As a sponsor, the Group is often involved in the legal set up and marketing of the entity and supports the entity in different ways such as providing operational support to ensure the entity’s continued operation. The Group is also deemed a sponsor for a structured entity if market participants would reasonably associate the entity with the Group. Additionally, the use of the Raiffeisen name for the structured entity often indicates that the Group has acted as a sponsor. The gross proceeds from sponsored entities for the year ending 31 December 2018 amounted to € 193,995 thousand (2017: € 197,987 thousand). No assets were transferred to sponsored non-consolidated structured entities in 2018 or 2017.
Angaga Handels- und Beteiligungs GmbH, Vienna (AT) 35,000 EUR 100.0% OT
Austria Leasing GmbH & Co KG Immobilienverwaltung Projekt EKZ Meitingen, Eschborn (DE) 10,000 EUR 100.0% OT
Bad Sauerbrunn Thermalwasser Nutzungs- und Verwertungs GmbH., Bad Sauerbrunn (AT) 0 EUR 50.0% OT
Bandos Handels- und Beteiligungs GmbH, Vienna (AT) 40,000 EUR 100.0% OT
CP Linzerstraße 221-227 Projektentwicklungs GmbH, Vienna (AT) 37,000 EUR 100.0% OT
Humanitarian Fund ''Budimir Bosko Kostic'', Belgrade (RS) 30,000 RSD 100.0% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
IDUS Handels- und Beteiligungs GmbH, Vienna (AT) 40,000 EUR 100.0% OT
Insurance Limited Liability Company "Priorlife", Minsk (BY) 7,682,300 BYN 100.0% VV
Körlog Logistika Építö és Kivitelezö Korlátolt Feleösségü Társaság, Budapest (HU) 3,000,000 HUF 100.0% OT
Limited Liability Company REC GAMMA, Kiev (UA) 49,015,000 UAH 100.0% BR
INFRA MI 1 Immobilien Gesellschaft mbH, Vienna (AT) 72,673 EUR 100.0% OT
Raiffeisen Autó Lízing Kft., Budapest (HU) 3,000,000 HUF 100.0% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
RAN elf Raiffeisen-Anlagenvermietung Gesellschaft m.b.H., Vienna (AT) 36,336 EUR 100.0% FI
RBI Real Estate Services Czechia s.r.o., Prague (CZ) 100,000 CZK 100.0% FI
Rent GRJ, s.r.o., Bratislava (SK) 6,639 EUR 100.0% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
Raiffeisen Capital a.d. Banja Luka, Banja Luka (BA) 355,000 BAM 100.0% FI
Raiffeisen Salzburg Invest Kapitalanlage GmbH, Salzburg (AT) 2,600,000 EUR 100.0% FI
SCTE Elsö Ingatlanfejlesztö és Ingatlanhasznosító Kft., Budapest (HU) 3,000,000 HUF 100.0% BR
St. Marx-Immobilien Verwertungs- und Verwaltungs GmbH, Vienna (AT) 36,336 EUR 100.0% OT
Steffany's Court s.r.o., Prague (CZ) 50,000 CZK 100.0% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
VINAGRIUM Borászati és Kereskedelmi Kft., Budapest (HU) 3,010,000 HUF 100.0% OT
ZUNO GmbH, Vienna (AT) 5,000,000 EUR 100.0% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
BTS Holding a.s. "v likvidácii", Bratislava (SK) 35,700 EUR 19.0% OT
Burza cennych papierov v. Bratislave, a.s., Bratislava (SK) 11,404,927,296 EUR 0.1% OT
Closed Joint Stock Company Truskavets Valeological Innovative Centre, Truskavets (UA) 100,000 UAH 5.0% OT
Commodity Exchange Crimean Interbank Currency Exchange, Simferopol (UA) 440,000 UAH 4.5% OT
Czech Real Estate Fund (CREF) B.V., Amsterdam (NL) 18,000 EUR 100.0% FI
Export and Industry Bank Inc., Makati City (PH) 4,734,452,540 PHP 9.5% BA
FACILITAS Grundstücksvermietungs Gesellschaft m.b.H., St. Pölten (AT) 36,360 EUR 50.0% FI
G + R Leasing Gesellschaft m.b.H., Graz (AT) 36,400 EUR 25.0% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
NÖ. HYPO Leasing und Raiffeisen-Immobilien-Leasing Traisenhaus GesmbH & Co OG, St Pölten (AT) 24,868,540 ATS 50.0% FI
OCTANOS Raiffeisen Immobilien Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 50.0% FI
O.Ö. Leasing für Gebietskörperschaften Ges.m.b.H., Linz (AT) 510,000 ATS 16.7% FI
ÖAMTC-Leasing GmbH & Co KG, Vienna (AT) 14,535 EUR 49.0% FI
PEGA Raiffeisen-Immobilien Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 50.0% FI
Public Joint Stock Company National Depositary of Ukraine, Kiev (UA) 103,200,000 UAH 0.1% BR
Public Joint Stock Company Settlement Center for Servicing of Contracts in Financial Markets, Kiev (UA) 206,700,000 UAH 0.0% FI
Raiffeisen-Leasing Anlagen und KFZ Vermietungs GmbH, Vienna (AT) 35,000 EUR 53.1% FI
RSIL Immobilienleasing Raiffeisen Steiermark GmbH, Graz (AT) 38,000 EUR 19.0% FI
Societatea de Transfer de Fonduri si Decontari-TRANSFOND S.A, Bucharest (RO) 6,720,000 RON 3.4% BR
Steirische Leasing für öffentliche Bauten Gesellschaft m.b.H., Graz (AT) 36,336 EUR 50.0% FI
Stemcor Global Holdings Limited, St Helier (JE) 349,138 USD 0.9% OT
Tiroler Landesprojekte Grundverwertungs GmbH in Liqu., Innsbruck (AT) 39,000 EUR 33.3% FI
