Annual report 2019 Moving your business forward Table of Contents
About Amsterdam Trade Bank FINANCIAL STATEMENTS 2019 • Transforming into a digital bank 4 • ATB at-a-glance 6 Consolidated Financial Statements 2019 • Mission and Vision 7 • Consolidated statement of financial position at 31 December 44 • Core Values 8 • Consolidated statement of income 45 • Strategy 9 • Consolidated statement of changes in equity 46 • Consolidated statement of comprehensive income 46 • Consolidated statement of cash flows 47 Report of the Management Board • Letter from the Management Board 13 Notes to the Consolidated Financial Statements 2019 • Financial and Operational Performance 15 • Summary of significant accounting principles 50 • Commercial Activities and Developments 18 • Risk management 68 • Human Resources 19 • Notes to the consolidated financial statement 85 • Risk Management 20 • Notes to the consolidated statement of financial position 98 • Integrity 25 • Notes to the consolidated statement of income 129 • Corporate Social Responsibility 27 • Outlook 2020 28 Company Financial Statements 2019 • Responsibility Statement 29 • Company statement of financial position at 31 December 2019 140 • Company statement of income 141 Report of the Supervisory Board • Notes to the company statement of financial position 142 • Letter from the Supervisory Board 31 • Notes to the company statement of income 157 • Supervisory Board meetings 32 • Subsequent events 163
Corporate Governance Other information • The Management Board 35 • Independent auditor’s report 165 • The Supervisory Board 36 • Appropriation of result 175 • Dutch Banking Code 39 • Glossary 176 • Remuneration Report 40 Transforming into a digital bank About Amsterdam Amsterdam Trade Bank N.V. (ATB) is a to find solutions to the challenges our clients fully-licensed specialised financial institution, face in today’s rapidly changing macro-eco- focused on providing financing for the entire nomic and technological environment, spectrum of the international trade and offering a distinct set of products and Trade Bank commodity logistics chain, including shipping, solutions to clients requiring structured trade, asset-based and corporate finance. We transactional and/or asset financing. serve a wide range of customers active in all aspects of international trade, including In 2019 we decided to enhance our strategy commodity traders, producers, processors, by adding a focus on delivering digital manufacturers and ship owners. Since 2003, banking services to small and medium-sized we have been providing retail services in the enterprises (SME’s) in North-West Europe. Netherlands, offering savings and deposit We will invest in offering a digital banking products. In 2006, we expanded our internet platform that will enable us to provide a retail operations to Germany, followed by range of financial and non-financial products Austria in 2011 and the UK in 2019. to European SMEs. We plan to start these services in the course of 2020. We were established in the Netherlands in 1994 and are located in Amsterdam, histor- We are regulated by The Dutch Central ically one of the world’s most important Bank (De Nederlandsche Bank, DNB) and financial, commodity, maritime and the Netherlands Authority for the Financial technology hubs. We are ideally positioned Markets (Autoriteit Financiële Markten, AFM).
4 5 ATB at-a-glance
Growth in on-balance Total assets portfolio volume Trust 4% €1,394 mln Trust is the foundation of our relationships ith customers partners and regulators. e establish this trust by being transparent and reliable and by Innovate demonstrating our e pertise. Customers Innovation is hat allo s us to e ork ith medium-size to large achieve sustained success. e ork corporations ith a presence in or ith e pert partners to deliver trade flo s linked to Europe. ne banking technology taking a modular approach.
Total Income Operating result Total equity Collaborate before tax. e build long-term partnerships ith parties across the €24 (€20 €172 commodity value chain. mln mln) mln About Amsterdam Trade Bank Amsterdam Trade About
Male / Female Ratio Nationalities
61% 39% 23 Mission and Vision
Our mission is to use expertise, technology In view of our enhanced strategy we intend and networks to become the centre of to revise our mission and vision statement in excellence for financial solutions to the 2020. commodity value chain. Digital banking services to SME’s It is our vision to revolutionise the trade finance business and become the leading provider of financial solutions for commodity trade and related assets.
7 Core Values Strategy
We are determined to achieve our vision in a We are a modern bank with a clear custom- We are aiming to focus increasingly on way that is in line with our four core values. er-focused strategy and the ability to SME financing through a variety of digitally leverage our core areas of expertise. We offered products and services to clients focus on specific under-banked niches of in Western Europe. For this purpose we trade finance, shipping finance and asset- invest in new technology and new capability backed finance markets. We distinguish development. ourselves by providing value-adding solutions to our carefully selected customer Good citizenship and responsible entrepre- base, with the aim of creating mutual neurship are embedded at the very core of Client orientation Integrity long-term value. our strategy. We continuously balance our We interact with our clients and financial We adhere to the highest integrity standards financial return ambitions with the impact institutions on the basis of collaboration and for corporate and individual behaviour. We of our actions on society and environment. trust. Traditional values that have allowed us are committed to fostering and maintaining to build close, long-term partnerships. a sound corporate culture of honesty and accountability in order to protect the interests of all relevant stakeholders. About Amsterdam Trade Bank Amsterdam Trade About
Professionalism Teamwork We have the necessary knowledge, We believe that we achieve our best experience and skills to serve our clients results only when we work together as a well and perform our duties effectively. team. By cooperating, teams achieve what individuals cannot.
8 9 Our growth strategy is built around the following pillars:
Market Product Development Development 1 We focus on increasing the market share of our product offering in our current wholesale and retail target markets. 2 3 Market We look at opportunities to extend our existing corporate and retail 2 product offering in new geographical markets. Penetration Diversification
1 4 We continuously work on widening our product offering for new and 3 existing corporate and retail clients in our current target markets.
We strive for continuous improvement of our existing products, 4 operations and processes. We work on more automated, light- er-touch and smarter ways to conduct our business, and on new digital product offerings for new markets. Amsterdam Trade Bank
We focus on the development of new sustainable banking products 5 for a wider range of corporate and non-corporate clients. About Amsterdam Trade Bank Amsterdam Trade About
We continue to work on the development, acquisition and/or 6 deployment of digital channels of communication and service provision to a wider range of clients in the OECD economies. 87 5
Interaction with Sustainable As a gatekeeper to the financial system, we are committed to 7 our stakeholders banking products complying with all applicable laws and regulations. 7 6 We continuously work on enhancing our interaction with all of our 8 Gatekeeper Digital stakeholders. role channels
10 Letter from the Management Board
The year 2019 has been a difficult year for ATB considers this market to be a real us and a year with many changes. Although opportunity and based on its research we were able to grow our portfolio and our believes that the SME segment is largely number of clients we were not able to report underserved by incumbent banks. Banks have a profit on the increased size of our business. generally underinvested in the provision of We did however receive positive feedback on digital services to SMEs, have taken a one size the quality of the services we provide to our fits all approach to their products and lack clients and we are thankful for the trust our fast and easily accessible client on-boarding clients have placed in the bank. processes.
Although we continued to improve our ATB is planning to develop a platform that operations, by the end of 2019, based on our will deliver a tailor-made suite of SME credit performance in first half year, we concluded products and non-financial products which that we had to right-size our organisation. As it will deliver itself and in co-operation with such, we decided to reduce the staff levels third parties. Non-banking products may of the bank by around 30% and to reassess include products like expense, invoice and the IT platform needed to sustain our current tax management. By developing this platform and future business models. Through a ATB aims to become a full-service banking restructuring, we have said goodbye to many platform for SMEs. employees that sometimes had worked for the bank for many years and to whom we Building upon the rightsizing of our current
owe our gratitude for their commitment and business operations, we are confident that Report of the Management Board Report of the efforts. the enhancements to our strategy will deliver a profitable proposition based on high quality We also reviewed our core strategy which was services for our clients. aimed at trade finance, shipping finance and Management Board other asset based finance products. In order Our Board to prepare the bank for the future we have We have also seen important changes to the enhanced our strategy. composition of the management board. Our CEO, Harris Antoniou, for personal reasons A new and enhanced strategy will not be extending his four year term We are pleased to report that during 2019 with a second term. As a result, a new CEO ATB has created an enhanced strategy and has been appointed, Oren Bass, will lead has taken initial steps to set the bank on a the bank into its new phase focusing on the course to be able to serve, in addition to delivery of the enhanced digital strategy our current client base, SME’s financial and outlined above. Oren has a deep experience non-financial needs in Western Europe. The in building and running financial technology SME financeable need across Western Europe platforms and more specifically significant is significant and in ATB’s initial areas of domain expertise in European SME banking. focus. In the Netherlands and the United For the purpose of delivering the enhanced Kingdom there are 1.3 million SMEs with a digital strategy management board had financing need of approximately €20 billion already been strengthened by a fourth and 5.7 million SMEs with a financing need of member, Tabor Smeets, who has taken the approximately € 85 billion respectively. role of the Chief Digital Officer.
12 13 Financial and Operational Covid-19 Regulatory focus on AML At the moment that we are writing this The impact of the global regulatory Performance letter, the Corona (Covid-19) virus has hit emphasis on anti-money laundering the world with full force. Countries have measures has a consequent impact on been in lockdown, businesses have been interbank business and correspondent (temporarily) closed and it is evident that banking arrangements. Although to date At the start of 2019 we prioritized our goal amounting to € 3.9 million in relation to a the Corona crisis will have a vast social and the bank has been able to deal with to further grow our asset portfolio, aiming to reduction of more than 30 staff positions as economic impact. We are determined to changed circumstances, they make our maximise the utilisation of available capital at year-end 2019 following a further simpli- support our clients in the best possible way operating environment in the future less and strive for sustainable break-even results. fication of our organisation structure while during this crisis. Although obviously as a than optimal. It is good to notice that our Despite the further growth development still maintaining high standards of internal bank we will not escape the impact of the regulators are supportive to make sure the of our portfolio during the remaining part control. We also concluded that a one-off crisis, we are convinced that we are well banks will play their role in this crisis to of the year (and a resulting higher level by impairment charge of intangible assets positioned to cope with it. However, it has mitigate as much as possible the economic year-end), we could not achieve our targeted amounting to € 3.8 million is necessary in become clear that the Covid-19 pandemic impact. At the same time we need to interest income as the decrease in loan 2019 due to full write off of software appli- does impact some of our clients severely ensure that we maintain high regulatory volume in the first half year could not be cations becoming obsolete and considering and we have indications that this may standards that society and our regulator compensated with the growth of the second that part of current source systems will no lead to (partial) defaults. We have taken expect from us also during stressed times. half of the year. longer be used for operational support of additional measures to avoid as much as We are determined to do so, and have the revised lending portfolio nor for the possible negative consequences for the already adapted our operational processes As part of our key focus to become a viable enhanced strategy. bank. Furthermore, in case defaults may in accordance with new government bank with sustainable operational profits, impact our capital position, our share- regulations and social distancing, which we have carefully reviewed the performance The net loss before tax (including holders are committed to uphold regulatory allow us to continue servicing our clients. of the bank during the first half-year while impairments) in 2019 stood at € 20.4 million ratios to which the bank has to comply. the operational cost base could not be (2018: € 0.1 million net profit before tax). In these times once more it is important sufficiently covered through income to The operating loss before impairments On the other hand, as is the case in any to be thankful to our clients who have become operationally break-even. Based of financial instruments and intangibles crisis, it will not just offer threats but also been loyal to the bank, to our employees on a detailed analysis and reassessment in amounted to € 17.2 million.
opportunities to build a better future. In and to our various stakeholders who have the second half of the year, we decided to Report of the Management Board particular, the retrenchment by incumbent supported the bank in many ways. Without execute a substantial restructuring of the The total income from operating activities banks and alternative lenders in lending them we could not deliver the quality of bank through the reduction of our FTE’s, in 2019 was € 24.2 million (2018: € 29.6 and investment allows us an opportunity service that our clients expect from us. the rightsizing of our IT platforms and million). This decreased level of income to use this time to focus on launching our other cost saving measures. As a result we was mainly due to an increase of our net SME enhanced strategy and emerge strongly It is also this support that gives us the expect to achieve better performance on interest income by more than € 5.3 million from the crisis. We anticipate being able confidence that based on our enhanced our existing business in 2020. Meanwhile (22 %), which was offset by a drop in net to hire top talent from competitors as they strategy we will be able to further improve we will also enhance our strategy by aiming commission income by € 1.4 million, lower deal with legacy loan books impaired by the our client offering and transform the bank to deliver digital banking services to SME’s income from financial transactions by € 10.5 effects of the economic crisis. into a leading pan European financial in North-West Europe, offering banking million and slight increase in other income services platform. We are looking forward and possibly other services. The primary by € 1.2 million. to the future with anticipation and the focus will be on straight lending and invoice energy to make change happen. financing. This development has started We managed to increase our net interest early 2020, after the Management Board had income by € 5.3 million to nearly € 29 received approval on the investment case by million (2018: € 23 million). The bank has the Supervisory Board. gradually improved its net interest margin by Amsterdam, 31 July 2020 effectively managing its assets and liabilities In line with accounting policies applied in during the year within our approved risk The Management Board of Amsterdam accordance with Part 9, Book 2 of the Dutch appetite. This in combination with the lower Trade Bank Civil Code, the bank carefully assessed interest expenses, the net interest margin Oren Bass the consequences of the restructuring increased to an average level of 3.2% (2018: Eric Steeghs with respect to the financial statements 2.5%). Peter Ullmann of 2019. Accordingly, the Management Tabor Smeets Board recognized a restructuring provision
14 15 The income from financial transactions is Total assets nearly remained stable at € 1,394 Meanwhile, in the first quarter of 2020, the mainly explained by exceptional gains due million at year-end 2019 (€ 1,422 million at subordinated loan has been converted into to sale of loan assets early 2019 relating year-end 2018), mostly related to decreased equity in order to further strengthen our to our legacy portfolio amounting to € 3 volume in loans and advances to customers, Tier 1 capital position. million (2018: € 5 million), unrealized gains interest-bearing securities, intangible assets on loan participations of € 1 million (2018: € and other assets. We managed to maintain We apply the standardised approach when 1 million loss) and realized losses on hedging our operations within the limits set in our risk calculating our capital ratios under Pillar 1 derivatives mainly cross currency swaps of appetite. of the Basel III framework. We also contin- € 4.3 million (2018: € 1.4 million). Despite uously apply the Internal Capital Adequacy the decreased volume in savings and term Our capital position was further strengthened Assessment Process (ICAAP) and Internal deposits, the increased costs of hedging in line with our strategic and capital plans. As Liquidity Assessment Process (ILAAP) to our USD portfolio led to an increase in the of 30 December 2019, we issued € 9.8 million meet Pillar 2 requirements, under which interest expense of € 3 million. of new shares to our majority shareholder internal capital requirement is calculated Alfa Bank Russia. As a result, the ownership for additional risks that are not captured Total expenses excluding impairments of structure of the bank at the end of 2019 under Pillar 1 (i.e. concentration risk, financial instruments amounts to € 45.3 became as follows: Alfa Bank Russia (72.70%), country risk, interest rate risk in the banking million (including € 3.9 million one-off ATB Holdings S.A. (10.39%) and ABH Holdings book, strategic risk and liquidity risk). On expenses due to the restructuring) which is € S.A. (7.49%) and ESPP B.V. (9.42%). an ongoing basis, we monitor solvency 6.4 million higher than in 2018. Following the and liquidity to ensure compliance with cost saving measures of the restructuring Considering this capital injection and the internal limits and regulatory requirements. we expect that operational expenses will net loss of € 20.4 million made this year, our Additionally, capital and liquidity adequacy
decrease significantly in 2020. equity decreased to € 172 million at year-end are evaluated through regular stress tests. Report of the Management Board 2019 (year-end 2018: € 182 million). The internal assessments were subject to The specific guidelines for the determi- the Supervisory Review and Evaluation nation and methodology for assessment of At year-end 2019, our total capital ratio was Process (SREP) conducted by the DNB. Expected Credit Losses (ECL) have been 19.8% compared with 21.1% at year-end 2018. reviewed based on internal procedures, Since our capital structure does not include and Probability of Default (PD) and Loss any hybrid capital instruments qualifying as Given Default (LGD) models applied have additional Tier 1 capital, our T1 capital ratio been externally benchmarked. The loss equals our Core Equity Tier 1 capital ratio. allowance calculations of financial assets are These ratios were 17.4% at year-end 2019 performed on a quarterly basis and based (year-end 2018: 18%). on our consistently applied ECL model. The ECL assessments for financial instruments The contribution of Tier 2 capital (subor- are classified in Stage 1, Stage 2 or Stage dinated loan of € 35 million) eligible for 3 impairment losses. As at year-end 2019, regulatory total capital has been amortised the loan loss provisions for expected credit in accordance to the amortisation schedule losses in Stages 1 and 2 amounted to € 4.8 from 28 April 2018, with a final maturity date million (2018: € 3.2 million), and in Stage of 28 April 2023. Accordingly, the amortized 3 to € 1.9 million (2018: € 2.8 million). The value of Tier 2 capital eligible for regulatory provisions are all for the corporate portfolio. purposes decreased to € 23.3 million by year-end. We complied with the minimum regulatory requirements during the year.
16 17 Commercial Activities Human Resources and Developments
We maintain a clear focus on servicing expected to further diversify the portfolio Human Resources develops and implements We consider it essential to offer talented the international commodities supply of ATB over time; predominantly in respect policies and initiatives with respect to employees opportunities to develop chain and in particular the markets of of the industries, geographies and size of diversity and leadership development. We themselves within the organization. That major commodities (e.g. energy, agricul- companies covered. also need to comply with legislative and is why an employee learning journey tural and metals) and shipping finance. In delegated responsibilities for recruitment, will be developed within the ATB Talent the perspective of our business strategy Our commodities and shipping clients are compensation, pensions & benefits, Management Program. Training, coaching enhancement, we decided to reorganise serviced with financing solutions mostly employee development, organisational and mentoring will be part of this learning the Financial Institutions division allowing tailored to their needs. SME’s often health and labour relations. journey. We will develop a strategic it to focus on the relationships with other appreciate more standardized financing workforce planning so we can realize in time regulated institutions, primarily banks. solutions offered in a digital manner, The restructuring of the organisation at desired career development steps for our Such network enables us to operate globally however appreciate advisory services around the end of 2019 was prepared in good talented employees. and tap into different (wholesale) funding their financing. Next to that there are clear cooperation with the Works Council. After options. Furthermore, we discontinued the improvement capabilities when it comes to a difficult year 2019, we will roll out an We continuously review the effectiveness Corporates Desk with a view to concentrate assessment of credit risk (research shows employee survey in order to assess our and efficiency of our organization, also the available resources on the other that SME’s are more often declined financing employee engagement in the restruc- taking into account external, internal and business segments in which we have a more than would be appropriate based on their tured organization and decide on possible digital developments. Our enhanced strategy clearly defined market position and value credit risk profile). The use of transac- follow-up measures. may require changes in employee capabilities proposition. As a result of these measures tional data (facilitated by PSD2) allows an and resources, including additional training our commercial team now focuses on improvement on both credit risk assessment In 2019, we continued with the main and coaching which will be supported by commodity finance and shipping clients. The as well as advisory services. themes of leadership, culture and employee HR. For this year we would like to further total loan portfolio grew marginally in 2019 development by designing a talent automate current manual (HR) processes in
yet it exhibited solid performance from a Our internet retail savings and deposits management rotation program. We also order to improve business processes. Last Report of the Management Board risk-return perspective. clients in the Netherlands, Germany and continued our membership of Women In but not least, we will continue to strengthen Austria remain a loyal and stable funding Financial Services, supporting the mission to our performance-driven culture, by making In addition to our commercial pillars, we source. The Value Center Retail trialled the create a better male/female balance within a clear distinction between top performers recently decided to enhance our business expansion of its coverage into the United the financial sector. Progress was made in and under performers. strategy by gradually expanding our services Kingdom in the course of 2019, a first step promoting women to leadership positions. to SME’s. The combination of the existing in an envisaged extension of services to the businesses and the new, SME business is United Kingdom in the near future. Also in 2020 the focus will remain on leadership and culture, as effective leadership is key to reaching our targets and engaging with our employees. Human Resources will support the bank’s leadership in providing the organization with a clear mission and purpose, leading by example, having challenging and inspiring colleagues and having a diverse and inclusive work environment.
18 19 Risk Management
Exposure to risk, carefully balanced with its The third stage identifies relevant risk Risk Taxonomy expected rewards, lies at the core of the drivers and sets quantitative limits to each In 2019, our top-level risk areas and their corresponding operations of a bank. Every product offered, risk driver. Each driver has its own assigned appetite for residual risk were defined as follows: every client serviced, every decision and risk weighting, based on our business model action taken, may lead to financial, reputa- and local circumstances, and taking into tional, operational and/or strategic risks, account banking regulations. These risk Strategic Risk Operational Risk Regulatory Risk contributing to either success or failure. Our weightings and metrics are summarized The risk of non-compliance The risk of loss resulting from The risk of loss or impaired philosophy regarding risk management is in the Risk Appetite Dashboard, which is with the strategic objectives inadequate or failed internal capacity to do business due to one of a continuous process that should be regularly reported to all relevant governance that can arise from adverse processes, people, systems or failure to adhere to regulatory aligned with the strategy of the bank and bodies within our bank. business decisions, improper external events. In addition to or market standards, legal support decision-making. The governance implementation of decisions, the referred risks related to proceedings or inaccurate of risk management is arranged in a The Management Board monitors the metrics or a lack of responsiveness to processes, systems and people’s disclosure of formal reporting. committee structure, with the Management on a quarterly basis and instigates action industry / market changes. behaviour, sub-categories of Sub-categories of this risk and Supervisory Boards supported by these plans in cases where limits are breached. Includes Earnings Volatility Risk this risk include product, legal, include compliance, integrity committees in managing relevant risk areas. The Risk and Compliance Committee of (The risk that the bank will outsourcing, (natural) disaster and reporting risk. The committees act within the mandates the Supervisory Board discusses the Risk not be able to comply with and model risk. derived from our policies, Risk Appetite Appetite Dashboard during their regular profitability targets committed Statement and Committee Charters. Please meetings and, if necessary, raises issues to shareholders) and Solvency see the risk management section in the at the plenary meeting of the Supervisory Risk (the risk that the bank notes to the financial statements for an Board. will not be able to maintain organogram of the committee structure. sufficient capital reserves).
Risk Reporting Report of the Management Board Risk Appetite As previously stated, each risk committee is Appetite 2019: Medium Appetite 2019: Medium Appetite 2019: Low Our risk appetite is defined in three stages. provided with detailed reporting on trends In the first stage, the Baseline Risk Analysis and developments in their respective areas. (BRA) is conducted. This seeks to identify Comprehensive risk dashboards are reported Credit Risk Liquidity & Market Risk and assess at high level the risk areas that to the Management Board on a weekly, The risk of loss of principal Funding Risk The risk of loss of principal are relevant to us given our business profile monthly and quarterly basis. The quarterly or adequate financial reward The risk that the bank will or adequate financial reward and strategy. The BRA identifies the risk report consists of a full overview of all stemming from a counterparty’s fail to fund increases in assets due to movements in financial universe (or ‘taxonomy’) and the inherent risk categories, whereas the weekly report deterioration of financial and meet obligations as they markets (including, but not risk exposure to each of the risks defined. provides a more focused update on credit stability or failure to meet come due at reasonable limited to FX rates, interest developments. obligations. Sub-categories cost. Liquidity Risk arises rates, credit spreads, equity The second stage consists of a review of the of this risk include country, from the inability of ATB to prices and commodity prices). risk universe and sets qualitative boundaries concentration and counterparty accommodate decreases in for acceptable levels of (residual) risk. The default risk. liabilities or to fund current delta between inherent and acceptable (and increases in) assets in full, risk determines the level of governance at the right time and in the to employ, and is taken into account in right currency. the third stage. The inherent and residual Appetite 2019: Medium Appetite 2019: Low Appetite 2019: Low exposures, as well as the appetite of the first and second stages, are set out in a qualitative 3-point scale (Low, Medium, High) These qualitative risk appetites were largely unchanged from 2018, the changes only refecting a in order to align perceptions of risk across change from the 4-point scale in 2018 ( Low- Modest – Average – High) to a 3-point scale in 2019, the “moderate” appetite for strategic and operational risk and the “average” risk appetite for credit risk the organisation. translating into a medium risk appetite in 2019.
20 21 Strategic Risk when assessing operational risk exposure. therefore be continuing to pay attention With a specific focus on commodity trade Capital availability and cost efficiency The inherent volatility of such operational to the high-risk elements, including money and trade-related sectors, such as shipping, are the main drivers of risk related to the risk is demonstrated in our loss experience: laundering, and sanction and corruption we are exposed to industry-concentration realisation of our business plan. Growing the the total direct financial impact after risks. However, the residual risks in this area risk. Having said that, commodity trade portfolio, while maintaining full compliance recoveries remained low. are judged acceptable, due to our extensive itself is a diversified industry where different with regulatory requirements, remains a key investment in remedial policies, processes, sub-sectors react differently to related focus. This risk is managed through capital Operational risk is considered a non-re- systems and behaviours. The focus in 2019 economic cycles. Our shipping portfolio is planning and continuous daily tracking of warding risk, and as such the overall was to make sure that the policies remained well diversified within shipping subsectors. developments in available and required principle is to mitigate and/or transfer embedded in the organisation such that staff The diversification into SME business (which capital and pipeline projections. operational risk exposure while taking cost would be in a position to explain how they will be an element of our enhanced strategy) of control into account. Given the strategic have acted in compliance with the policies. will further de-risk the bank. Strategic risks emanating from the geopo- development the bank will pursue in 2020 a litical and macro-economic environment, ‘Neutral’ residual risk was accepted in the Credit Risk Liquidity & Funding Risk such as the Brexit or strained trade relation- Risk Appetite. Credit risk is one of our most significant The liquidity monitoring is based on a set of ships between nations, are monitored risks in terms of capital consumption. It also ratios, including regulatory ratios, liquidity and reported to the Management and ATB’s long-term ambition is, however, to includes all other forms of counterparty buffers and a stress test that is designed to Supervisory Boards. The effect of a potential achieve operational excellence within its exposure, where counterparties default on measure the liquidity survival for different ‘hard’ Brexit has been and continues to be organisation, minimizing risks due to errors their obligations to us in relation to hedging horizons and scenarios. closely monitored and is considered to be and/or suboptimal design. Early 2019 we or other financial activities. Measurement We put a high priority on establishing adequately addressed. The frequency and made important progress in this respect and monitoring of credit risks are embedded an internal funding and liquidity risk depth of the analyses are aligned with the by finalising our project to upgrade our in the Risk Appetite Dashboard via credit strategy that ensures we measure, monitor imminence of an event and its potential overall IT Security. In terms of longer term metrics, which include metrics for one and manage our liquidity risk so we can
impact on our bank. The enhancement strategic outlook (3 years) ATB has an obligor exposure, minimum credit quality, withstand a range of stress circumstances, Report of the Management Board of our strategy by the end of 2019 and ambition to decrease its operational risk country risk and industry concentration risk. without endangering the continuing viability more recently the Covid-19 pandemic will appetite to “risk averse” level. Although of our business. obviously have an impact on our overall this ambition remains our goal, as a result In 2019, the risk appetite threshold for strategic risk assessment and will lead to of the recent restructuring of the organi- the average one-year expected loss of We manage our liquidity profile through mitigating measures. sation, we will accept a delay in reaching the portfolio was increased from 0.5% to short-term liquidity risk management this ambition while we will ensure that our 0.6% whilst the risk tolerance threshold combined with a long-term funding strategy. Operational Risk level of operational control is sufficient and remained unchanged at 0.8%. The increase We maintain sufficient liquidity including a Oversight of operational risk is coordinated remains within our current risk appetite. in risk appetite largely refected the cushion of unencumbered, high quality liquid by the Operational Risk Committee (ORC). The proper functioning of our internal impact following the implementation of assets to withstand a range of stress events. The permanent members of the ORC consist control mechanisms continues to be closely a different rating model over 2018 as a Liquidity risk stress testing is also an of representatives from the Management monitored, through the three lines of result of which the average expected loss important element of our liquidity Board and all three lines of defence. The defence model that we apply. of the portfolio had increased to 0.58% by risk measurement, risk evaluation and ORC monitors trends and developments year end 2018. Despite the increase in this contingency funding planning for all in operational risk through the relevant Regulatory Risk credit metric, the quality of the portfolio potential contingent or improbable-but-plau- section(s) of the Risk Appetite Dashboard As a gatekeeper to the financial system, remained robust, as we continue to select sible stress events. and additional reporting, including key risk we are committed to complying with all and approve facilities with strong collateral overviews based on the output of Risk and applicable laws and regulations. Based on and structural properties. As a result of Control Self-Assessments (RCSAs), and the our analysis of these laws and regulations, that focus the average expected loss of the testing of internal controls by the 1st and and the impact they have on our clients, portfolio reached 0.50% by year end 2019. 2nd line of defence. Scenario analysis is products and countries of operation, we employed to ensure that less probable but have concluded that our inherent risk still plausible events with a high potential profile is relatively high compared with the impact are adequately taken into account Dutch financial sector as a whole. We will
22 23 Integrity
We use liquidity stress tests as a Risk (VaR), are set to prevent the accumu- We are committed to fostering and social and other international developments management tool to identify our potential lation of market risk beyond the market risk maintaining a sound corporate culture of in order to accordingly ensure the timely vulnerabilities and worst-case liquidity risks tolerance. The VaR limits are set, monitored integrity and accountability, to protect both update of policies and guidelines. on our current cash fows, liquidity position and managed at trading book level the interests of all relevant stakeholders and liquidity risk mitigation. (foreign exchange, derivatives and fixed and the sound functioning of the financial Based on a continuous dialogue with all income). These limits are complemented sector in general. We try to do this through ATB departments, the Integrity Department Detailed metrics for liquidity are included by additional monetary and non-monetary the following measures: not only detects and resolves potential in the Risk Appetite Dashboard. Given their trading controls, with the aim of preventing hurdles, but also provides support that importance, we have also implemented excessive concentrations or illiquidity of Risk-based approach enables our employees to exercise their a separate Liquidity Dashboard, which exposures. We use derivative transactions to We are required to establish, implement individual responsibility to act with provides granular information on metrics, hedge most of our market exposure (mainly and maintain adequate policies and integrity, and adhere to applicable laws and liquidly buffers and stress test which enables foreign exchange and interest rate risk). procedures to detect any risk of failure regulations. In this year, within the scope us to foresee any liquidity stress. by our bank and/or employees to comply of our annual theme, we have focused on We have interest-rate-risk measurement with their obligations. As part of this, the the improvement of our Client Relationship In 2019, the main driver of both liquidity systems that capture all material sources Integrity Department continuously identifies Management System. and funding risk came from the fact that of interest rate risk and assess the effect and assesses integrity risks, based upon all the majority of our funding is raised in the of interest rate changes in ways that are relevant laws, regulations, internal policies, form of Dutch, German and Austrian retail consistent with the scope of our activities: market standards and best practices, Education and awareness deposits (denominated in Euros), while the sensitivity analysis, stress scenarios and ATB’s Code of Conduct, and moral and The Integrity Department puts special majority of lending is conducted in USD Interest rate risk in the Banking Book (IRRBB) ethical standards. ATB’s integrity risks are effort into outlining to employees their denominated advances. The market risk limits. Key metrics for market risk are thoroughly and demonstrably assessed individual responsibility to continuously
of this currency mismatch was successfully included in the Risk Appetite Dashboard. periodically and measures to mitigate take time to gain the knowledge and Report of the Management Board managed down to acceptable exposure these risks are duly implemented within understanding required to exercise good levels. We continue to strive for further the bank, as described in the Systematic judgement, adhere to the policy framework diversification of the funding base and have Integrity Risk Analysis (SIRA). Based on and apply ATB’s business principles. This taken several initiatives in 2019 to improve these considerations annually we determine included re-emphasizing the Bankers’ Oath it, such as repos of assets in the securities the focus and the scope of the monitoring, principles, during a number of mandatory portfolio with commercial European banks, reporting and advisory activities. For 2019 sessions for all employees in the Week of secured funding and unsecured wholesale the main theme has been: Fast and Digital. the Integrity. All new employees participate funding from a syndicate of banks. in a mandatory introduction program. Policies and guidance By focusing on the individual employee’s Market Risk Our business principles, outlined in our responsibilities in this way, the Integrity It is our policy not to be exposed to Code of Conduct, provide the minimum Department contributes to a clear narrative significant open positions in interest rate standards of expected behaviour. In that underlines the importance we place on and foreign currency risk in the Banking addition to the Code of Conduct itself, we our business principles, policies and moral Book, and our strategy for the coming years have a policy framework that includes our standards. includes limited treasury trading activities in Anti-Corruption Policy, Market Abuse Policy, order to enable some income diversification. Speak Up Policy, Client Due Diligence In 2019, the Integrity Department has Market risk arising from Treasury Front (CDD) Policy, Data Protection Policy, updated the e-learnings modules related Office Department trading activities in the Complaints Management Policy and Incident to the Code of Conduct, Client Due trading book is managed and monitored in Management Policy. It is the Integrity diligence, Anti-Corruption and Personal accordance with the applicable internal Department’s responsibility to ensure the Data Protection and we have organised guidelines, principles and mandates: market framework is kept up-to-date at all times, a number of sessions in which all of our risk limits, expressed in terms of Value at and to continuously monitor relevant legal, integrity policies have been addressed.
