In 2017 the “Poste Risponde” Contact Centre handled around 26 million contacts (21 million in 2016). Alongside the usual customer relationship management and commercial network support services, new initiatives designed to support the Group’s businesses included completion of the roll-out at all Call Centres of the new front-end assistance application which enables Call Centre staff to improve customer management.
The web distribution channel, via the website www.poste.it and other dedicated web portals, provides access to online services for 15 million retail3 and business customers (13 million at 31 December 2016), operating as a direct end-to-end sales channel and as a support provider for other channels.
The economies of the Eurozone countries strengthened, embarking on a steady growth path (up 0.4 / 0.8 pp compared to the IMF and OECD forecasts at the beginning of the year). The recovery in foreign demand, the expansionary monetary policy of the European Central Bank (ECB), low inflation and the decline in political risk were the key factors in bolstering the economy. This enabled a recovery in household consumption, supported by the expanding labour market. Companies also benefited from strong global growth and the expansionary credit policy.
These changes are also reflected in the alternative performance indicators presented in this Report (a description is provided in an Appendix), in line with the guidance published by the European Securities and Markets Authority on 5 October 2015 (ESMA/2015/1415).
The cost of early retirement incentives during the year amounts to €499 million (€509 million in 2016), primarily relating to non-managerial staff for which provisions of €446 million have been made (€342 million in 2016) to the provisions for early retirement incentives, made to cover the estimated costs to be incurred by the Parent Company for early retirement incentives, under the current redundancy scheme for employees leaving the Company by 31 December 2019.
In detail, the contraction in volumes of Unrecorded Mail (110 million fewer items, or 7.4% less than in 2016) led to a fall in revenue of €123 million (down 13.2%).
In 2016, as previously mentioned, total revenue attributable to Universal Service compensation amounted to €371 million and took into account the release of compensation (approximately €108 million) held back in previous years, following new provision made by the Ministry of the Economy and Finance to cover previous contractual commitments.
Law 124 of 4 August 2017, the “Annual market and competition law”, came into effect on 29 August 2017. The legislation provides for the repeal, from 10 September 2017, of art. 4 of Legislative Decree 261/1999 and amendment of the relat8. Currently, pursuant to Legislative Decree 261/99, Poste Italiane SpA (which is responsible for the Universal Service until 30 April 2026) is obliged to provide a nationwide service to collect, transport, sort and distribute postal items weighing up to 2 kg and parcels weighing up to 20 kg, as well as the services relating to registered and insured items.
As already noted, the new Payments, Mobile and Digital (PMD) segment aims to centralise the management of payment services – partly in view of the new activities envisaged by PSD2 – and operate as a competence centre to support the implementation of the Group’s digital strategy. The segment includes the collection and payment services provided by BancoPosta RFC (managed in outsourcing), the e-money products and services offered by PosteMobile SpA, which has acquired significant experience over the years in digital services and in mobile banking and mobile payments. The investment in SIA SpA has also been allocated to the PMD segment.
The regulations issued by IVASS during the year include: �� IVASS Regulation 34 of 7 February 2017, laying down provisions on governance concerning the valuation of assets and liabilities other than technical provisions and the criteria used for their valuation and the relative report on the Regulation; �� lIVASS Regulation 35 of 7 February 2017, on the adjustment for the loss-absorbing capacity of technical provisions and deferred taxes for the determination of the solvency capital requirement calculated using the standard formula.
The labour market has entered the “fourth industrial revolution”, a set of transformations that, thanks to robotics, digital innovation and artificial intelligence, is changing not only companies’ business models, but also the way human capital is used. Today, companies have to manage a complex “ecosystem” of people as a result of the steady rise in the retirement age and the consequent longer period spent in the world of work, which entails the simultaneous presence of five generations who all have different values, experiences and aspirations that need to be managed. Recognising and valuing all forms of diversity has a strategic objective that brings advantages in terms of internal atmosphere, a sense of belonging, productivity and innovation.
The Materiality Matrix and a description of the material topics identified and used in the Non-Financial Statement are provided below, except for the topics of Economic and Financial Sustainability and Corporate Governance, which are dealt with in the Report on Operations and in the Report on Corporate Governance and the Ownership Structure.
Responding to new customer needs through innovation of the products and services provided, as well as of processes, especially via the opportunities offered by digitalisation.
Green building Risks connected with inadequate management of the Group’s buildings, including in terms of environmental sustainability, which may influence stakeholders’ perception of the Company.
Regarding the material topics identified, compared to the others, the ESG product investment and development topic, which particularly concerns Poste Vita Group companies and Banco Posta Fondi SGR, will follow a more significant development path in the short to medium term, also in line with national and international best practices.