UNDA Grundstücksvermietungs Gesellschaft m.b.H., St Pölten (AT) 36,360 EUR 25.0% FI
UNIQA Raiffeisen Software Service Kft., Budapest (HU) 19,900,000 HUF 1.0% OT
Visa Inc., San Francisco (US) 192,964 USD 0.0% BR 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
W 3 Errichtungs- und Betriebs-Aktiengesellschaft, Vienna (AT) 800,000 EUR 20.0% OT
Ziloti Holding S.A., Luxembourg (LU) 48,963 EUR 0.9% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
Establishment of a countercyclical buffer is the responsibility of the national supervisors. The buffer established for RBI resulted in a weighted average at the level of the RBI Group in order to curb excessive lending growth. The buffer was set at 0 per cent for the present time due to restrained lending growth and the stable macroeconomic environment in Austria. The buffer rates defined in other member states apply at the level of the RBI Group (based on a weighted calculation of averages).
As at 31 December 2018, RBI’s common equity tier 1 capital (CET1) after deductions amounted to € 9,702,017 thousand, representing a € 435,616 thousand increase compared to the 2017 year-end figure. A significant factor behind the improvement was the inclusion of earned income in regulatory capital. CET1 was negatively impacted through the implementation of the new IFRS 9 accounting standard on 1 January 2018, foreign exchange effects, and other deduction effects. Tier 1 capital after deductions increased € 1,088,848 thousand to € 10,927,869 thousand, particularly as a result of the placement of € 500,000 thousand of perpetual additional tier 1 capital in January 2018 and changes in CET1. In contrast, tier 2 capital declined € 689,918 thousand to € 2,362,918 thousand due to early repayments and matured capital instruments. RBI’s total capital amounted to
Regulatory information (70) Capital management and total capital according to CRR/CRD IV and Austrian Banking Act (BWG)
Risk-weighted assets (total RWA) increased € 769,571 thousand to € 72,671,743 thousand as at 31 December 2018. The increase was primarily due to growth in new and existing business at Group Corporates & Markets and in Russia, Romania, the Czech Republic (due among other things to reversal of a securitization position), and Slovakia. The sale of the Polish core banking operations had the opposite effect, reducing RWA by € 4,941,237 thousand.
Total capital requirement for position risk in bonds, equities, commodities and open currency positions 303,245 276,117
The leverage ratio is defined in Part 7 of the CRR. As at 31 December 2018, the leverage ratio was not yet a mandatory quantitative requirement and is therefore only used for informational purposes: Leverage ratio (transitional) 6.70% 6.12%
Risk-weighted assets for credit risk by asset classes broke down as follows: Risk-weighted assets according to standardized approach 22,718,655 27,950,121
Raiffeisen Bank International AG, Vienna (AT) IRB STA Internal model AMA
Raiffeisen Bank d.d. Bosna i Hercegovina, Sarajevo (BA) IRB IRB STA STA
All other units STA STA STA STA IRB: internal ratings-based approach Internal model for risk of open currency positions and general interest rate risk in the trading book STA: standardized approach AMA: advanced measurement approach
According to IFRS 9, all financial assets, financial liabilities and derivative financial instruments are to be recognized in the statement of financial position. A financial instrument is defined as any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. On initial recognition, financial instruments are to be measured at fair value, which generally corresponds to the transaction price at the time of acquisition or issue. According to IFRS 13, the fair value is defined as the exit price. This is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For subsequent measurement, financial instruments are recognized in the statement of financial position according to the respective measurement category pursuant to IFRS 9, either at (amortized ) cost or at fair value.
In RBI, a financial asset is measured at amortized cost if the objective is to hold the asset to collect the contractual cash flows and if the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition of an equity instrument that is not held for trading, RBI may irrevocably elect to present subsequent changes in fair value in other comprehensive income (OCI). This decision is made on an investment-by-investment basis for each investment and essentially covers strategic interests that are not fully consolidated.
