In the case of instruments backed by personal guarantees provided by a sovereign state or one or more companies, expected losses are calculated on the basis of the credit rating of the guarantor. With regard to covered bonds, the underlying guarantees were assessed with reference to the issue rating, rather than the issuer rating.
Derivative financial instruments and repurchase agreements In order to limit the counterparty risk exposure, Poste Italiane SpA has concluded standard ISDA master agreements (with attached CSA) and GMRAs which govern the collateralization of derivative transactions and repurchase agreements, respectively.
The Poste Italiane Group as a rule exempts the Public Administration from the provision of guarantees to secure trade receivables arising from transactions with it, save for the cases when such guarantees are mandatory by law or due to implementing rules of specific services.
Impairment of fixed income instruments/receivables held at the beginning of the period 20 - 20
Reversal of fixed income instruments/receivables held at the beginning of the period - - -
POSTE ITALIANE GROUP - CREDIT RISK - DETAILS OF THE PROVISION TO COVER EXPECTED LOSSES ON FINANCIAL ASSETS AT FVTOCI
Trade receivables The Poste Italiane Group’s exposure to credit risk, in relation to each class of trade receivable at 31 December 2018, is shown separately depending on whether or not the model used to estimate ECL is based on an individual or a collective assessment.
POSTE ITALIANE GROUP - CREDIT RISK - TRADE RECEIVABLES IMPAIRED ON THE BASIS OF THE SIMPLIFIED MATRIX
Movements in the expected credit loss provisions for trade receivables (due from customers and the MEF) are as follows: DETAILS OF THE PROVISION TO COVER EXPECTED LOSSES ON TRADE RECEIVABLES
Credit loss provisions for private customers include the provisions made by BancoPosta RFC to mitigate the risk of non-recovery of numerous individually modest amounts due from overdrawn current account holders. Credit loss provisions for the Public Administration regard items that may in part not be recoverable as a result of legislation limiting public spending and delays in payment and problems with a number of debtor entities. Credit loss provisions for amounts due from the MEF reflect the absence of funds in the state budget, making it not possible to collect certain amounts receivable, recognised on the basis of legislation or contracts and agreements in effect at the time of recognition.
Public Administration entities for sundry services 14 - 14 (5) (6) - 3
POSTE ITALIANE GROUP - CREDIT RISK ON OTHER RECEIVABLES AND ASSETS
Amount due from MEF following cancellation of EC Decision of 16 July 2008 - -
Interest accrued on IRAP refund 3 of which past due 58
Offsetting financial assets and liabilities In accordance with IFRS 7 – Financial Instruments: Disclosures, this section provides details of financial assets and liabilities that are subject to master netting agreements or similar arrangements, regardless of whether the financial instruments have been offset in keeping with paragraph 42 of IAS 32121.
FINANCIAL ASSETS OFFSET IN THE STATEMENT OF FINANCIAL POSITION OR THAT ARE SUBJECT TO A MASTER NETTING AGREEMENT OR SIMILAR ARRANGEMENTS
Financial liabilities * The gross amount of financial liabilities includes the financial instruments subject to offsetting and those subject to master netting agreements or similar arrangements, regardless of whether the financial instruments have been offset.
The following tables compare the Poste Italiane Group’s liabilities and assets at 31 December 2018, in terms of liquidity risk.
In terms of BancoPosta RFC’s specific operations, the liquidity risk regards current account deposits and prepaid cards122, the related investment of the deposits in Eurozone government securities and/or securities guaranteed by the Italian government, and the margins on derivative transactions. The potential risk derives from a mismatch between the maturities of investments in securities and those of liabilities, represented by current accounts where the funds are available on demand, thus compromising the Parent Company’s ability to meet its obligations to current account holders. This potential mismatch between assets and liabilities is monitored via comparison of the maturity schedule for assets with the statistical model of the performance of current account deposits, in accordance with the various likely maturity schedules and assuming the progressive total withdrawal of deposits over a period of twenty years for retail customers, ten years for business customers and PostePay cards and five years for Public Administration customers.
Cash flow interest rate risk This is defined as the uncertainty related to the generation of future cash flows, due to interest rate fluctuations. Such risk may arise from the mismatch – in terms of interest rate, interest rate resets and maturities – of financial assets and liabilities until their contractual maturity and/or expected maturity (banking book), with effects in terms of interest spreads and, as such, an impact on future results.
122. From 1 October 2018, PostePay collects the inflows from prepaid cards and then deposits the funds in full in postal current accounts held by the Parent Company.
The table below analyses the sensitivity of future cash flows for the Poste Italiane Group’s financial assets at 31 December 2018.
Nominal Carrying amount +100bps -100bps +100bps -100bps +100bps -100bps 2018 effects
Financial assets at amortised cost 142 173 - - - - - 2017 effects
+ Vol - Vol + Vol - Vol + Vol - Vol 2018 effects
+ Vol 260gg - Vol 260gg + Vol 260gg - Vol 260gg + Vol 260gg - Vol 260gg 2018 effects
Financial assets at fair value through profit or loss 58 50 4 (4) - - 4 (4)
Nominal Fair Value +100bps -100bps +100bps -100bps +100bps -100bps 2018 effects
from AAA to AA- from A+ to BBB- from BB+ to C Not Rated
from AAA to AA- from A+ to BBB- from BB+ to C Not
Hedge accounting effects Total Stage 1 Stage 2 Stage 1 Stage 2 Stage 1 Stage 2 Stage 3
Impairment of fixed income instruments/receivables held at the beginning of the period - 2 2
BANCOPOSTA RFC - CREDIT RISK - DETAILS OF THE PROVISION TOCOVER EXPECTED LOSSES ON FINANCIAL ASSETS AT FVTOCI
Impairment of fixed income instruments/receivables purchased/paid in the period - 1,275 1,275
Impairment of fixed income instruments/receivables held at the beginning of the period - 19,989 - 19,989 - 19,989
Reversal of fixed income instruments/receivables held at the beginning of the period (11) (100) (15) (115) - (126)
Impairment of fixed income instruments/receivables purchased/paid in the period 4 - - - - 4
Impairment of fixed income instruments/receivables held at the beginning of the period - - - - - -
Reversal of fixed income instruments/receivables held at the beginning of the period - - - - - -
Public Administration entities for sundry services 13 - 13 (4) - (6) 3
Receivables from fixed-term contract settlements 9 - 9 1 - - 10 of which attributable to BancoPosta RFC 27 - 27 18 - (18) 45
Balance at 31 December 2017 from Aaa to Aa3 from A1 to Baa3 from Ba1 to Not rated Total
Cash and deposits attributable to BancoPosta 3,318 - - 3,318 3,196 - - 3,196
Financial liabilities attributable to BancoPosta 27,764 13,329 23,849 64,942 23,683 13,371 23,173 60,227
In 2018, a series of steps have been taken to refine the operational risk management framework, with the aim of making the process of recording operational losses more efficient and mitigating such risks. This has involved the creation of cross-func-
tional working groups. Support has also been provided to the specialist units and the user responsible for the process of analysing and assessing IT risk, in keeping with the approach adopted in 2017.
Nevertheless, at 31 December 2018, the mortality risk is limited for the Group, considering the features of the products offered. The only area where this risk is somewhat significant is term life insurance, for which actual death rates are compared from time to time with those projected on the basis of the demographics adopted for pricing purposes. Moreover, mortality risk is mitigated through reinsurance and by setting limits on both the capital and the age of the policyholder when policies are sold.
Longevity risk is also low. In fact, for most life insurance products the probability of annuitisation is very close to zero, as historical experience shows that policyholders never use the option to annuitise. Pension products, in particular, still account for a limited share of insurance liabilities (about 5%). In addition, for these products, the Group may, if certain conditions materialise, change the demographic base and the composition by sex used to calculate the annuity rates.
The options embedded in the policies held in the portfolio include: �� Surrender option; �� Guaranteed minimum return option; �� Annuity conversion option.
Poste Assicura SpA is exposed to the following insurance risks: �� Underwriting risk: the risk deriving from the conclusion of insurance contracts associated with the events insured, the processes followed when pricing and selecting risks and unfavourable claims trends compared with previous estimates. This risk can be divided into the following categories: – Pricing risk: the risk linked to the company’s pricing of its policies which depends on the assumptions used in order to calculate premiums. If prices are based on inadequate assumptions, the insurer may be exposed to the risk of being unable to meet its contractual obligations to policyholders. These risks include those related to disability-morbidity, or the risk associated with the payment of benefits or claims for illness and/or injury. Pricing risk also includes the risk that the premiums charged are not sufficient to cover the actual costs incurred in the management of the contract and the risk of excessive growth in operations associated with poor selection of risks or the absence of resources sufficient to keep up with the pace of growth.
�� Anti-selection risk: this relates to the company’s unwillingness to insure an event not classified as future, uncertain and damaging.
In particular, with regard to real estate funds sold in the period 2002-2005, which have given rise to a number of complaints and disputes, the Company is closely monitoring performance through to the respective maturities, assessing the potential impact on the provisions for risks and charges accounted for in the financial statements. During the year ended 31 December 2018, the estimate of the liabilities deriving from risks linked to disputes with customers regarding certain financial instruments and investment products, sold in previous years and that have not yet reached maturity, whose performance is not in line with expectations, was prudently revised. On 16 January 2017, Poste Italiane SpA’s Board of Directors passed a resolution aimed at protecting all the customers who, in 2003, purchased units issued by the Invest Real Security real estate fund, and who still held the units at 31 December 2016, the date of the fund’s maturity. The estimated liabilities resulting from this initiative were recognised in provisions for risks and charges, with a total of €48 million used at 31 December 2017 following implementation. In addition, with a view to consolidating the Company’s historical customer relationships, based on trust and transparency, on 19 February and 28 June, Poste Italiane SpA’s Board of Directors approved an initiative designed to protect customers who, in 2004, against a different economic and regulatory backdrop compared with today’s, purchased units issued by the Europa Immobiliare 1 fund and who still held the units at 31 December 2017, the date of the fund’s maturity. This initiative, the aim of which was to allow each investor to recover the difference between the amount they invested at the time of subscription, increased by any income distributions or early returns of capital over the life of the fund, and the amount that the investor will receive from the Fund’s “Final Liquidation Distribution”, was launched on 24 September 2018 and came to a conclusion on 7 December 2018123.
8. Hedging transactions 124. 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. 125. The dollar offset approach is a quantitative method that involves a comparison between movements in the fair value or cash flow of the hedging instrument and the movements in the fair value or cash flow of the hedged instrument attributable to the risk hedged. Depending on the policy selected, this approach can be used: • on a cumulative basis, by observing the performance of the hedge since inception; • on a periodic basis, by comparing the hedge performance with that of the last test. The dollar offset approach can be implemented through a hypothetical derivative, that is by constructing a theoretical derivative to compare the relevant theoretical movements in fair value or cash flow with those of the hedged instrument (actual derivative).
The Poste Italiane Group has a government bond portfolio – made up of fixed-rate BTPs and inflation-linked BTPs – subject to movements in fair value due to changes in interest rates and in the inflation rate.
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.
The retrospective effectiveness test is run by utilising the “dollar offset approach through the hypothetical derivative125”. With this approach, consideration is given to the hedge ratio of the change in fair value of the actual derivative to the change in fair value of the hypothetical derivative occurred between inception and the valuation date. The hedge is considered effective if the hedge ratio ranges from 80% to 125%. The hypothetical derivative and the actual hedging instrument have a settlement date consistent with the hedge inception (spot or forward start) and differ solely in their spread which is considered, as already indicated, the main source of ineffectiveness126. The partial ineffectiveness of the hedge, equal to the difference between the changes in value of the two derivatives (hypothetical and actual) represents the net effect of the hedge recognised separately in profit or loss.
127. The critical terms approach involves a comparison between the critical terms of the hedging instrument with those of the hedged item. The hedging relationship is highly effective when all the critical terms of the two instruments match perfectly and there are no features or options that might invalidate the hedge. Critical terms include, among others: notional amount of the derivative and principal of the underlying, credit risk, timing, currency of the cash flows.
