Annual report 2018 Moving your business forward Table of Contents

About Amsterdam Trade Bank FINANCIAL STATEMENTS 2018 • A merchant bank for the modern world 5 • ATB at-a-glance 6 Consolidated Financial Statements 2018 • 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 48 Report of the Management Board • Letter from the CEO 12 Notes to the Consolidated Financial Statements 2018 • Financial and Operational Performance 14 • Summary of significant accounting principles 52 • Commercial Activities and Developments 16 • Risk management 68 • Human Resources 18 • Notes to the consolidated financial statement 82 • Risk Management 20 • Notes to the consolidated statement of financial position 96 • Integrity 25 • Notes to the consolidated statement of income 122 • Corporate Social Responsibility 27 • Outlook 2019 28 Company Financial Statements 2018 • Responsibility Statement 29 • Company statement of financial position at 31 December 2018 134 • Company statement of income 135 • Notes to the company statement of financial position 136 Report of the Supervisory Board • Notes to the company statement of income 147 • Letter from the Chair 31 • Subsequent events 152 • Supervisory Board meetings 32 Other information Corporate Governance • Independent auditor’s report 154 • The Management Board 35 • Appropriation of result 155 • The Supervisory Board 36 • Glossary 156 • Dutch Banking Code 39 • Remuneration Report 40 A merchant bank for the modern world About Amsterdam Amsterdam Trade Bank N.V. (ATB) is a We were established in the Netherlands in fully-licensed specialised institution, 1994 and are located in Amsterdam, histor- focused on providing financing for the ically one of the world’s most important entire spectrum of the international trade financial, commodity, maritime and Trade Bank and commodity logistics chain, including technology hubs. We are ideally positioned shipping, asset-based and corporate finance. to find solutions to the challenges our clients We serve a wide range of customers face in today’s rapidly changing macro-eco- active in all aspects of international trade, nomic and technological environment, including commodity traders, producers, offering a distinct set of products and processors, manufacturers and ship owners. solutions to clients requiring structured Since 2003, we have been providing retail trade, transactional and/or asset financing. services in the Netherlands, offering savings and deposit products. In 2006, we expanded We are regulated by The Dutch Central our internet retail operations to Germany, Bank (De Nederlandsche Bank, DNB) and followed by Austria in 2011. the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, AFM).

4 5 ATB at-a-glance

Total Own Funds Total assets Tier 1 and Tier 2 Trust €204 €1,426 mln mln Trust is the foundation of our relationships with customers, partners and regulators. We establish this trust by being transparent and reliable and by Innovate demonstrating our expertise. Customers Innovation is what allows us to We work with medium-size to large achieve sustained success. We work corporations with a presence in or with expert partners to deliver trade flows linked to Europe. new banking technology, taking a modular approach.

Total Income Operating result Growth in on-balance Collaborate before tax. portfolio volume We build long-term partnerships with parties across the €30 €0,1 36% commodity value chain. mln mln About Amsterdam Trade Bank Amsterdam Trade About

Male / Female Ratio Nationalities

60% 40% 21 Mission and Vision

Our mission is to use expertise, technology It is our vision to revolutionise the trade and networks to become the centre of finance business and become the leading excellence for financial solutions to the provider of financial solutions for commodity commodity value chain. trade and related assets. Dutch-based Commodity Value Total equity Merchant Bank Chain €182 mln

6 7 Core Values Strategy

We are determined to achieve our vision in a We are a modern merchant bank with Good citizenship and responsible entrepre- way that is in line with our four core values. a clear customer-focused strategy and neurship are embedded at the very core of the ability to leverage our core areas our strategy. We continuously balance our of expertise. We focus on specific financial return ambitions with the impact underbanked niches of the trade finance, of our actions on society and environment. shipping finance and asset-backed finance markets. We distinguish ourselves by Our business focuses on international providing value-adding solutions, including trade-related lending to local market risk mitigation treasury services, to our leaders. This means we have to be more Client orientation Integrity carefully selected customer base, with the responsive to dynamic market conditions, We interact with our clients and financial We adhere to the highest integrity standards aim of creating mutual long-term value. For with short turnaround times, and use our institutions on the basis of collaboration and for corporate and individual behaviour. We our future we invest in new technology and local market knowledge. trust. Traditional values that have allowed us are committed to fostering and maintaining new capability development. to build close, long-term partnerships. a sound corporate culture of honesty and accountability in order to protect the interests of all relevant stakeholders. ATB offers one-stop-shop financing solutions along the value chain

Shippers 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. Origination Destination

Financing Asset based (medium/long term) Receivable financing (short term) Transactional financing (short term)

Borrowing base financing (revolving) Pre-payments/ Pre-export finance Pre-payments/Pre-export finance (m/l)

ATB takes a value chain approach including asset based finance to optimally serve commodity traders in their trend of industrialisation (asset-heavy) and becoming one-stop shops for commodities

8 9 Our growth strategy is built around eight 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 both 8 Gatekeeper Digital individuals and corporates, either as clients, as stakeholders in our corporate responsibility programme, or as participants in our training role channels and development activities.

10 Letter from the CEO

“2018 was another year Report of the Management Board Report of the of growth” Harris Antoniou Management Board Chief Executive Officer I am happy to report that 2018 was another our competitive standing. Our successful year of growth for our organisation, during on-boarding of highly-qualified teams and which we increased our core loan portfolio individuals across all areas of activity has by 36%. We have followed a consistent reinvigorated our organisational capabil- policy of de-risking our activities in all ities. We also prioritised our culture by spheres, and managed to strengthen our embedding core values into our behaviours. IT capabilities and enhance our overall I am grateful to our clients, teams and reporting standards. many stakeholders for making all these things possible. Operationally, we improved our processes and created new tools, which among others manage collateral positions at a fraction of the cost of other market-based solutions. “Consumers of financials Importantly, we continued our efforts to improve our overall market position, services are becoming and sought new dimensions and strategic increasingly critical and directions that would allow us to improve demanding”

12 13 Financial and Operational Performance

Looking ahead, 2019 offers both challenges range of services in both our Corporate Despite the slower rate of global growth in both important metrics we are on the right and opportunities. The economic cycle and Value Center Retail propositions. We the second half of 2018, and the volatility track. Mainly through exceptional causes seems to be entering a slower period, are now looking at how we currently do in financial markets caused by latent related to legal and IT expenditures, our following years of relative growth, while business and analysing which capabilities trade disputes, geopolitical events and the operational costs were approximately € 4 trading conditions have been made more we will need going forward. In practice, continuation of quasi-emergency monetary million above our budget projections. Even difficult by actual and potential trade this means that we shall be pursuing: policies, we prioritized our goal to further with these exceptional costs, our total barriers, as well as a trend towards region- a the development of new sustainable grow our asset portfolio, aiming to maximise operational expenses decreased from € alization that will have an impact on inter- banking products for a wider range of the utilisation of available capital and strive 39 million in 2017 to € 38 million in 2018, national flows. corporate and non-corporate clients; for sustainable break-even results. Following which is a positive development. b the development, acquisition and/or a slower than expected start to the year, we “Enhance the customer’s deployment of digital channels of managed to increase our on-balance core The total income from operating activities communication and service provision portfolio volume by 36% to € 855 million in 2018 was € 30 million (2017: € 43 million). journey through process to a wider range of clients in the OECD by the end of 2018 (2017: € 630 million), This decrease was mainly due to a drop improvements and the economies; and thereby nearly met our targeted in net commission income and as a result digitization of our services” c the further reinforcement of ATB’s budget projections. of lower income from financial transac- gatekeeper role; and tions by € 11 million and other income by d the enhancement of our interaction Over the course of the year, we saw an € 4 million. The negative impact of the Significant attention is now being paid with both individuals and corporates, increase in both our client numbers and drop in our net commission income was by regulators to the role of banks as either as clients, as stakeholders in portfolio volume in the commodity finance, partially compensated by a significant € 3 gatekeepers of the financial world. our corporate responsibility asset-based financing and shipping finance million increase in net interest income. The Environmental and sustainability issues, programme, or as participants in our segments, and also witnessed a gradual increased costs of hedging our USD portfolio,

as well as cyber security, also remain training and development activities. increase in our interest margin level, and the increased volume in savings and term Report of the Management Board priorities. At the same time, consumers of particularly during the second half of deposits, led to an increase in the interest financial services are becoming increas- The next stage in our journey promises the year. We more or less completed the expense of € 6 million. The net loss of the ingly critical and demanding, while being to be an exciting one and I feel very phasing out of our legacy portfolio, which sale of ATB Leasing LLC realised at legal offered financial services by a wider range confident that we will once more reach our was reduced from € 26 million at year-end transfer date in February 2018 amounted to of market participants, both banks and goals. Enabling ATB to be agile and offer 2017 to a remaining gross volume of € 8 approximately € 1.2 million. non-banks, than ever before. Technological innovative solutions to our community million. Our successful recovery efforts from changes have also accelerated the pace of of clients; to be the bank for the sharing loans that were either impaired or largely As of 1 January 2018, we implemented the competition, with challengers rising fast economy, helping increase the prosperity of provided for means we were able to close specific guidelines for the determination and and incumbent leaders falling behind. nations by contributing to world trade; and the year-end 2018 with a marginally positive methodology for assessment of Expected to be true to our people, by helping one net profit. Credit Losses (ECL). The loss allowance calcu- Improving the Customer Journey another realise our potential. lations of financial assets are performed on It is an environment in which at ATB we feel We invite you to join us on this journey. We achieved an overall operating profit a quarterly basis and based on a consistently increasingly confident. This is because we before tax (including impairments) during applied ECL model that has been externally have taken, and will continue to take, steps Amsterdam, 26 April 2019 the year of € 0.1 million (2017: € 14 million). validated. The ECL assessments for financial to enhance the customer’s journey through The operating profit before tax in 2017 instruments are classified in Stage 1, Stage 2 process improvements and the digitization Harris Antoniou was mainly the result of financial trans- or Stage 3 impairment losses. As at year-end of our services. At the same time, we are Chief Executive Officer, actions, consisting of gains due to sale of 2018, the loan loss provisions for expected using our strong position to expand the Chairman of the Management Board loan assets relating to the phasing out of credit losses in Stages 1 and 2 amounted to our legacy portfolio. With respect to our € 3.2 million (2017: IBNR provision of € 2.1 core business we have achieved a further million), and in Stage 3 to € 2.8 million. increase in client numbers and have been able to sustain higher interest margins. On

14 15 Commercial Activities and Developments

Total assets increased by € 211 million to and liquidity to ensure compliance with € 1,426 million at year-end 2018 (€ 1,215 internal limits and regulatory requirements. million at year-end 2017), mostly related to Additionally, capital and liquidity adequacy increased volume in loans and advances to are evaluated through regular stress tests. customers and interest-bearing securities. We The internal assessments were subject to the maintained our operations within the limits Supervisory Review and Evaluation Process set in our risk appetite. (SREP) conducted by the DNB.

As a result of the small profit made this year, Operationally, 2018 has been a year of our equity remained stable at € 182 million at significant transformation. We relocated year-end 2018 (year-end 2017: € 182 million). to a modern office location in the heart of Amsterdam’s financial district. We concluded At year-end 2018, our total capital ratio was our infrastructure outsourcing programme, 21.1% compared with 24.8% at year-end 2017. and during the year have deepened our Since our capital structure does not include working relationship with Sentia, an any hybrid capital instruments qualifying as IT-managed services and outsourcing additional Tier 1 capital, our T1 capital ratio company. Furthermore, we introduced equals our Core Equity Tier 1 capital ratio. workspaces based on virtual desktops and We have streamlined our corporate offering • Shipping provides financial services These ratios were 18.0% at year-end 2018 office telephony through VOIP (Voice Over into four sectors, creating greater clarity for to borrowers and owners operating (year-end 2017: 20.6%). Internet Protocol), improved our Client our customers and stakeholders: within the bulker, tanker and container Relationship Management functionality, and segments. We are also active in the field

The contribution of Tier 2 capital (subordi- upgraded our core banking platforms. As a • Commodity Finance provides various of LNG carriers. Coupled with our joint Report of the Management Board nated loan issued by ABHH of € 35 million) financial institution, we fully recognize the forms of credit to traders, producers, venture partners at MidShip Capital, eligible for regulatory total capital will importance of data and its protection. To and physical and financial intermediaries our Shipping team’s focus, initially on amortize in five years from 28 April 2018, this end, we have set up a dedicated team to in agriculture, energy and metals. The Southern Europe and the United States, with a final maturity date of 28 April 2023. bring our IT security environment up to the product range includes transactional and is now extending across Europe. Accordingly, the amortized value of Tier latest standards, and have made significant pre-export finance, as well as mezzanine 2 capital eligible for regulatory purposes progress in the area of data management. and structured facilities. While our Our four business lines enjoyed significant decreased to € 30 million by year-end. We In addition to the technological changes, geographical span is essentially global, growth during 2018 and completed a number complied with the minimum regulatory we also restructured our IT and Operations our focus is on EMEA and the Americas. of landmark transactions: requirements during the year. departments in order to improve the support to our organisation and clients. • Corporates caters for the needs of Year-on-year growth in our commodities loan We apply the standardised approach when companies active in port infrastructure book exceeded 30%. Whilst originating in our calculating our capital ratios under Pillar 1 (including storage), manufacturing traditional geographies, we have expanded of the Basel III framework. We also contin- (capital goods), and power generation. our activities on the African continent and uously apply the Internal Capital Adequacy opened up new opportunities in the United Assessment Process (ICAAP) and Internal • Financial Institutions manages our States. In 2018, we embarked on a journey Liquidity Assessment Process (ILAAP) to commercial relationships with regulated that will allow us to offer physical intermedi- meet Pillar 2 requirements, under which institutions, primarily banks. This enables ation structures to our customers. Embedded internal capital requirement is calculated us to operate globally via a network in our credit facilities, such a solution will for additional risks that are not captured of correspondents. The relationships both benefit our clients’ balance sheet under Pillar 1 (i.e. concentration risk, are two-way: through the provision of management and enhance our capital country risk, interest rate risk in the banking bilateral trade-related facilities and deployment from the second half of 2019. book, strategic risk and liquidity risk). On through the negotiation of financial an ongoing basis, we monitor solvency institution funding for our core activities.

16 17 Human Resources

Human Resources develops and implements pension benefits to qualifying surviving policies and initiatives with respect to spouses and orphans. All employees were Corporates increased lending by 50%, Our internet retail savings and deposits diversity and leadership development. It informed about the plan during organised securing our first infrastructure project in clients in the Netherlands, Germany also leads on the fulfilment of legislative and plenary sessions. the Port of Rotterdam. and Austria remain a loyal and stable delegated responsibilities for recruitment, funding source. In 2018, we began the compensation, pensions & benefits, In 2019, HR will continue to focus on Our Financial Institutions team success- transformation of our Savings & Deposits employee development, organisational leadership and culture, as effective fully closed our first-ever Syndicated and department into Value Center Retail. health and labour relations. leadership is key to reaching our targets Trade-Related loans. Both are significant This new name recognises both the value and engaging with our employees. By breakthroughs in our funding base, to for our private individual clients of our In 2018, the main themes were leadership giving the organisation a clear mission and which they provide additional unsecured savings product offering and the internal and corporate culture. HR offered all purpose, leading by example, challenging wholesale credit. value for liquidity funding. We harmonised department heads a two-module learning and inspiring colleagues, and creating a In November, we entered into our first-ever and streamlined our processes, and series on leadership by TIAS NIMBAS diverse and inclusive work environment. asset securitization transaction. The implemented new call centre telephony business school. The training translated into Furthermore, and given the positive outlook underlying assets are part of our shipping software. In the latter part of 2018, we a dialogue on the corporate culture and for the labour market, we will continue to finance portfolio. Project Njord, named also began preparations to upgrade the leadership style most suitable for imple- prioritize our recruitment and employer after the Viking god of the sea, was customer experience. Our aim is to upgrade menting our strategy and business targets branding as an attractive employer with a arranged by Citibank NA and provides us our internet presence and introduce with maximum efficiency, and living up flexible, open, innovative culture. Employee with committed USD funding. Our first enhanced services during 2019. 2019 will to our core values of Client Orientation, branding via social media channels is drawing under this facility took place in also be the year when we will reap the Integrity, Professionalism and Teamwork. one of the key elements of our 2019 HR January 2019. The transaction is remarkable benefits of our investments in our core strategy. Within the ATB Talent Management as it is the first asset securitization done by banking environment: further automation Part of the training budget was dedicated to Programme, an employee learning journey a bank of our size and received significant of our processes and improved data lineage further development of female talents, by will be designed to identify the development

positive press coverage. Our capacity to will bring additional operational efficiencies enrolling two of our colleagues to a Future needs of employees and help them further Report of the Management Board originate and distribute risk in current throughout the organisation, enabling us to Female Leadership programme. We also develop their skills. Training, coaching market conditions will fuel Shipping’s 2019 support the growth of the business. became a member of Women In Financial and mentoring will be part of this learning marketing efforts in the Mediterranean Services, supporting the mission to create a journey. To remain attractive as an basin, Nordics and US. better balance within the financial sector. employer, we will look for a broader scope Although we do not meet the target of at of secondary employee benefits. And last least 30% women on our Management Board but not least, we want to strengthen our and Supervisory Board, significant progress performance-driven culture, by making a was made in 2018 in promoting women to clear distinction between our top performers leadership positions. When recruiting, we and underperformers. In addition to output, explicitly invite women to apply for open we also measure how people accomplish management positions. their targets.

During 2018, HR also focused on a number We continuously review the effectiveness of strategic priorities, such as improvement and efficiency of our organisation, also of the HR analytics reports; enhancements taking into account external, internal and to and standardization of the performance digital developments. This may require management process, and the selection changes in employee capabilities and of a new pension plan, implemented as of resources, including additional training and 1 January 2019. Be Frank is the provider coaching supported by HR. We are also keen of this defined contribution pension plan to achieve further economies of scale and to programme, which will result in capital further automate current manual processes upon retirement (at 68) based on life cycle in order to improve business processes. investments. The pension plan also provides

18 19 Risk Management

Exposure to risk, carefully balanced with its The third stage identifies relevant risk Risk Appetite & Taxonomy expected rewards, lies at the core of the drivers and sets quantitative limits to each In 2018, 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 2018: Modest Appetite 2018: Modest Appetite 2018: 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 will fail to fund or adequate financial reward and strategy. The BRA identifies the risk report consists of a full overview of all stemming from a counterparty’s increases in assets and meet due to movements in financial universe (or ‘taxonomy’) and the inherent risk categories, whereas the weekly report deterioration of financial obligations as they come due markets (including, but not risk exposure to each of the risks defined. provides a more focused update on credit stability or failure to meet at reasonable cost. Liquidity limited to FX rates, interest developments. obligations. Sub-categories Risk arises from the inability of rates, credit spreads, equity The second stage consists of a review of the of this risk include country, ATB to accommodate decreases prices and commodity prices. risk universe and sets qualitative boundaries concentration and counterparty in liabilities or to fund current for acceptable levels of (residual) risk. The default risk. (and increases in) assets in full, delta between inherent and acceptable at the right time and in the risk determines the level of governance right currency. to employ, and is taken into account in the third stage. The inherent and residual Appetite 2018: Average Appetite 2018: Low Appetite 2018: Low exposures, as well as the appetite of the first and second stages, are set out in a qualitative 4-point scale (Low, Modest, These qualitative risk appetites were unchanged from 2017. Average, High) in order to align perceptions of risk across the organisation.

20 21 Strategic Risk Operational risk is considered a non-re- Credit Risk Liquidity & Funding Risk Capital availability and cost efficiency warding risk, and as such the overall Credit risk is one of our most significant The liquidity monitoring is based on a set are the main drivers of risk related to the principle is to mitigate and/or transfer risks in terms of capital consumption. It also of ratios, including regulatory ratios, and a realisation of our business plan. Growing the operational risk exposure while taking cost includes all other forms of counterparty stress test that is designed to measure the portfolio, while maintaining full compliance of control into account. Our change agenda exposure, where counterparties default on liquidity survival for different horizons and with regulatory requirements, remains a key and strategic projects formed the main their obligations to us in relation to hedging scenarios. focus. This risk is managed through capital driver for operational risk exposure in 2018, or other financial activities. Measurement planning and continuous daily tracking of hence an exposure of ‘Modest’ residual risk and monitoring of credit risks are embedded We put a high priority on establishing developments in available and required was accepted in the Risk Appetite. in the Risk Appetite Dashboard via credit an internal funding and liquidity risk capital and pipeline projections. metrics, which include metrics for one strategy that ensures we measure, monitor Nevertheless, significant efforts have obligor exposure, minimum credit quality, and manage our liquidity risk so we can Strategic risks emanating from the geopo- been undertaken to improve control over country risk and industry concentration risk. withstand a range of stress circumstances, litical and macro-economic environment, operational risk. These resulted in improve- without endangering the continuing viability such as the Brexit or strained trade relation- ments in our IT General Control Framework In 2018, both the risk appetite and risk of our business. ships between nations, are monitored and controls documented through the tolerance threshold for the average and reported to the Management and RCSAs. Consequently, the overall assessment expected loss of the portfolio remained We manage our liquidity profile through Supervisory Boards. The effect of a potential on operational risk exposure and control unchanged at 0.5% and 0.8% respectively. short-term liquidity risk management ‘hard’ Brexit is being closely monitored and improved at year-end and we expect it to The year was characterized by a focus combined with a long-term funding is considered to be adequately addressed. improve further in 2019. on embedding risk culture and the credit strategy. Liquidity risk stress testing is The frequency and depth of the analyses are approval process within the organisation, also an important element of our liquidity aligned with the imminence of an event and Regulatory Risk the implementation for group reporting risk measurement, risk evaluation and its potential impact on our bank. As a gatekeeper to the financial system, of ‘Expected Credit Loss models’ and the contingency funding planning for all

we are committed to complying with all transition to a different rating model. The potential contingent or improbable-but-plau- Report of the Management Board Operational Risk applicable laws and regulations. Based on latter contributed to an increase of the sible stress events. Oversight of operational risk is coordinated our analysis of these laws and regulations, average expected loss of the portfolio from by the Operational Risk Committee (ORC). and the impact they have on our clients, 0.43% in 2017 to 0.58% at year-end 2018, and We use liquidity stress tests as a The permanent members of the ORC consist products and countries of operation, we to the decision to increase the risk appetite management tool to identify our potential of representatives from the Management have concluded that our inherent risk for 2019 to 0.6%. Despite the increase in this vulnerabilities and worst-case liquidity risks Board and all three lines of defence. The profile is relatively high compared with the credit metric, the quality of the portfolio on our current cash flows, liquidity position ORC monitors trends and developments Dutch financial sector as a whole. We will remained robust, as we continue to select and liquidity risk mitigation. in operational risk through the relevant therefore be continuing to pay attention and approve facilities with strong collateral section(s) of the Risk Appetite Dashboard to the high-risk elements, including money and structural properties. Detailed metrics for liquidity are included and additional reporting, including key risk laundering, and sanction and corruption in the Risk Appetite Dashboard. Given their overviews based on the output of Risk and risks. However, the residual risks in this area With a specific focus on commodity trade importance, we have also implemented Control Self-Assessments (RCSAs), and the are judged acceptable, due to our extensive and trade-related sectors, such as shipping, a separate Liquidity Dashboard, which testing of internal controls by the 1st and investment in remedial policies, processes, we are exposed to industry-concentration provides granular information to foresee any 2nd line of defence. Scenario analysis is systems and behaviours. The focus in 2018 risk. Having said that, commodity trade liquidity stress. employed to ensure that less probable but was to make sure that the policies remained itself is a diversified industry where different still plausible events with a high potential embedded in the organisation such that staff sub-sectors react differently to related impact are adequately taken into account would be in a position to explain how they economic cycles. Our shipping portfolio is when assessing operational risk exposure. have acted in compliance with the policies. well diversified within shipping subsectors. The inherent volatility of such operational risk is demonstrated in our loss experience: the total direct financial impact after recoveries was caused by only 12% of reported operational risk events.