In accordance with IFRS 9, embedded derivatives are not separated from the host contract of a financial asset. Instead, financial assets are classified in accordance with the business model and their contractual characteristics as explained in the chapter business model assessment and in the chapter analysis of contractual cash flow characteristics. The recognition of derivatives which are embedded in financial liabilities and in non-financial host contracts has not changed in IFRS 9.
A business model’s objective can be to hold financial assets to collect contractual cash flows even when some sales of financial assets have occurred or are expected to occur. For RBI the following sales may be consistent with the hold-to collect business model:  The sales are due to an increase in the credit risk of a financial asset.  The sales are infrequent (even if significant), or are insignificant individually and in aggregate (even if frequent).  The sales take place close to the maturity of the financial asset and the proceeds from the sales approximate the collection of the remaining contractual cash flows.
The recognition of financial liabilities is largely in accordance with the rules of IAS 39, with the exception that changes in the fair value of liabilities measured at fair value which are caused by changes in RBI’s own default risk are to be booked in other comprehensive income.
RBI makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The following factors are considered as evidence when assessing which business model is relevant:  How the performance of the business model (and the financial assets held within that business model) are evaluated and reported to the entity’s key management personnel
the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin. This assessment will be carried out on an instrument-by-instrument basis on the date of initial recognition of the financial asset.
In assessing whether the contractual cash flows are solely payments of principal and interest, RBI considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it no longer meets this condition. RBI considers:  Prepayment or extension terms  Leverage agreements  Claim is limited to specified assets or cash flows  Contractually linked instruments
The time value of money is the element of interest that provides consideration for only the passage of time. It does not take into account other risks (credit, liquidity etc.) or costs (administrative etc.) associated with holding a financial asset. In some cases, the time value of money element may be modified (imperfect). This would be the case, for example, if a financial asset’s interest rate is periodically reset but the frequency of that reset does not match the tenor of the interest rate. In this case units must assess the modification as to whether the contractual cash flows still represent solely payments of principal and interest, i.e. the modification term does not significantly alter the cash flows from a perfect benchmark instrument. This assessment is not an accounting policy choice and cannot be avoided simply by concluding that an instrument, in the absence of such an assessment, will be measured at fair value.
A benchmark test is applied for the following main contractual features that can potentially modify the time value of money:  Reset rate frequency does not match interest tenor  Lagging indicator  Smoothing clause  Grace period  Secondary market yield reference
In RBI, a financial asset is measured at amortized cost (AC) if both of the following conditions are met:  The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows.  The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
interest income is calculated based on the net carrying amount. The amortized cost is also adjusted by the expected loss recognized, using the expected loss approach in accordance with IFRS 9, as outlined in the chapter impairment general (IFRS 9).
In RBI, a financial asset is mandatorily measured at fair value if the financial asset is managed neither at amortized cost nor at fair value through other comprehensive income, and if there is no intention to trade and the asset was not voluntarily designated at fair value. Essentially, this concerns securities and loans which do not pass the contractual cash flow characteristics analysis and portfolios of financial assets which are not held for trading, which are managed at fair value and whose performance is assessed.
In RBI, an equity instrument is shown at fair value through other comprehensive income if RBI irrevocably decides to present subsequent changes in fair value in other comprehensive income (OCI). This decision is made on an investment-by-investment basis for each investment and essentially covers strategic interests that are not fully consolidated. In contrast to debt instruments, the gains and losses recorded in other comprehensive income (OCI) are not reclassified to the income statement on sale and no impairments are recorded through profit or loss.
Financial assets and liabilities – held for trading are acquired or incurred principally for the purpose of generating profit from short-term fluctuations in market prices. Securities and derivative financial instruments held-for-trading are recognized at their fair values. If securities are listed, the fair value is based on stock exchange prices. Where such prices are not available, internal prices based on present value calculations for originated financial instruments and futures or option pricing models for options are applied. Present value calculations are based on an interest rate curve which consists of money market rates, future rates and swap rates. Option price formulas Black-Scholes 1972, Black 1976 or Garman-Kohlhagen are applied depending on the kind of option. The measurement for complex options is based on a binominal tree model and Monte Carlo simulations.
Positive fair values (dirty price) are shown under financial assets – held for trading. Negative fair values are shown under financial liabilities – held for trading. Changes in fair value are shown in net trading income. Derivatives held for hedging purposes pursuant to IAS 39 are shown in the statement of financial position under the item hedge accounting. In addition, any liabilities from the short-selling of securities are shown in financial liabilities – held for trading.
Financial assets and financial liabilities – designated fair value through profit/loss
In 2018, as in 2017, observable market prices were used for the valuation of liabilities of subordinated issues measured at fair value. The financial liabilities are mostly structured bonds. The fair value of these financial liabilities is calculated by discounting the contractual cash flows with a credit-risk-adjusted yield curve, which reflects the level at which the Group could issue similar financial instruments at the reporting date. The market risk parameters are evaluated according to similar financial instruments that are held as financial assets. Valuation results for liabilities that are designated as a financial instrument at fair value are recognized in income from derivatives and liabilities.