Energy consumption, water consumption, GHG emissions, polluting emissions, other environmental aspects)
(around 8,000 in 2016 and around 10,000 in 2017), and to the addition of new types of contract. *** The increase in the volumes of electronic transactions in 2016 and 2017 is due to the “digitalisation” of certain transactions, resulting in the elimination of receipts. Indeed, in 2017, digitalised transaction volumes totalled approximately 30 million.
Permanent security plan The 2015-2019 Permanent Security Plan (PPS), which is revised and updated annually, has been drawn up to manage important IT security activities, initiatives and projects, in order to protect ICT resources and to adapt the countermeasures provided for by the various regulations and reference standards. It deals with the continuous evolution of IT risks on a permanent basis, and includes processing activities as well as projects regarding implementation of cross-cutting technological infrastructures to support all the services provided.
Poste Italiane’s commitment to cyber security is also reflected in its participation in international sectoral organisations, including the European Electronic Crime Task Force (EECTF)18 and the Global Cyber Security Center (GCSEC)19.
* The coverage represents the number of audits as a percentage of total corporate processes.
Reports may be sent, including anonymously, via traditional mail to this address: Comitato Valutazione Segnalazioni, Viale Europa no. 175 00144 Rome, or to this e-mail address: ComitatoValutazioneSegnalazioni@posteitaliane.it. The process of managing reports is overseen by the Whistleblowing Committee (the “Committee” or “WC”), coordinated by the Internal Auditing function, which carries out all investigative activities, assesses the checks to be made, and decides which corporate functions should be involved in assessment and recording, as well as ensuring the confidentiality of information and preparing periodic reports on the reports received. The complaints managed by the Committee in 2017 turned out to be unfounded, while, in one case, in 2016, they were confirmed. This was a report regarding fraud in the delivery quality monitoring process, which was the subject of a targeted audit by the Internal Auditing function. Some individuals were found to be responsible, which enabled the Company to take appropriate measures.
Men Women Total Men Women Total * Includes permanent staff and apprenticeships. ** Expressed in full-time equivalent terms. *** Includes staff on fixed-term contracts and on temporary contracts. Data refers to the headcount at 31 December.
In 2017, actions to support the special needs of personnel and family members continued, in application of corporate guidelines, including through the payment of allowances. The “PosteOrienta” project also continued, with the creation of educational and professional guidance seminars for employees’ children, and activation of an interactive portal that gave guidance to 800 young people in making their study and employment choices. The Company has launched the “Work experience champions” project by signing a memorandum of understanding with the Ministry of Education, Universities and Research to promote work experience schemes. Regarding personal services, thematic campaigns were carried out and around 120 agreements signed regarding the application of special product and service offerings, with a specific focus on health services and summer camps for children and young people. Prevention initiatives have been implemented, providing 270 employees in 9 cities with access to free specialist medical examinations. The organisation of summer holidays continued, organised by a team of specialist operators, in which 40 disabled children of employees participated.
Cultural integration The attention Poste Italiane pays to developments in the social environment, in which its approach to foreign citizens in Italy has become an important element in overcoming the language barrier, has resulted in the creation of 2 types of multi-ethnic post office, which offer postal services to Italian customers as well as to customers from various ethnic groups: �� mono-ethnic post offices, as a reference point in centres and/or neighbourhoods with a high concentration of specific communities. Examples include the post offices in Prato, where there is a large Chinese population, and the central post office in Foggia, which has a high concentration of African customers.
** For Postepay Standard and Evolution cards, renewals during the year are excluded.
�� Distribution Centres, which are regional centres that provide distribution, delivery and logistics support for the areas under their respective responsibility. They provide specialised deliveries, value-added services and, where available, notification messenger activities, delivery of undelivered mail and large account acceptance; in some cases they coordinate Secondary Distribution Centres and Decentralised Distribution Centres.
GRI 102-18 Governance structure of the organisation, including committees of the highest governance body, and those responsible for decision-making on economic, environmental, and social topics
GRI 102-45 A list of all entities included in the organisation’s consolidated financial statement that are not included in the Non-Financial Statement
GRI 102-46 An explanation of the process for defining the report content and the topic boundaries in the NonFinancial Statement.
GRI 403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities, by region and gender
Analysis of Poste Italiane SpA’s net (funds)/debt at 31 December (€m) 2017 2016 Increase/(decrease)
Industrial net (funds)/debt outside the ring-fence after adjusting for intersegment transactions (1,010) (887)
Net losses /recoveries on impairment of loans and advances (15) (6) (9) n/s
BancoPosta RFC’s performance during the year resulted in profit for the year of €585 million, up €17 million compared with 2016. The positive performance, despite being influenced by an increase in net provisions, which are up from €95 million in 2016 to €182 million in order to cover certain types of risk, including the voluntary initiative relating to the closed-end Europa Immobiliare fund, primarily reflects an improvement in net interest and other banking income (up 0.8% on 2016) and decline in administrative expenses (down 0.8% compared with 2016). Profit for 2017 also benefitted from a decline in tax expense, reflecting the reduction in the IRES rate from 27.50% to 24% in accordance with the 2016 Stability Law (Law 208 of 28 December 2015).