24 25 Corporate Social Responsibility
During these sessions employees received of the integrity risks related to outsourced Being a good corporate citizen in the Another important pillar of our CSR strategy information on regulatory changes and activities. Findings and/or recommendations local and global communities in which we is to support education since we strongly other relevant developments. The changes are included in the quarterly reports to operate is at the heart of our culture. The believe that education unites people and and developments were also communicated the Integrity Committee, which consists scope and ambitions of our commitment cultures. We partner with United World digitally to the relevant employees. of representatives from all three lines of to sustainability come through actions in Colleges to contribute to a better world defence. This enables each line of defence four areas: our employees, our economic through education, the Erasmus University to take responsibility for maintaining a activities, the environment and ethical Rotterdam by providing students with Monitoring and reporting sound corporate culture of integrity and behaviour, as these four dimensions are business challenges to consult on as part The risks relating to integrity, and adherence accountability. the drivers of our organisation and business of their curriculum and we supported to applicable laws and regulations, are model. We are proud to be one of the first the Netherland-America Friendship thoroughly and demonstrably assessed ATB’s Incident Management Policy and signatories to the Poseidon Principles. Gala of which the proceeds support the periodically. Measures mitigating these risks Speak Up Policy aim to ensure that anything The Poseidon Principles are a framework NAF-Fulbright Fellowship Program and other are duly implemented within our bank as that may cause harm or damage to our for assessing and disclosing the climate student exchange programs between The described in the SIRA, which is updated organisation, including our employees, are alignment of ship finance portfolio, creating Netherlands and the United States. For permanently. reported and dealt with in a timely and a global baseline to support and work the fourth year in a row, our employees adequate manner. In 2019, there were no towards the greater goals for our society by organised a charity raffe and auction on We recognize our responsibility to prevent incidents that required reporting to DNB ensuring our portfolios are environmentally their own initiative, the proceeds of which crime in any form, and to participate in the or the AFM. There were a few reports filed responsible. were donated to the Children Cancer-free international fight against any form of money with respect to the Speak Up Policy. Based Foundation KiKa. Our relocation to the World laundering and/or terrorism financing. When on how these reports were dealt with and Trade Center building at the beginning of negative coverage is published relating to finalised, it was concluded that the Speak Up 2018 has enabled us to make our operations any of these subjects, we perform internal process was implemented appropriately and more sustainable. The building’s electricity
look-backs. We also request our corporate works effectively. is generated by Dutch wind turbines and we Report of the Management Board clients to provide an ‘Annual Compliance have introduced a separate-waste system. Letter’, in which they confirm that they have As the ‘rules of the financial game’ are acted in compliance with applicable laws permanently changing, our policies and and regulations (in particular with regard procedures will change accordingly and as a to Anti-Money Laundering, Anti-Corruption result thereof we will continuously focus on and (inter)national sanctions) in the previous implementation of these changes and make year and will continue to do so in the years sure that the staff of ATB is able to mitigate to come. the identified integrity risks.
We periodically conduct thematic reviews. The Fiod investigation that was initiated in In 2019, these focused on the embedding 2017 into possible past breaches of the Wwft of the required reporting of unusual with regard to client due diligence and the transactions to the Financial Intelligence timely reporting of unusual transaction has Unit, adherence to the FATCA/CRS rules, not yet been finalized. It is not yet clear adherence to our Incident Management what consequences, if any, this investigation Policy and we have monitored the mitigation may have.
UWC Art for Impact Sijtse Keur - Hof van Eden
26 27 Outlook 2020 Responsibility Statement
The current Covid-19 outbreak will most Pursuant to section 5:25c sub 2 part c of likely impact the global economy and the the Dutch Financial Supervision Act, the financial position and results of banks. members of the Management Board state More specifically the impact is expected that to the best of their knowledge: on instruments measured at fair value and on the expected credit losses. Currently • The Annual Financial Statements give Amsterdam Trade Bank is closely monitoring a true and fair view of the assets, any financial impact attributable to the liabilities, financial position and profit or Covid-19 outbreak. Given the uncertainties loss of Amsterdam Trade Bank N.V. (and and ongoing developments the Company the companies included in the consoli- cannot accurately and reliably estimate the dation); quantitative impact. • The Annual Report gives a true and fair view of the state of affairs on the balance sheet date and the course of business during the financial year 2019 of Amsterdam Trade Bank N.V. and of its affiliated entities, of which data is included in its Annual Financial Statements; • The Annual Report describes the material risks with which Amsterdam Trade Bank
N.V. is faced. Report of the Management Board
Amsterdam, 31 July 2020
Management Board:
Oren Bass, Chief Executive Officer and Chairman Eric Steeghs, Chief Financial Officer Peter Ullmann, Chief Risk Officer Tabor Smeets, Chief Digital Officer
28 29 Letter from the Supervisory Board
2019 has been a difficult year and has not national experience in risk, corporate resulted in the profitability envisaged at investment, banking and venture capital, the start of the year. As a result, the bank in particular related to technological had to reshape and simplify the organi- innovation. On 31 January 2020, Mr R. zation, carefully review its product offering Emerson stepped down after having served while also taking into account that the for 3 years as Chairman of the Supervisory world around us is changing rapidly through Board in view of a potential confict of technology. The bank is building for the interest with one of his other roles. Mr R. future, aiming to provide a full ecosystem Meijer has taken over the role of Chairman of solutions to SMEs. The Management of the Supervisory Board as of March 2020. Board has designed an enhanced digital The Supervisory Board wishes to express strategy to become a sustainable and its gratitude to Mr Emerson, Mr Vovk and meaningful player in the markets we Mr Antoniou for their valuable work and operate. continuous support during the years they served. We are pleased to announce the hire of Mr Oren Bass as Chief Executive Officer to lead With the support of ATB shareholders, we the bank through this transformation. Mr will support the Management Board to Bass brings significant experience in setting continue developing new capabilities aiming up online lending platforms, advising the to support our clients in the SME world SME sector and asset management. Mr and we are confident in the bank’s ability
Bass succeeds Mr Antoniou who decided to do so. The Supervisory Board has and Report of the Supervisory Board Report of the to pursue new challenges outside the will continue to focus on the progress and bank after completing his 4-year term. delivery under the digital transformation The Management Board has also been programme. We invite our clients and other strengthened by the hiring of Mr Tabor stakeholders to join us on this exciting Supervisory Board Smeets as the Chief Digital Officer in journey. November 2019. Mr Smeets is an expert in digital solutions in financial services. Amsterdam, 31 July 2020
Also, the composition of the Supervisory The Supervisory Board Board has changed during 2019 and early 2020. On 1 November 2019, Mr O. Vaksman R. Meijer, Chairman was appointed as a member of the H.C.M. van Damme, Vice-Chairman Supervisory Board, succeeding Mr D. Vovk A.B. Sokolov who was reaching the end of his 4-year A.J. Baxter term. Mr Vaksman is a senior financial O. Vaksman services executive with 20 years of inter-
31 Supervisory Board meetings
The Supervisory Board temporarily consists While retaining overall responsibility, the The Remuneration and Nominating continued during 2019. The permanent of five members. All members share equal Supervisory Board assigns tasks to the Committee met 3 times and discussed, education programme consisted of responsibility for the execution of the following three permanent committees: amongst other things, the search for two sessions on (i) Operational Risk Supervisory Board’s function. In 2019, the CDO and the search for the new Management and (ii) the Wwft (money the Supervisory Board had six regular The Audit Committee met 4 times in CEO, ATB’s Remuneration Policy, as well laundering and terrorist financing act) and meetings in January, February, April, June, 2019 with the required quorum. Members as the Employee Share Purchase Plan sanction law. The financial statements September, and November. Five combined of the Management Board, the external and the alignment thereof with Dutch and the findings of the external auditor meetings via conference call were held to auditor and the Head of Internal Audit and European banking regulations, were discussed in the external auditor’s discuss specific topics. When required, the were present at these meetings. The Audit expectations of the various stakeholders presence. The annual report (including Supervisory Board also organized closed Committee discussed the regular risk and social acceptance. The Remuneration the financial statements) have been drawn sessions. All members of the Supervisory assessment, the audit plans and reports and Nominating Committee discussed the up by the Management Board and audited Board and Management Board participated of the internal and external auditor, performances of the Supervisory Board, by Ernst & Young Accountants LLP, who in the regular Supervisory Board meetings the audit plan execution, and progress its committees, its members and the issued an unqualified audit opinion dated and combined conference calls. The main in the resolution of audit issues. The individual members of the Management 31 July 2020. We recommend that the theme for the second half of 2019 was the Audit Committee annually evaluates the Board. During 2019, the committee shareholders adopt the 2019 financial design of the enhanced strategy which functioning of the internal audit function consisted of Mr D. Vovk (Chairman until 31 statements, and discharge the Management was discussed with the Management Board and the external auditor, and the external October 2019), Mr A.J. Baxter (Chairman – Board and Supervisory Board for their and extensively discussed in Supervisory auditor’s independence and fees. Key as of 1 November 2019), Mr R.V. Emerson respective management and supervision Board meetings during the last two months audit matters, as included in the external and Mr H.C.M. van Damme (as of 1 during the financial year 2019. On adoption of the year. Other topics discussed during auditors’ report and opinion, were also November 2019). of the 2019 annual report, no dividend will the Supervisory Board meetings included a topic of discussion. During 2019, the be distributed for the financial year 2019.
the following: our long-term strategy and committee consisted of Mr H.C.M. van The Supervisory Board committee Report of the Supervisory Board the implementation thereof, commercial Damme (Chairman), Mr R. Meijer and Mr meetings were, in nearly all cases, We would like to thank the members of activities and new strategic initiatives, A.J. Baxter. attended by all members of the the Management Board, all employees and risk management and risk appetite, the committees and the members of the shareholders for their ongoing commitment credit portfolio, financial performance, The Risk and Compliance Committee Management Board (with the exception to ATB. capital, the funding profile, IT, integrity, met 4 times and monitored ATB’s risk of the Remuneration and Nominating the remuneration policy, the regulatory policies, appetite and profile, as well Committee, which is attended only by the Amsterdam, 31 July 2020 environment and reporting, culture as its governance and compliance with CEO). and the internal organisation as well as laws and codes. To this end, the Risk The Supervisory Board management board composition. The and Compliance Committee discussed The Supervisory Board has been involved composition of the Supervisory Board ATB’s policies and appetite on credit in ATB’s compliance with the Dutch R. Meijer, Chairman and its committees were also discussed. risk, market risk, capital and liquidity Banking Code. In support of this role, the H.C.M. van Damme, Vice-Chairman There were no transactions in the financial adequacy, operational risk, regulatory permanent education programme (through A.B. Sokolov year 2019 in which the members of risk and strategic risk. On an ongoing which the expertise of the members of A.J. Baxter the Supervisory Board had a confict of basis during the year, the committee the Management Board and Supervisory O. Vaksman interest. The Supervisory Board maintains also took several decisions on credit Board is maintained and expanded) was good relationships and has regular proposals escalated in accordance with meetings with key stakeholders like DNB, ATB’s internal governance. During 2019, the shareholders and the employees the committee consisted of Mr R. Meijer through the Works Council. (Chairman), Mr A.B. Sokolov, Mr. H.C.M. van Damme, and Mr O. Vaksman (as of 1 November 2019).
32 33 The Management Board
The Management Board is collectively assessment between the commercial interests responsible for the management of ATB and of ATB and the risks to be taken. One member the general course of affairs, while each of is responsible for risk management and does its members has specific roles and respon- not bear any individual commercial responsi- sibilities. Each member of the Management bilities. In accordance with best practice, the Board possesses a thorough knowledge of the Management Board submits ATB’s operational financial sector in general and banking sector and financial objectives, together with the in particular. Each member of the Management strategy to achieve its stated goals, to the Board is required to act in accordance with the Supervisory Board for the latter’s consider- interest of ATB and its business, and is aware ation and approval. The composition of the of the social role of a bank and of the interests Management Board makes it possible for it of the various stakeholders. The members to perform its tasks properly. The outlined of the Management Board are appointed by objectives and strategy include detailed the General Meeting upon nomination of the parameters to be applied in relation to the Corporate Supervisory Board. Taking into account the risk strategy, such as ATB’s financial ratios, and appetite approved by the Supervisory Board, capital and liquidity adequacy levels. the Management Board ensures for a balanced Governance The composition of the Management Board as per 31 December 2019 was:
C. Antoniou H.P.M.G. Steeghs ATB has a two-tier governance structure, comprising a management board and a supervisory (Chairman, CEO)1 (CFO) board. The (mitigated) Dutch large structure regime applies to ATB. Corporate Governance
Areas: Commercial activities, Business Strategy & Year of birth: 1957 | Nationality: Dutch Development, Human Resources, Internal Audit, Member Since: 2014 | End of term: 2022 Corporate Office. Areas: Finance & Control, Regulatory Office, Operations, ICT
P.J. Ullmann T.A.J. Smeets (CRO)
Year of birth: 1958 | Nationality: British Year of birth: 1975 | Nationality: Dutch Member Since: 2014 | End of term: 2022 Member Since: 2019 | End of term: 2023 Areas: Risk Management, Integrity, Credit Support, Areas: Digital banking Financial Restructuring & Recovery.
34 35 1 As of May 1st 2020 Mr. O. Bass (Year of birth: 1977; Nationality: British), has been appointed as the CEO. The Supervisory
The composition of the Supervisory Board Board as per 31 December 2019 was:
R.V. Emerson H.C.M. van Damme A.B. Sokolov The role of the Supervisory Board is to possesses the specific expertise needed Chairman (independent) Vice-Chairman (dependent) supervise the policies of the Management to perform their role on the Supervisory Year of birth: 1947 (independent) Board and the general course of affairs Board. The composition of the Supervisory of ATB. The Supervisory Board assesses Board makes it possible for it to perform periodically, at the strategic level, whether its tasks properly. The Supervisory Board the commercial activities in the general ultimately adopts ATB’s remuneration policy, sense are appropriate in the context of and is responsible for the implementation ATB’s risk appetite. The Supervisory Board and evaluation of the remuneration policy consists of six non-managing members2. adopted. The Supervisory Board discusses Year of birth: 1955 Up to three members are affiliated with annually the variable incomes. Specific Nationality: British Year of birth: 1951 Nationality: Russian the Alfa Banking Group, the majority issues are dealt with and prepared in the Member Since: 2017 Nationality: Dutch Member Since: 2016 shareholder of ATB. The other members, Audit Committee, the Risk and Compliance End of term: 20213 Member Since: 2013 End of term: 2020 including the chairman, are independent. Committee, and the Remuneration and Other positions: Chairman End of term: 2021 Other positions: Chairman Supervisory Board B-North Other positions: Director Executive Board OJSC The members of the Supervisory Board have Nominating Committee. Members of these (United Kingdom) Checkmates B.V. (The Alfa-Bank (Russia) a collective responsibility. Each member committees are appointed by and consist of Netherlands), Chair Common is required to act in accordance with the a number of members of the Supervisory Content Project, Supervisory interest of ATB, and is aware of the social Board. The assessment of the effectiveness Board Member ATB ESPP B.V. role of a bank and of the interests of its of the permanent education programme (The Netherlands) various stakeholders. Pursuant to the for the Supervisory Board and Management Articles of Association, Supervisory Board Board is part of the annual evaluation Corporate Governance members are empowered to obtain any performed by the Supervisory Board. information they deem necessary for the A.J. Baxter R. Meijer O. Vaksman performance of their duties. Members of (dependent) (independent) (dependent) the Supervisory Board are appointed by the General Meeting. Each member is expected to be capable of assessing the main aspects of ATB’s overall policy in order to form a balanced and independent opinion about the basic risks involved. Each member also
Year of birth: 1966 Year of birth: 1958 Year of birth: 1977 Nationality: British Nationality: Dutch Nationality: South African Member Since: 2016 Member Since: 2018 Member Since: 2019 End of term: 2020 End of term: 2022 End of term: 2023 Other positions: Director Other positions: Chairman of Other positions: Chairman and CFO ABH Holdings S.A. the Board of Directors of Digital Horizon (United Kingdom), (Luxembourg), Director OJSC Buckaroo B.V. (The Netherlands), Independent Director Mail.ru Alfa-Bank (Russia), Director PJSC Director Xenia Consulting B.V Group (Russia), Independent Alfa-Bank (Ukraine), (The Netherlands) Chairman Supervisory Board Supervisory Board Member ANNA Gazprombank (Switzerland), (United Kingdom), Supervisory Supervisory Board Member ANNA Board Member ATB ESPP B.V. (United Kingdom), Supervisory (The Netherlands) Board Member Lendfo (United Kingdom)
2 The Supervisory Board temporarily consists of five members due to one vacancy. In accordance with ATB’s charter governing the rules and procedures of the Supervisory Board, three of the six Supervisory Board members are considered independent. 36 37 3 Mr Emerson resigned on 31 January 2020 from the Supervisory Board. Dutch Banking Code
Audit Committee (AC) remunerations policy for the members of The Dutch Banking Code, drawn up by The main responsibility of the Audit the Supervisory Board, members of the the Dutch Association of Banks, came Committee is to assist the Supervisory Management Board and senior management; into force on 1 January 2010. The Code Board in monitoring the preparation and to implement, evaluate and oversee the focuses on making the best interests of the audit of ATB’s financial statements, and implementation of the remuneration policy customer a priority, on the principles of risk ATB’s capital and liquidity adequacy adopted with regard to the members management, auditing and governance, and assessment reports, monitoring the quality of the Management Board and senior on compensation policies. The Banking Code and effectiveness of ATB’s system of management; and to approve the principles applies to all banks with a banking licence. governance, risk management and control of the remuneration policy for other bank Deviations from the principles of the Banking procedures, and monitoring the external employees. The RNC’s responsibilities Code are allowed, provided that the reasons and internal audit governance and quality, include the monitoring of the performance are explained. including IT audits and IT security. The of the Supervisory Board, its committees, AC reports its findings to the Supervisory its members and the individual members of We adhere to the Banking Code and have Board and these findings are discussed in its the Management Board. The RNC prepares taken into account the recommenda- plenary meetings. the profiles of individual Supervisory tions following the report ‘Bridging the Board and Management Board positions, differences’ from the Monitoring Committee Risk and Compliance considering the required specific expertise, Codes of Conduct 2016. More information Committee (RCC) complementarity, collegiality and diversity. on our implementation of the Banking The main responsibility of the Risk and The RNC prepares the proposals for Code, including the full comply-or-explain Compliance Committee is to assist the appointment, re-appointment and dismissal statement as required under the Banking Corporate Governance Supervisory Board in supervising ATB’s of Management Board members, Supervisory Code, is available at risk policy, appetite and profile on credit Board members and the composition of the www.amsterdamtradebank.com/about-us/ risk, market risk, capital and liquidity Supervisory Board committees. The RNC corporate-governance/ adequacy, operational risk, regulatory risk prepares the proposals for the Supervisory and strategic risk. In addition, the RCC Board and reports its monitoring findings to assists the Supervisory Board in the overall the Supervisory Board in order that these oversight of ATB’s compliance function and can be discussed in its plenary meetings. internal governance, and ATB’s adherence to corporate governance principles and its Code Digital Transformation of Conduct. The RCC assesses the policy in Committee (DTC) the fields of corporate sustainability and In the meeting of 31 January 2020, the corporate social responsibility. Furthermore, Supervisory Board decided to install the the RCC has authority to decide on credit Digital Transformation Committee. The main proposals escalated in accordance with ATB’s responsibilities of the DTC are to support the internal governance rules. The RCC reports Supervisory Board in fulfilling its oversight its findings to the Supervisory Board and responsibilities and to provide strategic these findings are discussed in its plenary advice to the Management Board relating meetings. to ATB’s digital transformation strategy and initiatives. The DTC reports its findings to Remuneration and Nominating the Supervisory Board and these findings are Committee (RNC) discussed in its plenary meetings. The main responsibilities of the Remuner- ation and Nominating Committee are to advise the Supervisory Board on the
38 39 Remuneration Report
We practice a restrained and sustainable Within the framework of a restrained and Our remuneration remuneration policy that is in line with our sustainable remuneration policy, we aim to principles are as follows: long-term strategy, risk appetite, goals and offer competitive remuneration levels, in values. Our remuneration policy aims in its accordance with relevant regulations and execution to avoid conficts of interest and accepted standard practices, and taking Remuneration is Remuneration is excessive risk-taking, and has the protection into account our size, the diversity of our employee-oriented by: performance-related by: of our customers’ interests at heart. workforce and the international context in Furthermore, it is designed to support us in which we operate. • fostering a sense of value and appreciation in • establishing a clear link between performance achieving our strategic HR objectives: each individual employee; and pay, and aligning adequate indicators and • promoting the shorter and longer-term interests target-setting with performance evaluation and (i) attracting, retaining, motivating and well-being of all employees via adequate remuneration; and rewarding the required levels of compensation, pension and/or other benefits; • refecting individual as well as collective highly-qualified employees, and • supporting the career development of our performance in line with our long-term interests; (ii) fostering an alignment of interests employees. • avoiding any ‘pay-for-non-performance’. between our employees and our bank in general. Remuneration is equality-driven by: • promoting fairness, consistency and alignment in our remuneration policies and practices, with balanced proportions in the remuneration packages across the different echelons (internal equality); Corporate Governance • avoiding any discrimination on nationality, race, gender, religion, sexual orientation and/or cultural beliefs in our remuneration structures (internal equality); • aiming at controlled market competitive remuneration in comparison with an appropriately established peer group (external equality).
Remuneration is risk-prudent by: • aligning business objectives with risk management requirements in target-setting practices; • limiting the variable pay of all staff to 20% of fixed pay (with limited exceptions, but never exceeding 100% of fixed pay); • limiting the potential score of financial KPIs to 50% of total overall performance, leaving 50% of the potential score for non-financial-related targets; • having variable pay based on a combination of individual, business unit and overall group performance; • remunerating control functions independently from the business they oversee; • implementing various ex-ante and ex-post-risk assessments, including malus and clawback.
In 2019, the total amount of remuner- € 313,000). Over the financial year 2019, ation paid to the Management Board was no variable remuneration was awarded € 1,940,000 (2018: € 1,710,000) and to to employees and Management Board the Supervisory Board € 500,000 (2018: members.
