The Going Concern report shows the structural liquidity position. It covers all material risk drivers which might affect the Group in a business as usual scenario. The results of the going concern scenario are shown in the following table. It illustrates excess liquidity and the ratio of expected cash inflows plus counterbalancing capacity to cash outflows (liquidity ratio) for selected maturities on a cumulative basis. Based on assumptions employing expert opinions, statistical analyses and country specifics, this calculation also incorporates estimates of the stability of the customer deposit base, outflows from items off the statement of financial position and downward market movements in relation to positions which influence the liquidity counterbalancing capacity.
in € thousand 2019 2018 Maturity 1 month 1 year 1 month 1 year
The RBI Group is involved in various legal, governmental or arbitration proceedings before various courts and governmental agencies mainly arising in the ordinary course of business and involving contractual, labor and other matters. There is also a tendency, particularly in the aftermaths of financial market and economic crisis, towards more aggressive behavior on the part of contracting parties in the context of legal or other disputes. This also applies to credit institutions with whom an agreement could be reached in the past as well as to credit institutions with whom RBI maintains business relationships in connection with syndicated loan facilities where it acts, inter alia, as co-manager or agent.
A provision is only recognized if there is a legal or constructive obligation as a result of a past event, payment is likely and the amount can be reliably estimated. A contingent liability that arises from a past event is disclosed unless payment is highly unlikely. A contingent asset that arises from a past event is reported if there is high probability of occurance. In no instance in the description that follows is an amount stated in which, in accordance with IAS 37, this would be severely detrimental. In some cases, provisions are measured on a portfolio basis because this results in the obligation being estimated with greater reliability. RBI has grouped its provisions, contingent assets and contingent liabilities under the headings of consumer protection, banking business, regulatory enforcement and tax litigation.
In Poland, a significant number of civil lawsuits are pending in relation to certain contractual stipulations connected with consumer mortgage loans denominated in or indexed to foreign currencies. In this connection, a Polish court requested the European Court of Justice (ECJ) for clarification whether certain clauses in these agreements breach European law and are unfair. The ECJ’s preliminary ruling of 3 October 2019 does not answer whether the loan agreements are invalid in whole or part but merely gives interpretative guidance on the principles according to which the national courts must decide in each individual case. According to this, a loan agreement without unfair terms should remain valid provided, that it is in conformity with national law. If a loan agreement cannot remain valid without the unfair term, the entire contract would have to be annulled. If the annulment of the entire contract triggers material negative consequences for the borrower, the Polish courts can replace the unfair term by a valid term in accordance with national law. The consequences of the contract being annulled must be carefully examined so that the borrower can consider all potential negative consequences of annulment. However, the consequences of canceling an annulled loan agreement remain unclear and may be serious for the borrower, for example due to the obligation to repay the loan immediately including the costs of using the loan amount. It remains to be seen how the principles developed by the ECJ will be applied under national law on a case-by-case basis.
The impact assessment in relation to affected loan agreements indexed to or denominated in a foreign currency may also be influenced by investigations initiated against RBI’s Polish branch by the President of the Office of Competition and Consumer Protection (UOKiK). The object of the proceedings is certain standard clauses in foreign currency loan agreements and a related practice which allegedly may have been contrary to the collective interests of consumers.
The Romanian subsidiary is confronted with a number of individual lawsuits and a lawsuit filed by the consumer protection authority for the use of unfair loan clauses. The clauses relate to administration fees and interest change clauses. € 4,233 thousand in compensation was paid out in this connection up to 2018. For the approximately 1,400 remaining cases, a provision has been recognized for further estimated losses of € 14,160 thousand calculated in scenario analysis.
RBI and its subsidiaries provide services for corporate customers that increase litigation risk at operating level. The most important cases are as follows: Following the insolvency of Alpine Holding GmbH (Alpine) in 2013, a number of lawsuits were filed by retail investors in Austria against RBI and another credit institution in connection with a bond which had been issued by Alpine in 2012 in an aggregate principal amount of € 100 million. The claims against RBI, filed either directly, by investors or in a class action, amount to approximately € 10 million of value in dispute. Among other things, it is claimed that the banks acted as joint lead managers of the bond issue and were or at least should have been aware of the financial problems of Alpine at the time of the issue. Thus, they should have known that Alpine was not in a position to redeem the bonds as set forth in the terms and conditions of the bonds. It is alleged that the capital market prospectus in relation to the bond issue was misleading and incomplete and that the joint lead managers including RBI, which were also involved in the preparation of the prospectus, were aware of that fact.
RBI was served with a lawsuit by the Romanian Ministry of Traffic against RBI and Banca de Export Import a Romaniei Eximbank SA (EximBank) regarding payment of € 10 million in May 2017. According to the lawsuit, in the year 2013, RBI issued a letter of credit on the amount of € 10 million for the benefit of the Romanian Ministry of Traffic at the request of a Romanian customer of Romanian Network Bank Raiffeisen Bank S.A., Bucharest, which is indirectly owned by RBI. EximBank acted as advising bank of RBI in Romania. The Romanian Ministry of Traffic had sent a payment request under the mentioned letter of credit in March 2014 which had been denied by RBI as having been received after termination date thereof. In April 2018, the lawsuit was rejected as unfounded by the court of first instance, which was confirmed by the Bucharest Court of Appeal in October 2019.