22 23 Integrity

In 2018, the main driver of both liquidity We have interest-rate-risk measurement We are committed to fostering and update of policies and guidelines. The CDD and funding risk came from the fact that systems that capture all material sources maintaining a sound corporate culture of Policy, for instance, was amended in 2018 the majority of our funding is raised in the of interest rate risk and assess the effect integrity and accountability, to protect both due to changes in the Dutch Wwft. form of Dutch, German and Austrian retail of interest rate changes in ways that are the interests of all relevant stakeholders deposits (denominated in Euros), while the consistent with the scope of our activities: and the sound functioning of the financial Although not all documents were due for majority of lending is conducted in USD sensitivity analysis, stress scenarios and sector in general. We try to do this through review this year, the Integrity Department denominated advances. The market risk Interest rate risk in the Banking Book (IRRBB) the following measures: decided to proactively review, update of this currency mismatch was successfully limits. Key metrics for market risk are and align the entire set of documents that managed down to acceptable exposure included in the Risk Appetite Dashboard. Risk-based approach make up the policy framework in order levels. However, we recognise the need We are required to establish, implement to maximise uniformity in wording and for further diversification of the funding and maintain adequate policies and efficiency in planning. base and have launched several initiatives procedures to detect any risk of failure to improve it, such as repos of assets in by our bank and/or employees to comply Based on a continuous dialogue with all ATB the securities portfolio with commercial with their obligations. As part of this, the departments, the Integrity Department not European banks, secured funding from Integrity Department continuously identifies only detects and resolves potential hurdles, Citibank NA and unsecured wholesale and assesses Integrity Risks, based upon all but also provides support that enables funding from a syndicate of banks. relevant laws, regulations, internal policies, our employees to exercise their individual market standards and best practices, responsibility to act with integrity, and Market Risk ATB’s Code of Conduct, and moral and adhere to applicable laws and regulations. It is our policy not to be exposed to ethical standards. ATB’s integrity risks are significant open positions in interest rate thoroughly and demonstrably assessed Education and awareness

and foreign currency risk in the Banking periodically, and measures to mitigate In order that our employees are kept Report of the Management Board Book, and our strategy for the coming years these risks are duly implemented within aware of integrity risks and applicable includes treasury trading activities in order the bank, as described in the Systematic regulations, we ensure there is a to enable some income diversification. Integrity Risk Analysis (SIRA). comprehensive education programme to maintain sufficient knowledge of ATB’s Market risk arising from Treasury Front Policies and guidance integrity policies. In 2018, the Integrity Office Department trading activities in the Our business principles, outlined in our Department organised a number of trading book is managed and monitored in Code of Conduct, provide the minimum sessions on a range of topics including accordance with the applicable internal standards of expected behaviour. In CDD, General Data Protection Regulation guidelines, principles and mandates: market addition to the Code of Conduct itself, we (GDPR), Sanctions, Foreign Account Tax risk limits, expressed in terms of Value at have a policy framework that includes our Compliance Act (FATCA), SIRA, the working Risk (VaR), are set to prevent the accumu- Anti-Corruption Policy, Market Abuse Policy, of the three-lines-of-defence model, lation of market risk beyond the market risk Speak Up Policy, Client Due Diligence lessons to be learned from the Houston tolerance. The VaR limits are set, monitored (CDD) Policy, Data Protection Policy, (ING) investigation, Anti-Corruption, and and managed at trading book level Complaints Management Policy, Incident the employee mind-set. Some of these (foreign exchange, derivatives and fixed Management Policy, the Charter of the sessions were mandatory for all employees income). These limits are complemented Integrity Department and the Charter of and Management Board members, and by additional monetary and non-monetary the Integrity Committee. It is the Integrity during these sessions employees received trading controls, with the aim of preventing Department’s responsibility to ensure the information on regulatory changes and excessive concentrations or illiquidity of framework is kept up-to-date at all times, other relevant developments. The changes exposures. We use derivative transactions to and to continuously monitor relevant legal, and developments were also communicated hedge most of our market exposure (mainly social and other international developments digitally to the relevant employees. foreign exchange and interest rate risk). in order to accordingly ensure the timely

24 25 Corporate Social Responsibility

The Integrity Department puts special and international sanctions) in the previous Being a good corporate citizen in the we can together take steps to help make effort into outlining to employees their year and will continue to do so in the year local and global communities in which we the finance industry more sustainable. We individual responsibility to continuously to come. operate is at the heart of our culture, and achieve this by being open to new insights take the time to gain the knowledge and we committed to a sustainable future. In and innovative ideas, and by maintaining a understanding required to exercise good We periodically conduct thematic reviews. September 2018, we appointed a dedicated healthy dialogue with our stakeholders. We judgement, adhere to the policy framework In 2018, these focused on the embedding of Director Corporate Social Responsibility who were therefore proud to accept an invitation and apply ATB’s business principles. This the Anti-Corruption Policy, GDPR, Transaction focuses fully on this area. to participate in the speakers’ panel of the included a repetition of the Bankers’ Oath Monitoring and employee mindset. Findings 5th Conference of the European Associations principles over a number of sessions that and/or recommendations are included in the Our Corporate Social Responsibility of Foreign Banks to discuss “accepting were mandatory for all employees. All quarterly reports to the Integrity Committee, (CSR) agenda ranges from implementing responsibility and investing sustainably – new employees also undergo a mandatory which is made up of representatives from environmentally-friendly workplace policies allocating capital and driving the change introduction programme. By focusing on the all three lines of defence. This enables each to making our business model more actively”. We have also been closely involved individual employee’s responsibilities in this line of defence to take responsibility for sustainable, as we realize that the real in the drafting of a set of principles to way, the Integrity Department contributes maintaining a sound corporate culture of opportunities to make a contribution lie in support the integration of climate risk to a clear narrative that underlines the integrity and accountability. our core activities. Our aim is to create a into lending decisions in shipping finance. importance we place on our business CSR strategy that focuses on co-creating The scope of these principles includes principles, policies and moral standards. ATB’s Incident Management Policy and Speak value for the business and society. target-setting for Green House Gas (GHG) Up Policy aim to ensure that any matters The scope and ambitions of our emissions, and enforcement through the Monitoring and reporting that may cause harm or damage to our commitment to sustainability come through requirement of annual updates and reporting The risks relating to integrity, and adherence organisation, including our employees, are actions in four areas: our employees, our on progress regrading decarbonisation. to applicable laws and regulations, are reported and dealt with in a timely and economic activities, the environment and thoroughly and demonstrably assessed adequate manner. In 2018, there were no ethical behaviour, as these four dimensions Because we believe strongly that education

periodically. Measures mitigating these risks incidents that required reporting to DNB or are the drivers of our organisation and unites people and cultures, we organised an Report of the Management Board are duly implemented within our bank as the AFM. There were a few reports filed in business model. interactive workshop for Erasmus University described in the SIRA, which is updated respect of the Speak Up Policy. Based on how Rotterdam School of Management MBA every year. The Integrity Department also these reports were dealt with and finalised, All employees were asked to define their students to introduce them to banking monitors whether risks are identified, it was concluded that the Speak Up process own personal individual CSR target for 2019. and commodity finance, and the shipping assessed and mitigated effectively. Quarterly was implemented appropriately and works Because we cooperate with different parties finance industry in particular. We continued integrity monitoring reports are presented effectively. throughout the commodity value chain, our support of United World Colleges by to the Integrity Committee and the sponsoring the UWC Art for Impact auction, Management Board. Action taken is tracked Looking forward the proceeds from which are used to fund to ensure follow-up and completion. We support a culture of openness and scholarships for talented, committed honesty, where employees are encouraged students who wouldn’t otherwise have We recognize our responsibility to prevent to discuss any questions, dilemmas or the resources to fund their education. For crime in any form, and to participate in concerns. The Integrity Department the third year in a row, our employees the international fight against any form contributes to this culture, and to organised a charity raffle and auction on of money laundering and/or terrorism transparency within our bank and towards their own initiative, the proceeds of which financing. When negative coverage our stakeholders. were donated to the Dutch Cancer Society is published relating to any of these (KWF Kankerbestrijding). subjects, we perform internal look-backs. The Fiod investigation into possible We also request our clients to provide past breaches of the Wwft with regard Our relocation to the World Trade Center an ‘Annual Compliance Letter’, in which to client due diligence and the timely building at the beginning of 2018 has they confirm that they have acted in reporting of unusual transactions has not enabled us to make our operations more compliance with applicable laws and yet been finalized. It is not yet clear what sustainable. The building’s electricity is regulations (in particular with regard to consequences, if any, this investigation UWC Art for Impact generated by Dutch wind turbines and we Anti-Money Laundering, Anti-Corruption may have. Sijtse Keur - Hof van Eden have introduced a separate-waste system.

26 27 Outlook 2019 Responsibility Statement

The macro-economic environment presents retail offering with a view to enhancing the Pursuant to section 5:25c sub 2 part c of significant uncertainties: the slowdown customer experience. the Dutch Financial Supervision Act, the of global economic growth, the impact members of the Management Board state of Brexit, the non-resolution of the trade There will remain a strong focus on that to the best of their knowledge: conflict between the United States and regulatory compliance, including but not China, and low Eurozone growth rate. All limited to our role as gatekeeper of the • The Annual Financial Statements give these uncertainties have an impact on financial system, and cyber security. a true and fair view of the assets, global trade and create a drive towards We also embrace the importance of liabilities, financial position and profit or the regionalisation of trade. For a bank corporate social responsibility, and assisted loss of Amsterdam Trade Bank N.V. (and that is positioned around the trade value by students of the Erasmus University the companies included in the consoli- chain, the current situation provides both Rotterdam School of Management, we are dation); challenges and opportunities; and our conducting a research project into how to • The Annual Report gives a true and location, size and agility mean we are embed sustainability and good citizenship fair view of the state of affairs on the well-positioned to respond quickly to any into our daily operations. balance sheet date and the course changing environment and benefit from the of business during the financial year opportunities it may offer. We expect a considerable improvement 2018 of Amsterdam Trade Bank N.V. in our 2019 operational result, due to the and of its affiliated entities, of which Our strategy designed around underbanked expected organic business growth and data is included in its Annual Financial niches of the trade value chain was first efficiency gains resulting from further Statements; rolled out in 2016 and has proven successful automation of our internal processes. We • The Annual Report describes the material ever since. Three years down the road, will continue to strengthen our values and risks with which Amsterdam Trade Bank

we will be reviewing and fine-tuning corporate culture, and gear our organisation, N.V. is faced. Report of the Management Board this strategy to align it with current in both number of employees and skills circumstances and allow us to build further and knowledge, to the requirements of the Amsterdam, 26 April 2019 on our strong core capabilities. Important markets and our clients. 2019 themes are growth, risk diversification, Management Board: expansion of revenue streams, improved efficiency and enhanced technology. C. Antoniou, Chief Executive Officer and Chairman H.P.M.G. Steeghs, Chief Financial Officer To better service our clients, we are P.J. Ullmann, Chief Risk Officer extending our corporate clients offering with innovative and differentiating structured commodity products and services that will help clients optimise their balance sheets and liquidity positions. We intend to simplify and shorten the ‘time-to-yes’ for our all our clients by implementing best-in-class automation and streamlining our operational processes. We are exploring opportunities to extend our strategy to underbanked niches beyond the trade value chain. The focus will remain on mobility and entrepreneurship. We are expanding, modernising and upgrading our

28 29 Letter from the Chair

have concluded productive partnerships with other financial institutions and made solid progress on our digital transformation journey. Delivering business value through the smart use of technology and enhancing our digital offering remains one of our key objectives, and we are excited about the possibilities it offers.

During the course of the year, the Supervisory Board has been further strengthened by the appointment of Ruut Meijer as an independent member. Ruut brings extensive banking experience to the board with more than 30 years with ABN AMRO, including FinTech development, which will help further accelerate our new technological initiatives.

In the coming year, we will continue to deliver on our mission to become the

“In the coming year, we will centre of excellence for financial solutions Report of the Supervisory Board Report of the continue to deliver on our to the commodity value chain. Despite the ongoing disruptions to world trade, we are mission to become the centre optimistic about the future and the business of excellence for financial community’s ability to adapt to world Supervisory Board solutions to the commodity events, and our aim is to support them in value chain.” these efforts. Equally important is having a positive impact on our employees and the Ron Emerson CBE Chairman of the Supervisory Board communities we serve by embedding sustain- ability deeper into the way we do business.

Together with my colleagues on the In 2018, ATB made good progress in Supervisory Board, I look forward to developing our merchant bank for the continuing to oversee ATB as it continues 21st century. From our new offices in the on its exciting journey. Finally, I would like financial heart of Amsterdam, we continued to thank our employees and all our stake- to expand our business. Despite increasing holders for their contributions over the geo-political and economic uncertainty, past year. we have grown our portfolio, expanded the offering to our clients and widened our Amsterdam, 26 April 2019 geographical footprint. Our customer-centric approach has been rewarded with a growing Ron Emerson CBE number of new clients. Along the way, we Chairman of the Supervisory Board

31 Supervisory Board meetings

The Supervisory Board consists of six Audit Committee annually evaluates the Mr A.J. Baxter (as of 1 September 2018), members. All members share equal functioning of the internal audit function and Mr R.V. Emerson (as of 1 September responsibility for the execution of the and the external auditor, and the external 2018). Supervisory Board’s function. In 2018, auditor’s independence and fees. Key the Supervisory Board had five regular audit matters, as included in the external The composition of the Supervisory Board meetings in February, April, June, auditors’ management letter, were also changed during 2018. On 1 September September and November, and five a topic of discussion. During 2018, the 2018, Mr R. Meijer was appointed as a further meetings via conference call to committee consisted of Mr H.C.M. van member of the Supervisory Board, adding discuss specific topics. All members of the Damme (Chairman), Mr R. Meijer (as of 1 significant experience in corporate and Supervisory Board and Management Board September 2018) and Mr A.J. Baxter. merchant banking, both domestically and participated in the regular Supervisory internationally. Board meetings. The topics discussed The Risk and Compliance Committee during these meetings included the met five times and monitored ATB’s risk The annual report (including the financial following: our long-term strategy and policies, appetite and profile, as well statements) have been drawn up by the the implementation thereof, commercial as its governance and compliance with Management Board and audited by Ernst activities and new strategic initiatives, laws and codes. To this end, the Risk & Young Accountants LLP, who issued an risk management and risk appetite, the and Compliance Committee discussed unqualified audit opinion dated 26 April credit portfolio, financial performance, ATB’s policies and appetite on credit 2019. We recommend that the shareholders capital, the funding profile, IT, integrity, risk, market risk, capital and liquidity adopt the 2018 financial statements, and the remuneration policy, the regulatory adequacy, operational risk, regulatory discharge the Management Board and environment and reporting, culture risk and strategic risk. On an ongoing Supervisory Board for their respective

and the internal organisation. The basis during the year, the committee management and supervision during the Report of the Supervisory Board composition of the Supervisory Board also took several decisions on credit financial year 2018. On adoption of the and its committees were also discussed. proposals escalated in accordance with 2018 annual report, no dividend will be There were no transactions in the ATB’s internal governance. During 2018, distributed for the financial year 2018. financial year 2018 in which the members the committee consisted of Mr R. Meijer of the Supervisory Board had a conflict (Chairman – as of 1 September 2018), Mr We would like to thank the members of of interest. The financial statements H.C.M. van Damme (interim chairman until the Management Board, all employees and and the findings of the external auditor 31 August 2018) and Mr A.B. Sokolov. shareholders for their ongoing commitment were discussed in the external auditor’s to ATB. presence. The Remuneration and Nominating Committee met four times and discussed, Amsterdam, 26 April 2019 While retaining overall responsibility, the amongst other things, ATB’s Remuneration Supervisory Board assigns tasks to the Policy and the alignment thereof with The Supervisory Board following three permanent committees: Dutch and European banking regulations, expectations of the various stakeholders R.V. Emerson, Chairman Management Board, the external auditor and social acceptance. The Remuneration H.C.M. van Damme, Vice-Chairman and the Head of Internal Audit were and Nominating Committee discussed the D. Vovk present at these meetings. The Audit performances of the Supervisory Board, A.B. Sokolov Committee discussed the regular risk its committees, its members and the A.J. Baxter assessment, the audit plans and reports individual members of the Management R. Meijer of the internal and external auditor, Board. During 2018, the committee the audit plan execution, and progress consisted of Mr D. Vovk (Chairman), Mr. in the resolution of audit issues. The H.C.M. van Damme (until 31 August 2018),

32 33 The Management Board

The Management Board is collectively between the commercial interests of ATB responsible for the management of ATB and the risks to be taken. One member and the general course of affairs, while is responsible for risk management and each of its members has specific roles does not bear any individual commercial and responsibilities. Each member of the responsibilities. In accordance with best Management Board possesses a thorough practice, the Management Board submits knowledge of the financial sector in ATB’s operational and financial objectives, general and banking sector in particular. together with the strategy to achieve its Each member of the Management Board stated goals, to the Supervisory Board for Corporate is required to act in accordance with the the latter’s consideration and approval. interest of ATB and its business, and is The composition of the Management Board aware of the social role of a bank and of makes it possible for it to perform its tasks the interests of the various stakeholders. properly. The outlined objectives and Governance The members of the Management Board strategy include detailed parameters to are appointed by the General Meeting upon be applied in relation to the strategy, such nomination of the Supervisory Board. Taking as ATB’s financial ratios, and capital and into account the risk appetite approved by liquidity adequacy levels. the Supervisory Board, the Management Board ensures for a balanced assessment Corporate Governance

The composition of the Management Board as per 31 December 2018 was:

C. Antoniou H.P.M.G. Steeghs P.J. Ullmann (Chairman, CEO) (CFO) (CRO)

Year of birth: 1968 Year of birth: 1957 Year of birth: 1958 Nationality: Hellenic Nationality: Dutch Nationality: British Member Since: 2016 Member Since: 2014 Member Since: 2014 End of term: 2020 End of term: 2022 End of term: 2022 Areas: Commercial activities, Areas: Finance & Control, Areas: Risk Management, Business Strategy Regulatory Office, Integrity, Credit Support, & Development, ICT, Operations. Financial Restructuring Human Resources, & Recovery. Internal Audit, Corporate Office.

34 35 The Supervisory

The composition of the Supervisory Board Board as per 31 December 2018 was:

R.V. Emerson H.C.M. van Damme D. Vovk The role of the Supervisory Board is to possesses the specific expertise needed Chairman (independent) (independent) (dependent) supervise the policies of the Management to perform their role on the Supervisory 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 members. Up adopted. The Supervisory Board discusses Year of birth: 1947 Year of birth: 1951 Year of birth: 1969 to three members are affiliated with the annually the variable incomes. Specific Nationality: British Nationality: Dutch Nationality: Russian Alfa Banking Group, the shareholder of issues are dealt with and prepared in the Member Since: 2017 Member Since: 2013 Member Since: 2016 ATB. The other members, including the Audit Committee, the Risk and Compliance End of term: 2021 End of term: 2021 End of term: 2020 chairman, are independent. The members Committee, and the Remuneration and Other positions: Director Other positions: Director ATB Checkmates B.V., Chair Holdings S.A. (Luxembourg) of the Supervisory Board have a collective Nominating Committee. Members of these Common Content Project responsibility. Each member is required committees are appointed by and consist of to act in accordance with the interest of a number of members of the Supervisory ATB, and is aware of the social role of a Board. The assessment of the effectiveness bank and of the interests of its various of the permanent education programme stakeholders. Pursuant to the Articles of for the Supervisory Board and Management Association, Supervisory Board members Board is part of the annual evaluation Corporate Governance are empowered to obtain any information performed by the Supervisory Board. they deem necessary for the performance A.B. Sokolov A.J. Baxter R. Meijer of their duties. Members of the Supervisory (dependent) (dependent) (independent) 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: 1955 Year of birth: 1966 Year of birth: 1958 Nationality: Russian Nationality: South-African Nationality: Dutch Member Since: 2016 Member Since: 2016 Member Since: 2018 End of term: 2020 End of term: 2020 End of term: 2022 Other positions: Chairman Other positions: Director Other positions: Chairman Executive Board OJSC and CFO ABH Holdings S.A. of the Board of Directors of Alfa-Bank (Russia), Chairman (Luxembourg), Director ABH Buckaroo B.V., Chairman Board of Directors Financial Limited (Cyprus), of the Board of Directors Baltiyskiy Bank (Russia) Director OJSC Alfa-Bank of ABN AMRO Channel (Russia), Director PJSC Islands Ltd, Director Xenia Ukrsotsbank (Ukraine), Director Consulting B.V. PJSC Alfa-Bank (Ukraine)

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 Dutch Banking Code

Audit Committee (AC) Remuneration and Nominating The Dutch Banking Code, drawn up by The main responsibility of the Audit Committee (RNC) the Dutch Association of Banks, came Committee is to assist the Supervisory The main responsibilities of the Remuner- into force on 1 January 2010. The Code Board in monitoring the preparation and ation and Nominating Committee are focuses on making the best interests of the audit of ATB’s financial statements, and to advise the Supervisory Board on the customer a priority, on the principles of risk ATB’s capital and liquidity adequacy remunerations policy for the members of management, auditing and governance, and assessment reports, monitoring the quality the Supervisory Board, members of the on compensation policies. The Banking Code and effectiveness of ATB’s system of Management Board and senior management; applies to all banks with a banking licence. governance, risk management and control to implement, evaluate and oversee the Deviations from the principles of the Banking procedures, and monitoring the external implementation of the remuneration policy Code are allowed, provided that the reasons and internal audit governance and quality, adopted with regard to the members are explained. including IT audits and IT security. The of the Management Board and senior AC reports its findings to the Supervisory management; and to approve the principles We adhere to the Banking Code and have Board and these findings are discussed in its of the remuneration policy for other bank taken into account the recommenda- plenary meetings. employees. The RNC’s responsibilities tions following the report ‘Bridging the include the monitoring of the performance differences’ from the Monitoring Committee Risk and Compliance of the Supervisory Board, its committees, Codes of Conduct 2016. More information Committee (RCC) its members and the individual members of on our implementation of the Banking The main responsibility of the Risk and the Management Board. The RNC prepares Code, including the full comply-or-explain Compliance Committee is to assist the the profiles of individual Supervisory statement as required under the Banking Corporate Governance Supervisory Board in supervising ATB’s Board and Management Board positions, Code, is available at: risk policy, appetite and profile on credit considering the required specific expertise, www.amsterdamtradebank.com/about-us/ risk, market risk, capital and liquidity complementarity, collegiality and diversity. corporate-governance/ adequacy, operational risk, regulatory risk The RNC prepares the proposals for and strategic risk. In addition, the RCC appointment, re-appointment and dismissal assists the Supervisory Board in the overall of Management Board members, Supervisory oversight of ATB’s compliance function and Board members and the composition of the internal governance, and ATB’s adherence to Supervisory Board committees. The RNC corporate governance principles and its Code prepares the proposals for the Supervisory of Conduct. The RCC assesses the policy in Board and reports its monitoring findings to the fields of corporate sustainability and the Supervisory Board in order that these corporate social responsibility. Furthermore, can be discussed in its plenary meetings. the RCC has authority to decide on credit proposals escalated in accordance with ATB’s internal governance rules. The RCC reports its findings to the Supervisory Board and these findings are discussed in its plenary meetings.

38 39 Remuneration Report

We reviewed and amended our remuner- In 2018, the total amount of remuneration Our remuneration ation policy in 2018, taking into account all paid to the Management Board was € 1,710 principles are as follows: relevant laws, regulations and guidelines. thousand (2017: € 1,663 thousand) and We practice a restrained and sustainable to the Supervisory Board € 313 thousand remuneration policy that is in line with our (2017: € 319 thousand). Over the financial Remuneration is Remuneration is long-term strategy, risk appetite, goals and year 2018, limited variable remuneration employee-oriented by: performance-related by: values. Our remuneration policy aims in its was awarded to employees and no variable execution to avoid conflicts of interest and remuneration was awarded to Management • fostering a sense of value and appreciation in • establishing a clear link between performance excessive risk-taking, and has the protection Board members (2017: € 16 thousand). each individual employee; and pay, and aligning adequate indicators and of our customers’ interests at heart. • promoting the shorter and longer-term interests target-setting with performance evaluation and Furthermore, it is designed to support us in and well-being of all employees via adequate remuneration; achieving our strategic HR objectives: compensation, pension and/or other benefits; • reflecting individual as well as collective • supporting the career development of our performance in line with our long-term interests; (i) attracting, retaining, motivating employees. • avoiding any ‘pay-for-non-performance’. and rewarding the required levels of highly-qualified employees, and (ii) fostering an alignment of interests Remuneration is equality-driven by: between our employees and our bank in • promoting fairness, consistency and alignment in our remuneration policies and practices, with balanced general. 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 Within the framework of a restrained and in our remuneration structures (internal equality); sustainable remuneration policy, we aim to • aiming at controlled market competitive remuneration in comparison with an appropriately established offer competitive remuneration levels, in peer group (external equality). accordance with relevant regulations and accepted standard practices, and taking into account our size, the diversity of our Remuneration is risk-prudent by: workforce and the international context in which we operate. • 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.

40 41 Financial Consolidated Statements 2018 Financial Statements 2018

42 43 Consolidated statement of financial position Consolidated statement of income At 31 December before appropriation of profit

(in 1,000 euro’s) 31/12/2018 31/12/2017 (in 1,000 euro’s) 2018 2017

Assets Note* Income from operating Note* activities Cash and balances with central banks 1 138,867 181,791 Interest income 18 44,488 36,214 Loans and advances to banks 2 84,865 116,469 Interest expense 19 21,073 15,521 Loans and advances to customers 3 841,263 610,650 Net interest income 23,415 20,693 Interest-bearing securities 4 306,479 226,966 Commission income 2,653 3,668 Shares and other non-interest-bearing securities 5 194 240 Commission expense 191 231 Intangible assets 6 11,136 8,747 Net commission income 20 2,462 3,437 Property and equipment 7 2,075 1,106 Result on financial transactions 21 4,898 15,852 Prepayments and accrued income 8 21,021 20,460 Other income 22 -1,153 3,208 Other assets 9 19,951 48,845 Total income from operating 29,622 43,190 Total assets 1,425,851 1,215,274 activities

Liabilities and equity Expenses Amounts due to banks 10 80,539 33,065 Staff expenses 23 21,050 21,014 Funds entrusted 11 1,074,913 922,080 General and administrative expenses 24 13,465 15,662

Accruals and deferred income 12 17,436 18,765 Depreciation and impairments of Provisions and other liabilities 13 35,738 24,234 intangible assets and property and 25 3,043 2,691 equipment Subordinated loans 14 35,000 35,000

Resolution charge 26 1,355 1,203 Financial statements Total liabilities 1,243,626 1,033,144 Impairments of financial instruments 27 -9,429 -11,021 Equity: Total expenses 29,484 29,549 • Issued share capital 99,763 99,763 Operating result before tax 138 13,641 • Share premium reserve 88,186 88,186 Income tax 28 - 2,923 • Retained earnings -5,862 - Net result 138 10,718 • Currency translation reserve - -16,537 • Undistributed result 138 10,718 Total equity 15 182,225 182,130 Total liabilities and equity 1,425,851 1,215,274

Contingent liabilities 16 35,956 54,382 Irrevocable commitments 17 13,949 49,519

* 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

(in 1,000 euro’s) Share capital Share premium reserve Retained earnings Currency translation Undistributed profit Total equity reserve

Balance at 1 January 2017 271,803 11,384 -74,460 -15,351 -50,778 142,598 FX revaluation - - - -1,186 - -1,186

Net result (as per statement of income after restatement - - - - 10,718 10,718 material error ESPP accounting) Total FX movement and net result - - - -1,186 10,718 9,532 Appropriation of result - - -50,778 - 50,778 - Issue of shares (nominal € 453) 30,000 - - - - 30,000 Redenomination of shares (from € 453 to € 150) -202,040 76,802 125,238 - - - Balance at 31 December 2017 99,763 88,186 - -16,537 10,718 182,130 Impact of adopting RJ 290 based on ECL - - -43 - - -43 Balance at 1 January 2018 99,763 88,186 -43 -16,537 10,718 182,087 Net result (as per statement of income) - - - - 138 138 Total FX movement and net result - - - - 138 138 Appropriation of result - - 10,718 - -10,718 - Disposal of subsidiary - - -16,537 16,537 - - Balance at 31 December 2018 99,763 88,186 -5,862 - 138 182,225 Financial statements

Consolidated statement of comprehensive income

(in 1,000 euro’s) 2018 2017

Net result (as per statement of 138 10,718 income)

Translation difference - -1,186 foreign activities

Net other comprehensive income - -1,186 recognized directly in Total equity

Total comprehensive income for 138 9,532 the period

46 47 Consolidated statement of cash flows Consolidated statement of cash flows

(in 1,000 euro’s) 2018 2017 2018 2017 Cash flow from operating activities Cash flow from financing activities Operating result before tax 138 13,641 • Issuance of capital - 15,000 Adjustment for Net cash flow from financing activities - 15,000 • Depreciation and impairments of intangible assets and property 3,043 2,691 Net decrease/increase in cashflows -14,989 -236,033 and equipment • Impairments of financial instruments -9,429 -11,021 Cash and cash equivalents • Amortisation premium and discounts 3,564 3,266 Balance at 1 January 159,311 395,344 • Result from sale of interest bearing securities -919 -402 Balance at 31 December 144,322 159,311 • Result from sale of non-core loans -5,291 -15,729 Decrease/increase in cash and cash equivalents -14,989 -236,033 • unrealized result on loan participations -1,013 - • Result from sale of shares -6 - Additional information • FX effect on subsidiary - -1,186 Cash flows from interest received 46,134 40,415 • FX revaluation effects 1,484 -11,093 Cash flows from interest paid -20,325 -16,653 Cash flow from operating activities -8,429 -19,833

Net increase (decrease) in operating assets and liabilities • Amounts due from banks 40,548 -50,021 • Amounts due to banks 66,336 -107,28 4 • Loans and advances to customers -216,953 -80,227 • Funds entrusted 152,833 -10,515

• Prepayments and accrued income / Financial statements -1,890 3,870 Accruals and deferred income • Other assets / liabilities 41,360 -14,872 Total movement in assets and liabilities 82,234 -259,049 Net cash flow from operating activities 73,805 -278,882

Cash flow from investing activities Investments and acquisitions • Interest-bearing securities -221,550 -67,47 7 • Intangible assets -5,105 -2,655 • Property and equipment -1,296 -1,097

