ABOUT BINCKBANK
ANNUAL REPORT 2016
ABOUT BINCKBANK
ABOUT BINCKBANK
ANNUAL REPORT 2016 This document is a translation of the Dutch original and is provided as a courtesy only. In the event of any disparity, the Dutch version shall prevail. No rights may be derived from the translated document. ABOUT BINCKBANK
TABLE OF CONTENTS
ABOUT BINCKBANK 8 BinckBank profile 9 BinckBank at a glance 10 Key figures 11 Information for shareholders 12 Financial calendar for 2017 15 Key events in 2016 16
REPORT OF THE EXECUTIVE BOARD 18 Chairman’s message 19 BinckBank’s vision, mission and strategy 21 The New Binck 24 2016 targets and medium-term targets for 2018 27 Overview earnings model 28 Strengths, weaknesses, opportunities, and threats (SWOT analysis) 30 2016 Financial results 31 Developments in the countries 34 Human Resources 37 Corporate social responsibility (CSR) 39 Tax policy 42 Reserve and dividend policy 46 Outlook for 2017 47
DEVELOPMENTS IN LEGISLATION AND REGULATIONS 48
RISK MANAGEMENT 56 Risk management 57 Capital management 71 Liquidity management 79
MANAGEMENT STATEMENT 82 In-Control Statement 83
CORPORATE GOVERNANCE 84 Introduction 85 Future-oriented banking 86 Dutch Corporate Governance Code 88 Decree implementing Article 10 of the Takeover Directive 93
REPORT OF THE SUPERVISORY BOARD 94 Message from the chairman of the supervisory board 95 7
Duties of the supervisory board 96 // Composition of the supervisory board 96 Meetings of the supervisory board and subcommittees in 2016 97 Summary of the 2016 BinckBank remuneration report 102
PERSONAL DETAILS OF THE BOARD MEMBERS 107
FINANCIAL STATEMENTS 2016 111 Annual Report 2016 ABOUT BINCKBANK ABOUT BINCKBANK
PROFILE BINCKBANK
BinckBank N.V. BinckBank is an online bank for investors and savers. It is listed on Euronext Amsterdam and has been included in the Amsterdam Smallcap Index (AScX) since 2016. BinckBank provides services for private customers, companies/legal entities, and independent asset managers. BinckBank offers Trading, Investing, and Saving services, using a European IT base platform. BinckBank has offices in the Netherlands, Belgium, France, Italy, and Spain, and offers its services under the brands Binck and Alex.
BinckBank enjoys a leading brokerage position the Netherlands and Belgium and is ranked third in France. An important feature of the online brokerage service is a stable platform that gives users access to important financial markets, professional trading facilities, and analysis tools.
The online platform Binck Fundcoach makes it easy for people to invest in investment funds and ETFs by providing news, opinions, columns, and detailed fund information. Alex Vermogensbeheer and Binck Laten Beleggen are discretionary asset management products that customers can use to authorise BinckBank to invest their money.
BinckBank has developed its savings brokerage service Binck Sparen for savers. With this product, BinckBank gives its customers easy access to the international savings market with an ample choice of savings products covered by the European Deposit Guarantee Scheme.
BINCKBANK IN A EUROPEAN CONTEXT 9 // Annual Report 2016 ABOUT BINCKBANK
BINCKBANK AT A GLANCE
BinckBank is an online bank for investors and savers.
Operating income y country Operational income y type of income FTE y country (in € million) (in € million)
26 4 Net interest income 114 5 Netherlands 541 Netherlands 79 2 Net commission income Total 11 1 Belgium Total - transaction related Total 40 Belgium 8 1 France 36 France 147 7 147 7 29 8 Net commission income 642 3 1 Italy - non transaction related 21 Italy 10 9 Group 4 Spain 12 3 Other income Num erNum erNum er of oftransactions transactions of transactions Num erNum erNum er of ofaccounts accounts of accounts CustomerCustomerCustomer satisfaction satisfaction satisfaction 10 10 10 .3 .3 .3 620620 620 10 10 10 Num er8.6 Num er8.6 Num er8.6 of oftransactions transactions of transactions Num erNum erNum er of ofaccounts accounts of accounts615615 615 CustomerCustomerCustomer satisfaction satisfaction satisfaction 7.7 7.7 7.7 108 108 108 .3 .3 .3 620620 620 108 108 1087,1 7,1 7,1 7,3 7,3 7,3 7,3 7,3 7,3 8.6 8.6 8.6 610610 610 607607 607 615615 615 7.7 7.7 7.7 86 86 86 86 86 867,1 7,1 7,1 7,3 7,3 7,3 7,3 7,3 7,3 600610600610 600610 607607 607 Num erNum erNum er of transactionsof transactions of transactions 5 6Num er5 6Num er5 6Num er of accountsof accounts of accounts CustomerCustomerCustomer satisfaction satisfaction satisfaction 64 64 64 64 64 64 x million x million x million 10 10 10 .3 .3 .3 x thousand 6205 0600x thousand 5 0600620x thousand 5 06206005 65 6 5 6 10 10 10 42 42 428.6 8.6 8.6 615 615 615 42 42 42 x million x million x million
7.7 7.7 7.7 x thousand x thousand x thousand 8 8 8 5 05 0 5 0 8 8 87,1 7,1 7,1 7,3 7,3 7,3 7,3 7,3 7,3 20 20 20 610580610580 610580 607 607 607 20 20 20 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 6 6 6 6 6 6 0 0 0 600580600580 600580 0 0 0 20145 620145 620145 6 201520152015 201620162016 201420142014 201520152015 201620162016 4 4 4201420142014 201520152015 201620162016 4 4 4 x million x million x million x thousand 5 0x thousand 5 0x thousand 5 0 2 2 2 2 2 2
0 0 0 580 580 580 0 0 0 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016
AdjustedAdjustedAdjusted net net result net result result AdjustedAdjustedAdjusted earnings earnings earnings per per share per share share Cost incomeCost incomeCost income ratio ratio ratio 60 60 6057.557.5AdjustedAdjusted57.5Adjusted net55.5 net55.5 result net 55.5result result 1,0 1,0 1,0AdjustedAdjustedAdjusted earnings earnings earnings per per share per share share 100 100 100 Cost incomeCost incomeCost income ratio ratio ratio 0.820.82 0.82 57.557.5 57.5 0.7 0.7 0.7 7 7 7 60 60 60 55.555.5 55.5 1,00,8 1,00,8 1,00,8 100 80 100 80 100 80 72 72 72 64 64 64 40 40 40 0.820.82 0.82 0.7 0.7 0.7 7 7 7 30.530.5 30.5 0,80,6 0,80,6 0,80,6 80 60 80 60 80 60 72 72 72 0.450.45 0.45 64 64 64 40 40 40 AdjustedAdjustedAdjusted net net result net result result in € in € in € AdjustedAdjustedAdjusted earnings earnings earnings per per share per share share Cost incomeCost incomeCost income ratio ratio ratio 30.530.5 30.5 0,60,4 0,60,4 0,60,4 60 40 60 40 60 40 20 20 20 0.450.45 0.45 in € million 60in € million 60in € million 6057.557.5 57.5 55.555.5 55.5 in € 1,0in € 1,0in € 1,0 100 100 100 0,40,2 0,40,2 0,40,2 40 20 40 20 40 20 20 20 20 0.820.82 0.82 0.7 0.7 0.7 7 7 7 in € million in € million in € million 0,8 0,8 0,8 80 80 80 0 0 0 0,20,0 0,20,0 0,20,0 20 0 20 0 20 0 72 72 72 40 40 40201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 201420142014 201564 201564 201564 201620162016 30.530.5 30.5 0,6 0,6 0,6 60 60 60 0 0 0 0,0 0,0 0,0 0.450.45 0.45 0 0 0
201420142014 201520152015 201620162016 in € in € in € 0,4 0,4 0,4201420142014 201520152015 201620162016 40 40 40 201420142014 201520152015 201620162016 20 20 20 in € million in € million in € million 0,2 0,2 0,2 20 20 20
0 0 0 0,0 0,0 0,0 0 0 0 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016
10 AssetsAssetsAssets under under under administration administration administration AssetsAssetsAssets under under under management management management CapitalCapitalCapital ratio ratio ratio // 50 50 50 25 25 Assets25 AssetsAssets under under under administration administration administration22.822.8 22.8 2,5 2,5 2,5AssetsAssetsAssets under under under management management management CapitalCapitalCapital ratio ratio ratio 20.620.6 20.6 1. 1. 1. 40.2 40.2 40.2 2520 2520 2520 18.518.5 18.5 2,52,0 2,52,0 2,52,0 50 40 50 40 50 40 37.1 37.1 37.1 22.822.8 22.8 1.7 1.7 1.7 31. 31. 31. 20.620.6 20.6 1. 1. 1. 40.2 40.2 40.2 2015 2015 2015 18.518.5 18.5 2,01,5 2,01,5 2,01,5 1.3 1.3 1.3 40 30 40 30 40 30 37.1 37.1 37.1 1.7 1.7 1.7 31. 31. 31. AssetsAssetsAssets under under underadministration administration administration AssetsAssetsAssets under under undermanagement management management 20 20 20 CapitalCapitalCapital ratio ratio ratio 1510 1510 1510 1,51,0 1,51,0 1,51,0 1.3 1.3 1.3 30 30 30 in € billion 25 in € billion 25 in € billion 25 in € billion 2,5in € billion 2,5in € billion 2,5 50 50 50 105 105 105 22.822.8 22.8 1,00,5 1,00,5 1,00,5 20 10 20 10 20 10 20.620.6 20.6 1. 1. 1. 40.2 40.2 40.2 in € billion 20 in € billion 20 in € billion 2018.518.5 18.5 in € billion 2,0in € billion 2,0in € billion 2,0 40 40 40 37.1 37.1 37.1 50 50 50 0,50,0 0,50,0 0,50,0 1.7 1.7 1.7 10 0 10 0 10 0 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 201420142014 201520152015 31. 2016201631. 31. 2016 15 15 15 1,5 1,5 1,5 1.3 1.3 1.3 30 30 30
Annual Report 2016 0 0 0 0,0 0,0 0,0 0 0 0 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 10 10 10 1,0 1,0 1,0 20 20 20 in € billion in € billion in € billion in € billion in € billion in € billion 5 5 5 0,5 0,5 0,5 10 10 10
0 0 0 0,0 0,0 0,0 0 0 0 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 201420142014 201520152015 201620162016 ABOUT BINCKBANK
KEY FIGURES for the period ending December 31, consolidated
(amounts in € 000’s) 2016 2015 2014 2013 2012
CUSTOMER FIGURES
Number of customer accounts 614,973 606,514 595,506 551,970 518,771
Number of transactions 7,726,110 9,293,591 8,617,490 8,164,978 7,769,681
Assets under administration 22,793,380 20,575,397 18,538,716 16,124,263 13,383,874
Assets under management 1,279,980 1,697,871 1,952,193 2,147,591 1,012,617
COMPANY PROFIT AND LOSS ACCOUNT
Net interest income 26,325 25,724 28,497 27,686 32,024
Net fee and commission income 109,076 131,461 125,951 137,936 113,663
Other income from operational activities 12,324 12,993 11,285 11,088 12,025
Total income from operating activities 147,725 170,178 165,733 176,710 157,712
Total adjusted operating expenses* 116,634 108,863 119,870 112,863 94,231
Total operating expenses 31,091 61,315 45,863 63,847 63,481
Adjusted tax* 2,273 (3,961) (1,148) (6,559) (5,588)
Results of associates and joint ventures (2,821) (730) 12,674 (2,393) (3,580)
Net result 30,543 56,624 57,389 54,895 54,313
Result attributable to non-controlling interests (87) (1,076) 87 322 720
Result attributable to shareholders BinckBank 30,456 55,548 57,476 55,217 55,033
Adjusted net earnings per share (in €) 0.45 0.79 0.82 0.78 0.76
Cost/income ratio excluding IFRS amortisation 79% 64% 72% 64% 60%
CAPITAL ADEQUACY
Total equity 245,542 253,582 225,898 200,693 160,342
Capital ratio 31.9% 40.2% 37.1% 36.2% 31.1% 11
Leverage ratio 6.7% 7.1% 6.7% - - //
* Compared to the IFRS results, within the adjusted result, the total operating expenses and taxes are adjusted for IFRS amortisation and tax savings on the difference between fiscal and commercial amortisation of the intangible assets acquired with the acquisition of Alex and goodwill paid. Page 33 of this report includes the reconciliation of the adjusted result to the IFRS result. Annual Report 2016 ABOUT BINCKBANK
INFORMATION FOR THE SHAREHOLDER
BinckBank attaches great importance to maintaining relationships with investors and analysts and is committed to meeting the highest standards of integrity and fair disclosure.
BinckBank considers it essential to maintain a transparent and consistent policy with regard to information. BinckBank actively seeks a dialogue with its shareholders. It communicates openly with investors and others with a financial or other interest in the company in order to keep them as fully and promptly informed as possible with regard to the company’s policy, developments and outlook, so that they can take well-founded investment decisions. All relevant information, such as the annual report, half-yearly reports, quarterly reports, analyst presentations, and background information, is available on the corporate website at www.binck.com.
Share price and total investment return on the BinckBank share in 2016 The BinckBank share is listed on Euronext Amsterdam and since 21 March 2016 has been included in the Amsterdam Smallcap Index (AScX), with an index weighting factor of 5.63% on 31 December 2016.
ISIN code: NL0000335578 Reuters: BINCK.AS Bloomberg: BINCK.NA The average daily number of shares traded in 2016 was 255,546 (2015: 392,355).
The BinckBank share is currently being monitored by five analysts. During the compilation of the financial statements they gave institutional and other investors the following recommendations on the BinckBank share.
ANALYSTS*
COMPANY RECOMMENDATION ANTICIPATED PRICE NAME E-MAIL
ABN Amro Hold € 5.75 Cor Kluis [email protected]
ING Hold € 5.50 Albert Ploegh [email protected]
KBC Buy € 6.00 Matthias de Wit [email protected]
Kepler Reduce € 5.00 Hans Pluijgers [email protected]
Th. Gilissen Hold N/A Jos Versteeg [email protected]
* as of 28 februari 2017
Share ownership 12
// The following shareholders of an interest of 3% or more in BinckBank (position on 31 December 2016): • Old Mutual plc (>5%) • Delta Lloyd Deelnemingenfonds N.V. (>5%) • Boron Investments B.V. (>5%) • Navitas B.V. (>5%) • Fidelity Management & Research L.L.C. (>3%) • Dimensional Fund Advisors LP (>3%)
Annual Report 2016 • Farringdon Capital management (>3%) ABOUT BINCKBANK
The equity positions of the board members of BinckBank at year-end 2016 were as follows: • Vincent Germyns: 57,530 shares • Evert-Jan Kooistra: 88,827 shares • Steven Clausing: 9,076 shares
KEY FIGURES FOR BINCKBANK SHARES*
2016 2015 2014
Adjusted earnings per share € 0.45 € 0.79 € 0.82
Dividend per share** € 0.23 € 0.39 € 0.41
Earnings per share € 0.07 € 0.42 € 0.45
Dividend yield in % (based on year-end closing quote) 4.20% 4.90% 5.80%
Net asset value € 5.59 € 6.16 € 6.20
Year-end share price BinckBank N.V. € 5.50 € 7.95 € 7.05
P/E ratio 12.22 10.06 8.60
* as of 31 December 2016. ** 2016 figures are subject to approval of the General Meeting.
SHARE CAPITAL
2016 2015 2014
Authorised ordinary shares 100,000,000 100,000,000 100,000,000
Issued shares at year-end 71,000,000 71,000,000 71,000,000
Treasury shares held at year-end 5,281,525 719,277 804,674
Number of priority shares 50 50 50
Average number of shares outstanding during the year 67,578,245 70,251,842 70,171,109
Market capitalisation year-end 390,500,000 564,379,000 500,479,000
SHARE PRICE & VOLUMES
2016 2015 2014
Closing price € 5.50 € 7.95 € 7.05
Highest price € 7.90 € 9.33 € 9.66
Lowest price € 4.07 € 6.50 € 6.70
Share turnover 65,675,191 100,442,801 60,590,301 13 //
Daily turnover - high (amount) 2,341,873 2,317,382 3,223,889
Daily turnover - low (amount) 41,015 27,727 29,780
Average daily turnover (amount) 255,546 392,355 237,609 Annual Report 2016 ABOUT BINCKBANK
MOVEMENTB ANDB VOLUMES IN THE BINCKBANK SHARE
Share price BinckBank in € 2,500,000
Publication of Q1 figures Volume share BinckBank 8
2,000,000 7
6 1,500,000 5 e
Publication of 2015 figures m u
4 l o
1,000,000 V Share price 3
2 500,000
1
0 0 6 6 6 6 6 6 6 6 6 6 6 6 1 1 1 1 1 1 1 1 1 1 l r v 1 c 1 g p b n n p J u a e J u Oc t S e A u D e N o 2 A 2 J 31 Dec 15 31 Mar 31 May 2 F
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Prijs aandeel BinckBank in EUR 2.500.000
Hier een tekstje met uitleg Volume aandeel BinckBank 8 over deze piek? 2.000.000 7
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0 0 6 6 6 6 6 6 6 6 6 6 6 6 1 1 1 1 1 1 1 1 1 1 l i t t r v 1 c 1 g p b n n r e u k p e j o u a e u j o j f a m s e d n a m 2 31 dec 15 2 31 2 31 14 //
1,00
0,80 0,82 0,7
0,60 0,46 0,40 Annual Report 2016 0,20
0,00 2014 2015 2016 ABOUT BINCKBANK
FINANCIAL CALENDAR 2017
JAN FEB MAR APR 1 1 2 3 4 5 1 2 3 4 5 1 2 2 3 4 5 6 7 8 6 7 8 9 10 11 12 6 7 8 9 10 11 12 3 4 5 6 7 8 9 9 10 11 12 13 14 15 13 14 15 16 17 18 19 13 14 15 16 17 18 19 10 11 12 13 14 15 16 16 17 18 19 20 21 22 20 21 22 23 24 25 26 20 21 22 23 24 25 26 17 18 19 20 21 22 23 23 24 25 26 27 28 29 27 28 27 28 29 30 31 24 25 26 27 28 29 30 30 31
MAY JUN JUL AUG 1 2 3 4 5 6 7 1 2 3 4 1 2 1 2 3 4 5 6 8 9 10 11 12 13 14 5 6 7 8 9 10 11 3 4 5 6 7 8 9 7 8 9 10 11 12 13 15 16 17 18 19 20 21 12 13 14 15 16 17 18 10 11 12 13 14 15 16 14 15 16 17 18 19 20 22 23 24 25 26 27 28 19 20 21 22 23 24 25 17 18 19 20 21 22 23 21 22 23 24 25 26 27 29 30 31 26 27 28 29 30 24 25 26 27 28 29 30 28 29 30 31 31
SEP OCT NOV DEC 1 2 3 1 1 2 3 4 5 1 2 3 4 5 6 7 8 9 10 2 3 4 5 6 7 8 6 7 8 9 10 11 12 4 5 6 7 8 9 10 11 12 13 14 15 16 17 9 10 11 12 13 14 15 13 14 15 16 17 18 19 11 12 13 14 15 16 17 18 19 20 21 22 23 24 16 17 18 19 20 21 22 20 21 22 23 24 25 26 18 19 20 21 22 23 24 25 26 27 28 29 30 23 24 25 26 27 28 29 27 28 29 30 25 26 27 28 29 30 31 30 31
Trading update for the first quarter of 2017 24 April 2017 General Meeting 24 April 2017 Ex-date dividend 26 April 2017 Record-date dividend 27 April 2017 Payment of dividend 3 May 2017 15
Half-year report 24 July 2017 // Ex-date interim dividend 26 July 2017 Record-date interim dividend 2 July 2017 Payment of interim dividend 31 July 2017 Trading update for the third quarter of 2017 23 October 2017 Annual Report 2016 Annual Report 2016 // 16 Think TotalMarketUCTISETFNeutraal elected productofthemonthbyDFT. BinckBank Italywinsawardfor Best Bank oftheYearinOnlineTrading. on theEuropeanBase Platform. Announcement andstartofthe BinckBank Francemigration. share buy-backprogramme. All countriesarenowunited B UA Completion ofthe A C UN A KEY EVENTS IN 2016 EVENTS KEY ABOUT BINCKBANK ABOUT ANUA label BinckBankFundcoach. All-in-1-investing’ underthe BinckBank launches B UA a partnership withProBeleggen. BinckBank Netherlandsstarts A I best brokerbyIEXNetprofiler. BinckBank Netherlandselected A The AFMimposedafineonBinckBank BinckBank purchasea€340million ThinkETF winsCashCowawardfor mortgage portfoliofromObvion. information incommercialsfor ThinkETF awardedbyFiscalert BinckBank Belgiumlaunches best financialproduct2016 Start pilotforBinckSparen. for unclearandmisleading BinckBank Franceawarded for ThinkEuropeanEquity Les dossiersdel’ pargne. Alex Vermogensbeheer. NO B NO B Binck Latenbeleggen. Label d’excellenceby C B for theretailmarket. C B best ETFprovider. OCTOB U U C B * Basedonacalculation byLiquidMetricsforEuronext mortgages. € 500millioninDutchresidential BinckBank achievestargetof C B saves €4million Introduction EuronextBestofBook NO B Online Shopper. better executionofshareorders. BinckBank Belgiumwins2 C B Certificate Awardforbestonlinebroker. BinckBank ItalyawardedwithItalian NO B a neutral risk. € 100monthlyina mixed fundwith the periodicinvestor,whoinvests Consumentenbond asbestchoicefor BinckBank Fundcoachproclaimedby U * forclientsthrough nd pricefor Think TotalMarketUCTISETFNeutraal elected productofthemonthbyDFT. BinckBank Italywinsawardfor Best Bank oftheYearinOnlineTrading. on theEuropeanBase Platform. Announcement andstartofthe BinckBank Francemigration. share buy-backprogramme. All countriesarenowunited B UA Completion ofthe A C UN A ANUA a partnership withProBeleggen. BinckBank Netherlandsstarts A I label BinckBankFundcoach. All-in-1-investing’ underthe BinckBank launches B UA best brokerbyIEXNetprofiler. BinckBank Netherlandselected A The AFMimposedafineonBinckBank BinckBank purchasea€340million ThinkETF winsCashCowawardfor mortgage portfoliofromObvion. information incommercialsfor ThinkETF awardedbyFiscalert BinckBank Belgiumlaunches best financialproduct2016 Start pilotforBinckSparen. for unclearandmisleading BinckBank Franceawarded for ThinkEuropeanEquity Les dossiersdel’ pargne. Alex Vermogensbeheer. NO B NO B Binck Latenbeleggen. Label d’excellenceby C B for theretailmarket. C B best ETFprovider. OCTOB U U ABOUT BINCKBANK ABOUT C B * Basedonacalculation byLiquidMetricsforEuronext mortgages. € 500millioninDutchresidential BinckBank achievestargetof C B saves €4million Introduction EuronextBestofBook NO B Online Shopper. better executionofshareorders. a neutral risk. € 100monthlyina mixed fundwith the periodicinvestor,whoinvests Consumentenbond asbestchoicefor BinckBank Fundcoachproclaimedby U BinckBank Belgiumwins2 C B Certificate Awardforbestonlinebroker. BinckBank ItalyawardedwithItalian NO B * forclientsthrough nd pricefor
Annual Report 2016 // 17 From left to right: Steven Clausing, Vincent Germyns, and Evert-Jan Kooistra.
REPORT OF THE EXECUTIVE BOARD REPORT OF THE EXECUTIVE BOARD
CHAIRMAN’S MESSAGE
“First of all I would like to thank our customers for their loyalty. During the past year,
we have once again had the pleasure of serving a broad and loyal customer base, and
have also welcomed a large number of new customers to the fold. 2016 was an intensive
year for BinckBank. We made good progress with the strategic transformation that allowed
us to demonstrate our innovative strength, and also focused on the challenging market
conditions we faced. We demonstrated that we have what it takes to learn from the past
and act accordingly, leaving us free to look to the future.”
The start of the 2016 trading year was marked by lower transaction volumes, smaller order sizes and lower average revenues per transaction, which resulted in lower net commission income over the whole of 2016. It was not until the fourth quarter that we saw an improvement in market sentiment. This favourable market sentiment in Q4 translated into a rise in transactions and average revenues per transaction in all countries. The corrected net result for the whole of 2016 was € 0.45 per share (FY15: € 0.79 per share). In keeping with our dividend policy the proposed dividend for 2016 was € 0.23 per share. Taking the paid interim dividend of € 0.04 into account, the final dividend will come to € 0.19 per share.
Throughout 2016 we continued work on all aspects of BinckBank’s strategic transformation (Redesign Binck) and the development of new products and services in the strategic product matrix (9-grid). In the fourth quarter of 2016, for example, we started a pilot with an innovative savings product (Binck Sparen), which is expected to be brought onto the market in the first half of 2017. Also, a new discretionary asset management product (Binck Laten Beleggen) was launched in Belgium at the end of 2016. BinckBank thus took the first steps towards using its ‘navigator’ role to extend its services in the Investing and Saving segments in addition to the current online Trading service. During the year under review, we also made good progress with the further optimisation of the European base platform. Since the migration of the French Retail activities, all Retail activities have been unified on a single platform.
We introduced the Agile Transformation Program, Design Thinking and Atomic Design to bring our approach more in line with the new standards, focusing keenly on our customers. We also won various international customer satisfaction and user-friendliness awards, which serves to underline our strong position. BinckBank is thus demonstrating more than ever before our dual approach, in which we continue to capitalise on our existing base and services whilst maximising our efforts to develop the next game changers. 19 // The legislative developments and changes in 2016 once again had a major impact on our operations and the use of our resources. We are faced with the monumental challenge of deciding between devoting our resources to the implementation of new statutory regulations, strengthening our IT platform, and developing new products and services. For 2017 there are some other major projects in the pipeline, such as the implementation of MiFID II, which is due to come into effect at the beginning of 2018. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
We regret that BinckBank was given two fines by the Netherlands Authority for the Financial Markets (AFM) in 2016. Both pertained to matters dating back over two years ago. In 2015 we had already introduced measures to prevent their recurrence, and in 2016 we continued to work hard on making our structure even more robust. In January 2017 we reached agreement with the VEB (Association of Stockholders) and the Vermogensmonitor on the settlement of existing complaints for members and customers.
BinckBank began investing in Dutch residential mortgages at the beginning of 2016. It acts as the financer in a collective structure in which an AFM-licensed service provider is responsible for the marketing, sales, administration and the duty of care. The investments in the mortgage portfolio are based on the goal of generating more stable revenues on the interest-bearing assets. In July 2016 we also took over a € 340 million mortgage portfolio from Obvion. Our aim for the whole of 2016 was to invest € 500 million in Dutch residential mortgage loans, and that aim was met.
At the beginning of 2016 we assessed the adequacy of our capital and liquidity position and economic outlook against CRR/CRD and the directives of the European Central Bank (ECB). This assessment resulted in a share buy-back programme in which BinckBank purchased shares worth € 25 million between 19 February and 23 September 2016.
I would like to thank our shareholders for the confidence they have placed in us. We are very much aware that the develop- ments in BinckBank’s share price put their patience to the test in the past year. We would however like to reiterate that a strategic transition takes time and that we are focusing on the long term. We have every confidence that BinckBank’s new direction will ultimately create value. I would like to close by expressing my gratitude to our employees for all their efforts in the past year. We are confident that BinckBank has a successful future to look forward to and will do our utmost to serve the interests of our stakeholders to the best of our ability.
Amsterdam, 6 March 2017
BinckBank N.V. Vincent Germyns, Chairman of the executive board 20 // Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
BINCKBANK’S VISION, MISSION AND STRATEGY
Vision
Private customers are becoming more and more aware, autonomous, and active when it comes to their private finances and capital. BinckBank believes in customers’ financial self-reliance. People should be able to control their own financial affairs. BinckBank is well-positioned to assist private customers in achieving their financial ambitions and goals regarding the retention and accumulation of their capital.
Mission
BinckBank serves all customers wishing to consciously, actively, and autonomously manage their capital and assets for a broad and differentiated market with a wide range of financial profiles and motives. BinckBank supports and encourages customers with technology-driven but highly personalised solutions. The innovative solutions centre on convenience, simplicity, clarity, insight, and accessibility at acceptable prices. BinckBank plays a key role in activating, facilitating, and teaching all those wishing to retain and accrue capital. Each and every customer is given optimum control of and insight into the development of his or her capital and its revenues.
Strategy
The six strategic axes BinckBank founds its business activities on six strategic axes:
CUSTOMER INTIMACY & OPERATIONAL EXCELLENCE BinckBank aims to achieve a high level of customer satisfaction. But its relationship with customers goes beyond achieving a high customer satisfaction rating. Customer intimacy is all about the conviction that it is vital to identify customers’ needs before trying to meet them. A strong relationship grows through improving existing services and developing new products and services in partnership with customers. We take our customers’ wishes and requirements as the basis for determining our position and setting our agenda for further development.
BinckBank’s strategic objective is to maximise the efficiency of its existing infrastructure by settling as many transactions as possible and administering and/or managing maximum capital and assets. The central IT infrastructure and the central back office are important aspects of this. Economies of scale (achieving large volumes) are necessary to maintaining a competitive edge in the long term. The volume can be increased, for example, by increasing the number of accounts in existing markets, but also by launching new products and services. Operational excellence is all about continuously improving processes, systems and people. BinckBank manages costs and limits losses caused by operational errors to acceptable levels by working on structural improvements to its operations. 21
Key developments in 2016 // Under the heading of customer intimacy, during the year under review we introduced customers to new products and services such as Binck Sparen in the Netherlands and Binck Laten Beleggen in Belgium. We invested in improving our data management and set up a new User Experience (UX) department, the purpose of which is to use currently available data to attune the development of new products and services more closely to the needs of customers in order to further optimise the customer experience.
Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
Progress was made with IT in the area of operational excellence. The French Retail activities migrated to the European base platform at the beginning of 2016. The COO led the way in streamlining the product development chain and the IT organisation with the aim of improving the time to market for new products and services and gearing them more closely to customer needs.
MORE BALANCED INCOME FLOW BinckBank is working towards a more balanced mix of income from operational activities, where at least two thirds of our income must be generated by recurring commissions, interest, and asset-related income. For this purpose BinckBank’s income model will be transformed in the years to come from a ‘transaction based income model’ to a more ‘asset based income model’.
Key developments in 2016 The extra interest margin from investments in mortgage portfolios contributes to our aim of creating a more balanced income flow. At the end of 2016, BinckBank set itself the goal of gradually investing € 500 million in Dutch residential mortgage loans. For this purpose, in 2015 BinckBank concluded a joint venture agreement with a new Dutch mortgage provider that offers mortgage loans to private Dutch home owners under the BijBouwe (www.bijbouwe.nl) label.Additionally, in July 2016 we took over a portfolio of Dutch private residential mortgages from Obvion for a sum of € 340 million. The 2016 target of € 500 was met and at the end of 2016 the investment in Dutch residential mortgages was € 520 million.
BinckBank ran a pilot with a select group of customers for the savings brokerage service ‘Binck Sparen’ at the end of 2016. The income from this new service is based on the underlying savings capital and dovetails with the aim of achieving a more stable earnings flow. The disappointing results of Alex Vermogensbeheer meant that in 2016 BinckBank was confronted by an outflow of managed assets. At the end of 2016 BinckBank had fallen behind with its goal of creating more continuous income through managed assets. In 2016 BinckBank launched ‘Binck Laten Beleggen’ for the Belgian market.
BinckBank stresses that short-term focus is not compatible with BinckBank’s current strategic transformation. The trans- formation to ‘The New Binck’ will take a lot of time and will involve investments. This will therefore have an impact on the medium-term objectives for 2018.
NAVIGATOR ROLE: FOCUS ON DISTRIBUTION BinckBank will increasingly be playing a ‘navigator’ role, providing optimum support for customers to enable them to make the right financial and other choices. BinckBank will concentrate more on making its knowledge available in the field of securities, asset management, with the focus increasingly on customer needs and less on the development of proprietary products. BinckBank will improve its customer focus by intensifying its relationships with providers of new technologies and/or financial services, based on the concept in which BinckBank maintains contact with the customer, and customers can decide whether to invest their capital themselves or have BinckBank do it for them.
Key developments in 2016 To offer new products and services of other providers on BinckBank’s base platform it will be necessary ensure that the IT backbone has a structure that provides efficient connectivity with new external interfaces. The connectivity of our platform with that of partners is a critical success factor. In 2016 progress was made with the development of our application program interfaces (API). API is a structure that facilitates interfaces that make it possible to connect our infrastructure with that of our partners. The partner Safened for the Binck Sparen service is connected with an API interface, for example.
CONSOLIDATING OUR EXISTING INTERNATIONAL FOOTPRINT BinckBank is looking to achieve further growth in its online brokerage activities and to extend its assessment management and savings services within its existing geographical footprint. Important parameters in this regard include growth in the number of account holders, assets under administration and management, and the transaction volume. 22
// Key developments in 2016 Last year BinckBank launched ‘Binck Laten Beleggen’ for the Belgian market. Good progress was also made with optimising the European base platform in 2016. All retail activities are now unified on a single platform, which will speed up the rollout of new and adapted products in all countries. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
ONGOING DEVELOPMENT OF THE INCOME MODEL BinckBank’s future income model will be based more on a sound basic service at an attractive price, with an option to purchase additional paid services. This will enable customers to get to know and appreciate BinckBank’s products and decide for themselves which additional services they want to buy. This is all about user experience and personalising the service, and BinckBank is setting out to make the pricing model completely transparent to customers so that they know precisely what BinckBank’s services cost.
Key developments in 2016 A start was made in 2016 with a study into BinckBank’s pricing strategy in the Netherlands. The aim of this was to attune the prices of our products and services more closely to our customers’ needs.
BRAND POSITIONING In recent years the Binck brand has targeted independent investors who take control of their own financial future. Binck supports them with all conceivable tools and platforms and an outstanding service. This approach centres on the brand values convenience, transparency, cost-awareness, reliability, and security. The Binck brand will be developed as broadly as possible in the years to come. The brand currently enjoys a very strong position in the investors’ market, but it will have to be positioned as a bank that attracts customers interested in more than active investment alone. The Alex brand is positioned in the market for asset management and individual investment. Both brands are used in the Netherlands, whereas only the Binck brand is used in branches in other countries. BinckBank’s brand policy is evaluated each year.
Key developments in 2016 During the first quarter of 2016 BinckBank ran a marketing campaign – ‘Let Alex invest your money’ in the Netherlands’ – for the Alex brand. Unfortunately the market conditions at the time prevented the campaign from getting off the ground, and it was not continued for the rest of 2016. In 2017 the board will reconsider the brand policy partly in the context of completing the target for assets under management. Ways of optimising the situation will be looked into in 2017. 23 // Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
THE NEW BINCK
In retrospect – success and growth in profits (2000 - 2009) BinckBank was founded in 2000 and entered the market with a highly innovative online trading concept. That was the point at which private investors were given direct access to the exchange to buy and sell securities in the same way as professional investors. The private investor market was soon captured by a stable and user-friendly platform, competitive prices and outstanding service. At the time BinckBank was in fact already a ’fintech company avant la lettre’. Distinctiveness, customer experience, and customer satisfaction initially led to strong growth, and the acquisition of competitor Alex Beleggersbank made BinckBank the market leader in the Netherlands. At the height of the financial crisis (2009) BinckBank’s profits peaked in response to unprecedented high market volumes and limited competition.
The change in fortunes – decline in profitability (2009 - 2016) In recent years there have been major changes in the setting in which BinckBank operates. There was a sharp fall in the trading volumes at the exchanges in the years following the financial crisis, which left BinckBank facing declining transaction volumes. In addition to this, BinckBank’s business model attracted competition. Various smaller online brokers have now entered the private investor market and are competing on price with BinckBank. Falling transaction volumes and competition have exerted downward pressure on BinckBank’s net commission income. Interest rates on the money and capital markets bottomed out (even reaching negative interest), which also resulted in a sharp decline in income from interest rate operations. Governments and national and international regulatory authorities responded to the financial crisis by drafting new legislation and regulations. The torrent of new legislation and regulations calls for monumental efforts, and pushes up costs. 24 // Annual Report 2016 • • • of consists three transformation phases: BinckBank’s area. this in services new with services its expanding and situation this to offerings product its adapting on working is BinckBank savings. in portfolio their of part tokeep towant tend segment this enter do that those And segments. Investing and Trading the tojoin hesitate but rate, interest low the about concerned are investors Many (DGS). scheme guarantee deposit the under guaranteed amount maximum the and rate interest low to the in response segment Saving the in products new for need a identified also has BinckBank assets. substantial with investors on mainly focus services investment-related of providers Today’s support. more need and this for knowledge and time necessary the lack but capital their of control totake want who investors are there that recognises BinckBank segment, Trading the In market. the in available currently those than other services and products for aneed have segments all that established has BinckBank and Saving, and Investing, Trading, segments the out singled needs customer into A survey them. suits it when choices financial their make toindependently investors allow tools online and apps, websites, New importance. in gaining is –anywhere’ –anytime ‘Online developments. technological by affected also are buy they services and products the for set investors requirements The loans. and grants student as such support, governmental toenjoy used that facilities of reduction the and pensions, crumbling security, social reduced by driven being is awareness This life. later in themselves for provide and capital private toaccumulate initiative the take to need they that aware increasingly becoming also are Consumers returns. investment for search their in effort more tomake have they that means This levels. low tohistorically down rates interest forced have prospects economic micro- uncertain and growth, economic slow crisis, financial The challenges. of anumber face today of investors Private onwards) 2018 (from BinckBank for opportunities and future The IN SINCE PROFITABILITY THE FOUNDATIONDEVELOPMENT TRANSITION TOTHENEXTSTAGEOFGROWTH Highest historical profits 2 Netherlands La Relaunch Binck Relaunch Redesign Binck Rethink Binck 0 unch 0 0 T A 2 B K 0 a E-O 0 nk 3 ing lic / D 2 F i 0 F s 0 r 4 (identification of the future opportunities; concluded at the end of 2015), end the at concluded opportunities; future the of (identification u e p (development concepts, 2016-2017), of new service and nce (result recovery, from 2018). from recovery, (result t o r F 2 B Launch 0 i e n 0 lg t 5 ium e c h
A v a n t
l a
L 2 A A e 0 le c t q 0 t MATURITY x r uis 8 REPORT OF THE EXECUTIVE BOARD e’ it ion B ( T O R R 2 F Launch N A O r 0 D rates, competition,developments a L 0 K nce I I E N N Financial crisis,lowinterest R E G A M DOWNWARD
G A in lawsandregulation E) R K ET 2 I Launch t 0 a ly 1 2 widening businessmodel 2 B R 0 e inc 1 t hink 5 k 2 B R 0 e inc 1 d 6 e k s ig n 3-5 YEARS T & SAVING I N R V A E D from R S I 2 Relaunch e N T 0 l I a 1 G, N 8 u G 2 n
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Annual Report 2016 // 25 REPORT OF THE EXECUTIVE BOARD
Redesign – ‘The New Binck’ BinckBank has established that customers are looking for a reliable partner to assist them in making the right choices and enabling them to achieve capital growth. BinckBank’s new growth strategy is aimed at helping private customers to achieve their capital accumulation goals. BinckBank strives to help its customers make the right choices of financial products and focuses on meeting customer needs.
Fintech startups usually have ‘innovative strength’ but lack fully developed technology and often have insufficient capital to distribute (marketing, sales, and service) their new financial products, which makes it difficult for them to build a large customer base. This makes it an attractive option for fintech players to work with BinckBank. To BinckBank this is a unique opportunity to speed up the provision of its service to customers, to make more use of the platform’s benefits of scale and, where applicable, to deliver personalised services with a high user experience in the market.
9-GRID (STRATEGIC PRODUCT MATRIX) BinckBank has developed the 9-grid product matrix for the introduction of its new strategy. BinckBank uses an interactive questionnaire and customer data to identify customer wishes (in relation to actual behaviour) and thus navigates its customers towards the products in the 9-grid that are most suitable for them. The 9-grid consists of three segments and three levels of customer involvement. BinckBank is currently operating in only a limited number of these segments with its current products and services.
STRATEGIC BINCK PRODUCT MATRIX (9-GRID)
Do-it-myself Help-me-do-it Do-it-for-me
ZELF BELEGGEN Trading zelf beleggen
LATEN BELEGGEN Investment vermogensbeheer
SPAREN Saving sparen
Potential for development 26 // Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
2016 GOALS AND MEDIUM-TERM TARGETS FOR 2018
At the end of 2015 BinckBank defined the following goals for 2016. All of these goals were achieved in 2016.
ACHIEVING THE 2016 GOALS CONTRIBUTES TO STRATEGIC GOAL: STATUS
Migration of French customers to Customer intimacy & Operational The migration was completed in the first quarter European base platform. Excellence. of 2016.
Introduction of Binck Sparen. Customer Intimacy and more Pilot with small group of customers started in 4th balanced income flow. quarter of 2016. Commercial launch expected in first half of 2017.
Introduction of Binck Laten Beleggen Customer Intimacy and more balanced Launched in December 2016. Belgium. income flow.
Investment of € 500 million in Dutch More balanced income flow. At the end of 2016 a sum of € 520 million was residential mortgages. invested in Dutch residential mortgage portfolios.
In 2014 BinckBank’s board also defined medium-term targets for 2018. These targets were met as follows in 2016:
REALISATION REALISATION REALISATION MEDIUM-TERM TARGETS 2018 TARGET 2018 YEAR-END 2016 YEAR-END 2015 YEAR-END 2014
Customer satisfaction >=8 weighted-average 7.3 weighted-average 7.3 weighted-average 7.1 weighted-average
Number of transactions 11.0 million 7.7 million 9.3 million 8.6 million
Assets under administration € 21.0 billion € 22.8 billion € 20.6 billion € 18.5 billion
Assets under management € 3.5 billion € 1.3 billion € 1.7 billion € 2.0 billion
Cost/income ratio (excluding <65% 79% 64% 72% IFRS amortisation)
More balanced income flow At least 2/3 of revenue 35.6% 33.8% 34.1% comes from recurring commission, interest and asset management fees
The medium-term targets concerning the assets under administration were met at the end of 2016. BinckBank is currently behind with the other medium-term targets for 2018, and it is likely to take longer for them to be met. 27 // Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
OVERVIEW EARNINGS MODEL
BinckBank’s income is generated through interest rate operations and commission operations (net commission income). The summary below shows the income model for the interest rate and commission operations with the underlying drivers.
Interest rates in Liquid assets money market and capital market
Size of Investment portfolio investment portfolio
Risk evaluation of the investments
Risk appetite Interest income Term of the portfolio of customer
Collateralised loans Amount of credit Value of portfolio
Debit interest Haircuts/margin NET INTEREST INCOME Residential mortgages Loan volume
Debet interest rate
Volume of Interest expenses customer deposits
Credit interest rate on securities accounts and savings accounts
Number of Number of transactions securities accounts
Transaction-related Average revenue Investor sentiment and net fee and per transaction market volatility commission income
Assets under management Price structure (Fixed+variable) NET FEE AND Asset management Service fee COMMISSION INCOME fees Value of the securities 28
// BPO fees Exchange and clearing costs Custody fees Other net fee and (based on assets commission income under administration)
Subscriptions and other fees Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
Interest rate operations (net interest income) BinckBank has a liquidity surplus because customers keep a cash amount as part of their investments. This means that customers’ investment and savings accounts contain a cash balance shown in the balance sheet under ‘funds entrusted’. BinckBank holds some of the funds entrusted as liquid assets for operational funding. BinckBank also uses some of the funds entrusted to finance customers’ securities-based loans. BinckBank invests the bulk of the funds entrusted in the investment portfolio consisting of bonds and Dutch residential mortgages. Taken together these three components generate interest income for BinckBank. The interest income on the bond portfolio – in addition to the interest rates on the money and capital markets – is determined by the size of the portfolio, the rating, and the maturity of the bonds. The interest income on the securities-based loans is determined by the number of securities-based loans and the debit interest that BinckBank charges its customers for loans. The interest income on the mortgage portfolio is determined by the agreed interest payment on the mortgage loan and the size of the mortgage portfolio. The interest charges are determined by the funds entrusted that BinckBank holds for its customers, the interest charges on cash positions, and credit interest payments on securities and savings accounts. The net interest income comprises interest income less interest charges.
Commission operations (net fee and commission income) The net fee and commission income consists of transaction-related commission income, recurring asset management fees, and other commission income. The transaction-related commission income is determined by the volume of trans actions and the average revenue per transaction. The transaction volume that BinckBank processes for its customers depends on the number of customers that it has (the number of securities accounts) and the level of activity among these customers. The level of activity is determined by investor sentiment, which to a large extent depends in turn on the volatility and direction (rise or fall) of financial markets. The average income per transaction depends on the pricing structure used by BinckBank, the value of the securities being traded and the exchange & clearing costs that BinckBank charges for the settlement of the transaction. The ongoing asset management fee is determined by the level of capital that BinckBank manages for its customers, the service fee, and possible performance incentive that it charges. The other commission income consists of the ongoing payments for various services. Their level is determined by the number of underlying service contracts, the number of concluded subscriptions and the volume of assets under administration. 29 // Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT ANALYSIS)
BinckBank performs a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis to map out the characteristics of the organisation and its environment. The SWOT analysis is taken as a basis for the development of BinckBank’s strategy. The strengths and weaknesses reflect the internal elements. The opportunities and threats indicate external developments, events and outside influences that affect BinckBank. The following table shows the key internal and external elements:
STRENGTHS (INTERNAL) WEAKNESSES (INTERNAL)
• Solid customer base in four European countries. • Strongly dependent on volatile transaction • Strong brand name and good distribution capabilities revenue and a relatively small group of highly for new and current investment and savings products. active customers in online brokerage. • High service level. Customers appreciate our • High fixed and rising cost base (governance and proactive and fast service. infrastructure). Maintenance projects and projects • Robust financial position and conservative risk for legislative changes call for a lot of IT capacity. monitoring. • IT infrastructure subject to obsolescence. • Our financial position forms a solid basis for • Still not big enough to maximise economies product innovation. of scale. • Central back office and IT infrastructure with ample expertise and knowledge of securities transactions. • Flat hierarchical structure, focusing on capital retention, and/or accumulation.
OPPORTUNITIES (EXTERNAL) THREATS (EXTERNAL)
• Consumers are also becoming increasingly aware • Falling trading volumes, increasing competition that they need to take a hands-on approach to for ‘self-investment’. accumulating private capital and providing for • Some small new competitors have less legacy to themselves in later life. deal with resulting in a shorter time to market of • Technological developments present opportunities new products and services. to offer new investment and savings services that • Consistently low (and even negative) interest rates cater to customers’ needs. on money and capital markets. • Passive investment (ETF / Trackers) is gaining • Enhanced risk of a rising cost base caused by 30
// in popularity. increasing complexity of legislation and regulations • Potential for generating extra revenue on funds (internal control and compliance costs). entrusted by customers as soon as the interest • Absence of a level playing field in the market. rate on the money and capital markets goes up. • Customer intimacy can be further enhanced by investing in User Experience. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
FINANCIAL RESULTS 2016
KEY FIGURES (CONSOLIDATED)
(amounts in € 000’s) 2016 2015 Δ
CUSTOMER FIGURES
Number of transactions 7,726,110 9,293,591 -17%
Assets under administration 22,793,380 20,575,397 11%
Assets under management 1,279,980 1,697,871 -25%
ADJUSTED PROFIT AND LOSS ACCOUNT
Net interest income 26,325 25,724 2%
Net fee and commission income 109,076 131,461 -17%
Other income from operational activities 12,324 12,993 -5%
Total income from operating activities 147,725 170,178 -13%
Total adjusted operational expenses* 116,634 108,863 7%
Adjusted result from operating activities 31,091 61,315 -49%
Adjusted tax* 2,273 (3,961)
Results of associates (2,821) (730)
Adjusted result after tax 30,543 56,624 -46%
Result attributable to non-controlling interests (87) (1,076)
Adjusted net result 30,456 55,548 -45%
Adjusted net earnings per share (in €) 0.45 0.79
Cost/income ratio excluding IFRS amortisation 79% 64%
CAPITAL ADEQUACY 31
Total equity 245,542 253,582 -3% //
Capital ratio 31.9% 40.2%
Leverage ratio 6.7% 7.1%
* Compared to the IFRS results, within the adjusted result, the total operating expenses and taxes are adjusted for IFRS amortisation and tax savings on the difference between fiscal and commercial amortisation of the intangible assets acquired with the acquisition of Alex and goodwill paid. Page 33 of this
report includes the reconciliation of the adjusted result to the IFRS result. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
Adjusted net result for 2016 The adjusted net result for 2016 was € 30.5 million, which is € 0.45 per share. This was a decrease of 45% compared to 2015 (FY15: € 55.5 million, € 0.79 per share). The fall in the adjusted net result can be attributed mainly to lower commission income due to lower transaction volumes and higher operating expenses. The adjusted operating expenses for 2016 rose to € 116.6 million (FY15 € 108.9 million) as a result of extra expenditure for the strategic transformation (Redesign Binck), structural extra costs relating to the banking sector and supervision, changes to the provisions, costs of marketing and market data, and service charges for the mortgage portfolios.
Net interest income Net interest income in 2016 totalled € 26.3 million. This is 2% higher than 2015 (FY15: € 25.7 million). The rise can be attributed mainly to the interest income generated on the mortgage portfolio which contributed favourably to the net interest result. Net interest income on the collaterlaised loans was slightly lower in 2016 than in 2015.
Interest charges remained virtually unchanged compared to 2015. Interest charges rose slightly owing to the negative interest that BinckBank pays for the cash held at the financial institutions on the one hand, and fell owing to a lower payment on funds entrusted by customers.
I I 3,500 3,500 30 28.530 28.5 438 438 25.7 25.7 26.3 26.3 3,000 3,000 520 520 25 25 2,500 2,500138 138 502 502 361 361 Other loansOther loans 20 20 2,000 2,000 1,514 Collateralised1,514 Collateralised lending lending 15 15 1,500 1,500 1, 34 1, 34 1, 81 1, 81 Mortgage portfolioMortgage portfolio 10 10 in € million 1,000 in € million 1,000 in € million in € million Investment portfolioInvestment portfolio 5 5 500 500 82 82 0 0228 I 228 357 357 Cash and banksCash and banks 0 0 2014 20142015 20152016 2016 2014 20142015 20152016 2016 3,500 30 28.5 438 25.7 26.3 3,000 520 25 2,500 138 502 Net commission income361 Other loans 20 2,000 1,514 Collateralised lending 15 Net commission1,500 income in 2016 totalled € 109.1 million. This is 17% lower than in 2015 (FY15: € 131.5 million). The fall in 1, 34 1, 81 Mortgage portfolio 150 15010 in € million in € million the net commission1,000 income is in in line with the 17% decrease in the transaction volume.126.0 The126.0 131.5asset management131.5 fee Investment portfolio 5 500 82 10 .1 10 .1 continued to decline in 2016228 compared357 to 2015 as a result of the lower average assets under management in 2016. 0 Cash and banks 100 1000 The asset management2014 fee for 20162015 includes2016 a performance-based fee of € 0.4 million (FY152014 € 3.6 million).2015 2016 50 50 in € million in € million
Num er of transactions Num er of accounts 0 0 Customer satisfaction 2014 20142015 20152016 2016 10 .3 620 150 10 615 8.6 126.0 131.5 7.7 8 8 7,310 .1 7,3 610 607 7,1 100 6 6 600 5 6 4 4 x million 50 in € million x thousand 5 0 2 T T 2 0150 150 580 0 0 2014 2015 2016 2014 2015 2016 2014 20142015 20152016 2016 11 . 11 . 116.6 116.6 108. 108.
