realised
EUR 11,655 thousand of income from individually impaired loans (2013: EUR 11,216 thousand).
3.2 Dividend income
2014
2013
Dividends from available for sale financial assets
Dividends from financial assets held for trading
346
-
379
8
Total
346
387
84
3.3 Net fee and commission income
2014
2013
Fee and commission income
Payment services
Card operations
Current account
Guarantees and credit insurance
Other services
16,438
6,286
4,807
3,330
1,752
263
17,344
6,441
5,020
3,307
2,316
260
Fee and commission expenses
Payment services
Card operations
Brokerage commissions and other securities transactions
Other services
(1,494)
(622)
(650)
(94)
(128)
(1,526)
(680)
(654)
(129)
(63)
14,944
15,818
3.4 Gains less losses from financial assets and liabilities not classified at fair value through
profit or loss
2014
2013
Equity securities
Debt securities
Financial assets recognised at amortised cost
Financial liabilities recognised at amortised cost
16,901
8,024
8,877
1,550
15
545
364
181
(108)
54,787
Total
18,466
55,224
Gains from financial assets available for sale were higher in 2014 than in 2013 and were mainly
generated with the sale of government bonds and with the sale of certain shares and mutual funds
in line with business policies. Under financial liabilities at amortised cost the Bank did not attain
significant gains in 2014 compared with the previous year. Gains in 2013 were mostly due to
valuation of subordinated bonds and certificates of deposit, which were cancelled in December 2014.
3.5 Gains less losses from financial assets and liabilities held for trading
2014
2013
Equity securities
Foreign currency trading
Debt securities
Currency derivative financial instruments
Forwards and futures with underlying securities
IRS and options
497
279
112
(159)
(346)
(865)
(1)
262
(104)
443
(4,838)
(1,539)
Total
(482)
(5,777)
85
A reduced loss from financial assets and liabilities held for trading in 2014 as compared with the
previous year is foremost the result of a smaller loss recorded from futures and forwards and the
underlying securities due to the winding-up of forward and futures and securities operations.
The loss from interest rate swaps (IRS) recorded in 2014 pertains to the valuation of IRS to a lower
fair value, mostly due to approaching final maturities.
3.6 Gains less losses from financial assets and liabilities designated at fair value through
profit or loss
2014
2013
Gains from valuation of securities in issue
(Losses) from bond valuation
-
32,604
(1,174)
Total
-
31,430
The profit from the valuation of issued securities in 2013 is the result of the valuation of subordinated
bonds, which were written down in December 2014.
3.7 Changes in fair value from hedge accounting
Net profit from hedged instruments
Net (loss) from hedging derivatives
Total
2014
2013
1,408
(1,396)
3,487
(3,453)
12
34
Using hedge accounting, the Bank hedged the fair value of some of its financial liabilities related to
a change in interest rates. Hedging derivatives are disclosed in detail in Note 4.7.
3.8 Gains less losses from foreign exchange differences
Positive exchange rate differences
Negative exchange rate differences
Total
2014
2013
2,726
(2,164)
4,904
(5,394)
562
(490)
Net profit / (loss) from foreign exchange differences must be assessed with the effects of currency
derivatives shown in Note 3.5 as the Bank has in place a managed FX exposure policy through the
use of derivatives. Subsequently, the effects on its income are immaterial.
86
3.9 Net other operating (loss)
2014
2013
305
179
126
306
198
108
Expenses
Taxes and other duties
Membership fees
Contributions to humanitarian organisations
Other operating expenses
(2,119)
(1,928)
(78)
(54)
(59)
(2,241)
(2,076)
(92)
(63)
(10)
Total
(1,814)
(1,935)
Income
Rental income
Income from the sale of real estate
Other operating income
Taxes and other duties feature the expense for balance sheet tax in an amount of EUR 687 thousand
(2013: EUR 952 thousand) and the expense for financial services tax amounting to EUR 1,130
thousand (2013: EUR 1,013 thousand).
3.10
Administrative expenses
2014
2013
Labour costs
Gross salaries and compensations
Defined contribution scheme
Social security
Employee benefits
- post-employment benefits
- other employee benefits
Other labour expenses
(15,427)
(11,903)
(1,043)
(868)
191
80
111
(1,804)
(16,892)
(12,361)
(1,436)
(904)
(589)
(132)
(457)
(1,602)
General and administrative expenses
IT
Maintenance
Credit cards
Rent
- property
- equipment
- software
Material and energy costs
Advertising
Office stationery costs
Audit and consultancy
Other services
(14,313)
(3,431)
(1,759)
(1,601)
(882)
(472)
(386)
(24)
(569)
(568)
(391)
(871)
(4,241)
(13,718)
(3,441)
(2,005)
(1,557)
(842)
(488)
(331)
(23)
(637)
(593)
(408)
(312)
(3,923)
Total
(29,740)
(30,610)
87
Future operating lease payments
- up to 1 year
- 1 to 5 years
- over 5 years
948
2,156
761
Total
3,865
The audit and advisory service expenses for 2014 include EUR 53 thousand (2013: EUR 53
thousand) of expenses for the annual audit of financial statement.
Employee data are presented in Chapter 8.5 of the Business report.
3.11
Amortisation and depreciation
Depreciation of property and equipment
Amortisation of intangible assets
Depreciation of investment property
Note
2014
2013
4.8
4.10
4.9
(1,551)
(1,042)
-
(1,855)
(1,036)
-
(2,593)
(2,891)
Note
2014
2013
4.21
(3,555)
(57)
(3,555)
(57)
Total
3.12
Provisions
Provisions for guarantees and commitments
Total
In 2014 the Bank made additional provisions to cover for guarantees and commitments mostly.
3.13
Impairment charges
Note
Impairment of loans measured at amortised cost
Impairment of other assets
Impairment of available for sale financial assets
4.3
Impairment of equity securities
Impairment of debt securities
Total
Detailed data on impairment of loans are disclosed in Note 5.1.
88
2014
2013
(50,683)
(4,353)
(5,761)
(196,181)
(11,657)
(6,159)
(5,261)
(500)
(5,659)
(500)
(60,797)
(213,997)
4
NOTES TO STATEMENT OF FINANCIAL POSITION
4.1 Cash and balances with the Central Bank and demand deposits with banks
31 December 2014
31 December 2013
Balances with Central Bank
Demand deposits with banks
Cash in hand
137,155
103,203
13,691
178,744
12,045
13,251
Total
254,049
204,040
During the first half of 2014 the Bank placed surplus liquidity with the Central bank in the form of
term deposits with a maturity of 7 days, while placing surplus funds with other commercial banks in
the second half of the year.
4.2 Held for trading financial assets
Note
Derivatives
Equity securities
Debt instruments
31 December 2014
Assets
Liabilities
4.2a
Total
31 December 2013
Assets
Liabilities
4,636
-
796
-
5,934
3,040
1,987
1,125
-
4,636
796
10,961
1,125
In accordance with its investment policy, as at 31 December 2014 the Bank only holds derivatives
in its held for trading financial assets and liabilities.
Financial assets held for trading did not form part of assets pledged in 2014 nor in 2013, and no debt
securities with original maturities below three months are held.
4.2a Derivative assets and liabilities
Contractual amount
31 December 31 December
2014
2013
Derivatives
Fair value
31 December 2014
Assets Liabilities
31 December 2013
Assets Liabilities
IRS
Currency swaps
Futures and forwards
Option (Interest rate cap)
117,661
18,570
10,500
120,424
23,351
9,733
11,000
4,573
63
-
698
98
-
5,782
26
126
-
1,049
76
-
Total
146,731
164,508
4,636
796
5,934
1,125
In 2014 the Bank reduced the volume of derivatives trading. The fair values of receivables and
liabilities from IRS decreased due to lower contractual values and approaching maturities. Mainly
the Bank has entered in IRS, where it pays a variable interest, while receiving fixed. A decrease in
assets was attained from these transactions. On the other hand, the transactions where it pays fixed
and receives variable interest, from which it achieved a reduction in liabilities, are less frequent.
89
4.3 Available for sale financial assets
31 December 2014
Impairment
Balance
31 December 2013
Impairment
Balance
Debt instruments
Equity instruments
479,434
4,467
(1,117)
318,435
33,354
(514)
(23,380)
Total gross
483,901
(1,117)
351,789
(23,894)
Total net
482,784
327,895
As at 31 December 2014 the Bank held EUR 81,222 thousand of securities eligible for ECB funding
in the Financial Property Fund with the Bank of Slovenia (2013: EUR 263,089 thousand).
Changes in available for sale financial assets:
Equity securities
Debt securities
Total available for sale
financial assets
16,591
1,487
(2,538)
94
(5,660)
9,974
170,167
41,267
(57,940)
(63,079)
221,051
6,955
(500)
317,921
186,758
42,754
(60,478)
(63,079)
221,051
7,049
(6,160)
327,895
4,829
(13,216)
7,024
(5,261)
3,350
133,264
94,998
125,795
(43,995)
(151,017)
2,968
(500)
479,434
138,093
94,998
125,795
(57,211)
(151,017)
9,992
(5,761)
482,784
Balance as at 1 January 2013
Purchase
Sale
Realization at maturity
Reclassification from held to maturity
Change in fair value
Impairment
Balance as at 31 December 2013
Purchase
Recapitalization
BAMC bond
Sale
Realization
Change in fair value
Impairment
4.4 Loans and advances to banks (excluding demand deposits)
31 December 2014
Balance
31 December 2013
Impairment
Balance
Impairment
Short-term loans
52,000
-
5,822
-
Total gross
52,000
-
5,822
-
Total net
52,000
5,822
Cash and cash equivalents (Note 4.26) include loans to banks with a maturity up to 90 days.
90
4.5 Loans and advances to customers
4.5.1
Analysis by types of borrowers and currency:
31 December 2013
31 December 2014
Local currency
Loans to the state and local communities
Loans to private individuals
- overdraft accounts and cards
- housing loans
- consumer loans
- unauthorised account overdrafts
Loans to private entrepreneurs
Loans to companies
- large companies
- SME
- other
Foreign currency
Loans to private individuals
- housing loans
- consumer loans and other
Loans to companies
- large companies
- SME
- other
Total gross
Balance
Impairment
Balance
Impairment
1,031,262
69,745
295,934
34,774
161,908
98,474
778
33,941
631,642
259,530
356,049
16,063
(151,235)
(2,034)
(15,348)
(196)
(6,680)
(8,103)
(369)
(4,449)
(129,404)
(32,323)
(88,921)
(8,160)
1,555,159
65,883
308,835
36,102
164,789
107,060
884
46,272
1,134,169
457,877
515,481
160,811
(337,007)
(258)
(12,498)
(206)
(4,903)
(7,024)
(365)
(5,049)
(319,202)
(80,420)
(128,302)
(110,480)
14,827
13,989
9,145
4,844
323
515
446
69
(3,225)
(3,158)
(201)
(2,957)
(14)
(53)
(12)
(41)
32,770
15,701
10,736
4,965
481
16,588
5,184
1,016
10,388
(10,865)
(2,461)
(353)
(2,108)
(21)
(8,383)
(85)
(91)
(8,207)
1,046,089
(154,460)
1,587,929
(347,872)
891,629
Net total
1,240,057
The decrease is mainly the result of the transfer of bad assets to the BAMC in accordance with the
ZUKSB and the reduced lending volume. The Bank transferred loans in the amount of EUR 349,240
thousand to the BAMC, impairments of these are disclosed in table 4.5.2.
91
4.5.2
Impairments and write-offs for customers, by types of credit facilities:
Housing
loans
Impairment charges
Reversal of impairments
Write-offs
Loans to
Consumer
private
and other
loans individuals
Loans to private
Loans to
entrepreneurs companies
Total
4,222
2,441
(1,407)
-
7,347
3,838
(1,372)
(110)
11,569
6,279
(2,779)
(110)
4,202
1,922
(997)
(57)
138,987
198,387
(6,631)
(2,900)
154,758
206,588
(10,407)
(3,067)
5,256
9,703
14,959
5,070
327,843
347,872
Impairment charges
Sale of receivables
Transfer to the BAMC
Write-offs
2,303
(665)
(13)
2,652
(600)
(130)
4,955
(1,265)
(143)
2,045
(436)
(1,627)
(589)
69,713
(24,329)
(3,684)
(226,229)
(11,823)
76,713
(26,030)
(3,684)
(227,856)
(12,555)
6,881
11,625
18,506
4,463
131,491
154,460
4.6 Other financial assets
Bank
31 December
31 December
2014
2013
Group
31 December
31 December
2014
2013
Credit card receivables
Receivables on the course of collection
Fees and commissions receivables
Other
Impairment
1,055
504
206
613
(445)
1,107
2,525
666
355
(2,364)
1,055
504
206
811
(498)
1,107
2,525
666
816
(2,386)
Total
1,933
2,289
2,078
2,728
Movements in impairment provisions:
Impairment
Write-offs
Impairment
Release of provisions due to transfer to BAMC
Write-offs
92
Bank
Group
2,098
1,250
(873)
(111)
2,364
2,119
1,251
(873)
(111)
2,386
898
(239)
(2,544)
(34)
445
929
(239)
(2,544)
(34)
498
4.7 Hedging derivatives
Contractual amount
31 December 31 December
2014
2013
Fair value
31 December 2014
31 December 2013
Assets
Liabilities
Assets
Liabilities
Hedging derivatives (IRS)
54,150
164,150
1,424
-
3,437
-
Total
54,150
164,150
1,424
-
3,437
-
Hedge accounting rules (fair value hedge) were applied in the hedging of interest rate risk using IRS.
These hedge relationships are created in such a way that the characteristics of the hedge instrument
and those of the hedged item match (e.g. the principal terms match).
The fair value of hedging instruments decreased compared with the previous year, mainly due to the
decrease of contractual values.
4.8 Property and equipment
Note
Cost as at 1 January 2013
Additions
Removal of Vodnikova
Transfer from assets in course of
construction
Disposals
Cost as at 31 December 2013
Depreciation
Depreciation charge
Removal of Vodnikova
Disposals
3.11
Net carrying value as at 31 December 2013
Additions
Transfer from assets in course of
construction
Disposals
Depreciation
Depreciation charge
Disposals
3.11
Land and
buildings
Property held
Other
under finance Computer
lease hardware equipment
Assets in
course of
construction
Total
27,045
(784)
-
11,986
-
7,688
-
1,286
-
46,719
1,286
(784)
78
26,339
669
669
480
(773)
11,693
59
(291)
7,456
(1,286)
-
(1,064)
46,157
16,169
514
(644)
16,039
10,300
8
8
661
9,740
897
(773)
9,864
1,829
5,892
436
(247)
6,081
1,375
-
31,801
1,855
(644)
(1,020)
31,992
14,165
26,339
-
669
-
11,693
-
7,456
-
497
46,157
497
238
(90)
26,487
669
114
(1,794)
10,013
145
(250)
7,351
(497)
-
(2,134)
44,520
16,039
515
(75)
16,479
10,008
8
13
21
648
9,864
682
(1,704)
8,842
1,171
6,081
341
(250)
6,172
1,179
-
31,992
1,551
(2,029)
31,514
13,006
The larger purchase of computer equipment in 2014 pertains to safety data copying equipment and
the electronic banking environment update. Decreases are mostly the result of the sale of POS
terminals, which the Bank outsources and the destruction of obsolete computer and other equipment.
93
The cost of equipment and property, that has already been fully depreciated, but is still in use by the
Bank, amounts to EUR 10,705 thousand (2013: EUR 10.414 thousand).
Property and equipment have not been pledged in 2014 or 2013.
4.9 Investment property
Group
Note
Additions
Transfer to inventory
Disposals
Depreciation
Depreciation charge
Disposals
3.11
Additions
Transfer from inventory
Disposals
Depreciation
Depreciation charge
Disposals
3.11
Land
Buildings
Total
38
461
499
2,720
1,074
540
(296)
4,038
2,758
1,535
540
(296)
4,537
499
79
30
(4)
105
3,933
79
30
(4)
105
4,432
499
1
(5)
(6)
489
4,038
55
(91)
(452)
3,550
4,537
56
(96)
(458)
4,039
489
105
35
(47)
93
3,457
105
35
(47)
93
3,946
Investment property includes land and buildings acquired to be leased out under an operating lease.
Rental income of EUR 180 thousand (2013: EUR 186 thousand) is included in Net other operating
(loss) of the Group. Maintenance costs related to investments property of EUR 12 thousand (2013:
EUR 9 thousand) are included in General and Administrative Expenses of the Group. The fair value
of investment property was assessed by authorised appraisers using the comparative sales method
and the capitalisation of income. The fair value of investment property (level 3) as at 31 December
2014 amounts to EUR 4,548 thousand (2013: 5,802 thousand).
94
4.10
Intangible assets
Note
Software licenses
Assets in course of
installation and
other
Total
14,619
907
15,526
338
729
(907)
160
14,957
729
15,686
10,542
1,036
11,578
3,948
160
10,542
1,036
11,578
4,108
15,526
386
15,912
160
421
(386)
195
15,686
421
16,107
11,578
1,042
12,620
3,292
195
11,578
1,042
12,620
3,487
Additions
Transfer from fixed assets in installation
Depreciation
Amortisation charge
3.11
Additions
Transfer from fixed assets in installation
Depreciation
Amortisation charge
3.11
The cost of intangible long-term assets, that have been fully depreciated, but are still used by the
Bank, amounts to EUR 7,237 thousand (2013: EUR 7.004 thousand).
4.11
Investments in subsidiaries, associates and joint ventures
Posest, d.o.o., Celje
Investment
% of
amount
ownership
% voting
rights
Basic equity
capital
Operating
result
31 December 2014
2,257
100.00
100.00
2,124
11
31 December 2013
2,257
100.00
100.00
2,124
(137)
4.12
Income tax assets
4.12.1 Deferred tax assets
31 December 2014
31 December 2013
Deferred tax
4,271
-
Balance of assets as at 31 December
4,271
-
31 December 2014
31 December 2013
Tax loss
Available for sale securities
4,550
(279)
-
Deferred tax assets
4,271
-
95
Changes in deferred tax:
31 December 2014
Balance as at 1 January
31 December 2013
-
10,087
- derecognition of assets
-
(5,235)
Provisions for liabilities to employees
-
(222)
4,550
-
(5,141)
-
(75)
4,550
(10,673)
(4,674)
4,395
586
Changes in deferred taxes recorded in other
comprehensive income as at 31 December
(279)
586
Statement of financial position on 31 December
4,271
-
Income statement changes in deferred taxes:
Available for sale instruments - impairment
Tax loss
- recognition of assets
Investment tax relief
- recognition of assets
Income statement changes in deferred taxes as at
31 December
Changes in deferred taxes in the statement of comprehensive income:
Available for sale securities
- valuation to fair value
- elimination
4.13
Other assets
Bank
31 December 2014 31 December 2013
Group
Claims against the Tax
Administration of the Republic
of Slovenia
Deferred expenses
Inventories
Other receivables
264
231
8
3
1
177
16
3
264
241
4,141
-
177
4,138
11
Total
506
197
4,646
4,326
The inventory of the Group end 2014 pertains to houses, flats and property. The carrying amount of
inventory as at 31 December does not exceed its realizable value.
96
4.14
Financial liabilities designated at fair value through profit or loss
Maturity
Contractual
amount
Interest rate as at
31 December 2014
31 December
2014
31 December
2013
Subordinated bonds BCE10
Certificates of deposit
Certificates of deposit
-
409
161
134
263
30
3
Total
-
1,000
Based on the Decision on emergency measures by the Bank of Slovenia, all of the Bank’s qualified
liabilities were written down on 16 December 2014, including a total of EUR 92,020 thousand of the
Bank’s liabilities from issued financial instruments representing the Bank’s subordinated liabilities.
These included:
- subordinated, registered bonds designated BCE11, with an outstanding qualified liability of the
Bank from the instrument as at the day of the Decision of EUR 15,145 thousand plus
accumulated interest;
- subordinated certificates of deposit dated 29 November 2007 and 20 December 2012, with an
outstanding qualified liability of the Bank from the instruments as at the day of the Decision of
EUR 3,250 thousand plus accumulated interest.
4.15
Financial liabilities at amortised cost – deposits from banks and central banks
4.15.1 Analysis by currency and maturity
At sight
In local currency
In foreign currency
498
6
492
1,023
100
923
Short-term
In local currency
255
255
10,253
10,253
Total
753
11,276
97
4.15.2 Analysis by region
31 December 2014
31 December 2013
Slovenia
Other countries
747
6
11,175
101
Total
753
11,276
4.16
Financial liabilities at amortised cost – due to customers
4.16.1 Analysis by currency and maturity and by type of customer
31 December 2014
At sight
State and local
communities
In local currency
Companies
In local currency
In foreign currency
Private entrepreneurs
In local currency
In foreign currency
Private individuals
In local currency
In foreign currency
Other financial
institutions
In local currency
In foreign currency
Total
Total at sight, short-term
and long-term
Short-term
31 December 2013
Long-term
At sight
Short-term
Long-term
27,038
27,038
157,740
157,740
80,364
80,364
15,884
15,884
91,100
91,100
165,444
165,444
133,781
131,991
1,790
87,641
87,640
1
19,089
19,089
-
92,195
89,619
2,576
158,587
158,467
120
26,839
26,839
-
29,356
29,309
47
2,554
2,554
-
550
550
-
22,535
22,493
42
1,477
1,477
-
1,662
1,662
-
326,613
316,114
10,499
138,141
136,932
1,209
205,819
203,276
2,543
301,983
292,350
9,633
170,442
168,590
1,852
185,432
183,493
1,939
886
886
-
7,443
7,443
-
32,808
32,808
-
558
557
1
6,798
6,798
-
31,082
31,082
-
517,674
393,519
338,630
433,155
428,404
410,459
1,249,823
1,272,018
31 December 2014
31 December 2013
Slovenia
EU
Other countries
1,236,745
9,111
3,967
1,257,073
10,181
4,764
Total
1,249,823
1,272,018
98
4.17 Financial liabilities, measured at amortised cost – borrowings from banks and central
banks
4.17.1 Analysis by currency and maturity
Interest rate as at
31 December 2014
31 December 2014
31 December 2013
136,291
136,291
336,226
336,226
136,291
336,226
31 December 2014
31 December 2013
Slovenia
136,291
336,226
Total
136,291
336,226
Local currency
Long-term loans
2.36%
Total
4.18
Financial liabilities at amortised cost – borrowing from customers
Interest rate as at
31 December 2014
31 December 2014
Short-term
Local currency
2.89%
4.19
Long-term
-
Total
31 December 2013
Short-term
1,498
Long-term
-
1,498
2,134
2,134
Debt securities
Maturity
Interest rate as at
31 December 2014
Certificates of deposit in local currency
CDs - maturity in 2014
Bonds in local currency
Bonds BCE13
Bonds BCE14
Bonds BCE15
30.3.2015
1.10.2015
15.2.2016
Total
3.44%
4.40%
8,253
7,844
409
34,557
28,569
5,604
384
4.75%
4.55%
5.00%
98,523
41,409
20,472
36,642
99,284
41,380
20,699
37,205
106,776
133,841
In March 2010 the Bank issued the 13th issue bonds in a total amount of EUR 40,000 thousand, in
October 2010 it issued the 14th issue bonds in an amount of EUR 20,000 thousand and the 15th issue
bonds in a total issue amount of EUR 34,150 thousand. The issues pertain to registered, EUR
denominated, non-materialised bonds. Interest is paid out annually, with bullet repayment at
maturity. The liabilities from the bonds are not secured nor otherwise guaranteed. The Bank
guarantees the obligations from the bonds it issues with all its assets without limit.
99
The BCE13, BCE14 and BCE15 series bonds are all listed on the Ljubljana stock exchange, while
certificates of deposit are not.
4.20
Other financial liabilities
31 December 2014
31 December 2013
Suppliers
Debit or credit card payables
Payroll liabilities
Accruals
Items in course of payment
Other
1,543
1,433
1,316
487
460
960
1,191
1,619
1,216
516
179
699
Total
6,199
5,420
4.21
Provisions
Note
Provisions for guarantees and commitments
Employee benefits provision
Other provisions
Pending legal cases
31 December 2014
4.25d
4.25a
Total
31 December 2013
5,284
2,726
82
-
2,299
2,885
121
4,598
8,092
9,903
Provisions for liabilities toward employees include future severance pay at retirement, jubilee
benefits and unpaid salaries. Other provisions relate to the national housing savings scheme
(NSVS).
