Group management report Market development 50 Significant events in the reporting period 56 Earnings and financial performance 58 Research and development 65 Internal control and risk management system 66 Capital, share, voting, and control rights 69 Risk management 71 Corporate Governance 72 Consolidated non-financial report 72 Human Resources 72 Outlook 73 Events after the reporting date 75
Segment and country analysis Segment overview 78 Segment and country performance 79
Return on equity after tax 6.8% 11.0% (4.2) PP 12.7% 12.5% 6.7%
Consolidated return on equity 6.4% 11.0% (4.5) PP 12.6% 12.2% 5.8%
Return on assets before tax 0.77% 1.18% (0.42) PP 1.33% 1.23% 0.79%
Common equity tier 1 ratio (fully loaded) 13.6% 13.9% (0.3) PP 13.4% 12.7% 13.6%
Number of shares in million (31/12) 328.94 328.94 0.0% 328.94 328.94 292.98
Employees as at reporting date (full-time equivalents) 45,414 46,873 (3.1)% 47,079 49,700 48,556
Many will remember 2020 as a difficult year due to the COVID-19 pandemic. How did RBI meet the challenges arising in the financial year? We can, without any exaggeration, describe the challenges associated with the pandemic as historic. Many have lost their lives or fell seriously ill, businesses had to shut down their entire operations, in some cases for weeks, and the virus also put great personal pressure on people in their private lives. For us, protecting the health of our employees and customers was, and continues to be, always of utmost importance.
Despite these circumstances, we generated a consolidated profit of 804 million euros – a good result. Of course, the lockdowns and the related recession together with interest rate cuts and the devaluation of CEE currencies have left their mark, leading to a significant reduction in the results compared to the previous year. All in all, however, I believe that RBI came through the year well.
Can you describe the situation in Central and Eastern Europe? How are businesses coping there? The various lockdowns have of course resulted in severe disruption to economic activity overall. However, the recession in CEE has been significantly milder than the euro area average. Following the financial crisis in 2008 and 2009, the countries in Central and Eastern Europe have markedly scaled back their debt levels, have become less dependent on foreign finance and have lowered foreign currency loan volumes. In addition, many markets in Central and Southeastern Europe are benefiting significantly from EU aid programs.
There’s another point I’d like to make about the situation with respect to our corporate customers. The focus is often on the sectors that are especially hard hit and will probably take the longest to recover, the aviation and tourism industries for example. It is sometimes overlooked that many sectors, such as retail, have not only suffered less in the crisis but will also recover at a significantly faster pace.
You made use of an opportunity for inorganic growth at the beginning of 2021 with the purchase of Equa bank in the Czech Republic. What do expect from this acquisition? We have always viewed the Czech Republic as a market in which we would like to grow, not only organically. The bank and its 480,000 customers, particularly from the retail and SME areas, complements our Czech subsidiary. Aside from strengthening our presence in the Czech market, we see good opportunities to improve our digital offering.
Investments cost money. What has happened to the cost reduction plans? Cost discipline remains a top priority and we achieved our targets last year. In implementing our Target Operating Model, we reduced general administrative expenses by a mid-double digit million euro amount in 2020. However, we want to further exploit savings opportunities wherever possible. The digitalization process discussed previously also provides an opportunity to minimize costs, as a digital business outlet, for example, is significantly cheaper than a physical one in terms of maintenance. With these cost reductions we are creating more headroom for investments.
With the rapid global spread of COVID-19 during the first quarter of 2020, countries, companies and private individuals found themselves confronting entirely unprecedented challenges. From the outset, our top priority was to protect the health of our employees and customers. It quickly became clear that alongside the health risks, the impact on the economy would also necessitate significant government aid programs on a large scale, as well as market intervention by central banks. Government-imposed lockdowns required to control the virus had far-reaching consequences for real economies. Significant key rate cuts in numerous countries, the expansion of bond purchase programs and state support measures failed to stave off a recession, however they did mitigate the consequences and also helped calm the capital markets following initial panic-driven price swings.
The banking industry and RBI face extremely challenging market conditions that are in particular characterized by a continuing low interest rate environment and by a cyclical decline in demand for credit. Despite many companies and sectors experiencing renewed hardship, the second wave of infection in the third and fourth quarters failed to suppress the optimism that had returned during the summer months. The promising progress in the development of vaccines and initial approvals by the authorities at the turn of the year have made overcoming the pandemic and a strong economic recovery in the coming months increasingly more likely.
There are two further issues that naturally interest your shareholders – the share price and the dividend. What can you say about those? We cannot be satisfied with the decline in the share price of 25 per cent to 16.68 euros during 2020. However, one must consider the impact of the coronavirus crisis, which triggered a sharp fall in share prices in the second half of February 2020. The omission to date of the dividend payment for 2019 has certainly also weighed on the share price. I am therefore especially grateful to those shareholders who have continued to place their trust in us during this period.
To conclude, a question on the current year, 2021. What areas are you focusing on and what are your expectations? The economic recovery and the future development of our business will depend strongly on how quickly the pandemic can be contained and suppressed. The approval of vaccines and the start of extensive vaccination programs in many countries have established important prerequisites to enabling people to regain confidence and pursue their normal lives and activities. As a result, the economic recovery should also be rapid. In some sectors there will be catch-up effects that may accelerate the economic upturn, while others will grapple with the fallout from the pandemic for longer. Therefore, we will pay particular attention to risk management. Like every crisis, however, this one has also shown that resulting opportunities may present themselves – for example, the acceleration of the digitalization process which has already been mentioned several times, the shift towards new working methods and the emergence of new business models. We want to utilize these and play an active role in the transformation process as a reliable partner to our customers.
