About Credit Europe Bank

Transcription

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

21 Profile of the Managing Board Outlook 19 From left to right: Umut Bayoğlu (CFO), Scott Cheung (CRO), Enver Murat Bașbay (CEO), Ine Bastiaens (Corporate Secretary), Șenol Aloğlu (Deputy CEO), Levent Karaca (member)

22 Profile of the Managing Board 20 Profile of the Managing Board Profile of the Managing Board as per February 2012 E. Murat Başbay (1968) Chief Executive Officer Enver Murat Başbay holds a BSc degree in business administration from Bosphorus University, Istanbul. He began his career in 1992 as an auditor at Arthur Andersen and worked in the Istanbul and Dubai offices. In 1997 he was a member of the founding team of Credit Europe Bank in Russia. In 1999 he joined the management team of Credit Europe Bank in the Netherlands and he played an active role in the expansion of the bank as CFO and member of the Managing Board. Mr. Başbay returned to Russia in 2005 as CEO for a five year period. Since June 2010, Mr. Başbay has been CEO of Credit Europe Bank, currently responsible for treasury, corporate credits and corporate governance Şenol Aloğlu (1965) Deputy Chief Executive Officer A graduate of Bosphorus University, Istanbul, in business administration, Şenol Aloğlu started his banking career at Interbank in 1987, joining the Fiba Group in He held various positions at Finansbank AS and Finans Leasing AS in Istanbul. In November 2000, he was appointed Executive Vice President for Financial Institutions and also Country Manager for the Netherlands. In November 2005, he was appointed Managing Board member at Credit Europe Bank. Mr. Aloğlu is responsible for retail banking, bank relations, financial institutions credits, information technology, operations and public relations. Umut Bayoğlu (1973) Chief Financial Officer Holds a BSc in economics from METU in Ankara. He began his career in 1996 as a management trainee with Finansbank AS. In 2001 he was appointed Head of Financial Control in Germany. In 2006 he became CFO of Credit Europe Bank and in 2008 he joined the Managing Board. He is responsible for financial control, human resources, accounting and central bank reporting. Scott Cheung (1975) Chief Risk Officer Holds a postgraduate Registeraccountant qualification from the University of Amsterdam. He worked for six years at Ernst & Young Accountants in Amsterdam and Hong Kong, before joining Credit Europe Bank in 2002 as Head of the Internal Audit Department. In 2006, he was appointed Head of Group Audit, responsible for coordinating the group s Internal Audit activities. Mr. Cheung has been a member of the Managing Board since December 1, He is responsible for financial and non-financial risk management, internal audit and compliance. Levent Karaca (1970) Member Holds an MBA degree in Finance and Economics from Marmara University in Istanbul. He began his career in Istanbul with Finansbank AS, worked for Banque de Bosphore in Paris, France and joined Credit Europe Bank in He worked at the Belgian branch of the bank, and was responsible for setting up the corporate and retail divisions of this branch before moving to Russia in 2006, where he was head of the Corporate Banking division and a member of the management team. He returned to Amsterdam in 2010 to become Division Director Corporate Banking responsible for the corporate banking activities of the bank on a consolidated level. Mr. Karaca was appointed to the Managing Board of the bank as per January 1, As a Board Member he is chiefly responsible for corporate banking and legal affairs.

23 Integrity Integrity is the driving force behind everything Credit Europe Bank does. Integrity is not just a theoretical concept. It defines our obligation to generate trust and confidence through ethical behavior and by complying with laws, regulations and guidelines, and by caring about the preservation and promotion of the highest standards of professional conduct in our work place and community.

24 Corporate Governance 22 Corporate Governance A. General Credit Europe Bank N.V. (CEB) is a public limited company (naamloze vennootschap) established in Amsterdam on February 24, The company has registered shares and is not listed on any stock exchange. Share capital The total issued and fully paid-up share capital of the bank at end-2012 amounted to million (the same as at end-2011). The shares of CEB are fully owned by Credit Europe Group N.V. (CEG), a holding company established in the Netherlands. CEB makes up more than 99% of CEG s assets. CEG s shares are ultimately owned, through the investment company FIBA Holding AS in Turkey, by Hüsnü M. Özyeğin. Regulatory framework CEB has had a full banking license in the Netherlands since The Dutch Central Bank (De Nederlandsche Bank or DNB) is the consolidated prudential supervisor: its supervision extends to CEB s banking activities in the Netherlands as well as to the banking activities of its subsidiaries. In addition, the bank is registered as financial services provider with the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten or AFM). Although CEB is not listed, it voluntarily supports and applies, to a large extent, the best practices of the Dutch Corporate Governance Code, mindful of its role as a financial institution in the Netherlands. This is also in line with Dutch Central Bank recommendations to apply the best practices of the Dutch Corporate Governance Code. For more information on the bank s application of the principles and best practices of the Dutch Corporate Governance Code, see page 31. Not only is the Dutch Central Bank the supervisor of CEB, it is also our regulator. The provisions in the Regulations and Policy Rules issued by the central bank apply to CEB to the fullest extent. Furthermore, the international standards and guidelines from European- and other relevant authorities are used by CEB as tool to substantiate its due compliance to these regulations. In addition, CEB is subject to the provisions of the Banking Code (Code Banken) insofar its principles are not overruled in the meantime by legislation. The sector-wide principles in the Banking Code were announced by the Dutch Bankers Association (Nederlandse Vereniging van Banken) with effect from January 1, For more information on our application of the principles of the Banking Code, please see a summary report page 31, section D. and a full report on www. crediteuropebank.com. The statutory corporate rules in the Netherlands are laid down in the bank's articles of association (statuten). The Managing Board, Supervisory Board and each subcommittee have their own charters (reglementen). The charters of the Managing Board, the Supervisory Board and its subcommittees are published on our corporate website. For employees and others working with CEB, a Code of Conduct has been established to set standards for professional conduct. Furthermore, an extensive set of internal governancerelated policies and procedures apply to our employees, ranging from whistleblower procedures to policies relating to expenses. Credit Europe Bank N.V. as a parent bank Per the end of 2012 CEB directly owns five banking subsidiaries in Russia, Switzerland, Romania, Ukraine and the United Arab Emirates, and three leasing companies in Russia, Romania and Ukraine. The banking subsidiary in Turkey, acquired in 2010, was spun off into the Fiba Group in December To underpin the central position of the head office in Amsterdam, the Netherlands, the bank applies a functional reporting structure: local managers in the subsidiaries must maintain a direct reporting line to the functional head of the respective department in Amsterdam. This structure applies to departments such as Internal Audit, Compliance, Treasury (asset-liability management), Credits, Risk Management, IT, Financial Control and Corporate Banking. Moreover, the general managers of all subsidiaries report directly to the CEO of CEB. During 2012, the general managers of the bank s subsidiaries and the members of the Managing Board met on a regular basis. The main purpose of these meetings is to share knowledge and experience, to align group policies, and to consider the bank s strategy and budgets. Finally, in order to ensure that CEB s business policies are applied consistently and for CEB to exercise control over its subsidiaries, the CEO of CEB and one other Managing Board member sit on the Supervisory Board or Boards of Director of subsidiaries of CEB. In such local boards, also one or two CEB Supervisory Board members participate. In the course of 2013 this structure is subject to re-assessment and possibly some elements of this governance structure might be amended.

25 Corporate Governance B. Boards CEB has a two-tier board structure, with a Managing Board and a Supervisory Board. Managing Board Composition Since the beginning of 2012, the Managing Board consists of 5 board members. Their individual resumes can be found on page 26. Tasks The Managing Board is responsible for the management of CEB, which includes realizing the bank s goals and strategy, setting policies and achieving results. The Managing Board is also responsible for compliance with all relevant laws and regulations, management of the risks attached to our banking activities and the bank s funding. Without affecting this collective and joint responsibility, the members of the Managing Board have agreed to allocate their tasks as follows: Murat Başbay, CEO Treasury, corporate credit and corporate governance Şenol Aloğlu, Deputy CEO Retail banking, bank relations, financial institutions credits, operations, information technology, public relations Umut Bayoğlu, CFO Financial control, human resources, accounting, central bank reporting Scott Cheung, CRO Financial and non-financial risk management, internal audit, compliance Levent Karaca, member Corporate banking and legal Supervisory Board For a full description of the Supervisory Board: its composition, tasks, subcommittees and 2012 report, see page 40. C. Dutch Corporate Governance Code This section contains a brief overview of CEB s compliance with the best practice rules of the Dutch Corporate Governance Code (in this section known as the Code). It should be noted that due to our private ownership structure, the Code s provisions on shareholders (rights, meetings, obligations, protective measures see Chapter IV of the Code) are not applicable to CEB. Based on a gap analysis of the provisions in the Code and CEB s current practice and structure, the CEB s main deviations from the relevant best practices of the Code are: Transparency on remuneration of Managing Board and Supervisory Board (best practice provisions II.2 and III.7) At present, information is given on the remuneration of the Managing and Supervisory Boards collectively per board, split into fixed and variable remuneration. No information is given at an individual level. This also applies to (individual) pension rights, peer group information and performance assessment criteria. It is the view of the Managing Board that the aggregate quantitative and qualitative information provided in the Remuneration Report in paragraph F. below is sufficiently transparent for stakeholders. Information in paragraph F below is in line with the disclosure requirements set out by DNB. Independence of Supervisory Board members (best practice provision III.2) Under best practice provision III.2, the requirement is set for Supervisory Board members that all members but one are independent. Since January 1, 2013, the following statement applies to the Supervisory Board of CEB: that half of the members are independent. This ratio is in line with DNB s requirements in that respect. D. Banking Code This section summarizes how CEB applies the principles of the Banking Code and where we deviate from these. A full report on our implementation of the Banking Code can be found on our website, Since the Dutch Bankers Association published the Banking Code in September 2009, the Managing Board has taken all necessary steps to apply the Code s guidelines and principles to CEB at a consolidated level. An initial analysis, evaluating the structure, services and products offered by CEB, revealed that the bank was to a large extent already in compliance with the principles. Existence of a Risk Committee at Supervisory Board level, the presence of a solid and independent internal audit function and the moderate level of variable remuneration for key executives are examples of similarities between CEB s existing policies and practices and the Banking Code principles. On the basis of a road map with a concrete plan of action, the Managing Board took steps to improve or fully comply with the requirements of the Banking Code. All actions and measures were discussed and approved at Supervisory Board level. As of February 2013, CEB is in full compliance with the principles of the Banking Code. Please find below a summary of our application of the Banking Code principles. The overview follows the sequence of the chapters in the Banking Code. A full report can be found at Corporate Governance 23

26 Corporate Governance 24 Corporate Governance 1. Supervisory Board Since the beginning of January 2013, CEB s Supervisory Board has consisted of six members. Taking into account the bank s size and nature, but also the composition of the Supervisory Board, such a number is deemed sufficient in itself. The number of independent members and dependent members is equal at 3. All the members of the Supervisory Board have a financial or legal background and the majority of them are still active in the financial and/or legal services business on a day-to-day basis. It is common practice within CEB that every Supervisory Board member is physically present at each board and subcommittee meeting. In terms of compensation, each Supervisory Board member receives a suitable amount of compensation (fixed; no variable pay). Suitable takes into account the total number of hours spent on the tasks. For the board training a yearly agenda is set. In 2012, for example we had a training on corporate governance developments. For 2013, additional trainings in that respect and on other high level topics are organized. To date, the Supervisory Board has performed a self-evaluation annually and in follow up of the external board evaluation in June 2011, another one was organized in November The 2012 evaluation was based on interviews taken by an external facilitator mainly focusing on topics like the cooperation amongst board members, the internal and external functioning of the Board and the cooperation with the Managing Board. The summary report of the interviews formed the basis for an open discussion between the external facilitator and all board members. CEB has an Audit & Risk Committee, which is a subcommittee of the Supervisory Board. Risk was explicitly added to Audit and a substantial amount of time and attention is dedicated to risk management subjects during Audit & Risk Committee meetings. The Audit & Risk Committee meets at least four times a year and standing topics in the meeting are reviewing consolidated risk management updates, the internal audit plan, internal audit status reports, the external audit plan, the external audit reports and the most recent financials. 2. Managing Board Since January 1, 2012, the Managing Board of CEB has had five members. All members have gained thorough expertise and knowledge of banking, of our company, and of the locations in the various countries where the bank is active. It is the Managing Board s task to set the business policy and strategy of CEB. On an annual basis, mostly while discussing the consolidated budget, the bank s business policy is discussed with and validated by the Supervisory Board. This policy also takes into account external developments such as movements in the markets where the bank is active, global financial developments, the general financial situation of the bank, its clients interests and other stakeholders positions. The members of the Managing Board, together with other senior executives such as the division directors of Risk Management and Treasury, meet on a weekly basis in the Asset & Liability Committee, where the bank s liquidity position is discussed and related policies are reviewed. Additionally, meetings of the IT Steering Committee take place monthly and are attended by members of the Managing Board and representatives of the IT department. Furthermore, on a weekly basis there are HR working committee meetings to which at least one member of the Managing Board and representatives of the HR department attend. The moral declaration on ethical conduct, signed by every Managing Board member, is published on our corporate website. Not only have the members of the Managing Board signed this declaration, but the Board has also asked all employees working in the Amsterdam head office and its branches to sign such a statement. The signed declaration is part of an employee s personal file with the HR department. All new hires are asked to sign a moral declaration once they join the bank. In CEB subsidiaries, a similar exercise was performed to have senior staff and employees sign a moral declaration. By virtue of new DNB regulations per the 1st of January 2013, banks in the Netherlands have to have their board members take an oath on moral behavior. How such requirement will be worked out in CEB will be structured in the first half of Risk Management Risk management is at the heart of our organization, and supported at both the Managing Board and Supervisory Board level. In addition to the Risk Management and control statement, as presented in the Report of the Managing Board, page 8, more detailed information is presented in paragraph 37 of the Consolidated Financial Statements. 4. Putting the customer first Being a relatively new entrant into the competitive Dutch banking sector, CEB felt obliged from the start to make the interests of its retail clients a priority in its service provision. From the outset, it has been our goal to offer a small range

27 Corporate Governance of easy-to-use, easy-to-understand and simple online retail products. On the savings side, CEB offers a daily savings account and some time deposits with terms ranging from six months to 10 years. The bank principally avoids complicated interest structures, in which it is difficult for clients to trace or receive bonus interest or similar benefits. On the retail loans side, we offer installment loans and revolving loans. In Western Europe, CEB does not offer securities products, complicated derivatives, other investment instruments or mortgage loans for retail clients. CEB attaches great importance to accurate, comprehensible, clear marketing and client communication by post, and telephone but also on our websites, where up-to-date information on products, interest rates, contact details and background is always available to clients. Having no bricks and mortar service offices in the Netherlands, Belgium or Germany but a multilingual centralized service center, we can invest the money we save on rent and advertising costs in training our employees to deliver high-quality, accurate and flexible services. CEB seeks to consider the client s needs in all stages of the development of new products and services, from conceptualization through to market launch. In future, new products and services will also have to comply with CEB s Principles of a Modern Savings Policy, drafted with a view to the guidelines in the Banking Code and as required by the AFM. This policy is currently being discussed for approval within the bank. The Managing Board and its executives responsible for the retail business are fully aware that client focus is more than high-quality and flexible service levels; more than simply evaluating the number of client complaints received each year. Client focus is also anticipating and assessing a client s needs and interests. For example, for our seven-year and 10-year time deposits, we offer the option of a monthly payout of accrued interest. For clients who deposit their money with us for such a considerable length of time, it was deemed fair to offer a monthly payment of accrued interest. On the retail loans side, we have monitoring tools to be able to screen a client s creditworthiness and to give early warnings to the client care department and clients themselves if there are discrepancies in the payment/repayment rhythm. The tool also helps us grant the kind of loan best suited to a client s need, rather than suited to enhancing the bank s profit. For example, if a client wants a loan to buy a car, our client support must and will advise a personal loan instead of a revolving loan, even though the latter would benefit CEB s earnings more. 5. Audits The Internal Audit Department (IAD) within CEB plays an important role in ensuring ever better governance. It represents an independent and objective assurance and consulting function as a third line of defense. Through the application of a risk-based methodology, IAD evaluates and examines whether proper measures are taken to ensure control in the organization and its activities. The Group Internal Auditor has a direct reporting line to the CRO and the Chairman of the Audit & Risk Committee. 6. Remuneration For a summary of the remuneration policy in CEB, please revert to paragraph F. below. E. Handling potential conflicts of interests Credit Europe Bank has affected a group of procedures suitable for managing potential conflicts of interests. Such arrangements have to be complied with for professional integrity - and transparency reasons. The generic arrangements aim at setting criteria and controls that identify and govern potential conflicts of interest arising from normal personal banking transactions by employees, senior management or members of the Managingand Supervisory Board. In 2012 no direct, indirect or formal conflicts of interest were identified. A special category of potentially conflicting situations forms the Bank entering into a transaction with a related party. Parties related to Credit Europe Bank include all Fiba Group associated companies, any member of the Managing- or Supervisory Board as well as their close family members and any entities controlled by them. Related party transactions are settled in the normal course of business and on an arm s length basis, i.e. under the same commercial and market terms that apply to non-related parties. The kind of transactions that fall under related party transactions are various: loans, deposits or foreign exchange transactions. The Bank has specific arrangements in place to ensure a proper management of potential conflicts of interests in related party transactions. These arrangements include procedures to Corporate Governance 25

28 Corporate Governance 26 Corporate Governance identify, authorize and report related party transactions to the Managing Board and the Compliance Oversight Committee. In every Compliance Oversight Committee meeting, an overview with (approved) related party transactions is presented to review whether the Bank acted in conformity with its established procedures and with the required approval process. On an annual basis, the bank s Internal Audit department carries out audit procedures to provide reasonable assurance that the Bank s policies and procedures for related party transactions are properly and effectively executed. See also note 35 of the financial statements for the disclosure on related parties. F. Remuneration Report (i) Decision- making process to determine the remuneration By virtue of CEB s Group Remuneration Policy (described in more detail below), the key elements of the governance structure for the fixing, execution and evaluation of the remuneration management are as follows: CEB s Supervisory Board is responsible for the establishment, execution and evaluation of the Group Remuneration Policy and the Supervisory Board monitors the proper implementation of this by the Managing Board. The HR & Remuneration Committee (a subcommittee of the Supervisory Board described in more detail below) prepares the decision-making process for the Supervisory Board, taking into account the long-term interests of all stakeholders of CEB. Remuneration of Key Executives (defined in the Group Remuneration Policy; in the Dutch Central Bank s Regulation on Sound Remuneration Policy these persons are referred to as identified staff ) is determined by the Supervisory Board. The remuneration of the other employees is determined and implemented by the Managing Board and supervised by the HR & Remuneration Committee. For senior managers in control functions, remuneration is directly supervised by the HR & Remuneration Committee. As a general principle, CEB s Group Remuneration Policy authorizes the Supervisory Board to adjust the variable remuneration of (a group of) Employees as defined in such Policy, if continuation on the same level would have an unfair and unintended effect. Moreover, the Supervisory Board has the right to reclaim the variable component of remuneration granted to Employees, if it turns out that such a variable was based on inaccurate data. Such reclaim is allowed until two years after the award of the variable pay. (ii) Link between performance and pay One of the key elements of CEB s Group Remuneration Policy is the description of the appraisal process. In this paragraph, a summary is given of this process: On the basis of pre-determined and assessable objectives, comprising financial and non-financial elements, and also on the basis of competences and general indicators, an Employee s overall performance assessment is determined, at least once per year. The non-financial objectives form a substantial portion of the total set of objectives for an employee. Objective-setting Each year, the Managing Board formulates its own objectives (financial and non-financial) and presents them for approval to the Supervisory Board. The approved objectives are then assigned (partially) to the relevant Key Executives and Employees. Pursuant to the Group Remuneration Policy, financial objective-setting for Employees in control functions may not be based on the commercial objectives of CEB, i.e. the objectives of these Employees must be set independent from the financial targets and/or results of the business they control. Performance assessment Financial performance of an employee is assessed in the context of CEB s financial stability and own funds requirements as well as the long-term interests of the shareholders and other stakeholders. Financial performance shall be evaluated on the basis of (a) divisional/ departmental profitability, calculated on financial criteria such as Net Income and (b) the department s attribution/claim to the risk profile of CEB. Via a web-based performance management system, an overall performance score is generated. The three performance categories are competences, general indicators and objectives. For the overall score, the following weighted percentages apply per category: competences 30%, general indicators 20% and objectives 50%. The end score is a figure between 1 and 5 whereby 5 is excellent. Performance evaluation of a Key Executive takes into account performance over several years and appraisals for Employees in control functions take into account the countervailing function of these staff members. (iii) Most important characteristics of remuneration system Apart from the governance structure and appraisal process,

29 Corporate Governance the CEB Group Remuneration Policy also incorporates rules and guidelines for the setting and determination of fixed and variable remuneration for Employees. As a rule in CEB, fixed salary levels are conservatively (i.e. on the low end) aligned in comparison to similar functions in banking and the industry, nationally and internationally. One of the basic principles for granting variable pay (if any at all) is that variable pay may never exceed 100% of the fixed salary, and that guaranteed variable remuneration to Key Executives or other senior managers is not allowed. Phantom Share plan In 2012, CEB introduced a Phantom Share Plan. In brief, such a plan lays down the terms and conditions for the granting of Phantom Shares to Key Executives. The Plan entails that variable remuneration awarded to a Key Executive will be for 60% unconditional and for 40% deferred. At least 50% of the variable remuneration (deferred or unconditional) is in the form of financial instruments whose value is determined by/ derived from the value of CEB shares: Phantom Shares. These financial instruments are rights not shares. The deferred part of the variable remuneration vests over a period of 3 years. Furthermore, vested Phantom Shares (whether deferred or unconditional) are subject to a retention period of 1 year. Vesting and exercise of the Phantom Shares is subject to the fulfillment of certain conditions. For example, the holder s performance score (see paragraph (ii) above) must exceed a certain limit. (iv) Most important parameters & motivation for variable remuneration Pursuant to the Group Remuneration Policy, the granting of variable remuneration at all depends on CEB s performance in a year. By virtue of the rules, if CEB s ROAE in any given year is less than 2% or negative, there will be no variable remuneration. Additionally, the requirement applies that the granting of variable remuneration may not restrict CEB s possibilities to reinforce its regulatory capital, its solvency ratio or its own funds. CEB has no other non-cash benefits/non-cash variable remuneration elements. (v) Aggregate quantitative information on remuneration per business segment Over 2012, CEB paid out EUR 61,149,278 (2011: EUR 69,073,262) to employees working in the Wholesale Banking business segment and EUR 87,529,580 (2011: EUR 79,065,152) to employees in the Retail Banking segment (fixed gross salaries). (vi) Aggregate quantitative information on remuneration for Key Executives and senior managers CEB has identified 41 Key Executive (or identified staff as referred to in the Dutch central bank Remuneration Regulation on Sound Remuneration Policy) and 80 senior managers (i.e. division directors (not being Key Executive)). In 2012, the total amount of remuneration paid out to these Key Executives and senior managers amounted to EUR 17,180,681, split into EUR 15,543,077 fixed salary and EUR 1,637,605 variable remuneration. The variable remuneration for Key Executives was split in a deferred and unconditional part (resp. 40% and 60%) and awarded in cash or Phantom Shares (50/50). A retention period of 1 year applies to the vested Phantom Shares. The total amount of awarded and outstanding deferred remuneration (vested and unvested) in 2013 (for the Phantom Shares granted in 2012) amounts to EUR 1,099,424. As the Phantom Share Plan was only implemented in 2012 (over the performance 2011), no deferred remuneration was paid out yet (February 2013). First payment is due in April By virtue of the rules in the Group Remuneration Policy, in 2013 there will be no less than awarded deferred pay-out due to unsatisfactory performance adjustment. (vii) New severance payment In the reporting year 2012, CEB on a consolidated basis paid severance payments to a total of 88 (2011: 222) employees of which none are Key Executives. For none of them did the severance payment exceed one year s fixed salary a requirement explicitly included in CEB s Group Remuneration Policy. In total, CEB paid EUR 632,731 in severance in 2012 (EUR 2,529,750 in 2011). The highest amount granted was EUR 126,900. CEB did not pay sign-on or entry awards to a Key Executive in Corporate Governance

30 Profile of the Supervisory Board Profile of the Supervisory Board 28 From left to right: Onur Umut, Korkmaz Ilkorur, Hector de Beaufort (chairman), Mehmet Güleșci, Murat Özyeğin and Frits Deiters.

