Contingent capital Pursuant to Section 159 (2) item 1 of the Austrian Joint Stock Companies Act (AktG), the subscribed capital has been increased contingently by a maximum of € 47,174 thousand by issuing a maximum of 15,466,750 common bearer shares (contingent capital). The contingent capital increase would only be carried out to the extent that holders of convertible bonds issued under the resolution of the Annual General Meeting of 10 June 2008 make use of their right to convert such bonds into shares of the Company. No convertible bonds have been issued to date, however.
Share-based remuneration In 2011, the third allotment of the share incentive program (SIP – SIP allotment 2008) matured. In accordance with the terms and conditions (published in euro adhoc on 29 May 2008) the number of shares shown in the table below was actually transferred: Share incentive program (SIP) 2008
Under the SIP, a new tranche was previously issued each year – so also in 2011. However, because of the merger of Raiffeisen International with the principal business areas of RZB, no SIP tranche was issued in 2010. This means that on the reporting date contingent shares for 2 allotments were assigned. As of 31 December 2011, the contingent allotment of shares came to 608,964 shares (of which 370,092 shares were attributable to the 2009 allotment and 238,872 shares to the 2011 allotment ). The originally announced number of contingently allotted shares changed due to various personnel changes within Group units and due to the maturation of the SIP allotment 2008. This is shown on an aggregated level in the following table: Share incentive program (SIP) 2009 (2011)
Members of the management boards of bank subsidiaries affiliated with the company 287,754 86,326 431,631
Impairment losses on loans and advances (5,053,212) 0 0 0 0 31/12/2010
Companies can carry out business with related parties that may affect the entity’s asset, financial and earnings position. Information about related parties refers to the top ot the consolidated group of Raiffeisen-Landesbanken-Holding GmbH. Parent companies are Raiffeisen-Landesbanken-Holding GmbH, Vienna, and Raiffeisen Zentralbank Österreich Aktiengesellschaft, Vienna. Disclosures on Raiffeisen Bank International’s relations to key management are reported under note (53) relations to key management.
Assets and liabilities with counterparties outside Austria are as follows: RBI as originator Securitization is the packaging of designated portfolios of loans or leasing claims with an appropriate level of credit enhancement and the redistribution of these portfolios to investors. The objective of RBI’s securitization transactions is to ease the strain relief on the Group’s regulatory own funds and to use additional refinancing sources.
Within the scope of synthetic securitizations ROOF CEE 2006-1, the non-derecognized loans amounted to € 162,480 thousand at year-end 2011 (2010: € 392,616 thousand). The differences compared to the volumes at the beginning of the transactions are due to maturing volumes and to changes in currency exchange rates.
As of 31 December 2010 the corresponding exposure of Structured Credit Products composed as stated in the below table: € 000 Outstanding notional amount Carrying amount
Within the framework of securities lending, borrowed securities amounted to € 1,053,999 thousand (2010: € 973,283 thousand ) and loaned securities amounted to € 2,335,047 thousand (2010: 3,912,527 thousand).
The following liabilities are secured by assets shown in the statement of financial position: Deposits from banks 5,092,553 8,145,418
Active risk management is a core competency of RBI. In order to effectively identify, measure, and manage risks the Group continues to develop its comprehensive risk management system. Risk management is an integrated part of overall bank management. In particular, in addition to legal and regulatory requirements, it takes into account the nature, scale, and complexity of the business activities and the resulting risks. The risk report describes the principles and organization of risk management and explains the current risk exposures in all material risk categories.
RBI has a system of risk principles and procedures in place for measuring and monitoring risk, which is aimed at controlling and managing material risks at all banks and specialist companies in the Group. The risk policies and risk management principles are laid out by the Management Board of RBI. The principles include the following risk policies: Integrated risk management: Credit, country, market, liquidity, and operational risks are managed as main risks on a
Group-wide basis. For this purpose, these risks are measured, limited, aggregated, and compared to available risk coverage capital.
Ex ante and ex post control: Risks are consistently measured within the scope of product selling and in risk-adjusted performance measurement. Thereby it is ensured that business in general is conducted only under risk-return considerations and that there are no incentives for taking high risks.
Local management implements the Group guidelines and reports regularly to the RBI Management Board
The central Risk Controlling division assumes the independent risk controlling function required by banking law. Amongst others, this division is responsible for developing the Group-wide framework for overall bank risk management (integrating all risk types) and preparing independent reports on the risk profile for the Management Board and the heads of individual business units. It also measures required risk coverage capital for different business units and calculates the utilization of the allocated risk capital budgets in the internal capital adequacy framework,.
The Market Risk Committee controls market risks of trading and banking book transactions of RBI and establishes corresponding limits and processes. In particular, it relies on profit and loss reports, the amount of risks taken and the limit utilization, as well as the results of scenario analyses and stress tests with respect to market risks for controlling.
The Group Asset/Liability Committee assesses and manages balance sheet and liquidity risks and defines the standards for internal funds transfer pricing. In this context it plays an important role for the Group’s long-term funding planning and the hedging of structural interest rate and foreign exchange risks.
Moreover, an independent and objective audit, free of potential conflicts, is carried out during the audit of the annual financial statements by the auditing companies. Finally, RBI is continuously supervised by the Austrian Financial Markets Authority and by local supervisors in those countries, where RBI is represented by branches or banking subsidiaries.
