HELLENIC BANK GROUP ANNUAL REPORT 2016 www.hellenicbank.com ANNUAL REPORT

WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL CONTENTS BANK REPORT GROUP 2016

1 BASIC FINANCIAL HIGHLIGHTS 3 BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE 4 CHAIRWOMAN’S STATEMENT 6 GROUP GENERAL MANAGER, BUSINESS AND INSURANCE DIVISION’S REVIEW 10 GROUP OPERATIONS REVIEW 30 GROUP MANAGEMENT REPORT 38 REPORT OF THE BOARD OF DIRECTORS ON CORPORATE GOVERNANCE FOR THE YEAR 2016 52 REMUNERATION POLICY REPORT FOR THE YEAR 2016 64 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED 68 CONSOLIDATED INCOME STATEMENT 69 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 70 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 71 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 73 CONSOLIDATED STATEMENT OF CASH FLOWS 74 INCOME STATEMENT 75 STATEMENT OF COMPREHENSIVE INCOME 76 STATEMENT OF FINANCIAL POSITION 77 STATEMENT OF CHANGES IN EQUITY 79 STATEMENT OF CASH FLOWS 80 NOTES TO THE FINANCIAL STATEMENTS 187 DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE BANK OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS BOARDS OF DIRECTORS OF THE GROUP’S MAIN SUBSIDIARY COMPANIES 188 DESIGN AND LAYOUT: GNOMI COMMUNICATION CONSULTANTS 189 GROUP OFFICES AND BRANCH NETWORK PRINTING AND BINDING: CHR. NICOLAOU & SONS LTD 194 SHAREHOLDER INFORMATION AND INVESTOR RELATIONS WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade BASIC HELLENIC ANNUAL BANK REPORT FINANCIAL GROUP 2016 HIGHLIGHTS

2016 2015 2014 2013 2012

CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS € million 6.111,1 6.138,7 6.345,9 5.513,3 7.766,9

LOANS AND ADVANCES € million 4.300,1 4.395,9 4.405,1 4.394,2 5.556,8

TOTAL FINANCIAL POSITION € million 7.037,6 7.397,4 7.551,6 6.383,9 8.755,7

CAPITAL RESOURCES € million 563,5 639,6 590,0 394,5 481,7

GROUP PROFIT FROM ORDINARY OPERATIONS BEFORE IMPAIRMENT LOSSES AND PROVISIONS TO COVER CREDIT RISK € million 103,2 104,3 157,9 129,5 159,4

Note: According to the provisions of the International Financial Reporting Standard 5, ‘Non-current Assets Held for Sale and Discontinued Operations’, the results for the year ended 31 December 2014 refer to the comparative figures of the annual results of the Group for the year ended 31 December 2014 which have been restated to reflect the reclassification of the operations of the BNG from continuing to discontinued operations on 26 of March 2013, as well as the disposal of the Bank’s subsidiary company in Russia, Limited Liability Company Commercial Bank ‘Hellenic Bank’ on 5 June 2014 and the disposal of the Bank’s subsidiary Borenham Holding Limited on 6 February 2015.

1 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL BANK REPORT GROUP 2016 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade BOARD OF DIRECTORS AND HELLENIC ANNUAL BANK REPORT EXECUTIVE COMMITTEE GROUP 2016 AS AT 30 MARCH 2017

Board of Directors of Hellenic Bank Antonis Rouvas Public Company Ltd Chief Financial Officer Irena A. Georgiadou (until 18.01.2017) CHAIRWOMAN Lars Kramer Marinos S. Yannopoulos Chief Financial Officer VICE-CHAIRMAN (from 03.04.2017)

Marianna Pantelidou Neophytou Vladislav Botic Ioannis A. Matsis Chief Operating Officer David Whalen Bonanno Evripides A. Polykarpou Stefano Capodagli Georgios Fereos Chief Risk Officer Christodoulos A. Hadjistavris Henricus Lambertus (Bert) Pijls (until 15.12.2016) INTERIM HEAD GROUP Andreas Christofides COMPLIANCE UNIT Lambros Papadopoulos Marina Kolokotroni (from 13.06.2016) Andrew Charles Wynn Stephen John Albutt Chief Internal Auditor (from 21.09.2016) Niki Nicolaidou-Hadjixenophontos

Chief Financial Officer Chief Executive Officer Antonis Rouvas (until 18.01.2017) Henricus Lambertus (Bert) Pijls Lars Kramer (from 03.04.2017) (until 15.12.2016) Ioannis A. Matsis Company Secretary (The appointment is subject to approval Petros Arsalides from the regulatory authorities. In the meantime, the duties of the Chief Executive Officer will be officiated by Mr. Phivos Staso- Auditors poulos, Group General Manager, Business & KPMG Limited Insurance Division) Legal Advisers Georgiades & Pelides LLC Executive Committee of the Hellenic Registered Office Bank Group Corner Limassol Avenue & 200 Athalassa Avenue, 2025 Strovolos, Nicosia, Cyprus Georgios Fereos P.O.Box 24747, 1394 Nicosia, Cyprus Group General Manager, Group Corporate Development

Kyriaki Papadopoulou Group General Manager, Group Arrears Management Division

Phivos Stasopoulos Group General Manager, Business & Insurance Division

George Karageorgis Group General Manager, Retail & International Banking

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In the context of strengthening our The referendum in the United Kingdom and balance sheet, we increased provisions the decision in favour of Brexit have caused for problematic loans, a practice which, great market confusion. On the one hand, in conjunction with the one-off write the sterling is slipping but, on the other, off of deferred tax assets amounting to the British economy is predicted to grow by €51.2 million, led to a loss after taxes from 2% in 2017. At the same time, Italy’s fragile continuing operations amounting to €62.7 banking sector is also causing stock markets million for 2016. turbulence.

The systematic review of our business model Concurrently, the Eurozone has been split revealed key challenges, but is has also given into two camps due to the monetary policy. us a clear path to improve the Bank. It is In an effort to tackle unemployment, very important to grasp every opportunity prolonged deflation and the low investment given, to improve our performance. It is rate, there remains disagreement regarding our job as Board of Directors to ensure that whether or not the unusual negative interest each strategy translates into value for our rates and the ECB’s Quantitative Easing Irena A. Georgiadou shareholders. This is why we will never shy Programme should continue. Chairwoman away from change. All of this is happening while the increased International Economic Environment influx of refugees continues, the number of 2016 was a difficult year, full of intense Eurosceptics is growing and Europe faces the political turmoil and changes. Investors’ challenge of populism. Populism threatens psychology has being tested continuously on the Union which was built on the foundations Dear Shareholders, an international level. of liberalism and democracy.

This past year was filled with challenges From the beginning of 2016, markets The uncertainty is reflected on growth rates both for Hellenic Bank and our country. We witnessed the tumbling of oil prices, which remain subdued. The Eurozone’s managed through an international financial a decrease which led to high global growth rate reached 1.7% in 2016 and is crisis and its turbulent aftermath, while never uncertainty. predicted to recede slightly, to 1.6%, in 2017. losing sight of the reason we are here: to serve our clients, our economy and country, Concurrently, the growth rate of the Chinese Reforms in Cyprus and of course, the interests our shareholders. economy, the second biggest economy Despite international volatility and after the USA, receded to the lowest point uncertainty, 2016 was the year that Cyprus In 2016, we implemented our strategic of the past 25 years, a development which returned to stability. In March 2016, our priorities in a disciplined and focused inevitably affected global demand. country successfully completed the three- manner. year macroeconomic adjustment programme Despite concerns and the unpredictable and regained access to international capital We enhanced our corporate governance and geopolitical environment, the International markets. brought about changes in the composition of Monetary Fund’s projections for the global both the Board of Directors and the Executive economy in 2017, estimate a strengthened For seven consecutive quarters, the Cypriot Management Team, the most important of growth rate of 3.4% due to the fact that economy has exhibited growth and is one which was the smooth transition for our new emerging economies are still growing at high of the fastest-growing economies in the Chief Executive Officer, Mr. Yannis Matsis. rates. Eurozone. More specifically, in 2016 the growth rate reached 2.8% and is predicted We also focused on implementing our “In 2016, we continued to actively to remain at the same level for 2017, while strategy for dealing with Non-Performing in 2018 it is expected to range between Exposures (NPEs) more effectively and support recovery of the econo- 2.5% and 3%. The impressive recovery of faster via the creation of the first NPE my granting €354 million in new the Cypriot economy is also reflected in servicing platform in co-operation with the loans, equivalent to the one third the improved levels of confidence. Credit international firm APS Holdings. (1/3) of the total loans given to rating agencies place our economy just one level below investment grade and this was For another year, we grew our balance the island”. preceded by seven upgrades from the lowest sheet responsibly and supported point in June 2013. creditworthy businesses and households, Upsets in the European Union while we continued to invest in technology, 2016 was also a year of upsets in the The steady course towards recovery is also infrastructure and new talents which European Union as, six decades after the reflected in the labour market conditions constitute the Bank’s future. Our efforts were founding of EU, its integrity is being tested as which are improving, as well as private fruitful and were recognised by international never before. consumption which increased by 2.9% credit rating agencies such as Moody’s and compared to 2015. At the same time, Fitch which upgraded Hellenic Bank’s credit investments exhibited a growth of 26%. ratings.

4 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL BANK REPORT GROUP 2016 “Increased competition within Cyprus combined with absence of sufficient qualitative demand and low interest rates significantly restrain the banks’ revenues”.

Positive results leave no room for Safeguarding Hellenic Bank Prospects for 2017 complacency as both internal and external Our objective for 2016 was the shielding of The solid foundations for structural reforms, challenges remain. There are important the Bank’s balance sheet and the laying of the positive growth rate and the declining outstanding structural reforms which strong foundations for the future. To this trend of NPEs bode favourably for the are vital for sustainable growth. These end, provisions were increased in order country’s economy and the banking sector reforms concern the implementation of the to cover credit risk, a practice which, in in 2017. Sectors such as shipping, tourism, privatisation plan, public administration, local conjunction with the one-off write off of energy and services lead the way towards government and the health sector. deferred tax assets amounting to €51.2 growth. million, led to a loss after taxes from Challenges in the Banking Sector continuing operations of €62.7 million. Moreover, the prospect of smoothing In 2016, the banking system was also relations with Turkey and the possibility of stabilised. Through this warren of changes and resolving the Cyprus issue would create even challenges, Hellenic Bank had a leading role further prospects for growth. Stability is reflected both in the increase in financing growth. in deposits and the deleveraging of For Hellenic Bank, 2017 is once again balance sheets, as well as in the upgrades In 2016, we continued to actively support expected to be filled with challenges, by international credit rating agencies. recovery of the economy granting €354 however, the bold corrective measures we Specifically and according to data provided by million in new loans, equivalent to the one have already taken allow us to be optimistic. the Central Bank, total deposits in February third (1/3) of the total loans given to the 2017 exhibited a net increase of €174.9 island. The result shows that Hellenic Bank Dear Shareholders, million, reaching €49.3 billion. achieved its target and remains the most For yet another year, Management is focused reliable banking partner in Cyprus. We aim to on its key strategic priorities: Reduction Despite the progress made, challenges still continue financing growth, investing in pillars of the high NPEs percentage, expansion remain. The high level of private debt have of the economy such as tourism, technology of the loan portfolio via new lending and led to increased levels of NPEs which harbour and shipping and continuously examining technological development in order to get risks regarding the stability of the domestic new opportunities for expansion. even closer to our clients’ needs. banking sector. Legislations concerning insolvency and foreclosures are indeed The Group maintains capital adequacy For another year, our efforts will focus on important tools for tackling the problem but ratios which exceed the minimum capital discipline and maintaining comfortable need further improvement. requirements set by the relevant supervisory liquidity so that we take advantage of authorities, as at 31 December 2016, the opportunities, finance creditworthy In October 2016, the amount of loans in Group’s Capital Adequacy Ratio stood at 17, businesses and households, and continue to arrears over 90 days decreased to €18.5 24%. support the growth of the economy. billion from €23.2 billion in January 2015, while seven in ten restructurings remain “We maintain one of the highest viable. According to the European Banking Authority, from the end of 2015 until the NPE coverage ratios in Cyprus”. end of 2016, NPEs in Cyprus decreased by €3 billion. In 2016’s fourth quarter, the NPL ratio The reduction of NPEs remains a key for Cyprus decreased to 44.8%. strategic priority for the Group and, in 2016, the Bank proceeded in restructuring loans Aside from NPEs, the greatest challenge amounting to €701 million. to the banking sector is still the European Central Bank’s decision to keep negative In this context, we created an innovative Irena A. Georgiadou interest rates, a policy which exerts great platform in co-operation with APS Holdings, Chairwoman pressure on banks profitability, especially an international company which specialises those with surplus liquidity. At the same in NPE management. The objective is the time increased competition within Cyprus effective reduction of NPEs while the Bank Nicosia, 30 March 2017 combined with absence of sufficient will be able to exploit its resources in order qualitative demand and low interest rates, to strengthen its market position, become the lowest of the last decade, significantly even more competitive and increase its restrain the banks’ revenues. market share.

Simultaneously, changes in the European In addition, at 55%, we maintain one of the supervisory system have raised serious highest NPE coverage ratios in Cyprus when concerns. Aside from the appropriate the average NPE coverage ratio in Europe is supervision, composure and caution are 44, 6%. Moreover, taking into account the necessary elements in order to avoid value of collateral, the ratio reaches 113%. undermining the balance which was achieved through strenuous efforts.

5 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL GROUP GENERAL MANAGER, BANK REPORT GROUP 2016 BUSINESS AND INSURANCE DIVISION’S REVIEW

Simultaneously, the past year, Hellenic In addition, a deferred tax asset of €51.2 Bank continued to grow. Specifically, the million was derecognised during 2016. The Bank granted new loans amounting to derecognition of the deferred tax asset €354 million in 2016, supporting credit- resulted from tax losses for which is no worthy businesses and households. Its longer probable that the related tax benefit loan market share reached 7.4%. Our aim will realise, as the majority of these losses is to support credit-worthy businesses and will expire by 31 December 2018. Increased households that will enhance our country’s provisions, combined with the one-off write- competitiveness, while exploring new loan off of deferred tax liabilities, led to a loss opportunities. after taxes from continuing operations which amounted to €62.7 million. At the same time, 2016 was a year filled with innovation. Hellenic Bank’s shift Despite this, the Group’s capital indicators towards technology continues. We do continuously remained higher than not simply aim to lead, but also to open a the minimum requirements set by the Phivos Stasopoulos window of communication with the digital Supervisory Authorities. The Common Equity Group General Manager, world thus creating opportunities for co- Tier 1 (CET1) Ratio stood at 13.8%, the Tier 1 Business & Insurance Division operation beyond the borders of Cyprus. Capital Ratio reached 17.0% and the Group’s Besides, this is necessitated by international Capital Adequacy Ratio 17.24%. developments. The Group’s level of NPEs decreased to Positive results and achievement of our €2,504 million by 31st December 2016, while Dear Shareholders, targets could not materialise without the the NPEs coverage ratio with provisions dedication and support of our staff. Hellenic increased at 54.9%. Taking into account In 2016, Cyprus succeeded in exiting MoU Bank’s people are the driving force behind tangible collaterals the overall coverage status much earlier than initially expected. our success. This is the reason why we stands at 113%. The decrease in NPEs is Fiscal results exceeded expectations and always pay attention to staff development small but steady, reflecting the very good confidence from international markets was and training while simultaneously work being done in loan restructuring, which reinstated relatively quickly. strengthening the team with capable amounted to €701 million in 2016. executives who can provide specialised The Bank is on the right path towards At Hellenic Bank, we continued on our knowledge and experience to the Bank. implementing its strategy. Comfortable steady and disciplined course towards liquidity, a consequence of depositors’ trust viable growth, supporting and responsibly in Hellenic Bank, reflects the stable deposit financing the Cypriot economy. Financial Results for 2016 base, with the net loans to deposits ratio Hellenic Bank’s primary objective for 2016 at 48%, and allows for further growth. As Targets and Priorities was to strengthen its balance sheet and lay at 31 December 2016, customer deposits Hellenic Bank’s primary objective for 2016 strong foundations for the future. amounted to €6.1 billion while the Bank’s was the shielding of its balance sheet, laying deposits market share reached 12.6%. strong foundations for the future. The Increased provisions to cover credit risk Capital Adequacy Ratio of the Group as at in 2016 serve that exact purpose. Total Furthermore, within the framework of 31 December 2016 was 17,24% significantly impairment losses and provisions to cover overall discipline, the Group’s expenses surpassing the regulatory minimum set by credit risk for 2016 amounted €115.2 million, also decreased, reaching €144.5 million. the Regulatory Authorities. up by 14% compared to 2015. The significant This decrease of 5%, compared to €152.1 increase occurred due to the Bank’s decision million in 2015, is due to the reduction in The effective reduction of non-performing to adopt more conservative assumptions in administrative and other expenses. The cost exposures (NPEs) was – and remains – an relation to its provisioning methodology for to income ratio for the period ended at 31 equally-critical strategic priority for the calculating impairment losses and as part of December 2016 reached 58.3%, compared Group. In 2016 we managed to reduce NPEs the regulatory engagement with European to 59.3% for 2015. ratio by 4% and increased provisions, thus Central Bank (ECB) in relation to the reinforcing NPEs coverage. Indicators prove Supervisory Review and Evaluation Process Expectations and Challenges for 2017 that loan restructuring is effective and that (SREP). In 2016, we sought to lay solid foundations we are on the right track, however this for a strong future. Many challenges remain leaves no room for complacency. and that is why we must stay alert.

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The primary objective for us is the reduction At the same time, we continue our journey of NPEs, a problem which, for many, is into technology. Following the successful the greatest obstacle of growth of the launch of the Hellenic Bank Mobile App and Cypriot economy. This is why we signed an the innovative PayBand, Hellenic Bank once agreement with APS Holdings a.s, to create again leads the way in presenting the first the first debt servicing platform, aiming to API Banking digital platform in Cyprus. deal with NPEs faster and more effectively. The new company will essentially take over Dear Shareholders, the management of NPEs and real estate owned by the Bank, in order to effectively At Hellenic Bank have proved that, with the deal with non-performing exposures in an right management and discipline, challenges accelerated way. This will allow the Group can be converted to opportunities. We laid to exploit the rest of its resources in order solid foundations for the Group’s future to strengthen its market position. This will course. Better customer service, financing enable us to become more competitive and of growth, support of the economy and increase our turnover and market share. our shareholders’ interests remain our main priorities. We are ready for another We aim to support customers who face constructive year. serious financial issues and to find mutually- acceptable solutions so that they can meet their obligations. This applies to customers who are willing to co-operate. We must have no tolerance for those who have the financial ability but refuse to fulfil their obligations. It is our duty to protect our depositors and shareholders.

We also have similar zero tolerance when Phivos Stasopoulos it comes to issues of AML and any form Group General Manager, of financial crime. We have a robust and Business & Insurance Division effective framework which aims to combat practices related to money laundering. We calculate risk, identify our clients and detect Nicosia, 30 March 2017 any possible suspicious transactions which we report to the supervisory authorities using strict procedures and systems.

2017 is expected to be a year that will be committed to the primary banking activity which is none other than the financing of the growth of the economy. For yet another year, we will focus in key pillars of the economy such as shipping, tourism, transportation, energy and other sectors.

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GROUP OPERATIONS REVIEW

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Financial Results 2016 income for 2016 was €52,0 million down by Statement of Financial Position Analysis Loss before taxation for 2016 amounted to 11% compared to 2015, with the decrease Deposits €12,0 million compared to a profit of €3,5 mainly reflecting lower card interchange Customer deposits amounted to €6,1 billion million reported for 2015 . The reported fees and reduced commission income in the as at 31 December 2016 (31 December 2015: loss of 2016 was primarily due to increased International Business Division due to the €6,1 billion). They comprised of €4,6 billion impairment losses and provisions to cover Bank’s efforts to reposition its strategy on deposits in Euro and €1,5 billion deposits in credit risk. the said business. Net gain on disposal and foreign currencies, mostly US Dollars. Trends in revaluation of foreign currencies and financial customer deposits reflect the Bank’s strategy Loss attributable to the Bank’s shareholders instruments was €27,4 million for 2016, down to maintain a low cost of deposits taking into for 2016 amounted to €63,5 million. Profit by 16% compared to €32,6 million for 2015. account its existing strong liquidity position. attributable to the Bank’s shareholders for This amount included a gain of €14,0 million The Bank’s deposits market share as at 31 2015 amounted to €12,1 million and included from the disposal of the shares in Visa Europe December 2016 was 12,6% (31 December a profit of €4,8 million from discontinued Limited in 2016, while in 2015 included a gain 2015: 13,5%). operations that related to the disposal of a of €16,7 million from the disposal of building owned by the Group in Moscow, Cyprus Government bonds. Loans following the sale of its Russian banking Total new lending for 2016 reached €353,7 subsidiary in 2014. Expenses million (31 December 2015 €376,7 million). Total expenses for 2016 amounted to The Bank continued providing lending to During 2016, a deferred tax asset of €51,2 €144,5 million, reduced by 5% compared creditworthy businesses and households while million was derecognised and charged in the to the €152,1 million of 2015, due to lower examining other growth opportunities. Gross Income Statement. The derecognition of the administrative and other expenses. loans as at 31 December 2016 amounted to deferred tax asset resulted from tax losses for €4.300 million (31 December 2015: €4.396 which it is no longer probable that the related Staff costs for 2016 accounted for 56,8% of the million) recording a decrease of 2% from 31 tax benefit will realise, as the majority of these Group’s total expenses, recording an increase December 2015. A key driver in the reduction losses will expire by 31 December 2018. The of 2% compared to 2015, mainly due to the of gross loans is the increased restructuring carrying amount of the deferred tax asset is increase in the number of employees from activity including the debt to asset swap based on judgements of the Management 1.555 to 1.646 as at 31 December 2016. arrangements, loan repayments and customer of the Bank on its ability to generate future efforts to deleverage. During 2016 exposures taxable profits. These judgements are Total administrative and other expenses for of €160,5 million were written off (2015: based on available information including 2016 amounted to €56,4 million, down by 16% €123,9 million). The Bank’s loan market historical data, improved macroeconomic compared to the €67,3 million of 2015. In 2016 share as at 31 December 2016 was 7,4% (31 estimates, the reduction in deposit rates, the administrative and other expenses included December 2015: 7,0%). stabilisation of the non-performing loans, the a charge of €1,1 million regarding the cost of bank’s impairment process and the results of early retirement (4 employees) compared to The net loans to deposits ratio stood at 47,9% operations. 2015 charge of €3,1 million (36 employees). as at 31 December 2016 (31 December 2015: Excluding the aforementioned one off charges 50,4%). As at 31 December 2016, the Group’s total from each year, the decrease is revised at 14% assets amounted to €7,0 billion, down by 5% (down by €8,8 million) and was primarily due Loan Portfolio Quality compared to 31 December 2015. This was to lower cost of advisory services and lower Committed efforts to resolve problematic loans reflected in the decreased placements with charge for provisions for pending litigations continued. The level of NPEs has been reduced other banks following the early repayment of or complaints which were partly offset by the for a fifth consecutive quarter to €2.504 million the TLTRO borrowing on 29 June 2016. penalty of €1,0 million imposed by the Central at 31 December 2016, down by 4% compared Bank of Cyprus (CBC), charged in 2016. to 31 December 2015. Terminated loans Income Statement Analysis included in NPEs amounted to €1.593 million Net interest income The cost to income ratio for 2016 was 58,3%, as at 31 December 2016 (31 December 2015: Net interest income for 2016 was €147,5 compared to the 59,3% for 2015. €1.477 million). Gross loans with forbearance million, up by 1% compared to 2015. The measures as at 31 December 2016 amounted lower deposit rates in 2016 compared to 2015 Impairment losses and provisions to cover to €1.311 million (31 December 2015: €1.317 caused a substantial decrease in the interest credit risk million). expense, with a positive impact on net interest Total impairment losses and provisions to income. Reduction in interest income on a cover credit risk amounted to €115,2 million During 2016 the Bank continued focusing yearly basis was mainly due to lower lending for 2016, up by 14% compared to 2015. on the restructuring of NPEs, using a toolset rates and due to the decreased carrying As announced on 30 December 2016, the of sustainable solutions, such as debt to amount of the impaired loan portfolio. The Bank proceeded with the adoption of more asset swaps, balance/instalment reductions, Group’s net interest margin for 2016 amounted conservative assumptions in relation to its extensions of maturity, grace periods etc. An to 2,2% (2015: 2,0%). provisioning methodology for calculating amount of €700,6 million relating to total impairment losses and as part of the regulatory customers’ exposures, was restructured during Non-interest income engagement with European Central Bank (ECB) 2016, while an amount of €160,5 million was Total non-interest income for 2016 amounted in relation to the 2016 Supervisory Review and written off as part of the whole curing process. to €100,2 million, recording a decrease of 10% Evaluation Process (SREP). The cost of risk for In 2015 €123,9 million exposures were written compared to 2015. Net fee and commission 2016 was 2,8% compared to 2,3% for 2015. off mostly due to legal changes. The stock

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of properties held for sale, which are mostly from customers’ debt settlement, amounted to €117,6 million as at 31 December 2016 (31 December 2015: €71,2 million).

The NPEs to gross loans ratio as at 31 December 2016 was reduced to 58,2% (31 December 2015: 59,2%). Accumulated impairment losses, amounted € mln. 7.766,9 € mln. 6.345,9 € mln. 6.138,7 € mln. 6.111,1

to €1.374 million as at 31 December 2016 € mln. 5.513,3 € mln. 5.556,8 € mln. 4.405,1 € mln. 4.395,9 € mln. 4.394,2 (31 December 2015: €1.303 million) and € mln. 4.300,1 represented 32,0% of the total gross loans (31 December 2015: 29,6%).

The NPEs provision coverage stood at 54,9% as at 31 December 2016 (31 December 2015: 50,1%), with the overall coverage taking into 12 13 14 15 16 12 13 14 15 16 account tangible collaterals totalling 113%. CUSTOMER DEPOSITS AND LOANS AND ADVANCES OTHER CUSTOMER ACCOUNTS € mln. 8.755,7 € mln. 7.551,6 € mln. 639,6 € mln. 7.397,4 € mln. 590,0 € mln. 7.037,6 € mln. 6.383,9 € mln. 563,5 € mln. 481,7 € mln. 394,5

12 13 14 15 16 12 13 14 15 16

TOTAL FINANCIAL POSITION CAPITAL RESOURCES € mln. 159,4 € mln. 157,9 € mln. 129,5 € mln. 104,3 € mln. 103,2

12 13 14 15 16 GROUP PROFIT FROM ORDINARY OPERATIONS BEFORE IMPAIR- MENT LOSSES AND PROVISIONS TO COVER CREDIT RISK

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DOMESTIC OPERATIONS Commercial Banking Division Emphasis has been given to the The rapid expansion of the Bank’s operations enhancement of customer service after Corporate Banking Division created the need for restructuring of office hours with the continuous upgrading the Group in order to help maintain its of ATM network. All ATMs have a new design The Corporate Banking Division’s primary customer-centric focus. The Business and software that offer more options to and perennial goal is to continuously Services Division was established in order users, better and more personal service as provide upgraded and ever-improving to better serve the Small and Medium-Sized well as increased safety. qualitative services to large businesses, Enterprises (SMEs) sector, which constitutes public companies and semi-governmental the backbone of the Cypriot economy. ATMs at all branches Cyprus wide offer organisations that operate in Cyprus. A basic It offers contemporary and continuously additional functionalities as real time element in the achievement of this goal is a upgraded services and specialised products cash deposits, cash deposits to credit professional, friendly and effective customer aimed at fully meeting the banking needs cards, identification and customization of service, as well as the provision of consulting of SMEs active in all sectors of the economy customers favorite transactions. services to address customers’ current and and their directors and shareholders. future needs. In a difficult and very competitive Given the huge challenges faced by the environment, the division managed to Particular emphasis is placed on the study Cyprus economy, the Division’s primary increase its lending portfolio and maintain and analysis of the key factors which affect objective has been to support businesses deposits at optimum levels as a result of the operations and cash flow of companies whilst developing and maintaining a continuous team effort and commitment in order to determine the necessary perennially professional and human from the staff. At the same time, measures for dealing with the risks relationship through a high-quality, friendly restructuring of the problematic lending associated with each financing. Apart from and prompt service. portfolio continued, with viable solutions the management and consolidation of the offered on a case by case approach and existing portfolio, the aim is to attract new The Business Services Division is staffed based on customers’ repayment ability. customers with healthy economic profiles by qualified, experienced and specialised while developing the portfolio of existing officers who offer a professional and A large number of new loans were clients. effective service to SMEs. The broad range successfully granted to existing and new of the Group’s products and services and the customers of the Bank, being mainly housing All officers who staff Corporate Centres continuously upgraded and technologically- loans with competitive rates, consumer have the necessary academic background, developed systems form the foundation loans, and car finance with a positive impact are qualified and experienced and have the for building strong client relationships. The in the market and the economy in general. delivery of a prompt and effective customer Division plays a key role in restoring the service as their primary objective. The economy by providing financial solutions for The new products designed, offered new Corporate Banking Division is the Group’s the development of sustainable businesses housing solutions, educational schemes and main lending unit and is primarily funded by and the utilisation of European funding consolidation loans with positive feedback the deposits of the Retail Division’s branch programmes. received from existing and new customers. network. The main mission of Retail Division and its Strengthening the infrastructure of the team is the continuous enhancement of the The Corporate Banking Division, in co- Business Services Division has been set as quality of service through staff training and operation with other units and departments one of the Group’s strategic priorities as the use of state of the art technology. of the Group, provides integrated solutions the SME sector presents the potential for which include the full range of products and future growth.Both the Corporate Banking services offered by the Group and are in line International Banking Division and Business Services Divisions contribute with the continuously changing financial In 2016 the International Banking Division significantly to the Group’s credit expansion needs of customers, as outlined below: of Hellenic Bank remained on a successful and overall achievement of strategic targets. course of growth and continued profitability. • Overdraft accounts • Long-term loans Retail Banking Division Through a wide range of services supported • Short-term loans During 2016, Retail Division continued with by advanced technology and experienced • Hire purchase loans the rationalization of the Branch network, staff, the International Banking Division • Factoring facilities with a view to further enhance quality of of Hellenic Bank provides comprehensive • Letters of credit service through larger and modern branches financial services to corporate, institutional • Trade finance offering a wide range of products and and private clients worldwide. With • Letters of guarantee services. commitment to the customer-oriented • Credit cards (company and personal) approach that characterizes Hellenic With a network of 53 branches Cyprus Bank, distinction in professional service is These facilities are aimed at all sectors of the wide, specially designed products and achieved. economy and are marketed according to the services were promoted covering the needs strategy of the Bank at the time. of individuals and small businesses with The outcome of the above was the a major target of the division remaining achievement of another year of the increase of customer base and lending recertification of the four International portfolio. Business Centers with the quality standard ISO 9001:2008.

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The International Banking Division Business Division, continued the disposition Clients are offered access to various implements with great care the principles of the total amount of €100 million international investment choices such as and the compliance guidelines of the (€50 million from EIB and €50 million from mutual funds of leading overseas fund regulatory authorities. 2016 was a year of Hellenic Bank’s own funds). managers, structured products, including, changes, our services and processes were capital guaranteed ones, brokerage services upgraded and investment was made in Furthermore, the Department worked to in shares and bonds traded on major systems, in order to provide better service to complete a new agreement with EIB, for international markets and precious metals our customers, and also to ensure complete an additional amount of €50 million. This transactions. implementation of the regulatory framework amount, along with an amount of €16,7 of the supervisory authorities. million from Hellenic Bank’s own funds Year 2016 was yet another one characterized (€66,7 million in total) has been added to by a mix of markets’ volatility and The investment in human resources the existing €100 million. As a result, a total uncertainty and significant geopolitical of the International Banking Division, of €166,7 million has been assigned for developments. It was also the year, which through specialized programs and the loans to eligible Cyprus enterprises. many will look back to, as one when use of e-learning was also a priority this unconventional Central Bank policies year, in order to better fulfill the evolving Treasury Department started to unwind. Notwithstanding needs of our customers and the economic The Treasury Department is responsible for these demanding circumstances, the environment. managing the Bank’s investment portfolio, as Unit managed to achieve its targets and well as the Group’s market and liquidity risk, contribute to the Bank’s overall profitability. The International Banking Division of always acting within the policy framework Hellenic Bank, will continue in 2017 to and the limits approved by the Assets and Group Trust & Custodian Services expand its international activities with aim Liabilities Management Committee (ALCO). Hellenic Bank’s Trust & Custodian Services and caution, taking into consideration the Unit, is recognized as one of Cyprus leading highly diversified environment, with strategic The Department plays an important role in providers of Custodian Services offering objective the strengthening of its business the formulation and implementation of the local and international investors consistent relationships with the Group’s associates and Bank’s interest rate policy, as well as the superior service in its deliverables. The customers. close monitoring of liquidity and customer Unit participates as a general clearer and cash flows. At the same time, the Treasury custodian in the clearing and settlement Product Development and Sales Support is actively engaged in the foreign exchange systems of the Cyprus and Athens Stock Department market, offering professional service and Exchanges while enjoys a selective network The Product Development and Sales Support competitive pricing to its customers. of reputable sub-custodians effectively Department monitors developments in covering all major international markets. the banking sector, investigates customers’ During 2016, following the approved needs through specialized market research revision, within the year, of the Investment Services offered include safekeeping of and analysis of their suggestions and Framework, the Department continued to client assets, cross-border settlement complaints, and develops products that actively invest part of the excess liquidity in and clearing of trades and other common meet those needs. various fixed income instruments, with the custodial functions, such as collection of aim of increasing the interest income. The income arising from client assets under At the same time, the Department monitors remaining liquidity continued to be placed safekeeping, notification and dealing with all of the Group’s products, analyses their in short term interbank deposits and the corporate actions, provision of information performance and makes adjustments where European Central Bank. on the securities held under safekeeping, necessary. It also monitors international cash management and tax reclamation. trends in banking products and works In 2016, the Department’s revenues In addition, it offers escrow agency towards the development of innovative continued to improve significantly compared services, as well as, specialized services to products and services aimed at the greatest to the previous year, surpassing its set collective investment managers and fund possible satisfaction of customer needs. targets. administrators.

During 2016, the Department both Private Banking Unit In 2016, it maintained its leading position developed new products and revised The Private Banking Unit is a specialised unit in the local market by further expanding a number of existing schemes, while offering premium investment and banking its services offered to existing clients to continued to offer support to the Bank’s services to high net-worth individuals include Depositary Services within the branches and business centres with regard both in Cyprus and abroad. It is active in Alternative Investment Fund Regulatory to the promotion and sales of the Group’s the international markets through the Framework, while also actively engaging in products. implementation of a comprehensive strategy the overall marketing efforts to promote based on the following pillars: the Cyprus Investment Fund Industry via its In addition, within the framework of an 1. Adequate and proper evaluation and participation and close co-operation with the agreement between Hellenic Bank and fulfilment of its customers’ investment and Cyprus Investment Funds Association (CIFA). the European Investment Bank (EIB), for banking needs; lending Cyprus enterprises in the sectors of 2. Competitively priced market access; Towards the end of 2016, important industry, tourism and other service sectors, 3. Continuous upgrade of the Unit’s decisions were taken to support the growth the Department, in collaboration with the infrastructure and its staff’s training and of the Unit by investing in both innovative development.

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software solutions and recruiting new The Bank has, during the year, spent costs and improve customer service. In professionals to join the existing seasoned considerable time and resources with addition, particular emphasis was placed on team. the aim to achieve the streamline of its training the Group’s employees on insurance strategy, put in place a specialized team, matters in order to develop their knowledge Shipping Division design a rigorous evaluation and selection and skills so that they are able to respond The Shipping Division provides a wide range process within the context of appropriate to customers’ needs and demands, more of specialised banking services to shipping governance. The investment framework in effectively and efficiently. In the years to companies in Cyprus and abroad. For our leveraged finance entails clear and explicit come, the Company will continue to place Division, 2016 was another successful year, guidelines for credit and other related risks particular emphasis on the improvement of characterised by continuous improvement of analysis that will result in a superior risk profitability in all insurance classes. the service offering and transaction banking reward. as well as the development of our shipping Great importance will also be given on the corporate business and ship finance. Hellenic Bank (Investments) Limited improvement of the premium collection On 28 November 2016 a decision was taken period through the improvement of In a highly competitive market, our by the Board of Directors of Hellenic Bank monitoring procedures and the management dedicated transaction banking team, once (Investments) Limited to discontinue all its of outstanding balances. Specifically, again, was able to continue its growth and business activities, which primarily relate collection teams will be strengthened, significantly increase the Division’s operating to retail brokerage services. Following this stricter monitoring mechanisms will profit and profit (before taxation) by also decision, the Company, in close cooperation be implemented and incentives will be providing its international customers with a with its external legal advisors, began the offered for quicker collections. Due to its full spectrum of reliable transaction banking process for the orderly termination of ample liquidity and despite the negative services. all business activities, including, without environment, Pancyprian Insurance limitation, notifying clients and other continued to respond to its clients’ demands On the back of, two decades-long, successful business associates and liaise with the in a timely, fair and human manner, presence in the maritime industry and to competent authorities. confirming its reputation as one of the most further develop the shipping corporate reliable General Insurance Companies. The business, in 2016 the Bank has initiated Pancyprian Insurance Ltd Company maintains a strong capital base the launch of a new, dedicated ship finance In 2016, Pancyprian Insurance Ltd remained and is compliant with its obligations arising desk. This desk combines the Shipping the third largest General Insurance Company from the European Solvency II Directive Division’s structuring and financing expertise in Cyprus. It maintained ample liquidity which came into effect on 1st January 2016. and is the most competent one across and at the same time prudently managed the Bank, for all financing activities to the great challenges faced by the insurance Hellenic Alico Life Insurance Company the maritime industry. Whilst the global industry. The general insurance market Ltd shipping market environment remains very decreased marginally by 0,1% during the Hellenic Alico Life Insurance Company Ltd challenging, marked by years of crisis with first nine months of 2016 compared to the managed to achieve satisfactory premium high earnings volatility and declining market corresponding period in 2015. Pancyprian income and maintain its high penetration values, as a result of tonnage oversupply recorded a decrease in premiums of 8,2% rates to new customers. It has also achieved as well as macroeconomic and geopolitical in 2016 compared to 2015, which is mainly a high profit margin which resulted in a uncertainties, our lending strategy in ship due to non-repetitive decrease of specific significant contribution to the Group results. finance follows a conservative approach, large policies. Excluding these large policies, strictly focussed on high-quality financing premiums increased marginally by 0,3%. The Company’s philosophy of providing projects with first-class operators. products characterized by their simplicity The company managed to maintain its and ease in their promotion lead in the Leveraged Finance Unit market share and increase its profitability. achievement of very satisfactory company The Leveraged Finance Unit set up was In the context of its strategic target for results. initiated in 2016 as part of the strategic increasing income and profitability, the initiative of the Bank to explore growth company placed particular emphasis on its One other significant factor which opportunities in overseas markets. contemporary and competitive products contributes to the company’s success Following a thorough evaluation of various which will be continuously upgraded in order is the innovative nature of its products alternatives, the Unit focused in pursuing to meet market needs. It cooperated with in conjunction with the way they are investments in European syndicated loans the Bank’s Business Units in intensifying promoted. These facts place the company as a syndicate lender (not as underwriter efforts to attract new Hellenic Bank highly among life insurance companies in the or sub-underwriter). The strategic objective customers. In addition, it strengthened Cyprus Insurance Industry. The key element of the unit is to build a diversified portfolio efforts to attract new reputable agents by in the development of the Company’s consisted of the most senior and most promoting its reliability. products are customer needs and provision secured loans in a company’s capital of financial security for them and their structure across countries and industries. Pancyprian Insurance also continued its families in the case of an unforeseen event The selection space will consist of high- efforts to improve productivity through that may leave them financially exposed. quality large capitalization borrowers that the implementation of new procedures, The Company’s products are divided into are owned by a financially strong strategic automation and technological upgrades with two main categories, Credit life products and corporate investor or a Private Equity Fund. an ultimate aim of reducing its operational other products (non-bank facility related).

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Card Services app that will act as a lifestyle tool to better FinTech thought leader amongst big names The year 2016 was a particularly challenging serve the smartphone dependent customer. in the global industry. year for the card payment industry mainly due to the adoption of the European Union Key metrics: We have a multitude of revolutionary regulation for capping interchange fees for • 12 releases in 1 year, projects in the pipeline for which 2016 was payments using consumer debit and credit • Over 30.000 mobile app downloads in 1 a catalyst in building the right partnerships cards. Despite the challenges, Hellenic year, that will enable a sequence of innovative Bank Cards continued their significant • 47% of active web banking customers are product and channel launches in 2017. contribution to the Group’s income while using the mobile app, they strengthened their position in the • 75% of registered mobile app users, Customer Contact Center market. The Bank focused its strategy on engage with the app regularly, In 2016, Hellenic Bank developed its increasing card usage and on the continuous • A constant 4.4 rating (higher than most Customer Contact Center. The Service Line upgrade of its card portfolio. local and international competition). and Sales Promotion refer to the Center.

In this context, the Bank has successfully This product has received international Service Line completed the implementation of Visa acclaim as a groundbreaking innovation and Service Line has been successfully providing, contactless technology and now all Visa has become a case study reference point by professional and immediate support to cards are issued with the contactless international leaders of the industry. Hellenic Bank customers, particularly during technology. In response to market needs the non-working hours of the Bank. and to the international developments in At the Banking Technology Awards - the digital technologies, the Bank have launched premier event at recognizing excellence Professionalism, efficiency and high quality PayBand, an innovative wearable product in the use of IT in financial services - the of service are the fundamental pillars upon which enables its owner to complete Hellenic Bank Mobile App received a Highly which the department operates. contactless payments without the necessity Commended distinction in the category Best of a wallet. It is worth mentioning that Mobile System/Service Initiative. The continuous increase in the demand Hellenic Bank was the first Bank in Cyprus of the services provided by Service Line, and one of the first Banks in Europe, which As the bank continues to invest in reflects the high quality of the department’s adopted this payment method. modernizing its infrastructure, it has operation. researched, analysed, evaluated and scored Throughout the year, particular emphasis solutions by the most significant software Furthermore, the high technology systems, was placed on improving and enhancing providers; and selected a leading Omni- which are constantly updated, along with customer relationship through the channel digital banking platform to drive the the experienced and well trained personnel, implementation of targeted campaigns digital strategy. ensure the continuous improvement of with the aim of increasing card usage and the quality of the services provided to the transaction volume. Web banking remains the preferred digital customers. channel for Hellenic Bank’s customers. The security of card transactions has always Sales Promotion been a top priority for Hellenic Bank and Specifically, in 2016 there was an increase Sales Promotion is a recently established therefore the investments in this area have in total registered customers by 8%, while Department, which promotes cross-sales been very important. In 2016, the Bank the overall customer penetration rate in by contacting the customers directly over upgraded its Safe@Web service in line with digital channels has reached 45% showing the phone. Its main objective is to provide latest and most advanced international a significant increase (17%) compared to information to customers on specific standards to safeguard card transactions, 2015. products and services that the Bank can thus providing additional security during provide for them. online shopping. The implementation of In terms of transaction volumes through these technologies and the actions of the web banking compared with the bank’s Sales Promotion department provides active experienced Fraud Team helped the Bank aggregated totals, online users perform: support to the Branch Network of the Bank, to reduce fraud losses and to maintain its • 69% of total monetary transactions by conducting several campaigns which key ratios well below Payment Schemes’ • 85% of payroll and mass payments are specially designed following a proper averages of international organisation. transactions analysis and process of the customers’ status and needs. Digital Banking and Innovation Furthermore, Hellenic Bank was named 2016 was a transformational year for the country winner in two categories for the The Department contributes in the increase digital banking services of the bank. Great third consecutive year by the prestigious of sales while targeting the improvement of focus was placed on the awarded mobile magazine Global Finance: customer service. banking app aiming to make mobile the key • Best Corporate/Institutional Digital Bank growth channel. in Cyprus Arrears Management and Debt • Best Consumer Digital Bank in Cyprus Recovery Division By integrating major features into this The purpose of the Arrears Management ecosystem such as the personalized “offers 2016 has also been a year of establishing Division is the prevention, management zone”, the strategy is to build an all-in-one Hellenic Bank at a dominant position as a and recovery of Non-Performing Loans

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(NPLs) and the effective management and Property Management Unit (PMU) The Representative office furnishes a point mitigation of future impairment and existing PMU is Bank’s department specialised in of access to its customers and it is the only impairment stock. The Division is responsible managing the Bank’s real estate portfolio, remaining Representative Office of a Cyprus for the management of clients throughout which consists of a number of assets across Bank in South Africa. the distressed spectrum. The Bank’s Cyprus and Greece. The Unit was established philosophy is to support and find solutions in 2016 with the aim to view, manage and for those clients who make every effort to dispose assets (including Special Purpose HEAD OFFICE SUPPORT SERVICES resolve their financial difficulties. Vehicles) prior to and after acquisition (debt for asset swaps, foreclosures or other). Group Risk Management Following assessment of the given The Cyprus financial system in the last two circumstances, the Bank seeks consensual years has gone through a turnaround and solutions in order to assist customers in OVERSEAS OPERATIONS reforming phase after the 2013 country repaying their loans in a manner which is financial crisis, which raised questions both fair and reasonable. However, there is regarding its credibility/viability. Hereafter Representative Offices key macroeconomic and financial highlights intolerance of uncooperative clients and the The Representative Offices continued to Bank will use all available means, including are reported confirming the positive outlook successfully represent the Group overseas for Cyprus in 2017, after the exiting from foreclosure and legal action, to obtain via a strong presence in Russia with offices repayment. The division consists of the the MoU status, signed in 2013 between the in Moscow and Saint Petersburg, in Ukraine Government and the Troika. following units: (Kiev) and in South Africa (Johannesburg). The geopolitical situation in the wider area Business Support Team (BST) Representative Offices provide updates The Business Support Team engages of the eastern Mediterranean affects Cyprus and information on the entire range of the positively as it remains the only point of Business clients at the pre-arrears or early Group’s services through their experienced arrears stage in order to assess the viability stability in the region which is in turmoil due and highly-qualified staff. Clients active mainly to the Syrian crisis. As a result of this of the client’s turnaround plans and, if overseas are therefore able to benefit from appropriate, develop and shape a suitable crisis, European countries are in a difficult the physical presence of the Group in these position of having to manage the waves of restructuring solution to support the client’s three markets. needs and avoid deterioration to NPL status. refugees fleeing Syrian territory and seeking a safe haven, mainly through Greece and Another important role of Representative Turkey. Arrears Management Unit (AMU) and Offices is to facilitate monitoring of the local Collections political and economic situation as well as The AMU officers are working directly On the other hand, the possible legal and business environment, contributing deterioration of the UK and Russian with both retail and business NPL clients. to the timely taking of measures for the The officer’s duties involve making a full economic outlook and the mentioned protection of the interests of the Group and increased geopolitical tensions in the assessment of the client’s circumstances (in its clients. accordance with the Arrears Management Middle East and Eastern Mediterranean, could trigger adverse spillovers to economic Directive), with the objective of concluding South Africa Representative Office a viable and sustainable restructuring of the confidence, tourism and consequently to the The Representative Office in South Africa client’s commitments to the Bank. The Bank aggregate economic activity. has been in operation for over 19 successful is currently using a range of restructuring years. tools and techniques in order to optimize the The intercommunal UN-led talks between restructuring options available to both the the two community leaders in Cyprus have The office provides updates and information Bank and the client. been intensifying during 2016, and revived to the expatriate community in South the hope for a long-sought solution of the Africa on the entire range of Hellenic Collection officers make regular reminder Cyprus issue. Prospects for the resolution of Bank’s products and services through their telephone calls and send SMS messages the problem have sent sentiments high for experienced and highly qualified local staff, to clients or their guarantors to collect a positive outcome that will expedite exit represents and promotes Hellenic Bank outstanding payments and make sure due from the crisis and mark a return to stability Group and keep the Group informed on payments are made on time. and welfare. Hellenic Bank is studying all the international business developments in possibilities but considers it premature to South Africa. Debt Recovery Unit (DRU) make definite assessments regarding the The DRU handles non-viable and/or outcome of the talks. The office also plans and promotes activities uncooperative clients. The strategy for to attract investment into Cyprus as well as handling these problematic cases depends Despite the important steps taken towards attracting new customers. on the circumstances of each borrower or restoring the economic climate, some guarantor. The preference is for consensual degree of uncertainty remains, as the The Representative Office supports the resolution but, failing that, the full range of country still has certain issues to resolve, Greek Cypriot community in South Africa actions, including foreclosure, is pursued in such as the high volume of non-performing through sponsorship of the SAHETI Greek order to collect the outstanding debt. exposures (NPEs), high private indebtedness, School; the Archbishopric of Johannesburg high public debt, high unemployment and and Pretoria, as well as the Hellenic Radio delays in the progress of structural reforms. Station.

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The recovery of the property market largely NPLs and prospectively the property sales to execute their payment business and depends on the ability of local buyers to management, remains the Bank’s most cover transactions, especially in US dollar. obtain mortgages to finance property important priorities, and this has been Foreign banks’ concerns focus mainly on investments given their already high level further addressed recently by signing an the perception that Cyprus is lax in its AML of debt. At the same time, the high level of outsourcing agreement with a foreign and compliance risk management and weak NPEs of which big part is either terminated specialized company of NPEs management. on measures for the prevention of terrorist or has a collateral based recovery strategy The deployment of excess liquidity through financing. Hellenic Bank attaches a lot of means that a significant amount of sound and prudent loan growth is also importance to compliance with all AML properties need to be sold to new buyers. an important priority which is dealt with, and ATF regulations and invests significant Banks, including Hellenic Bank, are currently whilst always taking into account market resources in order to achieve this. increasingly involved in voluntary D2A conditions, regulatory frameworks, strategy swaps. This increases the market oversupply and risk appetite, as approved by the Board Impact on/ Developments in Hellenic Bank and subsequent downward pressures in of Directors. • The Bank participated in a number of prices in the banks’ attempt to liquidate regulatory ‘thematic evaluations’ which were repossessed properties, given the limited The foreclosure law is yet to be tested as carried out by the Joint Supervisory Teams timeframe permitted by the regulator. only few cases have been sent through that (JST). One of those reviews was related to In the energy sector, there are moderate specific procedure. This understandably Regulatory Capital calculation. expectations for the long-term prospects, raises questions to the Regulators as to the based on both the current estimated law’s effectiveness, something which in turn • The Bank prepared and submitted to the reserves of natural gas and developments in adversely affects the Bank’s effectiveness in supervisory authorities its annual Internal the oil and gas market which led the entire dealing with the management of NPEs. On Capital Adequacy Assessment Process sector to consolidation mode. the other hand, the Banks are increasingly (ICAAP) and Internal Liquidity Adequacy exposed to property business risk as a Assessment Process (ILAAP) exercises, Fitch Ratings upgraded the long-term rating result of above-mentioned voluntarily following their approval by the Bank’s Board of Cyprus by one notch to BB- with a positive repossessed assets through Debt-to-Asset of Directors. The results of those exercises in outlook in October 2016. In September swap agreements with non-performing conjunction with the thematic evaluations 2016, Standard and Poor’s, also, upgraded clients. This poses additional uncertainty on have been taken into account in the Cyprus’ long-term rating by one notch to their near future performance and capital Supervisory Review and Evaluation Process BB with a positive outlook. Moreover, in adequacy. (SREP) and especially in updating the Bank’s August 2016, Moody’s has changed its required capital adequacy ratio. outlook on the Cypriot banking system to The Hellenic Bank Group continues to be positive from stable. As a result, the Cyprus exposed to regulatory and legal risks due • In 2016, the Bank updated its Recovery Bonds will qualify for the program when to the complexity and the large number Plan and submitted it to the supervisory Cyprus returns to investment grade. In of compliance and local and EU regulatory authorities following approval by the Board July 2016, the Republic of Cyprus, tapped obligations. The Group’s operation is of Directors. The submission of this plan international markets for the first time after therefore affected by continuous changes in emanates from the requirements of the the completion of the economic adjustment laws, directives and regulations that govern Bank Recovery and Resolution Directive program, with an issue of a seven year bond the operation of financial institutions. (BRRD) 2014/59/EU for the ‘Recovery of €1 billion at a yield of 3,8%. and Resolution of Credit Institutions and Cyber risk is the emerging risk for all banks Investment Firms’. The Banking sector, despite the still high nowadays, due to higher use of electronic but improving level of NPEs, showed a banking and internet in general. Hackers are • The Bank, following the mentioned SREP strengthened capital and liquidity position. violating firewalls in their efforts to illegally recommendations, has been working on Its size has been reduced to a moderate 3.7 gain access to customers’ sensitive data and a comprehensive collective and individual times the GDP or about the EU average. use it for their own benefit. Phishing attacks impairment methodology upgrade which is Foreign exposures have been eliminated and are a phenomenon that has taken significant expected to be fully implemented in 2017. domestic operations form the main focus. dimensions. In an effort to prevent such In addition, an updated NPL strategic and attacks and mitigate their effects, the Bank operational plan, integrated in financial New lending during 2016 continued to be is taking proactive measures in order to planning and appropriately aligned with satisfactory in the banking system. The boost the security of its systems, protecting Hellenic Bank’s Strategic Plan, ICAAP and Bank’s target expectations set for the year from potential losses through international Risk Appetite Framework is expected to be were met (above Eur 300mln). The fiercer insurance policies and simultaneously completed early 2017. competition among banks continues to educate its customers to be vigilant and exercise pressure on margins in all banking alert when these attacks occur. • The increased regulatory requirements and segments and challenges the risk-adjusted the plethora of new regulatory directives returns mid-term sustainability of domestic The conscious effort made by foreign banks and/or amendments of existing ones has banking business. to de-risk their operations, especially from continued to be the main characteristic of risks associated with their co-operation with 2016 in terms of regulatory activity. NPEs decreased in 2016 both at banking other counterparties, and their decision to system (~-13%) and at Hellenic Bank level withdraw from certain countries led the Risk Governance (~-12%), while the incoming flows of loans banks in Cyprus, Hellenic Bank inclusive, The Risk Governance Unit was set up in in arrears stabilised. The management of to look for foreign counterparties so as December 2015, with the aim to provide

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horizontal support to risk management criteria, it identifies and assesses risks and LGDs) which were developed and are revised activities across the risk spectrum, especially recommends ways to manage them. It on a regular basis by the Quantitative Risk vis-à-vis the development of risk frameworks monitors high-risk accounts and ensures Analysis Unit. and policies, to coordinate and drive the accuracy and completeness of the cross-departmental projects for which provisions. The Unit took part in the Internal Capital risk management is a key stakeholder and Adequacy Assessment Process (ICAAP) additionally to support administratively During 2016, the Credit Risk Management performed by the Bank. The results of this the work of the Board Risk Management Unit formulated Credit Risk Management exercise, formed the main components in Committee. Framework and policies and procedures for the supervisory review to determine the the identification, measurement, approval, SREP capital adequacy ratio. During 2016, the unit led/supported the management and reporting of credit risk, development or annual review of risk which were approved by the Board of Throughout the year, the Unit actively frameworks and policies and ensured proper Directors. participated in the Executive Credit Risk governance of approval for documents Committee’s operations, with frequent like the Enterprise Risk Management Particular emphasis was placed on the reports on the risks it monitors, and Framework, Risk Appetite Framework and monitoring of Non-Performing Loans (NPLs) submitted proposals for their reduction or Statement, Group Risk Management Charter and the progress made in restructuring loans their management, thus assisting in making and various cascading policies under the which were in arrears or which presented a important decisions. In addition to the above specific risk family frameworks. Additionally, high risk of becoming non-performing. reports, the Unit submitted for approval the unit provided coordinating support new or revised policies on issues relating across various activities performed by the To this end, the Unit prepared monthly to credit risk, as well as suggestions for the Risk Management Division such as audits, reports for both Senior Management improvement of existing processes. regulatory requests and others. and the Board of Directors, as well as the supervisory authorities. In an effort to (b) Treasury Book The Unit coordinated or actively supported reduce the level of NPLs, the Unit prepares The Bank’s Treasury portfolio remains cross-departmental projects such as ICAAP, reports on a monthly basis to the Business positioned mostly in countries and/or ILAAP, Recovery Plan, Pillar 3 disclosures etc. Departments to inform them about accounts banking institutions with a good credit with a high risk of becoming non-performing rating. However, the Group is exposed to Twenty-four Board Risk Management so as to undertake corrective actions on a Cyprus Government Bonds which are below Committees were organized during 2016, timely basis. investment grade. In October 2016, the with the unit’s administrative support. The Board of Directors approved an increase in unit facilitated communication between Furthermore, the Unit provided training to the investment limit for Cyprus Government Board Members and Executives to drive the the Business Departments on various issues Bonds by €100 million. Committee’s decisions forward, as well as to relating to the detection, measurement, ensure proper escalation of matters to the monitoring and mitigation of credit risk. During 2016, the Board of Directors also Board for review and approval. approved the revised Bond Investment In an effort to improve the efficiency and Framework, with the aim to profitably Credit Risk Management effectiveness of restructurings performed deploy the Bank’s excess liquidity in The management of credit risk constitutes and increase the pace of restructurings, the alignment with the Group’s Risk Appetite. a fundamental process in the operation of Credit Risk Management Unit formulated The Bond Investment Framework sets a bank and it is of vital importance to its a new Restructuring Policy and co- concentration limits per sector, credit rating, long-term robustness. The Group employs operated with other departments of the accounting portfolio, issuer/issue limits various policies of detection, measurement, Bank to introduce new and revise existing and industry sector limits. During the year, monitoring, reporting and management/ restructuring processes and solutions. On Treasury also proceeded with investments mitigation of credit risk in both the Loan this basis, the Unit introduced monthly in securitizations, which were aligned with Book and the Treasury Book. The Group reporting of restructuring solution success the limits assigned by the Bond Investment simultaneously engages in frequent and rate and monthly reporting for NPLs cash Framework. ongoing revision and redrafting of these collection. policies based on supervisory Directives The Unit closely monitored international and best practices, as well as its strategic The Credit Risk Management Unit ensures market developments throughout 2016, as objectives and emerging developments in the accuracy and adequacy of provisions well as potential fluctuations in the credit the local and international economies. through the validation of individual ratings of the Bank’s counterparties and assessments for a number of borrowers. The of the countries in which exposures exist. (a) Loan Book Unit examines the parameters set for the Consequently, in 2016 the Unit proceeded The Credit Risk Management Unit closely calculation of impairments for credit losses in the reduction or retraction of the monitors the composition and quality of and makes the relevant recommendations. credit limits of countries and/or financial the Loan Portfolio and, as appropriate, Provisions are divided into two categories. institutions which were adversely affected. takes preventive or corrective action. It A number of accounts are individually In addition, the Unit submitted a number of suggests appropriate action to Business examined for provisioning purposes based reports and suggestion memos, based on Departments in order to improve portfolio on internal set limits, while the remaining which decisions and corrective measures quality and reduce credit risk. It examines accounts are examined for provisions based were taken in order to mitigate credit risks loan proposals that meet predetermined on credit risk measurement models (P/Ds, involved.

