About Credit Europe Bank

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1 Annual Report 2012

2 About Credit Europe Bank We offer to our corporate customers a wide range of banking products, including international trade and commodity finance, project finance and working capital loans. Represented in key trading hubs such as the Netherlands, Switzerland, China and the United Arab Emirates, as well as in raw material exporting and importing countries including, Russia, Turkey and Ukraine, we are well positioned to finance our customer transaction flows across the globe. To our retail and SME customers we offer simple and transparent products in seven Western and Eastern European countries: Belgium, Germany, the Netherlands, Malta, Romania, Russia and Ukraine. Our mission is providing financial services that create value for customers. Our vision is being the preferred bank in our core markets. Credit Europe Bank N.V. is headquartered in the Netherlands and operates around 200 branches, 960 ATMs, nearly 20,000 sales points and more than 19,000 point of sale terminals. More than 3.5 million customers around the world entrust their financial affairs to Credit Europe Bank.

3 Contents Strategy 2 Highlights Five-year key figures 4 Report of the Managing Board From the CEO 5 Our Network 6 Retail Banking 8 Corporate Banking 10 Funding 12 Human Resources 14 Corporate Social Responsibility 15 Risk Management and Control 16 Outlook 18 Profile of the Managing Board 19 Corporate Governance 22 Profile of the Supervisory Board 28 Report of the Supervisory Board 30 Consolidated Financial Statements Consolidated Statement of Financial Position 35 Consolidated statement of income 36 Consolidated Statement of Comprehensive Income 37 Consolidated Statement of Changes in Equity 38 Consolidated Statement of Cash Flow 39 Notes to Financial Statements 40 Parent Company Financial Statements Statement of Financial Position 113 Statement of income 114 Statement of Changes in Equity 115 Summary of significant accounting policies 116 Notes to Financial Statements 117 Other Information 128

4 Strategy 2 2 Banking in its purest form is our business: easy-to-use loan and deposit products for retail customers and financing services that support our corporate clients in growing their businesses. Our strategy is to be close to our customers: we provide our services through a network of around 200 branches, 960 ATMs, nearly 20,000 sales points and more than 19,000 point of sale terminals in 11 countries. For more than two decades, we have focused on international trade and commodity finance. We have gained thorough experience and expertise to act as a bridge for our customers in key importing and exporting countries in Western Europe, the Black Sea region, the Gulf region and, nowadays, China and the Americas. We will continue to offer short-term, self-liquidating commodity financing, as well as balance sheet lending and project finance. Strategy In corporate banking, as a medium-sized bank with hands-on managers and short communication lines, we are fast to spot and react to our customers needs and to create innovative, tailor-made solutions. Our flexible approach supported our customers during turbulent times and positioned us to take advantage of improving market conditions. In the Western European markets, we offer retail banking products via internet and telephone banking as well as through our broker and partner network. In addition to simple savings products, we continue to build up our retail loan business in that region. Our services are facilitated by having a centralized, cross-border contact center applying high-quality information technology. In Russia and Romania, next to the above mentioned distribution channels, we also use our existing branch network to serve our retail customers and consolidate our retail position. In all areas of the bank, we invest in the professionalism, expertise and customer focus of our employees. In order to sustain our long-term growth ambitions, we combine prudent capital and liquidity management with sound risk management, high level of compliance and transparent corporate governance. We believe this strategy safeguards the interests of all our stakeholders.

5 Highlights 2012 Hector de Beaufort Levent Karaca January The position of Chairman of the Supervisory Board was passed to Hector de Beaufort. Levent Karaca was appointed as a member of Credit Europe Bank s Managing Board. Korkmaz Ilkorur August As per 1 st August 2012 Korkmaz Ilkorur was appointed as member of Credit Europe Bank s Supervisory Board. Moody s affirmed the Ba2 long-term debt and deposit rating of Credit Europe Bank N.V. and affirmed the outlook as positive. October 3 A new website has been launched for Germany, the Netherlands, Belgium, Malta and Russia. April Credit Europe Bank Russia issued Ferrari, a new co-branded credit card, designed according to the Ferrari style. This new product is primarily addressed to the fans of this legendary Italian car brand. November Highlights 2012 Credit Europe Bank Russia issued a 7-year subordinated bond amounting to USD 250 million, which demonstrates continuous confidence of investors in the bank. Frits Deiters May As per 1st May 2012 Frits Deiters was appointed as member of the Supervisory Board of Credit Europe Bank. July Fitch Ratings affirmed Credit Europe Bank N.V.'s and Credit Europe Bank Ltd's (CEBR) Long-term Issuer Default Ratings (IDRs) at 'BB' and 'BB-', respectively. The agency has also affirmed CEB's December Credit Europe Bank completed the sale of its 97.6% shareholding in the Turkish bank Fibabanka AS to Fiba Holding AS. CEB NV s Supervisory Board reached a 50/50 ratio of independent and non-independent members by resignation of two non-independent members Viability Rating (VR) of 'bb' and upgraded CEBR's VR to 'bb-' from 'b+'. The Outlooks on the Long-term IDRs remained Stable.