Objective Description of risk Measurement technique Confidence level TTarget rating perspective
Risk-taking capacity (projected earnings plus capital exceeding regulatory requirements ) must not fall below the annualized value-at-risk of the Group 99 per cent reflecting the owners’ willingness to inject additional own funds
Capital and loss projection for a threeyear planning period based on a severe macroeconomic downturn scenario 70-90 per cent based on the management decision that the Group might be required to temporarily reduce risks or raise additional core capital
Target rating perspective Risks in the target rating perspective are measured based on economic capital which represents a comparable measure across all types of risks. It is calculated as the sum of unexpected losses stemming from different Group units and different risk categories (credit, participation, market, and operational risk). In addition, a general buffer for other risks not explicitly quantified is held on Group level.
Risk contribution of indvidual risk types to economic capital as of 31/12/2011
In the regional break down of economic capital as of 31 Decmber 2011 the largest share, at around 30 per cent (2010: 26 per cent), is allocated to Group units located in Central Europe. Network units in the Czech Republik and Slovakia contribute most to this total risk potential, due to their high credit exposure.
Going concern perspective Parallel to that procedure, internal capital adequacy also is assessed with focus on the uninterrupted operation of the Group on a going concern basis. In this perspective, risks again are compared to risk taking capacity – now with a focus on regulatory capital and minimum capital requirements.
In line with this target, risk taking capacity is calculated as the amount of planned profits, expected risks costs, and the excess of own funds (taking into account various limits on eligible capital). This capital amount is compared to the overall value-at-risk (including expected losses). Quantitative models used in the calculation thereof are mostly comparable to the target rating perspective, (albeit on a lower 99 per cent confidence level). Using this perspective the Group ensures adequate regulatory capitalization (going concern) with the given probability.
Internal targets for regulatory capital ratios consequently are intentionally set higher than the legal minimum, in order to be able to fulfill regulatory capital requirements at all times and to account for other risks, which are not considered in the regulatory requirements. In this process, regulatory capital requirements are calculated on Group level according to Austrian regulations. Additional local regulatory capital requirements for individual Group units can be met by adequate structural balance sheet measures.
The main focus of this integrated stress test is the resulting core capital ratio at the end of the multi-year period. It should not fall below a sustainable level and thus neither require the bank to substantially increase capital nor to significantly reduce business activities. The current minimum amount of core capital thus is determined by the size of the potential economic downturn. In this downturn scenario the need for allocating loan loss provisions, potential procyclical effects that increase minimum regulatory capital requirements, the impact of foreign exchange fluctuations as well as other valuation and earnings effects are incorporated.
This perspective thus also complements traditional risk measurement based on the value-at-risk concept (which is in general based on historic data). Therefore it can incorporate exceptional market situations that have not been observed in the past and it is possible to estimate the potential impact of such developments. The stress test also allows for analyzing risk concentrations (e.g. individual positions, industries, or geographical regions) and gives insight into the profitability, liquidity situation, and solvability under extreme situations. Based on these analyses risk management in RBI enhances portfolio diversification, for example via limits for the total exposure of individual industry segments and countries and through ongoing updates to its lending standards.
Credit decisions are made within the context of a hierarchical competence authority scheme depending on the type and size of a loan. It always requires the approval of the business and the credit risk management divisions for individual limit decisions or when performing regular rating renewals. If the individual decision-making parties disagree, the potential transaction will have to be decided upon by the next higher-ranking credit authority.
The limit application process in the retail segment is stronger automated due to the high number of applications and lower exposure amounts. Limit applications often are assessed and approved in central processing centers based on credit score cards. This process is facilitated by the respective IT systems.
Valuation and disclosure differences 1,176,923 1,683,746 1 Adjustments of previous year figures due to different mapping. 2 Balance positions containing only credit risk parts
Credit portfolio – Corporates The internal rating model for corporates takes into account qualitative factors as well as several business and performance figures (e.g. interest cover, EBT margin, EBTDA margin, equity ratio, return on assets, debt amortization period), which are tailored to the various industries and financial reporting standards.
All in all the credit exposure in targeted industries (e.g. consumer non-cyclical, energy) increased strongly whereas credit growth in restricted industries such as real estate and construction was much weaker in comparison.
Defaulted exposures according to Basel II (rating 5.0) amounted to 5.2 per cent of the total credit exposure (€ 4,609,661 thousand), with the segment Central Europe affected most with € 1,234,996 thousand. Slightly less than half of the unrated credit exposure is due to small loans. The share of unrated exposure against corporates, which increased in 2010 due to the merger, has been strongly reduced again.
6.3 Acceptable project risk profile – average risk 1,241,476 14.7% 912,439 14.7%
Retail customers – small and medium-sized entities 1,673,386 802,226 20,035 190,823 0 hereof individual loan loss provision 332,314 346,625 177,951 445,441 196 hereof portfolio based loan loss provision 198,742 100,996 8,846 44,646 0
In the table below the retail exposure selected by products is shown: Central Europe
The following table shows the maximum credit exposure by internal rating for financial institutions. Due to the small number of customers (or number of defaults respectively), default probabilities of individual rating grades in this asset class are estimated based on a combination of internal and external data.