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Due to the prevailing adverse conditions in The Department participated, for yet The Group places particular emphasis on Cyprus a decrease in the limits extended another year, in the Internal Capital the management of operational risk, having to the Bank by certain counterparties was Adequacy Assessment Process (ICAAP) that assessed it on the higher level as a material observed, a development which affected the Bank conducted. ICAAP’s aim was to risk in recognition of its importance. Treasury Operations and contained the assess the risks that are related to the Bank’s transaction options available. Some operations, the complexity of its activities The Group maintains an internal control correspondent banks with which the Group and the risks emanating from the structure framework, supported and overseen by an transacts have requested collateral in of its balance sheet. ICAAP included, inter independent operational risk management the form of pledged cash, in an effort to alia, an assessment of liquidity risk, interest function. Group Operational Risk Unit is reduce their exposure with the Bank. This rate risk in the banking book and price risk. empowered to oversee operational risk development arose mostly as a result of the management. This is effected through current condition of the Cypriot economy The Department also had an instrumental establishing, and providing support in and not necessarily because of a lack of trust role to play in carrying out the Bank’s implementing and embedding, policies, in the Hellenic Bank Group. Internal Liquidity Adequacy Assessment responsibly aligning policies risk and strategy Process (ILAAP). Based on the European and providing assurance to Internal Audit. With all of the above activities, the Credit Directive 2013/36/EU (CRD) and the Indicative examples of control mechanisms Risk Management Unit contributed guidelines of the European Banking are effective segregation of duties, access significantly towards the effective Authority (EBA), the Bank is required authorization and reconciliation procedures, management and control of credit risk in the to assess the adequacy of its liquidity ongoing staff training and assessment Group. risk management processes and the processes as well as key risk indicators degree to which its pool of liquid assets is Market and Liquidity Risk Management commensurate with the Bank’s risk profile Re-affirming the Group’s resiliency, and over During the past year, Group Market and and risk appetite of its Board of Directors. the course of 2016, there have been no Liquidity Risk Management focused Through the ILAAP, a series of stress test operational risk events which could, either primarily on the assessment, monitoring and scenarios were conducted which showed individually or in aggregate, breach approved management of the critical area of liquidity that, for 2016, the Bank held satisfactory limits and/or threaten the Group’s viability risk. Particular emphasis was placed on the liquidity to implement its strategic plan and, and reputation. close monitoring of the evolution of deposits even more importantly, to withstand a series and their sources of origin, as well as their of adverse scenarios of deposit outflows. During 2016, Group Operational Risk Unit structure. The Department also monitored, has been heavily engaged in risk assessment throughout the year, the Bank’s compliance Furthermore, the Department participated and mitigating measures/action plan with regulatory liquidity ratios and the in the updating of the Bank’s Recovery Plan, implementation and risk monitoring as changes in the Bank’s internal liquidity which is a requirement emanating from the per its remit. Included, but not limited ratios, proposing actions and measures for European Directive 2014/59/EU (BRRD). The to, are the articulation of a number of their improvement. By the end of 2016, the Recovery Plan includes actions that the Bank operational risk related Policies, fostering Bank maintained very satisfactory levels of may take to restore its financial position implementation of the Operational Risk excess liquidity. (capital and liquidity adequacy) following Management Framework and aligned a significant deterioration of its financial with Group strategic objectives, the In utilizing its excess liquidity, the Bank condition. During 2016, the Bank was well implementation of a comprehensive risk and invested primarily in sovereign and within the Recovery Plan limits relating to compliance management system, providing supranational bonds in euro and in liquidity and the Plan was therefore not for enhanced operational risk incident foreign currency. The Department played activated. management, operational risk assessment, an instrumental role in updating and management and reporting capabilities as formulating a comprehensive framework Finally, throughout the year, the Department well as servicing the needs of other control for bond investments, which includes the actively participated in the functioning of functions. general principles, guidelines and investment the Asset and Liability Committee (ALCO) limits which would govern investments with frequent reports and presentations Risk awareness has also been enhanced in fixed income securities. Furthermore, regarding the risks monitored and via relevant trainings, especially towards the Department assessed the market suggestions for their mitigation or the Risk & Compliance Liaisons, as well as and liquidity risks emanating from these management, thus facilitating ALCO in intensifying the frequency and extend of positions on a regular basis. The equity reaching important decisions. Through all interaction with 1st Line of Defense Units portfolio and foreign currency positions, these means, the Department contributed through incident management. Particular on the other hand, remained at low levels significantly in the effective management of emphasis has been placed on enhancing throughout the year. market and liquidity risks in the Group. business resiliency by supervising the complete coverage of Group operations During the year, the Department also Operational Risk Management with adequate business continuity plans regularly monitored developments in Operational risk is defined as the risk of (BCP), and the routing of critical systems the area of interest rate risk. At the end loss resulting from inadequate or failed to dedicated disaster recovery sites (DRS). of the year, interest rate risk remains at internal processes, people and systems or Additionally, and not least importantly, relatively low levels and certainly well below from external events. For Hellenic Group, Conduct risk management is being solidified regulatory limits. this definition includes legal, conduct and via the creation of an Executive Product & reputation risk, but excludes strategic risk. Conduct Committee, mandated to fine-tune

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development, implementation and on-going The Unit reports its findings and Quantitative Risk Management review of products and services, new recommendations to the Bank’s The Quantitative Risk Analysis unit supports business lines, markets as well as the Bank’s Management to take the appropriate both the Risk Management and Senior Conduct of Business Strategy. corrective action in a timely manner. Management in respectively risk and strategic modelling matters. It focuses on Group Credit Control and Review Unit During 2016, the Unit performed its the analytically related engagements of Risk The Group Credit Control and Review Unit scheduled assessments and prepared Management such as business intelligence, which was re-activated late 2015, performs reports to the management as well as the rating and scoring models, capital stress independent assessments of the quality and business divisions with its findings and testing models, collective provisioning, IFRS direction of credit risk in the Bank through recommendations contributing towards 9 and regulatory and internal reporting. planned portfolio reviews and oversight strengthening the Bank’s credit monitoring In addition, it provides analytical support of key credit risk indicators. Furthermore, process and credit risk mitigation. The main to the strategic and capital planning and it performs on a sample basis, individual areas that the Unit concentrated its reviews modelling of the whole Bank. Furthermore, credit reviews to assess the management of during the year were in the control of loan it provides assistance to other Divisions, such the loan portfolios, exercise of delegations, arrears, excesses, reviews of revolving as the Arrears Management Division with and compliance with credit policies and accounts, restructurings of non-performing analysis on NPLs and property collaterals. procedures by all Divisions. loans, adherence to credit policies and procedures and credit monitoring process. WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL BANK REPORT GROUP 2016

Group Compliance Unit works toward strengthening relationships • Introduction of cafeterias at Head Office The Group Compliance Unit (GCU) works with correspondent banks by evaluating & Amphipoleos Buildings in fully renovated to ensure the Group’s compliance with their expectations of the Group’s AML/CTF high caliber space aiming to provide staff, regulatory and legislative requirements. framework and responding to their requests associates and customers better service and GCU’s activities are broadly divided into two for information in a timely and effective higher quality. areas: anti-money laundering and counter- manner. • Re-certification of our Energy Management terrorist financing (AML/CTF), which aims to System ISO 50001 which has since its safeguard the Group against financial crime; GCU has also implemented high standards initiation, reduced our energy consumption and regulatory compliance which aims to and strong practices in other (non-AML/CTF) by about 30% and our electricity bill by ensure the Group’s compliance with the areas of regulatory compliance. For instance, about 55% (from about €2.4 million in 2012 legal and regulatory framework. it certifies the Group’s compliance with to €1.1 million in 2016). Common Reporting Standard (CRS) and U.S. • Assessment of our property valuation The scope of compliance continues to Foreign Account Tax Compliance Act (FATCA) panel and its reduction by 50%, plus be broad and complex, with a significant requirements. Additionally, to uphold the establishment of a property valuations impact on business. As regulatory Group’s commitment to maintaining the framework. expectations continue to increase, the privacy of its customers’ data, GCU monitors • Complete outsourcing of the printing of challenge is to successfully implement a compliance with stringent data protection customer statements and advices. compliance program that constitutes a requirements. • Development of operations KPIs. proactive component of the institution’s • Takeover of the Customer Complaints risk management culture embedded in the Group Operations function on a Group-wide basis. Group’s business units. Operations’ vision for the year 2016 was • Implementation of enhanced practices and “We are Changing – Operations Made culture in Business Continuity and Health Minimizing the Group’s exposure to financial Simple”. We thus aimed to change our & Safety including better planning, risk and crime risk protects the Group from legal practices, procedures and organizational other assessments, testing, educating staff or regulatory action, financial penalties, structure, in an effort to become more and handling of incidents. and damage to the Group’s reputation. efficient. We furthermore targeted to do GCU tracks applicable laws, directives, more (centralized) work with less resources. Group Strategy and other regulatory communications and Our 2016 assessment has revealed that Group Strategy is responsible for, amongst develops programs to bring the Group into the above objectives have been met. On others, the preparation of the Strategic compliance with them. the one side a lot of initiatives took place Plan and the Annual Business Plan. The that changed the way we operate, whilst Department monitors and assists the In 2016, GCU took several major actions to in parallel, we took over and centralized implementation of the targets of the various strengthen the Group’s AML/CTF compliance various work. At the same time we reduced divisions and subsidiaries, according to program. In particular, GCU conducted the Operations work force from 196 to 175 the strategic guidelines set by the Board reviews of all types of customer accounts during the year, which represents a drop of of Directors. Also, Group Strategy submits to test the robustness of the Group’s over 10%. to Senior Management regular reports know-your-customer (KYC) practices, which In 2016 we focused to support more concerning the overall financial sector and are the foundation of a healthy AML/CTF efficiently the Bank’s two main strategic is responsible to carry out various strategic control environment. GCU also upgraded goals (re: NPL Management and Growth). To projects. the Group’s transaction monitoring system, achieve this we restructured our Processing a key AML/CTF tool, resulting in more Centres as follows: Economic Research Department accurate and consistent identification of • Separated Credit from other types of work. The Economic Research Department’s main suspicious activity. In addition, Compliance • Divided Legal Documentation work into objective is to monitor and analyze domestic has conducted an overhaul of the policy and teams designated by business sector, thus and international economic developments, procedure documents covering all major no longer a structure by district applies. to construct macroeconomic projections areas of the function. • Established weekly Key Performance and brief the Bank’s Board and Management Indicators (KPIs)/reporting of the status of and personnel, as well as its clients, on In addition, GCU has augmented its own applications transparently forwarded to the these developments. The Department is also staff capabilities by increasing its headcount business sectors. responsible for authoring reports, articles to almost 25 compliance specialists, hiring and commentaries on various economic people from both international and local Other 2016 Operations success stories were: issues, as well as carrying out statistical banks. A major area of focus in terms of • Centralization of corporate payrolls at analyses of economic data and statistics and fostering a “culture of compliance” has the Payments Centre and moving gradually presenting the results to the Bank’s Board been to enhance the AML/CTF training customers to WebBanking, plus other Management, staff and clients. program across the Bank through improved centralization activities taken over by classroom-based and online training Trade Finance, Card Operations and Loan Group Technology programs covering a variety of themes and Operations. Information Technology subjects. • Improving the operation of Technical The mission of Group Information Services. Technology is to enable the strategic goals of The Group takes its correspondent banking • Various renovations of office space and the Group through agile IT infrastructure and relationships seriously and recognizes the branches with a new look comprising innovative technological solutions. importance that many of its correspondents of glass partitions, open plan and new place on compliance. GCU continuously furniture. 21 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL GROUP OPERATIONS BANK REPORT GROUP 2016 REVIEW

In the year under review an IT Transformation data is accurate, complete and up to date Additionally, it has the objective to assist program has started and is expected to and how to turn data into insights, and in ensuring that the Group-wide project empower the Group Information Technology insights into real business advantage. The portfolio is appropriately prioritized, to master the regulatory changes and fuel reality is that turning volumes of data into managed and resourced. As part of the the digital growth aspirations of the Group. accurate, valuable, practical and actionable setting up of the Transformation Office it was The program lies on a 3-year roadmap and information is not that straightforward. decided that the already established Project focuses on incremental modernization. With Management Office would be reporting to the introduction of modernized platforms Banking institutions are facing great the Transformation Office. focusing on customer experience will challenges reporting on an ad-hoc and provide higher flexibility to deliver digital regular basis to the regulatory bodies. The Transformation Office comprises two features, shorten time-to-market, and Hellenic Bank being proactive and focusing distinct but interfaced components, namely: supplies consistent and reliable reporting. on the implementation of a sound Data Governance and Data Quality Framework, The Project Management Office In 2016, the following have been delivered has established the solid foundation needed The Project Management Office addresses as part of incremental modernization to become a data-driven organization. transformation from the viewpoint of the roadmap: various projects that are running at any • Data Warehouse upgrade. The new The aim of the Bank is to fully comply with given time within the Bank. platform is acting as the Bank’s Central Data the regulation of the Basel Committee on 1. It attempts to identify pieces of work repository for consolidated information Banking Supervision, BCBS239 - Principles running in the Bank that are of such size and and is capable of handling among other the for effective risk data aggregation and complexity to be categorized as Projects. increasing requirements for management risk reporting but also to formalize and 2. Once identified it categorises these and regulatory reporting. standardize its approach through a Data projects into those directly managed by the • Middleware Platform upgrade. Governance model. PMO and those monitored by the PMO but Increases the business flexibility and smart managed by specialized functions. interoperability of systems, regardless of In order to achieve all the above, the Bank 3. It assists in challenging new project data format and protocol, and simplifies the had developed and implemented a Data initiatives and assess within the existing connectivity between the legacy systems, Governance Framework. To cover the portfolio. applications and web services. scope of the framework, the bank had 4. Finally, it is tasked with promoting • Customer Relationship Management defined a Data Management Policy and the the Project Management Governance (CRM) was implemented in the first relevant Data Management, Master Data and appropriate tools in order to create instance to be utilized for Periodic Customer Management, Data Quality Management consistency and transparency as to how Review/ KYC deployment across the Bank and Regulatory Reporting Processes. projects are executed and monitored. as well as to Service Line and Suggestions & Complaints Departments, resulting in Further to the above and as part of the Data The Transformation Team improving Customer Service. Governance Framework, a Data Dictionary The Transformation Team attempts to follow has been developed identifying and defining a top down approach to transformation. The implementation of IT Service the various data elements required for It uses the approved Bank strategy as Management strategy has been initiated regulatory reporting at a first stage with an its starting point in order to create the during the year in a fully integrated aim to further develop and maintain as the roadmap for the changes envisaged by software platform that will facilitate a new common reference within the bank. it. This roadmap affects areas such as governance model to IT, improve IT speed In parallel to the Data Governance initiative, Technology, Processes and People as and agility, streamline IT operations and a Data Warehouse Harmonization Project mentioned previously. The Transformation deliver qualitative IT services throughout the has been executed with main objective Team’s objectives are to manage and provide bank. to modernize and harmonize the data all necessary information to the Executive repository of the bank aligned to the newly Committee of the Bank which is the Key element of our digital strategy is to developed data dictionary and establish a appropriately empowered body to steer the modernize and digitalize the workplace. single source of truth, as required from the Transformation in the Bank. As part of our strategy, we are introducing BCBS 239 regulation, to facilitate reliable, applications and services to promote consistent, complete, easily available to Human Resource Unit collaboration (internal and with customers) those with a legitimate need for it. Αt the end of 2016, Group staff numbered and secure information sharing on a 1646, 1630 (99%) of whom were employed seamless/streamline basis. Group Transformation Office in Cyprus and the rest at the Representative In 2016 Hellenic Bank established a Offices of the Group. Of the total workforce, Data Governance Transformation Office to help manage the 57% were university graduates, 32% of Organizations have been struggling to make Bank’s transformation journey. The objective whom had also completed postgraduate sense of all the information they have. Over of the Transformation Office is to provide studies. Furthermore, 18% were college the past few years, the focus on data has the necessary assistance to ensure that the graduates and, of the remaining staff, 51% started to shift and today, the issue is no change envisaged for the Bank’s business were holders of professional qualifications. longer about owning the most of data but model (which comprises of Technology, rather about how to gain the most insight Processes and People) goes in line with the In 2016, 147 employees were recruited, from it. The importance is to ensure that Bank’s strategy and delivers appropriate mainly in specialized positions such as Risk business benefits and return on investment.

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Management, Ship Finance, Internal Audit, Collective Labor Agreement which expired Promotion of Products and Services and Group Compliance. These specialized on 31/12/2016, aiming at the improvement During 2016, support of the Group’s recruitments were the result of the Bank’s and rationalization of outdated provisions products and services was strengthened strategic decision to expand its activities and adapting them to the Bank’s economic through enhanced advertising campaigns, in new areas and the increased regulatory position. while there was simultaneous assistance in obligations imposed by various supervisory efforts to attain cross-sales and strengthen authorities. Legal Services Team the index for preference for the Bank’s The Legal Services Team is responsible products over those provided by the The training program was successfully for advising on any issues requiring legal competition. completed with emphasis on topics related analysis, in order to provide the best to compliance, credit, risk management, possible service and support to all the units In the loan products sector, plans were restructuring of loans, new systems, of the Group. implemented for the promotion of: information security and skills development. • the ‘Foundation’, ‘5,7,9’ and ‘Offset’ In 2016, there was a significant increase It is responsible for providing legal support housing loan schemes provided by the Bank of 43% in in-house training programs, to all the units of the Group to ensure the • the ‘ONE loan, ONE bank’ Balance Transfer while total participations exceeded 5.100. efficient and effective handling of a wide scheme, and Furthermore, e-learning was applied for range of legal issues related, or directly • a comprehensive Car Hire scheme with compliance issues, with substantial benefits connected, to the daily operations of the interest rates starting at 2,45%. to all staff. Group. Recognising education as a supreme right, In addition, Group Human Resources Furthermore, the Legal Services Team Hellenic Bank has, over the past few years, proceeded with the upgrade of the provides advice and guidance for the increasingly focused on covering student Performance Appraisal System based on protection of the Group’s interests, to needs. In this context, in 2016, it used best practices in the area of Performance the extent possible, including legal issues the slogan ‘Put on our ‘Pack’ and watch Management and it was aligned with the relating to the Bank’s general credit policy. your student life skyrocket!’ to promote Strategic Pillars and Values of the Bank. The In addition, it is responsible for drafting Student Pack, a new preferential package upgraded Performance Appraisal System will new standard documents and agreements created especially for students which be implemented at the beginning of 2017. to be used by the Group and the occasional provides significant privileges and discounts. revision of such documents, to ensure that Regarding the minors section of the market, In April 2016, the Payroll department of the their provisions comply with applicable in October 2016, Hellenic Bank promoted Group Human Resources launched a new legislation. It is also responsible to advise Youth Club, a new preferential package payroll system. The system SAP/Payroll aims the Group in relation to the legal aspect of for teenagers which aims to assist them in to exploit the possibilities and advantages of its relations with its various stakeholders becoming financially responsible and offers the common platform and automate several (such as investors, customers, shareholders, many benefits and discounts at selected processes involving HR issues. employees). businesses. The Winners’ Team deposit scheme for minors was also promoted, In the same year, the “Code for Dealing with The Legal Services Team also provides legal enabling young depositors to use their Harassment in the Workplace” was officially advice and reviews the legal documentation membership card to enjoy discounts for introduced to the Group. Its objective is to relating to any transactions entered into shops, play areas, bookshops, etc. prevent and avoid any form of harassment by the Bank in order to meet the particular amongst staff, customers and associates circumstances of each case and to safeguard During 2016, significant additions were and ensure that if such conduct occurs, the the interests of the Bank. made to the card sector. In May 2016, necessary mechanisms for monitoring and Hellenic Bank presented PayBand, the non-repetition will be directly implemented. Besides the above, the Legal Services most modern and simplest contactless Team handles lawsuits against the Group payment method. Via PayBand, Hellenic In line with the revision of the “Code of in collaboration with external counsel as Bank exclusively introduced Wearables to Business Conduct and Ethics”, Group Human well as the cases against the Group by the Cypriot market, thus evolving contactless Resources presented and promoted the new administrative authorities. payment technology as we know it thus seven Corporate Values of the Group. The far. Hellenic Bank aims to enhance the new values were devised by the Executive consumer’s journey via the services and Committee with the aim of promoting a GROUP MARKETING, PUBLIC products it offers, exploiting new technology new culture within the Group and they are and improving our banking experience. as follows: Integrity, Individual Ownership/ RELATIONS AND CULTURAL Prepaid PayBand was subsequently launched Accountability, Teamwork, Respect, ACTIVITIES DEPARTMENT in November 2016, thus also enriching the Reliability, Meritocracy, Transparency. Bank’s prepaid products and, once again, beating the competition into second place. The Group’s Marketing, Public Relations and Within the framework of the Industrial Overall, various campaigns were developed Cultural Activities Department is mandated Relations Code, Group’s senior throughout the year for the promotion to ensure the Group’s public image, to management submitted to the employees’ of competitions/draws for Hellenic Bank promote its products and services and to representatives, a letter accompanied cardholders (UEFA Champions League, foster corporate social responsibility through by a list of claims for the renewal of the summer and Christmas competitions, activities. reforestation campaign, etc.).

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In the insurance products sector, the The Bank also developed the Hellenic Bank During 2015, the Press Office created Marketing Department provided advertising Running Under the Moon athletic event new communication flow, while it also material to support Pancyprian Insurance’s for the second-consecutive year, where participated in a number of the Bank’s private car insurance, home insurance and participants enjoyed an evening race in activities which necessitated the preparation travel insurance. It also supported efforts to Nicosia’s Athalassa Park. Part of the event’s of communication management plans. sell Hellenic Alico Life’s products, including proceeds were donated to ‘Thermokoitida the revised ‘Future Plus Advance’ insurance Agapis’ (‘Incubator of Love’), the Association Within the framework of its responsibilities plan. of Friends of the Neonatal Intensive Care and obligations, the Office monitored Unit. current events in the news and informed the Digital Marketing Bank’s management and administration. It The Digital Marketing Team has concentrated The Bank continues its perennial successful simultaneously ensured that that the Bank’s their efforts in ensuring the Bank’s online support of the Eco-Schools Programme, news and matters which concern the public marketing strategy is in line with strategic while, in 2016, it sponsored and hosted were transmitted and promoted in the best objectives and other marketing activities: Climate Launch pad, the innovative business possible way. In this context, a series of press implementing online and social media competition which aims to promote new conferences were held, contact with media as core marketing channels, engaging in talent throughout the spectrum of green representatives was made, interviews were multichannel campaigns for all products, growth and the exploitation of renewable given to electronic and print media, and a promoting digital products (Hellenic Bank’s energy sources, for the second-consecutive series of articles regarding the Bank and the mobile app), monitoring social interactions, year. financial sector in general were published. customer concerns and queries, while adopting a test-and-learn mindset in the For the first time, Hellenic Bank organised ever-changing digital environment. The a unique educational exhibition of CYPRIOT ECONOMIC team is making it their business to make the dinosaurs which were created by the Félix Bank available online in order to focus on de Azara Natural History Foundation and ENVIRONMENT two-way conversations with both customers Argentina’s Maimonides University, curated and potential clients, regarding the Bank’s by Sebastian Apesteguía, world-famous Economic Developments during 2016 products and services. Furthermore, priority palaeontologist and a Doctor of Natural Cyprus has completed its three-year is given to listening to our online community. Sciences. macroeconomic Adjustment Programme in It’s all about the customer. March 2016, with the sovereign regaining Participation in Business Conferences international capital market access. Cyprus Recognising the importance and role that has implemented important fiscal and Corporate Social Responsibility Activities seminars can play in the development and structural reforms under its macroeconomic Hellenic Bank’s Corporate Social improvement of the financial sector and, adjustment programme, which are set to Responsibility Programme is based on consequently, the economy, the Group contribute towards strong fiscal governance the axes of Society, Education, Health and strengthened its presence in the Cypriot in the coming years. Research, as well as activities which concern financial scene. the Environment, the Arts and Culture. Public finances have been consolidated to Within this framework, in 2016, it sponsored a large extent to secure the sustainability Once again, in 2016, the Bank participated important conferences, including The of public debt. Fiscal developments have in initiatives which aimed to alleviate social Economist (12th Cyprus Summit), Med largely out-performed the primary balance problems, supporting families and groups Business Expo, Shipping Gala Dinner targets that were set at the beginning of which provide assistance to cover the needs 2016, Cyprus Banking Forum, the Cyprus the programme. Also, significant progress of vulnerable sections of the population. Investment and Economic Summit in New has been made under the programme to York, ‘Life-Changing Ideas’, amongst others. restructure and restore confidence in the During 2016, various Units of the Bank Cypriot financial system. continued to realise campaigns, fundraising and other charitable events in order to Press Office – Communications Strategy The better than expected outcome in the collect money, comestibles and other items In its efforts to upgrade communications economy have created and maintained an which were donated to Municipalities, and improve the service offered to media environment of improved confidence which Associations and other bodies. representatives, the Group proceeded is reflected in the upgrades of the country’s in upgrading and institutionalising the and the largest domestic banks’ credit rating Special mention must be made to the operation of its Communication and Press by international rating agencies. As a result, funds offered to the PASYKAF Association Office in 2016. Cyprus successfully tapped international and the Red Cross, support of the ‘Zitite markets three times during 2016, while Elpis’ (‘Hope Wanted’) campaign for Syrian The purpose of the Press Office is to ensure the yields declined to historically low levels refugees on Greek islands for the second- and maintain constructive relationships allowing to refinance the national debt at consecutive year, support of the Make A with the media, as well as create messages more favourable rates and with extended Wish Foundation and the Anti-Drugs Council, and prepare and implement the Group’s maturities. and participation of the Bank’s employees in communications policy, in line with its blood drives. strategy and targets. The commitment regarding the implementation of the Economic Adjustment Programme has been the cornerstone in

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steering the economy out of recession. The advancement of structural reforms. The high economy has been exhibiting robust growth private indebtedness levels that have led to since the beginning of 2015, with real GDP deleveraging and increased NPEs, continue growth increasing by 2,8% during the first to pose significant risks to the stability of nine months of 2016. The course of the the domestic banking system and to the steady recovery path is reflected in the labor outlook for the economy, especially via market, which tends to follow the recovery developments in property prices. with a time lag. The deflation observed from the first months of 2013 has started From an exogenous perspective, the diminishing in magnitude, with the price country’s economy may be negatively level in 2016 expected to decline by 1,2%, influenced due to weaker than expected compared with a decrease of 1,5% in 2015. growth in the Euro area and a slowdown in output growth in the UK and further The expansion of the economy was mainly depreciation of the pound against the driven by rising private consumption amid Euro, as a result of increased uncertainty negative inflation and supported by the following the UK referendum. Also, possible depreciation of the Euro and the low oil deterioration of the Russian economic prices. During the first nine months of outlook and the increased geopolitical 2016, private consumption grew by 3,2%, tensions in the Middle East and Eastern compared with the corresponding period Mediterranean, could trigger adverse of 2015. Over the same period, investment spillovers to economic confidence, tourism grew by 10,4%, primarily due to investment and consequently to the aggregate in transport equipment, while investment in economic activity. On the other hand, construction also increased by 7,8%. From a geopolitical tensions in neighboring counties sectoral point of view, growth was supported render Cyprus as a safer tourist destination by resilient export performance in the and could therefore counterbalance, to a services sectors of tourism and professional significant extent, the potential reduction business. Specifically, during 2016, tourist in tourist traffic from UK. Additionally, arrivals increased an annual 19,8%, developments over a potential reunification compared with the previous year and at the of Cyprus along with the exploitation of same time, revenues from tourism increased Cyprus’ natural resources are being closely by 12,3% for the period January-November monitored in order to assess the potential 2016 compared with the corresponding prospects that are being developed. period of 2015. In spite of these challenges, Cyprus’ The housing market continued its macroeconomic outlook is positive. Official adjustment in the course of 2016, bringing forecasts by the Ministry of Finance of the cumulative fall in prices since mid-2008 the Republic of Cyprus anticipate growth to 32% (Central Bank of Cyprus’s Property of 2,8% in 2017. The pick-up in domestic Price Index). During 2016, property sales demand is expected to be reflected into recorded a new increase according to Land improved labor market conditions, with Registry data. Specifically, the sales deeds unemployment starting to ease gradually. submitted during 2016 increased to 7.063 Inflation is expected to turn positive, but versus 4.952 during the corresponding remain relatively low, weighed down by previous period, recording a year-on-year recent declines in oil prices. increase of 43%.

Cyprus Economic Outlook for 2017 Cyprus’ macroeconomic outlook is positive and is accompanied by a significant increase in real gross domestic product in the first nine months of 2016, the reduction in unemployment and further improvement of key domestic indicators since the beginning of the year. Despite the important steps taken towards restoring the economic climate, some degree of uncertainty remains, as the country still has certain issues to resolve, such as the high volume of non-performing exposures (NPEs), high unemployment and delays in the

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ANALYSIS OF SHAREHOLDERS 31/12/2016

Category of Shareholders Number of Shares Percentage % Number of Shareholders COMPANIES 172.895.270 87,11 540 PRIVATE INDIVIDUALS 15.432.442 7,77 23.601 CHURCH INSTITUTIONS 7.768.063 3,91 31 PROVIDENT FUNDS 1.462.598 0,73 60 STAFF 916.339 0,46 783 Total Capital 198.474.712 100% 25.015 Issued Capital 198.474.712

0,73% 0,46% 3,91% 7,77%

87,11%

26 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL BANK REPORT GROUP 2016 16,1 15,9 15,5 12,5 2.312 11,9 2.112 2.082 2.023 1.927 1.749 1.549 7,9 3,5 6,3 3,1 2,8 2,5 1,6 1,1 0,4 0,4 -0,3 - 1,5 - 1,2 - 2,5 - 5,9 - 2,5

10 11 12 13 14 15 16 10 11 12 13 14 15 16

UNEMPLOYMENT INCOME FROM TOURISM (Percentage Points) 10 11 12 13 14 15 16 (€ million)

INFLATION (Percentage Points) 10 11 12 13 14 15 16

GDP GROWTH RATE (At Constant Prices/ Percentage Points)

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GROUP MANAGEMENT REPORT

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Incorporation, Activities and Branch 2015. The reported loss of 2016 was December 2016 was €52,0 million (Bank: Network primarily due to increased impairment losses €52,7 million) down by 11% (Bank: down Hellenic Bank Public Company Limited (the and provisions to cover credit risk. by 11%), compared to the year ended “Bank”) was incorporated in Cyprus and 31 December 2015 with the decrease is a public company in accordance with During 2016, a deferred tax asset of €51,2 mainly reflecting lower card interchange the provisions of the Companies Law Cap. million was derecognised and charged in fees and reduced commission income in 113, the Cyprus Stock Exchange Laws and the income statement. The derecognition the International Business Division due Regulations and the Income Tax Laws. The of the deferred tax asset resulted from tax to the Bank’s efforts to reposition its Bank’s registered office is located at 200, losses for which is no longer probable that strategy on the said business. The Group’s Corner of Limassol and Athalassa Avenues, the related tax benefit will realise, as the and the Bank’s net gain on disposal and 2025 Strovolos, P.O. Box 24747, 1394 majority of these losses will expire by 31 revaluation of foreign currencies and Nicosia. The Bank is the holding company of December 2018. The carrying amount of the financial instruments for the year ended 31 Hellenic Bank Group (the “Group”). deferred tax asset is based on judgements December 2016 was €27,4 million, down of the Management of the Bank on its by 16% compared to €32,6 million for the The principal activity of the Group during ability to generate future taxable profits. year ended 31 December 2015. This amount 2016 continued to be the provision of a These judgements are based on available included a gain of €14,0 million from the wide range of banking and financial services, information including historical data, disposal of the shares in Visa Europe Limited including financing, investment, insurance improved macroeconomic estimates, the in 2016, while in 2015 included a gain of services, custodian and factoring services reduction in deposit rates, the stabilisation €16,7 million from the disposal of Cyprus as well as management and disposal of of the non-performing loans, the bank’s Government bonds. properties. impairment process and the results of operations. Expenses The Bank provides banking and financial Group’s total expenses for the year ended services through its branch network which As at 31 December 2016, the Group’s total 31 December 2016 amounted to €144,5 includes 53 branches in Cyprus as well as assets amounted to €7,0 billion, down by 5% million (Bank: €136,4 million), reduced its representative offices in South Africa, compared to 31 December 2015. This was by 5% compared to €152,1 million (Bank: Ukraine and Russia. On 17 November 2015 reflected in the decreased placements with €143,4 million, reduced by 5%), for the year the Bank was granted approval by the other banks following the early repayment ended 31 December 2015 due to lower 2 Central Bank of Cyprus for the operation of a of the TLTRO borrowing on 29 June 2016. administrative and other expenses. Representative Office in Athens. Income Statement Analysis Staff costs For further details and recent developments Net interest income Staff costs for the year ended 31 December on the Group’s structure refer to Note 22 of The Group’s net interest income for the 2016 accounted for 56,8% of the Group’s the Financial Statements. year ended 31 December 2016 was €147,5 total expenses recording an increase of 2% million (Bank: €147,1 million), up by 1% compared to the year ended 31 December Examination of the Development (Bank: increase of 2%) compared to the year 2015 (Bank: 56,1%, increase 3% compared to Position, and Performance of the ended 31 December 2015. The lower deposit last year), mainly due to the increase in the rates in 2016 compared to 2015 caused a number of employees from 1.555 to 1.646 Group’s Activities1 substantial decrease in the interest expense, as at 31 December 2016 (Bank: December Loss attributable to the Bank’s shareholders with a positive impact on net interest 2016: 1.531 employees, December 2015: for the year ended 31 December 2016 income. Reduction in interest income on a 1.438 employees). Analysis of staff costs amounted to €63,5 million. Profit yearly basis was mainly due to lower lending are disclosed in Note 10 of the Financial attributable to the Bank’s shareholders rates and due to the decreased carrying Statements. for the year ended 31 December 2015 amount of the impaired3 loan portfolio. amounted to €12,1 million and included The Group’s net interest margin for the year Administrative and other expenses a profit of €4,8 million from discontinued ended 31 December 2016 amounted to 2,2% Group’s total administrative and other operations that related to the disposal of a (31 December 2015: 2,0%). expenses for the year ended 31 December building owned by the Group in Moscow, 2016 amounted to €56,4 million, down by following the sale of its Russian banking Non-interest income 16% compared to €67,3 million for the year subsidiary in 2014. The Group’s total non-interest income ended 31 December 2015. Administrative for the year ended 31 December 2016 and other expenses for the year ended Group’s loss before taxation for the year amounted to €100,2 million (Bank: €90,2 31 December 2016 included a charge of ended 31 December 2016 amounted to million), recording a decrease of 10% (Bank: €1,1 million regarding the cost of early €12,0 million (Bank: €14,3 million) compared decrease of 14%) compared to the year retirement of 4 members of the staff (out of to a profit of €3,5 million (Bank: €5,1 million) ended 31 December 2015. Net fee and which 3 were Key Management personnel), reported for the year ended 31 December commission income for the year ended 31 compared to the charge of €3,1 million

1 The Financial Statements and the Group’s Financial Results presentation for the year ended 31 December 2016 are available on the Group’s website www.hellenicbank.com (Investor Relations). The Financial Statements are also available at the Bank’s registered office. 2 The Bank participated in the targeted longer-term refinancing operations (TLTRO) program in December 2014 by borrowing €236 million at an interest rate of 0,15% for 4 years. 3 As defined in IAS39.

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(36 employees) for the year ended strong liquidity position. The Bank’s deposits from customers’ debt settlement, amounted 31 December 2015. Excluding the market share6 as at 31 December 2016 was to €117,6 million as at 31 December 2016 aforementioned one off charges from each 12,6% (31 December 2015: 13,5%). (31 December 2015: €71,2 million). year, the decrease is revised at 14% (down by €8,8 million) and was primarily due to Loans The NPEs8 to gross loans7 ratio for the lower cost of advisory services and lower Total new lending for the year ended 31 Group and the Bank as at 31 December charge for provisions for pending litigations December 2016 reached €353,7 million (31 2016, was reduced to 58,2% (31 December or complaints which were partly offset by December: 2015 €376,7 million). The Bank 2015: 59,2%). the penalty4 of €1,0 million imposed by the continued providing lending to creditworthy Central Bank of Cyprus (CBC), charged in businesses and households while examining Accumulated impairment losses for 2016. Bank’s total administrative and other other growth opportunities. Gross loans7 the Group and the Bank, amounted to expenses for the year ended 31 December as at 31 December 2016 amounted to €1.374 million as at 31 December 2016 2016 amounted to €53,9 million, down by €4.300 million (31 December 2015: €4.396 (31 December 2015: €1.303 million) and 16% compared to €64,2 million for the year million) recording a decrease of 2% from represented 32,0% of the total gross loans ended 31 December 2015. 31 December 2015. A key driver in the (31 December 2015: 29,6%). reduction of gross loans is the increased Analysis of total fees for statutory auditors restructuring activity including the debt to The NPEs8 provision coverage for the Group are disclosed in Note 11 of the Financial asset swap arrangements, loan repayments and the Bank, stood at 54,9% as at 31 Statements. and customer efforts to deleverage. December 2016 (31 December 2015: 50,1%), During the year ended 31 December 2016 with the overall coverage taking into account The Group’s cost to income ratio for the exposures of €160,5 million were written tangible collaterals9 totalling 113,1%. year ended 31 December 2016 was 58,3%, off (31 December 2015 €123,9 million). compared to 59,3% for the year ended The Bank’s loan market share6 as at 31 Share Capital 31 December 2015 whereas the Bank’s December 2016 was 7,4% (31 December At 31 December 2016, 198.474.712 fully cost to income ratio for the year ended 31 2015: 7,0%). paid shares were in issue, with a nominal December 2016 and 2015 was 57,5%. value of €0,50 each (2015: 198.434.584 The net loans to deposits ratio stood shares with a nominal value €0,50 each). Impairment losses and provisions to cover at 47,9% as at 31 December 2016 (31 credit risk December 2015: 50,4%). Details on the development of the share The Group’s and the Bank’s total impairment capital are disclosed in Note 33 of the losses and provisions to cover credit risk Loan Portfolio Quality Financial Statements. There are no amounted to €115,2 million for the year Committed efforts to resolve problematic restrictions on the transfer of the Bank’s ended 31 December 20165, up by 14% loans continued. The level of NPEs reached ordinary shares, other than the provisions compared to the year ended 31 December €2.504 million at 31 December 2016, of the Business of Credit Institutions Law of 2015. As announced on 30 December 20165, down by 4% compared to 31 December Cyprus which require the approval of the the Bank proceeded with the adoption 2015. Terminated loans included in NPEs Central Bank of Cyprus prior to acquiring of more conservative assumptions in amounted to €1.593 million as at 31 shares of the Bank in excess of certain relation to its provisioning methodology for December 2016 (31 December 2015: €1.477 thresholds and the requirements of the EU calculating impairment losses and as part of million). Gross loans with forbearance Market Abuse Regulation. the regulatory engagement with European measures as at 31 December 2016 Central Bank (ECB) in relation to the 2016 amounted to €1.311 million (31 December The Bank does not have any shares in issue Supervisory Review and Evaluation Process 2015: €1.317 million). which carry special control rights. (SREP). The cost of risk for the year ended 31 December 2016 was 2,8% compared to 2,3% During 2016 the Bank continued focusing Loan Capital for the year ended 31 December 2015. on the restructuring of NPEs, using a Loan capital developments are disclosed in toolset of sustainable solutions, such as Note 32 of the Financial Statements. Statement of Financial Position Analysis debt to asset swaps, balance/instalment Deposits reductions, extensions of maturity, grace Capital Base And Adequacy Customer deposits amounted to €6,1 billion periods etc. An amount of €700,6 million The Group maintains capital adequacy ratios, as at 31 December 2016 (31 December relating to total customers’ exposures, was above the minimum required by the relevant 2015: €6,1 billion). They comprised of €4,6 restructured during 2016, while an amount regulatory authorities. billion deposits in Euro and €1,5 billion of €160,5 million was written off as part of deposits in foreign currencies, mostly US the whole curing process. In 2015 €123,9 Under Pillar I (transitional basis), the Capital Dollars. Trends in customer deposits reflect million exposures were written off mostly Adequacy Ratio of the Group as at 31 the Bank’s strategy to maintain a low cost due to legal changes. The Group’s stock of December 2016 was 17,24% (Bank: 17,21%), of deposits taking into account its existing properties held for sale, which are mostly the Tier 1 Ratio was 17,01% (Bank: 16,97%)

4 CBC financial penalty relating to controls omissions and weaknesses in the implementation of due diligence measures and customer identification procedures identified in 2014 and related to preceding years. The penalty does not relate to any identification of incidents of suppression of proceeds from any illegal activities. The Bank has made significant progress in rectifying these issues, following an independent review and subsequent restructuring of part of its business initiated since 2014 and overseen by the Board of Directors. At the same time, the Bank is continuing repositioning its International Banking Division strategy reflecting the changing regulatory environment with specific focus on anti-money laundering issues. 5 See announcement dated 30 December 2016 (Trading update for the financial results for the fourth quarter of 2016) posted on the Group’s website www.hellenicbank.com (Investor Relations). 6 Source: CBC and Hellenic Bank. 7 Excluding the contractual interest on impaired loans of €164,0 million for 2016, gross loans amounted to €4.136 million. 8 Excluding the contractual interest on impaired loans of €164,0 million for 2016, the ratio of NPEs to gross loans and the coverage of the NPEs by provisions were 56,6% and 51,7% respectively. 9 Based on open market values (capped at client exposure). 31 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL GROUP MANAGEMENT REPORT BANK REPORT GROUP 2016

and the Common Equity Tier 1 Ratio (CET 1) dividend was paid or proposed for the year are becoming visible. The economic recovery was 13,83% (Bank: 13,79%). ended 31 December 2015. is expected to accelerate the pace of tackling NPEs. The Group’s risk weighted assets as at 31 Strategic Targets and Outlook December 2016 amounted to €3.744 million The Bank’s strategy focuses on two As part of implementing its strategic (Bank: €3.748 million) (31 December 2015, aspects: “Fix” and “Build”. The “Fix” aspect targets, the Group is focused on supporting Group: €3.958 million, Bank: €3.957 million). predominantly relates to the reduction of the economy’s recovery and contributing the high level of non-performing exposures towards sustainable economic growth. The As from 20 November 2015 the (NPEs). As part of its “Fix” strategy, the Bank Bank maintains sufficient liquidity to exploit Bank is required to maintain, on a is continuing repositioning its International opportunities while maintaining its focus on consolidated basis, a CET 1 capital ratio Banking Division strategy reflecting the organic growth. In order to undertake this, of 11,75%,including a fully loaded capital changing regulatory environment. The a key priority is to address the high level of conservation buffer (CCB) of 2,5%. The ECB “Build” aspect of the strategy relates to NPEs, which continue to affect the Group’s decision was based on the Supervisory the growth of the loan portfolio and the interest income and to pressure profitability Review and Evaluation Process (SREP) strengthening of customer relationships, through elevated provisions. At the same conducted on the information available with be those of deposit or lending nature. It time the Bank recognises that the real estate reference date 31 December 2014. also relates to advancements in technology market continues to be subdued. and enhancement of the customer service, In February 2017, the House of as well as simplification of procedures and The Bank has managed to navigate Representatives in Cyprus passed into processes. Further, in order to meet the successfully through the banking crisis. It law, an amendment in the Business of challenges of the competitive environment has maintained throughout the crisis its Credit Institutions Law which introduces and streamline/empower the Executive reputation for stability and trust and is a transitional period for the application Committee, the Bank revised its Group concentrating on strengthening and better of CCB requirement with retrospective organisational structure. focusing of its market positioning. Through application from 1st January 2016 of 0,625% its focus on its “Fix” and “Build” initiatives, with full implementation from 1st January The Bank, advancing towards decisive the Group has all the ingredients to continue 2019 of 2,5%. actions to tackle its loan portfolio quality, the implementation of its strategy. At the has reached an agreement with APS Holding same time the operating environment If the provisions of the above law a.s (APS) for the management of real estate remains challenging and the Bank will amendment are applied the minimum CET 1 assets and servicing of the entire portfolio of remain vigilant of developments to turn ratio is reduced to 9,875% for 2016. NPEs of the Bank (refer to Note 49). them into opportunities both in Cyprus and internationally. In December 2016, following ECB’s The economy has been exhibiting significant final decision in establishing prudential positive growth since the beginning of Risk Management requirements, which was based on the SREP 2015 which accelerated in 2016 with real The Group is exposed to a variety of with reference date 31 December 2015 GDP growing by an annual 2,8%. The better risks, the most important of which are the Bank is required to maintain for 2017, than expected outcome in the economy, described and analysed in Note 48 of the on a consolidated basis, a phase-in Capital along with the gradual restructuring of the Financial Statements. The management Adequacy Ratio of 12,75%. banking sector, have created and maintained and monitoring of risks is centralised under an environment of improved confidence a uniform management, which covers the Taking into account the phased-in legislation which is reflected in the upgrades of the entire range of the Group’s operations. for capital conservation buffer, the Group’s country’s and the largest domestic banks’ minimum CET1 and Tier 1 ratios effective as credit rating by international rating agencies. Agreements with Members of Tthe from 1st January 2017 are set at 9,25% and The rise in deposits for the banking system Board of Directors or the Staff of the 10,75% respectively. as a whole, combined with deleveraging of Bank the market, results in a declining loan-to- The employment contract of the Executive In addition to the above, the ECB has set, deposit ratio, suggesting positive effects Member of the Board/Group General on a consolidated basis, a Pillar II capital on growth of the economy. From a sectoral Manager Corporate Development, include guidance to be made up entirely of CET 1 point of view, growth in 2016 was driven terms governing payment of compensation capital, effective as from 1st January 2017. by the tourism sector, which performed as a result of his premature and unjustified well throughout 2016, along with a termination by the Bank. More detailed Details of the capital management of the continued strong growth in the business and reference is made in the Remuneration Group are disclosed in Note 48 of the professional services sectors. At the same Policy Report for 2016. Financial Statements. time, the high percentage of NPEs remains the biggest challenge for the banking sector On 15 December 2016 the Bank has Dividend and the economy at large and the successful announced that Board of Directors has The Bank is currently under a regulatory strategic reduction in their levels will reduce decided to appoint Mr Ioannis A. Matsis dividend distribution prohibition and the pressure on the banks’ profitability, as Group Chief Executive Officer, replacing therefore the Board of Directors of the Bank resulting in increased confidence towards Mr Pijls. The appointment of Mr Matsis is does not propose the payment of a dividend the Cypriot banking sector and economy. It subject to approval from the regulatory for the year ended 31 December 2016 at the is encouraging that the first positive results authorities. In the meantime the duties of shareholders’ Annual General Meeting. No from the application of all relevant actions the Chief Executive Officer will be officiated

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by Mr Phivos Stasopoulos, Group General Environmental Issues Preparation of Periodic Reports Manager Business & Insurance. The Bank, in the context of its wider The Group has in place an effective system environmental culture and actions, plays of internal controls, the adequacy of which Corporate Governance Statement a pioneering role in the field of energy is evaluated at least annually by the Board The Corporate Governance Code published management. It has established an Energy of Directors and in more frequent intervals by the Cyprus Stock Exchange (4th Edition Management Policy four years ago, through by the Board’s Audit Committee, in respect Revised – April 2014) has been fully adopted which it has managed to reduce (2016 v. of financial and operational systems as well by the Bank’s Board of Directors. 2012) its energy consumption by almost as for compliance with any risk management 30%, as a result its CO2 emissions by over regulations that may arise. The adequacy The Board of Directors recognises the 20% and its electricity cost by over 50%. of the system of internal controls secures importance of implementing sound the validity of financial data and compliance Corporate Governance based on the Code in As of the beginning of 2015 the Bank is with relevant legislation and aims to ensure combination with the mandate and practices certified with the international standard the management of risks, while providing followed by the various Committees of ISO 50001 Energy Management System, reasonable assurance that no loss will incur. the Board of Directors in order to achieve being the first organization in Cyprus to the target of maximising the shareholders’ achieve this certification. The ISO 50001 The Group’s internal audit and risk investment. Energy Management System is implemented management systems incorporate effective across the entire Group and its success procedures aiming at the identification and The Corporate Governance Code is publicly depends to a great extent on the awareness, prevention of errors, omissions or fraud available on the Cyprus Stock Exchange (CSE) contribution and involvement of all staff, that could result in material misstatements website www.cse.com.cy. providing a systematic approach towards during the preparation of Financial the continuous improvement of energy Statements and relevant disclosures which Information on Members of the Board of performance, including energy efficiency, are included in the periodic reporting Directors retiring and being eligible for re- use and consumption. provided by the Group based on Part election, as well as on the composition and II of the Transparency Requirements operation of the Bank’s Board of Directors In addition, Hellenic Bank, in cooperation Law (Securities admitted to trading on a and its committees are set out in section B of with the environmental organization Regulated Market) Laws of 2007 up to 2014. the Report on Corporate Governance. Cymepa has achieved certification of a number of its buildings with Green Key Events After the Reporting Period Any amendments to the Articles of (Head Office building) and Green Offices (30 Events after the reporting period are Association of the Company are only valid branches and offices). The Green Offices disclosed in Note 49 of the Financial if approved by a Special Resolution at a program is again a pioneering activity of Statements. General Meeting of the shareholders. Hellenic Bank Group in cooperation with Cymepa, as it has been for the first time Board of Directors Details of restrictions in voting rights and implemented in Cyprus. Through this The Members of the Board of Directors as at special control rights in relation to the shares scheme environmental targets and action 31 December 2016 were the following: of the Bank are set out in the share capital plans are activated in the buildings and section above. branches participating. Irena A. Georgiadou Non-Executive Chairwoman The Board of Directors may issue share Employee Matters capital if there is sufficient authorised capital The Bank is in the process of negotiation Marinos S. Yannopoulos which has not been issued and as long as with the Cyprus Union of Bank Employees Non-Executive Vice Chairman the new shares to be issued are offered for the renewal of the Collective Agreement first to the existing shareholders, pro-rata which has expired on 31 December 2016. Dr Evripides A. Polykarpou to their percentage holding in the Bank’s Non-Executive Member of the Board share capital. In the event that a share The Bank upgraded the Performance capital increase requires an increase in the Management System based on best Ioannis A. Matsis authorised share capital or if the new shares practices. The new upgraded system is in Non-Executive Member of the Board will not be offered to existing shareholders, line with the Strategic Pillars and Values the approval of the shareholders at a of the Bank and has been implemented Marianna Pantelidou Neophytou General Meeting must be obtained. The at the beginning of 2017. In addition, to Non-Executive Member of the Board Board of Directors may also propose to a create a healthier working environment, General Meeting of the shareholders a share the Bank has amended its Policies/Codes David Whalen Bonanno buyback scheme. such as the “Whistleblowing Policy” and the Non-Executive Member of the Board “Code of Business Conduct and Ethics” and Shareholders Holding More Than 5% of has introduced the “Code for Dealing with Christodoulos A. Hadjistavris the Share Capital Harassment in the Workplace” aiming to Non-Executive Member of the Board Shareholders holding more than 5% of the prevent and avoid any form of harassment share capital of the Bank are disclosed in amongst staff, customers and associates Andreas Christofides Note 40 of the Financial Statements. and ensure that if such conduct occurs, the Non-Executive Member of the Board necessary mechanisms for monitoring and non-repetition will be directly implemented.

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Lambros Papadopoulos Independent Auditors Non-Executive Member of the Board The independent auditors KPMG Limited have expressed their willingness to continue Andrew Charles Wynn in office as the Bank’s auditors. A resolution Non-Executive Member of the Board authorising the Board of Directors to fix their remuneration will be proposed at the Annual Stephen John Albutt General Meeting. Non-Executive Member of the Board On behalf of the Board of Directors, Georgios Fereos Executive Member of the Board Irena A. Georgiadou Chairwoman During 2016 the changes in the Board of Directors of the Bank were as follows: Nicosia, 30 March 2017 Mr Andrew Charles Wynn was appointed as an Independent Non-Executive Member of the Board of Directors of the Bank with effect from 19th February 2016.

Mr Stephen John Albutt was appointed as an Independent Non-Executive Member of the Board of Directors of the Bank with effect from 21st September 2016.

On 15 December 2016 Mr Henricus Lambertus (Bert) Pijls resigned from the position of Chief Executive Officer and Executive Member of the Board.

Reference to Directors’ emoluments, fees and compensation is made in Note 39 of the Financial Statements.

In accordance with the Company’s Articles of Association, Mrs Irena A. Georgiadou, Mr Marinos S. Yannopoulos, Mr Christodoulos A. Hadjistavris and Mr Georgios Fereos will retire, and being eligible, will offer themselves for re-election. The vacancies so created will be filled by election.

Directors’ Interest in the Share Capital of the Company The interest in the share capital of the Bank held by Members of the Board of Directors are disclosed in Note 38 to the Financial Statements.

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REPORT OF THE BOARD OF DIRECTORS ON CORPORATE GOVERNANCE FOR THE YEAR 2016

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Introduction The Board of Directors of the Bank (“BoD”) Institutions of 2014 of the Central Bank of The Board of Directors of Hellenic Bank sets the strategic aims of the group of Cyprus (“the Governance Directive”), one Public Company Limited (“the Company” Hellenic Bank (“the Group”) and ensures of the above mentioned meetings was held or “the Bank”) fully adopted the Code that the necessary financial and human without the presence of the Chairwoman of Corporate Governance, which was resources are in place to meet the strategic and without the presence of the Executive published by the Cyprus Stock Exchange (4th and operational objectives of the Group. Directors, was chaired by the Senior revised edition – April 2014), hereinafter Independent Director and its purpose was to referred to as “the Code”. In compliance The Board of Directors has the overall assess the performance of the Chairwoman with the provisions included in the Code’s responsibility for: of the Board of Directors and three of the introduction, the Board of Directors of the • Setting and overseeing the values and above mentioned Board meetings were Company (“the Board”) incorporates the standards of the Group held without the presence of the Executive present Report on Corporate Governance in • Setting and overseeing the business model Directors. the Company’s 2016 Annual Report. of the Group • Maintaining effective systems and controls It is ensured that all Members of the Board Part A to ensure effective operation of the Group are duly informed in writing of forthcoming The Company states that the full and compliance with applicable laws and Board meetings and all necessary implementation of the Code’s principles regulation documentation related to the meeting is constitutes the Company’s policy and that it • Setting the framework and policy for provided, so that they have sufficient time had already taken the initiative of applying effective governance and oversight of the to review it. The participation of the Board many of these principles well before the Group Members in other boards is such, so as to establishment of the Code. The Board • Monitoring business performance against allow them to devote the necessary time believes that good corporate governance, the strategic objectives, risk appetite and and attention to their duties as Members of based on the Code, in conjunction with expected standards. the Board of the Company. the terms of reference and the practices followed by the various Board Committees, The BoD is responsible for ensuring that There is a clear division of responsibilities constitutes a fundamental factor in Board and Committees composition and between the Chairwoman of the Board of achieving the corporate goal of maximising organization are appropriate. Directors and the Chief Executive Officer. shareholder value. The Board acknowledges that there is an on-going process of The Bank’s Corporate Governance The Chairwoman of the Board of Directors formulating principles of corporate Framework includes a list of matters leads and manages the Board of Directors in governance based on both international reserved for the Board. Such matters a manner such as to ensure that it discharges and local conditions. As such, the Board include, inter alia, setting of the Group’s its legal and regulatory responsibilities continually follows a policy of reviewing and overall strategy and targets, approval of fully and effectively. The primary role of readjusting the various aspects of corporate the annual budget, approval of capital the Chairwoman of the Board of Directors governance accordingly. and funding plans, decisions relating to is to ensure that the Board of Directors the capital structure of the Company, is organized and operates properly and Part B decisions on important matters and material efficiently, to promote the required team The Company confirms that it has complied transactions, transactions with Board spirit to the Board of Directors, to promote with the provisions of the Code. Members and Senior Executives or major high standards of corporate governance shareholders, appointment or removal of the and probity and to ensure that appropriate The Company applies the provisions of the Chief Executive Officer, matters concerning management information is provided to Code throughout the Group of Companies the composition and organization of the the Board to enable it to discharge its to which it belongs, i.e. and to its subsidiary Board and Board Committees, governance management and supervisory roles. companies through central subcommittees matters etc. of the Company. As at the date of this The Chief Executive Officer, under the Report all significant subsidiary companies On 31st December 2016, the Board was delegated authority from the Board of maintain an Audit Committee and a Risk composed of eleven non-Executive Directors Directors, has the responsibility for the Management Committee as shown in and one Executive Director, all of whom day-to-day running of the Group, leads and paragraph (13) (Board Committees) below. have the appropriate qualifications and directs the implementation of the Group broad relevant experience. The Board’s strategy, which is determined by the Board In light of the above, the following composition as at 31st December 2016, as of Directors and ensures that the Group’s confirmations and reports are made: well as the changes in the composition and activities are executed in line with the distribution of responsibilities of the Board performance targets set by the Board of The Board Of Directors throughout the year and up to the date of Directors, the Laws, Regulations and Group the present Report, appear in the Directors’ The Company is governed and controlled Policies. The Chief Executive Officer of Report for the year 2016. by the Board of Directors, which operates the Group is accountable to the Board of on the basis of the Code, the relevant Directors. During 2016, the Board of Directors Companies, Stock Exchange and Business of held thirty four meetings. In accordance Credit Institutions Laws and the Company’s The Board of Directors appoints an with the provisions of the Directive to Articles of Association. Independent Director as the Senior Credit Institutions on Governance and Independent Director. The Senior Management Arrangements in Credit Independent Director is available to

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shareholders if they have concerns which 2014, Mr Marinos S. Yannopoulos is no the Board possess at all times sufficient have failed to be resolved through normal longer considered to hold the position of knowledge and skills to perform their duties communication channels. In addition, Independent Non-Executive Director of the and that their education and development the Senior Independent Director, at Company. needs are addressed on a continuing basis. least annually, chairs a meeting with the For this purpose, at the beginning of each Non-Executive Directors without the (3) Executive Directors in 2016 year, a Board annual training schedule Chairwoman present, in order to appraise • Henricus Lambertus (Bert) Pijls**, is prepared, which includes specialized the performance of the Chairwoman. Director / Chief Executive Officer programmes covering technical matters and (until 15 December 2016) matters for the development of business The Company Secretary and the Compliance • Georgios Fereos, Executive Director and personal skills. In addition, depending Officer with the Code of Corporate on the responsibilities and personal training Governance provide information and At least 50% of the Board of Directors needs of each Board member, they are given advisory services to the Members of the (excluding the Chairwoman) consists of the opportunity to participate in specialized Board related to board procedures and the Independent Non-Executive Directors. induction programmes and seminars which Code. relate to their responsibilities as members of (4) Chief Executive Officer Board Committees. (1) Independent Non-Executive • Henricus Lambertus (Bert) Pijls** Directors in 2016 (until 15 December 2016). Evaluation of Performance of the Board of Based on the provisions of the Code and for Directors the purposes of this Report, the following Notes: Pursuant to the provisions of the are the Independent Non-Executive * Under the independence criteria listed Governance Directive and best practices on Directors in 2016: in the Directive on the Assessment of the Corporate Governance, the Board performs • Irena A. Georgiadou, Chairperson Fitness and Probity of the Members of an assessment of the Board of Directors and • Marianna Pantelidou Neophytou* the Management Body and Managers of its Committees at least on an annual basis. • Ioannis A. Matsis** Authorised Credit Institutions of 2014 of the • David Whalen Bonanno* Central Bank of Cyprus, which differ from In addition, in accordance with the • Dr Evripides A. Polykarpou, Senior those in the Corporate Governance Code, Governance Directive, the Bank must assign Independent Director Mrs Marianna Pantelidou Neophytou, Mr at least every three (3) years the review and • Christodoulos A. Hadjistavris* Christodoulos A. Hadjistavris and Mr David evaluation of the composition, efficiency • Andreas Christofides Whalen Bonanno are not independent. and effectiveness of the Board and its • Lambros Papadopoulos committees to an independent external • Andrew Charles Wynn ** It is noted that on 15 December 2016 the consultant. Both the internal and external (Appointed on 19 February 2016) Bank has announced that Mr. Bert Pijls is evaluations are submitted to the Central •Stephen John Albutt stepping down from the position of Group Bank of Cyprus. (Elected by the 42nd Annual General Chief Executive Officer strictly on personal Meeting on 25 May 2016 provided that his and family reasons and has at the same The Bank has established policies and appointment would be effective from the time announced that the Board of Directors procedures which govern the evaluation date of the approval by the Central Bank has decided to appoint Mr. Ioannis Matsis of the performance of the Board and its of Cyprus / European Central Bank, and as Group Chief Executive Officer, replacing Committees. upon approval of his appointment by the Mr. Pijls. The appointment of Mr. Matsis European Central Bank, was appointed is subject to approval from the regulatory In the first quarter of 2017 the Board Director with effect from 21 September authorities. In the meantime the duties of of Directors has performed the annual 2016). the Chief Executive Officer will be officiated evaluation of the Board and its Committees by Mr. Phivos Stasopoulos, Group General for 2016. This evaluation followed the A relevant “Confirmation of Independence” Manager Business & Insurance. evaluation for year 2015 which took place in based on the minimum independence February 2016. criteria in accordance with provision (5) Application of best possible practices The first evaluation performed by the A.2.3. of the Code is signed by each of the of Corporate and Internal Governance Board concerned the period 1st June 2014 Independent Non-Executive Directors and in the Company is submitted to the Cyprus Stock Exchange until 31st May 2015 and was conducted in Directors’ Induction and Ongoing June 2015. At the same time, in June 2015 together with the present Report on Development Corporate Governance. an external evaluation was conducted by All newly appointed Board Members receive external advisors. an induction and training. They receive an (2) Non-Independent Non-Executive induction information pack, participate The Board’s Chairperson ensures that a Directors in 2016 in an induction programme and have the clear improvement plan is put in place • Marinos S. Yannopoulos, Vice Chairman opportunity to meet with senior officers of which includes clear actions to address the Upon the appointment of Mr Marinos S. the Bank, be briefed by them and participate development areas; and that it is regularly Yannopoulos as Chief Executive Officer on 9 in introductory presentations. monitored by the Board. September 2014, a position which he held until 8 January 2015, the independence In addition, the Chairperson of the Board The results of each annual self-assessment criterion A.2.3.(d) of the Code was not with the assistance of the Secretary of the and the progress on the implementation fulfilled and therefore, from 9 September Company must ensure that members of

