Unipol Banca Financial Statements 2014

Transcription

1 Unipol Banca Financial Statements 2014

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3 Unipol Banca Financial Statements 2014

4 Contents Unipol Banca SpA Financial Statements Company Bodies 5 Highlights Management Report 16 The Macroeconomic Context 18 The National Banking System 19 Your Bank 20 Comment on the Main Statement of Financial Position Items 22 Comment on the Main Income Statement Items 35 Policies and Strategies Complaints Management 39 Risk Management and Control 40 Managing of Non-Compliance Risk 41 Human Resources and Organisation 42 Internal Auditing 46 Corporate Governance 47 Report on Corporate Governance and Ownership Structures 48 Data Protection 49 Other Information 49 Management and Coordination by The Parent Company Unipol Gruppo Finanziario 50 Transactions with Group Companies 50 Research & Development 50 Significant events after the reporting period 50 Business outlook 50 Proposal for Approval of the Financial Statements and of Covering the Loss for the Period 51

5 2. Separate Financial Statements 52 Unipol Banca Group Consolidated Financial Statements 3. Notes to the Separate Financial Statements Consolidated Report Banking Group Performance Board of Statutory Auditors Report 228 Consolidated statement of financial position 245 Consolidated income statement 246 Related-party transactions 246 Significant subsequent events Independent Auditors Report 236 Business outlook Consolidated Financial Statements Notes to the Consolidated Financial Statements Independent Auditors Report 418

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7 Unipol Banca Financial Statements 2014 Company Bodies BOARD OF DIRECTORS CHAIRMAN Oscar Guidetti VICE CHAIRMAN Sergio Costalli DEPUTY CHAIRMAN Elio Gasperoni (*) DIRECTORS Giuseppe Capanna Maurizio Castellina Carlo Cimbri Manuela Cojutti (*) Fabrizio Gillone Antonio Rizzi Giuseppe Santella Pierluigi Stefanini Francesco Vella (*) Umberto Venturi Rossana Zambelli (**) Carlo Zini (*) Director appointed by the Ordinary Shareholders Meeting of 23 April 2014 (**) Director appointed by the Ordinary Shareholders Meeting of 3 October 2014 SECRETARY OF THE BOARD OF DIRECTORS Stefano De Santis BOARD OF STATUTORY AUDITORS CHAIRMAN Roberto Chiusoli STATUTORY AUDITORS Carlo Cassamagnaghi Giovanni Battista Graziosi ALTERNATE AUDITORS Nicola Bruni Domenico Livio Trombone GENERAL MANAGEMENT GENERAL MANAGER Stefano Rossetti ADMINISTRATION, LOANS AND Claudio Strocchi OPERATIONS DEPUTY GENERAL MANAGER COMMERCIAL AREA DEPUTY GENERAL MANAGER Danilo Torriani INDEPENDENT AUDITORS PricewaterhouseCoopers SpA 5

8 Unipol Banca Financial Statements 2014 Territorial organisation List of branches of Unipol Banca SpA Cod. Region Branch Address Prov. Model Post code 108 ABRUZZO AVEZZANO Via Muzio Febonio, 32 AQ Integrated ABRUZZO GIULIANOVA Via Filippo Turati ang. Via S. Michele TE Proximity ABRUZZO PESCARA Via Nicola Fabrizi, 144 PE Proximity ABRUZZO PIANE D'ARCHI Via Nazionale, 45 CH Integrated BASILICATA MELFI Via Aldo Moro, 17 PZ Integrated CAMPANIA CASERTA Via Lamberti comparto "A" fabbricato A3" CE Integrated CAMPANIA CASTELLAMMARE DI STABIA Via Principe Amedeo, 77/79 NA Integrated CAMPANIA ISCHIA Via Foschini, 17 NA Proximity CAMPANIA NAPOLI Corso Vittorio Emanuele, 678 NA Proximity CAMPANIA NAPOLI Piazzetta Arenella, 12 NA Proximity CAMPANIA NAPOLI Via Riviera Di Chiaia, 14 NA Proximity CAMPANIA NAPOLI Via Dell'epomeo, 4 NA Proximity CAMPANIA NAPOLI Via Cardinale G. Sanfelice 53A NA Proximity CAMPANIA NOLA Via Anfiteatro Laterizio, 81 NA Integrated CAMPANIA SALERNO Via Lucio Orofino, 6 SA Proximity CAMPANIA SAN GIUSEPPE VESUVIANO Piazza Garibaldi, 1 NA Integrated CAMPANIA SANTA MARIA CAPUA VETERE Piazza San Pietro, CE Proximity CAMPANIA VALLO DELLA LUCANIA Via Angelo Rubino SA Integrated EMILIA ROMAGNA ALFONSINE Piazza Guido Errani, 1 RA Integrated EMILIA ROMAGNA ALTEDO Via Minghetti, 1/A int.1 BO Integrated EMILIA ROMAGNA BAZZANO Piazza Garibaldi, 6/A BO Integrated EMILIA ROMAGNA BOLOGNA Via Aurelio Saffi, 6 BO Proximity EMILIA ROMAGNA BOLOGNA Via Stalingrado, 59/A BO Proximity EMILIA ROMAGNA BOLOGNA Piazza Adam Mickiewicz, 6 BO Integrated EMILIA ROMAGNA BOLOGNA Via Genuzio Bentini, 31/A Int. 2 BO Integrated EMILIA ROMAGNA BOLOGNA Via Giuseppe Mezzofanti, 89 BO Integrated EMILIA ROMAGNA BOLOGNA Via Farini, 12 BO Proximity EMILIA ROMAGNA BOLOGNA Via Rizzoli, 20 BO Integrated EMILIA ROMAGNA BOLOGNA Via Maggia, 6 BO Integrated EMILIA ROMAGNA BOLOGNA Via Marco Emilio Lepido,110/a BO Proximity EMILIA ROMAGNA BOLOGNA Via Porrettana, 9 BO Proximity EMILIA ROMAGNA CADELBOSCO DI SOPRA Via Monsignor G. Saccani, 1 RE Integrated EMILIA ROMAGNA CARPI Via Cantina della Pioppa, 1 MO Integrated EMILIA ROMAGNA CASALECCHIO DI RENO Via Guglielmo Marconi, 10 BO Integrated EMILIA ROMAGNA CASTEL SAN PIETRO Via Giuseppe Mazzini, 204 BO Integrated EMILIA ROMAGNA CASTELNUOVO RANGONE Via Zanasi, 37c MO Integrated EMILIA ROMAGNA CAVRIAGO Piazza Benderi, 2 RE Integrated EMILIA ROMAGNA CERVIA Piazza XXV Aprile,12 RA Integrated EMILIA ROMAGNA CESENA Viale Giosuè Carducci, 79 FC Integrated EMILIA ROMAGNA CESENATICO Piazza Comandini, 1 a/b FC Integrated EMILIA ROMAGNA CORREGGIO Via Cesare Battisti, 9 RE Integrated EMILIA ROMAGNA FAENZA Viale Alfredo Baccarini, 31 RA Integrated Continues 6

9 Unipol Banca Financial Statements 2014 Territorial organisation List of branches of Unipol Banca SpA Cod. Region Branch Address Prov. Model Post code 13 EMILIA ROMAGNA FERRARA Via Bologna, 108 FE Integrated EMILIA ROMAGNA FERRARA Largo Castello, 32/34 FE Integrated EMILIA ROMAGNA FORLÌ Via Grado, 2/2 FC Proximity EMILIA ROMAGNA FORLÌ Via Guglielmo Zuelli, 3 FC Integrated EMILIA ROMAGNA IMOLA Via Appia, 86/88 BO Proximity EMILIA ROMAGNA IMOLA Via Paolo Bentivoglio, 36 BO Integrated EMILIA ROMAGNA LUGO Via Acquacalda n.37 RA Integrated EMILIA ROMAGNA MIRANDOLA Via Circonvallazione, 172 MO Integrated EMILIA ROMAGNA MODENA Via Carlo Zucchi, 21/E MO Integrated EMILIA ROMAGNA MODENA Via Nonantolana, 685/B MO Proximity EMILIA ROMAGNA MODENA Strada Vignolese, 439/1 MO Integrated EMILIA ROMAGNA MODENA Via Pietro Giardini, 465 MO Integrated EMILIA ROMAGNA MODENA Via Giovanni Dalton, 55 MO Integrated EMILIA ROMAGNA NOVELLARA Viale Roma, 26 RE Integrated EMILIA ROMAGNA PARMA Via La Spezia, 75/b PR Integrated EMILIA ROMAGNA PARMA Viale Mentana, 84 PR Integrated EMILIA ROMAGNA RAVENNA Via Faentina, RA Integrated EMILIA ROMAGNA RAVENNA Viale Berlinguer, 38 RA Integrated EMILIA ROMAGNA RAVENNA Via Ravegnana, 96 ang. Via Bassano del Grappa RA Proximity EMILIA ROMAGNA REGGIO EMILIA Viale Piave, 35/2 RE Integrated EMILIA ROMAGNA REGGIO EMILIA Via Martiri di Cervarolo, 16 RE Integrated EMILIA ROMAGNA REGGIO EMILIA Via Fratelli Cervi 5 RE Integrated EMILIA ROMAGNA REGGIO EMILIA Via Repubblica, 19/E RE Integrated EMILIA ROMAGNA REGGIO EMILIA Via M.Ruini, 8 RE Integrated EMILIA ROMAGNA RICCIONE Viale Maria Ceccarini, 189 RN Integrated EMILIA ROMAGNA RIMINI Via Marecchiese, 37 RN Proximity EMILIA ROMAGNA RUBIERA Via Giacomo Matteotti, 12/B RE Integrated EMILIA ROMAGNA SAN GIORGIO DI PIANO Via Pirotti, 6 BO Integrated EMILIA ROMAGNA SAN GIOVANNI IN PERSICETO Circonvallazione Liberazione, 7 BO Integrated EMILIA ROMAGNA SAN LAZZARO DI SAVENA Via Emilia, 1 BO Proximity EMILIA ROMAGNA SASSO MARCONI Via della Stazione, BO Integrated EMILIA ROMAGNA SASSUOLO Via Radici in Piano, 149 MO Integrated EMILIA ROMAGNA SAVIGNANO SUL RUBICONE Via Fratelli Cairoli, 7-9 FC Integrated EMILIA ROMAGNA SCANDIANO Corso Vallisneri, 17/R RE Integrated EMILIA ROMAGNA VIGNOLA Via Bellucci, 2 MO Integrated EMILIA ROMAGNA ZOLA PREDOSA Via Risorgimento, 184 BO Integrated FRIULI VENEZIA G. PORDENONE Viale Michelangelo Grigoletti, 94 C PN Integrated FRIULI VENEZIA G. TRIESTE Piazza Guglielmo Oberdan, 4/b TS Proximity FRIULI VENEZIA G. UDINE Piazzale D Annunzio, 17 UD Integrated LAZIO CASSINO Via Gaetano Di Biasio, 80 FR Integrated LAZIO FONDI Via Fabio Filzi, 78 LT Integrated LAZIO FORMIA Via Vitruvio, 408 LT Integrated Continues 7

10 Unipol Banca Financial Statements 2014 Territorial organisation List of branches of Unipol Banca SpA Cod. Region Branch Address Prov. Model Post code 318 LAZIO FRASCATI Via Sciadonna, 28 RM Integrated LAZIO FROSINONE Via San Tommaso d' Aquino, 3 FR Integrated LAZIO GUIDONIA Via Umberto Maddalena, 9/A RM Integrated LAZIO LATINA Via San Carlo da Sezze, 80 LT Integrated LAZIO PALESTRINA Via Colle Martino, 1 RM Integrated LAZIO POMEZIA Via Filippo Re 52 RM Integrated LAZIO RIETI Via Fratelli Sebastiani, 201 RI Integrated LAZIO ROMA Via Saturnia, 21-21/a RM Proximity LAZIO ROMA Viale di Porta Tiburtina, 46 RM Proximity LAZIO ROMA Via Zenodossio, 33 RM Integrated LAZIO ROMA Via Gasperina, 263 RM Integrated LAZIO ROMA Via Gabriello Chiabrera, 53 RM Proximity LAZIO ROMA Piazza Carlo Alberto Scotti, 22 RM Proximity LAZIO ROMA Via Nomentana Nuova, 71 RM Proximity LAZIO ROMA Via Messina, 24 RM Proximity LAZIO ROMA Via Tommaso Arcidiacono, 93/95 RM Stand Alone LAZIO ROMA Viale America, 107 RM Proximity LAZIO ROMA Via Carlo Francesco Bellingeri, 7/a RM Stand Alone LAZIO ROMA Via Tor Bella Monaca, RM Stand Alone LAZIO ROMA Via Roberto Bracco, 42 RM Proximity LAZIO ROMA Largo Arenula, 32 RM Stand Alone LAZIO ROMA Via Ostiense, 73/h RM Proximity LAZIO ROMA Via delle Cave, 38/d-40 RM Integrated LAZIO ROMA Viale Giulio Agricola, 51 RM Proximity LAZIO ROMA Via di Casalotti, 185/a-b RM Stand Alone LAZIO ROMA Via Flaminia Nuova, 209 RM Integrated LAZIO ROMA Via Flavia, 56 RM Proximity LAZIO ROMA Viale Antonio Ciamarra, 274 RM Integrated LAZIO ROMA Via Cavour, 70/72 RM Proximity LAZIO SAN GIOVANNI INCARICO Via Civita Farnese, 43 FR Stand Alone LAZIO SPIGNO SATURNIA Via Martiri d'ungheria, 6/8/10 LT Stand Alone LAZIO STRANGOLAGALLI Via Madonna di Loreto, 3 FR Stand Alone LAZIO SUPINO Viale Regina Margherita, 35/37 FR Stand Alone LAZIO TERRACINA Via Tripoli, 2/4/6/8 LT Integrated LAZIO TIVOLI Via Tiburtina Valeria, 116/118 RM Proximity LAZIO TREVI NEL LAZIO Via delle Fornaci FR Stand Alone LAZIO VITERBO Via Igino Garbini, 84/h VT Integrated LIGURIA GENOVA Via Lungobisagno Dalmazia, 75/R GE Proximity LIGURIA GENOVA Via De Marini, 15 GE Proximity LIGURIA GENOVA Via Antonio Cantore, 238/240 GE Integrated LIGURIA GENOVA Via Napoli, 139/b-r GE Proximity LIGURIA GENOVA Via Degli Orefici, 18/R GE Proximity LIGURIA GENOVA Viale Brigata Bisagno, 59 GE Proximity LIGURIA LA SPEZIA Via del Prione, 15 SP Integrated LIGURIA SARZANA Via Brigata Partigiana Muccini, 20 SP Integrated Continues 8

11 Unipol Banca Financial Statements 2014 Territorial organisation List of branches of Unipol Banca SpA Cod. Region Branch Address Prov. Model Post code 259 LIGURIA SAVONA Via Paleocapa, 150 r SV Integrated LIGURIA SESTRI LEVANTE Piazza della Repubblica, 16 GE Integrated LOMBARDIA BERGAMO Via Gabriele Camozzi, 24 BG Proximity LOMBARDIA BRESCIA Via Fratelli Lechi, 58 BS Proximity LOMBARDIA BRESCIA Via XX Settembre, BS Proximity LOMBARDIA CANTÙ Via Cavour, 11 CO Proximity LOMBARDIA CAVENAGO DI BRIANZA Via Roma, 23 MB Integrated LOMBARDIA CINISELLO BALSAMO Viale Rinascita, 31 ang. Piazza Costa MI Proximity LOMBARDIA CREMONA Piazza Luigi Cadorna, 9 CR Proximity LOMBARDIA DESENZANO DEL GARDA Via de Andreis, 74 BS Integrated LOMBARDIA DESIO Via Milano, 136 ang. Via Turati, 2 MB Proximity LOMBARDIA GALLARATE Via Magenta, 25 VA Proximity LOMBARDIA MANERBIO Via Mazzini, 9 BS Proximity LOMBARDIA MANTOVA Via Principe Amedeo, 9 MN Proximity LOMBARDIA MERATE Via Monsignor Colombo, 1 LC Integrated LOMBARDIA MILANO Piazza Riccardo Wagner, 8 MI Proximity LOMBARDIA MILANO Via A. Traversi angolo Via A. Gazzoletti MI Proximity LOMBARDIA MILANO Via Luigi Mercantini, 4 MI Proximity LOMBARDIA MILANO Viale Papiniano ang Via Calco 2 MI Proximity LOMBARDIA MILANO Via Ambrogio Binda, 56 MI Integrated LOMBARDIA MILANO Corso di Porta Romana, 89 MI Proximity LOMBARDIA MILANO Via Vittor Pisani, 19 MI Proximity LOMBARDIA MILANO Piazza Missori, 2 MI Proximity LOMBARDIA MILANO Via Senigallia, 18/2 MI Proximity LOMBARDIA MONZA Via Parravicini, 2 ang. Via Prina MB Proximity LOMBARDIA PAVIA Via San Paolo, 47 PV Proximity LOMBARDIA ROVATO Via Dieci Giornate, 5 BS Stand Alone LOMBARDIA SAN DONATO MILANESE Via dell'unione Europea, 3/B MI Proximity LOMBARDIA SAN GIULIANO MILANESE Via Enrico De Nicola, 8 MI Integrated LOMBARDIA SENAGO Piazza Giacomo Matteotti, 13 MI Integrated LOMBARDIA SESTO SAN GIOVANNI Via Modena, 53 MI Proximity LOMBARDIA SUZZARA Via Montecchi, 11B MN Integrated LOMBARDIA VARESE Via Marcobi, 4 VA Proximity LOMBARDIA VOGHERA Corso XXVII Marzo, 49 PV Proximity MARCHE ANCONA Via Giannelli 18 AN Proximity MARCHE ASCOLI PICENO Viale Indipendenza, 7 AP Proximity MARCHE CIVITANOVA MARCHE Via Silvio Zavatti n.10 MC Integrated MARCHE FANO Via XXIV Maggio,11 PU Integrated MARCHE JESI Via XXIV Maggio, 22 AN Integrated MARCHE MACERATA Via dei Velini, 19/R MC Proximity MARCHE OSIMO Via Marco Polo, 220/C AN Integrated MARCHE PESARO Via Giolitti, 155 PU Integrated MARCHE SENIGALLIA Via Giordano Bruno, 65 AN Proximity MARCHE TOLENTINO Traversa Giacomo Brodolini, 11 MC Stand Alone PIEMONTE ASTI Via Massimo D' Azeglio, 22 AT Proximity Continues 9

12 Unipol Banca Financial Statements 2014 Territorial organisation List of branches of Unipol Banca SpA Cod. Region Branch Address Prov. Model Post code 172 PIEMONTE BIELLA Via Antonio Gramsci, 8 Via Pietro Losana BI Proximity PIEMONTE CHIVASSO Via Siccardi, 18 TO Integrated PIEMONTE IVREA Corso Vercelli, 117 TO Integrated PIEMONTE MONCALIERI Via Camillo Benso di Cavour, TO Proximity PIEMONTE NOVARA Via Marconi, 3/a NO Integrated PIEMONTE NOVI LIGURE Piazza della Repubblica, 6/9 AL Proximity PIEMONTE OVADA Corso Italia, 43 L AL Integrated PIEMONTE TORINO Corso Alcide De Gasperi, 20/a TO Proximity PIEMONTE TORINO Via Pomaretto, 6/b TO Integrated PIEMONTE TORINO Via Duchessa Jolanda, 25 TO Proximity PIEMONTE TORINO C.so Filippo Brunelleschi, 18 TO Integrated PIEMONTE TORINO Corso Vittorio Emanuele II, 48 TO Proximity PUGLIA ANDRIA Via Felice Cavallotti, 2 BT Proximity PUGLIA BARI Via Melo da Bari, 103/a BA Proximity PUGLIA BARI Via Enrico Pessina, 43 BA Integrated PUGLIA FASANO Corso Garibaldi, 156 BR Integrated PUGLIA FOGGIA Piazza Caduti sul Lavoro, 7 FG Integrated PUGLIA GALLIPOLI Corso Italia, LE Integrated PUGLIA LECCE Viale della Liberta, 133/c LE Integrated PUGLIA MAGLIE C.so Cavour, 30 LE Integrated PUGLIA MOLFETTA Viale Pio XI, 28 BA Proximity PUGLIA TAURISANO Via Filippo Lopez Y Royo, 42 LE Integrated PUGLIA TRANI Via Napoli, 20 BT Integrated SARDEGNA ALGHERO Via XX Settembre, 160 SS Integrated SARDEGNA CAGLIARI Via Pasquale Cugia, 40 CA Proximity SARDEGNA CAGLIARI Piazza Ichnusa, 21 CA Integrated SARDEGNA CAGLIARI Viale Trieste, 38 CA Proximity SARDEGNA CAPOTERRA Via Diaz, 124 ang.via Mameli CA Proximity SARDEGNA IGLESIAS Via XX Settembre, 20 CI Proximity SARDEGNA NUORO Piazza Italia, 3 NU Proximity SARDEGNA OLBIA Via Roma, 21 OT Integrated SARDEGNA ORISTANO Via Giuseppe Mazzini, 32/34 OR Proximity SARDEGNA SASSARI Via Giagu, 27 SS Integrated SARDEGNA TERRALBA Viale Sardegna, 27 OR Stand Alone SICILIA ACIREALE Piazza Indirizzo, 10 CT Proximity SICILIA AUGUSTA Via C. Colombo, 37 SR Proximity SICILIA CAPO D'ORLANDO Via Piave, ME Integrated SICILIA CATANIA Viale Vittorio Veneto, 251 CT Proximity SICILIA CATANIA Viale Rapisardi, 509 CT Integrated SICILIA CATANIA Viale Africa, 74 CT Proximity SICILIA GIARRE Via Callipoli, 230 CT Proximity SICILIA ISOLA DELLE FEMMINE Via Piano Levante, 2 PA Stand Alone SICILIA LENTINI Via Eschilo, 12 SR Integrated SICILIA MARSALA Piazza Goffredo Mameli, angolo Via Sibilla TP Proximity SICILIA MESSINA Viale della Libertà n isolato 481 ME Proximity Continues 10

13 Unipol Banca Financial Statements 2014 Territorial organisation List of branches of Unipol Banca SpA Cod. Region Branch Address Prov. Model Post code 265 SICILIA MESSINA Via XXVII Luglio, 38 ME Integrated SICILIA MILAZZO Via Massimiliano Regis, snc - Compl. Le Palme - Corpo A ME Integrated SICILIA MISTERBIANCO Via San Nicolò, 343 ang. Via Antonino Giuffrida CT Integrated SICILIA NIZZA DI SICILIA Via Umberto I, 77 ME Stand Alone SICILIA PALERMO Via Roma, 52/54/56 PA Proximity SICILIA PALERMO Via Emerico Amari, 100 PA Proximity SICILIA PALERMO Via della Libertà, 34 PA Proximity SICILIA PALERMO Largo Cavalieri del Lavoro, 62 PA Proximity SICILIA PALERMO Via Leonardo da Vinci, 217/219 PA Proximity SICILIA PALERMO Via Marchese di Villabianca, 78/80 PA Proximity SICILIA PARTINICO Viale L. Calandrino, 24 PA Proximity SICILIA SALEMI Via P. F. Clementi, 97/99 TP Proximity SICILIA SANT'AGATA DI MILITELLO Via Trento, 32 ME Proximity SICILIA SIRACUSA Viale Santa Panagia, 109 (c/o Tribunale) SR Proximity SICILIA SIRACUSA Viale Teracati 162a/b ang. Via G.Malfitano, 2/10 SR Integrated SICILIA TAORMINA Corso Umberto I, 159 ME Proximity SICILIA TRAPANI Corso Italia, 1/a TP Proximity SICILIA TRAPANI Via Degli Iris, 2 TP Integrated TOSCANA AREZZO Viale Mecenate, 35 AR Proximity TOSCANA AULLA Viale Lunigiana, 3 MS Integrated TOSCANA CASTEL DEL PIANO Viale Dante Alighieri,10 GR Integrated TOSCANA CECINA Via Circonvallazione, 17/19 LI Integrated TOSCANA COLLE DI VAL D'ELSA Via Bilenchi, 10 SI Integrated TOSCANA EMPOLI Viale Francesco Petrarca, 4 FI Integrated TOSCANA FIRENZE Viale Spartaco Lavagnini, 40 FI Proximity TOSCANA FIRENZE Via Luigi Alamanni, 39 FI Proximity TOSCANA FIRENZE Borgo La Croce, 65/r FI Proximity TOSCANA FIRENZE Viale Francesco Talenti, FI Integrated TOSCANA FIRENZE Piazza della Libertà, 3 FI Proximity TOSCANA FOLLONICA Viale Albereta, 44 GR Integrated TOSCANA GROSSETO Via Svizzera, 229 GR Integrated TOSCANA GROSSETO P.zza Albegna, 14 ang. Via Adige GR Proximity TOSCANA LARCIANO Via Dante Alighieri, 1 PT Integrated TOSCANA LIVORNO Via Pietro Tacca, 26 LI Proximity TOSCANA LUCCA Via San Paolino, 14/18 LU Proximity TOSCANA MASSA Via Roma, MS Integrated TOSCANA ORBETELLO Via Mura di Levante, 14 GR Integrated TOSCANA PIOMBINO Via Galilei, 3/5 LI Proximity TOSCANA PISA Via Carlo Matteucci, 85 PI Integrated TOSCANA PISA Piazza S. Antonio, 9 PI Proximity TOSCANA PISTOIA Via Del Villone, 37/41 PT Proximity TOSCANA PONTEDERA Via Enrico Toti angolo Via Armando Diaz PI Integrated TOSCANA PRATO Via Montegrappa, 220, A/F PO Proximity TOSCANA SAN GIOVANNI VALDARNO Corso Italia, 30 AR Integrated TOSCANA SCANDICCI Via Roma, 53/55 FI Proximity Continues 11

14 Unipol Banca Financial Statements 2014 Territorial organisation List of branches of Unipol Banca SpA Cod. Region Branch Address Prov. Model Post code 9 TOSCANA SESTO FIORENTINO Piazza Del Mercato, 24 FI Integrated TOSCANA SIENA Via Vittorio Zani, 3 SI Integrated TOSCANA VIAREGGIO P.zza Shelley, 1 LU Proximity TRENTINO ALTO ADIGE BOLZANO C.so Liberta, 56 BZ Proximity TRENTINO ALTO ADIGE TRENTO Via Brennero, 194 TN Integrated UMBRIA CASTIGLIONE DEL LAGO Via Bruno Buozzi, 119/a PG Integrated UMBRIA CITTA' DI CASTELLO Via Luca della Robbia, 55 PG Integrated UMBRIA FOLIGNO Via Cesare Battisti, 20 PG Integrated UMBRIA NARNI SCALO Via Tuderte, 398 TR Integrated UMBRIA PERUGIA Via Fontivegge, 45 PG Integrated UMBRIA PONTE SAN GIOVANNI Via Quintina, 50 PG Integrated UMBRIA SPOLETO Piazza Giuseppe Garibaldi, 12 PG Integrated UMBRIA TERNI Via Tre Monumenti, 34 TR Integrated VALLE D'AOSTA AOSTA C.so Battaglione Aosta, 12 AO Integrated VENETO BASSANO DEL GRAPPA Viale XI Febbraio, 5/A VI Integrated VENETO CAMPOSAMPIERO Via Ippolito Nievo, 2 PD Integrated VENETO CASSOLA Via Pio X, 58 VI Integrated VENETO CITTADELLA Via Borgo Padova, 164 PD Integrated VENETO ODERZO Via Giuseppe Verdi, 41 TV Integrated VENETO PADOVA Via Francesco Rismondo, 2/C PD Integrated VENETO PADOVA Via Palermo, 9/B PD Proximity VENETO PORTOGRUARO Viale Luigi Cadorna,6 VE Integrated VENETO ROVIGO Via Antonio Minelli,1 angolo Corso del Popolo RO Integrated VENETO TREVISO Piazza San Leonardo, 5/B TV Proximity VENETO VERONA Via Antonio Pisano, 69 VR Proximity VENETO VERONA Stradone Porta Palio, 82 VR Proximity VENETO VICENZA Corso Santi Felice e Fortunato, 300 VI Proximity TOTAL 291 Regions 18 Provinces 83 12

15 Unipol Banca Financial Statements 2014 Unipol Banca SpA branches UNIPOL BANCA BRANCHES Regions 18 Provinces 83 13

16 Unipol Banca Financial Statements 2014 Shareholders UnipolSai Assicurazioni SpA % Unipol Gruppo Finanziario SpA % Ordinary - Extraordinary Shareholders Meeting Bologna, 29 April 2015 Ordinary session 1. Financial statements at 31 December 2014; Management Report; Board of Statutory Auditors Report and Independent Auditors Report. Pertinent and consequent resolutions. 2. Remuneration policies: report on the application of the Remuneration policies in the 2014 financial year and proposal to adopt the Remuneration policies for the 2015 financial year; pertinent and consequent resolutions. 3. Approval of compensation plans based on financial instruments; pertinent and consequent resolutions. Extraordinary session 1. Amendments to articles 8 (Shareholders meeting), 12 (Board of Directors) and 23 (Statutory auditors), of the By-Laws. Pertinent and consequent resolutions. 14

17 Unipol Banca Financial Statements 2014 Highlights 31/12/ /12/ /12/2012 Balance sheet Total Assets 12,306,757 12,391,603 12,827,907 Receivables from customers 9,827,831 9,615,689 10,078,173 of which: doubtful loans 1,583,315 1,235, ,364 Securities 1,456,812 1,721,425 1,501,916 Equity investments 52,742 11,439 78,248 Customer deposits and funds 59,364,857 33,789,274 31,034,062 Direct customer deposits 10,248,266 10,066,991 9,915,283 of which: due to customers 7,622,298 7,745,904 7,557,679 securities outstanding 2,625,968 2,321,087 2,357,604 Indirect customer funds 49,116,591 23,722,283 21,118,779 of which: assets under management 1,866,856 1,222,089 1,121,460 assets under administration 47,249,734 22,500,194 19,997,319 Net interbank position (449,744) (874,218) (1,056,870) Shareholders' equity 714, , ,764 Income statement Net interest income 219, , ,949 Net interest and other banking income 401, , ,629 Net result from financial activities 156,311 (50,823) 281,179 Profit from current operations before tax (112,993) (431,717) 27,210 Net profit (90,967) (299,588) 13,439 Structural data No. of employees at year end (1) 2,388 2,325 2,313 No. of branches at year end (1) No. of financial advisers at year end Return on assets Net profits/total assets (0.739%) (2.418%) 0.105% (1) -The figure includes 4 branches acquired in 2014 following the merger by incorporation of Banca Sai SpA 15

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20 1 Management Report The Macroeconomic Context The beginning of 2014 was characterised by volatility in financial markets due to tensions on some emerging countries mainly due to the slowdown of the Chinese economy and to the reduction (started at the end of 2013) of the monetary stimulus by the Federal Reserve Usa (Fed), which led to capital outflows from emerging regions, generating some difficulties for countries with large current account deficits (mainly Argentina, South Africa, Turkey, Brazil, India and Indonesia) and concerns about possible future financing of these economic areas, all the more so in countries with a high percentage of public debt denominated in strong currency. These tensions were quickly replaced by a calmer climate, due to the awareness that the expansive approach of the central banks was still far from disappearing, because of evidence that economic growth was still fragile in much of the developed world and called for policies targeted to support the economy. With reference to the Eurozone, the climate with regard to the periphery is calmer, albeit the lack of widespread economic growth in almost all member countries has forced the European Central Bank (ECB) to intervene in June to introduce new expansionary monetary measures with the ultimate goal of ending the disinflating path (caused by weak domestic consumption and excessive strength of the euro) that characterised the first half of Specifically, the package of expansionary measures launched by the ECB included: a) cut in the reference rate by 10 basis points (down to 0.15% from the previous 0.25%) and at the same time cut in the rate on deposits of banks at the ECB, currently negative (-0.1%); b) targeted LTRO: financing plan for banks, at a rate of 0.25%, linked to an increase in loans to the private sector; c) extension of the maturity of full allotment operations (from July 2015 to 2016); d) interruption of the sterilisation of the SMP purchase plan, which corresponds to a quantitative easing of the monetary base, along the lines of the one launched by the Federal Reserve Usa as from Finally, ECB President Draghi stressed that, in the future, the preparatory work linked to purchases of banking Abs (Asset backed securities) by the ECB will be intensified. The beginning of the third quarter of 2014 was characterised by the deterioration of the degree of investor confidence towards the Eurozone because of lower than expected economic data in some areas, including Germany (with weak data on retail sales) and Italy, with inflation close to negative and a weak data on industrial production. The situation was worsened by the financial difficulties of the Portuguese financial group linked to the Espirito Santo family, with repercussions on the bank of the group and the deterioration of relations between Russia and the West with threats of mutual sanctions that resulted in the partial failure of one of the most important markets of European goods and services. The ECB, after announcing in June the introduction of new measures of liquidity to the banking system (subject to the actual disbursements of loans to companies), in the traditional meeting of August among the main central bankers at Jackson Hole, hinted at the imminent launch of further expansionary measures in support of the economy, paving the way for a new purchase programme of Covered Bonds and Abs (linked both to mortgages and loans to companies) announced in September and indicating the intention to bring the assets in its financial statements back to the levels of 2013 (equivalent to a quantity of asset purchases totalling a trillion) ended with strong expectations of a launch, by the ECB, of a large-scale programme of quantitative easing of the monetary base, along the lines of the one launched by the Fed, also considering that the spectre of deflation will appear more and more clearly in almost all major economies of the Eurozone. The economic growth forecasts of the International Monetary Fund (contained in the last World Economic Outlook), show downward revisions compared to the forecasts at the beginning of 2014, with a growth rate in 2014 at +3.3% globally compared to previous estimates expecting a more sustained increase (+3.7%).This revision concerns without distinction developed economies (+1.8% compared to +2.2% at the beginning of 2014) and emerging economies (+4.4% compared to the initial forecasts of +5.1%). In particular, the economic growth in the United States is equal to +2.4% (from the initial +2.8%), whereas the main downward revision concerns Japan, which ended the year with a growth close to zero (+0.1% vs +1.7% estimated initially). After two years of negative contribution to global economic growth, the Eurozone recorded a positive growth of +0.8% in 2014, mainly driven by Germany (+1.5%) and Spain (+1.4%); downward revision for the Italian and French growth rate this year, with a growth in 2014 now set at -0.4% and +0.4%, respectively: for Italy, this is the third consecutive year of recession. Within the developing world, the following countries recorded downward revisions of growth estimates in 2014 (compared to what was expected at the beginning of the year): Brazil (+0.1% vs +2.3% estimated initially), Russia (+0.6% vs +2%) and South Africa (+1.4% vs +2.8%); whereas the figures of China (+7.4% in 2014) and India (+5.8%) are still strong. 18

21 Unipol Banca Financial Statements 2014 In terms of currency, a strong weakening of the Eurozone was recorded against major global currencies in 2014: the euro-dollar exchange rate ended the year at a value of 1.21 compared to the value of 1.38 at the end of 2013, which is equivalent to a depreciation by around 12%. The reason for this weakening of the Euro is due to the very expansive monetary policy strategy undertaken by the ECB. Long-term government bonds, both in the United States and in the Eurozone, followed a strongly bearish trend during the year, in accordance with economic figures that show, in the main global economies, bearish pressures on consumer price indexes, with a special reference to the Eurozone; the American ten-year rate closed 2014 at a value of 2.17%, compared to 3.03% at the end of 2013 (on expected delays in the process of normalisation of the monetary policy by the Fed); an even stronger change affected the German ten-year rate that closed 2014 at a value of 0.54% compared to 1.93% at the end of The strong return of the sovereign risk in the Eurozone involved, in 2014, a reduction trend of the rate spreads of the peripheral countries compared to the core countries. In particular, the Italy-Germany differential on the ten-year government segment went from about 212 basis points at the beginning of 2013 to about 132 basis points at the end of Waiting for the imminent end of the season of unconventional monetary policy by the Fed, in addition to specific social and political problems, led the developing world to record strong cash outflows. As evidence of the climate of risk aversion that characterised the developing world, during 2014, the EMBI Global Spread index (that measures the spread between the government bonds of developing countries against American government securities), increased from 330 basis points at the end of 2013 to 404 basis points at the end of the year. With reference to the stock markets, 2014 ended with a rise in local currency of the MSCI World share index in dollars of +2.10% according to the climate of optimism on the global economic scenario, albeit growth forecasts lowered during the year. Within the developed economic areas, the best performance was recorded by the United States stock exchange (+11.40% in the S&P500 index in dollars), followed by Japan (+7.12% in the performance of the Nikkey index in local currency) and Eurozone (+4.35% in the EuroStoxx600 index in Euro); the emerging equity markets were negative (-4.60% in the MSCI Emerging Markets index in dollars). Within the Eurozone, the performance gap among stock lists of the core countries (Germany +2.65%; France -0.71%) and peripheral countries (Italy +0.23%; Spain +3.81%) is decreasing: this trend was particularly pronounced during the period. With regard to volatility in share indexes, the American VIX and the European V2X reported a trend stabilised at moderate levels during 2014: both were below the long-term historical averages until the last quarter, in which tensions increased, mainly due to the sharp drop in oil prices. The National Banking System 1 - Source: ABI Monthly Outlook - Full report February 2015 Table 4F.24 page Source: ABI Monthly Outlook - Full report February 2015 Table 4F.9 page Source: ABI Monthly Outlook - Full report February 2015 Table 4E.1 page Source: ABI Monthly Outlook - Summarised trend February 2015 Table 7 page 24. During 2014, according to the latest ABI available figures, deposits from customers (households and non-financial companies) 1, equal to 2,225bn at the end of December 2014, decreased by 5.4% compared to the values of December 2013 as a result of the decline of the bond component (-18.1%), whereas deposits increased (+2.1%) to 1,516bn. In the same period, the cost of deposits decreased by 39 basis points (from 1.88% to 1.49%), divided between bonds (from 3.44% to 3.16%) and deposits (from 0.97% to 0.71%). Overall, loans to households and non-financial companies recorded a slight decrease (0.8% compared to December 2013), which covers both short-term loans and medium and long-term loans. During 2014, the average rate to households for the purchase of homes 2 was down by 74 basis points (from 3.50% to 2.76%) as well as the overall average rate on loans to households and non-financial companies that decreased from 3.82% to 3.61%. The gap between average interest rates on loans to and deposits from households and nonfinancial companies reached 212 basis points at the end of 2014, up 18 basis points compared to the figure at the end of The deterioration in the quality of credit continued 3 : in December 2014, gross doubtful loans amounted to 183.7bn (+17.8% compared to the end of 2013), while net doubtful loans amounted to 84.5bn (+5.6% compared to the end of 2013), accounting for 4.64% of loans 4 (increasing compared to 4.31% in December 2013). 19

22 1 Management Report Your Bank 5 -Calculated as the sum of items 80.Net result from trading and 100.b profits (losses) on disposal or repurchase of available-forsale financial assets. Following the changes introduced by the Supervisory Regulations of the Bank of Italy, with a special note of 1 August 2014 the Supervisory Authority announced the change of the Register of Banking Groups through the cancellation of the Banking Group Unipol Banca SpA and the registration of the new Unipol Banking Group. Therefore, Unipol Banca is no longer the Parent Company of the previous Unipol Banca Banking Group and at the same time it is part of the Unipol Banking Group, with the Parent Company Unipol Gruppo Finanziario SpA. In June 2014, the 100.0m share capital increase against payment was completed, subject to its reduction to cover prior losses (of 339.5m), resolved by the Extraordinary Shareholders Meeting of 23 April In November 2014, the merger by incorporation of Banca Sai SpA into Unipol Banca SpA (transaction authorised by the Bank of Italy on 25/9/2014 and whose tax and accounting effects will be effective as from 1/1/2014), with which, among other things, the Bank acquired control over the company Finitalia SpA operating in the sector of financing, of insurance premiums, in particular, was completed. As a result of these transactions, the share capital of Unipol Banca SpA amounted to 897,384,181. In November 2014, the equity investment in Unicard SpA was sold. In October 2014, a general inspection was started by the Bank of Italy, completed in January 2015 and whose results will be announced by the Supervisory Body in the coming months. In organisational terms, in 2014, the new commercial structure came into force with the creation of 9 areas (previously 6 with 3 sub areas) and the process of reduction of the hierarchical levels was completed, already started in 2013 as part of the General Management, also on the commercial network with the elimination of the post of retail market manager. At the same time, the post of sales manager was created with the function of coordinating the commercial activity with the insurance agencies, the sales units of LSRT (Large Retail Chains) - which offer to their members standardised banking products - and with the function of coordinating on their territory the newly formed group of developers. These are resources dedicated exclusively to the acquisition of new customers that operate mainly within insurance agencies with the aim of offering banking products to insurance customers. The activity of the Bank in 2014 mainly focused on retail customers (Private Customers and SMEs), and in particular on insurance customers of the Group and members of consumers co-operatives. 76.5% of new mortgage loans (equating to 159.4m) was provided to retail customers, in addition to a further 100.0m of unsecured loans\personal loans (equal to 64.1% of production). The commercial development allowed to increase by 10.9% (compared to the figure at the end of 2013 also inclusive of around 12,600 accounts present in Banca Sai SpA at the same date) the number of ordinary current accounts that amounted to around 317,500 at 31 December Therefore, by considering also the accounts coming from Banca Sai SpA, a particularly positive figure is the drop in the churn rate of 9.0%, significantly down compared to December 2013 (11.8%). The acquisition rate has also increased considerably reaching 19.9% (13.1% as December 2013) with more than 57,000 open accounts. The increase in openings concerned all the distribution channels with +49.9% for branches, +44.8% for agency channels, which is joined by the MyUnipol channel (launched during the second half of 2013) with around 3,000 new accounts. At 31 December 2014, the amounts of direct customer deposits recorded a 1.8% increase (equating to 181.3m) reaching 10.2bn; by including in the value at 31 December 2013 also 840.3m of Banca Sai SpA, they would decrease by 6.0%, equating to 659.0m. Lending to customers compared to 2013 increased by 2.2% (equating to 212.1m) reaching 9.8bn; including in the initial figure 682.5m of Banca Sai SpA at 31 December 2013, the change would decrease by 4.6%, equating to 470.3m. Nonperforming loans at 31 December 2014 were 3,896.1m (gross value), up 720.2m compared to It should be kept in mind that part of this increase was due to the merger by incorporation of Banca Sai SpA, whose gross non-performing loans at 31 December 2013 amounted to 171.3m. Net doubtful loans amounted to 1,583.3m and represent 16.1% of net loans (12.9% in 2013 without considering those of Banca Sai SpA). The percentage of coverage of non-performing loans increased from 26.7% in 2013 (without Banca Sai SpA) to 29.6% at the end of Net interest and other banking income reached 401.5m, up (+31.1%) compared to 2013, thanks to the contribution of Banca Sai SpA ( 31.6m the value of net interest and other banking income of Banca Sai SpA at 31 December 2013), and of capital gains of 76.3m 5 obtained from the sale of Government securities, in addition to the good results obtained by assets under administration and banking services. Financial operations recorded 20

23 Unipol Banca Financial Statements Calculated as the sum of items 70, 80, 90 and 100 of the Income Statement. 7 - Calculated as the ratio between items 200. operating expenses and 120. net interest and other banking income of the Income Statement. a total increase of 72.6m, reaching 78.4m 6 at the end of the 2014 financial year. Net interest income also increased by 12.6m (+6.1%) and amounted to 219.1m ( 19.1m the 2013 figure of Banca Sai SpA), whereas net commission income amounted to 104.0m, recording a 10.7% increase ( 10.9m the 2013 figure of Banca Sai SpA). The 2014 financial year recorded adjustment loans totalling 194.1m with a cost of credit risk at 31 December 2014 of points, down compared to the figure at the end of 2013 (of points, calculated on the values of Unipol Banca only). Moreover, the income statement was affected by net adjustments to securities of the AFS portfolio, equity investments and unsecured loans totalling 53.1m ( 175.8m the figure at the end of 2013, inclusive of 124.7m of adjustments to goodwill not repeated in 2014). Operating expenses, amounting to 267.3m, increased by 4.4% compared to the previous year with a cost/ income 7 of 66.6%, down compared to the figure of December 2013 (83.6%) thanks to the increase in net interest and other banking income. Note that the operating costs of Banca Sai SpA at the end of 2013 amounted to 16.5m. The result before tax showed a loss of 113.0m (a loss of 431.7m at 31 December 2013), whereas the net result, after considering positive taxes of 22.0m, was a negative 91.0m (a loss of 299.6m in 2013). During 2014, the DISTRIBUTION NETWORK recorded the closure of 5 branches for grouping together on the same banking centre or adjacent centres and the addition of the 4 branches of the former Banca Sai and therefore, at 31 December 2014, looked like this: 291 bank branches, of which: Integrated with insurance agencies; Traditional; 344 Financial advisers with mandate; 1,805 Agency sales units qualified for the sale of bank products. Number /12/ /12/2014 Branches Financial Advisers 21

24 1 Management Report Comment on the Main Statement of Financial Position Items Direct Customer Deposits Direct customer deposits at 31 December 2014, equating to 10,248.3m, increased compared to the value of December 2013 (+1.8%), thanks to the masses acquired with the merger by incorporation of Banca Sai SpA of 840.3m at 31 December Considering also these masses at 31 December 2013, the change would be negative by 6.0%. Amounts in m Change Change % Current accounts 5,543 5,986 (443) (7.4%) Time Deposits (159) (17.8%) Savings deposits and Deposit certificates % Repurchase agreements % Bonds issued 2,587 2, % Securitisation notes % Other % Direct customer deposits 10,248 10, % In 2014, the net balance between purchases and sales of the sale/purchase of bonds with ordinary customers was negative by 89.1m. We would like to note that during 2014 bonds of 458.8m, previously placed with ordinary customers and totally replaced thanks to a commercial effort that allowed to place 624.0m of new bonds issued, expired. The Bank, with a view to extending its average duration of liabilities, concluded also a transaction with an institutional investor by placing 200m of bonds repurchased at the time by the Bank upon issuance. Moreover, the Bank placed with institutional investors notes, originally issued by its securitisation vehicle and at the same time repurchased upon the issue by Unipol Banca SpA (subject-matter of the so-called self-securitisation ), increasing the value of these securities present on the market to 757.7m ( 485.1m at 31/12/2013). As a result of the above, in 2014 medium/long-term components, represented by the issued bonds and by the notes of the securitisation, increased by 558.2m, reaching 32.6% of total direct customer deposits (27.7% at 31/12/2013). Short-term deposits recorded a total reduction of 376.9m, due to the significant drop in current accounts ( 443.0m) and time deposits ( m), only partially offset by the increase in repurchase agreements ( m) mainly attributable to transactions with Cassa Compensazione e Garanzia ( m). Amounts in m 2014 % of tot 2013 % of tot Change Retail 5, % 4, % 288 Corporate 3, % 3, % 52 UnipolSai Group 1, % 1, % (284) C.C.&G % % 125 Direct customer deposits 10, % 10, %

25 Unipol Banca Financial Statements 2014 Analysis by counterparty 8 shows a growth of Retail customers ( m) sufficient to cover the reduction of the masses of the UnipolSai Group ( m). Deposits from Corporate customers also increased (+ 51.6m). Net of the masses attributable to the UnipolSai Group, direct customer deposits increased by 5.4%. Direct Customer Deposits by Counterparty and Technical Form 3,500 3,000 2,500 2,000 1,500 1, Retail Corporate UnipolSai Group CC&G Short term Medium and long term 8 -The segmentations proposed in this report differ for what concerns the 2013 figures from the figures in the 2013 Financial Statements, in that customer segmentation was updated as from January 2014 eliminating at the same time the Cooperative market, mainly included in the Corporate market. 23

26 1 Management Report Lending At 31 December 2014, receivables from customers amounted to 9,827.8m, up compared to the value at the end of 2013 (+2.2%). Including in the initial figure 682.5m of Banca Sai SpA at 31 December 2013, the change would be a negative 4.6%. Amounts in m Loans Change % Change Current accounts 2,135 1, % Foreign % Leases (24) (22.2%) Mortgages and Loans 4,879 4, % Securitised loans 2,526 2,863 (337) (11.8%) Other (85) (70.9%) Total loans 9,828 9, % The loan trend allowed an increase in the short-term component ( m) and to a lower extent of medium/ long-term components (+ 68.4m including loans, securitised and leases) decreasing the portion of the latter over the total to 76.2% (77.2% at 31/12/2013). Analysis by counterparty 9 (Retail and Corporate) shows a substantial equality of markets. Amounts in m 2014 % of tot 2013 % of tot Change Retail 4, % 4, % 248 Corporate 4, % 4, % (36) Receivables from customers 9, % 9, % 212 The new loans of 2014 mainly focused on retail customers (Private Customers and SMEs), with 76.5% new mortgage loans (equating to 159.4m), in addition to a further 100.0m of unsecured loans\personal loans (equal to 64.1% of production). 9 - The segmentations proposed in this report differ for what concerns the 2013 figures from the figures in the 2013 Financial Statements, in that customer segmentation was updated as from January 2014 eliminating at the same time the Cooperative market, mainly included in the Corporate market. 24

27 Unipol Banca Financial Statements 2014 Costumer Loans by Maturity and Market 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Retail Corporate Loans On Demand MLT loans Gross non-performing loans at 31 December 2014 were 3,896.1m ( 3,175.9m at 31/12/2013). The increase recorded during the financial year, totalling 720.2m (+22.7% compared to the end of the previous financial year) is partially due to the merger by incorporation of Banca Sai SpA into the Bank, completed in November 2014, which led to the recording of non-performing loans of the merged bank in the accounting records of the merging company (at 31 December 2013, they amounted to 171.3m). During the financial year, the coverage ratio increased by 2.9 percentage points. The trend of non-performing loans is represented in the following table: Amounts in m % Change Gross non-performing loans 3,896 3, % Adjustment funds (1,154) (847) 36.3% Net non-performing loans 2,742 2, % Coverage ratio 29.6% 26.7% 2.9% Net non-performing loans /Loans 27.9% 24.2% 3.7% The Bank mitigated the credit risk by entering into an agreement (hereto the Indemnity Agreement) with its holding company Unipol Gruppo Finanziario SpA, on 3 August 2011, according to which the holding company 25

28 1 Management Report undertook to indemnify the Bank for losses that it may endure after having pursued all remedies and out-ofcourt and legal actions. The Indemnity Agreement covers a segment of net non-performing exposures which, at 31 December 2014, amounted to 706.8m, mostly related to counterparties in the real estate, extended effective as from the end of the year to additional non-performing loans of 200.9m, for the total amount of non-performing loans covered by an indemnity amounting to 907.7m. With the indemnity agreement, the Bank basically transferred to third parties the credit risk related to the positions related to it, net of adjustment funds. The following table shows the breakdown of non-performing loans by category. Amounts in m Gross value Funds Net value % hedged % on net loans Doubtful loans 2,530 (947) 1, % 16.1% Watchlist loans 1,128 (163) % 9.8% Restructured loans 162 (41) % 1.2% Past Due loans 76 (3) % 0.7% Total Non-performing loans 3,896 (1,154) 2, % 27.9% In December 2013, an agreement was signed with an external company for the management of the recovery of a portfolio of non-performing loans, mostly doubtful loans. In this way, the Bank was able to better focus its resources, also in terms of staff, to the management of the most important positions and, at the same time, benefit from the experience of a company specialised in the recovery of non-performing loans. Gross doubtful loans at 31 December 2014 amounted to 2,529.9m ( 1,914.6m at 31/12/2013). The adjustment funds increased for a total of 267.8m (including adjustment funds transferred from other categories of nonperforming loans, uses for transfers to losses and write-backs, the funds set aside by Banca Sai SpA before the merger). The change in doubtful loans during the financial year is shown in the following table: % Change Gross doubtful loans 2,529,899 1,914, % Funds (946,584) (678,820) 39.4% Net doubtful loans 1,583,315 1,235, % % hedged 37.4% 35.5% 1.9% Net doubtful loans/loans 16.1% 12.9% 3.2% The increase in gross doubtful loans at 31 December 2014, totalling 615.3m, was originated, in addition to doubtful loans brought by Banca Sai SpA with the merger that at 31 December 2013 amounted to 105.7m, for 366.0m by lending operations accompanied by voluntary collateral (60% of the total increase recorded during the year). The coverage ratio increased by around 2 percentage points, by increasing the adjustment funds from 678.8m of 31 December 2013 to 946.6m at the end of the year. Net doubtful loans covered by the Indemnity Agreement at 31 December 2014 amounted to 707.7m, of which 95.4m for new positions included covered by an indemnity effective as from the end of the year. The effects generated by the Indemnity Agreement in terms of hedging the credit risk on doubtful positions are highlighted in the following table: 26

29 Unipol Banca Financial Statements 2014 Doubtful loans at 31/12/2014 Incidence of type on total doubtful loans Accounting balance Adjustment to doubtful loans Coverage ratio Net loans of which backed by UGF indemnity Risk net of funds and indemnity loans accompanied by collateral 52.8% 1,335, , % 1,035, , ,505 unsecured loans 47.2% 1,194, , % 547, , ,104 Total % 2,529, , % 1,583, , , Intended as sums of watchlist, restructured and past due loans. As highlighted in the previous table, the Indemnity Agreement covers most of the secured loans, specifically large exposures towards certain groups in the real estate and construction segment, in that the Bank intended, in this way, to neutralise the credit risks connected to the enhancement of value or the disposal of large real estate complexes, during a recession and contraction in demand on the market. The other classes of non-performing loans 10 recorded a total growth of 104.9m (gross of the adjustment funds) reaching 1,366.2m; the funds amounted to 207.0m. The coverage ratio on watchlist loans shows a 1.7% decrease, partially due to an increase of the component accompanied by collateral and, more significantly, by the extension of the Indemnity Agreement to watchlist positions. On the other hand, the hedging of restructured loans increased by 15.5 points and the hedging of past-due loans increased by 1.7 points. The breakdown of the different classes is shown in the following tables: % Change Gross watchlist loans 1,127, , % Funds (163,191) (150,795) 8.2% Net watchlist loans 964, , % % hedged 14.5% 16.2% (1.7%) Net watchlist loans/loans 9.8% 8.1% 1.7% Gross restructured loans 162, , % Funds (40,908) (12,961) 215.6% Net restructured loans 121, , % % hedged 25.2% 9.7% 15.5% Net restructured loans/loans 1.2% 1.3% (0.1%) Gross Past Due loans 76, ,813 (61.4%) Funds (2,889) (4,067) (29.0%) Net Past Due loans 73, ,747 (62.1%) % hedged 3.8% 2.1% 1.7% Net Past Due loans/loans 0.7% 2.0% (1.3%) Past due loans clearly decreased, down by 121.5m, whereas restructured loans increased by 29.0m: these are in part results driven by the reorganisation of management processes of problem loans, which improved the predictability of the risk measurement tools in order to prevent the deterioration of credit relations, in addition to an increasing attention to the identification of negotiating solutions to the positions with more evident problems. 27

30 1 Management Report Also for the watchlist loans, the determination of the effective level of coverage of the risk cannot be separated from the effects of the Indemnity Agreement, as shown in the following table: Amounts at 31/12/2014 Accounting balance Adjustments to doubtful loans Coverage ratio Net loans of which backed by UGF indemnity Net mortgages not covered by UGF Risk net of funds and indemnity Watchlist loans 1,127, , % 964, , , ,453 Of the total net loans, equating to 964.4m, 508.9m (52.7%) are represented by loans secured by collateral, further 200.0m are covered by the Indemnity Agreement. Concentration Risk In the statement of financial position at 31 December 2014 Receivables from customers included two major types of exposure, the level of concentration of the risk and the sector of activity, almost all being property. Most of them fall into 26 economic groups, with a total exposure of 1,206m, 763m of which classified as doubtful and 432m of which classified under other non-performing positions, in addition to doubtful positions but performing of 11m; all were backed by 99.8m of adjustment funds. At 31 December 2013, this portfolio segment included 21 economic groups for a total exposure of 876.8m, with adjustment funds of 83.8m. Much of this portfolio is covered by the Indemnity Agreement in force with the holding company Unipol Gruppo Finanziario SpA, the commitment of which goes well beyond the mere assumption of an indemnification obligation, also resulting in the support of the enhancement of the value of the real estate assets used as collateral for the loans. The Bank continues the activity for the restructuring of exposures, for identifying professional operators interested in taking on the real estate initiatives financed, more in general for identifying ways and interlocutors capable of fully enhancing the value of the assets the repayment of the exposure of which depends on their disposal or profitability. Contingent Liabilities Unipol Banca SpA executed the following orders on financial transactions: in November 2007 and July 2009 several Unipol Banca SpA customers took civil and criminal action relating to alleged irregularities and illicit activities carried out by Unipol Banca SpA while dealing in financial derivatives OTC. The plaintiffs submitted claims for compensation for a total of 67m. The preliminary criminal investigations concluded in April 2009 with the Public Prosecutor applying for the case to be dismissed and the plaintiffs opposing said application. Considering the claims of the plaintiffs to be unfounded, Unipol Banca SpA also applied for the civil case to be dismissed and made a counterclaim for payment of the receivables due to Unipol Banca by the plaintiffs. In November 2009, the counterparties presented further claims for compensation totalling 145m. In court, Unipol Banca SpA disputed the admissibility of the new claims, not only on the grounds that they had been made very late but also on the grounds that they were totally unfounded. In July 2011, the judge for the preliminary investigations in Bologna had ordered that the criminal proceedings instigated as a result of the private prosecution brought by these customers who had operated in financial derivatives be dismissed. Within the context of the civil court proceedings, the judge ordered intervention by the official court expert to clarify, among other things, the amounts and results of transactions in derivatives over the years. In April 2012, the reports of the court expert relating to cases of a lesser amount were deposited: in all cases, the expert appointed by the judge confirmed that the amounts booked and deduced in court by the Bank correctly portray the result of the transactions performed, also with reference to the entity of the revenues collected by the 28

31 Unipol Banca Financial Statements 2014 customers over the years. The same conclusion was reached in the expert s report deposited in September 2012 in relation to cases for a higher amount: in this case too, the official court expert quantified the entity of the earnings matured over the years by the customers at a considerable sum, substantially in line with that deduced in court by the Bank. With orders on 31 December 2013, the Court accepted further preliminary investigations formulated by the Bank and therefore, re-convened the court expert for any further clarification, in addition to bringing the evidences from witnesses requested by the Bank. At the hearing held in April 2014, the court expert made the requested clarification. With regard to the cases for a higher amount, evidences from witnesses were acquired at the hearing of 19 June, since at the outcome the circumstances deducted in the items of evidence articulated by the Bank s defence were confirmed. After the end of the year, at the hearing of 5 February 2015, other witnesses summoned by the Bank and by counterparties were examined; at the outcome, the investigating judge fixed the final hearing on 10 March Meanwhile, one of the counterparties involved expressed its willingness to reach a settlement agreement ending the dispute, with waiver of the parties of any mutual claim and/or dispute: with regard to this counterparty, the Judge adjourned the case to 19 November 2015 to allow the formalisation of the settlement agreement. No further evolution was recorded during the current financial year. Indirect Customer Deposits Indirect customer deposits in 2014 of 49.1bn recorded a significant increase (+ 25.4bn) following the merger of Banca Sai SpA, whose masses at 31 December 2013 amounted to 19.7bn. Considering these masses in the initial figure, a 13.3% increase would be recorded, equating to 5.7bn, divided between the masses of the UnipolSai Group (+13.5% for 5.4bn) and ordinary customers (+10.2% for 331.8m). Overall, ASSETS UNDER MANAGEMENT at 31 December 2014 amounted to 1.9bn (+52.8% compared to December 2013) divided into portfolio management ( 227.2m), funds ( 937.2m) and Life insurance ( 702.5m). 29

32 1 Management Report 900, , , , , , , , ,000 0 Retail Corporate UnipolSai Group Portfolio Management Founds Life Insurance FUNDS UNDER CUSTODY at 31 December 2014 amounted to 47.2bn with a growth of 24.7bn mostly related to the already mentioned merger by incorporation with Banca Sai SpA. The masses of ordinary customers amounted to 1.7bn, of which 0.9bn on the Retail market and 0.8bn on the Corporate market. 30

33 Unipol Banca Financial Statements 2014 Funds under custody - breakdown UnipolSai Group 96% Retail 2% Corporate 2% Financial Assets At 31 December 2014, financial assets amounted to 1.5bn, down by 264.6m ( 1.7bn at the end of 2013) Change Held for trading 46 99,472 (99,426) Available for sale 638, ,572 (164,777) Held to maturity 817, ,381 (410) Financial assets 1,456,812 1,721,425 (264,613) During 2014, several sale and repurchase agreements of government securities were completed to take advantage of favourable market prices and at the same time lengthen the maturities of investments. As can be seen from the following chart, investments presented a low risk, being mainly in government bonds ( 1,344.7m, equating to 92% of the whole portfolio). The remaining part of the portfolio is divided into shares, bank bonds, corporate bonds and UCITS. 31

34 1 Management Report Financial Assets UCITS 3% Other bonds 0% Shares 2% Government and ECB securities 92% Bank bonds 3% During 2014, write-downs of 48.0m were made in the AFS portfolio on bonds, shares and UCITS units. Treasury Shares The Bank held no treasury shares at 31 December 2014, or shares of parent companies and it did not carry out any purchases or sales of such shares during the year. Equity Investments At 31 December 2014, equity amounted to 52.7m, up compared to 2013 ( 11.4m the figure at the end of 2013), as a result of the following extraordinary transactions carried out during the financial year: as part of the merger by incorporation of Banca Sai SpA into Unipol Banca SpA, the equity investment in Finitalia SpA was acquired, recorded in the financial statements with a value of 45.2m; disposal of the equity investment in Unicard, previously recorded for 3.1m. 32

35 Unipol Banca Financial Statements 2014 Equity investments Share Capital % Investment Carrying amount Finitalia SpA 15,376, % 45,184,905 Nettuno Fiduciaria Srl 250, % 263,120 Campuscertosa Srl in liquidazione 747, % 588,051 Promorest Srl 10,400, % 5,121,655 SCS Azioninnova SpA 3,501, % 1,584,483 52,742,215 Finitalia SpA is a company that mainly deals with financing for the instalment payment of the premiums related to the insurance policies of the UnipolSai Group. This company closed the 2014 financial year with a net profit of 6.7m (+79% compared to 2013), result achieved mainly thanks to higher volumes disbursed (+62%). The products were placed through more than 4,000 sales units (insurance agencies), which were complemented by the bank branches of Unipol Banca, as a new distribution channel for personal loans. Banks At 31 December 2014, the net interbank position was negative by 449.7m, after a negative figure of 874.2m at the end of Change Receivables from banks 346, ,334 (37,185) Due to banks 795,893 1,257, ,659 Net interbank position 11 (449,744) (874,218) 424, Calculated as the difference between Receivables from banks (item 60 of Statement of Financial Position assets) and Due to banks (item 10 of Statement of Financial Position liabilities). Receivables from banks include, compared to December 2013, the drop in the Compulsory Bank Reserve (CBR) from 104.4m to 91.7m and in bank bonds from 30.5m to 7.7m; whereas deposits and transaction accounts were essentially stable decreasing from 248.5m in 2013 to 246.8m in In terms of debt towards banks, current accounts and deposits decreased from 407.6m to 30.9m; in particular, in 2014, a medium/long-term loan that at 31 December 2013 amounted to 320.0m was repaid, whereas short-term positions (interbank, repurchase agreements, overnight deposits) decreased by 56.7m. In terms of transactions with the ECB, during 2014, 500.0m deriving from LTRO auctions were repaid in advance, and we took part in the TLTRO auction of December 2014 of 415.0m. At the end of 2014, the exposure to the ECB was 765.0m ( 850.0m in 2013). 33

36 1 Management Report Shareholders Equity Shareholders equity at 31 December 2014 was 714.9m, up 81.5m compared to 31 December Change Valuation reserves (11,036) 4,763 (15,799) Reserves (80,493) (76,322) (4,171) Share capital 897,384 1,004,500 (107,116) Net result for the period (90,967) (299,588) 208,621 Shareholders Equity 714, ,353 81,535 During the year, the Share Capital decreased by 107.1m as a result of the following three main events: its reduction to cover prior losses of 339.5m, capital increase by 100.0m carried out in June and finally the increase in capital for the merger by incorporation of Banca Sai SpA of 132.4m. Reserves recorded a decrease of 4.2m whereas Valuation reserves of 15.8m. 34

37 Unipol Banca Financial Statements 2014 Comment on the Main Income Statement Items 12 - Calculated as the sum of items 70, 80, 90 and 100 of the Income Statement. NET INTEREST INCOME of 2014, equal to 219.1m, increased compared to 2013 by 6.1% (equating to 12.6m). Growth has been possible thanks to the contribution of Banca Sai, whose net interest income in 2013 amounted to 19.1m, and to the reductions in the cost of funding that offset the loss in net interest income deriving from higher non-interest bearing masses of assets (doubtful loans). NET COMMISSION INCOME, equal to 104.0m, increased by 10.7% (+ 10.1m compared to 2013). The contribution of Banca Sai ( 10.9m net commission income in 2013) and the growth of the component linked to indirect customer deposits made it possible to offset the increase of the liability component linked to the indemnity agreement signed with Unipol Gruppo Finanziario SpA (+ 12.9m as a result of the widening of the area subject matter of the agreement and to the change in its economic conditions). As regards FINANCIAL OPERATIONS 12, 2014 showed an increase compared to 2013 of 72.6m ( 1.7m the figure of Banca Sai in 2013). The growth is attributable to the sale/purchase of Government securities that generated higher revenues of 70.4m, and to dividends received by the subsidiary Finitalia Change Dividends and similar income 2, ,794 Net result from trading 11,355 (6,030) 17,385 Net result from hedging 229 (122) 351 Profits (losses) on disposal or repurchase 64,548 11,512 53,036 Financial operations 78,422 5,856 72,566 Overall, therefore, the NET INTEREST AND OTHER BANKING INCOME at 31 December 2014 was 401.5m, up 31.1% compared to 2013, with a significant change in the breakdown of its components Change Net interest income 219, ,437 12,645 Net commission income 104,016 93,930 10,086 Financial operations 78,422 5,856 72,566 Net interest and other banking income 401, ,223 95,297 35

38 1 Management Report 55% 31% 2% 19% 26% December 2014 December % Net interest income Net commission income Financial operations 13 - Calculated as the ratio between net impairment adjustments to receivables (item 130.a of the Income Statement) and receivables from customers (item 70 of the Statement of Financial Position assets) The 2013 figure differs in the breakdown between Management and Network compared to what was presented in the 2013 Financial Statements and in the 2013 half-year report as a result of organisational changes. IMPAIRMENT ADJUSTMENTS at 31 December 2014 of 194.1m decreased by 111.8m compared to 2013 (-36.6%) but are still high (risk cost 13, of basis points compared to basis points in 2013). In addition to these adjustments, during the financial year LOSSES ON EQUITY INVESTMENTS amounted to 2.0m (not present in 2013), NET ADJUSTMENT TO AFS PORTFOLIO of 48.0m ( 49.6m at 31 December 2013) and adjustments to OTHER FINANCIAL ASSETS of 3.1m (compared to 1.5m in 2013), due to write-downs on unsecured loans. The STAFF at 31 December 2014 numbered 2,388 employees, up 63 resources compared to 31 December Considering also the 2013 staff of Banca Sai SpA of 146 resources, a reduction of 83 resources would be recorded in The portion of resources employed at the General Management (23.5%) recorded an increase compared to the figure at the end of 2013 (23.1% 14 ). 36

39 Unipol Banca Financial Statements 2014 No. of resources 2,500 Man.% / Tot 50.0% 45.0% 2,000 1,500 1,713 2,325 2,388 1, % 35.0% 30.0% 1, % 23.5% 25.0% 20.0% % 10.0% % 0.0% 31/12/ /12/2014 NETWORK MANAGEMENT NOT IN SERVICE Man.% / Tot OPERATING EXPENSES of 2014 amounted to 267.3m, up on the total at 31 December 2013 of 4.4% (+ 11.2m). The increase derived exclusively from the merger by incorporation with Banca Sai (that showed costs in 2013 of 16.5m) therefore, including in the 2013 balance the figure of Banca Sai, operating expenses decreased by 5.3m. Compared to the net interest and other banking income, the incidence of operating expenses deteriorated by 17 percentage points, decreasing from 83.6% in 2013 to 66.6% in 2014, thanks to the recovery of net interest and other banking income, which more than cancelled out the increase in operating expenses. Result for the Period and Comprehensive Income The result net of income taxes at 31 December 2014 was a loss of 113.0m, an improvement over the 431.7m gross loss recorded in Taxes at 31 December 2014 were a positive 22.0m, with a net loss of 91.0m (loss of 299.6m in 2013). The analysis of the statement of comprehensive income shows the total income generated during the year, highlighting, together with the economic result, also the result of changes in the value of assets booked as contraentries to specific equity items. Overall, the other income components net of taxes deteriorated the result for 2014 by 15.4m, reducing the loss to 106.3m (loss of 272.4m at 31/12/2013). 37

40 1 Management Report Policies and Strategies 2014 During 2014, all the activities envisaged by the Business Plan of the Bank were started and the initiatives illustrated in the Marketing Plan for 2014 were drawn up. A close monitoring of the actions and commercial objectives (KPI) was introduced in order to measure the progress of performance envisaged by the Plan. The Bank-Company agreement was redefined in 2014 focusing on the commissions system for the placement of the banking products standardised on a win-win approach in order to favour development and develop the loyalty of integrated customers and the widening of the area of agencies that collaborate with the bank, with the introduction of additional 450 agencies. The Bank/Company synergy was further strengthened by creating a parallel chain in the two commercial structures, which includes the presence of similar coordination figures with the task of developing the Bank business. Monthly initiatives for the acquisition of insurance customers (assurance to bank) and for the presentation of bank customers to the agencies (bank to assurance) were planned: the first experiment of commercial development of the Bank in favour of the Insurance Company with a reciprocity approach. In the early months of 2014, the Accounts Catalogue of Unipol Banca SpA was completely renewed with the launch of the new Valore Comune dedicated to Private customers, Professionals, Companies and Cooperatives, with the aim to simplify, rationalise and focus more the offer to the targets of reference, increase customer base and attract new deposits and investments. The offer was strengthened by a series of promotional initiatives combined during the year with the new accounts catalogue, such as the absence of charge for the first year or for the first six months, discounts on UnipolSai Assicurazioni insurance policies or the zero-interest payment in instalments of the motor insurance policy. Within a process of rationalisation and standardisation of the existing Agreements, the Valore Comune Line was combined with an offer dedicated to the targets of reference of the Bank (Suppliers and Fiduciaries of the Group, Large Retail Chains, Partner Organisations), with a standard agreement to be offered to Companies with special arrangements and with an offer dedicated to Joint owners. A joint development project with the Parent Company for defining an offer dedicated to the different Companies of the Group. Some communication tools to support the network were introduced during the year (short commercial videos, datasheets at the disposal of the manager) to improve the knowledge of offers and products of the bank. As part of the development and acquisition of Private Customers, in line with the growth objectives of the Business Plan, a specific offer aimed at acquiring new Liquidity and Financial Resources (AFI) for both new and old customers, by using two new types of specifically created Time Deposits. The financing instruments that Unipol Banca offers to Customers increased when it started to market a loan with a very competitive spread that finances up to 50% of the value of the property and through the collaboration with Finitalia, a company specialising in consumer credit. The restyling of the catalogue of loans dedicated to Companies and Private Customers Consumers was also started, for a better risk monitoring by the Customer s rating class and for rationalising the available products. Finally, capitalisation products dedicated to Cooperatives, Start Ups and female entrepreneurship were prepared. New segmentation criteria of Corporate Customers (with annual sales of more than 2.5m) were defined, whose first result was the creation of a specific offer for companies with sales ranging from 2.5m to 5m. A specific offer dedicated to Agents, Financial Advisers, Sub-Agents and Employees was prepared. During 2014, a new distribution agreement of the American Express credit cards for private customers and companies was reached; its offer completed the mid to high end service portfolio with a high standing product, besides with the credit risk entirely on Amex. In terms of business customers, the Mobile POS was also introduced with the CartaSi partner, an innovative instrument that allows mobile professionals to manage collections anywhere by means of devices such as smartphones or tablets, turning them into real payment terminals. For the Remote Banking segment, new developments in terms of marketing and communication were launched to promote the offer, in particular by expanding digital communication, the restyling of the website and the launch of social channels. The offer of My Unipol Banca products was also enhanced with the launch of Save Up, a three-year accumulation deposit account aimed at stabilising the deposits. The GeoReti service - geomarketing platform aimed at providing the branches with a more efficient instrument in commercial initiatives for prospect customers (Professionals and Small Business, in particular) - was also issued in

41 Unipol Banca Financial Statements 2014 Financial Activity Within the scope of Asset Management, 2014 was characterised by two spheres of development: Investment management: within the scope of investment management, the provision of support and advice to individual customers and to the commercial structure continued, both at retail customer, high-standing private customer and institutional customer level (foundations, social security entities and companies). With reference to retail customers, all the lines reported positive returns, with a special reference to lines with equity content. Management of minority assets: a catalogue of products for distribution, managed by investment houses with an excellent reputation on the market and with a complete product range, allowed in 2014 to reach largely positive net inflows, with an increase in the masses of funds and Sicav of around 40%. These values do not include the strong positive contribution from the merger of Unipol Banca and Banca Sai, which has further enriched the product catalogue as part of assets under management, now composed of 12 investment houses among the most prestigious worldwide. The constant training and information for the networks carried out by the organisational structure dedicated to fund advisory activities were essential for the excellent figures of net inflows. O.T.C. derivatives: the Bank entered into interest rates swaps on its own Government Bonds during 2014, solely within the scope of its own financial investments. Complaints Management 15 - Type of complaining customer (ABI M.A.T. 03/ document page 14.) Private customers: People with the qualification of consumer in accordance with Art. 121, paragraph one of the Consolidated Banking Law. Intermediary: this category consists of small business customers, craftsmen, professionals, traders, schools, associations and companies (excluding capital companies). Other: this category includes every other type of customer that does not fall within the two previous definitions (e.g.: local health departments, municipalized companies, capital companies and other enterprises). Unipol Banca SpA has always paid particular attention to the management of complaints, basing relations with customers on the principles of transparency, assistance and quality: a satisfied and correctly informed customer is a capital that our bank wishes to protect. Customer complaints made in writing are divided in the following categories: 1. complaints concerning investment services ( CONSOB complaints); 2. PSD complaints (complaints concerning the PSD Regulations: payment instruments, bank transfers, dd, etc.); 3. ordinary complaints, regarding all the banking services and operations apart from those indicated in the previous points. At 31 December 2014, 875 complaints were registered (818 in 2013), of which 37 (4%) retraceable to complaints relating to investment services, 76 (9%) PSD complaints and 762 (87%) relating to ordinary complaints (for example, claims on current accounts, ATM cards, mortgages). 62% of the complaints (544) were made by Private Customers, 213 (24%) by Other and the remaining 118 (14%) by Intermediaries 15. In view of the classification supplied by the ABI, the products that determined most complaints were current accounts (35%), mortgages (18%) and credit/debit cards (10%). The causes, on the other hand, were mainly the application of conditions (38%), the execution of operations (26%) and frauds/losses (9%). The outcome of the complaints was positive/partially positive for the Customer in 28% of cases (it should be noted that this percentage is attributable, in most cases, to trade policies of the Bank with regard to Customers with a view to customer care) while it was negative in 51% of the cases and clarifications were provided in 17% of cases. It should be noted that, at 31 December 2014, 35 complaints are being handled, equal to 4% of total complaints received. 39

