Cassa di Risparmio di Cento spa ANNUAL REPORT AND

dal 1859
LA BANCA DEL TERRITORIO
Cassa di Risparmio di Cento spa
ANNUAL REPORT AND FINANCIAL STATEMENTS
2009 FINANCIAL YEAR
Approved by the Board of Directors
on 23 March 2010
Draft of the Board of Directors to be submitted for shareholder approval
1
CASSA DI RISPARMIO DI CENTO SPA
CHAIRMAN
Vilmo Ferioli
GENERAL MANAGER
Ivan Damiano
BOARD OF DIRECTORS
Vilmo Ferioli
Mauro Manuzzi
Antonino Balboni
Luigi Chiari
Ugo Poppi
Aproniano Tassinari
Vincenzo Tassinari
Chairman
Deputy Chairman
Director
Director
Director
Director
Director
BOARD OF AUDITORS
Domenico Livio Trombone
Massimo Calanchi
Dario Alessio Taddia
Chairman
Auditor
Auditor
MANAGEMENT
Ivan Damiano
General Manager
INDEPENDENT AUDITORS
RECONTA ERNST & YOUNG SpA
2
Shareholders at 31 December 2009
no. of shares
Fondazione Cassa di Risparmio di Cento
Cassa di Risparmio di Cento Holding
Individual shareholders (about 6,350)
%
6,714,291
51.33 %
2,046,000
15.64 %
4,320,902
33.03 %
----------------------------13,081,193 100.00%
Total
3
BRANCH NETWORK
at 31 December 2009
REGISTERED OFFICE AND
Cento (FE) - via Matteotti, 8/b
HEADQUARTERS
tel. 051/6833111 - fax 051/6833443
www.crcento.it
postmaster@crcento.it
BRANCHES (48)
Province of Ferrara (21)
Province of Bologna (17)
Province of Modena (10)
Cento – headquarters branch office
Cento – city branch no. 1
Cento – city branch no. 2
Cento – city branch no. 3
Alberone
Bondeno
Casumaro
Coronella
Dodici Morelli
Dosso
Ferrara
Ferrara Est
Ferrara Sud
Ferrara4
Ferrara5
Mirabello
Poggio Renatico
Renazzo
Sant'Agostino
San Carlo
Vigarano Mainarda
Bologna
Bologna DueTorri
Bologna Murri
Castello d'Argile
Casalecchio di Reno
Castel Maggiore
Crevalcore
Galliera - San Venanzio
Lippo di Calderara di Reno
Ozzano dell’Emilia
Pieve di Cento
Stiatico
San Giovanni in Persiceto
San Lazzaro di Savena
San Matteo della Decima
San Pietro in Casale
Venezzano
Modena
ModenaDue
ModenaTre
Castelfranco Emilia
Campogalliano
Finale Emilia
Massa Finalese
Nonantola
Rami-Ravarino
Sassuolo
4
NOTICE OF SHAREHOLDERS’ MEETING
Published in the daily newspaper Il Resto del Carlino on 3 April 2010
Shareholders are called to the Ordinary and Extraordinary Shareholders’ Meeting to be held at the
convention center of the Grand Hotel Bologna in Pieve di Cento (FE), Via Ponte Nuovo 42, on
Thursday 29 April 2010 at 3:30 p.m. at first calling and, if necessary, on the following day at
second calling, at the same time and place to resolve the following:
Agenda:
Ordinary business:
1) Financial statements at 31 December 2009 and related resolutions;
2) Appointment of members of the Board of Directors, determining the number of members of the
Board and setting compensation, in accordance with Article 19 of the articles of association;
appointment of the Chairman and Deputy Chairman (or Deputy Chairmen);
3) Appointment of the Board of Auditors and its chairman; establishing related compensation;
4) Auditing of the accounts: engagement of independent auditor for 2010, 2011 and 2012;
5) Treasury share purchasing fund and procedures for transactions in such shares;
6) Approval (in accordance with Article 6 of the articles of association) of the compensation
policies for 2010 for the members of the Board of Directors, employees and other non-employee
associates of the Company. Discussion of the implementation of the compensation policies
adopted for 2009.
Extraordinary business:
1) Amendment of Articles 6, 12 and 20 of the articles of association.
Cento, 26 March 2010
for THE BOARD OF DIRECTORS
THE CHAIRMAN
Vilmo Ferioli
SUMMARY OF RESOLUTIONS
5
Contents
Highlights
pag. 7
Directors' Report on Operations
pag.
10
Proposed distribution of income
pag.
38
Financial statements
pag.
39
Notes to the financial statements
pag.
47
Annexes
pag.
159
Certification of financial statements
pag.
170
Report of the Board of Auditors
pag.
171
Report of the independent auditors
pag.
6
Highlights
The Bank closed 2009 with a net profit of €7.145 million, a highly positive result
given the severe economic crisis and a financial market that remains mired in
uncertainty.
The year featured an increase in direct funding, which rose 13.4% over 2008 to reach
€1,987.8 million, representing an effective response to the needs of our customers,
who, made uneasy by the high degree of volatility on the financial markets, sought
out safe, liquid financial instruments.
Within this context, the composition of the Bank’s funding shifted towards demand
and short-term instruments (up €80.3 million or 7.7%), along with a significant
increase in term funding (up €154.3 million or 21.6%). This improved in the Bank’s
already “safe” level of liquidity, with the ratio of lending to funding now at a
reassuring level of less than 1.
Indirect funding came to €1,792.9 million (down €71.2 million or 3.8%), a decline
attributable to the reduction in assets under administration due in part to the general
decline in the prices of many securities (down €168.5 million or 13.9%), whereas
assets under management posted a significant increase (€97.3 million or 14.9%).
Lending to ordinary customers totaled €1,843.2 million (-2.4%). Short-term
borrowing declined by €107.6 million or 20.0%, whereas the medium/long-term
component posted an increase of €60.6 million or 4.7% to a total of €1,357.7 million
at year-end, accounting for 73.7% of all loans to customers. The decline in revenues
for businesses and the need to consolidate debt had a significant impact on these
aggregates.
As a result of the particularly adverse economic environment, gross impaired assets
reached €114.3 million, increasing by €68.8 million in 2009. Half of this increase
(€35.6 million) was due to the recent changes in regulations introduced by the Bank
of Italy, which broadened the concept of “impaired assets” by including over-limit
positions past due by 90-180 days. The ratio of problem exposures to total lending
rose to 6.09% (but would have been 4.20% without the regulatory change), up from
the 2.37% of 2008 under the previous rules.
As regards the income statement at 31 December 2009, net interest income amounted
to €53.9 million, a decline of 8.0% from 2008 due mainly to the significant reduction
in interest rates, eroding much of the spread on funding, which was only partially
offset by an increase in the spread on lending.
Net fee and commission income came to €20.3 million, a slight decline (-1.3%) from
2008 based on uniform classification criteria.
7
Business in the “finance” segment generated net revenues of €4.85 million, compared
with the loss of €4.47 million in 2008, a change of €9.32 million. This improvement
was due in part to the performance of the financial markets, which made it possible to
recoup much of the losses posted in 2008. As a result, gross income reached €80.0
million (up €4.9 million over 2008, an increase of 6.6%).
Developments in economic conditions generated an increase of €3.34 million in net
losses on impaired loans (up 33.7% over 2008) due mainly to the worsening in the
stock of problem loans, partially mitigated by an improvement in the risk of
performing loans due primarily to the strong shift towards secured forms of lending,
underscoring the good quality and low risk of the Bank’s assets.
Personnel expenses came to €31.6 million, an increase of €2.6 million (+8.9%) over
2008 due to non-recurring charges in the amount of €2.7 million. Conversely,
administrative expenses declined by 4.2% to €20.2 million, even after the
extraordinary expenses related to the Bank’s 150th anniversary. The good
performance achieved underscores the Bank’s constant focus on controlling
administrative expenses, which increased by €1.7 million on the whole (+3.4% over
2008) due entirely to the non-recurring expenses incurred during the year in the
amount of €3.3 million.
After income tax expense for the year (with the tax rate rising from 45.5% to 49.4%),
net profit came to €7.145 million, a decline of €1.54 million (-17.8%) from the
previous year. Without the non-recurring charges mentioned above, net profit would
have been appreciably higher than in 2008.
The financial performance described above produced a cost-to-income ratio of 64.6%
(vs. 65.6% in 2008), with return on equity (ROE) amounting to 4.0% (compared with
5.0% in 2008).
In approving the draft financial statements discussed above, the Board of Directors
also decided to recommend that shareholders, at their meeting of 29 April, approve a
dividend of €0.20 per share (compared with €0.30 for 2008), thereby achieving the
twofold objective of self-financing our core business and strengthening capital as
required of banks by the supervisory authorities.
The Bank pays especially close attention to capital levels, as our capital ratios
demonstrate: the core Tier 1 ratio rose from 8.44% to 9.54% and the total capital ratio
rose from 10.56% to 11.70%, both of which are well above regulatory minimums and
even enough for the levels expected to be introduced with Basel III.
The following are the main indicators:
8
31/12/2009
Profitability ratios
ROE
Net interest income/operating income
Net fee and commission income/operating
income
31/12/2008
31/12/2007
3.98%
64.74%
5.00%
73.93%
8.82%
66.25%
24.39%
25.96%
26.10%
Structural ratios
Equity/total assets
Equity/direct funding
Loans/direct funding (excluding repos)
Gross lending/total assets
7.40%
9.03%
97.35%
77.29%
7.42%
9.92%
117.58%
81.78%
7.61%
8.99%
106.90%
80.93%
Risk ratios
Bad debts/loans (net)
Bad debts/ loans (gross)
Loan-loss provisions/gross loans
Bad debts (net)/equity
1.17%
1.74%
1.75%
11.99%
0.57%
0.84%
1.42%
6.17%
1.52%
2.53%
2.24%
15.77%
62.29%
63.29%
53.77%
64.63%
65.56%
55.73%
Efficiency ratios
Admin. expenses/operating income
Admin. expenses, amort. & depr./operating
income
9
Directors’ Report on Operations
Shareholders,
We would have preferred for the 150th anniversary to have come in a much different
economic, financial and social context. The winds of the crisis have blown hard on
both businesses and families throughout the world, and Italy has not been spared.
This has led to a quest for temperance in all initiatives. At the same time, however,
this has not distracted us from the true objectives of this occasion, namely to
remember and underscore how close the Bank has always been, and will continue to
be, to the communities in which we operate. As such, a specific section of this report
has been dedicated to the events and projects organized by the Bank and the
Foundation, which have involved tens of thousands of people throughout 2009 and
have reiterated the active role of both organizations as key elements of the economic,
financial and social fabric of our communities.
*
1. The national and regional economies
ISTAT’s main economic indicators for 2009 offer a picture of unremitting gloom for
Italy, with the tax burden increasing, unemployment reaching highs not seen since
2004, gross domestic product collapsing (-5%, the largest fall in nearly 40 years), and
the primary balance turning negative for the first time since 1991.
More specifically, unemployment reached 8.6% in January 2010, with persons
seeking employment numbering 2,144,000, an increase of 307,000 over the previous
year. Unemployment among young people came to 26.8%. The financial situation of
general government is also poor, with net borrowing (deficit/GDP) calculated for the
purposes of Maastricht Treaty compliance reaching 5.3%, up from the 2.7% of the
previous year. In value terms, net borrowing increased by some €38.2 billion to reach
€80.8 billion. The public debt, in turn, rose to 115.8% of GDP at the end of 2009
according to the latest Bank of Italy estimates. At the same time, the tax burden
reached 43.2% of GDP, compared with 42.9% for 2008.
In 2009, final consumption declined by 1.2% in real terms, with consumption
expenditure by resident households falling 1.8%, general government expenditure
rising 0.6%, and spending by non-profit institutions serving households increasing by
1.1%. Domestic private consumption contracted by 1.9%. Compensation of
employees and wages and salaries decreased by 0.6%. Exports fell 20.7% and
imports by 22%.
Banks’ bad debts reached an all-time high, increasing by 40% over the previous year.
*
Last year also had a profound impact on the economy of the Emilia-Romagna region.
The collapse in demand throughout the world could not but have an impact on the
10
region as well, although the repercussions of the recession were less severe than for
the rest of Italy. Indeed, GDP declined by 4.6%, while employment remained
essentially stable. However, massive use was made of income support mechanisms,
particularly their exceptional extension to all small businesses in industries that had
previously not been covered, activated with the help of the regional government.
An addition factor was the positive impact of the “crisis survival pact” agreed by the
regional government, the social partners, and the local authorities, which prevented
layoffs. No fewer than 500 special wage supplementation agreements were signed,
while the number of agreements extending income support mechanisms was only
slightly smaller. Overall, these measures involved and prevented layoffs for some
40,000 workers.
The decline in GDP was paralleled by a decline in domestic demand.
Industry was buffeted by the crisis, with the decline in value added estimated at
around 13.0% in real terms.
In agriculture, gross saleable production declined by 9.5%, which is a heavy loss for
the industry, with cereal output being hit particularly hard.
The impact of the international crisis was not uniform throughout the various areas of
the region. According to estimates, the provinces that were the least affected by the
crisis were Piacenza and Parma. Next came the Romagna provinces, followed by
Bologna and Ferrara. Modena and Reggio Emilia were the provinces that were most
severely affected. Forecasts for the region point to a subdued recovery. GDP is
expected to grow by 0.9% in real terms. In 2011, we should see a more tangible
improvement in both consumption and in gross fixed investment.
For the latter part of the year, the main indicators measured by the chamber of
commerce show a modest improvement for the province of Ferrara, although the
overall context will remain markedly negative. However, manufacturing posted a
sharp decline throughout the year, with a slight recovery seen only in the construction
segment. Use of the Wage Supplementation Fund was substantial and widespread,
with ordinary use rising by nearly 600% and extraordinary use by 400%. Exports also
struggled significantly. Last year closed with a contraction in the number of
businesses in the Ferrara province, with a reduction of 275 enterprises in absolute
terms. Within this general trend, the various forms of business in the province
performed differently: on the one hand, corporations posted growth, while the crisis
tended to heighten the difficulties of smaller businesses, sole proprietorships in
particular. Agriculture posted a sharp decline in gross saleable output, although the
contraction was slightly smaller than for the region as a whole.
As the Ferrara chamber of commerce noted, the global crisis has not yet entirely run
its course.
At this very fragile juncture, institutions are being called upon to support businesses
by all available means, and particularly by promoting innovation and international
expansion, as well as by further developing the modern, successful network and value
chain models, which reward the ability to work together. In order to foster a more
rapid recovery in the employment lost in recent months, it will be essential to take
11
action to make aggregation and innovation easier and more attractive for businesses,
because, as the numbers now show, one is more likely to lose while standing alone.
As one might expect, the economic environment in the province of Bologna is not
encouraging, either. However, a small number of segments have helped mitigate the
situation, namely food products, fashion and textiles. Mechanical engineering bore
the most evident signs of the crisis, due in large part to the collapse in exports.
In the province of Modena, the economic situation is also highly challenging as a
result of the severe crisis experienced by the engineering segment, which plays a
dominant role in the local economy. However, the satisfactory performance of food
and agriculture and, to a lesser extent, textiles partially offset this decline.
Economic and social performance in the Cento area was in line with this general
trend. A number of leading companies reported sharp declines in new orders and
were forced to make use of the income support mechanisms. Businesses in the
service industry and outsourcing – particularly small-scale craft businesses – fared no
better. Wholesale and retail trade was also affected by the decline in household
disposable income and the psychological repercussions of the difficult economy on
consumption. Finally, agriculture felt the impact of the sharp decline in the volume
and value of output.
2. Developments in the financial markets
For the first two months of 2009, the markets continued the downward trend of the
previous year. Stock prices shed between 25% and 35%, while credit risk premiums
reached new highs, particularly in the high-yield and financial service segments. The
sharp decline in the market capitalization of banks and the continuation of the total
lack of liquidity for various categories of assets made it necessary for central banks to
take additional extraordinary measures, in addition to government rescue efforts,
which in various cases resulted in actual nationalizations.
However, the highly expansionary monetary policies began to have a reflationary
impact on the prices of financial assets beginning in March. With official rates at zero
in the U.S. and Japan, at 0.5% in the U.K. and 1% in the euro area, in addition to the
substantial injections of liquidity by central banks, the banking system was able to
resolve the problems related to the financing of assets that had turned illiquid. The
expansionary policy stance of the central banks gradually fostered the return of
liquidity on the bond market, which was exploited for carry trade transactions by
banks themselves. This resulted in a further increase in the slope of yield curves and a
compression of credit risk premiums, which were reduced by more than half from
their highs by the end of 2009. The spread between the yields on Italian and German
ten-year government bonds went from a high of 160 basis points to 75 basis points by
year end. Both sovereign and corporate issuers took advantage of the abundance of
liquidity and the record low level of interest rates to raise funds on advantageous
terms. Initially, the market accepted issues by highly rated corporations before also
absorbing high-yield issues. The recovery of the stock markets also began in March,
posting increases of between 60% and 80% in just ten months to close the year with
average increases of 20% over the end of 2008. In this context, the Italian stock
12
market posted an increase of 19.47% (FTSE-MIB index) from the end of 2008.
Banking stocks in particular benefited from these increases, which enabled banks to
improve their capital ratios and undertake capital increases, enabling them, especially
in the United States, to repay much of the government aid received in 2008 and 2009.
Although the worst of the financial crisis had most likely passed, the real economy
continued to deteriorate. Rising unemployment led to an increase in defaults and bad
debts. There was also a generalized deterioration in the public finances, which is
expected to raise the debt-to-GDP ratios of the leading industrial countries to above
100% in just a few years. In addition to posing problems of sustainability, this could
dampen potential growth in the coming years, although the markets do not appear to
be giving much credence to this scenario.
3. The Bank’s activities
The recessionary economy made it necessary to take a new approach involving the
opening of discussions with local authorities, industry associations and the mutual
guarantee consortia aimed at supporting businesses and their employees. In addition,
the Bank promptly signed up to participate in the ABI debt moratorium for small and
medium-sized enterprises.
The Bank also reached an agreement with the provinces of Ferrara, Bologna and
Modena for interest-free “social advances” from the extraordinary wage
supplementation fund. This emergency measure is providing hundreds of employees
of ailing businesses with relief from the now enormous difficulties created by delays
in payments under income support mechanisms by INPS, Italy’s national social
security institution. The beneficiaries of this measure are those employees of
businesses that, as from 1 January 2009, requested activation of extraordinary wage
supplementation benefits.
Credit has also been made available for businesses associated with Unindustria
Ferrara, Unindustria Bologna and Confindustria Modena for company
recapitalization transactions, as have specific agreements for the financing of all
types of short, medium and long-term investments, including: special financing for
13th- and 14th-month deferred wages, taxes and duties, energy-related loans for
investments in energy savings and efficiency, financing for technological innovation
and profit participation loans.
New treasury agreements were also signed with small-business associations, such as
the regional small craft business protocol and the Confintesa accord with craft
businesses and small retailers in the province of Ferrara.
The Bank, the first in the Emila-Romagna region to have adopted this measure, also
extended the debt moratorium for small and medium-sized businesses to the
agriculture industry. The Bank had immediately pledged to participate in the
moratorium agreed between by the Ministry for the Economy and ABI, which is valid
for all industries, with the exception of businesses that have received subsidized
loans. One particular interpretation excluded farming businesses and blocked this aid.
This prompted a long series of meetings between the regional government, banks and
the agricultural loan guarantee consortia. The region had formalized a request not to
13
consider the subsidized loans granted to farmers as “government aid”. In addition to
the ordinary agreements for the agricultural industry, a regional protocol was signed
together with the agricultural guarantee consortia that made €20 million in credit
available to agricultural businesses on highly advantageous terms.
Finally, in the area of activities with the local authorities, agreements were
established with the municipalities of the territory in which we operate aimed at
supporting the businesses and the professionals with receivables due from them
owing to the restrictions imposed by the Stability Pact, with the granting of financing
against assignment of the related invoices.
In the building industry, the Bank allocated €10 million in credit to projects aimed at
assisting this key industry for our economy, incorporating the Government’s Piano
Casa building legislation, which was made operational by the Emilia Romagna
regional government and by local authorities. This financing is intended to meet the
needs of individuals related to home expansions of up to 20% in volume, which can
be increased to 35% when accompanied by energy-efficiency improvements and to
50% in the case of buildings being moved from protected areas or other areas at risk.
The Bank ensures fast, low-cost loan origination on facilitated terms and conditions,
particularly in cases in which the project includes energy efficiency enhancements.
This set of initiatives to support businesses and households for energy savings
projects falls under a broad, detailed plan designed specifically to contribute to the
sustainable growth of the community and is in line with our “green bank” vision,
focused on the issues of energy savings and smart consumption.
In addition, €10 million in funds were also made available to support business
recapitalization and international expansion. This is one of the main features of the
agreement signed with Confindustria Modena, which includes interesting subsidy
measures. Financing for capital increases (with a ceiling of €750,000) is granted at a
fixed spread regardless of the credit rating of the company concerned, i.e. a fixed
spread of 1.20% over 3-month Euribor. In relation to international expansion efforts,
Cassa di Risparmio di Cento has chosen to support businesses in meeting the costs of
purchasing, restructuring and leasing properties abroad for use by the company;
purchasing the plant and equipment needed to establish and develop
telecommunication connections; specialist consulting for joint ventures and other
partnerships with businesses; and participating in international trade fairs. The
interest rate applied is equal to 3-month Euribor plus a spread that varies depending
on the company’s credit rating.
A - Operations
The amounts shown in the tables in this report are expressed in thousands of euros.
Funding from customers
The following table shows the volume and percentage breakdown of total funding by
technical form and percentage variation over the last three years.
14
31 Dec. 2009
31 Dec. 2008
31 Dec. 2007
Due to customers:
Current accounts and
demand deposits
Repurchase agreements
Other loans
Bonds
Certificates of deposit
Total direct funding from customers
Liabilities in respect of
assets assigned but not
derecognized
Total direct funding
Indirect funding*
Total funding
1,792,935 47.42%
3,780,718 100.00%
1,864,186 51.53%
3,617,393 100.00%
2,060,815 56.36%
3,656,211 100.00%
31 Dec. 2009
1,042,472 58.14%
750,463 41.86%
31 Dec. 2008
1,210,994 64.96%
653,192 35.04%
31 Dec. 2007
1,187,496 57.62%
873,318 42.38%
238,234
259,799
155,158
1,864,186
277,954
401,759
193,605
2,060,815
1,056,881
27.95%
913,266
25.25%
820,989
22.45%
60,652
1,630
790,994
77,626
1.60%
0.04%
20.92%
2.05%
123,852
1,725
646,671
67,693
3.42%
0.05%
17.88%
1.87%
192,167
2,128
548,733
31,379
5.26%
0.06%
15.01%
0.86%
1,987,783
52.58%
1,753,207
48.47%
1,595,396
43.64%
217,446
5.75%
256,009
7.08%
237,100
6.48%
2,205,229
58.33%
2,009,216
55.54%
1,832,496
50.12%
Breakdown of indirect funding*
Administered
Under management
- of which:
Investment funds
273,983
Portfolio management
278,434
Life insurance
198,046
Total indirect funding
1,792,935
* management control figures
36.51%
37.10%
26.39%
100%
36.47%
39.77%
23.75%
100%
31.83%
46.00%
22.17%
100%
As the table shows, total funding increased by 4.5% over the previous year. Direct
funding continued growing at a rapid pace (+13.4%), while indirect funding declined
by 3.8%. The most significant increase within direct funding came from bonds
(+21.6%), with current accounts and demand deposits (+15.7%) and certificates of
deposit (+14.7%) also posting growth. Repurchase agreements continued to decline.
Regarding indirect funding, while the administered component declined (-13.9%),
assets under management increased (+14.9%), with the growth being reflected in all
three components: investment funds (+15.0%); portfolio management (+7.2%); and
life insurance (+27.6%).
The ratio of direct funding to total funding continued to increase, as a result of
growth in all aggregates, with the exception of repurchase agreements with
customers. The continuing uncertainty on the markets make the performance of
direct funding even more encouraging, while indirect funding continued to decline as
a percentage of the total (from 51.5% to 47.4%). Within indirect funding, the
administered component accounts for 58.1% of the total, compared with 65% for the
15
previous year. Consequently, the managed component rose from 35% of the total to
41.9%.
Loans to customers
NET LOANS TO CUSTOMERS
Current accounts
Medium/long-term loans
Credit cards and personal loans
Other transactions
Impaired assets
- of which: 90 to 180 days past
due
Assets assigned but not
derecognized (performing)
Debt securities
Total carrying amount
Guarantees
Total loans to customers
NET LOANS TO CUSTOMERS
(% composition)
Current accounts
Medium/long-term loans
Credit cards and personal loans
Other transactions
Impaired assets
- of which:
90 to 180 days past due
Assets assigned but not
derecognized
Debt securities
Total carrying amount
Guarantees
Total loans to customers
31 Dec. 2009
342,470
1,028,085
9,508
148,506
94,059
31 Dec. 2008
415,704
927,363
12,565
235,969
36,293
31 Dec. 2007
399,640
810,871
15,113
203,224
50,944
35,577
-
-
215,597
255,673
234,473
5,008
1,843,233
122,730
1,965,963
5,029
1,888,596
129,718
2,018,314
1,714,265
146,497
1,860,762
31 Dec. 2009
17.4%
52.3%
0.5%
7.6%
4.8%
31 Dec. 2008
20.6%
45.9%
0.6%
11.7%
1.8%
31 Dec. 2007
21.5%
43.6%
0.8%
10.9%
2.7%
1.8%
-
-
11%
12.7%
12.6%
0.3%
93.8%
6.2%
100.0%
0.2%
93.6%
6.4%
100.0%
92.1%
7.9%
100.0%
16
GROSS LENDING AND GUARANTEES TO ORDINARY CUSTOMERS
BY SIZE OF EXPOSURE
31 Dec. 2009
Amount
31 Dec. 2008
% of total
Amount
lending
31 Dec. 2007
% of total
lending
Amount
% of total
lending
10 largest customers
93,643
4.69%
106,973
5.23%
98,194
5.17%
20 largest customers
146,788
7.34%
171,856
8.40%
161,015
8.47%
50 largest customers
261,691
13.09%
308,697
15.09%
289,057
15.21%
Total gross lending
1,998,755
2,045,538
LOANS BY BRANCH OF ECONOMIC ACTIVITY
% COMPOSITION - 2009
SECTOR AND BRANCH
Government
Financial companies
Consumers
Agriculture, forestry and fishing products
Energy products
Ferrous and non-ferrous minerals/metals
Non-metal minerals and products
Chemical products
Metal products excluding transport equipment
Agricultural and industrial machinery
Data processing equipment
Electrical material and supplies
Transport equipment
Food products, beverages and tobacco
Textiles, leather products, footwear, clothing
Paper, paper products, publishing
Rubber and plastic products
Other industrial products
Construction and public works
Wholesale and retail trade services, recovery and
repair services
Hotels and catering
Domestic transport
Transport-related services
Other market services
Communications services
TOTAL
17
1,900,084
Amount
%
15,098
47,172
624,221
54,758
13,860
4,435
21,323
17,847
41,245
49,035
6,733
25,905
7,743
34,786
20,278
11,270
12,103
16,158
248,077
0.8%
2.6%
33.9%
3.0%
0.8%
0.2%
1.2%
1.0%
2.2%
2.7%
0.4%
1.4%
0.4%
1.9%
1.1%
0.6%
0.7%
0.9%
13.5%
165,649
26,114
12,655
8,830
357,815
123
9.0%
1.4%
0.7%
0.5%
19.4%
0.0%
1,843,233
100.0%
LOANS BY ECONOMIC SEGMENT
% composition
Government
Financial companies and quasi-corporate
enterprises
Non-financial companies and quasicorporate enterprises
Private and unclassified social institutions
Households (consumer and producer)
31 Dec. 2009
0.55%
31 Dec. 2008
0.52%
31 Dec. 2007
0.34%
2.56%
4.32%
3.11%
54.92%
0.27%
41.70%
100.00%
56.21%
0.32%
38.62%
100.00%
55.38%
0.79%
40.39%
100.00%
The tables above confirm the substantial diversification of risk over time in the
various economic segments.
Bad debts
The ratio of bad debts to total lending shows the following trends:
BAD DEBT RATIOS
31 Dec. 2009
Bad debts – principal amount
Doubtful loans
Net bad debts
32,676
11,148
21,528
Coverage percentage after recognition of loss (1)
34.1%
31 Dec. 2008
16,078
5,346
10,732
33.3%
31 Dec.
2007
44,255
18,261
25,994
41.3%
Gross loans
1,876,025
1,915,820
1,753,587
Writedowns
Net loans
32,792
1,843,233
27,224
1,888,596
39,322
1,714,265
(1) The coverage ratio of bad debts prior to recognizing the loss was 51.1% in 2009
and 44.6% in 2008.
Bad debts/loans gross of writedowns
31 Dec. 2009
Gross bad debts
Gross loans
Gross bad debts/gross loans
32,676
1,876,025
1.74%
31 Dec. 2008
16,078
1,915,820
0.84%
31 Dec.
2007
44,255
1,753,587
2.52%
Bad debts/loans net of writedowns
31 Dec. 2009
Net bad debts
Net loans
Net bad debts/net loans
21,528
1,843,233
1.17%
18
31 Dec. 2008
10,732
1,888,596
0.57%
31 Dec.
2007
25,994
1,714,265
1.52%
New bad debt ratios
31 Dec. 2009
New bad debts
Average loans for the year
Ratio of new bad debts to loans
31 Dec.
2007
31 Dec. 2008
28,705
1,853,995
1.55%
20,557
1,766,003
1.16%
16,339
1,630,419
1.00%
Performance
31 Dec.
2009
Income statement
31 Dec.
2008
31 Dec.
2007
% chg.
08-09
Net interest income
53,889
58,575
52,229
-8.00%
Net fee and commission income
Operating revenues (gross income + other operating
income/expenses)
Operating expenses (administrative expenses +
amortization/depreciation)
20,302
20,566
20,577
-1.29%
83,241
79,227
78,836
5.07%
53,796
51,942
43,933
3.57%
Administrative expenses
51,853
50,142
42,388
3.41%
Net operating income
29,445
27,286
34,903
7.91%
Profit (loss) before tax on continuing operations
14,115
15,929
25,201
-11.39%
7,145
8,687
14,531
-17.76%
Net profit (loss) for the period
Administrative expenses
31 Dec.
2009
31 Dec.
2008
31 Dec.
2007
% chg. 08-09
Personnel expenses
31,643
29,045
26,137
8.95%
Other administrative expenses
20,210
21,097
16,251
-4.20%
Total administrative expenses
51,853
50,142
42,388
3.41%
Provisions for risks and charges and impairment of
loans
31 Dec.
31 Dec.
31 Dec.
2009
2008
2007
% chg. 08-09
Net provisions for risks and charges
-1,701
-986
-446
72.55%
Net loss on impairment of loans
-13,230
-9,893
-9,171
33.73%
The Bank’s performance was affected by the heightening of the crisis that swept
through all industries and the consequent abrupt fall in interest rates following the
monetary policy response of the world’s central banks. In this challenging
environment, net interest income declined from the levels posted in 2008 due mainly
19
to the squeeze on the cost of funding and the decline in lending volumes, particularly
to businesses.
The margin on services increased as a result of the strategies implemented in previous
years aimed at maintaining the positions achieved in asset management, based on the
awareness that the quality of the products placed will also be a source of satisfaction
for customers.
Performance for the financial services segment returned to its usual high standards,
thereby enabling us to achieve significant growth in gross income (+6.6% over 2008).
Finally, net income from financial activities also increased (+2.6% over 2008),
despite a considerable increase in provisions for credit risk (+31%).
Net of extraordinary items totaling €3.3 million (150th anniversary, early retirement
incentives and other significant items), expenses were significantly lower, which
testifies to our strategic focus on containing the various individual components of
spending.
B – The situation of the Bank
Lending
Activity in the lending area was particularly intensive last year. The process of
establishing approval powers was redesigned. The responsibilities of the authorizing
bodies are now determined based on a combination of factors: the risk category of the
loan type; the size of the exposure, both by risk class and globally; the customer
segment concerned; the customer’s credit rating; the type of customer; and the type of
transaction. The inclusion of credit ratings among the drivers of assigning approval
powers was a response to the need to increase efficiency and use the loan approval
process to direct the riskiest positions to more senior decision-making levels while
also increasing approval powers for less risky positions in order to promote a more
streamlined commercial approach.
Internal rules were modified with regard to the maturity of transactions in response to
the Bank of Italy's redefinition of "short-term" transactions. As part of the ongoing
efforts in technological innovation, the new procedure to manage customer advances
was launched.
In the area of “problem loans”, the Bank saw an increase in positions being restored
to performing status despite the challenging economic and social environment in
which we operated as a result of the financial crisis. On numerous occasions, efforts
involving the most seriously impaired positions also enabled more rapid start
(compared with other creditors) of recovery action and judicial execution of mortgage
claims.
Medium/long-term lending
In 2009, the Bank promoted a great many initiatives in support of the community.
Unfortunately, the recession, whose disruptive economic and social effects began to
emerge in 2008, had a significant impact on consumer purchasing power and business
20
earnings, particularly for smaller firms, which account for the lion’s share of the local
economy. This compromised both growth and investment and had a negative impact
on employment.
In particular, in order to limit the hardship for businesses as much as possible and to
give relief to households experiencing the greatest challenges, last year the Bank was
engaged in: a) renegotiating mortgage loans for primary residences, extending
payment plans. This initiative, which is still in effect, was one of those that the Bank
proposed in conjunction with our 150th anniversary in order to offer private borrowers
in difficulty due to special circumstances (temporary layoffs, permanent job losses,
etc.) the option of making payments of interest alone for up to 12 months and
extending the maturity of loans for the same period of time; b) renegotiating
unsecured and mortgage loans granted to small and medium-sized enterprises, in
application of the accord between the Ministry for the Economy and Finance, ABI
and industry associations for a 12-month moratorium on principal payments and
extension of repayment plans for the same length of time. The accord is operational
until 30 June 2010.
Of particular note among the other initiatives the Bank has adopted in response to the
crisis is the “Prestito sull’Onore” (honor loan) agreement reached with the city of
Cento and the aforementioned protocol of understanding to support the income of
employees of struggling companies.
*
In 2009, interest rates on medium and long-term loans continued the decline that
began in the latter part of 2008. 6-month Euribor went from an average of 3.502% in
December 2008 to 1.010% in December 2009. At the same time, 3-month Euribor
fell from an average of 3.431% in December 2008 to 0.725% in December 2009.
The demand for credit rose in terms of the number of loans, but declined in value.
Loans to individuals for home purchases and/or renovations increased from the
previous year. Mortgage lending to businesses also increased. Conversely, unsecured
loans to companies declined, as did smaller loans to individuals (Prestito amico and
Prontacassa, for example) used mainly to purchase consumer goods.
The Finance area
At the beginning of this report, we underscored the gravity of the world’s economic
and financial crisis. In such a difficult context, management of the securities
portfolio, which is described in detail in Section E of the notes to the financial
statements, focused on maintaining a prudent risk/return profile, while also taking
advantage of any trading opportunities that the market had to offer. The
predominance of bonds issued by Italian banks in the portfolio enabled us to achieve
better-than-expected performance, thereby confirming that the impairment losses
recognized last year were temporary and due to the lack of liquidity and the
especially poor performance of markets at the end of 2008.
The exposure of the portfolio to credit and interest rate risk remains limited, with a
weighted average duration of less than 3 months for both the held-for-trading and
21
available-for-sale portfolios and a modified duration – which shows the sensitivity of
prices to changes in interest rates – of 0.21.
In 2009, nearly all investments in funds of hedge funds were sold, and relative-value
strategies were implemented for the equity segment, but in amounts that never
exceeded 2% of the trading book.
Liquidity management continued to play a role of primary importance in 2009.
Liquidity needs declined gradually from 2008, thanks to a carefully selected mix of
direct funding and refinancing operations with the European Central Bank. In
particular, participation in the 12-month auctions held by the ECB in September and
December enabled us to replace liquidity with a weekly maturity with 12-month
funds.
The asset management segment also benefited from the recovery of the financial
markets. The performance of the individual asset management lines, which was
achieved at levels of volatility below that of the market, largely exceeded the
respective benchmarks. In addition to the positive performance in terms of returns,
net funding also increased. The multi-manager approach that has always been at the
heart of the Bank’s asset management philosophy bore fruit by enabling us to
overweight the best products for the individual managers while diversifying
investments.
Following the poor performance of the markets until March, customers remained
highly risk averse and favored investments in financial instruments with a low
risk/return profile. This was manifested as a preference for short-term securities with
certain interest flows and guaranteed capital upon maturity. The sharp drop in 3-6
month rates also resulted in a decline in the volume of repo transactions and
investments in 3-month Treasury bills. The bonds issued by the Bank continued to be
well received by investors thanks to their simplicity and transparency, both at the
time of placement (with a prospectus prepared by the Bank and approved by
CONSOB) and in subsequent trading. The system of determining prices on the
secondary market is also explained in the prospectus, which helps to limit the severe
fluctuations generated by the financial markets.
The sales network
The number of branches has risen to 48 with the opening of the branch in San
Lazzaro di Savena. Of these, 21 are now located in the province of Ferrara, 17 in the
province of Bologna, and 10 in the province of Modena.
The Bank now serves 21 municipalities, of which 7 are in the province of Ferrara, 13
in Bologna and 7 in Modena.
There are now a total of 55 automated teller machines and 1,507 point-of-sale
terminals, accounting for a total of 1,128,510 transactions executed.
In a testament to our role as a “local” bank, the Bank performs treasury activities for
a number of local governments within the area. In 2009, we renewed the treasury
services contract with the City of Nonantola, and again won the public tender for the
treasury services contract for the City of Finale Emilia.
22
Partnerships with area schools are also strong. In 2009, cashier service contracts were
acquired for the new schools established in the cities of Sant’Agostino, Poggio
Renatico and Vigarano Mainarda following the reorganization of the primary and
secondary schools in those areas.
Products and services
Regarding actual commercial activities, the launch of new products and services has
intensified in response to the need to provided customers with an increasingly
diversified range of effective, up-to-date opportunities.
In the funding/services segment, the “Ci Conto” deposit account was launched.
On the financial services side, of particular note are the CRC bonds and certificates of
deposit denominated in foreign currencies; the funds Arca Cedola Governativo Euro
Bond, Corporate Bond, Governativo Euro Bond series II, and Corporate Bond series
II; and the portfolio management accounts “Euro Quant” and “Black Diamond, which
are being promoted particularly for private banking customers.