100 57.1100 57.1 Other operatingOther expenses operating expenses 50.1 50.1 60.3 60.3 DepreciationDepreciation and amortisation and amortisation Other income6.2 from6.2 operating5.8 5.8 activities 50 50 4.7 Employee4.7 expensesEmployee expenses in € million in € million
The other income56.6 from56.6 operating53.0 53.0 activities51.6 relates51.6 mainly to income from the Able, results of the Binck turbo’s , movements in the value0 of financial0 T assets and liabilities that do not come under another heading. Revenues from Binck turbo’s 2014 20142015 20152016 2016 increased in 2016150 by 25% to € 2.5 million. At the end of 2016, the funding level of the Binck turbo’s reached the highest
Adjusted net11 . result 116.6 Adjusted earnings per share Cost income ratio level since the launch in 2014 (€ 225108. million). 57.5 60 100 57.155.5 1,0 Other operating expenses 100 60.3 50.1 0.82 0.7 7 0,8 Depreciation and amortisation 80 6.2 5.8 72 50 4.7 Employee expenses 64 40 in € million 30.5 0,6 60 56.6 53.0 51.6 0.45 32 in €
// 0,4 40 20 0 in € million 2014 2015 2016 0,2 20
0 0,0 0 2014 2015 2016 2014 2015 2016 2014 2015 2016 Annual Report 2016 Assets under administration Assets under management Capital ratio 50 25 22.8 2,5 20.6 1. 40.2 20 18.5 2,0 40 37.1 1.7 31. 15 1,5 1.3 30 10 1,0 20 in € billion in € billion 5 0,5 10
0 0,0 0 2014 2015 2016 2014 2015 2016 2014 2015 2016 commercial of acquired the intangible the assets acquisition with amortisation of and Alex goodwill paid. and fiscal between difference the on savings tax and amortisation IFRS for adjusted are taxes and expenses operating total the results, IFRS tothe compared As result. IFRS the with result net adjusted the of reconciliation the shows below table The result IFRS adjusted the with key of figures Reconciliation cash year.interim An 2016 the for financial paid be €0.23 of dividend atotal that shareholders tothe proposed be will It reserves the to charged dividend final Proposed 16Q4 result. the in € 1.7 of shown is charge million additional an which for to nil, N.V. Tom in Holding interest its down wrote 16Q4 BinckBank in reason, that For € 0. as N.V. Tom scenario of this Holding in value realisable the that estimated has BinckBank development. its in step next the torealise TOM enable will that partner strategic new a finding in TOM support toactively agreed has NV, BinckBank Holding TOM of shareholders the of one As associates of Results €0.9 million. by expenses operating the increased portfolio mortgage the with associated costs service the and €1.9 by million, increased marketing for costs Further, €2.75 16Q4 of in million. expense one-time additional an in resulted complaints Vermogensbeheer Alex the on Vermogensmonitor and VEB with agreement The Fund. Resolution Single the and system guarantee deposit to the of form the in regulation, its and sector banking tothe relating costs additional structural in million €2.0 incurred also BinckBank million. to€2.3 amounting IT and support for costs additional necessitated transformation strategic the of aresult as products new of rollout The Binck). (Redesign transformation strategic tothe relates expenses these of A part € 10.2 of million. expenses operating other in increase an of result the primarily therefore is expenses operating adjusted total the of increase The million. €2.4 of a total by fell, both amortisation and expenses employee The € 108.9 million). (FY15: year previous the than €116.6 at higher 7% 2016 out over came million, expenses operating adjusted total The expenses operating Total adjusted ex-dividend on 26 April 2017. Payment of the final dividend will take place on 3 May 2017.May on 3 place take will dividend 2017. final 26 the of April on Payment ex-dividend 2017, quoted be 24 on April will share Meeting the General the by toapproval Subject earnings. retained from made be partly will dividend proposed the result, a As the for year. profit the from dividend final the of payment for insufficient 2016 for is result annual The applied. been have (ECB/2016/44) Bank Central European the of recommendation the as well as regulations related and (EU/2013/575) CRR the (EU/2013/36), IV CRD of requirements the dividend the determining IFRS result IFRS amortisation fiscal and commercial between difference the from resulting benefit tax Adjustment amortisation IFRS Adjusted taxes after result Adjusted €000’s) in (amounts in € million in € million 1,000 1,500 2,000 2,500 3,000 3,500 100 150 500
dividend of € 0.04 was distributed on 1 August 2016, making the proposed final cash dividend € 0.19 € In share. per dividend cash final proposed the 2016, making 1August on distributed was €0.04 of dividend 50 0 0 T I 2014 2014 11 . 56.6 57.1 6.2 228 1, 34 361 138 2015 2015 108. 53.0 50.1 5.8 357 1, 81 502 2016 2016 116.6 51.6 60.3 82 1,514 520 438 4.7 REPORT OF THE EXECUTIVE BOARD Cash andbanks Investment portfolio Mortgage portfolio Collateralised lending Other loans Employee expenses Depreciation andamortisation Other operatingexpenses
in € million in € million 100 150 50 10 15 20 25 30 0 0 5 2014 2014 126.0 28.5 2015 2015 131.5 (21.515) 25.7 30.543 30.543 (4.407) 4.621 4.621 2016 2016 2016 10 .1 26.3 contributions contributions (21.515) 56.624 56.624 30.702 30.702 (4.407) 2015
Annual Report 2016 // 33 REPORT OF THE EXECUTIVE BOARD
DEVELOPMENTS IN THE COUNTRIES
The year 2016 The year under review was marked by a downward trend in revenues resulting from difficult market conditions. In 2016, customers conducted 7.7 million transactions (FY15: 9.3 million transactions), which is 1.6 million fewer (-17%) than the previous year. In a strongly competitive environment and a difficult market climate transaction volumes fell in the Nether- lands, Belgium, and France by 15%, 30%, and 24% respectively. The influx of new customers and the relatively high level of activity among Italian customers resulted in the transaction volume in Italy rising by 3%. The speculation tax introduced in Belgium at the beginning of 2016 adversely affected the transaction volume. However, the fourth quarter of 2016 saw a general increase in the transaction volumes of our customers, and net commission income rose compared to the previous three quarters. The transaction volume in the fourth quarter rose by 13% to almost 2.0 million transactions, and the average revenues per transaction rose by over 8% to € 11.09.
In 2016 Euronext launched the Best of Book offer for 550 on Euronext listed funds. This gave private investors further options for an optimum transaction price for their trading via BinckBank. Up until December 2016 customers gained an advantage of over € 5 million* for the execution of share orders via Binck and Alex. This advantage for the private investor is expected to increase in 2017 when the Best of Book is extended.
The assets under administration with independent asset managers is growing and is stable in nature. In 2016 the assets under administration in the Netherlands rose by almost € 1 billion to € 7.4 billion. The securities giro (Effectengiro) is enjoying increasing popularity and is now being used by 14 independent asset managers.
In 2016, Alex Vermogensbeheer faced an outflow of customer funds. The managed assets for Alex Vermogensbeheer fell in 2016 to € 1.3 billion. In 2014 a number of clients of Alex Vermogensbeheer complained about the information it provided during the period from 8 September 2012 to 26 August 2014, including the warning about the risk of market conditions that arose in 2014. BinckBank has reached agreement on the settlement of these complaints with the VEB and Vermogensmonitor for members and customers. The VEB and Vermogensmonitor are being given the opportunity to offer a compensation to customers who filed a complaint and meet certain criteria. This should not however be taken to mean that Alex Vermogensbeheer recognises any form of culpability of liability. The agreement has reduced BinckBank’s 2016 profit by € 2.75 million.
Customer satisfaction BinckBank takes a high customer satisfaction rating very seriously. BinckBank endeavors to achieve this by continuously improving and broadening the service for its customers. In 2016, Binck and Alex were able to benefit in several areas from an improved and extended service. Order functionalities were added to the customer website, which made it easier for customers to conduct complex trading operations, for instance. The Binck app was made more attractive by incorporating the most frequently made suggestions in new developments. The Alex app has also been updated and asset management has been added. The number of users and executed transactions via mobile apps continues to grow.
Good service and stable systems are important to our customers. The quality and reliability of the platform was 34
// demonstrated this year when it remained available and continued to quickly and reliably process large transaction volumes at extremely busy times, such as following the announcement of the US election result. It is precisely at times such as these that our top quality customer service stood out, and that is reflected in high customer ratings. The IEX Netprofiler award for Best Online Broker affirmed the efforts made for customers over the past year. Retail investors and the expert panel singled out BinckBank in the Netherlands as the best broker. Security, user-friendliness, and education were the decisive factors.
Annual Report 2016 * Based on a calculation by Liquid Metrics for Euronext REPORT OF THE EXECUTIVE BOARD
During the past year, BinckBank has once addressed education and personal contact with its customers by means of weekly webinars, national customer meetings and training sessions given by the Alex Academy. In 2016 we organised the second edition of the Binck Investor Day which was attended by about a thousand active customers and prospects. The theme of the Binck Investor Day was the future and investing with long-term focus.
ETHER A D Number of accounts thousand Number of transactions million Assets under administration billion Assets under management billion Customer satisfaction BE IU Number of accounts thousand Number of transactions million Assets under administration billion Assets under management miljoen Customer satisfaction
FRA CE Number of accounts thousand Number of transactions million Assets under administration billion ITA Customer satisfaction Number of accounts thousand Number of transactions million Assets under administration billion Customer satisfaction
Developments During the year under review, we also made good progress with the optimising of the European base platform. All retail activities are now unified on a single platform, which will speed up the implementation of new and adapted products in all countries. Most of our websites have been switched to a uniform platform with a better user experience. Good progress has also been made with improving the online intake process, which enables new customers to open an account more quickly. The digital intake process will also due to be modified in the near future so as to provide enhanced support for our navigator role. With a view to the implementation of new products and services in the strategic product framework (9 grid) this is a precondition for the success of the strategic transformation.
In the past year BinckBank devoted a lot of time to developing new products and services in the context of the Redesign phase of the strategy. In this context BinckBank enriched its existing products with those of its partners ProBeleggen and 35
ZoneBourse. The partnership with ProBeleggen links our customers to specific investment professionals with the aim to // inspire and and trigger client activity.
BinckBank has identified a growing demand for passive investing. For that reason a new discretionary asset management product (Binck Laten Beleggen) was launched in Belgium at the end of 2016. In 2017, BinckBank will continue to work on the commercial launch of this new product for the Belgian market. In the first two weeks following the introduction of Binck Laten Beleggen our Belgian customers entrusted a sum of € 2.1 million to us. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
In November a pilot was started in the Netherlands (technical market launch) with an innovative savings product (Binck Sparen). With Binck Sparen, BinckBank offers its customers a secure platform that allows them to spread their savings over one or more carefully selected partner banks in the Eurozone. Customers can boost their revenues by choosing between different deposits and simultaneously reducing their risk by spreading it among banks covered by Europe’s various national deposit guarantee schemes. Binck Sparen is due to be commercially launched during the first half of 2017.
For 2016 BinckBank had set itself the goal of investing € 500 million in Dutch residential mortgage loans. Mortgage loans were provided via the BijBouwe label for this purpose. Additionally, on 16 July 2016 a mortgage portfolio was taken over from Obvion for € 340 million. By the end of 2016 we had amply exceeded our goal of € 500 million (€ 520 million). By growing the residential mortgage portfolio BinckBank has largely succeeded in restoring the revenues on the asset side of the balance sheet. Net interest income rose by 2% in the year under review, which can be attributed mainly to the mortgage portfolio and was achieved despite the general downward trend in interest rates on the money and capital markets. 36 // Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
HUMAN RESOURCES
Introduction BinckBank is an enterprise where new initiatives are developed and where there is a pleasant informal working atmosphere. BinckBank employs ambitious people who want to advance in their careers and devote their talents to BinckBank’s success. At the end of 2016, the average age of the employees was 36.
FTE FTE FTE FTE FTE FTE
700 650 700 650 300 300 700 650 700 634650 642 642634 642 300 300 1 4 6341 44 4 634 44 4 1 4 1 1 1 4 4 21 211 4 21 600 34 34600 3634 3636 36 600 36 600 3636 36 4036 36 36 40 36 250 250 36 557 36 36 557 40 36 40 250 250 500 557 500 53 53 557 541 54153 541 500 500 200 200 Spain Spain Spain 200 200 400 400 400 Italy Italy 150 150 273 267 250 Italy Italy 150 273 267 250 150 300 300 300 273 267 250 273 267 250 France France 100 100 2016 2016 200 200 France France 100 100 2016 2016 149 154 190 200 200 149 154 190 Belgium Belgium 149 154 190 149 154 190 2015 2015 100 100 Belgium Belgium 50 50 2015 2015 79 67 50 50 79 67 64 79 81 64 79 81 110 100 100 110 79 67 79 67 54 55 54 54 55 54 64 79 81 64 79 81 110 110 Netherlands Netherlands 54 55 54 201454 55 54 2014 2014 0 0 0 Netherlands Netherlands 0 0 0 2014 2014 2015 20152014 2016 20162015 2016 Retail Retail ICT ICT AbleRetailAbleOperationsOperationsICT OtherAble Other Operations Other supportsupport support
FTE FTE FTE
300 300 300 250 250 womenwomen women womenwomen women 250 250 200 200 200 150 150 Total 2016Total 2016 Total 2016 Total 2015Total 2015 Total 2015 283 259 283 259 267 150 150267 283 259 283 259 267 267 2016 2016 100 100 100 2016 2016 196 187 196 187 180 180 196 187 196 187 180 180 2015
108 123 2015 108 123 120 50 120 2015 2015 50 108 123 108 123 50 50 120 120 36 36
36 36 36 36 27 31 37 27 31 37 2014 men men men men 36 36 36 36
36 36 2014 27 31 37 2014 27 31 37 2014 men men men men 0 0 0 24 24 25-3425-3435-44 2435-4445-5425-3445-54 >5535-44>55 45-54 >55
Recruitment vrouwenvrouwen vrouwen BinckBank’s ambitions offer employees opportunities in terms of personal and professional development and promotion, and provide plenty of space for individual contributions and ideas.
BinckBank strives to be and remain an attractive employer. The candidate selection process is started via the ‘working mannen at mannen mannen Binck’ website. In 2016 the ‘working at Binck’ website made it possible to submit video job applications. This is a relatively new recruitment method that is well-received by candidates.
Education and Development BinckBank’s success is largely determined by the quality of the service and the customer-focused nature of its employees. To successfully pursue the new strategy with the right knowledge and skills among employees, the executive board held a 37
number of strategy sessions in 2016, and increasing knowledge and personal development among employees once again // occupied a high position on the agenda.
In 2016, all employees were offered online training facilities to improve their knowledge and skills via a ‘Learning & Development module’. Apart from internal courses and theme-based activities, employees were able to follow external study programmes to aid their development. There is also an internal monitoring programme in which employees help each other to develop their knowledge and skills. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
Culture In line with its strategy, the five core valuesof BinckBank are: Build Trust, Be Engaged, Be a Genius, Exceed Expectations and Empower & Guide. The cultural programme underlying the introduction and experience of the core values will continue to be addressed in the years to come.
Bankers’ oath All employees of BinckBank in the Netherlands had taken the bankers’ oath by 1 April 2016. The bankers’ oath was introduced to the Dutch banking sector in 2015. By signing this oath employees working in the Netherlands agree to act in keeping with the rules of conduct and to submit to the disciplinary regulations applicable to them.
The rules of behaviour laid down in the Bankers’ Oath are about: • Integrity and due care; • A careful balancing of interests that centres on the customer; • Compliance with laws and regulations and the code of conduct; • Information confidentiality; • Transparency and responsibility; • Maintaining confidence in the financial sector.
In 2016, the compliance department provided information sessions for all new employees working in the Netherlands and external employees (temporary staff and external contractors). The employees were able to take the Bankers’ oath after completing these sessions.
Employee satisfaction survey (‘FABBS’) The employee satisfaction survey under the name FABBS (For A Better Binck Survey) was held in 2016 with the aim of measuring satisfaction among all Binck employees. This modern, transparent survey was geared to BinckBank’s plans and ambitions. The survey was held among staff in all countries. The survey concentrates on important themes, plans, ambitions and corporate culture. Although there were differences in the results between countries and subjects, the satisfaction ratings were generally high and have improved on all aspects compared to last year. The entire organisation responded favourably to the results of FABBS and the follow-up plans formulated in all departments. The survey will be repeated in 2017.
Vitality In 2016, special attention was paid to the vitality of employees in the form of sports activities and healthy diet. Various sports were offered two days a week during the year in partnership with the Bootcamp Club. Many employees (including directors) took part in these activities.
An especially fanatical group of employees took part in marathons, cycling competitions and football tournaments under the name Binck S(up)ports. Binck S(up)ports draws attention to charities through sport. Employees look for sponsors and jointly decide on the charity they want to contribute to. The executive board doubled the total amount collected by the employees. In 2016, the attention we pay to a healthy diet was intensified through workshops and the introduction of the new company restaurant. In keeping with the Health and Safety Policy a new Risk Assessment was carried out, including a study into the pressure of the workload. Fit and healthy employees are indispensable to a highly ambitious company. Absenteeism due to illness was 2.74% in 2016. Compared to the previous year this was 0.54% lower (3.28% in 2015).
Consultation with the Works Council The composition of the Works Council changed in 2016 due to the Works Council elections. The Works Council consists of nine members. The executive board and the works council held regular formal and informal meetings. These meetings can be described as enjoyable, informative and transparent. In 2016 consultations were held on making the employment conditions more flexible and a start was made with the buying and selling of days’ leave. Also, the job classification system was extended by scales 11, 12, and 13, so that the more senior and specialist positions are now covered. The board once 38
// again looks forward to a constructive partnership with the works council in 2017.
Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Introduction Our business activities are first and foremost about building confidence among our customers and achieving added value for them. BinckBank strives at all times to achieve high quality services with outstanding customer service. In other words, our service and our social role are closely aligned. We regard concern for the social effects of the company’s operations as a core value of the organisation. An implicit aspect of our service for investors is that BinckBank constantly evaluates how its operations affect its wider surroundings.
Delineation BinckBank operates the guidelines formulated by the Dutch Banking Association as the starting point for its corporate social responsibility. BinckBank applies them in accordance with its own business operations. A bank’s social status involves important issues concerning the interests of customers in the context of the duty of care, risk management, governance and remuneration. BinckBank operates in a clear setting and our geographical footprint in countries within the European Union limits our company’s complexity. BinckBank is only affected to a limited extent by current international issues concerning human rights, income distribution, working conditions and the scarcity of raw materials. The frameworks developed for this purpose such as the UN Global Compact, the OECD Guidelines for multinationals, the Equator Principles and the Principles for Responsible Investment are therefore either inapplicable or only applicable to BinckBank to a limited extent. In view of our geographical working area we comply with the applicable OECD guidelines as a matter of course.
BinckBank has subdivided the CSR issues into three categories: customer value and dialogue, business operations and sustainable products and services.
CUSTOMER VALUE & DIALOGUE BUSINESS OPERATIONS SUSTAINABLE PRODUCTS & SERVICES
1 Customer satisfaction 6 Risk management 13 Responsible credit policy
2 Financial education 7 Corporate Governance 14 Sustainable investing
3 Customer service and 8 Tax Policy 15 Conservative investment policy complaint management
4 Privacy & security 9 Compliance and observance of 16 Transparency on costs and conditions legislation and regulation
5 Platform stability 10 Human resources 17 CSR projects and donations
11 Environmental care 39 // 12 Human rights and working conditions Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
Customer value & dialogue
1 CUSTOMER SATISFACTION One of BinckBank’s strategic axes is customer intimacy. Customer satisfaction is the main KPI for this, which is why it is embedded in our strategic medium-term goals. BinckBank sets out to continuously exceed its customers ambitions through innovation and aspires to be the bank with the highest customer satisfaction rating. BinckBank holds a quarterly survey among different client groups to measure their level of satisfaction. These insights make it possible to make any necessary adjustments in areas highlighted by customers as having room for improvement. BinckBank also works with customer panels and customers are invited to make suggestions regarding the development of services. The new mobile app is a good example of this. Product development at BinckBank is iterative, and customers are involved from the outset.
2 FINANCIAL EDUCATION BinckBank looks to help its customers to make better decisions in order to achieve their financial aspirations. Education plays a prominent role here. BinckBank offers its customers education products such as the Binck Investors’ Day, online seminars, online training modules, and masterclasses.
3 CUSTOMER SERVICE AND COMPLAINT MANAGEMENT Ever since its incorporation, a top quality customer service has been one of the aspects on which BinckBank stands out from crowd. The customer services department plays an important role in this respect. To guarantee that quality, BinckBank continuously invests in the training and coaching of its customer services staff. Employees are also encouraged to gain DSI certification. This guarantees that customers are always served by expert staff members. Our customer servicesmaintained their high level in 2016, which was due in part to increased staffing levels and investing in quality.
4 PRIVACY & SECURITY Privacy and online security are intrinsic aspects of BinckBank’s service. The subject of internet security is gaining more and more public attention, also regarding measures taken by consumers themselves to protect their computers and smartphones. In this context BinckBank informs its customers about the initiative of www.veiligbankieren.nl. Visitors to this website are given information and methods they can use to secure their PC and mobile environments.
BinckBank has implemented two-step verification in all countries. Customers are only able to configure the user-friendly login process for smartphones once they have used a PC to configure mobile telephone access (once-only process).
BinckBank protects personal data in accordance with the application privacy legislation. BinckBank treats this data honestly at all times.
5 PLATFORM STABILITY BinckBank invests continuously in the stability of the various trading platforms. In 2016 BinckBank’s trading platform proved its worth by dealing with peak periods (caused by events such as the American elections) without any significant problems arising. The uptime KPIs are defined annually, differentiating between availability during and outside trading hours. Planned maintenance is always performed outside trading times. The system availability rate during trading hours in 2016 was 99.94%, which meets the set standard of 99.90%.
BinckBank has set up a fully equipped disaster recovery environment for Business Continuity purposes. A disaster recovery test of the production environment is carried out at least twice a year. As well as the disaster recovery facilities for the IT infrastructure, a new disaster recovery location with an office facility was taken into use during the year under review.
Business operations
6 7 8 9 10 Reference is made to the relevant chapters of this report for a description of risk management, corporate governance, tax 40
// policy, and compliance with laws and regulations. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
11 ENVIRONMENTAL MANAGEMENT BinckBank’s ecological footprint is limited to its head office in Amsterdam and its branche offices in Belgium, France, Italy, and Spain.
BinckBank made a start with refurbishing its data centres in 2016. The data centres are responsible for most of the CO2 emissions in BinckBank’s business operations. Power consumption is an important criterion for the selection of suppliers.
Investments will be made in new technologies and hardware to substantially reduce the CO2 footprint and improve efficiency. The power consumption of the data centres is expected to fall by over 40% in 2017 compared to 2016.
BinckBank is moving to new, smaller rooms with the existing hosting parties for the hosting of its data centres. Both parties are ISO 14001 (environmental management) certified, and one of them has ISO 50001 (energy management) certification. BinckBank uses green electricity at its Barbara Strozzilaan location.
12 HUMAN RIGHTS AND WORKING CONDITIONS BinckBank’s ecological footprint is limited to its head office in Amsterdam and the offices in Belgium, France, Italy, and Spain. There are no special circumstances concerning human rights and working conditions in these locations.
Sustainable products & services
13 RESPONSIBLE CREDIT POLICY One of the forms of credit that BinckBank offers to its customers is collateralised loans. This is a collateralised continuous credit facility that may only be used to purchase securities. Customers can opt for a separate contract to make use of this credit facility. BinckBank has capped the collateral haircut precentages to prevent its customers becoming overindebted. The maximum amount of the collateralised loan is determined by the customer’s risk appetite and BinckBank’s willingness to provide loans against collateral. BinckBank’s willingness to issue credit depends on the customer’s investment portfolio, and adapts to price changes and movements in the portfolio. Setting the cap prevents customers from accumulating irresponsibly high debts at BinckBank.
BinckBank also started investing in the financing of Dutch residential mortgage loans in 2016. The acceptance and management of credit risks have been outsourced to Dynamic Credit and are monitored through extensive data on the mortgage portfolio issued within the scope of the statutory requirements. BinckBank has issued responsible acceptance criteria.
14 SUSTAINABLE INVESTING Within its investment policy for Alex Vermogensbeheer, BinckBank operates exclusion criteria for companies that do not satisfy the UN Global Compact guidelines. In a collaborative effort with Sustainalytics, Alex Vermogensbeheer screens on a quarterly basis the totality of shares in which the model invests. The purpose of this screening is to avoid investing in companies that fail to act in keeping with the principles of the UN Global Compact. In 2016 BinckBank saw a further increase in the popularity of sustainable investment.
15 CONSERVATIVE INVESTMENT POLICY BinckBank pursues a conservative financial policy and takes a cautious approach to investing the customer funds entrusted. Funds entrusted, which are not used for collateralised loans, are partly held in cash with the remainder being invested through the investment portfolio (consisting of bonds and Dutch residential mortgage loans). Lending is conducted in a responsible manner in accordance with the established risk appetite. Detailed information about this can be found in the Risk Management chapter (page 59).
16 TRANSPARENCY ON COSTS AND CONDITIONS BinckBank strives for transparency in the pricing model for its customers so they can determine in advance what BinckBank’s services cost and establish afterwards what they have paid for them.
17 41
CSR PROJECTS AND DONATIONS // In terms of social projects and donations, BinckBank supports the IEX Schools Competition, an investment competition that is included in the Economics lessons at the upper level of senior secondary and pre-university education. This reflects the importance that BinckBank ascribes to financial education. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
TAX POLICY
Introduction BinckBank regards compliance with its tax obligations as part of the process of long-term value creation for all stakeholders. Transparency is one of the key elements in the current social discussion on CSR. BinckBank concurs with this discussion and thus explains its tax policy in this part of the report. The income tax paid by BinckBank for each geographic segment is also demonstrated by means of the country-by-country overview in the Corporation Tax section.
Tax policy BinckBank’s customers are primarily looking for a secure, reliable, and operationally efficient banking and broker institution. BinckBank’s positioning as a provider of financial services is therefore geared towards a low risk appetite in its policy and operational decisions relating to tax affairs. BinckBank aims to avoid any risks by adopting tax stances that could adversely affect the tax position or reputation of BinckBank and/or its customers.
BinckBank strives to comply with all relevant national and international tax rules and legislation, taking account of the intention of the legislature and best-practice guidelines, such as the OECD Guidelines for Multinational Enterprises, in order to adequately monitor the tax position and pay taxes on time. BinckBank is assisted by accredited tax consultants in all countries where it operates. It is BinckBank’s position that a reasonable application of the law does not involve aiming for an artificial reduction of the effective tax burden, for instance by means of tax avoidance through tax havens. At the same time, it is in the interest of the continuity and value of the business to optimise the tax position in this context. BinckBank also has a responsibility in this regard towards shareholders to improve shareholder value, bearing in mind that taxation is a derivative of business operations. If BinckBank believes that it can utilise a tax facility, this will be agreed in advance with the Dutch Tax and Customs Administration. One example of this is the advance tax ruling that BinckBank has obtained from the Dutch Tax and Customs Administration on the application of the innovation box to the income attributable to the innovative trading platform that BinckBank has developed for private investors.
BinckBank’s tax position is in keeping with its business operations and reflects its business strategy and the geographic distribution of its activities. BinckBank has considered the OECD’s definitive action reports on the ‘Action Plan on Base Erosion and Profit Shifting’ (BEPS) project and similar EU Anti-tax avoidance programmes. Given that BinckBank’s tax position is in keeping with its business operations in various countries and that it does not use any aggressive and socially criticised tax structures and tax havens, BinckBank believes that the BEPS action report and the ATA programme will have a limited impact on it.
For the purpose of transfer pricing (the pricing of international transactions within a multinational enterprise), BinckBank uses the Master/Local File principles, which have been coordinated with the Dutch Tax and Customs Administration by means of a bilateral Advance Pricing Agreement (APA) and unilateral APA. An agreement has been reached by which the Transactional Net Margin Method (TNMM) is used to calculate transfer pricing, with gross operating revenue as the profit indicator. The profit margin of the foreign branch is established as a fixed percentage of the ‘net fee and commission income’ and all other income and expenses will be borne by the head office in the Netherlands. For branch offices that do not generate local income, it has been agreed with the Dutch Tax and Customs Administration that under the unilateral APA the cost-plus 42
// basis is the most suitable method for transfer pricing. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
BinckBank practises transparency towards the tax authorities in all countries where it operates. This means that BinckBank provides all relevant and requested information on tax affairs in order to facilitate a reasonable assessment of its tax position. If necessary, and where practical, discussion items are agreed as far as possible in advance with the Dutch Tax and Customs Administration. This limits the possibility of subsequent differences in opinion and any later adjustments. Ultimately this gives BinckBank more clarity and certainty about tax positions. In the context of horizontal monitoring, BinckBank has entered into a covenant in the Netherlands with the Dutch Tax and Customs Administration. The Dutch Tax and Customs Administration wishes to use horizontal monitoring to place even greater emphasis on cooperation between equals in monitoring. This means that when a need arises for coordination between BinckBank and the Dutch Tax and Customs Administration, this happens beforehand instead of having subsequent audits.
When it enters into an covenant, the Dutch Tax and Customs Administration’s assumption is the taxpayer has a well-functioning tax control framework, which means that the Administration makes use of the quality that exists within BinckBank and makes arrangements regarding quality.
Taxation and customers BinckBank provides investment services to many customers in various countries that are subject to different local tax regimes. In its role as broker, BinckBank assumes an active role in certain tax payments. BinckBank has set up adequate processes in this role for prompt and correct payments to be made in the various countries. The customers are first and foremost responsible for their own tax obligations. BinckBank does not provide any tax advice to its customers.
BinckBank is obliged to issue certain information about savings and securities products to the Dutch Tax and Customs Administration. This information is used for purposes such as pre-completing the income tax returns of Dutch taxpayers, which makes it easier to file the income tax return. The information is also used to counteract tax evasion (in the form of undeclared savings, for example) in the context of the Common Reporting Standard (CRS). Under the CRS BinckBank has been obliged since 1 January 2016 to establish whether customers are tax residents of countries other than the Netherlands. Together with the account information the Dutch tax authorities share this information with the tax authorities of participating countries. Conversely, the Dutch tax authorities receive information from the participating countries about residents of the Netherlands who keep bank and/or securities accounts in those countries.
Corporation tax The tax burden shown in the financial statements relates only to current tax. The effective tax burden is the reported tax expense as a percentage of the result before tax. The differences between accounting and tax rules give rise to an effective tax burden that differs from the nominal tax rate. On a consolidated basis, BinckBank’s effective tax burden in 2016 was 31.6% of the operating result (2015: 21.4%), which is higher than the nominal tax rate. The reconciliation of the effective tax rate with the tax rate applicable to the consolidated financial statements is as follows:
2016 2016 2015 2015 (amounts in € 000’s) AMOUNT PERCENTAGE AMOUNT PERCENTAGE
Nominal tax rate (1,689) 25.0% (9,768) 25.0%
Effect of different (foreign) tax rate (45) 0.7% (93) 0.2%
Effect of substantial holding exemptions (705) 10.4% (183) 0.5%
Effect of tax facilities 155 -2.3% 1,062 -2.7%
Other effects 150 -2.2% 614 -1.6%
Total tax effect (2,134) 31.6% (8,368) 21.4%
Fiscal benefits resulting from differences between 4,407 4,407 commercial and fiscal amortisation 43 // Adjusted taxes 2,273 (3,961) Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
The higher tax burden in relation to the nominal tax rate can be explained as follows: • Holding exemptions ensure there is no double taxation of results of substantial holdings. • The application of the innovation box that BinckBank has agreed with the Dutch Tax and Customs Authority in the Netherlands. The innovation box is a tax facility for Dutch corporation tax by which gains generated by certain intangible assets are taxed on request at an effective rate of 5% instead of at the maximum rate of 25%. • Any deferred tax assets and liabilities. • Other tax effects that can cause differences are adjustments in respect of prior financial years, expenses that are not tax deductible, such as the shares issued to personnel under the remuneration policy.
The tax burden and the effective tax rate breakdown by the various BinckBank branch offices is as follows.
COUNTRY-BY-COUNTRY REPORTING OVERVIEW 2016
(amounts in € 000’s) OPERATING JURIS MOST IMPORTANT RESULT CORPORATE TAX DICTION COMPANY ACTIVITY FTE BEFORE TAX TAX BURDEN online broker, asset Netherlands BinckBank N.V. 541 6,132 2,012 32.8% management, subsidiaries
Belgium Binck Belgium branch online broker 40 274 115 42.1%
France Binck France branch online broker 36 220 35 16.0%
Italy Binck Italy branch online broker 21 62 (48) -78.2%
Spain Binck Spain branch sales office 4 68 20 30.1%
Total 642 6,755 2,134 31.6%
The effective tax charge of 32.8% in the Netherlands is higher than the nominal rate of 25%. This is primarily due to the application of the Innovation box, losses under falling thesubstantial holding exemption, non-deductible costs and differences between fiscal and accounting depreciation periods for assets.
The effective tax rate for BinckBank Belgium is 42.1%, whilst the nominal tax rate is 33.99%. The higher effective tax burden is largely due to the expenses that are not tax deductible under the Belgian tax regime.
The effective tax rate for BinckBank France is 16.0%, whilst the nominal tax rate is 33.33%. The lower effective tax burden can be attributed to the CICE, a tax incentive to encourage investment and create jobs in the French business community.
The effective tax rate for BinckBank Italy is -78.2%. Corporation tax in Italy consists of two components, each with a different basis, the IRES and the regional IRAP. The IRES is a tax on taxable profit and amounts to 27.5%. The IRAP is a regional tax which is not charged over taxable profit but over production activities, and amounts to 5.57%. In addition, the final assessment for corporation tax for last year is taken into account in the tax charge for 2015.
The effective tax rate for BinckBank Spain is 30.1%, which is in line with the nominal tax rate of 30%.
Fiscal developments As a member of the finance sector BinckBank constantly faces the impact of new tax legislation. In Belgium, the sector was taken by surprise by the introduction of the speculation tax effective as from 1 January 2016. However it emerged during the course of 2016 that the speculation tax yielded less than expected and it was therefore decided to abolish it with effect from 2017. BinckBank also faced additional costs as a result of the adjustment of the composition and the basis of the 44
// bank tax in Belgium. This bank tax is the result of the tax shift in Belgium intended to contribute to lowering labour costs. The rate of this bank tax can be adapted annually to Belgian’s budget targets.
There were also various legislative initiatives at national and European level, such as the previously described BEPS action reports, ATA programme and CRS. The EU is also working on the introduction of a common profit tax: the Common Consolidated Corporate Tax Base (CCCTB). These initiatives have arisen from the growing attention paid to the taxation of multinationals. Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
In February 2013 the European Commission made new proposals for the introduction of a tax on financial transactions, the Financial Transaction Tax (FTT). Ten Member States have joined forces to give shape to this collaboration. The idea behind this tax is for the financial sector to give money back to society following the 2008 financial crisis. This tax would also impose restrictions on high-frequency trading. No agreement had yet been reached on the introduction of the FTT at the end of 2016. The scope and date of the introduction of the FTT depends on the negotiations between the participating States, the European Council, consultations with other EU institutions and the subsequent conversion into local legislation. Depending on its ultimate form, the introduction of an FTT in the Netherlands or in other countries could have a seriously adverse effect on BinckBank’s results and activities. 45 // Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
RESERVE AND DIVIDEND POLICY
Introduction BinckBank’s authorised capital consists of ordinary shares and 50 priority shares both with a nominal value of € 0.10. The priority shares are unlisted registered shares and are held by Stichting Prioriteit Binck (hereinafter, ‘the Priority’). BinckBank’s articles of association stipulate that - if profits permit - a sum of six per cent (6%) is paid out on the priority shares, based on the nominal amount of those shares (50 x € 0.10 x 6%). The Priority determines the extent to which the profits are transferred to reserves. The remaining profit is placed at the disposal of the general meeting. Any amounts not distributed will be transferred to BinckBank’s reserves. BinckBank’s executive board is authorised to pass a resolution for BinckBank to pay an interim dividend with the prior approval of the Priority.
BinckBank operates the following principles for dividend payments. • Sustainability and prudence are preconditions for making dividend payments and for determining their level and the form in which they are made. • Dividend distributions must comply with the applicable laws and regulations (including the requirements of the European Central Bank (ECB) and De Nederlandsche Bank (DNB)). • Dividend distributions must be responsible – from the perspective of sustainability and prudence – in the judgement of BinckBank based on the solvency position and economic outlook. • If a dividend is proposed to the general meeting, BinckBank aims for a payout ratio of 50% of the adjusted net result. • Dividend payments are made in cash and are payable no later than fourteen days following the resolution. • Interim dividend is paid from the net profit in the current financial year.
BinckBank continuously evaluates its reserves and dividend policy and discusses this policy annually as a separate agenda item at the general meeting.
2016 Dividend Proposal A total dividend for the 2016 financial year of € 0.23 will be proposed to the shareholders. On 1 August 2016 an interim dividend of € 0.04 per share was paid out in cash, taking the proposed final cash dividend to € 0.19 per share. The calculation of the payable dividend meets the requirements of CRD IV (EU/2013/36) and CRR (EU/2013/575) and the related legislation, as well as the recommendation of the European Central Bank (ECB/2016/44). The 2016 net result is insufficient for payment of the final dividend from the current year’s profit. The intended dividend payment will therefore be drawn in part from the retained earnings. Subject to the approval of the general meeting on 24 April 2017, the share will be listed ex-dividend on 26 April 2017. The final dividend will be paid on 3 May 2017. 46 // Annual Report 2016 REPORT OF THE EXECUTIVE BOARD
OUTLOOK 2017
Progress with the strategy BinckBank’s strategic transformation consists of three phases. The first phase, Rethink Binck, which was completed in 2015, involved identifying growth opportunities for the years to come. In 2016 and 2017, the focus is on the second stage: Redesign Binck. Redesign Binck entails developing new products and services aimed at seizing opportunities in the market. The third phase is Relaunch Binck. In this final phase (from 2018), the new products and services must contribute favourably to the results in order to achieve the intended new growth phase.
Fiscal amortisation Alex Vermogensbank In 2008, BinckBank purchased ‘Alex Vermogensbank’ from Rabobank for € 391.4 million. This amount is subject to straight-line amortisation in ten years for tax purposes. This made it possible to achieve a tax benefit from the assets/ liabilities transaction. In the period from 2008 to 2017 BinckBank will enjoy a total tax benefit of € 97.8 million (25% of € 391.4 million), which is € 9.8 million a year. 2017 is the final year in which BinckBank will be able to record an amortisation resulting from the acquisition of ‘Alex Vermogensbank’ against the taxable profits and realise the tax benefit.
Cancellation of shares The share buy-back programme announced in February 2016 was completed in September 2016. The programme represented a value of € 25 million. A total of over 4.6 million shares were repurchased. The share purchase has returned capital to the shareholders in addition to dividend payments. During the 2017 general meeting the company will make a proposal for the cancellation of 3.5 million shares repurchased under the programme.
Financial outlook for 2017 BinckBank’s result depends heavily on its customers’ trading activity. The volatility and direction of the stock exchange are strong determinative factors here. This is unpredictable and BinckBank therefore does not make any specific projections. 47 // Annual Report 2016 DEVELOPMENTS IN LEGISLATION AND REGULATION DEVELOPMENTS IN LEGISLATION AND REGULATION
DEVELOPMENTS IN LEGISLATION AND REGULATION
Increased regulatory pressure from Europe is having a major impact on the operations of financial institutions. The European Union is introducing a constant stream of new and revised regulations in many areas, some of which directly affect the Member States and others are to be implemented in national legislation. Assessing the impact and implementation makes heavy demands on the banks, both financially and otherwise. New regulatory developments are often uncertain, and their full impact is therefore difficult to estimate. In many cases smaller banks such as BinckBank are expected to meet the same requirements as systemically important banks. Correct and timely implementation is complex and costly.
Given below is a brief overview of the main developments in (European) legislation and regulations and their potential impact for BinckBank.
BEPS ECB/EBA/ESMA CRS FTT DNB/AFM AMLD4
Prudential & Tax Supervisory Compliance BRRD/ CRD IV/CRR II: MREL/TLAC FINREP Authority & AML
CRD IV/CRR II Capital & IFRS Reporting & Anacredit Accounting Liquidity R v Operational MAD Consumer BCBS 23 Risk & Data Protection Security MiFID II
AVG Product Markets & Regulation PRIIPs Infrastructure
EMIR UCITS V
Tax compliance & AML
TAX COMPLIANCE As a member of the finance sector BinckBank constantly faces the impact of new tax legislation. Current topics include the 49
Action Plan on Base Erosion and Profit Shifting’ (BEPS), the Common Reporting Standard (CRS), the Financial Transaction // Tax (FTT) and the speculation tax in Belgium. See the Tax Policy chapter on page 42 for the developments in fiscal legislation and regulations. Annual Report 2016 DEVELOPMENTS IN LEGISLATION AND REGULATION
ANTI-MONEY LAUNDERING DIRECTIVE 4 (AMLD 4) AND THE REGULATION ON INFORMATION ACCOMPANYING TRANSFERS OF FUNDS (IFTR) AMLD 4 contains new rules to combat money laundering and terrorist financing in the European Union. The purpose of the new AMLD 4 is to improve the collaboration between and the uniformity within the Member States. The IFTR contains rules aimed at guaranteeing the full traceability of payment transactions from, within and to the European Union. Both AMLD 4 and the IFTR observe the recommendations of the Financial Action Task Force (2012).
Capital & Liquidity
EUROPEAN LEGISLATION Bank Recovery and Resolution Directive (BRRD), Minimum Requirement for own funds and Eligible Liabilities (MREL) and Total Loss Absorbing Capacity (TLAC) The BRRD stipulates the powers, rights and obligations of the resolution authorities and the banks, as well has how the various resolution instruments can be used. DNB is designated as the Netherlands’ resolution authority.
BinckBank formulates an annual recovery and resolution plan to meet its obligations under the BRRD. In the recovery and resolution plans banks put in place measures that they can take if the bank’s financial continuity is jeopardised. Resolution plans give regulatory authorities more insight into the bank’s structure, which enables them to prevent contamination of the rest of the financial system in the event of an actual or imminent bankruptcy. Formulating recovery plans also better prepares banks for problems and enables them to tackle them more quickly and efficiently.
The purpose of the BRRD is to allow DNB to settle a bank’s bankruptcy in an orderly manner. It has been agreed that DNB assesses whether a bank can go bankrupt in the ‘normal’ way or whether resolution is needed to prevent contamination of the economy and the financial system. If DNB judges that resolution is necessary, it is authorised to use various instruments for that purpose. Banks do of course need sufficient resources to implement the ‘bail-in’. The BRRD is closely related to the requirements laid down in the MREL and TLAC. The ultimate consequences of this mechanism are therefore still as yet unknown and it is not possible to provide an estimate of the final level of capital.
Reform package, European Regulations for Banks (CRD V and CRR II) On 23 November 2016, the European Commission proposed a broad package of reforms to strengthen the resilience of European banks.
The proposals will amend the following legislative instruments: • the Capital Requirement Regulation (CRR) and the Capital Requirement Directive (CRD IV) which were adopted in 2013 and contain prudential requirements for credit institutions (banks) and investment companies, as well as rules relating to governance and supervision. • the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Resolution that were adopted in 2014 and which contain rules for the recovery and resolution of bankrupt or imminently bankrupt institu- tions and the common resolution mechanism. 50 // Annual Report 2016 DEVELOPMENTS IN LEGISLATION AND REGULATION
The key elements of the proposals are as follows:
1. Measures to increase resilience of the EU institutions and to promote financial stability, including: • more risk-sensitive capital requirements based on the FRTB, mainly in the area of market risk, the counterparty credit risk, and exposures relating to central counterparties; • the execution of methods that take better account of the actual risks to which banks are exposed; • adjustment of the large exposures regime: The capital included in the calculation of the large exposures limit has been adjusted (Tier 1 capital only); • a binding leverage ratio (LR) to hold back an excessive leverage effect; • a binding net stable financing ratio (NSFR) to tackle excessive dependence on short-term wholesale funding and reduce the long-term financing risk; • for global systemic banks, the integration of the TLAC requirements in the existing MREL system (minimum requirement for own funds and eligible liabilities) that is applicable to all banks.
2. Measures to improve the lending capacity of banks to support the economy in the European Union, which include: • increasing the ability of banks to issue loans to the SME sector and to finance infrastructure projects; • reducing the administrative burden for non-complex, small banks in relation to a number of rules governing remuneration; • making the CRDIV/CRR rules more proportionate and less burdensome for smaller and less complex institutions.
3. Measures to promote the role of banks in achieving deeper and more liquid European capital markets to support the establishment of a capital market union, which include: • avoiding disproportionate capital requirements for trading portfolio positions, including those related to the activities of market makers; • reducing the costs of issuing/holding certain instruments (covered bonds, high-quality securitisation instruments, state debt instruments, derivatives for hedging purposes); • to prevent disincentives for institutions that act as intermediaries for clients in relation to transactions cleared by central counterparties.
AnaCredit Regulation On 18 May 2016, the European Central Bank (ECB) signed the AnaCredit Regulation (ECB/2016/13). AnaCredit is a statistical regulation under which regular information about individual loans can be requested from institutions, which will probably come into effect at the end of 2018. AnaCredit is a new database containing detailed information about individual bank loans in the Eurozone. The name stands for ‘analytical credit datasets’. AnaCredit will make use of new data and existing national credit registers, resulting in a harmonised database that supports various central banking functions. As a small institution, BinckBank is exempted from reports for the time being, but is likely to have to meet this requirement in due course. The preparation of IT and reporting systems therefore remains on the agenda.
BASEL COMMITTEE PROPOSALS Proposals of the Basel Committee do not directly affect European banks, but are often integrated in European legislation at a later stage. European banks therefore have to include the proposals in their assessments.
Revised Standardised Approach – BCBS 347 The main purpose of introducing CRD IV and the CRR in 2013 was to strengthen the capital base of banks. The Basel Committee has made proposals for the revision of the capital requirements under the standardised approach to the credit risk (BCBS). The purpose of the review is to reduce dependence on external ratings and increase the risk sensitivity of the standardised approach. More specifically, the Basel Committee proposes changing the risk weighting for private mortgages from a fixed weighting of 35% to a risk-based weighting depending on the loan-to-value (LTV) ratio, which is the ratio between the remaining loan and the value of the collateral. Under the revised standardised approach, mortgages with an LTV ratio higher than 100% can be assigned a risk weighting of up to 75% (see the following figure). 51 // Annual Report 2016 DEVELOPMENTS IN LEGISLATION AND REGULATION
BASEL I BASEL III BASEL IV
Governments 0% 0-150% 0-150%
Institutions 20% 20-150% 20-150%
Corporates 100% 20-150% 20-150%
Private mortgages 50% 35% 25-75%
Other private individuals 100% 75% 75%
The new capital requirements are expected to have a serious effect on the amount of equity and other loss buffers that banks are required to keep, and this could also affect the pricing of mortgages.
Capital floor based on the revised standardised approach (Capital Floors - BCBS 306) The proposal sets minimum requirements for the weightings that IRB banks are allowed to operate. The risk approach based on internal models usually leads to lower risk weightings than those in the standardised approach. If the internal models produce much lower risk weightings, they cannot be used and the bank is obliged to assess the risk as higher than prescribed by its own internal models. The bank’s own risk model is taken out of the picture. BinckBank only uses the standardised approach and will therefore not be affected by this for the time being.
OTHER BASEL COMMITTEE PROPOSALS The following proposals of the Basel Committee potentially affect BinckBank to a lesser extent. These proposals do however have to be monitored and assessed for their potential impact if a change is made.
BCBS 303 – revisions to the securitisation framework (final) BCBS 279 – standardised approach for counterparty credit risk (final) BCBS 319 – Interest rate risk in the banking book BCBS 325 – Review of the CVA risk framework BCBS 349 – Step-in risk BCBS 352 – Fundamental Review of the Trading Book (final) BCBS 355 – Revisions to operational risk BCBS 356 – Pillar III disclosure requirements BCBS 362 – IRB approach
Credit risk – Expected Credit Loss (ECL) With effect from 1 January 2018 listed companies are required to operate IFRS 9 (financial instruments) in their consolidated financial statements. IFRS 9 replaces large parts of IAS 39 (Financial instruments; inclusion and valuation). Under IFRS 9 banks will be required to base the calculation of their credit loss provisions on future cash flows, taking economic conditions into consideration. This is because potential losses must be identified sooner rather than once the loan has become problematic, e.g. as a result of payment arrears.
In the context of IFRS 9 (and the transition to an Expected Credit Loss model in particular), the Basel Committee will be taking a closer look at the regulatory use of provisions (both general and specific). 52 // Annual Report 2016 DEVELOPMENTS IN LEGISLATION AND REGULATION
Consumer protection
FINANCIAL MARKETS (AMENDMENT) ACT 2016 The Dutch Financial Markets (Amendment) Act 2016 came into effect on 1 April 2016. One of the most important changes concerns the protection of derivatives owners against the bankruptcy of intermediaries (including banks). Derivatives positions entered into by an intermediary on behalf of clients must be segregated from the capital of the intermediary. Banks are also required to indicate in advance whether they are taking derivatives positions as intermediaries or as a counterparty on behalf of the client. BinckBank has indicated that it will be assuming the role of intermediary. The protection of derivative owners against the bankruptcy of intermediaries is provided for in the Dutch Securities (Bank Giro Transactions) Act.
The MAR and MAD came into effect on 3 July 2016. The new rules for the prevention of market abuse are especially important to listed companies (issuers) and the people involved in the issuers (such as directors and supervisory directors) and other parties involved in transactions in listed instruments, such as shares and bonds. To guarantee fair and transparent trading in listed instruments, issuers must disclose insider knowledge without delay so that all investors can act on the basis of the same information, which is accessible to all, and all parties with insider information are barred from trading. BinckBank has tightened up and improved its internal procedures to meet the requirements of the MAR and the MAD.
Market in Financial Instruments Directive II (MiFID II) The review of MiFID I and the introduction of the Markets in Financial Instruments Regulation (MiFIR) are collectively referred to as MiFID II. October 2016 saw the publication of a legislative proposal for the implementation of the European MiFID II directive in Dutch legislation. The purpose of MiFID II is to make the European financial markets more efficient and more transparent and to enhance the protection of investors. The directive includes a ban on commissions for asset management and independent advice. Banks are also required to disclose all costs charged to the client in relation to investment. There are many rules to ensure that clients are only advised to purchase products that are suitable for them. The regulations have a major impact on banks’ systems and procedures and call for additional IT efforts to meet all of the reporting requirements.
Packaged Retail Investment and Insurance-based investment Products Regulation (PRIIPS) With effect from 31 December 2017, the European PRIIPs Directive will apply to a large number of investment products and insurance products with an investment component. The purpose of the European PRIIPs Regulation is to improve the transparency of investment products in order to protect investors. This is being done by introducing the Essential Information Document (EID), containing essential information on the nature of the product. This document has a uniform form and content throughout the European Union, which reduces obstacles to financial products and services in the internal market. The EID must be issued in a timely manner to retail investors before they are bound to a contract or an offer for PRIIPs. This gives them a better understanding of the risks, costs, and target revenues so that they can compare products. The regulation’s requirements will come into effect on 31 December 2017. As well as publishing the EID for its own turbo option products, BinckBank is obliged to collect and issue EIDs for products traded using its systems.
Product regulation
UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES V (UCITS V) The Act amending the Directive for Institutions for Collective Investment in Securities came into effect on 18 March 2016. This implemented Directive EU/2014/91 to amend ICBE directive EU/2009/65 (UCITS V) in the Dutch Financial Supervision Act. The implementation of the Directive means that a permit is required by custodians of alternative investment funds (AIFMs) and custodians of institutions for collective investment (ICBEs) that hold a European passport to offer their products to retail investors – unless they are exempted from this requirement.
The purpose of UCITS V is to raise the transparency and protection of investors to a higher level. Subsidiary Think ETF Asset Management B.V. is fully UCITS V-compliant. 53 // Annual Report 2016 DEVELOPMENTS IN LEGISLATION AND REGULATION
Markets & Infrastructure
EUROPEAN MARKET INFRASTRUCTURE REGULATION (EMIR) EMIR was initiated by the European Commission to make trading in OTC derivatives more transparent and secure. EMIR is a European Regulation, which means that it has direct effect in the Member States of the European Union. EMIR contains rules governing the settlement of derivatives by a central counterparty (CCP), a permit obligation for CCPs and requirements for the collateral and portability of positions, even if the OTC derivative contracts are not settled via a CCP. EMIR stipulates that the details of all derivative transactions must be reported to a Trade Repository. All transactions must be reported, regardless of whether the contract was traded via the stock exchange, an MTF or OTC. Unlike the settlement obligation, the reporting obligation applies to all derivatives transactions. Trade Repositories are supervised by ESMA and are intended for the central collection of reports on derivatives transactions.
To the extent that BinckBank is involved in OTC derivatives transactions, all of the obligations are met.
Operational risk & data security
GUIDELINES FOR EFFECTIVE RISK AGGREGATION AND REPORTING (BCBS 239) Banks that qualify as global systemically important banks (G-SIB) must comply with the BCBS 239 directives with effect from January 2016. The BCBS also advises regulatory authorities to have these directives remain in effect for domestic systemically important banks (D-SIBs) within three years after qualifying in that capacity. The deadline is now approaching, but many banks are struggling to satisfy the guidelines.
The core of BCBS is that a bank must always have available a clear cross-section at any level of aggregation required. The BCBS directives basically amount to the following:
• The governance of the risk organisation, data architecture and IT infrastructure must support the flexible, reliable, and future-robust disclosure and reporting of risk data. • Data must be available at any level required and at any given time. This data is subject to strict requirements regarding Accuracy, Integrity, and Completeness. The risk data must at all times be reconcilable with the finance data. • This data is taken as a basis for generating reports that meet the requirements of Accuracy, Comprehensiveness, Frequency of Distribution, Clarity, and Usefulness.
Monitoring compliance The regulatory authorities are expected to continuously monitor whether the banks are complying with the principles throughout their organisations. To supervise the banks in a broader perspective, regulatory authorities should work together in different jurisdictions and exchange information.