In accordance with IFRS 9, these financial instruments are measured at fair value. Interest income is shown in net interest income; valuation results and proceeds from disposals are shown in net trading income and fair value result.
Liabilities are predominantly recognized at amortized cost. In addition to interest expense, if there are differences between the amount paid and face value, the effective interest method is used and amounts are shown in net interest income. This category mainly includes customer deposits and securities issues for refinancing purposes.
Relationships between assets/liabilities, measurement criteria and category pursuant to IFRS 9
Assets/liabilities Fair value Amortized cost Other Category according to IFRS 9 Asset classes
Financial assets - fair value through other comprehensive income X FVOCI
The fair value is the price that would be received for the sale of an asset or paid for the transfer of a liability, in an orderly business transaction between market participants on the measurement reference date. This applies irrespective of whether the price is directly observable or has been estimated using a valuation method. In accordance with IFRS 13, RBI uses the following hierarchy to determine and report the fair value for financial instruments.
A financial asset is derecognized when the contractual rights to the cash flows arising from a financial asset have expired, when the Group has transferred the rights to the cash flows, or if the Group has the obligation, in case that certain criteria occur, to transfer the cash flows to one or more receivers. A transferred asset is also derecognized if all material risks and rewards of ownership of the assets are transferred. The Group has in place a write-off policy based on the principle that the bank being the creditor of loans does not expect any recovery/payment either on the entire exposure (full write-off) or on a part of the exposure (partial write-off). Furthermore the loans have to be either fully impaired in amount of the entire exposure or, in case of collateralized loans, they are impaired in the extent not being collateralized. Further information on write-offs is provided in (35) Expected loan defaults.
RBI securitizes various financial assets from transactions with retail and commercial customers by placing risks from these financial assets and transferring them to special purpose vehicles (SPV) or structured entities (SE) that issue securities to investors. The assets transferred may be derecognized fully or partly, or be reflected in the form of a transfer of risks in the existence of portfolio guarantees received. Rights to securitized financial assets can be retained in the form of senior or subordinated tranches, interest claims or other residual claims (retained rights).
The Group derecognizes a financial liability if the obligations of the Group have been paid, expired or revoked. The income or expense from the repurchase of own liabilities is shown in the notes under (6) Other net operating income. The repurchase of own bonds also falls under derecognition of financial liabilities. Differences on repurchase between the carrying value of the liability (including premiums and discounts) and the purchase price are reported in the income statement in other net operating income.
Reclassification is only possible for financial assets, not for financial liabilities, In RBI a change in the measurement category is only possible if there is a change in the business model used to manage a financial asset. Reclassification is then mandatory in such cases. Such changes must be determined by the Management Board and be significant for corporate activities. If such reclassification is necessary, this must be effected prospectively from the date of reclassification and approved by the RBI Management Board.
Derivative instruments held to hedge the fair values of individual items in the statement of financial position (except trading derivatives ) are recognized at their fair values (dirty prices) under the item hedge accounting (for assets: positive dirty prices; for liabilities: negative dirty prices). Changes in the carrying amounts of hedged items (assets or liabilities) are allocated directly to the corresponding items of the statement of financial position and reported separately in the notes.
 POCI: Purchased or originated credit-impaired assets are financial assets which were already impaired at the time of initial recognition. On initial recognition, the asset is recorded at fair value without any impairment, using an effective interest rate that is adjusted for creditworthiness. The impairment recognized in subsequent periods equals the cumulative change in the lifetime expected credit loss of the financial instrument since the initial recognition in the statement of financial position. This remains the basis for measurement, even if the value of the financial instrument has risen.
The recognition and measurement principles for calculating expected credit losses are set out in the notes under (35) Expected credit losses in the chapter determination of expected credit losses. The recognition and measurement principles for determining a significant increase in the credit risk are set out under (35) Expected credit losses in the chapter significant increase in the credit risk. The expected credit losses are measured on either a collective or individual basis. The requirements for collective measurement are set out under (35) Expected credit losses in the section shared credit risk characteristics.
 Exposure at default (EAD): The exposure at default is the amount which RBI expects to be owed at the time of default, over the next twelve months or over the entire lifetime.
As a rule, the risk parameters specific to IFRS 9 are estimated not only on historical default information but also, in particular, on the current economic environment (point-in-time perspective) and forward-looking information. This assessment primarily involves regularly reviewing the effects which the bank’s macroeconomic forecasts will have regarding the amount of the ECL, and including these effects in the determination of the ECL. A baseline scenario is used for this purpose which relies on the respective applicable consensus (forecasts of Raiffeisen Research on significant macroeconomic factors, such as real GDP, unemployment rate, reference interest rates and Information about the currently assumed state of the credit cycle). This baseline scenario is then supplemented with additional macroeconomic parameters that are relevant for the model. Other risks which cannot be depicted in the standard model and the related expected losses are also taken into account.