The maximum credit exposure of these customers was € 38,829,566 thousand at year end 2011. With respect to the rating distribution in this asset class, the rating class A3 contributed € 24,221,051 thousand or 62.4 per cent. The strong increase in this rating class results mainly from segment Group Markets. Taking all rating classes together, segment Group Markets accounts for the largest portfolio share (€ 32,490,734 thousand or 83.7 per cent) followed by the segment Group Corporates at € 2,444,968 thousand or 6.3 per cent.
The share of not rated financial institutions was 0.2 per cent at year end 2011. This exposure was mainly caused by short-term loans to small banks, where the rating process had not yet been completed.
RBI continues to reduce the unsecured exposure in this asset class according to its strategy. New business in this asset class thus mainly stems from repurchase agreements, counterparty credit exposure from derivatives and short-term money market deposits. Credit business with other financial institutions in the Raiffeisen Banking Group which are participating in a joint risk monitoring system of course is not restricted.
The table below shows the maximum credit exposure to financial institutions (excluding central banks) selected by products: Credit exposure – Sovereigns Another asset class is formed by central governments, central banks, and regional municipalities as well as other public sector entities. The table below provides a breakdown of the credit exposure to sovereigns (including central banks) by internal rating. Since defaults in this asset class are historically very rare, default probabilities are estimated using full data sets provided by external rating agencies.
The maximum credit exposure to sovereigns amounted to € 26,893,046 thousand at year-end and represents 14.4 per cent of the bank’s total credit exposure. The highest portfolio share with 35.6 per cent is held in rating class Minimal Risk (rating A1), which results mainly from new securities investments in government bonds.
The table below shows the credit exposure to sovereigns (including central banks) selected by products: The table below shows the credit exposure to the public sector in non-investment grade (rating B3 and below): The credit exposure to the public sector in non-investment grade (rating B3 and below) was to year end 2011 with € 9,809,234 thousand virtually unchanged from 2010 and resulted primarily from deposits of group units with the local central banks in Central and Southeastern Europe. They were used for completion of the minimum reserve requirements, and the shortterm investment of excess liquidity, and were therefore inextricably linked to the business activities in these countries.
Credit risk mitigation Collateralization is one of the main strategies and an actively pursued measure for reducing potential credit risks. The value of collateral and the effect of other risk mitigation techniques are determined within each limit application. The risk mitigation effect taken into account is the value that RBI expects to receive when selling the collateral within a reasonable liquidation period. Eligible collaterals are defined in the Group’s collateral catalog and evaluation guidelines for collateral. The collateral value is calculated according to specified methods which include standardized calculation formulas based on market values, predefined minimum discounts, and expert assessments.
Loans and advances to banks and customers net of allocated loan loss provisions (net exposure), the additional offbalance sheet exposure (contingent liabilities, commitments, and revocable credit lines), and the the market prices (fair value) of collateral pledged in favor of RBI are shown in the following table: 31/12/2011 Maximum credit exposure Fair value of collateral € 000 Net exposure Commitments/
Problem loan management The credit portfolio and individual borrowers are subject to constant monitoring. The main purpose of monitoring is to ensure that the borrower meets the terms and conditions of the contract, as well as following the obligor’s economic development. Such a review is conducted at least once annually in the non-retail asset classes corporates, financial institutions, and sovereigns. This includes a rating review and the re-evaluation of financial and tangible collateral.
Problem loans (where debtors might run into material financial difficulties or a delayed payment is expected) need special treatment. In non-retail divisions, problem loan committees in individual Group units make decisions on problematic exposures. If the need for intensified treatment and workout is identified, then problem loans are assigned either to a designated specialist
The assessment of the expected recovery value is heavily influenced by the number of days payments are late. The following table shows the amount of overdue – not impaired – credit exposure of banks and customers for different time bands.
The following table shows the exposure of non-performing loans in the defined asset classes loans and advances to banks and loans and advances to customers (excluding off-balance sheet positions) as reported in the statement of financial position for the reporting period: As of 1/1/2011
The following table shows the share of non-performing loans in the defined asset classes from financial statement of position items loans and advances to banks and loans and advances to customers (excluding off-balance sheet positions), as well as the corresponding collateraland loan loss provisions provided: Central Europe
Impairment losses on loans and advances 5,848 0 0 64 0 0
Impairment losses on loans and advances 2,164 598 967 191 1,951 212,506
Impairment losses on loans and advances 687,381 458,922 443,391 502,867 563,264 183,281
In the retail portfolio, non-performing loans grew by 2 per cent (€ 55,767 thousand) to € 2,451,979 thousand. The main increase took place in Southeastern Europe by 6 per cent, whereas Russsia reported a decline by 3 per cent. The total NPL ratio in the retail asset class increased by 0.1 percentage points to 11.5 per cent. Loan loss provisions have been increased for retail customers to € 1,773,391 thousand which improves the coverage ratio by 3.0 percentage points to 72.3 per cent.
In the asset class financial institutions non-performing loans amount to € 241,276 thousand at year-end, for which loan loss provisions of € 227,643 thoausand were allocated.
The following table summarizes the development of impairment losses on loans and advances and off-balance sheet transactions during the fiscal year and the corresponding items from the statement of financial position: As of 1/1/2011
Loans and advances to customers 790,137 (15) 249,889 (341,293) 0 (18,160) 680,558 1 Allocation including direct write-downs and income on written down claims. 2 Usage including direct write-downs and income on written down claims.
