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Euroclear SA/NV Consolidated Financial Statements 2017

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Euroclear SA/NV Consolidated Financial Statements 2017 Euroclear SA/NV Consolidated financial statements at 31 December 2017 Contents Directors' report ......................................................................................................................... 3 Board and Committees - composition .................................................................................... 17 Consolidated income statement .............................................................................................. 19 Consolidated statement of comprehensive income .............................................................. 20 Consolidated statement of changes in equity ....................................................................... 21 Consolidated statement of financial position ........................................................................ 22 Consolidated statement of cash flows ................................................................................... 23 Notes to the consolidated financial statements .................................................................... 25 I. Interests in other entities ...................................................................................................... 25 II. Accounting policies .............................................................................................................. 29 III. Critical accounting estimates and judgements ................................................................ 36 IV. Risk management and the financial risk management environment ............................. 38 V. Segment analysis ................................................................................................................. 55 VI. Net interest income ............................................................................................................. 58 VII. Net fee and commission income ....................................................................................... 58 VIII. Realised gains/(losses) on investment securities .......................................................... 59 IX. Net gains/(losses) on financial assets and liabilities held for trading ............................ 59 X. Administrative expenses ..................................................................................................... 60 XI. Impairment ........................................................................................................................... 61 XII. Taxation ............................................................................................................................... 61 XIII. Deferred taxation ............................................................................................................... 63 XIV. Available-for-sale financial assets .................................................................................. 65 XV. Financial instruments held for trading ............................................................................. 66 XVI. Derivatives used for hedging ........................................................................................... 67 XVII. Property, plant and equipment ....................................................................................... 69 XVIII. Goodwill and intangible assets ..................................................................................... 70 XIX. Provisions for liabilities and charges ............................................................................. 72 XX. Defined benefit plans ......................................................................................................... 72 XXI. Share capital and share premium .................................................................................... 77 XXII. Other reserves .................................................................................................................. 78 XXIII. Dividends paid ................................................................................................................. 78 XXIV. Contingent liabilities and commitments ....................................................................... 79 XXV. Operating lease commitments ....................................................................................... 79 XXVI. Related party disclosures .............................................................................................. 80 XXVII. Events after the balance sheet date ............................................................................. 82 Statutory auditors' report ......................................................................................................... 83 2 Euroclear SA/NV annual report 2017 Directors' report Directors' report The directors of Euroclear SA/NV are pleased to present their report, together with the audited consolidated financial statements of the company and its subsidiaries (the ‘group’) for the year ended 31 December 2017. Group overview and principal activities The Euroclear group is the world's leading provider of post-trade services. The group provides settlement, safekeeping and servicing of domestic and cross-border securities, with asset classes covered including bonds, equities and investment funds. The Euroclear group includes the International Central Securities Depository (ICSD), Euroclear Bank, based in Brussels, as well as the domestic Central Securities Depositories (CSDs) Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & Ireland. Euroclear Bank is the only credit institution in the Euroclear group. Euroclear SA/NV provides system development and support services to the other companies of the group. Euroclear plc is the holding company which owns, directly or indirectly, the entire issued share capital of these companies. Euroclear SA/NV is headquartered in Brussels and operates three branches in Amsterdam, London and Paris. The group’s domestic CSDs are headquartered in their local markets. Euroclear Bank is headquartered in Brussels and operates branches in Hong Kong, Krakow and Tokyo, established in 2017. Euroclear Bank’s branch in Krakow, Euroclear Bank SA/NV (Spółka Akcyjna) - Oddział w Polsce, officially opened in January 2013. By the end of 2017, it had grown to 550 employees who serve our global client base. The Krakow branch provides a dual-office arrangement with Euroclear Bank’s existing operations in Belgium. With 146 employees, the Hong Kong Branch of Euroclear Bank SA/NV is an important contributor to client servicing in Asia. Through the Hong Kong office, we are able to provide clients with a global service offering, despite the time zone difference with our headquarters in Europe. In November 2017, Euroclear Bank was granted a licence from Japan's Financial Services Agency (FSA) to establish a foreign bank branch under the Japan Banking Act. This enabled Euroclear Bank to strengthen its capabilities in Japan so to provide a more convenient and comprehensive service to its clients and help them conduct their business more efficiently. DTCC-Euroclear Global Collateral Ltd is a joint venture shared equally between Euroclear SA/NV and The Depository Trust & Clearing Corporation (DTCC), founded in September 2014. Through DTCC-Euroclear Global Collateral Ltd, we will enable the automatic transfer and segregation of collateral based on agreed margin calls relating to over-the-counter (OTC) derivatives and other collateralised contracts. In June 2017, Euroclear SA/NV acquired 35% of Quantessence, a UK based company. This will reinforce the capacity of Euroclear SA/NV to establish an infrastructure to connect market participants (distributors, investment managers and investment banks) active in Individualised Constant Proportion Portfolio Insurance (iCPPI) services. In November 2017, Euroclear Bank sold its equity stake in Calar Belgium SA/NV to Euroclear Investments SA. Calar Belgium SA/NV is a real estate company of the group which owns 51% of the Euroclear Head Office building in Brussels where one of the 3 Euroclear data centers is hosted. In December 2017, Euroclear France sold its data center building to Euroclear Properties France, another group real estate entity a (100% subsidiary of Euroclear Investments SA), owning the group third data center building located near Paris. This transaction aimed at centralizing the management of Euroclear data center premises. Finally, in December 2017, Euroclear SA/NV decided to liquidate Euroclear Market Solutions Limited and as a result, will gradually stop providing central infrastructure services enabling banks and their counterparties to manage operations payables and receivables claims. Business review Our strategy for evolving capital markets Euroclear’s strategic vision is to remain a leading partner for the global capital markets, by connecting our traditional European core to the world’s financial markets and by providing services that improve efficiency and meet specific client needs. In the context of evolving financial markets, participants seek to work with a trusted market infrastructure to benefit from operating stability and resilience, greater collateral mobility and access to liquidity, and higher levels of process automation. 3 Euroclear SA/NV annual report 2017 Directors' report The Euroclear group is committed to helping its clients navigate the rapidly changing operating environment and growing need for liquidity, including through new opportunities to develop innovative, value-add solutions that ensure our long-term relevance
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