General Data Protection Regulation (GDPR) The new European privacy regulation (GDPR) came into effect on 25 May 2016. Since that date, all organisations in the public and private sectors have been required to bring their operations into line with the GDPR, and have been given until 25 May 2018 to do so. After that date there will be just one privacy law throughout the European Union (EU). The Dutch Personal Data Protection Act (Wbp) will be repealed at that time. Non-compliance with the GDPR may result in fines of up to € 20 million or a maximum of 4% of the organisation’s global annual turnover. BinckBank will need to make significant investments in the IT infrastructure to meet the requirements of the GDPR. Processes such as these are generally lengthy. 54 // Annual Report 2016 DEVELOPMENTS IN LEGISLATION AND REGULATION
Reporting & Accounting
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) For developments concerning the IFRS standards, see the explanatory notes to the consolidated financial statements, paragraph 2.2, Changes in accounting principles, page 121.
Prudential & Supervisory authority
Local regulatory authorities such as DNB and Netherlands Authority for the Financial Markets (AFM) and European regulators such as the ECB and the ESMA regularly publish guidelines and recommendations on how certain national and European regulations should be interpreted and applied.
The timeline given below shows when new and/or amended regulations will apply to BinckBank.
before 2017 2018 201 and later 2017 J F M A M J J A S O N D e
c CRS n L a x i l M p A T a
m & o AMLD4 C
BRRD Liquidity Capital & CRD IV/CRR II
MiFID II Protection
Consumer PRIIPs/MiFID II
Markets & EMIR Infrastructure
BCBS 23
Security AVG Risk & Data Operational
IFRS
IFRS 15 IFRS 16 Accounting Reporting & 55 // Annual Report 2016 RISK MANAGEMENT RISK MANAGEMENT
RISK MANAGEMENT
The sections on risk management, capital management and liquidity management contain background information and explain how BinckBank has structured and controls its organisation. The tables also provide insight into the identified risks and the capital maintained for this purpose. More qualitative and quantitative information regarding risk management is also included in note 39. Risk management of the financial statements. The disclosures on risk management, capital management, and liquidity management are divided as follows: • Risk management describes risk governance, risk appetite, the management of the risk profile, and developments during 2016 in the various risk categories. • Capital management describes the capital structure, capital adequacy, and stress tests from a quantitative perspective. • Liquidity management describes the liquidity risk framework, the liquidity profile, stress tests, and contingency funding.
BinckBank’s approach to risk management is in keeping with its character and scale. BinckBank consciously operates a conservative risk profile in order to maximally mitigate the impact of unexpected events on its solvency, liquidity, and results. Policy, procedures, and systems are devoted to anticipating risks and prevent or limiting them wherever possible. Clear choices and the proper anchoring of risk management at every level of the organisation play an important role in this respect.
As part of the annual risk management cycle a number of policy documents are produced setting out how BinckBank shapes the management of capital and liquidity risks. These documents, the ICAAP for capital in relation to risks and ILAAP for liquidity are evaluated annually by DNB during the Supervisory Review and Evaluation process (SREP). BinckBank also draws up a Recovery Plan setting out early warning indicators and triggers in the capital and liquidity areas. The document also contains recovery measures that the bank can take in stress situations.
BinckBank’s risk management focuses primarily on the following risk types: • strategic risk; • solvency and liquidity risk; • credit risk; • interest-rate risk; • market risk; • operational risk; • financial reporting risk; • compliance risk. 57 // Annual Report 2016 RISK MANAGEMENT
MAIN RISK THEMES FOR BINCKBANK
Persistently low interest rates The persistently low interest rates in the Eurozone present a challenge in areas such as balance sheet management, interest rate risk, and the investment portfolio. The ECB’s expanded asset purchase programme is causing price increases and a fall in the returns of bonds included in BinckBank’s investment policy. Although the structurally ample liquidity position provides a strong buffer for the liquidity risk, it also exerts strong downward pressure on the interest result. The Asset & Liability Committee (ALCO) addresses the investment policy and interest risk management every month. Choices have been made in the investment policy whereby the investment mandate has been broadened to improve revenues without compromising on risk appetite. It has also been decided to extend the investments with an investment in Dutch residential mortgage loans. To prevent the liquidity buffer from increasing, well-considered choices are made when compiling the balance sheet, the financing strategy, and the pricing policy.
BinckBank transformation Driven by technological developments and changing customer needs, the financial sector is rapidly transforming. Traditional service providers in the financial sector are increasingly experiencing competition from non-traditional parties. This new group of competitors provides innovative products and services in specific market segments. BinckBank acknowledged this in 2015 and initiated a transformation based on a strategic reorientation in which new service concepts are developed and dependence on volatile transaction volumes is reduced. Execution risk is inherent to any transformation process. The BinckBank transformation is the most important focal point for the executive board and the supervisory board.
Mounting regulatory pressure The amount and complexity of new legislation and regulations affecting banks continues to rise sharply. As well as new and amended regulations of the European Banking Authority (EBA) and the Basel Committee in areas such as the standardised approach to credit risk, interest rate risk, resolution planning and reporting requirements, the regulatory authority is exerting more and more pressure on the staffs of banks within on-site investigations and intensified supervision. Complying with these regulations is an expensive business. In many cases, banks such as BinckBank are expected to meet the same requirements as large banks. Correct and timely implementation is complex and costly. BinckBank ensures that sufficient priority and capacity is given to meet current and new regulations in the legal, finance, treasury, and risk management area. 58 // Annual Report 2016 RISK MANAGEMENT
RISK MANAGEMENT
Risk governance
AUDITED Efficient and effective risk management is vital to the pursuance of BinckBank’s strategy. The risk management framework with the accompanying policy and systems is continuously improved and adapted to changes in the external setting and the internal organisation. Operational control measures have been described in detail and the effectiveness of these measures is periodically assessed.
Governance Structure & Three Lines of Defence BinckBank operates according to the Three Lines of Defence principle (3LoD). The 3LoD concept goes further than organisational structure and the designation of roles. BinckBank regards this as a form of operating, cooperating, and thinking, which is also the foundation of the risk culture. The first line in this structure is formed by operational management and support units that are responsible and answerable for the evaluation, management and mitigation of risks. The first- line departments are advised and monitored by second-line specialised departments: governance, risk & compliance (GRC), finance & control, and legal & regulatory. These departments are also responsible for managing risk management- related policy, processes and methodologies. The Internal Audit Department (IAD) forms the third line of defence that provides additional assurance to the executive board and the supervisory board by means of a risk-based approach. The executive board is responsible for effectively setting up and managing the governance risk compliance framework. This framework enables the executive board to formulate and monitor the risk appetite and to effectively perform risk management and internal control. The supervisory board and its subcommittees (the audit committee, the risk and product development committee and the remuneration committee) together with the external auditor form the last link in the governance risk compliance framework.
SUPERVISORY BOARD
Risk and Product Development Remuneration Committee Audit Committee Committee (RPC) (RemCo) (AC)
EXECUTIVE BOARD Risk & Legal & Asset & Liability Compliance Investment Architecture & Control Accounting Regulatory Disclosure Committee Committee Committee Data Board Committee Committee Committee Committee
RISK & INTERNAL CONTROL AUDIT FUNCTIONS DEPARTMENT OFFICES (IAD) Netherlands Belgium France Italy Spain Risk & control
monitoring Finance Business Product Investment ICT & Control Management Management Management 59
Legal Audit on // SUPPORT DEPARTMENTS Management st nd
Quality & Regulatory 1 and 2 line control Safeguard Treasury & Operations Internal control Communication ALM (incl. CRM) measures Governance Risk & Compliance Owner of risk
Fin. Admin. Human Other en reward line) nd Risk
Risk reporting (2 & Reporting Resources support reporting (1st line)
ST ND RD 1 LINE ‘OF DEFENCE’ 2 LINE ‘OF DEFENCE’ 3 LINE ‘OF DEFENCE’ Annual Report 2016 RISK MANAGEMENT
Supervisory board The supervisory board discusses the strategy and the risks associated with the business each year, and, on the basis of
AUDITED reports, assesses the structure and operation of the internal risk management and control systems. Supervision of the provided financial information by the company is the responsibility of the supervisory board. The executive board submits the risk appetite to the supervisory board for approval each year. Significant interim changes to the risk appetite are also submitted to the supervisory board for approval. The supervisory board has three subcommittees: the audit committee, the remuneration committee and the risk and product development committee. These subcommittees are explained in more detail in the table below.
SUBCOMMITTEE OBJECTIVE RISKS
Risk and product The risk and product development committee handles subjects concerning • Credit risk development committee the credit risk, market risk, interest risk, solvency and liquidity risk, operational • Market risk risk. It also advises the Supervisory Board on matters including the risk profile • Interest-rate risk and the risk appetite of BinckBank. It further tests whether new products or • Solvency risk changes to existing products, systems, and services comply with the risk • Liquidity risk appetite and the duty of care to the client. • Operational risk • Investment policy on discretionary asset management products • Data and information risk
Audit Committee (AC) The audit committee is responsible for overseeing the design and operation • Financial reporting of the internal control system and risk management measures, and for and disclosure risk monitoring the implementation of the external auditor’s recommendations • Compliance risk and the functioning of the IAD. • Legal risks
Remuneration Committee The RemCo advises the supervisory board on matters including the • Personnel & (RemCo) remuneration of the executive board and advises on the remuneration remuneration of designated persons within the senior management (identified staff) and employees in the control functions.
Executive board The executive board is responsible for establishing, implementing and, if necessary, adjusting the Company’s risk policy. The executive board ensures that risk management is adequately structured so it is aware of material risks to which the company is exposed in sufficiently good time for these risks to be controlled. Decisions that could materially affect the risk profile, capital allocation or liquidity requirement are taken by the executive board.
There are a number of governance committees (executive board subcommittees) whose members include representatives of the executive board and the first and second lines who are closely involved in the management of certain risks. These subcommittees are explained in more detail in the table below.
The governance committees have an advisory role towards the executive board and operate under a charter that is approved by the executive board. The governance committees can issue mandates for individual departments within the charter. Monitoring of the risk appetite is carried out within the relevant governance committees. 60 // Annual Report 2016 RISK MANAGEMENT
SUBCOMMITTEES OF THE EXECUTIVE BOARD OBJECTIVE RISKS
AUDITED Asset & Liability Committee The ALCO monitors all the risks affecting BinckBank’s balance sheet. The ALCO • Credit risk (ALCO) is mainly concerned with the management of credit risk, market risk (currency • Market risk risk) and the interest-rate risk, and also assesses the adequacy of BinckBank’s • Interest-rate risk liquidity and capital position. This committee also sets the investment policy • Solvency risk for the interest rate business. • Liquidity risk
Accounting Committee (AcC) The financial reporting and disclosure risk is monitored by the AcC. • Financial reporting This body focuses on the management of risks associated with accounting and disclosure risk processes, accounting manuals, accounting policies, provisions and the application of new accounting standards (IFRS).
Risk & Compliance The risk & compliance committee oversees operational and compliance risk in • Operational Risk Committee (RCC) the banking business This committee has important tasks in ensuring sound • Compliance Risk and controlled operations. It further tests whether new products or changes • Approval new to existing products, products services and services comply with the risk products appetite and duty of care towards the client.
Legal & Regulatory Committee The purpose of the legal & regulatory committee is to oversee the timely • Legal Risks (LRC) identification of new developments in relevant legislation and regulations, determine their impact on BinckBank and control the legal risks.
Investment Committee (IC) The Investment Committee supervises the implementation of the investment • Investment policy on policy for the product asset management products. The investment discretionary asset committee assesses changes to the investment policy and approves these management where necessary.
Architecture & Data Board The purpose of the Architecture & Data Board is to advise the executive board • Data- and on the use of data and information and to bring ICT systems and architecture information Risk in line with the future strategic direction.
Disclosure Committee The disclosure committee supervises the disclosure of price-sensitive • Reporting and information. This committee also supervises the measures that are adopted clarification risk within the organisation to deal confidentially with potentially price-sensitive information.
ADVISORY COMMITTEE OBJECTIVE RISKS
Control Committee Each year, on the instructions of the RemCo, the Control Committee performs • Personnel & a risk analysis on the implementation of the remuneration policy and reports remuneration on this to the RemCo. The Control Committee also conducts an annual audit to determine whether the remuneration policy complies with the relevant legislation and regulations and the applicable recommendations. 61 // Annual Report 2016 RISK MANAGEMENT
RISK APPETITE
Introduction Risk appetite is the degree to which BinckBank is prepared to accept risk in its business operations in order to achieve its objectives. Risk appetite involves a balance between risk and return and is a core element of BinckBank’s business operations. Commercial interests and returns are weighed up against the risks involved. The executive board also considers the interests of all stakeholders when determining risk appetite. Their expectations with respect to the risk profile, the risk appetite, and the return are also taken into account. The executive board of BinckBank forms an impression of this by combining various information sources and during numerous discussions with its stakeholders. Risk appetite is the main parameter within BinckBank’s risk management system and thus constitutes the starting point for risk management. The risk appetite is monitored by means of a risk dashboard. This sets quantitative standards in order to assess whether BinckBank has remained within its own risk appetite. Key Risk Indicators (KRI) and Key Performance Indicators (KPI) are included in this dashboard and represent BinckBank’s risk profile as closely as possible. Monthly monitoring in the governance committees makes it possible to make timely adjustments and keep the current risk profile within accepted risk appetite parameters. 62 // Annual Report 2016 RISK MANAGEMENT
BinckBank’s risk appetite in 2016 Since BinckBank is an organisation that operates in a dynamic and complex environment, there may be differences between the desired and the actual risk profile. In cases where the actual risk profile is higher than the desired risk profile, BinckBank has taken measures to return the profile to within the desired risk appetite. BinckBank conducts its business on the basis of an appropriate balance between risk and return, and strives to accept risks in a conscious and responsible way. It also strives for a moderate risk profile.
RISK CATEGORY RISK APPETITE VERY LOW LOW MEDIUM HIGH VERY HIGH
RISKS 1 2 3 4 5
STRATEGIC RISK Reputation
Business risk (profitability)
SOLVENCY & LIQUIDITY Capital adequacy
Liquidity risk
CREDIT RISK Credit risk on investment portfolio & cash positions
Credit risk on col. loans & margins
Credit risk on mortgages (new)
Counter-party risk
INTEREST RATE RISK Interest rate risk in the banking book
MARKET RISK Currency risk
OPERATIONAL RISK People
Processes
Projects & Changes (execution power)
IT systems & information risk
Outsourcing risk
Model risk
FIN. REP. & DISCL. RISK Financial reporting & disclosure risk
COMPLIANCE RISK Compliance risk
LEGAL RISK Legal risk
Desired risk profile (Risk Appetite) Average desired risk profile 63 // Annual Report 2016 RISK MANAGEMENT
MANAGEMENT OF THE RISK PROFILE
This chapter deals with the management of and developments concerning the various risks and their influence onBinckBank’s risk profile. Internal developments and improvements to control measures that have been implemented in 2016 are also discussed.
Management and development of strategic risk Strategic risk within BinckBank is defined as exposure to a strategy that proves to be ineffective or is inappropriate for the continuity of the business, the earnings model, and the duty of care towards customers. Strategic risk is broken down into reputational risk and business risk.
For BinckBank, the trust of the customer and other stakeholders is essential and BinckBank therefore strives to minimise risks that could damage its reputation as far as possible. In 2016 the reputation risk was adversely affected by publications regarding law suits and the fines imposed by the AFM for the advertisements of Alex Vermogensbeheer and the late reporting of transactions in financial instruments. Despite the potentially adverse effects of this in the short term, BinckBank feels that transparency benefits the reliability and reputation of the organisation in the longer term.
BinckBank’s business risk is the risk of company objectives not being met and is mainly expressed in its dependence on the transaction volume in the financial markets. This makes BinckBank’s profitability heavily reliant on the sentiment and volatility of the stock exchange. To reduce the business risk various projects were started in 2016 with the aim of creating a more stable revenue stream. Examples include the launch of ‘Binck Laten Beleggen’ in Belgium, investing in the Dutch residential mortgage market and the launch of ‘Binck Sparen’.
Management and development of the solvency and liquidity risk The minimum amount of capital to be held is calculated using standardised and proprietary models. The available capital at BinckBank exceeds the minimum that must be held in accordance with the models. BinckBank assesses whether the available capital is adequate to withstand a period of stress by means of monthly stress tests. BinckBank translates the low risk appetite in the area of capital adequacy into a minimum internal Pillar I capital ratio of 15%. As at 31 December 2016, BinckBank had a comfortable capital ratio of 31.9% (2015: 40.2%) and thus easily complies with the desired risk profile.
Liquidity risk is the risk that a demand will be made for the payment of liabilities at a time when assets cannot be converted into cash at prevailing market conditions. BinckBank has a low risk appetite in the area of liquidity risk and, in order to achieve this, its bond portfolio investments are made mainly in liquid assets in the form of bonds that can be traded on a daily basis. BinckBank is also working on defining various exit scenarios for its mortgage portfolio with the aim of mitigating the liquidity risk.
BinckBank reassessed the adequacy of its capital and liquidity position at the end of December 2016 and concluded that its total available capital of € 245.5 million and available liquidity were sufficient at that time to cover the risks associated with its business operations. BinckBank remained within its desired risk profile for capital adequacy and liquidity risks in 2016. 64 // Annual Report 2016 RISK MANAGEMENT
Management and development of credit risk Credit risk is the risk of a counterparty and/or issuing institution that is involved in the trade or issue of a financial
AUDITED instrument defaulting on an obligation and thus harming BinckBank financially. Credit risk within BinckBank is broken down into risks on investments and cash, mortgage receivables, collateralised loans, margin, and counterparty risk. • BinckBank has a low desired risk profile for credit risk in the investment portfolio. Investment portfolio purchases must have a long-term credit rating of at least single A (Fitch or equivalent). BinckBank limits the credit risk in its own portfolio by aiming for adequate diversification in its investments through limits on each individual investment. • The desired risk profile for mortgage receivables, collateralised loans, and margin risk is also low. BinckBank wishes to avoid a situation in which it has an uncovered credit exposure to its customers and thus runs a credit risk in respect of its customers. BinckBank can limit the credit risk in respect of its customers by continuously monitoring lending and the collateral for the loans it provides. • For BinckBank, counterparty risk is the risk it incurs on counterparties in financial transactions itself, after a price has been agreed but the transaction has not yet actually been settled. If the counterparty defaults, BinckBank is exposed to the risk that a similar transaction can be effected only on less favourable terms.
BinckBank deals prudently with the funds entrusted to it by its customers. Funds entrusted, which are not used for collateralised loans and mortgage loans, T are partly held in cash with the remainder being invested through the investment
portfolio.60 Lending is conducted in a responsible manner in accordance with the established risk appetite. BinckBank’s objective with its investment portfolio is to place surplus liquidity in the market in such a way as to optimise the interest margin between the cost of raising and lending funds.
40 The risk profile in relation to the credit was raised slightly in 2016 by changing the investment policy in such a way that more is invested in investment grade bonds of European banks. In the context of its strategic objective to achieve a more balanced income, a sum of € 520 million was invested in Dutch residential mortgage loans during 2016. 20 BinckBank offers customers various forms of lending against securities collateral. This advance funding can be used to T cover margin requirements or for the purchase of securities. BinckBank has a potential or actual credit risk in respect of 100 the customer in both cases. Due to the nature of the collateralised loans and the surplus collateral received, the credit risk 0 80 is limited.NHG To illustrate the 75 risk, the loan75- 0 is shown in 0-100 graph form as>100 a percentage of the available collateral. of the value of the collateral 60 COVERAGE LEVEL OF SECURITIES-BASED CREDIT 40 20
0 NHG 75 75- 0 0-100 >100 250 of the value of the collateral
200
150 100
80 100 60
40 50 20
0 75 75- 0 0-100 >100 0 >0 - 50 >50 - 75 >75 - 100 >=100 of the value of the collateral of the value of the collateral 65 // Annual Report 2016 Annual Report 2016 // 66 guaranteed Government Government/
The rise in the exposure to private individuals is being caused mainly by the investments in Dutch residential mortgages. residential Dutch in investments the by mainly caused being is individuals toprivate exposure the in rise The PER CONCENTRATION ECONOMICRISK SECTOR statements. financial the in 39 note toexplanatory made is reference graphs the of all about information more For insights. concentration various into down broken are assets financial the below tables the In CREDIT RISK CONCENTRATIONS risk. 172page Credit statements, financial the of chapter Management Risk tothe made is reference risk credit about information more For Reported). Not But Incurred including (€ 575,000 to € 461,000 provisions specific the (2015: takes 92%). purpose This this for (2015: created loans was 0.1%). 80% of impaired of Aprovision consisted portfolio 2016, credit 0.7% the year-end of At created. been has a provision which for those are loans Impaired IMPAIRED LOANS ratio. (LTV) loan-to-value the on based portfolio mortgage the of quality the of overview an is below Given set. been have standards quality credit strict which in Obvion, from portfolio mortgage residential existing an purchased also has BinckBank criteria. acceptance strict with accordance in issued are mortgages These provider. service AFM-licensed an Credit, Dynamic by provided are management and administration, sales, marketing, the which in structure collective in a fginancer the as in 2016.acts It loans mortgage residential Dutch of financing the in investing began BinckBank MORTGAGES (in €million) 20 40 60 100 150 200 250 0 Retail 50 0 guaranteed Government Government/
(in €million) Retail >0 -50 NHG Corporate Total Corporate 75 >50 -75 Total of thevaluecollateral of thevaluecollateral Central banks Financial institutions T 75- 0 Central banks Financial institutions >75 -100 0-100 RISK MANAGEMENT
>=100 >100 guaranteed Government Government/
(in €million) Retail guaranteed Government Government/
(in €million) Retail Corporate 100 100 20 40 60 80 20 40 60 80 0 0 Total Corporate NHG 75 Central banks Total of thevaluecollateral of thevaluecollateral 75 75- 0 Central banks T Financial institutions 75- 0 0-100 0-100 Financial institutions >100 >100 AUDITED between AA+enAA- Other EU-countries between A+enA- Long termrating Long termrating Committee on the change to the capital requirements for the interest rate risk. rate interest the for requirements capital tothe change the on Committee Basel the of proposals the as such risk, rate interest the governing legislation new and tocurrent changes for itself preparing and following also is BinckBank profile. risk rate interest the in changes tomanage BinckBank positions better model This model. risk rate interest a new implementing by management risk interest its improved 2016In BinckBank 2016the year. during profile risk rate interest BinckBank’s changed other. This the on Obvion from mortgages existing of portfolio a purchasing by and hand, one the on partner a with together mortgages new financing by done was This loans. mortgage residential Dutch in entrusted funds investing with astart made 2016 of BinckBank beginning the at rates, more challenging To for portfolio. the investment reduce dependence its on in movements short-term market interest even consideration risk-return the makes This bonds. other and government on returns the in decline toafurther led resulted in a decline in interest ECB income The purchase asset expanded from programme portfolio. the investment has has rates interest market in development This fall. to continued also rates interest long-term the ever, and time first the for year a whole for negative were rates interest short-term The levels. rate interest in fall afurther by 2016 marked was risk. rate interest long-term the and interest short-term the both considering policy, risk rate interest prudent a pursues BinckBank value. market bank’s the and result rate interest the both affect thus can movements rate Interest accordingly. change value present net the and/or flows, cash interest moves, curve yield the When movements. rate tointerest bank the of value market the and/or result interest the of sensitivity the concerns risk rate interest The risk interest-rate of development and Management 2015 AND 2016 AT DECEMBER AS ASSETS FINANCIAL OF CATEGORIES RISK DNB. at held position cash larger the and mortgages residential Dutch in investments the by mainly caused being is exposure geographical Netherlands’ the in rise The LOCATION CONCENTRATION BYRISK GEOGRAPHICAL Belgium, France,Italy Germany
(in €million) between AA+enAA- (in €million) Other EU-countries between A+enA- Long termrating Long termrating Long termratingBBB+ Belgium, France,Italy Germany North America
(in €million) (in €million) Long termratingBBB+ North America Other countries Lange termijnratingtussenAAA Lange termijnratingtussenAA+enAA- Lange termijnratingtussenA+enA- Lange termijnratingBBB+ Geen rating Total Other countries Total No rating Supra-national Lange termijnratingtussenAAA Lange termijnratingtussenAA+enAA- Lange termijnratingtussenA+enA- Lange termijnratingBBB+ Geen rating Total Total No rating Supra-national Netherlands rating AAA Long term Netherlands rating AAA Long term RISK MANAGEMENT between AA+enAA- Other EU-countries Long termrating between A+enA- Long termrating
(in €million)
between AA+enAA- (in €million) Other EU-countries Long termrating Germany between A+enA- Long termrating Long termratingBBB+
North America (in €million) (in €million) Germany Long termratingBBB+ North America Other countries Lange termijnratingtussenAAA Lange termijnratingtussenAA+enAA- Lange termijnratingtussenA+enA- Lange termijnratingBBB Geen rating Total Total Supra-national No rating Other countries Lange termijnratingtussenAAA Lange termijnratingtussenAA+enAA- Lange termijnratingtussenA+enA- Lange termijnratingBBB Geen rating Total Total No rating Supra-national Belgium, France,Italy Netherlands rating AAA Long term Belgium, France,Italy Netherlands rating AAA Long term
Annual Report 2016 // 67 RISK MANAGEMENT
BinckBank pursues a prudent interest rate risk policy, which considers both the short-term and the long-term interest rate risk. The short-term interest rate risk is addressed mainly from the perspective of income (earnings-at-risk). The earnings-
AUDITED at-risk analyse studies the sensitivity of the one-year interest rate result among several interest rate scenarios. For the long-term interest rate risk it is mainly the economic value calculation that is used. This calculation considers the change in value of assets and liabilities as a result interest rate movements. Investing in Dutch residential mortgages has placed BinckBank’s 2016 interest rate risk position in line with the risk appetite.
The following diagrams illustrate the interest rate sensitivity of BinckBank on the basis of the contractual interest rate to maturity of financial assets and liabilities.
INTEREST RATE MATURITY CALENDER AS AT 31 DECEMBER 2016
Assets Liabilities
1 month
> 1 month 1 year
> 1 year 5 year
> 5 year 10 year
> 10 year
Non-interest bearing
3,500 3,000 2,500 2,000 1,500 1,000 500 0 500 1,000 1,500 2,000 2,500 3,000 3,500
INTEREST RATE MATURITY CALENDER AS AT 31 DECEMBER 2015
Assets Liabilities
1 month
> 1 month 1 year
> 1 year 5 year
> 5 year 10 year
> 10 year
Non-interest bearing
3,500 3,000 2,500 2,000 1,500 1,000 500 0 500 1,000 1,500 2,000 2,500 3,000 3,500
For further information regarding interest rate risk we refer to chapter Risk management, paragraph 6 Interest rate risk in the financial statements, page 182.
Management and development of market risk The market risk at BinckBank is expressed in the currency risk. Currency risk is the risk presented by movements in the value of items denominated in foreign currencies due to movements in exchange rates and its effect on BinckBank’s AUDITED capital and/or results. The policy is not to take active foreign-exchange trading positions. Currency positions can therefore arise only as a result of the facilitation of customer transactions. Currency positions are hedged until 10:00 PM on the same day. The remaining net overnight positions are hedged on the next trading day and do not exceed € 150,000 on average. BinckBank considers this to be accepted risk. 68 // Annual Report 2016 RISK MANAGEMENT
Management and development of operational risk
AUDITED CONTROL OF THE OPERATIONAL RISK The operational risk is the risk of losses being caused by inadequate or deficient internal processes and systems, human error or external events and fraud. Due to the nature of its business activities, BinckBank has a high inherent operational risk. Operational risk is determined by various factors including the large number of complex administrative entries that must be processed on a daily basis. Another important aspect of the operational risk is that communication with the customer and third parties (stock exchanges) is primarily via the internet or telephone. This means that daily practice depends heavily on ICT and external connections. As a result, BinckBank is inherently sensitive to ICT disruptions. A third aspect that leads to a high inherent operation risk is the fact that BinckBank is committed to innovating and improving its services, which results in the regular implementation of system adjustments and improvements.
A framework of processes, systems and accompanying control measures has been established to consistently control operational risks. Together with a clear organisational structure within the 3LoD model, this forms the basis for the design of internal control system. BinckBank runs a number of risk management processes through the first-line departments. Risk management in the second line of defence has a coordinating, advisory, and monitoring role to safeguard the correct functioning of the first-line risk management processes. Despite the large number of risk-mitigating measures in the risk management framework, it is still possible for BinckBank to be faced with an operational loss. BinckBank is insured with third parties for certain types of operational loss. This insurance includes policies for directors’ and officers’ liability, corporate liability, professional liability, inventory, reinstatement costs, and trading loss.
The internal target for 2016 is for these operational losses on normal business not to exceed 1.4% of the total income from operational activities on an annual basis. Operational losses in 2016 amounted to 0.90% (0.85% in 2015) of the total income from operational activities. These operational losses mainly consist of the financial result of out-trades, compensation for customers (claims) and losses resulting from faults in the IT systems, and operational processes. Movements in current claims and provisions for operational losses are included.
SPECIFIC OPERATING RISKS ICT risk Since the business activities of BinckBank depend heavily on ICT, a significant proportion of the operational risk concerns ICT risk. Deficiencies in ICT can constitute a significant threat to critical business processes and customer services. To reduce this risk, specific control measures have been implemented. These include measures in the areas of IT administration, software development and cybersecurity.
Information security Information security is regarded as a company-wide responsibility to protect customer and commercial information. The second line is responsible for formulating the strategic information security policy and the risk management framework, and monitors the correct adherence to this policy. The first line of defence is responsible for the security of BinckBank’s systems, applications and data. Taking the appropriate measures based on targeted risk assessments for business and IT processes guarantees that the data of our customers and our commercial data are properly protected.
Business Continuity Management (BCM) The availability of critical services and the security of customers, visitors, and employees are of the highest importance to BinckBank. In order to ensure the availability of its critical services, BinckBank has implemented a BCM process. BCM forms part of the overall risk management framework. The business continuity council meets at least once a quarter. In the event of a disaster, this council also acts as the crisis team and operates on the basis of a clearly defined and tested crisis management process. BinckBank also has a financial recovery plan. which describes the measures BinckBank can take to recover from a financial or other crisis on its own initiative.
DEVELOPMENTS IN OPERATIONAL RISK 69
Implementation of the operational excellence strategy continued in 2016 and will result over time in a reduction of the // operational risk profile. As product innovation is an essential element of BinckBank’s strategy, it is vital that all departments involved in change management collaborate in an efficient and effective manner.
In 2016 further investments were made in network and computer system security in response to the development in the IT risk. During this year BinckBank made improvements by rolling out systems and a method that makes it easier for the organisation to maintain control of the systems that seek a connection with our network. The desktop systems were also
given better protection against malware. Annual Report 2016 RISK MANAGEMENT
Management and development of financial reporting risk The financial reporting risk is the risk of BinckBank failing to satisfy the legislation and regulations with regard to reports under the heading of financial reporting and the disclosure of information to the market, governments and regulatory authorities. BinckBank endorses the importance of providing accurate, timely, and comprehensive reports to the market, governments, and regulators. At all levels of external reporting, from regulator reports and financial statements to tax reports, there has been an increase in demand in recent years for information, data points, and detailed reports and demand is expected to rise even more so in the coming years. Consequently, BinckBank has expanded and strengthened its reporting function over the past few years through the appointment of various specialists. In addition, external advisers are brought in where needed to support internal specialists in certain areas. BinckBank has established stringent standards with regard to the timeliness and accuracy of the reports in order to meet the external requirements. These standards are monitored on a monthly basis. Monitoring of the external financial reports is the responsibility of the accounting committee and the audit committee. By taking these measures, BinckBank strives to apply the right knowledge in all areas of reporting in an adequate internal control environment.
Management and development of legal and compliance risks The legal and compliance risk is the risk that BinckBank will fail to comply with applicable legislation and regulations, which may lead to damage being suffered. BinckBank places a high priority on integrity and reliability, and emphasises this by means of its code of conduct, house rules, insider trading regulations, and whistle-blower’s scheme. BinckBank strives to comply with all existing, changing and new legislation and regulations in a commercially responsible manner.
SYSTEMATIC ANALYSIS OF INTEGRITY RISKS In the first quarter of 2016, BinckBank performed a systematic integrity risk analysis (SIRA) in the Dutch branch based on guidelines supplied by De Nederlandsche Bank. The purpose of the SIRA is to acquire a comprehensive understanding on an on-going basis of the compliance and integrity risks that BinckBank faces. This involves a further analysis of today’s compliance risks, which include anti-money laundering (ALM) and market abuse, but also less obvious compliance risks such as those in the areas of culture, behaviour, and tax evasion. The analysis was integrated throughout the year in the control framework and in the management information to the executive board and the audit committee. The third quarter of 2016 saw a start with the implementation of SIRA in the other branches (Italy, France, and Belgium). This is expected to be completed at the beginning of 2017.
ROLLOUT OF NEW COMPLIANCE CONTROL FRAMEWORK In 2016, an integrated Compliance Control Framework was rolled out at all branches. This integrated Compliance Control Framework replaces the current compliance controls at the branches, and uniform key risks and controls have now been implemented on all compliance themes. This has further strengthened the central monitoring role of the compliance function.
In the year under review, a lot of attention was paid to the various regulatory projects. The biggest theme at the beginning of 2016 was the implementation of the Market Abuse Directive/Market Abuse Regulation (MAD/MAR). In anticipation of the implementation of the MAD/MAR in July 2016, BinckBank invested in 2015 in the implementation of an automated monitoring system in 2015 for the detection of patterns of market abuse or market manipulation in the trading behaviour of its customers and employees. In 2016, we considered ways of further improving this system’s effectiveness. Changes were made to the policy and awareness training courses were given to the relevant departments.
During the course of the year, a lot of time was also invested within the current project into carrying out an in-depth GAP analysis for the Markets in Financial Instruments Directive/Regulation (MiFID II/MiFIR). This European legislation will come into effect in 2018 and will have a considerable impact on the financial markets and on the services provided by BinckBank. Other legislation that called for a lot of time and investment in 2016 included the implementation of the Packaged Retail Investment & Insurance-based investment Products Regulations (PRIIPs) and Common Reporting Standards (CRS). 70 // Annual Report 2016 RISK MANAGEMENT
CAPITAL MANAGEMENT
Introduction BinckBank’s capital requirement is determined on the basis of the risk appetite and strategy, taking into account the expectations and requirements of external stakeholders, such as customers, regulators, and investors. The capital adequacy of BinckBank is monitored constantly and compared with the risk appetite and strategy. BinckBank’s capital management is intended to maintain a solid solvency position. In the design of its capital structure, BinckBank takes account of the thresholds set by DNB, the Wft, European regulations, and its own internal requirements with respect to capital adequacy.
BinckBank also takes into consideration expected developments in legislation and regulations with regard to capitalisation. The current capital position and capital requirement are discussed by the Asset and Liability Committee (ALCO) on a monthly basis. Adjustments can then be made if and when necessary.
Management and development of capital adequacy
CAPITAL STRUCTURE BinckBank holds capital to cover the risks it incurs as a result of the conduct of its business. The amount and quality of the capital is determined on the basis of IFRS and the provisions established in the Capital Requirement Directive (CRD IV) and AUDITED the Capital Requirement Regulation (CRR). BinckBank’s equity capital consists of its paid-up and issued share capital, the share premium reserve, the fair value reserve, retained earnings, the result in the current financial year (adjusted for the interim dividends previously distributed), and the value of the minority interests. Treasury shares are deducted from equity. In order to calculate the Tier 1 core capital, prudential adjustmentsare made for the items of goodwill (adjusted for deferred taxation), intangible assets, minority interests, unappropriated profit in the current financial year, and reserves for future distribution of dividend and capital. The equity capital is moreover adjusted for the prudent valuation of financial instruments carried at fair value in the balance sheet. The table overleaf shows the composition of equity capital and core capital as at 31 December 2016. 71 // Annual Report 2016 RISK MANAGEMENT
AVAILABLE CAPITAL AND CORE CAPITAL
(amounts in € 000’s) 31 December 2016 31 December 2015 AUDITED Issued share capital 7,100 7,100
Share premium reserve 361,379 361,379
Treasury shares (29,468) (4,979)
Fair value reserve 1,021 1,526
Retained earnings 51,003 41,532
Result financial year 4,534 29,626
Non-controlling interests 1,383 1,296
Total equity 396,952 437,480
Less: goodwill (144,882) (144,882)
Plus: deferred tax liabilities related to goodwill 32,273 28,651
Less: other intangible fixed assets (23,204) (45,417)
Less: prudent valuation adjustment (724 ) (1,167)
Less: non-controlling interests (1,383) (1,296)
Less: proposed dividend in accordance with dividend policy (13,490 ) (17,750)
Less: unappropriated profit adjusted for interim dividend and proposed final dividend - (2,037)
Tier 1 Core capital (CET1) (A) 245,542 253,582
Banks are exposed to various risks resulting form their daily activities. Banks need to retain capital to cover potential losses that may arise from the risks so that, when they are faced with such losses, they are still able to pursue their activities. The capital ratios form an important parameter for these banks in this respect.
CAPITAL RATIOS The CRD IV and CRR directives are applicable to all banks in the Netherlands. This integrated framework for bank supervision consists of three pillars: • Pillar 1: External capital requirements for credit risk, market risk, and operational risk; • Pillar 2: Internal processes for risk management and for the calculation of internal capital requirements, economic capital and how the regulatory authority views these internal processes (the Supervisory Review); • Pillar 3: Obligation to provide risk information for external stakeholders.
Pillar 3 concerns the obligation to provide risk information for external stakeholders and supports the determination of the minimum solvency requirements (Pillar 1) and the solvency requirements laid down by the management (Pillar 2). The purpose of Pillar 3 is to improve the quality of the institution’s risk management through the disciplinary market effect. BinckBank has made the Pillar 3 report separately available on its website.
EXTERNAL CAPITAL RATIOS 72
// Under current legislation banks are required to maintain a capital buffer to absorb risks resulting from the banking operations. Pillar 1 provides guidelines for calculating the minimum capital that the regulatory authorities require them to maintain for credit market, settlement and operational risks. The regulations provide a number of variants of capital calculation methods for these risks, ranging from relatively simple to advanced. Banks have the option of choosing one of these methods under certain conditions. Various quality requirements are linked to this choice. Once a bank decides to switch to a more advanced method it is no longer possible to go back to a simpler one. Annual Report 2016 AUDITED and hedge currency positions resulting from operational activities, this does not lead to a risk-weighted item. item. toa risk-weighted lead not does this activities, operational from resulting positions currency hedge and currency foreign in positions trading active totake not is policy its since but risk, currency the is risk market BinckBank’s portfolio. bond the in exposures the than method standardised the under weighting risk average ahiger features which mortgages, residential Dutch in investment tothe attributed largely be can risk credit the to related items risk-weighted the in increase The CRR. the in defined as weighting arisk by provisions and adjustments value of net exposures individual all multiplying by determined are risk credit the for items risk-weighted The CRR. the in method standardised the under determined are items risk-weighted the how shows overview following The CRR. the in described as risk operational and risk, settlement risk, credit for items risk-weighted the calculating for method standardised the uses BinckBank ERATI NA RISK SETT EMENT RISK RE IT RISK Off-balance sheetitems: unsettled transactions Exposure relatedto price differencesof Asset management Other adjustments Assets, adjusted Retail Brokerage Agency Services minus: 168,086 minus: 14,524 Retail Banking Total assets 3,800,261 on Tier1 1 ,33 8,727 17,533 26,771 7,654 56 12 15 12 12 Average factor: 18 RISK MANAGEMENT valuation adjustment Capital Requirements Capital Requirements Exposure after and provision 3,816, 0 18,312 10 risk weight risk weight risk weight x 1250 x 1250 Average Average Average 14.1 exposure amount exposure amount exposure amount exposure amount Risk weighted Risk weighted Risk weighted risk weighted (amounts in€000’s) 53 ,650 228,8 8 768,675 Total 127
Annual Report 2016 // 73 RISK MANAGEMENT
Settlement risk, on the other hand, does lead to risk-weighted exposures when a securities transaction is not settled in time and settlement leads to a loss for BinckBank. The amount of the risk-weighted exposure is dependent upon the
AUDITED difference between the market price and the agreed settlement price and upon the number of days that the settlement date has been exceeded.
BinckBank uses the standardised approach (SA) to calculate its operational risk. Under the SA, the operating income in the three preceding financial years is divided into various business lines. The average operating income per business line multiplied by the risk weighting of the business line is the risk-weighted exposure for operational risk.
ADDITIONAL CAPITAL BUFFERS With effect from 1 January 2016 banks are required to maintain a number of additional capital buffers over and above the required capital required capital for credit risks. The following buffers are relevant to BinckBank:
Countercyclical capital buffer The countercyclical capital buffer takes account of the credit cycle and the risks of excessive credit growth in the country in question. The minimum countercyclical capital buffer is 0% and the maximum is 2.5% of the relevant risk-weighted items and it must be drawn from the company’s equity (Tier 1 core capital) The institution-specific countercyclical buffer calculated by BinckBank is currently nil, chiefly because most of the country-specific countercyclical buffer requirements have been set at nil by the competent authorities.
Capital conservation buffer The capital conservation buffer was designed to ensure that banks accumulate additional capital buffers over and above the minimum capital requirements outside stress periods.
The framework reduces the choice of banks that have exhausted their capital buffers to further reduce them by paying generous dividends, thus discouraging them from engaging in ‘unacceptable practices’ such as: • using recovery forecasts to justify continuing to make generous payments to shareholders. It is the shareholders, not the savers, who should bear the risk of recovery not materialising; • attempting to use capital allocation as a way of calling attention to their financial strength.
The capital requirements will be increased in phases each year from 0.625% of the risk items from 2016 to 2.5% in 2019. The buffer requirements of the capital conservation buffer total € 4.8 million. The mark-up for 2017 is 1.25%.
LEVERAGE RATIO The leverage ratio is a simple non-risk sensitive standard under which capital is divided by a sum of balance sheet items and off-balance sheet items. The unweighted balance sheet total rose in 2016 owing to the increase in the funds entrusted. The prudential adjustments decreased because the derivatives positions held on behalf of clients are no longer counted in the risk standard owing the amendment to the Dutch Securities (Bank Giro Transactions) Act.
INTERNAL CAPITAL RATIOS BinckBank also uses an internal capital requirement for calculating the amount of capital to be held. The adequacy of this internal capital requirement is assessed periodically and can lead to higher or lower internal capital requirements. BinckBank uses a minimum internal capital requirement for the Pillar I Total Capital Ratio (TCR) of 15% and a minimum leverage ratio of 3.5%. 74 // Annual Report 2016 RISK MANAGEMENT
The table below reflects the capital ratio’s.
AUDITED CAPITAL RATIOS
(amounts in € 000’s) 31 December 2016 31 December 2015
CAPITAL RATIO – PILLAR I
Total Tier 1 core capital (A) 245,542 253,582
Credit risk 539,650 386,339
Settlement risk 127 72
Operational risk 228,898 244,252
Total risk weighted exposure – Pillar I (B) 768,675 630,663
Capital ratio – Pillar I (=A/B) 31.9% 40.2%
Required capital based on CRR (=B*8%) 61,494 50,453
Capital conservation buffer (=B*(2016: 0.625%, 2015: 0%)) 4,804 -
Countercyclical buffer - -
Required capital based on CRR including buffers 66,298 50,453
Required capital based on internal standard (=B*15%) 115,301 94,599
CRR buffers 4,804 -
Required capital based on internal standard including buffers 120,105 94,599
LEVERAGE RATIO
Risk measure for leverage ratio:
Unweighted balance sheet total 3,800,261 3,436,335
Prudential adjustments (139,791) 124,022
Risk measure (C) 3,660,470 3,560,357
Leverage ratio (=A/C) 6.7% 7.1%
Required capital based on CRR (3.0%) 109,814 106,811 75 //
Required capital based on internal standard (3.5%) 128,116 124,612
For 2015 and 2016, the table above shows that the leverage ratio is the most restrictive standard (required capital) based on internal standards. Annual Report 2016 RISK MANAGEMENT
Developments in regulations concerning capital Since the financial crisis, various measures have been taken to prevent banks from experiencing financial difficulties again
AUDITED in future. These measures include more stringent requirements regarding the size and quality of own funds that banks should hold and radical changes have also been made to the supervision of banks. In 2016, a start was made with phasing in the capital conservation buffer and countercyclical buffer.
In addition, further measures have been proposed to improve the resolvability of a bank should it nevertheless encounter problems despite these precautions. These include proposals for an MREL (Minimum Requirement for own funds and Eligible Liabilities) and TLAC (Total Loss Absorbing Capacity). Bail-in-able debt capital plays an important role in these proposals.
Over the coming years, banks will continue to work on increasing their capital ratios in order to meet the definitive capital requirements for 2019. As a next step, the Basel Committee has put forward proposals for the adjustment of the capital requirements under the ‘Standardised Approach’ and for the implementation of a minimum floor for capital. This will increase the risk weightings of many assets, which could mean that banks may have to retain even more capital in the long run. In addition, there are also initiatives for a revision of the standardised methods for operational risk and interest rate risk in the banking book. As these proposals are still at consultation stage and since the eventual implementation of the rules through European regulations will be decisive for the European banks, it is very difficult at this stage to estimate the extent of the impact on the banking sector.
Capital adequacy and stress tests The robustness of the capitalisation is put to the test by means of stress tests. BinckBank conducts periodic stress tests to evaluate the scale of the risks involved in extreme events with a change in one or several parameters. Stress testing is an integral part of capital management and as such is mandatory under the CRD IV/CRR. The purpose of a stress test is to express the risks of extreme events in terms of financial loss. The likelihood and effect of this in relation to the risk appetite will lead to an evaluation of the accepted risks and measures to mitigate the risk or the decision to reserve additional capital. If the outcome of an extreme but to some extent feasible stress scenario leads to a TCR (Total Capital Ratio) Pillar I of less than 15% or a leverage ratio of less than 3.5%, BinckBank will no longer meet its own minimum internal capital requirement after stress. In this case, BinckBank will have to take adequate action in the form of risk-mitigating measures such as policy changes or insurance, or by reducing the risk profile of its existing activities.
The financial impact resulting from stress tests is defined as the direct negative effect on BinckBank’s core capital. The expected financial impact is calculated for each individual stress test and the effect of this on capital adequacy expressed in the Pillar I capital ratio and the leverage ratio. If the capital requirement changes as a result of a stress test, this is expressed as a second-round effect. This clearly shows the ultimate effect of a stress test once all factors have been taken into account.
RESULTS OF RECENT STRESS TESTS AND MAXIMUM STRESS SCENARIO For the calculation of the maximum stress scenario, it is important to understand that there is a difference between stress scenarios and stress testing. A stress test is a single test for one particular event and thus a change in one single parameter. A stress scenario is a set of stress tests that together form a scenario. Various stress tests have been developed for each risk category to enable management to assess the scale of the risk involved in extreme situations. The individual stress tests are not complementary, since not all events can occur simultaneously, so that a stress scenario is compiled for each risk category. The various results of the stress scenarios for each risk category are combined into a maximum stress scenario for the testing of capital adequacy. The following figure shows the size of the maximum combined scenario spread across the various risk categories. 76 // Annual Report 2016 RISK MANAGEMENT
IMPACT MAXIMUM COMBINED STRESS SCENARIO PER RISK CATEGORY
28, 44 30,000
20,000
13,700 12,521
10,000 Decline core capital (in € 000’s)
1,800 24 0 0 Credit risk Interest risk Operational Liquidity risk Business risk Maximum risk combined scenario
The most extreme stress scenario calculated by BinckBank for the purpose of capital management – the maximum combined stress scenario – is based on the following assumptions: • Increasing uncertainty regarding the creditworthiness of European countries leads to a two-step rating downgrade by well-known rating agencies for the bonds BinckBank holds in its investment portfolio. • Interest rates rise by 200 basis points due to uncertainty over inflation and the markets come under pressure and undergo a sudden and extreme decline. • Confidence in BinckBank is damaged due to a system breakdown on a busy trading day. The competition benefits from this and goes on the attack, leading to immediate withdrawal of 50% of the funds entrusted that are not covered by the 1000 deposit guarantee scheme and 25% of the funds entrusted that are covered by the deposit guarantee scheme. 58 BinckBank is forced to sell part of its investment portfolio at a loss. 854
800 The capital loss under the maximum combined stress scenario comes to € 28.9 million as at 31 December 2016, reducing the amount of available (core) capital to € 216.6 million. The second-round effect that occurs shows that the effects of the stress600 scenario affect the capital requirement. In other words, the forced liquidation of part of the investment portfolio would change the capital requirement for the credit risk. Credit risk would increase first as a result of the two-step credit 501 downgrade and would then decline as a result of the forced liquidation of part of the investment portfolio. These two effects400 offset one another, leading to a situation in which the total risk-weighted exposure under Pillar I for credit risk falls
in EUR miljoen 33 from 539,697 to 454,214. The following table shows the development of the capital317 adequacy after the most extreme stress scenario has actually occurred, including the related second-round26 effects. 200
0 56 34 13 20 10 20 0 4 F1 of hoger F2 of lager AAA Tussen AA+ en AA- Tussen A+ en A- BBB+ KORTE TERMIJN RATING LANGE TERMIJN RATING GEEN RATING
Kasmiddelen Financiele activa beschikbaar voor verkoop
Bankiers Financiele activa aangehouden tot einde looptijd
Financiele activa aangehouden voor handelsdoeleinden Leningen en vorderingen
Financiele activa aangemerkt als tegen reele waarde via de winst- en verliesrekening
A TE
700 650 4 634 642 4 1 1 4 21 600 34 36 36 36 36 40 557 500 53 541 Spanje 400
Itali 77 300 Frankrijk // 200 Belgi 100 0 Nederland 2014 2015 2016 Annual Report 2016 RISK MANAGEMENT
CAPITAL POSITION IN EVENT OF MAXIMUM STRESS Maximum (amounts in € 000’s) 31 December 2016 combined stress Impact
Total available capital (A) – Tier 1 245,542 216,598 -12%
Credit risk 539,697 454,214 -16%
Market risk 127 127 0%
Operational risk 228,898 228,898 0%
Risk weighted exposure (B) - Pillar I 768,675 683,239 -11%
Capital ratio Pillar I (=A/B) 31.9% 31.7%
Leverage ratio 6.7% 8.4%
Based on the second-round effect, BinckBank has established that its capital is also adequate under the maximum combined stress scenario. The TCR Pillar I capital ratio falls to 31.7% and the leverage ratio rises to 8.4%, meaning that no additional or mitigating measures are necessary. One can therefore conclude that the capital position would still be adequate under the maximum combined stress scenario, and our own internal standard of at least 15% under TCR Pillar I and of 3.5% for the leverage ratio would be maintained. 78 // Annual Report 2016 RISK MANAGEMENT
LIQUIDITY MANAGEMENT
Introduction Liquidity risk is the risk that BinckBank will not be able to meet its payment obligations. BinckBank adopts a prudent policy with regard to liquidity risk that is designed to ensure that demand by its customers for their cash can be met at all times. There were no materially significant liquidity incidents in the year under review.
Developments in liquidity The investment in Dutch residential mortgages affects BinckBank’s liquidity management. The stress tests have been extended to investment in Dutch residential mortgage loans, and the day-to-day cash management activities are taken into account. The management reports have been adjusted accordingly.
Liquidity profile of BinckBank Customers with an account at BinckBank mostly do not invest 100% of their assets, but hold part of their assets in cash in their investment account or savings account. The non-invested part of their assets is expressed in the ‘entrusted funds’ item on the balance sheet. BinckBank provides loans based on securities as collateral (collateralised lending) and places its remaining entrusted funds in an investment portfolio BinckBank began investing in the financing of Dutch residential mortgage loans in 2016. It acts as the financer in a collective structure in which an AFM-licensed service provider is responsible for the marketing, sales, administration, and the duty of care. The investment in Dutch residential mortgages forms part of the investment policy that was adjusted in 2015. In addition, during 2016 BinckBank took over a portfolio of Dutch residential mortgage loans worth approximately € 340 million taken over from Obvion.
Since historically the balance of the customer funds entrusted far exceeds that of the collateralised lending, BinckBank has a natural liquidity surplus and has no need to attract other long or short-term funding. The funds held by BinckBank’s customers can be called upon at any time. BinckBank does not offer its customers deposits whereby cash is locked in for longer periods. As the securities transactions are settled within two working days of the transaction date, BinckBank is able to estimate the liquidity position for two days. This means that the main focus of liquidity policy is on managing liquidity in the short term. 79 // Annual Report 2016 RISK MANAGEMENT
COMPOSITION OF LIQUIDITY BUFFER
(amounts in € 000’s) 31 December 2016 31 December 2015
Cash, banks and central bank balances 883,268 205,527
Government bonds 385,157 594,030
Government-guaranteed bonds 138,794 170,285
Supra-national bonds 23,767 17,425
Covered bonds 304,886 550,691
Other 638,295 648,175
Total 2,374,167 2,186,133
% eligible 90% 91%
% € 90% 91%
% USD 10% 9%
LCR >100% >100%
NSFR >100% >100%
Management and development of liquidity risk The policy on monitoring and controlling BinckBank’s liquidity position and liquidity risk is laid down in the ILAAP. BinckBank’s risk appetite regarding liquidity is demonstrated by the high liquidity position in its balance sheet. BinckBank has no need for external funding and considers the entrusted funds as a stable source of funding. To avoid a situation in which it faces a liquidity shortfall, BinckBank has implemented various control measures.
