Annual Report 2011. For family businesses and liberal professions. www.bankvanbreda.be

Annual Report 2011 For family businesses and liberal professions www.bankvanbreda.be

Annual Report 2011 Content Preface 4 Basic figures 6 Annual report 9 Organisation chart 31 Corporate governance 33 Consolidated financial statements 37 You are welcome at our bank 46 ANNUAL REPORT 2011 3

Preface Bank J.Van Breda & C is different We operate on the basis of our own unique approach, constantly keeping our clients long-term interests in mind. We guarantee you personal service for the systematic accumulation and protection of your assets. As your financial advisor, we stand out ever more clearly because of three crucial strengths. We are: 1. Specialised Because we do nothing else besides dealing with people like you, we are thoroughly familiar with the needs and concerns of family businesses and the liberal professions. We keep an eye on the financial balance between your business, your practice or your firm on the one hand and your private capital accumulation on the other. This means that we can make the difference at crucial points in your career. To fulfil these promises, a unique team stands ready to serve you. The staff members who look after your interests set great store by the following values: 1. Honesty We work exclusively with people of integrity who seek to live and work ethically both in their private and in their professional lives. 2. Sense of Responsibility If one of our staff members gives a piece of advice, they take your long-term needs into consideration. They make specific arrangements with you and they honour those commitments. That is their fundamental approach. 3. Enthusiasm You can feel the difference from the very first contact: here is a team ready to serve you with a positive attitude. 2. Personal As our client, you have a permanent account manager. Our small scale means that he or she can also guarantee you a really personal approach. Our staff are trained to listen first and only then to give advice. 3. Proactive We take the initiative at the right time and without delay or needless fuss. Bank J.Van Breda & C is not a bank for everyone. On the contrary, our main asset is our in-depth specialisation. We aim to be the best advisory bank for family businesses and liberal professions, providing lifelong service for both private and professional needs. This is the focus of our entire organisation. ANNUAL REPORT 2011 4

Preface We are ready now for 2019 Profit is essential for the future of all businesses. But there is more. The success of our deliberate focus also increases our colleagues pride in their profession. Our client satisfaction remains historically high: 93% of our clients indicate that they would recommend our bank. We feel at home in the world of SMEs. Our heart beats for the medical sector. The feeling of doing meaningful work for interesting clients, in a company where people feel comfortable: this is what motivates us. And we try to pass on this positive feeling to you, the client. The shareholders equity of Bank J.Van Breda & C was not affected by the crisis on the financial markets and was significantly strengthened by the acquisition of ABK. We have also continued to be profitable during the years of crisis. And even stronger: we already satisfy the new requirements that Basel III will impose from 2019 to prevent a systemic crisis of financial institutions in the future. High-quality capital The standard for high-quality capital ( tier 1 ) is increasing from 4 to 8.5% of the risk-weighted assets; we are already at 14.7% today. High liquidity High liquidity buffer in cash with the Nationale Bank and in government bonds, of which 98% are issued or guaranteed by the following European governments: Germany, the Netherlands, Belgium, Austria, Luxembourg and Finland. This buffer provides cover for more than 19% of client deposits. Stable financing Your bank finances its investment portfolio and lending exclusively from its shareholders equity and client deposits. We do not make use of market financing. Low leverage The bank s shareholders equity amounts to 10.3% of the total assets, or more than three times the 3% standard being targeted by supervisory authorities. Carlo Henriksen President of the Executive Committee Bank J.Van Breda & C The banking sector will need to raise hundreds of billions of euros in additional capital and stable sources of finance. Bank J.Van Breda & C already satisfies all criteria and is therefore very strong. ANNUAL REPORT 2011 5