6 Five-year key figures 4 4 Five-year financial highlights millions 2012(*) Assets Cash and balances at central banks 1,238 1,771 1,235 1,596 1,965 Financial assets at fair value through profit or loss Financial investments ,414 1, Loans and receivables banks Loans and receivables customers 5,954 6,556 5,854 5,219 5,370 Other assets Total assets 9,237 10,505 10,003 9,956 9,541 Liabilities Due to banks 1, ,114 1,317 1,229 Due to customers 5,932 7,520 7,185 7,223 6,802 Issued debt securities Other liabilities Total liabilities (excluding subordinated liabilities) 8,083 9,493 9,034 9,095 8,639 Subordinated liabilities Total liabilities 8,588 9,766 9,270 9,318 8,870 Total equity Total equity and liabilities 9,237 10,505 10,003 9,956 9,541 Commitment and contingencies 1,185 3,068 1, ,417 millions 2012(*) Net interest income Net fee and commission income Operating income Credit loss charges (140) (102) (105) (160) (144) Net operating income Total operating expenses (290) (269) (239) (238) (284) Share of profit/(loss) of associate Operating profit before tax Income tax expense (27) (24) (25) (27) (27) Profit for the year from continued operations Profit for the year from discontinued operations (1) Profit for the year (*) including effects of the spin-off of Fibabanka AS

7 Report of the Managing Board From the CEO I am pleased to report that in 2012, Credit Europe Bank again proved its ability to deliver sound earnings continuing a long record of strong performance and sustainable profit. Although the global economy performed relatively well in the first quarter of 2012, it remained challenging for the rest of the year. Economic output in the United States improved, although growth was slow. The US climate stayed tense until the last minute of 2012 as the struggle to avoid the fiscal cliff affected sentiment worldwide. The Eurozone debt crisis was eased by the European Central Bank s Outright Monetary Transactions bond-buying program and the entry into force of the European Stability Mechanism. The outlook for the Eurozone is still fragile and growth in most emerging markets is not as strong as the previous years now that monetary policy tightening, designed to combat rising inflation, took effect. However, we don t expect the tight monetary policies in the emerging markets to continue in In response, we maintained our prudent approach to risk taking and capital management without jeopardizing our client activities. We mitigated effects of the fast-changing environment by diversifying our risk portfolio and by conducting an agile risk management. Despite the effect of the spin-off of Fibabanka, Credit Europe Bank s net profit for 2012 reached a satisfactory level of EUR 78 million. By year end our loan book amounted to EUR 6.3 billion, while the bank s solvency ratio increased from 12.7% to 13.4 %. In retail banking, we continued our selected growth strategy and specifically focused on consumer loans in Germany, car loans in Russia and credit cards in Russia and Romania. In Russia, where we operate in 53 cities, we managed to double the issuance of cash loans in the retail market in We are now ranked 6th among all banks in terms of issued car loans and 18th in terms of overall retail loans. In Romania, on the other hand, we sustained our market leader position in credit cards, amassing market share of almost 20%. We also managed to increase interest income generation through our cards portfolio through well-targeted and successfully implemented campaigns. We concentrate on our key strategic priority to boost the existing consumer loan business in Germany. To further promote the product portfolio and to find new opportunities, we enhanced web-based intermediated partnerships. Our corporate banking business performed well in We have handled a trade finance volume of around EUR 9 billion and further diversified our activities in terms of geographies as well as commodities. As to the balance sheet lending, thanks to our regional expertise and long years of experience, we have funded many new transactions of our prime customers in different geographies. Retail deposits remained to be the core funding source for the bank during In spite of the tough competition, we have managed to strengthen our deposit franchise both inside and outside the Eurozone thanks to our customer focused approach and state-of-the-art online banking technology. Our banking subsidiaries managed to fortify and diversify their funding bases. A good example is US$ 250 million seven-year subordinated bond issuance of CEB Russia in the 4th quarter of 2012, which demonstrates an ever-increasing confidence in our operations and business model. Taking in to account the importance of the technology, we continue to invest in our group-wide IT systems, with the attention on security and governance. In line with our risk diversification strategy, we have taken the decision to spin-off our fast growing Turkish subsidiary Fibabanka A.S. The transaction was executed at a market price of EUR million with a positive effect of EUR 20.7 million on the reserves and a negative effect of EUR 1.4 million on the current year income. The spin-off was finalized in December 2012, ensured that our current credit portfolio weights towards developed and emerging markets at optimum levels. As regard to risk management, we continued our efforts to become fully compliant and aligned with the Basel 3 guidelines and related European rules on capital and liquidity requirements. We continued to improve our governance structure and achieved some important milestones in By the end of the year, we reached a 50/50 ratio of independent/non-independent Supervisory Board members. In the course of 2012, two new independent members joined the Supervisory Board: Mr. Frits Deiters and Mr. Korkmaz Ilkorur. Subsequently, two non-independent Supervisory Board members one of them our ultimate shareholder resigned from the Supervisory Board per the end of We take this opportunity to extend our gratitude for having had our founder, our shareholder, Mr. Husnu Ozyegin in our Supervisory Board since the inception of the Bank. His vast knowledge and experience - and highly regarded reputation in international banking have been of great value to our Bank. The same goes for Mr. Fevzi Bozer, whose experience and expertise in the field of credit risk and trade finance contributed to a large extent to where the Bank stands today. At the same time, we take the opportunity to welcome the new independent members to our Supervisory Board. We are sure that their respective experience in banking, finance and governance will further strengthen our internal supervision and proper decision- making. I firmly believe that Credit Europe Bank is very well-equipped to face the challenges ahead, and to seize the opportunities along the way. I should like to express my gratitude to our customers, business partners and employees, all of whom worked together intensively last year to continue generating long-term value for all our stakeholders. Amsterdam, March 13, 2013 E. Murat Basbay 5 Report of the Managing Board

