• On 25 July 2016, the deed for the merger of SDS Nuova Sanità Srl was signed, and the merged entity was renamed as Poste Welfare Servizi Srl (100% PosteVita). The merger was effective for accounting and tax purposes from 1 January 2016, and for legal purposes from the date on which the merger deed was filed with the Companies ’ Register (29 July 2016).
Other Services The Other services segment includes Poste Mobile SpA and Consorzio per i Servizi di Telefonia Mobile ScpA operations. PosteMobile is the Group’s mobile operator which, in keeping with its planned development, has gradually switched from being an Enhanced Service Provider (or ESP) to operating as a Full MVNO (a Full Mobile Virtual Network Operator). Consorzio per i Servizi di Telefonia Mobile ScpA is responsible for providing Poste Italiane with electronic communications networks and the related platforms, systems and terminals, by coordinating, organising and managing the resources, equipment and people made available by consortium members. The consortium is also responsible for supplying the related mobile, fixed-line, integrated and value added services.
(8) The Specialist Business Financial Promotors are responsible for the promotion and sale of certain investment products and services.
new simulation apps linked to the launch of certain products and the possibility of making a claim on the customer’s personal insurance policy and following its progress through to the outcome.
Profit/(loss) on investments accounted for using the equity method 6 3 3 n/s
Following this five-yearly assessment by AGCom, the Ministry for Economic Development issued a Decree on 25 August 2016, confirming that Poste Italiane’s provision of the universal service in the period from 30 April 2011 to 30 April 2016 had fulfilled the related requirements. On 26 January 2015, the Ministry for Economic Development issued a Decree regarding “Calculation and procedures for the payment of contributions by postal operators to AGCom for the years 2012, 2013 and 2014”, regarding the contribution that all postal service operators are obliged to pay to AGCom to fund the regulator’s activities, in accordance with the provisions of Legislative Decree 261/99. Poste Italiane paid the contributions. Following an appeal lodged by the Italian Association of International Air Couriers (AICAI) and other postal operators, requesting cancellation of the
Directors’ report on operations for the year ended 31 December 2016 relevant Decree, on 10 February 2016, Lazio Regional Administrative Court passed judgement in first instance, ruling that the retroactive nature of the contribution for the years 2012-2014 was unlawful. This was ruling was then confirmed in second instance by the Council of State.
(*) Whilst waiting for the official figure, inclusive of the standard deviation, from AGCom. The results refer to December YTD.
Bank deposits by resident Italian savers fell 1.3% in 2016, with aggregate deposits totalling approximately €1,676 billion in December 2016. This negative performance is due to falling investment in bonds (down €77 billion year-on-year in December 2016), only partially offset by growth in deposits by resident customers (up €55 billion year-on-year). Funding costs (deposits, bonds and repurchase agreements) were also down in 2016: the average cost of customer deposits in December 2016 was 0.97%, compared with 1.08% in June 2016 and 1.19% in December 2015. Bank lending rose. In December 2016, total lending to Italian residents – excluding interbank loans – amounted to approximately €1,808 billion, marking a year-on-year increase of 0.7%. The mortgage market is showing signs of picking up. In November 2016, total mortgage lending to households was up 1.8%, confirming the trend witnessed in late 2015. Doubtful loans within the banking system, after impairments, amounted to approximately €85 billion in November 2016, down by approximately €3.6 billion compared with the same month in 2015. In percentage terms, doubtful loans amounted to 4.80% of total loans in November 2016 (4.89% one year earlier). The average interest rate applied to consumer and corporate loans has fallen, with the rate at 2.85% in December 2016, compared with 3.05% in June 2016 and 3.25% in December 2015.