Furthermore, a Cypriot company (the Cypriot claimant) filed a separate action for damages in the amount of approximately € 43.1 million. In January 2016, the Cypriot claimant filed a petition for increasing the claimed amount by € 84 million and the court approved this petition. It means that the total claimed amount in this lawsuit is approximately € 127 million. This lawsuit is connected with the proceeding of the Slovak claimant above because the Cypriot claimant having filed the action had acquired the claim from a shareholder of the holding company of the Slovak claimant. The matter of the claim is the same as in the proceeding above. According to the Cypriot claimant, this had caused damage to the Slovak claimant and, thus, also to the shareholder of the holding company in the form of a loss of value of its shares. Subsequently, said shareholder assigned his claim to the Cypriot claimant. The Cypriot claimant claims that Tatra banka acted contrary to the good morals as well as contrary to fair business conduct and requires Tatra banka to pay part of its claims corresponding to the loss in value of the holding company’s shares.
In 2015, a former client of RBHR launched a claim for damages in the amount of approximately HRK 181 million (€ 24 million) based on the allegation that RBHR had acted fraudulently by terminating loans, which had been granted for the financing of the client’s hotel business, without justification. In previous court proceedings in respect of the termination of the loans as well as the enforcement over the real estate, all final judgments were in favor of RBHR. Several hearings were held as well as submissions exchanged. So far, no ruling has been passed.
From 2014 onwards, a group of former clients of RBHR launched several claims for damages in the amount of approximately HRK 120.7 million (€ 16 million) based on the allegation that RBHR had acted fraudulently by terminating and collecting loans. In some of the court proceedings the final court decisions were issued by which the claims (in the amount of approximately HRK 20 million (€ 3 million) were declined.
In September 2018, two administrative fines of total PLN 55 million (€ 13 million) were imposed on RBPL in the course of administrative proceedings based on alleged non-performance of the duties as the depositary and liquidator of certain investment funds. RBPL as custodian of investment funds assumed the role as liquidator of certain funds in spring 2018. According to the interpretation of the Polish Financial Supervision Authority (PFSA) RBPL failed to comply with certain obligations in its function as depository bank and liquidator of the funds. In the course of the transactions related to the sale of RBPL, the responsibility for said administrative proceedings and related fines was assumed by RBI. RBI filed appeals against these fines in their entirety. In September 2019, in relation to the PLN 5 million (€ 1 million) fine regarding RBPL’s duties as depositary bank, the Voivodship Administrative Court approved RBI’s appeal and overturned the PFSA’s decision entirely. However, the PFSA appealed such decision. In relation to the PLN 50 million (€ 12 million) fine regarding RBPL’s function as liquidator, the Voivodship Administrative Court decided to dismiss the appeal and uphold the PFSA decision entirely. RBI has raised appeal to the Supreme Administrative Court because it takes the view that RBPL has duly complied with all its duties.
RBI is or is expected to be involved in various tax audits, tax reviews and tax proceedings. RBI is involved in the following significant tax proceedings, among others: A provision for pending legal and tax litigation in the amount of € 27 million was recognized for German property transfer tax resulting from corporate reorganizations in previous years. This related to the merger of Raiffeisen Zentralbank and RBI AG in 2017 and to the acquisition of shares in Raiffeisen Leasing Group in 2012 and 2013. Interest on arrears and contractual penalties may also be incurred.
In connection with loan sales, assessments by the tax authorities in Romania could result in an exceptional tax burden of approximately € 33 million plus approximately € 22 million in penalty payments. The Romanian subsidiary bank considers the probability of occurrence to be very small.
In the vast majority of the aforementioned amounts, the decision of the respective tax authorities is or will be challenged.
Several Institutional Protection Schemes (IPS) have been set up in the Austrian Raiffeisen Banking Group since the end of 2013. To this end, contractual or statutory liability arrangements have been concluded which protect the participating institutions and, in particular, ensure their liquidity and solvency if required. These Institutional Protection Schemes are based on uniform and joint risk monitoring as part of an early warning system pursuant to Article 113 (7) of the Capital Requirements Regulation of the European Union (CRR). In line with RBG’s organizational structure, the IPS were also designed in two stages (currently one federal IPS and six regional IPS).
As RBG’s central institution, RBI AG is a member of the federal IPS whose members, in addition to the regional Raiffeisen banks, include: Raiffeisen-Holding Niederösterreich-Wien reg GmbH, Vienna, Posojilnica Bank eGen, Klagenfurt, Raiffeisen Wohnbaubank AG, Vienna, and Raiffeisen Bausparkasse Gesellschaft m.b.H., Vienna. A regional IPS was also set up in six federal states.
Fiduciary business not recognized in the statement of financial position was concluded with the following volumes on the reporting date: Loans to customers 219,330 224,240
Other fiduciary liabilities 7,163 9,409 1 Previous-year figures adjusted; reclassification to managed funds
The following table contains the funds managed by the Group: Retail investment funds 25,281,762 21,343,391
Assets under finance leases break down as follows: Real estate leasing 964,734 1,042,184
The following table shows the maturity analysis of lease receivables to be received after the reporting date: Gross investment value 3,557,266 3,312,016
Assets under operating leases (including unleased parts) break down as follows: Real estate leasing 153,999 153,564
The following table shows the maturity analysis of lease receivables to be received after the reporting date: More than 1 year, up to 5 years 89,361 47,753
The following table shows the development of right-of-use assets and related accumulated depreciation.
Number of employees as of reporting date 1 Current income from investments in associates, which was previously presented in the other result item, is now presented under operating income.
