Annual report 2017 Moving your business forward Table of Contents
About Amsterdam Trade Bank FINANCIAL STATEMENTS 2017 • A merchant bank for the modern world 5 • ATB at-a-glance 6 Consolidated Financial Statements 2017 • Mission and Vision 7 • Consolidated statement of financial position at 31 December 46 • Core Values 8 • Consolidated statement of income 47 • Strategy 9 • Consolidated statement of changes in equity 48 • Consolidated statement of comprehensive income 48 • Consolidated statement of cash flows 50 Report of the Management Board • Letter from the CEO 12 Notes to the Consolidated Financial Statements 2017 • Economic Developments 14 • Summary of significant accounting principles 54 • Operational Review and Key Financials 16 • Risk management 64 • Business Strategy and Developments 19 • Notes to the consolidated statement of financial position 88 • Human Resources 23 • Notes to the consolidated statement of income 108 • Risk Management 24 • Integrity 28 Company Financial Statements 2017 • Corporate Social Responsibility 30 • Company statement of financial position at 31 December 2017 120 • Outlook 2018 31 • Company statement of income 121 • Responsibility Statement 32 • Notes to the company statement of financial position 122 • Notes to the company statement of income 131 • Subsequent events 136 Report of the Supervisory Board • Letter from the Chair 34 Other information • Supervisory Board meetings 35 • Independent auditor’s report 138 • Appropriation of result 145 Corporate Governance • Glossary 146 • The Management Board 38 • The Supervisory Board 39 • Dutch Banking Code 42 A merchant bank for the modern world About Amsterdam Amsterdam Trade Bank N.V. (ATB) is a fully We are located in Amsterdam, the licensed specialised financial institution Netherlands, historically one of the world’s focused on the entire spectrum of commodity most important financial, commodity, finance (covering softs, metals and energy), maritime and technology hubs. We are Trade Bank as well as shipping and asset-based financing. ideally positioned to find solutions to the We serve a wide range of customers active challenges our customers face in today’s across all aspects of international trade, rapidly changing world, and to offer a including commodity traders and producers, distinct set of products and solutions to processors and manufacturers, and ship customers who require structured trade, owners and companies otherwise involved transactional and/or asset financing. Since in the global logistics chain. Our product 2003, we are also active in the internet offering is tailored around three main retail market in the Netherlands, offering categories: financing solutions, treasury savings and deposit products. In 2006, we services and transaction banking (financial expanded our internet retail operations to institutions and documentary services). We Germany, followed by Austria in 2011. were established in the Netherlands in 1994 and have been part of Alfa Group since 2001. We are regulated by the Dutch Central As a member of Alfa Group, one of Russia’s Bank (De Nederlandsche Bank, DNB) and largest privately-owned financial institutions, the Netherlands Authority for the Financial we have exceptionally good access to the CIS Markets (Autoriteit Financiële Markten, AFM). markets. Outside the CIS region, our network of financial institutions helps us create oppor- tunities for our customers across the globe.
4 5 ATB at-a-glance
Trust Total Own Funds Total assets Tier 1 and Tier 2 Trust is the foundation of our relationships with customers partners and regulators. We €210 €1,215 establish this trust by being mln mln 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. Collaborate We build long-term partnerships with parties across the Total Income Operating result ROE commodity value chain. before tax.
€46 €15 6.4% mln mln About Amsterdam Trade Bank Amsterdam Trade About
Male / Female Ratio Nationalities
62% 38% 22 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 Client Relationship Merchant Bank Chain Growth
69%
6 7 Strategy
Our goal is to become the centre of risk management and advisory products and excellence for financial solutions to the services, to our carefully selected customer commodity value chain. We have successfully base. In the CIS region, our business focuses Core Values repositioned the bank for high growth. In on trade-related corporate lending to local recent years, we have transformed ourselves market leaders. We distinguish ourselves by We are determined to achieve our vision in a from a CIS corporate lender into a modern being more responsive to dynamic market way that is in line with our four core values. merchant bank with a clear customer- conditions, with short turnaround times, and focused strategy and the ability to leverage by leveraging our local market knowledge. our core areas of expertise. We focus on Our unique platform combines strong specific underbanked segments in the large origination skills with operating capabilities, commodity finance, ship finance and asset- and facilitates our ambitious but executable backed finance markets. We compete by organic growth plan. providing value-adding solutions, including
Client orientation Integrity We interact with our clients and financial We adhere to the highest integrity standards institutions on the basis of collaboration and for corporate and individual behaviour. We trust. Traditional values that have allowed are committed to fostering and maintaining ATB offers one-stop-shop financing solutions along the value chain us to build close, long-term partnerships. a sound corporate culture of honesty and accountability in order to protect the interests of all relevant stakeholders. Shippers About Amsterdam Trade Bank Amsterdam Trade About
Professionalism Teamwork Origination Destination 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 Financing well and perform our duties effectively. team. By cooperating, teams achieve what Asset based (medium/long term) individuals cannot. 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 ATB Growth Strategy Key points
Our growth strategy is tailored around:
Market Penetration Market Development We focus on increasing the market share of our We look at opportunities to extend our existing existing product offering in our current target markets. product offering in new markets.
Product Development Diversification We work to widen our existing We strive for continuous improvement of our existing products, product offering for existing and operations and processes. We work on smarter ways to conduct our new customers in our current business and on new product offerings for new markets. target markets. Report of the Management Board
10 Letter from the CEO
We delivered on our strategy. Our phase-out to facilitate transactional asset financing Success does not come without its challenges, of the legacy non-performing portfolio was with execution and monitoring based on and we are all well aware of the challenges completed, our new core loan portfolio blockchain infrastructure. we have faced and are still facing. We are of trade and commodity finance and fully cooperating with the investigation of associated assets has grown substantially, “ATB, a great place to be” the Public Prosecutor into potential past and our efforts to build an excellent breaches of Dutch regulations specifically operating model are on track. concerning client due diligence and timely At the same time we also observe new reporting of unusual transactions, for exited In 2017 ATB enjoyed a profitable year; dynamics emerge in financial markets, clients in prior years. We are continuously an important achievement made possible driven by economic, regulatory and tech- and significantly increasing awareness and by the hard work, determination and nological factors. Despite the continuous implementing best practice in AML and passion of each of us for what we do; but improvement of global economic activity KYC regulations, as well as assessing and also thanks to the support of our clients during the year, geopolitical uncertainties monitoring risks. and our stakeholders. could affect banking more than in recent years. At the same time, disintermediation Our shared values of Client Orientation, and financial technology are disrupting Teamwork, Integrity and Professionalism, “Discipline to complete small financial institutions across the board while as well as different perspectives and ideas, the pace of regulatory changes remains make ATB not only a great place to be but tasks that accumulate to high and increases costs significantly. These also more meaningful for ourselves and our deliver great results” developments create fertile ground for M&A colleagues, partners, clients and share- activity, both in-market combinations and holders. We are particularly pleased to
“A merchant bank for cross-border. Digitization of commerce, and welcome Mr Ron Emerson in the position of Report of the Management Board the modern world” Our accomplishments include broad success in environmental and regulatory pressures, Chairman of the Supervisory Board and are dealing with legacy issues and the clean-up are also affecting the markets our clients certain that his broad financial and academic Harris Antoniou of the non-performing portfolio, while operate in, whether in the extractive experience will be of great value to us all. Chief Executive Officer still ensuring regulatory compliance. We industries, trading, or transportation and implemented organisational improvements, logistics. At ATB, we are working continu- Our relocation to a brand-new, modern, Two years ago, we opted to reposition our ranging from IT infrastructure to policy ously and diligently on all fronts to make friendly, energy efficient work space at the business on large but underbanked markets to process optimisation focussed on more our bank ‘future-proof’. We are developing end of January 2018 is a pivotal moment that that require the specialised expertise we efficient product delivery. We expanded tools to measure our performance. We are will help speed up the transformation of the have embedded within the organisation. the ATB family with high quality profes- hiring more expert teams to explore new organisation. We decided to focus on servicing clients sionals across the board, which allows us products and markets. along the trade and commodity value to continue the expansion of our product On behalf of the Management Board, I would chain and associated assets. This was not range and services to our clients, while like to thank all our employees, customers, only because of the attractive commercial strengthening our capital base by raising In 2018, we will continue: shareholders and stakeholders for their opportunities this offers, but importantly additional equity from our shareholders to • ensuring the current capital and liquidity continued support and trust, and look because it is our belief that trade is a continue the roll-out of our business plan. strength forward to continuing on our path towards symbol of relationships amongst people. We entered into a cooperation agreement • focus on diversifying of liquidity sources a high-performance organisation. A symbol of respect for one another, and with Midship Capital LLC, and expanding • enhancing our operational and a recognition of placing value where it the capital placement and advisory information platforms; belongs. Trade is also what allows nations solutions offered to our clients. And last • further developing our core values, Amsterdam, 31 May 2018 to prosper and developing economies to but not least, we are continuing our efforts leadership capabilities and technical achieve the higher standing they deserve on Fintech by launching our prototype trade skills through continuous learning; Harris Antoniou in our world. finance blockchain solution, which aims • focusing on supporting our clients in Chief Executive Officer, achieving their goals. Chairman of the Management Board
12 13 East have all supported crude oil prices. Shipping6 Economic Brent Crude ended the year on a high note, Dry bulk: finishing with an almost 18% gain in 2017, The improved bulk carrier market largely bringing crude prices to their highest levels reflects improved demand growth, with Developments since 2015. The price had been rising since global seaborne dry bulk trade currently June, when it reached USD 45 USD/bbl, projected to have grown by 4.2% in full year supported by supply tightening from OPEC 2017, and by 5% in terms of tonne-miles. (and Russia), and improved demand driven Looking ahead to 2018, current projections by healthy economic fundamentals. indicate healthy global seaborne dry bulk trade growth of around 3% in terms of tonnes, Global other currencies, fell nearly 10% in 2017.3 A Coking coal: and around 4% in terms of tonne-miles. World growth strengthened in 2017 to 3.8 big part of the dollar’s decline during the Coking coal had a staggering 2017 in which On the supply side, the bulk carrier fleet percent, with a notable rebound in global year was due to the euro’s strength. the price almost doubled. This rise was is projected to have grown by 3.1% in full trade. It was driven by an investment supported by strong demand from Chinese year 2017. Looking ahead, bulk carrier fleet recovery in advanced economies, continued Interest rates steel mills, China’s domestic restrictions growth is expected to ease to around 1% in strong growth in emerging Asia, a notable The Federal Reserve (FED) hiked its policy on coal mining activity (which reduced 2018, reflecting expectations of a slower pace upswing in emerging Europe, and signs of rate twice, as it had said it would. The domestic supply), and finally by weather-in- of deliveries following reduced contracting recovery in several commodity exporters. European Central Bank (ECB) announced that duced supply disruptions. activity in recent years, and despite a slight Global growth is expected to tick up to it would lower its monthly asset purchases increase in contracting activity compared to 3.9 percent this year and next, supported to € 30 billion as of the start of 2018. Metals: 2016. Although some uncertainty remains, by strong momentum, favorable market Markets expect FED to increase rates by an Industrial and precious metals were the the combination of slow fleet expansion and sentiment, accommodative financial additional 25-50 bps in 2018, and a likely two sectors with the largest gains during relatively healthy growth in demand in 2018 conditions, and the domestic and interna- additional 25 bps in 2019.4 By contrast, the the year, up 31% and 12.9% respectively, are expected to see the bulk carrier sector tional repercussions of expansionary fiscal ECB is not expected to change rates in the according to the S&P GSCI index. continue to gradually improve next year. policy in the United States. The partial foreseeable future, but Quantitative Easing recovery in commodity prices should allow (an unconventional monetary policy in Industrial metals recorded large gains in Tanker markets: conditions in commodity exporters to which a central bank purchases government 2017, led by Aluminium (+33%), while Zinc Despite good developments in long-haul gradually improve.1 The pickup in growth has securities or other securities from the and Copper prices also rose more 30%. The trades out of the Atlantic and a firm growth been broad-based, with improved outturns market in order to lower interest rates and gains in aluminium and copper prices were in demand of some 5.1%, overall earnings
for the advanced, emerging market and increase the money supply) is expected to mainly due to tighter supply, though the for tankers were down 35% y-o-y, and 54% Report of the Management Board developing economy groups. Upside growth slow down. copper rally has intensified going into 2018, for VLCCs. The crude tanker fleet growth of surprises were particularly pronounced in driven by expectations of higher demand on 5.7% weighed heavily on the market. Fleet Europe and Asia. The Eurozone’s economic Commodities5 the back of faster growth around the world. expansion is expected to slow to 3.9% in 2018, performance was on the positive side, with Commodity prices had a mixed start to 2017, whilst demand growth is expected to be 5%, economic confidence reaching pre-crisis with the S&P Goldman Sachs Commodity supported by OPEC’s decision in November levels. Growth rates for many of the Index (S&P GSCI) falling by 15% at its low 2017 to extend their supply cut deal until euro-area economies have been marked point in June, driven down mainly by the Selected commodities changes Change MoM the end of 2018. This combination of factors up, especially for Germany, Italy and decline in oil prices. However, as the in December and YTD Change YTD has the potential to support a gradual the Netherlands, reflecting the stronger OPEC-led output restrictions started to improvement in market balance. Product momentum in domestic demand and higher bite, crude oil prices increased, with a 100% tanker demand is currently expected to have external demand.2 strong performance in the fourth quarter. 80% expanded by 3.6% in full year 2017, supported Industrial metals also had an impressive run 60% by growing intra-Asian products trade and US EUR and USD in 2017, particularly copper and aluminium. 40% products exports. The euro rose against the US dollar in 2017, Going into 2018, most investors are bullish These factors are expected to continue to 20% building on the strengthening economic about commodities, especially against the drive products trade growth in 2018, with 0% outlook in the euro area, diminishing backdrop of a strengthening global economy. product tanker demand expected to grow by -20% political uncertainty and expectations Zinc Lead Corn 3.7%. The product tanker fleet is currently Nickel Copper Wheat regarding the tapering of quantitative Oil: expected to have expanded by a firm 4.3% Coking Coal Aluminium Crude (Brent) easing (QE) in the euro area. The US dollar An improving global growth outlook, weather Hot Rolled Steel in full year 2017, exerting further supply-side recorded an annual decline for the first time events in the United States, the extension of pressure. Fleet growth is expected to ease in five years. The ICE dollar index, which the OPEC+ agreement to limit oil production, to 2.2% in 2018, which could start to help measures the dollar against a basket of six and geopolitical tensions in the Middle rebalance fundamentals.
1 Source: IMF - World Economic Outlook Update, April 2018 6 Clarksons (Dry Bulk Trade Outlook, Oil and Tanker Trade Outlook) 2 Source: IMF - World Economic Outlook Update, December 2017 14 3, 4 Source: Bloomberg 15 5 Source: Capital Economics - Commodities Weekly Wrap Compared to 2016, the net commission of our shares to ATB ESPP B.V., a private Operational Review income remained stable at € 6 million. limited liability company by the end of The net commission income is generated December 2017. The sole purpose of this mainly by business (leading to arrangement company is to hold shares in our bank. and Key Financials fees), guarantee services and other credit Given its characteristics, the ESPP qualifies commitment services to clients. Given the as a cash-settled plan in the corporate importance of this type of income, we have and consolidated financial statements decided to change our accounting practice based on Dutch Accounting Standards 275 and amortise fees above € 10,000 against Share-based Payments (and not on Dutch The turnaround of our bank in 2017 also Key financials the tenor of the related loan. Accounting Standard 240 Shareholders’ manifested itself in becoming profitable We achieved our key target to become Equity). Consequently, the shares issued to again. Our operational results gradually break-even by November 2017 and The result on financial transactions ATB ESPP B.V. and commitments relating improved through the year, although for generated an overall operating profit increased by € 17 million. The result on to this plan have been recognized as a the full year operationally we still incurred before tax (including impairments) of € 15 financial transactions mainly consists of liability. a loss. However, thanks to the successful million during the year (2016: € 48 million gains due to sale of loan assets in our recovery and resolution of several loans operating loss before tax), supported by legacy portfolio, gains due to sale of Equity in our legacy portfolio, we were able to increase of result on financial transactions interest bearing securities and minor Our capital position was further strengthened achieve a net profit of € 12 million. primarily based on sale of loan assets. negative foreign exchange results related during the year to facilitate business growth Our continuous focus on the execution of to ATB Leasing LLC. in line with our strategic and capital plan. In 2017, we made significant progress in the new business strategy has resulted in Other income increased by € 2.9 million executing our strategy to achieve the an improved cost-to-income ratio (before to € 5.7 million (2016: € 2.8 million), which As of 12 June 2017, we issued € 30 million following key goals: impairments and resolution charges) of 90% was mainly caused by an increase in rental of new shares, of which € 3.63 million was • Grow the core portfolio: our new core (2016: 172%). The positive operational trend income generated by ATB Leasing. acquired by ATB Holdings S.A. and € 26.37 business of trade and commodity finance in our results was built on increasing client by ABH Holdings S.A. We early repaid € 15 and associated financing has further numbers (69% higher than the previous Total operational expenses excluding million of ABH Holdings S.A. subordinated grown to approximately € 630 million year) and sustained high interest margins. impairments and the resolution charge loan. The latter used the proceeds of this (2016: € 394 million). The off-balance On both important metrics, we are on the decreased by € 8 million, from € 49 million repayment for acquisition of its shares. core portfolio increased to € 100 million right track. to € 41 million, mostly due to a decrease in As a result, our CET1 capital increased by (2016: € 36 million). internal staff expenses as FTEs decreased € 30 million and Tier 2 capital decreased
• Phasing out the legacy portfolio: we The total income from operating activities from an average 138 FTEs in 2016 to an by € 15 million. Our ownership structure Report of the Management Board further reduced the legacy portfolio by increased to € 46 million (2016: € 28 million), average 125 FTEs in 2017. at the end of June 2017 became as follows: more than € 300 million to a remaining mainly through an increase in other income Alfa Bank Russia (79.2%), ATB Holdings S.A. gross volume of € 34 million, mainly and result on financial transactions of The loan loss provisions also include a (12.1%) and ABH Holdings S.A. (8.7%). due to sale of loan assets (€ 84 million), € 20 million, against a slight decrease of general provision (so called IBNR – incurred repayments (€ 58 million) and write-off net interest income by € 2 million. In 2017, but not reported) for credit losses of As a result, our equity has increased to of fully impaired loans (€ 98 million). we increased the net interest income of our € 2.1 million (2016: € 2.4 million). The IBNR € 183 million at year-end 2017 (year-end • Build an excellent operating model: (i) core business in accordance with the new mainly decreased due to a decrease in 2016: € 143 million). we successfully outsourced and migrated business strategy, but this was still offset average expected loss of the core portfolio. to a new IT platform in February 2017; by the reduction of the interest income Capital Adequacy (ii) we successfully implemented an from our legacy business. Interest expense Total assets decreased slightly by € 78 At year-end 2017, our total capital ratio upgrade of our core banking systems decreased by € 5 million, mainly due to million to € 1,215 million at year-end 2017 was 24.8% compared with 24.3% at year-end in March 2018; (iii) we signed a rental reduced interest rates amid stable volumes (€ 1,293 million at year-end 2016), mostly 2016. Our capital was strengthened in contract with WTC Amsterdam and of savings and term deposits. In Q1 2018 related to lower balances with the DNB. 2017 with the continued support of our completed our relocation by the end we finalised the sale of our Russian leasing We managed to maintain our operations ultimate shareholders. Since our capital of January 2018; and (iv) working in activities which has basically completed the within the limits set in our risk appetite. structure does not include any hybrid cooperation with solution partners, we phasing out of our legacy business. capital instruments qualifying as additional introduced an innovative solution by During the year under review, we launched Tier 1 capital our Tier 1 capital ratio equals building a blockchain proof-of-concept. an Employee Share Purchase Plan (ESPP). our Core Equity Tier 1 capital ratio. These The ESPP has been designed with the ratios increased to 20.6% at year-end 2017 objective of creating a long term alignment (year-end 2016: 17.7%). As a result of these between our bank and key employees, good capital ratios we are well positioned who were invited to invest indirectly with for further business growth in 2018. their own funds in our bank. We issued 9.9% We apply the standardised approach in
16 17 calculating our capital ratios under Pillar 1 of the Basel III framework. Moreover, we continuously apply the Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Assessment Process Business Strategy (ILAAP) to meet Pillar 2 requirements, under which internal capital requirement is calculated for additional risks that are not captured under Pillar 1 (i.e. concentration and Developments risk, country risk, interest rate risk in the banking book, strategic risk and liquidity Highlights per Business Line risk). On an ongoing basis, we monitor solvency and liquidity to ensure compliance with internal limits and regulatory require-
ments. Additionally, capital and liquidity Commodity Finance Corporate Asset-Based adequacy are evaluated through regular Finance stress tests. The conducted internal assessments are subject to the Supervisory Review and Evaluation Process (SREP) conducted by the DNB.
• Benefitted from strong margins and rapid transactional cycles • Creation of Corporate Asset-Based • Deployed a substantial amount of new facilities Finance Business Line with focus • Expanded geographic and sectorial reach on Dutch corporates (acquiring mining and bunkering expertise) • Hiring of new staff and management • Managed to deepen relationships with • Specific focus on Rotterdam existing customers region was launched Report of the Management Board
Network Banking Network Banking Shipping – – Financial Institutions Corporate Banking Asset-Based Finance
• Expansion of risk • Disbursement of substantial • Substantial increase in utilised loan mitigation structures new facilities commitments • Successfully established • Successful sale of legacy • Healthy transaction pipeline new banking lines to assets to third parties • Growth in total number of customers facilitate our commodity • Hiring of new, well-qualified staff value chain & trade offering
18 19 Expansion of our product SCS products will be embedded into the The Future of Banking is Digital offering larger framework of Commodity Finance’s We continuously work on improving our facilities, offering a seamless transition existing products and developing new between traditional lending and repo-like ones to fulfil the needs of our clients. structures. This will ensure end-to-end Technological developments are changing On 14 November 2017, we announced a supply chain support for our clients, with the world of banking and we are ourselves cooperation agreement with Midship Capital a broad and flexible product suite. As part undergoing a digital transformation LLC, a specialist merchant bank based of this end-to-end offering, SCS intends to programme. Technology is an integrated in New York and focused on delivering operate in origin jurisdictions, underbanked part of our strategy and we are actively principal and investment banking solutions by larger lenders. Target clients will be engaging with solution partners to increase to the energy, commodities and transpor- medium-size commodity companies, our customer value. tation sectors. The cooperation extends our including primary producers, exporters, product offering with investment banking traders and processors. Building the foundation for the products and services, and enhances our digital trade bank origination and execution capacity at a time On 11 August 2017, we announced our During 2017, we migrated our IT infra- when customer demand for creative capital membership of the Loan Market Association structure to a cloud-managed service solutions is considerable. The partnership (LMA), as well as of the Bankers Association provider. This migration allows us to allows us to deliver tailored products and for Finance and Trade (BAFT). BAFT is the leverage a state-of-the-art digital infra- services that are based on deep knowledge leading international transaction banking structure that has also introduced additional of the complexities and ever-evolving association, providing advocacy, thought cyber security protection measures. We nature of the global energy and transpor- leadership, education, training and a global have progressed our core banking renewal tation markets. forum for its members in the areas of programme, which is another cornerstone of trade finance, payments, compliance and our digital strategy. At the end of 2017, Commodity Finance regulations. made steps towards the rollout of the Blockchain to lower Structured Commodity Solutions platform What is Blockchain? transactional costs throughout (SCS). As of March 2018, a dedicated team • A shared, distributed ledger that is the value chain of two senior industry specialists joined us secured by cryptography With our technology partner, we built a from a leading supplier of SCS solutions. • Computers in a network, called nodes, blockchain proof-of-concept based on the
They will offer a wide range of off-balance process and store transactions Ethereum blockchain platform. Blockchain is Report of the Management Board sheet financing products from origin & • A blockchain network can span the globe a secure transaction method and blockchain production to destination & consumption, and predictably reconcile transactions transactions can be accessed from anywhere initially focusing on supply chain solutions in the world via the web, with all parties via ownership-based financing structures: Why is blockchain so relevant involved sharing an open, distributed ledger. • Traditional repos: we will buy/sell for Trade Finance? All transactions within the blockchain are exchange deliverable commodities stored • Today most process flows are still paper- cryptographically chained, making the ledger in exchange deliverable locations; based, causing delays and inefficiencies impervious to fraud: to change a single • Physical intermediation: we will step in the cash and information flow entry, you would have to rewrite history. into a client’s supply chain in a • Online platforms have emerged but principal capacity, but as a financial require world+dog to be onboarded intermediary only. • Cost of a trade finance transaction is therefore too high (for SME’s)
20 21 Human Resources From Paper to Blockchain Ownership
Customer Bill of Bank Lading and time-to-market can be reduced dramati- Our Human Resources department plays A leadership training programme for our cally. At the same time, the proof-of-concept a critical role in supporting the successful senior managers is being rolled out in close has allowed us to further understand the implementation of our business model. cooperation with TIAS Business School in questions that need to be addressed before Our success depends on the skills and order to further develop and define ATB’s entering into full-scale blockchain-based professionalism of our employees. In 2017, management style. The leadership training financial solutions. These questions concern further efforts were made to align our is tailored around important topics such such areas as technology choices, legal human capabilities through both training as engagement, retention and employee frameworks and supply chain integration. efforts and the recruitment of 34 new staff motivation. members. To help us reach various different Paperless trade - digitising trade organisational milestones, such as the imple- We are also taking several measures documentation mentation of a new core banking platform, to improve gender diversity within our During 2017, we worked with essDOCS to we were supported by 21 interim staff and workforce. When we recruit for new digitise existing paper artefacts across the consultants. Given the size and number of positions, female candidates are explicitly commodity value chain. We use essDOCS’ these projects, we accepted that we had to invited to apply. Extra attention is being CargoDocs for real-time online creation overstep the normal ideal balance between given to developing the leadership skills of and approval of trade documentation fixed and interim staff. female employees and this year two female Customer/Shipper/Warehouse/ for exporters, forwarders and logistics colleagues have been enrolled in a female Bank/Supplier/Buyer companies. CargoDocs is an important leadership training programme. In addition, building block in the digital transformation To enhance the development and we are planning to organise round table for an industry where paperwork can take capabilities of our human capital, meetings specially for our female colleagues longer to arrive than the traded goods more emphasis will be put on in 2018. themselves. This solution is helping our (e-learning) training courses
customers significantly reduce the capital To further evolve the Human Resources Report of the Management Board cycle, since the original documents required function from an administrative unit into for import, export, shipping, trade and We realise it is vital to foster an engaging a professional, value-adding business finance can now be signed and exchanged work environment. To this end, we made partner, the focus within the team was on electronically. a further analysis of the outcomes of the optimising operational efficiency. Adminis- employee survey conducted in 2016. In trative processes have been streamlined and Looking forward addition to noting the positive findings, the reduced. The relocation to our new premises Token During 2018, we will continue our digital managers worked with their teams on action was a unique opportunity for a full digiti- transformation journey, by improving plans for further improvements. During the sation of all employee files. The employee and integrating our digital channels into annual performance measurement cycle of software, COBRA, will be further enhanced We have worked with a customer to build upgraded core banking platforms that will 2017, a 360º feedback tool was launched to roll-out the concept of Employee and a blockchain solution that facilitates enable an efficient and scalable banking in order to obtain valuable input from Management Self-Service. This will create ownership transfer within the value chain, model. colleagues about behaviour in the context room for Human Resources to move towards starting with a digitalised title document. of our core values. As an integrated part of a more strategic role, by starting to review We have seen a clear potential for significant our performance measurement software, core HR processes such as Performance increases in transactional efficiency and the tool is seen as user-friendly and been Management, Function Framework and security. Since no paper is involved, and positively received. A more in-depth analysis Learning. The process to elevate Human no human resources required to verify will follow later this year. Resources from a personnel and adminis- documentation, administrative overheads trative function to a business partner role To enhance the development and capabil- will continue in 2018. ities of our human capital, more emphasis will be put on e-learning training courses.