40 41 Financial Consolidated Statements 2019 Financial Statements 2019
42 43 Consolidated statement of financial position Consolidated statement of income at 31 December before appropriation of result
(in 1,000 euro’s) 31/12/2019 31/12/2018 (in 1,000 euro’s) 2019 2018
Assets Note* Income from operating Note* activities Cash and balances with central banks 1 210,244 138,867 Interest income 19 52,900 44,488 Loans and advances to banks 2 105,443 84,865 Interest expense 20 24,232 21,073 Loans and advances to customers 3 799,604 837,713 Net interest income 28,668 23,415 Interest-bearing securities 4 253,930 306,479 Commission income 1,835 2,653 Shares and other non-interest-bearing securities 5 198 194 Commission expense 750 191 Intangible assets 6 5,849 11,136 Net commission income 21 1,085 2,462 Property and equipment 7 1,850 2,075 Result on financial transactions 22 -5,574 4,898 Prepayments and accrued income 8 12,086 21,021 Other income 23 64 -1,153 Other assets 9 4,315 19,951 Total income from operating 24,243 29,622 Total assets 1,393,519 1,422,301 activities
Liabilities and equity Expenses Amounts due to banks 10 161,578 80,539 Staff expenses 24 23,753 21,050 Funds entrusted 11 993,388 1,074,913 General and administrative expenses 25 13,063 13,465
Accruals and deferred income 12 9,613 13,886 Depreciation and impairments of Other liabilities 13 22,217 35,678 intangible assets and property and 26 7,024 3,043 equipment Provisions 14 106 60
Resolution charge 27 1,488 1,355 Financial statements Subordinated loans 15 35,000 35,000 Impairments of financial instruments 28 -654 -9,429 Total liabilities 1,221,902 1,240,076 Total expenses 44,674 29,484 Equity: Operating result before tax -20,431 138 • Issued share capital 105,408 99,763 Income tax 29 - - • Share premium reserve 92,364 88,186 Net result -20,431 138 • Retained earnings -5,724 -5,862 • Undistributed result -20,431 138 Total equity 16 171,617 182,225 Total liabilities and equity 1,393,519 1,422,301
Contingent liabilities 17 26,266 35,956 Irrevocable commitments 18 22,340 13,949
* The number beside each item refers to the relevant note * The number beside each item refers to the relevant note
44 45 Consolidated statement of changes in equity Consolidated statement of cash flows
(in 1,000 euro’s) 2019 2018 (in 1,000 euro’s) Share Share Retained Currency Undistributed Total equity Cash flow from operating activities capital premium earnings translation result Operating result before tax -20,431 138 reserve reserve Adjustment for Balance at 1 January 99,763 88,186 -43 -16,537 10,718 182,087 • Depreciation and impairments of intangible assets 2018 7,024 3,043 and property and equipment Net result (as per - - - - 138 138 • Impairments of financial instruments 2,703 -9,429 statement of income) • Amortisation premium and discounts 2,772 3,564 Total FX movement and - - - - 138 138 net result • Result from sale of interest bearing securities - -919
Appropriation of result - - 10,718 - -10,718 - • Result from sale of non-core loans 70 -5,291 • Unrealized result on loan participations -56 -1,013 Disposal of subsidiary - - -16,537 16,537 - - • Result from sale of shares -11 -6 • FX revaluation effects -82 1,484 Balance at 31 99,763 88,186 -5,862 - 138 182,225 Cash fow from operating activities -8,011 -8,429 December 2018 Net increase (decrease) in operating assets and liabilities Net result (as per - - - - -20,431 -20,431 statement of income) • Amounts due from banks -35,942 40,548 • Amounts due to banks 90,037 66,336 Total FX movement and - - - - -20,431 -20,431 net result • Loans and advances to customers 36,102 -216,953 Appropriation of result - - 138 - -138 - • Funds entrusted -81,525 152,833 Issue of shares 5,645 4,178 - - - 9,823 • Prepayments and accrued income / 4,718 -1,890 Accruals and deferred income Financial statements Balance at 31 December 105,408 92,364 -5,724 - -20,431 171,617 • Other assets / liabilities 2,174 41,360 2019 Total movement in assets and liabilities 15,564 82,234 Net cash flow from operating activities 7,553 73,805
Cash flow from investing activities Investments and acquisitions Consolidated statement of comprehensive income • Interest-bearing securities -20,131 -221,550 • Intangible assets -1,380 -5,105 (in 1,000 euro’s) 2019 2018 • Property and equipment -132 -1,296 Net result (as per statement of -20,431 138 income) Divestments, repayments and sales Translation difference - - foreign activities • Interest-bearing securities 70,000 139,127 • Shares - 30 Net other comprehensive income - - recognized directly in Total equity Net cash flow from investing activities 48,357 -88,794 Total comprehensive income for -20,431 138 the period
46 47 Consolidated statement of cash flows
2019 2018 Cash flow from financing activities • Issuance of capital 5,645 - • Share premium 4,178 - Net cash flow from financing activities 9,823 - Net decrease/increase in cashflows 65,733 -14,989
Cash and cash equivalents • Cash and balances with central banks 138,867 181,791 • Banks on demand 14,675 -15,800 • Restricted demand deposits at central banks -9,220 -6,680 Balance at 1 January 144,322 159,311 • Cash and balances with central banks 210,244 138,867 Notes to • Banks, available on demand 8,484 14,675 • Restricted demand deposits at central banks -8,673 -9,220 Balance at 31 December 210,055 144,322 the Consolidated Decrease/increase in cash and cash equivalents 65,733 -14,989
Additional information Cash fows from interest received 56,884 46,134 Financial Statements Cash fows from interest paid -24,940 -20,325 Cash fows from income tax 6,055 - 2019
48 49 • ATB ESPP B.V. in Amsterdam, a pooling mitigate the risks around the execution of Summary of significant entity only for the purpose of holding its strategic goals, the Management Board the shares of the employee share concludes that the financial statements purchase plan (ESPP) in which ATB has 0% 2019 should be stated on a going concern accounting principles ownership; basis. • ATB Shipping Finance I B.V. in Amsterdam, a Special Purpose Entity (SPE) to B.1.4 Judgement and estimates facilitate a securitisation structure in The preparation of the financial statements and policies which ATB has 0% ownership. requires management to make estimates and assumptions that affect the amounts B.1.3 Going concern reported for assets and liabilities, the The Management Board has made extensive reporting of contingent assets and liabilities analyses of the possible developments over at the date of the financial statements, as the next twelve months in order to assess well as the amounts reported for income the potential impact on the results of the and expenses during the reporting period. A. General B. Basis of preparation Bank and the Bank’s capital position. The situations that are assessed based on Amsterdam Trade Bank N.V. (ATB) is an The Management Board’s business plan available financial data and information independent financial institution founded in B.1.1 General scenario takes into account the Bank’s mainly relate to the determination of the 1994 that obtained its banking license in the The financial statements have been prepared current financial position, the commitment allowance for expected credit losses, legal same year. ATB provides financing for the in accordance with Part 9, Book 2 of the of the shareholders to continue providing cases, the fair value of financial assets entire spectrum of the international trade Dutch Civil Code. The accounting policies support to the Bank, as well as the ability and liabilities as well as the identification and commodity logistics chain including applied for measuring assets and liabilities to execute the approved strategy. of impairments. Although management asset based and corporate finance. ATB and profit determination are based on the based its estimates on the most careful serves a wide range of customers active historical cost basis unless stated otherwise. The Management Board has also considered assessment of the current circumstances cross all aspects of international trade, All amounts are expressed in thousands of risks embedded in its business plan around and activities, the actual results might including commodity traders, producers, euros, unless stated otherwise. The totals the new strategy and the Covid-19 crisis deviate from these estimates. The use of processors, manufacturers and ship-owners. may not always match the sum of the and has concluded that the Bank is strong different assumptions and methods may, Since 2003, ATB has been providing retail individuals due to rounding. The accounting enough to continue with its normal business due to the subjective nature involved, Financial statements services in The Netherlands, offering policies for the consolidated financial operations into the foreseeable future result in different outcomes. savings and deposit products. In 2006, ATB statement are equal to the company only and is well positioned to take its next expanded its internet retail operations to financial statement. steps in achieving the strategic targets in Germany, followed by Austria in 2011 and accordance with the business plan. Great Britain in 2019. B.1.2 Basis for consolidation The consolidated financial statements of Furthermore, the Management Board ATB’s registered office is at Strawin- ATB comprise the financial statements of would like to point out that it also values skylaan 1939, 1077 XX, Amsterdam, the Amsterdam Trade Bank N.V., its subsidiaries the support of the ultimate shareholders Netherlands. ATB is a company incorpo- and other companies controlled by ATB and of ATB, as has been expressed by one of rated and established in the Netherlands are prepared at 31 December. The financial them in a letter to the Management Board and registered under number 33260432 year is the same as the calendar year. Intra of ATB itself. In such letter the shareholder at the Chamber of Commerce. Ultimate group payables and receivables and any reiterated its willingness and ability to shareholder of ATB is Alfa Group. The unrealized profit and losses within the group provide support for the Bank to meet its consolidated financial statements of or income and expense from such trans- regulatory requirements. The promise to Amsterdam Trade Bank N.V. at 31 December actions are eliminated upon preparing the uphold regulatory ratios of ATB is a clear 2019 were prepared by the Management consolidated financial statements. commitment to ensure ATB’s continued Board, approved by the Supervisory Board operation by being fully compliant with the on 31 July 2020 and will be submitted to The following entities are part of the consoli- solvency and liquidity requirements set by the General Meeting of Shareholders for dation group as per 31 December 2019: the regulator. adoption within the regulatory time period. • Amsterdam Trade Capital Administration Corporation B.V. (ATCAC), a 100% owned Based on the above assessment, the subsidiary; conditions present in order to fulfil the projections made in the business plan and the assessment of ATB’s capability to
50 51 Critical accounting estimates and Besides this, exposures included on the d) Amortisation of intangible assets it is expected to result in an outfow from judgments Watch list and forborne exposures are The amortisation of intangible assets the entity of resources embodying economic ATB makes estimates and assumptions that transferred to stage 2 as the risks of these refects the pattern of how assets benefits and the amount of the obligation affect the reported amounts of assets and customers are considered significantly contribute to future cash fows. At can be measured reliability. liabilities within the next financial year. increased. balance sheet date, management Estimates and judgements are continually assessed whether the pattern of future An asset or liability that is recognised in evaluated and are based on historical A loan is not automatically considered economic benefits expected to fow from the statement of financial position remains experience and other factors, including to have lower credit risk. Typically a the Bank’s intangible assets that are on the statement of financial position if a expectations of future events that are borrower would need to demonstrate subject to amortization had changed. transaction (with respect to the asset or believed to be reasonable under the consistently good payment behaviour Furthermore, ATB assesses whether liability) does not lead to a mayor change circumstances. The main items subject to over a period of time (probation period there are indications of impairment of in the economic reality with respect to the accounting estimates where changes in the of twelve months) before the credit risk is intangible assets. Intangible assets are asset or liability. An asset or liability is no underlying assumptions may impact the considered to have decreased and the loan tested for impairment by comparing the longer recognised in the balance sheet when financial statements are the following: moves from stage 3 to stage 2, or from carrying value with the best estimate of a transaction results in the position that stage 2 to stage 1. the recoverable amount. The recoverable all or substantially all rights to economic a) Impairment losses on financial instruments amount is estimated as the higher of fair benefits and / or all of the risks related to ATB reviews its loan portfolio and other b) Litigation / legal cases value less cost to sell and value in use. the asset or liability have been transferred financial instruments to assess impairment From time to time ATB is involved in to a third party. at least on an annual basis. In determining claims and litigations. Management Board e) Unconsolidated structured entities whether an impairment loss should be makes estimates as to whether provisions A structured entity is an entity for which A debt remains on the balance sheet if a recorded in the statement of income, the are needed on a case-by-case basis. The voting rights are not the dominant factor transaction does not lead to a significant Bank makes judgements as to whether Bank has a number of litigations and legal in deciding control. Structured entities change in the economic reality with regard there is any observable data indicating cases, mainly the ongoing Fiod case. have restricted activities and are generally to this debt. Such transactions should not that there is a measurable decrease in Litigation provisions, if any, are monitored designed to achieve a narrow and well-de- give rise to the justification of results. the estimated future cash fow from loans by management on a periodic basis. The fined objective. An interest in a structured and other financial instruments in the amount recognised as a provision for entity is any form of contractual or If a transaction leads to a significant change portfolio. litigation and claims represents the best non-contractual involvement with variable in part of the economic benefits and risks estimate of the expenditure required returns arising from the performance with respect to an asset or asset that has Financial statements ATB applies Directive 2090 Financial to settle at the balance sheet date. of the entity for the Group. ATB does previously been recognized in the assets, Instruments, which allows companies Management Board implemented internal not have any unconsolidated structured the economic reality of the transaction to account for impairments on financial processes, controls and procedures in entities. determines to what extent the asset or asset assets based on expected credit loss order to make the best estimate of of the foreign asset capital is partially or in accordance with IFRS 9 Financial provision for litigation and claims on f) Restructuring provision fully included in the balance sheet. instruments. ECL are measured as an an individual (case-by-case) basis. The ATB has accounted for a restructuring allowance equal to 12‑month ECL for stage process involves the Integrity department provision as of 31 December 2019. In The assessment of whether there is a 1 assets, or lifetime ECL for stage 2 or and assessment performed by external determining the cost related to the significant change in economic reality is stage 3 assets. Changes in impairment legal experts. restructuring, ATB makes judgements based on those economic benefits and risks stages will occur when the criteria for the based on the latest expectations with that are likely to occur in practice, and not original stage classification are no longer c) Deferred tax asset respect to the execution of the restruc- on benefits and risks that cannot reasonably met. An asset moves to stage 2 when its Deferred tax assets arise mainly from tax turing plans and the expected outfow. be expected to occur. credit risk has increased significantly since losses that can be carried forward to be initial recognition. In assessing whether utilised against profits in future years. The Income is recognised in the statement of the credit risk of an asset has signifi- level of deferred tax asset recognition is B.2 Recognition and income when an increase in future economic cantly increased, ATB takes into account infuenced by management’s assessment de-recognition potential related to an increase in an asset qualitative and quantitative reasonable of future profitability. At each balance or a decrease of a liability has arisen, the and supportable forward looking sheet date, existing assessments are An asset is recognised in the statement of size of which can be measured reliably. information. reviewed and, if necessary, revised to financial position when it is probable that Expenses are recognised when a decrease in refect changed circumstances. the expected future economic benefits that the economic potential related to a decrease are attributable to the asset will fow to in an asset or an increase of a liability has the entity and the cost of the asset can be arisen, the size of which can be measured measured reliably. A liability is recognised with sufficient reliability. in the statement of financial position when
52 53 B.3 Subsidiaries • ATB is exposed to any financial risk Commitment and standby fees have been B.5.2 Instruments not used for The participating interests over which ATB or reward connecting to ATB ESPP BV recognized as of the start of the facility and hedging has control are considered group companies although the shares held by ATB are not are amortized until the ending of the facility When ATB enters into derivatives for trading and these are consolidated. Control is taken into consideration for distribution agreement. purposes, realised and unrealised gains and exercised over a participating interest if of any dividend. losses are accounted for under ‘Result on the investor is exposed to, or is entitled Per 18 December 2019 the funding structure financial transactions’. to, fuctuating income in respect of his was terminated and all legal obligations involvement in the participating interest and B.4 Securitisation towards Citibank have been settled. As per B.5.3 Hedging instruments has the opportunity to infuence this income ATB entered into an arrangement to 18 December 2019, Citibank does not have ATB does not apply hedge accounting. by using his control over the participating securitize part of its financial assets in order any rights nor has the SPE any obligations interest. The assets, liabilities and profit/loss to expand its funding facilities. These assets towards Citibank. The legal title of the loans B.5.4 Embedded derivatives of these companies are fully consolidated. have been transferred to a special purpose has been transferred back to ATB in March Embedded derivatives are treated as entity (SPE) in 2019. This transaction does 2020. separate derivatives when their economic Participating interests are consolidated as not meet the conditions for de-recognition characteristics are not closely related of the date on which the effective control as the majority of risks and rewards have During 2019 the securisation period was to those of the financial host contract. is transferred to ATB and will no longer be not been transferred to the SPE and remain running within the triggering events of The embedded derivative is measured consolidated as of the date on which this on the balance sheet of ATB, and therefore the securisation program. Due to the separately if the financial contract itself is control is terminated. All transactions, the loans remain recognised within the termination on 18 December 2019, the not recognised at fair value. A determination balances and unrealized gains and losses statement of financial position of ATB. The triggering events were not applicable is carried out in advance as to whether an from transactions between ATB and its group loans that are assigned to this transaction anymore on 31 December 2019. embedded derivative is closely related. companies have been eliminated on consol- are pledged to this facility and considered idation. For a list of the consolidated group encumbered assets. companies, refer to note ‘Group Companies’ B.5 Derivative financial B.6 Trading financial in the Notes to the company financial ATB currently has a shipping loan portfolio instruments and hedging assets statements. that is denominated in USD currency. In 2018 ATB established ATB Shipping Finance I B.5.1 General Trading financial assets are financial assets At year-end 2019, ATB has all voting rights in B.V., a Special Purpose Entity (SPE) in order Derivative financial instruments generally acquired with the objective of generating a 100% owned subsidiary, Amsterdam Trade to transfer part of its portfolio to this SPE. comprise foreign exchange contracts, profit from short-term fuctuations in prices Financial statements Capital Administration Corporation B.V. The purpose of this structure was to receive currency and interest rate swaps, and or traders’ margins, or financial assets (ATCAC). This subsidiary is an empty shell wholesale funding in order to diversify interest rate options (written as well as that form part of portfolios characterized company. the funding profile and to mitigate foreign acquired). Derivative financial instruments by patterns of short-term profit partici- currency risk by receiving funding in USD can be traded either on the stock exchange pation. Financial assets held for trading are ATB Shipping Finance I B.V., a Special currency. or over the counter (OTC) between ATB measured at fair value based on listed bid Purpose Entity (SPE) to facilitate a securi- and a client. Initially all derivative financial prices. All related comprehensive income tisation structure in which ATB has 0% The SPE is established as an independent instruments are recognised at fair value. is included under Result on financial trans- ownership is included in the consolidated structure, commonly used for this type of Subsequent measurement of derivative actions. Interest earned on financial assets financial statements as all risks and rewards transactions. The SPE is a Dutch limited financial instruments is at fair value. All is recognised as interest income. All acqui- of the shipping loan portfolio sold and liability company (“besloten vennootschap”), derivative financial instruments are included sitions and sales of financial assets held for assigned to the SPE are retained with ATB. of which all shares are held by a Dutch under assets if their value is positive and trading which require delivery within a time foundation. The management of the SPE under liabilities if their value is negative. limit prescribed under the regulations or ATB ESPP B.V. in Amsterdam, a pooling entity is outsourced to an external party (Vistra) Derivative financial instruments that are in accordance with market conventions are only for the purpose of holding the shares who acts as director and is also the adminis- embedded in other financial instruments are accounted for on the transaction date. of the employee share purchase plan (ESPP) trator. There is also a security trustee being treated separately if their risks and charac- in which ATB has 0% ownership. ATB ESPP is Citibank Agency and Trust. Citibank, N.A. teristics are not closely related to those of consolidated based on the following criteria: London Branch acts as Account Bank, Cash the underlying derivative contract and this • The Management Board of ATB ESPP B.V. Manager and Loan Agent for the transaction. contract is not classified as at fair value consists of ATB’s Chief Financial Officer ATB acts as servicer of the portfolio while through profit and loss. and the department head of human Citibank, N.A. London Branch is available as resources. The Supervisory Board of ATB a Substitute Servicer. ESPP B.V. consists of 2 members of ATB ‘s Supervisory Board;
54 55 B.7 Repo transactions and and 2018 the netted amounts are nil. B.11 Loans and advances If a transaction leads to a significant change reverse repo transactions to customers and Due in part of the economic benefits and risks from banks with respect to an asset or asset that has Securities sold subject to repurchase B.10 Foreign currencies previously been recognized in the assets, agreements (repos) continue to be included Loans and advances to customers and Due the economic reality of the transaction in the statement of financial position. The B.10.1 Foreign entities from banks are non-derivative financial determines to what extent the asset or asset related liability is included under the line Items included in the financial statements instruments with fixed or defined payments, of the foreign asset capital is partially or item concerned (mainly Due to banks). of each entity in ATB are carried in the not listed on an active market. Loans fully included in the balance sheet. Securities purchased subject to resale currency that best refects the economic and advances to customers and Due from agreements (reverse repos) are presented reality of the underlying events and circum- banks are initially recognised at fair value, Management continually assesses these under the line item Due from banks or Loans stances that are relevant for the entity (the including transaction costs. renegotiated loans to ensure that all criteria and advances to customers. The difference functional currency). are satisfied with a view to expected future between the sales price and the purchase The consolidated financial statements are For each individually assessed loan, the cash fows. price is recognised in the statement of presented in euros, which is the parent losses are estimated based on the expected income as interest during the term of the company’s functional currency. Gains, credit worthiness of the borrowers and the agreement. losses and cash fows of foreign entities are value of the collateral provided to ATB, and B.12 Allowance for translated into the presentation currency taking into account the actual economic expected credit losses of of ATB at the exchange rates ruling at the conditions under which the borrowers financial instruments B.8 Cash and balances transaction dates, which is approximately conduct their activities. The carrying withdrawable with central equal to the average exchange rates. Assets amount of the loans is reduced through The Bank’s ECL framework facilitates the banks and liabilities are translated at closing the use of a provision account and the calculation of one-year expected credit rates. Translation differences arising on loss is taken to the statement of income. losses and lifetime expected credit losses, Cash equivalents are highly liquid short-term the net investments in foreign entities and Write-offs of provisions for expected loan individually for all ATB’s (non-retail) counter- investments held to meet current obligations on loans and other currency instruments losses are made as soon as virtually no other parties and determines the final provision in cash, rather than for investments or other designated as hedges of these investments means of recovery are to be expected. based on the identified stage. purposes. Such investments have remaining are recognised in equity. If a foreign entity Any amounts subsequently collected are terms of less than 90 days at inception. Cash is sold, any such translation differences are included as negative amounts under the ATB recognizes a loss allowance at an amount equivalents are readily convertible to known reclassified within Equity. item Impairments on loans and advances to equal to 12-month expected credit losses, Financial statements amounts of cash and subject to an insignif- customers and shares in the statement of if the credit risk at the reporting date has icant risk of changes in value. The amount B.10.2 Foreign-currency income. not increased significantly since initial due from DNB from the minimum reserve transactions recognition (Stage 1). This amount represents requirement is also included in this item. Monetary assets and liabilities denominated ATB sometimes renegotiates or otherwise the expected credit losses resulting from in foreign currencies are converted at modifies the contractual cash fows of loans default events that are possible within the closing rate at reporting date. Exchange rate to customers. When this happens, ATB next 12 months. The interest revenue is B.9 Netting of financial effects arising from the conversion of assets assesses whether or not the new terms are calculated on the gross carrying amount for assets and liabilities and liabilities are stated in the statement substantially different to the original terms. financial assets in Stage 1. of income as ‘Result on financial transac- Financial assets and liabilities can be netted tions’. Transactions in foreign currencies are Modified loans are assessed whether there is IFRS 9 requires for recognition of credit and presented in the financial statements translated at the exchange rate prevailing on a significant change in economic reality and losses over the remaining life of the financial at the net amount when ATB has a legally the transaction date. should be based on those economic benefits assets (‘lifetime expected losses’) which enforceable right to offset the recognised and risks that are likely to occur in practice, are considered to have experienced a amounts and there is an intention to settle and not on benefits and risks that cannot significant increase in credit risk (Stage on a net basis, or realize the asset and settle reasonably be expected to occur. If there 2) and for financial assets that are credit the liability simultaneously. At year-end 2019 is no significant change of the reality of the impaired at the reporting date (Stage 3). The transaction the (modified) old loans should lifetime expected credit losses represent all still be recognized on the balance sheet possible default events over the expected date. A loan is no longer included in the life of a financial instrument. ATB leverages balance sheet if the transaction results in all existing risk management indicators (e.g. or virtually all rights to economic benefits watch list and forbearance trigger), credit and all or after all risks associated with the rating changes and takes into consideration asset or the financial liability are transferred reasonable and supportable information to a third party. which allows ATB to identify whether the
56 57 credit risk of financial assets has significantly amount (including the allowance). Financial before the credit risk is considered to have The backstop of 30 days past due remains. increased. This process includes consider- instruments become credit-impaired when decreased and the loan moves from stage 3 Any customer with a 30 days past due ation of forward-looking information and one or more events have occurred that had a to stage 2, or from stage 2 to stage 1. cannot be moved back to stage 1, regardless macro-economic factors. Furthermore, detrimental impact on estimated future cash of any decision and changes to the rating of financial assets will be transferred to Stage 2 fows. The movements from stage 2 back to stage the involved customer when 30 days past due. The interest revenue 1 are decided on the criteria defined below is calculated on the gross carrying amount of The ECL on an instrument are based on an and mirror the criteria on the “increased B.12.1 Significant increase in financial assets in Stage 2. unbiased probability-weighted amount that is credit risk”. While essentially a mirror of the credit risk determined by evaluating a range of possible earlier criteria, a buffer is defined, i.e. the ATB is basing its staging (12-month versus As the primary definition for credit impaired and reasonable outcomes and refect performance has to be better than the initial lifetime expected credit losses) on quanti- financial assets moving to Stage 3, ATB information available on current conditions threshold to be allowed back into stage 1. tative changes in the PDs, however a process applies the default definition as laid out and forecasts of future economic conditions, This serves two reasons. First, it puts the is in place that allows qualitative elements in the Capital Requirements Regulation such as e.g. gross domestic product growth, customer (exposure) on a probation period: to be incorporated into its PDs. As such, (“CRR”) Article 178. Interest revenues are unemployment rates, interest rates. it has to proof that stage 1 is indeed the all relevant factors are captured in the PD calculated on the net carrying amount for right classification before returning back to which is used as the basis for the staging these financial assets only. Forward-looking In order to allocate financial instruments it. Secondly, it lessens unnecessary volatility. assessment. information, including macro-economic between stages 1 and 2, ATB uses criteria Moving back and forth between stage 1 and factors, is taken into account to measure that are currently applied in the credit stage 2, just because of minor changes is In assessing whether the credit risk on a IFRS 9 compliant expected credit losses. process. Also, the quantitative criteria that neither desirable nor informative. financial instrument has increased signif- IFRS 9 does not distinguish between individ- will be used are related to the probability of icantly since initial recognition, ATB ually significant or not individually significant default (PD), where a financial instrument In the criteria for the rating override compares the risk of a default occurring on financial instruments. Therefore, ATB is allocated to stage 2 when an increase in indicators a similar approach is taken: a the financial instrument at the reporting decided to measure the allowance for credit the weighted average PD since origination certain improvement or ‘cure’ period has to date with the risk of a default occurring on losses on an individual transaction basis. exceeds a predefined threshold. be taken into account before reconsidering the financial instrument at the date of initial Similarly, the assessment for transferring any previous override. recognition. In making this assessment, ATB financial assets between Stages 1, 2 and 3 In order to ensure that ATB is following the considers both quantitative and qualitative are prepared on an individual transaction best practice in recognising the asset quality According to the Doubtful and Problem Loan information that is reasonable and basis. deterioration, the consistent approach in Procedure the forbearance classification can supportable, including historical experience Financial statements defining forbearance has been established only be removed after a probation period, and forward‑looking information that is The rules governing impairments apply in accordance with the European Banking under certain conditions. This reclassifi- available without undue cost or effort. to financial assets at amortised cost as Authority (EBA) regulation. cation is also the trigger to review any rating Forward‑looking information considered well as to loan commitments and financial override that followed the forbearance. includes future economic conditions, such guarantees. At initial recognition, an EBA defines forborne exposure as a debt as e.g. gross domestic product growth, allowance will be formed for the amount contract in respect of which forbearance A removal of a customer off the watch list, unemployment rates and interest rates. of the expected credit losses from measures have been extended. Forbearance back to satisfactory, will trigger a review of possible defaults in the coming 12 months measures consist of concession towards a the rating. The ECL framework uses the Bank’s internal (‘12-months expected credit loss’ (ECL). debtor facing or about to face difficulties in rating models as well as external credit If credit risk increased significantly since meeting its financial obligation (“financial For the watch list no “cure” period will be ratings. ATB’s credit risk approach for IFRS 9 origination (but remains non-credit-im- difficulties”). defined as this is implicit in the notion of the purposes aligns with the general credit risk paired), an allowance will be required for watch list itself. Customers are only removed approach at the Bank: the amount that equals the expected credit Changes in impairment stages will occur from the watch list when it is judged, and • governments are externally rated; losses stemming from possible defaults when the criteria for the original stage Credit Committee has approved, that all • financial institutions are usually during the expected lifetime of the financial classification are no longer met. potential risks responsible for inclusion on externally rated, otherwise a proxy rating asset (‘Lifetime ECL’). If the financial the watch list are no longer present. is assigned; instrument becomes credit-impaired the A loan is not automatically considered to • the corporate customers are rated allowance will remain at the Lifetime ECL. have lower credit risk. Typically a borrower A similar approach is taken for the NPL with internal rating models, even when However, for these instruments the interest would need to demonstrate consistently classification, which also determines the external ratings are available; income will be recognised by applying the good payment behaviour over a period of treatment of any past due customers, • for shipping exposures, compare the CCA effective interest rate on the net carrying time (probation period of twelve months) because of the NPL classification of any factor against Marsoft base case outlook. customers with an over 30 days past due facility. Their classification can only be The internal rating models used for the changed after confirmation of the FR&R committee.
58 59 corporate customers are sourced from a ATB applies the following approach for the B.12.2 Measurement and B.13 Interest-bearing software application provided by Moody’s. forward looking scenarios: recognition of expected credit securities This software application consists of Moody’s • good and bad scenarios are always losses RiskAnalyst and RiskCalc. RiskAnalyst is the applied for all transactions according to The measurement of expected credit losses Interest-bearing securities are debt comprehensive tool used for credit analysis an automated procedure; is a function of the probability of default, securities held in the investment portfolio, purposes of corporate customers. RiskCalc is • retrieve the credit cycle adjustment loss given default (i.e. the magnitude of the with the general intent to hold the securities the calculation engine used by the Bank to (CCA) factor from RiskCalc; loss if there is a default) and the exposure until redemption date. The investment determine the ratings based on quantitative • compare the CCA factor against 12-month at default. The assessment of the probability portfolio is measured at amortised cost information only, i.e. financials of corporate GDP growth forecasts. of default and loss given default is based on including premiums and discounts less customers. The RiskCalc model provides for • for shipping exposures, compare the CCA historical data adjusted by forward‑looking impairment charges, if necessary. Premiums each corporate customer a one-year PD, a factor against Marsoft base case outlook. information as described above. and discounts are amortized over the five-year PD term structure and a forward- remaining life of the securities on a straight looking credit cycle adjusted (CCA) PD for When estimating the ECL, the Bank considers As for the exposure at default, for financial line basis. scenario analysis. three scenarios (a base case, a good and a assets, this is represented by the assets bad scenario). For the good scenario, ATB gross carrying amount at the reporting For the PDs, a term structure derived from applied a good scenario weight of 12% (2018: date; for financial guarantee contracts, B.14 Shares and other RiskCalc is used as input for ECL calcula- 10%) with a multiplier of 0.3 (2018: 0.25) and the exposure includes the amount drawn non-interest-bearing tions. From this curve, the probability of a bad case scenario of 4% (2018: 34%) with a down as at the reporting date, together securities a default between the reporting date and multiplier of 4 (2018: 3.5). with any additional amounts expected to maturity date of a contract is derived via be drawn down in the future by default Shares and other non-interest-bearing linear interpolation. The calculation of the The IFRS 9 required forward looking date determined based on historical trend, securities are initially recognised at PDs depends on several building blocks. component is effectively incorporated into ATB’s understanding of the specific future fair value and subsequently at cost less The counterparty ratings (either internal the CCA adjustment, based on Moody’s financing needs of the debtors, and other impairment charges. Impairment charges or or external) are used as the starting point. Distance-to-Default approach, which in relevant forward‑looking information. the reversal (until cost) of the impairment is Ultimately, based on the ratings and the turn is based on equity markets as an early recognised in the statement of income. macroeconomic expectations, PD curves warning indicator as explained earlier and If ATB has measured the loss allowance Equity instruments are impaired if their are produced for every counterparty which in Moody’s documentation. It creates a full for a financial instrument at an amount cost permanently exceeds their recoverable is the basis of the forward-looking scenario credit cycle adjusted PD term structure (up equal to lifetime ECL in the previous amount, i.e. their fair value is permanently Financial statements analysis. to 5 years). reporting period, but determines at the or significantly lower than their cost. The For financial instruments on-balance, the current reporting date that the conditions recoverable amount of investments in EAD is calculated as the present value The Moody’s CCA factors are compared to for lifetime ECL are no longer met, ATB unlisted equity instruments is determined of future cash fows. For off-balance GDP growth forecasts as provided by the measures the loss allowance at an amount using an internal valuation model using commitments and guarantee contracts, IMF, World Bank and OECD, for the world, equal to 12‑month ECL at the current quotations, cash fow projections as well as the EAD is equal to the nominal exposure Euro area and Russia. reporting date. the development of commodity prices. multiplied by a credit conversion factor (CCF) based on Foundation Internal-Ratings Shipping exposures are compared with the ATB recognises an impairment gain or loss Based Basel values. Marsoft forecasts for Shipping, which are in profit or loss for all financial instruments forward looking. with a corresponding adjustment to their For the LGD calculation, a straightforward carrying amount through a loss allowance approach is applied described in an internal In the Risk management section a detailed account. LGD policy which is providing guidance explanation is provided with respect to ATB’s to decide on the LGD covering a specific impairment process and ECL model applied sector: Transactional Finance, Shipping to financial instruments. Finance, Asset Based Finance, Financial Insti- tutions and Securities. In principle, ATB does not rebut the presumption of 30 days past due exposures in stage 2. Only in individual cases, where a past due is clearly the result of some technical issue not related to credit risk, this principle will not apply.
60 61 B.15 Intangible assets Estimated useful lives of property and B.18 Employee benefits / B.20 Due to banks, equipment are as follows: Pension due to customers and B.15.1 General Leasehold improvement : 10 years subordinated liabilities Costs related to the implementation or Computer equipment : 5 years ATB has defined contribution plans under maintenance of software are recognised as Other equipment : 5 years which ATB pays contributions to publicly These borrowings are initially recognised at an expense at the time they are incurred. or privately managed insured pension fair value, i.e. the issue price less directly Costs directly incurred in connection with At reporting date ATB assesses whether schemes on a compulsory, contractual or allocable and non-recurring transaction identifiable and unique software products there is objective evidence for an voluntary basis. Once the contributions have costs, and subsequently carried at amortised over which ATB has control and that impairment of Property and equipment. been made, ATB has no further payment cost, including transaction costs. will probably provide economic benefits Property and equipment is impaired if loss obligations. The regular contributions are exceeding the costs for longer than a year event(s) occurred that had an impact on net period costs for the year in which they are recognised as intangible assets. the estimated net realizable value of these are due and are included on this basis under B.21 Employee Share assets. If the carrying amount of an asset ‘Staff expense’. Purchase Plan Expenditures that improve the performance exceeds its estimated recoverable amount, of software compared with their original the carrying amount is written down ATB operates a cash settled employee specifications are added to the original cost immediately to the recoverable amount. B.19 Ta x share purchase plan (ESPP). For this plan, of the software. Software implementation Impairment losses and reversed impairments Current tax receivables and payables are set during the employment period of the costs are recognised as assets and amortised of property and equipment are included in off if there is a legally enforceable right to set employees, the share-based investment by on a straight-line basis over a period not ‘Depreciation and impairments of intangible off such items and if simultaneous treatment the employees is recognised as a liability. exceeding five years. assets and property and equipment’ in or settlement is intended. Deferred tax assets The liability is re-measured at each reporting the statement of income. Gains and losses and liabilities are set off if there is a legally date up to and including the settlement date B.15.2 Impairment losses on on the disposal of items of property and enforceable right to set off such items and with changes in fair value recognised in the Intangible assets equipment are determined in proportion if they relate to the same tax authority and general and administrative expenses, taken At reporting date, ATB assesses whether to their carrying amounts and taken into arise from the same tax group. into account the estimated leavers if any. there are indications of impairment of account when determining the operating intangible assets. Intangible assets are result. Provisions are formed in full for deferred tax The fair value change is based on the tested for impairment by comparing the liabilities, using the liability method, arising positive/negative difference between the carrying value with the best estimate of Repair and maintenance work is charged to from temporary differences at the reporting fair value of the underlying share and the Financial statements the recoverable amount. The recoverable the statement of income at the time the date between the tax bases of assets and exercise price. The visible intrinsic value amount is estimated as the higher of fair relevant costs are incurred. liabilities and their carrying amounts for of an ATB share with certain adjustments is value less cost to sell and value in use. financial reporting purposes. considered as the proxy for the fair value. The fair value change of the employee share An impairment loss is recognised if the B.17 Leases / ATB as Deferred income tax assets and liabilities are purchase plan as calculated for the year is carrying amount exceeds the recoverable lessor Finance leases measured at the tax rates that have been recognized in full in the general and admin- amount. Impairment losses and reversed enacted or substantively enacted at the istrative expenses. impairments of other intangible assets are If assets are leased under a finance lease, reporting date. included in the statement of income. the present value of the lease payments The ESPP requires the employees to is recognised as a receivable under ‘Due Deferred tax assets are recognised to the hold their shares for a period of at least from banks’ or ‘Loans to customers’. The extent that it is probable that future taxable four years or up until the moment their B.16 Property and difference between the gross receivable profits will be available within the period employment with Amsterdam Trade Bank equipment and the present value of the receivable is available to compensate taxable losses N.V. will be terminated. In view of the four recognised as unearned finance income. according to applicable tax laws, against year holding period the acquisition price Property and equipment is initially carried at Lease income is recognised as interest which the temporary differences can be has a discount of 15% that will be amortized cost and subsequently at historical cost less income over the term of the lease using the utilised. Taxes on profit are calculated in during the holding period. The discount accumulated depreciation and accumulated net investment method, which results in a accordance with the tax legislation of the is treated as general and administrative impairments. Depreciation is calculated on a constant rate of return on the investment. relevant jurisdiction and recognised as an expenses during the vesting period of 48 straight-line basis over the useful lives of the expense in the period in which the profit is months, with a corresponding adjustment to assets concerned. realised. The tax effects of the carry-forward Other liabilities. New participants entering of unused tax losses are recognised as an into the current holding period of ESPP, asset if it is probable that future taxable received a proportional discount that will be profits will be available against which the amortized during the holding period. losses can be utilised. Deferred taxes are recorded at nominal value.