8 Our Network 6 Our Network Western Europe Corporate banking and trade finance services from the Netherlands, Switzerland and Malta Private banking services from Switzerland Strong focus on online banking services Retail banking to almost half a million customers in Germany, the Netherlands, Belgium and Malta, mainly through the multilingual operations and contact center in Frankfurt Russia Active in retail, corporate, commercial and SME banking 125 branches in more than 50 cities covering seven time zones More than 11,000 point of sale terminals and 12,500 sales points Ranked 6th in car loans, 10th in credit cards 800 ATMs Ukraine Active in corporate, commercial and SME banking from one centralized office Romania Active in retail and commercial banking 71 branches in 34 cities Ranked 1st in Romania in terms of issued credit cards Strong partner merchant network with more than 8,300 point of sale terminals and 7,150 sales points Turkey Representative office in Istanbul Outside Europe Trade finance services from the Dubai International Financial Centre in the United Arab Emirates Representative office in Shanghai, China

9 Customer Focus The success of our customers is our own success. All of our decisions are therefore taken with the customer in focus. By working in partnerships, we enable our customers to be provided with innovative, tailor-made, effective products and services and to succeed in reaching their targets.

10 Retail Banking 8 Retail Banking In 2012, Credit Europe Bank s retail banking business successfully maintained its strong position in the market. Last year, we served over 3.5 million retail customers in Western- and Eastern Europe by offering a broad range of competitive, transparent and non-complex products such as deposits, cash loans, car loans and credit cards as well as a number of insurance products in cooperation with external insurance providers. Our distribution strategy is to serve our clients via online banking, a widespread network of branches, points of sale, and extensive -some exclusive- co-operations with brokers and partners. In 2012, retail banking has continued its momentum under the principles of proactive sales, tailor made service, and operational excellence. Our additional focus on operational efficiency has enabled us to invest in human resources, IT infrastructure, sales promotions, effective relationship management, and integrated distribution channels, which further improved our ability to seize new opportunities and led to our offering distinctive value proposition to our retail customers. Retail Loans and Credit Card Loans ( million) 2, * 2, * 2012 Figure does not include Fibabanka AS 1, , We continuously invest in competitive, simple and transparent products, secure online banking services and easy-to useonline application processes. This ensures that our systems can support a future simplification of the business and helps us to improve our capabilities. As a result, in 2012 our key objectives of increasing business volumes, attracting new customers and ensuring high-quality customer service were successfully achieved. Positioned for the future Our Western European retail operations are centralized in Frankfurt. This is where our multilingual customer contact center, marketing and back offices are based, all fully equipped with the latest technology. Last year, we continued to make substantial progress in increasing the existing consumer loan business in Germany- one of our key strategic priorities. We managed to increase our consumer loan issuance by 14%. Our solid growth in this area is the result of relentless customer acquisition and an increased focus on third party online partnerships. An illustration of an online campaign. Our bancassurance business showed healthy results, growing by 8.1%. Our Eurozone retail deposit base is one of the main funding sources of the bank. All the while, we remained strongly focused on our strategic partnerships and gained important partners such as Fidelity Worldwide Investment. For our retail customers a new website was launched for Germany, the Netherlands, Belgium, Malta and Russia. The website features a number of enhancements designed to make it easier to find information, to access online services and to contact us. Keeping close to customers In Russia, we celebrated our 15th anniversary as one of the leading universal banks. We achieved a strong performance, serving over three million retail clients through 125 branches, more than 11,000 point of sale terminals, 12,500 sales points and 800 ATMs. We became the 18th Russian bank in terms of retail loans (source: Frank Research Group), the 40th in terms of asset size (Source: RBC), the fifth in terms of issued car loans and the sixth in point of sale (source: Frank Research Group). We further strengthened our partner network on the car manufacturing side, already comprising AvtoVAZ, Uz-Daewoo, Hyundai, Chrysler, Isuzu, GAZ, Fuso, Chery, ZAZ, HINO, once again gaining a number of leading brands such as KIA, Mitsubishi and LIFAN.