22 23 Risk Management
Exposure to risk, carefully balanced with The third stage identifies relevant risk Compliance risk one on a value-chain basis and aligned with its expected reward, lies at the core of the drivers and sets quantitative limits to each As a gatekeeper to the financial system, we the initiatives stemming from the overall operations of a bank. Every product offered, of these. Each driver has its own assigned are committed to comply with all applicable transformation programme. At year-end, all every client serviced, every decision and risk weighting, based on our business model laws and regulations. Based on our analysis primary value chains were assessed based action taken may lead to financial, reputa- and local circumstances, and taking into of clients, products and countries, we have on this approach, resulting in updated and tional, operational and/or strategic risks, account banking regulations. These risk concluded that our inherent risk profile is tested risk & control matrices. contributing to either success or failure. weightings and metrics are summarised considered relatively high compared with Our philosophy is that risk management is in the Risk Appetite Dashboard, which is the Dutch financial sector in general and Credit Risk a continuous process that should be aligned regularly reported to all relevant governance therefore we will continue paying attention In terms of capital consumption, credit risk with strategy and support decision-making. bodies within our bank. to the high risk elements including sanction constitutes one of our most significant risks. The governance of risk management is The Management Board monitors the metrics risks. However, the residual risks in the area Credit risk also includes all other forms of arranged in a committee structure. The on a regular basis and instigates action of Compliance are judged to be standard counterparty exposure, where counter- Supervisory and Management boards are plans in cases where risk appetite limits due to our extensive investment in policies, parties default on their obligations to ATB supported by these committees to manage are breached. The Risk and Compliance processes, systems and culture. Please see in relation to hedging or other financial relevant risk areas. These committees Committee of the Supervisory Board the relevant section in the notes to the activities. act within the mandates derived from our discusses the Risk Appetite Dashboard financial statements for further details of Measurement and monitoring of credit risks policies and Risk Appetite Statement, and during their regular meetings, and at least our robust set of mitigants. is embedded in the Risk Appetite Dashboard Committee Charters. Please see the risk once a year, and will bring issues to the via credit metrics. Credit metrics includes management section in the notes to the general meeting of the Supervisory Board as Operational Risk metrics for one obligor exposure, minimum financial statements for an organogram of necessary. We are exposed to potential losses credit quality, country risk and sector the committee structure. caused by failures in information, system concentration risk.
Strategic Risk processing, and settlement of transactions In 2017, the risk appetite threshold for the Report of the Management Board Risk Appetite Setting Our transition into a sustainable trade and procedures. average expected loss of the core portfolio Our risk appetite is defined in three stages. finance bank, with a distinct focus on Oversight of operational risk is coordinated increased to 0.5% (2016: 0.2%), while the risk In the first stage, a Baseline Risk Analysis financing commodity trade flows and by the Operational Risk Committee (ORC). tolerance threshold remained unchanged at (BRA) is conducted. This seeks to identify associated assets, will remain challenging The permanent members of the ORC consist 0.8%. Ultimately, this increased threshold and assess at a high level the risk areas that in the near future. Management is focused of representatives from the Management did not constitute an increase in overall risk are relevant to us given our business profile on growing the core portfolio while Board and all three lines of defence. The appetite: the average credit quality of the and strategy. The BRA results in the risk maintaining full compliance with regulatory ORC monitors the policies in the overall core portfolio improved, with the expected universe (or “taxonomy”) and the inherent requirements. framework and aims to ensure they are loss reducing to 0.43% at year-end (2016: risk exposure to each of the risks defined. up-to-date and consistent, and publishes 0.51%). In 2018, we will continue to select Solvency risk updated documents at a central location and approve facilities with robust collateral The second stage consists of a review of the Solvency risk is interconnected with accessible to all staff. or structural properties. risk universe and sets qualitative boundaries strategic risk, as our solvency position on the acceptable levels of (residual) risk. impacts our service delivery options to our During 2017, operational risk was at the The delta between inherent and acceptable clients. We primarily monitor this risk by forefront of our collective consciousness risk determines the level of governance continuously tracking the developments in as several strategic initiatives were rolled to employ, and is taken into account in available and required capital levels and out in parallel, introducing interdepend- the third stage. The inherent and residual pipeline projections. encies and potential spill-over risks between exposures, as well as appetite for the first 2017 saw an improvement in our capital- processes, systems and the organisation. and second stages, are set on a qualitative isation and solvency risk thanks to the 4-point scale: Low, Modest, Average, High. continued support of our shareholders, the In order to control operational risk exposure, These ranges are specified in qualitative positive year-end result, and the continued the approach to conducting risk & control terms to align the perception of risk across de-risking of the balance sheet. self-assessments (RCSAs) was revised to the organisation.
24 25 Risk Appetite & Taxonomy In 2017, our top-level risk areas for residual risk were defined as follows:
Market Risk Liquidity & Funding Risk Strategic Risk Within the market risk management As a key area of focus, we put a high The risk of non-compliance with the strategic objectives framework, market risk limits, expressed priority on establishing an internal funding that can arise from adverse business decisions, improper in terms of Value at Risk (VaR), are set and liquidity risk strategy that ensures we implementation of decisions, or a lack of responsiveness to to prevent the accumulation of market measure, monitor and manage our liquidity industry / market changes. Includes Earnings Volatility Risk risk beyond the market risk tolerance of risk in order to be able to withstand a range (The risk that the bank will not be able to comply with ATB. The VaR limits are set, monitored of stress circumstances without endangering profitability targets committed to shareholders) and managed at trading book level: the continuing viability of our business. foreign exchange, derivatives and fixed Appetite 2017: Modest income. These limits are complemented We manage our liquidity profile through by additional monetary and non-monetary short-term liquidity risk management trading controls, with the aim of preventing combined with a long-term funding Solvency Risk Compliance Risk Operational Risk excessive concentrations or illiquidity of strategy. Liquidity risk stress testing is The risk that the Bank will not The risk of loss or impaired The risk of loss resulting from exposures. We use derivative transactions also an important element of liquidity be able to maintain sufficient capacity to do business due to inadequate or failed internal to hedge most of our market exposure risk measurement, risk evaluation and capital reserves to cover its failure to adhere to regulatory processes, people, systems or (mainly foreign exchange and interest contingency funding planning for all financial and operational risks or market standards, legal external events. rate risk). Key metrics for market risk are potential contingent or improbable-but- to the extent prescribed by proceedings or inaccurate included in the Risk Appetite Dashboard. plausible stress events. We use liquidity the regulator. disclosure of formal reporting. stress tests as a management tool to identify our potential vulnerabilities and worst-case Appetite 2017: Modest Appetite 2017: Low Appetite 2017: Modest liquidity risks on our current cash flows,
liquidity position and liquidity risk mitigates. Report of the Management Board Detailed metrics for liquidity are included in the Risk Appetite Dashboard. Given its Credit Risk Market Risk Liquidity & importance, we have also implemented a The risk of loss of principal The risk of loss of principal Funding Risk separate Liquidity Dashboard. or adequate financial reward or adequate financial reward The risk that the Bank will stemming from a counterparty’s due to movements in financial fail to fund increases in assets For 2017, the main driver of both liquidity deterioration of financial markets (including, but not and meet obligations as they and funding risk originated from the fact stability or failure to meet limited to FX rates, interest come due at reasonable that the majority of ATB’s funding is raised obligations. rates, credit spreads, equity cost. Liquidity Risk arises in the form of Dutch, German and Austrian prices and commodity prices). from the inability of ATB to retail deposits (denominated in EUR), while accommodate decreases in the majority of lending is conducted in liabilities or to fund current USD denominated loans. The market risk (and increases in) assets in full, of this currency mismatch was successfully at the right time and in the managed down to acceptable exposures. right currency. However, we recognise the need for further diversification of the funding base and Appetite 2017: Average Appetite 2017: Low Appetite 2017: Low have launched several initiatives to further improve the funding mix. The qualitative appetite on ATB’s key risk areas has remained unchanged.
26 27 making. Integrity instruments, such as of the mitigating measures, controls and Integrity the Bankers’ Oath, are much more than a monitoring activities as performed by the formality. The Bankers’ Oath is consistently Integrity Department. enforced, and mandatorily taken by all staff, including the members of our Management Full transparency is a given for the Board and Supervisory Board. We provide effectiveness of the integrity policies. We consider it a top priority for the financial In order to be able to adjust these policies mandatory workshops and e-learning to help We are committed to enhancing transparency market industry to make and maintain a whenever required, the Integrity Department staff maintain the highest level of ability by all means possible, including open strong and solid commitment to corporate continuously monitors legal, social and other to comply with fair business practices. Fair communication and a culture of integrity. integrity, and be able to demonstrate developments in the relevant countries, as business practices include sustainability The use of accessible and fair instruments the effectiveness of its robust integrity well as developments initiated by interna- items and the prevention of involvement with and systems is part of that process. An framework. Our own integrity framework tional political organisations. We realise that financial crimes, including money laundering, open culture is promoted throughout the consists of policies, education, monitoring business activities are executed in a complex, terrorism financing, tax evasion and bribery. organisation and information is shared with and reporting. The Integrity Department is highly detailed and rapidly-changing legal and Comprehensive and regular interactive due observance of required confidentiality, responsible for maintaining this framework. social environment. The question whether workshops on integrity are a vital part of especially for clients. something is not only legal, but also right the awareness process. Integrity policies and fair, should always be asked. We consider We have the same attitude regarding the Compliance with all laws and regulations the integrity policies a cornerstone, ensuring Monitoring Supervisory authorities, as ultimately we applicable in the Netherlands and other staff are aware of what we stand for and Besides education, the other focus of our share the same goal: a sustainable financial relevant jurisdictions is a must. As such, also serving as a constructive tool for making Integrity Department is on monitoring. system. We respect each and everyone’s role the US Foreign Corrupt Practices Act and the right decisions. Those right decisions Integrity is not only a case of how we act, in realising this ultimate goal. the UK Bribery Act are part of our Anti-Cor- will benefit our clients and our staff. It goes but primarily of being able to explain what ruption policy. We have developed policies without saying that not all instructions can we have done: how and why we have done Regulatory developments and procedures, together with our corre- be captured in concrete rules, and we have what we have done. It is about making In 2017 we took significant efforts in ensuring spondent banks, to ensure that our business therefore introduced concrete rules where conscious choices and being able to justify ongoing compliance with developments in activities are operated in full compliance possible and guidelines where appropriate. these with the right arguments and evidence. regulatory requirements. In that respect, with applicable laws, regulations and sound The core values: integrity, professionalism, The outcome of the monitoring activities the bank assigned a dedicated expert team banking practices. Our integrity policies teamwork and client orientation underline are summarised by the Key Integrity Risk to prepare assessment of an impact analysis include the Code of Conduct, Anti-Cor- the expected behaviour of staff in applying Indicators. The Key Integrity Risk Indicators and develop appropriate tools for the
ruption Policy, Market Abuse Policy, Speak- the integrity policies. include: whistleblowing reports, high-risk implementation of IFRS 9 regulations as per Report of the Management Board Up Policy, Client Due Diligence Policy and clients, education sessions, reported com- 1 January 2018. Furthermore, analysis Data Leakage Policy, and all of these were Education pliance incidents (if any) and reported un- has been initiated and solutions are being reviewed in 2017. The relevant policies have Education is one of our top priorities. usual transactions (if any). Our robust integrity developed in order to prepare the bank been adjusted to align with new rules and Staff are aware of all the relevant rules, framework is fully observed, adhered to and for the introduction and implementation of regulations. regulations and sound banking practices, as supported throughout the entire organisation. Basel IV, AnaCredit requirements and GDPR The policies are in line with sound banking well as mitigating measures taken internally. We have designed a system of active self-dis- (General Data Protection Regulation) in practices. Ongoing enforcement of the integrity policies closure and awareness. We achieve our goal May 2018. The bank is committed to closely is crucial for the effectiveness of our integrity by continuously verifying our corporate and monitor developments in the regulatory During the year, in-house seminars were framework. The framework is effective compliance processes and reporting require- requirements to be able to continue meeting organised to explain the content of most of when staff have sufficient knowledge to be ments. The Key Integrity Risk Indicators assist its compliance obligations. the policies. The presence of all staff was able to apply the integrity policies and act us in demonstrating the result of the effec- required and attendance lists were kept. accordingly. tiveness of our integrity framework. Integrity The intranet of the Integrity Department issues are monitored and identified in an has been completely renewed to ensure that In order to not only show this by word, but expeditious and clear manner. all relevant knowledge can be easily shared also by deed (‘practice what you preach’), in and questions directed to the staff of the addition to our integrity policies themselves, However, having the right integrity policies in Integrity Department. Q&As form part of we have developed a dynamic and evolving place does not imply that all will necessarily a ‘policy page’. The appointment of a very approach to the execution of those policies, be compliant. Once an issue is identified as senior External Counsellor (as referred to in which is very hands-on. By ensuring people irregular or unfair, it is treated as an incident the Speak-Up Policy) is designed to ensure at all levels are clear of the purpose and and appropriate measures are taken. Our the policy’s effectiveness. values of the integrity policies we reduce internal audit function provides us with the risk of failure in day-to-day decision- objective assurance of the effectiveness
28 29 Corporate Social Outlook 2018 Responsibility We are cautiously optimistic about the In 2018 we continue our efforts to grow our outlook for 2018. Overall market conditions core loan portfolios in Commodity Finance, have improved in the light of the positive Shipping Finance and Corporate Banking We are committed to a sustainable future. We also encourage our employees to do economic climate, and we expect to see in line with our business plan and risk Being a good corporate citizen in the local volunteer work for the local and global opportunities in the trade and commodity appetite. In line with its strategic focus, and global communities in which we operate communities in which we operate. value chain. We will continue to add value to the bank legally transferred the shares of is at the heart of our culture. We actively Employees have also been requested to our expanding customer base with innovative its subsidiary ATB Leasing LLC by the end participate in Corporate Social Responsibility submit their ideas for other initiatives. Apart solutions, speed and reliability that our of February 2018. The expected business initiatives. from monetary involvement, employees have customers can count on. We also continue growth will support our 2018 operational been asked how we can play an active part to explore opportunities in underbanked result which we expect to improve signifi- We are part of the Taskforce on Decarbon- in the selected good cause. The responses areas of the market with existing and new cantly compared to 2017. izing Shipping, an industry-led initiative that received focused on projects related to product offerings. This includes the further aims to develop tangible pathways on how to education, by supporting local initiatives in development of our essDOCS and blockchain We will also continue to strengthen our decarbonise shipping. schools, running guest talks in secondary initiatives, which will strengthen our position values and corporate culture and right and primary schools, and offering internship as the go-to partner for innovative state-of- size our organization, both in number of In 2017, our employees organised a charity positions to students. Other initiatives the-art solutions. employees as capabilities. All to position raffle and auction at their own initiative, are aimed at bridging the gap individuals ourselves favourably and to allow us to the proceeds of which were donated to experience in their daily lives. Responses We continue to actively manage the benefit from the improved market circum- War Child and Médicins sans Frontières. show that employees value CSR and a composition of our asset and liability stances. However, the outcome of all our stronger participation by us in such projects. portfolios in order to ensure sustainable strategic initiatives is dependent upon In 2017, we signed a sponsorship agree- The next step is to select the initiatives profitability within our risk appetite. market circumstances.
ment with United World Colleges, a global presented and incorporate them in an Throughout the year, we will further Report of the Management Board education movement founded in 1962 in overarching plan for 2018-2019. strengthen our customer service teams, the UK and now active in 17 countries on particularly in commodity repo and ship 4 continents. Like us, United World Colleges finance capabilities, to support our existing believes that education unites people and market strategy. We will also continue to cultures. We are committed to sponsorship build on our partnership with MID-SHIP for 5 years from 2018. Capital, and focus on developing and offering specialised credits and loans, as well as providing investment banking products and services to the energy, commodities and transportation sectors. In the coming months, we will continue to work on our strategic alternatives, which may include diversification of our funding and acquisition of certain asset portfolios.
30 31 Responsibility Statement
Pursuant to section 5:25c sub 2 part c of the Dutch Financial Supervision Act, the members of the Management Board state that to the best of their knowledge:
• The Financial Statements give a true and fair view of the assets, liabilities, financial position and profit or loss of Amsterdam Trade Bank N.V. (and the companies included in the consolidation); • The Annual Report gives a true and fair view of the state of affairs on the balance sheet date and the course of business during the financial year 2017 of Amsterdam Trade Bank N.V. and of its affiliated entities, of which data is included in its Financial Statements; • The Annual Report describes the material risks Amsterdam Trade Bank N.V. faces. Report of the Amsterdam, 31 May 2018 Management Board: Supervisory Board C. Antoniou, Chief Executive Officer and Chairman H.P.M.G. Steeghs, Chief Financial Officer P.J. Ullmann, Chief Risk Officer
32 Letter from Supervisory Board the Chair meetings
new IT systems, processes, operations and human capital. The sale of ATB Leasing The Supervisory Board temporarily consists The Risk and Compliance Committee met LLC will further enable us to focus on our of five members. All members share five times and monitored ATB’s risk policies, core strategy. Alongside re-engineering our equal responsibilities for the execution appetite and profile, as well as ATB’s product offering and go-to-market strategy, of the Supervisory Board’s function. The governance and compliance with laws and we have completed the clean-up of our Supervisory Board met 13 times in the codes. To this end, the Risk and Compliance legacy issues. course of 2017 in the presence of the Committee discussed ATB’s policies and Management Board. One meeting took place appetite on credit risk, market risk, capital We value the continued support of our in the absence of the Management Board. and liquidity adequacy, operational risk, shareholders, reflected in June 2017 with The topics discussed during these meetings compliance risk, earnings volatility and a new capital injection of € 30 million to included the following: the execution of strategic risk. On an ongoing basis during support our new strategic direction. During ATB’s strategic direction, which is focused the year, the committee also took several the year we saw the departure of Frank on financing international commodity trade decisions on credit proposals escalated in Kuijlaars, an independent member of the flows, and shipping and asset-based finance; accordance with ATB’s internal governance. Supervisory Board, after his term ended. risk management and risk appetite; the During 2017, the committee consisted of Over the past five years, he has made a credit portfolio; financial performance; Mr F.C.W. Kuijlaars (Chairman – until 1 valuable contribution to the transformation capital; IT; integrity, culture and the internal November 2017), Mr H.C.M. van Damme and of our bank and helped to redirect the organisation. The composition of the Mr A.B. Sokolov. bank’s strategy. We wish him all the best Supervisory Board and its committees were in his future endeavours. The Supervisory also discussed. The Remuneration and Nominating Board is currently interviewing independent Committee met six times and discussed,
“Our vision is to revolutionise candidates to fill this vacancy. While retaining overall responsibility, the among other things, ATB’s Employee Report of the Supervisory Board the trade finance business” Supervisory Board assigns tasks to the Share Purchase Plan, its Remuneration In the coming year, we will continue following three permanent committees: Policy and the alignment thereof with Ron Emerson CBE to focus on delivering this new bank, Dutch and European banking regulations, Chairman of the Supervisory Board including important new initiatives to The Audit Committee met five times in 2017 expectations of the various stakeholders deliver business value through the smart with the required quorum. Members of the and social acceptance. The Remuneration I am delighted to provide my first intro- use of technology. Our recent relocation Management Board, the external auditor and Nominating Committee discussed the duction to the annual report and financial to the World Trade Center in the financial and the Head of Internal Audit were present performances of the Supervisory Board, its statements as the new Chair of the heart of Amsterdam was also symbolic for at these meetings. The Audit Committee committees, its members and the individual Supervisory Board of ATB. I am excited us in signalling a new direction for ATB as discussed the regular risk assessment, the members of the Management Board. During to be part of this merchant bank for a modern, innovative and client-oriented audit plans and reports of the internal and 2017, the committee consisted of Mr D. Vovk the modern world. In looking back on member of this banking community. external auditor, the audit plan execution, (Chairman), Mr H.C.M. van Damme, and Mr a successful 2017, it is remarkable to and progress in the resolution of audit F.C.W. Kuijlaars (until 1 November 2017). see the extent to which the bank has I would like to thank all stakeholders for issues, including IT audit- and compliance-re- undergone a fundamental financial and their contribution over the past year. I lated matters. The Audit Committee annually The Supervisory Board committee meetings operational turnaround in recent years. look forward to continuing to work with evaluates the functioning of the internal were, in nearly all cases, attended by This is all part of a vision to revolutionise our highly experienced and specialised audit function and the external auditor, all members of the committees and the the trade finance business and become employees. and the external auditor’s independence members of the Management Board. the leading provider of financial solutions and fees. Key audit matters, as included in for commodity trade and related assets. Amsterdam, 31 May 2018 the external auditors’ management letter, The Supervisory Board has been involved During the year under review, we success- were also a topic of discussion. During 2017, in ATB’s compliance with the Dutch fully expanded our product offering and Ron Emerson CBE the committee consisted of Mr H.C.M. van Banking Code. In support of this role, the geographical footprint, and invested in Chairman of the Supervisory Board Damme (Chairman), and Mr. A.J. Baxter. permanent education program, through
34 35 which the expertise of the members of the We would like to thank the members of Management Board and the Supervisory the Management Board, all employees and Board is maintained and expanded, shareholders for their ongoing commitment continued during the course of 2017. to ATB. The permanent education programme covers relevant developments at ATB and the sectors ATB operates in, corporate Amsterdam, 31 May 2018 governance in general and in the financial sector in particular, the duty of care The Supervisory Board towards customers, culture, corporate governance, integrity, IT infrastructure, R.V. Emerson, Chairman risk management, financial reporting and H.C.M. van Damme, Vice-Chairman auditing. D. Vovk A.B. Sokolov The composition of the Supervisory Board A.J. Baxter changed during 2017. On 6 April 2017, Mr R.V. Emerson was appointed as the Chairman of the Supervisory Board, adding a wealth of banking experience. On 1 November 2017, Corporate Mr Frank Kuijlaars stepped down after his five-year term ended. The annual report (including the financial Governance statements) have been drawn up by the Management Board and audited by Ernst & Young Accountants LLP, who issued an unqualified opinion dated 31 May 2018. We recommend that the shareholders adopt the 2017 financial statements and discharge the Management Board and Supervisory Board for their respective management and supervision during the financial year 2017. On adoption of the 2017 annual report, no dividend will be distributed for the financial year 2017.
36 The Management The Supervisory Board Board
The Management Board is collectively between the commercial interests of ATB The role of the Supervisory Board is to Each member also possesses the specific responsible for the management of ATB and and the risks to be taken. One member is supervise the policies of the Management expertise needed to perform his or her role the general course of affairs, while each of responsible for risk management and does Board and the general course of affairs on the Supervisory Board. The composition its members has specific roles and respon- not bear any individual commercial respon- of ATB. The Supervisory Board assesses of the Supervisory Board makes it possible sibilities. Each member of the Management sibility. In accordance with best practice, periodically, at the strategic level, whether for it to perform its tasks properly. The Board possesses a thorough knowledge of the Management Board submits ATB’s the commercial activities in the general Supervisory Board ultimately adopts ATB’s the financial sector in general and banking operational and financial objectives together sense are appropriate in the context of remuneration policy, and is responsible sector in particular. Each member of the with the strategy to achieve its stated goals ATB’s risk appetite. The Supervisory Board for the implementation and evaluation Management Board is required to act in to the Supervisory Board for its consider- consists of six non-Managing members1. of the remuneration policy adopted. The accordance with the interest of ATB and ation and approval. The composition of the Up to three members are affiliated with Supervisory Board discusses annually the its business, and is aware of the social Management Board makes it possible for it the Alfa Group, the ultimate shareholder variable incomes at ATB. Specific issues role of a bank and of the interests of the to perform its tasks properly. The outlined of ATB. The other members, including the are dealt with and prepared in the Audit various stakeholders. The members of the objectives and strategy include detailed chairman, are independent. The members Committee, the Risk and Compliance Management Board are appointed by the parameters to be applied in relation to the of the Supervisory Board have a collective Committee, and the Remuneration and General Meeting of Shareholders upon strategy, such as ATB’s financial ratios, and responsibility. Each member is required Nominating Committee. Members of these nomination of the Supervisory Board. Taking capital and liquidity adequacy levels. to act in accordance with the interest of committees are appointed by and consist of into account the risk appetite approved by ATB and is aware of the social role of a a number of members of the Supervisory the Supervisory Board, the Management bank and of the interests of the various Board. The assessment of the effectiveness Board ensures a balanced assessment stakeholders. Pursuant to the Articles of of the permanent education programme Association, Supervisory Board members for the Supervisory Board and Management Corporate Governance are empowered to obtain any information Board is part of the annual evaluation The composition of the Management they deem necessary for the performance performed by the Supervisory Board. Board as per 31 December 2017 of their duties. Members of the Supervisory Board are appointed by the General Meeting of Shareholders. Each member is
C. Antoniou H.P.M.G. Steeghs P.J. Ullmann expected to be capable of assessing the (Chairman, CEO) (CFO) (CRO) main aspects of ATB’s overall policy in order to form a balanced and independent opinion about the basic risks involved.