ORGANISATIONAL The BinckBank executive board determines the risk appetite with regard to liquidity risk on an annual basis. The risk appetite with regard to liquidity is set by the board at ‘very low’ (1 on a scale of 1 to 5). The board’s very low risk appetite with regard AUDITED to liquidity risk is based on: a) The liquidity characteristics of the business model, which chiefly concerns the execution of securities transactions and the size of the immediately callable funds entrusted; b) The fact that inability to meet its obligations to customers or third parties promptly could seriously damage confidence in BinckBank and thereby constitute a threat to BinckBank’s continuity, and c) BinckBank needs to avoid a situation in which it is forced to sell its assets at unfavourable market prices and thereby suffer losses.
BinckBank has no need for external funding and places a large proportion of its liquidity surplus in liquid financial assets. BinckBank funds its assets with the funds entrusted by customers. BinckBank considers the entrusted funds as a stable source of funding. The risk appetite regarding liquidity is also a major factor in BinckBank’s policy with respect to its investment portfolio. The investments must be of high credit quality, liquid, and directly eligible as collateral with the central bank and/or other banks. Clear mandates are in place with regard to the management of cash, placements in the money market, and the management of the investment portfolio. The frameworks for permitted investments by the Treasury & ALM department are set by the ALCO and established in mandates. The Risk Management department monitors that none of the mandates are exceeded. The liquidity value of the assets is monitored on the basis of established 80
// criteria. The securities in the investment portfolio and the criteria for the liquidity value of the assets are discussed by the ALCO on a monthly basis.
The number of officers involved in liquidity management at BinckBank is relatively low, and they are all at senior level. Communication lines are short, and decisions can be taken extremely quickly. The main officers concerned are: the CFRO, the manager of Risk Management, the manager of Treasury & ALM, the cash manager and the group controller. The senior officers concerned have extensive knowledge of the liquidity aspects of BinckBank’s business model, the drivers of
Annual Report 2016 liquidity, and the liquidity aspects of the available assets and liabilities. RISK MANAGEMENT
The liquidity risk is explicitly included in the Risk Appetite Statement. Limits are set for the LCR, NSFR, survival periods under stress, funding ratio, and size of the liquidity buffer. The LCR and NSFR are increasingly becoming key ratios that are
AUDITED used for internal management purposes. These Basel III ratios are laid down monthly and reported to the ALCO and form an integral part of the bank’s liquidity management.
INTRADAY MONITORING Outgoing payment traffic is monitored continuously. The Treasury & ALM reports the incoming and outgoing payment transactions to the senior management on a daily basis. In stress situations, payment transactions can be monitored on an hourly basis. The Treasury & ALM department receives statements of the transfers effected for customers four times a day, and the liquidity forecast is adjusted on this basis. The liquidity position is determined daily and a projection is made for the next three days (T+3), which is then tested against the internal liquidity target. Liquidity reports are sent to the executive board and the members of the ALCO. Treasury & ALM monitors the cash inflow and outflow. In case of heavy cash outflow, an escalation procedure to the executive board (CFRO) is applied and action is taken.
LONG-TERM MONITORING Collateralised loans are provided on the condition that BinckBank has at all times the right to unilaterally adjust the coverage rate of the collateral security and, with it, reduce the use of credit.
EARLY WARNING INDICATORS AND ESCALATION PROCEDURES There are clear escalation procedures that are applied if there is a threat that the lower limit of the internal liquidity target will be breached. Escalation is applied using what is known as a traffic-lights model. This is a system of warning signals that lead to an increased level of vigilance with respect to the liquidity position. Code green applies when none of the escalation criteria have been triggered. This can be escalated to code yellow, orange, and ultimately code red. Code red would apply in a situation of negative publicity regarding BinckBank’s reputation and/or heavy cash outflow in combination with a limited cash balance.
Stress testing and contingency funding BinckBank carries out various liquidity stress tests on a periodic basis to test whether BinckBank is still meeting its internal liquidity target. The liquidity stress tests are based on various durations, for which the LCR, NSFR, and the amount of cash in relation to entrusted funds is used as a ratio. The internal standard for the amount of cash in relation to entrusted funds is between 5.0% and 10.0%, with BinckBank aiming for a ratio of 7.5%. BinckBank remained above 7.5% throughout 2015. At 31 December 2016, this ratio amounted to 35.75% (2015: 11.2%). The LCR and NSFR remained above 100% throughout 2015.
The liquidity stress tests are based on various alternative sources of liquidity (Contingency Funding). These sources are: • Repurchase agreements; • Multi-currency credit facility (with securities collateral); • Liquidation of the investment portfolio; • European Central Bank reserve obligation; and • Marginal lending facility of DNB. 81 // Annual Report 2016 MANAGEMENT STATEMENT MANAGEMENT STATEMENT
IN CONTROL STATEMENT
In the risk management section (pages 56 to 81) we have given a detailed description of our risks and our risk management framework.
Our internal risk management and control systems are based on a risk-identification process combination with a fixed set of detection, prevention and control measures. This provides reasonable assurances that the financial reports do not contain any material misstatement and that the internal risk management and control systems related to the financial reporting risks are operated effectively during the year under review.
In accordance with the best practice provisions as stated in the Corporate Governance Code and with due observance of the limitations set out below we confirm that our risk management and control systems provide reasonable assurances and that we are aware: a. of the extent to which BinckBank’s strategic and operational targets are achieved b. that BinckBank is in compliance with the applicable legislation and regulations, and c. that our financial reporting is free from material misstatements.
Our internal risk management and control systems cannot, however, provide absolute certainty that the strategic and financial targets will be achieved, or that the legislation and regulations will be complied with at all times. Furthermore, risk management and control systems cannot prevent all human errors or errors of assessment Nor are these systems able to withstand situations in which employees collude together and in which the integrity and reliability of employees cannot be guaranteed. The acceptance of risk and implementation of control measures is always subject to cost/benefit considerations, and is an inherent part of entrepreneurial activity. We continue to strive to further improve and optimise our internal risk management and control procedures.
Without prejudice to our statement, we would like to refer to the weaknesses and threats as described in the SWOT analysis on page 30 of the report of the executive board.
Statement of the executive board In accordance with section 5:25c of the Financial Supervision Act (Wft) we state that according to the best of our knowledge: 1. The financial statements present a true and fair view of the assets, the liabilities, the financial position, and the profit of BinckBank N.V. and the companies included in the consolidation; and 2. that the report of the executive board gives a true and fair view of the situation on 31 December 2016, the course of business during the financial year of BinckBank N.V. and its affiliated companies, whose data have been included in its financial statements, and that the annual report describes the essential risks faced by BinckBank N.V.
Amsterdam, 6 March 2017
The executive board Vincent Germyns, Chairman of the executive board Evert-Jan Kooistra, member of the board (CFRO) Steven Clausing, member of the board (COO) 83 // Annual Report 2016 CORPORATE GOVERNANCE CORPORATE GOVERNANCE
INTRODUCTION
BinckBank is a listed public limited company under Dutch law. The executive board is responsible for managing the company. The supervisory board is charged with the supervision of the policy of the executive board and the general developments at the company and its affiliated entities. The supervisory board advises the executive board in the exercise of its duties. The executive board and the supervisory board are directly accountable to the company’s General Meeting. BinckBank’s executive board and the supervisory board are jointly responsible for the bank’s corporate governance structure. Good corporate governance is a precondition for the efficient and effective realisation of set goals, ensures adequate control of risks, and ensures informed judgments can be made regarding the interests of all of BinckBank’s stakeholders, such as shareholders, employees, and customers. Within this framework, BinckBank applies the principles of both ‘Future-oriented banking’ and the Dutch Corporate Governance Code.
A comprehensive overview about Corporate Governance Code is also published at www.binck.com. 85 // Annual Report 2016 CORPORATE GOVERNANCE
FUTURE ORIENTED BANKING
At the end of 2014, the Dutch Banking Association (Nederlandse Vereniging van Banken, NVB) presented a package entitled ‘Future-oriented banking’, in which banks jointly set out their intention to pursue service-oriented and sustainable banking activities. The package consists of a social charter, the Banking Code and rules of conduct.
Social Charter Society must be able to rely on a stable, service-oriented, and reliable banking industry which offers products and services in line with the often widely divergent wishes of consumers, businesses, institutions, and governments. This attaches requirements to the competencies of banks to deliver on promises and expectations. It is necessary to create market conditions that ensure healthy competition based on a varied banking landscape and provide a sufficiently diversified offer, for example, in terms of the type of activities and services, forms of undertakings, and geographical coverage. In a shared struggle for a stable, service-oriented, and reliable banking industry, the Social Charter is based on the following assumptions: • The banking industry is pluriform and offers customers a wide choice; • Banks are reliable, service-oriented, and transparent; • Bank employees are ethical, expert, and professional, and ensure that customers and other stakeholders are treated with care; • Banks have a social responsibility to contribute to a sustainable economy.
Code Banken The Banking Code applies to all activities performed in or directed towards the Netherlands by banks established in the Netherlands and licensed by the Nederlandsche Bank pursuant to Section 2:11 of the Financial Supervision Act. In the event of overlap or contradiction with international legislation or the policy of regulators, this prevails over self-regulation such as the Banking Code. The new Banking Code is designed – along with the Social Charter and the introduction of the bankers’ oath, rules of conduct, and disciplinary scheme – to make a major contribution to public trust in banks and their role in the community. Consequently, the principles in the Banking Code emphasise the importance of sound and ethical operation by banks and set this out in the principles for the executive board and supervisory board, proper risk management, thorough audit processes, and a sound, balanced, and sustainable remuneration policy. Compliance with the Banking Code is monitored by an independent Banking Code Monitoring Committee established on 14 October 2014. The main task of the Banking Code Monitoring Committee is to monitor compliance with the Banking Code on the basis of the ‘comply or explain’ principle. In doing so, the committee can flag up any ambiguities and imbalances in the Banking Code, and make recommendations about possible adjustments. The Monitoring Committee will in any case issue a publicly available annual report. The revised Banking Code came into effect on 1 January 2015. The Banking Code does not stand alone but is part of the full set of national and international regulations, case law, and self-regulation. When applying its principles, a bank will take this national and international context, the social environment in which it operates, and the specific characteristics of the individual bank and group, if it is part of one, into account.
The principles in the Banking Code pertain to: 1. Sound and ethical operation 86
// 2. Activities of the supervisory board 3. Activities of the executive board 4. The risk policy 5. The audit function 6. The remuneration policy Annual Report 2016 CORPORATE GOVERNANCE
Rules of conduct Along with the introduction of a Social Charter and updating the Banking Code, the bankers’ oath has also been implemented for all employees working in the Netherlands. Everyone working in the banking industry is bound by the rules of conduct attached to this statement for the ethical and careful practice of his/her profession. Employees have personal responsibility for complying with those rules of conduct and can be held accountable for non-compliance and, if necessary, face disciplinary action. New employees must take the oath within three months of being appointed to the job. Employees who have taken the oath automatically endorse the code of conduct for bank employees and must comply with disciplinary rules. All employees of BinckBank made the banker’s oath by 1 April 2016.
The disciplinary rules apply to individual employees. Anyone discovering an infringement of the code of conduct may file a complaint with the Foundation for Banking Ethics Enforcement (FBEE) (Stichting Tuchtrecht Banken). This foundation assess the content of the complaint in light of the Disciplinary Regulation for the Banking Sector. When conducting disciplinary proceedings, the foundation receives support from the independent institute DSI, whose activities since 1999 include screening employees in the financial sector, keeping registers of recognised financial experts, and settling disputes concerning investments between financial companies. 87 // Annual Report 2016 CORPORATE GOVERNANCE
DUTCH CORPORATE GOVERNANCE CODE
The Dutch Corporate Governance Code (the Corporate Governance Code) is an important code for good business conduct for Dutch listed companies. The Code is self-regulatory in nature, and is based on the principle known as ‘apply or explain’. The duty of the Corporate Governance Code Monitoring Committee (the Committee) is to encourage the topicality and usefulness of the Code, as well as to monitor compliance with the Code by Dutch listed companies.
During the past year the Monitoring Committee Corporate Governance Code published a proposal to amend the Code on the request of the supporting parties (VNO-NCW, VEUO, Eumedion, VEB, FNV, CNV and Euronext). The revised Corporate Governance Code was published on 8 December 2016. The revision of the Corporate Governance Code addressed both current and foreseeable new regulations, as well as legal precedent and development at the international level in the field of corporate governance. Like its predecessor, the updated Corporate Governance Code is principle-based and offers a reliable framework for corporate governance for the coming years. In 2018 Dutch companies will be required to report on compliance with the revised Corporate Governance Code in financial year 2017. This is subject to the condition that the revised Code is enshrined in the Dutch law.
The Corporate Governance Code applicable in financial year 2016 has a legal basis in the sense that a listed company has to include a statement in its management report regarding its compliance with the principles and best practice provisions of the Code that relate to the company’s executive board or supervisory board. BinckBank generally endorses the principles stated and broadly supported in the Code.
According to best practice provision I.1 of the Code, the broad outlines of the company’s corporate governance structure must be explained each year in a separate section of the management report, partly by reference to the principles of the Code. This section must also expressly state the extent to which the best practice provisions in the Code are being observed, and where this is not the case, why and to what extent the provisions are not applied. This ‘apply or explain’ principle has a basis in the law. This section is the implementation of the requirements of this best practice provision I.1 of the Code. The provision in this section and the statements regarding the key features of the company’s management and control systems in relation to financial reporting as included in the management’s in control statement can also be described as the corporate governance statement mentioned in Section 2:391(5) of the Dutch Civil Code. 88 // Annual Report 2016 CORPORATE GOVERNANCE
Legal structure BinckBank is a public limited company listed on NYSE Euronext Amsterdam with branches in Belgium, France, Italy and Spain. BinckBank adopted a two-tier board structure in 2012. BinckBank has a number of Dutch subsidiaries and associates.
STICHTING PRIORITEIT 50 priority shares
BinckBank N.V.
25,5 60 100 100
Think ETF Asset Bewaarbedrijf TOM Holding N.V. Able Holding B.V. Management B.V. BinckBank B.V.
100 100 TOM B.V. Fintegration B.V.
BinckBank N.V. BinckBank N.V. Spain Branch Belgium Branch 100 100 TOM Broker B.V. Able B.V.
BinckBank N.V. BinckBank N.V. Italy Branch France Branch At 31 December 2016
Shares, issue of shares, voting rights and shareholder structure
SHARES The company’s authorised share capital amounts to € 10,000,005, divided into 100,000,000 ordinary shares and 50 priority shares each with a nominal value of € 0.10. BinckBank’s issued capital consists of 71,000,000 ordinary, listed shares and 50 priority shares. The priority shares represent 0.00007% of the issued capital, are unlisted registered shares and are held by Stichting Prioriteit Binck (hereinafter, ‘the Foundation’). The priority shares confer special control rights, as stipulated in the company’s articles of association. The company’s articles of association are available on our website: www.binck.com. Further details regarding the position of Stichting Prioriteit are given below in this section. No depositary receipts are issued for BinckBank shares.
ISSUANCE OF SHARES The general meeting (GM) adopts resolutions with regard to the issuance of shares and may grant this authority to another company body for a period of up to five years. On the issuance of ordinary shares, each shareholder has a preference right in the amount of his or her total number of shares held, subject to legal provisions. No preferential rights exist on shares issued; a) to employees of the company or a group company; or b) against payment other than in cash.
The preferential rights may be limited or excluded by resolution of the GM. The preferential rights may also be limited or excluded by the above-mentioned other company bodies if these have been granted the authority to limit or exclude the 89
preferential rights by resolution of the GM for a period of up to five years. A resolution by the GM to limit or exclude the // preferential rights or to grant or withdraw the authority to take such action requires a majority of at least two-thirds of the votes cast if less than half of the issued capital is represented at the GM. Such resolutions may only be adopted by the GM if proposed by the Foundation. Resolutions by the executive board regarding the issuance of shares are subject to approval by the supervisory board. Annual Report 2016 CORPORATE GOVERNANCE
VOTING RIGHTS Each BinckBank share entitles its holder to cast one vote. All resolutions of the General Meeting of Shareholders shall be carried by an ordinary majority of the votes cast, unless a larger majority is required by law or the Articles of Association. BinckBank uses a registration date in accordance with the Shareholders’ Rights Act (Wet aandeelhoudersrechten).
SHAREHOLDER STRUCTURE Page 12 of this Annual Report includes a list of the shareholders who disclosed a holding in DPA pursuant to Section 5.3 of the Financial Supervision Act. No shareholder agreements have been concluded between BinckBank and the major shareholders concerned.
Anti-takeover defences The Foundation has a role in many important resolutions pursuant to the articles of association. The Foundation holds 50 BinckBank priority shares. The authorities of the Foundation consist of the initiation of specific resolutions of the GM and the granting of prior approval to the resolutions described below. The Foundation also has direct powers, including setting the number of executive and supervisory directors.
In short, the objective of the Foundation is to shield the management and the course of events at BinckBank from influences which might negatively affect the independence of the company and its affiliated companies, and to promote a positive course of events in said management.
The board of the Foundation has three members. Member A is appointed by the supervisory board of BinckBank, member B is appointed by the executive board of BinckBank and member C is appointed by members A and B together. Mr J.W.T. van der Steen (chairman of the supervisory board), Mr V.J.J. Germyns (chairman of the executive board) and Ms C. van der Weerdt-Norder (supervisory director) currently act as members A, B and C of the board of the Foundation.
The supervisory board and the executive board see no reason to initiate any limitation and/or removal of the powers of the Foundation. The supervisory board and the executive board believe that maintaining the position of the Foundation is beneficial to the continuity of BinckBank and the policies pursued by the bank in the short and long term, subject to careful consideration of the interests of those involved in the company. The powers of the Foundation form an integral part of the articles of association of the company. With due observance of its objectives under the articles of association, the Foundation is obliged when exercising its powers to protect the interests of the company and its affiliated companies, and in doing so to consider the legitimate interests of those involved in the company. The manner in which the Foundation exercises its powers will depend on the actual facts and circumstances of the individual case.
Executive board BinckBank has a two-tier board system, meaning that management and supervision are assigned to the BinckBank executive board and supervisory board respectively. BinckBank believes that this structure promotes a system of adequate checks and balances, in which the executive board is responsible for the day-to-day management of the company and the realisation of the company’s short-term and medium-term targets, while the supervisory board super- vises the executive board and has an advisory role.
DUTY OF THE EXECUTIVE BOARD Subject to the limitations stated in the articles of association, the executive board is charged with the management of the company.
REGULATIONS FOR THE APPOINTMENT, SUSPENSION AND DISMISSAL OF EXECUTIVE BOARD MEMBERS The executive directors of BinckBank are appointed by the supervisory board in accordance with the provisions of the articles of association on the basis of a non-binding nomination by the Foundation. An executive director is appointed or reappointed for a term commencing on the date of their (re)appointment and ending at the end of the AGM held in the fourth calendar year after the calendar year in which they were appointed/reappointed, or at such time as is determined at 90
// the time of their appointment/reappointment, if earlier. Executive directors may be suspended or dismissed by the supervisory board at any time. The supervisory board shall not dismiss a member of the executive board without taking advice from the GM regarding the dismissal. Annual Report 2016 CORPORATE GOVERNANCE
PERMANENT EDUCATION BinckBank has a permanent education programme for its executive directors. The permanent education programme consists of the following various training programmes and courses intended to maintain the level of expertise of executive directors and improve this where necessary. Evert-Jan Kooistra is a public certified accountant. Since 1 January 2007, a permanent education scheme has applied for members of the Dutch Association of Registered Controllers (the ‘VRC’) and accountants in business of the Netherlands Institute of Chartered Accountants, or ‘NBA’. Vincent Germyns followed the four-day ‘Blue Ocean Strategy Programme’ at INSEAD in 2016. Evert-Jan Kooistra followed the five-day programme ‘CFO Strategy & Leadership Programme’ at Euromoney training solutions. Steven Clausing followed the five-day programme ‘Leading Digital Business Transformation’ at IMD.
Supervisory board The supervisory board is charged with the supervision of the policy of the executive board and the general developments at the company and its business. The supervisory board highly values close involvement with the company’s development. In the exercise of its duties, the supervisory board focuses on the interests of the company and its affiliated companies, taking the interests of those involved in the company into consideration. It also considers the social aspects of doing business that are relevant to the company. The supervisory board also advises the executive board. The supervisory board is further charged with all duties assigned to it by law and under the articles of association. Certain key resolutions are subject to the approval of the supervisory board.
Other than under the provision of Article 21 sub 7 of the articles of association, supervisory directors of BinckBank are appointed by the GM on the basis of nomination by the supervisory board. The GM and the works council may recommend candidates to the supervisory board for nomination as a supervisory director. For one-third of the number of supervisory directors, the supervisory board will nominate a person recommended by the works council, unless the supervisory board objects to the recommendation on the grounds that it does not consider the recommended candidate to be suitable to act as a supervisory director, or that the composition of the supervisory board would not be appropriate if the recommen- dation were to be adopted. A supervisory director may be suspended by the supervisory board. The Enterprise Division of the Amsterdam Court of Appeal may dismiss a supervisory director on the conditions stated in the articles of association. The GM can withdraw its confidence in the supervisory board. A resolution of no confidence by the GM will result in the immediate dismissal of all members of the supervisory board.
A supervisory director is appointed or reappointed for a term commencing on the date of their appointment/reappointment and ending at the end of the AGM held in the fourth calendar year after the calendar year in which they were appointed/ reappointed, or at such time as is determined at the time of their appointment/reappointment, if earlier.
General Meeting (GM) The GM has the powers vested in it by law and under the articles of association. The Foundation has an important role with reference to the powers of the GM in many cases. A GM is held at least once a year. The most important powers of the GM concern the adoption of the financial statements, the establishment of dividend and other distributions, the granting of discharge of responsibility to the executive board for its policy and to the supervisory board for its supervision, the setting of the remuneration of the executive board and the remuneration of the supervisory directors, amendments to the articles of association and all the other powers vested in it by law and the company’s articles of association.
Compliance with the Code In the section on corporate governance in its annual report, BinckBank has to state the extent to which it observes the best practice provisions included in the Code, listing the reasons and the extent of non-compliance if it does not (the ‘apply or explain’ principle). BinckBank complies with the best practice provisions included in the Code, including best practice provisions II.3.2 – II.3.4 and III.6.1 – III.6.4, with the exception of the best practice provisions described below.
REMUNERATION OF THE EXECUTIVE BOARD 91
According to best practice provision II.2.13 of the Code, the overview of the remuneration policy for the next financial year // and subsequent financial years to be provided by the supervisory board has to include certain information. BinckBank applies best practice provision II.2.13 of the Code, if and to the extent that publication does not concern commercially sensitive information, in other words, financial and commercial targets. The executive board and supervisory board of BinckBank take the view that the provision of such information is not in the interests of the company and its stakeholders. The same applies to the main elements of the contract between a director and the company, which according to best practice provision II.2.14 of the Code should be published without delay after the contract is concluded, to the extent
that these elements concern market-sensitive information. Moreover, specific information mentioned in the applicable Annual Report 2016 CORPORATE GOVERNANCE
remuneration policy is published afterwards. The supervisory board therefore gives account to the GM with regard to its assessment of the performance of the executive board.
According to best practice provision II.2.5 of the Code, shares granted to executive directors without financial consideration must be retained for a period of at least five years in each case or at least until the end of the employment relationship, whichever comes first. BinckBank complies with best practice provision II.2.5 of the Code to the extent that calculated from the date the shares are awarded unconditionally, BinckBank shares have to be retained for a period of two years (instead of five years). With this shorter retention period of two years instead of five years, BinckBank complies with the regulations for a variable remuneration as specified in the Regulation for a Restrained Remuneration Policy in the Wft 2014. In BinckBank’s opinion, the conditional allocation of a material part of a variable remuneration (as stated in the Regulation for a Restrained Remuneration Policy in the Wft 2014) in combination with the stated retention period of two years is sufficient to meet the objective of a long-term commitment to the company and its associated business.
BALANCED COMPOSITION OF EXECUTIVE BOARD AND SUPERVISORY BOARD An executive or supervisory board of a large company has a balanced composition if at least 30% of the members are female and at least 30% are male. The supervisory board is made up of 40% female supervisory directors, so its composition can be considered balanced. The seats on the board of BinckBank are currently not evenly balanced. Efforts will of course be made to achieve a more balanced composition when filling any vacancies for directors that arise. 92 // Annual Report 2016 CORPORATE GOVERNANCE
DECISION ON ARTICLE 10 OF THE TAKEOVER DIRECTIVE
Under Article 10 of the Takeover Directive, BinckBank is obliged to include the following information in its annual report: a. An overview of the company’s capital structure is included on pages 89 and 90 of this annual report. This explains the various types of shares and the rights attached thereto (including special control rights), the obligations and the percentage of issued capital represented by each type of share; b. The company has not imposed any restrictions on the transfer of shares; c. Shareholdings in the company which have to be reported pursuant to Section 5.3 Wft are listed on page 12 of this annual report; d. Special control rights attached to shares held by the Foundation are stated on pages 89 and 90 of the annual report; e. Control of the scheme whereby rights are allocated to employees to take or receive shares in the capital of the company or a subsidiary company is exercised by the IAD and the Compliance department; f. No restrictions apply to the voting rights attached to the company’s shares. No depositary receipts for shares have been issued; g. The company is only aware of a restriction regarding the transfer of BinckBank shares that arises as a result of the remuneration policy in force and similar restrictions applying to other employees of BinckBank; h. The procedures for appointing and dismissing supervisory and executive directors and the regulations applying to amendments to the articles of association are established in the company’s articles of association and are described in general terms on pages 90 and 91 of the annual report. For the full text of the articles of association, see www.binck.com; i. The powers of the executive board with particular reference to the issuance of the company’s shares and the repurchase of shares by the company are described on pages 89 and 90 of the annual report. For further information, see the company’s articles of association and the minutes of the General Meeting at www.binck.com; j. The service agreement concluded with SNS Bank N.V. on 30 September 2010 states that the agreement can be terminated with immediate effect in the event of a specifically described change of control at BinckBank; The service agreement concluded with BeFrank in 2014 states that in case of a specifically described change of control at BinckBank to which BeFrank has serious objections that are reasonable and objectively substantiated the service agreement may be cancelled with a notice period of 3 months. k. Information on severance arrangements with executive directors (insofar as applicable) is provided in the Remuneration Report for 2016.
Conclusion: BinckBank complies with virtually all the provisions of the Code and the Banking Code. Any irregularities have been explained and substantiated. 93 // Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
From left to right: Leo Deuzeman, Hanny Kemna, John van der Steen, Carla van der Weerdt-Norder and Arjen Soederhuizen. REPORT OF THE SUPERVISORY BOARD
MESSAGE FROM THE CHAIRMAN OF THE SUPERVISORY BOARD
Dear reader,
We hereby present the report of the supervisory board for 2016. 2016 was an intensive and important year for the company. A start was made with pursuing the new strategy announced in 2015. This entailed investing in a solid basis for a more diversified and future-proof income flow aimed at achieving sustainable growth. The market conditions were unfavourable in 2016, which placed the current sources of income under pressure. Regrettably, this resulted in disappointing results in 2016.
In the coming period the focus remains on further realization of the new strategy. We will also be paying attention to cost control. The mounting demands and costs resulting from new laws and regulations continue to present the company with a challenge.
The company’s investment policy was evaluated in 2016, and extended to investments in residential mortgages. Given the declining interest income in past years, this was an important step. In 2016, the company has repurchased own shares for a total of € 25 million.
During the year under review the supervisory board held frequent consultations with the executive board on the develop- ments outlined above. These matters will also need to be addressed in the new financial year.
Mr E.J.M. Kooistra (CFRO) was reappointed to the executive board for the usual term of four years. An amendment to the remuneration policy for the executive board was proposed at the annual general meeting. The company’s articles of association were placed in line with the latest legal requirements.
The financial statements were audited by Deloitte Accountants BV (‘Deloitte’) and an unqualified audit opinion was issued. The unconditional audit opinion is given in pages 214 to 218.
We would like to express our appreciation to the executive board and all employees for their efforts and commitment in 2016.
Amsterdam, 6 March 2017
J.W.T. van der Steen Chairman of the supervisory board 95 // Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
DUTIES OF THE SUPERVISORY BOARD
The supervisory board is charged with the supervision of the policy of the executive board and the general developments at the company and its business. In the exercise of its duties, the supervisory board focuses on the interests of the company and its affiliated companies, taking the interests of those involved in the company into consideration. The supervisory board is also involved in the social aspects of business operations relevant to the company. The supervisory board also advises the executive board. The supervisory board is further charged with all duties assigned to it by law and under the articles of association. Certain key resolutions of the executive board are subject to the approval of the supervisory board.
COMPOSITION OF THE SUPERVISORY BOARD
Composition The composition of the supervisory board is currently as follows:
• J.W.T. van der Steen (chairman) • C. van der Weerdt-Norder (vice-chairwoman) • J.M.A. Kemna • L. Deuzeman • A. Soederhuizen.
The information identified in best practice provision III.1.3 of the Corporate Governance Code concerning the members of the supervisory board is provided on pages 91 and 92.
Having been a member of the supervisory board for 10 years, Mr Deuzeman has indicated that will be stepping down after the annual general meeting in 2017. Not least in view of current public opinion on the maximum term of office for supervisory directors, Mr Deuzeman believes that the time has come to introduce new blood. At the 2017 annual general meeting 96
// Ms M. Pijnenborg (1970) will be nominated for appointment to the supervisory board. Ms Pijnenborg’s background is in online consumer services.
Independence The composition of the supervisory board is such that the supervisory directors can operate independently within the framework of the profile description of the supervisory board, whether in relation to each other, the executive board or any other particular interest. The supervisory board meets the independence criteria stated in best practice provision
Annual Report 2016 III.2.1 of the Code. REPORT OF THE SUPERVISORY BOARD
MEE TINGS OF THE SUPERVISORY BOARD AND SUBCOMMITTEES IN 2016
Meetings of the supervisory board
FREQUENCY The supervisory board held its regular combined meetings with the executive board in attendance on six occasions in 2016. The meetings were spread over the year. In addition, the chairman, and on certain occasions an individual supervisory director, held frequent informal discussions with the executive directors, the works council and other members of the organisation. Consultations were also held with the management and employees during visits to our branches in Belgium, Italy and Spain. The supervisory board also met a further four times in its own meetings in 2016. The number of meetings illustrates the close involvement of the supervisory board with the company. The supervisory board will pursue a comparable schedule of meetings in 2017.
ATTENDANCE The supervisory directors each attended essentially all meetings. Instances of absence remained limited to prevention due to circumstances beyond the member’s control. The availability of the supervisory directors and the executive board for interim consultation was good.
Agenda items
GENERAL The agendas for the meetings of the supervisory board covered virtually all aspects of the company’s business. Subjects including the following were discussed during the meetings: the strategy, standards and values within the organisation, the interests of the various stakeholders, the principal risks associated with the enterprise and the preparedness for these risks, innovation, potential acquisitions, the results of the executive board’s evaluation of the design and operation of the internal risk management and control systems and significant changes to them. Attention was also devoted to matters such as the organisational culture, staffing, legislation and regulations, the budget and internal and external financial quarterly, half-yearly and annual reports. Recurring and mandatory items such as the regular progress reports were also dealt with in the meetings of the supervisory board.
SPECIFIC ITEMS Specific items addressed in 2016 included the following subjects:
Strategy In 2016, the supervisory board upheld its responsibility to involve itself in the execution of the new business strategy that was presented externally during the BinckBank Capital Markets Day in November 2015. This strategy is intended to provide a response to the challenges that the business faces in the longer term, particularly in reference to the earnings model. Further diversification of sources of income, products and services is desired, and the strategy addresses this. The super- visory board found the directors willing to invest in Binck shares in fixed predetermined amounts and on a fixed periodic basis. This shows belief in the company’s strategy and ensures alignment with the interests of shareholders. 97 // The company’s capital policy is closely linked to its strategy and risk acceptance. This policy and the dividend policy it provides for formed another item of the supervisory board’s agenda.
In the context of the capital policy, the supervisory board was also involved in the decision on continuing to invest in mortgages and the set up of an accompanying control framework. The goal of this investment in mortgages is to generate stable interest earnings within the risk acceptance profile established by the supervisory board. This risk acceptance is an
annual agenda item at the supervisory board level. Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
The discussions on the strategy centred mainly on how the strategy can best serve the interests of the stakeholders and how execution of the strategy can be facilitated and accelerated. The talks also comprehensively addressed the short-term results in relation to long-term value creation. It was concluded that long-term value creation is of decisive importance, but that it is important not to lose sight of the short term. Various alternative scenarios were discussed, covering the pros and cons of the short and long term. This centred on the question of whether, and if so, to what extent these alternative scenarios could contribute to speeding up the transformation to ‘The New Binck’ and to creating customer and shareholder value at a faster rate.
Remuneration policy The supervisory board has prepared a new remuneration policy that has been adopted by the general meeting. The policy is in line with the amended statutory requirements and provides a solid basis for attracting and retaining qualified directors. The variable pay component has been reduced to the statutory maximum. The fixed remuneration of the directors has been placed in line with the outcome of a benchmark study. Previously granted variable pay components were also reassessed.
Buy-back of shares The share buy-back programme was placed on the supervisory board’s agenda in 2016. The buy-back programme announced in February 2016 was completed in September 2016. The programme represented a value of approximately € 25 million. A total of over 4.6 million shares were purchased. The share purchase has returned capital to the shareholders in addition to dividend payments. During the 2017 general meeting the company will make a proposal for the cancellation of 3.5 million shares purchased under the programme in 2016.
Core values The company’s core values were re-established and discussed with the supervisory board. The values form a solid foundation for the company’s future development. The limited number of values and their simplicity provide a clear guideline for the organisation’s conduct and attitude.
Alex Vermogensbeheer On 13 July 2016 the Netherlands Authority for the Financial Markets (AFM) imposed two fines on BinckBank. The fines were imposed for the late reporting of transactions in financial instruments to the AFM and the provision of inaccurate and misleading information in advertisements for Alex Vermogensbeheer. BinckBank lodged an appeal against the second fine with the AFM. The AFM dismissed BinckBank’s appeal and upheld the fine. The supervisory board was involved in the decision to lodge an appeal and in determining the grounds for objection and appeal. The supervisory board also spoke to the executive board about the lessons learned from the fine. The supervisory board was also involved in the further develop- ment of the asset management activities, which included considering complaints and suggestions received from customers.
2017 Budget The 2017 budget was comprehensively discussed during the meetings of the supervisory board. The transition to more diversified sources of revenue will also affect the budget and related objectives in 2017. At the same time efforts will be made to take a more disciplined approach to costs.
Executive board targets in 2016 The supervisory board fulfilled its responsibility for determining the targets of the executive board and their achievement in 2016. The targets for the executive board were selected carefully. The supervisory board considers it important that the targets established be as objectively quantifiable as possible. The supervisory board has also held discussions with the individual executive directors regarding their ambitions for the future.
Evaluations of the supervisory board and executive board The annual evaluations of the supervisory board and executive board prescribed under the Code were conducted in 2016 under the supervision of an independent third party. The evaluations were based on individual interviews followed by a joint discussion within the supervisory board. The conclusions were discussed with the relevant bodies and the individual 98
// members and incorporated in collective and personal goals for those involved. Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
Subsidiaries and associates During the meetings of the supervisory board attention was paid to the subsidiaries and associates, also in the light of the strategic objectives. Special attention was paid to the strategic value of TOM Holding N.V. and Think ETF Asset Management B.V. TOM Holding N.V. started a strategic reorientation in 2016, which was closely monitored in terms of both the customer relationship and the shareholding. A study was conducted into whether the products of Think ETF Asset Management B.V. could be used more effectively in pursuing the new strategy.
The relationship with the works council The supervisory board attaches importance to maintaining a constructive relationship with the Works Council. During the year under review regular talks were held with one or more representatives of the supervisory board and the works council. The aim of this is to roll out the new (agile) approach to work more deeply throughout the organisation. This could improve quality in a way that results in improved efficiency and a faster time to market.
Shareholder relations The executive board worked on its relations with shareholders (and potential shareholders) in 2016 by periodically holding roadshows and conferences, during which presentations were give based on public information, the results of which were discussed with the supervisory board.
Meetings of the audit committee in 2016 The supervisory board has appointed an audit committee from among its members. The members of the audit committee did not change in 2016. Ms C. van der Weerdt-Norder was appointed chairwoman of the audit committee effective October 2014. The other members of the audit committee are Mr L.J. Deuzeman and Mr J.W.T. van der Steen. The meetings were attended by the members of the audit committee and Mr V.J.J. Germyns (chairman of the executive board), Mr E.J.M. Kooistra (CFRO), the IAD manager, the head of ethics & compliance (the first two meetings) and the governance, risk and compliance manager (the last two meetings).
The audit committee meets the applicable independence requirements and has sufficient members with the required financial expertise. The audit Committee met four times in 2016, spread over the year. All meetings were attended by the chairman of the executive board and the CFRO of BinckBank. The audit committee also met with the external and internal auditors without the presence of the executive board.
Supervision of the disclosure of financial information by the company is the responsibility of the supervisory board. The audit committee is responsible for overseeing the design, continuity and functioning of the system of internal control and risk management measures, for monitoring the implementation of recommendations by the external auditor and the IAD and for the functioning of the IAD. During its regular review of the annual and half-yearly results the audit committee satisfied itself that the figures had been approved by the external auditor without significant changes, and no unforeseen circumstances were brought to its attention.
The audits conducted by the IAD and their resulting findings and recommendations were the central focus of the meetings of the audit committee. On the basis of analysis of the various risk categories as summarised in the IAD management letter, the IAD assessed the design, existence and functioning of the internal control measures.
Special attention was devoted to the foreign branches, information security, laws and regulations, (including Anti Market Abuse, Anti Money Laundering, SIRA), regulatory reporting, strategic projects and governance. In a large number of audits, risk management was assessed as adequate. In the areas the IAD evaluated as ‘needs improvement’, appropriate steps have either already been taken or are in development, so the internal control can be qualified as adequate.
In addition to the discussion of internal and external audits, compliance was a standing agenda item at every meeting. This always included a review of the current compliance status. In every meeting of the audit committee, the head of ethics & compliance reported on subjects such as duty of care, anti-money laundering, anti-market abuse, fraud, privacy and 99
conflicts of interest. The last two meetings were attended by the governance, risk and compliance manager, who was newly // appointed in the summer. Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
During the course of the year, the audit committee devoted attention to the Regulatory Reporting Framework, the rollout of IFRS 9, the Tax Framework, the whistle-blower’s scheme and the impairment test and its results. The audit committee also evaluated the performance of the external auditor, compliance with the policy for non-audit services and the independence of the external auditor. Talks were held about the contact with and reports to DNB and the Netherlands Authority for the Financial Markets. The audit committee also carried out a self-assessment facilitated by the IAD manager.
The general opinion was good, but the audit committee identified a number of points to be addressed, such as the segregation of duties between the audit committee and the risk and product development committee.
At the General Meeting of 22 April 2014 Deloitte was appointed new external auditor for a term of three years. The auditor is appointed for the purpose of auditing the financial statements of BinckBank N.V. In accordance with the current rules of the Netherlands Institute of Chartered Accountants (‘NBA’) governing independence, BinckBank’s external auditor only carries out the audit and does not provide any advisory services.
Meetings of the risk and product development committee in 2016 The supervisory board has appointed a risk and product development committee (RPC) from among its members. The composition did not change in 2016. Mr L. Deuzeman is chairman and the other members for the supervisory board are Ms H. Kemna and Mr A.J. Soederhuizen The RPC held five regular and two additional meetings in 2016.
The RPC’s tasks include advising the supervisory board on the details of the company’s risk profile and the risk appetite. The RPC also oversees management of all relevant risks, including customer interest and the duty of care towards the customer in respect of new and existing products and services. The RPC also monitors the adequacy of the company’s capital and liquidity.
For the purposes of the fulfilment of its role, the committee receives information in each meeting from the departments: Legal, Treasury and the second-line department Risk Management. The Treasury department informs the committee concerning solvency and liquidity and their impact on the company during times of stress scenarios; this department also informs the committee of the composition of the investment portfolio. The Legal & Regulatory department informs the committee about the receipt or resolution of any claims. Risk Management informs the committee in every meeting about the subjects discussed in the various risk committees within the organisation, in part on the basis of the risk reporting drafted each quarter. This report specifies all risks identified and discusses changes in the risk profile, in part on the basis of the defined risk appetite. This information allows the committee to identify any changes in the bank’s risk profile in a timely manner.
Change Product Approvals were addressed during the meetings. This takes the form of an approval process that is followed before initiating and approving a Change. This implies, for example, that new products and services are reviewed in the RPC. The Treasury Dashboard, the Credit Risk Policy and the mortgage portfolio were among the other subjects addressed. In response to the increasing demands in the area of Privacy, the roadmap formulated for this purpose was examined. ICT Security and the Risk & Control Framework are recurring subjects on the agenda of the RPC meetings.
Remuneration committee in 2016 The remuneration committee is responsible for preparing decisions on pay, including decisions to be taken by the supervisory board on remuneration with implications for BinckBank’s risks and risk management. The remuneration committee’s members are currently Ms Kemna (chairwoman), Mr Van der Steen and Mr Soederhuizen. The chairman of the executive board and the Human Resources manager also attend the remuneration committee.
When ruling on these resolutions, the remuneration committee considers the long-term interests of the shareholders, investors and all other stakeholders of BinckBank. The chairman of the executive board and the Human Resources Manager provide the remuneration committee with information. The committee is also informed and advised by the audit committee, which includes the Human Resources manager, the head of governance, risk & compliance and a legal expert. 100
// The remuneration committee is independent and has sufficient expertise with reference to the remuneration policy, the remuneration culture and the circumstances and motivations whereby undesirable incentives to make decisions that conflict with the conservative management of risk, capital and liquidity could arise. Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
During the year, the items of attention for the remuneration committee included the evaluations and remuneration of the Identified Staff and the executive board, the pension system and various issues relating to the remuneration policy. At each meeting of the remuneration committee, the manager of Human Resources presented a report on developments at BinckBank with respect to issues such as appraisals, employee satisfaction, internal and external training, recruitment and selection and changes to the pension system and employment law.
The remuneration committee met on five occasions in 2016. The remuneration committee held one meeting in 2016 with the audit committee and without the presence of the executive board. 101 // Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
SUMMARY OF THE 2016 BINCKBANK REMUNERATION REPORT
General matters
Best practice provision II.2.12 of the Code stipulates that information must be included in the remuneration report as to the manner in which the remuneration policy of the preceding year has been implemented. In addition, it must contain a remuneration policy overview for the following and subsequent years as envisaged by the supervisory board. The remuneration report for calendar year 2016 (Remuneration Report 2016) and the report on the remuneration policy for Identified Staff can be found at www.binck.com.
BinckBank Remuneration Policy
Introduction The BinckBank Remuneration Policy, which is based on the Regulation on Sound Remuneration Policies under the Wft 2014 (‘the Regulation’) and the provisions under the Financial Undertakings (Remuneration Policy) Act as included in the Financial Supervision Act, is the framework in which the supervisory board set the remuneration of the executive board of BinckBank N.V. for calendar year 2016.
Remuneration elements The BinckBank Remuneration Policy comprises the following remuneration components: a. Fixed gross annual salary b. Variable compensation c. Pension scheme and WIA insurance d. Car lease scheme and mobile telephone reimbursement
A description of each element in the BinckBank Remuneration Policy and the way in which it was implemented by the supervisory board during the calendar year 2016 is given below.
A.A. FIXED GROSS ANNUAL SALARY The fixed gross basic annual salary is set as follows:
V.J.J. Germyns € 630,000 E.J.M. Kooistra € 565,000 S.J. Clausing € 510,000
B. VARIABLE COMPENSATION BinckBank Remuneration Policy A variable remuneration consists of 50% BinckBank shares and 50% cash. A variable remuneration may not exceed 20% of the gross annual salary. Of the total granted variable pay, 50% is granted unconditionally. The other 50% is allocated 102
// conditionally over a period of three years on a pro rata basis. At the end of each year (within the three-year period) a reassessment is made on the basis of the initial criteria. Depending on the result of the reassessment, the part of the variable performance fee allocated for the year in question pro rata becomes fully or partially unconditional.
BinckBank shares allocated unconditionally are subject to a holding period of 2 years. Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
Implementation of BinckBank Remuneration Policy Each year, at the end of the financial year, the remuneration committee agrees on the performance targets for the new year with the executive board. After the end of the year, the supervisory board determines whether the executive board can be eligible for conditional or definitive allocation of the variable remuneration and payment of the variable remuneration over the calendar year in question.
Financial targets (50% of the total score) The following key financial targets have been defined for 2016: • Adjusted net earnings per share • Reduction of operating losses • Balanced income flow • Operational results of various company divisions • Cost savings on Market data
A total of 12.4% of the financial objectives were met.
Qualitative and quantitative (non-financial) targets (50% of the total score) The following key non-financial targets have been defined for 2016: • Customer satisfaction • Assets under management and number of transactions • Availability of trading platforms • Complete and up-to-date control framework • Progress made on strategic projects • Employee satisfaction A total of 57.2% of the non-financial objectives were met.
Conclusion: As shown above, a total of 34.8% of the objectives were met. The supervisory board registered this as such and used it as the basis for the calculation of the performance-based remuneration. There were no grounds for differentiation between the individual directors.
C. PENSION SCHEME AND WIA INSURANCE BinckBank Remuneration Policy and its implementation
Pension scheme BinckBank pays the pension contribution based on the executive director’s age to the executive director’s pension insurer for the maximum pensionable salary of € 100,000. The remaining contribution, for the salary in excess of € 100,000, is made available to the executive director as pension compensation.
WIA gap insurance BinckBank pays 50% of the premium for WIA insurance, which entitles the insured person to receive a maximum of 70% of their last-earned salary. The premium is 2.249% of the insured sum per year. Executive directors participated in this scheme in 2015. Mr Clausing works under a ‘contract of services’ which stipulates a notice period of six months. As an additional supplement for him, WIA gap insurance was contracted for the following 18 months, in the event that his contract is cancelled due to occupational disability. This puts him under conditions equivalent to the same conditions applicable to the other executive directors.
D. CAR LEASE SCHEME AND MOBILE TELEPHONE REIMBURSEMENT BinckBank Remuneration Policy and its implementation Executive directors participate in the relevant BinckBank car lease scheme and are reimbursed for mobile telephone costs. 103 // Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
RENUMERATION OF THE EXECUTIVE BOARD 2016 Total Variable BinckBank of which, Shares yet to be Fixed gross Performance- remunera- as % of sharehold- shares in received from annual Pension related tion (fixed + fixed remu- ing at year- lock-up previous financial salary contribution rewards 2016 variable) neration end 2016 period years*
V.J.J. Germyns € 630,000 € 9,679 € 43,799 € 683,478 7.0% 57,530 20,388 16,456
E.J.M. Kooistra € 565,000 € 20,327 € 39,280 € 624,607 7.0% 88,827 28,062 16,799
S.J. Clausing € 510,000 € 10,011 € 35,456 € 555,467 7.0% 9,076 261 260
Total € 1,705,000 € 40,017 € 118,535 € 1,863,552 155,253 48,711 33,515
* Shares still to be received from previous financial years are under reservation of a reevaluation of the performances achieved in performance year in question
RENUMERATION OF THE EXECUTIVE BOARD 2015 Total Variable BinckBank of which, Shares yet to be Fixed gross Pension Performance- remunera- as % of sharehold- shares in received from annual contribution related tion (fixed + fixed remu- ing at year- lock-up previous financial salary 20%** rewards 2015 variable) neration end 2015 period years***
V.J.J. Germyns € 400,000 € 80,000 € 305,521 € 785,521 76,4% 27,630 13,028 12,445
E.J.M. Kooistra € 360,000 € 72,000 € 274,969 € 706,969 76,4% 62,506 28,774 14,071
S.J. Clausing* € 54,167 € 10,833 € 8,275 € 73,275 15,3% - - -
Total € 814,167 € 162,833 € 588,765 € 1,565,765 90,136 41,802 26,516
* Appointed to executive board on 30 October 2015; fixed and variable remuneration rounded to nearest whole month ** Pension contribution includes pension premium paid, pension compensation linked to pension accrual up to € 100,000 and reduction in premium contribution from original 20% to applicable age-based percentage of individual executive director *** Shares still to be received from previous financial years are under reservation of a reevaluation of the performances achieved in performance year in question
OVERVIEW OF THE APPOINTMENT OF THE EXECUTIVE DIRECTORS Date of Date of (re)appointment contract expiry
V.J.J. Germyns 22-4-2014 GM 2018
E.J.M. Kooistra 25-4-2016 GM 2020
S.J. Clausing 30-10-2015 GM 2019
Loans extended to executive directors Executive directors can make use of a collateralised lending facility in accordance with the conditions applicable to the personnel. In 2016, none of the executive directors made use of this facility. No other loans were extended to executive directors. 104 // Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
Remuneration of members of the supervisory board and subcommittees in 2016 The annual General Meetings of Shareholders in 2010 and 2011 resolved to apply the following remuneration for members of the supervisory board and its subcommittees:
Annual remuneration of the supervisory board: • chairman of the supervisory board € 40,000 gross • supervisory directors € 26,000 gross
Annual remuneration for committee members: • chairman of the audit committee € 8,000 gross • members of the audit committee € 6,000 gross • chairman of the risk and product development committee € 8,000 gross • members of the risk and product development committee € 6,000 gross • chairman of the remuneration committee € 8,000 gross • members of the remuneration committee € 6,000 gross
The remuneration awarded to supervisory directors was in accordance with the above. The tables below give an overview of the remuneration of the supervisory board, the audit committee, the risk and product development committee and the remuneration committee. An overview of the remaining terms of appointment for the individual supervisory directors is also presented.
REMUNERATION OF SUPERVISORY BOARD 2016 Fixed Fixed Fixed Fixed renumeration renumeration renumeration renumeration member SB member AC member RPC member RemCo Total
L. Deuzeman € 26,000 € 6,000 € 8,000 - € 40,000
C. van der Weerdt-Norder € 26,000 € 8,000 € 6,000 - € 40,000
J.M.A. Kemna € 26,000 - € 6,000 € 8,000 € 40,000
J.W.T. van der Steen € 40,000 € 6,000 - € 6,000 € 52,000
A. Soederhuizen € 26,000 - € 6,000 € 6,000 € 38,000
Total € 144,000 € 20,000 € 26,000 € 20,000 € 210,000
REMUNERATION OF SUPERVISORY BOARD 2015 Fixed Fixed Fixed Fixed Fee delegated renumeration renumeration renumeration renumeration supervisory member SB member AC member RPC member RemCo director Total
C.J.M. Scholtes* € 16,000 € 2,400 - € 2,400 - € 20,800
J.K. Brouwer* € 8,667 € 2,000 € 2,667 - - € 13,334
L. Deuzeman € 26,000 € 6,000 € 6,000 - € 90,956 € 128,956
C. van der Weerdt-Norder € 26,000 € 8,000 € 4,500 - - € 38,500
J.M.A. Kemna € 26,000 - € 7,500 € 6,833 - € 40,333
J.W.T. van der Steen € 36,500 € 3,000 - € 6,500 - € 46,000 105 A. Soederhuizen** € 4,333 - € 1,000 € 1,000 - € 6,333 //
Total € 143,500 € 21,400 € 21,667 € 16,733 € 90,956 € 294,256 * Resigned from supervisory board on 31 December 2015 ** Appointed to supervisory board on 30 October 2015 Annual Report 2016 REPORT OF THE SUPERVISORY BOARD
OVERVIEW OF TERMS OF APPOINTMENT OF THE SUPERVISORY BOARD Date of Date of (re)appointment contract expiry
L. Deuzeman 30-4-2015 GM 2019
C. van der Weerdt-Norder 18-9-2014 GM 2018
J.M.A. Kemna 18-9-2014 GM 2018
J.W.T. van der Steen 18-9-2014 GM 2018
A. Soederhuizen 30-10-2015 GM 2019
Financial statements and dividend The 2016 financial statements were discussed and adopted by the supervisory board during its meeting on 6 March 2017 with the executive board and Deloitte Accountants B.V., the external auditor. Deloitte Accountants B.V. issued an unqualified audit opinion. The financial statements will be submitted to the General Meeting for adoption on 24 April 2017. BinckBank intends to pay a final dividend of € 0.19 in keeping with the dividend policy. The calculation of the payable dividend meets the requirements of the CRR (EU/2013/575) and the related legislation, as well as the recommendation of the European Central Bank (ECB/2016/44). The 2016 result is insufficient for payment of the final dividend from the year’s profit. The intended dividend payment will therefore be drawn in part from the reserves. Subject to the approval of the general meeting on 24 April 2017, the share will be listed ex-dividend on 26 April 2017. The final dividend will be paid on 3 May 2017. 106 // Annual Report 2016 PERSONAL DETAILS OF THE BOARD MEMBERS
Personal details of the exectutive board members
Chairman of the executive board VINCENT GERMYNS – 1973 – BELGIAN NATIONALITY
Vincent was appointed director under the articles of association during the general meeting of 22 April 2014. The supervisory board officially appointed him as chairman of the executive board of BinckBank on 11 June 2015. In his role as chairman of the executive board Vincent concentrates first and foremost on the pursuit of the strategy and growth in turnover. During his career at BinckBank Vincent has headed BinckBank’s international expansion. He was responsible for the start-up of the Belgian branch and for the management of all branches abroad. Vincent’s education included studies at the Royal Military Academy (Brussels - Belgium) and the KU Leuven (Belgium). Earlier on in his career he worked at KBC Asset Management in Belgium.