11 Retail Banking MasterCard. In Romania, we maintained our strong position in credit cards with CardAvantaj - the most popular local installment-based credit card with a market share close to 20%. We also managed to increase the generation of interest income in our cards portfolio through targeted and successfully implemented campaigns. Retail Banking 9 We consolidated our Romanian network of merchants, securing new partnerships with companies like Telecom, Vodafone, Cosmote (a member of OTE Group) and Regina Maria, the largest local private clinics network. Moreover, more than 500 new and existing sales points gained MasterCard PayPass acquiring capabilities. CEB Romania s MasterCard Display Card, which we first released in 2011, was recognized in the Best Innovative Banking Products category, by the magazine Business Arena. Ferrari card campaign in Russia. In addition, we became a key banking partner to important Russian furniture and clothing retailers such as Lazurit, Angstrem and Snow Queen, operating more than 350 stores in Russia. Similarly, we managed to enlarge our position in providing holiday loans. Thereto we started a joint program with Pegas Touristik. Finally, we successfully launched a loan for house refurbishments. In credit cards, the number of active cards reached 760,000 (2011: 600,000). We commenced a number of select customer initiatives, such as a co-branded card with Ferrari design and a 3D secure e-commerce program for both VISA and These results underscore the success of our high level of operating efficiency and can be attributed to the outstanding efforts of our teams, which successfully met the challenges of economic and market instability. PRODUCTS & SERVICES CEB NL CEB RU CEB RO Cash Loan Car Loan Retail Deposits Mortgage Credit Card Point of Sales Finance

12 Corporate Banking 10 Retail Banking Credit Europe Bank offers a full range of corporate banking services and products such as working capital and project finance loans, syndicated loans and factoring services. In addition, Credit Europe Bank has accumulated valuable experience in structured trade and commodity finance since its inception. In today s global marketplace, trade finance is vital to international business. Even in times of high volatility, trade finance has remained resilient. Trade finance customers are serviced locally by our trade finance experts in either Amsterdam or in two important trade hubs: Dubai and Geneva. Through our presence in key trading hubs such as the Netherlands, Switzerland, China and the United Arab Emirates, as well as in raw material exporting and importing countries such as Russia, Turkey and Ukraine, we are perfectly positioned to finance our corporate customers trade finance needs across the globe at any stage of the process. Geographically, we are positioned for success in trade finance as we have a strong presence in countries bridging Europe and Asia. We are diversified across geographies and commodities. Our clients range from medium-sized and large companies to international commodity traders. In line with the corporate banking s strategy, our teams target industries with high growth potential. The focus is on growing our customer base. Corporate banking s customer base for credit products includes companies in oil and energy, metals and minerals, soft commodities, commercial real estate and construction, tourism, retail, maritime and other industries. Corporate banking s main strength lies in its local expertise. Our seasoned banking teams operate across six group banks and have what it takes to succeed in each home market. This teamwork across various divisions within corporate banking allows us to provide the best possible service for individual customer needs across borders. We provide our valued international clientele with tailor-made products and prompt service wherever and whenever required. Our fast and accurate service underpins our strong relationship with our corporate customers. Prudent strategy 2012 was a difficult year for corporate banking, particularly in the Eurozone. In addition to contraction in the Eurozone, some emerging market power houses also experienced a slowdown. Given this challenging environment, prudence was the strategy for our corporate banking division. Corporate customers were reluctant to invest in big projects due to negative market sentiment. Trading companies streamlined their respective operations by reducing levels of stocks and receivables. These developments affected business volumes. In the face of such difficulties, corporate banking managed to perform reasonably well in 2012 and capitalized on its regional expertise in stronger emerging markets such as Turkey and Russia. In 2012, the bank continued its strategy of focusing on project finance and balance sheet lending to blue-chip companies within defined target markets and geographies. Since 2010, Credit Europe Bank has an increased focus on the tourism sector. We have established solid relationships with the largest tourism companies in Russia, providing them with comprehensive banking products including cash management and short and long-term financing. Tourism-related cash flows between Turkey and Russia have been a great success, with the synergy between peer banks resulting in market leadership. In 2012, we had more than 50% of market share in this business. This is testament to the strength of our various corporate banking teams, located across different banks, providing cross-border solutions in a focused and accurate manner to international clients. Corporate Banking: main products and services PRODUCTS & SERVICES CEB NL CEB RU CEB RO CEB UAE CEB CH CEB UA Structured Trade and Commodity Finance Balance Sheet Lending and Syndicated Loans Current Accounts and FX Services Project Finance Factoring Marine Finance