Then there are the Eurovita policies “Special coupon 3.50%, Step up”, “Eurospring”,
“Eurolight Spring”, “Special dual coupon”, “Eurofit single premium”, “Return” (for
the “tax shield”); and the restyling of the Eurovita policies “Aurora VIP”,
“Eurocash”, and “Eurocoupon”.
On the lending side, new loan offerings include “150° Rata Light” (with the option to
extend the payment plan) and “150° Zero%” (with a zero spread for the first 12
months). Other products have also been designed and launched in conjunction with
our 150th anniversary, as discussed elsewhere in this report.
Finally, new home banking functions have been launched (i.e. payment of the RAI
television tax, online bank transfers, and information on savings deposits).
Efforts in the services area were particularly intensive and resulted in an increase in
the number and value of agreements or other initiatives implemented with
associations and public entities.
A factoring agreement was signed with GE Capital Finance.
As a part of our constant, constructive partnership with businesses, the Bank has
confirmed the offering of extraordinary financing for enterprises intended for
payment of INAIL workplace insurance premiums. As has been done for a number
of years now, special credit has also been made available to businesses for selfassessed tax payments, tax payments on account and settlement of final balances, and
for natural disasters in order to support the local economy.
Similarly, special loans were confirmed for businesses with fewer than 150
employees to help finance staff holiday pay during the summer break and for 13thmonth deferred wage payments.
The launch of most of these products was supported by extensive marketing
campaigns, including advertising through various local and national media outlets.
23
REMOTE BANKING
PRODUCTS
BANCOMAT
Number of active ATMs
Number of withdrawals
Amount
PAGOBANCOMAT P.O.S.
Number of machines installed
Number of debits
Amount
31/12/2009
31/12/2008
55
777,804
114,864
52
1,007,641
138,421
50
964,299
132,548
1,507
1,128,510
77,747
1,523
1,086,992
76,383
1,342
1,021,114
72,175
31/12/2007
Private banking customers
In 2009, the Bank reached the important milestone of having all of our private
bankers certified as European Financial Advisors (EFAs), in addition to their
longstanding certification as financial advisors in Italy. This is yet another step along
a broader training path, which seeks, over time, to place the customer increasingly at
the heart of our day-to-day operations by agreeing goals and the vision for achieving
those goals with them.
In order to provide the most advanced solutions to our private banking customers, last
year we activated a multi-manager asset management line known as “Black
Diamond”. Under this line, the Bank and the customer agree the asset allocation of
the portfolio, highlighting the expected return, the duration of the bond component,
and overall volatility. The asset allocation can be altered at customers’ discretion,
based on their risk profiles and investment objectives, discussing the process with the
financial advisor.
In the spring of 2009, the Bank sponsored a series of conferences in Ferrara as part of
the “Scuola per Genitori” (school for parents) project. Coordinated by Prof. Paolo
Crepet, this project was extremely well received, with more than 800 people signing
up, including customers of the Bank’s private banking operations.
Retail customers
Competition in this segment of the banking industry intensified during the year, as
the large national and international banks have begun to consider what was until now
the realm of smaller banks to be a strategic target. For this reason, our focus has been
directed at keeping service quality high and service terms and conditions attractive to
our customers.
In the area of direct funding, such a difficult year meant that certificates of deposit
were popular, as they meet the needs of security that many customers have and
complement the bond offering that, for us, has always featured clear, transparent
products, which has enabled us to increase the offering further, while also offering
securities with longer maturities in order to lend additional stability to the Bank’s
24
funding. Towards the end of the year, a campaign (Ci Conto) was also launched with
the goal of acquiring new customers on the funding side.
Corporate customers
Our traditional consulting and support for businesses is provided through a wide
range of financial services. During the year, innovative tools and methodologies were
proposed in the form of financial products and consulting for investments in
renewable energy and energy efficiency. Inspired by the increasingly pressing
problem of energy costs and climate change, the Bank has distinguished itself as a
“green bank”, finding real opportunities for economic recovery by investing in
energy, eco-sustainable building, and agro-industrial businesses.
In concert with the Foundation, we also launched information initiatives targeting
businesses and households regarding energy and climate change. Considerable effort
was spent on organizing conferences in the various provinces in which we operate
(Ferrara, Bologna and Modena) regarding renewable energy generation, with a
particular emphasis on photovoltaic systems, co-generation, and energy efficiency for
new and renovated homes, while also launching initiatives with leading local and
national proponents of these fields. These efforts were well received by both
businesses and households and provided an adequate return for the Bank.
An agreement was also signed with the Agency for Energy and Sustainable
Development (AESS – Agenzia per l’Energia e lo Sviluppo Sostenibile) for the
installation of photovoltaic systems, which was supported by Geovent Srl, a service
firm established by 11 municipalities in the provinces of Modena and Bologna. A
similar agreement is also being defined for the cities of the upper Ferrara area.
Also of note are the two new loans for energy-efficient building and photovoltaic and
other renewable energy systems (“Efficienza energetica edifici: per le ristrutturazioni
agevolate 55% e la nuova edilizia ad alta efficienza” and “Fotovoltaico e impianti
energie rinnovabili”), as well as the credit allocated for building expansion projects
in accordance with the “Piano Casa” legislation.
Intensive activities also involved specialist products for businesses. In the leasing
segment, the repercussions of the economic crisis for the business world continued to
have a negative impact on investment and, consequently, on the demand for finance
leasing, which in 2009 had already posted a decline compared with 2008. In 2009, the
number of lease transactions decreased again, although considerably less than for the
Italian market as a whole. The “global assistance” service provided to customers to
help prepare applications under Law 1329/65 (the “Sabatini” Act), was particularly
well received.
Derivatives operations continued to target the corporate segment in 2009, although
transactions were concluded with individual customers as well. In the area of
factoring, the year saw an increased commitment to developing contacts and
establishing relations with customers, which was done mainly with the help of Emil
Ro Factor, in which the Bank has a stake.
Finally, operations expanded in the area of credit insurance, as well as in business
consulting on investment-related public subsidies and tax incentives.
25
The organizational and IT systems
During the year, the following important processes related to the organization took
place: the launch of new web-based branch procedures that reorganize and improve
all transaction with customers and increase the quality and quantity of the real-time
information provided; adaptation of company processes to the transparency
regulations issued by the Bank of Italy, which resulted in a revision of all contracts
related to customer-oriented services; adaptation of payment services to the European
Payment Services Directive, which establishes new rules for such services.
Logistics
Extraordinary maintenance of the Bank’s properties included the following: the
refurbishing of the entire façade of Palazzo Rusconi, the Bank’s historic
headquarters, in conjunction with the 150th anniversary; the start of restructuring
work on the new headquarters in Cento.
In addition, the new branch in San Lazzaro di Savena was completed.
Security
The data security policy document was drafted and completed as required by law
(Legislative Decree 196/2003). In accordance with the obligations of Law 626/94, the
general document regarding the assessment of risks related to worker health and
safety was prepared and drafted. Regarding the risk of theft, pursuing the strategy of
not keeping cash in our safes and maintaining effective video surveillance 24 hours a
day, just 2 thefts were recorded.
Human resources
At 31 December 2009, the Bank had 426 employees, of whom 417 were on
permanent contracts and 9 on fixed-term contracts (an overall increase of 7
employees from 31 December of the previous year).
The average workforce for 2009 came to 421 employees, compared with 416 in 2008.
There were a total of 16 new hires (1 on a permanent contract and 15 on fixed-term
contracts). There were a total of 9 terminations of employment (5 on permanent
contracts and 4 on fixed-term contracts). Finally, 22 fixed-term contracts were
converted into permanent contracts.
In 2009, much work was done with the trade unions in order to execute a project for
participation in the Solidarity Fund, which would call for the potential early
retirement of employees that meet the requirements for retirement over the next five
years. These efforts resulted in the actual participation of 17 employees, who will be
retiring between January and September 2010.
In order to support skills development in conjunction with this generational change,
with experienced employees leaving the company during the year, work was also
done to prepare a project to bring in new employees on four-year professional
training contracts beginning in March 2010. These efforts included screening
applicants, recruiting and selection, designing the contract, defining the individual
26
training program, etc. Similarly, considerable commitment was dedicated to
extensive efforts to recruit experienced personnel in order to find people to bring in
for future branch openings, as well as for the new branch that was opened at the end
of the year in San Lazzaro di Savena (Bologna). In 2009, we also turned to the
services of temporary employment agencies for the first time, an experience which
proved to be the ideal solution to managing peaks in operations, which came about, in
particular, in response to the need to roll out the new IT platform for branch
operations. This project involved four pilot branches in 2009.
The commitment of previous years was kept alive in order to ensure continuity in the
quality and quantity of training initiatives, focusing particular attention on the
development of specific knowledge in the professional areas within the company. In
November, a detailed training plan was presented to obtain full financing from Fondo
Professionale Banca Assicurazione (FBA), which was granted. The plan was
organized as follows: an initiative aimed at developing the skills of management; a
project designed to identify the aptitudes and potential of young, less senior
employees ( “PER.FORM.A.R.E – PERcorso FORMativo Aziendale per Risorse in
Evidenza”); and, finally, a diverse series of initiatives regarding lending, finance,
legislation and other areas of interest. Particular emphasis was also placed on
conducting the training called for by the protocol for maintaining ISVAP
certification, which is essential for employees listed with this register in order to
continue being able to sell insurance products.
During the year, computerized evaluation forms were again used to obtain a clear and
transparent overall professional assessment for all employees. No significant changes
were made to the form, given that the feedback from the evaluators and those being
evaluated was very positive.
The control system
Again in 2009, the Bank placed emphasis on refining the skills and tools for the
assessment, measurement and management of risk. In particular, efforts focused on
refining the internal ratings system, which is described in detail in Section E of the
notes to the financial statements, as well as on the constant analysis of interest rate
and liquidity risk, which included appropriate stress tests.
Last year was the first full year of annual reporting to the Bank of Italy under the
Internal Capital Adequacy Assessment Process (ICAAP). The Bank dedicated a great
deal of technical energy to the detailed measurement of exposures to all types of
material risk.
In 2009, the structure of the overall system was further refined with the establishment
of the position of financial reporting manager, who has certified these financial
statements.
Many internal codes of conduct/operations were revised in order to make the control
processes more efficient and effective and to comply with the following regulations
regarding corporate governance and organization, which were issued by the Bank of
Italy on 4 March 2008 and became effective in July 2009: rules for transactions with
27
related parties; rules for personal transactions with relevant parties; and rules for the
various control functions, such as Internal Audit, Compliance and Risk Management.
The Compliance unit was especially committed both to ensuring compliance with the
above regulations and to the constant verification of the conformity of internal rules
with regulatory requirements, with particular regard to money laundering and the “tax
shield” capital repatriation scheme. Another issue faced was that of transparency in
relation to both the Consolidated Banking Act issued by the Bank of Italy and the
rules being issued by the Government regarding commissions charged to customers.
The Compliance and Internal Audit units worked together with the Supervisory Body
established in accordance with Law 231/2001, whose mission is to analyze the
Bank’s activities concerning the preparation of an appropriate compliance model.
In 2009, the efforts of Internal Audit focused on verifying compliance with the
legislation and internal regulations regarding securities intermediation and employee
compliance with the rules and principles set out in the internal Self-Disciplinary Code
and the Code of Ethics.
Particular emphasis was placed on compliance with transparency regulations and the
fulfillment of the obligations established by money laundering legislation.
Control activities also involved the Bank’s branches and headquarters. These
activities sought to verify and identify any risks related to lending and financial
services, as well as to identify the most significant operational risks, so as to remove,
reduce or continue monitoring such risks.
Regarding the management of customer complaints, controls were conducted, in
addition to the analysis, definition and settlement of such complaints, in order to
determine the causes of any disservice reported.
Cassa di Risparmio di Cento and the local community
As always, numerous initiatives were undertaken throughout the territory, ranging
from society to culture, sports to hobbies. This year, these activities were often
conducted in concert with the programs for our 150th anniversary.
The numerous technical workshops and conferences for businesses are described
elsewhere in this report.
Among the most significant projects for the community, “Sapori senza maschera”,
which was repeated and enhanced in 2010, involved conferences and other meetings
designed to be an opportunity to promote the territory and its cuisine, as well as the
food and agriculture firms of the area: quality localism right here in Cento. The
official name of the event came from its connection with the Cento Carnival, which is
famous throughout Europe, as well as from the need for in-depth knowledge of the
value chain underlying the food we eat; all of which was done with a view to
transparency and safety. Speakers at the event, featuring industry experts,
researchers, business people and spokespeople, included Giovanni Rana, Francesco
Amadori, Luigi Cremonini, Paolo Bruni, and Vincenzo Tassinari, as well as the Fava
group, Andalini and Negrini. Two sessions were held each day: one in the morning
28
with schools and one in the afternoon with industry experts and mere citizens
interested in the topic.
As discussed in another section of this report, a number of conferences were also
promoted regarding the topic of renewable energy.
Other events specifically for businesses were held to discuss challenges in foreign
trade. This was carried out in close collaboration with the Ferrara Chamber of
Commerce and within the scope of an interesting series of seminars and workshops
promoted by the chamber of commerce.
The Bank was present with stands and booths in a number of trade shows in the
region, beginning with the historic Cento and Misen event (Bondeno).
In the area of culture, the Bank was again involved in “Invito a Palazzo”, an
initiative enabling hundreds of thousands of people to visit the historic buildings of
Italian banks. As such, Palazzo Rusconi, with its works of art and its architecture,
was opened to the public on the first Sunday of October.
The Bank provided its traditional support in organizing the international youth
literature award “Fondazione CariCento” and contributed to the success of an
excellent book on the solidarity and commitment of young people in helping the
victims of the Abruzzo earthquake. Another initiative in support of the young people
of the community was our renewed sponsorship of the “Giochi della Gioventù”
(youth games).
A sponsorship agreement for the Cento Carnival was signed and then confirmed in
2010. This event provides a great deal of international visibility and interesting media
opportunities, and the Bank’s customers and shareholders again received an entrance
pass free of charge.
Finally, special assistance was established for our customers in relation to the exhibits
at Palazzo dei Diamanti in Ferrara.
On the whole, a total of some 700 contributions were made in support of sports,
culture and society, for a total of some €500,000.
Our 150th anniversary
In conjunction with the 150th anniversary of the founding of Cassa di Risparmio di
Cento, the Bank and the Foundation carried out numerous initiatives with and for the
community, involving the latter in the awareness that their fortunes have always been
tied to those of the Bank and vice versa.
A simple, but well attended celebration kicked off the various initiatives at the end of
March, and these events were repeated at the various bank branches.
In April, our anniversary was celebrated at the employee convention and at the
meetings of shareholders of the Foundation and the Bank.
A marvelous photography exhibit was inaugurated in May, at the Representation
Hall, in collaboration with the prestigious Alinari archives. Entitled “In Cento50
anni”, the exhibit sought to promote awareness of the relationship that the Bank has
had with the community and of what the Bank has done to support our community.
More specifically, the exhibit was designed to show the moments, the places and the
29
people that have characterized Cento and the nearby cities such as Modena, Bologna
and Ferrara, as well as the profound economic, social, architectural and
environmental changes that have taken place over the last hundred and fifty years.
In June, we held the “Festa del Volontariato e dello Sport”, an important event for
volunteer work and sports for young people, their families, the local sports
organizations, and those working in social realms. Prominent figures from the world
of sports come to the crowded Cento sports arena, including world champions such as
the cyclist Francesco Moser, the canoeist Antonio Rossi, the boxer Alessandro
Duran, and the jujitsu duo of Michele Vallieri and Vito Zaccaria, as well as the soccer
coach Osvaldo Bagnoli and goalkeepers Nello Cusin and Fabrizio Ferron. From the
world of volunteer work, among the thousand active companies and individuals from
the local area and beyond, speakers at the event included Franco Pannuti, chairman of
ANT; Brother Lucio Cariani, a missionary working in Africa; the Department of
Civil Protection, the Crocetta Association, and the Sagre Association. The event was
hosted by Red Ronnie and Chiara Buratti and closed with a concert by Paolo Belli
and his band.
In the summer, a video was produced about the history of the Bank and the territory
in which we operate, which included meaningful references to the most important
events of Italian and world history.
The height of the Bank’s celebrations was reached with the conference “Fondazioni e
Banche: i sistemi economici locali”, a day dedicated to the ethics of finance and
economics and to the active role that the community’s banks and banking foundations
play. The conference was held in Cento’s “Borgatti” theater, with the morning
session featuring the presence of authorities such as Gianfranco Fini, President of the
Chamber of Deputies, Vasco Errani, President of the Region of Emilia Romagna, and
Giuseppe Guzzetti, the chairman of ACRI, all of which was moderated by Enrico
Mentana. The afternoon session was dedicated to an important, in-depth roundtable
discussion on finance, moderated by the economist Fabrizio Onida. First and
foremost, the event highlighted the central role the Bank has played in the social and
economic development of the region, while also recalling the values that underlie the
activities of the Foundation, based on the principles of subsidiarity – the same
principles mentioned a number of times by Pope Benedict XVI in his recent
encyclical. The Bank and the Foundation are a particularly effective unified whole,
thanks to their efforts socially and to the parallel work of the Bank, controlled by the
Foundation and with deep roots in the community.
In October, we presented the grand social project featuring Cento’s Giordani
preschool, the building of which is to be refurbished, including restoration of the
school’s theater, which will also be made available to the community of Cento. This
preschool has a long, important history. Officially opened in 1870 (some fifty days
before the breach of Porta Pia and just a few years after the Bank), the school is a
classic example of a project brought about by a small, “inevitable” group of
visionaries, but completed, consolidated and then further developed with the
commitment of the community. While Antonio Giordani, director of the Bank, was
among the leading promoters of the association, together with the rector, Don Vito
30
Facchini (secular and religious together), Giuseppe Borselli, the first chairman,
donated great amounts of his own funds until his death in 1892. Cassa di Risparmio
di Cento played a key role when, in the early 1880s, it bought the current location
with incorporated homes and refurbished them. A few years later, the property was
expanded to the adjacent building. We owe a great deal to Chairman Borselli, who
was, at the same time, chairman of the bank. The preschool’s inevitable financial
difficulties were always overcome thanks to the generosity of many, beginning with
Cassa di Risparmio di Cento and now Fondazione CR Cento. Dear to the hearts of the
people of Cento, the preschool has historically been a symbol of the desire of the
Bank and of the Foundation to act in the best interests of the city.
In the fall, as well as in other periods of the year, seminars and other meetings for
businesses were held to discuss economics.
The celebrations came to a close with the publication of the book for the 150th
anniversary, featuring Cento, its history and its territory, but above all its Bank and its
Foundation at the service of its community and its economy for over a century and a
half. Indeed, the mandate of the organizing committee for the 150th anniversary was
clear: to publish not a celebratory book, but one that would describe the key moments
in the history, the growth, the expectations, the projects and the challenges both of
Cassa di Risparmio di Cento and of the community in which we operate. Indeed, both
have been supporting each other with strength and conviction since 1859 and have
been working together to find solutions of benefit to all. One would not be the same
without the other. This “symbiosis” was the inspiration not only of the book’s
coordinators, but also of the authors called upon to write pieces on a wide range of
specific topics, all related to the Bank’s “universe” – finance and economics, of
course, but also social issues, history, art and culture. What has the Bank (and then
the Foundation) done? How as this benefited the community? And who has been
chosen to lead the Bank over the years? What were their values? How did the bank
and its organization evolve? In terms of methodology, we wanted to avoid presenting
history in a traditional, chronological manner. Instead, we sought variety in
expression, including essays, tables, interviews, images of yesterday and today, and
even a short story written for the occasion.
We also distributed an exquisite numbered engraving by Claudio Bortoluzzi
representing Palazzo Rusconi, the Bank’s headquarters since the turn of the 20th
century.
*
Initiatives, yes. But also financial action with a social component. Thus we have
decided to donate one euro for each current account opened during the year to the
ANT Foundation. This initiative was widely promoted by both the Bank and the
foundation, and culminated in the Festa del Volontariato described above. ANT will
be receiving more than €5,000. In conjunction with the Festa del Volontariato, the
competition “150 per tre” was also launched. This scratch-and-win competition
featured a great many prizes (e.g. prepaid cards, mobile phone top-ups, iPods, digital
photo and video cameras, and GPS navigators).
31
Generally speaking, a great many opportunities to meet and communicate during the
year were centered around our anniversary. Of particular note was the Bank’s
presence at the Cento fair with a stand dedicated to our 150th anniversary.
Research and development
In the early part of 2009, the main research efforts concerned issues of governance in
response to the new regulations regarding bank governance and organization issued
on 4 March 2008, which called for significant changes in corporate governance and
even a revision of the articles of association. The Corporate Governance project came
out of this research and was submitted to the Bank of Italy on 30 June 2009.
We have also spoken previously of the refinement of the techniques for measuring
risks related to the ICAAP, but intelligence activities related to product marketing
and distribution were also important, particularly with regard to financial services, for
which the Bank has refined the strategies and procedures for the new investment
consulting service and cutting-edge products particularly in the area of portfolio
management products, such as “Black Diamond”.
32
4. Report on corporate governance
In accordance with Article 123-bis of the Consolidated Law on Financial
Intermediation, Cassa di Risparmio di Cento has prepared a report on corporate
governance for 2009. The report, which the Board of Directors approved on 23
March 2010, is available to shareholders and the public on the company’s website
(www.crcento.it), as well as at the company’s headquarters, and has been distributed
at the meeting of shareholders.
5. Capital and shareholder structure
At 31 December 2009, the Bank’s equity, before payment of dividends, came to
€186,718,550, as follows:
SHAREHOLDERS’ EQUITY
31/12/2009
Share capital
Share premium reserve
Reserves
Valuation reserves
Equity instruments
Sub-total
Earnings for the period
Total equity
31/12/2008
67,499
30,851
60,203
21,021
179,574
7,145
186,719
67,499
30,851
55,436
20,106
173,893
8,687
182,580
31/12/2007
66,030
26,627
47,687
24,179
278
164,801
14,531
179,332
The total number of shares was 13,081,193. They were held as follows: Fondazione
Cassa di Risparmio di Cento: 6,714,291 shares (51.33%); the holding company
“Fondazione Cassa di Risparmio di Cento”: 2,046,000 shares (15.64%); individual
shareholders: 4,320,902 shares (33.03%).
At 31 December 2009, there were no treasury shares held. In any event, such shares
are traded by way of a system of weekly auctions. During 2009, a total of 97,368 of
the Bank’s shares were traded, as compared with 113,792 for the previous year. The
weighted average price was €27.03 per share for a total value of €2,632,005, as
compared with €3,404,657 for the previous year. The share price declined by 14.48%
during the year. The high for the year was €29.00, and the low was €24.80.
33
Regulatory capital and capital ratios
Regulatory capital at 31 December 2009 came to €194,957,611. The total capital ratio
was 11.70%, and the Tier 1 ratio was 9.54%.
31/12/2009
163,081
-753
-3,370
158,958
45,411
-6,042
-3,370
35,999
0
194,957
1,666,425
1,520,152
3,121
143,152
11.70%
9.54%
Tier 1 capital before prudential filters
Total IAS/IFRS filters
Elements to deduct from Tier 1 capital
Total Tier 1 capital
Tier 2 capital before prudential filters
Total IAS/IFRS filters
Elements to deduct from Tier 2 capital
Total Tier 2 capital
Other elements to deduct
Regulatory capital
Risk-weighted assets
- for credit risk
- for market risk
- for operational risk
Total capital ratio
Tier 1 capital ratio
31/12/2008
158,549
-2,602
-1,395
154,553
47,708
-6,510
-1,395
39,804
-990
193,367
1,831,842
1,681,255
13,438
137,149
10.56%
8.44%
31/12/2007
148,093
-217
-3,352
144,524
49,396
-7,354
-3,352
38,690
-991
182,223
1,963,823
1,890,904
72,919
9.28%
7.36%
Outlook
The hoped-for signs of recovery did not emerge in the first quarter of 2010, although
the first faint improvements in production indicators could be glimpsed. The Bank
has therefore maintained its focus on credit risk and has further developed efforts in
the area of reputation risk, which, as the Bank of Italy has underscored, has become
essential to assessing a bank’s ability to cope with a crisis and to contribute to
economic recovery.
Significant post-period events
A number of regulatory developments had an impact in the first part of 2010:
- Legislative Decree 27 of 27 January 2010 concerning the transposition of the
Directive regarding the rights of shareholders of listed companies, including the
issuers of widely-held listed financial instruments such as those of the Bank, as well
as the procedures for shareholder participation and techniques for presenting agendas
for meetings of shareholders. These changes will require another revision of the
articles of association.
- The new CONSOB regulations regarding transactions with related parties, which
will require another change to internal regulations and operations.
- The legislative decree that modifies the activity of independent auditors, which also
affected the procedures by which the auditing firm is to be proposed in this general
meeting of shareholders.
34
Conclusions
An extremely challenging 2009 is now behind us, but it would be overly optimistic to
think that the current year will allow for substantially different performance. Thus,
we are expecting another stretch of bumpy road ahead. We do not know how long it
will be, but it will be challenging. This is shown in a number of unmistakable
indicators, namely the low level of orders, the likely fall in employment and the
forecasts for interest rates, which are expected to remain at their current, unusually
low levels for many more months. The real economy will continue to struggle.
Faced with this discouraging scenario, the Bank must leverage its best qualities: our
strong roots within the community, the trust that businesses and individuals have in
us, the expertise of our staff, the commitment of all areas of our organization, and the
vitality of a region that has always overcome even the hardest of times.
The range of growth factors for the Cento area is also expanding, although, as
mentioned above, critical issues are also on the rise. All of this has emerged from the
in-depth study conducted by Centro Documentazione Studi (CDS) of Ferrara on
behalf of the Bank and published in the volume dedicated to our 150th anniversary. A
summary of the conclusions of the research is presented here. We would like to point
out that the study underscored the six traditional keys to the success of the region,
which dates back to before the Second World War, and clarified a number of other
aspects. These six keys are: the Partecipanze agrarie (agrarian commons; Cassa di
Risparmio di Cento; social cohesion; the local identity; the fact that it is a “border
land”; and the creation of a new governing class and a dynamic, entrepreneurial
middle class.
This combination of factors sparked a new “made in Cento” entrepreneurial identity,
which developed in the 1950s and 1960s, but growth did not stop there. It continued
and strengthened thanks, in part, to the success of the “Taddia” professional institute.
CDS further noted that a unique form of political autonomy developed in Cento, one
infused with little ideology, but with a staunch defense of an administrative identity
“against” the province and the region. The industrial district was then established at
the same time that human capital was being strengthened through high levels of
education and of training generally.
Now, the road ahead has become more challenging; the obstacles have multiplied, as
have the critical issues. According to CDS, the “dark side” of the “Cento Model” is
twofold: its political autonomy (this time not always a positive factor) and the
governance of social change. For the former, the study shows that, although political
autonomy assisted growth in the area, it has also placed limits on the infrastructure
and economic policies of the province and the region. In other words, in the past
Cento was able to stand alone (and obtain various benefits), given that the area was
self-sufficient, but this is no longer sustainable today. As for the second cause for
concern, CDS has found that the Cento model has been changing rapidly, beginning
with the systems of social mobility that created it in the first place. Perhaps the
people of Cento are finding it difficult to interpret the new model. At the same time,
skilled labor is declining, while immigrant labor, which needs to be socialized in line
35
with the local identity, is increasing. The CDS study continues by noting that we need
to reinterpret the mechanisms of inclusion that ensure social cohesion, and new
policy planning is a priority for the area.
This substantial slowing has also been confirmed by another study by Rivo Ghelfi of
the University of Bologna, which is also presented in the same volume and which
speaks of “tired heroes” and the clear signs of stasis (with few new patents and a
decline in the number of university graduates compared with other areas, particularly
in the field of engineering).
Nonetheless, the Cento area remains the province’s most dynamic, and is one of the
most vibrant in the region. However, we need to understand the repositioning our
area is experiencing, so that we can maintain a course suited to facing the challenges
of both the present and future.
The difficulties of this moment in history, discussed repeatedly here, should not
distract us from the Bank’s strengths, particularly its increasingly deep roots in the
community, its image earned over many years of professionalism and transparency,
and the value added provided through the social initiatives carried out both directly
and, above all, through our parent, Fondazione Cassa di Risparmio di Cento. And
that’s not all. In terms of performance, while the banking system as a whole is
showing clear signs of strain, the Bank is not just holding ground, it is also able to
generate revenue. In that regard, it is important to note that all of our branches have
broken even: a great achievement.
Moreover, regardless of the slogans, banks are not all the same. This is the message
that has been repeated throughout the celebration of our 150th anniversary and which
has become the leitmotiv of many discussions about banking. The Bank’s leaders are
not the only ones to be convinced of this. Many businesses, investors, and our other
stakeholders generally, i.e. all those who are in some way involved with the bank, a
bank that is, not coincidentally, viewed as a “local” bank, distanced from the
disastrous creative finance that has run rampant in recent years.
*
In closing this report, the Board of Directors would like to reiterate the cause for
satisfaction represented by the buoyancy the Bank has displayed throughout this
challenging year.
There is an increasing need for cohesion and unity among all stakeholders – including
businesses, associations, the consumer and public institutions – in order to confirm
and develop the Bank’s extensive presence throughout the territory.
The current Board of Directors is ending its three-year term with the satisfaction of
having given its utmost commitment, a commitment rewarded with especially strong
performance given the difficult economic and financial circumstances we have faced.
*
Our heartfelt thanks go to the Bank’s shareholders and all our customers for the trust,
support and collaboration provided, all of which again testifies to your appreciation of
the professional relationship that has been created and is the key to the positive results
that have been illustrated here.
36
We would also like to thank the General Manager, Ivan Damiano, for the
commitment, professionalism, constant presence and care that have characterized his
efforts throughout such a long series of challenges this financial year.
We further add our appreciation for the effective, diligent work of management and of
all the personnel of both general management and the various branches. We are
grateful for the work they have done, which was made objectively more difficult by a
context that was anything but simple. They, first and foremost, have made Bank’s
positive performance possible, and we are convinced that their ongoing commitment
will be indispensable in growing the business in the future.
Our thanks also go to the Bank of Italy and to Roberto Marchetti, Director of the
Bologna branch, and all of his colleagues for the invaluable suggestions and support
they have provided.
Finally, we would like to thank ABI and ACRI for their ongoing support and
professionalism, as well as the Universities of Ferrara, Bologna and Modena, the
authorities and public bodies of our territory, the industry associations, the various
professional bodies, and the volunteer groups for their extensive and effective
collaboration.
THE BOARD OF DIRECTORS
37
PROPOSED DISTRIBUTION OF INCOME FOR 2009
NET PROFIT FOR THE YEAR
7,144,537.61
- allocation to the legal reserve
(5% Art. 24 of the articles of association)
357,226.88
- allocation to the statutory reserve
(10% Art. 24 of the articles of association)
714,453.76
-allocation to the extraordinary reserve
3,456,618.37
- dividend distribution of €0.20 per share
to the 13,081,193 shares (36.6% payout)
2,616,238.60
Total
7,144,537.61
After the allocation of net profit as proposed above, shareholders’ equity will
comprise:
Item 130 – Valuation reserves
Item 150 – Equity instruments
Item 160 – Reserves
Item 170 – Share premium reserve
Item 180 – Share capital
21,020,813.42
64,731,212.90
30,851,329.00
67,498,955.88
Total shareholders’ equity
184,102,311.20
38
FINANCIAL STATEMENTS
39
BALANCE SHEET
ASSETS
10.
20.
40.
60.
70.
80.
110.
130.
150.
Cash and cash equivalents
Financial assets held for trading
Financial assets available for sale
Due from banks
Loans to customers
Hedging derivatives
Property and equipment
Tax assets
a) current
b) deferred
Other assets
TOTAL ASSETS
40
31/12/2009
11,041,753
35,577,750
108,620,420
322,615,985
1,843,232,964
8,506,602
44,125,413
17,991,028
8,673,859
9,317,169
35,428,575
31/12/2008
11,323,096
67,261,619
112,151,844
161,765,917
1,888,595,987
5,419,698
42,640,593
18,157,383
9,337,947
8,819,436
35,346,858
2,427,140,490
2,342,662,994
BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
10.
20.
30.
40.
60.
80.
100.
110.
120.
130.
160.
170.
180.
200.
Due to banks
Due to customers
Securities issued
Financial liabilities held for trading
Hedging derivatives
Tax liabilities
a) current
b) deferred
Other liabilities
Employee termination benefits
Provisions for risks and charges
a) retirement and similar liabilities
b) other provisions
Valuation reserves
Reserves
Share premium reserves
Share capital
Net profit (loss) for the period
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
41
31/12/2009
174,076,859
1,119,162,770
868,620,357
8,482,610
198,295
15,040,946
8,653,393
6,387,552
46,305,255
5,110,497
3,424,352
0
3,424,352
21,020,813
60,202,914
30,851,329
67,498,956
7,144,538
31/12/2008
315,085,902
1,038,842,962
714,363,722
7,854,090
1,319,826
14,982,226
8,349,897
6,632,329
54,506,226
4,994,175
8,133,847
4,299,568
3,834,280
20,106,349
55,435,938
30,851,329
67,498,956
8,687,448
2,427,140,490
2,342,662,994
INCOME STATEMENT
31/12/2009
10.
20.
30.
40.
50.
60.
70.
80.
90.
100.
120.
130.
140.
150.
160.
170.
190.
200.
240.
250.
260.
270.
290
31/12/2008
Interest and similar income
Interest and similar expense
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Dividends and similar income
Net gain (loss) on trading activities
Net gain (loss) on hedging activities
Gains (losses) on disposal or repurchase of
a) loans
b) financial assets available for sale
d) financial liabilities
Gross income
Net losses/recoveries on impairment of :
96,797,093
(42,907,999 )
53,889,094
24,299,532
(3,997,687 )
20,301,844
961,876
2,524,536
598,482
1,722,101
404,043
1,064,497
253,560
79,997,933
(13,623,599 )
131,710,141
(73,134,750 )
58,575,391
23,853,964
(3,287,570 )
20,566,394
399,138
(3,959,391 )
(804,285 )
289,044
766,474
(725,624 )
248,194
75,066,291
(10,399,118 )
a) loans
b) financial assets available for sale
d) other financial transactions
Financial income (expense), net
Administrative expenses
a) personnel expenses
b) other administrative expenses
Net provisions for risks and charges
Net adjustments of property and equipment
Other operating income (expense)
Operating costs
Gains (losses) on disposal of investments
Income (loss) before tax from continuing operations
Income tax expense for the period on continuing
operations
Profit (loss) after tax on continuing operations
Profit (loss) for the year
(13,229,691 )
(737,805 )
343,898
66,374,335
(51,852,720 )
(31,642,998 )
(20,209,722 )
(1,700,569 )
(1,943,467 )
3,242,873
(52,253,883 )
(5,914 )
14,114,538
(9,892,892 )
(514,654 )
8,428
64,667,173
(50,141,719 )
(29,044,893 )
(21,096,826 )
(985,562 )
(1,799,817 )
4,161,187
(48,765,911 )
27,931
15,929,193
(6,970,000 )
7,144,538
7,144,538
(7,241,744 )
8,687,448
8,687,448
42
STATEMENT OF COMPREHENSIVE INCOME
31/12/2009
10.
Profit (loss) for the year
31/12/2008
7,144,538
8,687,448
Other comprehensive income net of taxes
20.
Financial assets available for sale
914,464
(4,072,489 )
110.
Total other comprehensive income net of taxes
914,464
(4,072,489 )
120.