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of the actions in the improvement plan Statement prepared by the Board of Directors following will constitute the basis for a review in the • Enterprise Risk Management Framework a proposal by the Remuneration Committee following year. • Concentration Risk Policy in accordance with Appendix 1 of the Code. • Operational Risk Management Framework It is presented after the present Board of Corporate Governance Framework • Liquidity Risk Management Framework Directors’ Report on Corporate Governance. The Bank has established a Corporate • Credit Risk Management Framework The Remuneration Policy Report will be Governance Framework purporting to • Market Risk Management Framework presented to the Annual General Meeting of provide a comprehensive document which • Liquidity Risk Policy Shareholders for approval. clearly sets out the Company’s corporate • Market Risk Policy governance arrangements. • Interest Rate Risk Policy Information on the remuneration / fees of • Reputational Risk Management Policy the Members of the Board of Directors and The Corporate Governance Framework • Operational Risk Management Policy the Executive Directors for the year 2016 provides information on the structures, • Information Security Charter is disclosed in the notes to the Accounts responsibilities and processes established • Group Information Security Policy contained in this Annual Report (Note 39) as that ensure proper and effective • Vendor and Outsourcing Management well as in the Remuneration Policy Report management and oversight of the Policy itself. Company’s affairs. • Customer Acceptance Policy • Bond Investment Framework (7) Going Concern The Company’s corporate governance • Lending Policy The Board of Directors states that the policies purport to ensure the independence • Lending Policy on Shipping and approval Company intends to continue to operate on of the Board of Directors and its ability of Limits a going concern basis for the next twelve to effectively supervise management’s • Capital Policy months. operation of the Company. The policies are • Business Continuity Policy reviewed annually and in accordance with • Products & Services Management Policy (8) System of Internal Controls changing regulation and emerging best • Group Debt to Asset Policy The Board of Directors has ensured that practice information. • Health and Safety Policy the Bank maintained an effective system • Data Governance Policy of internal control in 2016. The adequacy The Corporate Governance Framework is • Compliance Policy to the Pillar 3 Disclosure and effectiveness of the system of internal reviewed at least annually. requirements as per CRR / CRD IV control is reviewed by the Board at least • Property Valuations Policy annually. The review covers all systems of Approval and Review of Policies, internal control, including financial and Frameworks and Charters The Chairperson of the Board of Directors, operational systems, as well as compliance During 2016 and 2017 until the date of this the Chief Executive Officer, the Company systems and systems for the management of Report, taking into account the provisions Secretary and the Executive Officer for risks, which threaten the attainment of the of the Governance Directive and within Corporate Governance Code, confirm Group’s objectives. the framework of the continuous efforts that compliance with the relevant of the Company to improve its Corporate laws, regulations and directives, the To meet this requirement, procedures have Governance, the Board has approved or implementation of best practices of been designed for safeguarding the Group’s revised or reviewed, inter alia, the following Corporate Governance within the Company assets; for maintaining proper accounting Policies and/or Frameworks and/or Charters: and the application of an adequate records; and for ensuring the accuracy, and transparent framework of internal completeness and validity of the information • Corporate Governance Framework governance are amongst the priorities of the provided to the Group’s stakeholders. These • Self-Assessment and External Evaluation Bank. procedures can only provide reasonable (Board’s Chairperson, Board Committees and but not absolute assurance against material Board Members) Policy Percentages of Major Shareholders as at 27 misstatement, errors, losses, fraud or • Board Nomination, Evaluation, Selection, March 2017: breaches of laws and regulations. Succession and Ongoing Assessment Policy • Group Recruitment Policy The percentage of the Shareholders holding In this context, all Group operational • Policy on the Recruitment, Ongoing more than five per cent of the Company’s management units are suitably staffed Assessment and Succession of Key Function issued share capital as at 27 March 2017 are and committed to the introduction and Holders as follows: operation of appropriate control system • Promotions Policy according to their respective business and • Code of Business Conduct and Ethics CPB FBO THIRD POINT HELLENIC RECOVERY responsibilities. Within this framework, the • Anti-Money Laundering, Counter-Terrorism FUND LP 26,20% above mentioned management units: Financing & Economic Sanctions Policy WARGAMING GROUP LIMITED 24,92% • Conflicts of Interest Policy DEMETRA INVESTMENT PUBLIC LTD 10,05% • Operate on the basis of a specific • Whistleblowing Policy BANK OF CYPRUS PUBLIC CO LTD – OMNIBUS organisational structure and allocation of • Group Compliance Charter and Framework ACCOUNT (NR) 5,37% responsibilities, • Group Compliance Policy (Concerns the participation of the EBRD) • Prepare and monitor the implementation • Group Internal Audit Charter of the strategic and business plans and • Risk Management Charter (6) Remuneration Policy Report annual budgets, • Risk Appetite Framework / Risk Appetite The Remuneration Policy Report was • Follow written procedures, receive and

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disseminate information and advice through (10) External Auditors – Provision C.2.2. (13) Board Committees circulars and training programmes, of the Code The following Board Committees operate • Adopt a policy of adequate segregation of In 2016 Messrs KPMG, external auditors of within the Company: duties in order to avoid a conflict of interest the Company, offered non-audit services wherever this is deemed necessary, e.g. tax services, general and specialized (a) Audit Committee • Apply, at branch level, performance advisory services, review of various returns, Chairperson: Lambros Papadopoulos evaluation and measurement models based training seminars, etc. Their objectivity and on specific targets, independence are ensured in the following Members: • Are supported by appropriate software ways: Christodoulos A. Hadjistavris and hardware systems, Dr Evripides A. Polykarpou • Are subject to regular internal and external (a) Non-auditing services are offered by Andreas Christofides audits. different companies / departments of Andrew Charles Wynn (From 17 March 2016 the KPMG Group in accordance with the until 15 December 2016) The effectiveness of the system of internal professional code of certified accountants / Stephen John Albutt (From 15 December control is reviewed on a more regular auditors (“Chinese Walls”). 2016) basis by the Audit and Risk Management Committee through regular reports to the (b) The KPMG team that carries out the (b) Remuneration Committee Board. In carrying out their reviews, the external audit of the Company does not Chairperson: Irena A. Georgiadou Audit Committee and Risk Management participate in offering any other services Committee receive reports on internal except auditing. Members: controls, both financial and non-financial David Whalen Bonanno internal audit reports, external audit reports (c) The offer of non-audit services by Christodoulos A. Hadjistavris and regulatory reports. the External Auditors is monitored by Lambros Papadopoulos (From 17 March the Audit Committee in a manner which 2016) The Executive Management of the Group aims to ensure that their objectivity and Stephen John Albutt (From 14 October is responsible for addressing weaknesses independence are not compromised. 2016). arising out of these reviews and for ensuring that mitigating actions are implemented Messrs KPMG have confirmed in writing to (c) Nominations / Internal Governance within an appropriate and agreed timetable. the Company that the offering of the above Committee mentioned services does not affect their Chairperson: Irena A. Georgiadou The Group Internal Audit reports directly independence and objectivity. The external to the Audit Committee and the Board of auditors do not offer internal audit services Members: Directors itself. It consists of 33 persons to the Company. Marianna Pantelidou Neophytou and is headed by Mrs. Niki Nicolaidou Ioannis A. Matsis (Until 15 December 2016) – Hadjixenophontos (B.Sc. Honours in (11) Credit Facilities to Directors David Whalen Bonanno Financial Services, M.B.A., A.C.I.B., F.C.C.A.). Information as to credit facilities provided Dr Evripides A. Polykarpou. to Company Directors (and related parties) The following audit assignments have been is to be found in the relevant notes to the (d) Risk Management Committee outsourced in 2016 to external audit firms: Financial Statements contained within Chairperson: a) Audit of the Insurance Companies of the the present Annual Report (Note 39). Ioannis A. Matsis Group (Pancyprian Insurance and Hellenic It is confirmed that credit facilities to (Until 15 December 2016) Alico Life), Company Directors (and related parties) Andrew Charles Wynn b) Follow up audit Network adequacy and or to its subsidiary or associated company (From 15 December 2016) security (audit performed 2015), Directors are granted in the normal course c) Outsourcing of three specialized technical of the Company’s business, under normal Members: IT audits. commercial and employment terms and Marianna Pantelidou Neophytou with transparency. Furthermore, it is Marinos S. Yannopoulos (9) Confirmation in Accordance with the confirmed that all relevant cases of Bank Andreas Christofides Provision C.2.1. of the Code facilities to Company Directors and its Lambros Papadopoulos (Until 17 March In relation to paragraph (8) above (System subsidiary company Directors are forwarded 2016) of Internal Controls), the Members of the for approval to the Board, after the relevant Andrew Charles Wynn (From 17 March Board of Directors confirm that they have proposal of the Board’s Audit Committee. 2016). reviewed the adequacy of the System The interested Member of the Board is of Internal Controls of the Company as neither present nor participates in the The terms of reference of the above well as the procedures for verification procedure. Committees are based both on the relevant of correctness, accuracy and validity of provisions of the Code pertaining to them information disseminated to investors. (12) Code of Corporate Governance and the relevant guiding Directives of the Central Bank of Cyprus. They are published Compliance Officer in paragraph 14 below while those of the The Board also confirms that, to its The Company has appointed on 20 February Remuneration Committee are included in knowledge, no violation in the Stock 2015 Mrs Eleni Christodoulidou as Executive the Remuneration Policy Report. Within the Exchange Legislation and Regulations has Officer for the Corporate Governance Code. occurred, except in cases already reported to framework of the provisions of the Code the relevant authorities (where this applies). 41 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL REPORT OF THE BOARD OF DIRECTORS BANK REPORT GROUP 2016 ON CORPORATE GOVERNANCE FOR THE YEAR 2016

concerning relations with shareholders, The Risk Management Committee assists levels in the Group as well as non-financial the Chairpersons of these Committees the Company’s Board of Directors in criteria e.g. compliance with applicable rules are available to answer any questions at fulfilling its responsibilities and obligations and procedures. The Committee’s aim is to the Annual General Meeting at which all concerning the identification, measurement, attract and retain good quality officers at shareholders are encouraged to participate. monitoring and effective management of Executive and General Management levels, The Chairpersons and Members of the all the Group’s risks (credit, interest-rates, in order to better serve the interests of the Committees periodically submit reports or operational, market, liquidity, foreign Group as well as those of its shareholders proposals to the Board of Directors following exchange, capital and other). Amongst and other stakeholders. meetings of the corresponding Committees, other duties, the Committee prepares depending on the subjects being addressed. and submits proposals for approval to Each year, the Remuneration Committee the Board concerning the principles, the proposes to the Board of Directors the The Audit Committee meets before the framework and policies of undertaking and Annual Remuneration Policy Report, as announcement of the quarterly results, to managing all forms of risk and the use of part of the Annual Report of the Company, monitor the integrity, accuracy and reliability capital that corresponds to the business which is submitted to the shareholders’ of the Group’s quarterly and annual financial objectives of the Company, the Group and/ Annual General Meeting for approval. The reporting process and Financial Statements, or each subsidiary company separately. The Committee also reviews and approves as well as any formal announcements Committee’s mission includes promoting a the Information disclosed on the Annual relating to the Group’s financial culture of risk awareness across the Group Remuneration of the Members of the performance, to assess the adequacy of and assisting the Board of Directors in Board, which is prepared by Group Human the provisions in line with accounting overseeing the effective implementation of Resources for inclusion in the notes to the policies and standards and to monitor the the risk appetite framework and strategy. annual accounts of the Company and the establishment of accounting policies and Remuneration Policy Report itself. practices, paying particular attention to (i) It is noted that Pancyprian Insurance Ltd changes to critical accounting policies and and Hellenic Alico Life Insurance Company During 2016, the Remuneration Committee practices, (ii) decisions requiring a significant Ltd also maintain a Risk Management held eleven meetings. element of judgement and (iii) unusual Committee and that the Audit Committee of transactions and how these are disclosed. It Hellenic Bank (Investments) Ltd has also Risk The Nominations / Internal Governance then proceeds with the relevant suggestions Management Committee responsibilities. Committee is engaged in selecting fit and to the Board through a detailed memo. proper individuals for appointment as Board The Risk Management Committee meets Members of the Company or its subsidiaries, The Audit Committee also meets (without whenever necessary and at least twice every either for positions extraordinarily vacated the presence of members of the Executive quarter. or after the retirement of Board Directors. Management, unless the Audit Committee The Committee then submits its suggestion deems their attendance necessary, but During 2016, the Risk Management to the Board of Directors for reaching a with the presence of the Control Functions Committee held twenty four meetings. relevant decision. The new Members of that report to it) to review matters which the Board of Directors undergo a detailed The Remuneration Committee defines and are within its responsibility and terms induction programme. The Committee also recommends for approval by the Board of of reference, especially in relation to has the responsibility of implementing the Directors the Remuneration Policy, including the design, operation, adequacy and Group’s policies on internal governance. pensions and variable compensation and effectiveness of the Systems of Internal The Nominations / Internal Governance the Remuneration Principles of the Group, Control and Compliance. The Committee Committee meets whenever issues within its which are aligned to the Group’s strategic makes recommendations or suggestions to competency arise. objectives and values. The Committee the Board of Directors on issues under its meets whenever it is necessary to fix or jurisdiction. The Committee is assisted by the During 2016, the Nominations / Internal review the remuneration of Executive and respective Audit Committees of three of the Governance Committee held eleven non-Executive Members of the Board of Bank’s subsidiary companies – Hellenic Bank meetings. Directors, the Company Secretary, the Chief (Investments) Ltd, Pancyprian Insurance Ltd Executive Officer, the officers reporting and Hellenic Alico Life Insurance Company directly to the Chief Executive Officer and (14) Terms of Reference of the Board Ltd. the Heads of the Control Functions. After of Directors’ Committees (except the considering all relevant parameters and data, Remuneration Committee) During 2016, the Audit Committee held it makes relevant recommendations to the twenty seven meetings. Board for making decisions, in the absence Terms of Reference of the Audit Committee of the Executive Member of the Board or 1. Establishment / Mission The Committee’s Chairperson has university other Officers involved. The Committee’s The Audit Committee was established degree in Accounting with Computing suggestions and the Group’s Remuneration to ensure Hellenic Bank Public Company (B.A.(Hons)). He is a Chartered Accountant Policy take into consideration the relevant Limited (‘‘the Company’’) complies with the - Member of the Institute of Chartered responsibilities, workload, qualifications, Directives published by the Central Bank of Accountants in England and Wales as from know-how, academic background, Cyprus in accordance with the provisions of 1996. He works as a Financial Advisor in the experience, individual performance, the Business of Credit Institutions Laws. private sector. remuneration of comparable positions in the market, especially in areas where the The primary mission of the Committee is Group is active, remuneration at other to ensure the fulfilment, in a reliable and

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effective manner, of the obligations imposed Members of the Committee cannot The Committee liaises and holds meetings on the Company by the abovementioned participate in more than two (2) with the external Auditors frequently to Directives, the compliance with the relevant committees, including the Audit Committee. discuss matters arising from their audit provisions of the Code of Corporate findings. Governance issued by the Cyprus Stock The Chairperson of the Committee shall be Exchange and to review and challenge, independent and have specialist knowledge 4. Decision-making Process where necessary, Group policies, practices, and experience in the application of 4.1 The Committee is authorized by the controls and actions and judgement of the accounting principles and internal control Board to: management team that contribute to the processes and will be appointed by the (a) Investigate any activity within its Terms of sound management and conduct of the Board. Reference, operations and activities of the Company. (b) Seek any information and clarifications The Chairperson of the Board shall not be a from any employee of the Company. All The Audit Committee is responsible for Member of the Audit Committee. employees are required to co-operate with assisting the Board of Directors (‘‘the any request made by this Committee. Board’’) in the effective monitoring of the The term-in-office of the Members of the activities and operations of the Group. Committee is decided by the Board. 4.2 The decisions of the Committee are taken by majority voting. In the event of an In order to accomplish its mission, the 3. Meetings of the Committee equality of votes, the Chairperson of the Committee has under its direct monitoring The Committee holds meetings, at least meeting shall not have a second or casting and control the Group Internal Audit Unit, quarterly, which, where appropriate, vote. which is independent of the Executive must coincide with important financial Management and accountable to the reporting dates. In emergency or crisis 5. Duties and Responsibilities Committee. Also, the Group Compliance situations, the Committee may convene The duties and responsibilities of the Unit reports quarterly to the Committee via teleconferencing for decision-taking. Committee are the following: on matters related to the adequacy and The next integral number of one half of the effectiveness of the Compliance Framework Members comprises a quorum. 5.1 Financial Statements and the Framework for Business Conduct. 5.1.1 It monitors the integrity, accuracy The Committee invites regularly to its and reliability of the Group’s quarterly and The Committee has adequate access to the meetings the Head of the Group Internal annual financial reporting process and internal control units and with the approval Audit Unit, the Head of the Group Financial Statements, as well as any formal of the Board, it obtains independent Compliance Unit and any officers of the announcements relating to the Group’s professional advice whenever it deems this Group, whose opinion it considers necessary financial performance. necessary. for the best conduct of its duties and compliance. 5.1.2 It assesses the adequacy of the 2. Composition and Term-in-Office of provisions in line with applicable accounting Members of the Audit Committee The Chairperson of the Committee must policies and standards and submits a The Board appoints at least three and ensure that no other person is present, relevant report to the Board of Directors up to seven non-Executive Directors as including other Members of the Board, and the Risk Management Committee on a Members of the Committee. The majority unless formally invited to attend for a quarterly basis. of the Members of the Committee must be specific item(s) on the agenda. Any such independent non-Executive Members of the person is present only during the discussion 5.1.3 It monitors the establishment of Board. of the specific item and leaves the meeting applicable accounting policies and practices, room immediately after, without any paying particular attention to the following: The Audit Committee as a whole should participation in the decision-making process. (a) Changes to critical accounting policies have: and practices, The Company Secretariat must be closely (b) Decisions requiring a significant element (a) Recent and relevant practical experience involved in the preparation of the meeting’s of judgement, in the area of financial markets or agenda and ensure it is distributed, including (c) Unusual transactions and how these are professional experience directly linked to supporting papers where relevant, at least disclosed. financial markets activity and three (3) business days in advance of the meeting. 5.1.4 It monitors the effectiveness of the (b) Knowledge of the Group’s broader internal quality control and risk management business environment, including information The Committee reports regularly to the systems as well as internal audit in relation systems, technology, compliance and Board and the Company Secretariat ensures to the Group’s quarterly and annual financial internal audit. that minutes of the Committee’s meetings reporting. and decisions are kept in accordance with Members of the Committee must not hold Paragraph 7(4) of the Governance and 5.2 External Audit any other posts or positions or conduct Management Arrangements Directive of 5.2.1 It submits proposals to the Board transactions which could be considered to 2014 of the Central Bank of Cyprus, which it regarding the appointment, compensation, be in conflict with the Terms of Reference of circulates to the Board. terms and scope of engagement and the Committee. substitution or rotation of the approved

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Auditor and other external Auditors of the 5.2.8 It evaluates the comments and 5.3.4 It assesses, on an annual basis, the Group. It is responsible for any selection proposals of the Auditors with regard to the performance of the Head of the Group procedure run and complying with all the management of the Group, the preparation Internal Audit Unit and submits his/her regulatory requirements in relation to such and presentation of its Financial Statements annual appraisal to the Board. procedures. and the monitoring of their application. 5.3.5 It assesses and monitors the 5.2.2 It monitors and ensures the 5.2.9 It is responsible for the oversight independence, adequacy and effectiveness independence and effectiveness of the of permissible non-auditing services to of the Group Internal Audit Unit. Auditors, including: the Bank and its subsidiary or affiliated (a) Seeking from the Auditors information companies by the Auditors, taking into 5.3.6 It monitors and assesses, on an annual about the policies and procedures for account the nature of the services offered, basis, the adequacy and effectiveness of maintaining independence and compliance the threats to their independence and the the Group’s internal control systems and with relevant requirements, at least on an safeguards applied. information systems, based on reports annual basis, of the Group Internal Audit Unit and the (b) Seeking reassurance that the Auditors 5.2.10 It monitors the volume, nature, fees observations and comments of the external and their staff have no family, financial, and extent of permissible non-auditing Auditors and the competent supervisory employment or business relationship with services provided by: authorities. the Company (other than in the normal (a) The Auditors at Group level, aiming to course of business), maintain the balance between objectivity 5.3.7 It reviews the quarterly and annual (c) Discussing with the Auditors the and the value added by the services offered. reports submitted by the Group Chief threats to independence and applicable (b) In the case where non-auditing services Internal Auditor, which are subsequently safeguards as well as the key issues related are offered to a subsidiary or affiliated submitted to the Board. to independence in the Auditors’ Additional company of the Bank and the volume is Report to the Audit Committee and such that it downgrades the objectivity of 5.3.8 It submits to the Board reports mitigation actions, their audits, the Committee informs the regarding the following: (d) Taking account of the Audit Firm’s corresponding Committee (where it exists) (a) Proposals for addressing any weaknesses Partners rotation policy, of the subsidiary company or its Board of of the internal control systems and (e) Overseeing the Auditors’ compliance with Directors. information systems, which have been the reporting requirements in relation to the (c) The Committee is informed, at least once identified based on reports of the Group Audit Report and the Auditors’ Additional a year, by Group Finance, about the nature, Internal Audit Unit and the observations and Report to the Audit Committee, extent and fees for non-auditing services or comments of the external Auditors and the (f) Monitoring the history of new key other advisory duties of the Auditors. competent supervisory authorities. management staff joining the Group in (b) Matters relating to the independence and relation to previous employment by the 5.2.11 It prepares annually a report in which smooth execution of the audit work carried incumbent Auditors. the auditing and non-auditing services are out by the Group Internal Audit Unit. recorded by category, time and fees paid to 5.2.3 It oversees the relationship between the Auditors. This report is submitted to the 5.3.9 (a) It confirms that the Company the Group and its Auditors. Board, along with the relevant comments of assigns the assessment of the adequacy of the Committee. the Internal Control System, on an individual 5.2.4 It evaluates the extent and and consolidated base, to external Auditors effectiveness of the audits and examines 5.3 Internal Audit who have the necessary experience. ways to better co-ordinate the audit effort 5.3.1 It approves and evaluates the Internal (b) It evaluates the findings of the above to ensure complete coverage, avoidance Audit Charter. assessment and proposes corrective of overlapping work and the best use of measures to the Board. available audit resources (cost effectiveness). 5.3.2 The Group Internal Audit Unit submits its annual audit plan and budget to the 5.3.10 It ensures that the Group Internal 5.2.5 It monitors the Statutory Audit of the Audit Committee for review and approval, Audit Unit has adequate resources and Annual Financial Statements, taking into ensuring appropriate coverage, prioritisation appropriate standing within the Company. account any findings or conclusions of the and flexibility to adapt to variations in Cyprus Public Audit Oversight Board. response to developments. Any changes 5.4 Compliance that are likely to be made to the audit plan 5.4.1 It assesses and monitors the 5.2.6 It informs the Board of the outcome or the budget during the year must also be independence, adequacy and effectiveness of the Statutory Audit, explaining its approved by the Committee. of the Group Compliance Unit. contribution to the integrity of the Group Financial Statements. 5.3.3 It submits to the Board its 5.4.2 It submits to the Board its recommendations on the appointment recommendations on the appointment 5.2.7 It evaluates the statements made / and replacement of the Head of the Group and replacement of the Head of the Group matters identified in the Audit Report and Internal Audit Unit. Compliance Unit. the Auditors’ Additional Report to the Audit Committee.

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5.4.3 It assesses, on an annual basis, the 5.4.6 The Group Compliance Unit submits its Unit or to independent experts, following performance of the Head of the Group annual audit plan and budget to the Audit the authorisation of the Board, the Compliance Unit and submits his/her annual Committee for approval, ensuring that they investigation of any matters which fall within appraisal to the Board. are sufficiently flexible to adapt to variations its mission and responsibilities. in response to developments. 5.4.4 It advises the Board, drawing on 5.5.2 It requests information from the work of the Group Compliance Unit, 5.4.7 It reviews the quarterly and annual Management on the significant risks to on the adequacy and effectiveness of the compliance reports submitted by the Head which the Group is exposed; it evaluates the Framework for Business Conduct. of the Group Compliance Unit, which are measures taken by the Management and the subsequently submitted to the Board. The Board to minimise these risks and submits its 5.4.5 It advises the Board, drawing on the annual reports of the Money Laundering recommendations for the improvement of work of the Group Compliance Unit and Compliance Officer are submitted directly to those measures. external Auditors, on the adequacy and the Board. effectiveness of the Compliance Framework 5.5.3 It investigates any other important (including the Compliance Monitoring 5.4.8 It ensures that the Group Compliance data, information or facts that concern and Programme and Compliance Policies). Unit has adequate resources. influence the performance and operation of Anti-Money Laundering Compliance is the Company or its compliance with the laws not included therein but it is the direct 5.5 Miscellaneous Issues and regulations that govern it. responsibility of the Board to monitor. 5.5.1 It assigns to the Group Internal Audit WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL REPORT OF THE BOARD OF DIRECTORS BANK REPORT GROUP 2016 ON CORPORATE GOVERNANCE FOR THE YEAR 2016

5.5.4 It oversees that Senior Management restructuring process and it subsequently 1.1 Set a well-defined and clearly takes the necessary corrective actions informs the Management and the Board on communicated strategy for risk management in a timely manner to address control further action as it considers necessary. throughout the Bank and embedding of the weaknesses, non-compliance with policies, Risk Appetite Framework, ‘RAF’; laws and regulations and other weaknesses 5.5.11 It carries out a self-assessment identified by external Auditors, the Group and reports to the Board its conclusions 1.2 Promote and embed a culture of risk Internal Audit and Compliance Units and the and recommendations for improvements awareness across the Bank and assist the supervisory authorities. and changes in relation to the structure, Management Body in implementing the the responsibilities and the work of the strategy; 5.5.5 Following a decision of the Audit Committee. Committee, the Chairperson of the Audit 1.3 Ensure compliance with the Committee convenes a joint meeting with 5.5.12 The Chairperson of the Committee requirements of the Business of Credit the Members of the Audit Committee of a will be available for personal, telephone, Institutions Laws, the relevant Central Bank subsidiary company to discuss and study any electronic or written communication, upon of Cyprus’ and European Central Bank’s matters concerning that company as may be request of the Company’s shareholders, Directives and requirements, and the deemed necessary. regarding issues concerning the work of the Cyprus Stock Exchange’s Code of Corporate Committee. He/She will also be available Governance in relation to Risk Management 5.5.6 The Committee has the responsibility to answer any questions raised during and Information Security; for examining any significant transactions, of the Annual General Meeting or any other any nature, carried out by the Bank and/or informative meeting of the Company’s 1.4 Periodically review the Bank’s Enterprise its subsidiary companies, in which a Member shareholders. Risk Management Framework and of the Board, the Chief Executive Officer, a Senior Executive, the Company Secretary, 5.5.13 Information regarding the structure 1.5 Ensure that Risk Management fulfills its the Auditor or a major shareholder of the and work of the Committee will also responsibilities and obligations concerning Company (who directly or indirectly holds be included in the Annual Corporate the identification, measurement, monitoring more than 5% of the issued share capital Governance Report of the Board of Directors and effective management of all Group of the Company or its voting rights) has, of Hellenic Bank Public Company Limited. Risks. directly or indirectly, any significant interest, so as to ensure that these transactions are 6. Validity and Amendments of the Terms of 2. Composition of the Risk Management carried out within the framework of the Reference Committee Company’s normal commercial practices (at The Terms of Reference are reviewed The Committee is appointed by the Board arm’s length). regularly, at least annually, to ensure of Directors, ‘BoD’ or ‘Board’ and consists continuing appropriateness. The reviews of three to seven non-Executive Directors The above definition includes the Members must be documented and include, where with sufficient knowledge and experience in of the Board of subsidiary companies. necessary, recommendations to the Board the Risk Management sector. The majority on revisions so as to reflect any new of the Members of the Committee must be 5.5.7 It prepares, with the assistance of practices that may be adopted by the independent non-Executive Members of the the Compliance Officer with the Corporate Group. These may include organisational Board. Governance Code, the Report of the Board restructuring, Directives of the Central of Directors on Corporate Governance to be Bank of Cyprus, amendments in the Members of the Risk Management included in the Group’s Annual Report. relevant legislation, new Directives of the Committee can be members of only one Securities and Exchange Commission or new other Board Committee. 5.5.8 It discusses with the Management the Regulations of the Cyprus Stock Exchange policy for the management and assessment which are added to the Code. The Chairperson of the Committee is of business risk, including the main financial appointed by the Board. risks of the Group, and the measures that 7. Code of Corporate Governance are taken by the Board for their monitoring Notwithstanding the above, the Audit The term-in-office of the Members of the and mitigation. The external Auditors and Committee will function strictly within Committee is decided by the Board. the Head of the Group Internal Audit Unit the framework of the relevant provisions may also be invited to this meeting. of the Code of Corporate Governance, as The Board can, during the term-in-office of determined in Chapter C of the Code. the Committee: (a) replace any Member of 5.5.9 It handles any eponymous or the Committee, including the Chairperson anonymous reports by employees, Terms of Reference of the Risk Management and (b) fill positions in the Committee which submitted in the context of the Group’s Committee of the Board of Directors are vacated for any reason. formal relevant policy. 1. Establishment / Mission Committee Members shall not hold 5.5.10 It assesses the adequacy and The Risk Management Committee, any other posts or positions or conduct effectiveness of the appeals process, based ‘BRMC’ of Hellenic Bank Public Company transactions which could be considered to on reports of the Appeals Committee, and Limited (‘the Company’ or ‘the Bank’) was be in conflict with the Terms of Reference of of the Appeals Committee itself. It identifies established to fulfil the following mission: the Committee. any weaknesses or gaps in the loans

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Committee Members shall have appropriate The Committee may formally invite to any of 4.4 Assist the Board in overseeing the knowledge, skills and expertise to fully its meetings, for a specific item or items on effective implementation of the risk understand and monitor the risk strategy the agenda, any person who may contribute appetite framework and strategy by senior and the risk appetite of the Company. towards that specific item. Such person is management including: present only during the discussion of the 3. Meetings / Decision-making Process of specific item and leaves the meeting room a. The development of mechanisms to the Risk Management Committee immediately after without any participation ensure material exposures that are close to The Committee shall meet whenever in the decision making process. or exceed approved risk limits are managed necessary and at least twice every and, where necessary, mitigated in an quarter. In emergency or crisis situations, 4. Duties and Responsibilities of the Risk effective and timely manner; the Committee may convene via Management Committee b. The identification and escalation of teleconferencing for decision-taking. A breaches in risk limits and of material risk Committee resolution in writing signed or The Committee shall carry out the duties set exposures in a timely manner; approved by email, text message, fax or any out below: c. Submitting proposals and other means of transmission (i.e. Diligent) recommendations for corrective actions by ALL Committee Members shall be valid Framework and Policies whenever weaknesses are identified in and effectual as if it had been passed at a 4.1 Define and submit for periodic review, implementing the risk strategy; meeting of the Committee duly convened prior to Board approval: d. Embedding attitudes around risk taking, and held. management and control in line with the 4.1.1 The principles which should govern risk Board’s communicated Strategy and Risk The majority of Committee Members management as set out by the Enterprise Appetite Statement. shall comprise a quorum. A majority of Risk Management Framework, ‘ERMF’, the Committee Members shall be considered to framework for undertaking all forms of risk, 4.5 Review whether prices of liabilities be the next integral number of one half of and the risk frameworks covering individual and assets offered to clients take fully into the Members. A decision of the Committee risks; account the Company’s business model and may be adopted by the majority of attending risk strategy. Where prices do not properly Committee Members. In the case of a tie, 4.1.2 The appropriate allocation of capital reflect risks in accordance with the business the Chairperson shall not have a second or across the various divisions of the Group model and risk strategy, the Committee shall casting vote. that would enable the Company, Group and/ require that management prepare a remedy or each subsidiary separately to achieve plan for BRMC examination and review for The Company Secretariat must be closely their business objectives, in accordance to presentation to the Board. involved in the preparation of the meeting’s the Strategic Plan of the Group, and within agenda and ensure it is distributed, including the constraints and guidelines laid out in Capital Management any supporting papers where relevant, at the Capital Plan and in the Risk Appetite 4.6 Review and recommend to the Board for least three (3) business days in advance of Framework and Statement; approval relevant regulatory submissions the meeting. after review and approval at Executive 4.1.3 The policies of the Group with regard Level such as the Group’s Internal Capital The Company Secretariat must ensure to the limits and pricing of undertaking Adequacy Assessment Process (ICAAP), minutes of the Committee’s meetings Group risks and the Group’s Stress Testing Process and the and decisions are kept in accordance with Group’s Recovery Plan. Paragraph 7(4) of the Governance and 4.1.4 All other risk related policies cascading Management Arrangements Directive of from ERMF and the risk frameworks. 4.7 Approve the methodology, assumptions 2014 of the Central Bank of Cyprus and and parameters used for the calculation circulate them to the Board. In addition, 4.2 Cultivate an internal environment of risk of the provisions by the Group Risk the Company Secretariat must send the management and control, that will govern Management Function. approved Committee minutes to the the business decision-making processes Central Bank of Cyprus within one month across the activities and Units of the Group Liquidity Management of the meeting date in accordance with the and its subsidiaries and which will be 4.8 Review and recommend to the Board for requirements of the Governance Directive. consistent with the Board’s communicated approval relevant regulatory submissions Business Strategy and Risk Appetite and returns after review and approval at The Company Secretariat works in close Statement. Executive Level such as the Group’s Internal cooperation with ERM & Governance Liquidity Adequacy Assessment Process Unit to coordinate: (i) the submission Risk Appetite / Risk Strategy (ILAAP) and the Group’s Contingency of support material and information to 4.3 Advise and develop recommendations Funding Plan. the Risk Management Committee and for the Board on the Group’s overall current (ii) the communication between the Risk and future risk appetite and ensure it Risk Data Aggregation and Reporting Management Committee and relevant remains consistent with the Bank’s short 4.9 Oversee the implementation of the Basel stakeholders. and long-term strategy, business and capital Risk Data Aggregation and Risk Reporting plans, risk capacity as well as compensation Principles and in particular review the The Committee has the approval of the programs; taking into account relevant legal Framework for Risk Data Aggregation and Board to obtain independent professional and regulatory requirements. Reporting. advice whenever it deems this necessary.

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Pillar 3 Disclosures Management Information 4.22 The Risk Management Committee shall 4.10 Review and recommend to the Board 4.17 Determine the nature, the amount, the work with the Audit Committee of the Board for approval the Group’s Compliance Policy format and the frequency of the information to ensure that a global view is taken in the to the Pillar 3 disclosure requirements as per which it is to receive on the risk situation of management of risk. CRR / CRD IV. the Company and for each type of risk and each business unit. The Committee must: Committee Governance 4.11 Review and endorse statements in 4.23 The Committee shall review its Terms relation to financial and operational risk (i) approve metrics or a process to satisfy of Reference regularly, at least annually, made in the risk management section of the itself that the risk reports and information to ensure continuing appropriateness. The Pillar 3 Disclosures. it receives are accurate, comprehensive and reviews must be documented and include, depict an appropriate view of the Company’s where necessary, recommendations to the Remuneration risk profile; Board on revisions. 4.12 Review whether incentives provided (ii) ensure that risk parameters and risk by the remuneration system take into models developed and used to quantify 4.24 The Committee shall conduct a self- consideration risk, capital, liquidity and the them are subject to periodic independent assessment and report its conclusions and likelihood and timing of earnings. validation. recommendations for improvements and changes to the Board. Control Functions 4.18 Review the Bank’s risk profile in 4.13 Assess and monitor the independence, relation to its strategy and risk appetite 4.25 The Chairperson of the Committee adequacy and effectiveness of the Group and monitor material risks, key risk trends, shall be available for personal, telephone, Risk Management and Information Security concentrations and exposures by considering electronic or written communication, which Functions, including carrying out the annual and evaluating: shareholders of the Company may request, appraisal of the Chief Risk Officer and Head regarding issues concerning the work of the of Information Security and submit the (i) the quarterly reports submitted by Committee. He/She will also be available relevant reports to the Board. the Head of the Group Risk Management to answer any questions during the Annual Function within two months from the General Meeting or any meeting for the 4.14 Submit to the Board recommendations end of each quarter and inform the Board purposes of briefing the shareholders of for the appointment or removal of the Heads accordingly; the Company. Information concerning of the Risk Management and Information (ii) the annual reports submitted by the the structure and work of the Committee Security Functions. Head of the Group Risk Management will also be given in the Annual Corporate Function and the Head of Group Information Governance Report of the Board of Directors 4.15 Advise the Board, drawing on the Security within two months from the of Hellenic Bank Public Company Limited. work of the Audit Committee, Group Risk end of each year and submit these to the Management Function, Information Security Board, accompanied by the Committee’s Terms of Reference of the Nominations / Function and external Auditors, on: assessment of the reports; Internal Governance Committee (iii) the relevant reports prepared by Group 1. Role of the Nominations / Internal (i) the adequacy and effectiveness of the Internal Audit Unit, subsidiary Boards and/ Governance Committee risk management and information security or Risk Committees and the regulators The Nominations / Internal Governance frameworks and propose improvements and oversee that corrective measures are Committee was established to ensure that where necessary; implemented where these are necessary. Hellenic Bank Public Company Limited (‘the (ii) the adequacy and robustness of Company’) complies with the requirements information and communication systems 4.19 Promote the development of relevant of the Business of Credit Institutions to enable identification, measurement, Early Warning Indicators. Laws, the relevant Central Bank of Cyprus’ assessment and reporting of risk in a Directives and the Cyprus Stock Exchange’s timely and accurate manner and ensure Evaluation of Risks Code of Corporate Governance. the adequate protection of the Company’s 4.20 The Committee reviews the confidential and proprietary information; evaluation and recommendations of the The primary role of the Committee is to (iii) the adequacy of provisions and Risk Management Function related to the prepare proposals for the Board of Directors effectiveness of strategies and policies with involvement of the Group in new markets, (‘the Board’) regarding the selection of respect to maintaining, on an ongoing basis, new companies or business ventures and individuals for nomination as Members amounts, types and distribution of both submit its respective recommendations to of its Board or the Boards of subsidiary or internal capital and own funds, adequate to the Board. associated companies of the Group or of cover the risks of the Company. any other company in which the Company 4.21 The Committee shall periodically and has the right to appoint any member of the 4.16 Review and approve the budgets of the at least on a six-monthly basis evaluate board, either to fill extraordinarily vacated Group Risk Management and Information the Arrears Management Strategy and its or vacant seats or after the retirement of a Security Functions, ensuring that they are underlying hypothesis and assumptions Member in accordance with the retirement sufficiently flexible to adapt to variations in and submit the revised strategy to the policy due to age. response to developments. CBC as well as ensure appropriate control mechanisms to effectively manage NPE and In addition, the Committee is responsible to Forborne loans. prepare proposals for the Board regarding

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the selection of the Chief Executive The Company Secretariat must ensure b) Board diversity, including a target Officer (“CEO”) of the Company or its minutes of the Committee’s meetings representation of the underrepresented subsidiary companies or the appointment and decisions are kept in accordance with gender and how to reach and maintain this of any Executive member of the board of Paragraph 7(4) of the Governance and target. directors of the Company or the board of Management Arrangements Directive of directors of any of its subsidiary companies. 2014 of the Central Bank of Cyprus and 4.5 Review periodically and at least annually, The Committee is also responsible for circulate them to the Board. the policy for selection, development, the development, implementation and appointment and replacement of senior oversight of policies of internal governance The Committee has the approval of the management and Heads of Group Control arrangements within the Group. Board to obtain independent professional Functions and make recommendations to advice whenever it deems this necessary. the Board. 2. Composition of the Nominations / Internal Governance Committee The Committee may formally invite to any of 4.6 Review periodically the policy for The Committee is appointed by the Board its meetings, for a specific item or items on recruitment, rotation and promotion of staff, and consists of three to six exclusively the agenda, any person who may contribute reporting accordingly to the Board of the non-Executive Directors. The majority of towards that specific item. Such person is Company. the Members of the Committee must be present only during the discussion of the independent non-Executive Members of the specific item and leaves the meeting room Board and CEO Appointments Board. immediately after without any participation 4.7 Identify, evaluate and recommend, for in the decision making process. the approval by the Board, candidates to Members of the Nominations / Internal fill vacancies in the board of directors of Governance Committee can be members of 4. Duties and Responsibilities of the the Company or the boards of its subsidiary only one other Board Committee. Nominations / Internal Governance or associated companies or of any other Committee company in which the Company has the The Chairperson of the Committee is right to appoint any member to its board of appointed by the Board. The Committee shall carry out the duties directors. set out below for the Company and its The term-in-office of the Members of the subsidiaries: In identifying candidates the Committee Committee is decided by the Board. shall: Board Evaluation a) Consider candidates from a wide range of Committee Members shall not hold 4.1 Assess at least annually, the structure, backgrounds; any other posts or positions or conduct size, composition and performance of the b) Pay due regard to the Fitness and Probity transactions which could be considered to Board and make recommendation with requirements and be in conflict with the Terms of Reference of regard to any changes to the Board. c) Consider candidates on merit and against the Committee. objective criteria, as defined in the relevant 4.2 Evaluate regularly and at least annually, policy, with due regard to the benefits 3. Meetings / Decision-making Process of the skills, knowledge, experience, diversity of diversity, taking care that appointees the Nominations / Internal Governance and expertise of Members of the Board will have sufficient time to devote to the Committee of Directors and those of the Group’s position. The Committee shall meet whenever subsidiary companies, individually and necessary and at least on a quarterly basis. collectively, reporting accordingly to the 4.8 Identify, evaluate and recommend, for Board. the approval by the Board, candidates for The majority of Committee Members the position of the CEO of the Company or shall comprise a quorum. A majority of Board Succession Plans its subsidiary companies. Committee Members shall be considered to 4.3 Review periodically and at least annually, be the next integral number of one half of succession plans for the Board to ensure 4.9. In its recommendation to the Board to the Members. on the one hand that successions occur appoint a candidate as Director or CEO, the smoothly and an appropriate balance of Committee shall provide a full rationale of The decisions of the Committee are taken by diversity, skills and experience is maintained, how it arrived at its decision. majority voting. In the event of an equality and on the other hand the progressive of votes, the Chairperson of the meeting renewal of the Board, reporting accordingly 4.10 Prior to the appointment of a Director, shall not have a second or casting vote. to the Board. the proposed appointee shall be required by the Nominations / Internal Governance The Company Secretariat must be closely Policies Committee to disclose any other business involved in the preparation of the meeting’s 4.4 Define, for the approval by the Board, interests that may result in a conflict of agenda and ensure it is distributed, including and periodically review policies for: interest and be required to report any future any supporting papers where relevant, at a) Appointment of Board Members, business interests that could result in a least three (3) business days in advance of including the necessary qualifications that conflict of interest. the meeting. an individual should possess in order to serve as a member of the Board of Directors of any of the Group’s companies and

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Appointment of the Direct Reports to the Committee Governance 5. Code of Corporate Governance CEO 4.17 The Committee shall review its Terms It is understood that the Nominations 4.11 Evaluate and recommend, for the of Reference regularly, at least annually, / Internal Governance Committee will approval by the Board, the appointment of to ensure continuing appropriateness. The operate strictly within the framework of the the direct Reports to the CEO, following a reviews must be documented and include, relevant provisions of the Code of Corporate relevant recommendation by the CEO. where necessary, recommendations to the Governance, as determined in Chapter A of Board on revisions. the Code. Fitness and Probity 4.12 At least annually, conduct Fitness and 4.18 The Committee shall conduct a self- (15) Part D of the Code which refers to Probity evaluation of each Member of the assessment and report its conclusions and the Relations of the Company with its Board, based on the relevant criteria defined recommendations for improvements and Shareholders in the Directive on the Assessment of Fitness changes to the Board. The Board of Directors of the Company and Probity of Members of the Management utilises the occasions of the announcements Body and Managers of Authorised Credit Annual General Meeting of financial results, as well as of the Annual Institutions of 2014 of the Central Bank of 4.19 The Chairperson of the Committee General Meeting of the Shareholders itself Cyprus and report the outcome of such shall be available for personal, telephone, for organising analytical presentations evaluations to the Board. electronic or written communication, which of the Financial Statements. These are shareholders of the Company may request, usually undertaken by the Group Chief 4.13 If at any given time, persons who hold regarding issues concerning the work of the Financial Officer and the Company’s the post of an independent Director do Committee. He/She shall also be available Executive Management for the benefit of not satisfy or seem not to satisfy any of the to answer any questions during the Annual shareholders, financial analysts, members of independence criteria due to developments, General Meeting or any meeting for the the Stock Exchange and representatives of then the Nominations / Internal Governance purposes of briefing the shareholders of the media. Committee must address the issue the Company. Information concerning immediately and proceed with a relevant the structure and work of the Committee Regarding the Annual General Meeting, recommendation to the Board as to the shall also be given in the Annual Corporate the Company takes into consideration the issue and as to the necessary remedial Governance Report of the Board of Directors relevant provisions of the legislation, the measures, including removing the said of Hellenic Bank Public Company Limited. Company’s Articles of Association and the Member from the Board or redefining his/ Code. her role in the Board and/or appointing a Reporting to the Central Bank of Cyprus new independent Director. The time period 4.20 The Annual Evaluation Reports referred Mr Constantinos Pittalis has been appointed for implementing all necessary remedial to in Paragraphs 4.1, 4.2 and 4.10 shall be as Investor Relations Officer with effect from measures should not exceed one (1) month. submitted to the Central Bank of Cyprus 1st September 2016. (tel. 22500794, e-mail: The said Member should be released from within three (3) months of the end of every [email protected]). any of his/her duties as an independent year. Member of the Board from the date the (16) Rotating Directors eligible for Re- non-compliance with the independence Job Descriptions Election criteria is identified. 4.21 The Committee shall review and Members of the Board retire on a rotating approve, where this is deemed necessary, basis or retire according to the relevant Control Functions the Job Description (roles, responsibilities, provisions of the Company’s Articles of 4.14 Review periodically, and at least main duties, powers, etc.) of the Executive Association and the relevant provisions of annually, in collaboration with the Audit Members of the Board, the Chief Executive the Companies Law and the Code (at least and Risk Management Committees, the Officer, his/her direct reports and the Heads every three years). The retiring Directors, composition, authority and independence of the Control Functions. who are eligible and will offer themselves for of the Group Control Functions, reporting re-election at the Annual General Meeting accordingly to the Board of the Company. 4.22 The Committee is responsible for: of the Shareholders on 24 May 2017, are the a. ensuring that prior to being appointed, following (brief curriculum vitae included): 4.15 Following a relevant recommendation members of the Board are required to by the Audit Committee or Risk disclose any other business interests and (a) Irena A. Georgiadou Management Committee accordingly, continue to do so on a continuous basis Irena Georgiadou was born in Nicosia, evaluate and recommend for the approval following their appointment to the Board; Cyprus in 1976. by the Board, the appointment of the Heads b. assessing whether any interests or She is the Chairwoman of the Board of of Internal Control Functions. relationships declared by members of the Directors of Hellenic Bank Public Co. Ltd. Board present an actual or potential conflict Previously she served as the Commissioner Internal Governance Arrangements of interest and for the Reform of the Cyprus Civil Service 4.16 Ensure effective internal governance c. approving members of the Board having been appointed by President arrangements are in place and evaluate requests related to directorships with other Anastasiades in March 2014. the extent of compliance with the policies companies or intra-Group. of internal governance as approved by the Board.

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She also served as an Advisor to the Minister Chief Executive Officer of the Hellenic Bank non-executive director and also served on of Finance and the Director of the Minister Public Company Limited Group for a period the board of HD Direct Ltd (Hellas Direct) as of Finance’s office. of four months. Re-elected Vice Chairman non-executive director. She has extensive professional experience, of the Board of Directors of Hellenic Bank having served in managerial positions in on 24 September 2015. Member of the Elected Member of the Board of Directors public and private companies. Risk Management Committee of the Bank’s of Hellenic Bank on 28 May 2014 and Board of Directors. appointed Executive Member of the Board / She studied Politics and Economics (BSc – He is also a non-Executive Director of EMA Group General Manager, Corporate 1998) at the University of Bristol UK, and S.A. Development on 29 April 2015. is professionally qualified as a Chartered Accountant (ACA – 2001) and as a Corporate (c) Christodoulos A. Hadjistavris Financier (CF – 2006) from the Institute of Born on 20 October 1981. Graduated from Chartered Accountants in England and Wales the First Kykkos Lyceum in Nicosia and (ICAEW). She graduated from the English studied Mathematical Science with Finance School Nicosia (1988-95). and Economics at the City University in Nicosia, 30 March, 2017 London. A Chartered Accountant – Member She is also a non-Executive Director of of the Institute of Chartered Accountants in the Cyprus International Institute of England and Wales. Management Limited (CIIM) and the Cyprus Employers and Industrialists Federation Worked in the international Audit Firm / (OEB). She is married and has one son. Financial Advisors Pricewaterhouse Coopers from 2004 to 2008 and afterwards in Group (b) Marinos S. Yannopoulos Strategy, Mergers & Acquisitions of the Bank Born on 7 August 1953. Graduated from the of Cyprus. Since 2014 works at Wargaming Athens College and studied Economics (B.A.) Group Ltd as Investment Portfolio Manager. at the American College of Greece (Deree College), Industrial Economics (M.A.) at the Elected Member of the Board of Directors University of Sussex in the United Kingdom of Hellenic Bank on 28 May 2014 and and Business Administration (M.B.A.) at also Member of the Board of Directors of the University of Manchester (Manchester Pancyprian Insurance Limited. Member of Business School) also in the United Kingdom. the Audit and Remuneration Committees of the Bank’s Board of Directors. Commenced his career in 1978, working for five years for Exxon in London, Rome and (d) Georgios Fereos Athens. From 1982 he worked for ten years Born on 1 March 1977. Graduated from for Chase Manhattan Bank, in the Treasury the A’ Ethnarch Makarios III Lyceum in Department in New York and then in Milan Paphos and studied Accounting & Finance and Frankfurt as Country Capital Markets (B.Sc.) at the London School of Economics Executive and Treasurer. Returned to Greece & Political Science and Finance (M.Phil.) at in 1991 to manage Ionian Bank as General the University of Cambridge in the United Manager until 1993. He subsequently Kingdom. worked from 1994 till 2010 for Alpha Bank. During this time he managed numerous Began his career in 2000 in London, as businesses such as Treasury and Trading, Investment Banker for Credit Suisse First Asset Management, Private Banking, Boston and afterwards worked for Bank of Shipping, International Operations and Real America and Morgan Stanley in Leveraged Estate. He was also responsible for the Bad Finance Debt Capital Markets. After almost Debt Division and setting up the Arreas nine years as Investment Banker, became Management Function. Marinos was also the an Investment Advisor and specialized in Chief Financial Officer, Member of the Board businesses experiencing financial difficulties of Directors and the Executive Committee. and undergoing recapitalisation, balance Joined Chipita in 2011 as Deputy Managing sheet restructuring, operational turnaround Director (until February 2014) and Member or liquidation. In this area, worked for of the Board of Directors (until March 2015). Gladwyne Investments LLP in London and Alden Global Capital Ltd in New York and Elected Member of the Board of Directors Jersey. Upon his return to Cyprus in 2013, of Hellenic Bank on 28 May 2014 and Vice worked as a financial advisor to local and Chairman of the Board on 17 July 2014, foreign companies seeking to raise growth an office from which he resigned on 9 capital and/or financing, served on the September 2014 upon his appointment as board of Hellenic Bank as independent

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REMUNERATION POLICY REPORT FOR THE YEAR 2016

Introduction inclusion in the notes to the annual accounts majority of the Members of the Committee The Board of Directors of Hellenic Bank of the Company and the Remuneration must be independent non-Executive Public Company Limited (‘‘the Company’’), Policy Report itself. Members of the Board. in compliance with the provisions of the Code of Corporate Governance, published The composition of the Remuneration Members of the Remuneration Committee by the Cyprus Stock Exchange (4th revised Committee during 2016 and until the date of can be members of only one other Board edition - April 2014) and particularly this report is as follows: Committee. Appendix 1 of the Code, incorporates the present Remuneration Policy Report in Chairperson: Irena A. Georgiadou The Chairperson of the Committee is the Company’s 2016 Annual Report. The Members: appointed by the Board. Company’s 2016 Annual Report is published David Whalen Bonanno in the Company’s website. Christodoulos A. Hadjistavris The term-in-office of the Members of the Lambros Papadopoulos Committee is decided by the Board. Remuneration Committee (from 17 March 2016) The primary role of the Committee is to Stephen John Albutt Committee Members shall not hold define and recommend for approval by (from 14 October 2016). any other posts or positions or conduct the Board of Directors the Remuneration transactions which could be considered to Policy and the Remuneration Principles The terms of reference of the Remuneration be in conflict with the Terms of Reference of for the Group that are aligned to the Committee appear below: the Committee. Group’s strategic objectives and values. Also, the Committee meets whenever it is Terms of Reference of the Remuneration 3. Meetings / Decision-making Process of the necessary to fix or review the remuneration Committee Remuneration Committee of Executive and non-Executive Members 1. Role of the Remuneration Committee The Committee shall meet whenever of the Board of Directors (‘‘the Board’’), The Remuneration Committee was necessary and at least twice a year. the Chief Executive Officer, the Company established to ensure that Hellenic Bank Secretary, the officers reporting directly to Public Company Limited (“the Company”) The majority of Committee Members the Chief Executive Officer and the Heads complies with the requirements of the shall comprise a quorum. A majority of of the Control Functions. After considering Business of Credit Institutions Laws, the Committee Members shall be considered all relevant parameters and data, it makes relevant Central Bank of Cyprus’ Directives to be the next integral number of one half relevant recommendations to the Board and the Cyprus Stock Exchange’s Code of of the Members. The decisions of the for making decisions, in the absence of the Corporate Governance and is responsible Committee are taken by majority voting. Executive Member(s) of the Board involved for the evaluation of proposals regarding In the event of an equality of votes, the or other officers involved. The Committee’s remuneration matters, including those Chairperson of the meeting shall not have a suggestions and the Group’s Remuneration proposals which have an implication on the second or casting vote. Policy take into consideration the relevant risk and risk management of the Group. responsibilities, workload, qualifications, The Company Secretariat must be closely know-how, academic background, The primary role of the Committee is to involved in the preparation of the meeting’s experience, individual performance, define and recommend for approval by the agenda and ensures it is distributed, remuneration of comparable positions in Board of Directors of the Company (“the including any supporting papers, where the market, especially in areas where the Board”) the Remuneration Policy, including relevant, at least three (3) business days in Group is active, remuneration at other pensions and variable compensation, and advance of the meeting. levels in the Group as well as, non-financial the Remuneration Principles for the Group criteria e.g. compliance with applicable rules that are aligned to the Group’s strategic The Company Secretariat must ensure and procedures. The Committee’s aim is to objectives and values. Also, the Committee minutes of the Committee’s meetings attract and retain good quality officers at prepares proposals for the approval by and decisions are kept in accordance with Executive and General Management levels the Board on the remuneration packages, Paragraph 7(4) of the Governance and in order to better serve the interests of the including retirement and other benefits, of Management Arrangements Directive of Group as well as, those of its shareholders Executive and non-Executive Members of 2014 of the Central Bank of Cyprus and and other stakeholders. the Board, the Company Secretary, as well circulate them to the Board. as of the Chief Executive Officer, his/her Each year, the Remuneration Committee direct reports and the Heads of the Control The Committee has the approval of the proposes to the Board of Directors the Functions. Board to obtain independent professional Annual Remuneration Policy Report, as advice whenever it deems this necessary. part of the Annual Report of the Company, 2. Composition of the Remuneration which is submitted to the shareholders’ Committee The Committee may formally invite to any of Annual General Meeting for approval. The The Committee is appointed by the Board its meetings, for a specific item or items on Committee also reviews and approves the and consists of three to six exclusively the agenda, any person who may contribute Disclosure of Information regarding the non-Executive Directors who shall exercise towards that specific item. Such person is Remuneration of the Directors, which is competent and independent judgment on present only during the discussion of the prepared by Group Human Resources for remuneration policies and practices. The

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specific item and leaves the meeting room 4.3 During the preparation of its proposals, c. The non-correlation of remuneration to immediately after without any participation the Committee shall provide the opportunity the profitability of the Company and in the decision making process. to the Chairperson and the Chief Executive d. The non-participation in any insurance or Officer to express an opinion with regard pension plan. 4. Duties and Responsibilities of the to its proposals concerning the salaries of Remuneration Committee other Executive Board Members. It should Readjustment of Benefits Remuneration Framework also have access to professional advice, both 4.10 The Committee shall submit to the 4.1 The Committee shall submit to the internal and external. Board proposals for the determination Board, within terms of reference agreed of each readjustment of benefits of the upon and without the presence of the Remuneration Policy Members of the Board, the Chief Executive party interested in their evaluation, 4.4. The Committee shall assist the Board Officer and his/her direct reports, being proposals concerning the framework and in fulfilling its duty in ensuring that the sensitive to the terms of remuneration and level of remuneration (including fixed pay, remuneration policy and practices are conditions of employment at other levels of performance-related pay, bonuses, pension consistent with the risk appetite of the the Group. rights and any compensation payments, Company, prevent conflicts of interest share options, etc.) of Executive and non- and promote sound and effective risk External Advice Executive Members of the board of the management. 4.11 The Committee shall, when using Company or its subsidiary companies, the the services of a consultant to obtain Company Secretary, the Chief Executive 4.5 The Committee shall ensure that information on market standards for Officer of the Company or its subsidiary staff members, who are involved in the remuneration systems, ensure that this companies, his/her direct reports and the design, review and implementation of consultant does not also give advice to Heads of the Control Functions. the remuneration policies and practices, the Human Resources Department or the have relevant expertise and are capable Executive Members of the Board. The Committee will take into consideration of forming independent judgment on the factors such as the relevant responsibilities, suitability of the remuneration policies and Control Functions workload, qualifications, know-how, practices, including their suitability for risk 4.12 The Committee shall directly oversee academic background, experience, individual management. Independent external advice the remuneration of the senior officers in performance, remuneration of comparable may also be sought. the Group Control Functions. positions in the market, especially in areas where the Group is active, remuneration in 4.6 The Committee shall assist, through Remuneration Reports / Statements other levels of the Group and non-financial relevant studies / proposals, the Board 4.13 The Committee shall prepare, for criteria e.g. compliance with applicable rules in fulfilling its duties in approving and submission to the Board, the Annual and procedures. It will also consider the periodically reviewing the Principles that Remuneration Policy Report, which will need to attract and retain the most suitable govern the Group Remuneration Policy and comprise part of or be attached to the Directors (Executive and non-Executive) / the Policy itself and in overseeing the latter’s Annual Report of the Company. Senior Executives in the Company. implementation. 4.14 The Committee shall review and 4.2 During the formulation of the above- 4.7. The Committee shall ensure that approve the Annual Remuneration mentioned proposals, the Committee should Internal Control Functions are involved in Statement, prepared by Group Human take care so that: the design, review and implementation of Resources for inclusion in the Company’s (a) these proposals are consistent with the the Remuneration Policy. annual Accounts or in the notes to the relevant legal and regulatory requirements annual Accounts, in accordance with and 4.8. In addition to setting the Remuneration Appendix 2 of the Code of Corporate (b) the performance-related systems: Policy, the Committee shall: Governance and the relevant Cyprus Central - should not extend any benefits before the a. Determine and periodically review target Bank’s Directives / Guidelines. gains expected by the Company materialise and measures to be applied for variable in a satisfactory degree compensation, liaising with the Risk 4.15 The Committee shall review and - should not include non-Executive Management Committee of the Board and approve the content of any resolutions Members of the Board among the b. Set budget for annual staff increases. submitted for approval at the General beneficiaries Meeting of the shareholders, which will - should specify targets and evaluation Remuneration of Non-Executive Members be prepared by the Company Secretariat criteria so that the remuneration of the of the Board in cooperation with the Group’s Legal Company Executives is properly aligned with 4.9 In relation to the level of remuneration Advisors, in accordance with Appendix 3 the long-term interests of the shareholders, of the non-Executive Members of the Board, of the Code of Corporate Governance, and investors, other stakeholders and the the Committee shall take the following into concern possible plans for the remuneration public interest, the Company’s business consideration: of Executive Members of the Board in the objectives and strategies with a view of a. The available time that the Members have form of shares, share warrants or share delivering sustainable value and maintaining to prepare for attending meetings, options and of any resolutions submitted a sound capital base, always within the risk b. The responsibilities assumed by each for approval at the General Meeting of the framework of the Company. Member, shareholders, which will be prepared by the

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Company Secretariat in cooperation with the 4.17 The Committee shall conduct a self- the Annual General Meeting or any meeting Group’s Legal Advisors concerning possible assessment and report its conclusions and for the purposes of briefing shareholders plans for remuneration of employees of the recommendations for improvements and of the Company. Information concerning Group in the form of shares, share warrants changes to the Board. the structure and work of the Committee or share options. will also be given in the Annual Corporate Annual General Meeting Governance Report of the Board of Directors Committee Governance 4.18 The Chairperson of the Committee of Hellenic Bank Public Company Limited. 4.16 The Committee shall review its Terms shall be available for personal, telephone, of Reference at least annually, to ensure electronic or written communication, 5. Code of Corporate Governance continuing appropriateness. The reviews which shareholders of the Company may It is understood that the Remuneration must be documented and include, where request, regarding issues concerning the Committee will act strictly within the necessary, recommendations to the Board work of the Committee. He/She will also be framework of the relevant provisions of on revisions. available to answer any questions during the Code of Corporate Governance, as determined in Chapter B of the Code. WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL BANK REPORT GROUP 2016