For the purposes of the prospective effectiveness test, the critical terms approach is applied, considering at inception the consistency between the hedging instrument and the hedged item on the basis of the qualitative characteristics of the contracts129.
With respect to inflation-linked bonds, the retrospective effectiveness test considers the hedge ratio between the change in fair value of the actual derivative to the change in fair value of the hypothetical derivative occurred between the date of inception and the valuation date. The hedge is considered effective if the hedge ratio ranges from 80% to 125%.
The hypothetical derivative and the actual derivative have the settlement date that matches the inception of the hedge and differ in terms of their fixed-rate component130. Moreover, for the derivatives used to hedge inflation-linked BTP, the fair value at the settlement date reflects also the interest of the instrument accrued from the latest interest payment date to the date of settlement of the derivative. As such, both are considered the main sources of ineffectiveness.
The change in fair value of the actual derivative is recognised through equity, for the effective portion of the hedge, while the change in fair value of the ineffective portion is recognised through profit or loss.
131. Calculated by assuming a parallel shift of + / - 100 bps of the yield curves.
The exposure to this risk is hedged through an interest rate swap to hedge cash flows whereby the Parent Company took on the obligation to pay a fixed rate and sold the variable interest payable by the bond. The hedge covers the interest rate risk while the implicit credit risk is not hedged.
Accumulated amount of fair value hedge adjustments on the hedge item in case of discontinuing
Fixed income instruments, of which: 26,136 - 993 - 686 -
Gain/(Loss) on hedged recognised in OCI Transfers to profit or loss: Hedge accounting effects Discontinued
On 27 February 2015, the tax Authorities notified Poste Italiane SpA of an indictment for accounting irregularities before the Court of Auditors for the Lazio region, regarding a number of accounting records for the handling and distribution of revenue stamps in the years between 2007 and 2010. The hearing was held on 2 July 2015. With sentence no. 332 of 9 July 2015, the Court of Auditors for the Lazio region fined the Parent Company an amount of €8 million, plus monetary revaluation and legal interest. The Company filed an appeal and, on 15 November 2017, the Court of Auditors issued judgement 542, upholding the appeal and limiting the initial fine to the sum, amounting to €4 million. During the year under review, following expiry of the deadline for lodging an appeal against the judgement and after subsequent confirmation from the counterparty, a receivable of €4 million was recognised.
In November 2011, the tax Authorities notified EGI SpA of three notices of assessment for the years 2006, 2007 and 2008, resulting in the identification of the same irregularity in each of the three years. This concerned the application, for the purposes of IRES, of art. 11, paragraph 2 of Law 413/1991 to properties of historical and artistic interest owned by EGI and leased by it to third parties. Following the ruling in first instance of the Provincial Tax Tribunal of Rome, on 7 May 2014, the company proceeded to pay a total amount due of approximately €2.1 million. Furthermore, as a result of the ruling in second instance, handed down by the Regional Tax Tribunal of Rome in EGI SpA’s favour, on 10 June 2015, the company obtained a refund of the amount paid. On 24 April 2015, the tax Authorities notified EGI that they had filed an appeal with the Court of Cassation, requesting annulment of the judgement on appeal, and on 12 June 2015 EGI SpA presented a cross appeal. The litigation is currently pending before the Supreme Court of Cassation. On this specific issue, the Supreme Court has recently adopted an interpretation favourable to the tax Authorities. As a result, conscious of significant increase in the risk of an adverse outcome, EGI is assessing the possibility of settling the dispute in return for concessions, in accordance with art. 6 of Law Decree 119/2018. In this case, EGI will have to pay a sum equal to 15% of the additional IRES claimed, amounting to a total of approximately €0.4 million. EGI has thus made provision for this amount in its provisions for risks and charges.
On 25 November 2014, a tax audit relating to Postel SpA, regarding direct taxes and VAT for the tax years from 2009 to 2012 and previously undertaken by the tax Authorities, came to an end with delivery of a tax audit report in which the right to deduct VAT from purchases, applied by the company in 2010 and 2011, was contested. Then, on 8 October 2015, an audit regarding income tax and withholding tax, regarding Postel SpA’s alleged failure to pay social security contributions for employees and/ or contractors used by a supplier between 2010 and 2014, came to an end with delivery of a tax audit report, contesting the right to deduct VAT and the deductibility of IRAP. As a result of the above audits, the tax Authorities have served the company with two separate tax assessment notices for 2010 and 2011. Specifically: �� In relation to 2010, on 21 December 2015, the company was requested to pay VAT of €5.6 million, in addition to penalties and interest, as well as VAT, IRES and IRAP totalling €0.2 million, plus penalties and interest. On 18 May 2016, the company appealed the assessment notice, at the same time paying a provisional amount of approximately €2.3 million of the VAT due.
�� In relation to 2011, on 18 October 2016, the company received a tax assessment notice for VAT, IRES, IRAP and withholding tax, amounting to €1.2 million, plus penalties and interest. On 16 December 2016, the company appealed the assessment notice, at the same time paying a provisional amount of approximately €0.5 million.
With regard to the assessment notices for 2010 and 2011, the company has elected to take up the settlement concession introduced by art. 11 of Law Decree 50 of 24 April 2017, which involves payment of the outstanding tax and interest on the arrears accruing up to the 60th day after notification of the assessment, except for penalties and overdue interest. The amounts payable under the settlement are reduced by the amounts already paid as a result of the legislation in force regarding the collection of tax when judgement is pending. In this instance, the amount payable by the company is €8.4 million. Thus, having already paid the sum of €2.8 million, the company proceeded to pay the sum of €5.6 million. The provisions made in previous years, totalling €8.3 million, have been used up. The actions brought against the company were thus cancelled by the Tribunal in 2018.
On 19 April 2018, the tax Authorities in Rome (Guardia di Finanza – Nucleo di Polizia economico-finanziaria) entered the offices of SDA Express Courier SpA. The purpose of the inspection was to verify the company’s compliance with the requirements regarding VAT, income tax, IRAP and withholding tax for the years 2014, 2015 and 2016, pursuant to and for the purposes of articles 52 and 63 of Presidential Decree 633/72, art. 33 of Presidential Decree 600/73, art. 2 of Legislative Decree 68/2001 and Law 4/1929. On 29 November 2018, the audit was formally declared at an end. The main finding in final notice of assessment regards the deduction of VAT relating to the adjustment entries issued by the company in connection with discounts granted to customers following an increase in the number of shipments. These discounts become price reductions, originally applied by the company when the shipment is handled, and are therefore classified as rebates or discounts under the related contract. In the view of SDA’s consultants, the finding is without grounds in either fact or law. As a result, the company plans to challenge the finding through the appropriate administrative and/or legal channels.
Poste Italiane financial statements for the year ended 31 december 2018 9. Proceedings pending and principal relations with the Authorities
The other two cases are still pending and are still at the preliminary stage, relating to the appeals filed by Postel SpA against the payment orders for the period from May 2009 to September 2018. Taking into account the favourable judgements, the reasons given for the judgements and the latest appeals brought by INPS, the company has adjusted its provisions for risks and charges based on the opinion of its legal advisors.
132. In fact, in its ruling of 14 September 2016, the AGCM clarified that, at that time, there were no grounds to justify action pursuant to Law 287/90, as art. 8, paragraph 2-quater of Law 287/90 does not establish a generic obligation to grant access to the network on ad hoc terms, but an obligation to grant access on equivalent terms to those applied to subsidiaries.
European Commission On 13 September 2013, the Court of Justice of the European Union upheld Poste Italiane SpA’s appeal, overturning the decision of the European Commission of 16 July 2008 on state aid, ordering the EC to pay legal costs. Acting on the European Commission’s Decision, and in accordance with instructions from the Parent Company’s shareholder, in January 2009 Poste Italiane SpA paid €443 million plus interest of €41 million to the MEF. In implementation of the European Court’s (by then definitive) decision, in accordance with art.1 paragraph 281 of the 2015 Budget Law, (Law 190 of 23 December 2014), on 13 May 2015, the Company collected the amount of €535 million from its then sole shareholder, the MEF. Following the European Court’s decision, however, the European Commission reopened its review and appointed an external expert to determine whether (in accordance with art. 1, paragraph 31 of the 2006 Budget Law - Law 266 of 23 December 2005) the rates of interest earned by the Company on deposits with the MEF during the period from 1 January 2005 to 31 December 2007 were in line with market rates. The external expert has provided the Commission, on a preliminary basis, with an updated version of the analysis originally performed by the Commission. Poste Italiane will collaborate with the relevant national Authorities to demonstrate the appropriate nature of the returns earned during the period in question.
On 3 October 2018, Poste Italiane proceeded to pay the fine of €23 million plus interest imposed by the Autorità Garante della Concorrenza e del Mercato (AGCM - the Antitrust Authority) following its ruling, in January 2018, that Poste Italiane had abused its dominant market position as per art. 102 of the TFEU. This does not constitute acceptance or admission of liability in relation to the alleged misconduct and does not affect the Company’s right to defend its position through the appropriate channels. At 31 December 2018, the provisions made in 2017 have been used in full.
ii. In September 2017, the regulator published Resolution 298/17/CONS relating to its assessment of the net cost of the universal postal service incurred by the Company for 2013 and 2014 and the applicability of the mechanism for allocating such cost. In detail, the regulator has assessed the cost of providing the universal service for 2013 and 2014 to be €393 million and €409 million, respectively, compared with revenue of €343 million and €277 million recognised in Poste Italiane SpA’s statement of profit or loss in previous years. The regulator has also announced that the compensation fund to cover the cost of providing the universal service, as provided for in art. 10 of Legislative Decree 261/1999, has not been set up. On 6 November 2017, the Company challenged this resolution by filing an appeal before the Regional Administrative Court (TAR).
iii. With Resolution 571/18/CONS, published on 11 February 2019, AGCom has launched a public consultation on the assessment of the net cost of providing the Universal Postal Service in 2015 and 2016, with the estimated costs of providing the service amounting to €378 million for 2015 and €355 million for 2016, compared with revenue of €279 million and €262 million recognised by the Parent Company for the services rendered in those years. Interested parties have 45 days from publication of the Resolution in which to send their contributions to the consultation. The above figures may be adjusted by the regulator in its final decision following closure of the consultation.
Bank of Italy With regard to the inspection of Poste Italiane conducted last year by the Bank of Italy, with the aim of assessing the governance, control and operational and IT risk management systems in relation to BancoPosta’s operations, the process of implementing the relevant compliance initiatives is still in progress and work is proceeding according to the established timing.
IVASS - Istituto per la Vigilanza sulle Assicurazioni (the insurance regulator) On 20 March 2017, IVASS began an inspection of Poste Vita pursuant to art. 189 of the Private Insurance Code (Legislative Decree 209 of 7 September 2005). The inspection ended on 28 June 2017. The focus of the inspection was “an audit of the best estimate of liabilities and the assumptions used in computing such liabilities and solvency capital requirements (SCR), including on a prospective basis”. On 27 September 2017, Poste Vita provided the documentation requested. On 27 September 2017, IVASS sent Poste Vita the results of the inspection. Finding that the degree of implementation of the Solvency II framework was satisfactory overall, the regulator did not identify any specific shortcomings, and issued a partially favourably opinion, making a number of points and observations. Therefore, on 25 October 2017 the company submitted its considerations regarding the investigations and corrective measures required by the inspection report to IVASS, and planned a series of activities aimed at implementing the improvement initiatives recommended by the Authority. To date, Poste Vita’s implementation of the planned actions is on schedule.