Further details on forward-looking information are provided in (35) Expected credit losses in the chapter forward-looking information.
In order to mitigate credit risks for financial assets, RBI endeavors to use collateral wherever possible. This collateral can take different forms, such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories and other non-financial assets and credit improvements such as netting agreements. The accounting principles for collateral remain unchanged compared
In a genuine sale and repurchase transaction, RBI sells assets to a third party and agrees at the same time to repurchase these assets at an agreed price and time. The assets remain on RBI’s statement of financial position and are measured according to the standards applied to the item in the statement of financial position under which they are shown. The securities are not derecognized since all the risks and rewards of RBI associated with the ownership of the repurchased securities are retained. Cash inflows arising from a sale and repurchase transaction are recognized in the statement of financial position as financial liabilities – amortized cost.
If RBI holds assets under a finance lease as lessee, these are shown under the relevant tangible fixed asset item, which corresponds to a lease liability. Interest expenditure is reported under net interest income.
Under reverse repurchase agreements, assets are acquired by RBI with the obligation to sell them in the future. The purchased securities on which the financial transaction is based are not reported in RBI’s statement of financial position and accordingly not measured. Cash outflows arising from reverse repurchase agreements are recorded in the statement of financial position under the item financial assets – amortized cost.
When nearly all the risks and rewards of a leased asset are transferred to the lessee, RBI as lessor recognizes a loan under the item financial assets – amortized cost. The loan amount is the amount of the net investment. The income from the finance lease is spread over periods in such a way as to represent a constant periodic rate of interest on the outstanding net investment in the leases. Interest income is reported under net interest income.
An operating lease exists when the risks and rewards of ownership remain with the lessor. The leased assets are allocated to RBI under the item tangible fixed assets and depreciated in accordance with the principles applicable to the type of fixed assets. Rental income from the corresponding lease object is spread on a straight-line basis over the term of the leasing contract and reported in other net operating income. Expenses for operating leases are generally amortized on a straight-line basis over the term of the leasing contract and reported as administrative expenses.
Similar to subsidiaries, consolidation of structured entities is necessary, if the Group has control over the entity. In the Group, the need to consolidate structured entities is reviewed as part of the securitization transaction process, where the structured entity is either formed by the Group with or without participation of third parties, or, in which the Group with or without participation of third parties enters into contractual relationships with already existing structured entities. Whether an entity should be consolidated or not is reviewed at least quarterly. All fully consolidated structured entities and interests in non-consolidated structured entities are to be found in the notes under (65) Group composition.
Intra-group income and expenses are also eliminated and temporary differences resulting from bank business transactions are included partly in net interest income and partly in net trading income. Other differences are shown in the item other net operating income.
An associated company is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of an entity in which shares are held. No control or joint management of decision making processes exists. As a rule, significant influence is assumed if the Group holds 20 to 50 per cent of the voting rights. When judging whether the Group has the ability to exert a significant influence on another entity, the existence and the effect of potential voting rights which are actually usable or convertible are taken into account. Further parameters for judging significant influence are, for example, the representation in executive committees and supervisory boards (Supervisory Board in Austrian Joint Stock companies) of the entity and material business transactions with the entity. Shares in associated companies are valued at equity and shown in the statement of financial position under the item investments in subsidiaries and associates under the sub-item investments accounted for at equity.
to the actual date of disposal. The Group reviews the adequacy of previous decisions on which companies to consolidate at least every quarter. Accordingly, any organizational changes are immediately taken into account. Apart from changes in ownership, these also include any changes to the Group’s existing contractual arrangements or new contractual arrangements with a unit.
In debt consolidation, intra-group loans and liabilities are eliminated. Remaining temporary differences are recognized under the items other assets/other liabilities in the consolidated statement of financial position.
Intra-group results are eliminated insofar as they have a material effect on the income statement items. Transactions between Group members are executed on an arm's length basis.
the other comprehensive income statement of RBI. This is especially relevant for valuation effects seen from financial assets availablefor -sale.
Adjustments to the measurement or additional recognition of further assets and liabilities in order to reflect information about facts and circumstances which already existed at the time of acquisition are corrected retrospectively within the measurement period and posted accordingly against goodwill. The measurement period may not exceed one year from the date of acquisition.
Shareholdings in subsidiaries not included in the consolidated financial statements because of their minor significance, and shareholdings in associated companies that are not valued at equity are shown in investments in subsidiaries and associates under the sub-item investments in affiliated companies.
The land and buildings as well as office furniture and equipment reported under tangible fixed assets are measured at cost of acquisition or conversion less depreciation. Depreciation is recorded under the item general administrative expenses.