Member of the executive board, chief financial & risk officer EVERT-JAN KOOISTRA – 1968 – DUTCH NATIONALITY
Evert-Jan has been a member of the board of BinckBank and chief financial and risk officer (CFRO) since 2008. Evert-Jan was reappointed as a director under the articles of association by the supervisory board of BinckBank during the general meeting of 25 April 2016. He is responsible for finance & control, operations, governance, risk, compliance and treasury & ALM. Evert-Jan studied Business Economics at the Erasmus University in Rotterdam and is a registered accountant. He has a twenty-three year track record in the financial sector, at companies including PriceWaterhouseCoopers and Shell. His most recent position was as financial director of the American International Game Technology.
Member of the executive board, chief operating officer STEVEN CLAUSING – 1971 – DUTCH NATIONALITY
Steven was appointed director under the articles of association (chief operating officer) of BinckBank at the extraordinary general meeting of 30 October 2015. Steven is a Technical Industrial Engineer (TU Eindhoven) and also has a Master’s degree in Finance (TIAS business school, Tilburg) and an Executive Master’s in Internal Auditing (Erasmus University, Rotterdam). Steven began his education and career in the Royal Netherlands Navy and was primarily involved in improving operations. He joined ABN AMRO Bank in 1998, where he held both commercial and internally-based positions. In 2008 he took up a position at RBS, where he moved in 2011 from the position of head of Internal Audit of the business unit ‘international payments’ to Risk Management. In that post he focused chiefly on 107
the assessment of worldwide transition management. He joined BinckBank as // head of Risk Management in March 2013. In that position he played a prominent role in various sub-committees of the executive board and the supervisory board. In his position as COO Steven concentrates mainly on product development and IT. Annual Report 2016 PERSONAL DETAILS OF THE BOARD MEMBERS
Personal details of the supervisory board members
JOHN VAN DER STEEN Mr Van der Steen began his career at ING Bank N.V. In 1954 – Dutch nationality 2001 he moved to Aon where he was CEO and chairman of Aon’s board of directors under its articles of association Mr J.W.T. Van der Steen was in the Netherlands, Belgium and Luxembourg until 2006. appointed as a supervisory director of BinckBank at the Until 2010 he was also a supervisory director of Aon Extraordinary General Meeting Switzerland (as chairman), Germany, Norway and on 18 September 2014 for a term Belgium. He was then appointed as chairman of Global of four years. Mr Van der Steen Accounts at Aon. Since 1 May 2014, Mr Van der Steen is Chairman of the supervisory has been a consultant for Aon Global Accounts. board and member of the remuneration committee and Mr Van der Steen is connected to RAI Holding B.V. as a audit committee. member and deputy chairman of the supervisory board and as chairman of the audit committee. He is also the In his most recent position, managing director and major shareholder of Ansteen Mr Van der Steen was Chairman of Global Accounts at Holding B.V. and Ansteen B.V. At the beginning of 2015 Aon, where together with his team he was responsible Mr Van der Steen was appointed as chairman of the for Aon’s 1,500 largest clients worldwide. The primary supervisory board of Princess Sportsgear & Traveller B.V. tasks of his team were risk management and risk At the end of 2016 he was appointed executive director transfer services for financial institutions, industrial of Stadhold Insurances Luxembourg S.A. Mr Van Der enterprises and service providers with a global Steen is also a member of the board of Stichting footprint. Mr Van der Steen was also chairman of Donateurs van het Koninklijk Concertgebouw Orkest. Aon Holdings B.V., the holding company for Aon’s businesses in Europe, the Middle East & Africa (EMEA) and Asia, and member of the worldwide Executive Committee ARS in Chicago. Number of BinckBank shares held on 31 December 2016: 0
LEO DEUZEMAN From 1990 to 1998 and from April 1952 – Dutch nationality 2003 to April 2007, he held the position of CFO at Kempen & Mr Deuzeman was reappointed for a term of four years Co N.V., at which bank he fulfilled as a member of the supervisory board of BinckBank in the role of director of finances an Extraordinary General Meeting on 30 April 2015. and administration from 1986 Mr Deuzeman is chairman of the risk and product to 1990. From 1998 to 2003 development committee and a member of the audit Mr Deuzeman was managing committee. partner of the private equity firm Greenfield Capital Partners N.V. Mr Deuzeman is a business economist and was employed by Deloitte as a registered accountant Mr Deuzeman is currently a from 1979 to 1986. In the period 1976-1979, he was member of the supervisory board affiliated with the University of Groningen as an of the Blue Sky Group and of 108
// academic member of staff with the Financial Intereffekt Investment Funds Department Faculty of Economic Sciences. (chairman). He is also a supervisory director and member of the investment advice committee of the investment fund Monolith Fund N.V. in Amsterdam and chairman of Stichting Administratiekantoor Monolith.
Number of BinckBank shares held on 31 December 2016: 0 Annual Report 2016 PERSONAL DETAILS OF THE BOARD MEMBERS
CARLA VAN DER WEERDT-NORDER Since 2008 Ms Van der Weerdt- 1964 – Dutch nationality Norder has been director and owner of Accent Organisatie Ms Van der Weerdt-Norder was appointed as a super Advies B.V., an organisation of visory director of BinckBank at the Extraordinary 14 organisational advisors General Meeting on 18 September 2014 for a term of specialising in the fields of risk four years. Ms Van der Weerdt-Norder is chairwoman of management and finance. the audit committee and a member of the risk and Ms Van der Weerdt-Norder is a product development committee. supervisory director chairwoman of the Audit & Risk Committee Ms Van de Weerdt-Norder is a business administrator for Triodos Bank N.V. and registered accountant. She began her career in a She is also a member of the sales position at IBM, after which she held various supervisory board of DWS positions at ABN AMRO in Risk Management and Zorgverzekeraar, Habion and Finance. Her last position at ABN AMRO was CFO/COO InHolland university of applied of the Business Unit Global Transaction Banking. sciences.
Number of BinckBank shares held on 31 December 2016: 0
HANNY KEMNA She then accepted a position as managing partner of IT 1960 – Dutch nationality Risk and Assurance for EY EMEIA FSO, the international division of EY in Europe focusing on services to the Ms Kemna was appointed as a financial sector. supervisory director of BinckBank at the Extraordinary general In the summer of 2013 Ms Kemna decided to return meeting on 18 September 2014 to the Netherlands and to end her career at EY in for a term of four years. early 2014.
Ms Kemna is chairwoman of the Ms Kemna is affiliated with cooperative Menzis N.V. as remuneration committee and a member of the supervisory board and chairwoman of member of the risk and product the governance, risk and compliance committee. She is development committee. also a member of the supervisory council of Nictiz, the Netherlands institute for ICT in the healthcare sector. Ms Kemna has worked as She is external member of the audit committee of the a programmer and systems analyst, and later as a Ministry of Security & Justice, and member of the quality assurance manager, developing, testing and Advisory Committee for the Tax Authorities Financial implementing IT systems. At Ernst & Young she worked Control Framework for the Ministry of Finance. Since in the financial sector in the position of IT auditor. 1 January 2016, she has served as a supervisory board Ms Kemna was also responsible for various internal member of pension administrator MN Services N.V. strategic IT projects at EY, for which she spent some Ms Kemna is an independent advisor and director/ time working in the USA. major shareholder of JMA Kemna Beheer BV and JMA Kemna BV. In 1999 Ms Kemna became a partner at Ernst & Young Accountants, with final responsibility for audits of the quality of IT, euro conversions, security projects and institutional governance programmes. At the beginning of 2005 Ms Kemna was asked to take on the leadership 109
of the IT Risk and Assurance services for EY CIS (at its // office in Moscow, Russia). She held this position until July 2008. Number of BinckBank shares held on 31 December 2016: 0 Annual Report 2016 PERSONAL DETAILS OF THE BOARD MEMBERS
ARJEN SOEDERHUIZEN In 2004 Mr Soederhuizen was appointed CEO of ABN 1965 – Dutch nationality AMRO Asset Management Nederland B.V. In that position he was ultimately responsible for all of ABN Mr Soederhuizen was appointed AMRO Bank N.V’s asset management activities on the as a supervisory director of Dutch market. BinckBank at the Extraordinary General Meeting on 30 October After the takeover of ABN AMRO Bank N.V. By a banking 2015 for a term of four years. consortium, Mr Soederhuizen oversaw the legal- He is a member of both the risk technical process of integrating AAAM NL into Fortis and the product development Investment Management, after which he ultimately committee and the remuneration decided against continuing his career with Fortis committee. Investment Management. In 2009, Mr Soederhuizen was invited to take an interim position at PGGM. He Mr Soederhuizen (business held that position for two and a half years as a member economist) began his career in of the asset management team and CIO for private 1991 as a management trainee at ABN AMRO. After markets. After that he held the positions of advisor of working for three years as an equity analyst at ABN ABN AMRO Pensioen Fonds and interim CIO at the same AMRO’s investment bank, he moved in 1994 to the fund from 2013 - 2014. Since 2014, Mr Soederhuizen bank’s asset management operations (ABN AMRO has held an ancillary position with the ABN AMRO Asset Management). At ABN AMRO Asset Management pension fund. He is a member of the asset management he held both commercial and purely investment committee and the balance sheet management positions. Between 1994 and 1998 he was responsible committee. Mr Soederhuizen’s ancillary position for all institutional clients in the Middle East, Africa, involves a time commitment of approximately sixteen Latin America and Spain. From 1998 to 2004, he days a year. headed an investment division of twenty quantitative investment specialists. Mr Soederhuizen has been a member of the Advisory Committee for Amundi Asset Management in the Netherlands since 1 July 2016. He spends approximately eight days a year on this ancillary position.
Number of BinckBank shares held on 31 December 2016: 0 110 // Annual Report 2016 FINANCIAL STATEMENTS 2016 FINANCIAL STATEMENTS 112 // Annual Report 2016 FINANCIAL STATEMENTS
CONTENTS OF FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of financial position 114 Consolidated income statement 115 Consolidated statement of comprehensive income 116 Consolidated statement of cash flows 117 Consolidated statement of changes in equity 119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 136
NOTES TO THE CONSOLIDATED INCOME STATEMENT 153
OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 161
COMPANY FINANCIAL STATEMENTS Company balance sheet 192 Company income statement 193 Company statement of changes in equity 194
NOTES TO THE COMPANY FINANCIAL STATEMENTS 196
NOTES TO THE COMPANY BALANCE SHEET 197
NOTES TO THE COMPANY FINANCIAL STATEMENTS 206
OTHER INFORMATION Independent auditor’s report 214 Provisions of the Articles of Association regarding priority shares (articles 15 and 21) 219 Provisions of the Articles of Association regarding profit appropriation (Article 32) 220 113 // Annual Report 2016 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (amounts in € 000’s) Note 2016 2015
ASSETS
Cash and balances at central banks 5 854,230 178,365
Banks 6 127,755 178,244
Financial assets held for trading 7 20,393 12,297
Financial assets designated at fair value through profit and loss 7 9,499 15,405
Available-for-sale financial assets 8 724,398 1,167,121
Held-to-maturity financial assets 9 790,021 813,484
Loans and receivables 10 958,329 502,006
Associates 11 - 1,227
Intangible assets 12 168,260 190,560
Property, plant and equipment 13 35,128 34,830
Current tax assets 14 12,270 7,945
Deferred tax assets 15 1,048 1,121
Other assets 16 63,451 28,103
Prepayments and accrued income 17 35,479 45,122
Derivative positions held on behalf of clients 18 - 260,505
Total assets 3,800,261 3,436,335
LIABILITIES
Banks 6 2,017 23,582
Financial liabilities held for trading 7 20,428 12,286
Financial liabilities designated at fair value through profit and loss 7 1,018 46
Funds entrusted 19 3,308,829 2,589,714
Provisions 20 8,891 7,884
Current tax liabilities 14 10 19
Deferred tax liabilities 15 31,982 27,874
Other liabilities 21 19,841 66,080
Accruals and deferred income 22 10,293 10,865
Derivative positions held on behalf of clients 18 - 260,505
Total liabilities 3,403,309 2,998,855 114 // Equity attributable to:
Owners of the parent 23 395,569 436,184
Non-controlling interests 23 1,383 1,296
Total equity 396,952 437,480
Total equity and liabilities 3,800,261 3,436,335 Annual Report 2016 FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
(amounts in € 000’s) Note 2016 2015
INCOME
Interest income 30,123 29,580
Interest expense (3,798) (3,856)
Net interest income 24 26,325 25,724
Fees and commission income 129,547 155,826
Fees and commission expense (20,471) (24,365)
Net fees and commission income 25 109,076 131,461
Other income 26 9,910 10,947
Result from financial instruments 27 2,530 2,031
Impairment of financial instruments 28 (116) 15
Total income from operating activities 147,725 170,178
EXPENSES
Employee expenses 29 51,635 53,015
Depreciation and amortisation 30 26,215 27,253
Other operating expenses 31 60,299 50,110
Total operating expenses 138,149 130,378
Result from operating activities 9,576 39,800
Share in results of associates 11 (2,821) (730)
Result before tax 6,755 39,070
Income tax expense 14 (2,134) (8,368)
Net result 4,621 30,702
Net result attributable to:
Owners of the parent 4,534 29,626 115 //
Non-controlling interests 87 1,076
Net result 4,621 30,702
Basic and diluted earnings per share 32 0.07 0.42 Annual Report 2016 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(amounts in € 000’s) Note 2016 2015
Net result from income statement 4,621 30,702
Other comprehensive income recognised through profit and loss on realisation
Net gain/(loss) on available-for-sale financial assets 23 (708) (2,869)
Gains and losses realised through the profit and loss 23 66 -
Income tax relating to components of other comprehensive income 23 137 618
Other comprehensive income, net of tax (505) (2,251)
Total comprehensive income, net of tax 4,116 28,451
BinckBank N.V. has no other comprehensive income that will not be recognised through profit and loss on realisation.
Result attributable to:
Owners of the parent 4,029 27,375
Non-controlling interests 23 87 1,076
Total realised and unrealised results, net of tax 4,116 28,451 116 // Annual Report 2016 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in € 000’s) Note 2016 2015
CASH FLOWS FROM OPERATIONS
Net result for the year 4,621 30,702
Adjustments for:
Amortisation of intangible assets and depreciation of property, 12,13 26,215 27,253 plant and equipment
Provisions 20 1,007 (1)
Amoratisation premiums and discounts and foreign currency 8 14,186 13,996 translation on available-for-sale financial assets
Amortisation premiums and discounts and foreign currency 9 3,522 5,599 translation on held-to-maturity financial assets
Amortisation premiums and discounts on loans and receivables 11 2,279 -
Impairment losses on loans and receivables 10 (7) (20)
Movements in deferred tax 15 4,318 2,967
Share in results of associates 11 2,821 730
Other non-cash movements (1,389) (4,258)
Movements in operating assets and liabilities:
Banks (assets) 6 (55) (754)
Financial liabilities held for trading 7 46 (92)
Financial assets and liabilities at fair value through profit and loss 7 6,878 444
Loans and receivables 10 (458,595) (3,078)
Taxes, other assets and prepayments and accrued income 14,16,17 (30,030) 73,409
Banks (liabilities) 6 (21,565) (2,005)
Funds entrusted 19 719,115 44,294
Tax liabilities, other liabilities, accruals and deferred income 14,21,22 (46,820) 35,379
Net cash flows from operating activities 226,547 224,565
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in available-for-sale financial assets 8 (254,720) (327,710)
Divestments and redemption of available-for-sale financial assets 8 682,615 532,870 117
Investments in held-to-maturity financial assets 9 19,941 (273,975) //
Investments in associates 11 (1,594) (664)
Investments in intangible assets 12 (386) (74)
Investments in property, plant and equipment 13 (3,827) (637)
Net cash flows from investing activities 442,029 (70,190) Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) Note 2016 2015
CASH FLOWS FROM FINANCING ACTIVITIES
Share buy-back 23 (24,950) -
Dividends paid:
Final dividend preceding year 33 (17,199) (21,787)
Interim dividend current year 33 (2,657) (9,839)
Net cash flows from financing activities (44,806) (31,626)
Net cash flows 623,770 122,749
Opening balance of cash and cash equivalents 352,532 225,117
Net cash flows 623,770 122,749
Effect of exchange rate changes on cash and cash equivalents 1,551 4,666
Closing balance of cash and cash equivalents 977,853 352,532
The cash and cash equivalents presented in the consolidated statement of cash flows are includedin the consolidated balance sheet under the following headings at the amounts stated below:
Cash 5 854,230 178,365
Banks 6 127,755 178,244
Banks – non-cash equivalents 6 (4,132) (4,077)
Total cash equivalents 977,853 352,532
Cash flows from operating activities includes the following items:
Tax paid (6,459) (9,302)
Interest received 36,863 34,071
Interest paid (3,810) (4,125)
Commission received 133,134 152,704
Commission paid (20,248) (24,701) 118 // Annual Report 2016 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued Share Fair Non- share premium Treasury value Retained controlling Total (amounts in € 000’s) Note capital reserve shares reserve earnings interests equity
1 January 2016 7,100 361,379 (4,979) 1,526 71,158 1,296 437,480
Net result for the year - - - - 4,534 87 4,621
Other comprehensive - - - (505) - - (505) income Total comprehensive - - - (505) 4,534 87 4,116 income
Final dividend 2015 33 - - - - (17,199) - (17,199)
Interim dividend 2016 33 - - - - (2,657) - (2,657)
Grant of rights to shares 23 - - - - 162 - 162
Issue of shares to executive 23 - - 461 - (461) - - board and employees
Share buy-back 23 - - (24,950) - - - (24,950)
31 December 2016 7,100 361,379 (29,468) 1,021 55,537 1,383 396,952
Issued Share Fair Non- share premium Treasury value Retained controlling Total (amounts in € 000’s) Note capital reserve shares reserve earnings interests equity
1 January 2015 7,100 361,379 (5,570) 3,777 73,341 220 440,247
Net result for the year - - - - 29,626 1,076 30,702
Other comprehensive - - - (2,251) - - (2,251) income Total comprehensive - - - (2,251) 29,626 1,076 28,451 income
Final dividend 2014 33 - - - - (21,787) - (21,787)
Interim dividend 2015 33 - - - - (9,839) - (9,839)
Grant of rights to shares 23 - - - - 408 - 408 119
Issue of shares to executive // 23 - - 591 - (591) - - board and employees
31 December 2015 7,100 361,379 (4,979) 1,526 71,158 1,296 437,480 Annual Report 2016 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Company information
BinckBank N.V., established and registered in the Netherlands, is a public limited liability company incorporated under Dutch law, whose shares are publicly traded. BinckBank has its registered office at Barbara Strozzilaan 310, 1083 HN, Amsterdam, registered with the Chamber of Commerce under number 33162223. BinckBank N.V. provides online brokerage services in financial instruments for private and professional investors. In addition to its brokerage services, BinckBank N.V. offers asset management services and savings products. ‘BinckBank’ hereinafter refers to BinckBank N.V. and to its various subsidiaries.
The consolidated company financial statements for BinckBank for the period ending on 31 December 2016 have been prepared by the executive board and approved for publication pursuant to the resolution of the executive board and the supervisory board dated 6 March 2017.
Executive board: Supervisory board: V.J.J. Germyns (bestuursvoorzitter) J.W.T. van der Steen (voorzitter) E.J.M. Kooistra (CFRO) Ms C.J. van der Weerdt-Norder S.J. Clausing (COO) L. Deuzeman Ms J.M. Kemna A. Soederhuizen
2. General accounting principles
2.1 PRESENTATION OF THE FINANCIAL STATEMENTS The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), hereinafter referred to as IFRS-EU.
The consolidated financial statements have been prepared on the basis of historical cost, apart from the financial assets and liabilities held for trading, financial assets, and liabilities recognised at fair value through profit and loss and derivatives positions held on behalf of customers, all of which are recognised at fair value.
The financial statements are prepared on the basis of the going concern assumption. Unless otherwise stated, the consolidated financial statements are presented in euros, with all amounts rounded to the nearest thousand (€ 000’s). The figures stated in the tables are based on amounts that have not been rounded off, and therefore rounding differences may occur.
Information provided under IFRS 7, ‘Financial instruments: disclosures’, concerning the nature and scale of risks arising from financial instruments is in part incorporated in the consolidated financial statements on the basis of the audited sections of the Report of the executive board in the section Risk management (see pages 56 to 81) and in note 39 relating 120
// to Risk management. The relevant passages are marked as audited.
The presentation of the consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of cash flows, consolidated statement of changes in equity and notes may be changed in order to provide better information or improve reconciliation with the current period.
Annual Report 2016 FINANCIAL STATEMENTS
2.2 CHANGES IN ACCOUNTING PRINCIPLES The accounting principles with regard to recognition and measurement are consistent with those applied in the previous year, with the exception of any changes as a result of the implications of new, amended or improved IFRS standards as described below or as a result of new activities.
In the current year, BinckBank has applied the new or amended IFRS standards and IFRIC interpretations effective for annual periods commencing on or after 1 January 2016. New or amended standards take effect for annual periods beginning on or after the date as stated by IFRS and after ratification by the EU, whereby earlier application is permitted in some cases. The new standards and amendments to standards that took effect in the current year have been applied in the existing reporting principles. None of the new standards and amendments had a significant influence on the financial position and results of BinckBank.
New standards, amendments of standards and interpretations, that have not yet taken effect or have not yet been ratified by the European Union are listed below. These standards have not yet been applied by BinckBank. The list begins with the standards that are expected to have a significant impact on BinckBank and continues with the standards that are expected to have little or no impact on the financial position and results of BinckBank:
STANDARDS EXPECTED TO HAVE A SIGNIFICANT IMPACT ON BINCKBANK
NEW OR AMENDED STANDARDS EFFECTIVE FOR FINANCIAL YEARS BEGINNING ON OR AFTER 1 JANUARY 2018
IFRS 9 – Financial Instruments, IFRS 9 Financial instruments classification, and measurement (and IFRS 9 Financial Instruments will replace IAS 39 ‘Financial Instruments: Recognition and related sections of IFRS 7) Measurement’ and includes requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and micro hedge accounting. The new requirements become effective as of 1 January 2018. The classification and measurement and impairment requirements will be applied retrospectively by adjusting the opening balance sheet and opening equity at 1 January 2018, with no restatement of comparative periods. It is expected that the implementation of IFRS 9 will have a significant impact on Shareholders’ equity, Net result and/or Other comprehensive income and disclosures.
Enhanced Disclosure Task Force (EDTF) In November 2015, the EDTF published a report on IFRS 9 recommended disclosures which may be useful to help stakeholders understand the upcoming changes as a result of using the Expected Credit Loss (‘ECL’) approach. Given that full IFRS 9 disclosures are only required for the year ending 31 December 2018, the additional EDTF recommendations during the period before adoption aim at promoting consistency and comparability across internationally active banks. BinckBank has used these recommendations as a guideline for transitional disclosures with an initial focus on qualitative disclosures.
IFRS 9 – programme In 2016, BinckBank focused on establishing the IFRS 9 program, the interpretation of key IFRS 9 concepts and the initiation of the impact assessment. Furthermore we have started with the implementation of the IFRS 9 requirements in models, systems, processes and governance is as much as they are relevant for the various portfolio’s. Work will be continued in 2017 including the preparation and execution of a parallel run. The governance structure of the IFRS 9 Program has been set-up based on the three phases of IFRS 9: Classification and Measurement, Impairments and Hedge Accounting. Each workstream consists of experts from Finance, Risk, Treasury and other relevant departments. The Steering Committee is the decision making body.
Classification and measurement BinckBank has applied a two-step approach to determine the classification and measure- ment of financial assets into one of the three categories, being Amortised cost, Fair Value
through Other Comprehensive Income (FVOCI) or Fair value through profit and loss: 121 // 1. The Business Model test will be applied to determine how a portfolio of financial instruments is managed as a whole; and Annual Report 2016 FINANCIAL STATEMENTS
NEW OR AMENDED STANDARDS EFFECTIVE FOR FINANCIAL YEARS BEGINNING ON OR AFTER 1 JANUARY 2018
IFRS 9 – Financial Instruments, 2. The Solely Payments of Principle and Interest (SPPI) test will be applied to determine classification, and measurement the contractual cash flow characteristics of financial assets in the Business Model. (and related sections of IFRS 7) In most instances the classification and measurement outcomes will be similar to IAS 39, (continued) although certain differences could arise. The classification and measurement of financial liabilities remains essentially the same as under IAS 39. In 2016 BinckBank has initiated both the Business Model test and the SPPI test. Final outcomes are expected early in 2017.
Impairment The recognition and measurement of impairment is intended to be more forward-looking, based on an expected credit loss (‘ECL’) model, than under IAS 39 which is of an incurred loss model. The ECL model applies to on-balance financial assets accounted for at amortised cost and FVOCI, such as loans and receivables and debt securities. BinckBank has started with the financial impact analysis on the level of impairment allowances under the new ECL approach and initial work on determining key concepts and assumptions essential to the new impairment model, such as the definition of significant deterioration and the approach how to measure ECL
BinckBank shall adopt the IFRS 9 three-stage approach to the determination of the expected credit losses: • Stage 1: 12 month ECL – performing assets Financial instruments that have not had a significant increase in credit risk since initial recognition require, at initial recognition, a provision for expected credit losses associated with the probability of default events occurring within the next 12 months (12 month ECL). • Stage 2: Lifetime ECL – under-performing assets In the event of a significant increase in credit risk since initial recognition, a provision is required for ECL resulting from all possible default events over the expected life of the financial instrument (Lifetime ECL). Triggers to move to Stage 2 will be defined depending on the type of asset/portfolio. Once the ECL models are available, further calibration of the triggers will be defined and tested. • Stage 3: Lifelong ECL – non-performing assets Financial instruments will move into Stage 3 once defaulted. The aim is to align the default definition for IFRS 9 with the internal definition of default for risk management purposes. Stage 3 requires a Lifetime ECL provision.
Hedge accounting IFRS 9 aims to simplify general hedge accounting requirements. All micro hedge accounting strategies as well as the macro cash flow hedge are in scope of IFRS 9. Macro fair value hedging is currently outside the scope of IFRS 9. At present BinckBank does not have apply hedge accounting and as such it is out of scope of the project.
IFRS 15 – Revenue from contracts with IFRS 15 contains the new guideline for the recognition of revenue from contracts with customers customers, with the intention of defining the revenue model and describing it in a standard. The current guidelines for revenue recognition are spread over various standards, and will disappear once IFRS 15 takes effect. This standard requires an analysis to determine the timing of revenue using a method in which the determination of the timing can have a significant influence on the operational processes. BinckBank expects the quantitative effect on the financial position and results of BinckBank to be limited because the period during which operational activities are provided is generally very short. BinckBank expects that it will be able to provide a more detailed estimate of the impact of this new standard in 2017.
NEW OR AMENDED STANDARDS EFFECTIVE FOR FINANCIAL YEARS BEGINNING ON OR AFTER 1 JANUARY 2019
IFRS 16 – Leases This new standard describes the treatment of financial and operating lease contracts. Under the new standard, an asset has to be recognised in the statement of financial
122 position for both types of lease. A financial obligation also has to be recognised of the
// payments are spread across multiple periods. The full study of the effect of this new standard has to be completed. Annual Report 2016 FINANCIAL STATEMENTS
STANDARDS EXPECTED TO HAVE LITTLE OR NO IMPACT ON BINCKBANK
NEW OR AMENDED STANDARDS EFFECTIVE FOR FINANCIAL YEARS BEGINNING ON OR AFTER 1 JANUARY 2017
IAS 12 – Corporation tax This change further clarifies the measurement and recognition of temporary deferred tax assets resulting from unrealised losses on financial instruments held at fair value. The impact of the adjustments to this standard on the financial position and results is expected to be limited.
IAS 7 – Cash flow statement As a result of the disclosure initiative, additions to the cash flow statement are proposed which are intended to provide more detailed breakdown of the changes in the obligations from financing activities. BinckBank will include the proposal in the notes to the cash flow statement. This adjustment will have no effect on the financial position and results of BinckBank.
NEW OR AMENDED STANDARDS EFFECTIVE FOR FINANCIAL YEARS BEGINNING ON OR AFTER 1 JANUARY 2018
IFRS 10, IFRS 12, and IAS 28 – This amendment is primarily focused on investment entities. As BinckBank does not Investment entities: application of fall under the definition of an investment entity, this amendment will have no impact on consolidation exemption BinckBank.
IFRS 2 – Clarifications of classification and This amendment clarifies the classification and measurement of share based payments. measurement of share based payment The clarification primarily relates to the manner in which vesting conditions affect the fair transactions value of the transaction.
IFRS 4 – Insurance contracts This amendment relates to an exemption for the application of IFRS 9 Financial Instruments in combination with IFRS 4 Insurance Contracts. As IFRS 4, relating to insurance contracts is not applicable to BinckBank this amendment will not be of relevance.
Annual improvements cycle 2014-2016 This comprise of several smaller amendments to existing standards in order to clarify application. The amendments are expected to have no significant impact.
IFRIC Interpretation 22 Foreign currency This amendment clarifies the accouting for transactions that include the receipt or pay- transactions and advance consideration ment of advance considerations processing of transactions in a foreign currency. The amendment is expected to have no significant impact.
Amendment IAS 40 – Transfer of This is an amendment which provides guidance on the criteria to apply on transfers to or investment property from investment properties. The amendment is expected to have no significant impact.
NEW OR AMENDED STANDARDS EFFECTIVE FOR FINANCIAL YEARS BEGINNING ON OR AFTER A DATE THAT IS NOT YET KNOWN
IFRS 10 and IAS 28 – Amendment This amendment relates to the time and extent of gain or loss recognition for transactions of standards to remove conflicting with an associate or joint venture. This amendment has no effect on the financial position requirements and results of BinckBank. In connection with an investigation of the equity method, the IASB has suspended the effective date of this adjustment indefinitely.
IFRS 14 – Regulated activities (issued on As this standard is applicable to first time adopters of IFRS, it is not applicable toBinckBank. 30 January 2014)
2.3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of the financial statements involves estimates and assumptions based on subjective presumptions and estimates. Situations are assessed on the basis of available financial data and information. These estimates may materially affect the size of the reported assets and liabilities and the contingent assets and liabilities on the date of the consolidated financial statements and the income and expenses reported for the period under review. While the management strives to make these estimates to the best of its ability, actual results may vary from these estimates.
The estimates and underlying assumptions are reviewed regularly. Revisions are recognised in the period in which the 123
estimate is revised, or in the period of revision and future periods, if the revision affects both the current and future // reporting periods. The most significant assumptions for the future and other key sources of estimation uncertainty at balance sheet date that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are: Annual Report 2016 FINANCIAL STATEMENTS
GOING CONCERN Management of BinckBank has evaluated the bank’s ability to operate as a going concern is satisfied that the bank has adequate resources to continue its activities in the foreseeable future. Moreover, the management is not aware of any material uncertainties that may cast doubt upon BinckBank’s ability to continue as a going concern. Therefore the financial statements are prepared on a going concern basis.
CONSOLIDATION OF ASSOCIATES AND JOINT VENTURES The consolidated financial statements has been prepared on the basis of the consolidation of BinckBank and its associates and joint ventures. In determining whether associates and joint ventures should be consolidated, management has assessed whether there is de facto control as a result of decisive control, risk and reward regarding the variable results of the entity or influence over the appropriation of the results of the entity on the basis of current circumstances and insights, consistent with the conditions of IFRS 10.
FAIR VALUE OF FINANCIAL INSTRUMENTS Where the fair value of financial assets and financial liabilities cannot be obtained from active markets, they are determined using valuation methods, including cash flow models or other valuation models. Observable market data is used as the input to these models wherever possible, but where this is not possible judgements are required in determining fair values. These judgements involve consideration of input factors such as liquidity risk, credit risk and volatility. Changes in assumptions regarding these factors can affect the fair value of financial instruments.
IMPAIRMENTS OF AVAILABLE-FOR-SALE FINANCIAL ASSETS AND HELD-TO-MATURITY FINANCIAL ASSETS An impairment provision is formed for available-for-sale financial assets and held-to-maturity financial assets when there are objective indications that BinckBank will not be able to collect all amounts that should be received under the original contractual conditions of the loan. An initial indication for impairment has occurred when over a longer period of time the fair value is substantially lower than the amortised cost. BinckBank makes individual estimates of the recoverable value, being the value of future cash flows and the costs of collection of the amounts receivable. When the financial assets meet the criteria for impairment then the amount written down is equal to the difference between the carrying amount and the recoverable value.
IMPAIRMENT OF LOANS AND RECEIVABLES An impairment provision is formed for loans and receivables when there are objective indications that BinckBank will not be able to collect all amounts under the original contractual conditions of the loan. Individual or collective estimates are then made of the recoverable amount of the loan, being the value of the future cash flows, the proceeds from liquidating the collateral net of transaction costs, and the costs of collecting the receivables. The provision is formed in an amount equal to the difference between the carrying amount and the recoverable amount.
IMPAIRMENT OF GOODWILL BinckBank performs an impairment test on the carrying amount of goodwill at least once a year. This involves estimating the value in use of the cash-generating units to which the goodwill is attributed. BinckBank estimates the value in use by estimating the expected future cash flows from the cash-generating unit and determining an appropriate discount rate for the calculation of the net present value of those cash flows.
FAIR VALUE OF IDENTIFIED INTANGIBLE ASSETS ACQUIRED THROUGH ACQUISITIONS BinckBank measures the value of the identifiable intangible assets acquired through the acquisition of a company or business activities. The measurement is performed using cash flow models and/or royalty models. BinckBank makes assumptions and projections of future revenues and results in order to arrive at the cash flows and also determines the applicable discount rate. Where the royalty method is used, an estimate is also made of the appropriate royalty percentage. An impairment test is performed on each balance sheet date.
ECONOMIC LIFE OF INTANGIBLE ASSETS AND PROPERTY, PLANT, AND EQUIPMENT 124
// BinckBank applies standard amortisation and depreciation periods for various groups of assets. BinckBank assesses each individual asset periodically to establish whether the standard amortisation or depreciation period still corresponds to the expected useful life of the asset concerned. Circumstances may occur during the use of the asset which may lead to a situation in which the standard period no longer corresponds to the actual useful life. As soon as a deviation is identified, the remaining carrying amount of the asset is written off over the revised remaining economic life on a straight-line basis. Annual Report 2016 FINANCIAL STATEMENTS
DEFERRED TAX ASSETS Deferred tax assets are recognised if it is probable that future taxable profits will be generated which allow the tax loss carryforwards to be utilised.
PROVISIONS AND OFF BALANCE SHEET LIABILITIES Provisions and off balance sheet liabilities are determined based on available information and management estimates. The actual results may differ from these estimates.
3. Accounting principles used for consolidation
The consolidated financial statements consist of the financial statements of BinckBank and its subsidiaries on 31 December 2016.
BinckBank controls an investment only if: • it has control of the investment (meaning that entitlements exist whereby it can directly influence the relevant operations of the investment); • it is exposed or entitled to variable returns due to its involvement in the investment; and • it has the possibility of using its control of the investment to influence the returns.
If BinckBank does not hold a majority of the voting rights or equivalent entitlements with respect to an investment, it takes account of all the relevant facts and circumstances in order to assess whether it has control of the investment, including: • contractual agreements with the other parties holding voting rights with respect to the investment; • entitlements arising from other contractual arrangements; and • potential voting rights.
BinckBank reassesses whether it has control of an investment if there are indications from the facts and circumstances that one or more of the three elements of control have changed. Consolidation of a subsidiary begins when BinckBank acquires control of the subsidiary and ceases when control of subsidiary ends. Assets, liabilities, income and expense items of a subsidiary acquired or disposed of during the year are recognised in the financial statements from the date on which BinckBank acquires control until the date on which BinckBank ceases to have control.
Profit or loss and every component of other comprehensive income (OCI) are allocated to the shareholders of the parent company of BinckBank and the non-controlling interests, even if this leads to non-controlling interests showing a negative balance. If necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those of BinckBank.
A change in the ownership of a subsidiary not involving loss of control is recognised as an equity transaction. At the time as BinckBank ceases to control a subsidiary, it will: • no longer recognise the assets (including goodwill) and liabilities of the subsidiary in its statement of financial position; • no longer recognise the carrying amounts of non-controlling interests in its statement of financial position; • adjust the cumulative translation differences in equity; • recognise the fair value of the payment received; • recognise the fair value of an investment held in its statement of financial position; • recognise any surplus or shortfall in its income statement; • reclassify BinckBank’s share in the amounts previously recognised under other comprehensive income to the result or to retained earnings, as would be required in the event that BinckBank had disposed of the asset or liability in question directly.
Unrealised gains on transactions with investments and associates are eliminated in proportion to BinckBank’s interests in the companies concerned. Unrealised losses are also eliminated, except where the transactions indicate that the 125
transferred asset has become impaired. //
Transactions between BinckBank and its subsidiaries took place during the year. These intercompany transactions have been fully eliminated in the consolidated financial statements. Annual Report 2016 FINANCIAL STATEMENTS
4. Accounting policies
4.1 FOREIGN CURRENCY TRANSLATION The consolidated financial statements are in euros, this being both BinckBank’s functional and presentation currency. Items recognised in the financial statements of each entity are measured on the basis of the relevant entity’s functional currency. Transactions in foreign currencies are translated on initial recognition at the functional currency’s exchange rate on the transaction date.
Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing on the balance sheet date. Differences relating to movements in exchange rates are recognised in the income statement. Non- monetary items in foreign currencies measured against fair value are translated at the exchange rate at the moment the fair value is determined. Currency translation differences on non-monetary items carried at fair value through profit and loss are likewise recognised in the income statement. The results of financial transactions and costs are translated into euros at the exchange rate prevailing on the transaction date in the income statement.
At the reporting date, the assets and liabilities of foreign associates are translated into BinckBank’s functional currency at the exchange rate prevailing on the balance sheet date, while the income statement is translated at the weighted average exchange rate for the year. Translation differences are recognised directly in a separate component of equity. On the sale of a foreign currency entity the deferred cumulative amount included in equity for the relevant entity is recognised in the income statement.
4.2 FINANCIAL ASSETS AND LIABILITIES
CLASSIFICATION AND MEASUREMENT OF FINANCIAL ASSETS AND LIABILITIES Financial assets and liabilities are classified in categories on the basis of the nature and purpose of the assets or liabilities. The following categories are used: • Financial assets and liabilities at fair value through profit and loss; • Available-for-sale financial assets; • Held-to maturity financial assets; • Loans and receivables.
Financial assets and liabilities bought and sold in accordance with standard market conventions are recognised at the transaction date of the relevant purchase or sale. Other financial assets and liabilities are recognised in the balance sheet at the time of acquisition.
On initial recognition, financial instruments may be assigned to a specific category, their accounting treatment being decided at the same time. Initial recognition of financial assets and liabilities is at fair value, including directly attributable transaction costs, except for the category which is carried at fair value through profit and loss, where the transaction costs are expensed.
Financial assets and liabilities at fair value through profit and loss An instrument is classified as carried at fair value through profit and loss if it is held for trading or if it was designated as such on initial recognition for one of the following reasons: • It eliminates or substantially reduces inconsistencies in measurement and recognition which would otherwise arise on the recognition of assets or of income and expenses on a different basis. • The performance of the financial asset concerned is assessed on the basis of its fair value in accordance with a documented risk management or investment strategy. Reporting to management is on the basis of fair value. • The host contract of the financial instruments contains one or more embedded derivatives and the entire contract is recognised at fair value through profit and loss. This is only permissible provided the embedded derivative has a significant influence on the contractually agreed cash flows, or it is evident on initial recognition of the financial 126
// instrument that separation of the embedded derivative is not permissible (e.g. option of premature settlement at amortised cost).
Derivatives are classified as being held for trading purposes. Derivatives are financial instruments requiring only a limited net initial investment or none at all, with future settlement dependent on the underlying notional amount of the contract and movements in certain rates or prices (e.g. an interest rate or the price of a financial instrument). Financial instruments are recognised at fair value. Both unrealised and realised gains and losses are recognised directly in the income statement
Annual Report 2016 under Result from financial instruments. FINANCIAL STATEMENTS
Available-for-sale financial assets Available-for-sale financial assets are financial assets that are designated as being available for sale or are not included in one of the other categories. After initial recognition, available-for-sale financial assets are measured at fair value. Any gain or loss is shown, net of tax, as an unrealised result in the fair value reserve until the investment is derecognised or determined to be impaired. In that case, the cumulative gain or loss previously shown in equity is recognised in the income statement in the result from financial instruments.
Held-to maturity financial assets Financial assets with fixed or determinable payments and a fixed maturity date are designated as investments to be held-to-maturity if BinckBank specifically intends to hold them until maturity and is in a position to do so. Held-to-maturity investments are recognised at amortised cost, measured using the effective interest method, less any impairment losses.
Loans and receivables Loans and receivables are financial instruments with fixed or determinable payments that are not quoted in an active market. After initial recognition, the items are valued at amortised cost, using the effective interest method and less a provision for impairment, where relevant.
EFFECTIVE INTEREST RATE The effective interest rate is the rate that exactly discounts the estimated future cash flows through the expected life of the financial instrument or, when appropriate, a shorter period, to the carrying value of the financial asset or financial liability.
OFFSETTING FINANCIAL ASSETS AND LIABILITIES The gross presentation of the financial assets and financial liabilities in the balance sheet is customary practice. Financial assets and liabilities are set off against each other and the net amount is presented in the balance sheet when there is a legally enforceable right to set off the amounts and an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
An entity needs to possess a continuous legal and enforceable offsetting right to meet the offsetting criterion. Consequently, the offsetting right: • may never be contingent on a future event; and • must be legally enforceable in all the following circumstances: - within the context of the normal course of business; - in the event of default; and - in the event of the insolvency or bankruptcy of the entity and of all counterparties.
DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES A financial asset (or, when applicable, a component of a financial asset or part of a group of similar financial assets) is no longer recognised in the balance sheet if: • BinckBank ceases to have a right to the cash flows from the asset; or • BinckBank retains the right to receive the cash flows from the asset but has entered into an obligation to pay them to a third party in their entirety and without significant delay under the terms of a specific contract; and • BinckBank has transferred its rights to receive the cash flows from the asset and has either (a) largely transferred all risks and rewards of ownership of the asset or (b) not largely transferred all risks and rewards of ownership of the asset, or retained them fully, but has transferred control of the asset.
If BinckBank has transferred its rights to receive the cash flows from an asset but has not largely transferred all risks and rewards of ownership of the asset or retained them fully and has not transferred control of the asset, that asset continues to be recognised for as long as BinckBank remains involved with the asset. Financial liabilities cease to be recognised in the balance sheet as soon as the performance relating to the obligation has been completed or the obligation has been 127
removed or has expired. //
Loans and receivables and the related impairment losses are written off if there is no longer any real possibility of being able to recover the outstanding debt following foreclosure of the collateral. Annual Report 2016 FINANCIAL STATEMENTS
SECURITIES LENDING TRANSACTIONS Securities lending and borrowing transactions are usually collateralised by securities or cash. The related securities in the borrowing or lending transaction are not recognised (borrowing transactions) or derecognised (lending transactions) on the balance sheet. The collateral received or paid as securities is not recognised respectively derecognised on the balance sheet. Collateral received or paid as cash is recognised in the balance sheet as cash advanced (included in due from banks and loans) or received (due to banks or due to customers). Interest received or paid are recognised on an effective interest basis and recorded as interest income or interest expense.
IMPAIRMENT OF FINACIAL ASSETS On a regular basis and at each balance sheet date, BinckBank assesses whether there is objective evidence, provided by one or more events, of impairment of a financial assets or group of financial assets. Impairment losses are only recognised when there is an adverse effect on the future cash flows. BinckBank does not regard possible future events as objective indicators and such forecasts are accordingly not used as evidence of impairment of a financial asset or a portfolio of financial assets. Losses based on future events are not recognised, regardless of probability. The impairment loss is determined for available- for-sale financial assets, held-to-maturity financial assets and loans and receivables as follows.
Available-for-sale financial assets Investments in interest-bearing securities are assessed for impairment when there are objective indications of financial problems at the issuer or borrower, there is no longer an active market, or there are other such indications. When there are indications of impairment, the cumulative net loss previously recognised directly in equity is transferred from equity to the income statement under the impairments item. Any reversal of impairment losses in subsequent years relating to interest-bearing securities is recognised in the income statement if the increase in the fair value of the instrument can be objectively related to an event occurring after the previous impairment loss was recognised in the income statement.
Held-to maturity financial assets Held-to-maturity investments are individually assessed and the amount of any impairment is measured using the same method as has been explained for loans and receivables.
Loans and receivables BinckBank assesses whether there is objective evidence of impairment of the lending portfolio (including any related margin facilities, collateral, and guarantees). In the case of loans with collateral in the form of securities, there is an objective indication if the fair value of the collateral is lower than the carrying amount of the loan. Evidence that a loan or receivable is impaired is obtained via the group’s lending assessment process. This involves the assessment of customers’ creditworthiness as well as the assessment of the nature of customers’ investment transactions and monitoring of customer transactions and balances.
BinckBank carries out individual assessments of the receivables in the mortgage portfolio to identify any impairment. Situations in which the borrower states that he is in financial difficulty or when the conditions attached to the loan agreement are not met are objective indications of the impairment of these receivables. BinckBank regards arrears in interest and repayments of more than 90 days as an objective indication of impairment. An impairment management process has been implemented to manage any arrears and, in consultation with the borrower, arrive at a solution to so that the borrower can catch up with the arrears and make future payments with the least possible problems.
The amount of any impairment loss is measured as the difference between the loan’s carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate of the loan. In computing the present value of the estimated future cash flows from a financial asset for which collateral has been provided, consideration is taken of the cash flows that will arise on realisation of the collateral less the costs that will need to be incurred in obtaining and selling the collateral. The loss is presented in the income statement in impairment of financial assets. 128
// In the event of impairment, the impairment provision is increased by the amount of the impairment loss. The affected loans are written down only when all the necessary procedures have been completed and the amount of the loss has been determined. If, in a subsequent period, the amount of an impairment decreases and the decrease can be objectively related to an event occurring after the initial write-down, then the previously recognised impairment loss is reversed. Reversal of an impairment is recognised in the provision and in the income statement. Amounts subsequently collected after having been written off are credited to the income statement in Impairment of financial assets. Annual Report 2016 FINANCIAL STATEMENTS
A collective credit loss provision is also formed for the loans and receivables. This collective provision relates to losses that have already been incurred at balance sheet date but which have not been captured by credit risk systems (incurred but not reported). The methodology for the determination of the amount of the provision is based on the probability of default, exposure at default and the loss identification period.
The methodology and the assumptions used in estimating future cash flows are regularly evaluated in order to reduce variances between estimated and actual losses.
4.3 ACQUISITIONS AND GOODWILL All acquisitions are accounted for using the acquisition method. The identifiable assets, equity, and liabilities of the acquired company or activities are recognised at fair value.
BinckBank measures the value of the identifiable intangible assets acquired through the acquisition of a company or business activities. The measurement is performed using cash flow models and/or royalty models. BinckBank makes assumptions and projections of future revenues and results in order to arrive at the cash flows and also determines the applicable discount rate. When the royalty method is used, an estimate is also made of the appropriate royalty percentage.
Earn-out arrangements may be agreed as part of business acquisitions. BinckBank makes an estimate of the earn-out payments on the basis of the expected future results of the acquired companies or activities. These earn-out payments form part of the price paid for the acquired company or activities. An annual assessment is made to determine whether the earn-out obligation should be adjusted in the light of any changes to the development of the results. Adjustments to the earn-out calculations after completion of the acquisition are recognised directly in the income statement.
On initial recognition, goodwill acquired in a combination is measured as the difference between the acquisition price of the business combination and BinckBank’s share of the net fair value of the acquired company’s identifiable assets, liabilities, and contingent liabilities, if positive. Subsequently, goodwill is carried at cost less any cumulative impairment losses. A negative difference between acquisition price and fair value is expensed immediately.
A third-party interest in the acquired company is measured at either the fair value on the acquisition date or the proportional share in the identifiable assets and liabilities of the acquired company or activities.
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount might be impaired. For this impairment test, goodwill acquired in a business combination is allocated from the acquisition date to BinckBank’s cash-generating units or groups of cash-generating units that are expected to benefit from the synergy of the business combination.
An impairment is measured by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. The recoverable amount is the greater of an asset’s net selling price or its value in use. If the recoverable amount is lower than the carrying amount, an impairment is recognised. Impairment of goodwill is not reversed.
Necessary adjustments to the fair value of acquired assets, equity, and liabilities measured at the time of acquisition that are identified before the end of the first reporting period after the business combination result in an adjustment of the goodwill. Necessary adjustments identified at a later date are recognised in the income statement as either profit or loss. Gains and losses on the disposal of a company or activity are measured as the difference between the proceeds from disposal and the carrying amount of the company or activity, including goodwill and currency translation reserve.
Transaction costs associated with an acquisition are recognised directly in the income statement. 129 // Annual Report 2016 FINANCIAL STATEMENTS
4.4 CASH AND CASH EQUIVALENTS Cash and cash equivalents in the statement of financial position consists of cash, balances at other banks and short-term deposits (call money) with original maturities of three months or less that are readily convertible into known amounts of cash and on which there is a negligible impairment risk.
4.5 ASSOCIATES Associates are entities in which BinckBank generally holds between 20% and 50% of the voting rights or in which BinckBank is able to exercise significant influence in some other way but over which BinckBank does not have control. Investments in associates are accounted for using the equity method.
The item includes goodwill paid on acquisition, less any cumulative impairment losses. Under the equity method, BinckBank’s share in the results of the associate is reported in BinckBank’s income statement as share in the results of associates. BinckBank’s share in changes in the reserves of an associate is recognised directly in BinckBank’s equity. The carrying amount of the investment is adjusted for the reported results and changes in reserves. When the carrying amount of the investment in an associate falls to nil, no further losses are recognised unless BinckBank has accepted liabilities on behalf of the associate concerned or has already made payments on behalf of the associate. Where necessary, the accounting principles of associates are adjusted in order to ensure consistency with those of BinckBank.
4.6 INTANGIBLE ASSETS Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Subsequently, intangible assets are carried at cost less cumulative amortisation and any cumulative impairments.
Intangible assets are determined as having either a definite or an indefinite useful life. Intangible assets with a definite useful life are amortised over the useful life and tested for impairment if there are indications that an intangible asset may be impaired. The useful lives of the intangible assets are assessed annually and adjusted if there has been a change. Amortisation of intangible assets with a definite useful life is presented in the income statement under depreciation and amortisation.
Intangible assets with an indefinite useful life are subjected to an annual impairment test, either individually or at the level of the cash-generating unit. These intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reassessed annually, including an assessment of whether the indefinite useful life is still justifiable.
4.7 PROPERTY, PLANT, AND EQUIPMENT Property for own use is carried at historical cost less cumulative depreciation and impairments. All other assets recognised in the balance sheet as plant and equipment are carried at historical cost less cumulative depreciation and any impairments. Property, plant, and equipment are subject to straight-line depreciation on the basis of useful life, taking account of the residual value. The expected useful life is:
Property (own use) 50 years Computer hardware 5 years Fixtures, fittings and equipment 5-10 years Other fixed assets 5 years
When an asset consists of various ‘components’ with different useful lives and/or different residual values then the asset is divided into these components and depreciation is applied separately. Useful life and residual value are assessed annually. When it emerges that the estimated values differ from previous estimates then the values are adjusted. When the carrying amount of an asset is higher than the estimated recoverable amount, then an impairment is recognised which is charged to the income statement. Results on the sale of property, plant, and equipment, being the difference between the sale proceeds and the carrying amount, are recognised in the income statement in the period in which the sale occurred. 130
// Repair and maintenance costs are charged to the income statement in the period to which they relate. The costs of significant renovations are capitalised when it is probable that additional future benefits will be realised from the existing asset Significant renovations are written off on the basis of the remaining useful life of the asset concerned. Leasehold prepayments (operational lease) are recognised in investments in real estate. Amortisation of the leasehold is applied on a linear basis over the remaining life to maturity. Annual Report 2016 FINANCIAL STATEMENTS
4.8 TAX
CURRENT TAX Current tax relates to immediately payable and offsettable tax assets and liabilities for current and prior years. These are carried at the amount expected to be claimed from or paid to the Dutch Tax and Customs Administration. The tax amount is computed on the basis of enacted tax rates and applicable tax legislation.