62 63 The employees participating in this B.22 Provisions The expenses for the restructuring provision Other contingent liabilities share-based investment have agreed to Provisions are recognised for obligations recognized, which is based on management A contingent liability is a possible obligation the terms and conditions laid down in an (both legal and constructive) arising as a best estimate and individual agreements that arises from past events and whose investment agreement which is signed by result of a past event where it is probable with former employees at the end of 2019, existence will be confirmed only by the ATB, ATB ESPP B.V. and the Participant. The that an outfow of resources will be required are presented under the accruals and occurrence or non-occurrence of one key conditions and features underlying such to settle the obligation and a reliable deferred income (see note 12) as these will or more uncertain future events not a commitment as follows: estimate can be made of the amount of the be settled/paid out within one year after wholly within the control of ATB; or a • Investment period 1 January 2017 - 31 obligation. If ATB expects a provision to be balance sheet date. present obligation that arises from past December 2020; reimbursed, for example under an insurance events but is not recognized because it • Investment value per ESPP share; policy, the reimbursement is recognised as a is either not probable that an outfow • The number of ESPP shares which separate asset but only if the reimbursement B.23 Equity of economic benefits will be required to participant has acquired; is virtually certain. Provisions that have an Financial instruments that are designated settle the obligation or the amount of the • Blocking period during the investment expected maturity over one year are carried as equity instruments by virtue of the obligation cannot be measured reliably. period; at the discounted value of the expected economic reality are presented under Contingent liabilities are not recognized • How the purchase price will be future cash fows and are classified under ‘Equity’. Payments to holders of these in the statement of financial position, but determined during and after the Blocking Provisions. Provisions that have an expected instruments are deducted from ‘Equity’ as are rather disclosed in the notes unless Period, in case the ESPP Shares are sold maturity less than one year are carried part of profit distribution. the possibility of the outfow of economic by the Participant back to ATB or its at nominal value (expected cash outfow benefits is remote. nominee. and are classified under Other Liabilities. Direct costs of new shares issued are Additions to and releases of provisions are deducted from equity, taking taxes into Irrevocable commitments The price payable for the shares is subject recognised in the statement of income. account. Irrevocable commitments consist of unused to the leaver qualification (Good or Bad facilities, sale and repurchase commitments Leaver). A participant is considered a Bad In the case of off-balance sheet and all other obligations resulting from leaver if employment is terminated for commitments, which is mainly consisting B.24 Obligations not irrevocable commitments that can give rise cause (‘dringende redenen’). In all other of committed facilities and guarantee recognised in the to loans. cases a leaver is considered a Good Leaver. contracts, ATB classified the provisions statement of financial Subject to the discretion of the Supervisory for these items in Provisions and other Board and dependent on the circumstance liabilities. As at 31 December 2019, the position B.25 Revenue Financial statements applicable to a Good Leaver (e.g. death, provision for off-balance sheet commitments This relates to the obligations that represent Revenue is recognised insofar as it is likely disability, redundancy), repayment of amounts to € 105 thousand (2018 € 59 a potential credit or other risk and consists that the economic benefits will fow to ATB the non-amortized discount and/or the thousand). of the off-balance sheet items contingent and can be measured reliably. Costs are remainder of a loan can be waived (limited liabilities and irrevocable commitments. allocated as far as possible to the period in recourse). A provision for restructuring costs is formed which the services were rendered or to the when a formal detailed plan has been Contingent liabilities relevant proceeds. In case of a Good Leaver the price payable developed and a justified expectation has Contingent liabilities are carried at the is the fair market value minus the non-am- been raised with the employees affected contract value and consist of guarantees and ortized discount and in case of a Bad Leaver that the reorganization will be carried out. irrevocable letters of credit. B.26 Interest income and the price is the lower of the investment The provision consists of direct costs as interest expenses price and the fair market value minus the described and agreed in the restructuring Financial guarantee contracts require the non-amortized discount. plan. With respect to reorganizations for issuer to compensate the holder for losses Interest income and expense for all inter- With the settlement of the ESPP with which a formal plan has been developed incurred when the debtor fails to meet its est-bearing instruments is recognised in the the participant, the loans with the as at the balance sheet date, but for which obligations under the terms of the related statement of income on an accrual basis, ESPP participant is also settled. When a either a justified expectation has been debt instrument. The guarantees are initially with the effective interest method being participant leaves the ESPP, shares are sold raised with those employees affected by recognised at fair value and subsequently applied. Interest income includes coupons by the Participant back to ATB. the reorganization will be carried out or measured at the higher of the discounted relating to fixed interest financial assets and implementation of the reorganization plan best estimate of the obligation under interest-bearing securities. Staff is entitled to finance up to 90 per cent has commenced only after the balance sheet the guarantee and the amount initially of their investment via a loan, granted by date, information has been included under recognised less cumulative amortisation. Recognition of interest income for inter- ATB. The total amount of these loans is events after the balance sheet date. est-bearing financial instruments assigned to classified as Staff Loans. stage 1 and stage 2 are based on their gross carrying amount. Recognition of interest
64 65 income for financial instruments assigned to B.30 Staff costs B.32 Cash flow statement • The carrying amount of the short-term stage 3 is based on their net carrying value Staff costs comprise wages and salaries, The cash fow statement has been drawn foating rate inter-bank placements, after deduction of impairments. pension costs, other social costs and other up in accordance with the indirect method, overnight deposits and fixed deposits staff costs. distinguishing between cash fows from placed with banks is deemed to be a Arrangement fees are administration charges operating, investing and financing activities. good estimate of their fair value given. directly linked to arranging credit to lenders Cash and cash equivalents comprise, at • The fair value of the interest-bearing and are therefore as part of the effective B.31 General and face value, all cash in hand and balances securities in the investment portfolio interest rate recognized as interest income administrative expense withdrawable on demand with central banks is based on the active market prices at and amortized over the life of the legal term and other banks in respect of which the risk reporting date. of the underlying credit for future handling. General and administrative expenses of value changes is insignificant. • The fair value of derivatives is based on comprise costs related to support of the observable market data. The fair value is Bank’s operational activities such as IT Cash fows arising from foreign currency determined using listed market prices (a B.27 Net commission expenses, costs of marketing and communi- transactions are translated into the small bid-ask range applies to derivatives income cation, cost of credit insurance, accommo- functional currency using the exchange rates quoted in euros, US dollars and/or pound dation expenses, office expenses and other at the date of the cash fows. sterling, and mid prices are used), along This item consists of income, other than administrative expenses. Recovered VAT is The net cash fow shown in respect of ‘Loans with prices offered by traders, cash fow income similar to interest, earned on classified in and deducted from general and and advances to customers’ relates only to discounting models and option valuation banking services provided to third parties. administrative expense. transactions involving actual payments or models based on current market prices Commission received from and paid to receipts. and contracted prices for the underlying third parties is generally accounted for as The ESPP requires the employees to instruments, as well as the time value of commission income and commission expense hold their shares for a period of at least money, yield curves and the volatility of over the life of the underlying contracts. four years or up until the moment their B.33 Fair value the underlying assets and liabilities. employment with Amsterdam Trade Bank The fair value of financial assets and • The fair value of liabilities to banks, N.V. will be terminated. In view of the four liabilities is derived from active markets. funds entrusted and subordinated B.28 Result on financial year holding period the acquisition price Where the fair value cannot be derived liabilities is determined using discounted transactions has a discount of 15% that will be amortized from active markets, these are determined cash fows using applicable money during the holding period. New participants using valuation techniques that include the market rates for debt instruments with Other foreign exchange results consists of entering into the current holding period of use of mathematical models. The input a comparable term to maturity, taking Financial statements the revaluation effects of balance sheet ESPP, received a proportional discount. to these models is taken from observable account of own credit risk positions in foreign currencies. markets where possible, but where this is At the moment that the ESPP shares are not possible a degree of judgment may be Sale of interest-bearing securities and purchased by the intermediate entity at required in establishing the fair value. loans and advances represents the financial discount, the fair market value per share result on exited positions in the respective exceeds the issue price and the resulting The following summarises the major portfolio. The result on derivatives difference is treated as expenses during methods and assumptions used in estimating represents the result on trade derivatives. the vesting period, with a corresponding the fair values: Exchange and price gains and losses on adjustment to other liabilities. The total trading in other financial instruments on amount to be taken into consideration is • The estimated fair value of Loans and behalf of clients are recognised under Result determined on the basis of the fair value advances to customers represents the on foreign currency trading. of the depositary receipts and the cost to discounted amount of estimated future acquire them as established on the date on cash fows of individual loans expected which they are acquired. to be received. Expected cash fows are B.29 Other income discounted using market rates as discount Other income comprises non-banking rate. Given the volatile economic income. environment the realizable value may differ significantly from the disclosed fair value in the event the loans would be sold before maturity.
66 67 Risk Management
Second line of defence – Countervailing Third line of defence – Independent C.1 Introduction exposure to risk, but to ensure that powers oversight This section consists of a general description exposure is knowingly assumed and The second line of defence maintains The third line of defence provides of ATB’s approach to risk management adequately managed. oversight on control mechanisms and independent assessment of the effectiveness (C.2); a description and explanation of risk • Identify and manage multiple and monitors their effectiveness. Control of governance, risk management, and governance (C.3); and explanation of the cross-enterprise risk: ATB faces risks mechanisms are methods, measures and internal controls. Internal Audit (IA) acts management of various categories of risk, as affecting different parts of the organi- tools (including but not limited to policies, as the third line of defence. IA provides its defined in the Bank’s risk taxonomy (C.4). zation. Our risk management approach procedural requirements and reporting) to recommendations based on independent and facilitates integrated responses to risks. measure and reduce consequences and/or objective assurance. • Seize opportunities: by considering a full likelihood of the related risk. C.2 Risk Management range of potential events, management The second line of defence acts Approach is positioned to identify and proactively independently from the first line of realise opportunities, within risk defence and provides its view on risks (and ATB adopts an integrated approach to risk appetite. associated mitigating actions) taken by the management as laid down in its Enterprise • Improve deployment of capital: risk owners. Risk Management (ERM) Policy (updated in obtaining robust risk information allows August 2019). management to effectively assess overall The second line of defence has the authority capital needs and enhance capital to instruct the first line of defence on ATB takes its definition of ERM from that allocation. actions to be taken to ensure compliance proposed by COSO: “a process effected with the bank’s risk appetite and risk by the Executive Board, management and Actual exposure on all risk types is frameworks (within the boundaries of Financial statements other personnel; applied in strategy setting monitored at least quarterly in the ERM established policies and procedures) and to and across the bank; designed to identify report, and on a monthly basis through more propose new mechanisms for measuring and potential events that may affect ATB, to specialized reporting (e.g. the Portfolio managing risks. The Integrity Department manage risk to be within its risk appetite Management Report for credit risks, the as part of the second line of defence has and to provide reasonable assurance ALCO report for market risks). direct access to the Board. The second line regarding the achievement of ATB’s of defence is composed of such functions objectives”. By means of this approach, ATB as Risk Management, Human Resource seeks to: C.3 Risk Governance Management, Finance & Control and • Align risk and strategy: by considering ATB’s ERM framework consists of three layers Integrity Department. risk appetite in making strategic of risk governance, also known as the three choices, setting related objectives, and lines of defence model. developing mechanisms to measure and manage related risks. First line of defence – Risk awareness in • Enhance risk-based decision making by day-to-day business providing clear direction and guidance The person or organisational unit that, to identify and select among alternative through its actions, gives rise to a responses to risk (avoidance, reduction, risk is responsible for that risk and its sharing, acceptance and pursuance). management, within defined boundaries. • Reduce surprises and losses: ATB contin- This is the “first line of defence”, and uously seeks to enhance the capability acts as the risk owner. The first line of to identify potential events and establish defence / risk owner should have sufficient responses, reducing surprises and authority and accountability to take those associated costs or losses. Note that ATB actions necessary to manage the risk, or if does not intend to completely remove necessary ensure that the risk is escalated to the appropriate level of management.
68 69 In the monitoring and day-to-day Risk and Earnings Volatility risk are discussed Asset & Liability Committee (ALCO) ments in the portfolio. The Credit Committee management of identified risks, the directly in the Management Board. The ALCO consists of the members of the is responsible for the establishment of Management Board, and in its oversight All other risk categories from the risk Management Board as well as the heads of country and industry limits. The Committee, capacity, the Supervisory Board, are taxonomy are discussed and managed in Treasury Front Office, Risk Management, in its recommendations, takes economic and supported by a number of committees delegation in one (or more) committees. Financial Services and a commercial business legal circumstances into account. Individual which provide to ensure compliance with These committees also approve and review representative. The ALCO meets at least transactions are allocated to specific the ability all relevant regulations regarding policies supporting relevant departments once a month to monitor funding, interest country limits by the Credit Committee. risk and capital management, and to ensure that are responsible for managing the risks rate, foreign exchange, market, liquidity and In a limited number of cases and based on compliance with the risk appetite, unless in their activities within approved risk solvency risk. In addition, the ALCO discusses a predetermined escalation model, credit separately approved otherwise. Strategic tolerance limits. market developments and provides recom- and/or country limit decisions are taken by mendations on managing liquidity. the Risk and Compliance Committee of the Supervisory Board. Operational Risk Committee (ORC) The Operational Risk Committee consists of Provisioning Committee members of the Management Board, as well The Provisioning Committee consists of the as the heads of Risk Management, Integrity, Management Board as well as the Heads Internal Audit and identified Risk Owners. of Credit Risk Management and Financial It meets monthly and monitors issues Services. It convenes at least on a quarterly Supervisory relating to the maintenance of an adequate basis. All relevant loans are discussed and Board Sub committees of the Supervisory Board operational risk management framework (in their staging classification based on the which all operational risks as mentioned in ECL model based methodology. Potential ERM are monitored) and the assessment of non-performing loans are put under special Audit Committee operational risk incidents. monitoring for industry and company specific developments. The Provisioning Committee Risk and Compliance Furthermore, the committee monitors advises the Management Board on loan Committee the effectiveness of the internal control impairments and provisions to be taken. Remuneration and framework and the resolution of control Norminating Committee issues identified by both the internal and Financial Restructuring & Recovery Financial statements external auditor and the Supervisory Committee Authorities. Lastly, the committee approves The Financial Restructuring & Recovery New Product Approval Proposals and Policies. Committee consists of members of the Management Board and Financial Restruc- Integrity Committee turing & Recovery. The non-performing Management The Integrity Committee consists of the portfolio is discussed and relevant develop- Board Management Board as well as the head of ments are escalated for decision. Integrity and the head of Merchant Banking. In general its meetings are held weekly to Project Portfolio Board (PPB) accept new clients, review client files, and The PPB consists of the Management Board Asset and Liability Operational Risk to discuss and decide upon new compliance as well as Head of Business Technology Committee Committee related policies or frameworks, covering risks and Change, the Head of Operations and as defined in the Systematic Integrity Risk Services, the Head of Merchant Banking, the Analysis (SIRA). Head of Financial Services and the Head of Integrity Credit Integrity. Committee Committee Credit Committee The Credit Committee consists of members The Project Portfolio Board monitors all of the Management Board, the heads of projects within the bank aiming to improve ATB’s systems and processes in an efficient FR R Provisioning Credit Risk Management and Merchant Committee Committee Banking as well as (representatives of) and effective way. This will be achieved by Integrity and the commercial business providing the project framework and delivery departments. Meetings are held weekly means, control and quality measures. to decide on new credit applications and Meetings are held on a monthly basis. proposals and to monitor credit risk develop- Pro ect Portfolio Board
70 71 C.4 Risk categories operations, the likelihood of compliance risks ensure the timely update of policies and by the first line of defence. Decisions regarding occurring is considered to be ‘very likely’. guidelines. The upcoming changes in the credit risk are taken in the Credit Committee C.4.1 Strategic risks As the impact of such risks manifesting is Dutch laws relating the introduction of a UBO or in the Financial Restructuring and Recovery Strategic risk is defined as the risk of non-com- considered to be high due to reputational and register are closely monitored and the CDD Committee, unless these are escalated through pliance with the strategic objectives that financial damage, the risk profile in relation to Policy, for instance, will be amended at the a pre-defined escalation mechanism. can arise from adverse business decisions, these risks is considered to be relatively high moment of enactment of said regulation. improper implementation of decisions, or a compared to the (Dutch) financial sector in Monitoring of credit risks against individually lack of responsiveness to industry / market general. AML 5 will have no material impact for the established limits and portfolio established changes. This includes Earnings Volatility Risk business of ATB. risk appetite limits takes place on an ongoing (the risk that the bank will not be able to Since ATB’s customer portfolio typically basis. Specific portfolio reports are created comply with profitability targets committed to includes many customers operating in high C.4.3 Credit risk weekly, monthly and quarterly (with varying shareholders). ATB has defined early warning risk political and economic environments, ATB Credit risk is the current or prospective threat scopes) to provide complete and timely indicators (EWI’s) to monitor whether or not has stringent procedures with respect to the to ATB’s earnings, liquidity and capital as a overviews to senior management for steering strategic risks may materialize, and which may mitigation of its reputation and integrity risk result of a counterparty’s failure to comply if and when required. act as a trigger for management’s judgment to strengthen our internal controls in this area. with financial or other contractual obligations call. These early warning indicators are ATB has taken several measures to further stemming from a credit relationship. Although ATB uses the standardized approach principally quantitative (e.g. capital, liquidity, improve its compliance framework, including for credit risk (following the Basel models), and profitability). related processes and procedures, next to the Credit risk comprises of four separately continuous development of internal rating intense efforts of de-risking its exposures by defined sub categories, which relate to the methodologies as well as further integration Strategic risks that could have a negative reducing its legacy portfolio. ATB continues to main possible reasons of the counterparty’s of the Internal Rating System into the Risk impact on (some of) our client’s business closely monitor also the latest (geo-) political failure to comply as indicated above: counter- Management Processes and expansion of its and thereby on ATB are recognized in devel- developments with respect to sanctions and party credit risk, cross border risk, concen- scope (currently only corporates are rated opments concerning a new deterioration measures taken by various governments, and tration risk and country risk. through the system) are considered to be of the geopolitical situation and increasing will do its utmost to comply with all relevant Credit risk constitutes ATB’s most significant important to further strengthen ATB’s credit tensions around Russia, a “no-deal” Brexit and laws and regulations in this field. financial risk and arises mostly from the risk management system. ATB’s borrowers continued escalation of trade tariffs. Each of lending business. are mainly rated in the B-BB+ range. Credit these potential developments are monitored, A recent regular thematic inspection by DNB in enhancements and collateral are therefore with scenario analyses and/or response plans the area of integrity risk management resulted In the light of credit risk, FX risk for clients important credit risk mitigants and are Financial statements in place. in a number of findings where ATB could is addressed in credit applications and risk extensively used: a) exposures to counter- further improve its governance and process opinions. For each client or prospect client, parties in low rated/high risk countries are The current Covid-19 outbreak will most framework. ATB agrees with these findings the FX position given FX mismatches on (partly) credit insured, b) shipping loans are likely further impact the global economy and and has concluded a remediation plan which purchase and sale side is analysed. in general secured by first priority mortgages the financial position and results of banks, has been discussed with DNB and is being and provided against fairly conservative including ATB. ATB is closely monitoring any implemented. No sanction has been imposed ATB’s maximum exposure to credit risk advance rates with initial Loan-to-Values financial impact attributable to the Covid-19 by DNB at this stage. The regulator has also amounts to € 1,439.9 million at year-end 2019 depending amongst other things on the age outbreak on specific industry sectors such as made a comment on significant improvements (2018: € 1,475.7 million) of the financed assets and employment in shipping and trade and has ensured continuity in integrity risk management when compared combination with repayment profile and with of client servicing. Given the uncertainties to the past. Counterparty credit risk security coverage ratio covenants monitoring and ongoing developments the Bank cannot Counterparty Credit Risk follows the principles the Loan-to-Value throughout the tenor of the accurately and reliably estimate the quanti- An onsite investigation by DNB with regard as set out in the Enterprise Risk Management loan on at least semi-annual basis; c) trans- tative impact yet. So far the expectation of to the new strategy was performed in the framework and is primarily managed within actional financing is provided in structures management is that the additional risk with beginning of 2020. This onsite investigation the front offices as first line of defence. The providing control and often include cash regard to Covid-19 is manageable. resulted in a number of findings to which ATB Risk Management Department is responsible margins and in general advance rates below agrees. In order to address these findings, ATB for creating and maintaining credit policies 100% with pledges over receivables and/or C.4.2 Regulatory risks is currently preparing an action plan which will and frameworks, for monitoring the portfolio inventory in place when appropriate. The bank recognizes its responsibility as a be presented to DNB. developments as well as for independent gatekeeper to the financial system not to assessments of the individual risks originated facilitate crime and is committed to comply It is the Integrity Department’s responsibility with all applicable laws and regulations. Based to ensure the integrity framework is kept on the analysis of clients, products countries up-to-date at all times, and to continuously and the channels through the transactions run, monitor relevant legal, social and other inter- in combination with the strategy and business national developments in order to accordingly
72 73 figure 1 into account. Eligible collateral is defined as Credit Portfolio Characteristics collateral which reduces the capital charge of Measurement and monitoring of credit risk is Credit Application certain exposures and needs to follow certain embedded by means of its Key Risk Indicators. predefined eligibility criteria. ATB uses mainly These KRI’s include metrics for one obligor credit insurance and cash collateral as eligible exposure, minimum (average) credit quality, collateral. country risk and sector concentration risk.
Monitoring Risk Advice In those cases where collateral is not deemed In 2019 the internal monitoring on the pre-de- eligible for capital reduction; it may still termined risk appetite and tolerance for the be considered a credit enhancement and average expected loss of the core portfolio hence may play a role in the individual credit were 0.6% and 0.8% respectively. The average Documentation Credit Decision assessments. Shipping loans are always secured expected loss at year-end was of 0.50% at by a (in principle first priority) mortgage over year-end (2018: 0.58%). The average expected the financed assets, with limitations in terms loss is the volume weighted average expected of initial loan-to-value as well as loan-to- loss calculated over the performing loan value development over the life time of the portfolio: PD*LGD* EAD, whereby PD stands loan, monitored via a Security Coverage Ratio for Probability of Default, LGD for Loss Given The normal credit risk cycle of a client watch list. In this case, developments with covenant. Default and EAD for Exposure at Default. (figure 1), product or transaction begins as the client are monitored and reported to the The improvement in this key risk indicator the business analyses the risks of a client credit committee on a monthly basis. When The value of the collateral is based on valuation over 2019 is mainly the result of gradually and prepares a credit application highlighting a client requires temporary close monitoring reports received from approved external decreasing PD’s over the year as credit ratings the structure of the proposed transaction but the underlying reasons are not deemed valuators appraisers (always for Shipping) or of obligors improved. The improved credit or products and analysing the financial material enough to warrant watch list status, other sources (including warehouses and as ratings in turn are the result of more clients soundness of the relevant counterparties. they are added to the newly introduced provided by customers for Commodity Finance having sufficient track record to generate This credit application is sent to the Credit closely monitored list. These exposures are exposure). It is ATB’s policy to require for ratings with the Moody’s rating model (for Risk Management Department who prepares also reported to the credit committee on a periodic updates on these valuation reports. which they need 2 full year financials) and an independent opinion on the content of monthly basis. The closely monitored list was For shipping loans a formal Security Coverage better financial performance. Ratings of the credit application, and advises the credit introduced at the end of 2019 in order to have Ratio test takes place at least twice per year. borrowers without a 2-yr financial track record Financial statements committee on the appropriateness of the more granularity in monitoring. Watch list Valuations of immovable property are updated are capped at max. B+ and are subject to transaction in view of the business, financial status refects a significant increase in credit at least once per year. Due to volatile market expert opinion taking into account mainly the and structural risks as well as matching the risk and implies stage 2 for expected credit conditions in both the Shipping and Commodity strength of opening balance sheet and cash proposed transaction with the strategic fit loss calculations. Closely monitored remains Finance markets the value of the collateral can fow forecast/earnings visibility. and portfolio objectives of ATB. The credit stage 1. differ significantly from the value as stated in committee then balances the business and risk the latest available reports. This is monitored The net portfolio consisted of mainly views and decides on the application. On the Should a client still deteriorate and become on a daily basis by the Collateral Monitoring Commodity Finance (45%) and Shipping basis of this decision documentation is being non-performing, the client is transferred from Department for Commodity Finance loans (40%). Concentration risk within the Shipping drafted by the business, which is reviewed for the business to the Financial Restructuring and on the basis of VesselsValue data by the portfolio over 2019 has a more balanced sign-off by the Integrity Department and Recovery department who will take over Shipping team. Credit Risk also performs a spread of the main shipping sub-sectors day-to-day responsibility for the client and quarterly Key Risk Indicator test on the shipping (dry bulk and product tankers each ca. 30%, During the lifetime of a loan or a transaction, whose aim it is to ensure optimal recovery for portfolio, which may result in additional chemical tanker and container vessels each formal reviews (at least annually) are ATB. testing of the asset coverage. In addition to <10%, LPG and LNG carriers ca. 20%) whilst prepared by the business following a similar other collateral, both personal and corporate 2018 dry bulk represented ca. 40%. routine as for new applications. In addition, Credit risk mitigations guarantees are may be included in the security the borrower’s behavior, market circum- In order to optimally manage the credit package for repayment of the underlying On a regular basis ATB performs stress tests stances and compliance with covenants are risk on counterparties ATB employs various principal and interest amounts. related to its entire portfolio to assess the monitored by the business (and periodically formal credit risk mitigations. These relate to potential impact on its capital position. by the Credit Risk Management Department collateral (assets with material value which The Shipping portfolio is subjected to a as part of the review process) in order to are pledged to ATB), guarantees received and quarterly Key Risk Indicator test linked to assess whether increased monitoring (closely netting agreements. While ATB attaches some the development of indices which in turn monitored list or watch list) or amendments value to most types of collateral received, trigger value and cash fow tests when certain are required. In case a significant deterio- for risk mitigation and reduction purposes thresholds are met. ration is fagged by the business department only so-called eligible collateral is taken or risk department, the client is placed on a
74 75 Impairments on Non-performing and • in any other cases - and subject to CC • A total or partial refinancing of a In other words, impairment of an asset does Forborne Loans. approval - when the Bank considers that troubled debt contract that would not not automatically trigger a downgrade of In the context of the provisioning process, the obligor is unlikely to pay its credit have been granted had the debtor not a customer rating to default (PD=1) in ATB ATB reviews on a quarterly basis all relevant obligations to the institution, the parent been in financial difficulties. Refinancing rating models. Defaulted exposure will loans and advances to each individual undertaking or any of its subsidiaries in means the use of debt contracts to automatically be assigned to Stage 3 based customer based upon objective impairment time or in full, without recourse by the ensure the total or partial payment of on IFRS 9 guidelines. It has to be noted that, triggers, such as non-performing loans or bank to actions such as realizing security other debt contracts the current terms although Stage 2 based on IFRS 9 contains forborne loans, in order to assess whether (On Supervisory reporting on forbearance of which the debtor is unable to comply exposures with potentially decreased credit the allowance for expected credit losses and non-performing exposures under with. For instance, a contract has been quality, classification to Stage 2 should not is sufficient. This review is based on the article 99(4) of Regulation (EU) No refinanced if it is completely repaid with be considered an indication of default. Stage identification of impairment indicators (such 575/2013). a new contract granted on or close to the 2 exposures will in general not be considered as amounts overdue or requests for restruc- day when the initial contract expires. defaulted unless there are indications that turing) in order to assess the likelihood and In order to timely identify and manage the client is unlikely to pay. magnitude of incurred losses. non payments, a 30-calendar day past Evidence of a concession includes: due threshold has been introduced. Those • A difference in favor of the debtor The impact of this new EBA definition on Non-performing status is assigned to a loans are specifically mentioned under between the modified and the previous default will be evaluated in 2020. customer when any of the below conditions the “Prudential Non-Performing Loans” terms of the contract; apply category. • Cases where a modified contract includes The Management Board is responsible for • A customer is past due more than 30 more favorable terms than other debtors decisions made regarding additions to calendar days on any material credit debt Extensive use of granting concessions with a similar risk profile could have provisions, releases of provisions, write-off service to ATB; or leads to delayed loss recognition and obtained from the same institution. of an exposure and status of current interest • A coupon or principal payment on the masking asset quality deterioration. In • An exercise of clauses which, when charges of an exposure to be non-accrued. interest bearing security is delinquent for order to ensure that ATB is following the enforced at the discretion of the debtor, Notwithstanding the aforementioned, the at least 5 business days; or best practice in recognising asset quality enable the latter to change the terms of Management Board delegated its decision • Customer breaches granted overdraft deterioration, a consistent approach in the contract (“embedded forbearance authority to the Provisioning Committee. facility limit for longer than 5 business defining forbearance has been established clauses”), when the institution approves The Provisioning Committee includes days; or in accordance with the European Banking the exercise of the clauses and assesses Management Board Members as voting • A lease is past due more than 30 business Authority (EBA) regulation. that the debtor is in financial difficulties. members. All considerations for assessment Financial statements days on any material credit debt service of impairment triggers and related provisions to ATB; or EBA defines forborne exposure as a debt In order to classify an exposure as forborne are discussed in the Provisioning Committee. • A customer is declared insolvent by court contract in respect of which forbearance both conditions shall be satisfied: Impairment losses are classified in stage or arbitration (e.g. bankruptcy, chapter measures have been extended. Forbearance • The financial difficulties of the debtor, and 3 and based on discounted expected cash 11); or measures consist of concession towards a • A modification of the previous terms fows of the outstanding loan (including a • A cross-default declared on a customer debtor facing or about to face difficulties in and conditions of a contract due to the cash fow for the collateral value based on by any third party creditor unless revoked meeting its financial obligation (“financial debtor’s situation (including waiver of the estimated market value, as and when in 10 days; or difficulties”). actual or potential breaches). foreclosure of collateral is foreseen). • An exposure has been found impaired in accordance with the definition described As per EBA’s view a forbearance measure can Definition of default For the loans and advances to customers in the Policy; or be qualified as a modification or refinancing: The definition of default forms a key that are under restructuring, the impairment • A client (including, for the avoidance • A modification of the previous terms and part of the development and validation loss is measured as the difference between of doubt, any other obligor under the conditions of a contract the debtor is of ATB rating models. For this purpose, the carrying amount of the asset and the loan) indicating inability to comply with considered unable to comply with, due to the definition of default is aligned to the present value of estimated future cash fows payment terms; or its financial difficulties (“troubled debt”) Basel III definition. Please also refer to EBA discounted at the asset’s original effective to allow for sufficient debt service ability document “Guidelines on the application of interest rate. Such estimation is by its nature that would not have been granted had the definition of default under Article 178 of based on assumptions and actual results may the debtor not been in financial diffi- Regulation (EU) No 575/2013”. differ. culties. Exposures shall not be treated as forborne when the debtor is not in It should be clear that the definition of The total amount of non-performing loans as financial difficulties. default used for development and validation at 2019 is € 18.4 million (2018: € 7.8 million). of ATB rating models is relevant only in The total amount of forborne loans in 2019 respect to such matters. It is not directly is € 58.1 million (2018: € 6.5 million). All linked to the NPL definition, or to the forborne loans performing are in Stage 2, process of identification of impaired losses. non-performing in Stage 3.