Assets and liabilities with counterparties outside Austria pursuant to Section 64 (1) 2 of the Austrian Banking Act (BWG) were as follows: (62) Volume of the securities trading book
Transactions with related parties (companies and individuals) are limited to banking business transactions that are carried out at fair market conditions. Disclosures on related parties (individuals) are reported under (67) Relations to key management.
Loan commitments, financial guarantees and other commitments received 6,754 0 29,766 0
Loan commitments, financial guarantees and other commitments received 19,589 124 30,883 23,806 in € thousand
Key management refers to the members of the Management Board and the Supervisory Board of RBI AG. Transactions between key management and RBI are as follows (resprective fair values): The following table shows transactions of related parties of key management to RBI: There is no compensation agreed between the company and members of the Management Board and Supervisory Board or employees in the case of a takeover bid.
The following table shows total remuneration of the members of the Management Board according to IAS 24.17. The expenses according to IAS 24 were recognized on an accrual basis and according to the rules of the underlying standards (IAS 19 and IFRS 2): Short-term employee benefits 9,861 9,054
Other long-term benefits contain portions of the provision for bonus payments relating to deferred bonus portions in cash and retained portions payable in instruments. For the latter, valuation changes due to currency fluctuations are taken into account.
Bonus calculation is linked to the achievement of annually agreed objectives. These comprise four or five categories covering specific targets and financial targets adapted to the respective function. These are, for example, profit after tax in a particular segment, return on risk adjusted capital (RORAC), total costs, risk-weighted assets, customer-oriented and employee-oriented targets, as well as process-based, efficiency-based, and infrastructure targets, and if necessary other additional targets.
The bonus level is determined by the level of the return on equity and the cost/income ratio, whereby the target values to be achieved reflect the so-called strategic targets for the return on equity an the cost/income ratio at RBI level.
Remuneration Supervisory Board 1,069 1,060 1 Adjustment of the previous year’s figure (€ 965 thousand) to the remuneration actually paid
In the 2019 financial year, no contracts subject to approval within the meaning of Section 95 (5) 12 of the Austrian Stock Corporation Act (AktG) were concluded with members of the Supervisory Board.
The Annual General Meeting held on 21 June 2018 passed a resolution to grant remuneration to the Advisory Council members for their work. It was decided to distribute the remuneration as follows: Chairman € 25 thousand, Deputy Chairman € 20 thousand, each additional member € 15 thousand, plus attendance fees.
February 2020. The Management Board areas of responsibility will be reorganized in a way that aims to exploit opportunities to streamline the organization.
Suanne Unger2 16 February 2012 Until further notice 1 Effective as of 10 October 2010. 2 Delegated by the Staff Council
Included for the first time in the financial period 4 9
Anton Proksch Institut Kalksburg RBI Immobilien Leasing GmbH, Vienna (AT) 75.0% 1/12 Materiality
Adiantum Immobilienleasing GmbH & Co. Projekt Schillerhöhe Weimar KG, Eschborn (DE) 5,000 EUR 6.0% FI
Raiffeisen Leasing d.o.o., Ljubljana (SI) 3,738,107 EUR 100.0% FI 1 Less own shares 2 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financial holding, FI Financial institution, OT Other companies, VV Insurance, SC
RBI eins Leasing Holding GmbH, Vienna (AT) 35,000 EUR 75.0% FI 1 Less own shares 2 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financial holding, FI Financial institution, OT Other companies, VV Insurance, SC
Sky Tower Immobilien- und Verwaltung Kft, Budapest (HU) 43,000 HUF 100.0% OT
Unterinntaler Raiffeisen-Leasing GmbH & Co KG, Vienna (AT) 36,336 EUR 100.0% FI
URSA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI 1 Less own shares 2 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financial holding, FI Financial institution, OT Other companies, VV Insurance, SC
The following tables show the carrying amounts of the financial assets and the financial liabilities to non-consolidated structured entities broken down by type of structured entity. The carrying amounts presented below do not reflect the true variability of returns faced by the Group as they do not take into account the effects of collateral or hedges.
The Group engages in various business activities with structured entities which are designed to achieve a specific business purpose. A structured entity is one that has been set up so that any voting rights or similar rights are not the dominant factor in deciding who controls the entity. An example is when voting rights relate only to administrative tasks and the relevant activities are directed by contractual arrangements.
Raiffeisen Informatik GmbH & Co KG, Vienna (AT) 1,460,000 EUR 47.6% BR
"Am Hafen" Sutterlüty GmbH & Co, Vienna (AT) 100,000 EUR <0.1% FI
Abakus Immobilienleasing GmbH & Co Projekt Leese KG, Eschborn (DE) 5,000 EUR 6.0% OT
HERA Raiffeisen Immobilien Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% OT
Körlog Logistika Építö és Kivitelezö Korlátolt Feleösségü Társaság, Budapest (HU) 11,077 EUR 100.0% OT
Raiffeisen Invest Drustvo za upravljanje fondovima d.d. Sarajevo, Sarajevo (BA) 671,160 BAM 100.0% FI
RIRBRO ESTATE MANAGEMENT S.R.L., Bucharest (RO) 1,000 RON 100.0% BR 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financial holding, FI Financial institution, OT Other companies, VV Insurance,
Accession Mezzanine Capital II L.P. in liquidation, Bermuda (BM) 2,613 EUR 5.7% OT
Bad Sauerbrunn Thermalwasser Nutzungs- und Verwertungs GmbH., Bad Sauerbrunn (AT) 36,336 EUR 50.0% OT
GELDSERVICE AUSTRIA Logistik für Wertgestionierung und Transportkoordination G.m.b.H., Vienna (AT) 3,336,336 EUR 0.2% OT
NÖ. HYPO Leasing und Raiffeisen-Immobilien-Leasing Traisenhaus GesmbH & Co OG, St. Pölten (AT) 24,868,540 ATS 50.0% FI
OJSC NBFI Single Settlement and Information Space, Minsk (BY) 23,429,095 BYN 4.2% FI
RLB Holding eGen OÖ, Linz (AT) 1,566,939 EUR <0.1% FI 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financial holding, FI Financial institution, OT Other companies, VV Insurance,
Private Joint Stock Company First All-Ukrainian Credit Bureau, Kiev (UA) 11,750,000 UAH 5.1% OT
Private Joint Stock Company Ukrainian Interbank Currency Exchange, Kiev (UA) 36,000,000 UAH 3.1% OT
Regulatory changes and developments are monitored on an ongoing basis, included in scenario calculations, and are analyzed. Potential effects are considered in planning and governance, insofar as their scope and implementation are foreseeable.