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: 2018 End of term: 2022 Areas: Commercial activities, Areas: Finance & Control, Areas: Risk Management, Business Strategy & Business Technology & Integrity, Credit Support, Development, Change, Operations Financial Restructuring & Human Resources, Recovery Internal Audit, Corporate Office
1 The Supervisory Board temporarily consists of five members due to one vacancy
38 39 The composition of the Supervisory Audit Committee (AC) Remuneration and Nominating Board as per 31 December 2017 The main responsibility of the Audit Committee (RNC) Committee is to assist the Supervisory Board The main responsibilities of the Remuner- in monitoring the preparation and audit ation and Nominating Committee are
R.V. Emerson H.C.M. van Damme D. Vovk of ATB’s financial statements, and ATB’s to advice the Supervisory Board on the Chairman (independent) (independent) (dependent) capital and liquidity adequacy assessment remunerations policy for the members of reports, monitoring the quality and effec- the Supervisory Board, members of the tiveness of ATB’s system of governance, risk Management Board and senior management; management and control procedures, and to implement and evaluate the remuneration monitoring the external and internal audit policy adopted with regard to the members governance and quality, including IT audits of the Management Board; to oversee the and IT security. implementation of the remuneration policy for senior management by the Management The AC reports its findings to the Board; and to approve the principles of Year of birth: 1947 Year of birth: 1951 Year of birth: 1963 Supervisory Board and these findings the remuneration policy for other bank Nationality: British Nationality: Dutch Nationality: Russian are discussed in its plenary meetings. employees. The RNC’s responsibilities Member Since: 2017 Member Since: 2013 Member Since: 2016 End of term: 2021 End of term: 2021 End of term: 2020 include the monitoring of the performance Other positions: Chair Common Other positions: Director ATB Risk and Compliance of the Supervisory Board, its committees, its Content Project Holdings S.A. (Luxembourg) Committee (RCC) members and the individual members of the The main responsibility of the Risk and Management Board. The RNC prepares the Compliance Committee is to assist the profiles of individual Supervisory Board and Supervisory Board in supervising ATB’s risk Management Board positions, considering policy, appetite and profile on credit risk, the required specific expertise, complemen- market risk, capital and liquidity adequacy, tarity, collegiality and diversity. The RNC operational risk, compliance risk, earnings prepares the proposals for appointment, volatility and strategic risk. re-appointment and dismissal of board A.B. Sokolov A.J. Baxter Vacancy members to the Supervisory Board, its (dependent) (dependent) (independent) In addition, the Risk and Compliance committees and the Management Board. Committee assists the Supervisory Board The RNC prepares the proposals for the Corporate Governance in the overall oversight of ATB’s compliance Supervisory Board and reports its monitoring function and internal governance, and findings to the Supervisory Board in order ATB’s adherence to corporate governance that these can be discussed in its plenary principles and its Code of Conduct. The RCC meetings. assesses the policy in the fields of corporate sustainability and corporate social respon- sibility. The RCC has authority to decide on Year of birth: 1955 Year of birth: 1966 Year of birth credit proposals escalated in accordance Nationality: Russian Nationality: South-African Nationality Member Since: 2016 Member Since: 2016 Member Since with ATB’s internal governance rules. The End of term: 2020 End of term: 2020 End of term Risk and Compliance Committee reports Other positions: Chairman Executive Other positions: Director its findings to the Supervisory Board and Board OJSC Alfa-Bank (Russia), and CFO ABH Holdings S.A. these findings are discussed in its plenary Chairman Board of Directors (Luxembourg), Director ABH meetings. Baltiyskiy Bank (Russia) Financial Limited (Cyprus), Director OJSC Alfa-Bank (Russia), Director PJSC Ukrsotsbank (Ukraine) Director PJSC Alfa-Bank (Ukraine)
In accordance with ATB’s charter governing the Supervisory Board, three of the six Supervisory Board members should be independent
40 41 Dutch Banking Code
The Dutch Banking Code, drawn up by the Dutch Association of Banks, came into force on 1 January 2010. The Code focuses on making the best interests of the customer a priority, on the principles of risk management, auditing and governance, and on compensation policies. The Banking Code applies to all banks with a banking licence. Deviations from the principles of the Banking Code are allowed, provided Financial that the reasons are explained. We adhere to the Banking Code and have taken into account the recommendations following the report ‘bringing the differences’ from the Statements 2017 Monitoring Committee Codes of Conduct 2016. More information on our implemen- tation of the Banking Code, including the full comply-or-explain statement as required under the Banking Code, is available at www.amsterdamtradebank.com/about-us/ corporate-governance/
42 Consolidated Financial Statements 2017
44 Consolidated statement of financial position Consolidated statement of income At 31 December before appropriation of profit
(in euro’s) 31-12-2017 31-12-2016 (in euro’s) 2017 2016
Assets Note* Income from operating Note* activities Cash and balances with central banks 1 181,791,114 389,020,070 Interest income 18 33,446,400 40,454,981 Loans and advances to banks 2 116,468,505 82,928,210 Interest expense 19 15,520,774 20,468,892 Loans and advances to customers 3 610,650,123 493,688,694 Net interest income 17,925,626 19,986,089 Interest-bearing securities 4 226,966,120 261,430,841 Commission income 6,434,361 6,397,18 8 Shares and other non-interest-bearing securities 5 240,474 982,355 Commission expense 230,583 238,514 Intangible assets 6 8,746,944 8,564,321 Net commission income 20 6,203,778 6,158,674 Property and equipment 7 1,106,313 228,016 Result on financial transactions 21 15,851,854 -700,641 Prepayments and accrued income 8 20,459,159 22,211,904 Other income 22 5,6 87,83 4 2,808,428 Other assets 9 48,845,289 34,061,675 Total income from operating 45,669,092 28,252,550 Total assets 1,215,274,041 1,293,116,086 activities
Liabilities and equity Expenses Amounts due to banks 10 33,064,778 128,026,237 Staff expenses 23 21,013,796 25,188,165 Funds entrusted 11 922,079,529 932,595,014 General and administrative expenses 24 17,199,118 17,4 8 6,8 07
Accruals and deferred income 12 18,764,521 13,723,986 Depreciation and impairments of Other liabilities 13 23,291,515 26,171,775 intangible assets and property and 25 2,691,279 5,994,051 equipment Subordinated loans 14 35,000,000 50,000,000
Impairments of loans and advances Financial statements 26 -11,021,247 25,858,727 Total liabilities 1,032,200,343 1,150,517,012 to customers and shares Resolution charge 27 1,202,668 2,067,052 Equity: Total expenses 31,085,614 76,594,802 • Issued capital 99,762,900 271,802,876 Operating result before tax 14,583,478 -48,342,252 • Share premium 88,186,385 11,384,203 Income tax 28 2,922,873 2,435,757 • Retained earnings - -74,459,484 Net result 11,660,605 -50,778,009 • Currency translation reserve -16,536,192 -15,350,512 • Net result 11,660,605 -50,778,009 Total equity 15 183,073,698 142,599,074 Total liabilities and equity 1,215,274,041 1,293,116,086
Contingent liabilities 16 54,382,221 51,766,075 Irrevocable commitments 17 49,518,858 6,210,630
* The number beside each item refers to the relevant note * The number beside each item refers to the relevant note
46 47 Consolidated statement of changes in equity
(in euro’s) Issued capital Share premium Retained earnings Currency translation Undistributed profit Total equity reserve attributable to shareholders
Balance at 1 January 2016 165,276,205 11,385,022 155,807,874 -18,67 7,2 28 -230,267,358 83,524,515 FX revaluation - - - 3,326,716 - 3,326,716 Net result (as per statement of income) - - - - -50,778,009 -50,778,009 Total FX movement and net result - - - 3,326,716 -50,778,009 -47,451,293 Appropriation of result - - -230,267,358 - 230,267,358 - Dividends ------Issue of shares 106,526,671 -819 - - - 106,525,852 Balance at 31 December 2016 271,802,876 11,384,203 -74,459,484 -15,350,512 -50,778,009 142,599,074
FX revaluation - - - -1,185,680 - -1,185,680 Net result (as per statement of income) - - - - 11,660,605 11,660,605 Total FX movement and net result - - - -1,185,680 11,660,605 10,474,925 Appropriation of result - - -50,778,009 - 50,778,009 - Issue of shares (nominal € 453) 29,999,849 -150 - - - 29,999,699 Redenomination of shares (from € 453 to € 150) -202,039,825 76,802,332 125,237,493 - - - Balance at 31 December 2017 99,762,900 88,186,385 - -16,536,192 11,660,605 183,073,698
Consolidated statement of comprehensive income
(in euro’s) 2017 2016
Net result 11,660,605 -50,778,009
Translation difference -1,185,680 3,326,716 foreign activities
Net other comprehensive income -1,185,680 3,326,716 recognized directly in Total equity
Total comprehensive income for 10,474,925 -47,451,293 the period
48 49 Consolidated statement of cash flows Consolidated statement of cash flows
(in euro’s) 2017 2016 2017 2016 Cash flow from operating activities Cash and balances with central banks at 1 January 403,824,048 850,942,271 Operating result before tax 14,583,478 -48,342,252 Cash and balances with central banks at 31 December 165,991,485 403,824,048 Adjustment for: Movement -237,832,563 -447,118,223 • Depreciation and impairments of intangible assets and property 2,691,279 5,994,051 and equipment Additional information • Impairments of loans and advances to customers and shares -11,021,247 25,858,727 Cash flows from interest received 40,414,668 57,112,079
• Amortisation premium and discounts 3,265,531 5,147,8 41 Cash flows from interest paid -16,653,019 -24,247,020 • Result from sale of interest bearing securities -402,310 -5,042,848 Cash flows from income tax - 262,483 • Result from sale of non-core loans -15,729,282 4,063,031 • FX effect on subsidiary -1,185,680 3,326,716 • FX revaluation effects -11,092,995 11,919,422 Reconciliation to consolidated statement of cash flows: -18,891,226 2,924,688 Cash and balances with central banks 181,791,114 389,020,070
Net increase (decrease) in operating assets and liabilities: Amounts Loans and advances from banks, available on demand 17,265,149 33,745,948
• Amounts due from banks -50,021,094 78,760,491 Loans and advances to banks, repayable on demand -33,064,778 -18,941,970 • Amounts due to banks -109,084,267 87,76 4,9 07 Total cash and balances with central banks 165,991,485 403,824,048 • Loans and advances to customers -80,227,251 -4,308,568 • Funds entrusted -10,515,485 -827,303,025 • Prepayments and accrued income/ Accruals and deferred income 3,870,407 8,311,342
Other assets / liabilities -15,812,647 -25,150,918 Financial statements Total movement in assets and liabilities -261,790,337 -681,925,771 Net cash flow from operating activities -280,681,563 -679,001,083
Cash flow from investing activities Investments and acquisitions: • Interest-bearing securities -67,476,500 - • Intangible assets -2,655,144 -4,554,580 • Property and equipment -1,097,055 -23,799
Divestments, repayments and sales:
• Interest-bearing securities 99,078,000 166,461,239
Net cash flow from investing activities 27,849,301 161,882,860
Cash flow from financing activities • Issuance of capital 14,999,849 20,000,819 • Share premium -150 -819 • Issue of subordinated liabilities - 50,000,000 Net cash flow from financing activities 14,999,699 70,000,000 Net decrease/increase in cash and cash equivalents -237,832,563 -447,118,223
50 51 Notes to the Consolidated Financial Statements 2017
52 C.1.2. Judgement and estimates mitigate the risks around the execution of Summary of significant its strategic goals, the Management Board C.1.2.1 Going concern concludes that the financial statements 2017 The Management Board has made extensive should be stated on a going concern basis. accounting principles analyses of the possible developments over the next twelve months in order to assess C.1.2.2 Other judgement and estimates the potential impact on the results of the The preparation of the financial statements Bank and the Bank’s capital position. requires management to make estimates and policies The Management Board’s business plan and assumptions that affect the amounts scenario takes into account the Bank’s reported for assets and liabilities, the current solid financial footing, the reporting of contingent assets and liabilities commitment of the shareholders to continue at the date of the financial statements, as providing support to the Bank, as well as the well as the amounts reported for income ability to execute the approved strategy. and expenses during the reporting period. Based on an updated capital plan approved The situations that are assessed based on A. General B. Basis for consolidation by the Supervisory Board, the Bank is suffi- available financial data and information Amsterdam Trade Bank N.V. (ATB) is an The consolidated financial statements of ciently capitalized in order to grow the core mainly relate to the determination of the independent financial institution founded in ATB comprise the financial statements of business in accordance with the strategic loan loss provision, legal cases, the fair 1994 that obtained its banking license in the Amsterdam Trade Bank N.V., its subsidiaries plans. value of assets and liabilities as well as the same year. ATB provides financing, services and other companies controlled by ATB identification of impairments. Although and solutions for trade and cross border and are prepared at 31 December, using The Management Board has also considered management based its estimates on the transactions. ATB strives for excellence in consistent accounting policies. The financial another, more stressed, scenario in which most careful assessment of the current trade solutions, including treasury coverage. year is the same as the calendar year. Intra less strategic growth and no additional circumstances and activities, the actual ATB has a profound knowledge of the group payables and receivables and any capital support is taken into account and has results might deviate from these estimates. business environment in Russia and the other unrealized profit and losses within the group concluded that the Bank is strong enough to The use of different assumptions and CIS countries. or income and expense from such trans- continue with its normal business operations methods may, due to the subjective nature ATB’s registered office is at Strawin- actions are eliminated upon preparing the into the foreseeable future and is well involved, result in different outcomes. skylaan 1939, 1077 XX, Amsterdam, the consolidated financial statements. positioned to take its next steps in achieving Financial statements Netherlands. ATB is a company incorpo- the strategic targets in accordance with the C.1.2.3 Changes in presentation rated and established in the Netherlands business plan. In 2017 ATB changed its accounting policy and registered under number 33260432 C.1 Basis of preparation on the presentation of insurance premiums at the Chamber of Commerce. Ultimate Furthermore the Management Board would paid relating to credit insurances from shareholder of ATB is Alfa Group. The C.1.1 General like to point out that it also values the negative commission income into general consolidated financial statements of The financial statements have been commitment of the ultimate shareholders of and administrative expenses. In 2016 these Amsterdam Trade Bank N.V. at 31 December prepared in accordance with Part 9, Book ATB, as has been expressed by the share- insurance premiums were presented as 2017 were prepared by the Management 2 of the Dutch Civil Code. The accounting holders in a letter to the Management Board negative commission income (€ 1,256,050). Board, approved by the Supervisory Board policies applied for measuring assets and of ATB itself. In such letter the shareholders Accordingly, the comparative figures 2016 on 31 May 2018 and will be submitted to liabilities and profit determination are based reiterated their commitment to support have been adjusted. the General Meeting of Shareholders for on the historical cost convention, unless ATB in resolving the issues from the past adoption within the regulatory time period. stated otherwise in the specific accounting and state their willingness and ability to C.1.2.4 Textual error in note C.3.8.1 Foreign principles. provide support for the Bank to meet its entities of financial statements 2016 regulatory requirements. The promise to The statement in note C.3.8.1. (page 53) of uphold regulatory ratios of ATB is a clear the financial statements 2016 was not in line commitment to ensure ATB’s continued with section Currency translation reserve existence by being fully compliant with the explained in note 15 Equity (page 98) as it solvency and liquidity requirements set by was not reflecting the accounting treatment the regulator. as consistently applied by ATB. Consist- ently, note C.3.8.1. in the current financial Based on the above assessment, the statements has been adjusted accordingly. conditions present in order to fulfil the projections made in the business plan and the assessment of ATB’s capability to
54 55 C.2 Corporate and C.2.2 Subsidiaries C.3 Derivative financial limit prescribed under the regulations or consolidated financial The participating interests over which ATB instruments and hedging in accordance with market conventions are statements maintains control are considered group accounted for on the transaction date. companies and these are consolidated. Control is exercised over a participating C.3.1 General C.3.5 Repo transactions and C.2.1 Recognition and de- interest if the investor is exposed to, or is Derivative financial instruments generally reverse repo transactions recognition entitled to, fluctuating income in respect of comprise foreign exchange contracts, Securities sold subject to repurchase An asset is recognised in the statement of his involvement in the participating interest currency and interest rate futures, currency agreements (repos) continue to be included financial position when it is probable that and has the opportunity to influence this and interest rate swaps, and currency and in the statement of financial position. The the expected future economic benefits that income by using his control over the partic- interest rate options (written as well as related liability is included under the line are attributable to the asset will flow to ipating interest. The assets, liabilities and acquired). Derivative financial instruments item concerned (mainly Due to banks). the entity and the cost of the asset can be profit/loss of these companies are fully can be traded either on the stock exchange Securities purchased subject to resale measured reliably. A liability is recognised consolidated. or over the counter (OTC) between ATB agreements (reverse repos) are presented in the statement of financial position when Participating interests are consolidated as and a client. Initially all derivative financial under the line item Due from banks or Loans it is expected to result in an outflow from of the date on which the effective control instruments are recognised at fair value. and advances to customers. The difference the entity of resources embodying economic is transferred to ATB and will no longer be Subsequent measurement of derivative between the sales price and the purchase benefits and the amount of the obligation consolidated as of the date on which this financial instruments is at fair value. All price is recognised in the statement of can be measured with sufficient reliability. control is terminated. All transactions, derivative financial instruments are included income as interest during the term of the balances and unrealized gains and losses under assets if their value is positive and agreement. At year-end 2017 and 2016 ATB An asset or liability that is recognised in from transactions between ATB Group under liabilities if their value is negative. did not have any repos. the statement of financial position remains companies have been eliminated on consol- Derivative financial instruments that are on the statement of financial position if a idation. embedded in other financial instruments are C.3.6 Cash and balances transaction (with respect to the asset or For a list of the consolidated group treated separately if their risks and charac- withdrawable with central banks liability) does not lead to a major change companies, refer to note ‘Group Companies’ teristics are not closely related to those of Cash equivalents are highly liquid short-term in the economic reality with respect to the in the Notes to the company financial the underlying derivative contract and this investments held to meet current obligations asset or liability. An asset or liability is no statements. contract is not classified as at fair value in cash, rather than for investments or other longer recognised in the balance sheet when through profit and loss. purposes. Such investments have remaining a transaction results in the position that terms of less than 90 days at inception. Cash Financial statements all or substantially all rights to economic C.3.2 Instruments not used for equivalents are readily convertible to known benefits and or all of the risks related to the hedging amounts of cash and subject to an insignif- asset or liability have been transferred to a When ATB enters into derivatives for trading icant risk of changes in value. third party. purposes, realised and unrealised gains and losses are accounted for under ‘Result on C.3.7 Netting of financial assets Income is recognised in the statement of financial transactions’. and liabilities income when an increase in future economic Financial assets and liabilities can be netted potential related to an increase in an asset C.3.3 Hedging instruments and presented in the financial statements or a decrease of a liability has arisen, the ATB does not apply hedge accounting. at the net amount when ATB has a legally size of which can be measured reliably. enforceable right to offset the recognised Expenses are recognised when a decrease in C.3.4 Trading financial assets amounts and there is an intention to settle the economic potential related to a decrease Trading financial assets are financial assets on a net basis, or realize the asset and settle in an asset or an increase of a liability has acquired with the objective of generating the liability simultaneously. At year-end 2017 arisen, the size of which can be measured profit from short-term fluctuations in prices and 2016 the netted amounts are nil. with sufficient reliability. or traders’ margins, or financial assets that form part of portfolios characterized C.3.8 Foreign currencies by patterns of short-term profit partici- pation. Financial assets held for trading are C.3.8.1 Foreign entities measured at fair value based on listed bid Items included in the financial statements prices. All related comprehensive income of each entity in ATB are carried in the is included under Result on financial trans- currency that best reflects the economic actions. Interest earned on financial assets reality of the underlying events and circum- is recognised as interest income. All acqui- stances that are relevant for the entity (the sitions and sales of financial assets held for functional currency). trading which require delivery within a time
56 57 The consolidated financial statements are original (average) effective rate of interest default (EAD), the Loss Identification Period C.3.11 Shares and other non- presented in euros, which is the parent of the loans. (LIP) and a general adjustment factor (AF). interest-bearing securities company’s functional currency. Gains, The PD and LGD are based on internal Shares and other non-interest-bearing losses and cash flows of foreign entities are Examples of objective evidence for value models and are periodically assessed as securities are initially recognised at translated into the presentation currency adjustments are: part of ATB’s control framework. The LIP fair value and subsequently at cost less of ATB at the exchange rates ruling at the • significant financial difficulties on the is the estimated period between the time impairment charges. Impairment charges or transaction dates, which is approximately part of the borrower; a loss event occurs at the client’s company the reversal (until cost) of the impairment equal to the average exchange rates. Assets • default in making interest and/or and the time ATB has recorded the loss is recognised in the statement of income. and liabilities are translated at closing redemption payments on the part of the event in its risk systems. The AF is based Equity instruments are impaired if their rates. Translation differences arising on borrower; on the relationship of IBNR to loan portfolio cost permanently exceeds their recoverable the net investments in foreign entities and • loan renegotiations; volumes and the global economic outlook. amount, i.e. their fair value is permanently on loans and other currency instruments • possibility of bankruptcy of or financial As a result a generic adjustment factor or significantly lower than their cost. The designated as hedges of these investments reorganisation at the borrower; could be applied when calculating the IBNR recoverable amount of investments in are recognised in equity. If a foreign entity • changes in borrowers’ payment status; provision. unlisted equity instruments is determined is sold, any such translation differences are • changes in economic circumstances that using an internal valuation model using reclassified within Equity. could cause the borrower to default. C.3.10 Interest-bearing quotations, cash flow projections as well as securities the development of commodity prices. C.3.8.2 Foreign-currency transactions Individual impaired loans Interest-bearing securities are debt securities Monetary assets and liabilities denominated For each individually assessed loan, the held in the investment portfolio, with the C.3.12 Intangible assets in foreign currencies are converted at losses are estimated based on the expected general intent to hold the securities until closing rate at reporting date. Exchange rate credit worthiness of the borrowers and the redemption date. The investment portfolio is C.3.12.1 General effects arising from the conversion of assets value of the collateral provided to ATB, and valued at amortised cost including premiums Costs related to the implementation or and liabilities are stated in the statement taking into account the actual economic and discounts less impairment charges, maintenance of software are recognised as of income as ‘Result on financial transac- conditions under which the borrowers if necessary. Premiums and discounts are an expense at the time they are incurred. tions’. Transactions in foreign currencies are conduct their activities. The carrying amortized over the remaining life of the Costs directly incurred in connection with translated at the exchange rate prevailing on amount of the loans is reduced through securities on a straight line basis. identifiable and unique software products the transaction date. the use of a provision account and the over which ATB has control and that loss is taken to the statement of income. An investment in interest-bearing securities will probably provide economic benefits Financial statements C.3.9 Loans and advances to Write-offs of provisions for expected loan is tested for impairment if there is objective exceeding the costs for longer than a customers and Due from banks losses are made as soon as virtually no other evidence of financial difficulties occurring year are recognised as intangible assets. Loans and advances to customers and Due means of recovery are to be expected. at the counterparty, the collapse of a Expenditures that improve the performance from banks are non-derivative financial Any amounts subsequently collected are market or other indications. If, during the of software compared with their original instruments with fixed or defined payments, included as negative amounts under the subsequent period, the amount of the specifications are added to the original cost not listed on an active market. Loans item Impairments on loans and advances to impairment of these securities decreases, of the software. Software implementation and advances to customers and Due from customers and shares in the statement of and the decrease can objectively be costs are recognised as assets and banks are initially recognised at fair value, income. attributed to an event occurring after amortised on a straight-line basis over including transaction costs, and subse- As soon as the prospects for continuity have the write-off, the impairment previously a period not exceeding five years. quently carried at amortised cost, including recovered and arrears have been cleared recorded is reversed through the statement transaction costs. as agreed, the loan is no longer considered of income. C.3.12.2 Impairment losses on Intangible impaired (not fully collectible). Management assets Loans are subject to either individual or continually assesses these renegotiated loans Examples of objective evidence for value At each reporting date, ATB assesses collective impairment analyses. A value to ensure that all criteria are satisfied with a adjustments are: whether there are indications of adjustment, a provision for incurred losses view to expected future cash flows. • significant financial difficulties on the impairment of intangible assets. Intangible on loans, is recognised if there is objective part of the issuer; assets are tested for impairment by evidence that ATB will not be able to collect Incurred but not reported • default in making interest and/or comparing the carrying value with the best all amounts due under the original terms of Loans for which there is no objective redemption payments on the part of the estimate of the recoverable amount. The the contract. The size of the provision is the indication of impairment are included in issuer; recoverable amount is estimated as the difference between the carrying amount and the collective assessment for ‘incurred • possibility of bankruptcy of or financial higher of fair value less cost to sell and the expected recoverable amount, which but not reported’ (IBNR) provision. The reorganisation at the issuer; value in use. Several methodologies are is the present value of the expected cash IBNR impairment provision is calculated by • changes in issuer’ payment status; applied to arrive at the best estimate of flows, including amounts recoverable under estimating the probability of default (PD), • changes in economic circumstances that the recoverable amount. guarantees and sureties, discounted at the the loss given default (LGD) exposure at could cause the issuer to default. An impairment loss is recognised if the
58 59 carrying amount exceeds the recoverable income over the term of the lease using the Deferred tax assets are recognised to the the terms and conditions laid down in an amount. Impairment losses and reversed net investment method, which results in a extent that it is probable that future taxable investment agreement which is signed by impairments of other intangible assets are constant rate of return on the investment. profits will be available within the period ATB, ESPP B.V. and the Participant. The key included in the statement of income. available to compensate taxable losses conditions and features underlying such a C.3.15 Provisions according to applicable tax laws, against commitment as follows: C.3.13 Property and equipment Provisions are recognised if ATB has a which the temporary differences can be • Investment date 1 January 2017; Property and equipment is initially carried at present obligation (legal or constructive) as utilised. Taxes on profit are calculated in • Investment value per ESPP share; cost and subsequently at historical cost less a result of a past event, when it is probable accordance with the tax legislation of the • The number of ESPP shares which accumulated depreciation and accumulated that an outflow of resources will be required relevant jurisdiction and recognised as an participant has acquired; impairments. Depreciation is calculated on a to settle the obligation and only insofar a expense in the period in which the profit • Blocking period of 48 months; straight-line basis over the useful lives of the reliable estimate can be made of the amount is realised. The tax effects of the carry- • In case the ESPP Shares are sold by the assets concerned. of the obligation. If ATB expects a provision forward of unused tax losses are recognised Participant back to ATB or its nominee to be reimbursed, for example under an as an asset if it is probable that future during and after the Blocking Period how Estimated useful lives of property and insurance contract, the reimbursement is taxable profits will be available against the purchase price will be determined. equipment are as follows: recognised as a separate asset but only if which the losses can be utilised. Deferred Leasehold improvement: 10 years the reimbursement is virtually certain. The taxes are recorded at nominal value. C.3.20 Equity Computer equipment: 5 years provisions are carried at the discounted Financial instruments that are designated Other equipment: 5 years value of the expected future cash flows. C.3.18 Due to banks, due to as equity instruments by virtue of the customers and subordinated economic reality are presented under At reporting date ATB assesses whether there C.3.16 Employee benefits / liabilities ‘Equity’. Payments to holders of these is objective evidence for an impairment Pension These borrowings are initially recognised at instruments are deducted from ‘Equity’ as of Property and equipment. Property and ATB has defined contribution plans under fair value, i.e. the issue price less directly part of profit distribution. equipment is impaired if loss event(s) which ATB pays contributions to publicly allocable and nonrecurring transaction costs, Direct costs of new shares issued are occurred that had an impact on the estimated or privately managed insured pension and subsequently carried at amortised cost, deducted from equity, taking taxes into net realizable value of these assets. If the schemes on a compulsory, contractual or including transaction costs. account. carrying amount of an asset exceeds its voluntary basis. Once the contributions have estimated recoverable amount, the carrying been made, ATB has no further payment C.3.19 Other liabilities C.3.21 Obligations not amount is written down immediately to obligations. The regular contributions are ATB operates a cash settled employee share recognised in the statement of Financial statements the recoverable amount. Impairment losses net period costs for the year in which they purchase plan. For this plan, during the financial position and reversed impairments of property and are due and are included on this basis under employment period of the employees, the This relates to the obligations that represent equipment are included in ‘Depreciation and ‘Staff expense’. share-based investment by the employees a potential credit or other risk and consists impairments of intangible assets and property is recognised as a liability. The liability is of the off-balance sheet items contingent and equipment’ in the statement of income. C.3.17 Ta x re-measured at each reporting date up to liabilities and irrevocable commitments. Gains and losses on the disposal of items of Current tax receivables and payables are and including the settlement date with property and equipment are determined in set off if there is a legally enforceable changes in fair value recognised in the Contingent liabilities proportion to their carrying amounts and right to set off such items and if simulta- income statement in expenses, taken into Contingent liabilities are carried at the taken into account when determining the neous treatment or settlement is intended. account the estimated leavers if any. The contract value and consist of guarantees and operating result. Deferred tax assets and liabilities are set off fair value change is based on the positive/ irrevocable letters of credit. Repair and maintenance work is charged to if there is a legally enforceable right to set negative difference between the fair value the statement of income at the time the off such items and if they relate to the same of the underlying share and the exercise Other contingent liabilities relevant costs are incurred. tax authority and arise from the same tax price. The visible intrinsic value of an ATB A contingent liability is a possible obligation group. share with certain adjustments is considered that arises from past events and whose C.3.14 Leases / ATB as lessor Provisions are formed in full for deferred tax as the proxy for the fair value. existence will be confirmed only by the Finance leases liabilities, using the liability method, arising At the moment that the shares are occurrence or non-occurrence of one If assets are leased under a finance lease, from temporary differences at the reporting purchased by the intermediate entity at or more uncertain future events not the present value of the lease payments date between the tax bases of assets and discount, the fair market value per share wholly within the control of ATB; or a is recognised as a receivable under ‘Due liabilities and their carrying amounts for exceeds the issue price and the resulting present obligation that arises from past from banks’ or ‘Loans to customers’. The financial reporting purposes. difference is treated as expenses during the events but is not recognized because it difference between the gross receivable Deferred income tax assets and liabilities are vesting period of 48 months, with a corre- is either not probable that an outflow and the present value of the receivable is measured at the tax rates that have been sponding adjustment to Other liabilities of economic benefits will be required to recognised as unearned finance income. enacted or substantively enacted at the The employees participating in this settle the obligation or the amount of the Lease income is recognised as interest reporting date. share-based investment have agreed to obligation cannot be measured reliably.
