- financial assets held for trading - - - financial assets designated at fair value - - - other financial assets mandatorily measured at fair value 9,483 13,911,081 - financial assets measured at fair value through other comprehensive income (2,342,172,617) (1,038,739,773)
Net cash flow from / (used for) financing activities (525,685,913) (596,808,586)
Cash and cash equivalents at end of the year 6,404,127,761 4,313,694,951
BancoPosta RFC Separate report for the year ended 31 December 2020 Financial Statements
178. Under the indirect method, net cash from operating activities is determined by adjusting profit/(loss) for the year to reflect the impact of non-cash items, any deferment or provisions for previous or future operating inflows or outflows, and revenue or cost items linked to cash flows from investing or financing activities.
The accounting policies and the recognition, measurement and classification criteria adopted in this Report are consistent with those used to prepare the Separate Report at 31 December 2019. In order to allow for a uniform comparison with the figures for 2019, certain figures and notes for the comparison year have been reclassified.
Section 3 – Events after the end of the reporting period On 27 January 2021, Poste Italiane’s Board of Directors approved an amendment to BancoPosta RFC resulting in the removal of the restriction on the assets, properties and legal relationships that make up the Debit Business, to be submitted for final approval by Poste Italiane’s Extraordinary Shareholders’ Meeting, after obtaining all the authorisations required by current legislation and regulations; on 4 February 2021, PostePay’s Extraordinary Shareholders’ Meeting approved, among other things, a divisible capital increase to be subscribed and paid up by 30 September 2021 via the contribution in kind of the Debit Business by Poste Italiane.
Assets 20. Financial assets measured at fair value through profit or loss 72 - 71 a ) financial assets held for trading - - - b ) financial assets designated at fair value - - - c ) other financial assets mandatorily measured at fair value 72 - 71 30. Financial assets measured at fair value through other comprehensive income 42,638 - 36,799 40. Financial assets measured at amortised cost 52,028 902 39,792 651
Liabilities and equity 10. Financial liabilities measured at amortised cost 86,110 140 70,379 58 20. Financial liabilities held for trading 20 - 15 100. Provisions for risks and charges 213 - 327 180. Profit/(Loss) for the year (+/-) 629 - 611 -
The provision of services to BancoPosta RFC by Poste Italiane SpA functions is governed by the specific Regulations governing the process of awarding and outsourcing of BancoPosta RFC, approved by Poste Italiane SpA’s Board of Directors179.
In line with 2019, the services are charged for in the form of transfer prices. The transfer prices paid, inclusive of commissions and any other form of remuneration due, are determined on the basis of market prices and tariffs for the same or similar services, identified, where possible, following a benchmarking process. When the specifics and/or the particular nature of a service provided by a Poste Italiane function do not allow the use of a comparable market price, a cost-based method is used, again with the support of benchmarking to ensure that the price charged is adequate for the service provided. In this case, an appropriate mark-up, determined with reference to those used by comparable peers, is applied. The prices set in each Operating Guidelines can be reduced in the presence of operating losses of the activities outsourced or in case of penalties due to the failure to achieve pre-established service levels, as measured by specific performance indicators. The transfer prices defined in the Guidelines are revised every year in connection with the planning and budget process. The Guidelines, which expired on 31 December 2020 and are being renewed for the two-year period 2021-2022, were notified to the Bank of Italy pursuant to the Supervisory Provisions and the 60-day period within which the authority could initiate the administrative prohibition procedure has elapsed.
On 9 March 2015, the Authority notified Poste Italiane of an investigation of BancoPosta RFC for alleged violation of articles 20, 21 and 22 of the Consumer Code, regarding the “Libretto Smart” product. On 21 December 2015, the AGCM notified Poste Italiane of its final ruling in which it deemed the Poste Italiane’s conduct unfair and imposed a fine of €0.54 million, limited to a tenth of the maximum applicable amount taking into account the mitigating circumstance that Poste Italiane had adopted initiatives aimed at allowing customers to benefit from the bonus rate. Poste Italiane lodged an appeal against this ruling before the Lazio Regional Administrative Court, which has adjourned the case until a hearing on the merits to be set.
179. At its meeting of 12 May 2020, the Board of Directors approved an update to the “Regulations governing the process of awarding and outsourcing of BancoPosta RFC”, regulating and formalising both the process of awarding BancoPosta’s Corporate Functions to Poste Italiane and the process of outsourcing to third parties outside Poste Italiane’s organisation.
In January 2020, the Consob launched an inspection of a general nature pursuant to article 6-ter, paragraph 1, of Legislative Decree no. 58 of 24 February 1998, aimed at ascertaining the compliance with the new MiFID II legislation. The inspection was completed on 23 October 2020. Poste Italiane is awaiting feedback from the Authority.
It should also be noted that the uncertainties caused by the current pandemic were taken into account in the determination of the expected credit losses calculated in accordance with IFRS 9. In particular, the models used to assess the expected credit losses on the financial assets of BancoPosta RFC take account of the various macroeconomic scenarios characterised by greater risk and uncertainty and, as a result, additional impairments of approximately €12 million have been recognised, primarily relating to the securities portfolio and deposits with the MEF.
With regard to the adjustments made to the models, more detailed information is provided in Part E - Credit Risk.
1 – Financial assets measured at fair value through profit or loss a) recognition Financial assets measured at fair value through profit or loss are initially recognised on the settlement date for debt and equity instruments, whereas, for derivative contracts, on the subscription date. Financial assets are initially recognised at fair value which is generally the price paid. Changes in fair value between the trade date and the settlement date are recognised.
Expected credit losses are calculated in relation to these financial assets, as illustrated in the specific section. These expected losses are recognised in profit or loss in “Item 130 – Net losses/recoveries due to credit risk” with a counter-entry made under the “Item 110 – Valuation reserves”.
In addition to debt securities that reflect the characteristics outlined above, this item comprises mainly the deposits with the MEF and the trade receivables.
a) recognition and classification Derivative hedges are initially recognised on conclusion of the relevant contract. There are two types of hedge: z fair value hedges: hedge of the exposure to a change in fair value of a recognised asset or liability or of an unrecognised firm commitment attributable to a particular risk, and that could have an impact on profit or loss; z cash flow hedges: a hedge of the exposure to the variability of cash flows attributable to a particular risk associated with a recognised asset or liability or with a highly probable forecast transaction, and that could have an impact on profit or loss.
Derivative contracts that constitute effective hedging relationships are shown as assets or liabilities depending on whether the fair value is positive or negative.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges after initial recognition is recognised in a specific equity reserve (the Cash flow hedge reserve, within line “Item 110 – Valuation reserve”). A hedging transaction is generally considered highly effective if, both at inception of the hedge and on an ongoing basis, changes in the expected future cash flows of the hedged item are substantially offset by changes in the fair value of the hedging instrument. If the hedging transaction is not fully effective, the gain or loss arising from a change in fair value relating to the ineffective portion is recognised in line “Item 90 - Profits/(Losses) on hedging”.
If, during the life of the derivative, the forecast hedged transaction is no longer expected to occur, the related gains and losses accumulated in the cash flow hedge reserve are immediately reclassified in line “Item 80 – Profits/(Losses) on trading” for the relevant year. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, the related gains and losses accumulated in the cash flow hedge reserve at that time remain in equity and are recognised in profit or loss at the same time as the original underlying.
11 – Financial liabilities measured at amortised cost a) recognition and classification BancoPosta RFC has no outstanding debt securities and has not issued any such securities since its establishment. The subitems Due to banks and Due to customers consist of funding provided by customers and obtained from the interbank market. These financial liabilities are recognised at fair value on the date of receipt of the funds. Fair value is normally the amount received.
b) measurement and recognition of gains and losses Due to banks and customers are measured at amortised cost, employing the effective interest rate method. If there is a change in the expected cash flows and they can be reliably estimated, the value of amounts due is recalculated to reflect the change on the basis of the present value of estimated future cash flows and the internal rate of return initially applied.
c) derecognition Financial liabilities are derecognised when they are extinguished or when the obligation specified in the contract expires, is cancelled or discharged.
c) derecognition Financial liabilities on trading are derecognised when they are extinguished or when the obligation specified in the contract expires, is cancelled or discharged.
For revenue recognition purposes, so-called variable components of the consideration (discounts, rebates, price concessions, incentives, penalties and other similar) are included to supplement or adjust the transaction price. Among the variable components of the consideration, of particular importance are the penalties (other than those provided for compensation for damages), which IFRS 15 provides to be recorded as a direct decrease in revenue, instead of allocating them to a provision for risks and charges.
Revenue from activities carried out in favour of or on behalf of the state is recognised on the basis of the amount effectively accrued, with reference to the laws and agreements in force, taking account, in any event, of the provisions contained in legislation regarding the public finances. Returns on the portion of current account deposits deposited with the MEF are determined on an accruals basis, using the effective interest rate method, and classified in “Item 10 – Interest and similar income”. The same classification is applied to income from Eurozone government bonds, in which deposits paid into accounts by private customers are invested.
Impairment Loans and receivables and debt securities classified under “Financial assets measured at amortised cost” and “Financial assets measured at fair value through other comprehensive income” are tested for impairment in accordance with the Expected Credit Losses (ECL) model. The method utilised is the “General deterioration model”, whereby: z If on the reporting date the credit risk of a financial instrument has not increased significantly since initial recognition, a 12-month ECL is recognised (stage 1). Interest on the instrument is calculated on the gross carrying amount (amortised cost inclusive of the ECL); z If on the reporting date the credit risk of the financial instrument has increased significantly since initial recognition, a lifetime ECL is recognised (stage 2). Interest on the instrument is calculated on the gross carrying amount (amortised cost inclusive of the ECL); z if the financial instrument is impaired since initial recognition, or shows objective evidence of impairment at the reporting date, impairment will continue to be recognised over the lifetime of the financial instrument (stage 3). Interest is calculated on amortised cost.
However, there is a rebuttable default presumption if the financial instrument is more than 90 days past due, unless there is reasonable and supportable information to demonstrate that a default criterion with greater lag is more appropriate.
Repurchase agreements Any securities received as part of a transaction entailing subsequent re-sale and the delivery of securities as part of a transaction entailing their subsequent repurchase are not either recognised or derecognised. Consequently, in the case of securities purchased under a resale agreement, the amount paid is recognised as an amount due from customers or banks under Financial assets measured at amortised cost; in the case of securities sold under a repurchase agreement, the liability is recognised as an amount due to banks or customers under Financial liabilities measured at amortised cost. The transactions described are subject to offsetting if, and only if, they are carried out with the same counterparty, have the same maturity and offsetting is provided for in the contract.
Post-employment benefits consist of two types: z Defined benefit plans Defined benefit plans include employee termination benefits payable to employees in accordance with art. 2120 of the Italian Civil Code for the part accrued until 31 December 2006. In fact, following the reform of the supplementary pension fund, from 1 January 2007 vesting employee termination benefits (TFR) must be paid into a supplementary pension fund or into a Treasury Fund set up by INPS. Accordingly, BancoPosta RFC’s defined benefit liability is applicable only to the provisions made up to 31 December 2006181. Under these plans, given that the amount of the benefit to be paid is only quantifiable following the termination of employment, the related effects on profit or loss or the financial position are recognised on the basis of actuarial calculations in compliance with IAS 19. In particular, the liability to be paid on cessation of employment is calculated using the projected unit credit method and then discounted to recognise the time value of money prior to the liability being settled. The liability recognised in the Separate Report is based on calculations performed by independent actuaries. The calculation takes into account the employee termination benefits accrued for work already performed and is based on actuarial assumptions that mainly concern: demographic assumptions (such as employee turnover and mortality) and financial assumptions (such as rate of inflation and a discount rate consistent with that of the liability). As BancoPosta RFC is not liable for employee termination benefits accruing after 31 December 2006, the actuarial calculation of employee termination benefits no longer takes account of future salary increases. Actuarial gains and losses are recognised directly in equity at the end of each reporting period, based on the difference between the carrying amount of the liability and the present value of the BancoPosta RFC’s obligations at the end of the period, due to changes in the actuarial assumptions.
In the event of benefits granted to employees, recognition should take place in “Item 160 a) – Personnel expenses” over the period in which the employees render service and the expense accounted for.
Classification of the costs for services provided by Poste Italiane SpA Service costs charged by Poste Italiane SpA’s functions outside the ring-fence are normally recognised in “Item 160 b) - Other administrative expenses”.
The following section describes the accounting treatments that require greater subjectivity in the preparation of estimates and for which a change in the conditions underlying the assumptions used could have a material impact on the Separate Report, also taking account of the effects of the health emergency linked to the spread of the Coronavirus pandemic, which has had a significant impact on the economic and social context and makes it difficult to make realistic forecasts regarding the economic and financial outlook for the market and the Poste Italiane Group.
Impairment and stage allocation For the purposes of calculating impairment and determining the stage allocation, the main factors estimated are as follows, relating to the internal model developed for Sovereign, Banking and Corporate counterparties: z estimates of ratings by counterparty; z estimation of the probability of default “PD” for counterparties.
Provisions for risks and charges represent probable liabilities in connection with personnel, suppliers, third parties and, in general, liabilities deriving from present obligations. These provisions cover the liabilities that could result from legal action of varying nature, the impact on profit or loss of seizures incurred and not yet definitively assigned, and amounts expected to be refundable to customers where the final amount payable has yet to be determined.
A.4.1 Fair value levels 2 and 3: valuation techniques and inputs used BancoPosta RFC had adopted the Poste Italiane Group’s fair value policy. This policy sets out the general principles and rules to be applied in determining fair value for the purposes of preparing the financial statements, conducting risk management assessments and supporting the market transactions carried out by the Finance departments of the various Group entities. The general principles for measuring financial instruments at fair value have been updated since 31 December 2019 primarily to review roles and responsibilities in the process of establishing and implementing the policy. These general principles have been defined in compliance with indications from the various (banking and insurance) regulators and the relevant accounting standards, ensuring consistent application of the valuation techniques adopted at Group level. The methods used have been revised, where necessary, to take into account developments in operational procedures and in market practices during the year.
z Derivative financial instruments: – Plain vanilla interest rate swaps: valued using discounted cash flow techniques, involving the computation of the present value of future differentials between the receiver and payer legs of the swap. the construction of yield curves to estimate future cash flows indexed to market parameters (money market rates and/or inflation) and computation of the present value of future differentials are carried out using techniques commonly used in capital markets.
– Interest rate swaps with an embedded option: valuation is based on a building block approach, entailing decomposition of a structured position into its basic components: the linear and option components. The linear component is measured using the discounted cash flow techniques described for plain vanilla interest rate swaps above. Using the derivatives held in BancoPosta RFC’s portfolio as an example, the option component is derived from interest rate or inflation rate risks and is valued using a closed form expression, as with classical option valuation models with underlyings exposed to such risks.
z Financial liabilities either quoted on inactive markets or not at all, consisting of repurchase agreements used to raise finance are valued using discounted cash flow techniques involving the computation of future contractual cash flows. Repos may also be used for collateral and in such cases fair value need not be adjusted for the counterparty’s credit risk.
For all classes of assets and liabilities, the transfer from one level to another takes place on the date of the event or change in circumstances that led to the transfer.
Information on transfers during the period is provided in Part A.4.5 - Fair value hierarchy.
A.4.5.1 Assets and liabilities measured at fair value on a recurring basis: breakdown by fair value level
Financial assets measured at fair value through other comprehensive income 1. Financial liabilities held for trading - 20 - - 15 2. Financial liabilities designated at fair value - - - - - - * Notes on this position are provided in Part B, Assets, Table 2.5.
A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: breakdown by fair value level
In determining the fair values shown in the table, the following criteria were used: z debt securities measured at amortised cost were recognised applying the same rules as those used in the fair value measurement of financial assets measured at fair value through other comprehensive income; these instruments are shown in Level 1 of the fair value hierarchy; z the fair value of repurchase agreements was measured using the discounted cash flow techniques described in paragraph A.4.1; these financial instruments are shown in Level 2 of the fair value hierarchy; z the carrying amount of other financial assets and liabilities represents a reasonable approximation of fair value and is shown in the column corresponding to Level 3 in the fair value hierarchy.
Section 2 – Financial assets measured at fair value through profit or loss – Item 20 2.1 Financial assets held for trading: breakdown by type BancoPosta RFC had no financial instruments in the trading book either at 31 December 2020 or 31 December 2019.