31 Profile of the Supervisory Board Profile of the Supervisory Board as per February 2012 Hector de Beaufort (1956) Chairman Holds a Master s degree in Law from Utrecht University, the Netherlands, and from the University of Pennsylvania. He has been senior corporate partner at the leading international law firm Clifford Chance in the Netherlands since Prior to this, he was partner at Stibbe in the Netherlands and worked as a lawyer at Hughes Hubbard Reed in the USA. He has broad international experience in business law and corporate governance and has specific knowledge of corporate finance and capital market transactions. Besides the legal career, Mr. De Beaufort is active in foundations like the Stichting Vrienden van het Mauritshuis, the Von Grimborn Arboretum and the Raad van Beheer Kroondomein Het Loo. Mr. De Beaufort, who is a Dutch national, was appointed as independent member to the Supervisory Board in February 2011 and elected Chairman in January Murat Özyeğin (1976) Vice Chairman Holds a BS in Industrial Management and Economics from Carnegie Mellon University and completed his MBA at Harvard Business School. Currently he is the Head of Strategic Planning and Business Development of Fiba Group, Executive Board Member of Fina and Fiba Holding and Chairman of all of Fiba Group's non-banking businesses. Mr. Özyeğin began his career in 1998 at Bear Stearns & Co. Inc., in New York City as a Financial Analyst within the Mergers & Acquisition Group. In 2000, he was appointed a Senior Analyst position at the London office of the same company. After his return to Turkey in 2003, he established the Strategy and Business Development Departments of Finansbank and FIBA Holding. Next to his Fiba and Fina positions, Mr. Ozyegin is an Executive Board member of Endeavor Turkey, Hüsnü M. Özyeğin Foundation, a member of the Turkish Industry and Business Association (TÜSİAD), Member of the Board of Trustees of Ozyegin University and World Wildlife Fund, Board Member of Global Relations Forum, Board Member of OECD s Business, Industry Advisory Council (BIAC) and Member of Global Advisory Council of Harvard University. Mr. Özyeğin, who has Turkish nationality, was appointed to the Supervisory Board of Credit Europe Bank in F. Onur Umut (1962) Holds a BSc from Bosphorus University in Istanbul and completed the Wharton Executive MBA (1998). He joined the Fiba Group in 1988 and is now a member of the Board. From 1996 to 1999, he served as General Manager of Credit Europe Bank. He was appointed General Manager of Finansbank AS, Turkey. Mr. Umut, who has Turkish nationality, was appointed to the Supervisory Board in Mehmet Güleşci (1962) Holds a BA and an MBA from Bosphorus University in Istanbul. He is CFO of the Fiba Group and serves as a Board Member of a number of Credit Europe Bank subsidiaries and Fiba Group companies. Before joining Fiba Group in 1997, he was an Audit Partner at Ernst & Young in Turkey, responsible for the financial sector. He was CFO, and subsequently Board Member, of Finansbank AS until Mr. Güleşci, who is a Turkish national, was appointed to the Supervisory Board in Frits Deiters (1940) Holds a graduate degree in Economics from the University of Amsterdam. He has had a successful 35-year career with ABN Amro Bank (and its predecessors) in corporate- and private banking, and lastly as Country Manager for Luxembourg. Until late 2012, he was non-executive board member and chairman of the Audit, Risk and Compliance Committee of Lombard International Assurance, Luxembourg - a subsidiary of Friends Life in London. At present he is Treasurer of the Stichting Vrienden van het Singer Museum. Mr. Deiters is a Dutch national and was appointed to the Supervisory Board as independent member in May Korkmaz Ilkorur (1944) Has a master degree of Economics from the University of Pittsburgh, USA. He built up long years of managerial experience as a professional in the financial world with several banks and insurance companies like the Industrial Bank of Turkey, Yapi Kredi Bank and SBN Insurance. From 2002 till 2010 Mr. Ilkorur has been with the Business and Industrial Advisory Committee (BIAC) to the Organization for Economic Cooperation and Development (OECD) acting as the Chairman of the Governance Working Group. Since 1998 Mr. Ilkorur is a Member of the Senior Advisory Board of Oliver Wyman. One of Mr. Ilkorur s side functions is that he is (emeritus) trustee of the Robert College in Istanbul. Mr. Ilkorur is a Turkish national and was appointed to the Supervisory Board in August He qualifies as independent board member according to Dutch regulatory standards. Profile of the Supervisory Board 29

32 Report of the Supervisory Board 30 Report of the Supervisory Board The Supervisory Board is pleased to report that CEB through its own strengths was able to sustain its profitability in Taking into account the macro-economic and -financial developments in 2012, The Supervisory Board considers this an outstanding achievement. While the economies in the Eurozone worked through difficult financial circumstances, the Russian and Turkish economies showed their resilience. Both in Russia and in Turkey, the business activities of the subsidiary banks grew in all sectors. It was for the sake of allowing further growth, that the management of CEB decided to spin-off its recently acquired subsidiary in Turkey, Fibabanka AS. This transaction was extensively discussed amongst the Managing Board and Supervisory Board. After receipt of approval from DNB for this divestment, the spin-off was completed in December The Supervisory Board observes that CEB is operating in a rapidly changing regulatory environment, be it in the field of risk management, liquidity policy or corporate governance. All these adaptations require substantial time and energy from the Managing Board and its staff to keep up with the highest level of compliance to the new rules and regulations. The Supervisory Board is happy to see that this responsibility is taken with due commitment from all persons involved in CEB. As for the changes in the composition of the Supervisory Board of CEB, we are happy to inform that Messrs. Deiters and Ilkorur joined the Supervisory Board in The joining of these two independent board members contributes to a large extent to enhance the quality of our due governance in our Board and the bank. In order to meet the required 50%-rule set by DNB, two nonindependent Supervisory Board members stepped down per January 1, These members are: Husnu Ozyegin and Fevzi Bozer. The contribution that Mr. Ozyegin, founder, gave to the Bank is un-measurable. His vision and dedication have been one of the major driving forces for the success of the Bank as yet. Added to that, Mr. Bozer s in-depth knowledge and expertise in the field of corporate banking and credits. His role has been very valuable for the business and the steering of CEB. More in general, 2012 was a challenging yet good year for Credit Europe Bank and the Supervisory Board wishes to extend its gratitude to all employees working in the CEB group of companies for their continuous loyalty and energy expended in supporting the strength of the group. Net income allocation The Supervisory Board has taken note of the Report of the Managing Board and the financial statements for 2012, comprising the balance sheet and profit and loss accounts. The financial statements further include explanatory notes and other information, including the report of the external auditors, KPMG Accountants NV, for the year ending December 31, We propose and advise that the General Meeting of Shareholders adopt these financial statements. Furthermore, we propose to add the full amount of net income to the retained earnings (i.e. to pay no dividend to shareholders), thereby discharging the members of the Managing Board from their liability with respect to their management responsibilities and the members of the Supervisory Board with respect to their supervisory responsibilities. To conclude, we believe CEB is well positioned to face forthcoming challenges and opportunities for Given the incessant efforts and support of all CEB employees managed and guided by the Managing Board the Supervisory Board is convinced that this forms a solid basis to face the year ahead, with all its challenges and opportunities. Supervisory Board structure As per February 2013, the Supervisory Board of CEB had six members: Hector de Beaufort (Chairman), Onur Umut, Mehmet Güleşci, Murat Özyeğin (vice chairman), Frits Deiters and Korkmaz Ilkorur. All members of the Supervisory Board have a background and experience in banking, legal or finance. Mehmet Güleşci qualifies as financial expert as per III.3.2 of the Dutch Corporate Governance Code. Hector de Beaufort, chairman of the Supervisory Board is senior partner with Clifford Chance in Amsterdam, specialized in the legal side of M&A transactions, corporate finance and capital markets transactions. In line with corporate rules in the Netherlands, and as set out in CEB s Articles of Association and in the Charter of the Supervisory Board, the Supervisory Board s task is to supervise the policy of the Managing Board and the general affairs of the bank, and to support the Managing Board with advice. Committees The Supervisory Board is supported by four committees: Audit & Risk, Corporate Governance & Nomination, HR & Remuneration 1 and Compliance Oversight. (1) Until 2013 this committee was named: Remuneration Committee

33 Report of the Supervisory Board The main objective of each committee is as follows: Audit & Risk: advises the Supervisory Board on, and supervises the status of and developments in, the bank s risk management system, internal control systems, including internal audit function and compliance-related issues. It also performs a review of CEB s financial statements and the reports of the external auditor. Moreover, it discusses the relationship with the external auditor, including his independence, remuneration and other non-accounting related activities executed for the bank. In 2012 the following Supervisory Board members were member of this subcommittee: Mehmet Gulesci (chairman), F. Onur Umut and Fevzi Bozer 1. Corporate Governance & Nomination: advises the Supervisory Board on corporate governance developments reviews the implementation of corporate governance principles and practices within CEB and advises on adjustments. Also responsible for nominations, which involves establishing and advising on the selection criteria, profile and nomination process for new Supervisory and Managing Board members. The following Supervisory Board members formed the Corporate Governance & Nomination Committee in 2012: Hector de Beaufort (chairman), Mehmet Gulesci, F. Onur Umut, Murat Ozyegin 2. HR & Remuneration: proposes a policy and a structure relating to performance evaluation and target-setting for a certain level of senior employees of CEB and its subsidiaries, and oversees the implementation of relevant policies for the Supervisory Board. Members of the HR & Remuneration Committee in 2012 were: Fevzi Bozer (chairman), F. Onur Umut, Mehmet Gulesci, Murat Ozyegin and Hector de Beaufort 3. Compliance Oversight: keeps the Supervisory Board and Managing Board informed and updated on developments and/or best practices in compliance and reviews these developments and/or best practices for applicability to CEB. Reviews the implementation of CEB s compliance principles and Compliance Program and advises on adjustments. In 2012, this committee consisted of the following Supervisory Board members: F. Onur Umut (chairman), Fevzi Bozer, Mehmet Gulesci and Hector de Beaufort 4. Because of the change in the composition of the Supervisory Board per the end of 2012, the composition of the subcommittees has been adjusted as well in compliance with the governing standards of proper corporate governance. The details are set forth in the respective footnotes. Supervisory Board meetings The full Supervisory Board met five times during 2012, according to a pre-determined schedule. The meeting in December coincided with a global budget meeting. Two of the five meetings were held in the offices of a subsidiary of the bank. Additionally, three extraordinary (i.e. additional) meetings were held, mostly via video and/or telephone conferences, on specific topics that required immediate action, such as a discussion on the envisaged spin-off of the Turkish subsidiary Fibabanka. All Supervisory Board members were present at all meetings. As a rule, the Managing Board is always present at Supervisory Board meetings, with the exception of the executive session, in which the Supervisory Board discusses its own functioning as a whole, its culture and its relationship with the Managing Board. In November 2012, the Supervisory Board arranged for an externally facilitated assessment of its performance (see also page 32). Recurring topics in all Supervisory Board meetings are risk management and risk monitoring, developments in the retail and corporate banking business, in treasury and in liquidity management and updates on (regulatory) corporate governance guidelines. Not only in collective meetings are these topics discussed; also in various informal contacts between and with Supervisory Board members and (individual) members of the Managing Board or their direct reports, the developments in these areas are discussed or further explored. These contacts contribute to the Supervisory Board s engaging role and to the enhancing of the quality of the Board s supervisory responsibility. Report of the Supervisory Board 31 (1) Per 1 st January 2013, the ARC consists of: Frits Deiters (chairman), Mehmet Güleşci, Korkmaz Ilkorur (2) Per the 1 st of January 2013, the CG&NC consists of: Hector de Beaufort (chairman), Murat Özyeğin, Mehmet Güleşci (3) Starting 1 st January 2013, the HR&RC has the following members: F. Onur Umut (chairman), Murat Özyeğin, Hector de Beaufort (4) COC composition per 1 st January 2013: Korkmaz Ilkorur (chairman), Frits Deiters and Onur Umut.

34 Report of the Supervisory Board 32 Report of the Supervisory Board Audit & Risk Committee This committee met four times in Representatives of the bank s external auditor, the Managing Board, the Division Directors of the Internal Audit and Risk Management departments respectively joined all meetings. Key topics were financial performance, risk management developments and the risk profile of the bank, global internal audit activities and reports of the external auditor. Special attention was paid to the bank s Internal Capital Adequacy Assessment Process (ICAAP, the Internal Liquidity Adequacy Assessment Process (ILAAP), CEB s risk appetite policy and the implementation of the internal control framework. Corporate Governance & Nomination Committee This committee met four times in Key topics were the required changes in some elements of our corporate governance (e.g. the composition of the Supervisory Board), the related amendments to internal documents (like charters) and the implementation of new rules and regulations in the field of good governance. The CEO was present at all committee meetings. HR & Remuneration Committee In 2012, this committee met four times. Focus during the meetings was on the amendment of the group s Remuneration Policy, the finalization and implementation of the Phantom Share Plan and a re-assessment on the committee s functioning and scope. As the scope of attention of the committee is wider than remuneration, it was agreed to change the name of the committee to HR & Remuneration Committee (effective 1st January 2013). The CEO and CFO participated in all meetings. Compliance Oversight Committee This committee met four times in 2012 and was joined during these meetings by the CEO, the Chief Risk Officer and the Division Director Compliance. During the meetings, the focus was on monitoring transactions with high-risk countries, compliance with sanctions regulations, the preparations for the new FATCA rules, and the review of related party transactions. Amsterdam, March 8, 2013 Hector de Beaufort, Chairman Frits Deiters Korkmaz Ilkorur Mehmet Güleşci F. Onur Umut Murat Özyeğin

35 Transparency Credit Europe strives to make their products as transparent as possible. Furthermore, transparency is a key business best practice, whether in our products and services, accounting standards or management decision-making. Providing clear information demonstrates to stakeholders that we are sound and legitimate, thus decreasing perceived risk.

36 34 Consolidated Financial Statements 2012 Consolidated Financial Statements 2012 As of and for the year ended December 31, 2012 (Unless otherwise stated, all amounts are in thousands of euros)

37 Consolidated statement of financial position Notes Assets Cash and balances at central banks 5 1,237,932 1,770,458 Financial assets at fair value through profit or loss 6 38,746 46,270 Financial investments 7 974, ,140 Loans and receivables - banks 8 380, ,956 Loans and receivables - customers 9 5,954,911 6,556,345 Derivative financial instruments , ,331 Equity accounted investment 12 4,584 4,948 Property and equipment , ,518 Intangible assets 14 30,073 33,794 Deferred tax assets 31 26,100 27,408 Current tax assets 14,194 36,403 Other assets , ,142 Total assets 9,237,100 10,504,713 Liabilities Due to banks 16 1,113, ,996 Due to customers 17 5,931,934 7,519,808 Derivative financial instruments , ,296 Issued debt securities , ,439 Deferred tax liabilities 31 50,376 43,580 Current tax liabilities 16,179 18,592 Other liabilities 19 57,418 79,859 Total liabilities (excluding subordinated liabilities) 8,083,250 9,493,570 Subordinated liabilities , ,538 Total liabilities 8,588,332 9,766,108 Equity Share capital , ,500 Share premium 163, ,748 Retained earnings 257, ,356 Fair value reserve 8,015 (30,603) Translation reserve (71,342) (90,975) Hedge reserve (147,213) (96,291) Consolidated statement of financial position 35 Equity attributable to shareholders of the Parent Company 640, ,735 Equity attributable to non-controlling interests 8,517 12,870 Total equity 648, ,605 Total equity and liabilities 9,237,100 10,504,713 Commitment and contingencies 34 1,184,815 3,068,088

38 Consolidated statement of income Notes Interest and similar income 924, ,718 Interest expense and similar charges (536,767) (452,944) Net interest income , ,774 Fees and commissions income 124, ,221 Fees and commissions expense (54,825) (33,234) Net fee and commission income 23 69,262 72,987 Net trading income 24 18,420 17,009 Results from financial transactions 25 31,649 7,343 Other operating income 26 28,986 23, Operating income 79,055 48,094 Credit loss charges 10 (139,902) (102,226) Net operating income 396, ,629 Consolidated profit and loss statement Personnel expenses 27 (148,680) (148,138) General and administrative expenses 28 (93,948) (85,038) Depreciation and amortization 13,14 (19,267) (20,486) Other operating expenses 29 (18,823) (9,941) Other impairment loss 30 (9,203) (4,954) Total operating expenses (289,921) (268,557) Share of lossof associate (364) (75) Operating profit before tax 105, ,997 Income tax expense 31 (26,458) (24,262) Profit for the year from continuing operations 79,453 83,735 Result for the year from discontinued operations 38 (1,393) 10,522 Profit for the year 78,060 94,257 Attributable to: Equity holders of the Parent Company 77,377 92,656 Profit for the year from continuing operations 61,243 74,746 Profit for the year from discontinued operations 16,134 17,910 Non-controlling interests 683 1,601 Profit for the year from continuing operations 267 1,344 Profit for the year from discontinued operations Earnings per share attributable to equity holders of the Parent Company (in Euros) From continuing operations 32 Basic Diluted From discontinued operations 32 Basic Diluted

39 Consolidated statement of comprehensive income Profit for the period 78,060 94,257 Change in currency translation reserve 20,365 (21,917) Change in fair value reserve 38,702 (19,673) Change in net investment hedge reserve (51,341) (9,606) Change in cash flow hedge reserve Change in tangibles revaluation reserve Other comprehensive income for the period 8,985 (50,415) Total comprehensive income for the period 87,045 43,842 Attributable to: owners of the company 86,362 42,241 non-controlling interest 683 1,601 Total comprehensive income for the period 87,045 43,842 Consolidated statement of comprehensive income 37

40 Consolidated statement of changes in equity 38 Consolidated statement of changes in equity Attributable to equity holders of the Parent Company Net invest- Cash Fair ment flow Non- Issued Share Retained value hedge hedge Translation controlling Total capital premium earnings reserve reserve reserve reserve Total interest equity At January 1, , , ,356 (30,603) (96,614) 323 (90,975) 725,735 12, ,605 Change in fair value reserve , , ,702 Change in currency translation reserve ,633 19, ,365 Change in net investment hedge reserve (51,341) - - (51,341) - (51,341) Change in cash flow hedge reserve Change in tangibles revaluation reserve Profit for the year , , ,060 Total income and expense for the year recognized directly in equity ,203 38,618 (51,341) ,633 85,532 1,513 87,045 Change in share capital (5,309) (5,309) Dividends paid - - (171,016)(*) (171,016) (544) (171,560) Transfer to / from share premium (13) (13) At December 31, , , ,543 8,015 (147,955) 742 (71,342) 640,251 8, ,768 (*)More information can be found in Note 38. At January 1, , , ,700 (10,983) (87,008) (438) (69,087) 710,432 22, ,859 Change in fair value reserve (19,620) (19,620) (53) (19,673) Change in currency translation reserve (21,888) (21,888) (29) (21,917) Change in net investment hedge reserve (9,606) - - (9,606) - (9,606) Change in cash flow hedge reserve Change in tangibles revaluation reserve Profit for the year , ,656 1,601 94,257 Total income and expense for the year recognized directly in equity ,656 (19,620) (9,606) 761 (21,888) 42,303 1,539 43,842 Change in share capital (8,862) (8,862) Transfer to / from retained earnings (2,161) (2,161) Dividends paid - - (27,000) (27,000) - (27,000) Transfer to / from share premium (73) (73) At December 31, , , ,356 (30,603) (96,614) 323 (90,975) 725,735 12, ,605

41 Consolidated statement of cash flows Operating activities Notes Profit for the period 78,060 94,257 Adjustments for significant non-cash items included in income 191, ,928 Depreciation and amortization 13,14 19,267 20,486 Credit loss charges , ,226 Impairment loss 30 9,203 4,954 Income tax expense 31 26,458 24,262 Gain on disposal of subsidiary 38 (3,546) - Changes in operating assets and liabilities Change in financial assets at fair value through profit or loss (2,096) 97,071 Change in loans and receivables - banks 205, ,844 Change in loans and receivables - customers (717,836) (801,705) Change in other assets 108,137 (188,245) Total movements in operating assets (406,568) (704,035) Change in due to banks 559,615 (301,291) Change in due to customers (599,496) 411,560 Change in other liabilities (229,668) 205,659 Total movements in operating liabilities (269,549) 315,928 Net interest income (387,781) (357,774) Interest received 900, ,384 Interest paid (614,621) (529,849) Taxes paid (26,796) (58,927) Cash flows from operating activities (535,285) (281,088) Consolidated cash flow statement 39 Investing activities Purchases of financial investments 7 (1,388,206) (863,988) Sales and redemption of financial investments 7 1,150,430 1,554,839 Acquisition of property and equipment 13 (17,578) (64,767) Sale of property and equipment ,030 Acquisition of intangibles 14 (6,000) (8,794) Sale of intangibles 14-5 Acquisition of subsidiaries (3,629) (4,691) Disposal of discontinued operations 38 39,494 - Cash flows from investing activities (224,518) 613,634 Financing activities Issuance of other long-term funding and subordinated liabilities 605, ,826 Repayment of long-term funding (209,818) (65,306) Dividends paid (171,016) (27,000) Cash flows from financing activities 224, ,520 Movement in cash and cash equivalents (535,434) 542,066 Cash and cash equivalents at January 1 1,770,458 1,234,925 Foreign exchange rate fluctuations 2,908 (6,533) Cash and cash equivalents at December ,237,932 1,770,458

42 Notes to Consolidated Financial Statements 1. Reporting entity 40 Notes to Consolidated Financial Statements General Credit Europe Bank N.V., herein after the Bank, is domiciled in Amsterdam, the Netherlands. The Consolidated Financial Statements of the Bank for the year ended December 31, 2012, comprise the Bank and its figures of the Bank and its subsidiaries and other controlled entities (together referred to as the Bank.) The Bank was founded as a specialized trade-finance bank, which aimed to actively participate in the wholesale financing of international trade. In later years, the Bank started retailbanking activities, including savings accounts, mortgage loans, consumer loans and credit cards. The Bank s registered office is Karspeldreef 6A, 1101 CJ Amsterdam, Netherlands. Changes to the Group The Bank disposed its shares in its subsidiaries Fibabanka and Credit Plus Gulf in More information can be found in Note 38.

43 Notes to consolidated financial statements 2. Basis of preparation a) Statement of compliance The Consolidated Financial Statements of Credit Europe Bank N.V. and all its subsidiaries are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), and have been approved by the Managing Board and the Supervisory Board per March 8, b) Basis of measurement The Consolidated Financial Statements have been prepared on the historical-cost basis, except for available-for-sale investments, derivative financial instruments, assets held for sale and financial assets (and liabilities) designated at fair value through profit or loss, which are measured at fair value. c) Functional and presentation currency These Consolidated Financial Statements are presented in Euros, which is the Bank s functional currency. Financial information presented in Euros has been rounded to the nearest thousands, except where indicated. d) Use of estimates and judgments The preparation of Consolidated Financial Statements in conformity with IFRS requires the Bank s management to make judgments, estimates and assumptions that affect the application of policies, and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The most significant use of judgments and estimates are as follows: i. Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded on the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of liquidity and model inputs, such as correlation and volatility for longer-dated derivatives. ii. Impairment losses on loans and receivables and financial investment securities The Bank reviews its problem loans and receivables and financial investment securities at each reporting date to assess whether an allowance for impairment should be recorded in the income statement. In particular, judgment by the management is required on the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. In addition to specific allowances against individually significant losses and receivables, the Bank also makes a collective impairment allowance against the remaining exposures, which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when originally granted. This takes into consideration such factors as any deterioration in country risk or the industry, as well as any identified structural weaknesses or deterioration in cash flows. iii. Deferred tax assets Deferred tax assets are recognized for all tax losses to the extent that is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based on the likely timing and level of future taxable profits together with future tax-planning strategies. e) Accounting for business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Bank. Control is the power to govern the financials and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Bank takes into consideration potential voting rights that currently are exercisable. The Bank measures goodwill as the fair value of the consideration transferred including the recognized amount of any non-controlling interest in the acquire, less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss. Notes to consolidated financial statements 41

44 Notes to Consolidated Financial Statements 42 Notes to Consolidated Financial Statements Subsequent measurement Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investments, the carrying amount of goodwill is not included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to the carrying amount of the equity accounted investment. 3. Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements, and have been applied consistently throughout the Bank. Certain comparative amounts in the consolidated statement of comprehensive income has been re-presented as if the operation discontinued during the current year (refer to page 9) had been discontinued from the start of the comparative year. a) Basis of consolidation Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, i.e. when control is transferred to the Bank. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The Bank measures goodwill at the acquisition date as: the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in the income statement. Transactions costs, other than those associated with the issue of debt or equity securities, that the Bank incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. Non-controlling interests For each business combination, the Bank elects to measure any non-controlling interests in the acquiree either: at their proportionate share of the acquiree s identifiable net assets, which are generally at fair value; or at fair value. Changes in the Bank s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss. Subsidiaries Subsidiaries are those enterprises controlled by the Bank. Control exists when the Bank has the power, directly or indirectly, to govern the financial and operating policies of an enterprise to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. Special-purpose entities Special-purpose entities (SPEs) are created to accomplish a narrow and well-defined objective, such as the securitization of particular assets or the execution of a specific borrowing or lending transaction. An SPE is consolidated if, based on an evaluation of the substance of its relationship with the Bank and the SPE s risks and rewards, the Bank concludes that it controls the SPE. The following circumstances may indicate a relationship in which, in substance, the Bank controls and consequently consolidates an SPE: The SPE s activities are being conducted on behalf of the Bank according to its specific business needs so that the Group obtains benefits from the SPE s operation. The Bank has the decision-making powers to obtain the majority of the benefits of the activities of the SPE or, by setting up an autopilot mechanism; the Group has delegated these decision-making powers. The Bank has rights to obtain the majority of the benefits of

45 Notes to consolidated financial statements the SPE and therefore may be exposed to risks incident to the activities of the SPE. The Bank retains the majority of the residual or ownership risks related to the SPE or its assets to obtain benefits from its activities. Loss of control On the loss of control, the Bank derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Bank retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently that retained interest is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained. Investments in associates and jointly controlled entities (equity-accounted investments) Associates are those entities in which the Bank has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Bank holds between 20 and 50 percent of the voting power of another entity. Joint ventures are those entities over whose activities the Bank has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operational decisions.investments in associates and jointly controlled entities are accounted for using the equity method (equity-accounted investments) and are recognized initially at cost. The cost of the investment includes transaction costs. The consolidated financial statements include the Bank s share of the profit or loss and other comprehensive income, after adjustments to align the accounting policies with those of the Bank, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Bank s share of losses exceeds its interest in an equity-accounted investment, the carrying amount of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Bank has an obligation or has made payments on behalf of the investee. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Bank s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. b) Foreign currency translation Transaction and balances Transactions in foreign currencies are translated to the respective functional currencies of the Bank entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are generally recognised in profit or loss. However, foreign currency differences arising from the retranslation of the following items are recognised in other comprehensive income: available-for-sale equity investments (except on impairment in which case foreign currency differences that have been recognised in other comprehensive income are reclassified to profit or loss); a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or qualifying cash flow hedges to the extent the hedge is effective. Translation differences in the income statement accounts are included in net trading income. Translation differences related to the disposal of available-for-sale securities are considered an inherent part of the capital gains or losses recognized in results from financial transactions. Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to euro at exchange rates at the reporting date. The income and expenses of foreign operations are translated to euro at the weighted average exchange rates of the year. Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation Notes to consolidated financial statements 43

46 Notes to Consolidated Financial Statements 44 Notes to Consolidated Financial Statements reserve (translation reserve) in equity. However, if the foreign operation is a non-wholly owned subsidiary, then the relevant proportion of the translation difference is allocated to non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Bank disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Bank disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to the income statement. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such item are considered to form part of the net investment in the foreign operation and are recognised in other comprehensive income, and presented in the translation reserve in equity. Hedge of a net investment in a foreign operation Refer to note j net investment hedge c) Financial assets and liabilities Recognition The Bank initially recognizes financial assets and liabilities on the date that they are originated. Regular way of purchases or sales of financial assets are at which the Bank commits to purchase or sell the asset. All other financial assets and liabilities (including derivatives and assets and liabilities designated at fair value through profit or loss) are recognized initially on the trade-date basis. Forward purchases and sales other than those requiring delivery within the timeframe established by regulation or market convention are recognized as forward transactions until settlement. A financial asset or financial liability is measured initially at fair value plus, for an item not classified at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue. Classifications Financial assets The Bank classifies its financial assets in one of the following categories: Loans and receivables Held to maturity Available for sale At fair value through profit or loss and within the category as: - Held for trading - Designated at fair value through profit and loss. Financial liabilities The Bank classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost or fair value through profit and loss. De-recognition Financial assets The Bank derecognizes a financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) when: the rights to the cash flows from the financial asset expire; the Bank retains the contractual rights to receive cash flows of the financial asset, but assumes a contractual obligation ( pass-through arrangement) to pay the cash flows in full without material delay to a third party; or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Bank neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset. Any interest in such transferred financial assets that qualify for derecognition that is created or retained by the Bank is recognized as a separate asset or liability. On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset transferred), and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit and loss. The Bank enters into transactions whereby it transfers assets recognized on its balance sheet, but retains either all or substantially all of the risks and rewards of the transferred asset, or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognized from the balance sheet. Transfers of assets with retention of all risks and rewards include, for example, securities lending and repurchase transactions.