60 61 Contingent liabilities are not recognized C.3.22.4 Result on financial transactions C.3.23 Cash flow statement • The carrying amount of floating rate in the statement of financial position, but Other foreign exchange results consists of The cash flow statement has been drawn inter-bank placements, overnight deposits are rather disclosed in the notes unless the revaluation effects of balance sheet up in accordance with the indirect method, and fixed deposits placed with banks is the possibility of the outflow of economic positions in foreign currencies. distinguishing between cash flows from deemed to be a good estimate of their benefits is remote. Sale of interest-bearing securities and operating, investing and financing activities. fair value given. loans and advances represents the financial Cash and cash equivalents comprise, at • The fair value of the interest-bearing Irrevocable commitments result on exited positions in the respective face value, all cash in hand and balances securities in the investment portfolio Irrevocable commitments consist of unused portfolio. The result on derivatives withdrawable on demand with central banks is based on the active market prices at facilities, sale and repurchase commitments represents the result on trade derivatives. and other banks in respect of which the risk reporting date. and all other obligations resulting from Exchange and price gains and losses on of value changes is insignificant. • The fair value of derivatives is based on irrevocable commitments that can give rise trading in other financial instruments on Cash flows arising from foreign currency observable market data. The fair value is to loans. behalf of clients are recognised under Result transactions are translated into the determined using listed market prices (a on foreign currency trading. functional currency using the exchange rates small bid-ask range applies to derivatives C.3.22 Revenue at the date of the cash flows. quoted in euros, US dollars and/or pound C.3.22.5 Other income The net cash flow shown in respect of ‘Loans sterling, and mid prices are used), along C.3.22.1 General Other income comprises non-banking and advances to customers’ relates only to with prices offered by traders, cash flow Revenue is recognised insofar as it is likely income and consists of rent income and VAT transactions involving actual payments or discounting models and option valuation that the economic benefits will flow to ATB reclaimed . receipts. The addition to loan loss provisions models based on current market prices and can be measured reliably. Costs are which is deducted from the item ‘Loans and and contracted prices for the underlying allocated as far as possible to the period in C.3.22.6 Staff costs advances to customers’ in the statement instruments, as well as the time value of which the services were rendered or to the Staff costs comprise wages and salaries, of financial position has been adjusted money, yield curves and the volatility of relevant proceeds. pension costs, other social costs and other accordingly from the result before tax and is the underlying assets and liabilities. staff costs. shown separately in the statement of cash • The fair value of liabilities to banks, C.3.22.2 Net interest income flows in the line ‘FX revaluation effects’. funds entrusted and subordinated Interest income and expense for all inter- liabilities is determined using discounted est-bearing instruments is recognised in the Fair value cash flows using applicable money statement of income on an accrual basis, In general, the fair value of financial assets market rates for debt instruments with with the effective interest method being and liabilities is derived from active markets. a comparable term to maturity, taking Financial statements applied. Interest income includes coupons Where the fair value cannot be derived account of own credit risk. relating to fixed interest financial assets from active markets, these are determined and financial assets held for trading and using valuation techniques that include the interest-bearing securities. If any loans use of mathematical models. The input suffer impairment losses, these are written to these models is taken from observable down to their recoverable amounts and markets where possible, but where this is the interest income recognised henceforth not possible a degree of judgment may be is based on the original discount rate required in establishing the fair value. The for calculating the present value of the following summarises the major methods future cash flows used to determine the and assumptions used in estimating the fair recoverable amounts. values: • The estimated fair value of Loans and C.3.22.3 Net commission income advances to customers represents the This item consists of income, other than discounted amount of estimated future income similar to interest, earned on cash flows of individual loans expected banking services provided to third parties. to be received. Expected cash flows are Commission received from and paid to third discounted using market rates as discount parties is accounted for as commission rate. Given the volatile economic income and commission expense over the environment the realizable value may life of the underlying contracts. differ significantly from the disclosed fair value in the event the loans would be sold before maturity.
62 63 Risk Management
D.1 Introduction D.3 Risk Governance ATB has the following committees: with the bank’s risk appetite and risk This section consists of a general description ATB’s ERM framework consists of three layers frameworks (within the boundaries of of ATB’s approach to risk management of risk governance, also known as the three established policies and procedures) and to (D.2); a description and explanation of risk lines of defence model. propose new mechanisms for measuring and governance (D.3); and explanation of the managing risks. The Integrity Department of management of various categories of risk, as First line of defence – Risk awareness in the second line of defence has direct access defined in the Bank’s risk taxonomy (D.4). day-to-day business to the Management Board. The second line The person or organisational unit that, of defence is composed of such functions Supervisory through its actions, gives rise to a Board as Risk Management, Human Resource D.2 Risk Management risk is responsible for that risk and its Management, Finance & Control and management, within defined boundaries. Integrity Department. Approach Audit Committee This is the “first line of defence”, and ATB adopts an integrated approach to risk acts as the risk owner. The first line of Risk and Compliance Third line of defence – Independent management as laid down in its Enterprise defence / risk owner should have sufficient Committee oversight Risk Management Framework (ERM) (updated authority and accountability to take those Remuneration and The third line of defence provides in April 2017). actions necessary to manage the risk, or if Norminating Committee independent assessment of the effectiveness This framework describes the governance necessary ensure that the risk is escalated of governance, risk management, and of risk management within ATB by estab- to the appropriate level of management. internal controls. Internal Audit (IA) acts lishing clear risk owners, control owners as the third line of defence. IA provides its Financial statements and treatment owners for all major risk Second line of defence – Countervailing recommendations based on independent and Management categories under the established risk powers Board objective assurance. taxonomy. The second line of defence maintains Actual exposure on all risk types is oversight on control mechanisms and In the monitoring and day-to-day monitored at least quarterly in the ERM monitors their effectiveness. Control management of identified risks, the Asset and Liability Operational Risk report, and on a monthly basis through more mechanisms are methods, measures and Committee Committee Management Board, and in its oversight specialized reporting (e.g. the Portfolio tools (including but not limited to policies, capacity, the Supervisory Board, are Management Report for credit risks, the procedural requirements and reporting) to supported by a number of committees Integrity Credit ALCO report for market risks). measure and reduce consequences and/or Committee Committee which provide to ensure compliance with likelihood of the related risk. the ability all relevant regulations regarding The second line of defence acts risk and capital management, and to ensure independently from the first line of compliance with the risk appetite, unless FR&R Provisioning defence and provides its view on risks (and Committee Committee separately approved otherwise. Strategic associated mitigating actions) taken by the Risk and Earnings Volatility risk are discussed risk owners. directly in the Management Board. All other risk categories from the risk Project Portfolio The second line of defence has the authority Board taxonomy are discussed and managed in to instruct the first line of defence on delegation in one (or more) committees. actions to be taken to ensure compliance These committees also approve and review policies supporting relevant departments that are responsible to manage the risks in their activities within approved risk tolerance limits.
64 65 Asset and Liability Committee (ALCO) portfolio. New credit proposals are in a D.4 Risk categories Since ATB’s customer portfolio typically The ALCO consists of the members of the limited number of cases and based on a includes many customers operating in high Management Board as well as the heads of predetermined escalation model, decided D.4.1 Strategic risks risk political and economic environments, Treasury Front Office, Risk Management, upon by the Supervisory Board. The Credit In order structurally to change the risk profile ATB needs to have stringent procedures Finance & Control and a commercial business Committee is also responsible for the of ATB we managed to further decrease the with respect to reputation and integrity risk representative. The ALCO meets at least establishment of country and industry limits. net exposure of our legacy portfolio during which are also aligned with the recommen- once a month to monitor funding, interest The Committee, in its recommendations, 2017 mainly due to sale of loan assets, full dations of the regulator to strengthen our rate, foreign exchange, market, liquidity explicitly takes economic and legal circum- write-off of impaired loans and additional internal controls in this area. Since 2014, and solvency risk. In addition, the ALCO stances into account. Individual transactions provisions already taken into account in our also in view of the increased geopolitical discusses market developments and provides are allocated to specific country limits by capital position. The bank’s leasing portfolio tensions and related sanctions in the areas recommendations on managing liquidity. the Credit Committee. New or increased substantially decreased at year-end 2017 where ATB’s (former) customers have their country limits are in a limited number due to preparation for sale of the Russian business, ATB has taken several measures to Operational Risk Committee of cases and based on a predetermined subsidiary ATB Leasing LLC completed end further improve its compliance framework, The Operational Risk Committee consists of escalation model, decided upon by the of February 2018. Strategic risk is defined as including related processes and procedures, members of the Management Board, as well Supervisory Board. the risk of non-compliance with the strategic next to the intense efforts of de-risking its as the heads of Risk Management, Integrity, objectives that can arise from adverse exposures by reducing its legacy portfolio. Internal Audit and identified Risk Owners. Provisioning Committee business decisions, improper implementation ATB also continues to closely monitor also It meets monthly and monitors issues The Provisioning Committee consists of the of decisions, or a lack of responsiveness the latest (geo-) political developments with relating to the maintenance of an adequate Management Board as well as the Heads of to industry / market changes. To counter respect to sanctions and measures taken by operational risk management framework (in Risk Management and Finance & Control. It execution risk of the business plan, ATB various governments, and will comply with which all operational risks as mentioned in convenes at least on a semi-annual basis. All designed a monitoring framework in 2017 all relevant laws and regulations in this field. ERM are monitored) and the assessment of relevant loans are discussed and problem to identify any deviations from the business During 2014, 2015 and early 2016 ATB has operational risk incidents. loans are assessed or re-assessed. Potential model in a timely manner. This includes reviewed and scrutinized its complete client non-performing loans are put under special defining early warning indicators (EWI) that portfolio resulting in a significant reduction Furthermore, the committee monitors monitoring for industry and company specific may become a trigger for management’s of the total number of customers whilst at the effectiveness of the internal control developments. The Provisioning Committee judgment call. These early warning indicators the same time bringing the client files of framework and the resolution of audit issues advises the Management Board on loan are principally quantitative (e.g. capital, remaining clients fully in line with internal identified by both the internal and external impairments and provisions to be taken. liquidity, and profitability). and external standards. Financial statements auditor and the Supervisory Authorities. A new deterioration of the geopolitical Lastly, the committee approves New Product Financial Restructuring and Recovery situation and increasing tensions around D.4.3 Credit risk Approval Proposals and Policies. Committee Russia could have a negative impact on some Credit risk is the current or prospective The Financial Restructuring and Recovery of our clients trade business and thereby also threat to ATB’s earnings, liquidity and Integrity Committee Committee consists of the same members negatively affect ATB’s business results. capital as a result of counterparty’s The Integrity Committee consists of the as the Credit Committee, with the addition (company or financial institution) failure to Management Board as well as the head of of members of the Financial Restructuring D.4.2 Compliance risks comply with financial or other contractual Integrity, the head of Client Services and and Recovery team. The full non-performing ATB considers integrity as one of its core obligations stemming from a credit the heads of business lines. In general its portfolio is discussed and relevant develop- values. The bank recognizes its responsi- relationship. meetings are held weekly to accept new ments are escalated for decision. bility as a gatekeeper to the financial system Credit risk comprises four separately clients, review client files, and to discuss not to facilitate crime and is committed defined sub categories, which relate to and decide upon new compliance related Project Portfolio Board (PPB) to comply with all applicable laws and the main possible reasons of the counter- policies or frameworks, covering risks as The PPB is chaired by the CFO and consists regulations. Based on the analysis of clients, party’s failure to comply as indicated above: defined in the Systematic Integrity Risk of the following members: Head of Business products countries and the channels through counterparty credit risk, cross border Analysis (SIRA). Technology and Change, Head of Operations the transactions run, in combination with risk, concentration risk and country risk. and Services, Head of Finance and Control the strategy and business operations, the Credit risk constitutes ATB’s most significant Credit Committee and Head of Integrity. likelihood of compliance risks occurring is financial risk and arises mostly from the The Credit Committee consists of members The Project Portfolio Board monitors all considered to be ‘very likely’. As the impact lending business. of the Management Board as well as the projects within the bank aiming to improve of such risks manifesting is considered to heads of Risk Management, Integrity and ATB’s systems and processes in an efficient be high due to reputational and financial In the light of credit risk, FX risk for clients the commercial business departments and and effective way. This will be achieved damage, the risk profile in relation to these is addressed in credit applications and risk meetings are held weekly to decide on new by providing the project framework and risks is considered to be relatively high opinions. For each client or prospect client, credit applications and proposals, and to delivery means, control and quality measures. compared to the (Dutch) financial sector the FX position given FX mismatches on monitor credit risk developments in the Meetings are held on a monthly basis. in general. purchase and sale side is analysed.
66 67 ATB’s maximum exposure to credit risk further integration of the Internal Rating In addition, the borrower’s behavior, In addition to other collateral, both personal amounts to € 1,303.9 million at year-end System into the Risk Management Processes market circumstances and compliance and corporate guarantees are arranged for 2017 (2016 € 1,567.7 million) and expansion of its scope (currently only with covenants are monitored by the repayment of the underlying principal and corporates are rated through the system) business (and periodically by the Risk interest amounts. Counterparty credit risk are considered to be important to further Management Department) in order to assess Counterparty Credit Risk follows the strengthen ATB’s credit risk management whether increased monitoring (watch list) Credit Portfolio Characteristics principles as set out in the Enterprise Risk system. or amendments are required. In case a The main focus in management of the Management framework and is primarily significant deterioration is flagged by the portfolio is decreasing ATB’s exposure to managed within the front offices as first The normal credit risk cycle of a client business department or risk department, the regions such as Ukraine due to continuing line of defense. The Risk Management (figure 1), product or transaction begins as client is placed on a watch list. In this case, local conflict, Russia and other CIS countries, Department is responsible for creating and the business analyses the risks of a client developments with the client are monitored either through direct reduction, through the maintaining credit policies and frameworks, and prepares a credit application highlighting and reported to the credit committee on a purchase of credit protection instruments or for monitoring the portfolio developments the structure of the proposed transaction biweekly basis. through other credit protection measures. as well as for independent assessments of or products and analysing the financial Should a client still deteriorate and become Despite the ongoing difficulties in this the individual risks originated by the first soundness of the relevant counterparties. non-performing, the client is transferred region, ATB managed to significantly line of defense. Decisions regarding credit This credit application is sent to the Risk from the business to the Financial Restruc- reduce its portfolio at risk (defined as gross risk are taken in the Credit Committee Management Department who prepares an turing and Recovery department who will exposure, minus eligible collateral minus or in the Financial Restructuring and independent opinion on the content of the take over day-to-day responsibility for the specific provisions taken) in the CIS region. Recovery Committee, unless these are credit application, and advices the credit client and whose aim it is to ensure optimal escalated through a pre-defined escalation committee on the appropriateness of the recovery for ATB. Measurement and monitoring of credit risks mechanism. transaction in view of the business, financial is embedded in the Risk Appetite Dashboard Monitoring of credit risks against individ- and structural risks as well as matching the Credit risk mitigations via credit metrics. Credit metrics includes ually established limits and portfolio proposed transaction with the strategic fit In order to optimally manage the credit metrics for one obligor exposure, minimum established risk appetite limits takes place and portfolio objectives of ATB. The credit risk on counterparties ATB employs various credit quality, country risk and sector on an ongoing basis. Specific portfolio committee then balances the business and formal credit risk mitigations. These relate concentration risk. reports are created weekly, monthly and risk views and decides on the application. to collateral (assets with material value quarterly (with varying scopes) to provide On the basis of this decision documentation which are pledged to ATB), guarantees In 2017 the risk appetite threshold for the complete and timely overviews to senior is being drafted by the business, which is received and netting agreements. While average expected loss of the core portfolio Financial statements management for steering if and when reviewed for sign-off by Risk Management ATB attaches some value to most types was increased to 0.5% (2016: 0.2%), while the required. and the Integrity Department. of collateral received, for risk mitigation risk tolerance threshold remained unchanged During the lifetime of a loan or a and reduction purposes only so-called at 0.8%. Ultimately this increased threshold Although ATB uses the standardized transaction, formal reviews (at least eligible collateral is taken into account. did not constitute an increase of overall risk approach for credit risk (following the annually) are prepared by the business Eligible collateral is defined as collateral appetite; the average credit quality of the Basel models), continuous development of following a similar routine as for new which reduces the capital charge of certain core portfolio improved, with an expected internal rating methodologies as well as applications. exposures and needs to follow certain loss of 0.43% at year-end (2016: 0.51%). predefined eligibility criteria. For 2018 the average credit quality of the In those cases where collateral is not core portfolio is expected to continue its deemed eligible for capital reduction; it may favorable trend owing to the continuation of still be considered a credit enhancement selecting and approving credit facilities with Credit Application and hence may play a role in the individual adequate collateral or structural properties. credit assessments. The value of the collateral is based on Next to this and following the guidance of valuation reports received from external the Business Plan ATB has decided to change Monitoring Risk Advice valuators or other sources (including its strategic direction focusing increasingly warehouses and as provided by customers). on trade finance and asset based structures It is ATB’s policy to require for periodic and reduce clean cash flow based corporate updates on these valuation reports. Due lending. to volatile market conditions the value of Documentation Credit Decision the collateral can differ significantly from On a regular basis ATB performs stress tests the value as stated in the latest available related to its entire portfolio to assess the reports. potential impact on its capital position.