Risk-weighted assets (total RWA) totaled € 77,966,207 thousand as at 31 December 2019. The major factors behind the € 5,294,464 thousand increase were new lending business as well as general business developments at head office, in Russia and in Bulgaria. In addition, foreign exchange movements also increased risk-weighted assets, primarily due to the Russian ruble. The changes in market risk reduced risk-weighted assets, while the change in settlement risk increased them marginally.
Total capital requirement for position risk in bonds, equities, commodities and open currency positions 271,464 303,245
The leverage ratio is defined in Part 7 of the CRR. As at 31 December 2019, the leverage ratio was not yet a mandatory quantitative requirement and is therefore only used for informational purposes: Leverage ratio (transitional) 6.8% 6.7%
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. A financial asset is subsequently measured at fair value through other comprehensive income (FVOCI) if it is held within a business model whose objective is both collecting contractual cash flows and selling financial assets. In addition, 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.
The recognition of derivatives which are embedded in financial liabilities and in non-financial host contracts has not changed under IFRS 9.
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 frequency, value and timing of sales in prior periods, the reasons for such sales, and expectations about future sales activity and
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.
IFRS 9 includes regulations for prepayment features with negative compensation. Negative compensation arises where the contractual terms permit the borrower to prepay the instrument before its contractual maturity, but the prepayment amount could be less than unpaid amounts of principal and interest. However, to qualify for amortized cost measurement, the negative compensation must be a reasonable compensation for early termination of the contract.
In RBI, a debt instrument is measured at fair value through other comprehensive income if both of the following conditions are met:  A financial asset is classified as subsequently measured at fair value through other comprehensive income (FVOCI) if it is held within a business model whose objective is both collecting contractual cash flows and selling financial assets.
 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.
If no sufficient current verifiable market data is available for the measurement with measurement models, parameters which are not observable in the market are also used. These input parameters may include data which is calculated in terms of approximated values from historical data among other factors (fair value hierarchy level III). The utilization of these models requires assumptions and estimates of the Management. The scope of the assumptions and estimates depends on the price transparency of the financial instrument, its market and the complexity of the instrument.
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).
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 changed prospectively from the date of reclassification and approved by the RBI Management Board.
Within the operating activity, the Group carries out different transactions with derivative financial instruments for trading and hedging purposes. The Group uses derivatives including swaps, standardized forward contracts, futures, credit derivatives, options and similar contracts. The Group uses derivatives in order to meet client requirements concerning their risk management, to manage and hedge risks and to generate profit in proprietary trading. Derivatives are initially recognized at the time of the transaction at fair value and subsequently revalued to fair value. The resulting valuation gain or loss is recognized immediately in net trading income and fair value result, unless the derivative is designated as a hedging instrument for hedge accounting purposes and the hedge is effective. Here the timing of the recognition of the gain or loss on the hedging instrument depends on the type of hedging relationship.
Derivatives which are used for hedging against market risk (excluding trading assets/liabilities) for a non-homogeneous portfolio do not meet the conditions for IAS 39 hedge accounting. These are recognized as follows: the dirty price is booked under the item financial assets – held for trading or financial liabilities – held for trading in the statement of financial position. The change in value of these derivatives, on the basis of the clean price, is shown in net trading income and fair value result and interest is shown in net interest income.
Additional information on derivatives is provided in the notes under (46) Derivative financial instruments.
If derivatives are held for the purpose of risk management and if the respective transactions meet specific criteria, the Group uses hedge accounting. The Group designates certain hedging instruments - mostly derivatives - as fair value hedges, cash flow hedges or capital hedges. At the beginning of the hedging relationship, the relationship between underlying and hedging instrument, including the risk management objectives, is documented. Furthermore, it is necessary to regularly document from the beginning and during the lifetime of the hedging relationship that the fair value or cash flow hedge is highly effective.
Hedge accounting according to IAS 39 applies to those derivatives that are used to hedge the fair value of financial assets and liabilities. The credit business is especially subject to such fair value risks if it deals with fixed-interest loans. Interest rate swaps that satisfy the prerequisites for hedge accounting are contracted to hedge against the interest-rate risks arising from individual loans or refinancing. Thus, hedges are formally documented, continuously assessed, and tested to be highly effective. Throughout the term of a hedge it can therefore be assumed that changes in the fair value of a hedged item will be nearly completely offset by a change in the fair value of the hedging instrument and that the actual effectiveness outcome will lie within a band of 80 to 125 per cent.