47 Notes to consolidated financial statements In transactions in which the Bank neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the Bank continues to recognize the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of the consideration that the Bank could be required to repay. Where continuing involvement takes the form of a written and/ or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Bank s continuing involvement is the amount of the transferred asset that the Bank may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, to the extent of the Bank s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. In certain transactions the Bank retains the obligation to service the transferred financial asset for a fee. The transferred asset is derecognized if it meets the derecognition criteria. An asset or liability is recognized for the servicing contract, depending on whether the servicing fee is more than adequate (asset) or is less than adequate (liability) for performing servicing. The Bank securitizes various loans and advances to customers, which generally result in the sale of these assets to specialpurpose entities, which in turn issue securities to investors. Interests in the securitised financial assets may be retained in the form of senior or subordinated tranches, interest-only strips or other residual interests (retained interests). Retained interests are primarily recorded in available-for-sale investment securities and carried at fair value. Gains or losses on securitisation depend in part on the carrying amount of the transferred financial asset, allocated between the financial assets derecognized and the retained interests based on their relative fair value at the date of the transfer. Gains or losses on securitisation are recorded under result financial transactions. Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in income statement. Offsetting and collateral The Bank enters into master netting arrangements with counterparties wherever possible, and when appropriate, obtains collateral. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Bank has a legal right and intends to settle them on a net basis or to realize the asset and settle the liability simultaneously. Due to differences in the timing of actual cash flows, derivatives with positive and negative fair values are generally not netted, even if they are held with the same counterparty. Also current accounts with positive and negative balances held with the same counterpart are not netted. 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 principle repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount recognized and the maturity amount, minus any reduction for impairment. The amortization is recognized in the profit and loss statement under interest income. Fair value measurement Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction on the measurement date. When available, the Bank measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm s length basis. If a market for a financial instrument is not active, the Bank establishes fair value using a valuation technique. Valuation techniques include using recent arm s length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash-flow analyses and option-pricing models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Bank, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent Notes to consolidated financial statements 45

48 Notes to Consolidated Financial Statements 46 Notes to Consolidated Financial Statements market expectations and measures of the risk-return factors inherent in the financial instrument. The Bank calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data. Assets and long positions are measured at a bid price, liabilities and short positions are measured at an asking price. Where the Bank has positions with offsetting risks, mid-market prices are used to measure the offsetting risk positions and a bid or asking price adjustments is applied only to the net position as appropriate. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Bank entity and the counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties; to the extent that the Bank believes a third-party market participant would take them into account in pricing a transaction. The best evidence of the fair value of a financial instrument at initial recognition is the transaction price (i.e. the fair value of the consideration given or received). However, in some cases, the fair value of a financial instrument on initial recognition may be different to its transaction price. If such fair value is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables only include data from observable markets, then the difference is recognized in profit and loss (net trading income) on initial recognition of the instrument. In other cases the difference is not recognized in profit and loss immediately but is recognised over the life of the instrument on an appropriate basis or when the instrument is redeemed, transferred or sold, or the fair value becomes observable. The principal methods and assumptions used by the Bank in determining the fair value of financial instruments are: Fair values for trading and investment securities are determined using market prices from active markets. If no quoted prices are available from an active market, the fair value is determined using discounted cash-flow models. Discount factors are based on the swap curve (observable in the market), plus a spread reflecting the characteristics of the instrument. Fair values for derivative financial instruments are obtained from active markets or determined using, as appropriate, discounted cash-flow models. Discount factors are based on the swap curve ( observable in the market), plus a spread reflecting the characteristics of the instrument. Fair values for loans and deposits are determined using discounted cash-flow models based on the Bank s current incremental lending rates for similar types of loans. For variable-rate loans that re-price frequently and have no significant change in credit risk, fair values are approximated by the carrying amount. The fair value of loans that are quoted in active markets is determined using the quoted prices. The Bank uses valuation method to establish the fair value of instruments where prices quoted in active markets are not available. Parameter inputs to the valuation method are based on observable data derived from prices of relevant instruments traded in an active market. These valuation methods involve discounting future cash flows of loan with related yield curve plus spread on similar transactions and using recent offers if available. The carrying amounts are considered to approximate fair values for other financial assets and liabilities, such as shortterm payables and receivables. Identification and measurement of impairment At each balance sheet date, the Bank assesses whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (an incurred loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Objective evidence of impairment may include indications that the borrower or group of borrowers are experiencing significant financial difficulty, default or delinquency in interest or principal payments, restructuring of loans or advances by the Bank on terms that the Bank would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, deterioration in the value of collateral, 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. (i) Loans and receivables from customer and banks For loans and receivables from customers and banks carried at amortized cost, the Bank first assesses whether objective evidence of impairment exists individually for significant financial assets or collectively for non-significant financial assets. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit-risk characteristics and collectively assesses

49 Notes to consolidated financial statements them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through an allowance account and the loss is recognized in the income statement. Interest continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Bank. If, in a subsequent year, the estimated impairment loss increases or decreases due to an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. When any part of a claim is deemed uncollectible or forgiven, a write-off is charged to the allowance account. If a future write-off is later recovered, the recovery is credited to the other operating income. The present value of estimated future cash flows is discounted at the financial asset s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure, less costs for obtaining and selling the collateral, whether or not foreclosure is probable. Collective evaluation of impairment aims to establish portfolio provisions for losses incurred but not yet identified. By definition, these are losses that cannot yet be attributed to particular transactions. Therefore, this provision is derived from the portfolio analysis, which is based on the homogenous exposure structures of the financial assets being analyzed. Financial assets are grouped on the basis of their credit-risk characteristics, such as type, geographical location, past-due status and other relevant factors. Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experiences for assets with credit-risk characteristics similar to those in the group. Historical loss experiences are adjusted on the basis of current and observable data to reflect the effects of current conditions that did not affect the year on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for estimating future cash flows are reviewed regularly by means of back testing to reduce any differences between loss estimates and actual loss experience. Where possible, the Bank seeks to restructure loans rather than take possession of collateral. If the terms of a financial asset are renegotiated or modified or an existing financial asset is replace with a new one due to financial difficulties of the borrower then an assessment is made whether the financial asset should be derecognized. If the cash flows of the renegotiated asset are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. A substantial difference is defined, if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received, and discounting using the original effective interest rate, is at least 10 percent different from the discounted present value of the remaining cash flows of the financial liability. In this case the original financial asset is derecognized and the new financial asset is recognised at fair value. The impairment loss is measured as follows: If the expected restructuring does not result in derecognition of the existing asset, the estimated cash flows arising from the modified financial assets are included in the measurement of the existing asset based on their expected timing and amounts discounted at the original effective interest rate of the existing financial asset. If the expected restructuring results in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of derecognition. This amount is discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset. Once the terms have been renegotiated, the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment. Impairment losses are recognized in profit and loss (under credit loss charges) and reflected in an allowance account against loans and advances. Contractual interest receipts are taken into account when the entity estimates the future cash flows of the instrument and are thus recognized upon receipt. Notes to consolidated financial statements 47

50 Notes to Consolidated Financial Statements 48 Notes to Consolidated Financial Statements If no contractual interest payments will be collected, the only interest income recognized is the unwinding of the discount on those cash flows expected to be received. When an event occurring after the impairment was recognized causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit and loss. (ii) Held-to-maturity financial investments For held-to-maturity investments, the Bank assesses individually whether there is objective evidence of impairment. If there is objective evidence that an impairment loss has been incurred, the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the assets original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the income statement. If, in a subsequent year, the estimated impairment loss decreases because of an event occurring after the impairment was recognized, any amounts formerly charged are reversed to the credit loss charges. (iii) Available-for-sale financial assets For available-for-sale financial assets, the Bank assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired at each balance sheet date. In the case of equity investments classified as AFS, objective evidence would include a significant or prolonged decline in the fair value of the investment below cost. Significant and prolonged are interpreted on a case-by-case. Generally 20% and 9 months are used as triggers. Where there is evidence of impairment, impairment losses on available-for-sale investment securities are recognized by transferring the cumulative loss directly in equity to income statement. The cumulative loss that is removed from equity and recognized in income statement is the difference between the acquisition cost, net of any principal repayment and amortization, and the current fair value, less any impairment loss previously recognized in income statement. In the case of unquoted debt instruments classified as available-for-sale, the impairment loss is calculated as the difference between the carrying amount of the investment and the present value of estimated future cash flows, discounted at the current market rate of return for similar financial assets. Whether an impairment event has occurred is assessed for each debt instrument individually based on the impairment indicators relevant for that instrument. Interest based on market rates is accrued at the effective interest rate on the reduced carrying amount of the asset, and is recorded as part of interest and similar income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss is reversed through the income statement. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized directly in equity. d) Cash and cash equivalents Cash and cash equivalents, as referred to in the cash flows statement, comprises cash on hand and balances with central banks with an insignificant risk of a change in value. Cash and cash equivalents are carried at amortized costs in the balance sheet. The cash flows statement, based on the indirect method of calculation, gives details of the source of cash and cash equivalents that became available during the year, and the application of these cash and cash equivalents over the course of the year. The cash flows are analyzed into cash flows from operations, including banking, investment and financing activities. Movements in loans and receivables and inter-bank deposits are included in cash flows from operating activities. Investment activities comprise sales and redemptions in respect of financial investments, and property and equipment. The issuing of shares, and the borrowing and repayment of long-term funds are treated as financing activities. Movements due to currency-translation differences and the effects of the consolidation of business acquisitions, where of material significance, are eliminated from the cash flows figures. e) Trading assets and liabilities (excluding trading derivatives) Trading assets and liabilities are those assets and liabilities that the Bank acquires or incurs principally for the purpose of selling or repurchasing in the near future, or holds as part of portfolio that is managed together for short-term profit or position taking. Trading assets and liabilities are initially recognized and subsequently measured at fair value in the balance sheet with transaction costs taken directly to income statement. Interest income or expense is recorded in net interest income according to the terms of the contract. All changes in fair value, except for the interest accruals, are recognized as part of net trading income in income statement. Trading assets and liabilities are not reclassified subsequent to their initial recognition.

51 Notes to consolidated financial statements f) Available-for-sale financial assets Available-for-sale financial assets are designated as such or do not qualify to be recorded at fair value through profit or loss or held-to-maturity. They may be sold in response to liquidity needs or changes in market conditions. After initial measurement, available-for-sale financial assets are subsequently measured at fair value. Unrealized gains and losses are recognized directly in equity in the fair value reserve. When the security is disposed of, or is determined to be impaired, the cumulative gain or loss previously recognized in equity is recognized in the income statement in results from financial transactions. Interest earned while holding available-for-sale investment securities is reported as interest income using the effective interest rate. The losses arising from impairment of such investments are recognized in the income statement as credit loss charges. g) Held-to-maturity investments Held-to-maturity investments are those which carry fixed or determinable payments and which the Bank has the intention and ability to hold to maturity and which are not designated at fair value through profit or loss or as available-for-sale. After initial measurement, held-to-maturity investments are subsequently measured at amortized cost using the effectiveinterest-rate method, less provision for impairment. h) Loans and receivables from banks and customers Loans and receivables due from banks (excluding the trading loans) are non-derivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not classified as financial assets held for trading, financial investments - available-for-sale or financial assets designated at fair value through profit or loss. After initial measurement, the amounts from loans and receivables from banks and customers are subsequently measured at amortized cost using the effectiveinterest method, less an allowance for impairment. i) Derivatives held for trading A derivative financial instrument is a financial contract between two parties where payments are dependent on movements in price of one or more underlying financial instruments, references, rates or indices. Derivatives include currency and cross-currency swaps, forward foreign-exchange contracts, interest-rate swaps, currency options, equity options, bonds options, futures and credit-default swaps. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Derivative financial instruments are subsequently re-measured at fair value. Changes in the fair value of derivatives are included in net trading income. Derivatives embedded in other financial instruments are treated as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contract, and the host contract is not itself held for trading or designated at fair value through profit or loss. The embedded derivatives separated from the host are carried at fair value in the trading portfolio with changes in fair value recognized in the income statement under net trading income. j) Derivatives held for risk-management purposes and hedge accounting Derivatives held for asset-liability risk-management purposes (i.e. asset and liability management) include all derivative assets and liabilities that are not classified as trading assets and liabilities. Derivatives held for risk-management purposes are measured at fair value in the balance sheet. Interest component of derivative financial instruments used for asset-liability management are recorded in interest income and interest expense. The Bank designates certain derivatives held for risk-management purposes and certain non-derivative financial instruments as hedging instruments in qualifying hedging relationships. On initial designation of the hedge, the Bank formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk-management objective and strategy in undertaking the hedge transaction, together with the method that will be used to assess the effectiveness of the hedging relationship. The Bank makes an assessment, both at the inception of the hedge relationship as well as an ongoing basis, whether the hedging instrument(s) is (are) expected to be highly effective in offsetting in the changes in the fair value or cash flows of the respective hedged item(s) during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of percent. Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in the income statement account, together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing instruments, amortized through the Notes to consolidated financial statements 49

52 Notes to Consolidated Financial Statements 50 Notes to Consolidated Financial Statements income statement account over the remaining term of the original hedge or recognized directly when the hedged item is derecognized. Net investment hedges When a derivative (or a non-derivative financial liability) is designated as the hedging instrument in a hedge of a net investment in a foreign operation, the effective portion of changes in the fair value of the hedging instrument is recognized directly in equity, in the foreign-currency-translation reserve (or in our case revaluation reserves hedging ). Any ineffective portion of changes in the fair value of the derivative is recognized immediately in income statement. The amount recognized in equity is removed and included in income statement on disposal of the foreign operations. Cash-flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in equity. The gain or loss relating to the ineffective portion is recognized immediately in the income statement account. Amounts accumulated in equity are recycled to the income statement account in the periods in which the hedged item affects net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the income statement account. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is transferred immediately to the income statement account. k) Repo contracts Transactions where financial instruments, such as loans and securities, are sold under a commitment to repurchase (repos) at a predetermined price or are purchased under a commitment to resell (reverse repo) are treated as collateralized borrowing and lending transactions. The legal title of the financial instrument subject to resale or repurchase commitments is transferred to the lender. Financial instruments transferred under a repurchase commitment are henceforth included in the relevant items of the Bank s balance sheet, such as loans and receivables - customers and financial investments, while the borrowing is recorded in due to banks. Financial instruments received under a resale commitment are recorded in the offbalance sheet accounts, unless sold. Income and expenses arising from repurchase and resale commitments, being the difference between the selling and the purchase price, are accrued over the period of the transaction and recorded in the income statement as interest and similar income or interest expense and similar charges. l) Leasing Determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement depends on using a specific asset or assets and the arrangement conveys a right to use the asset. (i) Bank as a lessee Finance leases, which substantially transfer all the risks and benefits incidental to ownership of the leased item to the Bank, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments, and are included in property and equipment with the corresponding liability to the lessor included in other liabilities. Lease payments are apportioned between the finance charges and reduction of the lease liability to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the income statement as interest and similar expenses. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Bank will obtain ownership by the end of the lease term. Operating lease payments are not recognized on the balance sheet. Any rentals payable are accounted for on a straight-line basis over the lease term and included in general and administrative expenses. (ii) Bank as a lessor Finance leases, where the Bank substantially transfers all the risks and benefits incidental to ownership of the leased item to the lessee, are included on the balance sheet as loans and receivables - customers. A receivable is recognized over the leasing period at an amount equal to the present value of the lease payments using the implicit rate of interest and including any guaranteed residual value. All income resulting from the receivable is included under interest and similar income in the income statement. m) Property and equipment Property and equipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value.borrowing costs if any, are included in the cost of property, plant and equipment in case they are directly attributable to the acquisition, construction

53 Notes to consolidated financial statements or production of the asset. Changes in the expected useful life are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. Depreciation is calculated on other assets using the straightline method to allocate their cost to their residual values over their estimated useful lives as follows: Buildings Furniture and fixtures IT equipment Vehicles Leasehold improvements years 3-20 years 3-10 years 3-5 years Over the term of respective leases or 3-5 years An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in other operating income in the income statement in the year the asset is derecognized. n) Intangible assets (i) Software Intangible assets mainly include the value of computer software. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets are amortized over the useful economic life and are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets is recognized in the income statement in depreciation and amortization. Expenditure on internally developed software is recognized as asset when the Bank is able to demonstrate its intention and ability to complete the development and use the software in a manner that will generate future economic benefits and can reliably measure the costs to complete development. The capitalized costs of internally developed software include all costs directly attributable to developing the software, and are amortized over its useful life. Internally developed software is stated at capitalized cost, less accumulated amortization and any accumulated impairment losses. Amortization is calculated using the straight-line method over their estimated useful life of software, from the date it is available to use. The estimated useful life of software is three to ten years. (ii) Goodwill Goodwill (negative goodwill) arises on the acquisition of subsidiaries. Goodwill arising on the acquisition of a noncontrolling interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of exchange. Subsequent to recognition, goodwill is measured at cost, less accumulated impairment losses. o) Assets held for sale The Bank takes possession of collateral it holds as security. The Bank books these assets as held for sale. These assets are not used for the daily banking transactions and the management intends to sell these assets in the future in their present conditions. They are initially measured at fair value less costs at acquisition. After initial measurement, noncurrent assets held for sale are subsequently measured at fair value. Changes in the fair value of the assets are recognized under the income statement in other impairment loss. These assets have not been disclosed separately in the statement of financial position, but are disclosed separately as component of other assets. p) Impairment of non-financial assets At each reporting date, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired, the Bank assesses whether there is an indication that a non-financial asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Bank makes an estimate of the asset s recoverable amount. Where the carrying amount of an asset (or cashgenerating unit) exceeds its recoverable amount, the asset (or cash-generating unit) is considered impaired and is written down to its recoverable amount. The recoverable amount of an asset (or cash-generating unit) is the greater of its value in use and its fair value, less cost 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. For non-financial assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no Notes to consolidated financial statements 51

54 Notes to Consolidated Financial Statements 52 Notes to Consolidated Financial Statements longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. Impairment losses for goodwill cannot be reversed for subsequent increases in its recoverable amount in future periods. q) Deposits, issued debt securities and subordinated liabilities Deposits, debt securities issued and subordinated liabilities are the Bank s sources of debt funding. Issued financial instruments or their components that are not designated at fair value through profit or loss, are classified as liabilities under issued debt securities where the substance of the contractual arrangement results in the Bank having an obligation to either deliver cash or another financial asset to the holder, or to satisfy the obligation other than by exchange of a fixed amount of cash. Deposits, issued debt securities and subordinated liabilities are initially measured at fair value, plus directly attributable transaction costs, and are subsequently measured at amortized cost using the effective-interest-rate method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that is an integral part of the effective interest rate. r) Financial guarantees and loan commitments In the ordinary course of business, the Bank gives financial guarantees consisting of letters of credit, letters of guarantees, and acceptances. Financial guarantees are initially recognized in the financial statements at fair value, in other liabilities, being the premium received. Subsequent to initial recognition, the Bank s liability under each guarantee is measured at the higher of the amortized premium and the best estimate of expenditure required settling any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantees is taken to the income statement as other impairment loss. The premium received is recognized in the income statement under fees and commission income on a straight-line basis over the life of the guarantee. Loan commitments are firm commitments to provide credit under pre-specified terms and conditions. s) Provisions Provisions are recognized when the Bank has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. t) Income taxes (i) Current tax Current tax assets and liabilities for current and prior years are measured at the amount expected to be recovered from, or paid to, the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted, or substantively enacted, by the balance sheet date. (ii) Deferred income tax Deferred income tax is provided, using the liability method, on all taxable temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except for differences not deductible for tax purposes and initial recognition of assets and liabilities that affect neither accounting nor taxable profit. Deferred tax liabilities and assets are recognized when it is probable that the future economic benefits resulting from the reversal of taxable temporary differences will flow to or from the Bank. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. The carrying value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Current tax and deferred tax relating to items recognized directly in equity are also recognized in equity and not in the income statement. Deferred tax assets and deferred

55 Notes to consolidated financial statements tax liabilities are offset if a legally enforceable right exists to offset current tax assets against current tax liabilities, and the deferred taxes relate to the same taxable entity and the same taxation authority. u) Recognition of income and expenses Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: (i) Interest income and expenses For all financial instruments measured at amortized cost and interest-bearing financial instruments classified as availablefor-sale financial investments, interest income or expense is recorded at the effective interest rate. Interest income or expenses from asset-liability risk management derivatives are included within interest income and expense. (ii) Fees and commissions income The Bank earns fee and commission income from a diverse range of services it provides to its customers. Fees and commissions for the provision of services over a period of time are generally recognized on an accrual basis. Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs), and are recognized as an adjustment to the effective interest rate of the loan. Commission and fees arising from negotiating or participating in the negotiation of a transaction for a third party are recognized on completion of the underlying transaction. Management and service fees are recognized based on the applicable service contracts. Fees for bank transfers and other banking transaction services are recorded as income when collected. (iii) Net trading income Net trading income includes gains and losses arising from changes in the fair value and disposal of financial assets and liabilities held for trading, and includes dividends received from trading instruments. Realized and unrealized gains and losses on derivative financial instruments held for trading are recognized under net trading income. (iv) Results from financial transactions Results from financial transactions include gains and losses on the sale of non-trading portfolio assets and liabilities. Dividend income from non-trading portfolio equity investments is recognized when entitlement is established. v) Fiduciary activities Assets held in fiduciary capacity, if any, are not reported in the financial statements, as they are not the assets of the Bank. w) Dividends on ordinary shares Dividends on ordinary shares of the Bank are recognized as a liability and they are deducted from equity when they are approved by the Bank s shareholders. Interim dividends are deducted from equity when they are paid. Dividends for the year that are approved after the balance sheet date are dealt with in the subsequent events note. x) Equity components Translation reserve The currency translation account comprises all currency differences arising from translating the financial statements of foreign operations, net of the translation impact on foreign currency liabilities. These currency differences are included in the income statement on disposal or partial disposal of the operation. Net investment hedge reserve The Bank uses forward foreign-exchange contracts to hedge the foreign currency translation risk on its net investments in foreign subsidiaries. When a financial instrument is designated as the hedging instrument to hedge a carrying value of net investment in a foreign operation, the effective portion of changes in the fair value of the hedging instrument is recognized directly in equity, in the `net investment hedge reserve'. The hedge reserve includes interest elements of the forward contract, which for hedge effectiveness is excluded from the hedge effectiveness test. Any ineffective portion of changes in the fair value of the derivative as determined by hedge effectiveness testing is recognized immediately in income statement. The amount recognized in equity is removed and included in the income statement on disposal of the foreign operation. Cash flow hedge reserve The Bank uses derivative financial instruments such as interest rate swaps to hedge uncertain future cash flows. The cumulative effective gain or loss recognized in equity of the derivative used in a cash flow hedge is transferred to income statement in the same period that the hedge item affects income statement. 53 Notes to consolidated financial statements

56 Notes to Consolidated Financial Statements 54 Notes to Consolidated Financial Statements Fair value reserve In this component, gains and losses arising from a change in the fair value of available-for-sale assets are recognized, net of taxes. When the relevant assets are sold, impaired or otherwise disposed of, the related cumulative gain or loss recognized in equity is transferred to the income statement. y) Earnings per share The Bank presents basic and diluted earnings-per-share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit and loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit and loss attributable to ordinary shareholders and weighted average number of ordinary shares outstanding for the effects of any potentially diluting ordinary shares. z) Discontinued operation A discontinued operation is a component of the Bank s business, the operations and cash flows of which can be clearly distinguished from the rest of the Bank and which: represents a separate major line of business or geographical area of operations; is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or is a subsidiary acquired exclusively with a view to re-sale. Classification as a discontinued operation occurs on disposal or when the operation meets the criteria to be classified as heldfor-sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year. aa) Segment reporting Segment information is presented in respect of the Bank s operating segments, where the Bank assesses performance and accordingly makes resource allocations. bb) New standards and interpretations not yet adopted At the date of authorization of these financial statements, certain new standards, interpretations and amendments to existing standards that are likely to be applicable to the Bank have been published but are not yet effective, and have not been adopted early by the Bank. IFRS 9: Financial Instruments (effective 1 January 2015) The IASB aims to replace IAS 39 Financial Instruments: Recognition and Measurement in its entirety. IFRS 9 is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and de-recognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning 1 January Further chapters dealing with impairment methodology and hedge accounting are still being developed. The Bank's management has yet-to assess the impact of this new standard on the Bank's consolidated financial statements. However, they do not expect to implement IFRS 9 until all of its chapters have been published and they can comprehensively assess the impact of all changes. Amendments to IFRS 7 and IAS 32: Offsetting financial assets and financial liabilities Amendments to IFRS 7 introduce disclosures about the impact of netting arrangements on an entity s financial position. The amendments are effective beginning on or after 1 January Amendments to IAS 32 clarify the offsetting criteria in IAS 32 by explaining when an entity currently has a legally enforceable right to set off and when gross settlement is equivalent to net settlement. The amendments are effective beginning on or after 1 January The Bank's management assessed the impact of amendments on the Bank's consolidated financial statements and none of these amendments are expected to have a material effect on the Bank s consolidated financial statements. IFRS10: Consolidated Financial Statements (effective 1 January 2013) IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities. It introduces a new, principle-based definition of control which will apply to all investees to determine the scope of consolidation. The Bank's management assessed the impact of this new and revised standard on the Bank's consolidated financial statements and this standard is not expected to have a material effect on the Bank s consolidated financial statements. IFRS 12: Disclosures of interests in other entities (effective 1 January 2013) IFRS 12 combines the disclosure requirements for subsidiaries, joint arrangements, associates and structured entities within a comprehensive disclosure standard. The Bank's management assessed the impact of this new and revised standard on the Bank's consolidated financial statements and this standard is not expected to have a material effect on the Bank s consolidated financial statements. IFRS 13: Fair Value Measurement (effective 1 January 2013) The new IFRS does not affect which items are required to be 'fair-valued', but specifies how an entity should measure fair

57 Notes to Consolidated Financial Statements value and disclose fair value information. Prior to the publication of IFRS 13, the guidance on measuring fair value was distributed across many IFRSs. IFRS 13 has been developed to remedy this problem, by: establishing a single source of guidance for all fair value measurements clarifying the definition of fair value and related guidance: and enhancing disclosures about fair value measurements (new disclosures increase transparency about fair value measurements, including the valuation techniques and inputs used to measure fair value). Though the standard would apply to the Bank and the fair value measurements, the Bank's management assessed the impact of this new and revised standard on the Bank's consolidated financial statements and this standard is not expected to have a material effect on the Bank s consolidated financial statements. IAS 19: Employee Benefits (effective 1 January 2013) IAS 19 changes the definition of the short term and other long term employee benefits to clarify the distinction between the two. For defined benefit plans, removal of the accounting policy choice for recognition of actuarial gains and losses is not expected to have any impact on the Bank. IAS 27: Separate Financial Statements (effective 1 January 2013) Consequential changes have been made to IAS27 as a result of the publication of the new IFRSs. IAS 27 will now solely address separate financial statements, the requirements for which are substantially unchanged. Though applicable, based on management's assessment, the standard is not likely to have an impact on the Bank financial statements as the requirements have remained unchanged. Notes to consolidated financial statements 55

58 Notes to Consolidated Financial Statements 4. Segment information 56 Notes to Consolidated Financial Statements Segment information is presented in respect of the Bank s operating segments, for which the Bank assesses performance and accordingly makes resource allocations. The Bank has eight reportable segments (described below), which are the group s strategic areas of operation. The strategic areas offer banking and banking related products, and are managed separately to take account of local economic environments, which require different risk management and pricing strategies. For each of the strategic areas, the CFO reviews internal management reports on at least a monthly basis. The following summary describes the operation of each of the Bank s reportable segments: Western Europe retail: includes retail loans and funds entrusted by retail customers in Western Europe, including Germany, the Netherlands and Belgium. Western Europe wholesale: includes loans to non-retail customers and funds entrusted by non-retail customers in the Netherlands, Germany, Belgium, Malta and Switzerland. Russia retail: includes retail loans and funds entrusted from retail customers in Russia. Russia wholesale: includes loans to non-retail customers and funds entrusted from non-retail customers in Russia. Romania retail: includes retail loans and funds entrusted from retail customers in Romania. Romania wholesale: includes loans to non-retail customers and funds entrusted from non-retail customers in Romania. Turkey wholesale: includes loans to non-retail customers and funds entrusted from non-retail customers in Turkey Other: includes Bank s operations in Dubai and Ukraine. Measurement of segment assets and liabilities, and segment income and results is based on the Bank s accounting policies. Intersegment pricing is determined on an arm s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