The following table shows the breakdown of loan loss provisions according to business segments: As of 1/1/2011
Country risk Country risk includes transfer and convertibility risks as well as political risk. It arises from cross-border transactions and direct investments in foreign countries. RBI is exposed to this risk due to its strong business activities in the Central and Eastern European markets. In these markets political and economic risks to some extent are still seen as comparatively significant.
Risk policies and credit portfolio management in RBI take into account the industry class of customers as well. Banking and insurance represents the largest industry class, which, however, is mostly attributed to exposures to members of the Austrian Raiffeisen Sector (central liquidity balancing function). The second largest industry class is private households, primarily consisting of loans to retail customers in Central and Eastern European countries. The following table shows the maximum credit exposure of the Group by the customers’ industry classification: Wholesale trade and commission trade (except car trading) 17,893,915 9.6% 15,217,496 9.0%
Retail trade except repair of motor vehicles 5,315,068 2.8% 4,087,343 2.4%
Extraction of crude petroleum and natural gas 1,580,433 0.8% 1,277,371 0.8%
Counterparty credit risk The default of a counterparty in a derivative, repurchase, securities or commodities lending or borrowing transaction can lead to losses from re-establishing the contract with another counterparty. In RBI this risk is measured by the mark-to-market approach where a predefined add-on is added to the current positive fair value of the contract in order to account for potential future changes. For internal management purposes potential price changes, which affect the fair value of an instrument, are calculated specifically for different contract types based on historical market price changes.
The Market Risk Committee is responsible for strategic market risk management issues. It is responsible for managing and controlling all market risks in the Group. The Group’s overall limit is set by the Management Board on the basis of the risktaking capacity and income budget. This limit is apportioned to sub-limits in coordination with business divisions according to the strategy, business model and risk appetite.
Value-at-risk (VaR) is the main steering instrument in liquid markets and normal market situations. VaR is measured based on a hybrid simulation approach, where 5000 scenarios are calculated. The approach combines the advantages of a historical simulation and a Monte Carlo simulation and derives market parameters from 500 days historical data. Distribution assumptions include modern features like volatility declustering, random time change, and extreme event containers. This helps in reproducing fat-tailed and asymmetric distributions accurately. The Austrian Financial Market Authority has approved this model such that it can be used for calculating own funds requirements for market risks. Value-at-risk results are not only used for limiting risk but also in the internal capital allocation.
Value-at-Risk (VaR) The following table shows the VaR (99%, 1d, in € thousand) for individual markets risk categories of the trading and banking book. RBI’s VaR mainly results from exchange rate risk out of long-termed equity positions, structural interest rate risks, and credit spread risks of bonds, which are held as liquidity buffer.
January February March April May June July August September Oktober November December
RBI holds several large participations located outside of the European Monetary Union with their equity denoted in the corresponding local currency. Also, a significant share of risk weighted assets in RBI is denominated in foreign currencies. Changes in foreign exchange rates thus lead to a change of consolidated capital in RBI and they influence own funds requirement for credit risks as well.
Basically, there are two different approaches for managing exchange rate risks: Preserve equity: With this hedging strategy an offsetting capital position is held on Group level for local currency denominated equity positions. However, the necessary hedging positions cannot be established in all currencies due to the required high volume. Moreover, these hedges might be inefficient for some currencies if they carry a high interest rate differential.
Other 1 7 (11) 9 (2) (3) 7 (2) (3) 0 0 0 1 The representation of currencies has changed year on year depending on the absolute value of the interest rate sensitivity
This risk is mainly hedged by a combination of on- and off-balance sheet transactions where in particular interest rate swaps and – to a smaller extend – also interest rate forwards and interest rate options are used. Balance sheet management is a core task of the central Treasury division and of individual network banks, which are supported by asset/liability management committees. They base their decisions on various interest income analyses and simulations that ensure proper interest rate sensitivity in line with expected changes in market rates and the overall risk appetite.
Banks perform maturity transformation as an important role for international financial markets. The need for maturity transformation arises from the needs of depositors to access their funds within short notice and the opposite need of borrowers for longterm loans. This function constantly results in positive or negative liquidity gaps for different maturities that are managed through transactions with other market participants under normal market conditions.
The Austrian liquidity risk management directive, which implements the principles developed by the Committee of European Banking Supervision (CEBS) in Austria, became effective on 31 December 2010. RBI had already established the now mandatory instruments for liquidity risk management (amongst others a sufficiently large liquidity buffer, stress tests based on different scenarios, and liquidity contingency plans). Additional regulatory changes in the liquidity risk area will be defined in Basel III. As far as it is possible to estimate the new liquidity ratios based on the still preliminary rules, RBI appears to be well prepared for the new regulations.
€ 000 2011 2010 Maturity 1 week 1 month 1 year 1 week 1 month 1 year
The following table shows a breakdown of cash flows according to the contractual maturity of financial liabilities: 31/12/2011
Up to 3 months 3-12 months More than 1 year, up to 5 years
This risk category is analyzed and managed on the basis of own historical loss data and the results of self assessments. Another management tool is the incentive system implemented in internal capital allocation. This system rewards high data quality and low expected operational risk costs of individual business units. Generally speaking, RBI implements a centralized - decentralized system for operational risk management. In this process, a central operational risk management function defines all basic principles and minimum requirements, which then are implemented risk type specific in the individual local units.