Divestments, repayments and sales

• Interest-bearing securities 139,127 99,078

• Shares 30 -

Net cash flow from investing activities -88,794 27,849

48 49 Notes to the Consolidated Financial Statements 2018

50 51 • ATB ESPP B.V. in Amsterdam, a pooling past and state their willingness and ability Summary of significant entity only for the purpose of holding to provide support for the Bank to meet its the shares of the employee share regulatory requirements. The promise to purchase plan (ESPP) in which ATB has 0% uphold regulatory ratios of ATB is a clear ownership; commitment to ensure ATB’s continued accounting principles existence by being fully compliant with the • ATB Shipping B.V. in Amsterdam, a Special Purpose Entity (SPE) to facilitate solvency and liquidity requirements set by a securitisation structure in which ATB the regulator. and policies has 0% ownership. Based on the above assessment, the B.1.3 Going concern conditions present in order to fulfil the The Management Board has made extensive projections made in the business plan analyses of the possible developments over and the assessment of ATB’s capability to the next twelve months in order to assess mitigate the risks around the execution of the potential impact on the results of the its strategic goals, the Management Board A. General B. Basis of preparation Bank and the Bank’s capital position. concludes that the financial statements Amsterdam Trade Bank N.V. (ATB) is an 2018 have been prepared on a going independent financial institution founded in B.1.1 General The Management Board’s business concern basis. 1994 that obtained its banking license in the The financial statements have been prepared plan scenario takes into account the same year. ATB provides financing for the in accordance with Part 9, Book 2 of the Bank’s updated financial projections, B.1.4 Judgement and estimates entire spectrum of the international trade Dutch Civil Code. The accounting policies the commitment of our shareholders to The preparation of the financial statements and commodity logistics chain including applied for measuring assets and liabilities continue providing support to the Bank, as requires management to make estimates asset based and corporate finance. ATB and profit determination are based on the well as the ability to continue execution and assumptions that affect the amounts serves a wide range of customers active historical cost basis unless stated otherwise. of our strategy. Considering the challenges reported for assets and liabilities, the across all aspects of international trade, All amounts are expressed in thousands of in 2019, the Bank has defined cost control reporting of contingent assets and liabilities including commodity traders, producers, euros, unless stated otherwise. measures and increased cost awareness at the date of the financial statements, as processors, manufacturers and ship-owners. throughout the organization which have well as the amounts reported for income Since 2003, ATB has been providing retail B.1.2 Basis for consolidation been implemented by the end of 2018. and expenses during the reporting period. Financial statements services in The Netherlands, offering The consolidated financial statements of The Bank is sufficiently capitalized in The situations that are assessed based on savings and deposit products. In 2006, ATB ATB comprise the financial statements of order to continue with its normal business available financial data and information expanded its internet retail operations to Amsterdam Trade Bank N.V., its subsidi- operations in accordance with the strategic mainly relate to the determination of the Germany, followed by Austria in 2011. aries and other companies controlled by plans. allowance for expected credit losses, legal ATB and are prepared at 31 December. The cases, the fair value of financial assets ATB’s registered office is at Strawin- financial year is the same as the calendar The Management Board has also considered and liabilities as well as the identification skylaan 1939, 1077 XX, Amsterdam, the year. Intra group payables and receivables another, more stressed, scenario in which of impairments. Although management Netherlands. ATB is a company incorpo- and any unrealized profit and losses within less strategic growth and no additional based its estimates on the most careful rated and established in The Netherlands the group or income and expense from such capital support is taken into account and assessment of the current circumstances and registered under number 33260432 transactions are eliminated upon preparing has concluded that the Bank is strong and activities, the actual results might at the Chamber of Commerce. The main the consolidated financial statements. The enough to continue with its normal business deviate from these estimates. The use of shareholder of ATB is Alfa Group. The totals may not always match the sum of the operations into the foreseeable future different assumptions and methods may, consolidated financial statements of individuals due to rounding. and is well positioned to take its next due to the subjective nature involved, Amsterdam Trade Bank N.V. at 31 December steps in achieving the strategic targets in result in different outcomes. 2018 were prepared by the Management The following entities are part of the consoli- accordance with the business plan. Board, approved by the Supervisory Board dation group as at 31 December 2018: on 26 April 2019 and will be submitted to • Amsterdam Trade Capital Administration Furthermore, the Management Board would the General Meeting of Shareholders for Corporation B.V. (ATCAC), a 100% owned like to point out that it also values the adoption within the regulatory time period. subsidiary; commitment of the ultimate shareholders of ATB, as has been expressed by the shareholders in a letter to the Management Board of ATB itself. In such letter the share- holders reiterated their commitment to support ATB in resolving the issues from the

52 53 Critical accounting estimates and c) Deferred tax asset underlying share and the purchase price. financial assets based on expected credit judgments Deferred tax assets arise mainly from As from 2017, this liability is re-measured at losses (ECL) in accordance with IFRS 9 ATB makes estimates and assumptions that tax losses that can be carried forward each reporting date up to and including the Financial instruments. The new standard affect the reported amounts of assets and to be utilised against profits in future settlement date with changes in fair value became effective on 1 January 2018. ATB liabilities within the next financial year. years. The level of deferred tax asset recognised in the general and administrative applies this standard by adjusting the Estimates and judgments are continually recognition is influenced by management’s expenses in the income statement while opening balance sheet and opening retained evaluated and are based on historical assessment of future profitability. At each amortized during the vesting period of 48 earnings as per 1 January 2018, with no experience and other factors, including balance sheet date, existing assessments months, with a corresponding adjustment restatement of comparative periods. expectations of future events that are are reviewed and, if necessary, revised to Other liabilities. As such, the fair value believed to be reasonable under the to reflect changed circumstances. At 31 change of the employee share purchase plan In 2018, ATB changed its accounting circumstances. The main items subject to December 2018, no deferred tax asset is as calculated for 2017 amounted to € 1.257 presentation with respect to the following accounting estimates where changes in the recognized (2017: nil). million while an amount of € 314 thousand items and adjusted the comparative figures underlying assumptions may impact the was recognized in the general and adminis- 2017 accordingly: financial statements are the following: d) Amortisation of intangible assets trative expenses of the income statement • Presentation of arrangement fee accounts The amortisation of intangible assets 2017. from commission income into interest a) Impairment losses on financial instruments reflects the pattern of how assets income. In 2017, these arrangement fee ATB reviews its loan portfolio and other contribute to future cash flows. At balance In 2018, ATB has re-assessed the conditions accounts were presented as commission financial instruments to assess impairment sheet date, management assessed if stipulated in the agreement of the ESPP with income (€ 2.8 million). at least on an annual basis. In determining the pattern of future economic benefits respect to the fair value changes of these • Presentation of recoverable VAT from whether an impairment loss should be expected to flow from the Bank’s shares. It became clear that the partici- other income into general and adminis- recorded in the statement of income, intangible assets that are subject to pants are entitled to a fair value change at trative expenses. In 2017, the recoverable the Bank makes judgments as to whether amortization had changed. There were no any moment during the four years period, VAT were presented as other income (€ there is any observable data indicating changes in amortization periods during so their rights vest immediately. As such a 2.5 million). that there is a measurable decrease in the year. fair value change should be accounted for in the estimated future cash flow from loans each year instead of amortizing the annual B.1.6.1 Expected Credit Losses model and other financial instruments in the e) Unconsolidated structured entities fair value movement over the remaining As from 1 January 2018, ATB has been portfolio. A structured entity is an entity for which vesting period of 48 months. The effect of recording the allowance for expected voting rights are not the dominant factor this error in the financial statements 2017 is credit losses (ECL) for loans and advances Financial statements b) Litigation / legal cases in deciding control. Structured entities material and amounts to € 943 thousand. to banks, loans and advances to customers, From time to time ATB is involved in have restricted activities and are generally interest bearing securities and for contrac- claims and litigations. Management Board designed to achieve a narrow and well-de- This omission of € 943 thousand has been tually committed facilities and financial makes estimates as to whether provisions fined objective. An interest in a structured adjusted retrospectively in the general guarantee contracts, referred as ‘financial are needed on a case-by-case basis. The entity is any form of contractual or and administrative expenses of 2017 in instruments’. Bank has a few number of litigations non-contractual involvement with variable accordance with Dutch Accounting Standards and legal cases, mainly the FIOD case. returns arising from the performance of 150. As a result, the net profit and closing The previous impairment methodology was Litigation provisions, if any, are monitored the entity for the Group. equity in the comparative figures of 2017 based on an ‘incurred loss’ model, meaning by management on a periodic basis. The retrospectively decreased with this same that an allowance was assessed when an amount recognised as a provision for B.1.5 Correction of material amount of € 943 thousand. instrument was credit-impaired, that is, litigation and claims represents the best error in financial statements when a loss event has occurred that had a estimate of the expenditure required 2017 The fair value change of the employee share detrimental impact on estimated future cash to settle at the balance sheet date. ATB has a cash settled employee share purchase plan as calculated for 2018 of € 314 flows. The amendment on Dutch Accounting Management Board implemented internal purchase plan (ESPP) initiated in 2017. For thousand has been recognized in the general Standard 290 allows ATB to replace the processes, controls and procedures in this plan, during the employment period of and administrative expenses for 2018. incurred credit loss model with the expected order to make the best estimate of the employees, the share-based investment credit losses (ECL) model, which is designed provision for litigation and claims on by the employees is recognised as a liability. B.1.6 Changes in accounting to be more forward-looking. an individual (case-by-case) basis. The The visible intrinsic value of ATB’s share principles and presentation process involves the Integrity department price with certain adjustments is considered On 19 December 2017 the Dutch Accounting The Bank’s ECL framework facilitates the and assessment performed by external as the proxy for the fair value. The fair value Standards Board (Raad voor de Jaarvers- calculation of one-year expected credit legal experts. change is based on the positive/negative laggeving) approved the amendment on losses and lifetime expected credit losses, difference between the fair value of the Dutch Accounting Standard 290 Financial individually for all ATB’s (non-retail) counter- Instruments. This adjustment allows parties and determines the final provision companies to account for impairments on based on the identified stage.

54 55 ATB uses a so-called time-to-maturity are produced for every counterparty which In 2017, ATB applied a collective assessment approach of previous IBNR provision approach, where for each horizon a is the basis of the forward-looking scenario for incurred but not reported (IBNR) compared to the currently forward looking probability of default (PD), exposure at analysis. impairments for loans and advances to scenarios in our ECL model applied to default (EAD) and loss given default (LGD) customers and banks for which there was individual financial instruments and based on is modelled. The product of these three For financial instruments on-balance, the no objective indication of impairment. The industry information supplied by Moody’s. components results in the expected credit EAD is calculated as the present value IBNR impairment provision was calculated by loss if a default happens at a specific of future cash flows. For off-balance estimating a collective weighted average for The off-balance sheet commitments moment in the future. Finally, discounting commitments and guarantee contracts, the probability of default (PD), a collective mainly consist of committed facilities and back to the reporting date is performed. the EAD is equal to the nominal exposure weighted average for the loss given default guarantee contracts. ATB classifies the The sum over either, the one-year or the multiplied by a credit conversion factor (LGD), exposure at default (EAD), an provisions and allowances assigned to full lifetime of the exposure is then the final (CCF) based on Foundation Internal-Ratings estimated Loss Identification Period (LIP) of these financial instruments in Provisions expected loss outcome per transaction. Based Basel values. 6 months and a general adjustment factor and other liabilities. As at 31 December (AF). In 2018, ATB replaced this collective 2018, the allowance for off-balance sheet The ECL framework uses the Bank’s internal For the LGD calculation, a straightforward assessment for the IBNR provision with an commitments amounts to € 114 thousand. rating models as well as external credit approach is applied described in an internal ECL model designed to be forward-looking ratings. ATB’s credit risk approach for IFRS 9 LGD policy which is providing guidance applied to the relevant individual financial The following table provides a reconcili- purposes aligns with the general credit risk to decide on the LGD covering a specific instruments. ation of allowances assigned to financial approach at the Bank: sector: Transactional Finance, Shipping instruments including off-balance sheet • governments are externally rated; Finance, Asset Based Finance, Financial Insti- The first time adoption effect due to the commitments as at closing balance date • financial institutions are usually tutions and Securities. introduction of this ECL model as at 1 of 31 December 2017 before application of externally rated, otherwise a proxy January 2018 shows a decrease of € 328 amended Dutch Accounting Standard 290 and rating is assigned; ATB applies the following approach for the thousand with respect to the provision for the allowances determined after adoption of • the corporate customers are rated forward looking scenarios: loans and advances to customers which is our ECL model on 1 January 2018. with internal rating models, even when • good and bad scenarios are always mainly due to the collective assessment external ratings are available. applied for all transactions according to an automated procedure; The internal rating models used for the • retrieve the credit cycle adjustment corporate customers are sourced from a (CCA) factor from RiskCalc; Financial statements software application provided by Moody’s. • compare the CCA factor against 12-month Transition of on-balance allowances This software application consists of Moody’s GDP growth forecasts. RiskAnalyst and RiskCalc. RiskAnalyst is the and off-balance sheet provisions comprehensive tool used for credit analysis When estimating the ECL, the Bank considers purposes of corporate customers. RiskCalc is three scenarios (a base case, an upside and Closing balance before Opening balance after application adjusted Impact adoption the calculation engine used by the Bank to a downside scenario). adoption ECL model RJ290 based on ECL ECL model* determine the ratings based on quantitative (at 1 January 2018) (at 31 December 2017) information only, i.e. financials of corporate In the Risk management section a detailed customers. The RiskCalc model provides for explanation is provided with respect to ATB’s Loans and advances to banks - 109 109 each corporate customer a one-year PD, a impairment process and ECL model applied Loans and advances to customers 22,029 -328 21,701 five-year PD term structure and a forward- to financial instruments. Interest-bearing securities - 148 148 looking credit cycle adjusted (CCA) PD for scenario analysis. B.1.6.2 Adoption of ECL model and impact Total on-balance sheet allowances 22,029 -71 21,958 This section provides insight into the Provision for undrawn For the PDs, a term structure derived from impact of the transition to amended Dutch contractually committed facilities - 114 114 and guarantee contracts RiskCalc is used as input for ECL calcula- Accounting Standard 290 on the consoli- tions. From this curve, the probability of dated statement of financial position at Total allowances and provisions 22,029 43 22,072 a default between the reporting date and the transition date of 1 January 2018. maturity date of a contract is derived via The introduction of the amended RJ 290 linear interpolation. The calculation of the impairment requirements has a negative net * Additional allowances and provision of €43 thousand due to adoption of the ECL model are recorded in Retained Earnings PDs depends on several building blocks. impact of € 43 thousand on the total level The counterparty ratings (either internal of allowances and provisions assigned to or external) are used as the starting point. financial instruments held by ATB as at 31 Ultimately, based on the ratings and the December 2017. macroeconomic expectations, PD curves

56 57 B.1.6.3 Determination of allowance when 30 days past due. The interest revenue and forecasts of future economic conditions, a transaction results in the position that for expected credit losses of financial is calculated on the gross carrying amount of such as e.g. gross domestic product growth, all or substantially all rights to economic instruments financial assets in Stage 2. unemployment rates, interest rates. benefits and or all of the risks related to the The determination of expected credit asset or liability have been transferred to a losses and allowances moved from an As the primary definition for credit impaired In order to allocate financial instruments third party. incurred credit loss model whereby credit financial assets moving to Stage 3, ATB between stages 1 and 2, ATB uses criteria losses are recognized when a defined loss applies the default definition as laid out that are currently applied in the credit Income is recognised in the statement of event occurs under IAS 39, to an expected in the Capital Requirements Regulation process. Also, the quantitative criteria that income when an increase in future economic loss model under IFRS 9, where provisions (“CRR”) Article 178. Interest revenues are will be used are related to the probability of potential related to an increase in an asset are taken upon initial recognition of the calculated on the net carrying amount for default (PD), where a financial instrument or a decrease of a liability has arisen, the financial instrument, based on expecta- these financial assets only. Forward-looking is allocated to stage 2 when an increase in size of which can be measured reliably. tions of potential credit losses at that time. information, including macro-economic the weighted average PD since origination Expenses are recognised when a decrease in Previously, ATB first evaluates individually factors are taken into account to measure exceeds a predefined threshold. the economic potential related to a decrease whether objective evidence of impairment IFRS 9 compliant expected credit losses. IFRS in an asset or an increase of a liability has exists for loans that are individually 9 does not distinguish between individually In order to ensure that ATB is following the arisen, the size of which can be measured significant. It then collectively assesses significant or not individually significant best practice in recognising the asset quality with sufficient reliability. loans that are not individually significant financial instruments. Therefore, ATB decided deterioration, the consistent approach in and loans which are significant but for which to measure the allowance for credit losses on defining forbearance has been established there is no objective evidence of impairment an individual transaction basis. Similarly, the in accordance with the European Banking B.3 Subsidiaries available under the individual assessment. assessment for transferring financial assets Authority (EBA) regulation. The participating interests over which ATB between Stages 1, 2 and 3 are prepared on an maintains control are considered group Under IFRS 9 for financial assets originated or individual transaction basis. EBA defines forborne exposure as a debt companies and these are consolidated. purchased, ATB recognizes a loss allowance at contract in respect of which forbearance Control is exercised over a participating an amount equal to 12-month expected credit The rules governing impairments apply measures have been extended. Forbearance interest if the investor is exposed to, or is losses, if the credit risk at the reporting date to financial assets at amortised cost as measures consist of concession towards a entitled to, fluctuating income in respect of has not increased significantly since initial well as to loan commitments and financial debtor facing or about to face difficulties in his involvement in the participating interest recognition (Stage 1). This amount represents guarantees. At initial recognition, an meeting its financial obligation (“financial and has the opportunity to influence this the expected credit losses resulting from allowance will be formed for the amount difficulties”). income by using his control over the partic- Financial statements default events that are possible within the of the expected credit losses from possible ipating interest. The assets, liabilities and next 12 months. The interest revenue is defaults in the coming 12 months (‘12-months profit/loss of these companies are fully calculated on the gross carrying amount for expected credit loss’ (ECL). If credit risk B.2 Recognition and de- consolidated. financial assets in Stage 1. increased significantly since origination (but recognition remains non-credit-impaired), an allowance Participating interests are consolidated as IFRS 9 allows for recognition of credit losses will be required for the amount that equals An asset is recognised in the statement of of the date on which the effective control over the remaining life of the financial the expected credit losses stemming from financial position when it is probable that is transferred to ATB and will no longer be assets (‘lifetime expected losses’) which possible defaults during the expected the expected future economic benefits that consolidated as of the date on which this are considered to have experienced a lifetime of the financial asset (‘Lifetime are attributable to the asset will flow to control is terminated. All transactions, significant increase in credit risk (Stage ECL’). If the financial instrument becomes the entity and the cost of the asset can be balances and unrealized gains and losses from 2) and for financial assets that are credit credit-impaired the allowance will remain measured reliably. A liability is recognised transactions between ATB Group companies impaired at the reporting date (Stage 3). The at the Lifetime ECL. However, for these in the statement of financial position when have been eliminated on consolidation. For lifetime expected credit losses represent all instruments the interest income will be it is expected to result in an outflow from a list of the consolidated group companies, possible default events over the expected recognised by applying the effective interest the entity of resources embodying economic refer to note ‘Group Companies’ in the Notes life of a financial instrument. ATB leverages rate on the net carrying amount (including benefits and the amount of the obligation to the company financial statements. existing risk management indicators (e.g. the allowance). Financial instruments can be measured with sufficient reliability. watch list and forbearance trigger), credit become credit-impaired when one or more At year-end 2018, ATB has all voting rights rating changes and takes into consideration events have occurred that had a detrimental An asset or liability that is recognised in in a 100% owned subsidiary, Amsterdam reasonable and supportable information impact on estimated future cash flows. the statement of financial position remains Trade Capital Administration Corporation BV which allows ATB to identify whether the on the statement of financial position if a (ATCAC). This subsidiary is an empty shell credit risk of financial assets has significantly The ECL on an instrument are based on an transaction (with respect to the asset or company. increased. This process includes consider- unbiased probability-weighted amount that is liability) does not lead to a major change ation of forward-looking information and determined by evaluating a range of possible in the economic reality with respect to the macro-economic factors. Furthermore, and reasonable outcomes and reflect asset or liability. An asset or liability is no financial assets will be transferred to Stage 2 information available on current conditions longer recognised in the balance sheet when

58 59 B.4 Securitisation B.5 Derivative financial B.6 Trading financial B.9 Netting of financial instruments and hedging assets assets and liabilities B.4.1 General ATB entered into an arrangement to Trading financial assets are financial assets Financial assets and liabilities can be netted securitize part of its financial assets in order B.5.1 General acquired with the objective of generating and presented in the financial statements to expand its funding facilities. These assets Derivative financial instruments generally profit from short-term fluctuations in prices or at the net amount when ATB has a legally will be transferred to a special purpose comprise foreign exchange contracts, traders’ margins, or financial assets that form enforceable right to offset the recognised entity (SPE). This transaction does not currency and interest rate futures, currency part of portfolios characterized by patterns amounts and there is an intention to settle on meet the conditions for de-recognition as and interest rate swaps, and currency and of short-term profit participation. Financial a net basis, or realize the asset and settle the the majority of risks and rewards have not interest rate options (written as well as assets held for trading are measured at fair liability simultaneously. At year-end 2018 and been transferred to the SPE and remain on acquired). Derivative financial instruments value based on listed bid prices. All related 2017 the netted amounts are nil. the balance sheet of ATB, and therefore can be traded either on the stock exchange comprehensive income is included under the loans remain recognised within the or over the counter (OTC) between ATB Result on financial transactions. Interest statement of financial position of ATB. As and a client. Initially all derivative financial earned on financial assets is recognised as B.10 Foreign currencies a result of this accounting treatment this instruments are recognised at fair value. interest income. All acquisitions and sales transaction does not have any consolidation Subsequent measurement of derivative of financial assets held for trading which B.10.1 Foreign entities consequences as the securitization structure financial instruments is at fair value. All require delivery within a time limit prescribed Items included in the financial statements is an autopilot structure. The loans that are derivative financial instruments are included under the regulations or in accordance with of each entity in ATB are carried in the assigned to this transaction are pledged to under assets if their value is positive and market conventions are accounted for on the currency that best reflects the economic this facility and considered encumbered under liabilities if their value is negative. transaction date. reality of the underlying events and circum- assets. Derivative financial instruments that are stances that are relevant for the entity (the embedded in other financial instruments are functional currency). B.4.2 Securitisation structure treated separately if their risks and charac- B.7 Repo transactions and The consolidated financial statements are ATB currently has a shipping loan portfolio, teristics are not closely related to those of reverse repo transactions presented in euros, which is the parent that is denominated in USD currency. ATB the underlying derivative contract and this company’s functional currency. Gains, established a Special Purpose Entity (SPE) contract is not classified as at fair value Securities sold subject to repurchase losses and cash flows of foreign entities are in order to transfer part of its portfolio to through profit and loss. agreements (repos) continue to be included translated into the presentation currency this SPE. The purpose of this structure is in the statement of financial position. The of ATB at the exchange rates ruling at the Financial statements to receive wholesale funding in order to B.5.2 Instruments not used for related liability is included under the line item transaction dates, which is approximately diversify the funding profile and to mitigate hedging concerned (mainly Due to banks). Securities equal to the average exchange rates. Assets foreign currency risk by receiving funding in When ATB enters into derivatives for trading purchased subject to resale agreements and liabilities are translated at closing USD currency. purposes, realised and unrealised gains and (reverse repos) are presented under the line rates. Translation differences arising on losses are accounted for under ‘Result on item Due from banks or Loans and advances to the net investments in foreign entities and The SPE is established as an independent financial transactions’. customers. The difference between the sales on loans and other currency instruments structure, commonly used for this type of price and the purchase price is recognised in designated as hedges of these investments transactions. The SPE is a Dutch limited B.5.3 Hedging instruments the statement of income as interest during are recognised in equity. If a foreign entity liability company (“besloten vennootschap”), ATB does not apply hedge accounting. the term of the agreement. is sold, any such translation differences are of which all shares are held by a Dutch reclassified within Equity. foundation. The management of the SPE B.5.4 Embedded derivatives is outsourced to an external party (Vistra) Embedded derivatives are treated as separate B.8 Cash and balances B.10.2 Foreign-currency who acts as director and is also the adminis- derivatives when their economic charac- withdrawable with central transactions trator. There is also a security trustee being teristics are not closely related to those of banks Monetary assets and liabilities denominated Citibank Agency and Trust. Citibank, N.A. the financial host contract. The embedded in foreign currencies are converted at London Branch acts as Account Bank, Cash derivative is measured separately if the Cash equivalents are highly liquid short-term closing rate at reporting date. Exchange rate Manager and Loan Agent for the transaction. financial contract itself is not recognised at investments held to meet current obligations effects arising from the conversion of assets ATB acts as servicer of the portfolio while fair value. A determination is carried out in cash, rather than for investments or other and liabilities are stated in the statement Citibank, N.A. London Branch is available as in advance as to whether an embedded purposes. Such investments have remaining of income as ‘Result on financial transac- a Substitute Servicer. derivative is closely related. terms of less than 90 days at inception. Cash tions’. Transactions in foreign currencies are equivalents are readily convertible to known translated at the exchange rate prevailing on Commitment and standby fees have been amounts of cash and subject to an insignif- the transaction date. recognized as of the usage of the facility icant risk of changes in value. The amount until the ending of the facility agreement. due from DNB based on the minimum reserve requirement is also included in this item.

60 61 B.11 Loans and advances B.13 Shares and other higher of fair value less cost to sell and B.16 Leases / ATB as to customers and Due non-interest-bearing value in use. Several methodologies are lessor Finance leases from banks securities applied to arrive at the best estimate of the recoverable amount. If assets are leased under a finance lease, Loans and advances to customers and Due Shares and other non-interest-bearing the present value of the lease payments from banks are non-derivative financial securities are initially recognised at An impairment loss is recognised if the is recognised as a receivable under ‘Due instruments with fixed or defined payments, fair value and subsequently at cost less carrying amount exceeds the recoverable from banks’ or ‘Loans to customers’. The not listed on an active market. Loans impairment charges. Impairment charges or amount. Impairment losses and reversed difference between the gross receivable and advances to customers and Due from the reversal (until cost) of the impairment is impairments of other intangible assets are and the present value of the receivable is banks are initially recognised at fair value, recognised in the statement of income. included in the statement of income. recognised as unearned finance income. including transaction costs, and subse- Equity instruments are impaired if their Lease income is recognised as interest quently carried at amortised cost, including cost permanently exceeds their recoverable income over the term of the lease using the transaction costs. amount, i.e. their fair value is permanently B.15 Property and net investment method, which results in a or significantly lower than their cost. The equipment constant rate of return on the investment. For each individually assessed loan, the recoverable amount of investments in losses are estimated based on the expected unlisted equity instruments is determined Property and equipment is initially carried at credit worthiness of the borrowers and the using an internal valuation model using cost and subsequently at historical cost less B.17 Employee benefits / value of the collateral provided to ATB, and quotations, cash flow projections as well as accumulated depreciation and accumulated Pension taking into account the actual economic the development of commodity prices. impairments. Depreciation is calculated on a conditions under which the borrowers straight-line basis over the useful lives of the ATB has defined contribution plans under conduct their activities. The carrying assets concerned. which ATB pays contributions to publicly amount of the loans is reduced through the B.14 Intangible assets or privately managed insured pension use of a provision account and the loss is Estimated useful lives of property and schemes on a compulsory, contractual or taken to the statement of income. Write-offs B.14.1 General equipment are as follows: voluntary basis. Once the contributions have of allowances for expected credit losses Costs related to the implementation or Leasehold improvement : 10 years been made, ATB has no further payment are made as soon as virtually no other maintenance of software are recognised as Computer equipment : 5 years obligations. The regular contributions are means of recovery are to be expected. Any an expense at the time they are incurred. Other equipment : 5 years net period costs for the year in which they amount subsequently collected are included Costs directly incurred in connection with are due and are included on this basis under Financial statements as negative amounts under the item identifiable and unique software products At reporting date ATB assesses whether there ‘Staff expense’. Impairments of financial instruments and over which ATB has control and that is objective evidence for an impairment shares in the statement of income. will probably provide economic benefits of Property and equipment. Property and exceeding the costs for longer than a year equipment is impaired if loss event(s) B.18 Ta x Management continuously assesses these are recognised as intangible assets. occurred that had an impact on the estimated Current tax receivables and payables are set renegotiated loans to ensure that all criteria net realizable value of these assets. If the off if there is a legally enforceable right to set are satisfied with a view to expected future Expenditures that improve the performance carrying amount of an asset exceeds its off such items and if simultaneous treatment cash flows. of software compared with their original estimated recoverable amount, the carrying or settlement is intended. Deferred tax assets specifications are added to the original cost amount is written down immediately to and liabilities are set off if there is a legally of the software. Software implementation the recoverable amount. Impairment losses enforceable right to set off such items and B.12 Interest-bearing costs are recognised as assets and amortised and reversed impairments of property and if they relate to the same tax authority and securities on a straight-line basis over a period not equipment are included in ‘Depreciation and arise from the same tax group. exceeding five years. impairments of intangible assets and property Interest-bearing securities are debt and equipment’ in the statement of income. Provisions are formed in full for deferred tax securities held in the investment portfolio, B.14.2 Impairment losses on Gains and losses on the disposal of items of liabilities, using the liability method, arising with the general intent to hold the securities Intangible assets property and equipment are determined in from temporary differences at the reporting until redemption date. The investment At each reporting date, ATB assesses proportion to their carrying amounts and date between the tax bases of assets and portfolio is valued at amortised cost whether there are indications of taken into account when determining the liabilities and their carrying amounts for including premiums and discounts less impairment of intangible assets. Intangible operating result. financial reporting purposes. impairment charges, if necessary. Premiums assets are tested for impairment by Repair and maintenance work is charged to Deferred income tax assets and liabilities are and discounts are amortized over the comparing the carrying value with the best the statement of income at the time the measured at the tax rates that have been remaining life of the securities on a straight estimate of the recoverable amount. The relevant costs are incurred. enacted or substantively enacted at the line basis. recoverable amount is estimated as the reporting date.