With regard to the steps taken to ensure compliance with the Supervisory Standards issued by the Bank of Italy (Circular 285 of 17 December 2013, 16th update of 17 May 2016), which fully apply the “Final guidance on the security of online payments”, work on strengthening the measures designed to prevent, monitor and combat fraud has been carried out. Changes to procedures and IT systems also continued with a view to strengthening business continuity and information systems, as part of a two-year review plan. Following the entry into effect of Legislative Decree 72 of 21 April 2016, which aims to provide appropriate protection for consumers who take out residential mortgages, Poste Italiane has, in agreement with its partner, Deutsche Bank, completed the process of implementing the new legislation, finalising the content of the new contracts and adjusting the processes and procedures involved in selling its products, which has included staff training. In response to the determination 343 issued by the CICR (the Interministerial Committee for Lending and Savings) on 3 August 2016, containing new measures on “procedures and criteria for the computation of interest on overdue interest on banking and financial transactions (art. 120, paragraph 2 of the Consolidated Law on Banking, as amended by art. 25 of Legislative Decree 342/99)”, Poste Italiane worked with its partner, Deutsche Bank, on the process of drawing up new contracts and amending existing ones. With regard to insurance broking, the steps taken, together with Poste Vita and Poste Assicura, to make the organisational changes required by IVASS Regulation 46 of 3 May 2016, which has extended the application of ISVAP Regulation 24 of 2008, regarding the handling of complaints, to include insurance brokers, were completed in November. Following the entry into effect of the MEF Decree of 29 February 2016, providing for the introduction, from 15 November 2016, of dematerialised Savings Books, Poste Italiane, in agreement with Cassa Depositi e Prestiti, has introduced the new savings book that does not involve the traditional paper document. It solely involves accounting entries and requires use of an electronic card, the “Carta Libretto”. With regard to the provision of investment services, CONSOB Resolution 19602 of 4 May 2016 has established the Financial Services Ombudsman (Arbitro per le Controversie Finanziarie or ACF), with responsibility for resolving disputes with investors in connection with the provision of investment and collective asset management services. The Resolution also sets out the related Terms of Reference. The new system, following the issue of further organisational and functional guidelines by the CONSOB, is operational from 9 January 2017. As with the Bank of Italy’s Banking Ombudsman (Arbitro Bancario Finanziario or ABF), intermediaries’ participation in the CONSOB’s new system for the out-of-court settlement of disputes is mandatory and this applies to Poste Italiane – BancoPosta RFC, which has completed the process of ensuring correct application of the system.
Operating profit generated by the Insurance Services and Asset Management segment amounts to €636 million, marking an increase of 24.7% on the previous year. This primarily reflects the positive performance of the Poste Vita Group, whose operations resulted in total premium revenue of €19.9 billion, after the portion ceded to reinsurers (up 9.3% on premium revenue of €18.2 billion in 2015). This was generated primarily by the sale of life products, amounting to €19.8 billion (€18.1 billion in 2015), whilst €80 million was generated by sales of non-life products. With regard to assets under management, the period saw an increase in inflows into mutual investment funds, generating commission income of €60 million in 2016 (up 36.4% on the previous year). Despite a market scenario marked by a high degree of volatility and falling yields on government securities, net finance income from securities related to traditional products amounts to €3,274 million, up on the €2,352 million of 2015. This reflects both an increase in ordinary income, thanks to growth in assets under management, and above all financial market trends, which resulted in the recognition of net unrealised gains of €475 million, compared with losses of €435 million in 2015. However, given that these investments are included in the separately managed accounts covering the matching insurance liabilities, this amount has been attributed in full to policyholders under the shadow accounting method. Finance income from investments linked to index- and unit-linked products amounts to approximately €35 million in 2016, down on the figure of €193 million recorded in 2015, primarily reflecting heightened financial market volatility and the number of Class III products reaching maturity. This amount is almost entirely matched by a corresponding change in technical provisions.
Management of the non-life business was also along the lines set out in the business plan, seeking to meet the new needs of customers in the areas of welfare and health insurance, expanding the offering and fine-tuning the model for network support. Above all, during the year the company identified specific marketing and commercial initiatives aimed at a product offering increasingly based on the offer of modular health and protection products (e.g., PosteProtezione Innova Salute and PosteProtezione Innova Infortuni), capable of meeting the different needs of a very large customer base. While the contribution to the Group’s results is still limited, the segment recorded a positive performance, with total premium revenue for the period of €118.8 million(19), up 28% on the figure for 2015 (€93.0 million). This performance was accompanied by a positive technical performance as a result of a reduced volume of claims with respect to the growth in sales.