Risk identification Identifying and evaluating risky areas that might endanger the Group’s existence if a loss occurs (but where losses are highly unlikely to be realized) and also areas where losses are more likely to happen frequently (but cause only smaller losses) are important tasks for controlling operational risks.
Loss data is collected in a central database called ORCA (Operational Risk Controlling Application) in a structured manner and on a Group-wide basis according to the event type and the business line. Collecting losses stemming from operational risks is a prerequisite for implementing a statistical loss distribution model and a minimum requirement for implementing the regulatory Standardized Approach. Furthermore, loss data (and near misses) is used to create and validate operational risk scenarios and for exchange with international data pools to further develop advanced operational risk management tools. The results of analyses as well as loss events resulting from operational risks are reported in a comprehensive manner to the Group Risk Committee on a regular basis. The distribution of losses in the Group by event type shows an increase in category Clients, Products & Business Practices in the year 2011, which is mainly caused by losses stemming from foreign currency loan conversions in Hungary.
Foreign exchange rate and gold contracts 42,618,739 7,734,681 1,794,526 52,147,948 741,486 (1,168,629)
Loans and advances to banks 25,499,535 25,520,401 (20,866) 21,270,497 21,532,406 (6,890)
Intangible and tangible fixed assets 2,578,823 2,577,025 1,798 2,671,347 2,673,446 (2,100)
Liabilities at fair value through profit and loss 0 3,345,911 0 2,557,396 0
Negative fair values of derivatives from hedge accounting 0 42,702 0 0 476,764 0 1 Including other derivatives.
The following tables show the changes in the fair value of financial instruments whose valuation models are based on unobservable parameters.
Financial assets at fair value through profit or loss 155,352 0 (1,090) 697 (126,089)
Gains and losses resulting from financial instruments of the level III fair value hierarchy amounted to a gain of € 106,408 thousand (2010: € 20,196 thousand).
Fiduciary business not recognized in the statement of financial position was concluded with the following volumes on the balance sheet date: Loans and advances to banks 9,509 9,442
Fiduciary income and expenses break down as follows: The following table contains the funds managed by RBI: Retail investment funds 4,976,007 5,148,417
Regulatory values are defined for RBI on a partly consolidated and on an individual basis by the Austrian Banking Act based on adequate guidelines of the EU. There are also – often deviating with regard to content – guidelines in the several countries in which RBI operates. Such guidelines have to be adhered to by the local Group units.
The main focus in the control is on the core tier 1 ratio (common-equity Tier 1). Besides that, the risk taking capacity is calculated in the framework of regulatory limits. It is defined as the maximum loss, which the bank or the banking group may encounter during the current calendar year without falling short of the regulatory minimum capital values. Accordingly, the mixture of capital instruments (several kinds of tier-1, tier-2 andtier 3 capitals) has an important role due to the complex mutual consideration limits. Tier 3 capital, however, plays a minor role, since this kind of capital will no longer be eligible under Basel 3 and CRR I/CRD IV. Furthermore the use of Tier 2 under the regulations becoming effective in 2013 (Basel 3) will be more limited than under Basel 2.
The current regulatory discussions and publications of the Basel Committee, EU Committees and the Austrian Regulatory Authority in connection with the new regulatory guidelines (Basel 3) are demonstrated in scenario calculations by Planning & Finance and Risk Controlling. The effects are immediately considered in planning and control in case of a certain occurrence probability.
Supplementary capital according to Section 23 (1) 5 BWG 598,742 599,792
The total own funds requirement is as follows: Risk-weighted assets according to section 22 BWG 77,150,488 75,601,318 of which 8 per cent minimum own funds for the credit risk according to sections 22a to 22 h BWG 6,172,039 6,048,105
The same regulations for employees are in principle valid for six members of the Management Board. These regulations provide a basic contribution to a pension fund from the company and an additional contribution if the employee pays own contributions of the same amount. One member of the Management Board has a defined benefit plan. Four members of the Management Board additionally have individual retirement benefits, which are funded by a reinsurance policy. For one member of the Management Board a further individual retirement benefit which is being funded by a single premium, in the amount of € 1,500 thousand m under a reinsurancepolicy thausand was made.
For one member of the Management Board entitlement to severance payments has been converted in the course of merger-related changes of existing contracts. Corresponding payments are made in the years 2011 and 2012, in the financial year 2011 these amounted to € 2,022 thousand.
Moreover, protection against the risk of occupational invalidity exists which is covered by a pension fund and/or by individual pension agreements secured through reinsurance. The contracts are concluded for the functional duration or limited to a maximum of five years. The severance payments in case of premature termination of office without good cause shall not exceed more than two years total remuneration.
Group relations of key management Key management refers to the members of the Management Board and the Supervisory Board of Raiffeisen Bank International AG, the parent company and Raiffeisen Zentralbank Österreich Aktiengesellschaft, the major shareholder. Relations of key management to Raiffeisen Bank International are as follows (respective fair values): The following table shows relations of close family members of key management to Raiffeisen Bank International: Moreover, as of 31 December 2011 guarantees for a loan granted to a member of the Management Board amounted to € 765 thousand (2010: € 765 thousand). There is no compensation agreed between the company and their members of the Management Board and Supervisory Board or employees in the case of a takeover bid.