Directors’ Remuneration Policy in total to the gross amount of €526.400. In relation to the variable remuneration The Remuneration Policy for the Directors Under the termination agreement Mr Pijls of the Executive Director / Chief Executive of the Company remains the same as it Variable Remuneration Plan was terminated Officer, the Extraordinary General Meeting was when approved in the Annual General (with the exception of his retention of the Shareholders of the Company, held on Meeting of the Shareholders held on 25 May obligations for the variable remuneration 27 February 2015 resolved the following: 2016, as shown below. A relevant proposal shares that were issued in his name) and will be submitted by the Board of Directors he waived his rights to any unvested cash That the Board of Directors (or a duly to the Annual General Meeting of the payments and shares, which he was entitled authorised committee of the Board of shareholders for approval. under his Variable Remuneration Plan. Directors) be authorised to exercise all powers of the Company to issue and allot to The remuneration of the Members of the Under his contract of employment, Mr. B. the Chief Executive Officer of the Company Board of Directors for the year 2016 was Pijls was rewarded with a remuneration up to €200.000 worth of ordinary shares of fixed as follows: package based on a contract of the Company of nominal value of €0,50 (the employment the terms of which, took “New Shares”) for every twelve months of (i) Chairperson: €140.000 into account the relevant provisions of the his employment as Chief Executive Officer, (ii) Vice-Chairperson: €50.000 existing Cyprus Stock Exchange Code of as the Board of Directors may, in its sole and (iii) Senior Independent Director: €50.000 Corporate Governance and the Directive unfettered discretion determine; provided (iv) Board Members: €45.000 to Credit Institutions on Governance and that: Management Arrangements in Credit (i) such New Shares shall form part of Furthermore, following approval by the Institutions of 2014 of the Central Bank the Chief Executive Officer’s variable Extraordinary General Meeting of the of Cyprus (“the Governance Directive”). remuneration package; Shareholders the remuneration of the The remuneration package included a (ii) the issue of such New Shares will be Members of the following Committees of non-variable annual salary and variable based upon such performance criteria as the Board of Directors for the year 2016 was remuneration. the Board of Directors of the Company fixed as follows: may, from time to time, determine and the The non-variable annual salary was paid New Shares shall be issued in a manner (i) Chairperson of the Audit Committee: monthly and took into consideration which is consistent with the provisions €45.000 his knowledge, experience, academic of the Directive to Credit Institutions (ii) Chairperson of the Risk Management background, expertise and leadership on Governance and Management Committee: €45.000 skills. In addition, it took into consideration Arrangements in Credit Institutions of 2014 (iii) Chairperson of the Remuneration the offered services, the time required issued by the Central Bank of Cyprus, as the Committee: €15.000 to be devoted to the Group, the scope same may be amended from time to time; (iv) Chairperson of the Nominations / of undertaken responsibilities and the (iii) the issue price per New Share shall be Internal Governance Committee: €15.000 benefits and remuneration of officials equal to the higher of (a) the nominal price (v) Member of the Audit Committee: in corresponding positions in other per New Share and (b) the average closing €20.000 comparable organisations. His remuneration price of one ordinary share of nominal value (vi) Member of the Risk Management package also included fringe benefits such of €0,50 of the Company, at the Cyprus Stock Committee: €20.000 as participation in a medical and accident Exchange, over the month of December (vii) Member of the Remuneration plan for the employee and his family, life of the year in respect of which the Committee: €10.000 and permanent disability insurance and performance of the Chief Executive Officer (viii) Member of the Nominations / Internal accident cover whilst on the Company’s will be assessed, and the relevant issue of Governance Committee: €10.000 business as per the Company’s policy, use New Shares shall be made as a result of such of a company car, payment by the Company assessment and In addition, according to Article 88 of the of all expenses in connection with such use (iv) the above-mentioned authority shall Company’s Articles of Association, the Board and payment of expenses by the Company expire on the date being five years from and of Directors may also be paid all travelling, in relation to the provision to him of tax including the date of the resolution unless hotel and other expenses properly incurred advisory services. extended by the general meeting of the by them in attending and returning from In addition, the employment contract of Mr. shareholders of the Company. meetings of the Directors or in connection Pijls provided that he might be entitled to be The following were agreed as regards the with the business of the Company. paid additional variable performance related Executive Director / Chief Executive Officer’s remuneration. The variable remuneration variable remuneration: Remuneration Policy For The Executive would be in line with the provisions of the Director / Chief Executive Officer Company’s Remuneration Policy, applicable Amount and allocation: The variable On 15 December 2016 the contract of legislation, the regulations of the Central remuneration would be up to 50% of Mr Pijls employment between Mr. B. Pijls, Executive Bank of Cyprus and/or the European Central Annual Fixed Remuneration and would be Director / Chief Executive Officer and Bank, the Governance Directive issued allocated pro-rata between shares and cash the Company was terminated by mutual by the Central Bank of Cyprus and the as follows: shares 41,2% and cash 8,8% of his consent. The two parties agreed to a Corporate Governance Code. Annual Fixed Remuneration. consideration for the termination of the contract of employment, in cash, amounting

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Granting: Mr Pijls would be assessed in the There were also Non-Financial criteria like The Executive Director / Group General first Quarter of the year that follows the year providing Leadership to the Organization, Manager is compensated with a of assessment, following approval of the promoting a culture of good governance remuneration package based on a contract previous year’s preliminary results by the within the Organization, motivating people, the terms of which take into account the Board and would be adjusted in the second completion of certain projects, enhancing relevant provisions of the existing Code of Quarter of the year that followed the year the Bank’s corporate image, designing Corporate Governance and the Governance of assessment in case of material changes in and implementing certain strategies Directive. The remuneration package the results. and processes and re-engineering and includes a non-variable annual salary. The streamlining of major processes. Executive Director / Group General Manager Vesting: The variable remuneration granted In relation to the variable remuneration of will participate in a performance related as above, would gradually vest within 4 years Mr. Pijls for the year 2015: stock compensation scheme or other from the year of granting. For example the performance related compensation scheme variable remuneration for 2015, would be (i) the amount of €25.961 in cash was addressed to members of the Executive granted in 2016, and would vest between awarded to him, out of which the amount Management of the Bank, when and if such 2016 and 2019. of €10.384 has vested and was paid to him scheme(s) are designed and implemented by during 2016 and the Bank at its sole discretion. Retention: The shares vesting as above, (ii) shares of the Bank worth of €122.390 should be retained for a further period of with issue price €1,22 (calculated in As at the date of this Report no such 2 to 6 years. The number of shares to be accordance with the provisions of a Special Scheme(s) was / were implemented. retained each year was determined. Resolution of the Extraordinary General The following Resolutions were approved at Meeting of the Shareholders dated 27 the Annual General Meeting of the Company Malus and Clawback: In accordance with February 2015) of nominal value €0,50 on 25 May 2016 (“AGM”): the Governance Directive, up to 100% of were awarded to him. Of those shares, “(A) That the board of directors (or a duly the variable remuneration is subject to 40.128 have vested and have been issued authorised committee of the board of malus or clawback arrangements based on and allotted to him. These shares should be directors) be and is hereby authorised to responsibility for significant deterioration retained for defined period(s). exercise all powers of the Bank to establish of results and failure to meet standards of an employee long-term incentive plan and fitness and probity. Within the context of the termination of the for such purpose allot and/or issue to such employment contract of Mr. Pijls by mutual employees of the Bank (including, without Performance Criteria: consent, it was agreed that his Variable limitation, executive members of the board The variable remuneration of Mr Pijls was Remuneration Plan be terminated with of directors, other than the Bank’s Chief based on a blend of Financial and Non- the exception of his retention obligations Executive Officer), as the board of directors Financial Performance Criteria (40% and 60% in respect of the abovementioned 40.128 (or a duly authorised committee of the weight respectively), which were assessed shares that have vested and were issued to board of directors) of the Bank may, in its using a more qualitative rather than him and he waived any right he had under sole and unfettered discretion determine, up quantitative approach, with emphasis on his variable Remuneration Plan including any to an aggregate of 9.921.725 ordinary shares significant improvement in the set areas. right to any variable remuneration shares in the Bank of a nominal value of €0,50 each which have not vested or any cash payment. (the “New Shares”). The long term incentive The Financial and Non-Financial Criteria plan will be a performance-based share plan, were reviewed and updated annually to Mr Pijls contract had a five-year duration with performance-based share awards being reflect the targets and the priorities set by and could be renewed for a further period granted to employees for the period March the Board of Directors for the specific period. of five years if the Company provided to the 2017 to March 2022, provided that: employee a written request to renew the (i) Each performance-based share award will For determining the performance criteria the agreement at least twelve months prior to on vesting of the award entitle the employee following factors were taken into account: its expiry. In such case the contract would to one New Share; the Bank’s overall results, the Bank’s areas be renewed on the same terms other than (ii) not more than 1.984.345 performance- of priority and strategic plan, the risks salary, which will be re-negotiated between based share awards (the “Annual Maximum undertaken and the long-term interests of the parties. Allocation”) may be granted in any calendar the Group. The overall state of the economy, year; the longer term perspective of the Bank’s 3 The contract of employment of Mr Pijls (iii) any performance-based share awards year plan and possible extraordinary items included provisions concerning payment not granted as part of the Annual Maximum occurring within the assessment year, were of compensation in the case of early and Allocation which may be granted in also taken into consideration. unjustified termination of employment by any calendar year shall not be added the Company. to the Annual Maximum Allocation of Performance Criteria for 2015: performance-based share awards which may The performance criteria for 2015 included Remuneration Policy For The Executive be granted in any subsequent year; Financial Criteria like capital ratios, Director(S) (iv) the award and vesting of such profitability ratios and key performance On 29 April 2015, Mr G. Fereos, who was performance-based share awards will be indicators in areas of priority (for example a non-Executive member of the Board based upon such performance criteria as restructurings) and other areas being of Directors was appointed as Executive the board of directors (or a duly authorised monitored. Director / Group General Manager, committee of the board of directors) of the Corporate Development. Bank may, from time to time, determine

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and the performance-based share awards not exceed 100% of the applicable fixed financial criteria such as compliance with the shall be awarded and/or issued in a manner component of the total remuneration of Bank’s risk appetite, procedures and policies, which is consistent with the provisions such employees.” (c) The long term interests of the Group. of the Governance and Management Arrangements Directive of 2014 of the The non-variable annual salary of the The remuneration policy for the Members Central Bank of Cyprus, as may be amended Executive Director / Group General of the Board / Chief Executive Officer, or replaced from time to time; Manager is paid monthly. His remuneration as described above, was codified for the (v) the issue price per New Share, which package also includes fringe benefits such first time in the Group Remuneration shall be paid by the Bank, shall be equal to as participation in a medical plan for the Policy which was approved by the Board the higher of (a) the nominal value per New employee and his family, life and permanent of Directors, following a proposal by the Share, and (b) the average closing price of disability insurance and accident cover Remuneration Committee on 25 February one ordinary share of the Bank of a nominal whilst on the Company’s business as per 2010, on the basis of the provisions of value of €0,50 each at the Cyprus Stock the Company’s policy, fixed car allowance the amending Directive of the Central Exchange, over the five days immediately and fixed accommodation allowance, Bank “Framework of Principles of preceding the date of issue of the New Share per annum, payable in equal monthly Operation and Criteria of Assessment of concerned during which there is trading in instalments and contribution by the Banks’ Organisational Structure, Internal respect of ordinary shares of the Bank on Company towards a defined-contribution Governance and Internal Control Systems” the Cyprus Stock Exchange; provident fund. (2009). (vi) this authority shall be valid for a period of five years from and including the date The Executive Director / Group General The remuneration policy for the Members of this resolution unless extended by the Manager contract is not for a fixed term of the Board / Chief Executive Officer general meeting of the Bank and duration and it can be terminated by either was amended and incorporated in the (vii) in the event that the Bank shall at any party giving the other party 3 months Group Remuneration Policy, which was time or from time to time subdivide the written notice. approved by the Board of Directors as ordinary shares of the Bank of a nominal recommended by the Remuneration value of €0,50 each (the “Ordinary Shares”) In the event the contract is terminated Committee on 28 February 2012, based into a larger number of shares or combine by the Company without cause, the on the revision of the 3rd Edition of the the issued Ordinary Shares into a smaller Company shall pay to the employee as Corporate Governance Code as published by number of shares, then, and in each such compensation for the termination of his the Cyprus Stock Exchange in March 2011. case, the nominal value and number of the employment, an amount equivalent to the Further amendment followed based on the New Shares shall be adjusted accordingly, greater of: (a) 6 months gross basic salaries Directive of the Central Bank of Cyprus for in such manner as the board of directors of or (b) compensation for unfair dismissal the “Calculation of the Capital Requirements the Bank (or a duly authorised committee of according to Table IV of the Termination of and Large Exposures of Banks of 2006 to the board of directors) may, in its sole and Employment Law 24/67 as amended, and 2011” and the Guidelines of the Committee unfettered discretion, determine. shall give to the Employee 3 months prior of European Banking Supervisors (European written notice. Such compensation, notice Banking Authority) on Remuneration Policies (B) That any pre-emptive and other rights and any payment in lieu of notice will be and Practices, which was approved by the Bank’s shareholders have or may have calculated on gross basic salary excluding the Board of Directors as recommended by operation of law and/or pursuant to the additional remuneration and fringe by the Remuneration Committee on 5 articles of association of the Bank and/or benefits the employee enjoyed during his November 2012. Further amendment of otherwise in connection with the authority employment. the Group Remuneration Policy followed conferred on the board of directors (or a on 6 November 2014 and 9 June 2015, duly authorized committee of the board The changes in the cumulative retirement based on the provisions of the Central Bank of directors) for the issue and allotment benefits of the Executive Directors for the Directive on “Governance and Management of shares in the Bank as contemplated year are disclosed in note 39 to the Accounts Arrangements in Credit Institutions” of in resolution 8(A) above or the issue contained in this Annual Report. 2014, Articles 3 and 4 of Regulation (EU) of shares in the Bank pursuant to such No. 604/2014 and the 4th edition of the authority be and are hereby irrevocably and Remuneration Policy Corporate Governance Code which was unconditionally waived.” For the determination of the variable published by the Cyprus Stock Exchange (4th remuneration of the Executive Members revised edition – April 2014). In addition, the AGM adopted the following of the Board of Directors, the Board, on Resolution which was proposed in the basis of the recommendations of the The Group Remuneration Policy (“the accordance with paragraph 51(g)(ii) of the Remuneration Committee, takes into Policy”) is reviewed annually by the Board Governance Directive: account: of Directors, further to recommendation by the Remuneration Committee, in order “That for the purposes of paragraph 51(g) (a) The Group results, taking into account to ensure that it is in line with the Group’s (ii) of the Governance and Management the financial conditions of the market in prevailing strategic targets and to prevent Arrangements Directive of 2014 of the which these results were achieved and the the introduction of incentives which lead Central Bank of Cyprus, the maximum level risks assumed, to excessive risk assumption or conflicts of the ratio between the fixed and variable (b) The performance of the Executive and of interest. The Policy is also evaluated in components of remuneration provided to the Division(s) under his/her responsibility, order to determine whether it corresponds employees may reach but, in any event, shall bearing in mind both financial and non- to the prevailing conditions of the market

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and the Group and whether these justify the Policy’s review. The review is conducted with the participation of the Group’s internal control functions such as Internal Audit, Risk Management and Compliance Services and other Head Office Units. The Policy is currently under review to incorporate the provisions of the revised Guidelines of the European Banking Authority on Sound Remuneration Policies.

Related to the Remuneration Policy for the Members of the Board, the Chief Executive Officer and other Senior Managers for 2016 is the disclosure of information in the notes to the Accounts included in this Annual Report (Note 39) as well as the analytical Disclosure of Information Regarding the Remuneration of the Directors for the year 2016 shown below.

The Board of Directors submits this Remuneration Policy Report to the Annual General Meeting of the Shareholders and unanimously recommends its approval.

Nicosia, 30 March, 2017

58 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade DISCLOSURE OF INFORMATION REGARDING THE REMUNERATION OF DIRECTORS FOR THE YEAR 2016

Remuneration Remuneration and Assessment of the value for participation in the benefits from companies Remuneration in theof the benefits that are Annual increase Consideration for Remuneration Board of Directors Total remuneration of the same Group of form of profit and/or considered to formTotal remuneration and in the total terminating the contract for services and its Committees for services companies bonus distribution remuneration benefits retirement benefits of employment € € € € € € € € € Executive Directors Henricus Lambertus (Bert) Pijls 487.204 42.910 530.114 0 0 25.076 555.190 0 526.400 Georgios Fereos 179.631 45.000 224.631 0 0 31.378 256.009 15.300 0 666.835 87.910 754.745 0 0 56.454 811.199 15.300 526.400

Non-Executive Directors Irena A. Georgiadou 0 170.000 170.000 0 0 0 170.000 0 0 Marinos S. Yannopoulos 0 70.000 70.000 0 0 0 70.000 0 0 Dr Evripides A. Polykarpou 0 80.000 80.000 0 0 0 80.000 0 0 Ioannis A. Matsis 0 97.445 97.445 0 0 0 97.445 0 0 Marianna Pantelidou Neophytou 0 75.000 75.000 0 0 0 75.000 0 0 David Whalen Bonanno 0 65.000 65.000 0 0 0 65.000 0 0 Christodoulos A. Hadjistavris 0 75.000 75.000 9.000 0 0 84.000 0 0 Andreas Christofides 0 85.000 85.000 0 0 0 85.000 0 0 Lambros Papadopoulos 0 102.077 102.077 0 0 0 102.077 0 0 Andrew Charles Wynn 0 70.901 70.901 0 0 0 70.901 0 0 Stephen John Albutt 0 15.628 15.628 0 0 0 15.628 0 0 0 906.051 906.051 9.000 0 0 915.051 0 0

Total 666.835 993.961 1.660.796 9.000 0 56.454 1.726.250 15.300 526.400

NOTE: HELLENIC

In 2016, 40.128 shares of Hellenic Bank Public Company Ltd were issued to Mr. Henricus Lambertus (Bert) Pijls with issue price €1,22 (which was calculated in accordance GROUP BANK with the provisions of a Special Resolution of the Extraordinary General Meeting of the Shareholders dated 27 February 2015), as part of the variable remuneration of Mr. Pijls for the year 2015. ANNUAL REPORT 59 2016

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AUDITORS’ REPORT AND FINANCIAL STATEMENTS

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HELLENIC BANK GROUP ANNUAL FINANCIAL REPORT

30 GROUP MANAGEMENT REPORT 64 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED 68 CONSOLIDATED INCOME STATEMENT 69 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 70 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 71 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 73 CONSOLIDATED STATEMENT OF CASH FLOWS 74 INCOME STATEMENT 75 STATEMENT OF COMPREHENSIVE INCOME 76 STATEMENT OF FINANCIAL POSITION 77 STATEMENT OF CHANGES IN EQUITY 79 STATEMENT OF CASH FLOWS 80 NOTES TO THE FINANCIAL STATEMENTS 80 1. INCORPORATION AND PRINCIPAL ACTIVITY 80 2. SIGNIFICANT ACCOUNTING POLICIES 94 3. USE OF ESTIMATES AND JUDGEMENTS 98 4. INTEREST INCOME 98 5. INTEREST EXPENSE 98 6. FEE AND COMMISSION INCOME 99 7. FEE AND COMMISSION EXPENSE 99 8. NET GAINS ON DISPOSAL AND REVALUATION OF FOREIGN CURRENCIES AND FINANCIAL INSTRUMENTS 100 9. OTHER INCOME 101 10. STAFF COSTS 101 11. ADMINISTRATIVE AND OTHER EXPENSES 102 12. IMPAIRMENT LOSSES AND PROVISIONS TO COVER CREDIT RISK 103 13. TAXATION 105 14. PROFIT FROM DISCONTINUED OPERATIONS AFTER TAXATION 106 15. BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE 107 16. CASH AND BALANCES WITH CENTRAL BANKS 107 17. PLACEMENTS WITH OTHER BANKS 108 18. LOAN AND ADVANCES TO CUSTOMERS 119 19. DEBT SECURITIES 120 20. RECLASSIFICATION OF DEBT SECURITIES 121 21. EQUITY SECURITIES 122 22. INVESTMENTS IN SUBSIDIARY COMPANIES

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123 23. PROPERTY, PLANT AND EQUIPMENT 125 24. INTANGIBLE ASSETS 127 25. DEFERRED TAX ASSET 128 26. OTHER ASSETS 130 27. DEPOSITS BY BANKS 131 28. AMOUNTS DUE TO CENTRAL BANKS 131 29. CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS 132 30. DEFERRED TAX LIABILITY 133 31. OTHER LIABILITIES 134 32. LOAN CAPITAL 141 33. SHARE CAPITAL 143 34. REVALUATION RESERVES 143 35. CONTINGENT LIABILITIES AND COMMITMENTS 144 36. DERIVATIVES 145 37. CASH AND CASH EQUIVALENTS 145 38. DIRECTORS’ INTEREST IN THE SHARE CAPITAL OF THE BANK 146 39. RELATED PARTY TRANSACTIONS 149 40. SHAREHOLDERS HOLDING MORE THAN 5% OF THE SHARE CAPITAL 150 41. FAIR VALUE 154 42. SEGMENTAL ANALYSIS 156 43. CATEGORISATION OF FINANCIAL INSTRUMENTS 158 44. ECONOMIC ENVIRONMENT 159 45. BANK RECOVERY AND RESOLUTION DIRECTIVE (BRRD) 160 46. DECISIONS OF THE ANNUAL GENERAL MEETING OF THE SHAREHOLDERS OF HELLENIC BANK PUBLIC COMPANY LIMITED 160 47. EUROPEAN DEPOSIT INSURANCE SCHEME (EDIS) 161 48. RISK MANAGEMENT 185 49. EVENTS AFTER THE REPORTING PERIOD 187 DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE BANK OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS

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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED

Report on the audit of the consolidated and Bank’s separate financial statements

OPINION

We have audited the accompanying consolidated financial statements of Hellenic Bank Public Company Limited (the “Bank”) and its subsidiaries (the “Group”), and separate financial statements of Hellenic Bank Public Company Limited which are presented on pages 68 to 186 and comprise the consolidated statement of financial position and the statement of financial position of the Bank as at 31 December 2016, and the consolidated income statement, consolidated statements of comprehensive income, changes in equity and cash flows, and the income statement and statements of comprehensive income, changes in equity and cash flows of the Bank for the year then ended, and notes to the consolidated and separate financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated and separate financial statements give a true and fair view of the consolidated financial position of the Group and the Bank as at 31 December 2016, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU) and the requirements of the Cyprus Companies Law, Cap. 113, as amended from time to time (the “Companies Law, Cap. 113”).

BASIS OF OPINION

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the financial statements” section of our report. We are independent of the Bank in accordance with the Code of Ethics for Professional Accountants of the International Ethics Standards Board for Accountants (IESBA Code), and the ethical requirements in Cyprus that are relevant to our audit of the consolidated and the separate financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and the separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment of loans and advances to customers (see Note 18)

The key audit matter:

Impairment of loans and advances to customers is a key audit matter due to the significance of the balances, and complexity and subjectivity over estimating timing and amount of impairment.

The estimation of the impairment loss allowance on an individual basis requires the Bank to make judgments to determine whether there is objective evidence of impairment and to make assumptions about the financial condition of the borrowers and expected future cash flows.

The estimation of the impairment loss allowance on a collective assessment basis, relates to individually non- significant loans and losses incurred but not yet identified (IBNR loss allowance) on other loans. The audit matters include accuracy of input and appropriateness of methodology used.

How the matter was addressed in our audit

Our procedures in this area included: - Assessing and testing the design and operating effectiveness of the controls over the Group’s loan impairment process– for example: • controls over the completeness and accuracy of data input into provisioning tools for individual impairment testing;

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• IT controls including access, segregation of duties and data management, for the principal underlying IT system generating impairment allowance data, • the management review process over the calculations and assessment of the relevant impairment loss allowance;

- For individually significant loans: • assessing the appropriateness of individually significant loans impairment methodology; • performing credit assessment on a sample of loans assessing the appropriateness of impairment loss allowance and reasonableness of the amount of estimated recoverable cash flows, including realizable value of collateral; this work involved assessing the work performed by external experts used by the Group to value the collateral and assessing the estimates of future cash flows.

- For impairment loss allowance on a collective assessment basis: • assessing the appropriateness of the impairment calculation methodology; • assessing whether the modelling assumptions used considered the relevant risks and were reasonable in light of historical experience, economic climate, current operational processes and the circumstances of the borrowers; • using our IT specialists to test the accuracy of key inputs into the models; • using our credit modeling internal specialists to re-perform the calculations using our in-house challenger model; and • assessing whether disclosures in the financial statements appropriately reflect the Group’s exposure to credit risk.

OTHER INFORMATION

The Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report for the year ended 31 December 2016, but does not include the consolidated and separate financial statements and our auditors’ report thereon.

Our opinion on the consolidated and separate financial statements do not cover the other information and we do not express any form of assurance conclusion thereon, except as required by the Companies Law, Cap. 113.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Please also refer to the “Report on other legal requirements” section were we are reporting on other legal requirements with respect to the Management Report and the Corporate Governance Statement included as specific sections of the Annual Report.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS FOR THE CONSOLIDATED AND THE SEPARATE FINANCIAL STATEMENTS

The Board of Directors is responsible for the preparation of consolidated and separate financial statements that give a true and fair view in accordance with IFRS-EU and the requirements of the Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and the separate financial statements, the Board of Directors is responsible for assessing the Group’s and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless there is an intention to either liquidate the Bank or to cease operations, or there is no realistic alternative but to do so.

The Board of Directors is responsible for overseeing the Group’s financial reporting process.

AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND THE SEPARATE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated and the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. 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 consolidated and separate financial statements.

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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED (continued)

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated and the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain 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.

• Obtain 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 Bank’s and the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.

• Conclude on the appropriateness of the Board of Directors’ 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 Bank’s and the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated and the separate 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 auditors’ report. However, future events or conditions may cause the Group and the Bank to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated and the separate financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Board of Directors 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 Board of Directors, we determine those matters that were of most significance in the audit of the consolidated and the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL REQUIREMENTS

Pursuant to the additional requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts of Law 2009, L.42(I)/2009, as amended from time to time (“Law 42(I)/2009”), we report the following:

• We have obtained all the information and explanations we considered necessary for the purposes of our audit. • In our opinion, proper books of account have been kept by the Bank, so far as it appears from our examination of these books. • The Bank’s consolidated and separate financial statements are in agreement with the books of account. • In our opinion and to the best of our information and according to the explanations given to us, the consolidated and separate financial statements give the information required by the Companies Law, Cap. 113, in the manner so required.

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• In our opinion, the Management Report on pages 30 to 34, the preparation of which is the responsibility of the Board of Directors, has been prepared in accordance with the requirements of the Companies Law, Cap. 113, and the information given is consistent with the consolidated and separate financial statements. • In the light of the knowledge and understanding of the business and the Group’s environment obtained in the course of our audit, we have not identified material misstatements in the Management Report. • In our opinion, the information included in the Corporate Governance Statement is in accordance with the requirements of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113, and has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap, 113, and is consistent with the consolidated and separate financial statements. • In our opinion, and in the light of the knowledge and understanding of the Group and its environment obtained in the course of our audit, we have not identified material misstatements in the Corporate Governance Statement in relation to the information disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113. • In our opinion, the Corporate Governance Statement includes all information referred to in subparagraphs (i), (ii), (iii) and (vi) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113.

OTHER MATTER

This report, including the opinion, has been prepared for and only for the Bank’s members as a body in accordance with Section 34 of Law 42(I)/2009 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.

The engagement partner on the audit resulting in this independent auditors’ report is Panayiotis A. Peleties.

Panayiotis A. Peleties FCA Certified Public Accountant and Registered Auditor for and on behalf of

KPMG Limited Certified Public Accountants and Registered Auditors 14 Esperidon Street 1087 Nicosia Cyprus

30 March 2017

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HELLENIC BANK GROUP CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2016

2016 2015 Note €’000 €’000 Continuing Operations Interest income 4 185.236 205.766 Interest expense 5 (37.744) (60.406) Net interest income 147.492 145.360

Fee and commission income 6 56.640 63.349 Fee and commission expense 7 (4.648) (4.933) Net fee and commission income 51.992 58.416

Net gains on disposal and revaluation of foreign currencies and financial instruments 8 27.435 32.603 Other income 9 20.763 20.035 Total net income 247.682 256.414

Staff costs 10 (82.006) (80.048) Depreciation and amortisation 23,24 (6.101) (4.767) Administrative and other expenses 11 (56.375) (67.284) Total expenses (144.482) (152.099)

Profit from ordinary operations before impairment losses and provisions to cover credit risk 103.200 104.315 Impairment losses and provisions to cover credit risk 12 (115.233) (100.788) (Loss)/profit before taxation (12.033) 3.527 Taxation 13 (50.628) 4.642 (Loss)/profit for the year from continuing operations (62.661) 8.169

Discontinued Operations Profit from discontinued operations after taxation 14 -- 4.826 (Loss)/profit for the year (62.661) 12.995

(Loss)/profit attributable to: Shareholders of the parent company from continuing operations (63.477) 7.251 Shareholders of the parent company from discontinued operations -- 4.826 (63.477) 12.077 Non-controlling interests 816 918 (Loss)/profit for the year (62.661) 12.995

Basic and diluted (loss)/earnings per share (cent) 15 (32,0) 6,4 Basic and diluted (loss)/earnings per share (cent) from continuing operations 15 (32,0) 3,9

The notes on pages 80 to 186 form an integral part of the Financial Statements.

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HELLENIC BANK GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016

2016 2015 Note €’000 €’000

(Loss)/profit for the year (62.661) 12.995

Other comprehensive (expenses)/income Items that will not be reclassified in the income statement

Taxation relating to components of other comprehensive income 13 (12) (41)

(12) (41)

Items that are or may be reclassified subsequently in the income statement

Surplus on revaluation of available for sale equity and debt securities 490 16.083

Transfer to the income statement on disposal of investments in equity available for sale 34 (12.381) --

Amortisation of revaluation of reclassified debt securities available for sale 34 (733) (1.492)

Transfer to the income statement on impairment of investments in equity available for sale 34 -- (315) (12.624) 14.276

Other comprehensive (expenses)/income for the year net of taxation (12.636) 14.235 Total comprehensive (expenses)/income for the year (75.297) 27.230

Total comprehensive (expenses)/income for the year attributable to: Shareholders of the parent company from continuing operations (76.133) 21.500 Shareholders of the parent company from discontinued operations -- 4.826 (76.133) 26.326 Non-controlling interests 836 904 (75.297) 27.230

The notes on pages 80 to 186 form an integral part of the Financial Statements.

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HELLENIC BANK GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2016

2016 2015 Note €’000 €’000 Assets Cash and balances with Central Banks 16 2.083.444 2.029.180 Placements with other banks 17 548.902 909.849 Loans and advances to customers 18 2.926.033 3.092.773 Debt securities 19 1.149.132 1.043.012 Equity securities & Collective investment units 21 16.008 15.140 Property, plant and equipment 23 99.648 98.564 Intangible assets 24 26.526 22.640 Tax receivable 127 66 Deferred tax asset 25 8.465 58.094 Other assets 26 179.319 128.055 Total assets 7.037.604 7.397.373

Liabilities Deposits by banks 27 100.652 76.938 Amounts due to Central Banks 28 -- 236.373 Customer deposits and other customer accounts 29 6.111.088 6.138.705 Tax payable 5.422 5.314 Deferred tax liability 30 1.980 1.472 Other liabilities 31 111.924 114.307 6.331.066 6.573.109 Loan capital 32 139.667 181.468

Equity Share capital 33 99.237 99.217 Reserves 464.252 540.380 Equity attributable to shareholders of the parent company 563.489 639.597 Non-controlling interests 3.382 3.199 Total equity 566.871 642.796 Total liabilities and equity 7.037.604 7.397.373 Contingent liabilities and commitments 35 854.887 790.047

The Consolidated Financial Statements have been approved by the Board of Directors on 30 March 2017.

I. A. Georgiadou M. S. Yannopoulos L. Papadopoulos Ph. Stasopoulos M. Keleshi Chairwoman of the Vice Chairman of the Chairman of the Audit Group General Manager, Group Chief Board of Directors Board of Directors Committee of the Board Business and Accountant Insurance Division

The notes on pages 80 to 186 form an integral part of the Financial Statements.

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ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT COMPANY Reduction of Share share capital Share Revaluation Non- Capital Reserve premium Revenue Translation reserves controlling (Note 33) (Note 33) reserve reserve reserve (Note 34) Total interests Total

€'000 €'000 €'000 €’000 €’000 €’000 €’000 €’000 €’000 Balance 1 January 2016 99.217 260.269 515.592 (286.013) 39 50.493 639.597 3.199 642.796 Total comprehensive (expenses)/ income for the year net of taxation (Loss)/profit for the year ------(63.477) -- -- (63.477) 816 (62.661) Other comprehensive (expenses)/income ------(12.656) (12.656) 20 (12.636) Transfer of excess depreciation on revaluation surplus ------317 -- (317) ------Disposal of immovable property ------11 -- (11) ------(63.149) -- (12.984) (76.133) 836 (75.297) Loss from the dissolution of a subsidiary company (Note 22) ------(6) (6) -- (12) -- (12) Transactions with shareholders Contributions and distributions Issue of shares to CEO as part of his variable remuneration package 20 -- 17 ------37 -- 37 Dividends by subsidiary ------(653) (653) HELLENIC

20 -- 17 ------37 (653) (616) GROUP BANK 31 December 2016 99.237 260.269 515.609 (349.168) 33 37.509 563.489 3.382 566.871

The notes on pages 80 to 186 form an integral part of the Financial Statements. ANNUAL REPORT 71 2016

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HELLENIC BANK GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 2016 REPORT ANNUAL FOR THE YEAR ENDED 31 DECEMBER 2016

ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT COMPANY Reduction of Share share capital Share Revaluation Non- Capital Reserve premium Revenue Translation reserves Own shares controlling (Note 33) (Note 33) reserve reserve reserve (Note 34) reserve Total interests Total

€'000 €'000 €'000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 Balance 1 January 2015 93.010 260.269 499.057 (297.345) 39 36.561 (1.604) 589.987 4.358 594.345 Total comprehensive income for the year net of taxation Profit for the year ------12.077 ------12.077 918 12.995 Other comprehensive income/ ------14.249 -- 14.249 (14) 14.235 (expenses) Transfer of excess depreciation on revaluation surplus ------317 -- (317) ------12.394 -- 13.932 -- 26.326 904 27.230 Transactions with shareholders Contributions and distributions Issue of shares 5.333 -- 14.667 ------20.000 -- 20.000 Issue of shares from the exercise of rights 874 -- 2.404 ------3.278 -- 3.278 Expenses from issue of shares -- -- (536) ------(536) -- (536) Dividends by subsidiary ------(2.063) (2.063) 6.207 -- 16.535 ------22.742 (2.063) 20.679 Disposal of own shares ------(1.062) -- -- 1.604 542 -- 542 ------(1.062) -- -- 1.604 542 -- 542 31 December 2015 99.217 260.269 515.592 (286.013) 39 50.493 -- 639.597 3.199 642.796

The notes on pages 80 to 186 form an integral part of the Financial Statements.

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HELLENIC BANK GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016 2016 2015 Note €’000 €’000 Cash flow from operating activities Group (loss)/profit for the year (62.661) 12.995 Depreciation of property, plant and equipment and amortisation of intangible assets 23,24 6.101 4.767 (Gain)/loss on disposal of property, plant and equipment (26) 118 Gain on disposal and revaluation of investments in debt and equity securities (4.862) (19.090) (Reversal of impairment)/impairment loss on debt securities and on equity securities 8 (74) 25 Impairment of stock of properties held for sale 11 1.025 413 Gain from the disposal of stock of properties/equity held for sale (11.594) (1.482) Income from investment in debt and equity securities (30.732) (21.967) Interest expense on loan capital 522 907 Impairment of goodwill 24 106 -- Impairment losses and provisions to cover credit risk 12 115.233 100.788 Gain from disposal of discontinued operations, after taxation -- (4.886) Issue of shares for a non-cash consideration 33 37 -- Taxation 13 50.628 (4.642) Operating profit before working capital changes 63.703 67.946 Increase in loans and advances to customers and other assets (24.619) (44.357) Decrease in customer deposits and other customer accounts and other liabilities (22.993) (203.957) Decrease in placements with other banks 2.072 12.613 Decrease in amounts due to Central Banks 10.349 6.547 Increase in deposits by banks 23.714 6.178 (Decrease)/increase in amounts due to Central Banks 28 (236.373) 359 Net cash flow used in operating activities before taxation (184.147) (154.671) Tax paid (424) (867) Net cash flow used in operating activities (184.571) (155.538) Cash flow from investing activities Disposal of discontinued operations, net of cash disposed of -- 4.022 Income from investments in debt and equity securities 30.732 21.967 Net (additions)/disposals/maturity of investments in debt and equity securities (103.274) (235.761) Additions of property, plant and equipment 23 (6.218) (4.928) Additions of intangible assets 24 (5.566) (3.777) Proceeds from the disposal of stock of properties held for sale 6.308 14.200 Proceeds from the disposal of shares held for sale 11.265 -- Proceeds from disposal of property, plant and equipment 27 13 Net cash flow used in investing activities (66.726) (204.264) Cash flow from financing activities Expenses from the increase in authorised capital and issue of shares and loan -- (536) capital Repayment of loan capital 32 (41.801) -- Proceeds from the issue of share capital -- 23.278 Dividend paid by subsidiary company (653) (2.063) Proceeds from the disposal of own shares -- 562 Interest paid on loan capital (522) (907) Net cash flow (used in)/from financing activities (42.976) 20.334 Net decrease in cash and cash equivalents (294.273) (339.468) Cash and cash equivalents at the beginning of the year 2.787.955 3.127.423 Cash and cash equivalents at the end of the year 37 2.493.682 2.787.955

The notes on pages 80 to 186 form an integral part of the Financial Statements.

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HELLENIC BANK PUBLIC COMPANY LIMITED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2016

2016 2015 Note €’000 €’000 Continuing Operations Interest income 4 185.103 205.705 Interest expense 5 (38.021) (60.975) Net interest income 147.082 144.730

Fee and commission income 6 55.059 61.805 Fee and commission expense 7 (2.365) (2.677) Net fee and commission income 52.694 59.128

Net gains on disposal and revaluation of foreign currencies and financial instruments 8 27.437 32.699 Other income 9 10.079 12.664 Total net income 237.292 249.221

Staff costs 10 (76.555) (74.571) Depreciation and amortisation 23,24 (5.946) (4.640) Administrative and other expenses 11 (53.907) (64.173) Total expenses (136.408) (143.384)

Profit from ordinary operations before impairment losses and provisions to cover credit risk 100.884 105.837 Impairment losses and provisions to cover credit risk 12 (115.233) (100.788) (Loss)/profit before taxation (14.349) 5.049 Taxation 13 (50.140) 5.431 (Loss)/profit for the year (64.489) 10.480 Basic and diluted (loss)/earnings per share (cent) 15 (32,5) 5,6

The notes on pages 80 to 186 form an integral part of the Financial Statements.

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HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016

2016 2015 Note €’000 €’000

(Loss)/profit for the year (64.489) 10.480

Other comprehensive (expenses)/income Items that will not be reclassified in the income statement Taxation relating to components of other comprehensive income 13 (9) (38) (9) (38) Items that are or may be reclassified subsequently in the income statement

Surplus on revaluation of available for sale equity and debt 34 411 16.155 securities Transfer to the income statement on disposal of investments in equity available for sale 34 (12.381) -- Amortisation of revaluation of reclassified debt securities 34 (733) (1.492) available for sale Transfer to the income statement on impairment of investments 34 -- (315) in equity available for sale (12.703) 14.348 Other comprehensive (expenses)/income for the year net of taxation (12.712) 14.310 Total comprehensive (expenses)/income for the year (77.201) 24.790

The notes on pages 80 to 186 form an integral part of the Financial Statements.

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HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2016

2016 2015 Note €’000 €’000 Assets Cash and balances with Central Banks 16 2.083.443 2.029.179 Placements with other banks 17 537.259 907.550 Loans and advances to customers 18 2.926.033 3.092.773 Debt securities 19 1.142.704 1.037.252 Equity securities & Collective investment units 21 8.503 8.094 Investments in subsidiary companies 22 91.621 38.169 Amounts due from subsidiary companies 1.007 90 Property, plant and equipment 23 93.490 91.726 Tax receivable 60 -- Intangible assets 24 11.663 7.783 Deferred tax asset 25 8.464 58.093 Other assets 26 90.178 94.131 Total assets 6.994.425 7.364.840

Liabilities Deposits by banks 27 100.652 76.938 Amounts due to Central Banks 28 -- 236.373 Customer deposits and other customer accounts 29 6.111.088 6.138.705 Amounts due to subsidiary companies 25.362 33.253 Tax payable 5.120 5.063 Deferred tax liability 30 1.800 1.337 Other liabilities 31 58.753 62.556 6.302.775 6.554.225 Loan capital 32 139.667 181.468

Equity Share capital 33 99.237 99.217 Reserves 452.746 529.930 Total equity 551.983 629.147 Total liabilities and equity 6.994.425 7.364.840 Contingent liabilities and commitments 35 859.472 795.231

The Financial Statements have been approved by the Board of Directors on 30 March 2017.

I. A. Georgiadou M. S. Yannopoulos L. Papadopoulos Ph. Stasopoulos M. Keleshi Chairwoman of the Vice Chairman of the Chairman of the Audit Group General Manager, Group Chief Board of Directors Board of Directors Committee of the Board Business and Accountant Insurance Division

The notes on pages 80 to 186 form an integral part of the Financial Statements.

76 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016

Reduction of Share share capital Share Revaluation Capital Reserve premium Revenue Translation reserves (Note 33) (Note 33) reserve reserve reserve (Note 34) Total

€'000 €'000 €'000 €’000 €’000 €’000 €’000 Balance 1 January 2016 99.217 260.269 515.459 (293.482) 67 47.617 629.147 Total comprehensive expenses for the year net of taxation

Loss for the year ------(64.489) -- -- (64.489) Other comprehensive expenses ------(12.712) (12.712) Transfer of excess depreciation on revaluation surplus ------292 -- (292) -- Disposal of immovable property -- -- 11 (11) ------(64.186) -- (13.015) (77.201)

Transactions with shareholders

Contributions and distributions

Issue of shares to CEO as part of his variable 20 -- 17 ------37 remuneration package

20 -- 17 ------37 31 December 2016 99.237 260.269 515.476 (357.668) 67 34.602 551.983 HELLENIC GROUP BANK

The notes on pages 80 to 186 form an integral part of the Financial Statements. ANNUAL REPORT 77 2016

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HELLENIC BANK PUBLIC COMPANY LIMITED 2016 REPORT ANNUAL STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016

Reduction of Share share capital Share Revaluation Capital Reserve premium Revenue Translation reserves (Note 33) (Note 33) reserve reserve reserve (Note 34) Total

€'000 €'000 €'000 €’000 €’000 €’000 €’000 Balance 1 January 2015 93.010 260.269 498.924 (304.254) 67 33.599 581.615 Total comprehensive income for the year net of taxation

Profit for the year ------10.480 -- -- 10.480 Other comprehensive income ------14.310 14.310 Transfer of excess depreciation on revaluation surplus ------292 -- (292) ------10.772 -- 14.018 24.790

Transactions with shareholders

Contributions and distributions Issue of shares 5.333 -- 14.667 ------20.000 Issue of shares from the exercise of rights 874 -- 2.404 ------3.278 Expenses from issue of shares -- -- (536) ------(536) 6.207 -- 16.535 ------22.742 31 December 2015 99.217 260.269 515.459 (293.482) 67 47.617 629.147

The notes on pages 80 to 186 form an integral part of the Financial Statements.

WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL BANK REPORT GROUP 2016 HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016

2016 2015 Note €’000 €’000 Cash flow from operating activities Bank (loss)/profit for the year (64.489) 10.480 Depreciation of property, plant and equipment and amortisation of intangible assets 23,24 5.946 4.640 (Gain)/loss on disposal of property, plant and equipment (26) 118 Gain on disposal and revaluation of investments in debt and equity securities (4.862) (19.096) (Reversal of impairment)/impairment loss on debt securities and on equity securities 8 (74) 25 Impairment of stock of properties held for sale 11 990 282 Gain from the disposal of stock of properties/equity held for sale (11.594) (1.482) Income from investment in debt and equity securities (34.895) (28.975) Interest expense on loan capital 522 907 Impairment losses and provisions to cover credit risk 12 115.233 100.788 Loss from dissolution of subsidiary 18 -- Issue of shares for non-cash consideration 33 37 -- Gain from disposal of subsidiary 9 -- (1.112) Taxation 13 50.140 (5.431) Operating profit before working capital changes 56.946 61.144 Decrease/(increase) in loans and advances to customers and other assets 46.984 (42.632) Decrease in customer deposits and other customer accounts and other liabilities (24.422) (209.092) Decrease in placements with other banks 1.942 12.590 Decrease in deposits with Central Banks 10.349 6.547 Increase in deposits by banks 23.714 6.178 (Increase)/decrease in amounts due from subsidiary companies (917) 4.116 (Decrease)/increase in amounts due to Central Banks 28 (236.373) 359 Decrease in amounts due to subsidiary companies (7.892) (9.542) Net cash flow used in operating activities before taxation (129.669) (170.332) Tax paid (58) (7) Net cash flow used in operating activities (129.727) (170.339) Cash flow from investing activities Increase in investment in subsidiary (68.664) -- Proceeds from disposal of subsidiary -- 4.052 Income from investments in debt and equity securities 34.895 28.975 Net (additions)/disposals/maturity of investments in debt and equity (229.552) securities (102.145) Additions of property, plant and equipment 23 (6.186) (4.880) Additions of intangible assets 24 (5.404) (3.767) Proceeds from the disposal of stock of properties held for sale 4.529 14.200 Proceeds from the disposal of shares held for sale 11.265 -- Proceeds from disposal of property, plant and equipment 27 12 Net cash flow used in investing activities (131.683) (190.960) Cash flow from financing activities Expenses from the increase in authorised capital and issue of shares and loan capital -- (536) Repayment of loan capital 32 (41.801) -- Proceeds from the issue of share capital -- 23.278 Interest paid on loan capital (522) (907) Net cash flow (used in)/from financing activities (42.323) 21.835 Net decrease in cash and cash equivalents (303.733) (339.464) Cash and cash equivalents at the beginning of the year 2.785.784 3.125.248 Cash and cash equivalents at the end of the year 37 2.482.051 2.785.784

The notes on pages 80 to 186 form an integral part of the Financial Statements.

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HELLENIC BANK GROUP NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 1. INCORPORATION AND PRINCIPAL ACTIVITY

Hellenic Bank Public Company Limited (the “Bank”) was incorporated in Cyprus and is a public company in accordance with the provisions of the Companies Law Cap. 113, the Cyprus Stock Exchange Laws and Regulations and the Income Tax Laws. The Bank’s registered office is located at 200, Corner of Limassol and Athalassa Avenues, 2025 Strovolos, P.O. Box 24747, 1394 Nicosia. The Bank is the holding company of Hellenic Bank Group (the “Group”).

The principal activity of the Group is the provision of a wide range of banking and financial services, which include financial, investment and insurance services, custodian and factoring services as well as management and disposal of properties.

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in the Consolidated Financial Statements and the Bank’s separate Financial Statements (hereafter collectively refer to as “Financial Statements”) and have been applied consistently by all companies of the Group.

2.1. Basis of preparation

(a) Going concern principle The Financial Statements have been prepared on a going concern basis.

(b) Statement of compliance The Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap.113, the Cyprus Stock Exchange and the Cyprus Securities and Exchange Commission Laws and Regulations.

(c) Basis of measurement The Financial Statements have been prepared on the historical cost basis, except from derivatives, financial assets at fair value through profit or loss and available for sale, which are measured at fair value and properties for own use which are measured at fair value less subsequent depreciation and impairment losses.

(d) Functional and presentation currency The Financial Statements are presented in Euro (€), which is the functional currency of the Bank. All figures have been rounded to the nearest thousand, except when otherwise indicated.

2.2. Adoption of new and revised International Financial Reporting Standards (IFRSs) and interpretations

As from 1st January 2016, the Group adopted all the changes to International Financial Reporting Standards (IFRS) as adopted by the EU which are relevant to its operations. These adoptions did not have a material effect on the Financial Statements of the Group.

2.3. Standards and interpretations that are not yet effective

The following Standards, Amendments to Standards and Interpretations have been issued but are not yet effective for annual periods beginning on 1st January 2016. The Group does not intend to adopt these standards prior to their effective date.

(i) Standards and Interpretations adopted by the EU

IFRS 9 ‘’Financial Instruments’’ (effective for annual periods beginning on or after 1st January 2018)

In July 2014, the International Accounting Standards Board issued the final version of IFRS9 Financial Instruments which is effective from 1st January 2018. The following pronouncement has not been applied by the Bank in preparing these financial statements for the year ended 31 December 2016 as the Bank decided not to early adopt. As described below, IFRS 9 replaces the requirements set out by IAS 39 for recognition and measurement of both financial assets and liabilities.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

CLASSIFICATION AND MEASUREMENT

IFRS 9 requires financial assets to be classified into one of three measurement categories, fair value through profit or loss, fair value through other comprehensive income or amortised cost. Financial assets will be measured at amortised cost if they are held within a business model the objective of which is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest. Financial assets will be measured at fair value through other comprehensive income if they are held within a business model the objective of which is achieved by both collecting contractual cash flows and selling financial assets and their contractual cash flows represent solely payments of principal and interest. Financial assets not meeting either of these two business models are measured at fair value through profit or loss. An entity may, at initial recognition, designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch.

For financial liabilities, IFRS 9 retains most of the existing requirements. However, for financial liabilities designated at fair value through profit or loss, gains or losses attributable to changes in own credit risk may be presented in other comprehensive income.

IMPAIRMENT MODEL

The IFRS 9 impairment model will be applicable to all financial assets at amortised cost, debt instruments measured at fair value through other comprehensive income, lease receivables, loan commitments and financial guarantees not measured at fair value through profit or loss. IFRS 9 replaces the existing ‘incurred loss’ impairment approach with an Expected Credit Loss (‘ECL’) model, which could result in earlier recognition of credit losses compared with IAS 39.

The ECL model has three stages. Entities are required to recognise a 12 month expected loss allowance on initial recognition (stage 1) and a lifetime expected loss allowance when there has been a significant increase in credit risk since initial recognition (stage 2). Stage 3 requires objective evidence that an asset is credit-impaired, which is similar to the guidance on incurred losses in IAS 39. The requirement to recognise lifetime ECL for loans which have experienced a significant increase in credit risk since origination, but which are not credit impaired, does not exist under IAS 39.

The methodology required for quantification of expected credit losses which will be based on an unbiased and weighted consideration of the occurrence of a range of possible future scenarios that could impact the collection of contractual cash flows, taking into account the time-value of money, all available information relevant to past events, and current conditions and projections of macroeconomic factors deemed relevant to the estimation of this amount (e.g. GNP, house pricing, unemployment rate, etc.). The need to consider a range of economic scenarios and how they could impact the loss allowance is a subjective feature of the IFRS 9 ECL model. The model will use mainly three key input parameters for the computation of expected losses, being probability of default (‘PD), loss given default (‘LGD’) and exposure at default (‘EAD’).

REGULATORY CAPITAL POSITION

Apart from the impact derived solely from the forthcoming implementation of IFRS 9 requirements, the impact to the Bank on the IFRS 9 provisions to the regulatory capital position of the Bank is unknown as there are proposals from both the European Commission and the European Banking Authority for a transitional implementation of the IFRS 9 impact to the capital base. The Bank is considering IFRS 9 impact in the Group capital planning.

PRELIMINARY IMPACT OF IFRS 9 ON THE GROUP

The adoption of IFRS 9 may result in an increase in the Group’s balance sheet provisions for credit losses and may therefore negatively impact the Group’s regulatory capital position. The extent of any increase in provisions will depend upon a number of factors including composition of the Group’s lending portfolios and forecast economic conditions at the date of implementation.

During the year 2016 and beginning of 2017, the Bank engaged with external consultants who carried out a current state gap analysis as well as a preliminary quantitative impact study (QIS). The high level gap analysis pointed to the Bank’s gaps in implementing the IFRS 9 requirements and also provided possible solutions to close those gaps. The QIS, which was based on existing financial asset classification, was performed to get an indication of the IFRS 9 impact provision-wise and to set an action plan which would assist the Bank during the full IFRS 9 implementation.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

The result of this exercise indicated that the Group’s profitability or regulatory capital position will be negatively affected, though the impact is not expected to be significant. However, it is too early to estimate the ongoing impact of the IFRS 9 impairment model on the financial results although the requirement to transfer assets between stages and to incorporate forward looking data into the expected credit loss calculation, including multiple economic scenarios, could result in impairment changes being more volatile when compared to the current IAS 39 impairment model. The final impact will depend on the facts and circumstances that will exist on 1st January 2018 as well as on the completion of IFRS 9 implementation programme for which the Bank engaged with external consultants.

IFRS 9 IMPLEMENTATION PROGRAMME

In addition to the above high level exercises completed early in the year 2017, the Group has an established IFRS 9 action plan in order to ensure a high quality implementation in compliance with the standard and additional regulatory guidance. The plan, which mainly involves the Finance and Risk functions, includes defining IFRS 9 methodology and accounting policy, development of ECL models, identifying data and system requirements, and establishing an appropriate operating model and governance framework. The Bank does not expect to restate comparatives on initial application of IFRS 9 on 1st January 2018 but will provide detailed transitional disclosures in accordance with the amended requirements of IFRS 7.

IFRS 15 ‘’Revenue from contracts with customers’’ (effective for annual periods beginning on or after 1st January 2018)

The new standard may have a significant effect on how and when entities will recognise revenue from contracts with customers. IFRS 15 replaces the IAS 11 “Construction contracts”, IAS 18 “Revenue”, IFRIC 13 “Customer Loyalty Programmes”, IFRIC 15 “Agreements for the Construction of Real Estate”, IFRIC 18 “Transfers of Assets from Customers” and SIC-31 “Revenue - Barter Transactions Involving Advertising Services”. The standard provides a single principles-based model to be applied to all contracts with customers and two approaches to the recognition of revenue: at a point in time or over time. The adoption of this standard is not expected to have a material effect on the Financial Statements of the Group.

(ii) Standards and Interpretations not adopted by the European Union

IFRS 16 “Leases” (effective for annual periods beginning on or after 1st January 2019)

IFRS 16 introduces a single on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard i.e. lessors continue to classify leases as finance or operating leases. IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases- Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The Group is currently evaluating the impact of the standard on its Financial Statements.

IAS 7 (Amendments) “Disclosure Initiative” (effective for annual accounting periods beginning on or after 1st January 2017)

The amendments are intended to clarify IAS 7 and improve information provided to users for an entity’s financing activities. The amendments will require that the following changes in liabilities arising from financing activities are disclosed (to the extent necessary): (a) changes from financing cash flows; (b) changes arising from obtaining or losing control of subsidiaries or other businesses; (c) the effect of changes in foreign exchange rates; (d) changes in fair values; and (e) other changes. The adoption of this standard is not expected to have a material effect on the Financial Statements of the Group.

IAS 12 (Amendments) “Recognition of Deferred Tax Assets for Unrealised Losses” (effective for annual periods beginning on or after 1st January 2017)

The amendments will give clarifications in relation to the recognition of a deferred tax asset that is related to a debt instrument measured at fair value. Additionally, it clarifies that the carrying amount of an asset does not limit the estimation of probable future taxable profits and that estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences. Finally, it clarifies that an entity assesses a deferred tax asset in combination with other deferred tax assets. Finally, where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type. The adoption of this standard is not expected to have a material effect on the Financial Statements of the Group.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Annual Improvements to IFRSs 2014-2016 Cycle (effective for annual periods beginning on or after 1st January 2017 (IFRS 12) and 1st January 2018 (IFRS 1 and IAS 28))

The annual improvements impact three standards. The amendments to IFRS 1 remove the outdated exemptions for first- time adopters of IFRSs. The amendments to IFRS 12 clarify that the disclosure requirements for interest in other entities also apply to interests that are classified as held for sale or distribution. The amendments to IAS 28 clarify that the election to measure at fair value through profit or loss an investment in associate or a joint venture that is held by an entity that is a venture capital organisation, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial recognition. The adoption of this standard is not expected to have a material effect on the Financial Statements of the Group.

IFRS 2 (Amendments) “Classification and Measurement of Share-based Payment Transactions” (effective for annual periods beginning on or after 1st January 2018)

The amendments cover three accounting areas: a) measurement of cash-settled share-based payments; b) classification of share-based payments settled net of tax withholdings; and c) accounting for a modification of a share-based payment from cash-settled to equity-settled. The new requirements could affect the classification and/or measurements of these arrangements and potentially the timing and amount of expense recognised for new and outstanding awards. The Group is currently evaluating the impact of these amendments on its Financial Statements.

IFRS 4 (Amendments) “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts” (effective for annual periods beginning on or after 1st January 2018)

The amendments intend to address concerns about the different effective dates of IFRS 9 and the forthcoming new insurance contracts standard (expected as IFRS 17). The amendments provide two options for entities that issue insurance contracts within the scope of IFRS 4: a) an option permitting entities to reclassify from profit or loss to other comprehensive income some of the income or expenses arising from designated financial assets (overlay approach) or b) an optional temporary exemption from applying IFRS 9 whose predominant activity is issuing contracts within the scope of IFRS 4 (deferral approach). The Group is currently evaluating the impact of these amendments on its Financial Statements.

IFRS 15 (Clarifications) “Revenue from Contracts with Customers” (effective for annual periods beginning on or after 1st January 2018)

The clarifications to IFRS 15, address three of the five topics identified after the issue of the IFRS i.e. identifying performance obligations, principal versus agent considerations, and licensing. The clarifications provide some transition relief for modified contracts and completed contracts. Additionally, the IASB concluded that it was not necessary to amend IFRS 15 with respect to the collectability or measuring non-cash consideration. The Group is currently evaluating the impact of these amendments on its Financial Statements.

IAS 40 (Amendments) “Transfers of Investment Property” (effective for annual periods beginning on or after 1st January 2018)

The amendments clarify when a company should transfer a property asset to, or from, investment property. A transfer is made when, and only when, there is an actual change in use i.e. an asset meets or ceases to meet the definition of investment property and there is evidence of the change in use. A change in management intention alone does not support a transfer. In addition, it is clarified that the revised examples of evidence of a change in use in the amended version of IAS 40 are not exhaustive. The Group is currently evaluating the impact of these amendments on its Financial Statements.

IFRIC 22 “Foreign Currency Transactions and Advance Consideration” (effective for annual periods beginning on or after 1st January 2018)

The interpretation clarifies that the transaction date is the date on which the company initially recognises the prepayment or deferred income arising from the advance consideration. For transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date. The Group is currently evaluating the impact of the interpretation on its Financial Statements.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.4. Basis of consolidation

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Business combinations are accounted for by applying the acquisition method. The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. Any goodwill which may arise is tested annually for impairment.

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in the income statement. Any interest retained in the former subsidiary is measured at fair value when control is lost.

Associates are entities in which the Group has significant influence, but not control, over their financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 per cent of the voting power of another entity. Associates are accounted for in the Consolidated Financial Statements using the equity method.

Intra-group balances, and income and expenses arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements.

The Group promotes the formation of special purpose vehicles (SPVs) for the purpose of asset securitisation transactions so as to accomplish defined objectives. The Group consolidates these SPVs if the substance of its relationship with them indicates that it has control over them.

Non-controlling interest relates to that portion of the income statement and net assets of a subsidiary, attributable to equity interests that are not owned directly or indirectly by the Group. The profits or losses attributable to non-controlling interest are disclosed on the face of the income statement as allocation of the income statement for the period/year. Non- controlling interest is presented on the face of the statement of financial position, within equity, separately from equity attributable to owners of the parent.

2.5. Investments in subsidiaries and associates

Investments in subsidiaries and associates are presented at cost in the Bank’s statement of financial position less provision for impairment, where applicable.

2.6. Foreign currency

(a) Foreign currency transactions Transactions in foreign currencies are translated into the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency at the exchange rate at the date when the fair value was determined. Foreign currency differences arising on retranslation are recognised in the income statement, except for differences arising on the retranslation of a financial liability designated as the hedging instrument in a hedge of the net investment in a foreign operation or in a qualifying cash flows hedge, which are recognised directly in equity.

(b) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the Group’s presentation currency (Euro) at exchange rates at the statement of financial position date. The income and expenses of foreign operations are translated into Euro using the average exchange rates for the year. Exchange differences arising on translation of foreign operations are recognised directly in the translation reserve within equity. When a foreign operation is disposed of, the cumulative amount of the exchange differences recognised in equity and relating to that foreign operation is reclassified to the income statement when the gain or loss on disposal is recognised.

2.7. Turnover

Group turnover includes interest income, fee and commission income, net gains or losses on disposal and revaluation of foreign currencies and financial instruments and other income.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8. Interest income and expense

Interest income and expense are recognised in the income statement using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial asset or liability to the net carrying amount of the financial asset or liability.

Interest income on impaired loans and advances, which corresponds to the amount of the impairment loss (see Note 3.1), is suspended and included in the accumulated impairment losses on the value of loans and advances.

2.9. Fee and commission income and expense

Fee and commission income and expense is recognised in the income statement on an accruals basis, as the related services are performed.

2.10. Dividend income

Dividend income is recognised when the Group’s right to receive payment is established.

2.11. Income from hire purchase

Income from hire purchase recognised in the income statement is calculated in a systematic manner on the basis of instalments falling due, in order to produce a constant periodic rate of return on the net investment outstanding.

Hire purchase debtors are included in loans and advances to customers in the consolidated statement of financial position, net of unearned charges attributable to future instalments.

2.12. Profit from the disposal of property held for sale

Profit on disposal of property held for sale is recognised in the income statement in “Other income” when the buyer accepts delivery and the transfer of risks and rewards to the buyer is completed.

2.13. Employee retirement benefits

The Group participates in two different defined contribution retirement plans.