13 Corporate Banking Trade Finance Volume ( million) Loans to Corporate Customers ( million) 9, , Corporate loans decreased by 19% in This was mainly due to the deconsolidation of Fibabanka. Our trade finance volume fell by 10% in 2012 due to our conservative credit approach. Outlook for , , Despite uncertainty and volatility across the globe, we believe there will be increased risk appetite in the markets in Compared to 2012, we are cautiously more optimistic and we will actively seek new business opportunities. There are signs that the year could see selective recovery in various markets, industries and commodities. Commodities such as iron ore, which are reliable indicators of economic activity, started this year strongly after a powerful rebound from their lows early last autumn. Our strong market position means we will be able to capitalize on a potential upturn. 3, , * 3, , , , Cash-loans Non-cash loans * 2012 Figure does not include Fibabanka AS 3, , Corporate Banking 11 Diversification will continue in We are looking to acquire new customers in commodity trading and corporate banking who require an international bank that can provide them with tailor-made services in defined geographies and commodities. New customer acquisitions will fuel our growth. Regardless of cyclical downturns, Credit Europe Bank has always been active in trade and commodity markets. Our aim is to grow trade finance exposure in 2013, with the increased contribution of Dubai and Geneva in 2013.

14 Funding 12 Corporate Banking Customer deposits continue to be the core funding source of Credit Europe Bank. We offer easy-to-use and transparent deposit products to our clients. The bank s policy is to have a stable and geographically diversified deposit base. In 2012, the Bank continued to lower the cost of its deposits while extending the maturities. Credit Europe Bank Russia was an active player in international capital markets during 2012 with three bond transactions. In February and October of the last year, the bank has launched two domestic bonds each for 5 billion Rubles. Issuance of a US$ 250 million, 7 year-term, subordinated Eurobonds in November 2012 was a clear signal of investor support to our bank. Our cooperation with the EBRD was further developed through the support for small to medium-sized enterprises in Russia. Credit Europe Bank Russia fully utilized its RUB 2.9 billion EBRD credit line as of January Credit Europe Bank Ukraine signed with our long-term partner IFC a 4 years loan with 2 years grace period to locally finance SME s in respective countries. In August 2012, Credit Europe Bank Russia has extended US$ million B loan under IFC-EBRD A/B Loan scheme for 1 more year. Late December 2012, Credit Europe Bank Suisse signed a US$ 67 million, multi-currency one-year club loan facility, for the purpose of pre-export financing. Credit ratings In July 2012, Fitch Ratings has affirmed Credit Europe Bank N.V.'s and Credit Europe Bank Russia's Long-term Issuer Default Ratings (IDRs) at 'BB' and 'BB-', respectively. The agency has also affirmed Credit Europe Bank NV s Viability Rating (VR) of 'bb' and upgraded Credit Europe Bank Russia's VR to 'bb- 'from 'b+'. The Outlooks on the Long-term IDRs remain Stable. The ratings of Credit Europe Bank N.V. are driven by their standalone viability and reflect a good depositdriven funding base, solid liquidity profile and experienced management. Credit Europe Bank s VR reflects the banks good liquidity profile, and its experienced management team, which has enabled performance to remain resilient. The bank continues to grow its retail deposit base and reduce subsidiary funding reliance. After the Fibabanka spin-off in December 2012, Fitch Ratings has affirmed Credit Europe Bank N.V.'s Long-term Issuer Default Rating at 'BB' and Viability Rating at 'bb'. The Outlook on the Long-term IDR is Stable. Fitch considered the impact of the transaction to be individually small and cumulatively limited. In August 2012, Moody s confirmed the Ba2 long-term debt and deposit rating of Credit Europe Bank N.V. and affirmed the outlook as positive due to the overall stronger performance of the bank's emerging market loan book compared to the banking systems' it has presence in, where overall the asset quality deterioration remained contained during the global recession. Furthermore, the favorable operating environment, notably in Russia and Turkey which are projected to continue with their low single digit GDP growth into 2013 should continue to support banks sound performance and targeted franchise expansion. Furthermore, in February 2013 Moody s confirmed the positive outlook and Ba2 standalone assessment on Credit Europe Bank N.V.