In July and August, two requests were received from the CONSOB: the first, dated 27 July, was also sent to other intermediaries and regarded an in-depth assessment of the key issues relating to implementation and application of MiFID II; the second, dated 13 August, contained a request for a meeting with the aim of obtaining greater details on the provision of investment services. During this meeting, held at the CONSOB in September 2018, additional information was provided with respect to the information previously made available, and the related implementation plan was presented, in line with the details submitted to the regulator in the Tableau de Bord on Compliance at 30 June 2018, supplemented with further guidance based on evidence
Garante per la protezione dei dati personali (the Data Protection Authority) On 15 January 2014, at the end of an investigation launched in 2009, the Authority imposed a fine of €0.34 million on Postel SpA, which the company accounted for in its financial statements for 2013. The company appealed the Authority’s ruling before the Civil Court of Rome, requesting an injunction suspending its implementation, which was accepted by the judge with a ruling on 16 June 2014. On 21 January 2016, the designated judge reduced the fine by €0.1 million, rejecting the other preliminary exceptions raised on the merits. On 21 March 2017, Equitalia Servizi di riscossione SpA notified the company of a payment order in which, in addition to requesting payment of a fine of €0.24 million, as reduced by the judgement handed won by the Court of Rome, it also applied, among other things, an additional amount of €0.12 million. Postel appealed the order, resulting in cancellation of the fine of €0.12 million by the Court of Rome. On 3 August 2018, the Authority notified the company that it had appealed this judgement before the Supreme Court and Postel proceeded to notify and lodge a counter-appeal within the legally required deadline. The Court’s ruling on the admissibility of the appeal and the date for a public hearing are awaited. The company has filed a formal request with the Authority in order to recover the sums in question (already paid by Postel following the Authority’s seizure of the related amounts from a third party) and, has also applied to the tax Authorities for a refund, a response to which has yet to be received.
�� The impairment loss of €33 million on the goodwill allocated to Postel SpA, as described in more detail in note 5.2-A3.
Under the definition provided by the CONSOB ruling of 28 July 2006, the Poste Italiane Group did not conduct any exceptional and/or unusual transactions135 in 2018.
Poste Italiane financial statements for the year ended 31 december 2018 10. Material non-recurring events and/or transactions
The net debt/(funds) of the Poste Italiane Group and Poste Italiane SpA at 31 December 2018 are analysed below.
Technical provisions for insurance business - - - 125,148 - 125,148 -
Financial assets at amortised cost (89) (53) (31,221) (1,506) - (32,869) (10,530)
MEF account, held at the Treasury - - 3,483 - - 3,483 3,483
Cash and deposits attributable to BancoPosta - - (3,196) - - (3,196) -
Net funds attributable to the Payments, Mobile and Digital and Financial Services segments at 31 December 2017 have been adjusted following recognition of debt of €279 million and €211 million, respectively, after the reclassification of the above investments.
An analysis of the net funds of the Mail, Parcels and Distribution segment at 31 December 2018, in accordance with ESMA recommendation 319/2013, is provided below: Poste Italiane financial statements for the year ended 31 december 2018 13. Additional information
At 31 December 2018, the Company has net funds of €3,138 million. The change during the year reflects a reduction in the fair value of financial instruments measured at FVTOCI, totalling €375 million, including the impact of first-time adoption of IFRS 9. The fair value reserve relating to these instruments, before the related taxation, is a negative €114 million.
Industrial net debt for capital outside ring-fence including intersegment transactions (634) (1,010)
At 31 December 2018, these assets concern reverse repurchase agreements entered into with primary financial intermediaries and entirely attributable to the Parent Company.
Receivables used as collateral provided by CSAs 1,332 1,332 1,110 1,110
Receivables used as collateral provided by GMRAs 185 185 69 69
At 31 December 2018, the Company has received financial assets as collateral for repurchase agreements, having a nominal value of €254 million and a fair value of €251 million.
Nominal value Carrying amount Fair Value Nominal value Carrying amount Fair Value
Financial assets at amortised cost 17,934 19,778 18,413 12,692 12,912 14,384
LU1193254122 Mfx - Global Fund - Asset Global Fund (Pimco Multi Asset)
ISIN (€m) Name Nature of entity Activity of the Fund % investment
LU1379774190 Multiflex-Diversified Dis-Cm Financial assets at FVTPL 5,463 695 4,768 VaR 99.5% over a 1-year time horizon
LU1407712014 Multiflex - Global Optimal Multi Asset Fund Financial assets at FVTPL 4,650 238 4,412 Provided by fund management company
LU1407712287 Multiflex - Strategic Insurance Distribution Financial assets at FVTPL 4,383 389 3,994 Provided by fund management company
LU1808839242 Multiflex-Olymp Insurn Ma-Cm Financial assets at FVTPL 533 50 483 Provided by fund management company
LU1808838863 Multiflex-Olympium Opt Ma-Cm Financial assets at FVTPL 538 33 505 Provided by fund management company
LU1500341240 Multiflex-Lt Optimal M/A-Cm Financial assets at FVTPL 384 26 358 Provided by fund management company
IT0005212193 Diamond Italian Properties Financial assets at FVTPL 157 46 111 VaR 99.5% over a 1-year time horizon
LU1500341752 Multiflex-Dynamic Lt M/A-Cm Financial assets at FVTPL 340 20 320 Provided by fund management company
LU1581282842 Indaco Sicav Sif - Indaco Cifc Us Loan Financial assets at FVTPL 81 34 47 VaR 99.5% over a 1-year time horizon
IT0005210593 Diamond Other Sector Italia Financial assets at FVTPL 59 14 45 VaR 99.5% over a 1-year time horizon
QU0006742476 Prima Global Equity Prtners Fund Financial assets at FVTPL 27 9 18 VaR 99.5% over a 1-year time horizon
Poste Italiane financial statements for the year ended 31 december 2018 13. Additional information
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 grant date for the phantom stocks or at the end of a retention period (as specified below). The key characteristics of the Plan are described below.
Beneficiaries The beneficiaries are: Poste Italiane’s Chief Executive Officer, in his role as General Manager, certain managers within the Poste Italiane Group, including key management personnel, Material Risk Takers who work for BancoPosta RFC and personnel belonging to the Poste Vita insurance group.
�� Indicator of short-term liquidity, based on LCR at the end of the period.
�� Indicator of risk-adjusted earnings, based on RORAC at the end of the period; this indicator has been introduced from the 2017-2019 cycle and only for the General Manager (and Chief Executive Officer).
Determination of fair value and effects on profit or loss Measurement, using Monte Carlo simulations, is carried out by an independent expert.
First Cycle 2016-2018 The total number of phantom stocks awarded to the 36 Beneficiaries of the First Cycle of the Plan outstanding at 31 December 2018 amounted to 351,346. The cost recognised for 2018 is approximately €1 million, whilst the liability recognised in amounts due to staff is approximately €2.6 million.
Second Cycle 2017-2019 The total number of phantom stocks awarded to the 52 Beneficiaries of the Second Cycle of the Plan at 31 December 2018 amounted to 576,124. The cost recognised for 2018 is approximately €1.6 million, whilst the liability recognised in amounts due to staff is approximately €2.5 million.
Third Cycle 2018-2020 The total number of phantom stocks awarded to the 72 Beneficiaries of the Third Cycle of the Plan amounted to 665,569, with an estimated fair value per unit at 31 December 2018 of €5.26 in relation to three Plans for the Chief Executive Officer and General Manager, €5.68 for BancoPosta RFC’s personnel, €5.89 for Poste Vita’s personnel and €5.69 relating to the Group’s remaining personnel. The cost recognised for 2018 is approximately €1.2 million, equivalent to the liability recognised in amounts due to staff.
First Cycle 2016-2018 The total number of phantom stocks awarded to the 31 Beneficiaries of the First Cycle of the Plan outstanding at 31 December 2018 amounted to 311,254. The cost recognised for 2018 is approximately €1 million, whilst the liability recognised in amounts due to staff is approximately €2.3 million.
Second Cycle 2017-2019 The total number of phantom stocks awarded to the 46 Beneficiaries of the Second Cycle of the Plan amounted to 525,791. The cost recognised for 2018 is approximately €1.5 million, whilst the liability recognised in amounts due to staff is approximately €2.3 million.
Third Cycle 2017-2019 The total number of phantom stocks awarded to the 65 Beneficiaries of the Third Cycle of the Plan amounted to 612,014. The cost recognised for 2018 is approximately €1 million, equivalent to the liability recognised in amounts due to staff.
136. The contribution of the card payments and payment services business unit, previously attributable to BancoPosta RFC, has involved the transfer of personnel who are the beneficiaries of share-based incentive schemes.
Poste Welfare Servizi Srl (Rome) 100.00% 16 3,211 10,884 * Poste Italiane SpA is committed to providing financial support to the subsidiaries SDA Express Courier SpA and Mistral Air Srl for 2019 and to Poste Tributi ScpA throughout its liquidation.
** The figures shown for these companies were prepared in accordance with IFRS and, as such, may vary from those available in the respective financial reports, which were prepared in accordance with the Italian Civil Code and Italian GAAP.
Poste Italiane Ministry of Education, Universities and Research Financial training 2,446
Postal savings deposits The following table provides a breakdown of postal savings deposits collected by the Parent Company in the name of and on behalf of Cassa depositi e prestiti, by category. The amounts are inclusive of accrued, unpaid interest.
Assets under management by BancoPosta Fondi SpA SGR, measured at fair value using information available on the last working day of the year, amount to €8,119 million at 31 December 2018 (€7,984 million at 31 December 2017).
At 31 December 2018, EGI SpA has given commitments to purchase electricity, with a total value of €21.5 million, on regulated forward markets in 2019. At 31 December 2018, the corresponding market value is €21 million.
Future commitments attributable to the Group and Poste Italiane SpA related to property leases, which may generally be terminated with six months’ notice, break down by due date as follows: COMMITMENTS DERIVING FROM PROPERTY LEASES AND OTHER LEASE ARRANGEMENTS - POSTE ITALIANE GROUP
Sureties and other guarantees issued: by banks/insurance companies in the interests of Group companies in favour of third parties 283 283 by the Group in its own interests in favour of third parties 21 21
In addition to the above, at 31 December 2018, Poste Italiane SpA holds a further €2 million in assets belonging to Group companies.
At 31 December 2018, the Parent Company had paid a total of €97 million in claims on behalf of the Ministry of Justice, for which, under the agreement between Poste Italiane SpA and the MEF, it has already been reimbursed by the Treasury, whilst awaiting acknowledgement of the relevant account receivable from the Ministry of Justice.
Disclosure of fees paid to independent auditors pursuant to art.149 duodecies of the consob’s regulations for issuers 137. Any audit or attestation services relating to accounts prior to the reporting date are recognised on an accruals basis, following engagement of the auditor, in the year in which the services are rendered, applying the percentage of completion method.
The following table shows fees payable to the Parent Company’s auditor, PricewaterhouseCoopers SpA, and companies within its network for 2017, presented in accordance with art. 149 duodecies of the CONSOB’s Regulations for Issuers: DISCLOSURE OF FEES PAID TO INDEPENDENT AUDITORS
Auditing services are expensed as incurred and reported in the audited financial statements137. With regard to the Parent Company, the item “Audit” includes additional fees of €75 thousand subject to approval by the Annual General Meeting of shareholders on 28 May 2019.
Poste Italiane Financial Statements for the year ended 31 December 2018 14. BANCOPOSTA RFC SEPARATE REPORT FOR THE YEAR ENDED 31 DECEMBER 2018
BANCOPOSTA RFC SEPARATE REPORT FOR THE YEAR ENDED 31 DECEMBER 2018
Statement of financial position at 31 December 10. Cash and cash equivalents 3,327,674,415 3,217,163,704 20. Financial assets measured at fair value through profit or loss 58,041,524 a ) financial assets held for trading - b ) financial assets designated at fair value - c ) other financial assets mandatorily measured at fair value 58,041,524 30. Financial assets measured at fair value through other comprehensive income 32,040,011,924 39,140,379,660 40. Financial assets measured at amortised cost 33,743,062,105 22,014,168,028 a) due from banks 1,400,368,286 1,150,646,309 b) due from customers 32,342,693,819 20,863,521,719 60. Adjustments for changes in hedged financial assets portfolio (+/-) - 80. Property, plant and equipment - 110. Non-current assets held for sale and discontinued operations - -
Financial liabilities held for trading - 30. Financial liabilities designated at fair value - 50. Adjustments for changes in hedged financial liabilities portfolio (+/-) - 70. Liabilities associated with non-current assets held for sale and discontinued operations 100. Provisions for risks and charges: 511,255,914 543,375,786 a) commitment and guarantees given - b ) post-employment benefit - 180.