The straight-line method is used for depreciation and is based on the following useful life figures: Useful life Years
This is property that is held to earn rental income and/or for capital appreciation. Investment property is reported at amortized cost using the cost model permitted by IAS 40 and is shown under tangible fixed assets because of minor importance. Straight line depreciation is applied on the basis of useful life. The normal useful life of investment property is identical to that of buildings recognized under tangible fixed assets. Depreciation is recorded under the item general administrative expenses.
Non-current assets and disposal groups classified as held for sale are valued at the lower amount of their original carrying value or fair value less costs to sell and are reported under other assets. Income from non-current assets held for sale and discontinued operations is reported in the other result. If the impairment expense of the discontinued operations exceeds the carrying value of the assets which fall under the scope of IFRS 5 (Measurement), there is no special provision in the IFRS on how to deal with this difference. This difference is recognized in the item provisions for onerous contracts in the statement of financial position.
Details on assets held for sale pursuant to IFRS 5 are included in the notes under (22) Other assets.
Provisions are recognized when the Group has a present obligation from a past event, where it is likely that it will be obliged to settle, and a reliable estimate of the amount is possible. The level of provisions is the best possible estimate of expected outflow of economic benefits at the reporting date while taking into account the risks and uncertainties underlying the commitment to fulfill the obligation. If a provision is formed based on cash flows estimated to fulfill an obligation, the cash flows must be discounted if the interest effect is material.
These types of provision are reported in the statement of financial position under the item provisions for liabilities and charges. Allocation to the various types of provision is booked through different line items in the income statement depending on the nature of the provision. Allocation of loan loss provisions for contingent liabilities is recorded in the income statement under the line item impairment losses on financial assets. Restructuring provisioning, provisioning for legal risks and other employee benefits are recorded in general administrative expenses. Provision allocations that are not assigned to a corresponding general administrative expense are as a matter of principle booked against other net operating income.
As of the financial year 2011, the following general and specific principles for the allocation, the claim and the payment of variable remuneration (including the payment of the deferred portion of the bonus) for board members of RBI AG and certain Group units and identified staff (risk personnel) are applied:  60 per cent for especially high amounts and 40 per cent of the annual bonus respectively will be paid out on a proportional basis as 50 per cent cash immediately (up-front), and 50 per cent through a phantom share plan (see details below), which will pay out after a holding period (retention period) of one year.
These rules are valid unless any applicable local laws prescribe a different procedure (e.g. Czech Republic, Poland).
The number of ordinary shares of RBI AG which ultimately will be transferred depended on the achievement of two performance criteria: the targeted return on equity (ROE) and the performance of the shares of RBI AG compared to the total shareholder return of the shares of companies in the DJ EURO STOXX Banks index after a five-year holding period.
Liabilities arising from insurance contracts change depending on changes in interest rates, income from investments and expenses for pension agreements for which future mortality rates cannot be reliably predicted. IFRS 4 must be applied to the reporting of liabilities resulting from the existence of mortality rate risks and discretionary participation features. All assets associated with pension products are reported in accordance with IFRS 9. Liabilities are recorded under other liabilities. Please refer to the notes under (29) Other liabilities for more information on insurance contracts.
Information on capital management, regulatory capital and risk-weighted assets is disclosed in the notes under (70) Capital management and total capital according to CCR/CRD IV and Austrian Banking Act (BWG).
If the lease agreement was classified under IAS 17 as a finance lease, RBI takes over the carrying amount of a leased asset as a right-of-use asset and the carrying amount of a leased liability as the carrying amount of the new leased liability.
If RBI is lessor, no specific transitional provisions apply. Consequently, no adjustments of the values are made at the time of transfer. The existing values are continued from the time of first application in accordance with the rules of IFRS 16.
If subleases exist (i.e. intragroup lease agreements), the sub-lessor must, for all subleases classified as operating leases, examine whether an operating lease or a finance lease applies pursuant to IFRS 16. For subleases which were accounted for as operating leases in accordance with IAS 17 but which are classified as finance leases under the rules of IFRS 16, the sub-lessor must account for the leases in the same way as for a new finance lease contract concluded as at that date.
The application of these amendments is not expected to have any significant impact on the consolidated financial statements of RBI.
The amendments clarify that an entity is obliged to apply IFRS 9 Financial Instruments including its impairment provisions to longterm interests in associates or joint ventures that form part of the net investment in the associate or joint venture but to which the equity method is not applied. The application of IFRS 9 thus takes precedence over the application of IAS 28. The application of this amendment is not expected to have any significant impact on the consolidated financial statements of RBI.
Amendment to IAS 19 (Plan amendments, curtailments, and settlements; entry into force 1 January 2019)
Amendment to the conceptual framework for IFRS (entry into force 1 January 2020)
Amendments to IFRS 10/IAS 28 (Sale or contribution of assets between an investor and its associate or joint venture)
Recoverability of loans and advances to customers reported under financial assets – amortized cost
As of the Balance Sheet date, impairments of EUR 2.4 billion were recognized for the above loans. They comprised EUR 1.3 billion for non-financial corporates and EUR 1.1 billion for households.