42 1 Management Report Disputes Settled out of Court In accordance with legislation, for some time our Bank has been a member of the various entities dealing with the out-of-court settlement of any disputes between Banks and Customers (Financial and Banking Arbitrator and Legal Banking Ombudsman). Financial and Banking Arbitrator The Financial and Banking Arbitrator is the new conciliation body set up within the Bank of Italy. At 31 December 2014, Customers presented 34 appeals and the Financial and Banking Arbitrator made 35 decisions, 20 of which referring to those presented in 2013 and 15 related to appeals presented in 2014: 13 appeals had a negative outcome (37%) of which 8 (23%) with acceptance of the claims (2 total acceptances and 6 partial), whereas for 5 appeals (14%) the Arbitrator ordered the termination of the bone of contention in that, pending the judgement, there was a refund in favour of the customer. Finally, the Arbitrator made 1 decision declaring the case inadmissible/non-receivable. Legal Banking Ombudsman At 31 December 2014, 6 appeals to the Legal Banking Ombudsman were notified to the Bank. Risk Management and Control Within the scope of the control system, Unipol Banca SpA has set up a risk management system, a process used in support of the company strategy that allows adequate understanding of the nature and importance of the risks to which the company is exposed. The main components of the risk management system show the risk controlling policies (or also policies ) and the new Risk Appetite Framework (hereinafter RAF ). The Risk Appetite is defined as the level of risk, overall and by type, that Unipol Banca intends to take in order to attain its strategic objectives with a focus on solid equity position and financial stability. Through this framework, the Board of Directors defines and approves the objectives of risk and any thresholds of tolerance, stated in terms of venture capital, capital adequacy, liquidity, leverage, approaches taken to manage non-quantifiable risks. This process includes different activities (identification, assessment, monitoring and intervention) for mitigating present or expected risks. The risk management system allows the company to have a single point of view and a holistic approach to risk management, which is an integral part of business management. As part of the adjustments to the New Provisions of the Bank of Italy on Internal Control Systems provided for by the 15th update of Circular 263/2006 during 2014, the main risk controlling policies were updated. The head of the Bank s Risk Management Department is in constant contact with the Risk Management Department of the Parent Company, UGF and with the other departments of Unipol Banca and the subsidiaries, in order to ensure that risk management policies and risk governance are applied uniformly and consistently at Group level. As well as implementing the usual system risk monitoring activity, during 2014, Unipol Banca s Risk Management Department also concentrated on the following new activities summarised below: New Provisions of the Bank of Italy on Internal Control Systems, IT Systems and Business Continuity (15th update of Circular 263/2006 of 2 July 2013; Chap 7,8,9). During the financial year, the structures in charge of the Bank, in coordination with the Parent Company UGF, put in place the measures required for complying with the regulations no later than 1 July 2014 (effective date). The documents, regulations and policies were approved by the Board of Directors of Unipol Banca during the board meeting of 30 June 2014; Basel 3: new rules on capital and liquidity of banks. During 2014, the Risk Management continued its cooperation with other business structures as part of activities undertaken to adjust to the new Supervisory regulations effective as from 1 January With regard to the liquidity risk, in compliance with the new regulations, the prudential disclosures related to the monitoring of the Liquidity Coverage Ratio (LCR) referring to the months starting from March 2014 were sent to the Bank of Italy within the established deadlines. The Risk Management Department collaborated with other company departments concerned to define and test the measurement metrics implemented in the application, provided by the outsourcer 40

43 Unipol Banca Financial Statements 2014 CEDACRI, for calculating the LCR. With reference to the leverage risk, a specific policy called Policy for calculating and monitoring the leverage was prepared in accordance with the new provisions. This Policy describes the methods of calculation and the monitoring process provided in order to limit the risk of excessive leverage. The different prudential disclosures on the leverage ratio on an individual basis, produced on a quarterly basis, were sent to the Bank of Italy; ICAAP report. The Annual assessment report on the adequacy of Internal Capital, drawn up in compliance with Bank of Italy Circular no. 285 of 17 December 2013, was approved by the Board of Directors of Unipol Banca on 23 April 2014 and then sent to the Bank of Italy; Tableau de Bord. in response to the request made during the year by the Bank of Italy to the heads of the Risk Management, Compliance and Audit departments of the banking groups subject to the supervision of the Banking Supervision Service 2, the Risk Management department began to submit on a quarterly basis to the Corporate Bodies a tableau de bord that summarises the results of the analyses carried out by the Risk Management department on the level of exposure of the banking group to the different types of risks (credit, market, operational, liquidity, interest rate, concentration etc.), to the development of the quality of loans, to the consistency of the risks actually taken (first and second pillar) and of any increase in operational volumes. Credit risk. During 2014, a Working Group was started at the outsourcer CEDACRI, in which our Bank took part together with other banks of the consortium, with the aim of reaching PD and Loss Given Default (LGD) measures recalibrated on the basis of a more recent time horizon than the one previously in force, able to consider also the effects of the current economic situation and align the existing models to the regulatory definitions of default. The new recalibrated PDs, related to the models for corporate and private customers, were released in the second half of 2014 and were applied for the first time in Unipol Banca in December As part of the monitoring of the quality of loan portfolio, the Risk Management, during the year, contributed to a further gradual and prudent extension of the areas of application of the internal rating system of the Bank in the process of credit risk taking and management (measuring individual risk, independent authorities, riskreturn combination, accounting provisions on performing loans). Liquidity/ALM and Market Risk. During 2014, following a request made by the Bank of Italy in the first months of the year, the Board of Directors on 23 April 2014 approved a liquidity plan for , prepared with the contribution of the Risk Management. Operational Risks. On 17 December 2014, the Operational Risk Management Policy was approved by the Board of Directors of Unipol Banca; this policy defines the general outline for the operational risk management and was prepared in compliance with the Bank of Italy regulations of reference in force. Managing of Non-Compliance Risk Unipol Banca SpA s Compliance Department is responsible for assessing the adequacy of procedures, processes and internal organisation in order to prevent the risk of sanctions, capital losses or damages to the Bank s image or reputation deriving from the breach of external regulations (laws, rules, provisions of the Supervisory Authorities) and internal rules (for example: by-laws, codes of conduct, codes of self-regulation). The Compliance Department is involved in the ex-ante assessment of conformity to regulations applicable of all the new projects (including operations in new products or services) that the Bank intends to undertake; moreover, offers assistance and advice to the bank bodies on all matters affected by a risk of non-conformity. It also cooperates in staff training in the provisions applicable to the activities performed, in order to encourage a corporate ethos of honesty, correct behaviour and respect of the spirit and the letter of the regulations. It also assesses the implementation of the operations planned and/or effectiveness of the existing organisational activities with reference to regulations already in force or for which appropriate measures have already been applied (ex-post activities). The department is directly responsible for managing the risk of non-compliance with regard to relevant regulations, such as those concerning the carrying out of banking and brokerage activities, management of conflicts of interest, transparency with regard to customers and, more in general, the regulations for the protection of the consumer, and for regulatory areas in respect of which forms of specialised supervision are not already provided for within the Bank. The department carries out its activity both with reference to the Bank and to other companies controlled by it. As regards compliance activities, at the beginning of the year, the department identifies the measures to take with reference to new regulations and to product or process innovations (ex-ante activities) and the activities to be carried out on regulations already in force or in relation to which appropriate steps have already been taken 41

44 1 Management Report with a view to assessing the implementation of the activities planned and/or the effectiveness of the existing organisational activities. On-going operations and those inherent in the general management of the noncompliance risk are also identified. The compliance activities are planned on the basis of the risk, taking into consideration the Department s aims and its main activities. To this end, the following aspects are considered: the evolution of the regulatory context of reference, the results of the previous year s Compliance monitoring activity and the monitoring of the relative corrective measures, the results of the Compliance Risk Assessment activities carried out during the previous year, the results of the activities of the departments that monitor the regulatory areas of interest on the Compliance Department during the previous year and the relative corrective measures, the Bank s strategic and business orientation and the comprehensive degree of implementation of the first level checks. The Bank bodies receive at least yearly reports on the planning, pursuit of activities and relative results as envisaged by the Supervisory Provisions. The Department also provides a regular report to the Internal Control Committee, the Board of Statutory Auditors and the General Manager, on the highlights of the non-compliance risks reported and the relative improvement measures taken or to be taken. During 2014, the Compliance Department continued to provide support and opinions, where appropriate, via participation in the numerous projects of the Bank, some of which completed to date, other still in progress (including participation in the regulatory adaptation projects related to the 15th update to Circular 263/2006 of Bank of Italy, to the Fatca tax legislation, to the 1st update related to Corporate governance and to the 2nd update related to the Banking Groups of Circular 285/2013 of Bank of Italy. With reference to the ex-post monitoring activities, the Department continued its monitoring activities, particularly with regard to investment services (including checks concerning the methods of provision of investment services, reporting obligations/information to be provided to customers and management and reporting of orders), transparency, usury, protection of the consumer, conflicts of interest. Also, it continued to provide support and consultancy to the structures of the Bank in order to ensure the proper application of the organisational procedures on related parties. Lastly, the Department continued to provide advice and assistance to the Bank s top management and to the other companies controlled by it, supporting the Bank s organisational structures (support with the issue of internal regulations: provisions, circulars, service orders) and, in general, the Banking Group in the fulfilment of the obligations imposed by the Supervisory Authorities (requests for information and/or explanations/inspections). Human Resources and Organisation Within the scope of the more comprehensive framework of business strategies, on the matter of Human Resources, human capital (professional and managerial) was developed and made the most of during 2014, with the activation of professional and territorial mobility processes aimed at ensuring the best possible coverage of the organisational positions in terms of quality and quantity. Specifically, Personnel Management supported the organisational changes made, identifying suitable resources, taking care of the communication phase, the relative support and facilitation of the launch of new structures, where this was envisaged. For example, the action in support of the Development project that involved in this period of the year a group of 100 Developers in the promotion and placement of banking products thanks to a specific Bank Insurance synergy. 42

45 Unipol Banca Financial Statements 2014 REMUNERATION POLICIES: highlights of the main activities Analysis and verification of the documents prepared by the Parent Company to guarantee alignment with the provisions issued by the Bank of Italy on 18 November 2014 ( Provisions on policies and practices of remuneration and incentives in banks and banking groups ), ensuring at the same time an overall consistency and uniformity on the matter of remunerations within the entire Unipol Group; remuneration policy, approved by the Board of Directors of UGF SpA on 20 March 2014, relating to the banking segment. In observance of the dictates of the Supervisory Body, this policy defines the principles and criteria that Unipol Banca SpA is required to adhere to in the elaboration and application of the remunerative policies and practices in the segment; on 14 May 2014, the Shareholders meeting of Unipol Banca SpA approved the resolution of the Board of Directors on the 2014 Remuneration policies and the ex post information explaining the remuneration disbursed during Personnel On 31 December 2014, the Bank had 2,388 employees in service, as follows: Open-End Contracts Other Contracts Total F M TOT F M TOT F M TOT General Management Commercial Network 650 1,077 1, ,078 1,732 Other Personnel (*) Total 961 1,422 2, ,423 2,388 (*) Staff on secondment or absent with entitlement to retain the place of employment. Staff members had a higher level of education than the average for the banking system, with 49.8% of employees holding a university degree (ABI statistics 2013: 34.5%), and were younger, with an average age of 43.4, (ABI statistics 2013: 45.1 years old). Despite the intense intra-group incoming mobility, the increase in the number of employees was limited thanks to the implementation of efficiency policies in the coverage of turnover with no replacement provided for 48 resources. The net increase resulted from 148 arrivals, of which 112 employees of Banca Sai SpA inserted as a result of the merger and 18 temporary employees to replace maternity, and the termination of 85 employment contracts, 15 of which early retired workers and 21 transfers to insurance companies of the Parent Company. The turnover of employees, measured using the ratio of new contracts to terminations, net of intra-group transfers, was 0.4, below the replacement value (ABI statistics 2013: 0.7), i.e. new contracts did not offset even half of the terminations of employment contracts during the year. Development and Training The training for all the personnel of Unipol Banca wanted to express, also for 2014, the explicit will to set itself as an essential tool for the growth of people s skills and knowledge, as well as key factor in facilitating professional development. Its purpose was to strongly enhance the company s commitment towards recognising, as a priority, the human resources present in the company. This is why training is a method for guaranteeing compatibility between the characteristics of the persons, the tasks assigned to them, the structures and positions held as well as the operating mechanisms. 43

46 1 Management Report This attention to the enhancement of the skills of the resources already on the company payroll was further implemented through the use of internal technical and commercial trainers. When the deepening and growth of managerial skills must be allowed, external trainers are still maintained. To consolidate these commitments, in synergy with the UnipolSai training structure, managerial and specialised training courses continued in 2014, targeted and aimed at different professional profiles in order to strengthen the skills for the coverage of current and/or future roles. The training activity in 2014 was characterised by the provision of technical and managerial/relation classroom courses for a total of 6,779 days and by the provision of remote courses using the Unipol Web Academy for a total of 2,853 days, totalling 10,633 days. During 2014, as already occurred in 2013, courses for the preparation and development of the skills of the newly hired resources were started; training in procedures and behaviours was dedicated to the incoming colleagues. The part dedicated to the technical aspects benefited from the support of internal trainers, especially through on-the-job training of the participants. Moreover, to allow greater acceptance of the new banking colleagues coming from Banca Sai SpA and increase their awareness of the corporate banking structure, a meeting was organised with representatives of the General Management and of the Parent Company called Welcome to Unipol Banca in which the organisational structures, the main strategic lines and the Bank s positioning within the Unipol Group were illustrated. The Bank/Insurance training synergy included the continuation of the Starter Pack project for the entry of former Fondiaria Sai Agencies in collaboration with the branch owners, aimed at developing the loyalty of the customer for increased productivity in both sectors. More specifically, with regard to the Network, the training programme specifically designed for the figure of Developer, Retail Sales Managers and the creation of a specific course on the development of the commercial role of the Coordinator continued in The training sessions on Foreign Sales Development also continued, for the specific figures of persons in charge of the Business centres and corporate managers, for studying in-depth and knowing specific technical aspects, with the help of internal trainers. During November 2014, the procedural course called Il Nuovo Modello di Consulenza di Portafoglio (The New Portfolio Consulting Model) was started: internally designed and produced in collaboration with the Finance Department, it envisages a development in the way and logics with which new investments are proposed, changing from a single-product approach to portfolio logic. It was attended by more than 350 people of the Network. The annual IVASS update aimed at maintaining operational more than 800 branch employees who perform activities related to the proposition and placement of insurance products and the mandatory training on Safety should also be mentioned. By contrast, with regard to the General Management, the training programme designed to enhance communication, collaboration and management of relations between the Management and Network offices was started in 2014 and will continue until May 2015: the programme focused on sharing and the awareness that each colleague contributes, with his/her own activity, to achieving the objectives of the Bank. With regard to the requirements for improving the language skills highlighted by the Finance, Financial Statement, Administration and Finance and Foreign departments, they took shape in 2014 with the creation of a specific Business and Financial English programme, with the setting up of 7 homogeneous groups that attended the lessons of native English speaking teachers for over six months. The training for non-employee financial advisers was also managed, providing them with both classroom courses and remote-learning courses (FAD), to be used by means of the network training platform of UnipolSai Assicurazioni and AssoretiFormazione. The total for 2014 was of 405 FAD training days, and 417 days of classroom training. Industrial Relations Unipol Banca SpA reserved a special attention to relations with trade unions, with the awareness that talks, respecting and separating the respective roles, are the best way to deal with the various phases of company performance. 44

47 Unipol Banca Financial Statements 2014 During 2014, seven trade union agreements were signed related to: the adjustment of insurance premiums in order to continue to enjoy the same guarantees provided on supplementary health service by Art. 5 and 6 of the CIA 19 April 2011, considering the technical imbalance that was determined on these insurance policies (agreement of 30/1/2014); the access to expected loans in accordance with notice 1/14 of the Fondo Banche Assicurazioni (Banks and Insurance Companies Fund), to finance the training plan called Unipol Banca in Form-Azione, which in turn consists of eight training projects for employees in line with the need to develop the individual professional skills of the recipients and with the development requirements of Unipol Banca s productivity (agreement of 10/9/2014); the setting up on an experimental and extraordinary basis of a one-off Welfare provision for the reimbursement of school fees, for net amount of As an alternative and at the employee s choice in order to ensure the accessibility to all employees - a one-off payment to the Pension Fund for a net amount of or a one-off grant that corresponds to the gross amount of (agreement of 10/9/2014); the merger of Unipol Banca and Banca Sai, in which the Parties defined the appropriate tools to ensure the best employment sustainability, in line with the company objectives of improvement of efficiency and rationalisation, avoiding the use of non-conservative solutions of jobs through the specialisation of some activities at the premises of Turin, the application of intra-group mobility or the proposal of retirement incentives for personnel fulfilling pension requirements. Moreover, existing regulations and wages at Unipol Banca were fully extended to all employees, thus ensuring full harmonisation (agreement of 22/9/2014). The other agreements of 16 and 23 September 2014, respectively, concerned video surveillance, telephone recordings at the Finance Department of the General Management, as well as the application of the Measure of Antitrust Authority no. 192 of 2011 on tracking of transactions related to customers of banks and in accordance with the provisions of Art. 4 of the Workers Statute of Rights. Moreover, special meetings were held with trade unions, during which the Business Plan, the 2014 Incentive System for all the employees of the Commercial Network, as well as the reorganisation of part of the Commercial Network were submitted to the Trade Union Organisations. Organisation and Systems During 2014, the operations to develop the organisational structure continued with a view to ensuring an increasingly effective and efficient development and commercial actions and risk monitoring. As part of the operations of the organisational structure, the following was carried out: simplification of the structures of the General Management by shortening the hierarchical levels with a view to improving the control over credit disbursement, monitoring and recovery; setting up of the Administration, Loans and Operations Deputy General Management with results in the reorganisation of the already existing functions reporting directly to the new functions; setting up of the Commercial Area Deputy General Management; reorganisation of the Remote banking functions as a result of the merger by incorporation of Banca Sai into Unipol Banca; establishment of the ICT and IT security function for monitoring better the IT system and the company IT security; Moreover, during 2014, the following projects were carried out: analyses of the evolutionary scenarios of the Network Commercial and Organisational Model, for making the commercial action increasingly effective and efficient through customer segmentation and organisational simplification; project to adapt the internal controls and the IT system to the 15th update of Circular no. 263/06 New prudential supervisory provisions for banks ; project to adapt the business continuity system, in compliance with both the indications of the Supervisory Authority and the update of circular no. 263/06, and implemented in accordance with the guidelines of Unipol Gruppo Finanziario. This project analysed business processes, assessing their risk of interruption, in order to ensure business continuity even in extreme conditions; 45

48 1 Management Report in relation to the Remote banking project, already started in 2013, during 2014, new developments in terms of products and services (commercial partnerships, new forms of deposit) and in terms of marketing and communication were launched to promote the offer; SEPA project, which provides for the abandonment of the national payment systems in favour of a single payment system in the Eurozone; as from 1 February 2014 (project end date set by the European Parliament) Unipol Banca adopted the new formats of incoming and outgoing transfers, without using the extension period envisaged by the European Commission; FATCA project, the new US tax legislation aimed to combat tax evasion, with the collaboration of foreign intermediaries. During the first half of 2014, Unipol Banca completed the first phase of the project, consisting in the definition of the overall governance model, in the preparation of the operational processes, in their formalisation in specific internal regulations, in the integration of the regulations with regard to customers and implementation of IT systems; development project, to significantly increase the base of common Bank Insurance customers, as part of a growing strategic interaction between the two. Internal Auditing The internal auditing activity performed by the Audit Department is an independent and objective insurance and advisory activity aimed at improving the effectiveness and efficiency of the organisation. It helps the organisation pursue its aims via a systematic professional approach, which generates added value in that it is aimed at assessing and improving the monitoring, risk management and corporate governance processes. Internal Audit is responsible for assessing whether the Internal Control and Risk Management System is adequate and suitable for the type of business carried out and the level of risks taken and whether it needs to be adapted to provide help and advice to the Company s other departments. In performing its tasks, the department structures the auditing activity into process audits, preparation of reports required by legislation and compliance checks/inspections on the commercial network. As regards the audits on head office processes, the auditing activity is planned in such a way as to identify the processes to be checked in advance taking a Risk Based and Process Driven approach, identifying the risk associated with each business process through the assessment made by the Risk Management, considering that the Audit Department is acquainted with the processes, related risks and feedback obtained from the audits carried out in previous years. As regards the compliance checks/inspections on commercial networks, the number and type of operations to be carried out are identified at the beginning of the year, while the single units of the network to be inspected are selected periodically, analysing the risks based on the anomaly indicators or on the basis of reports of potentially irregular aspects received and taking into account the time elapsed since the last inspection on site, regardless of the risk highlighted by the anomaly indicators. In drawing up the plan of activities, the Department also takes account of any specific request by the Senior Management, the Board of Directors, the Board of Statutory Auditors, the Internal Control Committee and a margin of flexibility to deal with any unforeseeable requirement or requests. The Audit Department reports regularly to the Internal Control Committee on the interventions carried out, any discrepancy found and the improvement actions carried out or to be implemented and possibly the detail of the most important measures and the outcome of the monitoring of the expired recommendations. The Board of Directors and the Board of Statutory Auditors are informed of the activity performed at least once a year. Audits on head office processes are carried out analysing the process subject to audit, in order to identify the risks pertinent to the internal checks being carried out, for which to assess the relative efficiency and effectiveness with a follow-up valuation. The results of these activities are promptly reported to the managers of the process analysed and the other control functions, in a specific Audit Report. The same report is also sent to the Chairman and to the Senior Management of the Bank and of Unipol Gruppo Finanziario and, in the event of intervention on a subsidiary of the Banking Group, to its Chairman and Senior Management. During 2014, as regards the process audits and the other audits, the department was engaged in 29 activities, of which 8 currently in progress. The completed operations showed corrective measurements that management has undertaken to implement, indicating those responsible and the envisaged completion date. With reference to the commercial network, the Audit Department carried out checks on observance of the internal and external rules aimed at identifying anomalous trends and/or violations of procedures and 46

49 Unipol Banca Financial Statements 2014 regulations by the network itself. These checks are also aimed at revealing any finding on the effectiveness/ efficiency of the internal control system of the commercial network and of the head office processes, where they influence the activity performed by the network. Overall, with reference to the branches network, 146 audits were carried out on site and 21 remote audits were carried out during 2014, as well as 16 centralised head office analytical checks relating mostly to inflows of information from other Bank departments. Checks were also carried out on 7 Business Centres and on 94 Financial advisers, 57 of which on site and 37 remote; of the latter, 4 are in progress. A check was also carried out to understand the state of service of the safe deposit boxes. During 2014, the Audit Department was engaged in project works and working groups, including the projects to adapt to the 15th update of Circular no. 263 New prudential supervisory provisions for banks and to the Measure of the Antitrust Authority no. 192 Provisions on circulation of bank information and tracking of banking transactions and the working group engaged in the preparation of the quarterly tableau de bord requested by the Bank of Italy. It has also carried out further checks resulting from regulatory obligations. As envisaged in internal regulations, the Department carried out a preliminary analysis of the corporate communication documents in order to ensure their consistency with Internal Audit and Risk Management System Guidelines approved by the Board of Directors; regular interviews enabled it to keep abreast of how deficiencies revealed in the audit reports were being dealt with; lastly, it drew up the reports for the Supervisory Authorities, the Internal Control Committee and the Board of Directors of the Bank and of each company of the Banking Group, and provided support for the Regulatory Bodies set up in accordance with Legislative Decree 231/2001. Corporate Governance Independence of Directors As already indicated in the Management Report related to previous financial years, the Bylaws of the Bank provide that at least two members of the Board of Directors have to possess the independence requirements established for statutory auditors by Art. 148, paragraph 3 of the Consolidated Law on Finance (TUF). The Board of Directors regulations regulated, among other things, the methods used to assess the condition of independence of the Board, envisaging the involvement of individual members and the Board as a whole. In order to keep a close eye on their independence (both during the appointment of each Director and during the annual monitoring of the board) and in view of CONSOB Communication DEM/ of 20 May 2010, the Board of Directors verified on 14 May 2014 and 15 October 2014 (following the appointment of the new director by the ordinary Shareholders Meeting of 3 October 2014) that the directors holding office on the above dates met the independence requirements. The Board of Directors, applying the system described above, identified and ascertained during the above meetings that the eight directors: Oscar Guidetti (Chairman), Gasperoni Elio (Deputy Chairman), Capanna Giuseppe, Gillone Fabrizio, Rizzi Antonio, Cojutti Manuela, Vella Francesco and Venturi Umberto, met the independence requirements. Limit to the Offices Held by Directors As already indicated in the Management Report related to previous financial years, the Bank specified in its Bylaws that the Board of Directors establishes its own rule for limits on the total number of offices that its Directors and Statutory Auditors may hold in all the companies referred to in book V, part V, chapters V, VI and VII of the Civil Code. The Code of Corporate Governance and the Rules governing the Board of Directors established the maximum number of directorships or auditorships deemed appropriate for the role of director to be carried out effectively. The general criteria identified differ for each role (chairman, executive director, nonexecutive director or independent director) depending on the type and size of the companies in which the roles are carried out and whether they belong to the Unipol Group. In 2014, in order to keep a close eye (both during the appointment of each Director and during the annual monitoring of the board) on the existence of any limits, in view of the checks to be carried out subsequently and 47

50 1 Management Report examined the number and type of the offices held by each director in accordance with the classification adopted, the Board of Directors at its meetings held on 14 May 2014 and 15 October 2014 (following the appointment of the new director by the ordinary Shareholders Meeting of 3 October 2014), resolved that all the Directors holding office on the most recent date were qualified to be Directors of the Bank. Annual Self-Assessment Following (i) the provisions issued by the Bank of Italy in force each time on the matter of corporate governance and organisation of banks, (ii) the provisions concerning the optimum qualitative and quantitative composition of the Board of Directors notified to the shareholders, (iii) the appointment of new Directors by the ordinary Shareholders Meeting of 23 April 2013, (iv) the subsequent co-optations occurred in 2013 and 2014, (v) and the appointments by the ordinary Shareholders Meeting of 23 April 2014 and of 3 October 2014 of directors including directors already co-opted, the Board of Directors examined and resolved on refocusing and on the presence of professional skills contemplated by the composition referred to in the previous point (ii). The process of self-assessment carried out on 2014, without prejudice to the fact that there were no significant differences with the previous assessments showed, inter alia, the following: an overall positive opinion on all the areas assessed; a substantially positive assessment on the composition of the internal board committees; that the Board; i) monitors efficiently the financial performance of the Bank, the objectives set and the results achieved; ii) ensures that the Bank is provided with adequate internal controls for risk control; iii) sees to and defines the correct implementation of the risk management process; iv) ensures the effectiveness of the risk management system and the dissemination of a culture of risk; v) effectively manages the potential conflicts of interest and transactions with related parties; vi) operates in an open and positive climate and with spirit of cooperation; that the Chairman performs its role efficiently; the preparation of appropriate actions (also through a broader information outline) that can help improve the preparation and the contribution of the Directors on strategies and organisation as well as the performance of the banking system with a special reference to the recovery of loans and to the development of the legal and regulatory framework; a greater assistance to the Shareholder by the Directors when defining the ex ante optimum qualitative and quantitative composition of the Board both on the method of selection of the new Directors and for a greater focus on the competence related to the knowledge of bank-insurance issues. Report on Corporate Governance and Ownership Structures Foreword and Regulatory References During 2012, Unipol Banca issued, in accordance with Italian Law Decree no. 210 of 6 December 2011, bonds guaranteed by the Italian Government due to their use as collaterals within the scope of a liquidity procurement programme with the ECB, according to the procedure laid down therein that also required the formal listing on a regulated market (occurred later on the MOT, (TBM - Telematic Bonds Market)). These bonds, following the ECB s decision not to consider them usable any more as collaterals as from January 2015, were sold during the financial year to qualified market operators. Moreover, in relation to both the purpose and amount of the issue and the type of investors, the bonds were never traded on that market. Art. 123-bis of the Consolidated Law on Finance (TUF) establishes the obligation of companies issuing shares admitted to trading on the regulated markets to entitle a section of the Management Report to the topic of corporate governance and ownership structures. Paragraph 5 of said article envisages particularly that, for companies that do not issue stocks admitted to trading on regulated markets or in multilateral trading systems, the informative obligation be limited to the main characteristics of the risk management and internal control systems existing in relation to the financial informative process, also at consolidated level. The next paragraph looks at the financial informative process, supplying the indications required by the provision of the law, as specified in paragraph 2b of Art. 123-bis of the Consolidated Financial Law. 48

51 Unipol Banca Financial Statements 2014 Systems of Risk Management qnd Internal Control Existing in Relation to the Financial Informative Process Taking into account that envisaged by Art. 154-bis, paragraphs 3 and 4, of legislative decree no. 58 of 24 February 1998, the Manager in charge of financial reporting of the Parent Company Unipol Gruppo Finanziario SpA, Maurizio Castellina, certifies the adequacy in relation to the characteristics of the business and the effective application of the administrative and accounting procedures for the formation of the consolidated financial statements on all the Group Companies considered significant, on the basis of the quantitative and qualitative criteria, in terms of contribution to the consolidated financial report of the aforesaid Parent Company Unipol Gruppo Finanziario SpA. The method adopted by Unipol Gruppo Finanziario envisages that the significant Companies be those that make a relevant contribution to the determination of the amounts presented in the items of the Consolidated Financial Statements. Applying this method to the figures of the financial statements at 31 December 2013, Unipol Banca was identified as a significant Company in the aggregate for 2014 and included in the corporate setting for the assessment of the adequacy and the effective application of the administrative and accounting procedures. The assessment of the adequacy of the administrative and accounting procedures for the formation of the consolidated financial statements at 31 December 2014 was based on a process defined by Unipol Gruppo Finanziario SpA inspired by the COSO Framework (Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Tradeway Commission) and, for the IT component, by the COBIT Framework (Control Objectives for IT and related technology), unanimously recognised as the reference standard for the implementation and assessment of the internal control systems. For further details, see the Annual Report on Corporate Governance that can be found on the website of the Parent Company Unipol Gruppo Finanziario SpA ( in the Corporate Governance section. Data Protection The Companies of the Banking Group took all the steps necessary to ensure fulfilment of the obligations envisaged by legislation on the matter of personal data protection (Legislative Decree no. 196/2003), in order to guarantee the defence and integrity of the data of customers, employees, other members of staff and all those with whom they come into contact. Even if Italian Law Decree no. 5 of 9 February 2012 Urgent measures for simplification and development eliminated, with Art. 45, the mandatory preparation of Data Protection Document (DPS), it was considered appropriate to continue to prepare a similar document considering it an important instrument for the pursuit of safety and confidentiality. Other Information At 31 December 2014, the parent company Unipol Gruppo Finanziario SpA directly and indirectly held 100% of Unipol Banca SpA. 49

52 1 Management Report Management and Coordination by The Parent Company Unipol Gruppo Finanziario Unipol Gruppo Finanziario SpA is the holding and service company of the UnipolSai Group, which carries out the management and coordination activity pursuant to Art et seq. of the Civil Code. Transactions with Group Companies The breakdown of the balances of the Statement of Financial Position and of the Income Statement for 2014, with regard to related party transactions of Unipol Banca SpA vis-à-vis the other companies of the Unipol Group, is indicated in the Notes to the Separate Financial Statements Part H Related-party transactions. Research & Development Pursuant to Art paragraph 2, no. 1), the Bank did not carry out any research and development during the financial year. Significant events after the reporting period In January 2015, the general inspection by the Bank of Italy was completed: the results will be announced by the Supervisory Body in the coming months. On 11 February 2015, an amendment to the Indemnity Agreement was defined with the Parent Company Unipol Gruppo Finanziario SpA that envisages, effective as from the end of the 2014 financial year, the widening of the area of indemnified non-performing loans to other positions totalling 200.9m (on the basis of the financial statements at 31 December 2014). After this amendment, the overall area of the loans included in the agreement amounted to 907.7m. Business outlook The actions undertaken both in commercial and credit terms suggest that it is possible to recover, albeit in a context still in crisis, the economic equilibrium in the medium term. 50

53 Unipol Banca Financial Statements 2014 Proposal for Approval of the Financial Statements and of Covering the Loss for the Period Dear Shareholders, We hereby submit for your approval the Separate Financial Statements for the year ended 31 December 2014, which close with a net loss of 90,967,220. We would suggest: deferring to future financial years the entire loss amounting to 90,967,220. The Board of Directors Bologna, 18 March

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56 2 Separate Financial Statements Amounts in Statement of Financial Position Assets 31/12/ /12/2013 Changes 10 Cash and cash equivalents 98,890, ,648,495 (9,758,095) 20 Held-for-trading financial assets 46,302 99,471,956 (99,425,654) 40 Available-for-sale financial assets 638,795, ,572,151 (164,776,842) 50 Held-to-maturity investments 817,970, ,380,894 (410,279) 60 Receivables from banks 346,148, ,333,941 (37,185,389) 70 Receivables from customers 9.827,830, ,689, ,141, Hedging derivatives 7,925,922 9,961,257 (2,035,335) 100 Equity investments 52,742,215 11,438,577 41,303, Property, plant and equipment 16,958,466 18,095,734 (1,137,268) 120 Intangible assets 603, , ,491 of which: - goodwill Tax assets 261,004, ,231,693 (28,226,912) a) current 9,093,609 19,662,794 (10,569,185) b) deferred 251,911, ,568,899 (17,657,727) b1) of which pursuant to Law 214/ ,084, ,116,536 (11,032,361) 140 Non-current assets and disposal groups held for sale Other assets 237,839, ,483,113 4,356,867 Total assets 12,306,756,856 12,391,603,076 (84,846,220) 54

57 Unipol Banca Financial Statements 2014 Amounts in Statement of Financial Position Liabilities and Shareholders Equity 31/12/ /12/2013 Changes 10 Due to banks 795,892,661 1,257,551,633 (461,658,972) 20 Due to customers 7,622,297,916 7,745,904,036 (123,606,120) 30 Securities outstanding 2,625,967,981 2,321,087, ,880, Held-for-trading financial liabilities - 2,852 (2,852) 60 Hedging derivatives 84,472,566 50,046,273 34,426, Tax liabilities 32,148,703 38,908,874 (6,760,171) a) current 4,560,385 7,784,148 (3,223,763) b) deferred 27,588,318 31,124,726 (3,536,408) 100 Post-employment benefits 397,439, ,296,609 82,142, Provisions for risks and charges: 17,208,631 15,418,277 1,790, pension funds and similar obligations 16,441,702 14,034,367 2,407,335 a) quiescienza e obblighi simili b) other provisions 16,441,702 14,034,367 2,407, Valuation reserves (11,036,423) 4,762,617 (15,799,040) 160 Reserves (80,492,944) (76,321,852) (4,171,092) 170 Share premium reserve Share capital 897,384,181 1,004,500,000 (107,115,819) 200 Profit (loss) for the year (+/-) (90,967,220) (299,587,855) 208,620,635 Total Liabilities and Shareholders Equity 12,306,756,856 12,391,603,076 (84,846,220) 55

58 2 Separate Financial Statements Amounts in Income Statement Items 31/12/ /12/2013 Changes 10 Interest income and similar income 392,670, ,159,338 (20,488,671) 20 Interest expense and similar expense (173,589,062) (206,722,832) 33,133, Net interest income 219,081, ,436,506 12,645, Commission income 152,607, ,321,692 24,285, Commission expense (48,591,165) (34,391,598) (14,199,567) 60 Net commission income 104,016,002 93,930,094 10,085, Dividends and similar income 2,289, ,006 1,793, Net result from trading 11,355,154 (6,029,740) 17,384, Net result from hedging 228,997 (121,990) 350, Profits (losses) on disposal or repurchase of: 64,548,468 11,512,116 53,036,352 a) receivables 10,373 (5,944,575) 5,954,948 b) available-for-sale financial assets 64,943,471 16,041,074 48,902,397 c) held-to-maturity investments d) financial liabilities (405,376) 1,415,617 (1,820,993) 110 Net result on financial assets and liabilities designated at fair value Net interest and other banking income 401,520, ,222,992 95,297, Net impairment adjustments to: (245,209,096) (357,045,791) 111,836,695 a) receivables (194,136,869) (305,977,750) 111,840,881 b) available-for-sale financial assets (47,981,491) (49,585,091) 1,603,600 c) held-to-maturity investments d) other financial assets (3,090,736) (1,482,950) (1,607,786) 140 Net result from financial activities 156,311,058 (50,822,799) 207,133, Administrative expenses: (285,171,881) (273,781,047) (11,390,834) a) personnel expenses (155,662,609) (147,493,257) (8,169,352) b) other administrative expenses (129,509,272) (126,287,790) (3,221,482) 160 Net provisions for risks and charges (3,739,324) (4,476,318) 736, Net adjustments/write-backs to property, plant and equipment (7,078,537) (8,965,772) 1,887, Net adjustments/write-backs to intangible assets (447,366) (561,781) 114, Other operating expenses/income 29,136,953 31,666,388 (2,529,435) 200 Operating expenses (267,300,155) (256,118,530) (11,181,625) 210 Profits (losses) on equity investments (2,004,209) (50,000) (1,954,209) 220 Valuation differences on property, plant and equipment and intangible assets designated at fair value Goodwill impairment - (124,725,881) 124,725, Profits (losses) on disposal of investments Pre-tax profit (loss) on current operations (112,993,306) (431,717,210) 318,723, Income tax on current operations 22,026, ,129,355 (110,103,269) 270 Profit (loss) on current operations after tax (90,967,220) (299,587,855) 208,620, Profit (loss) after tax on disposal groups held for sale Profit (loss) for the year (90,967,220) (299,587,855) 208,620,635 56

59 Unipol Banca Financial Statements 2014 Amounts in Statement of Comprehensive Income for the Year Ending 31 December 2014 Items 31/12/ /12/2013 Changes 10 Profit (loss) for the year (90,967,220) (299,587,855) 208,620,635 Other income components net of tax without transfer to the income statement 20 Property, plant and equipment Intangible assets Defined benefit plans (1,414,582) (289,300) (1,125,282) 50 Non-current assets being disposed of Portion of valuation reserves for investments valued at equity Other income components net of tax with transfer to the income statement 70 Foreign investment hedging Exchange rate differences Cash flow hedging (1,466,179) 8,055,743 (9,521,922) 100 Available-for-sale financial assets (12,497,686) 19,406,651 (31,904,337) 110 Non-current assets being disposed of Portion of valuation reserves for investments valued at equity Total other income components, net of taxes (15,378,447) 27,173,094 (42,551,541) 140 Comprehensive income (Item ) (106,345,667) (272,414,761) 166,069,094 57

60 2 Separate Financial Statements Valori in euro Statement of Changes in Shareholders Equity for the Year Ending 31 December 2013 Allocation of prior year s result Share capital: Balances at 31/12/2012 Changes in opening balances Balances at 1/1/2013 Reserves Dividends and other allocations a) ordinary shares 1,004,500,000-1,004,500, b) other shares Share premium reserve Reserves: a) profit (53,395,879) - (53,395,879) 13,439,336 - b) other (13,906,131) - (13,906,131) - - Valuation reserves: (21,872,953) - (21,872,953) - - Equity instruments Treasury shares Net profit (loss) for the year 13,439,336-13,439,336 (13,439,336) - Shareholders' equity 928,764, ,764, (1) On 22 April and 8 July 2013, the mergers by incorporation of Unipol Leasing SpA and Unipol Merchant SpA into Unipol Banca SpA became effective (accounting and tax effect 1/1/2013). These transactions, which were configured as mere reorganisations within the Group, were deemed to be lacking in all economic substance and consequently recorded with the continuity of amounts in line with that envisaged in document OPI 1 and E 2 issued by Assirevi. As the transfer values are higher than the historic amounts, the excess was reversed, by reducing the merging company s shareholders equity and recording to reserve 2,051,578 for Unipol Leasing SpA and 20,407,600 for Unipol Merchant SpA in its financial statements. Amounts in Statement of Changes in Shareholders Equity for the Year Ending 31 December 2014 Allocation of prior year s result Share capital: Balances at 31/12/2013 Changes in opening balances Balances at 1/1/2014 Reserves Dividends and other allocations a) ordinary shares 1,004,500,000-1,004,500, b) other shares Share premium reserve Reserves: a) profit (39,956,543) - (39,956,543) (299,587,855) - b) other (36,365,309) - (36,365,309) - - Valuation reserves: 4,762,617-4,762, Equity instruments Treasury shares Net profit (loss) for the year (299,587,855) - (299,587,855) 299,587,855 - Shareholders' equity 633,352, ,352, (1) On 3 November 2014, the merger by incorporation of Banca Sai SpA into Unipol Banca SpA became effective (accounting and tax effect 1/1/2014). This transaction, which was configured as a mere reorganisation within the Group, was deemed to be lacking in all economic substance and consequently recorded with the continuity of amounts in line with that envisaged in document OPI 1 and E 2 issued by Assirevi. As the transfer values are higher than the historic amounts, the excess was reversed by reducing the merging company s shareholders equity and recording to reserve 44,127,635 in its financial statements. 58

61 Unipol Banca Financial Statements 2014 Changes during the period Equity transactions Changes in reserves (1) Issue of new shares Purchase of treasury shares Extraordinary distribution of dividends Changes in equity instruments Derivatives on treasury shares Stock option 2013 Comprehensive income Shareholders equity at 31/12/ ,004,500, (39,956,543) (22,459,178) (36,365,309) (537,524) ,173,094 4,762, (299,587,855) (299,587,855) (22,996,702) (272,414,761) 633,352,910 Changes during the period Equity transactions Changes in reserves (1) Issue of new shares Purchase of treasury shares Extraordinary distribution of dividends Changes in equity instruments Derivatives on treasury shares Stock option 2014 Comprehensive income Shareholders equity at 31/12/2014 (339,544,397) 232,428, ,384, ,544, (44,127,635) (80,492,944) (420,593) (15,378,447) (11,036,423) (90,967,220) (90,967,220) (44,548,227) 232,428, (106,345,667) 714,887,594 59

62 2 Separate Financial Statements Amounts in Statement of cash flows - indirect method Amount 2014 Amount 2013 A. OPERATING ACTIVITY 1. Cash generated from operations 143,039,401 29,476,617 - net profit (loss) for the year (+/-) (90,967,220) (299,587,855) - capital gains/losses on held-for-trading financial assets/liabilities and on financial assets/liabilities designated at fair value (-/+) 43,300 (181,389) - capital gains/losses on hedging activities (-/+) (228,997) 121,990 - net impairment adjustments (+/-) 249,666, ,059,858 - net adjustments/write-backs to property, plant and equipment and intangible assets (+/-) 7,525,903 9,527,553 - net provisions for risks and charges and other costs/revenues (+/-) 3,739,324 4,476,318 - unsettled taxes (+) (22,025,953) (132,129,355) - net adjustments/write-backs to disposal groups held for sale, net of tax effect (-/+) other adjustments (+/-) (4,713,761) (36,810,503) 2. Cash generated (absorbed) by financial assets 780,496, ,226,856 - held-for-trading financial assets 110,429,050 (98,725,799) - financial assets designated at fair value available-for-sale financial assets 233,354,532 (4,506,010) - receivables from banks: on demand 21,257,767 54,015,024 - receivables from banks: other receivables 125,177,158 15,120,750 - receivables from customers 273,688, ,612,092 - other assets 16,589,042 14,710, Cash generated (absorbed) by financial liabilities (1,022,439,035) (245,125,518) - due to banks: on demand (14,088,780) - - due to banks: other payables (498,500,748) (251,788,540) - due to customers (942,904,566) 84,371,012 - securities outstanding 296,880,048 (31,168,448) - held-for-trading financial liabilities (2,852) 2,381 - financial liabilities designated at fair value other liabilities 136,177,863 (46,541,923) Net cash generated (absorbed) by operating activity (98,903,282) 81,577,955 B. INVESTMENT ACTIVITY 1. Cash generated by 4,086,160 2,079,406 - sales of equity investments 1,877,067 1,550,001 - dividends collected on equity investments 2,200, ,348 - sales of held-to-maturity investments sales of property, plant and equipment 8, ,057 - sales of intangible assets sales of business branches - - Continued 60

63 Unipol Banca Financial Statements 2014 Amounts in Statement of cash flows - indirect method Amount 2014 Amount Cash absorbed by (14,940,973) (105,437,068) - purchases of equity investments - (101,975) - purchases of held-to-maturity investments (8,597,388) (98,848,817) - purchases of property, plant and equipment (5,784,849) (6,070,550) - purchases of intangible assets (558,736) (415,726) - purchases of business branches - - Net cash generated (absorbed) by investment activity (10,854,813) (103,357,662) C. FINANCING ACTIVITY - issues/purchases of treasury shares 100,000, issues/purchases of equity instruments distribution of dividends and other purposes - - Net cash generated (absorbed) by financing activity 100,000,000 - NET CASH GENERATED (ABSORBED) DURING THE YEAR (9,758,095) (21,779,707) RECONCILIATION Financial statement items Amount 2014 Amount 2013 Cash and cash equivalents at the beginning of the year 108,648, ,428,202 Net total cash generated (absorbed) during the year (9,758,095) (21,779,707) Cash and cash equivalents: effect of change in exchange rates - - Cash and cash equivalents at the end of the year 98,890, ,648,495 61

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66 3 Notes to the Separate Financial Statements Part A ACCOUNTING POLICIES A.1 GENERAL Section 1 Declaration of compliance with international accounting standards In compliance with Legislative Decree 38 of 28 February 2005, the 2014 financial statements of Unipol Banca SpA were drafted in accordance with the International Financial Reporting Standards (IAS/IFRS) issued by the International Accounting Standards Board (IASB), endorsed by the European Commission and published in the Official Journal of the European Union, according to the approval and publication procedure set out in Community Regulation 1606 of 19 July The financial statements were drawn up in accordance with the instructions issued by the Bank of Italy, exercising the rights and powers conferred by the Decree. In particular, the instructions referred to in Circular 262 of 22 December 2005 as amended, which governs the layout and contents of the financial statements of banks to be drawn up in accordance with international accounting principles, were applied. In drafting the financial statements for the year, reference has been made to the IAS/IFRS international accounting standards, endorsed and effective at 31 December Recent developments regarding international accounting standards are shown in Section 4 Other aspects below. Section 2 General principles The financial statements are made up of the Statement of Financial Position, the Income Statement, the Statement of Comprehensive Income, the Statement of Changes in Shareholders Equity, the Statement of Cash Flows and the Notes to the Financial Statements. They are also accompanied by the Management Report. The company s financial statements have been drawn up clearly and represent the assets and liabilities, financial situation and economic result for the year in a truthful and correct manner. The measurement criteria are adopted with a view to the business as a going concern, in application of the principles of accruals, relevance and significance of the accounting information and prevalence of the economic substance over the legal form. The assumption that the business is a going concern is considered to be confirmed with reasonable certainty, since it is thought that the Bank, together with the reference group of companies, has adequate resources to guarantee that the business can continue in the foreseeable future. See also Section 4 Other aspects below. The international accounting standards were applied without exception. The currency of account is the Euro. The amounts in the tables to the financial statements are in euro units, while those in the notes to the financial statements are expressed in thousands, unless otherwise stated. The financial statements are shown in comparative format, stating the values for the previous year. The Notes to the Financial Statements and the Board of Directors Report on Operations supply the information required under applicable legislation, supplemented, where deemed appropriate, by other information that is not compulsory but intended to provide a better picture of the Bank s overall situation. Section 3 Events subsequent to the accounting reference date In January 2015, the general inspection by the Bank of Italy was completed: the results will be announced by the Supervisory Body in the coming months. On 11 February 2015, an amendment to the Indemnity Agreement was defined with the Parent Company Unipol Gruppo Finanziario SpA that envisages, effective as from the end of the 2014 financial year, the widening of the area of indemnified non-performing loans to other positions totalling 200.9m (on the basis of the financial statements at 31/12/2014). After this amendment, the overall area of the loans included in the agreement amounted to 907.7m. 64

67 Unipol Banca Financial Statements 2014 Section 4 Other aspects Information on expectation of the business to be a going concern The joint coordination board between the Bank of Italy, CONSOB and ISVAP on application of the IAS/IFRS according to document 2 of 6 February 2009 Information to be provided in financial reports on expectation of the business to be a going concern, financial risks, impairment tests on assets and uncertainty as to the use of estimates, asked the Directors to make particularly accurate assessments of the existence of the assumption of expected continuation of the business as a going concern. The recommendation was also referred to in document 4 of 3 March 2010, issued jointly by the Bank of Italy, CONSOB and ISVAP. Paragraphs 25 and 26 of IAS 1 in particular establish, in brief, that the senior executives must assess the company s ability to continue to operate as a functioning entity, taking into account all the information available on at least the twelve months following the end of the year. The level of analysis depends on the specific circumstances of each individual case. Profits from previous years and easy access to financial resources confirm the presumption that the company will remain in business, even if no detailed analysis is carried out. To this end, having examined the risks and uncertainties connected with the current macroeconomic context, it is considered reasonable to expect that the Bank will continue operating in the foreseeable future and, as a result, the consolidated financial statements for 2014 were drawn up on the assumption that the business is a going concern. The uncertainties connected with problems relating to risks involving liquidity, credit and income were not considered significant and, at any rate, such as not to generate doubts as to business continuing, considering also the Group s solid equity position and facilitated access to financial resources. Risks and uncertainties connected with the use of estimates The application of certain accounting standards necessarily involves significant assessment elements based on estimates and assumptions that are uncertain at the time of their formulation. For the 2014 financial statements, the assumptions made are considered to be appropriate and, as a result, the financial statements were drawn up with clarity and give a true and fair view of the financial position, the results of the operations and of the cash flows. In order to make reliable estimates and assumptions, reference was made to the historical experience as well as to other factors considered appropriate in the present case, based on all available information. However, it cannot be ruled out that changes in these estimates and assumptions may have significant effects on the financial and economic situation, as well as on potential assets and liabilities in the financial statements for reporting purposes, should the assessment elements be different than those expressed at the time. The estimates mainly concern: evaluation of receivables; assets and liabilities recognised at fair value (in particular, for level 2 and 3 financial instruments); the analyses aimed at identifying impairment losses on intangible assets (e.g.: goodwill) recorded in the financial statements (impairment test); the quantification of provisions for risks and charges and provisions for employee benefits. For information on the methods used in determining the items in question and the main risk factors, reference is made to paragraphs containing the description of the measurement criteria. Accounting standards and interpretations effective as from 1 January 2014 IFRS 10, 11, 12, amendments to IAS 27 and IAS 28 On 12 May 2011, the IASB published the standards: IFRS 10 Consolidated Financial Statements, which replaced IAS 27 with reference to the part concerning the consolidated financial statements and the SIC12 interpretation; IFRS 11 Joint Arrangements, which replaced IAS 31; 65

68 3 Notes to the Separate Financial Statements IFRS 12 Disclosure of Interests in Other Entities that contains the requirements of accounting representation for IFRS 10 and 11; IAS 27 Separate Financial Statements ; IAS 28 Investments in Associates and Joint Ventures. According to IFRS 10, an investor controls an investee if and only if the investor has all of the following elements: the decision-making power to direct the relevant activities (which affect the economic returns); exposure, or rights, to variable returns from its involvement with the investee; the ability to use its power over the investee to affect the amount of the investor s returns. IFRS 11 defined a joint arrangement as an arrangement of which two or more parties have joint control. It distinguishes a joint operation from a joint venture: a joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. In accounts, assets and liabilities relating to the arrangement are reflected in the financial statements using the standard of reference; a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. These parties are defined joint venturers. In accounts, the joint venture is consolidated using the equity method. The objective of IFRS 12 is to require the disclosure of information that enables users of financial statements to evaluate: the nature of, and risks associated with, its interests in other entities; the effects of those interests on its financial position, financial performance and cash flows. IAS 27 Separate Financial Statements has the objective of setting standards to be applied in accounting for investments in subsidiaries, joint ventures and associates in separate financial statements. The new IAS 28 Investments in Associates and Joint Ventures prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. IFRS 10, 11, 12, IAS 27 and IAS 28 were approved with (EU) Regulation no of 11 December 2012 and became effective as from 1 January IAS 32 - Financial Instruments: presentation The 1256/2012 Regulation of the European Commission of 13 December 2012, published in the Official Journal of the European Union No. L 360 of 29 December 2012 amended IAS 32, with reference to the requirements for offsetting financial assets and liabilities. Amendments are effective as from 1 January Amendments to IFRS 10, 12 and to IAS 27 Investment entities On 31 October 2012, IASB published the document Investment entities that amended IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements ; this document amended IFRS 10 in order to prescribe investment entities to assess their equity investment in a subsidiary at fair value recorded in the income statement rather than consolidate it, in order to better represent their business model. Following this logic, IFRS 12 was amended to impose, in case of application of the exception to the requirement to consolidate, the presentation of a specific information concerning the assessments and the significant assumptions adopted in determining whether the company fell under the case of investment entity. Consequently, IAS 27 was amended in order to provide that the company, as investment entity, is exempt from the consolidation, presents its separate financial statements as the only financial statements and that, if it has to prepare the consolidated financial statements, it is obliged to enter its investment in a subsidiary measured at fair value recorded in the income statement in the consolidated financial 66

69 Unipol Banca Financial Statements 2014 statements in the same way as the separate financial statements. The above-mentioned amendments were approved with (EU) Regulation no of 20 November 2013 effective as from 1 January Amendments to IFRS 10, 11 and 12 Transition Guidance The 313/2013 Regulation of the European Commission published on the Official Journal of the European Union, L 95 of 5 April 2013, adopted the amendments introduced by the document published by IASB on 28 June 2012, which allows to limit to the financial year immediately before that of the financial statements the comparative information to be provided in case of consolidation, following the first application of IFRS 10, of equity investments previously not consolidated (this facility is also extended to the transitional provisions of IFRS 11 and 12). Amendments are effective as from 1 January Amendment to IAS 36 - Recoverable Amount Disclosures for Non-Financial Assets On 29 May 2013, IASB published some amendments to IAS 36 Impairment of assets, which are intended to clarify that the recoverable amount disclosures for assets, when this value is based on the fair value net of the disposal costs, concern only the assets whose amount has been reduced. These amendments were approved with (EU) Regulation no of 19 December 2013 effective as from 1 January Amendment to IAS 39 - Novation of Derivatives and Continuation of Hedge Accounting On 27 June 2013, IASB published some amendments to the international accounting standard IAS 39; these amendments aimed at regulating situations in which a derivative designated as a hedging instrument is subject to novation by a counterparty to a central counterparty as a result of legislation or regulations. Hedge accounting may well continue regardless of the novation, which would not be allowed without the amendment. The amendments were approved with (EU) Regulation no of 19 December 2013 effective as from 1 January Developments regarding IAS/IFRS international accounting standards, as approved by the European Commission, which become effective starting from the financial statements ended or in progress at 31 December 2014, were also implemented by the Bank of Italy with the third update to Circular no. 262 issued on 22 December The application of the new accounting standards described did not have significant impacts on the result and financial position of the Bank. Forthcoming accounting standards and interpretations The main documents published by the International Accounting Standard Board, which may be relevant for the Bank but not yet applicable in that not yet endorsed by EFRAG or not yet applicable, are also described below. 67

70 3 Notes to the Separate Financial Statements IFRIC 21 Levies IFRIC 21 - issued to identify the method and timing of recognition and accounting of the levies (other than income taxes) imposed by a government agency for which the entity does not receive specific goods or services - was published on 20 May The interpretation deals both with the liability for taxes that fall within the scope of IAS 37 and with those for the levies whose timing and amount are certain. The interpretation published on the Official Gazette L 175 of 14 June 2014 applies starting from the financial years as from 17 June IFRS 9 Financial Instruments At the end of July, IASB issued, definitively, IFRS 9 Financial Instruments, standard replacing the previous versions published in 2009 and in The new standard concludes a process by stages of reform of the current IAS 39, structured in the revision of the rules of classification and measurement, impairment and hedge accounting (the regulation on macro hedge is still being defined). More specifically, with regard to financial assets, the new standard adopts a single approach based on the methods of management of financial instruments and on the characteristics of the contractual cash flows of the assets in order to establish the measurement criteria; the new model of impairment, based on a concept of forward-looking expected loss, aims at ensuring a more immediate recognition of losses compared to the current IAS 39 model of incurred loss, whereby the regulation concerning the hedging relations aims at ensuring greater alignment between the accounting representation of hedges and the risk management policies. Currently, the standard is expected to be effective as from 1 January Amendments to IAS 16 and IAS 38 - Clarification of acceptable methods of amortisation/depreciation and write-down The amendments made to the two accounting principles intend to clarify that amortisation/depreciation calculating methods based on revenues cannot be used, because revenues reflect the methods for generating future economic benefits that derive from the activity of the company to which the assets subject to amortisation/depreciation belong and do not reflect the methods of consumption of expected future economic benefits of the assets. IAS 38 was amended by introducing a presumption of fact according to which the methods for determining the amortisation of intangible assets, based on revenues, are inappropriate for the same reasons outlined with reference to IAS 16. Amendments to IAS 16 and IAS 38 will be effective as from 1 January Amendments to IFRS 11 - Accounting for acquisitions of interests in joint operations The document provides clarification on the accounting for acquisitions of interests in a joint operation by establishing that the acquirer of interests in a joint operation consisting of a company as defined by IFRS 3, must apply all the rules for the accounting of business combinations established by IFRS 3 (the IFRS Interpretations Committee was asked whether the acquirer of interests should apply, on initial recognition of the interest, the principles in IFRS 3 Business combinations or whether the acquirer should instead account for it as the acquisition of a group of assets). The amendments to IFRS 11 will come into effect as from 1 January Amendments to IAS 27 - Equity method in separate financial statements The document introduced the option to use, in the separate financial statements of an entity, the equity method for the measurement of investments in subsidiaries, joint ventures and associates. As a result, an entity will be able to measure these investments in its separate financial statements at cost, or according to what is envisaged 68

71 Unipol Banca Financial Statements 2014 by IFRS 9 (or IAS 39), or by using the equity method. The standard is expected to be effective as from 1 January Amendments to IFRS 10 and IAS 28 - Sales or contributions of assets between an investor and its associate or joint venture IFRS 10 was amended to establish that gains or losses resulting from the sale or contribution of a subsidiary that do not constitute a business to an associate or joint venture, measured with the equity method, are recognised only to the extent of unrelated investors interests in the associate or joint venture. IAS 28 was amended to establish that gains or losses resulting from the sale or contribution to an associate or a joint venture of assets that constitute a business are recognised in full. The standard is expected to be effective as from 1 January Amendments to IAS 19 - Defined Benefit Plans: Employee Contributions The amendments to IAS 19 allow to present the contributions made by employees or third parties to defined benefit plans as a reduction of the service cost in the period in which the contributions are paid. The right is allowed for contributions that are independent of the number of years of service and therefore are related to the service rendered by the employee in the period in which the contributions are paid. The amendments are effective as from the date of commencement of the first financial year, whether it starts on 1 February 2015 or later. IFRS 15 - Revenue from Contracts with Customers IFRS 15 replaces IAS 18 Revenue, IAS 11 Construction contracts, SIC 31 Revenue - Barter Transactions Involving Advertising Services, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate. The new model of revenue recognition applies to all contracts with customers except for leases within the scope of IAS 17 Leasing, for insurance contracts and for financial instruments. IFRS 15 identifies a five-step model framework to define the riming and the amount of revenues to be recognised (1. Identify the contract(s) with a customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price; 5. Recognise revenue when (or as) the entity satisfies a performance obligation. The standard is expected to be effective as from 1 January Documents of the Supervisory Authorities As from 1 January 2014, the rules set by the Basel Committee on banking supervision regarding capital adequacy (First Pillar) and public disclosure (Third Pillar) (known as Basel III ) were introduced in the European Union: their purpose is to improve the bank s ability to absorb shocks arising from financial and economic stress, improve risk management and governance, and strengthen banks disclosure. The contents of Basel III were translated into Law in Europe by means of two legislative instruments: (EU) Regulation no. 575/2013 ( CRR ) that lays down rules concerning prudential requirements that supervised institutions must comply with of the First Pillar and public disclosure requirements of the Third Pillar; Directive 2013/36/EU ( CRD IV ) that lays down rules concerning the conditions on access to the activity of credit institutions, the freedom of establishment and the freedom to provide services, the supervisory review process and capital reserves. 69

72 3 Notes to the Separate Financial Statements CRR and CRD IV are supplemented by Regulatory Technical Standards (RTS) or Implementing Technical Standard (ITS) approved by the European Commission on recommendation from the European Supervisory Authority ( ESA ), which supplement and implement the level 1 Community legislation. The rules and technical standards are directly applicable in national laws, without the need of implementation, and form the so-called Single Rulebook; whereas, the regulation contained in the directive needs to be implemented in national sources of law. To implement and facilitate the application of the new Community guidelines, as well as to carry out an overall review and simplification of the supervisory regulations of the banks, Bank of Italy issued for our country Circular 285 of 17 December 2013 (as amended) Prudential supervisory provisions for banks that: implements the CRD IV regulations, whose implementation, pursuant to the Consolidated Banking Law, pertains to the Bank of Italy; indicates the methods with which national discretions assigned by the Community guidelines to the national authorities were exercised; outlines a comprehensive, organic and rational regulatory framework integrated with directly applicable Community guidelines, in order to facilitate its use by operators during the transition period. The Supervisory Body also issued Circular 286 of 17 December 2013 (as amended) Instructions for the completion of prudential disclosures for banks and financial brokerage companies that carries out both the CRR and the ITS prepared by the European Banking Authority (EBA) and adopted by the Commission of the European Union (known as COREP formats ) on harmonised reporting formats (Own Funds, credit and counterparty risk, market risks, operational risk, large exposures, recognition on mortgage losses, overall equity position, liquidity monitoring and leverage) and non-harmonised reporting (related parties). Other The separate financial statements are submitted for auditing by PricewaterhouseCoopers SpA to whom the Shareholders Meeting has entrusted the assignment for A.2 MAIN FINANCIAL STATEMENT ITEMS 1 Held-for-trading financial assets 1.1 Classification A financial asset is classified as held for trading if it meets one of the following conditions: the asset is acquired principally for the purpose of selling it in the short term; the asset is part of a portfolio of identified financial instruments that are managed as a unit as part of a strategy aimed at making a profit in the short term; the asset is a derivative contract but not a derivative hedging contract; Hedging contracts include those incorporated into complex financial instruments (hybrid or combined), which have to be recorded separately if they meet all the following conditions: the economic features and the risks of the incorporated derivative are not strictly correlated with those of the primary contract; even if recorded separately, the incorporated derivative has features such as to comply with the definition of a derivative contract; the hybrid instrument that incorporates the derivative is not designated at fair value with the relating changes being recorded in the income statement. 70

73 Unipol Banca Financial Statements 2014 The Group has classified under this item debt securities, equity securities and positive values for derivative contracts held for trading. Debt securities and equity securities not managed for trading purposes, as well as hedge derivatives are excluded from this item. 1.2 Recognition The initial recognition of assets held for trading is carried out on the settlement date for debt securities and equity securities and on the subscription date for derivatives, for a value equal to the fair value of the financial instrument without taking into consideration directly chargeable transaction costs or income, which are recorded directly in the income statement. 1.3 Measurement After initial recognition, the assets in question are designated at fair value and the changes in value are recorded in the income statement (item 80 Net result from trading). For further information on the methods for determining the fair value, reference is made to part A.4 Information on fair value qualitative information. 1.4 Derecognition A financial asset is derecognised only when the contractual rights on the cash flows arising from it expire or when it is assigned to third parties and all the risks and benefits are effectively and substantially transferred. 2 Available-for-sale financial assets 2.1 Classification Classified under this item are all the financial assets, other than derivatives, designated as such or not otherwise classified as receivables, held-to-maturity investments and held-for-trading assets. The Bank has included the following types of financial asset in this category: debt securities held for the purposes of investment and not intended for short-term trading; strategic equity investments (less than 20% of the share capital, of strategic importance from a commercial or corporate point of view); equity investments not managed for the purposes of trading and not classifiable as controlling, associated or joint ventures. 2.2 Recognition Initial recognition is carried out when the Bank becomes party to the contractual clauses of the financial instrument, which normally coincides with the settlement date. The initial recognition value is equal to the fair value of the financial instrument, which generally coincides with the related purchase cost, including the directly chargeable transaction costs or income. When recognition is the result of a reclassification of assets originally entered under those held to maturity or those held for trading and carried at fair value, in the exceptional cases in which such transfers are permitted in accordance with IAS 39, the recognition value is determined at the fair value of the instrument on the transfer date. 71

74 3 Notes to the Separate Financial Statements 2.3 Measurement After initial recognition, the assets in question continue to be designated at fair value. The interest component resulting from application of the amortised cost method, where it exists, goes to the income statement, whilst profits and losses from the change in fair value are recorded directly under shareholders equity (item 130 Valuation reserves). For further information on the methods for determining the fair value, reference is made to part A.4 Information on fair value qualitative information. When the asset is derecognised or when reasons arise for recording a loss in value, the profits and losses accumulated due to changes in fair value are recorded in the income statement. The loss in value is recorded if there is objective evidence that the recoverable value of the financial instrument is lower than its purchase value less any refunds and depreciation. Write-backs are allowed only if the reasons that determined the recording of the loss no longer apply and they are recorded up to an amount such as to attribute to the financial instrument a value no higher than the value it would have had at that time as a result of applying the amortised cost method without previous adjustments. Losses in value go to the income statement under item 130 sub-item b) Net impairment adjustments to available-for-sale financial assets. Write-backs on debt securities are recorded under the same item, whilst write-backs on equity securities are recorded under a shareholders equity reserve (item 130 Valuation reserves). Checking for the existence of conditions for recording losses in value and subsequent write-backs is carried out on the reference date for each annual account or interim position. Equity instruments for which it is not possible to reliably determine the relative fair value amount are carried at cost, except for the recording of losses of value where reasons exist. These losses of value must not, however, be reinstated in subsequent years. Impairment policy on available-for-sale financial assets Paragraph 58 of IAS 39 states that, at each reference date for the financial statements, companies must check whether there is any objective evidence that a financial asset or group of financial assets has suffered a reduction of value. In order to determine whether a financial asset or group of financial assets has suffered a reduction in value, they need to be subjected to a periodical impairment test. Indications of a possible reduction in value are, for example, the issuer experiencing significant financial difficulties, failure to fulfil obligations or missed payments of interest or capital, the possibility that the beneficiary may become subject to bankruptcy proceedings or similar proceedings and the disappearance of an active market for the asset. In accordance with paragraph 61 of IAS 39, a significant or prolonged drop in the fair value of an investment in an instrument representing capital below cost must be considered to be objective evidence of impairment. IAS 39 does not define the terms significant and prolonged but implies, partly on the basis of an IFRIC guideline, that their meaning should be left to the opinion of the directors whenever they have to draw up financial statements or an interim statement for IAS purposes, as long as the meaning is determined objectively and in a reasonable manner and complies with paragraph 61 of IAS 39. The impairment policy adopted by the Bank is consistent with that adopted by the Parent Company Unipol Gruppo Finanziario SpA, and impairment testing is carried out in close collaboration with and under the leadership of the Group Finance Department. Starting with the 2009 financial statements, the Group defined as significant a drop in the market value of equity instruments classified as available for sale (AFS) of 20% compared with the initial subscription value and deemed 72

75 Unipol Banca Financial Statements 2014 as prolonged a market value remaining below the initial subscription value for more than 36 months. These parameters remained unchanged in subsequent valuations until and including the 2011 interim report. At the end of the 2011 financial year, in view of the impact of the financial markets crisis on share prices, which recorded a gradual downturn combined with an increase in volatility, giving rise to doubts as to whether current prices were the best indicator of the intrinsic value of assets, the Group carried out a thorough analysis of how markets had performed over the previous decade. The results of this analysis led the Group to raise the threshold of significance of losses in value to be considered as an objective indication of impairment for equity instruments classified as available for sale from 20% to 50%. Therefore as of 31 December 2011, in the case of equity securities, all the securities to which at least one of the following conditions applied were impairment-tested: a)the market price had remained below the initial subscription value for the previous 36 months; b) the decrease in value on the accounting reference date was more than 50% of the initial subscription value. This confirmed that these securities were impaired and the total variation in fair value was recorded in the income statement and the AFS provision written off. In the case of debt securities, whenever payment of a coupon or repayment of capital is late or missed and this is confirmed by the deposit bank, the Finance Department immediately notifies the Risk Management Department of the need to carry out any write-downs. 2.4 Derecognition The same criteria already stated for assets held for trading (paragraph 1.4) apply. 3 Held-to-maturity investments 3.1 Classification Held-to-maturity investments are represented by financial instruments other than derivatives, with fixed or determinable payments and a fixed due date, which there is the intention and the ability to hold onto until maturity. The Bank has classified financial assets under this item. 3.2 Recognition Initial recognition is carried out when the Bank becomes party to the contractual clauses of the financial instrument, which normally coincides with the settlement date. The initial recognition value is equal to the fair value of the financial instrument, which generally coincides with the related purchase cost, including the directly chargeable transaction costs or income. When recognition is the result of a reclassification of assets originally entered under those available for sale, the recognition value is determined at the fair value of the instrument on the transfer date. The Bank made no reclassifications of the kind described above. 3.3 Measurement After initial recognition, the assets in question are valued at amortised cost, using the effective interest method. Profits and losses are recorded in the income statement within the space of the residual life owing to amortisation of the difference between recognition value and redeemable value upon expiry. Profits and losses recorded when these assets are eliminated or undergo impairment also go to the income statement. Held-to-maturity investments are subject to periodical auditing for the existence of losses in value. Should objective evidence of impairment arise, the amount of the loss is measured against the difference in the carrying amount of the asset and the current value of the estimated future cash flows, discounted at the financial asset s 73

76 3 Notes to the Separate Financial Statements original effective interest rate. Write-backs are allowed only if the reasons that determined the recording of the loss no longer apply, and they are recorded up to an amount such as to assign the financial instrument a value no higher than the value it would have had at that time as a result of applying the amortised cost without previous adjustments. 3.4 Derecognition The same criteria already stated for assets held for trading (paragraph 1.4) apply. Should a significant amount of assets classified within this category be sold or reclassified during the year, before maturity, any remaining held-to-maturity investment would be reclassified as available for sale and for two successive years it would not be possible to classify any asset within this category. This penalty does not apply if the sales or reclassifications: are so close to maturity that the fluctuations in the market rates cannot have a significant effect on the fair value of the assets; occurred after substantially all the original principal for the asset was collected as a result of scheduled or early ordinary payments; are to be attributed to an uncontrollable isolated event, which is not recurrent and cannot therefore be reasonably forecast. 4 Receivables 4.1 Classification Classified within this category are financial assets, other than derivatives, which involve fixed or determinable payments and which are not listed on an active market. The following assets are excluded from this category: receivables intended for immediate or short term sale, which must be classified under assets held for trading; receivables for which it is not possible to recover substantially all the initial investment, due to reasons other than impairment of the receivable, which must be classified under assets available for sale; receivables that, at the time they were initially recognised, may have been designated as assets at fair value, booked to the income statement, or as assets available for sale. The Bank has classified within this category all the receivables resulting from loans and/or deposit contracts with customers and the banking system. Repurchase agreements and trade receivables also fall within this category. Receivables are shown in the financial statements under items 60 Receivables from banks and 70 Receivables from customers, with the exception of trade receivables that cannot be retraced to business with customers, which are allocated to item 150 Other assets. 4.2 Recognition The initial recognition is carried out when the Bank, as creditor, acquires the right to payment of the sums contractually agreed. This time coincides with the payment date in the case of loans and the settlement date in the case of debt securities. The asset is recognised at fair value, which is generally equal to the amount paid or to the purchase price, inclusive of costs and income directly traceable to the individual asset and determinable from the start of the transaction even if settled at a later date. Charges to be paid by the debtor and the company s normal internal administrative costs are not included. In the case of loans agreed under conditions other than those of the market, the fair value is determined using special valuation techniques and the difference between this value and the amount disbursed is recorded directly in the income statement. When recognition is the result of a reclassification of assets originally entered under those held to maturity or those held for trading and carried at fair value, in the exceptional cases in which such transfers are permitted in 74

77 Unipol Banca Financial Statements 2014 accordance with IAS 39, the recognition value is determined at the fair value of the instrument on the transfer date. Loans on negotiable securities and repurchase agreements with the obligation or entitlement to repurchase/ resell are entered in the financial statements as receivables and payables and the assets temporarily transferred are not derecognised. In particular, cash sale and forward repurchase agreements are recorded as payables for the amount received in cash and, vice versa, cash purchase and forward resale agreements are recorded as receivables for the amount paid in cash. 4.3 Measurement Following initial recognition, receivables are valued at the amortised cost, which is represented by the value at which they are initially recorded net of repayments, plus or minus any difference between the initial value and the value on maturity because of depreciation calculated in accordance with the criterion of effective interest and less any reduction due to a decrease in value or non-recoverability. Application of the effective interest rate enables, according to financial logic, distribution of the financial effect of a loan transaction to be spread evenly over its expected life. The effective interest rate is the rate that discounts all future cash flows of the loan and establishes a current value corresponding to the amount disbursed, including all the transaction costs and income relating to it. The estimate of cash flows and the contractual duration of the loan take into consideration all the contractual terms that can influence the amounts and the expiry dates (such as early redemptions and the various options that may be exercised), without however considering the losses expected on the loan. Following initial recognition, for the whole life of the loan the amortised cost is determined by the continued application of the effective interest rate set at the start of the operation (original interest rate). This original interest rate does not vary over time and is also used in the case of any contractual amendment to the interest rate or events that have rendered the loan unproductive (due to insolvency proceedings for example). The amortised cost method is applied only to credit arrangements with an original term of at least eighteen months, on the assumption that the application of this method for shorter-term arrangements would have a negligible effect on the economic result. Loans with a duration of less than eighteen months and those that have no fixed maturity date or are revocable are therefore valued at cost. At the reference date for each annual account or interim position, the receivables are audited to identify those which show objective evidence of a loss in value due to events that occurred after they were initially recognised. The valuation procedures differ depending on whether non-performing or performing loans are involved. Non-performing loans are considered to be those to which the status of doubtful loans, watchlist loans, restructured loans or past due loans by more than 90 days has been attributed, according to current Bank of Italy guidelines. These non-performing loans are subject to a process of cost analysis that consists of discounting (at the original effective interest rate) the expected cash flows for principal and interest, taking into account any guarantees backing the receivable. The negative difference between the current value of the loans determined in this way and its carrying amount (amortised cost) at the time of the valuation constitutes an adjustment that is entered in the income statement under item 130 sub-item a) Net impairment adjustments to receivables. The original value of the loans is reinstated in subsequent years only if the reasons that determined the recognition of the relating loss no longer apply. Write-backs are recorded up to an amount such as to assign the financial asset a value no higher than the value it would have had at that time as a result of applying the amortised cost without previous adjustments. Loans for which objective evidence of a loss has not been individually ascertained are subject to a process of collective valuation carried out by uniform credit risk categories, identified according to a matrix breakdown by customer segment and rating class assigned by the Credit Rating System (CRS) procedure of Cedacri. The value of the latent loss for each uniform category is quantified by applying the probability of Default (PD) and Loss Given Default (LGD) calculated on analyses and estimates made available by Cedacri on the basis of a consortium. 75

78 3 Notes to the Separate Financial Statements The adjustments determined according to the collective valuation method are entered in the income statement. In subsequent periods, any additional adjustments or write-backs are determined differentially with reference to the entire portfolio of receivables valued collectively. 4.4 Derecognition The general criteria already stated for the other classification items apply. In particular, receivables sold are derecognised only if the assignment involves the substantial transfer of the risks and benefits relating to them. If this is not the case, receivables continue to be recorded in the financial statements even though their ownership has been legally transferred. It is assumed that all risks and benefits have been substantially transferred if the assignment involves the transfer of at least 90% of them. Vice versa, it is assumed that all the risks and benefits are substantially maintained if the assignment involves the transfer of no more than 10% of them. If the assignment does not substantially involve the transfer or maintenance of the risks and benefits (in the event of the Bank having retained a risks/benefits ratio of more than 10% but less than 90%), the receivables are derecognised if the Bank does not retain any type of control over them. Otherwise, the existence of control over the assigned receivables determines that they remain in the financial statements in proportion to the extent of the residual involvement. The Bank has still entered in the financial statements under this category all the receivables subject to securitisations carried out after 31 December 2003, regarding which it has essentially retained all the risks and benefits as a result of holding the junior securities issued by the SPVs. For further information on the handling of securitisations, see paragraph 17.2 below. 5 Financial assets designated at fair value 5.1 Classification Any financial asset may be designated as measured at fair value at the time it is initially recognised (so-called fair value option), except for instruments representing capital for which active market prices are not recordable and the fair value of which cannot be reliably determined. Excluded from this category are derivatives and assets that belong to the trading portfolio, for which IAS 39 envisages the obligatory application of the fair value criterion. The Bank has not classified any asset under this item. The recognition, valuation and derecognition criteria are similar to those for held-for-trading financial assets, with recording of profits and losses under the relevant item in the income statement (item Net result on financial assets and liabilities designated at fair value). 6 Hedging transactions 6.1 Types of hedge According to IAS 39, hedging relationships can be of three types: a) fair value hedge: the aim is to hedge the exposure to changes in fair value of assets or liabilities, or part thereof, attributable to a particular risk, which could affect the income statement; b) cash flow hedge: the aim is to hedge the exposure to the variability of cash flows attributable to a particular risk associated with assets or liabilities that could affect the income statement; 76