59 Notes to Consolidated Financial Statements West West Europe Russia Romania Turkey Europe Whole- Russia Whole- Romania Whole- Whole Retail sale Retail sale Retail sale sale Other Total Interest income external 23, , , ,138 58,375 38,346-26, ,548 Interest income other segments - 82,457-2,902-17,430-1, ,509 Interest revenue 23, , , ,040 58,375 55,776-28,615 1,029,057 Interest expenses external (6,981) (343,455) (108,668) (38,485) (32,079) (5,618) - (1,481) (536,767) Interest expense other segments - (33,207) - (31,750) - (32,185) - (7,367) (104,509) Interest expense (6,981) (376,662) (108,668) (70,235) (32,079) (37,803) - (8,848) (641,276) Net commission income external 3,996 21,468 20,562 7,808 10,556 2,226-2,646 69,262 Net commission income other segments - (4,832) , (38) - Trading and other income 2,776 41,125 15,656 9,008 2,717 7, ,055 Trading and other income other segments - (124) - (127) - (502) Credit loss charges (10,024) (17,945) (55,457) 2,735 (37,273) (19,029) - (2,909) (139,902) Depreciation and amortization expense (900) (7,388) (7,059) (770) (1,523) (922) - (705) (19,267) Other operating expenses (8,848) (51,480) (123,885) (28,099) (30,413) (20,030) - (7,899) (270,654) Equity accounted earnings (364) (364) Operating profit before taxes 3,436 45,732 52,413 30,609 (25,019) (13,268) - 12, ,911 Income tax expense (847) (12,481) (10,727) (7,278) 4,256 2,213 - (1,594) (26,458) Profit for the year from continued operations 2,589 33,251 41,686 23,331 (20,763) (11,055) - 10,414 79,453 Notes to consolidated financial statements 57 Result for the year from discontinued operations (1,523) 130 (1,393) Profit for the year 2,589 33,251 41,686 23,331 (20,763) (11,055) (1,523) 10,544 78,060 Other information at 31 December2012 Total assets 363,986 4,383,495 2,157, , , , ,775 9,237,100 Total liabilities 4,014,753 1,662,090 1,820, , , ,295-41,873 8,588,332 Equity accounted investments ,584 4,584 Reversal of impairment allowances no longer required ,959 13,714 6,851-1,926 36,345

60 Notes to Consolidated Financial Statements 58 Notes to Consolidated Financial Statements West West Europe Russia Romania Turkey Europe Whole- Russia Whole- Romania Whole- Whole Retail sale Retail sale Retail sale sale Other Total Interest income external 20, , ,658 95,821 57,106 51,894-25, ,718 Interest income other segments - 94,240-6, , ,063 Interest revenue 20, , , ,542 57,106 52,425-26, ,781 Interest expenses external (5,413) (316,154) (58,601) (34,030) (27,334) (8,953) - (2,459) (452,944) Interest expense other segments - (51,508) - (20,015) - (23,838) - (7,702) (103,063) Interest expense (5,413) (367,662) (58,601) (54,045) (27,334) (32,791) - (10,161) (556,007) Net commission income external 3,604 26,234 20,152 6,814 11, ,803 72,987 Net commission income other segments - (4,618) ,841 - (223) - Trading and other income external 4,747 19,203 7,870 5,979 6,066 4, ,094 Trading and other income other segments - 1,512 - (573) - 1,218 - (1,202) 955 Credit loss charges (7,577) (31,134) (29,074) (391) (15,925) (13,962) - (4,163) (102,226) Depreciation and amortization expense (1,352) (10,424) (4,376) (604) (1,702) (1,037) - (991) (20,486) Other operating expenses external (9,743) (58,010) (99,419) (20,546) (30,192) (19,965) - (10,196) (248,071) Other operating expenses other segments - (955) (955) Equity accounted earnings (75) (75) Operating profit before taxes 4,811 14,928 50,210 39,176 (720) (5,006) - 4, ,997 Income tax expense (1,191) (6,342) (10,182) (7,906) (395) (24,262) Profit for the year from continued operations 3,620 8,586 40,028 31, (4,098) - 4,203 83,735 Result for the year from discontinued operations ,846 (324) 10,522 Profit for the year 3,620 8,586 40,028 31, (4,098) 10,846 3,879 94,257 Other information at 31 December2011 Total assets 330,971 5,092,090 1,491, , , ,639 1,008, ,269 10,504,713 Total liabilities 4,363,824 2,145,333 1,214, , , , ,681 94,328 9,766,108 Equity accounted investments ,948 4,948 Reversal of impairment allowances no longer required 891 4,572-6,855 25,898 24, ,154

61 Notes to Consolidated Financial Statements 5. Cash and balances at central banks This item includes cash on hand and deposits with central banks in countries in which the Bank has a presence Balances at central bank 1,153,677 1,697,589 Cash on hand 84,255 72,869 Total 1,237,932 1,770,458 Deposits at central banks include reserve deposits amounting to EUR 179,894 (2011: EUR 334,874), which represents the mandatory deposit and is not available in the Bank s day-to-day operations. 6. Financial assets at fair value through profit or loss Financial assets held for trading Bank bonds 37,286 28,705 Government bonds - 12,050 Corporate bonds - 4,215 Equity instruments 1,460 1,300 Total 38,746 46,270 EUR 38,746 (2011: EUR 46,270) of the total is listed securities and none (2011: None) of the total is non-listed securities. The financial assets that the Bank has pledged or resold amount to EUR 7,809 (2011: EUR 23,728). These transactions are conducted under terms that are normal and customary to standard lending, and securities borrowing and lending activities, as well as requirements determined by exchanges where the Bank acts as an intermediary. Gains and losses on changes in fair value of trading instruments are recognized in net trading income. Notes to consolidated financial statements 59

62 Notes to Consolidated Financial Statements 7. Financial investments 60 Notes to Consolidated Financial Statements Available-for-sale financial investments 974, ,005 Held-to-maturity financial investments - 76,135 Total 974, ,140 As of December 31, 2012, EUR 334,506 of the financial investments have been pledged or resold (2011: EUR 119,028). These transactions are conducted under terms that are normal and customary to standard lending, and securities borrowing and lending activities, as well as requirements determined by exchanges where the Bank acts as an intermediary. Available-for-sale portfolio Bank bonds 619, ,708 Government bonds 234,823 60,018 Corporate bonds 20,270 46,252 Loans 85,544 36,563 Equities 13, Total 974, ,005 EUR 865,709 (2011: EUR 573,949) of the total is listed securities and EUR 108,738 (2011: EUR 50,056) is non-listed financial investments. Held-to-maturity portfolio Bank bonds - 64,637 Corporate bonds - 11,498 Total - 76,135

63 Notes to Consolidated Financial Statements During the year ended 31 December 2012 the Bank sold before contractual maturity held-to-maturity investments in total amount of EUR 76,135. As consequence of these sales the Bank is precluded from classifying any financial instruments as financial instruments held-to-maturity during the next two financial years. 61 The movement in financial investments may be summarized for 2012 and 2011 as follows: Available- Held-tofor-sale maturity At January 1, ,005 76,135 Additions 1,388,206 - Disposals (sale and redemption) (1,074,078) (76,352) Gains from changes in fair value 42,225 - Disposal of subsidiary (6,485) - Impairment (654) - Exchange differences 1, At December 31, ,447 - Available- Held-tofor-sale maturity At January 1, ,276, ,110 Additions 863, Disposals (sale and redemption) (1,492,053) (62,786) Gains from changes in fair value (19,772) - Exchange differences (4,066) 462 At December 31, ,005 76, Loans and receivables - banks Placements with other banks 342, ,627 Loans and advances 20, ,467 Other 18,317 19,180 Subtotal 381, ,274 Allowances for impairment (1,178) (1,318) Notes to Consolidated Financial Statements Total 380, ,956 Placement with other banks that are not available in the Bank s day-to-day operations amount to EUR 42,226 (2011: EUR 187,697).

64 Notes to Consolidated Financial Statements 9. Loans and receivables - customers 62 Notes to Consolidated Financial Statements Commercial loans 2,908,707 3,961,309 Consumer loans 2,688,192 2,231,838 Credit card loans 411, ,536 Finance lease receivables, net 105, ,345 Private customers loans 27,082 90,635 Subtotal 6,140,527 6,739,663 Allowances for impairment (185,616) (183,318) Total 5,954,911 6,556,345 No individual loan or receivable has terms and conditions that materially affect the amount, timing or certainty of the consolidated cash flows of the Bank. Details of finance lease receivables are summarized below: Not later than 1 year 33,974 26,400 Later than 1 year and not later than 5 years 81,196 73,699 Later than 5 years 2,936 18,131 Gross lease receivables 118, ,230 Not later than 1 year (3,284) (3,634) Later than 1 year and not later than 5 years (9,478) (6,251) Later than 5 years (104) - Unearned interest income (12,866) (9,885) Finance lease receivables, net 105, ,345

65 Notes to Consolidated Financial Statements 10. Loan impairment charges and allowances Balance at January 1 184, ,079 New impairment allowances 175, ,380 Reversal of impairment allowances no longer required (36,345) (63,154) Amounts written off (136,443) (80,446) Currency translation differences 2,673 (2,908) Disposal of subsidiary (3,320) (315) Balance at December , ,636 Consumer loans 100,746 81,118 Commercial loans 42,874 64,234 Credit card loans 29,607 19,457 Finance lease receivables 12,389 18,509 Loans to banks 1,178 1,318 Total 186, ,636 Credit loss charges in income statement New impairment allowances 175, ,380 Reversal of impairment allowances no longer required (36,345) (63,154) Credit loss charges 139, ,226 In 2012, EUR 654 (2011: None) of the credit loss charge recognized in income statement is related to financial investment held as available-for-sale and no (2011: None) credit loss charge recognized in income statement related to financial investments held to maturity. Individually assessed allowances for impairment Balance at January 1 67,362 67,136 New impairment allowances 46,804 70,840 Reversal of impairment allowances no longer required (22,690) (12,400) Amounts written off (51,061) (56,837) Currency translation differences 661 (854) Disposal of subsidiary (1,868) (523) 63 Notes to Consolidated Financial Statements Balance at December 31 39,208 67,362 Collectively assessed allowances for impairment Balance at January 1 117,274 98,943 New impairment allowances 128,789 94,540 Reversal of impairment allowances no longer required (13,655) (50,754) Amounts written off (85,382) (23,609) Currency translation differences 2,012 (2,054) Disposal of subsidiary (1,452) 208 Balance at December , ,274

66 Notes to Consolidated Financial Statements 11. Derivative financial instruments 64 Notes to Consolidated Financial Statements In the ordinary course of business, the Bank enters into various types of transactions that involve derivative financial instruments. A derivative financial instrument is a financial contract between two parties where payments depend on movements in price in one or more underlying financial instruments, reference rates or indices. Derivative financial instruments include forwards, swaps, futures, credit default swaps and options. The table below shows the fair values of derivative financial instruments, recorded as assets and liabilities, together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative s underlying asset, reference rate or index, and is the basis on which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at the year-end and are indicative of neither the market nor the credit risk. Derivatives held for trading Notional Fair values Fair values Notional Fair values Fair values amounts assets liabilities amounts assets liabilities Interest rate derivatives Swaps 346,417 21,166 7, ,609 20,433 15,019 Futures 17, Subtotal 363,922 21,197 7, ,609 20,433 15,019 Currency derivatives Swaps 5,695, , ,354 10,436, , ,974 Forwards 748,993 3,120 2, ,846 3,730 5,762 Futures 21, Options (purchased) 2,458,435 31,739-3,649, ,971 - Options (sold) (2,398,435) - 31,692 (3,534,559) - 168,866 Subtotal 6,526, , ,850 11,081, , ,602 Credit Risk Derivatives Credit default swaps (purchased) 18, , Subtotal 18, , Other derivatives Equity options (purchased) 174,344 3, ,482 22,330 - Equity options (sold) (164,812) - 3,474 (180,482) - 22,330 Subtotal 9,532 3,476 3,474-22,330 22,330 Total derivatives 6,918, , ,229 11,791, , ,004 Derivative financial instruments held or issued for trading purposes: Most of the Bank s derivative trading activities relate to asset and liability management of the Bank and deals with customers who are normally laid off with counterparties. The Bank may also take positions with the expectation of profiting from favorable movements in prices, rates on indices. Forwards and futures: Forwards and futures contracts are contractual agreements to buy or sell a specified financial instrument at a specific price and date in the future. Forwards are customized contracts transacted in the over-the-counter market. Futures contracts are transacted in standardized amounts on regulated exchanges and are subject to daily cash margin requirements. Swaps: Swaps are contractual agreements between two parties to exchange movements in interest or foreign-currency rates or equity indices based on specified notional amounts.

67 Notes to Consolidated Financial Statements Credit-default swap: A credit-default swap (CDS) is a swap designed to transfer the credit risk of fixed-income products from one party to the other. It is an agreement between a protection buyer and a protection seller whereby the buyer pays a periodic fee in return for a contingent payment by the seller upon a credit event (such as a certain default) happening in the reference entity. Options: Options are contractual agreements that convey the right, but not the obligation for the purchaser, either to buy or sell a specific amount of a financial instrument at a fixed price, either at a fixed future date or at any time within a specified period. Fair value hedges The Bank uses forwards and swaps to hedge the interest rate risk. The fair value of derivatives designated as fair value hedges are as follows: Nominal Fair Fair Nominal Fair Fair Amounts values -assets values -liabilities Amounts values -assets values -liabilities Instrument type: Interest rate forwards and swaps 262,445 10, ,750-1,918 Currency swaps (180,736) 7, Total 81,709 18, ,750-1,918 During 2012, EUR 257 loss relating to the ineffective portion of fair value hedges was recognized in income statement (2011: EUR 38 loss). Net investment hedges The Bank uses forwards and swaps to hedge the foreign-currency-translation risk on its net investment in foreign subsidiaries. The fair value of derivatives designated as net investment hedges is as follows: Nominal Fair Fair Nominal Fair Fair Amounts values -assets values -liabilities Amounts values -assets values -liabilities 65 Notes to Consolidated Financial Statements Instrument type: Currency swaps 1,218,608 23,370 50,818 1,507,412 43,787 67,152 Total 1,218,608 23,370 50,818 1,507,412 43,787 67,152 During 2012 EUR 6 loss relating to the ineffective portion of net investment hedges was recognized in income statement (2011: EUR 212 loss). Cash flow hedges The Bank uses cross-currency swaps to hedge the exposure to variability in the foreign currency risk arising from foreign currency denominated borrowing and debt securities issued. The fair value of derivatives designated as cash flow hedge is as follows: Nominal Fair Fair Nominal Fair Fair Amounts values -assets values -liabilities Amounts values -assets values -liabilities Instrument type: Interest rate swaps ,865 5, Currency swaps 143,092-5,643 59,358 2,447 - Total 143,092-5, ,223 7,

68 Notes to Consolidated Financial Statements During 2012 no losses relating to the ineffective portion of cash flow hedges was recognized in income statement (2011: None). The table below shows the fair value of derivative financial instruments recorded as assets and liabilities Assets Liabilities Assets Liabilities Derivatives designated as Held for trading 212, , , ,004 Net investment hedge 23,370 50,818 43,787 67,152 Cash flow hedge - 5,643 7, Fair value hedge 18, ,918 Total 253, , , , Notes to Consolidated Financial Statements 12. Equity-accounted investments For 2012 and 2011, the movements of participating interests of the Bank companies are as follows: Balance at Capital Increase Balance at January 1, Result for and New December 31, 2012 the year Establishments 2012 Cirus Holding B.V. 4,000 (9) - 3,991 Ikano Finance Holding B.V. 823 (355) Stichting Credit Europe Custodian Services Total 4,948 (364) - 4,584 Balance at Capital Increase Balance at January 1, Result for and New December 31, 2011 the year Establishments 2011 Cirus Holding B.V ,000 4,000 Ikano Finance Holding B.V. 580 (75) Stichting Credit Europe Custodian Services Total 705 (75) 4,318 4,948 Cirus Holding B.V. is a joint venture entity, in which both the Bank and Ikano SA holds 50% of the shares. The company is established to become the holding company of a new bank in Russia. Ikano Finance Holding B.V. is a holding company which through its wholly owned Russian based subsidiary cooperates with Credit Europe Bank (Russia) Ltd in providing financial services and co-branded cards to the retail customers of IKEA and MEGA in Russia. Stichting Credit Europe Custodian Services is an entity that holds securities with custodian companies on behalf of clients of the Bank. The Bank owns a participation of 100%. From a legal point of view, control of a Stichting is exercised by its sole organ, being the board of directors. Control is not in the hand of shareholders because there are no shares or similar instruments.

69 Notes to Consolidated Financial Statements 13. Property and equipment The book value of property and equipment in 2012 and 2011 changed as follows: Furniture Leasehold Buildings and fixtures Vehicles improvements Total Balance at January 1, ,267 36,803 37,342 13, ,518 Additions 1,102 13, ,522 17,578 Revaluation Disposals (368) (393) (167) (43) (971) Depreciation (1,849) (7,360) (4,782) (1,280) (15,271) Write off (1,674) (943) (12) - (2,629) Disposal of subsidiary - (1,288) (19) (3,655) (4,962) Currency translation differences (434) 445 (397) 150 (236) Balance at December 31, ,846 40,737 32,446 10, ,829 Cost 68, ,266 47,541 19, ,678 Cumulative depreciation and impairment (22,653) (61,529) (15,095) (8,572) (107,849) Balance at December 31, ,846 40,737 32,446 10, ,829 Furniture Leasehold Buildings and fixtures Vehicles improvements Total Balance at January 1, ,681 31, ,531 91,082 Additions 2,448 10,815 44,338 7,166 64,767 Transfers (5,620) 813-4,807 - Disposals (535) (119) (181) (195) (1,030) Depreciation (1,494) (6,178) (7,181) (1,560) (16,413) Disposal of subsidiary(*) - (198) (20) (1,220) (1,438) Currency translation differences (213) (314) (500) (423) (1,450) Notes to Consolidated Financial Statements 67 Balance at December 31, ,267 36,803 37,342 13, ,518 Cost 64,384 73,968 46,971 26, ,201 Cumulative depreciation and impairment (16,117) (37,165) (9,629) (13,772) (76,683) Balance at December 31, ,267 36,803 37,342 13, ,518 (*)Includes depreciation expenses for the year ended 2011 from operations discontinued in During 2012, the Bank identified no significant events or circumstances that would indicate that the Bank s property and equipment may be impaired (2011: None). The Bank does not have any restrictions on title, and property, plant and equipment pledged as security for liabilities (2011: None). The Bank does not have any contractual commitments for the acquisition of property, plant and equipment.

70 Notes to Consolidated Financial Statements 14. Intangible assets The book value of intangibles is as follows: Patents Other Goodwill and licenses intangibles Total Balance at January 1, ,383 8,909 6,502 33,794 Other additions 2,406 1,646 1,948 6,000 Amortization - (2,675) (1,321) (3,996) Disposal of subsidiary - (2,933) (2,486) (5,419) Currency translation differences - (451) 145 (306) Balance at December 31, ,789 4,496 4,788 30, Cost 20,789 21,099 9,834 51,722 Cumulative amortization - (16,603) (5,046) (21,649) Balance at December 31, ,789 4,496 4,788 30,073 Notes to Consolidated Financial Statements Patents Other Goodwill and licenses intangibles Total Balance at January 1, ,766 10,674 4,534 29,974 Other additions 3,617 1,189 3,988 8,794 Disposals - (5) - (5) Amortization - (2,949) (1,124) (4,073) Disposal of subsidiary(*) - - (722) (722) Currency translation differences - - (174) (174) Balance at December 31, ,383 8,909 6,502 33,794 Cost 18,383 22,093 21,609 62,085 Cumulative amortization - (13,184) (15,107) (28,291) Balance at December 31, ,383 8,909 6,502 33,794 (*)Includes amortization expenses for the year ended 2011 from operations discontinued in The Bank does not have any intangible assets whose title is restricted (2011: None). There are no intangible assets pledged as security for liabilities (2011: None). During 2012 and 2011, there were no contractual commitments for the acquisition of intangible assets.

71 Notes to Consolidated Financial Statements 15. Other assets Assets held for resale 60,384 78,973 POS, debit card, credit card and ATM related receivables 37,659 10,282 Receivables from DNB 34,057 34,691 Prepayments to suppliers 27,222 16,939 Amounts held as guarantee 12,153 8,078 Accounts receivable 8,257 13,551 Items in the course of settlement 4,629 8,696 Materials and supplies 2,114 1,276 Tax related receivables 1,972 5,453 Other assets 3,575 6,203 Total 192, ,142 Assets held for sale represents repossessed collateral (i.e. ships and residential real estate) when clients were not able to meet their payment obligations. 16. Due to banks This item comprises amounts due to banking institutions Time deposits 851, ,750 Syndication loan 173, ,672 Current accounts 88,338 12,574 Total 1,113, ,996 The amount of repo transactions in time deposits is EUR 381,650 (2011: EUR 131,906). As of December 31, 2012, the Bank maintained time deposit balances of EUR 102,793 (2011: EUR 107,524), which were pledged to the Bank as collateral for loans granted by the Bank. Notes to Consolidated Financial Statements Due to customers This item comprises amounts due to customers other than banking institutions Retail time deposits 3,197,512 4,199,826 Retail saving and demand deposits 1,435,832 1,540,435 Corporate time deposits 871,396 1,222,008 Corporate demand deposits 427, ,539 Total 5,931,934 7,519,808 As of December 31, 2012, the Bank maintained customer deposit balances of EUR 127,017 (2011: EUR 405,781), which were pledged to the Bank as collateral for loans and off-balance sheet credit instruments granted by the Bank. As of December 31, 2012, EUR1,602,849(2011: EUR 1,677,322) of deposits from customers are expected to be settled more than 12 months after the balance sheet date.

72 Notes to Consolidated Financial Statements 18. Issued debt securities Issued debt securities and other borrowed funds, as of December 31, 2012: Principal Original Interest Opening Maturity Effective amount currency rate date date interest rate Amount 193,128 (a) USD 7.75% May 20, 2010 May 20, % 193,308 80,268 (b) RUB 9.50% February 15, 2011 February 18, % 44, ,979 (c) RUB 8.10% April 27, 2011 April 28, % 125, ,979 (d) RUB 10.00% February 10, 2012 February 10, % 124, ,979 (e) RUB 9.80% October 09, 2012 October 09, % 113,124 58,442 (f) RUB 8.00% December 28, 2012 December 20, % 57,552 5,545 (g) RUB 5.02% Various Various 5.15% 5, , Notes to Consolidated Financial Statements Issued debt securities and other borrowed funds, as of December 31, 2011: Principal Original Interest Opening Maturity Effective amount currency rate date date interest rate Amount 30,914 (h) USD 3.65% July 25, 2011 January 30, % 30, ,929 (i) USD 9.00% October 21, 2009 October 25, % 32, ,857 (a) USD 7.75% May 20, 2010 May 20, % 208,648 95,774 (b) RUB 8.30% February 15, 2011 February 18, % 98, ,717 (c) RUB 8.10% April 27, 2011 April 28, % 120,869 10,805 (j) RUB 6.00% Various Various 6.62% 10,783 (a) Amounting to USD 300 million participation notes listed on the London Stock Exchange. 501,439 (b) In February 2011, the Bank issued RUB 4,000 million of bonds. In August 2012, RUB 2,918 million of the RUB 4,000 million was executed under the put option of the bond. During 2012 the Bank sold parts of the bond to investors and as of the end of the year, the remaining amount of the bond was RUB 3,237 million. (c) Amounting to RUB 5,000 million participation notes listed on the Micex. (d) Amounting to RUB 5,000 million participation notes listed on the Micex. These bonds mature on February 10, 2015 with a put option date of February 12, (e) Amounting to RUB 5,000 million participation notes listed on the Micex. These bonds mature on October 9, 2015 with a put option date of October 9, (f) Amounting to RUB 2,355 million securitization bonds listed on the Micex. (g) Amounting to RUB 224 million promissory notes with opening and maturity dates throughout (h) Amounting to USD 40 million promissory notes. (i) Amounting to USD 150 million participation notes on the London Stock Exchange. (j) Amounting to RUB 451 million promissory notes with opening and maturity dates throughout The Bank did not have any defaults on principal, interest or other breaches with respect to its debt securities during 2012 and 2011.

73 Notes to Consolidated Financial Statements 19. Other liabilities Non-current tax related payable 10,863 8,782 Unfinished settlements 8,491 12,050 Accrued expenses 8,422 14,511 Unearned premiums reserve 6,849 1,549 Staff related liabilities 4,408 5,055 ATM settlements 2, Payables to suppliers 2,733 10,267 Advances from customers 2,373 1,345 Commission payable 1,825 3,031 Deferred income 1,661 1,457 Payables regarding to insurance agreements 1,443 1,616 Collateral payables Credit card payables Social security payables Provisions Cheque payables - 1,513 Deferred payment liability under letters of credit - 9,709 Other liabilities 2,898 6,037 Total 57,418 79,859 Other liabilities includes other accruals, miscellaneous payables. The Bank recognised a liability of EUR 267 in relation to the crisis tax of 16% to be charged to salaries above EUR 150. This liability will be settled in Notes to Consolidated Financial Statements

74 Notes to Consolidated Financial Statements 20. Subordinated liabilities 72 Notes to Consolidated Financial Statements Issued liabilities qualify as subordinated debt if claims by the holders are subordinated to all other current and future liabilities of, respectively, the Bank and other Group companies. These liabilities, except for the subordinated bonds issued by Credit Europe Bank Ltd. on November 12, 2012 for an amount of USD 250 million, qualify as capital, taking into account remaining maturities, for the purpose of determining the consolidated capital adequacy ratio for the Dutch Central Bank (De Nederlandsche Bank - DNB).The following table analyses the subordinated liabilities: Principal Original Opening Maturity amount (millions) currency date date Amount Amount (1) USD June 30, 2010 Perpetual Tier I 95,338 97, (2) EUR September 1, 2005 September 1, ,018 60, (3) USD October 30, 2008 October 30, ,299 15, (4) USD November 14, 2012 November 14, , (5) USD April 28, 2011 December 31, ,358 30, (6) USD February 28, 2012 February 28, , (7) USD March 30, 2012 March 30, , (8) USD October 22, 2012 October 22, , (9) USD September 28, 2007 September 28, , (9) USD September 30, 2008 September 30, , (9) USD October 2, 2008 October 2, ,086 Total 505, ,538 (1) The interest rate is fixed and amounts to 11.5% per annum and payable semi-annually in arrears on 30 June and 30 December of each year. (2) The subordinated bond is listed on the Luxembourg stock exchange. Interest will be payable quarterly in arrears. The interest rate is Euribor plus 3.0% per annum until September 2010 and Euribor plus 3.5% per annum thereafter. (3) Interest rate is Libor plus 5.0% per annum until October 2013 and Libor plus 5.5% per annum thereafter. (4) Interest will be payable semi-annually in arrears with a fixed interest rate of 8.50% per annum. (5) Interest rate is fixed and amounts to 10.0% per annum. Interest is payable quarterly in arrears. (6) The Bank issued USD 50 million Tier II as per February 28, Interest rate is fixed and amounts to 10.0% per annum. Interest is payable quarterly in arrears. (7) The Bank issued USD 90 million Tier II as per March 30, Interest rate is fixed and amounts to 10.0% per annum. Interest is payable quarterly in arrears. (8) The Bank issued USD 50 million Tier II as per October 22, Interest rate is fixed and amounts to 10.0% per annum. Interest is payable quarterly in arrears in each year, commencing from January 22, (9) As per March 30, 2012 the Bank early repaid three of outstanding Tier-II loans, amounting USD 21 million, USD 33.7 million and USD 33.7 million, respectively. The Bank has not had any defaults on principal, interest or other breaches with respect to its subordinated liabilities during 2012 and 2011.