Comprehensive income (items 10+110)
8,059,002
4,614,959
43
As at
31/12/2007
Change
to
opening
balance
As at
1/1/2008
Reserves
Dividends
and other
allocations
Equity transactions
Changes
in
reserves
Issue of
new
shares
Special
Purchase
Changes in Derivatives
Stock
dividend
of own
equity
on own
options
shares distribution instruments
shares
Shareholders'
equity as at
31/12/2008
Changes for the period
Allocation of net profit
for the period
Comprehensive
income as at
31/12/2008
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY AT 31 DECEMBER 2008
Share capital
a) ordinary shares
b) other shares
Share premium reserve
66,030,059
66,030,059
0
1,468,897
0
0
0
0
0
0
26,626,826
26,626,826
0
4,224,503
67,498,956
30,851,329
Reserves:
a) earnings
b) other
Valuation reserves:
Equity instruments
Treasury shares
Net profit (loss) for the year
Shareholders' equity
42,213,994
0
42,213,994
7,748,801
0
0
5,473,143
0
5,473,143
0
0
0
24,178,838
0
24,178,838
277,907
277,907
0
0
14,530,958
179,331,725
0
0
0
49,962,795
0
0
0
20,106,349
8,687,448
8,687,448
(277,907 )
0
0
14,530,958 (7,748,801 ) (6,782,157 )
0 179,331,725
5,473,143
(4,072,489 )
0 (6,782,157 )
0 5,693,400
0
0
44
(277,907 )
0
0
4,614,959 182,580,020
As at
31/12/2008
Change
to
opening
balance
As at
1/1/2009
Reserves
Equity transactions
Changes
in
Special
Dividends
Issue Purchase
Changes in Derivatives
Stock
dividend
and other reserves of new
of own
equity
on own
options
allocations
shares shares distribution instruments
shares
Shareholders' equity
as at 31/12/2009
Changes for the period
Allocation of net profit
for the period
Comprehensive
income as at
31/12/2009
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY AT 31 DECEMBER 2009
Share capital
a) ordinary shares
b) other shares
Share premium reserve
67,498,956
67,498,956
0
(0 )
0
0
0
0
0
0
30,851,329
30,851,329
0
0
49,962,795
4,763,090
0
67,498,956
0
30,851,329
Reserves:
a) earnings
b) other
Valuation reserves:
Equity instruments
Treasury shares
Net profit (loss) for the year
Shareholders' equity
49,962,795
0
5,473,143
0
5,473,143
20,106,349
0
20,106,349
0
182,580,020
0
0
0
0
0
0
0
5,473,143
914,464
0
0
0
54,729,771
X
0
0
8,687,448
3,886
0
0
0
0
8,687,448 (4,763,090 ) (3,924,358 )
0 182,580,020
0 (3,924,358 )
7,144,538
3,886
0
21,020,813
0
0
45
0
0
7,144,538
0 8,059,002 186,718,550
STATEMENT OF CASH FLOWS
A. OPERATING ACTIVITIES
1. Operations
- net profit for the year (+/-)
-gains/losses on financial assets held for trading and on financial
assets/liabilities at fair value (- /+)
- gains/losses on hedging activities (+/-)
- net impairment adjustments (+/-)
- net value adjustments to property and equipment and intangible assets
(+/-)
- net provisions and other costs/revenues (+/-)
- unpaid taxes and duties (+)
- net adjustments of disposal groups held for sale
net of tax effects
- other adjustments (+-)
2. Net cash flows from/used in financial assets
- financial assets held for trading
- financial assets at fair value
- financial assets available for sale
- due from banks : on demand
- due from banks : other loans
- loans to customers
- other assets
3. Net cash flows from/used in financial liabilities
- due to banks : on demand
- due to banks : other
- due to customers
- securities issued
- financial liabilities held for trading
- financial liabilities at fair value
- other liabilities
Net cash flows from/used in operating activities
B. INVESTING ACTIVITIES
1. Cash flow from
- sales of equity investments
- dividends from equity investments
- sales/redemptions of financial assets held to maturity
- sales of property and equipment
- sales of intangible assets
- sales of business units
2. Cash flow used in
- purchases of equity investments
- purchases of financial assets held to maturity
- purchases of property and equipment
- purchases of intangible assets
- purchases of business units
Net cash flows from/used in investing activities
C. FINANCING ACTIVITIES
- issues/purchases of own shares
- issues/purchases of equity instruments
- dividend distribution and other
Net cash flows from/used in financing activities
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS
31/12/2009
33,143,356
7,144,538
31/12/2008
32,856,239
8,687,448
(556,383 )
1,061,901
(598,482 )
13,963,346
804,285
8,901,125
1,943,467
1,799,817
1,700,569
6,970,000
985,562
7,241,744
0
0
2,576,302
(95,811,154 )
34,036,688
0
2,447,698
(42,310,674 )
(119,143,212 )
27,352,808
1,805,539
69,739,099
(9,144,819 )
(131,864,297 )
80,868,712
153,296,375
628,520
0
(24,045,392 )
7,071,301
3,374,357
(177,704,044 )
134,972,964
0
(75,204,623 )
(20,690,958 )
(22,622,453 )
(181,984,461 )
(12,174,513 )
155,003,308
21,650,742
235,885,468
(213,279,022 )
122,946,443
363,621
340,143
0
0
0
340,143
0
0
(3,768,429 )
416,774
0
(3,768,429 )
0
0
(3,428,286 )
(12,563,944 )
10,155,503
416,774
(1,950,547 )
(1,950,547 )
(1,533,773 )
0
0
(3,924,358 )
(3,924,358 )
0
(277,907 )
(6,782,157 )
(7,060,064 )
(281,343 )
1,561,666
31/12/2009
11,323,096
(281,343 )
11,041,753
31/12/2008
9,761,430
1,561,666
11,323,096
Reconciliation
Cash and cash equivalents at beginning of period
Net increase/decrease in cash and cash equivalents
Cash and cash equivalents at end of period
In order to provide the reader with a better basis for understanding the Bank’s ability to generate, as
well as use, cash and cash equivalents, the Bank has decided to use the indirect method in presenting its
statement of cash flows. The figures for the previous year were reclassified for comparative purposes.
46
NOTES TO THE FINANCIAL STATEMENTS
Part A – Accounting policies
Part B – Information on the balance sheet
Part C – Information on the income statement
Part D – Comprehensive income
Part E – Risks and risk management policies
Part F – Information on capital
Part G – Business combinations
Part H – Transactions with related parties
Part I – Share-based payments
Part L – Operating segments
47
Part A – Accounting policies
A.1 – GENERAL INFORMATION
Section 1 – Declaration of conformity with International Accounting
Standards
The financial statements at 31 December 2009 of Cassa di Risparmio di Cento, Società per Azioni, in
accordance with Art. 4 of Legislative Decree 38 of 28 February 2005, have been prepared in
compliance with the international accounting standards issued by the International Accounting
Standards Board (IASB) and the related interpretations of the International Financial Reporting
Interpretations Committee (IFRIC), as endorsed by the European Commission under Regulation (EC)
no. 1606 of 19 July 2002.
The accounting policies in effect at 31 December 2009 (including SIC and IFRIC interpretations) used
in preparing these financial statements are listed in an attachment to this document.
Cassa di Risparmio di Cento does not holding controlling interests in other companies and is therefore
not a parent company under supervisory regulations. The Bank does not believe that it is required to
prepare consolidated financial statements since it does not meet the requirements under Art. 24 of
Legislative Decree 87/1992.
Changes in accounting policies
Below is a description of the primary changes made to the accounting policies, approved by the IASB
and endorsed by the European Commission, that affect the Bank’s current operations and that have been
applied in preparing the 2009 financial statements.
Revised IAS 1“Presentation of financial statements” – adopted with Regulation (EC) no. 1274 of 17
December 2008
The policy, applicable starting from 1 January 2009, requires that the statement of changes in
shareholders’ equity provide information on just transactions with shareholders. Therefore a new
statement—the statement of comprehensive income – reporting the costs and revenues recognized
directly in equity was introduced. In other words, it reports changes in equity not attributable to
transactions with shareholders (“non-owner changes in equity”).
Specifically, IAS 1 permits all costs and revenues, including those taken directly to equity, to be shown
in a single statement or in two separate statements. In its update of Circular no. 262, the Bank of Italy
opted to require the presentation of two separate statements, a practice the Bank follows herein.
48
IAS 1 is important for the purposes of disclosure, but it has no impact on how assets and liabilities are
measured in the financial statements.
Amendment of IFRS 7 “Financial instruments: disclosures” – adopted with Regulation (EC) no. 1165
of 27 November 2009
The amendment of IFRS 7 marks the IASB’s attempt to improve the clarity of disclosures following the
crisis in the financial markets by requiring additional information on fair value measurement and
liquidity risk.
Specifically, in measuring the fair value of financial instruments, additional disclosures must be
provided on how the fair value is determined using a three-level hierarchy (level 1, 2, 3) based on
observable market inputs, as described further herein.
As to liquidity risk, the amendment of IFRS 7 introduced a new definition of risk relating to the
difficulty of paying financial liabilities settled through the delivery of cash and other financial assets.
The disclosure on liquidity risk, prepared based on Circular no. 262, is found in Part E – Risks and risk
management policies, Section 3 – Liquidity risk.
IFRS 8 – Operating segments
IFRS 8 was issued in November 2006 and replaces IAS 14 – Segment reporting. The policy is in effect
starting from 1 January 2009. The Bank adopted this policy and the pertinent disclosure is found in Part
L –Operating segments.
Section 2 – General preparation principles
The financial statements consist of the balance sheet, the income statement, the statement of changes in
shareholders’ equity, the statement of cash flows, the statement of comprehensive income and the
explanatory notes. They are accompanied by the report on operations.
The financial statements and the notes were prepared in accordance with the instructions contained in
Bank of Italy Circular no. 262 of 22 December 2005, as amended on 18 November 2009.
The financial statements were prepared based on historical cost, except for derivative financial
instruments and financial assets available for sale, which are instead recognized at fair value. The
carrying value of assets and liabilities hedged at fair value that would otherwise be recognized at cost is
adjusted to take account of the changes in fair value caused by the hedged risks.
In accordance with Article 5 of Legislative Decree 38/2005, the financial statements were prepared
using the euro as the reporting currency. Amounts in the financial statements are expressed in euros,
while amounts reported in the notes are presented in thousands of euros.
The financial statements were prepared by applying the general principles provided by the accounting
standards endorsed by the European Commission and explained in Part A.2 of these Notes.
Transactions undertaken by the company are recognized based on the settlement date, with derivatives
based on the contract date. Income statement and balance sheet figures are recognized on an accruals
and going-concern basis. The general principles of the materiality and significance of information and
the prevalence of substance over form have also been taken into account. Every material class of items
that are similar in nature or function is shown separately in the balance sheet. Items of a different nature
or function are shown separately, if material. Assets and liabilities and revenues and costs have not been
offset except where expressly required or permitted by an accounting standard or interpretation.
49
Accrued income and prepaid expense and accrued expense and deferred income referring to the main
balance sheet categories are recognized under the items to which they refer, while the other are reported
among “other assets” or “other liabilities”.
The financial statements and the accompanying notes set out the figures for the present period as well as
comparative figures at 31 December 2008 for the balance sheet, the income statement, the statement of
comprehensive income, the statement of change in shareholders’ equity and in the statement of cash
flows.
Contents of the financial statements
Balance sheet and income statement
The balance sheet and the income statement are formed of items and sub-items. The statements do not
report items for which no amount has been posted for both the year under review and the previous year.
In the income statement, revenues are shown without a sign, while costs are shown within parentheses
as provided by law (a graphical convention equivalent to showing numbers preceded by the negative
sign).
Statement of changes in shareholders’ equity
The statement of changes in shareholders’ equity reflects the information required by Circular no. 262
of 2005 issued by the Bank of Italy and shows the composition and change in shareholders’ equity
items that occurred in the year under review and in the previous year.
Statement of comprehensive income
The statement of comprehensive income shows the profit or loss for the year and the changes in assets
recognized during the period in the valuation reserves.
Statement of cash flows
The statement of cash flows for the year under review and the previous year were prepared using the
indirect method and show net cash flow generated by operating, investing and funding activities.
Cash flows generated during the year are presented without a sign, while figures representing liquidity
absorbed are shown within parentheses.
Section 3 – Events subsequent to the balance sheet date
No events subsequent to the balance sheet are reported beyond those already described in the relevant
section of the report on operations.
50
Section 4 – Other information
In June 2009, the Bank signed contracts to initiate an EMTN program for the issue of bonds targeted at
institutional investors. The first two issues occurred on 16 September 2009 and 22 September 2009 for
a total of €140 million.
In 2009, the defined-benefit portion of the pension program was partly liquidated and partly outsourced
to a specialist pension fund management firm.
Comparative information
The following comparative information in respect of the previous period is provided in accordance with
IAS 1 – “Presentation of Financial Statements”. Items in the financial statements are classified using the
same criteria used in the previous period, with the exception of:
§
§
§
§
€3,563 thousand relating to recoveries of stamp duty and special taxes, reclassified in the
financial statements and the explanatory notes from “Other administrative expenses” to “Other
operating expenses/income”. The equivalent amount for 2009 came to €3,429 thousand.
€2,026 thousand relating to fee and commission income on current accounts and deposits,
reclassified in the financial statements and the explanatory notes from “Other operating
expenses/income” to “Fee and commission income”. This item amounted to €2,067 thousand in
2009.
€143 thousand relating to the compensation of members of the Board of Auditors, reclassified in
the financial statements and the explanatory notes from “Other administrative expenses” to
“Personnel expenses”. The equivalent amount at 31 December 2009 came to €144 thousand.
€77 thousand relating to fees and commissions for management of securities, reclassified in the
financial statements and the explanatory notes from “Other administrative expenses” to “Fee
and commission income”. This item amounted to €117 thousand in 2009.
The reclassifications were made to comply with the update to Bank of Italy Circular no. 262 and to
present the information more accurately.
51
A.2 – NOTES TO THE MAIN ITEMS OF THE FINANCIAL
STATEMENTS
This section sets out the accounting policies adopted in preparing the financial statements at 31
December 2009. The presentation of the accounting policies adopted by Cassa di Risparmio di Cento,
Società per Azioni comprises a discussion of the stages of recognition, classification, measurement and
derecognition of the various asset and liability items. A description of the impact on profit or loss, if
any, is provided for each of these stages.
1. Financial assets held for trading
Recognition
Debt and equity securities are initially recognized at the settlement date, while derivatives contracts are
recognized at the date they are signed. Debt and equity securities are recognized at fair value at the
settlement date, without taking into account transaction costs or revenues.
Classification
This category includes debt and equity securities and the positive values of derivatives held for trading.
Derivates held for trading include embedded derivatives that are subject to separate recognition in the
following circumstances:
the financial and risk characteristics of the embedded derivative are not strictly correlated with
those of the host instrument;
embedded instruments, even separately recognized, satisfy the definition of a derivative;
the hybrid instrument is not subject to measurement at fair value with the difference recognized in
the income statement.
No transfer to other categories is allowed, except where there are unusual circumstances that are
unlikely to recur in the short term.
Measurement
Financial assets held for trading are measured at fair value following initial recognition. The effects of
this measurement are taken to profit or loss.
For financial instruments listed on active markets, the fair value is determined on the basis of the
official prices. For financial instruments that are not listed on active markets, fair value is determined
using commonly adopted estimation/valuation models that take into account all the risk factors
associated with the instruments: realizable value determined based on the price of listed instruments
with similar features, calculation of discounted cash flows, option pricing models, prices registered in
recent similar transactions, the solvency and country risk of the debtor.
For equity securities and derivatives on such securities, if the fair value cannot be reliably determined
following the guidelines above, they are measured at cost.
Derecognition
Financial assets held for trading are derecognized when substantially all of the risks and rewards
connected with ownership of the asset are transferred to a third party. Conversely, when a prevalent
share of the risks and rewards associated with ownership of the financial asset is retained, the assets
continue to be recognized even if legal title has been transferred. If the Bank retains even a portion of
52
control, the assets continue to be recognized to the extent of the continuing involvement, measured by
exposure to changes in the value of the assets transferred and to changes in the related cash flows.
Criteria for recognizing costs and revenues
Interest is recognized on an accrual basis. The effect of the measurement at fair value is recognized
through profit or loss.
Dividends are recognized at the time of distribution is authorized. The Bank has changed its practice
with respect to 2008 when the assets were recognized on a cash basis. This change resulted in the
recognition of €454 thousand through profit or loss.
2. Financial assets available for sale
Recognition
Financial assets available for sale are initially recognized at the settlement date.
Financial assets are initially recognized at fair value, including transaction costs or revenues directly
attributable to the instrument.
If a financial asset held to maturity is reclassified as available for sale in certain cases permitted under
these accounting policies, the amount recognized is the fair value at the time of transfer.
For the reclassification of financial assets held for trading prior to 1 November 2008 in relation to the
amendment of IAS 39, it is explicitly provided that the fair value of the instrument at 1 July 2008
become its recognized value in the category to which it is reclassified.
Classification
This category includes financial assets other than derivatives that are not classified in the balance sheet
as “loans and receivables”, “financial assets held to maturity” or “financial assets held for trading”.
This item includes:
Ÿ bonds that are not frequently traded;
Ÿ equity securities resulting from the reclassification of equity investments that are not held for
trading and do not qualify as a subsidiaries, associates or joint ventures;
Ÿ other equity securities that are not listed and holdings in private equity funds and other units in
collective investment undertakings.
Financial assets available for sale can be reclassified as financial assets held to maturity if:
· there has been a change in the intention or ability to hold the instrument to maturity;
· it is no longer possible to reliably measure the fair value (rare circumstances);
· the period under the tainting rule has passed and the portfolio of assets held to maturity can be
reformed.
It is also possible to reclassify the instruments to the category “loans and receivables” if the conditions
outlined in the “Other information” section below are met.
Measurement
Following initial recognition, financial assets available for sale are measured at fair value, while
measurement gains and losses are recognized in a special equity reserve until the asset is derecognized
or an impairment loss is recognized. The interest accrued on bonds using the effective interest rate is
taken to the income statement. At the time of transfer or recognition of an impairment loss, the reserve
is reversed, in whole or in part, to the income statement.
Fair value is determined using the same methods adopted for financial assets held for trading.
Equity instruments whose fair value cannot be reliably determined are carried at cost.
53
Available-for-sale financial assets undergo impairment testing to determine whether there is objective
evidence of impairment. The amount of the loss is measured as the difference between the carrying
amount of the asset and the present value of projected cash flows, discounted using the effective interest
rate, or using specific valuation methods for measuring equity instruments.
Where the reasons for the impairment should cease to obtain, writebacks are recognized in the income
statement for debt securities and in equity in the case of equity securities. The amount of the value of
the asset after the writeback shall not in any event exceed the amortized cost that the instrument would
have had in the absence of the prior writedown.
On 7 May 2009, IFRIC offered an interpretation on the meaning of the concepts of a “significant” or
“prolonged” reduction in the fair value of an equity instrument classified as AFS. As a result, the Board
of Directors of the Bank decided at its 15 September 2009 meeting to change the policy approved on 24
March 2009 for drawing up the financial statements at 31 December 2008. These policy changes were
required given the characteristics of the equity instruments held by Cassa di Risparmio di Cento as
available for sale, and due to the high degree of market instability reported starting from the second half
of 2007. The policy now better defines the quantitative criteria to be used to determine whether
impairment has occurred, namely where the fair value at the balance sheet date is more than 30% lower
than the original carrying amount or the fair value remains below the initially recognized value for 48
straight months for private equity securities and 12 months for stock.
As a result of the Board’s decision, a negative reserve with respect to provisions for private equity was
established in the amount of €123 thousand.
Derecognition
Financial assets available for sale are derecognized when substantially all of the risks and rewards
connected with ownership of the asset are transferred to a third party. When a prevalent share of the
risks and rewards associated with ownership of the financial asset are retained, the assets continue to be
recognized even if legal title has been transferred. If the Bank retains even a portion of control, the
assets continue to be recognized to the extent of the continuing involvement, measured by exposure to
changes in the value of the assets transferred and to changes in the related cash flows.
Criteria for recognizing costs and revenues
Dividends from shareholdings are recognized in the period in which their distribution is authorized. The
Bank has changed its practice with respect to 2008 when the assets were recognized on a cash basis.
This change resulted in the recognition of €454 thousand through profit or loss.
Accrued interest on debt instruments is recognized using amortized cost.
3. Financial assets held to maturity
Cassa di Risparmio di Cento S.p.A. does not have financial assets held to maturity. Nevertheless, the
accounting policies that apply to these assets are provided.
Recognition
Financial assets held to maturity are initially recognized at fair value, including transaction costs or
revenues directly attributable to the asset. If the assets recognized have been reclassified from financial
assets available for sale, the assets are initially recognized at the fair value on the date of transfer, the
value which is taken as the new amortized cost of the assets.
Classification
This category covers securities for which the Bank must have the ability and the intention to hold such
assets to maturity. If an asset is disposed of before maturity, even for valid economic reasons, the entire
category is subject to the “tainting rule”, i.e. the transfer of the entire portfolio to the category “financial
54
assets available for sale”. The portfolio of “financial assets held to maturity” cannot be reinstated for a
period of two years.
The intention and ability to hold the instruments to maturity is reviewed annually.
Instruments must meet the following requirements to qualify as held to maturity:
Ÿ fixed maturity;
Ÿ produce steady, measurable income flows;
Ÿ in accordance with the stricter rules issued by the Bank of Italy concerning the financial statement
of banks, they must also be listed on a regulated market.
Measurement
Following initial recognition, financial assets held to maturity are recognized at amortized cost using
the effective interest rate method.
The instruments undergo impairment testing to determine whether there is evidence of significant or
prolonged impairment. If so, the amount of the loss is measured as the difference between the carrying
amount of the asset and the present value of projected cash flows, discounted using the effective interest
rate, and is taken to profit or loss. Where the reasons for the impairment should cease to obtain,
writebacks are recognized in the income statement. The amount of the value of the asset after the
writeback shall not in any event exceed the amortized cost that the instrument would have had in the
absence of the prior writedown.
Derecognition
Financial assets held to maturity are derecognized when substantially all of the risks and rewards
connected with ownership of the asset are transferred to a third party. When a prevalent share of the
risks and rewards associated with ownership of the financial asset are retained, the assets continue to be
recognized even if legal title has been transferred. If the Bank retains even a portion of control, the
assets continue to be recognized to the extent of the continuing involvement, measured by exposure to
changes in the value of the assets transferred and to changes in the related cash flows.
Criteria for recognizing costs and revenues
Costs and revenues are recognized on an accruals basis using the amortized cost method.
4. Loans and receivables
Recognition
Loans and receivables are initially recognized at the date of the signing of the contract which generally
corresponds to the disbursement date for the amount disbursed, or at the subscription price, including
costs and revenues attributable to the individual loan or receivable and determinable from the date of
disbursement. The initially recognized amount does not include costs that, despite possessing the above
characteristics, are to be reimbursed by the counterparty or that can be characterized as normal
administrative costs.
For the reclassification of financial assets held for trading prior to 1 November 2008 in relation to the
amendment of IAS 39, it is explicitly provided that the fair value of the instrument at 1 July 2008
becomes its recognized value in the category to which it is reclassified.
Classification
Loan and receivables includes loans to customers and receivables due from banks, whether disbursed
directly or acquired from third parties, with fixed or determinable payments, that are not listed on an
active market.
This category includes trade receivables, reverse repurchase agreements, but does not include loans
listed on active markets.
55
Financial assets in this category cannot be reclassified to other categories.
Measurement
Following initial recognition, loans are measured at amortized cost using the effective interest method.
Amortized cost is arrived at using:
Ÿ the initial recognition amount;
Ÿ less principal repayments;
Ÿ plus or minus amortization using the effective interest method (difference between the initial
amount and the maturity amount);
Ÿ minus impairment;
Ÿ plus revaluation.
The effective interest method is used to calculate the amortized cost and interest income of the loan for
its entire life. The effective interest rate is the rate that exactly discounts estimated future payments over
the expected life of the loan to the net carrying amount at the time of initial recognition, including
directly attributable transaction costs and amounts paid or received between the contracting parties.
In estimating cash flows and the term of loans, the Bank takes into account all the clauses in the
contracts that could affect the amounts and maturities, and does not consider expected losses associated
with the loan.
This method is applied to medium and long-term loans, regardless of whether measured individually or
collectively.
The amortized cost method is not used for short-term loans because discounting these loans has no
material impact. Loans without a specified maturity and revocable loans are also not discounted.
Loans are tested for impairment at every annual and interim balance sheet date to determine whether, in
response to events that occurred subsequent to initial recognition, there is objective evidence of
impairment. Impaired loans include bad debts, substandard loans, restructured loans or loans past due in
accordance with the current regulations issued by the Bank of Italy, consistent with IAS.
Specifically, impaired loans are divided into the following classes:
bad debts: loans to parties that are insolvent or in a substantially similar situation;
substandard loans: loans to parties in objective temporary difficulty, from which they are expected
to emerge within an appropriate period of time.
Substandard status may be normal for a loan when based on the measurement of the Problem Positions
unit or “objective” where the characteristics set out in the Supervisory Instructions are found.
“Objectively substandard loans” are exposures with the following characteristics:
a) are fully secured by real property and granted to a natural person for the purchase of residential
property, for the debtor’s own use or for rental to a third party, when notice of foreclosure has
been served. These loans must also meet the preferential risk weight of 35% in the event the
standardized approach is used in the supervision of credit and counterparty risk.
b) loans other than that described in a) above where both of the following conditions are met:
i. are past due and/or overlimit on an ongoing basis:
1. by more than 150 days, in the case of consumer credit exposures of an original duration
of less than 36 months;
2. by more than 180 days, in the case of consumer credit exposures of an original duration
of more than 36 months.
3. by more than 270 days, for exposures other than those listed in 1) and 2) above.
ii. the total amount of the exposure described in “i” above and the other portions falling due in
less than 150, 180 or 270 days is at least equal to 10% of the entire exposure to that debtor
(excluding penalty interest).
restructured loans: loans to parties to whom a moratorium in the form of repayment at belowmarket interest rates has been granted;
loans past due and/or overlimit: loans to debtors that, at the end of the year, are past due or
overlimit for more than 90 days when assessed individually (up to 180 days until 31 December
56
2011). These exposures can be measured with respect to the individual debtor or the individual
transaction.
a) individual debtor: the exposure must be recognized as past due and/or overlimit when, at the
reporting date, the larger of the two following amounts is equal to or greater than 5%:
· the average of the past due and/or over-drawn portions of the entire exposure recognized
on a daily basis over the last preceding quarter;
· the past due and/or over-drawn portion of the entire exposure at the reporting date.
b) individual transaction: past due and/or over-drawn exposures secured by real property. The
past-due status must be ongoing and not subject to settlement using existing undrawn amounts
from other credit lines granted to the same debtor nor materiality thresholds.
These impaired loans are measured individually. The amount of the impairment loss on individual
loans, equal to the negative difference between the recoverable amount and the amortized cost of the
loans, is reported in the income statement. The recoverable amount is equal to the present value of
expected future cash flows, calculated based on the following:
- cash flows provided for under the contract, as estimated based on the debtor’s ability to meet the
obligations assumed and on the collateral and unsecured guarantees pledged as security;
- estimated recovery time, also taking account of the status of any pending procedures;
- internal rate of return.
Subsequently, the original amount of the loans is written back when the reason for the impairment
ceases to obtain. This writeback is taken to profit or loss.
Loans for which no objective evidence of impairment has been found undergo collective impairment
testing.
Impairment is measured based on uniform categories of credit risk and the relative loss percentages
using historical loss rates based on data observable at the measurement date.
Loans are grouped by similar risk classes, based on the characteristics that indicate the debtor’s ability
to meet its contractual obligations (type of relationship, economic sector, guarantees, insolvency status
and other relevant factors).
The group classifications reflect the same rating categories established in the new Capital Accord
(Basel II).
Loans are transferred from a collectively-measured group to one measured individually using the gross
amount since the writedowns do not follow the loan, but the amounts will be adjusted based on the
results at the end of the period, with “mass” writedowns or writebacks. Collectively-measured value
adjustments are taken to profit or loss.
Derecognition
Loans and receivables are derecognized when substantially all of the risks and rewards connected with
ownership of the asset are transferred to a third party. When a prevalent share of the risks and rewards
associated with ownership of the financial asset are retained, the asset continues to be recognized even
if legal title has been transferred. If the Bank retains even a portion of control, the asset continues to be
recognized.
If the risks and rewards associated with the asset are retained, the loan continues to recognized to the
extent of the continuing involvement in the asset, measured by exposure to changes in the value of the
assets transferred and to changes in the related cash flows.
Criteria for recognizing costs and revenues
Individual and collective writedowns are recognized in the income statement.
The cash flows of individually measured loans are discounted and the related cost is recognized in the
income statement. The amount is adjusted annually.
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The collective impairment provision is not discounted since the effective rate is estimated to be the
same as the contractual interest rate.
The reversal of the discounting effect in subsequent years is recognized in the income statement.
If the adjusted amount declines in subsequent years due to events (such as an improvement in the
debtor’s solvency status), a writeback is taken to the income statement. The maximum value of the loan
after the writeback cannot exceed the amortized cost that the loan would have at the time the writeback
is made.
Default interest on bad debts is recognized only upon collection.
5. Financial assets designated at fair value
The Bank has elected not to exercise the fair value option.
6. Hedging
Recognition
Derivative hedging instruments, like all derivatives, are initially recognized and subsequently measured
at fair value.
Classification: type of hedge
Derivatives instruments qualify as hedges where there is formal documentation of the relationship
between the hedged item and the hedging instrument and where the hedge is considered effective at
inception and throughout its life.
The effectiveness of the hedge depends upon the extent to which the changes in the fair value of the
hedged item or the related expected cash flows are offset by those of the hedging instrument.
Therefore effectiveness is measured and determined by comparing these changes, based on the intent of
the company at the time the hedge is created.
The hedge is effective when changes in the fair value (or the cash flows) of the hedging instrument
almost entirely offset, within the established interval of 80% to 125%, the changes in the hedged
instrument with respect to the hedged risk.
The effectiveness of the hedge is tested monthly using:
prospective tests, which justify the application of hedge accounting and demonstrate that the
hedge is effective;
retrospective tests, which show the degree of effectiveness achieved during the relevant period
and measure the difference between the effectiveness achieved and perfect hedging.
The hedge is terminated only in cases where the retrospective tests reveal that the hedge continues to be
ineffective, with the consequent accounting operations performed.
Hedging instruments can be used to hedge:
exposure to the risk of changes in the fair value of assets and liabilities or irrevocable
commitments;
exposure to the risk of changes in cash flows and exchange rates associated with assets or
liabilities or forecast transactions.
Fair value hedges are employed to reduce credit risk and interest rate risk. A fair value hedge is
generally used for fixed-rate assets with cash flows that do not vary during the life of the instrument.
The purpose of the hedge is to protect the present value of the asset or liability hedged and so the focus
is on the balance sheet.
This kind of hedge is also employed to hedge the market risk of fixed-rate or structured bond issues.
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Cash flow hedges are employed to reduce the variability of future cash flows connected with a
particular floating-rate asset or liability in order to manage and control the future variability of the
corresponding cash flow and so the focus is on the income statement.
Measurement
Hedging derivatives are always measured at fair value.
Derecognition
If the tests do not confirm the prospective and retrospective effectiveness of the hedge, the hedge will
no longer be recognized as such. In this event, the derivative hedging instrument is reclassified as held
for trading. The hedged instrument is recognized in the category to which it belongs at its fair value at
the time the hedge ceases to be effectiveness and will once again be measured according to the criteria
for its original category.
Criteria for recognizing costs and revenues
Recognition depends on the type of hedge:
1) in the case of fair value hedges, the change in the fair value of the hedged item is offset by the
change in the fair value of the hedging instrument. This offsetting is recognized in the income
statement when the values of the derivatives contract and the hedged asset are adjusted. Any
difference representing the partial ineffectiveness of the hedge represents the net impact on profit or
loss. The fair values of the hedged assets and liabilities are adjusted through profit or loss;
2) in the case of cash flow hedges, changes in the fair value of the derivative are taken to equity for the
effective portion of the hedge, and are recognized in the income statement only when a change in
cash flows from the hedged position (compared with expected cash flows) occurs or when the hedge
is found to be ineffective. The Bank does not hold any such position.
Hedges of a net investment in a foreign operation are recognized using the method applicable to cash
flow hedges. The Bank does not have any hedges of investments in foreign currency.
7. Equity investments
Does not apply to Cassa di Risparmio di Cento S.p.A.
8. Property and equipment
Recognition
Property and equipment is initially recognized at cost, which includes all incidental expenses directly
attributable to the transaction and to placing the asset in service in addition to the purchase price.
Extraordinary maintenance costs that increase the future economic benefits of such assets are
recognized as an increase in the value of the assets, while ordinary maintenance costs are recognized in
the income statement.
Classification
Property and equipment includes land and buildings used in operations and investment property,
technical plant, furnishings and equipment.
This item includes property and equipment:
- used in operations, such as land, buildings, furniture and furnishings, plants, machinery and technical
equipment;
- held for investment purposes, such as land and buildings.
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Property and equipment includes assets held under finance leases for which substantially all the risks
and rewards of ownership have been assumed by the Bank as lessee. Leased assets are initially
recognized at a value equal to the lesser of the fair value and the present value of the minimum
payments provided for under the lease contract. This amount is subsequently subject to depreciation.
Assets for which negotiations are under way for their sale and for which disposal is highly likely are
recognized among disposal groups.
Measurement
Property and equipment, including investment property, is measured at cost, less any depreciation and
impairment loss. Property and equipment is measured systematically on a straight-line basis over the
asset’s useful life. The depreciable amount is represented by the cost of the assets since the value
remaining at the end of the depreciation process is not deemed material. Buildings are depreciated
applying the depreciation rate that best reflects the deterioration of the assets following their use, taking
into account extraordinary maintenance, which goes to increase of the value of the assets.
Land is not depreciated as it has an indefinite useful life.
If there is evidence of impairment of the value of the asset, its carrying amount is compared with its
recoverable value and any difference is recognized in the income statement. If the reasons for the
impairment cease to obtain, a writeback is recognized.
Equipment, excluding works of artistic value, are recognized with respect to their useful life. For
uniform categories of assets, a useful life has been established, based on which depreciation is
determined on a straight-line basis starting from the month in which the asset is put into service.
Derecognition
An asset is derecognized when divested or when no future economic benefits are expected to be
obtained from it.
Criteria for recognizing costs and revenues
Depreciation based on the useful life of each category of asset is recognized in the income statement.
9. Intangible Assets
The Bank does not hold any intangible assets, nevertheless their accounting treatment is described
below.
Recognition
Intangible assets are recognized at the price paid at the time of acquisition, adjusted for any incidental
expenses.
Classification
Intangible assets are recognized as such only if they are identifiable, measurable, controlled by the
entity that prepares the financial statements and are capable of generating future economic benefits.
Intangible assets are identifiable when they can be separated from the entity or are based on legal or
contractual rights and include:
- software applications;
- trademarks and patents.
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Criteria for recognizing costs and revenues
The cost of intangible assets is amortized over the course of their useful life.
Derecognition
Assets are derecognized when there is evidence of impairment, or when no future economic benefits are
expected.
10. Non-current assets held for sale
Does not apply to Cassa di Risparmio di Cento S.p.A.
11.Current and deferred taxation
Recognition
Income tax provisions are accrued based on a prudential estimate of current tax liabilities and deferred
tax assets and liabilities. Deferred tax assets and liabilities are calculated in respect of temporary
differences between the carrying value of the assets and liabilities recognized in the financial statements
and their value recognized for tax purposes.
Deferred tax assets are recognized to the extent their recovery is deemed likely given future taxable
income. Deferred tax liabilities are recognized to the extent to which it is likely that the related
conditions for payment will occur in future years.
The tax rates used, distinguished by type of tax, are those in effect when the temporary differences
reverse, without time limitations.
Classification
Tax assets and liabilities are shown separately from other assets and liabilities in the balance sheet.
Deferred tax assets and liabilities are recognized separately from current tax assets and liabilities.
Measurement
Deferred tax assets and liabilities are measured at the end of the period to take account of any regulatory
changes or changes in tax rates and are not discounted.
Derecognition
Tax assets and liabilities are derecognized when there is no longer a valid reason for the existence of
receivables from or payables to the tax authorities.
At the end of the period, the “provision for deferred taxes” and “current tax assets” are adjusted to
reflect the reversal to the income statement of taxes that became current during the year.
Criteria for recognizing costs and revenues
Current taxes accrued during the year, deferred tax assets and liabilities arising during the year and
changes in stocks for the previous year are recognized in the income statement. They are taken to equity
when allocated to an equity reserve. Taxes with respect to assets held for sale directly reduce the
relevant items in the income statement.
12. Provisions for risks and charges
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Recognition
The provisions for risks and charges consists of liabilities for which the amount or maturity is uncertain
and recognized when:
- the company has a present legal or constructive obligation resulting from a past event;
- it is likely that resources will have to be used to perform the obligation;
- the amount of the obligation can be reliably estimated.
Provisions are recognized only for events preceding the closing date for the interim financial statements
and represent the best estimate possible of the amount required to satisfy the current obligation at the
balance sheet date.
Classification
“Other provisions for risks and charges” is comprised of amounts that could be owed in the event of the
loss of revocatory actions against the Bank, the estimated outlays for claims made by customers with
regard to securities trading activity, as well as a reliable estimate of other outlays for any other present
legal or constructive obligation at the balance sheet date.
During the year, the defined-contribution section of the retirement plan portion was liquidated.
Measurement
The amounts of the provisions are reviewed at every balance sheet date and are adjusted to reflect the
best current estimate, based on the Bank’s historical data. Where the impact of the passage of time is
material, the amounts are discounted using the current market interest rate (Euribor).
Derecognition
Each provision is used only for the purpose for which is was originally established.
Criteria for recognizing costs and revenues
Costs and revenues relating to provisions include:
- personnel costs for the provisions relating to current or retired staff;
- net accruals to provisions for risks and charges in other cases.
The impact of discounting is reflected in the income statement.
13. Debt and securities issued
Recognition
These financial liabilities are initially recognized at the date of signing of the contract, which usually
corresponds to the date on which amounts are received or debt securities are issued.
They are initially recognized at fair value, which is normally equal to the amounts received or the issue
price, plus or minus any additional costs or revenues directly attributable to the individual transaction.
Internal administrative costs are excluded.
Classification
The items “due to banks”, “due to customers” and “securities issued” include the various forms of
interbank and customer funding, reverse repurchase agreements and customer funding through
certificates of deposit, outstanding bond issues and subordinated loans, excluding any amounts
repurchased. They also includes the payable recognized by the Bank as lessee under a finance lease
arrangement.
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Measurement
Following initial recognition, financial liabilities are measured at amortized cost using the effective
interest method.
Short-term liabilities are excluded, since the time factor is insignificant, and are instead recognized in
the amount received.
Any portions representing equity are separated from debt securities.
Financial instruments covered by effective fair value hedges are recognized at fair value.
Derecognition
These financial liabilities are derecognized when expired or extinguished. They are also derecognized
when previously issued securities are repurchased.
The difference between the carrying amount of the liability and the amount paid to repurchase it is
recognized in the income statement.
If the repurchased security is subsequently placed again on the market, this is treated as a new issue and
is recognized at the new placement price.
Criteria for recognizing costs and revenues
Interest is recognized on an accruals basis. The amortized cost method applies to medium and long-term
liabilities, including any up-front costs.
14. Financial liabilities held for trading
Recognition
Debt and equity securities representing financial liabilities held for trading are recognized at the
settlement date, while derivatives are recognized at the date they are signed.
Derivative contracts embedded in financial instruments or other contracts, which have financial and risk
characteristics that are not correlated with the host instrument or which meet the requirements to be
classified themselves as derivative contracts, are recognized separately, if they have a negative value,
among financial liabilities held for trading, except in cases in which the complex instrument containing
the derivative is measured at fair value through profit or loss.
Classification
The item includes the negative value of trading derivatives as well as the negative value of derivatives
embedded in complex contracts.
Measurement
All financial liabilities held for trading are measured at fair value through profit or loss.
Derecognition
Financial liabilities held for trading are derecognized when expired or extinguished.
Criteria for recognizing costs and revenues
Costs and revenues from the measurement of financial liabilities held for trading are recognized through
the income statement.
15. Financial liabilities at fair value
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The Bank has elected not to exercise the fair value option. Therefore it does not carry financial
liabilities at fair value, other than those indicated by IAS 39 based on their specific functional
destination.
16. Foreign currency transactions
Initial recognition
Foreign currency transactions are initially recognized in the reporting currency by applying the
exchange rate prevailing at the transaction date.
Subsequent recognition
At each balance sheet date:
- monetary items are translated using the exchange rate prevailing at the balance sheet date;
- non-monetary items measured at historic cost are translated using the exchange rate prevailing at the
transaction date;
- non-monetary items carried at fair value are translated using the exchange rate prevailing at the
balance sheet date.
Criteria for recognizing costs and revenues
Exchange rate differences resulting from the settlement of monetary items or from the translation at
exchange rates other than the initial translation rate are recognized in the income statement in the period
in which they emerge.