The terms of employment of the majority of Group employees are in accordance with the provisions of the Collective Agreement between the Cyprus Banks Employers Association and the Cyprus Union of Bank Employees under which a defined contributions Provident Fund for the Hellenic Bank Group staff was set up and since then operates in accordance with Cyprus legislation. In accordance with the Collective Agreement, as of 1st of January 2012, employer’s contributions to the Provident Fund amounted to 14% of the gross salary (basic salary plus cost of living allowance) of each employee. Following the conclusion on 17 March 2014 of a new agreement amending the Collective Agreement, the employers’ contributions to the Provident Fund, with effect from 1st January 2014, were fixed at 9% for the years 2014 and 2015, 9,5% for 2016 and 11,5% for 2017.

A number of staff are employed on the basis of personalised employment contracts that are not in accordance with the terms of the Collective Agreement. These employees are members of a multi-employer defined contribution Provident Fund to which the employer contributes 9% of the employees’ gross salary.

Group obligations towards the employees’ retirement benefits are limited to payment of the contributions to each Provident Fund. Employer’s contributions due for payment are recognised as staff expense.

Prepaid contributions are recognised as an asset to the extent that cash will be refunded or future payments will be reduced.

2.14. Income tax

Income tax expense comprises of current and deferred tax. It is recognised in the income statement unless it relates to items recognised directly in equity or in the statement of comprehensive income.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Current taxation represents the amount of income tax payable on the taxable income of a tax period, using tax rates prevailing as at the date of the statement of financial position as well as any adjustments to tax payable in respect of previous years’ results.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Statements and their tax base. Deferred tax asset is recognised only to the extent that future taxable profits will be available against which the deferred tax asset can be utilised.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will realise.

Deferred tax is calculated at tax rates expected to be applicable in the period during which the asset will be utilised or the liability will be settled taking into consideration the tax rates and legislation enacted or substantially enacted at the reporting date.

Tax assets and liabilities are offset if they relate to taxes imposed by the same tax authority provided it allows such settlements, and provided the intention of the Group is to either settle the net amount or realise the asset and settle the obligation simultaneously.

2.15. Special Levy

According to the “Special Levy on Credit Institutions Law of 2011 to 2015”, special levy is imposed on credit institutions on a quarterly basis, at the rate of 0,0375% on qualifying deposits held by each credit institution on 31st December, 31st March, 30th June and 30th September.

Based on the latest amendment of the above mentioned Law published in the official Gazette on the 17th December 2015, as from 1st January 2015 until 31st of December 2021, 35/60 of the funds received will be deposited to the Recapitalisation Fund incorporated pursuant to the Law 190(I) 2015.

2.16. Financial instruments

(a) Recognition The Group initially recognises loans and advances to customers, customer deposits and loan capital issued on the date at which they are originated. All other financial assets and liabilities are initially recognised on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

(b) Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows expire, or when it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest or obligation in transferred assets that is created or retained by the Group is recognised as a separate asset or liability.

The Group derecognises a financial liability when its contractual obligation is discharged, cancelled or expired.

(c) Offsetting Financial assets and liabilities are set off and the net amount is presented in the statement of financial position only when the Group has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions.

(d) Initial measurement A financial asset or financial liability is measured initially at fair value plus (for an item not subsequently measured at fair value through profit or loss) transaction costs that are directly attributable to its acquisition or issue.

(e) Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

The Group measures the fair value of an instrument using the quoted price in an active market, when available for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the main factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price, i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability, nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in the income statement on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price.

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure. Those portfolio- level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.

The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid.

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

(g) Derivatives Derivatives include mainly forward contracts, interest rate and currency swaps, credit default swaps, futures and options.

Derivatives are recognised and measured at fair value. When their fair value is positive, derivatives are included in other assets and when their fair value is negative they are included in other liabilities. Changes in the fair value of derivatives are recognised in the income statement in net gains/(losses) on disposal and revaluation of foreign currencies and financial instruments.

(h) Financial assets The Group has classified its financial assets that comprise of balances with Central Banks, placements with other banks, loans and advances to customers, investments in debt securities and investment in equity securities and collective investments units, under the following four categories. Financial assets are classified in these categories upon their initial recognition based on their characteristics and the purpose for which they were acquired.

(i) Held to maturity Held to maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity and they do not meet the loans and receivables definition.

After initial measurement, held to maturity investments are measured at amortised cost using the effective interest method less provisions for impairment.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Sale or reclassification of a more than insignificant amount of held to maturity investments not close to their maturity, will result in the reclassification of all held to maturity investments as available for sale, and prevent the Group from classifying investment securities as held to maturity for the current and the following two financial years.

(ii) At fair value through profit or loss Financial assets at fair value through profit or loss are analysed in two categories:

Financial Assets held for trading: include financial assets acquired or incurred principally for the purpose of selling or repurchasing them in the near term or which are part of a portfolio of identified financial assets that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking.

Financial Assets designated as at fair value through profit or loss upon initial recognition: include financial assets initially designated in this category when this designation results in more relevant information, because either:

• it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or

• a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the Group is provided internally on that basis to the Group’s Key Management personnel.

The changes in fair value of financial assets at fair value through profit or loss are recognised in the income statement.

(iii) Available for sale Available for sale investments are non-derivative financial assets that are designated as available for sale or are not classified under another category of financial assets. Available for sale investments may be held for an undetermined period of time or may be sold in response to changes in market risks or liquidity requirements.

Subsequent to initial recognition, available for sale investments are measured at fair value and changes therein, other than impairment losses are recognised directly in equity. When an investment is sold or impaired, the cumulative gain or loss previously recognised in equity is recognised in the income statement.

(iv) Loans and receivables Financial assets classified as loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Group does not intend to sell immediately or in the near term. Cash and balances with Central Banks, Placements with other banks and Loans and advances to customers are classified under this category. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method less provisions for impairment losses.

(i) Loan capital Loan capital is initially measured at the fair value of the consideration received minus transaction costs that are directly attributable to the issue of the loan capital. Subsequently it is measured at amortised cost using the effective interest method, in order to amortise the difference between the cost and the redemption value, over the period to the earliest date that the Bank has the right to redeem the loan capital.

(j) Convertible bonds On issuance of compound financial instruments that contain both liability and equity elements, these are accounted for separately, as financial liabilities and equity respectively. When the initial carrying amount of a compound financial instrument is allocated to its equity and liability components, the equity component is assigned the residual amount after deducting from the fair value of the instrument, as a whole, the amount separately determined for the liability component. On initial recognition, the fair value of the liability component is the present value of the contractually determined stream of future cash flows discounted at the rate of interest applied at that time by the market to instruments of comparable credit status and providing substantially the same cash flows, on the same terms, but without the conversion option.

No gain or loss arises from initially recognising the components of the instrument separately. The liability component is subsequently measured at amortised cost using the effective interest rate method in order to amortise the difference between the nominal value and the carrying value at inception until it is extinguished on conversion or redemption. The equity component is not subsequently remeasured.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(k) Convertible Capital Securities (CCS) CCS are perpetual financial instruments issued by the Bank. They have no maturity date and can be converted to shares during the conversion periods upon their holder’s decision. The Bank may, at its discretion, at any time, and taking account its financial position as well as its solvency, cancel the interest payment on a non-cumulative basis. Any cancellation of interest payment will be final and will no longer be payable by the Bank.

The Bank, in applying the provisions of the Prospectus dated 30 September 2013, may, at its sole discretion, redeem the CCS at par, including accrued interest, excluding any cancelled interest, the whole or part of CCS1 or/and CCS2. In case of a redemption of part of the CCS1 or/and CCS2, the redemption will occur for all holders of CCS1 or/and CCS2 in proportion to the CCS1 or/and CCS2 they hold.

The CCS will be mandatorily converted into Bank’s ordinary shares, if any of the contingent conversion triggers as defined in the Prospectus dated 30 September 2013 occur.

(l) Customer deposits and other customer accounts Subsequent to initial recognition, customer deposits and other customer accounts are measured at amortised cost using the effective interest method, except for certain deposits linked to derivatives that the Group has elected to classify as financial liabilities at fair value through profit or loss. Any changes in fair value in respect of deposits designated as at fair value through profit or loss are recognised in the income statement.

2.17. Impairment

(a) Financial assets At the end of each reporting period the Group assesses whether there is any objective evidence that financial assets not carried at fair value through profit or loss are impaired.

Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that loss event has an impact on the future cash flows of the asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a borrower, restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider, indications that the borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the Group, or economic conditions that correlate with defaults in the Group. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

(i) Loans and advances to customers The Group reviews its loan portfolio, for evidence of impairment loss from past events, at both individual and collective basis. Significant loans are assessed at an individual basis. Non-significant loans are collectively evaluated for impairment losses. Significant loans that are assessed on an individual basis and found not to be impaired are also assessed on a collective basis for losses incurred but not reported (IBNR).These loans are grouped based on similar credit risk characteristics and evaluated for impairment. Impairment losses on the various groups are calculated on a collective basis. In assessing collective impairment the Group uses historical trends of the probability of default demonstrated by the relevant groups with similar risk characteristics.

Impairment loss on loans and advances to customers is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the loan’s original effective interest rate. Losses are recognised in the income statement and accumulated in an impairment loss reserve as stated in Note 3.1.

When a subsequent event causes the amount of the provision for impairment loss to decrease or amounts are collected from impaired loans, the decrease in impairment loss is reversed through the income statement.

(ii) Held to maturity investments and investments classified as loans and receivables If there is objective evidence that an impairment loss on held to maturity investments and investments classified as loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the investment’s original effective interest rate. The amount of the loss is recognised in the income statement and the carrying amount of investments is reduced.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

For investments in debt securities, the principal indication of impairment is the downgrading of the credit rating of the issuer.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed in the income statement.

(iii) Available for sale investments When there is objective evidence that an available for sale investment is impaired, the cumulative loss that had been recognised in equity is reclassified from equity to the income statement. The amount of the cumulative loss that is reclassified from equity to the income statement is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that investment previously recognised in the income statement.

For investments in debt securities, the principal indication of impairment is the downgrading of the credit rating of the issuer. For investments in shares the main evidence of impairment is a significant or prolonged decline in the fair value below its cost. Generally, the Group considers that a reduction of 20% below cost is significant and a period of nine months is prolonged. However in special cases a smaller decrease or a shorter period may be objective evidence of impairment.

If, in a subsequent period, the fair value of an impaired available for sale debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss will be reversed, with the amount of the reversal recognised in the income statement. Impairment losses recognised in the income statement for impaired available for sale equity securities are not reversed through the income statement but are recognised in equity.

(b) Non-financial assets The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the income statement.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

The loss from impairment of goodwill is not reversible. The loss from impairment of other non-financial assets is reversible only to the extent that the carrying value does not exceed net carrying value that the non-financial asset would have if the impairment loss was not recognised.

2.18. Property, plant and equipment

Owner-occupied property is property held by the Group for use in the supply of services or for administrative purposes. The classification of property is reviewed on a regular basis to account for any major changes in use. Owner occupied land and buildings are initially recognised at cost and are subsequently measured at fair value less subsequent accumulated depreciation and impairment losses. Fair value is determined from market-based valuations undertaken by professionally qualified valuers periodically between three to five years. Plant and equipment is measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes all expenditure that is directly attributable to the acquisition of the asset.

Depreciation for property, plant and equipment is recognised in the income statement on a straight line basis over the estimated useful lives of the assets. Land is not depreciated.

The depreciation rates used are as follows: Buildings 2% Leashold improvements 20% Plant and equipment 10% to 25%

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Depreciation methods, useful lives and residual values are reassessed at each reporting date.

Gains and losses on disposal of property, plant and equipment, that are determined as the difference between the net disposal proceeds and the carrying amount of the asset, are included in the income statement when the item is derecognised.

2.19. Property revaluation reserve

Any surplus arising on the revaluation of land and buildings is credited to the property revaluation reserve that is included in equity. If, after a revaluation, the depreciation charge is increased, then an amount equal to the increase (net of deferred taxation) is transferred annually from the property revaluation reserve to revenue reserves. Upon disposal of revalued property, any relevant accumulated revaluation surplus which remains in the property revaluation reserve is also transferred to revenue reserves.

2.20. Intangible assets

GOODWILL

Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entities at the date of acquisition. When the excess is negative (negative goodwill) is recognised immediately in the income statement.

Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses. The carrying amount of goodwill is reviewed for impairment at least on an annual basis.

Present value of acquired in-force business (PVIF) PVIF represents agents’ portfolios acquired separately. PVIF is initially recognised at cost. Subsequent to initial recognition, the intangible asset is carried at cost less accumulated amortisation and accumulated impairment losses. The intangible asset is amortised over the useful life of the acquired in-force policy during which future premiums are expected, which is typically determined at 4 years, and is recognised in the income statement. PVIF is tested for impairment, annually and when circumstances indicate that the carrying value may be impaired. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the income statement. PVIF is derecognised when the related contracts are settled or disposed of.

Computer software Computer software is measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised in the income statement on a straight-line basis over the estimated useful life of the software estimated at five years.

2.21. Cash and cash equivalents

Cash and cash equivalents include cash and unrestricted balances with Central Banks, investment in debt securities, placements with other banks and repurchase agreements, with original maturities of less than three months.

Cash and cash equivalents are presented in the statement of financial position at amortised cost.

2.22. Share capital and Share premium reserve

The difference between the issue price of share capital and its nominal value is recognised in the share premium reserve.

Expenses incurred from increase of authorised capital and issue of share capital are directly recognised in equity in the same year.

2.23. Own shares reserve

Shares of the Bank held by the Group’s subsidiaries are deducted from the equity on their purchase. When own shares are sold or reissued subsequently, no gain or loss is recognised in the consolidated income statement.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.24. Derivatives and hedge accounting

The Group designates certain derivatives held for risk management purposes as hedging instruments in qualifying hedging relationships. Hedging relationships are classified as fair value hedges or cash flow hedges. A hedging relationship qualifies for hedge accounting if the following conditions are met:

(a) Existence of formal documentation describing the derivative and the hedging objectives, as well as the specific hedged item.

(b) Existence of documented risk management strategy according to which the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk throughout the financial reporting periods for which the hedge was designated.

(c) Maintenance of reliable monitoring systems and verification of the high continuous effectiveness of the hedging derivative.

For fair value hedges, changes in the fair value of the derivative are recognised in the income statement together with changes in the value of the hedged item attributable to the hedged risk.

For cash flow hedges, the effective portion of changes in the fair value of the derivative is recognised directly in equity. The amount recognised in equity is removed and included in the income statement in the same period as the hedged cash flows affect the income statement under the same income statement line as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the income statement.

If the hedge no longer meets the criteria for hedge accounting the relevant adjusting entries are made and hedge accounting is discontinued.

For the remaining derivatives where the criteria are not satisfied in order to qualify for hedge accounting or which are held for trading, the accounting policies for financial instruments held for trading are applied.

Several of the derivatives have been acquired with the intention of hedging interest rate or foreign currency risks.

Certain derivative transactions, while providing effective economic hedges under risk management, do not qualify for the use of hedge accounting. These derivatives are included under other assets or liabilities, with any changes in their fair value recognised in the income statement for the year.

These include derivatives held for offsetting interest rate or other risks, in relation to other assets and liabilities that are selectively designated as at fair value through profit or loss and which do not qualify for the use of hedge accounting.

The Group also hedges the foreign currency risk that derives from the translation to Euro of the net position of its foreign subsidiaries by maintaining an open foreign exchange position. All exchange differences resulting from the translation of the open foreign exchange position are recognised in the translation reserve.

2.25 Repurchase agreements

Repurchase agreements represent agreements with Central Banks. Cash received under the agreements, including accrued interest, is recognised as a liability on the statement of financial position. The relevant debt securities disposed to be repurchased at a future date are not derecognised from the statement of financial position. The difference between the sales price and repurchase price is recognised as interest expense over the duration of the agreement using the effective interest rate method.

2.26. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the person or group that is responsible for allocating resources to and assessing the performance of the operating segments of the Group.

For management purposes, during 2016 the Group was organised into two operating segments:(i) Banking and financial services and (ii) Insurance services.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Management monitors the operating results of the Group’s operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating income before taxation which is measured in the same manner as in the Consolidated Financial Statements.

Transfer prices between segments are on an arm’s length basis in a manner similar to transactions with third parties. Balances and transactions between segments are eliminated on consolidation.

2.27. Assets held for sale

The Group classifies non-current assets as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. The condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. When the Bank is committed to a sale plan involving loss of control of a subsidiary, the total assets and liabilities of that subsidiary are classified as held for sale, regardless of whether non-controlling interest in its former subsidiary after the sale is retained. Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell. Impairment losses on initial classification and gains or losses from subsequent measurement are recognised in the income statement. A gain is only recognised to the extent that it is not in excess of the cumulative impairment loss that has been recognised. Non-current assets held for sale are not depreciated once they have been classified under this category.

2.28. Provisions for pending litigations or complaints and/or claims or cases subject to arbitration proceedings

Provisions for pending litigations or complaints and/or claims or cases subject to arbitration proceedings are recognised when: (a) the Group has a present obligation (legal or constructive) as a result of a past event, (b) an outflow of resources embodying economic benefits to settle the obligation is probable and (c) a reliable estimate of the amount of the obligation can be made.

The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the facts and circumstances of any litigation or arbitration proceedings. When a separate liability is measured, the most likely outcome may be considered the best estimate of the liability.

Where an individual provision is material, the fact that a provision has been made is stated and quantified, except to the extent doing so would be seriously prejudicial. Any provision recognised does not constitute an admission of wrongdoing or legal liability.

Where the effect of the time value of money is material, the amount of the provision is the present value of the estimated future expenditures expected to be required to settle the obligation.

Where an outflow of resources embodying economic benefits to settle the obligation is possible, a contingent liability is disclosed, unless the possibility of an outflow of resources embodying economic benefits is remote.

2.29. Provisions to cover credit risk resulting from commitments and guarantees

The Group enters into various contingent liabilities. These include acceptances and endorsements, guarantees, undrawn formal standby facilities, undisbursed loans amounts and other commitments. Although these liabilities are not recognised in the consolidated statement of financial position, they expose the Group to credit risk. To cover the credit risk a provision is calculated and recognised in other liabilities in the consolidated statement of financial position with a corresponding charge in the consolidated income statement under “Impairment losses and provisions to cover credit risk”.

2.30. Discontinued operations

The Group presents discontinued operations in a separate line in the consolidated income statement if an entity or a component of an entity has been disposed of or is classified as held for sale and a) represents a separate major line of business or geographical area of operations, b) is part of an autonomous plan to dispose of a separate major line of business or of a geographical location of operations, or c) is a subsidiary acquired exclusively with intend to sale. Net profit from discontinued operations includes the net total of operating profit and loss before tax from discontinued operations (including net gain or loss on sale before tax) and discontinued operations tax expense.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

When the Bank is committed to a sale plan involving loss of control of a subsidiary, the total assets and liabilities of that subsidiary are classified as held for sale, regardless of whether non-controlling interest in its former subsidiary after the sale is retained.

2.31. Stock of properties held for sale

Assets are classified as stock of properties held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This category includes property acquired in satisfaction of debt as well as own property which the Group no longer uses and intends to sell.

The Group, in its normal course of business, repossesses properties through debt to asset swaps and/or through foreclosures. These properties are held either directly or by entities set up and controlled by the Group (Special Purpose Vehicle(s) “SPV”, indirect acquisition) for liquidation optimisation. The SPV can be either a “single property owner” or “multi property owner.

Stock of properties held for sale is recognised in the statement of financial position and is included in other assets, reflecting the substance of these transactions. The initial measurement of the acquired property is based on the carrying amount of the debt settled. Subsequently to initial recognition, stock of properties held for sale is measured at the lower of cost and net realisable value (NRV). Any write-down to NRV should be recognised as an expense in the period in which the write- down occurs. Any reversal is recognised in the income statement in the period in which the reversal occurs.

Profit or loss from disposal of stock of properties held for sale, is the difference between the net consideration amount and the carrying value of the asset and is recognised in the income statement when the asset is disposed.

2.32. Comparatives

Comparatives presented in the Financial Statements are restated, where considered necessary, to conform with changes in the presentation of the current year.

3. USE OF ESTIMATES AND JUDGEMENTS

The preparation of Financial Statements requires Management to make use of judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances and the results of which form the basis of making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Therefore, they involve risks and uncertainties as they relate to events and depend on circumstances that will occur in the future. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and in future periods if the revision affects both current and future periods.

The accounting policies that are deemed critical to the Group’s results and financial position and which involve significant estimates and judgments are set out below:

3.1 Provision for impairment of loans and advances to customers

The Group reviews the loans and advances to customers to assess whether impairment losses should be recognised in the income statement and accumulated in an impairment loss reserve.

The Group assesses whether there is objective evidence of impairment of the loan portfolio on an individual and collective basis.

Indicatively, the following events may be considered by the Group as an evidence of impairment. However, one event alone may not constitute evidence of impairment while the absence of a specific event does not preclude the existence of impairment:

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3. USE OF ESTIMATES AND JUDGEMENTS (continued)

1) Credit facilities classified as non-performing 2) Restructured credit facilities included in performing loans and advances 3) Significant and sustained reduction of total income/future cash flows of the borrower 4) Apparent deterioration of the debt servicing capacity of the borrower 5) The possibility of the debtor’s insolvency 6) Significant reduction in the value of collateral 7) Credit facilities which are impaired 8) Credit facilities with internal credit rating that represents high credit risk 9) Credit facilities which are pending renewal, violating the relevant credit policy of the Bank 10) Macroeconomic indications that may affect the expected future cash flows of the borrowers such as increase in unemployment rates and decline in real estate prices.

The loan portfolio which is assessed on an individual basis includes significant loans of economic groups that are above certain thresholds set by the Bank in accordance with the provisions of the Central Bank of Cyprus Directive on Loan Impairment and Provisioning Procedures as well as all credit facilities to:

(i) Shareholders with holdings in excess of 10% of the Bank’s share capital and their connected persons. (ii) Members of the Board of Directors of the Bank and their connected persons. (iii) Key Management personnel and their connected persons.

The amount of impairment loss on the value of loans and advances to customers which are examined on an individual basis, is measured as the difference between the carrying amount of the credit facility and the present value of estimated future cash flows, discounted at the credit facility’s original effective interest rate. In cases where the interest rate of the loan is variable, the original effective interest rate is measured with reference to the initial margin corresponding to the current base rate of the interest rate and the value of the current base rate at the reporting date. The estimated future cash flows are based on assumptions about a number of factors and therefore the actual losses may be different. To determine the amount of impairment loss on the value of loans and advances to customers, judgment is involved regarding the amount and timing of estimated future cash flows. The estimated future cash flows include any expected cash flows from the borrowers operations, any other sources of funds and the expected proceeds from the liquidation of collateral, where applicable. The timing of these cash flows is estimated on a case by case basis.

Where the future expected cash flows relate to realisation of the property collateral, the expected amount to be received at the point of liquidation is estimated taking into account the projected property prices at the time of liquidation, net of any selling, taxes and other expenses to be incurred by the Bank in relation to the repossession and the disposal of the collateral.

Loans and advances assessed on an individual basis and for which no impairment loss is recognised are assessed on a collective basis. In addition, loans and advances that are below the materiality threshold for individually assessment, are assessed on a collective basis for impairment losses.

For the calculation of impairment loss on a collective basis, loans and advances are grouped based on similar credit risk characteristics and appropriate models are applied that take into account the recent historical loss experience of each group with similar credit risk characteristics adjusted for current conditions using appropriate probabilities of default and loss given default. Restructured facilities are classified in separate group with higher risk parameters.

These calculations include estimates and the use of judgment to supplement, assess and adjust accordingly the historical information and past experience events which determine the parameters and calculation of impairment losses as at the reporting date. The main assumptions used to estimate loss given default relate to the treatment of property collateral such as the time needed for collateral liquidation and the liquidation discount at the point of sale. For loans and advances assessed individually, the specifics of each case are taken into consideration in determining the property parameters.

During 2016, the Bank has improved its property collateral database that allowed a more granular approach in collective provisioning. The new collateral information which was incorporated in collective provisioning takes into account the specificities of the properties by segmenting them into various property types and sub-types as well as by classifying them by district and location within each district. Different liquidation discounts are applied depending on the type and location of each collateral with the liquidation discount including cost ranging from 15% for a limited number of prime property types to 40% for non-prime properties. The resulting average liquidation discount for the collectively assessed portfolio is approximately 25% including costs.

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3. USE OF ESTIMATES AND JUDGEMENTS (continued)

Further improvements to the collective provisioning methodology relate to the alignment to the status of the portfolio and the NPL management strategies pursuit by the Bank with the collective provision assessment by differentiating the liquidation period assumptions. As a result of this exercise, the average liquidation period assumption for the collectively assessed portfolio managed by the Debt Recovery Unit is 5 years. For the remaining non-performing portfolio, the liquidation period ranges from 4 to 5 years depending on the status and the time in default. The total average liquidation period of the non-performing collective portfolio is currently approximately 4.7 years while for performing loans, the liquidation period assumption is 5 years.

Accumulated impairment losses of the Group’s loans and advances are inherently uncertain due to their sensitivity to economic and credit conditions of the environment in which the Group operates. Conditions are affected by many factors with a high degree of interdependency and there is not one single factor to which these conditions are particularly sensitive. It is possible for the actual conditions in the next financial year to differ significantly from the assumptions made during the current year, so that the carrying amount of loans and advances to be adjusted significantly.

For the purposes of providing an indication of the change in accumulated impairment losses as a result of changes in key loan impairment assumptions, the Bank utilized the collective models on the total loan and advances portfolio with reference date 31 December 2016, to carry out a sensitivity analysis. The simulated impact on the provisions for impairment of loans and advances is presented below:

Increase/(decrease) on accumulated impairment losses on the total loan Change on key assumptions and advances portfolio €’million. Increase the liquidation period by 1 year 33 Decrease the liquidation period by 1 year (33)

Increase the liquidation discount (i.e. reduce the recoverable amount from collateral) by 5% 46

Decrease the liquidation discount (i.e. increase the recoverable amount from collateral) by 5% (43)

Increase the liquidation price assumption by 1% for each year until the disposal of property (30)

Decrease the liquidation price assumption by 1% for each year until the disposal of property 31

3.2. Provisions for pending litigations or complaints and/or claims or cases subject to arbitration proceedings

In order to assess whether a provision must be recognised, the Group examines whether there is a present obligation (legal or constructive) as a result of a past event, for which an outflow of resources embodying economic benefits is probable and a reliable estimate for the amount of the obligation can be made.

The Group obtains legal advice on the value of the provision of specific complaints and/or claims and arbitration.

The amounts recognised as provisions are the best estimates of the expenditure required to settle the present obligation at the end of the reporting period. When a separate liability is measured, the most likely outcome may be considered the best estimate of the liability. Due to the risks and uncertainties surrounding the facts and circumstances of any pending litigations or complaints and/or claims or cases subject to arbitration proceedings, a significant degree of judgement is required for the estimation of the relevant outcome.

3.3. Impairment of goodwill and investments in subsidiaries

The process of identifying and evaluating impairment of goodwill and investments in subsidiaries is inherently uncertain because it requires significant Management judgement in making a series of estimates, the results of which are highly sensitive to the assumptions used. The review of impairment represents Management’s best estimate of the factors below.

Firstly, significant Management judgement is required in estimating the future cash flows of the acquired entities. The values are sensitive to the cash flows projected for the periods for which detailed forecasts are available, and to assumptions regarding the long-term pattern of sustainable cash flows thereafter.

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3. USE OF ESTIMATES AND JUDGEMENTS (continued)

The cash flow forecasts are compared with actual performance and verifiable economic data in future years. However, the cash flow forecasts necessarily and appropriately reflect Management’s view of future business prospects. Additionally, the cost of capital used to discount future cash flows, can have a significant effect on the entity’s valuation. For SPVs, the principal indication of impairment is a decrease in the carrying value of the underlying properties as assessed by independent qualified real estate valuers.

Any impairment of goodwill of the acquired entities affects the Group’s results while any impairment of investments in subsidiaries affects the Bank’s results. PVIF are tested for impairment, annually and when circumstances indicate that the carrying value may be impaired. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the income statement.

3.4. Fair value of investments

The best evidence of fair value of investments is a quoted price in an actively traded market. If the market for a financial instrument is not active, a valuation technique is used. The majority of valuation techniques employed by the Group use only observable market data and thus the reliability of the fair value measurement is relatively high. The Group uses models with unobservable inputs only for the valuation of non-listed investments. In these cases, the Group takes into account, amongst others, the net positions of the entities in which the investment has been made, as well as estimates of the Group’s Management to reflect uncertainties in fair values resulting from the lack of data and significant adverse changes in technology, market, economic or legal environment in which the entity operates.

3.5. Impairment of available for sale investments

Available for sale investments in equity securities are impaired when there has been a significant or prolonged decline in their fair value below cost. In such a case, the total loss previously recognised in equity is recognised in the consolidated income statement. The determination of what is significant or prolonged requires judgment by Management. The factors which are taken into account in these estimates include the percentage reduction in the cost or impaired cost, as well as the net positions of the entities.

Available for sale investments in debt securities are impaired when there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the investment and the loss event (or events) has an impact on the estimated future cash flows of the investment. The identification of impairment requires judgment by Management. An individual assessment of impairment is carried out on debt securities whose fair value as at the date of the financial position has significantly decreased as well as the issuer has been downgraded.

3.6. Properties held for sale/stock of properties held for sale

Properties held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Stock of property is measured at the lower of cost and net realisable value. The estimated sales price is determined with reference to the fair value of properties.

The fair value is established through valuations carried out by qualified real estate valuers who apply internationally accepted valuation models, use their market knowledge and professional judgement. This exercise, depending on the nature of the underlying asset and available market information, has a degree of uncertainty. The determination of costs to sell may also require professional judgement which involves a degree of uncertainly due to the relatively low level of market activity.

3.7. Taxation

The Group is subject to corporation tax in the countries in which it operates. Estimates are required in determining the provision for corporation taxes as at the date of the financial position. There is the possibility of a change in the tax treatment of impairment losses on the value of loans and advances other than those concerning customers individually assessed, as indicated in correspondence from the office of the Commissioner of Taxation and contrary to the policy applied by the Bank to date. Where the final tax is different from the amounts initially recognised in the income statement, such differences will impact the tax expense, the tax liabilities and deferred tax assets or liabilities of the period in which the final tax is agreed with the relevant tax authorities.

Deferred tax assets arising from tax losses are recognised to the extent that it is probable that the Group will generate future taxable profits against which these losses can be utilised. The recognition of deferred tax asset in respect of tax losses is based on judgements made in relation to the probability, sufficiency and timing of future taxable profits as well as the

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3. USE OF ESTIMATES AND JUDGEMENTS (continued)

applicability of future tax planning strategies. These judgements rely on historical available information and estimations regarding, among others, macroeconomic conditions, changes in interest rates, real estate prices and demand, the level of the non-performing exposures and the expected results of operations based on the business model and strategic plan of the Group. The parameters underlying the judgements made are subject to uncertainty and may result in changes in the measurement of deferred tax asset compared to initial estimates.

4. INTEREST INCOME

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Interest income from cash and balances with Central Banks 172 32 172 32 Interest income from placements with other banks 7.542 8.020 7.458 8.006 Interest income from loans and advances to customers 149.359 176.316 149.361 176.364 Interest income from debt securities 22.222 17.643 22.171 17.548 Interest income from other financial instruments 5.941 3.755 5.941 3.755 185.236 205.766 185.103 205.705 Interest from loans and advances to customers include interest on the net carrying amount of impaired loans and advances amounting to €58,7 million (2015: €75,6 million).

5. INTEREST EXPENSE

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Interest expense on deposits by other banks 7.426 4.412 7.424 4.412 Interest expense on amounts due to Central Banks 178 359 178 359 Interest expense on customer deposits and other customer accounts 25.277 50.272 25.556 50.841 Interest expense on loan capital 522 907 522 907 Interest expense on other financial instruments 4.341 4.456 4.341 4.456 37.744 60.406 38.021 60.975

6. FEE AND COMMISSION INCOME

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Banking fees and commissions 51.776 58.423 54.048 60.414 Commissions from insurance operations 3.507 3.119 -- -- Asset management fees 1.085 1.460 1.011 1.391 Other fees and commissions 272 347 -- -- 56.640 63.349 55.059 61.805

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7. FEE AND COMMISSION EXPENSE

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Banking fees and commissions 2.019 2.297 2.019 2.297 Commissions for insurance operations 1.769 1.737 -- -- Other fees and commissions 860 899 346 380 4.648 4.933 2.365 2.677

8. NET GAINS ON DISPOSAL AND REVALUATION OF FOREIGN CURRENCIES AND FINANCIAL INSTRUMENTS

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Gain on disposal and revaluation of foreign currencies 10.081 11.458 10.083 11.548 Gain/(loss) on disposal of debt securities and other financial instruments: Instruments available for sale 2.114 (33) 2.114 (33) Instruments held for trading 55 (381) 55 (381) Instruments classified as loans and receivables -- 16.674 -- 16.674 Surplus on revaluation of debt securities and other financial instruments: Instruments held for trading 1.059 1.968 1.059 1.968 Gain/(loss) on disposal of equity securities: Instruments available for sale -- 2.973 -- 2.973 Instruments held for trading -- (10) -- (4) Gain on disposal of VISA Europe Limited shares 14.040 -- 14.040 -- Surplus/(deficit) on revaluation of equity securities: Instruments held for trading 12 (17) 12 (17) Changes in fair value of financial instruments in fair value hedges: Hedged items -- (27) -- (27) Hedging instruments -- 23 -- 23 Reversal of impairment loss/(impairment loss) on equity securities and debt securities: Instruments available for sale 74 (25) 74 (25) 27.435 32.603 27.437 32.699

The Group and the Bank 2016 2015 €’000 €’000

Reversal of impairment loss/(impairment loss) on equity securities and debt securities: Listed investments -- (162) Unlisted investments 74 137 74 (25)

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8. NET GAINS ON DISPOSAL AND REVALUATION OF FOREIGN CURRENCIES AND FINANCIAL INSTRUMENTS (continued)

The Group and the Bank 2016 2015 €’000 €’000 Reversal of impairment loss/(impairment loss) on equity securities and debt securities: Equity securities -- (162) Debt securities 74 137 74 (25)

The gain on disposal and revaluation of foreign currencies of the Group results from the translation of monetary assets denominated in foreign currency at the reporting date and the realised gains/(losses) on foreign currency transactions that were settled during the year.

For the year ended 31 December 2015, ”Gain on disposal of instruments classified as loans and receivables” of €16,7 million for the Group and the Bank, relates to the disposal of Cyprus Government Registered Development Stocks.

During 2015 Visa Inc. expressed an interest in acquiring the 100% of the issued and outstanding share capital of Visa Europe Limited. On 21st June 2016, the acquisition of Visa Europe by Visa Inc. was completed. Upon the completion of the transaction, the gain on disposal of Visa Europe shares amounted to €14,0 million and recognised in the income statement of the Bank.

The deal valued Visa Europe at approximately €18,37 billion and the proportion attributable to Hellenic Bank was split and valued as follows:

I. Cash consideration of €11 million received upon closing date. II. Preferred stock in Visa Inc.: The value of the convertible shares received was estimated by converting each of the 4.090 Series C Visa Inc. shares into 13,952 Class A Common Stock at closing price on 30 June 2016. Due to the conversion of the shares taking place on the 12th anniversary of the closing date of the agreement after settling any unresolved and outstanding cover claims, it was considered prudent to apply a haircut of 50% on the calculated value of the shares. As at 30 June 2016, Visa Inc. shares were valued at €1,9 million. III. Deferred cash payment: The amount of deferred cash payment due to the Bank amounts to €1,0 million. The value of the deferred payment that was accounted for is €0,9 million and represents the net present value of the estimated due amount which will be paid shortly after the 3rd anniversary of the closing date of the agreement.

9. OTHER INCOME

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Dividend income 2.872 609 7.087 7.673 Income from insurance operations 14.732 15.149 -- -- Gain from the disposal of subsidiary company ------1.112 Profit from the disposal of stock of properties held for sale 527 1.538 527 1.538 Other income 2.632 2.739 2.465 2.341 20.763 20.035 10.079 12.664

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10. STAFF COSTS

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Salaries 66.279 65.165 61.390 60.286 Employer’s contributions for social insurance etc. 10.438 10.031 10.133 9.697 Provident Fund Contributions 5.289 4.852 5.032 4.588 82.006 80.048 76.555 74.571

The Group participates in two different defined contribution retirement plans.

The terms of employment of the majority of Group employees are in accordance with the provisions of the Collective Agreement between the Cyprus Banks Employers Association and the Cyprus Union of Bank Employees under which a defined contributions Provident Fund for the Hellenic Bank Group staff was set up and since then operates in accordance with Cyprus legislation. In accordance with the Collective Agreement, as of 1st of January 2012, employer contributions to the Provident Fund amounted to 14% of the gross salary (basic salary plus cost of living allowance) of each employee. Following the conclusion on 17 March 2014 of a new agreement amending the Collective Agreement, the employers’ contributions to the Provident Fund, with effect from 1st January 2014, were fixed at 9% for the years 2014 and 2015, 9,5% for 2016 and 11,5% for 2017.

A number of staff are employed on the basis of personalised employment contracts that are not in accordance with the terms of the Collective Agreement. During 2015 these employees became members of a multi-employer defined contribution Provident Fund to which the employer contributes 9% of the employees’ gross salary. During 2016 an amount of €114 thousand (31 December 2015: €32 thousand) was charged to the income statement.

Group obligations towards the employees’ retirement benefits are limited to payment of the contributions to each Provident Fund. Employer’s contributions due for payment are recognised as staff expense.

On 31st of December 2016, the number of staff employed by the Group was 1.646 (December 2015: 1.555 employees) and by the Bank 1.531 (December 2015: 1.438 employees). The average number of staff employed by the Group and the Bank for 2016 was 1.617 and 1.502 respectively (2015: Group 1.514, Bank 1.399).

11. ADMINISTRATIVE AND OTHER EXPENSES

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Impairment losses on stock of properties held for sale (refer to Note 26) 1.025 413 990 282 Operating leases of land and buildings 2.448 2.583 2.429 2.563 Repairs and maintenance 6.984 6.509 6.933 6.444 Consultancy and other professional services fees 11.735 15.252 11.287 14.967 Regulatory Supervisory fees 756 835 756 835 Central Bank of Cyprus Penalty 973 -- 973 -- Special Levy on Credit Institutions 9.119 9.526 9.119 9.526 Provisions for pending litigations or complaints and/or claims (refer to Note 31) 149 5.857 149 5.857 Early retirement cost 1.101 3.090 835 2.577 Other administrative expenses 22.085 23.219 20.436 21.122 56.375 67.284 53.907 64.173

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11. ADMINISTRATIVE AND OTHER EXPENSES (continued)

CENTRAL BANK OF CYPRUS PENALTY

Administrative expenses include an amount of €973 thousand that relates to a financial penalty issued by the Central Bank of Cyprus (CBC) on 13 July 2016, relating to controls omissions and weaknesses in the implementation of due diligence measures and customer identification procedures, as part of the Bank’s anti-money laundering and know-your-customer framework. The historical shortcomings were identified in an audit conducted by the CBC in September 2014 and related to the preceding years. The penalty did not relate to any identification of incidents of suppression of proceeds from any illegal activities. Hellenic Bank has made significant progress in rectifying these issues, following an independent review and subsequent restructuring of part of its business initiated since September 2014 and overseen by the Board of Directors. As part of this restructuring, a number of client accounts have been closed. At the same time, the Bank is continuing repositioning its International Banking Division strategy reflecting the changing regulatory environment with specific focus on anti-money laundering issues.

EARLY RETIREMENT COST

On the 20th of November 2015, the Bank announced, as part of its strategy to reorganise and reshape its business model, its decision to proceed with a Special Voluntary Early Retirement Scheme (“Scheme”) which took the form of voluntary retirement. The Scheme, which was in line with the rules of corporate governance and employee rights, was addressed to all permanent members of the staff and was in effect from the 20th of November 2015 to the 18th of December 2015. Upon completion, 36 members of the staff opted to take the scheme and leave the Bank. As a result, an amount of €3.090 thousand (Bank: €2.577 thousand) was charged to the income statement under administrative expenses.

During 2016, the contract of employment between 4 members of the staff (out of which 3 were Key Management personnel) and the Group was terminated, and an amount of €1.101 thousand (Bank: €835 thousand) was charged to the income statement under administrative expenses.

The total fees for statutory auditors included in the consultancy and other professional services fees are analysed as follows:

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Audit of annual accounts 225 172 111 101 Assurance services 22 26 11 11 Tax advisory 54 48 54 48 Other non-audit services 382 366 376 334 683 612 552 494

12. IMPAIRMENT LOSSES AND PROVISIONS TO COVER CREDIT RISK

The Group and the Bank 2016 2015 €’000 €’000 Impairment losses on the value of loans and advances (refer to Note 18) 122.235 101.437

Provisions to cover credit risk for contractual commitments and guarantees (refer to Note 31) (7.002) (649) 115.233 100.788

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13. TAXATION

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Corporation tax (442) (877) -- -- Taxes withheld at source (61) (18) (57) -- Deferred tax (50.125) 5.537 (50.083) 5.431 (50.628) 4.642 50.140 5.431

According to the Income Tax Law 118(I)/2002 as amended, the Bank’s profit and that of its subsidiaries in Cyprus, is subject to corporation tax at the rate of 12,5%. Tax losses of Group companies in Cyprus can be offset against taxable profits of other Group companies in Cyprus and any tax losses not utilised can be carried forward and offset against the same entity’s taxable profits of the next five years. As of 1st January 2015 onwards cross-border relief is allowed only in the case of losses of an EU subsidiary that has exhausted all other possibilities to use the said losses in its country of tax residence.

Profits earned by subsidiary companies and permanent establishments outside Cyprus are subject to taxation at the rates applicable in the country in which the operations are carried out.

Tax exemptions, allowances, deductions and offsets pursuant to Articles 8, 9, 10 and 13 of the Income Tax Law 118(I)/2002 are taken into consideration for the calculation of the tax liability.

According to the provisions of the Special Contribution for the Defence of the Republic Law, Companies that do not distribute 70% of their profits after tax, as these profits are defined by this Law, during the two years following the end of the year to which the profits refer, will be deemed to have distributed this amount as dividend. Special contribution for defence at 17% will be payable on such deemed dividends to the extent that the shareholders (individuals and companies), at the end of the period of two years from the end of the fiscal year to which the profits refer, are Cyprus residents for the purposes of this Law. The amount of the deemed dividend distribution is reduced by any actual dividend already distributed in respect of the year to which the profits refer. The special contribution for defence is paid by the Bank on behalf of the shareholders.

OTHER DEVELOPMENTS ON TAXATION ISSUES

• Notional Interest Deduction: In an attempt to reduce excessive debt financing and encourage the injection of capital in corporate structures (hence reducing the overall debt exposure and de-leveraging of the economy), new provisions to the Law have been enacted. These provide for a Notional Interest Deduction (NID) as from 1st January 2015. The NID is calculated on the basis of an interest reference rate on new equity introduced in a company and used in the business.

• Loan Restructuring Exemption – An exemption from CGT/Income Tax/Corporate Tax/Land Registry Fees/Stamp Duties is available on all transfers of immovable property (IP) or shares of companies owning IP as a result of loan restructuring arrangements concluded between lenders and borrowers. The exemption is available until 31 December 2017.

• Capital Gains Tax exemption on future disposal of Immovable Property (IP) – This exemption is available in respect of profits from the disposal of an IP, at any time in the future, to any person who acquired that IP before 31 December 2016.

• Other Amendments to the Tax Laws: The following amendments have been enacted in order to improve harmonisation of the Cyprus tax legislation with EU Law and also render the Cyprus tax environment more attractive to investors:

o Harmonisation with the EU Parent Subsidiary Directive regarding the taxation of distributable profits provided these are considered tax deductible in the country where the entity paying the dividend is resident. o Unrealised Exchange Differences will not be adjusted in the computation of chargeable income if they relate to transactions in the nature of trade. o Harmonisation with EU case law with regard to Cross Border Tax Losses Group Relief. o When, through the application of the Arms-Length Principle, income is subjected to taxation in one entity the respective expense will be allowed in the other entity.

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13. TAXATION (continued)

During 2016, a deferred tax asset of €51,2 million was derecognised and charged in the income statement. The derecognition of the deferred tax asset resulted from tax losses for which is no longer probable that the related tax benefit will realise, as the majority of these losses will expire by 31 December 2018. The carrying amount of the deferred tax asset is based on judgements of the Management of the Bank on its ability to generate future taxable profits. These judgements are based on available information including historical data, improved macroeconomic estimates, the reduction in deposit rates, the stabilisation of the non-performing loans, the bank’s impairment process and the results of operations.

Reconciliation of taxation based on taxable income and taxation based on accounting profits

2016 2015 The Group €’000 €’000 Group (loss)/profit before taxation (12.033) 3.527

Taxation based on applicable tax rates (1.504) 441 Expenses non-tax deductible 4.629 2.812 Non-taxable income (2.635) (8.202) Tax effect of losses from overseas operations (48) (115) Other taxation 62 178 Deferred tax 50.124 244 Tax debit/(credit) for the year 50.628 (4.642)

2016 2015 The Bank €’000 €’000 (Bank (loss)/profit before taxation (14.349) 5.049

Taxation based on applicable tax rates (1.794) 631 Expenses non-tax deductible 4.549 2.721 Non-taxable income (2.804) (9.018) Tax effect of losses from overseas operations 49 (115) Other taxation 54 -- Deferred tax 50.086 350 Tax debit/(credit) for the year 50.140 (5.431)

Taxation recognised in other comprehensive income:

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Deferred taxation on property revaluation (12) (41) (9) (38)

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14. PROFIT FROM DISCONTINUED OPERATIONS AFTER TAXATION

On the 6th of February 2015, the Bank proceeded with the disposal of its subsidiary Borenham Holdings Limited. Borenham Holdings Limited owned 100% of the share capital of the Russian company Limited Liability Company “Format Invest”, owner of the building facilities of its former Russian banking subsidiary “Limited Liability Company Commercial Bank “Hellenic Bank” which was disposed on 5th of June 2014.

According to the provisions of the IFRS 5, “Non-Current assets held for sale and discontinued operations”, the comparable Group’s results for the year ended 31 December 2015 have been adjusted to reflect the reclassification from continuing operations to discontinued operations of the Bank’s subsidiaries, Limited Liability Company Commercial Bank “Hellenic Bank” and Borenham Holdings Limited that were disposed.

On 28 November 2016 the Board of Directors of Hellenic Bank (Investments) Ltd decided to discontinue all its business activities, which primarily relate to retail brokerage services. Based on this decision, on the 17th of February 2017 Hellenic Bank (Investments) Ltd business activities were terminated. Hellenic Bank (Investments) Ltd results were not shown as discontinued operations since Management of the Bank considered them not material. As at 31 December 2016 Hellenic Bank (Investments) Ltd reported losses for the year net of tax €172 thousand, turnover €404 thousand and total assets € 2.079 thousand.

The effect of the Group’s discontinued operations in Russia on the Group’s results is presented and is further analysed below:

RUSSIAN SEGMENT-BORENHAM HOLDINGS LIMITED

2016 2015 Note €’000 €’000 Discontinued operations Turnover -- --

Net interest income -- -- Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income -- --

Total net income -- -- Total expenses -- (60) Loss before taxation -- (60) Taxation -- -- Loss after taxation -- (60) Profit on disposal of subsidiary company -- 4.886 Profit for the year -- 4.826 Basic and diluted earnings per share (cent) 15 -- 2,6

The profit has arisen from the salve of the subsidiary’s assets and liabilities, under the signed agreement on the 6th of February 2015, which constitutes the difference between the net payable amount and the carrying amount of the Net Assets is analysed as follows:

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14. PROFIT FROM DISCONTINUED OPERATIONS AFTER TAXATION (continued)

€’000 Assets Cash and balances with Central Banks 30 Property, plant and equipment 3.828 Other assets 53 Total assets 3.911 Liabilities Intercompany loan undertaken by new company shareholders 3.514 Other liabilities 1.231 Total liabilities 4.745 Net liabilities 834 Disposal consideration 4.052 Profit on disposal of subsidiary company 4.886

The effect of the discontinued operations on the Statement of Cash Flows was as follows:

2016 2015 €’000 €’000 Cash flow from discontinued operations Net cash flow from investing activities -- 4.021 Net cash flow used in operating activities -- (863) Net cash flow for the year -- 3.158

15. BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE

The Group The Bank 2016 2015 2016 2015

Basic and diluted (loss)/earnings per share

(Loss)/profit attributable to owners of the parent company (€ thousand) (63.477) 12.077 (64.489) 10.480 Average number of shares in issue during the year (thousand) 198.432 188.258 198.432 188.258 Basic and diluted (loss)/earnings per share (cent €) (32,0) 6,4 (32,5) 5,6

The Group The Bank 2016 2015 2016 2015 Basic and diluted (loss)/earnings per share from continuing operations (Loss)/profit attributable to owners of the parent company (€ thousand) from continuing operations (63.477) 7.251 (64.489) 10.480 Average number of shares in issue during the year (thousand) 198.432 188.258 198.432 188.258 Basic and diluted (loss)/earnings per share (cent €) from continuing operations (32,0) 3,9 (32,5) 5,6

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15. BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE (continued)

The Group The Bank 2016 2015 2016 2015 Basic and diluted earnings per share from discontinued operations Profit attributable to owners of the parent company (€ thousand) from discontinued operations -- 4.826 -- -- Average number of shares in issue during the year (thousand) -- 188.258 -- -- Basic and diluted earnings per share (cent €) from discontinued operations -- 2,6 -- --

For the calculation of the basic earnings per share for the year ended 31 December 2015, the average number of shares issued is adjusted in accordance with IAS 33 to take into account the issue of shares during 2016 (refer to Note 33) .

As at 31 December 2016 and 2015 there were no options or instruments convertible into new shares and so basic and diluted loss per share are the same.

16. CASH AND BALANCES WITH CENTRAL BANKS

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Cash 54.673 65.038 54.672 65.037 Balances with Central Banks 2.028.771 1.964.142 2.028.771 1.964.142 2.083.444 2.029.180 2.083.443 2.029.179

On 31 December 2016, cash and balances with Central Banks included the deposit to the ECB amounting to €2.000 million (2015: €1.925 million). The obligatory deposits for liquidity purposes as at 31 December 2016, as determined by the CBC amounted to €60.668 thousand (2015: €63.318 thousand).

17. PLACEMENTS WITH OTHER BANKS

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Other placements with banks 419.176 762.332 419.167 762.076 Interbank accounts 129.726 147.517 118.092 145.474 548.902 909.849 537.259 907.550

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17. PLACEMENTS WITH OTHER BANKS (continued)

The analysis of placements with other Banks is based on their remaining contractual maturity as at 31 December is as follows:

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 On demand 81.126 92.276 69.493 90.232 Within three months 363.870 710.455 363.860 710.304 Between three months and one year 455 4.574 455 4.470 Between one year and five years 103.451 102.544 103.451 102.544 548.902 909.849 537.259 907.550

On 31 December 2016, an amount of €110.978 thousand (2015: €112.235 thousand) is pledged as collateral on placements with other banks, being common practice among financial institutions.

18. LOANS AND ADVANCES TO CUSTOMERS

The Group and the Bank 2016 2015 €’000 €’000 Trade 744.499 743.866 Construction and Real Estate 1.081.122 1.130.901 Manufacturing 255.450 269.497 Tourism 262.422 285.183 Other Sectors 682.807 701.435 Retail 1.273.817 1.265.014 4.300.117 4.395.896 Accumulated Impairment losses (1.374.084) (1.303.123) 2.926.033 3.092.773

Analysis of loans and advances to customers is based on their remaining contractual maturity as at 31 December.

The Group and the Bank 2016 2015 €’000 €’000 On demand 2.159.648 2.244.520 Within three months 94.472 94.877 Between three months and one year 221.218 200.804 Between one year and five years 784.489 871.778 Over five years 1.040.290 983.917 4.300.117 4.395.896 Accumulated Impairment losses (1.374.084) (1.303.123) 2.926.033 3.092.773

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18. LOANS AND ADVANCES TO CUSTOMERS (continued)

Accumulated impairment losses on the value of loans and advances

The Group and the Bank 2016 2015 €’000 €’000 Individual impairment losses On an individual and collective assessment basis 1 January 1.269.536 1.133.574 Contractual interest on impaired loans 164.001 202.185 Unwinding of discount (58.680) (75.551) 105.321 126.634 Net write-offs of loan impairment losses (156.138) (121.248) Charge for the year 123.972 116.559 Exchange difference 3.835 14.017 76.990 135.962 31 December 1.346.526 1.269.536

Collective impairment losses On collective assessment basis (IBNR) 1 January 33.587 50.453 Net write-offs of loan impairment losses (4.372) (2.670) Release for the year (1.737) (15.122) Exchange difference 80 926 (6.029) (16.866) 31 December 27.558 33.587 Accumulated impairment losses 1.374.084 1.303.123

Impaired loans and advances

Represent the loans and advances for which the Group determines that there is objective evidence for impairment as a result of one or more loss events occurring after initial recognition and which have an impact on the estimated future cash flows as assessed either on an individual basis or on a collective basis. The resulting impairment loss is recognised under “Individual Impairment losses”. These loans and advances are classified in Grade 3 (high risk) based on the Group’s credit risk assessment system.

Loans with renegotiated terms due to the deterioration of the financial position of the customer are usually considered impaired, if the Group determines that, according to the loan contractual terms, non-repayments of the total principal and contractual interest due is possible.

Non-impaired loans and advances

The loans and advances which were not found to be impaired, are presented in risk categories based on the credit risk assessment system of the Group. The risk categories are as follows:

Grade 1 (Low Risk): An immediate ability to repay the credit facility is assumed.

Grade 2 (Medium Risk): The probability of indirect recovery of the credit facility is assumed.

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18. LOANS AND ADVANCES TO CUSTOMERS (continued)

Grade 3 (High Risk): The debtor presents a higher risk compared to Grade 1 and 2 on the existence of direct and indirect recovery of the credit facility.

Past due but not impaired loans and advances Represent non-impaired loans and advances for which the contractual interest or principal repayments are past due and the Group determines that there is no objective evidence of impairment by taking into account, among others, the value of available collateral.

Collateral On the basis of the Group’s policy, the amount of credit facilities granted should be based on the repayment capacity of the relevant counterparties. Furthermore, policies are applied for the hedging and mitigation of credit risk through the holding of collateral. These policies define the types of collaterals held and the methods for estimating their fair value.

The main collaterals held by the Group include mortgage interests over property, pledging of cash, government and bank guarantees, charges over business assets as well as personal and corporate guarantees.

Property collateral relates to immovable commercial, residential and land real estate collateral. The open market value is indexed to today using publicly available indices. The indexations are monitored and validated for their ability to accurately reflect the current market values of the property collaterals of the Bank. During 2016, the indexation validation exercise suggested that for property collaterals related to land, a downward correction was appropriate in order to more accurately reflect their current market value.

The value of tangible collateral for loans and advances classified as impaired both under Collective and Individual assessments amounted to €1.677 million as at 31 December 2016 (31 December 2015: €2.053 million). The value of tangible collateral for loans and advances past due but not impaired amounted to €239,1 million as at 31 December 2016 compared to €295,1 million as at 31 December 2015.

Forborne Exposures According to the European Banking Authority’s (EBA) technical standards, forborne exposures are (i) exposures which involve changes in their terms and/or conditions and (ii) the forbearance measures consist of concessions towards a debtor which aim to address existing or anticipated difficulties on the part of the borrower to service debt in accordance with the current repayment schedule. Changes in the terms and conditions of a contract that do not occur because the customer is not able to meet the terms and conditions of the contract due to financial difficulties do not constitute forbearance measures (see details below).

The most significant prerequisite for the forbearance of an exposure is the existence of customer repayment ability i.e. the customer is viable. The Bank’s Restructuring Policy includes the terms and conditions on which the Bank determines whether or not a renegotiated repayment schedule shall be granted.

The forbearance measures to be taken and their duration thereof are determined on the basis of specific customer information, based on the prevailing economic conditions and in accordance with relevant legislation or regulatory Directives.

The monitoring of forborne loans is performed by both, Business Units and the Credit Risk Management department.

Every effort is taken by the Bank for the proper assessment of the new repayment schedule on the basis of the forbearance measures, in order to avoid a new default.

Non-performing and forborne exposures according to the European Banking Authority’s (EBA) technical standards

The European Banking Authority (EBA) published in 2014 its technical standards with respect to non-performing and forborne exposures which were adopted by the European Commission (EC) through the commission implementation regulation (EU) 2015_1278. Exposures include all debt instruments (loans and advances and debt securities) and off-balance sheet exposures, except those held for trading exposures.

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18. LOANS AND ADVANCES TO CUSTOMERS (continued)

As per the above regulation, the following are considered as non-performing Exposures (NPEs):

(i) Material exposures that are over 90 days past due,

(ii) The debtor is assessed as unlikely to pay its credit obligations in full without realisation of collateral, regardless of the existence of any past-due amount or of the number of days past due,

(iii) Exposures in respect of which a default is considered to have occurred in accordance with Article 178 of Regulation (EU) No 575/2013,

(iv) Exposures of debtors against whom legal action has been taken by the Bank or exposures of bankrupt debtors,

(v) Exposures that are found impaired as per the applicable accounting framework,

(vi) Forborne exposures that were NPE at forbearance or became NPE after forbearance and which are re-forborne while under probation (the probation period for forborne exposures begins once the contract is considered as performing and lasts for two years minimum),

(vii) Forborne exposures reclassified from NPE status i.e. that were NPE at forbearance or became NPE after forbearance and present more than 30 days past due while under probation

(viii) Further to the above the all-embracing criteria apply as follows: (a) for debtors classified as retail debtors as per the Regulation (EU) No 575/2013, when the Bank has on-balance sheet exposures to a debtor that are material and are past due by more than 90 days the gross carrying amount of which represents more than 20% of the gross carrying amount of all on-balance sheet exposures to that debtor, all on and off-balance sheet exposures to that debtor shall be considered as non-performing and (b) for debtors classified as non-retail debtors as per the Regulation (EU) No 575/2013, when the Bank has any on-balance sheet exposures to a debtor that are non-performing (if the exposure is non-performing due to over 90 days past due it must pass the materiality thresholds), all on and off-balance sheet exposures to that debtor shall be considered as NPE. Else, only exposures that are non-performing will be classified as such.

The below materiality thresholds apply only for the NPE criterion of arrears over 90 days past due.

For exposures to debtors classified as Retail as per the Regulation (EU) No 575/2013:

• For term loans: if the past due amount of each exposure is over €500 the exposure shall be classified as material.

• For overdrafts/current accounts: if the past due amount or the excess of the exposure exceeds €500 or 10% of the limit approved by the Bank the exposure shall be classified as material.

For exposures to debtors not classified as Retail as per the Regulation (EU) No 575/2013:

• If the total excesses/past dues of debtors exceed €1.000 or exceed 10% of their total on balance sheet exposures then all the exposures of the debtor shall be classified as material.

If as per the above the exposures are not classified as material, then they may be classified as performing NPE even if they present arrears over 90 days past due.

Exposures may be considered to have ceased being non-performing when all of the following conditions are met:

(a) the situation of the debtor has improved to the extent that full repayment, according to the original or when applicable the modified conditions, is likely to be made;

(b) the debtor does not have any amount past-due by more than 90 days.

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18. LOANS AND ADVANCES TO CUSTOMERS (continued)

When forbearance measures are extended to non-performing exposures or to exposures which had been non-performing at forbearance or became non-performing after forbearance, the exposures may be considered to have ceased being non- performing only when all the following conditions are met:

(a) the extension of forbearance does not lead to the recognition of impairment or default;

(b) one year has passed since the forbearance measures were extended;

(c) there is not, following the forbearance measures, any past-due amount or concerns regarding the full repayment of the exposure according to the post-forbearance conditions;

(d) the debtor does not have any amount past-due by more than 90 days.

As per EBA technical standards evidence of a concession towards a debtor which aim to address existing or anticipated difficulties on the part of the borrower to service debt in accordance with the current repayment schedule, includes:

(a) the modification of the previous terms and conditions of a contract would not have been granted had the debtor not been in financial difficulties;

(b) a difference in favour of the debtor between the modified and the previous terms of the contract;

(c) cases where a modified contract includes more favourable terms than other debtors with a similar risk profile could have obtained from the same institution.

Examples of exposures that should be classified as forborne as per the new EBA technical standards include:

(a) Exposures that were non-performing at forbearance;

(b) Exposures that were past due more than 30 days anytime within 3 months prior to forbearance;

(c) Forbearance measures such as partial write-offs.

The forbearance classification shall be discontinued when all of the following conditions are met:

(a) the contract is considered as performing, including if it has been reclassified from the non-performing category after an analysis of the financial condition of the debtor showed it no longer met the conditions to be considered as non-performing;

(b) a minimum 2 year probation period has passed from the date the forborne exposure was considered as performing;

(c) regular payments of more than an insignificant aggregate amount of principal or interest have been made during at least half of the probation period;

(d) none of the exposures to the debtor is more than 30 days past-due at the end of the probation period.