Amounts due from customers are down from the €9,004 million at 31 December 2016 to €7,951 million at 31 December 2017.
Directors’ report on operations for the year ended 31 December 2017 13. Appendix
�� Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial instruments that are either designated in this category or not attributable to any of the other categories described above. These financial instruments are recognised at fair value and any resulting fair value gains or losses are recognised in an equity reserve, with movements in such reserve being accounted for in “Other comprehensive income” (the “Fair value reserve”). This reserve is only recycled to profit or loss when the financial asset is effectively disposed of (or settled) or, in the event of accumulated losses, when there is evidence that the impairment recognised in equity cannot be recovered. Solely in the case of debt securities, if the fair value subsequently increases as the objective result of an event that took place after an impairment loss was recognised in profit or loss, the value of the financial instrument is reinstated and the reversal recognised in profit or loss. The recognition of returns on debt securities under the amortised cost method takes place through profit or loss, as do the effects of movements in exchange rates, whilst movements in exchange rates relating to available-for-sale equity instruments are recognised in a specific equity reserve, with movements in the reserve accounted for in “Other comprehensive income”. The classification of an asset as current or non-current depends on the term to maturity of the financial instrument. Financial instruments expected to be realised within twelve months of the end of the reporting period are, in any event, classified as current assets.
Non-current assets (or disposal groups) classified as held for sale and discontinued operations In compliance with IFRS 5, non-current assets, disposal groups and discontinued operations are measured at the lower of their carrying amount and fair value, less costs to sell.
Revenue recognition Revenue is recognised at the fair value of the consideration received, net of rebates and discounts, and in accordance with the accruals basis of accounting. Revenue from the rendering of services is recognised when it can be reliably measured on the basis of the stage of completion of the service provided. Revenue from activities carried out in favour of or on behalf of the state and Public Administration entities is recognised on the basis of the amount effectively accrued, with reference to the laws and agreements in force, taking account, in any event, of the instructions contained in legislation regarding the public finances. The return on the current account deposits held by the MEF is determined using the effective interest method and is recognised as revenue from financial services. The same classification is applied to income from euro area government securities, in which deposits paid into accounts by private customers are invested. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have been transferred to the buyer.
Dividends Dividends are recognised as finance income when the right to receive payment is established, which generally corresponds with approval of the distribution by the Shareholders Meeting of the investee company. Dividends from subsidiaries are accounted for as “Other operating income”.
2.4 Basis of consolidation The Poste Italiane Group’s consolidated financial statements include the financial statements of Poste Italiane SpA and of the companies over which the Parent Company directly or indirectly exercises control, as defined by IFRS 10, from the date on which control is obtained until the date on which control is no longer held by the Group. The Group controls an entity when it simultaneously: �� has power over the investee; �� is exposed, or has rights to, variable returns from its involvement with the investee; �� has the ability to influence those returns through its power over the investee.
Receivables due from Ministries and Public Administration entities: Cabinet Office for publisher tariff subsidies (v) 43 1
At 31 December 2017, provisions for doubtful debts reflect receivables for which no provision had been made in the state budget and other past due sums.
The cost of equity (Ke) is 6.74% for banking activities and 7.24% for asset management activities.
Depreciation and amortisation of property, plant and equipment and intangible assets The cost of these assets is depreciated or amortised on a straight-line basis over the estimated useful life of the asset. The useful life is determined at the time of acquisition and is based on historical experience of similar investments, market conditions and expectations regarding future events that may have an impact, such as technological developments. The actual useful life may, therefore, differ from the estimated useful life. Each year, changes in technology and within the industry and the costs of dismantling tangible assets and their recoverable amounts are reviewed in order to update the residual useful lives of such assets. This periodic update may lead to changes in the depreciation or amortisation period and thus in charges for depreciation or amortisation in the current and in future years.
�� Currency forwards: valuation is based on the differential between the reciprocal currency registered at the measurement date and the reciprocal currency fixed at the trade date.
2.7 New accounting standards and interpretations and those soon to be effective
Accounting standards and interpretations soon to be effective The following are applicable from 1 January 2018: �� IFRS 15 - Revenue from Contracts with Customers, adopted with Regulation (EU) no. 1905/2016. The new standard, which will replace IAS 18 - Revenue, IAS 11 – Construction Contracts and IFRIC 13 – Customer Loyalty Programmes, introduces an innovative, single framework that substantially changes the definitions, criteria and methods used for measuring and recognising revenue in the financial statements. Very briefly, the principal changes introduced by the standard are described below: a. Recognition of variable consideration
Revenue recognition is no longer related to the characteristics of the asset underlying the transaction with the customer (goods, services, interest, royalties) but is based on the distinction between an obligation “fulfilled at a point in time” and obligation “fulfilled over time”.