79 Unipol Banca Financial Statements 2014 c) hedging of a net investment in a foreign operation: the aim is to hedge the risks of an investment in a foreign company expressed in foreign currency. Only instruments traded with a counterparty outside the company or group of companies to which the financial statements refer can be considered to be hedging instruments. A relationship is described as a hedge and has consistent accounting representation if, and only if, all the following conditions are met: at the beginning of hedge there is a designation and formal documentation of the hedging relationship, the objectives of the company in the management of the risk and the strategy in carrying out the hedging. This documentation includes the identification of the hedging instrument, the hedged item or transaction, the nature of the hedged risk and how the company evaluates the effectiveness of the hedging instrument in offsetting the exposure to the changes in fair value of the hedged item or the cash flows attributable to the hedged risk; the hedge is expected to be highly effective; as regards the hedging of cash flows, the planned transaction subject to the hedge is highly likely and presents an exposure to the changes in cash flows that could have an effect on the income statement; the effectiveness of the hedge can be reliably evaluated; the hedge is assessed on the basis of a criterion of continuity and is considered to be highly effective for all the years for which the hedge was designated. At 31 December 2014, the Bank had cash flow hedging transactions on its own floating rate bond issues and on securities entered in the portfolio of available-for-sale financial assets, as well as fair value hedging transactions on its own fixed rate bond issues. 6.2 Measurement Hedging financial derivatives, like all derivatives, are initially recognised and then measured at fair value and are classified in the asset item 80 Hedge derivatives and liability item 60 Hedge derivatives. The effects of the valuation are shown as follows: in the case of a fair value hedge: the change in fair value of the hedging instrument is recorded in the income statement and is offset by the change in fair value of the hedged item, for the quota attributable to the hedged risk, which must be entered in the income statement as a contra-entry to the recognition value of the hedged item; in the case of a cash flow hedge: the changes in fair value of the derivative are allocated to equity only for the quota of the hedge considered to be effective and are entered in the Income Statement in the year or years in which the hedged cash flows have an effect on the Income Statement or if the hedging is not effective; in the case of hedges of a net investment in a foreign operation: the same criteria envisaged for cash flow hedges apply. The effectiveness of the hedge is evaluated continuously on the reference date of each of the annual and interim financial statements. In particular, the evaluation is carried out on the basis of prospective and retrospective tests that measure the expected effectiveness of the hedging relationship and the effectiveness attained in the reference period and therefore justify the classification of the instrument as a hedging instrument. Hedging is considered to be effective when the change in fair value of the hedged instrument (or of the expected cash flows) is substantially offset by the change in the hedging instrument, in a ratio between the two variations which falls within the limits of a fixed interval of %. The accounting of the hedging is discontinued prospectively in the following cases: the hedging instrument expires, is sold, terminated or exercised; the hedge no longer meets the aforementioned criteria for hedge accounting; the company revokes the designation. 77

80 3 Notes to the Separate Financial Statements If the hedging relationship is no longer effective or comes to an end, the hedging derivative, if it still exists, is classified amongst held-for-trading financial instruments and the hedged instrument is evaluated according to the measurement criteria corresponding to its classification in the financial statements. If the hedged instrument is an asset or liability evaluated according to the amortised cost criterion, the difference between the carrying amount of the hedged item at the moment hedging ceases and the carrying amount it would have held if the hedge had never existed, is amortised in the income statement for the remaining life of the financial instrument. If the hedged item is sold or reimbursed, the fair value quota not amortised is recorded immediately in the income statement. If a cash flow hedge terminates or is no longer effective, profits or losses on the hedging instrument already shown in the equity must be transferred to the income statement in the year in which the cash flows originally hedged have an effect on the income statement or in the year in which it emerges that these cash flows are no longer expected. 7 Equity Investments 7.1 Classification The item includes interests in subsidiaries, associates and joint ventures, where they exist. At 31 December 2014, the Bank did not have investments in joint ventures. Companies are considered to be subsidiaries if the Bank has all of the following elements: the decision-making power to direct the relevant activities (which affect the economic returns); exposure, or rights, to variable returns from its involvement with the investee; the ability to use its power over the investee to affect the amount of the investor s returns. 7.2 Recognition The initial recognition of the investment is carried out on the date of settlement, for a value equal to the purchase cost, including directly attributable costs or income. 7.3 Measurement Equity investments are valued at cost, adjusted downwards if there are losses in value. If there is evidence of impairment, the recoverable value of the investment is estimated on the basis of the current value of the future cash flows expected from it, including the final disposal value of the investment. If the recoverable value is lower than the carrying amount, the entire difference is shown as a loss in the income statement. The original value of the investments is reinstated in subsequent years only if the reasons that determined the recognition of the loss no longer apply. Write-backs are entered in the income statement. 7.4 Derecognition An investment can be derecognised only when the contractual rights on the cash flows deriving from it expire or when it is sold to third parties, effectively and substantially transferring all the risks and benefits. 78

81 Unipol Banca Financial Statements Property, plant and equipment 8.1 Classification The item includes property used for instrumental and investment purposes, technical systems, equipment, furniture and furnishings. These are assets held for functional purposes, to be used for more than one period in the production and supply of goods and services, either for investment purposes for rental to third parties or for the appreciation of the capital invested, or for both. 8.2 Recognition Property, plant and equipment are initially recognised at cost, inclusive of all the expenses directly attributable to their entry into operation. Non-routine maintenance costs, which include an increase in future economic benefits, are recorded as an increase in the value of the assets, whilst the ordinary maintenance costs are recorded in the income statement. 8.3 Measurement After initial recognition, property, plant and equipment including investment property are entered at cost net of depreciation and losses in value. Non-current assets with a limited useful life are systematically depreciated on a straight-line basis over their useful life. However, non-current assets with an unlimited useful life or those with a residual value equal to or higher than their carrying amount are not depreciated. The Bank does not, therefore, depreciate artistic assets. Should objective evidence of a reduction in value emerge, the loss is measured as the difference between the carrying amount of the asset and its recovery value, and is recorded in the income statement. The value of the asset must be reinstated if the reasons that determined the recognition of the loss, for an amount no higher than the value it would have had, net of the calculated amortisation, without impairments, no longer apply. 8.4 Derecognition Property, plant and equipment are derecognised at the time of disposal or when no further future economic benefits are expected from its use or disposal. 9 Intangible assets 9.1 Classification Intangible assets are non-monetary assets, identifiable even if they have no physical solidity, from which future economic benefits are expected. Intangible assets include goodwill and the other intangible assets governed by IAS

82 3 Notes to the Separate Financial Statements 9.2 Recognition and measurement for Goodwill Goodwill is defined as the difference between the purchase cost and the fair value of assets and liabilities acquired as part of a business combination which consists in the unification of different companies or company operations into a single firm, obliged to draw up financial statements. The result of almost all business combinations consists in the fact that only one company, the buyer, obtains control over one or more different company activities relating to the purchase. Goodwill is not subject to amortisation but is subject to impairment testing at least once a year, generally when drafting the annual financial statements and always upon the occurrence of events that lead to the belief that the asset may have undergone a reduction in value. Any adjustments made to goodwill, even if the reasons that originated it no longer apply in subsequent years, cannot be rectified. 9.3 Recognition and measurement for other intangible assets Intangible assets other than goodwill are entered in the financial statements at purchase value, inclusive of any direct cost incurred for preparation to use them, net of accumulated amortisation and any losses in value. Intangible non-current assets are systematically amortised on a straight-line basis over their useful life, which, for software, is estimated at an average three years. The Bank holds no intangible non-current assets with an unlimited life. Should objective evidence of a reduction in value emerge, the loss is measured as the difference between the carrying amount of the asset and its recovery value, and is recorded in the income statement. The value of the asset must be reinstated if the reasons that determined the recognition of the loss, for an amount no higher than the value it would have had, net of the calculated amortisation, without impairments, no longer apply. 9.4 Derecognition An intangible asset is derecognised at the time of disposal or when no further future economic benefits are expected from its use or disposal. 10 Non-current assets and disposal groups held for sale Non-current assets or groups of assets and associated liabilities for which a disposal process has been undertaken and the sale of which is considered highly likely are included under asset item 140 and liability item 90 (Liabilities associated with assets being disposed of). They are valued at the lesser between their carrying amount and their fair value net of sale costs. Income and charges, including the effects of the valuations, for these assets/liabilities are recorded under a special item in the income statement, net of the related tax effect. 11 Current and deferred taxation Income tax is recorded in the income statement, except that relating to items charged or credited directly to shareholders equity. The financial statements include the effects of deferred tax assets and liabilities deriving from temporary differences between carrying amounts and taxable values, in order to correctly show the charges for income tax on an accrual basis, irrespective of the actual cash flow. Deferred tax assets, except for those that can be transformed set forth in Italian Law 214/2011, are recorded in the financial statements under item 130 b) deferred tax assets, insofar as there is the likelihood of producing sufficient taxable income in future years to enable their recovery. Deferred tax liabilities are recorded under item 80

83 Unipol Banca Financial Statements b) deferred tax liabilities. The offsetting between deferred tax assets and deferred tax liabilities may be carried out exclusively within the scope of the individual tax and with reference to that tax year. Offsetting is not carried out unless the year in which the taxes for the changes in taxable income were relevant can be determined with certainty. Deferred tax assets and liabilities have been quantified on the basis of the rates in force for future years. Changes in the deferred tax assets and related economic effects are detailed in the relevant sections of the Notes to the Financial Statements. For the 2014 tax period, Unipol Banca SpA exited the Group tax consolidation in that the expected requirements are no longer met, pursuant to Art. 117 et sequitur of Italian Presidential Decree 917/86 and of Italian Ministerial Decree 9/6/2004, as announced on 23 January 2014 by the consolidating company Finsoe SpA. Deferred tax assets and liabilities are also recognised under the tax item, calculated on the temporary differences between the annual and tax results (arising or discharged during the financial year), and on consolidation adjustments. Deferred tax assets proportionate to the extent in which such losses may be reasonably used against future IRES income are recognised in connection with tax losses before the period of validity of the tax consolidation. 12 Provisions for risks and charges The Bank does not have pension funds and similar obligations. Other provisions for risks and charges are made up of allocations relating to current, legal or implicit obligations resulting from a past event, which will probably give rise to the disbursement of economic resources, the amount of which can be reliably estimated. The allocations are made on the basis of the best possible estimate of the expenses needed to fulfil the obligations. Provisions are measured at every reporting date and adjusted in order to reflect the best current estimate. They are recognised under the income statement items, according to a logic of classification of costs by type of expense. In particular, provisions related to future personnel expenses related to long-term benefits are recorded as personnel expenses, provisions for risks and charges of a tax-related nature are recognised as income taxes, whereas provisions related to the risk of potential losses not directly attributable to specific income statement items are recorded as net provisions for risks and charges. The amount of the estimated expenses is discounted at market rates if the effect of the deferment in time is significant. The provisions are periodically scrutinised and, if necessary, adjusted to reflect the best possible estimate. If, following re-examination, the expense becomes unlikely, the allocation is reversed. An allocation is only used to cover the expenses for which it was originally recorded. 13 Payables and securities outstanding 13.1 Classification The various technical forms of customer and inter-banking system deposits and funds are classified under the items Due to banks, Due to customers and Securities outstanding, along with funds raised by issuing bonds and other Securities outstanding, net of those that may be repurchased by the Bank. Also included are the repurchase agreements and the liabilities matching assets assigned and not derecognised due to a lack of the conditions necessary for derecognition. This involves, in particular, the liabilities associated with the securitisations carried out from 1 January These liabilities (notes) are entered under Due to customers in the separate financial statements and, for the same amount, under Securities outstanding in the consolidated financial statements. 81

84 3 Notes to the Separate Financial Statements 13.2 Recognition Initial recognition takes place on the date of settlement based on the fair value of the liabilities, which usually corresponds to the amount collected or the issue price, net of the directly attributable transaction costs. The mixed debt instruments connected with equity instruments, foreign currency, credit instruments or indices, are deemed to be structured instruments and recorded in the financial statements after separation of the incorporated derivative, should the conditions for this apply. The primary contract is attributed a value equal to the difference between the value collected and the fair value of the derivative separated Measurement After initial recognition, medium or long-term financial liabilities are entered at amortised cost based on the effective interest rate criterion. Short-term financial liabilities, on the other hand, continue to be recorded at the originally collected value, less any repayments Derecognition Financial liabilities are derecognised when they are paid off. The repurchase of treasury shares previously issued is assimilated to repayment and leads to derecognition of the liabilities. Any replacement on the market of repurchased treasury shares is similar to a new issue of financial instruments and is recorded in the financial statements on the basis of the new placement price. Public exchange offers relating to financial liabilities Paragraph 40 of IAS 39 envisages that an exchange of debt securities with substantially different contractual terms be carried as an extinction of the original financial liability, entering a new financial liability. As regards the definition of substantially different contractual terms, where the discounted value of cash flows according to the new terms (including any fee paid, net of any fee received and discounted in compliance with the effective original interest rate) differs by at least ten percent from the discounted value of the remaining cash flows of the original liability, paragraph AG62 of IAS 39 envisages their consideration as such. If an exchange of debt securities or a change in the terms is recorded as an extinction, any cost or fee sustained is recorded as part of the profit or loss connected with the extinction. If the exchange or amendment is not recorded as extinction, any cost or fee sustained adjusts the carrying amount of the liability and is aligned with the remaining term of the changed amended liability. In identifying the factors that can determine the presence of substantially different contractual terms, as currently accepted by best practices, qualitative factors are also taken into consideration and their presence can lead to the belief that the original liability is extinct and to the emission of a new debt security. The factors that can be used to identify the presence of such conditions include: diversity in the degree of subordination of the liabilities; diversity in the type of rate (fixed or floating); diversity in the currency in which the liability is issued; diversity in the risk profile of the liability; diversity in the lifespan of the liability. 82

85 Unipol Banca Financial Statements Held-for-trading financial liabilities 14.1 Classification The item can include: a) derivatives that are not recorded as hedging items; b) financial liabilities issued with the intention of repurchasing them in the short term; c) financial liabilities that form part of a portfolio of financial instruments considered as a unit and for which there is evidence of an effective management strategy aimed at obtaining profit in the short term. The Bank has classified under the item only the negative values for derivatives Recognition, measurement and derecognition All the financial liabilities included in this category are designated at fair value both at the time they are initially recognised and later during the life of the transaction, with the result of the valuation being charged to the income statement. Unless otherwise stated, the criteria for held-for-trading financial assets apply. 15 Financial liabilities designated at fair value Following a change to IAS 39, endorsed by European Union Regulation 1864 of 15 November 2005, it is also possible to apply the so-called fair value option to financial liabilities, designating the financial liabilities at the time they are initially recorded at fair value. This possibility is allowed as long as designation at fair value makes it possible to eliminate or significantly reduce a lack of uniformity which would otherwise result from valuation of assets and liabilities using different criteria, or if a group of liabilities or financial assets/liabilities were to be managed at fair value under an investment or risk management strategy documented internally to the Management Boards. The Bank has not classified any liability under this item. The recognition, measurement and derecognition criteria are similar to those for Held-for-trading liabilities, with recognition of profits and losses in a special item in the income statement (item Net result on financial assets and liabilities designated at fair value). 83

86 3 Notes to the Separate Financial Statements 16 Transactions in foreign currency 16.1 Recognition Transactions in foreign currency are initially recorded by applying the exchange rate current on the date of the transaction Measurement Periodically upon closing the financial statements and any interim positions, monetary entries in foreign currency are valued using the exchange rate current on the closing date, recognising profits and losses in the income statement. Non-monetary assets and liabilities designated at fair value are also converted using the exchange rate at the date of valuation, charging the differences to the income statement if they are available-for-sale assets/ liabilities. Non-monetary assets and liabilities entered at historic cost are, however, valued at the historical exchange rate. 17 Other information 17.1 Reclassification of financial assets As a result of the amendments to IAS 39 issued by the IASB and validated by the European Commission under EC Regulation 1004 of 15 October 2008, as of 2008 there have been other ways of reclassifying financial assets in addition to those previously allowed, which were limited to transfers between the categories of Held-tomaturity investments and Available-for-sale financial assets. The following ways of reclassifying assets are now also allowed. If a financial asset is no longer held for sale or repurchase in the short term (even though it may have been acquired or held mainly for sale or repurchase in the short term), it may be reclassified outside the fair value category booked to the income statement if the following requirements are met: the circumstances must be very unusual (par. 50B), or the asset to be reclassified would have come under the definition of loans and receivables (if it had not had to be classified as held for trading when initially recorded) and the entity has the intention and the ability to hold it for the foreseeable future or to maturity (par. 50D). A financial asset classified as available for sale that would have come under the definition of loans and receivables (if it had not been recognised as available for sale) may be reclassified from available for sale to loans and receivables if the entity has the intention and the ability to hold it for the foreseeable future or to maturity (par. 50E). If an entity reclassifies a financial asset outside of the fair value category entered in the income statement or outside of the available for sale category, it must reclassify it at its fair value on the date of reclassification and the profit or loss already recorded in the income statement must not be adjusted. The fair value of the financial asset on the date of reclassification becomes its new cost or amortised cost (par. 50C and 50F). In the case of a financial asset reclassified outside of the available for sale category, the previous profit or loss on the asset recorded in the equity directly must be amortised in the income statement throughout its remaining useful life using the effective interest criterion. 84

87 Unipol Banca Financial Statements 2014 If the entity has reclassified a financial asset outside of the fair value category recorded in the income statement or outside of the available for sale category, the following is part of the information that must be provided (IFRS 7): the amount reclassified from and to each category; for each year until it is eliminated from the financial statements, the carrying amount and the fair value of all financial assets reclassified during the current and preceding year; whether a financial asset has been reclassified in accordance with paragraph 50B, however unusual the situation, along with the facts and circumstances indicating the rarity of the situation; for the year in which the financial asset was reclassified, the fair value profit or loss on the asset; for each year following reclassification of the financial asset (including the year in which it was reclassified) until it is eliminated from the financial statements, the fair value profit or loss that would have been recorded if it had not been reclassified. Until 1 November 2008, the changes to IAS 39 made it possible, on an exceptional basis, to reclassify assets retroactively from 1 July Any reclassification carried out after 1 November 2008 takes effect only as of the date on which it is carried out. For information on reclassifications of financial assets carried out by the Bank see Part A.3 Information on fair value Securitisations Since 2002 the Bank has carried out several securitisations under which it has assigned performing loan portfolios to vehicle companies set up for the purpose. None of the securitisations carried out meets the requirements for the assets assigned to be derecognised (reversed) since the Bank has retained almost all the risks and benefits of the assets assigned. For the operations completed after 31 December 2003 and before the transition to IAS, including the assignment of the first portfolio of receivables and the issue of the first series of notes carried out in December 2003 as part of a programme completed in the early months of 2005, the Bank has reversed the effects of the derecognition carried out by applying national accounting standards and has shown in the financial statements the economicfinancial results of the vehicles relating to the managed portfolios, eliminating the notes held in the portfolio. In the case of operations finalised after the transition to IAS, the Bank has not derecognised assets assigned and, as in the previous case, has shown in the financial statements the economic-financial results of the vehicles relating to the managed portfolios, eliminating the notes held in the portfolio. Consequently, the Bank performs the line-by-line consolidation of the separate management of the vehicle companies in its separate financial statements, as happens in the consolidated financial statements. In the case of securitisations finalised by 31 December 2003 in accordance with the provisions of paragraph 27 of IFRS 1, the Bank had maintained the effects of the derecognition carried out by 31 December 2003 under the national standards applicable at the time. This particularly affected two securitisations that were both redeemed, the first in 2007 and the second in 2008, because the option to repurchase the receivables originally assigned was exercised. The receivables repurchased were recorded in the financial statements on the basis of their fair value on the repurchase date Treasury shares Any treasury shares held are allocated to reduce shareholders equity. If they are subsequently resold, the difference between the sale price and the related repurchase value is allocated directly as a contra-entry to equity, net of the related tax effect. 85

88 3 Notes to the Separate Financial Statements 17.4 Post-employment benefits Post-employment benefits (TFR) are governed by IAS 19 Employee benefits. In particular, they fall within the category of benefits subsequent to the employment relationship, which IAS 19 distinguishes as defined benefit plans and defined contribution plans. The reform of the welfare system, governed by Legislative Decree 252/05, effective as from 1 January 2007, envisages that employers in the private sector, with the exclusion of companies with less than 50 employees, must pay all of the post-employment benefits maturing, not assigned to supplementary pension schemes, to a Fund called the Fund for disbursement of post-employment benefits to employees in the private sector as stated in Art of the Civil Code, managed by INPS on behalf of the State. This means that the contributions that matured and were due to mature after 31 December 2006 are transferred to external bodies and are entered as a cost at a sum equal to the amount due for each year. The obligation with regard to employees for the portion of post-employment benefits accrued up to 31 December 2006, entered in the financial statements as a liability, must not be transferred to external bodies, as stated in the aforementioned Decree, and was therefore quantified using actuarial techniques and updated on the reporting date by using the so-called Projected unit credit method (accrued benefit method prorated on service) Actuarial gains or losses related to the post-employment benefits are recognised as Other comprehensive income components. The discounting of future cash flows are carried out on the basis of the market yield curve, recognised at the end of the year, of corporate bonds issued by issuers of high credit standing. The service cost and net interests are recorded in the separate income statement. Net interests are calculated by applying the 1-year interest rate taken from the yield curve used for discounting the liabilities at the end of the previous financial year to the net value of the post-employment benefits at the beginning of the year Costs for improvements to third-party assets The costs of restructuring leased property are capitalised in consideration of the fact that, throughout the term of the leasing contract, the lessee company has control of the assets and draws future economic benefits from them. The aforementioned costs are classified under Other assets in the financial statements and not under Property, plant and equipment, in compliance with the instructions of the Bank of Italy, as these costs do not in themselves constitute identifiable and separable assets. Capitalised charges of this kind are amortised on the basis of their useful life, estimated over six years equal to the term of the leasing contract Guarantees issued and commitments Guarantees issued and commitments are valued analytically and collectively in a way similar to that used to evaluate receivables. The allocations aligned to the possible disbursements connected with the credit risks are recorded in the financial statements under Other liabilities in compliance with the instructions of the Bank of Italy and are offset in item 130.d) of the income statement Net impairment adjustments to other financial assets Revenues recognition and costs Revenues from the sale of goods or the provision of services are recorded in the financial statements at the fair value of the sum received, subject to compliance with the following terms: the company has transferred the risks and returns associated with the sale of goods or the provision of services to the buyer; the value of the income can be reliably determined; it is probable that financial returns will be received by the company. 86

89 Unipol Banca Financial Statements 2014 Costs and revenues will be recorded in the financial statements in accordance with the accrual principle; in particular: accrued interest income and expense is recorded using a time-based criterion that considers the actual return on the assets and liabilities; commissions are recorded according to accrual; costs are recorded in the income statement in the periods in which the associated income is recorded. Dividends are entered in the income statement in the period in which their distribution is decided Business combinations A business combination consists of the unification of separate companies or company activities in a single subject required to draw up financial statements. A merger can create an investment link between the Parent Company that is buying and the subsidiary that is bought. Under these circumstances, the buyer applies IFRS 3 (Business combinations) in the consolidated financial statements, while it records the interest acquired as an investment in a subsidiary in the separate financial statements, applying IAS 27 Consolidated and Separate Financial Statements. A merger can also envisage the purchase of the net assets of another entity, including any goodwill, or the purchase of the capital of another entity (mergers, grants, acquisitions of business branches). This type of merger does not translate into the same kind of relationship as that between parent and subsidiary and, therefore, IFRS 3 applies, also in the buyer s separate financial statements. On the basis of the provisions of IFRS 3, business combinations have to be recorded applying the purchase method that envisages the following phases: identification of the buyer; determination of the business combination cost; and allocation, on the acquisition date, of the business combination cost to the assets acquired and to the liabilities, including the contingent liabilities undertaken. Business combinations between jointly controlled entities Business combinations between parties subject to joint control do not fall within the scope of application of IFRS 3 (Business combinations). In the absence of references to specific IFRS standards or interpretations for such operations, reference is made to Assirevi OPI 1 Accounts of the business combination of entities under common control in the financial statements and in the consolidated financial statements, which highlights, in general terms, that the financial statements have to provide a reliable portrayal of the transactions, stating the economic substance. Assirevi OPI 1, therefore, states that, for transactions without significant influence of the future cash flows of the net assets transferred, the standard applicable is that of the continuity of the values. The application of the continuity of values gives rise to the recognition in the statement of financial position of the separate financial statements of values equal to those that would result if the companies being combined had always been merged. In substance, the net assets of the acquired entity and of the acquiring entity must be recognised at their carrying amounts that they had in the respective accounts before the transaction. With respect to these considerations it is, therefore, possible to identify two kinds of transactions and different accounting methods: transactions with a significant influence on future cash flows; these transactions are recorded at their fair value, which corresponds to the sum exchanged. Any difference between the prices of the transaction and the carrying amount is entered in the income statement; transactions without a significant influence on future cash flows; these transactions are recorded on the basis of the continuity of values. In this case, applying the continuity of values, the company recorded values on the Statement of financial position equal to those that would result if the companies subject to merger had always been joined. The net assets of the entity acquired and of the acquiring entity were, therefore, recorded at the carrying amounts that they had in the respective accounts before the transaction. If the transfer values are higher than the historic values, the excess must be reversed, reducing the shareholders equity of the acquiring company, with the recording of a special reserve in its financial statements. 87

90 3 Notes to the Separate Financial Statements A.3 Information on Transfers between Portfolios of Financial Assets This paragraph provides the information required by IFRS 7 when financial assets have been reclassified during the current year or previous years for as long as the asset is recorded under assets. As a result of the liquidity crisis in the financial markets in autumn 2008, the Bank transferred debt securities with a total value of 253,732k from the category of heldfortrading assets, effective from 1 July 2008, 245,506k being reclassified as loans and receivables and 8,226k as available-for-sale financial assets. An additional 8,216k was reclassified in this last category from the company Unipol Merchant Banca per le Imprese SpA, merged by incorporation into Unipol Banca SpA with tax and accounting effects from 1 January The table below shows the carrying amounts and the fair value of the securities reclassified and still in the portfolio and the effects on comprehensive income. A.3.1 Reclassified financial assets: carrying amount, fair value and effects on comprehensive income Type of financial instrument (1) Portfolio of origin (2) Target portfolio (3) Carrying amount at Fair value at 31/12/2014 (4) 31/12/2014 (5) Income components without transfer (before tax) Income components recorded in the year (before tax) Measured (⁶) Other (⁷) Measured (⁸) Other (⁹) Debt securities Held-for-trading financial assets Available-forsale financial assets Debt securities Held-for-trading financial assets Receivables from Banks 7,717 6,343 (1,365) Debt securities Held-for-trading financial assets Receivables from customers The valuation elements in the columns relating to income components without transfer (before tax) include the results of the valuations that would have been recorded in the income statement for the year or in the equity if the transfer had not taken place and the other elements include other types of charge and income relating to the reclassified assets (interest and profits/losses arising from disposal and reimbursement). The columns relating to income components recorded during the year (before tax) show the income components that were actually recorded in the income statement or in the shareholders equity. A.3.2 Reclassified financial assets: effects on comprehensive income before transfer Information not applicable as the Bank has not carried out transfers of financial assets during the year. A.3.3 Transfer of held-for-trading financial assets Information not applicable as the Bank has not carried out transfers of financial assets during the year. A.3.4 Effective interest rate and cash flows expected from the reclassified assets Information not applicable as the Bank has not carried out transfers of financial assets during the year. 88

91 Unipol Banca Financial Statements 2014 A.4 Information On Fair Value Qualitative information A.4.1 Levels of fair value 2 and 3: valuation techniques and inputs used Regulation no. 1255/2012 approved IFRS 13 Fair Value Measurement, which was effective as from 1 January IFRS 13 provides guidance on how to measure the fair value of financial instruments and of non-financial assets and liabilities already requested or allowed by the other IFRS accounting standards. This standard: defines fair value; sets out in a single IFRS a framework for measuring fair value; requires disclosures about fair value measurements. The standard defines fair value as the price that would be received to sell an asset in an orderly transaction or the price paid to transfer a liability in an ordinary transaction in the main market of reference under the current conditions at the measurement date (exit price). The fair value measurement assumes that the transaction related to the sale of the assets or to the transfer of the liabilities may occur: in the main listing market; in the absence of the main listing market, the most advantageous market for the assets and liabilities to be measured. When a market price is unobservable, an entity is required to mainly use valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The IFRS 13 standard defines also a fair value hierarchy depending on the degree of observability of the inputs contained in the valuation techniques used for determining the fair value. The IFRS 13 accounting standard governs the fair value measurement and the relevant disclosure also for assets and liabilities not measured at fair value on a recurring basis in the statement of financial position. For these assets and liabilities, the fair value is calculated for the purposes of disclosure in the financial statements. Moreover, since these assets and liabilities are not traded in general, the calculation of their fair value is mainly based on the use of internal inputs not directly observable on the market, with the sole exception of listed securities classified as Held-to-maturity investments. 89

92 3 Notes to the Separate Financial Statements Fair value measurement standards The following table shows briefly the methods for calculating the fair value for the different macro categories of financial instruments, loans and properties. Financial Instruments Bonds Shares and listed equality inv., ETF Shares and unlisted equity investments Listed derivatives OTC derivatives UCITS Mark to Market Contributor CBBT - Bloomberg Other contributor - Bloomberg Reference market Reference market Net Asset Value Mark to Model and other Mark to Model Counterparty valuation DCF DDM Multiples Mark to Model Receivables Property Receiv, from cust, (Mark to Model) Assessment value In compliance with the IFRS 13 standard, in order to calculate the fair value of the financial instruments, in the presence of instruments dealt with in a liquid and active market, the market price is used (Mark to Market). Liquid and active market means: a) the regulated market where the instrument to be measured is traded and regularly listed; b) the multilateral trading system (MTF, mercato telematico dei fondi - electronic funds market) where the instrument to be measured is traded or regularly listed; c) the pricing and transactions carried out on a regular basis or with transactions at high frequency and with low bid / offer spread, by an authorised intermediary (hereinafter contributor ). In the absence of availability of prices on a liquid and active market, valuation techniques that maximise the use of observable inputs and minimise the use of unobservable inputs are used. These methods are summarised in mark-to-model valuations, valuations by the counterparty or carrying amount valuations with regard to certain categories of non-financial assets. Mark to Market valuations With reference to shares, listed equity investments, ETFs and listed derivatives, the Mark to Market valuation corresponds to the official valuation price of the reference market. With reference to bonds, the sources used for the Mark to Market valuation of financial assets and liabilities are set below: a) The primary source is represented by the CBBT price provided by the data provider Bloomberg; b) if the price in the previous point is not available, the validated internal scoring model is used: it allows to select the liquid and active contributors on the basis of some defined parameters. With reference to UCITS, the source used is the Net Asset Value. 90

93 Unipol Banca Financial Statements 2014 Mark to Model valuations The valuation methods (Mark to Model) used by the Group are in line with the methods generally used by the market. The objective of the models for the fair value measurement is to obtain a value for the financial instrument that complies with the assumptions that the market participants would use when formulating a price, assumptions that also concern the risk implicit in a particular valuation technique and/or in the inputs used. For correct Mark to Model valuation of each instrument category, appropriate and consistent valuation models as well as the parameters of the reference market need to be defined in advance. The list of the main models used within the Unipol Group for the Mark to Model pricing related to financial instruments is set below: Securities and derivatives on interest rates Discounted cash flows; Black; Black-Derman-Toy; Hull & White 1,2 factors; Libor Market Model; Longstaff & Schwartz; Kirk. Securities and derivatives on inflation Discounted cash flows; Jarrow-Yildirim. Securities and derivatives on shares, indexes and exchange rates Discounted cash flows; Black Scholes. Securities and credit derivatives Discounted cash flows; Hazard rate models. The main observable market parameters used for carrying out the Mark to Model valuations are set below: interest rate curve by currency of reference interest-rate volatility surfaces by currency of reference; CDS spread or Asset Swap spread curves of the issuer; inflation curve by currency of reference; foreign exchange rates of reference; exchange-rate volatility surfaces; volatility surfaces on shares or indexes; reference prices of shares; inflation curve of reference. The main unobservable market parameters used for carrying out the Mark to Model valuations are set below: correlation matrixes between exchange rate and risk factor; historical volatility; curve spread benchmarks constructed for measuring bond instruments of issuers for which no prices of the bonds issued or CDS curves are available; credit risk parameters such as the recovery rate; delinquency or default rates and prepayment curves for ABS financial instruments. 91

94 3 Notes to the Separate Financial Statements With reference to the bonds, where it is not possible, also on the basis of the results of the Scoring Model, to measure an instrument with the Mark to Market model, the fair value is assigned based on the Mark to Model valuations. Based on the characteristics of the instrument, different valuation models indicated above are used. With reference to OTC derivatives, models consistent with the risk factor underlying the contract itself are used. The fair value of interest-rate OTC derivatives and inflation-linked OTC derivatives is measured on the basis of Mark to Model valuations implementing the rules provided by IFRS 13. As regards to OTC derivatives on which a collateralisation agreement is envisaged (Credit Support Annex) between the companies of the Unipol Group and the authorised market counterparties, the EONIA (Euro OverNight Index Average) discount curve can be used. In the case of non-collateralised derivatives, CVA (Credit Valuation Adjustment) and DVA (Debit Valuation Adjustment) adjustments can be used. On 31 December 2014, all the positions existing on derivatives referred to collateralised contracts for which CSA agreements exist between the traded counterparties. With reference to unlisted shares and equity investments for which there is no market price or assessment drawn up by an independent expert, the valuations are mainly carried out on the basis of (i) capital ratios, (ii) methods that consider the discounting of income flows or financial flows such as Discounted Cash Flow (DCF) or Dividend Discount Model (DDM) in the version called excess capital, (iii) or applicable methods based on market multiples. With reference to unlisted UCITS, Private Equity and Hedge Funds, the fair value is expressed as the Net Asset Value at the reporting date provided directly by the directors of the funds. With reference to receivables from banking customer portfolio, the fair value is assigned based on Mark to Model valuations using the Discounted Cash Flow method with a discount rate adjusted to the counterparty and transaction risk. For the other receivables, the Carrying amount is used. With reference to property, the fair value measurement is measured depending on assessment value calculated by the independent surveyors consistent with the provisions of the current legislation. Valuations by the Counterparty Financial assets and liabilities that do not fall under the instruments Mark to Market valued and for which there are no consistent valuation models validated for the purposes of fair value measurement are measured on the basis of the valuations provided by the counterparties that can be consulted for the liquidation of the position. Fair Value measurement on a recurring basis Process for fair value measurement on a recurring basis The valuation of the financial instruments is preparatory to the monitoring of the risk, to the integrated management of assets and liabilities and the preparation of separate financial statements. The fair value measurement on a recurring basis of the financial instruments is broken down in different phases and is carried out by the Risk Management Department on the basis of measurement criteria defined in the previous paragraph. Fair Value measurement on a recurring basis by means of unobservable parameters (Level 3) In the level 3 classification of financial assets and liabilities, a prudential approach is followed; this category mainly includes the following types of financial instruments: unlisted equity securities or investments for which there is no market price or assessment drawn up by an independent expert; the valuations are carried out on the basis of the previously indicated methods; 92

95 Unipol Banca Financial Statements 2014 units of private equity funds, hedge funds and unlisted UCITS for which the information related to financial instruments held in the relevant portfolios is not available and that as such could include financial instruments assessed at Mark to Model by using unobservable parameters; bonds assessed at Mark to Model by using unobservable parameters (correlations, curve spread benchmark, recovery rate); bonds assessed with price from counterparty at Mark to Model by using unobservable parameters; ABS bonds for which a Mark to Market measurement is not available; derivative instruments assessed at Mark to Model by using unobservable parameters (correlations, volatility, estimates of dividends); bonds that do not meet the requirements defined in the scoring test (see paragraph Mark to Market Valuations ) and for which a Mark to Model valuation is not possible. Fair value measurement on a non-recurring basis and in compliance with disclosure requirements of other principles Consistent with the accounting standard IFRS 13, the fair value is measured also for assets and liabilities not measured at fair value on a recurring basis in the statement of financial position and when the information on fair value must be provided in the additional information notes in accordance with other international accounting standards. Since these assets and liabilities are not traded in general, the calculation of their fair value is mainly based on the use of internal inputs not directly observable on the market. This category mainly includes the following types of instruments: bond issues measured at Mark to Market (level 1); bond issues and loans assessed at Mark to Model by using unobservable parameters (curve spread benchmark) (level 3); short-term payables with a duration of less than 18 months and Certificates of deposit measured at amortised cost (level 3); receivables from customers measured according to the following principles (level 3): -- receivables with a duration of more than 18 months (MLT receivables) valued at Mark to Model with a discounting method of cash flows for the principal and interest component. For MLT receivables, the discount rate used depends on the risk free rate plus a risk premium determined on the operation by means of the Probability of Default (PD) and Loss Given Default (LGD) parameters. These parameters are obtained from the Cedacri Credit Rating System (CRS) application and were estimated on the basis of a consortium. The cumulated probabilities of default (PD) are calculated through the application of a Markovian process to the one-year transition matrixes, whereas the LGD is considered constant throughout the time horizon; -- non-performing loans valued at amortised cost net of analytical valuations; -- receivables with a duration of less than 18 months measured at amortised cost; other receivables measured at carrying amount (level 3); investment property measured depending on assessment value calculated by the independent surveyors consistent with the provisions of the current legislation. The logic of assignment of the survey mandates contemplates a non-exclusive assignment of assets and a three-year rotation in the assignment of surveyors. A.4.2 Processes and sensitivity of measurements With reference to assets designated at fair value on a recurring basis and belonging to Level 3, the stress on non-observable parameters is carried out with reference to financial instruments valued at Mark to Model and on which the valuation is carried out through one or more non-observable parameters. On 31 December 2014, the portion of financial assets designated on a recurring basis and belonging to Level 3 amounted to 83.8m. 84% of this portfolio consists of unlisted equity securities and UCITS that were not subject to stress on unobservable inputs. The remaining portion of 16% consists of unlisted bonds that are characterised by a sensitivity irrelevant to unobservable inputs. 93

96 3 Notes to the Separate Financial Statements A.4.3 Fair Value hierarchy Assets and liabilities designated at fair value are classified on the basis of the hierarchy defined by the IFRS 13 accounting standard. The aim of this classification is to establish a fair value hierarchy depending on the degree of discretion used, giving priority to the use of parameters observable on the market in that able to reproduce the assumptions that the market participants would use when pricing the assets and liabilities. The classification is based on the criterion used for measuring the fair value, (Mark to Market, Mark to Model, Counterparty) and on the observability of the parameters used, in the case of Mark to Model valuation. Level 1: this category includes the assets and liabilities valued at Mark to Market with source the CBBT price and the prices from the contributor having the minimum requirements that guarantee that such prices are executable on active markets; Level 2: this category includes the assets and liabilities valued at Mark to Market but that cannot be classified under the previous category and the assets whose fair value is measured by a consistent pricing model supported by parameters observable on the market; Level 3: this category includes the assets and liabilities for which the estimate variability of the pricing model can be significant because of the complexity of the payoff or, if a consistent and validated model is available, the parameters required for the valuation are unobservable. Moreover, this category includes the bonds that do not meet the requirements defined in the scoring test (see paragraph Mark to Market Valuations ) and for which a Mark to Model valuation is not possible. Finally, this category also includes receivables and investment property. A.4.4 Other information On the reporting date, there was no information to be reported pursuant to IFRS 13, paragraphs 51, 93 letter (i) and

97 Unipol Banca Financial Statements 2014 Quantitative information A.4.5 Fair Value hierarchy A Assets and liabilities measured at fair value on a recurring basis: division by level of fair value Assets/liabilities measured at fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Held-for-trading financial assets , Financial assets designated at fair value Available-for-sale financial assets 553,610 1,383 83, , , Hedging derivatives - 7, , Property, plant and equipment Intangible assets Total 553,656 9,309 83, ,122 9, , Held-for-trading financial liabilities Financial liabilities designated at fair value Hedging derivatives - 84, ,046 - Total - 84, ,048 1 Transfers of assets from level 1 to level 2 of the fair value hierarchy carried out during the financial year amounted to 1,383k and are due to a loss of importance of prices expressed by the main market. In order to determine the fair value of financial derivatives, CVA (Credit Valuation Adjustment) and DVA (Debit Valuation Adjustment) adjustments were not used in that, at 31 December 2014, all the positions existing on derivatives referred to collateralised contracts for which CSA agreements exist between the traded counterparties. 95

98 3 Notes to the Separate Financial Statements A Annual changes in assets designated at fair value on a recurring basis (level 3) Held-for-trading financial assets Financial assets Designated at fair value Available-for-sale financial assets Hedging derivatives Property, plant and equipment Intangible assets 1. Opening balances , Increases , Purchases , Profits allocated to: Income statement of which capital gains Shareholders' equity Transfers from other levels Other increases - - 3, Decreases 11-48, Sales Repayments Losses allocated to: , Income statement , of which capital losses , Shareholders' equity Transfers to other levels Other decreases Closing balances ,

99 Unipol Banca Financial Statements 2014 A Annual changes in liabilities designated at fair value on a recurring basis (level 3) Held-for-trading financial liabilities Financial liabilities designated at fair value Hedging derivatives 1. Opening balances Increases Issues Losses allocated to: Income statement of which capital losses Shareholders' equity Transfers from other levels Other increases Decreases Repayments Repurchases Profits allocated to: of which capital gains Shareholders' equity Transfers to other levels Other decreases Closing balances

100 3 Notes to the Separate Financial Statements A Assets and liabilities not designated at fair value or designated at fair value on a non-recurring basis: breakdown by level of fair value. Assets/Liabilities not measured at fair value or measured at fair value on a non-recurring basis Carrying Amount Level 1 Level 2 Level 3 Carrying Amount Level 1 Level 2 Level 3 1. Held-to-maturity investments 817, , , , Receivables from banks 346,149 6, , ,334 10,706 17, , Receivables from customers 9,827, ,658,883 9,615, ,190, Property, plant and equipment held for investment 5. Non-current assets and disposal groups held for sale 1, , , Total 10,993, ,520-10,998,139 10,818, ,561 17,993 10,543, Due to banks 795, ,893 1,257, ,257, Due to customers 7,622, ,622,298 7,745, ,745, Securities outstanding 2,625, ,678,784 2,321, ,314, Liabilities associated with assets being disposed of Total 11,044, ,096,975 11,324, ,317,588 A.5 - Information on the So-Called Day One Profit/Loss The initial subscription value of financial instruments corresponds to their fair value on the date they are first recorded and is normally deemed to be the price paid. In the case of financial instruments that are not very liquid and are classified among those valued at fair value recorded in the income statement, the valuation models are based on prudential criteria in order to ensure that the effects recorded in the income statement are based on valuation parameters that can be seen on the markets. 98

101 Unipol Banca Financial Statements 2014 Part B Information on the Statement of Financial Position ASSETS Section 1 Cash and cash equivalents Item 10 Cash and cash equivalents: breakdown Total 31/12/2014 Total 31/12/2013 a) Cash on hand 98, ,648 b) Demand deposits with Central Banks - - Total 98, ,648 Section 2 Held-for-trading financial assets Item Held-for-trading financial assets: breakdown Total 31/12/2014 Total 31/12/2013 Items/Amounts Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Balance sheet assets 1. Debt securities , Structured securities Other debt securities , Equity securities UCITS units Loans Repurchase agreements receivable Other Total A , B. Derivatives 1. Financial derivatives: for trading connected to the fair value option other Credit derivatives: for trading connected to the fair value option other Total B Total (A+B) ,

102 3 Notes to the Separate Financial Statements 2.2 Held-for-trading financial assets: breakdown by debtors/issuers Items/Amounts Total 31/12/2014 Total 31/12/2013 A. Balance sheet assets 1. Debt securities - 99,295 a) Governments and Central banks - 99,295 b) Other public bodies - - c) Banks - - d) Other issuers Equity securities a) Banks 10 - b) Other issuers: insurance companies financial companies non-financial companies other UCITS units Loans - - a) Governments and Central banks - - b) Other public bodies - - c) Banks - - d) Other entities - - Total A 46 99,455 B. Derivatives a) Banks - 2 b) Customers - 15 Total B - 17 Total (A + B) 46 99,

103 Unipol Banca Financial Statements Held-for-trading financial assets: annual changes Debt securities Equity securities UCITS units Loans Total A. Opening balances 99, ,455 B. Increases 432, ,088 B1. Purchases 421, ,908 B2. Positive fair value changes B3. Other changes 11, ,180 C. Decreases 531, ,497 C1. Sales 430, ,474 C2. Repayments 100, ,406 C3. Negative fair value changes C4. Transfers to other portfolios C5. Other changes D. Closing balances The amount recognised under item B.3. Other changes includes contributions deriving from the merger by incorporation of Banca Sai SpA of 11,030k as debt securities and 16.5k as equity securities. This transaction qualifies as business combination between entities under common control, not regulated by the IFRS 3 accounting standard. Section 3 Financial assets designated at fair value Item 30 The financial statements contain no assets under this item. Section 4 Available-for-sale financial assets Item Available-for-sale financial assets: breakdown Total 31/12/2014 Total 31/12/2013 Items/Amounts Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 553,265 1,383 14, ,540-4, Structured securities Other debt securities 553,265 1,383 14, ,540-4, Equity securities ,591 1,123-57, Designated at fair value , Designated at cost , , UCITS units , , Loans Total 553,610 1,383 83, , ,

104 3 Notes to the Separate Financial Statements Financial assets designated at cost include investments in equity instruments unlisted on active markets for which the related fair value cannot be reliably determined and therefore are maintained at their cost of acquisition. 4.2 Available-for-sale financial assets: breakdown by debtors/issuers Items/Amounts Total 31/12/2014 Total 31/12/ Debt securities 568, ,025 a) Governments and Central banks 526, ,073 b) Other public bodies - - c) Banks 40,433 29,948 d) Other issuers 1,726 2, Equity securities 31,936 58,958 a) Banks - - b) Other issuers: 31,936 58,958 - insurance companies financial companies 2,321 1,976 - non-financial companies 29,615 56,982 - other UCITS units 38,014 47, Loans - - a) Governments and Central banks - - b) Other public bodies - - c) Banks - - d) Other entities - - Total 638, ,572 Equity securities include securities issued by subjects classified as watchlist, whose initial subscription value of 39,564k was completely written down, with a negative effect in the income statement in the financial year under review of 33,064k. 102

105 Unipol Banca Financial Statements Micro-hedged available-for-sale financial assets Total 31/12/2014 Total 31/12/ Securities subject to micro-hedging of fair value: - - a) interest rate risk - - b) exchange rate risk - - c) more than one risk Securities subject to micro-hedging of cash flows: 324, ,630 a) interest rate risk 324, ,630 b) exchange rate risk - - c) other - - Total 324, , Available-for-sale financial assets: annual changes Debt securities Equity securities UCITS units Loans Total A. Opening balances 697,025 58,958 47, ,572 B. Increases 1,242,039 7,219 4,769-1,254,027 B1. Purchases 1,093,449 3,630 4,769-1,101,848 B2. Positive FV changes 4, ,525 B3. Write-backs allocated to the income statement allocated to equity B4. Transfers from other portfolios B5. Other changes 144,065 3, ,654 C. Decreases 1,370,219 34,241 14,344-1,418,804 C1. Sales 1,336,023 1, ,337,198 C2. Repayments 26, ,545 C3. Negative FV changes C4. Impairment write-downs ,064 14,344-47,981 - allocated to the income statement ,064 14,344-47,981 - allocated to equity C5. Transfers to other portfolios C6. Other changes 7, ,064 D. Closing balances 568,845 31,936 38, ,795 The amount recognised under item B.5. Other changes includes contributions deriving from the merger by incorporation of Banca Sai SpA of 108.9m as debt securities and 3.2m as equity securities. This transaction qualifies as business combination between entities under common control, not regulated by the IFRS 3 accounting standard. 103

106 3 Notes to the Separate Financial Statements Impairment write-downs - allocated to the income statement of the item C4 concern impairments recognised based on IAS 39 of certain financial instruments held by the Bank. Other changes of the items B5 and C6 includes both profits/losses made on assignments and/or redemptions of securities and positive/negative effects of the amortised cost on debt securities. Section 5 Held-to-maturity investments Item Held-to-maturity investments: breakdown Total 31/12/2014 Total 31/12/2013 Fair Value Fair Value Carrying Amount Level 1 Level 2 Level 3 Carrying Amount Level 1 Level 2 Level 3 1. Debt securities 817, , , , structured other 817, , , , Loans Held-to-maturity investments: debtors/issuers Type of transactions/amounts Total 31/12/2014 Total 31/12/ Debt securities 817, ,381 a) Governments and Central banks 817, ,381 b) Other public bodies - - c) Banks - - d) Other issuers Loans - - a) Governments and Central banks - - b) Other public bodies - - c) Banks - - d) Other entities - - Total 817, ,381 Total fair value 870, , Micro-hedged held-to-maturity investments The Group has no micro-hedged investments. 104

107 Unipol Banca Financial Statements Held-to-maturity investments: annual changes Debt securities Loans Total A. Opening balances 818, ,381 B. Increases 267, ,181 B1. Purchases 255, ,287 B2. Write-backs B3. Transfers from other portfolios B4. Other changes 11,894-11,894 C. Decreases 267, ,591 C1. Sales C2. Repayments 246, ,689 C3. Adjustments C4. Transfers to other portfolios C5. Other changes 20,902-20,902 D. Closing balances 817, ,

108 3 Notes to the Separate Financial Statements Section 6 Receivables from banks Item Receivables from banks: breakdown Total 31/12/2014 Total 31/12/2013 Fair Value Fair Value Type of transactions/amounts Carrying Amount Level 1 Level 2 Level 3 Carrying Amount Level 1 Level 2 Level 3 A. Receivables from Central banks 91, , , , Term deposits Compulsory reserve 91, , Repurchase agreements Other B. Receivables from banks 254,474 6, , ,982 10,706 17, , Loans 246, , , , Current accounts and demand deposits 134, , Term deposits Other loans: 112, , Repurchase agreements receivable Financial leases Other 112, , Debt securities 7,717 6, ,468 10,706 17, Structured securities Other debt securities 7, , Total 346,149 6, , ,334 10,706 17, , Receivables from banks: micro-hedged assets The Group has no micro-hedged assets. 6.3 Financial leases There are no finance lease contracts with banks. 106

109 Unipol Banca Financial Statements 2014 Section 7 Receivables from customers Item Receivables from customers: breakdown Total 31/12/2014 Total 31/12/2013 Carrying amount Fair value Carrying amount Fair value Performing Non-performing L1 L2 L3 Performing Non-performing L1 L2 L3 Type of transactions/amounts Purchased Other Purchased Other Loans 7,085,269-2,742, ,658,833 7,286,417-2,329, ,189, Current accounts 1,199, , , , Repurchase agreements receivable 15,162-1, ,371-1, Mortgages 4,834,541-1,887, ,143,736-1,596, Credit cards, personal loans and loans against salary 26,927-14, ,388-14, Financial leases 51,175-36, ,044-33, Factoring Other loans 957, , ,038, , Debt securities Structured securities Other debt securities Total 7,085,319-2,742, ,658,883 7,286,467-2,329, ,190, Receivables from customers: breakdown by debtors/issuers Total 31/12/2014 Total 31/12/2013 non-performing non-performing Type of transactions/amounts Performing Purchased Other Performing Purchased Other 1. Debt securities a) Governments b) Other Public bodies c) Other issuers non-financial companies financial companies insurance companies other Loans to: 7,085,269-2,742,512 7,286,417-2,329,222 a) Governments b) Other Public bodies 23, , c) Other entities 7,061,235-2,742,512 7,258,987-2,329,196 - non-financial companies 3,030,905-2,213,401 3,559,579-1,959,588 - financial companies 653, , ,878-25,086 - insurance companies 6, , other 3,370, ,694 3,229, ,522 Total 7,085,319-2,742,512 7,286,467-2,329,

110 3 Notes to the Separate Financial Statements 7.3 Receivables from customers: micro-hedged assets The Group has no micro-hedged assets. 7.4 Financial leases Total 2014 Total 2013 Minimum payments Gross investment Minimum payments Gross investment Time bands Non- Performing Exposures Principal Interest Principal Interest of which guaranteed residual value of which nonguaranteed residual value Non- Performing Exposures of which guaranteed residual value of which nonguaranteed residual value on demand 7,138 1, ,744-6,694 2, up to 3 months 504 2, , , ,434 - from 3 months to 1 year 2,100 7, ,436 8,916-2,466 12, ,170 14,282 - from 1 year to 5 years 19,104 15, ,234 20,498-12,620 27,012 1,372 7,297 34,309 - over 5 years 7,662 24,831 5,782 5,448 30,279-11,395 32,985 7,871 8,025 41,010 - unspecified duration Total 36,508 51,175 7,092 12,659 63,834-33,742 77,044 10,186 18,303 95,347 - Section 8 Hedging derivatives Item Hedging derivatives: breakdown by type of hedge and by level Amounts k 31/12/ /12/2013 Fair Value Fair Value Level 1 Level 2 Level 3 Nominal Value Level 1 Level 2 Level 3 Nominal Value A. Financial derivatives: - 7,926-97,524-9, ,024 1) Fair Value - 7,926-97,524-9, ,024 2) Cash flows ) Foreign investments B. Credit derivatives: ) Fair Value ) Cash flows Total - 7,926-97,524-9, ,

111 Unipol Banca Financial Statements Hedging derivatives: breakdown by hedged portfolios and by type of hedge Transactions/Type of hedge Rate Exchange risk rate risk Fair Value Cash flows Foreign invest. Micro Macro Micro Macro Credit risk Price risk More than one risk 1. Available-for-sale financial assets Receivables Held-to-maturity investments Portfolio Other transactions Total assets Financial liabilities 7, Portfolio Total liabilities 7, Anticipated transactions Portfolio of financial assets and liabilities Section 9 Adjustments of macro-hedged financial assets Item 90 The financial statements contain no such adjustments. Section 10 Equity investments Item Equity investments: information on participating interests Name Registered office Operating office % holding A. Fully controlled subsidiaries 1. Nettuno Fiduciaria Srl Bologna Bologna % 2. Finitalia Spa Milano Milano % B. Joint ventures none C. Companies subject to significant influence 1. Campuscertosa Srl in liquidazione Milano Milano 26.16% 2. SCS Azioninnova Spa Bologna Bologna 42.85% 3. Promorest Srl Castenaso (Bo) Castenaso (Bo) 49.92% 109

112 3 Notes to the Separate Financial Statements 10.2 Significant equity investments: carrying amounts, fair values and dividends received For the information related to this paragraph, please see the contents of the same section in the Notes to the consolidated financial statements Significant equity investments: accounting information For the information related to this paragraph, please see the contents of the same section in the Notes to the consolidated financial statements Equity investments considered not significant: accounting information For the information related to this paragraph, please see the contents of the same section in the Notes to the consolidated financial statements Equity investments: annual changes Total 2014 Total 2013 A. Opening balances 11,439 78,248 B. Increases 45,184 9,835 B.1 Purchases B.2 Write-backs - - B.3 Revaluations - - B.4 Other changes 45,184 9,733 C. Decreases 3,881 76,644 C.1 Sales 1,877 1,550 C.2 Adjustments C.3 Other changes 1,252 75,094 D. Closing balances 52,742 11,439 E. Total revaluations - - F. Total adjustments 9,176 1,048 The item B.4 Other changes refers entirely to the equity investment in Finitalia SpA acquired following the merger by incorporation of Banca Sai SpA into Unipol Banca SpA. The item C.1 Sales refers entirely to the disposal of the equity investment in Unicard SpA in The item F. Total adjustments comprises 7,376k related to the adjustment made by Banca Sai SpA on the equity investment in Finitalia SpA during Commitments relating to equity investments in joint ventures For the information related to this paragraph, please see the contents of the same section in the Notes to the consolidated financial statements. 110

113 Unipol Banca Financial Statements Commitments relating to equity investments in companies subject to significant influence For the information related to this paragraph, please see the contents of the same section in the Notes to the consolidated financial statements Significant restrictions For the information related to this paragraph, please see the contents of the same section in the Notes to the consolidated financial statements Other information For the information related to this paragraph, please see the contents of the same section in the Notes to the consolidated financial statements. Section 11 Property, plant and equipment Item Property, plant and equipment for functional use: breakdown of assets valued at cost Assets/amounts Total 31/12/2014 Total 31/12/ Owned assets 15,880 17,018 a) land - - b) buildings 1,236 1,288 c) furniture 9,236 7,992 d) electronic equipment 5,383 7,698 e) other Assets acquired under financial lease - - a) land - - b) buildings - - c) furniture - - d) electronic equipment - - e) other - - Total 15,880 17,

114 3 Notes to the Separate Financial Statements 11.2 Property, plant and equipment held for investment: breakdown of assets valued at cost Total 31/12/2014 Total 31/12/2013 Fair Value Fair Value Assets/Amounts Carrying amount Level 1 Level 2 Level 3 Carrying amount Level 1 Level 2 Level 3 1. Owned assets 1, , ,078 a) land b) buildings 1, , , Assets acquired under financial lease a) land b) buildings Total 1, , , Property, plant and equipment of functional use: breakdown of revalued assets There are no property, plant and equipment for functional use revalued Property, plant and equipment held for investment: breakdown of assets designated at fair value There are no property, plant and equipment held for investment designated at fair value. 112

115 Unipol Banca Financial Statements Property, plant and equipment for functional use: annual changes Land Buildings Forniture Electronic equipment Other Total A. Gross opening balances - 1,700 43,254 46,215 1,223 92,392 A.1 Net total reductions in value - (412) (35,262) (38,517) (1,183) (75,374) A.2 Net opening balances - 1,288 7,992 7, ,018 B. Increases - - 4,103 1,847-5,950 B.1 Purchases - - 3,996 1,798-5,794 B.2 Capitalised improvement costs B.3 Write-backs B.4 Positive fair value changes allocated to: a) shareholders equity b) income statement B.5 Positive exchange rate differences B.6 Transfers from property assets held for investment B.7 Other changes C. Decreases - (52) (2,859) (4,162) (15) (7,088) C.1 Sales - - (9) - - (9) C.2 Depreciation - (52) (2,850) (4,162) - (7,064) C.3 Impairment adjustments allocated to: (15) (15) a) shareholders equity b) income statement (15) (15) C.4 Negative fair value changes allocated to: a) shareholders equity b) income statement C.5 Negative exchange rate differences C.6 Transfers to: a) property, plant and equipment held for investment b) assets being disposed of C.7 Other changes D. Net closing balances - 1,236 9,236 5, ,880 D.1 Net total reductions in value (464) (38,112) (42,679) (1,183) (82,438) D.2 Gross closing balances - 1,700 47,348 48,062 1,208 98,318 E. Valuation at cost The item B.7 Other changes includes 156k recognised as a result of the merger by incorporation of Banca Sai SpA into Unipol Banca SpA in The values indicated in items A1 and D1 refer exclusively to total depreciation at the beginning and end of the year, respectively. Item E Valuation at cost provides additional information only where there are property, plant and equipment designated at fair value. This is not the case in these financial statements and therefore there are no values under this item. 113

116 3 Notes to the Separate Financial Statements 11.6 Property, plant and equipment held for investment: annual changes Amouts in k Total Land Buildings A. Opening balances - 1,078 B. Increases - - B.1 Purchases - - B.2 Capitalised improvement costs - - B.3 Positive fair value changes - - B.4 Write-backs - - B.5 Positive exchange rate differences - - B.6 Transfers from property assets for functional use - - B.7 Other changes - - C. Decreases - - C.1 Sales - - C.2 Depreciation - - C.3 Negative fair value changes - - C.4 Impairment adjustments - - C.5 Negative exchange rate differences - - C.6 Transfers to other portfolios of assets - - a) property assets for functional use - - b) non-current assets being disposed of - - C.7 Other changes - - D. Closing balances - 1,078 E. Measurement at fair value Commitments to purchase property, plant and equipment (IAS 16/74.c.) There are no commitments to purchase property, plant and equipment (IAS 16/74.c.). 114

117 Unipol Banca Financial Statements 2014 Section 12 Intangible assets Item Intangible assets: breakdown by type of assets Total 31/12/2014 Total 31/12/2013 Assets/Amounts Limited life Unlimited life Limited life Unlimited life A.1 Goodwill - - A.2 Other intangible assets A.2.1 Assets valued at cost: a) Intangible assets generated internally b) Other assets A.2.2 Assets designated at fair value: a) Intangible assets generated internally b) Other assets Total Intangible assets, totalling 604k, mainly consist of software user licences, with a limited useful life, amortisable over three years at a constant amortisation rate. Amortisation accrued for the financial year is recorded in item 180 of the Income Statement. The Unipol Banca financial statements no longer include goodwill in that already fully written down at 31 December

118 3 Notes to the Separate Financial Statements 12.2 Intangible assets: annual changes Goodwill generated internally Limited life Other intangible assets Unlimited life Limited life other Unlimited life Total A. Opening balances ,870-6,870 A.1 Net total reductions in value (6,574) - (6,574) A.2. Net opening balances B. Increases B.1 Purchases B.2 Increases in internal intangible assets B.3 Write-backs B.4 Positive fair value changes shareholders equity income statement B.5 Positive exchange rate differences B.6 Other changes C. Decreases (447) - (447) C.1 Sales C.2 Adjustments (447) - (447) - Amortisation (447) - (447) - Write-downs shareholders equity income statement C.3 Negative fair value changes shareholders equity income statement C.4 Transfers to non-current assets being disposed of C.5 Negative exchange rate differences C.6 Other changes D. Net closing balances D.1 Net total adjustments ,021-7,021 E. Gross closing balances ,625-7,625 F. Valuation at cost The item B.6 Other changes includes 196k recognised as a result of the merger by incorporation of Banca Sai SpA in The values indicated under items A.1 and D.1 Net total adjustments - include the balance of the amortisation fund, at year-start and year-end respectively, for intangible assets with a limited life and total goodwill adjustments. Item F Valuation at cost provides additional information only where there are intangible assets designated at fair value in the financial statements. This is not the case in these financial statements and therefore there are no values under this item. 116

119 Unipol Banca Financial Statements Other information There are no cases related to the requested information. Section 13 Tax assets and liabilities Asset item 130 and liability item Deferred tax assets: breakdown 31/12/ /12/2013 IRES effect IRAP effect IRES effect IRAP effect Deferred tax assets in the income statement: 214,006 32, ,704 31,837 - write-downs on receivables deductible in future years 130,684 16, ,438 13,633 - impairment on goodwill 59,400 12,562 75,197 15,231 - goodwill exempted on equity investments 1, , provision for risks of revocation tax losses 16,028-23, detaxation of ACE (support for economic growth) other provisions for risks and charges 5,187-4, impairment on UCITS - 3,187-2,388 - other items , Deferred tax assets in shareholders equity: 4, , capital losses on assets AFS (debt securities) , capital losses on assets AFS (equity instruments) capital losses on assets AFS (UCITS units) capital losses on cash flow hedging derivatives 2, , Tax Losses IAS post-employment benefits Total deferred tax assets 218,840 33, ,960 32,

120 3 Notes to the Separate Financial Statements 13.2 Deferred tax liabilities: breakdown 31/12/ /12/2013 IRES effect IRAP effect IRES effect Deferred tax liabilities in the income statement: 26, , uncollected interest on arrears 13, , net income from securitisation 13,253-12,675 - Deferred tax liabilities in the shareholders equity: ,527 1,322 - capital gains on assets AFS (debt securities) ,527 1,322 - capital gains on assets AFS (equity securities) Total deferred tax liabilities 27, ,765 1,360 IRAP effect 13.3 Changes in deferred tax assets (through the income statement) Total 31/12/2014 Total 31/12/ Opening balance 264, , Increases 72, , Deferred tax assets recorded during the year 53, ,775 a) relating to previous years b) due to changes in accounting standards - - c) write-backs - - d) other 53, , New taxes or increases in tax rates Other increases 18,782 8, Decreases 90,700 2, Deferred tax assets derecognised during the year 16,054 2,949 a) reallocations 16,007 2,949 b) write-downs for unanticipated non-recoverability - - c) changes in accounting standards - - d) other Reductions in tax rates Other decreases 74,646 - a) transformation into tax receivables pursuant to L. 214/ ,646 - b) other Closing balance 246, ,541 The 2014 increase set forth in item 2.3, not recognised in the income statement, was related for 14m to deferred tax assets deriving from the merger of Banca Sai SpA into Unipol Banca SpA. On 1 December 2014, the consolidating company Finsoe Spa communicated to the consolidated company Unipol Banca SpA the return of 4,856k of previously transferred tax losses. 118

121 Unipol Banca Financial Statements Changes in deferred tax assets pursuant to Law 214/2011 (through the income statement) Total 31/12/2014 Total 31/12/ Opening balance 232, , Increases 64, , Decreases 75,137 1, Reallocations Transformations in tax receivables 74,646 - a) deriving from losses for the year 74,259 - b) deriving from tax losses Other decreases 491 1, Closing balance 221, ,117 The 2014 increase set forth in item 2 was related for 13,932k to deferred tax assets pursuant to L. 214/2011 deriving from the merger of Banca Sai SpA into Unipol Banca SpA Change in deferred tax liabilities (through the income statement) Total 31/12/2014 Total 31/12/ Opening balance 23,276 20, Increases 3,459 3, Deferred tax liabilities recorded during the year 3,459 3,667 a) relating to previous years - - b) due to changes in accounting standards - - c) other 3,459 3, New taxes or increases in tax rates Other increases Decreases Deferred tax liabilities derecognised during the year a) reallocations b) due to changes in accounting standards - - c) other Reductions in tax rates Other decreases Closing balance 26,735 23,276 The balance of deferred taxes deriving from the merger of Banca Sai SpA into Unipol Banca SpA amounted to 255k. 119

122 3 Notes to the Separate Financial Statements 13.5 Change in deferred tax assets (through the shareholders equity) Total 31/12/2014 Total 31/12/ Opening balance 5,028 17, Increases 1, Deferred tax assets recorded during the year 1,262 1 a) relating to previous years - - b) due to changes in accounting standards - - c) other 1, New taxes or increases in tax rates Other increases Decreases , Deferred tax assets derecognised during the year ,126 a) reallocations ,126 b) write-downs for unanticipated non-recoverability - - c) due to changes in accounting standards - - d) other Reductions in tax rates Other decreases Closing balance 5,604 5,028 The 2014 increase set forth in item 2.1.c was related for 381k to deferred tax assets deriving from the merger of Banca Sai SpA into Unipol Banca SpA Change in deferred tax assets (through the shareholders equity) Total 31/12/2014 Total 31/12/ Opening balance 7,849 7, Increases Deferred tax liabilities recorded during the year a) relating to previous years - - b) due to changes in accounting standards - - c) other New taxes or increases in tax rates Other increases Decreases 6, Deferred tax liabilities derecognised during the year 6,996 - a) reallocations 6,996 - b) due to changes in accounting standards - - c) other Reductions in tax rates Other decreases Closing balance 853 7,

123 Unipol Banca Financial Statements Other information The rates used for determining deferred tax assets and liabilities are set below: IRES 27.5%; IRAP 5.57%. Section 14 Non-current assets and disposal groups held for sale and associated liabilities Asset item 140 and liability item Non-current assets and disposal groups held for sale: breakdown by type of assets This item is not present in the financial statements. Section 15 Other assets Item Other assets: breakdown Total 31/12/2014 Total 31/12/2013 Current account cheques being processed 36,784 42,301 Debits being processed 69,947 57,210 Improvements to third party assets 9,965 13,162 Sundry prepaid expenses 2,546 3,058 Tax assets connected with substitute tax assets 24,555 36,873 Securities transactions to be settled Other 94,021 80,020 Total 237, ,

124 3 Notes to the Separate Financial Statements LIABILITIES Section 1 Due to banks Item Due to banks: breakdown Type of transactions/amounts Total 31/12/2014 Total 31/12/ Due to central banks 770, , Due to banks 25, , Current accounts and demand deposits 25,774 39, Term deposits - 35, Loans - 321, Repurchase agreements payable Other Amounts due for commitments to repurchase own equity instruments Other payables - - Total 795,893 1,257,552 Fair value - level Fair value - level Fair value - level 3 795,893 1,257,552 Total fair value 795,893 1,257, Breakdown of item 10 Due to banks : subordinated payables There are no payables of this type in the financial statements. 1.3 Breakdown of item 10 Due to banks : structured payables There are no payables of this type in the financial statements. 1.4 Due to banks: micro-hedged payables There are no payables of this type in the financial statements. 1.5 Payables for financial leases There are no payables of this type in the financial statements. 122

125 Unipol Banca Financial Statements 2014 Section 2 Due to customers Item Due to customers: breakdown Type of transactions/amounts Total 31/12/2014 Total 31/12/ Current accounts and demand deposits 5,671,213 6,113, Term deposits 738, , Loans 300, , Repurchase agreements payable 300, , Other Amounts due for commitments to repurchase own equity instruments Other payables 912, ,123 Total 7,622,298 7,745,904 Fair value - level Fair value - level Fair value - level 3 7,622,298 7,745,904 Total fair value 7,622,298 7,745, Breakdown of item 20 Due to customers : subordinate payables There are no payables of this type in the financial statements. 2.3 Breakdown of item 20 Due to customers: structured payables There are no payables of this type in the financial statements. 2.4 Due to customers : micro-hedged payables There are no payables of this type in the financial statements. 2.5 Payables for financial leases Item not present in the year in question. 123

126 3 Notes to the Separate Financial Statements Section 3 Securities outstanding Item Securities outstanding: breakdown Total 31/12/2014 Total 31/12/2013 Fair Value Fair Value Type of Securities/Amounts Carrying amount Level 1 Level 2 Level 3 Carrying amount Level 1 Level 2 Level 3 A. Securities 2,625, ,678,784 2,321, ,314, Bonds 2,611, ,664,783 2,305, ,298, structured other 2,611, ,664,783 2,305, ,298, Other securities 14, ,001 15, , structured other 14, ,001 15, ,297 Total 2,625, ,678,784 2,321, ,314, Breakdown of item 30 Securities outstanding : subordinate securities Total 31/12/2014 Total 31/12/2013 Securities outstanding: subordinate securities 589, , Securities outstanding : micro-hedged securities Total 31/12/2014 Total 31/12/ Securities subject to micro-hedging of fair value: 98, ,075 a) interest rate risk 98, ,075 b) exchange rate risk - - c) more than one risk Securities subject to micro-hedging of cash flows: 129, ,661 a) interest rate risk 129, ,661 b) exchange rate risk - - c) other - - Total 227, ,

127 Unipol Banca Financial Statements 2014 Section 4 Held-for-trading financial assets Item Held-for-trading financial assets: breakdown Total 31/12/2014 Total 31/12/2013 Fair Value Fair Value Type of transactions/amounts Nominal value Level 1 Level 2 Level 3 Fair Value* Nominal value Level 1 Level 2 Level 3 A. Balance sheet liabilities 1. Due to banks Due to customers Debt securities Bonds Structured Other bonds Other securities Structured Other Total A B. Derivatives 1. Financial derivatives For trading Connected to the fair value option Other Credit derivatives For trading Connected to the fair value option Other Total B Total (A + B) Fair Value* *Fair Value calculated by excluding the changes in value that are due to the change in creditworthiness 125

128 3 Notes to the Separate Financial Statements 4.2 Breakdown of item 40 Held-for-trading financial liabilities : subordinated liabilities There are no liabilities of this type in the financial statements. 4.3 Breakdown of item 40 Held-for-trading financial liabilities : structured payables There are no liabilities of this type in the financial statements. 4.4 Held-for-trading financial liabilities (excluding technical overdrafts ): annual changes There are no liabilities of this type in the financial statements. Section 5 Financial liabilities designated at fair value Item 50 There are no liabilities of this type in the financial statements. Section 6 Hedging derivatives Item Hedging derivatives: breakdown by type of hedge and by hierarchical levels 31/12/ /12/2013 Fair Value Fair Value Level 1 Level 2 Level 3 Nominal value Level 1 Level 2 Level 3 Nominal value A) Financial derivatives - 84, ,000-50, ,000 1) Fair value ) Cash flows - 84, ,000-50, ,000 3) Foreign investments B) Credit derivatives ) Fair value ) Cash flows Total - 84, ,000-50, ,

129 Unipol Banca Financial Statements Hedging derivatives: breakdown by hedged portfolios and by type of hedge Transactions/Type of hedge Rate risk rate risk Exchange Fair Value Cash flows Foreign invest. Micro Macro Micro Macro Credit risk Price risk More than one risk 1. Available-for-sale financial assets , Receivables Held-to-maturity investments Portfolio Other transactions Total assets , Financial liabilities , Portfolio - - Total liabilities , Anticipated transactions - 2. Portfolio of financial assets and liabilities Section 7 Adjustment of macro-hedged financial liabilities Item 70 This item is not present in the financial statements. Section 8 Tax liabilities Item 80 See Section 13 of the assets. Section 9 Liabilities associated with assets being disposed of Item 90 See Section 14 of the assets. 127

130 3 Notes to the Separate Financial Statements Section 10 Other liabilities Item Other liabilities: breakdown Total 31/12/2014 Total 31/12/2013 Items being processed 45,645 49,094 Payables to tax authorities 18,699 31,437 Sums payable to third parties on mortgage loans granted 61 1,667 Payables to suppliers 29,091 28,664 Bank transfers being processed 134,337 49,807 Cheque and bill discounts subject to/after collection 42,062 47,392 Payables to employees 4,434 4,007 Sundry accrued expenses 1,599 1,763 Creditors for portfolio risk 1, Utility bills paid by customers Payables to social security bodies 5,958 5,502 Inter-branch transit items Other 113,548 94,787 Total 397, ,297 Section 11 Post-employment benefits Item Post-employment benefits: annual changes Total 31/12/2014 Total 31/12/2013 A. Opening balances 15,418 15,071 B. Increases 9,200 7,156 B.1 Provision for the year 6,577 6,344 B.2 Other changes 2, C. Decreases (7,409) (6,809) C.1 Payments made (864) (557) C.2 Other changes (6,545) (6,252) D. Closing balances 17,209 15,418 Total 17,209 15,418 The item B.2 Other changes includes a total of 661k recognised as a result of the merger by incorporation of Banca Sai SpA in The other decreases include the quotas transferred to external funds: a supplementary pension scheme or a treasury fund set up with the INPS [national pensions body]. 128

131 Unipol Banca Financial Statements Other information The main statistical, actuarial and financial assumptions used for determining the post-employment benefits and seniority bonuses according to IAS 19 are shown below: Post-employment benefits and Seniority bonuses 1) Discount rate Composite curve ZC 2) 1-year discount rate 0.26% 3) Expected inflation rate 0.60% 4) Post-employment benefits percentage paid early in the year (pra) 0.78% 5) Post-employment benefits percentage paid due to resignations in the year (dm) 2.65% 6) Demographic assumption SI 2009 tt=0% Section 12 Provisions for risks and charges Item Provisions for risks and charges: breakdown Items/Amounts Total 31/12/2014 Total 31/12/ Company pensions funds Other provisions for risks and charges 16,442 14, legal disputes 4,944 4, staff expenses 6,888 5, other 4,610 4,858 Total 16,442 14, Provisions for risks and charges: annual changes Pension funds Other funds Total A. Opening balances - 14,034 14,034 B. Increases - 8,016 8,016 B.1 Provision for the year - 4,910 4,910 B.2 Changes due to the passage of time B.3 Changes due to discount rate changes B.4 Other changes - 3,106 3,106 C. Decreases - 5,608 5,608 C.1 Use during the year - 5,555 5,555 C.2 Changes due to discount rate changes C.3 Other changes D. Closing balances - 16,442 16,