The table contains fixed and performance-based remuneration, remunerations for membership of boards of affiliated subsidiaries, bonus payments, and benefits in kind. In the financial year, the share of performance-based remuneration components was 10.0 per cent (2010: 1.9 per cent).
The members of the RI Management Board that had waived their rights to the bonus payments in 2010 were awarded a onetime voluntary gratuity in the amount of € 1,400 thousand which was processed by the system according to displaced bonus payments described in note (34) Equity.
For one member of the Management Board liabilities existed as of 31 December 2011 in the amount of € 765 thousand (2010: € 765 thousand).
Thus, in the financial year, € 423 thousand was paid to the members of the Supervisory Board. In the previous year, the members of the Supervisory Board received remunerations of € 380 thousand.
KG, "SEPTIMUS" FRANKE IMMOBILIEN HANDEL KG, H. Stepic F.C. GmbH Karl Sevelda: Bene Privatstiftung, BestLine Privatstiftung, Bene AG, Milletertius Kreihsler Immobilienhandel KG,
Österreichische Raiffeisen-Einlagensicherung eGen Patrick Butler: CEESEG AG, Wiener Börse AG Aris Bogdaneris: Visa Global Advisory Board Martin Grüll: Stefan Stolitzka Privatstiftung
Helge Rechberger2 10 October 2010 Until further notice 1 Assignment effective as of 10 October 2010 2 Staff council delegates
In the course of its measures to prepare for the Basel III guidelines that will be in force as of 2013, Raiffeisen Bank International AG (RBI) is currently optimizing its structure of participations. The European implementation of Basel III will limit the recognition of the capital contributions provided by minority shareholders. In order to avoid this effect, RBI will acquire the minority shareholdings that Raiffeisen Zentralbank Österreich AG (RZB) holds in the Slovak Tatra banka a.s. and the Czech Republic's Raiffeisenbank a.s. By doing so, RBI will increase its already existing majority shareholdings in these network banks and will further simplify the shareholder structure.
Raiffeisen Insurance Agency Sp.z.o.o, Warsaw (PL) 200,000 PLN 87.5% BR 1 Company type: BA…Bank, BR…Company rendering banking-related ancillary services, FI…Financial institution, OT…Other companies
RZB Finance (Jersey) II Ltd, St. Helier (JE) 100,000,002 EUR *2 FI
RZB Finance (Jersey) IV Limited, GBJ-St. Helier JE4 8PX, St. Helier (GBJ) 500,002,000 EUR *2 FI
Tatra Asset Management sprav.spol., a.s., Bratislava (SK) 1,659,700 EUR 65.8% FI
ZUNO BANK AG, Vienna (AT) 5,000,000 EUR 100.0% BA 1 Company type: BA…Bank, BR…Company rendering banking-related ancillary services, FI…Financial institution, OT… Other companies 2 Companies, that are consolidated based on the economic control according to the IFRS framework
1 Company type: BA…Bank, BR…Company rendering banking-related ancillary services, FI…Financial institution, OT…Other companies, , VV… Insurance, WP …
LLC "Insurance Company 'Raiffeisen Life", Moscow (RU) 60,000,000 RUB 25.0% VV
Raiffeisen Investment Fund Management JSC, Budapest (HU) 100,000,000 HUF 100.0% FI
The Zagreb Stock Exchange joint stock company, Zagreb (HR) 40,408,000 HRK 3.3% SC 1 Company type: BA…Bank, BR…Company rendering banking-related ancillary services, FI…Financial institution, OT…Other companies, , VV… Insurance, WP …
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with laws and regulations applicable in Austria and in accordance with International Standards on Auditing, issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). Those standards require that we comply with professional guidelines and that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
Our audit did not give rise to any objections. In our opinion, which is based on the results of our audit, the consolidated financial statements comply with legal requirements and give a true and fair view of the financial position of the Group as of 31 December 2011 and of its financial performance and its cash flows for the year from 1 January to 31 December 2011 in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU.
Pursuant to statutory provisions, the management report for the Group is to be audited as to whether it is consistent with the consolidated financial statements and as to whether the other disclosures are not misleading with respect to the Company’s position. The auditor’s report also has to contain a statement as to whether the management report for the Group is consistent with the consolidated financial statements and whether the disclosures pursuant to Section 243a UGB (Austrian Commercial Code) are appropriate. In our opinion, the management report for the Group is consistent with the consolidated financial statements. The disclosures pursuant to Section 243a UGB (Austrian Commercial Code) are appropriate.
Chief Executive Officer responsible for Internal Audit, Legal & Compliance, Human Resources, Management Secretariat, Organization & Internal Control System, Group Strategy and PR, Marketing and Event Management
Country Risk & Group Portfolio Management, Retail Risk Management, Credit Management Corporates, Workout and Risk Excellence & Projects
Overview of RBI Interview with the Chairman of the Management Board 8 Management Board of RBI 14 Report of the Supervisory Board 16 RBI at a glance 18 RBI’s strategy 21 RBI in the capital markets 28 Corporate governance report 33 Corporate responsibility 44
Consolidated fi nancial statements Income statement 134 Statement of fi nancial position 138 Statement of changes in equity 139 Cash fl ow statement 140 Segment reporting 142 Notes 150 Audit opinion 262
Basel II – The body of capital adequacy regulations proposed in recent years by the “Basel Committee,” an international forum dedicated to improving bank supervision. According to EU Directives 2006/48/EC and 2006/49/EC, the regulations must be applied in the member states of the European Union from 1 January 2007 onwards to all banks and fi nancial service institutions. As in the case of the Basel I Accord, the goal is to ensure that banks have adequate capital resources and that uniform competitive conditions are created for both lending and credit trading. The main objective of the changes made by Basel II compared to Basel I is to orient capital adequacy requirements prescribed by regulators more eff ectively to actual risk and hence approximate the capital requirements internally ascertained by banks.