Both the effect of changes in the carrying amounts of positions requiring hedging and the effects of changes in the clean prices of the derivative instruments are recorded under net income from hedge accounting.
Within the management of interest rate risks, the hedging of interest rate risk is also undertaken on the portfolio level. Individual transactions or groups of transactions with similar risk structures, divided into maturities according to the expected repayment and interest rate adjustment date in a portfolio, are hedged. Portfolios can contain assets only, liabilities only, or both. For hedge accounting, the change in the value of the hedged asset or liability is shown in net income from hedge accounting. The hedged amount of the hedged items is determined in the consolidated financial statements including sight deposits (the rules of the EU carve-out are therefore applied).
Cash flow hedge accounting according to IAS 39 applies for those derivatives that are used to hedge against the risk of fluctuating future cash flows. Variable-interest loans and liabilities, as well as expected transactions such as expected borrowing or investment, are especially subject to such cash flow risks. Interest rate swaps used to hedge against the risk of fluctuating cash flows arising from specific variable interest-rate items are recognized as follows: The hedging instrument is recognized at fair value, changes in its clean price are recorded in other comprehensive income. Any ineffective portion is recognized in the income statement under net gains/losses from hedge accounting.
 Stage 3 includes financial instruments which are classified as impaired as at the reporting date. RBI’s criterion for this classification is the definition of a default in accordance with Article 178 CRR. The expected credit loss over the entire remaining lifetime of the financial instrument is also to be used as the basis for recognizing impairment of Stage 3 loans in default.
Further details on forward-looking information are provided in the notes under (36) Expected credit losses in the chapter forwardlooking information.
Further details on determining expected credit losses are provided under (36) Expected credit losses.
RBI’s rating systems combine into the PD all available quantitative and qualitative information relevant for forecasting the credit risk. This metric is based primarily on a statistical selection and weighting of all available indictors. In addition, the PD adjusted in accordance with IFRS 9 requirements takes into account not only historical information and the current economic environment, but also, in particular, forward-looking information such as the forecast for the development of macroeconomic conditions. As a consequence, RBI uses the PD only as a frame of reference for assessing whether the credit risk of a financial instrument has risen significantly since the date of its initial recognition. By anchoring the review of the relative transfer criterion in the robust processes and procedures of the bank’s Group-wide credit-risk-management framework, the bank ensures that a significant increase in the credit risk is identified in a reliable and timely manner based on objective criteria. The review to determine whether the credit default risk as at the financial reporting date has risen significantly since the initial recognition of the respective financial instrument is performed as at the reporting date. This review compares the observed probability of default over the residual maturity of the financial instrument (Lifetime-PD) against the lifetime PD over the same period as expected on the date of recognition. Further details on forward-looking information are provided in the notes under (36) Expected credit losses in the chapter significant increase in the credit risk.
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 to IAS 39. Collateral is not recorded in RBI’s statement of financial position unless it is repossessed. The fair value of collateral does, however, affect the calculation of ECLs. Generally, it is valued at least at the outset, and subject to half-yearly reviews. Some collateral such as cash or securities are assessed daily in respect of margin requirements. Further details are provided in the notes under (35) Collateral and maximum credit risk.
A special case is the classification of land and buildings from bail-out purchases within the framework of collateral realization as such real estate or other assets have been primarily acquired to avoid losses from the lending business and are generally intended to be re-sold. In a first step, RBI assesses whether or not an asset that has been taken back can be used for its own business operations. Assets that are considered useful for own business operations are transferred to the bank’s tangible fixed assets at the lower of the re-procurement value or the carrying amount of the originally collateralized asset. Assets which are planned to be sold are recognized in RBI’s inventories at fair value less selling costs for non-financial assets at the time of repossession, in accordance with the bank’s guidelines. When realizing collateral, however, RBI does not generally take physical possession of the assets but commissions external agents to obtain funds through auctions in order to settle outstanding debts of the customer. Any excess funds are returned to customers. Due to this practice, residential real estate is not reported in RBI’s statement of financial position within the context of the realization of collateral.
RBI has applied IFRS 16 using the modified retrospective approach and therefore the comparative information for 2018 has not been restated and continues to be reported under IAS 17 and IFRIC 4. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed separately if they are different from those under IFRS 16 and the impacts on the consolidated financial statements are disclosed in section application of new and revised standards.
At inception of a contract, RBI assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, RBI assesses whether:  the contract involves the use of an identified asset - this is the case if either the asset is explicitly specified in the contract or the asset is implicitly specified at the time that it is made available for use by the customer that is capable of being used to meet the contract terms. If the supplier has a substantive substitution right, then the asset is not identified;  RBI has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and  RBI has the right to direct how and for what purpose the asset is used throughout the period of use or the relevant decisions about how and for what purpose the asset is used are predetermined.
The lease payments included in the measurement of the lease liability comprise the following:  fixed payments including in-substance fixed payments  variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date;  amounts expected to be payable by the lessee under residual value guarantees;  the exercise price of a purchase option if RBI is reasonably certain to exercise that option; and  payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease
The lease liability is measured on an ongoing basis similarly to other financial liabilities, using an effective interest method, so that the carrying amount of the lease liability is measured on an amortized cost basis and the interest expense is allocated over the lease term. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the RBI’s estimate of the amount expected to be payable under a residual value guarantee, or if RBI changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of right-of-use asset has been reduced to zero.