The Management Board describes the processes of monitoring credit risk and the procedures for determining impairments in note 35 Expected credit losses and the Risk Report and Recognition and Measurement Principles chapters in the notes of the Financial Statements. The impact of the transition from IAS 39 to IFRS 9 as at 1 January 2018 is described in the section on IFRS 9 transition in the notes.
Loans and advances to customers are reported under financial assets – amortized cost in the amount of EUR 73.0 billion in the statement of financial position. They comprise EUR 42.0 billion in loans and advances to non-financial corporations and EUR 31.0 billion in loans and advances to households.
As part of the credit risk monitoring process, the bank checks whether there is an indication of default and therefore whether an individual impairment (stage 3) is required. The calculation of impairments for defaulted, individually significant customers is based on an analysis of the expected scenario-weighted future cash flows. This analysis is influenced by the assessment of the respective customer’s economic situation and development, the estimate of collateral values and the estimated amount and timing of cash flows derived from the analysis. For defaulted, individually insignificant customers in the households segment, impairment is determined according to the so-called best estimate of expected loss model. This represents a best estimate of expected loss based on statistical evidence.
The determination of ECL requires the use of estimates and assumptions. These cover rating-based probabilities of default and loss ratios, which take account of current and forward-looking information.
We have evaluated the documentation that describes the process of loan issuance, loan monitoring and recognizing impairments and assessed whether the processes adequately identify an impending credit default and ensure that valuations of loans and advances to customers are recognized at their appropriate carrying value. In addition, we tested the processes and, with the assistance of IT specialists, essential key controls. We thereby tested their design, implementation and effectiveness.
With regard to defaulted loans to customers (ECL stage 3), we used a sample based approach to determine whether there is an indication for a default. The method applied to select the sample is on the one hand risk-oriented, based on customer ratings and on the other hand a random sample. For defaults, on the basis of gross exposure, we critically assessed the bank’s estimates regarding the amount and timing of future cash flows, including those resulting from realization of collateral, and whether the bank’s assessment was in line with the internal and external information available. With regard to the internal collateral valuation, we assessed on a sample basis, together with our valuation specialists, whether the estimates used in the models were adequate and in line with available market data.
Finally we asssessed whether the disclosures in the notes to the Financial Statements regarding the calculation of impairments on loans and advances to customers were appropriate, including the corresponding disclosures on the transition effect to IFRS 9 as of 1 January 2018.
The Board describes the process of calculating the fair value of these financial liabilities that are measured at fair value within note 24 and the Recognition and Measurement Principles chapter in the notes of the Financial Statements.
The fair value calculation of debt securities issued and other financial liabilities for which no market price is available is based on an internal valuation model. The fair value is determined using a Discounted Cash Flow Model applying estimated credit spreads. The credit spreads used in the model are derived from available market data.
We have analyzed the documentation that describes the process of issuance, valuation and risk and limit monitoring of liabilities measured at fair value. The design and implementation of essential controls in the processes were critically assessed and the effectiveness of these controls was tested.
We involved valuation specialists to assess the fair value models used by the Group. Further, we compared the data inputs to this model to the available market data to determine whether the data input lies within a reasonable range in comparison to the available market data. Based on the documentation obtained, we assessed whether the derived credit spread curve was adequate for determining the fair value of the financial liabilities. We tested whether the fair values calculation was appropriate on a sample basis.
Finally, we assessed whether the disclosures in the notes regarding the financial liabilities at fair value were appropriate and complete.
Moreover:  We identify and assess the risks of material misstatement in the consolidated financial statements, whether due to fraud or error, we design and perform audit procedures responsive to those risks and obtain sufficient and appropriate audit evidence to serve as a basis for our audit opinion. The risk of not detecting material misstatements resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misprepresentations or override of internal control.
Our opinion on the consolidated financial statements does not cover other information and we do not provide any assurance thereon.
This report is a translation of the original report in German, which is solely valid.
Member of the Management Board responsible for Group Competence Center for Capital Markets Corporate & Retail Sales, Group
Chief Executive Officer responsible for Chairman’s Office, Group Communications, Group Compliance, Group Executive Office, Group Governmental & Public Affairs, Group Human Resources, Group Internal Audit, Group Marketing, Group Participations, Group Regulatory Affairs, Group
Risk-weighted assets (RWA credit risk) – The sum of the weighted accounts receivable including receivables in the form of items on and off the statement of financial position and CVA (Credit Value Adjustment) risk.
Risk-weighted assets (total RWA) – Risk-weighted assets (credit risk, CVA risk) including market risk and operational risk.
Alternative Performance Measures (APM) The Group uses alternative performance measures in its financial reporting, not defined by IFRS or CRR regulations, to describe RBI Group's financial position and performance. These should not be viewed in isolation, but treated as sup-plementary information.