132 3 Notes to the Separate Financial Statements The item B.4 Other changes includes around 3m recognised as a result of the merger by incorporation of Banca Sai SpA in Defined benefit company pension funds There are no provisions of this kind Provisions for risks and charges: other provisions The other provisions for risks and charges consist mainly in: funds for personnel costs: 5.3m were set aside as an actuarial estimate at 31 December 2014 of future charges of employees related to long-term benefits (seniority bonuses); provision for risks for compensation to customers: this amounted to 3.2m at 31 December 2014 ( 3.2m at 31/12/2013) and was set up to meet the likely costs of paying compensation to customers as a consequence of illegal actions carried out by some members of the sales network; during 2014, 2.5k of the provision in question was used for actually paying compensation; provision for risks of legal disputes for contingent liabilities related to actions against it and revocatory actions of 4.9m. Section 13 Redeemable shares Item 140 This item is not present in the financial statements. Section 14 Shareholders equity - Items 130, 150, 160, 170, 180, 190 and Capital and Treasury shares : breakdown The share capital is fully paid up and is made up of 897,384,181 ordinary shares each with a nominal value of At the end of the reporting period, the company did not hold treasury shares in its portfolio. 130

133 Unipol Banca Financial Statements Share capital Number of shares: annual changes Number of shares Items/Types Ordinary Other A. Shares existing at the beginning of the year 1,004,500, fully paid-up 1,004,500, not fully paid-up - - A.1 Treasury shares (-) - - A.2 Shares outstanding: opening balances 1,004,500,000 - B. Increases 232,428,578 - B.1 New issues 232,428, for payment: 232,428, business combinations conversion of bonds exercise of warrants other 232,428, free: in favour of employees in favour of directors other - - B.2 Sale of treasury shares - - B.3 Other changes - - C. Decreases 339,544,397 - C.1 Cancellation 339,544,397 - C.2 Purchase of treasury shares - - C.3 Business disposals - - C.4 Other changes - - D. Shares outstanding: closing balances 897,384,181 - D.1 Treasury shares (+) - - D.2 Shares existing at the end of the year 897,384, fully paid-up 897,384, not fully paid-up Share capital: Other information The share capital of the Bank is exclusively made up of ordinary shares each with a nominal value of 1. There are no rights, preferences and restrictions on the above-mentioned shares Profit reserves: other information For further details on the breakdown of the profit reserves, please refer to Part F Section 1 Shareholders Equity in the Notes to the Separate Financial Statements. 131

134 3 Notes to the Separate Financial Statements 14.5 Equity instruments: breakdown and annual changes This item is not present in the financial statements Other information There is no other information to report. Other Information 1. Guarantees issued and commitments Transactions Amount 31/12/2014 Amount 31/12/2013 1) Financial guarantees issued 59,522 66,595 a) Banks 8,659 8,304 b) Customers 50,863 58,291 2) Commercial guarantees issued 387, ,500 a) Banks 2,247 2,235 b) Customers 385, ,265 3) Irrevocable commitments to grant funds 110, ,121 a) Banks 664 1,667 i) certain use 664 1,667 ii) uncertain use - - b) Customers 110, ,454 i) certain use 6,199 12,651 ii) uncertain use 103, ,803 4) Commitments underlying credit derivatives: protection sales - - 5) Assets lodged as a guarantee of third-party obligations - - 6) Other commitments - - Total 557, , Assets lodged as guarantee for own liabilities and commitments Portfolios Amount 31/12/2014 Amount 31/12/ Held-for-trading financial assets Financial assets designated at fair value Available-for-sale financial assets 294,601 32, Held-to-maturity investments 448, , Receivables from banks Receivables from customers Property, plant and equipment

135 Unipol Banca Financial Statements 2014 In addition to the assets listed in the table it should be mentioned that 531,574k of securitised securities were locked up in order to back lending, Eurolending and repurchase agreements payable operations. 3. Information on operative leasing At the end of the reporting period, as well as during the period, there are no liabilities that can be classified in this item. 4. Management and brokerage on behalf of third parties Type of service Amount 31/12/ Trading for customers - a) Purchases - 1. settled - 2. not settled - b) Sales - 1. settled - 2. not settled - 2. Portfolio management 170,906 a) Individual 170,906 b) Collective - 3. Custody and administration of securities 46,920,267 a) Third-party securities on deposit: connected with the bank s custodian activity (excluding portfolio management) - 1. securities issued by the reporting bank - 2. other securities - b) third-party securities on deposit (excluding portfolio management): other 44,587, securities issued by the reporting bank 3,096, other securities 41,491,350 c) third-party securities deposited with third parties 44,512,386 d) securities owned deposited with third parties 2,332, Other transactions - 133

136 3 Notes to the Separate Financial Statements 5. Financial assets offset in the financial statements, or subject to master offsetting or similar agreements. Technical forms Gross amount of financial assets (a) Amount of financial liabilities offset in the financial statements (b) Net amount of financial assets shown in the financial statements (c=a-b) Related amounts not offset in the financial statements Financial instruments (d) Cash deposits received as collateral (e) Net amount 31/12/2014 (f=c-d-e) Net amount 31/12/ Derivatives 7,926-7,926-7, Repurchase agreements 16,465-16,465 16, Securities lending Other Total ,391 24,391 16,465 7,926 - Total ,332-24,332 14,371 9, Financial liabilities offset in the financial statements, or subject to master offsetting or similar agreements. Technical forms Gross amount of financial liabilities (a) Amount of financial assets offset in the financial statements (b) Net amount of financial liabilities shown in the financial statements (c=a-b) Related amounts not offset in the financial statements Financial instruments (d) Cash deposits as collateral (e) Net amount 31/12/2014 (f=c-d-e) Net amount 31/12/ Derivatives 84,472-84,472-84, Repurchase agreements 300, , , Securities lending Other Total , , ,430 84,472 - Total , , ,295 50,046 - At 31 December 2014, the financial instruments that were subject to an enforceable master netting arrangement or similar agreement were not offset in the financial statements in accordance with IAS 32 paragraph Securities lending transactions There are no transactions of this type in the financial statements. 8. Information on joint operations There are no operations of this type in the financial statements. 134

137 Unipol Banca Financial Statements 2014 Part C Information On The Consolidated Income Statement Section 1 Interest Items 10 and Interest income and similar income: breakdown Items/Technical forms Debt securities Loans Other transactions Total 2014 Total Held-for-trading financial assets 1, , Available-for-sale financial assets 13, ,880 17, Held-to-maturity investments 38, ,216 32, Receivables from banks 382 1,478-1,860 1, Receivables from customers - 336, , , Financial assets designated at fair value Hedging derivatives - - 1,351 1,351 5, Other assets Total 53, ,489 1, , ,159 On the items classified as non-performing, interest income of 55,151k matured in 2014 ( 60,085k in 2013). As regards doubtful loans, hedged by the indemnity agreement with the Parent Company UGF, interest income was recorded for the sum of 10.7m. 1.2 Interest income and similar income: differentials relating to hedging transactions Items/amounts Total 2014 Total 2013 A. Positive differentials relating to hedging transactions 15,152 23,107 B. Negative differentials relating to hedging transactions 13,801 17,998 C. Balance (A-B) 1,351 5, Interest income and similar income: other information Interest income on financial assets in foreign currency Items/Amounts Total 2014 Total 2013 Interest income on financial assets in foreign currency 4,696 4,

138 3 Notes to the Separate Financial Statements Interest income on financial lease transactions Items/Amounts Total 2014 Total 2013 Interest income on financial assets in foreign currency 2,751 3, Interest expense and similar expenses: breakdown Items/Technical forms Payables Securities Other transactions Total 2014 Total Due to central banks 1, ,592 4, Due to banks 4, ,166 8, Due to customers 74, , , Securities outstanding - 93,547-93,547 93, Held-for-trading financial liabilities Financial liabilities designated at fair value Other liabilities and funds Hedging derivatives Total 80,030 93, , , Interest expense and similar expenses: differentials relating to hedging transactions Item not applicable for the years under examination. 1.6 Interest expense and similar expenses: other information Interest expense on liabilities in foreign currency Total 2014 Total 2013 Interest expense on liabilities in foreign currency Interest expense on liabilities for financial lease transactions Item not applicable for the years under examination. 136

139 Unipol Banca Financial Statements 2014 Section 2 Commissions Items 40 and Commission income: breakdown Type of service/amounts Total 2014 Total 2013 a) Guarantees issued 3,810 3,688 b) Credit derivatives - - c) Management, brokerage and consultancy services: 50,971 31, Trading of financial instruments Trading of foreign currencies 1,141 1, Portfolio management 1, individual 1, collective Custody and administration of securities 30,873 16, Custodian bank Placement of securities 7,591 4, Receipt and transmission of orders 1,628 1, Consultancy activity investment activities financial structure activities Distribution of third-party services 8,569 7, Portfolio management individual collective Insurance products 4,967 4, Other products 3,602 2,724 d) Collection and payment services 38,938 33,554 e) Securitisation services f) Factoring services 6 - g) Tax collection services - - h) Management of multilateral trading systems - - i) Current account holding and management 52,734 53,241 j) Other services 6,117 5,818 Total 152, ,

140 3 Notes to the Separate Financial Statements 2.2 Commission income: distribution channels for products and services Channels/Amounts Total 2014 Total 2013 a) through own desks: 12,151 9, Portfolio management Placement of securities 2,887 2, Third-party services and products ,340 b) services offered off-premises: 5,048 2, Portfolio management Placement of securities 4,710 2, Third-party services and products - - c) other distribution channels: Portfolio management Placement of securities Third-party services and products Commission expense: breakdown Services/Amounts Total 2014 Total 2013 a) Guarantees received 24,778 11,904 b) Credit derivatives - - c) Management and brokerage services: 11,082 8, Trading of financial instruments Trading of foreign currencies Portfolio management: own delegated by third parties Custody and administration of securities 1,995 1, Placement of financial instruments Financial instruments, products and services offered off-premises 8,931 7,713 d) Collection and payment services 12,480 13,092 e) Other services Total 48,591 34,

141 Unipol Banca Financial Statements 2014 Section 3 Dividends and similar income Item Dividends and similar income: breakdown Items/Income Total 2014 Total 2013 Income from Dividends UCITS units Dividends Income from UCITS units A. Held-for-trading financial assets B. Available-for-sale financial assets C. Financial assets designated at fair value D. Equity investments 2, Total 2, Section 4 Net result from trading Item Net result from trading: breakdown Transactions/Income components Capital gains (A) Profits from trading (B) Capital losses (C) Losses from trading (D) Net result [(A+B) - (C+D)] 1. Held-for-trading financial assets (44) (517) (303) 1.1 Debt securities (504) (258) 1.2. Equity securities - 12 (44) (13) (45) 1.3 UCITS units Loans Other Held-for-trading financial liabilities Debt securities Payables Other Other financial assets and liabilities: exchange rate differences 4. Derivatives - 9,485 (12) - 9, Financial derivatives: - 9,485 (12) - 9,473 - on debt securities and interest rates - 9,485 (12) - 9,473 - on equity securities and stock market indices on foreign currencies and gold - - other Credit derivatives Total - 9,743 (56) (517) 11,355 2,185 The item Profits from trading, relating to Derivatives, comprises the effects deriving from the entry in January and December 2014 into several hedging agreements for indexed Italian treasury bonds allocated to the available-for-sale portfolio. 139

142 3 Notes to the Separate Financial Statements Section 5 Net result from hedging Item Net result of hedging: breakdown Income components/amounts Total 2014 Total 2013 A. Income relating to: A.1 Fair value hedging derivatives - 6,550 A.2 Financial assets hedged (fair value) - - A.3 Financial liabilities hedged (fair value) 3,378 - A.4 Financial derivatives for hedging cash flows - - A.5 Assets and liabilities in foreign currency - - Total income from hedging activities (A) 3,378 6,550 B. Charges relating to: B.1 Fair value hedging derivatives 3,149 6,672 B.2 Financial assets hedged (fair value) - - B.3 Financial liabilities hedged (fair value) - - B.4 Financial derivatives for hedging cash flows - - B.5 Assets and liabilities in foreign currency - - Total charges from hedging activities (B) 3,149 6,672 C. Net result from hedging (A B) 229 (122) Section 6 Profits (losses) on disposal/repurchase Item Profits (losses) on disposal/repurchase: breakdown Items/Income components Profits Losses Total 2014 Total 2013 Net result Profits Losses Financial assets 1. Receivables from banks (37) (37) 2. Receivables from customers (5,908) (5,908) 3. Available-for-sale financial assets 65,001 (58) 64,943 16,042-16, Debt securities 64,811 (58) 64,753 15,934-15, Equity securities UCITS units Loans Held-to-maturity investments Total assets 65,011 (58) 64,953 16,042 (5,945) 10,097 Financial liabilities 1. Due to banks Due to customers Securities outstanding 946 (1,351) (405) 2,061 (646) 1,415 Total liabilities 946 (1,351) (405) 2,061 (646) 1,415 Net result 140

143 Unipol Banca Financial Statements 2014 The profits on equity securities are due mainly to the sale of EUKEDOS shares whereas those on debt securities mainly refer to the sale of securities of governments and central banks. Section 7 Net result on financial assets and liabilities designated at fair value Item 110 This item is not present in the financial statements. Section 8 Net impairment adjustments Item Net impairment adjustments to loans: breakdown Transactions/ Income components Adjustments (1) Write-backs (2) Specific Portfolio Specific Portfolio Write-offs Other interest other write-backs interest other write-backs Total 2014 (3)=(1) (2) Total 2013 (3)=(1) (2) A. Receivables from banks Loans Debt securities B. Receivables from customers 7, ,580 18, , , ,978 Non-performing loans purchased Loans Debt securities Other receivables 7, ,580 18, , , ,978 - Other receivables 7, ,580 18, , , ,978 - Debt securities C. Total 7, ,580 18, , , , Net impairment adjustments to available-for-sale financial assets: breakdown Adjustments (1) Write-backs (2) Transactions/Income components Specific Write-offs Other interest Specific other write-backs Total 31/12/2014 (3)=(1) (2) Total 31/12/2013 (3)=(1) (2) A. Debt securities B. Equity securities - 33, , C. UCITS Units - 14, ,344 42,864 D. Loans to banks E. Loans to customers F. Total - 47, ,981 49,

144 3 Notes to the Separate Financial Statements 8.3 Net impairment adjustments to held-to-maturity investments: breakdown Sub-item is not present in the financial statements. 8.4 Net impairment adjustments to other financial assets: breakdown Transactions/ Income components Adjustments (1) Write-backs (2) Specific Portfolio Specific Portfolio Total 31/12/2014 Write-offs Other interest other write-backs interest other write-backs (3)=(1) (2) Total 31/12/2013 (3)=(1) (2) A. Guarantees issued ,091 1,483 B. Credit derivatives C. Commitments to disburse funds D. Other transactions E. Total ,091 1,

145 Unipol Banca Financial Statements 2014 Section 9 Administrative expenses Item Personnel expenses: breakdown Type of expense/amounts Total 2014 Total ) Employees 154, ,735 a) Wages and salaries 106,685 99,618 b) Social security contributions 28,534 26,541 c) Termination indemnities d) Pension-related expenses - - e) Provision for post-employment benefits 5,834 5,722 f) Provision for pension fund and similar: - defined contribution defined benefit - - g) Payments into external supplementary pension schemes: 4,363 3,976 - defined contribution 4,363 3,976 - defined benefit - - h) Costs deriving from payment agreements based on own equity instruments - - i) Other benefits in favour of employees 7,955 7,256 2) Other staff ) Directors and auditors 788 1,049 4) Retired staff - - 5) Recovery of expenses for staff on secondment to other companies (1,535) (424) 6) Redemptions of expenses for staff of third parties on secondment to the company 2,075 3,127 Total 155, ,493 The Bank disburses a complementary pension to employees registered with the external defined-contribution Pension Fund for Unipol Banca Employees, which was set up on the basis of supplementary corporate agreements. The total amount of contributions paid is shown in line 1.g) of table 9.1 above. 9.2 Average number of employees per category Average 2014 Average 2013 Employees: ,320 a) Executives 10 3 b) Total middle management c) Remaining employees 1,396 1,441 Other staff Total 2,321 2,

146 3 Notes to the Separate Financial Statements 9.3 Defined benefit company pension funds: costs and revenues No internal pension funds were set up. 9.4 Other benefits in favour of employees The item in question, shown in table 9.1, is made up of 6,357k in charges for luncheon vouchers and sickness and accident welfare services. The remainder is due to lump-sum expenses for travel, staff training and other incidental costs. 9.5 Other administrative expenses: breakdown Type of expense/amounts Total 2014 Total 2013 Rent expense 28,060 29,542 IT and data processing costs 22,109 17,696 Taxes and indirect taxation 17,816 15,613 Professional services 10,172 10,208 Condominium costs and utility charges 4,899 5,415 Security and safety 1,484 1,740 Insurance premiums 2,281 1,952 Postage 2,524 2,487 Transport and delivery costs 2,719 2,681 Cleaning costs 2,790 2,915 Reports and surveys 3,228 3,740 Advertising and representation costs 3,028 3,262 Print-outs and stationery 1,933 1,418 Maintenance costs 3,744 3,468 Telephone costs Membership fees 1, Miscellaneous expenses 20,747 22,431 Total 129, ,288 Section 10 Net provisions for risks and charges Item Net provisions for risks and charges: breakdown Total 2014 Total Allocations for revocation actions Allocations for sundry charges 3,739 4,476 Total 3,739 4,

147 Unipol Banca Financial Statements 2014 Section 11 Net adjustments/write-backs to property, plant and equipment Item Net adjustments/write-backs to property, plant and equipment: breakdown Assets/Income components Depreciation (a) Impairment adjustments (b) Write-backs (c) Net profit (loss) (a + b c) A. Property, plant and equipment 7, ,079 A.1 Owned 7, ,079 - For functional use 7, ,079 - For investment A.2 Acquired under financial lease For functional use For investment Total 7, ,079 Section 12 Net adjustments/write-backs to intangible assets Item Net adjustments to intangible assets: breakdown Assets/Income components Amortisation (a) Impairment adjustments (b) Write-backs (c) Net profit (loss) (a + b c) A. Intangible assets A.1 Owned Generated internally by the company Other A.2 Acquired under financial lease Total

148 3 Notes to the Separate Financial Statements Section 13 Other operating expenses/income Item Other operating expenses: breakdown Income components/amounts Total 2014 Total Amortisation of improvements to property belonging to third parties 5,929 6,862 - Indemnities paid to third parties 1,314 1,295 - Losses from thefts and robberies Extraordinary losses Charges for early withdrawals Miscellaneous charges Total 8,907 9, Other operating income: breakdown Income components/amounts Total 2014 Total Recovery of indirect taxes 16,478 14,079 - Recovery of miscellaneous expenses 10,223 11,513 - Reimbursement of utilities and rent Extraordinary gains 3, Reimbursement of indemnities and attendance fees by subsidiaries Recovery of legal expenses 5,780 6,847 - Miscellaneous income 1,752 7,864 Total 38,044 41,

149 Unipol Banca Financial Statements 2014 Section 14 Profits (losses) on equity investments Item Profits (Losses) on equity investments: breakdown Income component/amounts Total 2014 Total 2013 A. Income Revaluations Profits on disposal Write-backs Other income - - B. Expense 2, Write-downs Impairment adjustments Losses on disposal 1, Other expenses - - Net profit (loss) (2,004) (50) The item B2 corresponds to the recognition of the adjustment due to the impairment of the equity investment in the company Campuscertosa S.r.l. in liquidation. The Losses on disposal of the item B.3 refer to the assignment of the entire shareholding in Unicard SpA. Section 15 Valuation differences on property, plant and equipment and intangible assets designated at fair value Item 220 This item is not present in the financial statements. Section 16 Goodwill impairment Item Impairment of goodwill: breakdown Income components/amounts Total 2014 Total 2013 Goodwill impairment - 124,726 Valuation of goodwill in 2013 involved the full impairment of the residual amount recorded in the statement of financial position assets. Section 17 Profit (losses) on disposal of investments Item 240 This item is not present in the financial statements. 147

150 3 Notes to the Separate Financial Statements Section 18 Income tax on current operations Item Income tax on current operations: breakdown Income components/amounts Total 2014 Total Current tax (-) (26,105) (4,578) 2. Changes in current tax for previous years (+/-) Reduction in current tax for the year (+) 15,324-3.bis Reduction in current tax for the year for tax credits pursuant to Law 214/2011 (+) 74, Change in deferred tax assets (+/-) (37,016) 139, Change in deferred tax liabilities (+/-) (5,506) (2,810) 6. Tax for the year (-) (-1+/ bis +/-4+/-5) 22, ,129 including IRES 23, ,387 including IRAP (1,230) 16,742 Including substitute tax on deductions out of accounts - - The difference compared to that indicated for 2014 under point 4 ( 37,016k) with regard to the change in deferred tax assets shown in table 13.3 ( 18,782k) is related to the increase in deferred tax assets (not recognised in the income statement) deriving from the merger by incorporation of Banca Sai SpA into Unipol Banca SpA and to deferred tax assets on tax losses returned by the consolidating company Finsoe SpA in that not used. 148

151 Unipol Banca Financial Statements Reconciliation between theoretical tax charge and actual tax charge in the consolidated financial statements Total 2014 Total 2013 Profit (loss) on current operations, gross of tax (112,993) (431,717) Income tax - theoretical charge 31, ,722 Effect of non-taxable income or income taxed at reduced rates 2, Effect on non-deductible charges (11,994) (6,195) Other effects 3,192 2,605 Income tax - actual charge 24, ,264 IRAP - theoretical tax charge Effect of income and charges excluded from taxable income (7,768) (7,318) Effects of goodwill exemption 74 8 Effect of rate changes on net deferred items (1,400) 16,737 Effect of regional additional taxes 74 8 IRAP - actual tax charge (1,400) 16,737 Tax relating to previous years (IRES) Tax relating to previous years (IRAP) Reclassification of deferred tax liabilities adjustment (2,047) - Total actual tax charge in the financial statements 22, ,129 The theoretical tax charge is calculated on the basis of the following rates: 27.5% for IRES and 5.57% for IRAP. The theoretical IRAP rate adopted is equivalent to that approved by the Emilia Romagna region. The effects of differentiated rate taxation are indicated separately under Effect of regional additional taxes. Section 19 Profit (loss) after tax on disposal groups held for sale Item 280 This item is not present in the financial statements. Section 20 Other information There is no further information other than that already shown in the previous sections. Section 21 Earnings per share Information not due for companies with shares not traded on financial markets. 149

152 3 Notes to the Separate Financial Statements Part D Comprehensive Income Detailed Table Of Consolidated Comprehensive Income Items Gross amount Income tax Net amount 10. Profit (loss) for the year (90,967) Other income components without transfer to the income statement Property, plant and equipment Intangible assets Defined benefit plans (1,951) 537 (1,414) 50. Non-current assets being disposed of Portion of valuation reserves for investments valued at equity Other income components with transfer to the income statement Foreign investment hedging a) changes in fair value b) transfer to the income statement c) other changes Exchange rate differences a) changes in fair value b) transfer to the income statement c) other changes Cash flow hedging (2,190) 724 (1,466) a) changes in fair value 1,772 (586) 1,186 b) transfer to the income statement (3,962) 1,310 (2,652) c) other changes Available-for-sale financial assets (18,840) 6,342 (12,498) a) changes in fair value 4,509 (1,492) 3,017 b) transfer to the income statement (23,349) 7,834 (15,515) - impairment adjustments profits/losses on sale (23,349) 7,834 (15,515) c) other changes Non-current assets being disposed of a) changes in fair value b) transfer to the income statement c) other changes Portion of valuation reserves for investments valued at equity a) changes in fair value b) transfer to the income statement impairment adjustments profits/losses on sale c) other changes Total other income components (22,981) 7,603 (15,378) 140. Comprehensive income (Item ) (22,981) 7,603 (106,345) 150

153 Unipol Banca Financial Statements 2014 Part E Information On Risks And Related Hedging Policies Foreword Unipol Banca SpA s Risk Management department is part of the broader internal control and risk management system that operates on three levels: line checks (assigned to the operational units); controls on risks and on compliance (Risk Management, Compliance, Anti-Money Laundering, etc); Internal Audit. The Internal control and risk management system is an essential element of the corporate governance as a whole; it comprises a set of rules, procedures and organisational structures that aim at ensuring: efficiency and effectiveness of business processes; adequate control of current and future risks; prevention of the risk that the company is involved, even unintentionally, in illegal activities with particular reference to those related to money laundering, usury and terrorist financing: monitoring the implementation of strategies and corporate policies; safeguarding of company assets and the good management of that held on behalf of customers; reliability and integrity of accounting and management information and IT procedures; the adequacy and timeliness of the reporting system of corporate information; the compliance of the activity of the company and of transactions put in place on behalf of customers with the law, supervisory regulations, self-regulations and internal provisions of the company. This system is an integral part of the company and permeates all its sectors and structures, involving all resources, each by level of competence and responsibility, in order to ensure a constant and effective supervision of risks. Within the scope of the internal control and risk management system, Unipol Banca has set up a risk management system that allows adequate understanding of the nature and importance of the risks to which the Company is exposed and allows to have a single point of view and a holistic approach to risk management, which is an integral part of business management. The risk management process defined within the System of risk management involves the following stages: identification of risks, current and future assessment of risk exposure, monitoring of risk exposure and mitigation of risks. These stages are carried out on a continuous basis to take account both of the changes that have occurred to the nature and size of the business and to the market context, and of the onset of new risks or the change in existing risks. An important component of the risk management system is represented by management policies of specific risks. These policies establish the adequate guidelines for the direction of the identification, assessment, monitoring and mitigation of risks and the operating limits in line with the defined Risk Appetite. The Risk Management Department of Unipol Banca is part of Unipol Banca s Head Office and reports to the Risk Management Department of the Parent Company, UGF SpA. As part of the risk governance role, the head of the Bank s Risk Management Department is in constant contact with the Risk Management Department of the Parent Company, UGF and with the other departments of Unipol Banca and the subsidiaries, in order to ensure that risk management policies and risk governance are applied uniformly and consistently at Group level. Moreover, the Risk Management department: is involved in defining the RAF, risk controlling policies and the different phases that form their management process as well as fixing the operating limits to the assumption of various types of risk; verifies the adequacy of the RAF; verifies continuously the adequacy of the management process of risks and operating limits; monitors the development, validation and maintenance of risk measurement and control systems ensuring that they are subject to regular backtesting, that an appropriate number of scenarios are analysed and that conservative assumptions on branches and on correlations are used; ensures the consistency of risk measurement and control systems with processes and valuation techniques of company activities, in coordination with other company departments concerned; develops and applies indicators that are able to highlight situations of failure and inefficiency of the risk measurement and control systems; 151

154 3 Notes to the Separate Financial Statements analyses the risks of new products and services and those deriving from the entry in new operating and market segments; expresses opinions in advance on the compliance with RAF of most significant transactions, by acquiring, if possible, depending on the type of operation, the opinion of other departments involved in the risk management process; monitors constantly the actual risk assumed by the Company and its compliance with the risk objectives as well as the compliance with the operating limits assigned to the operating structures in relation to the assumption of various types of risk; verifies proper execution of performance scoring on individual exposures; checks the adequacy and efficacy of the measures adopted to remedy the shortfalls noted in the risk management process; prepares the reporting for the managers of the operating structures, company committees and for the Board of Directors, relating to the monitoring of the risks and limits defined in the risk-taking and risk management policies. For the purposes of disseminating the culture of risk, the continuous comparison with the Management and with each Business unit has a key role, also by participating directly to different company committees in addition to the adoption of taxonomies common to other control structures. In particular, the bank completed the structure of the joint database with the support of the MEGA GRC platform that will make it possible to give a common focus to the risk management and control system with the other control governance and Organisation and Operations departments. Moreover, business processes will be gradually mapped with the support of the joint database. The structured activity of adequacy assessment of the risk assumption and management process was carried out on an annual basis during ICAAP, whose purpose is to raise awareness on the governance of relevant risks. Moreover, the Risk Self Assessment process (hereinafter RSA) carried out for the purposes of assessment of operating risks, due to its nature, places the interlocutors, responsible for business and administrative processes, in front of the risks of their activities disseminating the culture of risk itself given the pervasiveness of operational risk. The activity of RSA in Unipol Banca is implemented in meetings with different risk owners of Unipol Banca and with the Chief Executive Officer of the subsidiary companies for the assessment of operational risks in terms of frequency, impact and the worst case. Section 1 credit risk Qualitative information 1. General aspects The following events characterised 2014: maintenance in line with previous years of attention on the quality of the Bank s loan portfolio, both with regard to granting, completion/acquisition of guarantees and with regard to monitoring; adoption of the risk parameters of the PD and LGD models for the calculation of the collective write-downs of performing loans. 2. Credit risk management policies 2.1 Organisational aspects Further refinement of the IT tools for managing the lending procedure made available by the IT outsourcer CEDACRI as part of a continuous procedure of improvement of the process itself. As regards the management of the Bank s loan portfolio quality and particularly the monitoring, use of the monitoring procedure was further consolidated and implemented and the credit management process as from the first anomalies was further improved. In particular, a further response to Credit Monitoring (of Management and Area), a pronounced separation - also in Areas - of granting and monitoring activities is contemplated. 152

155 Unipol Banca Financial Statements Management, measuring and monitoring systems Credit risk is governed by the principles defined in the Credit Policy Group: this document defines, in particular, the guidelines for the taking and monitoring of the credit risk in order to ensure global exposure to the individual counterparty, in line with the risk appetite expressed in the Group s strategic objectives, guaranteeing adequate diversification of the portfolio. The Credit Policy defines: the types of customer and transaction deemed suitable for granting credit, also in line with the criteria set out in the sustainability report of the Unipol Group; the general principles with which the credit risk underwriting policy must comply can be summarised as follows: -- reduction of the weight of large concentrations on single counterparties, groups or sectors, or on high risk counterparties based on internal rating models; -- development of banking and insurance business with the SME and retail segments, which prioritises the granting of traditional credit facilities; the main roles and duties of the organisational structures, to ensure observance of the provisions of the Credit Policy; the roles and responsibilities in the risk monitoring process at Group level, i.e. of the Board of Directors, which is required to approve the general guidelines of the process, and those of the Executive Committee, the Group Credit Risk Committee and the Risk Management Department, and their relations with the various structures of the individual Group companies; the functions of the Group Credit Risk Committee, paying particular attention to its responsibility for monitoring major exposures, reporting to Senior Management and suggesting possible risk mitigation actions. The trend in credit risk is currently monitored using traditional indicators, paying particular attention to the largest debts and to the sectors of greatest concentration. The credit rating models for companies and private customers developed by the IT outsourcer CEDACRI with the support of the consulting company Prometeia, were used to measure the credit risk in The previous rating models supplied by the same outsourcer continued to be used for some residual segments. Finally, together with the retail counterparty rating, the CRIF scoring systems were used during the disbursement. 2.3 Credit risk mitigation techniques Lending focused on traditional transactions in 2014, with the emphasis being placed on SME/small business counterparties. For private customers, as in previous years new transactions mainly concerned home mortgages. Corporate loans were granted mainly in support of manufacturing cycles (releasing credit). General debt rescheduling transactions were confirmed as particularly important during 2014, largely due to the on-going economic crisis affecting most sectors, particularly property. As regards risk mitigation techniques, the Bank used traditional forms of guarantee recognised by the sector (mortgage guarantees, repossession guarantees and sureties), including CONFIDI guarantees. In order to reduce the Residual Risk, mortgage guarantees and actions to monitor them are particularly important. To this end, the prudential regulatory provisions for banks (Bank of Italy Circular 285) have been implemented. The fluctuation in the values of the financial instruments used to guarantee lines of credit granted (mainly government bonds, bonds issued by the Bank and policies) is being monitored. 153

156 3 Notes to the Separate Financial Statements 2.4 Non-performing financial assets The Bank classifies receivables on the basis of regulatory provisions issued by the Bank of Italy in line with the International Accounting Standards. In particular, the Bank included the following customers in the definition and quantification of its non-performing portfolio: a) those in a state of insolvency (even if this has not been legally ascertained) or in similar situations (doubtful loans); b) those in temporary objective difficulty (watchlist loans) or persistently in arrears, as established by the Supervisory Instructions in relation to particular technical forms of loan (objective watchlist loans); c) those subject to debt-restructuring agreements, following a deterioration in the economic-financial conditions of the counterparty (restructured loans); d) those with past due loans as defined by law (past due loans and objective watchlist loans). The management of critical positions was reinforced with the organisational implementations already mentioned above. In addition to managing the non-performing portfolio, organisational efforts focused on prevention, trying to identify (and resolve) anomalies as soon as they arise in order to protect the Bank s credit ratios. 154

157 Unipol Banca Financial Statements 2014 Quantitative Information A. Credit Quality A.1 Non-performing and performing exposures: amounts, adjustments, changes, economic and territorial distribution A.1.1 Distribution of credit exposures by portfolio and quality (carrying amounts) Portfolios/quality Doubtful loans Watchlist loans Restructured exposures Past due exposures non-performing Past due exposures performing Other assets 1. Held-for-trading financial assets Available-for-sale financial assets , ,845 Total 3. Held-to-maturity investments , , Receivables from banks , , Receivables from customers 1,583, , ,338 73, ,296 6,731,024 9,827, Financial assets designated at fair value Financial assets being disposed of Hedging derivatives ,926 7,926 Total ,583, , ,338 73, ,296 8,471,915 11,568,722 Total ,235, , , , ,892 8,958,588 11,623,702 A.1.2 Distribution of credit exposures by portfolio and quality (gross and net amounts) Portfolios/quality Gross exposure Non-performing assets Specific adjustments Net exposure Gross exposure Performing Specific adjustments Net exposure Total (Net exposure) 1. Held-for-trading financial assets Available-for-sale financial assets , , , Held-to-maturity investments , , , Receivables from banks , , , Receivables from customers 3,896,082 1,153,571 2,742,511 7,155,076 69,756 7,085,320 9,827, Financial assets designated at fair value Financial assets being disposed of Hedging derivatives ,926 7,926 Total ,896,082 1,153,571 2,742,511 8,888,041 69,756 8,826,211 11,568,722 Total ,175, ,643 2,329,222 9,233,838 48,631 9,294,480 11,623,

158 3 Notes to the Separate Financial Statements A Breakdown of performing loans by portfolio and renegotiation agreements Portfolios/quality Performing Up to 3 Months From 3 months to 6 months Past due loans From 6 months to 1 year Over 1 year Total 1. Held-for-trading financial assets Available-for-sale financial assets 568, , Held-to-maturity investments 817, , Receivables from banks 346, , Receivables from customers 6,731, ,628 33,848 1,008 7,085,320 - not renegotiated 5,678, ,667 49,649 22, ,904,454 - renegotiation granted by the Bank 792,611 45,865 38,795 9, ,389 - renegotiated under collective agreements 260,161 22,280 9,184 2, ,477 - Tremonti Decree Law 93/ ,549 1, ,714 - Flooding in the Veneto region 1, ,534 - Joint SME agreement 32,165 1, ,480 - CDP-ABI SME agreement 2, ,161 - Family Plan , ,403 - Solidarity Fund ,468 - Flooding in Liguria and Tuscany Earthquake in Emilia Decree Law 74/ ,991 2, ,824 - ABI agreement on New measures for credit to SME ,703 15,212 6, ,165 - Flooding in Tuscany Region 1, , Financial assets designated at fair value Financial assets being disposed of Hedging derivatives 7, ,926 Total ,471, ,812 97,628 33,848 1,008 8,826,

159 Unipol Banca Financial Statements 2014 A.1.3 Balance sheet and off-balance sheet credit exposures to banks: gross and net amounts Types of exposures/amounts Gross exposure Specific adjustments Portfolio adjustments Net exposure A. BALANCE SHEET EXPOSURES a) Doubtful loans b) Watchlist loans c) Restructured exposures d) Past due exposures non-performing e) Other assets 386, ,582 TOTAL A 386, ,582 B. OFF-BALANCE SHEET EXPOSURES a) Non-performing b) Other 10,906-10,906 TOTAL B 11, ,906 TOTAL A + B 397, ,488 The balance sheet exposures shown in the previous table comprise all balance sheet financial receivables from banks, regardless of the portfolio they belong to. In particular, the assets represented are allocated to the financial statements in the credit portfolio, in the trading portfolio and in the available-for-sale financial assets portfolio. A.1.4 Balance sheet credit exposures to banks: changes in gross non-performing exposures There are no exposures of this type in the financial statements. A.1.5 Balance sheet credit exposures to banks: change in total adjustments The valuation of balance sheet exposures to banks did not require the posting of any adjustment. 157

160 3 Notes to the Separate Financial Statements A.1.6 Balance sheet and off-balance sheet credit exposures to customers: gross and net amounts Types of exposures/amounts Gross exposure Specific adjustments Portfolio adjustments Net exposure A. BALANCE SHEET EXPOSURES a) Doubtful loans 2,529, ,584-1,583,315 b) Watchlist loans 1,127, , ,406 c) Restructured exposures 162,246 40, ,338 d) Past due exposures 76,340 2,888-73,452 e) Other assets 8,501,458 69,756 8,431,702 TOTAL A 12,397,540 1,153,571 69,756 11,174,213 B. OFF-BALANCE SHEET EXPOSURES a) Non-performing 55, ,803 b) Other 500,618 3, ,539 TOTAL B 556, , ,342 The balance sheet exposures shown in the previous table comprise all balance sheet financial receivables from banks, regardless of the portfolio they belong to. In particular, the assets represented are allocated to the financial statements in the credit portfolio, the trading portfolio, the available-for-sale financial assets portfolio and the held-to-maturity investments portfolio. A.1.7 Balance sheet exposures to customers: change in gross non-performing exposures Causes/Categories Doubtful loans Watchlist loans Restructured exposures Past due exposures A. Gross opening exposure 1,914, , , ,814 - of which: exposures assigned but not derecognised 141, ,416 2,258 77,473 B. Increases 654, , , ,657 B.1 Inflows from performing loans 7, ,248 3, ,791 B.2 Transfers from other categories of non-performing exposures 320, ,585 35,805 11,913 B.3 Other increases 326, , ,023 78,953 C. Decreases 39, , , ,131 C.1 Outflows to performing loans - 33, ,861 C.2 Write-offs 4, C.3 Collections 34, ,039 84,951 72,361 C.4 Proceeds from assignments C.4 bis Losses arising from assignments C.5 Transfers to other categories of non-performing exposures - 353,511 40, ,909 C.6 Other decreases D. Gross closing exposure 2,529,899 1,127, ,246 76,340 - of which: exposures assigned but not derecognised 126,875 82, ,

161 Unipol Banca Financial Statements 2014 The item B.3 includes gross non-performing exposures deriving from the merger by incorporation of Banca Sai SpA in Unipol Banca SpA classified as doubtful loans of 105,707k and classified in other categories of nonperforming loans of 65,557k. A.1.8 Balance sheet exposures to customers: change in total adjustments Causes/Categories Doubtful loans Watchlist loans Restructured exposures Past due exposures Total opening adjustments 678, ,795 12,961 4,067 - of which: exposures assigned but not derecognised 29,061 3, B. Increases 288,500 65,390 31,538 2,189 B.1. Adjustments 163,292 51,540 21, B.1.bis Losses arising from assignments B.2. Transfers from other categories of non-performing exposures 48, B.3. Other increases 76,975 13,850 10,110 1,742 C. Decreases 20,736 52,994 3,591 3,367 C.1. Write-backs arising from valuation 13,826 5,594 2,429 2,986 C.2. Write-backs arising from collection 2, C.2.bis Profits arising from assignments C.3. Write-offs 4, C.4. Transfers to other categories of non-performing exposures - 47, C.5 Other decreases D. Total closing adjustments 946, ,191 40,908 2,889 - of which: exposures assigned but not derecognised 18,364 2, The item B.3 includes adjustments deriving from the merger by incorporation of Banca Sai SpA into Unipol Banca SpA of 70,581k classified as doubtful loans and of 25,702k classified in other categories of non-performing loans. 159

162 3 Notes to the Separate Financial Statements A.2 Classification of exposures based on external and internal ratings A.2.1 Distribution of balance sheet and off-balance sheet exposures by external rating class External rating class Exposures Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 No rating Total A. Balance sheet exposures - - 1,354,554 10,573-13,005 10,220,677 11,598,809 B. Derivatives B.1 Financial derivatives B.2 Credit derivatives C. Guarantees issued ,806 1, , ,187 D. Commitments to grant funds - - 1, , ,715 E. Other ,542 11,542 Total - - 1,439,887 11,694-13,005 10,703,667 12,168,253 A.2.2 Distribution of balance sheet and off-balance sheet exposures by internal rating class Information not available with reference to 31 December A.3 Distribution of guaranteed exposures by type of guarantee A.3.1 Guaranteed exposures to banks There are no exposures of this type in the financial statements. 160

163 Unipol Banca Financial Statements 2014 A.3.2 Guaranteed exposure to customers Net exposure amount Propertiesmortgage loans Personal guarantees (2) Collaterals (1) Credit derivatives Unsecured loans Propertiesfinance leases Securities Other collaterals C L N Governments and central banks Other derivatives Other public bodies Banks Other entities Governments and central banks 1. Guaranteed balance sheet exposures 7,792,377 13,176,396 64, , , , ,737,840 21,543, fully guaranteed 7,102,717 12,833,122 64,837 98, , , ,648,480 21,030,657 - of which nonperforming 1,949,195 3,134,104 24,743 14, , , ,642,690 5,942, partially guaranteed 689, ,274-17,646 27, ,192-89, ,437 - of which nonperforming 435, ,276-2,124 6, ,209-57, , Guaranteed off-balance sheet exposures: 149,780 38,398-43,650 7, , , , fully guaranteed 118,219 27,547-38,661 6, , ,983 - of which nonperforming 18,463 13, , ,015 27, partially guaranteed 31,561 10,851-4,989 1, , ,335 - of which nonperforming 14,371 10, ,942 Other public bodies Banks Other parties Total (1) + (2) 161

164 3 Notes to the Separate Financial Statements B. Distribution And Concentration Of Credit Exposures B.1 Sectoral distribution of balance sheet and off-balance sheet exposures to customers (carrying amount) Exposures/Counterparties Net exposure Governments Other public bodies Financial companies Specific adjustments Portfolio adjustments Net exposure Specific adjustments Portfolio adjustments Net exposure Specific adjustments Portfolio adjustments A, Balance sheet exposures: A.1 Doubtful loans ,237 38,508 - A.2 Watchlist loans ,838 8,535 - A.3 Restructured exposures ,305 7,893 - A.4 Past due exposures A.5 Other exposures 1,344, , ,524-5,112 TOTAL A 1,344, , ,941 54,944 5,112 B. Off-Balance sheet exposures: B.1 Doubtful loans B.2 Watchlist loans , B.3 Other non-performing loans B.4 Other exposures , , TOTAL B , , TOTAL ,345, , ,294 54,944 5,331 TOTAL ,584, , ,879 18,623 1,

165 Unipol Banca Financial Statements 2014 Insurance companies Non-financial companies Other entities Net exposure Specific adjustments Portfolio adjustments Net exposure Specific adjustments Portfolio adjustments Net exposure Specific adjustments Portfolio adjustments ,347, , , , , , ,634 46, ,725 33, ,987 2,385-40, , ,032,551-53,442 3,370,081-10,788 6, ,245, ,901 53,442 3,735, ,726 10, , , , , ,082-2,292 16, , , ,292 18, , ,675, ,527 55,734 3,753, ,727 10,886 58, ,058, ,611 41,242 3,601, ,705 6,

166 3 Notes to the Separate Financial Statements B.2 Territorial distribution of balance sheet and off-balance sheet exposures to customers (carrying amount) Italy Other European countries America Asia Rest of the World Exposures/Geographic areas Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. Balance sheet exposures A.1 Doubtful loans 1,583, , A.2 Watchlist loans 963, , , A.3 Restructured exposures 121,338 40, A.4 Past due exposures 73,452 2, A.5 Other exposures 8,406,286 69,370 18, , TOTAL 11,147,787 1,220,620 18,822 1,218 7,492 1, B. Off-Balance sheet exposures B.1 Doubtful loans 11, B.2 Watchlist loans 37, B.3 Other non-performing loans 5, B.4 Other exposures 485,623 3, TOTAL 540,426 3, TOTAL ,688,213 1,224,326 18,825 1,218 7,862 1, TOTAL ,818, ,219 3, ,806 1, B.2.2 Territorial distribution of balance sheet and off-balance sheet exposures to customers (carrying amount) Northwest Italy Northeast Italy Central Italy Southern Italy/Islands Exposures/Geographic areas Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. Balance sheet exposures A.1 Doubtful loans 214, , , , , , , ,598 A.2 Watchlist loans 213,337 42, ,407 37, ,457 58, ,279 21,208 A.3 Restructured exposures 38,506 5,967 58,906 31,106 12,703 1,590 11,223 2,245 A.4 Past due exposures 10, , ,631 1,263 22, A.5 Other exposures 1,753,777 13,427 2,064,403 18,622 3,254,490 22,759 1,333,616 14,562 TOTAL 2,229, ,770 2,891, ,155 4,151, ,132 1,874, ,563 B. Off-Balance sheet exposures B.1 Doubtful loans , B.2 Watchlist loans 12, , , , B.3 Other non-performing loans 194-4, B.4 Other exposures 115, ,867 1,614 57, , TOTAL 127, ,123 1,851 63, , TOTAL ,357, ,599 3,203, ,006 4,215, ,634 1,912, ,087 TOTAL ,940, ,537 3,442, ,245 4,538, ,950 1,896, ,

167 Unipol Banca Financial Statements 2014 B.3 Territorial distribution of balance sheet and off-balance sheet exposures to banks (carrying amount) Italy Other European countries America Asia Rest of the World Exposures/Geographic areas Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. Balance sheet exposures A.1 Doubtful loans A.2 Watchlist loans A.3 Restructured exposures A.4 Past due exposures A.5 Other exposures 282, , ,061 - TOTAL 282, , ,061 - B. Off-Balance sheet exposures B.1 Doubtful loans B.2 Watchlist loans B.3 Other non-performing loans B.4 Other exposures 10, TOTAL 10, TOTAL , , ,061 - TOTAL ,639 1, ,635-4, B.3.2 Territorial distribution of balance sheet and off-balance sheet exposures to banks (carrying amount) Northwest Italy Northeast Italy Central Italy Southern Italy/Islands Exposures/Geographic areas Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. Balance sheet exposures A.1 Doubtful loans A.2 Watchlist loans A.3 Restructured exposures A.4 Past due exposures A.5 Other exposures 117,065-73,749-91, TOTAL 117,065-73,749-91, B. Off-Balance sheet exposures B.1 Doubtful loans B.2 Watchlist loans B.3 Other non-performing loans B.4 Other exposures , TOTAL , TOTAL ,065-73, , TOTAL , , ,491 1,

168 3 Notes to the Separate Financial Statements B.4 Large exposures 31/12/2014 a) Amount (carrying amount) 3,463,256 b) Amount (weighted value) 504,510 c) Number 6 As regards the concentration risk, see the information supplied in the specific paragraph of the Management Report. C. Securitisations C.1 Securitisations Qualitative information In the period from 2001 to 2012, the Bank carried out a total of eight performing loan securitisations, all arising from loans granted independently, where the first two had already been fully paid off in The operation carried out in 2012 is excluded from this section in that it is defined as a self-securitisation, under the supervisory regulations issued by the Bank of Italy and carried out after 30 November 2008, since the bank subscribed, at the time they were issued, and still holds at the close of the year all the ABS securities issued by the vehicle company; its main features will be summarised at the end of this section. The operations carried out in 2009 and 2011, included initially in this last category, became part of this section as a result of the assignment to third parties of the ABS securities fully subscribed at the time they were issued by the Bank. While on the subject of these regulations, it should be mentioned that the fifth securitisation, under which the bank also subscribed all the ABS securities at the time they were issued by the vehicle company, was carried out by the deadline of 30 November 2008 and under Bank of Italy provisions is therefore classified as a grandfathered self-securitisation and dealt with in this section. The transactions were carried out with a view to diversifying types of funding, improving the correlation between customer deposits and loan maturities. In all transactions, also other than self-securitisations, Unipol Banca SpA has always subscribed and still holds all the junior notes issued under the various securitisation programmes and not yet repaid. Thus the risk relating to the assets assigned remains with the Bank which, as servicer, will regularly monitor performance and provide reports. In addition to the junior notes, the Bank also holds some of the higher-priority notes (senior and mezzanine, if any) that were not placed on the market at the time of issue or were subsequently repurchased. At the same time, we provide also the situation of the ratings assigned by the various agencies to the ABS securities, compared to the original, almost everywhere unchanged compared to the previous financial year. As already indicated in Part A Accounting Policies, in the case of operations still in existence, all completed after 31 December 2003, the assets assigned continued to appear in the financial statements, as essentially the risk was not transferred to third parties. There follows a descriptive analysis of each of the operations still in existence during

169 Unipol Banca Financial Statements Securitisation scheme carried out through Grecale ABS Srl, launched in December 2003 issue on the market in April 2005 following repackaging through Castoro RMBS Srl (Grecale ABS Securitisation 2) In December 2003 a securitisation scheme was signed in which the maximum amount of securities to be issued totalled 750m and which was to be carried out within an initial warehousing period of one year, which was then extended until April Under this scheme, organised in collaboration with ABN AMRO N.V. acting as arranger and with Unipol Merchant Banca per le Imprese SpA as co-arranger, three assignments of receivables were made, funded by Grecale ABS issuing three series of securities, divided into only two classes: senior notes and junior notes. Assignments of receivables after the first assignment have been partly financed, up to the available amount, with principal funds derived from the income collected from receivables previously assigned. All assignments of receivables carried out in the warehousing period form a single portfolio in the interests of the holders of the securities issued, according to the priorities set between the various classes of securities but with no differentiation between the various series of securities within the same class. The receivables assigned come from performing residential mortgage loans issued by Unipol Banca, also as a result of acquisition of branches from other banks, granted to private customers residing in Italy (North Italy 51%, Central Italy 32% Southern Italy and Islands 17%), secured by first degree or equivalent mortgages, with a ratio between residual debt and property value as determined by an expert valuation of no more than 80%. Overall receivables with a total principal value of 678,084k were assigned for 727,004k. Price of receivables assigned to Grecale ABS Sec, 2 Year 2003 Year 2004 Amount Assignment price - principal 270, , ,084 Assignment price - interest ,000 Assignment price - premium 20,302 27,618 47,920 Total 291, , ,004 Grecale ABS financed the purchase by issuing two classes of securities, split into three series, with a total nominal value equal to the amount of the receivables, net of the funds available from receipts of collections from the mortgages. The following table summarises the main characteristics of the securities issued. Securities issued by Grecale ABS Classe Legal expiry date Interest rate Rating Nominal amount Senior 28/01/2041 3m Euribor + 40b.p. n/r 618,000 Junior 28/01/2041 1% + variable return n/r 81,528 Total 699,528 During the warehousing period, the senior notes were subscribed through private placement by an independent SPV (Tulip Asset Purchase Company B.V. registered in Amsterdam) and the junior notes were subscribed by Unipol Banca. In April 2005, all the securities issued by Grecale ABS were transferred to the SPV Castoro RMBS Srl, which funded the purchase by issuing three classes, were repackaged. The following table shows the main features of the securities issued by Castoro RMBS. 167

170 3 Notes to the Separate Financial Statements Securities issued by Castoro RMBS Class Legal expiry date Interest rate Moody s/fitch original rating Moody s/fitch current rating Nominal amount Class A 28/01/2041 3m Euribor + 10b.p. Aaa/AAA A2/AA+ 622,500 Clase B 28/01/2041 3m Euribor + 28b.p. Aa3/A A2/AA+ 26,000 Class C 28/01/2041 1% fisso n/r n/r 51,678 Total 700,178 The first two classes of securities were placed on the market with Italian and foreign institutional investors. Unipol Banca subscribed the entire amount of junior notes (Class C) after transferring to Castoro RMBS the junior notes issued by Grecale ABS. Unipol Banca subsequently purchased Class B notes issued by Castoro for a nominal value of 4m, as well as Class A notes issued by Castoro for a nominal value (on issue) of 35m; the Class A notes already repaid at the close of the year were approximately 90% of their nominal value on issue as seen in the table below. The three classes of securities feature increasing degrees of subordination, with absolute preference in favour of the Class A securities, on which principal repayment began in October The residual value to be repaid on the Castoro notes is set out below: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A notes 622,500 87,743 62,854 Class B notes 26,000 26,000 26,000 Class C notes 51,678 51,678 51,678 Total 700, , ,532 The transaction as a whole is a pass through type, the entire mortgage loan portfolio of Grecale ABS is collateral for the holders of securities issued by Castoro and all the inward cash flows of Grecale ABS are transferred to Castoro RMBS separately for the principal and interest portions. RBS (which took over the activities of ABN AMRO Bank) puts at the disposal of the Castoro vehicle a line of liquidity of an amount initially totalling 19.5m; to date, this line has decreased, according to the decrease of the residual value of the Notes to be redeemed, to the minimum amount of 9.7m and has never been used. Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, which is set up to hedge the interest rate risks affecting Castoro. Under the terms of the interest rate swap contract, the SPV receives from the counterparty 3-month Euribor and pays to the counterparty a fixed rate of 3.75%, 6-month Euribor + 3bps and 3-month Euribor on notional amounts corresponding to the portion of the mortgage loan portfolio indexed to these parameters. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. In 2014, the securitisation recorded that one of the trigger events envisaged in the regulations, relating to the percentage ratio between the delinquent loans and the residual loan amount, had been exceeded; this event caused a suspension of the payment, but not the accrual, of interest on the class C junior notes, producing also a movement of flows from the interest to the principal, which will help speed up the process of redeeming the senior notes. 168

171 Unipol Banca Financial Statements Securitisation scheme carried out through Grecale ABS Srl launched in December 2004 issue on the market in May 2006 following repackaging through Atlante Finance Srl (Grecale ABS Securitisation 3) In December 2004, another securitisation scheme was launched, in which the initial maximum amount of securities to be issued totalled 1,050m, later raised to 1,700m, to be completed within a one-year warehousing period expiring in December 2005, later extended to May During this scheme, organised in collaboration with ABN AMRO N.V. as arranger and Unipol Merchant Banca per le Imprese SpA and Nomura International plc as co-arrangers, five assignments of receivables were made, funded by Grecale ABS by issuing several series of notes, divided into only two classes: senior notes and junior notes. Assignments of receivables after the first assignment have been partly financed, up to the available amount, with principal funds derived from the income collected from receivables previously assigned. All assignments of receivables carried out in the warehousing period form a single portfolio in the interests of the holders of the securities issued, according to the priorities set between the various classes of securities but with no differentiation between the various series of securities within the same class. The receivables assigned come from performing residential loans, granted to private customers (34%) and non-residential mortgage loans (Commercial 46%; SME 17%), and from loans other than mortgage loans to public bodies (3%), issued by Unipol Banca, also as a result of acquisition of branches from other banks, granted to persons residing in Italy (North Italy 54%, Central Italy 28% Southern Italy and Islands 18%), secured (with the sole exception of loans to public bodies) by first degree or equivalent mortgages, with a ratio between residual debt and property value as determined by an expert valuation of no more than 80%. Summarised below are the amounts of the assignments made: Price of receivables assigned to Grecale ABS Sec. 3 Year 2004 Year 2005 Amount Assignment price - principal 570, ,752 1,536,562 Assignment price - interest 2,856 1,362 4,218 Assignment price - premium 28,541 57,945 86,486 Total 602,207 1,025,059 1,627,266 Five assignments of receivables were completed, the first taking place in December 2004 and the rest during Grecale ABS funded the purchase by issuing two classes of securities, divided into five series, for an aggregate nominal value equal to the amount of the loans net of available funds deriving from loan proceeds. The following table summarises the main features of the securities issued by Grecale ABS. Securities issued by Grecale ABS Class Legal expiry date Interest rate Rating Nominal amount Senior 28/01/2047 3m Euribor + 40b.p. n/r 1,358,000 Junior 28/01/2047 1% fisso n/r 158,150 Total 1,516,

172 3 Notes to the Separate Financial Statements During the warehousing period the senior notes were subscribed through private placement by an independent SPV (Tulip Asset Purchase Company B.V. registered in Amsterdam) and the junior notes were subscribed by Unipol Banca. In May 2006, all the securities issued by Grecale ABS that were assigned to the SPV Atlante Finance Srl, which funded the purchase by issuing four classes of notes, were repackaged. The following table shows the main features of the securities issued by Atlante Finance. Securities issued by Atlante Finance Class Legal expiry date Interest rate Moody s/fitch/s&p original rating Moody s/fitch/s&p current rating Nominal amount Class A 28/07/2047 3m Euribor + 19b.p. Aaa/AAA/AAA Aa2/AA/A 1,202,500 Class B 28/07/2047 3m Euribor + 62b.p. Aa3/A/A Aa2/AA/A 28,800 Class C 28/07/2047 3m Euribor + 160b.p. Baa3/BBB-/BBB- B1/BB/B- 136,800 Class D 28/07/2047 3m Euribor n/r n/r 152,250 Total 1,520,350 The first three classes of securities were placed on the market with Italian and foreign institutional investors. Unipol Banca subscribed the entire amount of Junior notes (Class D) after transferring to Atlante Finance the junior notes issued by Grecale ABS. The Group also subscribed a portion of the Class C mezzanine notes for a nominal value of 21m and repurchased all in all Class C notes issued by Atlante for a nominal value of 70m. Moreover, Unipol Banca has guarantees issued to third parties over 40m of nominal value of Class C notes, originally subscribed by the former subsidiary Unipol Merchant and subsequently transferred to parties, secured by money-back guarantee of the repayment of the principal by Unipol Banca. By effect of this guarantee the risk is not transferred to third parties with respect to the Group; consequently, in the financial statements, as a result of the merger of Unipol Merchant into Unipol Banca, the effects of the derecognition applied in the individual financial statements of the former subsidiary Unipol Merchant were always reversed and the equivalent value collected, including capital gains accrued to future years, was recognised under the item payables to customers. As regards the capital gain on the assignment, amounting to 4,680k, corresponding to the excess spread anticipated on the securities assigned with respect to the normal return on substantially free risk securities, it should be noted that it is recognised pro rata temporis under interest income in the income statement during the average anticipated life of the securities assigned. The total income recognised at 31 December 2012 was 2,136k; due to the merger by incorporation of Unipol Merchant into Unipol Banca, income deferred to future years at 1 January 2013, amounting to 2,544k, were recognised pro rata temporis by the latter; In fact, Unipol Banca recorded on the merger date a shareholders equity reserve equal to the total value of the income still to be recognised net of the deferred tax effect; gross income of 347k were recognised in The Bank repurchased Class A notes issued by Atlante for a nominal value of 400.6m; the Class A notes already repaid at the close of the year were more than 96% of their nominal value on issue as seen in the table below. Finally, the Bank repurchased Class A notes issued by Atlante for a nominal value of 6.8m at the time of issue. The four classes of notes are characterised by growing levels of subordination, with absolute priority in favour of the Class A notes, with repayment of the principal having started in January

173 Unipol Banca Financial Statements 2014 The residual value to be repaid on the Atlante notes is set out below: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A notes 1,202, ,103 42,446 Class B notes 28,800 28,800 28,800 Class C notes 136, , ,800 Class D notes 152, , ,250 Total 1,520, , ,296 The transaction as a whole is a pass through type: the entire mortgage loan portfolio of Grecale ABS is collateral for the holders of securities issued by Atlante Finance and all the inward cash flows of Grecale ABS are transferred to Atlante Finance separately for the principal and interest portions. RBS (that took over the activities of ABN AMRO Bank) provided the SPV Atlante with a credit facility initially totalling 110.8m, now reduced, as a result of the fall in the residual value of the notes to be refunded, to 63.8m and never used. Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, which is set up to hedge the interest rate risks affecting Atlante. Under the terms of the interest rate swap contract, the SPV receives from the counterparty 3-month Euribor and pays to the counterparty a fixed rate of 4.32%, 6-month Euribor bps and 3-month Euribor +31.5bps on notional amounts corresponding to the portion of the loan portfolio indexed to these parameters. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. In 2009, the securitisation recorded that one of the trigger events envisaged in the regulations, relating to the percentage ratio between the delinquent loans (with instalment payments in arrears by between 30 and 180 days) and the residual loan amount, had been exceeded; this event is focused on the commercial positions and caused a suspension of the payment, but not the accrual, of interest on the class D junior notes, producing also a movement of flows from the interest to the principal, which will help speed up the process of redeeming the senior notes. 3. Securitisation carried out through Grecale ABS Srl in May (Grecale ABS Securitisation 4) In May 2008, a securitisation was performed for an amount of securities issued for the nominal value of 1,104m. The scheme was organised with the collaboration of BNP Paribas and Finanziaria Internazionale Securitisation Group as arrangers; the assignment of loans was funded by Grecale ABS with the issuing of securities distributed in only two classes: senior notes and junior notes. The loans assigned arise from performing mortgage loans to private consumers, granted by Unipol Banca to individuals resident in Italy (North Italy 48%, Central Italy 28% Southern Italy and Islands 24%), backed by first degree or equivalent mortgages, where the residual debt does not exceed 80% of the property value as determined by an expert valuation. The values of the assignment carried out are as follows. 171

174 3 Notes to the Separate Financial Statements Price of receivables assigned to Grecale ABS Sec. 4 Year 2008 Assignment price - principal 1,059,353 Assignment price - interest 1,139 Total 1,060,492 The following table summarises the main features of the securities issued by Grecale ABS. Class Legal expiry date Interest rate Moody s/s&p original rating Moody s/s&p current rating Nominal amount Senior 22/04/2058 6m/3m Euribor + 60b.p. Aaa/AAA Baa2/AA- 1,007,750 Junior 22/04/2058 variable return n/r n/r 96,510 Total 1,104,260 Unipol Banca subscribed the full amount of both the senior notes (class A) and the junior notes (class B). Given the tensions generated on the financial market and the strong rise in the credit spreads applied to the interest rates following the sub-prime mortgage crisis, the operation was structured from the start with the aim of subscribing all the notes issued, with a view to using, as indeed happened, the senior notes for refinancing operations with the ECB and other central bodies. The features of the notes are, however, such to allow swift placement with institutional investors, should the changed expectations with regard to yield expressed by the market make the offer profitable. The two classes of notes are characterised by increasing levels of subordination, with absolute priority in favour of the Class A securities. The repayment of principal began eighteen months from issue in January 2010 and at the date on which the financial year closed almost 54% of Class A notes had already been repaid at their nominal issue value, as seen in the table shown below. The senior notes were initially issued with the half-yearly coupon indexed to the 6-month Euribor until 24 January 2011 and subsequently, with a quarterly coupon and indexing to the 3-month Euribor. The operation was restructured in line with the change in the coupon indexation and to take into account the possibility of Class A notes being sold to third parties in the future, which mainly involved the originator repurchasing a package of delinquent and default loans, the widening of the spreads paid on Class A coupons, the widening of the spreads on interest-rate-swap contract and the subsequent request to the two rating agencies involved to confirm the rating to take into account the changes made to the contract. The operation was not backed by any credit facility as it has a cash reserve of 41.9m, originally financed by an over-issue of junior notes designed to protect the Class A securities, the amount of which it will be possible to reduce according to the changed requirements for protection as soon as the amount of the junior notes (class B) is at least 17.50% of the residual value of the senior notes (class A) in circulation. As with the transactions described previously, here, too, Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, entered into to hedge the interest rate risk affecting the vehicle company. On the basis of the current interest rate swap contract, the vehicle company collected the 3-month Euribor +130bps from the counterparty and paid the counterparty all the interest collected, net of the differential of the relating accruals on the performing loans. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. 172

175 Unipol Banca Financial Statements 2014 At the closing date the residual value of the securities was as follows: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A notes 1,007, , ,668 Class B notes 96,510 96,510 96,510 Total 1,104, , , Securitisation carried out through Grecale ABS Srl in April (Grecale ABS Securitisation 5) In April 2009, the bank carried out a securitisation for an amount of securities issued for the nominal value of 627m. The scheme was organised with the collaboration of UBS Investment Bank Limited and Unipol Merchant Banca per le Imprese SpA as arrangers; the assignment of loans was funded by Grecale ABS with the issuing of securities distributed in only two classes: senior notes and junior notes. The loans assigned arise from performing mortgage loans to private consumers, granted by Unipol Banca to individuals resident in Italy (North Italy 44%, Central Italy 38% Southern Italy and Islands 18%), backed by first degree or equivalent mortgages, where the residual debt does not exceed 80% of the property value as determined by an expert valuation. The values of the assignment carried out are as follows. Price of receivables assigned to Grecale ABS Sec. 5 Year 2009 Assignment price - principal 611,005 Assignment price - interest 688 Total 611,693 The following table summarises the main features of the securities issued by Grecale ABS. Class Legal expiry date Interest rate Moody s original rating Moody s/s&p/dbrs current rating Nominal amount Senior 28/04/2056 6m Euribor + 30b.p. Aaa Aa2/A/AAA 531,700 Junior 28/04/2056 variable return n/r n/r 95,360 Total 627,060 The scheme was organised with the collaboration of UBS Investment Bank and Unipol Merchant as arrangers. All the securities were subscribed by Unipol Banca at the time of issue, with the aim of using the senior notes for refinancing operations with the ECB and other central bodies. The operation is therefore described as a self-securitisation. During the current financial year, the Senior notes were entirely sold to third financial counterparties on the market, determining the transformation of the type of operation that was no longer a selfsecuritisation. The two classes of notes are characterised by increasing levels of subordination, with absolute 173

176 3 Notes to the Separate Financial Statements priority in favour of the Class A notes; the redemption of senior notes began during the 2011 financial year and by the date the financial statements closed had been repaid by more than 56%. The senior notes were issued with the half-yearly coupon indexed to the 6-month Euribor +300bps. The operation was not backed by any credit facility as it has a cash reserve originally financed by an over-issue of junior notes designed to protect the Class A securities. The initial amount of the cash reserve is 2.5% of the initial portfolio and can increase later on according to the regulatory framework defined indemnity amount target amount ; the cash reserve will be zeroed only after the repayment in full of the senior notes. Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, which is set up to hedge the interest rate risks affecting the vehicle company. On the basis of the current interest rate swap contract, the vehicle company pays to the counterparty, with the same frequency of the coupons, an amount determined by applying to the notional value of reference a fixed rate, the arithmetical average of Euribor 3 months for the period plus a spread of 0.3% and the arithmetical average of Euribor 6 months for the period, respectively, and receives the variable interest rate plus a spread of 0.1%, and receives in all cases an amount determined by applying to the notional amount of reference Euribor 6 months reported at the beginning of the period. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. At the closing date the residual value of the securities was as follows: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A notes 531, , ,035 Class B notes 95,360 95,360 95,360 Total 627, , , Securitisation carried out through Grecale RMBS 2011 Srl in October (Grecale RMBS 2011 Securitisation 1) The securitisation was carried out in October 2011 through the transfer of performing mortgage loans to private consumers, granted by Unipol Banca to individuals resident in Italy (North Italy 43%, Central Italy 34% Southern Italy and Islands 23%), backed by first degree or equivalent mortgages, where the residual debt does not exceed 80% of the property value as determined by an expert valuation for a total amount of 723m. The scheme was organised with the collaboration of J.P.Morgan that acted as arranger and was financed by issuing securities for a nominal value of 724m, divided in three classes (Senior A1-A2 and Junior). 174

177 Unipol Banca Financial Statements 2014 The values of the assignment carried out are as follows: Price of receivables assigned to Grecale RMBS 2011 Sec. 1 Year 2011 Assignment price - principal 722,571 Assignment price - interest 929 Total 723,500 The following table summarises the main features of the securities issued by Grecale RMBS 2011: Amouts in k Class Legal expiry date Interest rate Moody s/fitch original rating Moody s/fitch current rating Nominal amount Senior A1 27/01/2061 3m Euribor + 200b.p. Aaa/AAA A2/AA+ (*) 175,000 Senior A2 27/01/2061 3m Euribor + 50b.p. Aaa/AAA Aa2/AA+ 390,200 Junior 27/01/2061 variable return n/r n/r 158,980 Total 724,180 (*) last rating available before repayment All the securities were subscribed by Unipol Banca at the time of issue, with the aim of using the senior notes for refinancing operations with the ECB and other central bodies. The operation was therefore described as a self-securitisation until the previous financial year. During the previous and current financial year, all of the Senior A2 securities were sold to third financial counterparties on the market, determining the transformation of the type of operation that was no longer a self-securitisation. The redemption of the senior securities started in 2013, eighteen months after the issue date. At the closing date, class A1 was fully repaid, therefore, the repayment of class A2 for a residual value of 98% started. The senior notes were issued with the quarterly coupon indexed to the 3-month Euribor +2000bps for class A1 and 500bps for class A2. The operation was not backed by any credit facility as it has a cash reserve originally financed by an over-issue of junior notes designed to protect the Class A securities. The initial amount of the cash reserve is 2.5% of the initial portfolio and can increase later on according to the regulatory framework defined indemnity amount target amount ; the cash reserve will be zeroed only after the repayment in full of the senior notes. Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, which is set up to hedge the interest rate risks affecting the vehicle company. On the basis of the current interest rate swap contract, the vehicle company pays to the counterparty, with the same frequency of the coupons, an amount determined by applying to the notional value of reference a fixed rate, the arithmetical average of Euribor 3 months for the period plus a spread of 0.3% and the arithmetical average of Euribor 6 months for the period, respectively, and receives the variable interest rate plus a spread of 0.1%, and receives in all cases an amount determined by applying to the notional amount of reference Euribor 6 months reported at the beginning of the period. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. 175

178 3 Notes to the Separate Financial Statements At the closing date the residual value of the securities was as follows: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A1 notes 175,000 40,989 - Class A2 notes 390, , ,268 Class B notes 158, , ,980 Total 724, , , Securitisation carried out through SME Grecale Srl in July (SME Grecale) Purely for informative purposes, as stated at the beginning of this section, it should be mentioned that in July 2012 a new securitisation was carried out by selling a total of 839m of secured and unsecured performing loans granted by Unipol Banca to SMEs resident in Italy, backed, for the secured part, by first degree or subsequent degree mortgages, where the residual debt did not exceed 80% of the professionally ascertained value of the property, and consequently securities with the same nominal value, divided into two classes (senior and junior), were issued, as shown in the following table: Class Legal expiry date Interest rate Fitch/DBRS original rating Fitch/DBRS current rating Nominal amount Senior 31/01/2062 3m Euribor + 350b.p. AAA/AAA AA+/AAA 430,000 Junior 31/01/2062 3m Euribor n/r n/r 409,217 Total 839,217 The scheme was organised with the collaboration of J.P. Morgan as arranger. All the securities were subscribed by Unipol Banca at the time of issue, with the aim of using the senior notes for refinancing operations with the ECB and other central bodies. The operation is therefore described as a self-securitisation. The redemption of the senior securities began in 2012; these securities had been already repaid by more than 87% of their nominal value on issue. Moreover, during the last two financial years, the bank repurchased, for reasons of commercial management and within the powers granted by the Service agreement, loans part of the scheme for an amount of residual capital of 56m. Repurchases continued also in the first months of

179 Unipol Banca Financial Statements 2014 Quantitative information C.1. Exposures deriving from securitisations categorised by the quality of the underlying assets Balance sheet exposures Guarantees issued Senior Mezzanine Junior Senior Mezzanine Junior Quality of underlying assets/exposures Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure A. With own underlying assets: 474, , , , , , a) Non-performing b) Other 474, , , , , , B. With third-party underlying assets: a) Non-performing b) Other The Bank has not granted credit facilities or guarantees associated with securitisations, shown in the previous table. 177

180 3 Notes to the Separate Financial Statements C.2 Exposures deriving from the main own securitisations divided by type of asset securitised and type of exposure Balance sheet exposures Guarantees issued Senior Mezzanine Junior Senior Mezzanine Junior Type of assets securitised/ Exposures Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs A. Fully derecognised A.1 Grecale Srl - Performing res. mortgage loans A.2 Grecale ABS sec. 1 - Performing mortgage loans B. Partially derecognised C. Not derecognised 474, , ,343 (5,785) C.1 Grecale ABS Sec. 2 - Performing res. mortgage loans 2,865-3,800-54,461 (254) C.2 Grecale ABS Sec. 3 - Performing mortgage loans 5, , ,011 (3,938) C.3 Grecale ABS Sec. 4 - Performing mortgage loans 466, ,353 (1,081) C.4 Grecale ABS Sec. 5 - Performing mortgage loans ,939 (395) C.5 Grecale RMBS Sec. 1 - Performing mortgage loans ,580 (117) Total 474, , ,343 (5,785) C.3 Exposures deriving from the main securitisations of third parties divided by type of asset securitised and type of exposure Balance sheet exposures Guarantees issued Type of assets securitised/ Exposures A.1 Public property fund Funding 1 Carrying amount Senior Mezzanine Junior Senior Mezzanine Junior Adjust./ writebacks Carrying amount Adjust./ writebacks Carrying amount Adjust./ writebacks Net exposure Adjust./ writebacks Net exposure Adjust./ writebacks Net exposure - trade receivables Adjust./ writebacks 178

181 Unipol Banca Financial Statements 2014 C.4 Securitisation exposures divided by portfolio and type Exposure/ portfolio 1. Balance sheet exposures Held-for-trading financial assets Financial assets fair value option Available-for-sale financial assets Held-to-maturity investments Receivables Total 31/12/2014 Total 31/12/ "Senior" "Mezzanine" "Junior" Off-balance sheet exposures "Senior" "Mezzanine" "Junior"

182 3 Notes to the Separate Financial Statements C.5 Total amount of securitised assets underlying Junior notes or other forms of credit support Assets/Amounts Traditional securitisations A. Own underlying assets: 1,252,732 A.1 Fully derecognised - Synthetic securitisations 1. Doubtful loans - 2. Watchlist loans - 3. Restructured exposures - 4. Past due exposures - 5. Other assets - A.2 Partially derecognised - 1. Doubtful loans - 2. Watchlist loans - 3. Restructured exposures - 4. Past due exposures - 5. Other assets - A.3 Not derecognised 1,252, Doubtful loans Watchlist loans Restructured exposures Past due exposures Other assets 1,252,732 - B. Third-party underlying assets: - - B.1 Doubtful loans - - B.2 Watchlist loans - - B.3 Restructured exposures - - B.4 Past due exposures - - B.5 Other assets

183 Unipol Banca Financial Statements 2014 C.6 SPVs for securitisation Assets Liabilities Securitisation name / SPV name Registered office Consolidation Receivables Debt securities Other Senior Mezzanine Junior Grecale ABS Srl Bologna YES securitisation no , ,175-54,543 securitisation no , , ,152 securitisation no , ,668-96,510 securitisation no , ,035-95,360 Castoro RMBS Srl Milan YES 140, ,854 26,000 51,678 Atlante Finance Srl Milan YES 372,338 2,420 42, , ,250 Grecale RMBS 2011 Srl Bologna YES 554, , ,980 SME Grecale Srl Bologna YES 495, , ,217 C.7 Non-consolidated SPVs for securitisation There are no non-consolidated SPVs for securitisation. C.8 Servicer activity - collections of securitised loans and repayments of securities issued by the SPVs for securitisation Servicer activity: collections for individual securitisations Principal Other collections Total collections Collections on behalf of Grecale ABS Srl Sec, 2: 537, , ,999 - of which during the year 21,815 3,570 25,385 - of which in previous years 515, , ,614 Collections on behalf of Grecale ABS Srl Sec, 3: 1,170, ,728 1,497,760 - of which during the year 52,296 9,579 61,875 - of which in previous years 1,117, ,149 1,435,885 Collections on behalf of Grecale ABS Srl Sec, 4: 545, , ,598 - of which during the year 47,264 15,142 62,406 - of which in previous years 497, , ,192 Collections on behalf of Grecale ABS Srl Sec, 5: 291, , ,992 - of which during the year 29,553 12,852 42,405 - of which in previous years 261,773 94, ,587 Collections on behalf of Grecale RMBS 2011 Srl: 168,984 72, ,712 - of which during the year 43,784 16,522 60,306 - of which in previous years 125,200 56, ,406 Total collections: 2,713, ,753 3,567,061 - of which during the year 194,712 57, ,377 - of which in previous years 2,518, ,088 3,314,

184 3 Notes to the Separate Financial Statements Remember that the Bank also serviced the self-securitisation not included in the table above; information on repayment of the securities issued by the vehicle company is included in the information on individual operations on the previous pages. D Information on structured entities not consolidated for accounting purposes (other than SPVs for securitisation) Qualitative information Case not present in the years under examination. E. Assignments A. Financial assets assigned and not fully derecognised Qualitative Information Unipol Banca has not carried out assignments for which it is necessary to provide information pursuant to IFRS 7, paragraph 7, 42D letters a), b), c), and paragraph 42H. E.1 Financial assets assigned and not derecognised: carrying amount and full value Technical forms/ Portfolio Held-for-trading financial assets Financial assets designated at fair value Available-for-sale financial assets Held-to-maturity investments Receivables from banks Receivables from customers A A A A A A Total A. Balance sheet assets , ,849-1,435,604 1,661,684 1,344, Debt securities , , , , Equity securities UCITS Loans ,435,604 1,435,604 1,237,500 B. Derivatives Total , ,849-1,435,604 1,661,684 - of which non-performing , Total ,354-1,237,500-1,344,854 of which non-performing Key: A = financial assets assigned and fully recognised (carrying amount) B = financial assets assigned and partially recognised (carrying amount) C = financial assets assigned and partially recognised (full value) 182