BancoPosta RFC Separate Report for the year ended 31 December 2018 Financial Statements
40. Fee and commission income 3,861,199,639 3,628,959,602 50. Fee and commission expense (139,560,667) (64,607,340)
180. Net losses/recoveries on property, plant and equipment - 190. Net losses/recoveries on intangible assets - 200. Other operating income/(expenses) (31,424,095) (57,613,621)
280. Income/(Loss) after tax from continuing operations 596,808,586 584,979,647 290. Income/(Loss) after tax from discontinued operations - 300. Profit/(Loss) for the year 596,808,586 584,979,647
Hedges (elements not designated) - 140. Financial assets (other than equity instruments) measured at fair value through other comprehensive income 150. Non-current assets held for sale and discontinued operations - 160. Share of valuation reserve attributable to equity-accounted investments - 170. Total other components of comprehensive income after taxes (1,472,257,839) (753,949,913)
Comprehensive income for 2018 * This item corresponds to the BancoPosta RFC reserve.
- net losses/recoveries due to credit risk (+/-) 21,388,521 14,583,719 - net losses/recoveries on property, plant and equipment and intangible assets (+/-) - - - net provisions and other expenses/income (+/-) 147,682,241 444,520,215 - unpaid taxes and duties (+) 233,104,452 185,040,192 - net losses/recoveries on discontinued operations after tax (+/-) - 2. Cash flow from/(used for) financial assets (4,480,855,905) (2,352,404,996)
- financial assets held for trading - - - financial assets designated at fair value - - - other financial assets mandatorily measured at fair value - - - financial assets measured at fair value through other comprehensive income 1,253,773,199 (2,764,116,693)
- financial assets measured at amortised cost (5,332,798,567) 919,204,139 3. Cash flow from/(used for) financial liabilities 4,258,506,041 2,847,080,414 - financial liabilities measured at amortised cost 4,565,926,545 3,463,588,665 - financial liabilities held for trading - - - financial liabilities designated at fair value - -
C. Financing activities - issuance/purchase of own shares - - - issuance/purchase of equity instruments - - - dividends and other payments* (374,979,647) (458,276,740)
Cash and cash equivalents at end of the year 3,327,674,415 3,217,163,704
Part A – Accounting policies 138. 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.
Section 1 – Declaration of compliance with international financial reporting standards The Separate Report has been prepared in compliance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). These were endorsed for application in the European Union by European Regulation (EC) 1606/2002 of 19 July 2002, as transposed into Italian law by Legislative Decree 38 of 28 February 2005 governing the introduction of IFRS into Italian legislation. The term “IFRS” means all International Financial Reporting Standards, all International Accounting Standards (“IAS”), and all interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) previously known as the Standing Interpretations Committee (“SIC”) endorsed for application in the European Union by EU Regulations issued prior to 19 March 2019, the date on which the Board of Directors of Poste Italiane SpA approved the BancoPosta RFC Separate Report as part of Poste Italiane SpA’s Annual Report.
Accounting standards and interpretations applicable from 1 January 2018 and those soon to be effective
The relevant information is provided in note 2.7 – New Accounting standards and interpretations and those soon to be effective – in the section – Poste Italiane financial statements – of this Annual Report.
The financial reporting standards and the recognition, measurement and classification criteria adopted in this Report are consistent with those used to prepare the separate Report as of and for the year ended 31 December 2017, except for the classification, measurement and impairment of financial instruments and the recognition of revenue, which changed following the coming into force of IFRS 9 – Financial Instruments and IFRS 15 – Revenue from Contracts with Customers.
The Poste Italiane Group elected to adopt the new financial reporting standards starting from its mandatory effective date, i.e. 1 January 2018, without early adoption. Regarding the transition method, it elected to: �� in relation to IFRS 9, use the exemption in accordance with the provisions of IFRS 9.7.2.15 whereby the retrospective cumulative effect of the change to the new accounting standard is recognised, as of 1 January 2018, in retained earnings and in the fair value reserve, where appropriate, without restating the comparative data; �� in relation to IFRS 15, adopt the Simplified transition method whereby the cumulative effect of the change to the new accounting standard is recognised, as of 1 January 2018, in retained earnings, without restating the comparatives, thus opting not to apply the new rules to contracts completed at the transition date and accounted for in accordance with IAS 18 and related interpretations.
To reclassify the comparative data at 31 December 2017 in the new official formats required by the 5th update of Circular 262 of the Bank of Italy, steps were taken to that effect, without changing the amounts, to report them in the new items. In particular, it is noted that: �� The items “Due from customers”, “Due from banks” and “Held to maturity financial assets” in last year’s financial report have all be reclassified to item 40 “Financial assets measured at amortised cost”; �� “Available-for-sale financial assets” in last year’s financial report have been reclassified to Item 30 “Financial assets measured at fair value through other comprehensive income”; �� “Due to banks” and “Due to customers” in last year’s financial report have been reclassified to Item 10 “Financial liabilities measured at amortised cost”.
The effects of the transition to the new financial reporting standards are illustrated in Section 4 - Other information.
Section 3 – Events after the end of the reporting period As of 1 January 2019, BancoPosta has outsourced its investment management activities to BancoPosta Fondi SGR, a Poste Italiane Group company, a licensed, regulated intermediary specialising in asset management and designated as a competence centre for the management of financial investments. At the same time, again from 1 January 2019, as part of the reorganisation of BancoPosta RFC’s internal and operating processes, BancoPosta Fondi SGR outsourced its Internal Audit and Risk Management to BancoPosta, designed to achieve an overall strengthening of the controls conducted by the audit departments involved.
Assets 20. Financial assets measured at fair value through profit or loss 58 - - a ) financial assets held for trading - - - - b) financial assets designated at fair value - - - - c) other financial assets mandatorily measured at fair value 58 - - 30. Financial assets measured at fair value through other comprehensive income 32,040 - 39,140 40. Financial assets measured at amortised cost 33,743 844 22,014 734 a) due from banks 1,400 - 1,151 - b) due from customers 32,343 844 20,863 734 60. Adjustments for changes in hedged financial assets portfolio (+/-) - - - of which: - goodwill 110. Non-current assets held for sale and discontinued operations - - - -
Liabilities and equity 10. Financial liabilities measured at amortised cost 64,203 - 59,636 256 a) due to banks 5,985 - 5,950 - b) due to customers 58,218 79 53,686 256 20. Financial liabilities held for trading - - - 30.
In implementation of BancoPosta RFC’s Regulation, these General Guidelines139, identify the services in question and determine the manner in which they are remunerated. The general policies and instructions contained in the General Guidelines in relation to transfer pricing are detailed in specific Operating Guidelines, jointly developed by BancoPosta and other Poste Italiane SpA functions. The Operating Guidelines establish, among other things, the applicable levels of service and transfer prices and are effective following an authorisation process involving the relevant functions, the Chief Executive Officer and, where required, the Company’s Board of Directors. When BancoPosta intends to contract out a major operating process or a control procedure, whether in its entirety or in part, to Poste Italiane SpA in accordance with specific Operating Guidelines, it must give prior notice to the Bank of Italy. In accordance with Bank of Italy Circular 285 issued on 17 December 2013, Part Four, Chapter 1 BancoPosta, Section II, paragraph 2, the Board of Statutory Auditors is required to verify, at least every six months, that the policies adopted are fit for purpose and are in compliance with the related statutory requirements and supervisory standards.
On 27 February 2015, the tax authorities notified Poste Italiane SpA, in relation to BancoPosta RFC’s operations, of an indictment for accounting irregularities before the Court of Auditors for the Lazio region, regarding a number of accounting records for the handling and distribution of revenue stamps in the years between 2007 and 2010. The hearing was held on 2 July 2015. With sentence 332 of 9 July 2015, the Court of Auditors for the Lazio region fined Poste Italiane an amount of €8 million, plus monetary revaluation and legal interest. Poste Italiane filed an appeal and, on 15 November 2017, the Court of Auditors issued judgement 542, upholding the appeal and limiting the initial fine to the sum amounting to €4 million. During the year under review, following expiry of the deadline for lodging an appeal against the judgement and after subsequent confirmation from the counterparty, a receivable of €4 million was recognised.
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 adjourned the case to a hearing on the merits. The hearing on the merits, scheduled for 17 October 2018, did not take place and the case was removed from the register. It may be resumed at the Company’s request by 17 April 2019.
On 8 October 2018, the AGCM notified Poste Italiane, with reference to BancoPosta RFC, of the launch of investigation PS11215 – pursuant to art. 27, paragraph 3 of Legislative Decree 206/05 (the Consumer Code) and art. 6 of the Regulation for Investigations – with an accompanying request for information pursuant to art. 12, paragraph 1 of the above Regulation. The investigation is in response to complaints filed on 24 July 2018 by “Altroconsumo” and on 8 August 2018 by “Centro Tutela Consumatori e Utenti” (two consumers’ associations). The Authority is primarily looking into an advertising campaign called “Buoni e libretti – Buono a sapersi”, promoting Interest-bearing Postal Certificates and Postal Savings Books via TV and press adverts. The investigation regards the alleged violation of articles 21 and 22, paragraph 1 and 4 letter a) of the Consumer Code, as the effect of taxation was, in the Authority’s view, not clearly indicated.
With regard to the inspection of Poste Italiane conducted last year by the Bank of Italy, with the aim of assessing the governance, control and operational and IT risk management systems in relation to BancoPosta’s operations, the process of implementing the relevant compliance initiatives is still in progress and work is proceeding according to the established timing.
In 2017, in line with the roll-out plan launched in October 2016, IT releases were completed for the new guided consultancy platform, which was gradually extended to the entire Poste Italiane network. In parallel, further compliance initiatives aimed at implementing the MiFID 2 Directive, which came into force on 3 January 2018, were also implemented.
The project to adopt the new standard was implemented by Poste Italiane in 2017, with the objective to: i) identify the areas impacted by the standard (“Classification & Measurement”, “Impairment” and “Hedge accounting”), ii) determine the quantitative and qualitative effects of the transition, iii) identify and implement the application and organisational solutions for an organic, effective and consistent management process within the Group.
Below, a description is provided of the main effects on the statement of financial position at 1 January 2018 of BancoPosta RFC determined by the adoption of the new standard.
-m at ur ity fi na nc ia l a ss et s
To ta l a ss et s 10. Cash and cash equivalents 20. Financial assets measured at fair value through profit or loss 30. Financial assets measured at fair value through other comprehensive income 40. Financial assets measured at amortised cost 60. Adjustments for changes in hedged financial assets portfolio (+/-)
80. Property, plant and equipment 110. Non-current assets held for sale and discontinued operations
eb t s ec ur iti es in is su e
in an ci al li ab ili tie s he ld fo r t ra di ng
E m pl oy ee te rm in at io n be ne fit s 0.
To ta l l ia bi lit ie s an d eq ui ty 10. Financial liabilities measured at amortised cost 20. Financial liabilities held for trading - - - - - - - - - - - - - - - - - - - 30. Financial liabilities designated at fair value 50. Adjustments for changes in hedged financial liabilities portfolio (+/-)
Reconciliation between the Statement of financial position at 31 December 2017 (which reflects the new classification rules under IFRS 9) and the Statement of financial position at 1 January 2018 (which reflects the new measurement and impairment rules under IFRS 9)
Impairment 20. Financial assets measured at fair value through profit or loss 49 - - 49 30. Financial assets measured at fair value through other comprehensive income 40. Financial assets measured at amortised cost 27,738 458 (10) 28,186 60. Adjustments for changes in hedged financial assets portfolio (+/-) - - - 110. Non-current assets held for sale and discontinued operations - - - -
Impairment 10. Financial liabilities measured at amortised cost 59,636 - - 59,636 20. Financial liabilities held for trading - - - 30. Financial liabilities designated at fair value - - - 50. Adjustments for changes in hedged financial liabilities portfolio (+/-)
70. Liabilities associated with non-current assets held for sale and discontinued operations 100. Provisions for risks and charges 543 - - 543 180. Profit/(Loss) for the year (+/-) 585 - - 585
The transition to IFRS 9 determined (net of the tax effect) a positive effect on Equity at 1 January 2018, for a total amount of €1,370 million, due to (i) an increase of €1,373 million deriving from the different classification of financial assets; and (ii) a decrease of €3 million deriving from the new method to calculate expected credit losses.