Equity instruments account for a residual portfolio share, compared with the debt instruments and shares/units of collective investment schemes held by the Poste Italiane Group. Nearly all the shares held by the Group are reported at fair value through profit or loss.
The Poste Italiane Group’s securities portfolio (with the exclusion of trade receivables, other receivables and hedging derivatives ) at 31 December 2017 consists of: �� Held to maturity: €12.9 billion
Equity attributable to owners of the Parent As a result of the above, the expected effects on equity attributable to owners of the Parent at 1 January 2018 are as follows (before the related taxation): �� An increase of approximately €1.7 billion in the fair value reserve.
The assessment, design and implementation of the project to adopt the new standard were completed in the last quarter of 2017.
Investments accounted for using the equity method [A4] 508 508 218 218
(€m) Note 2017 of which, related party transactions 2016 of which, related party transactions
Revenue from Mail, Parcel & other [C1] 3,631 513 3,822 549
Cost of goods and services [C5] 2,370 195 2,442 192 of which, non-recurring costs - 37
Taxation of items recognised directly in, or transferred from, equity not to be reclassified in the Statement of profit or loss for the year - 18
The following table shows movements in property, plant and equipment in 2017: tab. A1 - Movements in property, plant and equipment
During the year the Group effected reclassifications from intangible assets under construction to industrial patents, intellectual property, rights, concessions, licences, trademarks and similar rights, amounting to €79 million, reflecting the completion and commissioning of software and the upgrade of existing software.
These financial instruments are held by the subsidiary, Poste Vita SpA, and relate to: �� Fixed income securities, amounting to €6,220 million and consisting of €2,152 million in coupon stripped BTPs e Zero Coupon primarily acquired to cover the contractual obligations arising on Class III insurance policies, while the balance of €4,068 million is primarily made up of corporate bonds issued by blue-chip companies, including €3,886 million linked to separately managed accounts, €114 million covering contractual obligations arising on Class III insurance policies and the remaining €68 million relating to securities in which the company’s free capital has been invested.
Guarantee deposits relate to collateral provided to counterparties with whom the Company has entered into asset swaps.
Fair value gains and losses through equity (1) - - (1)
During the year under review, Poste Italiane SpA sold its holdings in equity mutual investment funds. This generated a gain of €4 million recognised in finance income.
Other movements (including accruals at end of period) - - - -
A total of €370 million was collected in 2017, including €262 million relating to compensation for 2017 and €108 million in residual compensation for 2015 and 2014. With reference to the amount receivable for 2012, AGCom has recognised a net cost incurred by the Company of €327 million, compared with compensation of €350 million originally recognised. Provision has not been made in the state budget for the remaining €23 million. The Company appealed AGCom’s decision on 13 November 2014 before the Regional Administrative Court (TAR). The outstanding receivable relating to compensation for 2005 was subject to cuts in the budget laws for 2007 and 2008. Finally, with regard to the outstanding balance of the compensation for 2013, which was collected in full in 2015, with resolution 493/14/CONS of 9 October 2014, AGCom has initiated an assessment of the net cost incurred by Poste Italiane SpA. On 24 July 2015, the regulator notified the Company that it would extend the assessment to include the 2014 financial year. At the end of the public consultation, launched by AGCom in 2016, the regulator published Resolution 298/17/CONS, in which it assessed the cost of providing the universal service for 2013 and 2014 to be €393 million and €409 million, respectively, compared with revenue of €343 million and €277 million recognised in the Company’s statement of profit or loss for services rendered in the relevant years. The regulator also announced that the compensation fund to cover the cost of providing the universal service has not been set up. The Company filed a legal challenge to AGCom’s resolution before the Regional Administrative Court on 6 November 2017. On 27 October 2017, AGCom announced the launch of the process of verifying the net cost of the universal postal service for 2015 and 2016.
Amounts payable for operational risks - 35 35 - 35 35
Thirteenth and fourteenth month salaries - 231 231 - 236 236
This item breaks down as follows: tab. C1 - Revenue from mail, parcel & other revenue
Movement in technical provisions where investment risk is transferred to policyholders (3,370) (319)
Impairments of disposal groups held for sale [tab. A11.1] 3 37
Realised losses on financial instruments at fair value through profit or loss - -
Realignment of tax bases and carrying amounts and taxation for previous years - -0.01% (3) -0.33%
Disclosure about geographical segments, based on the geographical areas in which the various Group companies are based or the location of its customers, is of no material significance. At 31 December 2017, all entities consolidated on a line-byline basis are based in Italy, as is the majority of their client base; revenue from foreign clients does not represent a significant percentage of total revenue.