Changes in provisions:
Provisions for
pending legal
cases
Provisions for
guarantees and
commitments
Employee
provisions
Other
provisions
Total
Provisions made / (released)
4,738
-
2,242
57
2,412
588
184
-
9,576
645
Release of provisions to accumulated
other comprehensive income
Direct use of provisions
(140)
4,598
2,299
(74)
(41)
2,885
(63)
121
(74)
(244)
9,903
458
3,097
(192)
-
3,363
(5,056)
-
(112)
5,284
91
(58)
2,726
(39)
82
91
(5,265)
8,092
Provisions made / (released)
Provisions from accumulated other
comprehensive income
Direct use of provisions
100
Provisions for unresolved legal proceedings, have been formed for the costs of the denationalization
of the management building at Vodnikova, have been fully used for the payment to denationalization
beneficiaries in line with the court’s decision.
4.22
Other liabilities
Bank
Group
Taxes payable
Accruals
126
47
711
816
294
47
922
815
Total
173
1,527
341
1,737
4.23
Share capital
The capital of Banka Celje, d.d., after the increase of capital with state aid in the amount of EUR 190
million, amounted to EUR 201,581 thousand on 31 December 2014 (31 December 2013: 40,758
thousand).
4.23.1 Subscribed capital
The Bank’s subscribed capital after the capital increase from 16 December 2014 comprised
5,000,000 dematerialised ordinary registered no par value shares. All shares, representing the
qualified first grade liability of the Bank prior to the capital increase, being 508,629 ordinary no par
value shares, were fully written down on the day of the capital increase.
The Subsidiary is registered as a limited liability company.
After the capital increase, the state is the Bank’s sole owner.
Number of shares and amount of share capital:
Number of
shares
Share capital in thousands of EUR
Ordinary shares
Preference shares
Total
508,629
16,980
-
16,980
508,629
5,000,000
16,980
50,000
-
16,980
50,000
4.23.2 Treasury shares
After all the shares have been eliminated on 16 December 2014, the Bank as at 31 December 2014
no longer held any treasury shares in its portfolio (31 December 2013: 251 ordinary treasury shares
in a total amount of EUR 31 thousand).
4.23.3 Share premium
With the capital increase the Bank’s share premium increased by a total of EUR 166,221 thousand
(amounting to EUR 51,380 thousand in the years 2011, 2012 and 2013). The increase in the amount
of EUR 140,000 thousand is the result of payments, which exceeded the nominal value of the shares
paid in. The appropriate amount of one new ordinary no par share is EUR 10, with the share’s issue
101
value being EUR 38. At the same time capital reserves decreased by EUR 42,433 thousand as well,
due to the cover for the loss from 2013 and increased by EUR 16,980 from a simplified decrease of
share capital as a result of the elimination of shares and by EUR 294 thousand due to the transfer
of liabilities from unconverted shares of Banka Noricum to the shares of Banka Celje, d.d.
4.23.4 Reserves
As at 31 December 2014 the Bank’s reserves amount to EUR 2,948 thousand (Group: EUR 3,147
thousand), comprising statutory reserves in the amount of EUR 2,905 thousand (Group: EUR 3,005
thousand) and other profit reserves in the amount of EUR 43 thousand (Group: EUR 142 thousand).
4.23.5 Revaluation reserve
The accumulated comprehensive income, forming part of the capital, amounted to EUR 3,513
thousand as at 31 December 2014, wherein the Bank shows the revaluation of available for sale
assets to a fair value of EUR 3,531 thousand and net actuarial losses from severance pay in the
amount of EUR 18 thousand. Changes in the accumulated other comprehensive income are shown
in the statement of comprehensive income.
4.24
Dividend per share
Dividends payable are not accounted for until they have been ratified at the Bank's annual General
Shareholders’ Assembly. The dividends for 2012 and 2013 were not confirmed and not paid out.
4.25
Contingent liabilities and commitments
a) Legal proceedings
In 2014 the bank received the decision and the verdict by the High Court in Celje in the dispute
concerning the payment of compensation on the basis of the inability to use the management
building at Vodnikova 2, which was returned in the denationalization process. On 30 September
2014 the Bank thus paid EUR 5 million to two denationalization beneficiaries, namely the Kapitalska
zadruga and the Deželna banka Slovenije. To this aim it formed additional provisions to ensure their
total is sufficient for the payment of all liabilities. As at 31 December 2014 the Bank no longer records
any provisions from legally unresolved disputes (31 December 2013: EUR 4,598 thousand).
At the same time, the Bank is continuing the proceedings for the reimbursement of the costs of the
denationalization. In the proceedings it has received an interim decision by the District Court in
Ljubljana, being the court of first instance, case no. 459/2011 from 6 March 2015, which states that
the Bank is entitled to reimbursement on the basis of Article 73 of the Denationalization Act. The
court will decide on the amount of the reimbursement after the final decision in the matter.
b) Capital commitments
As at 31 December 2014 and 31 December 2013, the Group did not exhibit any future obligations to
acquire property or equipment or intangible assets.
c) Contingent liabilities and commitments
Documentary (and standby) letters of credit constitute a written and irrevocable commitment of the
issuing (opening) bank, on behalf of the issuer (importer) to pay the beneficiary (exporter) the value
set out in the documents by a defined deadline:
- if the letter of credit is payable on sight; and
102
-
if the letter of credit provides for deferred payment – to be paid at maturity, provided that the
beneficiary (exporter) presents documents that are in line with the conditions and deadlines set
out in the letter of credit.
A commitment may also take the form of a letter of credit confirmation, which is usually done at the
request or authorisation of the issuing (opening) bank and constitutes a firm commitment by the
confirming bank, in addition to that of the issuing bank, which independently assumes a commitment
to the beneficiary under certain conditions.
Commitments to extend credit represent unused portions of authorisations to extend credit in the
form of loans, letters of intent and letters of credit. With respect to credit risk on commitments to
extend credit, the Bank is exposed to loss in an amount equal to the total unused commitments.
d) Breakdown of contractual amounts relating to bank guarantees and assumed liabilities
Note
Guarantees
- performance guarantees
- financial guarantees
Commitments to extend credits
Total
Provisions
4.21
Total
4.26
31 December 2014
31 December 2013
81,758
62,992
18,766
83,967
103,844
77,069
26,775
99,152
165,725
(5,284)
202,996
(2,299)
160,441
200,697
Cash and cash equivalents
Cash and cash equivalents in the statement of cash flows represent instruments with an original
maturity of less than 90 days.
Note
31 December 2014
31 December 2013
Cash and cash balances with central banks and demand
deposits
4.1
254,049
204,040
Loans to banks (without demand deposits)
4.4
52,000
5,822
306,049
209,862
Total
103
4.27
Related party transactions
Related parties comprise key management personnel (Management Board members, Supervisory
Board members, senior management and their immediate family members), companies with
significant impact on the Bank and the Subsidiary until 16 December 2014.
Gross amounts paid out to key management personnel
2014
Senior management
Management
Board members
Supervisory
Board members
commercial
business units
other business
units
Total
Fixed income
Variable income
Other income
Cost reimbursement
Meeting fees
241
11
5
-
6
56
372
9
10
-
714
10
22
-
1,327
30
43
56
Total
257
62
391
746
1,456
2013
Senior management
Management Supervisory Board
Board members
members
commercial
business units
other business
units
Total
Fixed income
Variable income
Other income
Cost reimbursement
Meeting fees
362
55
6
-
8
62
506
30
11
-
649
29
21
-
1,517
114
46
62
Total
423
70
547
699
1,739
The Bank’s Management Board comprised 2 members in 2014. The senior management comprised
13 members since April. In 2014 salaries paid out to the Management Board and the senior
management were aligned with the legislation governing the remuneration of management in
companies under majority ownership of the Republic of Slovenia.
Gross amounts paid out to Management Board and Supervisory Board members
Management Board Members
2014
2013
Revenue
Revenue
Cost
reimburFixed Variable Other sement Total
Cost
reimburFixed Variable Other sement Total
Davorin Leskovar
Aleksander Vozel, M.Sc.
Dušan Drofenik, M.Sc.
124
117
-
-
9
2
-
1
4
-
134
123
-
121
114
127
-
22
12
21
1
4
1
144
130
149
Total
241
-
11
5
257
362
-
55
6
423
104
Fixed remuneration includes gross salary, other pertains to holiday pay and accrued bonuses.
2014
Supervisory Board members
Fix
remuneration
2013
Cost
reimbursement Total
Fix
remuneration
Cost
reimbursement Total
Jure Peljhan, Ph.D.
Zvonko Ivanušič, M.Sc.
Zdenko Zanoški, M.Sc.
Bojan Šrot
Tomaž Subotič, Ph.D.
Melita Malgaj
Barbara Smolnikar, M.Sc.
Uroš Čufer, Ph.D.
11
9
9
9
9
9
-
1
4
1
-
12
9
9
13
10
9
-
11
10
9
9
9
9
3
2
1
1
6
-
12
11
9
9
15
9
3
2
Total
56
6
62
62
8
70
Related party transactions
2014
Managem ent and
Senior Shareholders
Supervisory Board m anagem ent
w ith m ore
m em bers w ith related
w ith related
than 20% of
parties
parties
shares
Posest,
d.o.o.
Total
RECEIVABLES
Loans
Securities and derivatives
Liabilities assumed
Other financial assets
110
51
-
273
151
58
-
8,639
9
12,701
149
-
21,723
151
258
9
Total
161
482
8,648
12,850
22,141
16
(1)
47
65,801
(141)
2,424
(142)
68,288
923
941
-
1
1,865
92
-
102
39
957
365
41
1,151
445
1,015
1,082
1,322
42
3,461
3
(31)
-
15
(23)
-
16
(199)
68
220
(128)
254
(253)
(60)
Impaired loans
Loan repayments during the year
LIABILITIES
Deposits
Debt securities and derivatives in
issue
Total
Interest income
Interest expense
Impairment charges and provisions
105
2013
RECEIVABLES
Loans
Securities and derivatives
Liabilities assumed
Performance guarantees and
counter guarantees
Senior Shareholders
Managem ent and
w ith m ore
Supervisory Board m anagem ent
than 20% of
w ith related
m em bers w ith related
shares
parties
parties
Posest,
d.o.o.
Total
55
15
260
151
34
3,711
1
-
14,220
110
18,246
152
159
-
-
1,917
7
21
2
1,938
9
Total
70
445
5,636
14,353
20,504
Impaired loans
Loan repayments during the year
79
(1)
179
(68)
62,578
(14)
2,784
(83)
65,620
915
1,057
-
3
1,975
248
-
138
1
1,575
96
-
1,961
97
1,163
1,196
1,671
3
4,033
(3)
-
5
(20)
-
104
(777)
(1,544)
269
(14)
378
(800)
(1,558)
LIABILITIES
Deposits
Debt securities and derivatives in
issue
Total
Interest income
Interest expense
Impairment charges and provisions
Shareholders holding more than 20% of interest are represented by companies, which met the
conditions until the decision by the Bank of Slovenia on emergency measures was passed on 16
December 2014 and remain the same as in 2013.
In line with the decision by the Bank of Slovenia on 16 December 2014 all qualified liabilities of the
Bank were written down and the share capital was decreased to zero. Based on Article 262a. of the
ZBan-1, the Bank of Slovenia implemented an emergency measure of increasing share capital, thus
having the Republic of Slovenia increase the capital of the Bank by EUR 190 million and becoming
its 100% owner.
As at 31 December 2014 the Bank’s investments include debt securities of the Republic of Slovenia
in the amount of EUR 272,796 thousand (31 December 2013: EUR 176,576 thousand), loans to the
state and the Republic of Slovenia in the amount of EUR 11,980 thousand (31 December 2013: EUR
10,136 thousand), under liabilities the deposits taken from the state in the amount of EUR 221,152
thousand (31 December 2013: EUR 215,467 thousand).
From the transactions with the Republic of Slovenia in 2014 the Bank attained interest income in the
amount of EUR 5,515 thousand (EUR 8,737 thousand in 2013), interest expenses in the amount of
EUR 3,863 thousand (EUR 7,003 thousand in 2013) and gains from financial operations in the
amount of EUR 9,498 thousand (EUR 2,686 thousand in 2013).
The Bank also maintains contractual relations with state related companies, for which individually
significant transactions are disclosed. As at 31 December 2014 the Bank only recorded on
individually significant transaction in the amount of EUR 125,800 thousand from debt securities
purchased. As at 31 December 2013 the amount of individually significant loans and deposits
amounted to EUR 31,000 thousand (2 transactions).
106
The effects of the significant transactions above have been recorded in the income statement under
interest income and expenses mainly. Interest income amounted to EUR 57 thousand in 2014, while
interest expenses came in at EUR 8 thousand, while the 2013 figure stood at EUR 43 thousand.
Related party transaction contractual interest rates (including government and government related
entities) in % p.a.:
31 December 2013
RECEIVABLES
Interest Rate
Premium
- Reference Interest Rate
- Nominal Interest Rate
Euribor 1 Month - 6 Months
1.2% to 8.2%
0.3% to 5.5%
Securities
Euribor 3 Months - 6 Months
0% to 4.9%
0.1% to 0.2%
Euribor 6 Months
0.01% to 4.8%
-0.1% to 2.2%
Euribor 6 Months
6.3%
0.6% to 3.1%
LIABILITIES
Due to customers
Borrowings
Bonds and Certificates of deposit
2.1% to 5.0%
31 December 2013
RECEIVABLES
Interest Rate
Premium
Euribor 1 Month - 6 Months
1.3% - 8.5%
0.3% - 5.5%
Securities
Euribor 3 Months - 6 Months
1.0% - 8.0%
0.1% - 0.2%
Due to customers
- Base Interest Rate
Euribor 6 Months
0.01% - 6.3%
Base Interest Rate
0.1% - 2.2%
Deposits from banks
0.4%
LIABILITIES
0.0% - 3.0%
Borrowings
Euribor 6 Months
6.3%
0.6% - 3.1%
Euribor 6 Months
3.1% - 8.0%
2.0%
Bonds and Certificates of deposit
107
4.28
Information on the results of organisational units abroad
The Group has no subsidiaries or associated companies abroad.
4.29
Events after reporting date
On 12 January 2015 a work group was established to perform coordination activities with the
Monitoring Trustee, with its key tasks being the monitoring and reporting on the implementation of
the commitments made to the European Commission.
Activities in connection with the merger of Abanka and Banka Celje were also set in motion in 2015.
The banks selected an advisory company for the merger and formed task groups, which are to
ascertain how the merged bank is to operate without disruption to the customers.
The implementation of amended legislation in April 2015 will see the conclusion of the Bank’s
cooperation with the Financial Administration of the Republic of Slovenia in relation to horizontal
monitoring and the Bank will again be transferred to formal tax treatment in accordance with the
provisions of the ZDavP-2.
In the merger process with Abanka Aleksander Vozel, M.Sc., will, after acquiring a licence from the
Bank of Slovenia and after a new member of the Banka Celje Management Board has been named,
join the Management Board of Abanka, where he will continue working on the merger of both banks.
5
RISK MANAGEMENT
In its operations, the Bank assumes a number of different types of risk, the amount of which depends
on the type of transaction and the willingness to assume risk. The Bank mainly focuses on the
performance of traditional banking operations and provides its clients with services pertaining to
treasury and other financial transactions in a limited capacity. It conducts most of its operations within
the Republic of Slovenia, whereas it is also present in the interbank markets of other EU member
states as well as other low credit risk countries. In lending to corporate and retail clients, it is gradually
withdrawing from foreign markets.
To achieve strategic goals pertaining to its operations and risk management, the Bank pays
particular attention to credit, liquidity and capital risks. The Bank decreased its exposure to market
and interest rate risks by implementing investment policies and management processes for individual
risk types.
5.1 Credit risk
Credit risk is the risk of loss resulting from a debtor’s inability to meet, for any reason, its financial or
contractual obligations in their entirety. This type of risk includes subcategories, namely country risk,
risk of concentration and residual risk. The Risk Management Division, being an organisationally
independent unit in relation to commercial units and answering directly to the Bank's Management
Board, manages the implementation of the policy of assuming and managing credit risk, and
regularly reports to the ALCO on the exposure to credit risk and limit consideration.
The granting of loans includes commercial organisational units, the Restructuring and Recovery
Division, the Risk Management Division and the Operational Support Division. Granting loans and
other transactions is subject to authorisations and legal limitations. Authorisations depend on the
rating of the debtor, the size of the total exposure, loan size, the total limit, collateral and deviation
108
from other conditions. The loan granting process includes different decision-making levels within the
Bank.
The Bank manages credit risk related to a single debtor or an investment (standalone risk), as well
as the risk related to the entire credit portfolio (portfolio risk).
5.1.1 Measuring and managing credit risk
The Bank measures credit risk for active on-balance sheet items and for commitments and
contingent liabilities. Credit risk is assessed for financial assets measured at amortised cost, for
financial assets designated at fair value and for assumed liabilities from commitments and contingent
liabilities. Credit risk is the result of business, commercial and housing loans, credit card operations,
transaction account overdrafts, guarantees and granted undrawn loans, as well as a consequence
of the investments in debt securities and the exposure from transactions with derivatives.
Exposure to credit risk depends on three elements: (1) The probability of default or exposure to the
debtor’s rating class, (2) Current exposure from statement of financial position and commitment and
contingent liability items, and (3) The amount of outstanding debt paid off, in case of default.
(1) The probability of default or exposure to the debtor’s rating class
Internal rating systems have been developed for the classification of the Bank’s debtors into rating
classes and for the measurement of probability of default for different debtor groups (legal entities,
individual entrepreneurs, banks and private individuals). Debtor classification is based on the
estimated qualitative and quantitative elements. In the classification of banks and sovereigns
(states), external ratings are usually considered (Moody’s Investor Service, Fitch Ratings, Standard
& Poor’s). Prior to every individual private loan or investment approval, each individual’s
creditworthiness is assessed and the settlement of existing liabilities checked. Before approving a
loan, as a rule, an inquiry is made with the use of the SISBON system (Slovene Information System
on the Rating of Retail Clients), which includes data on indebtedness and settlement of liabilities
pertaining to retail clients in the Slovenian banking environment.
Prior to approving a transaction, the Bank classifies a debtor into a rating class, determining the
probability of default and expected loss. On an ongoing – or at least on a quarterly basis – it verifies
the adequacy of an individual classification in relation to the debtor’s financial standing, the
settlement of due liabilities and the assessment of qualitative factors, on the basis of which the
classification is retained or the debtor is classified into a higher or lower rating class. Transitional
matrices are prepared regularly, showing the transitions between rating classes and measuring the
number of defaults in an observed period. Estimates on the probability of default for an individual
rating class are then adjusted on the basis of data pertaining to defaults.
109
The internal ratings system with the description of rating classes and the comparison with external
ratings:
Comparison with the
Bank of Slovenia
ratings
Internal
rating class
Internal rating
description
Risk level
A1, A2, A3
Prime
Investment grade
A
Comparison with Moody’s Investors Service*
from Aaa to Aa3, from A1 to A3, from Baa1 to
Baa3
B1, B2, B3
Standard
Investment grade
B
from Ba1 to Ba3, from B1 to B3
C1, C2
Substandard
Sub-investment grade
C
from Caa1 and lower
Default**
Default
D
Default
Default recovery**
E
Default
E
Default
* Comparison prepared for banks.
** Borrowers in default are debtors who are more than 90 days overdue on any significant liability and debtors, for which the Bank estimates
a small probability of the settlement of the credit liability toward the Bank in full, without it having to employ other measures to achieve
repayment.
Defaulting counterparties are classified as non-performing assets.
D
(2) Current exposure from statement of financial position and commitment and contingent liability
items
The level exposure in items of the statement of financial position (loans) and the level of commitment
and contingent liability exposures equal their carrying amount.
(3) The amount of outstanding debt paid off, in case of default
The loss amount in case of default depends on the amount of exposure and the collateral obtained.
The Bank strives toward securing receivables to minimise loss. It is important for the Bank to begin
procedures for the settlement of overdue, unpaid receivables as soon as possible.
Debt securities
In managing credit risk from debt securities, the Bank utilises the external ratings (Moody's Investor
Service, Fitch Ratings, Standard & Poor's) of securities and issuers. In cases where the fair value of
an individual security is significantly lower than the original cost and the drop in value is attributable
to reasons pointing to objective evidence of impairment, the Bank recognises the impairment charge
on the investment.
Assumed commitments and contingent liabilities
Assumed commitments and contingent liabilities (off-balance sheet items) include the undrawn part
of loans granted, guarantees and letters of credit. By issuing these instruments, the Bank commit to
providing cash to the counterparty, when so instructed. The potential exposure to loss from these
instruments pertains to credit risk. The same methodologies are applied in measuring credit risk from
assumed commitments and contingent liabilities as are used in measuring credit risk pertaining to
loans.
Derivatives
The exposure to credit risk from derivatives pertains to exposure to counterparty risk, namely the
risk of a counterparty defaulting prior to final settlement of cash flow from the transaction. The
exposure to credit risk equals the credit replacement value, calculated on the basis of the current
exposure method. The Bank enters into derivative instrument agreements with prime debtors, mainly
in foreign currency transactions and IRS. In the event of increased credit risk, the Bank tries to
acquire additional collateral. The exposure to credit risk is managed within the framework of limits
pertaining to lending agreements, as approved by the Credit Committee.
Limit definition and monitoring
The Bank calculates limits for loans to individual debtors and to groups of related entities on the
basis of data on the existing and future operations. In doing so, it takes into consideration the legal
110
requirements in connection with the largest exposure limits related to an individual entity or a group
of related entities, which must not exceed 25% of the Bank’s capital, while taking into account its own
policies as well. The diversification of exposure to individual debtors or groups of related entities is
one of the objectives the Bank is working toward, which is why it is reducing the number and value
of exposures to individual debtors or groups of related entities. Limits are monitored on an ongoing
basis and are adjusted in relation to the risk profile of the debtor or a group of related entities and
the sector in which the debtor is active. It focuses on the debtor’s cash flow, available for the
repayment of debt. Total limits and their possible increases or decreases are approved by the Bank’s
Credit Committee. Exposures exceeding 10% of the Bank's capital require the approval of the
Supervisory Board. The Bank has prepared an indebtedness ceiling calculation methodology for
corporates, for banks and for large exposures to private entrepreneurs. For lower exposures to
private entrepreneurs and for exposures to private individuals, creditworthiness is assessed prior to
the approval of a new loan.
In addition to limits set for individual debtors or groups of related entities, the Bank also implements
structural limits according to sector or category of debtor, according to geographic area and
according to industry - thus limiting the risk of portfolio concentration and of exposure to high risk
industries or regions. Structural limits are usually confirmed annually at ALCO meetings, with their
consideration and trends monitored on the basis of monthly reports. If required, due to economic
conditions and exposure to risk, these limits may also be modified.
Collateral
The Bank’s exposure to credit risk is reduced with the implementation of policies regarding collateral.
To minimise loss in the event of default, the Bank tends to acquire adequate collateral from the
borrower, such as a mortgage on commercial or residential real estate, pledges of financial property
(bank deposits, securities) or the acquisition of personal credit insurance by an adequate provider.
Other forms of collateral, such as physical collateral, inventories and cash claims, are considered to
be of lesser quality. Usually long-term loans are collateralised, with a large portion of short-term
loans collateralised as well, while the only ones not requiring collateral being those granted to
borrowers exhibiting a higher credit rating. Should a borrower's credit rating deteriorate or the fair
value of collateral decrease, the Bank begins negotiations to obtain additional collateral or to
decrease exposure.
The significant types of appropriate collateral that the Bank utilises and the related valuation:
- financial assets used as collateral (bank deposits at the Bank or cash-assimilated instruments,
debt securities, issued by sovereigns, central banks or institutions, equity and other securities,
listed on stock exchanges), valued at market and revalued on a daily basis;
- pledged commercial or residential property, valued at fair value;
- personal assurances given by: sovereigns and central banks, regional or local authorities, public
sector entities, institutions, insurance companies and companies with a high credit rating (100%
percent of the value is considered).
The macroeconomic conditions and the circumstances prevailing in the real estate and capital
markets in 2014 required a great deal of attention to be directed at monitoring the fair value of
collateral, especially commercial and residential real estate. Exposures collateralised with securities
continued to decrease with loans maturing and collateral being liquidated in the collection process.
To reduce credit risk, the Bank does not execute balance sheet netting or use credit derivatives.
Estimating credit risk losses
A methodology for the estimation of credit risk losses has been prepared in accordance with the
IFRS, which is updated at least once a year and adapted to the economic conditions. Continuously,
or at least on a quarterly basis, estimations are made as to whether there is objective evidence of
111
impairment relating to financial assets and liabilities assumed on the basis of commitments and
contingent liabilities. Should such evidence exist, the Bank must calculate the amount of loss due to
impairment and make provisions for commitments and contingent liabilities. The methodology of
estimating impairment charges is set up according to type of debtor: legal entities and private
entrepreneurs, retail clients, banks and savings banks and prime debtors.