RBI has elected not to recognize right-of-use assets and lease liabilities for short-term leases of equipment that have a lease term of twelve months or less and leases of low-value assets, including IT equipment. RBI recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Sometimes RBI is an intermediate lessor which means that RBI acts as both the lessee and lessor of the same underlying asset and accounts for its interest in the main lease and the sublease separately. When the main lease is a short-term lease, the sublease is classified as an operating lease. Otherwise, RBI assesses the classification of a sublease by reference to the right-of-use asset in the main lease and not by reference to the underlying asset of the main lease.
RBI recognizes the lease payments associated with the operating lease as income on a straight-line basis over the lease term.
All material subsidiaries over which RBI AG directly or indirectly has control are fully consolidated. The Group has control over an entity when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Investments in subsidiaries which are not consolidated in the consolidated financial statements are measured at fair value. Investments in subsidiaries whose fair value differ insignificantly from the acquisition costs less impairment, are simply measured at the acquisition costs minus impairment. Investments in subsidiaries are shown under the item investments in subsidiaries and associates.
In debt consolidation, intra-group loans and liabilities are eliminated. Remaining temporary differences are recognized under the items other assets or other liabilities in the consolidated statement of financial position.
Goodwill is measured as the excess of the aggregate of the value of the consideration transferred, the amount of any non-controlling interest and the acquisition-date fair value of the acquirer’s previously-held equity interest in the acquiree (if any), and the net
of the acquisition-date amounts of the fair values of identifiable assets acquired and the liabilities assumed. In the event that the difference is negative after further review, the resulting gain is recognized immediately in the income statement.
In RBI, separately acquired intangible fixed assets, i.e. those with a definite useful life not acquired in a business combination, are capitalized at acquisition cost less accumulated amortization and impairment. Amortization is accrued in a straight line over the expected useful life and reported as an expense in the income statement. The expected useful life and the depreciation method are reviewed at each reporting date and any possible changes in measurement taken into account prospectively. Separately acquired intangible fixed assets with an indefinite useful life are capitalized at acquisition cost less accumulated impairment. The normal useful life of software is between four and six years. The normal useful life for large software projects may extend over a longer period.
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.
A tangible fixed asset is derecognized on disposal or when no future economic benefit can be expected from the continued use of the asset. The resulting gain or loss from the sale or retirement of any asset is determined as the difference between the proceeds and the carrying amount of the asset and is recognized in other net operating income.
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
On each reporting date, goodwill is examined with a view to its future economic utility on the basis of cash generating units (CGUs). A cash generating unit is defined by the management and represents the smallest identifiable group of assets of a company that generates cash inflows from operations. Within RBI, all segments according to segment reporting are determined as cash generating units. Legal entities within the segments form their own CGU for the purpose of impairment testing of goodwill. The carrying amount of the relevant entity (including any assigned goodwill) is compared with its recoverable amount. This is, as a general principle, defined as the higher of the fair value less selling costs and the amount resulting from its value in use. The value in use is based on expected potential dividends discounted using a rate of interest reflecting the risk involved. The estimation of the future results requires an assessment of previous as well as future performance. The latter must take into account the likely development of the relevant markets and the overall macroeconomic environment.
Raiffeisen Bank International | Annual Report 2019 recognized under tangible fixed assets. Depreciation is recorded under the item general administrative expenses. Impairments that are expected to be permanent are recognized in profit or loss and shown in the item impairment on non-financial assets. If the reasons for the impairment cease to exist, a write-up is made up to the amortized acquisition costs.
All defined benefit plans relating to so-called social capital (provisions for pensions, provisions for severance payments and provisions for service anniversary bonuses) are measured using the Projected Unit Credit Method in accordance with IAS 19 – Employee Benefits. The biometrical basis for the calculation of provisions for pensions, severance payments and service anniversary bonuses for Austrian companies is provided by AVÖ 2018-P-Rechnungsgrundlagen für die Pensionsversicherung (Computational Framework for Pension Insurance), using the relevant parameters for salaried employees. In other countries, comparable actuarial parameters are used for calculation.
All expenses associated with the variable remuneration were recognized in personnel expenses in accordance with IAS 19 and the expected discounted payment amount was set aside. They are shown in more detail in the notes under (28) provisions.
Net fee and commission income item mainly includes income and expenses arising from payment transfer business, asset management, foreign exchange business and credit business. Fee and commission income and expenses are accrued in the reporting period.
RBI AG as group parent and 49 of its consolidated domestic subsidiaries are members of a tax group. Current taxes are calculated on the basis of taxable income for the current year taking into account the tax group (in terms of a tax group allocation). In the reporting year, a supplementary agreement was added to the current tax group allocation agreement. If RBI AG generates a negative taxable net income and these taxable losses are not usable in the group, then the group parent does not immediately pay a negative tax group allocation. Only and after withdrawal from the tax group at the latest, a final settlement is carried out. The taxable income deviates from the profit/loss before tax of the consolidated statement of comprehensive income due to expenses and income which are taxable or tax-deductible in the following years or which are never taxable or tax-deductible. The liability of the Group for current taxes is recognized on the basis of the actual tax rate or the expected applicable tax rate.
Other comprehensive income comprises all income and expenses directly recognized in equity according to IFRS standards. Income and expenses recognized directly in equity that are reclassified in the income statement are reported separately from income and expenses recognized directly in equity that are not reclassified in the income statement. Currency differences resulting from the translation of equity in subsidiaries held in foreign currency, changes resulting from the hedging of net investments in a foreign entity (capital hedge), the effective part of a cash flow hedge, changes resulting from valuation of financial assets (debt instruments) of the category FVOCI, proportionate other comprehensive income from associates accounted for at equity as well as deferred taxes on the mentioned items are recognized in other comprehensive income.