Basic figures At a glance Bank J.Van Breda & C 2007 2008 2009 2010 2011 2011 excl. ABK incl. ABK Staff 399 403 399 418 412 462 Results Net profit after taxes 22,384 20,619 23,317 25,664 21,407 54,880 Profit growth -8% -8% 13% 10% -17% (**) Balance sheet data Total invested by clients 4,700,986 5,009,245 5,644,268 6,368,943 7,135,002 7,469,140 Client deposits 1,899,356 2,221,400 2,358,533 2,596,766 3,119,141 3,453,279 Off-balance sheet products 2,801,630 2,787,845 3,285,735 3,772,177 4,015,861 4,015,861 Total private lending (incl. Van Breda Car Finance) 2,056,606 2,202,059 2,328,371 2,631,339 2,818,021 3,043,941 Equity 206,577 222,599 243,731 258,671 275,383 410,965 Ratios Efficiency ratio (cost/income) 58% 60% 60% 57% 59% 61% Return on average equity (ROE) 10.4% 9.6% 10% 10% 8% (**) Return on assets (ROA) 0.85% 0.70% 0.77% 0.80% 0.62% (**) Amounts written down on loans 0.13% 0.19% 0.09% 0.15% 0.05% 0.06% Solvency ratio (equity to assets) 7.8% 7.6% 8.1% 8.1% 7.9% 10.3% Core capital ratio (core tier 1) (*) 9.5% 10.1% 11.8% 11.3% 10.8% 14.7% Risk-weighted assets ratio (RAR) (*) 11.8% 12.5% 14.6% 14.7% 13.7% 17.3% All data at 31.12, with monetary amounts in thousands of euro. (*) Core capital ratio and risk-weighted assets ratio up to and including 2007 were calculated in accordance with Basel I standards, from 2008 in accordance with Basel II standards (standardised approach). (**) Given the exceptional non-recurring profit impact of the acquisition of ABK, these percentages would give a distorted picture of the underlying economic returns. Bank J.Van Breda & C NV consolidated with Van Breda Car Finance NV, Antwerps Beroepskrediet CV (shortened to ABK, from 31/5/2011), Beherman Vehicle Finance NV (dissolved on 7/10/2009), Beherman Vehicle Supply NV, Station Zuid NV and Fracav SA (from 13/3/2007) using the full consolidation method and with Power Lease NV (up to 11/12/2007), Finauto NV, Necadis Credit NV (dissolved on 16/12/2010), Financieringsmaatschappij Definco NV, Antwerpse Financiële Handelsmaatschappij NV, Jaguar Finance Belgium NV (dissolved on 26/06/2007) and Informatica J.Van Breda & C NV using the equity method. ANNUAL REPORT 2011 6

Basic figures Group Delen 2007 2008 2009 2010 2011* Staff 210 215 214 232 530 Results Net profit after taxes 36,714 32,469 34,570 54,281 57,171 Profit growth 22% -12% 6% 57% 5% Balance sheet data Total invested by customers 12,125,735 10,342,784 13,242,868 15,272,178 22,570,394 Equity 246,021 281,083 303,597 344,089 364,258 Ratios Cost-income ratio 44.6% 46.1% 48.3% 41.7% 44.2% Return on average equity (ROE) 18.6% 12.3% 11.8% 16.8% 16.1% All data as at 31.12, with monetary amounts in thousands of euro. Since the 2005 financial year, the Delen Group has published its accounts in accordance with International Financial Reporting Standards (IFRS). * JM Finn & C Ltd. included ANNUAL REPORT 2011 7

ANNUAL REPORT 2011 8

Annual Report Bank J.Van Breda & C achieved a consolidated net profit in 2011 of 54.9 million euro. Excluding ABK and an exceptional impairment loss in the investment portfolio, the underlying net profit amounted to 26.4 million euro, compared to 25.7 million in 2010. There was another record increase in assets under management. Consolidated equity increased to 411 million euro as a result of the ABK acquisition. Bank J.Van Breda & C Bank J.Van Breda & C is a specialist advisory bank which exclusively targets entrepreneurs and the liberal professions. We help them to systematically build up, manage and protect their assets. With us they can count on personal proactive advice. Both professionally and privately. Throughout their lives. The bank s sustainable, careful approach and the high levels of client satisfaction have resulted in strong growth in commercial activities. Capital invested saw record growth of 766 million in 2011 to 7.1 billion euro (+12%). Client deposits increased to 3.1 billion euro (+20%) and this in an extremely competitive market environment. Investments in off-balance sheet products increased by 6% to 4.0 billion euro, thanks to the inflow of additional investments. In terms of asset management Bank Delen had 2,115 million euro under management at the end of 2011 for clients of Bank J.Van Breda & C (compared to 1,968 million euro in 2010, +7%), despite the difficult stock market climate. Bank J.Van Breda & C achieves record growth in assets under management. ABK acquisition provides for significant strengthening of equity. ANNUAL REPORT 2011 9