The impact of related party transactions on the financial position and profit or loss. The impact of related party transactions on the financial position and profit or loss is shown below.
Net cash generated by/(used for) financial assets held for trading - (89)
BancoPosta RFC’s operations BancoPosta RFC’s operations consist of the investment of cash held in postal current accounts, in the name of BancoPosta but subject to statutory restrictions, and the management of third parties’ collections and remittances. This latter activity includes the collection of postal savings (Postal Savings Books and Interest-bearing Postal Certificates), carried out on behalf of Cassa Depositi e Prestiti and the MEF, and services delegated by Public Administration entities. These transactions involve the use of cash advances from the Italian Treasury and the recognition of financial items awaiting settlement. The specific agreement with the MEF requires BancoPosta to provide daily statements of all cash flows, with a delay of two bank working days with respect to the transaction date. In compliance with the 2007 Budget Law, from 2007 the Company is required to invest the funds raised from deposits paid into postal current accounts by private customers in euro area government securities79. Funds deposited by Public Administration entities are, instead, deposited with the Ministry of the Economy and Finance and earn a variable rate of return linked to a basket of government securities and money market indices, in accordance with a specific agreement with the MEF regarding treasury services, renewed on 2 October 2017 and covering the two-year period 2017-2018. In addition, under the agreement with the MEF, renewed on 16 November 2017 for the three-year period 20172019, a percentage of the funds deriving from private customer deposits may be placed in a special “Buffer” account at the MEF, with the objective of ensuring flexibility with regard to investments in view of daily movements in amounts payable to current account holders. These deposits are remunerated at a variable rate calculated on the basis of the Euro OverNight Index Average (EONIA)80 rate.
Movements in investments in subsidiaries and associates are as follows: Tab. A4.1 - Movements in investments in the year ended 31 December 2017
(1) Consortium fund in the case of consortia. The registered offices of all the companies are located in Rome, with the exception of Anima Holding SpA and FSIA Investimenti Srl, whose registered offices are in Milan, and Conio Inc., whose registered office is in California (USA).
The operations in question regard the financial services provided by the Company pursuant to Presidential Decree 144/2001, which from 2 May 2011 are attributable to the ring-fenced capital, and which relate to the management of postal current accounts deposits, carried out in the name of BancoPosta but subject to statutory restrictions on the investment of the liquidity in compliance with the applicable legislation, and the management of collections and payments on behalf of third parties (see note 5.2 - Information on BancoPosta RFC).
Finally, during the last quarter of 2017, Poste Italiane SpA sold its holding of 756,280 Class B Mastercard Incorporated shares in a series of transactions, following their conversion into Class A shares. The transaction generated a gain of €91 million, recognised as a non-recurring realised gain and accounted for in “Other income from financial activities”.
Accrued interest on non-current loans 1 - 1 1 - 1
Interest accrued on IRES refund [C10] - 46 46 - 46 46
Transfers to profit or loss - - (666) (4) - (670)
�� Provisions for disputes with staff regard liabilities that may arise following labour litigation and disputes of various types. Net provisions of €20 million relate to an update of the estimate of the liabilities and the related legal expenses, taking account of both the overall value of negative outcomes in terms of litigation, and the application of Law 183 of 4 November 2010 (“Collegato lavoro”), which introduced a cap on current and future compensation payable to an employee in the event of “court-imposed conversion” of a fixed-term contract to a permanent one.
(1) For the purposes of reconciliation with the statement of cash flows, uses of the provisions in 2017, after the transfer of provisions as a result of the merger of the subsidiary, Postecom SpA, with and into the Company, amount to €94 million.
97. A commitment given to creditors by which a borrower undertakes not to give senior security to other lenders ranking pari passu with existing creditors, unless the same degree of protection is also offered to them.
for non-recurring charges incurred by BancoPosta [tab. B4] 170 86 for other risks and charges [tab. B4] 39 15
(1) For the purposes of reconciliation with the statement of cash flows, in 2017 financial costs after foreign exchange losses amount to €138 million (€63 million in 2016).
The tax rate for 2017 is 8.31% and consists of: tab. C10.1 - Reconciliation between the theoretical IRES tax rate and the effective IRES tax rate
�� Purchases from the Leonardo Group primarily relate to the supply, by Leonardo SpA (formerly Selex ES SpA), of equipment, maintenance and technical assistance for mechanised sorting equipment, and systems and IT assistance regarding the creation of document storage facilities, specialist consulting services and software maintenance, and the supply of software licences and of hardware.
�� With regard to finance risk, qualitative and quantitative disclosures are provided about the Group’s exposure, indicating aspects that specifically relate to Poste Italiane SpA. Where the risk exposure regards the Group, the qualitative disclosure is provided only once, distinguishing between aspects attributable to the Parent Company and those attributable to other Group companies, whilst quantitative data (balances at the reporting date and the outcomes of stress tests) is provided at both consolidated level and in relation to Poste Italiane SpA. In contrast, where the risk only regards the Parent Company’s operations, this fact is explained at the beginning of the section dealing with that risk.