Investments in equity securities refer to: z for €34 million, the fair value of 32,059 Visa Incorporated preference shares (Series C Convertible Participating Preferred Stock) received for the sale of the Visa Europe Ltd. share to Visa Incorporated on 21 June 2016. These shares are convertible at the rate of 6.853183 ordinary shares for each C share, minus a suitable illiquidity discount. These shares can be converted into several tranches starting from the fourth year after closing and up to the twelfth year. On 21 June 2020 (the fourth year after closing), the process of determining the proportion of convertibility and related rate of Visa Incorporated Series C Convertible Participating Preferred Stock commenced, partially concluded on 24 September 2020 with the grant of 2,199 preference shares of Visa Incorporated Series A Preferred Stock; z for €38 million, the fair value of 2,199 Visa Incorporated preference shares (Series A Preferred Stock); these shares are convertible into ordinary shares on the basis of a ratio of one hundred ordinary shares for every share of Class A Preferred Stock.
The overall net change in fair value during the year is a positive €2 million and is recorded in profit or loss under “Item 110 - Profits (Losses) of other financial assets and liabilities measured at fair value through profit or loss”.
2.6 Other financial assets mandatorily measured at fair value: breakdown by debtor/issuer
(€m) Total at 31/12/2020 Total at 31/12/2019 of which: banks - of which: other financial companies 72 71 of which: non-financial companies - b ) Public Administration entities - d ) Other financial companies - of which: insurance companies - e ) Non-financial companies - b ) Public Administration entities - d ) Other financial companies - of which: insurance companies - e ) Non-financial companies - -
3.2 Financial assets measured at fair value through other comprehensive income: breakdown by debtor/issuer
Items/Amounts (€m) Total at 31/12/2020 Total at 31/12/2019 b) Public Administration entities 42,638 36,799 d) Other financial companies - of which: insurance companies - e ) Non-financial companies - of which: insurance companies - b ) Public Administration entities - d ) Other financial companies - of which: insurance companies - e ) Non-financial companies - -
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 of which: Instruments with low credit risk of which: purchased or originated impaired financial assets * Amount reported for disclosure purposes.
Fixed income instruments recognised at FVTOCI are adjusted for impairment through the relevant equity reserve, with a matching entry in profit or loss. Accumulated impairments at 31 December 2020 amount to €18 million (€11 million at 31 December 2019).
Section 4 – Financial assets measured at amortised cost – Item 40 4.1 Financial assets measured at amortised cost: breakdown of amounts due from banks by type
“Other loans, Other” includes cash collateral held by counterparties for interest rate swaps (€6,289 million as collateral pursuant to Credit Support Annexes), entered into for cash flow and fair value hedging purposes by BancoPosta RFC.
In addition, “Other loans, Other” includes trade receivables for €52 million arising from contracts with customers, accounted for in accordance with IFRS 15 (€70 million at 31 December 2019) mainly relating to financial services and personal loan distribution.
4.2 Financial assets measured at amortised cost: breakdown of amounts due to customers by type
The sub-item “Reverse repurchase agreements” refers to agreements of €364 million entered into with the Cassa di Compensazione e Garanzia SpA (hereinafter the Central Counterparty) for the temporary use of liquidity from private customer deposits. These transactions are guaranteed by securities for a total nominal amount of €360 million. The fair value of Reverse repurchase agreements is shown in Level 2 of the fair value hierarchy.
Financial assets and liabilities relating to repurchase agreements managed through the Central Counterparty that meet the requirements of IAS 32 are offset. The effect of netting at 31 December 2020, already included in the exposure to net balances, amounted to €363 million (€1,158 million at 31 December 2019).
Receivables arisen from contracts with customers, which fall within the scope of IFRS 15, amount to €991 million (€782 million at 31 December 2019). These are mainly due to financial services, pension payments, interest on postal deposits, and personal loan distribution, net of any loss provisions for €47 million (€40 million at 31 December 2019). Information on the dynamics of total value adjustments is described in Part E, Section 1.
At 31 December 2020 the total fair value of these instruments, inclusive of €236 million in accrued interest, amounts to €34,760 million, of which €31,188 million classified in Level 1 of the fair value hierarchy and €3,572 million classified in Level 2.
4.3 Financial assets measured at amortised cost: breakdown of amounts due from customers by debtor/issuer
Securities related to “Other financial companies” for a carrying amount of €3,300 million refer to fixed-rate securities for a total nominal amount of €3,000 million issued by Cassa Depositi e Prestiti and guaranteed by the Italian State.
Financial assets measured at fair value through other comprehensive income 2.
Section 8 – Property, plant and equipment – Item 80 BancoPosta does not own property, plant and equipment either for operating or investment purposes.
Deferred tax assets through Equity 167 31 30 5 - - - - 197 36 10.2 Deferred tax liabilities: breakdown
Deferred tax liabilities through Equity 496 93 61 12 557 105
c) due to changes in accounting policies (6) 3. 2 Reductions of tax rates - a ) transformation into tax credit pursuant to Law 214/2011 - 10. 4 Changes in deferred tax liabilities through Profit or loss
(€m) Total at 31/12/2020 Total at 31/12/2019 2.1 Deferred tax liabilities recognised in the year (4) a ) relating to previous years - b ) due to changes in accounting policies (2) 2. 2 New taxes or tax rate increases - 3. 1 Deferred tax liabilities derecognised in the year 1 b ) due to changes in accounting policies - 3. 2 Reductions of tax rates - -
(€m) Total at 31/12/2020 Total at 31/12/2019 2.1 Deferred tax assets recognised in the year 24 11 a) relating to previous years - b ) due to changes in accounting policies - 2. 2 New taxes or tax rate increases - 3. 1 Deferred tax assets derecognised in the year (182) (148)
There are no non-current assets held for sale or discontinued operations at the reporting date.
Section 12 – Other assets – Item 120 12.1 Other assets: breakdown
Section 1 – Financial liabilities measured at amortised cost – Item 10 1.1 Financial liabilities measured at amortised cost: breakdown of amounts due to banks by type
At 31 December 2020, €9,701 million is due to banks under the terms of “Loans, repurchase agreements” entered into with primary financial institutions involving securities with a total nominal value of €8,856 million. These regard €5,109 million in Long Term Repos and €4,592 million in loans, with the resulting proceeds invested in Italian fixed income government securities and utilised as funding for incremental deposits used as collateral in collateralisation transactions. At 31 December 2020, repurchase agreements with a nominal value of €900 million were subject to fair value hedges, entered into during the year to hedge interest rate risk.
Repurchase agreements are classified as fair value Level 2 transactions, whereas the fair value of other types of transaction included in this line item approximates to their carrying amounts and they are classified as Level 3.
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1.
At 31 December 2020 “Loans, repurchase agreements” amount to €5,010 million, reflecting transactions entered into with Central Counterparty in relation to securities with a nominal amount of €4,599 million. These regard €1,974 million in Long Term Repos and €3,036 million in loans, with the resulting proceeds invested in Italian fixed income government securities and utilised as funding for incremental deposits used as collateral in collateralisation transactions.
Section 2 – Financial liabilities held for trading – Item 20
B. Derivative instruments 1.2 Connected to the fair value option 2.2 Connected to the fair value option * Fair value calculated excluding any changes in value due to changes in the credit standing of the issuer over the date of issue.
Financial liabilities held for trading relate to a forward sale agreement for 400,000 ordinary shares of Visa Incorporated (discussed in Section 2 of Assets).
Fair value at 31/12/2019 Notional amount* at 31/12/2019Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 * The settlement price of derivatives involving the exchange of principal (securities or other assets) has been indicated, as required by Bank of Italy Circular 262/2005.
Section 8 – Other liabilities – Item 80 8.1 Other liabilities: breakdown
The sub-item “Tax payables to revenue agency” mainly includes: z €1,474 million in stamp duty accrued to 31 December 2020 on outstanding Interest-bearing Postal Certificates in accordance with the requirements referenced in Part B, Assets, Table 12.1; z €52 million in the payable for virtual stamp duty to the tax authorities; z €10 million in tax withholdings on current account interest earned by customers.
“Items in process, other” refer, among other things, to domestic and foreign transfers and BancoPosta’s operations for amounts to be credited to customers, mainly in the first few days of 2021.
The decrease in the sub-item “Other items” compared to 31 December 2019 is due to the settlement of prior items resulting from an overall process of revision of estimates completed in the year under review, with consequent positive effects recognised in the statement of profit or loss in “Item 200 - Other operating income/(expenses)”.
Movements in current tax assets and liabilities receivable from and payable to Poste Italiane SpA outside the ring-fence are shown below: Description (€m)
9.2 Other information Measurement of the liability entails actuarial computations for which the following assumptions were used in 2020 and 2019: Economic and financial assumptions 31/12/2020
Items/Amounts (€m) Total at 31/12/2020 Total at 31/12/2019 1. Provisions for credit risk relating to financial commitments and guarantees given - 2. Provisions for other commitments and guarantees given - 3. Provisions for retirement benefits - 4.
The composition of “Other provisions” is provided in Table 10.6, below.
B.3 Changes due to changed discount rates - - - -
The main changes are commented in the remainder of this section.
Section 11 – Redeemable shares – Item 120 Nothing to report.
12.4 Profit reserves: other information At 31 December 2020, retained earnings amounted to €1,142 million, increased compared to 31 December 2019 by the allocation of €85 million, as approved by the General Shareholders’ Meeting of 15 May 2020.
Other reserves amounted to €1,211 million, including the initial reserve of €1,000 million provided to BancoPosta RFC on its creation, €210 million in additional capital contributions in 2018, and €1 million for incentive plans reserves, described in Part I.
Regarding the availability and distributability of the reserves of BancoPosta RFC, reference should be made to the information provided in Section 5, Table B.3 - Availability and distributability of reserves - of this section - Financial statements of Poste Italiane - of the Annual Report.
“Financial assets measured at fair value through other comprehensive income” relate to securities used as collateral in repurchase agreements and to securities provided as collateral to counterparties with which interest rate swap transactions with negative fair value are in place. “Financial assets measured at amortised cost” relate to securities used as collateral in repurchase agreements and securities provided as collateral to counterparties in interest rate swaps with negative fair value and in repurchase agreements.
Type of services (€m) Amount 1. Execution of orders on behalf of customers 2. Individual portfolio management 3. Custody and administration of securities 62,318 a) third-party securities in custody: associated with depositary bank services (excluding portfolio management) 1. securities issued by the reporting bank b ) other third-party securities in custody (excluding portfolio management): other 2,592 1. securities issued by the reporting bank c ) third-party securities deposited with third parties 2,592 d) own securities deposited with third parties 59,726 a) Postal Savings Books 103,710 b) Interest-bearing Postal Certificates 145,017
The above tables have been compiled in accordance with IFRS 7, which requires a specific disclosure regardless of whether or not the financial instruments have been offset in the financial statements.
Other transactions FY 2020 FY 2019 1. Financial assets measured at fair value through profit or loss - - - - 1. 1 Financial assets held for trading - - - - 1. 2 Financial assets measured at fair value - - - - 1.
The sub-item “Financial liabilities” reflects mainly interest income accruing during the year on repurchase agreements.
The sub-item “Financial assets” mainly includes interest expense on the deposit at MEF (Buffer account) for €6 million and interest expense accrued during the year for repurchase agreements for €2 million.
“Management, brokerage and advisory services” include, within the context of the distribution of other products, fees receivable in return for the collection of postal savings deposits, totalling €1,851 million. This service relates to the provision and redemption of Interest-bearing Postal Certificates and payments into and withdrawals from Postal Savings Books, carried out on behalf of Cassa Depositi e Prestiti under the Agreement expired 31 December 2020 and being renewed.
Revenue from contracts with customers relate mainly to: (i) revenue from management, brokerage and advisory services these are recognised over time and measured on the basis of the volumes placed, quantified on the basis of commercial agreements with financial institutions. With regard to the remuneration for postal savings deposits, the agreement entered into with Cassa Depositi e Prestiti provides for the payment of a variable fee when certain levels of funding are reached, the quantification of which is determined annually on the basis of volumes of deposits and early redemptions; certain commercial agreements, entered into with leading financial partners for the placement of loan products, provide for the relegation of placement fees in the event of early redemption or subrogation by customers; (ii) revenue for collection and payment services: recognised at point in time on the basis of the number of transactions accepted at the counter (e.g. commissions on postal current account slips) and valued on the basis of the contractual terms of sale and recognised over time based on the customer’s use of the service, mainly with reference to commissions on delegated services and debit cards; (iii) revenue for current account maintenance and management services: recognised over time, measured on the basis of the service rendered and valued on the basis of the contractual terms offered to customers.
2.2 Fee and commission income by product and service distribution channel
Channels/Amounts (€m) FY 2020 FY 2019 3. third-party products and services 2,731 2,828
C. other distribution channels: - 3. third-party products and services - -
6. door-to-door marketing of financial instruments, products and services - d ) collection and payment services (287) (331)
2. Financial assets measured at fair value through other comprehensive income 399 (97) 302 352 (3) 349
7.2 Net change in value of other financial assets and liabilities measured at fair value through profit or loss: breakdown of other financial assets mandatorily measured at fair value
2. Financial assets in foreign currencies: exchange differences x x x x (6)
FY 2020 FY 2019 * Figures expressed in full time equivalent terms.
- credit and debit card supply services - 3 ) Advisory and other professional services (16) (12)
Section 11 – Net provisions for risks and charges – Item 170 11.3 Net provisions for other risks and charges: breakdown
Section 12 – Net losses/(recoveries) on property, plant and equipment – Item 180
Section 13 – Net losses/(recoveries) on intangible assets – Item 190 Nothing to report.
Profit components/Amounts (€m) FY 2020 FY 2019 1. Burglaries and theft (6) (4)
Section 15 – Profits/(Losses) on investments – Item 220 Nothing to report.
Section 17 – Impairment of goodwill – Item 240 Nothing to report.
3. Reduction in current taxes (+) - 3. bis Reduction in current taxes due to tax credit pursuant to Law 214/2011 (+) - 4. Increase/(decrease) in deferred tax assets (+/-) (24) (58)
The decrease in the tax rate is mainly due to the effects deriving from the recognition of the Patent Box.
Section 20 – Profit/(Loss) after tax from discontinued operations – Item 290
Items (€m) FY 2020 FY 2019 10. Profit/(Loss) for the year 629 611
Property, plant and equipment - 80. Non-current assets and disposal groups held for sale - 90. Share of valuation reserve attributable to equity-accounted investments - 100. Tax expense on other comprehensive income not reclassified to Profit or loss - -
Other components of comprehensive income reclassified to Profit or loss 110. Hedges of foreign investments: - a ) changes in fair value - b ) reclassified to Profit or loss - a ) changes in value - b ) reclassified to Profit or loss - a ) changes in fair value (27) 98 b) reclassified to Profit or loss 3 (60)
Share of valuation reserves attributable to equity-accounted investments: - a ) changes in fair value - b ) reclassified to Profit or loss - 180.
190. Total other comprehensive income 1,195 1,068 200. Comprehensive income (Items 10+190) 1,824 1,679
Introduction 188. Amendment of art. 1, paragraph 1097 of Law 296 of 27 December 2006, introduced by art. 1, paragraph 285 of the 2015 Stability Law (Law 190 of 23 December 2014).
The funds raised by private customers on postal current accounts must be used in Eurozone government bonds and, for a portion not exceeding 50% of the funds raised, in other securities backed by the Italian government guarantee188, whilst deposits by Public Administration entities are deposited with the MEF.
In 2020, BancoPosta RFC’s operations focused on investment of the significantly increased volume of current account deposits, the reinvestment of funds deriving from maturing government bonds and in the active management of financial instruments.
Due to the monetary policy measures adopted by the ECB to mitigate the impact of the Coronavirus pandemic on the Eurozone economy, financial year 2020 was characterised by a reduction in yields on Italian government securities (the 10-year BTP fell from 1.4% to 0.5%), which brought the BTP-Bund spread to 111 basis points compared to 160 last year.