17. Other information
Employee termination benefits
During 2007, the regulations governing the way in which employee termination benefits (trattamento
di fine rapporto) are handled were changed significantly (Law 296/2006, in effect from 1 January
2007). In the case of Cassa di Risparmio di Cento, a company with more than 50 employees, accrued
benefits where transferred, at the employee’s election, to the treasury fund managed by INPS (Italy’s
National Social Security Institute) or to specialized supplementary pension funds authorized and
supervised by COVIP (Italy’s Pension Oversight Commission).
As a result, the obligations accrued through 31 December 2006 and portions accrued through the option
exercise period (up to 30 June 2007) are reported in the financial statements in a special provision that
is revalued annually in accordance with the law (this requirement has not changed). The applicable
revaluation rate consists of two components, a fixed rate (1.5%) and a variable rate (75% of the change
in the consumer price index as calculated by ISTAT). This provision continues to represent definedbenefit plans under which benefits are paid on a deferred basis. Consequently, the recognized value is
determined on the basis of a specific actuarial estimate.
The portions of employee termination benefits accrued starting from 1 January 2007 are treated as a
“defined-contribution plan” regardless of whether the employee opts to pay into the supplementary
pension scheme or the treasury fund management by INPS. The amount of the portions, recognized
among personnel expenses, is calculated based on the contributions owed without applying actuarial
accounting methods.
At 31 December 2009 the actuarial value of the entire provision came to €5,110,497, compared with
€4,994,175 at 31 December 2008, with a use of the provision amounting to €137,266 and an overall net
effect on the income statement of €253,588.
The external portion of the provision for employee termination benefits, identified as “accruing after 1
January 2007” by Law 296/2006, has been added to the external supplementary pension scheme. The
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amount recognized in the income statement for 2009 came to €1,485 thousand, while the figure for
2008 amounted to €1,572 thousand.
Pension funds
Starting 1 July 2007, the defined-contribution pension program was terminated, with employees being
given the choice between a closed fund and an open fund. This action was required since the internally
managed fund no longer met the regulatory requirements for handling employee termination benefits.
In 2009, the defined-benefit portion of the fund was dissolved, in part by paying out benefits directly to
the beneficiaries and in part by outsourcing the responsibility to a leading insurance company. In July
2009, the Bank paid the insurance company a lump-sum premium to guarantee those still enrolled a
life-time monthly payment. On 31 July 2009, the Bank finally formally terminated the pension fund,
notifying the relevant authorities.
In response to the requests of the fund participants, the Bank included a clause in the agreements with
said participants stating that it would intervene should the insurance company find itself unable to
satisfy its obligations. Given the supplementary guarantee, the Bank continues to recognize the
obligation with respect to a defined-benefit plan. IAS 19 provides that the plan must be recognized at
the current amount of the obligation at the balance sheet date, net of the fair value of the assets servicing
the plan. In this specific case, the asset servicing the plan is the insurance policy entered into with the
payment of a sole premium in July 2009. Given the high credit rating of the investments underlying the
insurance policy and of the insurance company counterparty, the Bank did not believe it necessary to
adjust the value of the assets servicing the plan and, therefore, has shown an obligation of null under the
pension plans. On 31 December 2009, the entire mathematical reserve amounted to €1,295,655.
Guarantees and commitments
“Guarantees issued” includes all guarantees granted by the Bank.
Guarantees of a “financial nature” are those given to support transactions involving the acquisition of
financial resources, while guarantees of a “commercial nature” are those given to back specific
commercial transactions. Guarantees are reported in respect of the borrower, i.e. the party whose
obligations are backed by the guarantee.
Guarantees are recognized at nominal value, net of actual loans and any writedowns.
Commitments to disburse funds are irrevocable commitments of certain or uncertain use, and may give
rise to credit risk (commitments in respect of derivatives contracts are excluded). The recognized value
does not include amounts already disbursed and any writedowns.
Irrevocable commitments certain to be used include commitments to disburse funds the use of which by
the borrower is certain and defined: they are contracts that bind both the guarantor and the borrower.
They include, inter alia, securities purchases that are not yet settled (the company recognizes the
securities at the settlement date) and deposits and funding to be disbursed at an agreed future date.
Irrevocable commitments of uncertain use regard positions where use by the borrower is optional. In
this case, it is not certain whether and in what amount the funds will be effectively disbursed.
With regard to commitments underlying credit derivatives, sales of protection are commitments arising
from the sale of protection against credit risk.
They are recognized at nominal value, net of amounts disbursed and any writedowns determined
specifically for impaired positions and generally for performing positions.
Provisions for guarantees and commitments
The risk in respect of guarantees granted is determined individually for positions categorized as bad
debts or substandard and collectively for other loans. The provision is recognized under “Other
liabilities”.
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Recognition of revenues
Revenues are recognized when realized or when it is probable that future benefits will be received.
When these future benefits cannot be reliably determined, revenues are measured to the extent the
relative costs incurred are recoverable.
Specifically:
§ interest is recognized on an accruals basis using the contractual interest rate or the effective interest
rate where the duration of the contract is beyond short term;
§ dividends are recognized when their distribution is authorized. This marks a change from the
practice in 2008 when dividends were recognized on a cash basis. This change led to the
recognition of €454 thousand in the income statement.
§ commissions for revenues from services are recognized, in accordance with the terms of the
contracts, in the period in which the service is rendered;
§ revenues from the sale of non-financial assets are recognized upon completion of the sale, unless
the Bank has retained most of the risks and rewards associated with ownership of the asset.
Default interest is recognized upon collection.
Leasehold improvements
Expenses incurred to renovate premises owned by third parties are recognized among “other assets” and
are taken to profit or loss based on the assets ability to generate future economic benefits, normally
corresponding to the term of the underlying lease agreement. These expenses primarily relate to the
renovation of third-party premises used as bank branches.
Determining fair value
Fair value is the primary standard used in measuring financial instruments under the IAS, and it is also
the measurement standard applied to derivatives, regardless of the purpose for which these instruments
were acquired (trading or hedging). Moreover, the notes to the financial statements must also report the
fair value of financial instruments recognized at amortized cost in the balance sheet.
The IAS define fair value as the amount for which an asset could be exchanged, or a liability settled,
between knowledgeable parties in an arm’s length transaction.
However, such transactions must take place on the assumption that the business is a going concern.
Listed instruments
In the case of instruments listed on active markets, the fair value is equal to the listed price. A market is
deemed active when securities markets, intermediaries, dealers or information providers have prompt
and regular input into the price of the financial instrument and when the price itself represents actual
transactions in the instrument being measured.
The current definition of regulated market does not always coincide with the notion of “active market”.
An “official regulated market” operates properly where:
- there are rules, issued or approved by the relevant authority of the market’s country of origin, that
govern operating and access conditions, as well as the requirements that a contract must meet to be
traded effectively;
- has a netting mechanism in place that requires that derivatives contracts be subject to daily margins
requirements that provide adequate protection.
However, a regulated market does not provide “significant” prices if it does not represent a significant
daily trading volume.
As a result, it is necessary to adopt appropriate procedures for identifying active markets, i.e. those
markets in which the prices of traded instruments represent the value at which market transactions are
effectively carried out.
This process is based on an analysis of the following factors:
- the number of participants and the involvement of any dealers, brokers and market makers;
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- the frequency with which the listed figure is updated and the difference from the previous listed
price;
- the existence of an acceptable difference between the bid price and the ask price;
- the trading volumes involved.
Specifically, the prices used for balance-sheet valuations are:
- the bid price in the case of assets held;
- the ask price in the case of liabilities to be issued;
- the mid-market price in the case of offsetting risk profiles (the difference between the bid price and
the ask price is attributable to transaction costs alone).
When the same financial instrument is listed on more than one market, the most advantageous listed
price is the one used.
If a rate rather than a price is listed on active markets, the Bank must use that rate as the input for the
valuation techniques for determining the instrument’s fair value.
Investment funds
The fair value of open funds in which participants have the right to demand reimbursement of their
shares at any time and of hedge funds is determined based on the latest published net asset value.
In the case of closed and private equity listed funds, the fair value is equal to the listed price provided
by the market, if active. Otherwise, the most recently published net asset value is used.
Unlisted instruments
If the financial instruments are not listed on active markets, fair value is determined using valuation
techniques that:
- tend to maximize the use of market input and minimize estimates and internal assumptions;
- reflect the methods used by the market in pricing instruments;
- use inputs that represent market expectations and the risk-return ratio of the instruments measured;
- incorporate all factors that market participants would consider in setting a price;
- are consistent with commonly accepted methodologies;
- undergo periodic testing and calibration to test their ability to represent the fair value in line with the
prices of actual transactions involving the instrument being measured so as to ensure the
comparability, reliability and neutrality of the process of setting the values of financial instruments
required by regulations.
Fair value of derivative instruments
The fair value of derivative instruments is determined using a variety of valuation models based on the
type of instrument, specifically:
- to determine the fair value of options, volatility estimation models are used;
- to determine the fair value of swaps, discounted cash flow analysis is used.
These valuations have been adjusted for the creditworthiness of the counterparty (counterparty risk).
Equity instruments classified as available for sale
The fair value of equity investments is determined with reference to the price set by independent,
external experts or based on trading prices observed in recent transactions. If the amount involved is
insignificant and it is too difficult to arrive at a reliable price, the items are recognized at cost. Other
equity instruments are recognized at cost.
Fair value hierarchy
IFRS 7 introduced new disclosure requirements that distinguish the fair value of financial instruments
based on the materiality of the inputs used in making the measurements. It presents three levels:
Level 1: the measurement is the market price of the financial instrument being measured, obtained
using quoted prices in active markets. A market is active when the prices quoted reflect
normal market transactions, are regularly and readily available from exchanges, pricing
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services, brokers and if these prices represent actual and regularly occurring market
transactions.
Level 2: the measurement is based on the quoted prices for similar assets in active markets or is arrived
at using valuation techniques for which all the material factors – including credit and
liquidity spreads – can be derived from observable market data. For this level only a modest
amount of discretion is involved in making the measurement since all the inputs used are
drawn from the market and the calculation methods replicate the quotation of prices on
active markets.
Level 3: measurements are made using a variety of inputs, not all directly derived from observable
market inputs, and therefore involve a significant amount of estimation and assumptions on
the part of the measuring party.
Cassa di Risparmio di Cento has established the following criteria to be used in assigning the proper fair
value hierarchy level to the individual financial instruments it owns:
Level 1: instruments for which there is at least one active market. Therefore, the Bank may take into
account, if material, prices reported on regulated markets, the Italian exchange for trading
funds (MTF), or quotes by market markers. In this case, Bloomberg must publish quotes by
at least three market markers, and the average bid-ask spreads must not exceed 2%. The
Bank may also consider the net asset values provided by the asset management company,
provided that they are values at which it is possible to liquidate the investment.
Level 2:
instruments for which Bloomberg reports quotes by fewer than three market makers and/or
having an average bid-ask spread higher than 2%; instruments for which comparable
securities (by issuer, financial characteristics, degree of risk) classifiable as Level 1 exist or
that are measured using valuation models commonly used by professional traders using
directly or indirectly observable market inputs. Any adjustments made by the measuring
party must not have a material impact on the determination of the fair value.
Level 3: instruments for which no active market exists and that cannot be measured using the criteria
established for Level 2; net asset value provided by the asset management company, not
representing the values at which it is possible to liquidate the investment.
Reclassification of Financial Instruments
On 13 October 2008, the IASB approved an amendment to IAS 39 and IFRS 7, which was endorsed on
an urgent basis by the European Commission on 15 October 2008 with Regulation (EC) no. 1004/2008.
Under the amendment, financial instruments recognized at the time of purchase as financial assets held
for trading or financial assets available may be reclassified to other categories upon the satisfaction of
certain conditions. Prior to this amendment, the general rule was that transfers between categories were
not allowed except for transfers between financial assets available for sale and financial assets held to
maturity.
Based on paragraphs 50D and 50E of the new version of IAS 39, the following can be reclassified:
·
financial instruments, other than derivatives, previously classified as financial instruments held
for trading can be reclassified as loans and receivables. It is not possible to reclassify financial
assets at fair value following adoption of the fair value option. In order to be reclassified, the
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·
financial instrument must, at the date of transfer, satisfy the requirements for classification
among loans and receivables and the company must not plan to trade the reclassified security,
but rather must have the intention to hold the financial instrument for the foreseeable future or
until maturity;
non-derivative financial instruments classified as financial assets available for sale can be
reclassified as loans and receivables if the financial instrument would have met the definition for
loans and receivables at the date of reclassification and the company presently has the intention
and ability to hold it for the foreseeable future or until maturity.
Any other non-derivative debt or equity instrument may be reclassified from financial assets held for
trading to assets available for sale or from assets held for trading to assets held to maturity (for debt
instruments only), if said instruments are no longer held for short-term trading. However, according to
paragraph 50B, this is permitted only in rare circumstances.
The reclassified financial asset is recognized in the new category (loans and receivables, financial assets
held to maturity, financial assets available for sale) at its fair value at the date of reclassification, which
represents its new cost or amortized cost.
Once transferred, the financial instruments follow the measurement and recognition rules for their new
category, except as specified herein. Therefore, the actual rate of return to be used starting from the date
of reclassification must be determined for assets measured as amortized cost.
In 2009, the Bank did not carry out any reclassifications as provided by the amendment to IAS 39 and
described in this paragraph.
Assets sold and not derecognized: securitizations
As described in Part E – Section C, Cassa di Risparmio di Cento has introduced a securitization
program.
As in 2008, the assigned receivables are recognized in the financial statements of Cassa di Risparmio di
Cento. In accordance with IAS 39, if the Bank retains significant involvement in the assets transferred,
it must continue to recognize the instruments. In our case, significant involvement is represented by
ownership of the entire security issue.
Repurchase agreements
Securities received as part of transactions that contractually require their later resale (reverse repurchase
agreements) and securities delivered as part of transactions that contractually require their later
repurchase (repurchase agreements) are not recognized or derecognized, respectively.
Therefore, the amount paid for securities in reverse repurchase agreements is recognized under “loans
to customers or due from banks”, while the amount received for securities sold in repurchase
agreements is recognized among liabilities as “due to customers or banks”.
Interest is recognized as accrued on loans granted and payables to customers and banks.
Use of estimates and assumptions in preparing the financial statements
In applying certain accounting policies it is necessary to make estimates and assumptions that have an
impact on asset and liability figures reported in the financial statements and on the disclosures made
concerning contingent assets and liabilities. The assumptions underlying the estimates made take into
consideration all the information available at the date the financial statements are prepared as well as
assumptions deemed reasonable in light of both past experience and current financial market conditions.
The situation caused by the current economic and financial crisis has made it necessary to make
assumptions concerning future developments in a climate of significant uncertainty.
69
Given this uncertainty, it is quite possible that the assumptions made may, despite their reasonableness,
not be borne out in the future situation in which the Bank will be operating. Future actual results could
differ from the estimates made for the purposes of preparing the financial statements and could,
therefore, require adjustments to the carrying values of assets and liabilities recognized in the financial
statements that currently cannot be foreseen or estimated.
Valuation processes that rely heavily upon estimates and assumptions in order to determine the amounts
to be recognized in the financial statements are represented by:
1) the quantification of impairment losses of financial assets, particularly loans and receivables and
financial assets available for sale;
2) the determination of impairment of goodwill and equity investments;
3) the determination of the fair value of financial assets and liabilities in cases in which it is not directly
observable on active markets. The subjective aspects relate, in that case, to the choice of the
valuation models or the inputs that may not be observable in the market;
4) the quantification of the provisions for risks and charges and of the pension funds due to the
uncertainty of the relief sought, the timing of the contingency and the actuarial assumptions used;
5) the estimate of the recoverability of deferred tax assets.
The above list of valuation processes is provided solely to give the reader a better understanding of the
main areas where uncertainty exists, but it is not intended in any way to suggest that alternative
assumptions may currently be appropriate.
In addition, measurements made in the financial statements are based on the assumption that the Bank
will continue as a going concern, since no risks were found that would jeopardize the orderly conduct of
business by the Bank.
70
A.3 – FAIR VALUE DISCLOSURES
A.3.1 Transfers between categories
A.3.1.1 Reclassified financial assets: carrying amount, fair value and impact on comprehensive
income
Debt securities Financial assets available for sale
Debt securities Loans to customers
Comprehensive income
in the absence of the
transfer
(before taxes)
31/12/2009
Valuations
Other
39,618
39,618
2,216
5,008
5,000
-
Debt securities Due from banks
17,243
Type of
financial
instrument
Category to which transfer is
made
Fair value
at
Carrying
amount at
31/12/2009
17,218
1,455
Comprehensive income
recognized during the
year (before taxes)
Valuations
Other
293
-
-
-
68
A.3.1.2 Reclassified financial assets: impact on comprehensive income before transfer
No transfers were made in 2009.
A.3.1.3 Transfer of financial assets held for trading
No transfers were made in 2009.
A.3.1.4 Effective interest rate and expected cash flows of reclassified assets
No transfers were made in 2009.
A.3.2 Fair value hierarchy
A.3.2.1 Portfolios: breakdown by fair value input level
Financial assets/liabilities measured at fair value
1.
Financial assets held for trading
2.
Financial assets at fair value
3.
Financial assets available for sale
4.
Hedging derivatives
Total
1.
Financial assets held for trading
2.
Financial liabilities at fair value
3.
Hedging derivatives
Total
31/12/2009
Level 1
Level 2
31/12/2008
Level 3
Level 1
Level 2
Level 3
7,541
26,289
1,748
5,981
59,295
1,986
37,078
34,724
36,818
28,668
45,076
38,407
8,507
44,619
0
69,520
5,420
38,566
34,649
109,791
8,483
7,854
198
1,320
8,681
0
0
9,174
40,393
0
The Bank is unable to report on the sensitivity analysis for Level 3 instruments as required by paragraph
40 of IFRS 7 since the fair value figures were provided directly by the asset management companies for
units in collective investment undertakings, by the issuers for structured securities and from recent
transactions for stock. Refer to the following tables for information by asset class.
71
A.3.2.2 Change for the year in financial assets at fair value (level 3)
FINANCIAL ASSETS
held for trading
at
fair value
available
for
sale
hedging
1.
Opening balance
1,986
38,407
2.
Increases
4
5,363
2.1
Purchases
3
3,968
2.2
Profits taken to:
1
117
2.2.1 Income statement
- of which: capital gains
2.2.2 Shareholders' equity
X
2.3 Transfers from other levels
-
B.3 Other increases
-
3.
-
X
Decreases
1,278
-
242
6,952
3.1 Sales
55
4,506
3.2 Redemptions
-
1
3.3 Losses taken to:
3.3.1 Income statement
187
- of which: capital losses
3.3.2 Shareholders' equity
3.4 Transfers to other levels
3.5 Other decreases
4.
Closing balance
1,209
187
738
X
X
1,233
-
3
1,748
36,818
A.3.2.3 Change for the period in liabilities at fair value (Level 3)
There were no such financial liabilities.
A3.3. Disclosures on “day one profit/loss”
The Bank does not hold such positions.
72
Part B – Information on the balance sheet
ASSETS
SECTION 1 – CASH AND CASH EQUIVALENTS – ITEM 10
1.1 Cash and cash equivalents: composition
31/12/2009
a) Cash
31/12/2008
11,042
b) Demand deposits with central banks
Total
11,323
-
-
11,042
11,323
SECTION 2 – FINANCIAL ASSETS HELD FOR TRADING – ITEM 20
2.1 Financial assets held for trading: composition by type
31/12/2009
Level 1
A. On-balance-sheet assets
1. Debt securities
1.1 structured securities
1.2 other debt securities
2. Equity securities
3. Units in collective investment
undertakings.
4. Loans
4.1 repurchase agreements
4.2 other
Total A
B. Derivatives
1. Financial derivatives
1.1 trading
1.2 associated with fair value option
1.3 other
2. Credit derivatives
2.1 trading
2.2 associated with fair value option
2.3 other
Total B
Total (A+B)
Level 2
31/12/0008
Level 3
Level 1
Level 2
Level 3
7,538
4
7,534
18,847
7,617
11,230
1,745
1,736
9
5,965
50
5,915
52,132
3,353
48,779
1,981
1,972
9
7,538
18,847
1,745
5,965
52,132
1,981
3
3
7,442
7,431
3
3
16
16
7,163
5,563
5
5
11
1,600
3
7,442
3
16
7,163
5
7,541
26,289
1,748
5,981
59,295
1,986
73
2.2 Financial assets held for trading: composition by debtor/issuer
31/12/2009
A. On-balance-sheet assets
1. Debt securities
a) Government and central banks
b) Other government agencies
c) Banks
d) Other issuers
2. Equity securities
a) Banks
b) Other issuers
- insurance undertakings
- financial companies
- non-financial companies
- other
3. Units in collective investment undertakings
4. Loans
a) Government and central banks
b) Other government agencies
c) Banks
d) Other
Total A
B. Derivatives
a) Banks
- fair value
b) customers
- fair value
Total B
Total (A+B)
31/12/2008
28,130
2,531
0
25,598
1
0
0
0
0
0
0
0
0
0
0
0
0
0
28,130
60,078
3,422
20
56,164
472
0
0
0
0
0
0
0
0
0
0
0
0
0
60,078
3,542
3,542
3,906
3,906
7,448
3,673
3,673
3,511
3,511
7,184
35,578
67,262
2.3 On-balance-sheet financial assets held for trading: changes for the period
Debt
securities
A. Opening balance
B. Increases
B1. Purchases
B2. Fair value gains
B3. Other changes
C. Decreases
C1. Sales
C2. Redemptions
C3. Fair value losses
C4. Transfers from other portfolios
C5. Other changes
D. Closing balance
Equity
securities
Units in
collective
investment
undertakings
1,401
1,394
7
1,401
1,400
60,078
256,529
255,136
358
1,035
288,477
236,948
50,763
187
14,700
14,062
638
14,700
14,366
579
334
1
28,130
-
-
SECTION 3 – FINANCIAL ASSETS AT FAIR VALUE – ITEM 30
Does not apply to Cassa di Risparmio di Cento.
74
Loans
Total
-
-
60,078
272,630
270,592
358
1,680
304,578
252,714
50,763
187
914
-
28,130
SECTION 4 – FINANCIAL ASSETS AVAILABLE FOR SALE – ITEM 40
4.1 Financial assets available for sale: composition by type
31/12/2009
Level 1
36,885
1. Debt securities
1.1 structured securities
1.2 other debt securities
2. Equity securities
2.1 at fair value
2.2 carried at cost
3. Units in collective investment undertakings
4. Loans
36,885
193
193
Total
37,078
31/12/2008
Level 2
34,724
7,403
27,321
-
Level 3
3,400
3,400
31,909
16,574
15,335
1,509
-
Level 1
28,486
28,486
182
182
Level 2
45,076
6,999
38,077
-
Level 3
3,074
3,074
30,726
22,287
8,439
4,607
-
34,724
36,818
28,668
45,076
38,407
Securities measured at cost at 31 December 2009 that were measured at fair value a year earlier
amounted to €6,895 thousand. This was required due to the lack of prices representing the fair value.
The item “Equity securities” breaks down as follows:
Shareholdings
Other securities
Total
31/12/2009
31,772
330
31/12/2008
30,542
366
32,102
30,908
For a breakdown of equity investments, see the specific annex to the financial statements.
4.2 Financial assets available for sale: composition by debtor/issuer
1. Debt securities
a) Governments and central banks
b) Other government agencies
c) Banks
d) Other issuers
2. Equity securities
a) Banks
b) Other issuers
- insurance undertakings
- financial companies
- non-financial companies
- other
3. Units in collective investment undertakings
4. Loans
a) Government and central banks
b) Other government agencies
c) Banks
d) Other
Total
31/12/2009
31/12/2008
75,009
9,545
58,787
6,677
32,102
7,790
24,312
2,221
10,414
11,677
1,509
-
76,636
14,872
56,587
5,177
30,908
6,434
24,474
2,879
10,918
10,677
4,607
-
108,620
112,151
4.3 Financial assets available for sale hedged specifically
None.
75
4.4 Financial assets available for sale: change for the period
Debt
securities
Equity
securities
A. Opening balance
B. Increases
B1. Purchases
B2. Fair value gains
B3. Writebacks
- recognized through income statement
- recognized through equity
B4. Transfers from other portfolios
B5. Other changes
C. Decreases
C1. Sales
C2. Redemptions
C3. Fair value losses
C4. Writedowns for impairment
- recognized through income statement (1)
- recognized through equity
C5. Transfers from other portfolios
C6. Other changes
76,636
47,441
42,917
2,223
30,908
9,629
9,618
11
2,301
49,068
45,916
2,600
4
8,435
7,267
1,168
D. Closing balance
75,009
Units in
collective
investment
undertakings
4,607
2,252
1,617
90
Loans
Total
115
112,151
59,322
54,152
2,324
2,846
62,853
57,616
2,600
1,236
738
663
1,509
108,620
-
545
5,350
4,433
64
738
548
32,102
(1) The writedown for impairment taken to profit or loss amounted to €738 thousand and is attributed to
three private equity funds for which “prolonged” impairment, in excess of 30% for the Bank
specifically, has been found pursuant to IAS 39.
SECTION 5 – FINANCIAL ASSETS HELD TO MATURITY – ITEM 50
No financial instruments have been classified under this item.
SECTION 6 – DUE FROM BANKS – ITEM 60
6.1 Due from banks: composition by type
A. Claims on central banks
1. Fixed-term deposits
2. Reserve requirement
3. Repurchase agreements
4. Other
B. Due from banks
1. Current accounts and demand deposits
2. Fixed-term deposits
3. Other financing
3.1 repurchase agreements
3.2 finance leases
3.3 other
4. Debt securities
4.1 structured securities
4.2 other debt securities
Total (carrying amount)
Total (fair value)
31/12/2009
16,627
31/12/2008
29,827
16,627
19,827
305,989
82,999
2,360
705
705
219,925
219,925
322,616
322,616
76
10,000
131,939
40,688
1,796
1,055
1,055
88,400
88,400
161,766
161,766
6.2 Due from banks: assets hedged specifically
None.
6.3 Finance leases
None.
SECTION 7 – LOANS TO CUSTOMERS – ITEM 70
7.1 Loans to customers: composition by type
31/12/2009
Performing
1. Current accounts
2. Repurchase agreements
3. Medium/long-term loans
4. Credit cards, personal loans and loans repaid by
automatic deductions from wages
5. Financial leasing
6. Factoring
7. Other
8. Debt securities
8.1 Structured securities
8.2 Other debt securities
31/12/2008
Impaired
Performing
Impaired
342,470
19,554
415,704
11,688
1,243,682
72,113
1,182,796
23,474
9,508
480
12,565
429
148,506
5,008
1,912
235,920
5,029
991
Total carrying amount
5,008
1,749,174
94,059
5,029
1,852,014
36,582
Total fair value
1,749,174
94,059
1,852,014
36,582
The item “medium/long-term loans” includes loans assigned as part of securitizations net of collective
writedowns. This item includes net securitized loans totaling €217,394 thousand. For more details on
the securitization transactions, please see Part E – Section C of the notes to the financial statements.
77
7.2 Loans to customers: composition by debtor/issuer
31/12/2009
1. Debt securities:
a) Governments
b) Other government agencies
c) Other issuers
- non-financial companies
- financial companies
- insurance undertakings
- other
2. Loans to:
a) Governments
b) Other government agencies
c) Other
- non-financial companies
- financial companies
- insurance undertakings
- other
Total
Performing
5,008
0
0
5,008
5,008
0
0
0
1,744,166
2,214
7,969
1,733,983
1,106,621
47,172
0
580,190
1,749,174
31/12/2008
Impaired
0
0
0
0
0
0
0
0
94,059
0
0
94,059
65,296
0
0
28,763
Performing
5,029
0
0
5,029
5,029
0
0
0
1,846,985
3,243
6,629
1,837,113
1,197,378
81,652
0
558,083
94,059
1,852,014
Impaired
0
0
0
0
0
0
0
0
36,582
0
0
36,582
25,540
0
0
11,042
36,582
7.3 Loans to customers: assets hedged specifically
31/12/2009
1. Loans with specific fair value hedges
a) interest rate risk
b) exchange rate risk
c) credit risk
d) multiple risks
2. Loans with specific cash flow hedges
31/12/2008
2,673
2,673
-
2,913
2,913
-
a) interest rate risk
b) exchange rate risk
c) other
Total
2,673
2,913
Loans with specific fair value hedges refers to a single fixed-rate mortgage loan falling due on 1 July
2017.
7.4 Finance leases
None.
78
SECTION 8 – HEDGING DERIVATIVES – ITEM 80
8.1 Hedging derivatives: composition by type of contract and level
Fair value 31/12/2009
L1
L2
A. Financial derivatives
-
1) Fair value
2) Cash flows
3) Investments in foreign
operations
L3
8,507
L1
-
188,000
8,507
B. Credit derivatives
Fair value 31/12/2008
NV
31/12/2009
L2
-
-
-
-
8,507
-
188,000
L3
5,420
-
188,000
-
NV
31/12/2008
-
5,420
174,762
174,762
-
-
-
5,420
-
174,762
-
1) Fair value
2) Cash flows
Total
Key:
NV = Notional value
L1 = Level 1
L2 = Level 2
-
L3 = Level 3
8.2 Hedging derivatives: composition by hedged portfolio and type of hedge
Fair Value
Cash flows
Specific
Interest
rate risk
Exchang
e rate
risk
Credit
risk
Price
risk
Generic
Multiple
risks
1. Financial assets available
for sale
2. Loans
3. Financial assets held to
maturity
X
4. Portfolio
5. Other
Total assets
X
X
X
Specific
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
-
-
1. Financial liabilities
2. Portfolio
8,507
X
Total liabilities
8,507
X
-
-
-
X
X
X
Generic
Invest
ments
in
foreig
n
operat
ions
-
-
-
X
X
X
-
X
X
X
X
X
2. Portfolio of financial assets
and liabilities
X
X
X
X
X
X
X
X
-
1. Forecast transactions
X
X
-
X
X
X
X
The table above reports the positive fair values for hedging derivatives, broken down by hedged
financial asset or liability and the type of hedge.
Derivatives hedging financial liabilities refer to contracts entered into to specifically hedge the fair
value of the bonds issued.
SECTION 9 – VALUE ADJUSTMENTS OF FINANCIAL ASSETS HEDGED GENERICALLY
– ITEM 90
Does not apply to Cassa di Risparmio di Cento.
79
SECTION 10 – EQUITY INVESTMENTS – ITEM 100
Does not apply to Cassa di Risparmio di Cento.
SECTION 11 – PROPERTY AND EQUIPMENT – ITEM 110
11.1 Property and equipment: composition of assets carried at cost
Operating assets comprise all non-current assets used directly in the ordinary business of the Bank,
while investment property regards assets not used in operations that are held for the purpose of earning
rental income or long-term capital gains. The total rental income received in 2009 came to €300
thousand, while the ordinary maintenance expense incurred for these assets amounted to €22 thousand.
31/12/2009
A. Operating assets
1.1 owned
a) land
b) buildings
c) movables
d) electrical plant
e) other
1.2 acquired under finance leases
a) land
b) buildings
c) movables
d) electrical plant
e) other
Total A
B. Investment property
2.1 owned
a) land
b) buildings
2.2 acquired under finance leases
a) land
b) buildings
Total B
Total A+B
31/12/2008
32,571
9,637
14,767
1,946
953
5,268
2,856
1,584
1,272
35,427
30,536
9,637
15,274
1,989
1,209
2,427
2,900
1,584
1,316
33,436
8,698
3,580
5,118
8,698
9,205
3,686
5,519
9,205
44,125
42,641
Property and equipment are recognized at cost.
11.2 Property and equipment: composition of assets at fair value or revalued
None.
80
11.3 Operating property and equipment: change for the year
Land
A. Opening gross balance
A.1 Total net writedowns
A.2 Opening net balance
B. Increases
B.1Purchases
B.2 Capitalized improvement costs
B.3 Writebacks
B.4 Fair value gains recognized in:
a) equity
b) income statement
B.5 Positive exchange rate differences
B.6 Transfers from investment property
B.7 Other changes
C. Decreases
C.1 Sales
C.2 Depreciation
Buildings
11,221
Movables
11,221
0
18,745
(2,155 )
16,590
0
5,131
(3,142 )
1,989
81
73
0
(551 )
8
(124 )
(551 )
(124 )
Electrical
plant
Other
Total
3,300
(2,091 )
1,209
106
106
9,501
(7,074 )
2,427
3,651
3,590
(362 )
(1 )
(361 )
61
(810 )
(18 )
(722 )
47,898
(14,462 )
33,436
3,838
3,769
0
0
0
0
0
0
0
69
(1,847 )
(19 )
(1,758 )
C.3 Writedowns for impairment recognized in:
0
a) equity
b) income statement
C.4 Fair value losses recognized in:
a) equity
b) income statement
C.5 Negative exchange rate differences
C.6 Transfers to.:
0
0
0
0
0
0
0
a) Investment property
b) assets held for sale
C.7 Other changes
D. Closing net balance
D.1 Total net writedowns
D.2 Closing gross balance
0
11,221
16,039
2,706
18,745
11,221
E. Measurement at cost
81
1,946
3,261
5,207
953
2,452
3,405
(70 )
5,268
7,738
13,006
0
(70 )
35,427
16,157
51,584
11.4 Investment property: change for the year
Land
Buildings
Total
A. Opening balance
B. Increases
B.1 Purchases
B.2 Capitalized improvement costs
B.3 Net fair value gains
B.4 Writebacks
B.5 Positive exchange rate differences
B.6 Transfers from buildings to operating assets
B.7 Other changes
C. Decreases
C.1 Sales
C.2 Depreciation
C.3 Net fair value losses
C.4 Writedowns for impairment
C.5 Negative exchange rate differences
C.6 Transfers to other portfolio's assets
a) operating assets
b) non-current assets held for sale
C.7 Other changes
D. Closing balance
3,686
0
5,519
0
(106 )
(106 )
(401 )
(216 )
(185 )
3,580
5,118
9,205
0
0
0
0
0
0
0
0
(507 )
(322 )
(185 )
0
0
0
0
0
0
0
8,698
E. Measurement at fair value
3,580
6,013
9,593
The fair value figure reported is equal to the revaluation amount determined by independent experts in
2006. This amount still represent the best estimate of the fair value of these assets.
11.5 Commitments to acquire property and equipment (IAS 16/74.c)
There are no commitments to acquire property and equipment.
Other information on “Property and equipment”
Pursuant to Article 10 of Law 72/83, the following table reports information on revaluations of
buildings held by the Bank at 31 December 2009:
Law 576/75 (1)
Law 72/83 (1)
Law 218/90 (1)
Law 413/91 (1)
First Time Adoption IAS (1)(2)
31/12/2009
285
2,763
13,850
3,311
13,506
31/12/2008
310
2,846
13,900
3,323
13,693
33,715
34,072
Total revaluations
(1) revaluation of buildings
(2) this item includes: €12,413 thousand for revaluations of buildings and €1,092 thousand for revaluations of artwork.
82
The following table reports the useful life (in months) and the equivalent tax rates used in calculating
the depreciation for the various asset categories:
ASSET CATEGORIES
Useful life (in
months)
Tax rates
400
3%
0
0%
Buildings
Valuable artwork
Furniture
80
15%
Furnishings and ordinary office equipment
100
12%
Vehicles used solely in operations
60
20%
Vehicles not used in operations worth < €18,075.99
48
25% of 40% of cost
Vehicles not used in operations worth > €18,075.99
48
25% of 40% of cost up to €18,075.99
Vehicles available for employee personal use
48
25% of 90% of cost
Armored teller stations
60
20%
Light buildings
120
10%
Alarm and video equipment
40
30%
Telephone and cell phone systems
48
20% of 80% of cost
Electronic equipment
60
20%
Machinery and sundry plants
80
15%
Data processing systems
48
20%
SECTION 12 – INTANGIBLE ASSETS – ITEM 120
None.
SECTION 13 – TAX ASSETS AND TAX LIABILITIES– ITEM 130 OF ASSETS AND ITEM 80
OF LIABILITIES
13.1 Deferred tax assets: composition
Provisions for risks and charges
Loan writedowns
Entertainment expenses
Personnel expenses
Securities writedowns
Securities available for sale
Total
31/12/2009
1,111
7,778
10
0
60
358
31/12/2008
1,136
5,066
24
1,155
0
1,439
9,317
8,819
13.2 Deferred tax liabilities: composition
Capital gains
Revaluation of property and equipment
Penalty interest to be received
Dividends to be received
Securities available for sale
Total
31/12/2009
142
5,954
39
31/12/2008
248
6,139
-
6
247
245
6,388
6,632
83
13.3 Changes in deferred tax assets (recognized in income statement)
1. Opening balance
2. Increases
2.1 Deferred tax assets recognized during the year
a) in respect of previous periods
b) due to change in accounting polices
c) writebacks
d) other
2.2 New taxes or increases in tax rates
2.3 Other Increases
3. Decreases
3.1 Deferred tax assets derecognized during the year
a) reversals
b) writedowns for supervening non-recoverability
c) due to change in accounting polices
d) other
3.2 Reduction in tax rates
3.3 Other decreases
31/12/2009
7,380
3,535
31/12/2008
6,572
1,219
3,358
1,219
177
1,956
411
1,956
411
-
4. Closing balance
8,959
7,380
13.4 Changes in deferred tax liabilities (recognized in income statement)
1. Opening balance
2. Increases
2.1 Deferred tax liabilities recognized during the year
a) in respect of previous periods
b) due to change in accounting policies
c) other
2.2 New taxes or increases in tax rates
2.3 Other increases
3. Decreases
3.1 Deferred tax liabilities derecognized during the year
a) reversals
b) due to change in accounting policies
c) other
3.2 Reduction in tax rates
3.3 Other decreases
4. Closing balance
31/12/2009
6,387
136
31/12/2008
6,629
33
101
33
35
382
275
275
200
382
75
6,141
6,387
84
13.5 Changes in deferred tax assets (recognized in shareholders' equity)
1. Opening balance
2. Increases
2.1 Deferred tax assets recognized during the year
a) in respect of previous periods
b) due to change in accounting policies
c) other
2.2 New taxes or increases in tax rates
2.3 Other increases
3. Decreases
3.1 Deferred tax assets derecognized during the year
a) reversals
b) writedowns for supervening non-recoverability
c) due to change in accounting policies
d) other
3.2 Reduction in tax rates
3.3 Other decreases
4. Closing balance
31/12/2009
1,439
14
14
31/12/2008
109
1,330
1,330
14
1,330
0
1,095
1,095
1,095
0
0
0
0
0
0
0
0
358
1,439
The amounts exclusively regard tax items in respect of the negative reserve generated by the
measurement of the AFS securities portfolio.