Despite facing an increasingly difficult market environment due to the COVID-19 pandemic, European banks have so far largely coped well with the crisis. However, significant increases in loan loss provisions over the course of the year weighed negatively on the performance of bank shares. This and the renewed geopolitical tensions between some EU member states and Russia, and also the political situation in Belarus, had an adverse impact on RBI’s share price. After an initial high of € 22.92 at the start of the year, similarly to other European bank stocks it reached an annual low of € 11.25 immediately following the first lockdown measures. However, the share was able to regain some ground from its annual low towards the end of the year.
In 2020, RBI continued the process of digital transformation embarked upon in recent years. This is reflected in the further expansion of digital services, where the main focus of the initiatives and actions taken was on tailoring the service offering in consideration of customers’ requirements and wishes. Another important measure was the modification of internal processes as an adaptive organization, in order to be able to quickly respond to the ever-changing customer expectations. At the same time, RBI invested in the expansion and strengthening of its IT infrastructure, which also had a positive impact in 2020. Only this approach made it possible for 95 per cent of head office employees to work from home at peak times, while also meeting increased customer demand and an additional need for advisory services. Special thanks are extended to all employees for this flexibility and exceptional commitment. The digitalization strategy will also be consistently pursued in future. RBI’s successful initiatives and measures receive regular recognition from international trade journals, as evidenced by a total of 36 awards for RBI AG and its subsidiary banks in the 2020 financial year. Recently, the well-established Financial Times trade publication “The Banker” named RBI as the “Best Bank in Central and Eastern Europe” for the fifth successive time. In this context, it is also important to mention the regional awards for the subsidiary banks in Slovakia and Ukraine, both of which also received the title of “Best Bank”. In recognition of their achievements, the specialist publication “EMEA Finance” also awarded RBI and its subsidiary banks a total of 12 honors as best bank in their respective regions.
In light of the litigation relating to consumer protection in Poland and Croatia, the Supervisory Board and Management Board regularly dealt with the legal and financial consequences of pending legal cases in connection with foreign currency loans. In this context, the members of the Supervisory Board and Management Board monitored the development of decision-making practices in Polish and Croatian courts on an ongoing basis and held joint discussions on risk management measures.
RBI issued its first green bond in June 2018, with further bonds following in 2019 and 2020, and is consequently to date Austria’s largest green bond issuer. In tandem with our sustainable issuance activities, sustainable lending has also significantly increased. In 2020, RBI developed an internal ESG score for corporate customers, according to which every corporate customer is rated by industry, domicile and, going forward, also by an expert appraisal of ESG performance. This rating enables a better analysis of RBI’s loan portfolio in relation to possible climate risks and the carbon footprint. Ultimately, RBI is responsible for ensuring, through provision of sustainable financial products, that there is a positive impact on the environment and society and that customers are supported in reducing their emissions.
In preparation for the 32 meetings of the Supervisory Board and its Committees, seven Chairman’s meetings were held between the Chairman of the Supervisory Board and the members of RBI’s Management Board. In 2020, the Supervisory Board presidium, comprising the Chairman of the Supervisory Board and his deputy, held nine meetings with RBI’s Management Board, during which important current issues and strategic matters for the Supervisory Board were prepared and discussed. In addition, four preparatory meetings were held for the members of the Supervisory Board in advance of the respective Supervisory Board meetings, in order to discuss outstanding matters relating to proposals or reports with the Management Board and internal experts, and thus augment the decision-making process to optimum effect.
During the meetings of the Supervisory Board and its Committees, the members of the Supervisory Board focused in detail on business performance and risk trends at RBI’s network banks. Accordingly, detailed reports by the respective CEOs of selected subsidiaries formed a key part of the agenda at the meetings of the Supervisory Board on 17 June 2020 (Raiffeisenbank, Russia), on 16 September 2020 (Raiffeisenbank, Czech Republic), and on 2 December 2020 (Raiffeisenbank, Bulgaria). This enabled the members to take decisions on the basis of broad and detailed information. In addition, in 2020 the Chairman of the Supervisory Board and the Chairman of the Management Board also visited RBI’s subsidiary banks in Serbia, the Czech Republic and Bulgaria, albeit partly on a virtual basis due to the COVID-19 pandemic.
The Chairmen of the Management Board and Supervisory Board and its deputies maintained a regular exchange of information. Current issues were discussed jointly, sometimes on a situation-specific basis and sometimes daily. Factual issues were discussed regularly in preparation for the next meetings, and strategic matters were discussed with the members of the Management Board. In summary, the Chairman of the Supervisory Board held 37 bilateral meetings with members of the Management Board in 2020, 26 of which were held with the CEO. In fulfilling his responsibilities, also under the difficult conditions arising from the COVID-19 pandemic, the Chairman of the Supervisory Board ensured there was an efficient flow of information between the Management Board and the Supervisory Board as well as within the Supervisory Board.
On 2 December 2020, Andrea Gaal was elected from among the Supervisory Board members as the new Chairman and Martin Schaller was elected as the Deputy Chairman of the Digitalization Committee, which was established by the Supervisory Board on 16 September 2020. In addition, the Supervisory Board elected Rudolf Könighofer and – as previously mentioned – Reinhard Mayr as members of the new Digitalization Committee.
On the Nomination Committee’s recommendation, the Supervisory Board decided, at its meetings on 17 June 2020 and 2 December 2020 respectively, to extend the expiring Management Board mandates of Peter Lennkh, Andrii Stepanenko and Lukasz Januszewski for five years. The appointment by the Supervisory Board was preceded by a structured succession process in the Nomination Committee, during which the members of the Committee positively appraised the previous performance of Peter Lennkh, Andrii Stepanenko and Lukasz Januszewski, as well as their personal and professional aptitude for the continued exercise of Management Board mandates at the meetings on 16 March 2020 and 16 September 2020.