The investment profile is based on the constant monitoring of habits of current account holders and the use of a statistical/ econometric model that forecasts the interest rates and maturities typical of postal current accounts. Accordingly, the portfolio composition aims to replicate the financial structure of current accounts by private customers. Management of the relationship between the structure of deposits and investments is handled through an appropriate Asset & Liability Management system. The above-mentioned system is thus the general reference for the policy of investments (the limits of which are determined by specific Guidelines approved by the Board of Directors) in order to limit exposure to interest rate and liquidity risks.
The management of investments and risk hedging related to BancoPosta RFC have been assigned by means of a specific mandate to the specialist functions of BancoPosta Fondi SpA SGR, a Poste Italiane Group company; In constructing the Risk Model used by BancoPosta RFC, account was also taken of the existing prudential supervisory standards for banks and the specific instructions for BancoPosta, published by the Bank of Italy on 27 May 2014 with the third revision of Circular 285 of 17 December 2013.
The above prudential standards have imposed the same obligations on BancoPosta as those applicable to banks in terms of corporate governance, internal controls and risk management, requiring, among other things, achievement of the following objectives: z definition of a Risk Appetite Framework (RAF); z oversight of implementation of the Company’s strategies and policies; z the containment of risks within the limits set by the RAF; z protection of the value of assets and against losses; z identification of material transactions to be subject to prior examination by the risk control function; z application of the internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy assessment process (ILAAP).
The limits for BancoPosta RFC’s financial transactions contain rating limits that only permit dealings with investment grade counterparties. The limits referred to above have been established by the “Guidelines on Poste Italiane SpA’s financial management”189 for BancoPosta RFC. Specifically, as regards rating limits, transactions are allowed solely with investment grade counterparties and Eurozone government issuers with a rating at least equal to that of the Italian Republic.
190. According to prudential regulations, with reference to the rules on Large Exposures, risk-weighted assets must remain below 25% of own funds. As a rule, exposures are recognised at nominal value, taking into consideration any credit risk mitigation techniques. To take into account the lower risk related to the nature of the borrower, more favourable weighting factors are applied.
Below, the main assumptions adopted in determining the single factors are illustrated: z PD: as indicated from the start a Point in Time (PIT) and forward-looking valuation has been adopted; z LGD: use has been made of the Internal Ratings-Based (IRB) Base Approach under the Basel guidelines (45% for senior risk assets, 75% for subordinated risk assets); z EAD: exposure calculated prospectively until maturity of the instrument, starting from the development of projected cash flows. In the development account was taken of specific indexation assumptions for every asset class (fixed income securities, floating-rate securities, inflation-indexed securities, etc.); z TF: the effective interest rate of each exposure was used as discount factor.
This change in notches is compared with a threshold that takes into account the following factors: z the rating of the financial instrument at the time of investment; z the rating of the financial instrument at the reporting date; z the seniority of the position within the portfolio (vintage factor); z an additive factor to mitigate the non-linearity of the PD vis-à-vis the rating classes194; z a judgemental factor to be used only in the presence of sudden changes in the creditworthiness not yet reflected by the rating195.
With respect to payment delays, the definition of default is based on the following approach: z late payments, even by one day, or debt renegotiation for financial instruments with sovereign counterparties; z payments 90 days past due, for financial instruments with banking and corporate counterparties.
As to the estimation techniques used, it is noted that since the approaches to calculate the PD for Sovereign, Banking and Corporate counterparties cannot use default events, as they are not frequent, a shadow rating approach was adopted.
The amount of expected losses on financial instruments in the RFC is mainly attributable to exposures to the Italian Republic. In the calculation of the ECL, the sensitive parameter is the PD which, in the case of the Italian Republic, is estimated through the application of an internal model dedicated to sovereign counterparties used in macroeconomic variable inputs. The sensitivity of the PD, and therefore of the ECL, to these macroeconomic factors can be assessed by comparing the PD value of the Italian Republic in two forecast scenarios for 2021.
At 31 December 2020, the following sensitivity analysis was performed on financial instruments relating to BancoPosta RFC: z the application of the model to a scenario characterised by an increase in the Debt/GDP ratio of 4% would result in an increase in the PD of the Italian Republic of 9%, with a negative effect on the fund to cover expected losses of approximately €3 million; z the application of the model to a scenario characterised by a decrease in the Debt/GDP ratio of 4% would determine a decrease in the PD of the Italian Republic of 19% with a consequent positive effect of approximately €6 million on the fund to cover expected losses.
BancoPosta RFC adopts credit and counterparty risk mitigation techniques. Specifically: z regarding hedging derivatives and repurchase agreements, credit and counterparty risks are mitigated by entering into a master netting agreement and requiring collateral in the form of cash or government securities; z in relation to trade receivables credit terms are extended for customers, requesting, in certain cases, guarantees or sureties issued by prime banks or insurance companies.
There were no impacts from the Covid-19 pandemic on guarantees and other credit risk mitigation instruments.
Debt instruments secured by guarantees or other credit risk mitigation instruments are bonds issued by CDP SpA guaranteed by the Italian State and subscribed by BancoPosta RFC, amounting to a nominal value of €3,000 million at 31 December 2020. These are recognised as financial assets measured at amortised cost and, in determining the associated expected credit losses, account was taken of the PD of the Italian Republic.
To mitigate the risks arising from the extension of credit terms to its customers, BancoPosta RFC has implemented a policy and suitable guidelines that govern the management of trade receivables, the terms and conditions of payment applicable to customers and defines the corporate process aimed at checking the customer’s creditworthiness, as well as the sustainability of the business risk inherent in the contract involving extended payment terms.
At 31 December 2020, unsecured trade receivables minus the relevant loss provisions amount to €1,043 million.
Other performing exposures Total 1. Financial assets measured at amortised cost - - - 70 51,958 52,028 2.
BancoPosta RFC Separate report for the year ended 31 December 2020 Notes – Part E – Information on risks and related hedging policies
A.1.3 Distribution of financial assets by past due categories (carrying amounts)
Over 90 days 1. Financial assets measured at amortised cost - - 10 50 10 - - 2.
A.1.4 Financial assets, commitments to disburse funds and financial guarantees given: overall impairment losses/recoveries and overall provisions
Total provisions for commitments to disburse funds and financial guarantees given
Assets in stage 1 Assets in stage 2 Assets in stage 3 of which: purchased or originated impaired financial assets
The increase in the provision to cover expected losses takes account of the increased risk caused by the current pandemic.
Stage 2 reflects mainly value adjustments related to trade receivables for which the loss provisions are measured in accordance with the simplified approach.
A.1.6 On- and off-balance-sheet credit exposures to banks: gross and net amounts
“Off-balance sheet exposures, Performing” relates to the counterparty risk associated with derivatives registering fair value gains, gross of any netting agreements197, securities provided as collateral under counterparty risk mitigation agreements and for Repo financing with Securities Financing Transactions (SFT)198 margins.
197. BancoPosta RFC is not a party to enforceable master netting agreements or similar arrangements meeting the requirements of IAS 32, paragraph 42 for offsetting in the financial statements but used standard bilateral netting agreements that allow, in the event of the counterparty’s default, the offsetting of debit and credit positions in relation to derivative financial instruments.
“Off-balance sheet exposures, Performing” relates to the counterparty risk associated with derivatives registering fair value gains, gross of any existing netting agreements, and to spot purchases of government securities not yet settled (regular way).
A.1.9 On-balance sheet credit exposures to customers: trends in gross non-performing exposures
B.2 Transfers from acquired or originated impaired financial assets - - -
B.3 Transfers from other categories of non-performing exposures - - -
C.7 Contract amendments without termination - - - - of which: transferred and not derecognised - - -
A.1.11 On-balance-sheet non-performing credit exposures to customers: trends in overall impairment losses/recoveries
B.1 Impairment losses to acquired or originated impaired financial assets - X - X - X
B.4 Transfers from other categories of non-performing exposures - - - - - -
C.1 Reversal of impairment losses on valuation - - - - - -
C.2 Reversal of impairment losses on collection - - - - - -
C.5 Transfers to other categories of non-performing exposures - - - - - - - of which: transferred and not derecognised - - - - - -
A. Financial assets measured at amortised cost 1,866 4,496 44,591 1 - - 1,169 52,123
B. Financial assets measured at fair value through other comprehensive income - - 42,656 - - - - 42,656
2 from A+ to A- from A1 to A3 from A+ to A- from AH to AL
3 from BBB+ to BBB- from Baa1 to Baa3 from BBB+ to BBB- from BBBH to BBBL
4 from BB+ to BB- from Ba1 to Ba3 from BB+ to BB- from BBH to BBL
6 CCC+ and below Caa1 and below CCC+ and below CCC
Other entities 1. Guaranteed onbalance sheet credit exposures: - of which nonperforming
B.1 Distribution of on- and off-balance sheet credit exposures to customers by economic sector
B.2 Geographical distribution of on- and off-balance sheet credit exposures to customers
Carrying amount of which: securitised of which: subject to repurchase agreements of which nonperforming
Carrying amount of which: securitised of which: subject to repurchase agreements
C. Financial assets measured at fair value - - - - - - -
D. Financial assets measured at fair value through other comprehensive income 8,883 - 8,883 - 8,406 - 8,406
E. Financial assets measured at amortised cost 6,366 - 6,366 - 6,305 - 6,305
Market risk relates to: z price risk: the risk that the value of a financial instrument fluctuates as a result of market price movements, deriving from factors specific to the individual instrument or the issuer, and factors that influence all instruments traded on the market; z foreign exchange risk: the risk that the value of a financial instrument fluctuates as a result of movements in exchange rates for currencies other than the functional currency; z fair value interest rate risk: the risk that the value of a financial instrument fluctuates as a result of movements in market interest rates; z spread risk: the risk relates to the potential fall in the value of bonds held, following a deterioration in the creditworthiness of issuers; z cash flow interest rate risk: the risk that the cash flows will fluctuate because of movements in market interest rates; z interest rate risk of future cash flows: the risk that the cash flows will fluctuate because of movements in inflation rates in the market.
2.1 Interest rate and price risks - supervisory trading book At 31 December 2020, there were financial liabilities for trading deriving exclusively from the stipulation of a forward contract for the sale of 400 thousand ordinary shares of Visa Incorporated for the purpose of stabilising their yield. This transaction does not meet the “trading intent” requirement, as defined by art. 104 of EU Regulation no. 575/2013, for classification in the “Regulatory trading book”; this intent is, however, excluded from the “Guidelines on Poste Italiane SpA’s financial management” for BancoPosta RFC.
Information on the market risks associated with this transaction is provided in the “Banking Book” section.
A. Generalities, management policies and interest rate and price risk measurement methods
Fair value interest rate risk primarily refers to the effects of changes in interest rates on the price of fixed rate financial instruments or variable rate financial instruments converted to fixed rate via cash flow hedges and, to a lesser degree, the effects of changes in interest rates on the fixed components of floating rate financial instruments or fixed rate financial instruments converted to variable rate via fair value hedges. The impact of these effects is directly related to the financial instrument’s duration199.
Spread risk regards commitments in Eurozone government bonds or guaranteed by the Italian government and classified as financial assets measured at fair value through other comprehensive income. 2020 witnessed an average decrease in the yields on Italian government securities compared with the previous year and, at 31 December 2020, the spread between ten-year Italian government securities and German bunds is approximately 111 bps, down on the figure for the previous year (160 bps at 31 December 2019).
In the reporting period, as described above resulted in the portfolio of financial assets measured at fair value through other comprehensive income (notional of around €34 billion), held by BancoPosta RFC, an overall net increase in fair value of approximately €3.7 billion: this change was partly recognised in the profit or loss for a positive amount of approximately €1.7 billion relating to the change in the fair value of securities hedged against interest rate risk, whilst the positive change in the fair value of unhedged securities and the spread risk component (not hedged) was reflected in equity for approximately €2 billion.
Price risk relates to financial assets measured at fair value through profit or loss.
Unspecified maturity 3. Financial derivatives 3.1 With underlying securities - Options - Other derivatives 3.2 Without underlying securities - Options - Other derivatives 4. Other off-balance sheet transactions
In particular, the risk in question concerns: z In relation to financial assets measured at fair value through other comprehensive income, fixed income government securities for €42,638 million, consisting of fixed income bonds for €17,190 million, floating-rate bonds swapped into fixed income bonds through interest rate swaps of cash flow hedges for €2,257 million, inflation-indexed bonds for €2,656 million and fixed income bonds swapped into variable rate instruments through fair value hedge derivatives for €20,535 million (of which €18,096 million with forward starts); z In relation to hedge derivatives, forward sales of government securities for a notional amount of €2,449 million, classified as cash flow hedges.
Spread risk reflects the impact of the difference between yields on sovereign debt and the fair value of Eurozone government bonds, where such difference, or spread, reflects the perception of markets regarding issuers’ creditworthiness.
The value of the portfolio of Italian government bonds or backed by the guarantee of the Italian State is much more sensitive to the credit risk associated with the Italian Republic than to changes in so-called risk-free interest rates. This is due to the fact that changes in credit spreads are not hedged and regard the entire securities portfolio, meaning both the fixed and variable rate components. In this latter case, in fact, fair value derivatives, used to convert variable rate instruments, hedge only the risk-free interest rate risk and not credit risk. This means that a change in the credit spread has an equal impact on both fixed and variable instruments.
The sensitivity to the spread201 has been calculated by applying a shift of +/- 100 bps to the yield curve for Italian government bonds.
201. For sensitivity purposes, the swap rate curve and the BTP curve were used (10-year swap rate of 26.4 bps and the spread of the BTP compared to the 10-year swap rate of 80.7 bps).
Financial assets measured at fair value through other comprehensive income 2019 effects
Financial assets measured at fair value through other comprehensive income * The VAR for fixed-income securities also takes into account forward sales.
In order to jointly monitor spread and fair value interest rate risks, the following table shows the results of the VaR analysis conducted with reference to financial assets measured at fair value through other comprehensive income and the relevant derivative financial instruments, taking into account the variability of both risk factors: Average VaR (552) (412)
Taking into account both financial assets measured at fair value through other comprehensive income (including the related hedges outstanding) and forward sales, the combined analysis of spread risk and fair value interest rate risk at 31 December 2020 results in a potential loss of €226 million (VaR at the end of the period). The decrease in VaR at the end of the period, compared to €336 million at 31 December 2019, is due to the decrease in volatility recorded in the markets determined mainly by the actions put in place by the ECB to address the Covid-19 emergency. During the year, at the start of the pandemic, market volatility was extremely high, so much so that in March a VaR of €1,385 million was recorded.
The sensitivity to cash flow interest rate risk at 31 December 2019 and 31 December 2020 is summarised in the table below and was computed assuming a +/- 100 bps parallel shift in the market forward interest rate curve.
Cash flow inflation rate risk at 31 December 2020 relates to government inflation indexed bonds which were not hedged through the arrangement of cash flow hedges or fair value hedges entered into by BancoPosta RFC, having a nominal value of €2,143 million and a carrying amount of €2,844 million. The effects of sensitivity analysis are immaterial.
Financial liabilities held for trading (15) (12) 12 (12) 12 - -
Notes on the related equity instruments (shares) are contained in Part B, Assets, Table 2.5.
The VaR sensitivity analyses are shown below: Average VaR - (1)
Foreign exchange risk relates to losses that could be incurred on foreign currency positions, regardless of portfolio, through fluctuations in foreign exchange rates. In BancoPosta RFC’s case, this risk primarily derives from foreign currency bank accounts, foreign currency cash and VISA shares202.
Without netting agreements 1. Debt securities and interest rates - - - - - - - 2. Equity instruments and equity indexes - 51 - - - 51 - -
Specifically, the RFC holds interest rate swaps designated as fair value hedges with a floating “leg” indexed to EURIBOR and a notional value of €31,034 million.
BancoPosta RFC enters into: z forward purchases of government securities, to limit the exposure to interest rate risk deriving from the need to reinvest the cash generated by maturing bonds held in portfolio; z forward sales of government securities to pursue the stabilisation of returns.
Regarding fair value hedge instruments, the main source of ineffectiveness is the use of different spreads/fixed rates203 in determining the fair value of the hypothetical derivative and the derivative actually entered into. In particular, to evaluate the effectiveness of the hedge relationship, for the hypothetical derivative use is made of the mid-market spread/fixed rate, which makes the present value at the settlement date equal to zero, and for the actual derivative the interest rate agreed upon with the counterparty.