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18. LOANS AND ADVANCES TO CUSTOMERS (continued)

Based on the above categories, loans and advances to customers of the Group and the Bank, are presented as follows:

Loans and advances to customers 31 December 2016 31 December 2015 €’000 €’000 Carrying amount 2.926.033 3.092.773 Impaired: Grade 3 (high risk) 2.473.278 2.528.751 Individual impairment losses (1.346.526) (1.269.536) Carrying amount 1.126.752 1.259.215 Of which with forbearance measures 561.943 552.765 Past due but not impaired: Grade 1 (low risk) 64.527 90.129 Grade 2 (medium risk) 84.416 88.435 Grade 3 (high risk) 3.354 10.030 Carrying amount 152.297 188.594 Past due comprises: 0+ up to 30 days 62.117 64.903 30+ up to 60 days 62.543 58.441 60+ up to 90 days 23.921 40.452 90 days+ 3.716 24.798 Carrying amount 152.297 188.594 Of which with forbearance measures 62.161 42.806 Neither past due nor impaired: Grade 1 (low risk) 1.356.264 1.227.706 Grade 2 (medium risk) 301.527 423.873 Grade 3 (high risk) 16.751 26.972 Carrying amount 1.674.542 1.678.551 Of which with forbearance measures 275.416 334.068

Balances after individual impairment losses 2.953.591 3.126.360 Collective impairment losses (27.558) (33.587) Total carrying amount 2.926.033 3.092.773

The movement of the net carrying amount of the Group’s and the Bank’s impaired loans and advances to customers is as follows:

31 December 2016 31 December 2015 €’000 €’000 1 January 1.259.215 1.235.219 Transfer to non- impaired loans and advances during the year (232.862) (160.757) Net movement of impaired loans and advances (95.660) (51.014) 930.693 1.023.448 Loans and advances classified as impaired during the year 196.059 235.767 31 December 1.126.752 1.259.215

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18. LOANS AND ADVANCES TO CUSTOMERS (continued)

The Group’s and the Bank’s loans and advances with forbearance measures are analysed below:

After individual impairment losses 31 December 31 December 31 December 31 December 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Trade 107.604 97.275 73.555 67.769 Construction and Real Estate 674.880 650.651 431.447 418.626 Manufacturing 54.361 57.346 36.004 41.251 Tourism 67.175 87.031 55.428 63.574 Other sectors 209.086 246.886 154.191 200.361 Retail 197.762 177.457 148.895 138.058 1.310.868 1.316.646 899.520 929.639

The tangible collateral relating to loans and advances with forbearance measures amounted to €1.428 million as at 31 December 2016 (31 December 2015: €1.638 million).

Non-Performing Exposures (NPEs)

According to the CBC directive on Loan Impairment and Provisions Practices (February 2014), the credit institutions are obliged to announce Table A and Table B as presented below. The non-performing exposures portfolio of the Group as at 31 December 2016 amounted to €2.504 million (31 December 2015: €2.602 million).

The ratio of NPEs to gross loans was 58,2% (31 December 2015: 59,2%).

The NPEs provision (individual and collective impairment losses) coverage was 54,9% as at 31 December 2016 (31 December 2015: 50,1%).

Excluding the contractual interest on impaired loans from NPEs and gross loans of €164,0 million for 2016, the ratio of NPEs to gross loans and the coverage of the NPEs by provisions were 56,6% and 51,7% respectively.

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Analysis of loan portfolio according to the counterparty sector as at 31 December 2016 Table A

Total loan portfolio Cumulative Impairment losses of which non- of which non- performing of which exposures with performing of which exposures with exposures forbearance measures exposures forbearance measures

of which on of which on non-performing non-performing exposures exposures €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Loans and advances* 4.300.117 2.503.866 1.310.868 983.643 1.374.084 1.346.526 419.142 411.348 General Governments 1.447 ------14 ------Other financial corporations 66.370 31.514 33.468 21.675 17.518 16.805 10.801 10.398 Non-financial corporations 2.869.983 1.772.477 1.052.328 812.283 940.856 922.225 349.262 343.975 of which: Small and Medium-sized enterprises 2.675.041 1.705.248 1.004.426 782.109 907.509 891.315 337.519 332.307 of which: Commercial real estate 498.278 217.860 175.392 112.015 91.040 86.080 43.644 42.012 By sector 1. Construction 801.406 653.664 313.257 2. Wholesale and retail trade 701.465 418.713 258.432 3. Real estate activities 265.598 164.855 89.458 4. Accommodation and food service activities 302.612 144.231 67.082 5. Manufacturing 250.768 113.213 64.655 6. Other sectors 548.134 277.801 147.972 Households 1.362.317 699.875 225.072 149.685 415.696 407.496 59.079 56.975 HELLENIC

of which: Residential mortgage loans 619.380 236.427 97.458 53.951 102.947 100.496 17.035 16.222 GROUP BANK of which: Credit for consumption 246.895 144.834 17.794 11.225 114.412 112.072 4.362 4.034

* Non-including loans and advances to central banks and credit institutions. ANNUAL REPORT 115 2016

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18. LOANS AND ADVANCES TO CUSTOMERS (continued) 2016 REPORT ANNUAL Analysis of loan portfolio according to the counterparty sector as at 31 December 2015 Table Α

Total loan portfolio Cumulative Impairment losses of which non- of which non- performing of which exposures with performing of which exposures with exposures forbearance measures exposures forbearance measures

of which on of which on non-performing non-performing exposures exposures €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Loans and advances* 4.395.896 2.602.383 1.316.646 958.884 1.303.123 1.269.536 396.297 387.007 General Governments 2.029 6 -- -- 40 4 -- -- Other financial corporations 93.426 50.821 36.395 34.697 22.577 20.917 14.395 14.228 Non-financial corporations 2.942.086 1.843.684 1.070.462 777.770 896.188 874.040 334.246 327.015 of which: Small and Medium-sized enterprises 2.737.472 1.758.353 1.031.318 746.204 848.777 829.728 322.757 315.775 of which: Commercial real estate 587.535 297.974 153.612 118.090 125.320 120.276 48.591 46.967 By sector 1. Construction 820.662 692.827 294.439 2. Wholesale and retail trade 704.041 428.633 247.651 3. Real estate activities 296.312 181.288 91.307 4. Accommodation and food service activities 326.775 180.750 77.930 5. Manufacturing 265.287 117.495 54.068 6. Other sectors 529.009 242.691 130.793 Households 1.358.355 707.872 209.789 146.417 384.318 374.575 47.656 45.764 of which: Residential mortgage loans 655.928 282.162 89.005 53.360 115.941 112.552 15.680 14.873 of which: Credit for consumption 247.965 142.582 15.986 10.245 106.253 103.517 2.901 2.574

* Non-including loans and advances to central banks and credit institutions.

WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade 18. LOANS AND ADVANCES TO CUSTOMERS (continued) Analysis of loan portfolio* on the basis of loan origination date as at 31 December 2016 Table Β

Total loan portfolio Loans to non-financial corporations Loans to other financial corporations Loans to households

Loan Cumulative Cumulative Cumulative Cumulative origination Non-performing Impairment Non-performing Impairment Non-performing Impairment Non-performing Impairment date** exposures losses exposures losses exposures losses exposures losses €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Within 1 year 291.612 9.743 7.189 205.522 8.843 6.288 3.301 29 52 82.789 871 849 1 - 2 years 275.474 34.253 10.490 197.731 33.473 9.955 2.070 1 25 75.673 779 510 2 - 3 years 31.567 5.730 3.435 14.505 4.313 2.650 43 8 7 17.019 1.409 778 3 - 5 years 319.443 160.793 87.989 201.000 120.681 66.153 4.949 1.130 235 113.494 38.982 21.601 5 - 7 years 783.376 483.336 245.082 509.128 357.020 178.581 10.336 2.937 1.903 263.912 123.379 64.598 7 - 10 years 1.416.757 997.590 524.505 920.610 682.462 342.008 34.024 20.730 11.469 462.123 294.398 171.028 Over 10 years 1.180.441 812.421 495.380 821.487 565.685 335.221 11.647 6.679 3.827 347.307 240.057 156.332

Total 4.298.670 2.503.866 1.374.070 2.869.983 1.772.477 940.856 66.370 31.514 17.518 1.362.317 699.875 415.696

* Non-including loans and advances to general governments.

** Loan origination date is defined as the contractual loan origination date for each account. For restructured loans the origination date was derived based on the origination date of the original loan that was restructured. HELLENIC GROUP BANK ANNUAL REPORT 117 2016

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18. LOANS AND ADVANCES TO CUSTOMERS (continued) Analysis of loan portfolio* on the basis of loan origination date as at 31 December 2015 Table Β

Total loan portfolio Loans to non-financial corporations Loans to other financial corporations Loans to households

Loan Cumulative Cumulative Cumulative Cumulative origination Non-performing Impairment Non-performing Impairment Non-performing Impairment Non-performing Impairment date** exposures losses exposures losses exposures losses exposuresς losses €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Within 1 year 280.704 12.573 4.829 204.829 11.580 4.388 618 -- 15 75.257 993 426 1 - 2 years 34.694 4.421 1.840 13.556 3.586 1.503 41 4 5 21.097 831 332 2 - 3 years 133.255 60.721 28.118 86.041 48.418 21.895 271 166 27 46.943 12.137 6.196 3 - 5 years 616.475 333.089 141.672 402.327 242.151 103.424 10.249 3.702 1.743 203.899 87.236 36.505 5 - 7 years 771.136 452.832 218.375 482.377 315.852 155.618 7.357 531 281 281.402 136.449 62.476 7 - 10 years 1.599.330 1.097.637 541.286 1.056.862 759.839 357.829 63.226 40.064 16.601 479.242 297.734 166.856 Over 10 years 958.273 641.104 366.963 696.094 462.258 251.531 11.664 6.354 3.905 250.515 172.492 111.527

Total 4.393.867 2.602.377 1.303.083 2.942.086 1.843.684 896.188 93.426 50.821 22.577 1.358.355 707.872 384.318

Note: The figures disclosed on this table were restated to conform to the change of definition of “loan origination date” adopted in the current year.

* Non-including loans and advances to general governments.

** Loan origination date is defined as the contractual loan origination date for each account. For restructured loans the origination date was derived based on the origination date of the original loan that was restructured.

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19. DEBT SECURITIES

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Securities held for trading Listed -- 1.819 -- 1.819 Securities held to maturity Listed 47.214 45.501 47.214 45.501 Securities classified as loans and receivables Listed 299.360 226.963 299.360 226.963 Securities available for sale Listed 802.558 758.842 796.130 753.082 Unlisted -- 9.961 -- 9.961 Provisions for impairment -- (74) -- (74) 802.558 768.729 796.130 762.969 1.149.132 1.043.012 1.142.704 1.037.252

The analysis of Debt securities is based on their remaining contractual maturity as at 31 December.

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Within three months 133.480 67.738 129.026 67.303 Between three months and one year 161.769 79.493 161.276 79.141 Between one year and five years 369.218 515.557 368.498 510.584 Over five years 484.665 380.224 483.904 380.224 1.149.132 1.043.012 1.142.704 1.037.252

Analysis of Debt securities by sector:

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Concentration by sector: Governments 781.665 561.411 779.238 559.664 Banks 61.642 180.853 61.642 180.853 Other sectors 305.825 300.748 301.824 296.735 1.149.132 1.043.012 1.142.704 1.037.252

As at 31 December 2016 the Group’s exposure in Cyprus Government Bonds amounted to €643.188 thousand (31 December 2015: €393.903 thousand).

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19. DEBT SECURITIES (continued)

The category “Other sectors” mainly consists of debt securities of supranational organisations.

As at 31 December 2016 there were no debt securities pledged (31 December 2015: €236 million, as part of the Group participation in a targeted long term refinancing operation (TLTROs) (refer to Note 28).

MOVEMENT OF PROVISION FOR IMPAIRMENT IN VALUE OF INVESTMENT IN DEBT SECURITIES:

The Group and the Bank 2016 2015 €’000 €’000

Securities Securities available for available for sale sale Provisions for impairment Balance 1 January 74 211 Reversal of provision (74) (137) Balance 31 December -- 74

20. RECLASSIFICATION OF DEBT SECURITIES

On the 1st of January 2009, the Group proceeded with a review of its intention for the holding of debt securities and consequently of its policy for classifying them under the various categories. As a result of this review, a number of debt securities, which were included in the held for trading and available for sale categories, were reclassified to the held to maturity and loans and receivables categories. For the years 2010 to 2016, there has been no other reclassification of debt securities in other categories.

All reclassified held for trading debt securities had matured by 2011.

RECLASSIFICATION OF AVAILABLE FOR SALE INVESTMENTS

In accordance with the provisions of the amended IAS 39, the Group has reclassified certain available for sale debt securities to loans and receivables, in view of the fact that there was no active market for these debt securities and the Group did not have the intention to sell these securities in the foreseeable future.

The carrying amount and fair value of the reclassified debt securities is presented below:

1 January 31 December 2009 2016 Carrying amount Carrying Fair and fair value amount value €’000 €’000 €’000

Available for sale debt securities reclassified as loans and receivables 109.303 104.216 104.481

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20. RECLASSIFICATION OF DEBT SECURITIES (continued)

Had the Group not reclassified the available for sale debt securities to loans and receivables on the 1st of January 2009, the Group’s equity would have included losses from change in fair value of these debt securities of €4.822 thousand that would have been included in the revaluation reserve for available for sale investments.

In addition, on the 1st of January 2009, the Group reclassified certain available for sale debt securities, that it intends to hold to maturity, to the held to maturity category. The carrying amount of these debt securities transferred on the 1st of January 2009 amounted to €1.019 million. On 31st December 2016 the carrying value of these remaining bonds amounted to nil since all bonds matured (31 December 2015: €6.795 thousand).

As a result of the above decision, for the year ended 31 December 2016, an amount of €733 thousand (31 December 2015: €1.492 thousand), being amortisation of revaluation of reclassified debt securities available for sale, was transferred from the investment revaluation reserve to the income statement.

21. EQUITY SECURITIES AND COLLECTIVE INVESTMENTS UNITS

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Securities held for trading Listed securities 293 282 293 282 Securities available for sale Listed securities 1.352 1.657 1.352 1.657 Provisions for impairment (370) (370) (370) (370) 982 1.287 982 1.287 Unlisted securities 8.252 7.535 7.974 7.257 Provisions for impairment (1.024) (1.010) (746) (732) 7.228 6.525 7.228 6.525 Collective investments units 7.505 7.046 -- -- 15.715 14.858 8.210 7.812 16.008 15.140 8.503 8.094

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Concentration by sector: Securities held for trading Other sectors 293 282 293 282

Securities available for sale Other sectors 8.210 7.812 8.210 7.812 Collective investments units 7.505 7.046 -- -- 15.715 14.858 8.210 7.812 16.008 15.140 8.503 8.094

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21. EQUITY SECURITIES AND COLLECTIVE INVESTMENTS UNITS (continued)

Unlisted securities available for sale include the Group’s and the Bank’s investment in JCC Payment Systems Ltd of €4.894 thousand (2015: €6.269 thousand). In determining the fair value of the Bank’s investment in the unlisted company JCC Payment Systems Ltd a valuation method based on the company’s net assets was used.

During 2016 the Group continued investing in collective investments units (ETFs) which are shares/units in well diversified investments funds.

MOVEMENT OF PROVISION FOR IMPAIRMENT IN THE VALUE OF INVESTMENT IN SHARES:

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Provisions for impairment Balance 1 January 1.380 12.548 1.102 11.387 Exchange difference 14 370 14 370 Reversal due to disposal -- (11.538) -- (10.655) Balance 31 December 1.394 1.380 1.116 1.102

22. INVESTMENTS IN SUBSIDIARY COMPANIES

Investments in subsidiary companies represent the cost of acquisition of shares or the cost of incorporation/investment net of any provision for impairment of investment, where applicable, in the following subsidiary companies:

The Bank Country of Number of operation and Ownership shares 2016 2015 Line of Business registration % (thousand) €’000 €’000 Hellenic Bank Investment banking, Cyprus 100 3.750 4.309 4.309 (Investments) Ltd asset management and brokerage

Hellenic Bank Trust and Financing Services Cyprus 100 50 94 94 Finance Corporation Ltd General Insurance Pancyprian General Cyprus 99.96 15.700 32.423 32.423 Insurance Ltd Insurance Hellenic Alico Life Life Insurance Cyprus 72.50 725 1.239 1.239 Insurance Company Ltd Hellenic Insurance Inactive Greece 99.50 600 -- 18 Agensy Ltd Hellenic Insurance Insurance Cyprus 100 50 86 86 Agency Ltd Intermediation D4A2 Ltd Investment holdings Cyprus 100 340 53.470 -- company 91.621 38.169

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22. INVESTMENTS IN SUBSIDIARY COMPANIES (continued)

Hellenic Insurance Agensy Ltd was dissolved on the 1st September 2016.

On 28 November 2016 the Board of Directors of Hellenic Bank (Investments) Ltd decided to discontinue all its business activities, which primarily relate to retail brokerage services. Based on this decision, on the 17th of February 2017 Hellenic Bank (Investments) Ltd business activities were terminated.

At 31 December 2016, D4A2 Ltd was the holding company of 25 wholly owned SPVs established or acquired to hold assets acquired or that will be acquired in satisfaction of debt. 5 out of the 25 SPVs were dormant (31 December 2016) while 2 of those had signed agreements for the acquisition of assets. For details on D4A2 Ltd refer to Note 26.

23. PROPERTY, PLANT AND EQUIPMENT

Land and Plant and Total buildings equipment 2016 2016 2016 The Group €΄000 €΄000 €΄000 Cost or valuation 1 January 87.975 60.832 148.807 Additions 41 6.177 6.218 Transfer to stock of properties held for sale (621) -- (621) Disposals/transfers -- (1.618) (1.618) 31 December 87.395 65.391 152.786 Depreciation 1 January 1.421 48.822 50.243 Charge for the year 1.099 3.429 4.528 Transfer to stock of properties held for sale (16) -- (16) Disposals/transfers -- (1.617) (1.617) 31 December 2.504 50.634 53.138 Net book value 31 December 84.891 14.757 99.648

Land and Plant and Total buildings equipment 2015 2015 2015 The Group €΄000 €΄000 €΄000 Cost or valuation 1 January 87.975 57.351 145.326 Additions -- 4.928 4.928 Disposals/transfers -- (1.447) (1.447) 31 December 87.975 60.832 148.807 Depreciation 1 January 325 47.286 47.611 Charge for the year 1.096 2.851 3.947 Disposals/transfers -- (1.315) (1.315) 31 December 1.421 48.822 50.243 Net book value 31 December 86.554 12.010 98.564

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23. PROPERTY, PLANT AND EQUIPMENT (continued)

Land and Plant and Total buildings equipment 2016 2016 2016 The Bank €΄000 €΄000 €΄000 Cost or valuation 1 January 81.171 58.253 139.424 Additions 41 6.145 6.186 Disposals/transfers -- (1.599) (1.599) 31 December 81.212 62.799 144.011 Depreciation 1 January 1.283 46.415 47.698 Charge for the year 1.042 3.380 4.422 Disposals/transfers -- (1.599) (1.599) 31 December 2.325 48.196 50.521 Net book value 31 December 78.887 14.603 93.490

Land and Plant and Total buildings equipment 2015 2015 2015 The Bank €΄000 €΄000 €΄000 Cost or valuation 1 January 81.171 54.807 135.978 Additions -- 4.880 4.880 Disposals/transfers -- (1.434) (1.434) 31 December 81.171 58.253 139.424 Depreciation 1 January 244 44.927 45.171 Charge for the year 1.039 2.794 3.833 Disposals/transfers -- (1.306) (1.306) 31 December 1.283 46.415 47.698 Net book value 31 December 79.888 11.838 91.726

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23. PROPERTY, PLANT AND EQUIPMENT (continued)

Land and buildings were revalued as at 31 December 2014, by independent qualified valuers on a market value basis for their existing use.

The cost and net book value on a historic cost basis of the freehold land and buildings as at 31 December 2016 amounted to €70.921 thousand (2015: €70.880 thousand) and €63.091 thousand (2015: €63.751 thousand) respectively for the Group, and to €66.964 thousand (2015: €66.923 thousand) and €59.176 thousand (2015: €59.836 thousand) respectively for the Bank.

The cost of branches under renovation included under plant and equipment as at 31 December 2016 amounted to €957 thousand (2015: €1.038 thousand) for the Group and the Bank.

As at 31 December 2016 the value of the revalued freehold land not subject to depreciation amounted to €30.237 thousand (2015: €30.196 thousand) for the Group and €29.107 thousand (2015: €29.067 thousand) for the Bank.

24. INTANGIBLE ASSETS

Computer Goodwill Total software 2016 2016 2016 The Group €΄000 €΄000 €΄000 Cost 1 January 25.967 25.130 51.097 Additions 5.465 101 5.566 Disposals (134) -- (134) 31 December 31.298 25.231 56.529 Amortisation or impairment losses 1 January 18.151 10.306 28.457 Charge for the year 1.548 25 1.573 Impairment -- 106 106 Disposals (133) -- (133) 31 December 19.566 10.437 30.003 Net book value 31 December 11.732 14.794 26.526

On 31 December 2016, the Group assessed whether there is any impairment of goodwill arising on the acquisition of Pancyprian Insurance Ltd, by calculating the estimated fair value of the company, based on the future cash flows discounted to their present value using a pre-tax discount rate that reflects current market estimates of the time value of money and the risks specific to the investments. As a result of this assessment, no impairment of goodwill arose.

During 2016 PVIFs of value of €101 thousand (31 December 2015: € nil) were acquired by Pancyprian Insurance Ltd.

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24. INTANGIBLE ASSETS (continued)

Computer Goodwill Total software 2015 2015 2015 The Group €΄000 €΄000 €΄000 Cost 1 January 22.192 25.130 47.322 Additions 3.777 -- 3.777 Disposals (2) -- (2) 31 December 25.967 25.130 51.097 Amortisation or impairment losses 1 January 17.333 10.306 27.639 Charge for the year 820 -- 820 Disposals (2) -- (2) 31 December 18.151 10.306 28.457 Net book value 31 December 7.816 14.824 22.640

Computer software 2016 The Bank €΄000 Cost 1 January 25.540 Additions 5.404 Disposals (134) 31 December 30.810 Amortisation or impairment losses 1 January 17.757 Charge for the year 1.524 Disposals (134) 31 December 19.147 Net book value 31 December 11.663

Computer software 2015 The Bank €΄000 Cost 1 January 21.775 Additions 3.767 Disposals (2) 31 December 25.540 Amortisation or impairment losses 1 January 16.952 Charge for the year 807 Disposals (2) 31 December 17.757 Net book value 31 December 7.783

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25. DEFERRED TAX ASSET

Deferred taxation arose as follows:

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Property revaluation differences and differences between depreciation and capital allowances 1 1 -- -- Tax losses 8.464 58.093 8.464 58.093 8.465 58.094 8.464 58.093

MOVEMENT OF DEFERRED TAXATION:

The Group

Effect Balance on income Balance 1 January statement 31 December 2016 €’000 €’000 €’000 Property revaluation differences and differences between depreciation and capital allowances 1 -- 1 Tax losses 58.093 (49.629) 8.464 58.094 (49.629) 8.465

The Group

Effect Balance on income Balance 1 January statement 31 December 2015 €’000 €’000 €’000 Property revaluation differences and differences between depreciation and capital allowances 159 (158) 1 Tax losses 52.312 5.781 58.093 52.471 5.623 58.094

The Bank

Effect Balance on income Balance 1 January statement 31 December 2016 €’000 €’000 €’000 Tax losses 58.093 (49.629) 8.464

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25. DEFERRED TAX ASSET (continued)

The Bank Effect Balance on income Balance 1 January statement 31 December 2015 €’000 €’000 €’000 Property revaluation differences and differences between depreciation and capital allowances 158 (158) -- Tax losses 52.312 5.781 58.093 52.470 5.623 58.093

An analysis of accumulated tax losses is presented below:

Tax losses for which Tax losses for which deferred tax was deferred tax was Tax losses derecognised recognised €’000 €’000 €’000 Expiring within the current year 67.721 67.721 -- Expiring within 3 years 370.496 341.496 29.000 Expiring between 4 and 5 years 38.713 -- 38.713 476.930 409.217 67.713

During 2016, a deferred tax asset of €51,2 million was derecognised and charged in the income statement. The derecognition of the deferred tax asset resulted from tax losses for which is no longer probable that the related tax benefit will realise, as the majority of these losses will expire by 31 December 2018. The carrying amount of the deferred tax asset is based on judgements of the Management of the Bank on its ability to generate future taxable profits. These judgements are based on available information including historical data, improved macroeconomic estimates, the reduction in deposit rates, the stabilisation of the non-performing loans, the Bank’s impairment process and the results of operations.

The applicable tax rate is 12,5%.The tax losses relate to the same jurisdiction with the deferred tax asset.

26. OTHER ASSETS

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Prepaid expenses 2.370 2.195 2.364 2.189 Fair value of derivatives (refer to Note 36) 10.926 6.653 10.926 6.653 Assets held to cover liabilities of unit linked funds 14.230 13.372 -- -- Assets held for sale -- -- 40.625 41.414 Stock of properties held for sale 117.695 71.216 24.029 28.200 Debtors and other receivables 34.098 22.238 12.234 3.294 Equity held for sale -- 12.381 -- 12.381 179.319 128.055 90.178 94.131

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26. OTHER ASSETS (continued)

STOCK OF PROPERTIES HELD FOR SALE

The Bank as part of its non-performing exposures management is entering into a number of debt-to-asset swap transactions.

Assets acquired in satisfaction of debt are acquired either directly or indirectly through wholly owned Special Purpose Vehicles (SPVs). For liquidation optimisation the SPVs are owned either directly by the Bank or indirectly through a wholly owned holding company (D4A2 Ltd). For properties held through SPVs and for which the titles have not yet been issued, the ownership is ensured via filing of the Sales/Purchases agreement with the Land Registry.

The stock of properties include residential, offices and other commercial properties, industrial buildings and land (fields and plots).

During 2015 the Bank set up and has a 100% shareholding in Anolia Holdings Ltd whose main activity is the ownership and management of immovable property and is classified under assets held for sale. The fair value of the investment as at 31 December 2016 amounted to €40.625 thousand (31 December 2015: €41.414 thousand).

As at 31 December 2016, the Group’s Stock of properties held for sale amounted to €117.695 thousand (31 December 2015: €71.216 thousand), of which €116.270 thousand (31 December 2015: €70.483 thousand) relate to assets acquired in satisfaction of debt and the remaining €1.425 thousand (31 December 2015: €733 thousand) relate to assets not in use.

The Group’s movement of assets from customers’ debt settlement held for sale is presented as follows:

Banking & Financial Insurance Services Services Total €’000 €’000 €’000 1 January 2016 69.655 828 70.483 Additions 51.510 -- 51.510 Disposals (4.698) -- (4.698) Impairment losses (990) (35) (1.025) 31 December 2016 115.477 793 116.270

Banking & Financial Insurance Services Services Total €’000 €’000 €’000 1 January 2015 7.257 908 8.165 Additions 62.910 -- 62.910 Disposals (256) -- (256) Impairment losses (256) (80) (336) 31 December 2015 69.655 828 70.483

During 2016, the stock of property held for sale and assets held for sale were revalued by independent professional valuers based on open market value for their existing use. The fair value of these assets for the Group amounted to €141.350 thousand (2015: €71.186 thousand) and for the Bank €139.692 thousand (2015: €69.958 thousand).

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26. OTHER ASSETS (continued)

EQUITY HELD FOR SALE

During 2015 equity held for sale related to the shares owned by the Bank in Visa Europe Limited and were disposed during 2016 (refer to Note 8).

Assets held to cover liabilities of unit linked funds comprise of:

The Group 2016 2015 €’000 €’000 Deposits 3.456 2.782 Government bonds 434 330 Equity securities 10.340 10.260 14.230 13.372

27. DEPOSITS BY BANKS

The Group and the Bank 2016 2015 €’000 €’000 Interbank accounts 55.132 37.036 Cheque clearing 19.149 15.610 Money Market deposits 26.371 24.292 100.652 76.938

Analysis of deposits by banks is based on their remaining contractual maturity as at 31 December.

The Group and the Bank 2016 2015 €’000 €’000 On demand 74.309 52.629 Within three months 16.821 17.166 Between three months and one year 9.522 7.143 100.652 76.938

On 31 December 2016, an amount of €12.794 thousand (2015: €2.271 thousand) is pledged as collateral on deposits by banks, being common practice among financial institutions.

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28. AMOUNTS DUE TO CENTRAL BANKS

The Group and the Bank 2016 2015 €’000 €’000 Between one and five years -- 236.373

On 5th of June 2014, in pursuing its price stability mandate, the Governing Council of the European Central Bank (ECB) decided to introduce measures to enhance the functioning of the monetary policy transmission mechanism by supporting lending to the real economy. One particular measure announced by the ECB in relation to achieving this objective, was the decision of ECB to conduct a series of targeted longer-term refinancing operations (TLTROs) over a period of two years. In implementing this plan, the Governing Council aimed to support bank lending to the non-financial private sector, meaning households and non-financial corporations, in the Eurozone member states. This measure did not propose to deal with lending to households for the purposes of house purchases. Under the scheme, banks were entitled to an initial borrowing allowance equal to 7% of a specific part of their loans in two parts, in September and December 2014. The Bank participated in the TLTRO program in December 2014 by borrowing €236 million at an interest rate of 0,15% for 4 years. On 29th of June 2016, the Bank proceeded with the full early repayment of the TLTRO borrowing.

29. CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS

The Group and the Bank 2016 2015 €’000 €’000 Demand deposits 3.043.347 3.012.242 Savings deposits 613.996 574.385 Notice deposits 210.532 154.170 Time deposits 2.243.213 2.397.908 6.111.088 6.138.705

Analysis of customer deposits and other customer accounts is based on their remaining contractual maturity as at 31 December.

The Group and the Bank 2016 2015 €’000 €’000 On demand 3.687.876 3.737.609 Within three months 1.132.639 1.095.319 Between three months and one year 1.183.822 1.184.733 Between one year and five years 106.751 121.044 6.111.088 6.138.705

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30. DEFERRED TAX LIABILITY

Deferred taxation arose as follows:

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Property revaluation differences and differences between depreciation and capital allowances 1.975 1.467 1.792 1.329 Other temporary differences 5 5 8 8 1.980 1.472 1.800 1.337

MOVEMENT OF DEFERRED TAXATION:

The Group

Effect on Effect Balance revaluation on income Balance 1 January reserve statement 31 December 2016 €’000 €’000 €’000 €’000 Property revaluation differences and differences between depreciation and capital allowances 1.467 12 496 1.975 Other temporary differences 5 -- -- 5 1.472 12 496 1.980

The Group

Effect on Effect Balance revaluation on income Balance 1 January reserve statement 31 December 2015 €’000 €’000 €’000 €’000 Property revaluation differences and differences between depreciation and capital allowances 1.340 41 86 1.467 Other temporary differences 5 -- -- 5 1.345 41 86 1.472

The Bank

Effect on Effect Balance revaluation on income Balance 1 January reserve statement 31 December 2016 €’000 €’000 €’000 €’000 Property revaluation differences and differences between depreciation and capital allowances 1.329 9 454 1.792 Other temporary differences 8 -- -- 8 1.337 9 454 1.800

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30. DEFERRED TAX LIABILITY (continued)

The Bank

Effect on Effect Balance revaluation on income Balance 1 January reserve statement 31 December 2015 €’000 €’000 €’000 €’000 Property revaluation differences and differences between depreciation and capital allowances 1.099 38 192 1.329 Other temporary differences 8 -- -- 8 1.107 38 192 1.337

31. OTHER LIABILITIES

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Fair value of derivatives (refer to Note 36) 4.227 7.362 4.227 7.362 Accrued expenses 15.089 15.457 15.021 15.095 Liabilities of unit linked funds 14.230 13.372 -- -- Provisions to cover credit risk resulting from commitments and guarantees 14.823 21.814 14.823 21.814 Provisions for pending litigations or complaints and/or claims 8.019 8.008 8.019 8.008 Other accounts payable 55.536 48.294 16.663 10.277 111.924 114.307 58.753 62.556

Accumulated Provisions to cover credit risk resulting from commitments and guarantees:

The Group and the Bank 2016 2015 €’000 €’000 1 January 21.814 22.463 Charge for the year (7.002) (649) Exchange difference 11 -- 31 December 14.823 21.814

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31. OTHER LIABILITIES (continued)

Provisions for pending litigations or complaints and/or claims:

The Group and the Bank 2016 2015 €’000 €’000 1 January 8.008 2.151 Provision utilised (138) -- Charge for the year 149 5.857 31 December 8.019 8.008

The amounts recognised as provisions are the best estimates of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the facts and circumstances of any pending litigations or complaints and/or claims. Any provision recognised does not constitute an admission of wrongdoing or legal liability.

32. LOAN CAPITAL

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Tier 1 Capital Convertible Capital Securities 1 1.597 1.597 1.597 1.597 Convertible Capital Securities 2 128.070 128.070 128.070 128.070 129.667 129.667 129.667 129.667

Tier 2 Capital Non-Convertible Bonds 2016 -- 41.801 -- 41.801 Non-Convertible Bonds 2018 10.000 10.000 10.000 10.000 10.000 51.801 10.000 51.801

139.667 181.468 139.667 181.468

Full details/terms of issue of the Bonds and Securities of the Bank are included in the Prospectus and the Supplementary Prospectuses of each issue.

Tier 1 Capital

CONVERTIBLE CAPITAL SECURITIES 1 (“CCS1”)

The Convertible Capital Securities 1 are perpetual securities with no maturity date. Under the terms of their issue, they bear an annual fixed interest rate of 11% which is payable on a quarterly basis at the end of each Interest Payment period. Interest payment dates are set to be the 31st of March, 30th of June, 30th of September and 31st of December.

The Bank may, at its sole discretion, partially or fully cancel the interest payment on non-cumulative basis at any time considered necessary or desirable and for any reason, for an unlimited time period and without any restriction to the Bank.

The interest payment will be paid by the Available Distributable Items of the Bank.

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32. LOAN CAPITAL (continued)

Without this affecting the right of the Bank on cancelling the interest payment at its sole discretion, as mentioned above, the mandatory cancellation of the interest payment will apply in cases where:

(i) the Bank does not possess the necessary Available Distributable Items for such an interest payment on CCS1, or (ii) the Bank or the Group is in breach of applicable laws, regulations, requirements, guidelines and policies regarding the Bank’s or the Group’s capital requirements, or (iii) there is a requirement by the Central Bank of Cyprus at its sole discretion, as the competent authority, to cancel all or part of an interest payment.

Interest cancellation will not constitute an event of default, will not impose any restrictions on the Bank and will not grant the right to CCS1 holders to apply for the liquidation or resolution of the Bank. The Bank may use any cancelled interest payment without restrictions in order to meet its obligations, as they fall due.

The CCS1 are unsecured and subordinated obligations of the Bank and are classified as Tier 1 capital securities in accordance with the Directive of Capital Requirements and Large Exposures (as amended, revised or replaced) and any relevant European Union Directives and Regulations as applied in Cyprus or any other requirements that may apply.

The rights and claims of CCS1 holders:

(i) are subordinated to the claims of the Bank’s creditors, which are: • depositors or other creditors whose claims are not subordinated to claims of the depositors,

• creditors whose claims are subordinated, except those whose claims rank pari passu with the claims of CCS1 holders,

• Bank bondholders that are classified as Capital Tier 2 (Tier 2), whose claims are subordinated,

• holders of securities that are issued or guaranteed by the Bank and ranked in higher priority than the CCS1.

(ii) Rank pari passu with the claims of other existing issues of the Bank (Capital Securities 2003 and NCPCS) and any other future bond and other securities issues of the Bank that are classified as Tier 1, excluding ordinary shares.

(iii) They have priority only in respect of the Bank’s ordinary shareholders.

Under the provisions of the Prospectus dated 30 September 2013 the Bank may, at its sole discretion, redeem, following a notification of CCS1 holders and the Trustee, at par including accrued interest, excluding any cancelled interest, the total or part of the CCS1, on 31 October 2018 or on any interest payment date after that date, provided that the financial position and/or the solvency of the Bank and/or the Group are not adversely affected by such a redemption and after approval by the Central Bank of Cyprus or other competent supervisory authority. In case of redemption of part of the CCS1, the redemption will apply for all holders of CCS1 in proportion to the CCS1 they hold.

The CCS1 are also redeemable at the sole discretion of the Bank, at or after their issuance (after approval of the Central Bank of Cyprus or other competent authority and given that events or conditions referred to in (i) or/and (ii) below, as applicable, could not reasonably be anticipated by the Bank at the time of the issue of CCS1 and deemed by the Central Bank of Cyprus that such changes in (i) below are considered almost certain), in whole and not part of, at par including accrued interest not cancelled:

(i) when as a result of any change or proposed change in Laws or Regulations of the Republic of Cyprus, the relevant Directives, Regulations or Laws in relation to the Credit Institutions or change or proposed change in the application or official interpretation, the CCS1 cease to be considered:

(a) Tier 1 Capital and/or

(b) appropriate funds for inclusion in the calculation of capital requirements as defined by Troika (as long as the Hellenic Bank or the Group is required to maintain Common Equity Tier 1 ratio equal to or greater than 9%).

(ii) if the Bank shall not be entitled to claim any deduction in the calculation of tax liabilities in Cyprus with respect to any interest payment on the next interest payment date or if the amount of any deduction for the Bank would be greatly reduced.

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32. LOAN CAPITAL (continued)

All CCS1 redeemed by the Bank will be cancelled and will not be reissued or resold. The Bank shall cease to have any obligations in regards to any CCS1 that may be cancelled.

On 9 December 2013, in accordance with the above provisions, and at its sole discretion, the Bank announced the mandatory cancellation of the interest payment as a result of the inexistence of the required Available Distributable Items for such interest payment. The mandatory cancellation of interest payment will be valid unless the Bank informs the holders of the CCS1 otherwise.

Any redemption of CCS1 will be subject to prior approval from the Central Bank of Cyprus, as the supervisory authority and/ or any other competent authority.

The CCS1 will mandatorily and irrevocably be converted into ordinary shares, if any of the following occur:

(a) The Common Equity Tier 1 ratio of the Bank or the Group after 31st October 2013 or if this date is amended by the Central Bank of Cyprus, after this new date, has decreased, or remains below 9% (as long as Hellenic Bank or the Group is required, by the Central Bank of Cyprus, to maintain its Common Equity Tier 1 ratio equal to or greater than 9%).

(b) The Common Equity Tier 1 ratio of the Bank or the Group at any time decreases or remains below the applicable percentage required, by the Central Bank of Cyprus, to be maintained by the Bank or the Group with maximum ratio of Common Equity Tier 1 of 9%.

(c) The Common Equity Tier 1 ratio of the Bank or the Group is decreased below 5,125%.

(d) If any Non-Viability Event occurs for the Bank or the Bank may be subject to state aid measures.

The conversion amount will be, as applicable, (i) the amount required to restore the Common Equity Tier 1 ratio of the Bank and/or the Group to 5,125% and/or to 9% (for the latter, as long as Hellenic Bank or the Group is required to maintain the Common Equity Tier 1 ratio equal to or greater than 9%) and/or the applicable ratio that is required, at any time, from the Central Bank of Cyprus with maximum ratio of Common Equity Tier 1 Capital of 9% or (ii) the amount required so that Hellenic Bank is considered viable by the Central Bank of Cyprus, in each case up to the entire nominal amount of CCS1. Any conversion will apply pro rata to the outstanding balance of CCS1.

In accordance with the provisions of the Prospectus dated 30 September 2013:

The CCS1 will be converted into new fully paid ordinary shares of Hellenic Bank at the “Mandatory Conversion Price”, which will be equal to the higher of:

(i) the Mandatory Reported Market Price, i.e. the average closing price of the last five days of trading of the shares of the Bank on the CSE prior to conversion with 20% discount,

(ii) the minimum conversion price of €0,10 and,

(iii) the nominal value of the Bank’s ordinary shares.

The CCS1 holders may voluntarily convert them into fully paid ordinary shares of the Bank, at predetermined periods each year at the “Voluntary Conversion Price”, which will be equal to the higher of:

(i) the Voluntary Reported Market Price, i.e. the average closing price of the last five days of trading of the shares of the Bank on the CSE prior to conversion with 20% discount,

(ii) the minimum conversion price of €0,15 and,

(iii) the nominal value of the Bank’s ordinary shares.

On 28th of February 2014, under the provisions of the Prospectus dated 30 September 2013, within the implementation framework of the issue terms of CCS1 and as a result of the formation of the Common Equity Tier 1 ratio of the Group and the Bank being below the minimum required supervisory ratio of 9%, CCS1 of a total value of €85.873.871 were mandatorily and irrevocably converted, without any obligation to obtain the consent of the CCS1 holders, to shares so that the lower of the two, Common Equity Tier 1 Ratio of the Group and the Bank is increased to 9%.

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32. LOAN CAPITAL (continued)

Furthermore, on 29 August 2014 and on 26 October 2014 and as a result of the Common Equity Tier 1 Ratio of the Group and the Bank being below the minimum required supervisory ratio of 8%, as set by the Central Bank’s circular dated 29 May 2014, CCS1 of total value of €15.106.520 and €23.804.161 respectively, were mandatorily and irrevocably converted to shares so that, the lower of the two, Common Equity Tier 1 Ratio of the Bank and the Group is increased to 8%.

The mandatory conversion was applied pro rata to the outstanding balance of CCS1 for each investor on the conversion date and the applicable mandatory Conversion Price of CCS1 to shares was set at €0,10. All CCS1 that have been converted into shares were automatically cancelled and any right or obligation derived from the Prospectus ceased to be valid.

The CCS1 are listed on the Cyprus Stock Exchange.

CONVERTIBLE CAPITAL SECURITIES 2 (“CCS2”)

The Convertible Capital Securities 2 are perpetual securities with no maturity date. Under the terms of their issue, they bear an annual fixed interest rate of 10% which is payable on a quarterly basis at the end of each Interest Payment period. Interest payment dates are set to be the 31st of March, 30th of June, 30th of September and 31st of December.

The Bank may, at its sole discretion, partially or fully cancel the interest payment on non-cumulative basis at any time considered necessary or desirable and for any reason, for an indefinite time period and without any restriction to the Bank.

The interest payment will be paid by the Available Distributable Items of the Bank.

Without this affecting the right of the Bank on cancelling the interest payment at its sole discretion, as mentioned above, the mandatory cancellation of the interest payment will apply in cases where:

(i) the Bank does not possess the necessary Available Distributable Items for such an interest payment on CCS2, or (ii) the Bank or the Group is in breach of applicable laws, regulations, requirements, guidelines and policies regarding the Bank’s or the Group’s capital requirements, or (iii) there is a requirement by the Central Bank of Cyprus at its sole discretion, as the competent authority, to cancel all or part of an interest payment.

Interest cancellation will not constitute an event of default, will not impose any restrictions on the Bank and will not grant the right to CCS2 holders to apply for the liquidation or resolution of the Bank. The Bank may use any cancelled interest payment without restrictions in order to meet its obligations, as they fall due.

CCS2 were offered (the “CCS2 Voluntary Exchange Offer”) to the holders of the following securities: • Bonds due 2016 (ISIN CY0140040110), issued under the issuance terms of the Prospectus dated 11 May 2006, • Bonds due 2018 issued on 1 September 2008, • Bonds due 2019 (ISIN CY0140940111) issued on 11 March 2009 under the issuance terms included in the Prospectus dated 18 May 2009 and, • Capital securities (ISIN CY0048940114) issued on 18 April 2003 under the issuance terms of the Prospectus dated 7 November 2003.

The CCS2 are unsecured and subordinated obligations of the Bank and are classified as Tier I capital securities in accordance with the Directive of Capital Requirements and Large Exposures (as amended, revised or replaced) and any relevant European Union Directives and Regulations as applied in Cyprus or any other requirements that may apply.

The rights and claims of CCS2 holders:

(i) are subordinated to the claims of the Bank’s creditors, which are:

• depositors or other creditors whose claims are not subordinated to claims of the depositors,

• creditors whose claims are subordinated, except those whose claims rank pari passu with the claims of CCS2 holders,

• Bank bondholders that are classified as Capital Tier 2 (Tier 2), whose claims are subordinated,

• Holders of securities that are issued or guaranteed by the Bank and their rank is higher of the rank of CCS2.

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32. LOAN CAPITAL (continued)

(ii) Rank pari passu with the claims of other existing issues of the Bank (Capital Securities 2003 and NCPCS) and any other future bond and other securities issues of the Bank that are classified as Tier 1, with the exception of the ordinary shares.

(iii) They have priority only in respect of the Bank’s ordinary shareholders.

Under the provisions of the Prospectus dated 30 September 2013 the Bank may, at its sole discretion, redeem, following a notification of CCS2 holders and the Trustee, at par including accrued interest, excluding any cancelled interest, the total or part of the CCS2, on 31 October 2018 or on any interest payment date after that date, provided that the financial position and/or the solvency of the Bank and/or the Group are not adversely affected by such a redemption and after approval by the Central Bank of Cyprus or other competent supervisory authority. In case of redemption of part of the CCS2, the redemption will apply for all holders of CCS2 in proportion to the CCS2 they hold.

The CCS2 are also redeemable at the sole discretion of the Bank, at or after their issuance (after approval of the Central Bank of Cyprus or other competent authority and given that events or conditions referred to in (i) or/and (ii) below, as applicable, could not reasonably be anticipated by the Bank at the time of the issue of CCS2 and deemed by the Central Bank of Cyprus that such changes in (i) below are considered almost certain), in whole and not part of, at par including accrued interest not cancelled:

(i) when as a result of any change or proposed change in Laws or Regulations of the Republic of Cyprus, the relevant Directives, Regulations or Laws in relation to the Credit Institutions or change or proposed change in the application or official interpretation, the CCS2 cease to be considered:

(a) Tier 1 capital and/or

(b) appropriate funds for inclusion in the calculation of capital requirements as defined by Troika (as long as the Hellenic Bank or the Group is required to maintain Common Equity Tier 1 ratio equal to or greater than 9%).

(ii) if the Bank shall not be entitled to claim any deduction in the calculation of tax liabilities in Cyprus with respect to any interest payment on the next interest payment date or the amount of any deduction for the Bank would be significantly reduced.

All CCS2 redeemed by the Bank will be cancelled and will not be reissued or resold. The Bank shall cease to have any obligations in regards to any CCS2 that may be cancelled.

On 9 December 2013, in accordance with the above provisions, and at its sole discretion, the Bank announced mandatory the cancellation of the interest payment as a result of inexistence of the required Available Distributable Items for such interest payment. The mandatory cancellation of interest payment will be valid unless the Bank warns the holders of the CCS2 otherwise.

Any redemption of CCS2 will be subject to prior approval from the Central Bank of Cyprus, as supervisory authority or/and any other competent authority.

The CCS2 will mandatorily and irrevocably be converted into ordinary shares, if any of the following occur:

(a) The Common Equity Tier 1 ratio of the Bank or the Group after 31 October 2013 or if this date is amended by the Central Bank of Cyprus, after this new date, has decreased, or remains below 9% (as long as Hellenic Bank or the Group is required, by the Central Bank of Cyprus, to maintain its Common Equity Tier 1 ratio equal to or greater than 9%).

(b) the Common Equity Tier 1 ratio of the Bank or the Group at any time decreases or remains below the applicable percentage required, by the Central Bank of Cyprus, to be maintained by the Bank or the Group with maximum ratio of Common Equity Tier 1 of 9%.

(c) The Common Equity Tier 1 ratio of the Bank or the Group is decreased below 5,125%.

(d) If any Non-Viability Event occurs for the Bank or the Group may be subject to State Aid measures.

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32. LOAN CAPITAL (continued)

The conversion amount will be, as applicable, (i) the amount required to restore the Common Equity Tier 1 ratio of the Bank and/or the Group to 5,125% and/or to 9% (for the latter, as long as Hellenic Bank or the Group is required to maintain the Common Equity Tier 1 ratio equal to or greater than 9%) and/or the applicable ratio that is required, at any time, from the Central Bank of Cyprus with maximum ratio of Common Equity Tier 1 Capital of 9% or (ii) the amount required so that Hellenic Bank is considered viable by the Central Bank of Cyprus, in each case up to the entire nominal amount of CCS2. Any conversion will apply pro rata to the outstanding balance of CCS2.

In accordance with the provisions of the Prospectus dated 30 September 2013:

The CCS2 will be converted into new fully paid ordinary shares of Hellenic Bank at the “Mandatory Conversion Price”, which will be equal to the higher of:

(i) the Mandatory Reported Market Price, i.e. the average closing price of the last five days of trading of the shares of the Bank on the CSE prior to conversion with 20% discount,

(ii) the minimum conversion price of €0,05 and,

(iii) the nominal value of the Bank’s ordinary shares.

The CCS2 holders may voluntarily convert them into fully paid ordinary shares of the Bank, at predetermined periods each year at the “Voluntary Conversion Price”, which will be equal to the higher of:

(i) the Voluntary Reported Market Price, i.e. the average closing price of the last five days of trading of the shares of the Bank on the CSE prior to conversion with 20% discount,

(ii) the minimum conversion price of €0,15 and,

(iii) the nominal value of the Bank’s ordinary shares.

The CCS2 are listed on the Cyprus Stock Exchange.

Further to the announcement of Hellenic Bank Public Company Ltd dated 31 October 2014, concerning the decision of the Board of Directors of the Bank for the issue of shares via rights issue and based on the provisions of the Prospectus dated 30 September 2013 (“the Prospectus”) part IV/B/III paragraph 10 C1 and part IV/C/III paragraph 11 C1, the minimum price of mandatory conversion of the CCS1 was adjusted from €0,10 to €0,08, the minimum price of voluntary conversion of the CCS1 was adjusted from €0,15 to €0,13 as well as the minimum price of mandatory conversion of the CCS2 was adjusted from €0,05 to €0,04 and the minimum price of voluntary conversion of the CCS2 was adjusted from €0,15 to €0,13.

These adjustments became effective from 18 November 2014, the date of the first CSE session that the shares of Hellenic Bank traded ex-rights.

Following the approval of the relevant Special Resolution by the Extraordinary General Meeting which was held on the 27th of February 2015, the issued share capital of the Bank, has been consolidated and divided and based on the provisions of the Prospectus dated 30 September 2013, Part ΙV/Β/ΙΙΙ paragraph C1 (i) and Part ΙV/C/ΙΙΙ paragraph C1 (i), the following adjustments took place which were effective from the 27th of February 2015:

Minimum Price of Mandatory Conversion: • For CCS1 the price was adjusted from €0,08 to €4,00 • For CCS2 the price was adjusted from €0,04 to €2,00 Minimum Price of Voluntary Conversion: • For CCS1 the price was adjusted from €0,13 to €6,50 • For CCS2 the price was adjusted from €0,13 to €6,50

As long as the Bank continues to be required to maintain CET1 ratio equal to or greater than 9% pursuant to the provisions of the Prospectus dated 30 September 2013 for the issue of CCS1 and CCS2, each of the CCS1 and CCS2 will be mandatorily converted into ordinary shares of the Bank, if the CET1 ratio of the Bank, on a consolidated basis, decreases or remains below 9% and/or in the event of any other occurrences specified as contingent conversion triggers for mandatory conversion in the Prospectus.

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32. LOAN CAPITAL (continued)

Pursuant to the terms of the Prospectus, CCS1/CCS2 holders may exercise the right to convert the CCS1/CCS2 into ordinary shares, during the periods between 15-31 January and 15-31 July of each year (“the Conversion Period”) with the first Conversion Period commencing on 15 January 2016 and the last Conversion Period commencing on 15 July 2023. If a CCS1/ CCS2 holder exercises his Right to convert, any interest accrued ceases to be calculated and becomes due until the end of the conversion period during which the holder has exercised voluntary conversion, according to the provisions of Paragraph 10.B.(d) of Part IV/B/III of the Prospectus.

The first Conversion Period for CCS1/CCS2 commenced on 15 January 2016 and ended on 29 January 2016, the second Conversion Period for 2016 for CCS1/CCS2 commenced on 15 July 2016 and ended on 29 July 2016 and the third Conversion Period for CCS1/CCS2 commenced on 16 January 2017 and ended on 31 January 2017. During the three conversion periods the Bank did not receive a Voluntary Conversion Application from any CCS1 /CCS2 holder.

Tier 2 Capital

For the purposes of the calculation of the capital base, the following bonds were considered as Tier 2 Capital.

NON-CONVERTIBLE BONDS 2016

The Bonds 2016 were issued in three different series and matured on the 1st of July 2016, irrespective of the date of issue. Under the terms of issue, (Prospectus dated 11 May 2006, Supplementary Prospectus dated 7 June 2006, Second Supplementary Prospectus dated 1 November 2006, Third Supplementary Prospectus dated 12 December 2006 and Fourth Supplementary Prospectus dated 5 April 2007), the Bank had the right to redeem the Bonds 2016 on any interest payment date after the 1st of July 2011. The Bonds which resulted from all issues were listed on the Cyprus Stock Exchange.

Bonds 2016 were not secured and in the event of the Bank’s liquidation their repayment would have followed in priority the claims of depositors and other creditors. They had, however, priority over shareholders and Capital Securities holders.

Bonds 2016 bore interest at a floating rate reviewed at the beginning of each interest payment period and applicable to that specific period. According to the Bonds’ terms of issue, if the Bonds were not redeemed by the Bank, the current interest rate was the 3-month Euribor plus 0,80% until the 1st of July 2011 and the 3-month Euribor plus 1,50% after the 1st of July 2011. Interest was payable quarterly in cash at the end of each interest period.

Pursuant to the Prospectus, dated 30 September 2013 among others, CCS2 of total value of €20.881.785 were issued to exchange the Non-Convertible Bonds 2016 (ISIN CY0140040110)(HBDF), to the holders who had accepted the CCS2 Voluntary Exchange Offer.

On the 2nd of November 2013, all Non-Convertible Bonds 2016 that were converted into CCS2 were automatically cancelled and the Bank ceased to have any obligations in respect of them.

In implementing the provisions of the Prospectus dated 11 May 2006, the Bank proceeded on the 1st of July 2016 with the full redemption of Bonds 2016. Following the redemption of the Bonds, any obligations the Bank may otherwise had in relation to all or any of the Bonds and the holders thereof ceased to apply. The interest on the Bonds for the period from the 1st April 2016 to 30 June 2016 with a rate of 1,257% was paid on 1st July 2016. Individuals entitled to receive the interest payment were all registered holders of the Bonds as at 23rd of June 2016 (record date). Bonds last cum-interest trading date was the 21st of June 2016.

NON-CONVERTIBLE BONDS 2018

On the 1st of September 2008, the Bank proceeded with the issue of the Bonds 2018 amounting to €10.000.000. The Bonds mature on 31 August 2018.

Interest on Bonds 2018 is payable in cash every three months, at the end of each interest period. Bonds 2018 bear interest at a floating rate equal to the 3-month Euribor rate applicable at the beginning of each interest period, plus 1,75%. Under the terms of issuance of the bond if the bonds are not redeemed by the Bank after the 1st of September 2013, they would bear an additional interest of 1%. Consequently the interest rate applicable subsequent to the 1st of September 2013 is equal to the 3-month Euribor plus 2,75%.

Bonds 2018 are not secured and in the event of the Bank’s liquidation their repayment follows in priority the claims of depositors and other creditors. They have, however, priority over shareholders and Capital Securities holders. Bonds 2018 are not listed on the Cyprus Stock Exchange.

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33. SHARE CAPITAL

The Group and the Bank 31 December Number 31 December Number 2016 of shares 2015 of shares €’000 (thousand) €’000 (thousand) Authorised 1.032 million shares €0,50 each 516.000 1.032.000 516.000 1.032.000

31 December Number 31 December Number 2016 of shares 2015 of shares €’000 (thousand) €’000 (thousand) Issued Fully paid shares 1 January 99.217 198.435 93.010 9.300.974 Allotment of unexercised 2014 rights -- -- 874 87.422 Reverse split ------(9.200.628) Issue of shares to EBRD -- -- 5.333 10.667 Issue of shares to CEO as part of his variable remu- neration package 20 40 -- -- Total issued share capital 99.237 198.475 99.217 198.435

AUTHORISED SHARE CAPITAL

At the Extraordinary General Meeting of the shareholders of the Bank which was held on 27th of February 2015, amongst others, it was discussed and approved the consolidation and division (reverse split) of the share capital with a ratio of 50:1, the proposal for the issue of shares to the Chief Executive Officer of the Bank as part of his variable remuneration package and a proposal authorising the Board of Directors to issue and allot up to 18.776.000 ordinary shares (post the effect of consolidation and the reverse split) in order to take advantage of any capital raising opportunities that may arise within a period of 12 months. The issue price of such shares shall not be less than €1,875. It was also decided that the fractions of ordinary shares, arose on reverse split to be aggregated and sold in the market. The net proceeds from the sale, which amounted to €19.433, were distributed to Cyprus Red Cross.

ISSUED SHARE CAPITAL

On the 26th of October 2014, the European Central Bank (ECB) and the European Banking Authority (EBA) published the results of the Asset Quality Review (AQR) and the Stress Tests (together the “Comprehensive Assessment”) for 130 banks across the Eurozone, including Hellenic Bank (the “Bank” or the “Group”). The results of the “Baseline Scenario” of the stress test confirmed the business model of Hellenic Bank while the “Adverse Scenario” calculated the capital that the Bank should raise to be able to handle unexpected future losses. The capital actions of the Bank reduced the initial gap of €277 million, based on the “Adverse Scenario”, to €105 million.

As a result of the above, the Board of Directors of the Bank decided at a meeting held on the 31st of October 2014 to increase the share capital of the Bank by €210 million via a Rights Issue to the existing shareholders of the Bank after securing the necessary approvals by the competent authorities.

According to the provisions of the Prospectus issued on the 14th of November 2014, the Rights were issued and allotted to all existing shareholders at the ratio of one (1) Right to every one (1) Ordinary Share held on the Record Date. Every two (2) Rights exercised were converted to three (3) new Ordinary Shares of the Bank of nominal value €0,01 with an Exercise Price of €0,0375 for every New Share. The Holders of Subscription Rights who exercised all of their Subscription Rights in time could, concurrently with the exercise of their Subscription Rights, exercise their Presubscription Right to acquire any New Unsubscribed Shares, i.e. shares that correspond to the unexercised Subscription Rights, at a price equal to the Exercise Price, i.e. €0,0375 per New Share, provided that the exercise of such Holder’s Subscription Rights and Presubscription Right did not result in such investor holding equal or in excess of 30% of the issued share capital of the Bank after giving effect to the issue of shares pursuant to the Subscription Rights and Presubscription Right.

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33. SHARE CAPITAL (continued)

New Shares issued pursuant to a Presubscription Right were allocated on a pro rata basis, to those holders that exercise them, up to 100% of the number of New Shares corresponding to the Subscription Rights exercised by such Holder. If the Presubscription Right is in excess of the aforementioned limit of 100%, then satisfying the excess percentage over 100% will be at the discretion of the Board.

A total of 5.364.374.709 ordinary shares resulted during 2014 from the exercise of Rights according to the provisions of the Prospectus dated 14 November 2014.

In addition, on the 28th of January 2015, 87.421.980 ordinary shares were issued from the exercise of unallocated 2014 Rights.

On 28th of January 2015, the Bank announced that it has successfully concluded the share capital increase that commenced in November 2014, raising €204 million and covering by 92% of the target set in an adverse and challenging economic environment. Specifically, as mentioned above, €201 million raised in phase 1 of the capital increase (through the Subscription and Presubscription phase), and €3 million raised through the shares allotment that correspond to the unexercised Rights, not allotted through the Presubscription phase.

The Extraordinary General Meeting decided on the 27th of February 2015 the reverse split of the share capital with a ratio of 50:1 and as result the number of shares in issue were decreased by 9.200.628 thousand.

On 30th of September 2015 the Bank and the European Bank for Reconstruction and Development (EBRD) signed an agreement of participation in the share capital of the Bank.

Following the signing of the agreement, on the 12th of October 2015, 10.666.666 new ordinary shares of nominal value €0,50 per each share were issued and allotted to EBRD at an issue price of €1,875 per share. As a result, EBRD acquired a 5,38% shareholding in the Bank’s share capital.

All shares resulted from the mandatory conversion, the exercise of Rights and the issue of shares have been listed and are traded on the Cyprus Stock Exchange.

On the 24th of November 2016 the Bank announced the listing of 40.128 new ordinary shares which were issued to the Chief Executive Officer as part of his variable remuneration. Detailed announcement is available on the Bank’s official site www.hellenicbank.com.

At 31 December 2016, 198.474.712 fully paid shares were in issue, with a nominal value of €0,50 each (2015: 198.434.584 shares with a nominal value €0,50 each).

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34. REVALUATION RESERVES

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Property revaluation reserve 1 January 29.740 30.098 26.775 27.105 Deferred taxation on property revaluation (12) (41) (9) (38) Transfer to revenue reserve due to excess depreciation (317) (317) (292) (292) Transfer to revenue reserve due to disposal of immovable property (11) -- (11) -- 29.400 29.740 26.463 26.775

Revaluation reserve of available for sale securities 1 January 20.753 6.463 20.842 6.494 Revaluation of equity securities available for sale (1.471) 14.478 (1.477) 14.500 Revaluation of debt securities available for sale 1.941 1.619 1.888 1.655 Amortisation of revaluation of reclassified debt securities available for sale (733) (1.492) (733) (1.492) Transfer to the income statement on disposal of investments in equity available for sale (12.381) -- (12.381) -- Impairment losses of investments in equity securities transferred to the income statement -- (315) -- (315) 8.109 20.753 8.139 20.842 Total revaluation reserves 31 December 37.509 50.493 34.602 47.617

The revaluation reserve of available for sale securities as at 31 December 2016 consists entirely of revaluation to fair value gains.