13.6 Changes in deferred tax liabilities (recognized in shareholders' equity)
1. Opening balance
2. Increases
2.1 Deferred tax liabilities recognized during the year
a) in respect of previous periods
b) due to change in accounting policies
c) other
2.2 New taxes or increases in tax rates
2.3 Other increases
3. Decreases
3.1 Deferred tax liabilities derecognized during the year
a) reversals
b) due to change in accounting policies
c) other
3.2 Reduction in tax rates
3.3 Other decreases
31/12/2009
245
191
58
58
133
189
189
189
4. Closing balance
31/12/2008
315
60
60
60
130
39
39
91
247
245
The provision regards tax items in respect of the positive reserve for securities reclassified in the AFS
portfolio.
13.7 Other information
Current tax assets:
This item includes tax credits in respect of the central tax authorities:
- tax credits - principal
- tax credits - interest
- advance payments
Total current tax assets
31/12/2009
111
7
8,556
31/12/2008
111
7
9,220
8,674
9,338
85
Current tax liabilities
The provision for current tax liabilities includes:
carryover from previous year
31/12/2009
74
31/12/2008
658
8,653
(74 )
8,653
8,350
(658 )
8,350
tax provisions accrued in balance sheet:
- IRAP and IRES for the year
- uses of carryover from previous year
Total provision for current taxes
SECTION 14 – NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE
AND ASSOCIATED LIABILITIES – ITEM 140 OF ASSETS AND ITEM 90 OF LIABILITIES
Does not apply to Cassa di Risparmio di Cento.
SECTION 15 – OTHER ASSETS - ITEM 150
15.1 Other assets: composition
31/12/2009
31/12/2008
Tax receivables
Tax payments on account, stamp duty and special taxes and VAT
Indirect tax receivables
2,302
2,023
168
364
Tax credits for stamp duties and withholdings of 27%
3,381
286
5,851
2,673
8,321
8,202
Total receivables
Current account checks drawn on other banks
82
58
Checks drawn on customer accounts
3,409
3,564
Sundry receivables for fees and commissions
4,921
2,933
Sundry operations to be charged to customers
1,441
2,243
Transitory ATM account
1,354
1,238
345
307
1,159
2,306
Checks to be received from clearing house
Leasehold improvements on assets other than property and
equipment
Accrued income
Prepaid expenses
Receivables with respect to securities to be received
Transitory invoices account
596
1,337
1,372
1,708
422
487
Illiquid portfolio items removed from original account
1,266
-
Other
4,890
8,291
35,429
35,347
Total
The main existing items and new items are discussed below:
Current account checks drawn on other banks and customer accounts
These items regard checks being processed that will be debited in the first few days of the following
month.
86
Sundry receivables for fees and commissions
This regards commission income recognized on an accruals basis.
Leasehold improvements
The item regards expenditure for leasehold improvements to buildings. The costs are amortized over the
residual life of the lease contracts.
Receivables with respect to securities to be received
This item regards securities sold for which payment would be received in 2010.
87
LIABILITIES
SECTION 1 –DUE TO BANKS – ITEM 10
1.1 Due to banks: composition by type
31/12/2009
1. Due to central banks
31/12/2008
151,701
275,230
2. Due to banks
22,376
39,856
2.1 Current accounts and demand deposits
13,486
22,630
8,890
17,226
-
-
2.2 Fixed-term deposits
2.3 Loans
2. 3.1 Repurchase agreements
-
2. 3.2 Other
-
-
2.4 Liabilities in respect of commitments to repurchase own equity
instruments
-
-
2.5 Other payables
-
-
Total
174,077
315,086
Fair value
174,077
315,086
1.2 Breakdown of item 10 “Due to banks”: subordinated liabilities
There were no such positions.
1.3 Breakdown of item 10 “Due to banks”: structured debts
There were no such positions.
1.4 Due to banks: assets hedged specifically
There were no such positions.
1.5 Liabilities in respect of finance leases
Cassa di Risparmio di Cento in not party to finance leases with banks.
88
SECTION 2 – DUE TO CUSTOMERS – ITEM 20
Due to customers: composition by type
1. Current accounts and free deposits
2. Fixed-term deposits
3. Loans
3.1 Repurchase agreements
3.2 Other
4. Liabilities in respect of commitments to repurchase own
equity instruments
5. Other liabilities
Total
31/12/2009
1,056,881
62,030
60,652
1,378
31/12/2008
913,266
125,420
123,852
1,568
-
-
252
1,119,163
157
1,038,843
1,119,163
1,038,843
Fair value
2.2 Breakdown of item 20 “Due to customers”: subordinated loans
There were no such positions.
2.3 Breakdown of item 20 “Due to customers”: structured debts
There were no such positions.
2.4 Due to customers: assets hedged specifically
None.
2.5 Liabilities in respect of finance leases
31/12/2009
Liabilities in respect of finance leases
1,378
31/12/2008
1,568
Liabilities in respect of finance leases amounted to €1,378 thousand, compared with €1,568 thousand
the previous year. The liabilities regard a building hosting a branch. The asset is recognized under
Section 11 of Assets. Total expected payments, including interest, amount to €1,979 thousand.
The residual maturity of the liabilities is as follows:
up to 1 year
from 1 year to 5 years
more than 5 years
31/12/2009
195
1,064
119
31/12/2008
190
1,034
344
1,378
1,568
Total
The total value of the building came to €3,080 thousand and the provision for depreciation amounted to
€224 thousand, for a net value of €2,856 thousand recognized under “Property and equipment”.
89
SECTION 3 – SECURITIES ISSUED - ITEM 30
3.1 Securities issued: composition by type
31/12/2009
Carrying
amount
A. Securities
1. Bonds
1.1 structured
1.2 other
2. Other
2.1 structured
2.2 other
790,994
7,391
783,603
77,626
77,626
Total
868,620
31/12/2008
Fair value
Level 1
Level 2
Level 3
790,994
7,391
783,603
77,626
77,626
77,626
790,994
Fair value
Carrying
amount
Level 1
Level 2
646,671
16,215
630,456
67,693
Level 3
646,671
16,215
630,456
67,693
67,693
67,693
714,364
67,693
646,671
In the fair value column, hedged securities are presented at fair value while unhedged securities are
shown at amortized cost, which is deemed to approximate the fair value given that they are floating-rate
liabilities.
Embedded derivatives that, at the issue date, met the requirements of IAS 39 for separation from the
host instrument at 31 December 2009, came to a positive fair value of €11 thousand.
3.2 Breakdown of item 30 “Securities issued”: subordinated securities
At 31 December 2009, subordinated loans in issue amounted to €23,663 thousand, compared with
€24,330 a year earlier.
Subordinated securities in issue break down as follows:
Security
CRC 25/11/2015 TV Sub
CRC 16/01/20216 TV Sub
CRC 26/01/2016 TV Sub
Issue ID
IT0003950273
IT0004000367
IT0004008345
Issue date
25/11/2005
16/01/2006
26/01/2006
Maturity
25/11/2015
16/01/2016
26/01/2016
Interest
rate
Floating
Floating
Floating
Nominal
Total nominal value (net of
value
repurchases)
10,000
9,100
7,500
7,500
7,500
7,037
25,000
23,637
Book
value
9,110
7,504
7,049
23,663
The issue contracts contain clauses permitting early redemption subject to authorization by the Bank of
Italy. More specifically, the Bank may redeem the securities in advance as from the following dates:
Issue ID
IT0003950273
IT0004000367
25/11/2010
16/01/2011
IT0004008345
26/01/2011
In the event the Bank is liquidated, the bonds will be repaid together with other creditors with the same
degree of subordination only after all preferred creditors, unsecured creditors and creditors with a lower
degree of subordination have been repaid and before those with a higher degree of subordination.
3.3 Securities issued: securities hedged specifically
90
Securities hedged specifically amounted to €193,330 thousand, compared with €259,154 thousand a
year earlier.
Specifically, this item reports bonds issued by the Bank on which the interest rate risk has been hedged
with IRSs entered into with leading financial counterparties.
SECTION 4 – FINANCIAL LIABILITIES HELD FOR TRADING - ITEM 40
Financial liabilities held for trading: composition by type
31/12/2009
31/12/2008
FV
NV
A. On-balance-sheet liabilities
1. Due to banks
2. Due to customers
3. Debt securities
3.1 Bonds
3.1.1 structured
3.1.2 other
3.2 Other
3.2.1 structured
3.2.2 other
Total (A)
B. Derivatives
1) Financial derivatives
1.1 trading
1.2 associated with fair value option
1.3 other
2. Credit derivatives
2.1 trading
2.2 associated with fair value option
2.3 other
Total (B)
Total (A+B)
L1
FV
L2
L3
FV *
NV
-
X
X
X
X
-
-
-
-
8,483
8,483
X
X
X
-
L1
L2
L3
-
-
-
7,854
7,854
-
FV *
X
X
X
X
-
X
X
X
X
X
X
X
X
X
X
-
7,854
X
X
X
X
X
-
7,854
X
X
X
X
X
-
8,483
X
X
X
X
X
-
8,483
X
X
X
X
Key: FV = fair value; FV * = fair value calculated excluding changes in value due to changes in the issuer's creditworthiness since the issue
date; NV = nominal or notional value
L1 = Level 1;
L2 = Level 2;
L3 = Level 3.
(1) The item mainly consists of Cap agreements with customers, IRSs with leading financial counterparties in respect of corresponding
contracts with customers.
4.2 Breakdown of item 40 “Financial liabilities held for trading”: subordinated liabilities
There were no such positions.
4.3 Breakdown of item 40 “Financial liabilities held for trading”: structured debts
There were no such positions.
4.4 On-balance-sheet financial liabilities (excluding technical overdrafts) held for trading: change
for the year
91
There were no such positions.
SECTION 5 – FINANCIAL ASSETS AT FAIR VALUE – ITEM 50
Does not apply to Cassa di Risparmio di Cento.
SECTION 6 – HEDGING DERIVATIVES – ITEM 60
6.1 Hedging derivatives: composition by type of hedge and level of inputs
Fair value 31/12/2009
L1
A. Financial derivatives
1) Fair value
2) Cash flow
3) Investment in foreign operation
B. Credit derivatives
1) Fair value
2) Cash flow
Total
Key:
NV = nominal or notional value
L1 = Level 1;
L2 = Level 2;
-
L2
198
198
-
-
Fair value 31/12/2008
NV
31/12/2009
L3
L1
-
2,519
2,519
-
L2
1,320
1,320
-
-
-
-
198
-
2,519
-
NV
31/12/2008
L3
-
84,066
84,066
-
-
-
1,320
-
84,066
L3 = Level 3.
6.2 Hedging derivatives: composition by hedged portfolio and type of hedge
Cash flow
Generic
Fair value
Investm
ent in
foreign
operatio
n
X
X
X
X
X
X
X
X
X
X
X
1. Financial assets available for
sale
2. Loans
3. Financial assets held to
maturity
4. Portfolio
5. Other
Exchange
rate risk
Credit risk
198
X
X
X
X
Price risk
X
Generic
Interest
rate risk
Specific
Specific
Multiple
risks
X
X
X
X
Total assets
198
-
-
1. Financial liabilities
2. Portfolio
-
-
-
X
Total liabilities
-
-
-
-
-
X
-
-
1. Forecast transactions
X
X
X
X
X
2. Portfolio of financial assets
and liabilities
X
X
X
X
X
92
X
-
-
X
X
X
X
X
-
X
X
SECTION 7 – VALUE ADJUSTMENTS OF GENERICALLY HEDGED LIABILITIES- ITEM 70
Does not apply to Cassa di Risparmio di Cento.
SECTION 8 – TAX LIABILITIES - ITEM 80
See Section 13 under Assets.
SECTION 9 – LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE - ITEM 90
There were no such positions.
SECTION 10 – OTHER LIABILITIES – ITEM 100
10.1 Other liabilities: composition
31/12/2009
- Amounts payable to tax authorities on behalf of third
parties
- Amounts payable to tax authorities for indirect taxes
- Amounts for credit transfers awaiting execution
- Standing credit transfers
- MAV transfers by customers
- Invoices to be received
- Due to suppliers
- Amounts due to social security institutions
- Illiquid portfolio items removed from original account
- Amounts available for unpaid checks
- Security deposits
- Temporary credit card account
- Temporary check account
- Items to be credited to customers
- Credit cards for installment payments
- VAT to be paid
- Provision for guarantees
- Accrued liabilities and deferred income
- Temporary bank account
- Due to employees
- Other
Total
31/12/2008
1,958
2,356
412
13,091
711
152
3,176
2,465
1,079
375
51
2,024
3,005
1,527
1,273
9
702
389
4,745
4,804
4,357
453
18,723
390
737
2,548
1,054
1,003
5,213
228
52
1,860
2,919
1,033
1,283
11
1,045
4,638
46,305
54,506
2,693
6,267
The main existing or new items are discussed below:
Amounts for credit transfers awaiting execution
The item mainly regards credit transfers to be credited, primarily transactions carried out in the final
days of the year.
Invoices to be received
The item reports the accrued liability in respect of invoices to be received.
Temporary check account
93
The item regards ICCRI checks issued awaiting settlement.
Provision for guarantees
The provision covers writedowns of impaired and performing guarantees. The provision was calculated
specifically for impaired positions and generally for performing positions.
Accrued liabilities and deferred income
The item reports accrued liabilities and deferred income not allocated to a specific item.
Due to employees
This regards liabilities due to employees for holiday leave not taken and bonuses that will be paid the
following year.
SECTION 11 – EMPLOYEE TERMINATION BENEFITS– ITEM 110
Employee termination benefits: change for the year
A. Opening balance
A. Increases
B.1 Provision for the year
B.2 Other increases
C. Decreases
C.1 Benefit payments
C.2 Other decreases
D. Closing balance
Total
31/12/2009
4,994
254
254
138
128
10
5,110
31/12/2008
4,954
325
325
285
245
40
4,994
5,110
4,994
The actuarial measurement resulted in a provision of €254 thousand.
11.2 Other information
As from 1 January 2007, the Finance Act and the related implementing decrees introduced significant
changes to the rules governing the termination benefit system, giving employees a choice in allocating
their accruing benefit entitlement.
More specifically, while provisions accrued up to 31 December 2006 remain with the company, in the
first half of 2007 employees were allowed to choose whether to allocate accruing contributions to a
supplementary pension scheme or to keep them with the company, in which case the latter is required to
pay those contributions into a treasury account with Italy’s National Social Security Institute (INPS).
The employee termination benefit provision accrued through 1 January 2007 (or the date of election to
accrue contributions to a supplementary pension scheme, if any) continues to take the form of a “postemployment benefit” classified as a “defined-benefit plan” and therefore the related liability is subject
to actuarial assessment. Compared with the calculation employed through 31 December 2006, the
current method does not take into account the annual average rate of increase of salaries since the
employee benefits are deemed almost fully accrued (except for revaluation).
The actuarial assumptions made by the independent actuary in calculating the liabilities at the balance
sheet date are as follows:
Economic and financial bases
Annual discount rate
Annual inflation rate
Annual rate of increase in employee termination
4.00%
2.00%
3.00%
94
benefits
Demographic bases
Mortality
Incapacity
Retirement age
RG48 life expectancy table
INPS tables by age and sex
Reaching the minimum requirements set by the
Mandatory General Insurance agency (AGO)
The annual rate of early receipt of employee termination benefits calculated using the Bank’s historic
data came to 3.50%, while annual turnover amounted to 3%.
SECTION 12 –PROVISIONS FOR RISKS AND CHARGES – ITEM 120
12.1 Provisions for risks and charges: composition
31/12/2009
1. Company pension plans
2. Other provisions for risks and charges
2.1 legal disputes
2.2 personnel expenses
2.3 other
Total
3,424
2,585
427
412
3,424
31/12/2008
4,300
3,834
3,140
319
375
8,134
Provisions for risks and charges: change for the year
Retirement
A. Opening balance
B. Increases
B.1 Provision for the year
B.2 Changes due to passage of time
B.3 Changes due to changes in discount rates
B.4 Other increases
C. Decreases
C.1 Use during the year
C.2 Changes due to changes in discount rates
Other
provisions
4,300
423
423
4,723
1,599
provisions
3,834
1,961
1,834
28
4
95
2,371
2,218
14
Total
8,134
2,384
2,257
28
4
95
7,094
3,817
14
C.3 Other decreases
3,124
139
3,263
D. Closing balance
-
3,424
3,424
“Other decreases” in respect of pension plans mainly regard the portion of the fund transferred to a
specialist pension fund management company.
12.3 Defined-benefit company pension plans
1. Description
In 2009 negotiations were held to reach an agreement on the liquidation of the defined-benefit section.
The remainder was transferred to a specialist pension fund management company.
95
2. Change for the year
Developments in the two sections of the fund were as follow:
1) Defined benefit section
Balance at 31/12/2008
4,211
INCREASES
Employee contributions
0
Allocations
423
DECREASES
-
Termination payments
1,598
Use per fund transfer
3,036
Balance at 31/12/2009
0
Contingency account
Balance at 31/12/2008
89
INCREASES
Adjustment of mathematical reserve
Withholdings
DECREASES
Other changes
89
Actuary's fees
Payments
Balance at 31/12/2009
SUMMARY
0
31/12/2009
31/12/2008
Defined benefit
0
4,211
Contingency account
0
89
Total
0
4,300
3. Change for the year in plan assets and other information
There are no changes or other information to report beyond what has been provided above.
4. Reconciliation of present value of funds, present value of plan assets and assets and liabilities
recognized in the financial statements
This item is not applicable since the defined benefit provision was completely liquidated in 2009.
5. Description of main actuarial assumptions
No actuarial assumptions were made since the define benefit provision was completely liquidated in
2009.
6. Comparative information
There is no comparative information to report.
96
12.Provisions for risks and charges—other provisions
“Other provisions” include:
legal disputes: the provision is established to cover potential losses on litigation and revocatory
actions in bankruptcy;
personnel costs: this includes the employee loyalty bonus provision and the contingency provision
with respect to the commitment to pay an additional amount should employment terminate due to
death or permanent disability;
other: this reports accruals for potential claims in respect of investments in defaulted securities.
SECTION 13 – REDEEMABLE SHARES – ITEM 140
13.1 Redeemable shares: composition
There were no such shares.
SECTION 14 – SHAREHOLDERS’ EQUITY – ITEM 130, 150, 160, 170, 180, 190, 200
14.1 “Share capital” and “Treasury shares”: composition
Share capital
Total
31/12/2009
67,499
67,499
31/12/2008
67,499
67,499
Share capital is fully subscribed and paid in. It is represented by 13,081,193 ordinary shares with a par
value of €5.16 each. At the balance sheet date, the Bank did not hold any treasury shares.
14.2 Share capital – Number of shares: change for the year
There was no change in the number of shares in 2009.
14.3 Share capital: other information
There is no further information to report.
97
Earning reserves: other information
As required under Article 2427, paragraph 7-bis, of the Italian Civil Code, the following tables reports
the components of shareholders’ equity and their corresponding origin, possible uses and availability
for distribution.
Amount available for
Amount
Possible uses
Available
amount
Share capital
67,499
Share premium reserve
30,851
ABC (1)
0
30,851
0
Legal reserve
24,840
A.(2) B.
0
Reserve established in bylaws
25,172
ABC
25,172
Extraordinary reserve
18,336
ABC
18,336
5,420
ABC
5,420
53
ABC
Reserves
Reserve from contribution of assets - Law 218/90. 218 /90
Reserve under Leg. Dec. 124/1993
FTA reserve
-14,792
Retained earnings
-
53
-
1,174
ABC
1,174
9,689
ABC
9,689
11,332
(3)
Valuation reserves
- FTA reserve for measurement of property and equipment
at deemed cost
-
Reserve from valuation of AFS assets
Equity instruments
TOTAL
0
179,574
Net profit for the year
TOTAL SHAREHOLDERS’ EQUITY
-
7,145
186,719
14.5 Equity instruments: composition and change for the year
Does not apply to Cassa di Risparmio di Cento S.p.A.
14.6 Other information
There is no further information to report.
98
90,695
BC
Other information
1. Guarantees issued and commitments
1) Financial guarantees issued
a) Banks
b) Customers
2) Commercial guarantees issued
a) Banks
b) Customers
3) Irrevocable commitments to disburse funds
a) Banks
i) certain use
ii) uncertain use
b) Customers
i) certain use
ii) uncertain use (*)
4) Commitments underlying credit derivatives: sales of
protection
5) Assets pledged as collateral for third-party debts
6) Other commitments
31/12/2009
46,479
2,439
44,040
77,994
77,994
142,446
10,450
8,450
2,000
131,996
142
131,854
31/12/2008
56,349
2,264
54,085
74,701
74,701
204,138
15,493
15,493
188,645
266
188,379
-
-
-
-
266,919
335,188
Total
The risk in respect of guarantees was measured specifically for impaired positions and generally for
performing positions through recognition of the provision under “Other liabilities”.
2. Assets pledged as collateral for own debts and commitments
Portfolio
1. Financial assets held for trading
2. Financial assets at fair value
3. Financial assets available for sale
4. Financial assets held to maturity
5. Due from banks
6. Loans to customers
31/12/2009
21,727
31/12/2008
31,790
13,438
61,575
78,440
280,156
176,806
74,766
7. Property and equipment
-
-
Assets pledged as collateral break down as follows:
- Securities transferred in repurchase transactions
- Securities securing derivatives contracts
31/12/2009
284,234
2,503
31/12/2008
449,451
2,510
286,737
451,961
3. Information on operating leases
Assets leased by the Bank mainly refer to the buildings in which its branches are located.
Future payments on existing operating leases for leased buildings fall due as follows:
Up to 1 year
Buildings
1,717
More than 1
year to 5
years
More than 5
years
5,541
3,380
99
4. Management and intermediation services
1. Execution of customer orders
a) Purchases
1. settled
2. unsettled
b) Sales
1. settled
2. unsettled
2. Asset management
a) individual
b) collective
3. Securities custody and administration
a) third-party securities held as part of depository bank
services (excluding asset management)
1. securities issued by reporting entity
2. other
b) other third-party securities on deposit
(excluding asset management)
1. securities issued by reporting entity
2. other
c) third-party securities deposited with third parties
d) securities owned by bank deposited with third
parties
4. Other
31/12/2009
216,045
106,023
106,023
0
110,022
110,022
0
277,745
277,745
0
3,552,115
31/12/2008
392,183
215,209
215,209
0
176,974
176,974
0
258,807
258,807
0
3,562,550
0
0
0
0
0
0
1,468,045
1,514,647
696,384
771,661
1,431,634
635,011
879,636
1,505,409
652,436
542,494
0
0
Trading in financial instruments on behalf of third parties regards transactions with customers.
The item “Asset management” represents the market value of the portfolios under management.
100
Part C – Information on the income statement
SECTION 1 – Interest – Items 10 and 20
1.1 Interest and similar income: composition
Debt securities
1. Financial assets held for trading
2. Financial assets available for sale
3. Financial assets held to maturity
4. Due from banks
5. Loans to customers
6. Financial assets at fair value
7. Hedging derivatives
8. Other assets
Total
Loans
Other
31/12/2009
1,257
2,536
12,845
546
76,385
X
X
16,638
X
X
76,931
1,257
2,536
0
13,391
76,385
0
3,228
0
96,797
3,228
3,228
1.2 Interest and similar income: differences on hedging transactions
31/12/2009
A. Positive differences on hedging transactions
B. Negative differences on hedging transactions
C.. Balance (A-B)
3,284
56
3,228
31/12/2008
23
0
23
1.3 Interest and similar income: other information
1.3.1 Interest income on foreign-currency financial assets
31/12/2009
752
Interest income on foreign-currency financial assets
1.3.2 Interest income from finance leases
No such transactions were carried out.
101
31/12/2008
1,156
31/12/2008
7,208
673
0
8,248
115,558
0
23
0
131,710
1.4 Interest and similar expense: composition
Debt
1. Due to central banks
2. Due to banks
3. Due to customers
4. Securities issued
5. Financial liabilities held for trading
6. Financial liabilities at fair value
7. Other liabilities and provisions
8. Hedging derivatives
Total
Securities
Other
3,489
10,515
X
X
X
X
19,940
8,950
X
X
14,004
X
X
19,940
14
0
8,964
1.5 Interest and similar expense: differences on hedging transactions
31/12/2009
A. Positive differences on hedging transactions
B. Negative differences on hedging transactions
C. Balance (A-B)
31/12/2008
0
3,078
(3,078 )
0
0
0
1.6 Interest and similar expense: other information
1.6.1 Interest expense on foreign-currency liabilities
Interest expense on foreign-currency liabilities
31/12/2009
111
31/12/2008
762
1.6.2 Interest expense on liabilities in respect of finance leases
31/12/2009
Interest expense on liabilities in respect of finance
leases
36
102
31/12/2008
95
31/12/2009 31/12/2008
3,489
10,515
28,890
0
0
14
0
42,908
0
2,672
29,497
37,879
0
0
9
3,078
73,135
SECTION 2 – Fees and commissions – Items 40 and 50
2.1 Fee and commission income: composition
31/12/2009
a) guarantees issued
b) credit derivatives
c) management, intermediation and advisory services
1. trading in financial instruments
2. foreign exchange
3. asset management
3.1 individual
3.2 collective
4. securities custody and administration
5. depository services
6. securities placement
7. order collection and transmission
8. advisory services
8.1 concerning investments
8.2 concerning financial structure
9. distribution of third-party services
9.1 asset management
9.1.1 individual
9.1.2 collective
9.2 insurance products
9.3 other
d) collection and payment services
e) servicing activities for securitizations
f.) services for factoring transactions
g.) tax collection services
h.) management of multilateral trading systems
i) holding and management of current accounts
j) other services
Total
31/12/2008
904
1,010
125
219
113
221
3,910
2,858
303
0
1,833
1,837
355
0
2,508
1,917
898
1,788
4,497
982
2,216
4,545
5,102
2,884
24,300
5,276
1,853
23,854
2.2 Fee and commission income: distribution channels for products and services
31/12/2009
a) own branches:
1. asset management
2. securities placement
3. third-party services and products
b) off-premises distribution:
1. asset management
2. securities placement
3. third-party services and products
c) other distribution channels
1. asset management
2. securities placement
3. third-party services and products
Total
7,745
3,267
1,791
2,687
685
643
42
0
0
0
0
0
8,430
103
31/12/2008
7,916
2,248
2,471
3,197
647
610
37
0
0
0
0
0
8,563
2.3 Fee and commission expense: composition
31/12/2009
a) guarantees received
b) credit derivatives
c) management and intermediation services
1. trading in financial instruments
2. foreign exchange
3. asset management:
3.1 own portfolio
3.2 third-party portfolio
4. securities custody and administration
5. placement of financial instruments
6. off-premises distribution of securities, products and
services
d) collection and payment services
e) other services
Total
31/12/2008
955
193
149
8
178
6
660
1,916
310
3,998
581
1,611
719
3,288
SECTION 3 – Dividends and similar income – Item 70
3.1 Dividends and similar income: composition
A. Financial assets held for trading
B.. Financial assets available for sale
C.. Financial assets at fair value
D.. Equity investments
Total
31/12/2009
Income from
units in
Dividends
collective
investment
undertakings
17
0
942
3
0
0
0
X
959
3
104
31/12/2008
Income from
units in
Dividends
collective
investment
undertakings
25
0
370
4
0
0
0
X
395
4
SECTION 4 – Net gain (loss) on trading activities – Item 80
4.1 Net gain (loss) on trading activities: composition
Capital
gains
(A)
1. Financial assets held for trading
1.1 Debt securities
1.2 Equity securities
1.3 Units in collective investment
undertakings
1.4 Loans
1.5 Other
2. Financial liabilities held for trading
2.1 Debt securities
2.2 Payables
2.3 Other
3. Financial assets and liabilities: exchange
rate differences
4. Derivatives
4.1 Financial derivatives
- on debt securities and interest rates
- on equity securities and equity
indices
- on foreign currencies and gold
- other
4.2 Credit derivatives
Total
Capital losses
(C)
Trading
profits (B)
Net
income
[(A+B)(C+D)]
Trading
losses
(D)
359
359
0
1,470
826
638
187
187
0
348
14
334
1,294
984
304
0
0
0
0
0
0
0
6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6
0
0
0
0
X
X
2,729
2,729
2,729
X
2,870
2,870
2,870
0
X
2,344
2,344
2,344
0
X
0
0
3,088
X
0
X
0
0
4,340
SECTION 5 – Net gain (loss) on hedging activities– Item 90
5.1 Net gain (loss) on hedging activities: composition
31/12/2009
A. Gain on:
A.1 Fair value hedges
A.2 Hedged financial assets (fair value)
A.3 Hedged financial liabilities (fair value)
A.4 Cash flow hedges
A.5 Assets and liabilities in foreign currencies
Total income on hedging activities (A)
B. Loss on:
B.1 Fair value hedges
B.2 Hedged financial assets (fair value)
B.3 Hedged financial liabilities (fair value)
B.4 Cash flow hedges
B.5 Assets and liabilities in foreign currencies
Total expense on hedging activities (B)
C. Net gain (loss) on hedging activities (A - B)
105
57
2,081
2,081
2,081
1,174
1,174
1,174
0
0
0
0
0
2,525
X
0
0
2,531
31/12/2008
2,091
24
7,940
151
2,115
8,091
28
1,488
156
8,739
1,516
599
8,895
(804 )
0
0
0
2,429
SECTION 6 – Gains (losses) on disposal or repurchase – Item 100
6.1 Gains (losses) on disposal or repurchase: composition
31/12/2009
Gains
Financial assets
1. Due from banks
2. Loans to customers
3. Financial assets available for sale
3.1 Debt securities
3.2 Equity securities
3.3 Units in collective investment undertakings
3.4 Loans
4. Financial assets held to maturity
Total assets
Financial liabilities
1. Due to banks
2. Due to customers
3. Securities issued
Total liabilities
31/12/2008
Net gain
(loss)
Losses
Gains
Losses
Net
gain
(loss)
404
0
1,561
1,477
0
84
0
0
1,965
0
0
(497 )
(29 )
0
(468 )
0
0
(497 )
404
0
1,064
1,448
0
(384 )
0
0
1,468
0
766
0
0
0
0
0
0
766
0
0
(726 )
0
(726 )
0
0
0
(726 )
0
766
(726 )
0
(726 )
0
0
0
40
0
0
254
254
0
0
0
0
0
0
254
254
0
0
248
248
0
0
0
0
0
0
248
248
SECTION 7 – Net adjustments of financial assets and liabilities at fair value – Item 110
Does not apply to Cassa di Risparmio di Cento.
SECTION 8 – Net losses/recoveries on impairment – Item 130
8.1 Net losses/recoveries on impairment of loans: composition
A Due from banks
- Loans
- Debt securities
B. Loans to customers
- Loans
- Debt securities
C. Total
Losses
Specific
Portfol
io
Writeoffs
Other
0
0
0
0
0
0
0
0
0
78
22,349
0
78
22,349
0
0
0
0
78
22,349
0
Key:
A: Recoveries from interest
B: Other recoveries
106
Recoveries
31/12/2009 31/12/2008
Specific
Portfolio
A
B
A
B
0
0 0
0
0
0
0
0 0
0
0
0
0
0 0
0
0
0
982
2,445 0
5,770
13,230
9,893
982
2,445 0
5,770
13,230
9,893
0
0 0
0
0
0
982
2,445 0
5,770
13,230
9,893
8.2 Net losses/recoveries on impairment of financial assets available for sale: composition
Losses
Specific
Writeoffs
A Debt securities
B Equity securities
C. Units in collective
investment undertakings
D. Loans to banks
E. Loans to customers
F. Total
Other
0
738
Recoveries
Specific
A
B
X
31/12/2009
X
31/12/2008
738
515
738
515
X
0
738
0
0
Key:
A: Recoveries from interest
B: Other recoveries
Losses include €279 thousand in respect of the reversal of the negative reserve at 31 December 2009 for
impaired securities, and €459 thousand to the change in the fair value for 2009.
8.3 Net losses/recoveries on impairment of financial assets held to maturity: composition
Does not apply to Cassa di Risparmio di Cento.
8.4 Net losses/recoveries on impairment of other financial transactions: composition
Losses
Recoveries
Specific
Specific
Portfolio 31/12/2009 31/12/2008
Portfolio
Writeoffs Other
A
B
A
B
A Guarantees issued
19
325
344
8
B. Credit derivatives
0
0
C. Commitments to disburse funds
0
0
D. Other transactions
0
0
E. Total
0
0
0
0
19
0 325
344
8
Key:
A: Recoveries from interest
B: Other recoveries
Losses for guarantees issued were measured specifically for impaired positions and generally for
performing positions.
107
SECTION 9 - Administrative expenses – Item 150
Personnel expenses: composition
31/12/2009
1) Employees
a) wages and salaries
b) social security contributions
c) termination benefits
d) pensions
e) allocation to employee termination benefit provision
f) allocation to provision for retirement and similar liabilities
- defined contribution
- defined benefit
g) payments to external pensions funds
- defined contribution
- defined benefit
h) costs in respect of agreements to make payments in own equity instruments
i) other employee benefits
2) Other personnel
3) Board of Directors and members of Board of Auditors
31/12/2008
19,083
5,336
18,994
5,442
1,485
1,367
423
1,024
619
578
4,218
1,186
461
454
4) Retired personnel
42 -
5) Recovery of expenses for employees seconded to other companies
6) Reimbursement of expenses for third-party employees seconded to the Company
Total
(24 ) 31,643
29,045
Refer to Part A, Section 17 for more information on Line 1e) “allocation to employee termination
benefit provision”.
9.2 Average number of employees by category
31/12/2009
Employees
a) Senior management
b) Middle management
c) Other employees
Other personnel
Total number of employees
31/12/2008
6
95
320
0
421
6
94
316
0
416
At 31 December 2009, the Bank had 426 employees, compared with 419 at 31 December 2008.
9.3 Defined-benefit company pension plans: total costs
31/12/2009
Total costs for the year include:
- accrual for revenues from investments
- adjustments of fund liabilities to actuarial values
Total
0
423
423
108
31/12/2008
0
1,024
1,024
9.4 Other employee benefits
The item "Other employee benefits" breaks down as follows:
- reimbursement of business trip expenses
- training expenses
- other contractual expenses (lunch vouchers and insurance)
- fringe benefits
- early retirement incentive expenses
- other expenses
Total
31/12/2009
262
133
697
420
2,634
72
4,218
31/12/2008
281
133
682
90
0
0
1,186
9.5 Other administrative expenses: composition
31/12/2009 31/12/2008
- office supplies and printing
- telephone and external network connection
subscriptions
- lighting, power, heating and water
- postal expenses
- association dues
- collection of information and preliminary enquiries
- security and security transportation
- rental of buildings
- legal expenses
- expenses for treasury acquisition
- software purchases and maintenance
- advisory services
- advertising and promotional
- prize operations
- EDP outsourcing
- cleaning services
- maintenance of furnishings and machinery
- building maintenance
- insurance
- books and newspaper subscriptions
- transportation
- other
Indirect taxes and duties:
amounts paid during the year
- stamp duty
- municipal property tax
- tax on medium/long-term loans
- other
totalling
Total other administrative expenses
109
Absolute
change
%
change
255
442
(187 )
-42.3%
928
635
958
345
881
512
1,642
790
169
827
946
1,537
1
3,786
396
614
326
276
53
365
77
16,319
945
648
1,120
227
926
551
1,509
1,173
175
824
1,201
1,289
6
4,099
410
662
272
296
52
366
69
17,262
(17 )
(13 )
(162 )
118
(45 )
(39 )
133
(383 )
(6 )
3
(255 )
248
(5 )
(313 )
(14 )
(48 )
54
(20 )
1
(1 )
8
(943 )
-1.8%
-2.0%
-14.5%
52.0%
-4.9%
-7.1%
8.8%
-32.7%
-3.4%
0.4%
-21.2%
19.2%
-83.3%
-7.6%
-3.4%
-7.3%
19.9%
-6.8%
1.9%
-0.3%
11.6%
-5.47%
2,680
120
811
280
3,891
20,210
2,667
117
925
126
3,835
21,097
13
3
(114 )
154
56
(887 )
0.5%
2.6%
-12.3%
122.2%
1.47%
-4.20%
SECTION 10 – Net provisions for risks and charges– Item 160
10.1 Net provisions for risks and charges: composition
The item breaks down as follows:
31/12/2009
775
579
347
1,701
- revocatory actions in bankruptcy
- litigation
- other
31/12/2008
348
610
27
985
SECTION 11 – Net adjustments of property and equipment – Item 170
11.1 Net adjustments of property and equipment: composition
Depreciation
(a)
A. Property and equipment
A.1 owned
- operating assets
- investment property
A.2 acquired under finance leases
- operating assets
- investment property
Total
Writedowns
Net
Writebacks
for impairment
income
(c)
(b)
(a + b - c)
1,944
1,899
1,714
185
45
45
1,944
1,899
1,714
185
45
45
1,944
1,944
SECTION 12 – Net adjustments of intangible assets – Item 180
12.1 Net adjustments of intangible assets: composition
Does not apply to Cassa di Risparmio di Cento.
110
SECTION 13 – Other operating expenses/income – Item 190
13.1 Other operating expenses: composition
The item "Other operating expenses" breaks down as follows:
- maintenance of leased buildings
- interest on value date differences in collection and payment transactions
- charitable donations
- out-of-period expense and theft
Total other operating expenses
(A)
31/12/2009
135
169
63
1,682
2,049
31/12/2008
164
747
123
837
1,871
31/12/2009
31/12/2008
13.2 Other operating income: composition
The item "Other operating income" breaks down as follows:
- recovery of stamp duty and withholding tax
3,429
3,564
155
833
20
142
- recovery of expenses on outsourcing services provided
280
61
- rental income
301
305
- recovery of insurance expenses in respect of customers
134
141
- other non-recurring income
973
986
5,292
6,032
3,243
4,161
- recovery of interest on value date differences in collection and payment transactions
- recovery of legal expenses
Total other operating income
Net other operating income
(B)
(B) - (A)
SECTION 14 – Gains (losses) on equity investments– Item 210
Does not apply to Cassa di Risparmio di Cento.
SECTION 15 – Net adjustments to fair value of property and equipment and intangible assets –
Item 220
Does not apply to Cassa di Risparmio di Cento.