185 Unipol Banca Financial Statements 2014 E.2 Financial liabilities relating to financial assets assigned and not derecognised: carrying amount Liabilities/Assets portfolio Held-for-trading financial assets Financial assets designated at fair value Available-for-sale financial assets Held-to-maturity investments Receivables from banks Receivables from customers 1. Due to customers , , ,303 1,058,268 a) relating to assets fully recognised , , ,303 1,058,268 b) relating to assets partially recognised Due to banks a) relating to assets fully recognised b) relating to assets partially recognised Total , , ,303 1,058,268 Total , ,127 Total E.3 Assignments with liabilities relating solely to assigned assets: fair value Item not applicable for the years in question. B. Financial assets assigned and fully derecognised with recognition of the continued involvement Case not present in the years under examination. E.4 Covered bond transactions Case not present in the years under examination. F. Credit risk measurement models See what is shown in Part E Section 1 Credit risk. Section 2 Market Risk Qualitative Information The market risk is the risk arising from the volatility of the market prices of financial instruments that may affect the value of Unipol Banca SpA s trading portfolio. As regards market risks, Unipol Banca SpA is subject to residual exposure to items arising from both trading and managing the network s commercial flows. Items held for trading are those intended for sale in the short term and/or held to benefit, in the short term, from differences between purchase and selling prices or other variations in price or interest rate. Items are those held by the Bank and items arising from services to customers or as back-up for buying and selling (market-making) that have Unipol Banca SpA s own portfolio as direct contra-entry. 183

186 3 Notes to the Separate Financial Statements The new Group Investment Policy, which lays down guidelines for investment procedures, the criteria for the investment policy, the types of asset in which it is deemed appropriate to invest and the limits, was approved during The policy specified the following limits: Portfolio limits; Rating risk limits and concentration limits; VaR limits; Sensitivity limits; Exchange rate risk limits; Limits on loss in the income statement; ALM risk limits; Counterparty risk limits; Settlement risk limits. The market risk is calculated and the limits laid down in the Investment Policy are monitored once a week by the Market Risk Report, which is drawn up and discussed at a meeting of the Finance Committee of Unipol Banca SpA every month. The Risk Management Department presents a quarterly report on the monitoring of the Investment Policy limits to the Bank s Board of Directors. The market risk is measured for management purposes using the Value at Risk, calculated, using the Historical Simulation method with 99.5% reliability, on a daily basis by the Risk Management Department of Unipol Banca SpA, against the trading portfolio and the available-for-sale portfolio using the Kondor Global Risk (KGR) application. A different holding period is envisaged depending on the portfolio of reference; for the trading portfolio in particular, the holding period is 10 days, while for the Available-for-Sale portfolio, this period is 252 days. The historical observation period considered for the calculation of the Value at Risk is at least one year for the trading portfolio and three years for the Available-for-Sale portfolio. The VAR is based on the Held-for-Trading and Available-for-Sale portfolios of Unipol Banca. The VaR of Unipol Banca SpA s trading portfolio at 31 December 2014 (IAS Held-for-trading and Available-for-sale portfolios) is shown below, subdivided according to risk factor. Amounts in m Market Value VAR Total VAR Equity VAR Interest Rate VAR Spread VAR Real Estate UNIPOL BANCA SpA Available-for-sale portfolio Held-for-trading portfolio The total VAR (available-for-sale and trading portfolios) is 58.02m, 9.37% of the market value of the financial instruments present. The risk spread relating to the Value at Risk includes debt securities issued or guaranteed by governments, central governments, central banks or multilateral development banks in the Bank s trading portfolio. The Value at Risk includes instruments held to hedge the risk and mechanisms for transferring the risk. The main sensitivities are calculated and monitored as well as the Value at Risk. Sensitivities indicate the change in the market value of financial instruments as a result of changes in market risk factors. They help to manage market risk as they enable the translation of the Value-at-Risk limits into limits that can be monitored by financial operators. 184

187 Unipol Banca Financial Statements 2014 The main sensitivity measures used are: basis point value; duration; sensitivity to credit spreads; delta of the share portfolio; vega value. 2.1 Interest Rate Risk And Price Risk Regulatory Trading Portfolio Qualitative Information The interest rate risk is the risk deriving from a possible change in the value of a financial asset in the trading portfolio as a result of adverse changes in interest rates. The interest rate risk on the trading portfolio is measured either by calculating the VaR or by determining the sensitivity and the impacts resulting from stress tests. Unipol Banca SpA s operations on share markets on its own account are limited. The price risk is calculated and monitored using the VaR, sensitivity measures and stress tests. The figures for the sensitivity to interest rates, credit spreads and share prices of the Held-for-Trading and Available-for-Sale portfolios of Unipol Banca SpA at 31 December 2014 are shown below. Amounts in m Market Value Duration Sensitivities rate (+1bps) Sensitivities Credit Spread (+1bps) Sensitivities Equity (-1%) Sensitivities Real Estate (-1%) UNIPOL BANCA SpA (0.27) (0.31) (0.68) (0.53) Available-for-sale portfolio (0.27) (0.31) (0.68) (0.53) Held-for-trading portfolio

188 3 Notes to the Separate Financial Statements Quantitative Information 1. Regulatory trading portfolio: distribution by residual duration (repricing date) of balance sheet assets and liabilities and financial derivatives Currency of denomination: Euro Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Other assets Balance sheet liabilities Repurchase agreements payable Other liabilities Financial derivatives - 6, With underlying security Options Long positions Short positions Other derivatives Long positions Short positions Without underlying security - 6, Options Long positions Short positions Other derivatives - 6, Long positions - 5, Short positions

189 Unipol Banca Financial Statements 2014 Currency of denomination: USD Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Other assets Balance sheet liabilities Repurchase agreements payable Other liabilities Financial derivatives - 6, With underlying security Options Long positions Short positions Other derivatives Long positions Short positions Without underlying security - 6, Options Long positions Short positions Other derivatives - 6, Long positions Short positions - 5,

190 3 Notes to the Separate Financial Statements Currency of denomination: CHF Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Other assets Balance sheet liabilities Repurchase agreements payable Other liabilities Financial derivatives With underlying security Options Long positions Short positions Other derivatives Long positions Short positions Without underlying security Options Long positions Short positions Other derivatives Long positions Short positions

191 Unipol Banca Financial Statements 2014 Currency of denomination: other currencies Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Other assets Balance sheet liabilities Repurchase agreements payable Other liabilities Financial derivatives With underlying security Options Long positions Short positions Other derivatives Long positions Short positions Without underlying security Options Long positions Short positions Other derivatives Long positions Short positions

192 3 Notes to the Separate Financial Statements 2. Regulatory trading portfolio: distribution of exposures in equity securities and share indices by the main countries of the market on which they are listed Type of transactions /Listing index Listed Italy Unlisted A. Equity securities long positions short positions - - B. Purchase and sale of equity securities not yet regulated long positions short positions - - C. Other derivatives on equity securities long positions short positions - - D. Derivatives on share indices long positions short positions Interest Rate Risk And Price Risk Banking Portfolio Qualitative Information The entire banking portfolio was analysed, comparing all lending to customers with income sensitive to interest rate risk to provide an overview and pick up any mismatch either in duration or in the imbalance of items placed in the various repricing segments. A table summarising the sensitivity parameters for the banking portfolio at 31 December 2014 is shown below. The duration gap shows the weighted average difference between the duration of the asset compared with that of the liability (including off-balance items), whilst the sensitivity parameters illustrate the percentage divergence between the expected margin and the economic value of the bank s shareholders equity in relation to an interest rate shock of +/- 100 basis points. The banking portfolio rate risk is analysed using typical asset and liability management tools, such as the duration gap and calculating the effect of changes in interest rates on expected net interest income and on the financial value of equity. Amounts in 31/12/ /12/2014 Duration Gap (0,09) 0,60 Margin sensitivity +100 B.P. (1,820,012) 4,374, B.P. (22,858,920) (34,576,292) Economic value sensitivity +100 B.P. 17,041,853 (66,784,142) -100 B.P. (9,544,768) 83,767,

193 Unipol Banca Financial Statements 2014 Quantitative Information 1. Banking portfolio: distribution by residual duration (repricing date) of financial assets and liabilities Currency of denomination: Euro From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Type/Residual duration On demand Up to 3 months Over 10 years Unspecified duration 1. Balance sheet assets 6,553,398 1,571, , ,176 1,215, , , Debt securities , ,756 10, , , with early repayment option - 29,336 3, other , ,943 10, , , Loans to banks 122, , Loans to customers 6,430, , , ,003 1,009, , , current account 1,414,215 33,592 39,935 63, ,723 33, other loans 5,016, , , , , , , with early repayment option 3,954, , ,780 48, , , , other 1,061, ,851 74, , , ,161 7, Balance sheet liabilities 6,551,563 1,311, , ,850 2,028,184 70, Due to customers 6,439, , , ,029 92, current account 5,533, , ,186 74,767 91, other payables 905, ,424 28,720 54,262 1, with early repayment option other 905, ,424 28,720 54,262 1, Due to banks 25, , , current account 5, other payables 19, , , Debt securities 86, , , ,821 1,520,467 70, with early repayment option 81,621 59,819 9,961 50, , other 5, , , ,489 1,419,008 69, Other liabilities with early repayment option other Financial derivatives - 459,479 42,862 77, , , With underlying security - 1,479 1, Options long positions short positions Other derivatives - 1,479 1, long positions short positions Without underlying security - 458,000 41,524 77, , , Options long positions short positions Other derivatives - 458,000 41,524 77, , , long positions - 143,000 9,000 77, , short positions - 315,000 32, , Other off-balance sheet transactions 137, long positions 68, short positions 68,

194 3 Notes to the Separate Financial Statements Currency of denomination: USD Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets 7,266 10, Debt securities with early repayment option other Loans to banks 2, Loans to customers 4,405 10, current account other loans 4,398 10, with early repayment option 4,398 10, other Balance sheet liabilities 6, Due to customers 6, current account 6, other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other derivatives long positions short positions Without underlying security Options long positions short positions Other derivatives long positions short positions Other off-balance sheet transactions long positions short positions

195 Unipol Banca Financial Statements 2014 Currency of denomination: GBP Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets 4, Debt securities with early repayment option other Loans to banks 4, Loans to customers current account other loans with early repayment option other Balance sheet liabilities 1, Due to customers 1, current account 1, other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other derivatives long positions short positions Without underlying security Options long positions short positions Other derivatives long positions short positions Other off-balance sheet transactions long positions short positions

196 3 Notes to the Separate Financial Statements Currency of denomination: CHF Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Loans to banks Loans to customers current account other loans with early repayment option other Balance sheet liabilities Due to customers current account other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other derivatives long positions short positions Without underlying security Options long positions short positions Other derivatives long positions short positions Other off-balance sheet transactions long positions short positions

197 Unipol Banca Financial Statements 2014 Currency of denomination: CAD Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Loans to banks Loans to customers current account other loans with early repayment option other Balance sheet liabilities Due to customers current account other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other derivatives long positions short positions Without underlying security Options long positions short positions Other derivatives long positions short positions Other off-balance sheet transactions long positions short positions

198 3 Notes to the Separate Financial Statements Currency of denomination: other currencies Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets 3, Debt securities with early repayment option other Loans to banks 3, Loans to customers current account other loans with early repayment option other Balance sheet liabilities Due to customers current account other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other derivatives long positions short positions Without underlying security Options long positions short positions Other derivatives long positions short positions Other off-balance sheet transactions long positions short positions

199 Unipol Banca Financial Statements Exchange Rate Risk Qualitative Information The exchange rate risk is the possibility that fluctuations in market exchange rates could lead to significant changes, both positive and negative, in the value of the Bank s equity. Managing the exchange rate risk within Unipol Banca SpA consists in operating with spot and forward exchanges rates. Operation with spot exchanges is aimed at managing commercial flows from the sales network. Quantitative Information Distribution by currency of denomination of assets and liabilities and of derivatives Currencies Items USD GBP CHF JPY CAD Other currencies A. Financial assets 17,938 4, ,563 A.1 Debt securities A.2 Equity securities A.3 Loans to banks 2,861 4, ,563 A.4 Loans to customers 15, A.5 Other financial assets B. Other assets 1, C. Financial liabilities 6,637 1, C.1 Due to banks C.2 Due to customers 6,446 1, C.3 Debt securities C.4 Other financial liabilities D. Other liabilities E. Financial derivatives 6, Options Long positions Short positions Other 6, Long positions Short positions 5, Total assets 20,387 5,538 1,469 1, ,217 Total liabilities 12,481 1, Imbalance (+/ ) 7,906 4,040 1, ,

200 3 Notes to the Separate Financial Statements 2.4 Derivatives A. Financial derivatives A.1 Regulatory trading portfolio: year-end and average notional values Total 2014 Total 2013 Over the Central Over the Central Underlying assets/type of derivatives counter counterparties counter counterparties 1. Debt securities and interest rates - - 2,611 - a) Options b) Swaps c) Forward - - 2,611 - d) Futures e) Other Equity securities and share indices a) Options b) Swaps c) Forward d) Futures e) Other Currencies and gold a) Options b) Swaps c) Forward d) Futures e) Other Goods Other underlyings Total - - 2,613 - Average values - - 1,

201 Unipol Banca Financial Statements 2014 A.2 Banking portfolio: year-end and average notional values A.2.1 Hedging derivatives Underlying assets/type of derivatives Total 2014 Total 2013 Over the counter Central counterparties Over the counter Central counterparties 1. Debt securities and interest rates 479, ,024 - a) Options b) Swaps 479, ,024 - c) Forward d) Futures e) Other Equity securities and share indices a) Options b) Swaps c) Forward d) Futures e) Other Currencies and gold a) Options b) Swaps c) Forward d) Futures e) Other Goods Other underlyings Total 479, ,024 - Average values 239, ,012 - A.2.2 Other derivatives There are no other derivatives. 199

202 3 Notes to the Separate Financial Statements A.3 Financial derivatives: gross positive fair value - breakdown by products Portfolios/Type of derivatives Gross positive fair value Total 2014 Total 2013 Over the counter Central counterparties Over the counter Central counterparties A. Regulatory trading portfolio a) Options b) Interest rate swaps c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other B. Banking portfolio - for hedging 7,926-9,961 - a) Options b) Interest rate swaps 7,926-9,961 - c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other C. Banking portfolio - other derivatives a) Options b) Interest rate swaps c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other Total 7,926-9,

203 Unipol Banca Financial Statements 2014 A.4 Financial derivatives: gross negative fair value - breakdown by products Portfolios/Type of derivatives Gross negative fair value Total 2014 Total 2013 Over the counter Central counterparties Over the counter Central counterparties A. Regulatory trading portfolio a) Options b) Interest rate swaps c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other B. Banking portfolio - for hedging 84,472-50,046 - a) Options b) Interest rate swaps 84,472-50,046 - c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other C. Banking portfolio - other derivatives a) Options b) Interest rate swaps c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other Total 84,472-50,049 - A.5 Financial derivatives OTC regulatory trading portfolio: notional values, gross positive and negative fair values by counterparty contracts not included in offsetting agreements Case not present in the year under examination. A.6 Financial derivatives OTC regulatory trading portfolio: notional values, gross positive and negative fair values by counterparty contracts included in offsetting agreements Case not present in the year under examination. 201

204 3 Notes to the Separate Financial Statements A.7 Financial derivatives OTC banking portfolio: notional values, gross positive and negative fair values by counterparty contracts not included in offsetting agreements Case not present in the year under examination. A.8 Financial derivatives OTC banking portfolio: notional values, gross positive and negative fair values by counterparty contracts included in offsetting agreements Contracts included in offsetting agreements Governments and central banks Other public bodies Banks Financial companies Insurance companies Nonfinancial companies Other entities 1) Debt securities and interest rates , notional value , positive fair value - - 7, negative fair value , ) Equity securities and share indices notional value positive fair value negative fair value ) Currencies and gold notional value positive fair value negative fair value ) Other values notional value positive fair value negative fair value

205 Unipol Banca Financial Statements 2014 A.9 Residual life of financial derivatives OTC: notional values Underlyings/Residual life Up to 1 year From 1 year to 5 years Over 5 years Total A. Regulatory trading portfolio A.1 Financial derivatives on debt securities and interest rates A.2 Financial derivatives on equity securities and share indices A.3 Financial derivatives on exchange rates and gold A.4 Financial derivatives on other values B. Banking portfolio 97, , , ,524 B.1 Financial derivatives on debt securities and interest rates 97, , , ,524 B.2 Financial derivatives on equity securities and share indices B.3 Financial derivatives on exchange rates and gold B.4 Financial derivatives on other values Total , , , ,524 Total , ,524 15, ,637 A.10 Financial derivatives OTC: counterparty risk/financial risk Internal models Information not available with reference to 31 December B. Credit derivatives There are no derivatives of this type. 203

206 3 Notes to the Separate Financial Statements Section 3 Liquidity Risk Qualitative Information A. General aspects, management processes and methods of calculating the operational risk The liquidity risk is the risk that the bank might find it difficult to meet its expected or unexpected cash liabilities within a reasonable time and therefore have to sell some of its less liquid assets at unfavourable conditions, thus affecting its solvency. Within the limits approved by the Board of Directors, Unipol Banca SpA s Finance Committee is responsible for managing Unipol Banca SpA s ALM and the liquidity risk. Unipol Banca SpA s Finance Department is responsible for the operational management of liquidity. A Unipol Banca SpA ALM and Liquidity meeting takes place every week. During this meeting the overall liquidity situation of the Unipol Banca SpA is monitored and decisions are made with regard to action to meet emerging liquidity requirements. At the weekly meeting, the structural and tactical liquidity-gap situation is analysed based on the date cash flows are due. Short-term tactical cash flows are supplemented by the expected flows linked to the renewal of sources of finance due from institutional customers to expected major new transactions not present in the IT systems used for generating cash flows and managing liquidity, and to administrative expenses and taxes due. The meeting also analyses trends in final amounts and rates on income and lending by institutional counterparties, banks and customers of Unipol Banca and compares them with the budget concerned. The liquidity gap based on contractual flows and expected flows is then compared with the reserves of liquid assets or assets that can be swiftly turned into cash. The analysis is carried out under both normal conditions (business as usual), and idiosyncratic, market and combined stress conditions (worst-case scenario). Idiosyncratic stress includes for example: a partial reduction of sources of finance by cooperative counterparties; a partial reduction of sources of finance by retail customers (sale on the secondary market of the bonds issued by Unipol Banca and partial withdrawal of on demand items); the failure to renew the sources of finance not collateralised by institutional counterparties and banks, reduction of the possibility of loans on characteristic markets (Interbank Deposit Market, Collateralised interbank market, EMTN issues); a reduction in maturities related to available sources of finance; possible events related to the achievement of thresholds on collateral agreements and impacts on credit lines by institutional counterparties and banks for transactions in derivatives, collateralised deposits, repurchase agreements of deposits and security and currency forward transactions. The stress of the market is defined as the simultaneous unavailability of certain characteristic loan markets (interbank market, EMTN issues) as well as the reduction of liquidity on financial markets relating to the sale/ purchase of financial instruments resulting in the inability to liquidate positions in securities over a short-term period without significant economic impacts. 204

207 Unipol Banca Financial Statements 2014 In such a scenario, it is assumed, for example: a reduction of the possibility of loans on characteristic markets (Interbank Deposit Market, Collateralised interbank market, MTS, EMTN issues) and a reduction in maturities related to available sources of finance; a decrease in the value of the assets in the portfolio; the failure to renew the sources of finance collateralised and not collateralised by institutional counterparties and banks a partial reduction of sources of finance by cooperative counterparties; an increase in the use of credit lines by corporate counterparties of Unipol Banca. The combined stress scenario is a worst case scenario that considers the joint impact of the two previous scenarios. The severity levels envisaged may be different from the previous two, and the combination of the idiosyncratic and market scenarios will not necessarily be equal to the algebraic sum of the impacts of the two previous scenarios but interrelations will be considered in order to determine the combined effects. Stress application must be contemplated in two phases: very short term (two weeks) that assumes an acute phase of stress and a longer period (up to two months) that assumes a phase of stress less acute but persistent. Lastly, the principal market indicators (early warning indicators) are continuously monitored in order to give advance warning of any potential crisis. In particular, in order to identify the occurrence of market stress situations, prices and performance of the stock-market index on the reference market, information related to debt securities or credit default swaps of the market, information on the financial sector to which they belong are monitored; to identify the occurrence of an idiosyncratic stress, the rating of the Bank and other information specific to Unipol Banca SpA are monitored. A summary of the information shared during weekly meetings held to monitor liquidity and any actions to be taken are recorded in the minutes and reported to Unipol Banca SpA s Finance Committee. During the monthly meeting of Unipol Banca SpA s Finance Committee, the Head of Unipol Banca s Corporate Treasury Department and its Head of Risk Management present a description of the short-term tactical liquidity situation and the long-term strategic liquidity situation, including any action to be taken to improve the overall liquidity profile. 205

208 3 Notes to the Separate Financial Statements Evidence of the 12-month liquidity gaps for Unipol Banca at 31 December 2014, with a comparison between the actual and accumulated gaps on the various due dates and the reserves of assets that can be used as contingencies and the liquidity buffer is shown below. Demand 3 days 4 days 5 days 6 days 2 weeks 3 weeks Assets Liabilities (39) (21) (22) (51) (8) (82) (497) GAP on precise date 181 (5) (11) (30) 0 (26) (33) Cumulative GAP (a) Counterbalancing Capacity (b) Liquidity buffers OPERATING scenario STRESSED scenario As regards the new regulatory framework, Basel 3, in 2014, the Risk Management Department worked with the other company departments on exercises to estimate the possible effects of the prudential new standards on the short-term liquidity ratios (Liquidity Coverage Ratio - LCR). The calculation of the ratio was shared in Finance Committees and funding strategies that would enable full compliance with the regulatory requirements were outlined. Moreover, with reference to the medium-term liquidity indicator (Net Stable Funding Ratio - NSFR), a balancing activity of the figures of Cedacri were started during the year. 206

209 Unipol Banca Financial Statements month 2 months 3 months 4 months 5 months 6 months 7 months 8 months 9 months 10 months 11 months 12 months (228) (548) (263) (184) (258) (199) (61) (145) (150) (115) (72) (1,206) 225 (360) (67) (55) (146) (128) 50 (58) (10) (16) 51 (1,124) 301 (59) (126) (181) (327) (455) (405) (464) (473) (489) (438) (1,526) (567) 75 (239) (309) (369) (494) (625) (576) (605) (615) (609) (559) (1,684) 207

210 3 Notes to the Separate Financial Statements QUANTITATIVE INFORMATION 1. Time distribution of financial assets and liabilities by remaining contract duration Currency of denomination: Euro From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Items/Time bands On demand Over 5 years Unspecified duration Balance sheet assets 2,084,811 15,434 13, ,156 1,136, , ,951 2,904,278 4,377, ,681 A.1 Government securities ,938 4,680 8, , ,000 - A.2 Other debt securities 3, ,368 42, A.3 UCITS units ,014 A.4 Loans 2,081,723 15,434 13, , , , ,146 2,561,427 3,782,697 91,667 - Banks 122, , ,667 - Customers 1,958,923 15,434 13, , , , ,146 2,561,427 3,782,697 - Balance sheet liabilities 5,843,324 52,036 27, , , , ,890 2,457, ,086 - B.1 Deposits and current accounts 5,691,110 8,137 10,508 43, , ,967 76,430 91, Banks 25, Customers 5,665,983 8,137 10,508 43, , ,967 76,430 91, B.2 Debt securities , , , ,543 1,950,456 75,967 - B.3 Other liabilities 151,555 43,767 15, , ,566 28,517 53, , ,119 - Off-balance sheet transactions 78,821 8, ,953 11,804 21,711 8,013 19,293 - C.1 Financial derivatives with capital swaps - 8, , Long positions - 6, Short positions - 1, C.2 Financial derivatives without capital swaps ,787 1,648 10, Long positions , Short positions ,443 1,348 2, C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds 78, ,156 8,816 10,939 7,918 19, Long positions 10, ,156 8,816 10,939 7,918 19, Short positions 68, C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

211 Unipol Banca Financial Statements 2014 Currency of denomination: USD Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans Banks Customers Balance sheet liabilities B.1 Deposits and current accounts Banks Customers B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with capital swaps Long positions Short positions C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

212 3 Notes to the Separate Financial Statements Currency of denomination: GBP Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets 4, A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans 4, Banks 4, Customers Balance sheet liabilities 1, B.1 Deposits and current accounts 1, Banks Customers 1, B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with capital swaps Long positions Short positions C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

213 Unipol Banca Financial Statements 2014 Currency of denomination: CHF Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans Banks Customers Balance sheet liabilities B.1 Deposits and current accounts Banks Customers B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with capital swaps Long positions Short positions C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

214 3 Notes to the Separate Financial Statements Currency of denomination: CAD Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans Banks Customers Balance sheet liabilities B.1 Deposits and current accounts Banks Customers B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with capital swaps Long positions Short positions C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

215 Unipol Banca Financial Statements 2014 Currency of denomination: other currencies Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets 3, A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans 3, Banks 3, Customers Balance sheet liabilities B.1 Deposits and current accounts Banks Customers B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with capital swaps Long positions Short positions C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

216 3 Notes to the Separate Financial Statements 2. Information on recognised tied up assets Technical forms Carrying Amount Tied up Fair Value Not tied up Carrying Amount Fair Value Total 31/12/2014 Total 31/12/ Cash and cash equivalents - 98,890 98, , Debt securities 742, , , ,045 1,394,583 1,645, Equity securities ,982 32,096 31,982 59, Loans 2,543,824 7,622,389 10,166,213 9,968, Other financial assets - 98,690 98,690 69, Non-financial assets - 516, , ,107 Total ,286, ,369 9,020, ,141 12,306,757 Total ,025, ,636 9,366,422 1,580,405 12,391, Information on derecognised tied up owned assets Technical forms Tied up Not tied up Total 31/12/2014 Total 31/12/ Financial assets 531,574 1,642,436 2,174,010 3,093,264 - Securities 531,574 1,642,436 2,174,010 3,093,264 - Other Non-financial assets Total ,574 1,642,436 2,174,010 Total ,652,927 1,440,337 3,093,

217 Unipol Banca Financial Statements 2014 Section 4 - Operational Risks Qualitative Information A. General aspects, management processes and methods of calculating the operational risk The Unipol Group, implementing the provisions of (EU) Regulation no. 575/2013 (known as CRR ) for credit institutions and investment companies, defines the operational risk as: the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events such as fraud or the activity of service providers. The operational risk includes, in terms of identification and quantitative assessment, the legal risk, the risk of non-compliance with regulations and IT risk, whereas the strategic and reputational risk are excluded. The MEGA project works shared with the different Control Governance functions of the Unipol Group for defining the Operational risk management and control system continued. In particular, the structure of the joint database that will make it possible to give a common focus to the information of the control structures in order to achieve important synergies was completed. Work also continued on the activities relating to the Operational Risk Management System, in line with the regulatory requirements envisaged by the Traditional Standardised Approach. This model hinges on: the process for collecting operating loss events; the process for a prospective qualitative analysis of the level of corporate risk (Risk Self-Assessment). Collection of data on operational losses continued on a quarterly basis. Quantitative Information In order to determine the capital requirement, Unipol Banca adopted the basic indicator approach. The capital requirement at 31 December 2014 was 52.9m. 215

218 3 Notes to the Separate Financial Statements PART F INFORMATION ON EQUITY Section 1 Shareholders Equity A. Qualitative information Equity management relates to all the policies and choices required to identify the size of the equity, as well as the optimum combination among the various alternative capitalisation instruments, in order to ensure that the equity and the ratios of the Bank are consistent with the risk profile undertaken and comply with regulatory requirements. The Bank is subject to the capital adequacy rules established by the Bank of Italy. Activity to verify compliance with the regulatory requirements and consequently capital adequacy is on-going and is based on the development targets established. B. Quantitative information The following table indicates the analytical breakdown of equity. B.1 Equity: breakdown Items/amounts Amount 2014 Amount Share capital 897,384 1,004, Share premiums reserve Reserves (80,493) (76,322) - profit - (39,957) a) legal b) statutory - - c) treasury shares - - d) other - (40,629) - other (80,493) (36,365) 4. Equity instruments (Treasury shares) Valuation reserves: (11,036) 4,763 - Available-for-sale financial assets (502) 12,093 - Property, plant and equipment Intangible assets Foreign investment hedging Cash flow hedging (7,045) (5,578) - Exchange rate differences Non-current assets being disposed of Actuarial profits (losses) relating to defined-benefit pension (3,489) (1,752) - Portions of valuation reserves relating to investments carried at equity Profit (loss) for the period (90,967) (299,588) TOTAL 714, ,

219 Unipol Banca Financial Statements 2014 B.2 Valuation reserves of available-for-sale financial assets: breakdown Assets/amounts Total 2014 Total 2013 Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities 1,727 2,147 15,884 3, Equity securities UCITS units Loans Total 1,727 2,229 15,884 3,791 B.3 Valuation reserves of available-for-sale financial assets: annual changes Debt securities Equity securities 1. Opening balances 12,371 (278) Positive changes 3, Fair value increases 3, Reclassification of negative reserves in the income statement due to impairment following disposal Other changes Negative changes 16, Fair value decreases Impairment adjustments Reclassification in the income statement of positive reserves: following disposal 15, Other changes Closing balances (420) (82) - - UCITS units Loans The item 3.4 Other changes Debt securities comprises 98k contributed by Banca Sai SpA as a result of the merger. B.4 Valuation reserves related to defined benefit plans: annual changes During the financial year, the reserves in question, net of 323k contributed by Banca Sai following the merger by incorporation into Unipol Banca, decreased by 1,415k. 217

220 3 Notes to the Separate Financial Statements Availability and distribution of equity items In compliance with the requirements of Art par. 7-bis of the Civil Code, the individual items that make up the equity (excluding the profit for the year) at 31 December 2014 are indicated below, showing the potential for using and distributing such balances. Type/Description Amount Possibility of use Amount available Use in the previous three years To hedge losses Other uses Share Capital 897, Share premium reserve - A, B - 122,613 - Profit reserves: - legal reserve - B - 14, extraordinary reserve - A, B, C - 10,919 - Valuation reserves: - available-for-sale assets (502) actuarial profits (losses) (3,489) for hedging cash flows (7,045) Total ,274 - Non-distributable amount Distributable amount Key: A: for increase in share capital B: to hedge losses C: for distribution to shareholders Section 2 Own funds and regulatory ratios 2.1. Own funds A. Qualitative information Own Funds were determined based on the provisions contained in EU Regulation no. 575/2013 (CRR) related to the prudential requirements of credit institutions and investment companies and in Bank of Italy Circulars 285/2013 (Prudential supervisory provisions for banks) and 286/2013 (Instructions for the completion of prudential disclosures for banks and financial brokerage companies) as subsequently amended and supplemented. 218

221 Unipol Banca Financial Statements Common equity Tier 1 CET1 Common Equity Tier One (CET1) consists exclusively of ordinary shares and there are no other instruments that can be calculated in CET1. 2. Additional Tier 1 AT1 The bank has no equity instruments that can be calculated in Additional Tier One (AT1). 3. Tier 2 T2 The Tier Two Capital (T2) consists of subordinated instruments issued by Unipol Banca with characteristics indicated in the following table: Amount calculated in owr funds Orignal maturity date Date of the optional early redemption Position in the hieranchy of subordination Identification Nominal Currency Date of Fixed/variable Coupon rate Convertible/ Issuer code amount of issue issue coupons (annual gross) non convertible Unipol Banca SpA IT ,000,000 6,471,548 EUR 01/09/ /09/ /09/2010 Tasso Fisso 3.60% No lower T2 Unipol Banca SpA IT ,000,000 32,202,197 EUR 15/01/ /01/ /01/2012 Tasso variabile 3m Euribor (act/360) + spread No lower T2 0.20%) Unipol Banca SpA IT ,000,000 5,965,140 EUR 15/01/ /01/ /01/2012 Tasso Fisso 4.40% No lower T2 Unipol Banca SpA IT ,000,000 30,087,227 EUR 05/12/ /12/ /12/2012 Tasso variabile 3m Euribor (act/360) + spread No lower T2 0.30%) Unipol Banca SpA IT ,000,000 4,045,479 EUR 05/12/ /12/ /12/2012 Tasso Fisso 4.80% No lower T2 Unipol Banca SpA IT ,000,000 22,381,802 EUR 24/08/ /08/ /08/2014 Tasso Fisso 4.50% No lower T2 Unipol Banca SpA IT ,000,000 46,419,682 EUR 12/10/ /10/ /10/2014 Tasso Fisso 4.50% No lower T2 Unipol Banca SpA IT ,000, ,000,000 EUR 17/12/ /12/2019 no Tasso variabile media trim 3m Euribor (act/365) % No Upper T2 Starting from prudential reporting related to 31 March 2014 and until the Commission has not adopted a regulation on the basis of the regulations (EC) no. 1606/2002 that approves the International Financial Reporting Standard instead of IAS 39, Unipol Banca SpA will exercise the right contemplated by the Bank of Italy Circular no. 285 of 17 December 2013, on the treatment for the purposes of the regulatory reports of unrealised losses and profits related to exposures towards central administrations classified in the category Available-for sale financial assets. In particular, Unipol Banca SpA will not include in any element of own funds the abovementioned unrealised profits and losses. 219

222 3 Notes to the Separate Financial Statements B. Quantitative information Amount in k Totale 2014 Totale 2013 A. Common Equity Tier 1 (CET1) before the application of prudential filters 714, ,543 of which instruments of CET1 subject to transitional provisions - - B. CET 1 prudential filters (+/-) 7,213 (278) C. CET1 gross of elements to be deducted and of the effects of the transitional regime (A+/-B) 722, ,265 D. Elements to be deducted from CET1 6, E. Transitional regime - Impact on CET1 (+/-) 2,945 - F. Common Equity Tier 1 (CET1) (C D +/-E) 719, ,162 G. Additional Tier 1 capital (AT1) gross of elements to be deducted and of the effects of the transitional regime - - of which instruments of AT1 subject to transitional provisions - - H. Elements to be deducted from AT1 (1,649) - I. Transitional regime - Impact on AT1 (+/-) (1,649) - L. Total Additional Tier 1 capital (AT1) (G-H+/-I) - - M. Tier 2 capital (T2) gross of elements to be deducted and of the effects of transitional regime 447, ,279 of which instruments of T2 subject to transitional provisions - - N. Elements to be deducted from T2-103 O. Transitional regime - Impact on T2 (+/-) - - P. Total Tier 2 capital (Tier 2 - T2) (M-N+/-O) 447, ,176 Q. Total own funds (F + L + P) 1,166,587 1,164, Capital Adequacy A. Qualitative information Preparatory to the risk management process is the task of defining the Risk Appetite through which the risk objectives and any thresholds of tolerance are formalised. These indicators are regulated in a specific document called Risk Appetite Statement and include at least the following elements: Venture capital; Capital adequacy; Liquidity; Leverage; Non compliance; Reputational and strategic risks; Operational risk; The Parent Company, as part of the capital allocation process, defines the Risk Appetite at the Banking Group level and - if deemed necessary by virtue of a consistent pursuit and maintenance of the desired risk profile - even for one or more companies of the Banking Scope, including Unipol Banca. The process defining the Risk Appetite is related to the process defining the Business plan and the Budget. It is an iteration process aimed at the gradual alignment between the multi-year development of economic and financial variables and the objectives in terms of risk management. The Risk Appetite amount is determined in accordance with the current and future capital adequacy assessment process contained in the ICAAP (Internal Capital Adequacy Assessment Process) and prepared at the Banking Group level. As part of the ICAAP process, the different structures of the Bank, and in particular the Risk 220

223 Unipol Banca Financial Statements 2014 Management Department, collaborated with the Parent Company in the activities aimed at the current and future capital adequacy of the Banking Group, providing the appropriate and pertaining information. The Risk Appetite of the Bank is monitored on a quarterly basis and the outcome is reported to the Board of Directors. The significant risks, i.e. the risks whose consequences could affect the solvency of the Banking Group and/or of the Bank or constitute a serious obstacle to the achievement of business objectives, were classified according to criteria that take account of both the structure of the Group and the specificity of the businesses managed by the Bank. These risks are: credit risk counterparty risk market risk operational risk interest rate risk on the banking book liquidity risk concentration risk residual risk non-compliance risk strategic risk reputational risk leverage risk The identification of risks comes from a careful work carried on continuously by the Risk Management department of the Parent Company in coordination with the structures of the Banking Group companies including Unipol Banca, through: i) the continuous monitoring of company operations, its organisational structure, strategic guidelines and business model adopted; ii) a careful reading of the internal and external regulations, adequately enriched by a continuous collection of information carried out internally and externally by the department also via participation in trade and industrial associations, specialised conferences and studies and research. For the purposes of calculating the total internal capital, the Banking Group saw it fit to follow the instructions provided by Bank of Italy Circular 285/2013, adopting the methods easier to determine, allowed to intermediaries for their class of reference for ICAAP purposes and making choices in line with the regulatory practices, in such a way as to favour at best dialogue and transparency with the Supervisory Body. The analyses of capital adequacy are carried out with reference to year-end final situation and to the prospective situation in line with the budget forecasts. These analyses take place on three different levels, namely: Pillar I Pillar I + Pillar II Pillar I + Pillar II + Stress Test The total internal capital, also with reference to the Bank, is determined using a building-block approach, which consists in adding to the regulatory requirements related to the first pillar risks, the internal capital against the second pillar risks and the outcome of the stress tests (involving both categories of risks). 221

224 3 Notes to the Separate Financial Statements B. Quantitative information Unweighted amounts Weighted amounts/requirements Categories/amounts 31/12/ /12/ /12/ /12/2013 A. RISK ASSETS A.1 Credit and counterparty risk 12,501,551 12,577,252 8,035,602 8,090, Standardised method 12,501,421 12,577,252 8,035,472 8,090, Internal ratings method Basic Advanced Securitisations B. EQUITY REQUIREMENTS FOR REGULATORY PURPOSES B.1 Credit and counterparty risk - 642, ,223 B.2 Credit rating adjustment risk B.3 Settlement risk B.4 Market risks Standard method Internal models Concentration risk B.5 Operational risk - 52,919 48, Basic method - 52,919 48, Standardised method Advanced method B.6 Other calculation elements - - (174,134) B.7 Total prudential requirements - 695, ,402 C. RISK ASSETS AND REGULATORY RATIOS C.1 Risk-weighted assets - 8,698,715 6,530,030 C.2 Common equity tier 1 capital / Risk-weighted assets (CET1 capital ratio) % - C.3 Tier 1 Capital/Risk-weighted assets (Tier 1 capital ratio) % 9.59% C.4 Total own funds/risk-weighted assets (Total capital ratio) % 17.83% 222

225 Unipol Banca Financial Statements 2014 Part G Business Combinations Section 1 Business combinations carried out during the year During the year, there were no business combinations as regulated by IFRS 3. In the context of the reorganisation and rationalisation of the Banking Group, in November 2014 the merger by incorporation of Banca Sai SpA into Unipol Banca SpA became effective. The transaction was authorised by the Bank of Italy on 25 September 2014 and its tax and accounting effects started as from 1 January 2014 and with it, among other things, the Bank acquired control over the company Finitalia SpA operating in the sector of financing - of insurance premiums, in particular. This transaction, which was configured as a mere reorganisation within the Group (Unipol Banking Group with parent company Unipol Gruppo Finanziario SpA) was deemed to be lacking in all economic substance and consequently recorded with the continuity of amounts in line with the provisions of the documents OPI 1 and 2 issued by Assirevi. As the transfer values are higher than the historic amounts, the excess was reversed, reducing the merging company s equity, with the recording of a special reserve in its financial statements of 44,127,635. Section 2 Transactions after the end of the year No aggregations were carried out after the end of the year. Section 3 Retrospective adjustments There were no financial and economic changes on the amounts recognised in previous years, relating to business combinations. 223

226 3 Notes to the Separate Financial Statements Part H Related-Party Transactions The types of related parties, as defined by IAS 24, include: holding companies; subsidiaries; associated companies; directors, statutory auditors and senior management of the Bank; close family members of the above; the pension funds of Unipol Group employees. 1. Information on emoluments to directors, statutory auditors and executives with strategic responsibility Information on emoluments paid for various reasons during 2014 to directors, statutory auditors and executives with strategic responsibilities, such as general managers and deputy general managers, is given below. Payments Directors Statutory auditors Executive with strategic responsibilities Emoluments and contributions ,309 Bonuses, premiums and various incentives Non-monetary benefits Total ,489 - of which paid to owned companies 223-1, Information on related-party transactions Transactions with related parties were usually carried out at the same terms as those applied for transactions entered into with independent third parties and they are attributable to the ordinary operations of the Bank. The following table shows the assets, liabilities and guarantees existing at 31 December Related parties/items Trading assets Receivables from banks Receivables from customers Due to banks Due to customers Securities outstanding Guarantees Holding companies , Subsidiaries ,176-1, Associated companies ,390-16, Affiliated companies , ,202 41,565 - Directors and Management ,883 1,403 - Statutory auditors Employee pension fund , The main financial figures for the year in relation to transactions with related parties are shown below. 224

227 Unipol Banca Financial Statements 2014 Items/Related parties Holding companies Subsidiaries Associated companies Affiliated companies Interest income - 8, ,574 Interest expense ,173 Commission income 4,555 4, ,300 Commission expense 18, ,561 Dividends Other operating expenses/income Administrative expenses 1,782 5, ,870 There are no positions identified as non-performing loans and no provisions for doubtful debts related to subjects that at 31 December 2014 qualified as related parties were necessary. Information on the holding company Unipol Banca SpA is held by Unipol Gruppo Finanziario SpA, formerly Compagnia Assicuratrice Unipol SpA with registered office in Via Stalingrado 45, Bologna. Following the changes introduced by the Supervisory Regulations of the Bank of Italy, with a special note of 1 August 2014 the Supervisory Authority announced the change of the Register of Banking Groups through the cancellation of the Banking Group Unipol Banca SpA and the registration of the new Unipol Banking Group. Therefore, Unipol Banca is no longer the Parent Company of the previous Unipol Banca Banking Group and at the same time it is part of the Unipol Banking Group, with the Parent Company Unipol Gruppo Finanziario SpA. In accordance with Art bis of the Civil Code, the key figures of the last financial statements approved by Unipol Gruppo Finanziario SpA, the parent company that exercises the management and coordination of Unipol Banca SpA, are shown below. For a proper and complete understanding of the equity and financial situation of Unipol Gruppo Finanziario SpA at 31 December 2013, as well as the operating result achieved by the company in the year closed on said date, please see the financial statements which, together with the Independent Auditors Report, are available at the Company s registered office or on the website 225

228 3 Notes to the Separate Financial Statements Highlights of the Financial Statements of Unipol Gruppo Finanziario at 31 December 2013 Amounts in m Statement Of Financial Position ASSETS 31/12/ /12/2012 A) SUBSCRIBED CAPITAL UNPAID B) FIXED ASSETS I Intangible assets II Property, plant and equipment III Financial assets 5, ,128.8 TOTAL FIXED ASSETS 5, ,211.0 C) CURRENT ASSEX I Inventories - - II Receivables III Current financial assets IV Cash and cash equivalents TOTAL CURRENT ASSETS 1, ,638.9 D) ACCRUALS AND DEFERRALS TOTAL ASSETS 7, ,857.6 LIABILITIES A) SHAREHOLDERS EQUITY I Share Capital 3, ,365.3 II Share premium reserve 1, ,410.0 III Revaluation reserve IV Legal reserve V Statutory reserves - - VI Reserve for treasury shares in portfolio 23 - VII Other reserves VIII Profits (losses) carried forward - - IX Profits (loss) for the year TOTAL SHAREHOLDERS EQUITY 5, ,632.6 B) PROVISIONS FOR RISKS CHARGES C) POST EMPLOYEMENT BENEFITS D) PAYABLES 1, ,076.4 E) ACCRUALS AND DEFERRALS TOTAL LIABILITIES 7, ,

229 Unipol Banca Financial Statements 2014 Amounts in m Income Statement 31/12/ /12/2012 A) VALUE OF PRODUCTION B) COSTS OF PRODUCTION DIFFERENCE BETWEEN VALUE AND COSTS OF PRODUCTION (A-B) (369.8) (110.1) C) FINANCIAL INCOME STATEMENT D) VALUE ADJUSTMENTS TO FINANCIAL ASSETS (193.0) 29.9 E) EXTRAORDINARY INCOME AND EXPENSES PRE-TAX PROFIT (LOSS) PROFIT (LOSS) FOR THE YEAR Part I Payment Agreements Based on Own Equity Instruments At the financial statement reference date, there are no payment agreements based on own equity instruments. Part L Sector Information Sector information is provided at consolidated level. Disclosure of Payments to the Independent Auditors The following table shows the payments made (in k), in accordance with Art. 149duodecies of the CONSOB Issuer Regulation by the companies of the Unipol Banca Group to the independent auditors, or to entities belonging to the network of said independent auditors, for audits and for rendering other services, broken down by type or category. Statement of payments to the independent auditors pursuant to Art. 149-duodecies of the Issuer Regulation Type of services Service provider Recipient Payments Auditing PwC SpA Unipol Banca Spa 169 Certification services PwC SpA Unipol Banca Spa 7 Other services TLS Rete PwC Unipol Banca Spa 40 Total Unipol Banca SpA 216 Auditing PwC SpA Subsidiaries and special securitisation SPVs 106 Certification services PwC SpA Securitisation SPVs 3 Total subsidiaries 109 General total 325 The payments shown do not include expenses charged, VAT that is not recoverable and the CONSOB contribution. 227

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232 4 Board of Statutory Auditors Report BOARD OF STATUTORY AUDITORS REPORT TO THE MEETING OF SHAREHOLDERS OF UNIPOL BANCA S.P.A. ON THE FINANCIAL STATEMENTS AT 31 DECEMBER 2014 IN ACCORDANCE WITH ART. 153 OF LEGISLATIVE DECREE 58 OF 24 FEBRUARY 1998 AND OF ART OF THE CIVIL CODE Dear Shareholders, During the year ending 31 December 2014, we carried out the supervisory activity envisaged by law, in accordance with the code of conduct recommended by the National Council of Accounts and Accounting Experts. In particular, also in observance with the instructions issued in Consob communication of 6 April 2001, we hereby report as follows. I. Preliminary information on the legislation governing the formation of the financial statements of Unipol Banca S.p.A at 31 December A) The Board of Statutory Auditors certifies that Unipol Banca S.p.A s 2014 financial statements are made up of the Statement of Financial Position, the Income statement, the Statement of Comprehensive Income, the Statement of Changes in Shareholders Equity, the Statement of Cash Flows and the Notes to the Financial Statements. They are also accompanied by the Management Report. As envisaged by Legislative Decree 38 of 28 February 2005, the Unipol Banca S.p.A financial statements for 2014 are drawn up in compliance with the International Financial Reporting Standards (IAS/IFRS) issued by the International Accounting Standards Board (IASB), approved by the European Commission and published on the Official Journal of the European Union, in accordance with the approval and publication procedure envisaged by EC Regulation 1606 of 19 July The financial statements were also drawn up in accordance with the instructions issued by the Bank of Italy, exercising the rights and powers conferred by the Decree. In particular, the instructions referred to in Circular 262 of 22 December 2005 as amended, which governs the layout and contents of the financial statements of banks to be drawn up in accordance with international accounting principles, were applied. In drawing up the financial statements, reference was made to the IAS/IFRS international accounting standards approved and in force at 31 December Recent developments regarding international accounting standards applied in these Financial Statements at 31 December 2014 concern: IFRS 12 "Disclosure of Interests in Other Entities", which contains the requirements of accounting representation for IFRS 10 and 11; IAS 27 "Separate Financial Statements": amended; IAS 28 "Investments in Associates and Joint Ventures": amended 230

233 Unipol Banca Financial Statements 2014 Specific parts of IAS 32, 36 and 39 were also amended. Developments regarding IAS/IFRS international accounting standards, as approved by the European Commission, which become effective starting from the financial statements ended or in progress at 31 December 2014, were also implemented by the Bank of Italy with the third update to Circular 262 issued on 22 December The measurement criteria are adopted with a view to the business as a going concern, in application of the principles of accrual, relevance and significance of the accounting information and prevalence of the economic substance over the legal form. Your Directors inform you on the fact that the assumption that the business is a going concern is considered to be confirmed with reasonable certainty, since it is thought that the Bank, together with the reference Group of companies, have adequate resources to guarantee that the business can continue in the foreseeable future. The international accounting standards were applied without exception. B) Summary of the figures in the Financial Statements As usual, the financial highlights are expressed below for 2014, in k. Statement of Financial Position Financial year Financial year Assets 12,306,757 12,391,603 Liabilities 11,591,869 11,758,250 Shareholders' equity 805, ,941 Profit (loss) for the year (90,967) (299,588) Income statement Profit (loss) on current operations (112,993) (431,717) Income tax on current operations 22, ,129 Profit (loss) for the year (90,967) (299,588) II. The auditing activity carried out by the Board of Statutory Auditors. In accordance with the legislation and regulations referred to above, the Board of Statutory Auditors reports below the results of its activity. 1. We ensured that the law and the articles of association were observed. 2. We received a monthly report from the Directors on the business activity and the operations carried out by the Company that had a major economic and financial impact and we can reasonably state that the activities decided on and carried out complied with the 231

234 4 Board of Statutory Auditors Report law and with the by-laws and did not appear to be imprudent, risky, likely to give rise to a conflict of interest nor to be in conflict with the resolutions passed by the Shareholders' Meeting. 3. As far as we were able, we examined the company's organisational structure and ensured that it was properly administered and that the information requested by the company in its capacity as holding company was sufficient and timely. We collected information from departmental heads and held meetings with the Independent Auditors in order to exchange relevant figures and information, and we have no particular observations to make in that respect. 4. By looking at the information obtained from the heads of the various departments, examining company records and analysing the results of the work carried out by the Independent Auditors, the various company bodies and those responsible for internal audit, we ensured that the internal control system and the bookkeeping system were appropriate and that the bookkeeping system could be relied on to give an accurate representation of business operations. By examining the work carried out by the various departments (Internal Audit, Compliance and Risk Management) and by attending the meetings of the Internal Control Committee (with which joint meetings were held), we were able to check that it was done properly and evaluate the effectiveness of the entire Internal Control System. On the basis of the findings made while carrying out its supervisory duties, the Board of Statutory Auditors deems that the Internal Control System and R.A.F. are currently complete, adequate, operational and reliable. The Board of Statutory Auditors is also of the opinion that the Internal Audit, Compliance and Risk Management Departments were staffed in such a way and carried out their work in such a professional manner that the Internal Control System and R.A.F. were complete, adequate, operational and reliable. 5. As regards the Organisational and Management Model set up in accordance with Legislative Decree 231/2001 (hereinafter OMM), the Board noted at the outset that it assumed the role of Supervisory Body as from the second half of The Body, as part of its activities, followed the process of updating the OMM, which was then approved by the Board of Directors of the Bank at its meeting on 17 December The Body followed carefully (and continues to follow in the current year 2015) the preparation of the so-called Masterplan, which consists in mapping sensitive processes pursuant to Decree 231/2001, identifying problems, planning the operations for preparing controls that can report to the Body on the completion by the various Departments involved. 6. Unipol Banca S.p.A is administered and coordinated by Unipol Gruppo Finanziario S.p.A. (in accordance with Articles 2497 et seq. of the Civil Code). Your Directors provide in the Notes to the Financial Statements the information required by Art bis of the Civil Code on the essential figures in the latest financial statements approved by Unipol Gruppo Finanziario Spa. 232

235 Unipol Banca Financial Statements As indicated in the previous paragraph 6), Unipol Banca S.p.A is part of the "Unipol Gruppo Finanziario S.p.A." Group. We ascertained the existence of relations, both ordinary and recurrent, of a financial and commercial nature between your Company and the companies in the Unipol Gruppo Finanziario S.p.A. Group (including the Parent Company). The financial and commercial relations between Unipol Banca and the other companies in the Unipol Gruppo Finanziario S.p.A. Group come under the usual business of a group split into different companies and, as far as banking is concerned, relate to deposit or financing services rendered. Agreements were also entered into for the sale and/or management of banking and investment products and/or services and for the provision of auxiliary banking services in general. The financial effects of these relations were governed by the market terms applied to major customers. We also ascertained that loans and guarantees granted to Directors, Statutory Auditors and other representatives with management and auditing responsibilities in your Bank were approved in accordance with Art. 136 of Legislative Decree 385/93. All the transactions with related parties are set out in the Notes to the Financial Statements and are grouped according to type. The Board of Statutory Auditors ascertained that the aims of all the transactions with related parties mentioned above were rationalisation and profitability and we found nothing that could give rise to doubts about the accuracy and completeness of the information, conflicts of interest, safeguarding the equity and the protection of minority shareholders. 8. We found no evidence of atypical or unusual transactions with third parties or with related parties, as stated above. 9. We held meetings with representatives of the Independent Auditors and found no figures nor information in the financial statements for the year ended 31 December 2014 that required a mention in this report. The Report by the Independent Auditors PricewaterhouseCoopers SpA on the Financial Statements at 31 December 2014 contains no comments. 10. The Independent Auditors PricewaterhouseCoopers SpA were entrusted with the following additional tasks during the year: - National guarantee funds, for a remuneration of 3, Approval, for a remuneration of 4, During the financial year, a subject related with the Independent Auditors specifically, the Company TLS Associazione Professionale di Avvocati e commercialisti, was entrusted with a task. The task consisted in: a tax consultancy activity on the main phases of the procedure for assessing direct taxes (IRES and IRAP), indirect taxes (VAT, stamp duty etc.) and the obligations as withholding agent with specific reference to the characteristics of the banking activity. The remuneration paid amounted to 40,

236 4 Board of Statutory Auditors Report 12. During 2014, the Board of Statutory Auditors issued the following opinions: - on 25 February 2014, opinion on integration of fees to the Independent Auditors; - on 22 April 2014, opinion on appointment of the new Risk Management Department Manager. 13. The Board of Statutory Auditors received no complaints in accordance with Art of the Civil Code, nor were any complaints received from third parties. 14. We checked that the Financial Statements and the Management Report had been drawn up in accordance with current legislation and in a thorough manner. Under the provisions of Art. 14 of Legislative Decree 39 of 27 January 2010, the Independent Auditors are responsible for expressing an opinion on the consistency of the Management Report with the Financial Statements. The Report on the Financial Statements for the year ended 31 December 2014 issued by the Independent Auditors did not contain any comments on the above matter. 15. The Board of Statutory Auditors reports that the Notes to the Financial Statements and the Management Report include full information on the procedures to be followed when preparing the financial statements as required by the Joint Document issued by the Bank of Italy, Consob and Isvap on 3 March Obligation to prepare the Consolidated Financial Statements and the Auditors Report. Following the changes introduced by the Supervisory Regulations of the Bank of Italy, with a special note of 1 August 2014, the Supervisory Authority announced the change of the Register of Banking Groups through the cancellation of the Banking Group Unipol Banca S.p.A. and the registration of the new Unipol Banking Group. Therefore, Unipol Banca is no longer the Parent Company of the previous Unipol Banca Banking Group and at the same time it is part of the Unipol Banking Group, with the Parent Company Unipol Gruppo Finanziario S.p.A. Unipol Banca is still obliged to prepare the Consolidated Financial Statements pursuant to the provision of IFRS 10. The Board of Statutory Auditors states that it fulfilled such obligation with the approval of the Board of Directors during the meeting held on 18 March The Consolidated Financial Statements for the year ending 31 December 2014 were drawn up in compliance with the IAS/IFRS international accounting standards issued by the IASB and approved by the European Commission, with the relative interpretations issued by the IFRIC in accordance with that envisaged by EC Regulation 1606/2002, in force on the closing date. Recent developments regarding international accounting standards applied in these Consolidated Financial statements at 31 December 2014 concern: IFRS 10 "Consolidated Financial Statements", which replaced IAS 27 with reference to the part concerning the consolidated financial statements and the SIC12 interpretation; IFRS 11 "Joint Arrangements", which replaced IAS 31 The Consolidated Financial Statements consist of the Statement of Financial Position, the Income statement, the Statement of Comprehensive Income, the Statement of Changes in Shareholders Equity, the Statement of Cash Flows and the Notes to the Financial Statements, and are accompanied by the Directors Management Report. They were drawn up in accordance with the instructions issued by the Bank of Italy in Circular 262 of 234

237 Unipol Banca Financial Statements December 2005 and relative amendments and additions, which regulate the layout and content of banking financial statements to be drawn up in compliance with the international accounting standards. As regards the obligation for the auditors to issue the Report on the Consolidated Financial Statements, the Board of Statutory Auditors informs you that, in accordance with Art. 14 of Legislative Decree 39 of 27 January 2010 and Art. 41 of Legislative Decree 127 of 9 April 1991, the Report on the Consolidated Financial Statements must be drawn up by the Independent Auditors of the accounts, comprising the opinion on the consistency of the Management Report with the Consolidated Financial Statements. Following that stated, we ought to point out that the above tasks are the responsibility of the Independent Auditors: PricewaterhouseCoopers S.p.A. The Board of Statutory Auditors in monitoring the independent audit examined the Independent Auditors work schedule for the Consolidated Financial Statements and exchanged information with the company on the work performed, finding no anomalies worthy of mention in the present Report. The Report issued by PricewaterhouseCoopers S.p.A. on the Consolidated Financial Statements at 31 December 2014 contains no comments. The Board of Statutory Auditors carried out the work described above by holding 32 meetings and attending the 13 meetings of the Board of Directors. During the course of the supervisory work and on the basis of information obtained from the Independent Auditors, no omissions, mistakes, irregularities nor any significant facts came to light such as to require the supervisory entities to be notified nor to require a mention in this Report on the Financial Statements for the year ended 31 December The Board of Statutory Auditors invites the Shareholders' Meeting to approve the 2014 Financial Statements as submitted by the Board of Directors and expresses its agreement with the carrying forward of the loss for the year of 90,967,220. Bologna, 8 April 2015 For the Board of Statutory Auditors The Chairman Roberto Chiusoli (signed on the original) 235

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240 5 Independent Auditors Report 238

241 Unipol Banca Financial Statements

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243 Unipol Banca Group Consolidated Financial Statements 2014

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246 6 Consolidated report 2014 Banking Group Performance In June 2014, Unipol Banca completed the 100.0m share capital increase against payment, subject to its reduction to cover prior losses (of 339.5m), resolved by the Extraordinary Shareholders Meeting of 23 April In November 2014, the merger by incorporation of Banca Sai SpA into Unipol Banca SpA (transaction authorised by the Bank of Italy on 25 September 2014 and whose tax and accounting effects will be effective as from 1 January 2014), with which, among other things, Unipol Banca acquired control over the company Finitalia SpA operating in the sector of financing, of insurance premiums, in particular, was completed. As a result of these transactions, the share capital of Unipol Banca SpA amounted to 897,384,181. In November 2014, Unipol Banca sold the equity investment in Unicard SpA. The scope of consolidation is made up of Unipol Banca SpA, Finitalia SpA and Nettuno Fiduciaria Srl, together with the SPV for securitisations that, despite not being controlled by Unipol Banca SpA, are consolidated on the basis of that defined on the de facto control by IFRS 10 that replaced SIC 12 effective as from 1 January Scope of Consolidation at 31 December 2014 Companies Consolidated according to the line-by-line method investment % Company - Registerd office Business-Share capital (Amounts in ) direct indirect Group s share PARENT COMPANY Unipol Banca SpA Bank Bologna 897, SUBSIDIARIES Finitalia SpA Consumer Credit Milan 15,376,285 Nettuno Fiduciaria Srl Trust business Bologna 250,000 SPECIAL PURPOSE VEHICLE Grecale ABS Srl Loan Securitisation Bologna 20,000 Castoro RMBS Srl Loan Securitisation Milan 10,000 Atlante Finance Srl Loan Securitisation Milan 10,000 Grecale RMBS 2011 Srl Loan Securitisation Bologna 10,000 SME Grecale Srl Loan Securitisation Bologna 10,000 Company Consolidated using the equity method ASSOCIATES CampusCertosa Srl in liquidazione Property management Milan 747,900 SCS Azioninnova SpA Consultancy and training services Bologna 3,501,650 Promorest Srl Holding company Villanova di Castenaso (BO) 10,400,

247 Unipol Banca Financial Statements 2014 The consolidated economic and financial amounts basically coincide with those of Unipol Banca SpA, therefore if there are not events to report, please see the Management Report of Unipol Banca SpA. Consolidated Statement of Financial Position Direct customer deposits At 31 December 2014, consolidated direct customer deposits amounted to 10,270.6m. For a more detailed analysis of this item, please see the Management Report of Unipol Banca SpA. Indirect customer deposits In 2014, indirect customer deposits amounted to 49.1bn. For a more detailed analysis of this item, please see the Management Report of Unipol Banca SpA. Lending Lending to customers stood at 9,901.1m, whilst receivables from banks amounted to 347.1m. For a more detailed analysis of this item, please see the Management Report of Unipol Banca SpA. Non-performing loans At consolidated level, at 31 December 2014, net non-performing loans amounted to 2,755.8m, including net doubtful loans of 1,589.2m. The hedging level of non-performing loans was 29.8% (37.6% the hedging of doubtful loans) and represented 27.8% of receivables from customers. For more details on exposures referable to Unipol Banca SpA, please see the Management Report of Unipol Banca SpA. Concentration risk Please see the Management Report of Unipol Banca SpA. Contingent liabilities Please see the Management Report of Unipol Banca SpA. Financial assets 16 The overall balance of financial assets at 31 December 2014 was 1,456.8m. For a more detailed analysis of this item, please see the Management Report of Unipol Banca SpA They are held-fortrading financial assets, available-for-sale financial assets and held-to-maturity investments. Treasury shares None of the companies within the scope of consolidation held treasury shares or shares of the Parent company at 31 December 2014, nor did they carry out any purchases or sales of such shares during the year. 245

248 6 Consolidated report 2014 Shareholders equity The Group s consolidated shareholders equity at 31 December 2014 was 721.3m. Since the percentage held in the subsidiaries was 100%, this amount was not attributable to third parties. The table below compares the shareholders equity of Unipol Banca SpA and the consolidated shareholders equity: Comparison between the shareholders equity of the parent company and the consolidated shareholders equity at 31 December 2014 Shareholders equity Of which Profit (loss) Financial Statements Unipol Banca SpA 714,888 (90,967) Consolidation of the subsidiaries 5,872 6,841 Consolidation of investees using the equity method (961) (571) Dividends collected in the year - (2,200) Elimination of intra-group profits/losses 1,491 1,491 Consolidated financial statements 721,290 (85,406) For a more detailed analysis of this item, please see the Management Report of Unipol Banca SpA. Consolidated income statement The income statement showed a net interest income of 255.4m, while net commission income amounted to 104.7m. Financial operations stood at 76.2m, as a result, NET INTEREST AND OTHER BANKING INCOME of 2014 amounted to 436.4m. Impairment adjustments to loans of 203.3m were carried out, as well as adjustments to available-for-sale financial assets and to other financial assets totalling 51.1m. Consolidated operating costs amounted to 284.3m. Profit (loss) on current operations, gross of tax, came to a negative 103.4m; after booking income taxes of 18.1m, the CONSOLIDATED LOSS amounted to 85.4m. Related-party transactions Financial and commercial transactions between the companies of this consolidation and the other companies of the Unipol Group fall under usual group operations and regard, as far as banking activity is concerned, correspondence for deposit or financing services rendered. Agreements were also entered into for the distribution and/or management of banking and financial products and/or services and, more generally, the performance of auxiliary banking services. The economic effects linked with the above transactions are usually carried out on the basis of market conditions applied to primary customers. 246

249 Unipol Banca Financial Statements 2014 Significant subsequent events In January 2015, the general inspection by the Bank of Italy at Unipol Banca SpA was completed: the results will be announced by the Supervisory Body in the coming months. On 11 February 2015, an amendment to the Indemnity Agreement was defined with the Parent Company Unipol Gruppo Finanziario SpA that envisages, effective as from the end of the 2014 financial year, the widening of the area of indemnified non-performing loans to other positions totalling 200.9m (on the basis of the financial statements at 31 December 2014). After this amendment, the overall area of the loans included in the agreement amounted to 907.7m. Business outlook The actions undertaken both in commercial and credit terms suggest that it is possible to recover, albeit in a context still in crisis, the economic equilibrium in the medium term. 247

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252 7 Consolidated Financial Statements Unipol Banca Group Consolidated Statement of Financial Position Asset items 31/12/ /12/2013 Changes 10. Cash and cash equivalents 98, ,649 (9,752) 20. Held-for-trading financial assets 48 99,473 (99,425) 40. Available-for-sale financial assets 638, ,573 (164,769) 50. Held-to-maturity investments 817, ,381 (410) 60. Receivables from banks 347, ,412 (36,353) 70. Receivables from customers 9,901,066 9,615, , Hedging derivatives 7,926 9,961 (2,035) 100. Equity investments 7,458 8,028 (570) 120. Property, plant and equipment 16,969 18,109 (1,140) 130. Intangible assets 625 2,060 (1,435) of which: - goodwill (735) 140. Tax assets 276, ,998 (13,418) a) current 12,627 19,748 (7,121) b) deferred 263, ,250 (6,297) pursuant to Law 214/ , , Non-current assets and disposal groups held for sale Other assets 241, ,092 7,184 Total assets 12,354,679 12,391,688 (37,009) 250

253 Unipol Banca Financial Statements 2014 Unipol Banca Group Consolidated Statement of Financial Position Liability items 31/12/ /12/2013 Changes 10. Due to banks 806,104 1,257,574 (451,470) 20. Due to customers 6,926,840 7,300,002 (373,162) 30. Securities outstanding 3,343,716 2,766, , Held-for-trading financial liabilities - 3 (3) 60. Hedging derivatives 84,473 50,046 34, Tax liabilities 37,361 38,993 (1,632) a) current 9,730 7,868 1,862 b) deferred 27,631 31,125 (3,494) 90. Liabilities associated with assets being disposed of Other liabilities 400, ,203 85, Post-employment benefits 18,041 15,647 2, Provisions for risks and charges: 16,442 14,034 2,408 a) pension funds and similar obligations b) other provisions 16,442 14,034 2, Valuation reserves (11,276) 4,751 (16,027) 170. Reserves (79,412) (77,038) (2,374) 190. Share capital 897,384 1,004,500 (107,116) 210. Non-controlling interests (+/-) 64 1,429 (1,365) 220. Profit (loss) for the year (+/-) (85,406) (299,606) 214,200 Total Liabilities and Shareholders Equity 12,354,679 12,391,688 (37,009) 251

254 7 Consolidated Financial Statements Unipol Banca Group Consolidated Income Statement Items 31/12/ /12/2013 Changes 10. Interest income and similar income 429, ,161 16, Interest expense and similar expense (173,884) (206,720) 32, Net interest income 255, ,441 48, Commission income 149, ,489 21, Commission expense (45,133) (29,001) (16,132) 60. Net commission income 104,725 99,488 5, Dividends and similar income Net result from trading 11,355 (6,030) 17, Net result from hedging 229 (122) Profits (losses) on disposal or repurchase of: 64,548 11,512 53,036 a) receivables 10 (5,945) 5,955 b) available-for-sale financial assets 64,943 16,041 48,902 c) held-to-maturity investments d) financial liabilities (405) 1,416 (1,821) 110. Net result on financial assets and liabilities designated at fair value Net interest and other banking income 436, , , Net impairment adjustments to: (254,371) (357,061) 102,690 a) receivables (203,299) (305,993) 102,694 b) available-for-sale financial assets (47,981) (49,585) 1,604 c) held-to-maturity investments d) other financial assets (3,091) (1,483) (1,608) 140. Net result from financial activities 181,995 (45,696) 227, Net insurance premiums Other net insurance income (expense) Net result from financial and insurance activities 181,995 (45,696) 227, Administrative expenses: (303,028) (278,585) (24,443) a) personnel expenses (162,209) (148,521) (13,688) b) other administrative expenses (140,819) (130,064) (10,755) 190. Net provisions for risks and charges (3,739) (4,476) Net adjustments/write-backs to property, plant and equipment (7,086) (8,973) 1, Net adjustments/write-backs to intangible assets (795) (1,165) Other operating expenses/income 30,308 31,730 (1,422) 230. Operating expenses (284,340) (261,469) (22,871) 240. Profits (losses) on equity investments (570) (29) (541) 250. Valuation differences on property, plant and equipment and intangible assets designated at fair value Goodwill impairment (513) (124,726) 124, Profits (losses) on disposal of investments Profit (loss) on current operations before tax (103,428) (431,920) 328, Income tax on current operations 18, ,216 (114,127) 300. Profit (loss) on current operations after tax (85,339) (299,704) 214, Profit (loss) after tax on disposal groups held for sale (279) 320. Profit (loss) for the year (85,339) (299,425) 214, Net profit (loss) attributable to non-controlling interests (67) (181) Profit (loss) for the period attributable to the Parent Company (+/-) (85,406) (299,606) 214,

255 Unipol Banca Financial Statements 2014 Unipol Banca Group Statement of Comprehensive Income Items 31/12/ /12/2013 Changes 10. Profit (loss) for the year (85,339) (299,425) 214,086 Other income components net of tax without transfer to the income statement 20. Property, plant and equipment Intangible assets Defined benefit plans (1,422) (274) (1,148) 50. Non-current assets being disposed of Portion of valuation reserves for investments valued at equity Other income components net of tax with transfer to the income statement 70. Foreign investment hedging Exchange rate differences Cash flow hedging (1,466) 8,056 (9,522) 100. Available-for-sale financial assets (12,497) 19,406 (31,903) 110. Non-current assets being disposed of Portion of valuation reserves for investments valued at equity Total other income components, net of taxes (15,385) 27,188 (42,573) 140. Comprehensive income (Item ) (100,724) (272,237) 171, Consolidated comprehensive attributable to non-controlling interests (76) (188) Consolidated comprehensive income attributable to the Parent Company (100,800) (272,425) 171,

256 7 Consolidated Financial Statements Statement of Changes in Consolidated Shareholders Equity for the Year Ended 31 December 2014 Allocation of prior year s result Share capital: Balances at 31/12/2013 Changes in opening balances Balances at 1/1/2014 Reserves Dividends and other allocations a) ordinary shares 1,006,128-1,006, b) other shares Share premium reserve Reserves: a) profit (77,409) 36,365 (41,044) (299,425) - b) other - (36,365) (36,365) - - Valuation reserves: 4,742-4, Equity instruments Treasury shares Net profit (loss) for the period (299,425) - (299,425) 299,425 - Group shareholders' equity 632, , Non-controlling interests 1,429-1, Statement of Changes in Consolidated Shareholders Equity for the Year Ended 31 December 2013 Allocation of prior year s result Share capital: Balances at 31/12/2012 Changes in opening balances Balances at 1/1/2013 Reserves Dividends and other allocations a) ordinary shares 1,006,128-1,006, b) other shares Share premium reserve Reserves: a) profit (83,683) - (83,683) 6,277 - b) other Valuation reserves: (22,446) - (22,446) - - Equity instruments Treasury shares Net profit (loss) for the period 6,277-6,277 (6,277) - Group shareholders' equity 905, , Non-controlling interests 1,241-1,

257 Unipol Banca Financial Statements 2014 Changes during the period Changes in reserves Issue of new shares Purchase of treasury shares Extraordinary distribution of dividends Changes in shareholdings Changes in equity instruments Derivatives on treasury shares Stock option Changes in shareholdings 2014 Comprehensive income Group shareholders equity at 31/12/2014 Non-controlling interests at 31/12/2014 (339,544) 232, (1,568) - 897, , ,081 (63) (44,128) (80,493) - (633) (15,385) (11,276) (85,339) (85,406) 67 (42,945) 232, (100,800) 721,290 - (1) (1,440) Changes during the period Changes in reserves Issue of new shares Purchase of treasury shares Extraordinary distribution of dividends Changes in shareholdings Changes in equity instruments Derivatives on treasury shares Stock option Changes in shareholdings 2013 Comprehensive income Group shareholders equity at 31/12/2013 Non-controlling interests at 31/12/ ,004,500 1, (3) (77,038) (371) ,188 4,751 (9) (299,425) (299,606) 181 (3) (272,425) 632, ,

258 7 Consolidated Financial Statements Statement of Cash Flows Amount 2014 Amount 2013 A. OPERATING ACTIVITY 1. Cash generated from operations 145,771 15,924 - net profit (loss) for the year (+/-) (85,406) (299,606) - capital gains/losses on financial held-for-trading assets/liabilities and on financial assets/liabilities designated at fair value (-/+) (11,355) 6,030 - capital gains/losses on hedging activities (-/+) (229) net impairment adjustments (+/-) 219, ,795 - net adjustments/write-backs to property, plant and equipment and intangible assets (+/-) 7,881 10,138 - net provisions for risks and charges and other costs/revenues (+/-) 3,739 4,476 - uncollected net insurance premiums (-) other uncollected net insurance income (expense) (-/+) unsettled taxes (+) 11,786 (116,914) - net adjustment/write-backs to disposal groups held for sale, net of tax effect (-/+) other adjustments (+/-) (144) (1,117) 2. Cash generated (absorbed) by financial assets (197,347) 191,318 - held-for-trading financial assets 110,780 (104,804) - financial assets designated at fair value available-for-sale financial assets 152,173 21,659 - receivables from banks: on demand 54,093 - receivables from banks: other receivables 36,353 (3,795) - receivables from customers (491,504) 188,247 - other assets (5,149) 35, Cash generated (absorbed) by financial liabilities (141,827) (125,188) - due to banks: on demand due to banks: other payables (451,470) (251,454) - due to customers (373,162) 28,428 - securities outstanding 610, ,571 - held-for-trading financial liabilities (3) 3 - financial liabilities designated at fair value other liabilities 71,876 (16,736) Net cash generated (absorbed) by operating activity (193,403) 82,054 B. INVESTMENT ACTIVITY 1. Cash generated by 2,386 1,685 - sales of equity investments dividends collected on equity investments sales of held-to-maturity investments sales of property, plant and equipment sales of intangible assets sale of subsidiaries and business branches 1,877 1, Cash absorbed by (51,164) (105,519) - purchases of equity investments purchases of financial assets held to maturity - (98,849) - purchases of property, plant and equipment (5,794) (6,072) - purchases of intangible assets (561) (496) - purchase of subsidiaries and business branches (44,809) - Net cash generated (absorbed) by investment activity (48,778) (103,834) C. FINANCING ACTIVITY - issues/purchases of treasury shares 232, issues/purchases of equity instruments distribution of dividends and other purposes - - Net cash generated (absorbed) by financing activity 232,429 - NET CASH GENERATED (ABSORBED) DURING THE YEAR (9,752) (21,780) 256

259 Unipol Banca Financial Statements 2014 Reconciliation Amount 2014 Amount 2013 Financial statement items Cash and cash equivalents at the beginning of the year 108, ,429 Net total cash generated (absorbed) during the year (9,752) (21,780) Cash and cash equivalents: effect of change in exchange rates - - Cash and cash equivalents at the end of the year 98, ,