15 Professionalism Being professional means Credit Europe Bank is committed to continuous self-development. Professionalism embraces and stimulates the necessary skills, qualifications, knowledge and diversity so that employees undertake their tasks in a competent and integer manner. Through teamwork we achieve our goals.

16 Human Resources 14 Human Resources Given the economic and regulatory events of the recent past, we are keenly aware of the need to allocate capital to our business in an efficient and prudent way. We must likewise invest in our people to deliver high levels of customer service and reach our strategic targets. Our highly trained, long-tenured and motivated workforce remains our most important corporate asset. We recognize that talented, engaged and satisfied employees are the foundation to achieving our goals. We strive to cultivate a high-performing workforce of innovative and engaged employees, unassailably professional, responsive to business and operational needs, working in an environment that is engaging, collaborative and empowering. Credit Europe Bank supports a continuous enrichment of our human assets by optimizing the leadership capabilities of every employee, assign them where most appropriate and provide ongoing training where needed. All of our employees have the opportunity to grow and develop and get the best out of their jobs and careers. Credit Europe Bank is focusing on core areas such as performance management and reward, talent development and recruitment. We continued to organize trainings, team-building events and operational workshops to enhance 'soft-skill' competences. We also offered more e-learning trainings to our employees. Our employees are of more than 40 nationalities. As an international bank serving customers around the globe, we believe that in today's workplace, diversity is key to fostering new ways of thinking, reaching out to a wider range of customers and growing our business. With our diverse range of employees we are well placed to understand the needs of a wide range of customers, and can interact with a broad client base. We pride ourselves on having unique people with original ideas and broad expertise, always striving to deliver the right solutions. Credit Europe Bank employs around 7,000 people. In 2012 we further developed our remuneration policy, designed to support key business strategies and to create a strong, performance-orientated environment while attracting, motivating and retaining talent. Workforce / gender Workforce / age group 4% 1% 31% 12% 36% (01) <25 male female (02) (03) % 47% (04) (05) >55

17 Corporate Social Responsibility Credit Europe Bank is committed to conducting its business in an ethical, socially responsible and environmentally sustainable manner. The Bank gives high importance to the impact of its activities on its stakeholders customers, investors, regulators and other authorities, and employees - as well as on society and the environment at large. The year 2012 was marked by high-level formalization of the bank s Social and Environmental Responsibility Policy and by taking the necessary actions to ensure adherence to the policy at all levels across the Bank, in order to establish genuine awareness. The policy is sponsored by the Managing Board and supplements other internal policies and procedures such as the Code of Conduct. Credit Europe Bank s Social and Environmental Responsibility Policy is based on four main principles: (i) Ethical business practices The Bank is diligent in ensuring compliance with applicable laws and regulations and using relevant local and international best practices. It conducts its business in an ethical manner, giving priority to observation of the basic ethical norms, i.e. the value of human life, the right to work, fair working conditions, civil responsibility, equal opportunities, occupational health and safety. (ii) Environmental commitment Credit Europe Bank avoids participating in activities that can potentially have a negative impact on the environment and the Bank s reputation. The Bank is conscious of its responsibility to conserve resources and continuously aims to use the resources required for its business practices more efficiently. (iii) Transparency and communication The Bank s social and environmental performance is regularly reported to the Managing Board through a system of established committees. The Bank s main activities in the field of social and environmental responsibility are also subject to disclosure in the annual report. (iv) Voluntary participation The Bank independently and voluntarily chooses its strategy in establishing a socially and environmentally responsible policy. This means that the policy is not the result of any regulatory requirement and that Credit Europe Bank is free to decide what concrete measures and activities are included in the policy Corporate Social Responsibility 15 In coming years, Credit Europe Bank aspires to further enhance its social and environmental responsibility activities, in order to establish a more robust sustainability framework within the Bank.