(1) Assessment of impairment charges for exposure to legal entities and private entrepreneurs
The impairment charge may be calculated individually on the basis of the estimated future cash flows
or collectively on the basis of historical data on defaults and losses for groups of exposures with
similar characteristics, adjusted to account for the current situation, thus reflecting the effects of
recent operating conditions. Individual estimates pertain to assets individually exhibiting significant
characteristics (exposures above EUR 650,000) and showing signs of impairment (exposures
classified lower than D and E). If there are no sign of impairment, the exposure is classified into a
group of financial assets with similar characteristics and the impairment is assessed collectively.
Impairment is also assessed individually for financial assets which have already been recognised as
impaired (exposures classified D and E). Impairment is appraised on the basis of estimated future
cash flows, including expected repayment from liquidation of collateral.
For exposures not exhibiting signs of impairment (exposures classified A1, A2 and A3, B2 and B3,
C1 and C2), the charge is assessed collectively on the basis of historical default data and loss
estimates. The estimation percentage includes a general risk factor, reflecting current economic
conditions and thus impacting the probability of defaults. The value of the general risk factor is
assessed at least once a year on the basis of fluctuations in the general price levels, interest rates,
the settlement of liabilities, fluctuations in the financial and capital markets as well as the real estate
market conditions, economic activity, conditions in the job market and the trends in the energy and
raw material markets.
(2) Assessment of impairment charges for exposure to retail
The Bank classifies financial assets into rating groups A, B, C, D and E on the basis of the settlement
of liabilities. Individually significant financial assets (exposures above EUR 400,000), where there is
objective evidence to suggest there is a need for the establishment of an impairment, are impaired
individually. The same applies to financial assets already recognised as impaired (exposures
classified C, D and E). For the purpose of collective impairment, financial assets are divided into
homogenous groups on the basis of the settlement of liabilities and in accordance with product
groups (housing loans, consumer loans, quick loans, account overdrafts). Impairment charge
percentages are based on past data and adjusted to reflect current conditions, thus differing for every
product group and each rating class. Impairment charge percentages are reviewed once a year.
(3) Assessment of impairment charges for exposures to banks and prime debtors
For banks, impairment is estimated solely on an individual basis. Exposures to prime debtors
(sovereigns and central banks) are assessed using the collective or individual approaches.
Increased credit risk monitoring system (ICR)
The Bank has set up a loan monitoring system, which allows for a timely detection of increased credit
risk. Based on the assessment of qualitative and quantitative criteria, pointing to increased credit
risk, the Bank rates debtors in five groups (ICR1 – watch list, ICR2 – problem exposure, ICR3 –
debtors in recovery procedure, bankruptcy, erasure, ICR4 – renegotiated exposure and ICR5 –
comprehensive restructuring). Determining the group of increased credit risk is the basis for defining
the Bank’s further activities aimed at reducing exposure to credit risk. In the event of default, the
Bank then ascertains direct and indirect responsibility.
112
Managing credit risk in 2015
Credit risk remains one of the most significant risk types faced by the Bank. We estimate that the
recovery of the domestic economy and the economies of European members will be slow, which is
why the exposure to credit risk remains high. The Bank will continue implementing measures to
mitigate the effects of the crisis on its financial position and its operational results.
The Bank will continuously monitor debtor operations and their creditworthiness, the value of the
collateral and continuously determine adequate impairments. It will actively attract new clients with
a higher rating and creditworthiness, all the while financing investments in the core business of
companies and export oriented companies, using an appropriate investment policy to stimulate
lending activities to retail. The Bank will work on financial restructuring where it positively assesses
the business model. With timely identification of increased credit risk and with continued active
recovery of overdue claims and the collateral called it will attempt to decrease the value and the
share of overdue non-performing loans.
The Bank will continue to follow its goal of diversifying the credit portfolio according to debtors,
activities and regions. It will limit investments in the activities and regions with higher risk levels.
Slovenia remains the core market. It will continue to decrease exposure to the SEE region.
113
5.1.2 Maximum credit risk exposure
31 December 2014
Maximum
exposure to
credit risk
Fair value of
2
collateral
31 December 2013
Maximum
exposure to
credit risk
Fair value of
2
collateral
Statement of financial position assets
Loans
Loans to the state or local communities
Loans and advances to private individuals
- overdraft accounts and cards
- housing loans
- consumer and other loans
- unauthorised account overdrafts
Loans to companies 1
- large companies
- small and medium sized enterprises (SME)
- other
Derivatives
Debt securities
Debt securities
Derivative financial intruments designated for
hedging
Commitments and contingent liabilities
Financial guarantees
Other off-balance sheet exposures
1,431,056
945,562
67,711
52,000
291,417
34,578
164,172
92,258
409
29,801
502,700
227,207
267,562
7,931
1,933
4,636
4,636
479,434
479,434
1,344,555
1,204,509
13,922
468,505
27,137
326,584
114,559
225
67,315
654,767
237,332
399,731
17,704
140,046
140,046
1,577,447
1,248,168
65,625
5,822
309,577
35,896
170,269
102,893
519
41,683
823,172
382,556
388,104
52,512
2,289
7,921
5,934
1,987
317,921
317,921
1,491,620
1,418,398
13,611
5,000
522,960
28,457
366,158
128,092
253
61,015
815,812
304,612
456,316
54,884
73,222
73,222
1,424
100,608
17,865
82,743
36,644
7,265
29,379
3,437
117,796
26,003
91,793
44,740
14,180
30,560
Total
1,531,664
1,381,199
1,707,288
1,551,371
1
Size of companies defined in accordance with the ZGD-1; the micro, small and medium size enterprises (SME) comprise those which
fulfil two of the following criteria:
average number of employees is less than 250,
net sales income does not exceed EUR 35,000 thousand,
value of assets does not exceed EUR 17,500 thousand.
Large companies are defined as those which do not fit the SME criteria.
’’Other’’ shows regional and local state levels, public sector entities, new companies, companies in receivership, societies and other
debtors, which do not provide information on their size.
2
-
Fair value of collateral equals:
market value of financial assets held as collateral,
100% of the value of insurance company guarantees, bank guarantees, state and municipal guarantees and prime rated companies,
values of residential and commercial real estate are equal to market values of comparable real estate.
The table shows the Bank’s maximum credit risk exposure from loans, investments in securities and
commitments and contingent liabilities as at 31 December 2014 and 31 December 2013. In 2014,
the exposure to credit risk decreased in comparison with the previous year due to the transfer of
assets to the BAMC, due to regular repayment of loans, recovery activities, write-off and additional
impairment charges. The transfer of assets to the BAMC resulted in an improved credit portfolio, the
decreased exposures to corporates, to Slovenia and to the riskier sectors. Loans decreased by 24%,
mainly loans to corporates and to a lesser extent to retail and private entrepreneurs. Loans to banks
and exposures from debt securities increased. Commitments and contingent liabilities went down by
19% due to a reduced volume of unused loan commitments and financial guarantees.
114
By carefully implementing investment policies in the harsher economic conditions and by managing
credit risk, the Bank achieved the following results in 2014:
- as at 31 December 2014 loans that were classified into the highest of investment grade rating
classes, namely A and B, represented 67.20% of all loans (31 December 2013: 57.12%),
impairment charge coverage dropped to 14.07% (31 December 2013: 21.83%);
- the coverage of exposure with adequate collateral decreased and reached 60% of all loans as
at 31 December 2014 (31 December 2013: 69%);
- 70% of the Bank’s investments in debt instruments is rated at least Ba1;
- the income statement shows impairment charges amounting to EUR 60,797 thousand (2013:
EUR 213,997 thousand), wherein impairment charges for loans measured at amortised cost
represent EUR 55,036 thousand (2013: EUR 207,838 thousand) and securities impairment
charges amount to EUR 5,761 thousand (2013: EUR 6,159 thousand). Provisions for
commitments and contingent liabilities amounted to EUR 3,555 thousand (2013: EUR 57
thousand). Impairment charges were created due to the deteriorated financial position of the
debtors, the liabilities due, as well as the decrease in the fair values of collateral and financial
assets.
5.1.3 Exposure to credit risk according to type of collateral
The following is a disclosure of all loans (to the state and local communities, to banks, to retail, to
private entrepreneurs and to corporates), except other financial assets.
Exposure from loans
The table below lists loans according to type of collateral. Secured loans are the ones, where the
fair value of collateral is greater or equal to the carrying amount of the loan. Unsecured loans are
represented by loans, which are entirely unsecured and by the parts of loans, where the fair value
of collateral is not sufficient for their repayment.
Loans
Collateral:
- deposits
- government guarantee
- insurance company and bank guarantee
- securities
- residential real estate
- commercial real estate
- other*
2,959
41,841
119,104
16,335
158,554
277,114
12,953
4,524
52,498
120,256
40,867
188,168
443,391
19,877
Secured loans - carrying amount
628,860
869,581
Unsecured loans - carrying amount
314,769
376,298
Loans - carrying amount
943,629
1,245,879
*Other collateral mainly refers to guarantees by A rated guarantors - corporates and to physical collateral to a lesser extent.
For the most part, loans are secured with commercial real estate, followed by residential real estate
as well as insurance company and bank guarantees. The latter are mainly used to secure retail
loans. In 2014 the share of loans, secured with commercial and residential real estate decreased
due to the transfer of assets to the BAMC and on account of a reduced fair value of property and the
share of loans secured with bank deposits, government guarantees by the Republic of Slovenia and
with securities.
In 2014 the Bank redeemed collateral (securities, real estate property, etc.) to ensure repayment of
loans granted. Securities were sold on the regulated market, while property and other assets were
115
sold in the recovery process (court and out-of-court proceedings, bankruptcies). The Bank does not
have repossessed collateral in its books of accounts.
According to loan type
Loans to com panies
31 Decem ber 2014
Loans to the
Loans to
Loans to
state and local Loans to
private
private
Large
communities
banks
individuals entrepreneurs companies
Collateral:
- deposits
- government
guarantee
- insurance company
and bank guarantee
- securities
- residential real
estate
- commercial real
estate
- other
Secured loans carrying amount
Unsecured loans carrying amount
Loans - carrying
amount
31 Decem ber 2013
Secured loans carrying amount
Unsecured loans carrying amount
Loans - carrying
amount
SME
Other
Total
-
-
1,508
139
-
1,312
-
2,959
11,050
-
-
-
30,008
783
-
41,841
-
-
117,821
1,487
1,252
-
13,120
5
1,728
27
-
119,105
16,335
266
-
132,740
5,097
3,619
16,338
494
158,554
304
-
-
6,590
580
16,996
432
97,116
858
149,620
11,061
6,488
22
277,114
12,953
11,620
-
260,726
23,916
144,721
180,847
7,031
628,861
56,091
52,000
30,691
5,885
82,486
86,715
900
314,768
67,711
52,000
291,417
29,801
227,207
267,562
7,931
943,629
11,625
5,000
278,640
31,110
231,551
267,531
44,124
869,581
54,000
822
30,937
10,573
151,005
120,573
8,388
376,298
65,625
5,822
309,577
41,683
382,556
388,104
52,512 1,245,879
5.1.4 Credit risk exposure according to rating class
Exposure from loans
31 Decem ber 2014
Impairment
Loan amount
amount
Total
31 Decem ber 2013
Impairment
Loan amount
amount
1,098,089
(154,460)
1,593,751
(347,872)
Prime (A)
47.47%
0.91%
35.78%
0.33%
Standard (B)
19.73%
2.57%
21.34%
1.68%
Substandard (C)
10.97%
10.97%
11.39%
6.74%
Default (D)
10.89%
33.73%
10.51%
24.11%
Default (E) - recovery
10.94%
51.82%
20.97%
67.14%
100%
100%
100%
100%
Structure
Total
Gross exposure to loans as at 31 December 2013 amounted to EUR 1,098,089 thousand,
representing a 31% drop as compared with the previous year (31 December 2013: EUR 1,593,751
thousand). After accounting for impairment charges, the loan carrying amount is EUR 943,629
thousand, being 24% less than in the previous year (31 December 2013: EUR 1,245,879 thousand).
Portfolio quality improved due to the transfer of assets to the BAMC, with the percentage of loans in
116
the highest rating classes (classes A and B) increasing to 67.20% (31 December 2013: 57.12%).
Impairment charge coverage decreased to 14.07% (31 December 2013: 21.83%).
Gross exposure to non-performing loans as at 31 December 3014 amounted to EUR 243,637
thousand (22% of the credit portfolio) or a net of EUR 111,159 thousand (31 December 2013: gross
exposure EUR 527,023 thousand or 33% of the credit portfolio and a net of EUR 206,845 thousand).
The stated net exposure from non-performing assets is secured with collateral, the fair value of which
amounted to EUR 197,889 thousand on 31 December 2014.
According to loan class
31 Decem ber 2014
Rating class
Loans to com panies
Loans to the
state and local
com m unities
Loans to
banks
Loans to
Loans to
private
private
Large
SME
Prime (A)
Standard (B)
Substandard (C)
Default (D)
66,733
136
-
52,000
-
280,350
2,384
9,355
3,336
9,449
12,264
4,403
3,581
52,154
87,534
73,625
46,217
60,120
112,969
33,080
66,339
Default (E) recovery
Impairments
2,876
(2,034)
-
14,498
(18,506)
4,567
(4,463)
(32,323)
83,987
(88,933)
Total
67,711
52,000
291,417
29,801
227,207
267,562
Prime (A)
Standard (B)
Substandard (C)
Default (D)
Impairments
Total
494
1,395
1
58
Total
521,300
216,682
120,464
119,531
14,184
120,112
(8,201) (154,460)
7,931
943,629
Loans to com panies
31 Decem ber 2013
Rating class
Other
Loans to the
Loans to
Loans to
private
private
com m unities
banks individuals entrepreneurs
62,894
171
2,818
5,822
-
(258)
65,625
Large
companies
SME
79,404
167,205
70,560
59,049
Other
293,351
7,109
9,204
4,974
13,279
18,645
5,973
1,109
114,591
144,717
81,476
102,439
-
9,898
(14,959)
7,747
(5,070)
19,838 140,279 156,504
334,266
(80,505) (128,393) (118,687) (347,872)
5,822
309,577
41,683
382,556
388,104
984
2,218
11,494
(1)
Total
570,325
340,065
181,525
167,570
52,512 1,245,879
Loans to retail decreased by 6% as compared to the previous year due to the decrease of personal
consumption and housing loans. Loan quality remains high (31 December 2014: 91.23% of loans
were classified A and B; 31 December 2013: 92.58%).
Loans to private entrepreneurs decreased by 28%, with their quality also having dropped somewhat.
The share of loans classified A and B fell to 63.37% (31 December 2013: 68.28%).
Lending to the corporate sector decreased by 39% compared with the previous year, with the quality
having improved. The share of loans classified A and B increased to 49.78% (31 December 2013:
44.24%).
117
Credit exposure to banks increased in 2014 due to interbank operations, with exposure to the state
and local communities increasing also. The Bank mainly deals with low risk sovereign entities and
banks.
5.1.5 Credit risk exposure according to impairment and maturity
Loans according to impairment and maturity
31 December 2014
Loans to the
communities
banks
Loans neither past due nor impaired
Loans not past due impaired
Loans past due - nor
impaired
Loans past due individually impaired
Impairments
Total
Loans to
Loans to
private
private
individuals entrepreneurs
Loans to
companies
Total
66,858
52,000
291,257
25,831
417,537
853,483
-
-
2,416
3,414
96,097
101,926
11
-
833
285
3,833
4,962
2,876
(2,034)
-
15,417
(18,506)
4,734
(4,463)
67,711
52,000
291,417
29,801
114,690
137,718
(129,457) (154,460)
502,700
943,629
31 December 2013
Loans to the
state and local
communities
Loans neither past
due - nor impaired
Loans not past due impaired
Loans past due - not
impaired
Loans past due individually impaired
Impairments
Total
Loans to
private
individuals
Loans to
banks
Loans to
private
Loans to
Total
63,071
5,822
308,355
37,131
647,026
1,061,405
-
-
1,246
813
117,535
119,594
2,812
-
1,313
767
25,639
30,531
(258)
-
13,622
(14,959)
8,042
(5,070)
360,557
(327,585)
382,221
(347,872)
65,625
5,822
295,955
33,641
462,615
863,658
The decrease pertaining to loans due and to unmatured impaired loans is the result of assets having
been transferred to the BAMC.
118
Loans and advances neither past due nor impaired
31 December 2014
Rating class
Loans to the
state and local
communities
Loans to
banks
Loans to private
individuals
Loans to private
entrepreneurs
Loans to
companies
Prime (A)
Standard (B)
Substandard (C)
66,722
136
-
52,000
-
279,873
2,294
9,090
9,414
12,092
4,325
111,910
201,518
104,110
Total
66,858
52,000
291,257
25,831
417,538
31 December 2013
Rating class
Loans to the
state and local
communities
Loans to
banks
Loans to private
individuals
Loans to private
entrepreneurs
Loans to
companies
Prime (A)
Standard (B)
Substandard (C)
62,882
171
18
5,822
-
292,789
6,691
8,875
13,180
18,207
5,744
194,893
312,651
139,482
Total
63,071
5,822
308,355
37,131
647,026
Loans and advances not past due but impaired
31 December 2014
Rating class
Loans to
Loans to
private
private
individuals entrepreneurs
31 December 2013
Loans to
Loans to
private
private
Loans to
Loans to
companies
Default (D, E)
2,416
3,414
96,097
1,246
813
117,535
Total
2,416
3,414
96,097
1,246
813
117,535
The item mainly includes restructured loans, where the Bank recognised significant impairment
(loss).
Loans and advances past due but not impaired
31 Decem ber 2014
31 Decem ber 2013
Loans to the
state and
Loans to
Loans to
local
priv ate
priv ate
Loans to
communities indiv iduals entrepreneurs companies
Receivables up to
30 overdue
Loans to the
state and
Loans to
Loans to
local
priv ate
priv ate
Loans to
communities indiv iduals entrepreneurs companies
11
496
175
2,422
12
656
472
9,181
Receivables over 30
to 90 days overdue
-
337
105
1,368
-
412
260
11,045
Receivables over 90
days overdue
-
-
5
43
2,800
245
35
5,413
11
833
285
3,833
2,812
1,313
767
25,639
Total
119
Loans and advances past due and individually impaired
31 Decem ber 2014
Loans to the
state and local
communities
Receivables up to 30
overdue
Loans to
priv ate
entrepreneurs
Loans to
companies
Loans to
priv ate
indiv iduals
Loans to
priv ate
Loans to
2,876
1,564
367
6,580
2,402
592
30,531
-
420
54
8,806
116
180
22,216
-
13,433
4,313
99,304
11,104
7,270
307,810
2,876
15,417
4,734
114,690
13,622
8,042
360,557
Receivables over 30
to 90 days overdue
Receivables over 90
days overdue
Total
Loans to
priv ate
indiv iduals
31 Decem ber 2013
5.1.6 Credit risk exposure according to impairment approach
Exposure from loans
31 Decem ber 2014
Collective approach
Individual approach
Prime (A)
469,300
(1,411)
52,000
-
564,502
(1,153)
5,822
-
Standard (B)
216,682
(3,963)
-
-
340,087
(5,854)
-
-
Substandard (C)
116,091
(16,942)
(22,982)
Total
Fair value of
collateral
Impairments
Loans
Impairments
Individual approach
Loans
Loans
Collective approach
Rating class
Default (D)
Impairments
31 Decem ber 2013
Loans
Impairments
4,373
-
165,558
15,969
(460)
6,426
(2,804) 113,105
(49,303)
3,700
(1,477) 163,871
(82,386)
15,091
(12,402) 105,021
(67,635)
12,640
(10,471) 321,602
(223,089)
823,590
(37,522) 274,499
(116,938) - 1,086,487
(41,937) 507,264
(305,935)
1,046,017
158,492
1,180,694
237,704
The Bank recognises impairment charges in accordance with the internal methodology on creation
of impairment charges and provisions in line with the IFRS. Individually significant exposures and
exposures, where there is objective evidence of impairment are impaired individually on the basis of
estimated future cash flows, while other exposures are impaired collectively. As at 31 December
2014, individual assessment was conducted on 25% of the Bank’s credit portfolio, representing 76%
of impairment charges (31 December 2013: 32% of the credit portfolio or 88% of impairment
charges).
120
5.1.7 Concentration of exposures according to region and industry
Credit risk exposure according to region
The table below shows credit exposure according to geographical regions. The exposure according
to region is determined in accordance with the address of the debtor's headquarters.
31 December 2014
Loans and advances to the state
and local communities
Loans and advances to private
individuals
Loans to companies:
- large companies
- small and medium sized
enterprises (SME)
- other
Total loans
Slovenia
EU
SE Europe
Other regions
Total
69,745
-
52,000
-
-
69,745
52,000
305,719
34,264
536,097
250,143
3,983
67,235
4,373
146
23,811
-
75
5,014
5,014
309,923
34,264
632,157
259,530
269,822
16,132
62,862
-
23,811
-
-
356,495
16,132
945,825
123,218
23,957
5,089
1,098,089
(106,012)
(31,696)
(16,552)
(200)
(154,460)
839,813
91,522
7,405
4,889
943,629
31 December 2013
Loans and advances
Impairments
1,481,404
(314,829)
82,197
(21,692)
26,130
(11,299)
4,020
(52)
1,593,751
(347,872)
Total net loans
1,166,575
60,505
14,831
3,968
1,245,879
Impairments
Total net loans
From the regional point of view, exposure to Slovenia decreased in 2014, while credit exposure to
the EU increased due to the increased exposure to banks. The exposure to the SEE continues to
decrease, with the Bank having created additional impairment charges. A target limit is in place for
the highest allowed exposure to the region.
121
Credit risk exposure according to industry
31 December 2014
Loans and advances
to the state and local
communities
Loans and advances
to banks
Loans and advances
to private individuals
Loans to private
entrepreneurs
Manuf acturing
Commerce
and motor
v ehicle
repairs
Construction
Finance
Prof essional,
scientif ic and
business
industry
Real estate
Priv ate
indiv iduals
Other
Total
-
-
-
10,048
764
136
58,797
-
69,745
-
-
-
52,000
-
-
-
-
52,000
-
-
-
-
-
-
- 309,923
309,923
7,648
3,141
8,950
77
622
2,058
11,768
-
34,264
Loans to companies:
- large companies
- small and
medium sized
- other
169,792
98,275
126,573
58,328
43,214
2,990
29,812
13,346
71,835
8,938
84,693
31,072
106,238
46,581
-
632,157
259,530
65,983
5,534
65,039
3,206
37,929
2,295
16,466
-
61,966
931
52,233
1,388
56,879
2,778
-
356,495
16,132
Total loans
177,440
129,714
52,164
91,937
73,221
86,887
176,803 309,923 1,098,089
Impairments
(22,164)
(25,105)
(21,246)
(4,485)
(29,003)
(21,151)
(12,800) (18,506) (154,460)
Total net loans
155,276
104,609
30,918
87,452
44,218
65,736
263,562
(54,538)
191,490
(39,217)
131,996 167,369
(67,147) (83,621)
96,059
(26,787)
165,297
(47,072)
253,441 324,537 1,593,751
(14,531) (14,959) (347,872)
209,024
152,273
69,272
118,225
238,910 309,578 1,245,879
31 December 2013
Loans and advances
Impairments
Total net loans and
advances
64,849
83,748
164,003 291,417
943,629
In terms of exposure by industry, exposure to the manufacturing industry remains highest, being
quite a diversified group in itself. In 2014, the Bank was able to decrease exposure to construction,
financial mediation and professional, scientific activities and commerce the most. In 2015, the Bank
will continue to pursue the objective of diversified investments according to industry and limit or
reduce investments in the higher risk sectors.
122
5.1.8 Exposure to credit risk from debt financial instruments
The table below features the carrying value of debt financial instruments classified according to
issuer and rating by Moody’s Investor Service.
31 December 2014
Issuer
Governments
Multilateral development
banks
Regional units and public
sector entities
Banks
Companies
Available for sale
financial assets
Rating by Moody's
Aaa to Aa3
Ba1
41,179
272,795
Aaa
8,101
Aaa to Aa1
unrated *
Aaa to Aa3
Ba1
Baa1
unrated *
2,005
13,274
8,008
4,697
4,979
124,396
Total
479,434
* All unrated exposures have been classified into the highest rating class A in accordance w ith internal methodologies.
Unrated exposures to corporates are collateralised w ith the guarantee of the Republic of Slovenia.