Below, a description is provided of the effect resulting from the adjustment to the carrying amount of the investment portfolio following the change in the business model: a. Reclassification of “Available-for-sale financial assets” to “Financial assets measured at amortised cost” (Hold to collect - HTC business model) for €15,398 million, with the resulting determination of the carrying amount and an increase in the valuation reserve for €458 million; b. Reclassification of “Available-for-sale financial assets” to “Financial assets measured at fair value through profit or loss” (Other/Trading business model) for €41 million, attributable to equity instruments that have not been measured at “fair value through other comprehensive income”, with no effects on Equity (increase of €16 million in Retained earnings and corresponding decrease in the valuation reserve); c. Reclassification of “Financial assets held to maturity” to “Financial assets measured at fair value through other comprehensive income” (“Hold to collect and sell” - HTC&S business model) for €9,666 million, with the resulting remeasurement of the carrying amount and recognition in the valuation reserve of the changes in fair value since origination for €1,465 million; d. Reclassification of “Due from customers” for €8 million to “Financial assets measured at fair value through profit or loss”, without any effect on Equity.
Effects resulting from reclassifications of financial instruments - IFRS 9 1,907
Effects resulting from provisions for expected credit losses - IFRS 9 14
Effects resulting from reclassifications of financial instruments - IFRS 9 16
With the aim of more effectively driving growth in the payment services market and strengthening the service offering for retail, business and Public Administration customers, Poste Italiane has combined the Group’s expertise and competencies in the field of mobile and digital payments in one specialist entity. The initiative was implemented via the contribution, to PosteMobile SpA, of BancoPosta RFC’s card payments and payment services business unit and PosteMobile’s establishment of a separate ring-fenced entity through which it is able to operate as a “hybrid” electronic money institution (“EMI”), whilst also continuing to operate as a mobile virtual network operator.
In implementation of projects involving the reorganisation and centralisation of operational activities in Poste Italiane SpA, on 29 May 2018, based on the decision adopted by the Board of Directors on 25 January 2018, the Extraordinary General Meeting of Shareholders resolved to remove the restriction on the rights and obligation of BancoPosta RFC relating to back-office and anti-money laundering activities. Consequently, from 1 October 2018, 1,082 full time equivalent employees (including 126 middle managers and 9 executives) were transferred from BancoPosta RFC to the Chief Operating Office function of Poste Italiane outside the ring-fence.
BancoPosta RFC Separate Report for the year ended 31 December 2018 Notes – Part A – Accounting policies
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. Any changes in fair value occurring between the trade and settlement dates are recognised in the Separate Report.
b) Classification This item includes all financial assets other than those classified as “Financial assets measured at fair value through other comprehensive income” and as “Financial assets measured at amortised cost”. In particular, this item includes: financial assets purchased and held mainly for trading; b) financial assets designated as such on initial recognition, thanks to the fair value option; c) financial assets mandatorily measured at fair value through profit or loss.
This item comprises: �� debt securities and loans that are classified in the “Other/Trading” business model (thus not in the “Hold to Collect” and “Hold to Collect and Sell” business models) or fail to meet the SPPI140 test; �� equity instruments held for trading or that were not initially recognised at fair value through other comprehensive income; �� derivative contracts, except those designated as hedges, that are classified as assets or liabilities held for trading, depending on whether their fair value is positive or negative; positive and negative fair values arising from transactions with the same counterparties are offset, where allowed by contract.
c) Measurement and recognition of gains and losses These financial assets are recognised at fair value with any changes in fair value recognised in profit or loss in line “Item 80 - Profits/(Losses) on trading” and in line “Item 110 – Profits/(Losses) on other financial assets and liabilities measured at fair value through profit or loss”.
c) Measurement and recognition of gains and losses Financial assets other than equity instruments are measured at fair value and any subsequent change in fair value is recognised through other comprehensive income (“OCI”) until the financial asset is either derecognised or reclassified, except for currency gains and losses recognised in the income statement in “Item 80 – Profits/(Losses) on trading”. When the financial asset is derecognised, the related cumulative gains and losses recognised in OCI are reclassified to the income statement in “Item 100 – Profits/(Losses) on disposal or repurchase”.
The effects of the application of amortised cost are recognised in the income statement in “Item 10 - Interest and similar income”.
d) Derecognition Financial assets are derecognised when the contractual rights to the cash flows of those financial assets cease or on the disposal of the financial asset and substantially all risks and rewards relating to the financial asset are transferred. 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.
b) Classification This item includes financial assets held in connection with a business model where the objective is the collection of the relevant cash flows (“Hold to Collect” - HTC business model), represented by payments, at specified dates, of principal and interest accrued on the principal outstanding (SPPI). The business model in question permits sales. If sales are not occasional, and their value is not immaterial, it is necessary to consider consistency with the HTC business model.
In addition to debt instruments that reflect the characteristics outlined above, this item comprises mainly the deposits at the MEF and the trade receivables.
d) Derecognition These financial assets are derecognised when the contractual rights to the cash flows of those financial assets cease or on the disposal of the financial asset and all risks and rewards relating to the financial asset are substantially transferred. 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.
4 – Hedges The Poste Italiane Group elected, in accordance with IFRS 9, to continue to apply hedge accounting in line with IAS 39 to all its hedging transactions.
�� Cash flow hedge: A hedge of the exposure to the variability of cash flows attributable to a particular risk associated with an asset or liability or with a highly probable forecast transaction, and that could have an impact on profit or loss.
When the hedge is related to recognised assets or liabilities, or an unrecognised firm commitment, changes in the fair values of both the hedging instrument and the hedged item are recognised in profit or loss. Any difference represents the ineffective portion of the hedge and is accounted for as a loss or gain, recognised separately in “Item 90 - Fair value adjustments in hedge accounting”.
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 “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. Amounts accumulated in equity are recycled to profit or loss in the period in which the hedged item affect profit or loss.
9 – Current and deferred taxation Current income tax expense (IRES and IRAP) is based on the best estimate of taxable profit for the period and the related regulations, applying the rates in force. Deferred tax assets and liabilities are calculated on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts, using tax rates that are expected to apply when the related deferred tax assets are realised or the deferred tax liabilities are settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
11 – Financial liabilities measured at amortised cost a) Recognition and classification
Financial liabilities are derecognised when repaid or in the event that BancoPosta RFC transfers all risks and charges associated with the relevant instrument.
Financial liabilities held for trading are measured at fair value though profit or loss. Under the fair value option, changes in fair value due to a change in own credit risk are recognised through other comprehensive income, unless such treatment creates or amplifies an asymmetry versus accounting requirements, while the remaining amount of the changes in fair value is recognised through profit or loss.
Foreign currency items are translated at each reporting date as shown below: �� monetary items at closing exchange rates; �� non-monetary items are recognised at their historical cost translated at the transaction date spot rate; �� non-monetary items measured at fair value at closing exchange rates.
Foreign exchange differences realised on the settlement of monetary items or on the translation of monetary and non-monetary items, using exchange rates other than the rate used to translate the item on initial recognition, are recognised in profit or loss in “Item 80 - Profits/(Losses) on trading”.
Revenue deriving from contracts with customers reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
Furthermore: �� interest is evenly accrued over time at the contractual rate of interest or, for items carried at amortised cost, the effective interest rate; �� dividends are recognised in profit or loss when the right to receive payment is established, which generally corresponds with approval of the distribution by the shareholders of the investee company; �� service fee income is recognised in accordance with the underlying contracts in the period in which the services are rendered. Fees are recognised when can be reliably estimated on a percentage of completion basis. Fees on activities carried out in favour of or on behalf of the state are 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 instructions contained in legislation regarding the public finances; �� returns on deposits at 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 euro area government securities and securities guaranteed by the Italian government, in which deposits paid into accounts by private customers are invested; Annual Report Poste Italiane Group 2018
�� revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods are transferred by the entity to the buyer.
On the other hand, a simplified approach to measure the loss provisions is applied to trade receivables that do not contain a significant financing component pursuant to IFRS 15. The simplified approach is based on a matrix of observed historical losses. No determination is made of any significant increase in credit risk but provisions are set aside for lifetime expected credit losses.
The liability for employee termination benefits (TFR) 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 account of termination benefits accrued for the period of service to date and is based on actuarial assumptions. These primarily regard: 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.
Termination benefits payable to employees are recognised as a liability when BancoPosta RFC decides to terminate an employee, or group of employees, prior to the normal retirement date or, alternatively, an employee or group of employees accepts an offer of benefits in consideration of a termination of employment. Termination benefits payable to employees are immediately recognised as personnel expenses.
Share-based payments In the event of share-based payment transactions settled in cash, shares or other financial instruments, BancoPosta RFC is required to measure the goods or services acquired and the liability incurred at fair value. Until the liability is settled, the fair value of the liability must be remeasured at the end of each reporting period, recognising any changes in fair value in profit or loss for the period. In the event of benefits granted to employees, recognition should take place in the period in which the employees render service and the expense accounted for in personnel expenses.
Service costs charged by Poste Italiane SpA’s functions outside the ring-fence are normally recognised in “Item 160 b) - Other administrative expenses”.
As more fully described in Part I – Share-based payment arrangements, measurement of the fair value of the “Long-term Incentive Plan for 2016-2018 (LTIP) – Phantom Stock Plan”, approved by Poste Italiane SpA’s shareholders on 24 May 2016, and the short-term incentive plans assigned in the form of Phantom Stocks (MBO) for BancoPosta RFC’s material risk takers (approved by Poste Italiane SpA’s shareholders on 27 April 2017 and 29 May 2018) as well as the Employee termination plans was based on the conclusions of independent actuaries. The Plans’ terms and conditions require the occurrence of certain future events, such as the achievement of performance targets, performance hurdles and of certain indicators of capital adequacy and short-term liquidity. For these reasons, measurement of the related liabilities requires the application of estimates based on current information about factors that may change over time, thereby resulting in outcomes that may be different from those taken into account during preparation of this Separate Report.
Level 1: this level is comprised of fair values determined with reference to (unadjusted) prices quoted in active markets for identical assets or liabilities to which the entity has access on the measurement date. For BancoPosta RFC, the financial instruments included in this category consist of bonds issued by the Italian government, the valuation of which is based on the bid prices, according to a hierarchy of sources where the MTS (the wholesale electronic market for government securities) ranks first, MILA (Milan Stock Exchange) second, for bonds intended for retail customers, and the CBBT (Composite Bloomberg Bond Trader) third. Level 1 bond price quotations incorporate a credit risk component.
Sensitivity analysis of recurring fair value measurements classified in Level 3 of the hierarchy is conducted for the Series C Visa Incorporated Convertible Participating Preferred Stock. Measurement of these financial instruments is in fact subject to change following alterations that may occur in the discount factor applied in determining fair value, in order to take into account the illiquid nature of the shares. This discount factor, estimated using an internal valuation technique, is above all influenced by the annual volatility of the underlying shares. Applying the maximum volatility according to the technique used, the potential reduction in fair value could reach approximately 28%.
Movements during the period in question include the change in the fair value of the Series C Visa Incorporated Convertible Participating Preferred Stock which, as of 1 January 2018, were reclassified in implementation of IFRS 9 from “Financial assets measured at fair value through other comprehensive income” to “Financial assets mandatorily measured at fair value”.