Directors’ report on operations for the year ended 31 December 2016
Equity amounts to €8.1 billion at 31 December 2016 a reduction of €1.5 billion compared with 31 December 2015. This primarily reflects movements in the fair value reserves (€1.6 billion, after tax), reflecting positive and negative movements in the fair value of investments in available-for-sale financial assets held by the Financial Services segment. The reduction in equity also reflects the payment of dividends totalling €444 million, as approved by the Annual General Meeting of 24 May 2016 (€0.34 per share, paid to shareholders on 22 June 2016). The above reductions were partially offset by profit for the year of €622 million.
Technical provisions for insurance business – – (100,314) – – (100,314)
Cash and cash equivalents reclassified to non-current assets and disposal groups held for sale (90) –
Online courses in hours for the year ended 31 December 2016 for the year ended 31 December 2015
Information technology risk Within the context of the risks associated with tangible events (e.g., fires, earthquakes, water damage, equipment breakdowns) and/or intangible events (breaches of trust, unexpected network outages, cyber crime), data breaches have assumed growing importance. The direct consequences are the loss, destruction or unauthorised disclosure of sensitive and confidential information. Poste Italiane is thus conducting an assessment with the aim of deciding whether or not to obtain more appropriate insurance cover to protect the Company, in view of the considerable growth in the quantity of digital information held, which has increased the risks to data confidentiality, integrity and access.
In line with the relevant regulations, on 5 August 2016, the bank submitted its comments on the findings and its observations to the Bank of Italy, as well the overall plan for compliance initiatives, which have already been partially implemented and are being monitored on a continuous basis by the various internal bodies.
This section of the Annual Report for the year ended 31 December 2016 includes the consolidated financial statements of the Poste Italiane Group and the separate financial statements of Poste Italiane SpA, to which BancoPosta RFC’s Separate Report is attached. Information on the accounting policies, measurement criteria and estimation methods adopted by both the Group and by Poste Italiane SpA (note 2 – Basis of preparation and significant accounting policies), is provided only once, in sections relevant to both sets of statements. Unless otherwise indicated, therefore, the contents of these sections apply to both the consolidated and separate financial statements.
(35) Following a number of organisational changes in 2015, from 2016 BancoPosta Fondi SpA SGR, which was previously allocated to the Financial Services segment, now forms part of the Insurance Services and Asset Management segment, whilst Poste Tributi ScpA, which was previously allocated to the Postal and Business Services segment, has been transferred to the Financial Services segment.
Financial liabilities Financial liabilities, including borrowings, trade payables and other payment obligations, are carried at amortised cost using the effective interest method. If there is a change in the expected cash flows and they can be reliably estimated, the value of borrowings is recalculated to reflect the change on the basis of the present value of estimated future cash flows and the internal rate of return initially applied. Financial liabilities are classified as current liabilities, unless there is an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. Financial liabilities are derecognised when settled or when all the related risks and rewards have been substantially transferred.
2.4 USE OF ESTIMATES Preparation of the annual accounts requires the application of accounting standards and methods that are at times based on complex subjective judgments and estimates based on historical experience, and assumptions that are considered reasonable and realistic under the circumstances. Use of such estimates and assumptions affects the amounts reported in the financial statements and related disclosures. The actual amounts of items for which the above estimates and assumptions have been applied may differ from those reported in previous financial statements, due to uncertainties regarding the assumptions themselves and the conditions on which estimates are based. Estimates and assumptions are periodically reviewed and the impact of any changes is reflected in the financial statements for the period in which the estimate is revised if the revision only influences the current period, or also in future periods if the revision influences both current and future periods. This section provides a description of accounting treatments that require the use of subjective estimates and for which a change in the conditions underlying the assumptions used could have a material impact on the Group’s financial statements.