62 63 Deferred tax assets are recognised to the The ESPP requires the employees to hold is virtually certain. The provisions are B.23 Obligations not extent that it is probable that future taxable their shares for a period of at least four years carried at the discounted value of the recognised in the profits will be available within the period or up until the moment their employment expected future cash flows. The additions statement of financial available to compensate taxable losses with Amsterdam Trade Bank NV will be to and releases of provisions are recognised according to applicable tax laws, against terminated. In view of the four year holding in the statement of income under ‘Other position which the temporary differences can be period the acquisition price has a discount of administrative expenses’. This relates to the obligations that represent utilised. Taxes on profit are calculated in 15% that will be amortized during the holding a potential credit or other risk and consists accordance with the tax legislation of the period. In the case of off-balance sheet of the off-balance sheet items contingent relevant jurisdiction and recognised as an commitments, which is mainly consisting liabilities and irrevocable commitments. expense in the period in which the profit At the moment that the shares are purchased of committed facilities and guarantee is realised. The tax effects of the carry- by the intermediate entity at discount, the contracts, ATB classified the provisions Contingent liabilities forward of unused tax losses are recognised fair market value per share exceeds the issue for these items in Provisions and other Contingent liabilities are carried at the as an asset if it is probable that future price and the resulting difference is treated liabilities. As at 31 December 2018, the contract value and consist of guarantees and taxable profits will be available against as staff expenses during the vesting period of provision for off-balance sheet commitments irrevocable letters of credit. which the losses can be utilised. Deferred 48 months, with a corresponding adjustment amounts to € 59 thousand. taxes are recorded at nominal value. to Other liabilities. Other contingent liabilities A provision for restructuring costs is formed A contingent liability is a possible obligation The employees participating in this when a formal detailed plan has been that arises from past events and whose B.19 Due to banks, share-based investment have agreed to developed and a justified expectation has existence will be confirmed only by the due to customers and the terms and conditions laid down in an been raised with the employees affected occurrence or non-occurrence of one subordinated liabilities investment agreement which is signed by that the reorganization will be carried out. or more uncertain future events not ATB, ATB ESPP BV and the Participant. The The provision consists of direct costs. With wholly within the control of ATB; or a These borrowings are initially recognised at key conditions and features underlying such respect to reorganizations for which a formal present obligation that arises from past fair value, i.e. the issue price less directly a commitment as follows: plan has been developed as at the balance events but is not recognized because it allocable and nonrecurring transaction costs, • Investment period 1 January 2017 - 31 sheet date, but for which either a justified is either not probable that an outflow and subsequently carried at amortised cost, December 2020; expectation has been raised with those of economic benefits will be required to including transaction costs. • Investment value per ESPP share; employees affected by the reorganization settle the obligation or the amount of the • The number of ESPP shares which will be carried out or implementation of the obligation cannot be measured reliably. Financial statements participant has acquired; reorganization plan has commenced only Contingent liabilities are not recognized B.20 Employee Share • Blocking period during the investment after the balance sheet date, information in the statement of financial position, but Purchase Plan period; has been included under events after the are rather disclosed in the notes unless • In case the ESPP Shares are sold by the balance sheet date. the possibility of the outflow of economic ATB operates a cash settled employee Participant back to ATB or its nominee benefits is remote. share purchase plan (ESPP). For this plan, during and after the Blocking Period how during the employment period of the the purchase price will be determined. B.22 Equity Irrevocable commitments employees, the share-based investment by Financial instruments that are designated Irrevocable commitments consist of unused the employees is recognised as a liability. Staff is entitled to finance up to 90 per cent as equity instruments by virtue of the facilities, sale and repurchase commitments The liability is re-measured at each reporting of their investment via a loan, granted by economic reality are presented under and all other obligations resulting from date up to and including the settlement date ATB. The total amount of these loans are ‘Equity’. Payments to holders of these irrevocable commitments that can give rise with changes in fair value recognised in the classified as Staff Loans. instruments are deducted from ‘Equity’ as to loans. general and administrative expenses, taken part of profit distribution. into account the estimated leavers if any. Direct costs of new shares issued are B.21 Provisions deducted from equity, taking taxes into B.24 Revenue The fair value change is based on the Provisions are recognised for obligations account. Revenue is recognised insofar as it is likely positive/negative difference between the (both legal and constructive) arising as a that the economic benefits will flow to ATB fair value of the underlying share and the result of a past event where it is probable and can be measured reliably. Costs are exercise price. The visible intrinsic value that an outflow of resources will be required allocated as far as possible to the period in of an ATB share with certain adjustments is to settle the obligation and a reliable which the services were rendered or to the considered as the proxy for the fair value. estimate can be made of the amount of the relevant proceeds. The fair value change of the employee share obligation. If ATB expects a provision to be purchase plan as calculated for the year is reimbursed, for example under an insurance recognized in full in the general and admin- policy, the reimbursement is recognised as a istrative expenses. separate asset but only if the reimbursement

64 65 B.25 Net interest income B.28 Other income B.31 Cash flow statement value in the event the loans would be Interest income and expense for all inter- Other income comprises non-banking income. The cash flow statement has been drawn sold before maturity. est-bearing instruments is recognised in the up in accordance with the indirect method, • The carrying amount of floating rate statement of income on an accrual basis, distinguishing between cash flows from inter-bank placements, overnight deposits with the effective interest method being B.29 Staff costs operating, investing and financing activities. and fixed deposits placed with banks is applied. Interest income includes coupons Staff costs comprise wages and salaries, Cash and cash equivalents comprise, at deemed to be a good estimate of their relating to fixed interest financial assets and pension costs, other social costs and other face value, all cash in hand and balances fair value given. interest-bearing securities. staff costs. withdrawable on demand with central banks • The fair value of the interest-bearing and other banks in respect of which the risk securities in the investment portfolio Recognition of interest income for inter- of value changes is insignificant. is based on the active market prices at est-bearing financial instruments assigned to B.30 General and reporting date. stage 1 and stage 2 are based on their gross administrative expense Cash flows arising from foreign currency • The fair value of derivatives is based on carrying amount. Recognition of interest transactions are translated into the observable market data. The fair value is income for financial instruments assigned to General and administrative expenses functional currency using the exchange rates determined using listed market prices (a stage 3 are based on their net carrying value comprise costs related to support of the at the date of the cash flows. small bid-ask range applies to derivatives after deduction of impairments. Bank’s operational activities such as IT The net cash flow shown in respect of ‘Loans quoted in euros, US dollars and/or pound expenses, costs of marketing and communi- and advances to customers’ relates only to sterling, and mid prices are used), along Arrangement fees received is recognized as cation, cost of credit insurance, accommo- transactions involving actual payments or with prices offered by traders, cash flow interest income and amortized over the life dation expenses, office expenses and other receipts. discounting models and option valuation of the underlying contract. administrative expenses. Recovered VAT is models based on current market prices classified in and deducted from general and The addition to allowance for expected and contracted prices for the underlying administrative expense. losses which is deducted from the financial instruments, as well as the time value of B.26 Net commission instruments in the statement of financial money, yield curves and the volatility of income The ESPP requires the employees to hold position has been adjusted accordingly from the underlying assets and liabilities. their shares for a period of at least four years the result before tax and is shown separately • The fair value of liabilities to banks, This item consists of income, other than or up until the moment their employment in the statement of cash flows. funds entrusted and subordinated income similar to interest, earned on with Amsterdam Trade Bank NV will be liabilities is determined using discounted banking services provided to third parties. terminated. In view of the four year holding cash flows using applicable money Financial statements Commission received from and paid to third period the acquisition price has a discount of B.32 Fair value market rates for debt instruments with parties is accounted for as commission 15% that will be amortized during the holding The fair value of financial assets and a comparable term to maturity, taking income and commission expense over the period. liabilities is derived from active markets. account of own credit risk. life of the underlying contracts. At the moment that the ESPP shares are Where the fair value cannot be derived purchased by the intermediate entity at from active markets, these are determined discount, the fair market value per share using valuation techniques that include the B.27 Result on financial exceeds the issue price and the resulting use of mathematical models. The input transactions difference is treated as expenses during the to these models is taken from observable vesting period of 48 months, with a corre- markets where possible, but where this is Other foreign exchange results consists of the sponding adjustment to equity. The total not possible a degree of judgment may be revaluation effects of balance sheet positions amount to be taken into consideration is required in establishing the fair value. in foreign currencies. determined on the basis of the fair value of the depositary receipts and the cost to The following summarises the major Sale of interest-bearing securities and acquire them as established on the date on methods and assumptions used in estimating loans and advances represents the financial which they are acquired. the fair values: result on exited positions in the respective • The estimated fair value of Loans and portfolio. The result on derivatives represents advances to customers represents the the result on trade derivatives. Exchange discounted amount of estimated future and price gains and losses on trading in other cash flows of individual loans expected financial instruments on behalf of clients are to be received. Expected cash flows are recognised under Result on foreign currency discounted using market rates as discount trading. rate. Given the volatile economic environment the realisable value may differ significantly from the disclosed fair

66 67 Risk Management

C.1 Introduction • Enhance risk-based decision making by C.3 Risk Governance The second line of defence has the authority This section consists of a general description providing clear direction and guidance ATB’s ERM framework consists of three layers to instruct the first line of defence on of ATB’s approach to risk management to identify and select among alternative of risk governance, also known as the three actions to be taken to ensure compliance (C.2); a description and explanation of risk responses to risk (avoidance, reduction, lines of defence model. with the banks risk appetite and risk governance (C.3); and explanation of the sharing, acceptance and pursuance) frameworks (within the boundaries of management of various categories of risk, as • Reduce surprises and losses: ATB contin- First line of defence – Risk awareness in established policies and procedures) and to defined in the Bank’s risk taxonomy (C.4). uously seeks to enhance the capability day-to-day business propose new mechanisms for measuring and to identify potential events and establish The person or organisational unit that, managing risks. The Integrity Department responses, reducing surprises and through its actions, gives rise to a as part of the second line of defence has C.2 Risk Management associated costs or losses. Note that ATB risk is responsible for that risk and its direct access to the Board. The second line Approach does not intend to completely remove management, within defined boundaries. of defence is composed of such functions exposure to risk, but to ensure that This is the “first line of defence”, and as Risk Management, Human Resource ATB adopts an integrated approach to risk exposure is knowingly assumed and acts as the risk owner. The first line of Management, Finance & Control and management as laid down in its Enterprise adequately managed. defence / risk owner should have sufficient Integrity Department. Risk Management (ERM) Policy (updated in • Identify and manage multiple and authority and accountability to take those May 2018). cross-enterprise risk: ATB faces risks actions necessary to manage the risk, or if This policy establishes ATB’s approach to affecting different parts of the organi- necessary ensure that the risk is escalated identifying, measuring, managing, reporting, zation. Our risk management approach to the appropriate level of management. prioritizing and controlling risk of any type. facilitates integrated responses to risks. It documents the methods and tools in • Seize opportunities: by considering a full Second line of defence – Countervailing Financial statements place, including the governance structure range of potential events, management powers and relation to other governing bodies. This is positioned to identify and proactively The second line of defence maintains policy helps to establish clarity on roles realise opportunities, within risk oversight on control mechanisms and and responsibilities across departments and appetite. monitors their effectiveness. Control (senior) management, and sets the ground • Improve deployment of capital: mechanisms are methods, measures and rules for measuring, reporting and escalation obtaining robust risk information allows tools (including but not limited to policies, of risk and governance issues. management to effectively assess overall procedural requirements and reporting) to capital needs and enhance capital measure and reduce consequences and/or ATB takes its definition of ERM from that allocation likelihood of the related risk. proposed by COSO: “a process effected The second line of defence acts by the Executive Board, management and Actual exposure on all risk types is independently from the first line of other personnel; applied in strategy setting monitored at least quarterly in the ERM defence and provides its view on risks (and and across the bank; designed to identify report, and on a monthly basis through more associated mitigating actions) taken by the potential events that may affect ATB, to specialized reporting (e.g. the Portfolio risk owners. manage risk to be within its risk appetite Management Report for credit risks, the and to provide reasonable assurance ALCO report for market risks). regarding the achievement of ATB’s objectives”. By means of this approach, ATB seeks to: • Align risk and strategy: by considering risk appetite in making strategic choices, setting related objectives, and developing mechanisms to measure and manage related risks.

68 69 Third line of defence – Independent which provide to ensure compliance with Asset & Liability Committee (ALCO) ments in the portfolio. The Credit Committee oversight the ability all relevant regulations regarding The ALCO consists of the members of the is responsible for the establishment of The third line of defence provides risk and capital management, and to ensure Management Board as well as the heads of country and industry limits. The Committee, independent assessment of the effectiveness compliance with the risk appetite, unless Treasury Front Office, Risk Management, in its recommendations, takes economic and of governance, risk management, and separately approved otherwise. Strategic Financial Services and a commercial business legal circumstances into account. Individual internal controls. Internal Audit (IA) acts Risk and Earnings Volatility risk are discussed representative. The ALCO meets at least transactions are allocated to specific as the third line of defence. IA provides its directly in the Management Board. once a month to monitor funding, interest country limits by the Credit Committee. recommendations based on independent and All other risk categories from the risk rate, foreign exchange, market, liquidity and In a limited number of cases and based on objective assurance. taxonomy are discussed and managed in solvency risk. In addition, the ALCO discusses a predetermined escalation model, credit delegation in one (or more) committees. market developments and provides recom- and/or country limit decisions are taken by In the monitoring and day-to-day These committees also approve and review mendations on managing liquidity. the Risk and Compliance Committee of the management of identified risks, the policies supporting relevant departments Supervisory Board. Management Board, and in its oversight that are responsible for managing the risks Operational Risk Committee (ORC) capacity, the Supervisory Board, are in their activities within approved risk The Operational Risk Committee consists of Provisioning Committee supported by a number of committees tolerance limits. 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 of Internal Audit and identified Risk Owners. Risk Management and Financial Services. It It meets monthly and monitors issues convenes at least on a semi-annual basis. relating to the maintenance of an adequate All relevant loans are discussed and its operational risk management framework (in staging classification based on the new which all operational risks as mentioned in ECL model based methodology. Potential Supervisory Board ERM are monitored) and the assessment of non-performing loans are put under special operational risk incidents. monitoring for industry and company specific developments. The Provisioning Committee Audit Committee Furthermore, the committee monitors advises the Management Board on loan the effectiveness of the internal control impairments and provisions to be taken. Risk and Compliance Committee framework and the resolution of audit issues identified by both the internal and external Financial Restructuring & Recovery Financial statements Remuneration and auditor and the Supervisory Authorities. Committee Norminating Committee Lastly, the committee approves New Product The Financial Restructuring & Recovery Approval Proposals and Policies. Committee consists of the same members as the Credit Committee, with the addition Integrity Committee of Financial Restructuring & Recovery. The The Integrity Committee consists of the non-performing portfolio is discussed and Management Management Board as well as the head of relevant developments are escalated for Board Integrity and the head of Merchant Banking. decision. In general its meetings are held weekly to accept new clients, review client files, and Project Portfolio Board (PPB) to discuss and decide upon new compliance The PPB consists of the Managemen Board Asset and Liability Operational Risk Committee Committee related policies or frameworks, covering risks as well as Head of Business Technology as defined in the Systematic Integrity Risk and Change, the Head of Operations and Analysis (SIRA). Services, the Head of Merchant Banking, the Integrity Credit Head of Financial Services and the Head of Committee Committee Credit Committee Integrity. The Credit Committee consists of members of the Management Board, the heads of The Project Portfolio Board monitors all Credit Risk Management, Integrity and projects within the bank aiming to improve FR&R Provisioning Committee Committee Merchant Banking as well as (represent- ATB’s systems and processes in an efficient atives of) and the commercial business and effective way. This will be achieved by departments. Meetings are held weekly providing the project framework and delivery to decide on new credit applications and means, control and quality measures. proposals and to monitor credit risk develop- Meetings are held on a monthly basis. Project Portfolio Board

70 71 C.4 Risk categories aligned with the recommendations of the Counterparty credit risk The normal credit risk cycle of a client regulator to strengthen our internal controls Counterparty Credit Risk follows the principles (figure 1), product or transaction begins as C.4.1 Strategic risks in this area. Since 2014, also in view of the as set out in the Enterprise Risk Management the business analyses the risks of a client Strategic risk is defined as the risk of non-com- increased geopolitical tensions and related framework and is primarily managed within and prepares a credit application highlighting pliance with the strategic objectives that sanctions in the areas where ATB’s (former) the front offices as first line of defense. The the structure of the proposed transaction or can arise from adverse business decisions, customers have their business, ATB has Risk Management Department is responsible products and analysing the financial soundness improper implementation of decisions, or a taken several measures to further improve for creating and maintaining credit policies of the relevant counterparties. This credit lack of responsiveness to industry / market its compliance framework, including related and frameworks, for monitoring the portfolio application is sent to the Risk Management changes. Includes Earnings Volatility Risk processes and procedures, next to the intense developments as well as for independent Department who prepares an independent (The risk that the bank will not be able to efforts of de-risking its exposures by reducing assessments of the individual risks originated opinion on the content of the credit comply with profitability targets committed to its legacy portfolio. ATB continues to closely by the first line of defense. Decisions regarding application, and advices the credit committee shareholders). ATB has defined early warning monitor also the latest (geo-) political develop- credit risk are taken in the Credit Committee on the appropriateness of the transaction in indicators (EWI’s) to monitor whether or not ments with respect to sanctions and measures or in the Financial Restructuring and Recovery view of the business, financial and structural strategic risks may materialize, and which may taken by various governments, and will comply Committee, unless these are escalated through risks as well as matching the proposed act as a trigger for management’s judgment with all relevant laws and regulations in this a pre-defined escalation mechanism. transaction with the strategic fit and portfolio call. These early warning indicators are field. objectives of ATB. The credit committee then principally quantitative (e.g. capital, liquidity, Monitoring of credit risks against individually balances the business and risk views and and profitability). During 2014, 2015 and early 2016 ATB has established limits and portfolio established decides on the application. On the basis of this reviewed and scrutinized its complete client risk appetite limits takes place on an ongoing decision documentation is being drafted by Strategic risks that could have a negative portfolio resulting in a significant reduction of basis. Specific portfolio reports are created the business, which is reviewed for sign-off by impact on (some of) our client’s business the total number of customers whilst at the weekly, monthly and quarterly (with varying the Integrity Department. and thereby on ATB are recognized in devel- same time bringing the client files of remaining scopes) to provide complete and timely opments concerning a new deterioration clients fully in line with internal and external overviews to senior management for steering During the lifetime of a loan or a transaction, of the geopolitical situation and increasing standards. This level of quality has remained in if and when required. formal reviews (at least annually) are prepared tensions around Russia, a “no-deal” Brexit and place since then. by the business following a similar routine as continued escalation of trade tariffs. Each of Although ATB uses the standardized approach for new applications. these potential developments are monitored, C.4.3 Credit risk for credit risk (following the Basel models), In addition, the borrower’s behavior, market with scenario analyses and/or response plans Credit risk is the current or prospective threat continuous development of internal rating circumstances and compliance with covenants Financial statements in place. to ATB’s earnings, liquidity and capital as a methodologies as well as further integration are monitored by the business (and period- result of a counterparty’s failure to comply of the Internal Rating System into the Risk ically by the Risk Management Department C.4.2 Regulatory risks with financial or other contractual obligations Management Processes and expansion of its as part of the review process) in order to The bank recognizes its responsibility as a stemming from a credit relationship. scope (currently only corporates are rated assess whether increased monitoring (watch gatekeeper to the financial system not to through the system) are considered to be list) or amendments are required. In case facilitate crime and is committed to comply Credit risk comprises of four separately important to further strengthen ATB’s credit a significant deterioration is flagged by the with all applicable laws and regulations. Based defined sub categories, which relate to the risk management system. business department or risk department, the on the analysis of clients, products countries main possible reasons of the counterparty’s and the channels through the transactions run, failure to comply as indicated above: in combination with the strategy and business counterparty credit risk, cross border risk, operations, the likelihood of compliance risks concentration risk and country risk. occurring is considered to be ‘very likely’. Credit risk constitutes ATB’s most significant Credit Application As the impact of such risks manifesting is financial risk and arises mostly from the considered to be high due to reputational and lending business. financial damage, the risk profile in relation to these risks is considered to be relatively high In the light of credit risk, FX risk for clients Monitoring Risk Advice compared to the (Dutch) financial sector in is addressed in credit applications and risk general. opinions. For each client or prospect client, the FX position given FX mismatches on Since ATB’s customer portfolio typically purchase and sale side is analysed. includes many customers operating in high Documentation Credit Decision risk political and economic environments, ATB’s maximum exposure to credit risk ATB has stringent procedures with respect to amounts to € 1,475.7 million at year-end 2018 reputation and integrity risk which are also (2017: € 1,319.1 million) figure 1

72 73 client is placed on a watch list. In this case, In 2018 the risk appetite and tolerance • A cross-default declared on a customer by financial difficulties. Refinancing means developments with the client are monitored thresholds for the average expected loss of any third party creditor unless revoked in the use of debt contracts to ensure the and reported to the credit committee on a the core portfolio remained stable at 0.5% ten days; or total or partial payment of other debt monthly basis. and 0.8% respectively. The average credit • An exposure has been found impaired in contracts the current terms of which quality of the portfolio was affected by the accordance with the definition described the debtor is unable to comply with. For Should a client still deteriorate and become adoption of Moody’s credit rating model, in the Policy; or instance, a contract has been refinanced non-performing, the client is transferred from which is reflecting data, more closely to the • A client (including, for the avoidance if it is completely repaid with a new the business to the Financial Restructuring nature of the credit risks taken by ATB. This of doubt, any other obligor under the contract granted on or close to the day and Recovery department who will take over new model, in combination with ATB’s credit loan) indicating inability to comply with when the initial contract expires. day-to-day responsibility for the client and policies on rating SPC’s with limited financial payment terms; or whose aim it is to ensure optimal recovery track-record, resulted in a 5bps increase • In any other cases – and subject to the Evidence of a concession includes: for ATB. of expected loss across the portfolio. This approval of the Credit Committee- when • A difference in favor of the debtor contributed to the average expected loss of ATB considers that the obligor is unlikely between the modified and the previous Credit risk mitigations 0.58% at year-end (2017: 0.43%). to pay its credit obligations to the terms of the contract; In order to optimally manage the credit institution, the parent undertaking or • Cases where a modified contract includes risk on counterparties ATB employs various On a regular basis ATB performs stress tests any of its subsidiaries in time or in full, more favorable terms than other debtors formal credit risk mitigations. These relate to related to its entire portfolio to assess the without recourse by ATB to actions such as with a similar risk profile could have collateral (assets with material value which potential impact on its capital position. realising security. obtained from the same institution. are pledged to ATB), guarantees received and • An exercise of clauses which, when netting agreements. While ATB attaches some Impairments on Non-performing and Extensive use of granting concessions leads enforced at the discretion of the debtor, value to most types of collateral received, Forborne Loans. to delayed loss recognition and masking enable the latter to change the terms of for risk mitigation and reduction purposes In the context of the provisioning process, asset quality deterioration. In order to the contract (“embedded forbearance only so-called eligible collateral is taken ATB reviews at least semi-annually all ensure that ATB is following the best clauses”), when the institution approves into account. Eligible collateral is defined as relevant loans and advances to each practice in recognising the asset quality the exercise of the clauses and assesses collateral which reduces the capital charge of individual customer based upon objective deterioration, the consistent approach in that the debtor is in financial difficulties. certain exposures and needs to follow certain impairment triggers, such as non-performing defining forbearance has been established predefined eligibility criteria. loans or forborne loans, in order to assess in accordance with the European Banking In order to classify an exposure as forborne In those cases where collateral is not deemed whether the allowance for expected credit Authority (EBA) regulation. both conditions shall be satisfied: Financial statements eligible for capital reduction; it may still losses is sufficient. This review is based on • The financial difficulties of the debtor, and be considered a credit enhancement and the identification of impairment indicators EBA defines forborne exposure as a debt • A modification of the previous terms hence may play a role in the individual credit (such as amounts overdue or requests for contract in respect of which forbearance and conditions of a contract due to the assessments. restructuring) in order to assess the likelihood measures have been extended. Forbearance debtor’s situation (including waiver of and magnitude of incurred losses. measures consist of concession towards a actual or potential breaches). The value of the collateral is based on debtor facing or about to face difficulties in valuation reports received from external Non-performing status is assigned to a meeting its financial obligation (“financial Definition of default valuators or other sources (including customer when any of the below conditions difficulties”). The definition of default forms a key warehouses and as provided by customers). It apply part of the development and validation is ATB’s policy to require for periodic updates • A customer is past due more than thirty As per EBA’s view a forbearance measure can of ATB rating models. For this purpose, on these valuation reports. Due to volatile calendar days on any material debt service be qualified as a modification or refinancing: the definition of default is aligned to the market conditions the value of the collateral to ATB; or • A modification of the previous terms and Basel III definition. Please also refer to EBA can differ significantly from the value as stated • A coupon or principal payment on the conditions of a contract the debtor is document “Guidelines on the application of in the latest available reports. In addition to interest bearing security is delinquent for considered unable to comply with, due to the definition of default under Article 178 of other collateral, both personal and corporate at least five business days; or its financial difficulties (“troubled debt”) Regulation (EU) No 575/2013”. guarantees are may be included in the security • Customer breaches granted overdraft to allow for sufficient debt service ability It should be clear that the definition of package for repayment of the underlying facility limit for longer than five business that would not have been granted had the default used for development and validation principal and interest amounts. days; or debtor not been in financial difficulties. of ATB rating models is relevant only in • A lessee is past due more than thirty Exposures shall not be treated as forborne respect to such matters. It is not directly Credit Portfolio Characteristics business days on at least € 500,000 of when the debtor is not in financial diffi- linked to the NPL definition, or to the process Measurement and monitoring of credit risk is credit lent service to ATB; or culties. of identification of impaired losses. embedded by means of its Key Risk Indicators. • A customer is declared insolvent by court • A total or partial refinancing of a troubled These KRI’s include metrics for one obligor or arbitration (e.g. bankruptcy, chapter debt contract that would not have been exposure, minimum (average) credit quality, 11); or granted had the debtor not been in country risk and sector concentration risk.