figure 1
68 69 Impairments on Non-performing and Forborne exposure is a debt contract in interest rate. Such estimation is by its tration risk levels to capital allocation under Forborne Loans respect of which forbearance measures nature based on assumptions and actual Pillar 2 of Basel three (the ICAAP approach). In the context of the provisioning process, have been extended. Forbearance measures results may differ. ATB reviews at least semi-annually all consist of concession towards a debtor facing Single Name Concentration risk is managed relevant loans and advances to each or about to face difficulties in meeting its The total amount of non-performing both on an individual and on a portfolio individual customer based upon objective financial obligation (‘financial difficulties’). loans as at 2017 is € 106.3 million (2016: level. On an individual level it is managed in impairment triggers, such as non-performing € 330.3 million). The total amount of such a way that it ensures that each single loans or forborne loans, in order to assess Forborne transactions can be qualified as forborne loans in 2017 is € 37.1 million (2016: exposure to a (group of connected) client(s), whether the loan loss provision is sufficient. modification or refinancing: € 201.6 million). when defaulting, would remain manageable This review is based on the identification • A modification of the previous terms from a capital point of view. The definition of impairment indicators (such as amounts and conditions of a contract the debtor Proposals for impairments are discussed in of ‘connected’ includes exposures which are overdue or requests for restructuring) in is considered unable to comply with, the Provisioning Committee and proposed connected through, for example, common order to assess the likelihood and magnitude due to its financial difficulties (‘troubled to the Management Board. The Management ownership, management or guarantors. of incurred losses. debt’) to allow for sufficient debt service Board decides on the provisioning level. ATB manages single name concentration Non-performing status is assigned to a ability that would not have been granted Impairment losses are based on discounted risk and calculates internal capital for this customer when any of the below conditions had the debtor not been in financial expected cash flows of the outstanding loan risk under the current Basel framework. apply difficulties. (including a cash flow for the collateral value ATB’s risk appetite defines limits to single • A customer is past due more than 5 • A total or partial refinancing of a based on the estimated market value, as and name concentration both on an individual business days on any material debt troubled debt contract that would not when foreclosure of collateral is foreseen). and portfolio level. In its core portfolio ATB service to ATB; or have been granted had the debtor not complies with its risk appetite targets. • A coupon or principal payment on the been in financial difficulties. Refinancing During 2017 several fully impaired loans interest bearing security is delinquent for means the use of debt contracts to were written off (total loan amount: € 230.7 Industry concentration relates to the risk at least five business days; or ensure the total or partial payment of million; 2016 € 55.2 million) that sector or industry factors drive the • Customer breaches granted overdraft other debt contracts the current terms likelihood of default for a significant number facility limit for longer than five business of which the debtor is unable to Cross border risk of counterparties in the portfolio. Industry days; or comply with. Cross border risk is a specific subset of concentration risk arises if the portfolio is • A lessee is past due more than thirty country risks and deals with the convert- unbalanced in exposures to certain sectors, days on at least € 500,000 of credit lent The Management Board is responsible for ibility and transferability of currencies. entailing dependencies between default Financial statements service to ATB; or decisions made regarding additions to The risk materialized in 2015 as Ukraine events. • A customer is declared insolvent by court provisions, releases of provisions, write-off (and some other CIS countries) introduced or arbitration (e.g. bankruptcy, chapter of an exposure and status of current interest currency controls hampering recovery and Country risk 11); or charges of an exposure to be non-accrued. repayment efforts of our clients. The risk is Country risk is the risk of losses due to • A cross-default declared on a customer Notwithstanding the aforementioned, the monitored through the country and industry country-specific events or circumstances. by any third party creditor unless revoked Management Board delegated its decision risk as well as through individual credit It is also an exposure to cross-border risk, in ten days; or authority to the Provisioning Committee. applications. The presence of local Alfa especially convertibility and transfer risk, • An exposure has been found impaired in The Provisioning Committee includes units in (some of) these countries has been i.e. the risk of obligations not being repaid accordance with the definition described Management Board Members as voting instrumental to understand the scope of as a consequence of a debt moratorium in the Policy; or members. All considerations for assessment regulations and to provide some mitigants or similar payment restriction. Cross- • A client (including, for the avoidance of impairment triggers and related provisions to the direct effects of such risk. border risk is the risk that funds in foreign of doubt, any other obligor under the are discussed in the Provisioning Committee. currencies cannot be transferred out of a loan) indicating inability to comply with Impairment losses are based on discounted Concentration risk risk country as a result of a specific event payment terms; or expected cash flows of the outstanding loan Concentration risk is the credit risk related or circumstance. • In any other cases – and subject to the (including a cash flow for the collateral value to the degree of diversification in the approval of the Credit Committee- when based on the estimated market value, as and credit portfolio. ATB takes separately into ATB’s approach to measure country risk is ATB considers that the obligor is unlikely when foreclosure of collateral is foreseen). account the single name concentration, based on a more strict interpretation of to pay its credit obligations to the country concentration, and industry concen- regulations for assigning countries of risk. institution, the parent undertaking or For the loans and advances to customers tration. Due to the significance of Country The country of risk is defined in line with any of its subsidiaries in time or in full, that are under restructuring, the impairment risks for ATB, these risks are managed and the DNB policy rule as “the risk that a without recourse by ATB to actions such loss is measured as the difference between reported upon separately. In addition, ATB borrower fails to meet his credit obligations as realising security. the carrying amount of the asset and the has implemented a framework to measure owing to transfer or FX risk and the risk of present value of estimated future cash flows concentration risk quantitatively and losses related to developments in a specific discounted at the asset’s original effective established an approach that links concen- country, over which the government has
70 71 some degree of influence, but private D.5 Market risk Risk Management. The Bank expresses Interest risk is also managed by adjusting companies or individuals certainly have not”. Within the market risk management the Market Limits in term of Value at Risk the interest rates charged to customers The assignment of country of risk follows an framework, market risk limits, expressed (1 day 99% VaR), RWA and P&L stop loss. (borrowers as well as savings clients) to approach which is geared towards identifying in terms of Value at Risk (VaR), are set to the interest rate fluctuations on the money any single country where a potential country prevent the accumulation of market risk Key metrics for market risk are set and market. The adjustments of interest rates event will have a substantial effect on the beyond the market risk tolerance of ATB. periodically review in the Risk Appetite shows a delay compared to the market overall financial performance of the counter- The VaR limits are set, monitored and Dashboard. At year ended 2017 the Bank fluctuation, especially when funding has party. As guidance, this may be based on the managed at trading book level: i.e. foreign had no material market risk exposure. a longer term. This could lead to a risk country of incorporation of a company, the exchange, derivatives, and fixed income. exposure which is being mitigated through country where cash flows are generated or These limits are complemented by additional D.5.1 Interest rate risk capital and interest margin. the country where the majority of supplies/ monetary and non-monetary trading controls management production assets are situated. with the aim of preventing excessive concen- In line with the internal risk governance The majority of ATB’s IRR arises from trations and illiquidity of exposures. We use system Interest Rate Risk in the Banking non-trading asset and liability positions. In Country risk analysis is being performed derivative transactions to hedge most of its Book (IRRBB) risk is defined as a sub-section 2017 the overall IRR sensitivity decreased at least annually (following a quarterly market exposure (mainly foreign exchange of the Market Risk, hence inherent risk since ATB reduced average duration of calendar, as with the industry risks) by Risk and interest rate risk). (average) and risk appetite (low) are the assets and reduced gaps in the longer Management Department. On the basis of the same. Main principal in hedging and term buckets as part of business transfor- this analysis, recommendations are made The Bank differentiates between two types managing interest rate risk (IRR) exposure mation. The Interest Risk as calculated and to establish or amend country limits. The of market risk: 1) Trading market risk are 1) sufficient capital buffer to sustain presented in the next overview is based on analysis is based on the macro-economic arises primarily through taking positions in interest rate shocks, 2) continuous ability the contractual interest revision dates and circumstances of the countries, but also debt, foreign exchange and derivatives. 2) to generate stable earnings sufficient to gives information per balance sheet item per on the compliance and legal aspects of the Non-trading market risk arises from market maintain bank’s normal business operations, time bucket. country. These elements, combined with a movements, primarily outside the activities and 3) macro level active hedging using business indication of their business plans for of our trading units, in the banking book and derivative instruments. a country, lead to a recommended maximum from off-balance sheet items country limit. ATB is measuring IRRBB using both earnings ATB assesses inherent Market Risk as and economic value perspective. Monitoring In view of the extraordinary situation in average, with risk appetite being set as low. tools include Economic Value-at-Risk (EVaR) Financial statements the CIS region, the Management Board has Market limits are set to prevent the accumu- analysis, Economic Value of Equity at Risk taken some specific additional measures in lation of market risk beyond the market risk (EVEaR), Gap / Modified Duration analysis order to manage credit risks arising from the tolerance level. Market risk management is and Earnings at Risk (EaR). For IRR appetite manifested country risks and its impact on governed through a dedicated framework setting and as a main IRRBB steering tool, ATB’s performance. These measures include through which the Bank allows market the Bank uses historical EVaR (1 year 99% day-to-day portfolio management on the CIS risk exposures in its trading and banking VaR) methodology. IRR for the Investment related credit risks, running off exposures book without unduly compromising its Book is measured separately using 10 days for the CIS portfolio and more frequent capital and the stability of its earnings. 99% VaR. In repricing gap report (prepared stress testing with respect to various Additionally, limits are set to prevent the separately for EUR and USD) interest rate regulatory ratios. accumulation of market risk beyond the sensitive assets are compared to interest market risk tolerance level. These limits are rate sensitive liabilities. The net position The Credit Committee is also responsible for complemented by additional monetary and per time period and cumulative gap is then the establishment of country and industry non-monetary trading controls with the aim calculated for each material currency. limits. The committee, in its recommenda- of preventing excessive concentrations and Furthermore ATB stresses yield curve tions, explicitly takes economic, compliance illiquidity of exposures. movements through parallel and nonparallel and legal circumstances into account. shifts to calculate interest rate risk Individual transactions are allocated For the Trading Book ATB applies Market sensitivity. The interest rate limit utilizations to specific country limits by the Credit Risk Appetite and Tolerance levels on the for all risk calculations are then reported Committee. New or increased country limits aggregate portfolio level, which presents and discussed during regular ALCO meetings. are in a limited number of cases and based the overall risk budget. Consequently, Key metrics for market risk are set and on a predetermined escalation model, a risk budgeting process is used to set limits periodically review in the Risk Appetite decided upon by the Supervisory Board. on the trading book level (FX, Derivatives Dashboard. and Fixed Income), where risks are effectively monitored and managed by
72 73 Notes to the consolidated financial statements at 31 December 2017
Between Between Between Within No interest (in euro’s) On demand 1 and 3 months and 1 year and Over 5 years Total 1 month rate maturity 3 months 1 year 5 years
Assets Cash and balances with central banks 181,791,114 ------181,791,114 Loans and advances to banks 19,744,128 36,005,177 29,809,941 20,709,259 10,200,000 - - 116,468,505 Loans and advances to customers 195,856,709 96,981,350 204,812,935 59,805,006 48,720,770 4,473,353 - 610,650,123 Interest-bearing securities - 25,005,023 - 20,247,076 181,714,021 - - 226,966,120 Shares and other non-interest-bearing securities ------240,474 240,474 Intangible assets ------8,746,944 8,746,944 Property and equipment ------1,106,313 1,106,313 Prepayments and accrued income ------20,459,159 20,459,159 Other assets - - - - 11,175,228 - 37,670,061 48,845,289 Total assets 397,391,951 157,991,550 234,622,876 100,761,341 251,810,019 4,473,353 68,222,951 1,215,274,041
Liabilities and equity Amounts due to banks 22,010,302 11,054,476 - - - - - 33,064,778 Funds entrusted 461,600,996 26,128,608 43,446,840 182,609,135 208,293,950 - - 922,079,529 Accruals and deferred income ------18,764,521 18,764,521 Financial statements Other liabilities - - - - 11,067,224 - 12,224,291 23,291,515 Subordinated loans - 35,000,000 - - - - - 35,000,000 Total liabilities 483,611,298 72,183,084 43,446,840 182,609,135 219,361,174 - 30,988,812 1,032,200,343
Equity ------183,073,698 183,073,698 Total equity ------183,073,698 183,073,698
Total liabilities and equity 483,611,298 72,183,084 43,446,840 182,609,135 219,361,174 - 214,062,510 1,215,274,041
Net interest position -86,219,347 85,808,466 191,176,036 -81,847,794 32,448,845 4,473,353 -145,839,559 -
74 75 Notes to the consolidated financial statements at 31 December 2016
Between Between Between Within No interest (in euro’s) On demand 1 and 3 months and 1 year and Over 5 years Total 1 month rate maturity 3 months 1 year 5 years
Assets Cash and balances with central banks 389,020,070 ------389,020,070 Loans and advances to banks 72,422,953 5,088,597 - 462,105 - 4,954,555 - 82,928,210 Loans and advances to customers 1,423,213 215,356,524 81,486,820 94,140,296 87,188,113 14,093,728 - 493,688,694 Interest-bearing securities - 315,117 630,233 92,217,649 153,131,058 15,136,784 - 261,430,841 Shares and other non-interest-bearing securities ------982,355 982,355 Intangible assets ------8,564,321 8,564,321 Property and equipment ------228,016 228,016 Prepayments and accrued income ------22,211,904 22,211,904 Other assets - - - - 14,370,407 - 19,691,268 34,061,675 Total assets 462,866,236 220,760,238 82,117,053 186,820,050 254,689,578 34,185,067 51,677,864 1,293,116,086
Liabilities and equity Amounts due to banks 22,077,094 11,054,476 94,894,667 - - - - 128,026,237 Funds entrusted 442,641,054 39,158,407 46,247,092 214,945,217 189,603,244 - - 932,595,014 Accruals and deferred income ------13,723,986 13,723,986 Financial statements Other liabilities - - - - 14,448,304 - 11,723,471 26,171,775 Subordinated loans - 50,000,000 - - - - - 50,000,000 Total liabilities 464,718,148 100,212,883 141,141,759 214,945,217 204,051,548 - 25,447,457 1,150,517,012
Equity ------142,599,074 142,599,074 Total equity ------142,599,074 142,599,074
Total liabilities and equity 464,718,148 100,212,883 141,141,759 214,945,217 204,051,548 - 168,046,531 1,293,116,086
Net interest position -1,851,912 120,547,355 -59,024,706 -28,125,167 50,638,030 34,185,067 -116,368,667 -
76 77 Notes to the consolidated financial statements Notes to the consolidated financial at 31 December statements at 31 December
ATB’s interest rate swaps portfolio can be detailed as follows: D.5.2 Foreign exchange risk The Bank expresses the FX Limits in term management of Value at Risk (VaR), notional limits and (in euro’s) Notional amount Market value In line with the internal risk governance P&L stop loss. VaR limit for the Banking system FX risk is defined as a sub-section Book (1 year 99% VaR) and the Trading Book Year Total <= 1 year 1-< 5 year > 5 year Positive Negative of the Market Risk, hence inherent risk (1 day 99% VaR) are defined and managed 2017 ------(average) and risk appetite (low) are the separately by Risk Management. Key metrics same. The Bank conducts business in for market risk are set and periodically 2016 7,600,000 7,600,000 - - 37,143 -30,785 various currencies, with EUR, USD and RUB review in the Risk Appetite Dashboard. At Interest rate swaps are denominated in EUR. being the most material currencies in which year ended 2017 the Bank had no material the business is conducted, and GBP, JPY net FX risk exposure. and CHF being other relevant currencies used in the FX Trading activities. For Effective interest rates at: hedging and managing exposure derivative 31 December 2017 31 December 2016 transactions are used.
(in % per annum) EUR USD RUB EUR USD RUB Assets
Loans and advances to banks 2.02 1.36 - 0.09 2.32 -
Loans and advances to customers 3.91 5.33 9.33 6.56 5.56 10.77
Interest-bearing securities 0.44 - - 0.47 - - Foreign exchange position Financial statements
Liabilities 31 December 2017 31 December 2016
Amounts due to banks - - - - 1.14 - (in euro’s) Long Short Net Long Short Net Savings and savings deposits 0.78 - - 1.00 - - Pound sterling 4,294,215 4,356,310 -62,095 1,048,414 894,343 154,071 Other funds entrusted - 0.12 - 0.03 0.35 - Japanes Yen 8,284 0 8,284 42,599 - 42,599 Subordinated loans 4.58 - - 4.58 - - Russian Ruble 39,112,726 37,950,330 1,162,396 72,352,738 58,692,946 13,659,792
Swiss Franc 20,464 31 20,433 49,914 7 49,907
Turkish Lira 1,878 72 1,806 24,261 122 24,139
US Dollar 645,492,392 646,678,161 -1,185,769 671,184,499 669,409,758 1,774,741
Other 2,731,437 2,719,856 11,581 3,096,856 3,085,623 11,233
Total 691,661,396 691,704,760 -43,364 747,799,281 732,082,799 15,716,482
78 79 Notes to the consolidated financial statements Notes to the consolidated financial at 31 December statements at 31 December
Foreign exchange contracts risk measurement, risk evaluation and In the light of any substantial changes in (in euro’s) Notional amount Market value contingency funding planning for all the market or other factors affecting the potential contingent as well as improbable, financial strength of the bank, reverse Year Total <= 1 year 1-< 5 year > 5 year Positive Negative but plausible stress events. ATB uses stress testing might be updated more liquidity stress tests as a management tool frequently to assist in mitigating potential 2017 554,529,157 554,529,157 - - 7,797,921 -963,946 to identify the potential vulnerabilities risks to the Bank. 2016 237,088,844 237,088,844 - - 884,737 -11,887,808 and worst case liquidity risks of ATB on its current cash flows and liquidity position. Furthermore, ATB applies reverse stress The foreign exchange contracts consist mainly on USD contracts. Key metrics for market risk are set and testing to further explore the vulnerabil- periodically reviewed in the Risk Appetite ities of ATB’s risk profile and identify a In the statement of financial position the total euro equivalent in foreign currency of assets amounts to € 561 million (2016: € 452 million), and of liabilities amounts to € 132 million (2016: € 206 million). Dashboard. Due to the importance, the scenario with a higher likelihood that could Bank also implemented a separate liquidity threaten ATB’s viability. The reverse stress dashboard. test is performed on an annual basis and integrated into the annual ICAAP process. ATB’s cross currency swaps portfolio can be detailed as follows: D.6.1 Stress testing and scenario In the light of any substantial changes in analysis the market or other factors affecting the (in euro’s) Notional amount Market value Stress testing aims on exposing the material financial strength of the bank, reverse risk at which the bank is sensitive and stress testing might be updated more Year Total <= 1 year 1-< 5 year > 5 year Positive Negative which therefore should be given more frequently to assist in mitigating potential attention from the risk management risks to the Bank. 2017 43,969,016 - 43,969,016 - 11,171,926 -11,063,923 perspective. The relevant output of the 2016 49,047,104 - 49,047,104 - 14,664,688 -14,448,304 stress tests is taken into account as part of D.6.2 Liquidity requirements a range of risk management tool to support under CRR Financial statements Cross currency swaps consists of USD - RUB swap positions. different business decisions and processes, On a daily basis, ATB monitors the keeping in mind the assumptions made and regulatory risk indicators of Liquidity limitations of the stress testing exercise. Coverage Ratio (LCR) and Net Stable The integral aspect of the testing strategy Funding Ratio (NSFR), as well as other is involvement of the Board and Senior internal liquidity measures. Both LCR and Management in ensuring the appropriate NSFR are measured based on regulatory run use of stress testing in the capital planning. off and recovery factors. The Bank monitors D.6 Liquidity risk and manages its compliance with these As a key area of focus, ATB puts a high The Bank regularly performs stress tests ratios based on the minimum regulatory priority on establishing an internal funding related to its entire portfolio to assess the and internally set risk tolerance levels. and liquidity risk strategy that ensures potential impact on its capital, earnings ATB measures, monitors and manages and liquidity position. Stress testing is The next tables represent the assets its liquidity risk to be able to withstand also embedded into the Internal Capital and liabilities based on their remaining a range of stress circumstances without Adequacy Assessment Process (ICAAP) and contractual terms to maturity at reporting endangering the continuing viability of its Internal Liquidity Adequacy Assessment date. Retail savings accounts are based on business. ATB assesses inherent Liquidity Process (ILAAP). expected maturity. and Funding Risk as average, with risk appetite being set as low. Furthermore, ATB applies reverse stress testing to further explore the vulnerabil- The Bank manages its liquidity profile ities of ATB’s risk profile and identify a by short-term liquidity risk management scenario with a higher likelihood that could combined with a long-term funding threaten ATB’s viability. The reverse stress strategy. Additionally, liquidity risk stress test is performed on an annual basis and testing is an important element of liquidity integrated into the annual ICAAP process.
80 81 Notes to the consolidated financial statements at 31 December 2017
(in euro’s) On demand Within Between Between Between Over 5 years No cash flow Total 1 month 1 and 3 months and 1 year and 3 months 1 year 5 years
Assets Note* Cash and balances with central banks 1 181.791.114 ------181.791.114 Loans and advances to banks 2 17.265.149 38.484.156 19.809.941 20.709.259 20.200.000 - - 116.468.505 Loans and advances to customers 3 193.084.626 60.212.455 96.859.627 76.737.160 180.169.036 3.587.219 - 610.650.123 Interest-bearing securities 4 - 25.005.022 - 20.247.07 7 181.714.021 - - 226.966.120 Shares and other non-interest-bearing securities 5 ------240.474 240.474 Intangible assets 6 ------8.746.944 8.746.944 Property and equipment 7 - 4.571 - - - - 1.101.742 1.106.313 Prepayments and accrued income 8 - 7.862.959 1.228.844 11.275.740 91.616 - - 20.459.159 Other assets 9 - 35.546.073 2.050.620 73.369 11.175.227 - - 48.845.289
Total assets 392.140.889 167.115.236 119.949.032 129.042.605 393.349.900 3.587.219 10.089.160 1.215.274.041
Liabilities and equity Amounts due to banks 10 33.064.778 ------33.064.778 Funds entrusted 11 143.260.801 62.073.917 53.445.057 221.215.388 299.299.616 142.784.750 - 922.079.529 Accruals and deferred income 12 - 11.089.129 - 7.675.392 - - - 18.764.521
Other liabilities 13 - 369.684 631.646 94.716 22.195.469 - - 23.291.515 Financial statements Subordinated loans 14 - - - - - 35.000.000 - 35.000.000 Total liabilities 176.325.579 73.532.730 54.076.703 228.985.496 321.495.085 177.784.750 - 1.032.200.343
Equity 15 183.073.698 183.073.698 Total equity ------183.073.698 183.073.698
Total liabilities and equity 176.325.579 73.532.730 54.076.703 228.985.496 321.495.085 177.784.750 183.073.698 1.215.274.041
Liquidity GAP 215.815.310 93.582.506 65.872.329 -99.942.891 71.854.815 -174.197.531 -172.984.538 -
* The number beside each item refers to the relevant note
82 83 Notes to the consolidated financial statements at 31 December 2016
(in euro’s) On demand Within Between Between Between Over 5 years No cash flow Total 1 month 1 and 3 months and 1 year and 3 months 1 year 5 years
Assets Note* Cash and balances with central banks 1 389,020,070 ------389,020,070 Loans and advances to banks 2 33,745,948 835,120 - 43,392,587 4,954,555 - - 82,928,210 Loans and advances to customers 3 1,423,213 241,440,540 62,009,104 87,979,581 86,742,528 14,093,728 - 493,688,694 Interest-bearing securities 4 - 315,117 630,233 92,217,649 153,131,058 15,136,784 - 261,430,841 Shares and other non-interest-bearing securities 5 ------982,355 982,355 Intangible assets 6 ------8,564,321 8,564,321 Property and equipment 7 ------228,016 228,016 Prepayments and accrued income 8 - 6,428,033 2,020,595 13,763,277 - - - 22,211,905 Other assets 9 - 852,418 191 4 07,23 4 14,664,688 - 18,137,14 4 34,061,675 Total assets 424,189,231 249,871,228 64,660,123 237,760,328 259,492,829 29,230,512 27,911,836 1,293,116,086
Liabilities and equity Amounts due to banks 10 18,941,970 14,189,600 94,894,667 - - - - 128,026,237 Funds entrusted 11 62,244,498 55,878,442 95,580,779 316,453,217 309,822,282 92,615,796 - 932,595,014 Accruals and deferred income 12 - 6,188,890 208,231 4,863,258 2,463,607 - - 13,723,986
Other liabilities 13 - 9,045,939 2,471,950 205,581 14,448,305 - - 26,171,775 Financial statements Subordinated loans 14 - - - - - 50,000,000 - 50,000,000 Total liabilities 81,186,468 85,302,871 193,155,627 321,522,056 326,734,194 142,615,796 - 1,150,517,012
Equity 15 ------142,599,074 142,599,074 Total equity ------142,599,074 142,599,074
Total liabilities and equity 81,186,468 85,302,871 193,155,627 321,522,056 326,734,194 142,615,796 142,599,074 1,293,116,086
Liquidity GAP 343,002,763 164,568,357 -128,495,504 -83,761,728 - 67,241,365 -113,385,284 -114,687,238 -
* The number beside each item refers to the relevant note
84 85 Notes to the consolidated financial Notes to the consolidated financial statements statements at 31 December at 31 December
D.7 Operational risk During 2017 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 revaluation of the other portfolio of inter- on a daily basis. The assumptions are permanent members of the ORC consist In order to control operational risk exposure, est-bearing securities (€ 0.6 million) which developed with quantitative analysis, of representatives from the Management the approach to conducting risk & control under IFRS is classified as ‘Available for sale’ regulatory framework and, where Board, and all three lines of defense. The self-assessments (RCSA’s) was revised to with revaluation in Equity. The positive appropriate, according to hypothetical ORC monitors and aims for a timely update a value chain basis and aligned with the revaluation on FX derivatives of € 0.6 million assumptions to identify the bank’s most and consistency of the policies in the initiatives stemming from the overall trans- and other positive revaluations, lead to a important vulnerabilities under various overall framework and publishes updated formation program. At year-end, all primary total IFRS P&L adjustment of positive stress events. documents on a central location accessible value chains were assessed based on this € 0.9 million. • The solvency stress testing is performed to all staff. approach and resulted in updated and tested During 2017 the capital was strengthened on a regular basis, with application of risk & control matrices. due to the continued support by ATB’s direct severe but plausible scenarios. These shareholders and resulted in higher capital have been built in compliance with the ratios achieved. The capital ratios are within stress testing guidelines issued by the regulatory and internal requirements. European Banking Authority (EBA). The stress tests program ranges from simple Basel requirements sensitivity analysis on single portfolios to D.8 Solvency risk ATB has implemented the standardized complex macroeconomic scenario stress Capital ratios and capital requirements are calculated using the Standardized Approach (SA) approach for credit risk capital adequacy testing on a company-wide basis. Financial statements under Basel III. calculation and the Basic Indicator Approach • The Interest rate risk stress testing is for Operational Risk capital calculation. performed on a regular basis. ATB uses 31-12-2017 31-12-2016 ATB has also developed its Internal Capital 1.0% shock in interest rates for earnings Capital information Adequacy Assessment Process (ICAAP) and measures and a standardized 2.0% shock Internal Liquidity Adequacy Assessment in interest rates for Economic Value Capital and solvency ratios are: Process (ILAAP) frameworks to meet Basel measures as prescribed by EBA regulatory • Total capital ratio 24.8% 24.3% requirements, under which internal capital guidelines. The results of stress test • CET1 capital available (in € million) 175 134 is calculated for concentration risk, country analysis are part of regular reporting to risk, and interest rate risk in the banking ALCO and the regulator. • Total capital available (in € million) 210 184 book. Reports based upon ICAAP and ATB on regular basis also performs stress • CET1 capital ratio 20.6% 17.7% ILAAP are submitted to Dutch Central Bank tests for the market risk (trading and annually. The reports are subject to the investment portfolio), credit portfolio and annual Supervisory Review and Evaluation operational risk. Outcomes are reported to Process (SREP). On 1st September 2017, ATB relevant internal bodies, the Management submitted its annual ICAAP and ILAAP to Board and the regulator. Dutch Central Bank in compliance with Basel requirements. D.9 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.