31 December 2013
Issuer
Governments
Rating by
Moody's
Financial assets
held for trading
Available for sale
financial assets
Total financial assets
Aaa to Aa3
Baa1
-
47,388
176,576
47,388
176,576
Aaa
-
8,173
8,173
Regional units and public
sector entities
Aaa to Aa1
unrated *
Banks
Aaa to Aa3
A3
Ba1
Caa2
Companies
unrated *
1,987
-
12,088
13,523
46,646
4,840
4,651
4,037
12,088
13,523
46,646
4,840
4,651
1,987
4,037
Total
1,987
317,921
319,907
Multilateral development
banks
* All unrated exposures have been classified into the highest rating class A in accordance w ith internal methodologies, w ith
the exception of one bond, w hich has been impaired.
The Bank impaired one debt financial instrument in 2014 due to increased credit risk (a corporate
bond, which at the end of 2014 was no longer part of the Bank’s financial instruments). All exposures
from debt financial instruments are unmatured.
The Bank holds 70% of investments in sovereign, bank and public sector debt securities with a rating
no lower than Ba1. As at 31 December 2014 the Bank holds investments in Slovenia (84% of all
investments) and in the low risk EU countries as well as Norway (16% of all investments).
123
5.1.9 Exposure to credit risk from derivatives
31 Decem ber 2014
31 Decem ber 2013
Fair value
Fair value
Derivatives - trading
Futures and forw ards
Interest rate sw aps
Currency sw aps
4,573
63
126
5,782
26
Total
4,636
5,934
Interest rate sw aps
1,424
3,437
Total
1,424
3,437
Exposure to credit risk from derivatives is based on the possibility of a counterparty failing to deliver.
The Bank enters into IRS transactions with prime rated foreign banks (at least Baa2 according to
Moody’s ratings). The volume of these transactions decreased in 2014. Currency swaps are also
done with foreign banks and, to a lesser extent, with corporates.
The Bank no longer enters into new securities forward agreements.
5.2 Market risk
Market risk is the risk of change in the fair value of financial instruments due to changes in risk
factors, being interest rates, currency rates and financial instrument prices. The most significant risk
type within market risk is positional risk pertaining to equity and debt financial instruments and
derivatives. Exposure to currency risk is low.
The Bank assesses market risk as the risk it is exposed to when performing trading activities and
the risks it is exposed to in non-trading activities pertaining to market risk factors.
Monitoring and reporting on the amount of exposure to market risk is done using limit systems and
using a number of different methods to measure market risk.
5.2.1 Measuring and managing market risk
The monitoring of positional risk (the risk of change in value) pertaining to equity and debt securities
is performed at the level of the entire portfolio as well as at the individual transaction level. The Bank
performs scenarios based on extraordinary conditions, which reflect the effect that extraordinary, but
plausible, conditions in the financial markets have on the value of financial instruments.
The Bank manages exposure to positional risk by also utilising a system of limits. These are basically
separated into trading and banking book limits and then further according to financial instrument
type, region and issuer. Exposure to positional risk is also measured at individual transaction level,
which is why stop limits have been put in place within the limit system, defined on the basis of the
Bank’s willingness to assume risk.
Currency risk is measured daily by monitoring net positions according to individual foreign
currencies. The exposure to currency risk is monitored with the use of foreign currency position limits,
which define the maximum level of an open net position according to an individual currency.
124
The Bank enters into currency and interest rate derivative transactions. Its basic policy in the area
of derivatives’ trading is to enter into transactions to hedge own positions and the positions of
customers, whereby the latter are hedged with counter positions. Transactions are entered into with
prime foreign banks.
In measuring market risk, the Bank calculates capital requirements pertaining to currency risk and
market risk for all items held for trading in line with CRR/CRD IV.
On 31 December 2014, the Bank prepared a simulation of the effect that a decrease of 20% in the
market prices of all equity instruments from the trading and banking book and an increase in interest
rates by 100 basis points for all debt securities from the trading and banking book would have on the
income statement and on capital.
Results of the analysis are shown in the table below:
31 Decem ber 2014
Debt
Equity
securities
securities
Effect on income statement
-
-
31 Decem ber 2013
Debt
Equity
securities
securities
Total
Total
-
(70)
(64)
(134)
Effect on equity
(9,907)
(592) (10,499)
(6,226)
(1,917)
(8,143)
Total
(9,907)
(592) (10,499)
(6,296)
(1,981)
(8,277)
5.2.2 Sensitivity analysis for financial instruments included in the banking book
The interest rate sensitive financial instruments in the banking book are analysed using the method
of interest rate gaps, where the amount of the gap in an individual time frame is also limited.
Exposure to interest rate risk is also measured using sensitivity analyses and stress tests, prepared
on the basis of the estimated duration gap. Based on these two methods, different analyses of
interest rate sensitivity are performed, including stress scenarios.
The sensitivity analysis of all interest rate sensitive financial instruments in the banking book as at
31 December 2014 shows that with a parallel increase of the interest curve by 50 basis points, the
net present value of the said financial instruments would increase by EUR 85 thousand (31
December 2012: EUR 2,789 thousand). The effect on the net present value of financial instruments
is calculated using the method of duration gaps between financials assets and liabilities in the
banking book.
On 31 December 2014 the Bank prepared a simulation of the effect of a change in the interest rate
on the income statement, where it assumed an immediate increase of interest rates by 50 basis
points. The analysis included all interest sensitive transactions maturing or are subject to interest
fixing within a one year interval. On the liabilities side, demand deposits have been excluded as the
Bank estimates that these pertain to liabilities not sensitive to interest rates. Floating interest rate
transactions assume a change in the reference interest rate, however not in the credit premium. In
the simulation of a parallel increase in the interest curve by 50 basis points, the effect on the amount
of interest is EUR 1,777 thousand.
125
The results of the analysis are shown in the table below.
31 Dec 2014
31 Dec 2013
Effect on interest income
Effect on interest expenses
5,398
3,621
6,546
5,493
Net effect
1,777
1,053
5.2.3 Currency risk
Foreign currency risk is a financial risk and represents the danger of financial loss due to changes
in currency rates. It is based on the open foreign currency positions. Thus a change in rates directly
affects asset value as well as foreign currency denominated liabilities, expressed in the reporting
currency. The Bank encounters foreign currency risk in international operations, being the result of:
- the assets and the liabilities of the Group are denominated in different currencies;
- the Group trades foreign currencies for its own account.
The risk of foreign currency exposure depends on the net foreign currency positions, on portfolio
structure, the volatility of foreign currencies and on the correlation between these variables. The
table below shows exposure to currency risk on 31 December 2014. It shows the carrying amounts
of assets and liabilities according to currency.
126
Exposure to foreign currency risk
31 Decem ber 2014
USD
CHF
Other
EUR
Total
Cash and balances w ith Central Banks and demand deposits
w ith commercial banks
Loans and advances
- loans and advances to banks (excluding demand deposits)
Derivative financial instruments designated for hedging
5,563
1,867
1,867
-
1,218
9,740
9,739
1
-
3,644
1
1
-
243,624
4,636
482,784
933,954
52,000
880,023
1,931
1,424
254,049
4,636
482,784
945,562
52,000
891,629
1,933
1,424
TOTAL ASSETS
7,430
10,958
3,645
1,666,422
1,688,455
- due to customers
- borrow ings from banks and central banks
- borrow ings from other customers
7,670
302
7,096
272
5,842
127
5,715
-
3,609
63
3,278
268
796
1,484,219
261
1,233,734
136,291
1,498
106,776
5,659
796
1,501,340
753
1,249,823
136,291
1,498
106,776
6,199
TOTAL LIABILITIES
7,670
5,842
3,609
1,485,015
1,502,136
Net balance sheet position on 31 December 2014
Net off-balance sheet position on 31 December 2014 - FX
Derivatives
(240)
5,116
36
181,407
186,319
20
(5,071)
321
4,699
(31)
6,725
8,029
(1,304)
19,683
6,103
13,580
3,518
3,111
407
1,764,575
1,745,797
18,778
1,794,501
1,763,040
31,461
1,361 (13,733)
(95)
12,412
(55)
31 Decem ber 2013
TOTAL ASSETS
TOTAL LIABILITIES
Net balance sheet position on 31 December 2013
Net off-balance sheet position on 31 December 2013 - FX
Derivatives
The table makes evident the relatively high level of the open long CHF position. The Bank manages
it using foreign currency derivatives (e.g. foreign currency swaps) and by FX trading. On 31
December 2014, the off-balance sheet position in CHF derivatives was short in the amount of EUR
5,071 thousand.
Taking into account the foreign currency derivative transactions and the purchases and sales,
currency positions are nearly closed, which is why the effects of changes in exchange rates are
negligible.
5.2.4 Interest rate risk
Interest rate risk represents the exposure of the Bank’s to unfavourable interest rate fluctuations,
thus impacting the income statement as well as the economic value of receivables, liabilities and
commitments and contingent liabilities or the economic value of the Bank's capital. For the most part,
exposure is derived from interest rate sensitive assets with different maturities and dynamics of
interest rate changes as compared to interest sensitive liabilities.
The interest rate risk the Bank was exposed to in 2014 was based on the unmatched maturities and
interest rate fixings between interest rate sensitive assets and liabilities. The Bank is reducing
exposure to interest rate risk with interest rate derivatives using hedge accounting to close larger
127
transactions, which had a significant impact on the size of the interest rate gap. The plan is to
continue closing interest rate gaps in 2015 with the use of balance sheet instruments and interest
rate derivatives, while maintaining low levels of exposure to interest rate risk.
Exposure to interest rate risk
3 - 12
m onths
1-5
years
Over 5
years
Noninterest
bearing
Total
31 Decem ber 2014
Up to 1
1-3
m onth m onths
Cash and balances w ith Central Banks and
demand deposits w ith commercial banks
240,358
-
-
-
-
13,691
254,049
-
-
242
4,331
-
63
4,636
Available-for-sale financial assets
Loans and advances
- loans and advances to banks
21,425
62,126
81,766
266,102
48,015
3,350
482,784
244,879
244,944
401,528
44,663
1,958
7,590
945,562
52,000
-
-
-
-
-
52,000
192,448
244,944
401,528
44,663
1,958
6,088
891,629
431
-
-
-
-
1,502
1,933
-
-
325
1,099
-
-
1,424
506,662
307,070
483,861
316,195
49,973
24,694
1,688,455
-
-
241
457
-
98
796
-
-
-
-
-
-
-
693,579
301,319
376,104
123,307
314
6,717
1,501,340
498
255
-
-
-
-
753
673,597
228,068
265,690
82,124
314
30
1,249,823
15,055
30,000
85,589
5,647
-
-
136,291
5
900
-
-
-
593
1,498
4,319
42,096
24,825
35,536
-
-
106,776
- other financial liabiltities
105
-
-
-
-
6,094
6,199
693,579
301,319
376,345
123,764
314
6,815
1,502,136
(186,917)
5,751
107,516
192,431
49,659
17,879
186,319
TOTAL ASSETS
593,766
346,851
610,331
152,131
62,925
28,497
1,794,501
TOTAL LIABILITIES
688,692
266,260
462,688
338,153
1,812
5,435
1,763,040
GAP on 31 December 2013
(94,926)
80,591
147,643 (186,022)
61,113
23,062
31,461
Derivative financial instruments designated
for hedging
TOTAL ASSETS
Financial liabilities designated at fair value
through P&L
- due to customers
- borrow ings from banks
TOTAL LIABILITIES
31 Decem ber 2013
The Bank sorts its positions into different time intervals depending on the time remaining until
repricing for floating interest rate transactions and in accordance with remaining maturities for fixed
interest rate transactions.
In the up-to 1 month interval, the Bank includes all demand deposits on the liabilities side, which is
why the interest rate gap is negative. By entering into IRS, the Bank reduces exposure to interest
rate risk.
The sensitivity analysis of reasonably possible shifts and the impact on the income statement and
the Bank’s capital is included in Note 5.2.2.
128
5.3 Liquidity risk
Liquidity risk is the risk that the Bank will not be able to settle all due liabilities or is forced to acquire
funding at significantly higher cost and the market liquidity risk, which arises when it is not possible
to sell a position in a financial instrument or replace it in a short period of time without significantly
influencing market prices. From a timing point of view, it is possible to distinguish between the
management of operational liquidity and the management of structural liquidity.
For banks, the duration gaps in assets and liabilities are common, as transforming short-term funding
into long-term loans is a core role they play, however the Bank is exposed to liquidity risk in doing
so. Due to this fact, the Bank has set up an efficient liquidity management system, which includes:
- analysis and planning of future cash flows;
- maintaining very liquid assets within liquidity reserves;
- monitoring target values and limits pertaining to operational and structural liquidity through the
system of internal and external reporting;
- ensuring an adequate diversification of liquidity sources; and
- preparing scenarios simulating extraordinary liquidity conditions.
On a quarterly basis, the Bank prepares three different scenarios of extraordinary liquidity conditions,
which are based on a dynamic analysis of liquidity gaps:
- a scenario adapted to its own liquidity position, which assumes the impossibility of renewing
liquidity sources;
- a scenario based on the market situation, which provides for a drop in the liquidity of assets; and
- scenarios based on a combination of the above two scenarios.
Based on the results of the scenarios dealing with extreme liquidity conditions, the Bank determines
the minimum amount of liquidity reserves and its structure. The Bank has set up procedures of early
liquidity shortage detection, whereby it also regularly monitors the trends related to individual
products and the market situation. Additionally, it pays special attention to warning signals pointing
to extreme liquidity conditions. At the onset of possible warning signs, the Bank implements a crisis
plan which defines the most efficient ways of managing the positions in extraordinary liquidity
conditions. In such conditions, the Bank's activity would be twofold, namely it would work to acquire
additional, alternative funding and communicate with the public in an appropriate way.
The Regulation on rating requirements for credit institutions and investments firms introduces the
following to the field of liquidity risk: meeting the Liquidity Coverage Ratio – LCR, the Net Stable
Funding Ration – NSFR, and additional liquidity monitoring metrics. In 2014 the Bank reported the
set of LCR and NSFR items on a monthly and quarterly basis, while the reporting on liquidity metrics
will be introduced during the course of 2015.
129
Exposure to liquidity risk
31 Decem ber 2014
Cash and balances w ith Central Banks
and demand deposits w ith commercial
banks
Loans and advances
Carrying
am ount
Total cash flow
(undiscounted)
Up to 1
month
1-3
months
3 - 12
months 1 - 5 y ears
Ov er 5
y ears
254,049
4,636
482,784
945,562
52,000
891,629
1,933
254,049
10,060
517,868
1,036,098
52,000
982,156
1,942
254,049
168
18,531
135,553
52,000
81,880
1,673
250
63,462
70,678
70,409
269
2,487
88,995
259,424
259,424
-
7,155
296,644
394,172
394,172
-
50,236
176,271
176,271
-
1,424
2,930
89
232
1,278
1,331
-
TOTAL ASSETS
1,688,455
1,821,005
408,390
134,622
352,184
699,302
226,507
796
1,501,340
1,826
1,530,440
71
668,901
251
259,094
761
371,880
743
195,048
35,517
753
1,249,823
753
1,261,613
498
659,986
255
205,619
306,253
87,610
2,145
136,291
1,498
106,776
6,199
147,528
1,542
112,806
6,198
1,166
6
1,138
6,107
4,447
327
48,368
78
39,180
362
26,085
-
69,649
574
37,215
-
33,086
273
13
1,502,136
1,532,266
668,972
259,345
372,641
195,791
35,517
288,739 (260,582) (124,723)
(20,457)
503,511
190,990
Derivative financial instruments
designated for hedging
- deposits from banks and central
banks
- due to customers
- borrow ings from banks and central
banks
- other financal liabilities
TOTAL LIABILITIES
186,319
31.12.2013
TOTAL ASSETS
1,794,501
1,962,029
463,514
142,536
447,081
632,079
276,819
TOTAL LIABILITIES
1,763,040
1,817,812
656,661
218,586
447,090
447,510
47,965
144,217 (193,147)
(76,050)
(9)
184,569
228,854
31,461
The above table discloses non-discounted cash flow in relation to residual maturity on 31 December
2014, which, in addition to the carrying values of financial instruments, includes the anticipated future
interest cash flows. The amounts disclosed are based on spot rates and on interest rates at the
reporting date.
The liquidity gap within the up-to-one month time frame is negative, however the fact must be taken
into account that it includes all demand deposits under financial liabilities, even though the main
portion of the deposits exhibits a high level of stability. Financial assets feature securities included
in liquidity reserves recorded at remaining maturity, not in the up-to-one month interval. Considering
the aforementioned, the Bank actually recorded a liquidity surplus in the up-to-one month interval.
Liquidity gaps changed as compared with 31 December 2013 due to a number of reasons, with the
most significant being the decreasing total assets, the transfer of assets to the BAMC and due to the
increase in the Bank’s capital. The cumulative liquidity gap is greater than in the previous year.
130
5.4 Capital and capital adequacy
The Bank's capital risk management activities include the following:
- developing medium- and long-term projections of capital, capital requirements, and the relevant
capital adequacy ratios, and updating such projections in case of major changes in operations,
in order to identify and monitor future capital requirements;
- running quarterly scenarios of extraordinary situations considering the specific position;
- notifying the Bank's managerial and supervisory bodies on relevant capital risk taken by the Bank
in the course of its operations;
- establishing and maintaining a system of capital risk management and establishing and
controlling the limits of capital adequacy ratio, core capital ratio, and ratio between the internal
capital assessment and capital requirements according to the 1st pillar of Basel II.
In connection with capital risk, the Bank has specified limit and target ratios presented in the following
table:
Limit value
13.9
11.1
-
Total capital ratio
Tier 1 capital ratio
Common equity ratio
in %
Target value
15.0
13.0
11.0
On 16 December 2014 the Bank received the Decision on emergency measures issued by the Bank
of Slovenia, with which the EUR 190 million capital increase was approved. At the same time all of
the Bank’s qualified liabilities, pertaining to its share capital and the liabilities from subordinated debt
liabilities in issue, were written down also. The aforesaid capital increase was performed on the basis
of cash and in-kind contributions, which the Republic of Slovenia provided for the Bank in the form
of bonds. Simultaneously bad assets were also transferred to the BAMC for which the Bank received
their bonds with the Republic of Slovenia guarantee.
In line with the commitment given to the European Commission by the Government of the Republic
of Slovenia, stating that after potentially acquiring the majority share in Banka Celje it is prepared to
conduct the process of merging Abanka and Banka Celje, the merger procedure has also already
begun.
With the increase in share capital the Bank’s long-term capital adequacy has been provided for,
while at the same time meeting the minimum capital requirements.
Since 1 January 2014 new banking legislation is in effect, based on uniform BASEL III banking
standards. Changes in capital relate to its composition and the calculation of capital and capital
requirements. The new legislation also brings stricter requirements pertaining to the inclusion of
equity instruments in the calculation of capital, deductions from capital, additional disclosures in
connection with capital and the implementation of capital buffers.
In ensuring an adequate level of capital the new legislation emphasizes Common Equity Tier 1,
comprising capital instruments, which meet the required criteria, stock surplus from capital
instruments, retained earnings decreased by anticipated expenditure and dividends, accumulated
other comprehensive income, other reserves and provisions for general banking risks. It is the
highest quality and serves to cover losses from a bank’s regular activities. Tier 2 capital comprises
equity instruments and subordinated debt and the share premium from equity instruments and
serves to cover losses in the event of bankruptcy or a bank’s liquidation.
131
31 December
2014
Capital and capital requirements
I. TOTAL CAPITAL for capital adequacy
1. TIER 1 CAPITAL (T1)
Common Equity Tier 1 capital (CET1)
Paid-up capital instruments
Share premium
Retained profit
Other reserves
Regulatory adjustments to Common Equity Tier 1 capital
- own CET1 instruments
- other intangible assets
- deferred tax assets that rely on future profitability and do not
arise from temporary differences
- excess of deduction from AT1 items over AT1 Capital
- other transitional adjustments to CET1
- other deductions from CET1
Additional Tier 1 Capital (AT1)
2. TIER 2 CAPITAL (T2)
II. TOTAL EXPOSURE TO RISK
- credit risk and counterparty risk
- market risk
- operational risk
- credit valuation adjustments
III. CAPITAL RATIOS
CET1 ratio
T1 ratio
Total capital ratio
31 December
2013
193.345
193.345
193.345
50.000
166.221
(21.101)
2.948
3.531
(8.254)
(3.487)
34.298
24.656
24.495
16.980
51.380
(126.257)
86.759
(4.367)
(91)
(4.108)
(4.550)
(19.670)
19.453
-
(168)
161
-
9.642
1.061.409
887.409
574
172.113
1.313
1.374.688
1.174.550
63.075
137.063
-
18,22%
18,22%
18,22%
1,78%
1,79%
2,49%
The capital and capital adequacy data as at 31 December 2013 has been restated to the new Basel
III standards solely for comparison purposes.
As at 31 December 2014 the Bank only holds Common Equity Tier 1 capital (CET1). In 2014 the
amount of total exposure to risk decreased due to a decrease in credit risk (transfer of assets to the
BAMC, loan repayments) and market risk (sale of financial instruments, transfer of financial
instruments from the trading to the banking book).
5.5 Fair value of financial assets and liabilities
Fair value hierarchy
The Bank defines a hierarchy of valuation techniques based on whether the input parameters for
those valuations are published or not. Published input parameters reflect market data obtained from
independent sources; non-published parameters reflect the Bank's market assumptions.
These abovementioned types of input parameters are the basis for the following fair value hierarchy:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. This level
includes equity securities and debt instruments listed on exchanges (e.g. the Ljubljana Stock
Exchange).
132
Level 2 – input parameters based on published market data. This level includes most OTC
derivatives contracts, certain debt instruments and financial liabilities measured at amortised cost.
The sources of input parameters like the EURIBOR yield curve or forward FX rates are Bloomberg
and Reuters.
Level 3 – input parameters other than published market data for assets or liabilities. This level
includes investments in equity securities with significant, non-published components and granted
loans. To assess the market values of investments the Bank used the income approach (discounting
future cash flows).
This hierarchy requires the use of published market data when available. When available the Bank
considers relevant and published market prices in its valuation.
a)
Assets and liabilities measured at fair value
31 Decem ber 2014
Level 1
Financial assets measured at fair value:
Derivatives
Debt instruments
Equity instruments
Level 3
Total
-
4,636
-
4,636
357,822
355,038
2,784
124,396
124,396
-
566
566
482,784
479,434
3,350
-
1,424
-
1,424
357,822
130,456
566
488,844
-
796
-
796
-
796
-
796
Total assets
Level 2
Financial liabilities measured at fair value:
Financial liabilities held for trading (Derivatives)
Financial liabilities at amortised cost:
Total liabilities
31 Decem ber 2013
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value:
Debt instruments
Equity instruments
Derivatives
Debt instruments
Equity instruments
5,027
1,987
3,040
-
5,934
5,934
-
10,961
1,987
3,040
5,934
323,958
316,994
6,964
414
414
-
3,523
513
3,010
327,895
317,921
9,974
-
3,437
-
3,437
328,985
9,785
3,523
342,293
-
1,125
-
1,125
-
-
1,000
1,000
-
1,125
1,000
2,125
Financial assets at amortised cost:
Total assets
Financial liabilities measured at fair value:
Financial liabilities held for trading (Derivatives)
Financial liabilities designated at fair value through profit or
loss
Financial liabilities at amortised cost:
Total liabilities
133
Reconciliation for Level 3 items:
Transfer between levels
(Loss)
Impairments
Valuation
Investment acquisition
Sale (transfer)
Impairments
8,132
1,027
(171)
(5,465)
3,523
(13)
4,829
(2,012)
(5,761)
566
The Bank acquired financial assets in the restructuring process in 2014 (the restructuring of debt into
equity). The sale of financial instruments pertains to the transfer of assets to the BAMC and sales to
investors.
The Bank performed a sensitivity analysis, where it simulated the effect a 3rd level decrease in the
carrying amount of equity instruments has on the income statement. Should the fair value of these
financial instruments decrease by 50%, this would have a negative effect on the income statement
in the amount of EUR 283 thousand (2013: EUR 1,762 thousand).
b) Financial instruments not measured at fair value
Carrying am ount
31 Decem ber 31 Decem ber
2014
2013
Fair value
31 Decem ber 31 Decem ber
2014
2013
Financial assets
Loans
945,561
52,000
891,629
1,932
1,260,213
17,867
1,240,057
2,289
1,019,691
52,000
965,655
2,036
1,325,716
17,867
1,305,560
2,289
TOTAL
945,561
1,260,213
1,019,691
1,325,716
- deposits from banks
- due to customers
- borrow ings from banks
- borrow ings from costumers
1,501,339
752
1,249,823
136,291
1,498
106,776
6,199
1,760,915
11,276
1,272,018
336,226
2,134
133,841
5,420
1,494,732
751
1,246,981
129,441
1,416
109,963
6,180
1,753,319
11,189
1,280,059
317,593
2,073
137,310
5,095
TOTAL
1,501,339
1,760,915
1,494,732
1,753,319
Financial liabilities
To determine the fair value of financial assets the Bank used the discounted future cash flow
methodology.