The test involves the allocation of goodwill to the various cash generating units and the subsequent measurement of the related recoverable amount. If the resulting recoverable amount is lower than the carrying amount of the cash generating unit, it is necessary to reduce the value of goodwill allocated to the unit. The allocation of goodwill to cash generating units and the measurement of their fair value involves the use of estimates based on factors that may change over time, affecting the analyses performed.
• Annual improvement cycle in relation to IFRS 2012-2014 adopted with Regulation (EU) no. 2343/2015 in connection with the annual projects to improve and revise international accounting standards.
Lastly, as of the date of approval of these financial statements, the IASB has issued standards, interpretations, amendments that have not yet been endorsed by the EU: • IFRS 14 - Regulatory Deferral Accounts; • IFRS 16 - Leases, applicable from 1 January 2019.
• Clarification on IFRS 15 – Revenue from Contracts with Customers.
Net change in technical provisions for insurance business and other claims expenses [C6] 21,958 – 19,683 –
Net cash generated by/(used for) available-for-sale financial assets attributable to financial activities (5,127) (2,477)
Subsidiaries that, in terms of their size or operations, are, either individually or taken together, irrelevant to a true and fair view of the Group’s results of operations and financial position have not been included within the scope of consolidation. The criteria used for line-by-line consolidation are as follows: • the assets, liabilities, costs and revenue of consolidated entities are accounted for on a line-by-line basis, separating where applicable the equity and profit/(loss) amounts attributable to non-controlling interests in consolidated equity and consolidated profit or loss; • business combinations, in which control over an entity is acquired, are accounting for using the acquisition method. The cost of acquisition is based on the fair values of the assets given, the liabilities incurred and the equity instruments issued by the acquirer, plus any directly attributable acquisition costs incurred. Any difference between the cost of acquisition and the fair values of the assets and liabilities acquired, following review of their fair value, is recognised as goodwill arising from consolidation (if positive), or recognised in profit or loss (if negative); • acquisitions of non-controlling interests in entities already controlled by the Group are not accounted for as acquisitions, but as equity transactions; in the absence of a relevant accounting standard, the Group recognises any difference between the cost of acquisition and the related share of net assets of the subsidiary in equity; • any significant gains and losses (and the related tax effects) on transactions between companies consolidated on a line-by-line basis, to the extent not yet realised with respect to third parties, are eliminated, as are intercompany payables and receivables, costs and revenue, and finance costs and income; • gains and losses deriving from the disposal of investments in consolidated companies are recognised in profit or loss based on the difference between the sale price and the corresponding share of consolidated equity disposed of.
The following table shows movements in intangible assets in 2016: TAB. A3 – MOVEMENTS IN INTANGIBLE ASSETS
As of 31 December 2016 goodwill consisted of: TAB. A3.2 – GOODWILL
As a result, the carrying amount of the investment in Anima Holding at 31 December 2016 is approximately €216.6 million.
The following table provides a breakdown of financial assets at 31 December 2016: TAB. A5 – FINANCIAL ASSETS
Changes in cash flow hedge transactions (*) – 3 – 3
Fair value gains and losses through equity (680) – (4) (684)
Effects of sales on profit or loss 6 (4) (5) (3)
Due from MEF for repayment of loans accounted for in liabilities – 1 1 – 3 3
Guarantee deposits of €50 million relate to collateral provided to counterparties with whom the Company has entered into asset swaps.
Of which: Derivative assets – – – – – – – –
This item refers mainly to properties held for sale, which include the portion of EGI SpA’s real estate portfolio to be sold, whose fair value(61) at 31 December 2016 amounts to approximately €302 million.
Specifically: • Amounts due from ministries and Public Administration entities refer mainly to the following services: – Integrated Notification and mailroom services, amounting to €314 million, rendered to local government authorities; – Unfranked mail services provided on credit, totalling €80 million, to central government entities as well as local government authorities.