74 75 In other words, impairment of an asset does to the Management Board. The Management ownership, management or guarantors. ATB Country risk analysis is being performed not automatically trigger a downgrade of Board decides on the provisioning level. manages single name concentration risk and at least annually (following a quarterly a customer rating to default (PD=1) in ATB Impairment losses are based on discounted calculates internal capital for this risk under calendar, as with the industry risks) by Risk rating models. Defaulted exposure will expected cash flows of the outstanding loan the current Basel framework. ATB’s risk Management Department. On the basis of automatically be assigned to Stage 3 based (including a cash flow for the collateral value appetite defines limits to single name concen- this analysis, recommendations are made on IFRS 9 guidelines. It has to be noted that, based on the estimated market value, as and tration both on an individual and portfolio to establish or amend country limits. The although Stage 2 based on IFRS 9 contains when foreclosure of collateral is foreseen). level. In its core portfolio ATB complies with analysis is based on the macro-economic exposures with potentially decreased credit its risk appetite targets. circumstances of the countries, but also quality, classification to Stage 2 should not be During 2018 several fully impaired loans were on the compliance and legal aspects of the considered an indication of default. Stage 2 written off (total loan amount: € 6.3 million; Industry concentration relates to the risk country. These elements, combined with a exposures will in general not be considered 2017 € 230.7 million). The amount of loans, that sector or industry factors drive the business indication of their business plans for defaulted unless there are indications that subject to ATB recovery activities, amounts likelihood of default for a significant number a country, lead to a recommended maximum the client is unlikely to pay. to € 123.4 million at year end 2018. of counterparties in the portfolio. Industry country limit. concentration risk arises if the portfolio is The Management Board is responsible for Cross border risk unbalanced in exposures to certain sectors, The Credit Committee is also responsible for decisions made regarding additions to Cross border risk is a specific subset of entailing dependencies between default the establishment of country and industry provisions, releases of provisions, write-off country risks and deals with the convertibility events. limits. The committee, in its recommenda- of an exposure and status of current interest and transferability of currencies. The risk tions, explicitly takes economic, compliance charges of an exposure to be non-accrued. materialized in 2015 as Ukraine introduced Country risk and legal circumstances into account. Notwithstanding the aforementioned, the currency controls hampering recovery and Country risk is the risk of losses due to Individual transactions are allocated Management Board delegated its decision repayment efforts of our clients. The risk is country-specific events or circumstances. to specific country limits by the Credit authority to the Provisioning Committee. The monitored through the country and industry It is also an exposure to cross-border risk, Committee. New or increased country limits Provisioning Committee includes Management risk as well as through individual credit especially convertibility and transfer risk, i.e. are in a limited number of cases and based on Board Members as voting members. All applications. The presence of local Alfa the risk of obligations not being repaid as a a predetermined escalation model, decided considerations for assessment of impairment units in (some of) these countries has been consequence of a debt moratorium or similar upon by the Supervisory Board. triggers and related provisions are discussed instrumental to understand the scope of payment restriction. Cross-border risk is the in the Provisioning Committee. Impairment regulations and to provide some mitigants to risk that funds in foreign currencies cannot be losses are classified in stage 3 and based the direct effects of such risk. transferred out of a risk country as a result of Financial statements on discounted expected cash flows of the a specific event or circumstance. outstanding loan (including a cash flow for Concentration risk the collateral value based on the estimated Concentration risk is the credit risk related ATB’s approach to measure country risk is market value, as and when foreclosure of to the degree of diversification in the based on a more strict interpretation of collateral is foreseen). credit portfolio. ATB takes separately into regulations for assigning countries of risk. account the single name concentration, The country of risk is defined in line with the For the loans and advances to customers country concentration, and industry concen- DNB policy rule as “the risk that a borrower that are under restructuring, the impairment tration. Due to the significance of Country fails to meet his credit obligations owing loss is measured as the difference between risks for ATB, these risks are managed and to transfer or foreign currency risk and the the carrying amount of the asset and the reported upon separately. In addition, ATB risk of losses related to developments in a present value of estimated future cash flows has implemented a framework to measure specific country, over which the government discounted at the asset’s original effective concentration risk quantitatively and has some degree of influence, but private interest rate. Such estimation is by its nature established an approach that links concen- companies or individuals certainly have not”. based on assumptions and actual results may tration risk levels to capital allocation under The assignment of country of risk follows an differ. Pillar 2 of Basel three (the ICAAP approach). approach which is geared towards identifying any single country where a potential country The total amount of non-performing loans Single Name Concentration risk is managed event will have a substantial effect on the as at the end of 2018 is € 7.8 million (2017: € both on an individual and on a portfolio overall financial performance of the counter- 106.3 million). The total amount of forborne level. On an individual level it is managed in party. As guidance, this may be based on the loans at the end of 2018 is € 6.5 million (2017: such a way that it ensures that each single country of incorporation of a company, the € 37.1 million). The forborne loans relate to exposure to a (group of connected) client(s), country where cash flows are generated or one exposure which has been sold early 2019. when defaulting, would remain manageable the country where the majority of supplies/ from a capital point of view. The definition production assets are situated. Proposals for impairments are discussed in of ‘connected’ includes exposures which are the Provisioning Committee and proposed connected through, for example, common

76 77

C.5 Expected Credit C.5.1 Staging Although all exposures are individually C.5.2 Policy for return from Losses – Financial Staging guidelines in accordance with assessed, there is a collective element in the stage 2 to stage 1 instruments amended IFRS 9 determines whether a 12 credit cycle adjusted PDs based on Increased credit risk can result in financial month Expected Credit Loss (ECL) (stage 1), countries and industry sectors. On top of instruments moving from stage 1 to stage Specific ECL requirements based on the lifetime ECL (stage 2) or a credit impairment that, additional scenarios can be defined 2. Subsequent improvements in credit risk IFRS 9 Financial Instruments, prescribe to (stage 3) is taken as a provision. on countries and/or industries which can can result in a reclassification of financial determine an allowance for expected credit effectively override the modelled cycle instruments back from stage 2 to stage 1. losses with respect to the performing part The distinction between stage 1 and stage adjustment. In this way, the collective The movements from stage 2 back to stage of the portfolio. Subject to the ‘Staging’ 2 is identified by a ‘significant’ increase in assessments for staging are already captured 1 are decided on the criteria defined below of a financial asset according to IFRS 9 credit risk since origination for each specific in the individual, cycle adjusted, PD and mirror the criteria on the “increased principles determines whether a 12 months exposure. Stage 3 applies if impairment assessments. credit risk” as mentioned above. While ECL (Stage 1), lifetime ECL (Stage 2) or triggers are met. In the IFRS 9 Standard, essentially a mirror of the earlier criteria, a credit impairment (Stage 3) is taken as a loss guidelines and indications for staging ATB is basing its staging (12-month versus buffer is defined, i.e. the performance has provision. The distinction between Stage 1 movements between stage 1 and stage 2 lifetime expected credit losses) on quanti- to be better than the initial threshold to and Stage 2 is identified by a ‘significant’ are provided and translated into practical tative changes in the PDs, however a process be allowed back into stage 1. This puts the increase in credit risk since origination for policies that can be applied to ATB’s is in place that allows qualitative elements customer (exposure) on a probation period: each specific exposure. Stage 3 applies if portfolio. to be incorporated into its PDs. As such, it has to prove that stage 1 is indeed the impairment triggers are met in line with the all relevant factors are captured in the PD right classification before returning back to current practice (see next chapter). The ECL ATB has decided to implement a staging which is used as the basis for the staging it. calculation based on this staging process is policy that covers its entire portfolio. ATB’s assessment. performed on a quarterly basis. portfolio mainly consists of Corporates, Default probability criteria Financial Institutions and Government In principle, ATB does not rebut the The quantitative criteria are an exact mirror Finance prepares the loss allowance calcu- exposures. From a credit risk perspective presumption of 30 days past due exposures image of the criteria for increased credit lations based on ATB’s ECL model and those are approached in a similar way: All in stage 2. Only in individual cases, where a risk, except for a provision to see a certain provides the reports to Risk Management exposures are individually assessed and past due is clearly the result of some minimum improvement in credit risk before Department (RMD). RMD reviews the applied accompanied with credit ratings which technical issue not related to credit risk, this returning the exposure to stage 1: assumptions based on RiskCalc application provide indications of default probabilities principle will not apply. data (i.e. software application supplied by and LGDs, which provide indications of The multiplier: A movement of the multiplier Financial statements Moody’s) which is used in the bank’s ECL losses in case of default. ATB does not have New originations are always recognised in back below the threshold of 2 (2.5 minus model and also checks plausibility of the any retail exposures. The staging decision stage 1, even if other exposures of the same 20%) will move the exposure back to stage 1, scenarios sourced from the ECL model, to be process is based on developments in the customers are already recognised in stage unless the difference with the origination PD able to prepare an analysis for the quarterly credit rating and the associated proba- 2. This is based on the amended IFRS 9 is above the upper limit threshold. Provision Committee meeting. This analysis bilities of default (PD), representing the guidelines that an increase in credit risk is • The lower limit threshold: A movement focuses on a comparison to the previous indication for an increase in credit risk. The measured from origination. For this reason it of the PD below the absolute lower quarter and any expert based adjustments credit ratings include both quantitative and is important to establish what constitutes a threshold (0.28%, 0.35% minus 20%) limit (for example, the LGD cycle adjustment and qualitative factors. The staging assessment ‘new origination’. will move the exposure back to stage 1. additionally defined scenarios). Even if no is subsequently based on the change in PD • Drawings of loans, Letter of Credits • The upper limit threshold: A movement expert based adjustments are necessary, the since origination. or guarantees under an existing of the PD below the upper limit threshold analysis explains the reasoning behind this uncommitted facility are considered new (8%, 10% minus 20%) will move the decision. The ECL recommendation including A threshold by means of a multiplier (2.5x) is originations with the origination date at exposure back to stage 1, unless the analysis is presented by RMD to the Provision applied by ATB to assess whether the default the date of the actual drawing. multiplier threshold is above 2.0. Committee. probability has ‘significantly’ increased. • Drawings of loans, Letter of Credits or • An exposure in stage 2 that is upgraded An absolute threshold is used of 0.35% and guarantees under an existing committed to investment grade will move to stage 1, The previous calculations of Incurred-But- an upper threshold of 10%, comparing the facility are not considered new origina- regardless of the multiplier threshold or Not-Reported (IBNR) provisions have been current default probability with the default tions but originations with the origination absolute limits. replaced as per 1 January 2018 by required probability at origination. No significant date at the facility start date. • An exposure upgraded from the “CCC” ECL assessments of financial instruments increase in credit risk can be assumed for • Drawings under an overdraft facility are rating category will not be automat- classified in Stage 1 and Stage 2 based on financial instruments with low credit risk. not considered new originations, but ically classified in stage 2 but will IFRS 9 guidelines. Low credit risk means investment grade, originations at the facility start date. be re-assessed against the multiplier based on IFRS 9 Article B5.5.23. The Bank threshold and the absolute limits. only applies the low credit risk assumption to the interest bearing securities portfolio.

78 79 The backstop of 30 days past due remains. The result of the staging process is presented The Bank differentiates between two types of continuous ability to generate stable earnings Any customer with a 30 days past due cannot to the provision committee on a quarterly market risk: sufficient to maintain bank’s normal business be moved back to stage 1, regardless of any basis. To this end, an impairment analysis is 1) Trading market risk arises primarily through operations, and 3) macro level active hedging decision and changes to the rating of the prepared which is including the results of the taking positions in debt, foreign exchange using derivative instruments. involved customer. staging assessment process: and derivatives. • The exposures that are breaching PD 2) Non-trading market risk arises from market ATB is measuring IRRBB using both earnings The stage 3 procedure does not change thresholds may result in a movement movements, primarily outside the activities and economic value perspective. Monitoring compared to the current practice: impaired between stage 1 and 2. of our trading units, in the banking book tools include Economic Value-at-Risk (EVaR) loans are classified as stage 3 loans. These • A summary overview of all financial and from off-balance sheet items. analysis, Economic Value of Equity at Risk assessments are based on individual instruments subject to the impairment (EVEaR), Gap / Modified Duration analysis assessments and the impairment amounts are process and effected by the staging process ATB assesses inherent Market Risk as average, and Earnings at Risk (EaR). For IRR appetite based on individual cash flow analysis. as well as an assessment of the assigned with risk appetite being set as low. Market setting and as a main IRRBB steering tool, the allowances and provisions. limits are set to prevent the accumulation of Bank uses historical EVaR (1 year 99% VaR) C.5.3 Impairment process, staging market risk beyond the market risk tolerance methodology. IRR for the Investment Book is assessment and responsibilities The conclusions of the staging process is part level. Market risk management is governed measured separately using 10 days 99% VaR. The staging assessment is based on the PDs of the impairment analysis which summarizes through a dedicated framework through which In repricing gap report (prepared separately which result from the rating process. Some in detail, the movements of loss allowance and the Bank allows market risk exposures in its for EUR and USD) interest rate sensitive of the qualitative elements of the staging provisions assigned to the relating financial trading and banking book without unduly assets are compared to interest rate sensitive assessment are captured in the rating override instruments as at the current reporting period compromising its capital and the stability of its liabilities. The net position per time period process. The rating process, including the compared to the previous period. earnings. Additionally, limits are set to prevent and cumulative gap is then calculated for each overrides, are therefore an essential part of the accumulation of market risk beyond the material currency. Furthermore, ATB stresses the IFRS 9 staging process. Risk Management Department (RMD) has a key market risk tolerance level. These limits are yield curve movements through parallel and responsibility for the IFRS 9 staging assessment complemented by additional monetary and nonparallel shifts to calculate interest rate risk Stage 3, impaired exposures, overrides any process. It ensures that all the required non-monetary trading controls with the aim sensitivity. The interest rate limit utilizations other designation and is assigned on an qualitative assessments and judgements in the of preventing excessive concentrations and for all risk calculations are then reported and individual basis. All other, stage 1 and 2 rating overrides are provided. illiquidity of exposures. discussed during regular ALCO meetings. Key exposures are regularly assessed in order metrics for market risk are set and periodically to determine the staging level. At new Finance prepares the loss allowance overview For the Trading Book, ATB applies Market Risk review in the Risk Appetite Dashboard. Financial statements origination, stage 1 is assigned to a financial pack for the provision committee. The staging Appetite and Tolerance levels on the aggregate instrument. information is part of that overview. The final portfolio level, which presents the overall risk Interest risk is also managed by adjusting the result, i.e. the impairment stage per exposure, budget. Consequently, a risk budgeting process interest rates charged to customers (borrowers The rating process is triggered by new is used by Finance for the final calculation of is used to set limits on the trading book level as well as savings clients) to the interest originations and reviews. Next to those the loss allowance at quarter-end. (FX, Derivatives and Fixed Income), where rate fluctuations on the money market. The regular triggers the rating process can also risks are effectively monitored and managed adjustments of interest rates show a delay be triggered by certain events that require by Risk Management. The Bank expresses the compared to the market fluctuation, especially a review of the rating, including the IFRS 9 C.6 Market risk Market Limits in term of Value at Risk (1 day when funding has a longer term. This could qualitative triggers: Forbearance, Past due and Within the market risk management 99% VaR), RWA and P&L stop loss. lead to a risk exposure which is being other triggers (through the NPL classification framework, market risk limits, expressed mitigated through capital and interest margin. and the 30 days past due backstop). in terms of Value at Risk (VaR), are set to Key metrics for market risk are set and period- prevent the accumulation of market risk ically review in the Risk Appetite Dashboard. The majority of ATB’s IRR arises from The reviews are at least annual but can be beyond the market risk tolerance of ATB. The At year end 2018 the Bank had no material non-trading asset and liability positions. In more frequent depending on the rating or VaR limits are set, monitored and managed market risk exposure. 2018 the overall IRR sensitivity decreased since classification of the customer. Reviews are also at trading book level: i.e. foreign exchange, ATB reduced average duration of the assets triggered by a classification move to watch derivatives, and fixed income. These limits C.6.1 Interest rate risk and reduced gaps in the longer-term buckets list, NPL or forbearance or by a move back to are complemented by additional monetary management as part of business transformation. The performing or the removal of the forbearance and non-monetary trading controls with the In line with the internal risk governance Interest Risk as calculated and presented in qualifier. Separately, the 30 past due status is aim of preventing excessive concentrations system Interest Rate Risk in the Banking Book the next overview is based on the contractual taken into account for the final IFRS 9 staging and illiquidity of exposures. We use derivative (IRRBB) risk is defined as a sub-section of the interest revision dates and gives information designation. transactions to hedge most of its market Market Risk, hence inherent risk (average) per balance sheet item per time bucket. exposure (mainly foreign exchange and interest and risk appetite (low) are the same. Main rate risk). principal in hedging and managing interest rate risk (IRR) exposure are 1) sufficient capital buffer to sustain interest rate shocks, 2)

80 81 Notes to the consolidated financial statements at 31 December 2018

Between 3 Between 1 Within 1 Between 1 No interest (in 1,000 euro’s) On demand months and 1 year and 5 Over 5 years Total month and 3 months rate maturity year years

Assets Cash and balances with central banks 138,867 ------138,867 Loans and advances to banks 28,834 30,547 10,185 15,299 - - - 84,865 Loans and advances to customers 307,695 241,154 203,505 27,787 61,122 - - 841,263 Interest-bearing securities - 24,984 - 45,393 236,102 - - 306,479 Shares and other non-interest-bearing securities ------194 194 Intangible assets ------11,136 11,136 Property and equipment ------2,075 2,075 Prepayments and accrued income ------21,021 21,021 Other assets - - 1,081 14,868 86 - 3,916 19,951 Total assets 475,396 296,685 214,771 103,347 297,310 - 38,342 1,425,851

Liabilities and equity Amounts due to banks 268 27,0 41 53,230 - - - - 80,539 Funds entrusted 478,642 41,321 62,836 257,715 234,389 10 - 1,074,913 Accruals and deferred income ------17,436 17,436

Provisions and other liabilities - - 5 14,834 13,637 - 7,262 35,738 Financial statements Subordinated loans - 35,000 - - - - - 35,000 Total liabilities 478,910 103,362 116,071 272,549 248,026 10 24,698 1,243,626

Equity ------182,225 182,225 Total equity ------182,225 182,225

Total liabilities and equity 478,910 103,362 116,071 272,549 248,026 10 206,923 1,425,851

Net interest position -3,514 193,323 98,700 -169,202 49,284 -10 -168,581 -

82 83 Notes to the consolidated financial statements at 31 December 2017

Between 3 Between 1 Within 1 Between 1 No interest (in 1,000 euro’s) On demand months and 1 year and 5 Over 5 years Total month and 3 months rate maturity year years

Assets Cash and balances with central banks 181,791 ------181,791 Loans and advances to banks 19,745 36,005 29,810 20,709 10,200 - - 116,469 Loans and advances to customers 195,857 96,981 204,813 59,805 48,721 4,473 - 610,650 Interest-bearing securities - 25,005 - 20,247 181,714 - - 226,966 Shares and other non-interest-bearing securities ------240 240 Intangible assets ------8,747 8,747 Property and equipment ------1,106 1,106 Prepayments and accrued income ------20,460 20,460 Other assets - - - - 11,175 - 37,670 48,845 Total assets 397,393 157,991 234,623 100,761 251,810 4,473 68,223 1,215,274

Liabilities and equity Amounts due to banks 22,011 11,054 - - - - - 33,065 Funds entrusted 461,601 26,129 43,447 182,609 208,294 - - 922,080 Accruals and deferred income ------18,765 18,765

Provisions and other liabilities - - - - 11,067 - 13,167 24,234 Financial statements Subordinated loans - 35,000 - - - - - 35,000 Total liabilities 483,612 72,183 43,447 182,609 219,361 - 31,932 1,033,144

Equity ------182,130 182,130 Total equity ------182,130 182,130

Total liabilities and equity 483,612 72,183 43,447 182,609 219,361 - 214,062 1,215,274

Net interest position -86,219 85,808 191,176 -81,848 32,449 4,473 -145,839 -

84 85 Notes to the consolidated financial statements Notes to the consolidated at 31 December 2018 financial statements at 31 December 2018 Effective interest rates at:

31 December 2018 31 December 2017 C.6.2 Foreign exchange risk The Bank expresses the FX Limits in term of management Value at Risk (VaR), notional limits and Profit (in % per annum) EUR USD RUB EUR USD RUB In line with the internal risk governance & Loss stop loss. VaR limit for the Banking system, foreign currency (FX) risk is Book (1 year 99% VaR) and the Trading Book Assets defined as a sub-section of the Market (1 day 99% VaR) are defined and managed Loans and advances to banks 1.86 0.57 - 2.02 1.36 - Risk, hence inherent risk (average) and separately by Risk Management. Key metrics risk appetite (low) are the same. The Bank for market risk are set and periodically Loans and advances to customers 3.58 4.27 - 3.91 5.33 9.33 conducts business in various currencies, review in the Risk Appetite Dashboard. At with EUR, USD and RUB being the most year ended 2018 the Bank had no material Interest-bearing securities 0.25 - - 0.44 - - material currencies in which the business net FX risk exposure. Liabilities is conducted, and GBP, JPY and CHF being other relevant currencies used in the FX Amounts due to banks 0.32 - - - - - Trading activities. For hedging and managing Savings and savings deposits 0.69 - - 0.78 - - exposure derivative transactions are used.

Other funds entrusted 0.31 0.61 - - 0.12 -

Subordinated loans 4.58 - - 4.58 - -

Foreign exchange position Financial statements

31 December 2018 31 December 2017

(in 1,000 euro’s) Long Short Net Long Short Net

Pound sterling 1,161 1,095 66 4,294 4,356 -62

Japanes Yen 9 - 9 8 - 8

Russian Ruble 558 488 70 39,113 37,950 1,163

Swiss Franc 32 - 32 20 - 20

Turkish Lira 1 - 1 2 - 2

US Dollar 760,749 761,953 -1,204 645,492 646,678 -1,186

Other 37 25 12 2,731 2,720 11

Total 762,547 763,561 -1,014 691,660 691,704 (44)

86 87 Notes to the consolidated financial statements Notes to the consolidated at 31 December 2018 financial statements at 31 December 2018

Foreign exchange contracts limitations of the stress testing exercise. established a Special Purpose Entity (SPE) (in 1,000 euro’s) Notional amount Market value The integral aspect of the testing strategy in order to transfer part of its portfolio to is involvement of the Board and Senior this SPE. The purpose of this structure is Year Total <= 1 year 1-< 5 year > 5 year Positive Negative Management in ensuring the appropriate to receive wholesale funding in order to use of stress testing in the capital planning. diversify the funding profile and to mitigate 2018 519,105 519,105 - - 1,604 -2,919 foreign currency risk by receiving funding in 2017 554,529 554,529 - - 7,798 -964 The Bank regularly performs stress tests USD currency. The loans that are assigned related to its entire portfolio to assess the to this transaction are pledged to this The foreign exchange contracts consist mainly on USD contracts. potential impact on its capital, earnings facility and considered encumbered assets. and liquidity position. Stress testing is In the statement of financial position the total euro equivalent in foreign currency of assets amounts to € 696 million (2017: € 561 million), and of liabilities amounts to € 150 million (2017: € 132 million). also embedded into the Internal Capital Securitisation structure Adequacy Assessment Process (ICAAP) and ATB transfers the future cash flows of the Internal Liquidity Adequacy Assessment underlying loan portfolio to the SPE. In Process (ILAAP). return, the SPE pays ATB the purchase price equal to the notional amount. ATB’s cross currency swaps portfolio can be detailed as follows: Furthermore, ATB applies reverse stress (in 1,000 euro’s) Notional amount Market value testing to further explore the vulnerabil- In accordance with the agreement, the SPE ities of ATB’s risk profile and identify a will receive the following funding facilities: Year Total <= 1 year 1-< 5 year > 5 year Positive Negative scenario with a higher likelihood that could a. a Senior Loan of USD 150 million threaten ATB’s viability. The reverse stress (maximum 60% of total funding), and 2018 178,476 43,116 135,361 - 14,805 -16,765 test is performed on an annual basis and b. Junior funding from ATB for the 2017 43,969 - 43,969 - 11,172 -11,064 integrated into the annual ICAAP process. remainder (and to fund upfront In the light of any substantial changes in expenses). Financial statements Cross currency swaps consists of USD - RUB and USD - EUR swap positions. the market or other factors affecting the financial strength of the bank, reverse The SPE also needs to keep a minimum stress testing might be updated more required amount on a reserve account frequently to assist in mitigating potential which is not freely disposable. The Junior C.7 Liquidity risk ATB uses liquidity stress tests as a risks to the Bank. loan has a final maturity date falling within As a key area of focus, ATB puts a high management tool to identify the potential 2 years after the final maturity date of the priority on establishing an internal funding vulnerabilities and worst-case liquidity risks C.7.2 Liquidity requirements Senior Loan. At year end 2018 no loans have and liquidity risk strategy that ensures ATB of ATB on its current cash flows and liquidity under CRR been transferred to the SPE and the funding measures, monitors and manages its liquidity position. Key metrics for market risk are On a daily basis, ATB monitors the facility has not yet been utilized however risk to be able to withstand a range of set and periodically reviewed in the Risk regulatory risk indicators of Liquidity in February 2019, the Bank used the facility stress circumstances without endangering Appetite Dashboard. Due to the importance, Coverage Ratio (LCR) and Net Stable for an amount of USD 30 million. the continuing viability of its business. ATB the Bank also implemented a separate Funding Ratio (NSFR), as well as other assesses inherent Liquidity and Funding Risk liquidity dashboard. internal liquidity measures. Both LCR and The next tables represent the assets as average, with risk appetite being set as NSFR are measured based on regulatory run and liabilities based on their remaining low. C.7.1 Stress testing and scenario off and recovery factors. The Bank monitors contractual terms to maturity at reporting analysis and manages its compliance with these date. Retail savings accounts are based on The Bank manages its liquidity profile Stress testing aims on exposing the material ratios based on the minimum regulatory expected maturity. by short-term liquidity risk management risk at which the bank is sensitive and which and internally set risk tolerance levels. combined with a long-term funding therefore should be given more attention strategy. Additionally, liquidity risk stress from the risk management perspective. ATB entered into an arrangement to testing is an important element of liquidity The relevant output of the stress tests is securitize part of its financial assets in risk measurement, risk evaluation and taken into account as part of a range of order to expand its funding facilities. ATB contingency funding planning for all risk management tool to support different currently has a shipping loan portfolio, potential contingent as well as improbable, business decisions and processes, keeping that is denominated in USD currency. ATB but plausible stress events. in mind the assumptions made and

88 89 Notes to the consolidated financial statements at 31 December 2018

Between 3 Between 1 Within 1 Between 1 (in 1,000 euro’s) On demand months and 1 year and 5 Over 5 years No cash flow Total month and 3 months year years

Assets Cash and balances with central banks 138,867 ------138,867 Loans and advances to banks 28,878 626 27,683 27,678 - - - 84,865 Loans and advances to customers 319,986 69,424 45,746 71,389 334,718 - - 841,263 Interest-bearing securities - 24,984 - 45,393 236,102 - - 306,479 Shares and other non-interest-bearing securities ------194 194 Intangible assets ------11,136 11,136 Property and equipment ------2,075 2,075 Prepayments and accrued income 392 13,638 1,253 5,738 - - - 21,021 Other assets - 3,478 201 14,970 1,302 - - 19,951 Total assets 488,123 112,150 74,883 165,168 572,122 - 13,405 1,425,851

Liabilities and equity Amounts due to banks 14,203 13,106 27,018 17,475 8,737 - - 80,539 Funds entrusted 164,434 76,614 80,332 294,759 321,712 137,062 - 1,074,913 Accruals and deferred income - 9,402 10 8,024 - - - 17,436 Financial statements Provisions and other liabilities - 177 3,302 17,102 15,157 - - 35,738 Subordinated loans - - - - 35,000 - - 35,000 Total liabilities 178,637 99,299 110,662 337,360 380,606 137,062 - 1,243,626

Equity ------182,225 182,225 Total equity ------182,225 182,225

Total liabilities and equity 178,637 99,299 110,662 337,360 380,606 137,062 182,225 1,425,851

Liquidity GAP 309,486 12,851 -35,779 -172,192 191,516 -137,062 -168,820 -

90 91 Notes to the consolidated financial statements at 31 December 2017

Between 3 Between 1 Within 1 Between 1 (in 1,000 euro’s) On demand months and 1 year and 5 Over 5 years No cash flow Total month and 3 months year years

Assets Cash and balances with central banks 181,791 ------181,791 Loans and advances to banks 17,26 6 38,484 19,810 20,709 20,200 - - 116,469 Loans and advances to customers 193,085 60,212 96,860 76,737 180,169 3,587 - 610,650 Interest-bearing securities - 25,005 - 20,247 181,714 - - 226,966 Shares and other non-interest-bearing securities ------240 240 Intangible assets ------8,747 8,747 Property and equipment - 5 - - - - 1,101 1,106 Prepayments and accrued income - 7,863 1,229 11,276 92 - - 20,460 Other assets - 35,546 2,051 73 11,175 - - 48,845 Total assets 392,142 167,115 119,950 129,042 393,350 3,587 10,088 1,215,274

Liabilities and equity Amounts due to banks 33,065 ------33,065 Funds entrusted 143,261 62,074 53,445 221,215 299,300 142,785 - 922,080 Accruals and deferred income - 11,090 - 7,675 - - - 18,765 Financial statements Provisions and other liabilities - 370 632 95 23,137 - - 24,234 Subordinated loans - - - - - 35,000 - 35,000 Total liabilities 176,326 73,534 54,077 228,985 322,437 177,785 - 1,033,144

Equity ------182,130 182,130 Total equity ------182,130 182,130

Total liabilities and equity 176,326 73,534 54,077 228,985 322,437 177,785 182,130 1,215,274

Liquidity GAP 215,816 93,581 65,873 -99,943 70,913 -174,198 -172,042 -

92 93 Notes to the consolidated Notes to the consolidated financial statements financial statements at 31 December 2018 at 31 December 2018

C.8 Operational risk During 2018 operational risk was at the For regulatory reporting ATB applies Stress test framework ATB is exposed to potential losses caused by forefront of our collective consciousness IFRS accounting principles and therefore ATB uses scenario analysis and stress testing failures in information, system processing, as several strategic initiatives were rolled amounts, equity and results differ from to measure sensitivity of its main risk settlement of transactions and procedures. out in parallel, introducing interdepend- the accounting principles as used in these drivers: encies and potential spill-over risks between financial statements. The difference • The liquidity stress testing is performed Oversight on operational risk is coordinated processes, systems and the organisation. with the largest impact on equity is the and reported to the Management Board by the operational risk committee. The By year-end, significant improvements had revaluation of the other portfolio of inter- on a daily basis. The assumptions are permanent members of the ORC consist been realised which allowed a lowering of est-bearing securities (€ 1.3 million) which developed with quantitative analysis, of representatives from the Management the risk exposure within our risk-appetite as under IFRS is classified as ‘Available for sale’ regulatory framework and, where Board, and all three lines of defense. The compared to year-end 2017. with revaluation in Equity. The positive appropriate, according to hypothetical ORC monitors and aims for a timely update revaluation on FX derivatives of € 0.5 million assumptions to identify the bank’s most and consistency of the policies in the overall Capital requirements for operational risk and other positive revaluations, lead to a important vulnerabilities under various framework and publishes updated documents are calculated using the Basic Indicator total IFRS P&L adjustment of positive € 0.2 stress events. on a central location accessible to all staff. Approach (BIA). million. • The solvency stress testing is performed on a regular basis, with application of The capital ratios are within regulatory and severe but plausible scenarios. These internal requirements. have been built in compliance with the stress testing guidelines issued by the Basel requirements European Banking Authority (EBA). The ATB has implemented the standardized stress tests program ranges from simple approach for credit risk capital adequacy sensitivity analysis on single portfolios to C.9 Solvency risk calculation and the Basic Indicator Approach complex macroeconomic scenario stress Capital ratios and capital requirements are calculated using the Standardized Approach (SA) for Operational Risk capital calculation. testing on a company-wide basis. Financial statements under Basel III. ATB has also developed its Internal Capital • The Interest rate risk stress testing is Adequacy Assessment Process (ICAAP) and performed on a regular basis. ATB uses 31/12/2018 31/12/2017 Internal Liquidity Adequacy Assessment 1.0% shock in interest rates for earnings Capital information Process (ILAAP) frameworks to meet Basel measures and a standardized 2.0% shock requirements, under which internal capital in interest rates for Economic Value Capital and solvency ratios are: is calculated for concentration risk, country measures as prescribed by EBA regulatory • Total capital ratio 21.1% 24.8% risk, and interest rate risk in the banking guidelines. The results of stress test • CET1 capital available (in € million) 174 175 book. Reports based upon ICAAP and analysis are part of regular reporting to ILAAP are submitted to Dutch Central Bank ALCO and the regulator. • Total capital available (in € million) 204 210 annually. The reports are subject to the • CET1 capital ratio 18.0% 20.6% annual Supervisory Review and Evaluation ATB on regular basis also performs stress Process (SREP). On 1st September 2018, ATB tests for the market risk (trading and SREP requirements *) submitted its annual ICAAP and ILAAP to investment portfolio), credit portfolio and • Total SREP capital ratio (TSCR) 17.9% 17.0 % Dutch Central Bank in compliance with Basel operational risk. Outcomes are reported to • Tier 1 capital ratio 15.9% 15.0% requirements. relevant internal bodies, the Management Board and the regulator. • CET1 capital ratio 14.4% 13.5%

*) SREP decision dated 21 february 2019 C.10 Legal procedures The Bank is involved in a limited number of court procedures. It is not possible to predict the outcome of these procedures, but it is not expected that these will have a material negative effect on ATB’s financial position.