Annual Report The equity portion of the portfolio managed by Bank Delen was obviously not immune to the stock market malaise, but overall the portfolio offered strong resistance to the financial crisis. Within the investment strategy, there was a consciously defensive approach to the exposure to shares. Moreover, as in the past, the bond and cash portion of the portfolio was invested exclusively in high-quality debtors. This conservative investment strategy, alongside the wealth management services, made for a steady inflow of new capital in 2011, from both existing and new clients. Outstanding reserves in other insurance products (mainly group insurance) increased by 26% to more than 233 million euro. The investment funds grew to an invested capital of 230 million euro (+13%). In total, volumes of these investments in off-balance sheet products increased to 4,016 million euro (+6%). This growth in off-balance sheet products contributed an increase of 5% in commission income. Insurance investments grew to a volume of 1,438 million euro (+2%). 7,135 6,369 5,644 4,701 5,009 4,077 2,286 2,352 2,672 3,118 3,538 Trusted by entrepreneurs and the liberal professions with more than 7 billion euro of capital. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total invested by clients target group banking with Bank J.Van Breda & C (in million euro): deposits + off-balance sheet investments. ANNUAL REPORT 2011 10

Annual Report Loan portfolio for target group banking grows by 8% In 2011 the volume of loans made to target group banking also increased further to 2,477 million euro (+8%). Loans to successful entrepreneurs and liberal professions are made on the basis of a long-term relationship, making it possible to offer credit for well-considered and prudent investment and growth projects, even in a difficult financial and economic environment. Banking revenues from target group banking + 3% Despite the strong growth in the volume of deposits and loans, interest income stagnated. The continued disruption of the deposit market, with a number of banks being driven by their liquidity requirements to offer rates for savings that are significantly above the risk-free interest rate, affected the interest result. The flattening of the yield curve and the bank s strategy in its investment portfolio to prioritise security over yield had a negative impact on the interest result. The growth in off-balance sheet investments, however, contributed an increase in commission income of 5%, as a result of which banking revenues from target group banking were 3% higher at 85.4 million euro. Additional investments in commercial, IT and accommodation capacity, as well as the bank levy, resulted in costs increasing by 6%. 1,164 1,401 1,505 1,755 1,872 2,005 2,285 2,477 Personnel costs rose by 2% due to salary indexation, while non-payroll overheads were 13% higher. This increase is fully explained by investments in IT applications and the higher contribution imposed by the deposit protection fund as a consequence of the crisis in the large banks. This contribution has more than tripled compared to 2009 and has increased sixfold since 2008. 830 928 972 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Loan volume target group banking Bank J.Van Breda & C (in million euro) 2008 2009 2010 2011 500,000 990,000 2,054,000 2,962,000 Evolution of contributions to the deposit protection fund by Bank J.Van Breda & C NV (in euro) ANNUAL REPORT 2011 11

Annual Report Amounts written down on loans in target group banking exceptionally low Amounts written down on loans in target group banking remain at an exceptionally low level, at 1.3 million euro (only 0.06% of the average loan portfolio on an annualised basis). The profit from target group banking was down on the record level of 2010 Given the negative developments in the Greek situation, the 10 million of Greek government bonds in the investment portfolio of the bank was impaired by 7.6 million euro on grounds of prudence, being the difference between book value and market value. Even after deducting this substantial write-off, the bank achieved a very reasonable result in target group banking, albeit below the record level of 2010. The investment portfolio of Bank J.Van Breda & C NV consists solely of traditional bonds, 98% of which are issued or guaranteed by the following European governments: Germany, the Netherlands, Belgium, Austria, Luxembourg and Finland. There are no bonds from Italy, Portugal, Ireland or Spain in the portfolio. ANNUAL REPORT 2011 12

Annual Report Van Breda Car Finance Bank J.Van Breda & C enjoys a growing reputation as a specialist bank for entrepreneurs and professionals. In addition, through our subsidiary Van Breda Car Finance we are active in the vehicle financing and vehicle leasing sector throughout Belgium. Van Breda Car Finance aims to be the best credit partner for the customers of large, independent car dealers. The entire organisation focuses on providing rapid credit solutions for passenger vehicles through the company s own website. Starting from its core values - fast, friendly & flexible - Car Finance supports local car dealers through the entire sales process: from quotation, processing applications and preparing credit contracts up to and including confirming payments on the dossier. In this way we make it easier for our partners to make sales, as they can extend their customer service to include credit. At the end of 2011 the total portfolio remained almost unchanged at 288 million euro. Net amounts written down on loans remained exceptionally low, thanks to credit approval policies and recoveries in problem cases. Along with strict cost control, this resulted in a record profit. ANNUAL REPORT 2011 13