Responsibility for coordinating and managing the investment strategy and the hedging of capital market risks has been assigned to the Parent Company’s Coordination of Investment Management function, which aims to ensure a uniform approach across the Poste Italiane Group’s various financial entities. Treasury management for the Company and on a centralised basis, definition of the capital structure for the Group, and the assessment of funding transactions and extraordinary and subsidised transactions is, on the other hand, the responsibility of Administration, Finance and Control.
Fair value through profit or loss 184 47 (47) 47 (47) - - - -
Available-for-sale financial assets 1,335 183 (183) 158 (158) - - 25 (25)
Within the context of derivative financial instruments, the risk in question concerns forward purchase contracts for government bonds, classified as cash flow hedges, with a total nominal value of €1,408 million, entered into during the year by BancoPosta RFC and a derivative contract entered into by the Parent Company in 2013 to hedge the cash flows of the bond with a nominal value of €50 million.
Held-to-maturity financial assets 1,594 6,702 7,327 15,623 1,399 6,389 7,837 15,625
For the purposes of complete disclosure, Poste Italiane SpA’s exposure to the risk in question is shown in the following tables.
As a result of the above audits, the tax authorities have served the company with two separate tax assessment notices for 2010 and 2011. Specifically: �� In relation to 2010, on 21 December 2015, the company was requested to pay VAT of €5.6 million, in addition to penalties and interest, as well as VAT, IRES and IRAP totalling €0.2 million, plus penalties and interest. On 18 May 2016, the company appealed the assessment notice, at the same time paying a provisional amount of approximately €2.3 million of the VAT due.
Securities used as collateral provided by CSAs and GMRAs 253 269 676 716
Investment in a mix of asset classes (corporate bonds, government bonds, loans and equities)
Risparmio Holding SpA (Roma) Subsidiary 873 80.00% 1,208 117 1,091 - 737
Guarantees Unsecured guarantees issued by the Group and Poste Italiane SpA are as follows: Guarantees
Part E – Information on risks and related hedging policies 487
Assets (€) at 31 December 2017 at 31 December 2016 10. Cash and cash equivalents 3,217,163,704 2,510,820,434 20. Financial assets held for trading - 30. Financial assets designated at fair value - 40. Available-for-sale financial assets 39,140,379,660 37,263,441,355 50. Held-to-maturity financial assets 12,912,363,033 12,682,587,907 90. Adjustments for changes in hedged financial assets portfolio (+/-) - 110. Property, plant and equipment - of which: of which Law 214/2011 - 140.
Other components of comprehensive income after taxes reclassified to profit or loss 70. Hedges of foreign investments - 100. Available-for-sale financial assets (709,554,691) (1,611,038,479)
Section 1 – Declaration of compliance with international financial reporting standards The Separate Report has been prepared in compliance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). These were endorsed for application in the European Union by European Regulation (EC) 1606/2002 of 19 July 2002, as transposed into Italian law by Legislative Decree 38 of 28 February 2005 governing the introduction of IFRS into Italian legislation. The term “IFRS” means all International Financial Reporting Standards, all International Accounting Standards (“IAS”), and all interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) previously known as the Standing Interpretations Committee (“SIC”) endorsed for application in the European Union by EU Regulations issued prior to 29 March 2018, the date on which the Board of Directors of Poste Italiane SpA approved the BancoPosta RFC Separate Report as part of Poste Italiane SpA’s Annual Report.
4.1 Intersegment relations Balances relating to transactions between BancoPosta RFC and Poste Italiane SpA (“Intersegment transactions”) are recognised in the statement of financial position at 31 December 2017 as shown below: (€m) At of which intersegment At of which intersegment
In 2017, the Bank of Italy conducted an inspection pursuant to art. 54 of Legislative Decree 385 of 1993, with the aim of assessing the governance, control and operational and IT risk management systems in relation to BancoPosta’s operations. The inspection began on 10 February 2017 and ended on 5 May 2017. The related Inspection Report was issued on 20 July 2017. Poste Italiane responded within the required deadline by submitting its views in September 2017 and initiating the necessary remedial action.
If the hedging transaction is not fully effective, the gain or loss arising from a change in fair value relating to the ineffective portion is recognised in line “Item 90 - Fair value adjustments in hedge accounting”. If, during the life of the derivative, the forecast hedged transaction is no longer expected to occur, the related gains and losses accumulated in the cash flow hedge reserve are immediately reclassified in line “Item 80 – Profits/(Losses) on trading” for the relevant year. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, the related gains and losses accumulated in the cash flow hedge reserve at that time remain in equity and are recognised in profit or loss at the same time as the original underlying.