DEFERRED TAX Deferred tax liabilities are recognised on the basis of the temporary differences, at the balance sheet date, between the tax base of assets and liabilities and their carrying amount in these financial statements. Deferred tax liabilities are recognised for all taxable temporary differences except: • when the deferred tax liability arises on the initial recognition of goodwill or the initial recognition of an asset or a liability in a transaction that is not a business combination and does not affect the operating profit before tax or the taxable profit; • when taxable temporary differences are related to investments in subsidiaries and associates whereby BinckBank is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, unused tax facilities and unused tax loss carryforwards when it is probable that taxable profits will be available against which the deferred tax asset can be utilised, enabling the deductible temporary differences, unused tax facilities, and unused tax loss carryforwards to be used.
The carrying amount of the deferred tax assets is assessed at the balance sheet date and reduced to the extent that it is not probable that sufficient taxable profits will be available against which some or all of the deferred tax asset can be utilised. Unrecognised deferred tax assets are reassessed at the balance sheet date and recognised to the extent that it is probable that taxable profits will be available in the future against which the deferred tax asset can be utilised. Deferred tax assets and liabilities are carried at amounts measured at the tax rates expected to be applicable to the period in which the asset is realised or the liability is settled, based on enacted tax rates and applicable tax law. The tax on items recognised directly in equity is accounted for directly in equity instead of in the income statement. Deferred tax assets and liabilities are presented as a net amount if there is a legally enforceable right to set off deferred tax assets against deferred tax liabilities and the deferred tax is related to the same taxable entity and the same tax authority.
131 // Annual Report 2016 FINANCIAL STATEMENTS
4.9 WORK IN PROGRESS Work in progress relates exclusively to the external activities of the Able subsidiary. Work in progress is carried at the cost of the work performed, plus a proportion of the expected final results based on progress and less invoiced instalments, prepayments, and provisions. For anticipated losses on work in progress, provisions are recognised as soon as such losses are identified and are deducted from the cost, any already recognised profits also being reversed. The cost comprises the direct project costs, made up of direct wage costs, materials, costs of subcontracted work, other direct costs, and charges for the hire and maintenance of the equipment used. The progress of the project is measured on the basis of the cost of the work performed in relation to the expected cost of the project as a whole. Profits are not recognised on work in progress before it is possible to make a reliable estimate of the final result. For each project, the balance of the value of the work in progress less invoiced instalments and prepayments is measured. In the case of projects on which the invoiced instalments and prepayments exceed the value of the work, this balance is included in other liabilities instead of other assets.
4.10 IMPAIRMENT OF NON-FINANCIAL ASSETS The carrying amount of BinckBank’s assets is tested at each balance sheet date to determine whether there are indications for impairment. If so, the recoverable amount of the asset is estimated. The recoverable amount is an asset’s net selling price or its value in use, whichever is higher. An impairment is recognised when the carrying amount of an asset or cash- generating unit exceeds the recoverable amount.
4.11 DERIVATIVES POSITIONS HELD ON BEHALF OF CUSTOMERS BinckBank executes derivatives transactions on behalf of its customers and holds the resultant positions in its own name but for the customer’s account and at the customer’s risk. The positions are recognised at fair value, measured according to the quoted price at the balance sheet date. An opposite position is held with the clearing institution against each customer position. Financial settlement with the customers concerned in respect of such transactions and positions is effected immediately. The customers have lodged adequate collateral with BinckBank in the form of cash balances, bank guarantees, and securities to cover the risks arising out of the derivatives positions held.
Following amendments to the Wet Giraal effectenverkeer (Securities Giro Transfer Act, Wge) derivative instruments also fall under the protection of the Wge as from 1 April 2016, and, subject to conditions, are segregated from the assets of the institution. This has resulted in BinckBank’s reassessment of the IAS 39 recognition criteria for the ‘derivative positions held on behalf of clients’ item. BinckBank has concluded that in view of the nature of these positions this item, in accordance with the IFRS, should no longer be recognised in the statement of financial position after 1 April 2016.
4.12 FUNDS ENTRUSTED The funds entrusted comprise savings deposits, deposits available on demand and other balances including building deposits (bouwdepots). These are measured at fair value on initial recognition, including transaction costs. They are subsequently carried at amortised cost. Any difference between the proceeds and the redemption value, calculated using the effective interest method, is recognised in the income statement under the interest expense item.
4.13 PROVISIONS A provision is recognised if: • BinckBank has a present legal or constructive obligation as a result of a past event; • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • a reliable estimate can be made of the amount of the obligation. When it is expected that some or all of a provision will be reimbursed then this reimbursement is recognised as a separate asset only when this reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. When the effect of the time value of money is material then the provisions are discounted at a rate, before tax, that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.
132
// Annual Report 2016 FINANCIAL STATEMENTS
4.14 PENSIONS BinckBank operates a pension plan for its executive board and employees based on a defined contribution scheme. In a defined contribution scheme, a percentage of the employee’s fixed salary is paid as contribution to a pension insurer. The percentage payable is age-related. The pension contributions are recognised in the year to which they relate.
4.15 TREASURY SHARES Equity instruments which are reacquired (treasury shares) are deducted from equity at the acquisition price including transaction costs. Gains or losses on the purchase, sale, issue or withdrawal of BinckBank’s own equity instruments are not recognised in the income statement.
4.16 EMPLOYEE BENEFITS BinckBank’s variable performance pay scheme distinguishes between three target groups: • Identified Staff: including the executive board, senior management, managers in control positions and those in positions that can affect the risk profile; • Key Staff: employees who in exercising their duties play an important part in the conduct of BinckBank’s business, for whom a supplementary incentive programme has been agreed; • Other Staff: other staff have a performance-related pay scheme for which the total size is based on BinckBank’s result, but in which awards are made on the basis of the individual performance of the employee concerned.
The performance period for all the targets of all the above groups is one year. Balanced one-year performance targets are set at group, business unit, and individual level and are both financial and non-financial. Payment depends on the realisation of the previously set performance targets during the performance period.
The allocation of the variable performance pay for the Identified Staff is determined on the basis of scores obtained on financial, non-financial, quantitative, and qualitative performance indicators. A variable performance pay for Identified Staff consists of 50% in BinckBank N.V. shares and 50% in cash. This proportion applies to every payment of variable performance pay. Part of the total allocated variable performance pay is paid unconditionally, and part is awarded subject to conditions pro rata over a period of three years. A reassessment is made on the basis of the initial performance criteria linked to this variable payment at the end of each year (within the three-year period). Subject to the result of this reassessment, the part of the variable performance pay allocated pro rata for the year in question becomes fully or partially unconditional. The employment of Identified Staff during the deferral period is not a requirement for a deferred variable performance pay to be made unconditional and thus does not form part of the remuneration policy. BinckBank shares that have been unconditionally allocated have to be held in a blocked account for a lock-up period. The lock-up period for Identified Staff after the shares have been made unconditional is one year, with the exception of the executive board, for whom the lock-up period is two years.
The measurement of the shares conditionally allocated to Identified Staff is based on the following principles: • the fair value of the services provided by an employee must be allocated as a cost item to the performance year; • the fair value of the services provided that relate to the payment of the bonus is estimated as the fair value of the shares that the employee receives.
The fair value of shares in the future is equal to the fair value at the time of measurement. • ‘Missed’ dividends, by discounting the value of the shares by a dividend yield; • The lock-up period, by adjusting the value for the value of an American call option, calculated using a binomial tree.
The payment of the variable performance pay in cash to the executive board and Identified Staff is made after expiry of the remuneration year for 50% and 60% respectively, and 50% and 40% respectively in equal parts in the three succeeding years and is broken down into a current liability and a non-current cash liability. Accrual for the current liability and the non-current cash liability is formed for the estimated liabilities accumulated for performances delivered until the balance sheet date. The non-current liability is interest-bearing and is therefore recognised at nominal value including accrued 133
interest. A claw-back clause applies whereby any variable performance pay can be reclaimed if an employee has acted // unethically and/or in contravention of BinckBank policy. Annual Report 2016 FINANCIAL STATEMENTS
4.17 COMMITMENTS AND CONTINGENT LIABILITIES Liabilities with a potential credit risk are recognised under this item.
CONTINGENT LIABILITIES Contingent liabilities are liabilities that are not recognised in the balance sheet because their existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within BinckBank’s control. The maximum potential credit risk associated with these contingent liabilities faced by BinckBank is disclosed in the notes. In estimating the maximum potential credit risk, it is assumed that all counterparties default on their contractual obligations and all assets provided by way of collateral are without value.
IRREVOCABLE FACILITIES Irrevocable facilities are unused credit facilities and all other obligations pursuant to irrevocable commitments that can result in the extension of loans.
4.18 LEASING Lease contracts whereby the risks and benefits relating to the right of ownership are held to a significant extent by the lessor are designated as operating leases. Lease payments made in the capacity of lessee in relation to operating leases are applied to the result during the lease period, after deduction of any premiums received from the lessor. BinckBank is only involved in operational lease contracts as a lessee.
4.19 GENERAL PRINCIPLE FOR RECOGNITION AND MEASUREMENT OF INCOME AND EXPENSES Income and expense items are recognised in the period to which they relate, having due regard to the above accounting principles. Revenues are recognised if it is probable that their economic benefits will flow to BinckBank and the revenue can be reliably measured.
4.20 INTEREST INCOME Interest income consists of the interest on monetary financial assets attributable to the period. Interest on financial assets is measured using the effective interest method based on the actual acquisition price. The effective interest method is based on the expected cash flows, taking account of the risk of early redemption of the underlying financial instrument and the direct costs and revenues, such as the transaction costs charged and any discount or premium. When the risk of early redemption cannot be measured with sufficient reliability, then BinckBank adopts the cash flows during the entire term to maturity of the financial instruments. Interest income on financial assets subject to impairment which have been written down to the estimated recoverable value or fair value are subsequently recognised on the basis of the interest rate used to measure the recoverable value by discounting the future cash flows.
4.21 INTEREST EXPENSE This item includes the interest expense on all financial obligations and is measured on the basis of the effective interest method.
4.22 FEE AND COMMISSION INCOME Fee and commission income comprises payments, excluding interest, received or receivable from third parties, whether on a non-recurring or more regular basis, in respect of brokerage, asset management, and other services.
4.23 FEE AND COMMISSION EXPENSE Fee and commission expense comprises payments, excluding interest, paid or payable to third parties, respectively, whether on a non-recurring or more regular basis, in respect of brokerage, asset management, and other services.
4.24 OTHER INCOME Other income comprises amounts charged to third parties during the year in respect of goods and services supplied relating to hardware and software after deduction of sales expenses, together with all other income not classified under other income items. 134 // Annual Report 2016 FINANCIAL STATEMENTS
4.25 WORK IN PROGRESS ON CONTRACTS FOR THIRD PARTIES BinckBank uses the percentage of completion method to measure the revenue generated by each contract on balance sheet date. The percentage of completion is determined by comparing the total estimated costs for a project with the actual costs up to balance sheet date. BinckBank recognises the positive or negative balance of the revenue less invoiced instalments for each project in other assets or other liabilities, respectively.
Licence sales linked to an obligation to deliver customised work essential for the functioning of the delivered software are assumed to form part of the total project. Revenue in relation to licences as part of the total project amount are recognised pro rata to the progress of the project achieved in the reporting year, i.e. the percentage of completion.
4.26 RESULT FROM FINANCIAL INSTRUMENTS The result from financial instruments concerns the results of financial assets and liabilities held for trading and financial assets and liabilities recognised at fair value through profit and loss. The result consists of the changes in value of these financial instruments attributable to the period.
4.27 SHARE IN RESULTS OF ASSOCIATES This concerns BinckBank’s share in the results and impairment, where relevant, of its associates. When the carrying amount of the investment in an associate falls to nil no further losses are recognised unless BinckBank has accepted liabilities on behalf of the associate concerned or has already made payments on behalf of the associate.
4.28 TAX Tax is recognised in the income statement unless the tax relates to items recognised directly in equity, in which case the tax is recognised in the unrealised results and directly in equity respectively.
4.29 EARNINGS PER ORDINARY SHARE The earnings per ordinary share are calculated on the basis of the weighted average number of outstanding ordinary shares. The following considerations are taken into account in the calculation of the weighted average number of outstanding ordinary shares: • The total number of ordinary shares issued is reduced by the treasury shares held by group companies; • The calculation is based on daily averages.
The diluted earnings per ordinary share are calculated by adjusting the weighted average number of shares during the period for potential dilution, for example due to outstanding option entitlements. The conditionally allocated shares arising from share-based payments are not entitled to dividend and are only included in the calculation of the earnings per share at the time they become unconditional.
4.30 STATEMENT OF CASH FLOWS The statement of cash flows has been prepared using the indirect method, in which cash flows are analysed according to operating, investing and financing activities. In the cash flow from operating activities, the net result is adjusted for income and expenses that have not resulted in receipts and expenditures in the same financial year and for changes in provisions and suspense items. Cash includes the cash in hand together with freely available balances on deposit at central banks and other financial instruments with maturities of less than three months from the date of acquisition. Cash flows in foreign currency are translated into the functional currency at the exchange rate prevailing on the date the cash flow occurs. 135 // Annual Report 2016 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(amounts in € 000’s) 31 December 2016 31 December 2015
5. CASH AND BALANCES AT CENTRAL BANKS 854,230 178,365
This item includes all cash in legal tender, including bank notes and coins in foreign currency, and any credit balances available on demand from the central banks in countries where BinckBank has branch offices and the European Central Bank.
6. BANKS
Bank balances 127,755 178,244
This item includes all cash and cash equivalents relating to the business activities held in accounts with credit institutions supervised by bank regulators.
This item comprises:
Credit balances available on demand 94,541 146,994
Call money 44 11
Mandatory reserve deposits 29,038 27,162
Receivable from DNB in relation to the Deposit Guarantee 4,132 4,077 Scheme for DSB Bank
127,755 178,244
The call money receivables have original maturities of less than three months. Interest is received on these balances at a variable rate based on market rates.
The receivable from DNB in relation to the Deposit Guarantee Scheme for DSB Bank pertains to the cash-converted receivable of the future expected cash flows. At 31 December 2016, no loss against this claim is to be expected.
Due to banks 2,017 23,582
BinckBank has sweeping arrangements with various banks whereby the debit and credit balances in a large number of bank accounts are regulated with a fixed treasury contra-account. This is only visible on the statement for the next business day; BinckBank accordingly may have a liability to a single bank account for a very short period. This item also includes cash collateral received for securities lending transactions. 136 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE WITH CHANGES IN FAIR VALUE THROUGH PROFIT AND LOSS
Financial assets held for trading 20,393 12,297
Tur b o´s 20,330 12,138
SRD derivative assets 63 159
20,393 12,297
Financial assets designated at fair value through profit and loss 9,499 15,405
Equity positions in relation to SRD positions 9,499 15,405
Financial liabilities held for trading 20,428 12,286
Tur b o´s 20,351 12,144
SRD derivative liabilities 77 142
20,428 12,286
Financial liabilities designated at fair value through profit and loss 1,018 46
Equity positions in relation to SRD positions 1,018 46
BinckBank issues turbos under its own name to customers. The price risk on an issued turbo position is hedged economically by purchasing a turbo with identical conditions. The difference in the market value of the purchased and issued turbos is due to the use of a different haircut for the credit value adjustment (CVA) for BinckBank on the counterparty and for the customer on BinckBank.
BinckBank offers SRD (Service de Règlement Différé) contracts in France. An SRD contract is a transaction in a selected number of equities listed on Euronext Paris whereby the payment for shares purchased or delivery of shares sold is delayed until the last trading day of the month. The corresponding equity transaction in the cash market is executed by BinckBank in order to cover the price risk. In fact, BinckBank finances the transaction sum for the customer. As BinckBank takes a position in equities which exactly offsets the SRD derivatives position held by the customer, this results in a natural hedge of the price risk. 137 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
8. AVAILABLE-FOR-SALE FINANCIAL ASSETS 724,398 1,167,121
This item comprises:
Government bonds/government-guaranteed bonds 57,002 317,184
Other bonds 667,396 849,937
724,398 1,167,121
This item comprises a portfolio of interest-bearing securities with less than 3.5 years to maturity. At year-end 2016, the effective yield on this portfolio was 0.41% (2015: 0.54%).
Movements in available-for-sale financial assets were:
Amortised cost as at 1 January 1,165,178 1,384,334
Redemptions (667,549) (532,870)
Sales (15,066) -
Purchases 254,720 327,710
Foreign currency conversion 2,801 10,668
Amortisation of premiums/discounts (16,987) (24,664)
Amortised cost as at 31 December 723,097 1,165,178
Revaluation at 31 December 1,301 1,943
Balance sheet value as at 31 December 724,398 1,167,121
9. HELD-TO-MATURITY FINANCIAL ASSETS 790,021 813,484
This item comprises:
Government bonds/government-guaranteed bonds 515,463 464,556
Other bonds 274,558 348,928
790,021 813,484 BinckBank holds a portfolio held-to-maturity financial assets. The purpose of this portfolio is mainly to collect cash flows from interest and redemptions. This item comprises a portfolio of interest-bearing securities with less than three years to maturity. At year-end 2016, the effective yield on this portfolio was 0.45% (2015: 0.33%).
Movements in available-for-sale financial assets were:
Amortised cost as at 1 January 813,484 545,108
Purchases (125,959) -
138 Redemptions 106,018 273,975 //
Foreign currency conversion 6,906 3,835
Amortisation of premiums/discounts (10,428) (9,434)
Amortised cost as at 31 December 790,021 813,484 Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
10. LOANS AND RECEIVABLES 958,329 502,006
This item comprises receivables from clients, including overnight loans and overdrafts that are collateralised by securities, bank guarantees, and receivables secured by mortgages on immovable property.
The analysis is as follows:
Receivables collateralised by securities 433,181 498,722
Receivables collateralised by bank guarantees 4,563 3,242
Receivables collateralised by residential property 520,676 -
Other receivables 484 503
Loans and receivables, gross 958,904 502,467
Less: impairment provision (575) (461)
958,329 502,006
The changes in impairment provisions were as follows:
Balance as at 1 January 461 481
Added 212 209
Recovered (96) (223)
Write-offs (2) (6)
Balance as at 31 December 575 461
The impairment provision is calculated on an individual and collective basis.
The receivables covered by securities and bank guarantees contain loans collateralised by securities. The interest rate on these loans is based on EURIBOR or EONIA, whereby a minimum interest rate is applicable.
BinckBank began to invest in Dutch residential mortgages in 2016. The portfolio comprises variable interest terms and fixed interest terms for periods between one month and thirty years. The interest rates for the mortgage portfolio range from 1.3% to 6.4%.
Some of the mortgage portfolio falls under the National Mortgage Guarantee Scheme (NHG). This guarantee is issued by the Homeownership Guarantee Fund (WEW) that is in turn supported by the Dutch Government in the event of illiquidity. As a result, in the risk context the NHG is a government guarantee. This guarantee serves as a safety net in situations in which the borrower is unable to meet the conditions attached to the loan, whereby any residual debt, where relevant, after the sale of the collateral will in part be covered by the Fund. At 31 December 2016, the part of the mortgage portfolio falling under the NHG totalled € 221 million 139 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
11. INVESTMENTS IN ASSOCIATES - 1,227
This refers to the investment in the holding in TOM B.V.
The development of this item was as follows
Balance as at 1 January 1,227 1,293
Capital increases and acquisitions 1,594 664
Impairment (1,744) -
Result of associates (1,077) (730)
Balance as at 31 December - 1,227
Aggregated financial information about the associates is listed in the following table:
Long Share in Share in Fixed Current term Current Total Total (amounts in € 000’s) Country Interest equity result assets assets liabilities liabilities revenue expenses
Investment in associates 2016
TOM Holding N.V. NL 25.5% - (1,077) 1,698 6,651 - 1,522 5,562 (10,230)
Investment in associates 2015
TOM Holding N.V. NL 25.5% 1,227 (730) 1,610 6,018 - 2,825 6,845 (10,104)
The associate TOM Holding N.V. has two subsidiary companies, TOM Broker B.V. that provides a best-execution service to affiliated parties, and TOM B.V., which has a licence to operate as a multilateral trading facility (MTF), which trades in equities and options that are listed and traded on other markets. The shares of TOM Holding N.V. are not listed. BinckBank’s share in TOM Holding N.V. is recognised using the equity method.
On 20 October 2016, the shareholders in TOM Holding N.V. agreed to provide TOM Holding N.V. active support in finding a new strategic partner that will enable TOM Holding N.V. to take the next step in its development. BinckBank has reassessed the value of its investment in TOM Holding N.V. pending the outcome of this process. This was carried out by determining the realisable value of the associate on the basis of the estimated fair value after the deduction of costs. This resulted in the revaluation of the investment in TOM Holding N.V. to nil. 140 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
12. INTANGIBLE ASSETS 168,260 190,560
The movements in 2016 were as follows:
Brand Customer Customer name deposits base Software Goodwill Total
Balance as at 1 January 2016 245 16,819 26,674 1,940 144,882 190,560
Investments - - - 386 - 386
Disposals – cost - - - (68) - (68)
Disposals – cumulative amortisation - - - 68 - 68
Amortisation (70) (8,410) (13,243) (963) - (22,686)
Balance as at 31 December 2016 175 8,409 13,431 1,363 144,882 168,260
Cumulative cost 31,755 84,095 131,708 11,097 144,882 403,537
Cumulative amortisation and impairment (31,580) (75,686) (118,277) (9,734) - (235,277)
Balance as at 31 December 2016 175 8,409 13,431 1,363 144,882 168,260
Amortisation period (years) 5 10 5 - 10 5
The movements in 2015 were as follows:
Brand Customer Customer name deposits base Software Goodwill Total
Balance as at 1 January 2015 315 25,228 39,912 3,221 144,882 213,558
Investments - - - 74 - 74
Disposals – cost ------
Disposals – cumulative amortisation ------
Amortisation (70) (8,409) (13,238) (1,355) - (23,072)
Balance as at 31 December 2015 245 16,819 26,674 1,940 144,882 190,560
Cumulative cost 31,755 84,095 131,708 10,779 144,882 403,219
Cumulative amortisation and impairment (31,510) (67,276) (105,034) (8,839) - (212,659)
Balance as at 31 December 2015 245 16,819 26,674 1,940 144,882 190,560 141 //
Amortisation period (years) 5 10 5 - 10 5 Annual Report 2016 FINANCIAL STATEMENTS
The ‘Brand name’ item arises from the acquisition of Alex Beleggersbank and Fundcoach. The ‘Customer deposits’ item arises from the acquisition of Alex Beleggersbank. The ‘Customer base’ item arises from the acquisition of Alex Beleggersbank and Fundcoach. Software comprises purchased software licences.
The goodwill item relates to the excess of the price paid to acquire the operations of Alex Beleggersbank and Fundcoach over the fair value of the identifiable assets and liabilities.
GOODWILL IMPAIRMENT TEST The goodwill shown in the statement of financial position has been allocated entirely to the cash-generating unit Retail Netherlands. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount might be impaired. An impairment is measured by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. The recoverable amount is an asset’s net selling price or its value in use, whichever is higher. An impairment is recognised if the recoverable amount is lower than the carrying amount. The net realisable value is only included in the assessment if a reliable estimate can be made of the price at which a transaction could be concluded between parties in the current market circumstances. In order to estimate the value in use, BinckBank estimates the expected future cash flows from the cash-generating unit and determines an appropriate discount rate to calculate the net present value of those cash flows.
The annual test in conducted in the fourth quarter of 2016 gave no indication of the need for the recognition of impairment of goodwill. As at 31 December 2016, there were no changes in the circumstances of Retail Nederland that could give cause to the recognition of an impairment.
The principal assumptions in the calculation of the value in use are as follows: The recoverable amount of the cash-generating units is based on the value in use. Cash flow projections over a five-year period have been used, based on financial estimates used by the management to set targets. Cash flows beyond the five-year period have been extrapolated using a growth rate of 1.6%. Management has compared the principal assumptions against market estimates and market expectations.
The following assumptions have been used:
Assumptions in calculation of value in use of the cash generating unit Retail NL 2016 2015
Discount rate 9.96% 9.65%
Expected growth rate after projection period 1.6% 2.0%
GOODWILL RELATING TO RETAIL NETHERLANDS The principal assumptions used by management in arriving at the cash flow projections for the purposes of the goodwill impairment test were: • The natural attrition rate and inflow of new private investors based on the trends of the past five years and the budget, including a multi-year forecast, respectively. The estimated growth in the number of customers is reflected in the expected numbers of transactions and the entrusted and placed funds; • The interest margin based on the actual interest margin achieved over the past year, allowing for the long-term effect of low interest rate; • Commission income and expense, based on the expected average number of transactions and the average commission income and expense per transaction. The average income, expense and number of transactions are based on the identified trends in the previous year; The impairment test of 2016 showed a decrease in the value in use, mainly due to a decline in the expected commission income. The results from the test did not give cause to the recognition of an impairment and the derived market value was 86% higher than the carrying amount of the Retail Netherlands cash generating unit (2015: 100%). As at 31 December 2016, 142
// the derived market value of the Retail Netherlands cash-generating unit was higher than the carrying amount. Furthermore, there have been no changes in circumstances since the impairment test conducted in the fourth quarter that would give reason to new insights which could lead to the recognition of an impairment.
Annual Report 2016 FINANCIAL STATEMENTS
IMPAIRMENT TESTING OF OTHER INTANGIBLE ASSETS The other categories of intangible assets are tested annually or more frequently if events or changes in circumstances indicate that the carrying amount, less applicable annual amortisation, may have suffered an impairment. In the first instance, the test is made on the basis of the indicators referred to in IAS 36.12, augmented by indicators identified by BinckBank compared with the assumptions on which the valuation of the identified immaterial assets was based at the time of the acquisition:
INTANGIBLE ASSET INDICATOR
Reputational damage from acquired brand names Brand name Decision to limit the use of acquired brand names
Decline in balance of customer deposits Customer deposits Lower interest margin on customer deposits
Higher attrition rate of customer accounts acquired Customer base Lower average revenue per acquired customer
Decision to limit use of acquired software Software Change in expected useful life
General Higher market interest rates, which can be detrimental to the discount rate
When the test reveals an indication of impairment BinckBank carries out a full calculation of the recoverable amount of the intangible assets. This calculation is carried out using the same method as the method used for the calculation of the fair value of intangible assets identified on acquisition. 143 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
13. PROPERTY, PLANT AND EQUIPMENT 35,128 34,830
The movements in 2016 were as follows:
Fixtures, fittings and Computer Real estate equipment hardware Other Total
Balance as at 1 January 2016 26,439 4,084 4,259 48 34,830
Investments - 361 3,466 - 3,827
Disposals – cost - (14) (10,455) - (10,469)
Disposals – cumulative depreciation - 14 10,455 - 10,469
Depreciation (618) (1,023) (1,881) (7) (3,529)
Balance as at 31 December 2016 25,821 3,422 5,844 41 35,128
Cumulative cost 29,827 10,292 18,555 60 58,734
Cumulative depreciation and impairment (4,006) (6,870) (12,711) (19) (23,606)
Balance as at 31 December 2016 25,821 3,422 5,844 41 35,128
Depreciation period (years) 50 5 - 10 5 5
The movements in 2015 were as follows:
Fixtures, fittings and Computer Real estate equipment hardware Other Total
Balance as at 1 January 2015 27,058 5,298 6,015 3 38,374
Investments - 115 654 48 817
Disposals – cost - (226) - - (226)
Disposals – cumulative depreciation - 46 - - 46
Depreciation (619) (1,149) (2,410) (3) (4,181)
Balance as at 31 December 2015 26,439 4,084 4,259 48 34,830
Cumulative cost 29,827 9,945 25,544 60 65,376
Cumulative depreciation and impairment (3,388) (5,861) (21,285) (12) (30,546) 144 // Balance as at 31 December 2015 26,439 4,084 4,259 48 34,830
Depreciation period (years) 50 5 - 10 5 5 Annual Report 2016 FINANCIAL STATEMENTS
In 2012 BinckBank engaged an accredited appraiser to produce a valuation report of the real estate. The result of the valuation did not materially differ from the carrying amount, and gave no indication of impairment. Developments in the Dutch offices market in 2012-2016 gave no reason to revise this assessment
The investment in real estate includes prepayments in relation to a leasehold (operating lease) that expires on 15 April 2056. In 2016, an amount of € 256,000 in relation to amortisation of the leasehold is recognised under depreciation and amortisation (2015: € 256,000).
(amounts in € 000’s) 31 December 2016 31 December 2015
14. CURRENT TAX
Current tax assets 12,270 7,945
The balance at year-end relates to the last two financial years.
Current tax liabilities (10) (19)
This relates to current tax payable by subsidiaries which are not part of the tax group.
The reconciliation of the effective tax rate with the tax rate applicable to the consolidated financial statements is as follows: 2016 2016 2015 2015 (amounts in € 000’s) Amount Percentage Amount Percentage
Standard tax rate 1,689 25.0% 9,768 25.0%
Effect of different tax rates (in other countries) 45 0.7% 93 0.2%
Effect of substantial-holding exemptions 705 10.4% 183 0.5%
Effect of tax facilities (155) -2.3% (1,062) -2.7%
Other effects (150) -2.2% (614) -1.6%
Total tax expense 2,134 31.6% 8,368 21.4%
The effect of tax facilities includes the benefits arising from the agreement BinckBank has reached with the Dutch Tax and Customs Administration on the application of the Innovation Box to the income attributable to the innovative trading platform BinckBank developed for private investors. The Innovation Box is a tax facility for Dutch corporation tax whereby gains from intangible assets for which a domestic or foreign patent has been obtained, or for which an R&D certificate has been obtained, will on request be taxed at an effective rate of 5% instead of at the rate of a maximum 25%. This results in a tax exemption for these profits of up to 80%. The effect of the tax facilities item also includes benefits arising from application of the Innovation Box by the subsidiary Able Holding B.V.
The other effects item includes various tax effects, such as tax adjustments to prior years and differences arising because certain expenses are not tax deductible, such as the resolution levy. In addition, a deferred tax asset relating to Think ETF Asset Management B.V loss compensation was recognised in the statement of financial position in 2015. In addition the costs of the share based payments resulting from the remuneration policy do not qualify as tax-deductible. For tax purposes, the allocation of shares is treated as an arrangement between shareholders and thus cannot be offset against the taxable profit.
BinckBank has conducted a functional analysis of the methodology to determine valid ‘arm’s-length’ prices that must be 145
used for inter-company relations between BinckBank and its European branch offices, as defined in the OECD Transfer // Pricing Guidelines for Multinational Enterprises and Tax Administrations, and implemented in line with the 2010 report on the attribution of profit to permanent establishments. Annual Report 2016 FINANCIAL STATEMENTS
Based on the functional analysis and discussions with the tax authorities in the Netherlands and in France, a bilateral APA (advance pricing agreement) has been concluded between the Netherlands and France with respect to BinckBank and its branch office in France. In addition, on the basis of the functional analysis and discussions, a unilateral APA has been issued by the Dutch Tax and Customs Administration in relation to the branch offices in Belgium, Italy, and Spain. An agreement has been reached by which the Transactional Net Margin Method (TNMM) is used to calculate transfer pricing, with gross operating revenue as the profit indicator. The profit margin of the foreign branch will be established as a fixed percentage of the ‘net fee and commission income’ and all other income and expenses will be borne by the head office in the Netherlands. For branch offices that do not generate local income, it has been agreed with the Dutch Tax and Customs Administration that under the unilateral APA the cost-plus basis is the most suitable method for determining the transfer pricing.
(amounts in € 000’s) 31 December 2016 31 December 2015
15. DEFERRED TAX
Deferred tax receivables 1,048 1,121
Deferred tax liabilities (31,982) (27,874)
Total asset/(liability) (30,934) (26,753)
Maturity of deferred tax receivables:
Within one year 134 -
Between 1 and 5 years 914 1,121
Longer than five years - -
1,048 1,121
Maturity of deferred tax liabilities:
Within one year 461 219
Between 1 and 5 years (232) 521
Longer than five years (32,211) (28,614)
(31,982) (27,874) 146 // Annual Report 2016 FINANCIAL STATEMENTS
Movement Movement via income via balance 31 December (amounts in € 000’s) 1 January 2016 statement sheet 2016
Origin of deferred tax assets and liabilities
Tax-offsettable losses 1,121 (73) - 1,048
Available-for-sale financial assets (418) - 138 (280)
Goodwill and intangible assets (27,177) 117 (4,432) (31,492)
Depreciation period differences for fixed assets (879) (41) 295 (625)
Temporary differences as a result of intercompany transactions 697 (232) - 465
Other (97) (8) 55 (50)
Total deferred tax (26,753) (237) (3,944) (30,934)
Movement Movement via income via balance 31 December (amounts in € 000’s) 1 January 2015 statement sheet 2015
Origin of deferred tax assets and liabilities
Tax-offsettable losses - 1,121 - 1,121
Available-for-sale financial assets (1,035) - 617 (418)
Goodwill and intangible assets (22,862) (503) (3,812) (27,177)
Depreciation period differences for fixed assets (1,281) - 402 (879)
Temporary differences as a result of intercompany transactions 929 (232) - 697
Other (155) - 58 (97)
Total deferred tax (24,404) 386 (2,735) (26,753)
The tax losses carried forward pertain to the deferred tax claim for compensating losses of Think ETF Asset Management B.V. The expectation is that in the tax calculation the full amount of offsettable losses can be of the positive results in the coming years.
Available-for-sale financial assets relates to the deferred tax on unrealised gains resulting from the revaluation of the investment portfolio.
Goodwill and intangible assets in the deferred tax liabilities relate to the differences between the commercial and fiscal amortisation of the goodwill and intangible assets acquired in acquisitions of Alex and Fundcoach.
The depreciation period differences for fixed assets relate to factors including accelerated tax depreciation on certain investments in fixed assets in the years 2010 and 2011.
The temporary differences as a result of intercompany transactions originated from eliminated consolidated transactions, 147
where the current tax in the different tax entities is recorded at different times over a period of several years. //
The movements via the income statement relate to the application of the innovation box facility and its impact in the calculation of deferred tax positions. Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
16. OTHER ASSETS 63,451 28,103
This item comprises:
Trade receivables 2,230 2,053
Receivables relating to securities sold but not yet delivered 33,716 16,721
Cash flows to be settled – mortgage receivables 21,188 -
Other receivables 6,317 9,329
63,451 28,103
All these receivables have a remaining maturity of less than one year. The item receivables arising from securities sold but not yet delivered can fluctuate on a daily basis in line with movements in the market and the total size of the number of transactions.
17. PREPAYMENTS AND ACCRUED INCOME 35,479 45,122
This item comprises:
Interest receivable 20,538 27,278
Commission receivable 7,420 11,007
Other prepayments and accrued income 7,521 6,837
35,479 45,122
The commission receivable item comprises the regular commissions as well as performance-related fees. The other prepayments and accrued income item relates primarily to prepaid IT maintenance contracts.
18. DERIVATIVE POSITIONS HELD ON BEHALF - 260,505 OF CLIENTS
The derivative positions held on behalf of clients are held in BinckBank’s own name but for the client’s account and at the client’s risk. As from 1 April 2016, following the amendment of the Wge these derivatives held on behalf of clients do not meet the recognitions criteria of IAS 39 and are no longer recognised in the BinckBank balance sheet.
19. FUNDS ENTRUSTED 3,308,829 2,589,714
This item comprises:
Demand deposits in savings accounts 227,897 221,225
Demand deposits in current accounts 3,069,339 2,368,489
Granted credit facilities (building deposits) 11,593 -
3,308,829 2,589,714 148 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
20. PROVISIONS 8,891 7,884
The movement in the legal provisions was as follows:
Balance as at 1 January 7,884 7,885
Arising during the year 3,375 8,011
Utilised (1,317) (819)
Unused amounts reversed (1,051) (7,193)
Balance as at 31 December 8,891 7,884
The provision is an estimate of the potential loss for BinckBank as a result of legal proceedings instituted against BinckBank. BinckBank is in part dependent on the services of third parties for the settlement of legal disputes.
The operations of BinckBank take place in an environment that is regulated by legislation and supervision which exposes the organisation to significant legal processes and associated risks arising from disputes and regulatory requirements. BinckBank can therefore be involved in various disputes and legal proceedings. The results of these proceedings are often uncertain and difficult to predict. These uncertainties affect the amount and timing of potential cash outflow, and thereby the measurement of a provision. BinckBank does not give any further explanation for pending litigation to avoid influencing the proceedings.
On 20 January 2017, BinckBank reached agreement with the VEB (Association of Stockholders) and Vermogensmonitor consumer guidance and advice organisation, on the settlement of complaints from members and clients about the information provided by Alex Vermogensbeheer, including warnings for market condition risks in 2014, during the period from 8 September 2012 to 26 August 2014. The VEB and Vermogensmonitor will be placed in a position to offer compensation to clients who lodged complaints and meet specific criteria. Following this agreement € 2.75 million has been added to the provision.
On 17 March 2016, the Dutch Authority for the Financial Markets (AFM) imposed an administrative fine on BinckBank of € 500,000 for the late reporting of transactions in financial instrument transactions to the AFM. On 1 July 2016, AFM imposed an administrative fine on BinckBank of € 750,000 for unclear and misleading information in commercials for Alex Vermogensbeheer in the period from 8 September 2012 to 26 August 2014. An adequate provision for both these administrative fines had already been formed by the end of 2015, and these were charged to the provision in 2016.
BinckBank also has numerous cross-border contracts with suppliers, meaning differences of opinion regarding the interpretation of the contract conditions in the various jurisdictions may occur. Opinions in relation to these contracts may give reason to the recognition of a provision.
21. OTHER LIABILITIES 19,841 66,080
This item comprises:
Liabilities in respect of securities transactions not yet settled 10,692 51,774
Tax and social security contributions 3,097 5,194
Trade payables 2,426 3,348 149
Other liabilities 3,626 5,764 //
19,841 66,080
The item liabilities in respect of securities transactions not yet settled can fluctuate on a daily basis in line with movements in the market and the total number of transactions. Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
22. ACCRUALS AND DEFERRED INCOME 10,293 10,865
This item comprises:
Accrued interest 338 350
Employee expenses 5,390 6,753
Stock exchange and clearing costs payable 741 518
Other accruals and deferred income 3,824 3,244
10,293 10,865
The employee expenses item includes accruals for holiday allowance, unused holiday leave and performance-related remuneration.
23. EQUITY 396,952 437,480
This item comprises:
Issued share capital 7,100 7,100
Share premium reserve 361,379 361,379
Treasury shares (29,468) (4,979)
Fair value reserve 1,021 1,526
Retained earnings 55,537 71,158
Non-controlling interests 1,383 1,296
396,952 437,480
Issued share capital 7,100 7,100
A total of 71,000,000 ordinary shares were in issue (nominal value of € 0.10). The share capital is fully repaid. Stichting Prioriteit Binck holds 50 priority shares, each with a nominal value of € 0.10.
Share premium reserve 361,379 361,379
The share premium is exempt from tax and freelydistributable.
Treasury shares (29,468) (4,979)
Number Amount Number Amount
Balance as at 1 January 719,277 (4,979) 804,674 (5,570) 150 // Share buy-back 4,632,720 (24,950) - -
Issued to executive board and employees (70,472) 461 (85,397) 591
Balance as at 31 December 5,281,525 (29,468) 719,277 (4,979) Annual Report 2016 FINANCIAL STATEMENTS
At 1 January 2016, the number of treasury shares held was 719,277, acquired at an average purchase price of € 6.92. In 2016, 4,632,720 shares were purchased at an average purchase price of € 5.39. In 2016, 70,472 shares with an average purchase price of € 6.54 were granted to the executive board and employees in connection with the implementation of the remuneration scheme.
At the end of 2016, the carrying amounts of the treasury shares was measured at the average purchase price of € 5.58. The movements in the amounts of treasury shares purchased and sold are recognised under equity. At the end of 2016 the quoted share price was € 5.50 (2015: € 7.95).
(amounts in € 000’s) 31 December 2016 31 December 2015
Fair value reserve 1,021 1,526
The reserve comprises the fair value gains and losses, after tax, on available-for-sale financial assets.
This item comprises:
Unrealised profits 1,906 2,652
Unrealised losses (605) (709)
Tax on unrealised profits and losses (280) (417)
1,021 1,526
The movements in the fair value reserve were as follows:
Balance as at 1 January 1,526 3,777
Movement in fair value (708) (2,869)
Realised revaluation through the income statement 66 -
Tax on the movement in fair value 137 618
Balance as at 31 December 1,021 1,526
Retained earnings 55.537 71.158
Balance as at 1 January 71,158 73,341
Payment of final dividend (17,199) (21,787)
Payment of interim dividend (2,657) (9,839)
Grant of rights to shares 162 408
Shares granted to executive board and employees (461) (591)
Result for the year 4,534 29,626 151 //
Balance as at 31 December 55,537 71,158 Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
Non-controlling interests 1,383 1,296
Balance as at 1 January 1,296 220
Result attributable to non-controlling interests 87 1,076
Balance as at 31 December 1,383 1,296
BinckBank has a primary preference relating to the non-controlling interest on certain retained reserves up to an amount of € 1.1 million. The total measurement of the non-controlling interests is therefore equal to the paid-up nominal share capital plus the part of the retained reserves in excess of the value of BinckBank’s primary preference. For a more detailed description, see note 34. Related party disclosures. 152 // Annual Report 2016 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
(amounts in € 000’s) 2016 2015
24. NET INTEREST INCOME 26,325 25,724
This includes all income and expense items relating to the lending and borrowing of money, providing they are of a similar nature to interest, as well as interest income on credit balances or interest expense on overdrafts.
This item comprises:
Interest income
Balances at central banks 3 14
Available-for-sale financial assets 4,534 7,275
Held-to-maturity financial assets 3,260 2,622
Loans and receivables 22,205 19,508
Other interest income 121 161
30,123 29,580
The interest income recognised on non-performing loans is € 19 thousand (2015: € 20 thousand).
Interest expense
Interest on funds entrusted measured at amortised cost 609 1,268
Other interest expense 3,189 2,588
3,798 3,856
The other interest expense item includes interest charges with credit institutions. As a result of the continuing low, and even negative, interest rates on balances with credit institutions and the ECB BinckBank is, on balance, paying interest on these assets. Interest paid on funds held by BinckBank due to negative interest rates is recognised under interest expenses. 153 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
25. NET FEE AND COMMISSION INCOME 109,076 131,461
Net fee and commission income comprises fees for services as performed for and by third parties in respect of securities transactions and related services.
This item comprises:
Fees and commission income
Commission income 96,263 118,760
Asset management fees 15,836 20,901
Other commission income 17,448 16,165
129,547 155,826
The item asset management fees includes a performance fee of € 0.4 million over 2016 (2015: € 3.6 million). The item other fee and commission income includes all-in fees, service fees, custody fees, BPO fees, and other securities services.
Fees and commission expense
Costs of securities transactions 17,105 20,189
Asset management fees 1,678 1,831
Other commission expense 1,688 2,345
20,471 24,365
Other commission expense includes fees for the deposit and withdrawal of securities, custody fees, transfer fees, and other management activities.
26. OTHER OPERATING INCOME 9,910 10,947
This item comprises:
IT services – revenues 9,948 10,459
IT services – direct expenses (496) (742)
IT services – net result 9,452 9,717
Other revenues 458 1,230
9,910 10,947
This includes fees for subscriptions, courses, currency results, and other income and expense items that cannot be accounted for under other items. 154 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 2016 2015
27. RESULT FROM FINANCIAL INSTRUMENTS 2,530 2,031
This item comprises:
Result from SRD (Service de Règlement Différé) - -
Result from turbos 2,541 2,056
Result from other financial instruments (11) (25)
2,530 2,031
Result from SRD (Service de Règlement Différé)
Result on SRD derivative positions (1,837) 1,424
Result on SRD equity positions 1,837 (1,424)
- -
Movements in value of the SRD client contracts are recognised directly in the income statement under result from financial instruments. BinckBank purchase or sale of shares for the SRD receivables and payables creates an economic hedge of the price risk. Movements in value of the corresponding shares are also recognised under Result from financial instruments.
Result from turbos
Result on turbos 2,562 2,062
Fair value result turbos (CVA/DVA) (21) (6)
2,541 2,056
BinckBank has entered into a cooperation agreement with UBS for the turbos it has issued, whereby the latter bears the market risk. The revenues depend on the financing level of the turbos issued. The fair value result turbos comprise the haircut applied to the valuation of the turbo products relating to credit risk of the various contract parties in the market value of the Binck turbos issued and the corresponding hedge turbos purchased.
Result from other financial instruments
Available-for-sale financial assets (66) -
Other results from financial instruments 55 (25)
(11) (25)
The other results from financial instruments contains mainly the movement in the revaluation of the receivable on DNB in respect of the Deposit Guarantee Scheme - DSB Bank.
28. IMPAIRMENTS FINANCIAL INSTRUMENTS, NET (116) 15 155
This item comprises the movement in the provision relating to financial instruments, like loans and receivables. // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 2016 2015
29. EMPLOYEE EXPENSES 51,635 53,015
This item comprises:
Salaries 36,621 36,209
Social security contributions 5,759 5,816
Pension costs 2,539 2,640
Profit sharing and performance-related pay 1,140 3,132
Other employee expenses 5,576 5,218
51,635 53,015
(in numbers) 2016 2015
Number of employees (including members of the board)
Average during the financial year (FTE) 632 644
End of the financial year (headcount) 697 700
(amounts in € 000’s) 2016 2015
The following expenses are included in employee expenses in relation to associated parties (executive board and supervisory board)
Salaries 1,705 814
Social security contributions 30 20
Pension costs 40 163
Performance-related pay 118 538
Remuneration of supervisory board 210 294
2,103 1,829
More detailed information about the policy governing the remuneration of the members of BinckBank’s executive board and supervisory board is enclosed in the remuneration section of the annual report, on page 102. At the end of 2016, no loans had been granted to members of the executive board (2015: nil).
The fixed remuneration of the board is as follows: Pension Total fixed (amounts in € 000’s) Fixed gross salary contribution remuneration
Fixed remuneration 2016
V.J.J. Germyns 630 10 640 156 // E.J.M. Kooistra 565 20 585
S.J. Clausing 510 10 520
Total 1,705 40 1,745 Annual Report 2016 FINANCIAL STATEMENTS
Pension Total fixed (amounts in € 000’s) Fixed gross salary contribution remuneration
Fixed remuneration 2015
V.J.J. Germyns 400 80 480
E.J.M. Kooistra 360 72 432
S.J. Clausing 54 11 65
Total 814 163 977
VARIABLE REMUNERATION POLICY BinckBank has a remuneration policy that is based on the Regulation for a controlled remuneration policy (Financial Supervision Act) 2014 and the provisions pursuant to the Remuneration Policy (Financial Enterprises) Act as included in the Financial Supervision Act.
In 2016, an amount of € 162,000 has been recognised in the employee expenses in (2015: € 408,000) relating to the fair value of the variable remuneration in shares for the performance year.
The fair value of shares to be allocated in the future is equal to the fair value at the time of measurement. This fair value is adjusted for: • ‘Missed’ dividends, by discounting the value of the shares by a dividend yield; • The lock-up period, by adjusting the value for the value of an American call option, calculated using a binomial tree.
The parameters used in the calculation of the fair value of the variable performance pay payable in shares are stated below.
2016 2015
Share price on initial allocation date € 5.50 € 7.95
Volatility 28.6% 23.8%
Dividend yield 4.9% 5.8%
Risk-free interest rate 0.95% 0.85%
Average fair value of share price on allocation date € 4.34 € 6.38
The projected volatility is estimated on the basis of the historical daily volatility of BinckBank shares. The dividend yield is determined by dividing the dividend in the previous financial year (interim and final) by the share price at the end of the previous financial year. 157 // Annual Report 2016 FINANCIAL STATEMENTS
The total variable remuneration for the executive board and identified staff is shown in the tables below. Remuneration Remuneration Total variable (amounts in € 000’s) in cash in shares performance pay
Variable performance pay 2016
V.J.J. Germyns 22 22 44
E.J.M. Kooistra 20 19 39
S.J. Clausing 18 17 35
Other identified staff 102 104 206
Total 162 162 324
Variable performance pay 2015
V.J.J. Germyns 153 153 306
E.J.M. Kooistra 138 137 275
S.J. Clausing* 4 4 8
Other identified staff* 200 200 400
Total 495 494 989
* The table includes the amounts for the period in which S.J. Clausing held the office of member of the executive board or was a member of the identified staff
The variable remuneration paid in shares is converted at the closing share prices for the relevant performance year, whereby account is take of any depreciating effects.
The following tables list the amounts paid and future payments in shares and cash to the executive board and identified staff. All future payments in shares and cash are subject to the re-evaluation of the performance delivered in the relevant performance year. No claw-back has been applied to variable performance pay that have been paid. The following tables are included on the basis of projected payments and distributions. The figures in the tables present the number of shares for the period in which the staff member was a member of the executive board or was a member of identified staff.
Shares still to Shares still to be issued per Shares Shares be issued per (in numbers) 1 January issued granted 31 December
Movements 2016
V.J.J. Germyns 31,663 (15,207) 5,082 21,538
E.J.M. Kooistra 31,366 (14,567) 4,558 21,357
S.J. Clausing 521 (261) 4,114 4,374
Other identified staff 78,264 (40,437) 19,560 57,387 158 // Total 141,814 (70,472) 33,314 104,656 Annual Report 2016 FINANCIAL STATEMENTS
Shares still to Shares still to be issued per Shares Shares be issued per (in numbers) 1 January issued granted 31 December
Movements 2015
V.J.J. Germyns 25,473 (13,028) 19,218 31,663
E.J.M. Kooistra 27,565 (13,495) 17,296 31,366
S.J. Clausing - - 521 521
Other identified staff 111,956 (58,874) 25,182 78,264
Total 164,994 (85,397) 62,217 141,814
(in numbers) 2016 2015
Issued shares in lock-up period
V.J.J. Germyns 20,388 13,028
E.J.M. Kooistra 28,062 23,211
S.J. Clausing 261 -
Other identified staff 65,688 82,319
Total 114,399 118,558
(amounts in € 000’s) 2016 2015
30. DEPRECIATION AND AMORTISATION 26,215 27,253
This item comprises amortisation and depreciation on:
Intangible assets 22,686 23,072
Property, plant and equipment 3,529 4,181
26,215 27,253
31. OTHER OPERATING EXPENSES 60,299 50,110
This item comprises:
Marketing costs 13,318 11,406
ICT costs 11,129 10,494
Audit and professional services 17,172 13,485
Housing costs 2,515 2,322
Communication and information costs 9,115 7,300 159 // Other miscellaneous operating expenses 7,050 5,103
60,299 50,110
The Other miscellaneous operating expenses item includes office costs, banking costs, insurance, costs of and contributions to bank supervision, resolution levies, and movements in provisions. Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 2016 2015
32. EARNINGS PER SHARE
The basic earnings per ordinary share are calculated by dividing the earnings attributable to ordinary shareholders for the period by the weighted average number of shares outstanding during the period.
The calculation of the earnings per share is based on the following:
Net result after tax 4,621 30,702
Result attributable to minority shareholders (87) (1,076)
Result attributable to shareholders of BinckBank N.V. 4,534 29,626
Number of shares in issue on 1 January 71,000,000 71,000,000
Less: repurchased shares on 1 January (719,277) (804,674)
70,280,723 70,195,326
Weighted average number of shares relating to*:
Issued to executive board and employees 70,472 56,516
Repurchased shares (2,772,950) -
Average number of shares in issue 67,578,245 70,251,842
* The figures presented above are based on the total figures disclosed in note 23, taking account of the date of movement in equity.