The discount factors for financial assets have been calculated on the basis of a reference
zero-coupon interest curve according to individual currencies without a mark-up, while the discount
factors for financial liabilities were based on the interest curve with a mark-up of 4 basis points, which
reflects issuer risk.
134
The statement of financial position shows loans and other receivables in the net amounts, meaning
these have been decreased for impairment.
6
SEGMENT REPORTING
The Group's operations comprise three segments:
- retail and private entrepreneurs incorporating transaction accounts, savings, deposits, insurance
brokerage products, credit and debit cards and loans;
- corporates, incorporating transaction accounts, deposits, loans and other credit facilities and
payment operations;
- financial markets and other, incorporating trading in financial instruments, securities issued and
interbank relations.
In its operations, the Bank primarily performs credit and deposit operations. Segments are disclosed
according to the methodology used in the preparation of an internal report and are discussed at the
ALCO, which also comprises Management Board members. The heads of individual areas of
operation receive detailed reports on the operation of their units during the year. During the year
there have been no significant changes in reportable segments.
Liabilities and assets are shown according to segment, based on the segment they were acquired
from or the segment in which they were invested.
Transactions between segments for the purpose of internal accounting are based on harmonised
transfer bases (internal transfers of income effects between segments, keys for the transfer of
service costs and administrative unit costs to profit centres). Net interest is included in the report in
accordance with transfer prices from the market, whereby transfer income is applied to some
transactions and transfer expenses to others as well as transfer interest margins, indicating the
contribution of an individual transaction to the net interest of the Bank.
The transfer pricing system for the allocation of net interest revenue was methodologically designed
and confirmed by the ALCO which receives, together with individual segment heads, reports on the
transfer prices of interest bearing assets and liabilities on a monthly basis.
135
The report on operations according to segments for 2014:
Retail
Corporates
Financial
markets
and others
Total income
- external income
- income from other segments
23,683
23,683
-
47,490
47,258
232
29,502
29,502
-
-
100,675
100,443
232
Income from financial transactions
Administrative expenses with
depreciation and amortisation
Provisions
Impairment charges
(Loss) before income tax
Deferred tax
13,005
7,397
(449)
25,080
6,661
1,565
(543)
927
886
17,327
(822)
-
39,012
14,944
18,892
(1,814)
(12,542)
2
(5,647)
1,762
-
(7,446)
(3,095)
(49,389)
(27,167)
-
(12,345)
(458)
(5,761)
(246)
-
4,550
(32,333)
(3,551)
(60,797)
(25,651)
4,550
2014
Not allocated
Total
Net (loss)
Segment assets
Not allocated
(21,101)
485,592
-
569,575
-
646,210
-
10,605
Total assets
Segment liabilities
Not allocated
Equity
1,701,377
10,605
1,711,982
749,166
-
513,023
-
239,303
-
8,909
201,581
Total liabilities and equity
1,501,492
8,909
201,581
1,711,982
Other segment items
Investments in property and equipment
117
234
146
-
497
Investments in intangible assets
Depreciation
Amortisation
99
146
94
199
461
298
123
222
144
-
421
829
536
136
The report on operations according to segments in 2013:
Retail
Corporates
Financial
markets
and others
Total income
- external income
- income from other segments
43,031
43,031
-
126,728
126,459
269
15,233
15,233
-
-
184,992
184,723
269
Income from financial transactions
Administrative expenses with
depreciation and amortisation
Provisions
Impairment charges
(Loss) before income tax
Deferred tax
15,670
10,463
8,762
(1,051)
14,573
5,572
73,438
(504)
7,048
(217)
(1,403)
(380)
-
37,291
15,818
80,797
(1,935)
(16,478)
(138)
(14,863)
2,365
-
(3,916)
(315)
(192,986)
(104,138)
-
(13,107)
396
(6,148)
(13,811)
-
(10,673)
(33,501)
(57)
(213,997)
(115,584)
(10,673)
2013
Not allocated
Total
Net (loss)
Segment assets
Not allocated
(126,257)
496,023
-
888,031
-
422,446
-
8,728
Total assets
Segment liabilities
Not allocated
Equity
1,806,500
8,728
1,815,228
739,813
-
554,046
-
468,644
-
11,967
40,758
Total liabilities and equity
1,762,503
11,967
40,758
1,815,228
Other segment items
Investments in property and equipment
290
893
103
-
1,286
Investments in intangible assets
Depreciation
Amortisation
164
418
234
507
1,291
719
58
148
83
-
729
1,857
1,036
137
Reconciliation of results by geographic area:
2014
Slovenia
Croatia
Germany
Austria
Belgium
Serbia
USA
Bosnia and Herzegovina
Switzerland
Netherlands
France
Sweden
Italy
Australia
United Kingdom
Luxembourg
Finland
Denmark
Norway
Greece
Poland
Canada
Kosovo
Slovakia
Romania
Other - EU countries
Other
Total
138
Revenues
Non current assets
93,265
2,251
2,084
520
432
407
387
346
295
165
106
69
49
46
45
36
36
35
29
17
14
12
7
6
6
5
5
1,040,862
20,672
23,181
10,820
12,403
3,605
68
3,790
1,924
5,135
10,420
867
4,979
8,101
3,101
322
1
96
1
1
100,675
1,150,349
2013
Revenues
Non current assets
Slovenia
Croatia
Cyprus
Germany
Belgium
Austria
Serbia
Bosnia and Herzegovina
France
Netherlands
Sweden
Switzerland
Russia
Denmark
United Kingdom
Finland
Luxembourg
Italy
Poland
Greece
Slovakia
USA
Norway
Japan
Kosovo
Canada
Jersey
Australia
Other - EU countries
Other
171,855
3,801
3,492
1,371
872
800
572
488
404
318
237
166
156
150
132
100
66
56
26
21
11
8
6
(8)
(21)
(32)
(34)
(37)
4
12
1,031,126
27,361
36,506
12,669
27,319
7,406
6,979
16,051
15,586
9,366
1,976
4,840
3,128
12,590
1,046
435
224
3,021
2
8
Total
184,992
1,217,639
The total income and non-current assets are classified according to the customer’s residence. The
Bank makes the structurally largest portion of its revenue in the domestic market. It made more than
10% of total revenue from operations with the Republic of Slovenia and the Ministry of Finance,
amounting to EUR 15,012 thousand and shown in the financial markets and other segment and in
the corporate segment. In the previous reporting period the Bank did not make 10% or more of total
revenue with any one single client.
139
DISCLOSURES
pursuant to the Regulation (EU) No. 575/2013 on prudential requirements for credit institutions and
investment firms and amending Regulation (EU) No. 648/2012 (the CRR Regulation)
Banka Celje d.d.
Disclosures 2014
III DISCLOSURES OF BANKA CELJE, D.D.
1 GENERAL INFORMATION
The basis for the disclosures is the Regulation (EU) No. 575/2013 of the European Parliament and
the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms
and amending Regulation (EU) 648/2012 (the CRR Regulation).
The Bank does not disclose data in connection with:
- capital buffers – Article 440 of the CRR Regulation; in effect from 1 January 2016;
- indicators of global systemic importance – Article 441 of the CRR Regulation; as defined by the
regulator;
- exposure to position securitisation positions – Article 449 of the CRR Regulation; the Bank does
not record any securitisation positions;
- leverage – Article 451 of the CRR Regulation; in effect from 1 January 2015;
- information on the IRB (Internal Rating Based Approach), as the Bank uses the standardised
approach for the calculation of risk adjusted exposures.
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (Article 435 of the CRR Regulation)
a) Strategies and processes for managing risk
In its operations the Bank assumes a number of different risk types. Exposure depends on the type
and size of a transaction and the willingness to assume risk. Banka Celje d.d. is a universal bank,
focusing on traditional transactions, while executing client driven treasury transactions to a lesser
extent. The majority of its operations is done in the Republic of Slovenia. It is also present in the
markets of other EU states through interbank transactions. Exposure to south-eastern European
markets, where it lends to corporates and retail customers in a limited extent, is decreasing.
To achieve strategic goals related to operations and risk management, the Bank pays special
attention to credit risk, profitability risk, strategic, liquidity and operational risk, reputation risk, interest
rate and capital risk and market risk.
The Bank classifies risk types into two categories:
- quantifiable risk: credit, market, liquidity, operational, capital and profitability risk; and
- non-quantifiable risk: strategic risk and reputation risk.
The strategy of assuming and managing risks shows the Bank's fundamental relationship to risk
related to its operations and includes:
- objectives and general principles or policies on assuming and managing risk;
- the approach to the management of individual risk types;
- the approach to the execution of the internal capital adequacy assessment process; and
- the plan of significant activities and changes to the Bank's business strategy.
The Bank has prepared policies for assuming and managing nine types of risk:
- credit risk;
- market risk;
- interest rate risk;
- liquidity risk;
- operational risk;
- capital risk;
- profitability risk;
- strategic risk; and
143
Banka Celje d.d.
Disclosures 2014
-
reputation risk.
The policy of assuming and managing individual risk types includes the following:
- risk assumption capacity;
- risk management process (organisational rules for process execution, identification procedures,
measuring or assessment, management and monitoring, system of internal controls);
- calculation of capital requirement and the process of internal capital adequacy assessment
process; and
- Management Board and senior management responsibility.
The strategy and policies are updated annually. The preparation and adoption of the strategy and
policies is performed as follows:
- the employees responsible for the management of individual risk types prepare the documents;
- the Risk Management Committee reviews the documents in detail, harmonises them and
endorses them;
- the Management Board of Banka Celje, d.d., endorses them;
- the Audit Committee of Banka Celje, d.d., reviews the documents, acquaints itself with them and
proposes to the Supervisory Board to endorse them;
- the Supervisory Board of Banka Celje, d.d., reviews and endorses the documents.
Due to the development and the characteristics of the financial system, assuming and managing risk
is a significant element of a bank's comprehensive strategy. Risk in the banking sector is subject to
the regulation below:
- ZBan-1;
- Regulation (EU) No. 575/2013 of the European Parliament and the Council of 26 June 2013 on
prudential requirements for credit institutions and investment firms and amending Regulation
(EU) 648/2012 (the CRR Regulation);
- Directive 2013/36/EU of the European Parliament and the Council of 26 June 2013 on access to
the activity of credit institutions and the prudential supervision of credit institutions and investment
firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC
(the CRD IV Directive);
- regulatory and implementing standards;
- IFRS; and
- minimum standards for trading in banks and other related services, summarizing the rules of the
so-called ''good business practices''.
b) Structure and organisation of risk management, its hierarchy and status
The Bank’s organisational structure ensures the separation of sales organisational units, being units
that enter into transactions and assume risk (front office) from the back office, which books and
manages these transactions, and from the risk monitoring and management function. The Bank is
organised in a way as to ensure independent operations of individual organisational units up to the
management level and to allow for a suitable upstream and downstream communication flow as well
as between respective organisational units. The Bank’s organisational chart forms part of its annual
report.
c) Scope and nature of reporting and risk measurement systems
By developing internal reporting and preparing and adopting decisions at a number of the Bank’s
bodies, the Bank’s Management Board and the entire senior management (senior management
comprises executive directors and the managers of the Bank’s independently functional
organisational units) are actively taking part in the risk management process. By managing risk well
the Bank aims to react more quickly and more effectively to the changes in the environment, get
closer to client needs and ensure its own long-term financial stability.
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Risk management as a function is directly monitored at:
- credit committees and at restructuring and bad asset monitoring credit committees (once a
week): credit risk;
- liquidity committees (three times a week, in conditions of emergency every day: liquidity risk;
- the Asset and Liabilities Committee (the ALCO, once a month): credit, market, interest rate,
liquidity, capital and profitability risk;
- the Management Board and the Management Committee: operational and strategic as well as
reputation risk;
- the Risk Committee: all of the risk types the Bank encounters.
The Risk Committee plays an important role in the assumption and management of risk. It serves as
the coordinating and consultative to the Bank’s Management Board holding a comprehensive
overview of all risks. The Risk Committee met four times in 2014. On 1 January 2014 the Bank
implemented the new capital accord – Basel III, which was transferred into the banking environment
in the form of the abovementioned CRD IV Directive and the CRR Regulation. Further
implementation activities with regard to the new legislation are done through the Basel III Project
Group, which has been tasked with meeting the legal requirements for reporting to the regulator and
the improvement of risk monitoring as the basis for the further decision-making process. The new
legislation mainly deal with the management of capital and liquidity risks, while bringing significant
changes to credit risk management as well.
Credit risk
Credit risk represents the most significant risk type in banking. It is the risk of loss resulting from a
debtor’s inability to meet, for any reason, its financial or contractual obligations in their entirety. This
type of risk includes subcategories, namely country risk, risk of concentration and residual risk after
the realisation of collateral and to credit risk from securitisation. Banka Celje, d.d., is exposed to all
risk types, except the risk from securitisation.
The main objective of credit risk management is to maintain the quality and diversification of the
credit portfolio as well as the creation of adequate impairments and provisions to cover for losses.
The Bank directs investments toward less risky customers, industries and countries, secures its
receivables with adequate types of collateral, renegotiates financial assets, where it positively
assesses the business model and cash flow, and actively works on the recovery of receivables past
due.
Lending and risk management includes the Risk Management Division, sales organisational units,
the Restructuring and Recovery Division, the Operations Monitoring Department and the Legal and
Compliance Division. The Risk Management Division works independently of the commercial
organisational units and the Restructuring and Recovery Division, which manages credit risk at
debtor and credit portfolio levels. Prior to granting a loan, credit risk is assessed, the debtor is
classified into a rating group and a limit is set on the total exposure of the Bank to the debtor or to a
group of related entities. In determining a limit the financial debt/EBITDA ratio (Earnings before
Interest, Taxes, Depreciation and Amortization) is emphasized. After the loan is granted exposure
to credit risk is monitored and the required impairment charges and provisions are calculated in
compliance with the IFRS. Loans are granted in the Bank’s sales organisational units. For the entire
time of the credit relationship debtor operations are monitored as well as the settlement of liabilities
and the quality and value of collateral. The Operations Monitoring Department, organised separately
from the other units, performs the monitoring, recording and administration activities in relation to
loans.
Credit risk is assessed for financial assets measured at amortised cost, for financial assets
designated at fair value and for assumed liabilities from commitments and contingent liabilities.
Credit risk is the result of business, commercial and housing loans, credit card operations,
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transaction account overdrafts, guarantees and granted undrawn loans, as well as investments in
debt securities and the exposure from transactions with derivatives.
Credit risk measurement is done at debtor level and at the level of the entire portfolio. Exposure to
credit risk depends on the exposure amount, probability of default and the amount of loss in the
event of default, which further depends on the collateral and on the recovery procedures.
Market risk
Market risk is the risk of loss due to changes in interest rates, currency rates and market prices of
financial instruments. The most significant risk type within market risk is positional risk in debt
financial instruments. Exposure to currency risk is low, as the Bank continuously closes open
positions.
In trading with financial instruments, the Bank is predominantly active in the financial market of the
EU (securities transactions with government securities and prime bank issues in order to ensure an
adequate liquidity reserve). The Bank defines investments and trading in financial instruments by
applying limits to a number of different factors (according to issuer, transaction type, region, etc.),
which the Bank constantly adjusts to take into account the conditions in the financial markets and its
own business strategy. Additionally, it has also adopted stop-loss limits.
The Bank enters into transactions with foreign currency and interest rate derivatives. Its basic policy
in connection with derivatives trading is entering into transactions for the purpose of hedging own
positions and client positions, whereby the latter transactions are hedged with counter positions.
Transactions are entered into with prime foreign banks, thus allowing for low exposure to market risk
from these instruments.
In relation to foreign currency risk, the Bank’s policy is that of a closed position across individual
foreign currencies. Managing the open foreign exchange positions is performed through prompt
transactions and with the use of foreign exchange derivatives in line with the limits set. These are
low and are meant for the management of open foreign exchange positions within the scope of
regular operations, not intended for speculative trading.
The Bank calculates market risk capital requirements using the standardised approach. Based on
the calculated risk profile, market risk is one of the three lowest risk estimations in all nine risk types
that are assessed, which is why the Bank did not calculate capital requirements in 2014, only
assessing required internal capital levels by conducting stress tests and measuring the effect of
extraordinary, but probable events, on the profits and the financial position of the Bank.
In 2014 the Bank did not buy financial instruments with the aim of making profits from the difference
between the sale and purchase price. Market risk identification is done at purchase or issue of
financial instruments, taking into account all risks related to the individual financial instrument. The
Financial Markets Division executes purchases in accordance with the adopted policies and in line
with the limits in place. When a new financial instrument is purchased it is reviewed in relation to
market risk and processes for comprehensive management and control of market risk are
implemented.
Positional risk is measured at the level of the entire portfolio and at individual transaction level.
Exposure to positional risk is monitored from the perspective of capital requirements for market risk,
which are calculated according to the standardised approach and with the use of sensitivity analysis,
measuring the effect of changes in different risk factors (e.g. interest rates, currency rates) on the
value of a financial instrument.
The Bank measures currency risk daily by monitoring net positions per individual foreign currencies.
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Interest rate risk
The risk of change in interest rates pertains to the exposure of the Bank’s financial balances to
fluctuations in interest rates, mainly due to the mismatch between the maturities of investments and
the Bank's funding sources or to the mismatch between the type of interest rate or period, for which
the interest rate is fixed. Exposure to interest rate risk may influence the amount of the Bank's net
interest income as well as the economic value of its capital.
The Bank analyses exposure to interest rate risk using the method of interest rate gaps, calculating
the effect of a change in interest rates on net interest income (income-based metrics). The Bank also
analyses interest rate risk using the duration model, thereby assessing the impact of the changes in
interest rate on the economic value of capital (economic value-based metrics).
In relation to interest rate risk, the Bank implements the policy of a closed position, with the objective
being the smallest possible interest rate gaps. In 2014 the Bank attained a low level of exposure to
interest rate risk.
To decrease interest rate risk, the Bank uses traditional balance sheet transactions, such as lending,
securities purchases, deposit taking, issue of securities etc. In addition to these traditional banking
transactions, it also enters into interest rate derivative transactions, not for speculative purposes, but
to hedge individual operations.
In accordance with the IFRS the Bank measures such interest rate derivatives at fair value, which
may have a significant impact on the income statement. This is why it introduced hedge accounting,
which decreases the instability of operational results caused by adjustments in the fair value of
derivatives intended for hedging.
The Risk Management Division is included in the monitoring and management of interest rate risk,
monitoring, measuring and managing the exposure. The Division also defines and adjusts limits and
performs sensitivity analyses and administers stress tests. The Financial Markets Division is tasked
with the operational management of interest rate risk, executing purchases and sales of derivatives
to decrease exposure to interest rate risk. The process also includes sales organisational units,
which enter into interest rate sensitive transactions and assume interest rate risk and the Operations
Monitoring Department, which records and performs administration activities related to the
transactions.
The process of identifying interest rate risk is carried out so as to determine the interest rate
sensitivity of all existing transactions.
Measuring interest rate risk in the banking book is done with the interest rate gap method, meaning
that all items are classified into different time intervals depending on their final maturity or the
repricing date. Using this method the effect of a shift in the interest rate curves on net interest income
is calculated. Exposure to interest rate risk is also measured using the method of maturity gaps,
estimating the change in economic value of the Bank’s capital at a parallel change in the interest
rate curve. The Bank also calculates the impact of a change in the interest rate curve by 200 basis
point on the economic value of capital, which complies with the guidelines of the second pillar of
Basel III. The Bank has established a limit system aimed at limiting exposure to interest rate risk in
the banking book.
The interest rate risk in the trading book is represented by interest rate sensitive financial instruments
classified as trading book. To measure exposure to interest rate risk, modified duration is calculated
and analyses of interest rate sensitivity on debt securities in the trading book are conducted.
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Liquidity risk
Liquidity risk is the risk type that includes the risk of providing liquidity funding and market liquidity
risk. The risk of providing liquidity sources occurs, when the Bank is unable to settle all of its due
obligations or is forced to obtain sources of liquidity at significantly higher costs. Market liquidity risk
pertains to the inability to sell or replace financial instruments in a short period of time without
significantly impacting the market price. From the aspect of time, liquidity risk management is
separated into operational liquidity management and structural liquidity management.
Liquidity and liquidity risk management is reflected in a defined limit system, the range and size of
investments in financial instruments and the methodology of monitoring liquidity flows. It pursues the
policies of funding source diversification and ensuring an optimal structure of these in the long-term.
The Bank has defined the structure and the minimum amount of liquidity reserves, based on
emergency scenarios in relation to liquidity conditions. Based on the preparation of emergency
scenarios in relation to liquidity conditions, it has also defined a liquidity risk contingency plan.
The Bank has established methodologies for the distribution of costs, benefits and risks involved in
providing liquidity (the Methodology of internal transfer prices), which encompasses all the important
asset and liability items, commitments and contingent liabilities and all costs related to liquidity
(liquidity surcharge). The methodology includes suitable incentives in relation to the contribution of
individual operational areas to liquidity risk.
Its methodologies for identifying, measuring, managing and monitoring liquidity, allow the Bank to
coordinate actual and potential liquidity sources with the actual and potential use of liquid assets in
the same period. To this aim, liquidity management ensures compliance with actual and projected
significant cash flows arising from assets, liabilities, commitments and contingent liabilities.
Liquidity management is conducted by the Financial Markets Division, which performs all the basic
liquidity management processes. The Risk Management Division measures liquidity risk, sets and
monitors limits or target values related to liquidity and the concentration of deposits taken. The
Operations Monitoring Department, which records transactions and provides administrative activities
as well as preparing liquidity ratios, and the Accounting Division (preparation of the methodologies
and reports on transfer prices) are also included. The senior management and the Bank’s
Management Board are also included in liquidity and liquidity risk management through their different
bodies.
The methodology of identifying liquidity risk is based on the processes of identifying and classifying
transactions related to the Bank’s liquidity positions in the internally implemented simulations.
Measuring or estimating liquidity risk is based on daily simulations of open liquidity positions in
relation to operational and structural liquidity for a selected time interval, which is usually longer than
three months. Liquidity risk is also measured by analysing liquidity gaps, using liquidity ratio reports
and other liquidity risk indicators. At least once every three months the Bank prepares various
scenarios of exceptional liquidity conditions, which are based on a dynamic analysis of liquidity gaps.
Operational risk
Operational risk is the risk of loss due to:
- inadequate or unsuccessful execution of internal processes,
- actions by individual persons,
- functioning of systems and
- external factors.
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By defining and upgrading operational processes and through an adequate control environment, the
Bank aims to attain the lowest possible estimate of its potential exposure profile in relation to
operational risk and to decrease loss from loss events to the lowest possible level.
The identification of operational risk takes into account internal and external factors and means the
identification, definition and categorisation of loss events, their causes and consequences or effects.
New products, activities, processes and systems are subjected to suitable assessment procedures
related to operational risk prior to their implementation. The Bank carried out identification activities
related to operational risk by cataloguing operational processes and thus provided a foundation for
a high quality of own exposure monitoring.
The measurement comprises los events that have a certain gross effect on the income statement.
The Bank has defined the criteria for the valuation of small and large losses as well as the value and
quality aspects of defining significant operational risk.
An adequate amount of capital represents a safety reserve for different types of risk the Bank faces
in its operations. To cover unexpected loss, the capital of any bank must always amount to at least
the sum of the capital requirements for the credit, market and operational risk, while capital
adequacy, representing the ratio between capital and the sum of risk-adjusted items, must always
amount to at least 8%. The management of capital and capital adequacy within the Bank is based
on adopted policies of assuming and managing capital risk and is in line with annual business plans,
also expressed in the need for adequate regulatory capital.
With the intention of assessing the capacity for assuming risk, the Bank prepares projections of the
dynamics of capital and capital requirements as well as projections of the internal capital assessment
and capital requirements for a period of five years in accordance with the annual business policies
and its financial plan and five-year strategy. These show the dynamics of capital adequacy ratios in
relation to the planned volume of the Bank’s operations.