76 77 Proposals for impairments are discussed in from a capital point of view. The definition or similar payment restriction. Cross- C.5 Expected Credit the Provisioning Committee and proposed of ‘connected’ includes exposures which are border risk is the risk that funds in foreign Losses – IFRS 9 to the Management Board. The Management connected through, for example, common currencies cannot be transferred out of a Board decides on the provisioning level. ownership, management or guarantors. risk country as a result of a specific event or Specific ECL requirements based on IFRS Impairment losses are based on discounted ATB manages single name concentration circumstance. 9 prescribe to determine an allowance for expected cash fows of the outstanding loan risk and calculates internal capital for this expected credit losses with respect to the (including a cash fow for the collateral value risk under the current Basel framework. ATB’s approach to measure country risk is performing part of the portfolio. Subject based on the estimated market value, as and ATB’s risk appetite defines limits to single based on a more strict interpretation of to the ‘Staging’ of a financial asset, IFRS 9 when foreclosure of collateral is foreseen). name concentration both on an individual regulations for assigning countries of risk. principles determine whether a 12 month and portfolio level. In its core portfolio ATB The country of risk is defined in line with the ECL (Stage 1), lifetime ECL (Stage 2) or During 2019 several fully impaired loans complies with its risk appetite targets. DNB policy rule as “the risk that a borrower credit impairment (Stage 3) is taken as a loss were written off (total loan amount: € 0.7 fails to meet his credit obligations owing provision. The distinction between Stage 1 million; 2018 € 6.3 million). The amount of Industry concentration relates to the risk to transfer or foreign currency risk and the and Stage 2 is identified by a ‘significant’ loans, subject to ATB recovery activities, that sector or industry factors drive the risk of losses related to developments in a increase in credit risk since origination for amounts to € 59 million at year end 2019. likelihood of default for a significant number specific country, over which the government each specific exposure. Stage 3 applies if of counterparties in the portfolio. Industry has some degree of infuence, but private impairment triggers are met in line with the Cross border risk concentration risk arises if the portfolio is companies or individuals certainly have not”. current practice (see next chapter). The ECL Cross border risk is a specific subset of unbalanced in exposures to certain sectors, The assignment of country of risk follows an calculation based on this staging process is country risks and deals with the convert- entailing dependencies between default approach which is geared towards identifying performed on a quarterly basis. ibility and transferability of currencies. events. any single country where a potential country The risk materialized in 2015 as Ukraine event will have a substantial effect on the Finance prepares the loss allowance calcula- introduced currency controls hampering With a specific focus on commodity trade overall financial performance of the counter- tions based on ATB’s ECL model and provides recovery and repayment efforts of our and trade related sectors (like shipping) party. As guidance, this may be based on the the reports to the Credit Risk Management clients. The risk is monitored through the there is an obvious sector concentration. country of incorporation of a company, the Department. Credit Risk reviews the country and industry risk as well as through Having said that, commodity trade itself is a country where cash fows are generated or applied assumptions based on the RiskCalc individual credit applications. The presence diversified industry where different sections the country where the majority of supplies/ application data (i.e. software application of local banks from the Alfa group in (some react differently to related economic cycles. production assets are situated. supplied by Moody’s) which is used in the of) these countries has been instrumental to Commodity finance loans are distributed bank’s ECL model and also checks the Financial statements understand the scope of regulations and to across firms trading different commodities. Country risk analysis is being performed plausibility of the scenarios sourced from the provide some mitigants to the direct effects The profitability of these clients is more at least annually by the Risk Management ECL model, and prepares an analysis for the of such risk. dependent on volumes of commodities Department. On the basis of this analysis, quarterly Provisioning Committee meeting. traded than on the price level. Price recommendations are made to establish This analysis focuses on a comparison to Concentration risk declines of commodities are still a risk factor or amend country limits. The analysis is the previous quarter and any expert based Concentration risk is the credit risk related if the client is involved in commodity trades based on the macro-economic circum- adjustments (for example, different cycle to the degree of diversification in the that are not hedged. The study performed stances of the countries, but also on the adjustments for the shipping portfolio). credit portfolio. ATB takes separately into at ATB indicated that exposure to different compliance and legal aspects of the country. Even if no expert based adjustments account the single name concentration, commodity sectors provide diversification These elements, combined with a business are necessary, the analysis explains the country concentration, and industry concen- benefits. indication of their business plans for a reasoning behind this decision. The ECL tration. Due to the significance of Country ATB uses Herfindahl-Hirschman Index (HHI) country, lead to a recommended maximum recommendation including analysis is risks for ATB, these risks are managed and to measure concentration levels. The HHI country limit. presented by Credit Risk to the Provisioning reported upon separately. In addition, ATB is a commonly accepted measure of market Committee. has implemented a framework to measure concentration. It is calculated by squaring The Credit Committee is also responsible for concentration risk quantitatively and the market share of each firm competing in the establishment of country and industry established an approach that links concen- a market and then summing the resulting limits. The committee, in its recommenda- tration risk levels to capital allocation under numbers. tions, explicitly takes economic, compliance Pillar 2 of Basel III (the ICAAP approach). and legal circumstances into account. Country risk Individual transactions are allocated Single Name Concentration risk is managed Country risk is the risk of losses due to to specific country limits by the Credit both on an individual and on a portfolio country-specific events or circumstances. Committee. New or increased country limits level. On an individual level it is managed in It is also an exposure to cross-border risk, are in a limited number of cases and based such a way that it ensures that each single especially convertibility and transfer risk, on a predetermined escalation model, exposure to a (group of connected) client(s), i.e. the risk of obligations not being repaid decided upon by the Supervisory Board. when defaulting, would remain manageable as a consequence of a debt moratorium
78 79 C.5.1 Staging introduced some hard stops triggering a C.5.2 Policy for return from of any decision and changes to the rating of Staging guidelines in accordance with staging movement from Stage 1 to Stage 2, stage 2 to stage 1 the involved customer. A return from Stage 3 amended IFRS 9 determines whether a 12 such as forbearance and Watch List status. Increased credit risk can result in financial to Stage 2 is subject to a one year probation month ECL (stage 1), lifetime ECL (stage 2) instruments moving from stage 1 to stage period. or a credit impairment (stage 3) is taken as a Although all exposures are individually 2. Subsequent improvements in credit risk provision. assessed, there is a collective element in the can result in a reclassification of financial The stage 3 procedure does not change credit cycle adjusted PDs based on instruments back from stage 2 to stage 1. compared to the current practice: impaired The distinction between stage 1 and stage countries and industry sectors. On top of The movements from stage 2 back to stage loans are classified as stage 3 loans. These 2 is identified by a ‘significant’ increase in that, additional scenarios can be defined 1 are decided on the criteria defined below assessments are based on individual credit risk since origination for each specific on countries and/or industries which can and mirror the criteria on the “increased assessments and the impairment amounts exposure. Stage 3 applies if impairment effectively override the modelled cycle credit risk” as mentioned above. While are based on individual cash fow analysis. triggers are met. In the IFRS 9 Standard, adjustment. In this way, the collective essentially a mirror of the earlier criteria, a guidelines and indications for staging assessments for staging are already captured buffer is defined, i.e. the performance has C.5.3 Impairment process, movements between stage 1 and stage 2 in the individual, cycle adjusted, PD to be better than the initial threshold to staging assessment and are provided and translated into practical assessments. be allowed back into stage 1. This puts the responsibilities policies that can be applied to ATB’s customer (exposure) on a probation period: it The staging assessment is based on the portfolio. ATB is basing its staging (12-month versus has to prove that stage 1 is indeed the right PDs which result from the rating process. lifetime expected credit losses) on quanti- classification before returning back to it. Some of the qualitative elements of the ATB has decided to implement a staging tative changes in the PDs, however a process staging assessment are captured in the policy that covers its entire portfolio. ATB’s is in place that allows qualitative elements Default probability criteria rating override process. The rating process, portfolio mainly consists of Corporates, to be incorporated into its PDs. As such, The quantitative criteria are an exact mirror including the overrides, is therefore an Financial Institutions and Government all relevant factors are captured in the PD image of the criteria for increased credit essential part of the IFRS 9 staging process. exposures. From a credit risk perspective which is used as the basis for the staging risk, except for a provision to see a certain Additionally there are some qualitative those are approached in a similar way: All assessment. minimum improvement in credit risk before backstops triggering a movement stage from exposures are individually assessed and returning the exposure to stage 1: stage 1 to stage 2 (forbearance, watch list). accompanied with credit ratings which In principle, ATB does not rebut the provide indications of default probabilities presumption of 30 days past due exposures The multiplier: A movement of the multiplier Stage 3, impaired exposures, overrides and LGDs, which provide indications of in stage 2. Only in individual cases, where back below the threshold of 2 (2.5 minus and any other designation is assigned on Financial statements losses in case of default. ATB does not have a past due is clearly the result of some 20%) will move the exposure back to stage 1, an individual basis. All other, stage 1 and any retail exposures. The staging decision technical issue not related to credit risk, this unless the difference with the origination PD 2 exposures are regularly assessed in order process is based on developments in the principle will not apply. is above the upper limit threshold. to determine the staging level. At new credit rating and the associated proba- • The lower limit threshold: A movement origination, stage 1 is assigned to a financial bilities of default (PD), representing the New originations are always recognised in of the PD below the absolute lower instrument. indication for an increase in credit risk. The stage 1, even if other exposures of the same threshold (0.28%, 0.35% minus 20%) limit credit ratings include both quantitative and customers are already recognised in stage will move the exposure back to stage 1. The rating process is triggered by new qualitative factors. The staging assessment 2. This is based on the amended IFRS 9 • The upper limit threshold: A movement originations and reviews. Next to those is subsequently based on the change in PD guidelines that an increase in credit risk is of the PD below the upper limit threshold regular triggers the rating process can also since origination. measured from origination. For this reason it (8%, 10% minus 20%) will move the be triggered by certain events that require is important to establish what constitutes a exposure back to stage 1, unless the a review of the rating, including the IFRS 9 A threshold by means of a multiplier (2.5x) is ‘new origination’. multiplier threshold is above 2.0. qualitative triggers: forbearance, Past due applied by ATB to assess whether the default • Drawings of loans, Letter of Credits • An exposure in stage 2 that is upgraded and other triggers (through the NPL classifi- probability has ‘significantly’ increased. or guarantees under an existing to investment grade will move to stage 1, cation and the 30 days past due backstop). An absolute threshold is used of 0.35% and uncommitted facility are considered new regardless of the multiplier threshold or an upper threshold of 10%, comparing the originations with the origination date at absolute limits. The reviews are at least annual but can current default probability with the default the date of the actual drawing. • An exposure upgraded from the “CCC” be more frequent depending on the rating probability at origination. No significant • Drawings of loans, Letter of Credits or rating category will not be automat- or classification of the customer. Overdue increase in credit risk can be assumed for guarantees under an existing committed ically classified in stage 2 but will reviews automatically end up on the closely financial instruments with low credit risk. facility are not considered new origina- be re-assessed against the multiplier monitored list to allow close follow-up. Low credit risk means investment grade, tions but originations with the origination threshold and the absolute limits. Reviews are also triggered by a classification based on IFRS 9 Article B5.5.23. The Bank date at the facility start date. move to watch list, NPL or forbearance or by only applies the low credit risk assumption • Drawings under an overdraft facility are The backstop of 30 days past due remains. a move back to performing or the removal of to the interest bearing securities portfolio. not considered new originations, but Any customer with a 30 days past due the forbearance qualifier. Separately, the 30 In addition to the change in PD ATB also originations at the facility start date. cannot be moved back to stage 1, regardless
80 81 past due status is taken into account for the C.5.4 Sensitivity analysis Shipping exposures are compared with the final IFRS 9 staging designation. ATB applies the following approach for the Marsoft forecasts for Shipping, which are forward looking scenarios: forward looking. The result of the staging process is • good and bad scenarios are always presented to the provisioning committee on applied for all transactions according to In the annual report, both the bad and the a quarterly basis. To this end, an impairment an automated procedure; good scenario have been applied in the ECL analysis is prepared which is including the • retrieve the credit cycle adjustment calculation. The impact with regard to the results of the staging assessment process: (CCA) factor from RiskCalc; scenarios applied can be summarised as • The exposures that are breaching PD • compare the CCA factor against 12-month follows: thresholds may result in a movement GDP growth forecasts. between stage 1 and 2. • for shipping exposures, compare the CCA Expected credit loss Expected credit loss Expected credit loss • A summary overview of all financial factor against Marsoft base case outlook. Expected credit loss (EUR) (EUR) (EUR) Good scenario (EUR) Bad scenario instruments subject to the impairment process and effected by the staging When estimating the ECL, the Bank considers process as well as an assessment of the three scenarios (a base case, a good and a Good/Bad Good Bad assigned allowances and provisions. bad scenario). For the good scenario, ATB Effect in EUR 162,000 -278,000 440,000 applied a good scenario weight of 12% (2018: The conclusions of the staging process 10%) with a multiplier of 0.3 (2018: 0.25) and Effect in % 4% -6% 10% are part of the impairment analysis which a bad case scenario of 4% (2018: 34%) with a summarizes in detail the movements of multiplier of 4 (2018: 3.5). loss allowances and provisions assigned to The effect of the good and the bad scenarios The Bank differentiates between two types the related financial instruments at the The IFRS 9 required forward looking as applied in the ECL calculation is an of market risk: current reporting period as compared to the component is effectively incorporated into increase of the provision € 162.000. Without 1) Trading market risk arises primarily previous period. the CCA adjustment, based on Moody’s these scenarios, the ECL provision would be through taking positions in debt, Distance-to-Default approach, which in € 162.000 lower. foreign exchange and derivatives. The Credit Risk Management Department turn is based on equity markets as an early 2) Non-trading market risk arises from has a key responsibility for the IFRS 9 warning indicator as explained earlier and When only applying the good scenario to market movements, primarily outside staging assessment process. It ensures that in Moody’s documentation. It creates a full the ECL calculation, the total ECL provision the activities of our trading units, in Financial statements all the required qualitative assessments credit cycle adjusted PD term structure (up would have decreased with € 278.000. the banking book and from off-balance and judgements in the rating overrides are to 5 years). sheet items. provided. The effect of only applying the bad scenario The Moody’s CCA factors (0.97 indicating in the ECL calculation would result in an ATB assesses inherent Market Risk as Finance prepares the loss allowance a slightly better than historical average increase of the ECL provision of € 440.000. average, with risk appetite being set as low. overview pack for the provisioning outlook and the average being 1) are Market limits are set to prevent the accumu- committee. The staging information is part compared to GDP growth forecasts as lation of market risk beyond the market risk of that overview. The final result, i.e. the provided by the IMF, World Bank and OECD, C.6 Market risk tolerance level. Market risk management is impairment stage per exposure, is used by for the world (3.4%), Euro area (1.9%) and Within the market risk management governed through a dedicated framework Finance for the final calculation of the loss Russia (1.9%). framework, market risk limits, expressed through which the Bank allows market allowance at quarter-end. in terms of Value at Risk (VaR), are set to risk exposures in its trading and banking prevent the accumulation of market risk book without unduly compromising its beyond the market risk tolerance of ATB. capital and the stability of its earnings. The VaR limits are set, monitored and Additionally, limits are set to prevent the managed at trading book level: i.e. foreign accumulation of market risk beyond the exchange, derivatives, and fixed income. market risk tolerance level. These limits are These limits are complemented by additional complemented by additional monetary and monetary and non-monetary trading controls non-monetary trading controls with the aim with the aim of preventing excessive concen- of preventing excessive concentrations and trations and illiquidity of exposures. We use illiquidity of exposures. derivative transactions to hedge most of its market exposure (mainly foreign exchange For the Trading Book, ATB applies Market and interest rate risk). Risk Appetite and Tolerance levels on the
82 83 aggregate portfolio level, which presents Interest risk is also managed by adjusting Notes to the consolidated financial statements the overall risk budget. Consequently, a the interest rates charged to customers at 31 December 2019 risk budgeting process is used to set limits (borrowers as well as savings clients) to on the trading book level (FX, Derivatives the interest rate fuctuations on the money Between Between No Between market. The adjustments of interest rates On Within 1 3 months 1 year Over 5 interest and Fixed Income), where risks are (in 1,000 euro’s) 1 and 3 Total demand month and 1 and 5 years rate effectively monitored and managed by Risk show a delay compared to the market months year years maturity Management. The Bank expresses the Market fuctuation, especially when funding has Limits in term of Value at Risk (1 day 99% a longer term. This could lead to a risk VaR), RWA and P&L stop loss. exposure which is being mitigated through Assets capital and interest margin. Cash and balances with 210,244 ------210,244 Key metrics for market risk are set and central banks periodically review in the Risk Appetite The majority of ATB’s IRR arises from Loans and advances to Dashboard. At year end 2019 the Bank had non-trading asset and liability positions. In 13,690 2,478 54,468 33,217 1,590 - - 105,443 banks no material market risk exposure, due to 2019 the overall IRR sensitivity decreased Loans and advances to hedging. since ATB reduced average duration of the 280,835 150,322 239,566 - 114,388 14,493 - 799,604 customers assets and reduced gaps in the longer-term C.6.1 Interest rate risk buckets as part of business transfor- Interest-bearing securities - 9,993 - 35,031 208,906 - - 253,930 management mation. The Interest Risk as calculated and Shares and other non------198 198 In line with the internal risk governance presented in the next overview is based on interest-bearing securities system Interest Rate Risk in the Banking the contractual interest revision dates and Intangible assets ------5,849 5,849 Book (IRRBB) risk is defined as a sub-section gives information per balance sheet item per of the Market Risk, hence inherent risk time bucket. Property and equipment ------1,850 1,850 (average) and risk appetite (low) are Prepayments and accrued ------12,086 12,086 the same. Main principal in hedging and income managing interest rate risk (IRR) exposure Other assets - 2,325 804 94 - - 1,092 4,315 are 1) sufficient capital buffer to sustain interest rate shocks, 2) continuous ability Total assets 504,769 165,118 294,838 68,342 324,884 14,493 21,075 1,393,519 to generate stable earnings sufficient to Financial statements maintain bank’s normal business operations, and 3) macro level active hedging using Liabilities and derivative instruments. equity Amounts due to banks 5,205 87,690 68,683 - - - - 161,578 ATB is measuring IRRBB using both earnings Funds entrusted 441,024 46,987 63,623 239,204 202,550 - - 993,388 and economic value perspective. Monitoring Accruals and deferred tools include Economic Value of Equity ------9,613 9,613 income (EVE), Gap analysis and Earnings at Risk Provisions and other (EaR). For IRR appetite setting and as a - 1,859 2,485 241 4,001 - 13,737 22,323 liabilities main IRRBB steering tool, the Bank uses EVE methodology. In repricing gap report Subordinated loans - 35,000 - - - - - 35,000 (prepared separately for EUR and USD) Total liabilities 446,229 171,536 134,791 239,445 206,551 - 23,350 1,221,902 interest rate sensitive assets are compared to interest rate sensitive liabilities. The net position per time period and cumulative Equity ------171,617 171,617 gap is then calculated for each material currency. Furthermore, ATB stresses yield Total equity ------171,617 171,617 curve movements through parallel and nonparallel shifts to calculate interest rate risk sensitivity. The interest rate limit Total liabilities and equity 446,229 171,536 134,791 239,445 206,551 - 194,967 1,393,519 utilizations for all risk calculations are then reported and discussed during regular ALCO meetings. Key metrics for market risk Net interest position 58,540 -6,418 160,047 -171,103 118,333 14,493 -173,892 - are set and periodically review in the Risk Appetite Dashboard.
84 85 Notes to the consolidated financial statements Notes to the consolidated financial statements at 31 December 2018 at 31 December 2019
Between Between No Between Effective interest rates at: On Within 1 3 months 1 year Over 5 interest (in 1,000 euro’s) 1 and 3 Total demand month and 1 and 5 years rate months 31 December 2019 31 December 2018 year years maturity
(in % per annum) EUR USD EUR USD Assets Cash and balances with Assets 138,867 ------138,867 central banks Loans and advances to banks 0.52 5.25 1.86 0.57 Loans and advances to 28,834 30,547 10,185 15,299 - - - 84,865 banks Loans and advances to customers 3.46 5.77 3.58 4.27
Loans and advances to 307,695 241,154 203,505 24,237 61,122 - - 837,713 Interest-bearing securities 0.22 - 0.25 - customers
Interest-bearing securities - 24,984 - 45,393 236,102 - - 306,479 Liabilities Shares and other non- Amounts due to banks 0.39 3.09 0.32 ------194 194 interest-bearing securities Savings and savings deposits 0.58 2.39 0.69 - Intangible assets ------11,136 11,136 Property and equipment ------2,075 2,075 Other funds entrusted 0.03 0.49 0.31 0.61
Prepayments and accrued Subordinated loans 4.50 - 4.50 ------21,021 21,021 income
Other assets - - 1,081 14,868 86 - 3,916 19,951
Total assets 475,396 296,685 214,771 99,797 297,310 - 38,342 1,422,301 Financial statements Liabilities and equity Amounts due to banks 268 27,041 53,230 - - - - 80,539 Funds entrusted 478,642 41,321 62,836 257,715 234,389 10 - 1,074,913
Accruals and deferred ------13,886 13,886 income
Provisions and other - - 5 14,834 13,637 - 7,262 35,738 liabilities Subordinated loans - 35,000 - - - - - 35,000 Total liabilities 478,910 103,362 116,071 272,549 248,026 10 21,148 1,240,076
Equity ------182,225 182,225 Total equity ------182,225 182,225
Total liabilities and 478,910 103,362 116,071 272,549 248,026 10 203,373 1,422,301 equity
Net interest position -3,514 193,323 98,700 -172,752 49,284 -10 -165,031 -
86 87 Notes to the consolidated Notes to the consolidated financial statements financial statements at 31 December 2019 at 31 December 2019
C.6.2 Foreign exchange risk The Bank expresses the FX Limits in term Foreign exchange contracts management of Value at Risk (VaR) and notional limits. (in 1,000 euro’s) Notional amount Market value In line with the internal risk governance VaR limit for the Banking Book (1 year 99% system, foreign currency (FX) risk is defined VaR) and the Trading Book (1 day 99% VaR) Year Total <= 1 year 1-< 5 year > 5 year Positive Negative as a sub-section of the Market Risk, hence are defined and managed separately by Risk 2019 460,581 460,581 - - 1,754 -3,624 inherent risk (average) and risk appetite Management. Key metrics for market risk (low) are the same. The Bank conducts are set and periodically review in the Risk 2018 519,105 519,105 - - 1,604 -2,919 business in various currencies, with EUR and Appetite Dashboard. At year ended 2019 the USD being the most material currencies in Bank had no material net FX risk exposure. The foreign exchange contracts consist mainly on USD contracts. which the business is conducted, and RUB, The Foreign exchange contracts at ATB In the statement of financial position the total euro equivalent in foreign currency of assets amounts to € 701 million GBP, JPY and CHF being other relevant relates to FX forwards. (2018: € 696 million), and of liabilities amounts to € 298 million (2018: € 150 million). currencies used in the FX Trading activities. For hedging and managing exposure derivative transactions are used. ATB’s cross currency swaps portfolio can be detailed as follows:
(in 1,000 euro’s) Notional amount Market value
Year Total <= 1 year 1-< 5 year > 5 year Positive Negative
2019 135,361 - 135,361 - - -4,743
Foreign exchange position 2018 178,476 43,116 135,361 - 14,805 -16,765 Cross currency swaps consists of USD - RUB and USD - EUR swap positions. Financial statements 31 December 2019 31 December 2018
(in 1,000 euro’s) Long Short Net Long Short Net C.7 Liquidity risk ATB uses liquidity stress tests as a Pound sterling 5,435 5,692 -257 1,161 1,095 66 As a key area of focus, ATB puts a high management tool to identify the potential Japanes Yen 9 - 9 9 - 9 priority on establishing an internal funding vulnerabilities and worst-case liquidity risks and liquidity risk strategy that ensures ATB of ATB on its current cash fows and liquidity Russian Ruble 367 349 18 558 488 70 measures, monitors and manages its liquidity position. Key metrics for liquidity risk are risk to be able to withstand a range of set and periodically reviewed in the Risk Swiss Franc 69 - 69 32 - 32 stress circumstances without endangering Appetite Dashboard. Due to the importance, US Dollar 732,959 732,436 523 760,749 761,953 -1,204 the continuing viability of its business. ATB the Bank also implemented a separate assesses inherent Liquidity and Funding Risk liquidity dashboard. Other 28 26 2 38 25 13 as average, with risk appetite being set as low. In 2019, the main driver of both liquidity Total 738,867 738,503 364 762,547 763,561 (1,014) and funding risk came from the fact that The Bank manages its liquidity profile the majority of our funding is raised in the by short-term liquidity risk management form of Dutch, German and Austrian retail combined with a long-term funding deposits (denominated in Euros), while the strategy. Additionally, liquidity risk stress majority of lending is conducted in USD testing is an important element of liquidity denominated advances. The market risk risk measurement, risk evaluation and of this currency mismatch was successfully contingency funding planning for all managed down to acceptable exposure potential contingent as well as improbable, levels. However, we recognise the need but plausible stress events. for further diversification of the funding
88 89 Notes to the consolidated Notes to the consolidated financial statements financial statements at 31 December 2019 at 31 December 2019
base and have used several instruments The Bank regularly performs stress tests C.7.2 Liquidity requirements Securitisation structure to improve it, such as repos of assets in related to its entire portfolio to assess the under CRR ATB transferred the future cash fows of the the securities portfolio with commercial potential impact on its capital, earnings On a daily basis, ATB monitors the regulatory underlying loan portfolio to the SPE in 2019. European banks and unsecured wholesale and liquidity position. Stress testing is risk indicators of Liquidity Coverage Ratio In return, the SPE paid ATB the purchase funding from a syndicate of banks. also embedded into the Internal Capital (LCR) and Net Stable Funding Ratio (NSFR), price equal to the notional amount. Adequacy Assessment Process (ICAAP) and as well as other internal liquidity measures. Stable retail customer base and ATB’s Internal Liquidity Adequacy Assessment Both LCR and NSFR are measured based on In accordance with the agreement, the SPE ability to manage it is a strong side of ATB Process (ILAAP). regulatory run off and recovery factors. The will receive the following funding facilities: liabilities. There are examples of successful Bank monitors and manages its compliance a. Senior Loan of USD 150 million expansion to German, Austrian and UK Furthermore, ATB applies reverse stress with these ratios based on the minimum (maximum 60% of total funding), and markets, number of efforts to raise or testing to further explore the vulnerabilities regulatory and internally set risk tolerance b. Junior funding from ATB for the reduce rates (e.g. successful management of ATB’s risk profile and identify a scenario levels. remainder (and to fund upfront of both in and out-fows) and corresponding with a higher likelihood that could threaten expenses). marketing campaigns. ATB’s viability. The reverse stress test is ATB entered in 2018 into an arrangement performed on an annual basis and integrated to securitize part of its financial assets in Per 18 December 2019 the funding structure Early 2020 DNB increased minimum liquidity into the annual ILAAP process. In the light order to expand its funding facilities. ATB was terminated and all legal obligations buffers because of uncertainty with respect of any substantial changes in the market or had a shipping loan portfolio, which was towards Citibank have been settled. As per to the new business model and profitability other factors affecting the financial strength denominated in USD currency. In 2018, ATB 18 December 2019, Citibank does not have of ATB. of the bank, reverse stress testing might established a Special Purpose Entity (SPE) any rights nor has the SPE any obligations be updated more frequently to assist in in order to transfer part of its portfolio to towards Citibank. The legal titles of the C.7.1 Stress testing mitigating potential risks to the Bank. this SPE. The purpose of this structure was loans have been transferred back to ATB in Stress testing aims on exposing the material to receive wholesale funding in order to March 2020. risk at which the bank is sensitive and which diversify the funding profile and to mitigate Financial statements therefore should be given more attention foreign currency risk by receiving funding The next tables represent the assets from the risk management perspective. in USD currency. The loans that had been and liabilities based on their remaining The relevant output of the stress tests is assigned to this transaction were pledged contractual terms to maturity at reporting taken into account as part of a range of to this facility and considered encumbered date. Retail savings accounts are based on risk management tool to support different assets. expected maturity. business decisions and processes, keeping in mind the assumptions made and limitations of the stress testing exercise. The integral aspect of the testing strategy is involvement of the Board and Senior Management in ensuring the appropriate use of stress testing in the capital planning.
90 91 Notes to the consolidated financial statements Notes to the consolidated financial statements at 31 December 2019 at 31 December 2018
Between Between Between Between Between Between On Within 1 Over 5 No cash On Within 1 Over 5 No cash (in 1,000 euro’s) 1 and 3 3 months 1 year and Total (in 1,000 euro’s) 1 and 3 3 months 1 year and Total demand month years fow demand month years fow months and 1 year 5 years months and 1 year 5 years
Assets Assets Cash and balances with Cash and balances with 210,244 ------210,244 138,867 ------138,867 central banks central banks
Loans and advances to Loans and advances to 13,689 - 6,946 83,218 1,590 - - 105,443 28,878 626 27,683 27,678 - - - 84,865 banks banks
Loans and advances to Loans and advances to 71,843 146,310 130,373 110,384 328,651 12,043 - 799,604 319,986 69,424 45,746 67,839 334,718 - - 837,713 customers customers Interest-bearing securities - 9,993 - 35,031 208,906 - - 253,930 Interest-bearing securities - 24,984 - 45,393 236,102 - - 306,479 Shares and other non- Shares and other non------198 198 ------194 194 interest-bearing securities interest-bearing securities Intangible assets ------5,849 5,849 Intangible assets ------11,136 11,136 Property and equipment ------1,850 1,850 Property and equipment ------2,075 2,075 Prepayments and accrued Prepayments and accrued - 2,850 128 4,863 4,245 - - 12,086 392 13,638 1,253 5,738 - - - 21,021 income income Other assets - 2,325 804 94 - - 1,092 4,315 Other assets - 3,478 201 14,970 1,302 - - 19,951 Total assets 295,776 161,478 138,251 233,590 543,392 12,043 8,989 1,393,519 Total assets 488,123 112,150 74,883 161,618 572,122 - 13,405 1,422,301 Financial statements Liabilities and Liabilities and equity equity
Amounts due to banks 5,205 87,690 59,778 8,905 - - - 161,578 Amounts due to banks 14,203 13,106 27,018 17,475 8,737 - - 80,539 Funds entrusted 133,974 81,476 80,730 275,404 287,884 133,920 - 993,388 Funds entrusted 164,434 76,614 80,332 294,759 321,712 137,062 - 1,074,913
Accruals and deferred Accruals and deferred - 7,158 42 2,129 284 - - 9,613 - 9,402 10 4,474 - - - 13,886 income income
Provisions and other Provisions and other - 1,818 2,485 14,019 4,001 - - 22,323 - 177 3,302 17,102 15,157 - - 35,738 liabilities liabilities
Subordinated loans - - - - 35,000 - - 35,000 Subordinated loans - - - - 35,000 - - 35,000 Total liabilities 139,179 178,142 143,035 300,457 327,169 133,920 - 1,221,902 Total liabilities 178,637 99,299 110,662 333,810 380,606 137,062 - 1,240,076
Equity ------171,617 171,617 Equity ------182,225 182,225 Total equity ------171,617 171,617 Total equity ------182,225 182,225
Total liabilities and Total liabilities and 139,179 178,142 143,035 300,457 327,169 133,920 171,617 1,393,519 178,637 99,299 110,662 333,810 380,606 137,062 182,225 1,422,301 equity equity
Liquidity GAP 156,597 -16,664 -4,784 -66,867 216,223 -121,877 -162,628 - Liquidity GAP 309,486 12,851 -35,779 -172,192 191,516 -137,062 -168,820 -
92 93 Notes to the consolidated Notes to the consolidated financial statements financial statements at 31 December 2019 at 31 December 2019
C.8 Operational risk 4. Internal Control framework employed Despite the restructuring and reorganization, audits on specific risk and control framework During 2019 operational risk was at the to provide reasonable assurance that key elements of the existing risk and control elements, including segregation of duties in forefront of our collective consciousness mitigating actions as defined during framework have been kept in place, i.e. no the primary processes and in the 1st, 2nd, as several strategic initiatives were rolled the assessment / response stages are significant changes have been applied to the and 3rd lines of defence. out in parallel, introducing interdepend- effective; cadence and structure of risk committees, encies and potential spill-over risks between 5. Key Risk Indicators provide insight in the risk identification, and risk assessment The absence of major operational issues processes, systems and the organisation. current state of risks, enabling active approach, or management reporting of key / incidents triggered by the change in monitoring and assurance that risks risk indicators, amongst other monitoring practices to date, proves that there has ATB is expected to operate in a turn-around remain within permissible limits; tools. Although the organizational changes not been a material impact on the de facto state in 2020 due to review of strategic 6. Corrective Action Plans which is a central occurred at all levels of risk governance, risk profile. The people, processes, infra- development of the bank and performed overview of remediation actions in ATB aimed at preserving the three lines of structure and systems proved to be fully organizational changes. To refect response to operational risks. defence model with checks and balances, capable to support ATB’s business continuity the potential challenges in the new and segregation of duties in place. To ensure in the changed Covid-19 environment. environment, for the year of 2020 ATB is Operational risk management is designed in this is achieved, ATB performs internal ready to accept some volatility in headcount accordance with the Three Lines of Defence and staff expertise as well as inefficiencies model. The oversight on operational risk in process setup and systems’ functionalities. is coordinated by the Operational Risk However, there is a longer term ambition to Committee (ORC). The permanent members achieve operational excellence, minimizing of the ORC consist of representatives from risks due to errors and/or suboptimal design. the Management Board, and all three lines ATB is exposed to potential losses caused by of defence. The ORC monitors and aims for a failures in information, system processing, timely update and consistency of the policies settlement of transactions and procedures. in the overall framework and publishes Financial statements updated documents on a central location Operational risk management entails accessible to all staff. Identification, Assessment, Response and Monitoring of operational risks. These Capital requirements for operational risk components form an iterative process. are calculated using the Basic Indicator The identification of new risks (or new Approach (BIA). developments in existing risks) leads to an assessment of the nature and signifi- At the end of 2019 ATB underwent a process cance of each risk. Based on the resulting of restructuring and reorganization, as classification of a risk, the appropriate a result of the implementation of ATB’s risk response can be determined. Timely enhanced strategic direction, and planned and effective implementation the actions changes to the operating model. This had a associated with the appropriate response is potentially significant impact on the Banks’ then monitored, alongside other indicators operational risk profile. Such an impact which can then lead to new identification was and is under constant assessment and of risks. To support and embed this cycle monitoring through Risk and Control Self-As- throughout the organisation, a set of sessments, regular transformation-specific methods and tools is employed. Such tools meetings, as well as in the Operational Risk include: Committee. 1. Risk and Control Self-Assessment; 2. Events Reporting (internal and external); 3. Scenario Analysis used to identify and assess risks that are less likely to occur, but still plausible in a stress situation;
94 95 Notes to the consolidated Notes to the consolidated financial statements financial statements at 31 December 2019 at 31 December 2019
C.9 Solvency risk Basel requirements • The Interest rate risk stress testing is For regulatory reporting ATB applies IFRS accounting principles and therefore amounts, ATB has implemented the standardized performed on a regular basis. ATB uses equity and results differ from the accounting principles as used in these financial statements. approach for credit risk capital adequacy 1.0% shock in interest rates for earnings The difference with the largest impact on equity is the revaluation of the other portfolio calculation and the Basic Indicator Approach measures and a standardized 2.0% shock of interest-bearing securities (€ 0.4 million) which under IFRS is classified as ‘At Fair Value for Operational Risk capital calculation. in interest rates for Economic Value through Other Comprehensive Income’ with revaluation in Equity. The total IFRS P&L ATB has also developed its Internal Capital measures as prescribed by EBA regulatory adjustments amount to negative € 0.4 million. Adequacy Assessment Process (ICAAP) and guidelines. The results of stress test Internal Liquidity Adequacy Assessment analysis are part of regular reporting to Process (ILAAP) frameworks to meet Basel ALCO and the regulator. 31/12/2019 31/12/2018 requirements, under which internal capital Capital information is calculated for concentration risk, country ATB on regular basis also performs stress Capital and solvency ratios are: risk, and interest rate risk in the banking tests for the market risk (trading and book. Reports based upon ICAAP and investment portfolio), credit portfolio and • Total capital ratio 19.8% 21.1% ILAAP are submitted to Dutch Central Bank operational risk. Outcomes are reported to • CET1 capital available (in € million) 168 174 annually. The reports are subject to the relevant internal bodies, the Management • Total capital available (in € million) 192 204 annual Supervisory Review and Evaluation Board and the regulator. Process (SREP). On 30th August 2019, ATB • CET1 capital ratio 17.4% 18.0% submitted its annual ICAAP and ILAAP to Dutch Central Bank in compliance with Basel SREP requirements *) C.10 Legal procedures requirements. The Bank is involved in a limited number • Total SREP capital ratio (TSCR) 17.9% 17.9% of court procedures. It is not possible to • Tier 1 capital ratio 15.9% 15.9% Stress test framework predict the outcome of these procedures, ATB uses scenario analysis and stress testing but it is not expected that these will have a • CET1 capital ratio 14.4% 14.4% Financial statements to measure sensitivity of its main risk material negative effect on ATB’s financial drivers: position. The capital ratios are within regulatory and internal requirements • The liquidity stress testing is performed and reported to the Management Board SREP requirements per 30 January 2020 *) on a daily basis. The assumptions are • Total SREP capital ratio (TSCR) 20.6% developed with quantitative analysis, • Tier 1 capital ratio 18.6% regulatory framework and, where appropriate, according to hypothetical • CET1 capital ratio 17.1% assumptions to identify the bank’s most important vulnerabilities under various *) New SREP requirements applied to RWA position per 31-12-2019. New capital requirements consist of a fixed minimum capital combined with a percentage based on RWA. Required capital ratios therefor stress events. vary with RWA values. For the new capital requirements a grace period was granted until 31-03-2020. • The solvency stress testing is performed Per end of March 2020 the subordinated loan of EUR 35.0 million was converted to equity (see note on a regular basis, with application of 14. Subordinated loans and Subsequent events) which ensured compliance to the new SREP capaital requirements accordingly. These requirements do not take into account the temporary relief granted by severe but plausible scenarios. These DNB related to the COVID-19 crisis. have been built in compliance with the stress testing guidelines issued by the European Banking Authority (EBA). The stress tests program ranges from simple sensitivity analysis on single portfolios to complex macroeconomic scenario stress testing on a company-wide basis.