75 Notes to Consolidated Financial Statements 21. Capital and reserves As of December 31, 2012, the authorized share capital is EUR 1,000 million (2011: EUR 1,000 million) and consists of EUR 1,000 million (2011: EUR 1,000 million) ordinary shares with a face value of EUR 1. The called-up and paid-in capital consists of million (2011: million) ordinary shares with a face value of EUR 1. Translation reserve The translation reserve comprises all foreign-exchange differences arising from the translation of the financial statements of foreign operations. Hedge reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of the Bank s net investments in foreign operations hedges and cash flow hedges. Fair value reserves The fair value reserve includes the cumulative net change in the fair value of available-for-sale investments, excluding impairment losses, until the investment is derecognized or impaired. 22. Net interest income Interest income from: Loans and receivables customers valued at amortized cost 713, ,788 Derivative financial instruments 137, ,192 Financial investments 41,819 47,590 Interest on financial lease 10,628 7,084 Loans and receivables banks valued at amortized cost 9,882 15,078 Financial assets held for trading 8,441 7,611 Cash and balances at central banks valued at amortized cost 1,953 4, Notes to Consolidated Financial Statements Subtotal 924, ,718 Interest expense from: Due to customers valued at amortized cost 202, ,490 Derivative financial instruments 200, ,513 Issued debt securities valued at amortized cost 60,496 47,725 Due to banks valued at amortized cost 43,118 34,936 Subordinated liabilities valued at amortized cost 30,337 19,280 Subtotal 536, ,944 Total 387, ,774

76 Notes to Consolidated Financial Statements 23. Net fee and commission income 74 Notes to Consolidated Financial Statements Fee and commission income Credit cards 50,475 34,157 Insurance related commissions 14,847 10,376 Cash loans 12,668 13,590 Payment and transaction services fees 9,227 9,275 Cash withdrawal fees 7,041 5,723 Letters of credit 5,203 8,478 Foreign exchange transactions 4,354 3,368 Letters of guarantee 3,481 3,777 Fees from retailers 3,222 1,638 Commission on account maintenance 3,007 2,638 Commissions on fiduciary transactions 2,277 2,546 Commissions on fund transfers 1,928 2,160 Portfolio and other management fees 1, Early redemption fees 1,336 3,136 Other fees and commissions 3,544 4,818 Subtotal 124, ,221 Fee and commission expense Credit card fees 31,080 18,203 Commission paid to intermediaries/retailers 12,213 5,993 Collection operation fees 3,209 2,507 Payment and transaction services expense 3,176 2,811 Insurance related fees 1,963 2,427 Account maintenance fees Other fee and commission expenses 2, Subtotal 54,825 33,234 Total 69,262 72,987 Other fees and commissions income includes fees from collection services given and commissions on option transactions. 24. Net trading income Foreign exchange gain 11,960 8,653 Securities 5,710 4,503 Trading loans 3,528 3,163 Derivatives (2,778) 690 Total 18,420 17,009

77 Notes to Consolidated Financial Statements 25. Results from financial transactions Net gain from the disposal of available-for-sale investments(*) 23,764 4,646 Net gain from the disposal of HTM 7,885 2,697 Total 31,649 7,343 (*) Includes the amounts transferred from equity to the income statement on the derecognizing of available-for-sale investments and capital gains and losses. 26. Other operating income Income from loan sales 12,332 3,651 Collection from written off loans 8,795 12,660 Sale of assets held for resale 3, Income related to previous year 1,016 1,072 Income from financial leasing activities Rent income 553 1,395 Sale of fixed assets Dividend received Insurance recovery - 2,652 Other income 1, Total 28,986 23, Personnel expenses Wages and salaries 117, ,994 Social security and federal budget payments 11,369 12,911 Retirement benefit costs 13,793 11,553 Health insurance costs 1,599 1,365 Other employee costs 4,256 3, Notes to Consolidated Financial Statements Total 148, ,138 Average number of the employees 6,364 6,460 Banking activities Netherlands Banking activities - foreign countries 6,153 6,232 The retirement-benefit costs relate to EUR 807 (2011: EUR 994) for a defined contribution plan. The Bank has no defined benefit program. The assets of the schemes are held separately from those of the Bank in funds under the control of insurance companies.

78 Notes to Consolidated Financial Statements 28. General and administrative expenses 76 Notes to Consolidated Financial Statements Rent and maintenance expenses 33,764 32,404 Communication and information expenses 14,634 12,371 Taxes other than income 12,605 10,225 Stationary, office supplies and printing expense 6,880 5,729 Professional fees and consultancy 5,419 4,475 Information technology expenses 3,490 2,993 Travel and transportation expenses 3,383 3,562 Security expenses 2,681 2,870 Advertising and marketing expenses 2,549 2,535 Membership fees 1,390 1,157 Cleaning expenses 1, Insurance premiums Legal services expenses Representative expenses Other expenses 3,235 3,574 Total 93,948 85, Other operating expenses Expenses related to previous year 5, Expenses paid to retail partners 4,265 6,670 Unamortized part of fixed assets taken out of use 2, Insurance receivable write off 2,525 - Collection expenses Claims service expenses Other 2, Total 18,823 9, Other impairment loss Assets held for sale 8,827 5,163 Provision / (reversal of provision) for financial guarantee contracts 376 (608) Other Total 9,203 4,954

79 Notes to Consolidated Financial Statements 31. Taxation The Netherlands Corporate income tax is levied at the rate of 25% on the worldwide income of resident companies, which is determined by modifying accounting income for certain exclusions and allowances for tax purposes for the year A unilateral decree for the avoidance of double taxation provides relief for resident companies from Dutch tax on income, such as foreign business profits derived through a permanent establishment abroad, if no tax treaty applies. There is an additional dividend tax of 5% computed only on the amounts of dividend distribution at the time of such payments. Under the Dutch taxation system, tax losses can be carried forward to be offset against future taxable income for nine years. Tax losses can be carried back to offset profits for up to one year. Companies must file their tax returns within six months following the close of the tax year to which they relate, unless the company applies for an extension (normally an additional nine months). Tax returns are open for five years from the date of final assessment of the tax return during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Beginning from January 1, 2007, the Bank formed a fiscal unity with its Parent company. As a result of the fiscal unity, all profits and losses of the fiscal unity members are consolidated for tax purposes. The main advantages of a fiscal unity are that tax losses of one company can be offset against profits of another company and assets can be transferred to another company without recognizing income at the moment of transfer. Russian Federation The taxation system in the Russian Federation is characterized by frequent changes in legislation, official pronouncements and court decisions. The applicable tax rate for current tax is 20% (2011: 20%) and deferred tax is 20% (2011: 20%). Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances, a tax year may remain open longer. The Russian Federation suggests that the tax authorities are taking a more assertive position in their interpretation and enforcement of tax legislation. These circumstances may create tax risks in the Russian Federation that are substantially more significant than in other countries. Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on the financial position of the Bank, if the authorities were successful in enforcing their interpretations, could be significant. 77 Notes to Consolidated Financial Statements Romania The applicable tax rate for current and deferred tax is 16% (2011: 16%). The Romanian Government has a number of agencies that are authorized to conduct audits (controls) of Romanian companies, as well as foreign companies doing business in Romania. These controls are similar in nature to tax audits performed by tax authorities in many countries, but may extend not only to tax matters, but to other legal and regulatory matters in which the applicable agency may be interested. The statute of limitations period in Romania is of 5 years (extended to 10 years in case tax evasion is suspected by the tax authorities). When management is aware of specific circumstances where there is the probability of fine, appropriate reserves are established for such contingencies. It is likely that the Bank s consolidated subsidiaries in Romania will continue to be subject to controls from time to time for violations and alleged violations of existing and new laws and regulations. Although, the Bank s consolidated subsidiaries in Romania can contest the allegations of violations and resulting penalties when management believe there is cause to do so, the adoption or implementation of laws or regulations in Romania could have a material effect on the Bank s consolidated subsidiaries in Romania. The effective tax rate as per 31 December 2012 amounts to 16% Switzerland Corporate tax in Switzerland is a combination of Canton and Federal tax. Cantonal tax is levied at the effective rate of 23.38% on the net profit of the related period and at the effective rate of 0.401% on the shareholders equity of the related period. Federal tax is levied at the rate of 8.50% on the net profit of the related period. Since the tax expenses are tax deductible, the effective net tax rate is around 24%.

80 Notes to Consolidated Financial Statements 78 Notes to Consolidated Financial Statements In addition to the cantonal and federal taxes, another professional tax is levied at various effective rates on the average of the last two years gross revenue figures, rent expenses and number of employees. Under the Swiss taxation system, tax losses can be carried forward to be offset against future taxable income for seven years. Companies must file their tax returns within four months following the close of the tax year to which they relate, unless the company applies for an extension. Tax returns are open for five years from the date of final assessment of the tax return, during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Turkey Current Tax Statutory income is subject to corporate tax at 20% effective from 1 January 2006 according to Corporate Tax Law No: 5520 published in Official Gazette No: dated 21 June Corporate tax return is declared between the 1st and 25th day of the fourth month following the first day of the fiscal year end and paid until the end of the fourth month as a single installment. In accordance with the Corporate Tax Law, the tax losses can be carried forward to offset against future taxable income for up to five years. Declarations and related accounting records can be inspected within 5 years by tax authorities and the tax calculations can be controlled. Since 24 April 2003, including the year 2002 and earlier periods, the period income is not subject to withholding tax if it is not distributed, is transferred to share capital or is distributed to resident companies, while the profit distribution to the resident natural persons, to the ones exempt from corporate and income taxes, to the foreign based tax payers (except the ones generating dividend income through their operations or permanent representative offices in Turkey) is subject to withholding tax at 10% of the profit distribution. As per decision of the Council of Ministers No. 2006/10731, dated 22 July 2006 the profit distribution to the resident natural persons, to the ones exempt from corporate and income taxes, to the foreign based tax payers (except the ones generating dividend income through their operations or permanent representative offices in Turkey) is subject to withholding tax at 15% of the profit distribution. Ukraine The applicable tax rate for corporate profit is 21% (2011: 23%). The tax amount defined by the Bank could be re-assessed by the tax authorities during the three subsequent calendar years after the date of submitting the respective tax return; however, under certain circumstances this period could be longer. Therefore, the Bank should keep its primary documents related to tax returns until the beginning of the tax audit, but for no less than three years. Tax losses can be carried forward to be offset against future taxable income for the next taxable years after the year when this loss appeared. In case the tax losses are declared to the Tax Authority for the period of four consecutive tax years, Tax Authority gains the right to perform unscheduled audit. Starting from 1 January 2011 new Tax Code of Ukraine was adopted that implies certain changes in tax accounting. In particular Tax code stipulates the decrease in corporate income tax rates from 25% to 23 % since 1 April 2011, 21% since 1 January 2012, 19% since 1 January 2013 and 16% since 1 January 2014.

81 Notes to Consolidated Financial Statements Effective tax rate 24.98% 21.35% Income tax expense recognized in the income statement Current income tax (31,881) (29,259) Current income tax charge (31,966) (28,511) Adjustment in respect of current income tax of previous year 85 (748) Deferred income tax 5,423 4,997 Relating to origination and reversal of temporary differences 5,423 4,997 Income tax reported in income statement (26,458) (24,262) Income-tax expense recognized in equity Deferred income tax (5,798) 749 Unrealized gains/losses on available-for-sale financial assets (5,722) 878 Cash flow hedge (108) (175) Revaluation surplus Income tax reported in equity (5,798) 749 Reconciliation of income tax Operating profit before tax 105, ,997 Statutory tax rate 25.00% 25.00% At statutory income tax (26,478) (26,999) Income not subject to tax Effect of different income tax rates in other countries (2,828) 3,200 The effect of change in tax rate Utilization of previously unrecognized tax losses 260 1,355 Expenditure not allowable for income tax purposes (134) (2,003) Adjustment to prior years Other 2,118 (982) 79 Notes to Consolidated Financial Statements Income tax (26,458) (24,262) Assets Liabilities Net Assets Liabilities Net Tax losses carried forward 10,912-10,912 15,796-15,796 Loans and receivables 6,434 (16,364) (9,930) 5,936 (13,942) (8,006) Cash flow hedge 1,866-1,866 - (175) (175) Property, plant and equipment 484 (2,648) (2,164) - (2,390) (2,390) General risk provision - (21,181) (21,181) - (18,355) (18,355) Due to banks - (959) (959) - (604) (604) Available for sale securities 535 (7,087) (6,552) 1,031 (1,957) (926) Deferred commission income - (17) (17) 529 (258) 271 Other 5,869 (2,120) 3,749 4,116 (5,899) (1,783) 26,100 (50,376) (24,276) 27,408 (43,580) (16,172)

82 Notes to Consolidated Financial Statements 31. Taxation Deferred tax changes recorded in the income tax expense Deferred tax of fiscal loss 3,927 1,846 Loan impairment provision (2,828) 8,819 Revaluations of foreign exchange contracts to fair value 4,627 (2,340) Revaluations of financial assets to fair value Difference in changes in depreciation rates 28 (286) Commissions to be amortized (488) (537) Transaction cost to be amortized (499) (616) Other 530 (2,725) 5,423 4, Earnings per share The calculations for basic and diluted earnings per share are presented in the following table. Notes to Consolidated Financial Statements Weighted average number of ordinary shares outstanding 429, ,500 Diluted number of ordinary shares 429, ,500 Profit for the year from continuing operations attributable to shareholders of the Parent Company Basic earnings per ordinary share from continuing operations Fully diluted earnings per ordinary share from continuing operations Profit for the year from discontinued operations attributable to shareholders of the Parent Company Basic earnings per ordinary share from discontinued operations Fully diluted earnings per ordinary share from discontinued operations

83 Notes to Consolidated Financial Statements 33. Fair value information Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price. The estimated fair values of financial instruments have been determined using available market information by the Bank, and where it exists, appropriate valuation methodologies. However, given the uncertainties and the use of subjective judgment, the fair value should not be interpreted as being reliable in an immediate sale of the assets or settlement of liabilities. The Bank measures fair values using the following hierarchy of method: Level 1: This category includes financial instruments whose fair value is determined directly by reference to published quotes in an active market. These are instruments where the fair value can be determined directly from prices which are quoted in active, liquid markets and where the instrument observed in the market is representative of that being priced in the Bank s portfolio. Level 2: Valuation techniques based on observable inputs. These are instruments where the fair value can be determined by reference to similar instruments trading in active markets, or where a technique is used to derive the valuation but where all inputs to that technique are observable. Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique uses inputs based on unobservable data, which could have a significant effect on the instrument s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant, unobservable adjustments or assumptions are required to reflect differences between instruments. Unobservable in this context means that there is little or no current market data available from which the price at which an arm s length transaction would be likely to occur can be derived. The following table compares the carrying amount of financial assets and liabilities measured at cost to estimated fair values: December 31, 2012 Note Level 1 Level 2 Level 3 Total Financial assets Trading assets 6 38, ,746 Derivative assets held for risk management and trading , ,998 Financial investments 7 865,709 95,036 13, , Notes to Consolidated Financial Statements Total 904, ,034 13,702 1,267,191 Financial liabilities Derivative assets held for risk management , ,690 Total , ,690 Financial assets Trading assets 6 46, ,270 Derivative assets held for risk management and trading , ,331 Financial investments 7 573,949 49, ,005 Total 620, , ,082,606 Financial liabilities Derivative assets held for risk management , ,296 Total - 517, ,296 No securities were transferred from Level 1 to Level 2 of the fair value hierarchy in 2012.

84 Notes to Consolidated Financial Statements 34. Commitments and contingencies 82 Notes to Consolidated Financial Statements To meet the financial needs of customers, the Bank issues various irrevocable commitments and contingent liabilities. Even though these obligations may not be recognized on the balance sheet, they do contain credit risk and are, therefore, part of the overall risk of the Bank. In many instances, the amount recognized on the balance sheet for incurred obligations does not represent the loss potential of the arrangement in full. Letters of credit, guarantees and acceptances commit the Bank to make payments on behalf of customers, contingent on the failure of the customer to perform under the terms of the contract. Guarantees carry the same credit risk as loans. Credit guarantees can be in the form of bills of exchange, irrevocable letters of credit, advance payment guarantees, or endorsement liabilities from bills rediscounted. Commitments to extend credit represent contractual commitments to make loans and revolving credits. Commitments generally have fixed expiration dates, or other termination clauses. Since commitments may expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements. With respect to credit risk on commitments to extend the credit, the Bank is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments since most commitments to extend credit are contingent upon customers maintaining specific standards. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments Contingent liabilities with respect to irrevocable letters of credit - import 145, ,095 Contingent liabilities with respect to letters of guarantee granted - non-banks 133, ,995 Contingent liabilities with respect to irrevocable letters of credit - export 17,309 17,597 Contingent liabilities with respect to letters of guarantee granted - banks 12,650 15,161 Contingent liabilities with respect other guarantees 814 6,057 Total non-cash loans 309, ,905 Revocable credit-line commitments 438,576 2,478,512 Credit-card limits 304, ,420 Other commitments 132,445 20,251 Total 1,184,815 3,068,088 Litigation claims Litigation is a common occurrence in the banking industry due to the nature of the business. The Bank has an established protocol for dealing with such legal claims. Once professional advice has been obtained and the amount of damages reasonably estimated, the Bank makes adjustments to account for any adverse effects the claims might have on its financial standing. As of December , the Bank s management is unaware of any significant actual, pending or threatened claims against the Bank. Lease commitments The Bank leases a number of buildings and cars under operating leases. Non-cancelable operating lease rentals are payable as follows: Operating lease commitment - bank as lessee and rent commitments Not later than 1 year 10,490 9,564 Later than 1 year and not later than 5 years 8,294 8,002 Total 18,784 17,566

85 Notes to Consolidated Financial Statements 35. Related parties The Bank s Parent Company is Credit Europe Group N.V., The Netherlands, and the Ultimate Parent Company is FİBA Holding A.Ş., Turkey, both ultimately controlled by a single individual, Mr. Hüsnü Özyeğin. Parties are considered related if one party has the ability to control the other party or exercise significant influence over the other party in financial and operating decisions. The Bank enters into transactions with its Parent company, ultimate parent company and other related parties controlled by Mr. Hüsnü Özyeğin in the ordinary course of business at commercial interest and commission rates. The Bank provides general banking services to related parties including current accounts, time deposits, fx transactions, fiduciary transactions, brokerage activities and custodian services. All loans and advances to related parties are performing advances, and are free of any provision for possible credit losses. All amounts included in the financial statements stated in the table below relate to Group companies controlled by Mr Hüsnü Özyeğin: Ultimate Other Ultimate Other Parent Parent Related Parent Parent Related Company Company Parties Company Company Parties Assets Loans and receivables banks , Loans and receivables customers 14,500-99,455 14,011-22,199 Derivative financial instruments ,978 41,716 3,163 35, ,882 Liabilities Due to banks - - 5, Due to customers 3,830 8, ,598 14,532 63, ,336 Derivative financial instruments ,001 37, ,388 28,660 Subordinated liabilities 45, , ,267-97,247 Commitment and contingencies - - 4, , Notes to Consolidated Financial Statements All credit risk exposures related to derivate financial instruments are fully collateralized through pledge agreements. The Bank does not have any provisions regarding related party balances as of December 31, 2012 (2011: None) The income and expenses in respect of related parties included in the financial statements are as follows: Ultimate Other Ultimate Other Parent Parent Related Parent Parent Related Company Company Parties Company Company Parties Interest income 2, ,516 3, ,340 Interest expense (6,340) (6) (19,375) (6,953) (5,271) (1,585) Commission income , ,850 Commission expense - - (506) - - (1,261) Net trading income (97) ,828 Other operating income General and administrative expenses - (150) (240) (1) (504) (745)

86 Notes to Consolidated Financial Statements In 2012, the Bank management agreed with Fiba Holding to sell the Fibabanka and Credit Plus Gulf shares to Fiba Holding. The shares of Fibabanka were transferred on December 3, 2012 and shares of Credit Plus Gulf were on December 28, The prices for those sales were at arm s length basis and no guarantee was given. More information can be found in Note 38. In 2012, former employees of Credit Europe Bank Ltd. sold part of their holdings with the Bank to Credit Europe Bank N.V. for a value of EUR 3,629. Key management is defined as those persons in the Bank s Supervisory and Managing Board. The number of key management personnel is 13 (2011: 10). Key management personnel and their immediate relatives have transactions in the ordinary course of business at commercial interest and commission rates with the Bank. Loans granted to key management are as follows: Other loans 3,348 2, Notes to Consolidated Financial Statements The Bank does not have any provisions regarding the balances with key management personnel as of December 31, 2012 (2011: None). Key management costs, including remuneration and fees for the year ended December 31, 2012 amounted to EUR 3,026 (2011: EUR 3,601). Pension plan contribution amounted to EUR 128 (2011: EUR 113). 36. Intra-Group balances Intra-group balances that are eliminated during consolidation process: Assets Financial assets designated at fair value through profit or loss 387 3,902 Financial investments 115, ,583 Loans and receivables - banks 828, ,617 Loans and receivables - customers 156, ,656 Derivative financial instruments 26,117 47,275 Other assets 1,150 1,073 Liabilities Due to banks 978, ,564 Due to customers 6, ,709 Derivative financial instruments 26,117 47,275 Issued debt securities 115, ,485 Other liabilities 1,150 1,073 Commitments and contingencies 48,129 50,989 Interest income 104, ,063 Interest expense (104,509) (103,063) Commission income 4,870 4,841 Commission expense (4,870) (4,841)

87 Notes to Consolidated Financial Statements 37. Risk management Credit Europe Bank has set policy-level standards in accordance with the regulations of the Dutch Central Bank (De Nederlandsche Bank DNB) and the guidelines published by the Basel Committee and the European Banking Authority (formerly known as CEBS). The core elements of the bank s risk management and control framework are: Adhering to the risk appetite and strategy set Periodically assessing the risk governance structure Maintaining capital management in line with the capital strategy Managing financial and operational risk in line with the risk appetite and strategy Risk Appetite and Risk Governance The risk management philosophy requires direct reporting lines and a clear division of tasks and responsibilities. At the same time, it ensures that bank-wide criteria for acceptance, monitoring, control and management of risks are deeply rooted. We clearly separate risk ownership from business activities. Main pillars of the risk appetite are illustrated below: 85 QUALITATIVE Governance Standardized policies, guidelines and limits Risk tolerance is proposed and executed by the Managing Board upon the approval of the Supervisory Board Risk appetite in certain geographies and segments is determined in accordance with local presence and expertise Risk management is centralized and functions independently from the business lines Reputation Ensure high financial reporting transparency and efficient external communications QUANTITATIVE Credit risk concentration No single country exposure over 25% Diversified exposure within different geographies through retail, SME and corporate clients. Low sovereign exposure Liquidity No risk tolerance for liquidity risk, restrictions on short-term funding and credit-sensitive liabilities Insignificant liability concentration Trading and ALM Minor sensitivity to trading risk and limited interest rate mismatches in the banking book No exposure to securitized/re-securitized assets or CDOs Notes to Consolidated Financial Statements CEB exercises full control over its subsidiaries business performance and steers their risk appetite. In addition, we employ the following risk management governance structure: Effective Audit & Risk Committees at subsidiary as well as consolidated level; Direct reporting of general managers of the banks' subsidiaries to the CEO of CEB; Presence of a global CRO function on the Managing Board; A uniform credit committee structure at both local and the consolidated level. The Audit and Risk Committee (ARC) at the consolidated level plays a pivotal role in CEB s risk governance framework. ARC meets 4 times a year and receives regular reports and updates on the Bank s actual risk appetite with respect to the approved risk appetite statement. The Committee reviews and monitors the limits for individual types of risks and takes decisions whether principal risks have been properly identified and are being appropriately managed. ARC also makes assessments on the existing risk management capacity / know-how of the Bank and raises action items / investment plans where necessary- to reach the desired level. In line with the ARC recommendations we continued to invest in the Bank s risk management systems in 2011, including but not limited to the streamlining of the credit process, particularly with regard to risk modeling, and implementing integrated stress testing measures.

88 Notes to Consolidated Financial Statements 86 Notes to Consolidated Financial Statements Capital Management A capital level commensurate with the Bank s risk profile is the key to financial resilience. CEB operates with an optimum level and mix of capital resources. A centralized regulatory/internal capital management model plays a major role in this process. The internal capital model incorporates detailed scenario analyses of key risk factors and their potential effects on income statement and the Bank s capital base under different assumptions. This framework is designed to ensure CEB has sufficient capital resources to meet the capital requirements of DNB, as well as those of local regulators in our operating countries. It further ensures that we have capital available to meet our own risk appetite and internal guidelines. We place great emphasis on the strength of our capital base as a way to maintain investor, creditor and market confidence, and to sustain future business development. CEB allocates assets in accordance with the risk-return thresholds defined in our risk appetite statement. Business units are required to fully understand the inherent risk-reward profile of their business and to generate a specific level of return on regulatory/ internal capital requirements. The CEB risk strategy has proved its value, not only by providing consistently strong financial results, but also by yielding consistently robust returns on equity. The Bank s capital-management objectives are to: Maintain sufficient capital resources to meet the DNB s minimum regulatory capital requirements. Ensure that locally regulated subsidiaries can meet their minimum capital requirements. Achieve adequate capital levels to support the bank s risk appetite and internal capital requirements. Maintain a strong capital base to reassure investors, creditors and markets, and to sustain future business development. To support its capital-management objectives, the Bank takes into account: Possible volatility in anticipated demand for capital caused by new business opportunities, including acquisitions, or by deterioration in the credit quality of the Bank s assets. Possible volatility of reported profits and other capital resources compared with forecast. Capital ratio sensitivity to foreign-exchange-rate movements.