The Supervisory Board believes that a key factor for RBI’s successful future lies in the bank’s successful digital transformation, in order to ensure that customer requirements can be met to optimum effect. As in previous years, one focus of the Supervisory Board was on monitoring the consistent implementation of customer-oriented digitalization initiatives, with strengthening the multi-channel service offering playing a central role. At the same time, the Supervisory Board monitored the further expansion of a robust, crisisresilient IT infrastructure and discussed measures to strengthen cybersecurity. The Supervisory Board was also updated on the status of information security and cybersecurity within RBI AG and the Group on a quarterly basis. The decisions mentioned elsewhere which were taken by the Supervisory Board at the meeting on 16 September 2020 led to the establishment of a Digitalization Committee. The aim of the Digitalization Committee is to ensure that the Supervisory Board gives focused and detailed consideration to the current digitalization trends relevant for the banking sector and the consequences for RBI’s business model. The Supervisory Board is thereby taking steps to reflect the high level of importance that digitalization holds for RBI. The Digitalization Committee advises the Management Board on the current and future digitalization strategy (particularly in relation to new technologies, data analysis and innovation) and monitors its implementation.
The Supervisory Board also discussed the business performance and strategic direction of the Austrian financial services subsidiaries, including for example Raiffeisen Bausparkasse Gesellschaft m.b.H. and Raiffeisen Centrobank AG.
The members of the Supervisory Board undertook independent training and professional development measures required for their Supervisory Board roles and for which adequate support from RBI was received. In addition, the members of the Supervisory Board were able to undertake regular professional development training in the form of Fit & Proper courses, two of which took place during the year under review.
The Supervisory Board also discussed the efficiency of its activities, its organization and work procedures in accordance with Rule 36 of the Austrian Corporate Governance Code, and a self-evaluation and efficiency assessment was conducted in cooperation with the Vienna University of Economics and Business.
Despite an uncertain and challenging market environment due to the COVID-19 pandemic, the pursuit of sound and sustainable value creation in the interests of shareholders will again provide a clear roadmap for RBI’s business policy decisions in 2021.
In the 2021 financial year RBI also wants to drive organic growth forwards in its markets. In view of the still uncertain economic consequences of the COVID-19 pandemic for banks’ capitalization and liquidity, as the government support programs are expected to expire in 2021, the Supervisory Board and Management Board adopt decisions on the basis of anticipatory and prudent risk management in the context of a conservative risk strategy. In accordance with the strategic considerations, growth potential will continue to be reviewed in the 2021 financial year. Inorganic growth always requires sound capitalization and liquidity in keeping with solvency requirements. Decisions are assessed holistically based on a careful consideration of profitability, risk and business policy parameters.
At all meetings the members of the Supervisory Board were additionally given extensive information on current legal and regulatory developments and changes (including with regard to governance at RBI). Taking into account the high level of importance of sustainability, the members of the Supervisory Board were also given training during a Fit & Proper course on current developments at regulatory level and provided with detailed information on provisions of EU law in relation to ESG factors.
Given the continuing low interest rate environment to support the recovery of the real economy and the resulting difficult situation with respect to earnings, the existing approach of strict cost discipline will be maintained in order to increase profitability and achieve a sustainable cost structure for RBI. Internal processes will be continuously optimized and efficiency potential will be leveraged through effective cost management.
In total, around 45,000 RBI employees serve 17.2 million customers from more than 1,800 business outlets, the vast majority of which are in CEE. RBI AG shares have been listed on the Vienna Stock Exchange since 2005.
In view of the change in the legal and regulatory framework and implementation of Institutional Protection Schemes, the RKÖ and its respective member institutions have decided to discontinue the scheme for new transactions. Accordingly, the supplementary protection by RKÖ was only granted to protected transactions entered by 30 September 2019. The rights of customers with regard to statutory deposit insurance are not affected and remain fully in place.
Comparable mutual support structures apply to the members of the regional IPS. The institutional protection schemes hence supplement the RBG system of mutual assistance that comes into effect if a member experiences economic difficulty.
1 Change in total assets compared to 31 December 2019 expressed in local currencies varies due to fluctuations in euro exchange rates.
The 342 Raiffeisen banks with their branches, as well as the regional Raiffeisen banks and specialist companies, make up a comprehensive and extensive banking network. The Raiffeisen banks are universal banks that provide a full range of banking services and are also the owners of their respective regional bank.
Aside from the strong focus on digital transformation and scalability, cost efficiency constitutes another important aspect of RBI’s strategy. It is planned to sustainably improve the cost structure and profitability by means of standardization, automation and process optimization, as well as the centralization and further optimization of the business model.
RBI services around 100,000 corporate clients across CEE (including medium-sized businesses, large local companies, international corporations and local authorities). All activities in the corporate customer area are guided by the Vision of being the most recommended corporate customer bank.
Supported by extensive local market expertise and strong advisory capabilities, RBI concentrates on building long-term business partnerships and strives to provide its customers with solutions oriented towards their needs.
The corporate customer business proved to be highly resilient to crisis during the year. As less than 5 per cent of the corporate customer portfolio is comprised of weaker-rated customers in COVID-19 most-impacted industries, RBI increased asset volumes relative to the prior year. Despite the strategic and operational challenges, RBI was able – also in 2020 – to make further progress towards its Vision of becoming the most recommended corporate customer bank with the launch of new digital customer solutions (e.g. eKYC, eFinance or Cross Border Account Opening in Austria). Furthermore, RBI significantly improved its NPS position in 2020 and was ranked number one in 9 out of 14 markets, up from 4 out of 14 markets in 2019.