94 95 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

31/12/2018 % 31/12/2017 % 1 31/12/2018 31/12/2017 By geographical concentration: Cash and balances with 138,867 181,791 EUR utilising countries 50,933 60.0 49,052 42.2 central banks Other European countries 8,148 9.6 2,965 2.5 Non-restricted demand deposits at Russia 354 0.4 2,557 2.2 129,647 175,111 Dutch Central Bank Other CIS countries 25,429 30.0 38,337 32.9 Restricted demand deposits at 9,220 6,680 Other countries 1 - 23,558 20.2 Dutch Central Bank Total 84,865 100.0 116,469 100.0 Total 138,867 181,791

The mandatory cash reserve was recognized under the restricted demand deposits at 31/12/2018 31/12/2017 Dutch Central Bank. The average minimum reserve to be held at Dutch Central Bank for the month of December 2018 amounts to € 9.2 million (December 2017: € 6.7 million). By counterparty: Balances held with central banks are interest-bearing. Parent bank and related banks 389 2,595

2 31/12/2018 31/12/2017 Other banks 84,476 113,874 84,865 116,469 Loans and advances to banks Total 84,865 116,469 By type:

Nostro current accounts 28,878 19,744 Financial statements Deposits - freely available - 20,000 Stage 1 Stage 2 Stage 3 31/12/2018 Deposits - not freely available 30,592 18,424 Letter of Credit-loans 25,523 38,300 Loans - 20,000 Gross loans and advances to banks 84,993 - - 84,993 Impairments -128 - Movement in Impairments Total 84,865 116,469 Balance at 1 January 2018 91 18 - 109 New Assets originated or purchased 120 -20 - 100 Deposits - not freely available serve as collateral for liabilities arising from derivative Matured or repaid -14 - - -14 transactions. Transfer to/from other stage (net) -11 11 - - Re-measurement -58 -9 - -67 Impairments 128 - - 128 Amounts written off - - - - Impairments as at 31 December 2018 128 - - 128 Net loans and advances to banks 84,865 - - 84,865

96 97 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

31/12/2018 % 31/12/2017 % Total Stage 1 Stage 2 Stage 3 31/12/2018 By geographical concentration: EUR utilising countries 217,0 8 6 25.8 139,284 22.7

By credit rating class: Other European countries 184,954 22.0 115,260 18.9

AA- 3,805 - - 3,805 Russia 29,179 3.5 38,829 6.4 A+ 243 - - 243 Other CIS countries 74,566 8.9 56,097 9.2 A 5,567 - - 5,567 Marshall Islands 130,475 15.5 110,902 18.2 BBB+ 49,447 - - 49,447 United States 65,987 7.8 54,014 8.8 BBB- 1 - - 1 Singapore 37,273 4.4 28,185 4.6 BB+ 354 - - 354 Turkey 29,648 3.5 33,369 5.5 BB- 26 - - 26 Other countries 72,095 8.6 34,710 5.7 B 10,523 - - 10,523 Total 841,263 100.0 610,650 100.0 D 15,009 - - 15,009 Exposures in Other European countries mainly consist of exposures in Switzerland and Great Britain. Exposures in Other countries mainly consist of exposures in South Korea, Liberia and NR 18 - - 18 Croatia. Impairments -128 - - -128 Total 84,865 - - 84,865 31/12/2018 % 31/12/2017 % By sector and industry: ATB uses an internal rating system.

Shipping 265,626 31.6 155,167 25.4 Financial statements Energy 182,130 21.6 144,359 23.6 3 31/12/2018 31/12/2017 Industry and construction 116,210 13.8 132,289 21.7 841,263 610,650 Loans and advances to customers Trading companies 182,184 21.7 70,584 11.6 By type: Agriculture 66,827 7.9 45,732 7.5 Loans 448,744 306,047 Private persons 9,742 1.2 9,240 1.5

Syndicated loans 119,988 100,064 Others 18,544 2.2 53,279 8.7 Total 841,263 100.0 610,650 100.0 Overdraft and current accounts 268,328 198,952

Finance lease receivables - 18,344

Staff loans 9,742 9,272

Impairments -5,539 -22,029

Total 841,263 610,650

98 99 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (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 31/12/2018 the loan, the remaining part is classified as ‘Various unsecured’. The valuation methods of collateral are described in D.4.3 under credit risk. By credit rating class:

A- 12,003 - - 12,003 31/12/2018 % 31/12/2017 % BBB+ 20,192 - - 20,192 By type of collateral: BBB 53,948 - - 53,948 BBB- 90,627 - - 90,627 Secured by real estate (inc. ships) 284,722 33.8 205,382 33.6 BB+ 155,212 - - 155,212 Secured by moveable goods 364,353 43.4 201,118 32.9 BB 220,117 13,106 - 233,223 Secured by guarantees 4,715 0.6 85,300 14.0 BB- 100,215 - - 100,215 Secured by bill of lading 22,022 2.6 23,090 3.8 B+ 124,444 - - 124,444 B 39,591 - - 39,591 Partly secured by deposits 23,909 2.8 2,993 0.5 B- - - 7,6 05 7,605 Various secured 3,217 0.4 28,043 4.6 NR 9,742 - - 9,742

Various unsecured 138,325 16.4 64,724 10.6 Impairments -2,760 -19 -2,760 -5,539 Total 823,331 13,087 4,845 841,263 Total 841,263 100.0 610,650 100.0 Financial statements Loans secured by real estate and moveable goods increased significantly, see also the ATB uses an internal rating system. disclosure on Loans by sector and industry, and includes shipping loans. Loans and advances to customers no longer include net finance lease receivables (2017: € 15.9 million). The fair value of the collateral has not changed significantly during the financial year.

100 101 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

Loans to Managing Board in 2018 Stage 1 Stage 2 Stage 3 31/12/2018 31/12/2017

at 31 December Repaid Interest Term Collateral Gross loans and advances 826,091 13,106 7,605 846,802 632,679 C. Antoniou 8,388 2 2.917% 3 Pledge of shares to customers H.P.M.G. Steeghs 210 2 2.917% 3 Pledge of shares Movement in allowance for Impairments Balance at 1 January 2018 1,172 24 20,505 21,701 273,700 P.J. Ullmann 210 2 2.917% 3 Pledge of shares

New Assets originated or purchased 1,575 - - 1,575 - Total 8,808 6 Matured or repaid -442 -15 -7,162 -7,619 -17,2 27 Transfer to/from other stage (net) -2 2 - - - Loans to Managing Board in 2017 Re-measurement 407 7 -3,879 -3,465 7,510 FX impact 50 1 1,417 1,468 -11,288 at 31 December Repaid Interest Term Collateral Subtotal 2,760 19 10,881 13,660 252,695 Amounts written off - - -8,121 -8,121 -230,666 C. Antoniou 8,149 - 2.917% 4 Pledge of shares

Impairments at 31 December 2018 2,760 19 2,760 5,539 22,029 H.P.M.G. Steeghs 206 - 2.917% 4 Pledge of shares Net loans and advances to customers 823,331 13,087 4,845 841,263 610,650 P.J. Ullmann 206 - 2.917% 4 Pledge of shares

As at 31 December 2018, the gross loans and advances to customers classified in stage 3 Total 8,561 - amount to € 7.6 million and are provided for an amount of € 2.8 million. The additions of Financial statements allowances for impaired loans in stage 3 relate to 2 exposures representing 36.3% of the No loans and advances are outstanding to members of the Supervisory Board (2017: Nil). impaired loans. The collateral held for loans and advances to customers that are credit-im- paired and classified in stage 3 amount to nil. 4 31/12/2018 31/12/2017 The allowance for impairments assigned to the gross loans and advances to customers classified in stage 1 and stage 2 amount to € 2.8 million. Interest-bearing securities 306,479 226,966

Interest-bearing debt securities represent listed debt instruments, issued by: Maturities of gross investment in finance lease receivables 2017 31/12/2018 31/12/2017 Within 1 year Between More than Total 1 and 5 years 5 years Governments 296,744 216,972 Gross finance lease 24,847 - - 24,847 Banks and financial institutions 10,000 9,994 receivable Less future finance 6,503 - - 6,503 Impairments -265 - income Net investment 18,344 - - 18,344 Total debt securities 306,479 226,966 in finance lease

Income from finance lease receivables in 2018 is nil (2017: € 3.7 million).

102 103 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

31/12/2018 % 31/12/2017 % Stage 1 Stage 2 Stage 3 31/12/2018 By geographical concentration:

Netherlands 66,979 22.0 7 7,8 0 9 34.3 Gross Interest-bearing securities 306,744 - - 306,744 Ireland 50,013 16.3 - - Movement in allowance for ECL Italy 45,192 14.7 60,526 26.7 Balance at 1 January 2018 148 - - 148

Spain 44,974 14.7 - - New Assets originated or purchased 177 - - 177 Matured or repaid -53 - - -53 Portugal 31,585 10.3 32,075 14.1 Re-measurement -7 - - -7 France 20,035 6.5 30,107 13.3 Subtotal 265 - - 265 Slovenia 21,871 7.1 - - Amounts written off - - - -

Belgium 15,304 5.0 15,725 6.9 Impairments at 31 December 2018 265 - - 265 Net Interest-bearing securities 306,479 - - 306,479 Germany 10,526 3.4 10,724 4.7

Total 306,479 100.0 226,966 100.0

Total Stage 1 Stage 2 Stage 3 31/12/2018 Movements in the interest-bearing securitites were as follows:

2018 2017 By credit rating class: Financial statements

Balance at 1 January 226,966 261,431 AA- 112,866 - - 112,866 Purchases 221,550 67,47 7 A+ 50,044 - - 50,044 Redemptions -45,000 -90,000 A- 21,891 - - 21,891 Sales (including amortisations) -93,208 -8,676 BBB+ 45,040 - - 45,040 Amortisation premium and discount -3,564 -3,266 BBB- 31,643 - - 31,643 BBB 45,260 - - 45,260 Impairments -265 - Impairments -265 - - -265 Balance at 31 December 306,479 226,966 Total 306,479 - - 306,479

Interest bearing securities, in total amounting to € 26.4 million are not freely available as ATB uses an internal rating system. they are pledged as collateral in the context of Repo transactions (2017: Nil). In order to adhere to the IRRBB limits in 2018, a number of interest-bearing securities were sold during the year.

104 105 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s) 5 31/12/2018 31/12/2017 7 31/12/2018 31/12/2017 Shares and other non-interest- 194 240 Property and equipment 2,075 1,106 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 2018 Total 2017 2018 2017 improve- equipment ment Balance at 1 January 240 982 Balance at 1 January 382 503 221 1,106 228 Sales -30 - Additions 845 56 427 1,328 1,097 FX impact -16 -195 Disposals (net) - - -32 -32 - Impairments - -547 Depreciation -106 -101 -120 -327 -91 Balance at 31 December 194 240 Impairments - - - - -128

Shares and other non-interest-bearing securities consist of unlisted shares. Balance at 31 December 1,121 458 496 2,075 1,106 This balance consists of: Gross carrying amount 1,227 559 651 2,437 1,243 • 2 (2017: 17) shares of Swift (Society for Worldwide Interbank Financial Telecommunication); Accumulated -106 -101 -155 -362 -137 • 10,918 (2017: 10,918) shares of Stemcor Global Holdings Ltd depreciation (representing 1.1% of the voting power). Balance at 31 December 1,121 458 496 2,075 1,106 Financial statements 6 31/12/2018 31/12/2017 In 2018 and in 2017, the additions in property and equipment mainly relate to the relocation of our new office to the World Trade Center building. This relocation process was completed Intangible assets 11,136 8,747 in January 2018.

Movements in intangible assets were as follows:

2018 2017

Balance at 1 January 8,747 8,564

Additions 5,105 2,655

Depreciation -2,716 -2,055

Impairments - -417

Balance at 31 December 11,136 8,747

Gross carrying amount 19,876 15,189

Accumulated depreciation -8,740 -6,442

Balance at 31 December 11,136 8,747

Intangible assets refer to capitalized software expenses. Investment mainly consists of the cost of banking software. In 2017 the impairment charge mainly related to Core banking software.

106 107 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

8 31/12/2018 31/12/2017 10 31/12/2018 31/12/2017 Prepayments and accrued income 21,021 20,460 Amounts due to banks 80,539 33,065

Prepayments and accrued income can be specified as follows: Amounts due to banks can be specified as follows:

Interest receivable By type: Current accounts 268 22,011 • Parent bank and related banks 362 273 Syndicated loan 26,212 - • Related group companies 29 37 Repurchase agreements 27,018 - • Banks 479 1,064 Deposits 13,106 - • Loans and advances to customers 4,750 2,799 Margin calls 13,935 11,054 • Interest-bearing securities 1,942 1,472

Prepayments 7,4 0 4 8,021 Total 80,539 33,065

Current corporate income tax 6,055 6,055 ATB entered into a syndicated loan agreement being led by Alfa Bank and amounting to $30 million with an interest rate of 5.5%. This facility is divided into 2 repayment tranches of 12 Dutch Value Added Tax - 739 months and 24 months. Total 21,021 20,460 The loan is used for corporate funding purposes, including commodity financing of trade contracts for ATB’s clients related to deliveries of goods and equipment. Alfa Bank is Financial statements The current corporate tax of € 6 million is finally assessed by the Dutch Tax authorities responsible as the mandated lead arranger, book-runner, documentation agent and payment and is received early 2019. agent. FC Otkritie Bank PJSC is participating as a mandated lead arranger and Expo bank LLC is participating as a lead arranger.

9 31/12/2018 31/12/2017 In 2018, ATB entered into a short term repurchase agreement of € 10.8 million with Deutsche Bank maturing on 21 March 2019 and a short term repurchase agreement with Citi Group of € Other assets 19,951 48,845 16.2 million maturing on 19 February 2019.

Other assets consist of € 15.0 million of Cross Currency swaps (2017: € 11.2 million) and € 3.9 31/12/2018 % 31/12/2017 % million of FX contracts for hedging purposes (2017: € 7.7 million) and € 0.9 million (2017: Nil) of Embedded derivatives related to specific loan features. By geographical concentration: The swaps and FX contracts are mainly committed with large European financial institutions or with Alfa-Bank. In 2017 an amount of € 19.6 million is included in Other assets relating to property obtained from foreclosures of ATB Leasing. This entity was sold in February 2018. Russia 53,254 66.1 11,055 33.4 Other CIS countries 258 0.3 13 -

United States 16,243 20.2 - -

EUR utilising countries 10,784 13.4 21,997 66.6

Total 80,539 100.0 33,065 100.0

108 109 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

By counterparty: 12 31/12/2018 31/12/2017

Parent bank and related banks 35,842 11,068 Accruals and deferred income 17,436 18,765

Other banks 44,697 21,997 Accruals and deferred income can be specified as follows: Total 80,539 33,065 Interest payable • Parent bank and related banks 462 428

11 31/12/2018 31/12/2017 • Related group companies 280 276 • Banks 961 252 Funds entrusted 1,074,913 922,080 • Customers 295 249 Wage Tax & Social security premiums 963 984 Funds entrusted can be specified as follows: Corporate tax deferred - 1,146 31/12/2018 % 31/12/2017 % Deferred fee income 3,626 2,520

By type: Other accruals 10,756 11,770 Dutch Value Added Tax 93 - Retail accounts Russian Value Added Tax - 1,140 • Savings accounts 349,842 32.5 364,898 39.6 Total 17,436 18,765 • Savings deposits 589,112 54.8 452,853 49.1 Other accruals mainly comprise of staff expenses to be paid (holidays, severance)

Corporate accounts and other expenses to be paid (accounts payable, expense payable and other costs to be Financial statements paid). • Current accounts 124,280 11.6 93,138 10.1

• Fixed deposit accounts 7,16 0 0.7 7,627 0.8

• Deposit accounts pledged to ATB 4,519 0.4 3,564 0.4

Total 1,074,913 100,0 922,080 100.0

31/12/2018 31/12/2017

By counterparty:

Related parties 31,532 28,132

Other customers 1,043,381 893,948

Total 1,074,913 922,080

110 111 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s) 13 31/12/2018 31/12/2017 Employee Share Purchase Plan Provisions and other liabilities 35,738 24,234 In 2017 ATB implemented a cash settled Employee Share Purchase Plan (ESPP) covering the period 2017-2020. Through this plan a selective number of employees is offered to invest in the bank. These employees can buy shares of a company (ATB ESPP B.V.) that holds a maximum of Other liabilities consist of € 16.8 million (2017: € 11.1 million) of Cross Currency Swaps, € 9.9% shares in Amsterdam Trade Bank N.V. To this end 73,078 shares of Amsterdam Trade Bank 5.7 million (2017: € 1.1 million) of FX contracts for hedging purposes, € 13.1 million related to the cash settled Employee Share Purchase Plan (2017: € 12.1 million) and € 0.1 million N.V. have been issued in 2017 against a total price of € 14,939,185. (2017: nil) of provisions for Loan commitments and guarantees. The ESPP aims to build a strong alignment between key staff and the bank in order to create Of which Provisions: a partnership which reinforces joint goals between the bank and these employees. The 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 Movement in allowance for Provisions Off Balance and Guarantees of the shares that have been acquired by the employee. These loans are reported in note 3.

Stage 1 Stage 2 Stage 3 Total The ESPP requires the employees to hold their shares for a period of at least four years or up until the moment their employment with Amsterdam Trade Bank N.V. will be terminated. In Balance at 1 January 2018 72 42 - 114 view of the four year holding period the acquisition price has a discount of 15% that will be New Assets originated or purchased 59 6 - 65 amortized during the holding period. Matured or repaid -65 -28 - -93 The fair value change is based on the positive/negative difference between the fair value of Transfer to/from other stage (net) 22 -22 - - the underlying share and the exercise price. The visible intrinsic value of an ATB share with Re-measurement -32 4 - -28 certain adjustments is considered as the proxy for the fair value FX impact 1 - - 1 The fair value change of the employee share purchase plan as calculated for the year is Subtotal 57 2 - 59 recognized in full in the general and administrative expenses. Financial statements Amounts written off - - - - Impairments at 31 December 2018 57 2 - 59 As per year-end 2018, out of the 73,078 shares, 51,774 (2017: 50,663) have been placed (through 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 liabilities in the statement of financial position.

Movement of shares aquired by Movement 01/01/2018 31/12/2018 the Managing Board Members 2018

C. Antoniou 44,290 - 44,290 H.P.M.G. Steeghs 1,250 - 1,250 P.J. Ullmann 1,250 - 1,250

Movement of shares aquired Movement 01/01/2018 31/12/2018 by key staff 2018

Key staff 3,873 1,111 4,984

The movement of 1,111 shares consists of one good leaver (-175 shares ), new participants (759 shares) and an increase of shares with existing participants (527 shares).

112 113 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

14 31/12/2018 31/12/2017 2018 2017 Movement in issued Subordinated loans 35,000 35,000 Number Amount Number Amount capital

Issued share capital as The subordinated loans are held with associated companies and are subordinated in respect 665,086 99,763 598,975 271,803 of other current and future liabilities of ATB. at 1 January Issue of shares (nominal - 66,111 30,000 Movements in subordinated loans were as follows: € 453)

Share redenomination - -202,040 2018 2017 Issued share capital as at 665,086 99,763 665,086 99,763 Balance at 1 January 35,000 50,000 31 December

Conversion into equity - -15,000 During 2018 no new shares were issued. ATB has only one type of share and all shares have equal rights. Balance at 31 December 35,000 35,000

The interest rate on subordinated loans is 4.5% (2017: 4.5%). Final maturity date is 28 April Reserves 2023. Interest reset date is 31 January 2019. The interest expense during the year 2018 was EUR 1.6 million (2017: EUR 1.9 million). Share Retained Currency Undistributed premium earnings translation profit reserve Balance at 31 88,186 - -16,537 10,718 December 2017 31/12/2018 31/12/2017 15 Impact of adopting RJ - -43 - -

290 based on ECL Financial statements Equity 182,225 182,130 Balance at 1 88,186 -43 -16,537 10,718 January 2018 Issued Capital Net result - - - 138 Authorized share capital 450,000 450,000 Net result - - - 138 Unissued share capital -350,237 -350,237 Appropriation of - 10,718 - -10,718 Issued share capital 99,763 99,763 result

Net result - -16,537 16,537 -

Balance as at 31 Number of authorized shares 3,000,000 3,000,000 88,186 -5,862 - 138 December 2018 Number of shares issued and fully paid 665,086 665,086

Par value per share 150 150

114 115 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

Reserves 16 31/12/2018 31/12/2017

Share Retained Currency Undistributed 35,956 54,382 premium earnings translation profit Contingent liabilities reserve Balance at 1 11,384 -74,459 -15,351 -50,778 These are irrevocable contingent liabilities pursuant to guarantees. January 2017

FX revaluation - - -1,186 - By product: Guarantees issued 5,538 3,526 Net result - - - 11,661 Letters of credit 30,418 50,856 Total FX movement - - -1,186 11,661 and net result Total 35,956 54,382 Appropriation of - -50,778 - -50,778 result Redenomination of 76,802 125,237 - - By geographical concentration: shares EUR utilising countries 11,614 7,366 Issue of shares - - - - Other European countries 11,116 1,416 Balance at 31 88,186 - -16,537 11,661 December 2017 Russia - 4,402 Correction of error in - - - -943 ESPP accounting 2017 Other CIS countries 8,630 41,190

Balance at 31 Other countries 4,596 8 December 2017 for 88,186 - -16,537 10,718

comparative figures Total 35,956 54,382 Financial statements

Share premium This reserve includes amounts paid to ATB by shareholders above the nominal value Other contingent liabilities In the last few years, ATB has increased its effort to implement a strong compliance of purchased shares. culture and organisation, processes and tooling. As a result of this and also due to increased specific monitoring of its client files and Retained earnings business transactions, ATB identified and reported past unusual transactions to the This amount includes results from previous years kept in equity. authorities. The General Meeting of Shareholders held on 13 June 2018, decided to allocate the 2017 result of € 10,718,000 to Retained Earnings. ATB is being examined by the Fiod (Dutch Fiscal Intelligence and Investigation Department) for possible breaches by the bank in previous years regarding the Wwft (law against money Currency translation reserve laundering and terrorist financing) specifically with respect to client due diligence and Exchange gains and losses arising from the translation of foreign operations from functional timely reporting of unusual transactions. It is unclear which specific consequences (if any) to reporting currency of the parent are accounted for in this legal reserve. Following the the examination may have. Possible measures may include a penalty payment or a fine, sale of the Russian participating interest in February 2018, the associated accumulated which would mean that a present obligation per 31 December 2018 could exist and that exchange differences are taken to other reserves. The legal translation reserve relates to an outflow of resources may result as a consequence. Management is not able to assess the investment in ATB Leasing LLC. 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 would be. Accordingly, no provision has been booked at 31 December 2018.

Other contingent assets In August 2017 ATB entered into a cooperation agreement with Mid-Ship Capital LLC in order to extend ATB’s execution capacity in expanding products. Next to this cooperation agreement, a call option agreement was signed in which ATB conditionally has the possibility to acquire a sixty-six per cent membership interest in Mid-Ship Capital LLC. The Bank has not exercised this option after its expiration date by the end-of March 2019. The option is currently valued at nil due to the negative equity value of Mid-Ship Capital LLC.

116 117 Notes to the consolidated statement Notes to the consolidated statement of financial position of financial position at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

17 31/12/2018 31/12/2017 Related parties The consolidated statement of financial position and consolidated statement of income include Irrevocable commitments 13,949 49,519 the fully owned subsidiary Amsterdam Trade Capital Administration Corporation (Amsterdam) and for 2017 included also the fully owned subsidiary, ATB Leasing LLC (Moscow). Irrevocable credit facilities comprise the total amount of commitments in respect to undrawn irrevocable credit facilities. Transactions are at arm’s length basis and are based upon contractual arrangements and are separately disclosed in the related of the balance sheet and the income By geographical concentration: statement. Amounts receivable or payable to related parties and income and expenses regarding related parties are disclosed in the notes to the financial statements. EUR utilising countries 13,502 22,155 Related parties of ATB include, amongst others, its subsidiaries, associated companies within Other European countries 447 1,507 Alfa Group, key staff, Managing Board members and shareholders. Transactions between Other countries - 25,857 related parties mainly consist of forex transactions and financing activities. There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised Total 13,949 49,519 on outstanding balances with related parties.