86 87 Notes to the consolidated statement of Notes to the consolidated financial position (in euro’s) statement of financial 31-12-2017 % 31-12-2016 % By geographical concentration: position Russia 2,557,4 8 8 2.2 1,027,868 1.2 Other CIS countries 38,337,305 32.9 1,318,417 1.6
1 31-12-2017 31-12-2016 EUR utilising countries 49,050,407 42.2 71,452,240 86.2
Cash and balances with central 181,791,114 389,020,070 Other European countries 2,964,971 2.5 6,456,567 7.8 banks Other countries 23,558,334 20.2 2,673,118 3.2 Non-restricted demand deposits at 175,111,114 380,540,070 Dutch Central Bank Total 116,468,505 100.0 82,928,210 100.0 Restricted demand deposits at 6,680,000 8,480,000 Dutch Central Bank
Total 181,791,114 389,020,070 31-12-2017 31-12-2016
The mandatory cash reserve was recognized under the restricted demand deposits at By counterparty: Dutch Central Bank. The average minimum reserve to be held at Dutch Central Bank for the month of December Parent bank and related banks 2,594,580 1,682,715 2017 amounts to € 6.7 million (December 2016: € 8.5 million). Balances held with central banks are interest-bearing. Other banks 113,873,925 81,245,495
Total 116,468,505 82,928,210 Financial statements 2 31-12-2017 31-12-2016 Of which secured by pledged deposits: Loans and advances to banks 116,468,505 82,928,210 Parent bank and related banks - 171,563 Loans and advances to customers can be classified as follows: Other banks - - By type: Total - 171,563 Nostro current accounts 19,74 4,128 33,745,950
Deposits - freely available 20,000,000 171,563 There were no subordinated loans to banks outstanding in 2017 and 2016. No impairments were recorded in 2017 and 2016 on the amounts Loans and advances to Deposits - not freely available 18,424,164 47,8 85,035 banks at amortised cost.
Letter of Credit-loans 38,300,213 1,125,662
Loans 20,000,000 -
Total 116,468,505 82,928,210
At year end 2016 Deposits - not freely available contained a net amount of € 4,954,555 relating to ATB’s share in the bankruptcy of the Dutch DSB Bank N.V. under the Dutch Deposit Guarantee Scheme. In 2017 this amount was received.
88 89 Notes to the consolidated statement of Notes to the consolidated statement of financial position financial position (in euro’s) (in euro’s)
3 31-12-2017 31-12-2016 31-12-2017 % 31-12-2016 %
Loans and advances to customers 610,650,123 493,688,694 By type of collateral:
Loans and advances to customers can be classified as follows: Secured by real estate (incl. ships) 205,382,068 33.6 46,438,968 9.4
By type: Secured by moveable goods 201,118,477 32.9 97,0 05,4 63 19.6 Loans 30 6,0 47,658 482,147,748 Secured by guarantees 85,300,210 14.0 67,652,195 13.7 Syndicated loans 100,063,841 123,645,290 Secured by bill of lading 23,089,661 3.8 28,295,977 5.7 Overdraft and current accounts 198,951,781 126,192,192 Finance lease receivables 18,343,901 35,404,089 Secured by deposits 2,992,716 0.5 6,172,320 1.3 Secured by letters of comfort Staff loans 9,272,441 - - 0.0 54,495,067 11.0 issued by Alfa Bank companies Impairments -22,029,499 -273,700,625 Various secured 28,042,717 4.6 34,350,878 7.0 Total 610,650,123 493,688,694 Various unsecured 64,724,274 10.6 159,27 7,826 32.3
31-12-2017 % 31-12-2016 % Total 610,650,123 100.0 493,688,694 100.0 By geographical concentration: Russia 38,828,718 6.4 37,011,426 7.5 Other CIS countries 56,096,977 9.2 70,579,608 14.3 Loans secured by real estate increased significantly, see also the disclosure on Loans by sector and industry, and includes shipping loans. Loans and advances to customers EUR utilising countries 139,284,170 22.8 118,348,651 24.0 include finance lease receivables totally amounting to € 15,919,767 (2016: € 25,931,340). Lessees are Russian railway corporations, and the collateral for these leases are Russian
Other European countries 115,259,967 18.9 138,617,7 26 28.1 railway wagons (moveable goods). As consequence of the sale of ATB Leasing early 2018 all Financial statements Marshall Islands 110,902,366 18.2 22,300,247 4.5 expected maturities are set within the one year period.
United States 54,013,624 8.8 37,459,50 0 7.6 Maturities of gross investment in finance lease receivables 2017: Other countries 96,264,301 15.8 69,371,536 14.1 Within 1 year Between More than Total Total 610,650,123 100.0 493,688,694 100.0 1 and 5 years 5 years Exposures in Other European countries mainly consist of exposures in Switzerland and Great Gross finance lease 24,846,623 - - 24,846,623 Britain. Exposures in Other countries mainly consist of exposures in Turkey, Singapore and receivable Liberia. Less future finance 6,502,722 - - 6,502,722 31-12-2017 % 31-12-2016 % income By sector and industry: Net investment 18,343,901 - - 18,343,901 in finance lease Shipping 155,168,286 25.4 22,300,247 4.5 Energy 144,358,782 23.6 96,503,763 19.5 Industry and construction 132,289,234 21.7 138,023,641 28.0 Maturities of gross investment in finance lease receivables 2016: Trading companies 70,583,686 11.6 88,702,903 18.0 Agriculture 45,731,681 7.5 60,106,151 12.2 Within 1 year Between More than Total 1 and 5 years 5 years Private persons 9,239,855 1.5 - 0.0 Gross finance lease 8,688,016 27,636,96 6 15,375,318 51,700,300 Others 53,278,599 8.7 88,051,989 17.8 receivable Total 610,650,123 100.0 493,688,694 100.0 Less future finance 3,951,980 11,320,519 1,023,712 16,296,211 income The table below is a breakdown of the carrying value of loans and advances to customers Net investment 4,736,036 16,316,447 14,351,606 35,404,089 reported by type of collateral. If the collateral value is lower than the carrying value of in finance lease the loan, the remaining part is classified as ‘Various unsecured’. The valuation methods of collateral are described in D.4.3.1 under credit risk. Income from finance lease receivables in 2017 amounts to € 3,671,219 (2016: € 5,284,393).
90 91 Notes to the consolidated statement of Notes to the consolidated statement of financial position financial position (in euro’s) (in euro’s) Loans to Managing Board in 2017 4 31-12-2017 31-12-2016 Interest-bearing securities 226,966,120 261,430,841 at 31 December Repaid Interest Term Collateral Interest-bearing debt securities represent listed debt instruments, issued by: C. Antoniou 8,148,784 - 2.917% 4 Pledge of shares
H.P.M.G. Steeghs 205,538 - 2.917% 4 Pledge of shares 31-12-2017 31-12-2016
P.J. Ullmann 205,538 - 2.917% 4 Pledge of shares Governments 216,971,657 251,441,515
Total 8,559,860 - Banks and financial institutions 9,994,463 9,989,326
Total debt securities 226,966,120 261,430,841 Loans to Managing Board in 2016: Nil
No loans and advances are outstanding to members of the Supervisory Board (2016: Nil).
31-12-2017 % 31-12-2016 % 2017 2016 By geographical concentration: Impairments 22,029,499 273,700,625 Netherlands 77,808,086 34.3 98,703,450 37.8
Italy 60,526,376 26.7 35,839,843 13.7 Balance at 1 January 273,700,625 294,614,807 France 30,107,103 13.3 30,188,127 11.5 Releases -17,2 27,24 8 -4,125,918 Belgium 15,724,857 6.9 26,283,200 10.1 Financial statements Additions 7,50 9,856 25,868,746 Germany 10,724,200 4.7 10,921,113 4.2 FX impact -11,287,50 4 12,561,981 Portugal 32,075,498 14.1 20,585,342 7.9 Write offs -230,666,230 -55,218,991 Spain - 0.0 30,036,187 11.5 Balance at 31 December 22,029,499 273,700,625 Poland - 0.0 8,873,579 3.4 At 31 December 2017 for 6 clients (2016: 23) the loans have been impaired and provided for. The main additions relate to 4 (2016: 19) exposures representing 43% (2016: 80%) of the Total 226,966,120 100.0 261,430,841 100.0 impaired loans. The loan loss provision includes a provision for incurred but not reported (IBNR) credit losses of € 2.1 million (2016: € 2.4 million). Movements in the interest-bearing securitites were as follows:
2017 2016
Balance at 1 January 261,430,841 426,943,073 Purchases 67,476,50 0 - Redemptions -90,000,000 - Sales -8,675,690 -161,418,391 Amortisation premium and discount -3,265,531 -5,147,8 41 Impairments - 1,054,000 Balance at 31 December 226,966,120 261,430,841
92 93 Notes to the consolidated statement of Notes to the consolidated statement of financial position financial position (in euro’s) (in euro’s) 5 31-12-2017 31-12-2016 7 31-12-2017 31-12-2016 Shares and other non-interest- 240,474 982,355 Property and equipment 1,106,313 228,016 bearing securities
Movements in property and equipment were as follows: The movements in Shares and other non-interest-bearing securities were as follows:
2017 2016 Leasehold Computer Other Total 2017 Total 2016 Balance at 1 January 982,355 843,529 improve- equipment ment FX impact -194.510 34,712 Balance at 1 January 23,050 3,904 201,062 228,016 1,427,10 8
Impairments -5 47,371 104,114 Additions 382,359 501,123 213,573 1,097,055 23,799
Balance at 31 December 240,474 982,355 Depreciation -10,631 -1,987 -78,727 -91,345 -648,983
Shares and other non-interest-bearing securities consist of unlisted shares. Impairments -12,418 - -114,995 -127,413 -573,908 This balance consists of: • 17 (2016: 17) shares of Swift (Society for Worldwide Interbank Financial Telecommunication); Balance at 31 December 382,360 503,040 220,913 1,106,313 228,016 • 10.918 (2016: 10.918) shares of Stemcor Global Holdings Ltd (representing 1.1% of the voting power). Gross carrying amount 382,360 511,285 349,200 1,242,845 2,270,283
Accumulated - -8,245 -128,287 -136,532 -2,042,267 depreciation Balance at 31 December 382,360 503,040 220,913 1,106,313 228,016 6 31-12-2017 31-12-2016 Financial statements Intangible assets 8,746,944 8,564,321 In 2017 the additions mainly related to the movement to our new office, which was realized in January 2018. In 2016 the impairments mainly related to ICT-infrastructure.
Movements in intangible assets were as follows:
2017 2016
Balance at 1 January 8,564,321 8,783,828
Additions 2,655,144 4,554,580
Disposals (net) - -2,927
Depreciation -2,055,369 -2,873,887
Impairments -417,152 -1,897,273
Balance at 31 December 8,746,944 8,564,321
Gross carrying amount 15,188,627 14,949,315
Accumulated depreciation -6,441,683 -6,384,994
Balance at 31 December 8,746,944 8,564,321
Intangible assets refer to capitalized software expenses, Investment mainly consists of the cost of banking software, In 2017 and 2016 the impairment charge mainly related to Core banking software.
94 95 Notes to the consolidated statement of Notes to the consolidated statement of financial position financial position (in euro’s) (in euro’s) 8 31-12-2017 31-12-2016 10 31-12-2017 31-12-2016 Prepayments and accrued income 20,459,159 22,211,904 Amounts due to banks 33,064,778 128,026,237
Prepayments and accrued income can be specified as follows: Amounts due to banks can be specified as follows:
Interest receivable By type:
• Parent bank and related banks 272,618 272,796 Current accounts 22,010,302 18,941,970
• Related group companies 37,025 52,993 Deposits - 94,894,667
• Banks 1,064,026 463,810 Margin calls 11,054,476 14,189,600
• Loans and advances to customers 2,798,887 6,457,330 Total 33,064,778 128,026,237
• Interest-bearing securities 1,472,151 2,100,515
Prepayments 8,019,911 3,504,154 31-12-2017 % 31-12-2016 % Current corporate tax 6,055,420 7,983,265 By geographical concentration: Deferred corporate tax - 902,612 Russia 11,054,475 33.4 109,084,267 85.2 Dutch Value Added Tax 739,121 474,429 Other CIS countries 13,373 0.1 14,235 0.0 Total 20,459,159 22,211,904
EUR utilising countries 21,996,930 66.5 18,927,735 14.8 Financial statements Movements in current corporate tax were as follows: Total 33,064,778 100.0 128,026,237 100.0 Current corporate tax
2017 2016 By counterparty: Balance at 1 January 7,983,265 11,809,822 Parent bank and related banks 11,0 67,8 4 8 109,098,502 Tax in other jurisdictions -1,927,845 -262,483 Other banks 21,996,930 18,927,735 Write off Witholding tax - -3,564,074 Total 33,064,778 128,026,237 Balance at 31 December 6,055,420 7,983,265
9 31-12-2017 31-12-2016 Other assets 48,845,289 34,061,675
Other assets consist of € 10.3 million receivable regarding ESPP B.V. (2016: nill) which was received in January 2018, € 11.2 million of Cross Currency swaps (2016: € 14.7 million) and € 7.7 million of FX contracts for hedging purposes (2016: € 1.3 million). The swaps and FX contracts are mainly with large European financial institutions or with Alfa-Bank. Included in Other assets is property obtained from foreclosures of € 19.6 million (2016: € 18.1 million).
96 97 Notes to the consolidated statement of Notes to the consolidated statement of financial position financial position (in euro’s) (in euro’s) 11 31-12-2017 31-12-2016 12 31-12-2017 31-12-2016 Funds entrusted 922,079,529 932,595,014 Accruals and deferred income 18,764,521 13,723,986
Funds entrusted can be specified as follows: Accruals and defered income can be specified as follows:
31-12-2017 % 31-12-2016 % Interest payable • Parent bank and related banks 427,713 1,271,982 By type: • Related group companies 275,625 406,457 Retail accounts • Banks 251,519 250,226 • Savings accounts 364.898.419 39,6 382.266.646 41.0 • Customers 249,458 4 07,895
• Savings deposits 452.851.145 49,1 463.905.439 49.7 Wage Tax & Social security premiums 983,842 964,581 to be paid Corporate accounts Corporate tax deferred 1,145,590 1,055,712
• Current accounts 93.138.102 10,1 61.143.011 6.6 Deferred fee income 2,519,540 823,763 Other accruals 11,770,939 8,543,370 • Fixed deposit accounts 7.627.388 0,8 18.419.719 2.0 Russian Value Added Tax 1,140,295 - • Deposit accounts pledged to ATB 3.564.475 0,4 6.860.199 0.7 Total 18,764,521 13,723,986 Total 922.079.529 100,0 932.595.014 100.0 Other accruals mainly comprise of staff expenses to be paid (holidays, severance) and other expenses to be paid (accounts payable, expense payable and other costs to be paid).
Included in the other accruals is a provision for restructuring amounting to € 0.1 million Financial statements (2016: € 1.0 million). 31-12-2017 31-12-2016
By counterparty:
Related parties 28,132,118 24,753,400
Other customers 893,9 47,411 9 07,8 41,614
Total 922,079,529 932,595,014
98 99 Notes to the consolidated statement of Notes to the consolidated statement of financial position financial position (in euro’s) (in euro’s) 13 31-12-2017 31-12-2016 14 31-12-2017 31-12-2016 Other liabilities 23,291,515 26,171,775 Subordinated loans 35,000,000 50,000,000
Other liabilities consist of € 11.1 million (2016: € 14.5 million) of Cross Currency Swaps, The subordinated loans are held with associated companies and are subordinated in respect € 1.1 million (2016: € 11.7 million) of FX contracts for hedging purposes and € 11.1 million of other current and future liabilities of ATB. related to the cash settled Employee Share Purchase Plan (2016: Nil). Movements in subordinated loans were as follows: Employee Share Purchase Plan In 2017 ATB implemented a cash settled Employee Share Purchase Plan (ESPP). Through this plan a selective number of employees is offered to invest in the bank. These 2017 2016 employees could buy shares of a company (ATB ESPP B.V.) that holds a maximum of 9.9% shares in Amsterdam Trade Bank N.V. To this end 73,078 shares of Amsterdam Trade Bank Balance at 1 January 50,000,000 87,136,627 N.V. have been issued against a total price of € 14,939,185. New issuances - 50,000,000 The ESPP aims to build a strong alignment between key staff and the bank in order to create a partnership which reinforces joint goals between the bank and these employees. Conversion into equity -15,000,000 -86,525,851 The selected group of employees includes the Management Board members. In order to finance the investment, the bank has offered these employees a loan to a maximum of 90% of the initial value of the shares that were acquired by the employee. These loans are Exchange rate differences - -610,776 reported in note 3. Balance at 31 December 35,000,000 50,000,000 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 During 2017 a notional value of € 15,000,000 was converted into Equity (2016: € 55,000,000 terminated. In view of the four year holding period the acquisition price has a discount and $ 35,000,000). of 15% that will be amortized during the holding period. The interest rate on subordinated loans is 4.5% (2016: 4.5%). Final maturity date is 28 April 2023. Interest reset date is 31 January 2018. As per year-end 2017, out of the 73,078 shares, 50,663 have been placed (through ATB The interest expense during the year 2017 was € 1.9 million (2016: € 3.9 million). ESPP B.V.) with employees. The amortization of the discount has been included in the Profit & Loss Statement for 2017. As this plan qualifies as a cash settled plan, the related Financial statements shares and commitments are presented as a liability in the statement of financial position.
In view of not yet fully concluded discussions with our fiscal advisors and with the tax authorities about the impact of the investment on the personal tax accounts of the employees, the employees have received an option to unwind the plan depending on the outcome of these discussions.
Shares aquired by the Managing Board Members in 2017
Acquired shares
2017 2016 C. Antoniou 44,290 - H.P.M.G. Steeghs 1,250 - P.J. Ullmann 1,250 -
Shares aquired by key staff in 2017 Acquired shares
2017 2016 Number of shares by key staff 3,873 -
100 101 Notes to the consolidated statement of Notes to the consolidated statement of financial position financial position (in euro’s) (in euro’s)
15 31-12-2017 31-12-2016 Reserves Share Retained Currency Undistributed Equity 183,073,698 142,599,074 premium earnings translation profit reserve Issued Capital Balance at 11,384,203 -74,459,484 -15,350,512 -50,778,009 1 January 2017 Authorized share capital 450,000,000 411,719,132
Unissued share capital -350,237,10 0 -139,916,256 FX revaluation - - -1,185,680 - Net result - - - 11,660,605 Issued share capital 99,762,900 271,802,876 Total FX movement - - -1,185,680 11,660,605 and net result Appropriation of - -50,778,009 - 50,778,009 Number of authorized shares 3,000,000 9 07,310 result Redenomination of Number of shares issued and fully paid 665,086 598,975 76,802,332 125,237,493 - - shares
Par value per share 150 454 Issue of shares -150 - - -
Balance at 88,186,385 - -16,536,192 11,660,605 31 December 2017 2017 2016 Number Amount Number Amount Movement in issued Balance at 11,385,022 155,807,874 -18,677,228 -230,267,358 capital 1 January 2016 Financial statements Issued share capital as 598,975 271,802,876 364,221 165,276,205 FX revaluation - - 3,326,716 - at 1 January Net result - - - -50,778,009 Issue of shares (nominal 66,111 29,999,849 234,754 106,526,671 Total FX movement € 453) - - 3,326,716 -50,778,009 and net result Share redenomination -202,039,825 - Appropriation of - -230,267,358 - 230,267,358 Issued share capital as result 665,086 99,762,900 598,975 271,802,876 at 31 December Issue of shares -819 - - -
During 2017, next to the conversion of the subordinated debt of € 15,000,000. ABH Holdings Balance at 11,384,203 -74,459,484 -15,350,512 -50,778,009 and ATB Holdings SA issued a capital injection of € 15,000,000. ABHH acquired 58.112 newly 31 December 2016 issued shares for an amount of € 11,370,000 and as a result from the conversion of the subordinated debt and ATBH acquired 7.999 newly issued shares for an amount of € 3,630,000. Share premium This reserve includes amounts paid to ATB by shareholders above the nominal value In December 2017 ATB redemominated the nominal values of its ordinary share from of purchased shares. € 453 per share to € 150 per share. At that moment the number of outstanding shares was 665.086. This resulted in a decrease of share capital of € 202,039,825. The management Board decided and confirmed by notary decree to assign € 76,802,332 to Share Premium Retained earnings Reserve and to add € 125,237,493 to Retained Earnings. This amount includes results from previous years kept in equity. The General Meeting of Shareholders held on 11 May 2017, decided to allocate the 2016 ATB has only one type of share and all shares have equal rights. negative result of € 50,778,009 to Retained Earnings. Currency translation reserve Exchange gains and losses arising from the translation of foreign operations from functional to reporting currency of the parent are accounted for in this legal reserve. Following the sale of the Russian participating interest in February 2018, the associated accumulated exchange differences are taken to other reserves. The legal translation reserve relates to the investment in ATB Leasing LLC. Due to the negative balance the amount cannot be distributed.
102 103 Notes to the consolidated statement of Notes to the consolidated statement of financial position financial position (in euro’s) (in euro’s) 16 31-12-2017 31-12-2016 17 31-12-2017 31-12-2016 Contingent liabilities 54.382.221 51.766.075 Irrevocable commitments 49,518,858 6,210,630
These are irrevocable contingent liabilities pursuant to guarantees. Irrevocable credit facilities comprise the total amount of commitments in respect to undrawn irrevocable credit facilities. By product: By geographical concentration: Guarantees issued 3,526,395 3,773,802 Other CIS countries - 931.791 Letters of credit 50,855,826 47,9 92,273 EUR utilising countries 22,155,118 2,421,330 Total 54,382,221 51,766,075 Other European countries 1,507,187 2,857,50 9
By geographical concentration: Other countries 25,856,553 -
Russia 4,402,019 - Total 49,518,858 6,210,630
Other CIS countries 41,190,023 36,942,156
EUR utilising countries 7,365,915 12,498,475 Liabilities pledged to ATB In connection to the risk profile, the assets and liabilities as presented in the table below, Other European countries 1,416,279 2,317,460 are recorded in the financial statements and are subject to pledge agreements. With pledged deposits ATB places the amounts received from the pledged deposits, at the risk and reward of the pledged counterparty, with another bank or counterparty. As a consequence hereof, Other countries 7,985 7,984 these assets and liabilities are not (freely) available for ATB’s banking activities. The table
below shows the impact of these transactions on the balance sheet of ATB. Financial statements Total 54,382,221 51,766,075
Other contingent liabilities 31-12-2017 31-12-2016 In the last few years, ATB has increased its effort to implement a strong compliance culture and organisation, processes and tooling. Assets Liabilities Assets Liabilities As a result of this and also due to increased specific monitoring of its client files and Parent bank and business transactions, ATB identified and reported past unusual transactions to the - - 171,563 - authorities. related banks ATB is being examined by the Fiod (Dutch Fiscal Intelligence and Investigation Department) Related group - - - 171,563 for possible breaches by the bank in previous years regarding the Wwft (law against money companies laundering and terrorist financing) specifically with respect to client due diligence and timely reporting of unusual transactions. It is unclear which specific consequences (if any) Other banks - - - - the examination may have. Possible measures may include a penalty payment or a fine, which would mean that a present obligation per 31 December 2017 could exist and that an Loans and advances outflow of resources may result as a consequence. However, also given the fact that Fiod’s to customers/ examination is in its first stages, management is not able to assess reliably if such penalty Funds entrusted 2,992,716 3,564,475 6,172,320 6,688,636 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. Off balance 571,759 - 516,316 - The ESPP has been executed in December 2017 and the size of the program is subject to outcome of the final discussions with fiscal advisors and tax authorities (due to the option Total 3,564,475 3,564,475 6,860,199 6,860,199 for employees to unwind depending on the outcome of these discusssions). We expect these discussions to finalize in the first half of 2018. The related accrued interest forming part of the pledge agreements is not included in this table. 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. This option can only be exercised after March 2019. The option is currently valued at nil.
104 105 Notes to the consolidated statement of Notes to the consolidated statement of financial position financial position (in euro’s) (in euro’s)
Related parties Fair value of financial assets and liabilities The consolidated statement of financial position and consolidated statement of income The following table presents the fair value of ATB’s financial assets and liabilities. Certain include the subsidiaries ATB Leasing LLC (Moscow) and Amsterdam Trade Capital balance sheet items are not included in the table, as they do not meet the definition of Administration Corporation (Amsterdam) which are fully owned. 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. 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 Fair value Carrying value statement. Amounts receivable or payable to related parties and income and expenses regarding related parties are disclosed in the notes to the financial statements. Financial assets 2017 2016 2017 2016 Related parties of ATB include, amongst others, its subsidiaries, associated companies Cash and balances with 181,791,114 389,020,070 181,791,114 389,020,070 within Alfa Group, key staff, Managing Board members and shareholders. Transactions central banks between related parties mainly consist of forex transactions and financing activities. Loans and advances to 117,623,928 76,538,193 116,468,505 82,928,210 There are no significant provisions for doubtful debts or individually significant bad debt banks expenses recognised on outstanding balances with related parties. Loans and advances to 611,912,143 499,970,916 610,650,123 493,688,694 customers Related parties: Parent and related bank Interest-bearing 229,910,400 266,469,900 226,966,120 261,430,841 This relates to ATB’s direct majority shareholder Alfa-Bank Russia and its related banks securities within the Alfa Banking Group. Shares and other non-interest-bearing 261,469 1,100,000 240,474 982,355 Related parties: Other group companies securities Other group companies included all group companies (including other minority shareholders), Prepayments and exclusive of Parent and related banks, within the Alfa-Group and ATB ESPP B.V. 20,459,159 22,211,904 20,459,159 22,211,904 accrued income
Financial statements For the financial year 2017 related parties mainly consist of: Other assets* 49,001,010 33,731,423 48,845,289 34,061,675 • 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 Financial assets 1,210,959,223 1,289,042,406 1,205,420,784 1,284,323,749 and Remuneration) • Funds received from Banks within the Alfa-Bank group (disclosed under Banks) and funds Financial liabilities received from shareholders (disclosed under Funds entrusted) with income disclosed Amounts due to banks 33,064,778 128,379,785 33,064,778 128,026,237 under Interest expense. • Shares acquired by Managing Board members and key staff are disclosed under Other Funds entrusted 925,541,499 942,300,000 922,079,529 932,595,014 liabilities. The related costs are disclosed under expenses. Accruals and deferred 18,764,521 13,723,986 18,764,521 13,723,986 • In the notes on Results on financial transactions and Impairments of loans and advances income to customers and shares other transactions with group companies are disclosed. Other liabilities* 23,159,415 26,374,607 23,291,515 26,171,775
Rental commitments Subordinated liabilities 34,968,867 50,600,000 35,000,000 50,000,000 ATB has entered into rental agreements for its office premises and office equipment amounting to € 14,196,000 (2016: € 3,778,000). The contract includes an option to terminate Financial liabilities 1,035,499,080 1,161,378,378 1,032,200,343 1,150,517,012 early after 5 years against additional costs. Of this amount € 1,649,000 is payable within 1 year (2016: € 1,010,000), € 5,769,000 is * the fair value includes the fair value adjustments of derivatives which are not included in the carrying value. payable between 1 and 5 years (2016: € 2,768,000) and € 6,778,000 is payable after five years (2016: nil).