BIS – Bank for International Settlement. International organization supporting the cooperation between the monetary and fi nancial sector.
CEBS – Committee of European Banking Supervisors. Advisor of the European Commission regarding policy and regulatory issues in banking supervision and supporting the cooperation between supervisors in the European Union, especially in developing guidelines and recommendations for fi nancial institutions and supervisors.
Credit derivatives – Instruments designed to transfer credit risk arising from loans, bonds and other risk assets or market risk items to another party.
Deferred tax assets – The amounts of income taxes recoverable in future periods in respect of deductible temporary diff erences and the carry-forward of unused tax losses.
Fair Value Level II – (measurement techniques based on observable parameters ). When current bid and asking prices are unavailable, the price of the most recent transaction provides evidence of the current fair value as long as there has not been a signifi cant change in economic circumstances since the time of the transaction (in particular present value calculations and option price models ). Alternately, they can be established through recognized evaluation models using observable prices or parameters.
Fair Value Level III – (measurement techniques not based on observable parameters). If observable parameters are not available; the fair value will be measured through valuation methods appropriate for the fi nancial instrument.
Futures – Standardized forward contracts traded on a stock exchange under which a commodity traded in a money, capital, precious metal or currency market is to be delivered or accepted at a price fi xed in an exchange environment.
Goodwill – Any excess of the cost of the acquisition over the acquirer’s interest in the fair value of the identifi able assets and liabilities acquired as at the date of the exchange transaction.
Held-to-maturity – Securities with fi xed or determinable payments and fi xed maturity that an entity has the positive intention and ability to hold to maturity.
Investment property – Property (land or buildings – or part of buildings – or both) which are held to earn rentals or for capital appreciation or both.
IRB (Internal Ratings-Based approach) – Approach to measure the own funds requirement for credit risks in accordance with Basel II. By applying the IRB approach, the own funds requirement is determined according to internal credit ratings. In the process, features specifi c to the borrower and the loan are taken into account. The ratings must be made by an independent source.
Liquidity risk – Risk that a bank could be unable to meet its current and future fi nancial obligations in full or in good time. This arises from the danger that, e.g. refi nancing can only be obtained at very disadvantageous terms or is entirely impossible.
Loss rate – Usage of previously allocated loan loss provisions plus direct writedowns and income received on written-down claims divided by credit exposure to customers.
Monte-Carlo-Simulation – Numerical method to aggregate risks to evaluate specifi c risks concerning their infl uence on corresponding income statement items.
Net provisioning ratio (average risk-weighted assets credit risk) – Risk valuation ratio. Provisioning for impairment losses in relation to average credit risk-weighted assets.
Net provisioning ratio (total credit exposure) – Risk valuation ratio. Provisioning for impairment losses in relation to the total credit exposure.
Operating leasing – Lease under which commercial and legal ownership remains with the lessor, with the eff ect that the lessor must show the asset on its statement of fi nancial position.
Operational risk – Risk of unexpected losses resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk.
OTC instruments – Financial instruments that are neither standardized nor traded on a stock exchange. They are traded directly between market participants “over-the-counter.”
Own funds ratio – The ratio’s numerator is own funds within the meaning of the Austrian Banking Act (BWG) and its denominator is the own funds requirement multiplied by 12.5 per cent.
Own funds requirement according to BWG – Defi ned in Section 22 (1) BWG and involves the requirement for the credit risk, for position risk in bonds, equities and commodities and for position risk in foreign currency and for the operational risk.
Projected unit credit method – An actuarial valuation method defi ned by IAS 19 that sees each period of service as giving rise to an additional unit of benefi t entitlement and measures each unit separately to build up the fi nal obligation (sometimes known as the accrued benefi t method pro-rated on service or as the benefi t/years of service method).
Risk-weighted assets (credit risk) – This is the sum of the weighted accounts receivable and includes receivables in the form of asset items, items off the statement of fi nancial position according to Annex 1 of Section 22 and derivatives according to Annex 2 of Section 22 BWG.
RZB-Kreditinstitutsgruppe – Pursuant to Section 30 of the Austrian Banking Act (BWG), RZB-Kreditinstitutsgruppe is made up of all banks, fi nancial institutions, securities companies and companies rendering banking related services in which RZB holds direct or indirect interests or has control as a superordinate institution.
Statement of cash fl ows – Statement of cash fl ows during the fi nancial year arising from operating activities, investing activities and fi nancing activities and a reconciliation of cash and cash-equivalents held at the beginning and the end of the fi nancial year.
Stress tests – Stress tests endeavor to simulate extreme fl uctuations in market parameters. They are used because such fl uctuations are usually inadequately captured by VaR models (VaR forecasts maximum losses under normal market conditions).
Watson Wyatt Global Grading System – Internationally approved, market -oriented method to evaluate the value of job positions, based on role and competence requirements within a company with the aim of gaining a consistent compensation structure.