18 Risk Management and Control 16 Risk Management and Control The Managing Board implemented a risk management and control framework that fits the bank s business activities The Supervisory Board conducts oversight on the risk appetite and risk exposure of Credit Europe Bank s activities and portfolio. The Managing Board, and in particular the Chief Risk Officer (CRO) are responsible for implementing the risk policies within the organization and is supported by the following divisions: Financial risk management: credit risks, market risks, ALM and capital and liquidity management. Non-financial risk management: compliance risks, operational risks and information security risks. Each banking subsidiary has local risk management and compliance functions which report both to local and group management. Credit Europe Bank has adopted a three line of defense model for risk management and control. Credit Europe Bank s risk management and control framework is governed by a system of policies, procedures, committees, business lines, support and control functions. Limits and controls have been put in place to mitigate the financial and non-financial risks to an acceptable level within Credit Europe Bank s risk appetite. The risk appetite has been approved by the Supervisory Board and is designed to set Credit Europe Banks willingness to take risk and to set risk limits in order to protect the bank s activities, not only in terms of profitability and maintaining sound capital adequacy and liquidity ratios, but also in terms of reputation and integrity risks. To maintain the quality of financial reports, the bank has implemented internal financial reporting controls in order to increase the effectiveness of reporting. The internal audit function assesses the functioning and effectiveness of business units, risk management and nonfinancial risk management activities. Paragraph 37 of the Notes to the Financial Statements elaborates in more detail on the risk management and control framework, the risks incurred and the main risk factors attached to the strategy of the bank. Our corporate website also provides information on risk management and control. Key developments in 2012 In 2012, the following events required specific attention of the Managing Board: In 2012 Managing Board designed and implemented an internal control framework policy in both the Bank and its banking subsidiaries. The internal control framework enables the management of the Bank and its banking subsidiaries to control the financial and non-financial risks related to their business activities. Local management has evaluated the effectiveness of the system of internal control in their location after which they provide an internal control statement. After review of the internal control framework evaluations, which were shared with the Supervisory Board, it was concluded that the current risk management and control framework is adequate and effective. Since 2011, the Bank has been participating in DNB s semi-annual Basel III monitoring study and improving its systems and controls accordingly to manage the upcoming reporting requirements. Credit Europe Bank is very well positioned with Basel III rules. This is particularly due to its low-leverage business model and in fact, we expect Credit Europe Bank to gain comp etitive advantage in certain product segments, such as international trade finance. CEB further strengthened its liquidity management activities by implementing a process for Internal Liquidity Adequacy Assessment (ILAAP) and related reporting standards. In late 2012, the bank started to implement a tool that will improve the bank s systems and controls within its assetliability management framework as well as significant efficiency gains. The Bank and its subsidiary in Dubai successfully upgraded its automated Anti-Money Laundering monitoring tools, focused on both pre- and post-transaction monitoring. These tools analyze customer data, detect suspicious operations and provides for regular scanning of the customer database to detect black-listed entities. Comparable pre- and post-transaction monitoring solutions have been implemented in all other (banking) subsidiaries of the bank. CEB conducted internet penetration tests and strengthened its security monitoring function. In a broader perspective, information security improvements were made in order to reach the required maturity level for all internal security processes in the bank. The Managing Board paid continuous attention to further improving risk-mitigating measures for non-financial risks, which also resulted in further improvements on the reporting of non-financial risks, including any operational losses, both at bank - and subsidiary level in With its product approval process embedded in its processes, the bank ensures that proposed new business activities are tested against the risk appetite policy. During the lifecycle of a product, results and developments are checked against the risk appetite in force.

19 Risk Management and Control Areas of improvement for 2013 Credit Europe Bank observes that financial institutions are becoming more forward looking and pay more attention to scenarios that can affect the financial stability of organization. In this respect Credit Europe Bank will work out a recovery plan in 2013, as also required by regulatory bodies. The Bank will continue to focus on the operational efficiency of its business activities by using its core IT system. Further improvements of risk assessments and control activities which are undertaken by business units will be implemented in The results of these assessments will be used for further strengthening of the internal control framework and our risk control measures. Also, in 2013 the Bank will continue to make all necessary preparations to become SEPA compliant as well as to comply with the due diligence rules for new accounts under FATCA which will become effective as of All these preparations require significant adjustments to our core IT system and related procedures. These initiatives will however help us to meet increasing client expectations and to process transactions more efficiently and effectively. Responsibility Statement Credit Europe Bank s internal control framework is based on the framework developed by COSO (Committee of Sponsoring Organizations of the Treadway Commission). Our risk management and control framework is compliant with the basic requirements II.1.4 and II.1.5 of the Dutch Corporate Governance Code. Internal controls ensure that transactions are recorded as necessary for reporting in accordance with International Financial Reporting Standards as adapted by the European Union. The Managing Board has concluded that the risk management and control framework is adequate and effective and provides reasonable assurance that the financial reporting is free of material misstatement. Pursuant to article 5:25c section 2 part c of the Financial Supervision Act, the members of the Managing Board state that, to the best of their knowledge: the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of Credit Europe Bank and the companies included in the consolidation; the annual report gives a true and fair view of the state of affairs on the balance sheet date and the course of affairs during the financial year 2012 of Credit Europe Bank and its affiliated entities whose information is included in its financial statements; the annual report describes the material risks which Credit Europe Bank faces. Risk Management and Control 17