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262 8 Notes to the Consolidated Financial Statements Part A Accounting policies A.1 General Section 1 Declaration of compliance with international accounting standards In compliance with Legislative Decree 38 of 28 February 2005, the 2014 consolidated financial statements of the Unipol Banca Group were drafted in accordance with the International Financial Reporting Standards (IAS/ IFRS) issued by the International Accounting Standards Board (IASB), endorsed by the European Commission and published in the Official Journal of the European Union, according to the approval and publication procedure set out in Community Regulation 1606 of 19 July The financial statements were drawn up in accordance with the instructions issued by the Bank of Italy, exercising the rights and powers conferred by the Decree. In particular, the instructions referred to in Circular 262 of 22 December 2005 as amended, which governs the layout and contents of the financial statements of banks to be drawn up in accordance with international accounting principles, were applied. In drafting the consolidated financial statements, reference has been made to the IAS/IFRS international accounting standards, endorsed and effective at 31 December Recent developments regarding international accounting standards are shown in Section 5 Other aspects below. In exercising its management and coordination activity, the Parent Company requires the Group companies to apply, where appropriate, the accounting rules used within the Group. Section 2 General principles The consolidated financial statements are made up of the Statement of Financial Position, the Income Statement, the Statement of Comprehensive Income, the Statement of Changes in Shareholders Equity, the Statement of Cash Flows and the Notes to the Financial Statements. They are also accompanied by the Management Report. The consolidated financial statements have been drawn up clearly and represent the assets and liabilities, financial situation and economic result for the year in a truthful and correct manner. The measurement criteria are adopted with a view to the business as a going concern, in application of the principles of accruals, relevance and significance of the accounting information and prevalence of the economic substance over the legal form. The assumption that the business is a going concern is considered to be confirmed with reasonable certainty, since it is thought that the Group has adequate resources to guarantee that the business can continue in the foreseeable future. See also Section 5 Other aspects below. The international accounting standards were applied without exception. The currency of account is the Euro. The amounts in the tables to the financial statements and in the notes to the financial statements are in k, unless otherwise stated. The financial statements are shown in comparative format, stating the values for the previous year. The Notes to the Financial Statements and the Board of Directors Management Report supply the information required under applicable legislation, supplemented, where deemed appropriate, by other information that is not compulsory but intended to provide a better picture of the Group s overall situation. Section 3 Scope and methods of consolidation The scope of consolidation includes the Parent Company Unipol Banca SpA, the subsidiaries and the associated companies. Subsidiaries are considered to be companies in which the Parent Company holds, either directly or indirectly, the majority of the voting rights at the ordinary shareholders meeting, or in which it holds few voting rights but still exercises control by virtue of contractual agreements or statutory restrictions that allow appointment of the majority of the directors of the subsidiary or determination of the company s financial and operational policies. As a result of this definition, in compliance with that defined on the de facto control by IFRS 10 that replaced SIC 260

263 Unipol Banca Financial Statements effective as from 1 January 2014, securitisation vehicle companies, so-called Special Purpose Entities are also included in the scope of consolidation, although Unipol Banca has no participating interest in their share capital. Subsidiaries are consolidated according to the line-by-line method. Associated Companies are considered to be companies in which the Parent Company exercises, either directly or indirectly, considerable influence and that are not constituted as subsidiaries or joint ventures. Considerable influence is presumed when the partner holds at least 20% of the voting rights at the Ordinary Shareholders Meeting. Associated Companies are consolidated using the equity method. Joint ventures are considered to be companies in which the voting rights and control of the assets are distributed equally between a number of partners. There are no joint ventures within the scope of consolidation. Line-by-line consolidation The line-by-line method of consolidation involves recording in the consolidated financial statements all the items in the financial statements of the companies subject to consolidation, unless otherwise provided for by consolidation of the investments and elimination of the reciprocal transactions. The value of the investments held in the consolidated companies is offset by the group s share of equity in the participating interests and any non-controlling interest share is classified in the appropriate liability item. Offsetting is carried out according to the values at the date of acquisition or, if later, the date of consolidation. Differences in value arising from offsetting that cannot be fully or partially attributed to specific asset or liability items are entered, if positive such as goodwill, under intangible assets. Negative differences are generally charged to the income statement. As regards reciprocal transactions, credit and debit transactions between the consolidated companies, income and expense relating to transactions carried out between these companies and profits and losses resulting from infra-group transactions and therefore not carried out with third parties, are eliminated. Consolidation using the equity method The equity method represents a concise method of consolidation that incorporates the changes in the relevant portion of the equity into the value of the investment. The investment is, in fact, entered at cost, inclusive of any goodwill value paid on acquisition, and is adjusted from period to period to reflect the changes in the equity of the participating interest, including the pertinent share of non-distributed profit. The table below shows the subsidiaries included in the scope of consolidation according to the various classifications. 261

264 8 Notes to the Consolidated Financial Statements 1. Equity investments in fully-owned subsidiaries and joint ventures Investment relationship Name Registered office Type of relationship (1) Investor Investment % Availability of votes % (2) A Companies Parent company Unipol Banca SpA Bologna A.1 Consolidated on a line-by-line basis 1. Finitalia SpA Milan 1 Unipol Banca SpA % % 2. Nettuno Fiduciaria Srl Bologna 1 Unipol Banca SpA % % 3. Grecale ABS Srl Bologna Castoro RMBS Srl Milan Atlante Finance Srl Milan Grecale RMBS 2011 Srl Bologna Sme Grecale Srl Bologna A.2 Consolidated on a proportional basis Key (1) Type of relationship: 1 = majority of voting rights at Ordinary Shareholders Meetings 2 = dominant influence at Ordinary Shareholders Meetings 3 = agreements with other shareholders 4 = other forms of control 5 = single management pursuant to Art. 26 (1), of Leg. Decree 87/92 6 = single management pursuant to Art. 26 (2), of Leg. Decree 87/92 7 = joint control (2) Availability of votes at the ordinary shareholders meeting, distinguishing between actual and potential 2. Other information In the current financial year, note the following changes in the scope of consolidation: in November 2014, Unipol Banca sold the equity investment held in Unicard SpA to third parties; as part of the more extended merger between Unipol Banca SpA and Banca Sai SpA, Unipol Banca acquired the equity investment in Finitalia SpA, previously wholly owned by Banca Sai SpA. For consolidation purposes, the financial statements or the interim reports of the Parent Company and of the companies consolidated on a line-by-line basis were used. Almost all of the subsidiaries, excluding Nettuno Fiduciaria Srl, have to draw up their own financial statements in conformity with the international accounting standards (IAS/IFRS) under the provisions of Legislative Decree 38/2005. In cases where this obligation does not occur, the financial statements/interim reports of the subsidiaries have been duly reclassified and adjusted so that they conform to the IAS/IFRS, where necessary. The financial statements of the companies included in the consolidation are all at 31 December 2014 and are all drawn up in Euros; therefore it was not necessary to proceed with the conversion of values expressed in currency other than the Euro. 262

265 Unipol Banca Financial Statements 2014 Section 4 Events subsequent to the accounting reference date In January 2015, the general inspection by the Bank of Italy at Unipol Banca SpA was completed: the results will be announced by the Supervisory Body in the coming months. On 11 February 2015, an amendment to the Indemnity Agreement was defined with the Parent Company Unipol Gruppo Finanziario SpA that envisages, effective as from the end of the 2014 financial year, the widening of the area of indemnified non-performing loans to other positions totalling 200.9m (on the basis of the financial statements at 31 December 2014). After this amendment, the overall area of the loans included in the agreement amounted to 907.7m. No other significant events likely to affect the results of the financial statements or require significant changes to the scope of consolidation occurred after the close of the year. Section 5 Other aspects Information on expectation of the business to be a going concern The joint coordination board between the Bank of Italy, CONSOB and ISVAP on application of the IAS/IFRS according to document 2 of 6 February 2009 Information to be provided in financial reports on expectation of the business to be a going concern, financial risks, impairment tests on assets and uncertainty as to the use of estimates, asked the Directors to make particularly accurate assessments of the existence of the assumption of expected continuation of the business as a going concern. The recommendation was also referred to in document 4 of 3 March 2010, issued jointly by the Bank of Italy, CONSOB and ISVAP. Paragraphs 25 and 26 of IAS 1 in particular establish, in brief, that the senior executives must assess the company s ability to continue to operate as a functioning entity, taking into account all the information available on at least the twelve months following the end of the year. The level of analysis depends on the specific circumstances of each individual case. Profits from previous years and easy access to financial resources confirm the presumption that the company will remain in business, even if no detailed analysis is carried out. To this end, having examined the risks and uncertainties connected with the current macroeconomic context, it is considered reasonable to expect that the Group will continue operating in the foreseeable future and, as a result, the consolidated financial statements for 2014 were drawn up on the assumption that the business is a going concern. The uncertainties connected with problems relating to risks involving liquidity, credit and income were not considered significant and, at any rate, such as not to generate doubts as to business continuing, considering also the insurance Group s solid equity position and facilitated access to financial resources. Risks and uncertainties connected with the use of estimates The application of certain accounting standards necessarily involves significant assessment elements based on estimates and assumptions that are uncertain at the time of their formulation. For the 2014 financial statements, the assumptions made are considered to be appropriate and, as a result, the financial statements were drawn up with clarity and give a true and fair view of the financial position, the results of the operations and of the cash flows. In order to make reliable estimates and assumptions, reference was made to the historical experience as well as to other factors considered appropriate in the present case, based on all available information. However, it cannot be ruled out that changes in these estimates and assumptions may have significant effects on the financial and economic situation, as well as on potential assets and liabilities in the financial statements for reporting purposes, should the assessment elements be different than those expressed at the time. The estimates mainly concern: evaluation of receivables; assets and liabilities recognised at fair value (in particular, for level 2 and 3 financial instruments); the analyses aimed at identifying impairment losses on intangible assets (e.g.: goodwill) recorded in the financial statements (impairment test); the quantification of provisions for risks and charges and provisions for employee benefits. 263

266 8 Notes to the Consolidated Financial Statements For information on the methods used in determining the items in question and the main risk factors, reference is made to paragraphs containing the description of the measurement criteria. Accounting standards and interpretations effective as from 1 January 2014 IFRS 10, 11, 12, amendments to IAS 27 and IAS 28 On 12 May 2011, the IASB published the standards: IFRS 10 Consolidated Financial Statements, which replaced IAS 27 with reference to the part concerning the consolidated financial statements and the SIC12 interpretation; IFRS 11 Joint Arrangements, which replaced IAS 31; IFRS 12 Disclosure of Interests in Other Entities which contains the requirements of accounting representation for IFRS 10 and 11; IAS 27 Separate Financial Statements ; IAS 28 Investments in Associates and Joint Ventures. According to IFRS 10, an investor controls an investee if and only if the investor has all of the following elements: the decision-making power to direct the relevant activities (which affect the economic returns); exposure, or rights, to variable returns from its involvement with the investee; the ability to use its power over the investee to affect the amount of the investor s returns. IFRS 11 defined a joint arrangement as an arrangement of which two or more parties have joint control. It distinguishes a joint operation from a joint venture: a joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. In accounts, assets and liabilities relating to the arrangement are reflected in the financial statements using the standard of reference; a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. These parties are defined joint ventures. In accounts, the joint venture is consolidated using the equity method. The objective of IFRS 12 is to require the disclosure of information that enables users of financial statements to evaluate: the nature of, and risks associated with, its interests in other entities; the effects of those interests on its financial position, financial performance and cash flows. IAS 27 Separate Financial Statements has the objective of setting standards to be applied in accounting for investments in subsidiaries, joint ventures and associates in separate financial statements. The new IAS 28 Investments in Associates and Joint Ventures prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. IFRS 10, 11, 12, IAS 27 and IAS 28 were approved with (EU) Regulation no of 11 December 2012 and became effective as from 1 January IAS 32 Financial instruments - presentation The 1256/2012 Regulation of the European Commission of 13 December 2012, published in the Official Journal of the European Union No. L 360 of 29 December 2012 amended IAS 32, with reference to the requirements for offsetting financial assets and liabilities. Amendments will be effective as from 1 January

267 Unipol Banca Financial Statements 2014 Amendments to IFRS 10, 12 and to IAS 27 - Investment entities On 31 October 2012, IASB published the document Investment entities that amended IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements ; this document amended IFRS 10 in order to prescribe investment entities to assess their equity investment in a subsidiary at fair value recorded in the income statement rather than consolidate it, in order to better represent their business model. Following this logic, IFRS 12 was amended to impose, in case of application of the exception to the requirement to consolidate, the presentation of a specific information concerning the assessments and the significant assumptions adopted in determining whether the company fell under the case of investment entity. Consequently, IAS 27 was amended in order to provide that the company, as investment entity, is exempt from the consolidation, presents its separate financial statements as the only financial statements and that, if it has to prepare the consolidated financial statements, it is obliged to enter its investment in a subsidiary measured at fair value recorded in the income statement in the consolidated financial statements in the same way as the separate financial statements. The above-mentioned amendments were approved with (EU) Regulation no of 20 November 2013 effective as from 1 January Amendments to IFRS 10, 11 and 12 - Transition Guidance The 313/2013 Regulation of the European Commission published on the Official Journal of the European Union, L 95 of 5 April 2013, adopted the amendments introduced by the document published by the IASB on 28 June 2012, which allows to limit to the financial year immediately before that of the financial statements the comparative information to be provided in case of consolidation, following the first application of IFRS 10, of equity investments previously not consolidated (this facility is also extended to the transitional provisions of IFRS 11 and 12). Amendments are effective as from 1 January Amendment to IAS 36 - Recoverable Amount Disclosures for Non-Financial Assets On 29 May 2013, IASB published some amendments to IAS 36 Impairment of assets, which are intended to clarify that the recoverable amount disclosures for assets, when this value is based on the fair value net of the disposal costs, concern only the assets whose amount has been reduced. These amendments were approved with (EU) Regulation no of 19 December 2013 effective as from 1 January Amendment to IAS 39 - Novation of Derivatives and Continuation of Hedge Accounting On 27 June 2013, IASB published some amendments to the international accounting standard IAS 39; these amendments aimed at regulating situations in which a derivative designated as a hedging instrument is subject to novation by a counterparty to a central counterparty as a result of legislation or regulations. Hedge accounting may well continue regardless of the novation, which would not be allowed without the amendment. The amendments were approved with (EU) Regulation no of 19 December 2013 effective as from 1 January Developments regarding IAS/IFRS international accounting standards, as approved by the European Commission, which become effective starting from the financial statements ended or in progress at 31 December 2014, were also implemented by the Bank of Italy with the third update to Circular no. 262 issued on 22 December The application of the new accounting standards described did not have significant impacts on the result and financial position of the Group. 265

268 8 Notes to the Consolidated Financial Statements Forthcoming accounting standards and interpretations The main documents published by the International Accounting Standard Board, which may be relevant for the Group but not yet applicable in that not yet endorsed by EFRAG or not yet applicable, are also described below. IFRIC 21 Levies IFRIC 21 - issued to identify the method and timing of recognition and accounting of the levies (other than income taxes) imposed by a government agency for which the entity does not receive specific goods or services - was published on 20 May The interpretation deals both with the liability for taxes that fall within the scope of IAS 37 and with those for the levies whose timing and amount are certain. The interpretation published on the Official Gazette L 175 of 14 June 2014 applies starting from the financial years as from 17 June IFRS 9 Financial Instruments At the end of July, IASB issued, definitively, IFRS 9 Financial Instruments, standard replacing the previous versions published in 2009 and in The new standard concludes a process by stages of reform of the current IAS 39, structured in the revision of the rules of classification and measurement, impairment and hedge accounting (the regulation on macro hedge is still being defined). More specifically, with regard to financial assets, the new standard adopts a single approach based on the methods of management of financial instruments and on the characteristics of the contractual cash flows of the assets in order to establish the measurement criteria; the new model of impairment, based on a concept of forward-looking expected loss, aims at ensuring a more immediate recognition of losses compared to the current IAS 39 model of incurred loss, whereby the regulation concerning the hedging relations aims at ensuring greater alignment between the accounting representation of hedges and the risk management policies. Currently, the standard is expected to be effective as from 1 January Amendments to IAS 16 and IAS 38 - Clarification of acceptable methods of amortisation/depreciation and writedown The amendments made to the two accounting principles intend to clarify that amortisation/depreciation calculating methods based on revenues cannot be used, because revenues reflect the methods for generating future economic benefits that derive from the activity of the company to which the assets subject to amortisation/depreciation belong and do not reflect the methods of consumption of expected future economic benefits of the assets. IAS 38 was amended by introducing a presumption of fact according to which the methods for determining the amortisation of intangible assets, based on revenues, are inappropriate for the same reasons outlined with reference to IAS 16. Amendments to IAS 16 and IAS 38 will be effective as from 1 January Amendments to IFRS 11 - Accounting for acquisitions of interests in joint operations The document provides clarification on the accounting for acquisitions of interests in a joint operation by establishing that the acquirer of interests in a joint operation consisting of a company as defined by IFRS 3, must apply all the rules for the accounting of business combinations established by IFRS 3 (the IFRS Interpretations Committee was asked whether the acquirer of interests should apply, on initial recognition of the interest, the principles in IFRS 3 Business combinations or whether the acquirer should instead account for it as the acquisition of a group of assets). The amendments to IFRS 11 will come into effect as from 1 January

269 Unipol Banca Financial Statements 2014 Amendments to IAS 27 - Equity method in separate financial statements The document introduced the option to use, in the separate financial statements of an entity, the equity method for the measurement of investments in subsidiaries, joint ventures and associates. As a result, an entity will be able to measure these investments in its separate financial statements at cost, or according to what is envisaged by IFRS 9 (or IAS 39), or by using the equity method. The standard is expected to be effective as from 1 January Amendments to IFRS 10 and IAS 28 - Sales or contributions of assets between an investor and its associate or joint venture IFRS 10 was amended to establish that gains or losses resulting from the sale or contribution of a subsidiary that do not constitute a business to an associate or joint venture, measured with the equity method, are recognised only to the extent of unrelated investors interests in the associate or joint venture. IAS 28 was amended to establish that gains or losses resulting from the sale or contribution to an associate or a joint venture of assets that constitute a business are recognised in full. The standard is expected to be effective as from 1 January Amendments to IAS 19 - Defined Benefit Plans: Employee Contributions The amendments to IAS 19 allow to present the contributions made by employees or third parties to defined benefit plans as a reduction of the service cost in the period in which the contributions are paid. The right is allowed for contributions that are independent of the number of years of service and therefore are related to the service rendered by the employee in the period in which the contributions are paid. The amendments are effective as from the date of commencement of the first financial year, whether it starts on 1 February 2015 or later. IFRS 15 - Revenue from Contracts with Customers IFRS 15 replaces IAS 18 Revenue, IAS 11 Construction contracts, SIC 31 Revenue - Barter Transactions Involving Advertising Services, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate. The new model of revenue recognition applies to all contracts with customers except for leases within the scope of IAS 17 Leasing, for insurance contracts and for financial instruments. IFRS 15 identifies a five-step model framework to define the timing and the amount of revenues to be recognised (1. Identify the contract(s) with a customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price 4. Allocate the transaction price; 5. Recognise revenue when (or as) the entity satisfies a performance obligation. The standard is expected to be effective as from 1 January Other The consolidated financial statements are submitted for auditing by PricewaterhouseCoopers SpA to whom the Shareholders Meeting of the Parent Company has entrusted the assignment for

270 8 Notes to the Consolidated Financial Statements A.2 Main financial statement items 1 Held-for-trading financial assets 1.1 Classification A financial asset is classified as held for trading if it meets one of the following conditions: the asset is acquired principally for the purpose of selling it in the short term; the asset is part of a portfolio of identified financial instruments that are managed as a unit as part of a strategy aimed at making a profit in the short term; the asset is a derivative contract but not a derivative hedging contract; Hedging contracts include those incorporated into complex financial instruments (hybrid or combined), which have to be recorded separately if they meet all the following conditions: the economic features and the risks of the incorporated derivative are not strictly correlated with those of the primary contract; even if recorded separately, the incorporated derivative has features such as to comply with the definition of a derivative contract; the hybrid instrument that incorporates the derivative is not designated at fair value with the relating changes being recorded in the income statement. The Group has classified under this item debt securities, equity securities and positive values for derivative contracts held for trading. Debt securities and equity securities not managed for trading purposes, as well as hedge derivatives are excluded from this item. 1.2 Recognition The initial recognition of held-for-trading assets is carried out on the settlement date for debt securities and equity securities and on the subscription date for derivatives, for a value equal to the fair value of the financial instrument without taking into consideration directly chargeable transaction costs or income, which are recorded directly in the income statement. 1.3 Measurement After initial recognition, the assets in question are designated at fair value and the changes in value are recorded in the income statement (item 80 Net result from trading). For further information on the methods for determining the fair value, reference is made to part A.4 Information on fair value qualitative information. 1.4 Derecognition A financial asset is derecognised only when the contractual rights on the cash flows arising from it expire or when it is assigned to third parties and all the risks and benefits are effectively and substantially transferred. 2 Available-for-sale financial assets 2.1 Classification Classified under this item are all the financial assets, other than derivatives, designated as such or not otherwise classified as receivables, held-to-maturity investments and held-for-trading assets. 268

271 Unipol Banca Financial Statements 2014 The Group has included the following types of financial asset in this category: debt securities held for the purposes of investment and not intended for short-term trading; strategic equity investments (less than 20% of the share capital, of strategic importance from a commercial or corporate point of view); equity investments not managed for the purposes of trading and not classifiable as controlling, associated or joint ventures, including those held for merchant banking. 2.2 Recognition Initial recognition is carried out when the Group becomes party to the contractual clauses of the financial instrument, which normally coincides with the settlement date. The initial recognition value is equal to the fair value of the financial instrument, which generally coincides with the related purchase cost, including the directly chargeable transaction costs or income. When recognition is the result of a reclassification of assets originally entered under those held to maturity or those held for trading and carried at fair value, in the exceptional cases in which such transfers are permitted in accordance with IAS 39, the recognition value is determined at the fair value of the instrument on the transfer date. 2.3 Measurement After initial recognition, the assets in question continue to be designated at fair value. The interest component resulting from application of the amortised cost method, where it exists, goes to the income statement, whilst profits and losses from the change in fair value are recorded directly under shareholders equity (item 140 Valuation reserves). The fair value is determined according to the same criteria already stated for held-for-trading assets. When the asset is derecognised or when reasons arise for recording a loss in value, the profits and losses accumulated due to changes in fair value are recorded in the income statement. The loss in value is recorded if there is objective evidence that the recoverable value of the financial instrument is lower than its purchase value less any refunds and depreciation. Write-backs are allowed only if the reasons that determined the recording of the loss no longer apply and they are recorded up to an amount such as to attribute to the financial instrument a value no higher than the value it would have had at that time as a result of applying the amortised cost method without previous adjustments. Losses in value go to the income statement under item 130 sub-item b) Net impairment adjustments to available-for-sale financial assets. Write-backs on debt securities are recorded under the same item, whilst write-backs on equity securities are recorded under a shareholders equity reserve (item 140 Valuation reserves). Checking for the existence of conditions for recording losses in value and subsequent write-backs is carried out on the reference date for each annual account or interim position. Equity instruments for which it is not possible to reliably determine the relative fair value amount are carried at cost, except for the recording of losses of value where reasons exist. These losses of value must not, however, be reinstated in subsequent years. Impairment policy on available-for-sale financial assets Paragraph 58 of IAS 39 states that, at each reference date for the financial statements, companies must check whether there is any objective evidence that a financial asset or group of financial assets has suffered a reduction of value. In order to determine whether a financial asset or group of financial assets has suffered a reduction in value, they need to be subjected to a periodical impairment test. Indications of a possible reduction in value are, for example, the issuer experiencing significant financial difficulties, failure to fulfil obligations or missed payments of interest or capital, the possibility that the beneficiary may become subject to bankruptcy proceedings or similar proceedings and the disappearance of an active market for the asset. In accordance with paragraph 61 of IAS 39, 269

272 8 Notes to the Consolidated Financial Statements a significant or prolonged drop in the fair value of an investment in an instrument representing capital below cost must be considered to be objective evidence of impairment. IAS 39 does not define the terms significant and prolonged but implies, partly on the basis of an IFRIC guideline, that their meaning should be left to the opinion of the directors whenever they have to draw up financial statements or an interim statement for IAS purposes, as long as the meaning is determined objectively and in a reasonable manner and complies with paragraph 61 of IAS 39. The impairment policy adopted by the Group is consistent with that adopted by the Parent Company Unipol Gruppo Finanziario SpA, and impairment testing is carried out in close collaboration with and under the leadership of the Group Finance Department. Starting with the 2009 financial statements, the Group defined as significant a drop in the market value of equity instruments classified as available for sale (AFS) of 20% compared with the initial subscription value and deemed as prolonged a market value remaining below the initial subscription value for more than 36 months. These parameters remained unchanged in subsequent valuations until and including the 2011 interim report. At the end of the 2011 financial year, in view of the impact of the financial markets crisis on share prices, which recorded a gradual downturn combined with an increase in volatility, giving rise to doubts as to whether current prices were the best indicator of the intrinsic value of assets, the Group carried out a thorough analysis of how markets had performed over the previous decade. The results of this analysis led the Group to raise the threshold of significance of losses in value to be considered as an objective indication of impairment for equity instruments classified as available for sale from 20% to 50%. Therefore, as of 31 December 2011, in the case of equity securities, all the securities to which at least one of the following conditions applied were impairment-tested: a) the market price had remained below the initial subscription value for the previous 36 months; b) the decrease in value on the accounting reference date was more than 50% of the initial subscription value. This confirmed that these securities were impaired and the total variation in fair value was recorded in the income statement and the AFS provision written off. In the case of debt securities, whenever payment of a coupon or repayment of capital is late or missed and this is confirmed by the deposit bank, the Finance Department immediately notifies the Risk Management Department of the need to carry out any write-downs. 2.4 Derecognition The same criteria already stated for held-for-trading assets (paragraph 1.4) apply. 3 Held-to-maturity investments 3.1 Classification Held-to-maturity investments are represented by financial instruments other than derivatives, with fixed or determinable payments and a fixed due date, which there is the intention and the ability to hold onto until maturity. The Group has classified financial assets under this item. 270

273 Unipol Banca Financial Statements Recognition Initial recognition is carried out when the Group becomes party to the contractual clauses of the financial instrument, which normally coincides with the settlement date. The initial recognition value is equal to the fair value of the financial instrument, which generally coincides with the related purchase cost, including the directly chargeable transaction costs or income. When recognition is the result of a reclassification of assets originally entered under those available for sale, the recognition value is determined at the fair value of the instrument on the transfer date. The Group made no reclassifications of the kind described above. 3.3 Measurement After initial recognition, the assets in question are valued at amortised cost, using the effective interest method. Profits and losses are recorded in the income statement within the space of the residual life owing to amortisation of the difference between recognition value and redeemable value upon expiry. Profits and losses recorded when these assets are eliminated or undergo impairment also go to the income statement. Held-to-maturity investments are subject to periodical auditing for the existence of losses in value. Should objective evidence of impairment arise, the amount of the loss is measured against the difference in the carrying amount of the asset and the current value of the estimated future cash flows, discounted at the financial asset s original effective interest rate. Write-backs are allowed only if the reasons that determined the recording of the loss no longer apply, and they are recorded up to an amount such as to assign the financial instrument a value no higher than the value it would have had at that time as a result of applying the amortised cost without previous adjustments. 3.4 Derecognition The same criteria already stated for held-for-trading assets (paragraph 1.4) apply. Should a significant amount of assets, classified within this category, be sold or reclassified during the year, before maturity, any remaining held-to-maturity assets would be reclassified as available for sale and for two successive years it would not be possible to classify any asset within this category. This penalty does not apply if the sales or reclassifications: are so close to maturity that the fluctuations in the market rates cannot have a significant effect on the fair value of the assets; occurred after substantially all the original principal for the asset was collected as a result of scheduled or early ordinary payments; are to be attributed to an uncontrollable isolated event, which is not recurrent and cannot therefore be reasonably forecast. 4 Receivables 4.1 Classification Classified within this category are financial assets, other than derivatives, which involve fixed or determinable payments and which are not listed on an active market. The following assets are excluded from this category: receivables intended for immediate or short term sale, which must be classified under held-for-trading assets; receivables for which it is not possible to recover substantially all the initial investment, due to reasons other than impairment of the receivable, which must be classified under available-for-sale assets; receivables that, at the time they were initially recognised, may have been designated as assets at fair value, booked to the income statement, or as available-for-sale assets. The Group has classified within this category all the receivables resulting from loan and/or deposit contracts with customers and the banking system. Repurchase agreements and trade receivables also fall within this category. 271

274 8 Notes to the Consolidated Financial Statements Receivables are shown in the financial statements under items 60 Receivables from banks and 70 Receivables from customers, with the exception of trade receivables that cannot be retraced to business with customers, which are allocated to item 160 Other assets. 4.2 Recognition The initial recognition is carried out when the Group, as creditor, acquires the right to payment of the sums contractually agreed. This time coincides with the payment date in the case of loans and the settlement date in the case of debt securities. The asset is recognised at fair value, which is generally equal to the amount paid or to the purchase price, inclusive of costs and income directly traceable to the individual asset and determinable from the start of the transaction even if settled at a later date. Charges to be paid by the debtor and the company s normal internal administrative costs are not included. In the case of loans agreed under conditions other than those of the market, the fair value is determined using special valuation techniques and the difference between this value and the amount disbursed is recorded directly in the income statement. When recognition is the result of a reclassification of assets originally entered under those held to maturity or those held for trading and carried at fair value, in the exceptional cases in which such transfers are permitted in accordance with IAS 39, the recognition value is determined at the fair value of the instrument on the transfer date. Loans on negotiable securities and repurchase agreements with the obligation or entitlement to repurchase/ resell are entered in the financial statements as receivables and payables and the assets temporarily transferred are not derecognised. In particular, cash sale and forward repurchase agreements are recorded as payables for the amount received in cash and, vice versa, cash purchase and forward resale agreements are recorded as receivables for the amount paid in cash. 4.3 Measurement Following initial recognition, receivables are valued at the amortised cost, which is represented by the value at which they are initially recorded net of repayments, plus or minus any difference between the initial value and the value on maturity because of depreciation calculated in accordance with the criterion of effective interest and less any reduction due to a decrease in value or non-recoverability. Application of the effective interest rate enables, according to financial logic, distribution of the financial effect of a loan transaction to be spread evenly over its expected life. The effective interest rate is the rate that discounts all future cash flows of the loan and establishes a current value corresponding to the amount disbursed, including all the transaction costs and income relating to it. The estimate of cash flows and the contractual duration of the loan take into consideration all the contractual terms that can influence the amounts and the expiry dates (such as early redemptions and the various options that may be exercised), without however considering the losses expected on the loan. Following initial recognition, for the whole life of the loan the amortised cost is determined by the continued application of the effective interest rate set at the start of the operation (original interest rate). This original interest rate does not vary over time and is also used in the case of any contractual amendment to the interest rate or events that have rendered the loan unproductive (due to insolvency proceedings for example). The amortised cost method is applied only to credit arrangements with an original term of at least eighteen months, on the assumption that the application of this method for shorter-term arrangements would have a negligible effect on the economic result. Loans with a duration of less than eighteen months and those that have no fixed maturity date or are revocable are therefore valued at cost. At the reference date for each annual account or interim position, the receivables are audited to identify those that show objective evidence of a loss in value due to events that occurred after they were initially recognised. The valuation procedures differ depending on whether non-performing or performing loans are involved. Non-performing loans are considered to be those to which the status of doubtful loans, watchlist loans, restructured loans or past due loans by more than 90 days has been attributed, according to current Bank of Italy guidelines. These non-performing loans are subject to a process of cost analysis that consists of discounting (at 272

275 Unipol Banca Financial Statements 2014 the original effective interest rate) the expected cash flows for principal and interest, taking into account any guarantees backing the receivable. The negative difference between the current value of the loans determined in this way and its carrying amount (amortised cost) at the time of the valuation constitutes an adjustment that is entered in the income statement under item 130 sub-item a) Net impairment adjustments to receivables. The original value of the loans is reinstated in subsequent years only if the reasons that determined the recognition of the relating loss no longer apply. Write-backs are recorded up to an amount such as to assign the financial asset a value no higher than the value it would have had at that time as a result of applying the amortised cost without previous adjustments. Loans for which objective evidence of a loss has not been individually ascertained are subject to a process of collective valuation carried out by uniform credit risk categories, identified according to a matrix breakdown by customer segment and rating class assigned by the Credit Rating System (CRS) procedure of Cedacri (outsourcer UnipoBanca). The value of the latent loss for each uniform category is quantified by applying the probability of Default (PD) and Loss Given Default (LGD) calculated on analyses and estimates made available by Cedacri on the basis of a consortium. The Group companies that do not use the outsourcer Cedacri, performing exposures and those subject to country risk are subject to a process of collective valuation carried out by uniform credit risk categories, identified according to a matrix breakdown by customer segment and product type. The value of the latent loss for each uniform category is quantified by applying percentage loss indices inferred by the trend analysis of historical series for the same category. 4.4 Derecognition The general criteria already stated for the other classification items apply. In particular, receivables sold are derecognised only if the assignment involves the substantial transfer of the risks and benefits relating to them. If this is not the case, receivables continue to be recorded in the financial statements even though their ownership has been legally transferred. It is assumed that all risks and benefits have been substantially transferred, if the assignment involves the transfer of at least 90% of them. Vice versa, it is assumed that all the risks and benefits are substantially maintained if the assignment involves the transfer of no more than 10% of them. If the assignment does not substantially involve the transfer or maintenance of the risks and benefits (in the event of the Group having retained a risks/benefits ratio of more than 10% but less than 90%), the receivables are derecognised if the Group does not retain any type of control over them. Otherwise, the existence of control over the assigned receivables determines that they remain in the financial statements in proportion to the extent of the residual involvement. The Group has still entered in the financial statements under this category all the receivables subject to securitisations carried out after 31 December 2003, regarding which it has essentially retained all the risks and benefits as a result of holding the junior securities issued by the SPVs. For further information on the handling of securitisations, see paragraph 18.2 below. 273

276 8 Notes to the Consolidated Financial Statements 5 Financial assets designated at fair value 5.1 Classification Any financial asset may be designated as measured at fair value at the time it is initially recognised (so-called fair value option), except for instruments representing capital for which active market prices are not recordable and the fair value of which cannot be reliably determined. Excluded from this category are derivatives and assets that belong to the trading portfolio, for which IAS 39 envisages the obligatory application of the fair value criterion. The Group has not classified any asset under this item. The recognition, valuation and derecognition criteria are similar to those for held-for-trading financial assets, with recording of profits and losses under the relevant item in the income statement (item Net result on financial assets and liabilities designated at fair value). 6 Hedging transactions 6.1 Types of hedge According to IAS 39, hedging relationships can be of three types: a) fair value hedge: the aim is to hedge the exposure to changes in fair value of assets or liabilities, or part thereof, attributable to a particular risk, which could affect the income statement; b) cash flow hedge: the aim is to hedge the exposure to the variability of cash flows attributable to a particular risk associated with assets or liabilities that could affect the income statement; c) hedging of a net investment in a foreign operation: the aim is to hedge the risks of an investment in a foreign company expressed in foreign currency. Only instruments traded with a counterparty outside the company or group of companies to which the financial statements refer can be considered to be hedging instruments. A relationship is described as a hedge and has consistent accounting representation if, and only if, all the following conditions are met: at the beginning of hedge there is a designation and formal documentation of the hedging relationship, the objectives of the company in the management of the risk and the strategy in carrying out the hedging. This documentation includes the identification of the hedging instrument, the hedged item or transaction, the nature of the hedged risk and how the company evaluates the effectiveness of the hedging instrument in offsetting the exposure to the changes in fair value of the hedged item or the cash flows attributable to the hedged risk; the hedge is expected to be highly effective; as regards the hedging of cash flows, the planned transaction subject to the hedge is highly likely and presents an exposure to the changes in cash flows which could have an effect on the income statement; the effectiveness of the hedge can be reliably evaluated; the hedge is assessed on the basis of a criterion of continuity and is considered to be highly effective for all the years for which the hedge was designated. At 31 December 2014, the Group had cash flow hedging transactions on its own floating rate bond issues and on securities entered in the portfolio of available-for-sale financial assets, as well as fair value hedging transactions on its own fixed rate bond issues. 6.2 Measurement Hedging financial derivatives, like all derivatives, are initially recognised and then measured at fair value and are classified in the asset item 80 Hedge derivatives and liability item 60 Hedge derivatives. 274

277 Unipol Banca Financial Statements 2014 The effects of the valuation are shown as follows: in the case of a fair value hedge: the change in fair value of the hedging instrument is recorded in the income statement and is offset by the change in fair value of the hedged item, for the quota attributable to the hedged risk, which must be entered in the income statement as a contra-entry to the recognition value of the hedged item; in the case of a cash flow hedge: the changes in fair value of the derivative are allocated to equity only for the quota of the hedge considered to be effective and are entered in the Income Statement in the year or years in which the hedged cash flows have an effect on the Income Statement or if the hedging is not effective; in the case of hedges of a net investment in a foreign operation: the same criteria envisaged for cash flow hedges apply. The effectiveness of the hedge is evaluated continuously on the reference date of each of the annual and interim financial statements. In particular, the evaluation is carried out on the basis of prospective and retrospective tests that measure the expected effectiveness of the hedging relationship and the effectiveness attained in the reference period and therefore justify the classification of the instrument as a hedging instrument. Hedging is considered to be effective when the change in fair value of the hedged instrument (or of the expected cash flows) is substantially offset by the change in the hedging instrument, in a ratio between the two variations which falls within the limits of a fixed interval of %. The accounting of the hedging is discontinued prospectively in the following cases: the hedging instrument expires, is sold, terminated or exercised; the hedge no longer meets the aforementioned criteria for hedge accounting; the company revokes the designation. If the hedging relationship is no longer effective or comes to an end, the hedging derivative, if it still exists, is classified amongst held-for-trading financial instruments and the hedged instrument is evaluated according to the measurement criteria corresponding to its classification in the financial statements. If the hedged instrument is an asset or liability evaluated according to the amortised cost criterion, the difference between the carrying amount of the hedged item at the moment hedging ceases the carrying amount it would have held if the hedge had never existed, is amortised in the income statement for the remaining life of the financial instrument. If the hedged item is sold or reimbursed, the fair value quota not amortised is recorded immediately in the income statement. If a cash flow hedge terminates or is no longer effective, profits or losses on the hedging instrument already shown in the equity must be transferred to the income statement in the year in which the cash flows originally hedged have an effect on the income statement or in the year in which it emerges that these cash flows are no longer expected. 7 Equity Investments The recognition and valuation criteria applied to equity investments are regulated by IFRS 10 (Consolidated financial statements), IFRS 11 (Joint Arrangements), IFRS 12 (Disclosure of Interests in Other Entities), which replaced and integrated with effect from 1 January 2014 the provisions contained in this regard in IAS 27, 28 (both simultaneously issued in an amended manner) and 31; these criteria are set out in Section 3 - Scope and methods of consolidation in Part 1. The item includes interests in associated companies. The remaining equity investments, other than those in associated companies and subsidiaries (the Group has no joint ventures) are classified as available-for-sale assets. 275

278 8 Notes to the Consolidated Financial Statements 8 Property, plant and equipment 8.1 Classification The item includes property used for instrumental and investment purposes, technical systems, equipment, furniture and furnishings. These are assets held for functional purposes, to be used for more than one period in the production and supply of goods and services, either for investment purposes for rental to third parties or for the appreciation of the capital invested, or for both. 8.2 Recognition Property, plant and equipment are initially recognised at cost, inclusive of all the expenses directly attributable to their entry into operation. Non-routine maintenance costs, which include an increase in future economic benefits, are recorded as an increase in the value of the assets, whilst the ordinary maintenance costs are recorded in the income statement. 8.3 Measurement After initial recognition, property, plant and equipment including investment property are entered at cost net of depreciation and losses in value. Non-current assets with a limited useful life are systematically depreciated on a straight-line basis over their useful life. However, non-current assets with an unlimited useful life or those with a residual value equal to or higher than their carrying amount are not depreciated. The Bank does not, therefore, depreciate artistic assets. Should objective evidence of a reduction in value emerge, the loss is measured as the difference between the carrying amount of the asset and its recovery value, and is recorded in the income statement. The value of the asset must be reinstated if the reasons that determined the recognition of the loss, for an amount no higher than the value it would have had, net of the calculated amortisation, without impairments, no longer apply. 8.4 Derecognition Property, plant and equipment are derecognised at the time of disposal or when no further future economic benefits are expected from its use or disposal. 9 Intangible assets 9.1 Classification Intangible assets are non-monetary assets, identifiable even if they have no physical solidity, from which future economic benefits are expected. Intangible assets include goodwill and the other intangible assets governed by IAS Recognition and measurement for Goodwill Goodwill is defined as the difference between the purchase cost and the fair value of assets and liabilities acquired as part of a business combination which consists in the unification of different companies or company operations into a single firm, obliged to draw up financial statements. The result of almost all business combinations consists in the fact that only one company, the buyer, obtains control over one or more different company activities relating to the purchase. Goodwill is not subject to amortisation but is subject to impairment testing at least once a year, generally when 276

279 Unipol Banca Financial Statements 2014 drafting the annual financial statements and always upon the occurrence of events that lead to the belief that the asset may have undergone a reduction in value. Any adjustments made to goodwill, even if the reasons that originated it no longer apply in subsequent years, cannot be rectified. 9.3 Recognition and measurement for other intangible assets Intangible assets other than goodwill are entered in the financial statements at purchase value, inclusive of any direct cost incurred for preparation to use them, net of accumulated amortisation and any losses in value. Intangible non-current assets are systematically amortised on a straight-line basis over their useful life, which, for software, is estimated at an average three years. The Group holds no intangible non-current assets with an unlimited life. Should objective evidence of a reduction in value emerge, the loss is measured as the difference between the carrying amount of the asset and its recovery value, and is recorded in the income statement. The value of the asset must be reinstated if the reasons that determined the recognition of the loss, for an amount no higher than the value it would have had, net of the calculated amortisation, without impairments, no longer apply. 9.4 Derecognition An intangible asset is derecognised at the time of disposal or when no further future economic benefits are expected from its use or disposal. 10 Non-current assets and disposal groups held for sale Non-current assets or groups of assets and associated liabilities for which a disposal process has been undertaken and the sale of which is considered highly likely are included under asset item 150 and liability item 90 (Liabilities associated with assets being disposed of). They are valued at the lesser between their carrying amount and their fair value net of sale costs. Income and charges, including the effects of the valuations, for these assets/liabilities are recorded under a special item in the income statement, net of the related tax effect. 11 Current and deferred taxation Income tax is recorded in the income statement, except that relating to items charged or credited directly to shareholders equity. The financial statements include the effects of deferred tax assets and liabilities deriving from temporary differences between carrying amounts and taxable values, in order to correctly show the charges for income tax on an accrual basis, irrespective of the actual cash flow. Deferred tax assets, except for those that can be transformed set forth in Italian Law 214/2011, are recorded in the financial statements under item 140 b) deferred tax assets, insofar as there is the likelihood of producing sufficient taxable income in future years to enable their recovery. Deferred tax liabilities are recorded under item 80 b) deferred tax liabilities. The offsetting between deferred tax assets and deferred tax liabilities may be carried out exclusively within the scope of the individual tax and with reference to that tax year. Offsetting is not carried out unless the year in which the taxes for the changes in taxable income were relevant can be determined with certainty. Deferred tax assets and liabilities have been quantified on the basis of the rates currently in force for future years. Changes in the deferred tax assets and related economic effects are detailed in the relevant sections of the Notes to the Financial Statements. For the 2014 tax period, Unipol Banca SpA exited the Group tax consolidation in that the expected requirements are no longer met, pursuant to Art. 117 et sequitur of Italian Presidential Decree 917/86 and of Italian Ministerial Decree 9/6/2004, as announced on 23 January 2014 by the consolidating company Finsoe Spa. 277

280 8 Notes to the Consolidated Financial Statements Deferred tax assets and liabilities are also recognised under the tax item, calculated on the temporary differences between the annual and tax results (arising or discharged during the financial year), and on consolidation adjustments. Deferred tax assets proportionate to the extent in which such losses may be reasonably used against future IRES income are recognised in connection with tax losses before the period of validity of the tax consolidation. 12 Provisions for risks and charges The Group does not have pension funds and similar obligations. Other provisions for risks and charges are made up of allocations relating to current, legal or implicit obligations resulting from a past event, which will probably give rise to the disbursement of economic resources, the amount of which can be reliably estimated. The allocations are made on the basis of the best possible estimate of the expenses needed to fulfil the obligations. Provisions are measured at every reporting date and adjusted in order to reflect the best current estimate. They are recognised under the income statement items, according to a logic of classification of costs by type of expense. In particular, provisions related to future personnel expenses related to long-term benefits are recorded as personnel expenses, provisions for risks and charges of a tax-related nature are recognised as income taxes, whereas provisions related to the risk of potential losses not directly attributable to specific income statement items are recorded as net provisions for risks and charges. The amount of the estimated expenses is discounted at market rates if the effect of the deferment in time is significant. The provisions are periodically scrutinised and, if necessary, adjusted to reflect the best possible estimate. If, following re-examination, the expense becomes unlikely, the allocation is reversed. An allocation is only used to cover the expenses for which it was originally recorded. 13 Payables and securities outstanding 13.1 Classification The various technical forms of customer and inter-banking system deposits and funds are classified under the items Due to banks, Due to customers and Securities outstanding, along with funds raised by issuing bonds and other Securities outstanding, net of those that may be repurchased by the Group. Also included are the repurchase agreements and the liabilities matching assets assigned and not derecognised due to a lack of the conditions necessary for derecognition. This involves, in particular, the liabilities associated with the securitisations carried out from 1 January These liabilities (notes) are entered under Due to customers in the separate financial statements and, for the same amount, under Securities outstanding in the consolidated financial statements Recognition Initial recognition takes place on the date of settlement based on the fair value of the liabilities, which corresponds to the amount collected or the issue price, net of the directly attributable transaction costs. The mixed debt instruments connected with equity instruments, foreign currency, credit instruments or indices, are deemed to be structured instruments and recorded in the financial statements after separation of the incorporated derivative, should the conditions for this apply. The primary contract is attributed a value equal to the difference between the value collected and the fair value of the derivative separated. 278

281 Unipol Banca Financial Statements Measurement After initial recognition, medium or long-term financial liabilities are entered at amortised cost based on the effective interest rate criterion. Short-term financial liabilities, on the other hand, continue to be recorded at the originally collected value, less any repayments Derecognition Financial liabilities are derecognised when they are paid off. The repurchase of treasury shares previously issued is assimilated to repayment and leads to derecognition of the liabilities. Any replacement on the market of repurchased treasury shares is similar to a new issue of financial instruments and is recorded in the financial statements on the basis of the new placement price. Public exchange offers relating to financial liabilities Paragraph 40 of IAS 39 envisages that an exchange of debt securities with substantially different contractual terms be carried as an extinction of the original financial liability, entering a new financial liability. As regards the definition of substantially different contractual terms, where the discounted value of cash flows according to the new terms (including any fee paid, net of any fee received and discounted in compliance with the effective original interest rate) differs by at least ten percent from the discounted value of the remaining cash flows of the original liability, paragraph AG62 of IAS 39 envisages their consideration as such. If an exchange of debt securities or a change in the terms is recorded as an extinction, any cost or fee sustained is recorded as part of the profit or loss connected with the extinction. If the exchange or amendment is not recorded as extinction, any cost or fee sustained adjusts the carrying amount of the liability and is aligned with the remaining term of the changed amended liability. In identifying the factors that can determine the presence of substantially different contractual terms, as currently accepted by best practices, qualitative factors are also taken into consideration and their presence can lead to the belief that the original liability is extinct and to the emission of a new debt security. The factors that can be used to identify the presence of such conditions include: diversity in the degree of subordination of the liabilities; diversity in the type of rate (fixed or floating); diversity in the currency in which the liability is issued; diversity in the risk profile of the liability; diversity in the lifespan of the liability. 14 Held-for-trading financial liabilities 14.1 Classification The item can include: a) derivatives that are not recorded as hedging items; b) financial liabilities issued with the intention of repurchasing them in the short term; c) financial liabilities that form part of a portfolio of financial instruments considered as a unit and for which there is evidence of an effective management strategy aimed at obtaining profit in the short term. The Group has classified under the item only the negative values for derivatives. 279

282 8 Notes to the Consolidated Financial Statements 14.2 Recognition, measurement and derecognition All the financial liabilities included in this category are designated at fair value both at the time they are initially recognised and later during the life of the transaction, with the result of the valuation being charged to the income statement. Unless otherwise stated, the criteria for held-for-trading financial assets apply. 15 Financial liabilities designated at fair value Following a change to IAS 39, endorsed by European Union Regulation 1864 of 15 November 2005, it is also possible to apply the so-called fair value option to financial liabilities, designating the financial liabilities at the time they are initially recorded at fair value. This possibility is allowed as long as designation at fair value makes it possible to eliminate or significantly reduce a lack of uniformity which would otherwise result from valuation of assets and liabilities using different criteria, or if a group of liabilities or financial assets/liabilities were to be managed at fair value under an investment or risk management strategy documented internally to the Management Boards. The Group has not classified any liability under this item. The recognition, measurement and derecognition criteria are similar to those for Held-for-trading financial liabilities, with recognition of profits and losses in a special item in the income statement (item Net result on financial assets and liabilities designated at fair value). 16 Transactions in foreign currency 16.1 Recognition Transactions in foreign currency are initially recorded by applying the exchange rate current on the date of the transaction Measurement Periodically upon closing the financial statements and any interim positions, monetary entries in foreign currency are valued using the exchange rate current on the closing date, recognising profits and losses in the income statement. Non-monetary assets and liabilities designated at fair value are also converted using the exchange rate at the date of valuation, charging the differences to the income statement if they are available-for-sale assets/ liabilities. Non-monetary assets and liabilities entered at historic cost are, however, valued at the historical exchange rate. 17 Insurance assets and liabilities The Unipol Banca Group does not comprise companies that perform insurance activities, so there are no assets or liabilities of this kind in the consolidated financial statements. 280

283 Unipol Banca Financial Statements Other information 18.1 Reclassification of financial assets As a result of the amendments to IAS 39 issued by the IASB and validated by the European Commission under EC Regulation 1004 of 15 October 2008, as of 2008 there have been other ways of reclassifying financial assets in addition to those previously allowed, which were limited to transfers between the categories of Held-tomaturity investments and Available-for-sale financial assets. The following ways of reclassifying assets are now also allowed. If a financial asset is no longer held for sale or repurchase in the short term (even though it may have been acquired or held mainly for sale or repurchase in the short term), it may be reclassified outside the fair value category booked to the income statement if the following requirements are met: the circumstances must be very unusual (par. 50B), or the asset to be reclassified would have come under the definition of loans and receivables (if it had not had to be classified as held for trading when initially recorded) and the entity has the intention and the ability to hold it for the foreseeable future or to maturity (par. 50D). A financial asset classified as available for sale that would have come under the definition of loans and receivables (if it had not been recognised as available for sale) may be reclassified from available for sale to loans and receivables if the entity has the intention and the ability to hold it for the foreseeable future or to maturity (par. 50E). If an entity reclassifies a financial asset outside of the fair value category entered in the income statement or outside of the available for sale category, it must reclassify it at its fair value on the date of reclassification and the profit or loss already recorded in the income statement must not be adjusted. The fair value of the financial asset on the date of reclassification becomes its new cost or amortised cost (par. 50C and 50F). In the case of a financial asset reclassified outside of the available for sale category, the previous profit or loss on the asset recorded in the equity directly must be amortised in the income statement throughout its remaining useful life using the effective interest criterion. If the entity has reclassified a financial asset outside of the fair value category recorded in the income statement or outside of the available for sale category, the following is part of the information that must be provided (IFRS 7): the amount reclassified from and to each category; for each year until it is eliminated from the financial statements, the carrying amount and the fair value of all financial assets reclassified during the current and preceding year; whether a financial asset has been reclassified in accordance with paragraph 50B, however unusual the situation, along with the facts and circumstances indicating the rarity of the situation; for the year in which the financial asset was reclassified, the fair value profit or loss on the asset; for each year following reclassification of the financial asset (including the year in which it was reclassified) until it is eliminated from the financial statements, the fair value profit or loss that would have been recorded if it had not been reclassified. Until 1 November 2008, the changes to IAS 39 made it possible, on an exceptional basis, to reclassify assets retroactively from 1 July Any reclassification carried out after 1 November 2008 takes effect only as of the date on which it is carried out. For information on reclassifications of financial assets carried out by the Group see Part A.3 Information on fair value. 281

284 8 Notes to the Consolidated Financial Statements 18.2 Securitisations Since 2002, the Parent Company has carried out several securitisations under which it has assigned performing loan portfolios to vehicle companies set up for the purpose. None of the securitisations carried out meets the requirements for the assets assigned to be derecognised (reversed) since the Parent Company has retained almost all the risks and benefits of the assets assigned. For the operations completed after 31 December 2003 and before the transition to IAS, including the assignment of the first portfolio of receivables and the issue of the first series of notes carried out in December 2003 as part of a programme completed in the early months of 2005, the Parent Company has reversed the effects of the derecognition carried out by applying national accounting standards and has shown in the financial statements the economic-financial results of the vehicles relating to the managed portfolios, eliminating the notes held in the portfolio. Consequently, the Parent Company performs the line-by-line consolidation of the separate management of the vehicle companies in its separate financial statements, as happens in the consolidated financial statements. In the case of operations finalised after the transition to IAS, the Parent Company has not derecognised assets assigned and, as in the previous case, has shown in the financial statements the economic-financial results of the vehicles relating to the managed portfolios, eliminating the notes held in the portfolio. In the case of securitisations finalised by 31 December 2003 in accordance with the provisions of paragraph 27 of IFRS 1, the Parent Company had maintained the effects of the derecognition carried out by 31 December 2003 under the national standards applicable at the time. These particularly affected two securitisations that were both redeemed - the first in 2007 and the second in because the option to repurchase the receivables originally assigned was exercised. The receivables repurchased were recorded in the financial statements on the basis of their fair value on the repurchase date Treasury shares Any treasury shares held are allocated to reduce shareholders equity. If they are subsequently resold, the difference between the sale price and the related repurchase value is allocated directly as a contra-entry to equity, net of the related tax effect Post-employment benefits Post-employment benefits (TFR) are governed by IAS 19 Employee benefits. In particular, they fall within the category of benefits subsequent to the employment relationship, which IAS 19 distinguishes as defined benefit plans and defined contribution plans. The reform of the welfare system, governed by Legislative Decree 252/05, effective as from 1 January 2007, envisages that employers in the private sector, with the exclusion of companies with less than 50 employees, must pay all of the post-employment benefits maturing, not assigned to supplementary pension schemes, to a Fund called the Fund for disbursement of post-employment benefits to employees in the private sector as stated in Art of the Civil Code, managed by INPS on behalf of the State. This means that the contributions that matured and were due to mature after 31 December 2006 are transferred to external bodies and are entered as a cost at a sum equal to the amount due for each year. The obligation with regard to employees for the portion of post-employment benefits accrued up to 31 December 2006, entered in the financial statements as a liability, must not be transferred to external bodies, as stated in the aforementioned Decree, and was therefore quantified using actuarial techniques and updated on the reporting date by using the so-called Projected unit credit method (accrued benefit method prorated on service). Actuarial gains or losses related to the post-employment benefits are recognised as Other comprehensive income components. The discounting of future cash flows are carried out on the basis of the market yield curve, recognised at the end of the year, of corporate bonds issued by issuers of high credit standing. The service cost and net interests are recorded in the separate income statement. Net interests are calculated by applying the 1-year interest rate taken from the yield curve used for discounting the liabilities at the end of the previous financial year to the net value of the post-employment benefits at the beginning of the year. 282

285 Unipol Banca Financial Statements Costs for improvements to third-party assets The costs of restructuring leased property are capitalised in consideration of the fact that, throughout the term of the leasing contract, the lessee company has control of the assets and draws future economic benefits from them. The aforementioned costs are classified under Other assets in the financial statements and not under Property, plant and equipment, in compliance with the instructions of the Bank of Italy, as these costs do not in themselves constitute identifiable and separable assets. Capitalised charges of this kind are amortised on the basis of their useful life, estimated over six years equal to the term of the leasing contract Guarantees issued and commitments Guarantees issued and commitments are valued analytically and collectively in a way similar to that used to evaluate receivables. The allocations aligned to the possible disbursements connected with the credit risks are recorded in the financial statements under Other liabilities in compliance with the instructions of the Bank of Italy and are offset in item 130.d) of the income statement Net impairment adjustments to other financial assets Revenues recognition and costs Revenues from the sale of goods or the provision of services are recorded in the financial statements at the fair value of the sum received, subject to compliance with the following terms: the company has transferred the risks and returns associated with the sale of goods or the provision of services to the buyer; the value of the income can be reliably determined; it is probable that financial returns will be received by the company. Costs and revenues will be recorded in the financial statements in accordance with the accrual principle; in particular: accrued interest income and expense is recorded using a time-based criterion that considers the actual return on the assets and liabilities; commissions are recorded according to accrual; costs are recorded in the income statement in the periods in which the associated income is recorded. Dividends are entered in the income statement in the period in which their distribution is decided Business combinations A business combination consists of the unification of separate companies or company activities in a single subject required to draw up financial statements. A merger can create an investment link between the Parent Company that is buying and the subsidiary that is bought. Under these circumstances, the buyer applies IFRS 3 (Business combinations) in the consolidated financial statements, while it records the interest acquired as an investment in a subsidiary in the separate financial statements, applying IAS 27 Consolidated and Separate Financial Statements. A merger can also envisage the purchase of the net assets of another entity, including any goodwill, or the purchase of the capital of another entity (mergers, grants, acquisitions of business branches). This type of merger does not translate into the same kind of relationship as that between parent and subsidiary and, therefore, IFRS 3 applies, also in the buyer s separate financial statements. On the basis of the provisions of IFRS 3, business combinations have to be recorded applying the purchase method that envisages the following phases: identification of the buyer; determination of the business combination cost; and allocation, on the acquisition date, of the business combination cost to the assets acquired and to the liabilities, including the contingent liabilities undertaken. 283

286 8 Notes to the Consolidated Financial Statements Business combinations between jointly controlled entities Business combinations between parties subject to joint control do not fall within the scope of application of IFRS 3 (Business combinations). In the absence of references to specific IFRS standards or interpretations for such operations, reference is made to Assirevi OPI 1 Accounts of the business combination of entities under common control in the financial statements and in the consolidated financial statements, which highlights, in general terms, that the financial statements have to provide a reliable portrayal of the transactions, stating the economic substance. Assirevi OPI 1, therefore, states that, for transactions without significant influence of the future cash flows of the net assets transferred, the standard applicable is that of the continuity of the values. The application of the continuity of values gives rise to the recognition in the statement of financial position of the separate financial statements of values equal to those that would result if the companies being combined had always been merged. In substance, the net assets of the acquired entity and of the acquiring entity must be recognised at their carrying amounts that they had in the respective accounts before the transaction. With respect to these considerations it is, therefore, possible to identify two kinds of transactions and different accounting methods: transactions with a significant influence on future cash flows; these transactions are recorded at their fair value, which corresponds to the sum exchanged. Any difference between the prices of the transaction and the carrying amount is entered in the income statement; transactions without a significant influence on future cash flows; these transactions are recorded on the basis of the continuity of values. In this case, applying the continuity of values, the company recorded values on the Statement of Financial Position equal to those that would result if the companies subject to merger had always been joined. The net assets of the entity acquired and of the acquiring entity were, therefore, recorded at the carrying amounts that they had in the respective accounts before the transaction. If the transfer values are higher than the historic values, the excess must be reversed, reducing the shareholders equity of the acquiring company, with the recording of a special reserve in its financial statements. A.3 Information on transfers between portfolios of financial assets This paragraph provides the information required by IFRS 7 when financial assets have been reclassified during the current year or previous years for as long as the asset is recorded under assets. As a result of the liquidity crisis in the financial markets in autumn 2008, the Group transferred debt securities with a total value of 74,824k from the category of heldfortrading assets, effective from 1 July 2008, 58,382k being reclassified as loans and receivables and 16,442k as available-for-sale financial assets. The table below shows the carrying amounts and the fair value of the securities reclassified and still in the portfolio and the effects on comprehensive income. 284

287 Unipol Banca Financial Statements 2014 A.3.1 Reclassified financial assets: carrying amount, fair value and effects on comprehensive income Type of financial instrument (1) Portfolio of origin (2) Target portfolio (3) Carrying amount at Fair value at 31/12/2014 (4) 31/12/2014 (5) Income components without transfer (before tax) Income components recorded during the year (before tax) Measured (⁶) Other (⁷) Measured (⁸) Other (⁹) Debt securities Held-for-trading financial assets Available-forsale financial assets Debt securities Held-for-trading financial assets Receivables from Banks 7,717 6,343 (1,365) Debt securities Held-for-trading financial assets Receivables from customers Debt securities Held-for-trading financial assets Available-forsale financial assets The valuation elements in the columns relating to income components without transfer (before tax) include the results of the valuations that would have been recorded in the income statement for the year or in the equity if the transfer had not taken place and the other elements include other types of charge and income relating to the reclassified assets (interest and profits/losses arising from disposal and reimbursement). The columns relating to income components recorded during the year (before tax) show the income components that were actually recorded in the income statement or in the shareholders equity. A.3.2 Reclassified financial assets: effects on comprehensive income before transfer Information not applicable as the Group has not carried out transfers of financial assets during the year. A.3.3 Transfer of held-for-trading financial assets Information not applicable as the Group has not carried out transfers of financial assets during the year. A.3.4 Effective interest rate and cash flows expected from the reclassified assets Information not applicable as the Group has not carried out transfers of financial assets during the year. 285

288 8 Notes to the Consolidated Financial Statements A.4 Information on fair value Qualitative information A.4.1 Levels of fair value 2 and 3: valuation techniques and inputs used Regulation no. 1255/2012 approved IFRS 13 Fair Value Measurement, which was effective as from 1 January IFRS 13 provides guidance on how to measure the fair value of financial instruments and of non-financial assets and liabilities already requested or allowed by the other IFRS accounting standards. This standard: defines fair value; sets out in a single IFRS a framework for measuring fair value; requires disclosures about fair value measurements. The standard defines fair value as the price that would be received to sell an asset in an ordinary transaction or the price paid to transfer a liability in an ordinary transaction in the main market of reference under the current conditions at the measurement date (exit price). The fair value measurement assumes that the transaction related to the sale of the assets or to the transfer of the liabilities may occur: in the main listing market; in the absence of the main listing market, the most advantageous market for the assets and liabilities to be measured. When a market price is unobservable, an entity is required to mainly use valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The IFRS 13 standard defines also a fair value hierarchy depending on the degree of observability of the inputs contained in the valuation techniques used for determining the fair value. The IFRS 13 accounting standard governs the fair value measurement and the relevant disclosure also for assets and liabilities not measured at fair value on a recurring basis in the statement of financial position. For these assets and liabilities, the fair value is calculated for the purposes of disclosure in the financial statements. Moreover, since these assets and liabilities are not traded in general, the calculation of their fair value is mainly based on the use of internal inputs not directly observable on the market, with the sole exception of listed securities classified as Held-to-maturity investments. 286

289 Unipol Banca Financial Statements 2014 Fair value measurement standards The following table shows briefly the methods for calculating the fair value for the different macro categories of financial instruments, loans and properties. Financial Instruments Bonds Shares and listed equity inv., ETF Shares and unlisted equity investments Listed derivatives Mark to Market Contributor CBBT - Bloomberg Other contributor - Bloomberg Reference market Reference market Mark to Model and other Mark to Model Counterparty valuation DCF DDM Multiples Receivables Property OTC derivatives UCITS Net Asset Value Mark to Model Receiv. from cust. (Mark to Model) Other receivables (Carrying amount) Assessment value In compliance with the IFRS 13 standard, in order to calculate the fair value of the financial instruments, in the presence of instruments dealt with in a liquid and active market, the market price is used (Mark to Market). Liquid and active market means: a) the regulated market where the instrument to be measured is traded and regularly listed; b) the multilateral trading system (MTF, mercato telematico dei fondi - electronic funds market) where the instrument to be measured is traded or regularly listed; c) the pricing and transactions carried out on a regular basis or with transactions at high frequency and with low bid / offer spread, by an authorised intermediary (hereinafter contributor ). In the absence of availability of prices on a liquid and active market, valuation techniques that maximise the use of observable inputs and minimise the use of unobservable inputs are used. These methods are summarised in mark-to-model valuations, valuations by the counterparty or carrying amount valuations with regard to certain categories of non-financial assets. Mark to Market valuations With reference to shares, listed equity investments, ETFs and listed derivatives, the Mark to Market valuation corresponds to the official valuation price of the reference market. With reference to bonds, the sources used for the Mark to Market valuation of financial assets and liabilities are set below: a) The primary source is represented by the CBBT price provided by the data provider Bloomberg; b) if the price in the previous point is not available, the validated internal scoring model is used: it allows to select the liquid and active contributors on the basis of some defined parameters. With reference to UCITS, the source used is the Net Asset Value. 287

290 8 Notes to the Consolidated Financial Statements Mark to Model valuations The valuation methods (Mark to Model) used by the Group are in line with the methods generally used by the market. The objective of the models for the fair value measurement is to obtain a value for the financial instrument that complies with the assumptions that the market participants would use when formulating a price, assumptions that also concern the risk implicit in a particular valuation technique and/or in the inputs used. For correct Mark to Model valuation of each instrument category, appropriate and consistent valuation models as well as the parameters of the reference market need to be defined in advance. The list of the main models used within the Unipol Group for the Mark to Model pricing related to financial instruments is set below: Securities and derivatives on interest rates Discounted cash flows; Black; Black-Derman-Toy; Hull & White 1,2 factors; Libor Market Model; Longstaff & Schwartz; Kirk. Securities and derivatives on inflation Discounted cash flows; Jarrow-Yildirim. Securities and derivatives on shares, indexes and exchange rates Discounted cash flows; Black Scholes. Securities and credit derivatives Discounted cash flows; Hazard rate models. The main observable market parameters used for carrying out the Mark to Model valuations are set below: interest rate curve by currency of reference interest-rate volatility surfaces by currency of reference; CDS spread or Asset Swap spread curves of the issuer; inflation curve by currency of reference; foreign exchange rates of reference; exchange-rate volatility surfaces; volatility surfaces on shares or indexes; reference prices of shares; inflation curve of reference. The main unobservable market parameters used for carrying out the Mark to Model valuations are set below: correlation matrixes between exchange rate and risk factor; historical volatility; curve spread benchmarks constructed for measuring bond instruments of issuers for which no prices of the bonds issued or CDS curves are available; credit risk parameters such as the recovery rate; delinquency or default rates and prepayment curves for ABS financial instruments. 288

291 Unipol Banca Financial Statements 2014 With reference to the bonds, where it is not possible, also on the basis of the results of the Scoring Model, to measure an instrument with the Mark to Market model, the fair value is assigned based on the Mark to Model valuations. Based on the characteristics of the instrument, different valuation models indicated above are used. With reference to OTC derivatives, models consistent with the risk factor underlying the contract itself are used. The fair value of interest-rate OTC derivatives and inflation-linked OTC derivatives is measured on the basis of Mark to Model valuations implementing the rules provided by IFRS 13. As regards to OTC derivatives on which a collateralisation agreement is envisaged (Credit Support Annex) between the companies of the Unipol Group and the authorised market counterparties, the EONIA (Euro OverNight Index Average) discount curve can be used. In the case of non-collateralised derivatives, CVA (Credit Valuation Adjustment) and DVA (Debit Valuation Adjustment) adjustment can be used. On 31 December 2014, all the positions existing on derivatives referred to collateralised contracts for which CSA agreements exist between the traded counterparties. With reference to unlisted shares and equity investments for which there is no market price or assessment drawn up by an independent expert, the valuations are mainly carried out on the basis of (i) capital ratios, (ii) methods that consider the discounting of income flows or financial flows such as Discounted Cash Flow (DCF) or Dividend Discount Model (DDM) in the version called excess capital, (iii) or applicable methods based on market multiples. With reference to unlisted UCITS, Private Equity and Hedge Funds, the fair value is expressed as the Net Asset Value at the reporting date provided directly by the directors of the funds. With reference to receivables from banking customer portfolio, the fair value is assigned based on Mark to Model valuations using the Discounted Cash Flow method with a discount rate adjusted to the counterparty and transaction risk. For the other receivables, the Carrying amount is used. With reference to property, the fair value measurement is measured depending on assessment value calculated by the independent surveyors consistent with the provisions of the current legislation. Valuations by the Counterparty Financial assets and liabilities that do not fall under the instruments Mark to Market valued and for which there are no consistent valuation models validated for the purposes of fair value measurement are measured on the basis of the valuations provided by the counterparties that can be consulted for the liquidation of the position. Fair value measurement on a recurring basis Process for fair value measurement on a recurring basis The valuation of the financial instruments is preparatory to the monitoring of the risk, to the integrated management of assets and liabilities and the preparation of separate financial statements. The fair value measurement on a recurring basis of the financial instruments is broken down in different phases and is carried out by the Risk Management Department on the basis of measurement criteria defined in the previous paragraph. 289

292 8 Notes to the Consolidated Financial Statements Fair Value measurement on a recurring basis by means of unobservable parameters (Level 3) In the level 3 classification of financial assets and liabilities, a prudential approach is followed; this category mainly includes the following types of financial instruments: unlisted equity securities or investments for which there is no market price or assessment drawn up by an independent expert; the valuations are carried out on the basis of the previously indicated methods; units of private equity funds, hedge funds and unlisted UCITS for which the information related to financial instruments held in the relevant portfolios is not available and that as such could include financial instruments assessed at Mark to Model by using unobservable parameters; bonds assessed at Mark to Model by using unobservable parameters (correlations, curve spread benchmark, recovery rate); bonds assessed with price from counterparty at Mark to Model by using unobservable parameters; ABS bonds for which a Mark to Market measurement is not available; derivative instruments assessed at Mark to Model by using unobservable parameters (correlations, volatility, estimates of dividends); bonds that do not meet the requirements defined in the scoring test (see paragraph Mark to Market Valuations ) and for which a Mark to Model valuation is not possible. Fair value measurement on a non-recurring basis and in compliance with disclosure requirements of other principles Consistent with the accounting standard IFRS 13, the fair value is measured also for assets and liabilities not measured at fair value on a recurring basis in the statement of financial position and when the information on fair value must be provided in the additional information notes in accordance with other international accounting standards. Since these assets and liabilities are not traded in general, the calculation of their fair value is mainly based on the use of internal inputs not directly observable on the market. This category mainly includes the following types of instruments: bond issues measured at Mark to Market (level 1); bond issues and loans assessed at Mark to Model by using unobservable parameters (curve spread benchmark) (level 3); short-term payables with a duration of less than 18 months and Certificates of deposit measured at amortised cost (level 3); receivables from customers measured according to the following principles (level 3): -- receivables with a duration of more than 18 months (MLT receivables) valued at Mark to Model with a discounting method of cash flows for the principal and interest component. For MLT receivables, the discount rate used depends on the risk free rate plus a risk premium determined on the operation by means of the Probability of Default (PD) and Loss Given Default (LGD) parameters. These parameters are obtained from the Cedacri Credit Rating System (CRS) application and were estimated on the basis of a consortium. The cumulated probabilities of default (PD) are calculated through the application of a Markovian process to the one-year transition matrixes, whereas the LGD is considered constant throughout the time horizon; -- non-performing loans valued at amortised cost net of analytical valuations; -- receivables with a duration of less than 18 months measured at amortised cost; other receivables measured at carrying amount (level 3); investment property measured depending on assessment value calculated by the independent surveyors consistent with the provisions of the current legislation. The logic of assignment of the survey mandates contemplates a non-exclusive assignment of assets and a three-year rotation in the assignment of surveyors. 290

293 Unipol Banca Financial Statements 2014 A.4.2 Processes and sensitivity of measurements With reference to assets designated at fair value on a recurring basis and belonging to Level 3, the stress on non-observable parameters is carried out with reference to financial instruments valued at Mark to Model and on which the valuation is carried out through one or more non-observable parameters. On 31 December 2014, the portion of financial assets designated on a recurring basis and belonging to Level 3 amounted to 83.8m. 84% of this portfolio consists of unlisted equity securities and UCITS that were not subject to stress on unobservable inputs. The remaining portion of 16% consists of unlisted bonds that are characterised by a sensitivity irrelevant to unobservable inputs. A.4.3 Fair value hierarchy Assets and liabilities designated at fair value are classified on the basis of the hierarchy defined by the IFRS 13 accounting standard. The aim of this classification is to establish a fair value hierarchy depending on the degree of discretion used, giving priority to the use of parameters observable on the market in that able to reproduce the assumptions that the market participants would use when pricing the assets and liabilities. The classification is based on the criterion used for measuring the fair value, (Mark to Market, Mark to Model, Counterparty) and on the observability of the parameters used, in the case of Mark to Model valuation. Level 1: this category includes the assets and liabilities valued at Mark to Market with source the CBBT price and the prices from the contributor having the minimum requirements that guarantee that such prices are executable on active markets; Level 2: this category includes the assets and liabilities valued at Mark to Market but that cannot be classified under the previous category and the assets whose fair value is measured by a consistent pricing model supported by parameters observable on the market; Level 3: this category includes the assets and liabilities for which the estimate variability of the pricing model can be significant because of the complexity of the payoff or, if a consistent and validated model is available, the parameters required for the valuation are unobservable. Moreover, this category includes the bonds that do not meet the requirements defined in the scoring test (see paragraph Mark to Market Valuations ) and for which a Mark to Model valuation is not possible. Finally, this category also includes receivables and investment property. A.4.4 Other information On the reporting date, there was no information to be reported pursuant to IFRS 13, paragraphs 51, 93 letter (i) and

294 8 Notes to the Consolidated Financial Statements Quantitative information A.4.5 Fair value hierarchy A Assets and liabilities measured at fair value on a recurring basis: division by level of fair value. Amount in k Assets/liabilities measured at fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Held-for-trading financial assets , Financial assets designated at fair value Available-for-sale financial assets 553,610 1,383 83, , , Hedging derivatives - 7, , Property, plant and equipment Intangible assets Total 553,657 9,309 83, ,123 9, , Held-for-trading financial liabilities Financial liabilities designated at fair value Hedging derivatives - 84, ,046 - Total - 84, ,048 1 Transfers of assets from level 1 to level 2 of the fair value hierarchy carried out during the financial year amounted to 1,383k and are due to a loss of importance of prices expressed by the main market. In order to determine the fair value of financial derivatives, CVA (Credit Valuation Adjustment) and DVA (Debit Valuation Adjustment) adjustments were not used in that, at 31 December 2014, all the positions existing on derivatives referred to collateralised contracts for which CSA agreements exist between the traded counterparties. 292

295 Unipol Banca Financial Statements 2014 A Annual changes in assets designated at fair value on a recurring basis (level 3) Held-for-trading financial assets Financial assets designated at fair value Available-forsale financial assets Hedging derivatives Property, plant and equipment Intangible assets 1. Opening balances , Increases , Purchases , Profits allocated to: Income statement of which capital gains Shareholders equity Transfers from other levels Other increases - - 3, Decreases 11-48, Sales Repayments Losses allocated to: , Income statement , of which capital losses , Shareholders equity Transfers to other levels Other decreases Closing balances 1-83,

296 8 Notes to the Consolidated Financial Statements A Annual changes in liabilities designated at fair value on a recurring basis (level 3) Held-for-trading financial liabilities Financial liabilities designated at fair value Hedging derivatives 1. Opening balances Increases Issues Losses allocated to: Income statement of which capital losses Shareholders equity Transfers from other levels Other increases Decreases Repayments Repurchases Profits allocated to: Income statement of which capital gains Shareholders equity Transfers to other levels Other decreases Closing balances

297 Unipol Banca Financial Statements 2014 A Assets and liabilities not designated at fair value or designated at fair value on a non-recurring basis: division by level of fair value Assets/Liabilities not measured at fair value or measured at fair value on a non-recurring basis Carrying Amount Level 1 Level 2 Level 3 Carrying Amount Level 1 Level 2 Level 3 1. Held-to-maturity investments 817, , , , Receivables from banks 347,059 6, , ,412 10,706 17, , Receivables from customers 9,901, ,732,118 9,615, ,190, Property, plant and equipment held for investment 1, , , Non-current assets and disposal groups held for sale Total 11,067, ,520-11,072,284 10,818, ,561 17,993 10,544, Due to banks 806, ,104 1,257, ,257, Due to customers 6,926, ,926,840 7,300, ,300, Securities outstanding 3,343, ,396,532 2,766, ,759, Liabilities associated with assets being disposed of Total 11,076, ,129,476 11,323, ,316,771 A.5 - Information on the so-called day one profit/loss The initial subscription value of financial instruments corresponds to their fair value on the date they are first recorded and is normally deemed to be the price paid. In the case of financial instruments that are not very liquid and are classified among those valued at fair value recorded in the income statement, the valuation models are based on prudential criteria in order to ensure that the effects recorded in the income statement are based on valuation parameters that can be seen on the markets. 295