Albania Raiff eisen Bank Sh.a. “European Trade Center” Bulevardi “Bajram Curri” Tirana Phone: +355-4-238 1000 Fax: +355-4-227 5599 SWIFT/BIC: SGSBALTX www.raiff eisen.al
Bosnia and Herzegovina Raiff eisen BANK d.d. Bosna i Hercegovina Zmaja od Bosne bb 71000 Sarajevo Phone: +387-33-287 101 Fax: +387-33-213 851 SWIFT/BIC: RZBABA2S www.raiff eisenbank.ba
Bulgaria Raiff eisenbank (Bulgaria) EAD 18/20 Gogol Str. 1504 Sofi a Phone: +359-2-9198 5101 Fax: +359-2-943 4528 SWIFT/BIC: RZBBBGSF www.rbb.bg
Kosovo Raiff eisen Bank Kosovo J.S.C. UÇK Str. No. 51 10000 Pristina Phone: +381-38-222 222 Fax: +381-38-203 01130 SWIFT/BIC: RBKORS22 www.raiff eisen-kosovo.com
Poland Raiff eisen Bank Polska S.A. Ul. Piękna 20 00-549 Warsaw Phone: +48-22-585 2001 Fax: +48-22-585 2585 SWIFT/BIC: RCBWPLPW www.raiff eisen.pl
Slovenia Raiff eisen Banka d.d. Zagrebeška cesta 76 2000 Maribor Phone: +386-2-229 3100 Fax: +386-2-303 442 SWIFT/BIC: KREKSI22 www.raiff eisen.si
Ukraine Raiff eisen Bank Aval JSC 9, Leskova Street 01011 Kiev Phone: +38-044-490 8888 Fax: +38-044-285 3231 SWIFT/BIC: AVALUAUK www.aval.ua
Albania Raiff eisen Leasing Sh.a. “European Trade Center” Bulevardi “Bajram Curri” Tirana Phone: +355-4-2274 920 Fax: +355-4-2232 524 www.raiff eisen.al
Bosnia and Herzegovina Raiff eisen Leasing d.o.o. Sarajevo Zmaja od Bosne 11 71000 Sarajevo Phone: +387-33-254 354 Fax: +387-33-212 273 www.rlbh.ba
Croatia Raiff eisen Leasing d.o.o. Radnicka cesta 43 10000 Zagreb Phone: +385-1-6595 000 Fax: +385-1-6595 050 www.rl-hr.hr
Hungary Raiff eisen Lízing Zrt. Hungaria krt. 40-44 1087 Budapest Phone: +36-1-298 8000 Fax: +36-1-298 8010 www.raiff eisenlizing.hu
Kazakhstan Raiff eisen Leasing Kazakhstan LLP Shevchenko St. 146, No. 12 050008 Almaty Phone: +7-727-3785 430 Fax: +7-727-3785 447 www.rlkz.kz
Russia OOO Raiff eisen-Leasing Stanislavskogo St. 21/1 109004 Moscow Phone: +7-495-721 9980 Fax: +7-495-721 9901 www.raiff eisen-leasing.ru
Slovenia Raiff eisen Leasing d.o.o. Bleweisova cesta 30 1000 Ljubljana Phone: +386-1-241 6250 Fax: +386-1-241 6268 www.rl-sl.si
Ukraine LLC Raiff eisen Leasing Aval 9, Moskovskiy Av. Corp. 5 Offi ce 101 04073 Kiev Phone: +38-044-590 2490 www.rla.com.ua
Germany RBI Representative Offi ce Frankfurt Mainzer Landstraße 51 60329 Frankfurt Phone: +49-69-2992 1918 Fax: +49-69-2992 1922
France RBI Representative Offi ce Paris 9-11 Avenue Franklin D. Roosevelt 75008 Paris Phone: +33-1-4561 2700 Fax: +33-1-4561 1606
Malta Raiff eisen Malta Bank plc 52 “Il Piazzetta” Tower Road Sliema SLM 1607 Phone: +356-2260 0000 Fax: +356-2132 0954
RBI Representative Offi ce Hong Kong Unit 2106-08, 21st Floor, Tower One, Lippo Centre 89 Queensway, Hong Kong Phone: +85-2-2730 2112 Fax: +85-2-2730 6028
RBI Representative Offi ce Xiamen Unit 01-02, 32/F Zhongmin Building No 72 Hubin North Road Fujian Province 301012 Xiamen Phone: +86-592-2623 988 Fax: +86-592-2623 998
India RBI Representative Offi ce Mumbai 803, Peninsula Heights C.D. Barfi wala Road, Andhere (W)
Singapore RBI Singapore Branch One Raffl es Quay #38-01 North Tower Singapore 048583 Phone: +65-6305 6000 Fax: +65-6305 6001
Editor, Publisher Raiff eisen Bank International AG Am Stadtpark 9 1030 Vienna Austria Phone: +43-1-71707 0 Fax: +43-1-71707 1715 Internet: www.rbinternational.com
This annual report has been prepared and the data checked with the greatest possible care. Nonetheless, rounding, transmission, typesetting and printing errors cannot be ruled out. In the summing up of rounded amounts and percentages, rounding-off diff erences may occure. This annual report was prepared in German. The annual report in English is a translation of the original German report. The only authentic version is the German version.