203. For Repurchase Agreements, hedging is carried out by defining the variable rate component simply indexed to EURIBOR and the fixed rate component that instead incorporates market conditions.
BancoPosta RFC designates as hedged items: z fixed income and index-linked portfolio securities and fixed-rate repurchase agreements, within the fair value hedge policy; z inflation-linked bonds and forecast transactions, in connection with cash flow hedge policies.
In particular, in fair value hedges of government securities, the credit risk of the Italian Republic is not hedged and is set for the duration of the swap. In addition, full hedges and partial hedges are implemented, with the start date equal to the date of purchase of the instrument (swap spot start) and after the purchase of the instrument (swap forward start), respectively.
With regard to fair value hedges of repurchase agreements, total hedges are in place, with an immediate start date.
For the purposes of the prospective effectiveness test, different approaches have been applied, depending on the characteristics of the hedging swap. Specifically: z the “Critical terms206” approach for swap spot start, for which it has been determined at inception that the characteristics of the fixed leg make it possible to replicate exactly the fixed cash flows generated by the hedged item; z the “Dollar offset through the hypothetical derivative” approach for forward start swaps and hedging swaps of the repurchase agreements for which the prospective effectiveness test is performed by calculating the hedge ratio between the change in fair value of the hypothetical derivative and the change in fair value of the actual derivative207. The hedge is considered effective if the hedge ratio falls in the interval between 80% and 125%.
Regarding cash flow hedges, BancoPosta RFC evaluates the effectiveness of the designated derivative in every hedging relationship through a retrospective effectiveness test and a prospective effectiveness test.
204. IAS 39 requires two effectiveness tests: • prospective effectiveness test: attests that the hedging relationship is expected to be highly effective in future periods; • retrospective effectiveness test: attests that the hedging relationship has been effective from inception to the reporting date. For a hedge to be effective, the prospective effectiveness test must show that the hedge is highly effective in offsetting fair value or cash flow movements attributable to the hedged instrument during the designation period, while the result of the retrospective test must show offset ratios ranging from 80% to 125%. A hedge can be ineffective when the hedging instrument and the hedged item: are in different currencies; have different maturities; use different underlying interest rates; are exposed to different counterparty risks; and when the derivative is not equal to zero at inception.
Without netting agreements 1. Debt securities and interest rates - 35,203 - - - 28,864 - 2. Equity instruments and equity indexes - - - - - - - -
Without netting agreements 1. Positive fair value 2. Negative fair value
A.3 OTC hedging financial derivatives: notional amounts, gross positive and negative fair value by counterparty
2. Financial assets measured at amortised cost - hedging: 1.1 Debt securities and interest rates 21,874 - 4,390 - 1,658 X
1.2 Equity instruments and equity indexes - - - - - X
Reclassifications to Profit or loss 3 - - - - - - - - of which: future transactions no longer expected of which: transfers to initial carrying amount of hedged instruments 3.3 Other information on trading and hedging derivatives
In addition to postal deposits, BancoPosta also funds itself through: z long-term repos, amounting to an outstanding €7.1 billion; z short-term deposits created through repurchase agreements as funding for incremental deposits used as collateral for interest rate swaps and Repos (collateral provided, respectively, under CSAs and GMRAs).
BancoPosta RFC’s maturity mismatch approach entails an analysis of the mismatch between cash in and outflows for each time band of the maturity ladder.
BancoPosta RFC’s liquidity is assessed, in the form of stress tests, through risk indicators (the Liquidity Coverage Ratio and Net Stable Funding Ratio) defined by the Basel 3 prudential regulations. These indicators aim to assess whether or not the entity has sufficient high-quality liquid assets to overcome situations of acute stress lasting a month, and to verify that assets and liabilities have sustainable maturity profiles assuming a stress scenario lasting one year. Taking into account the capital structure of BancoPosta RFC characterised by the presence of a high amount of EU government bonds and deposits mainly made up of retail deposits, these indicators are well above the limits imposed by prudential regulations.
211. The threshold amount is the amount of collateral that is not required to be provided under the contract; it therefore represents the residual counterparty risk to be borne by a counterparty.
To protect against this form of risk, BancoPosta RFC has formalised a methodological and organisational framework to identify, measure and manage the operational risk related to its products/processes.
Systematic measurement of the mapped risks has enabled the prioritization of mitigation initiatives and the attribution of responsibilities in order to contain any future impact.
A. Qualitative information The prudential regulations applicable to banks and investment firms from 1 January 2014 are contained in Bank of Italy Circular 285/2013, the purpose of which was to implement EU Regulation 575/2013 (the so-called Capital Requirements Regulation, or “CRR”) and Directive 2013/36/EU (the so-called Capital Requirements Directive, or “CRD IV”), containing the reforms required in order to introduce the “Basel 3” regulations. In the third revision of the above Circular212, the Bank of Italy has extended the prudential requirements applicable to banks to BancoPosta, taking into account the specific nature of the entity. As a result, BancoPosta RFC is required to comply with Pillar 1 capital requirements (credit, counterparty, market and operational risks) and those regarding Pillar 2 internal capital adequacy (Pillar 1 and interest rate risks), for the purposes of the ICAAP process. The relevant definition of capital in both cases is provided by the above supervisory standards213.
In view of the extension of prudential standards to BancoPosta, BancoPosta RFC is now required to establish a system of internal controls in line with the provisions of Bank of Italy Circular 285/2013, which, among other things, requires the definition of a Risk Appetite Framework (RAF) and the containment of risks within the limits set by the RAF214. Compliance with the objective, threshold and limit system established by the RAF influences decisions regarding profit distributions as part of capital management.
Amount at 31/12/2019 b) required by articles of association - - - Equity instruments measured at fair value through other comprehensive income - - - Hedges of equity instruments measured at fair value through other comprehensive income - - - Financial assets (other than equity instruments) measured at fair value through other comprehensive income - Property, plant and equipment - - - Hedges of foreign investments - - - Hedging instruments (undesigneted elements) - - - Non-current assets and disposal groups held for sale - - - Financial liabilites designated at fair value through profit or loss (changes in own credit rating) - - - Actuarial gains/(losses) on defined benefit plans (2) (2)
B.2 Valuation reserves for financial assets measured at fair value through other comprehensive income: breakdown
BancoPosta RFC’s own funds are all Common Equity Tier 1 (CET 1) and consist of: z other reserves, being revenue reserves, amounting to €1 billion originating from the creation of the ring-fence, and any further amounts attributed by Poste Italiane SpA that meet the requirements for inclusion in own funds215; z undistributed earnings, being BancoPosta RFC’s profits appropriated on approval of Poste Italiane SpA’s financial statements.
At 31 December 2020, CET 1 was €2,449 million, of which €50 million from the profit for the 2020 financial year (in compliance with the provisions of article 26 of EU Regulation no. 575/2013) and €47 million including: z €35 million from the application of the transitional provisions to mitigate the effects of IFRS 9 on financial assets measured at amortised cost216; z €12 million from the application to BancoPosta RFC of the prudential supervisory requirements relating to financial assets measured at fair value through other comprehensive income.
Based on prudential standards, BancoPosta is required to comply with the following minimum capital ratios: z Total capital ratio (the ratio of total own funds to total risk weighted assets - RWA217), equal to 10.5% (8% being the minimum requirement and 2.5% being the capital conservation buffer); z Common Equity Tier 1 ratio (the ratio of CET1 to total risk weighted assets - RWAs): equal to 7.0% (4.5% being the minimum requirement and 2.5% being the capital conservation buffer); z Tier 1 ratio (the ratio of Tier 1 to total risk weighted assets - RWAs): equal to 8.5% (6.0% being the minimum requirement and 2.5% being the capital conservation buffer).
Part H – Related party transactions 1. Payments to key management personnel Key management personnel consist of Directors of Poste Italiane SpA and first-line managers, whose compensation before social security and welfare charges and contributions are disclosed in table 4.4.5 in the notes on Poste Italiane SpA’s financial statements and have been charged to BancoPosta RFC as part of the services provided by Poste Italiane functions outside the ring-fence (see Part C, Table 10.5). The charges are calculated in accordance with specific operating guidelines (Part A, paragraph A.1, Section 4).
2. Related party transactions Related party transactions have been carried out on terms equivalent to those prevailing in arm’s length transactions between independent parties.
BancoPosta RFC Separate report for the year ended 31 December 2020 Notes – Part G – Business combinations
Consorzio Servizi Telef. Mobile ScpA - - - - - - -
Other related parties external to the Group - - - - - - -
Other related parties external to the Group - - - - - - (1) -
Long-term incentive scheme: Phantom Stock Plan The Annual General Meeting of Poste Italiane SpA’s shareholders held on 24 May 2016 approved the information circular for the “Long-term Incentive Plan for 2016-2018 (LTIP) – Phantom Stock Plan”, prepared in accordance with art 84-bis of the Regulations for Issuers. The LTIP, set up in line with market practices, aims to link a portion of the variable component of remuneration to the achievement of earnings targets and the creation of sustainable shareholder value over the long term.
The phantom stocks are awarded if the performance targets are achieved, and converted into a cash bonus based on the market value of the shares in the thirty stock exchange trading days prior to the delivery date for the phantom stocks, after the retention period (as specified below). The key characteristics of the Plan are described below.
The total number of phantom stocks awarded to the 4 Beneficiaries of the First Cycle of the Plan outstanding at 31 December 2020 amounted to 39,294.
The total number of phantom stocks awarded to the 6 Beneficiaries of the Second Cycle of the Plan amounted to 56,165 units.
The Performance Targets, common to all Beneficiaries, to which the vesting of the Rights and, therefore, the allocation of the Shares is conditioned, for the first award cycle are highlighted below: z a profitability indicator identified in the Group’s three-year cumulative EBIT used to recognise the continuity and sustainability of profitability results over the long term; z an indicator of shareholder value creation, based on the relative Total Shareholder Return, used to measure performance based on the value created for Poste Italiane’s shareholders compared with the FTSE MIB index218.
Vesting of the Rights and the awarding of the Shares is subject to achievement of the Performance Hurdle, designed to ensure sustainability of the Plan at Group level. The Performance Hurdle corresponds with achievement of a certain target for the Group’s cumulative EBIT over a three-year period at the end of each Performance Period. In addition, vesting of the phantom stocks is also subject to achievement of Qualifying Conditions, designed to ensure the stability of BancoPosta RFC’s capital and liquidity position, as follows: z Indicator of capital adequacy, (CET 1) at the end of the period; z Indicator of short-term liquidity, (LCR) at the end of the period; z RORAC risk-adjusted earnings at the end of the period.
A further Retention Period of one year will be applied to both the up-front and deferred portions.
The valuation was carried out using an internal pricing tool that adopts simulation models consistent with the requirements of the reference accounting standards and takes into account the specific characteristics of the Plan.
Short-term incentive schemes: MBO On 27 May 2014, the Bank of Italy issued specific Supervisory Standards for BancoPosta (Part IV, Chapter I, “BancoPosta” including in Circular 285 of 17 December 2013 “Prudential supervisory standards for banks”) which, in taking into account BancoPosta’s specific organisational and operational aspects, has extended application of the prudential standards for banks to include BancoPosta RFC. This includes the standards relating to remuneration and incentive policies (Part I, Title IV, Chapter 2 “Remuneration and incentive policies and practices” in the above Circular 285). These standards provide that a part of the bonuses paid to BancoPosta RFC’s Risk Takers may be awarded in the form of financial instruments over a multi-year timeframe.
The most recent short-term management incentive schemes (MBO 2019 and MBO 2020) provide, where the incentive exceeds a materiality threshold, for the payment of a portion of the bonus accrued in the form of shares in Poste Italiane SpA and the application of deferral mechanisms: z 60% of the incentive over 5 years pro-rata for the head of the BancoPosta function; z 40% over 5 years pro-rata for the Senior Management Beneficiaries; z 40% over 3 years pro-rata for the Other Beneficiaries.
The allocation of Phantom Stocks (MBO 2017 and 2018) and Rights to receive Shares (MBO 2019 and 2020) is subject to the existence of a Performance Hurdle (Group Profitability EBIT) and Qualifying Conditions as follows: z Capital adequacy, (CET 1); z Short-term liquidity, (LCR).
The valuation was carried out using an internal pricing tool that adopts simulation models consistent with the requirements of the reference accounting standards and takes into account the specific characteristics of the Plan. At 31 December 2020, the number of Phantom Stocks relating to the 2017 and 2018 MBO plans in place was 78,110. During the year, a cost adjustment of approximately €0.1 million was recognised, payments of approximately €0.2 million were made and the liability recognised amounted to approximately €0.6 million.
The economic flows generated by BancoPosta RFC’s operations and the related performance are reported internally on a regular basis to the top management without identifying different segments. BancoPosta RFC’s results are consequently evaluated by senior management as one business division.
Attestation of the Consolidated Financial Statements of the Poste Italiane Group at 31 December 2020 pursuant to art. 154-bis, paragraph 5, of Legislative Decree 58/1998 and art. 81-ter of CONSOB Regulation no. 11971 of 14 May 1999 1. The undersigned Matteo Del Fante, as Chief Executive Officer, and Alessandro Del Gobbo, as Manager Responsible for Financial Reporting of Poste Italiane S.p.A., also taking into account the provisions of art. 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24 February 1998, attest to: - the adequacy, in relation to the characteristics of the Poste Italiane Group, and - the effective application of the administrative and accounting procedures for the formation of the Consolidated
Financial Statements of the Poste Italiane Group in the period between 1 January 2020 and 31 December 2020.
3.2 The report on operations includes a reliable analysis of the operating and financial performance and the situation of the issuer and the companies included in the scope of consolidation, together with a description of the main risks and uncertainties to which they are exposed.
Attestation of the Financial Statements at 31 December 2020 pursuant to art. 154-bis, paragraph 5, of Legislative Decree 58/1998 and art. 81-ter of CONSOB Regulation no. 11971 of 14 May 1999 1. The undersigned Matteo Del Fante, as Chief Executive Officer, and Alessandro Del Gobbo, as Manager Responsible for Financial Reporting of Poste Italiane S.p.A., also taking into account the provisions of art. 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24 February 1998, attest to: - the adequacy, in relation to the characteristics of the company, and - the effective application of the administrative and accounting procedures for the formation of the Financial
Statements in the period between 1 January 2020 and 31 December 2020.
S.p.A. (hereinafter also "Company", "Poste" or "Parent Company") fulfilled its statutory duties in accordance with the Italian Civil Code and Legislative Decree 39/2010, as amended by
Consolidated Law on Finance), pursuant to Presidential Decree 144/2001 “Regulations governing the services provided by BancoPosta”, and in accordance with the provisions applied to BancoPosta by the relevant authorities. In conducting its duties, the Board of Statutory
Auditors also took into account the indications contained in the Corporate Governance Code for Listed Companies, which the Company formally adopted with the Board of Directors’ (also
"BoD") resolution of 31 July 2015. The oversight activities required by law were also conducted in accordance with the code of conduct for Boards of Statutory Auditors of listed companies, drawn up by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili
Annual General Meeting of shareholders held on 28 May 2019, are Mauro Lonardo, Chairman, and Anna Rosa Adiutori and Luigi Borré, standing Auditors.
The Board of Statutory Auditors (also "Board") obtained the information necessary in order to carry out its appointed duties by attending the Board of Directors’ and Board Committee meetings, by taking part in the induction sessions organised by the Company, by holding meetings with the Company’s principal functions and - above all with internal auditing staff and the Supervisory Board - and with the Company’s management, as well as through ongoing contact with the Manager responsible for financial reporting and with PricewaterhouseCoopers
S.p.A. (PwC), the Independent Auditor appointed to audit the annual and consolidated financial
On 30 January 2020, the Control Body approved the new "Regulations governing the functioning of the Board of Statutory Auditors of Poste Italiane S.p.A.”, which regulates the procedures for functioning of the Board of Statutory Auditors in compliance with the law, the
By-laws and the provisions of Bank of Italy Circular 285 of 17 December 2013, as well as the principles set out in the Corporate Governance Code for Listed Companies and the Code of
Consob announcement DEM 1025564/2001, following the numerical order established thereby, as amended by announcement DEM/3021582 of 4 April 2003 and then by announcement
A) Supervisory activities during the period of the health emergency from Covid-19.