The new capital accord (CRR Regulation and Directive CRD IV) introduced a new definition of capital
based on Tier 1 and Tier 2 capital. Tier 1 comprises Common Equity Tier 1 and Additional Tier 1
capital, with emphasis on Common Equity Tier 1 or share capital, intended to cover for losses from
the Bank’s regular operations. Capital ratios are tied to the structure of capital. The innovations of
the new legislation, impacting the calculation of the Bank’s capital, also pertain to the stricter criteria
on the inclusion of capital instruments in the calculation of capital, capital deductions, additional
disclosures on capital and the implementation of capital buffers. To mitigate the effects of stricter
capital standards, which will influence the calculation of capital, a transitional period for a gradual
implementation of the new rules has been introduced.
The process of capital risk management includes the Risk Management Division, which regularly
calculates regulatory capital and capital requirements, defines limits and target values, which it
forwards to ALCO meetings for approval, and monitors compliance with them, and the Financial
Markets Division, which manages capital increases and the issue of financial instruments, eligible
for inclusion into regulatory capital. The Accounting Division is part of capital risk management
through the planning process.
The identification of capital risk is based on identifying capital components, capital requirements
and the ratios of capital adequacy over a longer period of time.
By regularly measuring it, the Bank ensures compliance with legislative requirements, internally
defined limits and target values as well as compliance with other assumed risks.
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Profitability risk
Profitability risk pertains to an inadequate structure or diversification of income or the inability to
ensure an adequate and constant level of profitability.
The main objective of profitability risk is to ensure the quality and stability of net financial and
operative income.
This risk type is managed by the Accounting Division, with the cooperation of other organisational
units, which are exposed to profitability risk, in the risk management processes. Important decisions
are adopted at the ALCO meetings.
Identification of profitability risk is based on determining the structure of the statement of financial
position, the income statement items and their quality, the interest margin, cost efficiency, the
profitability of new business and the return on assets and equity over a longer period of time with the
analysis of changes.
By regularly measuring the elements of profitability risk, the Bank ensures these are suitable for the
attainment of an adequate financial result.
Strategic risk
Strategic risk is the risk that arises due to inadequate business decisions, the improper
implementation of decisions and a lack of responsiveness to the changes in the operating
environment.
The main objective of strategic risk management is to ensure coherence between strategic policies
and objectives and the Bank’s business strategy for the implementation of policies, between assets
engaged and the quality of performance.
Strategic risk is managed through the Bank’s management and supervisory bodies, while all strategic
units that produce strategic risk cooperate in the process of its management. All major decisions
related to strategic risk are taken at Supervisory Board meetings, at Management Board meetings,
at ALCO or at the Bank’s Management Committee meetings.
Reputation risk
Reputation risk represents the risk of loss due to a negative image, which the Bank has in the eyes
of its clients, business partners, owners, investors and supervisors. This image impacts the
establishment of new business relationships and services as well as the maintenance of existing
ones. This risk type may lead to legal disputes, financial loss, liquidity problems and may cause a
decline in the number of customers.
To ensure the reputation of the Bank, as perceived by the interested public, is adequate for the
attainment of operational goals, the management of its reputation is a strategic task for the Bank as
a whole, not only its respective parts. The utmost attention is paid to operations with customers and
to the contacts with supervisory institutions, potential investors and other public groups.
The indicators for the identification of reputation risk are monitored according to respective
interested groups (owners, personnel, supervisory institutions, customers, business partners, the
general public, etc.). These indicators may differ, e.g. an assessment by the Bank of Slovenia, the
auditor’s report, operational results, monitoring media exposure, internal culture.
Reputation risk is a non-measurable risk type, which is why there indicators are mainly assessed
for their quality, adjusted for each individual criteria, empirically, in accordance with time, in different
intervals, at the onset. The measurable indicator pertains to the Bank’s operational results, which
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are reviewed on a monthly, quarterly, semi-annual and annual basis, internally and by an auditor,
the Bank of Slovenia, the Supervisory Board and by other supervisory institutions and interest
parties.
d) The policies for hedging and mitigating risk and the strategies and process for monitoring
the continuing efficiency of hedges and mitigants
Credit risk
The Bank has developed a number of processes and methodologies for the management of credit
risk. Prior to granting a loan it measures the risk associated with a debtor and classifies the debtor
in a rating class on the basis of quantitative and qualitative elements. It monitors the risk the debtor
represents for the entire duration of the credit relationship and adjusts debtor rating accordingly. The
Bank aims to secure its claims as best possible, which is why it regularly monitors the risk of
collateral. To limit large concentrations it has defined limits for the indebtedness of individual debtors
and groups of related parties as well as structural limits for the credit portfolio (according to sector,
industry, region). The loan monitoring process it implements, allows for early detection of increased
credit risk and for early start of activities for the settlement of receivables overdue.
The Bank has set up a loan monitoring system, which allows for a timely detection of increased credit
risk. Based on the assessment of qualitative and quantitative criteria, pointing to increased credit
risk (ICR), the Bank rates debtors in five groups (ICR1 – watch list, ICR 2 – problem exposure, ICR3
– debtors in recovery procedure, bankruptcy, erasure, ICR4 – renegotiated exposure and ICR5 –
comprehensive restructuring). Determining the group of increased credit risk is the basis for defining
the Bank’s further activities aimed at reducing exposure to credit risk. In the event of default, the
Bank then ascertains direct and indirect responsibility.
Continuously or at least once every three months, the Bank assesses whether there is objective
evidence on impairment of financial assets or assumed off-balance sheet liabilities. Should such
evidence exist, it must calculate the amount of impairment loss or create provisions for commitments
and contingent liabilities in accordance with the internal methodologies of credit risk loss assessment
under IFRS, which it updates and adapts to the economic situation at least once a year.
The monitoring of the Bank’s exposure to credit risk, compliance with limits and the adoption of
different measures aimed at mitigating credit risk are all performed on the basis of numerous
analyses and reports, which are forwarded to senior management and to different bodies of the Bank
(Credit Committee, ALCO, Management Committee, etc.). Exposure to individual debtors or groups
of related parties and overdue receivables are monitored daily, while reports on the credit portfolio,
including the reports on collateral received, are produced on a monthly basis.
Market risk
The management of this risk type is based on a system of limits, which reflects the Bank’s
willingness to accept potential losses. The Risk Management Division prepares limit proposals,
which are endorsed by the ALCO. The Financial Markets Division executes purchases of financial
instruments on the basis of the defined limits, authorisations and other adopted rules.
The Bank manages exposure to positional risk by also utilising a system of limits. These are basically
separated into trading and banking book limits. In their content trading book limits comply with the
Minimum standards for trading and related services in banks.
Managing risk from derivatives is based on the closed position policy. This implies that the market
risk of derivatives is secured through a counter transaction.
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Currency risk management is based on foreign currency position limits, which define the maximum
open amount (net position) per individual currency. Currency limits are low, as the Bank does not
expose itself to currency risk for speculative purposes.
Market risks are monitored through reports, which show the amount of exposure to market risks,
compliance with limits, the attained gains and losses from trading in financial instruments and the
like. Reporting to the ALCO is done once a month, while compliance with limits is monitored by the
Risk Management Division on a daily basis and separately from the front office and violations are
reported to the Management Board and the Bank’s senior management.
Interest rate risk
The management of risk as a process is headed by the ALCO, which adopts decisions and policies
on the amount of interest rate risk that the Bank is willing to accept. It provides guidelines to the
Financial Markets Division and to other sales divisions on the types of transactions to be entered
into, which will keep interest rate risk within the agreed amounts. These decisions are based on
interest rate risk analyses, which include reports on exposure to interest rate risk from the income
perspective (changes in net interest income) and the economic perspective (changes in the net
present value), being produced by the Risk Management Division.
The Risk Management Division conducts the monitoring of interest rate risk through reports
showing exposure to interest rate risk and compliance with limits, which are reviewed once a month
at ALCO meetings. The Financial Markets Division is also included in the monitoring process through
the purchases and sales of derivatives and as the coordinator in agreements on large interest rate
sensitive transactions. Irrespective of the above, the Bank also monitors interest rate risk from the
aspect of profitability.
Liquidity risk
The management liquidity risk encompasses closing open liquidity positions using defined
instruments in compliance with the set limits or ratios according to individual positions. The Bank
closes open positions using treasury or short-term commercial transactions. The selection of
instruments depends on their prices and the limits in place. Limits or target values are set in
accordance with the following:
- size of the bank,
- ownership structure,
- the bank’s regional character.
The Bank has defined limits or target values, which it uses to limit exposure to liquidity risk by
ensuring an adequate level of liquidity reserves and a suitable diversification of funding sources.
Limits or targets in relation to liquidity risk management are set be the Risk Management Division as
part of the scenarios of extreme liquidity risk conditions and are adopted by the ALCO. In addition to
own limits, the limits of other customers are also important for entering into transactions with the
Bank.
The monitoring of liquidity risk includes the internal control system, the system of internal and
external reports, the verification of the limit system and the reporting system in the event of violations.
Through a detailed definition of the reporting system, where a number of regular and special reports
are produced, and through authorisations given to decision-making levels, the Bank provides for the
monitoring and control of the implementation of measures for liquidity risk management.
Operational risk
The operational risk management system defines measures and rules or the plan for the
implementation of measures for assuming, mitigating, diversification, transfer or avoidance of
operational risk. Activities include assessing the probability of loss events in relation to identified
causes and the estimated effects. The Bank also monitors and assesses potential loss events, which
it sees as an opportunity for improvement, as these include all operational deviations, which may
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potentially have an effect on or cause a loss event. The list of operational processes is a good basis
for the management. Based on these the Bank produced: a matrix of connections between
organisational units in the operational processes within the Bank, the potential profile of the Bank’s
exposure to operational risk for an individual operational process and the Bank as a whole and the
catalogue of all operational risks, which the Bank has identified.
The Risk Management Division conducts the monitoring of operational risk. It prepares analyses
and reports on the basis of reports from all organisational units and informs the Management Board
or the Management Committee and the senior management on all major realized losses. Continuous
monitoring of the implementation of the measures adopted for the management of this risk type is
provided for.
The Bank has prepared rules of operation in conditions of severe business disruption. IT provides
for support to operational processes from a backup location. The Bank has prepared a recovery plan
of operation after a catastrophe, continuous operation plans have also been prepared.
The Bank has prepared manual procedures for activities, which can be carried out without the IT
system. It regularly prepares informational risk analyses for these processes.
For the purposes of capital risk management the Bank has set the limit for the capital adequacy
ratio at above 13.9%, the limit for the capital adequacy ratio, calculated from Tier 1, at above 11.1%,
the ratio between the internal capital assessment and capital requirements from pillar 1 above
173.6% and provided measures for the mitigation of capital risk.
The Bank mitigates capital risk by implementing measures to increase capital and to decrease
exposure to risk, subsequently lowering capital requirements. Prior to implementing measures to
increase capital, the Bank endeavours to decrease capital risk using risk exposure mitigation
measures, mainly in relation to credit and market risk exposures.
Monthly reports are prepared for capital risk monitoring purposes, which are reviewed at ALCO and
include, in addition to the calculation itself, the analyses of changes in comparison to the previous
period. Besides the changes in the capital accord and legislation, the report also includes projections
of the effect of changes to the Bank’s exposure to capital risk. The Bank prepares and, at major
changes in the operations, updates mid-term and long-term capital projections, capital requirements
projections and the related capital adequacy ratios, with an aim of identifying and monitoring future
capital requirements. On a quarterly basis it executes extreme situation scenarios taking into account
its own specific position.
Once a quarter the Bank reports its calculation of capital and capital requirements to the Bank of
Slovenia in accordance with the statutory reporting requirements.
To monitor the Bank’s capital adequacy in view of the assumed risk from operations, the ALCO also
reviews the calculation of the internal capital assessment and the internal assessment of capital
requirements on a quarterly basis.
Profitability risk
The core objective of profitability risk management is to ensure the quality and stability of net financial
and operative income.
The Accounting Division manages profitability risk, with other organisational units, which are
exposed to profitability risk, participating in the risk management process. All important decisions
are adopted at the ALCO meetings.
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Identification of profitability risk is based on determining the structure of the statement of financial
position, the income statement items and their quality, the interest margin, cost efficiency, the
profitability of new business and the return on assets and equity over a longer period of time with the
analysis of changes.
In 2014 the Bank was recapitalised with state aid after approval by the European Commission,
additionally the major part of bad assets was transferred to the BAMC, on the basis of which it is
expected that the future volume of additional impairments and provisions should be significantly
lower than in the past few years. This will have a major impact on the financial result of the Bank in
2015.
By regularly measuring the elements of profitability risk, the Bank ensures these are suitable for the
attainment of an adequate financial result.
To manage profitability risk the Bank follows the rule, on the basis of which it begins implementing
risk mitigation measures, if individual income statement items are not reaching planned results and
the Bank does not expect an improvement. If a single income statement item lags the planned
results, the Bank will aim to replace the income shortfall by changing the structure of business
activities first, however only in the risk assumption capacity allowed by the commitments to the EC.
Should this not suffice, it will begin activities to improve the quality of investments and strengthen
cost rationalization.
Due to the process of obtaining state aid the Bank’s plan for 2014 was amended several times and
on 16 June 2014 the Bank’s Supervisory Board discussed the Business policies and the financial
plan of the Bank for 2014 including the projection of operations until 2018, prepared on the basis of
the restructuring plan, forwarded to the European Commission to acquire state aid.
The monitoring of profitability risk is performed with the preparation of monthly reports in the form
of quantitative and qualitative analysis, which are then reviewed at ALCO meetings. The reporting
system provides for the dissemination of information on profitability risk to all of the Bank’s
organisational units.
Strategic risk
The main objective of strategic risk management is to ensure coherence between strategic policies
and objectives and the Bank’s business strategy for the implementation of policies, between assets
engaged and the quality of performance.
The management of strategic risk is done by the Bank’s management and supervisory bodies,
whereby all of the Bank’s organisational units, exposed to strategic risk, are involved in the process.
The major decision in relation to strategic risk are adopted at the Bank’s Supervisory Board
meetings, the Bank’s Management Board meetings, at ALCO meetings or at Management
Committee meetings.
The identification of strategic risk is based primarily on determining the Bank’s own vision, the
clarity and conservative nature of the strategy, the correctness of strategic objectives and the support
of the strategy with the necessary capital, management personnel and human and technological
resources.
Strategic risk decreased in 2014, as the Bank was recapitalized, with the state becoming its sole
owner. This provides for long-term stability of the Bank’s capital adequacy. In spite of the
aforementioned, strategic risk remains considerable, as the Bank will have to strictly adhere to the
commitments it gave to the European Commission and also merge with Abanka, which must be
concluded by 1 January 2016.
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Strategic risk is a non-measurable risk type; by regularly assessing its elements in the sense of
monitoring strategic policies and objectives, the Bank provides for their adequacy.
In relation to the management of strategic risk, the Bank has prepared measures to mitigate it, which
it will implement, should strategic objectives not be realized to the suitable extent and the Bank did
not expect an improvement in the future.
Based on the analysis of deviations, the Bank will try to implement appropriate operational measures
to promote activites necessary for the realization of strategic objectives. Should, however, the Bank
find that the deviations of actual operations from strategic objectives are significant, it will prepare
an analysis of these deviations with arguments.
For 2015 the Bank has prepared a business policy and a financial plan, which comply with the
restructuring program, sent to the EC. The strategy for the period until 2018 was prepared for the
merged bank. Both documents are reviewed and approved by the Bank’s supervisory bodies.
The monitoring of the implementation of its business policy and the realization of the financial plan
is conducted with the preparation of interim reports, which include qualitative analyses of operations.
Reputation risk
The Bank manages reputation risk by ensuring safe and stable high quality operations, by having
the Management Board and Supervisory Board conduct themselves in accordance with professional
prudence and the highest ethical standards of management, by providing transparent operations,
monitoring its media image, systematically communicating with various public groups, managing its
human resources with the utmost care and by being socially responsible.
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e) Declarations of the Bank’s Management Board and Supervisory Board
Declaration of the Management Board and the Supervisory Board on the adequacy of risk
management arrangements of Banka Celje, d.d.
The Bank’s Management Board confirms, reviews and provides up to date strategies and policies of
assuming and managing risk in relation to the changes in its internal and external environment. It
ensures that the strategies and policies are comprehensive in terms of proportional consideration of
risks, which the Bank assumes in its operations. The Bank’s Management Board monitors and
regularly assesses the efficiency of the risk management system and adapts it to changes, ensures
a transparent and documented process of making important decisions, a clear division of
responsibilities and tasks to comply with internal decisions and procedures and it promotes an
organisational culture, which gives the highest priority to honest and irreproachable execution of
business activities.
The Risk Committee plays a significant role in risk management at the Bank, as it functions as a
coordinating and advisory body the Bank’s Management Board, with a comprehensive overview of
all risk types.
The Supervisory Board regularly monitors and assesses the suitability of the Bank’s organisational
structure. With the help of the Audit Committee and the Remuneration Commission it monitors the
adequacy and implementation of the strategies and policies of assuming and managing risks and
the adequacy of the Bank’s reporting. With its supervision it contributes to the establishment and
implementation of an adequate and stable organisation of risk management and the operation of the
internal control system at the Bank. The Supervisory Board also regularly monitors and assesses
the adequacy of the Bank’s risk profile.
The Bank’s Management Board and the Supervisory Board believe that the Bank has set up an
appropriate risk management system, which, according to its risk profile, allows it to perform all
activities for the implementation of the adopted business strategy.
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Disclosures 2014
The risk statement of the Management Board and the Supervisory Board of Banka Celje, d.d.
The Bank conducts its operations in accordance with the business strategy, which also includes its
core objectives in relation to risk management. It defines its own risk profile that is adapted to the
risk management quality and the Bank’s risk appetite, while complying with the commitments to the
European Commission. The preferred risk profile of the Bank, which is submitted to its Supervisory
Board for endorsement on an annual basis, is between low and acceptable risk as defined in the
Strategy of assuming and managing risk. The determination of the risk appetite is an important part
of the decision-making process. Clearly set limits in relation to assuming risk are monitored by the
Bank and the Supervisory Board in accordance with the limit systems in place and the values of
individual risk types. The objective of limiting risk appetite is to ensure that the Bank operates with
an appropriate return even in the event of an emergency and to ensure long-term financial stability.
The risk management function in the Bank is set up in a way as to enable timely monitoring of risk
and reporting for simultaneous action and compliance with the defined limits and targets. The policies
of assuming and managing the Bank’s risks define the main objectives of risk management, which
ensure that the exposure to risk complies with the Bank’s preferred risk profile. Details in connection
with the Bank’s objectives are set out in the policies of assuming and managing risk, with the
following being the Bank’s core policies:
- long-term stability of capital adequacy,
- the core lending market is Slovenia, reducing exposures abroad, particularly to SE Europe,
- lending to creditworthy borrowers, targeting investments in SMEs and private individuals,
- securing loans with suitable property and in the correct proportion,
- ensuring diversification of investments according to industry, core exposure to a single branch
up to 10% of the credit portfolio,
- active collection of overdue loans and reducing non-performing loans (NPL),
- in restructuring programs the Bank follows the Slovenian principles of corporate debt
restructuring and assesses the debt in terms of the business model and in terms of ensuring
sufficient cash flow for the repayment of debt,
- decreasing the amount of investments in debt and equity financial instruments and reinvestment
in debt financial instruments for liquidity management, new equity financial instrument purchases
are not planned,
- entering into currency and interest rate transactions to close own and customer positions,
- ensuring adequate liquidity reserves and liquidity ratios,
- ensuring diversification of funding with an optimal structure of sources, while focusing on stable
liquidity sources.
157
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Disclosures 2014
Governance arrangements
a) Number of directorships held by members of the management body
The Bank’s Management Board comprises two members, with the Supervisory Board comprising 6
members. The Bank’s Supervisory Board is comprised of external members.
b) The recruitment policy for the selection of members of the management body and their
actual knowledge, skills and expertise
The Bank’s Management Board adopted the Policy for the assessment of suitability of key function
holders at Banka Celje, d.d. in October 2014. The policy has been prepared in accordance with EBA
guidelines, which refer to the assessment of suitability of management or supervisory body members
as well as key function holders and define procedures, criteria and requirements for the assessment
of the adequacy of management personnel in relation to corporate governance.
The suitability assessment of both Management Board members has been completed, however it
has not yet been reviewed by the Supervisory Board. As the ownership structure of the Bank
changed at the end of 2014 and due to the fact that the term of Supervisory Board members ends
in 2015, the Bank will take the provisions of the policy into consideration in the appointment of new
Supervisory Board members.
The policy also determines the criteria, on the basis of which the suitability of Management
Committee members is assessed. These include experience and reputation criteria. Management
and specific criteria are also considered.
The criteria on expertise, on the basis of which the Bank assesses the members, pertain to the
education level and profile, practical experience, acquired in past jobs, dating back 10 years, data
on education, training and recommendations.
The criteria also include criminal and other records relating to proceedings against members,
meeting professional and ethical standards, involvement in past business relationships and the
member’s financial situation.
The Bank also includes past jobs and functions in the criteria, personal, business and other relations
with the members of the Supervisory Board or the Management Board and collective professional
qualifications.
Special criteria pertain to social and personal skills, action competence and cultural skills. The Bank
has a zero tolerance toward the political activity of members.
In the re-appointment of the Management Board criteria is taken into account that relate to past work
and the conduct of a member in connection with operational results, organisational culture, employee
turnover, mobbing, the number of labour disputes and the like.
c) Risk Committee
The Risk Committee also operates within the Bank. It is the coordinating and advisory body to the
Management Board holding a comprehensive overview of all risks. It met four times in 2014.
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Disclosures 2014
d) The description of the information flow on risk to the management body
The strategy and policies of assuming and managing risk are prepared by the individual risk type
managers. The Risk Committee reviews them in detail, harmonises them and endorses them. The
Bank’s Management Board approves them, the Audit Committee reviews them and acquaints itself
with them, while the Supervisory Board considers the strategy and the policies and approves them.
Risk management is directly monitored at credit committees and at credit committees for
restructuring and the monitoring of bad debt, at liquidity committees, at the ALCO, at the
Management Board or the Management Committee and at the Risk Committee.
The Management Board of the Bank and the ALCO are appraised on the risks on a monthly basis,
while the Audit Committee and the Supervisory Board deal with materials in relation to risk at their
respective meetings.
3 SCOPE OF APPLICATION (Article 436 of the CRR Regulation)
Name of the bank, to which disclosures pursuant to the Regulation apply
Disclosures pursuant to the Regulation apply to Banka Celje, d.d.
Banka Celje, d.d., is a Slovenian joint stock company, performing universal banking services.
The Bank does not trade in shares in an organised capital market.
The Bank’s business address is: Banka Celje, d.d., Vodnikova 2, Celje.
An outline of the differences in the basis of consolidation for accounting and for the purpose
of supervision on consolidated basis
The Bank owns 100% of its subsidiary Posest, d.o.o., Celje. The Subsidiary in not included in
supervision on consolidated basis pursuant to the approval by the Bank of Slovenia, as it does not
represent any significant effect in terms of the objective of the Bank’s supervision.
The subsidiary wholly owned by the Bank is consolidated in the Bank’s consolidated financial
statements for financial reporting using the full consolidation method. It is fully consolidated from the
date of the acquisition of control and will be excluded from consolidation on the date that control
ceases.
Any current or foreseen material practical or legal impediment to the prompt transfer of own
funds or the repayment of liabilities among the parent undertaking and its subsidiaries
The Banka Celje Group sees no current or foreseen practical or legal impediment for the prompt
transfer of own funds or the repayment of liabilities among the parent undertaking and its subsidiary.
The aggregate amount by which the actual own funds are less than required in all subsidiaries
not included in the consolidation, and the name or names of such subsidiaries
The Bank’s subsidiary, not included in the consolidation in accordance with Article 19 of the CRR
Regulation, meets the minimum capital requirement.
159
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Disclosures 2014
4 OWN FUNDS - CAPITAL (Article 437 of the CRR Regulation)
a) Full reconciliation of regulatory capital items and the balance sheet in the audited
financial statements of the Bank
In the Bank the reconciliation of regulatory capital with the audited financial statement is based on
the statement of financial position, which includes all the items comprising regulatory capital,
including share capital and deductions. The reconciliation of regulatory capital items with the audited
financial statements is performed in three steps. In the first step the Bank discloses the differences
between accounting and prudential consolidation. The second step sees the Bank disclose
accounting data from the statement of financial positions and reference items of regulatory capital.
In the third step it matches regulatory capital items with statement of financial position items.
Step 1
The Bank is not included in supervision on a consolidated basis.
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Disclosures 2014
Step 2
Statement of financial position on 31 December 2014 and matching with the items of regulatory
capital.