298 8 Notes to the Consolidated Financial Statements Part B Information on the Consolidated Statement of Financial Position ASSETS Section 1 Cash and cash equivalents Item Cash and cash equivalents: breakdown Total 31/12/2014 Total 31/12/2013 a) Cash on hand 98, ,649 b) Demand deposits with Central Banks - - Total 98, ,649 Section 2 Held-for-trading financial assets Item Held-for-trading financial assets: breakdown Total 2014 Total 2013 Items/Amounts Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Balance sheet assets 1. Debt securities , Structured securities Other debt securities , Equity securities UCITS units Loans Repurchase agreements receivable Other Total A , B. Derivatives 1. Financial derivatives: for trading connected to the fair value option other Credit derivatives: for trading connected to the fair value option other Total B Total (A+B) ,

299 Unipol Banca Financial Statements Held-for-trading financial assets: breakdown by debtors/issuers Items/Amounts Total 31/12/2014 Total 31/12/2013 A. Balance sheet assets 1. Debt securities 2 99,295 a) Governments and Central banks 2 99,295 b) Other public bodies - - c) Banks - - d) Other issuers Equity securities a) Banks 10 - b) Other issuers: insurance companies financial companies non-financial companies other UCITS units Loans - - a) Governments and Central banks - - b) Other public bodies - - c) Banks - - d) Other entities - - Total A 48 99,456 B. Derivatives a) Banks fair value - 2 b) Customers fair value - 7 Total B - 17 Total (A + B) 48 99,

300 8 Notes to the Consolidated Financial Statements 2.3 Held-for-trading financial assets: annual changes Changes/Underlying assets Debt securities Equity securities UCITS units Loans Total A. Opening balances 99, ,456 B. Increases 432, ,089 B1. Purchases 421, ,908 B2. Positive fair value changes B3. Other changes 11, ,181 C. Decreases 531, ,497 C1. Sales 430, ,474 C2. Repayments 100, ,406 C3. Negative fair value changes C4. Transfers to other portfolios C5. Other changes D. Closing balances The amount recognised under item B.3. Other changes includes contributions deriving from the merger by incorporation of Banca Sai SpA of 11,030k as debt securities and 16.5k as equity securities. This transaction qualifies as business combination between entities under common control, not regulated by the IFRS 3 accounting standard. Section 3 Financial assets designated at fair value Item 30 The financial statements contain no assets under this item. Section 4 Available-for-sale financial assets Item Available-for-sale financial assets: breakdown Total 31/12/2014 Total 31/12/2013 Items/Amounts Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 553,265 1,383 14, ,540-4, Structured securities Other debt securities 553,265 1,383 14, ,540-4, Equity securities ,600 1,123-57, Designated at fair value , Designated at cost , , UCITS units , , Loans Total 553,610 1,383 83, , ,910 Financial assets designated at cost include investments in equity instruments unlisted on active markets for which the related fair value cannot be reliably determined and therefore are maintained at their cost of acquisition. 298

301 Unipol Banca Financial Statements Available-for-sale financial assets: breakdown by debtors/issuers Items/Amounts Totale 31/12/2014 Totale 31/12/ Debt securities 568, ,025 a) Governments and Central banks 526, ,073 b) Other public bodies - - c) Banks 40,433 29,948 d) Other issuers 1,726 2, Equity securities 31,945 58,959 a) Banks - - b) Other issuers: 31,945 58,959 - insurance companies financial companies 2,321 1,976 - non-financial companies 29,624 56,982 - other UCITS units 38,014 47, Loans - - a) Governments and Central banks - - b) Other public bodies - - c) Banks - - d) Other entities - - Total 638, ,573 Equity securities include securities issued by subjects classified as watchlist, whose initial subscription value of 39,564k was completely written down, with a negative effect in the income statement in the financial year under review of 33,064k. 4.3 Micro-hedged available-for-sale financial assets Items/Components Total 31/12/2014 Total 31/12/ Securities subject to micro-hedging of fair value: - - a) interest rate risk - - b) exchange rate risk - - c) more than one risk Securities subject to micro-hedging of cash flows: 324, ,630 a) interest rate risk 324, ,630 b) exchange rate risk - - c) other - - Total 324, ,

302 8 Notes to the Consolidated Financial Statements 4.4 Available-for-sale financial assets: annual changes Debt securities Equity securities UCITS units Loans Total A. Opening balances 697,025 58,958 47, ,572 B. Increases 1,242,039 7,228 4,769-1,254,036 B1. Purchases 1,093,449 3,630 4,769-1,101,848 B2. Positive FV changes 4, ,525 B3. Write-backs allocated to the income statement allocated to equity B4. Transfers from other portfolios B5. Other changes 144,065 3, ,663 C. Decreases 1,370,219 34,241 14,344-1,418,804 C1. Sales 1,336,023 1, ,337,198 C2. Repayments 26, ,545 C3. Negative FV changes C4. Impairment write-downs ,064 14,344-47,981 - allocated to the income statement ,064 14,344-47,981 - allocated to equity C5. Transfers to other portfolios C6. Other changes 7, ,064 D. Closing balances 568,845 31,945 38, ,804 The amount recognised under item B5. Other changes includes contributions deriving from the merger by incorporation of Banca Sai SpA of 108.9m as debt securities and 3.2m as equity securities. This transaction qualifies as business combination between entities under common control, not regulated by the IFRS 3 accounting standard. The item also includes non-significant effects deriving from the entry of Finitalia SpA in the scope of consolidation. Impairment write-downs - allocated to the income statement of the item C4 concern impairments recognised based on IAS 39 of certain financial instruments held by Unipol Banca SpA. Other changes of the items B5 and C6 includes both profits made on assignments and/or redemptions of securities and the positive effects of the amortised cost on debt securities. 300

303 Unipol Banca Financial Statements 2014 Section 5 Held-to-maturity investments Item Held-to-maturity investments: breakdown Total 31/12/2014 Total 31/12/2013 Type of transactions Carrying Fair Value Carrying Fair Value Group components Amount Level 1 Level 2 Level 3 Amount Level 1 Level 2 Level 3 1. Debt securities 817, , , , structured other 817, , , , Loans Total 817, , , , Held-to-maturity investments: debtors/issuers Type of transactions/amounts Total 31/12/2014 Total 31/12/ Debt securities 817, ,381 a) Governments and Central banks 817, ,381 b) Other public bodies - - c) Banks - - d) Other issuers Loans - - a) Governments and Central banks - - b) Other public bodies - - c) Banks - - d) Other entities - - Total 817, ,381 Total fair value 870, ,

304 8 Notes to the Consolidated Financial Statements 5.3 Micro-hedged held-to-maturity investments The Group has no micro-hedged investments. 5.4 Held-to-maturity investments: annual changes Debt securities Loans Total A. Opening balances 818, ,381 B. Increases 267, ,181 B1. Purchases 255, ,287 B2. Write-backs B3. Transfers from other portfolios B4. Other changes 11,894-11,894 C. Decreases 267, ,591 C1. Sales C2. Repayments 246, ,689 C3. Adjustments C4. Transfers to other portfolios C5. Other changes 20,902-20,902 D. Closing balances 817, ,

305 Unipol Banca Financial Statements 2014 Section 6 Receivables from banks Item Receivables from banks: breakdown Total 31/12/2014 Total 31/12/2013 Fair Value Fair Value Type of transactions/amounts Carrying Amount Level 1 Level 2 Level 3 Carrying Amount Level 1 Level 2 Level 3 A. Receivables from Central banks 91, , , , Term deposits Compulsory reserve 91, , Repurchase agreements receivable Other - - B. Receivables from banks 255,384 6, , ,060 10,706 17, , Loans 247, , , , Current accounts and demand deposits 135, , Term deposits Other loans: 112,034 92,533 - Repurchase agreements receivable Financial leases Other 112,034 92, Debt securities 7,717 6, ,468 10,706 17, Structured securities Other debt securities 7,717 30,468 Total 347,059 6, , ,412 10,706 17, , Receivables from banks: micro-hedged assets The Group has no micro-hedged investments. 303

306 8 Notes to the Consolidated Financial Statements 6.3 Financial leases There are no finance lease contracts with banks. Section 7 Receivables from customers Item Receivables from customers: breakdown Total 31/12/2014 Total 31/12/2013 Carrying amount Fair value Carrying amount Fair value Performing Non-performing Level 1 Level 2 Level 3 Performing Non-performing Level 1 Level 2 Level 3 Type of transactions/ Amounts Purchased Other Purchased Other Loans 7,145,222-2,755, ,733,032 7,286,661-2,329, ,190, Current accounts 887, , , , Repurchase agreements receivable 15,162-1, ,371-1, Mortgages 4,834,541-1,887, ,143,736-1,596, Credit cards, personal loans and loans against salary 377,909-27, ,394-14, Financial leases 51,175-36, ,044-33, Factoring Other loans 978, , ,038, , Debt securities Structured securities Other debt securities Total 7,145,272-2,755, ,733,082 7,286,711-2,329, ,190,

307 Unipol Banca Financial Statements Receivables from customers: breakdown by debtors/issuers Total 31/12/2014 Total 31/12/2013 Non-performing Non-performing Type of transactions/amounts Performing Purchased Other Performing Purchased Other 1. Debt securities a) Governments b) Other Public bodies c) Other issuers non-financial companies financial companies insurance companies other Loans to: 7,145,223-2,755,793 7,286,661-2,329,241 a) Governments b) Other Public bodies 23, , c) Other entities 7,121,123-2,755,792 7,259,231-2,329,215 - non-financial companies 3,047,670-2,214,292 3,559,658-1,959,588 - financial companies 341, , ,896-25,086 - insurance companies 27, , other 3,704, ,083 3,229, ,541 Total 7,145,273-2,755,793 7,286,711-2,329, Receivables from customers: micro-hedged assets The Group has no micro-hedged investments. 7.4 Financial leases Total 2014 Total 2013 Minimum payments Gross investment Minimum payments Gross investment Principal Interest Principal Interest Time bands Nonperforming exposures of which guaranteed residual value of which non-guaranteed residual value Nonperforming exposures of which guaranteed residual value of which non-guaranteed residual value on demand 7,138 1, ,744-6,694 2, ,312 - up to 3 months 504 2, , , ,434 - from 3 months to 1 year 2,100 7, ,436 8,916-2,466 12, ,170 14,282 - from 1 year to 5 years 19,104 15, ,234 20,498-12,620 27,012 1,372 7,297 34,309 - over 5 years 7,662 24,831 5,782 5,448 30,279-11,395 32,985 7,871 8,025 41,010 - unspecified duration Total 36,508 51,175 7,092 12,659 63,834-33,742 77,044 10,186 18,303 95,

308 8 Notes to the Consolidated Financial Statements Section 8 Hedging derivatives Item Hedging derivatives: breakdown by type of hedge and by level Fair Value 31/12/ /12/2013 Level 1 Level 2 Level 3 Fair Value Nominal Value 2014 Level 1 Level 2 Level 3 Nominal Value 2013 A) Financial derivatives: - 7,926-97,524-9, ,024 1) Fair Value - 7,926-97,524-9, ,024 2) Cash flows ) Foreign investments ) Credit derivatives: ) Fair Value ) Cash flows Total - 7,926-97,524-9, , Hedging derivatives: breakdown by hedged portfolios and by type of hedge (carrying amount) Transactions/Type of hedge Rate Exchange risk rate risk Fair Value Cash flows Foreign invest. Micro Macro Micro Macro Credit risk Price risk More than one risk 1. Available-for-sale financial assets Receivables Held-to-maturity investments Portfolio Other transactions - - Total assets Financial liabilities 7, Portfolio - - Total liabilities 7, Anticipated transactions - 2. Portfolio of financial assets and liabilities Section 9 Adjustments of macro-hedged financial assets Item 90 The financial statements contain no such adjustments. 306

309 Unipol Banca Financial Statements 2014 Section 10 Equity investments Item Equity investments: information on participating interests Investment relationship Name Registered office Operating office Type of relationship (1) Investor % investment Availability of votes % A. Joint ventures None B. Companies subject to significant influence 1. Campuscertosa Srl in liquidazione Milan Milan 1 Unipol Banca Spa 26.16% 26.16% 2. SCS Azioninnova SpA Bologna Bologna 1 Unipol Banca Spa 42.85% 42.85% 3. Promorest Srl Castenaso (Bo) Castenaso (Bo) 1 Unipol Banca Spa 49.92% 49.92% Key (1) Type of relationship: 1 = companies subject to significant influence As already mentioned in the general part of these notes, the Group has no joint ventures Significant equity investments: carrying amounts, fair values and dividends received At 31 December 2014, there are no equity investments considered significant Significant equity investments: accounting information At 31 December 2014, there are no equity investments considered significant Equity investments considered not significant: accounting information Names Carrying amount of equity investments Total assets Total liabilities Total revenues Profit (loss) on current operations after tax Profit (loss) after tax on disposal groups held for sale Profit (loss) for the year (1) Other income components, net of taxes (2) Comprehensive income (3) = (1) + (2) Joint ventures Companies subject to significant influence 7,458 85,224 4,786 5,649 (510) - (510) - (510) The figures shown in the table above refer to the financial statements at 31 December 2013 for the companies SCS Azioninnova SpA and Promorest SpA and to the interim financial statements at 31 July 2014 for the company Campuscertosa Srl in liquidazione. For the purpose of full disclosure, the figures of the above-mentioned investees were extrapolated by their separate financial statements drawn up in compliance with the Italian accounting standards, weighted by the stake held. In the total revenues column, the total value of the income components with a plus sign is indicated, gross of taxes. 307

310 8 Notes to the Consolidated Financial Statements 10.5 Equity investments: annual changes Total 31/12/2014 Total 31/12/2013 A. Opening balances 8,028 7,955 B. Increases B.1 Purchases B.2 Write-backs 96 - B.3 Revaluations - 18 B.4 Other changes - - C. Decreases C.1 Sales - - C.2 Adjustments C.3 Other changes - - D. Closing balances 7,458 8,028 E. Total revaluations - - F. Total adjustments 1,630 1, Significant valuations and assumptions for establishing the existence of the joint control or significant influence See Section 3 Scope and methods of consolidation of Part A of these Notes to the Financial Statements Commitments relating to equity investments in joint ventures There are no joint ventures Commitments relating to equity investments in companies subject to significant influence There are no commitments relating to investments in companies subject to significant influence Significant restrictions There are no significant restrictions relating to investments in companies subject to significant influence Other information For the companies subject to significant influence, the timing in which the year-end financial statements are available is not compatible with the timing of the closure of the consolidated financial statements of Unipol Banca; in this regard, as set out at the bottom of the table 10.4 Equity investments considered not significant: accounting information, for the application of the equity method reference is made to the latest financial statements available. In any case, when the reporting of the subsidiary refers to a date other than that of the consolidated financial statements of Unipol Banca, adjustments are made to account for the effects of any significant transactions or events that occur between that date and the reporting date of Unipol Banca. 308

311 Unipol Banca Financial Statements 2014 Section 11 Technical provisions - reinsurers share Item 110 Item not applicable to the Unipol Banca Group. Section 12 Property, plant and equipment Item Property, plant and equipment for functional use: breakdown of assets valued at cost Assets/Amounts Total 31/12/2014 Total 31/12/ Owned assets 15,891 17,031 a) land - - b) buildings 1,236 1,288 c) furniture 9, d) electronic equipment 5,392 7,710 e) other Assets acquired under financial lease - - a) land - - b) buildings - - c) furniture - - d) electronic equipment - - e) other - - Total 15,891 17, Property, plant and equipment held for investment: breakdown of assets valued at cost Total 31/12/2014 Total 31/12/2013 Fair Value Fair Value Assets/Amounts Carrying amount Level 1 Level 2 Level 3 Carrying amount Level 1 Level 2 Level 3 1. Owned assets 1, , ,078 a) land b) buildings 1, , , Assets acquired under financial lease a) land b) buildings Total 1, , , Property, plant and equipment for functional use: breakdown of revalued assets There are no property, plant and equipment for functional use designated at fair value or revalued. 309

312 8 Notes to the Consolidated Financial Statements 12.4 Property, plant and equipment held for investment: breakdown of assets designated at fair value There are no property, plant and equipment held for investment designated at fair value or revalued Property, plant and equipment for functional use: annual changes Land Buildings Furniture Electronic equipment Other Total A. Gross opening balances - 1,700 43,256 46,634 1,235 92,825 A.1 Net total reductions in value - (412) (35,264) (38,924) (1,194) (75,794) A.2 Net opening balances - 1,288 7,992 7, ,031 B. Increases - - 4,106 1,860-5,966 B.1 Purchases - - 3,996 1,798-5,794 B.2 Capitalised improvement costs B.3 Write-backs B.4 Positive fair value changes allocated to: a) shareholders equity b) income statement B.5 Positive exchange rate differences B.6 Transfers from property assets held for investment B.7 Other changes C. Decreases - (52) (2,860) (4,178) (16) (7,106) C.1 Sales - - (9) - - (9) C.2 Depreciation - (52) (2,851) (4,166) (1) (7,070) C.3 Impairment adjustments allocated to: (15) (15) a) shareholders equity b) income statement (15) (15) C.4 Negative fair value changes allocated to: a) shareholders equity b) income statement C.5 Negative exchange rate differences C.6 Transfers to: a) property, plant and equipment held for investment b) assets being disposed of C.7 Other changes (12) - (12) D. Net closing balances - 1,236 9,238 5, ,891 D.1 Net total reductions in value - (464) (38,112) (42,679) (1,180) (82,435) D.2 Gross closing balances - 1,700 47,350 48,071 1,205 98,326 E. Valuation at cost The values indicated in items A.1 and D.1 refer exclusively to total depreciation at the beginning and end of the year respectively. 310

313 Unipol Banca Financial Statements 2014 Item E Valuation at cost provides additional information only where there are property, plant and equipment designated at fair value. This is not the case in these financial statements and therefore there are no values under this item. Items B.7 and C.7 Other changes include the effects deriving from the change in the scope of consolidation following the merger by incorporation of Banca Sai into Unipol Banca Property, plant and equipment for investment: annual changes Total Land Buildings A. Opening balances - 1,078 B. Increases - - B.1 Purchases - - B.2 Capitalised improvement costs - - B.3 Positive fair value changes - - B.4 Write-backs - - B.5 Positive exchange rate differences - - B.6 Transfers from property assets for functional use - - B.7 Other changes - - C. Decreases - - C.1 Sales - - C.2 Depreciation - - C.3 Negative fair value changes - - C.4 Impairment adjustments - - C.5 Negative exchange rate differences - - C.6 Transfers to other portfolios of assets - - a) property assets for functional use - - b) non-current assets being disposed of - - C.7 Other changes - - D. Closing balances - 1,078 E. Measurement at fair value Commitments to purchase property, plant and equipment There are no commitments to purchase property, plant and equipment. 311

314 8 Notes to the Consolidated Financial Statements Section 13 Intangible assets Item Intangible assets: breakdown by type of assets Total 31/12/2014 Total 31/12/2013 Assets/amounts Limited life Unlimited life Limited life Unlimited life A.1 Goodwill A.1.1 belonging to the group A.1.2 belonging to third parties - - A.2 Other intangible assets 608-1,308 - A.2.1 Assets valued at cost: 608-1,308 - a) Intangible assets generated internally b) Other assets 608-1,308 - A.2.2 Assets designated at fair value: a) Intangible assets generated internally b) Other assets Total , The residual amount of goodwill in the consolidated financial statements is due to positive consolidation differences. Intangible assets with a limited life consist of software costs, which are amortised over a three-year period. 312

315 Unipol Banca Financial Statements Intangible assets: annual changes Goodwill Other intangible assets Generated internally Other Limited life Unlimited life Limited life Unlimited life Total A. Opening balances ,033-10,785 A.1 Net total reductions in value (8,725) - (8,725) A.2 Net opening balances ,308-2,060 B. Increases B.1 Purchases B.2 Increases in internal intangible assets B.3 Write-backs B.4 Positive fair value changes shareholders equity income statement B.5 Positive exchange rate differences B.6 Other changes C. Decreases (735) - - (1,457) - (2,192) C.1 Sales C.2 Adjustments (513) - - (795) - (1,308) - Amortisation - - (795) - (795) - Write-downs (513) (513) + shareholders equity income statement (513) (513) C.3 Negative fair value changes shareholders equity income statement C.4 Transfers to non-current assets being disposed of C.5 Negative exchange rate differences C.6 Other changes (222) - - (662) - (884) D. Net closing balances D.1 Net total adjustments ,027-7,027 E. Gross closing balances ,635-7,652 F. Valuation at cost The item B.6 Other changes includes 196k recognised as a result of the merger by incorporation of Banca Sai SpA in The item C.6 Other changes includes 661k recognised as a result of the exit from consolidation of Unicard SpA. The values indicated under items A.1 and D.1 Net total adjustments - include the balance of the amortisation fund, at year-start and year-end respectively, only for intangible assets with a limited life and goodwill adjustments. Item F Valuation at cost provides additional information only where there are intangible assets designated at fair value in the financial statements. This is not the case in these financial statements and therefore there are no values under this item. 313

316 8 Notes to the Consolidated Financial Statements Section 14 Tax assets and liabilities Asset item 140 and liability item Deferred tax assets: breakdown 31/12/ /12/2013 IRES effect IRAP effect IRES effect Deferred tax assets in the income statement: 225,063 33, ,385 31,837 - write-downs on receivables deductible in future years (IRES) 141,584 16, , write-downs on receivables deductible in future years (IRAP) ,633 - other taxed write-downs on receivables goodwill exempted on equity investments 1, , provision for risks of revocation other provisions for risks and charges 5,187-4, personnel expenses 84 3, impairment on UCITS ,388 - impairment on goodwill 59,400 12,562 75,197 15,231 - tax losses 16,034-24, detaxation of ACE (support for economic growth) other items (IRES) 645-1, other items (IRAP) Deferred tax assets in shareholders equity: 4, , capital losses on assets AFS (debt securities) , capital losses on assets AFS (equity instruments) capital losses on assets AFS (UCITS units) capital losses on cash flow hedging derivatives 2, , tax loss on provision for post-employment benefits 1, IRAP effect Total deferred tax assets 229,998 33, ,641 32,

317 Unipol Banca Financial Statements Deferred tax liabilities: breakdown 31/12/ /12/2013 Deferred tax liabilities in the income statement: 26, , uncollected interest on arrears 13, , net income from securitisation 13,253-12, other items Deferred tax liabilities in the shareholders equity: ,527 1,322 - capital gains on assets AFS (debt securities) ,527 1,322 - capital gains on assets AFS (equity securities) Total deferred tax liabilities 27, ,765 1,360 IRES effect IRAP effect IRES effect IRAP effect 14.3 Changes in deferred tax assets (through the income statement) Total 31/12/2014 Total 31/12/2013 Opening balance 265, ,586 Increases 85, , Deferred tax assets recorded during the year 56, ,953 a) relating to previous years b) due to changes in accounting standards - - c) write-backs - - d) other 56, , New taxes or increases in tax rates Other increases 29, Decreases 92,530 2, Deferred tax assets derecognised during the year 17,288 2,960 a) reallocations 17,241 2,960 b) write-downs for unanticipated non-recoverability - - c) changes in accounting standards - - d) other Reductions in tax rates Other decreases 75, a) transformation into tax receivables pursuant to L. 214/ ,646 - b) other - - Closing balance 258, ,222 The 2014 increase set forth in item 2.3, not recognised in the income statement, was related for 14m to deferred tax assets deriving from the merger of Banca Sai SpA into Unipol Banca SpA. Moreover, item 2.3 includes 10,556k recognised as a result of the entry of Finitalia SpA in the scope of consolidation. Item 3.3 Other decreases includes 597k recognised as a result of the exit of Unicard SpA from the scope of consolidation. On 1 December 2014, the consolidating company Finsoe Spa communicated to the consolidated company Unipol Banca SpA the return of 4,856k of previously transferred tax losses. 315

318 8 Notes to the Consolidated Financial Statements Changes in deferred tax assets pursuant to L. 214/2011 (through the income statement) Total 31/12/2014 Total 31/12/ Opening balance 232, , Increases 77, , Decreases 76,326 1, Reallocations 1, Transformation into tax receivables 74,646 - a) deriving from losses for the year 74,259 - b) deriving from tax losses Other decreases 534 1, Closing balance 232, ,160 Item 2. Increases includes 10,509k recognised as a result of the entry of Finitalia SpA in the scope of consolidation and 13,932k deriving from the merger of Banca Sai SpA into Unipol Banca SpA. Item 3.3 Other decreases includes 43k recognised as a result of the exit of Unicard SpA from the scope of consolidation Change in deferred tax liabilities (through the income statement) Total 31/12/2014 Total 31/12/2013 Opening balance 23,276 20,467 Increases 3,502 3, Deferred tax liabilities recorded during the year 3,474 3,667 a) relating to previous years 6 - b) due to changes in accounting standards - - c) other 3,468 3, New taxes or increases in tax rates Other increases 28 - Decreases Deferred tax liabilities derecognised during the year a) reallocations b) due to changes in accounting standards - - c) other Reductions in tax rates Other decreases - 1 Closing balance 26,778 23,276 Item 2.3 Other increases includes 28k recognised as a result of the entry of Finitalia SpA in the scope of consolidation and 255k deriving from the merger of Banca Sai SpA into Unipol Banca SpA. 316

319 Unipol Banca Financial Statements Change in deferred tax assets (through the shareholders equity) Total 31/12/2014 Total 31/12/2013 Opening balance 5,028 18,154 Increases 1, Deferred tax assets recorded during the year 1,293 - a) relating to previous years 10 - b) due to changes in accounting standards - - c) other 1, New taxes or increases in tax rates Other increases 70 - Decreases , Deferred tax assets derecognised during the year ,126 a) reallocations ,126 b) write-downs for unanticipated non-recoverability - - c) due to changes in accounting standards Reductions in tax rates Other decreases - - Closing balance 5,705 5,028 Item 2.3 Other increases includes 70k recognised as a result of the entry of Finitalia SpA in the scope of consolidation and 381k deriving from the merger of Banca Sai SpA into Unipol Banca SpA Change in deferred tax assets (through the shareholders equity) Total 31/12/2014 Total 31/12/2013 Opening balance 7,849 7,259 Increases Deferred tax liabilities recorded during the year a) relating to previous years - - b) due to changes in accounting standards - - c) other New taxes or increases in tax rates Other increases - - Decreases 6, Deferred tax liabilities derecognised during the year 6,996 - a) reallocations 6,996 - b) due to changes in accounting standards - - c) other Reductions in tax rates Other decreases - - Closing balance 853 7,

320 8 Notes to the Consolidated Financial Statements 14.7 Other information The rates used for determining deferred tax assets and liabilities are set below: IRES 27.5%; IRAP 5.57%. Section 15 Non-current assets and disposal groups held for sale and associated liabilities Asset item 150 and liability item Non-current assets and disposal groups held for sale: breakdown by type of assets This item is not present in the financial statements Other information There are no cases related to the requested information Information on equity investments in companies subject to significant influence, not carried at equity There are no investments of this type. Section 16 Other assets Item Other assets: breakdown Total 31/12/2014 Total 31/12/2013 Current account cheques being processed 36,784 42,301 Debits being processed 69,947 57,210 Improvements to third party assets 9,965 13,162 Sundry prepaid expenses 2,585 3,200 Sundry accrued income - - Tax assets connected with substitute tax assets 24,563 37,194 Securities transactions to be settled Other items 97,410 80,165 Total 241, ,

321 Unipol Banca Financial Statements 2014 LIABILITIES Section 1 Due to banks Item Due to banks: breakdown Type of transactions Total 31/12/2014 Total 31/12/ Due to central banks 770, , Due to banks 35, , Current accounts and demand deposits 25,976 39, Term deposits - 35, Loans 10, , repurchase agreements payable other 10, , Amounts due for commitments to repurchase own equity instruments Other payables - 22 Total 806,104 1,257,574 Fair value 806,104 1,257, Breakdown of item 10 Due to banks : subordinated payables The Group has no subordinated payables to banks. 1.3 Breakdown of item 10 Due to banks : structured payables The Group has no structured payables to banks. 1.4 Breakdown of item 10 Due to banks : micro-hedged payables There are no payables of this type in the financial statements. 1.5 Payables for financial leases The Group has no payables for financial leases. 319

322 8 Notes to the Consolidated Financial Statements Section 2 Due to customers Item Due to customers: breakdown Type of transactions Total 31/12/2014 Total 31/12/ Current accounts and demand deposits 5,671,009 6,112, Term deposits 738, , Loans 300, , repurchase agreements payable 300, , other Amounts due for commitments to repurchase own equity instruments Other payables 216, ,060 Total 6,926,840 7,300,002 Fair value 6,926,840 7,300, Breakdown of item 20 Due to customers : subordinate payables The Group has no subordinated Due to customers. 2.3 Breakdown of item 20 Due to customers: structured payables The Group has no structured payables to banks customers. 2.4 Breakdown of item 20 Due to customers : micro-hedged payables There are no payables of this type in the financial statements. 2.5 Payables for financial leases The Group has no payables for financial leases. 320

323 Unipol Banca Financial Statements 2014 Section 3 Securities outstanding Item Securities outstanding: breakdown Total 31/12/2014 Total 31/12/2013 Fair Value Fair Value Type of securities Carrying amount Level 1 Level 2 Level 3 Carrying amount Level 1 Level 2 Level 3 A. Securities 3,343, ,396,532 2,766, ,759, Bonds 3,329, ,382,531 2,750, ,743, structured other 3,329, ,382,531 2,750, ,743, Other securities 14, ,001 15, , structured other 14, ,001 15, ,297 Total 3,343, ,396,532 2,766, ,759, Breakdown of item 30 Securities outstanding : subordinate securities Total 31/12/2014 Total 31/12/2013 Securities outstanding: subordinate securities 589, , Breakdown of item 30 Securities outstanding : micro-hedged securities Type of transactions/amounts Total 31/12/2014 Total 31/12/ Securities subject to micro-hedging of fair value: 98, ,075 a) interest rate risk 98, ,075 b) exchange rate risk - - c) more than one risk Securities subject to micro-hedging of cash flows: 129, ,661 a) interest rate risk 129, ,661 b) exchange rate risk - - c) other - - Total 227, ,

324 8 Notes to the Consolidated Financial Statements Section 4 Held-for-trading financial liabilities Item Held-for-trading financial liabilities: breakdown Type of transactions/ Group components A. Balance sheet liabilities Nominal value Total 31/12/2014 Total 31/12/2013 Fair Value Fair Value Level 1 Level 2 Level 3 Fair Value* Nominal value Level 1 Level 2 Level 3 1. Due to banks Due to customers Debt securities Bonds Structured Other bonds Other securities Structured Other Total A B. Derivatives 1. Financial derivatives For trading Connected to the fair value option Other Credit derivatives For trading Connected to the fair value option Other Total B Total (A + B) Fair Value* * Fair Value = Fair value calculated by excluding the changes in value that are due to the change in creditworthiness of the issuer since the date of issue. 4.2 Breakdown of item 40 Held-for-trading financial liabilities : subordinated liabilities There are no liabilities of this type in the financial statements. 4.3 Breakdown of item 40 Held-for-trading financial liabilities : structured payables There are no liabilities of this type in the financial statements. 4.4 Held-for-trading financial liabilities (excluding technical overdrafts ): annual changes There are no liabilities of this type in the financial statements. 322

325 Unipol Banca Financial Statements 2014 Section 5 Financial liabilities designated at fair value Item 50 There are no liabilities of this type in the financial statements. Section 6 Hedging derivatives Item Hedging derivatives: breakdown by type of contract and by hierarchical levels Fair Value 2014 Fair Value 2013 Fair Value Level 1 Level 2 Level 3 Fair Value Nominal value 2014 Level 1 Level 2 Level 3 Nominal value 2013 A) Financial derivatives: - 84, ,000-50, ,000 1) Fair value ) Cash flows - 84, ,000-50, ,000 3) Foreign investments B) Credit derivatives: ) Fair value ) Cash flows Total - 84, ,000-50, , Hedging derivatives: breakdown by hedged portfolios and by type of hedge Transactions/Type of hedge Rate Exchange risk rate risk Fair value hedging Cash flow hedging Micro Macro Micro Macro Credit risk Price risk More than one risk 1. Available-for-sale financial assets , Receivables Foreign invest. 3. Held-to-maturity investments Portfolio - 5. Other transactions - Total assets , Financial liabilities , Portfolio - Total liabilities , Anticipated transactions - 2. Portfolio of financial assets and liabilities

326 8 Notes to the Consolidated Financial Statements Section 7 Adjustment of macro-hedged financial liabilities Item 70 This item is not present in the financial statements. Section 8 Tax liabilities Item 80 See Section 14 of the assets. Section 9 Liabilities associated with assets being disposed of Item 90 See Section 15 of the assets. Section 10 Other liabilities Item Other liabilities: breakdown Total 31/12/2014 Total 31/12/2013 Items being processed 45,645 49,094 Payables to tax authorities 18,823 31,462 Sums payable to third parties on mortgage loans granted 61 1,667 Payables to suppliers 29,209 29,930 Bank transfers being processed 134,337 49,807 Cheque and bill discounts subject to/after collection 42,062 47,392 Payables to employees 5,311 4,017 Sundry deferred income 3 2 Sundry accrued expenses 1,603 1,763 Payable to employees pension fund - 2 Creditors for portfolio risk 1, Payables to social security bodies 6,102 5,525 Utility bills paid by customers Inter-branch transit items Other 115,187 93,363 Total 400, ,

327 Unipol Banca Financial Statements 2014 Section 11 Post-employment benefits Item Post-employment benefits: annual changes Total 31/12/2014 Total 31/12/2013 A. Opening balances 15,647 15,488 B. Increases 10,268 6,986 B.1 Provision for the year 6,823 6,369 B.2 Other increases 3, C. Decreases 7,874 6,827 C.1 Payments made C.2 Other decreases 6,987 6,268 D. Closing balances 18,041 15,647 Total 18,041 15,647 Decreases include the quotas transferred to external funds: a supplementary pension scheme or a treasury fund set up with the INPS [national pensions body]. Item B.2 Other Increases includes 747k recognised as a result of the entry of Finitalia SpA in the scope of consolidation and 661k contributed by Banca Sai SpA as a result of the merger by incorporation into Unipol Banca SpA. Item C.2 Other decreases includes 241k recognised as a result of the exit of Unicard SpA from the scope of consolidation Other information The main statistical, actuarial and financial assumptions used for determining the postemployment benefits and seniority bonuses according to IAS 19 are shown below: Post-employment benefits and Seniority bonuses 1) Discount rate Composite curve ZC 2) 1-year discount rate 0.26% 2) Expected inflation rate 0.60% 3) Post-employment benefits percentage paid early in the year (pra) 0.78% 4) Post-employment benefits percentage paid due to resignations in the year (dm) 2.65% 5) Demographic assumption SI 2009 tt=0% 325

328 8 Notes to the Consolidated Financial Statements Section 12 Provisions for risks and charges Item Provisions for risks and charges: breakdown Items/Components Total 31/12/2014 Total 31/12/ Company pensions funds Other provisions for risks and charges 16,442 14, legal disputes 4,944 4, staff expenses 6,888 5, other 4,610 4,858 Total 16,442 14, Provisions for risks and charges: annual changes Pension funds Other funds Total A. Opening balances - 14,034 14,034 B. Increases - 8,016 8,016 B.1 Provision for the year - 4,910 4,910 B.2 Changes due to the passage of time B.3 Changes due to discount rate changes B.4 Other changes - 3,106 3,106 C. Decreases - 5,608 5,608 C.1 Use during the year - 5,555 5,555 C.2 Changes due to discount rate changes C.3 Other changes D. Closing balances - 16,442 16,442 The item B.4 Other changes includes around 3m recognised as a result of the merger by incorporation of Banca Sai SpA in Defined benefit company pension funds There are no provisions of this kind Provisions for risks and charges: other provisions The other provisions for risks and charges consist mainly in: funds for personnel costs: 5.3m were set aside as an actuarial estimate at 31 December 2014 of future charges of employees related to long-term benefits (seniority bonuses); provision for risks for compensation to customers: this amounted to 3.2m at 31 December 2014 ( 3.2m at 31/12/2013) and was set up to meet the likely costs of paying compensation to customers as a consequence of illegal actions carried out by some members of the sales network; during 2014, 2.5k of the provision in question was used for actually paying compensation; provision for risks of legal disputes for contingent liabilities related to actions against it and revocatory actions of 4.9m. 326

329 Unipol Banca Financial Statements 2014 Section 13 Technical provisions Item 130 This item is not present in the financial statements. Section 14 Redeemable shares Item 150 This item is not present in the financial statements. Section 15 Group equity Items 140, 160, 170, 180, 190, 200 and Share capital and Treasury shares : breakdown The share capital is fully paid up and is made up of 897,384,181 ordinary shares each with a nominal value of At the end of the reporting period, the company did not hold treasury shares in its portfolio Share capital Number of Parent Company shares: annual changes Number of shares Items/Types Ordinary Other A. Shares existing at the beginning of the year 1,004,500, fully paid-up 1,004,500, not fully paid-up - - A.1 Treasury shares (-) - - A.2 Shares outstanding: opening balances 1,004,500,000 - B. Increases 232,428,578 - B.1 New issues 232,428, for payment: 232,428, business combinations conversion of bonds exercise of warrants other 232,428, free: in favour of employees in favour of directors other - - B.2 Sale of treasury shares - - B.3 Other changes - - C. Decreases 339,544,397 - C.1 Cancellation 339,544,397 - C.2 Purchase of treasury shares - - C.3 Business disposals - - C.4 Other changes - - D. Shares outstanding: closing balances 897,384,181 - D.1 Treasury shares (+) - - D.2 Shares existing at the end of the year 897,384, fully paid-up 897,384, not fully paid-up

330 8 Notes to the Consolidated Financial Statements 15.3 Share capital: other information The share capital of the Bank is exclusively made up of ordinary shares each with a nominal value of 1. There are no rights, preferences and restrictions on the above-mentioned shares Profit reserves: other information For further details on the breakdown of the profit reserves, please refer to Part F Section 1 Consolidated Shareholders Equity in the Notes to the Financial Statements Other information There is no other information to report. Section 16 Non-controlling interests Item Breakdown of item 210 Non-controlling interests Company name 31/12/ /12/2013 Investments in consolidated companies with significant non-controlling interests 1. Grecale ABS Srl Grecale RMBS 2011 Srl SME Grecale Srl Castoro RMBS Srl Atlante Finance Srl Unicard SpA - 1,365 Other equity investments - - Total 64 1, Equity instruments: breakdown and annual changes This item is not present in the financial statements. 328

331 Unipol Banca Financial Statements 2014 OTHER INFORMATION 1. Guarantees issued and commitments Transactions Amount 31/12/2014 Amount 31/12/2013 1) Financial guarantees issued 59,522 66,595 a) Banks 8,659 8,304 b) Customers 50,863 58,291 2) Commercial guarantees issued 387, ,500 a) Banks 2,247 2,235 b) Customers 385, ,265 3) Irrevocable commitments to grant funds 110, ,121 a) Banks 664 1,667 i) certain use 664 1,667 ii) uncertain use - - b) Customers 110, ,454 i) certain use 6,199 12,651 ii) uncertain use 103, ,803 4) Commitments underlying credit derivatives: protection sales - - 5) Assets lodged as a guarantee of third-party obligations - - 6) Other commitments - - Total 557, , Assets lodged as guarantee for own liabilities and commitments Portfolios Amount 31/12/2014 Amount 31/12/ Held-for-trading financial assets Financial assets designated at fair value Available-for-sale financial assets 294,601 32, Held-to-maturity investments 448, , Receivables from banks Receivables from customers Property, plant and equipment - - In addition to the assets listed in the table it should be mentioned that 531,574k of securitised securities were locked up in order to back lending, Eurolending and repurchase agreements payable operations. 3. Information on operative leasing Information not applicable as the Group only performs financial lease transactions. 329

332 8 Notes to the Consolidated Financial Statements 4. Breakdown of investments with regard to unit-linked and index-linked policies Information not applicable. 5. Management and brokerage on behalf of third parties Type of service Amount 31/12/ Trading for customers - a) Purchases - 1. settled - 2. not settled - b) Sales - 1. settled - 2. not settled - 2. Portfolio management 170,929 a) Individual 170,929 b) Collective - 3. Custody and administration of securities 46,923,093 a) Third-party securities on deposit: connected with the bank s custodian activity (excluding portfolio management) - 1. Securities issued by the companies included in the consolidation - 2. Other securities - b) Other third-party securities on deposit (excluding portfolio management): other 44,590, Securities issued by the companies included in the consolidation 3,096, Other securities 41,494,176 c) Third-party securities deposited with third parties 44,515,212 d) Securities owned deposited with third parties 2,332, Other transactions - 330

333 Unipol Banca Financial Statements Financial assets offset in the financial statements, or subject to master offsetting or similar agreements Technical forms Gross amount of financial assets (a) Amount of financial liabilities offset in the financial statements (b) Net amount of financial assets shown in the financial statements (c=a-b) Related amounts not offset in the financial statements Financial instruments (d) Cash deposits received as collateral (e) Net amount 31/12/2014 (f=c-d-e) Net amount 31/12/ Derivatives 7,926-7,926-7, Repurchase agreements 16,465-16,465 16, Securities lending Other Total ,391-24,391 16,465 7,926 - Total ,332-24,332 14,371 9, Financial liabilities offset in the financial statements, or subject to master offsetting or similar agreements Amount in k Technical forms Gross amount of financial liabilities (a) Amount of financial assets offset in the financial statements (b) Net amount of financial liabilities shown in the financial statements (c=a-b) Related amounts not offset in the financial statements Financial instruments (d) Cash deposits received as collateral (e) Net amount 31/12/2014 (f=c-d-e) Net amount 31/12/ Derivatives 84,472-84,472-84, Repurchase agreements 300, , , Securities lending Other Total , , ,430 84, Total , , ,295 50, At 31 December 2014, the financial instruments that were subject to an enforceable master netting arrangement or similar agreement were not offset in the financial statements in accordance with IAS 32 paragraph Securities lending transactions There are no transactions of this type in the financial statements. 9. Information on joint operations There are no operations of this type in the financial statements. 331

334 8 Notes to the Consolidated Financial Statements Part C Information on the Consolidated Income Statement Section 1 Interest Items 10 and 20 Interest income and similar income: breakdown Items/Technical forms Debt securities Loans Other transactions Total 2014 Total Held-for-trading financial assets 1, , Financial assets designated at fair value Available-for-sale financial assets 13, ,880 17, Held-to-maturity investments 38, ,216 32, Receivables from banks 382 1, ,861 1, Receivables from customers - 372, , , Hedging derivatives 1,351 1,351 5, Other assets Total 53, ,118 1, , ,161 On the items classified as non-performing, interest income of 55,151k matured in 2014 ( 60,085k in 2013). As regards doubtful loans, hedged by the indemnity agreement with the Parent Company UGF, interest income was recorded for the sum of 10.7m. 1.2 Interest income and similar income: differentials relating to hedging transactions Items/Sectors Total 2014 Total 2013 A. Positive differentials relating to hedging transactions 15,152 23,107 B. Negative differentials relating to hedging transactions 13,801 17,998 C. Balance (A-B) 1,351 5, Interest income and similar income: other information Interest income on financial assets in foreign currency Total 2014 Total 2013 Interest income on financial assets in foreign currency 4,696 4,

335 Unipol Banca Financial Statements Interest income on financial lease transactions Total 2014 Total 2013 Interest income for financial lease transactions 2,751 3, Interest expense and similar expenses: breakdown Items/Technical forms Payables Securities Other transactions Total 2014 Total Due to central banks 1,592-1,592 4, Due to banks 12,426-12,426 8, Due to customers 66,306-66, , Securities outstanding 93,547-93,547 93, Held-for-trading financial liabilities Financial liabilities designated at fair value Other liabilities and funds Hedging derivatives Total 80,324 93, , , Interest expense and similar expenses: differentials relating to hedging transactions Item not applicable for the years under examination. 1.6 Interest expense and similar expenses: other information Interest expense on liabilities in foreign currency Total 2014 Total 2013 Interest expense on liabilities in foreign currency Interest expense on liabilities for financial lease transactions Item not applicable for the years under examination. 333

336 8 Notes to the Consolidated Financial Statements Section 2 Commissions Items 40 and Commission income: breakdown Type of service/sectors Total 2014 Total 2013 a) Guarantees issued 3,810 3,688 b) Credit derivatives - - c) Management, brokerage and consultancy services: 50,971 31, Trading of financial instruments Trading of foreign currencies 1,141 1, Portfolio management 1, individual 1, collective Custody and administration of securities 30,873 16, Custodian bank Placement of securities 7,591 4, Receipt and transmission of orders 1,628 1, Consultancy activity investment activities financial structure activities Distribution of third-party services 8,569 7, Portfolio management individual collective Insurance products 4,967 4, Other products 3,602 2,724 d) Collection and payment services 35,002 33,655 e) Securitisation services f) Factoring services 6 - g) Tax collection services - - h) Management of multilateral trading systems - - i) Current account holding and management 52,651 53,205 j) Other services 7,387 6,047 Total 149, ,

337 Unipol Banca Financial Statements Commission expense: breakdown Services/Sectors Total 2014 Total 2013 a) Guarantees received 24,778 11,904 b) Credit derivatives - - c) Management and brokerage services: 11,082 8, Trading of financial instruments Trading of foreign currencies Portfolio management: own delegated by third parties Custody and administration of securities 1,995 1, Placement of financial instruments Financial instruments, products and services offered off-premises 8,931 7,713 d) Collection and payment services 8,907 7,690 e) Other services Total 45,134 29,001 Section 3 Dividends and similar income Item Dividends and similar income: breakdown Items/Income Dividends Total 2014 Total 2013 Income from UCITS units Dividends Income from UCITS units A. Held-for-trading financial assets B. Available-for-sale financial assets C. Financial assets designated at fair value D. Equity investments - - Total

338 8 Notes to the Consolidated Financial Statements Section 4 Net result from trading - Item Net result from trading: breakdown Transactions/Income components Capital gains (A) Profits from trading (B) Capital losses (C) Losses from trading (D) Net profit (loss) [(A+B) - (C+D)] 1. Held-for-trading financial assets (44) (517) (303) 1.1 Debt securities (504) (258) 1.2 Equity securities - 12 (44) (13) (45) 1.3 UCITS units Loans Other Held-for-trading financial liabilities Debt securities Payables Other Other financial assets and liabilities: exchange rate differences 2, Derivatives - 9,485 (12) - 9, Financial derivatives: - 9,485 (12) - 9,473 - on debt securities and interest rates - 9,485 (12) - 9,473 - on equity securities and stock market indices on foreign currencies and gold - - other Credit derivatives Total - 9,743 (56) (517) 11,355 The item Profits from trading, relating to Derivatives, comprises the effects deriving from the entry in January and December 2014 into several hedging agreements for indexed Italian treasury bonds allocated to the available-for-sale portfolio. 336

339 Unipol Banca Financial Statements 2014 Section 5 Net result from hedging - Item Net result of hedging: breakdown Income components/amounts Total 2014 Total 2013 A. Income relating to: A.1 Fair value hedging derivatives - 6,550 A.2 Financial assets hedged (fair value) - - A.3 Financial liabilities hedged (fair value) 3,378 - A.4 Financial derivatives for hedging cash flows - - A.5 Assets and liabilities in foreign currency - - Total income from hedging activities (A) 3,378 6,550 B. Charges relating to: B.1 Fair value hedging derivatives 3,149 6,672 B.2 Financial assets hedged (fair value) - - B.3 Financial liabilities hedged (fair value) - - B.4 Financial derivatives for hedging cash flows - - B.5 Assets and liabilities in foreign currency - - Total charges from hedging activities (B) 3,149 6,672 C. Net result from hedging (A B) 229 (122) Section 6 Profits (losses) on disposal/repurchase Item Profits (losses) on disposal/repurchase: breakdown Total 2014 Total 2013 Items/Income components Profits Losses Net result Profits Losses Net result Financial assets 1. Receivables from banks (37) (37) 2. Receivables from customers (5,908) (5,908) 3. Available-for-sale financial assets 65,001 (58) 64,943 16,042 16, Debt securities 64,811 (58) 64,753 15,934-15, Equity securities UCITS units Loans Held-to-maturity investments Total assets 65,011 (58) 64,953 16,042 (5,945) 10,097 Financial liabilities 1. Due to banks Due to customers Securities outstanding 946 (1,351) (405) 2,061 (646) 1,415 Total liabilities 946 (1,351) (405) 2,061 (646) 1,415 The profits on equity securities are due mainly to the sale of EUKEDOS shares whereas those on debt securities mainly refer to the sale of securities of governments and central banks. 337

340 8 Notes to the Consolidated Financial Statements Section 7 Net result on financial assets and liabilities designated at fair value - Item 110 This item is not present in the financial statements. Section 8 Net impairment adjustments Item Net impairment adjustments to loans: breakdown Transactions/ Income components Adjustments (1) Write-backs (2) Specific Portfolio Specific Portfolio write-offs other interest other write-backs interest other write-backs Total 2014 (3)=(1) (2) Total 2013 (3)=(1) (2) A. Receivables from banks loans debt securities B. Receivables from customers 7, ,971 18, , , ,993 Non-performing loans purchased loans debt securities Other receivables 7, ,971 18, , , ,993 - loans 7, ,971 18, , , ,993 - debt securities C. Total 7, ,971 18, , , , Net impairment adjustments to available-for-sale financial assets: breakdown Adjustments (1) Write-backs (2) Specific Specific Transactions/Income components Write-offs Other interest other write-backs Total 2014 (3)=(1) (2) Total 2013 (3)=(1) (2) A. Debt securities B. Equity securities - 33,064 33,064 6,721 C. UCITS Units - 14,344-14,344 42,864 D. Loans to banks E. Loans to customers F. Total - 47, ,981 49,

341 Unipol Banca Financial Statements Net impairment adjustments to held-to-maturity investments: breakdown Sub-item is not present in the financial statements Net impairment adjustments to other financial assets: breakdown Transactions/ Income components Adjustments (1) Write-backs (2) Specific Portfolio Specific Portfolio write-offs other interest other write-backs interest other write-backs Total 2014 (3)=(1) (2) Total 2013 (3)=(1) (2) A. Guarantees issued , ,091 1,483 B. Credit derivatives C. Commitments to disburse funds D. Other transactions E. Total , ,091 1,483 Section 9 Net insurance premiums Item 150 This item is not present in the financial statements. Section 10 Other net insurance income (expense) Item 160 This item is not present in the financial statements. 339

342 8 Notes to the Consolidated Financial Statements Section 11 Administrative expenses Item Personnel expenses: breakdown Type of expense Total 2014 Total ) Employees 158, ,163 a) Wages and salaries 110,223 99,971 b) Social security contributions 29,541 26,646 c) Termination indemnities d) Pension-related expenses e) Provision for post-employment benefits 5,852 5,759 f) Provision for pension fund and similar: defined contribution defined benefit - - g) Payments into external supplementary pension schemes: 4,524 3,982 - defined contribution 4,524 3,982 - defined benefit - - h) Costs deriving from payment agreements based on own equity instruments - - i) Other benefits in favour of employees 6,934 7,169 2) Other staff 2,852 3,220 3) Directors and auditors 1,216 1,138 4) Retired staff 7 - Total 162, ,521 The Group disburses a complementary pension to employees registered with the external defined-contribution Pension Fund for Unipol Banca Employees, which was set up on the basis of supplementary corporate agreements. The total amount of contributions paid is shown in line 1g) of table 9.1 above Average number of employees per category average 2014 average 2013 Employees: 2,387 2,329 a) Executives 11 3 b) Middle management c) Remaining employees 1,456 1,449 Other staff Total 2,408 2,

343 Unipol Banca Financial Statements Defined benefit company pension funds: costs and revenues No internal pension funds were set up Other benefits in favour of employees The item in question, shown in table 11.1, is mainly made up of charges for luncheon vouchers and sickness and accident welfare services. The remainder is due to lump-sum expenses for travel, staff training and other incidental costs Other administrative expenses: breakdown Type of expense Total 2014 Total 2013 Rent expense 28,811 29,675 IT and data processing costs 25,212 20,046 Taxes and indirect taxation 17,991 15,633 Professional services 13,374 10,540 Condominium costs and utility charges 4,911 5,420 Insurance premiums 3,850 1,955 Postage 3,298 2,801 Reports and surveys 3,273 3,743 Transport and delivery costs 2,726 2,686 Security and safety 1,484 1,740 Cleaning costs 2,793 2,926 Advertising and representation costs 3,057 3,276 Print-outs and stationery 2,216 1,590 Maintenance costs 3,749 3,483 Telephone costs 1,012 1,171 Membership fees 1, Corporate Board expenses - - Miscellaneous expenses 21,845 22,559 Total 140, ,064 Section 12 Net provisions for risks and charges Item Net provisions for risks and charges: breakdown Type of allocations Total 2014 Total Allocations for revocation actions Allocations for sundry charges 3,739 4,476 Total 3,739 4,

344 8 Notes to the Consolidated Financial Statements Section 13 Net adjustments/write-backs to property, plant and equipment Item Net adjustments to property, plant and equipment: breakdown Assets/Income components Depreciation (a) Impairment adjustments (b) Write-backs (c) Net profit (loss) (a+b c) A. Property, plant and equipment 7, ,086 A.1 Owned 7, ,086 - For functional use 7, ,086 - For investment A.2 Acquired under financial lease For functional use For investment Total 7, ,086 Section 14 Net adjustments/write-backs to intangible assets Item Net adjustments to intangible assets: breakdown Assets/Income components Amortisation (a) Impairment adjustments (b) Write-backs (c) Net profit (loss) (a+b-c) A. Intangible assets A.1 Owned Generated internally by the company Other A.2 Acquired under financial lease Total Section 15 Other operating expenses/income Item Other operating expenses: breakdown Income components/amounts Total 2014 Total Amortisation of improvements to property belonging to third parties 5,929 6,862 - Indemnities paid to third parties 1,314 1,295 - Extraordinary losses Losses from thefts and robberies Miscellaneous charges 2, Total 10,303 9,

345 Unipol Banca Financial Statements Other operating income: breakdown Income components/amounts Total 2014 Total Recovery of indirect taxes 17,542 14,079 - Recovery of miscellaneous expenses 11,211 11,513 - Reimbursement of utilities and rent Extraordinary gains 3, Reimbursement of indemnities and attendance fees by subsidiaries Recovery of legal expenses 6,046 6,847 - Miscellaneous income 1,753 7,965 Total 40,610 41,332 Section 16 Profits (losses) on equity investments Item Profits (losses) on equity investments: breakdown Income components Total 2014 Total ) Joint ventures A. Income Revaluations Profits on disposal Write-backs Other income - - B. Expense Write-downs Impairment adjustments Losses on disposal Other expenses - - Net profit (loss) - - 2) Companies subject to significant influence A. Income Revaluations Profits on disposal Write-backs Other income - - B. Expense (666) (47) 1. Write-downs (666) (47) 2. Impairment adjustments Losses on disposal Other expenses - - Net profit (loss) (570) (29) Total (570) (29) 343

346 8 Notes to the Consolidated Financial Statements Section 17 Valuation differences on property, plant and equipment and intangible assets designated at fair value Item 250 This item is not present in the financial statements. Section 18 Goodwill impairment Item Goodwill impairment: breakdown Income components/amounts Total 2014 Total 2013 Goodwill impairment ,726 During the financial year, adjustments were made to positive consolidation differences, expression of goodwill in consolidated companies and recorded as intangible fixed assets. These adjustments concerned for 507k the company Unicard S.p.A., subject to transfer to third parties, and for the residual part, they are related to the company Campuscertosa wound up during the financial year. Section 19 Profit (losses) on disposal of investments Item 270 This item is not present in the financial statements. Section 20 Income tax on current operations Item Income tax on current operations: breakdown Income components/sectors Total 2013 Total Current tax (-) (31,313) (4,659) 2. Changes in current tax for previous years (+/-) Reduction in current tax for the year (+) 15,324-3.bis Reduction in current tax for the year for tax credits pursuant to Law 214/2011 (+) 74, Change in deferred tax assets (+/-) (35,712) 139, Change in deferred tax liabilities (+/-) (5,521) (2,810) 6. Tax for the year (-) (-1+/-2+3+/-4+/-5) 18, ,

347 Unipol Banca Financial Statements Reconciliation between theoretical tax charge and actual tax charge in the consolidated financial statements Total 2014 Total 2013 Income tax - theoretical charge (103,429) (431,850) Effect of non-taxable income or income taxed at reduced rates 28, ,759 Effect on non-deductible charges 2, Effect of goodwill exemption (12,035) (6,215) Other effects - - Income tax - actual charge 3,202 2,872 Income tax - actual charge 21, ,432 IRAP - theoretical tax charge 5,618 24,029 Effect of income and charges excluded from taxable income (7,999) (7,381) Effects due to changes in rates - - Effect of goodwill exemption - - Effect of regional additional taxes 74 8 IRAP - actual tax charge (2,307) 16,656 Substitute tax on goodwill exemption - - Tax relating to previous years (IRES) Tax relating to previous years (IRAP) Reclassification of deferred tax liabilities adjustment IAS 2 (2,047) - Total actual tax charge in the financial statements 18, ,216 The theoretical tax charge is calculated on the basis of the following rates: 27.5% for IRES and 5.57% for IRAP. The theoretical IRAP rate adopted is equivalent to that approved by the Emilia Romagna region. The effects of differentiated rate taxations are indicated separately under Effect of regional additional taxes. Section 21 Profit (loss) after tax on disposal groups held for sale Item Profit (Loss) after tax on disposal groups held for sale: breakdown Income components/sectors Total 2014 Total Income Expense - (478) 3. Result of valuations of the group of assets and associated liabilities Profits (losses) on disposal - (2) 5. Duties and taxes - (22) Profit/Loss

348 8 Notes to the Consolidated Financial Statements 21.2 Breakdown of income taxes relating to disposal groups held for sale Income components/sectors Total 2014 Total Current taxes (-) - (22) 2. Change in deferred tax assets (+/-) Change in deferred tax liabilities (+/-) Income tax for the year (-1+/-2+/-3) - (22) Section 22 Net profit (loss) attributable to non-controlling interests Item Breakdown of item 330 Net Profit (Loss) attributable to non-controlling interests The result for the year attributable to non-controlling interests is 67k relating almost entirely to the portion of profit recorded in the consolidation of the subsidiary Unicard SpA for the period prior to its transfer. Section 23 Other information There is no further information other than that already shown in the previous sections. Section 24 Earnings per share Information not due for companies with shares not traded on financial markets 346

349 Unipol Banca Financial Statements 2014 Part D Consolidated Comprehensive Income Detailed table of Consolidated Comprehensive Income Items Gross amount Income tax Net amount 10. Profit (loss) for the year (85,339) Other income components without transfer to the income statement: 20. Property, plant and equipment Intangible assets Defined benefit plans (1,996) 574 (1,422) 50. Non-current assets being disposed of Portion of valuation reserves for investments valued at equity Other income components with transfer to the income statement: 70. Foreign investment hedging: a) changes in fair value b) transfer to the income statement c) other changes Exchange rate differences a) changes in value b) transfer to the income statement c) other changes Cash flow hedging (2,190) 724 (1,466) a) changes in fair value 1,772 (586) 1,186 b) transfer to the income statement (3,962) 1,310 (2,652) c) other changes Available-for-sale financial assets: (18,839) 6,342 (12,497) a) changes in fair value 4,510 (1,492) 3,018 b) transfer to the income statement (23,349) 7,834 (15,515) - impairment adjustments profits/losses on sale (23,349) 7,834 (15,515) c) other changes Non-current assets being disposed of a) changes in fair value b) transfer to the income statement c) other changes , Portion of valuation reserves for investments carried at equity: a) changes in fair value b) transfer to the income statement impairment adjustments profits/losses on sale c) other changes Total other income components (23,025) 7,640 (15,385) 140. Comprehensive income (Item ) (23,025) 7,640 (100,724) 150. Consolidated comprehensive income attributable to non-controlling interests (76) 160. Consolidated comprehensive income attributable to the Parent Company (23,025) 7,640 (100,800) 347

350 8 Notes to the Consolidated Financial Statements Part E Information on risks and related hedging policies Foreword In the Unipol Group, the Risk Management department is part of the broader internal control and risk management system that operates on three levels: line checks (assigned to the operational units); controls on risks and on compliance (Risk Management, Compliance, Anti-Money Laundering, etc); Internal Audit. The Internal control and risk management system is an essential element of the corporate governance as a whole; it comprises a set of rules, procedures and organisational structures that aim at ensuring: efficiency and effectiveness of business processes; adequate control of current and future risks; prevention of the risk that the company is involved, even unintentionally, in illegal activities with particular reference to those related to money laundering, usury and terrorist financing: monitoring the implementation of strategies and corporate policies; safeguarding of company assets and the good management of that held on behalf of customers; reliability and integrity of accounting and management information and IT procedures; the adequacy and timeliness of the reporting system of corporate information; the compliance of the activity of the company and of transactions put in place on behalf of customers with the law, supervisory regulations, self-regulations and internal provisions of the company. This system is an integral part of the company and permeates all its sectors and structures, involving all resources, each by level of competence and responsibility, in order to ensure a constant and effective supervision of risks. Within the scope of the internal control and risk management system, the Unipol Banca Group has set up a risk management system that allows adequate understanding of the nature and importance of the risks to which the Company is exposed and allows to have a single point of view and a holistic approach to risk management, which is an integral part of business management. The risk management process defined within the System of risk management involves the following stages: identification of risks, current and future assessment of risk exposure, monitoring of risk exposure and mitigation of risks. These stages are carried out on a continuous basis to take account both of the changes that have occurred to the nature and size of the business and to the market context, and of the onset of new risks or the change in existing risks. An important component of the risk management system is represented by management policies of specific risks. These policies establish the adequate guidelines for the direction of the identification, assessment, monitoring and mitigation of risks and the operating limits in line with the defined Risk Appetite. The Risk Management Department of Unipol Banca is part of Unipol Banca s Head Office and reports to the Risk Management Department of the Parent Company, UGF S.p.A. As part of the risk governance role, the head of the Bank s Risk Management Department is in constant contact with the Risk Management Department of the Parent Company, UGF and with the other departments of Unipol Banca and the subsidiaries, in order to ensure that risk management policies and risk governance are applied uniformly and consistently at Group level. Moreover, the Risk Management department: is involved in defining the RAF, risk controlling policies and the different phases that form their management process as well as fixing the operating limits to the assumption of various types of risk; verifies the adequacy of the RAF; verifies continuously the adequacy of the management process of risks and operating limits; monitors the development, validation and maintenance of risk measurement and control systems ensuring that they are subject to regular backtesting, that an appropriate number of scenarios are analysed and that conservative assumptions on branches and on correlations are used; ensures the consistency of risk measurement and control systems with processes and valuation techniques of company activities, in coordination with other company departments concerned; develops and applies indicators that are able to highlight situations of failure and inefficiency of the risk measurement and control systems; analyses the risks of new products and services and those deriving from the entry in new operating and market segments; 348

351 Unipol Banca Financial Statements 2014 expresses opinions in advance on the compliance with RAF of most significant transactions, by acquiring, if possible, depending on the type of operation, the opinion of other departments involved in the risk management process; monitors constantly the actual risk assumed by the Company and its compliance with the risk objectives as well as the compliance with the operating limits assigned to the operating structures in relation to the assumption of various types of risk; verifies proper execution of performance scoring on individual exposures; checks the adequacy and efficacy of the measures adopted to remedy the shortfalls noted in the risk management process; prepares the reporting for the managers of the operating structures, company committees and for the Board of Directors, relating to the monitoring of the risks and limits defined in the risk-taking and risk management policies. For the purposes of disseminating the culture of risk, the continuous comparison with the Management and with each Business unit has a key role, also by participating directly to different company committees in addition to the adoption of taxonomies common to other control structures. In particular, the bank completed the structure of the joint database with the support of the MEGA GRC platform that will make it possible to give a common focus to the risk management and control system with the other control governance and Organisation and Operations departments. Moreover, business processes will be gradually mapped with the support of the joint database. The structured activity of adequacy assessment of the risk assumption and management process was carried out on an annual basis during ICAAP, whose purpose is to raise awareness on the governance of relevant risks. Moreover, the Risk Self Assessment process (hereinafter RSA) carried out for the purposes of assessment of operating risks, due to its nature, places the interlocutors, responsible for business and administrative processes, in front of the risks of their activities disseminating the culture of risk itself given the pervasiveness of operational risk. The activity of RSA in the Unipol Banca Group is implemented in meetings with different risk owners of Unipol Banca and with the Chief Executive Officer of the subsidiary companies for the assessment of operational risks in terms of frequency, impact and the worst case. Section 1 Credit Risk Qualitative Information General aspects The following events characterised 2014: maintenance in line with previous years of attention on the quality of the Group s loan portfolio, both with regard to granting, completion/acquisition of guarantees and with regard to monitoring; adoption of the risk parameters of the PD and LGD models for the calculation of the collective write-downs of performing loans. 349

352 8 Notes to the Consolidated Financial Statements 2. Credit risk management policies 2.1 Organisational aspects Further refinement of the IT tools for managing the lending procedure made available by the IT outsourcer CEDACRI as part of a continuous procedure of improvement of the process itself. As regards the management of the group s loan portfolio quality and particularly the monitoring, use of the LMP Loan Monitoring Procedure was consolidated and implemented in organisational terms by starting a project for further improving the credit management process from the first anomalies. In particular, a further response to Credit Monitoring (of Management and Area) and a more pronounced separation - also in Areas - of granting and monitoring activities is contemplated. 2.2 Management, measuring and monitoring systems Credit risk is governed by the principles defined in the Credit Policy Group: this document defines, in particular, the guidelines for the taking and monitoring of the credit risk in order to ensure global exposure to the individual counterparty, in line with the risk appetite expressed in the Group s strategic objectives, guaranteeing adequate diversification of the portfolio. The Credit Policy defines: the types of customer and transaction deemed suitable for granting credit, also in line with the criteria set out in the Sustainability Report of the Unipol Group; the general principles with which the credit risk underwriting policy must comply can be summarised as follows: -- reduction of the weight of large concentrations on single counterparties, groups or sectors, or on high risk counterparties based on internal rating models; -- development of banking and insurance business with the SME and retail segments, which prioritises the granting of traditional credit facilities; the main roles and duties of the organisational structures, to ensure observance of the provisions of the Credit Policy; the roles and responsibilities in the risk monitoring process at Group level, i.e. of the Board of Directors, which is required to approve the general guidelines of the process, and those of the Executive Committee, the Group Credit Risk Committee and the Risk Management Department, and their relations with the various structures of the individual Group companies; the functions of the Group Credit Risk Committee, paying particular attention to its responsibility for monitoring major exposures, reporting to Senior Management and suggesting possible risk mitigation actions. The trend in credit risk is currently monitored using traditional indicators, paying particular attention to the largest debts and to the sectors of greatest concentration. The credit rating models for companies and private customers developed by the IT outsourcer CEDACRI with the support of the consulting company Prometeia, were used to measure the credit risk in The previous rating models supplied by the same outsourcer continued to be used for some residual segments. Finally, together with the retail counterparty rating, the CRIF scoring systems were used during the disbursement. 2.3 Credit risk mitigation techniques Lending focused on traditional transactions in 2014, with the emphasis being placed on SME/small business counterparties. For private customers, as in previous years new transactions mainly concerned home mortgages. Corporate loans were granted mainly in support of manufacturing cycles (releasing credit). General debt rescheduling transactions were confirmed as particularly important during 2014, largely due to the on-going economic crisis affecting most sectors, particularly property. 350

353 Unipol Banca Financial Statements 2014 As regards risk mitigation techniques, the Group used traditional forms of guarantee recognised by the sector (mortgage guarantees, repossession guarantees and sureties), also trying to activate CONFIDI guarantees, where possible. In order to reduce the Residual Risk, mortgage guarantees and actions to monitor them are particularly important. To this end, the prudential regulatory provisions for banks (Bank of Italy Circular 285) have been implemented. The fluctuation in the values of the financial instruments used to guarantee lines of credit granted (mainly government bonds, bonds issued by the Bank and policies) is being monitored. 2.4 Non-performing financial assets The group classifies receivables on the basis of regulatory provisions issued by the Bank of Italy in line with the International Accounting Standards. In particular, the Bank included the following customers in the definition and quantification of its non-performing portfolio: a) those in a state of insolvency (even if this has not been legally ascertained) or in similar situations (doubtful loans); b) those in temporary objective difficulty (watchlist loans) or persistently in arrears, as established by the Supervisory Instructions in relation to particular technical forms of loan (objective watchlist loans); c) those subject to debt-restructuring agreements, following a deterioration in the economic-financial conditions of the counterparty (restructured loans); d) those with past due loans as defined by law (past due loans and objective watchlist loans). The management of critical positions was reinforced with the organisational implementations already mentioned above. In addition to managing the non-performing portfolio, organisational efforts focused on prevention, trying to identify (and resolve) anomalies as soon as they arise in order to protect the credit ratios of the Bank and of its subsidiaries. 351

354 8 Notes to the Consolidated Financial Statements Quantitative Information A. - Credit quality A.1 Non-performing and performing exposures: amounts, adjustments, changes, economic and territorial distribution A.1.1 Distribution of financial assets by portfolio and quality (carrying amounts) Banking group Past due exposures performing Other companies Past due exposures nonperforming Portfolios/quality doubtful loans watchlist loans restructured exposures Other aassets Non-performing Other Total 1. Held-for-trading financial assets Available-for-sale financial assets , , Held-to-maturity investments , , Receivables from banks , , Receivables from customers 1,589, , ,338 77, ,529 6,773, ,901, Financial assets designated at fair value Financial assets being disposed of Hedging derivatives , ,926 Total ,589, , ,338 77, ,529 8,515, ,642,870 Total ,235, , , , ,909 8,958, ,624,

355 Unipol Banca Financial Statements 2014 A.1.2 Distribution of financial assets by portfolio and quality (gross and net amounts) Portfolios/quality Gross exposure Non-performing assets Specific adjustments Net exposure Gross exposure Performing Specific adjustments Net exposure Total (net exposure) A. Banking group 1. Held-for-trading financial assets Available-for-sale financial assets , , , Held-to-maturity investments , , , Receivables from banks , , , Receivables from customers 3,923,486 1,167,693 2,755,793 7,218,379 73,104 7,145,275 9,901, Financial assets designated at fair value Financial assets being disposed of Hedging derivatives ,926 7,926 Total A 3,923,486 1,167,693 2,755,793 8,952,254 73,104 8,887,077 11,642,870 B. Other companies included in the consolidation 1. Held-for-trading financial assets Available-for-sale financial assets Held-to-maturity investments Receivables from banks Receivables from customers Financial assets designated at fair value Financial assets being disposed of Hedging derivatives Total B Total ,923,486 1,167,693 2,755,793 8,952,254 73,104 8,887,077 11,642,870 Total ,176, ,993 2,329,240 9,234,167 48,636 9,294,805 11,624,

356 8 Notes to the Consolidated Financial Statements A Breakdown of performing loans by portfolio and renegotiation agreements Portfolios/quality Performing Up to 3 Months From 3 months to 6 months Past due loans From 6 months to 1 year Over 1 year Total 1. Held-for-trading financial assets Available-for-sale financial assets 568, , Held-to-maturity investments 817, , Receivables from banks 347, , Receivables from customers 6,772, ,914 97,634 33,848 1,008 7,145,275 - not renegotiated under collective agreements 5,720, ,769 49,655 22, ,964,409 - renegotiated under collective agreements 1,052,772 68,145 47,979 11, ,180,866 - Joint SME agreement 32,165 1, ,480 - Family Plan 11,306 1, ,403 - Tremonti Decree Law 93/08 23,549 1, ,714 - Tremonti Decree Law 185/ Financial assets designated at fair value Financial assets being disposed of Hedging derivatives 7, ,926 Total ,514, ,914 97,634 33,848 1,008 8,887,077 A.1.3 Group Balance sheet and off-balance sheet credit exposures to banks: gross and net amounts Types of exposures/amounts Gross exposure Specific adjustments Portfolio adjustments Net exposure A. BALANCE SHEET EXPOSURES a) Doubtful loans b) Watchlist loans c) Restructured exposures d) Past due exposures e) Other assets 387, ,492 TOTAL A 387, ,492 B. OFF-BALANCE SHEET EXPOSURES a) Non-performing b) Other 10,906-10,906 TOTAL B 11, ,906 TOTAL (A+B) 398, ,

357 Unipol Banca Financial Statements 2014 The balance sheet exposures shown in the previous table comprise all balance sheet financial receivables from banks, regardless of the portfolio they belong to. In particular, the assets represented are allocated to the financial statements in the credit portfolio, the trading portfolio and in the available-for-sale financial assets portfolio. A.1.4 Group Balance sheet credit exposures to banks: change in gross non-performing exposures A.1.5 Group Balance sheet exposures to banks: change in total adjustments The valuation of balance sheet exposures to banks did not require the posting of this type of non-performing exposures nor, therefore, of any adjustment. A.1.6 Group - Balance sheet and off-balance sheet credit exposures to customers: gross and net amounts Types of exposures/amounts A. BALANCE SHEET EXPOSURES Gross exposure Specific adjustments Portfolio adjustments Net exposure a) Doubtful loans 2,547, ,600 1,589,240 b) Watchlist loans 1,132, , ,109 c) Restructured exposures 162,246 40, ,338 d) Past due exposures non-performing 80,872 3,766 77,106 f) Other assets 8,564,762 73,104 8,491,658 TOTAL A 12,488,248 1,167,693 73,104 11,247,451 B. OFF-BALANCE SHEET EXPOSURES a) Non-performing 55, ,803 b) Other 500,618 3, ,539 TOTAL B 556, , ,342 TOTAL (A+B) 13,044,296 1,168,320 76,183 11,799,793 The balance sheet exposures shown in the previous table comprise all balance sheet financial receivables from banks, regardless of the portfolio they belong to. In particular, the assets represented are allocated to the financial statements in the credit portfolio, the trading portfolio, the available-for-sale financial assets portfolio and the held-to-maturity investments portfolio. 355

358 8 Notes to the Consolidated Financial Statements A.1.7 Group - Balance sheet exposures to customers: change in gross non-performing exposures Causes/Categories Doubtful loans Watchlist loans Restructured exposures Past due exposures A. Gross opening exposure 1,914, , , ,888 - of which: exposures assigned but not derecognised 141, ,416 2,258 77,473 B. Increases 681, , , ,563 B.1 Inflows from performing loans 10, ,700 3, ,330 B.2 Transfers from other categories of non-performing exposures 326, ,149 35,805 11,924 B.3 Other increases 345, , ,023 82,309 C. Decreases 48, , , ,579 C.1 Outflows to performing loans 57 33, ,412 C.2 Write-offs 11, C.3 Collections 36, ,593 84,951 75,092 C.4 Proceeds from assignments C.4.bis Losses arising from assignments C.5 Transfers to other categories of non-performing exposures 1, ,646 40, ,058 C.6 Other decreases D. Gross closing exposure 2,547,840 1,132, ,246 80,872 - of which: exposures assigned but not derecognised 126,875 82, ,183 The above table, like the following, includes in items other increases and other decreases the effects deriving from the change in the scope of consolidation. A.1.8 Group - Balance sheet exposures to customers: change in total adjustments Causes/Categories Doubtful loans Watchlist loans Restructured exposures Past due exposures A. Total opening adjustments 679, ,797 12,961 4,127 - of which: exposures assigned but not derecognised 29,061 3, B. Increases 309,269 68,738 31,538 4,466 B.1. Adjustments 167,899 52,533 21,428 2,105 B.1.bis Losses arising from assignments B.2. Transfers from other categories of non-performing exposures 49,668 1,318-7 B.3. Other increases 91,702 14,887 10,110 2,354 C. Decreases 29,782 55,116 3,591 4,827 C.1. Write-backs arising from valuation 13,826 5,594 2,429 2,986 C.2. Write-backs arising from collection 2, C.2.bis Profits arising from assignments C.3. Write-offs 11, C.4. Transfers to other categories of non-performing exposures , ,348 C.5 Other decreases 1,153 1, D. Total closing adjustments 958, ,419 40,908 3,766 - of which: exposures assigned but not derecognised 18,364 2,

359 Unipol Banca Financial Statements 2014 A.2 Classification of exposures based on external and internal ratings A.2.1 Distribution of balance sheet and off-balance sheet exposures by external rating class External rating class Exposures Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 No rating Total A. Balance sheet exposures - - 1,354,554 10,573-13,005 10,294,825 11,672,957 B. Derivatives B.1 Financial derivatives B.2 Credit derivatives C. Guarantees issued ,806 1, , ,187 D. Commitments to grant funds - - 1, , ,715 E. Other ,542 11,542 Total - - 1,439,887 11,694-13,005 10,777,815 12,242,401 A.2.2 Distribution of balance sheet and off-balance sheet exposures by internal rating class Information not available with reference to 31 December A.3 Distribution of guaranteed exposures by type of guarantee A.3.1 Group - Guaranteed exposures to banks There are no exposures of the above type. 357