106 107 Notes to the consolidated statement Notes to the consolidated of income (in euro’s) statement of income 19 2017 2016 Interest expense 15,520,774 20,468,892
18 2017 2016 Interest expense comprise interest from:
Interest income 33,446,400 40,454,981 Central banks 1,113,152 1,665,445
Other banks 274,474 842,409 Interest income comprise interest from: Funds entrusted 7,558,343 12,229,809 Loans and advances to banks 1.743.418 2.178.788 Subordinated loans 1,891,250 3,909,598 Loans and advances to customers 30,610,650 35,549,308 Derivatives 4,683,555 1,821,631 Interest-bearing securities 1,090,559 2,696,885 Total 15,520,774 20,468,892 Derivatives 1,773 30,000
Total 33,446,400 40,454,981 2017 % 2016 %
By geographical concentration: 2017 % 2016 % Russia 134,672 0.9 2,765,365 13.5 By geographical concentration:
Other CIS countries 167,745 1.1 680,832 3.3 Financial statements Russia 4,554,644 13.6 4,135,825 10.2 EUR utilising countries 15,006,953 96.7 16,070,684 78.5 Other CIS countries 9,446,702 28.2 8,011,663 19.8 Other European countries 175,413 1.1 199,386 1.0 EUR utilising countries 3,773,517 11.3 15,438,216 38.2 Other countries 35,991 0.2 752,625 3.7 Other European countries 7,073,39 0 21.1 5,620,256 13.9 Total 15,520,774 100.0 20,468,892 100,0 Other countries 8,598,147 25.7 7,249,021 17.9
Total 33,446,400 100.0 40,454,981 100.0
2017 2016
Interest expense from parent and 2,045,637 3,213,744 2017 2016 related banks
Interest income from parent and 1,843,807 2,104,250 Interest expense pledged deposits - 632,457 related banks Of which from related parties - 401,228 Interest income pledged deposits - 747,67 2
Of which from related parties - 747,67 2
108 109 Notes to the consolidated statement Notes to the consolidated statement of income of income (in euro’s) (in euro’s) 20 2017 2016 22 2017 2016 Net commission income 6,203,778 6,158,674 Other income 5,687,834 2,808,428
net commission income consists of: Other income mainly consists of the recoverable VAT and rent income on railway wagons. The increase in 2017, related to 2016, is attributable to rent income. 2017 % 2016 %
Trade finance fees 5.264.898 81.8 5.657.598 88.4 23 2017 2016 Money transfer fees 93.666 1.5 118.013 1.8 Staff expenses 21,013,796 25,188,165 Other fees 1.075.797 16.7 621.577 9.7
Commission income 6.434.361 100.0 6.397.188 100.0 Staff expenses comprise:
Commission expense 230.583 238.514 Wages and salaries 14,145,498 17,539,261
Total 6.203.778 6.158.674 Pension cost 1,730,242 1,650,294
Other social cost 1,133,730 1,297,330
Other staff cost 4,004,326 4,701,280 21 2017 2016 Total 21,013,796 25,188,165 Result on financial transactions 15,851,854 -700,641
At 31 December 2017, the total number of employees expressed in full-time equivalents Financial statements Result on financial transactions consists of: was 134 (2016: 141).
Other foreign exchange results 119,302 -2,410,253 Remuneration of Supervisory Board and Management Board The remuneration of the Supervisory Board totaled € 318,333 (2016: € 263,334) and Sale of interest-bearing securities 402,310 5,042,848 contains the paid remuneration in 2017 and 2016 respectivily. Current members of the Supervisory Board employed within the Group are not remunerated. Sale of non-core loans and advances 15,729,282 -4,063,031 Remuneration of the Management Board includes pension and other benefits paid by ATB totaled € 1,663,514 (2016: € 2,440,436) and reflects the total remuneration of current and former members of the Management Board. Result on cross currency swaps -41,401 158,256
Foreign exchange results on client -357,639 571,539 transactions
Total 15,851,854 -700,641
110 111 Notes to the consolidated statement Notes to the consolidated statement of income of income (in euro’s) (in euro’s)
Supervisory Board Fair value changes of ESPP investments made by Managing Board 2017 2016 R.V. Emerson (as of April 6, 2017) 112,500 - 2017 2016
H.C.M. van Damme 7 7,50 0 81,945 C. Antoniou 674,204 - D. Vovk (as of February 1, 2016) 70,000 23,333 H.P.M.G. Steeghs 19,028 - F.C.W. Kuijlaars (up to November 1, 2017) 58,333 71,945 P.J. Ullmann 19,028 - W.J.M.O. Devriendt (up to June 30, 2016) - 86,111 Total remuneration 318,333 263,334 Total 712,260 -
For the Management Board members the totals of their total remuneration plus the fair value changes of the investments made by the Management Board members are for Mr. C. Antoniou € 1,414,089, for Mr. H.P.M.G. Steeghs € 494,127 and for Mr. P.J. Ullmann Remuneration Managing Board in 2017 € 467,558.
Salary Pension Variable Severance Other Total cost pay payment compen- remu- Remuneration Managing Board in 2016 sation neration Salary Pension Variable Severance Other Total C. Antoniou 650,000 21,135 50,000 - 18,750 739,885 cost pay payment compen- remu- sation neration H.P. M .G. 421,002 27,36 8 - - 26,729 475,099 Steeghs C. Antoniou 541,667 15,700 100,000 - 15,625 672,992 (as of April P.J. Ullmann 378,996 27,4 6 6 - - 42,068 448,530 25, 2016) Financial statements H.P. M .G. 410,004 24,333 - - 26,729 461,066 Total 1,449,998 75,969 50,000 - 87,547 1,663,514 Steeghs P.J. Ullmann 349,992 24,427 - - 42,068 416,487 In 2017 the members of the Managing Board invested indirectly in ATB via the ESPP Plan. For the loan related to the investment we refer to disclosure under loans and advances to customers and for the number of shares we refer to the disclosures under Other Liabilities. I. Pakan 235,000 9,442 170,000 430,833 44,616 889,891 In the table below the fair value of the investment made by the Management Board (up to July members is represented. 1, 2016) Total 1,536,663 73,902 270,000 430,833 129,038 2,440,436
112 113 Notes to the consolidated statement Notes to the consolidated statement of income of income (in euro’s) (in euro’s)
2017 2016 The audit fees relate to the financial year to which the financial statements pertain, 24 regardless of whether the external auditor and the audit firm performed the work during the financial year. In addition to the statutory audit and the performance of other audits General and administrative 17,199,118 17,486,807 at request of group auditors of different Alfa Bank companies, the auditor also provides a expenses number of other assurance services. These other assurance services consist reporting activities to the Dutch Central Bank. The increase of audit fees is due to additional (interim) financial information engagements, reporting to DNB over prior year and IFRS 9 first time adoption for General and administrative expenses comprise: group reporting.
Housing 2,665,233 1,334,774
ICT / communication 2,557,132 6,673,848 25 2017 2016 Credit insurance 2,534,913 1,256,050 Depreciation and impairments 2,691,279 5,994,051 Public relations 225,005 162,797 of intangible assets and property and equipment Professional services 4,528,601 4,902,438
Foreign taxes 64,184 3,550 Depreciation comprise the depreciation cost of:
Other cost 4,624,050 3,153,350 Depreciation of intangible assets 2,055,369 2,873,887
Total 17,199,118 17,4 8 6,8 07 Depreciation of property and equipment 91,345 648,983
The other cost include € 1,853,165 (2016: € 1,152,894) related to operating costs on property Impairment on intangile assets 417,152 1,897,273 obtained from foreclosure (see note Other assets) and € 1,103,174 (2016: € 695,511) related to market information. Impairment on property and equipment 127,413 573,908
Total 2,691,279 5,994,051 Financial statements External auditor's cost: The impairment charge on intangible assets consists of an additional depreciation on 2017 EY Accountants Other EY Total EY banking software that is no longer in use or on implementation cost which exceed the recoverable amounts. Audit services 775,852 52,200 828,052
Audit-related services 17,545 - 17,545
Tax advice services - - -
Other non-audit services - - -
Total 793,397 52,200 845,597
2016 EY Accountants Other EY Total EY
Audit services 701,800 58,000 759,800
Audit-related services - - -
Tax advice services - - -
Other non-audit services - - -
Total 701,800 58,000 759,800
114 115 Notes to the consolidated statement Notes to the consolidated statement of income of income (in euro’s) (in euro’s) 26 2017 2016 28 2017 2016 Impairments of loans and -26,750,529 25,858,727 Income tax 2,922,873 2,435,757 advances to customers and shares The statutory applicable corporate tax rate for 2017 in the Netherlands is 25% (2016: 25%) and in Russia is 20% (2016: 20%).
Taxes are calculated on the result before taxation, based on the applicable profit tax rate. Release relating to loans -17,2 27,24 8 -4,125,918 In ATB Leasing additional tax losses were to be taken as a result of a prudent approach towards the collectability on tax overpayments towards the Russian Tax authorities. Addition relating to loans 7,50 9,856 25,868,746 During the financial year 2017 ATB realised a profit. During the years 2013-2016 however ATB realised significant operational losses leading to tax losses. For tax accounting purposes Release relating to bonds - -1,054,000 tax losses are accrued only for the amount at which tax losses can be offset against past taxable profits. At year-end 2017 an amount of € 6,055,313 is accrued as current tax receivable. This amount can be offset with the amount of tax paid in 2013 (carry back). Addition relating to shares 5 47,371 - No deferred tax assets that depend on further probability of ATB are taken into account Release related to shares - -104,114 due 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 2017 is Other impairments -1,851,226 5,274,013 netted with the non regcognised future tax assets of last year and therefore do not lead to a tax position in the Statement of financial position. Total -11,021,247 25,858,727 For 2017 this resulted in an overall effective tax rate of 19.6% (2016: negative 5.0%).
The differences between the statutory applicable corporate tax rate and effective tax The addition regarding loans in 2017 relates to 4 clients (2016: 19). rate can be explained as follows: In 2017 ATB sold a number of loans that had been provided for in previous years. The results on these loans, which also were sold to related parties, are therefore disclosed as recovered amounts. 2017 2016 Other impairments results from the termination of Finance Lease agreements. Financial statementsw Operating result before tax 14,583,478 -48,342,252
Income tax
Theoretical tax charge at the statutory 3,645,870 -12,085,563 rate of 25%
Non deductible items - 2,712 27 2017 2016 Adjustments on previous years - 5,554 Resolution charge 1,202,668 2,067,052 Impact of foreign tax rate differences -264,276 284,146
Resolution charge consists of two levies € 944,265 (2016: € 1,085,711) regarding the Deposit Write off tax overpayment ATBL 1,864,286 - Guarantee Fund and € 258,403 (2016: € 981,341) regarding the Single Resolution Fund. Write off of withholding tax 422 3,564,074
Non recognised future tax assets -2,323,429 10,664,834
Total 2,922,873 2,435,757
At year-end 2017 an amount of € 275 million (2016: € 287 million) of losses available for carry forward have not been included in the measurement of deferred tax assets. In the past ATBL made an additional advance payment to the Russian Tax Authorities. The remaining amount is not expected to be settled with the Russian Tax Authorities and, as a consequence thereof, has been written-off.
116 117 Company Financial Statements 2017
118 Company statement of Company statement financial position of income At 31 December before appropriation of profit
(in euro’s) 31-12-2017 31-12-2016 (in euro’s) 2017 2016 Assets Note* Income from operating Note* Cash and balances with central banks 181,791,114 389,020,070 activities Loans and advances to banks 29 113,989,525 82,204,877 Interest income 38 31,993,228 38,237,550 Loans and advances to customers 30 616,711,677 504,918,527 Interest expense 15,520,774 20,468,892 Interest-bearing securities 226,966,120 261,430,841 Net interest income 16,472,454 17,768,658 Shares and other non-interest-bearing securities 240,474 982,355 Commission income 6,434,361 6,397,18 8 Participating interests 31 15,888,638 14,715,792 Commission expense 213,057 211,224 Intangible assets 8,746,944 8,564,321 Net commission income 39 6,221,304 6,185,964 Property and equipment 32 1,101,742 224,112 Result on financial transactions 40 15,618,419 1,170,438 Prepayments and accrued income 33 22,627,817 20,104,129 Other income 41 2,458,028 2,448,442 Other assets 34 29,295,057 15,967,387 Total income from operating 40,770,205 27,573,502 activities Total assets 1,217,359,108 1,298,132,411 Expenses Liabilities and equity Staff expenses 42 20,492,538 24,690,167 Financial statements Amounts due to banks 33,064,778 128,026,237 General and administrative expenses 43 15,294,967 15,997,989 Funds entrusted 35 922,915,980 935,336,411 Depreciation and impairments of 44 2,689,461 5,993,061 Accruals and deferred income 36 16,475,134 12,460,911 intangible assets and property and equipment Other liabilities 23,291,515 26,171,775 Provision participating interests 37 3,538,003 3,538,003 Impairments of loans and advances 45 -8,207,39 4 21,484,572 to customers and shares Subordinated loans 35,000,000 50,000,000 Resolution charge 1,202,668 2,067,052 Total liabilities 1,034,285,410 1,155,533,337 Total expenses 31,472,240 70,232,841
Equity: Operating result before tax 9,297,965 -42,659,339 • Issued capital 99,762,900 271,802,876 Income tax 46 422 3,569,628 • Share premium 88,186,385 11,384,203 Result subsidaries 2,363,062 -4,549,042 • Retained earnings - -74,459,484 Net result 11,660,605 -50,778,009 • Currency translation reserve -16,536,192 -15,350,512 • Net result 11,660,605 -50,778,009 Total equity 183,073,698 142,599,074 Total liabilities and equity 1,217,359,10 8 1,298,132,411
Contingent liabilities 54,382,221 51,766,075 Irrevocable commitments 49,518,858 6,210,630
* The number beside each item refers to the relevant note * The number beside each item refers to the relevant note
120 121 Notes to the company statement Notes to the company of financial position (in euro’s) statement of financial 29 31-12-2017 31-12-2016 Loans and advances to banks 113,989,525 82,204,877 position Loans and advances to banks can be classified as follows:
By type: General • ATB Leasing LLC, a 100% owned Nostro current accounts 17,265,14 8 33,022,617 The company financial statements of subsidiary for leasing activities in Deposits - freely available 20,000,000 171,563 Amsterdam Trade Bank N.V. (ATB) have Moscow. been prepared in conformity with section The paid-in capital of ATB Leasing Deposits - not freely available 18,424,164 47,8 85,035 14, “Provisions for banks”, of Book 2, Title amounts to € 28,807,976 (Russian Ruble LC-loans 38,300,213 1,125,662 9 of the Netherlands Civil Code with the 1,246,273,138). ATB holds all 111 (2016: Loans 20,000,000 - allowed application of the accounting policies 111) issued shares of ATB Leasing and has (DGAAP) as also applied in the consolidated all voting rights. The result regarding Total 113,989,525 82,204,877 annual accounts. The principles of valuation 2017 and 2016 has been recorded and determination of results stated in con- as a movement (2017 addition, 2016 nection with the consolidated statement of deduction) on the participating interest 31-12-2017 % 31-12-2016 % financial position and consolidated state- in ATB Leasing. By geographical concentration: ment of income are also applied to the • ATCAC (Amsterdam Trade Capital corporate statement of financial position Administration Corporation B.V.) a 100% Russia 78,508 0.1 304,535 0.4 and corporate statement of income. owned subsidiary, of which ATB has all voting rights. Other CIS countries 38,337,305 33.6 1,318,417 1.6 When the amounts included in the company • ATB ESPP B.V. as ATB has control over EUR utilising countries 49,050,407 43.0 71,452,240 86.9 Financial statements statement of financial position or the state- this pooling entity. ment of income are equal to the amounts as Investments and subsidiaries are valued Other European countries 2,964,971 2.6 6,456,567 7.9 included in the consolidated statement of using the net asset value method. financial position or statement of income, A provision is formed if and to the extent Other countries 23,558,334 20.7 2,673,118 3.3 no separate notes are included at company that the company stands surety for all Total 113,989,525 100.0 82,204,877 100.0 level. We refer to the notes as included in or part of the debt of the participating the consolidated financial statements. interest or if it has a constructive obligation to enable the participating Foreign currencies interest to repay its debts. 31-12-2017 31-12-2016 Translation differences on loans granted By counterparty: in foreign currencies from ATB to Group Other liabilities companies, which do not qualify as part of Given its characteristics and based on Dutch Parent bank and related banks 115,600 959,382 the net investment in foreign investment, Accounting Standard 275, the ESPP has been are recognised in the statement of income. recognised as a cash settled plan in the Other banks 113,873,925 81,245,495 company financial statements. Group companies Total 113,989,525 82,204,877 Group companies are legal entities and Equity Of which secured by pledged deposits: companies over which the company ATB has only one type of share and all shares exercises control. In connection with this, have equal rights. During financial year 2017, Parent bank and related banks - 171,563 financial and containing potential (voting) 73,078 normal shares have been issued of Other banks - - rights are also taken into account. which 50,663 shares are hold by ATB ESPP The following companies are recognised B.V. and the remaining 22,415 shares are Total - 171,563 as group companies: held as treasury shares by the company. There were no subordinated loans outstanding to banks in 2017 and 2016. No impairments were recorded in 2017 and 2016 on the amounts Loans and advances to banks at amortised cost.
122 123 Notes to the company statement Notes to the company statement of financial position of financial position (in euro’s) (in euro’s) 30 31-12-2017 31-12-2016 31-12-2017 % 31-12-2016 %
Loans and advances to customers 616,711,677 504,918,527 By sector and industry:
Shipping 155,168,286 25.2 22,300,247 4.4 Loans and advances to customers can be classified as follows: Energy 144,358,782 23.4 96,503,763 19.1 By type: Industry and construction 132,289,234 21.5 138,023,641 27.3 Loans 324,490,974 515,770,918 Trading companies 70,583,686 11.4 88,702,903 17.6 Syndicated loans 100,063,841 123,645,290 Agriculture 45,731,681 7.4 60,106,151 11.9 Overdraft and current accounts 202,489,784 129,730,195 Private persons 9,239,855 1.5 28 0.0 Staff loans 9,272,441 - Others 59,340,153 9.6 99,281,794 19.7 Impairments -19,605,363 -26 4,2 27,876 Total 616,711,677 100.0 504,918,527 100.0 Total 616,711,677 504,918,527 The table below is a breakdown of the carrying value of loans and advances to customers reported by type of collateral. If the collateral value is lower than the carrying value of the loan, the remaining part is classified as ‘Various unsecured’. The valuation methods of 31-12-2017 % 31-12-2016 % collateral are described in D.4.3 under credit risk mitigations.
By geographical concentration: 31-12-2017 % 31-12-2016 %
Russia 41,352,269 6.7 44,703,255 8.9 Financial statements By type of collateral: Other CIS countries 56,096,977 9.1 70,579,609 14.0 Secured by real estate (incl. ships) 205,382,068 33.3 46,438,968 9.20 EUR utilising countries 142,822,173 23.2 121,886,654 24.1 Secured by moveable goods 201,118,477 32.6 97,005,463 19.21 Other European countries 115,259,967 18.7 138,617,7 26 27.5 Secured by guarantees 85,300,210 13.8 67,652,195 13.40 Marshall Islands 110,902,367 18.0 22,300,247 4.4 Secured by bill of lading 23,089,661 3.7 28,295,977 5.60 United States 54,013,624 8.8 37,459,50 0 7.4 Secured by deposits 2,992,716 0.5 6,172,320 1.22 Other countries 96,264,300 15.6 69,371,536 13.7 Secured by letters of comfort issued - 0.0 54,495,067 10.79 Total 616,711,677 100.0 504,918,527 100.0 by Alfa Bank Various secured 28,042,717 4.5 34,350,878 6.80 Exposures in Other European countries mainly consist of exposures in Switzerland and Great Britain. Exposures in Other countries mainly consist of exposures in Turkey, Various unsecured 70,785,828 11.5 170,507,659 33.77 Singapore and Liberia. Total 616,711,677 100.0 504,918,527 100.00
124 125 Notes to the company statement Notes to the company statement of financial position of financial position (in euro’s) (in euro’s)
31-12-2017 31-12-2016 32 31-12-2017 31-12-2016 Impairments 19,605,363 264,227,876 Property and equipment 1,101,742 224,112
Movements in property and equipment were as follows:
Balance at 1 January 26 4,2 27,876 282,973,315 Leasehold Computer Other Total 2017 Total 2016 improve- equip- Releases -15,064,764 -2,217,597 ment ment
Additions 6,276,008 24,860,284 Balance at 1 January 23,050 - 201,062 224,112 1,423,082 Additions 382,359 498,638 213,573 1,094,570 22,931 FX impact -14,037,95 4 9,749,496 Depreciation -10,631 -169 -78,727 -89,527 -6 47,9 93 Write offs -221,795,803 -51,137,622 Impairments -12,418 - -114,995 -127,413 -573,908 Balance at 31 December 19,605,363 264,227,876 Balance at 31 December 382,360 498,469 220,913 1,101,742 224,112
At 31 December 2017 for 4 clients (2016: 18) the loans have been impaired and provided for. The main additions relate to 3 (2016: 14) exposures representing 42% (2015: 80%) of the Gross carrying amount 382,360 498,638 349,200 1,230,198 2,260,988 impaired loans. Accumulated The loan loss provision includes a provision for incurred but not reported (IBNR) credit - -169 -128,287 -128,456 -2,036,876 losses of € 2.1 million (2016: € 2.4 million). depreciation Balance at 31 December 382,360 498,469 220,913 1,101,742 224,112
In 2017 the additions mainly related to the movement to our new office in january 2018
and investments made for the outsourcing. In 2016 the impairments mainly related to ICT- Financial statements infrastructure. 31 31-12-2017 31-12-2016 Participating interests 15,888,638 14,715,792 33 31-12-2017 31-12-2016 Prepayments and accrued 22,627,817 20,104,129 Balance at 1 January 14,715,792 15,925,539 income
Result 2,363,062 -4,549,042 Prepayments and accrued income can be specified as follows:
FX translation reserve -1,190,216 3,339,295 Interest receivable Balance at 31 December 15,888,638 14,715,792 • Parent bank and related banks 272,618 272,796 • Related group companies 2,393,079 1,149,997 • Banks 1,064,026 463,810 • Loans and advances to customers 2,798,887 6,457,330 • Interest bearing securities 1,472,151 2,100,515 Prepayments 7,832,622 3,086,165 Current corporate tax 6,055,313 6,230,480 Value Added Tax 739,121 343,036 Total 22,627,817 20,104,129
126 127 Notes to the company statement Notes to the company statement of financial position of financial position (in euro’s) (in euro’s) 34 31-12-2017 31-12-2016 36 31-12-2017 31-12-2016 Other assets 29,295,057 15,967,387 Accruals and deferred income 16,475,134 12,460,911
Other assets consist of € 10.3 million receivable regarding ESPP B.V. (2016: nil) which was Accruals and defered income can be specified as follows: repaid in January 2018, € 11.2 million of Cross Currency swaps (2016: € 14.7 million) and € 7.8 million of FX contracts for hedging purposes (2016: € 1.3 million). The swaps and FX Interest payable contracts are mainly with large European financial institutions or with Alfa-Bank. • Parent bank and related banks 427,713 1,271,982
• Related group companies 275,625 406,457 35 31-12-2017 31-12-2016 • Banks 251,519 250,226 Funds entrusted 922,915,980 935,336,411 • Customers 249,458 4 07,895
Funds entrusted can be specified as follows: Wage Tax & Social security premiums 983,842 964,581 to be paid
31-12-2017 % 31-12-2016 % Deferred fee income 2,519,540 823,763
By type: Other accruals 11,767,437 8,336,007
Retail accounts Total 16,475,134 12,460,911
• Savings accounts 364,898,419 39.5 382,266,646 40.9 Other accruals mainly comprise of staff expenses to be paid (holidays, severance) and • Savings deposits 452,851,145 49.1 463,905,439 49.6 other expenses to be paid (accounts payable, expense payable and other costs to be paid).
Included in the other accruals is a provision for restructuring amounting to € 0.1 million Financial statements Corporate accounts (2016: € 1.0 million).