SECTION 16 – Value adjustments of goodwill – Item 230
Does not apply to Cassa di Risparmio di Cento.
111
SECTION 17 – Gains (losses) on disposal of investments – Item 240
17.1 Gains (losses) on disposal of investments: composition
31/12/2009
A. Land and buildings
- Gains on disposal
- Losses on disposal
B. Other assets
- Gains on disposal
- Losses on disposal
Net gain (loss)
31/12/2008
10
33
2
(18 )
(6 )
2
(7 )
28
SECTION 18 – Income tax expense from continuing operations – Item 260
18.1 Income tax expense from continuing operations: composition
31/12/2009
1. Current taxes (-)
2. Change in current taxes from previous periods (+/-)
3. Reduction of current taxes for the year (+)
4. Change in deferred tax assets (+/-)
5. Change in deferred tax liabilities (+/-)
6. Taxes for the year (-)(-1+/-2+3+/-4+/-5)
31/12/2008
(8,763 )
(8,496 )
110
1,402
281
(6,970 )
147
808
300
(7,241 )
18.2 Reconciliation of theoretical tax liability and actual tax liability recognized
Reconciliation of theoretical tax liability and actual tax liability recognized for IRES
Net profit (loss) for the period before tax
Net profit before taxes/theoretical tax liability
Taxable
Tax
income
rate
14,115 27.50%
Tax
3,882
Permanent positive differences
Permanent negative differences
Temporary differences taxable in subsequent periods
Negative temporary differences deductible in subsequent periods
Reversal of negative deductible temporary differences from previous years
Reversal of positive taxable temporary differences from previous years
Total permanent and temporary differences
(1,691 )
4,370
(1,188 )
12,447
(6,633 )
619
7,924
2,179
22,039
6,061
Taxable income and IRES liability
112
Reconciliation of theoretical tax liability and actual tax liability recognized for IRAP
Taxable
income
60,143
Net profit (loss) for the period before tax
Net profit before taxes/theoretical tax liability
Permanent positive differences
Permanent negative differences
Temporary differences taxable in subsequent periods
Negative temporary differences deductible in subsequent periods
Reversal of negative deductible temporary differences from previous years
(8,525 )
4,977
Reversal of positive taxable temporary differences from previous years
Tax relief
Total permanent and temporary differences
619
Tax
rate
4.82%
Tax
2,899
(1,142 )
Taxable income and IRAP liability
(4,071 )
-196
56,072
2,703
Total current taxes recognized in income statement
8,763
SECTION 19 – Profit (loss) after taxes from disposal groups – Item 280
Does not apply to Cassa di Risparmio di Cento.
SECTION 20 – Other information
There is no additional information to report.
SECTION 21 – Earnings per share
21.1 Average number of ordinary shares and diluted share capital
As the Bank only has ordinary shares and does not have any stock option plans in place, share capital is
not affected by dilution.
21.2 Other information
There is no additional information to report.
113
Part D – Comprehensive income
Detailed breakdown of comprehensive income
10.
Profit (loss) for the period
Gross amount
Income taxes
X
X
Net amount
7,145
Other comprehensive income
20.
1,864
(950 )
1,087
(720 )
777
(230 )
- impairment adjustments
279
(90 )
547
189
- gain/loss on realization
498
(140 )
358
1,864
(950 )
914
Financial assets available for sale:
a) fair value changes
b) reversal to income statement
914
367
c) other changes
30.
Property and equipment
40.
Intangible assets
50.
Hedging of foreign investments
a) fair value changes
b) reversal to income statement
c) other changes
60.
Cash flow hedges
a) fair value changes
b) reversal to income statement
c) other changes
70.
Exchange rate differences
a) fair value changes
b) reversal to income statement
c) other changes
80.
Non-current assets held for sale
a) fair value changes
b) reversal to income statement
c) other changes
90.
100.
Actuarial gains (losses) on defined benefit plans
Valuation reserves of equity investments accounted for with equity
method
a) fair value changes
b) reversal to income statement
c) other changes
110.
Total other comprehensive income
120.
Comprehensive income (items 10+110)
X
114
X
8,059
Part E – Risks and risk management policies
Part E of the notes to the financial statements provides information on risks and risk management
policies.
In order to reinforce market discipline, Title IV of Bank of Italy Circular no. 263 of 27 December 2006
introduced a requirement to public information on capital adequacy, risk exposures and the general
features of the systems used to identify, measure and manage such risks. In compliance with this
requirement (the "Third Pillar" of Basel II), the disclosure document at 31 December 2009 will be
published by the deadline set for the publication of the financial statements on the Bank's website
(www.crcento.it).
SECTION 1 – CREDIT RISK
QUALITATIVE DISCLOSURES
1. General aspects
The Bank’s lines of strategic development are set out in the three-year plan and are translated into
operational input in the annual budgets. As regards the lending sector, the adverse economic conditions
that emerged in 2008 and deteriorated further in 2009 caused lending to slow, with a consequent decline
in the stock of outstanding loans at the end of 2009 from its level the previous year. From the point of
view of strategic positioning, the plan provides for a “generalist” approach to the Retail and SME
segments and a more diversified and customized approach to higher value segments. The credit
products offered are typical commercial banking products. Operations in innovative financial
instruments is limited to plain vanilla interest rate derivatives: cap, floor and collar options and interest
rate swaps (IRSs). The Bank's trading in derivatives with customers does not involve speculative
structured products or complex instruments that would be difficult for customers to understand.
In the wake of the global recession, which is afflicting all economic sectors across the board, the Bank
decided to participate in the ABI agreement for enterprises and the "Tremonti Decree" schemes for
individuals with mortgage loans. The loans falling under these arrangements continue to be classified as
performing as they are earning interest. The following table summarizes participation in the
mechanisms:
Tremonti Decrees
ABI-MEF accord for SMEs
Total renegotiations
No. of loans
615
166
Outstanding debt
58,108,731
62,332,923
781
120,441,654
2. 2.Credit risk management policies
2.1
Organizational aspects
The quality of the loan portfolio is monitored through the operational procedures that govern the credit
process (approval, disbursement, monitoring, management of problem positions). The factors
underlying credit risk are controlled by assessing the customers current and future capacity to repay the
115
debt and the appropriateness of the loan (size, form, etc.) for the characteristics and needs of the
borrower. The unit responsible for loan approval, disbursement and management is the Lending
department, whose internal offices that are specialized in the various segments. Problem loans are
handled by the Problem Position unit (for past due and substandard positions) and the General and
Legal Affairs unit (bad debts). The former is part of the Lending department, while the latter is part of
the Compliance department. The latter department also includes the Control unit, which performs
second-level monitoring through analysis of individual positions, and the Risk Management unit, which
performs second-level monitoring through aggregate analyses.
2.2
Measurement, management and control systems
The systems used to identify, measure, manage and control credit risk comprise a set of tools,
procedures and internal rules. The main elements include:
- the credit watch procedure for the identification and management of performing positions with
potential problems to assess;
- a web procedure to manage overlimit positions;
- a credit rating system to assign ratings to customers. Such ratings reflect the probability of default;
- rules for the automatic renewal of low risk facilities, which seeks to enhance the efficiency of
position management without neglecting risk controls.
Internal ratings in the lending process are one of the sources of information used to support position
analysis as part of the credit risk management and monitoring process. They are used, together with
other parameters, to determine which positions can be renewed automatically and to monitor exposures
within the credit watch procedure, which governs the actions of the control units with respect to
potentially dangerous credit positions. The classification of customers by rating grade (uniform risk
categories) is also used for the collective assessment of performing loans and to attribute the cost of
credit risk to positions as part of management control. As from the end of 2009, a new system of
borrowing limits for performing positions was introduced. It associates the rating class with the
technical form of the loan and its size.
In addition to the CRS, the Bank also uses – solely for calculating capital requirements for credit risk –
the services of Lince SpA, an external credit assessment institution authorized by the Bank of Italy to
issue unsolicited ratings. The Lince ratings are applied to the "corporates and other persons" exposure
class envisaged under the standardized approach, namely enterprises that are not classified in the retail
exposure class because they have a turnover of more than €5 million or exposures of more than €1
million.
Credit risk mitigation techniques
Cassa di Risparmio di Cento has always used guarantees to contain the risk associated with its loans.
The range of instruments used is quite extensive, although the main tool is mortgages on property, both
residential and commercial: the loan portfolio secured by property mortgages amounted to €1,130.3
million at 31 December 2009. Liens on securities, cash or goods are less commonly used.
The main form of unsecured guarantee adopted is the surety (fideiussione), while the support of credit
guarantee consortia for their member companies also plays a significant role.
In 2009, partly with a view to more robust assessment of "residual risk" as part of the ICAAP, an
internal working group was established to analyze the organizational and regulatory aspects of the
portfolio of guarantees, focusing on the management process for the various forms of guarantees used
and compliance with the requirements of the Bank of Italy for recognition of such guarantees as risk
116
mitigation instruments for the purposes of calculating capital requirements. The working group will
complete its mission in the first half of 2010.
2.4 Impaired financial assets
Impaired financial assets are classified on a highly restrictive basis, with the approaches to managing
positions varying in accordance with the degree of impairment.
Impaired, or potentially impaired, positions are identified specifically and, in the case of persistent nonperformance, substandard loans and bad debts, are assigned a specific rating. Performing positions with
certain payment irregularities or developments that can be interpreted as a symptom or the start of
problems can be placed on a watchlist for a limited period in order to monitor the situation more
closely. Decision-making responsibility for such positions is transferred from the branches.
At 31 December 2009, substandard positions (temporary difficulty expected to be resolved within an
appropriate period of time) amounted to €40.1 million. They are managed (including during the
recovery stage) on a centralized basis by the Problem Position unit. They include positions for which
the credit facility has been revoked or for which special difficulties have been identified, or for
mortgage loans for which a specified number of installments are in arrears (2 half-yearly installments, 3
quarterly or 6 monthly) or unsecured loans in arrears (1 half-yearly installment, 2 quarterly, 4 monthly)
or when unpaid positions in the commercial portfolio are more than 5 days past due. Positions may not
remain in the substandard classification for more than 24 months and in any case no more than six
months if no workout plan has been established. In addition to traditional substandard positions, the
Bank also has €1.2 million in "objective" substandard positions, as recently defined by the Bank of
Italy.
Other persistent past due positions include those that are overlimit/past due by more than 180 days,
which at 31 December amounted to €3.1 million, or by more than 90 days if secured by property (€33.8
million). These positions, which do not yet qualify as problem loans, are assessed on the basis of
defaults and setting the writedown much closer to those for substandard positions than performing
positions. Finally, restructured positions amounted to €1.6 million.
The restoration of impaired positions to performing status is determined by the recovery of full
solvency by the debtor, which means full payment of past due amounts and restoration of the conditions
for reopening a normal position.
Estimated realizable value and writedowns are quantified in line with the recommendations of the
various units responsible for managing and monitoring impaired positions. Ex post checks (performed,
for example, on the occasion of the assignment of bad debts in May 2008) indicate that the overall
amount of writedowns is appropriate.
117
QUANTITATIVE DISCLOSURES
A. CREDIT QUALITY
A.1 IMPAIRED AND PERFORMING CREDIT EXPOSURES: STOCKS, WRITEDOWNS,
CHANGES, DISTRIBUTION BY SECTOR AND GEOGRAPHICAL AREA
On-balance-sheet and off-balance-sheet credit exposures to banks and customers comprise all onbalance-sheet financial assets regardless of classification (trading, available for sale, loans, etc.), with
the exception of equity securities and units in collective investment undertakings.
By contrast "exposure" also includes equity securities and units in collective investment undertakings.
Total at 31/12/2008
121
35,457
(*) 75,009
Total
Other assets
Past due
positions
Substandard
loans
Bad debts
1. Financial assets held for trading
2. Financial assets available for sale
3. Financial assets held to maturity
4. Due from banks
5. Loans to customers
6. Financial assets at fair value through profit or loss
7. Financial assets held for sale
8. Hedging derivatives
Total at 31/12/2009
Restructured
positions
A.1.1 Distribution of credit exposures by portfolio and credit quality (book value)
21,528
33,929
1,481
37,121
322,616
1,749,174
21,528
34,050
1,481
37,121
8,507
2,190,763
35,578
75,009
322,616
1,843,233
8,507
2,284,943
10,732
21,304
69
4,477
2,198,612
2,235,194
(*) Includes €800 thousand in impaired private equity securities.
114,297
20,238
114,418
20,238
121
X
0
75,009
0
0
322,616
94,059 1,761,728
0
X
0
0
X
94,180 2,159,353
Total at 31/12/2008
45,482
8,900
36,582 2,216,936
121
118
X
Net exposure
1. Financial assets held for trading
2. Financial assets available for sale
3. Financial assets held to maturity
4. Due from banks
5. Loans to customers
6. Financial assets at fair value
7. Financial assets held for sale
8. Hedging derivatives
Total at 31/12/2009
Portfolio
adjustments
Net exposure
Gross exposure
Performing
Specific
adjustments
Gross exposure
Impaired assets
Total
(net exposure)
A.1.2 Distribution of credit exposures by portfolio and credit quality (gross and net values)
X
12,554
35,457
35,578
75,009
75,009
0
0
322,616
322,616
1,749,174 1,843,233
0
0
0
8,507
8,507
2,190,763 2,284,943
18,324
2,198,612 2,235,194
12,554
X
A. On-balance-sheet exposures
a) Bad debts
b) Substandard loans
c) Restructured positions
d) Past due positions
f) Other assets
Total A
B. Off-balance-sheet exposures
a) Impaired
b) Other
Total B
Total (A+B)
Net exposure
Portfolio
writedowns
Specific
writedowns
Gross exposure
A.1.3 On-balance-sheet and off-balance-sheet exposures to banks: gross and net values
X
X
X
X
407,001
407,001
0
24,937
X
0
0
0
0
407,001
407,001
0
0
24,937
X
X
24,937
0
0
24,937
431,938
0
0
431,938
A.1.4 On-balance sheet exposures to banks: changes in gross impaired positions
The Bank has no impaired exposures in respect of banks.
A.1.5 On-balance sheet exposures to banks: changes in total adjustments
No writedowns have been recognized in respect of exposures to banks.
A. On-balance-sheet exposures
a) Bad debts
b) Substandard loans
c) Restructured positions
d) Past due positions
f) Other assets
Total A
B. Off-balance-sheet exposures
a) Impaired
b) Other
Total B
Net exposure
Portfolio
writedowns
Gross
exposure
Specific
writedowns
A.1.6 On-balance-sheet and off-balance-sheet credit exposures to customers: gross and net values
32,676
41,412
1,552
38,657
1,780,482
1,894,779
11,148
7,483
71
1,536
X
20,238
X
X
X
X
12,554
12,554
21,528
33,929
1,481
37,121
1,767,928
1,861,987
2,390
256,248
151
X
X
551
2,239
255,697
258,638
151
551
257,936
On- and off-balance-sheet exposures to customers include all on-balance-sheet financial assets held by
the Bank regardless of their classification (trading, available for sale, loans, etc.).
119
A.1.7 On-balance-sheet credit exposures to customers: changes in gross impaired positions
Bad debts
Substandard
Restructured
loans
positions
Past due
positions
Total
A. Opening gross exposure
- of which: exposures assigned but not derecognized
B.. Increases
B.1 from performing loans
16,078
0
27,775
4,620
24,316
321
62,564
55,877
74
0
1,500
0
5,014
0
55,193
53,041
45,482
321
147,032
113,538
B.2 transfers from other categories of impaired positions
B.3 other increases
C. Decreases
C.1 to performing loans
C.2 writeoffs
C.3 collections
C.4 assignments
22,247
908
11,177
0
8,026
3,103
48
3,266
3,421
45,468
7,794
0
11,903
0
1,472
28
22
0
0
22
0
2,052
100
21,550
11,546
0
6,738
0
29,037
4,457
78,217
19,340
8,026
21,766
48
C.5 transfers to other categories of impaired positions
C.6 other decreases
D. Closing gross exposure
0
0
32,676
25,771
0
41,412
0
0
1,552
3,266
0
38,657
29,037
0
114,297
0
224
0
1,658
1,882
- of which: exposures assigned but not derecognized
A.1.8 On-balance-sheet credit exposures to customers: changes in total adjustments
Substandard Restructured
loans
positions
Bad debts
A. Total opening adjustments
- of which: exposures assigned but not
derecognized
B. Increases
B.1 writedowns
B.2 transfers from other categories of impaired
positions
B.3 other increases
C. Decreases
C.1 writebacks from valuations
C.2 writebacks from collections
C.3 writeoffs
C.4 transfers to other categories of impaired
positions
C.5 other decreases
D. Total closing adjustments
- of which: exposures assigned but not
derecognized
Past due
positions
Total
5,346
3,012
5
537
8,900
0
14,945
13,290
30
7,443
7,443
0
71
71
0
1,545
1,545
0
24,004
22,349
1,655
0
9,143
782
360
8,001
0
0
2,972
1,021
412
0
0
0
5
5
0
0
0
0
546
317
112
0
1,655
0
12,666
2,125
884
8,001
0
0
11,148
1,539
0
7,483
0
0
71
117
0
1,536
1,656
0
20,238
0
28
0
57
85
120
A.2 Classification of exposures on the basis of external and internal rating grades
A.2.1 Distribution of on-balance-sheet and off-balance-sheet credit exposures by external rating
grades
External rating grades
Class 1
A. On-balance-sheet
exposures
B. Derivatives
B.1 Financial derivatives
B.2 Credit derivatives
C. Guarantees issued
D. Commitments to
disburse funds
Class 2
312,568
488
488
0
1,620
Total
Class 3
202,804
11,110
11,110
0
19,221
Class 4
196,389
431
431
0
26,392
Class 5
233,121
0
0
0
21,479
n/a
Class 6
84,146
0
0
0
9,884
235
0
0
0
0
Total
1,239,726
3,912
3,912
0
56,340
2,268,989
15,941
15,941
0
134,936
0
0
0
0
0
0
131,996
131,996
314,676
233,135
223,212
254,600
94,030
235
1,431,974
2,551,862
The following table maps the risk classes to the ratings issued by the rating agencies.
ECAI
Standard & Poor's
Fitch Ratings
Moody's
Lince
1
from AAA to AA-
from AAA to AA-
from Aaa to Aa3
from Aa.1 to Aa.3
2
from A+ to A-
from A+ to A-
from A1 to A3
from A.4 to Baa.9
3
from BBB+ to BBB-
from BBB+ to BBB-
from Baa1 to Baa3
from Ba.10 to Ba.12
4
from BB+ to BB-
from BB+ to BB-
from Ba1 to Ba3
from B.13 to B.16
5
from B+ to B-
from B+ to B-
from B1 to B3
from C.17 to C.18
6
CCC+ and lower
CCC+ and lower
Caa1 and lower
C.19
A.2.2 Distribution of on-balance-sheet and off-balance-sheet exposures by internal rating grades
The distribution at 31 December 2009 of total performing loans to customers by rating grade is as
follows:
Internal rating grades
A. On-balance-sheet exposures
B. Derivatives
B.1 Financial derivatives
B.2 Credit derivatives
C. Guarantees issued
D. Commitments to disburse funds
Total
Total
AAA
AA
A
BBB
7,451 473,082 185,373 286,832
0
558
824
943
0
558
824
943
0
0
0
0
3,614
21,345 17,482 11,157
3,890
21,971 19,270 16,563
BB
B.
CCC
185,199 279,894 128,659
161
617
116
161
617
116
0
0
0
23,490 25,111
6,681
10,080 29,664
9,091
CC
196,369
544
544
0
11,395
16,660
C
94,059
121
121
0
1,750
0
n/a
432,071
12,057
12,057
0
12,911
4,807
2,268,989
15,941
15,941
0
134,936
131,996
14,955 516,956 222,949 315,495
218,930 335,286 144,547
224,968
95,930
461,846
2,551,862
The distribution of exposures securitized but not derecognized by rating grade is as follows:
Internal rating grades
AAA
Exposures securitized
but not derecognized
0
AA
165,062
A
8,492
BBB
16,044
BB
B
12,675
9,573
121
CCC
1,455
CC
2,297
C
1,797
Total
n/a
0
217,395
A.3 DISTRIBUTION OF SECURED EXPOSURES BY TYPE OF GUARANTEE
A.3.1 Secured credit exposures to banks
The Bank does not have such exposures.
A.3.2 Secured credit exposures to customers
Unsecured guarantees
2. Secured off-balance-sheet credit
exposures
2.1 fully secured
- of which: impaired
2.2 partially secured
- of which: impaired
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,269
1,269
0
40
40
0
261,917
227,648
11,288
1,429,835
1,388,183
83,628
67,604
2,559
455
0
2,263
79
4,665
133
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
34,269
1,621
41,652
1,833
65,420
54,857
1,448
10,563
355
355
0
0
4,164
2,778
87
1,386
1,808
1,154
0
654
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
454
454
0
0
54,061
50,115
1,361
3,946
60,842
54,856
1,448
5,986
14
0
4
0
0
0
0
0
0
0
0
0
4
8
Other
Other
Securities
Land and
buildings
CLN
122
Banks
8,628
3,963
366
Banks
10,302
8,039
80
Other
government
agencies
1,147,679
1,147,224
71,894
Government
s and
central
banks
1,456,732
1,389,128
83,514
Other assets
Other
government
agencies
1.2 partially secured
- of which: impaired
Guarantees
Other derivatives
Governments
and central
banks
1. Secured on-balance-sheet credit
exposures:
1.1 fully secured
- of which: impaired
Credit derivatives
Total
Net exposure
Collateral
B. DISTRIBUTION AND CONCENTRATION OF CREDIT EXPOSURES
Total at 31/12/2008
0
0
0
0
0
14,270
21,536
0
0
0
0
0
0
0
0
0
0
7,989
7,989
0
0
0
0
0
0
0
0
13,224
13,224
21,213
0
0
20,594
X
0
0
0
0
X
X
X
X
0
0
0
0
X
X
X
X
0
0
0
0
0
0
53,849
53,849
0
0
0
0
0
0
0
0
1,055
1,055
54,904
0
0
104,207
X
0
0
0
0
X
X
X
X
0
0
0
0
X
X
X
X
X
1,135
0 1,135
0
0
0
X
X
X
X
0
0
0
0 1,135
0
123
647
0
0
0
0
0
0
2,879
0
0
0
0
X
X
X
X
3,822 1,587
X
12,767 2,061
X
66
0
X
12,107
482
X
580,190
X
1,096
608,952 4,130 1,096
21,528
33,929
1,481
37,121
1,767,928
1,861,987
Specific
writedowns
0
0
17,706
21,162
1,415
25,014
1,111,630
1,176,927
0
0
0
0
0
42
1,739
394
226,436
228,611
1,405,538
X
X
X
X
526
142
526
16,249 10,849
24
5
X
14
0
X
26
4
X
14,840
X
24
14,904
9
24
623,856 4,139 1,120
66
1,753
420
255,555
257,794
2,119,781
0
0
1,529,249
7,348 15,820
583,308 1,722 2,733
2,261,773
X
0
0
0
0
X
X
X
X
9,560
X
5,422
X
71
X
1,054
X
X
10,323
16,107 10,323
Other
Net exposure
Portfolio
writedowns
Specific
writedowns
Non-financial companies
Net exposure
Specific
writedowns
0
0
0
0
0
0
Portfolio
writedowns
Insurance undertakings
Net exposure
Portfolio
writedowns
Specific
writedowns
Net exposure
Portfolio
writedowns
Net exposure
Portfolio
writedowns
X
X
X
X
Financial companies
Total (net exposure)
0
0
0
0
14,270
14,270
Specific
writedowns
Net exposure
A. On-balance-sheet
exposures
A.1 Bad debts
A.2 Substandard loans
A.3 Restructured positions
A.4 Past due positions
A.5 Other
Total A
B.. Off-balance-sheet
exposures
B.1 Bad debts
B.2 Substandard loans
B.3 Other impaired assets
B.4 Other
Total B
Total at 31/12/2009
Specific
writedowns
Other government
agencies
Governments
Portfolio
writedowns
B.1 On-balance-sheet and off-balance-sheet credit exposures to customers by sector (book value)
0
90
52
B.2 On-balance-sheet and off-balance-sheet credit exposures to customers by geographical area
(book value)
29
1
0
0
3
33
0
0
0
1
121
122
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
3
0
0
0
0
0
0
66
1,753
420
255,413
257,652
2,106,996
5
90
56
549
700
33,459
0
0
0
142
142
12,660
0
0
0
2
2
35
0
0
0
0
0
122
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
0
0
0
0
0
0
2,248,492
28,104
13,193
166
83
0
0
0
6
1
Net exposure
Total writedowns
18
4
0
0
12,496
12,518
Net exposure
Total writedowns
11,119
7,482
71
1,536
12,551
32,759
Net exposure
Net exposure
Total writedowns
REST OF
WORLD
ASIA
Total writedowns
Total at 31/12/2008
AMERICAS
21,510
33,925
1,481
37,120
1,755,308
1,849,344
Net exposure
A. On-balance-sheet exposures
A.1 Bad debts
A.2 Substandard loans
A.3 Restructured positions
A.4 Past due positions
A.5 Other
Total
B.. Off-balance-sheet exposures
B.1 Bad debts
B.2 Substandard loans
B.3 Other impaired assets
B.4 Other
Total
Total at 31/12/2009
Total writedowns
OTHER EUROPEAN
COUNTRIES
ITALY
B.3 On-balance-sheet and off-balance-sheet credit exposures to banks by geographical area (book
value)
Total at 31/12/2008
Total writedowns
Total writedowns
Net exposure
Net exposure
REST OF
WORLD
ASIA
Total writedowns
AMERICAS
Net exposure
Net exposure
Total writedowns
Net exposure
A. On-balance-sheet exposures
A.1 Bad debts
A.2 Substandard loans
A.3 Restructured positions
A.4 Past due positions
A.5 Other
Total
B.. Off-balance-sheet exposures
B.1 Bad debts
B.2 Substandard loans
B.3 Other impaired assets
B.4 Other
Total
Total at 31/12/2009
Total writedowns
OTHER EUROPEAN
COUNTRIES
ITALY
0
0
0
0
380,829
380,829
0
0
0
0
0
0
0
0
0
0
23,341
23,341
0
0
0
0
0
0
0
0
0
0
775
775
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0 2,056
0 2,056
0
0
0
0
0
0
0
0
0
15,049
15,049
395,878
0
0
0
0
0
0
0
0
0
9,887
9,887
33,228
0
0
0
0
0
0
0
0
0
1
1
776
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0 2,056
0
0
0
0
0
0
267,397
0
30,465
0
715
0
0
0 9,405
0
124
B.4 Large exposures
31/12/2009
a) amount
b) number
0
0
31/12/2008
47,219
2
The strengthening of capital and the reduction of drawings by the largest borrowers meant that there
were no large exposures as of the end of the year.
125
C. SECURITIZATIONS AND ASSET DISPOSALS
C.1 SECURITIZATIONS
QUALITATIVE DISCLOSURES
Cassa di Risparmio di Cento’s securitization activity largely regards a transaction initiated in 2006,
which involved the Bank as originator and which is discussed in detail in the section on liquidity risk. In
addition to this transaction, the Bank has only one other exposure, classified as "available for sale", in
which it is an investor:
- -XS0239175564 “Zoo II 12/96 X-P” a Collateralized Debt Obligation (CDO) amounting to
€595 thousand.
The investment is consistent with the Bank's strategy of diversifying its proprietary investment
portfolio.
126
QUANTITATIVE DISCLOSURES
C.1.1 Exposures in respect of securitizations by quality of securitized assets
On-balance-sheet exposures
Gross exposure
Net exposure
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Net exposure
0
Net exposure
Gross exposure
Junior
Net exposure
Mezzanine
Gross exposure
Senior
Net exposure
Junior
Gross exposure
Mezzanine
Gross exposure
276,726 276,726 2,860 2,860 5,710 5,710
Credit lines
Senior
Net exposure
Net exposure
Gross exposure
Net exposure
Gross exposure
Guarantees issued
Junior
Gross exposure
A. With own underlying
assets
a) Impaired
b) Other (*)
B. With third-party
underlying assets
a) Impaired
Mezzanine
Net exposure
Gross exposure
Senior
276,726 276,726 2,860 2,860 5,710 5,710
0
0
0
0
0
0
b) Other
The exposure of €285,296 thousand regards the notes of the securitization carried out by the Bank
through the vehicle Guercino Solutions S.r.l. For financial reporting purposes, the notes, all held by the
Bank, were reclassified as a deduction from the overall debt generated by the securitization.
127
C.1.2 Exposures in respect of main own securitizations by type of securitized assets and type of exposure
A. 1 Fully derecognized
B. 2 Partially derecognized
C. Not derecognized
C.1 Siviglia finance
Securities
C.2 Guercino Solutions
Securities
276,726 276,726
2,860
2,860
5,710
5,710
276,726 276,726
2,860
2,860
5,710
5,710
276,726 276,726
2,860
2,860
5,710
5,710
Credit lines
C.1.3 Exposures in respect of main third-party securitizations by type of securitized assets and type of exposure
There is no exposure of this type in respect of transactions in which the Bank is originator.
128
Writedowns/writebac
ks
Junior
Net exposure
Writedowns/writebac
ks
Mezzanine
Net exposure
Writedowns/writebac
ks
Senior
Net exposure
Writedowns/writebac
ks
Junior
Net exposure
Mezzanine
Net exposure
Writedowns/writebac
ks
Senior
Net exposure
Writedowns/writebac
ks
Junior
Book value
Writedowns/writebac
ks
Mezzanine
Book value
Writedowns/writebac
ks
Book value
Senior
Guarantees issued
Writedowns/writebac
ks
On-balance-sheet exposures
C.1.4 Exposures in respect of securitizations by portfolio of financial assets and type
Financial
assets held
for trading
1. On-balance-sheet
exposures
- Senior
- Mezzanine
- Junior
2. Off-balance-sheet
exposures
- Senior
- Mezzanine
Financial
assets fair
value
option
Financial
assets
available
for sale
Financial
assets held to
maturity
Total at
31/12/2009
Loans
Total at
31/12/2008
0
0
0
0
285,296
276,726
2,860
5,710
285,296
276,726
2,860
5,710
286,293
277,716
2,870
5,707
0
0
0
0
0
0
0
0
0
0
0
0
0
- Junior
C.1.5 Total amount of securitized assets underlying junior securities or other forms of credit
support
Traditional
securitizations
A. With own underlying assets:
A.1 Fully derecognized
1. Bad debts
2. Substandard loans
3. Restructured positions
4. Past due positions
5. Other assets
A.2 Partially derecognized
1. Bad debts
2. Substandard loans
3. Restructured positions
4. Past due positions
5. Other assets
A.3 Not derecognized (**)
1. Bad debts
2. Substandard loans
3. Restructured positions
4. Past due positions
5. Other assets
B. With third-party underlying assets:
B.1 Bad debts
B.2 Substandard loans
B.3 Restructured positions
B.4 Past due positions
Synthetic
securitizations
217,634
0
0
217,634
0
224
1,658
215,752
0
B.5 Other
(**) Gross value of loans.
C.1.6 Holdings in special purpose vehicles
None.
129
0
0
X
X
X
X
X
X
X
X
X
X
X
0
0
C.1.7 Servicer activities – collections on securitized assets and redemption of securities issued by
vehicle
% of securities redeemed (end-period figure)
Servicer activities – collections on
securitized assets and redemption of
securities issued by Siviglia Finance
1,882
215,564
106 38,439
130
0%
0%
0%
0%
0%
Performing assets
Junior
Impaired assets
Mezzanine
Performing assets
Impaired assets
Performing
Impaired
Performing
Impaired
Senior
Performing assets
Collections in
the year
Impaired assets
Securitized assets
(end-period figure)
0%
C.2 ASSET DISPOSALS
A
B C
A. On-balance-sheet assets
16,719 0 0
1. Debt securities
16,719
2. Equity securities
0
3. Units in collective investment undertakings
0
4. Loans
0
5. Impaired assets
0
B. Derivatives
0
Total at 31/12/2009
16,719
Total at 31/12/2008
Financial assets at fair
value
A
0
X
29,280
B
0
X
C
0
X
Financial assets
available for sale
A
10,927
10,927
X
10,927
B
0
X
61,575
Financial assets held
to maturity
C
0
X
A
0
B
0
Due from banks
X
X
X
X
C
A
0 178,606
178,606
X
X
X
X
X
X
X
X
178,606
78,440
Key
A = financial assets assigned but fully recognized (book value)
B = financial assets assigned but partially recognized (book value)
C = financial assets assigned but partially recognized (full value)
( # ) Loans to customers gross of impairment
131
B
0
X
X
X
Loans to customers
C
A
0 221,149
3,515
X
X
X
X
217,634
X
X
221,149
4,979
B
0
X
X
X
31/12/2008
Financial
assets held
for trading
31/12/2009
C.2.1 Financial assets assigned but not derecognized
C
0 427,401 174,274
209,767 174,274
X
0
0
X
0
0
217,634
0
0
0
X
0
0
427,401 174,274
174,274
C.2.2 Financial liabilities in respect of financial assets assigned but not derecognized
Financial
assets held
for trading
1. Due to customers
a) in respect of assets fully recognized
b) in respect of assets partially
recognized
2. Due to banks
a) in respect of assets fully recognized
b) in respect of assets partially
recognized
Total at 31/12/2009
Total at 31/12/2008
Financial
assets
available for
sale
Financial
assets at
fair value
Financial
assets
held to
maturity
Due from
banks
Loans
to
customers
Total
0
0
0
0
0
284,450
284,450
284,450
284,450
0
0
0
0
0
0
0
0
0
0
0
0
0
0
284,450
0
284,450
0
0
0
0
0
284,450
284,450
C.3 Covered bond transactions
Does not apply to Cassa di Risparmio di Cento.
D. MODELS FOR MEASURING CREDIT RISK
The Bank does not use internal portfolio models to measure its exposure to credit risk, nor does it use
internal models for calculating capital requirements for credit risk. However, it does use management
models, notably the credit rating system to assign a rating to customers. Ratings are one of the elements
supporting position analysis in the management and monitoring of credit risk. They are used, together
with other parameters, to determine which positions can be renewed automatically and to manage
exposures within the credit watch procedure, which governs the actions of the control units in the event
of problems with potentially dangerous credit positions. The classification of customers by rating
grades (uniform risk categories) is also used to quantify the collective writedowns of performing loans.
For more on the quantification and distribution of exposures assessed using the credit rating system,
please see table A.2.2.
132
SECTION 2 – MARKET RISKS
2.1 INTEREST RATE AND PRICE RISK – SUPERVISORY TRADING BOOK
QUALITATIVE DISCLOSURES
A. General aspects
The investment process for the Bank’s portfolio is structured and formalized in internal rules and
documented by the framework resolutions of the Board of Directors. Asset allocation is determined on
the basis of the objectives set out in the framework resolution, which considers: performance in terms of
volumes, profitability and capital requirements; market analysis and forecasts; and the risk profile of
investments.
The profitability objectives and composition are set in line with the capital allocation policy and the
interest rate risk policy set out in the three-year business plan and the budget. They take appropriate
account of developments in the Bank’s overall liquidity position, with a view to supporting treasury
operations.
Interest rate risk on the supervisory trading book is quite limited in view of the predominance of
floating rate instruments in the portfolio, which produces a generally low overall duration (0.624 at 31
December 2009).
Investments in listed instruments on equity markets and in units of investment funds and Sicavs are, for
Cassa di Risparmio di Cento, a residual activity compared with operations on the bond markets. The
price risk in respect of the supervisory trading book is therefore very low.
B. Management and measurement of interest rate risk
The Risk Management unit measures interest rate risk and price risk of the supervisory trading book on
a weekly basis using a VaR methodology. This measurement is part of a broader process for controlling
the operations of the Finance area, which also provides for the establishment and verification of limits
in terms of position, type of counterparty and risk.
In addition to the VaR approach, the sensitivity of the supervisory trading book is analyzed with an
asset and liability management methodology (ALM) by way of analysis of the impact of alternative rate
scenarios on the market value of the securities portfolio.
Internal models are not used to calculate capital requirements for market risks.
QUANTITATIVE DISCLOSURES
1. Supervisory trading book: distribution by residual maturity (repricing date) of on-balancesheet assets and liabilities and financial derivatives
This table has not been prepared because, as envisaged in Bank of Italy Circular no. 262 of 22
December 2005, the following section provides a sensitivity analysis of interest rate risk on the basis of
the models or methodologies used.
133
2. Supervisory trading book: distribution of exposures in equity securities and equity indices for
the main markets in which the instruments are listed
This table has not been prepared because, as envisaged in Bank of Italy Circular no. 262 of 22
December 2005, the following section provides a sensitivity analysis of interest rate risk on the basis of
the models or methodologies used.
3. Supervisory trading book: internal models and other sensitivity analysis methods
At 31 December 2009, the VaR of the trading book in respect of interest rate risk was equal to
€154,596. This analysis measures the sensitivity of the portfolio to changes in interest rates, estimated
on the basis of their level and volatility in the last year. Value at risk represents the potential loss that
could be incurred in the ten days after the measurement date in 99% of possible cases. During the year,
that exposures remained below €100 thousand almost continuously. The equity VaR of the held-fortrading book was nil, since there were no exposures in equity securities at the end of the year. The
average for the year was equal to a few thousand euros, given the very small amount of shares in the
portfolio.
At the same date, the sensitivity analysis shows that a change in interest rates such as that implicit in
12-month forward rates would have a negative impact on the trading book of about €230 thousand,
equal to about 0.8% of the operating result for the year, confirming the small overall exposure of the
Bank to this form of risk.
2.2 INTEREST RATE RISK – BANKING BOOK
QUALITATIVE DISCLOSURES
A. General aspects, management and measurement of interest rate risk and price risk
The main sources of interest rate risk on financial assets and liabilities other than those discussed in the
previous section are related to the financial profile and indexing mechanisms of the various items
involved.
Both financial assets and liabilities mainly bear floating interest rates, while assets and liabilities in
respect of demand items are balanced. As a result, the exposure of the banking book to interest rate risk
is limited. Responsibility for monitoring and managing this risk lies with the Asset and Liability
Committee, which on a quarterly basis assesses the sensitivity of the Bank’s positions to interest rate
risk in terms of the impact of a change in interest rates on net interest income (gap analysis) and
shareholders’ equity (duration analysis).