89 Notes to Consolidated Financial Statements Regulatory Capital The Bank and all its subsidiaries are regulated by DNB, which consequently acts as the home regulator for Basel II compliance. The Bank applies the standardized approach for credit and market risks and operational risk. Banks are expected to meet the capitalrequirements constraints imposed by the Basel II accord. These are a minimum capital ratio of 8%, which is a ratio of total own funds to total risk-weighted assets (RWA), and minimum Tier I ratio of 4% (a ratio of Tier I capital to total RWA). The Bank s total own funds consist of Tier I capital (also referred as core capital ) and Tier II capital (or supplementary capital ). The various elements making up both components are presented in the table below: Composition of total own funds Tier I capital - paid up share capital 429, ,500 - share premium 163, ,748 - eligible reserves (including retained earnings) (43,872) 65,707 - fair value reserves (*) non-controlling interests 8,515 12,870 - income from current year 77,798 92,656 - perpetual Tier I capital 95,338 97,187 - Deductions from Tier I capital (**) (27,706) (25,267) Total Tier I capital 703, ,401 Tier II capital - subordinated capital 249, ,351 - revaluation reserves 5,482 4,728 - Deductions from Tier II capital (**) (42,170) (27,422) Total Tier II capital 212, ,657 Total own funds 916, , Notes to Consolidated Financial Statements (*) Fair value reserves have been adjusted for the fair value of interest bearing instruments that shall not be included into total own funds in any way, as laid down in the Dutch Financial Supervision Act. (**)Deductions from total own funds includes goodwill, other solvency deductible intangible assets, participations held in insurance and other entities which are not subject to banking supervision, holdings in other credit and financial institutions amounting to more than 10% of their capital which are not within consolidation scope, as well as the straight-line amortization of Tier II capital.

90 Notes to Consolidated Financial Statements 88 Notes to Consolidated Financial Statements The terms and conditions of the main features included in the Bank s total own funds can be found in notes 20 and 21. The Bank and its individually supervised subsidiaries have complied with all externally imposed capital requirements throughout the reporting period and maintained their capital ratios above the regulatory minimum ratios. Solvency ratio Capital ratio 13.40% 12.73% Tier I ratio 10.29% 10.76% Basel III In December 2010, the Basel Committee specified the details of the new capital requirements -- in particular, the target ratios and transition periods during which banks must adapt to the new regulations. Accompanied by the previous amendments (CRD II and CRD III), Basel III aspires to make the banking system safer by focusing on capital and funding. In general, the new rules will expose certain business models to substantial capital and liquidity shortfalls. CEB is well positioned to adopt Basel III and most of the expected impacts have already been deflected. For many banks, Basel III s stricter requirements on capital quality and widened capital deductions will have significant impact. However, CEB is insulated from this aspect of the new rules thanks to our historic reliance on core capital and limited use of hybrid capital instruments, and the restrictiveness of the existing capital definition in the Netherlands. It is likely that banks with capital markets-intensive business models will be far more affected than those with a more traditional focus like CEB. As a commercial and retail-oriented bank, CEB is very well positioned with regard to the product-specific changes in the capital markets segment. In fact, as a significantly low-leverage bank, the new rules may give us a competitive advantage in certain product segments. The trade finance business in particular could benefit, as the new leverage ratio threshold introduces a fivefold increase over today s capital ratio requirements for trade finance commitments. Another new requirement regards short-term liquidity and long-term funding. The Bank business model incorporates a strong focus on building, diversifying and stabilizing the deposit base, making it sufficiently resilient to withstand even the most severe systemic and/or bank-specific shocks. This approach gives an excellent starting position in terms of new liquidity and funding requirements, considering Basel III s focus on stable funding. With some fine-tuning of our business model, such as increasing the relative trade finance weight in the loan book and by continuing to optimize our product and customer mix, CEB will comfortably adapt to the new regulatory landscape. Meanwhile, we aim to further centralize liquidity management and invest in treasury systems that provide a more precise view of the Bank s liquidity position. Credit risk Credit risk is defined as the current or prospective threat to the bank s earnings and capital as a result of counterparty s failure to comply with financial or other contractual obligations. Credit risk constitutes the most significant risk of the bank and arises mainly from its trade-finance, lending, treasury, mortgage and leasing businesses. Concentration limits The bank has established maximum concentration limits in terms of both nominal and capital consumption- over country, industry and single-name concentrations to manage concentration risk in its loan portfolio.

91 Notes to Consolidated Financial Statements Credit risk is managed by following tools and principles: Risk mitigation CEB actively uses collateral management as the major risk mitigation mechanism. Collaterals are managed and followed-up in processes fully supported by the bank s banking system by means of collateral-transaction linkages, blocked accounts and system checking of collateralization. In particular, specialized lending is run through on collaterals and documentation. Valuation reports, survey report updates, insurance policies management are followed up systematically. Outsourcing is also utilized by Collateral Management Agreements and Collateral Monitoring Agreements with expert collateral management agents who have the management and reporting capabilities on the site of the collateral. CEB follows legal certainty and operational requirements as a pre-requisite for consideration risk mitigation effects of the collaterals. Legal department conducts in-depth legal review confirming the enforceability of the collateral arrangements under the law applicable to these arrangements in all relevant jurisdictions. Collateral value should not have a material positive correlation with the credit quality of the provider. The market value of the collateral should be appraised at least annually or more often whenever there exist a reason to believe that a significant decrease in its market value has occurred. Internal Rating Models and Scorecards CEB uses a centralized internal rating system, which is the primary tool for quantifying counterparty credit risk at the consolidated level. CEB borrower rating system employs a fundamental credit analysis supplemented by statistical models, as appropriate, in accordance with the analytical methodology. The obligor rating framework has several building blocks to ensure that qualitative and quantitative risk drivers of corporate default are inherent in the rating process. Since 2011, Internal Rating System model coverage has been extended with new specialized lending models, which ensure more robust estimation of initial risk parameters for transactional lending portfolios. In line with the CEB NV lending practices, seven sub-classes of specialized lending, namely structured trade finance, marine object finance, marine project (shipbuilding) finance, income producing real estate finance, real estate development finance, object finance and other project finance, are separately identified within the corporate asset class regarding the applied rating criteria. 89 Notes to Consolidated Financial Statements A continually improving rating system can reduce credit losses and sustain the long-term profitability and competitive advantage of the Bank.Validation of the internal rating system encompasses qualitative elements as well as quantitative methods. The key metrics used to measure the discriminatory power of the internal rating system is the Cumulative Accuracy Profile (CAP) and Accuracy Ratio(AR), which compresses the information depicted in the CAP curve into a single summary statistic. Accuracy of the risk parameter estimates is also continuously reviewed by their back testing and benchmarking. CEB has established a center of excellence for retail risk management responsible for scoring, risk based pricing, algorithm development, stress testing, monitoring and reporting. The center is composed of highly skilled statisticians, bankers, econometrists, database programmers and risk managers. The team has worked in projects in several countries including Russia, Romania, Germany, Turkey and Belgium. Now through their efforts, all banking entities are taking the right risk with the right interest margin. Stress testing The Bank puts stress-testing and capital planning at the centre of its internal capital assessment process. The factual starting point of the capital planning process is the three year business plan which reflects the baseline assumptions on the global economy. Macroeconomic assumptions are mainly based on a survey of multiple sources to ensure objectivity and consistency. Then, the Bank identifies the potential threats to its business plan and capital adequacy based on a set of adverse scenarios.

92 Notes to Consolidated Financial Statements 90 Notes to Consolidated Financial Statements Having a hypothetical stress testing framework, the bank s stress-testing methodology discourages both under-and over-reliance on internal data. The magnitude of the shocks varied across different portfolios based on their expected default correlation with the systematic risks which materialize under the adverse scenario. The bank s credit-risk stress tests shock both default- and recovery-related risk parameters. In particular, risk concentrations in the portfolio are penalized with harsher shocks. The bank s stress-testing methodology does not aim to make accurate forecasts of the downturns, but instead aims to capture the tail loss by simulating the unexpected and the undesirable. 37. a. Credit exposure Maximum credit-risk exposure The Bank identifies its maximum credit exposure as the sum of all transactions that may potentially expose the Bank to credit losses, should the counterparty not fulfill its contractual obligations. The maximum credit exposure presented in the table below comprises onand off-balance sheet items. Credit exposure is measured without taking account of any collateral held or other credit enhancements. Maximum credit-risk exposure, net of impairment allowances On-balance sheet items are presented at their carrying amount, net of impairment allowances. Derivative financial instruments are assessed at fair value of future cash flows. The off-balance credit risk exposure comprises: Letters of guarantee granted and letters of credit issued or confirmed, shown at the maximum amount that the Bank would have to pay if the guarantees or letters of credit are called upon; and, Undrawn credit-card limits Revocable credit line commitments are excluded as they do not create credit risk Balance sheet items Balances with central banks 1,153,677 1,697,589 Financial assets designated at fair value through profit or loss 38,746 46,270 Financial investments 975, ,140 Loans and receivables - banks 381, ,274 Loans and receivables - customers 6,140,527 6,739,663 Derivative financial instruments 253, ,331 Total balance sheet 8,943,491 10,194,267 Off- balance sheet items Issued letters of guarantee 146, ,213 Issued irrevocable letters of credit 162, ,692 Undrawn credit-card limits 304, ,420 Total off-balance sheet* 613, ,325 Maximum credit risk exposure 9,557,285 10,763,592 *Excluding revocable credit line commitments. The Bank considers items such as other credit commitments and contingent liabilities as a part of its maximum credit risk exposure. However, these are not included in tables below since they are composed of credit facilities that are either revocable or can be cancelled unconditionally by the Bank, and therefore bear insignificant credit risk. Concentration of credit exposure Concentration risk normally arises when number of counterparties operates in the same geographical region or within the same economic sector, and thus is affected to the same extent as economic, political and other conditions.

93 Notes to Consolidated Financial Statements 37.b. Sector concentration The Bank monitors its credit exposure within the following counterparty groups: corporate customers, banks and central governments, retail customers, SME customers, and residential mortgage loans. Exposure to corporate customers is presented, broken down by industry, according to the internal sector definitions On-balance Off-balance Total % of total Total % of total sheet sheet exposure(*) exposure exposure(*) exposure Exposure to central governments and financial institutions Exposure to central governments and central banks 1,153,677-1,153, % 1,697, % Exposure to financial institutions 381,442 30, , % 626, % Total exposure to central governments and financial institutions 1,535,119 30,203 1,565, % 2,323, % Corporate exposure Real estate 418, , % 500, % Leisure & tourism 384,384 7, , % 520, % Shipping & shipyards 384,011 3, , % 451, % Energy/coal 254, , % 229, % Retail 205,065 4, , % 122, % Iron & steel 174,853 30, , % 351, % Construction & installation 92,281 86, , % 344, % Oil & derivatives 94,176 78, , % 117, % Petrochemical, plasticizers & derivatives 79,061 30, , % 174, % Financial services & investments 95,032 4,704 99, % 123, % Soft commodities & agricultural products 84,246 2,487 86, % 65, % Automotive & derivatives 76, , % 102, % Textile, clothing, ready made wearing & leather 52,857 10,343 63, % 104, % Media & publishing 57, , % 64, % Food, beverage & tobacco 51,315 4,028 55, % 86, % Fertilizers 42,102-42, % 26, % Holding 37,604-37, % 47, % Transportation, logistics & warehousing 31, , % 129, % Services 24, , % 38, % Paper & pulp 16,880 6,531 23, % 32, % Technology, IT & electronic equipment 19,931 1,599 21, % 19, % Building materials 17, , % 20, % Luxury Goods 14,092-14, % 32, % Machinery office & optical equipment 13, , % 26, % Durable consumer goods 5,734-5, % 32, % Education & cultural services 4,037-4, % 8, % Telecommunications 1, , % 3, % Other 87,618 5,643 93, % 251, % 91 Notes to Consolidated Financial Statements Total exposure to corporate clients and private banking 2,822, ,958 3,100, % 4,027, %

94 Notes to Consolidated Financial Statements 92 Notes to Consolidated Financial Statements Exposure to retail customers and SMEs On-balance Off-balance Total % of total Total % of total sheet sheet exposure(*) exposure exposure(*) exposure Exposure to retail customers 2,463, ,026 2,767, % 2,044, % Exposure secured by residential real estate 636, , % 752, % Exposure to SME 218,089 1, , % 456, % Total exposure to retail customers and SMEs 3,318, ,633 3,624, % 3,253, % Total credit risk exposure* 7,675, ,794 8,289, % 9,604, % *Excluding financial assets and derivatives. The top five industries account for 53.50% (2011: 53.83%) of the total corporate portfolio, reflecting the traditional business areas of the Bank where it possesses strong expertise and profound industry practice. 37.c. Geographical concentration The following table provides the distribution of the Bank s credit exposure by risk country, as of December 31, 2012: 2012 Other emerging Developed Total Russia Romania Turkey Ukraine markets markets exposure Balance sheet items Demand deposits with central banks 58, ,016 1, ,779 1,153,677 Financial assets designated at fair value through profit or loss - 22,774 1, ,533 38,746 Financial investments 218, , ,483 40,275 12, , ,101 Loans and receivables banks 25,245 92,331 61, , , ,442 Loans and receivables customers 3,065, ,591 1,164, ,118 41,127 1,154,911 6,140,527 Derivative financial instruments , , ,998 Total balance sheet 3,368,517 1,027,539 1,484, ,573 65,750 2,853,159 8,943,491 Off-balance sheet items 290,610 69, ,511 5,483 9, , ,794 Total credit-risk exposure 3,659,127 1,097,343 1,588, ,056 75,361 2,987,934 9,557,285

95 Notes to Consolidated Financial Statements The following table provides the distribution of the Bank s credit exposure by risk country as of December 31, 2011: Balance sheet items Other 2011 emerging Developed Total Russia Romania Turkey Ukraine markets markets exposure Demand deposits with central banks 69,465 93, ,204 5,685-1,364,209 1,697,589 Financial assets designated at fair value through profit or loss 2,404 22,680 1, ,886 46,270 Financial investments 241, ,404 51,871 55,854 16, , ,140 Loans and receivables banks 60, , ,396 22, , ,274 Loans and receivables customers 2,308,344 1,671,661 1,241, ,653 51,126 1,345,681 6,739,663 Derivative financial instruments 1,383 93, , ,331 Total balance sheet 2,683,493 2,179,077 1,459, ,600 89,796 3,583,479 10,194,267 Off-balance sheet items 149, ,735 99,464 4,096 6, , ,325 Total credit-risk exposure 2,832,989 2,350,812 1,559, ,696 96,723 3,721,086 10,763, d. Collaterals and other credit enhancements obtained The Bank s credit policy requires that the loan-extension process is conducted with strong evidence of the customer s ability to repay the loan. Collaterals are also actively used for the purposes of credit-risk mitigation. In the tables below, collaterals are aggregated into two groups: Financial collaterals, which includes any kind of documentary collateral, such as bills of exchange or trade-related promissory notes. Cash collaterals, credit derivatives and other guarantees are also part of this group. Physical collaterals comprise other collaterals not mentioned under financial collaterals. Although the Bank accepts personal and corporate guarantees as collateral, they are not included in the tables below, due to their limited credit risk mitigation ability. 93 Notes to Consolidated Financial Statements Breakdown of collateralized exposure by collateral type 2012 Total Fair value of Fair value of Total Collaterals to exposure, financial of physical collaterals total net net collaterals collaterals obtained exposure Balance sheet Demand deposits with central banks 1,153, % Financial assets designated at fair value through profit or loss 38, % Financial investments 975, % Loans and receivables - banks 381,442 47,347-47,347 12% Loans and receivables - customers 6,140, ,234 3,325,550 3,828,784 62% Derivative financial instruments 253,998 26,510-26,510 10% Total balance sheet 8,943, ,091 3,325,550 3,902,641 44% Off-balance sheet 613,794 30,672 5,697 36,369 6% Total credit risk exposure 9,557, ,763 3,331,247 3,939,010 41%

96 Notes to Consolidated Financial Statements Breakdown of collateralized exposure by collateral type 2011 Balance sheet Total Fair value of Fair value of Total Collaterals to exposure, financial of physical collaterals total net net collaterals collaterals obtained exposure Demand deposits with central banks 1,697, % Financial assets designated at fair value through profit or loss 46, % Financial investments 700, % Loans and receivables - banks 598,274 3,050-3,050 1% Loans and receivables - customers 6,739, ,571 3,932,915 4,799,486 71% Derivative financial instruments 412, , ,138 33% Total balance sheet 10,194,267 1,004,759 3,932,915 4,937,674 48% 94 Notes to Consolidated Financial Statements Off-balance sheet 569,325 39,523 88, ,080 22% Total credit risk exposure 10,763,592 1,044,282 4,021,472 5,065,754 47% In general, the Bank obtains collaterals to secure its loan portfolio. Collaterals for derivative financial instruments consist mostly of the margin called by the Bank for its OTC-derivative assets. 37.e.Creditquality of financial assets The following table presents the credit quality of the Bank s financial assets, as of December 31, In assessing the credit quality of its financial assets, the Bank obtains ratings from eligible credit assessment institutions, namely Fitch, Standard & Poor s (S&P) and Moody s. In order to compare assets, the ratings below were mapped to Fitch s rating scale External rating class AAA / AA- A+ / A- BBB+ / BBB- BB+ / B- Below B- No rating Total Demand deposits with central banks 956, ,800 1, ,153,677 Financial assets designated at fair value through profit or loss - 2,856 21,402 13,048-1,440 38,746 Financial investments 131, , , ,322-49, ,101 Loans and receivables banks 111,928 37,061 65,420 25,903 5, , ,442 Loans and receivables customers ,474 17,189 6,106,864 6,140,527 Derivative financial instruments 36,305 94,776 16,458 4, , ,998 Off-balance sheet 7,215 8, , , ,794 Total 1,243, , , ,311 22,783 6,973,751 9,557, External rating class AAA / AA- A+ / A- BBB+ / BBB- BB+ / B- Below B- No rating Total Demand deposits with central banks 1,364, ,831 98, ,697,589 Financial assets designated at fair value through profit or loss - 15,551 19,200 10,218-1,301 46,270 Financial investments 30, , , ,982 5,325 30, ,140 Loans and receivables banks 157, ,555 51, ,250 17,146 44, ,274 Loans and receivables customers - - 7, ,731,883 6,739,663 Derivative financial instruments 53,609 90,769 16,796 5, , ,331 Off-balance sheet 4,505 3,345 8,295 20, , ,325 Total 1,609, , , ,605 22,483 7,585,364 10,763,592

97 Notes to Consolidated Financial Statements The assets in the tables above are allocated through the rating bucket following the principles imposed by the Basel II accord. Where multiple credit assessments are available, a second worst is taken into account. The total amount of impaired assets included in the tables above is EUR 1,227 (2011: EUR 2,559). The total amount of provisions allocated for these assets is EUR 1,178 (2011: EUR 2,093), while EUR 1,178 is allocated for loans to banks (2011: EUR 1,318). Impaired assets are concentrated in the categories Below B- and No rating. Loans and receivables - customers The next section provides a detailed overview of the credit quality of the Bank s loans and advances portfolio. CEB s current Loan Assessment and Impairment Policy is aligned with the industry practices and regulatory requirements. Our loan classification approach is based on the respective recovery capabilities and debtors creditworthiness levels, providing the management and the external stakeholders a detailed and a transparent overview of the portfolio s credit quality. There have been no major revisions in this policy in CEB differentiates between the following categories of assets in the loan portfolio: Standard (performing) loans covers corporate, retail, SME loans on which payments are made according to the contractual terms, repayment problems are not expected in the future and which are totally recoverable (collectable). Watch List (sub-standard loans) is for corporate loans where problems with principal or interest payments are not necessarily present yet, but which require close monitoring due to negative trends in the debtors payment capability or cash-flow positions, for instance. Corporate loans experiencing delays of contractual payments of less than 90 days or credit-quality deterioration in terms of internal rating. Non-Performing Loans (NPL) includes loans and receivables with limited (doubtful) recovery prospects. These clients: have limited means for total recovery because their repayment capacity is inadequate to cover payments on respective terms; they are likely to lead to losses if these problems are not solved; or, are in a situation where full or partial recovery prospects are fully dependent on the outcome of the liquidation of the underlying assets or recourse to the guarantor; or, have suffered significant credit quality deterioration; or, have delayed the capital and/or interest payments for more than 90 days as of the day of their payment date Loans are retail loans (including SME loans and the residential-mortgage portfolio) with a delay in contractual payment of no more than 90 days (also shown on Watch List). 95 Notes to Consolidated Financial Statements Impairment allowances The Bank aims to maintain sufficient reserves to cover its incurred losses. According to its policy, the Bank differentiates between: Provisions for individually assessed assets Provisions for collectively assessed assets Individual Assessment All Watch List and NPL customers are analyzed individually, regardless of size. Standard (performing) loans are subject to individual assessment only if they are deemed significant. The significance criterion is established at global level, and amounts to EUR 1 million. In terms of individual assessment, the trigger point for impairment is formal classification of an account as exhibiting serious financial problems and where any further deterioration is likely to lead to failure. Two key inputs to the cash-flow calculation are the valuation of all security and collateral and the timing of all asset realizations. Collective Assessment The Bank identifies loans to be evaluated for impairment on an individual basis and segments the remainder of the portfolio into groups of loans with similar credit characteristics. CEB classifies its corporate portfolio either on an obligor or a transactional rating scale, where corresponding probability of default PD or expected loss EL figures are readily available. The Bank calculates collective impairment allowances for retail portfolios using the dynamic statistical model, based on analysis of the portfolio s default and recovery rates according to historical data. The same approach is implemented across the Bank s entities, with adjustment for specific local conditions. The methodology remained unchanged in 2011.

98 Notes to Consolidated Financial Statements 96 Notes to Consolidated Financial Statements 37.f. Credit quality of loans and advances to customers The following tables provide a breakdown of the Bank s loans and advances to customers per credit-quality group, defined above. It also shows the allocation of provisions and collaterals obtained per group Provisions Provisions for for individually collectively Collateral Gross assesed assesed Net Financial Physical Total to net loans assets (-) assets (-) loans collateral collateral collateral loans Corporate loans 2,822,097 (34,710) (9,643) 2,777, ,092 1,575,704 1,949,796 70% Standard loans 2,624,379 (14,467) (9,643) 2,600, ,766 1,401,705 1,769,471 68% Watch List 111,206 (4,371) - 106, , ,738 97% NPL 86,512 (15,872) - 70,640 6,326 70,261 76, % Retail loans (incl. mortgages) 3,100,341 (613) (130,025) 2,969, ,413 1,590,397 1,711,810 58% Performing loans 2,654,266 - (7,679) 2,646,587 95,797 1,323,569 1,419,366 54% Watch List 254,516 (47) (19,093) 235,376 16, , ,722 74% NPL 191,559 (566) (103,253) 87,740 9, , , % SME loans 218,089 (2,707) (7,918) 207,464 7, , ,178 81% Performing loans 183,929 - (1,185) 182,744 7, , ,633 77% Watch List 9,356 - (439) 8, ,292 8,312 93% NPL 24,804 (2,707) (6,294) 15,803-18,233 18, % Total exposure 6,140,527 (38,030) (147,586) 5,954, ,234 3,325,550 3,828,784 64% Total NPL 302,875 (14,720) (113,972) 174,183 15, , , % 2011 Provisions Provisions for for individually collectively Collateral Gross assesed assesed Net Financial Physical Total to net loans assets (-) assets (-) loans collateral collateral collateral loans Corporate loans 3,713,710 (33,693) (19,916) 3,660, ,008 2,230,849 2,874,857 78% Standard loans 3,523,919 (5,791) (13,222) 3,504, ,008 2,077,109 2,721,117 78% Watch List 113,816 (12,046) (29) 101, , ,271 99% NPL 75,975 (15,856) (6,665) 53,454-53,469 53,469 85% Retail loans (incl. mortgages) 2,593,085 (5,402) (91,189) 2,496, ,428 1,373,598 1,590,026 %4 6 Performing loans 2,176,879 - (6,539) 2,170, ,736 1,149,524 1,310,260 60% Watch List 228,235 - (15,586) 212,649 20, , ,793 79% NPL 187,971 (5,402) (69,064) 113,505 34,814 76, , % SME loans 432,868 (20,283) (12,835) 399,750 6, , ,602 83% Performing loans 350,784 (104) (3,358) 347,322 6, , ,699 77% Watch List 20,727 (210) (544) 19, ,520 19,561 98% NPL 61,357 (19,969) (8,933) 32, ,340 46, % Total exposure 6,739,663 (59,378) (123,940) 6,556, ,570 3,932,915 4,799,485 73% Total NPL 325,303 (41,227) (84,662) 199,414 34, , , %

99 Notes to Consolidated Financial Statements Further credit quality breakdown of retail loans are as below: 2012 Total Collateral to Gross loans Provisions Net loans collateral net loans Credit cards 411,306 (29,607) 381, Standard loans 350,891 (1,774) 349,117-0% Watch List 23,475 (4,073) 19,402-0% NPL 36,940 (23,760) 13,180-0% Car loans 1,046,943 (37,531) 1,009,412 1,046, % Performing loans 944,053 (3,032) 941, , % Watch List 60,206 (6,324) 53,882 60, % NPL 42,684 (28,175) 14,509 42, % Mortgage 636,448 (32,022) 604, ,228 89% Performing loans 444,731 (987) 443, ,217 86% Watch List 113,710 (3,466) 110,244 97,548 88% NPL 78,007 (27,569) 50,438 62, % Other retail 1,005,644 (31,478) 974, ,781 13% Performing loans 914,592 (1,887) 912,705 96,102 11% Watch List 57,124 (5,276) 51,848 16,969 33% NPL 33,928 (24,315) 9,613 12, % Total retail exposure 3,100,341 (130,638) 2,969,703 1,711,810 58% Total NPL 191,559 (103,819) 87, , % Total 2011 Collateral to Gross loans Provisions Net loans collateral net loans Credit cards 338,888 (19,470) 319, Standard loans 289,907 (1,001) 288,906-0% Watch List 18,713 (3,042) 15,671-0% NPL 30,268 (15,427) 14,841-0% 97 Notes to Consolidated Financial Statements Car loans 685,888 (27,133) 658, , % Performing loans 620,448 (1,631) 618, , % Watch List 33,978 (3,785) 30,193 33, % NPL 31,462 (21,717) 9,745 31, % Mortgage 727,850 (20,323) 707, ,503 96% Performing loans 540,944 (1,988) 538, ,294 98% Watch List 123,575 (4,829) 118, ,548 89% NPL 63,331 (13,506) 49,825 44,661 90% Other retail 840,459 (29,665) 810, ,011 28% Performing loans 725,581 (1,920) 723, ,101 22% Watch List 51,968 (3,929) 48,039 29,059 61% NPL 62,910 (23,816) 39,094 34,851 89% Total retail exposure 2,593,085 (96,591) 2,496,494 1,590,026 64% Total NPL 187,971 (74,466) 113, ,974 98%