96 97 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
31/12/2019 % 31/12/2018 % 1 31/12/2019 31/12/2018 By geographical concentration: Cash and balances with 210,244 138,867 CIS countries 85,715 81.3 25,783 30.4 central banks EUR utilising countries 5,477 5.2 50,934 60.0 Non-restricted demand deposits at Dutch Other European countries 7,530 7.1 8,148 9.6 201,571 129,647 Central Bank United States 6,721 6.4 - - Restricted demand deposits at 8,673 9,220 Total 105,443 100.0 84,865 100.0 Dutch Central Bank
Total 210,244 138,867
The mandatory cash reserve was recognized under the restricted demand deposits at 31/12/2019 31/12/2018 Dutch Central Bank. The average minimum reserve to be held at Dutch Central Bank for the month of December 2019 amounts to € 8.7 million (December 2018: € 9.2 million). By counterparty: Balances held with central banks are interest-bearing negative. Parent bank and related banks 402 389
Other banks 105,041 84,476 2 31/12/2019 31/12/2018 Loans and advances to banks 105,443 84,865 Total 105,443 84,865 By type:
Loans to banks 86,162 25,523 Financial statements Deposits - freely available 6,419 - Deposits - not freely available 11,161 30,592 Nostro current accounts 2,551 28,878 Impairments -850 -128 Total 105,443 84,865
Deposits - not freely available serve as collateral for liabilities arising from derivative transactions.
98 99 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
Total Stage 1 Stage 2 Stage 3 31/12/2019 Stage 1 Stage 2 Stage 3 31/12/2019
By credit rating class: Gross loans and advances AA+ - AA- 1,794 - - 1,794 61,293 45,000 - 106,293 to banks A+ - A- 12,104 - - 12,104 Movement in Impairments BBB+ - BBB- 4,578 - - 4,578 Balance at 1 January 2019 128 - - 128 BB+ - BB- 30,685 - - 30,685 New Assets originated or - - - - B+ - B- 12,132 45,000 - 57,132 purchased
Impairments -467 -383 - -850 Matured or repaid -148 - - -148 Total 60,826 44,617 - 105,443 Re-measurement 487 383 - 870
Impairments as at 31 December 467 383 - 850 2019
Net loans and advances to Total 60,826 44,617 - 105,443 Stage 1 Stage 2 Stage 3 31/12/2018 banks
By credit rating class:
AA+ - AA- 3,805 - - 3,805 Financial statements Stage 1 Stage 2 Stage 3 31/12/2018 A+ - A- 5,810 - - 5,810 BBB+ - BBB- 49,448 - - 49,448 Gross loans and advances BB+ - BB- 380 - - 380 84,993 - - 84,993 to banks B+ - B- 25,532 - - 25,532 NR 18 - - 18 Movement in Impairments Impairments -128 - - -128 Balance at 1 January 2018 91 18 - 109 New Assets originated or Total 84,865 - - 84,865 120 - - 120 purchased Matured or repaid -14 -29 - -43 ATB uses an internal rating system. Transfer to/from other stage (net) -11 11 - - Re-measurement -58 - - -58
Impairments as at 31 December 128 - - 128 2018
Net loans and advances to 84,865 - - 84,865 banks
100 101 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
3 31/12/2019 31/12/2018 31/12/2019 % 31/12/2018 % Loans and advances to customers 799,604 837,713 By sector and industry: By type: Shipping 319,315 40.0 265,626 31.7 Energy 161,161 20.2 182,130 21.7 Loans 378,797 445,194 Trading companies 118,617 14.8 182,184 21.7 Overdraft and current accounts 279,071 268,328 Industry and construction 116,274 14.5 116,210 13.9 Syndicated loans 138,510 119,988 Agriculture 65,503 8.2 66,827 8.0
Staff loans 9,964 9,742 Private persons 9,964 1.2 9,742 1.2 Others 8,770 1.1 14,994 1.8 Impairments -6,738 -5,539 Total 799,604 100.0 837,713 100.0 Total 799,604 837,713
ATB has indirect right for loans amounting to EUR 88 million due to securitization. The legal right lies with the securisation SPE.
31/12/2019 % 31/12/2018 % By geographical concentration: EUR utilising countries 188,213 23.7 213,536 25.5 Marshall Islands 153,015 19.1 130,475 15.6 Other European countries 145,126 18.1 184,954 22.1 Financial statements Singapore 85,732 10.7 37,273 4.4 Turkey 34,067 4.3 29,648 3.5 Other CIS countries 50,282 6.3 74,566 8.9 United States 57,012 7.1 65,987 7.9 Russia 28,263 3.5 29,179 3.5 Other countries 57,894 7.2 72,095 8.6 Total 799,604 100.0 837,713 100.0
Exposures in Other European countries mainly consist of exposures in Switzerland, Great Britain and Croatia. Exposures in Other countries mainly consist of exposures in Liberia, United Arab Emirates and Australia.
102 103 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
The table below is a breakdown of the carrying value of loans and advances to customers Total Stage 1 Stage 2 Stage 3 reported by type of collateral. If the collateral value is lower than the carrying value of 31/12/2019 the loan, the remaining part is classified as ‘Various unsecured’. The valuation methods of collateral are described in C.4.3 under credit risk. By credit rating class:
BBB+ - BBB- 26,352 - - 26,352 31/12/2019 % 31/12/2018 % BB+ - BB- 471,059 27,417 - 498,476 By type of collateral: B+ - B- 194,387 58,754 - 253,141 D+ - D- - - 18,409 18,409 Secured by real estate (inc. ships) 311,690 38.9 282,654 33.6 NR 9,964 - - 9,964 Secured by moveable goods 268,452 33.6 362,557 43.4 Impairments -3,572 -1,231 -1,935 -6,738 Partly secured by deposits 21,354 2.7 23,780 2.8 Total 698,190 84,940 16,474 799,604 Secured by bill of lading 13,459 1.7 22,012 2.6
Secured by guarantees 7,261 0.9 4,715 0.6
Total Various secured 47,760 6.0 3,217 0.4 Stage 1 Stage 2 Stage 3 31/12/2018 Various unsecured 129,628 16.2 138,778 16.6
Total 799,604 100.0 837,713 100.0 By credit rating class:
A+ - A- 12,003 - - 12,003 Financial statements BBB+ - BBB- 164,766 - - 164,766 BB+ - BB- 471,995 13,106 - 485,101 B+ - B- 164,035 - - 164,035 D+ - D- - - 7,605 7,605 NR 9,742 - - 9,742 Impairments -2,760 -19 -2,760 -5,539 Total 819,781 13,087 4,845 837,713
ATB uses an internal rating system.
104 105 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
Gross loans and advances Gross loans and advances Stage 1 Stage 2 Stage 3 31/12/2019 Stage 1 Stage 2 Stage 3 31/12/2018 to customers to customers
Movements in gross carrying amount Movements in gross carrying amount Balance at 1 January 2019 822,541 13,106 7,605 843,252 Balance at 1 January 2018 548,770 35,662 28,741 613,173 New financial assets originated 246,494 - - 246,494 New financial assets originated 236,425 - - 236,425 Additions and releases without transfer -278,770 1,945 -5,830 -282,655 Additions and releases without transfer 97,098 -82,308 -13,015 1,775 Transfer to Stage 2 -88,503 88,503 - - Transfer to Stage 2 -59,752 59,752 - - Transfer to Stage 3 - -17,383 17,383 - Amounts written off - - -8,121 -8,121 Amounts written off - - -749 -749 Balance at 31 December 2018 822,541 13,106 7,605 843,252 Balance at 31 December 2019 701,762 86,171 18,409 806,342
Stage 1 Stage 2 Stage 3 31/12/2018 Stage 1 Stage 2 Stage 3 31/12/2019
Gross loans and advances 822,541 13,106 7,605 843,252 Gross loans and advances to customers 701,762 86,171 18,409 806,342 to customers Movement in allowance for Impairments Financial statements Movement in allowance for Impairments Balance at 1 January 2018 1,172 24 20,505 21,701 Balance at 1 January 2019 2,760 19 2,760 5,539 New Assets originated or purchased 1,575 - - 1,575 New Assets originated or purchased 2,701 - - 2,701 Matured or repaid -442 -15 -7,162 -7,619 Matured or repaid -1,118 -275 -584 -1,977 Transfer to/from other stage (net) -2 2 - - Transfer to/from other stage (net) -546 181 365 - Re-measurement 407 7 -4,251 -3,837 Re-measurement -225 1,306 3,579 4,660 FX impact 50 1 1,789 1,840 FX impact - - -79 -79 Amounts written off - - -8,121 -8,121 Amounts recovered - - -3,357 -3,357 Impairments at 31 December 2018 2,760 19 2,760 5,539 Amounts written off - - -749 -749 Net loans and advances to customers 819,781 13,087 4,845 837,713 Impairments at 31 December 2019 3,572 1,231 1,935 6,738 Net loans and advances to customers 698,190 84,940 16,474 799,604 The bank closely monitors collateral held for financial assets considered to be credit-im- paired, as it becomes more likely that ATB will have to exercise a collateral claim. The stage 3 provisioned loan is fully secured via an existing Borrowing Base (BB) collateral (valued at 50% of current ascribed Borrowing Base value); and a guarantee from parent company. Borrowing Base collateral means that the lenders have a pledge over the receivables and stock which are part of the Borrowing Base. The valuation of this collateral is at 50% of the underlying pledged receivables and stock.
For loans of which ATB has received cash collateral, ATB has not recognised a loss allowance. The amount of cash collateral is deducted from the gross loan amount of the customer in the expected credit loss calculation. The total amount of cash collateral amounts to € 10,7 million, which related to one client.
106 107 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
Loans to Managing Board in 2019 31/12/2019 % 31/12/2018 %
By geographical concentration: at 31 December Repaid/(Issued) Interest Term Collateral Ireland 50,086 19.6 50,013 16.3 C. Antoniou * 8,628 -239 2.917% 1 Pledge of shares Spain 44,983 17.7 44,974 14.7 H.P.M.G. Steeghs 204 6 2.917% 2 Pledge of shares Netherlands 41,294 16.3 66,979 22.0 P.J. Ullmann 204 6 2.917% 2 Pledge of shares Italy 35,036 13.8 45,192 14.7 Total 9,036 -227 Portugal 31,160 12.3 31,585 10.3 * Mr Antoniou stepped down as CEO as per 1st December 2019. Slovenia 20,952 8.3 21,871 7.1 The loans to the Management Board will be settled with the ESPP liability within two months after approval of the Annual Report of 2019. France 20,090 7.9 20,035 6.5
Germany 10,329 4.1 10,526 3.4
Loans to Managing Board in 2018 Belgium - - 15,304 5.0
Total 253,930 100.0 306,479 100.0 at 31 December Repaid/(Issued) Interest Term Collateral
C. Antoniou 8,388 2 2.917% 3 Pledge of shares Movements in the interest-bearing securitites were as follows: H.P.M.G. Steeghs 210 2 2.917% 3 Pledge of shares 2019 2018 Financial statements P.J. Ullmann 210 2 2.917% 3 Pledge of shares Balance at 1 January 306,479 226,966 Total 8,808 6 Purchases 20,131 221,550 No loans and advances are outstanding to members of the Supervisory Board (2018: Nil). Redemptions -70,000 -45,000 Sales (including amortisations) - -93,208 Amortisation premium and discount -2,772 -3,564 4 31/12/2019 31/12/2018 Releases/remeasurements and imparments 92 -265 Interest-bearing securities 253,930 306,479 Balance at 31 December 253,930 306,479
Interest-bearing debt securities represent listed debt instruments, issued by: Interest bearing securities totally amounting to € 120.0 million are not freely available as they are pledged as collateral in the context of Repo transactions (2018: € 26.4 million). 31/12/2019 31/12/2018 In order to adhere to the IRRBB limits in 2018, a number of interest-bearing securities were sold or not replaced during these years. Governments 254,103 296,744
Banks and financial institutions - 10,000
Impairments -173 -265
Total debt securities 253,930 306,479
108 109 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
Total Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 31/12/2019 31/12/2019
Gross Interest-bearing AAA+ - AAA- 51,627 - - 51,627 254,103 - - 254,103 securities AA+ - AA- 20,100 - - 20,100 Movement in allowance for ECL A+ - A- 116,094 - - 116,094 Balance at 1 January 2019 265 - - 265 BBB+ - BBB- 66,282 - - 66,282 New Assets originated or purchased 8 - - 8 Impairments -173 - - -173 Matured or repaid -3 - - -3 Total 253,930 - - 253,930 Re-measurement -97 - - -97 Impairments at 31 December 2019 173 - - 173 Net Interest-bearing securities 253,930 - - 253,930 Total Stage 1 Stage 2 Stage 3 31/12/2018
Stage 1 Stage 2 Stage 3 31/12/2018 By credit rating class:
AA+ - AA- 112,866 - - 112,866 Gross Interest-bearing A+ - A- 71,935 - - 71,935 306,744 - - 306,744 securities
BBB+ - BBB- 121,943 - - 121,943 Financial statements Movement in allowance for ECL Impairments -265 - - -265 Balance at 1 January 2018 148 - - 148 Total 306,479 - - 306,479 New Assets originated or purchased 177 - - 177 ATB uses an internal rating system. Matured or repaid -53 - - -53 Re-measurement -7 - - -7 Impairments at 31 December 2018 265 - - 265 Net Interest-bearing securities 306,479 - - 306,479
110 111 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s) 5 2019 2018 7 31/12/2019 31/12/2018 Shares and other non-interest- 198 194 Property and equipment 1,850 2,075 bearing securities
Movements in property and equipment were as follows: The movements in Shares and other non-interest-bearing securities were as follows: Leasehold Computer Other Total 2019 Total 2018 2019 2018 improve- equipment ment Balance at 1 January 194 240 Balance at 1 January 1,121 458 496 2,075 1,106 Sales - -30 Additions - - 132 132 1,328 FX impact 4 -16 Disposals (net) - - - - -32 Balance at 31 December 198 194 Depreciation -123 -111 -123 -357 -327
Shares and other non-interest-bearing securities consist of unlisted shares. Balance at 31 December 998 347 505 1,850 2,075
• This balance consists of: Gross carrying amount 1,227 560 781 2,568 2,437 • 2 (2018: 2) shares of Swift (Society for Worldwide Interbank Financial Telecommunication); Accumulated -229 -213 -276 -718 -362 • 10,918 (2018: 10,918) shares of Stemcor Global Holdings Ltd. (representing 1.1% of the voting depreciation power). Balance at 31 December 998 347 505 1,850 2,075
The fair value equals the book value. In 2018 the additions in property and equipment mainly relate to the relocation of our new office at the World Trade Center building. This relocation was completed in January 2018. Financial statements 6 2019 2018 Intangible assets 5,849 11,136
Movements in intangible assets were as follows:
2019 2018
Balance at 1 January 11,136 8,747
Additions 1,380 5,105
Depreciation -2,887 -2,716
Impairments -3,780 -
Balance at 31 December 5,849 11,136
Gross carrying amount 13,211 19,876
Accumulated depreciation -7,362 -8,740
Balance at 31 December 5,849 11,136
Intangible assets refer to capitalized software expenses. Investment mainly consists of the cost of banking software. In 2019 the impairment charge mainly relates to Core banking software that will not be used in the future due to the reassessment of ATB’s strategy. The total gross amount of the impaired software amounts to € 8.035 thousand.
112 113 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
8 31/12/2019 31/12/2018 10 31/12/2019 31/12/2018 Prepayments and accrued income 12,086 21,021 Amounts due to banks 161,578 80,539
Prepayments and accrued income can be specified as follows: Amounts due to banks can be specified as follows:
Interest receivable By type: Repurchase agreements 116,301 27,018 • Loans and advances to customers 4,117 4,750 Syndicated loan 8,905 26,212 • Interest-bearing securities 1,488 1,942 Current accounts 5,205 268 • Banks 729 479 Deposits 31,167 13,106 • Related group companies 14 29 Margin calls - 13,935 • Parent bank and related banks - 362
Prepayments 5,738 7,404 Total 161,578 80,539
Current corporate income tax - 6,055 In 2019 ATB entered into a syndicated loan agreement being led by Alfa Bank and amounting to $ 9 million with an interest rate of 4.6%. This facility is divided into 1 repayment tranche Total 12,086 21,021 of 9 months.
The current corporate income tax of € 6 million as per 31/12/2018 is finally asessed by the The loan is used for corporate funding purposes, including commodity financing of trade Dutch Tax Authorities and was received early 2019. contracts for ATB’s clients related to deliveries of goods and equipment. Alfa Bank is Financial statements responsible as the mandated lead arranger, bookrunner, documentation agent and payment agent. FC Otkritie Bank PJSC is participating as a mandated lead arranger and Expobank LLC is participating as a lead arranger.
9 31/12/2019 31/12/2018 In 2019, ATB entered into several short term repurchase agreements with different maturity dates but maturing before 28 February 2020. The decrease in Deposits and Margin calls is Other assets 4,315 19,951 mainly due to less placements by Alfa Bank.
Other assets consist of € nil million for Cross Currency Swaps (2018 € 15.0 million) € 3.2 31/12/2019 % 31/12/2018 % million of FX contracts for hedging purposes (2018: € 3.9 million) and € 1.1 million (2018: € 0.9 million) of Embedded derivatives related to specific loan features. The swaps and FX By geographical concentration: contracts are mainly committed with large European financial institutions or with Alfa-Bank. United States 75,783 46.9 16,243 20.2
EUR utilising countries 40,812 25.3 10,784 13.4
Russia 31,167 19.3 53,254 66.1
Other CIS countries 20 - 258 0.3
Other countries 13,796 8.5 - -
Total 161,578 100.0 80,539 100.0
114 115 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
By counterparty: 12 31/12/2019 31/12/2018
Parent bank and related banks 22,275 35,842 Accruals and deferred income 9,613 13,886
Other banks 139,303 44,697 Accruals and deferred income can be specified as follows: Total 161,578 80,539 Interest payable • Parent bank and related banks 69 462
11 31/12/2019 31/12/2018 • Related group companies 284 280 • Banks 607 961 Funds entrusted 993,388 1,074,913 • Customers 322 295 Dutch Value Added Tax 139 93 Funds entrusted can be specified as follows: Wage Tax & Social security 769 963 premiums to be paid 31/12/2019 % 31/12/2018 % Other accruals 7,423 10,832 By type: Total 9,613 13,886 Retail accounts Other accruals mainly comprise of staff expenses to be paid (holidays, severance) and • Savings accounts 342,156 34.4 349,842 32.5 other expenses to be paid (accounts payable, expense payable and other costs to be paid). Included in the other accruals is a provision for restructuring amounting to € 3.9 • Savings deposits 542,087 54.6 589,112 54.8 million. This restructuring provision consists of future payments relating to redundancy pay and other costs directly attributable to the reorganization program. These expenses
Corporate accounts are included when a redundancy scheme has been drawn up and communicated to Financial statements stakeholders. The expected outfow of funds will occur in 2020. • Current accounts 84,125 8.5 124,280 11.6
• Deposit accounts pledged to ATB 15,634 1.6 4,519 0.4 31/12/2019 • Fixed deposit accounts 9,386 0.9 7,160 0.7 Movement in provision for restructuring Total 993,388 100,0 1,074,913 100.0 Balance at 1 January 2019 -
Addition 3,889
31/12/2019 31/12/2018 Releases -
By counterparty: Total 3,889
Related parties 5,409 31,532
Other customers 987,979 1,043,381 13 31/12/2019 31/12/2018 Total 993,388 1,074,913 Other liabilities 22,217 35,678
Other liabilities consist of € 4.8 million (2018: € 16.8 million) of Cross Currency Swaps, € 5.1 million (2018: € 5.7 million) of FX contracts for hedging purposes and € 12.3 million related to the cash settled Employee Share Purchase Plan (2018: € 13.3 million).
116 117 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
Employee Share Purchase Plan Movement of shares aquired by Movement 01/01/2019 31/12/2019 In 2017 ATB implemented a cash settled Employee Share Purchase Plan (ESPP) covering the the Managing Board Members 2019 period 2017-2020. Through this plan and during this period a selective number of employees is offered to invest in the bank. These employees can buy shares of a company (ATB ESPP B.V.) C. Antoniou * 44,290 - 44,290 that holds a maximum of 9.9% shares in Amsterdam Trade Bank N.V. To this end 73,078 shares H.P.M.G. Steeghs 1,250 - 1,250 of Amsterdam Trade Bank N.V. have been issued in 2017 against a total price of € 14,939,185. P.J. Ullmann 1,250 - 1,250
The ESPP aims to build a strong alignment between key staff and the bank in order to create * Mr Antoniou stepped down as CEO as per 1st December 2019. His shares will be sold in a partnership which reinforces joint goals between the bank and these employees. The mid 2020. selected group of employees includes the Management Board members. In order to finance the investment, the bank has offered all employees a loan to a maximum of 90% of the initial value of the shares that have been acquired by the employee. These loans are reported in note 3. Movement of shares aquired by Movement 01/01/2018 31/12/2018 The ESPP requires the employees to hold their shares for a period of at least four years or up the Managing Board Members 2018 until the moment their employment with Amsterdam Trade Bank N.V. will be terminated. In view of the four year holding period the acquisition price has a discount of 15% that will be C. Antoniou 44,290 - 44,290 amortized during the holding period. H.P.M.G. Steeghs 1,250 - 1,250 The fair value change is based on the positive/negative difference between the fair value of P.J. Ullmann 1,250 - 1,250 the underlying share and the exercise price. The visible intrinsic value of an ATB share with certain adjustments is considered as the proxy for the fair value. The fair value change of the employee share purchase plan as calculated for the year is recognized in full in the general and administrative expenses. Movement of shares aquired Movement Financial statements As per year-end 2019, out of the 73,078 shares, 51,499 (2018: 51,774) have been placed (through 01/01/2019 31/12/2019 by key staff 2019 ATB ESPP B.V.) with employees. The amortization of the discount and the fair value changes of the ESPP shares during the year have been included in the income statement. As this plan qualifies as a cash settled plan, the related shares and commitments are included as other Key staff 4,984 -275 4,709 liabilities in the statement of financial position. Movement 01/01/2018 31/12/2018 All loans with the management board members and other participants will be settled via the 2018 ESPP Plan in 2020 within 2 months after approval of the Annual report of 2019. Settlement will take place based on the value as of 31 December 2019. Key staff 3,873 1,111 4,984
The movement of -275 Shares consists of 2 good leavers, no new participants nor decrease of shares with existing participants.
118 119 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
14 31/12/2019 31/12/2018 16 31/12/2019 31/12/2018 106 60 Provisions Equity 171,617 182,225
Issued Capital Movement in allowance for Provisions Off Balance and Guarantees Authorized share capital 450,000 450,000 Stage 1 Stage 2 Stage 3 31/12/2019 Unissued share capital -344,592 -350,237
Balance at 1 January 2019 58 2 - 60 Issued share capital 105,408 99,763 New Assets originated or purchased 105 - - 105 Matured or repaid -47 -2 - -49 Number of authorized shares 3,000,000 3,000,000 Re-measurement -11 1 - -10 Impairments at 31 December 2019 105 1 - 106 Number of shares issued and fully paid 702,716 665,086
Par value per share in EURO's 150 150 Stage 1 Stage 2 Stage 3 31/12/2018
Balance at 1 January 2018 72 42 - 114
New Assets originated or purchased 59 6 - 65 2019 2018 Matured or repaid -64 -28 - -92 Movement in issued Number Amount Number Amount
Transfer to/from other stage (net) 22 -22 - - capital Financial statements Re-measurement -32 4 - -28 Issued share capital as 665,086 99,763 665,086 99,763 FX impact 1 - - 1 at 1 January Issue of shares (nominal Impairments at 31 December 2018 58 2 - 60 37,630 5,645 - - € 150) Issued share capital as at 702,716 105,408 665,086 99,763 31 December 15 31/12/2019 31/12/2018 During 2019, ATB received a loan on 27 November 2019 from Alfa Bank Russia of € 9.8 million Subordinated loans 35,000 35,000 which was converted into capital on 30 December 2019. With this capital injection, Alfa Bank Russia acquired 37,630 newly issued shares with a nominal amount of € 5.6 million. ATB has only one type of share and all shares have equal rights. The subordinated loans are held with associated companies and are subordinated in respect of other current and future liabilities of ATB.
The interest rate on subordinated loans is 4.5% (2018: 4.5%). Final maturity date is 28 April 2023. The annual interest reset date is 31 January. The interest expense during the year 2019 was € 1.6 million (2018: € 1.6 million).
The subordinated loan has been converted into equity in March 2020 by a board decision on date 30 March 2020 and after permission by the DNB at date 26 March 2020. Also refer to the subsequent events.
120 121 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
17 31/12/2019 31/12/2018 Reserves Share Retained Currency Undistributed Contingent liabilities 26,266 35,956 premium earnings translation result reserve These are irrevocable contingent liabilities pursuant to guarantees. Balance at 1 88,186 -5,862 - 138 January 2019 By product: Net result - - - -20,431 Guarantees issued 10,072 5,538 Net result - - - -20,431 Letters of credit 16,194 30,418 Appropriation of - 138 - -138 result Total 26,266 35,956
Issue of shares 4,178 By geographical concentration: Balance at 31 92,364 -5,724 - -20,431 December 2019 EUR utilising countries 8,641 11,614
CIS countries 4,245 8,630
Reserves China 11,932 - Share Retained Currency Undistributed premium earnings translation result Other European countries 448 11,116 reserve Other countries 1,000 4,596 Balance at 1 88,186 -43 -16,537 10,718 January 2018 Total 26,266 35,956 Financial statements
Net result - - - 138
Net result - - - 138 Other contingent liabilities During the past 6 years, ATB has increased its effort to implement a strong compliance Appropriation of - 10,718 - -10,718 result culture and organisation, processes and tooling.
Net result - -16,537 16,537 - As a result of this and also due to increased specific monitoring of its client files and business transactions, ATB identified and reported past unusual transactions to the Balance at 31 88,186 -5,862 - 138 December 2018 authorities.
ATB is being examined by the Fiod (Dutch Fiscal Intelligence and Investigation Department) Share premium for possible breaches by the bank in previous years regarding the Wwft (law against money This reserve includes amounts paid to ATB by shareholders above the nominal value of laundering and terrorist financing) specifically with respect to client due diligence and purchased shares. The addition to the share premium of € 4.2 million related to the share timely reporting of unusual transactions. It is unclear which specific consequences (if any) premium of the conversion of the received loan from Alfa Bank Russia of € 9.8 million. the examination may have. Possible measures may include a penalty payment or a fine, which would mean that a present obligation per 31 December 2019 could exist and that an Retained earnings outfow of resources may result as a consequence. This amount includes results from previous years kept in equity. The General Meeting of Shareholders held on 14 May 2019, decided to allocate the 2018 Management is not able to assess reliably if such penalty or fine might be the outcome of result of € 138 to Retained Earnings. this investigation and if so, what the possible timing, scope or amounts of any such fines, penalties and/or other outcome would be. Accordingly, no provision has been booked at 31 December 2019, neither was a provision recognised at 31 December 2018.
122 123 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
18 31/12/2019 31/12/2018 Related parties The consolidated statement of financial position and consolidated statement of income Irrevocable commitments 22,340 13,949 include the subsidiary Amsterdam Trade Capital Administration Corporation (Amsterdam) which is fully owned.
Irrevocable credit facilities comprise the total amount of commitments in respect to Transactions are at arm’s length basis, are based upon contractual arrangements and are undrawn irrevocable credit facilities. separately disclosed in the related notes of the balance sheet and the income statement. Amounts receivable or payable to related parties and income and expenses regarding related By geographical concentration: parties are disclosed in the notes to the financial statements.
EUR utilising countries 14,678 13,502 Related parties of ATB include, amongst others, its subsidiaries, associated companies within Alfa Group, key staff, Managing Board members and shareholders. Transactions Other European countries 7,662 447 between related parties mainly consist of forex transactions and financing activities. There Total 22,340 13,949 are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with related parties.
Liabilities pledged to ATB Related parties: Parent and related bank In line with ATB’s risk appetite, the liabilities as presented in the table below are subject This relates to ATB’s direct majority shareholder Alfa-Bank Russia and its related banks to pledge agreements. As a consequence hereof, these liabilities are not (freely) available within the Alfa Banking Group. for ATB’s banking activities. The table below shows the impact of these transactions on the During 2019 Alfa Bank Russia granted a loan of $ 11 million which was converted into capital. balance sheet of ATB. Related parties: Other group companies Other group companies included all group companies (including other minority shareholders), 31-12-2019 31-12-2018 exclusive of Parent and related banks, within the Alfa-Group and ATB ESPP B.V. and ATB Liabilities Liabilities Financial statements Shipping Finance I B.V.
Funds entrusted 15,634 4,519 For the financial year 2019 related parties mainly consist of: • Funds received through ATB Shipping Finance I B.V. These funds were disclosed under Total 15,634 4,519 Banks with expense disclosed under Interest expenses. In order to receive these funds the collateral of the shipping loan portfolio was transferred to ATB Shipping B.V. The related accrued interest which as of the pledge agreements is not included in this • Funds received from Banks within the Alfa-Bank group (disclosed under Banks) and funds table. received from shareholders (disclosed under Funds entrusted) with expense disclosed under Interest expenses. • Shares acquired by Management Board members and key staff are disclosed under Other liabilities. The related costs are disclosed under expenses. • In the notes on Results on financial transactions and Impairments of loans and advances to customers and shares other transactions with group companies are disclosed.
Rental commitments ATB has entered into rental agreements for its office premises and office equipment amounting to € 2.9 million (2018: € 12.5 million). The contract includes an option to terminate early after 5 years against additional costs.
Of this amount € 1.2 million is payable within 1 year (2018: € 1.6 million), an amount of € 1.6 million is payable between 1 and 5 years (2018: € 5.2 million) and € nil million is payable after five years (2018: € 5.6 million).
124 125 Notes to the consolidated statement of financial position at 31 December 2019 (in 1,000 euro’s) Fair value of financial assets and liabilities The following table presents the fair value of ATB’s financial assets and liabilities. Certain balance sheet items are not included in the table, as they do not meet the definition of a financial instrument. The aggregation of the fair value presented below does not represent, and should not be construed as representing, the underlying value of ATB. Carrying value is presented without accrued interest. Fair value does include accrued interest.