A.4.5.3 Movements during the year in liabilities measured at fair value on a recurring basis (Level 3)
BancoPosta RFC entered into transactions to acquire and immediately dispose of debt securities and equities on behalf of certain customers in 2017.
Section 4 – Available-for-sale financial assets – item 40 4.1 Available-for-sale financial assets: analysis
B. Due from banks 1,151 1,314 1.1 Current accounts and demand deposits 3 x x x 4 x x x
Other 2. Reverse repurchase agreements 4. Credit cards, personal and salary loans
Section 14 – Non-current assets held for sale and discontinued operations and associated liabilities - assets item 140 and liabilities item 90 There are no non-current assets held for sale or discontinued operations at the reporting date.
Amounts payable to Poste Italiane SpA outside the ring-fence for services rendered 255 294
125. Provisions for expired and statute barred Postal Certificates were made in 1998 to cover the cost of redeeming certificates relating to specific issues, the value of which was recognised in revenue in profit or loss in the years in which the certificates became invalid. The provisions were made in response to Poste Italiane SpA’s decision to redeem such certificates even if expired and statute barred. At 31 December 2017, the provisions represent the present value of total liabilities, based on a nominal value of €21 million, expected to be progressively settled by 2043.
The “Custody and administration of third-party securities deposited with third parties” relates to customers’ securities held at primary market operators and presented at their nominal value. Orders received from customers are executed by qualified, designated credit institutions.
Section 11 – Net losses/recoveries on property, plant and equipment – item 170 Not applicable.
128. On 13 December 2017, Poste Italiane SpA’s Board of Directors approved new “Guidelines for financial transactions” for Poste Italiane SpA, following the entry into effect of the new accounting standard, IFRS 9 – Financial Instruments from 1 January 2018.
A.1.4/ A.1.5 On-balance sheet credit exposure to banks: changes in gross nonperforming exposures and in total adjustments
A. On-balance sheet exposures c) Non-performing past-due exposures - - - - X - X d ) Performing past-due exposures X X X X - X - -
1. Guaranteed on-balance sheet credit exposures: 2. Guaranteed off-balance sheet credit exposures: BancoPosta RFC Separate Report for the year ended 31 December 2017 Notes - Part E
B.2 Distribution of on and off-balance sheet credit exposures to customers by geographic area and carrying amount
The exposure to interest rate risk, as measured internally, is subject to stress tests of the principal risk factors – such as the duration of deposits, the value of investments and interest rate trends – that contribute to determining the measurement of exposure. In particular, the stress tests are based on an assumed reduction in the maximum time horizon (cut-off point) for retail and business customer deposits, revaluation of the asset portfolio in response to adverse market movements, and non-parallel shifts in the interest rate curve.
In view of the extension of prudential standards to BancoPosta, BancoPosta RFC is now required to establish a system of internal controls in line with the provisions of Bank of Italy Circular 285/2013, which, among other things, requires the definition of a Risk Appetite Framework (RAF) and the containment of risks within the limits set by the RAF135. Compliance with the metrics established by the RAF influences decisions regarding profit distributions as part of capital management.
A) Oversight of compliance with the law and the Company’s By-laws and with correct corporate governance principles, the adequacy of the organisational structure and the administrative and accounting systems adopted by the Company, and with Legislative
10 of Regulation (EU) 537/2014. In particular, the reports include information on key matters covered by the audit and the related audit procedures applied. As referred to in the reports on the separate and consolidated financial statements, these key matters (the
Italian’s Internal Auditing function at the specific request of the Board of Statutory
to the Independent Auditors, PricewaterhouseCoopers SpA, and companies within its network for the year under review.
In accordance with the Poste Italiane Group’s “Guidelines for the assignment of appointments to Poste Italiane’s Independent Auditor”, the Board of Statutory Auditors has issued the following favourable opinions on non-audit engagements of the
framework, the Parent Company’s Board of Statutory Auditors is required to give its express approval for engagements assigned to the Independent Auditor by subsidiaries.
Auditors and the work carried out in relation to the Corporate Governance Code, the impact of the various new regulatory and statutory requirements on the Board’s duties (the
Non-financial Statement and the new accounting standards, IFRS 9 and 15) and the activities related to inspections by supervisory authorities.