(€m) Balance at 31 December 2018 Balance at 31 December 2017 b) Central bank deposits 348 396
“Cash” is comprised of cash at post office counters and companies that provide cash transportation services, consisting of cash deposits on postal current accounts, postal savings products (Interest-bearing Postal Certificates and Postal Savings Books) or advances obtained from the Treasury to fund post office operations. This cash may only be used in settlement of these obligations. Cash includes foreign banknotes equivalent to €10 million.
In the year under review, BancoPosta RFC entered into floating-to-fixed swaps in relation to part of the deposits placed with the MEF. In particular, the transaction stabilised, for 2018, the return on the indexed components of the deposits, through a number of BTP repurchase agreements, without taking delivery of the financial instruments at maturity, but with the settlement of the difference between the pre-established price of the BTP and its market value.
2.3 / 2.4 Financial assets designated at fair value: analysis and composition by borrower/issuer
142. Until the assigned shares are fully converted into ordinary shares, the share exchange ratio may be reduced if Visa Europe Ltd. incurs liabilities that, as of the reporting date, were considered as merely contingent.
(€m) Balance at 31 December 2018 Balance at 31 December 2017 of which: banks - of which: other finance companies 50 of which: non-finance companies - b ) Public Administration entities - d ) Other finance companies - of which: insurance companies - e ) Non-finance companies - b ) Public Administration entities - d ) Other finance companies 8 of which: insurance companies - e ) Non-finance companies - -
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 143. The comparative figures at 31 December 2017 are measured in accordance with IAS 39, the then-applicable standard, and reclassified to the new items indicated by the fifth update of Bank of Italy’s Circular 262, which took effect as of 1 January 2018.
Investments in debt securities are recognised at fair value, for €32,040 million (of which €324 million in accrued interest).
Transaction Type/Amounts (€m) Balance at 31 December 2018 Balance at 31 December 2017 b) Public Administration entities 32,040 36,614 d) Other finance companies - 2,485 of which: insurance companies - e ) Non-finance companies - of which: insurance companies - b ) Public Administration entities - d ) Other finance companies - of which: insurance companies - e ) Non-finance companies - -
Debt securities issued by governments include Eurozone fixed income government bonds, represented by Italian government bonds with a nominal value of €30,229 million. Total fair value losses for the period amount to €1,561 million, with losses of €1,886 million recognised in the relevant equity reserve in relation to the portion of the portfolio not hedged by fair value hedges, and a gain of €325 million recognised through profit and loss in relation to the hedged portion.
During the year under review, bond sales for a total nominal amount of €3,478 million were completed.
On first-time adoption of IFRS 9, on 1 January 2018, debt securities issued by other financial institutions were reclassified to financial assets measured at amortised cost while equity instruments were reclassified to “Other financial assets” mandatorily measured at fair value.
“Other loans, Other” includes cash collateral held by counterparties for interest rate swaps (€1,275 million as collateral pursuant to Credit Support Annexes), entered into for cash flow and fair value hedging purposes by BancoPosta RFC, and repurchase agreements (€74 million as collateral pursuant to specific Global Master Repurchase Agreements).
In addition, “Other loans, Other” includes trade receivables for €46 million arising from contracts with customers, accounted for in accordance with IFRS 15 (€52 million at 31 December 017) mainly relating to financial services and personal loan distribution.
144. The comparative figures at 31 December 2017 are measured in accordance with IAS 39, the then-applicable standard, and reclassified to the new items indicated by the fifth update of Bank of Italy’s Circular 262, which took effect as of 1 January 2018.
4.2 Financial assets measured at amortised cost: breakdown of due from customers
145. The Central Counterparty is an entity that acts as an intermediary in a transaction between two parties, avoiding the parties’ exposure to the risk that one of the counterparties to the agreement may default and guaranteeing successful completion of the transaction.
Receivables arisen from contracts with customers, which fall within the scope of IFRS 15, amount to 837 million (€731 million at 31 December 2017). These are mainly due to financial services, pension payments, interest on postal deposits, and personal loan distribution, net of any loss provisions for €152 million (€149 million at 31 December 2017).
At 31 December 2018 the total fair value of these instruments, inclusive of €163 million in accrued interest, amounts to €21,189 million, of which €16,780 million classified in Level 1 of the fair value hierarchy and €4,409 million classified in Level 2.
Securities with a nominal value of €3,670 million are encumbered as follows: �� €3,424 million, carried at amortised cost for €3,527 million (Part B, Other Information, Table 3), and delivered to counterparties in connection with repurchase agreements concluded in the year under review; �� €246 million, carried at amortised cost for €246 million (Part B, Other Information, Table 3), and delivered to counterparties in connection with interest rate swaps and repurchase agreements concluded in the year under review.
4.4 Financial assets measured at amortised cost: composition of due from customers by borrower/issuer
Stage 1 and 2 Stage 3 of which: acquired or originated impaired financial assets
4.5 Financial assets measured at amortised cost: gross value and total value adjustments
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 of which: instruments with low credit risk of which: acquired or originated impaired financial assets X X - - X - - - * Amount reported for disclosure purposes
Fair value at 31 December 2017 Notional* amount at 31 December 2017Level 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.
Deferred tax assets through profit or loss - - - - 24 - 95 18 119 18 Deferred tax assets through equity 286 54 25 5 - - - - 311 59 2018 total 286 54 25 5 24 - 95 18 430 77 Deferred tax assets through profit or loss - - - - 24 - 97 19 121 19 Deferred tax assets through equity 196 37 28 5 - - - - 224 42 2017 total 196 37 28 5 24 - 97 19 345 61 10.2 Deferred tax liabilities: analysis
Deferred tax liabilities through equity 258 49 55 10 313 59 2018 total 258 49 55 10 313 59 Deferred tax liabilities through profit or loss - - - - - -
The item “Deferred tax assets derecognised during the year – other” under “Decreases”, refers to deferred tax assets related to the card payments and payment services business unit transferred to PostePay SpA from 1 October 2018.
(€m) Balance at 31 December 2018 Balance at 31 December 2017 2.1 Deferred tax assets derecognised in the year 364 92 a) relating to previous years - b ) due to changes in accounting policies 71 2. 2 New taxes or tax rate increases - 3. 1 Imposte anticipate annullate nell’esercizio (260) (33)
b) write-downs of non-recoverable items - c ) due to changes in accounting policies (227) 3. 2 Reduction of tax rate - -
(€m) Balance at 31 December 2018 Balance at 31 December 2017 2.1 Deferred tax liabilities recognised in the year (755) (34)
a) relating to previous years - b ) due to changes in accounting policies (686) 2. 2 New taxes or tax rate increases - 3. 1 Deferred tax liabilities derecognised in the year 690 256 b) due to changes in accounting policies 293 3. 2 Reduction of tax rate 1 -
The increases and decreases due to the changes in the accounting treatment of deferred tax assets and liabilities through equity reflect the effects of the transition to IFRS 9 as of 1 January 2018.
Section 11 – Non-current assets held for sale and discontinued operations and associated liabilities - Assets item 110 and liabilities item 70 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: analysis
Tax assets other than those included in item 130 326 372
Items in process 715 298 - items in transit between local branches 8 8
Tax assets primarily relate to payments on account, €303 million of which for virtual stamp duty payable in 2019 and €10 million for withholding tax on interest paid to current account holders for 2017.
Movements in current tax assets and liabilities receivable from and payable to Poste Italiane SpA outside the ring-fence are shown below: Item (€m)
Current tax liabilities due to Poste Italiane outside the ring-fence (Item 90 Liabilities)
“Other items” include mainly: �� €1,190 million in stamp duty accrued to 31 December 2018149 payable by holders of outstanding Interest-bearing Postal Certificates. An equal amount has been recognised in “Other liabilities” as tax payables (Part B, Liabilities, Table 8.1) until expiration or early extinguishment of Interest-bearing Postal Certificates, which is the date on which the tax must be paid to the authorities; �� €127 million relating to stamp duty charged to Postal Savings Books, which BancoPosta RFC pays in virtual form as required by law.
Section 1 – Financial liabilities measured at amortised cost – Item 10 1.1 Financial liabilities measured at amortised cost: analysis
At 31 December 2018, €5,323 million is due to banks under the terms of repurchase agreements entered into with primary financial institutions involving securities with a total nominal value of €5,077 million. These regard €4,648 million in Long Term Repos and €675 million in borrowings, with the resulting proceeds invested in Italian fixed income government securities and utilised as funding for incremental deposits used as collateral.
“Other payables” include €70 million in guarantee deposits provided to counterparties in relation to interest rate swaps (with €14 million in collateral provided by specific Credit Support Annexes), in relation to BancoPosta RFC’s cash flow hedges and fair value hedges and repurchase agreements (€56 million as collateral in accordance with specific Global Master Repurchase Agreements).
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Current accounts and demand deposits 50,618 x x x 46,468 x x x 4. Obligations to repurchase equity instruments - x x x - x x x
“Loans, Other” refers to the following: �� the net amount of €3,649 million deposited in the MEF account held at the Treasury, which breaks down as follows: – the balance of cash flows for advances, amounting to €3,546 million, represents the net amount payable as a result of advances from the MEF to meet the cash requirements of BancoPosta; – the balance of cash flows from the management of postal savings, amounting to a positive €89 million, represents the balance of withdrawals less deposits during the last two days of the year and cleared early in the following year. The balance at 31 December 2018 consists of €29 million payable to Cassa depositi e prestiti, less €118 million receivable from the MEF for Interest-bearing Postal Certificates issued on its behalf; – amounts payable due to thefts from post offices regard the liability to the MEF on behalf of the Italian Treasury for losses resulting from theft and fraud, totalling €157 million. This liability derives from cash withdrawals from the Treasury to make up for the losses resulting from these criminal acts, in order to ensure that post offices can continue to operate; – amounts payable for operational risks (€35 million) regard the portion of advances obtained to fund operations, in relation to which asset under recovery is certain or probable; �� €14 million relating to an amount due to Poste Italiane SpA’s functions outside the ring-fence in connection with the creation of BancoPosta RFC.
Section 8 – Other liabilities – Item 80 8.1 Other liabilities: analysis
“Items in process, other” includes, among other things, domestic and international bank transfers, totalling €69 million, unpaid postal cheques of €47 million and €21 million payable to PostePay SpA mainly in the early days of 2019.
Liablities for fees to be refunded - - - - 26 26
Deferred income from trading transactions - 27 27 (27) 3 3
Movements in these liabilities reflect mainly the decreases determined by the transfer to PostePay SpA, on 1 October 2018, of €27 million in prepaid commissions related to PostePay cards. Commissions to be repaid relate to the provisions of IFRS 15 whereby, as of 1 January 2018, the commissions to be repaid to the partners for the early repayment of loans are deducted directly from the relevant revenue.
(€m) Balance at 31 December 2018 Balance at 31 December 2017
The current service cost is not applicable to the employee termination benefits attributable to BancoPosta RFC, since this cost is recognised in personnel expenses, as the contributions are paid over to pension funds or other social security institutions.
Other decreases were caused mainly by reorganisation projects carried out within Poste Italiane SpA, for a total of €12 million, and the remaining part to actuarial gains.
Measurement of the liability entails actuarial computations for which the following assumptions were used in 2018 and 2017: Annual Report Poste Italiane Group 2018
BancoPosta RFC Separate Report for the year ended 31 December 2018 Notes – Part B – Information on the statement of financial position
B.3 Increases due to changed discount rates - - - -
Description (€m) Balance at 31 December 2018 Balance at 31 December 2017
Provisions for disputes with third parties regard expected liabilities deriving from different types of legal and out-of-court disputes with suppliers and third parties, the related legal expenses, administrative and penal sanctions and compensation payable to customers. During the year provisions were made for €11 million related mainly to the estimated value of new liabilities on the basis of the expected outcome.
In 2018, €93 million of the provisions in question was used, including €52 million payable to customers that had invested in the Europa Immobiliare I fund in connection with the foregoing initiative. On the other hand, €17 million was released to the income statement as the liabilities for which provisions had been made failed to materialise.