Annual Report ABK ABK has been a subsidiary of Bank J.Van Breda & C since 2011. Like Van Breda Car Finance, it has been given a separate strategy focused on a clearly distinct target market. ABK is the safe bank for simple, transparent and fairly priced savings and investment products. Safety means dealing carefully with the money that is entrusted to it, using only safe products. In this way, ABK has for more than 80 years been the trusted partner of the self-employed and of individuals. On 20 May 2011, Bank J.Van Breda & C acquired control of the Antwerps Beroepskrediet (ABK). This acquisition gave rise to a consolidation difference ( negative goodwill ) that contributed 35.5 million euro to the result. With the closing of the public offering and a later capital increase, Bank J.Van Breda & C increased its stake in ABK to 91.76%, with the difference between the purchase price and book value being taken directly to equity. This resulted in the growth of consolidated equity to 411.0 million euro, compared to 258.7 million euro at the end of 2010. Following the acquisition, the equity positions in ABK s investment portfolio were largely liquidated, resulting in losses. And there was an exceptional write-off in the investment portfolio on a few securities because of increased uncertainty about their repayment at maturity, reducing them to market value. ABK s total profit contribution in 2011 thus amounted to 33.5 million euro. ABK is the safe bank for simple, transparent and fairly priced savings and investment products. ANNUAL REPORT 2011 14

Annual Report With its equity equal to 34% of total assets, ABK s balance sheet is exceptionally strong in terms of solvency. Against the 334 million euro of client deposits, there is a healthy loan portfolio of 226 million, with a balance of 94.6 million euro at the National Bank and a portfolio of exclusively high-quality government bonds of 133 million. These government bonds represent 60% of the investment portfolio. The significant excess capital that ABK has available is further invested in a diversified portfolio that consists of financial and corporate bonds (34%), as well as shares and other securities (6%). Through ABK, Bank J.Van Breda & C aims to extend the added value of its wealth management services to a clientele outside the target group of entrepreneurs and liberal professions. Following the acquisition, the executive committee launched a strategic exercise about the future positioning of ABK. A number of initiatives were already launched in the autumn aimed at strengthening the commercial dynamic of ABK. On 31/12/2011 clients have entrusted ABK with 334 million euro of deposits, compared to 303 million euro at the time of the acquisition. The loan portfolio amounted to 226 million euro. ANNUAL REPORT 2011 15

Annual Report Consolidated annual result The consolidated annual profit of Bank J.Van Breda & C was 54.9 million euro. Excluding the profit contribution from ABK (33.5 million euro) and the exceptional write-offs (5 million euro after tax) the underlying net profit would have been 26.4 million euro, against 25.7 million in 2010. Banking revenues increase by 7% The consolidated banking revenues increased by 6.4 million euro to 99.8 million euro (+7%). Despite the volume growth in loans (+16%) and deposits (+33%), interest income rose by only 12%, as a consequence of the continued disruption of the deposit market in which savings were compensated at significantly above the risk-free interest rate. The flattening of the yield curve and the bank s strategy to give priority in its investment portfolio to security over yield had a negative impact on interest income. The growth in off-balance sheet investments (+6%) resulted in an increase in commission income of 5%. The losses on financial instruments amounted to 3.3 million euro and are primarily the consequence of the unwinding of equity positions in ABK s investment portfolio. ANNUAL REPORT 2011 16

Annual Report Cost income-ratio 61% Costs amounted to 61 million euro. The consolidated cost income-ratio was 61%, putting Bank J.Van Breda & C among the best performing Belgian banks. Write-offs on loans exceptionally low The write-downs and provision for loans fell to 1.7 million euro compared to 3.8 million euro in 2010. This represented only 0.06% of the average loan portfolio. The sustained, prudent credit policy and the cooperation with successful careful clients continue to bear fruit even in a period of economic crisis. 9.8 million euro written off securities portfolio Given the negative developments, it was considered prudent to reduce the book value of the 10 million euro of Greek government bonds in the investment portfolio of Bank J.Van Breda & C by 7.6 million euro, which is the difference between their book value and market value. An exceptional impairment was made on the investment portfolio of ABK in the amount of 2.2 million euro. Strong liquidity and solvency Bank J.Van Breda & C remains well armed to face the challenges of the financial-economic crisis thanks to its healthy liquidity position. The loan portfolio is fully funded by customer deposits. Equity increased from 259 million euro to 411 million. 136 million of this increase is the consequence of the acquisition of ABK. Excluding ABK, the increase amounted to 17 million. The healthy portfolio of Bank J. Van Breda & C ensures that, as was the case in 2008, 2009 and 2010, equity has not been affected by losses on financial instruments. This strong growth in equity gives the bank additional capacity to continue to grow steadily in a financially sound way, even under unforeseen market conditions. Bank J. Van Breda & C already meets the solvency standards that the Basel III Agreement aims to impose in 2019. ANNUAL REPORT 2011 17