Liabilities pledged to ATB Related parties: Parent and related bank In line with ATB’s risk appetite, the assets and liabilities as presented in the table below This relates to ATB’s direct majority shareholder Alfa-Bank Russia and its related banks within are subject to pledge agreements. This implies that within the conditions of these pledged agreements, deposits received from a pledged counterparty are fully placed by ATB at another the Alfa Banking Group. bank or counterparty at the risk and reward of this pledged counterparty. As a consequence hereof, these assets and liabilities are not (freely) available for ATB’s banking activities. The Related parties: Other group companies table below shows the impact of these transactions on the balance sheet of ATB. Other group companies included all group companies (including other minority shareholders), exclusive of Parent and related banks, within the Alfa-Group and ATB ESPP BV. Financial statements 31/12/2018 31/12/2017 For the financial year 2018 related parties mainly consist of: Assets Liabilities Assets Liabilities • Loans granted to members of the Management Board and other staff (disclosed under Loans and advances to customers and in the Statement of income under interest income Loans and advances to customers/ and Remuneration) Funds entrusted 1,561 4,519 2,993 3,564 • Funds received from Banks within the Alfa-Bank group (disclosed under Banks) and funds received from shareholders (disclosed under Funds entrusted) with income disclosed Off balance 2,958 - 571 - under Interest expense. • Shares acquired by Managing Board members and key staff are disclosed under Other Total 4,519 4,519 3,564 3,564 liabilities The related costs are disclosed under expenses. • In the notes on Results on financial transactions and Impairments of loans and advances The related accrued interest as part of the pledge agreements is not included in this table. 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 € 12.5 million (2017: € 14.2 million). The contract includes an option to terminate early after 5 years against additional costs.

Of this amount € 1.6 million is payable within 1 year (2017: € 1.6 million), an amount of € 5.2 million is payable between 1 and 5 years (2017: € 5.8 million) and € 5.6 million is payable after five years (2017: € 6.8 million).

118 119 Notes to the consolidated statement of financial position at 31 December 2018 (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 asset or liability. The aggregation of the fair value presented below does not represent, and should not be construed as representing, the underlying value of ATB.

Fair value Carrying value

Financial assets 2018 2017 2018 2017 Cash and balances with 138,867 181,791 138,867 181,791 central banks Loans and advances to 84,881 117,624 84,865 116,469 banks Loans and advances to 8 47,749 611,912 841,263 610,650 customers Interest-bearing 309,382 229,910 306,479 226,966 securities Shares and other non-interest-bearing 200 261 194 240 securities

Prepayments and 21,021 20,459 21,021 20,459 accrued income Financial statements Other assets 19,951 49,001 19,951 48,845

Financial assets 1,422,051 1,210,958 1,412,640 1,205,420

Financial liabilities Amounts due to banks 80,863 33,065 80,539 33,065

Funds entrusted 1,078,053 925,541 1,074,913 922,080

Accruals and deferred 17,436 18,765 17,436 18,765 income Provisions and other 35,738 24,101 35,738 24,234 liabilities

Subordinated liabilities 35,324 34,969 35,000 35,000

Financial liabilities 1,247,414 1,036,441 1,243,626 1,033,145

120 121 Notes to the consolidated Notes to the consolidated statement of income statement of income at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

18 2018 2017 19 2018 2017 Interest income 44,488 36,214 Interest expense 21,073 15,521

Interest income comprise interest from: Interest expense comprise interest from:

Loans and advances to banks 1,319 1,743 Central banks 817 1,113

Loans and advances to customers 42,462 33,378 Other banks 672 274

Interest-bearing securities 707 1,091 Funds entrusted 7,107 7,559

Interest income FX Swaps - 2 Subordinated loans 1,597 1,891

Total 44,488 36,214 Interest expense FX swaps 10,880 4,684

Total 21,073 15,521

2018 % 2017 %

By geographical concentration: 2018 % 2017 %

EUR utilising countries 4,723 10.6 3,774 10.4 By geographical concentration:

Other European countries 18,702 42.0 7,073 19.5 EUR utilising countries 19,916 94.5 15,007 96.7

Russia 1,449 3.3 4,555 12.6 Other European countries 492 2.3 175 1.1 Financial statements

Other CIS countries 3,737 8.4 9,447 26.1 Russia 608 2.9 135 0.9

Other countries 15,877 35.7 11,365 31.4 Other CIS countries 19 0.1 168 1.1

Total 44,488 100.0 36,214 100.0 Other countries 38 0.2 36 0.2

Total 21,073 100.0 15,521 100,0

2018 2017

Interest income from parent and 1,401 1,844 2018 2017 related banks Interest expense from parent and 1,739 2,046 related banks

122 123 Notes to the consolidated Notes to the consolidated statement of income statement of income at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

20 2018 2017 22 2018 2017 Net commission income 2,462 3,437 Other income -1,153 3,208

net commission income consists of: Other incomes consist of:

2018 % 2017 % Disposal of subsidiary -1,240 -

Trade finance fees 1,434 54.0 2,498 68.1 Rent on railway wagons - 3,230

Money transfer fees 114 4.3 94 2.6 Other 87 -22

Other fees 1,105 41.7 1,076 29.3 Total -1,153 3,208

Commission income 2,653 100.0 3,668 100.0 Disposal of subsidiary Commission expense 191 231 In February 2018, the ATB completed the sale and disposal of its subsidiary ATB Leasing Total 2,462 3,437 (ATBL). 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 for 2018. ATBL was identified as a non-core (but going concern) business in the course of reshaping of ATB’s business strategy in 2015, the whole transaction result a 21 2018 2017 negative result of € 1.2 million, which is mainly due to the exchange rate impact. Result on financial transactions 4,898 15,852 Financial statements Result on sale ATB leasing Outstanding Result Result on financial transactions consist of: Realized Amount (in EUR million) 31/12/2017 ATBL 2018 Other foreign exchange results -975 119 due to FX swaps Net equity value ATBL 15.9 17.3 1.4

Sale of interest-bearing securities 919 402 Current account FX-transactions 3.6 1.4 -2.2

Sale of non-core loans and advances 5,291 15,730 ATB funding 19.7 19.7 -

Unrealized result on loan participations 1,013 - Accrued interest ATB funding 2.4 2.4 -

Result on cross currency swaps -1,392 -41 ATBL receivable on ATB relating to CCZ 0.7 0.3 -0.4 loan transfer (USD 1.0 million) Foreign exchange results on client 36 -358 transactions Total 42.3 41.1 -1.2 Sale of shares 6 -

Total 4,898 15,852

124 125 Notes to the consolidated Notes to the consolidated statement of income statement of income at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

23 2018 2017 Remuneration Management Board in 2018 Staff expenses 21,050 21,014 Salary Pension Variable Severance Other Total cost pay payment compen- remu- Staff expenses comprise: sation neration

Wages and salaries 14,007 14,146 C. Antoniou 650 21 6 - 41 718

Pension cost 1,376 1,730 H.P. M .G. 432 32 6 - 27 497 Steeghs Other social cost 1,471 1,134 P.J. Ullmann 408 28 6 - 53 495 Other staff cost 4,196 4,004 Total 1,490 81 18 - 121 1,710 Total 21,050 21,014

As of 2017 the members of the Management Board invested indirectly in ATB via the At 31 December 2018, the total number of employees expressed in full-time equivalents ESPP Plan. For the loan related to the investment we refer to disclosure under loans was 129 (2017: 134). and advances to 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. Remuneration of Supervisory Board and Management Board The remuneration of the Supervisory Board totaled € 0.3 million (2017: € 0.3 million) and contains the paid remuneration in 2018 and 2017 respectively. Current members of the Supervisory Board employed within the Group are not remunerated. Fair value changes of ESPP investments made by Managing Board

Remuneration of the Management Board includes pension and other benefits paid by ATB totaled € 1.7 million (2017: € 1.7 million) and reflects the total remuneration of current 2018 2017

and former members of the Management Board. Financial statements C. Antoniou 251 1,099

H.P.M.G. Steeghs 7 31 Supervisory Board P.J. Ullmann 7 31 2018 2017 R.V. Emerson (as of April 6, 2017) 150 113 Total 265 1,161

H.C.M. van Damme 70 78 For the Management Board members the totals of their total remuneration plus the fair D. Vovk 70 70 value changes of the investments made by the Management Board members are for Mr. C. Antoniou € 0.9 million (2017: € 1.5 million), for Mr. H.P.M.G. Steeghs € 0.5 million (2017: € R. Meijer (as of September 1, 2018) 23 - 0.5 million) and for Mr. P.J. Ullmann € 0.5 million (2017: € 0.5 million). F.C.W. Kuijlaars (up to November 1, 2017) - 58 Total remuneration 313 319

126 127 Notes to the consolidated Notes to the consolidated statement of income statement of income at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

Remuneration Management Board in 2017 External auditor's cost:

Salary Pension Variable Severance Other Total 2018 EY Accountants Other EY Total EY cost pay payment compen- remu- sation neration Audit services 980 - 980

C. Antoniou 650 21 50 - 19 740 Audit-related services - - -

H.P. M .G. 421 27 - - 27 475 Tax advice services - - - Steeghs Other non-audit services - - - P.J. Ullmann 379 27 - - 42 448 Total 980 - 980 Total 1,450 75 50 - 88 1,663

2017 EY Accountants Other EY Total EY

24 2018 2017 Audit services 776 52 828 General and administrative Audit-related services 18 - 18 13,465 15,662 expenses Tax advice services - - -

General and administrative expenses comprise: Other non-audit services - - -

Total 794 52 846 Professional services 4,974 4,530 Financial statements

ICT / communication 4,837 2,557 The audit fees relate to the financial year to which the financial statements pertain, regardless of whether the external auditor and the audit firm performed the work during the Credit Insurance 1,628 2,535 financial year including the performance of other audits at request of the group auditors of Alfa Bank companies. Housing 747 2,665

Fair value change ESPP shares 877 1,257 25 2018 2017 Public relations 246 225 Depreciation and impairments 3,043 2,691 Recovered VAT -1,998 -2,480 of intangible assets and property and equipment Other cost 2,154 4,374 Depreciation comprise the depreciation cost of: Total 13,465 15,662

Depreciation of intangible assets 2,716 2,056 The other cost include € 1.1 million (2017: € 1.1 million) related to market information and for 2017 also € 1.8 million related to operating costs on property obtained from foreclosure of Depreciation of property and equipment 327 91 ATB Leasing of which the sale was completed and the proceeds settled in February 2018 (see note Other assets). Impairment on intangile assets - 417

Impairment on property and equipment - 127

Total 3,043 2,691

The impairment charge on intangible assets in 2017 consists of an additional depreciation on banking software that was no longer in use or on implementation cost which exceed the recoverable amounts.

128 129 Notes to the consolidated Notes to the consolidated statement of income statement of income at 31 December 2018 (in 1,000 euro’s) at 31 December 2018 (in 1,000 euro’s)

26 2018 2017 28 2018 2017 Resolution charge 1,355 1,203 Income tax - 2,923

The statutory applicable corporate tax rate for 2018 in The Netherlands is 25% (2017: 25%) Resolution charge consists of two levies € 1.4 million (2017: € 0.9 million) regarding the and in Russia is 20% (2017: 20%). Taxes are calculated on the result before taxation, based on Deposit Guarantee Fund and negative € 0.1 million (2017: € 0.3 million) regarding the Single the applicable profit tax rate. Resolution Fund.

During the financial years 2017 and 2018 ATB realised a profit. However, during the years 2013-2016 however ATB realised significant operational losses leading to tax losses. At year- end 2018 an amount of € 6.1 million is accrued as current tax receivable. This amount can be offset with the amount of tax paid in 2013 (carry back) and has been received in the 2018 2017 27 beginning of 2019.

Impairments of financial -9,429 -11,021 No deferred tax assets that depend on further probability of ATB are taken into account due instruments to the uncertainty on sufficient taxable profits during the taxable period that these losses can be offset. The tax payable on the positive result of the financial year 2018 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 2018 this resulted in an overall effective tax rate of 0.0% (2017: 19.6%).

Release relating to loans and advances -11,084 -17,2 27 ATB is currently subject to a tax audit covering Dutch corporate income tax and value added tax for the financial years 2013 - 2015. On 7 December 2018 ATB received a letter from the Dutch tax authorities in relation to the tax years 2013 and 2014. In this letter the Dutch tax Charge relating to loans and advances 1,575 7,510 authorities confirm that the 2013 and 2014 corporate income tax returns will be accepted without any adjustments. Charge relating to banks 19 - At this stage of this tax audit, it is currently not clear whether the outcome will lead to any Charge relating to interest-bearing 116 - adjustments for 2015. securities Financial statements The differences between the statutory applicable corporate tax rate and effective tax rate Relating to shares - 547 can be explained as follows: Release relating to off-balance items -55 - 2018 2017 Other charges (releases) - -1,851 Operating result before tax 138 13,641 Total -9,429 -11,021 Income tax

In 2018 ATB sold a number of loans that had been provided for in previous years. The Theoretical tax charge at the statutory 35 3,410 release of provisions in 2018 amounted to € 12.6 million (2017: € 17.2 million) relating rate of 25% to loans sold to related parties, are disclosed as recovered amounts. Other impairment releases relate to the termination of Finance Lease agreements of ATB Leasing which have Impact of foreign tax rate differences - -264 been sold in 2018. Write off tax overpayment ATBL - 1,864

Non recognised future tax assets -35 -2,087

Total - 2,923

At year-end 2018 an amount of € 270 million (2017: € 275 million) of losses available for carry forward have not been included in the measurement of deferred tax assets.

130 131 Company Financial Statements 2018

132 133 Company statement of Company statement financial position of income at 31 December before appropriation of profit

(in 1,000 euro’s) 31/12/2018 31/12/2017 (in 1,000 euro’s) 2018 2017 Assets Note* Income from operating Note* Cash and balances with central banks 138,867 181,791 activities Loans and advances to banks 29 84,865 113,990 Interest income 38 44,488 34,760 Loans and advances to customers 30 844,801 616,712 Interest expense 21,073 15,521 Interest-bearing securities 306,479 226,966 Net interest income 23,415 19,239 Shares and other non-interest-bearing securities 194 240 Commission income 2,653 3,668 Participating interests 31 - 15,889 Commission expense 191 213 Intangible assets 11,136 8,747 Net commission income 39 2,462 3,455 Property and equipment 32 2,075 1,102 Result on financial transactions 40 4,898 15,618 Prepayments and accrued income 33 21,021 22,628 Other income 41 -1,153 -22 Other assets 34 19,951 29,295 Total income from operating 29,622 38,290 activities Total assets 1,429,389 1,217,360 Expenses Liabilities and equity Staff expenses 42 21,050 20,492 Amounts due to banks 80,539 33,065 General and administrative expenses 43 13,465 13,758 Funds entrusted 35 1,074,913 922,918 Depreciation and impairments of 44 3,043 2,689 Accruals and deferred income 36 17,436 16,475 intangible assets and property and

equipment Financial statements Other liabilities 35,738 24,234 Provisions 37 3,538 3,538 Resolution charge 1,355 1,203 Subordinated loans 35,000 35,000 Impairments of finanicial instruments 45 -9,429 -8,207 Total liabilities 1,247,164 1,035,230 Total expenses 29,484 29,935

Equity: Operating result before tax 138 8,355 • Issued share capital 99,763 99,763 Income tax 46 - - • Share premium reserve 88,186 88,186 Result subsidaries - 2,363 • Retained earnings -5,862 - Net result 138 10,718 • Currency translation reserve - -16,537 • Undistributed result 138 10,718 Total equity 182,225 182,130 Total liabilities and equity 1,429,389 1,217,360

Contingent liabilities 35,956 54,382 Irrevocable commitments 13,949 49,519

* The number beside each item refers to the relevant note * The number beside each item refers to the relevant note

134 135 Notes to the company Notes to the company statement of financial statement of financial position position

General became effective on 1 January 2018. ATB Structured entities The company financial statements of applies this standard by adjusting the A structured entity is an entity which Amsterdam Trade Bank N.V. (ATB) have been opening balance sheet and opening retained is structured such that voting rights or prepared in conformity with section 14, earnings as per 1 January 2018, with no comparable rights do not constitute the “Provisions for banks”, of Book 2, Title 9 of restatement of comparative periods. 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 structured entity in order to securitise part (DGAAP) as also applied in the consolidated Foreign currencies of its loan portfolios in order to improve its annual accounts. The principles of valuation Translation differences on loans granted liquidity management. and determination of results stated in in foreign currencies from ATB to Group connection with the consolidated statement companies, which do not qualify as part of of financial position and consolidated the net investment in foreign investment, Other liabilities statement of income are also applied to the are recognised in the statement of income. Given its characteristics and based on Dutch corporate statement of financial position and Accounting Standard 275, the ESPP scheme corporate statement of income. has been recognised as a cash settled plan Group companies in the company financial statements. At year When the amounts included in the company ATCAC (Amsterdam Trade Capital Adminis- end 2018 ATB kept 21.304 own shares (2017: statement of financial position or the tration Corporation B.V.) is a 100% owned 22.415) as part of the ESPP. Financial statements statement of income are equal to the subsidiary, of which ATB has all voting rights. amounts as included in the consolidated statement of financial position or statement Investments and subsidiaries are valued Equity of income, no separate notes are included using the net asset value method. A ATB has only one type of share and all shares at company level. We refer to the notes provision is formed if and to the extent that have equal rights. During financial year 2018 as included in the consolidated financial the company stands surety for all or part of no shares have been issued. statements. the debt of the participating interest or if it has a constructive obligation to enable the participating interest to repay its debts. Changes in accounting principles and In February 2018 the sale of ATB Leasing presentation LLC, a formerly 100% owned subsidiary for leasing activities in Moscow, was completed. On 19 December 2017 the Dutch Accounting The sale of ATB leasing consisted of the Standards Board (Raad voor de Jaarvers- sale of all assets followed by the sale and laggeving) approved the amendment on transfer of the shares. As there were no Dutch Accounting Standard 290 Financial economic activities in ATB Leasing during Instruments. This adjustment allows the period of 1st January 2018 and the companies to account for impairments on actual transfer of the sale, no operational financial assets based on expected credit income has been recognised in relation to losses (ECL) in accordance with IFRS 9 this entity for this period Financial instruments. The new standard

136 137 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)

29 31/12/2018 31/12/2017 30 31/12/2018 31/12/2017 Loans and advances to banks 84,865 113,990 Loans and advances to customers 844,801 616,712

Loans and advances to banks can be classified as follows: Loans and advances to customers can be classified as follows:

By type: By type: Nostro current accounts 28,878 17,26 6 Loans 448,744 324,491 Deposits - freely available - 20,000 Syndicated loans 119,988 100,064 Deposits - not freely available 30,592 18,424 LC-loans 25,523 38,300 Overdraft and current accounts 271,866 202,490

Loans - 20,000 Staff loans 9,742 9,272 Impairments -128 - Impairments -5,539 -19,605 Total 84,865 113,990 Total 844,801 616,712 Deposits - not freely available serve as collateral for liabilities arising from derivative transactions.

31/12/2018 % 31/12/2017 % 31/12/2018 % 31/12/2017 %

By geographical concentration: By geographical concentration:

EUR utilising countries 50,933 60.0 49,052 43.0 EUR utilising countries 217,0 8 6 25.8 142,822 23.1 Financial statements

Other European countries 8,148 9.6 2,965 2.6 Other European countries 184,954 21.9 115,261 18.7

Russia 354 0.4 78 0.1 Russia 32,717 3.9 41,352 6.7

Other CIS countries 25,429 30.0 38,337 33.6 Other CIS countries 74,566 8.8 56,097 9.1

Other countries 1 0.0 23,558 20.7 Marshall Islands 130,475 15.4 110,902 18.0

Total 84,865 100.0 113,990 100.0 United States 65,987 7.8 54,014 8.8

Singapore 37,273 4.4 28,185 4.6

31/12/2018 31/12/2017 Turkey 29,648 3.5 33,369 5.4

Other countries 72,095 8.5 34,710 5.6 By counterparty: Total 844,801 100.0 616,712 100.0 Parent bank and related banks 389 116

Other banks 84,476 113,874 Exposures in Other European countries mainly consist of exposures in Switzerland and Great Britain. Exposures in Other countries mainly consist of exposures in South Korea, Total 84,865 113,990 Liberia and Croatia.

There were no subordinated loans outstanding to banks in 2018 and 2017.

138 139 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)

31/12/2018 % 31/12/2017 % Stage 1 Stage 2 Stage 3 31/12/2018 By sector and industry:

Shipping 265,626 31.4 155,168 25.2 Gross loans and advances 829,629 13,106 7,605 850,340 Energy 182,131 21.6 144,359 23.4 to customers Movement in allowance for Impairments Industry and construction 116,210 13.8 132,289 21.5 Balance at 1 January 2018 1,172 24 20,505 21,701 Trading companies 182,184 21.5 70,584 11.4 New Assets originated or purchased 1,575 - - 1,575 Agriculture 66,827 7.9 45,732 7.4 Matured or repaid -442 -15 -7,162 -7,619 Transfer to/from other stage (net) -2 2 - - Private persons 9,742 1.2 9,240 1.5 Re-measurement 407 7 -3,879 -3,465 Others 22,081 2.6 59,340 9.6 FX impact 50 1 1,417 1,468 Total 844,801 100.0 616,712 100.0 Subtotal 2,760 19 10,881 13,660 Amounts written off - - -8,121 -8,121 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 Impairments at 31 December 2018 2,760 19 2,760 5,539 the loan, the remaining part is classified as ‘Various unsecured’. The valuation methods of Net loans and advances to customers 826,869 13,087 4,845 844,801 collateral are described in C.4.3 under credit risk mitigations.

As at 31 December 2018, the gross loans and advances to customers classified in stage 3 amount are provided for 31/12/2018 % 31/12/2017 % an amount of € 2.8 million. The main additions of allowances for impaired loans in stage 3 relate to 2 exposures. The collateral held for loans and advances to customers that are credit-impaired and classified in stage 3 amount to nil. Financial statements By type of collateral: The allowance for impairments assigned to the gross loans and advances to customers classified in stage 1 and Secured by real estate (inc.ships) 284,722 33.7 205,382 33.3 stage 2 amount to € 2.8 million.

Secured by moveable goods 364,354 43.2 201,118 32.7

Secured by guarantees 4,715 0.6 85,300 13.8

Secured by bill of lading 22,022 2.6 23,090 3.7

Secured by deposits 23,909 2.8 2,993 0.5

Various secured 3,217 0.4 28,043 4.5

Various unsecured 141,862 16.8 70,786 11.5

Total 844,801 100.0 616,712 100.00

140 141 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 2018 2017 33 31/12/2018 31/12/2017 Participating interests - 15,889 Prepayments and accrued 21,021 22,628 income

Prepayments and accrued income can be specified as follows: Balance at 1 January 15,889 14,716 Interest receivable Disposal of subsidiary -15,889 - • Parent bank and related banks 362 273

Result of disposal subsidiary - 2,363 • Related group companies 29 2,393 • Banks 479 1,064 FX translation reserve - -1,190 • Loans and advances to customers 4,750 2,799 Balance at 31 December - 15,889 • Interest bearing securities 1,942 1,472 Prepayments 7,4 0 4 7,833 Current corporate tax 6,055 6,055 32 31/12/2018 31/12/2017 Value Added Tax - 739 Property and equipment 2,075 1,102 Total 21,021 22,628

Movements in property and equipment were as follows: The current corporate tax of € 6 million is finally assessed by the Dutch Tax authorities and is received early 2019. Leasehold Computer Other Total 2018 Total 2017 improve- equip- Financial statements ment ment 34 31/12/2018 31/12/2017 Balance at 1 January 382 503 221 1,106 224 Other assets 19,951 29,295 Additions 845 56 427 1,328 1,095

Depreciation -106 -101 -120 -327 -90 Other assets consist of € 15.0 million of Cross Currency swaps (2017: € 11.2 million) and € 3.9 million of FX contracts for hedging purposes (2017: € 7.7 million) and € 0.9 million Impairments - - -32 -32 -127 (2017: Nil) of Embedded derivatives related to specific loan features. The swaps and FX Balance at 31 December 1,121 458 496 2,075 1,102 contracts are mainly with large European financial institutions or with Alfa-Bank. Included in Other assets of 2017 is € 19.6 million regarding property obtained from foreclosures of ATB Leasing which was sold and the proceeds received in February 2018. Gross carrying amount 1,227 559 651 2,437 1,230 Accumulated -106 -101 -155 -362 -128 depreciation Balance at 31 December 1,121 458 496 2,075 1,102

In 2018 and in 2017, the additions in property and equipment mainly relate to the relocation of our new office to the World Trade Centre building. This relocation was completed in January 2018.

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)

35 31/12/2018 31/12/2017 36 31/12/2018 31/12/2017 Funds entrusted 1,074,913 922,918 Accruals and deferred income 17,436 16,475

Funds entrusted can be specified as follows: Accruals and defered income can be specified as follows:

31/12/2018 % 31/12/2017 % Interest payable

By type: • Parent bank and related banks 462 428

Retail accounts • Related group companies 280 276

• Savings accounts 349,842 32.5 364,898 39.5 • Banks 961 252

• Savings deposits 589,112 54.8 452,853 49.1 • Customers 295 249 Wage Tax & Social security Corporate accounts 963 984 premiums to be paid

• Current accounts 124,280 11.6 93,976 10.2 Deferred fee income 3,626 2,520

• Fixed deposit accounts 7,16 0 0.7 7,627 0.8 Value Added Tax 93 -

• Deposit accounts pledged to ATB 4,519 0.4 3,564 0.4 Other accruals 10,756 11,766

Total 1,074,913 100.0 922,918 100.0 Total 17,436 16,475

Other accruals mainly comprise of staff expenses to be paid (holidays, severance) and Financial statements other expenses to be paid (accounts payable, expense payable and other costs to be paid). 31/12/2018 31/12/2017

By counterparty:

Related parties 31,532 28,969

Other customers 1,043,381 893,949

Total 1,074,913 922,918

144 145 Notes to the company statement of financial position Notes to the company (in 1,000 euro’s)

37 31/12/2018 31/12/2017 statement of income (in 1,000 euro’s) Provision participating 3,538 3,538 interests

Provisions can be specified as follows: 38 2018 2017

Participating Interests 3,538 3,538 Interest income 44,488 34,760

Total 3,538 3,538 Interest income comprise interest from:

This provision on participating interests amount represents the full provision of the participating interest in ATCAC (Amsterdam Trade Capital Administration Corporation B.V.). Banks 1,319 1,743 There were no movements in 2018 and 2017 as there are no operational activities within this company. Loans and advances to customers 42,462 31,924

Interest-bearing securities 707 1,091 Other contingent liabilities In the last few years, ATB has increased its effort to implement a strong compliance Derivatives - 2 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 Total 44,488 34,760 and reported past unusual transactions to the authorities.

ATB is being examined by the Fiod (Dutch Fiscal Intelligence and Investigation Department) 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 2018 % 2017 % and timely reporting of unusual transactions. It is unclear which specific consequences (if any) the examination may have. Possible measures may include a penalty payment or a By geographical concentration: fine, which would mean that a present obligation per 31 December 2018 could exist and Financial statements that an outflow of resources may result as a consequence. Management is not able to EUR utilising countries 4,723 10.6 3,774 10.9 assess reliably if such penalty or fine might be the outcome of this investigation and if so, what would be the possible timing, scope or amounts of any such fines, penalties and/or other outcome. Other European countries 18,702 42.0 7,073 20.3 Other contingent assets Russia 1,449 3.3 3,101 8.9 In August 2017 ATB entered into a cooperation agreement with Mid-Ship Capital LLC in order to extend ATB’s execution capacity in expanding products. Next to this cooperation Other CIS countries 3,737 8.4 9,447 27.2 agreement, a call option agreement was signed in which ATB conditionally has the possibility to acquire a sixty-six per cent membership interest in Mid-Ship Capital LLC. The Other countries 15,877 35.7 11,365 32.7 bank has not exercised this option after its expiration date by the end-of March 2019. The option is currently valued at nil due to the negative equity value of Mid-Ship Capital LLC. Total 44,488 100.0 34,760 100.0

2018 2017

Interest income from parent 1,401 1,796 and related banks

146 147 Notes to the company Notes to the company statement of income statement of income (in 1,000 euro’s) (in 1,000 euro’s)

39 2018 2017 42 2018 2017 Net commission income 2,462 3,455 Staff expenses 21,050 20,492

Staff expense comprise: 2018 % 2017 % Wages and salaries 14,007 13,630 Trade finance fees 1,434 54.0 2,498 68.1 Pension cost 1,376 1,730 Money transfer fees 114 4.3 94 2.6 Other social cost 1,471 1,134 Other fees 1,105 41.7 1,076 29.3 Other staff cost 4,196 3,998 Commission income 2,653 100.0 3,668 100.0 Total 21,050 20,492 Commission expense 191 213

Total 2,462 3,455 At 31 December 2018, the total number of employees expressed in full-time equivalents was 129 (2017: 127).