 Digital operational excellence: Improved efficiency and effectiveness through digitalization and automation; fundamental redesign of important customer touchpoints and processes
 Adaptive organizational structure: Transformation of culture, organization and processes to enable faster responsiveness, improved collaboration and new methods of working
In order to respond to these customer requirements more quickly and innovatively, going forwards RBI will centrally develop standard products on a digitalized basis and make them available to its subsidiary banks. The pooling of these resources should lead to a further increase in customer usage and higher efficiency in the development process. The aim is to significantly improve the adoption rate of these digital channels and in particular to increase usage of mobile banking from 43 per cent in 2020 (2019: 32 per cent) to 55 per cent by 2021. Additionally, it is planned to exploit the potential of new technologies and data analytics to a greater extent in order to provide a superior customer experience for all retail customers.
For RBI’s institutional clients, the primary focus is on the further development of digital products to improve the customer experience. During the COVID-19 crisis, RBI launched a new monthly newsletter and website including webinars, information on research, products and services, which proved popular among customers. In 2020, RBI’s client relationship strength was reflected in the number one ranking in the NPS survey in Austria, Romania and Hungary. The main functionalities of the foreign exchange platform (R-Flex) were successfully developed in 2020 and will be rolled out in 2021, starting with Romania.
In the third quarter, key indicators pointed to a significant economic recovery. However, share prices declined in Autumn, primarily due to a resurgence of COVID-19 cases in many countries around the globe and the beginning of a second wave of the pandemic. Fears over further lockdown measures and economic restrictions again became reality for many European countries at the end of the year. A delay in the economic recovery, which had only just begun to manifest itself, and a further financial burden on businesses and public finances are likely to ensue. Despite the setback to the economic recovery, the approval of the first vaccines and the beginning of vaccination programs in a number of countries towards the end of the year gave rise to optimism in the financial markets, resulting in a further increase in share prices.
Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 Feb 21
Capital market communication Following the release of the preliminary figures on 6 February 2020, RBI published its 2019 Annual Report on 18 March 2020. This was accompanied by a conference call held by RBI’s Management Board with around 330 participants. Due to the ongoing restrictions on gatherings in Austria, the usual in-person meetings in Vienna, in which the annual results are discussed with members of the press, investors and analysts, were conducted through conference calls or video conferences.
Recurring central themes for investors and analysts in 2020 were the macroeconomic outlook for CEE and the resulting potential impact on business performance and credit risk. The discussions also frequently covered margins and cost development, the capital position, the planned dividend payment and the most recent geopolitical tensions in relation to Russia.
Financial Calendar 2021 12 April 2021 Record Date Annual General Meeting 22 April 2021 Annual General Meeting 23 April 2021 Start of Quiet Period 28 April 2021 Ex-Dividend Date 29 April 2021 Record Date Dividends 30 April 2021 Dividend Payment Date 7 May 2021 First Quarter Report, Conference Call 16 July 2021 Start of Quiet Period 30 July 2021 Semi-Annual Report, Conference Call 20 October 2021 Start of Quiet Period 3 November 2021 Third Quarter Report, Conference Call
The normally diverse opportunities to obtain information in personal meetings during roadshows and conferences were also impacted by the measures related to the COVID-19 pandemic. While personal meetings were still being held up to the middle of February in Frankfurt, London and Zurich, thereafter RBI instead offered analysts, equity and debt investors regular discussions with the CEO and CRO as well as Investor Relations via telephone or video conferences. These were either in a one-on-one format, small groups or larger virtual conferences with open Q&A sessions. This practice has been employed since the publication of the 2019 Annual Report in the middle of March 2020 and will be maintained until further notice for the protection of employees and other meeting participants.
The aim of RBI’s Investor Relations activities is to ensure a high level of transparency for market participants – also during the current situation – through use of flexible and innovative information formats.
RBI continuously strives to keep market participants fully informed. In the interest of making its communications as easily accessible and widespread as possible, RBI makes conference call presentations and other important events available as online webcasts. These can be viewed online at any time at www.rbinternational.com → Investors.
New issues On 9 June 2020, RBI issued a € 500 million subordinated tier 2 benchmark bond with a maturity of 12 years (non-callable for the first 7 years) and a coupon of 2.875 per cent, corresponding to a spread of 315 basis points over mid-swaps.
On 22 July 2020, RBI placed € 500 million of perpetual additional tier 1 capital (AT1). This was RBI’s third issuance of AT1 capital since 2017 and further optimized its capital structure and its compliance with Pillar 1 and Pillar 2 capital requirements.
The security has an annual coupon of 6.00 per cent until December 2026, which will be reset thereafter. With demand of € 1.6 billion, the order book was significantly oversubscribed and met with a high level of interest from investors, primarily in the UK, continental Europe and Asia.
These successful issuances once again highlight that RBI is seen as an attractive issuer in the international capital markets.
RBI follows a large number of legal standards and other requirements that govern its actions internally and vis-à-vis third parties. The legal framework ranges from numerous relevant regulations, directives, delegated acts of law, and implementing acts on the European level, through to national laws and regulations, and guidelines, notices and recommendations of responsible supervisory authorities and code of conducts of further institutions.
RReegguullaattoorryy rreeqquuiirreemmeennttss ffoorr aa ssuuppeerrvviisseedd eennttiittyy: major banks based in the European Union must adhere to, for example, the Capital Requirements Regulation (CRR) and Capital Rights Directive (CRD), the EU’s Anti-money laundering Directive (AMLD), the revised Markets in Financial Instruments Directive (MiFID II), and the Payment Services Directive (PSD 2). On a national level, there are numerous further relevant Austrian laws such as the Austrian Banking Act (BWG), Austrian Stock Corporation Act (AktG), Austrian Securities Supervision Act (WAG), and the Austrian Payment Services Act (ZaDiG). Together, these form the legal framework and thus significantly impact RBI’s process procedures.