The price risk for the banking book is concentrated in the AFS portfolio, for which risk measurement
and monitoring is carried out using the same procedures and tools used for the supervisory trading
book. The equity VaR of the AFS portfolio at 31 December 2009 amounted to €1.6 million including
equity investments and €230 thousand excluding equity investments. This analysis measures the
sensitivity of the portfolio to changes in share prices, estimated on the basis of their level and volatility
in the last year. Value at risk represents the potential loss that could be incurred in the ten days after the
measurement date in 99% of possible cases.
134
B. Fair value hedges
Designated hedging derivatives essentially involve interest rate swaps covering specific bond issues by
the Bank, mainly fixed rate, in order to transform the fixed rate into a floating rate. These transactions
have been designed to qualify for hedge accounting in order to limit the impact of measurement of the
instruments on profit or loss. This approach provides for annual verification of the effectiveness of the
hedge by way of specific tests to measure the change in fair value during the period, which must remain
with a range of 80-125%. The effectiveness tests are conducted on a quarterly basis with the use of an
application that draws the necessary data from the subsystems that manage the instruments and enables
the creation of a time series of the calculation and output data (documentation of the effectiveness
tests).
At the end of the year, hedge accounting was continued for the derivatives designated as hedges on the
basis of the outcome of the effectiveness tests.
In view of the reduced exposure to price risk, no hedges for that type of risk were established.
C. Cash flow hedges
No cash flow hedges are in place and no recourse was made to the fair value option.
QUANTITATIVE DISCLOSURES
1. Banking book distribution of financial assets and liabilities by residual maturity (repricing
date)
This table has not been prepared because, as envisaged in Bank of Italy Circular no. 262 of 22
December 2005, the following section provides a sensitivity analysis of interest rate risk on the basis of
the models or methodologies used.
2. Banking book: internal models and other sensitivity analysis methods
As noted above, the analysis of the interest rate risk on the banking book is conducted using an asset
and liability management approach. At 31 December 2009 the estimated impact on net interest income
of a 1% change in interest rates is on the order of 8.7%, while the impact on shareholders’ equity varies
between 0.20% and 3.50% depending on the scenario (+1%, 6- and 12-month forward rates and the
forecasts of infoproviders). In 2009 interest rate risk continued to be measured using the methodology
set out in the "Second Pillar" of the new regulations for the prudential supervision of banks issued by
the Bank of Italy with Circular no. 263 of 27 December 2006. The resulting risk ratio at 31 December
2009 was equal to 5.06%, well below the alert threshold of 20%.
135
2.3 EXCHANGE RATE RISK
QUALITATIVE DISCLOSURES
A. General aspects, management and measurement of exchange rate risk
Operations in foreign currencies are quite limited overall, as is the mismatch between foreign currency
assets and liabilities. This is reflected in a virtually zero gap for currencies other than the euro and a
VaR in respect of exchange rates that is traditionally very low (nil at 31 December 2009 and a few
thousand euros on average for 2009 as a whole).
B. Hedging exchange rate risk
As noted above, hedging exchange rate risk is achieved by matching assets and liabilities denominated
in currencies other than the euro in view of the small overall exposure, which would make recourse to
derivatives expensive.
QUANTITATIVE DISCLOSURES
1. 1.Distribution by currency of assets and liabilities and derivatives
CURRENCIES
US dollar
A. Financial assets
A.1 Debt securities
A.2 Equity securities
A.3 Due from banks
A.4 Loans to customers
A.5 Other financial assets
B. Other assets
C. Financial liabilities
C.1 Due to banks
C.2 Due to customers
C.3 Debt securities
C.4 Other financial liabilities
D. Other liabilities
E. Financial derivatives
- Options
+ Long positions
+ Short positions
- Other derivatives
+ Long positions
+ Short positions
Total assets
Total liabilities
Difference (+/-)
Pound
sterling
Canadian
dollar
Yen
Swiss
francs
Other
5,616
206
5,174
13
1,687
125
3,926
1,690
43
163
221
4,953
13
91
1,596
125
156
5,753
1,909
3,844
53
248
248
16
15,423
5,183
15
0
0
43
1,716
1,551
165
47
0
0
0
0
0
0
0
0
0
0
0
28
0
3
0
0
0
3
0
3
1,730
1,719
13
172
13
28
11
159
10,240
28
1,834
0
0
0
1,834
917
917
6,689
6,698
2
259
250
10,236
0
0
0
10,236
10,236
0
15,426
15,423
(9 )
9
3
2
0
0
0
2
136
0
13
0
0
0
13
2. Internal models and other sensitivity analysis methods
Internal models are not used to measure and manage exchange rate risk.
2.4 DERIVATIVES
Operations in derivatives mainly regard transactions with customers and contracts to hedge bonds
issued by the Bank. For customer transactions, Cassa di Risparmio di Cento does not operate in
speculative products or products of such complexity that would be difficult for customers to understand.
The instruments used to hedge the risk of interest rate changes on loans requested by customers include
cap and floor options and related collar options and, above all, various forms of IRS. Market risk can be
considered nil, thanks to the prudent counter-hedging policy of the Bank: positions opened with
customers are simultaneously closed with external counterparties. In the case of individual low-value
transactions, the corresponding transactions involve the aggregation of multiple positions, partly with a
view to obtaining more favorable terms. As a result, the exposure to market risk is small and limited to
the time necessary to achieve the critical mass needed to execute the connected market transaction.
Transactions in listed derivatives is restricted to a small number of operations (none outstanding at 31
December 2009), while transactions in credit derivatives is limited to a number of protection sales
contained in bond investments in the Bank’s proprietary portfolio.
137
A. FINANCIAL DERIVATIVES
A.1 Supervisory trading book: end-of-period and average notional values
31/12/2009
Over the
counter
1. Debt securities and interest rates
a) - Options
b) Swaps
c) Forwards
d) Futures
e) Other
2. Equity securities and equity indices
a) - Options
b) Swaps
c) Forwards
d) Futures
e) - Other
3. Foreign currencies and gold
a) Options
b) Swaps
c) Forwards
d) Futures
e) Other
4. Commodities
5. Other underlyings
Total
Averages
31/12/2008
Central
counterparties
704,410
266,562
395,638
0
Over the
counter
Central
counterparties
763,915
274,445
412,214
-
42,210
0
0
77,256
0
-
12,089
0
1,574
-
10,138
1,951
63
1,511
0
0
-
765,489
382,744
-
716,499
358,249
-
138
A.2 Banking book: end-of-period and average notional values
A.2.1 Hedging
31/12/2009
Over the
counter
1. Debt securities and interest rates
a) Options
b) Swaps
c) Forwards
d) Futures
e) Other
2. Equity securities and equity indices
a) Options
b) Swaps
c) Forwards
d) Futures
e) Other
3. Foreign currencies and gold
a) Options
b) Swaps
c) Forwards
d) Futures
e) Other
4. Commodities
5. Other underlyings
Total
Averages
31/12/2008
Central
counterparties
Over the
counter
190,519
258,828
190,519
258,828
190,519
95,259
139
0
0
258,828
129,414
Central
counterparties
0
0
A.2.2 Other derivatives
Does not apply to Cassa di Risparmio di Cento S.p.A.
A.3 Financial derivatives: gross positive fair value – breakdown by product
Positive fair value
31/12/2009
Over the
counter
31/12/2008
Central
counterparties
0
Over the
counter
Central
counterparties
A. Supervisory trading book
7,442
7,164
a) Options
b) Interest rate swaps
c) Cross currency swaps
3,944
3,464
2,263
3,244
18
57
0
d) Equity swaps
e) Forwards
f) Futures
g.) Other
16
B. Banking book - hedging
1,600
8,507
0
5,420
0
a) Options
b) Interest rate swaps
8,507
5,420
c) Cross currency swaps
d) Equity swaps
e) Forwards
f) Futures
g) Other
C. Banking book - other derivatives
0
0
0
0
15,949
0
12,584
0
a) Options
b) Interest rate swaps
c) Cross currency swaps
d) Equity swaps
e) Forwards
f) Futures
g) Other
Total
140
A.4 Financial derivatives: gross negative fair value – breakdown by product
Negative fair value
31/12/2009
Over the
counter
A. Supervisory trading book
a) Options
b) Interest rate swaps
c) Cross currency swaps
d) Equity swaps
e) Forwards
f) Futures
g) Other
B. Banking book - hedging
a) Options
b) Interest rate swaps
c) Cross currency swaps
d) Equity swaps
e) Forwards
f.) Futures
g) Other
C. Banking book - other derivatives
a) Options
b) Interest rate swaps
c) Cross currency swaps
d) Equity swaps
e) Forwards
f.) Futures
g) Other
Total
Central
counterparties
31/12/2008
Over the
counter
8,482
7,855
3,892
3,796
2,332
3,868
18
55
776
198
1,600
1,320
198
1,320
8,680
9,175
141
Central
counterparties
Other
Non-financial companies
Insurance undertakings
Financial companies
Banks
Other government
agencies
Governments and
central banks
A.5 Over-the-counter financial derivatives – supervisory trading book: notional values, gross
positive and negative fair values by counterparty - contracts not covered by netting
arrangements
1) Debt securities and interest rates
- notional value
- positive fair value
- negative fair value
- future exposure
2) Equity securities and equity indices
- notional value
- positive fair value
- negative fair value
- future exposure
3) Foreign currencies and gold
- notional value
- positive fair value
- negative fair value
- future exposure
4) Other assets
- notional value
- positive fair value
- negative fair value
418,930
3,178
3,821
1,228
1,041
18
0
5
- future exposure
142
37,154
344
398
220
219,580
3,743
2,503
192
28,747
153
978
5
1,052
1
35
5
9,995
5
747
0
A.6 Over-the-counter financial derivatives – supervisory trading book: notional values, gross
positive and negative fair values by counterparty – contracts covered by netting arrangements
Does not apply to Cassa di Risparmio di Cento S.p.A.
1) Debt securities and interest rates
- notional value
- positive fair value
- negative fair value
- future exposure
2) Equity securities and equity indices
- notional value
- positive fair value
- negative fair value
- future exposure
3) Foreign currencies and gold
- notional value
- positive fair value
- negative fair value
- future exposure
4) Other assets
- notional value
- positive fair value
- negative fair value
183,019
8,420
198
664
Other
Non-financial
companies
Insurance
undertakings
Financial
companies
Banks
Other
government
agencies
Governments
and central
banks
A.7 Over-the-counter financial derivatives – banking book: notional values, gross positive and
negative fair values by counterparty – contracts not covered by netting arrangements
7,500
87
13
- future exposure
A.8 Over-the-counter financial derivatives – banking book: notional values, gross positive and
negative fair values by counterparty - contracts covered by netting arrangements
Does not apply to Cassa di Risparmio di Cento S.p.A.
143
A.9 Residual life of over-the-counter financial derivatives: notional values
Up to 1 year
A. Supervisory trading book
A.1 Financial derivatives on debt securities and interest rates
A.2 Financial derivatives on equity securities and equity
indices
A.3 Financial derivatives on exchange rates and gold
A.4 Financial derivatives on other assets
B. Banking book
B.1 Financial derivatives on debt securities and interest rates
B.2 Financial derivatives on equity securities and equity
indices
B.3 Financial derivatives on exchange rates and gold
B.4 Financial derivatives on other assets
Total at 31/12/2009
185,043
172,955
242,303
Total at 31/12/2008
227,536
More than 1
year to 5 years
More than 5
years
75,215
75,215
456,240
456,240
Total
716,498
704,410
12,088
57,260
57,260
12,088
132,189
132,189
1,070
1,070
190,519
190,519
207,404
457,310
0
0
0
907,017
360,972
435,809
1,024,317
A.10 Over-the-counter financial derivatives: counterparty risk/financial risk – Internal models
Does not apply to Cassa di Risparmio di Cento S.p.A.
B. CREDIT DERIVATIVES
B.1 Credit derivatives: end-of-period and average notional values
Does not apply to Cassa di Risparmio di Cento S.p.A.
B.2 Over-the-counter credit derivatives: gross positive fair value – breakdown by product
There are no purchases of protection with a positive fair value.
B.3 Over-the-counter credit derivatives: gross negative fair value – breakdown by product
There are no purchases of protection with a negative fair value.
B.4 Over-the-counter credit derivatives: gross positive and negative fair values by counterparty –
contracts not covered by netting arrangements
None.
B.5 Over-the-counter credit derivatives: gross positive and negative fair values by counterparty –
contracts covered by netting arrangements
B.6 Residual life of credit derivatives: notional values
None.
B.7 Credit derivatives: counterparty and financial risk – Internal models
None.
144
C. FINANCIAL AND CREDIT DERIVATIVES
C.1 Over-the-counter financial and credit derivatives: net fair value and future exposure by
counterparty
None.
SECTION 3 – LIQUIDITY RISK
QUALITATIVE DISCLOSURES
A. General aspects, management and measurement of liquidity risk
Liquidity risk is managed on two levels:
- on a daily basis, the Treasury Finance unit maintains the balance of the Bank’s liquidity position
using short-term interbank transactions;
- every ten days Risk Management prepares a report comparing the inflows and outflows associated
with the contractual maturities of asset and liability items, with outflows calculated by modeling
demand items and the counterbalancing capacity, i.e. readily marketable assets available to meet
immediate liquidity needs.
- on a quarterly basis, the structural liquidity position is assessed in terms of the maturities of assets
and liabilities. This task is carried out by the ALCO, which examines the gap in maturing principal
flows and the maturity transformation rules, which even if they have been eliminated remain a
useful tool for monitoring liquidity risk.
No significant changes were made to management processes compared with the previous year.
145
QUANTITATIVE DISCLOSURES
1. Distribution of financial assets and liabilities by residual maturity
Currency: EURO
On
demand
On-balance-sheet
assets
A.1 Government
securities
A.2 Debt securities
A.3 Units in collective
investment undertakings
392,114
More
than 1
day to
7 days
More
than 7
days to
15
days
More
than 15
days to
1
month
11,560
1,129
15,466
1
More
than 1
month
to 3
months
More
than 3
months
to 6
months
More
than 6
months
to 1 year
More
than 1
year to 5
years
Inde
finit
e
life
More
than 5
years
126,227
55,093
80,559
742,793
626,810
15,143
11,541
5,078
11,785
259,319
8
20,721
-
Total
2,051,751
11,793
311,803
1,509
1,509
A.4 Loans
- banks
390,605
81,633
11,559
12
1,129
15,466
111,084
16,627
43,552
75,481
471,689
606,081
- customers
On-balance-sheet
liabilities
B.1 Deposits and current
accounts
- banks
- customers
B.2 Debt securities
B.3 Other liabilities
308,972
11,547
1,129
15,466
94,457
43,552
75,481
471,689
606,081
1,069,458
7,855
1,965
18,764
97,758
76,586
246,153
580,113
27,720
1,066,777
13,907
1,052,870
821
1,860
-
-
-
-
-
-
3
-
2,013
5,842
1,660
305
12,634
6,130
68,556
29,202
57,464
19,122
95,104
151,049
3
580,110
27,720
24,764
7,378
329
8,678
4,569
2,606
3,742
17,985
31,817
101,868
6,152
3,076
3,076
7,285
3,555
3,730
87
46
41
28
-
9
9
152
133
19
-
28
834
417
417
14,547
7,236
7,311
15,096
7,408
7,688
73
33
40
-
613
205
408
1,301
1,079
222
1,815
688
1,127
2,987
536
2,451
7,677
3,535
4,142
65
65
29,627
13,484
16,143
-
Off-balance-sheet
transactions
C.1 Financial derivatives
with exchange of
principal
- long positions
- short positions
C.2 Financial derivatives
without exchange of
principal
- long positions
- short positions
C.3 Deposits and loans
to receive
- long positions
- short positions
C.4 Irrevocable
commitments to disburse
funds
- long positions
- short positions
-
-
-
-
-
-
-
-
-
3,008
144
2,864
-
-
8,000
4,000
4,000
-
9
9
-
1,574
1,574
1,136
1,136
C.5 Financial guarantees
issued
508
20
242
37
2,434
782
746
8,582
30,616
146
-
1,726,646
98,272
1,628,374
-
2,126,372
1,066,780
13,907
1,052,873
846,082
213,510
-
-
13,727
6,863
6,864
43,967
Currency: other
On-balance-sheet assets
A.1 Government securities
A.2 Debt securities
A.3 Units in collective
investment undertakings
A.4 Loans
- banks
- customers
On-balance-sheet
liabilities
B.1 Deposits and current
accounts
- banks
- customers
B.2 Debt securities
B.3 Other liabilities
Off-balance-sheet
transactions
C.1 Financial derivatives
with exchange of principal
- long positions
- short positions
C.2 Financial derivatives
without exchange of principal
- long positions
- short positions
C.3 Deposits and loans to
receive
- long positions
- short positions
C.4 Irrevocable
commitments to disburse
funds
- long positions
- short positions
C.5 Financial guarantees
issued
More
than 1
month
to 3
months
More
than 3
months
to 6
months
On
deman
d
More
than 1
day to 7
days
More
than 7
days to
15 days
More
than 15
days to 1
month
More
than 6
months
to 1 year
More
than 1
year to 5
years
2,327
601
3,013
567
4,587
953
492
More Ind
than efin
5
ite
year life
s
321
-
2,327
2,059
268
601
567
4,587
953
492
321
601
3,013
2,360
653
567
4,587
953
492
321
4,014
98
4,879
4,258
6,429
3,269
191
4,010
1
4,009
4
-
4,729
4,729
4,160
4,160
-
-
-
98
150
98
6,429
3,269
191
770
971
90
103
860
-
-
971
513
458
90
42
48
30
30
-
860
430
430
770
5
765
-
-
-
-
-
-
-
-
-
-
Total
12,861
12,861
4,419
8,442
-
-
-
-
-
-
-
-
-
-
-
2,794
-
-
-
-
-
1,951
1,015
936
-
-
-
-
-
-
770
5
765
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
73
-
-
-
-
-
-
73
23,138
12,899
8,890
4,009
10,239
-
This section provides an update on the securitization initiated in 2006 by the Bank, which in 2008
subscribed all of the notes at the end of the warehousing stage at the time of the transfer of the "bridge"
securities from the first to the second vehicle, which raised funds by issuing rated notes that were
purchased entirely by Cassa di Risparmio di Cento, classifying them under loans & receivables. The
notes issued by Guercino Solutions S.r.l. in November 2008 totaled €284.45 million and were rated by
Standard & Poor’s as follows: €275.9 million rated AAA, €2.85 million rated BBB and €5.7 million in
unrated junior notes.
The securitized financial assets comprise residential mortgage loans to individuals with a residual
outstanding debt of €217.4 million at 31 December 2009. They regard buildings in the provinces of
Ferrara, Modena and Bologna with counterparties in Emilia Romagna. All assigned borrowers are
consumer households. The credit risk in respect of the assigned loans is retained by Cassa di Risparmio
di Cento. The risks in respect of the assigned loans are monitored and controlled in the same manner as
that for loans directly on the Bank’s books.
147
Cassa di Risparmio di Cento has not provided credit facilities to support the transaction. It has entered
into a “back-to-back” swap with Royal Bank of Scotland to hedge Guercino Solutions against interest
rate risk.
148
SECTION 4 – OPERATIONAL RISKS
QUALITATIVE DISCLOSURES
A. General aspects, management and measurement of operational risk
Fully aware of the specific nature of legal and reputational risks, Cassa di Risparmio di Cento has
established a Compliance department in line with the guidelines issued by the Bank of Italy. With
regard to the measurement of the operational risk, the Bank has drafted internal rules establishing the
process for the identification and registration of operational losses. They are used for management
purposes since, for regulatory purposes, the Bank will apply the fixed percentage of 15% of average
gross income in the last three financial years in order to calculate the related capital requirement.
The most significant pending litigation regards customer claims for damages in respect of defaulted
securities issued by the Argentine government. Appropriate provisions have been recognized in respect
of these and other disputes, as discussed in more detail in the notes to the income statement.
QUANTITATIVE DISCLOSURES
The tool used to manage operational risk consists of a database of operational losses recognized
following completion of the internal processing of the events.
In 2009 two cases of operational losses with a unit value of more than €500 were registered, for a total
of €1,934. In both cases the losses were associated with material errors by employees.
As regards other sources of operational risk, one branch of the Bank suffered a robbery with a nominal
loss of about €24 thousand. The effective loss was €12,500, representing the deductible on the
insurance coverage.
As regards litigation, uses of provisions for risks and charges amounted to €1.7 million, divided among
revocatory actions in bankruptcy (€1.1 million), suits involving defaulted securities (€570 thousand)
and other minor disputes (€50 thousand). During the year, accruals to the provision amounted to €1.7
million.
The Bank uses the basic indicator approach to calculate the related capital requirement, in line with the
First Pillar regulations.
149
Part F – Information on capital
SECTION 1 – SHAREHOLDERS’ EQUITY
A. Qualitative disclosures
Shareholders’ equity is composed of share capital and reserves of any sort. The aggregate, the
components of which are reported below, covers all the corporate risks discussed above (credit,
liquidity, market, operational and others). The Bank is subject to the capital requirements established
under the supervisory regulations issued by the Bank of Italy. The ratio of capital to risk-weighted
assets must be at least 8%. Compliance with the requirement is monitored on a quarterly basis and also
undergoes prospective analysis and simulations during strategic and operational planning (preparation
of business plans and budgets). Analogously, decisions concerning the pursuit of capital management
objectives are one of the key pillars of strategic planning, as capital adequacy is an essential driver of
any development project.
B. Quantitative disclosures
B.1 Shareholders' equity: composition
The Bank’s shareholders’ equity breaks down as follows:
31/12/2008
31/12/2008
1. Share capital
67,499
67,499
2. Share premium reserve
30,851
30,851
3. Reserves
60,203
55,437
- earnings
54,730
49,964
a) legal
24,840
24,402
b) established in bylaws
25,172
24,303
c) treasury shares
0
0
d) other
4,718
1,259
- other
5,473
5,473
4. Equity instruments
0
5 (Treasury shares)
0
6. Valuation reserves
- Financial assets available for sale
21,021
20,106
11,332
10,417
- Property and equipment
0
- Intangible assets
0
- Hedging of investments in foreign operations
0
- Foreign exchange differences
0
- Non-current assets held for sale
0
- Actuarial gains (losses) on defined benefit plans
0
- Share of valuation reserves of equity investments accounted for using
equity method
- Special revaluation laws
Net profit for the period
Total
150
0
9,689
9,689
7,145
8,687
186,719
182,580
B.2 Valuation reserves for financial assets available for sale: composition
31/12/2009
Positive
reserve
1. Debt securities
31/12/2008
Negative Positive
reserve reserve
469
2. Equity securities
11,908
3. Units in collective investment undertakings
Negative
reserve
1,890
13,039
107
732
4. Loans
Total
11,908
576
13,039
2,622
B.3 Valuation reserves for financial assets available for sale: change for the period
Units in
collective
investment
undertakings
13,039
(732)
Debt
Equity
securities securities
1. Opening balance
(1,890)
Loans
Total
-
10,417
2. Increases
3,584
37
1,530
-
5,151
2.1 Fair value gains
2,223
11
90
-
2,324
29
0
1,206
-
1,235
738
-
738
468
-
497
2.2 Reversal of negative reserves to income statement:
for impairment
29
for realization
2.3 Other increases
1,332
26
234
-
1,592
3. Decreases
2,163
1,168
905
-
4,236
4
1,168
64
-
1,236
84
-
1,561
757
-
1,439
(107)
-
11,332
3.1 Fair value losses
3.2 Reversal of positive reserves to income statement:
for realization
3.3 Other decreases
1,477
4. Closing balance
(469)
682
11,908
SECTION 2 – CAPITAL AND CAPITAL RATIOS
2.1 REGULATORY CAPITAL
A. Qualitative disclosures
Regulatory capital is calculated on the basis of the instructions issued by the Bank of Italy in Circular
no. 115 of 18 December 1991 – 12th update of 5 February 2008. The update establishes new reporting
schedules following transposition of the Community Directives on capital adequacy.
1. Tier 1 capital
Tier 1 capital is composed of share capital, the share premium reserve and other reserves including the
share of net profit to be used for self-financing. There are no negative elements, whereas the negative
prudential filters applied to Tier 1 capital regard the negative reserve on available-for-sale securities.
Gross Tier 1 capital is reduced by deducting 50% of shareholdings in credit and financial institutions
exceeding 10% of the share capital of the company in which the interest in held and the shareholding in
the Bank of Italy (total value of €2,902,204).
151
2. Tier 2 capital
Tier 2 capital is composed of valuation reserves, lower Tier 2 subordinated liabilities and positive
reserves for available-for-sale securities. There are no negative elements, whereas the negative
prudential filters applied to Tier 2 capital regard 50% of the positive reserves on available-for-sale
securities. Gross Tier 2 capital is reduced by deducting 50% of shareholdings in credit and financial
institutions exceeding 10% of the share capital of the company in which the interest in held; the
shareholding in the Bank of Italy.
31/12/2009
A. Tier 1 capital prior to the application of prudential filters
B. Tier 1 prudential filters:
B.1 Positive IAS/IFRS prudential filters
B.2 Negative IAS/IFRS prudential filters
C. Tier 1 capital after the application of prudential filters (A+B)
D. Elements to be deducted from Tier 1 capital
E. Total Tier 1 capital (TIER 1) (C-D)
31/12/2008
163,081
158,549
(753)
(2,602)
0
0
(753)
(2,602)
162,328
155,947
(3,370)
(1,395)
158.958
154,552
F. Tier 2 capital prior to the application of prudential filters
45,411
47,708
G. Tier 2 capital prudential filters
(6,043)
(6,510)
0
0
G.2 Negative IAS/IFRS prudential filters
(6,043)
(6,510)
H.. Tier 2 capital including deductible elements (F+G)
39,368
41,198
I. Elements to be deducted from Tier 2 capital
(3,369)
(1,395)
L. Total Tier 2 capital (TIER 2) (H-I)
35,999
39,803
G.1 Positive IAS/IFRS prudential filters
M. Elements to be deducted from Tier 1 and Tier 2 capital
N. Regulatory capital (E+L-M)
O. Tier 3 capital
P.. Regulatory capital including Tier 3 (N+O)
152
0
(990)
194,957
193,367
0
0
194,957
193,367
2.2 CAPITAL ADEQUACY
A. Qualitative disclosures
The Bank complies with the capital ratio limits required under supervisory regulations. The Bank's
investment policies are directed at maintaining a balance between economic and financial investments
and capital, while capital adequacy is also assessed through the Internal Capital Adequacy Assessment
Process (ICAAP).
B. Quantitative disclosures
Unweighted amounts
31/12/2009
31/12/2008
A. EXPOSURES
A.1 Credit and counterparty risk
1. Standardized approach
2. IRB approach
2.1 Foundation
2.2 Advanced
3. Securitizations
B. CAPITAL REQUIREMENTS
B.1 Credit risk and counterparty risk
B.2 Market risk
1. Standardized method
2. Internal models
3. Concentration risk
B.3 Operational risk
1. Basic indicator approach
2. Standardized approach
3. Advanced measurement approaches
B.3 Other prudential requirements
B.5 Other elements
B.6 Total prudential requirements
3,614,241
1,520,152
1,681,209
121,612
250
250
134,500
1,075
1,075
11,452
11,452
10,972
10,972
133,314
146,547
1,666,425
1,831,837
C.2 Tier 1 capital/risk-weighted assets (Tier 1 capital ratio) (1)
9.54%
8.44%
C.3 Regulatory capital/risk-weighted assets (Total capital ratio)
11.70%
10.56%
C EXPOSURES AND CAPITAL RATIOS
C.1 Risk-weighted assets
3,835,909
Weighted amounts/requirements
31/12/2009
31/12/2008
(*) The data have been drawn from supervisory reports on the basis of the regulations in force as of the respective reference
dates.
(**) The amounts at 31 December 2008 have been increased by €256,636 thousand and the related weighted amount by
€89,587 thousand for the securitized loans, which in 2008 were not included in the calculation of exposures.
153
Part G – Business combinations
No business combinations were carried out in 2009.
Part H – Transactions with related parties
1. Information on compensation of directors and management
Compensation of directors and key management personnel:
31/12/2009
Directors
General Manager
31/12/2008
461
377
454
373
2. Information on transactions with related parties
With regard to the provisions of Circular no. 262 of 22 December 2005 issued by the Bank of Italy
containing instructions for the preparation of the separate and consolidated financial statements of
banks in compliance with the IAS/IFRS, the following tables report the required information
concerning the Bank’s related parties as defined under IAS 24. More specifically, the table reports loans
and guarantees granted to related parties with the exclusion of transactions carried out in the year with
the same counterparties. In addition to the explicit provisions of IAS 24, the information also comprises
transactions envisaged in Article 136 paragraph 2 bis of the 1993 Banking Act where they involve
people defined as “key management personnel” by IAS 24.
OUTSTANDING LOANS AT 31 DECEMBER 2009
(in thousands of euros)
Loans
Directors and key management personnel
Members of the immediate family of the
above parties
Parent, subsidiary, associate or company
subject to the significant influence of the
above parties
Guarantees
13
3
29,717
5,162
The above loans regard major industrial groups in our area controlled by directors of the Bank.
Drawings on the credit facilities amounted to 43.2% of the total amount available, with contractual
terms and conditions in line with those for market transactions.
OTHER TRANSACTIONS
"Other transactions" – meaning the supply of goods and services and lease agreements – with the
related party Cedacri (it is a related party because the General Manager is a director on its board) are
completed with the signing of the framework agreement.
154
Part I – Share-based payments
None.
155
Part L – Operating segments
Reporting by operating segment
This section reports the results at 31 December 2009 by operating segment, as envisaged under IFRS 8
“Operating Segments”, with a reconstruction of the comparable figures at 31 December 2008.
Definition of segments
For a number of years now the Bank has used a number of customer "segments" in its management
models, with a view to identifying uniform macro-groups of customers. The primary subdivision is
between "Individuals" and “Enterprises", which of which is broken down further as follows:
For "Individuals", we have identified the following groups:
§ Family – funding of less than €80 thousand and simple requirements;
§ Personal – funding of up to €450 thousand, with customized assistance provided by branch
personnel;
§ Private – funding of more than €450 thousand, with highly customized assistance provided by
dedicated relationship managers.
“Enterprises” have been subdivided on the basis of turnover and complexity of the company structure,
generally indicated by the legal form of the enterprise involved. The broader category has been broken
down as follows:
§ P.O.E. – very small businesses, with turnover of less than €250 thousand, generally craft
businesses or retailers organized as sole proprietorships or partnerships;
§ Small Business – companies with turnover of up to €2.5 million, for which the branch manager
can provide all necessary assistance;
§ Corporate – companies with turnover of more than €2.5 million, often with complex
requirements and need for highly specialized consultants.
After segmenting the customer base, the top customers are assigned to Private and Corporate
relationship managers.
In determining performance by segment, the criteria used to calculate the amounts reported are closely
linked to the operational reporting used by management and, in part, the sales network. The amounts for
the L&R securities of the securitization have been eliminated in order to avoid double counting after the
incorporation of the data of the SPV.
In addition, please note that:
"net interest income" is that used in the internal management model with multiple ITRs normally used
to measure performance for all main analytical dimensions (centers, managers and segments) and so
such income is governed by the rules that essentially shift management of interest rate risk and liquidity
risk to the treasury pool;
the balance-sheet data are reported at end-of-period values.
156
Segment income statement
Thousands of euros
Individuals
Family and
Personal
Enterprises
P.O.E
and S.M.E.
Private
Corporate
Headquarters
centers
Total Bank
A – at 31 December 2009
Net interest income
Net income from services
19,693
1,176
16,066
15,149
1,805
53,889
8,075
3,705
5,370
3,916
-764
20,302
5,801
5,801
27,768
4,881
21,436
19,065
6,842
79,992
24,385
1,970
12,436
8,689
11,096
58,575
8,949
3,281
5,213
3,295
-172
20,566
-4,048
-4,048
Net income (loss) from financial operations
Gross income
B - at 31 December 2008
Net interest income
Net income from services
Net income (loss) from financial operations
Gross income
33,334
5,252
17,648
11,984
6,877
75,094
-4,692
-794
3,630
6,460
-9,291
-4,686
-874
424
157
621
-593
-265
-5,565
-371
3,787
7,081
-35
4,898
Changes = A - B
Net interest income
Net income from services
Gross income
157
Segment balance sheet
Thousands of euros
Individuals
Family and
Personal
Enterprises
P.O.E
and S.M.E.
Private
Corporate
Family and
Personal
Private
A - at 31 December 2009
Total assets
629,206
6,337
543,444
653,710
594,444
2,427,140
Total liabilities
953,207
370,761
204,263
207,098
691,812
2,427,140
-324,001
-364,425
339,181
446,613
-97,368
0
Total assets
588,795
6,981
562,259
714,955
469,672
2,342,663
Total liabilities
864,866
373,063
162,489
170,489
771,756
2,342,663
-276,070
-366,082
399,771
544,466
-302,084
0
Total assets
40,411
-645
-18,816
-61,244
124,772
84,477
Total liabilities
44,214
-2,302
16,311
36,608
4,777
84,477
Difference
B - at 31 December 2008
Difference
Changes = A - B
158
ANNEXES
§ List of property holdings
§ List of equity investments
§ Treasury services performed by the Bank
§ Disclosure of fees for audit and non-audit services pursuant
to Article 149 duodieces of the Consob Issuers Regulation
§ List of accounting standards endorsed by the European
Commission
159
LIST OF PROPERTY HOLDINGS AT 31/12/2009
Book value at
31/12/09
Description of holdings located in
Accumulated
depreciation
CENTO
Via Matteotti 8/10/12
and Via Guercino 32
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Used in operations by nature
Land appurtenant to buildings used in operations by nature
Not used in operations
Land appurtenant to buildings not used in operations
Total
11,138
6,827
2,331
1,385
1,970
1,214
24,865
1,669
0
343
0
296
0
2,308
194
126
731
474
1,525
29
0
110
0
139
981
655
423
282
2,341
147
0
63
0
210
491
594
1,085
74
0
74
300
300
0
0
CENTO
and Via Guercino 30
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Used in operations by nature
Land appurtenant to buildings used in operations by nature
Total
CENTO
Via Ferrarese
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Used in operations by nature
Land appurtenant to buildings used in operations by nature
Total
CENTO
Via Bologna
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
CENTO
Via Galvani
Used in operations by designation
Total
160
Book value at
31/12/09
Description of holdings located in
Accumulated
depreciation
CASUMARO
Via Correggio, 409
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Used in operations by nature
Land appurtenant to buildings used in operations by nature
Not used in operations
Land appurtenant to buildings not used in operations
Total
38
22
5
3
120
69
257
6
0
1
0
18
0
25
278
71
135
35
7
2
528
42
0
20
0
1
0
63
495
208
162
68
933
74
0
24
0
98
128
45
173
19
0
19
257
110
0
0
367
39
0
0
0
39
MIRABELLO
Corso Italia, 256
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Used in operations by nature
Land appurtenant to buildings used in operations by nature
Not used in operations
Land appurtenant to buildings not used in operations
Total
VIGARANO MAINARDA
Corso Roma, 3/5
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Used in operations by nature
Land appurtenant to buildings used in operations by nature
Total
SAN CARLO
Via Risorgimento, 41
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
SANT'AGOSTINO
Via Statale, 142
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Not used in operations
Land appurtenant to buildings not used in operations
Total
161
Book value at
31/12/09
Description of holdings located in
Accumulated
depreciation
ALBERONE
Via Riga, 54
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
81
53
134
12
0
12
151
45
77
273
20
0
0
20
188
66
37
13
304
28
0
6
0
34
119
34
153
18
0
18
195
80
0
0
275
29
0
0
0
29
656
281
937
96
0
96
DOSSO
Via Verdi,24/26
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Used in operations by designation
Total
POGGIO RENATICO
Viale Roma, 15
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Not used in operations
Land appurtenant to buildings not used in operations
Total
CORONELLA
Via Coronella, 73
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
PIEVE DI CENTO
Via Garibaldi, 13/15
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Not used in operations
Land appurtenant to buildings not used in operations
Total
PIEVE DI CENTO
Piazza Costa, 1
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
162
Book value at
31/12/09
Description of holdings located in
Accumulated
depreciation
VENEZZANO
Piazza Caduti 2 Agosto
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
152
44
196
23
0
23
91
36
127
14
0
14
272
73
345
41
0
41
305
125
430
46
0
46
508
98
606
31
0
31
243
81
324
0
36,478
36
0
36
0
3,375
FINALE EMILIA
Via per Modena 34/a
Used in operations by nature
Land appurtenant to buildings used in operations by nature
Total
CREVALCORE
Via Amendola, 330
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
RAMI DI RAVARINO
Via Vivaldi, 11
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
FERRARA
Via M.Tassini
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
FERRARA
Via Giovanni XXIII
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
TOTAL PROPERTY HOLDINGS
163
LEASED PROPERTY
Book value at
31/12/09
Description of holdings located in
Accumulated
depreciation
BOLOGNA
Strada Maggiore
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Total
1,496
1,584
3,080
224
TOTAL LEASED PROPERTY
3,080
224
39,558
3,599
TOTAL PROPERTY
224
LIST OF INVESTMENTS UNDER WAY AT 31/12/2009
Book value at
31/12/09
Description of holdings located in
Accumulated
depreciation
CENTO VIA MATTEOTTI
Headquarters renovation
Used in operations by designation
Used in operations by nature
Total
149
3,310
3,459
0
TOTAL
3,459
0
SUMMARY
Book value at
31/12/09
Description of holdings located in
Used in operations by designation
Land appurtenant to buildings used in operations by designation
Used in operations by nature
Land appurtenant to buildings used in operations by nature
Not used in operations
Land appurtenant to buildings not used in operations
Leasing - Used in operations by designation
Leasing - Land appurtenant to buildings used in operations by
designation
Total property
Total investments under way
Total
164
Accumulated
depreciation
17,247
9,638
3,878
2,283
2,134
1,298
1,496
2,479
0
575
0
321
0
224
1,584
39,558
0
3,599
3,459
0
43,017
3,599
LIST OF EQUITY INVESTMENTS AT 31 DECEMBER 2009
(amounts in euros)
No. of
shares or Nominal value
capital parts
SOC. ATT. FIER. FER. (SAFF)
% holding
Cost value
Equity reserve at Equity reserve at
31.12.09
31.12.08 (1)
Market value
1,193
5,965
2,147%
1,472
1,472
818
818,000
6,487%
2,509,592
8,976,298
6,466,707
6,466,707
-
29,615
1,333,267
1,694%
1,607,976
2,221,125
613,148
1,420,880
(807,732 )
311
162
0,104%
2,902,204
2,902,204
-
-
36,589
131,720
0,006%
697,050
192,916
10,519
-
3,637
3,637,000
13,789%
3,837,000
4,364,400
527,400
527,400
-
206,584
206,584
1,000%
206,584
206,584
-
-
-
12,000
12,000
15,000%
12,000
12,000
-
-
-
516,000
516,000
3,753%
516,000
516,000
-
-
-
DELTOS IMPIANTI
59,000
59,000
15,000%
59,000
59,000
-
-
-
SO.TE.MA. PACK S.R.L.