The Board of Statutory Auditors acknowledges that Poste, in managing the Covid-19 pandemic, has implemented a number of initiatives, reorganising the way it provides its services to reflect changes in the current epidemiological situation and the resulting government measures. The
Covid-19 pandemic, the Board of Statutory Auditors refers to the detailed information provided by the Company in its Report on Operations.
The Board of Statutory Auditors monitored on an ongoing basis the economic and financial effects of the pandemic, also from a prospective standpoint, in order to identify any critical issues that could have a negative impact on the Company's financial position and the remedial measures implemented by the Company to address the crisis.
In light of attention notice no. 1/21 issued on 16 February 2021 by Consob, the Board notes that it has carried out its supervisory activities in line with the instructions provided by the
Authority. In particular, information flows with the Management Body responsible for preparing the draft financial statements were strengthened and effective and timely communication with the Independent Auditor was promoted, in order to mutually exchange useful information for the performance of their respective tasks, also pursuant to art. 150, paragraph 3, of the Consolidated Law on Finance.
In 2020, the Board of Statutory Auditors met with the corresponding Control Bodies of the
Subsidiaries for the mutual exchange of information on the administration and control systems and on the general performance of the business, pursuant to art. 151 of the Consolidated Law on Finance.
The Board of Statutory Auditors also reviewed the assessments made by the Company regarding the existence of the going concern assumption and the adequacy of the Internal
Control System, as well as the risks related to the difficulty of performing on-site audits due to the restrictions connected with the Covid-19 pandemic.
B) Oversight of compliance with the law and the Company’s By-laws and with correct corporate governance principles, the adequacy of the organisational structure and the administrative and accounting systems adopted by the Company, and with Legislative
1. Most significant transactions having an impact on the results of operations and financial position and their compliance with the law and the By-laws.
The Board of Statutory Auditors monitored that the meetings were conducted in accordance with the By-laws and the laws and regulations that govern the operation of meetings; based on the information provided during the meetings of the Board of Directors, there is no evidence that the Directors engaged in transactions involving potential conflicts of interest with the
2. and 3. Exceptional or unusual transactions, including those with Group companies or related parties.
BancoPosta and Poste's related parties; ü infra-group or related party transactions did not give rise to critical issues; Reports and Attestations
The Board oversaw effective implementation of the rules governing related party transactions, by attending all meetings of the Related and Connected Parties Committee (“CP Committee”).
Moreover, the Directors have provided disclosure on intra-group and related party transactions in the Report on Operations and the notes to the separate and consolidated financial statements.
Following the issuance of the new Consob Regulation approved by resolution no. 21624 of 10
December 2020, the Company started the preparatory and preliminary activities for updating the Guideline for the management of transactions with related and connected parties. The new
Guideline will need to be approved by 30 June 2021 as the new Consob regulations will take effect from 1 July 2021.
“Committee responsible for internal and statutory auditing”, oversaw the financial reporting process.
Company’s Chief Executive Officer to issue the attestations required by art. 154-bis of the
Financial Reporting (SCIIF), during which the Manager responsible for financial reporting stated that the results showed the system to be effective and that significant weaknesses could
be ruled out. In addition, the Manager responsible for financial reporting represented that the activities for the attestation of the 2020 Annual Financial Statements were not materially impacted by the health emergency and were carried out consistently with the Governance 262 model. In particular, the activities concerned all the significant processes of the companies that make up the Large Portion: Poste Italiane, Poste Vita, Poste Assicura, SDA Express Courier,
The Report by the Manager responsible for financial reporting shows that over the years, while the scope of companies and processes has expanded, there has been an overall containment of the exceptions noted in both the functional and IT areas, indicating achievement of the maturity level of the 262 model. The exceptions noted in the second half of 2020, which are not numerically significant, are mostly due to some different operating methods in carrying out controls linked to the health emergency, as well as the recent introduction of the new accounting system.
PKC (1,107), revealed a positive outcome for 91% of the tests completed. The monitoring of the Action Plans showed that 91% of the planned initiatives were actually implemented.
System - SCI assessment) for harmonisation with Integrated Compliance and for the transition to the GRC-Archer platform, in order to facilitate coordination with compliance specialists, as well as to include SCIIF in integrated reporting; - the identification of synergies between the 262 and tax models - through the identification of SCIIF controls that also guarantee coverage of tax risks - in order to enable the coordination of the mapping and assessment phases of controls and make verification activities more efficient; - the completion of the adoption of the centralised model that envisages the figure of the
Manager responsible for financial reporting in the Parent Company and the subsidiary,
In terms of planning the 2021 activities of the Manager responsible for financial reporting, in addition to continuous monitoring of progress of the action plans following the exceptions identified by the assessment activities, the 262 procedures will be updated according to the results of the 262 independent audits and the organisational changes that have taken place.
Finally, envisaged are the updating of the self-assessment SCIIF Guideline, the transition of the attestation process to the GRC-Archer Group platform, the application of the SCIIF
Auditors of any actions or events deemed to be censurable or of an irregular nature requiring specific reporting pursuant to art. 155, paragraph 2, of Legislative Decree no. 58/1998
The administrative and accounting procedures adopted in preparation of the separate and consolidated financial statements, and of any other financial communication, have been drawn up under the responsibility of the Manager responsible for financial reporting who, together with the Chief Executive Officer, has attested to their adequacy with regard to the nature of
Auditor, Deloitte & Touche S.p.A., appointed by Annual General Meeting of Poste Italiane's shareholders to audit the separate and consolidated financial statements for the financial years
Group at 31 December 2020 and of the results of operations and cash flows for the year then ended, in accordance with the International Financial Reporting Standards as adopted by the European Union and with the regulations issued in implementation of article 9 of Legislative Decree 38/05; ü stated that, as required by art. 14, paragraph 2 e) of Legislative Decree 39/10 and article 123-bis, paragraph 4 of Legislative Decree 58/98, it has performed the audit procedures required under auditing standard (SA Italia) no. 720B in order to express an opinion of the consistency of the Report on Operations and of the specific information included in the Report on Corporate Governance and the Ownership Structure, referred to in article 123-bis, paragraph 4 of Legislative Decree 58/98, with Poste Italiane's separate and consolidated financial statements for the year ended 31 December 2020 and on their compliance with the law, as well as issue a statement on material misstatements, if any.
As a result, the Independent Auditor has also confirmed that the above Report on
The Independent Auditor’s reports do not contain qualifications or emphases of matter.
and the Independent Auditor concerning (i) provision for personnel leaving incentives, (ii)
In this regard, at the request of the Board of Statutory Auditors, the AFC Function and the
Manager responsible for financial reporting discussed in an articulated manner, the assessment logic adopted, as well as the support provided in terms of the accounting principles applied to the case. The line identified by management for the accounting treatment of the cases above has been analysed in detail and fully shared by the Independent Auditor.
Group's assets, noting that Deloitte confirmed the correctness of the accounting approach adopted by the Company, during the year, the Board of Statutory Auditors asked the Company to carry out in-depth studies and additional verifications with regard to the performance of "on site" expert work by an external Advisor, to support the work carried out by the Advisor appointed and suggested including in the relevant administrative and accounting process additional systematic periodic audits to identify any significant changes in the estimated residual useful life and residual value of fixed assets. Information about the impact of this review on the income statement (about €120 million less depreciation) is provided in the notes.
With regard to the treatment of items relating to BancoPosta RFC, the Board of Statutory
The financial statements also contain information on any liabilities and costs that may arise from pending legal proceedings. The Board of Statutory Auditors, together with the relevant
Company functions, examined in detail the methodology and process adopted in the analysis of litigation and in the analysis and evaluation of provisions for risks and charges for major disputes, and it requested to be periodically and promptly updated on the evolution thereof.
Board of Statutory Auditors obtained specific confirmation from the Independent Auditor that they agreed with the overall impairment procedure, and specifically with the following profiles: i) methods of composition of the cash generating units and in particular with regard to the scope of composition of the Mail Parcel & Distribution CGU with particular reference to the provisions of accounting standard IAS 36 ii) reasonableness of the assumptions underlying the long-term plan; iii) methods for establishing the cash flows of the 2021/2024 long-term plan; iv) discount rates for cash flows; v) growth rate of the flow relating to the terminal value. The figures in the 2021-2024 Plan were used excluding the effects of the Nexive and Sengi acquisitions (which became effective after 31/12/2020, the reporting date) without including additional alternative and improved strategic actions. In view of the synergies expected from the above transactions, this approach - which is consistent with the stricter interpretation of IAS
than the carrying amount, making impairment unnecessary. The method used to perform the impairment test was analysed and assessed by an independent expert, who issued an opinion stating that, while there were some areas that needed improvement, the method used to perform the impairment test "is consistent overall with IAS 36". The Board of Statutory Auditors recommended that the Board of Directors periodically monitor this area of the financial statements, as well as examine and evaluate in greater detail the points raised in the opinion issued by the independent expert on the impairment method with a view to further refinement thereof.
The impairment test was submitted for approval to the Board of Directors at its meeting on 24
The Independent Auditor has not reported any events or circumstances identified during the audit that might cast significant doubt on the entity's ability to continue as a going concern, nor has it reported any significant deficiencies in the Internal Control System on financial reporting and/or in the accounting system, or any significant instances of non-compliance, whether effective or assumed, with laws and regulations or the By-laws, that have come to light during its audit.
Consob Regulation 20267. Based on the work performed, the Independent Auditor stated that nothing has come to its attention that would cause it to believe that the Poste Italiane Group’s
with Resolution no. 20267 of 18 January 2018, supervised, in the exercise of its function, compliance with the provisions contained therein with regard to the preparation of the Non-
Financial Statement (hereinafter, also "NFS") as part of the Draft Integrated Report 2020, approved by the BoD on 24 March 2021.
Through a specific meeting with both the Auditor and the function involved in preparing the statement, the Board of Statutory Auditors has overseen compliance with the provisions of
Legislative Decree 254/2016, within the scope of the responsibilities assigned to us by law.
May 2020 recalled by Consob on 16 July 2020 and Public statement ESMA 32-63-1041 of 28
October 2020 "European common enforcement priorities for 2020 annual financial reports")
A new 2021/2024 business plan was adopted in February 2021, which is, of course, based on a number of assumptions that will have to be realised, including the signing of an agreement with
Auditors recommends that the Board of Directors systematically check the implementation of the plan on a quarterly basis, as it has always done in the past, both from an operational point of view and in terms of the effects on financial reporting and, in particular, for the impairment test of the Mail, Parcels and Distribution CGU.
During 2020, the Board received four complaints pursuant to art. 2408 of the Italian Civil Code: i. Complaint of 27 February 2020, by means of which shareholder Tommaso Marino reported the allegedly unlawful entrusting of treasury and cash management services to Poste by public administrations operating in small municipalities. In the complaint, Mr Marino refers to an article in the newspaper "Italia Oggi" of 9 April 2019 concerning the intervention of the Italian Competition Authority (AGCM) on the issue of direct entrustment to Poste of the services in question. In particular, the shareholder asked the Board of Statutory Auditors
"to ascertain how and whether management has resolved the issue, as well as what stage it has reached and how much the sanctions imposed on the Group to date amount to". The
ascertained that Poste's actions were correct, in accordance with current legislation, and that the complaint did not contain any elements that might damage shareholders' interests, the
Authority. At the end of the investigation and the assessments of competence, after an extensive and in-depth analysis, the Board of Statutory Auditors found that the AGCM
objections related to non-generalised phenomena on the national territory and, in any case, not attributable to management irregularities attributable to the Company's Directors or management. With regard to the alleged misleading nature of Poste's advertising messages, during the legal proceedings, the Company provided evidence that it had informed customers of the free nature of the service, which was correctly advertised. The Board of
iv. Complaint of 17 September 2020, by means of which shareholder Tommaso Marino claimed "Allegedly unlawful municipal treasury service at the Municipality of Cosenza by
Poste." The Board began its preliminary investigation and, noting that the complaint related to a ruling by the Court of Cosenza on 11 April 2017 that was unfavourable to Poste, regarding the treasury activities of the Municipality of Cosenza, acquired a detailed note prepared by the CA/Legal Affairs Function regarding the facts that were the subject of the complaint, which showed that Poste, whilst not acting as treasurer of the Municipality of
Cosenza, was obliged to hold and safeguard the sums owed to the local authority (by virtue of a current account relationship) as a result of a decision by the enforcement judge, and that the Company's approach was marked by prudence, in view of its role as "custodian" of the sums and the penalties provided for in the event of breach of the obligations incumbent on the custodian. The Board of Statutory Auditors, having acknowledged the evaluations expressed by the CA/Legal Affairs Function and finding that the unfavourable ruling has been appealed by the Company, concluded the investigation, not finding any reprehensible facts, although it reserves the right to monitor the progress of the dispute, currently pending before the Court of Appeal.
Briefly, in response to the four complaints received, the Board of Statutory Auditors has conducted careful investigations with the support of the relevant functions, assessing the grounds for the complaints, the adequacy of the actions taken, and monitoring the process of identifying any individual responsibility. As a result of our checks, we have concluded that there are no irregularities to report to the General Meeting.
In addition, during the year and up to the current date, the Board of Statutory Auditors has received a report/complaint from a third party, as a result of which it launched its own investigation, asking the Company to carry out the necessary inquiries with the relevant functions in order to obtain clarification on the matter indicated in the report/complaint.
The reported fact was handled and resolved in time by the relevant corporate functions and, as a result of the checks carried out, no irregularities to be reported to the General Meeting were identified.
On 16 September 2020, the Board of Statutory Auditors then approved the "Procedure for reporting complaints to the Board of Statutory Auditors pursuant to art. 2408 of the Italian Civil
Code", which governs, in accordance with legal requirements and the principles set out in the
The Board of Statutory Auditors has received the Independent Auditor’s annual declaration confirming its independence, drawn up pursuant to art. 6, paragraph 2, letter a) of Regulation
(EU) 537/2014 and paragraph 17, letter a) of ISA Italia 260, which confirms compliance with the ethical principles required by articles 9 and 9-bis of Legislative Decree 39/2010, not having identified situations that could compromise the Independent Auditor’s independence in the period from 1 January 2020 until the date of issue of the declaration (1 April 2021).
Annexed to the notes to the Company's separate financial statements is a section entitled
"Disclosure of fees paid to the Independent Auditor in accordance with art. 149 duodecies of the CONSOB Regulations for Issuers”, which includes a table showing the fees payable to the
Independent Auditor, Deloitte, and companies within its network for the year under review.
In view of: ü the independence declaration issued by Deloitte & Touche S.p.A. pursuant to art. 6, paragraph 2, letter a) of Regulation (EU) 537/2014 and paragraph 17 of ISA Italia 260 and the transparency report prepared by it and published on its website pursuant to art. 13 of the above Regulation; ü the engagements assigned to the Independent Auditor and companies within its network by Poste Italiane and Group Companies; the Board is not aware of any situations in which the Independent Auditor’s independence has been compromised.
9. Disclosure of opinions issued pursuant to the law during the year.
Pursuant to article 2389, paragraph 3 of the Italian Civil Code, the Board of Statutory Auditors, during the 2020 financial year, issued its opinion on the proposed remuneration to be paid to the Chairwoman of the Board of Directors and the Chief Executive Officer, and its opinion on the proposed remuneration to be paid to the Directors participating in Board Committees, issued on 16 December and 9 June 2020, respectively.
Cash project support "Sector actions in the field of multi-bank counting rooms" for the years 2020 and 2021 €50,000 (plus reimbursements for out-ofpocket and administrative expenses for a maximum of 5% of the fees and VAT)
Control and Risk Committee, formerly Control, Risk and Sustainability Committee), with the meetings having an average duration of approximately 3 hours and 17 minutes. We attended all
Board of Directors' meetings and all those of Board Committees. Specifically, the Board of
Statutory Auditors attended 15 Board of Directors' meetings, 12 meetings of the Control and
Committee, 11 meetings of the Related and Connected Parties Committee, 7 meetings of the
Remuneration Committee, attended by at least one Statutory Auditor, and 1 Ordinary General
Lastly, the Magistrate appointed by the Italian Court of Auditors to oversee Poste Italiane's financial management has always been invited to attend meetings of the Board of Statutory
Company" model, capable of accommodating a diversified and modifiable range of services as it is based on open architectures, digital innovation and agile working models that make the most of available technologies. Given the complexity of the Company's and the Group's organisational structure, which is subject to continuous change, the Board of Statutory Auditors did not identify any elements that would result in the organisational structure being considered inadequate, also in light of positive proof provided during the management of the epidemiological emergency due to the spread of Covid-19.