40 2018 2017 43 2018 2017 Result on financial transactions 4,898 15,618 General and administrative 13,465 13,758 expense

Result on financial transactions consist of: Financial statements General and administrative expense comprise: Other foreign exchange results -975 -114 due to FX swaps Professional services 4,974 4,676 Sale of interest-bearing securities 919 402 ICT / communication 4,837 2,555 Sale of non-core loans and advances 5,291 15,729 Credit Insurance 1,628 2,535 Unrealized result on loan participations 1,013 - Housing 747 2,551 Result on cross currency swaps -1,392 -41 Fair value change ESPP shares 877 1,257 Foreign exchange results on client 36 -358 transactions Public relations 246 225

Sale of shares 6 - Recovery VAT -1,998 -2,480

Total 4,898 15,618 Other cost 2,154 2,439

Total 13,465 13,758 The sale of loans and advances includes loans sold to related parties.

The other cost include € 1.1 million (2017: € 1.1 million) mainly related to external suppliers providing market information. 41 2018 2017 Other income -1,153 -22

Other income mainly relate to the disposal of subsidiary ATB Leasing, also refer to Note 22.

148 149 Notes to the company Notes to the company statement of income statement of income (in 1,000 euro’s) (in 1,000 euro’s)

44 2018 2017 46 2018 2017 Depreciation and impairments of 3,043 2,689 Income tax - - intangible assets and property and equipment The statutory applicable corporate tax rate for 2018 in The Netherlands is 25% (2017: 25%). Taxes are calculated on the result before taxation, based on the applicable profit tax rate. Depreciation comprise the depreciation cost of: During the financial years 2018 ATB realised operational gains leading to taxable profit. 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 2018 and 2017 no deferred tax assets Intangible assets 2,716 2,055 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. Property and equipment 327 90 Therefore the tax impact on the profits for the financial year is set at nil, resulting Impairment relating to intangile assets - 417 i n a n e g a t i v e a m o u n t o f € 3 5 t h o u s a n d i n t h e l i n e N o n r e c o g n i s e d f u t u r e t a x a s s e t s .

Impairment on property and equipment - 127 At year-end 2018 an amount of € 270 million (2017: € 275 million) of losses available for carry forward have not been included in the measurement of deferred tax assets. Total 3,043 2,689 At year-end 2018 ATB’s balance sheet contained an amount of € 6.1 million as current tax receivable. This amount has been offset with the amount of tax paid in 2013 (carry back) The impairment charge on intangible assets consists of an additional depreciation on which has been received in the beginning of 2019. For 2018 this resulted in an overall banking software that is no longer in use or on implementation cost which exceed the effective tax rate of 0.0% (2017: 0.0%). recoverable amounts. ATB is currently subject to a tax audit covering Dutch corporate income tax and value added tax for the financial years 2013 - 2015. On 7 December 2018 ATB received a letter from the Dutch tax authorities in relation to the tax years 2013 and 2014. In this letter the Dutch tax authorities confirm that the 2013 and 2014 corporate income tax returns will be accepted and as such a final tax assessment for these years will be imposed. 45 2018 2017

At this stage of this tax audit, it is currently not clear whether the outcome will lead to Financial statements Impairments of financial assets -9,429 -8,207 any corrections for 2015. and off balance

The differences between the statutory applicable corporate tax rate and effective tax rate can be explained as follows: Release relating to loans and advances -11,084 -15,064

Charge relating to loans and advances 1,575 6,276 Operating result before tax 138 8,355 Income tax Charge relating to banks 19 - Theoretical tax charge at the statutory 35 2,089 Charge relating to interest-bearing 116 - rate of 25% securities Write off of withholding tax - - Charge relating to shares - 547 Non recognised future tax assets -35 -2,089 Other charges (releases) -55 34 Total - - Total -9,429 -8,207

The addition regarding loans in 2018 relates to 2 clients (2017: 3).

150 151 Subsequent events

In February 2019, ATB utilised its securitized There are no other material events after funding facility as described in note C.7.2. for year-end closing which should be addressed an amount of USD 30 million. in this analysis.

We refer to the Other information for the statutory regulation on profit and distributions. It is proposed to allocate the net profit of € 138 thousand to Retained earnings.

Amsterdam, 26 April 2019 Other Management Board: Supervisory Board:

C. Antoniou, Chief Executive Officer and Chairman R.V. Emerson, Chairman Information H.P.M.G. Steeghs, Chief Financial Officer H.C.M. van Damme P.J. Ullmann, Chief Risk Officer D. Vovk A.B. Sokolov A.J. Baxter R. Meijer

152 153 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 2018 We have also taken misstatements into account and/or possible misstatements that in our included in the annual report opinion are material for the users of the financial statements for qualitative reasons.

We agreed with the Supervisory Board that misstatements in excess of € 90,000, which are Our opinion identified during the audit, would be reported to them, as well as smaller misstatements We have audited the financial statements 2018 of Amsterdam Trade Bank N.V., based in that in our view must be reported on qualitative grounds. Amsterdam. Scope of the group audit In our opinion the accompanying financial statements give a true and fair view of the Amsterdam Trade Bank N.V. is established in the Netherlands and up to February 2018 held a financial position of Amsterdam Trade Bank N.V. as at 31 December 2018, and of its result for subsidiary in Moscow, Russia. The financial information of this entity is included in the 2018 2018 in accordance with Part 9 of Book 2 of the Dutch Civil Code. consolidated financial statements of Amsterdam Trade Bank N.V. Because the activities of this Russian subsidiary were already transferred early 2018 to an external acquiring party, The financial statements comprise: the Company is centrally organized and controlled by one management board, we performed • The consolidated and company statement of financial position as at 31 December 2018 a full scope audit (ourselves) on the consolidated financial statements as a whole. We have • The consolidated and company income statement for 2018 been able to obtain sufficient and appropriate audit evidence about the group’s financial • The notes comprising a summary of the accounting policies and other explanatory information to provide an opinion about the consolidated financial statements

information Other Information Our key audit matters Basis for our opinion Key audit matters are those matters that, in our professional judgment, were of most We conducted our audit in accordance with Dutch law, including the Dutch Standards on significance in our audit of the financial statements. We have communicated the key audit Auditing. Our responsibilities under those standards are further described in the “Our matters to the supervisory board. The key audit matters are not a comprehensive reflection responsibilities for the audit of the financial statements” section of our report. of all matters discussed.

We are independent of Amsterdam Trade Bank N.V in accordance with the EU Regulation Compared to the audit of the financial statements 2017 of Amsterdam Trade Bank N.V. we on specific requirements regarding statutory audit of public-interest entities, the Wet have no changes in key audit matters, however, we have included the voluntary adoption toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake of the revised Dutch Accounting Standard 290 for expected credit losses also as part of the de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for key audit matter on the valuation of financial instruments given the impact on the opening Professional Accountants, a regulation with respect to independence) and other relevant balance and disclosures. Furthermore, we added a key audit matter in relation to the independence regulations in the Netherlands. Furthermore we have complied with the correction of an error on the accounting for the employee share plan. Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics). These matters were addressed in the context of our audit of the financial statements as We believe the audit evidence we have obtained is sufficient and appropriate to provide a a whole and in forming our opinion thereon, and we do not provide a separate opinion on basis for our opinion. these matters.

Materiality

Materiality € 1.8 million (2017: € 1.9 million) Benchmark applied 1% of equity total (rounded) Explanation As this and last year’s operational result were negative, we deem equity to be the more appropriate measurement basis.

154 155 Key obser- Key obser- Risk Our audit approach Risk Our audit approach vations vations Laws and regulations in relation to The availability of sufficient capital We have specifically devoted clients and transactions, note 16 and liquidity and the testing of attention to the solvency and to the financial statements whether the company will be able liquidity requirements set by to continue meeting its obligations the Dutch Central Bank towards under the requirements of the Dutch Amsterdam Trade Bank N.V. Amsterdam Trade Bank N.V. has We performed walkthrough We concur Central Bank are important for the and the compliance with these to comply with applicable laws procedures regarding the design with man- going concern assumption that is requirements as per 31 December and regulations in relation to of controls by Amsterdam Trade agement’s underlying the preparation of the 2018. Additionally, we assessed client acceptance and payment Bank N.V. to identify, monitor and assessments financial statements, and as such the appropriateness of the related transactions, as well as sanctions disclose potential obligations arising and find the are considered to be a key matter disclosures. applied by the EU against businesses from legal or regulatory matters and disclosures for the audit. and clients from certain specific other contingencies. We considered in note 16 in countries. As disclosed in note 16, whether obligations exist, and the the financial the company is subject of criminal appropriateness of provisioning and statements Measurement of financial investigations by Dutch prosecutor disclosure based on the facts and to be rea- instruments and voluntary regarding various requirements circumstances available. sonable. adoption revised Dutch Accounting related to the client onboarding On a regular basis, we inquired with Standard RJ 290, note 3 to the and anti-money laundering in the risk, compliance and internal financial statements previous years. It is not yet known audit departments of the company to which specific consequences the understand and discuss the existing The portfolio of loans and advances We have gained an understanding We consider investigation may have. Possible and potentially new obligations and to customers of Amsterdam Trade of the processes at Amsterdam the provision measures may include a penalty regulatory matters. We examined the Bank N.V. is measured at amortized Trade Bank N.V. with respect to loan for impair- payment or a fine. At this stage relevant internal reports as well as cost, less a provision for impairment origination, credit risk management ment losses the management of Amsterdam regulatory and legal correspondence losses. Impairment allowances and the estimation process of on loans and Trade Bank N.V. is not able to assess to assess the developments. Where represent the company’s best determining provisions for expected advances to reliably the possible timing, scope appropriate, we involved our estimate of expected losses. At 31 credit loan losses. Where possible, customers to or amounts of any penalties or other regulatory and forensic specialists. December 2018 total gross loans of we tested the operating effectiveness be reason- outcome. Therefore management EUR 847 million and EUR 6 million of the key controls within these able and in concluded that as per 31 December In order to evaluate the facts and of provisions are reported and processes. For the ECL calculation compliance 2018 no provision is accounted for. circumstances with respect to the disclosed in the financial statements methodologies, we tested the with Dutch specific investigation, we inspected in the “Summary of significant design of processes in connection GAAP. The Developments in the prosecutor with help of our legal specialist accounting policies” section, note with particularly the allocation of disclosures investigation, as well as the overall the correspondence from the B.1.4 “Judgement and estimates’’, assets into stages, data accuracy and relating to compliance to applicable laws and prosecutor with Amsterdam Trade note C.4.3 ‘’Credit risk’’, note C.5 completeness, credit monitoring and the provision regulations for Amsterdam Trade Bank N.V. We also obtained the ‘’Expected Credit Losses – Financial disclosures. for impair- Bank N.V. in its gatekeeping role, representation made by the external instruments’’ and note 3 “Loans and ment losses, require considerable management legal counsel and inquired with senior advances to customers. For the calculation of the impairment as well as attention. This includes assessing management and the compliance provisions per 31 December 2018, regarding the recognition of any accounting officer of Amsterdam Trade Bank On 1 January 2018, the revised we selected a sample of individual the tran- provisions and, similarly, judgment N.V. Furthermore, we assessed the Dutch Accounting Standard (‘DAS’) loans and performed detailed credit sitional in the determination of adequate adequacy of the disclosure regarding 290 Financial Instruments became file reviews and challenged the impact on disclosures of any contingent the investigations as included in effective, which allows entities to internal assessment of impairment the open- liabilities and charges. Therefore, Note 16 to be in accordance with the calculate the impairment on loans identification and measurement. In ing balance, we consider this a key audit matter. requirements of Dutch GAAP. and advances based on expected addition we assessed the assumptions meet the re- credit losses (‘ECL’) in accordance underlying the impairment quirements Going concern assumption, note with the new international identification and quantification, of EU-IFRS B.1.3 to the financial statements accounting standard IFRS 9 with including forecasts of future cash as defined in no restatement of comparative flows, and valuation of underlying DAS 290. numbers. Amsterdam Trade collateral. We applied professional Solvency and liquidity on the For our audit we evaluated We noted Bank N.V. decided to adopt this judgement in selecting those basis of prudential standards as management’s assessment for going that the main option and, accordingly, had to exposures for our detailed inspection disclosed in note C.9 to the financial concern through multiple scenarios issues, analy- substantially update its processes, and engaged our real estate valuation statements is relevant for the and the underlying assumptions, sis, elabora- internal controls, and methodologies specialists to assist us with the assessment of the financial position calculations for the capital and tions and to embed the complexities and new audit of the reasonableness of of Amsterdam Trade Bank N.V. As liquidity ratios and data used. This assumptions concepts of the accounting standard management’s valuation for certain per 31 December 2018 the Core evaluation included examining of in respect such as lifetime projection horizons, impaired loans. We challenged the Equity Tier 1 and Liquidity Coverage subsequent events, comparing of the going allocation of loans to credit criteria used to allocate loans to ratios were above the minimum actuals after 31 December 2018 with concern basis risk staging and use of forward stage 1, 2 or 3 in accordance with requirements of the Dutch Central the budget and, with the assistance of accounting looking information. The first time DAS 290 and tested a sample of loans Bank. of our corporate finance specialists, have been adoption has to be determined on appropriate staging. We tested the challenging the plausibility of the properly retrospectively. The net impact of data used in the ECL calculation by forecasted assumptions on expected disclosed in the new ECL methodology on equity reconciliation to source systems. With results. notes B.1.3, as at 1 January 2018 is a EUR 0.1 the methodology for expected credit C.7 and C.9 million reduction and is included losses adopted as of 2018, we also of the finan- as a transitional disclosure in note performed audit procedures on the cial state- B.1.6.2 to the financial statements. opening balances including testing ments.

156 157 Key obser- Key obser- Risk Our audit approach Risk Our audit approach vations vations The appropriateness of loan the adjustments and disclosures Correction accounting error loss provisions is a key area of made on transition. Employee Share Purchase Plan, judgment for management. The note B.1.5 to the financial identification of impairment and the Finally, we assessed the statements determination of the recoverable completeness and accuracy of the amount are an inherently disclosures relating to the provision In 2017 Amsterdam Trade Bank N.V. We reassessed the conditions in Based on our uncertain process involving various for impairment losses, as disclosed in started an Employee Share Purchase the contracts and documentation procedures assumptions and factors including note 3 to the financial statements, to Plan (‘ESPP’) for the managing of the ESPP plan and discussed we consider the financial condition of the evaluate compliance with disclosure board members and certain senior the accounting treatment with the account- counterparty, expected future cash requirements of EU-IFRS as defined in managers with the objective to management of Amsterdam Trade ing and flows, the value of collateral and the DAS 290. invest in the company over a vesting Bank N.V. With support of our disclosure assessment of objective evidence period of 4 years. Reference is technical specialist, we ensured the of the error for impairment of an individual made to note B.20 in the financial appropriateness of the correction correction loan. The use of assumptions could statements. The plan was accounted of the error and the evaluation related to produce significantly different for in accordance with DAS 275 of the materiality to the financial the ESPP to estimates of loan loss provisions. Share-based Payments assuming a statements. We also reviewed the be in accor- re-measurement at each reporting adequacy of the presentation and dance with Given the relative size of the loan date with changes in fair value disclosures regarding the material the require- portfolio of Amsterdam Trade Bank recognized over the vesting period error correction to determine these ments under N.V., the introduction of new and of four years. During 2018 further were in accordance with Dutch GAAP. D utch G A A P. complex accounting requirements investigation and clarification of with respect to calculating the underlying ESPP documentation provisions for expected impairment revealed that the participants are losses and the subjectivity involved actually entitled to a fair value in the judgments made, we change at any moment during the considered this to be a key audit four years period, and accordingly, matter. will vest immediately. As disclosed in note B.1.5 of the 2018 financial Reliability and continuity of the statements the error is considered IT environment, note C.8 to the to be material and has been financial statements recorded in the opening balance of equity in accordance with Dutch A proper IT infrastructure ensures We tested the IT general controls For the Accounting Standard 150 including the reliability and continuity at Amsterdam Trade Bank N.V. audit of the adjustment of prior year numbers. of Amsterdam Trade Bank related to logical access and change financial N.V.’s business processes and management and application controls statements Considering the inherent complexity financial reporting. The company as embedded in the automated we find the of accounting for employee share continuously makes investments data processing systems. In various reliability plans and the size and relevance of to further improve the IT areas where the effectiveness and continu- the related correction, we consider infrastructure. As described in note of controls over IT systems need ity of the this as a key matter for our audit. C.8 to the financial statements, further improvement, we performed automated Amsterdam Trade Bank N.V. additional substantive procedures. data pro- executed on a comprehensive IT cessing sys- remediation plan during 2018 and Furthermore, our audit procedures tems to be upgraded multiple applications and consisted of assessing the adequate. control measures. developments in the IT infrastructure and analyzing the impact on the IT The role of external reporting and organization. Specifically for the the increased granularity of financial improvement activities under the and non-financial data are important remediation plan of Amsterdam Trade to stakeholders and supervisors, Bank N.V. we analyzed and reviewed and require high quality data and the enhanced controls over the an adequate IT environment. We outsourced IT operations. therefore consider this a key audit matter. We assessed the reliability and continuity of automated data processing only to the extent necessary within the scope of the audit of the financial statements.

158 159 Report on other information included in As part of the preparation of the financial statements, management is responsible for the annual report assessing the company’s ability to continue as a going concern. Based on the financial reporting framework mentioned, management should prepare the financial statements using In addition to the financial statements and our auditor’s report thereon, the annual report the going concern basis of accounting unless management either intends to liquidate the contains other information that consists of: company or to cease operations, or has no realistic alternative but to do so. Management • The Report of the Management Board should disclose events and circumstances that may cast significant doubt on the company’s • Other information pursuant to Part 9 of Book 2 of the Dutch Civil Code ability to continue as a going concern in the financial statements.

Based on the following procedures performed, we conclude that the other information: The supervisory board is responsible for overseeing the company’s financial reporting • Is consistent with the financial statements and does not contain material misstatements process. • Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code Our responsibilities for the audit of the financial statements We have read the other information. Based on our knowledge and understanding obtained Our objective is to plan and perform the audit engagement in a manner that allows us to through our audit of the financial statements or otherwise, we have considered whether obtain sufficient and appropriate audit evidence for our opinion. the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Our audit has been performed with a high, but not absolute, level of assurance, which means Standard 720. The scope of the procedures performed is significantly less than the scope of we may not detect all material errors and fraud during our audit. those performed in our audit of the financial statements.

Misstatements can arise from fraud or error and are considered material if, individually or Other Information Management is responsible for the preparation of the other information, including the Report in the aggregate, they could reasonably be expected to influence the economic decisions of of the Management Board in accordance with Part 9 of Book 2 of the Dutch Civil Code and users taken on the basis of these financial statements. The materiality affects the nature, other information as required by Part 9 of Book 2 of the Dutch Civil Code. timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion. Report on other legal and regulatory requirements Engagement We have exercised professional judgment and have maintained professional skepticism We were engaged by the supervisory board as auditor of Amsterdam Trade Bank N.V., as of throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements the audit for the year 2016 and have operated as statutory auditor since that financial year. and independence requirements. Our audit included among others: • Identifying and assessing the risks of material misstatement of the financial statements, No prohibited non-audit services whether due to fraud or error, designing and performing audit procedures responsive to We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU those risks, and obtaining audit evidence that is sufficient and appropriate to provide a Regulation on specific requirements regarding statutory audit of public-interest entities. basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control Description of responsibilities for the financial • Obtaining an understanding of internal control relevant to the audit in order to design statements audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control Responsibilities of management and the supervisory board for the • Evaluating the appropriateness of accounting policies used and the reasonableness of financial statements accounting estimates and related disclosures made by management Management is responsible for the preparation and fair presentation of the financial • Concluding on the appropriateness of management’s use of the going concern basis of statements in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, accounting, and based on the audit evidence obtained, whether a material uncertainty management is responsible for such internal control as management determines is exists related to events or conditions that may cast significant doubt on the company’s necessary to enable the preparation of the financial statements that are free from material ability to continue as a going concern. If we conclude that a material uncertainty exists, misstatement, whether due to fraud or error. we are required to draw attention in our auditor’s report to the related disclosures in

160 161 Appropriation of result

the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue Statutory regulation on Profit • The general meeting of shareholders may as a going concern and distributions resolve to make cash or stock distribu- • Evaluating the overall presentation, structure and content of the financial statements, Article 32 of the Articles of association tions on account of the reserves. The including the disclosures describes the statutory regulation on Profit general meeting of shareholders shall • Evaluating whether the financial statements represent the underlying transactions and and distribution. refrain from doing this without consulting events in a manner that achieves fair presentation the management board and supervisory Article 32: board, which may also make a proposal Because we are ultimately responsible for the opinion, we are also responsible for directing, • The profits shall be at free disposal of to that extent. supervising and performing the group audit. In this respect we have determined the nature the general meeting of shareholders. The • The management board shall determine and extent of the audit procedures to be carried out for group entities. Decisive were the management board shall, subject to the the date on which (interim) distributions size and/or the risk profile of the group entities or operations. On this basis, we selected approval of the supervisory board, make shall be payable, which date shall be no group entities for which an audit or review had to be carried out on the complete set of a proposal to distribute (a part of) such later than the fifth business day following financial information or specific items. 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 communicate with the supervisory board regarding, among other matters, the planned The proposal to distribute dividend shall payment of a distribution shall be barred scope and timing of the audit and significant audit findings, including any significant findings be discussed as a separate item on the after five years have elapsed.

in internal control that we identify during our audit. In this respect we also submit an agenda of the general meeting of share- Other Information additional report to the audit committee in accordance with Article 11 of the EU Regulation holders. It is proposed to allocate the net profit of on specific requirements regarding statutory audit of public-interest entities. The information • The management board may, subject € 138 thousand to Retained earnings. included in this additional report is consistent with our audit opinion in this auditor’s report. to the approval of the supervisory board and provided that the profits as We provide the supervisory board with a statement that we have complied with evidenced by an interim balance sheet relevant ethical requirements regarding independence, and to communicate with them prepared in accordance with Section all relationships and other matters that may reasonably be thought to bear on our 2:105 paragraph 4 of the Dutch Civil Code independence, and where applicable, related safeguards. permit this, resolve to make interim-dis- tributions on the shares on one or more From the matters communicated with the supervisory board, we determine the key occasions during the financial year prior audit matters: those matters that were of most significance in the audit of the financial to the adoption of the annual accounts by statements. We describe these matters in our auditor’s report unless law or regulation the general meeting of shareholders precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

Amsterdam, 26 April 2019

Ernst & Young Accountants LLP

Signed by A.B. Roeders

162 163 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. flow 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 flows and subtracts the future liquidity risks. Committee on Banking Supervision which COSO present value of all liability cash flows. 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 European Banking Authority uncollectible loans and advances or because five years and started in January 2014. swaps) (EBA) an impairment test has shown that the asset In this type of swaps, variable interest The European Banking Authority (EBA) is has to be valued lower, because the fair BIS total capital ratio payments, linked to Euribor, are exchanged a regulatory body that works to maintain value is lower than the carrying amount or The percentage of a bank’s capital adequacy with credit guarantees vis-a-vis a third financial stability in the European Union’s because the fair value of investments and calculated by dividing qualifying capital by party. The counterparty is required to pay (EU) banking industry. associates is lower than cost. the risk-weighted assets as defined by the if the third party cannot meet its payment Bank for International Settlements (BIS). obligations. The specific events which are ERM Internal Capital Adequacy followed by payments are recorded in the Enterprise Risk Management. Assessment Process (ICAAP) CEE (Central and Eastern contract. Strategies and procedures designed for ATB’s Europe) Expected Credit Loss continuous assessment whether the amount, CEE is a generic term for countries in Central CRR An average, or mathematically expected, composition and distribution of equity still Europe, Southeast Europe and Eastern Capital Requirement Regulation. credit loss, generally determined through reconcile with the size and nature of its Europe, usually meaning former communist a combination of expected credit risk current and potential future risks. states in Europe. The term is used following exposure, probability of default, and the collapse of the Iron Curtain in 1989–90. anticipated recovery in default.

164 165 IRRBB Loss given default (LGD) Related parties: Other group companies Total Tier II capital The amount of the interest rate risk that An estimate of the loss for ATB after Other group companies included all group Also referred to as supplementary or is significantly influenced by the extent liquidation of the received collateral. companies (including other minority share- secondary capital. The total Tier II capital of the maturity transformation between holders), exclusive of Parent and related comprise the revaluation reserves and the fixed-interest periods on both the Management Board (MB) banks, within the Alfa-Group. certain subordinated liabilities, adjusted assets and liabilities side. This particularly CEO - Chief Executive Officer for certain deductions set by the regulatory applies to the retail business with long-term CFO - Chief Financial Officer Risk-weighted assets (RWA) authorities, if applicable. customer loans on the assets side, which are CRO - Chief Risk Officer The assets of a financial institution after refinanced with variable-rate deposits on the being adjusted by a weighting factor, as Total Capital Ratio liabilities side. Net Stable Funding Ratio (NSFR) determined by the regulatory authorities, The percentage of a bank’s capital adequacy, The NSFR represents the available stable that reflects the relative risk attached to calculated by dividing qualifying capital by Irrevocable commitments funding sources related to the required the relevant assets. Risk weighted assets are the risk-weighted assets as defined by the All obligations that could give rise to the amount of stable funding. used to calculate the minimum amount of Bank for International Settlements (BIS). granting of loans. capital that has to be held. Probability of default (PD) Value-at-Risk (VaR) IRRBB The likelihood that a client will default Solvency Statistical analysis of historical market devel- Interest Rate Risk Banking Book within ATB is within one year. ATB’s buffer capital expressed as a opments and volatility in order to estimate defined as a sub-section of Market Risk. percentage of risk weighted assets. the probability of a loss on a portfolio

Total capital exceeding a certain amount. Other Information Letter of credit (LC) The sum of total CET1 capital and total Tier Standardised Approach (SA) A letter of credit is a letter from a bank II capital. A method used under Basel III to measure guaranteeing that a buyer’s payment to a a bank’s operational, market and credit seller will be received on time and for the Related party risk. This method is based on the approach, correct amount. In the event that the buyer In the normal course of business, ATB in which the risk weighting of an item is is unable to make payment on the purchase, enters into various transactions with related prescribed by the regulatory authorities. the bank will be required to cover the full or parties. Parties are considered to be related remaining amount of the purchase. if one party has the ability to control or Supervisory Review Evaluation exercise significant influence over the Process (SREP) Leverage Ratio Basel III (LR) other party in making financial or operating The SREP is a set of procedures carried The LR represents the ratio between total decisions. out on an annual basis by the supervisory assets plus contingent items and the Basel III Related parties of ATB include, amongst authorities to ensure each credit institution CET1 capital. others, its subsidiaries, associated has in place the strategies, processes, companies within Alfa Group, key capital and liquidity that are appropriate to Liquidity Coverage Ratio (LCR) management personnel and shareholders. the risks to which it is or might be exposed The LCR represents the ratio between high Transactions between related parties to. quality liquid assets and the balance of cash mainly consist of forex transactions and outflows and cash inflows over the next 30 financing activities. There are no significant Total capital days. provisions for doubtful debts or individually The sum of total CET1 capital and total Tier significant bad debt expenses recognised on II capital. Lifetime Expected Credit Losses outstanding balances with related parties. (LECL) Related parties: Parent and related bank The expected credit losses that result from This relates to ATB’s direct majority all possible default events over the expected shareholder Alfa-Bank Russia and its related life of a financial instrument. banks within the Alfa Banking Group.

166 167 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]

168