100 Notes to Consolidated Financial Statements 98 Notes to Consolidated Financial Statements Strong collateralization forms a major component of CEB s risk appetite lending criteria and we believe this substantially mitigates the losses CEB might incur otherwise. The table above shows the collaterals held by the Bank against credit exposures. These valuations renewed at least annually and conducted mostly by third party appraisers. In certain cases, particularly residential mortgage loans, CEB could employ internal appraisers but ensure that all internal valuations are benchmarked against market prices. The total amount of NPL as of December 31, 2012 is EUR 302,875 (2011: EUR 325,303). The total NPL ratio as of December 31, 2012, is 4.93% (2011: 4.83% The Bank ensures that it allocates sufficient reserves to maintain a high level of provisioning coverage for its non-performing loans (NPL) after taking into account the fair value of collaterals obtained. Thus the total coverage for Bank s NPL in December 31, 2012 is 122% (2011: 106%). As of December 31, 2012, the total net amount of restructured loans comprises EUR 114,526 (2011: EUR 176,151). 37.g. Aging of loans and advances to customers The tables below present the Bank s portfolio of loans and advances to customers, broken down by delinquency bucket: Net exposure 2012 Loans Loans Loans 30 or more 60 or more Loans Loans less than but less but less 90 days Total that are not 30 days than 60 days than 90 days or more loans to past due past due past due past due past due customers Corporate loans 2,652,601 8,319 21,766 44,781 94,630 2,822,097 Retail loans and residential mortgage loans 2,654, ,162 59,018 40, ,084 3,100,341 SME loans 180,298 6,919 2,729 3,364 24, ,089 Total loans and advances to customers 5,486, ,400 83,513 88, ,493 6,140,527 Net exposure 2012 Loans Loans Loans 30 or more 60 or more Loans Loans less than but less but less 90 days Total that are not 30 days than 60 days than 90 days or more loans to past due past due past due past due past due customers Corporate loans 3,502,929 62,900 17,061 44,585 86,235 3,713,710 Retail loans and residential mortgage loans 2,176, ,438 56,169 41, ,115 2,593,085 SME loans 342,766 13,793 6,583 9,969 59, ,868 Total loans and advances to customers 6,022, ,131 79,813 96, ,107 6,739,663

101 Notes to Consolidated Financial Statements 37.h.Geographical concentration of loans advanced to customers, broken down by counterparty type The following tables breaks down customers loans and advances by risk country: Gross exposure 2012 Other emerging Developed Total Russia Romania Turkey Ukraine markets markets exposure Corporate loans 874, , ,591 88,899 41, ,933 2,822,097 Standard loans 843, , ,060 80,910 41, ,518 2,624,379 Watch List 27,570 14,639 13,778 6,176-49, ,206 NPL 3,127 31,447 35,753 1,813-14,372 86,512 Retail loans (incl. mortgages) 2,046, ,244-12, ,978 3,100,341 Performing loans 1,876, ,326-11, ,364 2,654,266 Watch List loans 100, , , ,516 NPL 69, ,327-1,145-12, ,559 SME loans 144,097 73, ,089 Performing loans 138,777 44, ,929 Watch List loans 1,812 7, ,356 NPL 3,508 21, ,804 Total exposure 3,065,269 1,164, , ,118 41,127 1,154,911 6,140,527 Gross exposure 2011 Other emerging Developed Total Russia Romania Turkey Ukraine markets markets exposure Corporate loans 773, ,611 1,412,441 95,008 51,114 1,029,822 3,713,710 Standard loans 769, ,412 1,353,179 83,335 49, ,492 3,523,919 Watch List 3,877 10,090 32,137 8,152 1,450 58, ,816 NPL - 45,109 27,125 3, ,975 Retail loans (incl. mortgages) 1,354, , ,858 21, ,858 2,593,085 Performing loans 1,239, , ,838 18, ,237 2,176,879 Watch List loans 62, ,160 15, , ,235 NPL 53, ,207 1,171 2, , ,971 SME loans 180, , ,362 5, ,868 Performing loans 172,498 53, , ,784 Watch List loans ,263 2, ,727 NPL 6,647 47,710 2,623 4, , Notes to Consolidated Financial Statements Total exposure 2,308,344 1,241,198 1,671, ,653 51,126 1,345,681 6,739,663

102 Notes to Consolidated Financial Statements 100 Notes to Consolidated Financial Statements 37.i. Liquidity risk The Bank defines liquidity risk as the current or prospective risk to earnings and capital arising from an institution s inability to meet its liabilities when they come due. CEB considers funding and liquidity as a major source of risk. CEB s minor and very limited tolerance towards liquidity risk is explicitly reflected its high internal liquidity buffer requirements and strict definition of liquid assets (or counterbalancing capacity). The Bank monitors its liquidity position on a daily basis and conducts regular liquidity stress testing and it is perceived as an important risk indicator by Asset/Liability Committee (ALCO), Audit and Risk Committee (ARC) and the Supervisory Board. The Bank identifies the following items as the key liquidity-risk drivers: Withdrawal of deposits: The Bank should withstand a severe meltdown in its non-maturity deposits through deploying its available liquid assets. The severity is defined as a 40% loss in the saving-account balance in a period of one month. Erosion in value of liquid assets: The Bank applies a 75% haircut for the securities that are not eligible for re-financing through the European Central Bank (ECB). The remaining qualifying securities are taken into account after adding nominal 5% on top of the existing haircuts applied by the ECB. The policy also incorporates a scenario of material price drops, which in return further decrease the re-financing capacity. Erosion in value of liquid assets: The Bank applies a 75% haircut for the securities that are not eligible for re-financing through the European Central Bank (ECB). The remaining qualifying securities are considered after applying certain haircuts according to their external ratings. Additional collateral requirements: The Bank has sensitivity to certain FX parities due to its involvement in swap markets. The Bank might face intensive margin calls from the counterparties if certain FX rates move in the adverse direction. The Bank measures the required liquidity under worse-than-expected FX market conditions. The Board and senior management ensure that the Bank's funding strategy and its implementation are consistent with their expressed risk tolerance. The board delegates responsibility for establishing specific liquidity-risk policies and practices to the ALCO. ALCO is responsible for ensuring that measurement systems adequately identify and quantify the Bank s liquidity exposure and that reporting systems communicate accurate and relevant information about the level and sources of that exposure. Any violation of the liquidity policy and predefined limits is reported to ALCO. In the case of limit excess during market turmoil, ALCO calls an immediate meeting to discuss options to bring the liquidity to its desired levels. This can include slowing down and/ or ceasing to enter into new commitments, selling assets from trading and AFS portfolios, and increasing spreads to attract new long-term funds on the consumer and corporate sides, as defined in the Bank s contingency-funding plan. To mitigate liquidity risk, the Bank diversifies funding sources as customer deposits and funds borrowed from abroad and it keeps certain level of assets as cash and cash equivalents. Liquidity gaps as a result of size and maturity mismatches in assets and liabilities also generate liquidity risk. Liquidity-gap analysis is done on a monthly basis, to be submitted to ALCO, or more frequently when required. It distributes all on-balance sheet assets and liabilities expected cash flows in predefined maturity bands according to remaining contractual maturity. In its second consultation paper, International Framework for Liquidity Risk Measurement, Standards and Monitoring, the Basel Committee proposes a strengthened liquidity framework which introduces quantitative standards for funding and liquidity. The two proposed measures are a 30-day liquidity coverage ratio (LCR) designed to ensure short-term resilience to liquidity disruptions and a longer-term structural liquidity ratio to address liquidity mismatches and promote the use of stable funding sources (NSFR). The regulatory observation period has already started in 2011 in the Netherlands and CEB s Basel III liquidity ratios (both LCR and NSFR) are comfortably higher than the minimum requirements

103 Notes to Consolidated Financial Statements 2012 Up to Over Maturity not Based on remaining maturity 1 month months months Year 5 years applicable Total Assets Cash and balances at central banks 1,237, ,237,932 Financial assets designated at fair value through profit or loss ,984 13,895 1,459 38,746 Financial investments 36, , , , ,434 13, ,447 Loans and receivables banks 329,885 31,353 19, ,264 Loans and receivables customers 580, ,065 1,167,544 2,655, , ,183 5,954,911 Tangible and intangible assets , ,902 Other assets 10,734 43,701 51,660 85, , ,898 Total assets 2,194, ,089 1,374,148 3,118,932 1,082, ,753 9,237,100 Liabilities Due to banks 220, , , , ,113,373 Due to customers 1,513, ,080 2,098,409 1,329, ,730-5,931,934 Issued debt securities 315 7, , ,348 57, ,280 Other liabilities 26,975 16,975 42,949 41, , ,663 Subordinated liabilities , ,726 95, ,082 Total liabilities 1,761, ,575 2,673,167 2,218, , ,098 8,588,332 Cumulative Liquidity gap 433, ,968 (961,051) (60,689) 340, , , Up to Over Maturity not Based on remaining maturity 1 month months months Year 5 years applicable Total Assets Cash and balances at central banks 1,770, ,770,458 Financial assets designated at fair value through profit or loss 2, ,330 21,199 15,961 1,300 46,270 Financial investments 2,951 10,474 56, , , ,140 Loans and receivables banks 462,240 22, ,507 9, ,956 Loans and receivables customers 1,021, ,336 1,269,641 2,302,369 1,079, ,413 6,556,345 Tangible and intangible assets , ,312 Other assets 59,940 72,934 57,558 53, , ,232 Notes to Consolidated Financial Statements 101 Total assets 3,319, ,614 1,490,526 2,784,606 1,328, ,253 10,504,713 Liabilities Due to banks 109, , , , ,996 Due to customers 1,975,442 1,036,849 2,830,034 1,393, , ,519,808 Issued debt securities 31,382 10, , , ,439 Other liabilities 101,936 27,935 25,731 45, , ,327 Subordinated liabilities , ,267 97, ,538 Total liabilities 2,218,158 1,279,696 3,454,234 1,859, , ,299 9,766,108 Cumulative Liquidity gap 1,101, ,344 (1,351,364) (425,922) 502, , ,605

104 Notes to Consolidated Financial Statements 102 Notes to Consolidated Financial Statements 37.j. Market risks Market risk is defined as the current or prospective threat to the Bank s earnings and capital as a result of adverse market movements in market prices (security and derivative prices, as well as interest rates and foreign exchange rates) or in parameters such as volatility and correlations. The trading portfolio includes financial instruments, such as securities, derivatives and loans to financial institutions, which are exposed to short-term price/interest-rate fluctuations. Eligible positions should be in line with the guidelines and principles set out in the market-risk policy. No eligible positions and financial instruments approved by ALCO are monitored within the scope of the banking book. In line with its business plan, the Bank has a minor risk appetite in market risk. The Bank aims to regularly measure and monitor its market risk associated with adverse market movements affecting the trading components of its Treasury and FI portfolio. It measures its market risk using different approaches - standard and internal models. Bank risk tolerance in the form of limits is determined to manage market risk efficiently and keep it within these limits. Risk limits, such as the Value-at-Risk (VaR) limit, notional limits and sensitivity limits, are set by considering the primary risk factors. In case of a limit breach, ALCO is convened to determine strategy and take necessary actions to restore the outstanding exposure within limits in a certain period of time. The Bank measures the market risk of its trading book and the foreign-exchange risk of its banking book by using an internal model, based on VaR methodology. VaR defines the maximum loss not exceeded with a given probability over a given period of time under normal market conditions. However, this approach fails to capture exceptional losses under extreme market conditions; that is why market risk measurement is complemented by periodic stress-testing analysis. The internal Monte Carlo-based VaR model is used for risk-monitoring purposes and whereas regulatory capital for market risk is calculated and reported quarterly according to the Standard Approach, as specified in the DNB smarket-risk regulations. The Monte Carlo Method simulations method is used starting from July 2010, while Historical simulation method is in place before that. The current portfolio is valued by modeling the instruments prices in the portfolio using stochastic processes. The volatilities and correlations in the pricing models are determined historically from the relevant risk factors over the previous one year period. Each simulation makes a stress scenario that will result in a possible return. The VaR is calculated by getting the percentile of possible loss corresponding to the given confidence interval. The internal limit for the 10-day trading portfolio, with VaR at 99%-confidence interval, is EUR 10 million (2011: EUR 10 million). This implies that the diversified VaR from foreign-exchange risk and interest-rate risk in the trading book should not exceed this level. Other market risks, such as liquidity, re-pricing and interest-rate risk, on the banking book are measured and monitored through sensitivity and gap analyses, detailed in subsequent sections. Value-at-risk figures Trading Book (2012) Total Diversification effect Interest-rate risk Foreign-exchange risk Average % Maximum 2, % 2, Minimum % Period-end % Value-at-risk figures Trading Book (2011) Total Diversification effect Interest-rate risk Foreign-exchange risk Average 1, % 1,521 1,208 Maximum 2, % 4, Minimum % Period-end 1, % 261 1,585

105 Notes to Consolidated Financial Statements 37.k. Interest-rate risk in the banking book One of the Bank s major risks under Pillar II is the interest-rate risk on the banking book. The Bank defines interest-rate risk as the current or prospective risk to earnings and capital arising from adverse movements in interest rates. The trading book is also subject to interest-rate risk, but this type of risk is dealt with under the Market Risk: Value-at-Risk section. The Bank has a minor risk tolerance towards interest-rate risk in its banking book. The Bank s interest-rate risk is monitored for the banking book by means of static-re-pricing-gap and interest-rate-sensitivity analyses once a month at all levels and for each major currency in use. Interest-rate sensitivity on the banking book is calculated according to the economic-value approach. Interest-rate sensitivity in the banking book is calculated according to the economic-value approach. All future cash flows, arising solely from on- and off- balance sheet assets and liabilities are discounted back to their present values with zero-coupon yield curves to see the impact of interest-rate changes on the economic value of the Bank. The impact of the curve with the maximum net gain or loss compared to a benchmark curve is analyzed. Interest-rate sensitivity in the banking book is measured by means of PV01 method. The PV01 method is based on flat upward shifts of each currency s yield curve in magnitudes of one basis point. The economic value impact of these shifts on the banking book is then analyzed. PV01 analysis is complemented with 200-basis-points (bps) scenarios, which consist of the parallel shifts of the yield curves by shifting short-term rates and long-term rates for each individual currency. The interest rate risk on the banking book, excluding the trading book has been calculated as EUR 23.5 million for 2012 with 200 basis point upward parallel rate shock(2011: EUR 48 million). The impact of the curve with the maximal net gain or loss compared to a benchmark curve is then analyzed. Determination of economic internal capital to be set aside to cover potential interest-rate risk in the banking book is based on a Historical Simulation method. Historical economic values of the current banking book are calculated by discounting the re-pricing gaps in each of the major currencies with historical month-end zero-coupon swap curves in pre-defined maturity buckets. Once historical economic values are obtained, an economic value change distribution is created using a rolling window of one year. Notes to Consolidated Financial Statements 103

106 Notes to Consolidated Financial Statements 104 Notes to Consolidated Financial Statements 2012 Non-interest- Over bearing Up to 1 month 1 3 months 3 12 months 1-5 years 5 years items 1 Total Assets Cash and balances at central banks 1,092, ,118 1,237,932 Financial assets designated at fair value through profit or loss ,983 13,896 1,459 38,746 Financial investments 51, , , , ,494 13, ,447 Loans and receivables - banks 182,558 31,210 7,446 4, , ,264 Loans and receivables - customers 1,378, ,615 1,388,486 1,750, , ,421 5,954,911 Tangible and intangible assets , ,902 Other assets , ,898 Total assets 2,705,534 1,050,615 1,542,851 2,075, ,937 1,200,212 9,237,100 Liabilities Due to banks 295, ,918 96, ,374-61,685 1,113,373 Due to customers 2,018, ,172 1,187,530 1,300, , ,807 5,931,934 Issued debt securities 315 7, , ,348 57, ,280 Other liabilities , ,663 Subordinated liabilities 15,299 60,018-95, , ,082 Total liabilities 2,329, ,723 1,597,087 1,985, ,995 1,091,155 8,588,332 Off-balance interest-sensitivity gap 438,122 89,901 65,868 (94,760) 72, ,648 Net gap 813, ,793 11,632 (4,414) 68, ,057 1,111,359 (*) Non-interest-bearing items are not taken into account in the net gap

107 Notes to Consolidated Financial Statements 2012 Non-interest- Over bearing Up to 1 month 1 3 months 3 12 months 1-5 years 5 years items 1 Total Assets Cash and balances at central banks 1,573, ,356 1,770,458 Financial assets designated at fair value through profit or loss 7, ,382 21,118 11,052 1,300 46,270 Financial investments 46,541 56,307 58, , , ,140 Loans and receivables - banks 241,628 49,700 74,683 10, , ,956 Loans and receivables - customers 1,903,627 1,112,757 1,397,120 1,374, , ,178 6,556,345 Tangible and intangible assets , ,312 Other assets , ,232 Total assets 3,772,583 1,219,497 1,534,754 1,719, ,530 1,483,782 10,504,713 Liabilities Due to banks 208, , ,217 18,991-10, ,996 Due to customers 2,879, ,213 1,515,215 1,370, , ,910 7,519,808 Issued debt securities 31,382 10, , , ,439 Other liabilities , ,327 Subordinated liabilities 41, ,531-97,399 30, ,538 Total liabilities 3,161,149 1,297,972 1,991,344 1,606, ,857 1,387,446 9,766,108 Off-balance interest-sensitivity gap 98,408 (163,935) 99,435 (3,706) 116, ,429 Net gap 709,842 (242,410) (357,155) 109, ,404 96, ,202 (*) Non-interest-bearing items are not taken into account in the net gap Notes to Consolidated Financial Statements 105

108 l. Currency risk The Bank takes on exposure to effects of fluctuations in the prevailing foreign-currency-exchange rates on its financial position and cash flows. The Bank enters into foreign-currency forward transactions and swap transactions to decrease foreign-currency position risk. The Bank s position limits on currency risk are determined according to the foreign-currency net position standard ratio determined by the DNB. The Bank has control limits for the positions of forward transactions, options and other similar agreements. The credit risk arising from these instruments is managed together with the risks resulting from market fluctuations. The Bank monitors the risks of forward transactions, options and other similar agreements, reviews open positions with the ALCO and takes appropriate action where deemed necessary. Consolidated subsidiaries and associates determine position limits related to currency risk as determined by local regulatory bodies. Subsidiaries established abroad conduct their operations in the currencies of the countries they are incorporated in. DNB sets the foreign currency limit to 15% of the Bank s Total Own Funds. The result of structural foreign-exchange positions on the Bank s net investments in foreign subsidiaries and branches, together with any related net investment hedges (see note 11), is recognized in equity. Foreign-exchange risk of the position held is calculated with VaR methodology and reported daily for the Bank level and monthly on a consolidated level. The VaR limits and other market risks related issues are monitored by the Risk Management Department and discussed in weekly ALCO meetings. The currency position, taking off-balance sheet derivative transactions into account, is at insignificant levels as of December 31, 2012 and December 31, The positions are taken in line with the Bank s risk management policies.

109 Notes to Consolidated Financial Statements Currency analysis for the year ended December 31, 2012: EUR(*) USD CHF RON RUB UAH TRY Others Total Cash and balances with central banks 1,010,722 3, , ,585 1, ,237,932 Financial assets designated at fair value through profit or loss 14,513 22,794-1, ,746 Financial investments 336, ,338-17,210 44,764 29, ,447 Loans and receivables banks 117, ,218 1,135 56,684 23,080-3,913 2, ,264 Loans and receivables customers 1,472,725 1,735, , ,086 2,289,189 29,772 32,831 2,664 5,954,911 Derivative financial instruments 239,763 11,294 1, ,998 Equity-accounted investments 4, ,584 Property and equipment 55,590 22,366 1,003 19,578 30,060 1, ,829 Goodwill and other intangible assets 23, , ,073 Other assets 72,660 14, ,669 80,616 2, ,316 Total assets 3,348,991 2,531, , ,767 2,597,574 64,012 37,652 6,112 9,237,100 Due to banks 409, , , , ,148 1,113,373 Due to customers 4,377, ,632 2, , ,653 8,476 35,878 24,894 5,931,934 Derivative financial instruments 228,724 12,734 1,465 1,327 3, ,690 Issued debt securities - 193, , ,280 Other liabilities 40,017 3,562 24,382 18,399 32,259 5, ,973 Subordinated liabilities 60, , ,082 Total liabilities 5,116,104 1,477,492 28, ,564 1,488,920 13,811 36,943 32,618 8,588,332 Net on-balance sheet position - 1,053, ,680 54,203 1,108,654 50, (26,506) 2,415,881 Off-balance sheet net position - (1,054,767) (173,618) (61,951) (1,107,713) (49,493) (619) 27,185 (2,420,976) Net open position - (827) 1,062 (7,748) (5,095) Notes to Consolidated Financial Statements 107

110 108 Currency analysis for the year ended December 31, 2011: EUR(*) USD CHF RON RUB UAH TRY Others Total Cash and balances with central banks 1,411,715 69, , ,326 3,039 31, ,770,458 Financial assets designated at fair value through profit or loss 20,769 13,891-1, ,310-46,270 Financial investments 160, ,952-35,222 29,571 34, ,140 Loans and receivables banks 231, ,515 1, ,074 14, , ,956 Loans and receivables customers 1,721,749 2,280, , ,951 1,500,220 39, ,885 10,491 6,556,345 Derivative financial instruments 224,114 25, ,478-2, ,784 1, ,331 Equity-accounted investments 4, ,948 Property and equipment 57,333 26,897 1,091 22,960 21, , ,518 Goodwill and other intangible assets 23, , ,851-33,794 Other assets 108,724 5, ,533 43,490 3,591 13, ,953 Total assets 3,964,483 3,153, , ,821 1,771,349 96, ,463 14,994 10,504,713 Due to banks 131, , , ,635-44,315 3, ,996 Due to customers 4,981, ,886 4, , ,740 10, ,173 16,256 7,519,808 Derivative financial instruments 319,164 24, ,499 2,744 7,648-7,106 1, ,296 Issued debt securities - 271, , ,439 Other liabilities 39,642 16,439 21,256 18,980 32,106 3,822 9, ,031 Subordinated liabilities 60, , ,538 Total liabilities 5,531,278 1,794, , , ,040 13, ,312 20,976 9,766,108 Net on-balance sheet position - 1,359, ,848 78, ,309 82,410 (278,849) (5,982) 2,305,400 Off-balance sheet net position - (1,386,782) (268,943) (81,357) (819,856) (80,689) 286,829 6,229 (2,344,569) Net open position - (27,038) (1,095) (2,437) (18,547) 1,721 7, (39,169)

111 Notes to Consolidated Financial Statements 37.m Operational risk CEB has a global Operational Risk Management (ORM) Department whose goal is to consolidate already-existing ORM activities and coordinate implementation of the framework at locations where there was no prior ORM activity. The framework uses the risk control self-assessment and operational loss database to identify risks and establish risk mitigating action points. Related departments have been given awareness trainings to ensure that operational risk management is embedded in day-to-day operations. 38. Discontinued operations On September 30, 2012 the Bank management agreed with Fiba Holding to sell the Fibabanka shares to Fiba Holding for a consideration of EUR 172,372. The shares of Fibabanka were transferred on December 3, 2012 with retrospective effect as per 30 September 2012 (date when control was lost). The transaction is executed in the form of a spin-off. As part of the spin-off process all assets and liabilities of Fibabanka A.S. is transferred to Fiba Holding A.S.; for the respective equity transfer the Bank paid out a dividend amount of EUR to Fiba Holding A.S. as per the execution date. The figures as presented in this disclosure are as of September 30, Below financials are translated to EUR at exchange rate at the date of the transaction Assets Cash and balances at central banks 132,878 Financial assets at fair value through profit or loss 9,620 Financial investments 6,288 Loans and receivables - banks 10,272 Loans and receivables - customers 1,151,827 Other assets 29,775 Total assets 1,340,660 Liabilities Due to banks 204,464 Due to customers 910,524 Issued debt securities 31,069 Other liabilities 23,183 Total liabilities 1,169,240 Notes to Consolidated Financial Statements 109 Net asset value 171,420 Shares disposed 97.63% Net assets disposed 167,351 Cash received 172,372 License rights 2,933 Gain on disposal 2,088

112 Notes to Consolidated Financial Statements The Bank agreed to sell the shares in its subsidiary Credit Plus Gulf to its parent company Fiba Holding AS. This sale was completed on December 28, The shares of Credit Plus Gulf were transferred on December 28, 2012 with retrospective effect as per 30 November 2012 (date when control was lost). Below financials are translated to EUR at exchange rate at the date of the control was lost Assets Cash and balances at central banks - Loans and receivables - banks 1,193 Loans and receivables - customers 52,056 Other assets Notes to Consolidated Financial Statements Total assets 53,349 Liabilities Due to banks 54,774 Other liabilities 59 Total liabilities 54,833 Net asset value (1,484) Shares disposed 100% Net assets disposed 1,458 Cash received - Gain on disposal 1,458 Results of discontinued operations Below table presents net results of discontinued operations as presented in the income statement. Results from operating activities for discontinued operations are as of the date when control was lost for 2012 and as of the year ended Incomes 121,665 85,475 Expenses (101,761) (73,625) Results from operating activities 19,904 11,850 Income tax expense (4,131) (1,328) Results from operating activities, net of tax 15,773 10,522 Gain on disposal 3,546 - Cumulative loss on reserves reclassified from equity on loss of control on subsidiary (20,712) - (Loss) / profit from discontinued operations (1,393) 10,522 Net cash received 2012 Cash received 172,372 Cash and cash equivalent balances disposed (-) (132,878) Net cash inflow 39,494

113 Notes to Consolidated Financial Statements Cash flows from discontinued operation Net cash used in operating activities (48,283) (1,713) Net cash from investing activities 1,481 (13,018) Net cash from financing activities 74,714 91,730 Net cash flows for the year 27,912 76, Subsequent events On January 24, 2013, the Bank issued a 10-year Tier II capital instrument with a principal of USD 400 million. The issue fulfills the current regulatory requirements of eligible total own funds and going forward, its terms and conditions are designed to comply with the upcoming CRD IV rules, such as avoiding any incentive to redeem and having clauses with respect to loss absorption at the point of non-viability. As per January 25, 2013 the Bank early repaid four of Tier II loans, amounting USD 200 million. On February 1, 2013, SNS REAAL N.V. was nationalised by the Dutch Government. In relation to this transaction, the Dutch Government will charge a tax to all Dutch banks to contribute to costs thereof. 40. List of subsidiaries There are no significant restrictions on the ability of subsidiaries to transfer funds to the Parent Company in the form of cash dividends or to repay loans or advances. Name Place Country Interest Credit Europe Bank (Dubai) Ltd Dubai United Arab Emirates % % Credit Europe Bank (Suisse) SA Geneva Switzerland % % Credit Europe Leasing (Ukraine) LLC Kiev Ukraine % % Stichting Credit Europe Custodian Services Amsterdam The Netherlands % % Walton Maritime SA Marshall Islands Marshall Islands % % Gosport Marine Inc. Marshall Islands Marshall Islands % % Bell Maritime Corporation Marshall Islands Marshall Islands % % Hunter Navigation Inc. Marshall Islands Marshall Islands % % PJSC Credit Europe Bank (Ukraine) Kiev Ukraine 99.99% 99.99% Credit Europe Leasing (Romania) Bucharest Romania 99.99% 99.99% Credit Europe Bank (Romania) SA Bucharest Romania 98.79% 98.79% Credit Europe Leasing (Russia) LLC Moscow Russia 98.40% 98.40% Credit Europe Bank (Russia) Ltd Moscow Russia 98.49% 98.14% Cirus Holding B.V. Amsterdam The Netherlands 50.00% 50.00% Ikano Finance Holding B.V. Amsterdam The Netherlands 50.00% 50.00% Maritime Enterprises B.V. Amsterdam The Netherlands % - Credit Plus Gulf Ltd. Dubai United Arab Emirates % Fibabanka A.Ş. Istanbul Turkey % Notes to Consolidated Financial Statements 111

114 Parent Company Financial Statements As of and for the year ended December 31, 2012

115 Statement of financial position Notes Assets Cash and balances with central banks a 956,633 1,364,085 Amount due from banks b 918, ,641 Loans and advances to customers c 2,413,196 2,613,218 Debt securities d 759, ,152 - Trading 408 3,902 - Available-for-sale 759, ,553 - Held-to-maturity - 58,697 Derivatives e 227, ,091 Investments in Group companies f 817, ,866 Intangible assets g 23,921 26,506 Property and equipment h 46,031 47,417 Other assets i 71, ,699 Total assets 6,234,635 6,867,675 Liabilities Amounts due to banks j 669, ,590 Customer deposits k 4,315,456 5,119,689 Derivatives e 221, ,064 Other liabilities l 41,670 52,059 Subordinated loans m 346, ,538 Total liabilities 5,594,384 6,141,940 Equity Share capital n 429, ,500 Share premium 163, ,748 Legal reserves 20,881 1,716 -Fair value reserve 8,015 (30,603) -Affiliated companies 225, ,857 -Currency translation differences (71,342) (90,975) -Net investment hedge (147,955) (96,614) -Cash flow hedge Tangibles 5,482 4,728 Other reserves 1, ,164 Unappropriate result 24,520 11,607 Total equity 640, ,735 Statement of financial position 113 Total equity and liabilities 6,234,635 6,867,675 Commitment and contingencies p 222, ,241

116 Statement of income Profit for the year of the Parent Company after taxes 24,520 11,607 Profit for the year participating interests after taxes 52,857 81,049 Profit for the year 77,377 92, Statement of income

117 Statements of changes in equity Issued Share Legal Others Unappropriate capital premium reserves reserves results Total At January 1, , ,748 1, ,164 11, ,735 Change in fair value reserve , ,618 Change in currency translation reserve , ,633 Change in tangibles revaluation reserve Change in hedge reserve - - (50,922) - - (50,922) Total income and expense for the year recognized directly in equity - - 8, ,155 Profit for the year ,857-24,520 77,377 Transfer from retained earnings ,607 (11,607) - Dividends received - - (41,847) 41, Dividends paid (171,016) - (171,016) At December 31, , ,748 20,881 1,602 24, ,251 At January 1, , ,748 20,435 77,629 19, ,432 Change in fair value reserve - - (19,620) - - (19,620) Change in currency translation reserve - - (21,888) - - (21,888) Change in hedge reserve - - (8,845) - - (8,845) Total income and expense for the year recognized directly in equity - - (50,353) - - (50,353) Profit for the year ,049-11,607 92,656 Transfer from retained earnings ,120 (19,120) - Dividends received - - (49,415) 49, Dividends paid (27,000) - (27,000) Statements of changes in equity 115 At December 31, , ,748 1, ,164 11, ,735

118 Summary of significant accounting policies Basis of preparation The Parent Company financial statements of Credit Europe Bank N.V. (CEB, the Bank) have been prepared in accordance with accounting principles in the Netherlands as embodied in Part 9 of Book 2 of the Netherlands Civil Code. Based on article 2:362.8 of the Netherlands Civil Code, the valuation principles applied in the Parent Company financial statements are based on International Financial Reporting Standards (IFRS), as used for the preparation of the Consolidated Financial Statements of the Bank. The accounting policies that are used in the preparation of these parent financial statements are consistent with the accounting policies used in preparation of the Consolidated Financial Statements of the Bank, as set out in those financial statements. The additional accounting policies that are specific to the Parent Company Financial Statements of CEB are set out below. Based on article 402 of Book 2 of the Netherlands Civil code, the Company s notes are simplified. 116 Summary of significant accounting policies Investment in subsidiaries The Group companies are stated at their net asset value, determined on the basis of IFRS, as applied in the Consolidated Financial Statements of the Bank. For details on the accounting policies applied for the Group companies, refer to the notes to the Consolidated Financial Statements as shown earlier in this document. Dividend income Dividend income from investments in subsidiaries is recognized when the right to receive payment is established.