Transparency is a key corporate governance issue and is therefore of particular importance to RBI. This Corporate Governance Report is structured according to the legal provisions contained in § 243c of the UGB and is based on the structure set forth in Appendix 2a of the ACGC.
As a result of the 2020 revision of the ACGC, the total remuneration of the individual Management Board members (§ 239 (1)4 lit. a UGB) and principles of remuneration policy (§ 243c (2)3 UGB) are presented in a separate remuneration report according to § 78c AktG.
RBI governance documents must be in accordance with the principles laid out in the CoC: www.rbinternational.com/en/who-weare /facts-figures/code-of-conduct.html.
The remuneration report will be presented for resolution to the Annual General Meeting on 22 April 2021 and published on the website in a timely manner before the Annual General Meeting.
The number of members of RBI AG’s Management Board was reduced from seven to six when Martin Grüll’s Management Board mandate expired at the end of February 2020. The Management Board areas of responsibility have been reorganized, thereby utilizing potential to streamline the organization (see also: Division of responsibilities and functions of the Management Board).
After discussing the respective function descriptions and requirements as a basis for the succession and recruiting process and evaluating the performance of the relevant Management Board members whose terms were approaching expiry, the Nomination Committee recommended that the Supervisory Board re-elect Peter Lennkh, Andrii Stepanenko and Lukasz Januszewski. The Supervisory Board extended the mandates of Peter Lennkh at its meeting on 17 June 2020, and of Andrii Stepanenko and Lukasz Januszewski at its meeting on 2 December 2020, for another five years.
Members of the Management Board held supervisory board seats or comparable functions in the following domestic and foreign companies that are not included in the consolidated financial statements: Johann Strobl UNIQA Insurance Group AG, 2nd Deputy Chairman (since 25 May 2020), UNIQA Österreich Versicherungen AG, Member (since 25 May 2020) Oesterreichische Kontrollbank Aktiengesellschaft, 1st Deputy Chairman (since 27 May 2020)
Raiffeisen banka a.d., Serbia, Chairman Raiffeisen Bank Kosovo J.S.C., Kosovo, Chairman Raiffeisen Bank Sh.A., Albania, Chairman Raiffeisenbank (Bulgaria) EAD, Bulgaria, Chairman Raiffeisenbank a.s., Czech Republic, Deputy Chairman AO Raiffeisenbank, Russia, Member Raiffeisen Bank S.A., Romania, Member Tatra banka, a.s., Slovakia, Member
As at 31 December 2020, the Supervisory Board comprised: SSuuppeerrvviissoorryy BBooaarrdd mmeemmbbeerr YYeeaarr ooff bbiirrtthh OOrriiggiinnaall aappppooiinnttmmeenntt EEnndd ooff tteerrmm Erwin Hameseder Chairman
 The Supervisory Board member shall not have, or have had in the previous year, any significant business relationships with the company or a subsidiary of the company. This also applies to business relationships with companies in which the Supervisory Board member has a significant financial interest, albeit not with regard to carrying out executive functions within the Group. The approval of individual transactions by the Supervisory Board according to L Rule 48 of the ACGC does not automatically lead to a non-independent qualification.
AO Raiffeisenbank, Russia, Chairman Raiffeisen Bank S.A., Romania, Chairman Raiffeisenbank a.s., Czech Republic, Member Tatra banka, a.s., Slovakia, Member
Priorbank JSC, Belarus, Chairman Raiffeisen Kapitalanlage-Gesellschaft m. b. H., Austria, Chairman Tatra banka, a.s., Slovakia, Chairman Kathrein Privatbank Aktiengesellschaft, Austria, Chairman AO Raiffeisenbank, Russia, Member Raiffeisenbank a.s., Czech Republic, Member Raiffeisen Bank Aval JSC, Ukraine, Member Raiffeisen Bank S.A., Romania, Member Raiffeisen Centrobank AG, Austria, Member
Natalie Egger-Grunicke2 1973 18 February 2016 Until further notice 1 Effective as of 10 October 2010 2 Delegated by the Staff Council
The Supervisory Board has 18 members, five of which are women.
 The Supervisory Board member shall not be a close relative (direct descendant, spouse, partner, father, mother, uncle, aunt, brother, sister, nephew, niece) of a member of the Management Board or of persons who meet one of the criteria described in the preceding points.
Eva Eberhartinger, Birgit Noggler and Andrea Gaal are free float representatives on the Supervisory Board of RBI AG according to C Rule 54 of the ACGC. These members of the Supervisory Board are neither shareholders with a shareholding of greater than 10 per cent, nor do they represent the interests of such shareholders.
In addition to their functions as members of RBI AG’s Supervisory Board, the following members also held supervisory board mandates at material subsidiaries during this period: Erwin Hameseder LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft, Austria, Chairman
1 The newly established Digitalization Committee did not meet during the financial year
In addition to serving as the Chairman of the Audit Committee, Eva Eberhartinger, in her main position, chairs the Tax Management division at the Institute for Accounting & Auditing at the Vienna University of Economics and Business, and was Vice Rector for financial affairs at the Vienna University of Economics and Business from 2006 to 2011. On account of her high level of expertise and many years of experience in research and lecturing at both national and international universities, Eva Eberhartinger is a recognized expert in the areas of finance and accounting, as well as taxation. Her research focuses on accounting, taxation, financing and taxes, European/international accounting, and international tax law. Furthermore, Eva Eberhartinger has numerous publications in various specialist journals. She has been on the supervisory board of the Austrian Treasury since 2013 and served as the Vice Chair until 2017. She has also been a member of the supervisory board of maxingvest AG (Germany) since 2014.