Provisions for taxation/social security contributions 24 5 1 (1) (1) – 28
Sundry payables attributable to BancoPosta 75 7 82 76 8 84
Interest expense on asset swaps of available-for-sale financial assets (33) 4
Other related parties external to the Group 76 5 – – – 3 62
The impact of related party transactions on the financial position, profit or loss and cash flows is shown in the following table: IMPACT OF RELATED PARTY TRANSACTIONS
Technical provisions for insurance business – – (100,314) – – (100,314) –
(Net transfers between Level 1 and 2) (312) 312 466 (466)
Instalments falling due: within 1 year of the reporting date 139 143 between 2 and 5 years after the reporting date 310 327 more than 5 years after the reporting date 52 51
Financial assets FVPL 4,047 487 3,560 Analytical VaR 99.5% over 1-year
From an organisational viewpoint, the model consists of: • the Risk and Control Committee, established in 2015, whose role, based on adequate research activity, is to act in an advisory capacity and make recommendations to support the Board of Directors in assessing and making decisions regarding Poste Italiane SpA’s internal control and risk management system.
The principal financial assets subject to price risk and the results of the analysis carried out as at 31 December 2016 for the Poste Italiane Group are shown in the following table.
Available-for-sale financial assets 2,777 122,634 687 126,098 2,579 112,999 474 116,052
Available-for-sale financial assets 9,825 11,399 37 (37) 35 (35) 2 (2)
The degree of uncertainty linked to the outcome of the pending court cases, with the next hearing scheduled for 16 March 2017 at the Court of Genoa, has, in any event, been prudentially taken into account in calculating provisions for risks and charges at 31 December 2016.
On 4 June 2015, the AGCM launched an investigation pursuant to art.8, paragraph 2 quater of Law 287/90, aimed at ascertaining whether actions taken by Poste Italiane were designed to prevent H3G SpA from accessing the post office network. Requests to participate in the investigation from Fastweb SpA and Vodafone Omnitel BV, as well as PosteMobile, were accepted. With the ruling adopted at a meeting held on 16 December 2015, the Authority deemed that Poste Italiane – at variance with the provisions of art. 8, paragraph 2 quater of Law 287/90 – failed, when requested, to offer a competitor of its subsidiary, PosteMobile, equal access to goods and services that are exclusively available from Poste Italiane, as they form part of the activities carried out within the scope of the Universal Postal Service. In the same ruling, the Authority also ruled that Poste Italiane should desist from such conduct in the future. The Authority did not impose a fine. Following the above ruling from the AGCM, on 23 December 2015, H3G also submitted a writ of summons to the Court of Rome, citing Poste Italiane and PosteMobile and requesting that the latter be ordered to pay compensation for damages incurred, arising from the violations referred to in the above ruling, amounting to approximately €375.8 million, as well as court fees. At the hearing held on 22 June 2016, after full discussion, the investigating judge upheld the procedural objection raised by Poste Italiane, regarding the lack of authority of H3G’s legal representative to institute legal proceedings, and adjourned the case to a hearing on 1 December 2016, setting a deadline for the submission of depositions, pursuant to art. 183 of the Code of Civil Procedure. Following completion of the investigation, and submission of the depositions pursuant to art. 183 of the Code of Civil Procedure, the settlement hearing has been scheduled for 29 March 2017. Poste Italiane lodged an appeal against the AGCM’s ruling on 25 February 2016, with PosteMobile also lodging an appeal against the final ruling before Lazio Regional Administrative Court on 19 February 2016. On 28 September 2016, Lazio Regional Administrative Court published its ruling, rejecting the appeals lodged by Poste and Poste Mobile, whilst confirming the principle, backed by Poste Italiane and expressly approved by the AGCM, under which the obligation established by art. 8, paragraph 2-quater of Law 287/90 regards equality of treatment. As a result, H3G’s request was unlawful, as it aimed to limit access to certain areas of Poste Italiane’s network and was not interested in obtaining treatment equal to that applied by Poste Italiane to its subsidiary, Poste Mobile(82). Having assessed the implications of the Lazio Regional Administrative Court ruling, PosteMobile and Poste Italiane decided not to appeal and the ruling thereby became final. Partly taking into account the percentage of uncertainty attaching to any judgment and impeding any quantification, it is now possible to state that the risk of an adverse outcome for Poste Italiane in the above dispute has been significantly reduced.