12.2 Capital – Number of shares: movements during the year Nil.
150. Provisions for expired and statute barred Postal Certificates were made in 1998 to cover the cost of redeeming certificates relating to specific issues, the value of which was recognised in revenue in profit or loss in the years in which the certificates became invalid. The provisions were made in response to Poste Italiane SpA’s decision to redeem such certificates even if expired and statute barred.
1. Commitments and guarantees provided (other than those designated at fair value)
Portfolio (€m) Balance at 31 December 2018 Balance at 31 December 2017 1. Financial assets measured at fair value through profit or loss - 2. Financial assets measured at fair value through other comprehensive income 5,179 3. Financial assets measured at amortised cost 3,773 4,755 4. Property, plant and equipment - of which: property, plant and equipment constituting inventories - -
“Other transactions” include the principal of postal savings deposits accepted for and on behalf of Cassa depositi e prestiti and the MEF.
December 2017 1. Financial assets measured at fair value through profit or loss - - - - 1. 1 Financial assets held for trading - - - - 1. 2 Financial assets designated at fair value - - - - 1. 3 Other financial assets mandatorily measured at fair value - - - - 2. Financial assets measured at fair value through other comprehensive income 981 - x 981 992 3. Financial assets measured at amortised cost 485 65 - 550 527 of which: interest income on impaired financial assets - - - - -
December 2017 1. Financial liabilities measured at amortised cost (21) - - (21) (25)
2. Financial liabilities held for trading - - - - 3. Financial liabilities measured at fair value - - - - -
BancoPosta RFC Separate Report for the year ended 31 December 2018 Notes – Part C – Information on the income statement
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 (136) (61)
As of 1 October 2018, costs in the amount of €82 million have been incurred for services rendered by PostePay SpA, in relation to BancoPosta products managed by outsourcers. Reference is made to Part H for a description of dealings between BancoPosta RFC and PostePay SpA.
3.1 Dividends and similar income: analysis During the year, BancoPosta RFC received dividends on its shares in Visa Incorporated, accounted for in “Financial assets measured at fair value through profit or loss”.
B. Other financial assets mandatorily measured at fair value - - 1 -
C. Financial assets measured at fair value through other comprehensive income
7.1 Net change in value of other financial assets and liabilities measured at fair value through profit or loss: composition of other financial assets and liabilities designated at fair value
7.2 Net change in value of other financial assets and liabilities measured at fair value through profit or loss: composition of other financial assets and liabilities mandatorily measured at fair value
x x x x 2 2. Foreign currency financial assets: exchange differences
Write-off Other of which: acquired or originated impaired financial assets - - - - - -
For the year ended 31 December 2017 a) wages and salaries (53) (64)
h) cost of share-based payments (1) i ) other employee benefits (10) (6)
3) Directors and Statutory Auditors - 5 ) Recovery of employment costs of staff seconded to other companies - 6 ) Refund of costs of third party employees seconded to the company - -
For the year ended 31 December 2017 * Figures expressed in full time equivalent terms.
For the year ended 31 December 2017 1) Cost of services provided by Poste Italiane SpA: (4,509) (4,418)
The cost of services provided by Poste Italiane functions outside the ring-fence relates to those services described in Part A - Accounting policies, A.1, Section 4 - Other information.
11.1 Net provisions for credit risk related to commitments to disburse funds and financial guarantees provided: analysis
Section 12 – Net losses/recoveries on property, plant and equipment – Item 180 Not applicable.
Section 13 – Net losses/recoveries on intangible assets – Item 190 Not applicable.
For the year ended 31 December 2017 1. Statute barred money orders - -
Other operating income includes revenue from contracts with customers for €2 million recognised at a point in time and relating to revenue document copies and to statute-barred money orders.
Section 17 – Impairment of goodwill – Item 240 Not applicable.
Section 18 – Profits/(Losses) on disposal of investments – Item 250 Not applicable.
Net provisions for risks and charges and impairments of receivables 1 0.1% 2 0.3%
Section 20 – Income/(Loss) after tax from discontinued operations – Item 290 Not applicable.
For the year ended 31 December 2017 10. Profit/(Loss) for the year 597 585 Other components of comprehensive income not reclassified to profit or loss 20. Equity instruments designated at fair value through other comprehensive income - a ) movements in fair value - b ) transfers to other equity - 30.
Financial liabilities designated at fair value through profit or loss (changes in own credit ratings) - a ) movements in fair value - b ) transfers to other equity - 40.
Financial assets (other than equity instruments) measured at fair value through other comprehensive income: (2,272) (974)
- impairment losses for credit risk (1) - - realised gains/(losses) (385) (662)
160. Non-current assets held for sale and discontinued operations: - a ) movements in fair value - b ) reclassified to profit or loss - 170.
Background BancoPosta’s operations, conducted in accordance with Presidential Decree 144/2001, consist in the management of liquidity generated by postal current account deposits, carried out in the name of BancoPosta but subject to statutory restrictions, and collections and payments on behalf of third parties.
The funds deposited by private account holders in postal current accounts are invested in euro zone government securities, with the option of investing up to 50% of the deposits in securities guaranteed by the Italian government151, whilst deposits by Public Administration entities are deposited with the MEF. In 2018, BancoPosta RFC’s operations focused on investment of the significantly increased volume of current account deposits, the reinvestment of funds deriving from maturing government securities and in the active management of financial instruments.
�� the Financial and Insurance Services Committee, established on 19 March 2018 to replace the previous Finance, Savings and Investment Committee, with the aim of overseeing the process of developing the products and services distributed by BancoPosta, in order to take a uniform, integrated view of the entire offering and to monitor the performance of the financial investments in which private customer deposits are invested; �� Poste Italiane SpA’s Coordination of Investment Management function, the work of which is regulated by specific operating guidelines, oversees investment strategy and the hedging of capital market risks in respect of the liquidity deriving from BancoPosta current account deposits, in accordance with the guidelines established by the various corporate bodies. As of 1 January 2019, the investment management activities of BancoPosta RFC have been attributed to the specialist functions of BancoPosta Fondi SGR, a Poste Italiane Group company; �� the BancoPosta’s Risk Management function, responsible for measuring and controlling risk and duly observing the independence of control functions from management.
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: �� definition of a Risk Appetite Framework (RAF); �� oversight of implementation of Poste Italiane SpA’s strategies and policies; �� the containment of risks within the limits set by the RAF; �� protection of the value of assets and against losses; �� identification of material transactions to be subject to prior examination by the risk control function; �� application of the internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy assessment process (ILAAP).
The standardised approach154, as defined by EU Regulation 575/2013, is used by BancoPosta to measure credit and counterparty risks. The method entails the use of Standard & Poor’s, Moody’s and Fitch for the computation of counterparty credit rating classes.
153. According to the prudential requirements, weighted risk exposure must at all times be below 25% of own funds. Exposures are normally equal to an asset’s nominal value adjusting for any credit risk mitigation. Lower risk borrowers are assigned lower risk weightings.
In terms of prudential oversight, the following methods are used to estimate the exposure to counterparty risk inherent in each of the following types of transaction: �� the “Market Value” method155, is used for interest rate swaps and forward purchases of government securities; �� Credit Risk Mitigation (CRM) techniques, the Full Method156, are used for repurchase transactions.
Below, the main assumptions adopted in determining the single factors are illustrated: �� PD: as indicated from the standard a Point in Time (PIT) or forward-looking PD has been adopted, depending on the stage of the exposure; �� LGD: use has been made of the Internal Ratings-Based (IRB) approach under the Basel guidelines (45% for senior risk assets, 75% for subordinated risk assets); �� 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.); �� TF: the effective interest rate of each exposure was used as discount factor.
BancoPosta RFC elected not to adopt the low credit risk exemption and to proceed instead with the staging allocation of the financial instruments concerned.
156. The full CRM method entails reducing risk exposure by the value of the guarantee. Specific rules are applied to take into account market price volatility of the guaranteed asset as well as the collateral received.
�� the seniority of the position within the portfolio (vintage factor); �� an additive factor to mitigate the non-linearity of the PD vis-à-vis the rating classes157; �� a judgmental factor to be used only in the presence of sudden changes in the creditworthiness not yet reflected by the rating158.
BancoPosta RFC defines a default on the basis of ad hoc assessments that take into consideration: �� significant payment delays; �� market information such as a default rating by the rating agencies; �� internal analyses of specific credit exposures.
The approach followed involves inclusion of forward-looking information in the estimation of the PD. In particular, the internal approach adopted allows completion of the input dataset necessary to calculate PD starting from a number of scenario values related to the approach. The objective of the approach is to estimate the unknown variables by using the historical correlation of the available information159.
As to the estimation techniques used, it is noted that since the approaches to calculate the PD for sovereign and banking counterparties cannot use default events, as they are not frequent, a shadow rating approach was adopted.
The models have been constructed by extracting and utilising the following types of data for each country in the sample: �� macroeconomic data; �� market data: domestic equity indices, global energy/non-energy indices, Eurostoxx and S&P 500; �� financial statement data.
To determine the rating of financial assets with corporate counterparties reference is made to the public rating one of the main rating agencies. In the absence of such information, the rating is estimated by compiling a scorecard which takes into consideration, among others: �� the risk specific to the company; �� the risk specific to the sector in which it operates; �� the specific and generic risk of the country where it is headquartered.
157. The additive factor is constructed as a function of the rating level achieved by the reporting date: the higher the rating, the higher the threshold for the transition to stage 2.
BancoPosta RFC adopts credit and counterparty risk mitigation techniques. In particular: �� 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 bonds; �� 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.
At 31 December 2018, BancoPosta RFC does not hold financial assets secured by guarantees or other credit risk mitigating instruments for which no loss provisions have been made (except for the temporary use of liquidity in reverse repurchase agreements).
BancoPosta RFC accepts mainly guarantees issued by primary banks or insurance companies. Alternatively, upon request
of the customer and after a risk analysis, it accepts sureties issued by other institutions, security deposits or the opening of postal escrow account.
At 31 December 2018 unsecured trade receivables minus the relevant loss provisions amount to €883 million.
A.1 Performing and non-performing credit exposures: amounts, value adjustments, movements and economic distribution
A.1.1 Distribution of financial assets by portfolio and credit quality by carrying amount
Other performing exposures Total 1. Financial assets measured at amortised cost - - - 43 33,700 33,743 2.
Financial assets measured at fair value through other comprehensive income 3. Financial assets designated at fair value - - - - - 4. Other financial assets mandatorily measured at fair value - - - - 8 8 5. Financial assets held for sale - - - - - -
Non-performing Performing Total (net exposure) Gross exposure Total value adjustments Net exposure Total partial write-offs*
Total value adjustments 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: acquired or originated impaired financial assets
A.1.6 On and off-balance sheet credit exposures to banks: gross and net amounts
A.1.7 On and off-balance sheet credit exposures to customers: gross and net amounts
“Off-balance sheet exposures, Performing” relates to the counterparty risk associated with derivatives registering fair value gains.
B.3 Transfers from other categories of non-performing exposure - - -
A.1.8 On-balance sheet credit exposures to banks: changes in gross non-performing exposures
A.1.9 On-balance sheet credit exposures to customers: changes in gross nonperforming exposures
Total of which: forborne exposures - of which: exposures sold but not derecognised - - - - - -
B.1 Value adjustments to acquired or originated impaired financial assets - X - X - X
B.4 Transfers from other categories of non-performing exposure - - - - - -
A.2.1 Distribution of financial assets, commitments to disburse funds and financial guarantees issued by external rating classes (gross amounts)
Other entities 1. Guaranteed onbalance sheet credit exposures: - of which non- - of which non2. Guaranteed offbalance sheet credit exposures: - of which non- - of which non-
B.2 Distribution of on and off-balance sheet credit exposures to customers by geographic area
A.3 Non-performing past-due exposures - - - 13 - - - -
D. Information on unconsolidated structured entities (other than securitisation vehicles) Nil.
Carrying amount of which: involved in securitisation transactions of which: involved in repurchase agreements of which nonperforming
Carrying amount of which: involved in securitisation transactions of which: involved in repurchase agreements
A. Generalities, operating procedures and interest rate and price risk measurement methods
Details on the risk management model are contained in the note on financial risks in Part E.