35. CONTINGENT LIABILITIES AND COMMITMENTS

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Contingent liabilities Acceptances and endorsements 272 367 272 367 Guarantees 248.039 217.831 248.063 217.831 248.311 218.198 248.335 218.198 Commitments Undrawn formal standby facilities 491.123 458.293 495.684 463.477 Undisbursed loan amounts 106.656 103.451 106.656 103.451 Other commitments 8.797 10.105 8.797 10.105 606.576 571.849 611.137 577.033

854.887 790.047 859.472 795.231

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35. CONTINGENT LIABILITIES AND COMMITMENTS (continued)

Capital Commitments

At 31 December 2016, the Group’s and the Bank’s commitments for capital expenditure, not recognised in the statement of financial position, amounted to €6.349 thousand (December 2015: €1.749 thousand).

Contingent liabilities for pending litigations or complaints and/or claims

The Group is engaged in various legal proceedings and regulatory matters arising out of its normal business operations, where an obligation is created for which an outflow of resources embodying economic benefits is possible. The existence of these obligations will be confirmed only by the occurrence, or non-occurrence, of one or more uncertain future events not wholly within the control of the Group.

Hence the effect of the outcome of these matters cannot be predicted with certainty but may impact the Group’s financial results. The Group is of the opinion that there are adequate defences in place for a successful outcome, in the course of the relevant proceedings. It is not practicable to provide an aggregate estimate of potential liability for such legal proceedings to be disclosed as a class of contingent liabilities.

36. DERIVATIVES

The Group uses the following derivative instruments:

Foreign currency forwards: represent agreements for the purchase or sale of foreign currencies settled at a future date.

Foreign currency swaps: represent agreements for the exchange of cash flows of different currencies.

Options: represent contracts for future purchase or sale, at a predetermined value of a financial “product”, offering the right, but not the obligation, to one of the two parties to request by the other party the fulfilment of the agreement during a certain period of time or on a specific date.

Interest rate swaps: represent agreements where one stream of future interest payments is exchanged for another based on a predetermined notional amount and time periods.

The Group and the Bank Nominal value Fair value Other Other assets liabilities €’000 €’000 €’000 At 31 December 2016 Foreign currency forwards 43.734 1.145 1 Foreign currency swaps 402.077 8.239 1.610 Options 24.311 94 94 Interest rate swaps 114.868 1.448 2.522 584.990 10.926 4.227

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36. DERIVATIVES (continued)

The Group and the Bank Nominal value Fair value Other Other assets liabilities €’000 €’000 €’000 At 31 December 2015 Foreign currency forwards 50.151 25 698 Foreign currency swaps 301.572 3.258 522 Options 34.333 136 136 Interest rate swaps 122.282 3.234 6.006 508.338 6.653 7.362

37. CASH AND CASH EQUIVALENTS

The Group The Bank 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Cash and balances with Central Banks 2.054.650 1.990.038 2.054.649 1.990.037 Placements with other banks 439.032 797.917 427.402 795.747 2.493.682 2.787.955 2.482.051 2.785.784

Cash and cash equivalents include cash and unrestricted balances with Central Banks and placements with other banks, with original maturities of less than three months.

38. DIRECTORS’ INTEREST IN THE SHARE CAPITAL OF THE BANK

According to the Cyprus Securities and Stock Exchange Regulations and in accordance with the requirements of the Directive DI190/2007/04 para. 4 of the Cyprus Securities and Exchange Commission, the Bank is required to disclose the percentage shareholdings in the Bank’s share capital owned by Members of the Board of Directors, their spouses, or/and relatives by blood up to first degree and companies in which they control directly and indirectly at least 20% of the voting rights as at 31 December 2016 and the respective percentages of five (5) days prior to the date of approval of the Financial Statements by the Board.

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38. DIRECTORS’ INTEREST IN THE SHARE CAPITAL OF THE BANK (continued)

31 December 2016 23 March 2017 Direct Indirect Direct Indirect participation participation Total participation participation Total I. A. Georgiadou ------A. Christofides -- 0,00001% 0,00001% -- 0,00001% 0,00001% L. Papadopoulos -- 0,00006% 0,00006% -- 0,00006% 0,00006% D. W. Bonanno ------M. S. Yannopoullos ------Dr E. A. Polykarpou ------G. Fereos ------M. Pantelidou - Neophytou 0,0037% -- 0,0037% 0,0037% -- 0,0037% I. A. Matsis -- 0,0012% 0,0012% -- 0,0012% 0,0012% Ch. A. Hadjistavris ------A. C. Wynn ------S. J. Albutt ------

The Members of the Board of Directors as at 31 December 2016 did not hold any stake in the Bank’s issued loan capital.

39. RELATED PARTY TRANSACTIONS

MEMBERS OF THE BOARD OF DIRECTORS AND CONNECTED PERSONS

Connected persons include the spouse, the children, the parents and the companies in which Directors hold, directly or indirectly, at least 20% of the voting rights at a general meeting.

31 December 31 December 2016 2015 €’000 €’000

Loans and advances 28 8

Tangible securities -- 6

Deposits 1.569 2.104

Additionally, as at 31 December 2016, there were contingent liabilities and commitments in respect of Members of the Board of Directors and their connected persons in the form of documentary credits, guarantees and unused limits amounting to €56 thousand which did not exceeded 1% of the Bank’s net assets (December 2015: €324 thousand).

For the year ended 31 December 2016 there was no interest income in relation to Members of the Board of Directors and their connected persons (December 2015: nil), while interest expense in respect of Members of the Board of Directors and their connected persons amounted to €10 thousand (December 2015: €13 thousand).

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39. RELATED PARTY TRANSACTIONS (continued)

Emoluments and fees of Members of the Board of Directors

31 December 31 December 2016 2015 €’000 €’000 Emoluments and fees of Members of the Board of Directors: Emoluments and benefits in executive capacity 723 674 Employer’s contributions for social insurance, etc. 57 37 Retirement benefits 15 10 Amounts paid on termination 526 -- Total emoluments for Executive Directors 1.321 721 Fees 1.003 890 Employer’s contributions – Non Executive Directors 10 10

On the 15th of December 2016 the Bank announced that Mr Bert Pijls stepped down from the position of Group Chief Executive Officer. The parties agreed to a consideration for the termination of the contract of employment, in cash amounting in total to around €526 thousand.

Other transactions with Members of the Board of Directors and related parties

The sales of insurance policies for the year ended 31 December 2016 by the Group’s subsidiary, Pancyprian Insurance Ltd, to Members of the Board and their connected persons as defined above, amounted to €12 thousand (31 December 2015: €8 thousand), while sales of insurance policies by the Group’s subsidiary, Hellenic Alico Life Insurance Company amounted to €140 (31 December 2015: €20).

For the year ended 31 December 2016, non-interest income amounting to €1 thousand was received which relates to Members of the Board of Directors and their connected persons.

KEY MANAGEMENT PERSONNEL WHO ARE NOT DIRECTORS AND THEIR CONNECTED PERSONS

Key Management personnel are those persons who have the authority and the responsibility for the planning, management and control of the Bank’s operations, directly or indirectly. The Group, according to the provisions of IAS 24 considers as Key Management personnel the General Managers of the Bank who were not Directors, the members of the Asset and Liability Committee (ALCO) as well as management personnel who refer directly to the Chief Executive Officer.

Connected persons include spouses, minor children and companies in which the Key Management personnel who were not Directors hold, directly or indirectly, at least 20% of the voting rights at a general meeting.

31 December 31 December 2016 2015 €’000 €’000

Loans and advances 716 688

Tangible securities 227 196

Deposits 4.134 5.169

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39. RELATED PARTY TRANSACTIONS (continued)

Emoluments of Key Management personnel of the Group

The emoluments of Key Management personnel who were not Directors were:

31 December 31 December 2016 2015 €’000 €’000 Emoluments of Key Management personnel who were not Directors: Salaries and other short term benefits 2.332 2.068 Employer’s contributions for social insurance etc. 194 227 Retirement benefits 149 131 Amounts paid on termination 238 942 2.913 3.368

It should be noted that due to changes in the Bank’s organisational structure, the number of Key Management personnel decreased and consequently their disclosed exposures/transactions with the Bank.

During the year 2016, the contract of employment between one Key Management personnel and the Bank was terminated by mutual consent. The parties agreed to a consideration for the termination of the contract of employment, in cash and in kind, amounting in total approximately €238 thousand (31 December 2015: €942 thousand/5 Key Management personnel).

Furthermore, the Bank signed a termination agreement with another Key Management Personnel and paid to him in 2016 the ex-gratia amount of €202 thousand. The termination took place during the first quarter of 2017.

In addition, as at 31 December 2016, there were contingent liabilities and commitments to Key Management personnel who were not Directors and their connected persons amounting to €296 thousand (31 December 2015: €335 thousand).

Interest income in relation to Key Management personnel and their connected persons for the year ended 31 December 2016 amounted to €14 thousand (31 December 2015: €16 thousand), while interest expense in relation to Key Management personnel and their connected persons amounted to €36 thousand (31 December 2015: €111 thousand).

The sales of insurance policies for the year ended 31 December 2016 by the Group’s subsidiary, Pancyprian Insurance Ltd, to Key Management personnel and their connected persons, as defined above, amounted to €23 thousand (31 December 2015: €20 thousand) while the sales of insurance policies by the Group’s subsidiary, Hellenic Alico Life Insurance Company amounted to €20 thousand (31 December 2015: €28 thousand).

SHAREHOLDERS WITH SIGNIFICANT INFLUENCE AND THEIR CONNECTED PERSONS

Pursuant to the provisions of IAS 24, related parties are considered, among others, the Shareholders who have significant influence to the Bank or/and hold directly or indirectly more than twenty percent (20%) of the nominal value of the issued capital of the Bank.

Connected persons include the entities controlled by Shareholders with significant influence as they are defined above.

31 December 31 December 2016 2015 €’000 €’000

Loans and advances 1 --

Tangible securities 198 208

Deposits 21.505 20.616

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39. RELATED PARTY TRANSACTIONS (continued)

On the 13th of September 2016, within its normal course of business, the Bank entered into an agreement with the European Bank for Reconstruction and Development (“EBRD”) to participate in an EBRD A/B loan granted to Hellenic Telecommunications Organisation (“OTE”). EBRD provided a €339 million syndicated loan to OTE to support its investment plans. The financing consists of an EBRD A loan of €150 million as part of a €339 million A/B loan and an additional financing of €189 million granted by Participants in the B loan. Hellenic Bank’s participation in the B loan is in the amount of €20 million. The Mandated Lead Arranger on this syndicated loan is the National Bank of Greece S.A. The Lead Arrangers are HSBC Bank plc and Hellenic Bank, while BNP Paribas S.A., Nomura International plc, Alpha Bank Albania, Piraeus Bank SA and Cordiant participate as Arrangers. As at 31 December 2016, the loan had a balance of €20 million, accrued interest amounted to €189 thousand and an amount of €180 thousand was included in other fees in the income statement.

On 31 December 2016, there were contingent liabilities and commitments in relation to Shareholders with significant influence and connected persons in the form of documentary credits, guarantees and unused limits amounting to €514 thousand (31 December 2015: €513 thousand).

Interest income in relation to Shareholders with significant influence and their connected persons for the year ended 31 December 2016 amounted to €nil (31 December 2015: €nil) while the corresponding interest expense was €3 thousand (31 December 2015: €62 thousand).

Other transactions with Shareholders with significant influence and their connected persons

During the year ended 31 December 2016, there were no purchases of goods and services by Shareholders with significant influence and their connected persons as defined above (31 December 2015: €nil). In addition, the sales of insurance policies by the Group’s subsidiary, Pancyprian Insurance Ltd, to Shareholders with significant influence and their connected persons as defined above, amounted to €150 thousand (31 December 2015: €121 thousand).

On 31 December 2016, Shareholders with significant influence and their connected persons had in their possession Convertible Capital Securities 2 (CCS2) amounting to €15,7 million (31 December 2015: €15,7 million).

For the year ended 31 December 2016 non-interest income amounting to €154 thousand (31 December 2015: €57 thousand) was received which relates to Shareholders with significant influence and their connected persons.

All transactions with Members of the Board of Directors, Key Management personnel, Shareholders with significant influence and their connected persons are at an arm’s length basis. Regarding the Key Management personnel, facilities have been granted based on current terms as those applicable to the rest of the Group’s personnel.

40. SHAREHOLDERS HOLDING MORE THAN 5% OF THE SHARE CAPITAL

According to the Cyprus Securities and Stock Exchange Regulations and pursuant to the requirements of the Directive DI190/2007/04 para. 4 of the Cyprus Securities and Exchange Commission, the following shareholders owned five (5%) percent or more of the nominal value of the Bank’s issued share capital as at 31 December 2016:

CPB FBO Third Point Hellenic Recovery Fund LP (CΥ) 26,20% Wargaming Group Limited 24,92% Demetra Investment Public Ltd 10,05% European Bank for Reconstruction and Development 5,37%

On 31 December 2016 shareholders holding more than 5% of the share capital, had in their possession CCS1 amounting to €23 thousand and CCS2 amounting to €15,7 million.

Pursuant to the requirements of the Directive DI190/2007/04 of the Cyprus Securities and Exchange Commission, the Bank is required to disclose the shareholders who held at least five (5%) percent of the nominal value of the issued capital, five (5) days prior to the date of approval of the Financial Statements by the Board.

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40. SHAREHOLDERS HOLDING MORE THAN 5% OF THE SHARE CAPITAL (continued)

CPB FBO Third Point Hellenic Recovery Fund LP (CΥ) 26,20% Wargaming Group Limited 24,92% Demetra Investment Public Ltd 10,05% European Bank for Reconstruction and Development 5,37%

Five (5) days prior to the date of approval of the Financial Statements by the Board, Shareholders holding more than 5% of the share capital, had in their possession CCS1 amounting to €23 thousand and CCS2 amounting to €15,7 million.

41. FAIR VALUE

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

The Group measures the fair value of an instrument using the quoted price in an active market, when available, for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the main factors that market participants would take into account in pricing a transaction.

Fair value of financial instruments

The table below presents the analysis of the Group’s financial instruments measured at fair value on the basis of the three-level hierarchy by reference to the source of data used to derive the fair values. The levels of hierarchy of fair value are as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: Data other than quoted prices included within level 1 that is observable for the asset or liability, either directly or indirectly. • Level 3: Import data for the asset or liability that is not based on observable market data (non-observable import data).

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41. FAIR VALUE (continued)

31 December 2016 Level 1 Level 2 Level 3 Total €΄000 €΄000 €΄000 €΄000 Financial assets Derivatives: Foreign currency forwards -- 1.145 -- 1.145 Options -- 94 -- 94 Interest rate swaps -- 1.448 -- 1.448 Currency swaps -- 8.239 -- 8.239 -- 10.926 -- 10.926 Other financial assets at fair value through profit or loss Debt securities: Banks ------Other issuers ------Equity securities 293 -- -- 293 293 -- -- 293 Investments available for sale Debt securities: Government 432.663 2.428 -- 435.091 Banks 61.642 -- -- 61.642 Other issuers 305.825 -- -- 305.825 Equity securities 982 -- 7.228 8.210 Collective investments units 7.505 -- -- 7.505 808.617 2.428 7.228 818.273 Total 808.910 13.354 7.228 829.492

31 December 2016 Level 1 Level 2 Level 3 Total €΄000 €΄000 €΄000 €΄000 Financial liabilities Derivatives: Foreign currency forwards -- 1 -- 1 Options -- 94 -- 94 Interest rate swaps -- 2.522 -- 2.522 Currency swaps -- 1.610 -- 1.610 Total -- 4.227 -- 4.227

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41. FAIR VALUE (continued)

31 December 2015 Level 1 Level 2 Level 3 Total €΄000 €΄000 €΄000 €΄000 Financial assets Derivatives: Foreign currency forwards -- 25 -- 25 Options -- 136 -- 136 Interest rate swaps -- 3.234 -- 3.234 Currency swaps -- 3.258 -- 3.258 -- 6.653 -- 6.653 Other financial assets at fair value through profit or loss Debt securities: Banks 269 -- -- 269 Other issuers 1.550 -- -- 1.550 Equity securities 282 -- -- 282 2.101 -- -- 2.101 Investments available for sale Debt securities: Government 287.200 1.747 -- 288.947 Banks 170.697 -- 9.887 180.584 Other issuers 299.198 -- -- 299.198 Equity securities 1.287 -- 6.525 7.812 Collective investments units 7.046 -- -- 7.046 765.428 1.747 16.412 783.587 Other Assets -Equity held for sale -- -- 12.381 12.381 Total 767.529 8.400 28.793 804.722

31 December 2015 Level 1 Level 2 Level 3 Total €΄000 €΄000 €΄000 €΄000 Financial liabilities Derivatives: Foreign currency forwards -- 698 -- 698 Options -- 136 -- 136 Interest rate swaps -- 6.006 -- 6.006 Currency swaps -- 522 -- 522 Total -- 7.362 -- 7.362

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41. FAIR VALUE (continued)

The tables below present the analysis of financial instruments categorised at level 3 hierarchy:

Investments available for sale Debt Equity Shares held securities securities for sale Total €΄000 €΄000 €΄000 €΄000 1 January 2016 9.887 6.525 12.381 28.793 Gains recognised in consolidated income statement in the category “Net gains on disposal and revaluation of foreign currencies and financial instruments” 113 -- -- 113 Additions -- 1.906 -- 1.906 Transfer out -- (32) -- (32) Disposals (10.000) -- (12.381) (22.381) Gains recognised in consolidated statement of comprehensive income in the category “Surplus on revaluation of available for sale equity and debt securities” -- (1.171) -- (1.171) 31 December 2016 -- 7.228 -- 7.228

Investments available for sale Debt Equity Shares held securities securities for sale Total €΄000 €΄000 €΄000 €΄000 1 January 2015 11.339 7.280 -- 18.619 Gains recognised in consolidated income state- ment in the category “Net gains on disposal and revaluation of foreign currencies and financial instruments” 178 -- -- 178 Repayments (1.630) -- -- (1.630) Disposals -- (2.609) -- (2.609) Gains recognised in consolidated statement of comprehensive income in the category “Surplus on revaluation of available for sale equity and debt securities” -- 1.854 12.381 14.235 31 December 2015 9.887 6.525 12.381 28.793

For the valuation at fair value of the investments in equity securities which are classified as Level 3, a valuation method based on the company’s equity at which the investment in shares is held as well as estimates of the Management of the Group have been used. Investments in debt securities, classified in Level 3, were valued using unobservable data that reflect however the assumptions that market participants would make to assess an asset or a liability, based on the best available information under current conditions.

On 31 December 2016 the fair value of investments in debt securities classified in the category “Assets held to maturity” and which are not measured at fair value for both the Group and the Bank amounted to €49.377 thousand (2015: Group and the Bank €46.108 thousand) and in the three-level hierarchy would be classified as level 1. Also the fair value of investments in debt securities classified in the category “Loans and receivables” and which are not measured at fair value, amounted to €302.096 thousand for the Group and the Bank (2015: €229.122 thousand) and in the three-level hierarchy would be classified as level 2.

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41. FAIR VALUE (continued)

The fair value of loans and advances to customers is based on the present value of expected future cash flows. The level of subjectivity and degree of management judgment required is significant in these discounted cash flow models given that management is required to exercise judgment in the selection and application of parameters and assumptions where some or all of the parameter inputs are less observable. Future cash flows have been based on the future expected loss rate per loan category, taking into account expectations in the credit quality of the borrowers. The discount rate includes components that capture: the Group’s funding cost, cost of capital and an adjustment for the future cost of risk.

The fair value of loans and advances to customers not measured at fair value on 31 December 2016 amounted to €2.819 million (2015:€3.035 million) for the Group and the Bank and have been classified at level 3.

42. SEGMENTAL ANALYSIS

For management purposes, the Group is organised into two operating segments based on the provision of services, as follows:

• Banking and financial services segment - principally providing banking and financial services, including financing and investment services, as well as custodian and factoring services. • Insurance services segment - principally providing life and general insurance services in Cyprus.

The table below presents income, expenses, impairment losses and provisions to cover credit risk, (loss)/profit before taxation and information on assets, liabilities and capital expenditure regarding the Group’s operating segments.

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Banking & Financial Intersegment services Insurance Services transactions/balances Total 2016 2015 2016 2015 2016 2015 2016 2015 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 Turnover 278.179 312.393 18.769 19.075 (6.874) (9.715) 290.074 321.753 Net interest income 147.115 144.776 377 620 -- (36) 147.492 145.360 Net fees and commission income/(expense) 53.007 59.546 (1.008) (1.123) (7) (7) 51.992 58.416 Net gains on disposal and revaluation of foreign currencies and financial instruments 27.435 32.586 -- 17 -- -- 27.435 32.603 Other income 10.243 11.911 14.871 15.303 (4.351) (7.179) 20.763 20.035 Staff costs (77.002) (75.050) (5.004) (4.998) -- -- (82.006) (80.048) Depreciation of property, plant & equipment and amortisation of intangibles (5.948) (4.643) (153) (124) -- -- (6.101) (4.767) Administrative and other expenses (54.073) (64.392) (2.378) (2.980) 76 88 (56.375) (67.284)

Profit/(loss) from ordinary operations before impairment losses and provisions to cover credit risk 100.777 104.734 6.705 6.715 (4.282) (7.134) 103.200 104.315 Impairment losses on the value of loans and advances (122.235) (101.437) ------(122.235) (101.437) Provisions to cover credit risks for contractual commitments and guarantees 7.002 649 ------7.002 649

(Loss)/profit before taxation (14.456) 3.946 6.705 6.715 (4.282) (7.134) (12.033) 3.527

Total assets 6.969.543 7.342.725 88.467 83.921 (20.406) (29.273) 7.037.604 7.397.373

Total liabilities 6.437.010 6.732.511 54.489 51.343 (20.766) (29.277) 6.470.733 6.754.577 HELLENIC

Capital expenditure on property, plant & equipment and GROUP computer software 11.594 8.650 89 55 -- -- 11.683 8.705 BANK ANNUAL REPORT 155 2016

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43. CATEGORISATION OF FINANCIAL INSTRUMENTS 2016 REPORT ANNUAL

Carrying Loans and Other amortised The Group Amount Trading Held to maturity receivables Available for sale cost 31 December 2016 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 2.083.444 -- -- 2.083.444 -- -- Placements with other banks 548.902 -- -- 548.902 -- -- Loans and advances to customers 2.926.033 -- -- 2.926.033 -- -- Debt securities 1.149.132 -- 47.214 299.360 802.558 -- Equity securities & Collective investment units 16.008 293 -- -- 15.715 -- Derivatives 10.926 10.926 ------6.734.445 11.219 47.214 5.857.739 818.273 -- Liabilities Deposits by banks 100.652 ------100.652 Customer deposits and other customer accounts 6.111.088 ------6.111.088 Derivatives 4.227 4.227 ------Loan Capital 139.667 ------139.667 6.355.634 4.227 ------6.351.407 31 December 2015 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 2.029.180 -- -- 2.029.180 -- -- Placements with other banks 909.849 -- -- 909.849 -- -- Loans and advances to customers 3.092.773 -- -- 3.092.773 -- -- Debt securities 1.043.012 1.819 45.501 226.963 768.729 -- Equity securities & Collective investment units 15.140 282 -- -- 14.858 -- Shares held for sale 12.381 ------12.381 Derivatives 6.653 6.653 ------7.108.988 8.754 45.501 6.258.765 795.968 -- Liabilities Deposits by banks 76.938 ------76.938 Amounts due to Central Banks 236.373 ------236.373 Customer deposits and other customer accounts 6.138.705 ------6.138.705 Derivatives 7.362 7.362 ------Loan Capital 181.468 ------181.468 6.640.846 7.362 ------6.633.484

WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade 43. CATEGORISATION OF FINANCIAL INSTRUMENTS (continued)

Carrying Loans and Other amortised The Bank Amount Trading Held to maturity receivables Available for sale cost 31 December 2016 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 2.083.443 -- -- 2.083.443 -- -- Placements with other banks 537.259 -- -- 537.259 -- -- Loans and advances to customers 2.926.033 -- -- 2.926.033 -- -- Debt securities 1.142.704 -- 47.214 299.360 796.130 -- Equity securities 8.503 293 -- -- 8.210 -- Derivatives 10.926 10.926 ------6.708.868 11.219 47.214 5.846.095 804.340 -- Liabilities Deposits by banks 100.652 ------100.652 Customer deposits and other customer accounts 6.111.088 ------6.111.088 Derivatives 4.227 4.227 ------Loan Capital 139.667 ------139.667 6.355.634 4.227 ------6.351.407 31 December 2015 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 2.029.179 -- -- 2.029.179 -- -- Placements with other banks 907.550 -- -- 907.550 -- -- Loans and advances to customers 3.092.773 -- -- 3.092.773 -- -- Debt securities 1.037.252 1.819 45.501 226.963 762.969 -- Equity securities 8.094 282 -- -- 7.812 -- Shares held for sale 12.381 ------12.381 -- Derivatives 6.653 6.653 ------7.093.882 8.754 45.501 6.256.465 783.162 -- Liabilities Deposits by banks 76.938 ------76.938 Amounts due to Central Banks 236.373 ------236.373 HELLENIC GROUP

Customer deposits and other customer accounts 6.138.705 ------6.138.705 BANK Derivatives 7.362 7.362 ------Loan Capital 181.468 ------181.468 6.640.846 7.362 ------6.633.484 ANNUAL REPORT 157 2016

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44. ECONOMIC ENVIRONMENT

ECONOMIC ENVIRONMENT AND GROUP OPERATIONS IN CYPRUS

Cyprus has completed its three-year macroeconomic Adjustment Programme in March 2016, with the sovereign regaining international capital market access. Cyprus has implemented important fiscal and structural reforms under its macroeconomic adjustment programme, which are set to contribute towards strong fiscal governance in the coming years. Public finances have been consolidated to a large extent to secure the sustainability of public debt. Fiscal developments have largely out-performed the primary balance targets that were set at the beginning of the programme. Also, significant progress has been made under the programme to restructure and restore confidence in the Cypriot financial system. The better than expected outcome in the economy, together with the gradual restructuring taking place in the banking sector, have created and maintained an environment of improved confidence which is reflected in the upgrades of the country’s and the largest domestic banks’ credit rating by international rating agencies. As a result, Cyprus successfully tapped international markets three times during 2016, while the yields declined to historically low levels allowing to refinance the national debt at more favourable rates and with extended maturities.

Fitch Ratings upgraded the long-term rating of Cyprus by one notch to BB- with a positive outlook in October 2016. In March 2017, Standard and Poor’s, also, upgraded Cyprus’ long-term rating by one notch to BB+, from BB now one notch below investment grade. Moreover, in August 2016, Moody’s has changed its outlook on the Cypriot banking system to positive from stable. As a result of the above, and the minimum credit rating requirement of the ECB’s quantitative easing programme, the Cyprus Bonds will qualify for the programme when Cyprus returns to investment grade. In July 2016, the Republic of Cyprus, accessed international capital markets for the first time after the completion of the economic adjustment programme, with an issue of a seven year bond of €1 billion at a yield of 3,8%.

The commitment regarding the implementation of the Economic Adjustment Programme has been the cornerstone in steering the economy out of recession. The economy has been exhibiting robust growth since the beginning of 2015, with real GDP growth increasing by 2,8% during 2016. The course of the steady recovery path is reflected in the labor market, which tends to follow the recovery with a time lag. The deflation observed from the first months of 2013 has started diminishing in magnitude, with the price level in 2016 expected to decline by 1,2%, compared with a decrease of 1,5% in 2015.

The expansion of the economy was mainly driven by rising private consumption amid negative inflation and supported by the depreciation of the Euro and the low oil prices. In 2016, private consumption grew by 2,9%, compared with the corresponding period of 2015. Over the same period, investment grew by 26%, primarily due to investment in transport equipment, while investment in construction also increased by 8,7%. From a sectoral point of view, growth was supported by resilient export performance in the services sectors of tourism and professional business. Specifically, during 2016, tourist arrivals increased an annual 19,8%, compared with the previous year and at the same time, revenues from tourism increased an annual 12%.

The housing market continued its adjustment in the course of 2016, bringing the cumulative fall in prices since mid-2008 to 32% (Central Bank of Cyprus’s Property Price Index). During 2016, property sales recorded a new increase according to Land Registry data. Specifically, the sales deeds submitted during 2016 increased to 7.063 versus 4.952 during the corresponding previous period, recording a year-on-year increase of 43%.

Cyprus’ macroeconomic outlook is positive and is accompanied by a significant increase in real gross domestic product in 2016, the reduction in unemployment and further improvement of key domestic indicators since the beginning of the year. Despite the important steps taken towards restoring the economic climate, some degree of uncertainty remains, as the country still has certain issues to resolve, such as the high volume of non-performing exposures (NPEs), high unemployment and delays in the advancement of structural reforms. The high private indebtedness levels that have led to deleveraging and increased NPEs, continue to pose significant risks to the stability of the domestic banking system and to the outlook for the economy, especially via developments in property prices.

From an exogenous perspective, the country’s economy may be negatively influenced due to weaker than expected growth in the Euro area and a slowdown in output growth in the UK and further depreciation of the pound against the Euro, as a result of increased uncertainty following the UK referendum. Also, possible deterioration of the Russian economic outlook and the increased geopolitical tensions in the Middle East and Eastern Mediterranean, could trigger adverse spillovers to economic confidence, tourism and consequently to the aggregate economic activity. On the other hand, geopolitical tensions in neighbouring counties render Cyprus as a safer tourist destination and could therefore counterbalance, to a significant extent, the potential reduction in tourist traffic from UK. Additionally, developments over a potential reunification of Cyprus along with the exploitation of Cyprus’ natural resources are being closely monitored in order to assess the potential prospects that are being developed.

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44. ECONOMIC ENVIRONMENT (continued)

In spite of these challenges, Cyprus’ macroeconomic outlook is positive. Official forecasts by the Ministry of Finance of the Republic of Cyprus anticipate growth of 2,8% in 2017. The pick-up in domestic demand is expected to be reflected into improved labor market conditions, with unemployment starting to ease gradually. Inflation is expected to turn positive, but remain relatively low, weighed down by recent declines in oil prices.

CONSEQUENCES OF THE RECENT DEVELOPMENTS

The Cyprus banking sector has gone through a reformation phase and is now in a strengthened capital and liquidity position. Its size has been reduced to a moderate 3,7 times the GDP or about the EU average. Foreign exposures have been eliminated and domestic operations form the main focus. While decisive steps were taken and swift progress has been achieved throughout the banking sector, the high share of NPEs is impacting both on the banks’ balance sheets as well as on their ability to extend credit to the economy.

The Bank has managed to navigate successfully through the banking crisis. It has maintained throughout the crisis its reputation for stability and trust and is concentrating in its strengthening and better focusing of its market positioning. Meanwhile, the Bank maintains sufficient liquidity to allow it to exploit opportunities while maintaining its focus on organic growth. The Bank has the ability to finance creditworthy businesses and households, helping in the restoration of the country’s economy. The Bank estimates that there is potential and opportunities in various sectors of the economy. The focus of new loans will be to companies that increase the competitiveness and productivity of the country, such as in the sectors of commercial activities, tourism, agriculture, European programs and specific projects on energy and shipping. At the same time, loans to the retail sector will be geared toward mortgages, small loans to new customers and supporting current clients who are deemed viable.

The high levels of NPEs pose major risks to the stability of the banking system and to the outlook for the economy. Ineffective implementation of the new insolvency and foreclosure legal framework could delay the resumption of healthy credit conditions and robust economic growth. Unavoidably, the high level of NPΕs causes an erosion of the Banks’ income and may cause additional provisions and effectively reduced profit from ordinary operations. At the same time the Bank recognises that the real estate market which is a significant driver of the provisions for impairment of customer loans continues to be subdued and puts further pressure on the profitability. Within the framework of tackling the Group’s loan portfolio quality, the Bank has reached an agreement with APS Holding a.s for the management of real estate assets and servicing of the entire portfolio of non-performing exposures of the Bank. This agreement, which is subject to finalisation and applicable approvals and clearances from the relevant regulatory and any other authorities, is of huge strategic importance for Hellenic Bank and falls under the Group’s strategy of reorganising and transforming its business model. The main pillars of the strategy is the reduction of non -performing exposures, the expansion of new lending thus increasing the Bank’s market share and the increase of its revenues through other banking activities. By creating the first debt servicing and real estate asset management platform in the Cypriot market, the Bank will be able to effectively deal with its non- performing exposures in an accelerated way, by developing, expanding and improving the recoveries of NPEs through leveraging on the knowhow and expertise of APS. Furthermore, it will allow the Bank to better allocate its resources on managing and growing the performing loan book by using its excess liquidity to the benefit of the market, as well as on continuing its digital transformation journey, the optimisation of corporate governance and the adaptation to the expanding compliance framework.

45. BANK RECOVERY AND RESOLUTION DIRECTIVE (BRRD)

The Bank within the framework of the Bank Recovery and Resolution Directive (BRRD) is subject to the minimum requirement for own funds and eligible liabilities (MREL). The framework, which entered into effect on 1 January 2016, provides authorities with a credible set of tools to intervene sufficiently early and quickly in an unsound or failing institution so as to ensure the continuity of the institution’s critical financial and economic functions, while minimising the impact of an institution’s failure on the economy and financial system. This is achieved by requiring banks to have a funding structure with a certain proportion of liabilities that can be written off or converted into equity in the event of a bank failure (that is: “bailed-in”). Such liabilities, in combination with equity, are known as MREL. The MREL requirements and criteria within the BRRD have recently been elaborated further by the EBA in the final version of a Regulatory Technical Standard.

The regulatory authorities are currently in the process of establishing the MREL requirement on a case-by-case basis. More specifically, the Single Resolution Board and the Local Resolution Authority are currently carrying out workshops and discussions with regulated institutions.

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46. DECISIONS OF THE ANNUAL GENERAL MEETING OF THE SHAREHOLDERS OF HELLENIC BANK PUBLIC COMPANY LIMITED The 42nd Annual General Meeting (“AGM”) of the Shareholders of the Bank, which was held on Wednesday 25th May 2016, was attended by 85 shareholders, either physically or by proxy, representing 156.777.111 shares, being 78,91% of the issued share capital of the Bank.

The AGM examined and approved the Directors’ Report, the Financial Statements and the Auditors’ Report for the year ended 31st December 2015.

Ms Marianna Pantelidou Neophytou, Mr Ioannis A. Matsis, Dr Evripides A. Polykarpou and Mr Andrew Charles Wynn were re-elected as Members of the Board of Directors, following voting by poll.

Mr Stephen John Albutt was elected as a new Member of the Board of Directors. The election of Mr Stephen John Albutt was approved by the Central Bank of Cyprus/European Central Bank and his appointment is effective as from the 21st of September 2016.

The AGM examined and approved the Remuneration Policy Report for the year 2015 and fixed the Remuneration of the Directors for the year 2016 at the same level as last year.

In accordance with section 153(2) of the Companies Law Cap. 113, and in view of the fact that (i) no notice was received by the Bank for the appointment of another auditor or requesting the removal of the current auditors of the Bank; and (ii) KPMG Limited remain qualified and wish to be reappointed as Auditors of the Bank, KPMG Limited were automatically re-appointed as Auditors of the Bank for 2016. The AGM decided that the Board of Directors be authorised to fix the remuneration of the Auditors.

The AGM also examined and approved the Amendment of Regulations 1, 57 ,87, 112, 126 & 127 of the Articles of Association of the Bank and approved a number of special resolutions.

The AGM additionally approved, that the Board of Directors is authorised to exercise all powers of the Bank to establish an employee long-term incentive plan and for such purpose allot and/or issue to such employees of the Bank (including, without limitation, executive members of the Board of Directors, other than the Bank’s Chief Executive Officer), up to an aggregate of 9.921.725 ordinary shares in the Bank of a nominal value of €0,50 each. The long term incentive plan will be a performance-based share plan, with performance-based share awards being granted to employees for the period March 2017 to March 2022.

Detailed announcement of the decisions of the AGM is available on the Bank’s official website www.hellenicbank.com

47. EUROPEAN DEPOSIT INSURANCE SCHEME (EDIS)

As of 1st of January 2016, the European Union within the Banking Union framework has put forward a third pillar, a deposit insurance scheme (EDIS-European Deposit Insurance Scheme) which will gradually take over the national depositors’ quarantee scheme. The first pillar of the Banking Union consists of a common framework for supervision of banks implemented by the Single Supervisory Mechanism (SSM); the second pillar consists of a common framework for bank resolution implemented by the Single Resolution.

Mechanism (SRM). The SRM provides that the Single Resolution Fund (SRF) will be built up over a period of 8 years with “ex- ante” contributions from the banking industry.

Currently, in case of a bank failure, the EU legislation ensures that all deposits up to €100.000 are protected, through their national deposit guarantee scheme (DGS). However, national DGS can be vulnerable to national bank crisis. EDIS provides a stronger and more uniform degree of insurance cover for all retail depositors in the Banking Union, ensuring that the depositors’ confidence will be protected even if the entire nation is under stress. Currently, all Member States have deposit guarantee schemes as the Deposit Guarantee Scheme Directive requires all deposit-taking banks in the EU to be a member of a national DGS. National schemes would continue to co-exist alongside EDIS. EDIS would be established in three sequential stages:

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47. EUROPEAN DEPOSIT INSURANCE SCHEME (EDIS) (continued)

• The first stage would be a re-insurance scheme and would apply for 3 years until 2020. In this stage, a National Guarantee Scheme will have access to EDIS funds only after exhausting its own resources. EDIS funds will provide extra funds only up to a certain level. In order to limit moral hazard and avoid “first-mover advantages”, a DGS can only benefit from EDIS in this stage if it has met its requirements and filled its national fund to the required level, and only if those funds have been fully depleted. • The second stage would be a co-insurance scheme and would apply for 4 years until 2024. For this phase, a national scheme would not have to be exhausted before accessing EDIS. EDIS will contribute from first euro of loss and would absorb a progressively larger share of any losses over the 4-year period in the event of a pay-out or resolution procedure. Access to EDIS would continue to be dependent on compliance by national DGS with the required funding levels. • In the final stage, EDIS would fully insure deposits and would cover all liquidity needs and losses in the event of a pay- out or resolution procedure.

Based on the above developments, the Bank received on the 28th April 2016 a notification from the CBC stating that its 2016 contribution to SRF amounted to €3,1 million and was payable until 27 June 2016. The 2016 annual contribution was paid by the Ministry of Finance from the annual contributions payable by credit institutions for the special levy imposed in accordance with the provisions of “Special Levy on Credit Institutions Law of 2011 to 2015”.

Regarding this ex ante contribution, during November 2016 a draft Law of the “Special Levy on Credit Institutions Law (Amended) 2016” was submitted before the House of Representatives. The purpose of the draft law was to amend specific articles in the Law in order to provide for the deduction of the ex -ante contributions from the amount of special levy and hence avoid duplicated contributions. The House of Representatives voted against the relevant draft law but a new draft law, together with some amendments is expected to be resubmitted during 2017.

48. RISK MANAGEMENT

Introduction and overview

The Group has exposure to the following risks from its use of financial instruments:

• Credit risk • Market and Liquidity risks • Operational risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the management of the Group´s capital.

Group Risk Management

The management and monitoring of all Group risks is centralised under a single division to which the following specialised risk management departments report:

• Group Credit Risk Management • Group Market and Liquidity Risk Management • Group Operational Risk Management • Quantitative Risk Analysis • Group Credit Control & Review • Risk Governance

These departments report to the Group Risk Management Division, which is administratively independent from other units with executive authority and reports to the Board of Directors, through the Risk Management Committee, as well as to the Chief Executive Officer.

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48. RISK MANAGEMENT (continued)

The departments cover all risk areas across the Group’s operations and are intensively working to ensure that the Bank fully conforms to the provisions of the Accord of Basel III, the Directives of the regulatory authorities and international best practices. This is facilitated by the Risk Governance unit which serves as a horizontal function, whose primary aim, is to facilitate in co-operation with the other risk departments, the development and review of risk frameworks and policies for the management of individual risks, co-ordinate and drive cross-departmental and departmental projects and enhance the management and monitoring of risks by providing administrative support to the Board Risk Committee.

On the 14th March 2017, the Bank’s Board of Directors approved a revised Group Risk Management charter. One of the main changes in the charter, is the establishment of a new unit named “Credit Analysis & Evaluation” which will be formed with the primary objective of identifying and assessing credit risk and providing independent second line of defence advice and recommendations to Loan Approval Committees. The changes aim to enhance the organisation of Group Risk Management and to reinforce the role of the second line of defence throughout the risk management cycle, with a special focus on the Bank’s material risks (i.e. credit and NPE risks). Additionally, the remaining units have been renamed and their roles and responsibilities enhanced to better respond to regulatory requirements and conform with best practice.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer and/or other counterparty to a financial instrument fail to meet their contractual obligations. This risk principally arises from lending, trade finance activities and treasury operations. The management of credit risk is one of the most important chapters in the Group’s operation and is essential for its long term soundness.

GROUP CREDIT RISK MANAGEMENT

Group Credit Risk Management is responsible for formulating and regularly reviewing the credit policy and other appropriate policies and procedures for detecting, evaluating, measuring and observing/controlling credit risk, based on the strategic objectives of the Group, as defined by the Board of Directors, as well as the economic and other developments in the local and international economy.

During 2016, the department continued to participate in the implementation/application of the relevant Directives of the Supervisory Authority. Emphasis is given to measuring the effectiveness of arrears management procedures and the efficiency of the restructuring solutions agreed with the customers. In addition, the department participates in the preparation of regular reports to the Central Bank of Cyprus and to the Single Supervisory Mechanism (SSM) which Hellenic Bank Group has joined in November 2014.

To ensure the effectiveness of credit risk management, there is a regular assessment of the Group’s credit and other policies and monitoring of the compliance of the relevant service/business lines with these policies. Group Credit Risk Management issues directions to the various service/business lines based on the Group’s credit risk appetite for specific market segments’ operations, as well as specific banking products and, whenever considered necessary, restrictions/limits are set regarding the undertaking of additional credit risk.

Group Credit Risk Management is responsible for the process of formation of provisions for impairment losses. The recommendations for proceeding or not with provisions for impairment losses on credit facilities which are individually assessed are made by the business units. The recommendations are submitted to the Group Credit Risk Management which evaluates them and accordingly it validates them or differentiates them.

GROUP CREDIT CONTROL & REVIEW

Group Credit Control & Review which was re-activated as a department in 2015 performs effective credit control and review to analyse and measure the Bank’s quality of credit portfolio exposures with the following objectives:

• Ensure credit decisions are supported by adequate credit analysis • Ensure that appropriate collection, default management and foreclosure strategies are in place and are followed • Monitor historical performance through review of various credit metrics and credit risk reporting inclusive of new originations, portfolio mitigations exception reporting, etc • Independently review and validate the consistency and accuracy of individual risk ratings on individual credit reviewed • Perform portfolio analysis on an aggregate basis to identify trends based on the systemic use of early warning indicators (KPI’s) and credit process and credit portfolio metrics • Review of individual credit decisions on a sample basis

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48. RISK MANAGEMENT (continued)

The department provides ongoing, regular and near real-time feedback on areas of improvement.

Group Credit Control & Review is responsible to report the findings and relevant recommendations stemming from its work and to follow up on implementation of recommendations.

QUANTITATIVE RISK ANALYSIS

For all those credit facilities that are not individually assessed for impairment of value, a collective assessment is made using the appropriate probability of default and loss-given default rates. The Quantitative Risk Analysis department applies models for calculating the probability of default for each credit facility category and for measuring the loss-given default. The models’ parameters are revisited on a regular basis. Upon completion of the above procedures the Group Risk Management submits its suggestions for individual as well as collective impairments for approval to the Impairment Losses Committee and subsequently to the relevant Committee of the Board of Directors.

In order to protect the interests of the Group, the significant and/or sudden changes in the parameters that shape credit risks are identified (world market developments/events, diversification of economic aggregates, credit ratings changes, reclassifications of countries, etc) and all necessary measures/implementation of actions within the framework of credit risk management are taken. Stress tests are conducted at regular time intervals, both in relation to the possible deterioration in asset quality as well as the possible impairment in the value of specific collaterals (with special emphasis on the value of mortgaged properties).

To achieve the above, sophisticated systems are employed to evaluate existing/potential borrowers’ creditworthiness and to measure credit risk based on quantitative and qualitative criteria:

1. For the Retail sector, a credit risk assessment system is applied for the evaluation of the creditworthiness of customers and the measurement of credit risk (Credit Scoring). This system covers credit cards and other retail lending products.

2. For the Commercial and Corporate sectors, an internal credit rating system (Credit Rating) is applied which classifies companies into credit rating bands, thus assisting both in the assessment of the credit worthiness of a company and in the rationalisation of pricing requirements according to the risk undertaken, while taking into account each company’s financial position and various qualitative criteria relating to the company as well as the market in which it operates.

3. For Treasury, there is a centralised management of exposures to countries, financial institutions and other counterparties. Limits are defined based on the Credit Limits Model, which is primarily based on the credit standing of the country and counterparty as determined by the credit ratings of External Credit Assessment Institutions, while also taking into account world and country ranks of counterparties in terms of assets but also specific country ranks.

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48. RISK MANAGEMENT (continued)

Exposure to credit risk

The Group’s loans and advances to customers, placements with other banks and debt securities are as follows:

Loans and advances to Placements with other Debt customers banks securities 2016 2015 2016 2015 2016 2015 €'000 €'000 €'000 €'000 €'000 €'000 Carrying amount 2.926.033 3.092.773 548.902 909.849 1.149.132 1.043.012 Impaired: Grade 3 (high risk) 2.473.278 2.528.751 ------9.961 Provisions for impairment (1.346.526) (1.269.536) ------(74) Carrying amount 1.126.752 1.259.215 ------9.887 Of which with forbearance measures 561.943 552.765 ------Past due but not impaired: Grade 1 (low risk) 64.527 90.129 ------Grade 2 (medium risk) 84.416 88.435 ------Grade 3 (high risk) 3.354 10.030 ------Carrying amount 152.297 188.594 ------Past due comprises: 0+ up to 30 days 62.117 64.903 ------30+ to 60 days 62.543 58.441 ------60+ to 90 days 23.921 40.452 ------90 days+ 3.716 24.798 ------Carrying amount 152.297 188.594 ------Of which with forbearance measures 62.161 42.806 ------Neither past due nor impaired: Grade 1 (low risk) 1.356.264 1.227.706 548.902 909.849 1.149.132 1.033.125 Grade 2 (medium risk) 301.527 423.873 ------Grade 3 (high risk) 16.751 26.972 ------Carrying amount 1.674.542 1.678.551 548.902 909.849 1.149.132 1.033.125 Of which with forbearance measures 275.416 334.068 ------Balances after individual impairment losses 2.953.591 3.126.360 548.902 909.849 1.149.132 1.043.012 Collective impairment losses (27.558) (33.587) ------

Total carrying amount 2.926.033 3.092.773 548.902 909.849 1.149.132 1.043.012

CONCENTRATION OF CREDIT RISK

The Group monitors concentration of credit risk by sector and by geographic location.

The concentration by geographic location for loans and advances to customers is measured based on the geographical position of the customer. The concentration by geographic location for investments and placements with other banks is based on the geographical position of the risk country of the issuer of the security and counterparty respectively.

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48. RISK MANAGEMENT (continued)

The analysis of concentration of credit risk at the reporting date is shown below:

Loans and advances to Placements with other Investments customers banks in bonds 2016 2015 2016 2015 2016 2015 Concentration by sector: €'000 €'000 €'000 €'000 €'000 €'000 Carrying amount 2.926.033 3.092.773 548.902 909.849 1.149.132 1.043.012 Businesses 3.026.300 3.130.882 ------Individuals 1.273.817 1.265.014 ------Banks -- -- 548.902 909.849 61.642 180.927 Government ------781.665 561.411 Other ------305.825 300.748 4.300.117 4.395.896 548.902 909.849 1.149.132 1.043.086 Provisions for impairment (1.374.084) (1.303.123) ------(74) 2.926.033 3.092.773 548.902 909.849 1.149.132 1.043.012

Businesses in the above table include trade, construction and real estate, manufacturing, tourism and other companies as disclosed in Note 18.

Loans and advances to Placements with other Investments customers banks in bonds Concentration by geographical 2016 2015 2016 2015 2016 2015 location: €'000 €'000 €'000 €'000 €'000 €'000 Carrying amount 2.926.033 3.092.773 548.902 909.849 1.149.132 1.043.012 Eurozone 4.194.110 4.266.418 172.022 397.328 842.564 629.592 Other European countries 98.474 120.389 270.541 394.481 70.715 91.923 America 812 766 101.833 104.830 190.257 191.955 Oceania 22 -- -- 542 7.523 77.019 Asia 379 523 3.120 11.431 38.073 46.046 Middle East 3.262 3.710 1.139 1.154 -- 6.551 Africa 3.058 4.090 247 83 -- -- 4.300.117 4.395.896 548.902 909.849 1.149.132 1.043.086 Provisions for impairment (1.374.084) (1.303.123) ------(74) 2.926.033 3.092.773 548.902 909.849 1.149.132 1.043.012

At 31 December 2016, the analysis of debt securities per credit rating, based on the Regulation (EU) No 575/2013 and CRD IV 2013/36/EU for the Risk Weighted Assets calculation (as per Section 4, Article 138 of the regulation), in Moody’s credit ratings equivalents were as follows:

2016 2015 €'000 €'000 Aaa 492.645 439.104 Aa1 -- 27.510 Aa2 -- 52.674 Aa3 13.299 34.389 A1 -- 40.639 A2 -- 16.741 A3 -- 22.333 Baa1 to B3 643.188 399.735 Unrated -- 9.887 1.149.132 1.043.012

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48. RISK MANAGEMENT (continued)

GROUP’S EXPOSURE IN COUNTRIES WITH HIGH CREDIT RISK

The Group closely monitors developments in the international markets so that any measures needed to reduce credit risk are promptly taken.

The monitoring of exposure in countries of high risk is centralised through systems that fully and on an ongoing basis cover all material exposures to these countries such as interbank placements, debt securities, other investments, etc. Also, maximum acceptable levels are specified according to the rankings of the countries and taking into account their credit ratings, in addition to political, economic and other factors.

For the classification of a country as “High Risk” country, the Non-Investment Grade status of countries which as per the CRR is the worst, out of the best two ratings from Moody’s, Fitch and S&P as well as the Euromoney Score of countries are primarily considered.

Some of the debt securities listed in the table below, based on the three level hierarchy depending on the significance of the inflows used to determine fair value, are classified in Level 2 and 3.

Category “Other countries” includes less material exposures in a number of countries.

The analysis of concentration of credit risk in countries with high credit risk at the reporting date is shown below:

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South Other Cyprus Greece Lebanon Italy Serbia Hungary Ukraine Africa Russia Kazakhstan Egypt countries Total At 31 December 2016 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets held for trading Government Bonds Carrying value (fair value) ------Bank Bonds Carrying value (fair value) ------Derivatives Carrying value (fair value) 1.238 ------1.238 Assets classified as held to maturity Government bonds Carrying value (amortised cost) 8.423 ------8.423 Fair value 8.287 ------8.287 Assets classified as loans and receivables Government bonds Carrying value (amortised cost) 299.360 ------299.360 Fair value 302.096 ------302.096 Deposits in other banks Carrying value (amortised cost) 24.792 452 -- 283 -- 169 -- 247 22.311 -- -- 245 48.499 Fair value 24.792 452 -- 283 -- 169 -- 247 22.311 -- -- 245 48.499 Loan and advances to customers Carrying value (amortised cost) 2.815.781 40.814 587 65 549 -- 1.036 1.845 27.400 131 361 1.597 2.890.166 Accumulated impairment losses (1.334.314) (526) (4) (50) (570) -- (2.324) (533) (6.785) (147) (2) (1.192) (1.346.447) Fair value 2.713.645 39.196 559 63 506 -- 1.027 1.805 25.302 127 358 1.540 2.784.128 Assets available for sale Government Bonds Nominal value 314.011 ------314.011 Carrying value (fair value) 335.406 ------335.406 Accumulated amount of the fair value reserve 5.117 ------5.117 Bank bonds Nominal value ------Carrying value (fair value) ------HELLENIC Accumulated impairment losses ------GROUP Accumulated amount of the fair value BANK reserve ------Other bonds Nominal value ------Carrying value (amortised cost) ------ANNUAL Accumulated amount of the fair value REPORT 167

reserve ------2016 Total book value 3.485.000 41.266 587 348 549 169 1.036 2.092 49.711 131 361 1.842 3.583.092

WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade 168 48. RISK MANAGEMENT (continued) GROUP BANK HELLENIC

South Other Cyprus Greece Ireland Italy Spain Hungary Africa Russia Ukraine Egypt countries Total

At 31 December 2015 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 2016 REPORT ANNUAL Assets held for trading Government Bonds Carrying value (fair value) ------Bank Bonds Carrying value (fair value) ------Derivatives Carrying value (fair value) 160 ------160 Assets classified as held to maturity Government bonds ------Carrying value (amortised cost) ------302 302 Fair value ------307 307 Assets classified as loans and receivables Government bonds Carrying value (amortised cost) 226.963 ------226.963 Fair value 229.122 ------229.122 Deposits in other banks Carrying value (amortised cost) 21.269 153 -- 356 937 779 83 29.696 -- -- 35 53.308 Fair value 21.269 153 -- 356 937 779 83 29.696 -- -- 35 53.308 Loan and advances to customers Carrying value (amortised cost) 2.994.571 9.369 922 104 1 92 2.867 37.810 1.516 411 5.600 3.053.263 Accumulated impairment losses (1.259.438) (173) (1.203) (10) (3) (3) (423) (8.028) (2.070) (4) (2.078) (1.273.433) Fair value 2.942.474 8.554 875 94 1 89 2.855 35.754 1.493 404 5.310 2.997.903 Assets available for sale Government Bonds Nominal value 157.691 ------157.691 Carrying value (fair value) 166.940 ------166.940 Accumulated amount of the fair value reserve 2.530 ------2.530 Bank bonds Nominal value -- -- 10.000 4.000 ------14.000 Carrying value (fair value) -- -- 9.887 3.981 ------13.868 Accumulated impairment losses -- -- (75) ------(75) Accumulated amount of the fair value reserve ------(18) ------(18) Other bonds Nominal value ------Carrying value (amortised cost) ------Accumulated amount of the fair value reserve ------Total book value 3.409.903 9.522 10.809 4.441 938 871 2.950 67.506 1.516 411 5.937 3.514.804

WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade South Other Cyprus Greece Ireland Italy Spain Hungary Africa Russia Ukraine Egypt countries Total At 31 December 2015 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets held for trading Government Bonds Carrying value (fair value) ------Bank Bonds Carrying value (fair value) ------Derivatives Carrying value (fair value) 160 ------160 Assets classified as held to maturity Government bonds ------Carrying value (amortised cost) ------302 302 Fair value ------307 307 Assets classified as loans and receivables Government bonds Carrying value (amortised cost) 226.963 ------226.963 Fair value 229.122 ------229.122 Deposits in other banks Carrying value (amortised cost) 21.269 153 -- 356 937 779 83 29.696 -- -- 35 53.308 Fair value 21.269 153 -- 356 937 779 83 29.696 -- -- 35 53.308 Loan and advances to customers Carrying value (amortised cost) 2.994.571 9.369 922 104 1 92 2.867 37.810 1.516 411 5.600 3.053.263 Accumulated impairment losses (1.259.438) (173) (1.203) (10) (3) (3) (423) (8.028) (2.070) (4) (2.078) (1.273.433) Fair value 2.942.474 8.554 875 94 1 89 2.855 35.754 1.493 404 5.310 2.997.903 Assets available for sale Government Bonds Nominal value 157.691 ------157.691 Carrying value (fair value) 166.940 ------166.940 Accumulated amount of the fair value reserve 2.530 ------2.530 Bank bonds Nominal value -- -- 10.000 4.000 ------14.000 Carrying value (fair value) -- -- 9.887 3.981 ------13.868 Accumulated impairment losses -- -- (75) ------(75) Accumulated amount of the fair value reserve ------(18) ------(18) Other bonds Nominal value ------Carrying value (amortised cost) ------Accumulated amount of the fair value reserve ------Total book value 3.409.903 9.522 10.809 4.441 938 871 2.950 67.506 1.516 411 5.937 3.514.804 The liquidassets ratio for theEuro was as follows: the Bankshouldalways equalorexceed 20%.Liquidassets comprise ofcash, interbank depositsanddebt securities. required by theCentral BankDirective onPrudential Liquidityin Euro. According totheDirective, theliquidassets ratioof In managingliquidityriskfor theEuro, theGroup calculates andmonitors, amongotherratios, theliquidassets ratio liquidity inEuro isbeingmonitored separately, whereas theliquidityinallforeign currencies, islumpedtogether. The liquidityriskofthebankingunitismonitored dailyby Group Market andLiquidityRiskManagement. At Group level, the whenever necessary. Regular stress testing scenarios are performed to simulate extreme conditions andtheappropriate measures are taken and through competitive and transparent pricing strategies. sources. Thisismainlyachieved through themaintenance ofgood andlongstanding relationships oftrust withcustomers The Group placesemphasisonthemaintenance ofstable customer deposits,asthey represent oneofitsbasicfunding the conditions prevailing inthe various markets. compliance withregulatory limits),isundertaken by theGroup Treasury department andislocally effected dependingon The Group currently operates mainlyinCyprus.Themanagement oftheliquidityGroup’s bankingunits(including well asunderstress conditions, withouttheGroup incurringany additional costs. loans), that there isadequate liquidityinorder to satisfy itsobligations, whenthey arise,under“normal”circumstances as possible (considering that themainrole oftheBankasanintermediary isto accept shortterm depositsandgrant longterm obligations, withoutincurringadditional costs. The Group’s approach inmanagingliquidityriskis toensure, totheextent Liquidity riskistheofdecrease inprofits or capital, arisingfrom a weakness oftheBank to meet itsimmediate Liquidity Risk the Board RiskManagement Committee andtheBoard ofDirectors itself. and for theirdailyassessment andmonitoring. Policies are reviewed at regular timeintervals andare approved by theALCO, approved by theALCO. Group RiskManagement isresponsible for developing policiesandprocesses for managingtherisks units undertheGroup Treasury department. Group Treasury manages risks usingaframework ofactivitiesandlimits The Group’s approach towards market andliquidity riskmanagement isto concentrate theserisks for allGroup business framework ofriskpoliciesand limitsdefined by theALCO. Management isresponsible for theassessment, monitoring andmanagement ofGroup market andliquidityrisks withinthe Directors regarding therisks andprofitability arisingfrom theGroup’s assets andliabilities. Group Market andLiquidityRisk The Assets andLiabilitiesManagement Committee (ALCO) is responsible forimplementing thepolicyofBank’s Board of GROUP MARKETANDLIQUIDITYRISKMANAGEMENT Market andLiquidityRisks 48. RISKMANAGEMENT (continued) At 31December Average for theyear Maximum percentage for theyear Minimum percentage for theyear 44,08 43,48 47,41 38,07 2016 HELLENIC %

GROUP BANK 41,64 44,47 48,95 41,46 2015 %

ANNUAL REPORT 169 2016

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48. RISK MANAGEMENT (continued)

At Group level, the liquidity in all foreign currencies is being monitored on an aggregate basis. According to the relevant Directive of the Central Bank of Cyprus on Prudential Liquidity in foreign currency, the Bank needs to maintain at least 70% of its total foreign currency deposits in highly liquid assets.

The liquid assets ratio in foreign currencies was as follows:

2016 2015 % % At 31 December 86,38 87,83 Average for the year 83,06 82,62 Maximum percentage for the year 90,62 92,99 Minimum percentage for the year 66,02¹ 77,11

(Note 1: This figure fell below the regulatory limit for three days, immediately following the successful exit of Cyprus from its economic and financial adjustment program. A more detailed explanation is provided below).

The ratio is calculated based on items expressed in all foreign currencies other than Euro.

The tables below present the undiscounted cash flows of the Group’s liabilities based on their remaining contractual maturity dates.

Analysis of financial liabilities based on their remaining contractual maturity as at 31 December 2016

Between Gross three nominal Within months Between Carrying (inflows)/ On three and one one and Over five amount outflows demand months year five years years €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Financial liabilities Deposits by banks 100.652 100.674 74.309 16.830 9.535 -- -- Customer deposits and other customer accounts 6.111.088 6.119.753 3.687.878 1.133.329 1.191.723 104.427 2.396 Derivatives - Cash inflows (154.898) (59.348) (95.550) ------Cash outflows 156.457 60.000 96.457 ------Taxation payable 5.422 5.422 5.422 ------Deferred tax liability 1.980 1.980 ------1.980 -- Other liabilities 111.924 107.691 84.798 6.909 7.549 6.955 1.480 Loan capital 139.667 140.073 -- 60 183 10.162 129.668 6.470.733 6.477.152 3.853.059 1.158.035 1.208.990 123.524 133.544

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48. RISK MANAGEMENT (continued)

Analysis of financial liabilities based on their remaining contractual maturity as at 31 December 2015

Between Gross three nominal Within months Between Carrying (inflows)/ On three and one one and Over five amount outflows demand months year five years years €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Financial liabilities Deposits by banks 76.938 76.971 52.629 17.184 7.158 -- -- Amounts due to Central Banks 236.373 237.356 ------237.356 -- Customer deposits and other customer accounts 6.138.705 6.148.119 3.737.622 1.096.444 1.192.806 119.727 1.520 Derivatives 7.362 - Cash inflows (191.236) (79.793) (111.443) ------Cash outflows 192.371 80.000 112.371 ------Taxation payable 5.314 5.314 5.314 ------Deferred tax liability 1.472 1.472 ------1.472 -- Other liabilities 106.945 106.934 65.720 4.483 7.500 20.695 8.536 Loan capital 181.468 182.453 -- 206 42.143 10.438 129.666 6.754.577 6.759.754 3.861.492 1.119.245 1.249.607 389.688 139.722

The liquid assets of the Group, calculated in accordance with the instructions of the Central bank of Cyprus for the purposes of Prudential Liquidity in Euro and foreign currencies as at 31 December, were as follows:

2016 2015 €΄000 €΄000 Cash and balances with Central Banks 2.083.444 2.029.180 Placements with other banks 420.534 770.728 Debt securities 945.417 609.273 Equity securities and Collective investments units 6.412 5.169 3.455.807 3.414.350

The Group has the ability to raise liquidity through the mechanisms of the European Central Bank.