In December 2015, the Bank of Italy’s Financial Intelligence Unit (UIF) launched an investigation of Poste Vita SpA relating to money laundering prevention as per art. 47 and art. 53, paragraph 4, of Legislative Decree 231 of 2007. The above investigation came to an end on 8 April 2016, with receipt of the final document from the company, containing the clarifications and information requested by the UIF.
On 18 November 2016, the Italian National Anti-Corruption Authority (ANAC) notified Postel SpA that it was launching an investigation following a report from the commissioning body, Fondimpresa, following Postel’s exclusion from a tender called to award a contract for the provision of digital mail and document storage services. The total value of the contract was €0.362 million. The exclusion was based on the fact that Postel, subjected to the checks required by art. 48, paragraph 2 of Legislative Decree 163/2006, did not provide evidence, within the required deadline, that it could meet the related financial and technical and organisational requirements contained in the tender terms and conditions. ANAC has scheduled a hearing for March 2017, specifying that the term for conclusion of the proceeding (180 days from the start) will be suspended in this period. The risk of a fine resulting from this proceeding has been assessed as possible. In the event of a negative outcome, the proceeding could result in a fine of up to €51 thousand.
Taxation of items recognised directly in, or transferred from, equity to be reclassified in the Statement of profit or loss for the year 612,236,179 (197,732,176)
Actuarial gains/(losses) on provisions for employee termination benefits [tab. B5] (48,563,432) 78,728,915
Net cash flow from/(for) financing activities and shareholder transactions [f] (987,293) (1,250,742)
Purchases of €200 million primarily relate to: • €28 million relating to extraordinary maintenance of post offices and local head offices around the country (€21 million) and mail sorting offices (€7 million); • €43 million relating to plant, of which €27 million for plant and equipment related to buildings, €6 million for the installation and extraordinary maintenance of video surveillance systems, €5 million for the installation of ATMs and €5 million for the purchase of telecommunications infrastructure; • €25 million to upgrade plant (€15 million) and the structure (€10 million) of properties held under lease; • €62 million relating to “Other assets”, including €53 million for the purchase of new computer hardware for post offices and head offices and the consolidation of storage systems, €7 million for the purchase of furniture and fittings in connection with the new layouts for post offices and €2 million to renew the equipment used in mail delivery; • €35 million relating to assets under construction, of which €19 million regards the restyling of post offices, €6 million the restructuring of head offices, €6 million the renovation of primary distribution centres and €3 million the purchase of hardware and other technological equipment not yet operational.
Items awaiting settlement with the banking system – 147 147 – 106 106
Banca del Mezzogiorno-MedioCredito Centrale SpA 50 – 50 200 – 200
This item regards BTPs with a total nominal value of €500 million (fair value of €562 million). Of these, instruments with a value of €375 million have been hedged using asset swaps designated as fair value hedges.
This item breaks down as follows: TAB. A8 – OTHER RECEIVABLES AND ASSETS
This item breaks down as follows: TAB. B6 – FINANCIAL LIABILITIES ATTRIBUTABLE TO BANCOPOSTA
Amounts payable for thefts during the year [tab. C8] 8 6
Overseas counterparties(1) 128 114 of which attributable to BancoPosta RFC 40 23
• Amounts due to the Istituto Nazionale per l’Assicurazione contro gli Infortuni sul Lavoro (INAIL, the National Occupational Injury Compensation Authority) relate to injury compensation paid to employees of the Company for injuries occurring up to 31 December 1998.
Specifically: • Withholding tax on employees’ and consultants’ salaries relates to amounts paid to the tax authorities by the Company in January and February 2017 as the withholding agent.
This item primarily regards the amount payable by Poste Italiane SpA, as the consolidating entity in the tax consolidation arrangement (note 2.3 – Summary of significant accounting standards and policies), to subsidiaries for the benefits linked to tax losses transferred by subsidiaries during the year.