According to § 63a (4) of the BWG, one member of the Audit Committee must be a financial expert. This requirement is fulfilled by Eva Eberhartinger as the Chairman of the Audit Committee. Three other members of the Audit Committee also have relevant expertise from their positions as senior executives of banks.
 For the Deputy Chairman of the Advisory Council: € 20,000 (excl. VAT)
Management Board members’ areas of responsibility have been defined by the Supervisory Board, without prejudice to the general responsibility of the Management Board, as follows (as at 31 December 2020):
With Eva Eberhartinger as Chairman of the Audit Committee, Birgit Noggler as Chairman of the Risk Committee, and Andrea Gaal as the new Chairman of the Digitalization Committee, the responsibilities of the free float representatives have been further strengthened.
The Advisory Council consists of representatives of RBG and has a purely consultative function for the Management Board of RBI AG. The rights and obligations that the Management Board and Supervisory Board have under the law and the Articles of Association are not curtailed by the Advisory Council’s activities.
Advisory Council members receive reasonable compensation for their activities. The compensation for the 2017 financial year and subsequent years was determined by the Annual General Meeting on 21 June 2018.
The Management Board manages the company’s business in accordance with the law, the Articles of Association and the Management Board’s rules of procedure. The Management Board’s weekly meetings are convened and led by the Chairman. The meetings facilitate mutual gathering and exchange of information, consultation and decision-making with respect to all matters requiring the Board’s approval. The procedural rules of the Supervisory Board and the Management Board describe the duties of the Management Board in terms of information and reporting, as well as a catalog of measures that require the approval of the Supervisory Board.
 Group Project Portfolio & Security Management was renamed Group Security, Resilience & Portfolio Governance in 2020. Resilience includes the Disaster Recovery, Crisis Management and Business Continuity departments.
 Group Procurement, Cost & Real Estate Management was renamed Group Procurement, Outsourcing & Cost Management in order to emphasize the outsourcing function due to its growing importance.
The Management Board addressed sustainable finance and the regulatory environment at a special meeting. Following an introduction to the EU’s planned measures to promote a sustainable economy (EU Action Plan), the issues of sustainable business and sustainable customers were covered in detail.
The planned range of services to be offered by the Institutional Customers and Corporate Financing businesses was also discussed (identification of products with ESG relevance, ESG consulting, best practice sharing with others – including internationally active customers, etc.) as well as the range to be offered by the Retail area (strengthening customer relationships based on UN principles by promoting digitalization, reducing operational impacts on the environment, taking account of the social needs of our customers and their business, and creating value with practical innovative solutions that focus on the environment).
Group Subsidiaries & Equity Investments, due to efficiency and synergy considerations. This new structure is designed to enable the division to pool the established strengths and core competencies of the relationship managers and equity investment managers in order to offer their services as a single point of contact to relevant individuals within RBI, its subsidiaries, representative offices, branches and equity investments. The new structure facilitates the adoption of a onestop shop principle and enables the unit to address all assigned issues within a single division.
 The former Group Human Resources division merged with the Strategy Development department from the Group Strategy & Innovation division. To direct the focus even more toward employees, the division was renamed Group People & Organizational Innovation.
During a Fit & Proper course on current regulatory issues, the Supervisory Board was updated on issues including the EBA’s planned changes to ESG risk integration in loan origination and monitoring, better disclosure, control and management of ESG risk factors, diversity (guidelines and measures to ensure adequate representation of all genders in supervisory boards, management boards and upper management), and the consideration of ESG factors in the management and control of companies.
The AAuuddiitt CCoommmmiitttteeee monitors the accounting process. It issues recommendations for improving reliability and supervises the effectiveness of the company’s internal control, audit and risk management systems. The committee also oversees the annual audit of the financial statements and consolidated financial statements and thus monitors the independence of the external Group auditor/bank auditor, particularly with respect to additional work performed for the audited company. During the financial year, changes were made to internal policies and a process was defined for approving necessary exceptions that conforms to the regulatory framework in order to ensure compliance with internal thresholds that are stricter than the duty of care required by law for non-auditing work performed by the external auditor. In addition, the committee examines the annual financial statements, the management report, the consolidated financial statements and the Group management report and is responsible for the preparation for their adoption by the Supervisory Board. The Audit Committee reviews the audit plan in great detail and engages in discussions with the auditor during the audit about key facts covered in the audit of the financial statements, special focuses of the audit, the management letter and the report on the effectiveness of risk management and the internal control system. It also examines the Management Board’s proposal for earnings appropriation and the Corporate Governance Report. The Audit Committee presents a report on the results of its examinations to the Supervisory Board. It also conducts a process, in accordance with statutory requirements, for the selection of the Group auditor and bank auditor and submits a recommendation to the Supervisory Board concerning the appointment of the auditor. Furthermore, the Supervisory Board reviews the consolidated non-financial report (Sustainability Report).
The risk committee also dealt with current material risk management topics. Due to COVID-19 pandemic, the committee thoroughly assessed the impact on RBI’s financial, risk, capital and liquidity position. Committee members were kept informed of the banking group’s profits and financials through regular and special reports given at the committee meetings. In addition, the committee looked at the risk management measures taken to limit the effects of COVID-19 on RBI at all its meetings and took this opportunity to discuss the measures themselves as well as planning steps relating to the corona playbook. The members of the Risk Committee addressed regulatory aspects and the internal system for limiting concentration risk and discussed measures derived from it for individual customer groups.
The Risk Committee also focused on the ongoing reporting and monitoring of compliance with Russian and US sanctions, as well as regular Anti-Money Laundering (AML) status reports and measures to combat money laundering in 2020. In addition, it concentrated on the requirements of, and compliance with, competition law and obtained reports on the status of significant legal disputes at every meeting.