20 Outlook 18 Outlook Financial markets entered the year in a more stable state thanks to easing of tensions around the Eurozone crisis, however due to persistent uncertainty around the further developments of the global economy as well as the political conditions, financial markets are expected to stay mildly volatile well into In general, we expect a stable year for the industry, although some episodes of risk aversion cannot be ruled out. The fiscal cliff issue in the US is averted for the moment. Yet the struggle within the US Congress to resolve the country s budget and debt ceiling issues will continue throughout the year and may reach a head in early spring. However, we are cautiously optimistic because of the improvement in the housing market and the acceleration in bank lending activity. The Eurozone environment also the political arena - should be monitored carefully. In March 2013 we experienced that the financial markets reacted negatively to the outcome of the Italian elections. Already in 2012, the European Central Bank reduced the risks of a near-term Eurozone break-up through its Outright Monetary Transaction (OMT) Program. The ECB acknowledges that the precious time gained is not infinite. With its uncapped bond purchases, the ECB can overcome the financial limitations of the European Stability Mechanism/European Financial Stability Facility and cap short-end government bond yields relative to Germany. China, after sending some alarming signals on the manufacturing front last year, has stabilized since fall The Bank of China (BOC) has been on an easing bias by reducing RRRs (Reserve Requirement Ratios) and injecting liquidity via reverse repos. At the same time, the Chinese government has been opening up the markets to foreign investors and expediting infrastructure investments, thus revitalizing the economy. Meanwhile, the new Japanese government is implementing a highly ambitious quantitative easing program, helping Asian assets to outperform their global peers at the moment. Despite the lingering uncertainties in global financial markets, we believe Russia s economy may show some improvement. We see growth staying stable compared to2012, with consumption supported by higher growth in fixed investments. In the monetary policy sphere, the expected reduction in inflationary pressures may prompt the Central Bank of Russia to ease its monetary policy stance moderately. As always, capital flows, inflationary pressures and oil prices are key factors for the Russian economy and we will continue to monitor these closely while executing our 2013 plans. In Romania, a fragile but improving growth outlook is safeguarded by fiscal and external buffers and a well-capitalized banking system. The Romanian authorities are likely to sign another precautionary IMF/EU deal to ensure that the structural reform effort continues. We expect S&P to join Moody s and Fitch and to bring Romania back to investment grade. Politics will remain a significant risk, although at the end of last year we observed a reduction in the political tensions in the country. Ukraine has a relatively negative outlook for 2013, mainly caused by its strong dependence on foreign markets for core export products. Ukraine faces a series of economic problems: a growing current account deficit, industrial production decline, and shrinking foreign exchange reserves. In 2013, Ukraine must redeem a record $9 billion of sovereign debt - 5% of GDP. We believe Ukraine will either look to resume cooperation with the IMF or to agree to join the Customs Union with Russia, which would reduce the price for imported gas. The main global and domestic risks are a decline in demand for exports, high energy prices, tight credit conditions on global markets and the slow pace of structural reforms. In Turkey, growth is picking up marginally while rebalancing the economy. After Fitch s upgrade of Turkey to investment grade in 2012, the general expectation is that S&P and Moody s will follow suit - which may be a significant positive catalyst. For the Netherlands, 2013 will be a low or possibly negative growth year. Austerity measures are suppressing domestic spending which is already squeezed by rising unemployment, falling house prices and lower supplementary pensions. The slow growth of European economy will present additional challenges for both consumer sentiment and export volumes. Overall, the conditions for 2013 continue to be challenging, both in the economic and political sphere. Any comprehensive solution to the Eurozone crisis will take time, as will the structural reforms needed to boost competitiveness and growth. At a global level though, US, China, and emerging markets in general will potentially provide support. As a result, we expect an overall benign environment with relatively slow global growth, but we may see differentiation between regions in terms of growth and interest rate environments. For 2013 we foresee no major investment and the total number of staff will remain stable. In January 2013, Credit Europe Bank N.V. successfully placed subordinated bonds (Tier 2) worth US$ 400 million with a maturity of 10 years. This issue further strengthened the capital base as well as the long term funding. Despite the continuing volatility in the financial markets, we are cautiously optimistic about CEB s profitability for 2013 thanks to our solid business model, strong capital ratios and proven track record. Amsterdam, March 13, 2013 E. Murat Basbay Senol Aloglu Umut Bayoglu Scott Cheung Levent Karaca

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