16,000
16,000
8,000%
16,000
16,000
-
-
-
SISTEMA WALCON
150,000
150,000
8,300%
150,000
150,000
-
-
AIRE SRL IN LIQUIDAZIONE
130,000
130,000
10,000%
1
0
(1 )
(1 )
73,358
378,527
4,891%
1,103,323
2,530,117
1,426,795
1,426,795
SWIFT
2
250
0,001%
1,141
1,141
-
-
PROFINGEST
2
5,165
0,190%
5,165
5,165
-
-
S.I.PRO. SPA
4,226
218,273
3,831%
220,077
218,273
(1,804 )
(1,804 )
EMIL-RO SERVICE SRL
7,800
7,800
8,333%
7,747
7,745
(1 )
(1 )
IMMOBILIARE CAT SPA
975
503,545
15,000%
503,545
503,545
211,390
2,113,900
8,456%
2,946,158
3,836,729
4,000
4,000
3,738%
4,000
4,000
1,900,000
1,900,000
8,071%
1,900,000
4,047,000
3,873
1,000,086
7,037%
1,000,086
1,000,086
20,206,120
31,771,800
CEDACRI SPA
EUROVITA SPA
BANCA D'ITALIA PART
BANCO POPOLARE
BCO DELLE TRE VENEZIE
LACOTE SRL
IMMOBILIARE FERRARA SUD
BILANCIAI INTERNATIONAL
FRAER LEASING SPA
EMILIA ROMAGNA FACTOR SPA
PART. PCO SCIEN. TEC.
VEGAGEST SGR
CPR SYSTEM PARTECIP
TOTAL
13,147,245
165
-
-
Revaluation
under Law
218/90
Change in
2009
-
10,519
2,902,043
440,198
-
890,571
965
890,571
526
-
2,147,000
12,080,334
2,470,000
13,200,547
(323,000 )
-1,120,213
3,343,732
LIST OF ENTITIES FOR WHICH THE BANK PERFORMS TREASURY SERVICES
The following list reports the entities for which the Bank performs treasury service, in alphabetical
order:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
ASILO INFANTILE CENTO
AUTOMOBILE CLUB FERRARA
CASA PROTETTA “G.B. PLATTIS” ONLUS
COMUNE DI CASTELLO D’ARGILE
COMUNE DI CENTO
COMUNE DI FINALE EMILIA
COMUNE DI GALLIERA
COMUNE DI MIRABELLO
COMUNE DI NONANTOLA
COMUNE DI PIEVE DI CENTO
COMUNE DI POGGIO RENATICO
COMUNE DI RAVARINO
COMUNE DI S. AGOSTINO
COMUNE DI VIGARANO MAINARDA
DIREZ. DIDATTICA SCUOLA ELEMENTARE CENTO
DIREZIONE DIDATTICA 2° CIRCOLO RENAZZO
DIREZIONE DIDATTICA 2° CIRCOLO SASSUOLO
DIREZIONE DIDATTICA SAN GIOVANNI IN PERSICETO
DISTRETTO SCOLASTICO N. 34 - CENTO
DISTRETTO SCOLASTICO N. 23 - S. PIETRO IN CASALE
FONDAZIONE “COLLEGIO BERTI”
FONDAZIONE “DON G. ZANANDREA”
FONDAZIONE “F.MANTOVANI” MIRABELLO
FONDAZIONE “S. MARIA CORPORENO”
I.P.S.I.A “F.LLI TADDIA” CENTO
I.S.I.T. “IND. BASSI-COMM.LE BURGATTI” CENTO
I.T.I.S. A.VOLTA SASSUOLO
ISIS ARCHIMEDE SAN GIOVANNI IN PERSICETO
IST. COMPR. DI S. PIETRO IN CASALE
IST. COMPR. SCUOLE PIEVE DI CENTO
ISTITUTO COMPRENSIVO - S. AGOSTINO
ISTITUTO COMPRENSIVO – POGGIO RENATICO
ISTITUTO COMPRENSIVO – VIGARANO MAINARDA
ISTITUTO COMPRENSIVO BONDENO
ISTITUTO COMPRENSIVO DI S.M. DECIMA
ISTITUTO COMPRENSIVO SALA BOLOGNESE
LICEO GINNASIO “G.CEVOLANI” CENTO
PARTECIPANZA AGRARIA DI CENTO
PARTECIPANZA AGRARIA DI NONANTOLA
PARTECIPANZA AGRARIA DI PIEVE DI CENTO
PATRIMONIO DEGLI STUDI CENTO
PENSIONATO LIVIA CAVALIERI GALLERANI – ONLUS
SCUOLA MEDIA STATALE - CENTO
SCUOLA MEDIA STATALE “PRIMO LEVI” SASSUOLO
166
DISCLOSURE OF FEES FOR AUDIT AND NON-AUDIT SERVICES PURSUANT TO
ARTICLE 149 DUODIECES OF THE CONSOB ISSUERS REGULATION
Pursuant to Article 149 duodecies of the Consob Issuers Regulation, the following table reports the fees
paid to the auditing firm Reconta Ernst&Young SpA for the following services:
1) Audit services, which include:
§
§
auditing of annual accounts for the purpose of issuing a professional opinion on such
accounts;
auditing of interim accounts;
2) Certification services, which includes engagements in which the auditors examine a specific
element, the determination of which is carried out by another party, who is responsible for such
determination, with a view to providing the beneficiary of the service with an opinion on the
reliability of that specific element.
3) Tax advisory services.
4) Other services, which include engagements of a minor nature.
The fees reported in the table for 2007 are contractual fees, including any indexing and VAT (but not
out-of-pocket expenses and any supervisory contribution).
Type of service
Auditing
Certification
Tax advisory
Other
Total
Entity providing the service
Reconta Ernst&Young S.p.A.
Reconta Ernst&Young S.p.A.
167
Beneficiary of service
Cassa di Risparmio di Cento SpA
Cassa di Risparmio di Cento SpA
Fees
(thousands of
euros)
79
4
83
List of international accounting standards endorsed by the European Commission
Standard Description
IFRS 1 First-time Adoption of International Financial Reporting
Standards
IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
Non-current Assets Held for Sale and Discontinued
IFRS 5 Operations
IFRS 6 Exploration for and Evaluation of Mineral Assets
IFRS 7
IFRS 8
IAS 1
IAS 2
IAS 7
IAS 8
IAS 10
IAS 11
IAS 12
IAS 16
IAS 17
IAS 18
IAS 19
IAS 20
Financial Instruments: Disclosures
Operating Segments
Presentation of Financial Statements
Inventories
Statement of Cash Flows
Accounting Policies, Changes in Accounting Estimates
and Errors
Events After the Reporting Period
Construction Contracts
Income Taxes
Property, Plant and Equipment
Leases
Revenue
Employee Benefits
Endorsement regulation
1126/2008 – amend. 1274/2008 - 69/2009 - 70/2009 –
494/2009 – 495/2009 – 1136/09
1126/2008 – amend. 1261/2008 – 495/2009
1126/2008 amend. 495/2009
1126/2008 - amend. 1274/2008 -494/2009 – 1165/2009
1126/2008 - amend. 1274/2008 - 70/2009 - 494/2009
1126/2008
1126/2008 - amend. 1274/2008 - 70/2009 – 824/2009 –
1165/2009
1126/2008 - amend. 1274/2008
1274/2008 - amend. 53/2009 - 70/2009 - 494/2009
1126/2008 - 70/2009
1126/2008 - amend. 1274/2008 - 70/2009 - 494/2009
1126/2008 - amend. 1274/2008 - 70/2009
1126/2008 - amend. 1274/2008 - 70/2009
1126/2008 - amend. 1274/2008
1126/2008 - amend. 1274/2008 -495/2009
1126/2008 - amend. 1274/2008 - 70/2009 -495/2009
1126/2008
1126/2008 – amend. 69/2009
1126/2008 - amend. 1274/2008 - 70/2009
1126/2008 – amend. 70/2009
IAS 21
IAS 23
IAS 24
Accounting for Government Grants and Disclosure of
Government Assistance
The Effects of Changes in Foreign Exchange Rates
Borrowing Costs
Related Party Disclosures
IAS 26
IAS 27
IAS 28
Accounting and Reporting by Retirement Benefit Plans
Consolidated and Separate Financial Statements
Investments in Associates
IAS 29
IAS 31
IAS 32
Financial Reporting in Hyperinflationary Economies
Interests In Joint Ventures
Financial Instruments: Presentation
IAS 33
Earnings Per Share
1126/2008 - amend. 1274/2008
1126/2008
1126/2008 - amend. 1274/2008 – 69/2009 - 494/2009
1126/2008 - amend. 1274/2008 - 70/2009 - 494/2009 495/2009
1126/2008 - amend. 1274/2008 - 70/2009
1126/2008 – amend. 70/2009 - 494/2009
1126/2008 - amend. 1274/2008- 53/2009 - 70/2009 494/2009 -495/2009 – 1293/2009
1126/2008 - amend. 1274/2008 - 494/2009 -495/2009
IAS 34
Interim Financial Reporting
1126/2008 - amend. 1274/2008 - 70/2009 -495/2009
IAS 36
Impairment of Assets
IAS 37
IAS 38
IAS 39
IAS 40
IAS 41
1126/2008 - amend. 1274/2008 – 69/2009 - 494/2009
1260/2008 – amend. 70/2009
1126/2008 - amend. 1274/2008 – 69/2009 - 70/2009 495/2009
Provisions, Contingent Liabilities and Contingent Assets 1126/2008 - amend. 1274/2008 -495/2009
Intangible Assets
1126/2008 - amend. 1274/2008 - 70/2009 -495/2009
Financial Instruments: Recognition and Measurement
1126/2008 - amend. 1274/2008 – 53/2009 - 494/2009 495/2009 – 824/2009 – 839/2009 – 1171/2009
Investment Property
1126/2008 - amend. 1274/2008 - 70/2009
Agriculture
1126/2008 - amend. 1274/2008 - 70/2009
168
IFRIC 1
IFRIC 2
IFRIC 4
IFRIC 5
IFRIC 6
INTERPRETATIONS
ENDORSEMENT REGULATION
Changes in Existing Decommissioning, Restoration and
1126/2008 - amend. 1274/2008
Similar Liabilities
Members' Shares in Co-operative Entities and Similar
Instruments
1126/2008 – 53/2009
Determining Whether an Arrangement Contains a Lease 1126/2008
Rights to Interests Arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds
1126/2008
Liabilities Arising from Participating in a Specific Market Waste Electrical and Electronic Equipment
1126/2008
1126/2008 - amend. 1274/2008 – 53/2009
IFRIC 7
Applying the Restatement Approach under IAS 29
Financial Reporting in Hyperinflationary Economies
IFRIC 8
IFRIC 9
IFRIC 10
Scope of IFRS 2
Reassessment of Embedded Derivatives
Interim Financial Reporting and Impairment
1126/2008
1126/2008 amend. 495/2009 – 1171/2009
IFRIC 11
Group and Treasury Share Transactions
1126/2008
IFRIC 12
Service Concession Arrangements
254/2009
IFRIC 13
Customer Loyalty Programmes
1126/2008 - amend. 1274/2008
IFRIC 16
1262/2008
IAS 19 – The Limit on a Defined Benefit Asset, Minimum 1263/2008 - amend. 1274/2008
Funding Requirements and their Interaction.
Agreements for the Construction of Real Estate
636/2009
Hedges of a Net Investment in a Foreign Operation
460/2009
IFRIC 17
Distributions of Non-cash Assets to Owners
1142/09
IFRIC 18
Transfers of Assets from Customers
1164/09
SIC 7
Introduction of the Euro
SIC 10
Government Assistance – No Specific Relation to
Operating Activities
Consolidation – Special Purpose Entities
1126/2008 - amend. 1274/2008 - 494/2009
1126/2008 - amend. 1274/2008
IFRIC 14
IFRIC 15
SIC 12
SIC 13
SIC 15
SIC 21
SIC 25
SIC 27
SIC 29
SIC 31
SIC 32
1126/2008
Jointly Controlled Entities – Non-Monetary Contributions 1126/2008 - amend. 1274/2008
by Venturers
Operating Leases – Incentives
1126/2008 - amend. 1274/2008
Income Taxes – Recovery of Revalued Non-Depreciable 1126/2008
Assets
Income Taxes – Changes in the Tax Status of an Enterprise 1126/2008 - amend. 1274/2008
or its Shareholders
Evaluating the Substance of Transactions in the Legal
1126/2008
Form of a Lease
Disclosure – Service Concession Arrangements
1126/2008 - amend. 1274/2008
Revenue – Barter Transactions Involving Advertising
Services
Intangible Assets – Web Site Costs
169
1126/2008
1126/2008- amend. 1274/2008
Certification of the separate financial statements pursuant to Article 81-ter of Consob
Regulation no. 11971 of 14 May 1999, as amended
1. The undersigned Ivan Damiano and Stefano Aldovrandi, in their respective capacities as
General Manager and manager responsible for preparing the financial reports of Cassa di
Risparmio di Cento SpA, hereby certify, taking account of the provisions of Article 154-bis,
paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998:
1.1
the appropriateness with respect to the characteristics of the company and
1.2
the effective adoption
of the administrative and accounting procedures for the preparation of the separate financial
statements for 2009.
2. The assessment of the appropriateness of the administrative and accounting procedures followed
in preparing the separate financial statements was based on a model developed by Cassa di
Risparmio di Cento SpA, in line with Internal Control standards which are generally accepted
at the international level.
3. In addition, we certify that:
3.1 the separate financial statements:
a) have been prepared in compliance with the International Financial Reporting
Standards adopted in the European Union pursuant to Regulation (EC) no. 1606 of 19
July 2002;
b) correspond to the information in the books and other accounting records;
c) have been prepared in compliance with art. 9 of Legislative Decree 38/2005 and
provide a true and fair representation of the performance and financial position of the
issuer;
3.2 the Report on Operations contains a reliable analysis of operations and performance, as well as
the situation of the issuer, together with a description of the main risks and uncertainties to
which it is exposed.
Cento, 23 March 2010
General Manager
Ivan Damiano
Financial Reporting Manager
Stefano Aldovrandi
170
Report of the Board of Auditors on the 2009 financial statements
Dear Shareholders,
The draft financial statements submitted for your attention reflect the results achieved during
2009.
The year just ended was once again affected by the challenging global economic climate that
emerged in 2008.
In an environment of declining prices, financial instability and weak signs of recovery, monetary
policy continued to be expansionary, with official rates close to zero in the United States and 1%
in the euro area.
During the third quarter of 2009, there were tangible – albeit insufficient – signs of an increase in
industrial orders and production, with a positive impact on gross domestic product (GDP).
In some ways, the difficult situation was felt even more sharply in 2009 than in 2008 since the
impact was mainly apparent on the real economy of the country as a whole, with a marked
increase in the unemployment rate.
Despite these objective difficulties, which currently can be easily seen in financial sector players,
your Bank has been able to carry out its role of providing proactive support to businesses,
especially those that can demonstrate that they possess the characteristics that will enable them
to weather this present crisis, and is preparing for the awaited recovery.
In 2009, your Bank once again distinguished itself for the prudence and care shown in its
operations, whether commercial investments made on behalf of its creditworthy customers or its
own investments in securities, which contain no toxic instruments. The results of these financial
investments partly mitigated the negative performance seen in the sector in 2008.
However, in 2009 we were not spared regulatory changes or the implementation of regulations
already enacted. These include the new regulations on banks’ organization and corporate
Governance, requiring greater order and transparency in corporate governance, as well as the
new transparency regulations and the transposition of the Directive on cross-border payment
services.
As in the past, our report is divided into two sections. The first looks at the financial statements,
annexes and the Board of Directors’ report on operations, while the second provides information
on the supervision and control exercised by the Board of Auditors in accordance with the law, on
proper administration and on the adequacy of the organizational structure, particularly with
respect to control arrangements.
Our work was carried out by attending all the meetings of the Board of Directors and by
conducting over 30 examinations and analyses of issues handled by corporate structures. All
work involved the active collaboration of the Bank’s internal control units.
The financial statements and the report on operations
In accordance with the law, the Board of Directors made available to us the draft financial
statements for the year ended 31 December 2009, which are submitted for your approval, along
with its report on operations. The independent auditor has expressed its opinion on both of these
documents.
These financial statements have been prepared in accordance with the International Accounting
Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB), as endorsed by the European Commission
pursuant to Regulation 1606 of 19 July 2002. They consist of five separate documents: the
balance sheet, the income statement, the statement of changes in shareholders’ equity, the cash
flow statement, and the notes to the financial statements.
171
Report of the Board of Auditors on the 2009 financial statements
The balance sheet can be summarized as follows:.
Assets
2,427,140,490
Liabilities and provisions
2,240,421,940
Equity
179,574,012
Net profit for the period
7,144,538
The net profit for the year amounted to €7,144,538, as shown in the income statement, which is
summarized below:
Gross income
79,997,933
Costs, sundry expenses
65,883,396
and adjustments
Gross profit
14,114,538
Net profit
7,144,538
The draft financial statements were audited by Reconta Ernst & Young S.p.A., who are
responsible for auditing the accounts. The auditing firm issued the attached report, without
reservations or exceptions, as did the manager responsible for preparing the financial statements
of the Bank, who issued his certification as required by law.
The notes to the financial statements contain all the information required by law. In particular, the
balance sheet and the income statement are accompanied by extensive comments on the
accounting policies used in preparing the financial statements and the criteria employed in
measuring items, adopted on a going-concern and accruals basis, in keeping with the principles
of the materiality and significance of the accounting information.
The financial statements do not contain items representing capitalized costs.
We have given our consent with respect to the measurement criteria for intangible assets, where
necessary.
We also carefully scrutinized the information provided on transactions with related parties to
ensure its accuracy.
In our opinion the report on operations is exhaustive, complete and transparent. We have no
observations concerning its compliance with the law.
The independent auditor shared our opinion on the consistency between the report on operations
and the financial statements, in accordance with the law.
Significant facts that occurred following the close of the period include:
- the enactment of Legislative Decree 7 of 27 January 2010, transposing the directive on the
rights of shareholders in listed companies, which governs, including for issuers of widely held,
listed financial instruments, as in the case of your Bank, the procedures for shareholder
participation and the procedures for presenting the agendas for shareholders’ meetings.
These changes will require amendment of the articles of association.
- the issue by Consob of the new regulations relating to transactions with related parties that
will require further changes to the Bank’s operations and its internal regulations.
Supervisory activities
We attended all the meetings of the Board of Directors and are able to confirm that the meetings
were carried out in compliance with correct management principles, with a view to safeguarding
the Bank’s assets, and in accordance with the law, external regulations and with most of the
corporate governance codes that the Board of Directors has imposed. The Board of Auditors, in
172
Report of the Board of Auditors on the 2009 financial statements
line with the frequently cited corporate governance rules issued by the Bank of Italy, adopted its
own rules of operation.
In implementation of the work plan adopted during the year, we remained in constant contact with
the General Manager and the Chairman of the Board of Directors, and kept them informed about
our supervisory work at all times. While at Board of Directors’ meetings, we confirmed that the
objective of separating strategic decisions from management and operational decisions was
being pursued.
As required by law, the Board of Auditors met with the independent auditor during the year.
These meetings were mainly to discuss the situation with the accounts and measurement of
risks, and audited the general organization of the financial statements as well as the conformity of
their structure and formation with the established criteria and the law. We have no particular
comments to make in this regard.
During the year, in accordance with supervisory regulations, the Bank amended its articles of
association with substantial innovations in the area of corporate governance, including with
respect to the Board of Auditors, for which it introduced the voting list system of appointment. As
to the Board of Directors, the most significant change was the introduction of the appointment of
independent directors.
Therefore, we closely monitored the Bank’s compliance with the regulations and the Board of
Directors’ application of practices for continually verifying the independence of directors identified
as such so as to ensure that there are always independent directors and that the required
minimum number of such directors is met.
As to the matter of governance, we verified that the rules on compensation policies have been
properly applied given that this issue is on the agenda for this and subsequent annual
shareholders’ meetings. Specifically, we found that:
· there is no provision for compensation in the form of financial instruments;
· there is no provision for a variable component in director compensation;
· the variable compensation of the General Manager, the only director holding an executive
position, is correlated to medium-term objectives and to capital preservation and
strengthening;
· payment of the variable portion of the General Manager’s compensation has been
deferred as required by the instructions issued last October by the Bank of Italy.
The Bank’ organizational structure underwent further changes in connection with the creation of
the position of “Manager responsible for preparing the financial statements of the Bank”, as
required by Law 262/2005 (the "Savings Act”) with the Board's resolution of 1 September 2009,
supported by the favorable opinion of the Board of Auditors.
The Board of Auditors constantly monitored the operation of the Bank’s control systems,
particularly looking at the effectiveness of the units involved in the process. We focused
especially on steps taken to control credit risk and on the monitoring and management of
reputational risk, which is becoming increasingly important for the banking system.
We devoted specific meetings to analyzing the outputs pertaining to the preparation of the ICAAP
report, verifying that the risk measurements made were appropriate with respect to Basel II "first
pillar" risks (credit, market and operational risk) and "second pillar" risks (other risks including
concentration and liquidity risk – with regard to which no issues were encountered during the
year – and the aforementioned reputational risk).
In 2009, the Bank of Italy overhauled the rules on transparency and the government took actions
concerning maximum overdraft charges. We therefore focused on these issues in the course of
our branch inspections, our analysis of the corporate internet site, and in following the progress
made in the project, introduced by management, to review contracts and corporate documents for
transparency.
173
Report of the Board of Auditors on the 2009 financial statements
The Board of Auditors also monitored regulatory changes pertaining to payment services (the
Payment Services Directive).
Note that in 2009, the Bank carried out transactions with related parties, which the Board of
Directors has described in its report on operations and in the explanatory notes. In this regard,
the Bank completed its rules governing transactions with related parties, which it included in its
Corporate Governance Report to be submitted to the Bank of Italy by 30 June 2009.
With regard to obligations with company officers, the Board of Auditors monitored transactions to
check that management used prudence in addressing the matter including where interpretation
was unclear.
As far as business carried out in 2009 is concerned, we ascertained that there were no atypical or
unusual transactions which might have caused doubts or arise with regard to the accuracy or
comprehensiveness of information, conflicts of interest, or safeguarding of assets.
The Directors also approved a resolution pertaining to personal transactions by relevant persons
pursuant to the joint regulation issued by the Bank of Italy and Consob. The relevant units
continually monitor these transactions to determine whether Consob should or must be informed.
The Board of Auditors took great care in verifying that the measures required by the regulations
on money-laundering have been implemented, particularly with respect to assets returning under
the so-called “tax shield” capital repatriation scheme.
We also verified that the control functions remain vigilant on this issue, that appropriate training
programs have been put in place and that consulting on these matters is always available to the
banking network.
Pursuant to Legislative Decree 196/2003 – the Data Protection Law – which took effect in
January 2004, we checked that the Security Policy Document had been prepared in accordance
with the law. This was noted by the Board of Directors at its meeting on 30 March 2010.
As far as pending disputes are concerned, we note that these are constantly being monitored and
that more detailed information can be found in the Directors’ report on operations.
The only event worthy of mention pertains to the inspection performed by the finance police
(Guardia di Finanza). This audit is conducted bi-annually given the Bank’s status as a major
taxpayer. No particular discrepancies were reported in the resulting report apart from irregularities
of a purely formal nature relating to the allocation of capital gains taxes over five years. The Bank
decided it would best to settle its position, taking advantage of the incentives for settlement, by
paying a total of €53 thousand in penalties and interest
The Board of Auditors expressed its opinion on the issues addressed by the Board of Directors
both when expressly required to do so under the law and when asked to do so by the Directors.
We carried out special examinations, primarily focusing on credit risk, both during our branch
visits (4) and in the examinations carried out at the Control unit and the Lending area, and by
continuing to urge the Board of Directors and the General Manager to be especially rigorous in
analyzing these positions. We found both the Directors and the General Manager to be sensitive
to this issue.
We did not find any serious breaches of the Code of Ethics.
We assessed the reliability of the administrative accounting system in accurately representing the
Bank’s operations through several meetings with the supervisor and employees of the Planning
and Financial Reporting unit, as well as with the independent auditor.
174
Report of the Board of Auditors on the 2009 financial statements
Using information prepared by Ernst & Young, engaged by Cassa di Risparmio di Cento – like
other banks in the Cedacri consortium – to audit the IT outsourcer, we verified the reliability of the
IT system.
We were entirely satisfied with the work carried out by the Internal Audit unit, which has always
been helpful to us in performing our duties. As in past years, we found their work to be extremely
effective and we believe that the unit has the appropriate resources to perform its duties.
In 2009, the Supervisory Body took a particularly active role in analyzing activities and internal
regulations in order to assess the adequacy of the new Compliance Model, pursuant to
Legislative Decree 231/2001, and stepping in to assist in its implementation, where required.
We verified that the Bank is dedicated to the development of its subsidiary Banco delle Tre
Venezie S.p.A., to which it provides administrative services on an outsourcing basis, as well as
advice on organizational and compliance matters. The first “true” financial statements of the
subsidiary (for 2009) show that the company beat the growth projections contained in the
business plan.
We verified that your Bank is not subject to direction or coordination by other companies or
entities, pursuant to Art. 2497 et seq. of the Italian Civil Code.
Our examinations did not find any acts or facts significant enough to be reported to the
competent bodies, and there was no need to make any reports pursuant to Art. 2408 of the Civil
Code.
Therefore, we can assure you that based on the verifications and audits conducted, the Bank
conducted its business in 2009 in accordance with the law and the articles of association, and
that the Board of Auditors found no censurable acts, omissions or irregularities to be reported to
the competent bodies.
Finally, we did not find any breaches pursuant to Art. 149(3) of the Consolidated Law on Financial
Intermediation.
In view of the foregoing, we invite you to approve the financial statements for 2009 presented by
the Board of Directors and express our favorable opinion concerning the proposed allocation of
the net profit of €7,144,537.61 as follows:
-
€357,226.88 to the legal reserve;
€714,453.76 to the reserve established in the articles of association;
€3,456,618.37 to the extraordinary reserve;
€2,616,238.60 to the shareholders distributed as a single dividend of €0.20 per share.
We would like to conclude by giving a heartfelt thanks to the Board of Directors, management
and all the staff at the Bank for their active support and their work.
We would like to express our gratitude in particular to Chairman Vilmo Ferioli.
As the end of our term has arrived, the shareholders are called upon to appoint of a new Board of
Auditors. We thank you for the confidence you have expressed in our work.
Cento (FE), 13 April 2010.
THE BOARD OF AUDITORS
Domenico Livio Trombone
175
Report of the Board of Auditors on the 2009 financial statements
Massimo Calanchi
Dario Alessio Taddia
176
Cassa di Risparmio di Cento S.p.A.
Attachment to the Report of the Board of Auditors -- Financial statements at 31 December
2009
*******************************
In compliance with Art. 144-quinquiesdecies of the implementing regulation for Legislative
Decree 58 of 24 February 1998 concerning the Issuers Regulation adopted by Consob with
Resolution no. 11971 of 14 May 1999 as amended, the tables below provide a list of the
positions held by each member of the Board of Auditors of Cassa di Risparmio di Cento S.p.A.
with companies under Book V, Title V, Chapters V, VI and VII of the Italian Civil Code.
Domenico Livio Trombone
COMPANY
POSITION
END OF TERM
CATEGORY OF
WEIGHT
COMPANY1
(see Note 1)
Unipol Gruppo
Finanziario S.p.A.
Standing auditor
April 2010
Issuer
1
UGF assicurazioni spa
Chairman
Board of auditors
April 2012
Public 2
interest
0.45
Cassa di Risparmio
Di Cento
Chairman
Board of auditors
April 2010
Issuer
1
Tutto per l’imballo spa
Standing auditor
April 2010
Large
0.40
Holding strategie e
Sviluppo dei teritori
Modenesi spa
Chairman
Board of auditors
October 2012
Medium
0.40
Arca Impresa gestioni
SGR
Chairman
Board of auditors
April 2012
Public
interest
0.75
CARIMONTE Holding spa
Director
April 2012
Large
0.30
Acacia 2000 srl
Standing auditor
April 2011
Small
0
Cooperativa Immobiliare
Modenese società
cooperativa
Chairman
Board of auditors
April 2011
Small
0
Cambiamo spa
Chairman
Board of auditors
April 2012
Small
0
Cooperare spa
Standing auditor
April 2012
Small
0
Rino Greggio Argenterie
Spa
Hotel Executive srl
Standing auditor
April 2010
Medium
0.20
Chairman
Board of auditors
April 2010
Small
0
Torre Guiducci srl
Sole director
Open ended
Small
0
GITANI srl
Director
Open ended
Small
0
1
As determined in compliance with Annex 5-bis to the “Issuers regulation”, applying Art. 148-bis, paragraph 1 of
Legislative Decree 58/1998.
2
Subsidiary of Unipol Gruppo Finanziario S.p.A.
GALLINARI srl
Director
Open ended
Small
0
Vignoladue srl
Sole director
Open ended
Small
0
CATEGORY OF
WEIGHT
COMPANY2
(see Note 1)
Domenico Livio Trombone
Total number of positions: 17
Number of positions with issuers: 2
Total weight of positions: 4.5
Dario Alessio Taddia
COMPANY
POSITION
END OF TERM
Cassa di Risparmio
Di Cento
Standing auditor
April 2010
Issuer
1
Rene' Guinot italia srl
Standing auditor
2010
Medium
0.4
Holding C.R. Cento spa
Standing auditor
2010
Small
0
H-Elite srl
Standing auditor
2010
Small
0
Medical Instruments spa
Standing auditor
2011
Small
0
BIELOMATIK SRL
Standing auditor
2010
Medium
0.4
GA.MA.
Standing auditor
2010
Medium
0.4
Molini Canonica & Bolognese
Standing auditor
spa
Metalwork srl
Standing auditor
2012
TBD
0
2012
Medium
0.4
CATEGORY OF
WEIGHT
COMPANY3
(see Note 1)
Issuer
1
Dario Alessio Taddia
Total number of positions: 9
Number of positions with issuers: 1
Total weight of positions: 2.6
Massimo Calanchi
COMPANY
Cassa di Risparmio
Di Cento
POSITION
Standing auditor
Massimo Calanchi
Total number of positions: 1
Number of positions with issuers: 1
Total weight of positions: 1
END OF TERM
April 2010
Cassa di Risparmio di Cento S.p.A.
Registered office: Via Matteotti 8/B 44042 Cento (FE)
Entered in Register of Banks with no. 5099
Share capital: €67,498,955.88
Tax ID, VAT registration and Ferrara Company Register no. 01208920387 – REA no. 138272
ANNUAL CORPORATE GOVERNANCE REPORT
(drafted pursuant to Art. 123-bis of Legislative Decree 58/1998)
Approved by the Board of Directors on 23 March 2010
Available on corporate website at www.crcento.it
2009 FINANCIAL YEAR
INTRODUCTION
The risk management and internal control system for financial reporting (the "System") is a part of
the general internal control and risk management system established by Cassa di Risparmio di
Cento S.p.A. (the Bank).
The System addresses the internal control and risk management issues associated with financial
reporting in an integrated manner. It seeks to identify, measure and control the risks associated with
the financial reporting process (financial reporting risk, i.e. the risk that an error might jeopardize
the true and fair representation of the Bank's performance and financial position in the financial
statements and in any other financial communication issued to investors) to which the Bank is
exposed. The System is therefore intended to ensure the reliability, accuracy and timeliness of
financial information. This objective was pursued by the Bank with the definition of a financial
reporting risk model (the "Model") consisting of a set of principles and rules designed to ensure the
implementation of an appropriate administrative and accounting system, including effective
administrative and accounting procedures and organizational processes.
In particular, in accordance with the System and the provisions of Art. 154-bis of the Consolidated
Law on Financial Intermediation, the manager responsible for preparing the Company's financial
reports (the "Financial Reporting Manager") is responsible for preparing and effectively
implementing adequate administrative and accounting procedures for the preparation of the annual
financial statements and for any other financial communication issued to investors.
The Financial Reporting Manager, together with the General Manager, is required to issue a specific
statement certifying:
§
§
§
§
§
§
the appropriateness and the effective adoption of the administrative and accounting procedures;
compliance with the International Financial Reporting Standards adopted in the European Union
pursuant to Regulation (EC) no. 1606 of 19 July 2002;
the correspondence of the financial reports with the information in the books and other
accounting records;
that the financial statements provide a true and fair representation of the performance and
financial position of the Company;
that the report on operations contains a reliable analysis of operations and performance, as well
as the situation of the issuer, together with a description of the main risks and uncertainties to
which it is exposed;
(for the condensed half-year report) that the interim financial report contains a reliable analysis
of the information concerning any important events that occurred during the first six months of
the year and their impact on the half-year financial statements, together with a description of the
main risks and uncertainties in the second half of the year and disclosures on significant
transactions with related parties.
In addition, in compliance with the provisions of Law 262 of 28 December 2005 (“Law 262”), the
Bank amended its articles of association with regard to the position of Financial Reporting Manager
and, on 1 September 2009, the Board of Directors appointed the current Financial Reporting
Manager and provided a summary description of the manager's powers and resources.
The model adopted by the Bank is based on frameworks that are generally accepted at the
international level as examples of best practice by auditing firms and international auditing bodies
and recommended by the main professional associations. More specifically, the reference
framework adopted by the Bank is the Internal Control – Integrated Framework issued in 1992 by
the Committee of Sponsoring Organisations (COSO) of the Treadway Commission, which sets out
guidelines for the assessment and development of an internal control system. Within the scope of
the COSO Framework, the model developed by the Bank is designed to verify the reliability of its
financial reporting, namely the component of the control system regarding the collection,
processing and publication of financial information.
DESCRIPTION OF THE MAIN FEATURES OF THE RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM
FOR FINANCIAL REPORTING
This section summarizes the main characteristics of the Model, focusing on the various phases and
functions involved, their respective roles and the related reporting flows.
1) The phases of the Model
a) Identification and assessment of financial reporting risks: this analysis envisages the
identification of:
i.
the most significant financial statement accounts by amount and type;
ii.
the management, business and operating processes that can directly and indirectly
impact the formation of these financial statement accounts and financial reporting
in general.
Within this framework, the Bank identifies the financial reporting risks to which it is
exposed, mapping their materiality in terms of inherent risk, which expresses the level
of risk without taking account of the mitigating effect of the associated controls.
b) Identification and assessment of the controls used to manage the identified risks: for
each process identified using the above criteria, the Bank identifies the controls used to
mitigate the financial reporting risks at the company and individual process level and
the information technology risks. The controls are characterized as follows:
i.
the timing of control execution: preventive or subsequent;
ii.
the manner of execution: automated, manual or semi-automated;
iii.
the nature of the controls (their structural characteristics): authorization,
reconciliation, management review, etc.;
iv.
the frequency with which controls are performed;
v. the check evidence: the documentation supporting the controls.
If any shortcomings are found during the verification of the appropriateness and effective adoption
of the System, the Financial Reporting Manager takes steps to develop any necessary corrective
actions and constantly monitors those actions.
Company-level controls are intended to verify the existence of organized and formalized company
arrangements to contain risks and identify any shortcomings. The presence of rules, policies, service
instructions and codes of conduct designed to instill ethical behavior and integrity all work to
contain risk. The subsequent phase of assessment their effectiveness involves reconciling the
system of rules and their actual application.
Process-level controls are intended mitigate risk through the entire system of financial reporting risk
controls. Tests of controls are used to verify performance of the overall control of the various
corporate processes.
Information technology controls involve the analysis of information and management flows in
respect of the systems used to prepare the financial statements. As regards the applications used for
business processes and closing the accounts, the analysis of the tests of controls provides for
verification of the effectiveness of the main automated controls in significant processes.
This approach makes it possible to define a matrix of risks and controls for each financial statement
account and process considered significant in qualitative and quantitative terms. The matrix
summarizes the assessment of the risk exposure of administrative and accounting processes
associated with operations and the effectiveness of risk controls.
2) The functions involved in the Model, roles and reporting flows
In accordance with the internal control and risk management system adopted by the Bank, the
financial reporting risk model involves the corporate bodies, operating units and control units in an
integrated effort to ensure the adequacy of the model, with each unit operating at its own level of
responsibility.
The Board of Directors, supported by the Internal Audit unit, ensures that the Model and the
System are capable of identifying, assessing and controlling all material risks through the definition
of strategies and general guidelines.
In addition, in compliance with the applicable law, the Board grants the Financial Reporting
Manager adequate powers and resources to perform the duties assigned to that position under Law
262.
The Financial Reporting Manager is responsible for implementing, maintaining and monitoring
the financial reporting risk model in conformity with the strategies developed by the Board of
Directors. The manager is responsible for the adequacy of the System and the effective adoption of
the administrative and accounting procedures, and the appropriateness of those procedures in
providing a true and fair representation of the performance and financial position of the Bank.
Assisted by the reporting units, the manager is also responsible for maintaining the map of
administrative/accounting processes, performing the tests of controls and developing corrective
measures and actions in response to any problems.
The Internal Audit Unit conducts periodic audits of the adequacy and effectiveness of procedures
and the system of controls. It supports the Financial Reporting Manager in assessing risks and the
related controls in the Bank’s administrative and accounting processes.
The Compliance function assesses the adequacy and effectiveness of administrative and
accounting processes from the point of view of their ongoing compliance with any applicable laws
and regulations.
The Process Owners are the heads of the individual organizational units of the Bank, appointed by
senior management to manage one or more processes relevant for Law 262 purposes. They are
tasked with ensuring the adequacy of the documentation associated with their duties, the effective
performance of the activities and controls envisaged for the process involved and, with regard to the
internal control system for financial reporting, the prompt implementation of any corrective actions.
The Bank has also developed an appropriate documentation system to ensure that all bodies and
functions with specific duties in the internal control and risk management system collaborate in
performing the activities assigned to them.
The Financial Reporting Manager reports periodically to the Board of Directors on the activities
performed and the most significant decisions taken in the exercise of his or her functions.