The Board of Statutory Auditors met periodically and systematically with the Head of Poste
Italiane's Internal Control Function and, among other things, discussed the results of the activities carried out in 2020, during a specific meeting; it also acknowledged, during March 2021, a summary of the “Group Report on Assessment of the adequacy of the 2020 Internal
The strengthening of the SCIGR, achieved over the last few years through organisational and procedural initiatives, has enabled the control system to deal with the risks that have emerged since the early months of 2020 due to the health emergency generated by Covid-19, through high capacity for readjustment to the new context, as evidenced by the rapid deployment of multiple interventions aimed at ensuring business continuity, while strictly complying with rules and regulations, including the following: (i) establishment, on 21 February, of the
Strategic Crisis Committee for the management of the Coronavirus risk, chaired by the CEO
The audit results received by the Board of Statutory Auditors, as well as the summary regarding the overall assessment of the SCIGR, showed an overall positive assessment, without prejudice to some areas for which there is a need or opportunity for strengthening.
In particular, due to the health emergency and the consequent need to enable, in a short period of time, the Group's personnel to work remotely using smart working tools, the "Information
ensure the security and efficiency of operations also in this context. Irrespective of these projects, the IT audits carried out in 2020 showed that the Internal Control System ("SCI") was evaluated less positively than in the previous year, although in the area of full adequacy; this was due to the presence of critical issues relating, for the most part, to shortcomings in the implementation of controls to protect the integrity and confidentiality of information and the availability of IT assets, despite the fact that these controls were already provided for at procedural level. These critical issues, which are present across the board with respect to the platforms audited, have led to the definition of a series of short and long-term Action Plans aimed at implementing procedural controls. In this context, the project to extend the certification environment to allow all the planned developments to go into production has been particularly important.
Moreover, with regard to the area of logistics processes, the SCI of which in 2019 was not yet fully adequate and characterised by a high degree of instability linked to the evolution of operational controls, the continuous auditing activities carried out in 2020 on the entire supply chain, from acceptance to delivery, and the follow-ups focused on the Action Plans resulting from previous audits, have on the whole found a sector affected by continuous evolution of the design of the control system, the effect of the implementation of strengthening interventions.
On the whole, this dynamic has led to a progressive adequacy of specific areas of the control system, even if there are still actions to strengthen it.
The interventions carried out at the Subsidiaries revealed areas of inadequacy, highlighted by the competent internal control function of the Board of Directors for (i) Postel, with reference to the management of BancoPosta's Central Archive, where areas of concern regarding the structure of controls persist, given that the objective of full digitalisation has not yet been achieved, and (ii) Consorzio Logistica e Pacchi, with reference to business and governance
The Board of Statutory Auditors acknowledges that the Company, through the Corporate
In 2020, in order to ensure that the SCIGR is strengthened as an enabling factor for the consolidation of processes, which are based on the principles of integrity, transparency, legality, sustainability and value creation, the Company has committed to the development and ongoing improvement of the Governance and Risk Management Model, to ensure that it is aligned with the principles defined by the new Corporate Governance Code, international regulatory standards, and the objectives of integrity and full traceability of activities that represent the
Also during 2020, multiple interventions were implemented aimed at strengthening and continuing to evolve the SCIGR; in particular, we highlight: - updating of the SCIGR Guidelines, in order to bring them into line with the main leading practices in this area (in particular, the changes introduced by the new Corporate Governance
- various initiatives in the ESG area, including the definition of the Group's ESG Strategic
Legislative Decree no.128/2015; in this context, the Company proceeded with the voluntary adoption of a new Guideline on Antitrust Compliance and appointed the Head of the
Regulatory Affairs Function and Relations with the Authorities within CA as the Head of the "Competition and consumer protection compliance programme" for the related implementation and monitoring, as provided for in the Guideline; - development and definition of the Integrated Compliance process based on the model designed during 2019; - establishment of the Sustainability Committee with the task of assisting the Board of
CA (formerly CA/GRG) which constitutes, through Group's Risk Management and Group's
support activities and processes carried out at territorial level by the Post Office Network and PCL functions; - conclusion of the process of centralising purchasing activities of a negotiation nature carried out in the territory; - completion of the process of centralisation of back office activities, launched by the
Poste Air Cargo and EGI brought together within the Parent Company's RUO function.
Violations ("Whistleblowing"); - on 16 February 2021, it approved the update of the SCIGR Guideline; - on 24 March 2021, it approved the amendment to the Financial Management Guideline for
In light of the centralisation of procurement, which reached a high level of consolidation in 2020, the CA/Purchasing Function is now the Poste Group's centre of excellence and is responsible for the unified and integrated management of the Group's purchasing processes. In this regard, the procedural framework has been formalised for the execution and management of passive contracts entered into by the Poste Italiane Group, with the introduction of two new positions: (i) the Manager responsible for the execution and management of the contracts and, if appointed, the Execution Manager, as well as Assistants thereof, in the case of contracts subject to the Code and (ii) the Contract Manager and, if appointed, the Operational Managers thereof in the case of excluded contracts.
In particular, the Board of Statutory Auditors acknowledges that the "Procedure for the prevention of money laundering and terrorist financing" was published in 2020, pursuant to art.
7, paragraph 1, letter a) of Legislative Decree no. 231/07, and the Operating Instructions of the
The Board of Statutory Auditors acknowledged, at the Group Anti-Money Laundering level, that the volume of "initiative reports" submitted in 2020 by the network of Post Offices ("POs"), is substantially in line with 2019 with a slight decrease attributable to the strengthened verification oversights on the operations of the POs (higher risk customers, cash), as well as lower branch operations due to the impacts of the health emergency from Covid-19. The Board acknowledged that in 2020, the Suspicious Transaction Reports (also "SOS") sent to the
Finance (also "MEF") mainly concern violations of article 51 of Legislative Decree no.
Transaction Reports) and are attributable to a single context. With reference to this data, during a special meeting, the Board also received an analysis of the historical trend, accompanied by a benchmark for the period.
the strategic objectives identified in the Business Plan and the Budget, highlighting that, on this occasion, the assessment was carried out paying particular attention to the context, also in consideration of the current health emergency situation.
The Strategic Risk Assessment confirmed that the top risks included those related to quality provided, customer satisfaction and IT security. The Risk Appetite Framework (RAF) 2021 has been supplemented with four indicators, with respective thresholds, associated with the risk of adverse changes in the macroeconomic scenario, regarding Dividend, Economic Performance and Liquidity, which also summarise the performance of the most significant financial and insurance risks affecting BancoPosta, Poste Vita and PostePay. The qualitative and quantitative indicators identified with regard to the aforementioned risks have been approved by the Board of Directors and will be monitored on a quarterly basis together with the treatment actions deemed appropriate to contain the exposure within the established level. In 2020, work continued on the transversal analysis of all risks affecting the company's operations, with an integrated approach based on processes, in order to exploit possible synergies and convergences, as well as to consolidate the overall view of Poste Italiane's integrated risk profile, thus going beyond the "silos" approach for each risk area.
For the purposes of strengthening the Governance oversight and the continuous evolution of the Group's SCIGR, the Group's CA/Group Risk Management ("GRG") Function developed and defined the Group Integrated Compliance process based on the model designed during 2019 with the objective of: (i) consolidating and/or creating operational synergies between the various specialist safeguards for non-compliance risks, (ii) harmonising models and information flows by promoting the integration and rationalisation of risks and controls and (iii) responding to the need to comply with more stringent and not always coordinated regulations. The main implementations carried out in 2020 as part of the Group Integrated Compliance include the introduction of the Legal Inventory, the Compliance Dashboard and Compliance Monitoring on Disciplinary Measures.
Regarding risk management, the Board of Statutory Auditors acknowledges that a Risk Management model has been implemented based on the Enterprise Risk Management (ERM) framework, with the aim of providing an organic, integrated vision and an effective, standardised response to the risks to which the Group is exposed. The envisaged Group's Sustainable Development, Risk and Compliance Function, as part of the CA Function, will guarantee these objectives, mainly through the definition of an integrated risk management process involving all SCIGR players in a coordinated manner. In this last regard, in 2020, the aforementioned Group GRC - RSA Archer integrated platform supporting the Integrated Risk Management process was subject to evolutionary implementations and migration of new risk
The Board of Statutory Auditors met periodically with the Supervisory Board ("SB") to ascertain the activities carried out by the latter during the 2020 financial year. During the course of the meetings, it became clear that the Group's oversight of 231 issues had been consolidated, including through functional coordination by the relevant departments, with the goal of standardising the general approach in line with the 231 model. In the first part of 2020, following the update of the 231 Risk Assessment and Gap Analysis, the Company launched a project for an extensive update of Poste Italiane's OM 231, which led to approval of the new
As part of the update of the cited OM 231, the main changes made to the General Section include the following: - Poste Italiane's SCIGR has been supplemented with new references to the "Integrated
Programme" implemented within the company; - in the paragraph relating to "Reporting violations (Whistleblowing)", the issue of information flows between the Whistleblowing Committee and the Supervisory Board has been revised, also with a view to increasing the focus of the role of the Supervisory Board in this matter.
In monitoring the relevant risk areas, the Supervisory Board verified that the Company maintained a high level of attention and control over the management of the Covid-19 health emergency within the Company; in this context, the Supervisory Board acquired the results of the audit conducted by the Internal Control Function, which showed a positive assessment of the prevention issues, noting the availability of support and prevention tools and management, information and training instructions. With regard to the adoption of the OM 231 within the
Poste's OM 231, which replaced the one approved on 10 June 2020.
In this context, the dedicated IT system (GRC-RSA Archer) - already mentioned above - was progressively updated on the basis of the evidence emerging from the monitoring of the 231
Auditors from the BancoPosta's Internal Control as well as the Internal Auditing
Functions; ü the results of the inspection activities carried out by the various Supervisory Authorities; ü the assessment results recorded during the year by the other corporate control functions provided for by the internal control and risk management system; ü the information acquired during participation by the Board of Statutory Auditors in the meetings of the Board of Directors and Board Committees; ü the exchange of information with the Independent Auditor, the Data Protection Officer and the Supervisory Board pursuant to 231/2001; ü the main developments of the SCIGR (internal control and risk management system)
14. Observations on the adequacy of the Company’s administrative/accounting system and its reliability in representing operating activities
Sustainability Committee and the Related and Connected Parties Committee; (iv) examining the results of activities carried out by Poste Italiane's Internal Control Function and by
BancoPosta's Internal Auditing Function; (v) examining the proposed Audit Plan for 2021, prepared by both Poste Italiane S.p.A.’s Internal Control Function and BancoPosta's Internal
Function and BancoPosta's Internal Auditing Function; (vii) obtaining information on inspections and proceedings conducted by Italian government or European Union bodies and authorities, including those of an independent nature, the details of which are provided in the section, “Principal relations with the authorities”, in the notes to the financial statements.
Further to the findings of the previous year, following the reinforcement of the internal control and risk management system, the Board of Statutory Auditors reports that the Company, as in the previous year, has carried out a number of additional important activities to analyse and process a number of BancoPosta's past accounting entries with significant positive effects on the statement of profit or loss. In order to strengthen the processes for identifying these accounting items of BancoPosta, initiatives have been adopted that have led to the progressive implementation of controls in the governance and management of operational and procedural as well as technological risks, thanks to the increasing automation of processes, the integration between management and accounting systems, and the dematerialisation of contracts and transactions. The activities also concerned the accuracy and timeliness of the processing of
"BancoPosta's suspended items", i.e. movements not immediately attributable to specific technical forms that may represent credit or debit situations for Poste Italiane (including service postal current accounts, items to be cleared, overdrawn current accounts).
The Board also notes the Attestations, dated 24 March 2021, of the separate and the consolidated financial statements for the year ended 31 December 2020 pursuant to art. 154bis, paragraph 5 of Legislative Decree 58/1998 and art. 81-ter of Consob Regulation 11971 of 14 May 1999, in which the Chief Executive Officer and the Manager responsible for financial reporting declare, among other things, that the separate and consolidated financial statements: ü have been prepared in compliance with the International Financial Reporting Standards endorsed by the European Union through EC Regulation 1606/2002, issued by the
Consolidated Law on Finance, following revision of the “Guideline for Management and
Registers”, approved by the Board of Directors on 22 June 2017, revised on 2 October 2018 and last updated on 30 July 2020.
This Guideline and the "Internal Dealing Guideline”, also approved by the Board of Directors on 22 June 2017, revised on 2 October 2018 and updated on 30 July 2020 are in compliance with the amendments to Italian legislation introduced from July 2016, in compliance with
The CA/Corporate Affairs Function revised the aforementioned Guidelines on the basis of the latest regulatory developments and best practices in the sector and, in this context, the main new element was the adoption of the Relevant Information List ("RIL"), which represents an additional protection tool with respect to the Insider Register.
Auditors of the Group's main Subsidiaries in order to verify the correct implementation of instructions issued by the Parent Company.
16. Oversight of the statutory audit of the annual and consolidated accounts and observations on any key aspects that came to light during meetings with the auditors pursuant to art. 150, paragraph 2 of Legislative Decree no. 58/1998.
considered reprehensible or irregularities that required the formulation of specific reports pursuant to art. 155, paragraph 2, of Legislative Decree no. 58/1998 (Consolidated Law on
Company's management on the understanding that certain points for improvement are contained in the Report pursuant to article 11 of EU Regulation 537/2014. With regard to these points, the Board of Statutory Auditors recommends that the Directors evaluate them with a view to their subsequent implementation. The 2020 Audit Plan was illustrated by the Independent
The Independent Auditor has not informed us of any events or circumstances identified during the performance of the audit that might raise significant doubts about the ability of the Company or the Group to continue to operate as a going concern, nor regarding material shortcomings in its internal control system over financial reporting and/or in its accounting system, or any significant doubts over instances of non-compliance, whether effective or presumed, with laws, regulations or statutory requirements identified during the performance of the audit.
The Reports on the audit of the separate and consolidated financial statements illustrate the key aspects that, in the Auditor's opinion, were most significant in the audit of the individual and consolidated financial statements for the year: (i) the estimate of the recoverable amount of the
Statutory Auditors also discussed these key issues, as well as the key issues of the 2020 financial statements, with the Company's management in specific meetings.
Committees, in addition to general meetings of shareholders, for a total of 83 meetings.
Committees and the Board of Directors would allow full access to the time required to review documents and the time needed to supplement documents or review the information received. In the same way, in the opinion of the Board of Statutory
Auditors, it would be useful to implement some digital solutions to support the meetings and increase the information provided to the Board of Directors by some of the Board
Committees, including a brief summary of the analyses performed or of the remarks that emerged during the preliminary investigation, especially when the debate of some items on the Committee's agenda was particularly in-depth.
S.p.A.'s Directors (pursuant to article 2, Recommendation 7, of the Corporate Governance
Code)", aligned in content with the new recommendations on independence set forth in the Corporate Governance Code published by Borsa Italiana S.p.A.'s Corporate
Governance Committee in January 2020. In this regard, it should be noted that the updating of the document in question was carried out in the context of the broader adherence, as resolved by the Company's Board of Directors in December 2020, to the aforementioned new Corporate Governance Code; on this occasion, in addition to updating the aforementioned Guideline, the remaining documents that embody the
ü The Board of Statutory Auditors, given the complexity of the corporate transactions carried out, the number of related parties and their heterogeneity, welcomed the strengthening of the legal and corporate procedures and, in particular, a more structured process with a better representation of the transactions themselves in the Related Parties
“Report on Corporate Governance and the Ownership Structure”, prepared by the
Directors in accordance with the instructions contained in the Borsa Italiana S.p.A.'s
Market Regulations and in the Consolidated Law on Finance. The Board, within the scope of our responsibilities and in accordance with the Corporate Governance Code, acknowledged the contents of the “Remuneration Report” prepared by the Directors.