Result per share (in €) 0.07 0.42
There are no rights outstanding that could lead to a dilution of earnings per share. The diluted earnings per share are therefore the same as the basic earnings per share, and consequently are no longer separately disclosed in these financial statements. No other transactions in ordinary shares or potential ordinary shares that could lead to a dilution were conducted between the reporting date and the date of completion of these financial statements. 160 // Annual Report 2016 FINANCIAL STATEMENTS
OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(amounts in € 000’s) 2016 2015
33. DIVIDEND DISTRIBUTED AND PROPOSED
Declared and paid during the year
Dividend on ordinary shares:
Final dividend for 2015: € 0.25 (2014: € 0.31) 17,199 21,787
Interim dividend for 2016: € 0.04 (2015: € 0.14) 2,657 9,839
19,856 31,626
Proposed for approval by the general meeting of shareholders (not recognised as a liability as at 31 December)
Dividend on ordinary shares:
Final dividend for 2016: € 0.19 (2015: € 0.25) 13,490 17,750
34. RELATED PARTY DISCLOSURES
The consolidated financial statements include the following BinckBank-related parties:
Interest Interest year-end year-end Main activity Country 2016 2015
Consolidated companies:
Able Holding B.V. ICT services Netherlands 100% 100%
Bewaarbedrijf BinckBank B.V. Securities custody Netherlands 100% 100%
Think ETF Asset Management B.V. Investment management Netherlands 60% 60%
Associates:
TOM Holding N.V. multilateral trading faciliteit & smart order router Netherlands 25.5% 25.5% 161 //
The group of related parties consists of consolidated entities, associates, and the executive board and supervisory board of BinckBank. The interest shown above is equal to the voting rights held in relation to the company concerned. Annual Report 2016 FINANCIAL STATEMENTS
TERMS AND CONDITIONS OF TRANSACTIONS WITH RELATED PARTIES Transactions with related parties are conducted on commercial terms and conditions and at market rates. As at year-end 2016, BinckBank did not recognise any bad debt provisions for receivables from related parties (2015: nil). The need for such provisions is made each year on the basis of an assessment of the financial position of the individual related parties and the markets in which they operate. No guarantees have been issued or received with regard to related parties.
No transactions involving the executive board or the supervisory board took place during the year other than under contracts of employment or contracts of services. See note 29 on Employee expenses and the broad outlines of the remuneration report on page 102 in the annual report for further details.
In 2016, BinckBank charged the related parties a fee for ICT, accommodation and administrative services of € 184,000 (2015: € 221,000), with receivables from these related parties of € 3,000 (2015: € 15,000). In 2016, related parties charged BinckBank € 3,122,000 (2015: € 3,973,000) for their services, whereby payables to the related parties amount to € 323,000 (2015: € 278,000).
Transactions with consolidated entities are fully eliminated in the consolidated financial statements.
THINK ETF ASSET MANAGEMENT B.V. No capital injection was invested by the shareholders in 2016 (2015: nil). BinckBank holds a primary preference on reserves up to an amount of € 1.1 million, followed by a secondary preference of the other shareholders up to an amount of € 1.1 million. The results in the financial year are allocated to the shareholders of BinckBank and the other shareholders according to the preferences as established in the shareholder agreements.
TOM HOLDING N.V. In 2016, an additional capital injection of € 1,594,000 (2015: € 664,000) was paid into the associate TOM Holding N.V.
In a shareholder agreement and in proportion to their holding, the existing shareholders have granted an option to NASDAQ OMX to increase its holding from 25% to 50.1%, subject to conditions and regulatory approval. This option may be exercised on two occasions each year in a 30-day period following 1 January and 1 July of each year and expiring on 2 July 2018. NASDAQ OMX has not exercised its option in the 30 days following 1 January 2017.
(amounts in € 000’s) 31 December 2016 31 December 2015
35. COMMITMENTS AND CONTINGENT LIABILITIES
Contingent liabilities
Liabilities in respect of contracts of suretyship and guarantees 1,069 1,862
Liabilities in respect of irrevocable facilities
Liabilities in respect of commitments that could result in lending 194,823 817
SURETYSHIPS AND GUARANTEES To meet the needs of its customers, BinckBank offers loan related products, such as contracts of suretyship and guarantees. The underlying value of these products is not recognised as assets or liabilities in the statement of financial position. The above figure represents the maximum potential credit risk for BinckBank related to these products on the assumption that all its counterparties should default on their contractual obligations and all existing collateral should prove worthless. Guarantees include both credit-substituting and non-credit-substituting guarantees. In most cases, guarantees can be expected to expire without a call being made on them and they will not give rise to any future cash flows. 162 // UNUSED CREDIT FACILITIES This relates to the obligations pursuant to mortgage offers issued. Annual Report 2016 FINANCIAL STATEMENTS
ALEX BOTTOM-LINE With the acquisition of Alex Beleggersbank at the end of 2007, BinckBank also acquired the Alex Bottom-Line product, which is an agreement with the Dutch Investors’ Association (the VEB). If BinckBank terminates this agreement then it will be liable to pay an amount equal to the custody fee and dividend commission paid by each customer of Alex Bottom-Line on entry into the agreement plus the amount of any custody fee and dividend commission additionally paid by each customer on exceeding set limits.
LEASE COMMITMENTS BinckBank has leases and service contracts for office premises in the Netherlands, Belgium, France, Spain, and Italy. It has also entered into operating lease contracts for the vehicle fleet and other contracts for periods of less than five years.
The remaining maturity of the outstanding liabilities is as follows:
(amounts in € 000’s) 31 December 2016 31 December 2015
Within one year 4,284 2,863
One to five years 5,993 3,412
Longer than five years 1,869 670
LEGAL PROCEEDINGS BinckBank is involved in various legal proceedings. Although it is not possible to predict the outcome of current or impending lawsuits, the executive board believes – on the basis of information currently available and after taking legal counsel – that the outcomes are unlikely to have material adverse effects on BinckBank’s financial position or results, other than cases that have already given cause to the formation of a provision.
ALEX VERMOGENSBEHEER BinckBank has reached agreement with the VEB (Association of Stockholders) and Vermogensmonitor consumer guidance and advice organisation on the settlement of complaints from members and clients about the information provided by Alex Vermogensbeheer, including warnings for market condition risks in 2014, during the period from 8 September 2012 to 26 August 2014. The VEB and Vermogensmonitor will be placed in a position to offer compensation to clients who lodged complaints and meet specific criteria. This has enabled BinckBank to settle as many complaints as possible. However, there is still a risk that clients will lodge new complaints with BinckBank, as a result of which the risk of legal proceedings remains.
EURONEXT LEGAL PROCEEDINGS On 22 July 2015, the Court of The Hague issued its judgement in the case brought by Euronext N.V. and Euronext Amsterdam N.V. against TOM Holding N.V. and its subsidiaries and BinckBank N.V. when the Court found in favour of Euronext in relation to a number of claims, including the infringement of Euronext’s trademark rights. BinckBank has been ordered to compensate Euronext for damages to be determined in follow-up proceedings. BinckBank has decided to appeal against this Court ruling. The executive board is of the opinion – based on information currently available and after taking legal counsel – that the amount of the damages cannot be reliably established at this time.
SERVICES FROM NATIONAL AND INTERNATIONAL SUPPLIERS OF DATA AND OTHER SERVICES BinckBank procures services from national and international suppliers of data and other services, such as market data, on the basis of complex contracts that present inherent risks of differences in legal interpretation. The executive board is of the opinion that the outcome of discussions on any such differences in interpretation can be uncertain and that it is not clear whether these could have material adverse effects on the financial position or results of BinckBank. 163 // Annual Report 2016 FINANCIAL STATEMENTS
DEPOSIT GUARANTEE SCHEME The deposit guarantee scheme (DGS) is intended to guarantee certain deposits by account holders if a bank cannot meet its obligations. The scheme provides security for deposits of up to € 100,000 and applies per account holder per bank, regardless of the number of accounts held. In case of a joint account operated by two persons, the maximum applies per person. More or less all savings accounts, current accounts, and term deposits are covered. Equities or bonds are not covered. If a credit institution finds itself in difficulties and does not have sufficient funds to pay all or part of the guaranteed amounts to its account holders, De Nederlandsche Bank will make up the difference to the aforementioned maxima. As from 26 November 2015, the funding of the deposit guarantee scheme was changed from an ex-post basis to an ex-ante basis. As from the first quarter of 2016, the banks make quarterly contributions to a fund for the deposit guarantee scheme. If the resources of the funds are not sufficient for compensation in the build-up phase then the remainder will be recovered from the banks on a pro rata basis.
INVESTOR COMPENSATION SCHEME The investor compensation scheme protects private investors and ‘small’ businesses who have entrusted money or financial instruments (such as securities or options) to a licensed bank or investment institution on the basis of an investment service. While banks and investment firms in the Netherlands are subject to regulation by DNB and the AFM, the possibility that a bank or investment firm will encounter payment problems cannot be ruled out. In this case, the investor compensation system guarantees a minimum level of protection in the event that the bank or investment firm cannot meet its obligations arising from the investment services it provides to its clients. Briefly, claims (in cash or securities) relating to the performance of certain services and investment services are eligible for payment. This concerns the cash or securities of an investor held in connection with these investment or other services, which cannot be repaid to the investor in the event that a bank or investment firm is unable to meet its obligations to its investment clients. Investment losses on financial instruments are not covered by the scheme. The investor compensation scheme provides a guarantee of a maximum of € 20,000 per person per institution.
36. Post balance sheet events
On 10 February 2017, the shareholders in TOM Holding N.V. decided to issue an unconditional joint guarantee to TOM Holding N.V. to cover a potential deficit relating to the prevailing solvency requirements. BinckBank’s share of the issued guarantee amounts to a maximum of € 1.1 million and is valid for the period ending on 31 December 2017 or as soon as the strategic repositioning has been completed.
No other events took place after the balance sheet date. 164 // Annual Report 2016 FINANCIAL STATEMENTS
37. CLASSIFICATION OF ASSETS AND LIABILITIES BY EXPECTED MATURITY
The table below shows the assets and liabilities classified by expected remaining life to maturity.
(amounts in € 000’s) < 12 months > 12 months Total
31 December 2016
ASSETS
Cash and balances at central banks 854,230 - 854,230
Banks 123,622 4,133 127,755
Financial assets held for trading 63 20,330 20,393
Financial assets designated at fair value through profit and loss 9,499 - 9,499
Available-for-sale financial assets 251,745 472,653 724,398
Held-to-maturity financial assets 506,385 283,636 790,021
Loans and receivables 477,576 480,753 958,329
Associates - - -
Intangible assets - 168,260 168,260
Property, plant and equipment - 35,128 35,128
Current tax assets 12,270 - 12,270
Deferred tax assets - 1,048 1,048
Other assets 63,451 - 63,451
Prepayments and accrued income 35,479 - 35,479
Derivative positions held on behalf of clients - - -
Total assets 2,334,320 1,465,941 3,800,261
LIABILITIES
Banks 2,017 - 2,017
Financial liabilities held for trading 77 20,351 20,428
Financial liabilities designated at fair value through profit and loss 1,018 - 1,018
Funds entrusted 3,308,829 - 3,308,829
Provisions 8,891 - 8,891
Current tax liabilities 10 - 10
Deferred tax liabilities (461) 32,443 31,982
Other liabilities 18,655 1,186 19,841 165
Accruals and deferred income 10,293 - 10,293 //
Derivative positions held on behalf of customers - - -
Total liabilities 3,349,329 53,980 3,403,309
Net (1,015,009) 1,411,961 396,952 Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) < 12 maanden > 12 maanden Total
31 December 2015
ASSETS
Cash and balances at central banks 178,365 - 178,365
Banks 174,167 4,077 178,244
Financial assets held for trading 159 12,138 12,297
Financial assets designated at fair value through profit and loss 15,405 - 15,405
Available-for-sale financial assets 675,455 491,666 1,167,121
Held-to-maturity financial assets 127,346 686,138 813,484
Loans and receivables 502,006 - 502,006
Associates - 1,227 1,227
Intangible assets - 190,560 190,560
Property, plant and equipment - 34,830 34,830
Current assets 7,945 - 7,945
Deferred tax assets - 1,121 1,121
Other assets 28,103 - 28,103
Prepayments and accrued income 45,122 - 45,122
Derivative positions held on behalf of clients 260,505 - 260,505
Total assets 2,014,578 1,421,757 3,436,335
LIABILITIES
Banks 23,582 - 23,582
Financial liabilities held for trading 142 12,144 12,286
Financial liabilities designated at fair value through profit and loss 46 - 46
Funds entrusted 2,589,714 - 2,589,714
Provisions 7,884 - 7,884
Current tax liabilities 19 - 19
Deferred tax liabilities (219) 28,093 27,874
Other liabilities 66,080 - 66,080
166 Accruals and deferred income 10,865 - 10,865 //
Derivative positions held on behalf of customers 260,505 - 260,505
Total liabilities 2,958,618 40,237 2,998,855
Net (944,040) 1,381,520 437,480 Annual Report 2016 FINANCIAL STATEMENTS
38. Segment information
A segment is a clearly distinct component of BinckBank which provides services to a particular economic market (market segment) that has a different risk and return profile to that of other segments. From an organisational perspective, the operations of BinckBank are primarily segmented in terms of the countries in which BinckBank is active. The executive board determines the performance targets, and authorises and monitors the budgets prepared for these business segments. The management of the business segment is responsible for setting policy for that segment, in accordance with the strategy and performance targets formulated by the executive board. As at 31 December 2016, the business segments are as follows: • The Netherlands • Belgium • France • Italy • Group operations
All income and expenses are attributed to the geographical areas on the basis of the operations carried out by the offices. In all countries, this relates to the activities as online broker in financial instruments for the private customer market, inclusive of the associated savings products. Professional Services are also included in the Netherlands and Belgium. The Netherlands also includes asset management services, the issue of financial instruments and the results from the BPO operations. All directly attributable income and expenses are recognised within the aforementioned geographical segments, together with the attributed costs of the Group operations.
The item Group operations includes the departments directly managed by the executive board and for which the income and expenses are not included in one of the other business segments. This includes the expenses of the central ICT, operations and staff departments. In addition, all results from the ThinkCapital and Able associates are recognised under Group operations. The allocation of Group operations to the geographical segments is carried out on the basis of predetermined allocation keys.
The same accounting policies are used for a business segment as those described for the consolidated statement of financial position and income statement of BinckBank. The amounts the various business segments charge each other have been eliminated and replaced by the allocation of the actual costs.
Investments in intangible assets and property, plant, and equipment are attributed to the business segments to the extent that the investments are directly acquired by the business segments. All other investments are recognised under Group operations.
Tax is managed at group level and for the segment summary is not attributed to the segments.
In both 2016 and 2015, no customer or group of associated customers was responsible for more than 10% of the bank’s total income.
The following analysis shows the geographical distribution of income from operating activities and the property, plant and equipment and intangible assets of BinckBank. Income is allocated on the basis of the country of domicile of the branch where the account is opened, and the property, plant and equipment and intangible assets on the basis of the country in which the assets are held. 167 // Annual Report 2016 FINANCIAL STATEMENTS
SEGMENTATION OF FINANCIAL INFORMATION BY REGION
Consolidated 2016 Inter company (amounts in € 000’s) Netherlands Belgium France Italy activities Total
PROFIT AND LOSS ACCOUNT
Net interest income 21,665 1,566 1,846 1,244 4 26,325
Net fee and commission income 88,577 9,193 6,257 1,873 3,176 109,076
Other income 2,026 - 13 - 7,871 9,910
Result from financial instruments 2,240 301 - - (11) 2,530
Impairment of financial assets 5 2 2 (3) (122) (116)
Total income from operating activities 114,513 11,062 8,118 3,114 10,918 147,725
Employee expenses 8,920 2,467 2,765 1,312 36,171 51,635
Depreciation and amortisation 21,750 29 14 62 4,360 26,215
Other operating expenses 19,582 4,647 4,450 2,037 29,583 60,299
Total operating expenses 50,252 7,143 7,229 3,411 70,114 138,149
Result from operating activities 64,261 3,919 889 (297) (59,196) 9,576
Internal cost allocation (48,300) (6,438) (5,545) (4,124 ) 64,407 -
Result from operating activities 15,961 (2,519) (4,656) (4,421) 5,211 9,576 after internal cost allocation
Share of results of associates (2,821)
Result before tax 6,755
Income tax expense (2,134)
Net result 4,621
Investments in intangible fixed assets 166,938 56 129 31 36,234 203,388
Total assets 2,911,770 464,514 227,080 136,033 60,864 3,800,261
Total liabilities 2,582,804 455,186 221,673 132,958 10,688 3,403,309 168 // Annual Report 2016 FINANCIAL STATEMENTS
Consolidated 2015 Inter company (amounts in € 000’s) Netherlands Belgium France Italy activities Total
PROFIT AND LOSS ACCOUNT
Net interest income 20,592 1,332 2,546 1,094 160 25,724
Net fee and commission income 106,871 12,949 7,739 1,577 2,325 131,461
Other income 2,040 2 24 - 8,881 10,947
Result from financial instruments 2,045 12 - - (26) 2,031
Impairment of financial assets 10 1 3 1 - 15
Total income from operating activities 131,558 14,296 10,312 2,672 11,340 170,178
Employee expenses 9,261 2,610 2,695 1,288 37,161 53,015
Depreciation and amortisation 21,828 11 5 75 5,334 27,253
Other operating expenses 16,140 4,243 3,502 1,956 24,269 50,110
Total operating expenses 47,229 6,864 6,202 3,319 66,764 130,378
Result from operating activities 84,329 7,432 4,110 (647) (55,424) 39,800
Internal cost allocation (45,563) (5,025) (5,405) (3,396) 59,389 -
Result from operating activities 38,766 2,407 (1,295) (4,043) 3,965 39,800 after internal cost allocation
Share of results of associates (730)
Result before tax 39,070
Income tax expense (8,368)
Net result 30,702
Investments in intangible fixed assets 188,668 85 20 91 36,526 225,390
Total assets 2,696,943 387,983 181,731 114,345 55,333 3,436,335
Total liabilities 2,317,648 379,813 176,509 111,879 13,006 2,998,855 169 // Annual Report 2016 FINANCIAL STATEMENTS
39. Risk management
RISK MANAGEMENT, ORGANISATION AND RISK APPETITE A comprehensive explanation of risk management, organisation, and risk acceptance is given on pages 56 to 81 of the annual report.
CAPITAL MANAGEMENT BinckBank holds monthly reviews on the current and future capital adequacy requirements in the Asset and Liability Committee (ALCO) meetings. The ALCO can decide to implement adjustment measures. A capital and funding plan drawn up once a year contains information about the strategic and tactical principles, as well as projections of the expected movements in the capital position. This plan is included in the ICAAP documentation.
BinckBank’s legally available capital is comprised entirely of Tier 1 core capital (CET1). BinckBank does not have any additional Tier 1 capital (AT1) or Tier 2 capital (T2). The CRR includes transitional provisions for various requirements. These transitional provisions include the phase-in of deductions to grant banks time to maintain their capital buffer at the required level. BinckBank does not take any account of this and adopts the full phase-in as this will prevail in 2018 when calculating the capital buffer.
Compared to the end of 2015, the Tier 1 core capital fell by € 8.0 million to € 245.5 million. The calculation of the Tier 1 core capital takes full account of any potential reduction of the reserves resulting from the dividend policy.
(amounts in € 000’s) 31 December 2016 31 December 2015
Issued share capital 7,100 7,100
Share premium 361,379 361,379
Treasury shares (29,468) (4,979)
Fair value reserves 1,021 1,526
Retained earnings 51,003 41,532
Result for the year 4,534 29,626
Non-controlling interests 1,383 1,296
Total Equity 396,952 437,480
Less: goodwill (144,882) (144,882)
Plus: deferred tax liabilities related to goodwill 32,273 28,651
Less: other intangible assets (23,204) (45,417)
Less: prudent valuation adjustment (724) (1,167)
Less: non-controlling interests (1,383) (1,296)
Less: proposed dividend in accordance with dividend policy (13,490) (17,750) 170 // Less: unappropriated profit adjusted for interim dividend and proposed final dividend - (2,037)
Total available capital (A) – Tier 1 245,542 253,582 Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
Total available capital (A) – Tier 1 245,542 253,582
Credit risk 539,650 386,339
Settlement risk 127 72
Operational risk 228,898 244,252
Total risk weighted exposure (B) – Pillar I 768,675 630,663
Capital ratio (=A/B) 31.9% 40.2%
CRR required capital (=B*8%) 61,494 50,453
CRR buffers 4,804 -
CRR required capital incl. buffers 66,298 50,453
Required capital based on own internal standard (=B*15%) 115,301 94,599
CRR buffers 4,804 -
Required capital based on own internal standard incl. buffers 120,105 94,599
CAPITAL RATIOS The CRD IV and CRR directives are applicable to all banks in the Netherlands. This integral framework for the supervision of banks is comprised of three pillars: • Pillar I: External capital adequacy requirements for credit risk, market risk and operational risk; • Pillar II: Internal processes relating to risk management and the calculation of internal capital adequacy requirements and economic capital, as well as the manner in which the supervisory authority assesses these internal processes, referred to as the Supervisory Review; • Pillar III: Disclosure requirements relating to key risk information for external stakeholders.
Pillar III, which is concerned with the obligation to provide external stakeholders with information on risk, supports the calculation of minimum solvency requirements (Pillar I) and the solvency requirements set by management (Pillar II). The objective of Pillar III is to bring about an improvement in the quality of risk management at institutions through the disciplinary effect of the market. BinckBank has made its Pillar III report available separately on its website.
Pursuant to the regulations, banks are required to hold sufficient buffer capital to cover the risks arising from banking operations. Pillar I provides guidelines for calculating the minimum capital buffer prescribed by the supervisory authorities to cover credit risk, market risk and operational risk. The regulations provide scope for a series of calculation methods for the capital adequacy requirements relating to these risks, which range from relatively simple to more advanced methods. Banks can exercise their discretion, subject to a number of conditions, in adopting one of these methods. A number of 171
qualitative requirements are applicable to this selection. Banks that opt for a more advanced method may not revert to a // simpler method at a later date.
The leverage ratio is a simple risk-neutral measure where capital is divided by the total of on and off balance sheet items. Annual Report 2016 FINANCIAL STATEMENTS
A summary of BinckBank’s Pillar I capital adequacy requirements and the associated ratios is presented below. Exposure net of value adjustments Risk weighted 8% Pillar I capital and provisions exposure amount requirement
(amounts in € 000’s) 2016 2015 2016 2015 2016 2015
CREDIT RISK
Claims or contingent claims on central 1,072,311 385,613 728 1,945 58 156 governments or central banks Claims or contingent claims on regional 377,410 601,093 - - - - governments or local authorities Claims or contingent claims on multilateral 23,848 17,473 - - - - development banks Claims or contingent claims on financial 667,207 736,958 227,388 231,082 18,191 18,487 enterprises and financial institutions
Claims or contingent claims on corporate clients 209,359 339,673 19 25 2 2
Claims or contingent claims on private individuals 502,774 672,682 75,391 1,002 6,031 80 and SMEs
Claims secured by mortgages 443,540 - 82,702 - 6,616 -
Overdue items 254 42 30 42 2 3
Claims in the form of covered bonds 310,196 556,036 31,020 55,604 2,482 4,448
Claims on institutions and corporates with 114,893 126,306 38,502 25,046 3,080 2,004 a short-term credit rating
Exposure in shares 6,463 6,759 8,893 10,833 711 867
Other receivables 88,735 71,476 74,977 60,760 5,998 4,861
Total credit risk standardised method 3,816,990 3,514,110 539,650 386,339 43,171 30,908
Market risk - - - -
Settlement risk 127 72 10 6
Operational risk (standardised) 228,898 244,252 18,312 19,540
Total risks 768,675 630,663 61,493 50,453
Total available capital – Tier 1 245,542 253,582
Capital ratio 31.9% 40.2%
Exposure amount as defined for leverage ratio 3,660,470 3,560,357
172 Leverage ratio 6.7% 7.1% // Annual Report 2016 FINANCIAL STATEMENTS
CREDIT RISK, CREDIT APPROVAL, AND CREDIT MANAGEMENT Credit risk is the risk of a counterparty and/or issuing institution that is involved in the trade or issue of a financial instrument defaulting on an obligation and thus harming BinckBank financially. BinckBank’s credit risk can be subdivided into the following categories: • credit risk on cash and investments; • credit risk on mortgages; • credit risk on outstanding collateralised loans/margin obligations/deferred settlement service (SRD) obligations; and • counterparty risk.
How BinckBank manages these risks and developments in this regard are explained below.
MANAGEMENT OF CREDIT RISK WITH CASH AND INVESTMENTS BinckBank deals prudently with the funds entrusted to it by its clients. Funds entrusted, which are not used for collateralised loans, are partly held in cash with the remainder being placed in the money market and capital market. All placements are made in a responsible manner in accordance with the established risk appetite. BinckBank’s objective with its investment portfolio, within the issued mandate, is to invest the available liquidity in the market in a manner that optimises the interest margin between the raised and placed funds.
The credit risk on cash and placements is monitored daily by the Treasury & ALM department. It reports daily to the CFRO and periodically to the Asset and Liability Committee (ALCO). Cash balances are placed in the money and capital market with central governments, regional governments (if guaranteed by central government), central banks and other credit institutions with a minimum credit rating of single A (Fitch or equivalent) and a stable outlook.
Agreements and limits with regard to placing funds in the money and capital markets are established in a limits system adopted by the ALCO. The Treasury & ALM department is bound by stringent requirements imposed on funds placed with counterparties. Internally-set limits on both the amount and terms of loans to approved counterparties are observed. BinckBank’s relatively low risk appetite with regard to credit risk is demonstrated by the policy of investing bonds in relatively safe and liquid instruments, most of which are eligible as collateral at the European Central Bank (ECB).
MANAGEMENT AND DEVELOPMENT OF MORTGAGE CREDIT RISK The credit appetite risk is focused on the monitoring and management of mortgage credit risk.
Credit approval BinckBank began investing in the financing of Dutch residential mortgages in 2016. BinckBank acts as the financier in a collective structure in which Dynamic Credit, a service provider licensed by the AFM, is responsible for the marketing, sales, administration and management. BinckBank defines its risk appetite within the investment mandate by issuing acceptance criteria and designating one or more credit risk buckets and interest rate revision periods. When viewed from a risk management perspective, the credit risk and outsourcing risk are of particular importance. Appropriate management of the operational risks, including the outsourcing risks, is provided for in the form of agreements laid down in a service level agreement (SLA). These agreements relate primarily to various elements of the mortgage loan process, the management and administration of mortgages loaned and the submission of data. BinckBank reviews compliance with the SLA once a month. Loan approval and management has been outsourced to Dynamic Credit and is monitored on the basis of the comprehensive data on the mortgage portfolio issued in accordance with the requisite prevailing statutory requirements. The information received is employed for purposes including the recognition of any arrears, where relevant.
BinckBank carries out periodic assessments of the mortgage production within the limits it has set. BinckBank is in a position to issue a stop notice to terminate the production on its behalf. The collateral for the loans is comprised of Dutch residential property. The collateral is comprised of a combination of Dutch homes with and without a National Mortgage Guarantee (NHG). 173
In July 2016, BinckBank also purchased a portfolio of existing mortgages from Obvion. The agreements reached in this // instance relate primarily to the management and administration of mortgages and the submission of data. Appropriate management of the operational risks, including the outsourcing risks, is provided for in the form of agreements laid down in a service level agreement (SLA). BinckBank reviews compliance with the SLA once a month. The management of the credit risks is monitored on the basis of the comprehensive data on the mortgage portfolio issued in accordance with the requisite prevailing statutory requirements. The information received is employed for purposes including the recognition of any arrears, where relevant. Annual Report 2016 FINANCIAL STATEMENTS
Arrears management All loans of which the interest and/or redemption is not paid in time are in arrears. When a client will probably be, or is, unable to fulfil his obligations towards the bank then a provision will be formed. The credit extended to the client is then designated as a non-performing loan. The service providers are entrusted with the arrears management within the agreements laid down in the SLAs. The service provider is entrusted with the responsibility for the initiation of a forbearance programme to renegotiate the credit agreements. The service provider notifies BinckBank of the initiation of any forbearance programmes.
Provisions methodology When a loan is impaired then BinckBank will make an estimate of the potential loss on the basis of the information at its disposal, including the information received from the service providers. Objective indications for an impairment of an individual item will give cause to an estimation of the cash flows. This estimate is based on assumptions of the proceeds from foreclosure of collateral, the payments yet to be received and the timing of these payments, as well as the discount rate. All other loans for which no individual provision is calculated are included in the IBNR (incurred but not reported) provision. The IBNR provision relates to impairments that have taken place on reporting date but are not yet known to the bank because of an information backlog. This impairment is calculated at portfolio level.
MANAGEMENT OF CREDIT RISK ON OUTSTANDING COLLATERALISED LOANS AND MARGIN OBLIGATIONS BinckBank offers customers various forms of lending against securities collateral. This advance funding can be used to cover margin requirements relating to derivative positions or for the purchase of securities. BinckBank has a potential or actual credit risk in respect of the client in both cases.
Collateralised loans are assessed on an automated basis at the time they are advanced, taking account of the haircut percentages for the collateral that qualifies for that purpose. This is all carried out in accordance with the guidelines set by the ALCO, with due regard for the limits set in Section 152 of the Besluit gedragstoezicht financiële ondernemingen (Market Conduct Supervision (Financial Institutions) Decree, BGfo). The loans granted are also monitored with automated systems on the basis of real-time prices. The credit risk for collateralised loans arises due to movements in value of the collateral coverage. Specific attention is given to undesirable concentrations in client portfolios, referred to as ‘concentration risk’. A cover deficit arises when the value of the collateral is insufficient to cover the collateralised loans and/or margin obligations. The client must make up a cover deficit within one to five trading days. When the client fails to comply with this requirement then BinckBank is entitled to sell collateral to redeem the loan. The first-line operations department monitors the outstanding collateralised loan, margin obligation and any excessive concentrations of client portfolios, where relevant. The second-line credit risk management department monitors the activities of the operations department. Provisions for non-performing collateralised loans are determined individually. The amount of the provision depends on the redemption terms agreed with the client. The total provision as at 31 December 2016 amounted to € 0.4 million (2015: € 0.5 million).
MANAGEMENT OF CREDIT RISK FROM COUNTERPARTY RISK The Treasury & ALM department conducts transactions for BinckBank’s account and risk. This involves counterparty risk. The ALCO approves the counterparty limits. The vast majority of equities transactions effected by BinckBank are for the account and risk of customers (online brokerage). These transactions are mainly effected on regulated or other markets such as NYSE, Euronext and TOM MTF, where use is made of a central counterparty (CCP). The counterparty risk for customers is therefore low. 174 // Annual Report 2016 FINANCIAL STATEMENTS
FORBEARANCE Forbearance occurs when a client is no longer able to fulfil his obligations towards BinckBank due to financial difficulties or to financial difficulties to be expected within the near future and the bank, in view of these circumstances, has made concessions on the terms and conditions of the credit agreement with the objective of enabling the client to fulfil the revised obligations.
These concessions on the existing credit agreement relate to circumstances surrounding the client’s financial situation and would not have been made if these circumstances had not arisen. For this reason, forbearance is not an issue when amendments of the conditions of the credit agreement are made for reasons other than the client’s financial difficulties.
The objective of the forbearance measures implemented is to maximise the probability of the recovery of the client’s payment capacity and, as a result, minimise the losses incurred in writing down all or part of the loan. The measures need to offer the client an appropriate and sustainable solution that will ultimately enable the client to fulfil the original obligations pursuant to the credit agreement.
In practice, the forbearance measures do not always achieve the intended result, i.e. the recovery of the client’s payment capacity or preventing a continued decline in the client’s payment capacity. This can, for example, be the case when the client’s financial situation continues to deteriorate or an expected improvement in his situation fails to materialise. Any such situations give cause to a new analysis of the client’s general and financial situation and the determination of the revised strategy to be followed. A forbearance situation ends when the status ‘non-performing’ has no longer applied to the loan for a period of two years. The ‘non-performing’ status must last a minimum of one year starting from the last forbearance measure. The client must moreover have made significant and regular payments of interest and/or principal during at least half this period. After expiry of the two-year period, no payments by the borrower may be in arrears for more than 30 days.
(amounts in € 000’s) 31 December 2016 31 December 2015
Forbearance
Mortgage receivables with forbearance measures 5,151 - 175 // Annual Report 2016 FINANCIAL STATEMENTS
MAXIMUM CREDIT RISK The maximum credit risk of on balance sheet items is, in general, the carrying value of the relevant financial asset. The maximum credit risk of off balance sheet items is the maximum amount that could possibly be paid. Collateral received is not taken into account in the determination of the maximum credit risk. The maximum credit risk of the following items differs from the carrying value. Neither past Non- due nor performing (amounts in € 000’s) Total Limit impaired Past due Impaired Provision loans
31 December 2016
Loans and receivables
Receivables collateralised by securities 433,181 434,250 433,181 - - - -
Receivables collateralised by bank 4,563 11,609 4,563 - - - - guarantees
Mortgage receivables 520,555 715,378 520,444 - 232 (121 ) 232
Other receivables 30 484 - - 484 (454) 484
Total 958,329 1,161,721 958,188 - 716 (575) 716
31 December 2015
Loans and receivables
Receivables collateralised by securities 498,722 500,584 498,722 - - - -
Receivables collateralised by bank 3,242 9,698 3,242 - - - - guarantees
Mortgage receivables - 817 - - - - -
Other receivables 42 503 - - 503 (461) 503
Total 502,006 511,602 501,964 - 503 (461) 503
The total outstanding amount in the tables is reduced by the impairment of loans. Impairment is classified into Incurred But Not Reported (IBNR) and into specific provisions. At the end of 2016, the IBNR item amounted to € 114,000. All loans of which the interest and/or redemption is not paid in time are in arrears. When a client will probably or is unable to fulfil his obligations towards the bank then a provision will be formed. The credit extended to the client is then designated non- performing credit.
Non-Performing Loans relates to loans that can be designated as: • loans that have been in material arrears for over 90 days; or • loans for which a provision has been taken; or • loans with a Probability of Default of 1; or • Forbearance exposures for which the two-year probationary period that has yet to begin. 176 // Annual Report 2016 FINANCIAL STATEMENTS
BinckBank provides loans solely on the basis of collateral received in the form of marketable securities, bank guarantees or mortgage collateral. The loans and receivables classified by cover ratio are as follows:
(amounts in € 000’s) 31 December 2016 31 December 2015
NHG guaranteed 243,788 -
Less than 75% of the value of the collateral 526,891 491,173
Between 75% and 90% of the value of the collateral 73,345 8,557
Between 90% and 100% of the value of the collateral 50,484 1,763
Greater than 100% of the value of the collateral 64,396 974
Total 958,904 502,467
Securities lending BinckBank usually acts as the principal in the borrowing and lending of securities. The following table lists the receivables and payables relating to securities recognised and loans provided, inclusive of the collateral received.
(amounts in € 000’s) 31 December 2016 31 December 2015
Receivables in respect of securities lending 3,881 -
Collateral received 2,019 -
Liabilities in respect of securities lending 3,881 -
Collateral Paid - - 177 // Annual Report 2016 FINANCIAL STATEMENTS
RISK CONCENTRATION BY ECONOMIC SECTOR The following table lists the credit risk by economic sector.
RISK CONCENTRATION BY ECONOMIC SECTOR AS AT 31 DECEMBER 2016 Government/ Other Central Financial Government Private private (amounts in € 000’s) banks institutions guaranteed individuals sector Total
Cash and balances at central banks 854,230 - - - - 854,230
Banks 29,038 98,717 - - - 127,755
Financial assets held for trading - 20,330 - - 63 20,393
Financial assets designated at fair value through - - - - 9,499 9,499 profit and loss
Available-for-sale financial assets - 667,396 57,002 - - 724,398
Held-to-maturity financial assets - 274,558 515,463 - - 790,021
Loans and receivables - - - 905,843 52,486 958,329
883,268 1,061,001 572,465 905,843 62,048 3,484,625
Guarantees - - - 848 221 1,069
Total 883,268 1,061,001 572,465 906,691 62,269 3,485,694
RISK CONCENTRATION BY ECONOMIC SECTOR AS AT 31 DECEMBER 2015 Government/ Other Central Financial Government Private private (amounts in € 000’s) banks institutions guaranteed individuals sector Total
Cash and balances at central banks 178,365 - - - - 178,365
Banks 27,162 151,082 - - - 178,244
Financial assets held for trading - 12,138 - - 159 12,297
Financial assets designated at fair value through - - - - 15,405 15,405 profit and loss
Available-for-sale financial assets - 849,937 317,184 - - 1,167,121
Held-to-maturity financial assets - 348,928 464,556 - - 813,484
Loans and receivables - - - 443,322 58,684 502,006
205,527 1,362,085 781,740 443,322 74,248 2,866,922
Guarantees - - - 901 961 1,862
Total 205,527 1,362,085 781,740 444,223 75,209 2,868,784 178 // Annual Report 2016 FINANCIAL STATEMENTS
RISK CONCENTRATION – GEOGRAPHICAL The following table lists the credit risk by geographical area.
GEOGRAPHICAL DISTRIBUTION AS AT 31 DECEMBER 2016 Belgium, Other Supra Nether France, EU- North Other (amounts in € 000’s) national lands Italy Germany countries America countries Total
Cash and balances at central banks - 847,328 6,902 - - - - 854,230
Banks - 87,968 27,998 - 122 11,179 488 127,755
Financial assets held for trading - - 63 - - - 20,330 20,393
Financial assets designated at fair value - - 9,499 - - - - 9,499 through profit and loss
Available-for-sale financial assets 8,549 99,335 160,268 77,916 221,532 75,840 80,958 724,398
Held-to-maturity financial assets 15,224 5,000 - 703,310 - 66,487 - 790,021
Loans and receivables - 908,938 36,340 5,230 5,219 - 2,602 958,329
23,773 1,948,569 241,070 786,456 226,873 153,506 104,378 3,484,625
Guarantees - 1,069 - - - - - 1,069
Total 23,773 1,949,638 241,070 786,456 226,873 153,506 104,378 3,485,694
GEOGRAPHICAL DISTRIBUTION AS AT 31 DECEMBER 2015 Belgium, Other Supra Nether France, EU- North Other (amounts in € 000’s) national lands Italy Germany countries America countries Total
Cash and balances at central banks - 171,607 6,758 - - - - 178,365
Banks - 120,299 17,171 - 35 40,049 690 178,244
Financial assets held for trading - - 159 - - - 12,138 12,297
Financial assets designated at fair value - - 15,405 - - - - 15,405 through profit and loss
Available-for-sale financial assets 17,425 135,785 200,629 381,090 222,874 154,028 55,290 1,167,121
Held-to-maturity financial assets - 5,000 - 771,713 - 36,771 - 813,484
Loans and receivables - 451,997 40,298 3,672 3,064 1 2,974 502,006
17,425 884,688 280,420 1,156,475 225,973 230,849 71,092 2,866,922
Guarantees - 1,862 - - - - - 1,862
Total 17,425 886,550 280,420 1,156,475 225,973 230,849 71,092 2,868,784 179 // Annual Report 2016 FINANCIAL STATEMENTS
RISK CATEGORY BY RATING The assessment of the creditworthiness of financial assets and liabilities is based on credit ratings provided by rating agencies. Cash and placements with banks are classified on the basis of the short-term credit ratings of rating agencies. The banks with no rating item concerns the residual receivable that arose from the implementation of the deposit guarantee scheme for DSB. The long-term rating is used for the investment portfolio. The loans and receivables relate to credit collateralised with securities and mortgage rights. These are not rated by rating agencies.
FINANCIAL ASSET RISK CATEGORIES AS AT 31 DECEMBER 2016 No Short term rating Long term rating rating Total between between F1 F2 AA+ and A+ and (amounts in € 000’s) or higher or lower AAA AA A- BBB+
Cash and balances at central banks 854,230 ------854,230
Banks 89,571 34,050 - - - - 4,133 127,754
Financial assets held for trading ------20,393 20,393
Financial assets designated at fair ------9,499 9,499 value through profit and loss
Available-for-sale financial assets - - 55,932 338,959 316,617 12,890 - 724,398
Held-to-maturity financial assets - - 501,003 268,869 - - 20,149 790,021
Loans and receivables ------958,329 958,329
Total 943,801 34,050 556,935 607,828 316,617 12,890 1,012,503 3,484,624
FINANCIAL ASSET RISK CATEGORIES AS AT 31 DECEMBER 2015 No Short term rating Long term rating rating Total between F1 F2 AA+ and between (amounts in € 000’s) or higher or lower AAA AA A+ and A- BBB+
Cash and balances at central banks 178,365 ------178,365
Banks 145,875 28,292 - - - - 4,077 178,244
Financial assets held for trading ------12,297 12,297
Financial assets designated at fair ------15,405 15,405 value through profit and loss
Available-for-sale financial assets - - 230,340 564,151 336,543 36,087 - 1,167,121
Held-to-maturity financial assets - - 474,761 317,883 - - 20,840 813,484
Loans and receivables ------502,006 502,006
180 Total 324,240 28,292 705,101 882,034 336,543 36,087 554,625 2,866,922 // Annual Report 2016 FINANCIAL STATEMENTS
OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES Financial assets and liabilities are set off against each other and the net amount is presented in the balance sheet when there is a legally enforceable right to set off the amounts and an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Generally, this does not apply to master netting agreements, and the assets and liabilities concerned are therefore presented on a gross basis in the balance sheet. Master netting agreements usually stipulate separate net settlement of all financial instruments falling under the agreements in the event of default on a particular contract. While master netting agreements can substantially reduce credit risk, it must be remembered that the extent to which the total credit risk is reduced can vary significantly within a short period, since the receivable is affected by every transaction under the agreement.
The following tables show which financial assets and liabilities are subject to offsetting within the balance sheet under IAS 32 and the effects of master netting agreements that do not comply with IAS 32:
FINANCIAL ASSETS AND LIABILITIES SUBJECT TO OFFSETTING, ENFORCEABLE MASTER NETTING AGREEMENTS AND SIMILAR AGREEMENTS
(a) (b) (c)=(a)-(b) (d) (e)=(c)-(d)
Recognised Related amounts not offset in financial the balance sheet assets and Financial assets Financial liabilities and liabilities assets offset in included in Collateral and liabilities, the balance the balance Financial received Net (amounts in € 000’s) gross sheet, gross sheet, net instruments in cash amount
31 December 2016
ASSETS
Banks 127,755 - 127,755 - - 127,755
Total 127,755 - 127,755 - - 127,755
LIABILITIES
Banks 2,017 - 2,017 - - 2,017
Total 2,017 - 2,017 - - 2,017
31 December 2015
ASSETS
Banks 178,244 - 178,244 (23,582) - 154,662
Total 178,244 - 178,244 (23,582) - 154,662
LIABILITIES 181
Banks 23,582 - 23,582 (23,582) - - //
Total 23,582 - 23,582 (23,582) - - Annual Report 2016 FINANCIAL STATEMENTS
OPERATIONAL RISK A comprehensive explanation of the management of the operational risk is enclosed in the Risk Management section on page 59 of the Annual Report. BinckBank uses the standardised approach (SA) to calculate its operational risk under Pillar I. Under the SA, the operating income in the three preceding financial years is divided into various business lines with the prescribed capital requirements of between 12% and 18%. The following table provides an insight into the calculation of the capital requirement arising from the operational risk.
STANDARDISED APPROACH AS AT 31 DECEMBER 2016
Operating income Capital (amounts in € 000’s) 2014 2015 2016 Average Risk weight requirement
BUSINESS LINE
Retail brokerage 98,933 107,254 89,996 98,728 12% 11,847
Retail banking 28,479 25,702 26,133 26,771 12% 3,213
Agency services 7,082 7,928 7,951 7,654 15% 1,148
Asset management 20,407 19,204 12,987 17,533 12% 2,104
Total 154,901 160,088 137,067 150,686 18,312
STANDARDISED APPROACH AS AT 31 DECEMBER 2015 Operating income Capital (amounts in € 000’s) 2013 2014 2015 Average Risk weight requirement
BUSINESS LINE
Retail brokerage 101,788 98,933 107,254 102,658 12% 12,319
Retail banking 27,634 28,479 25,702 27,272 12% 3,272
Agency services 8,764 7,082 7,928 7,925 15% 1,189
Asset management 29,385 20,407 19,204 22,999 12% 2,760
Total 167,571 154,901 160,088 160,854 19,540
MARKET RISK BinckBank’s sole market risk in Pillar I is currency risk. Currency risk is the risk of fluctuations in the value of items denominated in foreign currency as a result of movements in exchange rates. The policy is not to take active foreign- exchange trading positions.
INTEREST RATE RISK Interest rate risk relates to the sensitivity of the interest rate result and/or the market value of the bank to interest rate movements. A movement in the yield curve affects the future interest income and/or the net present value thereof. As a result, interest rate movements can have an impact on both the interest rate result and the market value of the bank. A distinction can be made between the following forms of interest rate risk: 182
// • Repricing risk: the interest rate risk arising from timing differences in interest rate adjustments of instruments. The earlier or later repricing of assets than liabilities creates interest rate risk. The repricing risk depends on factors including the extent to which interest rate movements are spread evenly across the yield curve (parallel yield curve shift); • Yield curve risk: the interest rate risk arising from non-parallel shifts in the yield curve; • Optionality risk: the interest rate risk arising when certain options have been made available to clients (for example, partially penalty-free right of early redemption or a capped variable interest rate) and this risk is not or cannot be
Annual Report 2016 fully hedged; FINANCIAL STATEMENTS
• Basis risk: the interest rate risk that arises when movements in an instrument used as a hedge do not precisely mirror movements in the corresponding item in the statement of financial position (for example, a mortgage based on one- month Euribor versus a swap based on three-month Euribor). BinckBank pursues a prudent interest rate risk policy which takes into account both the short-term and long-term interest rate risk.
The interest rate risk management involves the use of models to determine the interest rate risk of the assets and liabilities, whereby account is taken of the contractual and client-conduct aspects of the products. BinckBank manages this risk insofar as this relates to its banking operations by actively matching and keeping the maturities of its entrusted and placed funds matched within specified limits.
The following tables present the interest rate sensitivity on the basis of the contractual interest rate maturities of the individual balance sheet item.
INTEREST RATE MATURITY CALENDAR AS AT 31 DECEMBER 2016 Non- > 1 month > 1 year > 5 year interest (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year bearing Total
ASSETS
Cash and balances at central banks 854,230 - - - - - 854,230
Banks 123,622 - - - - 4,133 127,755
Financial assets held for trading - - - - - 20,393 20,393
Financial assets designated at fair - - - - - 9,499 9,499 value through profit and loss
Available-for-sale financial assets 32,226 219,524 472,648 - - - 724,398
Held-to-maturity financial assets 63,398 442,989 283,634 - - - 790,021
Loans and receivables 438,184 23,441 68,168 332,869 95,667 - 958,329
Total 1,511,660 685,954 824,450 332,869 95,667 34,025 3,484,625
LIABILITIES
Banks 2,017 - - - - - 2,017
Financial liabilities held for trading - - - - - 20,428 20,428
Financial liabilities designated at fair - - - - - 1,018 1,018 value through profit and loss
Funds entrusted 3,308,829 - - - - - 3,308,829
Total 3,310,846 - - - - 21,446 3,332,292 183 // Annual Report 2016 FINANCIAL STATEMENTS
INTEREST RATE MATURITY CALENDAR AS AT 31 DECEMBER 2015 Non- > 1 month > 1 year > 5 year interest (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year bearing Total
ASSETS
Cash and balances at central banks 178,365 - - - - - 178,365
Banks 174,167 - - - - 4,077 178,244
Financial assets held for trading - - - - - 12,297 12,297
Financial assets designated at fair - - - - - 15,405 15,405 value through profit and loss
Available-for-sale financial assets 98,351 594,385 474,385 - - - 1,167,121
Held-to-maturity financial assets - 127,350 686,134 - - - 813,484
Loans and receivables 502,006 - - - - - 502,006
Total 952,889 721,735 1,160,519 - - 31,779 2,866,922
LIABILITIES
Banks 23,582 - - - - - 23,582
Financial liabilities held for trading - - - - - 12,286 12,286
Financial liabilities designated at fair - - - - - 46 46 value through profit and loss
Funds entrusted 2,589,714 - - - - - 2,589,714
Total 2,613,296 - - - - 12,332 2,625,628
INTEREST RATE RISK ON THE RESULT The short term interest risk is addressed from an Earnings-at-Risk perspective. The effect of a gradual movement in interest rates on BinckBank’s profitability is determined using an Earnings-at-Risk model. This measures the impact of the interest-rate risk on the adjusted net result determined by calculating the expected interest income and interest expense on the basis of a gradual change in the market interest rate over a period of one year. This clearly expresses the interest- rate exposure of BinckBank’s result.
GRADUAL PARALLEL YIELD CURVE SHIFT
Effect on the result
(amounts in € 000’s) 31 December 2016 31 December 2015
Over a period of 1 year
+200 basis points 8,892 3,543
-200 basis points (1,572) (1,411) 184 //
Over a period of 2 years
+200 basis points 35,198 20,922
-200 basis points (5,915) (3,754) Annual Report 2016 FINANCIAL STATEMENTS
INTEREST RATE RISK ON CAPITAL The long term interest is addressed using an economic value approach. This approach is based on an examination of the change in the value of BinckBank’s assets and liabilities cause by sudden shifts in the yield curve, or interest rate shocks. The economic value approach uses duration analyses. The duration of equity indicates the extent to which the economic value of equity changes due to interest rate movements. In 2016, the investments in mortgages with longer fixed interest periods had an upward effect on the duration of equity. As the duration of the assets is more than that of the liabilities, a fall in the interest rate has a negative effect on BinckBank’s equity. BinckBank manages the effect of interest-rate movements on its equity by means of tolerance levels and monthly interest-rate risk reporting to the ALCO. The effect of an interest-rate shock of 200 basis points on equity is shown in the table below (before tax):
SUDDEN PARALLEL YIELD CURVE SHIFT
Effect on capital
(amounts in € 000’s) 31 December 2016 31 December 2015
+200 basis points (845) 34,924
-200 basis points (1,805) (4,045)
LIQUIDITY RISK
FINANCIAL INSTRUMENTS – REMAINING CONTRACTUAL MATURITY OF LIABILITIES The undiscounted liabilities on the basis of the remaining contractual maturity of financial liabilities are as follows:
UNDISCOUNTED LIABILITIES CLASSIFIED BY REMAINING CONTRACTUAL MATURITY AS AT 31 DECEMBER 2016 > 1 month > 1 year > 5 year (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year Total
LIABILITIES
Banks 2,017 - - - - 2,017
Funds entrusted 3,297,413 11,593 - - - 3,309,006
Financial liabilities held for trading - 77 - - 20,351 20,428
Financial liabilities designated at fair value through - 1,018 - - - 1,018 profit and loss
Total 3,299,430 12,688 - - 20,351 3,332,469
UNDISCOUNTED LIABILITIES CLASSIFIED BY REMAINING CONTRACTUAL MATURITY AS AT 31 DECEMBER 2015 > 1 month > 1 year > 5 year (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year Total
LIABILITIES
Banks 23,582 - - - - 23,582
Funds entrusted 2,590,044 - - - - 2,590,044
Financial liabilities held for trading - 142 - - 12,144 12,286 185
Financial liabilities designated at fair value through // - 46 - - - 46 profit and loss
Total 2,613,626 188 - - 12,144 2,625,958 Annual Report 2016 FINANCIAL STATEMENTS
FINANCIAL INSTRUMENTS BY EXPECTED MATURITY Items maturing within one week are treated as being available on demand. Funds entrusted are deemed to be available on demand. In practice, a longer behaviour-typical maturity is allocated to these products. The positions at the end of the year are representative of the positions during the year. In addition, the loan facilities and possibilities for liquidation of the interest-bearing securities are shown. This concerns fixed-interest securities which can be traded in an active market or used as collateral for lending from DNB
MATURITY CALENDAR AS AT 31 DECEMBER 2016 > 1 month > 1 year > 5 year (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year Total
ASSETS
Cash and balances at central banks 854,230 - - - - 854,230
Banks 123,622 - - 4,133 - 127,755
Financial assets held for trading - 63 - - 20,330 20,393
Financial assets designated at fair value through - 9,499 - - - 9,499 profit and loss
Available-for-sale financial assets 14,963 236,787 472,649 - - 724,399
Held-to-maturity financial assets 63,398 442,989 283,635 - - 790,021
Loans and receivables 438,184 11,855 48,418 55,806 404,066 958,329
1,494,397 701,193 804,702 59,939 424,396 3,484,626
Guarantees - 132 - 89 848 1,069
Total 1,494,397 701,325 804,702 60,028 425,244 3,485,695
LIABILITIES
Banks 2,017 - - - - 2,017
Financial liabilities held for trading - 77 - - 20,351 20,428
Financial liabilities designated at fair value through - 1,018 - - - 1,018 profit and loss
Funds entrusted 3,297,236 11,593 - - - 3,308,829
Total 3,299,253 12,688 - - 20,351 3,332,292
Liquidity surplus/deficit on basis of (1,804,856) 688,637 804,702 60,028 404,893 153,403 contractual maturities
Credit, lending facilities and possibilities
186 1,436,059 (679,776) (756,284) - - -
// for liquidation
Liquidity surplus/deficit taking account of credit, lending facilities and (368,797) 8,861 48,418 60,028 404,893 153,403 possibilities for liquidation Annual Report 2016 FINANCIAL STATEMENTS
MATURITY CALENDAR AS AT 31 DECEMBER 2015 > 1 month > 1 year > 5 year (amounts in € 000’s) < 1 month < 1 year < 5 year < 10 year > 10 year Total
ASSETS
Cash and balances at central banks 178,365 - - - - 178,365
Banks 174,167 - - 4,077 - 178,244
Financial assets held for trading - 159 - - 12,138 12,297
Financial assets designated at fair value through profit - 15,405 - - - 15,405 and loss
Available-for-sale financial assets 66,050 609,406 491,665 - - 1,167,121
Held-to-maturity financial assets - 127,350 686,134 - - 813,484
Loans and receivables 502,006 - - - - 502,006
920,588 752,320 1,177,799 4,077 12,138 2,866,922
Guarantees - - 9 729 1,566 2,304
Total 920,588 752,320 1,177,808 4,806 13,704 2,869,226
LIABILITIES
Banks 23,582 - - - - 23,582
Financial liabilities held for trading - 142 - - 12,144 12,286
Financial liabilities designated at fair value through profit - 46 - - - 46 and loss
Funds entrusted 2,589,714 - - - - 2,589,714
Total 2,613,296 188 - - 12,144 2,625,628
Liquidity surplus/deficit on basis of (1,692,708) 752,132 1,177,808 4,806 1,560 243,598 contractual maturities
Credit, lending facilities and possibilities 1,914,555 (736,756) (1,177,799) - - - for liquidation
Liquidity surplus/deficit taking account of credit, lending facilities and 221,847 15,376 9 4,806 1,560 243,598 possibilities for liquidation 187 // Annual Report 2016 FINANCIAL STATEMENTS
ENCUMBERED AND UNENCUMBERED ASSETS
Financial assets pledged as collateral Receipts and payments in relation to the settlement of securities transactions with the various parties involved do not occur at exactly the same time on the settlement date. In order to bridge these intra-day time differences, BinckBank has pledged part of its investment portfolio of fixed-income securities as collateral with its custodian. As there were no overnight exposures during and at the end of 2016 (and 2015), no pledge has been created.