• Current accounts 93,974,553 10.2 63,884,407 6.8
• Fixed deposit accounts 7,627,38 8 0.8 18,419,719 2.0
• Deposit accounts pledged to ATB 3.564.475 0.4 6,860,200 0.7
Total 922,915,980 100.0 935,336,411 100.0
31-12-2017 31-12-2016
By counterparty:
Related parties 28,968,569 27,494,796
Other customers 893,9 47,411 9 07,8 41,6145
Total 922,915,980 935,336,411
128 129 Notes to the company statement of financial position Notes to the company (in euro’s) 37 31-12-2017 31-12-2016 statement of income Provision participating 3,538,003 3,538,003 (in euro’s) interests
This amount represents the full provision of the participating interest in ATCAC (Amsterdam Trade Capital Administration Corporation BV). There were no movements in 2017 as there are no operational activities within this company. 38 2017 2016 Other contingent liabilities Interest income 31,993,228 38,237,550 In the last few years, ATB has increased its effort to implement a strong compliance culture and organisation, processes and tooling. As a result of this and also due to increased specific monitoring of its client files and Interest income comprise interest from: business transactions, ATB identified and reported past unusual transactions to the authorities. Banks 1,743,418 2,178,788 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 Loans and advances to customers 29,157,478 33,331,877 laundering and terrorist financing) specifically with respect to client due diligence and timely reporting of unusual transactions. It is unclear which specific consequences (if any) Interest-bearing securities 1,090,559 2,696,885 the examination may have. Possible measures may include a penalty payment or a fine, which would mean that a present obligation per 31 December 2017 could exist and that an Derivatives 1,773 30,000 outflow of resources may result as a consequence. However, also given the fact that Fiod’s examination is in its first stages, management is not able to assess reliably if such penalty Total 31,993,228 38,237,550 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.
The ESPP has been executed in December 2017 and is subject to approval of its treatment by Dutch Tax Authorities. Participant have the right to waive their partcipation if approval
is not granted in line with the arrangements as currently set up. 31-12-2017 % 31-12-2016 % Financial statements Other contingent assets By geographical concentration: 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 Russia 3,101,472 9.7 1,918,393 5.0 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. Other CIS countries 9,446,702 29.5 8,011,663 21.0 This option can only be exercised after March 2019. The option is currently valued at nil. EUR utilising countries 3,773,517 11.8 15,438,217 40.4
Other European countries 7,073,39 0 22.1 5,620,256 14.7
Other countries 8,598,147 26.9 7,249,021 19.0
Total 31,993,228 100.0 38,237,550 100.0
2017 2016
Interest income from parent 1,795,935 2,104,250 and related banks
Interest income pledged deposits - 747,67 2 Of which from related parties - 747,67 2
130 131 Notes to the company statement of income Notes to the company statement of income (in euro’s) (in euro’s)
39 2017 2016 42 2017 2016 Net commission income 6,221,304 6,185,964 Staff expenses 20,492,538 24,690,167
Staff expenses comprise:
2017 % 2016 % Wages and salaries 13,630,702 17,0 49,101
Trade finance fees 5,264,898 81.8 5,657,598 88.4 Pension cost 1,730,242 1,650,294
Money transfer fees 93,666 1.5 118,013 1.8 Other social cost 1,133,730 1,297,330
Other fees 1,075,797 16.7 621,577 9.7 Other staff cost 3,9 97,8 6 4 4,693,442
Commission income 6,434,361 100.0 6,397,188 100.0 Total 20,492,538 24,690,167
Commission expense 213,057 211,224 At 31 December 2017, the total number of employees expressed in full-time equivalents Total 6,221,304 6,185,964 was 127 (2016: 131).
43 2017 2016 40 2017 2016 General and administrative 15,294,967 15,997,989 Result on financial transactions 15,618,419 1,170,438 expense Financial statements Result on financial transactions consist of: General and administrative expense comprise:
Other foreign exchange results -114,133 -539,174 Housing 2,550,673 1,241,187
Sale of interest-bearing securities 402,310 5,042,848 ICT / communication 2,554,679 6,671,686
Sale of non-core loans and advances 15,729,282 -4,063,031 Credit Insurance 2,534,913 1,256,050
Result on derivatives -41,401 158,256 Public relations 224,910 161,240
Foreign exchange results on client Professional services 4,676,702 4,892,135 -357,639 571,539 transactions Other cost 2,753,090 1,775,691 Total 15,618,419 1,170,438 Total 15,294,967 15,997,989 The sale of loans and advances includes loans sold to related parties.
The other cost include € 1,103,174 (2016: € 695,511) relating to market information.
41 2017 2016 Other income 20,492,538 24,690,167
Other income mainly consists of recoverable VAT.
132 133 Notes to the company statement of income Notes to the company statement of income (in euro’s) (in euro’s)
44 2017 2016 46 2017 2016 Depreciation and impairments 2.689.461 5.993.061 Income tax 422 3,569,628 of intangible assets and property and equipment The statutory applicable corporate tax rate for 2017 in the Netherlands is 25% (2016: 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 2017 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 2017 and 2016 no deferred tax assets Intangible assets 2,055,369 2,873,887 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 89,527 6 47,9 93 Therefore the tax impact on the profits for the financial year is set at nil, resulting in a negative amount of € 2.4 million in the line Non recognised future tax assets. Impairment relating to intangile assets 417,152 1,897,273 At year-end 2017 an amount of € 275 million (2016: € 287 million) of losses available for carry forward have not been included in the measurement of deferred tax assets. Impairment on property and equipment 127,413 573,908 At year-end 2017 ATB’s balance sheet contained an amount of € 6,055,313 as current tax receivable. This amount has been offset with the amount of tax paid in 2013 (carry back). Total 2,689,461 5,993,061 For 2017 this resulted in an overall effective tax rate of 0.0% (2016: negative 5.0%).
The impairment charge on intangible assets consists of an additional depreciation on The differences between the statutory applicable corporate tax rate and effective tax banking software that is no longer in use or on implementation cost which exceed the rate can be explained as follows: recoverable amounts.
Operating result before tax 9,297,965 -42,659,339
Income tax 45 2017 2016
Theoretical tax charge at the statutory 2,324,491 -10,664,835 Financial statements Impairments of loans and -8,207,394 21,484,572 rate of 25% advances to customers and shares Write off of withholding tax 422 3,569,628 Non recognised future tax assets -2,324,491 10,664,835
Release relating to loans -15,064,764 -2,217,597 Total 422 3,569,628
Addition relating to loans 6,276,008 24,860,284
Release relating to bonds - -1,054,000
Addition relating to shares 5 47,371 -
Release related to shares - -104,115
Other impairments 33,991 -
Total -8,207,394 21,484,572
The addition regarding loans in 2017 relates to 3 clients (2016: 15).
134 135 Subsequent events
In October 2017, the Management Board To further improve the capital position of decided to sell the assets and shares the bank, a number of legacy loan exposures of ATB Leasing LLC and agreed to a fixed have been sold during the first three months price offered by the buyer, based on a after year end 2017 for a total sale amount of net equity value of € 14.5 million as at € 10 million. The carrying value at year-end 30 September 2017. 2017 amounted to € 5 million. As these sale On 26 February 2018 ATB legally transferred transactions were legally completed after the shares of its subsidiary ATB leasing LLC. year-end 2017, the proceedings are fully The final purchase price of this transaction recognized in 2018. amounts to approximately € 41 million which is covering (i) the repayments of all out- standing debt from ATB Leasing to ATB and (ii) the net equity value of ATB Leasing LLC at actual transfer date of shares. The net loss of this sale transaction realised at legal Other transfer date in February 2018 amounts to approximately € 1.2 million. The net equity value of ATB Leasing increased to an amount of € 15.9 million at year-end of 2017. Information
We refer to the Other information for the statutory regulation on profit and distributions. It is proposed to allocate the net profit of € 11,660,605 to Retained earnings.
Amsterdam, 31 May 2018
Managing Board: Supervisory Board:
C. Antoniou, Chief Executive Officer and Chairman R.V. Emerson, Chairman 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
136 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 2017 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 € 85,000, which are Our opinion identified during the audit, would be reported to them, as well as smaller misstatements We have audited the financial statements 2017 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 2017, and of its result subsidiary in Moscow, Russia. The financial information of this entity is included in the 2017 for 2017 in accordance with Part 9 of Book 2 of the Dutch Civil Code. financial statements of Amsterdam Trade Bank N.V.
The financial statements comprise: We are responsible for directing, supervising and performing the group audit. In this • The consolidated and company statement of financial position as at 31 December 2017 respect we have determined the nature and extent of the audit procedures to be carried • The consolidated and company income statement for 2017 out. We have performed full scope audit procedures on the financial information of • The notes comprising a summary of the accounting policies and other explanatory Amsterdam Trade Bank N.V. and the Russian subsidiary ATB Leasing. We instructed the
information work of the Russian EY component auditor to perform detailed audit procedures to obtain Other information sufficient coverage for financial statement line items from a consolidated financial statement Basis for our opinion perspective. We executed a program of regular communication that has been designed to We conducted our audit in accordance with Dutch law, including the Dutch Standards ensure that the audit progress and findings were discussed between us and the Russian audit on Auditing. Our responsibilities under those standards are further described in the team. In addition the group engagement team has visited the Russian component team. “Our responsibilities for the audit of the financial statements” section of our report. By performing the procedures mentioned above at Amsterdam Trade Bank N.V. and the We are independent of Amsterdam Trade Bank N.V in accordance with the EU Regulation Russian subsidiary, together with additional procedures at group level, we have been able on specific requirements regarding statutory audit of public-interest entities, the Wet to obtain sufficient and appropriate audit evidence about the group’s financial information toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake to provide an opinion about the consolidated financial statements. de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant Our key audit matters independence regulations in the Netherlands. Furthermore we have complied with the Key audit matters are those matters that, in our professional judgment, were of most Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics). significance in our audit of the financial statements. We have communicated the key audit matters to the supervisory board. The key audit matters are not a comprehensive reflection We believe the audit evidence we have obtained is sufficient and appropriate to provide a of all matters discussed. basis for our opinion. These matters were addressed in the context of our audit of the financial statements as Materiality a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Materiality € 1.9 million (2016: € 1.4 million) Compared to the audit of the financial statements 2016 of Amsterdam Trade Bank N.V. the Benchmark applied 1% of equity total (rounded) key audit matter ‘’Reliability and continuity of the IT environment’’ is added for the audit of Explanation As this and last year’s operational result were negative, we deem the financial statements 2017. equity to be the more appropriate measurement basis.
138 139 Key obser- Key obser- Risk Our audit approach Risk Our audit approach vations vations Laws and regulations in relation to Measurement of loan portfolio, clients and transactions, note 16 note 3 to the financial statements to the financial statements The portfolio of loans and advances We have gained an understanding of Based on our Amsterdam Trade Bank N.V. has Our audit procedures included the We concur to customers of Amsterdam Trade the processes at Amsterdam Trade procedures to comply with applicable laws evaluation of the estimation process with man- Bank N.V. represents a significant Bank N.V. for loan origination and performed and regulations in relation to at Amsterdam Trade Bank N.V. for agement’s part of the total assets (50%). The credit risk management and the we consider client acceptance and payment identification and measurement conclusion loans are measured at amortized estimation process of determining the loan loss transactions, as well as sanctions of potential obligations arising and find the cost less provision for loan losses, provisions for loan losses. We tested provisioning applied by the EU against businesses from legal matters and other disclosures amounting to a net balance of € 611 the operating effectiveness of the on loans and and clients from Russia. Breaches of contingencies. We considered in note 16 in million per 31 December 2017 and key controls within these processes. advances to these laws and regulations can lead whether obligations exist, the the financial disclosed in note 3 of the financial customers to to fines, penalties, litigation and appropriateness of provisioning and statements statements. On a risk basis we selected individual be reason- restrictions on future business and is disclosure based on the facts and to be rea- loans and performed detailed credit able. therefore a key audit matter for us. circumstances available. sonable. The appropriateness of loan file reviews and challenged the loss provisions is a key area of internal assessment of impairment We find the As disclosed in note 16, Amsterdam In order to assess the facts and judgment for management. The identification and measurement. In disclosures Trade Bank N.V. is subject of circumstances with respect to the identification of impairment addition we assessed the assumptions on loans and criminal investigations by Dutch specific investigation, with help of and the determination of the underlying the impairment advances prosecutor regarding our legal specialist, we inspected the recoverable amount are an identification and quantification, to and loan various requirements related to the correspondence from the prosecutor inherently uncertain process including forecasts of future cash impairment client onboarding and anti-money and external legal counsel. We involving various assumptions and flows, valuation of underlying allowances laundering. It is not yet known also obtained and inspected the factors including the financial collateral and estimates of recovery in line with which specific consequences the representation made by the external condition of the counterparty, on default. the require- investigation may have. Possible legal counsel and inquired with senior expected future cash flows, For the collective loan loss provisions, ments under measures may include a penalty management of Amsterdam Trade the value of collateral or other we considered the consistency and D utch G A A P. payment or a fine. Bank N.V. Furthermore, we assessed securities and the assessment of appropriateness of the methodology the adequacy of the disclosure objective evidence for impairment. and assumptions used and tested the Management at this stage is not regarding the investigations as As the use of assumptions could accuracy of the calculations. able to assess reliably the possible included in Note 16. produce significantly different timing, scope or amounts of any estimates of loan loss provisions, the Finally, we evaluated the fines, penalties and/or other measurement of the loan portfolio is appropriateness of the disclosure outcome. Therefore management a key audit matter. related to the loan loss provision as Other information concluded that as per 31 December included in note 3 of the financial 2017 no provision is accounted for. statements, to assess compliance with the disclosure requirements, under Dutch GAAP. Going concern assumption, note C.1.2.1 to the financial statements Reliability and continuity of the IT environment, note D.7 to the The availability of sufficient capital For our audit we evaluated We noted financial statements and liquidity and the testing of management’s assessment for going that the whether the Company will be able concern, assumptions, calculations main issues, to continue meeting its obligations for the present capital and liquidity analysis, A proper IT infrastructure ensures We tested the IT general controls For the audit under the requirements of the Dutch ratio and data used by the Company, elabora- the reliability and continuity of related to logical access and change of the finan- Central Bank are important for the with regard to the evaluation of tions and Amsterdam Trade Bank’s business management and application controls cial state- going concern assumption that is multiple scenario’s. This included assumptions processes and financial reporting. as embedded in the automated data ments we underlying the preparation of the examining of subsequent events, in respect The bank continuously makes processing systems, to the extent find the reli- financial statements, and as such comparing actuals after 31 December of the going investments to further improve the necessary within the scope of the ability and are significant aspects of our audit. 2017 with the budget and, with concern IT environment and IT systems. audit of the financial statements. continuity of the assistance of our corporate basis of As disclosed in note D.7 important In multiple areas we performed the auto- Solvency on the basis of prudential finance specialists, challenging accounting outsourcing and system upgrade additional substantive procedures on mated data standards as disclosed in the the plausibility of the forecasted have been programs have been initiated in access management for the related processing financial statements, is relevant assumptions on expected results. properly 2017. systems. systems to for the assessment of the financial We have specifically devoted disclosed in be reason- position of Amsterdam Trade Bank attention to the solvency and notes C1.2.1, The role of external reports, such We also assessed the impact of the able. N.V. In note C1.2.1 on going concern, liquidity requirements set by D.6 and D.8 as financial reporting and regulatory changes to the IT infrastructure management explained that with the Dutch Central Bank towards of the finan- reporting, and the increased during the year resulting from the support of the shareholders, the Amsterdam Trade Bank N.V. and that cial state- granularity of financial and non- the outsourcing and upgrading capital was strengthened in 2017. the Company complies with these ments. financial data are important to activities and performed incremental As per 31 December 2017 the core requirements as per 31 December stakeholders, which require high substantive procedures where tier 1 ratio was above the minimum 2017. quality data and an adequate IT necessary. requirements of the Dutch Central environment. We therefore consider Bank. this as a key audit matter.
140 141 Report on other information included in the annual report As part of the preparation of the financial statements, management is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting In addition to the financial statements and our auditor’s report thereon, the annual report framework mentioned, management should prepare the financial statements using the going contains other information that consists of: concern basis of accounting unless management either intends to liquidate the company or • The Report of the Management Board to cease operations, or has no realistic alternative but to do so. Management should disclose • Other information pursuant to Part 9 of Book 2 of the Dutch Civil Code events and circumstances that may cast significant doubt on the company’s ability to continue Based on the following procedures performed, we conclude that the other information: as a going concern in the financial statements. • Is consistent with the financial statements and does not contain material misstatements • Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code The supervisory board is responsible for overseeing the company’s financial reporting process.
We have read the other information. Based on our knowledge and understanding obtained Our responsibilities for the audit of the financial statements through our audit of the financial statements or otherwise, we have considered whether Our objective is to plan and perform the audit assignment in a manner that allows us to obtain the other information contains material misstatements. By performing these procedures, sufficient and appropriate audit evidence for our opinion. we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less than the scope of those Our audit has been performed with a high, but not absolute, level of assurance, which means
performed in our audit of the financial statements. we may not have detected all material errors and fraud. Other information
Management is responsible for the preparation of the other information, including the Report Misstatements can arise from fraud or error and are considered material if, individually or in of the Management Board in accordance with Part 9 of Book 2 of the Dutch Civil Code and the aggregate, they could reasonably be expected to influence the economic decisions of users other information pursuant to Part 9 of Book 2 of the Dutch Civil Code. taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on Report on other legal and regulatory requirements our opinion. Engagement We were engaged by the supervisory board as auditor of Amsterdam Trade Bank N.V., as of We have exercised professional judgment and have maintained professional skepticism the audit for the year 2016 and have operated as statutory auditor since that date. throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included e.g.: No prohibited non-audit services • Identifying and assessing the risks of material misstatement of the financial statements, We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU whether due to fraud or error, designing and performing audit procedures responsive to Regulation on specific requirements regarding statutory audit of public-interest entities. those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, Description of responsibilities for the financial intentional omissions, misrepresentations, or the override of internal control statements • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing Responsibilities of management and the supervisory board for the an opinion on the effectiveness of the company’s internal control financial statements • Evaluating the appropriateness of accounting policies used and the reasonableness of Management is responsible for the preparation and fair presentation of the financial accounting estimates and related disclosures made by management statements in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, • Concluding on the appropriateness of management’s use of the going concern basis of management is responsible for such internal control as management determines is accounting, and based on the audit evidence obtained, whether a material uncertainty necessary to enable the preparation of the financial statements that are free from material exists related to events or conditions that may cast significant doubt on the company’s misstatement, whether due to fraud or error. ability to continue as a going concern. If we conclude that a material uncertainty exists, we
142 143 Appropriation of result
are required to draw attention in our auditor’s report to the related disclosures in Statutory regulation on Profit • The general meeting of shareholders may the financial statements or, if such disclosures are inadequate, to modify our opinion. and distributions resolve to make cash of stock distribu- Our conclusions are based on the audit evidence obtained up to the date of our auditor’s Article 31 of the Articles of association tions on account of the reserves. The report. However, future events or conditions may cause a company to cease to continue describes the statutory regulation on Profit general meeting of shareholders shall as a going concern and distribution. refrain from doing this without consulting • Evaluating the overall presentation, structure and content of the financial statements, the management board and supervisory including the disclosures Article 31: board, which may also make a proposal • Evaluating whether the financial statements represent the underlying transactions and • The profits shall be at free disposal to that extent. events in a manner that achieves fair presentation of the general meeting of shareholders. • The management board shall determine The management board shall, subject to the date on which (interim) distributions Because we are ultimately responsible for the opinion, we are also responsible for directing, the approval of the supervisory board, shall be payable, which date shall be no supervising and performing the group audit. In this respect we have determined the nature and make a proposal to distribute (a part later than the fifth business day following extent of the audit procedures to be carried out for group entities. Decisive were the size and/ of) such profits or, as the case may be, the day of the resolution to make the or the risk profile of the group entities or operations. On this basis, we selected group entities allocate (a part of) these profits to the distribution. A claim of a shareholder for for which an audit or review had to be carried out on the complete set of financial information reserves. The proposal to distribute payment or specific items. dividend shall be discussed as a separate
item on the agenda of the general It is proposed to allocate the net profit of Other information We communicate with the supervisory board regarding, among other matters, the planned meeting of shareholders. € 11,660,605 to Retained earnings. scope and timing of the audit and significant audit findings, including any significant findings in • The management board may, subject internal control that we identify during our audit. In this respect we also submit an additional to the approval of the supervisory report to the audit committee in accordance with Article 11 of the EU Regulation on specific board and provided that the profits as requirements regarding statutory audit of public-interest entities. The information included in evidenced by an interim balance sheet this additional report is consistent with our audit opinion in this auditor’s report. prepared in accordance with Section 2:105 paragraph 4 of the Dutch Civil Code We provide the supervisory board with a statement that we have complied with relevant permit this, resolve to make interim-dis- ethical requirements regarding independence, and to communicate with them all relationships tributions on the shares on one or more and other matters that may reasonably be thought to bear on our independence, and where occasions during the financial year prior applicable, related safeguards. to the adoption of the annual accounts by the general meeting of shareholders. From the matters communicated with the supervisory board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
Amsterdam, 31 May 2018
Ernst & Young Accountants LLP
Signed by A.B. Roeders 144 145 Glossary
Amortised cost CET1 capital Impairments Net Stable Funding Ratio (NSFR) The amount for which financial assets or Common Equity Tier 1 capital also referred Amount charged to the statement of income The NSFR represents the available stable liabilities are initially recognised minus to as the core capital. ATB’s CET1 capital for possible losses on doubtful debts or uncol- funding sources related to the required redemptions, plus or minus the accumulated represents share capital, share premium lectible loans and advances or because an amount of stable funding. depreciation/amortization using the effective and other reserves, adjusted for certain impairment test has shown that the asset has interest rate method for the difference deductions set by the regulatory authorities, to be valued lower, because the fair value is Total capital between the original amount and the amount such as goodwill. lower than the carrying amount or because The sum of total CET1 capital and total on maturity date, and minus impairments. the fair value of investments and associates Tier II capital. CET1 capital ratio is lower than cost. Basel III The CET1 capital of ATB as a percentage of Related party The framework drawn up by the Basel risk weighted assets. Incurred But Not Reported In the normal course of business, ATB enters Committee on Banking Supervision which (IBNR) into various transactions with related parties. provides a stricter definition of capital and Credit derivatives (credit default swaps) Impairments which have occurred at Parties are considered to be related if one introduces several new ratios and buffers to In this type of swaps, variable interest reporting date but of which ATB is not yet party has the ability to control or exercise be complied with by banks. The period for payments, linked to Euribor, are exchanged aware due to an information time lag. significant influence over the other party in gradual transition from Basel II to Basel III is with credit guarantees vis-a-vis a third making financial or operating decisions. five years and started in January 2014. party. The counterparty is required to pay Internal Capital Adequacy Related parties of ATB include, amongst if the third party cannot meet its payment Assessment Process (ICAAP) others, its subsidiaries, associated companies
BIS total capital ratio obligations. The specific events which are Strategies and procedures designed for ATB’s within Alfa Group, key management Other information The percentage of a bank’s capital adequacy followed by payments are recorded in the continuous assessment whether the amount, personnel and shareholders. Transactions calculated by dividing qualifying capital by contract. composition and distribution of equity still between related parties mainly consist of the risk-weighted assets as defined by the reconcile with the size and nature of its forex transactions and financing activities. Bank for International Settlements (BIS). Derivative current and potential future risks. There are no significant provisions for A financial instrument whose value has been doubtful debts or individually significant bad CEE (Central and Eastern Europe) derived from the value of another financial Irrevocable commitments debt expenses recognised on outstanding CEE is a generic term for countries in Central instrument, an index or other variables. All obligations that could give rise to the balances with related parties. Europe, Southeast Europe and Eastern ATB holds both derivatives whose size (face granting of loans. Europe, usually meaning former communist value), conditions and price are determined Related parties: Parent and related bank states in Europe. It is in use after the collapse between ATB and the counterparties Leverage Ratio Basel III (LR) This relates to ATB’s direct majority of the Iron Curtain in 1989–90. (OTC derivatives), as well as standardized The LR represents the ratio between total shareholder Alfa-Bank Russia and its related derivatives negotiable on organised markets. assets plus contingent items and the Basel III banks within the Alfa Banking Group. CIS (Commonwealth of CET1 capital. Independent States) Fair value Related parties: Other group companies An alliance made up of states that had been The fair value of a financial instrument Liquidity Coverage Ratio (LCR) Other group companies included all group Soviet Socialist Republics in the Soviet Union is the amount for which an asset could The LCR represents the ratio between companies (including other minority share- prior to its dissolution in December 1991. be exchanged or a liability can be settled high quality liquid assets and the balance holders), exclusive of Parent and related between knowledgeable parties that are of cash outflows and cash inflows over the banks, within the Alfa-Group. Contingent liabilities willing to trade and are independent from next 30 days. All commitments arising from transactions each other. Risk-weighted assets (RWA) for which ATB has given a guarantee to Management Board (MB) The assets of a financial institution after third parties. Gross Domestic Product (GDP) CEO - Chief Executive Officer being adjusted by a weighting factor, as The market value of all officially recognised CFO - Chief Financial Officer determined by the regulatory authorities, final goods and services produced within a CRO - Chief Risk Officer that reflects the relative risk attached to the country in a year, or other given period.
146 147 relevant assets. Risk weighted assets are used to calculate the minimum amount of capital that has to be held.
Solvency ATB’s buffer capital expressed as a percentage of risk weighted assets.
Standardised Approach (SA) A method used under Basel II to measure a bank’s operational, market and credit risk. This method is based on the approach, in which the risk weighting of an item is prescribed by the regulatory authorities.
Total capital The sum of total CET1 capital and total Tier II capital.
Total Tier II capital Also referred to as supplementary or secondary capital. The total Tier II capital comprise the revaluation reserves and certain subordinated liabilities, adjusted for certain deductions set by the regulatory authorities, if applicable.
Total Capital Ratio The percentage of a bank’s capital adequacy, calculated by dividing qualifying capital by the risk-weighted assets as defined by the Bank for International Settlements (BIS).
Value-at-Risk (VaR) Statistical analysis of historical market developments and volatility in order to estimate the probability of a loss on a portfolio exceeding a certain amount.
148 149 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]