For the purpose of the analysis and description of the performance and the financial position these ratios are commonly used within the financial industry. The special items used below to calculate some alternative performance measures arise from the nature of Group’s business, i.e. that of a universal banking group. However it is to mention that the defini-tions mostly vary between companies. Please find the definitions of these ratios below.
Cost/income ratio –is an economic metric and shows the company’s costs in relation to its income. The ratio gives a clear view of operational efficiency. Banks use the cost/income ratio as an efficiency measure for steering the bank and for easily comparing its efficiency with other financial institutions. General administrative expenses in relation to operating income are calculated for the cost/income ratio. General administrative expenses comprise staff expenses, other administrative expenses and depreciation/amortization of intangible and tangible fixed assets. Operating income com-prises net interest income, dividend income, net fee and commission income, net trading income and fair value result, net gains/losses from hedge accounting and other net operating income.
Loan/deposit ratio – indicates a bank's ability to refinance its loans by deposits rather than wholesale funding. It is calculated with loans to non-financial corporations and households in relation to deposits from non-financial corporations and households.
NPE – Non-performing exposure. It contains all non-performing loans and debt securities according to the applicable definition of the EBA document Implementing Technical Standards (ITS) on Supervisory Reporting (Forbearance and non-performing exposures) and comprises all defaulted non-performing loans and debt securities and non-defaulted non-performing loans and debt securities (exposures without grounds for default pursuant to Article 178 CRR).
NPL – Defaulted, non-performing loans. A default and thus a non-performing loan pursuant to Article 178 CRR applies if it can be assumed that a customer is unlikely to fulfill all of its credit obligations to the bank, or if the debtor is overdue at least 90 days on any material credit obligation to the bank (for non-retail customers, twelve indicators are used to identify a default event).
NPL ratio (non-banks) – is an economic ratio to demonstrate the proportion of loans that have been classified as defaulted non-performing in relation to the entire customer loan portfolio (gross carrying amount). The definition of non-performing has been adopted from regulatory standards and guidelines and comprises in general those customers where repayment is doubtful, a realization of collaterals is expected and which thus have been moved to a defaulted customer rating segment. The ratio reflects the quality of the loan portfolio of the bank and provides an indicator for the performance of the bank’s credit risk management.
Albania Raiffeisen Bank Sh.A. “European Trade Center” Bulevardi “Bajram Curri” 1000 Tirana
Bulgaria Raiffeisenbank (Bulgaria) EAD 55 Nikola I. Vaptzarov Blvd. Business Center EXPO 2000 PHAZE III 1407 Sofia Phone: +359-2-91 985 101 Fax: +359-2-94 345 28 SWIFT/BIC: RZBBBGSF www.rbb.bg
Albania Raiffeisen Leasing Sh.a. “European Trade Center” Bulevardi “Bajram Curri” 1000 Tirana www.raiffeisen-leasing.al
Croatia Raiffeisen Leasing d.o.o. Radnicka cesta 43 10000 Zagreb Phone: +385-1-65 9-5000 Fax: +385-1-65 9-5050 www.raiffeisen-leasing.hr
Russia OOO Raiffeisen-Leasing Smolenskaya-Sennaya 28 119121 Moscow Phone: +7-495-72 1-9980 Fax: +7-495-72 1-9901 www.raiffeisen-leasing.ru
Slovenia Raiffeisen Leasing d.o.o. Letališka cesta 29a 1000 Ljubljana Phone: +386-1-241-6250 Fax: +386-1-241-6268 www.raiffeisen-leasing.si
Ukraine LLC Raiffeisen Leasing Aval Stepan Bandera av. 9 Build. 6 Office 6-201 04073 Kiev Phone: +380-44-590 24 90 Fax: +380-44-200 04 08 www.rla.com.ua
China RBI Beijing Branch Beijing International Club Suite 200 2nd Floor Jianguomenwai Dajie 21 100020 Beijing Phone: +86-10-65 32-3388 Fax: +86-10-65 32-5926
Korea RBI Representative Office Korea #1809 Le Meilleur Jongno Town 24 Jongno 1ga Seoul 110-888 Republic of Korea Phone: +82-2-72 5-7951 Fax: +82-2-72 5-7988
Singapore RBI Singapore Branch 50 Raffles Place #31-03 Singapore Land Tower Singapore 048623 Phone: +65-63 05-6000 Fax: +65-63 05-6001
Raiffeisen Bausparkasse Gesellschaft m.b.H. Mooslackengasse 12 1190 Vienna Phone: +43-1-54 646-0 www.bausparen.at
Raiffeisen Factor Bank AG Mooslackengasse 12 1190 Vienna Phone: +43-1-21 974-57 www.raiffeisen-factorbank.at
Valida Holding AG Mooslackengasse 12 1190 Vienna Phone: +43-1-31 648-0 www.valida.at
For Group Communications inquiries Phone: +43-1-71 707-1298 E-mail: communications@rbinternational.com Internet: www.rbinternational.com → Public Relations