Section I of the Report, which is submitted for express approval by the General Meeting of shareholders, has also been prepared in accordance with the instructions contained in
Directors by the General Meeting of 15 May 2020, and in February 2021. The postappointment assessment was carried out on the basis of (i) the self-declarations issued by each newly appointed Director and (ii) the historical Chamber of Commerce records
("person files") and, in this regard, the Board of Statutory Auditors recommended that, in the future, also upon first appointment, the information systems concerning the issuance of purchase orders, as set forth in the Guideline, be queried. The assessment carried out in February 2021 was conducted in accordance with the provisions of the Guideline on the "Application criteria and procedure for assessing the independence of Poste Italiane
Code), on the basis of (i) information attested by the Directors, (ii) the person file of each
Director, containing evidence of current and past positions held, and (iii) information obtained directly from the Company, with reference to any existing economic/financial
285/2013. As in the past, it has emerged that the remuneration envisaged for the Board of
Statutory Auditors does not appear to be fully consistent with the numerous commitments and responsibilities arising from the position.
BancoPosta”, the relevant regulations contained in the Consolidated Banking Law and in the
Consolidated Law on Finance and the implementing regulations for banks, deemed applicable to BancoPosta by the relevant authorities, and in compliance with the BancoPosta
Regulation, the Board of Statutory Auditors examined the specific issues regarding
BancoPosta RFC separately, reporting the results in the minutes of its meetings; - the Supervisory Standards issued by the Bank of Italy on 27 May 2014 and, more generally, those in Circular 285 of 17 December 2013, as amended.
Information Technology (IT) within the Parent Company, on 28 September 2020, the deed was signed for the sale of the PostePay's Information Systems business unit to the Parent Company, with effect from 1 October 2020. In particular, PostePay sold a business unit to Poste, including
The Board has also been informed by PostePay's Supervisory Body that, despite the Covid-19 epidemic, all centralisation measures have been implemented in line with planning.
Disaster Recovery area; and (vi) the updating of the Emergency Operating Procedures ("POE").
Finally, with reference to the "Data Center Transformation" Programme, the implementation of all the project initiatives related to the Programme is almost complete.
Based on the information received from the Manager responsible, the Independent Auditor, management of BancoPosta and the heads of BancoPosta’s control functions, and the Board’s examination of the annual report of the Manager responsible for financial reporting, it should be noted that BancoPosta RFC’s organisation and accounts have been unbundled with respect to the Company’s operations. In preparing the Report for BancoPosta RFC, in compliance with the provisions of Law Decree 225/10, converted into Law 10/11, which introduced regulations applicable to BancoPosta RFC, requiring the accounting separation provided for in articles 2214 et seq. of the Italian Civil Code and preparation of a Separate Report, the Company uses a specific dedicated system "Special Ledger" aimed at ensuring that transactions relating to
Paragraph 2 of Bank of Italy Circular 285/2013 - part IV of the Standards for particular intermediaries of BancoPosta - Chapter 1 BancoPosta, section II - requires that, in addition to directly attributable revenues and costs, the charges incurred for the services provided by Poste
Italiane in order to enable BancoPosta to operate should also be allocated to BancoPosta RFC, and that the allocation of these charges should be based on criteria that reflect the real contribution of the various functions to BancoPosta RFC results and to those of the Company as a whole.
BancoPosta's Report has been prepared in application of the International Financial Reporting
Standards adopted by the European Union and the 6th update of Bank of Italy Circular 262 of 22 December 2005 – "Banks' Financial Statements: Layouts and Preparation", and of art. 2447 septies, paragraph 2, of the Italian Civil Code.
Remuneration Committee, correct application of the regulations governing the remuneration of the heads of the Company's control functions. In this regard, the Board of Statutory Auditors had observed that the adequacy of this remuneration be subject to further analysis by the Human
Resources Department ("RUO"), also after benchmarking with similar entities. In this regard, during a meeting with the Head of the RUO Function held in April 2021, the Board received the document "Benchmark remuneration of BancoPosta's Control Functions" aimed at providing an analysis of the remuneration of BancoPosta's Control Functions and their competitive positioning, by individual remuneration component, with respect to the selected
BancoPosta in April 2021, the Board of Statutory Auditors carried out an in-depth examination of the relationship between business and profitability between BancoPosta and Poste Italiane
Guidelines and (iv) the significant increase in the number of KPIs. In addition, the Board of
Function (RUO), noted the maintenance in 2019 and 2020 of the summary performance indicators linked to the performance of the KPIs of the Guidelines within the Management
Consortium of activities relating to access to BancoPosta's payment accounts by Third Party
Providers, pursuant to the PSD2 Directive and presented in April 2019, the Board, during the year, noted that the major release called "Global Consent" has been implemented on the CBI
Globe platform, which will allow, once the adoption of the solution by the interfaces of
individual members is complete, access to AIS ("Account Information Service") functionalities through a single "Strong Customer Authentication" (SCA) process by the customer.
Statutory Auditors verified the state of progress of the corrective measures adopted following the Bank of Italy's findings, ascertaining that at 31 December 2020 the programme defined following the Bankit 2017 inspection had reached a state of progress of 97% and that there remain to be completed the verification activities of some interventions related to: (i) the Data
Center Transformation (DCT), planned to coincide with the first available test session related to BCM in May 2021, (ii) the closure of the action, also within the DCT, related to the automatic alignment of configurations between the production and Disaster Recovery areas, planned for
May 2021, (iii) the roll-out of the Data Governance Model by the end of 2021 and (iv) the completion of the technological renewal plan for the elimination of obsolescence in the financial services infrastructure, the conclusion of which is planned for May 2022. The Board acknowledged that on 5 May 2020, a communication from the Bank of Italy was received containing the results of the transparency audits it carried out from 23 May to 19 July 2019 at 24 Post Offices and headquarters, which concerned, among other things: the organisational structure of BancoPosta, the Group and the territorial network, the management of relations with external partners, and the management of payment not approved. In response to the feedback of the Bank of Italy, the Company has prepared a plan, shared with PostePay containing the corrective measures to be put in place with an indication of the implementation methods and timing, which was communicated to the Bank of Italy on 3 July 2020 and reported, starting from June 2020, in the quarterly Tableau de Bord of the Compliance Function.
January 2020 and concluded on 23 October 2020, aimed at ascertaining the state of compliance with MiFID 2 regulations, with particular reference to the following profiles: (i) procedural structures defined in terms of Product Governance, (ii) procedures for assessing the adequacy of transactions carried out on behalf of customers, (iii) description of commercial policies and
incentive system, (iv) professional training of personnel and (v) 2019 operations. The Board of
Statutory Auditors acknowledged that the action plan monitored in the Compliance Function's
Authority. With reference to the requests received by the Authority, the Board was informed that, in July 2020, Consob formally submitted a request relating to the audits carried out on the criteria for valuing transaction reporting, to which Poste responded on 24 August 2020, planning to carry out a recovery activity in the last quarter of 2020.
"sustainable" investment; Poste provided feedback on this assessment on 15 February 2021.
Other significant aspects are represented by (i) the anti-money laundering regulatory compliance activities carried out with the Group Anti-Money Laundering Function and (ii) the assessments on corporate governance following the new Regulations issued by the Bank of
Italy in December 2019 which provides, for intermediaries, new requirements in terms of organisation and corporate governance, as well as specific policies on personnel remuneration and incentives.
IT measures in the area of anti-money laundering in order to make up for the delay generated by the Covid-19 emergency.
The Board has also been informed of all significant events that have affected the governance and control system of the AMC and among these, in particular, that on 26 February 2020, an ordinary audit by the Bank of Italy was started, aimed at verifying the correct compliance, within the AMC, with the regulations in the last two years that was then interrupted, due to the constraints induced by the ongoing health emergency, on 22 May 2020 without issuing an audit report. The audit team communicated that the overall assessment was favourable; some areas for improvement were also communicated for which the AMC has prepared an Action Plan, the implementation of which is periodically monitored. In addition, in July and November 2020, the AMC outsourced to the relevant departments of Poste the processes of (i) purchasing goods and services and (ii) managing customer succession requests.
BancoPosta, the Board of Statutory Auditors, as well as the Company Functions with specific duties in this regard; - information flows and coordination methods between the parties involved in the internal control and risk management system; - Governance mechanisms.
With regard to the Governance mechanisms, during 2020 and up to the current date, the Board of Directors has approved various regulations and guidelines designed to strengthen the nature and effective functionality of the overall system of internal controls over BancoPosta RFC: - Update of the Poste Italiane Group's "Guidelines for the definition and monitoring of the
Banking Book - BancoPosta RFC"; - ICT Organisational Model - Poste Italiane; - Summary Report on ICT Adequacy and Costs - BancoPosta - Year 2019; - Fair Value Policy Guidelines - General Principles; - Competition and Consumer Protection Compliance Guidelines; - Distance Selling Guideline with telephone recording.
The Board of Statutory Auditors received periodic information from BancoPosta control functions and periodically reviewed the quarterly Tableau de Bord, and carried out an in-depth analysis of the results of the overall verification activities carried out in 2020.
In particular, this summary shows that the process of strengthening the organisational structure and governance of BancoPosta RFC continued during 2020, and the following are noted: − establishment of the new Digital, Technology & Operations Function with the aim of creating innovative product and service solutions to maximise customer satisfaction while responding quickly and effectively to business needs; − development of a model for the management of business and PA customers, by assigning commercial responsibility to the specialist sales force belonging to the Business and Public
Auditing function on the basis of the "2020 Audit Plan", approved by the Board of Directors on 5 March 2020, were promptly carried out and completed in compliance with the above Plan. In addition, the Board, in its meeting with the Head of Internal Auditing, reviewed the Annual 2021 and Multi-Year 2021-2023 Audit Plan at a special meeting that was subsequently approved by the Board on 16 February 2021.
January to October 2020, on the state of compliance with MiFID2 regulations.
Poste Italiane Internal Internal Auditing function on the basis of specific Operating Guidelines.
Finally, during meetings with the BancoPosta Internal Auditing department, the Board of
Statutory Auditors took note of the updated regulatory framework regarding the governance mechanisms for BancoPosta RFC (BancoPosta Organisational and Operating Regulations, and
Ø With regard to anti-money laundering oversight, the Board of Statutory Auditors, taking into account that in 2018, the Company adopted a centralised model for the coordination, control and management of risk and the related obligations for the prevention of money laundering and the financing of terrorism at Group level, recalls that at BancoPosta, the model adopted to oversee the risk of money laundering provides for an Anti-Money Laundering Manager in the Risk Management area and the existence of an independent oversight unit that carried out the following activities in 2020: • support to the Group Anti-Money Laundering Function in the analysis of higher risk situations for the preparation of new mitigation measures; • reporting of outsourced activities through the monitoring of KPIs; • integration of the second level control plan on operations considered to be at higher risk; • support to business functions during the launch of new products; in particular, during 2020, preparatory activities were carried out for the launch of new products in response to income support initiatives undertaken during the year such as: redundancy payments, loans to businesses guaranteed by the State, Ecobonus Project; • drafting of Anti-Money Laundering Operating Protocols (POA) as part of the distribution agreements for products of partner companies subject to anti-money laundering regulations; • monitoring and updating due diligence on foreign financial intermediaries with dealings with
In addition, in 2020, BancoPosta published (i) the AML/CFT Procedure and the BancoPosta
Lastly, in 2021, activities related to second-level controls are expected to be consolidated and collaboration on the preparation of specific controls in the area of cash and money orders is expected.
At the beginning of 2021, the Risk Management function carried out a self-assessment of the
AML/CFT risk for BancoPosta for 2020, to be presented to the Board of Directors as part of the Anti-Money Laundering Annual Report, and this time, in line with the previous year, a
Offices ("POs"), is substantially in line with 2019 with a slight decrease attributable to the strengthened verification oversights on the operations of the Post Offices (higher risk customers, cash), as well as lower branch operations due to the impacts of the health emergency from Covid-19. In addition, in the "Anti Money Laundering" ("AML") area, on 24 July 2020, the audit initiated by the Financial Intelligence Unit on 5 December 2019 with respect to
BancoPosta and PostePay, relating to the management of risks associated with operations with virtual currencies and digital assets, was concluded: the UIF highlighted some areas for improvement in the arrangements preordained for active collaboration. In this regard, the Board noted the areas for improvement and the fact that actions will be taken to implement the suggestions made, through the preparation of a Corrective and Adaptation Initiatives Plan.
Laundering function within CA. On the basis of the results of the audit activity and taking into account the project actions already activated by the Group Anti-Money Laundering Committee, the Internal Auditing function reports an overall adequate level of oversight of the control system, with points of attention mainly relating to the need to strengthen the architecture of the ex-ante control model on financial transactions in high-risk third countries and on online channel transactions, as well as the monitoring of PEP customers. The audits carried out on the 3 local Anti-Money Laundering Units, as part of BancoPosta's Internal Audit Plan, also revealed an overall positive control system.
Ø Turning to the activities of the BancoPosta Compliance Function, at the March 2021 meeting, the Board of Statutory Auditors was informed of the summary of the results of the activities carried out in 2020 by the BancoPosta Compliance Function, with the results that emerged, the weaknesses identified and the corrective actions planned in 2021 to remove them.
The 2020 Business Plan ("Plan"), which originally consisted of 67 actions, was supplemented during the year by additional interventions: (i) 10 on Investment Services following Consob audit; (ii) 9 on Insurance Brokerage following the joint IVASS-Bank of Italy letter; (iii) 6 on
The Board of Statutory Auditors was also informed of the 2021 Activities Plan, which envisages 67 interventions, mainly focused oriented: (i) in the area of Investment Services, to the development of ESG issues (product range, evolution of the profiling questionnaire and adequacy model); (ii) to the strengthening of governance processes for outsourcing, (iii) to fraud prevention and monitoring, (iv) to the modular and auto offering, (v) in the area of
Banking Services and Postal Savings, to the completion of the Action Plan resulting from the
In order to ensure adequate management of situations of dissatisfaction or potential conflict with its customers, the Compliance Function continued to verify the adequacy and effectiveness of the process for handling complaints and appeals submitted to the Financial Banking
Arbitrator ("ABF") and the Securities and Financial Ombudsman ("ACF"). The activities carried out concerned various areas (banking services, postal savings services, investment services and insurance brokerage services) and the results of the second-level controls in 2020 showed that complaints and the related outcome were correctly analysed and assessed and that the complaints management process had improved, although some areas for improvement remained.
operational and (iv) additional actions were completed that emerged during the in-depth analyses carried out and shared with the Authority (Supervisory Board reports, product governance, adequacy models, commercial policies and additional training); - in the Insurance Brokerage area, in compliance with the provisions of the IDD Directive: (i)
Customer Authentication ("SCA") in card transactions on third-party sites (e-commerce), the adaptation of which had been extended to 31 December by the Bank of Italy, and IT, procedural and control measures were implemented in relation to open communication standards, as provided for by the PSD2 Directive, or the implementation of business solutions (products and services) from an AISP and PISP perspective, and the fraud monitoring process was strengthened; - in the area of transversal regulations, a series of initiatives were carried out to consolidate the Company's regulatory framework and in particular: (i) the evolution of governance, ICT
Bank of Italy audit on operational and IT risk management. The Board, which had noted that the Plan would continue into 2020 as a result of the rescheduling of four of the Data Center
Transformation site interventions, was informed that three of the four rescheduled interventions were completed in 2020 and that the last intervention would be completed by the year 2022.
Among the most important interventions carried out during 2020 are: (i) the extension of
In 2020, the Board of Statutory Auditors increased its focus on ICT Risk by meeting with the relevant structures at various times for in-depth analysis, including through induction sessions.
The Board believes that it is of fundamental importance to ensure compliance with the commitments, time frames and planned investments, particularly in the ICT and Security areas, given the specific importance of the risks associated with IT security and Cyber Risk.
The Board noted that, in the area of Cyber Risk, there was a rapid and general evolution of
"cyber" threats in 2020, a year characterised by the pandemic emergency from Covid-19, which made the technologies present on computer systems more vulnerable. For these reasons the
CA/TA/Information Security function, BancoPosta servicer for IT risk analysis activities under the related agreement signed with the CA function, introduced a new indicator for assessing IT
risk compared with the last version examined by the Board of Directors in April 2020.
The Board of Statutory Auditors has taken note of the activities carried out by the Risk
Management function during 2020 and the actions planned for the year 2021.