360 8 Notes to the Consolidated Financial Statements A.3.2 Group - Guaranteed exposures to customers Collaterals (1) Net exposure amount Properties-mortgage loans Properties-finance leases Securities Other collaterals 1. Guaranteed balance sheet exposures 7,792,377 13,176,396 64, , , fully guaranteed 7,102,717 12,833,122 64,837 98, ,401 - of which non-performing 1,949,195 3,134,104 24,743 14, , partially guaranteed 689, ,274-17,646 27,835 - of which non-performing 435, ,276-2,124 6, Guaranteed off-balance sheet exposures: 149,780 38,398-43,650 7, fully guaranteed 118,219 27,547-38,661 6,317 - of which non-performing 18,463 13, , partially guaranteed 31,561 10,851-4,989 1,028 - of which non-performing 14,371 10, B DISTRIBUTION AND CONCENTRATION OF CREDIT EXPOSURES B.1 Group - Sectoral distribution of balance sheet and off-balance sheet exposures to customers (carrying amount) Governments Other public bodies Financial companies Exposures/Counterparties 1. Balance sheet exposures: Net exposure Specific adjustments Portfolio adjustments Net exposure Specific adjustments Portfolio adjustments Net exposure Specific adjustments A.1 Doubtful loans ,237 38,508 Portfolio adjustments A.2 Watchlist loans ,838 8,535 A.3 Restructured exposures ,305 7,893 A.4 Past due exposures A.5 Other exposures 1,344, , ,726 5,114 TOTAL A 1,344, , ,143 54,944 5,114 B. Off-Balance sheet exposures: B.1 Doubtful loans B.2 Watchlist loans ,307 - B.3 Other non-performing loans B.4 Other exposures 698-2, , TOTAL B , , TOTAL (A+B) ,345, , ,496 54,944 5,333 TOTAL (A+B) ,585, , ,897 18,623 1,

361 Unipol Banca Financial Statements 2014 Personal guarantees (2) Credit derivatives Unsecured loans Other derivatives C L N Governments and central banks Other public bodies Banks Other entities Governments and central banks Other public bodies Banks Other parties Total (1)+(2) , ,737,840 21,543, , ,648,480 21,030, , ,642,690 5,942, ,192-89, , ,209-57, , , , , , , ,015 27, , , ,942 Insurance companies Non-financial companies Other parties Net exposure Specific adjustments Portfolio adjustments Net exposure Specific adjustments Portfolio adjustments Net exposure Specific adjustments Portfolio adjustments - - 1,348, , , , , , ,125 47, ,725 33, ,262 2,453 43,807 1,305 27, ,049,301 53,608 3,704,233 13,967 27, ,263, ,914 53,608 4,082, ,834 13, , , , , ,082 2,292 16, , , ,292 18, , ,693, ,540 55,900 4,100, ,835 14,065 58, ,058, ,611 41,242 3,601, ,055 6,

362 8 Notes to the Consolidated Financial Statements B.2 Group - Territorial distribution of balance sheet and off-balance sheet exposures to customers (carrying amount) Amonuts in k Exposures/Geographic areas A. Balance sheet exposures Net exposure Italy Other European countries America Asia Rest of the World Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A.1 Doubtful loans 1,589, , A.2 Watchlist loans 967, , , A.3 Restructured exposures 121,338 40, A.4 Past due exposures 77,106 3, A.5 Other exposures 8,466,242 72,718 18, , TOTAL 11,221,025 1,238,090 18,822 1,218 7,492 1, B. Off-Balance sheet exposures B.1 Doubtful loans 11, B.2 Watchlist loans 37, B.3 Other non-performing loans 5, B.4 Other exposures 485,623 3, TOTAL 540,426 3, TOTAL ,761,451 1,241,796 18,825 1,218 7,862 1, TOTAL ,818, ,574 3, ,806 1, B.3 Group Territorial distribution of balance sheet and off-balance sheet exposures to banks (carrying amount) Exposures/Geographic areas A. Balance sheet exposures Net exposure Italy Other European countries America Asia Rest of the World Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A.1 Doubtful loans A.2 Watchlist loans A.3 Restructured exposures A.4 Past due exposures A.5 Other exposures 283, , ,061 - TOTAL A 283, , ,061 - B. Off-Balance sheet exposures B.1 Doubtful loans B.2 Watchlist loans B.3 Other non-performing loans B.4 Other exposures 10, TOTAL B 10, TOTAL , , ,061 - TOTAL , ,595-2,

363 Unipol Banca Financial Statements 2014 B.4 Large exposures Information not applicable please see section 2 - Own funds and regulatory ratios - for more details. C. Securitisations C.1 Securitisations Qualitative information In the period from 2001 to 2012, the Bank carried out a total of eight performing loan securitisations, all arising from loans granted independently, where the first two had already been fully paid off in The operation carried out in 2012 is excluded from this section in that it is defined as a self-securitisation, under the supervisory regulations issued by the Bank of Italy and carried out after 30 November 2008, since the bank subscribed, at the time they were issued, and still holds at the close of the year all the ABS securities issued by the vehicle company; its main features will be summarised at the end of this section. The operations carried out in 2009 and 2011, included initially in this last category, became part of this section as a result of the assignment to third parties of the ABS securities fully subscribed at the time they were issued by the Bank. While on the subject of these regulations, it should be mentioned that the fifth securitisation, under which the bank also subscribed all the ABS securities at the time they were issued by the vehicle company, was carried out by the deadline of 30 November 2008 and under Bank of Italy provisions is therefore classified as a grandfathered self-securitisation and dealt with in this section. The transactions were carried out with a view to diversifying types of funding, improving the correlation between customer deposits and loan maturities. In all transactions, also other than self-securitisations, Unipol Banca has always subscribed and still holds all the junior notes issued under the various securitisation programmes and not yet repaid. Thus the risk relating to the assets assigned remains with the parent bank which, as servicer, will regularly monitor performance and provide reports. In addition to the junior notes, the Bank also holds some of the higher-priority notes (senior and mezzanine, if any) that were not placed on the market at the time of issue or were subsequently repurchased. At the same time, we provide also the situation of the ratings assigned by the various agencies to the ABS securities, compared to the original, almost everywhere unchanged compared to the previous financial year. As already indicated in Part A Accounting Policies, in the case of operations still in existence, all completed after 31 December 2003, the assets assigned continued to appear in the financial statements, as essentially the risk was not transferred to third parties. There follows a descriptive analysis of each of the operations still in existence during Securitisation scheme carried out through Grecale ABS Srl, launched in December 2003 issue on the market in April 2005 following repackaging through Castoro RMBS Srl (Grecale ABS Securitisation 2) In December 2003, a securitisation scheme was signed in which the maximum amount of securities to be issued totalled 750m and that was to be carried out within an initial warehousing period of one year, which was then extended until April Under this scheme, organised in collaboration with ABN AMRO N.V. acting as arranger and with Unipol Merchant Banca per le Imprese Spa as co-arranger, three assignments of receivables were made, funded by Grecale ABS issuing three series of securities, divided into only two classes: senior notes and junior notes. Assignments of receivables after the first assignment have been partly financed, up to the available amount, with principal funds derived from the income collected from receivables previously assigned. All assignments of receivables carried out in the warehousing period form a single portfolio in the interests of the holders of the securities issued, according to the priorities set between the various classes of securities but with no differentiation between the various series of securities within the same class. The receivables assigned come from performing residential mortgage loans issued by Unipol Banca, also as a result of acquisition of branches from other banks, granted to private customers residing in Italy (North Italy 51%, 361

364 8 Notes to the Consolidated Financial Statements Central Italy 32% Southern Italy and Islands 17%), secured by first degree or equivalent mortgages, with a ratio between residual debt and property value as determined by an expert valuation of no more than 80%. Overall receivables with a total principal value of 678,084k were assigned for 727,004k. Price of receivables assigned to Grecale ABS Sec. 2 Year 2003 Year 2004 Amount Assignment price - principal 270, , ,084 Assignment price - interest ,000 Assignment price - premium 20,302 27,618 47,920 Total 291, , ,004 Grecale ABS financed the purchase by issuing two classes of securities, split into three series, with a total nominal value equal to the amount of the receivables, net of the funds available from receipts of collections from the mortgages. The following table summarises the main characteristics of the securities issued. Securities issued by Grecale ABS Class Legal expiry date Interest rate Rating Nominal amount Senior 28/01/2041 3m Euribor + 40b.p. n/r 618,000 Junior 28/01/2041 1% + variable return n/r 81,528 Total 699,528 During the warehousing period the senior notes were subscribed through private placement by an independent SPV (Tulip Asset Purchase Company B.V. registered in Amsterdam) and the junior notes were subscribed by Unipol Banca. In April 2005, all the securities issued by Grecale ABS were transferred to the SPV Castoro RMBS Srl, which funded the purchase by issuing three classes, were repackaged. The following table shows the main features of the securities issued by Castoro RMBS. 362

365 Unipol Banca Financial Statements 2014 Securities issued by Castoro RMB Class Legal expiry date Interest rate Moody s/fitch original rating Moody s/fitch current rating Nominal amount Class A 28/01/2041 3m Euribor + 10b.p. Aaa/AAA A2/AA+ 622,500 Class B 28/01/2041 3m Euribor + 28b.p. Aa3/A A2/AA+ 26,000 Class C 28/01/2041 1% fisso n/r n/r 51,678 Total 700,178 The first two classes of securities were placed on the market with Italian and foreign institutional investors. Unipol Banca subscribed the entire amount of junior notes (Class C) after transferring to Castoro RMBS the junior notes issued by Grecale ABS. Unipol Banca subsequently purchased Class B notes issued by Castoro for a nominal value of 4m, as well as Class A notes issued by Castoro for a nominal value (on issue) of 35m; the Class A notes already repaid at the close of the year were approximately 90% of their nominal value on issue as seen in the table below. The three classes of securities feature increasing degrees of subordination, with absolute preference in favour of the Class A securities, on which principal repayment began in October The residual value to be repaid on the Castoro notes is set out below: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A notes 622,500 87,743 62,854 Class B notes 26,000 26,000 26,000 Class C notes 51,678 51,678 51,678 Total 700, , ,532 The transaction as a whole is a pass through type, the entire mortgage loan portfolio of Grecale ABS is collateral for the holders of securities issued by Castoro and all the inward cash flows of Grecale ABS are transferred to Castoro RMBS separately for the principal and interest portions. RBS (which took over the activities of ABN AMRO Bank) puts at the disposal of the Castoro vehicle a line of liquidity of an amount initially totalling 19.5m; to date, this line has decreased, according to the decrease of the residual value of the Notes to be redeemed, to the minimum amount of 9.7m and has never been used. Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, which is set up to hedge the interest rate risks affecting Castoro. Under the terms of the interest rate swap contract, the SPV receives from the counterparty 3-month Euribor and pays to the counterparty a fixed rate of 3.75%, 6-month Euribor + 3bps and 3-month Euribor on notional amounts corresponding to the portion of the mortgage loan portfolio indexed to these parameters. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. In 2014, the securitisation recorded that one of the trigger events envisaged in the regulations, relating to the percentage ratio between the delinquent loans and the residual loan amount, had been exceeded; this event caused a suspension of the payment, but not the accrual, of interest on the class C junior notes, producing also a movement of flows from the interest to the principal, which will help speed up the process of redeeming the senior notes. 363

366 8 Notes to the Consolidated Financial Statements 2. Securitisation scheme carried out through Grecale ABS Srl launched in December 2004 issue on the market in May 2006 following repackaging through Atlante Finance Srl (Grecale ABS Securitisation 3) In December 2004, another securitisation scheme was launched, in which the initial maximum amount of securities to be issued totalled 1,050m, later raised to 1,700m, to be completed within a one-year warehousing period expiring in December 2005, later extended to May During this scheme, organised in collaboration with ABN AMRO N.V. as arranger and Unipol Merchant Banca per le Imprese Spa and Nomura International plc as co-arrangers, five assignments of receivables were made, funded by Grecale ABS by issuing several series of notes, divided into only two classes: senior notes and junior notes. Assignments of receivables after the first assignment have been partly financed, up to the available amount, with principal funds derived from the income collected from receivables previously assigned. All assignments of receivables carried out in the warehousing period form a single portfolio in the interests of the holders of the securities issued, according to the priorities set between the various classes of securities but with no differentiation between the various series of securities within the same class. The receivables assigned come from performing residential loans, granted to private customers (34%) and non-residential mortgage loans (Commercial 46%; SME 17%), and from loans other than mortgage loans to public bodies (3%), issued by Unipol Banca, also as a result of acquisition of branches from other banks, granted to persons residing in Italy (North Italy 54%, Central Italy 28% Southern Italy and Islands 18%), secured (with the sole exception of loans to public bodies) by first degree or equivalent mortgages, with a ratio between residual debt and property value as determined by an expert valuation of no more than 80%. Summarised below are the amounts of the assignments made: Price of receivables assigned to Grecale ABS Sec. 3 Year 2004 Year 2005 Amount Assignment price - principal 570, ,752 1,536,562 Assignment price - interest 2,856 1,362 4,218 Assignment price - premium 28,541 57,945 86,486 Total 602,207 1,025,059 1,627,266 Five assignments of receivables were completed, the first taking place in December 2004 and the rest during Grecale ABS funded the purchase by issuing two classes of securities, divided into five series, for an aggregate nominal value equal to the amount of the loans net of available funds deriving from loan proceeds. The following table summarises the main features of the securities issued by Grecale ABS. Securities issued by Grecale ABS Class Legal expiry date Interest rate Rating Nominal amount Senior 28/01/2047 3m Euribor + 40b.p. n/r 1,358,000 Junior 28/01/2047 1% fisso n/r 158,150 Total 1,516,

367 Unipol Banca Financial Statements 2014 During the warehousing period the senior notes were subscribed through private placement by an independent SPV (Tulip Asset Purchase Company B.V. registered in Amsterdam) and the junior notes were subscribed by Unipol Banca. In May 2006 all the securities issued by Grecale ABS which were assigned to the SPV Atlante Finance Srl, which funded the purchase by issuing four classes of notes, were repackaged. The following table shows the main features of the securities issued by Atlante Finance. Securities issued by Atlante Finance Class Legal expiry date Interest rate Moody s/fitch/s&p Original rating Moody s/fitch/s&p Current rating Nominal amount Class A 28/01/2047 3m Euribor + 19b.p. Aaa/AAA/AAA Aa2/AA/A 1,202,500 Class B 28/01/2047 3m Euribor + 62b.p. Aa3/A/A Aa2/AA/A 28,800 Class C 28/01/2047 3m Euribor + 160b.p. Baa3/BBB-/BBB- B1/BB/B- 136,800 Class D 28/01/2047 3m Euribor n/r n/r 152,250 Total 1,520,350 The first three classes of securities were placed on the market with Italian and foreign institutional investors. Unipol Banca subscribed the entire amount of Junior notes (Class D) after transferring to Atlante Finance the junior notes issued by Grecale ABS. The Group also subscribed a portion of the Class C mezzanine notes for a nominal value of 61m. During 2006, the subsidiary Unipol Merchant assigned Class C notes to third parties for a nominal value of 40m and Unipol Banca SpA issued a guarantee to the buyers for full repayment of the principal of the securities in question. By effect of this guarantee the risk is not transferred to third parties with respect to the Group; consequently, in the consolidated financial statements, the effects of the derecognition applied in the individual financial statements of the subsidiary Unipol Merchant were always reversed and the equivalent value collected, including capital gains accrued to future years, was recognised under the item payables to customers. As regards the capital gain on the assignment, amounting to 4,680k, corresponding to the excess spread anticipated on the securities assigned with respect to the normal return on substantially free risk securities, it should be noted that it is recognised pro rata temporis under interest income in the consolidated income statement during the average anticipated life of the securities assigned. The total income recognised at 31 December 2012 was 2,136k; due to the merger by incorporation of Unipol Merchant into Unipol Banca, income deferred to future years at 1 January 2013, amounting to 2,544k, were recognised pro rata temporis by the latter; in fact, Unipol Banca recorded on the merger date a shareholders equity reserve equal to the total value of the income still to be recognised net of the deferred tax effect; gross income of 347k were recognised in Unipol Banca SpA then repurchased Class C notes issued by Atlante for a nominal value of 70m. Unipol Banca repurchased Class A notes issued by Atlante for a nominal value of 400.6m; the Class A notes already repaid at the close of the year were more than 96% of their nominal value on issue as seen in the table below. Finally, the Bank repurchased Class A notes issued by Atlante for a nominal value of 6.8m at the time of issue. The four classes of notes are characterised by growing levels of subordination, with absolute priority in favour of the Class A notes, with repayment of the principal having started in January

368 8 Notes to the Consolidated Financial Statements The residual value to be repaid on the Atlante notes is set out below: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A notes 1,202, ,103 42,446 Class B notes 28,800 28,800 28,800 Class C notes 136, , ,800 Class D notes 152, , ,250 Total 1,520, , ,296 The transaction as a whole is a pass through type: the entire mortgage loan portfolio of Grecale ABS is collateral for the holders of securities issued by Atlante Finance and all the inward cash flows of Grecale ABS are transferred to Atlante Finance separately for the principal and interest portions. RBS (that took over the activities of ABN AMRO Bank) provided the SPV Atlante with a credit facility initially totalling 110.8m, now reduced, as a result of the fall in the residual value of the notes to be refunded, to 63.8m and never used. Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, which is set up to hedge the interest rate risks affecting Atlante. Under the terms of the interest rate swap contract, the SPV receives from the counterparty 3-month Euribor and pays to the counterparty a fixed rate of 4.32%, 6-month Euribor bps and 3-month Euribor +31.5bps on notional amounts corresponding to the portion of the loan portfolio indexed to these parameters. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. In 2009, the securitisation recorded that one of the trigger events envisaged in the regulations, relating to the percentage ratio between the delinquent loans (with instalment payments in arrears by between 30 and 180 days) and the residual loan amount, had been exceeded; this event is focused on the commercial positions and caused a suspension of the payment, but not the accrual, of interest on the class D junior notes, producing also a movement of flows from the interest to the principal, which will help speed up the process of redeeming the senior notes. 3. Securitisation carried out through Grecale ABS Srl in May (Grecale ABS Securitisation 4) In May 2008, a securitisation was performed for an amount of securities issued for the nominal value of 1,104m. The scheme was organised with the collaboration of BNP Paribas and Finanziaria Internazionale Securitisation Group as arrangers; the assignment of loans was funded by Grecale ABS with the issuing of securities distributed in only two classes: senior notes and junior notes. The loans assigned arise from performing mortgage loans to private consumers, granted by Unipol Banca to individuals resident in Italy (North Italy 48%, Central Italy 28% Southern Italy and Islands 24%), backed by first degree or equivalent mortgages, where the residual debt does not exceed 80% of the property value as determined by an expert valuation. 366

369 Unipol Banca Financial Statements 2014 The values of the assignment carried out are as follows. Price of receivables assigned to Grecale ABS Sec. 4 Year 2008 Assignment price - principal 1,059,353 Assignment price - interest 1,139 Total 1,060,492 The following table summarises the main features of the securities issued by Grecale ABS. Class Legal expiry date Interest rate Moody s/s&p original rating Moody s/s&p current rating Nominal amount Senior 22/04/2058 6m/3m Euribor + 60b.p. Aaa/AAA Baa2/AA- 1,007,750 Junior 22/04/2058 variable return n/r n/r 96,510 Total 1,104,260 Unipol Banca subscribed the full amount of both the senior notes (class A) and the junior notes (class B). Given the tensions generated on the financial market and the strong rise in the credit spreads applied to the interest rates following the sub-prime mortgage crisis, the operation was structured from the start with the aim of subscribing all the notes issued, with a view to using, as indeed happened, the senior notes for refinancing operations with the ECB and other central bodies. The features of the notes are, however, such as to allow swift placement with institutional investors, should the changed expectations with regard to yield expressed by the market make the offer profitable. The two classes of notes are characterised by increasing levels of subordination, with absolute priority in favour of the Class A securities. The repayment of principal began eighteen months from issue in January 2010 and at the date on which the financial year closed almost 54% of Class A securities had already been repaid at their nominal issue value, as seen in the table shown below. The senior notes were initially issued with the half-yearly coupon indexed to the 6-month Euribor until 24 January 2011 and subsequently, with a quarterly coupon and indexing to the 3-month Euribor. The operation was restructured in line with the change in the coupon indexation and to take into account the possibility of Class A securities being sold to third parties in the future, which mainly involved the originator repurchasing a package of delinquent and default loans, the widening of the spreads paid on Class A coupons, the widening of the spreads on interest-rate-swap contract and the subsequent request to the two rating agencies involved to confirm the rating to take into account the changes made to the contract. The operation was not backed by any credit facility as it has a cash reserve of 41.9m, originally financed by an over-issue of junior notes designed to protect the Class A securities, the amount of which it will be possible to reduce according to the changed requirements for protection as soon as the amount of the junior notes (class B) is at least 17.50% of the residual value of the senior notes (class A) in circulation. As with the transactions described previously, here, too, Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, entered into to hedge the interest rate risk affecting the vehicle company. On the basis of the current interest rate swap contract, the vehicle 367

370 8 Notes to the Consolidated Financial Statements company collected the 3-month Euribor +130bps from the counterparty and paid the counterparty all the interest collected, net of the differential of the relating accruals on the performing loans. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. At the closing date the residual value of the securities was as follows: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A notes 1,007, , ,668 Class B notes 96,510 96,510 96,510 Total 1,104, , , Securitisation carried out through Grecale ABS Srl in April (Grecale ABS Securitisation 5) In April 2009, the Parent Bank carried out a securitisation for an amount of securities issued for the nominal value of 627m. The scheme was organised with the collaboration of UBS Investment Bank Limited and Unipol Merchant Banca per le Imprese Spa as arrangers; the assignment of loans was funded by Grecale ABS with the issuing of securities distributed in only two classes: senior notes and junior notes. The loans assigned arise from performing mortgage loans to private consumers, granted by Unipol Banca to individuals resident in Italy (North Italy 44%, Central Italy 38% Southern Italy and Islands 18%), backed by first degree or equivalent mortgages, where the residual debt does not exceed 80% of the property value as determined by an expert valuation. The values of the assignment carried out are as follows. Price of receivables assigned to Grecale ABS Sec. 5 Year 2009 Assignment price - principal 611,005 Assignment price - interest 688 Total 611,693 The following table summarises the main features of the securities issued by Grecale ABS. Class Legal expiry date Interest rate Moody s original rating Moody s/s&p/dbrs current rating Nominal amount Senior 28/04/2056 6m Euribor + 30b.p. Aaa Aa2/A/AAA 531,700 Junior 28/04/2056 variable return n/r n/r 95,360 Total 627,

371 Unipol Banca Financial Statements 2014 The scheme was organised with the collaboration of UBS Investment Bank and Unipol Merchant as arrangers. All the securities were subscribed by Unipol Banca at the time of issue, with the aim of using the senior notes for refinancing operations with the ECB and other central bodies. The operation is therefore described as a self-securitisation. During the current financial year, the Senior securities were entirely sold to third financial counterparties on the market, determining the transformation of the type of operation that was no longer a self-securitisation. The two classes of notes are characterised by growing levels of subordination, with absolute priority in favour of the Class A notes; The redemption of senior notes began during the 2011 financial year and by the date the financial statements closed had been repaid by more than 56%. The senior notes were issued with the half-yearly coupon indexed to the 6-month Euribor +300bps. The operation was not backed by any credit facility as it has a cash reserve originally financed by an over-issue of junior notes designed to protect the Class A securities. The initial amount of the cash reserve is 2.5% of the initial portfolio and can be increased later on according to the regulatory framework defined indemnity amount target amount ; the cash reserve will be zeroed only after the repayment in full of the senior notes. Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, which is set up to hedge the interest rate risks affecting the vehicle company. On the basis of the current interest rate swap contract, the vehicle company pays to the counterparty, with the same frequency of the coupons, an amount determined by applying to the notional value of reference a fixed rate, the arithmetical average of Euribor 3 months for the period plus a spread of 0.3% and the arithmetical average of Euribor 6 months for the period, respectively, and receives the variable interest rate plus a spread of 0.1%, and receives in all cases an amount determined by applying to the notional amount of reference Euribor 6 months reported at the beginning of the period. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. At the closing date the residual value of the securities was as follows: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A notes 531, , ,035 Class B notes 95,360 95,360 95,360 Total 627, , , Securitisation carried out through Grecale RMBS 2011 Srl in October (Grecale RMBS 2011 Securitisation 1) The securitisation was carried out in October 2011 through the transfer of performing mortgage loans to private consumers, granted by Unipol Banca to individuals resident in Italy (North Italy 43%, Central Italy 34% Southern Italy and Islands 23%), backed by first degree or equivalent mortgages, where the residual debt does not exceed 80% of the property value as determined by an expert valuation for a total amount of 723m. The scheme was organised with the collaboration of J.P.Morgan that acted as arranger and was financed by issuing securities for a nominal value of 724m, divided in three classes (Senior A1-A2 and Junior). 369

372 8 Notes to the Consolidated Financial Statements The values of the assignment carried out are as follows: Price of receivables assigned to Grecale RMBS 2011 Sec. 1 Year 2011 Assignment price - principal 722,571 Assignment price - interest 929 Total 723,500 The following table summarises the main features of the securities issued by Grecale RMBS 2011: Class Legal expiry date Interest rate Moody s/fitch Original rating Moody s/fitch current rating nominal amount Senior A1 27/01/2061 3m Euribor + 200b.p. Aaa/AAA A2/AA+(*) 175,000 Senior A2 27/01/2061 3m Euribor + 50b.p. Aaa/AAA Aa2/AA+ 390,200 Junior 27/01/2061 variable return n/r n/r 158,980 Total 724,180 (*) last rating available before repayment. All the securities were subscribed by Unipol Banca at the time of issue, with the aim of using the senior notes for refinancing operations with the ECB and other central bodies. The operation was therefore described as a self-securitisation until the previous financial year. During the previous and current financial year, all of the Senior A2 securities were sold to third financial counterparties on the market, determining the transformation of the type of operation that was no longer a self-securitisation. The redemption of the senior securities started in 2013, eighteen months after the issue date. At the closing date, class A1 was fully repaid, therefore, the repayment of class A2 for a residual value of 98% started. The senior notes were issued with the quarterly coupon indexed to the 3-month Euribor +2000bps for class A1 and 500bps for class A2. The operation was not backed by any credit facility as it has a cash reserve originally financed by an over-issue of junior notes designed to protect the Class A securities. The initial amount of the cash reserve is 2.5% of the initial portfolio and can be increased later on according to the regulatory framework defined indemnity amount target amount ; the cash reserve will be zeroed only after the repayment in full of the senior notes. Unipol Banca acts as servicer in the securitisation process and is the indirect counterparty to the interest rate swap contract, which is set up to hedge the interest rate risks affecting the vehicle company. On the basis of the current interest rate swap contract, the vehicle company pays to the counterparty, with the same frequency of the coupons, an amount determined by applying to the notional value of reference a fixed rate, the arithmetical average of Euribor 3 months for the period plus a spread of 0.3% and the arithmetical average of Euribor 6 months for the period, respectively, and receives the variable interest rate plus a spread of 0.1%, and receives in all cases an amount determined by applying to the notional amount of reference Euribor 6 months reported at the beginning of the period. Unipol Banca has the option to repurchase the assigned loan portfolio only from the date on which the residual value of the receivables becomes less than 10% of the value originally assigned, for a payment not greater than the market value. The option may be exercised provided that the payment thus determined will be sufficient for full reimbursement of the residual value of the securities outstanding. 370

373 Unipol Banca Financial Statements 2014 At the closing date the residual value of the securities was as follows: Residual value to be paid on the notes issued Issue value Residual at 31/12/2013 Residual at 31/12/2014 Class A1 notes 175,000 40,989 - Class A2 notes 390, , ,268 Class B notes 158, , ,980 Total 724, , , Securitisation carried out through SME Grecale Srl in July (SME Grecale) Purely for informative purposes, as stated at the beginning of this section, it should be mentioned that in July 2012 a new securitisation was carried out by selling a total of 839m of secured and unsecured performing loans granted by Unipol Banca to SMEs resident in Italy, backed, for the secured part, by first degree or subsequent degree mortgages, where the residual debt did not exceed 80% of the professionally ascertained value of the property, and consequently securities with the same nominal value, divided into two classes (senior and junior), were issued, as shown in the following table: Class Legal expiry date Interest rate Fitch/DBRS original rating Fitch/DBRS current rating Nominal amount Senior 31/01/2062 3m Euribor + 350b.p. AAA/AAA AA+/AAA 430,000 Junior 31/01/2062 3m Euribor n/r n/r 409,217 Total 839,217 The scheme was organised with the collaboration of J.P. Morgan as arranger. All the securities were subscribed by Unipol Banca at the time of issue, with the aim of using the senior notes for refinancing operations with the ECB and other central bodies. The operation is therefore described as a self-securitisation. The redemption of the senior securities began in 2012; these securities had been already repaid by more than 87% of their nominal value on issue. Moreover, during the last two financial years, the parent bank repurchased, for reasons of commercial management and within the powers granted by the Service agreement, loans part of the scheme for an amount of residual capital of 56m. Repurchases continued also in the first months of

374 8 Notes to the Consolidated Financial Statements Quantitative information C.1 Group Exposures deriving from securitisations categorised by the quality of the underlying assets Balance sheet exposures Guarantees issued Senior Mezzanine Junior Senior Mezzanine Junior Quality of underlying assets/exposures A. With own underlying assets: Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure 474, , , , , , a) Non-performing b) Other 474, , , , , , B. With third-party underlying assets: a) Non-performing b) Other The Group has issued no credit lines or guarantees in connection with securitisations. C.2 Group - Exposures deriving from the main own securitisations divided by type of asset securitised and type of exposure Balance sheet exposures Guarantees issued Senior Mezzanine Junior Senior Mezzanine Junior Type of assets securitised/ Exposures Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs Carrying amount Adjustments/ Write-backs A. Fully derecognised A.1 Grecale Srl - Performing res. mortgage loans A.2 Grecale ABS Sec. 1 - Performing mortgage loans B. Partially derecognised C. Not derecognised 474, , ,343 (5,785) C.1 Grecale ABS Sec. 2 - Performing res. mortgage loans 2,865-3,800-54,461 (254) C.2 Grecale ABS Sec. 3 - Performing mortgage loans 5, , ,011 (3,938) C.3 Grecale ABS Sec. 4 - Performing mortgage loans 466, ,353 (1,081) C.4 Grecale ABS Sec. 5 - Performing mortgage loans ,939 (395) C.5 Grecale RMBS Sec. 1 - Performing mortgage loans ,580 (117) Total 474, , ,343 (5,785)

375 Unipol Banca Financial Statements 2014 C.3 Group - Exposures deriving from the main securitisations of third parties divided by type of asset securitised and type of exposure Balance sheet exposures Guarantees issued Senior Mezzanine Junior Senior Mezzanine Junior Type of assets securitised/ exposures A.1 Public property fund Funding 1 Carrying amount Adjust./ write-backs Carrying amount Adjust./ write-backs Carrying amount Adjust./ write-backs Net exposure Adjust./ write-backs Net exposure Adjust./ write-backs Net exposure Adjust./ write-backs - trade receivables C.4 Group - Securitisation exposures divided by portfolio and type Exposure/portfolio Held-for-trading financial assets Financial assets fair value option Available-for-sale financial assets Held-to-maturity investments Receivables Total 31/12/2014 Total 31/12/ Balance sheet exposures "Senior" "Mezzanine" "Junior" Off-balance sheet exposures "Senior" "Mezzanine" "Junior"

376 8 Notes to the Consolidated Financial Statements C.5 Group - Total amount of securitised assets underlying Junior notes or other forms of credit Assets/Amounts Traditional securitisations A. Own underlying assets: 1,252,732 A.1 Fully derecognised - Synthetic securitisations 1. Doubtful loans - 2. Watchlist loans - 3. Restructured exposures - 4. Past due exposures - 5. Other assets - A.2 Partially derecognised - 1. Doubtful loans - 2. Watchlist loans - 3. Restructured exposures - 4. Past due exposures - 5. Other assets - A.3 Not derecognised 1,252, Doubtful loans Watchlist loans Restructured exposures Past due exposures Other assets 1,252,732 - B. Third-party underlying assets: - - B.1 Doubtful loans - - B.2 Watchlist loans - - B.3 Restructured exposures - - B.4 Past due exposures - - B.5 Other assets

377 Unipol Banca Financial Statements 2014 C.6 Group - Participating interests in SPVs Assets Liabilities Securitisation name / SPV name Registered office Consolidation Receivables Debt securities Other Senior Mezzanine Junior Grecale ABS Srl Bologna SI securitisation no , ,175-54,543 securitisation no , , ,152 securitisation no , ,668-96,510 securitisation no , ,035-95,360 Castoro RMBS Srl Milan SI - 140, ,854 26,000 51,678 Atlante Finance Srl Milan SI - 372,338 2,420 42, , ,250 Grecale RMBS 2011 Srl Bologna SI 554, , ,980 SME Grecale Srl Bologna SI 495, , ,217 C.7 Group Non-consolidated SPVs for securitisation There are no non-consolidated SPVs for securitisation. C.8 Group Servicer activity - collections of securitised loans and repayments of securities issued by the SPVs for securitisation Servicer activity: collections for individual securitisations Principal Other collections Total collections Collections on behalf of Grecale ABS Srl Sec. 2: 537, , ,999 - of which during the year 21,815 3,570 25,385 - of which in previous years 515, , ,614 Collections on behalf of Grecale ABS Srl Sec. 3: 1,170, ,728 1,497,760 - of which during the year 52,296 9,579 61,875 - of which in previous years 1,117, ,149 1,435,885 Collections on behalf of Grecale ABS Srl Sec. 4: 545, , ,598 - of which during the year 47,264 15,142 62,406 - of which in previous years 497, , ,192 Collections on behalf of Grecale ABS Srl Sec. 5: 291, , ,992 - of which during the year 29,553 12,852 42,405 - of which in previous years 261,773 94, ,587 Collections on behalf of Grecale RMBS 2011 Srl: 168,984 72, ,712 - of which during the year 43,784 16,522 60,306 - of which in previous years 125,200 56, ,406 Total collections: 2,713, ,753 3,567,061 - of which during the year 194,712 57, ,377 - of which in previous years 2,518, ,088 3,314,

378 8 Notes to the Consolidated Financial Statements Remember that the Bank also serviced the self-securitisation not included in the table above; information on repayment of the securities issued by the vehicle company is included in the information on individual operations on the previous pages. C.9 Group SPVs for securitisation Please see the information on individual operations on the previous pages. D. Information on structured entities (other than SPVs for securitisation) Qualitative information Case not present in the years under examination. E. ASSIGNMENTS A. Financial assets assigned and not fully derecognised Qualitative information The Unipol Banca Group has not carried out assignments for which it is necessary to provide information pursuant to IFRS 7, paragraph 7, 42D letters a), b), c), and paragraph 42H. Quantitative information E.1 Group - Financial assets assigned and not derecognised: carrying amount and full value Technical forms/ Portfolio Held-fortrading financial assets Financial assets designated at fair value Available-for-sale financial assets Held-to-maturity investments Receivables from banks Receivables from customers A B C A B C A B C A B C A B C A B C Total A. Balance sheet assets , , ,435, ,661,684 1,344, Debt securities , , , , Equity securities UCITS Loans ,435, ,435,604 1,237,500 B. Derivatives Total , , ,435, ,661,684 of which non-performing , Total , ,237, ,344,854 of which non-performing Key: A = financial assets assigned and fully recognised (carrying amount) B = financial assets assigned and partially recognised (carrying amount) C = financial assets assigned and partially recognised (full value) There are no assets assigned and partially recognised. 376

379 Unipol Banca Financial Statements 2014 E.2 Group Financial liabilities relating to financial assets assigned and not derecognised: carrying amount Amounts in k Liabilities/Assets portfolio Held-for-trading financial assets Financial assets designated at fair value Available-for-sale financial assets Held-to-maturity investments Receivables from banks Receivables from customers 1. Due to customers , , , ,520 a) relating to assets fully recognised , , , ,520 b) relating to assets partially recognised Due to banks a) relating to assets fully recognised b) relating to assets partially recognised Securities outstanding , ,748 a) relating to assets fully recognised , ,748 b) relating to assets partially recognised Total , , ,303 1,058,268 Total , , ,127 Total E.3 Group - Assignments with liabilities relating solely to assigned assets: fair value Item not applicable for the years in question. E.4 Group covered bond transactions Information not applicable in that no transactions of this kind took place. F. Group Credit risk measurement models 1.2 GROUP - MARKET RISKS The market risk is the risk arising from the volatility of the market prices of financial instruments that may affect the value of the trading portfolio of the Unipol Banca Group. As regards market risks, the Group is subject to residual exposure to items arising from both trading and managing the network s commercial flows. Items held for trading are those intended for sale in the short term and/or held to benefit, in the short term, from differences between purchase and selling prices or other variations in price or interest rate. Items are those held by the Bank and items arising from services to customers or as back-up for buying and selling (market-making) that have Unipol Banca SpA s own portfolio as direct contra-entry. 377

380 8 Notes to the Consolidated Financial Statements The new Group Investment Policy, which lays down guidelines for investment procedures, the criteria for the investment policy, the types of asset in which it is deemed appropriate to invest and the limits, was approved during The policy specified the following limits: Portfolio limits; Rating risk limits and concentration limits; VaR limits; Sensitivity limits; Exchange rate risk limits; Limits on loss in the income statement; ALM risk limits; Counterparty risk limits; Settlement risk limits. The market risk is calculated and the limits laid down in the Investment Policy are monitored once a week by the Market Risk Report, which is drawn up and discussed at a meeting of the Finance Committee of Unipol Banca SpA every month. The Risk Management Department presents a quarterly report on the monitoring of the Investment Policy limits to the Bank s Board of Directors. The market risk is measured for management purposes using the Value at Risk, calculated, using the Historical Simulation method with 99.5% reliability, on a daily basis by the Risk Management Department of Unipol Banca SpA, against the trading portfolio and the AFS portfolio using the Kondor Global Risk (KGR) application. A different holding period is envisaged depending on the portfolio of reference; for the trading portfolio in particular, the holding period is 10 days, while for the Available-for-Sale portfolio, this period is 252 days. The historical observation period considered for the calculation of the Value at Risk is at least one year for the trading portfolio and three years for the Available-for-Sale portfolio. The VAR is based on the Held-for-Trading and Available-for-Sale portfolios of Unipol Banca. The VaR of Unipol Banca SpA s trading portfolio at 31 December 2014 (IAS Held-for-trading and Available-for-sale portfolios) is shown below, subdivided according to risk factor. Amounts in m Market Value VAR Total VAR Equity VAR Interest Rate VAR Spread VAR Real Estate UNIPOL BANCA SpA Aivailable-for-sale portfolio Held-for-trading portfolio The total VAR (available-for-sale and trading portfolios) is 58.02m, 9.37% of the market value of the financial instruments present. The risk spread relating to the Value at Risk includes debt securities issued or guaranteed by governments, central governments, central banks or multilateral development banks in the Bank s trading portfolio. The Value at Risk includes instruments held to hedge the risk and mechanisms for transferring the risk. The main sensitivities are calculated and monitored as well as the Value at Risk. Sensitivities indicate the change in the market value of financial instruments as a result of changes in market risk factors. They help to manage market risk as they enable the translation of the Value-at-Risk limits into limits that can be monitored by financial operators. 378

381 Unipol Banca Financial Statements 2014 The main sensitivity measures used are: basis point value; duration; sensitivity to credit spreads; delta of the share portfolio; vega value INTEREST RATE RISK AND PRICE RISK REGULATORY TRADING PORTFOLIO QUALITATIVE INFORMATION The interest rate risk is the risk deriving from a possible change in the value of a financial asset in the trading portfolio as a result of adverse changes in interest rates. The interest rate risk on the trading portfolio is measured either by calculating the VaR or by determining the sensitivity and the impacts resulting from stress tests. The Unipol Banca Group s operations on share markets on its own account are limited. The price risk is calculated and monitored using the VaR, sensitivity measures and stress tests. The figures for the sensitivity to interest rates, credit spreads and share prices of the Held-for-Trading and Available-for-Sale portfolios of Unipol Banca SpA at 31 December 2014 are shown below. Amounts in m Market Value Duration Rate Sensitivities (+1bps) Sensitivities Credit Spread (+1bps) Sensitivities Equity (-1%) Sensitivities Real Estate (-1%) UNIPOL BANCA SpA (0.27) (0.31) (0.68) (0.53) Aivailable-for-sale portfolio (0.27) (0.31) (0.68) (0.53) Held-for-trading portfolio

382 8 Notes to the Consolidated Financial Statements Quantitative information 1. Regulatory trading portfolio: distribution by residual duration (repricing date) of balance sheet assets and liabilities and financial derivatives Currency of denomination: Euro From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Type/Residual duration On demand Up to 3 months Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Other assets Balance sheet liabilities Repurchase agreements payable Other liabilities Financial derivatives - 6, With underlying security Options Long positions Short positions Other Long positions Short positions Without underlying security - 6, Options Long positions Short positions Other - 6, Long positions - 5, Short positions

383 Unipol Banca Financial Statements 2014 Currency of denomination: USD Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Other assets Balance sheet liabilities Repurchase agreements payable Other liabilities Financial derivatives - 6, With underlying security Options Long positions Short positions Other derivatives Long positions Short positions Without underlying security - 6, Options Long positions Short positions Other derivatives - 6, Long positions Short positions - 5,

384 8 Notes to the Consolidated Financial Statements Currency of denomination: CHF Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Other assets Balance sheet liabilities Repurchase agreements payable Other liabilities Financial derivatives With underlying security Options Long positions Short positions Other derivatives Long positions Short positions Without underlying security Options Long positions Short positions Other derivatives Long positions Short positions

385 Unipol Banca Financial Statements 2014 Currency of denomination: other currencies Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Other assets Balance sheet liabilities Repurchase agreements payable Other liabilities Financial derivatives With underlying security Options Long positions Short positions Other derivatives Long positions Short positions Without underlying security Options Long positions Short positions Other derivatives Long positions Short positions

386 8 Notes to the Consolidated Financial Statements 2. Regulatory trading portfolio: distribution of exposures in equity securities and share indices by the main countries of the market on which they are listed Listed Type/share indices Italy Unlisted A. Equity securities long positions short positions B. Purchase and sale of equity securities not yet regulated long positions short positions C. Other derivatives on equity securities long positions short positions D. Derivatives on share indices long positions short positions Interest rate risk and price risk Banking portfolio Qualitative information The entire banking portfolio was analysed, comparing all lending to customers with income sensitive to interest rate risk to provide an overview and pick up any mismatch either in duration or in the imbalance of items placed in the various repricing segments. A table summarising the sensitivity parameters for the banking portfolio at 31 December 2014 is shown below. The duration gap shows the weighted average difference between the duration of the asset compared with that of the liability (including off-balance items), whilst the sensitivity parameters illustrate the percentage divergence between the expected margin and the economic value of the bank s shareholders equity in relation to an interest rate shock of +/- 100 basis points. The banking portfolio rate risk is analysed using typical asset and liability management tools, such as the duration gap and calculating the effect of changes in interest rates on expected net interest income and on the financial value of equity. Amounts in 31/12/ /12/2014 Duration Gap (0.09) 0.60 Margin Sensitivity +100 B.P. (1,820,012) 4,374, B.P. (22,858,920) (34,576,292) Economic value sensitivity +100 B.P. 17,041,853 (66,784,142) -100 B.P. (9,544,768) 83,767,

387 Unipol Banca Financial Statements 2014 Quantitative information 1. Banking portfolio: distribution by residual duration (repricing date) of financial assets and liabilities Currency of denomination: Euro From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Type/Residual duration On demand Up to 3 months Over 10 years Unspecified duration 1. Balance sheet assets 6,245,670 1,735, , ,053 1,251, , , Debt securities , ,756 10, , , with early repayment option - 29,336 3, other , ,943 10, , , Loans to banks 123, , Loans to customers 6,121, , , ,880 1,045, , , current account 1,102,126 33,592 39,935 63, ,723 33, other loans 5,019, , , , , , , with early repayment option 3,954, , ,780 48, , , , other 1,064, , , , , ,618 7, Balance sheet liabilities 6,873,826 1,333, , ,850 2,028,184 70, Due to customers 5,721, , , ,029 92, current account 5,533, , ,186 74,767 91, other payables 187, ,963 28,720 54,262 1, with early repayment option other 187, ,963 28,720 54,262 1, Due to banks 347, , , current account 317, other payables 30, , , Debt securities 804, , , ,821 1,520,467 70, with early repayment option 81,621 59,819 9,961 50, , other 723, , , ,489 1,419,008 69, Other liabilities with early repayment option other Financial derivatives - 459,479 42,862 77, , , With underlying security - 1,479 1, Options long positions short positions Other - 1,479 1, long positions short positions Without underlying security - 458,000 41,524 77, , , Options long positions Short positions Other - 458,000 41,524 77, , , long positions - 143,000 9,000 77, , short positions - 315,000 32, , Other off-balance sheet transactions 137, long positions 68, short positions 68,

388 8 Notes to the Consolidated Financial Statements Currency of denomination: USD Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 5 years to 10 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets 7,266 10, Debt securities with early repayment option other Loans to banks 2, Loans to customers 4,405 10, current account other loans 4,398 10, with early repayment option 4,398 10, other Balance sheet liabilities 6, Due to customers 6, current account 6, other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other long positions short positions Without underlying security Options long positions short positions Other long positions short positions Other off-balance sheet transactions long positions short positions

389 Unipol Banca Financial Statements 2014 Currency of denomination: GBP Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Loans to banks Loans to customers current account other loans with early repayment option other Balance sheet liabilities Due to customers current account other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other long positions short positions Without underlying security Options long positions Short positions Other long positions short positions Other off-balance sheet transactions long positions short positions

390 8 Notes to the Consolidated Financial Statements Currency of denomination: CHF Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Loans to banks Loans to customers current account other loans with early repayment option other Balance sheet liabilities Due to customers current account other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other long positions short positions Without underlying security Options long positions short positions Other long positions short positions Other off-balance sheet transactions long positions short positions

391 Unipol Banca Financial Statements 2014 Currency of denomination: CAD Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets Debt securities with early repayment option other Loans to banks Loans to customers current account other loans with early repayment option other Balance sheet liabilities Due to customers current account other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other long positions short positions Without underlying security Options long positions short positions Other long positions short positions Other off-balance sheet transactions long positions short positions

392 8 Notes to the Consolidated Financial Statements Currency of denomination: other currencies Type/Residual duration On demand Up to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years From 5 years to 10 years Over 10 years Unspecified duration 1. Balance sheet assets 3, Debt securities with early repayment option other Loans to banks 3, Loans to customers current account other loans with early repayment option other Balance sheet liabilities Due to customers current account other payables with early repayment option other Due to banks current account other payables Debt securities with early repayment option other Other liabilities with early repayment option other Financial derivatives With underlying security Options long positions short positions Other long positions short positions Without underlying security Options long positions short positions Other long positions short positions Other off-balance sheet transactions long positions short positions

393 Unipol Banca Financial Statements Exchange rate risk QUALITATIVE INFORMATION The exchange rate risk is the possibility that fluctuations in market exchange rates could lead to significant changes, both positive and negative, in the value of the Group s equity. Managing the exchange rate risk within Unipol Banca SpA consists in operating with spot and forward exchanges rates. Operation with spot exchanges is aimed at managing commercial flows from the sales network. QUANTITATIVE INFORMATION 1. Distribution by currency of denomination of assets and liabilities and of derivatives Currencies Items USD GBP JPY CAD CHF Other currencies A. Financial assets 17,938 4, ,563 A.1 Debt securities A.2 Equity securities A.3 Loans to banks 2,861 4, ,563 A.4 Loans to customers 15, A.5 Other financial assets B. Other assets 1, C. Financial liabilities 6,637 1, C.1 Due to banks C.2 Due to customers 6,446 1, C.3 Debt securities C.4 Other financial liabilities D. Other liabilities E. Financial derivatives 6, Options Long positions Short positions Other derivatives 6, Long positions Short positions 5, Total assets 20,387 5,538 1, ,469 3,217 Total liabilities 12,353 1, Imbalance (+/-) 8,034 4, ,153 2,

394 8 Notes to the Consolidated Financial Statements DERIVATIVES A. Financial derivatives A.1 Regulatory trading portfolio: year-end and average notional values Total 2014 Total 2013 Over the Central Over the Central Underlying assets/type of derivatives counter counterparties counter counterparties 1. Debt securities and interest rates - - 2,611 - a) Options b) Swaps c) Forward - - 2,611 - d) Futures e) Other Equity securities and share indices a) Options b) Swaps c) Forward d) Futures e) Other Currencies and gold a) Options b) Swaps c) Forward d) Futures e) Other Goods Other underlyings Total - - 2,613 - Average values - - 1,

395 Unipol Banca Financial Statements 2014 A.2 Banking portfolio: year-end and average notional values A.2.1 Hedging derivatives Amoutns in k Underlying assets/type of derivatives Total 2014 Total 2013 Over the counter Central counterparties Over the counter Central counterparties 1. Debt securities and interest rates 479, ,024 - a) Options b) Swaps 479, ,024 - c) Forward d) Futures e) Other Equity securities and share indices a) Options b) Swaps c) Forward d) Futures e) Other Currencies and gold a) Options b) Swaps c) Forward d) Futures e) Other Goods Other underlyings Total 479, ,024 - Average values 239, ,

396 8 Notes to the Consolidated Financial Statements A.2.2 Other derivatives There are no other derivatives. A.3 Financial derivatives: gross positive fair value breakdown by products Positive fair value Total 2014 Total Over the Central Over the Central Portfolios/Type of derivatives counter counterparties counter counterparties A. Regulatory trading portfolio a) Options b) Interest rate swaps c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other B. Banking portfolio - for hedging 7,926-9,961 - a) Options b) Interest rate swaps 7,926-9,961 - c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other C. Banking portfolio - other derivatives a) Options b) Interest rate swaps c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other Total 7,926-9,

397 Unipol Banca Financial Statements 2014 A.4 Financial derivatives: gross negative fair value - breakdown by products Portfolios/Type of derivatives Negative fair value Total 2014 Total 2013 Over the counter Central counterparties Over the counter Central counterparties A. Regulatory trading portfolio a) Options b) Interest rate swaps c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other B. Banking portfolio - for hedging 84,472-50,046 - a) Options b) Interest rate swaps 84,472-50,046 - c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other C. Banking portfolio - other derivatives a) Options b) Interest rate swaps c) Cross currency swaps d) Equity swaps e) Forward f) Futures g) Other Total 84,472-50,

398 8 Notes to the Consolidated Financial Statements A.5 Financial derivatives OTC: regulatory trading portfolio notional values, gross positive and negative fair values by counterparty contracts not included in offsetting agreements There are no derivatives of this type. A.6 Financial derivatives OTC: regulatory trading portfolio notional values, gross positive and negative fair values by counterparty contracts included in offsetting agreements There are no derivatives of this type. A.7 Financial derivatives OTC: banking portfolio notional values, gross positive and negative fair values by counterparty contracts not included in offsetting agreements There are no derivatives of this type. A.8 Financial derivatives OTC: banking portfolio notional values, gross positive and negative fair values by counterparty contracts included in offsetting agreements Contracts included in offsetting agreements 1) Debt securities and interest rates Governments and central banks Other public bodies Banks Financial companies Insurance companies Nonfinancial companies Other entities - notional value , positive fair value - - 7, negative fair value , ) Equity securities and share indices - notional value positive fair value negative fair value ) Currencies and gold - notional value positive fair value negative fair value ) Other values - notional value positive fair value negative fair value

399 Unipol Banca Financial Statements 2014 A.9 Residual life of financial derivatives OTC: notional values Underlyings/Residual life Up to 1 year From 1 year to 5 years Over 5 years Total A. Regulatory trading portfolio A.1 Financial derivatives on debt securities and interest rates A.2 Financial derivatives on equity securities and share indices A.3 Financial derivatives on exchange rates and gold A.4 Financial derivatives on other values B. Banking portfolio 97, , , ,524 B.1 Financial derivatives on debt securities and interest rates 97, , , ,524 B.2 Financial derivatives on equity securities and share indices B.3 Financial derivatives on exchange rates and gold B.4 Financial derivatives on other values Total , , , ,524 Total , ,024 15, ,664 A.10 Financial derivatives OTC: counterparty risk/financial risk Internal models Information not available with reference to 31 December B. CREDIT DERIVATIVES There are no derivatives of this type. C. FINANCIAL AND CREDIT DERIVATIVES There are no derivatives of this type. 397

400 8 Notes to the Consolidated Financial Statements 1.3 GROUP LIQUIDITY RISK QUALITATIVE INFORMATION General aspects, management processes and methods of calculating the operational risk The liquidity risk is the risk that the Group might find it difficult to meet its expected or unexpected cash liabilities within a reasonable time and therefore have to sell some of its less liquid assets at unfavourable conditions, thus affecting its solvency. Within the limits approved by the Board of Directors, Unipol Banca SpA s Finance Committee is responsible for managing Unipol Banca SpA s ALM and the liquidity risk. Unipol Banca SpA s Finance Department is responsible for the operational management of liquidity. A Unipol Banca Group ALM and Liquidity meeting takes place every week. During this meeting the overall liquidity situation of the Unipol Banca SpA is monitored and decisions are made with regard to action to meet emerging liquidity requirements. At the weekly meeting, the structural and tactical liquidity-gap situation is analysed based on the date cash flows are due. Short-term tactical cash flows are supplemented by the expected flows linked to the renewal of sources of finance due from institutional customers, to expected major new transactions not present in the IT systems used for generating cash flows and managing liquidity, and to administrative expenses and taxes due. The meeting also analyses trends in final amounts and rates on income and lending by institutional counterparties, banks and customers of the Unipol Banca Group and compares them with the budget concerned. The liquidity gap based on contractual flows and expected flows is then compared with the reserves of liquid assets or assets that can be swiftly turned into cash. The analysis is carried out under both normal conditions (business as usual), and idiosyncratic, market and combined stress conditions (worst-case scenario). Idiosyncratic stress includes for example: a partial reduction of sources of finance by cooperative counterparties; a partial reduction of sources of finance by retail customers (sale on the secondary market of the bonds issued by Unipol Banca and partial withdrawal of on demand items); the failure to renew the sources of finance not collateralised by institutional counterparties and banks, reduction of the possibility of loans on characteristic markets (Interbank Deposit Market, Collateralised interbank market, EMTN issues); a reduction in maturities related to available sources of finance; possible events related to the achievement of thresholds on collateral agreements and impacts on credit lines by institutional counterparties and banks for transactions in derivatives, collateralised deposits, repurchase agreements of deposits and security and currency forward transactions. 398

401 Unipol Banca Financial Statements 2014 The stress of the market is defined as the simultaneous unavailability of certain characteristic loan markets (interbank market, EMTN issues) as well as the reduction of liquidity on financial markets relating to the sale/ purchase of financial instruments resulting in the inability to liquidate positions in securities over a short-term period without significant economic impacts. In such a scenario, it is assumed, for example: a reduction of the possibility of loans on characteristic markets (Interbank Deposit Market, Collateralised interbank market, MTS, EMTN issues) and a reduction in maturities related to available sources of finance; a decrease in the value of the assets in the portfolio; the failure to renew the sources of finance collateralised and not collateralised by institutional counterparties and banks a partial reduction of sources of finance by cooperative counterparties; an increase in the use of credit lines by corporate counterparties of the Unipol Banca Group. The combined stress scenario is a worst case scenario that considers the joint impact of the two previous scenarios. The severity levels envisaged may be different from the previous two, and the combination of the idiosyncratic and market scenarios will not necessarily be equal to the algebraic sum of the impacts of the two previous scenarios but interrelations will be considered in order to determine the combined effects. Stress application must be contemplated in two phases: very short term (two weeks) that assumes an acute phase of stress and a longer period (up to two months) that assumes a phase of stress less acute but persistent. Lastly, the principal market indicators (early warning indicators) are continuously monitored in order to give advance warning of any potential crisis. In particular, in order to identify the occurrence of market stress situations, prices and performance of the stock-market index on the reference market, information related to debt securities or credit default swaps of the market, information on the financial sector to which they belong are monitored; to identify the occurrence of an idiosyncratic stress, the rating of the Bank and other information specific to the Unipol Banca Group are monitored. A summary of the information shared during weekly meetings held to monitor liquidity and any actions to be taken are recorded in the minutes and reported to Unipol Banca SpA s Finance Committee. During the monthly meeting of Unipol Banca SpA s Finance Committee, the Head of Unipol Banca s Corporate Treasury Department and its Head of Risk Management present a description of the short-term tactical liquidity situation and the long-term strategic liquidity situation, including any action to be taken to improve the overall liquidity profile. Evidence of the 12-month liquidity gaps for Unipol Banca at 31 December 2014, with a comparison between the actual and accumulated gaps on the various due dates and the reserves of assets that can be used as contingencies and the liquidity buffer is shown below. 399

402 8 Notes to the Consolidated Financial Statements Amounts in m On Demand 3 days 4 days 5 days 6 days 2 weeks 3 weeks 1 month 2 months Assets Liabilities (39) (21) (22) (51) (8) (82) (497) (228) (548) GAP on precise dates 181 (5) (11) (30) 0 (26) (33) 225 (360) Comulative GAP (a) (59) Counterbalancing Capacity (b) Amounts in m Liquidity Buffers On Demand 3 days 4 days 5 days 6 days 2 weeks 3 weeks 1 month 2 months Operating scenario Stressed scenario (239) As regards the new regulatory framework, Basel 3, in 2014, the Risk Management Department worked with the other company departments on exercises to estimate the possible effects of the prudential new standards on the short-term liquidity ratios (Liquidity Coverage Ratio - LCR). The calculation of the ratio was shared in Finance Committees and funding strategies that would enable full compliance with the regulatory requirements were outlined. Moreover, with reference to the medium-term liquidity indicator (Net Stable Funding Ratio - NSFR), a balancing activity of the figures of Cedacri were started during the year. 400

403 Unipol Banca Financial Statements months 4 months 5 months 6 months 7 months 8 months 9 months 10 months 11 months 12 months (263) (184) (258) (199) (61) (145) (150) (115) (72) (1,206) (67) (55) (146) (128) 50 (58) (10) (16) 51 (1,124) (126) (181) (327) (455) (405) (464) (473) (489) (438) (1,562) months 4 months 5 months 6 months 7 months 8 months 9 months 10 months 11 months 12 months (567) (309) (369) (494) (625) (576) (605) (615) (609) (559) (1,684) 401

404 8 Notes to the Consolidated Financial Statements QUANTITATIVE INFORMATION 1. Time distribution of financial assets and liabilities by remaining contract duration Currency of denomination: Euro Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets 2,086,116 15,442 13, ,238 1,232, , ,595 2,949,685 4,385, ,690 A.1 Government securities ,938 4,680 8, , ,000 1 A.2 Other debt securities 3, ,368 42, A.3 UCITS units ,014 A.4 Loans 2,083,028 15,442 13, , , , ,790 2,606,834 3,789,988 91,667 - Banks 123, , ,667 - Customers 1,959,340 15,434 13, , , , ,790 2,606,834 3,789,988 - Balance sheet liabilities 5,843,211 72,152 27, , , , ,890 2,457, , B.1 Deposits and current accounts 4,973,249 28,253 10,615 54, , ,967 76,430 91, Banks 25, , Customers 4,947,902 28,253 10,615 44, , ,967 76,430 91, B.2 Debt securities 718, , , , ,543 1,950,456 75,967 - B.3 Other liabilities 151,555 43,767 15, , ,566 28,517 53, , ,119 - Off-balance sheet transactions 78,821 8, ,953 11,804 21,711 8,013 19,293 - C.1 Financial derivatives with capital swaps - 8, , Long positions - 6, Short positions - 1, C.2 Financial derivatives without capital swaps ,787 1,648 10, Long positions , Short positions ,443 1,348 2, C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds 78, ,156 8,816 10,939 7,918 19, Long positions 10, ,156 8,816 10,939 7,918 19, Short positions 68, C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

405 Unipol Banca Financial Statements 2014 Currency of denomination: USD Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets 7, ,374 6, A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans 7, ,374 6, Banks 2, Customers 4, ,374 6, Balance sheet liabilities 6, B.1 Deposits and current accounts 6, Banks Customers 6, B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions - 6, C.1 Financial derivatives with capital swaps - 6, Long positions Short positions - 5, C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

406 8 Notes to the Consolidated Financial Statements Currency of denomination: GBP Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets 4, A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans 4, Banks 4, Customers Balance sheet liabilities 1, B.1 Deposits and current accounts 1, Banks Customers 1, B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with capital swaps Long positions Short positions C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

407 Unipol Banca Financial Statements 2014 Currency of denomination: CHF Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans Banks Customers Balance sheet liabilities B.1 Deposits and current accounts Banks Customers B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with capital swaps Long positions Short positions C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

408 8 Notes to the Consolidated Financial Statements Currency of denomination: CAD Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans Banks Customers Balance sheet liabilities B.1 Deposits and current accounts Banks Customers B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with capital swaps Long positions Short positions C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

409 Unipol Banca Financial Statements 2014 Currency of denomination: other currencies Items/Time bands On demand From 1 day to 7 days From 7 days to 15 days From 15 days to 1 month From 1 month to 3 months From 3 months to 6 months From 6 months to 1 year From 1 year to 5 years Over 5 years Unspecified duration Balance sheet assets 3, A.1 Government securities A.2 Other debt securities A.3 UCITS units A.4 Loans 3, Banks 3, Customers Balance sheet liabilities B.1 Deposits and current accounts Banks Customers B.2 Debt securities B.3 Other liabilities Off-balance sheet transactions C.1 Financial derivatives with capital swaps Long positions Short positions C.2 Financial derivatives without capital swaps Long positions Short positions C.3 Deposits and loans to be received Long positions Short positions C.4 Irrevocable commitments to grant funds Long positions Short positions C.5 Financial guarantees issued C.6 Financial guarantees received C.7 Loan derivatives with capital swaps Long positions Short positions C.8 Loan derivatives without capital swaps Long positions Short positions

410 8 Notes to the Consolidated Financial Statements 2. Information on recognised tied up assets Technical forms Carrying amount Tied up Fair Value Not tied up Carrying amount Fair Value Total 31/12/2014 Total 31/12/ Cash and cash equivalents - 98,897 98, , Debt securities 742, , , ,045 1,394,585 1,645, Equity securities ,991 32,096 31,991 59, Loans 2,543,824 7,696,534 10,240,358 9,968, Other financial assets - 53,406 53,406 65, Non-financial assets - 535, , ,259 Total ,286, ,369 9,067, ,141 12,354,679 Total ,025, ,636 9,366,507 1,580,406 12,391, Information on derecognised tied up owned assets Technical forms Tied up Not tied up Total 31/12/2014 Total 31/12/ Financial assets 531,574 1,642,436 2,174,010 3,093,264 - Securities 531,574 1,642,436 2,174,010 3,093,264 - Other Non-financial assets Total ,574 1,642,436 2,174,010 Total ,652,927 1,440,337 3,093, GROUP - OPERATIONAL RISKS QUALITATIVE INFORMATION General aspects, management processes and methods of calculating the operational risk The Unipol Group, implementing the provisions of (EU) Regulation no. 575/2013 (known as CRR ) for credit institutions and investment companies, defines the operational risk as: the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events such as fraud or the activity of service providers. The operational risk includes, in terms of identification and quantitative assessment, the legal risk, the risk of non-compliance with regulations and IT risk, whereas the strategic and reputational risk are excluded. The MEGA project works shared with the different Control Governance functions of the Unipol Group for defining the Operational risk management and control system continued. In particular, the structure of the joint database that will make it possible to give a common focus to the information of the control structures in order to achieve important synergies was completed. Work also continued on the activities relating to the Operational Risk Management System, in line with the regulatory requirements envisaged by the Traditional Standardised Approach. 408

411 Unipol Banca Financial Statements 2014 This model hinges on: the process for recovering from operating loss events; the process for a prospective qualitative analysis of the level of corporate risk (Risk Self-Assessment). Collection of data on operational losses continued on a quarterly basis. Part F information on consolidated equity Section 1 Consolidated shareholders equity A. Qualitative information Equity management relates to all the policies and choices required to identify the size of the equity, as well as the optimum combination among the various alternative capitalisation instruments, in order to ensure that the equity and the ratios of the Bank are consistent with the risk profile undertaken and comply with regulatory requirements. The Bank is subject to the capital adequacy rules established by the Bank of Italy. Activity to verify compliance with the regulatory requirements and consequently capital adequacy is on-going and is based on the development targets established. B. Quantitative information The following table indicates the analytical breakdown of equity. B.1 Consolidated equity: breakdown by type of company Equity items Banking group Insurance companies Other companies Eliminations and adjustments from negative consolidation Share capital 897, ,444 Share premium reserve Reserves (79,475) - (79,475) Equity instruments (Treasury shares) Valuation reserves: (11,276) (11,276) - Available-for-sale financial assets (503) (503) - Property, plant and equipment Intangible assets Foreign investment hedging Cash flow hedging (7,045) (7,045) - Exchange rate differences Non-current assets being disposed of Actuarial profits (losses) relating to defined-benefit pension plans (3,728) (3,728) - Portions of valuation reserves relating to investments carried at equity Special revaluation laws Group profit (loss) and non-controlling interests for the year (+/-) (85,339) - - (85,339) Shareholders' equity 721, ,354 Total 409

412 8 Notes to the Consolidated Financial Statements B.2 Valuation reserves of available-for-sale financial assets: breakdown Banking Group Insurance companies Other companies Eliminations and adjustments from negative consolidation Total 2014 Assets/amounts Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities 1,727 2, ,727 2, Equity securities UCITS units Loans Total ,727 2, ,727 2,229 Total ,976 22, ,976 22,290 B.3 Valuation reserves of available-for-sale financial assets: annual changes Debt securities Equity securities UCITS units Loans 1. Opening balances 12,371 (278) Positive changes 3, Fair value increases 3, Reclassification of negative reserves in the income statement due to impairment following disposal Other changes Negative changes 16, Fair value decreases Impairment adjustments Reclassification in the income statement of positive reserves: following disposal 15, Other changes Closing balances (420) (82) - - The item 3.4 Other changes Debt securities comprises 98k contributed by Banca Sai SpA as a result of the merger. B.4 Valuation reserves related to defined benefit plans: annual changes During the financial year, the reserves in question, net of 534k contributed by Banca Sai and Finitalia following the well-known merger by incorporation of Banca Sai into Unipol Banca, decreased by 1,422k. 410

413 Unipol Banca Financial Statements 2014 Section 2 Own funds and regulatory ratios Information not applicable to this consolidation following the changes introduced by the Supervisory Regulations of the Bank of Italy that, with a special note of 1 August 2014 announced the change of the Register of Banking Groups through the cancellation of the Banking Group Unipol Banca SpA and the registration of the Unipol Banca in the new Unipol Banking Group with Parent Company Unipol Gruppo Finanziario SpA, subject to consolidated supervision. Therefore, Unipol Banca is no longer the Parent Company of the previous Unipol Banca Banking Group and hence not subject to consolidated supervision. Therefore, the information provided for in this section and the following sections 3 and 4 are the responsibility of the new Unipol Banking Group. Section 3 Insurance regulatory capital and ratios See Section 2. Section 4 The financial group s capital adequacy See Section

414 8 Notes to the Consolidated Financial Statements Part G Business combinations Section 1 Business combinations carried out during the year During the year, there were no business combinations as regulated by IFRS 3. In the context of the reorganisation and rationalisation of the Banking Group, in November 2014 the merger by incorporation of Banca Sai SpA into Unipol Banca SpA became effective. The transaction was authorised by the Bank of Italy on 25 September 2014 and its tax and accounting effects started as from 1 January 2014 and with it, among other things, the Bank acquired control over the company Finitalia SpA operating in the sector of financing - of insurance premiums, in particular. This transaction, which was configured as a mere reorganisation within the Group (Unipol Banking Group with parent company Unipol Gruppo Finanziario SpA), was deemed to be lacking in all economic substance and consequently recorded with the continuity of amounts in line with the provisions of the documents OPI 1 and 2 issued by Assirevi. As the transfer values are higher than the historic amounts, the excess was reversed, reducing the merging company s equity, with the recording of a special reserve in its financial statements, of 44,127,635. Section 2 Transactions after the end of the year No aggregations were carried out after the end of the year. Section 3 Retrospective adjustments There were no financial and economic changes on the amounts recognised in previous years, relating to business combinations. 412

415 Unipol Banca Financial Statements 2014 Part H Related-party transactions The types of related parties, as defined by IAS 24, include: holding companies; subsidiaries; associated companies; directors, statutory auditors and senior management of the Bank; close family members of the above; the pension funds of Unipol Group employees. 1. Information on emoluments to directors, statutory auditors and executives with strategic responsibilities Information on emoluments paid during 2014 to directors, statutory auditors and executives with strategic responsibilities, such as general managers and deputy general managers, is given below. Payments Directors and statutory auditors Executive with strategic responsibilities Emoluments and accessory charges 1,216 1,309 Bonuses, premiums and various incentives Non-monetary benefits - - Total 1,216 1, Information on related-party transactions Transactions with related parties were usually carried out at the same terms as those applied for transactions entered into with independent third parties and they are attributable to the ordinary operations of the Group. The following table shows the assets, liabilities and guarantees existing at 31 December Related parties/items Trading assets Receivables from banks Receivables from customers Due to banks Due to customers Securities outstanding Guarantees Holding companies , Associated and affiliated companies , ,448 41,565 - Directors and Management ,883 1,403 - Statutory auditors Employee pension fund ,

416 8 Notes to the Consolidated Financial Statements The main financial figures for the year in relation to transactions with related parties are shown below. Items/Related parties Holding companies Associated and affiliated companies Interest income - 37,101 Interest expense 562 4,197 Commission income 4,555 41,369 Commission expense 18,538 5,561 Dividends - - Other operating expenses/income Administrative expenses 1,784 19,938 There are no positions identified as non-performing loans and no provisions for doubtful debts related to subjects that at 31 December 2014 qualified as related parties were necessary. Information on the holding company Unipol Banca SpA is held by Unipol Gruppo Finanziario SpA, formerly Compagnia Assicuratrice Unipol SpA with registered office in Via Stalingrado 45, Bologna. Following the changes introduced by the Supervisory Regulations of the Bank of Italy, with a special note of 1 August 2014 the Supervisory Authority announced the change of the Register of Banking Groups through the cancellation of the Banking Group Unipol Banca S.p.A. and the registration of the new Unipol Banking Group. Therefore, Unipol Banca is no longer the Parent Company of the previous Unipol Banca Banking Group and at the same time it is part of the Unipol Banking Group, with the Parent Company Unipol Gruppo Finanziario SpA. In accordance with Art bis of the Civil Code, the key figures of the last financial statements approved by Unipol Gruppo Finanziario SpA, the parent company that exercises the management and coordination of Unipol Banca SpA, are shown below. For a proper and complete understanding of the equity and financial situation of Unipol Gruppo Finanziario Spa at 31 December 2013, as well as the operating result achieved by the company in the year closed on said date, please see the financial statements which, together with the Independent Auditors Report, are available at the Company s registered office or on the website 414

417 Unipol Banca Financial Statements 2014 Highlights of the Financial Statements of Unipol Gruppo Finanziario at 31 December 2013 and 31 December 2012 Amounts in m Statement of financial position ASSETS 31/12/ /12/2012 A) SUBSCRIBED CAPITAL UNPAID B) FIXED ASSETS I Intangible assets II Property. plant and equipment III Financial assets 5, ,128.8 TOTAL FIXED ASSETS 5, ,211.0 C) CURRENT ASSETS I Inventories - - II Receivables III Current financial assets IV Cash and cash equivalents TOTAL CURRENT ASSETS 1, ,638.9 D) ACCRUALS AND DEFFERALS TOTAL ASSETS 7, ,857.6 LIABILITIES A) SHAREHOLDERS EQUITY I Share Capital 3, ,365.3 II Share premium reserve 1, ,410.0 III Revaluation reserve IV Legal reserve V Statutory reserves - - VI Reserve for treasury shares in portfolio 23 - VII Other reserves VIII Profits (losses) carried forward - - IX Profit (loss) for the year TOTAL SHAREHOLDERS EQUITY 5, ,632.6 B) PROVISIONS FOR RISKS AND CHARGES C) POST-EMPLOYEMENT BENEFITS D) PAYABLES 1, ,076.4 E) ACCRUALS AND DEFFERALS TOTAL LIABILITIES 7, ,857.6 Amounts in m Income Statement 31/12/ /12/2012 A) VALUE OF PRODUCTION B) COSTS OF PRODUCTION DIFFERENCE BETWEEN VALUE AND COSTS OF PRODUCTION (A-B) (369.8) (110.1) C) FINANCIAL INCOME AND CHARGES D) VALUE ADJUSTMENTS TO FINANCIAL ASSETS (193.0) 29.9 E) EXTRAORDINARY INCOME AND EXPENSES PRE-TAX PROFIT (LOSS) PROFIT (LOSS) FOR THE YEAR

418 8 Notes to the Consolidated Financial Statements Part I Payment agreements based on own Equity Instruments At the financial statement reference date there are no payment agreements based on own equity instruments. Part L Sector information Breakdown by business sectors: income statement figures for 2014 Items Banking activity Additional financial activities Infra-sector eliminations and adjustments Net interest 219,082 36, ,419 Dividends and profits (losses) on investments carried at equity 2,290 - (2,200) 90 Net commission income 104, ,725 Result from trading and hedging activities 11, ,584 Profit (loss) on disposal and repurchase of financial assets and liabilities Total 64, ,548 Other operating expenses/income 29,137 1,624 (454) 30,307 Net operating income 430,657 38,391 (2,375) 466,673 Personnel expenses (155,663) (6,552) 6 (162,209) Administrative expenses (129,509) (11,478) 168 (140,819) Amortisation/depreciation on property, plant and equipment and intangible assets (7,526) (355) - (7,881) Operating expenses (292,698) (18,385) 174 (310,909) Operating result 137,959 20,006 (2,201) 155,764 Profits (losses) on equity investments (2,004) - 1,434 (570) Net provisions for risks and charges (3,739) - - (3,739) Net impairment adjustments to loans (194,137) (9,162) - (203,299) Net impairment adjustments to other assets (51,072) - - (51,072) Net impairment adjustments to goodwill - - (513) (513) Current result before tax (112,993) 10,844 (1,280) (103,429) Income tax on current operations 22,026 (3,937) - 18,089 Result of assets being disposed of Net profit (loss) attributable to non-controlling interests - (66) - (66) Net profit (loss) (90,967) 6,841 (1,280) (85,406) 416

419 Unipol Banca Financial Statements 2014 Disclosure of Payments to the Independent Auditors The following table shows the payments made (in k), in accordance with Art. 149-duodecies of the CONSOB Issuer Regulation by the companies of the Unipol Banca Group to the independent auditors, or to entities belonging to the network of said independent auditors, for audits and for rendering other services, broken down by type or category. Statement of payments to the independent auditors pursuant to Art. 149-duodecies of the Issuer Regulation Type of services Service provider Recipient Payments Auditing PwC SpA Unipol Banca SpA 169 Certification services PwC SpA Unipol Banca SpA 7 Other services TLS Rete PwC Unipol Banca SpA 40 Total Unipol Banca SpA 216 Auditing PwC SpA Subsidiaries and special securitisation SPVs 106 Certification services PwC SpA Securitisation SPVs 3 Total subsidiaries 109 General total 325 The payments shown do not include expenses charged, VAT that is not recoverable and the CONSOB contribution. 417

420

421

422 9 Independent Auditors Report 420

423 Unipol Banca Financial Statements

424 Unipol Banca S.p.A. Registered and Head Offices: Piazza della Costituzione, Bologna (Italy) Tel Fax /101 Share capital 1,004,500, fully paid-up Bologna Company Register Tax and VAT No Entered in the Register of Banks and Parent Company of the Unipol Banca Banking Group entered in the Register of Banking Groups Company steered and coordinated by Unipol Gruppo Finanziario S.p.A. Member of the Interbank Deposit Guarantee Fund Member of the National Guarantee Fund ABI No

425 Unipol Banca S.p.A. Registered office Piazza della Costituzione, Bologna (Italy)