The Audit Committee also thoroughly addressed relevant issues relating to the tax ICS at RBI and devoted its attention to the transfer pricing system. Based on the Audit Committee’s recommendations to the Supervisory Board, the Annual General Meeting on 20 October 2020 selected Deloitte Audit Wirtschaftsprüfungs GmbH as the external auditor and simultaneously as the bank auditor pursuant to §§ 60 et seq. of the BWG for RBI’s annual and consolidated financial statements for the 2021 financial year. In this context, the Audit Committee obtained ongoing status reports on the process of transferring the audit engagement to the new external auditor. The Audit Committee reviewed the economic impacts of the COVID-19 pandemic on the 2020 annual financial statements in detail.
The NNoommiinnaattiioonn CCoommmmiitttteeee’s duties include filling any posts on the Management Board and Supervisory Board that have become vacant. The Nomination Committee evaluates potential candidates based on a description of the duties entailed and, after conducting an appropriate Fit & Proper test, issues recommendations for filling the board vacancy, giving consideration to the balance and diversity of knowledge, skills and experience of all members of the governing body in question.
The Nomination Committee also specifies a target ratio for the under-represented gender on the Management Board and the Supervisory Board, consults on the strategy for achieving the defined target ratio and regularly discusses the implementation of development programs. The Nomination Committee is also responsible for evaluating decision-making within the Management Board and Supervisory Board, ensuring that the Management Board and the Supervisory Board are not dominated by one individual person or a small group of persons in a way which is contrary to the company’s interests. The Nomination Committee verifies and makes this assessment based on the meeting processes and communication lines within each board (e.g. minutetaking, deputizing arrangements, resolutions passed by circulation in urgent cases, monitoring of courses of action taken, meeting preparations, forwarding of documents) and on the perceptions of the members themselves. The Nomination Committee’s responsibilities also include regularly assessing the structure, size, composition and performance of the Management Board and Supervisory Board, with reports on the bodies’ composition, organizational structures and the results of their work being presented as a basis for any decisions. It also regularly evaluates the knowledge, skills and experience of the individual members of both the Management Board and Supervisory Board and also of the respective governing body as a whole. The evaluation takes place in the Nomination Committee and is based on the self-evaluation of the individual members of the Management Board and Supervisory Board, as well as on individual continuing education reports.
Günther Reibersdorfer and Johannes Ortner resigned from their functions in the 2020 financial year. The Nomination Committee devoted its attention to filling the vacant Supervisory Board seats and confirmed the personal and professional suitability of the new candidates Reinhard Mayr and Heinz Konrad. The Fit & Proper assessments of Erwin Hameseder and Klaus Buchleitner, whose Supervisory Board mandates expired in the 2020 financial year, were also confirmed. As was the case when filling vacant Supervisory Board positions or those nearing the end of their term, the Nomination Committee also thoroughly addressed the expiring Management Board mandates of Peter Lennkh, Andrii Stepanenko and Lukasz Januszewski as part of a structured succession process, positively assessing their past work and personal and professional suitability for the continued exercise of the Management Board functions. Based on the results of the succession process, the Nomination Committee recommended that the Supervisory Board propose the election of Erwin Hameseder, Klaus Buchleitner, Reinhard Mayr and Heinz Konrad to the Supervisory Board to the Annual General Meeting. The members of the Nomination Committee also made the recommendation to the Supervisory Board to extend the expiring Management Board mandates of Peter Lennkh, Andrii Stepanenko and Lukasz Januszewski.
The Nomination Committee also reviews the Management Board’s actions with regard to the selection of executives and supports the Supervisory Board in preparing recommendations for the Management Board. To this end, the Nomination Committee evaluates the selection of key function holders, the guiding principles of executive selection and development, succession planning and the policies and steps taken for filling upper management positions.
In addition, the Supervisory Board as well as the Working and Remuneration Committees also passed resolutions by circulation in accordance with § 92 (3) of the AktG.
The Nomination Committee determined in the Fit & Proper review that all the members of the Management Board and Supervisory Board, as well as the Management Board and Supervisory Board in their entirety, possessed the necessary knowledge, skills and experience. In addition, the mandate limits and availability in terms of time were reviewed and confirmed.
The PPeerrssoonnnneell CCoommmmiitttteeee deals with the remuneration of Management Board members as well as their employment contracts. In particular, it discusses and decides on provisions in the individual Management Board members’ employment contracts and makes changes to the contracts as needed. It is also responsible for approving any acceptance of secondary employment by members of the Management Board. The Committee discusses and reviews clawbacks of past bonuses or non-payment of bonuses from existing provisions (penalty) if it has any information indicating that these measures appear necessary.
The Working Committee (WC) held nine meetings in the 2020 financial year. The Risk Committee (RiC) met three times, the Audit Committee (AC) four times, the Remuneration Committee (ReC) three times, the Nomination Committee (NC) four times, and the Personnel Committee (PC) three times. The Digitalization Committee, established on 16 September 2020, had no meetings in the 2020 financial year.
Supervisory Board members attended the meetings of the Supervisory Board and its Committees as shown below: n/a – not applicable, as not a member of the respective Committee 1 Johannes Ortner left the Supervisory Board and Audit Committee effective 18 June 2020 2 Reinhard Mayr was elected to the Supervisory Board and Audit Committee on 20 October 2020 3 Günther Reibersdorfer left the Supervisory Board effective 20 October 2020 4 Heinz Konrad was elected to the Supervisory Board on 20 October 2020
In addition to the 32 days on which the Supervisory Board and its committees met in 2020, seven meetings were held between the Management Board and the Chairman of the Supervisory Board, Erwin Hameseder, to prepare for the meeting days and discuss current (strategic) issues on an ongoing basis. The Chairman and both his Deputies of the Supervisory Board met with the Management Board nine times in 2020.