119 Notes to Financial Statements A. Cash and balances at central banks This item includes cash on hand and deposits with central banks in countries in which CEB has a presence Balances at central bank 956,571 1,364,047 Cash on hand Total 956,633 1,364,085 Deposits at central banks include reserve deposits amounting to EUR 26,666 (2011: EUR 62,195), that represent the mandatory deposits and are not available in the CEB s day-to-day operations. B. Amounts due from banks Placement with other banks 409, ,946 Loans and advances 437, ,450 Trading loans 71,911 36,563 Subtotal 919, ,959 Allowances for impairment (1,178) (1,318) Total 918, ,641 Loans and receivables from intra group companies amount to EUR 644,270 (2011: EUR 644,553). The amount that will not mature within one year is EUR 359,335 (2011: EUR 510,037). C. Loans and advances to customers Notes to Financial Statements Commercial loans 1,862,677 2,073,501 Consumer loans 583, ,212 Subtotal 2,446,501 2,642,713 Allowances for impairment (33,305) (29,495) Total (*) 2,413,196 2,613,218 (*) None of these loans is subordinated. Loans and receivables from intra group companies amount to EUR 127,513 (2011: EUR 177,563). No individual loan or receivable has terms and conditions that materially affect the amount, timing or certainty of the cash flows of CEB. Loans and advances to customers do not include any amount related to receivables regarding securities that have been acquired in reverse repo transactions. As of December 31, 2012 EUR 1,783,207 (2011: EUR 1,828,967) of loans and advances to customers are not expected to mature within one year.

120 Notes to Financial Statements D. Debt securities 118 Notes to Financial Statements 2012 Financial assets held for Available for Held-to-maturity trading * sale ** portfolio *** Total Bank bonds , ,708 Government bonds and T-Bills - 105, ,000 Equity Total , , Financial assets held for Available for Held-to-maturity trading * sale ** portfolio *** Total Bank bonds 3, ,981 52, ,752 Corporate bonds - 6,572 5,828 12,400 Total 3, ,553 58, ,152 (*) EUR 408 of the total is listed securities (2011: EUR 3,902) and no non-listed securities (2011: None). Gains and losses on changes in the fair value of trading instruments are recognized in net trading income. Bank bonds issued by intra group companies amount to EUR 387 (2011: EUR 3,902). The amount that will not mature within one year is EUR 387 (2011: EUR 3,902) and the amount without maturity is EUR 21 (2011: None). (**) EUR 759,321 of the total is listed securities (2011: EUR 493,553) and bank bonds issued by intra group companies amounting to EUR 115,216 (2011: EUR 105,397). The amount will not mature within one year is EUR 554,804 (2011: EUR 407,937). (***) As of December 31, 2012, there is no held-to-maturity portfolio (2011: 58,697). As of December 31, 2011, the amount that will not mature within one year is EUR 58,697. E. Derivative financial instruments In the ordinary course of business, CEB enters into various types of transactions that involve derivative financial instruments. A derivative financial instrument is a financial contract between two parties where payments are dependent upon movements in price in one or more underlying financial instruments, reference rates or indices. Derivative financial instruments include forwards, swaps, futures, credit default swaps and options. The table below shows the fair values of derivative financial instruments, recorded as assets and liabilities, together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative s underlying asset, reference rate or index, and is the basis on which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at the year-end and are indicative of neither the market risk nor the credit risk.

121 Notes to Financial Statements Derivatives held for trading Interest rate derivatives Notional Fair values Fair values Notional Fair values Fair values amounts assets liabilities amounts assets liabilities Swaps 346,417 21,166 7, ,609 20,433 15,019 Futures 17, Subtotal 363,922 21,197 7, ,609 20,433 15,019 Currency derivatives Swaps 4,658, , ,359 8,374, , ,072 Forwards 498, ,764 1,560 1,582 Futures 21, Options (purchased) 556,915 1, ,554 16,624 - Options (sold) (496,915) - 1,366 (538,826) - 16,570 Subtotal 5,239, , ,746 8,542, , ,224 Credit derivatives Credit default swaps (purchased) 18, ,470 2, Subtotal 18, ,470 2, Other derivatives Equity options (purchased) 170,840 2, ,827 20,690 - Equity options (sold) (161,308) - 2,392 (176,827) - 20,690 Subtotal 9,532 2,394 2,392-20,690 20,690 Total derivatives 5,631, , ,041 9,252, , ,994 Notes to Financial Statements 119 Derivative financial instruments held or issued for trading purposes: Most of the Bank s derivatives-trading activities relate to asset and liability management for the Bank and deals with customers who are normally laid off with counterparties. The Bank may also take positions with the expectation of profiting from favorable movements in prices or rates on indices. No hedge accounting has been applied. Forwards and futures: Forwards and futures contracts are contractual agreements to buy or sell a specified financial instrument at a specific price and date in the future. Forwards are customized contracts transacted in the over-the-counter market. Future contracts are transacted in standardized amounts on regulated exchanges and are subject to daily cash margin requirements. Swaps: Swaps are contractual agreements between two parties to exchange movements in interest or foreign-currency rates and equity indices based on specified notional amounts. Credit-default swap: A credit-default swap (CDS) is a swap designed to transfer the credit risk of fixed income products from one party to the other. It is an agreement between a protection buyer and a protection seller, whereby the buyer pays a periodic fee in return for a contingent payment by the seller upon a credit event (such as a certain default) happening in the reference entity. Options: Options are contractual agreements that convey the right, but not the obligation for the purchaser, either to buy or sell a specific amount of a financial instrument at a fixed price, either at a fixed future date or at any time within a specified period.

122 Notes to Financial Statements Notes to Financial Statements 120 Derivatives held for risk management Fair value hedges The Bank uses forwards and swaps to hedge the cash flows risk. The fair value of derivatives designated as fair value hedges are as follows: Notional Fair values Fair values Notional Fair values Fair values amounts assets liabilities amounts assets liabilities Instrument type: Interest rate forwards and swaps 262,445 10, ,750-1,918 Currency swaps (180,736) 7, Subtotal 81,709 18, ,750-1,918 Net investment hedges The Bank uses forward foreign-exchange contracts to hedge the foreign-currency translation risk on its net investment in foreign subsidiaries. The fair value of derivatives designated as net investment hedges are as follows: Notional Fair values Fair values Notional Fair values Fair values amounts assets liabilities amounts assets liabilities Instrument type: Currency swaps 1,218,608 23,370 50,818 1,507,412 43,787 67,152 Subtotal 1,218,608 23,370 50,818 1,507,412 43,787 67,152 The table below shows the fair value of derivative financial instruments recorded as assets and liabilities Assets Liabilities Assets Liabilities Derivatives for held for trading 186, , , ,994 fair value hedges 18, ,918 net investment hedges 23,370 50,818 43,787 67, , , , ,064

123 Notes to Financial Statements F. Investments in Group companies For 2012, the movement of participating interests in Group companies is as follows: Balance at Results Dividend Translation Balance at 1 January Additions Disposals Reserves for the year paid difference 31 December Credit Europe Bank (Russia) Ltd 375,623 1,465-3,465 68,917 (26,260) 11, ,114 Credit Europe (Romania) Bank SA 176, ,762 (23,868) - (4,891) 151,679 Credit Europe (Suisse) Bank SA 117, (137) 12,807 (12,421) ,240 PJSC Credit Europe Bank 57, (391) 8,381 - (1,459) 63,887 Fibabanka A.S. 142,949 - (142,949) Credit Europe (Dubai) Ltd 47, ,896 - (986) 48,996 Credit Europe Leasing (Russia) LLC 7, (4,876) (3,166) Ikano Finance Holding B.V (355) Stichting Credit Europe Custodian Services Bell Maritime Corporation (400) (360) Walton Maritime SA (5,122) (3,359) (8,294) Gosport Marine Inc. (5,119) (2,406) (7,363) Hunter Navigation Inc. (539) (997) - - (1,536) Credit Europe Leasing (Ukraine) LLC (14,244) 12, (498) - (162) (2,494) Credit Europe Leasing (Romania) 17, (2,010) - (495) 15,404 Credit Plus Gulf (Dubai) Ltd (117) Cirus Holding B.V. 4, (9) - - 3,991 Maritime Enterprises B.V (192) - - (174) Total 921,866 13,893 (142,832) 6,699 54,464 (41,847) 5, , Notes to Financial Statements For 2011, the movement of participating interests in Group companies is as follows: Balance at Results Dividend Translation Balance at 1 January Additions Reserves for the year paid difference 31 December Credit Europe Bank (Russia) Ltd 343,581 6,575 (2,255) 66,554 (30,447) (8,385) 375,623 Credit Europe (Romania) Bank SA 173,746 4, ,592 - (4,484) 176,676 Credit Europe (Suisse) Bank SA 128,022 - (2,970) 5,597 (16,597) 3, ,201 PJSC Credit Europe Bank 54,822 - (300) 1,228-1,606 57,356 Fibabanka A.S. 51,791 97,471 (690) 10,588 - (16,211) 142,949 Credit Europe (Dubai) Ltd 41, ,793-1,716 47,086 Credit Europe Leasing (Russia) LLC 6, ,299 (2,371) (135) 7,659 Ikano Finance Holding B.V (75) Stichting Credit Europe Custodian Services Bell Maritime Corporation (374) - - (13) - (13) (400) Walton Maritime SA (530) - - (4,255) - (337) (5,122) Gosport Marine Inc. (1,239) - - (3,571) - (309) (5,119) Hunter Navigation Inc (539) - - (539) Credit Europe Leasing (Ukraine) LLC (13,214) - - (619) - (411) (14,244) Credit Europe Leasing (Romania) - 19,165 - (1,280) ,909 Credit Plus Gulf (Dubai) Ltd (324) - 42 (117) Cirus Holding B.V. - 4, ,000 Total 785, ,033 (5,732) 82,975 (49,415) (23,748) 921,866 As at 31 December 2012, participating interest in Group companies included credit institutions of EUR 830,286 (2011: EUR 930,273).

124 Notes to Financial Statements G. Intangible assets Notes to Financial Statements 122 The book value of intangibles is as follows: Patents and Goodwill licenses Total Balance at January 1, ,383 8,123 26,506 Other additions 2, ,762 Disposal of subsidiary - (2,933) (2,933) Amortization - (1,982) (1,982) Currency translation difference - (432) (432) Balance at December 31, ,789 3,132 23,921 Balance at January 1, ,767 9,578 24,345 Other additions 3, ,065 Amortization - (1,904) (1,904) Balance at December 31, ,383 8,123 26,506 H. Property and equipment The book value of property and equipment in 2012 and 2011 changed as follows: Furniture Leasehold Buildings and fixtures Vehicles improvements Total Balance at January 1, ,426 2, ,104 47,417 Additions Disposals Depreciation (960) (1,038) (11) 172 (1,837) Balance at December 31, ,466 2, ,417 46,031 Furniture Leasehold Buildings and fixtures Vehicles improvements Total Balance at January 1, ,784 3, ,323 Additions 1, ,056 Transfers (5,620) 813-4,807 - Disposals (27) (44) - (10) (81) Depreciation (592) (1,590) (10) (689) (2,881) Balance at December 31, ,426 2, ,104 47,417 I. Other assets Receivables from DNB 34,057 34,691 Assets held for sale 13,360 18,881 Current tax assets 9,291 26,792 Other receivables 8,753 17,825 Deferred tax assets 3,541 3,944 Prepayments and advance payments to suppliers Other assets 1,889 1,775 Total 71, ,699

125 Notes to Financial Statements Assets held for sale represents repossessed collateral (i.e. ships and residential real estate) when clients were not able to meet their payment obligations. As of December 31, 2012, EUR 34,057 (2011: EUR 31,751) of other assets are not expected to mature within one year. J. Amounts due to banks This item comprises amounts due to banking institutions Time deposits 559, ,437 Current accounts 109,772 20,153 Total 669, ,590 Deposits and current accounts of intra group companies amount to EUR 136,430 (2011: EUR 81,454). Amount of due to banks which is on demand is EUR 60,235 (2011: EUR 56,135). 123 The amount of repo transactions in time deposits is EUR 355,976 (2011: EUR 131,906). As of December 31, 2012, the Bank maintained time deposit balances of EUR 102,793 (2011: EUR 107,524), which were pledged to the Bank as collateral for loans granted by the Bank. K. Customer deposits This item comprises amounts due to customers other than banking institutions. Notes to Financial Statements Retail time deposits 2,754,703 3,118,693 Retail saving and demand deposits 1,260,050 1,403,611 Corporate demand deposits 162, ,065 Corporate time deposits 137, ,320 Total 4,315,456 5,119,689 As of December 31, 2012 EUR 1,552,206 (2011: EUR 1,657,313) of deposits from customers are expected to be settled more than 12 months after the balance sheet date. As of December 31, 2012, the Bank maintained customer deposit balances of EUR 85,865 (2011: EUR 340,519), which were pledged to the Bank. Deposits and current accounts of intra group companies amount to EUR 94 (2011: EUR 191).

126 Notes to Financial Statements L. Other liabilities Notes to Financial Statements Current tax liabilities 13,521 6,440 Unfinished settlements 7,775 10,850 Deferred tax liabilities 5,776 1,333 Taxes other than income 5,122 8,164 Accrued expenses 3,536 4,621 Payables to suppliers 405 5,831 Deferred payment liability under letters of credit(*) - 9,709 Other payables 5,535 5,111 Total 41,670 52,059 (*) Relates to deferred payments in relation to contractual agreements as set in letters of credit provided to or received from customers. The amount that will not mature within one year is EUR 5,776 (2011: EUR 1,333) M. Subordinated liabilities Issued liabilities qualify as subordinated debt if claims by the holders are subordinated to all other current and future liabilities of CEB. This liability qualifies as capital, taking into account remaining maturities, for the purpose of determining the consolidated capital adequacy ratio for the Dutch Central Bank (De Nederlandsche Bank - DNB). The following table analyses the subordinated liabilities: Principal amount (millions) Original currency Opening date Maturity date Amount Amount (1) USD June 30, 2010 Perpetual 95,338 97, (2) EUR September 1, 2005 September 1, ,018 60, (3) USD October 30, 2008 October 30, ,299 15, (4) USD April 28, 2011 December 31, ,358 30, (5) USD February 28, 2012 February 28, , (6) USD March 30, 2012 March 30, , (7) USD October 22, 2012 October 22, , (8) USD September 28, 2007 September 28, , (8) USD September 30, 2008 September 30, , (8) USD October 2, 2008 October 2, ,086 Total 346, ,538 (1) The interest rate is fixed and amounts to 11.5% per annum and payable semi-annually in arrears on 30 June and 30 December of each year. (2) The subordinated bond is listed on the Luxembourg stock exchange. Interest will be payable quarterly in arrears. The interest rate is Euribor plus 3.0% per annum until September 2010 and Euribor plus 3.5% per annum thereafter. (3) Interest rate is Libor plus 5.0% per annum until October 2013 and Libor plus 5.5% per annum thereafter. (4) Interest rate is fixed and amounts to 10.0% per annum. Interest is payable quarterly in arrears. (5) The Bank issued USD 50 million Tier II as per February 28, Interest rate is fixed and amounts to 10.0% per annum. Interest is payable quarterly in arrears. (6) The Bank issued USD 90 million Tier II as per March 30, Interest rate is fixed and amounts to 10.0% per annum. Interest is payable quarterly in arrears. (7) The Bank issued USD 50 million Tier II as per October 22, Interest rate is fixed and amounts to 10.0% per annum. Interest is payable quarterly in arrears commencing from January 22, (8) As per March 30, 2012 the Bank early paid three of existing Tier-2 loans, amounting USD 21 million, USD 33.7 million and USD 33.7 million, respectively. The Bank had not any defaults on principal, interest or other breaches with respect to its subordinated liabilities during 2012 and 2011.

127 Notes to Financial Statements N. Share capital The authorized share capital is EUR 1,000 million (2011: EUR 1,000 million) and comprises 1,000 million (2011: 1,000 million) ordinary shares with a face value of EUR 1. The called-up and paid-in capital consists of million (2011: million) ordinary shares with a face value of EUR 1. O. Legal reserves Under Dutch GAAP, legal reserves are required in certain circumstance. The objective of these legal reserves is to protect the creditors (i.e. the bank is only allowed to pay out profits to its shareholders that it has realized or can realize when the bank wants to). Legal reserves only relate to the Bank Financial Statements and are not applicable to the Consolidated Financial Statements. Profits of participations cannot be paid out to the Bank due to local legal requirements. For CEB, the following legal reserves are important: Participations reserve Currency translation differences reserve Revaluation for AFS instruments reserve Hedge accounting reserve In determining legal reserves deferred taxes on AFS instruments and revaluation reserves of buildings are taken into account. Deferred taxes attributable to equity are calculated on the difference between IFRS and tax values of AFS instruments and buildings. Hedge accounting reserves are subject to the participation exemption regime according to Dutch tax laws. Accordingly, profits and losses from participations are not taxable in The Netherlands. Due to the participation exemption regime, in practice, the participation hedge results are carried into statement of income for tax purposes and then exempted from taxable profit. P. Commitments and contingencies To meet the financial needs of customers, the Bank issues various irrevocable commitments and contingent liabilities. Even though these obligations may not be recognized on the balance sheet, they do contain credit risk and are, therefore, part of the overall risk of the Bank. In many instances, the amount recognized on the balance sheet for incurred obligations does not represent the loss potential of the arrangement in full. 125 Notes to Financial Statements Letters of credit, guarantees and acceptances commit the Bank to make payments on behalf of customers, contingent on the failure of the customer to perform under the terms of the contract. Guarantees carry the same credit risk as loans. Credit guarantees can be in the form of bills of exchange, irrevocable letters of credit, advance payment guarantees and endorsement liabilities from bills rediscounted. Commitments to extend credit represent contractual commitments to make loans and revolving credits. Commitments generally have fixed expiration dates, or other termination clauses. Since commitments may expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to loss equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments since most commitments to extend credit are contingent upon customers maintaining specific standards. The Bank monitors the term-to-maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.

128 Notes to Financial Statements 126 Notes to Financial Statements Contingent liabilities with respect to irrevocable letters of credit - import 120,731 79,753 Contingent liabilities with respect to letter of guarantees granted banks 44,116 31,000 Contingent liabilities with respect to letter of guarantees granted others 31,564 56,408 Contingent liabilities with respect to irrevocable letters of credit - export 17,538 12,330 Total non-cash loans 213, ,491 Revocable credit-line commitments 8,392 16,750 Total 222, ,241 Q. Litigation claims Litigation is a common occurrence in the Banking industry due to the nature of the business. The Bank has an established protocol for dealing with such legal claims. Once professional advice has been obtained and the amount of damages reasonably estimated, the Bank makes adjustments to account for any adverse effects the claims may have on its financial standing. At year-end, the Bank s management is unaware of any significant actual, pending or threatened claims against the Bank. R. Rental and lease contracts The Bank leases a number of property and equipment under operating lease. The amounts can be specified as follows: Operating lease commitment - Bank as lessee and rent commitments Not later than 1 year Later than 1 year and not later than 5 years Total S. Remuneration Key management costs including remuneration and fees; Total remuneration to (former) supervisory board members 971 1,033 Total remuneration to (former) managing board members 2,055 2,649 Total 3,026 3,682 Pension plan contribution amount is EUR 128 (2011: EUR 113). Managing Board Loans, advances and guarantees Outstanding at 1 January Granted during the year 52 - Repaid during the year (10) (9) Outstanding at 31 December 75 33

129 Notes to Financial Statements These transactions were concluded at staff terms and/or market rates. The average interest on fixed-interest loans in EUR for the Managing Board was 4.84% in 2012 (2011: 4.84%). There is no guarantee provided to managing and supervisory board members. Amsterdam, March 8, 2013 Supervisory Board: Managing Board: Hector De Beaufort Murat Basbay Mehmet Güleşci ŞenolAloğlu F. Onur Umut Umut Bayoglu Murat Özyeğin Scott Cheung Frits Deiters Levent Karaca Korkmaz Ilkorur Notes to Financial Statements 127

130 Other information Proposed profit appropriation Other information 128 The profit is appropriated pursuant to Article 31 of the Articles of Association of CEB; the relevant stipulations are as follows: The profits shall be at the disposal of the General Meeting of Shareholders. Dividends may be paid only up to an amount that does not exceed the distributable part of net assets. Dividends shall be paid after adoption of the annual accounts from which it appears that payment of dividends is permissible. It is proposed to appropriate net profit pursuant to the Articles of Association, as follows: Proposed profit appropriation Net profit 77,377 Addition to retained earnings pursuant to Article 31 of the Articles of Association 77,377

131 Other information To: The General Meeting of Shareholders of Credit Europe Bank N.V. Report on the financial statements We have audited the accompanying financial statements 2012 of Credit Europe Bank N.V., Amsterdam. The financial statements include the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated statement of financial position as at 31 December 2012, the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise the company balance sheet as at 31 December 2012, the company profit and loss account for the year then ended and the notes, comprising a summary of the accounting policies and other explanatory information. Management s responsibility Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Furthermore, management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. 129 Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Other information Opinion with respect to the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position of Credit Europe Bank N.V. as at 31 December 2012 and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code. Opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of Credit Europe Bank N.V. as at 31 December 2012 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Report on other legal and regulatory requirements Pursuant to the legal requirements under Section 2:393 sub 5 at e and f of the Netherlands Civil Code, we have no deficiencies to report as a result of our examination whether the management board report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b - h has been annexed. Further, we report that the management board report, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Netherlands Civil Code Amstelveen, March 8, 2013 KPMG Accountants N.V. W.G. Bakker RA

132 Addresses 130 Addresses Head office Credit Europe Bank NV Karspeldreef 6a 1101 CJ Amsterdam The Netherlands t +31 (0) f +31 (0) Branches Credit Europe Bank NV Niederlassung Deutschland Im Galluspark Frankfurt am Main Germany t +49 (0) f +49 (0) Credit Europe Bank NV Bijkantoor België Mechelsesteenweg Antwerp Belgium t +32 (0) f +32 (0) Credit Europe Bank NV Malta Branch Tower Road 143/2 Sliema SLM 1604 Malta t +356 (0) f +356 (0) Direct subsidiaries Credit Europe Bank (Romania) SA Anchor Plaza Building, B section 26Z Timisoara Blvd., 6th district Bucharest Romania t +40 (0) f +40 (0) Credit Europe Bank (Suisse) SA 12, Rue du Mt. Blanc 1211 Geneva Switzerland t +41 (0) f +41 (0) CJSC Credit Europe Bank (Ukraine) 2, Mechnikova Str. 9th Floor Parus Business Center 01601, Kiev Ukraine t +380 (0) f +380 (0) Credit Europe Leasing LLC 2, Mechnikova Str. 9th Floor Parus Business Center 01601, Kiev Ukraine t +380 (0) f +380 (0) Credit Europe Bank Ltd Paveletskaya Plaza, Paveletskaya Square 2/2 Moscow Russia t +7 (0) f +7 (0) Credit Europe Leasing LLC Leningradskiy Prospect 74A Moscow Russia t +7 (0) f +7 (0) Credit Europe Bank (Dubai) Ltd Currency House Office Building 1 Level 7, Unit 7 Al Fattan Area, DIFC Dubai United Arab Emirates t f Representative offices Credit Europe Bank NV Istanbul Temsilcilik Ofisi Eski Büyükdere Caddesi No: 22 Park Plaza Kat 10 Maslak Istanbul Turkey t +90(0) f +90(0) Credit Europe Bank NV Unit 2812, Plaza 66, 1266 Nanjing West Road Shanghai , China t +86 (0) f +86 (0)

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