STATEMENT OF FINANCIAL POSITION
Cash and balances with the Central banks and demand deposits
with commercial banks
31 December 2014
Reference to
regulatory capital
254,049
4,636
from these: investments in financial sector entities, where the
Bank holds no significant interestpomembne naložbe
482,784
Loans and advances
945,562
1,424
Property and equipment
174
a
13,006
Intangible assets
Long-term investments in the capital of subisidiaries, associated
companies or joint ventures
3,487
b
2,257
c
Income tax assets
4,271
from these: long-term deferred tax assets from tax loss
from these: long-term deferred tax assets from available for
sale financial assets
Other assets
4,550
d
-279
e
505
TOTAL ASSETS
1,711,982
796
Financial liabilites at amortised cost
1,501,340
Provisions
8,092
Income tax liabilties
from these: deferred tax liabilties from available for sale
assets
Other liabilities
f
173
TOTAL LIABILITIES
1,510,401
Share capital
Share premium
50,000
g
166,221
h
from these: revaluation reserve related to available for sale
financial assets
3,513
3,531
i
Profit reserves
2,948
j
Retained net loss (including net loss of the current financial year)
-21,101
k
TOTAL EQUITY
201,581
TOTAL LIABILITIES AND EQUITY
1,711,982
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Banka Celje d.d.
Disclosures 2014
Step 3
Disclosure of regulatory capital from the previous period
Amount
Reference to
subject to
Transitional own funds disclosure template
Amount
balance
transitional
sheet
treatment
Common Equity Tier 1 (CET1) capital: instruments and reserves
1 Capital instruments and the related share premium accounts
219.169
g, h, j
3 Accumulated other comprehensive income
3.531
-3.857
i
6 CET1 before regulatory adjustments
222.700
Common Equity Tier 1 (CET1) capital: regulatory adjustments
8 (-) Intangible assets (net of related tax liability)
-697
-2.790
b
(-) Deferred tax assets that rely on future profitability excluding
those arising from temporary differences (net of related tax
10 liability)
-910
-3.640
d
(-) Deferred tax assets arising from temporary differences
21 (amount above 10% threshold, net of related tax liability)
e-f
25a (-) Losses for the current financial year
-4.220
-16.880
k
26a Regulatory adjustments relating to unrealised gains and losses
-3.857
of which: 100 % filter for unrealised loss on exposures to central
governments
903
of which: 80 % filter for unrealised loss on other exposures
1.304
of which: 100 % filter for unrealised gain on exposures to central
governments
-4.576
of which: 100 % filter for unrealised gain on other exposures
-1.489
(-) Qualifying AT1 deductions that exceed the AT1 capital of the
27 institution
-19.670
28 Total regulatory adjustments to CET1 capital
-29.354
29 CET1 capital
193.345
Additional Tier 1 (AT1) capital: regulatory adjustments
Residual amounts deducted from AT1 capital with regard to
41a deduction from CET1 capital during the transitional period
-19.670
od which: residual amount of losses of the current year
-16.880
of which: residual amount of intangible assets
-2.790
43 Total regulatory adjustment to AT1 capital
-19.670
44 AT1 capital
45 Tier 1 capital (T1 = CET1 + AT1)
193.345
59 Total capital (TC = T1 + T2)
193.345
Risk weighted assets in respect of amounts subject to
59a transitional treatments
3.640
of which: deferred tax assets that rely on future profitability (net of
related tax liability) not deducted from CET1capital
3.640
60 Total risk weighted assets
1.061.409
Capital ratios
61 CET1 (as a percentage of risk exposure amount)
18,22
62 T1 (as a percentage of risk exposure amount)
18,22
63 Total capital (as a percentage of risk exposure amount)
18,22
Amounts below the thresholds for deduction (before risk weighting)
Direct and indirect holdings of the capital of financial sector
entities where the institution does not have a significant
72 investment in those entities (amount below 10% threshold)
174
Direct and indirect holdings by the institution of the CET1
instruments of financial sector entities where the institution has a
significat investment in those entities (amount below 10%
73 threshold)
2.257
162
i
i
i
i
i
k
b
d
d
a
c
Banka Celje d.d.
Disclosures 2014
b) A description of the main features of regulatory capital
A description of the main features of regulatory capital instruments is shown in the Main features of
capital instruments table. As at 31 December 2014 Banka Celje, d.d., only exhibits share capital.
1
2
3
4
5
6
7
8
9
9a
9b
10
11
12
13
14
15
16
17
18
19
20a
20b
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Capital instruments main features template
Banka Celje d.d. (based on the Bank of Slovenia
Issuer
Decision on emergency measures)
ISIN
ISIN: SI0021116858
Governing law(s) of the instrument
Slovenian legislation
Regulatory treatment
Transitional CRR rules
Common Equity Tier 1 capital
Post-transitional CRR rules
Common Equity Tier 1 capital
Eligible at solo/(sub-)consolidated/ solo & (sub)consolidated
Individual and consolidated basis
Intrument type
Regular shares
Amount recognised in regulatory capital
EUR 190 mln
No par value shares
Nominal amount of instrument
Issue price
EUR 38
Redemption not allowed without consent of the
Redemption price
European Commision
Accounting classification
Equity
Original date of issuance
17.12.2014
Perpetual or dated
Fixed
Original maturity date
No maturity
Issuer call subject to prior supervisory approval
No
Optional call date, contingent call dates and
redemption amount
N/A
Subsequent call dates, if applicable
N/A
Coupons/dividens
Fixed or floating dividend/coupon
Floating
Coupon rate and any related index
N/A
Existence of a dividend stopper
No
Payment of dividends prohibited in 2014 and 2015.
Full discretionary, partially discretionary or
Mandatory in the following years, expect when the
mandatory (in terms of timing)
payment would jeopardise the Bank's solvency.
Payment of dividends prohibited in 2014 and 2015.
Full discretionary, partially discretionary or
Mandatory in the following years, expect when the
mandatory (in terms of amount)
payment would jeopardise the Bank's solvency.
Existence of step up or other incentive to redeem
No
Noncumulative or cumulative
Non-cumulative
Convertible or non-convertible
N/A
If convertible, conversion trigger(s)
N/A
If convertible, fully or partially
N/A
If convertible, conversion rate
N/A
If convertible, mandatory or optional conversion
N/A
If convertible, specify intrument type convertible into
N/A
If convertible, specify issuer of instrument it converts
into
Write-down features
If write-down, write-down trigger(s)
If write-down, full or partial
If write-down, permanent or temporary
If temporary write-down, description of write-up
mechanism
Position in subordination hierarchy in liquidation
35
36 Non-compliant transitioned features
37 If yes, specify non-compliant features
N/A
Yes
Based on applicable legislation
Full or partial
Permanent
N/A
N/A
N/A
N/A
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c) Terms and conditions of all regulatory capital instruments
As at 31 December 2014 Banka Celje, d.d., only has share capital. All the terms and conditions of
regulatory instruments are shown in the table entitled Main features of capital instruments.
d) Separate disclosure of nature and the amounts of the following:
a. each prudential filter applied pursuant to Articles 32 to 35,
b. each deduction made pursuant to Articles 36, 56 and 66,
c. items not deducted in accordance with articles 47 (significant investment in a financial sector
entity), 48 (threshold exemptions from deduction from CET1 items), 56 (deductions from AT1
items), 66 (deductions from T2 items) and 79;
The separate disclosure of nature and the amounts of specific items of capital is shown in the table
Disclosures of regulatory capital in the previous period, from disclosures of capital in point a).
e) Restrictions applied to the calculation of capital in accordance with this Regulation and
the instruments, prudential filters and deductions to which these filters apply
Disclosure of all restrictions applied to the calculation of capital is shown in Disclosures of Regulatory
Capital in the previous period, from disclosures of capital in point a).
f) Explanation of the basis on which capital ratios are calculated
The Bank calculates capital ratios in accordance with the CRR Regulation.
5 CAPITAL REQUIREMENTS (Article 438 of the CRR Regulation)
a) A summary of the Bank’s approach to assessing internal capital
The Bank has set up a process of assessing adequate internal capital (the ICAAP process), which:
- is based on the identification, measurement and assessment of risk, the preparation of an
aggregate risk estimate and the monitoring of significant risk types;
- allows for ensuring adequate internal capital levels in relation to the risk profile of the Bank;
- is appropriately included in the management process (decision-making, risk management, etc.).
For the purpose of assessing internal capital, the Bank calculates internal capital requirement
estimates for risks it deems significant on the basis of its risk profile or it determines through the
procedure of risk identification, measurement or assessment, management and monitoring that
these might significantly impact its operations, thus requiring it to ensure appropriate capital levels.
The Bank calculates the internal capital assessment and capital requirements on a quarterly basis,
with the calculation being confirmed at the Risk Committee and then forwarded for consideration and
approval at the ALCO.
The Bank re-assessed the level of exposure to individual risk types in major business lines and the
quality of the control environment. It calculated the Bank’s risk profile and prepared a risk matrix.
Based on the risk profile, prepared in December 2014, the Bank is mostly exposed to credit risk,
followed by profitability, strategic, liquidity, operational risk, reputation risk, interest rate rand capital
risk and market risk. The risk profile deterioration trend stopped in 2014, however the calculated risk
profile still deviates from the desired risk profile, as defined in the Strategy of assuming and
managing risk. In spite of positive economic trends, the Bank is still in the process of dealing with
the consequences of the recent crisis, with a certain level of uncertainty and risk also stemming from
the merger with Abanka Vipa, d.d., planned for the coming year.
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b) Result of the Bank’s internal capital adequacy assessment process, including the
composition of additional capital requirements, based on the supervisory review process
In the process of assessing the adequacy of internal capital, the Bank defines and assesses
significant risks, which it is or could be exposed to in its operations. On this basis it then makes an
internal assessment of capital requirements and an internal assessment of capital as the most
important elements (in addition to the risk management system) of maintaining the capacity to
assume risk. The key objective of the ICAAP process is the maintenance of the Bank’s adequate
risk profile and early detection of internal and external factors, which might negatively impact the
Bank’s operations.
Pursuant to the guidelines of the Adequate internal capital assessment process and the Instructions
for the submission and fulfilment of the Report on the ICAAP process implementation, the Bank
submits a report to the Bank of Slovenia every year, which the regulator then evaluates and provides
observations on.
Considering the observations from the report for 2013, the Bank of Slovenia expects the Bank to:
- in relation to the existing risk profile, maintain an internal capital assessment of at least 173.6%
of capital requirements from pillar I as recognized by the regulator or the capital adequacy ratio
of at least 13.9%;
- provide at least 80% of share capital to cover for the recognized capital requirement assessment
or to maintain a Tier 1 ratio of capital adequacy of at least 11.1%.
The Bank’s capital requirements comprise:
- element 1: capital requirement for credit, operational and market risks,
- element 2: residual risk from credit and market risks,
- element 3: interest rate risk in the banking book and strategic risk,
- element 4: supplement due to the general condition of the business cycle (procyclicality),
- supplement according to the assessment of the control environment.
c) Capital requirements for credit risk according to individual exposure categories
The Bank calculates credit risk capital requirements using the standardised approach. The capital
requirement equals 8% of risk-weighted exposures. The table below shows credit risk capital
requirements according to exposure categories.
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31 December
2014
Central government and central banks
31 December
2013
-
-
Regional government or local authorities
571
607
Public sector entities
169
204
Multilateral development banks
-
-
7,029
1,646
Corporate entities
22,993
42,463
Retail banking
Institutions
21,252
25,501
Exposure to mortgages
1,349
1,294
Defaulted exposures
7,540
(a)
(a)
2,807
7,044
(a)
(a)
17,289
Overdue items
High risk exposures
Regulatory high risk exposures
Covered bond investments
-
-
Institutions and companies with a short-term rating
872
33
Exposures from equity instruments
697
(a)
Investment funds
Other items
(a)
-
1,477
(a)
(a)
2,120
70,993
93,964
Other exposures
Total
(a) due to amended regulations the item is not reported
Capital requirements for positional risk, currency risk and settlement risk
The capital requirement for positional risk, which the Bank calculates using the standardised
approach amounted to EUR 46 thousand on 31 December 2014 (2013: EUR 5,046 thousand).
In 2013 and 2014 the Bank did not include currency risk capital requirements in the calculation of
capital requirements as the currency risk exposure did not exceed 2% of regulatory capital.
In 2013 and 2014 the Bank did not record capital requirements from settlement risk.
d) Capital requirements for operational risk
For the calculation of capital requirements for operational risk the Bank uses the simple approach.
Capital requirement for operational risk as at 31 December 2014 was EUR 13,769 thousand (2013:
EUR 10,965 thousand).
6 EXPOSURE TO COUNTERPARTY CREDIT RISK (Article 439 of the CRR Regulation)
a) The methodology used to assign internal capital and credit limits for counterparty credit
exposure
Exposure form derivatives, sale and repurchase agreements and lending operations to increase the
trading portfolio, where the Bank is exposed to counterparty credit risk is small, which is why the
Bank did not develop a specific methodology for determining internal capital.
The Bank has set up a system of limits, which allows it to limit exposure to counterparty credit risk.
Compliance with these limits is monitored on a daily basis. A limit depends on the counterparty’s
rating and the type of financial instrument.
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Disclosures 2014
b), d) Policies of securing collateral and the impact on the amount of collateral to be provided
given a rating downgrade
The Bank enters into derivatives with counterparties with a good credit rating. Interest rate
derivatives and currency swaps are primarily entered into with prime banks, which is why exposure
to credit risk is low.
c) Wrong-Way risk exposure policy
The Bank hedges all derivative transactions with counter positions.
e) The method of exposure calculation for derivatives and sale and repurchase agreements
Derivatives give rise to credit exposure from the counterparty’s inability to deliver. The Bank
calculates counterparty credit risk from foreign currency derivatives (forwards and prop trading as
well as customer trading to a lesser extent) and interest rate derivatives. To calculate the value of
credit exposure the Bank utilises the current exposure method, as follows:
- replacement costs are calculated of positive value agreements, so that all agreements are
revalued to their current market value using current prices; negative value agreements exhibit a
current exposure of zero;
- the potential credit exposure for the remaining time to maturity of the agreement is calculated by
multiplying the nominal amount or the value of the underlying financial instruments with an
adequate conversion factor according to the residual maturity;
- the exposure value is the sum of replacement costs and the potential future credit exposure.
Gross positive fair value of agreements and net derivatives credit exposure
The table below show the net value of agreements and the net exposures according to type of
derivative.
31 December 2014
Potential
exposure
Fair value
Trading derivatives
Securities forwards
31 December 2013
Net credit
exposure
Fair value
Potential
exposure
Net credit
exposure
-
-
-
126
-
-
4,573
278
4,851
5,782
628
6,410
63
122
185
26
234
260
Total
4,636
400
5,036
5,934
862
6,796
Hedging derivatives
Interes rate derivatives
1,424
171
1,595
3,437
271
3,708
Total
1,424
171
1,595
3,437
271
3,708
Interes rate derivatives
Currency derivatives
g), h), i) The Bank does not enter into transactions with credit derivatives. It calculates exposure to
counterparty credit risk using the standardised approach, which is why it does not estimate the α.
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7 CREDIT RISK ADJUSTMENTS (Article 442 of the CRR Regulation)
a) Definitions of ’’past due’’ and ’’impaired’’ for accounting purposes
For accounting purposes ’’past due’’ pertains to all items, where the debtor has not settled his
liabilities in the contractually agreed period and in the contractually agreed amount.
For accounting purposes ’’impaired’’ pertains to all items, where there is objective evidence on the
impairment of financial assets, which the Bank has impaired individually or collectively.
b) The description of the approaches and methods, adopted for determining specific and
general credit risk adjustments
At every statement of financial position date, the Bank assesses whether there is objective evidence
on impairment of a financial asset or a group of financial assets. A financial asset or a group of
financial assets is only impaired, when there is objective evidence on impairment as a result of one
or multiple events, which have occurred after the assets initial recognition and which affect future
cash flows.
Objective evidence on the impairment of a financial asset or a group of assets is represented by:
- serious financial problems experienced by the debtor;
- breach of contract with the Bank (principal and/or interest not paid or a violation of other
contractual provisions);
- the probability that the debtor will declare bankruptcy, compulsory settlement or another form of
financial restructuring;
- the absence of a functioning market for the financial asset due to financial problems of the
securities issuer;
- the existence of a measurable decrease in expected future cash flows of the group of financial
assets from their initial recognitions, even though the decrease may not yet be recognised for
individual financial assets in the group, including:
- adverse changes in the payment status of borrowers in the group and
- changes in the economic conditions in the country or local environment, which correlate
with defaults on assets in the group;
- due to the economic and financial position of the debtor the Bank has renegotiated the loan
terms (such as e.g. extending the repayment period, decreasing the amount of the
receivables, etc.), which it would not have done were the debtor’s economic and financial
position normal.
The Bank first assesses whether there is objective evidence on impairment in individually significant
financial assets and collectively for financial assets, which are not significant individually. If the Bank
ascertains there is no evidence of impairment in an individually significant asset, it then includes it
in a group of financial assets with similar credit characteristics. Individual impairments are assessed
on the basis of estimated future cash flows, which also include the realization of collateral. Financial
assets that have already been recognised as impaired are also assessed for impairment individually.
Assets which have been assessed for impairment individually and have recorded a loss are not
included in the group assessment. The amount of loss is measured as the difference between the
asset’s carrying amount and the present value of expected future cash flows, which also include
guarantees and collateral, discounted using the financial asset’s original effective interest rate. If a
loan or a held to maturity investment is based on a variable interest rate, the discount rate for the
measurement of loss from impairment is the current effective interest rate, as defined in the contract.
The asset’s carrying amount is decreased with the use an allowance account, with the amount of
the loss recorded in the income statement.
168
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Disclosures 2014
The methodology of estimating impairment charges on assets and off-balance items is set up
separately for legal entities and private entrepreneurs, retail clients, banks and savings banks and
prime debtors (central government), which is presented in detail later on in this chapter.
(1) Assessment of impairment charges for exposure to legal entities and private entrepreneurs
The impairment charge may be calculated individually on the basis of the estimated future cash flows
or collectively on the basis of historical data on defaults and losses for groups of exposures with
similar characteristics, adjusted to account for the current situation, thus reflecting the effects of
recent operating conditions. Individual estimates pertain to assets individually exhibiting significant
characteristics (exposures above EUR 650,000) and showing signs of impairment (exposures
classified D and E). If there are no signs of impairment, the exposure is classified into a group of
financial assets with similar characteristics and the impairment is assessed collectively. Impairment
is also assessed individually for financial assets which have already been recognised as impaired
(exposures classified D and E). Impairment is appraised on the basis of estimated future cash flows,
including expected repayment from liquidation of collateral.
For exposures not exhibiting signs of impairment or those that are individually insignificant
(exposures classified A1, A2, A3, B1, B2 B3, C1 and C2 at an amount lower than EUR 650
thousand), the charge is assessed collectively on the basis of historical default data and loss
estimates. For collective assessment of impairment financial assets are combined on the basis of
similar credit characteristics, taking into account mainly the financial position of the borrower, the
settlement of liabilities in the past, the capacity to ensure cash flow in the future, the industry, regional
characteristics, etc.
The methodology of collectively assessing impairments is based on:
- the transitional matrix between rating groups, namely the transition to classes D and E inside of
a year (a multi-year average is used);
- the calculation of the recovery share in classes D and E (taking into account debtors, which are
impaired individually, with a multi-year average taken into account);
- a general risk factor, reflecting current economic conditions and thus impacting the probability of
defaults. The value of the general risk factor is assessed at least once a year on the basis of
fluctuations in the general price levels, interest rates, the settlement of liabilities, fluctuations in
the financial and capital markets as well as the real estate market conditions, economic activity,
conditions in the job market and the trends in the energy and raw material markets.
The methodology and assumptions, used to assess future cash flows are reviewed at least once a
year to decrease the differences between loss estimations and actual losses. The impairment
percentages are assessed separately for rating classes, which include exposures to legal entities
and separately for rating classes, which include exposures to private entrepreneurs.
(2) Assessment of impairment charges for exposure to retail
The Bank classifies financial assets into rating groups A, B, C, D and E on the basis of the settlement
of liabilities. Individually significant financial assets (exposures above EUR 400,000), where there is
objective evidence to suggest there is a need for the establishment of an impairment, are impaired
individually. The same applies to financial assets already recognised as impaired (exposures
classified D and E).
For the purpose of collective impairment, financial assets are divided into homogenous groups on
the basis of the settlement of liabilities and in accordance with product groups (housing loans,
consumer loans, quick loans, account overdrafts). Impairment charge percentages are based on
past data and are different for every product group and each rating class.
169
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Disclosures 2014
The methodology is based on:
- the transitional matrix between rating groups, namely the transition of financial asset to overdue
items or the classes C, D and E (a multi-year average is used for every product group); and
- the percentage of actual loss from default or the share of economic loss of financial assets in
recovery (rated E), which the Bank establishes annually on the basis of historical repayment data
(the percentage is determined for each product group).
(2) Assessment of impairment charges for exposures to banks, savings banks and prime debtors
(sovereigns and central banks) are assessed using the collective and individual approaches.
(3) Assessment of impairment charges for exposures to banks, savings banks and prime debtors
(central government)
(sovereigns and central banks) are assessed using the collective and individual approaches.
c) The total amount of exposures, decreased by impairments and provisions, without taking
into account the effects of credit risk mitigation and the average amount of exposures
over the reporting period, broken down by exposure classes
On
On
31 December 2014 average 31 December 2013 average
2014
2013
467,691
302,828
263,364
379,364
50,952
45,016
42,977
49,846
13,224
14,921
24,029
28,652
8,101
8,100
8,173
8,168
Institutions
147,461
73,928
73,305
123,485
Corporate entities
484,898
460,228
611,804
783,263
Retail banking
436,996
455,393
490,739
513,772
42,504
35,556
34,359
8,590
Defaulted exposures
87,854
86,292
(a)
(a)
(a)
(a)
24,512
24,834
58,952
166,213
(a)
(a)
(a)
(a)
208,207
254,943
Overdue items
High risk exposures
-
-
-
3,737
32,000
8,000
821
1,212
5,329
7,689
(a)
(a)
(a)
(a)
-
321
35,934
34,828
(a)
(a)
(a)
(a)
44,383
45,258
1,871,896
1,698,992
1,826,673
2,225,445
Investment funds
Other items
Other exposures
Total
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Disclosures 2014
d) The geographic distribution of the exposures, broken down in significant areas by
exposure classes
31 December 2014
Slovenia
EU
Other
countries
SE Europe
Total
426,512
41,179
-
-
467,691
35,673
15,279
-
-
50,952
13,224
-
-
-
13,224
-
8,101
-
-
8,101
18,554
121,895
51
6,961
147,461
Corporate entities
462,727
17,357
-
4,814
484,898
Retail banking
433,402
2,463
1,048
83
436,996
42,504
79,005
41,724
3,586
16,115
5,263
1,113
-
42,504
87,854
58,952
32,000
Institutions
Defaulted exposures
High risk exposures
Other exposures
Total
31 December 2014
-
32,000
-
-
5,311
18
-
-
5,329
23,582
301
-
12,051
35,934
1,558,636
257,993
7,475
11,858
1,871,896
Slovenia
EU
Other
countries
SE Europe
Total
226,567
36,797
-
-
263,364
Regional government or local authority
37,961
5,016
-
-
42,977
13,950
10,079
-
-
24,029
-
8,173
-
-
8,173
7,634
61,493
43
4,135
73,305
Corporate entities
577,202
23,045
7,600
3,957
611,804
Retail banking
485,948
4,373
405
13
490,739
32,689
1,670
-
-
34,359
Defaulted exposures
21,963
2,549
-
-
24,512
173,618
27,748
6,841
-
208,207
Mulitlateral development banks
Institutions
Other exposures
Total
-
821
-
-
821
31,463
920
-
12,000
44,383
1,608,995
182,684
14,889
20,105
1,826,673
171
Banka Celje d.d.