Spread risk regards bonds issued or guaranteed by the Italian government and classified as financial assets measured at fair value through other comprehensive income. On average, 2018 witnessed an increase in the yields on Italian government bonds, which caused the spread between ten-year Italian government bonds and German bunds to rise to approximately 250 bps, compared to 159 bps at 31 December 2017.
The value of the portfolio of bonds issued or guaranteed by the Italian government 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 concern the portfolio as a whole, with both fixed- and floating rate bonds. In fact, in this case, fair value derivatives, which change the bond to floating rate, hedge only the risk-free rate and not the credit risk. Accordingly, a change in the credit spread has an impact on both fixed- and floating-rate bonds.
The increase in VaR at the end of the period, compared with the €318 million at 31 December 2017, primarily reflects the increase in market volatility.
- Deposits at MEF (private customer deposits) 1,306 13 (13) 379 4 (4)
Due from customers - Due from Poste Italiane SpA outside the ring-fence (14) - - (14) - -
Cash flow inflation rate risk at 31 December 2018 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 €1,875 million and a fair value of €2,126 million. The effects of sensitivity analysis are immaterial.
+ Vol - Vol + Vol - Vol + Vol - Vol 2018 effect
US Dollar Swiss Franc Sterling Japanese Yen Tunisian Dinar Other currencies
Section 3 – Derivative instruments and hedging policies 3.1 Trading derivatives
At 31 December 2018 and 31 December 2017 there were no derivatives in the trading book. In 2018 derivative contracts were entered into to exchange the floating rate of part of the postal deposits placed with the MEF for a fixed rate (Part B, Assets, Section 2).
3.2 Hedge accounting BancoPosta RFC has fair value and cash flow hedge policies for which it elected, under IFRS 9, to maintain the accounting treatment provided for by IAS 39.
BancoPosta RFC enters into: �� forward purchases of government bonds, to limit the exposure to interest rate risk deriving from the need to reinvest the cash generated by maturing bonds held in portfolio; �� forward sales of government bonds to pursue the stabilisation of returns.
BancoPosta RFC designates as hedged items: �� fixed income and index-linked bonds, in connection the fair value hedge policy; �� inflation-linked bonds and forecast transactions, in connection with cash flow hedge policies.
Regarding fair value hedges, BancoPosta RFC evaluates the effectiveness of every hedging relationship in offsetting movements in fair value through a retrospective effectiveness test and a prospective effectiveness test162, using the approaches illustrated in the following notes.
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. 163. The dollar offset approach is a quantitative method that involves a comparison between movements in the fair value or cash flow of the hedging instrument and the movements in the fair value or cash flow of the hedged instrument attributable to the risk hedged. Depending on the policy selected, this approach can be used: • on a cumulative basis, by observing the performance of the hedge since inception; • on a periodic basis, by comparing the hedge performance with that of the last test. The dollar offset approach can be implemented through a hypothetical derivative, that is by constructing a theoretical derivative to compare the relevant theoretical movements in far value or cash flow with those of the hedged instrument (actual derivative). 164. The critical terms approach involves a comparison between the critical terms of the hedging instrument with those of the hedged item. The hedging relationship is highly effective when all the critical terms of the two instruments match perfectly and there are no features or options that might invalidate the hedge. Critical terms include, among others: notional amount of the derivative and principal of the underlying, credit risk, timing, currency of the cash flows.
Without netting agreements 1. Debt securities and interest rates - 28,335 - - - 22,570 - 2. Equity instruments and equity indexes - - - - - - - 167. Calculated by assuming a parallel shift of + / - 100 bps of the yield curves.
Without netting agreements 1. Fair value gains b) Interest rate swaps c) Cross currency swaps 2. Fair value losses b) Interest rate swaps c) Cross currency swaps
A.3 OTC hedging derivatives: notional amounts, gross positive and negative fair value by counterparty
Contracts falling within the scope of netting agreements 1) Debt securities and interest rates 2) Equity instruments and equity indexes 3) Currencies and gold 4) Commodities 5) Other
A.1 Financial derivatives on debt securities and interest rates 3,580 440 24,315 28,335
1.2 Equity instruments and equity indexes 2. Financial assets measured at amortised cost - hedging: 1.1 Debt securities and interest rates 12,563 - 993 - 341 X
At 31 December 2018 Banco Posta RFC had no master netting or similar agreements in place that meet the requirements of IAS 32, paragraph 42, regarding offsetting financial assets and liabilities.
In terms of BancoPosta RFC’s specific operations, liquidity risk regards the investment of current account and prepaid card168 deposits in bonds issued by euro area governments and/or guaranteed by the Italian Republic, and the margins on derivative transactions. The potential risk derives from a mismatch between the maturities of investments in securities and those of liabilities, represented by current accounts where the funds are available on demand, thus compromising the ability to meet its obligations to current account holders. This potential mismatch between assets and liabilities is monitored via comparison of loan and deposit maturities, using the statistical model of the performance of current account deposits, in accordance with the various likely maturity schedules and assuming the progressive total withdrawal of deposits over a period of 20 years for retail customers, 10 years for business customers and PostePay cards and 5 years for Public Administration customers. BancoPosta RFC closely monitors the behaviour of deposits taken in order to assure the model’s validity.
In addition to postal deposits, BancoPosta also funds itself through: �� long-term repos, amounting to an outstanding €6.7 billion; �� 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).
The liquidity risk resulting from contract terms requiring the provision of additional collateral in the event of a downgrade of Poste Italiane SpA is negligible. Such contracts include those for margin lending of derivatives, which require the threshold amount169 to be reduced to zero in the event that Poste Italiane SpA’s rating is downgraded to below “BBB-“. The threshold amounts relating to margin lending contracts included in repurchase agreements are equal to zero, meaning that these transactions are not subject to liquidity risk.
168. As of 1 October 2018, prepaid cards fall within the purview of PostePay SpA, the electronic money institution that has brought together Poste Italiane’s operations and competences in payments and telecommunications. The liquidity raised through these cards is transferred to BancoPosta, which invests it in euro area government bonds or bonds guaranteed by the Italian State. As such, for the purposes of specific risk analyses, the rationales related to each model underlying the different types of deposit inflow continue to apply.
Moreover, liquidity risk is monitored through the development of early warning indicators that, in addition to taking into account the level of deposit withdrawals under conditions of stress, aim to monitor funding outflows in line with the estimated performance of deposits at a 99% confidence level.
1. Distribution of residual terms to maturity of financial assets and liabilities
BancoPosta RFC Separate Report for the year ended 31 December 2018 Notes – Part E – Information on risks and related hedging policies
In 2018, activities continued to refine the operational risk management framework, with the aim of making the process of recording operational losses more efficient and mitigating such risks by cross-functional working groups. Support has also been provided to the specialist units and the owner of the process of analysing and assessing IT risk, in keeping with the approach adopted in 2017.
170. A definition of the RAF is provided in the “Introduction” to Part E.
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 RAF170. Compliance with the objective, threshold and limit system established by the RAF influences decisions regarding profit distributions as part of capital management.
BancoPosta RFC Separate Report for the year ended 31 December 2018 Notes – Part F – Information on equity
- Valuation reserves relating to equity accounted investments - 7. Net profit/(loss) for the year 597 585
“Reserves, other” consists of the initial reserve of €1 billion provided to BancoPosta RFC on its creation, through the attribution of Poste Italiane SpA’s retained earnings and the €210 million equity injection, resolved by the Extraordinary General Meeting of 29 May 2018, through the allocation of Poste Italiane SpA’s available reserves (Part A, Section 4, paragraph 4.4).
BancoPosta RFC’s own funds are all Common Equity Tier 1 (CET 1) and consist of: �� 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 funds171; �� undistributed earnings, being BancoPosta RFC’s profits appropriated on approval of Poste Italiane SpA’s financial statements.
For more details, reference is made, as provided for by Circular no 262 of the Bank of Italy, to the information on own funds and capital adequacy contained in the public disclosure (“Pillar 3”).
172. Risk weighted assets, or RWAs, are calculated by applying a risk weighting to the assets exposed to credit, counterparty, market and operational risks. 173. Applicable as of 1 January 2019. For 2018, the transitional provisions call for a ratio of 1.875%.
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 9.5). The charges are calculated in accordance with specific operating guidelines (Part A, paragraph A.1, Section 4).
Ministry of the Economy and Finance - 7,312 - 4 - 3,649 1
Provision for doubtful debts owing from external related parties * On 26 September 2018, PosteMobile was entered in the Register of electronic money institutions (article 114 – quater of the Consolidated Banking Act) and, as of 1 October 2018, changed its name to PostePay SpA.
Information on the transfer of a business unit to PostePay SpA
As described in Part A, Section 4, paragraph 4.4, on 1 October 2018, following the removal of the ring-fence restrictions from BancoPosta RFC, Poste Italiane SpA transferred to PostePay SpA the assets, liabilities and legal rights and obligations that make up the card payments and payment services business unit. On the same date, PostePay SpA established a ringfence for the card payments and payment services contained in the contribution-in-kind by Poste Italiane SpA, following the capital increase with a value of €140 million subscribed and reserved for Poste Italiane SpA outside the ring-fence.
The table below provides details of the assets and liabilities removed from BancoPosta RFC.
175. Products handled under service agreements: payment products and services and money transfers carried out exclusively within the scope of BancoPosta RFC’s operations, as they are “reserved to” the ring-fence by Presidential Decree 144/01.
The total number of phantom stocks awarded to the 7 Beneficiaries of the Second Cycle of the Plan amounted to 53,118 units.
The total number of phantom stocks awarded to the 7 Beneficiaries of the Third Cycle of the Plan amounted to 50,188 units. An independent expert was appointed to measure the value of the stocks and this was done using Monte Carlo simulations. The liability recognised as amount due to staff for the 3 cycles totals approximately €0.5 million.
An independent expert was appointed to measure the value of the stocks, based on best market practices. The liability recognised in amounts due to staff totals €0.6 million.
176. The transfer of the card payments and payment services business unit from BancoPosta RFC entailed the transfer of employees who are beneficiaries of the share-based plan.
BancoPosta RFC Separate Report for the year ended 31 December 2018 Notes – Part I – Share-based payment arrangements
Attestation of the Poste Italiane Group’s consolidated financial statements for the year ended 31 December 2018 pursuant to art. 154-bis , paragraph 5 of Legislative Decree 58/1998 and art. 81-ter of CONSOB Regulation 11971 of 14 May 1999 1. The undersigned, Matteo Del Fante, as Chief Executive Officer, and Tiziano Ceccarani, as Manager responsible for Poste Italiane SpA’s financial reporting, having also taken account of the provisions of art.154-bis, paragraphs 3 and 4 of Legislative Decree 58 of 24 February 1998, hereby attest to: - the adequacy with regard to the nature of the Poste Italiane Group and - the effective application of the administrative and accounting procedures adopted in preparation of the Poste
3. We also attest that: 3.1 the Poste Italiane Group’s consolidated financial statements for the year ended 31 December 2018: a) have been prepared in compliance with the International Financial Reporting Standards endorsed by the European Union through EC Regulation 1606/2002, issued by the European Parliament and by the Council on 19 July 2002; b) are consistent with the underlying accounting books and records; c) give a true and fair view of the financial position and results of operations of the issuer and the companies included in the scope of consolidation.
3. We also attest that: 3.1 the separate financial statements for the year ended 31 December 2018: a) have been prepared in compliance with the International Financial Reporting Standards endorsed by the European Union through EC Regulation 1606/2002, issued by the European Parliament and by the Council on 19 July 2002; b) are consistent with the underlying accounting books and records; c) give a true and fair view of the financial position and results of operations of the issuer.
Registered office: Viale Europa, 190 - Rome Fully paid-up share capital: €1,306,110,000.00
This document is available for inspection on the Company’s website at www.posteitaliane.it