In order to guarantee payments for regarding the financing of the mortgages BinckBank pledged part of its investment portfolio of fixed-income securities as collateral with its counterparties.
Financial assets received as collateral BinckBank provides loans and other facilities on the basis of securities pledged by customers as collateral. BinckBank is not entitled to lend the securities received as collateral and may only proceed to sell them if the borrower remains in default. BinckBank has established that all the risks and rewards of these securities are for the customer and therefore has not recognised these securities in the balance sheet.
BinckBank has implemented a securities lending programme in which the securities of clients are loaned to an intermediary. BinckBank is the counterparty for the intermediary and acts as principal in these transactions. The market risks associated with the loaned securities remains with the client. The intermediary pledges collateral for the loaned securities to cover the credit risk. The collateral consists of an agreed percentage, always of more than 100%, of the market value of the loaned securities. The current collateral is in the form of cash that is recognised in the statement of financial position under the Banks item.
Transferred financial assets As part of its liquidity management, BinckBank has repo facilities with several banks. Securities sold under the repo facilities are transferred to a third party, for which BinckBank receives cash. These transactions are effected subject to conditions based on the ISDA rules with regard to collateral. BinckBank has established that it retains virtually all the risks and rewards of these securities – credit risk and market risk in particular – and therefore continues to recognise them in the balance sheet. Furthermore, it assumes a financial liability with regard to the cash to be repaid.
BinckBank did not use these facilities in either 2016 or 2015, and accordingly no such positions are recognised in the balance sheet.
The following table lists the value of the financial assets pledged as collateral and/or encumbered. 188 // Annual Report 2016 FINANCIAL STATEMENTS
FINANCIAL ASSETS PLEDGED AND/OR ENCUMBERED (a) (b) (c)=(a)-(b) Un- Financial Encumbered encumbered (amounts in € 000’s) assets, gross financial assets financial assets
31 December 2016
ASSETS
Cash and balances at central banks 854,230 - 854,230
Banks 127,755 157 127,598
Financial assets held for trading 20,393 - 20,393
Financial assets designated at fair value through profit and loss 9,499 9,499 -
Available-for-sale financial assets 724,398 404,393 320,005
Held-to-maturity financial assets 790,021 53,476 736,545
Loans and receivables 958,329 29,038 929,291
Total 3,484,625 496,563 2,988,062
31 DECEMBER 2015
ASSETS
Cash and balances at central banks 178,365 - 178,365
Banks 178,244 8,802 169,442
Financial assets held for trading 12,297 - 12,297
Financial assets designated at fair value through profit and loss 15,405 15,405 -
Available-for-sale financial assets 1,167,121 207,138 959,983
Held-to-maturity financial assets 813,484 24,800 788,684
Loans and receivables 502,006 27,162 474,844
Total 2,866,922 283,307 2,583,615 189 // Annual Report 2016 FINANCIAL STATEMENTS
FAIR VALUE
FAIR VALUE OF FINANCIAL INSTRUMENTS BinckBank has classified its financial instruments that are measured in the balance sheet at fair value in a hierarchy of three levels based on the priority of the input to the valuation. The fair value hierarchy assigns the highest priority to quoted prices in an active market for similar assets and liabilities and the lowest priority for measurement techniques not based on observable market data. An active market for assets and liabilities is a market in which transactions for assets and liabilities occur with sufficient frequency and volume to provide reliable price information on an ongoing basis.
The fair value hierarchy consists of three levels: Level 1: fair value is determined on the basis of quoted prices in an active market; Level 2: measurement techniques using observable market parameters; Level 3: measurement techniques using input not based on an observable market and which has a more than immaterial effect on the fair value of the instrument.
Observable input relates to market data obtained from independent sources. Input not based on observable market data is based on subjective assumptions by BinckBank with regard to factors used by market participants to determine the price of an asset or liability developed on the basis of best information available in the circumstances. This input may include factors such as volatility, correlation, spreads to discount rates, default rates, recovery rates, prepayment rates and certain credit spreads. Valuation techniques that depend to a larger extent on non-observable inputs involve a greater contribution from management to determine the fair value.
Where valuation techniques or models are used to determine fair value, they are regularly reviewed and validated by qualified staff who are independent of those who have developed the said techniques or models. Models are calibrated in order to ensure that the results reflect actual data and comparable market prices. If available, models use observable data in order to minimise the use of non-observable inputs. BinckBank makes exclusive use of third-party valuation models and does not make any estimates of its own with regard to the inputs used. All the valuation methods employed are internally evaluated and approved. The majority of the data used in these valuation methods is validated on a daily basis. Valuation methods are inherently subjective. Measuring the fair value of certain financial assets and liabilities is accordingly largely dependent on estimates. The use of other valuation methods and assumptions might produce estimates of fair values that are materially different.
The fair value of financial instruments measured at fair value is determined as follows:
(amounts in € 000’s) Level 1 Level 2 Level 3 Total
31 December 2016
Financial assets held for trading 20,330 63 - 20,393
Financial assets designated at fair value through profit and loss 9,499 - - 9,499
Available-for-sale financial assets - 724,398 - 724,398
Total 29,829 724,461 - 754,290
Financial liabilities held for trading 20,351 77 - 20,428
Financial liabilities designated at fair value through profit and loss 1,018 - - 1,018
190 Total 21,369 77 - 21,446 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) Level 1 Level 2 Level 3 Total
31 December 2015
Financial assets held for trading 12,138 159 - 12,297
Financial assets designated at fair value through profit and loss 15,405 - - 15,405
Available-for-sale financial assets - 1,167,121 - 1,167,121
Total 27,543 1,167,280 - 1,194,823
Financial liabilities held for trading 12,144 142 - 12,286
Financial liabilities designated at fair value through profit and loss 46 - - 46
Total 12,190 142 - 12,332
The investment portfolio concerns bonds that are actively traded between professional market participants without the intermediation of a regulated market. Active price quotes are available from brokers on request. Transactions in these bonds are not centrally registered or published by a stock exchange, and BinckBank is therefore of the opinion that there is no demonstrably active market and has classified these instruments as level 2.
No financial assets have been reclassified from one level to another level in 2016 or 2015.
STATEMENT OF FINANCIAL POSITION ITEMS WITH A FAIR VALUE THAT DIFFERS FROM THE CARRYING VALUE The following statement of financial position items have a fair value that differs from the carrying value:
(amounts in € 000’s) Carrying value Fair value
31 December 2016
Held-to-maturity financial assets 790,021 790,816
Loans and receivables 958,329 960,501
31 December 2015
Held-to-maturity financial assets 813,484 816,111
Loans and receivables 502,006 502,006 191 // Annual Report 2016 FINANCIAL STATEMENTS
COMPANY BALANCE SHEET (BEFORE APPROPRIATION OF PROFIT)
(amounts in € 000’s) Note 31 December 2016 31 December 2015
ASSETS
Cash and balances at central banks c 854,230 178,365
Banks d 119,063 170,420
Loans and receivables e 958,329 502,006
Bonds and other fixed-income securities f 1,514,419 1,980,605
Equities and other non-fixed-income securities g 9,562 15,564
Investment in associates & group companies h 6,463 6,759
Intangible assets i 168,086 190,300
Property, plant and equipment j 34,805 34,363
Current tax k 12,112 7,635
Other assets m 82,345 38,335
Prepayments and accrued income n 37,687 48,727
Derivative positions held on behalf of customers 18 - 260,505
Total assets 3,797,101 3,433,584
LIABILITIES
Banks d 2,017 23,582
Funds entrusted o 3,308,832 2,589,714
Current tax k 10 19
Deferred tax l 31,982 27,874
Other liabilities p 40,444 77,638
Accruals and deferred income q 9,356 10,184
Derivative positions held on behalf of customers 18 - 260,505
Provisions r 8,891 7,884
Total liabilities 3,401,532 2,997,400
Issued share capital 7,100 7,100
Share premium 361,379 361,379
Treasury shares (29,468) (4,979) 192 // Revaluation reserve 1,021 1,526
Other reserves 53,660 51,371
Unappropriated profit 1,877 19,787
Equity s 395,569 436,184
Annual Report 2016 Total liabilities 3,797,101 3,433,584 FINANCIAL STATEMENTS
COMPANY INCOME STATEMENT
(amounts in € 000’s) Note 2016 2015
INCOME
Interest income 30,119 29,558
Interest expense (3,798) (3,856)
Net interest income t 26,321 25,702
Fee and commission income 126,076 153,303
Fee and commission expense (20,175) (24,167)
Net fee and commission income u 105,901 129,136
Other operating income v 2,431 3,204
Result from financial instruments w 2,530 2,031
Impairment losses (reversals) of financial instruments x (116) 15
Total income from operating activities 137,067 160,088
EXPENSES
Employee expenses y 44,855 44,500
Depreciation and amortisation z 25,905 26,900
Other operating expenses aa 57,664 52,989
Total operating expenses 128,424 124,389
Result from operating activities 8,643 35,699
Results of associates & group companies (1,891) 2,944
Result before tax 6,752 38,643
Income tax expense ab (2,218) (9,017)
Net result for the year 4,534 29,626 193 // Annual Report 2016 FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
Issued Share Reva Unappro- share premium Treasury luation Other priated Total (amounts in € 000’s) Note capital reserve share reserve reserves result equity
1 January 2016 7,100 361,379 (4,979) 1,526 51,371 19,787 436,184
Unrealised gain on available- s - - - (571) - - (571) for-sale assets (after tax)
Realisation of revaluations s - - - 66 - - 66 through profit and loss
Result recognised directly - - - (505) - - (505) in equity
Result for the year - - - - - 4,534 4,534
Total income and expenses - - - (505) - 4,534 4,029
Payment of final dividend s - - - - - (17,199) (17,199) 2015 Payment of interim s - - - - (2,657) (2,657) dividend 2016
Grant of rights to shares s - - - - 162 - 162
Issue of shares to executive s - - 461 - (461) - - board and employees
Share buy-back s - - (24,950) - - - (24,950)
Transfer of retained - - - - 2,588 (2,588) - earnings to other reserves
31 December 2016 7,100 361,379 (29,468) 1,021 53,660 1,877 395,569 194 // Annual Report 2016 FINANCIAL STATEMENTS
Issued Share Reva Unappro- share premium Treasury luation Other priated Total (amounts in € 000’s) Note capital reserve share reserve reserves result equity
1 January 2015 7,100 361,379 (5,570) 3,777 48,807 24,534 440,027
Unrealised gain on available- s - - - (2,251) - - (2,251) for-sale assets (after tax)
Realisation of revaluations s ------through profit and loss
Result recognised directly - - - (2,251) - - (2,251) in equity
Result for the year - - - - - 29,626 29,626
Total income and expenses - - - (2,251) - 29,626 27,375
Payment of final dividend s - - - - - (21,787) (21,787) 2014 Payment of interim s - - - - - (9,839) (9,839) dividend 2015
Grant of rights to shares s - - - - 408 - 408
Issue of shares to executive s - - 591 - (591) - - board and employees
Transfer of retained - - - - 2,747 (2,747) - earnings to other reserves
31 December 2015 7,100 361,379 (4,979) 1,526 51,371 19,787 436,184 195 // Annual Report 2016 FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
a General
COMPANY INFORMATION BinckBank N.V., established and registered in the Netherlands, is a public limited liability company incorporated under Dutch law, whose shares are publicly traded. BinckBank N.V. is officially domiciled at Barbara Strozzilaan 310, 1083 HN Amsterdam. BinckBank N.V. provides online brokerage services in financial instruments for private and professional investors. In addition to its brokerage services, BinckBank N.V. offers asset management and savings services. Hereinafter, ‘BinckBank’ refers to BinckBank N.V. and to its various subsidiaries.
The company financial statements for BinckBank for the period ending on 31 December 2016 have been prepared by the executive board and approved for publication pursuant to the resolution of the executive board and the supervisory board dated 13 March 2017.
Amsterdam,
Executive board: Supervisory board: V.J.J. Germyns (bestuursvoorzitter) J.W.T. van der Steen (voorzitter) E.J.M. Kooistra (CFRO) Ms C. van der Weerdt-Norder S.J. Clausing (COO) L. Deuzeman Ms J.M.A. Kemna A. Soederhuizen
b Accounting policies
GENERAL The company financial statements of BinckBank N.V. have been prepared in accordance with the provisions of Part 9 of Book 2 of the Dutch Civil Code. The option described in Section 362 Book 2 of the Dutch Civil Code of applying the same principles in the company financial statements as in the consolidated financial statements has been used. The principles in the company financial statements are therefore the same as those stated for the consolidated financial statements, with the exception of those listed below.
ASSOCIATES The investments in group companies are recognised and measured using the equity method. The reporting dates of these companies are the same and the accounting principles applied to their financial reporting are in accordance with those applied by BinckBank for similar transactions and events in similar circumstances.
196 // Annual Report 2016 FINANCIAL STATEMENTS
NOTES TO THE COMPANY BALANCE SHEET
(amounts in € 000’s) 31 December 2016 31 December 2015
C. CASH AND BALANCES AT CENTRAL BANKS 854,230 178,365
This item includes all cash in legal tender, including bank notes and coins in foreign currency, and any credit balances available on demand from the central banks in countries where BinckBank has offices and the European Central Bank.
D. BANKS
Bank balances 119,063 170,420
This item includes all cash and cash equivalents relating to the business activities held in accounts with credit institutions supervised by bank regulators.
This item comprises:
Balances available on demand 85,849 139,170
Call money 44 11
Mandatory reserve deposits 29,038 27,162
Receivable from DNB in relation to the Deposit Guarantee 4,132 4,077 Scheme for DSB Bank
119,063 170,420
Credit balances available on demand includes an amount of € 2.0 million received in the form of cash collateral relating to securities lending transactions. The call money receivables have original maturities of less than three months. Interest is received on these balances at a variable rate based on market rates. For the receivable from DNB in relation to the Deposit Guarantee Scheme for DSB Bank pertains to the cash-converted receivable of the future expected cash flows. As at 31 December 2016, no loss against this claim is to be expected.
Due to banks 2,017 23,582
BinckBank has sweeping arrangements with various banks whereby the debit and credit balances in a large number of bank accounts are regulated with a fixed treasury contra-account. This is only visible on the statement for the next business day; BinckBank accordingly may have a liability to a single bank account for a very short period. This item also includes cash collateral received for securities lending transactions. 197 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
E. LOANS AND RECEIVABLES 958,329 502,006
This item comprises receivables from clients, including overnight loans and overdrafts that are collateralised by securities, bank guarantees, and receivables secured by mortgages on immovable property.
The analysis is as follows:
Receivables collateralised by securities 433,181 498,722
Receivables collateralised by bank guarantees 4,563 3,242
Receivables collateralised by residential property 520,676 -
Other receivables 484 503
Loans and receivables, gross 958,904 502,467
Less: impairment provision (575) (461)
958,329 502,006
The interest rate is based on EURIBOR or EONIA. Other receivables refers to amounts receivable after execution of collateral.
F. BONDS AND OTHER FIXED-INCOME SECURITIES 1,514,419 1,980,605
This comprises the investment portfolio consisting of:
Available-for-sale financial assets 724,398 1,167,121
Held-to-maturity financial assets 790,021 813,484
1,514,419 1,980,605
Available-for-sale financial assets
This item comprises:
Government bonds / government-guaranteed bonds 57,002 317,184
Other bonds 667,396 849,937
724,398 1,167,121
This item comprises a portfolio of interest-bearing securities with less than 3.5 years to maturity. As at 31 December 2016, the effective yield on this portfolio was 0.41% (2015: 0.54%).
Held-to-maturity financial assets
This item comprises:
Government bonds / government-guaranteed bonds 515,463 464,556 198 // Other bonds 274,558 348,928
790,021 813,484
BinckBank holds a portfolio held-to-maturity financial assets. The purpose of this portfolio is mainly to collect cash flows from interest and redemptions. This item comprises a portfolio of interest-bearing securities with less than three years to maturity. As at 31 December 2016, the effective yield on this portfolio was 0.45% (2015: 0.33%). Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
G. EQUITIES AND OTHER NON-FIXED INCOME SECURITIES 9,562 15,564
The trading portfolio comprises:
SRD derivatives liabilities 63 159
Equity positions in relation to SRD liabilities 9,499 15,405
9,562 15,564
BinckBank offers SRD (Service de Règlement Différé) contracts in France. More information about this financial instrument is available in note 7 of the consolidated financial statements.
H. INVESTMENT IN ASSOCIATES & GROUP COMPANIES 6,463 6,759
This item comprises:
Group companies 6,463 5,532
Other associates - 1,227
6,463 6,759
Movements during the year were as follows:
Balance as at 1 January 6,759 3,151
Capital increases and acquisitions 1,594 664
Impairment (1,744) -
Result in associates (146) 2,944
Balance as at 31 December 6,463 6,759
The investments and acquisitions and the impairment items relate to investments in TOM Holding N.V.
OVERVIEW OF GROUP COMPANIES The group companies are listed in the folowing table. Interest Interest Place Country year-end 2016 year-end 2015
Bewaarbedrijf BinckBank B.V. Amsterdam Netherlands 100% 100%
Able Holding B.V. Reeuwijk Netherlands 100% 100%
Think ETF Asset Management B.V. Amsterdam Netherlands 60% 60%
Information about the aforementioned capital interests is enclosed in note 11 to the consolidated statement of financial position, Associates. 199 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
I. INTANGIBLE ASSETS 168,086 190,300
The movements in 2016 were as follows:
Brand Customer Customer name deposits base Software Goodwill Total
Balance as at 1 January 2016 245 16,819 26,674 1,680 144,882 190,300
Investments - - - 365 - 365
Disposals – cost - - - (68) - (68)
Disposals – cumulative amortisation - - - 68 - 68
Amortisation (70) (8,410) (13,243) (856) - (22,579)
Balance as at 31 December 2016 175 8,409 13,431 1,189 144,882 168,086
Cumulative cost 31,755 84,095 131,708 10,294 144,882 402,734
Cumulative amortisation and impairment (31,580) (75,686) (118,277) (9,105) - (234,648)
Balance as at 31 December 2016 175 8,409 13,431 1,189 144,882 168,086
Amortisation period (years) 5 10 5 - 10 5
The movements in 2015 were as follows:
Brand Customer Customer name deposits base Software Goodwill Total
Balance as at 1 January 2015 315 25,228 39,912 2,898 144,882 213,235
Investments - - - 25 - 25
Disposals – cost ------
Disposals – cumulative amortisation ------
Amortisation (70) (8,409) (13,238) (1,243) - (22,960)
Balance as at 31 December 2015 245 16,819 26,674 1,680 144,882 190,300
Cumulative cost 31,755 84,095 131,708 9,997 144,882 402,437
Cumulative amortisation and impairment (31,510) (67,276) (105,034) (8,317) - (212,137)
Balance as at 31 December 2015 245 16,819 26,674 1,680 144,882 190,300 200 //
Amortisation period (years) 5 10 5 - 10 5 Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
J. PROPERTY, PLANT AND EQUIPMENT 34,805 34,363
The movements in 2016 were as follows:
Fixtures, fittings and Computer Real estate equipment hardware Other Total
Balance as at 1 January 2016 26,439 4,029 3,847 48 34,363
Investments - 353 3,415 - 3,768
Disposals – cost - (14) (10,455) - (10,469)
Disposals – cumulative depreciation - 14 10,455 - 10,469
Depreciation (618) (992) (1,709) (7) (3,326)
Balance as at 31 December 2016 25,821 3,390 5,553 41 34,805
Cumulative cost 29,827 9,942 17,159 60 56,988
Cumulative depreciation and impairment (4,006) (6,552) (11,606) (19) (22,183)
Balance as at 31 December 2016 25,821 3,390 5,553 41 34,805
Amortisation period (years) 50 5 - 10 5 5
The movements in 2015 were as follows: Fixtures, fittings and Computer Real estate equipment hardware Other Total
Balance as at 1 January 2015 27,058 5,203 5,572 3 37,836
Investments - 112 487 48 647
Disposals – cost - (226) - - (226)
Disposals – cumulative depreciation - 46 - - 46
Depreciation (619) (1,106) (2,212) (3) (3,940)
Balance as at 31 December 2015 26,439 4,029 3,847 48 34,363
Cumulative cost 29,827 9,603 24,199 60 63,689
Cumulative depreciation and impairment (3,388) (5,574) (20,352) (12) (29,326)
Balance as at 31 December 2015 26,439 4,029 3,847 48 34,363 201 //
Amortisation period (years) 50 5 - 10 5 5
The investment in real estate includes prepayments in relation to a leasehold (operating lease) that expires on 15 April 2056. In 2016, an amount of € 256,000 in relation to amortisation of the leasehold is recognised under
depreciation and amortisation (2015: € 256,000). Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
K. CURRENT TAX 12,102 7,616
Current tax assets 12,112 7,635
Current tax liabilities (10) (19)
12,102 7,616
The balance at year-end relates to the last two financial years.
L. DEFERRED TAX 31,982 27,874
Origin of deferred tax liabilities:
Available-for-sale financial assets 280 418
Goodwill and other intangible assets 31,492 27,177
Depreciation period differences for non-current assets 625 879
Temporary differences as a result of intercompany transactions (465) (697)
Other liabilities 50 97
31,982 27,874
M. OTHER ASSETS 82,345 38,335
This item comprises:
Trade receivables 855 194
Receivables relating to securities sold, but not yet delivered 33,716 16,721
Derivative financial instruments 20,330 12,138
Cash flows to be settled – mortgages receivables 21,188 -
Other receivables 6,256 9,282
82,345 38,335
All receivables under other assets have a term of less than one year. The item receivables arising from securities sold but not yet delivered can fluctuate on a daily basis in line with movements in the market and the total size of the number of transactions. The derivative financial instruments contain the market value of the turbos purchased by BinckBank as hedge of the market risk on the issued turbos. The market value of these derivative financial instruments contains a haircut for counterparty credit risk. 202 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
N. PREPAYMENTS AND ACCRUED INCOME 37,687 48,727
This item comprises:
Interest receivable 20,533 27,268
Commission receivable 7,420 11,007
Other prepayments and accrued income 9,734 10,452
37,687 48,727
The commission receivable comprises the regular commission as well as the receivable relating to performance-related fees. Other prepayments and accrued income concern mainly prepaid IT maintenance contracts.
O. FUNDS ENTRUSTED 3,308,832 2,589,714
This item comprises:
Demand deposits in customer savings accounts 227,897 221,225
Demand deposits in customer current accounts 3,069,342 2,368,489
Granted credit facilities (building deposits) 11,593 -
3,308,832 2,589,714
P. OTHER LIABILITIES 40,444 77,638
This item comprises:
SRD derivatives liabilities 77 142
Derivative financial instruments 20,351 12,144
Equity positions in relation to SRD liabilities 1,018 46
Liabilities in respect of securities transactions not yet settled 10,693 51,774
Tax and social security contributions 2,714 4,644
Amounts owed to group companies 124 124
Trade payables 2,214 3,204
Other liabilities 3,253 5,560
40,444 77,638
BinckBank offers SRD (Service de Règlement Différé) contracts in France. More information about this financial 203
instrument is available in note 7 of the consolidated financial statements. // The derivative financial instruments contain the market value of the turbos issued by BinckBank. The market risk of these turbos is hedged by purchasing a turbo with identical characteristics. The market value of these derivative financial instruments contains a haircut for the own credit risk exposure. The item liabilities in respect of securities transactions not yet settled can fluctuate on a daily basis in line with movements in the market and the total number of transactions. Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
Q. ACCRUALS AND DEFERRED INCOME 9,356 10,184
This item comprises:
Accrued interest 338 350
Employee expenses 4,964 6,319
Stock exchange and clearing costs payable 741 518
Other accruals and deferred income 3,313 2,997
9,356 10,184
The employee expenses item includes accruals for holiday allowance, unused holiday leave and performance-related remuneration.
R. PROVISIONS 8,891 7,884
The movement in the legal provisions was as follows:
Balance as at 1 January 7,884 7,885
Arising during the year 3,375 8,011
Utilised (1,317) (819)
Unused amounts reversed (1,051) (7,193)
Balance as at 31 December 8,891 7,884
S. EQUITY 395,569 436,184
Issued share capital 7,100 7,100
The number of shares in issue is 71,000,000, each with a nominal value of € 0.10. The share capital is fully paid up. Stichting Prioriteit Binck holds 50 priority shares, each with a nominal value of € 0.10.
Share premium reserve 361,379 361,379
The share premium is exempt from tax, and freely distributable.
Treasury shares (29,468) (4,979)
Number Amount Number Amount
Balance as at 1 January 719,277 (4,979) 804,674 (5,570)
Share buy-back 4,632,720 (24,950) - -
Issued to executive board and employees (70,472) 461 (85,397) 591
Balance as at 31 December 5,281,525 (29,468) 719,277 (4,979)
As at 1 January 2016, 719,277 shares were held in treasury, acquired at an average purchase price of € 6.92. In 2016, 204
// 4,632,720 shares were purchased at an average purchase price of € 5.39. In 2016, 70,472 shares with an average purchase price of € 6.54 were granted to the executive board and employees in connection with the implementation of the remuneration scheme.
At the end of 2016, the carrying amounts of the treasury shares was measured at the average purchase price of € 5.58. The movements in the amounts of treasury shares purchased and sold are recognised under equity. At the end of 2016 the quoted share price was € 5.50 (2015: € 7.95). Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 31 December 2016 31 December 2015
Revaluation reserve 1,021 1,526
Balance as at 1 January 1,526 3,777
Movement in fair value (708) (2,869)
Realised revaluation through the income statement 66 -
Tax on unrealised result on available-for-sale financial assets 137 618
Balance as at 31 December 1,021 1,526
The reserve comprises the fair value changes, after tax, on available-for-sale financial assets. In the determination of the distributable profit, any negative revaluation reserve is deducted from the reserves available for distribution.
Other reserves 53,660 51,371
Balance as at 1 January 51,371 48,807
Grant of rights to shares 162 408
Shares sold to executive board and employees (461) (591)
Appropriation of result for previous year 2,588 2,747
Balance as at 31 December 53,660 51,371
Unappropriated result 1,877 19,787
Balance as at 1 January 19,787 24,534
Payment of final dividend (17,199) (21,787)
Addition to/(reduction from) other reserves (2,588) (2,747)
Result for the year 4,534 29,626
Payment of interim dividend current year (2,657) (9,839)
Balance as at 31 December 1,877 19,787 205 // Annual Report 2016 FINANCIAL STATEMENTS
NOTES TO THE COMPANY INCOME STATEMENT
(amounts in € 000’s) 2016 2015
T. NET INTEREST INCOME 26,321 25,702
This includes all income and expense items relating to the lending and borrowing of money, providing that they are of a similar nature to interest, as well as interest income on credit balances or interest expense on overdrafts.
This item comprises:
Interest income
Balances at central banks 3 14
Available-for-sale financial assets 4,534 7,275
Held-to-maturity financial assets 3,260 2,622
Loans and receivables 22,201 19,486
Other interest income 121 161
30,119 29,558
The interest income recognised on non-performing loans is € 19 thousand (2015: € 20 thousand).
Interest expense
Interest on funds entrusted measured at amortised cost 609 1,268
Other interest expense 3,189 2,588
3,798 3,856
The other interest expense item includes interest charges with credit institutions. As a result of the continuing low, and even negative, interest rates on balances with credit institutions and the ECB BinckBank is, on balance, paying interest on these assets. Interest paid on funds entrusted is recognised under interest expenses. 206 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 2016 2015
U. NET FEE AND COMMISSION INCOME 105,901 129,136
Net fee and commission income comprises fees for services as performed for and by third parties in respect of securities transactions and related services.
This item comprises:
Fee and commission income
Commission income 96,263 118,760
Asset management fees 12,365 18,378
Other commission income 17,448 16,165
126,076 153,303
The item asset management fees includes a performance fee of € 0.4 million over 2016 (2015: € 3.6 million). Other fee and commission income includes all-in fees, service fees, custody fees, BPO fees, and other securities services. This also includes the distribution fees in the foreign branches where distribution fees are not prohibited.
Fee and commission expense
Costs of securities transactions 17,105 20,189
Asset management fees 1,382 1,633
Other commission expenses 1,688 2,345
20,175 24,167
Other commission expense includes fees for the deposit and withdrawal of securities, transfer fees, other management activities, and custody fees.
V. OTHER OPERATING INCOME 2,431 3,204
This item comprises:
IT services – revenues 2,254 2,208
IT services – direct expenses (276) (235)
IT services – net result 1,978 1,973
Other revenues 453 1,231
2,431 3,204
This includes fees for subscriptions, courses, currency results, and other income and expense items that cannot be accounted for under other items. 207 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 2016 2015
W. RESULT FROM FINANCIAL INSTRUMENTS 2,530 2,031
This item comprises:
Result from SRD (Service de Règlement Différé) - -
Result from turbos 2,541 2,056
Result from other financial instruments (11) (25)
2,530 2,031
Result from SRD (Service de Règlement Différé)
Result on SRD derivative positions (1,837) 1,424
Result on SRD equity positions 1,837 (1,424)
- -
Movements in value are recognised directly in the income statement under result from financial instruments. BinckBank purchase or sale of shares for the SRD receivables and payables creates an economic hedge of the price risk. Movements in value of the corresponding shares are also recognised under Result from financial instruments.
Result from turbos
Result on turbos 2,562 2,062
Fair value result turbos (CVA/DVA) (21) (6)
2,541 2,056 BinckBank has entered into a cooperation agreement with UBS for the turbos it has issued, whereby the latter bears the market risk. The revenues depend on the financing level of the turbos issued. The fair value result turbos comprise the haircut applied to the valuation of the turbo products relating to credit risk of the various contract parties in the market value of the Binck turbos issued and the corresponding hedge turbos purchased.
Result from other financial instruments
Available-for-sale financial assets (66) -
Other results from financial instruments 55 (25)
(11) (25)
The other results from financial instruments contains mainly the movement in the revaluation of the receivable on DNB in respect of the Deposit Guarantee Scheme - DSB Bank.
X. IMPAIRMENTS FINANCIAL INSTRUMENTS, NET (116) 15
208 This item comprises the movement in the provision relating to collateralised lending. // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 2016 2015
Y. EMPLOYEE EXPENSES 44,855 44,500
This item comprises:
Salaries 31,922 30,330
Social security contributions 5,307 5,151
Pension costs 2,071 2,018
Profit sharing and performance-related pay 1,015 2,884
Other employee expenses 4,540 4,117
44,855 44,500
(in numbers) 2016 2015
Number of employees (including members of the board)
Average during the financial year (FTE) 607 598 of which employed in The Netherlands 507 504
End of the financial year (headcount) 617 608 of which employed in The Netherlands 511 510
(amounts in € 000’s) 2016 2015
The following expenses are included in employee expenses in relation to associated parties (executive board and supervisory board)
Salaries 1,705 814
Social security contributions 30 20
Pension costs 40 163
Performance-related pay 141 538
Remuneration of supervisory board 210 294
2,126 1,829
Details of the remuneration paid to the individual members of the executive board and supervisory board of BinckBank N.V. are disclosed in the remuneration section of the annual report on page 102. At year-end 2016, as was the case at year-end 2015, members of the executive board had no loans collateralised by securities on the general conditions applying to employees. 209 // Annual Report 2016 FINANCIAL STATEMENTS
(amounts in € 000’s) 2016 2015
Z. DEPRECIATION AND AMORTISATION 25,905 26,900
This item comprises amortisation and depreciation on:
Intangible assets 22,579 22,960
Property, plant and equipment 3,326 3,940
25,905 26,900
AA. OTHER OPERATING EXPENSES 57,664 52,989
This item comprises:
Marketing costs 12,669 10,800
ICT costs 12,055 16,470
Audit and professional services 15,321 11,756
Housing costs 1,987 1,862
Communication and information costs 8,958 7,172
Miscellaneous overheads 6,674 4,929
57,664 52,989
The item Miscellaneous overheads comprises costs including office costs, banking costs, insurances and movements in the provisions.
AB. INCOME TAX EXPENSE
Tax (2,218) (9,017)
The balance at the end of the year relates to the last two financial years.
The reconciliation of the effective tax rate with the applicable tax rate is as follows: 2016 2016 2015 2015 Amount Percentage Amount Percentage
Standard tax rate 1,688 25,0% 9,661 24,7%
Effect of different tax rates (in other countries) 45 0,7% 93 0,2%
Effect of substantial-holding privileges 473 7,0% (736) -1,9%
Effect of tax facilities (68) -1,0% (798) -2,0%
Other effects 80 1,1% 797 2,1% 210 // Total tax expense 2,218 32,8% 9,017 23,1% Annual Report 2016 FINANCIAL STATEMENTS
AC. AUDIT FEES The following fees, including VAT, were charged to the company, its subsidiaries and other consolidated entities in relation to the procedures performed by the external audit firm and its affiliates as referred to in Section 2:382a of the Dutch Civil Code:
Deloitte Deloitte (amounts in € 000’s) Accountants B.V. affiliates Total
2016
Audit of the financial statements, including the audit of the company financial statements and other statutory audits of 391 44 435 subsidiaries and consolidated companies
Other audit assignments 107 18 125
Tax related non-audit services - - -
Other non-audit services - - -
498 62 560
2015
Audit of the financial statements, including the audit of the company financial statements and other statutory audits of 393 42 435 subsidiaries and consolidated companies
Other audit assignments 79 18 97
Tax related non-audit services - - -
Other non-audit services - - -
472 60 532
AD. COMMITMENTS AND CONTINGENT LIABILITIES
(amounts in € 000’s) 31 December 2016 31 December 2015
Contingent liabilities
Liabilities in respect of contracts of suretyship and guarantees 946 1,738
Liabilities in respect of irrevocable facilities
Liabilities in respect of commitments that could result in lending 194,823 817
SURETYSHIPS AND GUARANTEES To meet the needs of its customers, BinckBank offers loan related products, such as contracts of suretyship and guarantees. The underlying value of these products is not recognised as assets or liabilities in the statement of financial position. The above figure represents the maximum potential credit risk for BinckBank related to these products on the assumption that all its counterparties should default on their contractual obligations and all existing collateral should prove worthless. 211
Guarantees include both credit-substituting and non-credit-substituting guarantees. In most cases, guarantees can be // expected to expire without a call being made on them and they will not give rise to any future cash flows. Annual Report 2016 FINANCIAL STATEMENTS
ALEX BOTTOM-LINE With the acquisition of Alex Beleggersbank at the end of 2007, BinckBank also acquired the Alex Bottom-Line product, which is an agreement with the VEB (Association of Stockholders). If BinckBank terminates this agreement then it will be liable to pay an amount equal to the custody fee and dividend commission paid by each customer of Alex Bottom-Line on entry into the agreement plus the amount of any custody fee and dividend commission additionally paid by each customer on exceeding set limits.
LEASE COMMITMENTS The company has leases and service contracts for office premises in the Netherlands, Belgium, France, Spain, and Italy. It has also entered into operating lease contracts for the vehicle fleet for periods of less than five years.
The commitments by remaining maturity are as follows:
(amounts in € 000’s) 31 December 2016 31 December 2015
Within one year 3,697 2,288
One to five years 5,145 2,150
Longer than five years 959 443
LEGAL PROCEEDINGS BinckBank is involved in various legal proceedings. Although it is not possible to predict the outcome of current or impending lawsuits, the executive board believes – on the basis of information currently available and after taking legal counsel – that the outcomes are unlikely to have material adverse effects on BinckBank’s financial position or results, with the exception of the cases reported under the note on provisions.
ALEX VERMOGENSBEHEER BinckBank has reached agreement with the VEB (Association of Stockholders) and Vermogensmonitor consumer guidance and advice organisation on the settlement of complaints from members and clients about the information provided by Alex Vermogensbeheer, including warnings for market condition risks in 2014, during the period from 8 September 2012 to 26 August 2014. The VEB and Vermogensmonitor will be placed in a position to offer compensation to clients who lodged complaints and meet specific criteria. This has enabled BinckBank to settle as many complaints as possible. However, there is still a risk that other clients will lodge new complaints about Alex Vermogensbeheer with BinckBank, as a result of which the risk of legal proceedings remains.
EURONEXT LEGAL PROCEEDINGS On 22 July 2015, the Court of The Hague issued its judgement in the case brought by Euronext N.V. and Euronext Amsterdam N.V. against TOM Holding N.V. and its subsidiaries and BinckBank N.V. when the Court found in favour of Euronext in relation to a number of claims, including the infringement of Euronext’s trademark rights. BinckBank has been ordered to compensate Euronext for damages to be determined in follow-up proceedings. BinckBank has decided to appeal against this Court ruling. The executive board is of the opinion – based on information currently available and after taking legal counsel – that the amount of the damages cannot be reliably established at this time.
SERVICES FROM NATIONAL AND INTERNATIONAL SUPPLIERS OF DATA AND OTHER SERVICES BinckBank procures services from national and international suppliers of data and other services, such as market data, on the basis of complex contracts that present inherent risks of differences in legal interpretation. The executive board is of the opinion that the outcome of discussions on any such differences in interpretation can be uncertain and that it is not clear whether these could have material adverse effects on the financial position or results of BinckBank. 212 // Annual Report 2016 FINANCIAL STATEMENTS
DEPOSIT GUARANTEE SCHEME The deposit guarantee scheme (DGS) is intended to guarantee certain deposits by account holders if a bank cannot meet its obligations. The scheme provides security for deposits of up to € 100,000 and applies per account holder per bank, regardless of the number of accounts held. In case of a joint account operated by two persons, the maximum applies per person. More or less all savings accounts, current accounts, and term deposits are covered. Equities or bonds are not covered. If a credit institution finds itself in difficulties and does not have sufficient funds to pay all or part of the guaranteed amounts to its account holders, De Nederlandsche Bank will make up the difference to the aforementioned maxima. As from 26 November 2015, the funding of the deposit guarantee scheme was changed from an ex-post basis to an ex-ante basis. As from the first quarter of 2016, the banks make quarterly contributions to a fund for the deposit guarantee scheme. If the resources of the funds are not sufficient for compensation in the build-up phase then the remainder will be recovered from the banks on a pro rata basis.
INVESTOR COMPENSATION SCHEME The investor compensation scheme protects private investors and ‘small’ businesses who have entrusted money or financial instruments (such as securities or options) to a licensed bank or investment institution on the basis of an investment service. While banks and investment firms in the Netherlands are subject to regulation by DNB and the AFM, the possibility that a bank or investment firm will encounter payment problems cannot be ruled out. In this case, the investor compensation system guarantees a minimum level of protection in the event that the bank or investment firm cannot meet its obligations arising from the investment services it provides to its clients. Briefly, claims (in cash or securities) relating to the performance of certain services and investment services are eligible for payment. This concerns investor’s cash or securities held in connection with these investment or other services, which cannot be repaid to the investor in the event that a bank or investment firm is unable to meet its obligations to its investment clients. Investment losses on financial instruments are not covered by the scheme. The investor compensation scheme provides a guarantee of up to € 20,000 per person per institution.
AE. POST BALANCE SHEET EVENTS On 10 February 2017, the shareholders in TOM Holding N.V. decided to issue an unconditional joint guarantee to TOM Holding N.V. to cover a potential deficit relating to the prevailing solvency requirements. BinckBank’s share of the issued guarantee amounts to a maximum of € 1.1 million and has been issued for the period ending on 31 December 2017 or as soon as the strategic repositioning has been completed.
No other events took place after the balance sheet date.
AF. PROPOSAL FOR PROFIT APPROPRIATION On the proposal of the foundation, no transfer will be made to the reserves. The entire profit for the period is at the disposal of the shareholders. It is proposed to distribute this in the form of a final dividend of € 0.19 per ordinary share. For this purpose a maximum amount of € 11,613,000 will be withdrawn from the other reserves. The profit appropriation and the proposed dividend distribution will then be as follows:
(amounts in € 000’s)
Profit in 2016 4,534
Less: paid interim dividend (2,657)
At shareholders’ disposal 1,877
Add: deduction from the other reserves 11,613
Proposed dividend 13,490 213
This proposal is not reflected in the balance sheet. // Annual Report 2016 FINANCIAL STATEMENTS
OTHER INFORMATION
INDEPENDENT AUDITOR’S REPORT
To the shareholders and supervisory board of BinckBank N.V.:
REPORT ON THE FINANCIAL STATEMENTS 2016 INCLUDED IN THE ANNUAL ACCOUNTS
OUR OPINION We have audited the financial statements 2016 of BinckBank N.V., based in Amsterdam. The financial statements include the consolidated financial statements and the company financial statements.
In our opinion: • The consolidated financial statements included in these annual accounts give a true and fair view of the financial position of BinckBank N.V. as at 31 December 2016, and of its result and its cash flows for 2016 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
• The company financial statements included in these annual accounts give a true and fair view of the financial position of BinckBank N.V. as at 31 December 2016, and of its result for 2016 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The consolidated financial statements comprise: 1. The consolidated statement of financial position as at 31 December 2016. 2. The following statements for 2016: the consolidated income statement, the consolidated statements of comprehensive income, consolidated statement of cash flows and consolidated changes in equity. 3. The notes comprising a summary of the significant accounting policies and other explanatory information.
The company financial statements comprise: 1. The company balance sheet as at 31 December 2016. 2. The company income statement and the company changes in equity for 2016. 3. The notes comprising a summary of the accounting policies and other explanatory.
BASIS FOR OUR OPINION We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the financial statements” section of our report.
We are independent of BinckBank N.V. in accordance with the Verordening inzake de onafhankelijkheid van accountants bij 214
// assurance-opdrachten (ViO) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion Annual Report 2016 FINANCIAL STATEMENTS
MATERIALITY Based on our professional judgement we determined the materiality for the financial statements as a whole at € 1.380.000. The materiality is based on 5% of the average income before tax in the past three years. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.
We agreed with the supervisory board that misstatements in excess of € 69.000, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
SCOPE OF THE GROUP AUDIT BinckBank N.V. is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements of BinckBank N.V.
Our group audit focused on significant group components. We have performed audit procedures ourselves regarding the branches of within the group entities. We have also made use of component auditors from the Deloitte network to perform specific audit procedures on the branches in Belgium, France and Italy. With respect to the remaining entities we have performed review or specific audit procedures.
By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion on the consolidated financial statements.
OUR KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most 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 of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
• Cut-off, completeness and accuracy of interest income and fee and commission income
Key audit matter BinckBank N.V. has several income sources, as disclosed in note 4 of the financial statements, of which interest income and fee and commission income are the most significant. Given the relative size of these revenue streams we have identifiedcut-off, completeness and accuracy of interest income and fee and commission income as a key audit matter.
Audit procedures performed We have tested the design, implementation and operating effectiveness of the (application) controls with respect to the cut-off, completeness and accuracy of the interest income and fee and commission income. Furthermore, we have performed a substantive analytical review using data analytics techniques complemented with detailed substantive procedures to test on the underlying pricing arrangements. Finally, we have evaluated the internal accounting policies for compliance with EU-IFRS.
• Valuation of goodwill
Key audit matter BinckBank N.V. has capitalized € 145 million of goodwill. Given the relative size of this balance in combination with the estimation uncertainty we have decided to classify valuation of goodwill as a key audit matter. 215
Audit procedures performed // We have tested the impairment model prepared by management and tested the valuation based on the impairment model as prepared by the external expert deployed by management. In addition we have tested the assumptions of management including the projected cash flows, the discount rate and the expected growth percentages. As part of our procedures we have obtained information from management and the external expert and have discussed and reviewed the input and assumptions. Furthermore, we tested the i) arithmetic accuracy of the impairment model ii) we tested the sensitivity analysis and iii) performed our own sensitivity analyses. The impairment test and the assumptions used are described in
note 13 of the financial statements. Annual Report 2016 FINANCIAL STATEMENTS
• Reliability and continuity of the automated systems
Key audit matter Given the activities of BinckBank N.V., the continuity of the operations is highly dependent on the IT-infrastructure as also explained in the Risk management paragraph of the annual accounts. Therefore, reliability and continuity of the automated systems has been a key audit matter during our audit.
Audit procedures performed We have tested the reliability and continuity of the automated systems relevant for our audit. For this purpose we have made use of IT auditors within our audit team. Our procedures included testing the design, implementation and operating effectiveness of the relevant general IT and application controls.
• Legal disputes and compliance with law and regulation
Key audit matter Law and regulation with respect to financial institutions is extensive and subject to change. BinckBank N.V. is active in several jurisdictions which all have their specific requirements. Furthermore, BinckBank N.V. is involved in several legal disputes. We have focused on the accounting and disclosures in respect of legal disputes.
Audit procedures performed We have tested the design, implementation and operating effectiveness of the relevant processes for our audit with respect to the legal and compliance functions. Furthermore, we have performed detailed substantive procedures on the related provisions and have requested confirmations of the involved layers. During these procedures we have made use of local specialists when deemed required. We also considered whether the disclosures in note 20 of the financial statements in respect of this legal exposure is compliant with the relevant accounting requirements. We focused on the adequacy of disclosure of the related risks and assumptions.
• Valuation of mortgages
Key audit matter In 2016 BinckBank N.V. invested € 521 million in mortgages. Due to the size of this amount, the valuation and the fact that investing in mortgages is a new activity of BinckBank N.V. we have decided to classify the valuation of mortgages as a key audit matter.
Audit procedures performed We have tested the design, implementation and operating effectiveness of the relevant controls regarding the valuation of mortgages. We have tested managements assumptions, the valuation model as disclosed in note 39.3 of the financial statements and the use of this model for the calculation of the collective and individual provisions. As part of our procedures we have obtained information from management and have discussed and reviewed the input and assumptions. Furthermore, we tested the arithmetic accuracy of the model and performed a sensitivity analyses. 216 // Annual Report 2016 FINANCIAL STATEMENTS
REPORT ON THE OTHER INFORMATION INCLUDED IN THE ANNUAL ACCOUNTS
In addition to the financial statements and our auditor’s report, the annual accounts contain other information that consists of
• Management Board’s Report
• Other Information as required by Part 9 of Book 2 of the Dutch Civil Code.
Based on the following procedures performed, we conclude that the other information:
• 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.
We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.
Management is responsible for the preparation of other information, including the Management Board’s Report in accordance with Part 9 of Book 2 of the Dutch Civil Code, and the other information as required by Part 9 of Book 2 of the Dutch Civil Code.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
ENGAGEMENT We were engaged by the supervisory board as auditor of BinckBank N.V. on April 22, 2014, as of the audit for year 2014 and have operated as statutory auditor ever since that date.
DESCRIPTION OF RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
RESPONSIBILITIES OF MANAGEMENT AND THE SUPERVISORY BOARD FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
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 framework mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Management should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.
The supervisory board is responsible for overseeing the company’s financial reporting process. 217 // OUR RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not have detected all material errors and fraud. Annual Report 2016 FINANCIAL STATEMENTS
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgment and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included e.g.:
• Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to 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, intentional omissions, misrepresentations, or the override of internal control.
• 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 an opinion on the effectiveness of the company’s internal control.
• Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Concluding on the appropriateness of management’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.
• Evaluating the overall presentation, structure and content of the financial statements, including the disclosures.
• Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items.
We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit.
We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
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. 218 // Amsterdam, March 6, 2017
Deloitte Accountants B.V.
Annual Report 2016 Signed on the original R.J.M. Maarschalk FINANCIAL STATEMENTS
Provisions of the articles of association regarding priority shares (articles 15 and 21)
The rights attached to the priority shares include the right to make non-binding nominations for appointment to the company’s supervisory board and executive board and to take various other actions. The priority shares are held by Stichting Prioriteit Binck, Amsterdam. This foundation’s board, which consists of three members, is appointed by the supervisory board and executive board of the company.
The board members of Stichting Prioriteit Binck are: J.W.T. van der Steen Ms C.J. van der Weerdt-Norder V.J.J. Germyns 219 // Annual Report 2016 FINANCIAL STATEMENTS
Provisions of the Articles of Association regarding profit appropriation (Article 32)
1. The company may only make distributions to the shareholders if the company’s equity exceeds its issued and paid-up share capital plus the reserves required to be held by law or by the articles of association. 2. Firstly – and only insofar as profits allow – an amount equal to six per cent (6%) of the nominal value of the priority shares will be distributed on these shares. 3. The foundation will determine the extent to which the remaining profits will be transferred to reserves. Profits remaining after application of the previous subsection and the previous sentence will be at the disposal of the general meeting of shareholders. Any amounts not distributed will be transferred to the company’s reserves. 4. Withdrawals from distributable reserves may be made pursuant to a resolution by the general meeting of shareholders, subject to the prior consent of the foundation. 5. The executive board may resolve to allow the company to make interim distributions, providing it demonstrates in the form of an interim statement of assets and liabilities as referred to Section 105(4) Book 2 of the Dutch Civil Code that it complies with item 1 above and subject to the prior consent of the foundation. The distributions referred to in this subsection may be made in cash, in shares in the company’s equity or in marketable rights thereto. 6. The general meeting of shareholders may resolve to declare that distributions on shares other than interim distributions as referred in subsection 5 of this article (whether at the shareholders’ discretion or otherwise) may, instead of being made in cash, be made fully or partly (whether at the shareholders’ discretion or otherwise) in: a. ordinary shares (which will, if desired and possible, be charged to the share premium reserve) or marketable rights to ordinary shares, or b. equity instruments of the company or marketable rights thereto. A resolution as referred to in the previous sentence may only be passed after being proposed by the executive board and approved by the supervisory board. A proposal to pass a resolution as referred to in b will be submitted only after consultation with Euronext Amsterdam N.V. 7. No distribution will be made to the company in respect of shares it holds in its own capital or on shares for which the company holds depositary receipts. 8. The calculation of the profit distributable on shares will disregard shares that are not eligible, pursuant to subsection 7, for such distribution. 9. Once a resolution to make a distribution has been passed, the amount will be declared payable within fourteen days. An entitlement to receive a distribution will lapse five years after the date on which the amount is declared payable, and the said amount will then revert to the company. 220 // Annual Report 2016 FINANCIAL STATEMENTS
MAJOR SUBSIDIARIES
Bewaarbedrijf BinckBank B.V. Barbara Strozzilaan 310 1083 HN Amsterdam The Netherlands Telephone +31 20 522 03 30
Able Holding B.V. Reeuwijkse Poort 114 2811MX Reeuwijk The Netherlands Telephone +31 182 398 888 www.able.eu
ThinkCapital Holding N.V. Barbara Strozzilaan 310 1083 HN Amsterdam The Netherlands Telephone +31 20 314 96 70 www.thinkcapital.nl
FOREIGN OFFICES
BinckBank Belgium Quellinstraat 22 2018 Antwerp Belgium Telephone +32 3 303 3133 www.binck.be
BinckBank France 1 Rue Collange 92300-Levallois-Perret France Telephone +33 170 36 70 62 www.binck.fr
BinckBank Italiya Via Ventura 5 20134 Milano Italy Telephone +39 02 360 16 161 www.binck.it
BinckBank Spain (Alex Spanje) Urbanizacion Marbella Real, local 15 Carretera de Cadiz, km 178,7 29602 Marbella 221
Malaga // Spain Telephone +34 952 92 4011 www.alexspanje.com Annual Report 2016
BinckBank N.V. Barbara Strozzilaan 310, 1083 HN Amsterdam, The Netherlands P.O. Box 75047, 1070 AA Amsterdam, The Netherlands T +31 20 522 03 92 | [email protected] www.binck.com