Disclosures 2014
e) The distribution of exposures by counterparty type, including the specification of
exposure to SMEs, broken down by exposure classes
Private
Corporate
entrepreneurs customers
State
Banks
Retail
330,536
137,155
-
-
-
50,952
13,170
132,322
1
897
-
8,101
147,461
- 322,039
3,884
3,631
-
3,798
23,805
3,534
4,787
1,302
54
348,778
91,151
35,086
78,539
57,650
Total
SMEs
31 December 2014
Central government and central
banks
Regional government or local
authorities
Institutions
Corporate entities
Retail banking
Defaulted exposures
High risk exposures
Institutions or companies with a
short-term rating
Exposures from equity
instruments
Other items
Total
467,691
-
50,952
13,224
8,101
147,461
484,898 253,490
436,996 111,202
42,504 23,420
87,854 49,074
58,952 49,579
-
32,000
-
-
-
32,000
-
-
16,501
7,331
-
5,329
12,102
5,329
35,934
2,431
51
527,878
341,218
336,885
37,226
State
Banks
Retail
628,689 1,871,896 489,247
Private
entrepreneurs
Corporate
customers
Total
SMEs
31 December 2013
Central government and central
banks
Regional government or local
Institutions
Corporate entities
Retail banking
Overdue items
Institutions and companies with a
short-term rating
Other exposures
Total
84,620 178,744
42,977
19,555
8,173
- 73,305
3,971
7
2,581
1
344,058
174
2,284
3,487
7,909
33,905
3,900
1,001
4,449
4,474
599,924
112,769
30,285
18,646
200,270
821
18,291
8,469
-
17,623
153,711 279,335
358,472
51,164
-
172
263,364
42,977
24,029
8,173
73,305
611,804 228,995
490,739 140,018
34,359 31,836
24,512 17,254
208,207 93,956
821
44,383
2,471
983,991 1,826,673 514,530
Banka Celje d.d.
Disclosures 2014
f) The residual maturity breakdown of exposures
31 December 2014
Up to 1 year Over 1 year
31 December 2013
Up to 1 year Over 1 year
281,813
185,878
14,011
11,191
237,670
25,694
36,941
3,147
39,830
2,033
11,565
12,464
5,082
3,019
80
8,093
Institutions
142,334
5,127
65,619
7,686
Corporate entities
151,857
333,041
325,478
286,326
Retail banking
190,928
246,068
220,617
270,122
21,993
20,511
15,144
19,215
Defaulted exposures
57,044
30,810
(a)
(a)
Overdue items
(a)
(a)
16,997
7,515
45,720
13,232
(a)
(a)
(a)
(a)
177,004
31,203
-
-
-
-
32,000
-
821
-
5,329
-
(a)
(a)
(a)
(a)
-
-
32,835
3,099
(a)
(a)
(a)
(a)
40,638
3,745
992,137
879,759
1,114,780
711,893
High risk exposures
Investment funds
Other items
Other exposures
Total
g) Exposures by counterparty type
Not yet due exposures, impaired exposures and overdue exposures according to debtor
category
31 Decem ber 2014
Loans to
government
and local
authorities
Outstanding loans - unimpaired
Outstanding loans - impaired
Overdue loans - individually impaired
Overdue loans - unimpaired
Loans and
advances to
banks
Retail loans
Loans to
private
entrepreneurs
Corporate
loans
66,858
52,000
291,257
25,831
417,537
-
-
2,416
3,414
96,097
2,876
-
15,417
4,734
114,690
11
-
833
285
3,833
Impairments
(2,034)
-
(18,506)
(4,463)
(129,457)
Total
67,711
52,000
291,417
29,801
502,700
173
Banka Celje d.d.
Disclosures 2014
31 Decem ber 2013
Loans
and
Loans to
advances
private
to banks
Retail loans entrepreneurs
Loans to
government
and local
authorities
Outstanding loans - unimpaired
Corporate
loans
63,071
5,822
308,355
37,131
647,026
-
-
1,246
813
117,535
Overdue loans - individually impaired
-
-
13,622
8,042
360,557
2,812
-
1,313
767
25,639
Impairments
(258)
-
(14,959)
(5,070)
(327,585)
65,625
5,822
309,577
41,683
823,172
Total
Specific and general credit risk adjustments, according to debtor category
31 DEC 2014
Loans to
government
and local
authorities
Loans and
advances to
banks
Retail loans
Loans to
private
entrepreneurs
Corporate
loans
Individual impairments
Collective impairments
1,978
56
-
6,127
12,379
2,293
2,170
106,540
22,917
Total
2,034
-
18,506
4,463
129,457
31 DEC 2013
Loans to
government
and local
authorities
Loans and
advances to
banks
Retail loans
Loans to
private
entrepreneurs
Corporate
loans
Individual impairments
Collective impairments
258
-
5,373
9,586
3,148
1,921
297,414
30,172
Total
258
-
14,959
5,070
327,586
Charges for specific and general credit risk adjustments during the reporting period
The balances and dynamics of impairments are disclosed in the financial statements of this annual
report. Impairments for loans and advances to customers are disclosed in item 4.5.2, while
impairments for other financial statements are shown under 4.6. Provisions for contingent liabilities
are shown in item 4.21 of the financial statements.
174
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h) Impaired exposures and past due exposures, broken down by significant geographical
areas
31 December 2014
Slovenia
Outstanding loans
EU
SE Europe
Other countries
772,438
74,828
1,127
5,089
90,550
147
11,230
-
Overdue loans - impaired
78,151
47,968
11,599
-
4,685
276
1
-
(106,011)
(31,696)
(16,552)
(200)
839,813
91,522
7,405
4,888
Impairments
Net exposure
31 December 2014
Slovenia
Outstanding loans
EU
SE Europe
Other countries
1,017,029
32,132
8,197
4,020
132,770
231
6,568
-
Overdue loans - impaired
303,909
47,130
11,235
-
27,696
2,705
129
-
Impairments
(314,829)
(21,693)
(11,299)
(52)
Net exposure
1,166,575
60,505
14,831
3,968
175
Banka Celje d.d.
Disclosures 2014
8 UNENCUMBERED ASSETS (Article 443 of the CRR Regulation)
Disclosure on asset encumbrance
Template A-Assets
Carrying amount of
Fair value of
encumbered assets encumbered assets
Assets of the reporting institution
Equity instruments
Debt securities
Other assets
16,612
Carrying amount of
unencumbered
assets
Fair value of
unencumbered
assets
1,695,370
-
-
3,350
3,350
16,612
16,612
462,822
462,822
-
43,278
Template B-Collateral received
Fair value of
encumbered
collateral received
or own debt
securities issued
Fair value of
collateral received
or own debt
securities issued
available for
encumbrance
Collateral received by the reporting institution
-
-
Own debt securities issued other than own
covered bonds or ABSs
-
-
Template C-Encumbered assets/collateral received and associated liabilities
Assets, collateral
received and own
Matching liabilities,
debt securities
contingent liabilities
issued other than
or securities lent
covered bonds and
ABSs encumbered
Carrying amount of selected financial liabilities,
contingent liabilities or securities lent
745,469
16,612
D - Information on importance of encumbrance
As at 31 December 2014 the Bank held EUR 16,612 thousand in bonds of the Republic of Slovenia, which it has pledged as a
deposit guarantee. With these assets the Bank covers for 2.2% of liabilities for liquid investments from the guarantee scheme.
The Banking act (Zban-1) and the Decision on the deposit guarantee system represent the basis for the encumbrance of assets
from deposit guarantees.
The carrying amounts of unencumbered assets from the Other assets item (Annex A) represent intangible assets and property
and equipment, deferred tax assets and derivative assets 62%.
9 USE OF ECAIs (Article 444 of the CRR Regulation)
a), b) The names of the nominated ECAI (External Credit Assessment Institutions) and the
exposure classes, for which each ECAI is used
Pursuant to Article 138 of the CRR Regulation the Bank nominated the following external credit
assessment institutions for risk weighting:
- Moody's Investors Service and Fitch Ratings for exposures to central government and
- Moody's Investor Service for exposures to institutions.
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Disclosures 2014
c) Description of the risk weighting process for exposures
To determine risk weights the Bank uses available ratings. If a financial instrument or an issuer has
been rated by two of the nominated ECAI and different weights suit the respective ratings, the rating
is used, which requires higher risk weighting. For exposure to the central government and central
banks and for exposure to institutions ratings for financial instruments are used as well as debtor or
issuer ratings. If a rating of a financial instrument is available, it is used to determine the risk weight.
Should it not be available, a long term rating of other comparable financial instruments is used or the
rating of the issuer or debtor. In the event there is no rating available whatsoever, exposure to central
governments and central banks is weighted at 100%.
Ratings and related credit quality steps for exposure to central government are used to determine
the risk weights of financial instruments and debtors from other exposures, for which there is no
other rating of a nominated ECAI available or for which the Bank did not nominate any ECAI
d) The association of external ratings of each nominated ECAI with the credit quality steps
The association of ratings with credit quality steps complies with the standard association published
by the EBA. The Bank does not associate ratings of individual ECAI, which the EBA does not publish.
Pursuant to the provisions of Article 114(4) of the CRR Regulation exposure to Member States’
central governments and central banks denominated and funded in the domestic currency of that
central government and central bank, may be assigned a risk weight of 0%, being equivalent to the
credit quality step 1.
e) Exposure values and exposure values after credit risk mitigation effects, associated with
each credit quality step
The table below shows exposure values and exposure values after the effects of credit protection,
broken down according to credit quality steps
31 December 2014
Net amount of
exposures
31 December 2013
Exposures taking
into account
collateral
Exposures taking
into account
collateral
Net amount of
exposures
Credit quality step 1
492,699
489,848
304,981
286,432
15,000
15,000
5,661
5,661
4,979
4,979
-
-
4,697
-
-
-
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Disclosures 2014
10 EXPOSURE TO MARKET RISK (Article 445 of the CRR Regulation)
The Bank discloses capital requirements (calculated in accordance with items (b) and (c) of Article
93(3)) separately per risk type (trading book).
31 December
2014
31 December
2013
Capital requiremet for positional risk from debt financial instruments
- general positional risks
- specific positoinal risk
32
32
-
4,350
3,740
610
Capital requiremet for positional risk from equity financial instruments
- general positional risks
- specific positoinal risk
- for positions in CIU property
Currency risk capital requirement
14
7
7
-
696
348
348
-
Total
46
5,046
11 OPERATIONAL RISK (Article 446 of the CRR Regulation)
The Bank discloses the approach to the calculation of capital requirements for operational risk, for
which it qualifies; methodologies from Article 312(2) are described in the event of the use of different
approaches.
The Bank calculates capital requirements for operational risk using the simple approach in
accordance with article 315 of the CRR Regulation. The capital requirement equals 15% of the three
year average of the relevant ratio defined in Article 316 of the aforementioned Regulation. As 31
December 2014 the capital requirement stood at EUR 13,769 thousand (2013: EUR 10,965
thousand).
12 EXPOSURES IN EQUITIES NOT INCLUDED IN THE TRADING BOOK (Article 447 of the CRR
Regulation)
The Bank does not disclose details on exposures that are immaterial, basing the decision on the
definition that a materially insignificant exposure represents less than 3% of the total exposure of the
bank.
Exposure from equity instruments, not included in the banking book, amounted to EUR 3,250
thousand on 31 December 2014 (2013: EUR 5,944 thousand), with investments into stock exchange
traded equity instruments accounting for EUR 2,685 thousand (2013: EUR 2,934 thousand). An
investment is valued at market, which reflects its fair value. Exposure from investments in non-public
companies amounted to EUR 566 thousand on 31 December 2014 (2013: EUR 3,010 thousand).
Details on the realized and unrealized gains and losses from non-exchange traded securities are
disclosed in the financial statements.
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Disclosures 2014
13 EXPOSURE TO INTEREST RATE RISK ON POSITIONS NOT INCLUDED IN THE TRADING
BOOK (Article 448 of the CRR Regulation)
Banks are usually exposed to interest rate risk, as their core objective is attaining funds at a specific
interest rate and investing these funds at a higher interest rate, which generally also means a
mismatch in the term structure of an investment as opposed to the funding. Exposure to interest rate
risk is mainly derived from the mismatch in the maturity or interest fixing dates between investments,
liabilities and off-balance sheet items. Additionally, interest rate risk can also be based on the risk of
a yield curve shift, basic risk and embedded options.
The Bank assesses exposure to interest rate risk on a monthly basis, taking into account all of the
abovementioned risk sources. Special focus it put on the fluctuations of demand deposits, where the
stable part of these is calculated, which the Bank estimates to be an interest rate insensitive source
in the short term.
Exposure to interest rate risk may manifest itself through changes in net interest income and through
changes in the economic value of the Bank’s equity. The impact on earnings or another measure of
value used in the management of interest rate risk in the event of a sudden increase or decrease in
interest rates. The table below shows the effects on net interest income and the economic value of
equity for items, not included in the trading book in the event of an immediate change in interest
rates by 100 basis points.
31 December 2014
31 December 2013
3,555
2,105
172
5,578
Effect on net interest income
Effect on the economic value of equity
14 REMUNERATION POLICY (Article 450 of the CRR Regulation)
The Bank has modelled and prepared its remuneration policy in accordance with the ZBan-1 and
the Decision on risk management and the implementation of internal capital adequacy assessment
for banks and savings banks. The policy has been aligned with the business strategy, the
organisational structure and the Bank’s planned operational and financial objectives.
The Bank’s Management Board, the Remuneration Committee and its Supervisory Board all
operated in line with the remuneration policy in 2014. The Remuneration Committee met twice in
2014, at its 3rd meeting in October and at its 4th meeting in November. The Supervisory Board
appointed Melita Malgaj to the Remuneration Committee in January. It comprises:
- Jure Peljhan, Ph.D. (President of the Supervisory Board) – committee president;
- Melita Malgaj (member of the Supervisory Board) – committee member;
- Tomaž Subotič, Ph.D. (member of the Supervisory Board) – committee member;
- Bojan Salobir – representative of the Bank with a standing invitation.
The Remuneration Committee monitors and verifies the effects and the adequacy of the
remuneration policy. Its assignment are:
- preparation of proposals pertaining to the general principles of the remuneration policy;
- assessment of existing methodologies of the remuneration system;
- preparation of recommendations to the Supervisory Board on the implementation of the
remuneration policy;
- preparation of proposals on the remuneration of employees;
- reviewing the adequacy of the general remuneration policies and their implementation;
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Banka Celje d.d.
Disclosures 2014
-
verifying compliance of the remuneration policy with the Bank’s business policies and direct
monitoring of the remuneration of those categories of employees, working in the internal
monitoring system and holding other monitoring functions.
The Committee prepares proposals for the decisions of the Supervisory Board in relation to the
remuneration of Management Board members and the categories of top ranking employees as well
as ensuring that the decisions adopted by the Supervisory Board are implemented.
A number of the Bank’s expert departments have been included in the preparation of the
Remuneration policy of Banka Celje, d.d. External advisors were not used.
Top ranking employees are the ones who have a significant impact on the Bank’s risk profile (the
Management Board, senior management) within the scope of their assignments and tasks.
The remuneration received by these individuals include a fixed and a variable part. The condition for
the payment of the variable part is the attainment of set business goals at the level of the Bank and
an organisational unit and the fulfilment of other obligations written in the individual employment
agreement within a business year.
The performance of an individual top ranking employee is assessed on the basis of financial and
non-financial performance criteria. Financial performance criteria are assessed at the level of the
Bank and an organisational unit. Non-financial criteria pertain to an individual top ranking employee
and take into account their attained development goals.
180
Banka Celje d.d.
Disclosures 2014
The table below shows target indicators for the evaluation of performance by top ranking employees,
which may be used ad hoc and are defined in the remuneration policy.
I.
FINANCIAL
CRITERIA
Indicator
Assessment estimates
THE OBJECTIVE IS:
Capital adequacy ratio
exceeded
I.1. at the level of the Bank
achieved
not
achieved
not
achieved
Attaining a net profit after
exceeded achieved
Target indicators are set every impairment and taxes
year by the Management Board
and
approved
by
the
Supervisory Board.
Attaining the planned result exceeded achieved not
before impairments
achieved
The shown indicators may be
selected, these are however An adequate ratio between exceeded achieved not
not exclusive, as new indicators costs and revenues
achieved
may be defined for an individual Ratio between net loans to exceeded achieved not
business year.
customers and deposits from
achieved
customers with certificates of
deposit
Variable part of the remuneration for the attainment of target indicators at bank level:
the highest possible amount of variable remuneration for the attainment of target indicators at the level
of the Bank is 15% of the annual remuneration of a top ranking employee.
I.2. at organisational unit level
Business goal of an
exceeded achieved not
organisational unit
achieved
Target indicators are set and Financial
goals
of
an exceeded achieved not
approved by the Management organisational unit (where
achieved
Board every year.
measurable)
Variable part of the remuneration for the attainment of target indicators at an organisational unit level:
the highest possible amount of variable remuneration for the attainment of target indicators at the
organisational unit level 10% of the annual remuneration of a top ranking employee.
II.
NON-FINANCIAL
CRITERIA
Reached development goals
of the top ranking employee Descriptive evaluation
II.1. per top ranking employee
(compliance with adopted
policies, compliance with the
For each business year target requirements of the regulator,
indicators per top ranking compliance
with
employee are defined together authorisations, consideration
with their superiors according of integrity and taking care to
to their post and approved by comply
with
legislation,
the
Bank’s
competent development and care for
authority.
employees, etc.)
Variable part of the remuneration for the attainment of non-financial criteria for a top ranking
employee:
the highest possible amount of variable remuneration for the attainment of non-financial criteria per
employee is 5% of the annual remuneration of a top ranking employee.
The assessment of the Management Board is the responsibility of the Supervisory Board, while the
assessment of other top ranking employees falls under the competencies of the Management Board.
181
Banka Celje d.d.
Disclosures 2014
The payment method and structure of the variable part of remuneration of the Management Board
with suspended payment is carried out according to the following model:
- 40% paid at confirmation of results at the Bank’s General Meeting;
- 60% is paid out over a period of 3 years.
For other top ranking employees the payment of the variable part of remuneration with suspended
payment is carried out according to the following model:
- 60% paid at confirmation of results at the Bank’s General Meeting;
- 40% is paid out over a period of 3 years.
In the event of the onset of restrictive conditions as set out in the Decision on risk management (e.g.
a deterioration of capital and liquidity positions), the Bank will immediately implement a conservative
remuneration policy.
In accordance with the remuneration policy, the Bank does not pay out the variable part in financial
instruments.
The significant characteristics of the remuneration policy
The purpose of the remuneration policy is ensuring its compliance with the recommendations and
principles of the remuneration policies in the financial sector. It is an umbrella act of the Bank in the
area of the definition of rights on the basis of work, management and supervision and it provides the
starting point and determines the types of remuneration at the Bank. The remuneration policy is
harmonised with the Bank’s business strategy, its objectives and values as well as the organisational
structure. The aim of the remuneration policy is to provide a reward system, which promotes
employee motivation and maximises performance, provides for transparency of remuneration and
efficient monitoring of remuneration, while at the same time ensuring efficient risk management and
promoting it.
The remuneration policy provides for a clear connection between work performance, managerial
skills and the variable part of remuneration. Employee remuneration is defined in proportion with
their authority, tasks, experience and responsibilities as well as the Bank’s financial positions, all in
accordance with legislation and regulation in the field, which defines remuneration ceilings.
Top ranking employee remuneration comprises a fix and variable part. The Bank provides a balance
of ratios between the two parts, which eliminates a significant dependency of total remuneration of
top ranking employees on the variable part, while still representing an efficient motivation of these
employees to reach or exceed planned performance results. The fixed part still represents a high
enough share in an employee’s total remuneration to allow the Bank to be completely flexible in its
variable remuneration policy, including the option of non-payment.
The remuneration of the Management Board and senior management are arranged in accordance
with the Act Regulating the Incomes of Managers of Companies owned by the Republic of Slovenia
and Municipalities (Official Gazette of the Republic of Slovenia, No. 21/10, 8/11, the ZPPOGD).
The performance criteria, based on which an employee is entitled to shares, options or other
forms of variable remuneration and the main rules and basis for the decision-making process
on the use of possible types of variable remuneration and other non-cash benefits for
employees
Variable remuneration may represent a maximum of 30% of the annual fixed remuneration received
by a top ranking employee. Such an employee may only be awarded a fixed variable part of
remuneration for in the first year of employment.
182
Banka Celje d.d.
Disclosures 2014
In line with the remuneration policy the payment of variable remuneration for the Management Board
and the top ranking employees is carried out with a suspension of three year, whereby each year of
suspension may see a maximum of 20% of the variable part paid out to the Management Board and
a maximum of 13.33% annually to top ranking employees. Prior to the payment the Bank must verify
that the conditions for the payment of the deferred part of variable remuneration have been met.
Information on the total gross amount of remuneration paid out in 2014
Information on remuneration is shown in item 4.27 of the Financial statements.
15 USE OF CREDIT RISK MITIGATION TECHNIQUES (Article 453 of the CRR Regulation)
a) Policies and processes for balance sheet and off-balance sheet netting
The Bank does not utilise balance sheet netting and credit derivatives to mitigate credit risk.
b) The policies and processes for collateral valuation and management
The Bank mitigates exposure to credit risk by implementing policies regarding collateral. To minimise
loss in the event of default, the Bank tends to acquire adequate collateral from the borrower, such
as a mortgage on commercial or residential real estate, pledges of financial property (bank deposits,
securities) or the acquisition of personal credit insurance by an adequate provider. Other forms of
collateral, such as physical collateral, inventories and cash claims, are considered to be of lesser
quality. Usually long-term and short-term loans are collateralised, with the only ones not requiring
collateral being those granted to borrowers exhibiting a higher credit rating. Should a borrower’s
credit rating deteriorate or the fair value of collateral decrease, the Bank begins negotiations to obtain
additional collateral or to decrease exposure.
The Bank manages market and credit risk from collateral by regularly monitoring the fair value and
liquidity of individual types of collateral. It has defined minimum collateral coverage ratios, set
according to the type of collateral and borrower risk. The Bank regularly monitors these collateral
coverage ratios and requires the borrower to put up additional collateral in the event of a drop in the
value and quality of collateral and the deterioration of a borrower’s creditworthiness. The
concentration of market and credit risk, based on use of collateral is managed by the Bank with
regular (monthly) reviews and analyses of received collateral.
When taking collateral the Bank exposes itself to residual risk, which is why it has prepared a policy
for assuming and managing collateral risk. It assesses and monitors the risk of inefficiency or
reduced efficiency of collateral, the risk in relation to collateral valuation, the risk of concentrations
of individual types of collateral and the risk associated with the termination of collateral.
c) The description of the main types of collateral taken by the Bank
The main types of adequate collateral that the Bank takes and their valuation are shown below:
- financial collateral (bank deposits or cash equivalents, debt securities issued by central
governments, central banks or institutions, equity and other securities listed on stock
exchanges), which is valued at market prices and revalued on a daily basis;
- commercial or residential real estate at fair value;
- personal credit insurance by the following: central governments and central banks,
municipalities, public sector entities, institutions, insurance companies and prime rated
companies.
183
Banka Celje d.d.
Disclosures 2014
d) Main types of guarantee issuers and counterparties in derivative transactions and their
credit rating
Rating
2014
amount
1. Central government
share
16.3%
58,314
18.9%
0
0.0%
0
0.0%
135,254
52.3%
151,876
49.3%
A
131,864
150,862
B
3,390
1,013
4. Companies
39,357
15.2%
58,230
A
9,342
14,864
B
30,015
43,367
5. Private entrepreneurs
4,017
1.6%
18.9%
3,163
A
1,559
1,832
B
2,458
1,331
6. Private individuals and personal
guarantees
Total
amount
42,086
2. Public sector entities
3. Institutions and insurance company
2013
share
1.0%
37,665
14.6%
36,766
11.9%
258,379
100.0%
308,349
100.0%
e) Information on market or credit risk concentrations within the collateral taken
2014
share
1.0%
4.4%
13.7%
1.8%
64.0%
15.2%
100.0%
Type of collateral
Deposits
Republic of Slovenia guarantee
Insurance company
Securities
Mortgages
Other types of collateral
Total
2013
share
0.7%
3.6%
10.9%
3.0%
67.2%
14.6%
100.0%
f) Total exposure after adjustment for instability, adequately covered by financial property
31 December 2014
amount
31 December 2013
share
amount
share
Retail banking
7,044
63.5%
6,545
33.8%
Corporate entities
3,180
28.7%
7,275
37.6%
Other items
542
4.9%
-
0.0%
Defaulted exposures
297
2.7%
-
0.0%
34
0.3%
34
0.2%
-
0.0%
4,965
25.6%
Other exposures
-
0.0%
539
2.8%
11,097
100.0%
19,358
100.0%
Total
In other exposure categories the Bank has no exposures secured with financial property.
184
Banka Celje d.d.
Disclosures 2014
g) Total exposure, covered by collateral or credit derivatives
31 December 2014
amount
Corporate entities
Institutions
Defaulted exposures
Retail banking
Total
31 December 2013
shares
amount
shares
154,636
89.1%
36,314
47.2%
11,004
6.3%
16,953
22.0%
7,549
4.3%
23,549
30.6%
393
0.2%
-
0.0%
-
0.0%
122
0.2%
173,582
100.0%
76,938
100.0%
In other exposure categories the Bank is not exposed to personal guarantees.
185

ANNUAL REPORT 2014 BANKA CELJE, d.d., AND THE BANKA

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