Fair value Carrying value
Financial assets 2019 2018 2019 2018 Cash and balances with 210,244 138,867 210,244 138,867 central banks Loans and advances to 106,881 84,881 105,443 84,865 banks Loans and advances to 831,459 847,749 799,604 837,713 customers Interest-bearing 257,378 309,382 253,930 306,479 securities Shares and other non-interest-bearing 198 200 198 194 securities
Prepayments and 12,086 21,021 12,086 21,021 accrued income
Other assets 4,315 19,951 4,315 19,951
Financial assets 1,422,561 1,422,051 1,385,820 1,409,090
Financial liabilities Amounts due to banks 161,854 80,863 161,578 80,539
Funds entrusted 995,952 1,078,053 993,388 1,074,913
Accruals and deferred 9,613 17,436 9,613 13,886 income Provisions and other 22,323 35,738 22,323 35,738 liabilities
Subordinated liabilities 35,638 35,324 35,000 35,000
Financial liabilities 1,225,380 1,247,414 1,221,902 1,240,076
126 127 Notes to the consolidated statement of income at 31 December 2019 (in 1,000 euro’s)
19 2019 2018 Interest income 52,900 44,488
Interest income comprise interest from:
Loans and advances to customers 50,347 42,462
Loans and advances to banks 2,004 1,319
Interest-bearing securities 549 707
Total 52,900 44,488
A amount of EUR 3,7 million (2018: EUR 3,3 million) included in the interest income is Notes to related to arrangement fees received from customers. the Consolidated 2019 % 2018 % By geographical concentration:
EUR utilising countries 16,528 31.2 4,723 10.6 Statement of income Other European countries 13,113 24.8 18,702 42.0 Financial statements Marshall Islands 10,553 19.9 7,745 17.4
United States 4,285 8.1 2,968 6.7
CIS countries 2,534 4.8 5,186 11.7
Singapore 1,676 3.2 618 1.4
Other countries 4,211 8.0 4,546 10.2
Total 52,900 100.0 44,488 100.0
2019 2018
Interest income from parent and 436 1,401 related banks
128 129 Notes to the consolidated Notes to the consolidated statement of income statement of income at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
20 2019 2018 21 2019 2018 Interest expense 24,232 21,073 Net commission income 1,085 2,462
Interest expense comprise interest from: net commission income consists of:
Interest expense FX swaps 10,264 10,880 2019 % 2018 %
Funds entrusted 6,577 7,107 Trade finance fees 1,046 57.0 1,434 54.0
Other banks 5,095 672 Money transfer fees 118 6.4 114 4.3
Subordinated loans 1,597 1,597 Other fees 671 36.6 1,105 41.7
Central banks 699 817 Commission income 1,835 100.0 2,653 100.0
Total 24,232 21,073 Commission expense 750 191
Total 1,085 2,462 The increase in Other banks is mainly due to Njord funding of € 1.9 million. Interest income with negative interest rate are classified as interest expense amounting to EUR 0,7 million.
22 2019 2018 2019 % 2018 % Result on financial transactions -5,574 4,898 By geographical concentration: Financial statements EUR utilising countries 18,669 7 7.0 19,916 94.5 Result on financial transactions consist of:
Other European countries 3,879 16.0 492 2.3 Unrealized result on loan participations 56 1,013 Russia 1,469 6.1 608 2.9 Sale of shares 11 6 Other countries 215 0.9 38 0.2 Sale of non-core loans and advances -11 5,291 Other CIS countries - - 19 0.1 Other foreign exchange results due to -1,093 -975 Total 24,232 100.0 21,073 100,0 FX swaps Foreign exchange results on client -259 36 transactions
Result on cross currency swaps -4,278 -1,392 2019 2018
Interest expense from parent and Sale of interest-bearing securities - 919 371 1,739 related banks Total -5,574 4,898
130 131 Notes to the consolidated Notes to the consolidated statement of income statement of income at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
23 2019 2018 24 2019 2018 Other income 64 -1,153 Staff expenses 23,753 21,050
Other incomes consist of: Staff expenses comprise:
Disposal of subsidiary - -1,240 Wages and salaries 14,279 14,007
Other 64 87 Social cost 1,501 1,471
Total 64 -1,153 Pension cost 1,787 1,376
Other staff cost 6,186 4,196 Disposal of subsidiary Total 23,753 21,050 In February 2018, the ATB completed the sale and disposal of its subsidiary ATB Leasing. The sale agreement consists of sale of assets and transfer of shares. As the assets were sold in 2017, no operational income from ATB is included in the ATB’s Statement of Income At 31 December 2019, the total number of employees expressed in full-time equivalents for 2018. ATBL was identified as a non-core (but going concern) business in the course of was 116 (2018: 129). reshaping of ATB’s business strategy in 2015, the whole transaction result a negative result The staff expenses include an amount of € 3.9 million regarding a provision for of € 1.2 million, which is mainly due to the exchange rate impact. restructuring costs. The restructuring provision consists of future payments relating to redundancy pay and other costs directly attributable to the reorganization program.
Remuneration of Supervisory Board and Management Board Result on sale ATB leasing Result The remuneration of the Supervisory Board totalled € 0.5 million (2018: € 0.3 million) and (in EUR million) ATBL 2018 contains the paid remuneration in 2019 and 2018 respectively. Current members of the
Supervisory Board employed within the Group are not remunerated. Financial statements Net equity value ATBL 1.4 Remuneration of the Management Board includes pension and other benefits paid by ATB totalled € 1.9 million (2018: € 1.7 million) and refects the total remuneration of current Current account FX-transactions -2.2 and former members of the Management Board. ATBL receivable on ATB relating to CCZ loan transfer -0.4 (USD 1.0 million) Total -1.2 Supervisory Board 2019 2018 R.V. Emerson 150 150 H.C.M. van Damme 70 70 D. Vovk 76 70 R. Meijer (as of September 1, 2018) 210 23 Valksman, O. 12 70 Total remuneration 518 383
132 133 Notes to the consolidated Notes to the consolidated statement of income statement of income at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
Remuneration Management Board in 2019 Remuneration Management Board in 2018
Salary Pension Variable Other Total Salary Pension Variable Other Total cost pay compen- remu- cost pay compen- remu- sation neration sation neration
C. Antoniou * 758 26 31 103 918 C. Antoniou 650 21 6 41 718
H.P.M.G. Steeghs 432 29 - 27 488 H.P.M.G. Steeghs 432 32 6 27 497
P.J. Ullmann 408 29 6 42 485 P.J. Ullmann 408 28 6 53 495
T. Smeets 41 2 - 6 49 Total 1,490 81 18 121 1,710 (as of September 1, 2019)
Total 1,639 59 37 178 1,940
* Mr Antoniou stepped down as CEO as per 1st December 2019. 25 2019 2018 As of 2016 the members of the Management Board invested indirectly in ATB via the ESPP General and administrative Plan. The program will end in 2020. The ESPP will be settled on the value as included in expenses 13,063 13,465 the Annual Accounts, as adopted by the general meeting of shareholders.
For the loan related to the investment we refer to disclosure under loans and advances to General and administrative expenses comprise: customers and for the number of shares we refer to the disclosures under Other Liabilities. In the table below the fair value of the investment made by the Management Board members is represented. Professional services 5,400 4,974 Financial statements ICT / communication 5,158 4,837
Credit Insurance 1,163 1,628 Fair value changes of ESPP investments made by Managing Board Housing 1,303 747 2019 2018 Public relations 250 246 C. Antoniou -1,277 251 ESPP Expenses -662 877 H.P.M.G. Steeghs -35 7 Recovered VAT -1,618 -1,998 P.J. Ullmann -35 7 Other cost 2,069 2,154 Total -1,347 265 Total 13,063 13,465 For the Management Board members the totals of their total remuneration plus the fair value changes of the investments made by the Management Board members are for Mr. C. Antoniou € 0.3 million negative (2018: € 0.9 million), for Mr. H.P.M.G. Steeghs € 0.5 million Included in the general and administrative expenses are the cancellation costs related (2018: € 0.5 million) and for Mr. P.J. Ullmann € 0.5 million (2018: € 0.5 million). to the ending of the securitization structure as mentioned in paragraph B.4.2. The cancellation costs amounting to € 0.7 million are in the professional services and a total amount of € 0.5 million is included in the fees and commission expenses in note 21.
The ESPP expenses relate the result of difference between the fair value of the underlying share and the exercise price, which resulted in a positive result of € 0.1 million (2018: negative result € 0.3 million and a correction of the discount amortisation over prior years of € 0.6 million.
The other cost include € 1.2 million (2018: € 1.1 million) mainly related to external suppliers providing market information.
134 135 Notes to the consolidated Notes to the consolidated statement of income statement of income at 31 December 2019 (in 1,000 euro’s) at 31 December 2019 (in 1,000 euro’s)
27 2019 2018 External auditor's cost: Resolution charge 1,488 1,355 EY Accountants 2019 Other EY Total EY LLP
Audit services 930 - 930 Resolution charge consists of two levies € 1.3 million (2018: € 1.3 million) regarding the Deposit Guarantee Fund and € 0.2 million (2018: € 0.1 million) regarding the Single Resolution Fund. Audit-related services - - -
Tax advice services - - - 28 2019 2018 Other non-audit services - - - Impairments of financial -654 -9,429 Total 930 - 930 instruments
2018 EY Accountants Other EY Total EY Charge relating to loans and advances 4,004 1,575
Audit services 980 - 980 Release relating to loans and advances -1,977 -11,085
Audit-related services - - - Recoveries relating to written off loans -3,357 - Tax advice services - - - Charge relating to banks 870 120 Other non-audit services - - - Release relating to banks -148 -101 Total 980 - 980 Financial statements Charge relating to interest-bearing 8 177 The audit fees relate to the financial year to which the financial statements pertain, securities regardless of whether the external auditor and the audit firm performed the work during Release relating to interest-bearing the financial year including the performance of other audits at request of the group auditors -100 -60 securities of Alfa Bank companies. The decrease in audit expenses in 2019 is mainly due to less engagements performed for interim prudential reporting and incidental procedures in 2018 Charge relating to off-balance items 105 65 following implementation of new accounting standards early 2018. Release relating to off-balance items -59 -120
Total -654 -9,429 26 2019 2018 The recovery of € 3.3 million is related to an old non-core portfolio exposure. Depreciation and impairments 7,024 3,043 of intangible assets and property and equipment
Depreciation comprise the depreciation cost of:
Depreciation of intangible assets 2,887 2,716
Depreciation of property and equipment 357 327
Impairment on intangible assets 3,780 -
Total 7,024 3,043
The impairment charge on intangible assets in 2019 consists of an additional depreciation on banking software that is no longer in use as result of the restructuring.
136 137 Notes to the consolidated statement of income at 31 December 2019 (in 1,000 euro’s)
29 2019 2018 Income tax - -
The statutory applicable corporate tax rate for 2019 in the Netherlands is 25% (2018: 25%). Taxes are calculated on the result before taxation, based on the applicable profit tax rate.
During the financial year 2019 ATB realised operational losses leading to tax losses. For tax accounting purposes tax losses are accrued only for the amount at which tax losses can be offset against past taxable profits. At year-end 2019 no amount has been accrued as current tax receivable.
No deferred tax assets that depend on further probability of ATB are taken into account due to the uncertainty on sufficient taxable profits during the taxable period that these losses can be offset. The tax receivable on the negative result of the financial year 2019 is added to the non recognised future tax assets (carry forward) and therefore do not lead to a tax position in the Statement of financial position For 2019 this resulted in an overall effective tax rate of 0.0% (2018: 0.0%). Company On 29 April 2020 ATB received the final report from Dutch Tax Authorities covering the 2013-2015 tax audit on Dutch corporate income tax and value added tax. The final report of the tax authorities does not lead to any adjustments for years under review or for the tax position in this annual report. Financial Statements The differences between the statutory applicable corporate tax rate and effective tax rate can be explained as follows: 2019 2018 2019 Operating result before tax -20,431 138
Income tax
Theoretical tax charge at the statutory -5,108 35 rate of 25%
Non recognised future tax assets 5,108 -35
Total - -
At year-end 2019 an amount of € 284 million (2018: € 270 million) of losses available for carry forward have not been included in the measurement of deferred tax assets.
138 139 Company statement of Company statement financial position of income at 31 December before appropriation of result
(in 1,000 euro’s) 31-12-2019 31-12-2018 (in 1,000 euro’s) 2019 2018 Assets Note* Income from operating Note* Cash and balances with central banks 210,244 138,867 activities Loans and advances to banks 30 99,024 84,865 Interest income 39 52,900 44,488 Loans and advances to customers 31 803,144 841,251 Interest expense 24,232 21,073 Interest-bearing securities 253,930 306,479 Net interest income 28,668 23,415 Shares and other non-interest-bearing securities 198 194 Commission income 1,835 2,653 Participating interests 32 - - Commission expense 750 191 Intangible assets 5,849 11,136 Net commission income 40 1,085 2,462 Property and equipment 33 1,850 2,075 Result on financial transactions 41 -5,574 4,898 Prepayments and accrued income 34 18,502 21,021 Other income 42 64 -1,153 Other assets 35 4,315 19,951 Total income from operating 24,243 29,622 activities Total assets 1,397,056 1,425,839 Expenses Liabilities and equity Staff expenses 43 23,753 21,050 Amounts due to banks 161,578 80,539 General and administrative expenses 44 13,063 13,465 Funds entrusted 36 993,388 1,074,913 Depreciation and impairments of 45 7,024 3,043 Accruals and deferred income 37 9,613 13,886 intangible assets and property and
equipment Financial statements Other liabilities 22,217 35,678 Provisions 38 3,643 3,598 Resolution charge 1,488 1,355 Subordinated loan 35,000 35,000 Impairments of finanicial instruments 46 -654 -9,429 Total liabilities 1,225,439 1,243,614 Total expenses 44,674 29,484
Equity: Operating result before tax -20,431 138 • Issued share capital 105,408 99,763 Income tax 47 - - • Share premium reserve 92,364 88,186 Net result -20,431 138 • Retained earnings -5,724 -5,862 • Undistributed result -20,431 138 Total equity 171,617 182,225 Total liabilities and equity 1,397,056 1,425,839
Contingent liabilities 26,266 35,956 Irrevocable commitments 22,340 13,949
*The number beside each item refers to the relevant note * The number beside each item refers to the relevant note
140 141 Notes to the company Notes to the company statement of financial statement of financial position position General Subsidiaries Structured entities The company financial statements of ATCAC (Amsterdam Trade Capital Admin- A structured entity is an entity which Amsterdam Trade Bank N.V. (ATB) have been istration Corporation B.V.) a 100% owned is structured such that voting rights or prepared in conformity with section 14, Subsidiary, of which ATB has all voting comparable rights do not constitute the “Provisions for banks”, of Book 2, Title 9 of rights. dominant factor in determining who the Netherlands Civil Code with the allowed exercises control over the entity. ATB uses a application of the accounting policies Investments and subsidiaries are valued structured entity in order to securitize part (DGAAP) as also applied in the consolidated using the net asset value method. A of its loan portfolios as part of its liquidity annual accounts. The principles of valuation provision is formed if and to the extent that management. and determination of results stated in the company stands surety for all or part of connection with the consolidated statement the debt of the participating interest or if it ATB consolidates the own-asset securiti- of financial position and consolidated has a constructive obligation to enable the zation vehicle because it did not transfer statement of income are also applied to the participating interest to repay its debts. all the risks and rewards in such a way that corporate statement of financial position and the assets qualify for derecognition. As a corporate statement of income. In February 2018 the sale of ATB Leasing consequence thereof ATB remains exposed LLC, a formerly 100% owned subsidiary for to the fuctuating income in respect of this When the amounts included in the company leasing activities in Moscow, was completed. entity. statement of financial position or the The sale of ATB leasing consisted of the Financial statements statement of income are equal to the sale of all assets followed by the sale and amounts as included in the consolidated transfer of the shares. As there were no Other liabilities statement of financial position or statement economic activities in ATB Leasing during Given its characteristics and based on Dutch of income, no separate notes are included the period of 1st January 2018 and the Accounting Standard 275, the ESPP has at company level. We refer to the notes actual transfer of the sale, no operational been recognised as a cash settled plan in as included in the consolidated financial income has been recognised for this period. the company financial statements. At year statements. end 2019 ATB kept 21.654 own shares (2018: 21.304) as part of the ESPP. Foreign currencies Translation differences on loans granted Equity in foreign currencies from ATB to Group ATB has only one type of share and all shares companies, which do not qualify as part of have equal rights. the net investment in foreign investment, are recognised in the statement of income.
142 143 Notes to the company statement Notes to the company statement of financial position of financial position (in 1,000 euro’s) (in 1,000 euro’s)
30 31/12/2019 31/12/2018 Total Stage 1 Stage 2 Stage 3 Loans and advances to banks 99,024 84,865 31/12/2019
By credit rating class: Loans and advances to banks can be classified as follows: AA+ - AA- 1,794 - - 1,794 By type: BBB+ - BBB- 4,578 - - 4,578 Letter of Credit-loans 86,162 25,523 BB+ - BB- 30,683 - - 30,683 Deposits - not freely available 11,161 30,592 B+ - B- 12,132 45,000 - 57,132 Nostro current accounts 2,551 28,878 Impairments -467 -383 - -850 Impairments -850 -128 Total 54,407 44,617 - 99,024 Total 99,024 84,865
Deposits - not freely available serve as collateral for liabilities arising from derivative Total transactions Stage 1 Stage 2 Stage 3 31/12/2018
31/12/2019 % 31/12/2018 % AA+ - AA- 3,805 - - 3,805
By geographical concentration: A+ - A- 5,810 - - 5,810 BBB+ - BBB- 49,448 - - 49,448 CIS countries 85,715 86.6 25,429 30.0 BB+ - BB- 380 - - 380
EUR utilising countries 5,477 5.5 50,934 60.0 Financial statements B+ - B- 25,532 - - 25,532 Other European countries 7,530 7.6 8,148 9.6 NR 18 - - 18
United States 302 0.3 354 0.4 Impairments -128 - - -128 Total 84,865 - - 84,865 Total 99,024 100.0 84,865 100.0
ATB uses an internal rating system.
31/12/2019 31/12/2018
By counterparty:
Parent bank and related banks 402 389
Other banks 98,622 84,476
Total 99,024 84,865
144 145 Notes to the company statement Notes to the company statement of financial position of financial position (in 1,000 euro’s) (in 1,000 euro’s)
31 31/12/2019 31/12/2018 Stage 1 Stage 2 Stage 3 31/12/2019 Loans and advances to customers 803,144 841,251
Gross loans and advances to 54,874 45,000 - 99,874 Loans and advances to customers can be classified as follows: banks Movement in Impairments By type: Balance at 1 January 2019 128 - - 128 Loans 378,798 445,194 New Assets originated or purchased -148 - - -148 Overdraft and current accounts 282,610 271,866 Matured or repaid - - - - Transfer to/from other stage (net) - - - - Syndicated loans 138,510 119,988 Re-measurement 487 383 - 870 Staff loans 9,964 9,742 Impairments as at 31 December 2019 467 383 - 850 Impairments -6,738 -5,539 Net loans and advances to banks 54,407 44,617 - 99,024 Total 803,144 841,251
Stage 1 Stage 2 Stage 3 31/12/2018 31/12/2019 % 31/12/2018 %
By geographical concentration:
Gross loans and advances to Financial statements 84,993 - - 84,993 EUR utilising countries 188,215 23.3 213,536 25.4 banks Movement in Impairments Marshall Islands 153,015 19.1 130,475 15.5 Balance at 1 January 2018 91 18 - 109 Other European countries 145,126 18.1 184,954 22.0 New Assets originated or purchased 120 - - 120 Singapore 85,732 10.7 37,273 4.4 Matured or repaid -14 -29 - -43 Turkey 34,067 4.2 29,648 3.5 Transfer to/from other stage (net) -11 11 - - Re-measurement -58 - - -58 Other CIS countries 50,282 6.3 74,566 8.9 Impairments as at 31 December 2018 128 - - 128 United States 57,012 7.1 65,987 7.8 Net loans and advances to banks 84,865 - - 84,865 Russia 31,801 4.0 32,717 3.9
Other countries 57,894 7.2 72,095 8.6
Total 803,144 100.0 841,251 100.0
Exposures in Other European countries mainly consist of exposures in Switzerland, Great Britain and Croatia. Exposures in Other countries mainly consist of exposures in Liberia, United Arab Emirates and Australia.
146 147 Notes to the company statement Notes to the company statement of financial position of financial position (in 1,000 euro’s) (in 1,000 euro’s)
31/12/2019 % 31/12/2018 % Total Stage 1 Stage 2 Stage 3 31/12/2019 By sector and industry:
Shipping 319,316 39.7 265,626 31.6 By credit rating class:
Energy 161,161 20.1 182,131 21.7 BBB+ - BBB- 26,352 - - 26,352 BB+ - BB- 471,059 27,417 - 498,476 Trading companies 118,617 14.8 182,184 21.6 B+ - B- 194,387 58,754 - 253,141 Industry and construction 116,274 14.5 116,210 13.8 D+ - D- - - 18,409 18,409 Agriculture 65,503 8.2 66,827 7.9 NR 13,504 - - 13,504
Private persons 9,964 1.2 9,742 1.2 Impairments -3,572 -1,231 -1,935 -6,738 Total 701,730 84,940 16,474 803,144 Others 12,309 1.5 18,531 2.2
Total 803,144 100.0 841,251 100.0
ATB has indirect right for loans amounting to € 88 million due to securisation. The legal Total right lies with the securisation SPE. Stage 1 Stage 2 Stage 3 31/12/2018 The table below is a breakdown of the carrying value of loans and advances to customers reported by type of collateral. If the collateral value is lower than the carrying value of the loan, the remaining part is classified as ‘Various unsecured’. The valuation methods of A+ - A- 12,003 - - 12,003 collateral are described in C.4.3 under credit risk mitigations. BBB+ - BBB- 164,766 - - 164,766
BB+ - BB- 471,995 13,106 - 485,101 Financial statements 31/12/2019 % 31/12/2018 % B+ - B- 164,035 - - 164,035
By type of collateral: NR 13,280 - - 13,280 Impairments -2,760 -19 -2,760 -5,539 Secured by real estate (inc.ships) 311,690 38.8 282,654 33.6 Total 823,319 13,087 4,845 841,251 Secured by moveable goods 268,452 33.4 362,557 43.1 ATB uses an internal rating system Secured by deposits 21,354 2.7 23,780 2.8
Secured by bill of lading 13,459 1.7 22,012 2.6
Secured by guarantees 7,261 0.9 4,715 0.6
Various secured 47,760 5.9 3,217 0.4
Various unsecured 133,168 16.6 142,316 16.9
Total 803,144 100.0 841,251 100.00
148 149 Notes to the company statement Notes to the company statement of financial position of financial position (in 1,000 euro’s) (in 1,000 euro’s)
Stage 1 Stage 2 Stage 3 31/12/2019 Stage 1 Stage 2 Stage 3 31/12/2018
Gross loans and advances Gross loans and advances to customers to customers Movements in gross carrying amount Movements in gross carrying amount Balance at 1 January 2019 826,079 13,106 7,605 846,790 Balance at 1 January 2018 552,308 35,662 28,741 616,711 New financial assets originated 246,496 - - 246,496 New financial assets originated 236,425 - - 236,425 Additions and releases without transfer -278,769 1,945 -5,831 -282,655 Additions and releases without transfer 97,098 -82,308 -13,015 1,775 Transfer to Stage 1 - - - - Transfer to Stage 1 - - - - Transfer to Stage 2 -88,503 88,503 - - Transfer to Stage 2 -59,752 59,752 - - Transfer to Stage 3 - -17,383 17,383 - Transfer to Stage 3 - - - - Amounts written off - - -749 -749 Amounts written off - - -8,121 -8,121 Balance at 31 December 2019 705,303 86,171 18,408 809,882 Balance at 31 December 2018 826,079 13,106 7,605 846,790
Stage 1 Stage 2 Stage 3 31/12/2019 Stage 1 Stage 2 Stage 3 31/12/2018 Financial statements
Gross loans and advances Gross loans and advances 705,303 86,171 18,408 809,882 826,079 13,106 7,605 846,790 to customers to customers Movements in allowance for Impairments Movements in allowance for Impairments Balance at 1 January 2019 2,760 19 2,760 5,539 Balance at 1 January 2018 1,172 24 20,505 21,701 New Assets originated or purchased 2,701 - - 2,701 New Assets originated or purchased 1,575 - - 1,575 Matured or repaid -1,118 -275 -584 -1,977 Matured or repaid -442 -15 -7,162 -7,619 Transfer to/from other stage (net) -546 181 365 - Transfer to/from other stage (net) -2 2 - - Re-measurement -225 1,306 3,579 4,660 Re-measurement 407 7 -4,251 -3,837 FX impact - - -79 -79 FX impact 50 1 1,789 1,840 Amounts recovered - - -3,357 -3,357 Amounts written off - - -8,121 -8,121 Amounts written off - - -749 -749 Impairments at 31 December 2019 2,760 19 2,760 5,539 Impairments at 31 December 2019 3,572 1,231 1,935 6,738 Net loans and advances to customers 823,319 13,087 4,845 841,251 Net loans and advances to customers 701,731 84,940 16,473 803,144 The bank closely monitors collateral held for financial assets considered to be credit-impaired, as it becomes more likely that ATB will have to exercise a collateral claim. The stage 3 provisioned loan is fully secured via an existing Borrowing Base (BB) collateral (valued at 50% of current ascribed Borrowing Base value); and a guarantee from the shareholder of the borrower. Borrowing Base collateral means that the lenders have a pledge over the receivables and stock which are part of the Borrowing Base. The valuation of this collateral is at 50% of the underlying pledged receivables and stock
For loans of which ATB has received cash collateral, ATB has not recognised a loss allowance. The amount of cash collateral is deducted from the gross loan amount of the customer in the expected credit loss calculation. The total amount of cash collateral amounts to € 10.7 million, which related to one client.
150 151 Notes to the company statement Notes to the company statement of financial position of financial position (in 1,000 euro’s) (in 1,000 euro’s)
32 2019 2018 34 31/12/2019 31/12/2018 Participating interests - - Prepayments and accrued 18,502 21,021 income
Prepayments and accrued income can be specified as follows: Balance at 1 January - 15,889 Interest receivable Disposal of subsidiary - -15,889 • Loans and advances to customers 4,117 4,750
Balance at 31 December - - • Interest bearing securities 1,488 1,942 • Banks 729 479 • Related group companies 14 29 • Parent bank and related banks - 362 33 31/12/2019 31/12/2018 Prepayments 12,154 7,404 Property and equipment 1,850 2,075 Current corporate tax - 6,055 Total 18,502 21,021 Movements in property and equipment were as follows: The current corporate tax of € 6 million as per 31/12/2018 is finally assessed by the Dutch Leasehold Computer Other Total 2019 Total 2018 Tax authorities and was received early 2019. improve- equip- ment ment
Balance at 1 January 1,121 458 496 2,075 1,106 35 31/12/2019 31/12/2018 Financial statements Additions - - 132 132 1,328 4,315 19,951 Reclassification - - Other assets Disposals (net) - - Depreciation -123 -111 -123 -357 -327 Other assets consist of € nil million for Cross Currency Swaps (2018 € 15.0 million) € 3.2 million of FX contracts for hedging purposes (2018: € 3.9 million) and € 1.1 million (2018: € Impairments - - - - -32 0.9 million) of Embedded derivatives related to specific loan features. The swaps and FX contracts are mainly committed with large European financial institutions or with Alfa- Balance at 31 December 998 347 505 1,850 2,075 Bank.
Gross carrying amount 1,227 560 781 2,568 2,437 Accumulated -229 -213 -276 -718 -362 depreciation Balance at 31 December 998 347 505 1,850 2,075
In 2018 the additions in property and equipment mainly related to the relocation of our office to the World Trade building. This relocation was completed in January 2018.
152 153 Notes to the company statement Notes to the company statement of financial position of financial position (in 1,000 euro’s) (in 1,000 euro’s)
36 31/12/2019 31/12/2018 37 31/12/2019 31/12/2018 Funds entrusted 993,388 1,074,913 Accruals and deferred income 9,613 13,886
Funds entrusted can be specified as follows: Accruals and defered income can be specified as follows:
31/12/2019 % 31/12/2018 % Interest payable
By type: • Parent bank and related banks 69 462
Retail accounts • Related group companies 284 280
• Savings accounts 342,156 34.4 349,842 32.5 • Banks 607 961
• Savings deposits 542,087 54.6 589,112 54.8 • Customers 322 295
Corporate accounts - Dutch Value Added Tax 139 93
• Current accounts 84,125 8.5 124,280 11.6 Wage Tax & Social security premiums 769 963 to be paid • Deposit accounts pledged to ATB 15,634 1.6 4,519 0.4 Other accruals 7,423 10,832 • Fixed deposit accounts 9,386 0.9 7,160 0.7 Total 9,613 13,886 Total 993,388 100.0 1,074,913 100.0 Other accruals mainly comprise of staff expenses to be paid (holidays, severance) and other expenses to be paid (accounts payable, expense payable and other costs to be paid). Included in the other accruals is a provision for restructuring amounting to € 3.9 Financial statements million. This restructuring provision consists of future payments relating to redundancy 31/12/2019 31/12/2018 pay and other costs directly attributable to the reorganization program. These expenses are included when a redundancy scheme has been drawn up and communicated to By counterparty: stakeholders. The expected outfow of funds will occur in 2020.
Related parties 5,409 31,532
Other customers 987,979 1,043,381
Total 993,388 1,074,913
154 155 Notes to the company statement of financial position Notes to the company (in 1,000 euro’s)
38 31/12/2019 31/12/2018 statement of income (in 1,000 euro’s) Provisions 3,643 3,598
Provisions can be specified as follows: 39 2019 2018 Participating Interests 3,538 3,538 Interest income 52,900 44,488 Provisions Off Balance and Guarantees 105 60
Total 3,643 3,598 Interest income comprise interest from:
Banks 2,004 1,319 This provision on participating interests amount represents the full provision of the participating interest in ATCAC (Amsterdam Trade Capital Administration Corporation B.V.). There were no movements in 2019 and 2018 as there are no operational activities within Loans and advances to customers 50,347 42,462 this company. Interest-bearing securities 549 707
Other contingent liabilities Total 52,900 44,488 During the past 6 years, ATB has increased its effort to implement a strong compliance culture and organisation, processes and tooling. As a result of this and also due to increased specific monitoring of its client files and business transactions, ATB identified and reported past unusual transactions to the 2019 % 2018 % authorities.
ATB is being examined by the Fiod (Dutch Fiscal Intelligence and Investigation Department) By geographical concentration: for possible breaches by the bank in previous years regarding the Wwft (law against money laundering and terrorist financing) specifically with respect to client due diligence and EUR utilising countries 16,528 31.2 4,723 10.6 timely reporting of unusual transactions. It is unclear which specific consequences (if any) Financial statements the examination may have. Possible measures may include a penalty payment or a fine, Other European countries 13,113 24.8 18,702 42.0 which would mean that a present obligation per 31 December 2019 could exist and that an outfow of resources may result as a consequence. Management is not able to assess Marshall Islands 10,553 19.9 7,745 17.4 reliably if such penalty or fine might be the outcome of this investigation and if so, what the possible timing, scope or amounts of any such fines, penalties and/or other outcome United States 4,285 8.1 2,968 6.7 would be. Accordingly, no provision has been booked at 31 December 2019, neither was a provision recognised at 31 December 2018. CIS countries 2,534 4.8 5,186 11.7
Singapore 1,676 3.2 618 1.4
Other countries 4,211 8.0 4,546 10.2
Total 52,900 100.0 44,488 100.0
2019 2018
Interest income from parent 436 1,401 and related banks
156 157 Notes to the company Notes to the company statement of income statement of income (in 1,000 euro’s) (in 1,000 euro’s)
40 2019 2018 43 2019 2018 Net commission income 1,085 2,462 Staff expenses 23,753 21,050
Staff expense comprise: 2019 % 2018 % Wages and salaries 14,279 14,007 Trade finance fees 1,046 57.0 1,434 54.0 Reorganisation cost 3,544 - Money transfer fees 118 6.4 114 4.3 Pension cost 1,787 1,376 Other fees 671 36.6 1,105 41.7 Social cost 1,501 1,471 Commission income 1,835 100.0 2,653 100.0 Other staff cost 2,642 4,196 Commission expense 750 191 Total 23,753 21,050 Total 1,085 2,462
At 31 December 2019, the total number of employees expressed in full-time equivalents was 116 (2018: 129).
41 2019 2018 The staff expenses include an amount of € 3.9 million regarding a provision for restructuring costs. Refer to note 24 Result on financial transactions -5,574 4,898
44 2019 2018 Result on financial transactions consist of: Financial statements General and administrative 13,063 13,465 Unrealized result on loan participations 56 1,013 expense
Sale of shares 11 6 General and administrative expense comprise: Sale of non-core loans and advances -11 5,291 Professional services 5,400 4,974 Other foreign exchange results due -1,093 -975 to FX swaps ICT / communication 5,158 4,837 Foreign exchange results on client -259 36 transactions Credit Insurance 1,163 1,628
Result on cross currency swaps -4,278 -1,392 Housing 1,303 747
Sale of interest-bearing securities - 919 ESPP Expenses -662 877
Total -5,574 4,898 Public relations 250 246 Recovery VAT -1,618 -1,998
Other cost 2,069 2,154
42 2019 2018 Total 13,063 13,465 Other income 64 -1,153
In 2018 Other income mainly relate to the disposal of subsidiary ATB Leasing, also refer to Note 23.