Transactions arising from the holding and placing of assets on behalf of third parties are not shown in the statement of financial position. Fees arising from these transactions are shown under net fee and commission income.
Amendment to the IFRS Conceptual Framework for Financial Reporting (effective date: 1 January 2020)
The new Conceptual Framework contains revised definitions of assets and liabilities as well as new guidance on measurement and derecognition, presentation and disclosure. The Conceptual Framework was not substantially revised as was originally intended when the project was initiated in 2004. Instead, the IASB focused on topics that were not yet covered or that showed obvious shortcomings that needed to be dealt with. The revised Conceptual Framework is not subject to the endorsement process.
Amendments to IFRS 9, IAS 39 and IFRS 7 (Interest Rate Benchmark Reform; effective date: 1 January 2020)
Amendments to IAS 1 and IAS 8 (Definition of Material; effective date: 1 January 2020)
The International Accounting Standards Board (IASB) has issued the Definition of Material (Amendments to IAS 1 and IAS 8) to align the definition of materiality used in the Conceptual Framework and the standards. Application of the revised standard is not expected to impact the consolidated financial statements of RBI.
The narrow-scope amendments to IFRS 3 aim to resolve the difficulties that arise when an entity is determining whether it has acquired a business or a group of assets. The difficulties result from the fact that the accounting requirements for goodwill, acquisition costs and deferred taxes differ on the acquisition of a business and on the acquisition of a group of assets. Application of the revised standard is not expected to impact the consolidated financial statements of RBI.
Effective tax rate (ETR) – Relation of income tax expense to profit before tax. The effective tax rate differs from the company´s jurisdictional tax rate due to many accounting factors and enables a better comparison among companies. The effective tax rate of a company is the average rate at which its pre-tax profits are taxed. It is calculated by dividing total tax expense (income taxes) by profit before tax. Total tax expense includes current income taxes and deferred taxes.
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.
NPL – Non-performing loans. It contains all non-performing loans according to the applicable definition of the EBA document Implementing Technical Standards (ITS) on Supervisory Reporting (Forbearance and non-performing exposures).
NPL ratio is an economic ratio to demonstrate the proportion of non-performing loans in relation to the entire loan portfolio to customers and banks. 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.
NPE coverage ratio describes to which extent, non-performing loans and debt securities have been covered by impairments (Stage 3) thus expressing also the ability of a bank to absorb losses from its NPE. It is calculated with impairment losses on loans to customers and banks and on debt securities set in relation to non-performing loans to customers and banks and debt securities.
Operating income – They are primarily income components of the ongoing business operations (before impairment). It comprises net interest income, dividend income, current income from investments in associates, net fee and commission income, net trading income and fair value result, net gains/losses from hedge accounting and other net operating income.
Return on risk-adjusted capital (RORAC) is a ratio of a risk-adjusted performance management and shows the yield on the riskadjusted capital (economic capital). The return on risk-adjusted capital is computed by dividing consolidated profit by the riskadjusted capital (i.e. average economic capital). This capital requirement is calculated within the economic capital model for credit, market and operational risk.
Leverage ratio – The ratio of tier 1 capital to specific exposures on and off the statement of financial position calculated in accordance with the methodology set out in CRD IV.
Total capital ratio – Total capital as a percentage of total risk-weighted assets (total RWA).
Member of the Management Board responsible for Active Credit Management, Group Investor Relations, Group Planning & Finance,
Group MIB Business Management & IC Experience, Institutional Clients and Raiffeisen Research
Analytics, Group Corporate Credit Management, Group Risk Controlling, Group Special Exposures Management, International
Member of the Management Board responsible for Group Asset Management, International Retail Business Management & Steering,
Private Banking, International Retail CRM, International Retail Lending, International Retail Online Banking and International Small Business
Raiffeisen Bank International AG, Vienna, and its subsidiaries (“the Group”), which comprise of the consolidated statement of financial position as at 31 December 2019, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.
We conducted our audit in accordance with the EU Regulation 537/2014 (AP Regulation) and Austrian Standards on Auditing. These standards require the audit to be conducted in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the “Auditor´s Responsibilities” section of our report. We are independent of the audited Group in accordance with Austrian company and banking lawas well as professional regulations, and we have fulfilled our other responsibilities under those relevant ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, however, we do not provide a separate opinion thereon.
For non-defaulted loans, a collective impairment allowance is recognized for expected credit losses (ECL). In general, the twelvemonth ECL is used (ECL stage 1). If credit risk has increased significantly (ECL stage 2), lifetime ECL is calculated.
With regard to defaulted loans to individual significant customers (ECL stage 3), we used a risk-oriented as well as a random sample based approach to determine whether there is an indication for a default. For defaults, 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.
In the case of defaulted individual insignificant customers, were the impairment is determined according to the so-called best estimate of expected loss and for non-defaulted loans (ECL stage 1 and stage 2), whose impairment was calculated on an ECL basis, we assesed the bank’s internal validation models and their parameters to determine whether they provide a suitable basis for calculating reasonable impairments. We evaluated the reasonableness of the used probabilities of default also by performed backtestings. We also analyzed the selection and calculation of forward-looking estimates and scenarios and examined how they were taken into account in parameter estimates. In these audit procedures, we were supported by our financial mathematicians. In addition, we performed a control-based audit approach to assess the processes, systems and interfaces underlying the calculation models.