Annual Report Risk management: permanent monitoring and control Corporate risks are inherent in the normal activities of a bank. In comparison with its peers Bank J.Van Breda & C and its subsidiaries have always remained simple and transparent institutions. Moreover, they have for many years exercised great care in accepting risks. They perform ongoing risk-monitoring and control. Historically, Bank J.Van Breda & C has amply proven its capacity to manage risk. The internal risk committee supervises the risks and risk positions of the bank and its subsidiaries in a structured manner. To this end the risk committee gathers information from the various departments and activities. Credit risk Our credit portfolio is highly diversified within Bank J. Van Breda & C s clientele of local entrepreneurs and liberal professions, along with the individuals and self-employed clients of ABK. The bank applies concentration limits by sector and maximum credit amounts per client. The loan portfolio is subdivided into risk categories, each of which is separately monitored. Periodic reports are made to the Board of Directors about loans in the highest risk category uncertain outcome. Bank J.Van Breda & C and its subsidiary ABK have opted for the standardised approach under Basel II. Debts that become doubtful are transferred to the department for Disputed Affairs. There are criteria for compulsory transfer whenever particular events occur among our clients, borrowers or guarantors. Write-offs were made against loans in the highest risk category uncertain outcome and on debts that become doubtful. Bank J.Van Breda & C and its subsidiaries have always remained simple and transparent institutions. ANNUAL REPORT 2011 18

Annual Report Credit risk of the investment portfolio 2.1% 3.0% Government bonds Aaa The risk profile of the investment portfolio has deliberately been kept very low for many years. The investment framework that is submitted annually for the approval of the Board of Directors determines where investments can be made and the limits that apply. 48.7% 10.4% 27.1% 0.4% Government bonds Aa1 and Aa2 Government bonds Aa3 Government bonds Ca Corporate bonds The following table shows the composition of the consolidated investment portfolio by rating, sector, currency and maturity. 8.3% Rating (Moody s) Financial bonds Shares and other securities Bank J.Van Breda & C ABK 3.1% 2012 48.7 % 9.2% 2013 27.3% 7.5% 2014 11.7% 2015 27.1 % 25.1% 15.9% 2016 2017-2020 undetermined 8.3 % 10.4 % 0.4 % 3.0 % 2.1 % Government bonds Aaa Government bonds Aa1 and Aa2 Government bonds Aa3 Government bonds Ca Corporate bonds Financial bonds Composition of the consolidated investment portfolio on 31/12/2011 by rating (Moody s) Shares and other securities Remaining term: consolidated investment portfolio Currency Percentage euro 100% ANNUAL REPORT 2011 19

Annual Report Bank J.Van Breda & C only invests in bonds, 98% of which are issued by the following European governments: Germany, the Netherlands, Belgium, Austria, Luxembourg and Finland. There are no bonds from Italy, Portugal, Ireland or Spain in the portfolio. With an equity equal to 34% of the total assets, the balance sheet of ABK demonstrates exceptionally strong solvency. Against the 334 million euro of customer deposits is a healthy loan portfolio of 226 million, 94.6 million euro deposited with the Nationale Bank van België (NBB) and a portfolio of government bonds to the value of 133 million. These exclusively high-quality government bonds represent 60% of the investment portfolio. The substantial surplus of capital at ABK s disposal is further invested in a diversified portfolio. Because of the reduction in a number of positions during the course of 2011, the ABK portfolio at 31/12/2011 is made up of 34% financial and corporate bonds and 6% shares and other securities. Exchange risk Because of the nature of its clients (both Bank J. Van Breda & C and ABK, as well as Van Breda Car Finance, only operate in Belgium), the bank does not have material foreign currency positions. Market risk As all our business is client-oriented and we do not engage in any market activities on our own behalf, our result is less sensitive to movements on the financial markets. Interest rate risk The bank adopts a cautious policy towards interest rate risk, well within the standards set by the NBB (National Bank of Belgium). In areas where the durations of assets and liabilities are insufficiently matched, the bank uses hedging instruments to correct the balance. We do this with a combination of rate swaps (which convert our variable interest rate commitments into fixed rate commitments) and options (which provide protection against a rise in interest rates above given levels). The interest rate risk is measured, among other things, using the Basis Point Value methodology. It was decided to maintain the interest rate risk at a relatively low level in 2011. The bank also carries out extensive interest gap analysis and a scenario analysis that takes account of changing market conditions, enabling the impact of stress scenarios to be analysed. ANNUAL REPORT 2011 20