In addition, work has started on a revised operating model for procurement, which entails a uniform, integrated approach to implementation, with the aim of ensuring the most costeffective results, in terms of both external and internal costs. In this regard, the Board notes completion of the process with the issue of the above “Group Procurement Regulation”, leading to adoption of the resulting procurement procedures, updated in response to suggested procedural improvements; - the new “Poste Italiane Group Code of Ethics” was approved in April 2018, strengthening the criteria to be followed in relation to conduct and stakeholder engagement, including in response to a concern raised by the Board with regard to potential conflicts of interest; - new whistleblowing guidelines were approved in April 2018, governing the channels and procedures to be used for reporting and handling irregularities or violations of the law or regulations (including for the purposes of Legislative Decree 231/2001) and also implementing a specific web portal, guaranteeing the anonymity of whistleblowers; Reports and Attestations
- the new Privacy Guidelines were approved in April 2018, in implementation of the new
The Board of Statutory Auditors examined and oversaw, within the scope of our responsibilities, the adequacy of the Company’s administrative/accounting system in reliably representing operating activities, the effectiveness of the internal control and risk management system and the financial reporting process, by: (i) gathering information from the heads of the various functions, from the Independent Auditor and from the Manager responsible for financial reporting; (ii) examining the annual report of the Manager responsible for financial reporting; (iii) taking part in the work of the Audit and Risk
Auditing function; (vi) examining reports prepared by Poste Italiane SpA’s Internal
Committee, responsibility of overseeing matters relating to the sustainability of the
Independent Auditors, the management of BancoPosta and the heads of BancoPosta’s control functions, and the Board’s examination of the annual report of the Manager responsible for the internal control system relating to financial reporting, it should be noted that: i) BancoPosta RFC’s organisation and accounts have been unbundled with respect to the Company’s operations. In preparing the Separate Report for BancoPosta RFC, in compliance with the provisions of Law Decree 225/10, converted into Law 10/11, which introduced regulations applicable to BancoPosta RFC, requiring the accounting separation provided for in articles 2214 et seq. of the Italian Civil Code and preparation of a separate report, the Company introduced a specific dedicated system. Point 2 of Bank of Italy Circular 285/2013 – part IV of the Standards for particular intermediaries: Bancoposta section II – requires that, in addition to directly attributable revenues and costs, also the charges incurred for the services provided by Poste Italiane in order to enable Bancoposta to operate should be allocated to Bancoposta RFC, and that the allocation of these charges should be based on criteria that reflect the real contribution of the various functions to
Bancoposta RFC’s results and to those of the Company as a whole. The Board of
Auditors has noted both the action plan implemented in 2017 and the new action plan for 2018, designed to strengthen internal controls and risk mitigation, recommending that action be taken in accordance with the timing proposed by the function with regard to i)
(CET1 of 16.9%) and a high level of own funds which, thanks to a reduction in the exposure to interest rate risk, are than double the Pillar 2 capital requirement (46.1%). In this regard, the Board recommends continuous and close monitoring of the key indicators set out in the Company’s Risk Appetite Framework (“RAF”) for 2018, with particular regard to the leverage ratio and the cost of operational risks, which rose in 2017.
In accordance with CONSOB requirements, we declare that in the performance of our duties we have not been made aware of omissions, instances of negligence, irregularities or evidence of inadequacies in the organisational structure, the internal control system or the administrative and accounting system.
Note C1 to the consolidated financial statements as of 31 December 2017 “Statement of profit or loss – Revenue from letter post, parcels and other”
Note B5 to the consolidated financial statements as of 31 December 2017 “Liabilities – Technical provisions for insurance business”
Note 2.5 to the consolidated financial statements as of 31 December 2017 “Use of estimates – Fair value of unquoted financial instruments”
As part of our audit activities, also supported by experts within the PwC network, we carried out the following main activities in order to address this key audit matter: • update of the analyses of the design and the effectiveness of the internal control system and the specific corporate guidelines governing IT systems and applications used by the Group for the calculation of the fair value under levels 2 and 3; • verification, on a sample basis, of the reasonableness of the input assumptions and parameters underlying the valuation techniques used to determine level 2 and level 3 fair value of the financial instruments; • requests for confirmation and for information from external banks and financial counterparties about financial instrument transactions carried out in 2017; • verification of disclosures provided in the consolidated financial statements as of 31 December 2017, in compliance with IFRS7 “Financial instruments: disclosures”.
Note 3.1 to the consolidated financial statements as of 31 December 2017 “Significant events in the year – principal corporate actions”
We confirm that the opinion on the consolidated financial statements expressed in this report is consistent with the additional report to those charged with governance, in their capacity as the audit committee, prepared pursuant to article 11 of the aforementioned Regulation.
We have audited the financial statements of Poste Italiane SpA (the Company), which comprise the statement of financial position as of 31 December 2017, the statement of profit or loss, statement of comprehensive income, statement of changes in equity, statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
Management of Poste Italiane SpA is responsible for preparing a report on operations and a report on the corporate governance and ownership structure of Poste Italiane SpA as of 31 December 2017, including their consistency with the relevant financial statements and their compliance with the law.
In particular, we performed the following procedures: 1. Analysis of the relevant matters reported in the NFS relating to the activities and characteristics of the company, in order to assess the reasonableness of the selection process used, in accordance with article 3 of the Decree and with the reporting standard adopted.