The provision is based on a statistical approach with weigthed scenario calculations. In these calculations, possible decision scenarios have been estimated together with the expected loss rates per scenario to determine the expected impact. In addition probabilities of occurrence of various claims were assessed and an expected value was calculated. Furthermore, the corresponding external legal costs were estimated and considered.
Finally, we assessed whether the disclosures in the notes regarding the provision were appropriate and complete.
3) Valuation of financial Liabilities at fair value through profit and loss
The Management Board describes the process of calculating the fair value of these financial liabilities that are measured at fair value within note 25 and the Recognition and Measurement Principles chapter in the notes of the Financial Statements.
We have analyzed the process of issuance, valuation and risk-monitoring of liabilities measured at fair value. The design and implementation of key 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. Thereby, 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.
Responsibilities of Management and the Audit Committee for the Consolidated Financial Statements
Austria Am Stadtpark 9 1030 Vienna Tel: +43-1-71 707-0 SWIFT/ BIC: RZBATWW www.rbinternational.com ir@rbinternational.com communications@rbinternational.com
Hungary Raiffeisen Bank Zrt. Akadémia utca 6 1054 Budapest Tel: +36-1-48 444-00 SWIFT/BIC: UBRTHUHB www.raiffeisen.hu
Romania Raiffeisen Bank S.A. Calea Floreasca 246C 014476 Bucharest Tel: +40-21-30 610 00 SWIFT/BIC: RZBRROBU www.raiffeisen.ro
Albania Raiffeisen Leasing Sh.a. European Trade Center Bulevardi “Bajram Curri” Tirana Tel: +355-4-22 749 20 www.raiffeisen-leasing.al
Romania Raiffeisen Leasing IFN S.A. Calea Floreasca 246 D 014476 Bucharest Tel: +40-21-36 532 96 www.raiffeisen-leasing.ro
Albania Raiffeisen Bank Sh.A. European Trade Center Bulevardi “Bajram Curri” 1000 Tirana Tel: +355-4-23 81 381 SWIFT/BIC: SGSBALTX www.raiffeisen.al
Kosovo Raiffeisen Bank Kosovo J.S.C. Robert Doll St. 99 10000 Pristina Tel: +383-38-222 222 SWIFT/BIC: RBKOXKPR www.raiffeisen-kosovo.com
Austria Raiffeisen-Leasing Gesellschaft m.b.H. Mooslackengasse 12 1190 Vienna Tel: +43-1-71 601-0 www.raiffeisen-leasing.at
Belarus “Raiffeisen-Leasing” JLLC V. Khoruzhey 31-A 220002 Minsk Tel: +375-17-28 9-9394 www.rl.by
Bulgaria Raiffeisen Leasing Bulgaria OOD 32A Cherni Vrah Blvd. Fl.6 1407 Sofia Tel: +359-2-49 191 91 www.rlbg.bg
Czech Republic Raiffeisen-Leasing s.r.o. Hvězdova 1716/2b 14078 Prague 4 Tel: +420-2-215 116 11 www.rl.cz
Hungary Raiffeisen Corporate Lízing Zrt. Akadémia utca 6 1054 Budapest Tel: +36-1-477 8709 www.raiffeisenlizing.hu
Russia OOO Raiffeisen-Leasing Smolenskaya-Sennaya Sq. 28 119121 Moscow Tel: +7-495-72 1-9980 www.raiffeisen-leasing.ru
Slovenia Raiffeisen Leasing d.o.o. Letališka cesta 29a 1000 Ljubljana Tel: +386-8-281-6200 www.raiffeisen-leasing.si
Germany RBI Frankfurt Branch Wiesenhüttenplatz 26 60 329 Frankfurt Tel: +49-69-29 921 924
Sweden RBI Representative Office Nordic Countries Drottninggatan 89, 14th Floor 11360 Stockholm Tel: +46-8-440 5086
China RBI Beijing Branch Beijing International Club Suite 200 2nd Floor Jianguomenwai Dajie 21 100020 Beijing Tel: +86-10-65 32-3388
RBI Representative Office Zhuhai Room 2404, Yue Cai Building No. 188, Jingshan Road, Jida, Zhuhai, Guangdong Province 519015, P.R. China Tel: +86-756-32 3-3500
India RBI Representative Office Mumbai 501, Kamla Hub, Gulmohar Road, Juhu Mumbai – 400049 Tel: +91-22-26 230 657
Austria Kathrein Privatbank Aktiengesellschaft Wipplingerstraße 25 1010 Vienna Tel: +43-1-53 451-300 www.kathrein.at
Raiffeisen Centrobank AG Tegetthoffstraße 1 1015 Vienna Tel: +43-1-51 520-0 www.rcb.at
Raiffeisen Wohnbaubank Aktiengesellschaft Mooslackengasse 12 1190 Vienna Tel: +43-1-71 707-0 www.raiffeisen-wohnbaubank.at
Valida Holding AG Mooslackengasse 12 1190 Vienna Tel: +43-1-31 648-0 www.valida.at
Editing: Capital Language Communications Production: Firesys financial reporting system Printed by: Bösmüller
The Annual Report is available online in German: The report is also available in English: The forecasts, plans and forward-looking statements contained in this Annual Report are based on the state of knowledge and assessments of Raiffeisen Bank International AG at the time of its preparation. Like all statements about the future, they are subject to known and unknown risks, as well as uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. No guarantee can be provided for the accuracy of forecasts, target values or forwardlooking statements.