Annual Report Liquidity risk Commercial banking activities are the most important source of liquidity risk. This is the risk that the bank will have insufficient resources to meet its immediate commitments. The bank also consciously aims for a low risk profile in this domain. The bank s healthy liquidity position has been further strengthened by the significant influx of customer deposits. The entire loan portfolio is financed by client deposits. Risk-averse investors, who were frightened by the financial crisis, when looking at options for their long-term investments, are paying more attention than previously to the risk profile of the bank to which they entrust their savings. They feel reassured by the healthy financial position of Bank J.Van Breda & C and ABK. The bank s liquidity risk is constantly monitored by means of pro-active treasury management, within the guidelines defined by Asset & Liability Management. Among the tools used by the bank to manage its liquidity are liquidity reports, ratio analysis and short and long term volume forecasts. The bank also works with an internal liquidity ratio that compares the liquid assets and the available liquidity in the investment portfolio against shortterm commitments. The NBB stress test ratios are also monitored monthly. The bank is well within NBB standards. The table below shows the assets and liabilities grouped together per period of maturity. The table takes account of internal assumptions about the stability of funds for products without maturity (for instance current and savings accounts). The bank once again enjoyed a comfortable liquidity position in 2011, characterised by treasury surpluses. At the end of 2011 the bank had a consolidated cash surplus amounting to 154 million euro on deposit with the National Bank. Liquidity gap in million euro 1 month 1-3 months 3-12 months 1-5 years 5-10 years > 10 years 31/12/2011 Assets 574 170 557 1589 635 515 Liabilities 862 396 664 1414 92 689 Gap -288-226 -107 +175 +543-174 31/12/2010 Assets 409 141 396 1303 547 358 Liabilities 799 498 544 917 66 344 Gap -390-357 -148 +386 +481 +14 ANNUAL REPORT 2011 21

Annual Report Moreover, the bank has a substantial portfolio of highquality bonds that can be used as a buffer to absorb liquidity fluctuations in the treasury position. At the end of 2011 this portfolio of government bonds amounted to 510 million euro, taking the total liquidity buffer to 664 million euro, or almost 19.2% of client deposits. External institutional financing (interbank + securities placed with institutions) accounts for less than 1% of total assets. This makes Bank J.Van Breda & C and ABK much stronger than the average European bank, which in mid-2010 was more than 45% dependent on market funding (see graph). The bank s clients have always been its main source of financing: many thousands of local business people and liberal professions use Bank J.Van Breda & C for their investments and their day-to-day banking activities. This applies equally to ABK s client base of the self-employed and individuals. This provides the bank with a stable source of financing, with volumes spread over a large group of clients. With equity amounting to 10% of total assets, the consolidated solvency of Bank J.Van Breda & C is a multiple of the European average, which stood at 4% in mid-2010. Bank J.Van Breda & C aims to ensure that the bank at all times complies with statutory requirements and maintains a level of capitalisation that adequately matches the level of activity and the risks incurred. This means that the equity must be sufficient to absorb any shock caused by credit losses, so that clients savings deposits are not jeopardised at any time. Equity and market funding Bank J.Van Breda & C Solvency risk The bank has adequate means to continue to grow using its own resources, even in the event of unforeseen market conditions. Consolidated equity increased significantly from 259 million to 411 million euro following the acquisition of ABK. This took the equity to 10% of total assets or 12% of customer deposits. In other words, for every 100 euro of client deposits there is a buffer of 12 euro in equity available to absorb impairments on loans or investments. Equity as percent of assets 8 7 6 5 4 3 2 Japan US June 2010 December 2008 UK EU 15 20 25 30 35 40 45 50 Market funding as percent of total financing (Source: IMF) ANNUAL REPORT 2011 22