Provisions (reversal of provisions) for receivables due from MEF [tab. A7.5] (7) (68)
Non-recurring income/(expenses) recognised in profit or loss – – – 24 – – 24
IMPACT OF RELATED PARTY TRANSACTIONS ON THE FINANCIAL POSITION AT 31 DECEMBER 2016
Other related parties external to the Group – – 4 – – – – 14 62
Consorzio Servizi Telef. Mobile ScpA – – – – – – – 38 –
Revenue from sales and services 8,219 2,910 35.4 8,205 2,937 35.8
The remuneration paid to members of the Company’s Supervisory Board who, since 24 May 2016 are no longer the same as the members of the Board of Statutory Auditors, amounts to approximately €51 thousand for the period from the date they took up office to 31 December 2016. In determining the remuneration, the amounts paid to managers of Poste Italiane who are members of the Supervisory Board is not taken into account, as this remuneration is passed on to the employer.
Receivables used as collateral provided by CSAs 1,391 1,391 857 857
Securities used as collateral provided by CSAs and GMRAs 676 716 345 373
Available-for-sale financial assets 32,178 37,159 (1,099) 1,031 – – (1,099) 1,031
• With reference to the interest rate risk exposure determined by the average duration of the portfolios, in 2016 the duration(111) of BancoPosta’s overall investments went from 5.58 to 5.56.
Over the period under review, the fall in Italian government bond prices, linked to movements in the spread and the reduction in risk-free interest rates to close to all-time lows, has led to a reduction in the fair value of BancoPosta RFC’s available-for-sale portfolio (a nominal value of approximately €32 billion) of approximately €0.8 billion. The increase in the fair value of instruments hedged against interest rate risk, amounting to approximately €0.8 billion, was offset by a reduction in the fair value of the related derivatives, whilst the reduction in the fair value of unhedged instruments and of the component subject to spread risk (unhedged) was reflected in consolidated equity (approximately €1.6 billion).
The following tables compare the Company liabilities and assets at 31 December 2016, in terms of liquidity risk.
Nominal +100 bps -100 bps +100 bps -100 bps 2016 effects
From a civil law standpoint, Gepin and Uptime SpA have brought a number of legal actions. Gepin has filed a claim for damages from SDA, amounting to €15.5 million, due to the alleged unjustified nature of termination of the above contracts, and has obtained an injunctive order for payment of approximately €3.7 million for uncontracted services that were in any event not provided. SDA has challenged the claims in court.
Reserves – – – – – – – – – –
Net cash flow from / (used for) financing activities (586,969,571) (289,664,565) NET CASH FLOW GENERATED / (USED) DURING THE YEAR (657,875,842) 290,534,831
Cash and cash equivalents at beginning of the year 3,168,696,276 2,878,161,445
Certain reclassifications have been made in the financial statements and notes to assure the consistency of comparatives with the figures for 2016.
The process of preparing for the introduction of the new “guided consultancy” service provided for in the Plan submitted to the CONSOB, following the inspection completed in 2014, has been completed. In line with the related plan submitted to the CONSOB on 1 June 2016, the new IT platform for the “guided consultancy” service was rolled out in 5 “pilot” post offices on 17 October. The platform was then implemented in a further 100 offices during the last quarter of 2016.
in fair value in profit or loss for the period. In the event of benefits granted to employees, recognition should take place in the period in which the employees render service and the expense accounted for in personnel expenses.
2.3. Transfers from other levels – – – – – –
No financial assets are held in portfolio designated at fair value through profit or loss (the “fair value option”).
At 31 December 2016, €170 million of the aggregate fair value of the held-to-maturity portfolio was accrued interest.