On the 16th of March 2016, the ECB issued a decision which was effective from the 1st of April 2016, and which stated that the Eurosystem’s standard criteria and credit quality thresholds should apply in respect of marketable debt instruments issued or fully guaranteed by the Republic of Cyprus and that such debt instruments would be subject to the standard haircuts according to the ECB guidelines. This was a consequence of the completion of Cyprus economic and financial adjustment programme and it effectively meant that the bonds issued by the Government of Cyprus held by Hellenic Bank would no longer be accepted as collateral for the purposes of Eurosystem monetary policy operations. This decision has led to a temporary breach of some of the prudential liquidity ratios of the Central Bank of Cyprus. On 2 June 2016, however, CBC issued a decision effective immediately, which allowed Cypriot banks to consider their holdings in Cyprus Government securities as liquid for prudential liquidity reporting purposes. This decision would hold for as long as the Cyprus sovereign debt was rated below investment grade (and hence non-ECB eligible) and for a maximum period of 12 months since the decision was issued, and would be subject to certain conditions being met.

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48. RISK MANAGEMENT (continued) 2016 REPORT ANNUAL

The table below presents the encumbered and unencumbered assets:

The Group The Bank Carrying amount of Carrying amount of Carrying amount of Carrying amount of encumbered assets of unencumbered assets encumbered assets of unencumbered assets which European Central of which European which European Central of which European Bank’s eligible Central Bank’s eligible Bank’s eligible Central Bank’s eligible

31 December 2016 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Loans on demand 618 -- 2.110.285 -- 618 -- 2.097.634 -- Equity instruments -- -- 8.503 ------8.503 -- Debt securities -- -- 1.149.132 55.482 -- -- 1.142.704 55.482 Loans and advances other than loans on demand 110.361 -- 3.283.442 -- 110.361 -- 3.284.449 -- Other assets -- -- 375.262 ------350.158 -- Total assets 110.979 -- 6.926.624 55.482 110.979 -- 6.883.448 55.482

The Group The Bank Carrying amount of Carrying amount of Carrying amount of Carrying amount of encumbered assets of unencumbered assets encumbered assets of unencumbered assets which European Central of which European which European Central of which European Bank’s eligible Central Bank’s eligible Bank’s eligible Central Bank’s eligible

31 December 2015 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Loans on demand 29 -- 2.054.390 -- 29 -- 2.054.255 -- Equity instruments -- -- 8.094 ------8.094 -- Debt securities 323.506 323.506 719.506 314.551 323.506 323.506 713.744 314.551 Loans and advances other than loans on demand 112.206 -- 3.800.143 -- 112.206 -- 3.797.977 -- Other assets -- -- 379.499 ------355.029 -- Total assets 435.741 323.506 6.961.632 314.551 435.741 323.506 6.929.099 314.551

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48. RISK MANAGEMENT (continued)

Market Risks

Market risks are derived from a change in the value of the Group’s statement of financial position and the uncertainty in the stream of future earnings, resulting from changes in market conditions (volatility in foreign exchange, interest rates and stock exchange prices).

The Group has defined its strategy and methods of continuous monitoring for the control of market risk undertaking and the prudential management of these risks. More specifically, this is achieved mainly through the implementation of position and stop loss limits for foreign currency and other trading limits. In addition, the Bank maintains an approved Bonds Investment Framework with various limits, such as a limit on total investments, limits per issuer group, limits on maturities and limits on Value at Risk.

The Bank carries out its activities involving foreign currency through correspondence banks for the respective currencies. For the major currencies, the Bank maintains three bank relationships for USD, including one which is a full service relationship, three bank relationships for GBP, four bank relationships for RUB, and two bank relationships for CHF.

The table below presents the distribution of assets and liabilities that are subject to market risk between trading and non- trading portfolios:

The Group The Bank Carrying Trading Non-trading Carrying Trading Non-trading amount portfolios portfolios amount portfolios portfolios 31 December 2016 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 2.083.444 -- 2.083.444 2.083.443 -- 2.083.443 Derivatives 10.926 10.926 -- 10.926 10.926 -- Placements with other banks 548.902 -- 548.902 537.259 -- 537.259 Loans and advances to customers 2.926.033 -- 2.926.033 2.926.033 -- 2.926.033 Debt ,equity securities & Collective Investments Units 1.165.140 293 1.164.847 1.151.207 293 1.150.914 6.734.445 11.219 6.723.226 6.708.868 11.219 6.697.649

The Group The Bank Carrying Trading Non-trading Carrying Trading Non-trading amount portfolios portfolios amount portfolios portfolios 31 December 2016 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Liabilities Derivatives 4.227 4.227 -- 4.227 4.227 -- Deposits 6.211.740 -- 6.211.740 6.211.740 -- 6.211.740 Loan capital 10.000 -- 10.000 10.000 -- 10.000 Subordinated loan capital 129.667 -- 129.667 129.667 -- 129.667 6.355.634 4.227 6.351.407 6.355.634 4.227 6.351.407

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48. RISK MANAGEMENT (continued)

The Group The Bank Carrying Trading Non-trading Carrying Trading Non-trading amount portfolios portfolios amount portfolios portfolios 31 December 2015 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 2.029.180 -- 2.029.180 2.029.179 -- 2.029.179 Derivatives 6.653 6.653 -- 6.653 6.653 -- Placements with other banks 909.849 -- 909.849 907.550 -- 907.550 Loans and advances to 3.092.773 3.092.773 -- 3.092.773 customers 3.092.773 -- Debt, equity securities & Collective investments units 1.058.152 2.101 1.056.051 1.045.346 2.101 1.043.245 Shares held for sale 12.381 -- 12.381 12.381 -- 12.381 7.108.988 8.754 7.100.234 7.093.882 8.754 7.085.128

The Group The Bank Carrying Trading Non-trading Carrying Trading Non-trading amount portfolios portfolios amount portfolios portfolios 31 December 2015 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Liabilities Derivatives 7.362 7.362 -- 7.362 7.362 -- Deposits 6.452.016 -- 6.452.016 6.452.016 -- 6.452.016 Loan capital 51.801 -- 51.801 51.801 -- 51.801 Subordinated loan capital 129.667 -- 129.667 129.667 -- 129.667 6.640.846 7.362 6.633.484 6.640.846 7.362 6.633.484

FOREIGN EXCHANGE RISK

Foreign exchange risk arises from the undertaking of an open position in one or more foreign currencies. Group Market and Liquidity Risk Management monitors foreign currency positions on an ongoing basis within the risk management framework and the limits set by the ALCO and the regulatory authority. Within this framework, there are nominal limits (by currency, in total, during the day, end-of-day), gain/loss limits and Value-at-Risk (VaR) limits. The regulatory limits for open positions during working hours exceed the limits for open positions during non-working hours.

The VaR methodology is an important tool for the monitoring of foreign exchange risk. With this methodology, the Group calculates the maximum potential loss that may be incurred as a result of changes in market conditions, at a confidence level of 99% and over a one day period (using the parametric method) based on the historical data of foreign exchange rate parities over a period of one year.

The table below presents VaR figures for the Group’s foreign exchange risk:

2016 2015 €΄000 €΄000 At 31 December 11 9 Average for the year 9 9 Maximum amount for the year 20 17 Minimum amount for the year 3 5

The limitations of the VaR methodology are derived from the fact that the historical data used in the calculation may not be indicative of future events.

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48. RISK MANAGEMENT (continued)

Analysis of assets and liabilities by currency as at 31 December 2016

British Swiss Other Euro US Dollar pound Rouble Franc currencies Total €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 2.078.900 2.751 1.500 56 65 172 2.083.444 Placements with other banks 35.601 324.001 102.568 43.296 3.611 39.825 548.902 Loans and advances to customers 2.687.988 123.205 7.062 4 94.899 12.875 2.926.033 Debt securities 685.982 463.150 ------1.149.132 Equity securities & Collective investments units 16.008 ------16.008 Property, plant and equipment 99.648 ------99.648 Intangible assets 26.526 ------26.526 Tax receivable 127 ------127 Deferred tax asset 8.465 ------8.465 Other assets 167.303 11.760 161 -- -- 95 179.319 Total assets 5.806.548 924.867 111.291 43.356 98.575 52.967 7.037.604

Liabilities Deposits by banks 53.668 46.984 ------100.652 Customer deposits and other customer accounts 4.614.673 1.308.763 108.249 43.277 4.662 31.464 6.111.088 Tax payable 5.422 ------5.422 Deferred tax liability 1.980 ------1.980 Other liabilities 104.547 3.096 2.899 -- 900 482 111.924 4.780.290 1.358.843 111.148 43.277 5.562 31.946 6.331.066

Loan capital 139.667 ------139.667

Equity Share capital 99.237 ------99.237 Reserves 464.252 ------464.252 Equity attributable to shareholders of the parent company 563.489 ------563.489 Non-controlling interests 3.382 ------3.382

566.871 ------566.871 Total liabilities and equity 5.486.828 1.358.843 111.148 43.277 5.562 31.946 7.037.604 Total position 319.720 (433.976) 143 79 93.013 21.021 Effect of foreign currency derivatives on position (319.714) 434.156 (147) -- (93.615) (20.680)

Net currency position 6 180 (4) 79 (602) 341

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48. RISK MANAGEMENT (continued)

Analysis of assets and liabilities by currency as at 31 December 2015

British Swiss Other Euro US Dollar pound Rouble Franc currencies Total €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 2.026.077 1.879 1.116 13 19 76 2.029.180 Placements with other banks 45.833 681.039 93.547 62.233 2.387 24.810 909.849 Loans and advances to customers 2.821.163 115.714 7.257 2 130.532 18.105 3.092.773 Debt securities 735.852 279.650 27.510 ------1.043.012 Equity securities & Collective investments units 15.140 ------15.140 Property, plant and equipment 98.564 ------98.564 Intangible assets 22.640 ------22.640 Tax receivable 66 ------66 Deferred tax asset 58.094 ------58.094 Other assets 121.140 6.720 59 -- -- 136 128.055 Total assets 5.944.569 1.085.002 129.489 62.248 132.938 43.127 7.397.373

Liabilities Deposits by banks 70.937 4.967 ------1.034 76.938 Amounts due to Central Banks 236.373 ------236.373 Customer deposits and other customer accounts 4.490.440 1.421.660 128.845 62.224 11.302 24.234 6.138.705 Tax payable 5.314 ------5.314 Deferred tax liability 1.472 ------1.472 Other liabilities 106.714 6.477 557 -- 39 520 114.307 4.911.250 1.433.104 129.402 62.224 11.341 25.788 6.573.109

Loan capital 181.468 ------181.468

Equity Share capital 99.217 ------99.217 Reserves 540.380 ------540.380 Equity attributable to shareholders of the parent company 639.597 ------639.597 Non-controlling interests 3.199 ------3.199

642.796 ------642.796 Total liabilities and equity 5.735.514 1.433.104 129.402 62.224 11.341 25.788 7.397.373 Total position 209.055 (348.102) 87 24 121.597 17.339 Effect of foreign currency derivatives on position (209.110) 347.157 (64) -- (121.595) (16.388)

Net currency position (55) (945) 23 24 2 951

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48. RISK MANAGEMENT (continued)

INTEREST RATE RISK

Interest rate risk arises as a result of timing differences on the interest rate repricing of assets and liabilities.

Interest rate risk is managed through the monitoring of interest rate gaps by currency, by time interval and in total (gap analysis).

Group Market and Liquidity Risk Management monitors interest rate positions on a continuous basis, within the risk management framework and limits set by the ALCO².

(Note 2: A proportion of current and sight deposits is assumed to be more stable (core deposits) and is slotted in time buckets with an average maturity of three years.)

Analysis of assets and liabilities based on their contractual repricing or maturity dates as at 31 December 2016

Between Between three Between Within one and months one Non-interest one three and one and five Over five bearing month months year years years Total €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 54.672 2.028.772 ------2.083.444 Placements with other banks 22.438 526.464 ------548.902 Loans and advances to customers -- 209.832 2.450.848 253.834 7.067 4.452 2.926.033 Debt securities -- 94.416 49.749 161.762 369.341 473.864 1.149.132 Equity securities & Collective investments units 8.503 ------7.505 -- 16.008 Property, plant and equipment 99.648 ------99.648 Intangible assets 26.526 ------26.526 Tax receivable 127 ------127 Deferred tax asset 8.465 ------8.465 Other assets 179.319 ------179.319 Total assets 399.698 2.859.484 2.500.597 415.596 383.913 478.316 7.037.604

Liabilities Deposits by banks -- 74.361 11.105 15.186 -- -- 100.652 Customer deposits and other customer accounts -- 3.182.626 582.732 1.512.406 665.881 167.443 6.111.088 Tax payable 5.422 ------5.422 Deferred tax liability 1.980 ------1.980 Other liabilities 111.924 ------111.924 119.326 3.256.987 593.837 1.527.592 665.881 167.443 6.331.066 Loan capital 129.667 -- 10.000 ------139.667

Total liabilities 248.993 3.256.987 603.837 1.527.592 665.881 167.443 6.470.733 Total position 150.705 (397.503) 1.896.760 (1.111.996) (281.968) 310.873 566.871 Nominal value of interest rate derivatives -- 5.744 33.829 (48.896) 9.323 -- --

Net position 150.705 (391.759) 1.930.589 (1.160.892) (272.645) 310.873 566.871

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48. RISK MANAGEMENT (continued)

Analysis of assets and liabilities based on their contractual repricing or maturity dates as at 31 December 2015

Between Between three Between Within one and months one Non-interest one three and one and five Over five bearing month months year years years Total €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 65.037 1.964.143 ------2.029.180 Placements with other banks 18.872 890.873 -- 104 -- -- 909.849 Loans and advances to customers -- 2.402.797 385.699 290.977 10.147 3.153 3.092.773 Debt securities -- 79.551 52.841 79.986 450.410 380.224 1.043.012 Equity securities & Collective investments units 8.094 ------7.046 -- 15.140 Property, plant and equipment 98.564 ------98.564 Intangible assets 22.640 ------22.640 Tax receivable 66 ------66 Deferred tax asset 58.094 ------58.094 Other assets 128.055 ------128.055 Total assets 399.422 5.337.364 438.540 371.067 467.603 383.377 7.397.373

Liabilities Deposits by banks -- 53.687 16.109 7.142 -- -- 76.938 Amounts due to Central Banks ------236.373 -- 236.373 Customer deposits and other customer accounts -- 4.308.563 609.886 1.206.756 11.948 1.552 6.138.705 Tax payable 5.314 ------5.314 Deferred tax liability 1.472 ------1.472 Other liabilities 114.307 ------114.307 121.093 4.362.250 625.995 1.213.898 248.321 1.552 6.573.109

Loan capital 129.667 -- 51.801 ------181.468

Total liabilities 250.760 4.362.250 677.796 1.213.898 248.321 1.552 6.754.577 Total position 148.662 975.114 (239.256) (842.831) 219.282 381.825 642.796 Nominal value of interest rate derivatives -- 6.210 15.638 (740) (21.108) -- --

Net position 148.662 981.324 (223.618) (843.571) 198.174 381.825 642.796

In addition to monitoring interest rate gaps, interest rate risk management is carried out mainly by monitoring the sensitivity of the Group’s Economic Value (Net Present Value) and Net Interest Income under various interest rate change scenarios. The ALCO is regularly informed about the magnitude of interest rate risk and makes decisions for the management of the risk based on this information. Scenario calculations for interest rate changes consider both parallel and non-parallel shifts of the yield curve. Additionally, analyses based on stress testing scenarios are also performed.

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48. RISK MANAGEMENT (continued)

The table below presents the impact on Net Interest Income and Group’s Economic Value (Net Present Value) from reasonably possible changes in interest rates:

Net Interest Net Present Income Value €’000 €’000 2016 +100 basis points 40.629 (11.333) 3 -100 basis points (40.629) 11.333

Net Interest Net Present Income Value €’000 €’000 2015 +100 basis points 35.495 (5.246) 3 -100 basis points (35.495) 5.246

(Note 3: Under the current circumstances, an interest rate reduction by 100 basis points is theoretical since market interest rates in most foreign currencies in which the Group holds a position, with the exception of USD, are at lower levels.)

PRICE RISK

Price risk is derived from the undertaking of an open position in equities, bonds or derivatives. The Group manages this risk through policies and procedures of setting and monitoring open position limits, stop loss limits and concentration limits by issuer on trading positions, and various quantitative limits on bond investments.

The table below presents the impact on financial results and own funds (including the impact from changes in net profits) from reasonably possible changes in equity prices which are traded on stock exchanges:

2016 2015 Net Own Net Own profits Funds profits Funds €’000 €’000 €’000 €’000 +15% change in index 44 1.232 42 1.172

-15% change in index (44) (1.232) (42) (1.172)

Operational risk Operational risk is defined as the risk of, direct or indirect, costs/losses resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal, conduct and reputational risks, but excludes strategic risk.

The Group has adopted the principles and provisions set out in the guidelines of the Directives of the Central Bank of Cyprus, the Single Supervisory Mechanism, Basel III as adopted by the EU and the Committee for European Banking Supervisors (CEBS).

The Group has developed a strong framework for the management of operational risk, by adopting operational risk principles in line with Basel Committee’s sound principles and taking into account its risk appetite and tolerance. The governance structures are developed to ensure that these principles are met at all times. The financial insurance coverage held by the Group is regarded as an effective tool for mitigating operational risks and forms part of this framework.

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48. RISK MANAGEMENT (continued)

The management of operational risk, through their knowledge and the implementation of an appropriate mitigation framework, constitutes one of the priorities for the Group. This involves all employees and is integrated into the various decision-making processes within the Group.

The Board supports the development of a robust operational risk management culture where the roles of business and control functions under a three lines of defence model, are well understood and respected. The Board encourages open discussion, challenge and thorough analyses of operational risks identified, to ensure that they are managed within the Group’s risk appetite.

Management of Operational Risk is supported and overseen by an independent Operational Risk Unit under the Chief Risk Officer. The Group Operational Risk Unit is empowered to oversee operational risk management. This is effected through establishing and providing support in implementing and embedding policies, responsibly aligning these policies with risk and strategy and providing assurance to Internal Audit. Indicative examples of control mechanisms are effective segregation of duties, access authorisation and reconciliation procedures, ongoing staff training and assessment processes as well as the utilisation of operational risk indicators.

The “Risk Control Self-Assessment” process is being implemented where departments, with the cooperation of the Group Operational Risk Unit, identify and assess potential risks inherent in their specific processes and activities, on a residual risk basis. Internal integrated controls and measures for monitoring operational risks form part of the assessment process. Where appropriate, Risk Indicators are agreed for the monitoring of the identified risks, and where necessary action plans guide remedial actions.

A holistic and efficient solution has been deployed for operational risk incident management purposes, as well as to enhance operational risk assessment, management and reporting. The system’s functionality embraces the requirements of operational-risk-related units; such as Information Security, Business Continuity, Health, Safety & Security, Compliance and Audit.

The Group Operational Risk Unit informs on regular intervals the Management and Risk Committee of the Board of Directors of the operational risks that the Group faces.

Capital management

Capital management ensures compliance with the regulatory requirements, which are set by the responsible Regulatory Bodies for banks in Cyprus. According to the European Council’s Regulation (EC) 1024/2013, specific tasks concerning policies relating to the prudential supervision of credit institutions have been assigned to the European Central Bank (ECB). Since 4th November 2014 the ECB has taken on full responsibility for the supervision of important credit institutions in participating Member States, including the Group, with the assistance of the local supervisory authorities. The Central Bank of Cyprus (CBC), as part of its supervisory role, has adopted the recommendations of the Basel Committee and the European Directives on banking supervisory matters.

As of 1st January 2014, the European Parliament’s and Council’s Directive 2013/36/EU (CRD IV) and the Regulation (EU) No 575/2013 (CRR) of 26 June 2013 became effective comprising the European regulatory package designed to transpose the new capital, liquidity and leverage standards of Basel III into the European Union’s legal framework.

The Regulation (EU) No 575/2013 (CRR) establishes the prudential requirements for capital, liquidity and leverage that entities need to abide by and is immediately binding on all European Union Member States. The Directive 2013/36/ EU (CRD IV) governs access to deposit-taking activities and internal governance arrangements including remuneration, board composition and transparency, while it also sets out additional capital buffer requirements. Unlike the Regulation (EU) No 575/2013 (CRR), the Directive 2013/36/EU (CRD IV) has been transposed into national law. The Regulation (EU) No 575/2013 (CRR) introduces significant changes in the prudential and regulatory regime applicable to banks including amended minimum capital adequacy ratios, changes to the definition of capital, changes in the calculation of risk-weighted assets and the introduction of new measures relating to leverage, liquidity and funding.

The CRR permits a transitional period for certain of the enhanced capital requirements and certain other measures, such as the leverage ratio, which will be largely fully effective by 2019, and some other transitional provisions with phase-in until 2024.

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48. RISK MANAGEMENT (continued)

CURRENT DEVELOPMENTS

The Bank is in the process of examining the draft guidelines of the CRR II/CRD V in order to be prepared for the effects of the upcoming amendments.

The Basel Committee is currently developing significant revisions to the calculation of credit, market and operational risk and is proposing a new “capital floor” to limit the extent to which a bank’s internal models-based approaches can drive its calculations for credit and market risks below those under the standardised approaches for these risks. The Basel Committee’s revised framework for the standardised approach to Counterparty Credit Risk has already been finalised, as well as for the Interest Rate Risk in the Banking Book and for Market Risk, with a recommended implementation date of 2017, 2018 and 2019 respectively. All these revisions are part of “Basel IV”.

The wide-ranging nature of these revisions means that they will have to be applied in the EU through substantial revisions to the CRR (CRR II) and through a new round of EBA technical standards and guidance.

Basel III comprises of three Pillars:

• Pillar I–Enhanced minimum capital and liquidity requirements • Pillar II–Enhanced supervisory review process for firm-wide risk management and capital planning • Pillar III–Enhanced risk disclosure and market discipline

PILLAR I – ENHANCED MINIMUM CAPITAL AND LIQUIDITY REQUIREMENTS

(i) Capital Requirements

Pillar I sets forth the guidelines for calculating the minimum capital requirements to cover the credit risk, the market risk and the operational risk.

The Group has adopted the Standardised Approach for the calculation of the minimum capital against credit risk. Under this approach, exposures are classified in specified classes and are weighed using specific weights, depending on the class the exposures belong to, their credit rating and/or the characteristics of the exposure. Also, the Basel framework suggests two alternative methods for the recognition of collateral, the Simple Approach and the Comprehensive Approach. The Group has applied the Comprehensive Approach, as it allows for a fairer recognition and better measurement of the Group’s collaterals.

Regarding market risk, the Group has adopted the Standardised Approach, according to which the minimum capital requirement is estimated by adding together the capital requirements of positions on interest rates, equity and debt securities, foreign exchange and derivatives derived from the Trading Portfolio using predefined models, by risk category.

The Group uses the Basic Indicator Approach for the calculation of the capital requirements for operational risk. Under the Basic Indicator Approach, the own funds requirement for operational risk is equal to 15% of the average of three years of the relevant indicator as set out in Article 316 of the CRR. The relevant indicator is based on the sum of the Group’s net interest income and its net non-interest income after certain qualification adjustments.

The Group’s Capital policy aims to ensure the viability of the Bank through the maintenance of an appropriate level of capital, so as to meet regulatory requirements and internal buffers set, safeguard the best interests of shareholders and support its business strategy.

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48. RISK MANAGEMENT (continued)

The Group’s regulatory capital is calculated in accordance with the provisions of the Regulation (EU) No 575/2013 and is analysed as follows:

• Common Equity Tier 1, which includes share capital, share premium, reduction of share capital reserve, retained earnings including the profit/loss for the year, the revaluation reserve (i.e. revaluation reserve of investment in debt securities, revaluation reserve of investment in equities and property revaluation reserve) and other reserves i.e. translation reserve. The carrying amount of goodwill and other intangible assets and deferred tax assets that rely on future profitability and do not arise from temporary differences are deducted from Common Equity Tier 1 capital subject to the transitional provisions of the relevant circular of the CBC (R.A.A. 393/2014). Also deducted from CET1 Capital is the Group’s contribution to the Investors Compensation Fund, as per the requirements of Circular 162 issued on 10th October 2016 by the Cyprus Securities and Exchange Commission (CySec). • Additional Tier 1 capital, which includes hybrid instruments, composed by Convertible Capital Securities 1 (CCS1) and Convertible Capital Securities 2 (CCS2). A portion of the carrying amount of intangible assets is deducted from Additional Tier 1 capital subject to the transitional provisions of the relevant circular of the CBC. • Tier 2 capital, which includes subordinated loan capital. The direct holdings of Tier 2 instruments are deducted from Tier 2 capital. In addition, other transitional adjustments in relation to property revaluation reserve are added to Tier 2 capital.

With regards to the Bank’s significant investments in financial sector entities, including its investments in subsidiary companies which operate in the insurance sector and deferred tax assets that rely on future profitability and arise from temporary differences, the Bank applied the exemptions from deduction from CET1 in accordance with the provisions of Article 470 of the European Regulation No. 575/2013 and these items are risk weighted at 250%.

The position of the Group’s regulatory capital and risk weighted assets as at 31 December was as follows:

2016 2015 €’000 €’000 Own funds Common Equity Tier 1 (CET1) 517.549 583.733 Additional Tier 1 (AT1) 119.085 116.103 Tier 1 (Τ1) 636.634 699.836 Tier 2 (T2) 8.846 17.892 Total regulatory capital 645.480 717.728

Risk weighted assets Credit risk 3.271.474 3.458.331 Market risk 9.318 10.095 Operational risk 460.788 488.725 Total risk exposure amount for credit valuation adjustments (CVA) 1.925 1.100 Total risk weighted assets 3.743.505 3.958.251

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48. RISK MANAGEMENT (continued)

The Capital Adequacy Ratios of the Group and the Bank under Pillar I, which are all above the minimum regulatory requirements as at 31 December 2016, were as follows:

Group Bank Group (fully loaded (transitional (transitional basis) basis) basis) 31 December 31 December 31 December 31 December Capital Adequacy Ratios 2016 2015 2016 2016 Capital Adequacy Ratio (%) 17,24% 18,13% 17,00% 17,21% Tier 1 Ratio (%) 17,01% 17,68% 16,92% 16,97% Common Equity Tier 1 (CET 1) Ratio (%) 13,83% 14,75% 13,45% 13,79% Common Equity Tier 1 capital (€million) 518 584 504 517

The decrease in CET 1 ratio compared to 31 December 2015, was mainly the result of the derecognition of deferred tax asset arising from tax losses and increase in provisions for impairment losses and provisions to cover credit risk.

SUPERVISORY REVIEW AND EVALUATION PROCESS (SREP) 2015

As from 20 November 2015 the Bank is required to maintain, on a consolidated basis, a CET 1 capital ratio of 11,75%, as such ratio is defined in Regulation (EU) No 575/2013 of the European Parliament and of the Council, including a fully loaded capital conservation buffer (CCB) of 2,5%. The ECB decision was based on the SREP conducted on the information available with reference date 31 December 2014.

In February 2017, the House of Representatives in Cyprus passed into law, an amendment in the Business of Credit Institutions Law which introduces a transitional period for the application of CCB requirement with retrospective application from 1st January 2016 of 0,625% with full implementation from 1st January 2019 of 2,5%.

If the provisions of the above law amendment are applied the minimum CET 1 ratio is reduced to 9,875% for 2016.

SUPERVISORY REVIEW AND EVALUATION PROCESS (SREP) 2016

In December 2016, following ECB’s final decision in establishing prudential requirements, which was based on the SREP conducted pursuant to Article 4(1)(f) of Regulation (EU) No 1024/2013 with reference date 31 December 2015, and also having regard to other relevant information received thereafter, the Bank is required to maintain for 2017, on a consolidated basis, a phase-in Capital Adequacy Ratio of 12,75%, which includes:

• the minimum Pillar I own funds requirements of 8% in accordance with Article 92(1) of Regulation (EU) No 575/2013 (of which up to 1,5% can be met with Additional Tier 1 Capital and up to 2% with Tier 2 Capital), • an own funds Pillar II requirement of 3,5% required to be held in excess of the minimum own funds requirement (to be made up entirely of CET 1 Capital), and • a phased-in combined buffer requirement which for 2017 includes the capital conservation buffer (CCB) of 1,25% following the above law amendment, which have to be made up of CET 1 capital.

Furthermore the Bank is prohibited from making distributions to shareholders until 31 December 2017.

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48. RISK MANAGEMENT (continued)

Additionally, applicable for Hellenic Bank, the combined buffer requirement includes: • an O-SII buffer of 1% fully loaded and is phased-in over a period of four years with application starting from 1st of January 2019, • a Counter-Cyclical Capital Buffer (CCyB) for which the CBC has set the level at 0% for 2016 and for the first and second quarter of 2017 (the Institution specific CCyB for 2016 was 0%), • Systemic Risk Buffer which has not been set to date.

Taking into account the phased-in legislation for CCB, the Group’s minimum CET1 and Tier 1 ratios effective as from 1st January 2017 are set at 9,25% and 10,75% respectively.

In addition to the above, the ECB has set, on a consolidated basis, a Pillar II capital guidance to be made up entirely of CET 1 capital, effective as from 1st January 2017.

(ii) Liquidity and Leverage Ratio Requirements

CRR sets forth the guidelines for calculating liquidity measures such as the Liquidity Coverage Requirement ratio (LCR) and Net Stable Funding ratio (NSFR). LCR is calculated as the sum of high quality liquid assets over the expected net liquidity outflows during the next 30 days, as these net outflows are specified under a stress scenario. At times of stress, institutions may use their liquid assets to cover their net liquidity outflows. The LCR of the Group was at 270% as at 31 December 2016 compared to 295% as at 31 December 2015.

The NSFR is defined as the amount of available stable funding (the portion of capital and liabilities expected to be reliable over the one year horizon) over the amount of required stable funding (based on the liquidity characteristics and residual maturities of the various assets held and off-balance sheet exposures). The ratio has a one year horizon and should be at least 100%. The NSFR of the Group was 157% as at 31 December 2016.

Additionally, Pillar I sets forth the guidelines for calculating the leverage ratio as an institution’s capital measure divided by the institution’s total exposure measure expressed as a percentage.

The leverage ratio of the Group is calculated using two capital measures: (a) Tier 1 capital: fully phased-in definition. (b) Tier 1 capital: transitional definition.

According to the Regulation No.2015/62 of the European Parliament and Council dated 10th October 2014, as at 31 December 2016 the Leverage Ratio for the Group was 8,75% (Bank: 8,74%) compared to 9,05% (Bank: 9,04%) as at 31 December 2015. The Leverage Ratio on a fully loaded basis for the Group was formed at 8,71% (Bank: 8,70%) compared to 8,60% (Bank: 8,59%) as at 31 December 2015.

Even before its full implementation in 2018, and as per relevant CBC instructions, the Net Stable Funding Ratio (NSFR) is being monitored by the Bank and reported quarterly to CBC.

PILLAR II – ENHANCED SUPERVISORY REVIEW PROCESS FOR FIRM-WIDE RISK MANAGEMENT AND CAPITAL PLANNING

Pillar II aims at enhancing the link between an institution’s risk profile, risk management, risk mitigation systems and its capital planning. Pillar II is divided into two major components, the Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP).

The ICAAP is reviewed and evaluated by the Single Supervisory Mechanism (SSM) as part of its SREP, which occurs periodically and contributes to SSM’s assessment of capital adequacy and additional own funds requirements.

ICAAP is an integral part within the holistic risk management approach at Hellenic Bank. It is integrated with the Bank’s strategic processes, including the Risk Appetite Framework and Business as well as Capital Planning.

During 2016 the Bank conducted the ICAAP to arrive at a forward looking assessment of its capital requirements taking into account the business strategy, risk profile and risk appetite utilising internal stress tests. The ICAAP incorporated the assessment of the Bank’s risk management processes and governance framework and was carried out in accordance with the guidance provided by the European Banking Authority (EBA) through the Guidelines on Common Procedures and Methodologies for SREP (EBA/GL/2014/13 – 19 December 2014) and the Consultation Paper on Guidelines on ICAAP and ILAAP Information collected for SREP purposes (EBA/CP/2015/26 – 03 November 2016).

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48. RISK MANAGEMENT (continued)

PILLAR III – ENHANCED RISK DISCLOSURE AND MARKET DISCIPLINE

Pillar III sets out required disclosures to allow market participants, having a full picture of the risk profile of the Group, to assess key pieces of information relevant to the capital structure, risk exposures, risk assessment processes and hence the capital adequacy of the Group.

Based on Part 8 “Disclosure by Institutions” of the Regulation (EU) No. 575/2013 (CRR) the banks shall disclose, among others, information relating to their objectives and risk management policies, the composition of their Common Equity Tier 1, Additional Tier 1 and Tier 2 Capital, their compliance with minimum capital requirements, their leverage ratio, their internal capital adequacy assessment process, their remuneration policy and their recruitment and staff evaluation processes.

The Group is fully in compliance with the requirements of the CRR regarding the disclosure of the Pillar III report, based on the Basel III principles as adopted by the European Union.

The Pillar III report is published by the Group at the end of April.

49. EVENTS AFTER THE REPORTING PERIOD

HELLENIC BANK AND APS SIGNED AN AGREEMENT FOR THE MANAGEMENT OF REAL ESTATE ASSETS AND THE SERVICING OF THE ENTIRE PORTFOLIO OF NON-PERFORMING EXPOSURES

On the 10th of January 2017, the Bank and APS Holding a.s reached an agreement for the management of real estate assets and servicing of the entire portfolio of non-performing exposures of the Bank. For this purpose a new company will be established in which the Bank will have 49% of shares, whereas APS Recovery Cyprus Ltd will own the majority of shares (51%). The operations of the current Arrears Management Division of the Bank will be transferred to the new company, including the necessary resources to carry on such work independently, in exchange for a positive consideration.

The new company’s management consist of Hellenic Bank’s staff, including its Chief Executive Officer, Mrs K. Papadopoulou, who currently holds the position of Group General Manager Arrears Management Division. Also about 160 employees of the Arrears Management Division of the Bank are expected to move to the new company.

It is noted that the Bank will retain the ownership of the portfolio of non-performing exposures and the real estate assets. It is anticipated that a portfolio of non-performing loans of about €2,4 billion will be serviced by the new company upon establishment.

APS Holding a.s is a specialised debt servicing company covering 11 European countries in Central and South Eastern Europe and has been selected following a competitive bidding process.

This agreement is of huge strategic importance for Hellenic Bank and falls under the Group’s strategy of reorganising and transforming its business model. The main pillars of the strategy is the reduction of non -performing exposures, the expansion of new lending thus increasing the Bank’s market share and the increase of its revenues through other banking activities.

By creating the first debt servicing and real estate asset management platform in the Cypriot market, the Bank will be able to effectively deal with its non-performing exposures in an accelerated way, by developing, expanding and improving the recoveries of NPEs through leveraging on the knowhow and expertise of APS. Furthermore, it will allow the Bank to better allocate its resources on managing and growing the performing loan book by using its excess liquidity to the benefit of the market, as well as on continuing its digital transformation journey, the optimisation of corporate governance and the adaptation to the expanding compliance framework.

The completion of the transaction is subject to applicable approvals and clearances from the relevant regulatory and any other authorities and is targeted to be achieved by the end of the second quarter of 2017. This transaction clearly falls within the direction indicated by the ECB guidance issued to Banks for the work-out of non-performing exposures, and it is considered by Hellenic Bank as the most appropriate NPEs strategy aimed to decisively address the issue.

Further details of the agreement, including the commercial and financial terms, are expected to be announced by the end of the second quarter of 2017, upon finalisation of the transaction.

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49. EVENTS AFTER THE REPORTING PERIOD (continued)

NEW AGREEMENT OF THE HELLENIC BANK WITH THE EUROPEAN INVESTMENT BANK

On the 13th March 2017 the Bank proceeded with the signing of an agreement with the European Investment Bank, aiming at the reinforcement of the Cypriot Small to Medium Enterprises (SMEs).

Based on the agreement, which is state guaranteed, an amount of around €66,7 million will be allocated in the form of low- interest loans to SMEs and Mid-Cap Companies. The amount of €66,7 million includes an amount €16,7 million, which will be provided from the Bank’s own funds. The Bank’s objective is to support the economy and to finance key sectors such as the manufacturing, the energy, the tourism, the health and the transport sector.

ECB’S NPL GUIDANCE FINALISED

On 20th March 2017, the ECB published the final guidance to banks on non-performing loans (NPLs). The guidance does not intent to substitute or supersede any applicable regulatory or accounting requirement or guidance from existing EU regulations or directives and the national transpositions or equivalent, or guidelines issued by the European Banking Authority (EBA). ECB Banking supervision within this guidance identifies a number of best practices relating to identification, measurement, management and write off of NPLs in areas where existing regulations, directives or guidelines are silent or lack specificity. The guidance which is currently non-binding in nature is applicable as of its date of publication. NPL disclosure expectations described in the guidance should start from 2018 reference dates. The guidance will be taken into consideration in the SSM regular Supervisory Review and Evaluation and non-compliance may trigger supervisory measures. The Bank is currently evaluating the guidance in order to ensure compliance.

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DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE BANK OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS

In accordance with article 9(3)(c) and (7) of the 2007 Law on Transparency Requirements (Securities Listed for Trading on a Regulated Market), we the Members of the Board of Directors and the Bank officials responsible for the drafting of the Financial Statements of Hellenic Bank Public Company Ltd (the “Bank”) for the year ended 31 December 2016, confirm that to the best of our knowledge:

(a) the annual Financial Statements presented in pages 68 to 186:

(i) have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union and the provisions of article (9), paragraph (4) of the Cyprus Companies Law, and

(ii) give a true and fair view of the assets and liabilities, the financial position and the profits or losses of Hellenic Bank Public Company Ltd and of the special included in the Consolidated Financial Statements, as a whole and

(b) the Group Management Report of the Board of Directors provides a fair review of the developments and performance of the business as well as the position of Hellenic Bank Public Company Ltd and of the entities included in the Consolidated Financial Statements, as a whole, together with a description of the major risks and uncertainties that they face.

Members of the Board of Directors

Irena A. Georgiadou Non-Executive Chairwoman

Marinos S. Yannopoulos Non-Executive Vice Chairman

Andreas Christofides Non-Executive Member of the Board

Dr Evripides A. Polykarpou Non-Executive Member of the Board

Marianna Pantelidou Neophytou Non-Executive Member of the Board

Ioannis A. Matsis Non-Executive Member of the Board

David Whalen Bonanno Non-Executive Member of the Board

Lambros Papadopoulos Non-Executive Member of the Board

Christodoulos A. Hadjistavris Non-Executive Member of the Board

Andrew Charles Wynn Non-Executive Member of the Board

Stephen John Albutt Non-Executive Member of the Board

Georgios Fereos Executive Member of the Board

Company official responsible for the drafting of the Financial Statements Maria Keleshi, Group Chief Accountant

Nicosia, 30 March 2017

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BOARD OF DIRECTORS OF THE GROUP’S MAIN SUBSIDIARY COMPANIES

HELLENIC BANK TRUST & HELLENIC ALICO LIFE INSURANCE COMPANY LTD FINANCE CORPORATION LTD Henricus Lambertus (Bert) Pijls, Chairman Marios P. Christoforides (Resigned on 15 December 2016) Marinos Athanassiades Michael Hatzidimitriou, Vice-Chairman (Resigned on 9 May 2016) Charalambos G. Phokas (Resigned on 27 January 2016) Mario Francisco Valdes Velasco, Vice-Chairman (Appointed on 27 September 2016) Antonios I. Karpasitis Christiana Konomou, Secretary George K. Pavlou Adamos Savvides Christos A. Antoniou PANCYPRIAN INSURANCE LTD (Resigned on 16 Μarch 2016) Henricus Lambertus (Bert) Pijls, Chairman Andreas Papadatos (Resigned on 15 December 2016) (Appointed on 13 May 2016) Phivos Stasopoulos, Chairman Phivos Stasopoulos (Appointed Member on 16 March 2017, (Appointed on 27 March 2017) Chairman from 23 March 2017) Ioannis Ch. Charilaou, Vice-Chairman (Resigned on 12 October 2016) Maria H. Vovides, Secretary Iacovos C. Constantinides George Iacovou Christodoulos A. Hadjistavris Marios M. Michaelides Socrates Demetriou Petros Arsalides Kyriacos Kyriakides Adamos Savvides (Appointed on 16 March 2017) Demetris Sparsis (Appointed on 16 March 2017)

Kyriacos Volis, Secretary

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GROUP OFFICES AND BRANCH NETWORK

HEAD OFFICE DEMOSTHENI SEVERI BRANCH Corner Limassol Avenue 15 Demostheni Severi Ave., & 200 Athalassa Avenue 1080 Nicosia 2025 Strovolos, Tel: 22 501 332, Fax: 22 667 813 P.O.Box 24747, 1394 Nicosia [email protected] SWIFT/BIC: HEBA CV 2Ν Tel: 22 500000, Fax: 22 500050 KANTARA BRANCH 18 Kantara Ave., 1037 Nicosia Website: http://www.hellenicbank.com Tel: 22 501 392, Fax: 22 435 500 [email protected] E-mail: [email protected] Service Line: 8000 99 99 AGLANTZIA BRANCH For calls from abroad: Aglantzia Ave. & 3 Angelou Vlachou, ++357 22 743 843 2108 Aglantzia, Nicosia Tel: 22 501 622, Fax: 22 444 130 [email protected] NICOSIA DISTRICT KENNEDY BRANCH 30 Kennedy Ave. & 25th March, AMPHIPOLEOS BUILDING 1087 Nicosia 20 Amphipoleos Str, Tel: 22 501 404, Fax: 22 875 307 2025 Strovolos, Nicosia [email protected] Tel: 22 500 000, Fax: 22 500 050 LATSIA BRANCH INFORMATION TECHNOLOGY 92 Αrch. Makarios III Ave., BUILDING 2224 Latsia 31 Kyriacou Matsi Ave, Tel: 22 501 413, Fax: 22 488 345 1082 Nicosia [email protected] Tel: 22 500 000, Fax: 22 500 050 DIGHENI AKRITA MAIN BRANCH PERSONAL BANKING DIVISION 92 Digheni Akrita Ave. & Kritis, 1061 Nicosia ELEFTHERIA SQUARE BRANCH Tel: 22 500 500, Fax: 22 500 560 1 Evagorou Ave., Mitsis Building 1, [email protected] Eleftheria Sq., 1065 Nicosia Tel: 22 501 000, Fax: 22 501 088 ACROPOLI BRANCH [email protected] 53 Acropoli Ave. & Thermopylon St., 2012 Nicosia KOKKINOTRIMITHIA BRANCH Tel: 22 501 425, Fax: 22 319 112 8C Gr. Afxentiou, acroρο[email protected] 2660 Kokkinotrimithia Tel: 22 501 362, Fax: 22 835 428 AGIOS ANTONIOS BRANCH [email protected] Corner 12Α Evgenias & Ant. Theodotou St. AGIOS DHOMETIOS BRANCH & Klimentos, 1061 Nicosia 112 Gregoriou Afxentiou St., Tel: 22 501 442, Fax: 22 433 490 2364 Nicosia [email protected] Tel: 22 501 453, Fax: 22 771 354 [email protected] STROVOLOS AVE BRANCH Strovolos Ave. & 56 Ayia Marina St., ATHALASSA BRANCH 2018 Nicosia 173 Athalassa Ave., Tel: 22 501 463, Fax: 22 316 153 2025 Strovolos, [email protected] Tel: 22 501 800, Fax: 22 501 990 [email protected]

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GROUP OFFICES AND BRANCH NETWORK

KAKOPETRIA BRANCH BUSINESS SERVICES DIVISION 45 Arch. Makarios III Ave., 2810 Kakopetria NICOSIA BUSINESS CENTER (1) Tel: 22 501 472, Fax: 22 923 461 173 Athalassa Ave., 2025 Nicosia, [email protected] P.O.Box 24747, 1394 Nicosia Tel: 22 501 820, Fax: 22 501 991 PRODROMOS BRANCH [email protected] 25 Prodromos St., 1095 Nicosia Tel: 22 501 487, NICOSIA BUSINESS CENTER (2) Fax: 22 676 881 173 Athalassa Ave., 2025 Nicosia, [email protected] P.O.Box 24747, 1394 Nicosia Tel: 22 501 824, Fax: 22 501 982 STAVROU BRANCH [email protected] 71 Stavrou Ave., 2035 Strovolos CORPORATE BANKING DIVISION Tel: 22 501 501, Fax: 22 491 057 [email protected] NICOSIA CORPORATE CENTER 173 Athalassa Ave., 2025 Strovolos, Nicosia PLATY BRANCH Tel: 22 501 893, Fax: 22 501 996 100Α Kyrenia Ave., Platy, cοrροratenicο[email protected]οm 2114 Aglantzia, Nicosia Tel: 22 501 514, Fax: 22 331 504 INTERNATIONAL BUSINESS DIVISION [email protected] INTERNATIONAL BUSINESS CENTER NICOSIA TSERIOU BRANCH 5 Esperidon, 2001 Nicosia Corner Tseriou Ave.& Naxou 1, Tel.: 22 501 888 Fax: 22 501 995 2043, Strovolos, Nicosia [email protected] Tel: 22 501 521, Fax: 22 327 299 [email protected] SHIPPING DIVISION DHALI BRANCH SHIP FINANCE 1A Arch. Makarios III St., Corner Lemesou Avenue & 200 Athalassa Avenue 2540 Dhali, Nicosia 2025, Nicosia, Cyprus Tel: 22 501 532, Fax: 22 524 780 Tel.: 22 500 500, Fax: 22 500 095 [email protected] [email protected] LAKATAMIA BRANCH 18 Arch. Makarios III Ave., 2324 Kato Lakatamia, Nicosia LIMASSOL DISTRICT Tel: 22 501 541, Fax: 22 320 986 [email protected] PERSONAL BANKING DIVISION

ENGOMI BRANCH ARCH MAKARIOS Ill AVE. BRANCH 3 Aheon & Agamemnonos, 131 Arch Makarios III Ave. 2413 Engomi, Nicosia & loannis Polemis St., Tel: 22 501 563, Fax: 22 358 029 3021 Limassol [email protected] Tel: 25 502 300, Fax: 25 731 031 [email protected] AMPHIPOLEOS BRANCH 20 Amphipoleos Str, AKROTIRI BRANCH 2025 Strovolos, Nicosia RAF Station Shopping Centre, Tel: 22 501 324, Fax: 22 311 433 Princess St., 3771 Akrotiri [email protected] Tel: 25 502 810, Fax: 25 952 588 [email protected]

AGIOS GEORGIOS BRANCH Promachon Eleftherias Ave., 4103 Limassol Tel: 25 502 801, Fax: 25 310 638 [email protected]

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GROUP OFFICES AND BRANCH NETWORK

GLADSTONOS & PH. KOLAKIDES BRANCH BUSINESS SERVICES DIVISION Corner 52 Gladstonos Ave. & Ph. Ko¬lakides St., 3022 Limassol LIMASSOL BUSINESS CENTER (1) P.O.Box 56588, 3308 Limassol Corner 52 Gladstonos Ave. & Tel: 25 502 032, Fax: 25 502 097 Ph. Kolakides St., 3022 Limassol [email protected] P.O.Box 56588, 3308 Limassol Tel: 25 502 002, Fax: 25 502 081 PAPHOS ST. BRANCH [email protected] 15 Paphos St., 3052 Limassol Tel: 25 502 844, Fax: 25 570 974 LIMASSOL BUSINESS CENTER (2) [email protected] Corner 52 Gladstonos Ave. & Ph. Kolakides St., 3022 Limassol COURT SQUARE BRANCH P.O.Box 56588, 3308 Limassol Arch Makarios III Ave. & Grivas Dhigenis, Tel: 25 502 405, Fax: 25 502 494 3105 Limassol [email protected] Tel: 25 502 604, Fax: 25 376 288 [email protected] CORPORATE BANKING DIVISION

YERMASOYIA BRANCH LIMASSOL- PAPHOS CORPORATE CENTER 54 George A’ St., 131 Arch. Makarios III Ave.& Old Rd. Limassol - Nicosia, loannis Polemis, 3021 Limassol 4047 Limassol Tel: 25 502 396/2407, Fax 25 502478 Tel: 25 502 863, Fax: 25 326 121 [email protected] [email protected] INTERNATIONAL BUSINESS DIVISION MESA YITONIA BRANCH Arch. Makarios III Ave & LIMASSOL INTERNATIONAL BUSINESS CENTER 43Ε St. Lenas, 4003 Limassol 131 Arch. Makarios III Ave. & loannis Polemis, Tel: 25 502 881, Fax: 25 753 864 3021 Limassol [email protected] Tel: 25 502 400, Fax: 25 502 485 [email protected] FRANKLIN ROUSVELT BRANCH Corner 108 Franklin Rousvelt & SHIPPING DIVISION Avanas, 3011 Limassol Tel: 25 502 890, Fax: 25 573 696 TRANSACTION BANKING SHIPPING [email protected] Agathangelou Business Center (1st floor) Corner Gladstonos & 1 Evangelistrias Street AYIA PHYLA BRANCH 3031, Limassol, Cyprus Corner 222 Ayia Phyla Ave Tel.: 25 502 700, Fax: 25 345 430 & Ag.Ilarionas St [email protected] 3116 Limassol Tel: 25 502 511, Fax: 25 730 181 [email protected] LARNACA DISTRICT KATO POLEMIDIA BRANCH 105 Nicos Pattichis Ave., PERSONAL BANKING DIVISION Kato Polemidia, 4155 Limassol Tel: 25 502 523, Fax: 25 731 570 ZENONOS KITIEOS BRANCH katopο[email protected] 2 Zenonos Kitieos St., P.O.Box 40434, 6304 Larnaca ACADEMIA BRANCH Tel: 24 503 000, Fax: 24 654 366 17 Spyros Kyprianou St., Linopetra, [email protected] 4040 Limassol Tel: 25 502 837, Fax: 25 314 985 [email protected]

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GROUP OFFICES AND BRANCH NETWORK

DHEKELIA BRANCH CORPORATE BANKING DIVISION Amenities Village, 6370 Dhekelia Tel: 24 503 351, Fax: 24 723 539 LARNACA & FAMAGUSTA CORPORATE CENTER [email protected] Corner Mystras & United Nations 6042 Larnaca, P.O.Box 51474, 6304 Larnaca ARCH. MAKARIOS III BRANCH Tel: 24 503 000, Fax: 24 656 919 86 Arch. Makarios III Ave., [email protected] 6017 Larnaca Tel: 24 503 310, Fax: 24 636 387 INTERNATIONAL BUSINESS DIVISION [email protected] LARNACA INTERNATIONAL BUSINESS CENTER NICOS PATTICHIS AVE. BRANCH 3-7 Arch. Makarios III Ave., 6016 Larnaca Corner Mystras & United Nations P.O.Box 40434, 6304 Lamaca 6042 Larnaca Tel: 24 503 480, Fax: 24659101/24625187 Tel: 24 503 373, Fax: 24 655 141 [email protected] [email protected]

SPYROS KYPRIANOU AVE. BRANCH FAMAGUSTA DISTRICT Corner 92 Spyros Kyprianou Ave. & Averof St. 6052 Larnaca PERSONAL BANKING DIVISION Tel: 24 503 413, Fax: 24 669 590 [email protected] KAPPARIS BRANCH 2 Kapparis Ave., DIONYSOU AVE. BRANCH 5290 Paralimni, Famagusta Dionysou & 1 Socratous St., Tel: 23 504 380, Fax: 23 740 228 Pyla Tourist Area, 7081 Larnaca [email protected] Tel: 24 503 420, Fax: 24 644 323 [email protected] SOTIRA BRANCH 6 Heroon St., 5390 Sotira, Famagusta LIVADIA BRANCH Tel: 23 504 391, Fax: 23 829 120 43Β Petrakis Kyprianou St., [email protected] 7060 Livadia, Larnaca Tel: 24 503 441, Fax: 24 662 744 PARALIMNI BRANCH [email protected] 85, 1st April St., 5281 Paralimni, Famagusta KITI BRANCH Tel: 23 504 300 65 Arc. Makarios Ave., Fax: 23 827 045/820 780 7550 Kiti [email protected] Tel: 24 503 452, Fax: 24 425 190 [email protected]οm TEFKROU ANTHIA BRANCH 7 Tefkrou Anthia St., PHANEROMENI BRANCH P.O.Box 30091, 120 Phaneromeni Ave., 5330 Ayia Napa, Famagusta 6031 Larnaca Tel: 23 504 345, Fax: 23 722 636 Tel: 24 503 461, Fax: 24 654 740 [email protected] [email protected] DHERYNIA BRANCH 79 Eleftherias St., BUSINESS SERVICES DIVISION 5380 Dherynia, Famagusta Tel: 23 504 355, Fax: 23 730 188 [email protected] LARNACA BUSINESS CENTER Corner Mystras & United Nations MONASTIRAKI AREA BRANCH 6042 Larnaca, P.O.Box 51474, 6304 Larnaca Arch. Makarios III Ave. & Tel: 24 503 000, Fax: 24 650 040 Misiaouli & Kavazoglou [email protected] 5330 Ayia Napa Tel: 23 504 375, Fax: 23 723 406 [email protected]

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GROUP OFFICES AND BRANCH NETWORK

BUSINESS SERVICES DIVISION YEROSKIPOU BRANCH Corner Arch. Makarios III Ave. FAMAGUSTA BUSINESS CENTER & Vasilis Michaelides St. 85, 1st April Ave., 5280 Paralimni, 8200 Yeroskipou P.O.Box 33011, 5310 Paralimni, Famagusta Tel: 26 505 220, Fax: 26 964 622 Tel: 23 504 300, Fax: 23 827 045 yeroskipου@hellenicbank.com [email protected] COURT AREA BRANCH 31 N. Nicolaides Ave., PAPHOS DISTRICT 8011 Paphos Tel: 26 505 231, Fax: 26 931 878 [email protected] PERSONAL BANKING DIVISION

ELLADOS AVE BRANCH BUSINESS SERVICES DIVISION Ellados Ave. & Xinaridou Rd., 8020 Paphos PAPHOS BUSINESS CENTER Tel: 26 505103, Fax: 26 953 077 6 Danaes Ave., 8042 Paphos [email protected] Tel: 26 505 167, Fax: 26 942 228 business.pafos@ hellenicbank.com TOMBS OF THE KINGS BRANCH 28 Tombs of the Kings Ave., SUBSIDIARY COMPANIES MAIN OFFICES Kato Paphos, 8046 Paphos Tel: 26 505 122, Fax: 26 946 920 PANCYPRIAN INSURANCE CO. LTD [email protected] 66 Grivas Dhigenis Ave., Pancyprian Bldg, 1080 Nicosia, P.O.Box 24747, 1394 Nicosia PEYIA BRANCH Tel: 22 743 743, Fax: 22 677 656 Platia Vrysi ton Pegiotisson www.pancyprianinsurance.com 8560 Peyia [email protected]οm Tel: 26 505 131, Fax: 26 621 786 [email protected] HELLENlC ALlCO LIFE INSURANCE COMPANY LTD 66 Grivas Dighenis Ave. 3rd Floor 1080 Nicosia, LYCEUM KYKKOU BRANCH P.O.Box 20672, 1662 Nicosia ΕΙ. Venizeloς & Tel: 22 501 581, Fax: 22 450 750 33 N. Nicolaides Ave., www.hellenicalico.com [email protected] 8021 Paphos Tel: 26 505 151, Fax: 26 949 677 HELLENIC BANK TRUST & FINANCE CORPORATION LTD [email protected] Corner Limassol & 200 Athalassa Avenue, 2025 Strovolos, DANAE AVE. BRANCH P.O.Box 24747, 1394 Nicosia 6 Danaes Ave., 8042 Paphos Tel: 22 500 611 / 500 823, Tel: 26 505 160, Fax: 26 964 262 Fax: 22 500 084 [email protected] [email protected]

NICODEMOS MYLONAS BRANCH 6 Nicodemos Mylonas St., P.O.Box 60200, 8126 Paphos Tel: 26 505 010, Fax: 26 941 484 [email protected]

POLIS CHRYSOCHOUS BRANCH 37 Arch. Makarios III Ave., 8820 Polis Chrysochous Tel: 26 505 191, Fax: 26 322 370 [email protected]

193 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL BANK REPORT GROUP 2016

GROUP OFFICES AND BRANCH NETWORK

REPRESENTATIVE OFFICES SHAREHOLDER INFORMATION SOUTH AFRICA - JOHANNESBURG Sandton Square, The Shareholders may contact the Shares & Bonds Corner Fifth & Maude Streets, Registry Department for matters relating to the 4th Floor, West Tower, Sandton 2146, Company’s registered securities, certificates, South Africa interest on Bonds and Capital Securities. P.O.BOX 783392 Sandton, 1HB, 2146, South Africa SHARES & BONDS REGISTRY DEPARTMENT Tel: +27 11 7830155/6, Fax: +27 11 7830157 Corner Limassol Avenue & 200 Athalassa Avenue, [email protected] 1st Floor, 2025 Strovolos P.O.Box 24747, 1394 Nicosia, Cyprus RUSSIA - MOSCOW Telephones: 22 500 649/50, Fax: 22 500 065 15 Savvinskaya Nab, E-mail: [email protected] Savvinskaya Office Bldg - Japan House, Moscow 119435, Russia Tel: +7 (495) 7929958/88 / 89 Fax: +7 (495) 7929985 hellenicbank@sovintel ru INVESTOR RELATIONS [email protected] Institutional investors, brokers, investment houses and other investment analysts may direct RUSSIA - ST. PETERSBURG their enquiries relating to recent developments, 23 Professors Popova St. financial results and the strategy of the Group to Office 311, 197376 the Investor Relations Department. St. Petersburg, Russia Tel: +7 (812) 3130300 Corner Limassol Avenue & 200 Athalassa Avenue, Fax: +7(812)3130400 5th Floor, 2025 Strovolos [email protected] P.O. Box 24747, 1394 Nicosia, Cyprus Telephone: 22 500 794, Fax: 22 500 077 UKRAINE - KIEV E-mail: [email protected] 8 Rybalska St. 1st Floor,

Kyiv 01011, Ukraine Tel: +38 044 288 7210 Fax: +38 044 288 7209 [email protected]οm

HEAD OFFICE Corner Limassol Avenue & 200 Athalassa Avenue, 2025 Strovolos P.O. Box 24747, 1394 Nicosia, Cyprus Telephone: 22 500 000, Fax: 22 500 050

Website: www.hellenicbank.com

E-mail Address: [email protected]

Service Line tel: 8000 99 99

194 WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC ANNUAL CONTENTS BANK REPORT GROUP 2016

1 BASIC FINANCIAL HIGHLIGHTS 3 BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE 4 CHAIRWOMAN’S STATEMENT 6 GROUP GENERAL MANAGER, BUSINESS AND INSURANCE DIVISION’S REVIEW 10 GROUP OPERATIONS REVIEW 30 GROUP MANAGEMENT REPORT 38 REPORT OF THE BOARD OF DIRECTORS ON CORPORATE GOVERNANCE FOR THE YEAR 2016 52 REMUNERATION POLICY REPORT FOR THE YEAR 2016 64 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED 68 CONSOLIDATED INCOME STATEMENT 69 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 70 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 71 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 73 CONSOLIDATED STATEMENT OF CASH FLOWS 74 INCOME STATEMENT 75 STATEMENT OF COMPREHENSIVE INCOME 76 STATEMENT OF FINANCIAL POSITION 77 STATEMENT OF CHANGES IN EQUITY 79 STATEMENT OF CASH FLOWS 80 NOTES TO THE FINANCIAL STATEMENTS 187 DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE BANK OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS BOARDS OF DIRECTORS OF THE GROUP’S MAIN SUBSIDIARY COMPANIES 188 DESIGN AND LAYOUT: GNOMI COMMUNICATION CONSULTANTS 189 GROUP OFFICES AND BRANCH NETWORK PRINTING AND BINDING: CHR. NICOLAOU & SONS LTD 194 SHAREHOLDER INFORMATION AND INVESTOR RELATIONS WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade HELLENIC BANK GROUP ANNUAL REPORT 2016 www.hellenicbank.com ANNUAL REPORT

WorldReginfo - 93ffc0d5-7d96-4df5-a945-701e01551ade