In particular, in 2020, due to the epidemiological emergency from Covid-19 and the government measures issued ad hoc, starting from the lockdown started in March, in line with company directives, the Risk Management activities were also carried out with a massive recourse to smart working, maintaining the service in terms of effectiveness and efficiency.
This Supervisory Body also verified the levels of materiality of the risks for BancoPosta with particular regard to risks of high relevance: (i) to "financial leverage", which is structurally higher than that of a bank due to the composition of BancoPosta assets; the Leverage Ratio, which had been brought back to the target value of 3% set in the 2020 RAF by setting aside €85 million in profits generated in 2019, resumed a downward trend during 2020, due to the extraordinary and unexpected
growth in funding volumes resulting from the pandemic. At the end of the year, the ratio stood at 2.6%, the limit set in the RAF, and will be raised to 3% during 2021, via a programme to strengthen BancoPosta capital by €300 million, to be implemented in 2021, via: a) a provision of €50 million of the profits generated in 2020, when the annual financial statements are approved; b) further contributions of €250 million from Poste, also in ways that are innovative with respect to those followed to date. This adjustment of equity should reduce the relevance of this risk category for 2021 and, in the expected scenario, also over the Plan horizon; (ii) to the "cost of operational risks", which is the most significant category in terms of capital requirements and absorption of the "Second Pillar". The losses recorded in the statement of profit or loss for the year are significantly lower than in 2019 (the ratio to net interest and other banking income has fallen from 96 to 20 basis points) and the capital absorbed is also significantly lower; (iii) to the "interest rate risk", the exposure of which, in terms of economic value, has remained at relatively contained levels (on average less than 15% of own funds), especially thanks to the considerable increase in funding in all its components and to the low level of interest rates. Despite this, IRRBB risk continues to be classified among the most relevant risks since, following the implementation of the relevant EBA Guidelines, the new measurement model, in use as of 31 December 2019, results in a higher and more volatile level of capital absorption; (iv) to the "spread risk", which is not relevant for capital requirements, but for unrealised gains.
The second half of 2020 was characterised by the reduction in Italian government bond yields and the BTP-Bund spread (111 points at the end of the year), which increased the implicit gains in the portfolio recognised in the financial statements at fair value (HTCS).
Medium risks include: - credit/counterparty risk: this is expected to increase further in 2020, in relation to the higher capital absorption determined by the increase in collateral paid to counterparties against the negative mark-to-market of hedging derivatives, which in turn is attributable to the fall in risk free interest rates; - reputational risk: this is mainly related to the issue of disputes with customers over returns on certain series of Interest-bearing Postal Certificates (BFP), and in particular those in the 21st - 30th year of the Q/P series, in relation to the numerous unfavourable decisions by the ABF, while the issue of real estate funds has been closed thanks to protection initiatives.
In this regard, the relevant company functions, having also consulted the Control and Risk
Among the risks of lesser importance this year are (i) business risk (due to the balanced mix of revenues and mainly variable costs), (ii) the risk of involvement in money laundering or terrorist financing (in line with the results of the self-assessment), and (iii) liquidity risk (due to stable funding as it is mainly retail and extremely liquid assets).
As already anticipated for the rebalancing of the Leverage Ratio to the target level of 3%, at the meeting of 18 March 2021, the Board of Directors approved a capital strengthening programme.
At 31 December 2020, indicators of capital adequacy show a high capital ratio (CET1 of 17.8%, up compared to 17.5% in Q3) and equity, which are more than double the Pillar 2 free capital requirement of 52%, against risks quantified in terms of capital.
In this regard, it should be noted that in 2020 the exposure to interest rate risk is gradually being reduced in terms of economic value, representing 8.1% of BancoPosta's equity at the end of 2020, a level that is widely compatible with the RAF target.
The budget planned for 2020 in relation to the programme of interventions defined downstream of the Bank of Italy's audit on operational and IT risks in 2017, amounting to €4.85 million, has been fully utilised, and its implementation has now reached 97%.
From the disclosures, there was a significant reduction in 2020, compared to 2019, in losses from operational risks (€53.5 million in 2020 compared to €88.3 million in 2019), mainly due to (i) a decrease in internal and external fraud; (ii) a decrease in losses of 82.7% arising from
In particular, with regard to BFP in the "21st-30th year" category (Q/P series), in respect of which the Company, not agreeing with the unfavourable approach taken by the ABF, has decided not to proceed with repayment from March 2020, the Board has taken note of the
In addition, as mentioned, operating losses have fallen as a result of certain areas of concern, such as real estate funds, where customer protection initiatives have been completed with high adhesion rates. In this regard, the undersigned Body has been informed that, for this reason, the residual amounts of provisions made in previous years were released in 2020.
The BancoPosta Risk Management function, as part of the 2021 budget process, estimated the impact of the scenarios on the risk profile ex ante, assessed the prospective adequacy of capital and identified the Risk Appetite Framework (RAF) in accordance with the strategic objectives and guidelines at Group level.
The proposed Risk Appetite Framework for the year 2021: • assumes an increase in BancoPosta's equity of €300 million, to be achieved in the course of 2021 through ordinary measures - starting with a €50 million allocation to reserves of a portion of the profits generated by BancoPosta in 2020 - and further capital injections by
Poste, including through innovative solutions currently being studied and to be discussed with the Bank of Italy; • confirms, with regard to interest rate risk in terms of economic value, a level of exposure that is structurally higher than the average for banks, for which the regulations establish attention thresholds (supervisory outlier test) of 15% and 20%, due to the profound differences in business models, and therefore in the capital allocation between the various risk categories, but expresses the objective of maintaining exposure within 20% as risk appetite; • shows, for interest rate risk in terms of net interest income, an increase in the triggers consistent with the characteristics of the investment portfolio, about half of which is covered
by fair value hedge derivatives, which in reality reflects the opportunity to increase income in the most likely scenario of an increase in interest rates; confirms the objective of maintaining the Leverage Ratio at or above 3% over the plan period, in order to maintain an ample "buffer" of capital in excess of Pillar 2 absorption against residual regulatory risk; the target level of 3% coincides with the regulatory minimum for banks, due to differences in business models that make this level less relevant as a minimum reference threshold for
Finally, the Board has been informed of the results of the ICAAP-ILAAP/2020 Report prepared by the Risk Management Function and the Report of BancoPosta's Internal Auditing on the
ICAAP/ILAAP 2020 process, presented to the Board of Directors in April 2021.
target. In light of the analyses conducted, it is clear that, following the significant strengthening of its equity over the years through the allocation of profits and further contributions from Poste, and taking account of the capital increase of €300 million approved in March 2021,
The Report of BancoPosta's Internal Auditing Function on ICAAP and ILAAP processes for 2020 showed that the ICAAP and ILAAP processes were solid, effective and complete in proportion to the nature, size and complexity of BancoPosta's activities. As noted in previous years, BancoPosta's risk management system is characterised by strong integration between
ICAAP and ILAAP, the RAF and the planning and budgeting processes. The forward-looking analyses conducted by BancoPosta's Risk Management have revealed the sustainability of the
RAF capital and earnings indicators over the plan period (2021-2024). With regard to the
In conclusion, the Board of Statutory Auditors did not identify any critical situations or facts that would lead to the conclusion that BancoPosta's Internal Control and Risk Management
definition and operational implementation of improvement measures and remedies for any weaknesses and shortcomings found.
19. and 20. Final considerations on the audit procedures performed and an indication of any proposals to be presented to the General Meeting pursuant to art. 153, paragraph 2 of
Deloitte & Touche S.p.A. Via della Camilluccia, 589/A 00135 Roma Italia
We have audited the consolidated financial statements of the Poste Italiane Group (the “Group”), which comprise the consolidated statement of financial position as at December 31, 2020, consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended and notes to the consolidated financial statements, including a summary of significant accounting policies.
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of Poste Italiane S.p.A. (the “Company”) in accordance with the ethical requirements applicable under Italian law to the audit of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
 identification and verification of key controls carried out by the Company over the impairment testing process;  obtaining an understanding of the methods and assumptions adopted by the Company to carry out the impairment test;  verification of the consistency of the methodological approach adopted by the Company, with particular reference to the identification of the CGU and the determination of its recoverable amount, with respect to the requirements of the accounting policy IAS 36 "Impairment of Assets";  analysis of the reasonableness, also by obtaining information from the Company, of the principal assumptions adopted to estimate future cash flows expected by the CGU, also taking into account the uncertainties related to the current macroeconomic environment characterised, among other things, by the health emergency related to the pandemic COVID-19, and the key variables used in the valuation model adopted for the impairment test;  verification of the logical and mathematical correctness of the determination of the cash flows in the context of the impairment test mentioned above, as well as of the overall reasonableness of the calculation of the weighted average cost of capital (“WACC”) and of the consistency of the assumptions related to the “terminal value”, that is the value that represents the ability of the company to generate cash flows, estimated beyond the explicit forecast period 2021 – 2024 in the Business Plan;  review of the sensitivity analysis prepared by the Company;  verification of the completeness and compliance of the disclosures provided by the Company in the consolidated financial statements with respect to the requirements of the IAS 36 “Impairment of assets”.
The determination of technical provisions for insurance business is based on complex subjective assessments and estimates linked to the historical experience and on assumptions which are from time to time considered reasonable and realistic based on the relevant circumstances which, with regard to the current period, are also affected by the uncertainty related to the current context characterized by the health emergency connected to the pandemic COVID-19.
In consideration of the significance of the amount of the mathematical provisions recorded in the consolidated financial statements, the existence of the discretionary component inherent in the estimation nature related to the assumptions and hypotheses of a technical nature, actuarial, demographic, financial, as well as on the projections of future cash flows deriving from the insurance contracts entered and effective at the end of the year, we considered the process of evaluating the mathematical provisions a key audit matter of the Group's consolidated financial statements as at December 31, 2020.
 analysis of the reasonableness of the methods and of the main technical and evolutionary hypotheses on which the estimates of the additional reserves included in the mathematical provisions were based, in accordance with the provisions of the applicable regulation;  obtaining and analysing the documentation prepared by the Group Management for the purpose of verifying the adequacy of the technical provisions recorded in the Group’s consolidated financial statements (the socalled Liability Adequacy Test);  verification of the completeness and adequacy of the information provided by the Group in accordance with the provisions of the applicable regulation.
The consolidated financial statements of Poste Italiane Group for the period ended as at December 31, 2019 were audited by other auditors, who expressed an unqualified opinion on those consolidated financial statements on March 25, 2020.
As part of an audit in accordance with International Standards on Auditing (ISA Italia), we exercise professional judgment and maintain professional skepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence applicable in Italy, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report.
We have carried out the procedures set forth in the Auditing Standard (SA Italia) n. 720B in order to express an opinion on the consistency of the report on operations and some specific information contained in the report on corporate governance and the ownership structure set forth in art. 123-bis, n. 4 of Legislative Decree 58/98, with the consolidated financial statements of Poste Italiane Group as at December 31, 2020 and on their compliance with the law, as well as to make a statement about any material misstatement.
In our opinion, the above-mentioned report on operations and some specific information contained in the report on corporate governance and the ownership structure are consistent with the consolidated financial statements of Poste Italiane Group as at December 31, 2020 and are prepared in accordance with the law.
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The Directors of Poste Italiane S.p.A. are responsible for the preparation of the non-financial statement pursuant to Legislative Decree 30 December 2016, no. 254.
We have audited the financial statements of Poste Italiane S.p.A. (the “Company”), which comprise the statement of financial position as at December 31, 2020, statement of profit or loss, statement of comprehensive income, statement of changes in equity and the statement of cash flows for the year then ended and notes to the financial statements, including a summary of significant accounting policies.
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements applicable under Italian law to the audit of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Considering the relevance of the amount of the carrying amount of the Company’s assets allocated to the CGU "Mail, Parcels and Distribution", the subjectivity of the estimates related to the determination of the cash flows expected of the CGU, taking into account also the uncertainties related to the current macroeconomic environment characterized by, among other things, the pandemic events, and the key variables of the impairment model, we considered the determination of the recoverable amount of the business segment "Mail, Parcels and Distribution", a key audit matter of the financial statements as at December 31, 2020.
The financial statements of Poste Italiane S.p.A. for the period ended as at December 31, 2019 were audited by other auditors, who expressed an unqualified opinion on those financial statements on March 25, 2020.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
We communicate with those charged with governance, identified at an appropriate level as required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence applicable in Italy, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report.
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The Directors of Poste Italiane S.p.A. are responsible for the preparation of the report on operations and the report on corporate governance and ownership structure of Poste Italiane S.p.A. as at December 31, 2020, including their consistency with the related financial statements and their compliance with the law.
Ancona Bari Bergamo Bologna Brescia Cagliari Firenze Genova Milano Napoli Padova Parma Roma Torino Treviso Udine Verona Sede Legale: Via Tortona, 25 - 20144 Milano | Capitale Sociale: Euro 10.328.220,00 i.v. Codice Fiscale/Registro delle Imprese di Milano Monza Brianza Lodi n. 03049560166 - R.E.A. n. MI-1720239 | Partita IVA: IT 03049560166
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Our firm applies International Standard on Quality Control 1 (ISQC Italia 1) and, accordingly, maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
The procedures performed have been based on our professional judgment and have included inquiries primarily of persons responsible for the preparation of the Separate Report, analysis of documents, recalculations, comparisons, reconciliations with the accounting records and other procedures to obtain supporting evidence.
The procedures performed are less in extent than for a reasonable assurance engagement conducted in accordance with ISAE 3000 revised and, consequently, do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement.
The Company presented data for the year ended December 31, 2019 for comparative purposes only. Our conclusions on the Separate Report as at December 31, 2020 do not extend to such data.
Pursuant to article 3, paragraph 10, of the Legislative Decree no. 254 of December 30, 2016 (the “Decree”) and to article 5 of the CONSOB Regulation n. 20267/2018, we have carried out a limited assurance engagement on the Consolidated Non-Financial Statement of Poste Italiane S.p.A. and its subsidiaries (hereinafter the “Poste Italiane Group” or the “Group”) as of December 31, 2020 prepared on the basis of art. 4 of the Decree, included in the specific section of the Report on Operations and approved by the Board of Directors on March 24, 2021 (hereinafter the “NFS”).
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The Directors are responsible for the preparation of the NFS in accordance with articles 3 and 4 of the Decree and “Global Reporting Initiative Sustainability Reporting Standards” established by GRI – Global Reporting Initiative (the “GRI Standards”), which they have identified as reporting framework.
The Board of Statutory Auditors is responsible for overseeing, within the terms established by law, the compliance with the provisions set out in the Decree.
NFS, in order to assess the reasonableness of the selection process in place in light of the provisions of art. 3 of the Decree and taking into account the adopted reporting standard; 2. analysis and assessment of the identification criteria of the consolidation area, in order to assess its compliance with the Decree; 3. comparison between the financial data and information included in the NFS with those included in the consolidated financial statements of the Poste Italiane Group; 4. understanding of the following matters:  business management model of the Group’s activities, with reference to the management of the topics specified by article 3 of the Decree; Reports and Attestations
 policies adopted by the entity in connection with the topics specified by article 3 of the Decree, achieved results and related fundamental performance indicators;  main risks, generated or undertaken, in connection with the topics specified by article 3 of the Decree.
Moreover, with reference to these matters, we carried out a comparison with the information contained in the NFS and the verifications described in the subsequent point 5, letter a) of this report; 5. understanding of the processes underlying the origination, recording and management of qualitative and quantitative material information included in the NFS.
In particular, we carried out interviews and discussions with the management of Poste Italiane S.p.A. and with the personnel of SDA Express Courier S.p.A. and we carried out limited documentary verifications, in order to gather information about the processes and procedures which support the collection, aggregation, elaboration and transmittal of non-financial data and information to the department responsible for the preparation of the NFS.
Based on the work performed, nothing has come to our attention that causes us to believe that the NFS of the Poste Italiane Group as of December 31, 2020 is not prepared, in all material aspects, in accordance with articles 3 and 4 of the Decree and GRI Standards.
The NFS for the years ended December 31, 2018 and December 31, 2019, whose data are presented for comparative purposes, have been subject to a limited assurance engagement by other auditors that respectively, on April 17, 2019 and March 25, 2020, expressed an unmodified conclusion.