Price risk Multiple risks 1. Available-for-sale financial assets 152 – – – – x 33 x x 3. Held-to-maturity financial assets x – – x – x – x x 5. Other transactions – – – – – x – x –
2. Portfolio of financial assets and financial liabilities x x x x x – x – –
adjustments to prior period taxes 1 – 1 – 1 1
6. Financial assets designated at fair value – – – – –
– on debt securities and interest rates – – – – –
Provisions for the year, totalling €96 million, include €47 million to reflect a revised assessment of the liabilities relating to the estimated cost of the voluntary action taken to protect customers who purchased units issued by the Invest Real Security real estate fund. The remaining provisions reflect a revised estimate of other liabilities, primarily linked to risks related to investment instruments sold to customers in the past and whose performances have failed to meet expectations(122), fraud and risks related to delegated services. Releases to profit or loss, amounting to €10 million, relate to liabilities recognised in the past that have failed to materialise.
Counterparty risk is the risk that a counterparty could default on obligations of a financial instrument during its term. This risk is inherent in certain types of transaction which, for BancoPosta RFC, would be derivatives and repurchase agreements.
B.2 Credit derivatives – – – – – – – –
2. Guaranteed off-balance sheet credit exposures: - of which non-performing – – – – – – – – – – – – – – –
B.4 Performing exposures – – – – 416 – – –
A.1 Doubtful loans – – – – – – – –
B.4 Performing exposures 316 – – – – – – –
B. Derivative instruments – – – X X X X X X X X X X X X X X X – –
• cash flow interest rate risk: the risk that the cash flows from a financial instrument will fluctuate because of movements in market interest rates; • cash flow inflation rate risk: the risk that the cash flows from a financial instrument will fluctuate because of movements in inflation rates.
The increase in VaR at the end of the period, compared with 31 December 2015, primarily reflects the increase in market volatility.
B.3 Financial derivatives on exchange rates and gold – – – –
BancoPosta RFC’s maturity mismatch approach entails an analysis of the mismatch between cash in and outflows for each time band of the maturity ladder. BancoPosta RFC’s cash is dynamically managed by treasury for the timely and continual monitoring of private customer postal current account cash flows and the efficient management of short-term cash shortfalls and excesses. In order to assure flexible investments in securities consistent with the dynamic nature of current accounts, BancoPosta RFC can also use the MEF buffer account within certain limits and subject to payment of a fee. Details on the risk management model are contained in the note on financial risks at the beginning of this Part E. The liquidity risk resulting from contract terms requiring the provision of additional collateral in the event of a downgrade of Poste Italiane SpA is negligible. Such contracts include those for margin lending of derivatives, which require the threshold amount(130) to be reduced to zero in the event that Poste Italiane SpA’s rating is downgraded to below “BBB- “. The threshold amounts relating to margin lending contracts included in repurchase agreements are equal to zero, meaning that these transactions are not subject to liquidity risk.
The time distribution of assets and liabilities is shown below, as established for banks’ financial statements (Bank of Italy Circular 262/2005, third Revision and relevant clarifications provided by the Supervisory Body), using accounting data reported for the residual contractual term to maturity.
On-balance sheet assets 1 – – – – – – – – –
B.3 Other liabilities – – – – – – – – – –
Based on prudential standards, BancoPosta is required to comply with the following minimum capital ratios: • Total capital ratio (the ratio of total own funds to total risk weighted assets – RWA(133)), equal to 10.5% (8% being the minimum requirement and 2.5% being the capital conservation buffer(134)); • Common Equity Tier 1 ratio (the ratio of CET1 to total RWA): equal to 7.0% (4.5% being the minimum requirement and 2.5% being the capital conservation buffer); • Tier 1 ratio (the ratio of T1 and total RWA): equal to 8.5% (6.0% being the minimum requirement and 2.5% being the capital conservation buffer).
(137) BancoPosta RFC calculates the relevant indicator as the sum of the following income statement items (in accordance with IAS): net interest income (items 10-20); net fee and commission income (items 40-50); the portion of “other operating income” not generated by extraordinary or non-recurring items (a portion of the positive component of item 190); net profits on the trading book (items 80, 90, 100b, 100c, 110); dividends (item 70).
Poste Assicura SpA – – 20 – – – – –