158 159 Notes to the company Notes to the company statement of income statement of income (in 1,000 euro’s) (in 1,000 euro’s)
Included in the general and administrative expenses are the cancellation costs related to the 46 2019 2018 ending of the securisation structure as mentioned in paragraph B.4.2. The cancellation costs Impairments of financial assets -654 -9,429 amounting to € 0.7 million are in the professional services and a total amount of € 0.5 million and off balance is included in the fees and commission expenses in note 21.
The ESPP expenses relate the result of difference between the fair value of the underlying Charge relating to loans and advances 4,004 1,575 share and the exercise price, which resulted in a positive result of € 0.1 million (2018: negative result € 0.3 million) and a correction of the discount amortisation over prior years Release relating to loans and advances -1,977 -11,085 of € 0.6 million. Recovered relating to write-off loans -3,357 - The other cost include € 1.2 million (2018: € 1.1 million) mainly related to external suppliers providing market information. Charge relating to banks 870 120
Release relating to banks -148 -101 45 2019 2018 Charge relating to interest-bearing 8 177 Depreciation and impairments of 7,024 3,043 securities Release relating to interest-bearing intangible assets and property -100 -60 and equipment securities Charge relating to off-balance items 105 65 Depreciation comprise the depreciation cost of: Release relating to off-balance items -59 -120
Intangible assets 2,887 2,716 Total -654 -9,429
Property and equipment 357 327 Financial statements The recovery of € 3,3 million is reated to an old non-core portfolio exposure. Impairment relating to intangile assets 3,780 -
Impairment on property and equipment - - 47 2019 2018 Total 7,024 3,043 Income tax - - The impairment charge on intangible assets in 2019 consists of an additional depreciation on banking software that is no longer in use as result of the restructuring.
160 161 Notes to the company statement of income Subsequent events (in 1,000 euro’s)
The statutory applicable corporate tax rate for 2019 in the Netherlands is 25% (2018: 25%). In order to improve ATB’s capital position, scheme has grown from the initial amount of Taxes are calculated on the result before taxation, based on the applicable profit tax rate. it converted in March 2020 its subordi- € 10 million at the start of the program to € nated loan with a nominal value of USD 35 70 million. In addition in March and April 2020 During the financial year 2019 ATB realised operational losses leading to tax losses. For tax million, granted by ABH Holdings SA. Before two LTRO deals of in total € 20 million were accounting purposes tax losses are accrued only for the amount at which tax losses can conversion the loan has been transferred executed that have expired in June 2020. be offset against past taxable profits. At year-end 2019 no amount has been accrued as from ABH Holdings SA to Alfa Bank Russia. current tax receivable. After transfer, the subordinated loan has In 2020 the decision has been taken to been converted into 141,391 ordinary shares terminate the ESPP plan. All loans with the No deferred tax assets that depend on further probability of ATB are taken into account of Alfa Bank. With this conversion Alfa Bank management board members and other due to the uncertainty on sufficient taxable profits during the taxable period that these share in ATB increased from 72.2% to 76.91%. participants will be settled via the ESPP Plan losses can be offset. The tax receivable on the negative result of the financial year 2019 is Besides this, ABH Holdings SA sold 14.685 within 2 months after approval of the Annual added to the non recognised future tax assets (carry forward) and therefore do not lead to shares to ATB Holdings SA decreasing the report of 2019.Settlement will take place a tax position in the Statement of financial position share of ABH Holdings from 7.49% to 5.6% and based on the value as of 31 December 2019. For 2019 this resulted in an overall effective tax rate of 0.0% (2018: 0.0%). increasing the share from ATB Holdings from 10.39% to 12.28%. The current Covid-19 outbreak will most likely On 29 April 2020 ATB received the final report from Dutch Tax Authorities covering the impact the global economy and the financial 2013-2015 tax audit on Dutch corporate income tax and value added tax. The final report In July 2020 one of the Shareholders has position and results of banks. In general of the tax authorities does not lead to any adjustments for years under review or for the committed to provide an additional capital banks could be impacted by instruments tax position in this annual report. injection of EUR 4.2 million to strengthen the being measured at fair value and on potential capital position which will be received in the credit losses. Currently, Amsterdam Trade third quarter 2020. Bank N.V. is closely monitoring any financial The differences between the statutory applicable corporate tax rate and effective tax rate can be explained as follows: impact attributable to the Covid-19 outbreak Starting in March 2020 ATB has entered on specific industry sectors such as shipping, Operating result before tax -20,431 138 into DNB’s TLTRO (Targeted Longer-Term and is taking preventative measures to ensure Financial statements Refinancing Operations) scheme. In this continuity of client servicing. Given the Income tax scheme part of ATB’s bond portfolio is used as uncertainties and ongoing developments the Theoretical tax charge at the statutory -5,108 35 collateral for DNB funding. By end June 2020 Bank cannot accurately and reliably estimate rate of 25% the outstanding amount under the TLTRO the quantitative impact yet. Non recognised future tax assets 5,108 -35 Total - - We refer to the Other information for the statutory regulation on profit and distributions. It is proposed to allocate the net loss of € 20 million to Retained earnings. At year-end 2019 an amount of € 284 million (2018: € 270 million) of losses available for carry forward have not been included in the measurement of deferred tax assets.
Amsterdam, 31 July 2020
Management Board: Supervisory Board:
O. Bass, Chief Executive Officer and Chairman R.Meijer, Chairman H.P.M.G. Steeghs, Chief Financial Officer H.C.M. van Damme P.J. Ullmann, Chief Risk Officer A.B. Sokolov T.A.J. Smeets, Chief Digital Officer A.J. Baxter O. Vaksman
162 163 Independent auditor’s report To: the shareholders and the supervisory board of Amsterdam Trade Bank N.V.
Report on the audit of the financial statements 2019 included in the annual report
We have audited the financial statements 2019 of Amsterdam Trade Bank N.V., based in Amsterdam.
In our opinion the accompanying financial statements give a true and fair view of the Other financial position of Amsterdam Trade Bank N.V. as at 31 December 2019, and of its result for 2019 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The financial statements comprise: Information • The consolidated and company statement of financial position as at 31 December 2019 • The consolidated and company income statement for 2019 • The notes comprising a summary of the accounting policies and other explanatory information Other Information Basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the financial statements” section of our report.
We are independent of Amsterdam Trade Bank N.V. in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Materiality
Materiality € 1.7 million (2017: € 1.8 million) Benchmark applied 1% of equity total (rounded) Explanation As this year’s result is negative, we deem equity to be the more appropriate measurement basis.
164 165 Key observa- Risk Our audit approach tions Going concern assumption, note B.1.3 to the financial statements
Due to the negative operational For our audit we evaluated We noted that results in past years and, limitations management’s assessment for the main is- in further growth of the balance going concern through multiple sues, analysis, sheet, Amsterdam Trade Bank scenarios and the underlying elaborations and N.V. reassessed its operational assumptions for the calculations assumptions in We have also taken into account misstatements into account and/or possible misstatements business model in the second half of the capital and liquidity ratios, respect of the year of 2019. Accordingly, the and taking into account the roll going concern that in our opinion are material for the users of the financial statements for qualitative management board, with oversight out of the strategy revisions as basis of account- reasons. of the supervisory board, developed well as the potential impact of ing have been strategy enhancements, initiated the current Covid-19 crisis. This properly dis- restructuring measures, and decided evaluation included examining of closed in notes We agreed with the supervisory board that misstatements in excess of EUR 85,000, which to stop with activities in certain subsequent events, comparing B.1.3, C.7 and are identified during the audit, would be reported to them, as well as smaller misstatements niche segments. Amsterdam Trade actuals after 31 December 2019 C.8 of the finan- that in our view must be reported on qualitative grounds. Bank N.V. currently is in the process with the budget and, with the cial statements. of implementing a revised business assistance of our corporate plan which has been also reviewed finance specialists, challenging Scope of the group audit by the Dutch Central Bank and the plausibility of the forecasted Amsterdam Trade Bank N.V. used to own a small Russian subsidiary which has been sold expected to be launched later in assumptions on expected at the end of 2017. The sale was structured in separate tranches with remaining assets 2020 after receiving additional results. We have read letters capital by the shareholder. from the shareholder about transferred early 2018. As the sale was already finalized at the end of 2017 no involvement Solvency and liquidity on the their commitment to provide from another external auditor was necessary during our 2018 audit. As the Company is basis of prudential standards as additional support and from the centrally organized and controlled by one management board, we performed both in 2018 disclosed in note C.9 to the financial Dutch Central Bank noting their statements is relevant for the observations and requirements and 2019 a full scope audit (ourselves) on the consolidated financial statements as a whole. assessment of the financial position with regard to the strategy We have been able to obtain sufficient and appropriate audit evidence about the group’s of Amsterdam Trade Bank N.V. As enhancements and business financial information to provide an opinion about the consolidated financial statements. per 31 December 2019 the Core operations. Where appropriate, Equity Tier 1 and Liquidity Coverage we involved our regulatory and ratios were above the minimum legal specialists.
Our key audit matters requirements of the Dutch Central We have specifically devoted Other Information Key audit matters are those matters that, in our professional judgment, were of most Bank. As refected in note 15 of the attention to the solvency and significance in our audit of the financial statements. We have communicated the key audit financial statements, the Company liquidity requirements set by received at the end of 2019 the Dutch Central Bank towards matters to the supervisory board. The key audit matters are not a comprehensive refection additional capital of EUR 9.8 million Amsterdam Trade Bank N.V. of all matters discussed. from one shareholder to compensate and the compliance with these this year’s operational losses and requirements as per 31 December to strengthen the capital position 2019 and thereafter. Additionally, In comparison to the audit of the financial statements 2018 of Amsterdam Trade Bank accordingly. In the beginning of we assessed the appropriateness N.V. three key audit matters changed. We identified the recognition of impairments and 2020 the Dutch Central Bank further of the related disclosures. a restructuring provision in 2019 a new key audit matter given the size of the expenses increased capital and liquidity requirements for Amsterdam Trade and the impact on the organization. The key audit matter in relation to the correction of Bank N.V. Consequently, incremental an error on the accounting for the employee share plan is not applicable anymore as it capital has been contributed in specifically related to 2018 and the recognition of the fair value during the vesting period March 2020, as is disclosed in note of this plan. The key audit matter on the reliability and continuity of the IT environment is 15 to the financial statements and note subsequent events. also not applicable anymore following the IT remediation program the company executed in The availability of sufficient capital 2018 and 2019. Compared to the audit of the financial statements 2018 of Amsterdam Trade and liquidity and the testing of Bank N.V. we have also excluded the voluntary adoption of the Dutch Accounting Standard whether the Company with help of its shareholders will be able to 290 for expected credit losses as part of the key audit matter on the valuation of financial continue meeting its obligations instruments given the impact on the opening balance 2018 and disclosures. under the requirements of the Dutch Central Bank are important for the going concern assumption that is These matters were addressed in the context of our audit of the financial statements as underlying the preparation of the a whole and in forming our opinion thereon, and we do not provide a separate opinion on financial statements, and as such these matters. are considered to be a key matter for the audit.
166 167 Key observa- Key observa- Risk Our audit approach Risk Our audit approach tions tions Laws and regulations in relation to Estimation of impairment losses on clients and transactions, note 16 loans and advances to customers, to the financial statements note 3 to the financial statements
Amsterdam Trade Bank N.V. has We performed walkthrough We concur with The portfolio of loans and advances We have obtained an We consider to comply with applicable laws procedures regarding the design management’s to customers of Amsterdam Trade understanding of the loan loss the provision and regulations in relation to of controls by Amsterdam Trade assessments and Bank N.V. is measured at amortized provisioning process and, where for impairment client acceptance and payment Bank N.V. to identify, monitor find the disclo- cost, less a provision for impairment possible, tested the design losses on loans transactions, as well as sanctions and disclose potential obligations sures in note 16 losses. Impairment allowances and operating effectiveness and advances to applied by the EU against businesses arising from legal or regulatory in the financial represent the Company’s best of internal controls related customers to be and clients from certain specific matters and other contingencies. statements to estimate of expected credit losses. to loan origination, credit reasonable and countries. As disclosed in note We considered whether be reasonable. At 31 December 2019 total gross risk management and the in compliance 16, the company is since the obligations exist, and the loans of EUR 811 million with EUR determination of the provisions with Dutch law. end of 2017 subject of criminal appropriateness of provisioning 6 million of provisions are reported for impairment losses. This The disclosures investigations by Dutch prosecutor and disclosure based on the facts and disclosed in the financial included testing data accuracy relating to the regarding various requirements and circumstances available. statements in the “Summary of and completeness, data transfers, provision for related to the client onboarding On a regular basis, we inquired significant accounting policies” staging, impairment calculation impairment and anti-money laundering in with the risk, compliance and section, note B.1.4 “Judgement and reporting. We inspected and losses meet the previous years. It is not yet known internal audit departments of and estimates’’, note C.4.3 ‘’Credit discussed internal model and requirements as which specific consequences the the company to understand risk’’, note C.5 ‘’Expected Credit impairment validation reports. defined in DAS investigation may have and how and discuss the existing and Losses – Financial instruments’’ We analysed the staging of the 290. long it may take. Possible measures potentially new obligations and and note 3 “Loans and advances to loans in relation to developments may include a penalty payment or a regulatory matters. We examined customers”. With the adoption of in the loan portfolio and the fine. At this stage the management the relevant internal reports, the expected credit losses option composition of the portfolio. of Amsterdam Trade Bank N.V. the results of internal lookback of Dutch Accounting Standard (DAS) is not able to assess reliably the analyses, as well as regulatory 290, the provision for impairment For the calculation of the possible timing, scope or amounts and legal correspondence to includes elements such as the impairment provisions per 31 of any penalties or other outcome. assess the developments. We also lifetime probability of default (PD) December 2019, we selected Therefore management concluded took note of the findings from and loss given default (LGD), the a sample of individual loans that as per 31 December 2019 no the supervisor following a recent allocation of loans to stages and the and performed detailed credit provision is accounted for. investigation at the compliance use of forward looking information file reviews and challenged Developments in the prosecutor department of Amsterdam Trade based on macro-economic scenarios. the internal assessment of investigation, as well as the overall Bank N.V. and the remedial action
The appropriateness of loan impairment identification and Other Information compliance to applicable laws and plan to address these findings. loss provisions is a key area of measurement. In addition regulations for Amsterdam Trade Where appropriate, we involved judgment for management. The we assessed the assumptions Bank N.V. in its gatekeeping role, our regulatory and forensic identification of impairment and the underlying the impairment require considerable management specialists. determination of the recoverable identification and quantification, attention. This includes assessing amount are an inherently including forecasts of future the recognition of any accounting In order to evaluate the facts uncertain process involving various cash fows, and valuation of provisions and, similarly, judgment and circumstances with respect assumptions and factors including underlying collateral. We in the determination of adequate to the specific investigation, the financial condition of the applied professional judgment in disclosures of any contingent we inspected with help of counterparty, expected future cash selecting those exposures for our liabilities and charges. Therefore, our legal specialist the latest fows, the value of collateral and the detailed inspection and engaged we consider this a key audit matter. correspondence from the assessment of objective evidence our shipping valuation specialists prosecutor with Amsterdam for impairment of a loan. The to assist us with the audit of the Trade Bank N.V. We also use of assumptions could produce reasonableness of management’s obtained the representation significantly different estimates of valuation for certain loans. We made by the external legal loan loss provisions. challenged the criteria used counsel and inquired with Given that the loans and advances to allocate loans and tested a senior management and the to customers are material to the sample of loans on appropriate compliance officer of Amsterdam Company’s balance sheet and staging. We tested the data used Trade Bank N.V. Furthermore, income statement, the accounting in the expected credit losses we assessed the adequacy of requirements with respect to calculation by reconciliation to the disclosure regarding the calculating provisions for expected source systems. investigations as included in Note impairment losses are complex Finally, we assessed the 16 to be in accordance with the and judgmental, and the economic completeness and accuracy of requirements of Dutch GAAP. sensitivity especially in the shipping the disclosures relating to the loan business, we considered this to provision for impairment losses, be a key audit matter. as disclosed in note 3 to the financial statements, to evaluate compliance with disclosure requirements of EU-IFRS 7 as defined in DAS 290.
168 169 Key observa- Risk Our audit approach tions Reorganization, note 6, note 12 and note 25 to the financial statements
As mentioned in the report of the Our audit procedures comprised We consider the management board, Amsterdam an assessment of whether the recognition and Trade Bank N.V. decided at the end recognition of the restructuring disclosures in of 2019 to execute a substantial expenses by the Company was connection with restructuring through reduction compliant with the requirements the restructur- of staff levels, rightsizing of the as set in Dutch Accounting ing provision Emphasis of matter relating to Covid-19 IT platform and other cost saving Standard (DAS) 252. This and expenses measures such as early cancellation includes availability of a formal for employee of structured funding facilities. restructuring plan and timely severances, im- The developments surrounding the Covid-19 virus epidemic have a profound impact on our As a consequence, restructuring communications to personnel pairment of non- society as a whole, as well as on the operational and financial performance of organizations. costs of EUR 8.8 million have been affected at the end of 2019. current assets The situation changes on a daily basis giving rise to inherent uncertainty. The assessment of recognized in the statement of In addition, we assessed the and write-off income over 2019, comprising EUR appropriateness of the model on cancellation the impact of these developments on the operations of Amsterdam Trade Bank N.V. in 2020 3.9 million employee severance used by management to calculate costs and unam- is included in the outlook section as part of the director’s report and the disclosure about payments as disclosed in note 12 to the employee severances as of 31 ortized fees to subsequent events as part of the notes to the financial statements. We draw the attention to the financial statements, EUR 3.9 December 2019. We verified the be reasonable million impairment of capitalized accuracy and completeness of the and in compli- these disclosures. Our opinion is not modified in respect of this matter. IT development cost as disclosed provision by comparing input data ance with Dutch in note 6 on non-current assets, with underlying documentation law. and EUR 1.0 million write off for as agreed in the social plan. We Report on other information included in cancellation costs and unamortized also reviewed management’s fees as disclosed in note 25. At assessment of the indicators of the annual report 31 December 2019 a provision of impairment and challenged the EUR 3.5 million is maintained for assumptions used in assessing In addition to the financial statements and our auditor’s report thereon, the annual report severances that will be paid in the the recoverability of intangible contains other information that consists of: course of 2020. assets, and the consequences of The accounting and disclosure for the cancellation agreement of the • The Report of the Management Board the restructuring measures can be structured funding facilities with • Other information as required by Part 9 of Book 2 of the Dutch Civil Code complex and requires judgment. regard to any penalty charges and • Other information, like the report of the supervisory board Other Information It includes evaluation of factors write off on cancellation costs such as the timing or whether any and unamortized fees. restructuring might lead to an Furthermore, as far as relevant Based on the following procedures performed, we conclude that the other information: impairment in the value of assets for our audit procedures we • Is consistent with the financial statements and does not contain material misstatements and the criteria for recognizing assessed the implications related provisions, as well as of the restructuring on the • Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code subjectivity in the application organizational processes and of assumptions to calculate the risk management procedures We have read the other information. Based on our knowledge and understanding obtained expected severance payments and of Amsterdam Trade Bank through our audit of the financial statements or otherwise, we have considered whether other compensations. Therefore we N.V., noting no major gaps in considered the restructuring to be a the operational effectiveness the other information contains material misstatements. By performing these procedures, significant matter for our audit. of controls as per the end of we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch December 2019. Audit Standard 720. The scope of the procedures performed is substantially less than the Finally, we assessed the completeness and accuracy scope of those performed in our audit of the financial statements. of the disclosures relating to the restructuring expenses The management board is responsible for the preparation of the other information, including as disclosed in the financial statements to evaluate the report of the management board in accordance with Part 9 of Book 2 of the Dutch Civil compliance with disclosure Code and other information as required by Part 9 of Book 2 of the Dutch Civil Code. requirements of Dutch law. Report on other legal and regulatory requirements Engagement We were engaged by the supervisory board as auditor of Amsterdam Trade Bank N.V., as of the audit for the year 2016 and have operated as statutory auditor since that financial year.
No prohibited non-audit services We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit of public-interest entities.
170 171 Description of responsibilities for the financial We have exercised professional judgment and have maintained professional skepticism statements throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others: Responsibilities of management and the supervisory board for the • Identifying and assessing the risks of material misstatement of the financial statements, financial statements whether due to fraud or error, designing and performing audit procedures responsive to Management is responsible for the preparation and fair presentation of the financial those risks, and obtaining audit evidence that is sufficient and appropriate to provide a statements in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, basis for our opinion. The risk of not detecting a material misstatement resulting from management is responsible for such internal control as management determines is fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, necessary to enable the preparation of the financial statements that are free from material intentional omissions, misrepresentations, or the override of internal control misstatement, whether due to fraud or error. • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of As part of the preparation of the financial statements, management is responsible for expressing an opinion on the effectiveness of the company’s internal control assessing the company’s ability to continue as a going concern. Based on the financial • Evaluating the appropriateness of accounting policies used and the reasonableness of reporting framework mentioned, management should prepare the financial statements using accounting estimates and related disclosures made by the management board the going concern basis of accounting unless management either intends to liquidate the • Concluding on the appropriateness of the management board’s use of the going concern company or to cease operations, or has no realistic alternative but to do so. Management basis of accounting, and based on the audit evidence obtained, whether a material should disclose events and circumstances that may cast significant doubt on the company’s uncertainty exists related to events or conditions that may cast significant doubt on ability to continue as a going concern in the financial statements. the company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the Other Information The supervisory board is responsible for overseeing the company’s financial reporting related disclosures in the financial statements or, if such disclosures are inadequate, to process. modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company Our responsibilities for the audit of the financial statements to cease to continue as a going concern Our objective is to plan and perform the audit engagement in a manner that allows us to • Evaluating the overall presentation, structure and content of the financial statements, obtain sufficient and appropriate audit evidence for our opinion. including the disclosures • Evaluating whether the financial statements represent the underlying transactions and Our audit has been performed with a high, but not absolute, level of assurance, which means events in a manner that achieves fair presentation we may not detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to infuence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
172 173 Appropriation of result
Because we are ultimately responsible for the opinion, we are also responsible for directing, Statutory regulation on Profit • The general meeting of shareholders may supervising and performing the group audit. In this respect we have determined the nature and distributions resolve to make cash or stock distribu- and extent of the audit procedures to be carried out for group entities. Decisive were the Article 32 of the Articles of association tions on account of the reserves. The size and/or the risk profile of the group entities or operations. On this basis, we selected describes the statutory regulation on Profit general meeting of shareholders shall group entities for which an audit or review had to be carried out on the complete set of and distribution. refrain from doing this without consulting financial information or specific items. the management board and supervisory Article 32: board, which may also make a proposal We communicate with the supervisory board regarding, among other matters, the planned • The profits shall be at free disposal of to that extent. scope and timing of the audit and significant audit findings, including any significant findings the general meeting of shareholders. The • The management board shall determine in internal control that we identify during our audit. In this respect we also submit an management board shall, subject to the the date on which (interim) distributions additional report to the audit committee in accordance with Article 11 of the EU Regulation approval of the supervisory board, make shall be payable, which date shall be no on specific requirements regarding statutory audit of public-interest entities. The information a proposal to distribute (a part of) such later than the fifth business day following included in this additional report is consistent with our audit opinion in this auditor’s report. profits or, as the case may be, allocate the day of the resolution to make the (a part of) these profits to the reserves. distribution. A claim of a shareholder for We provide the supervisory board with a statement that we have complied with The proposal to distribute dividend shall payment of a distribution shall be barred relevant ethical requirements regarding independence, and to communicate with them be discussed as a separate item on the after five years have elapsed. all relationships and other matters that may reasonably be thought to bear on our agenda of the general meeting of share- independence, and where applicable, related safeguards. holders. It is proposed to allocate the net loss of €
• The management board may, subject 20.4 million to Retained earnings. Other Information From the matters communicated with the supervisory board, we determine the key to the approval of the supervisory audit matters: those matters that were of most significance in the audit of the financial board and provided that the profits as statements. We describe these matters in our auditor’s report unless law or regulation evidenced by an interim balance sheet precludes public disclosure about the matter or when, in extremely rare circumstances, not prepared in accordance with Section communicating the matter is in the public interest. 2:105 paragraph 4 of the Dutch Civil Code permit this, resolve to make interim-dis- tributions on the shares on one or more Amsterdam, 31 July 2020 occasions during the financial year prior to the adoption of the annual accounts by Ernst & Young Accountants LLP the general meeting of shareholders
Signed by A.B. Roeders
174 175 Glossary
Amortised cost CIS (Commonwealth of Derivative Exposure at default (EAD) The amount for which financial assets or Independent States) A financial instrument whose value has been Exposure at the time of a client’s default, liabilities are initially recognised minus An alliance made up of states that had been derived from the value of another financial also referred to as net exposure. redemptions, plus or minus the accumulated Soviet Socialist Republics in the Soviet Union instrument, an index or other variables. depreciation/amortization using the prior to its dissolution in December 1991. ATB holds both derivatives whose size (face Fair value effective interest rate method for the value), conditions and price are determined The fair value of a financial instrument difference between the original amount and Contingent liabilities between ATB and the counterparties is the amount for which an asset could the amount on maturity date, and minus All commitments arising from transactions (OTC derivatives), as well as standardized be exchanged or a liability can be settled impairments. for which ATB has given a guarantee to third derivatives negotiable on organised markets. between knowledgeable parties that are parties. willing to trade and are independent from Basic Indicator Approach Earnings at Risk (EaR) each other. The Basic Indicator Approach is an approach CET1 capital Earnings at risk assesses the amount that to calculate operational risk capital under Common Equity Tier 1 capital also referred net income may change due to a change in Gross Domestic Product (GDP) the Basel Accord, and uses the bank’s total to as the core capital. ATB’s CET1 capital interest rates over a specified period. Value The market value of all officially recognised gross income as a risk indicator for the represents share capital, share premium at risk measures the overall change in value final goods and services produced within a bank’s operational risk exposure and sets and other reserves, adjusted for certain over a specified period within a certain country in a year, or other given period. the required level of operational risk capital deductions set by the regulatory authorities, degree of confidence. as 15% of the bank’s annual positive gross such as intangible assets. ILAAP
income averaged over the previous three Economic Value of Equity at Risk Strategies and procedures designed for the Other Information years. CET1 capital ratio (EVEaR) bank’s continuous assessment as to whether The CET1 capital of ATB as a percentage of Economic value of equity at risk is a cash the liquidity position still reconcile with the Basel III risk weighted assets. fow calculation that takes the present value size and nature of its current and potential The framework drawn up by the Basel of all asset cash fows and subtracts the future liquidity risks. Committee on Banking Supervision which COSO present value of all liability cash fows. In provides a stricter definition of capital and The Committee of Sponsoring Organizations this calculation the bank uses Equity at Risk Impairments introduces several new ratios and buffers to of the Treadway Commission. to manage its assets and liabilities. Amount charged to the statement of income be complied with by banks. The period for for possible losses on doubtful debts or gradual transition from Basel II to Basel III is Credit derivatives (credit default swaps) European Banking Authority uncollectible loans and advances or because five years and started in January 2014. In this type of swaps, variable interest (EBA) an impairment test has shown that the asset payments, linked to Euribor, are exchanged The European Banking Authority (EBA) is has to be valued lower, because the fair BIS total capital ratio with credit guarantees vis-a-vis a third a regulatory body that works to maintain value is lower than the carrying amount or The percentage of a bank’s capital adequacy party. The counterparty is required to pay financial stability in the European Union’s because the fair value of investments and calculated by dividing qualifying capital by if the third party cannot meet its payment (EU) banking industry. associates is lower than cost. the risk-weighted assets as defined by the obligations. The specific events which are Bank for International Settlements (BIS). followed by payments are recorded in the ERM contract. Enterprise Risk Management. Internal Capital Adequacy CEE (Central and Eastern Assessment Process (ICAAP) Europe) CRR Expected Credit Loss Strategies and procedures designed for ATB’s CEE is a generic term for countries in Central Capital Requirement Regulation. An average, or mathematically expected, continuous assessment whether the amount, Europe, Southeast Europe and Eastern credit loss, generally determined through composition and distribution of equity still Europe, usually meaning former communist a combination of expected credit risk reconcile with the size and nature of its states in Europe. The term is used following exposure, probability of default, and current and potential future risks. the collapse of the Iron Curtain in 1989–90. anticipated recovery in default.
176 177 IRRBB Lifetime Expected Credit Losses Related party risk. This method is based on the approach, The amount of the interest rate risk that (LECL) In the normal course of business, ATB in which the risk weighting of an item is is significantly infuenced by the extent The expected credit losses that result from enters into various transactions with related prescribed by the regulatory authorities. of the maturity transformation between all possible default events over the expected parties. Parties are considered to be related the fixed-interest periods on both the life of a financial instrument. if one party has the ability to control or Supervisory Review Evaluation assets and liabilities side. This particularly exercise significant infuence over the Process (SREP) applies to the retail business with long-term Loss given default (LGD) other party in making financial or operating The SREP is a set of procedures carried customer loans on the assets side, which are An estimate of the loss for ATB after decisions. out on an annual basis by the supervisory refinanced with variable-rate deposits on the liquidation of the received collateral. Related parties of ATB include, amongst authorities to ensure each credit institution liabilities side. others, its subsidiaries, associated has in place the strategies, processes, Management Board (MB) companies within Alfa Group, key capital and liquidity that are appropriate to Irrevocable commitments CEO - Chief Executive Officer management personnel and shareholders. the risks to which it is or might be exposed All obligations that could give rise to the CFO - Chief Financial Officer Transactions between related parties to. granting of loans. CRO - Chief Risk Officer mainly consist of forex transactions and financing activities. There are no significant Total capital IRRBB Net Stable Funding Ratio (NSFR) provisions for doubtful debts or individually The sum of total CET1 capital and total Tier Interest Rate Risk Banking Book within ATB is The NSFR represents the available stable significant bad debt expenses recognised on II capital. defined as a sub-section of Market Risk. funding sources related to the required outstanding balances with related parties.
amount of stable funding. Related parties: Parent and related bank Total Tier II capital Other Information Letter of credit (LC) This relates to ATB’s direct majority Also referred to as supplementary or A letter of credit is a letter from a bank Probability of default (PD) shareholder Alfa-Bank Russia and its related secondary capital. The total Tier II capital guaranteeing that a buyer’s payment to a The likelihood that a client will default banks within the Alfa Banking Group. comprises of the revaluation reserves and seller will be received on time and for the within one year. Related parties: Other group companies certain subordinated liabilities, adjusted correct amount. In the event that the buyer Other group companies included all group for certain deductions set by the regulatory is unable to make payment on the purchase, Total capital companies (including other minority share- authorities, if applicable. the bank will be required to cover the full or The sum of total CET1 capital and total Tier holders), exclusive of Parent and related remaining amount of the purchase. II capital. banks, within the Alfa-Group. Total Capital Ratio The percentage of a bank’s capital Leverage Ratio Basel III (LR) Risk-weighted assets (RWA) adequacy, calculated by dividing qualifying The LR represents the ratio between total The assets of a financial institution after capital by the risk-weighted assets as assets plus contingent items and the Basel III being adjusted by a weighting factor, as defined by the Bank for International CET1 capital. determined by the regulatory authorities, Settlements (BIS). that refects the relative risk attached to Liquidity Coverage Ratio (LCR) the relevant assets. Risk weighted assets are Value-at-Risk (VaR) The LCR represents the ratio between high used to calculate the minimum amount of Statistical analysis of historical market quality liquid assets and the balance of cash capital that has to be held. developments and volatility in order to outfows and cash infows over the next 30 estimate the probability of a loss on a days. Solvency portfolio exceeding a certain amount. ATB’s buffer capital expressed as a percentage of risk weighted assets.
Standardised Approach (SA) A method used under Basel III to measure a bank’s operational, market and credit
178 179 Head office Amsterdam Trade Bank N.V. World Trade Center - Tower I, Level 6 Strawinskylaan 1939 1077 XX Amsterdam www.amsterdamtradebank.com www.atbank.nl [email protected]
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