In addition, 37 bilateral meetings were held with members of the Management Board and the Chairman of the Supervisory Board during the financial year, including 26 meetings with the CEO. Similarly, the Chairmen of the Audit and Risk Committees stayed in regular contact and communication with the members of the Management Board, particularly the CEO and CRO, and with the heads of internal control functions as well as with the CFO. All in all, the Chairman of the Supervisory Board attended 84 RBI meetings.
To support the activities of the Supervisory Board and assist the Chairman of the Supervisory Board, the Chairman’s Office has been set up as an internal interface and secretarial office for the Supervisory Board and acts as a coordinator between the Supervisory Board (in particular the Chairman of the Supervisory Board) and all relevant RBI stakeholders.
In consideration of the ECB’s restrictions on dividend distributions (release from 15 December 2020), the dividend payment decision will be taken by the Annual General Meeting (22 April 2021)
The Supervisory Board discussed the results of the evaluation at a joint moderated workshop held on 18 June 2020. The Supervisory Board's work received very good ratings overall; suggestions for improvement started from a high baseline. Concrete future measures were defined in connection with the recommendations for improving the Supervisory Board’s activities. Some of these recommendations have already been implemented, including, for example, the creation of a Digitalization Committee, which was decided by the Supervisory Board on 16 September 2020. Furthermore, the Supervisory Board held its first-ever strategy workshop on 28 September 2020, with the Management Board, the CFO and internal strategy experts. It is planned to hold these types of strategy workshops twice a year. In response to the Supervisory Board members’ request for greater involvement of the network banks in Supervisory Board activities, local CEOs from selected network banks will present reports at every future Supervisory Board meeting. In addition, appropriate measures have already been taken to prepare information for the Supervisory Board in a way that is specifically oriented towards its needs.
The Chairman of the Supervisory Board leads and coordinates the Supervisory Board and interacts internally with the Management Board as the highest-ranking representative of the Supervisory Board. Serving as an intermediary, the Chairman of the Supervisory Board forwards information received from the Management Board to the other Supervisory Board members, so that they can perform their function in terms of supervision, control and participation. In addition to fulfilling his duties to ensure the smooth functioning of the Supervisory Board’s activities, the Chairman of the Supervisory Board also has external public-facing roles, such as chairing the Annual General Meeting.
Furthermore, in his capacity as the Chairman of the Supervisory Board, Erwin Hameseder visited several selected network banks in the 2020 financial year with CEO Johann Strobl, as was the case in 2019. The visits focused on obtaining detailed reports from local management boards on current business policy issues as well as a comprehensive picture of the respective financial, risk, capital and liquidity trends. In 2020, there was an onsite visit to the Raiffeisen bank in Serbia and virtual visits to the Raiffeisen banks in the Czech Republic and Bulgaria.
The Annual General Meeting for the 2019 financial year was held in Vienna on 20 October 2020. For the first time in RBI’s history, the Annual General Meeting was held virtually to protect all participants amid the COVID-19 pandemic. A web portal set up specifically for shareholders was made available. Both the live video stream of the meeting and the various portal features provided valuable support in ensuring that the 2020 Annual General Meeting went smoothly. Shareholders welcomed and actively used the possibility to participate through RBI’s AGM web portal, which also enabled them to ask questions and exercise their voting rights during the meeting.
Due to a syndicate agreement relating to RBI, the regional Raiffeisen banks and direct and indirect subsidiaries of the regional Raiffeisen banks are parties acting in concert as defined in § 1 6 of the Austrian Takeover Act (see most recent notification of voting rights published on 20 August 2019). The terms of the syndicate agreement include a block voting agreement for all matters that require a resolution from the General Meeting of RBI, rights to nominate members of the RBI Supervisory Board and preemption rights among the syndicate partners. The terms also include a contractual restriction on sales of the RBI shares held by the regional Raiffeisen banks (with a few exceptions) since the expiration of the three year period from the effective date of the merger between RZB and RBI, thus as of 18 March 2020, if the sale would directly and/or indirectly reduce the regional Raiffeisen banks’ aggregate shareholding in RBI to less than 40 per cent (formerly 50 per cent) of the share capital plus one share. There were no changes in the ownership structure of the syndicate members during the financial year.
Report on measures taken by the company to promote women to the Management Board, the Supervisory Board and into executive positions (§ 80 AktG) and a description of the diversity strategy as laid down in § 243c (2) 2 and 3 of the UGB
The RBI Group Diversity Policy defines a strategy for filling Management Board and Supervisory Board positions, whereby hiring must give consideration to both diversity and compliance with statutory requirements. Other important diversity aspects include age, gender and geographic origin. The main requirements for holding such a position also include solid education and professional experience, preferably in roles related to fintech companies, banks or financial institutions. The objective is that the boards include a wide range of qualifications and expertise in order to obtain the broadest possible variety of experience and diverse opinions, collectively resulting in sound decision-making.
The mandates of three members of the RBI AG Management Board were extended (see composition of the Management Board). Of the six Management Board members, currently four are from Austria, one is from Poland, and one is from Ukraine. Members of non-Austrian origin therefore constituted 33 per cent of the Management Board at the end of 2020 (2019: 29 per cent). Two Supervisory Board positions were filled by men and two men were re-elected in 2020. All the Supervisory Board members are of Austrian origin and thus unchanged. The ages of the Supervisory Board members range between 46 and 66 years (2019: between 44 and 65 years), and of the Management Board between 42 and 61 years (2019: between 41 and 60 years).
Measures taken to promote women to the Management Board, the Supervisory Board and into executive positions
The career trajectories of female and male employees generally show noticeable differences over time. In future, therefore, specific focus will be placed on the selection and development of female talent.
A secure, anonymous and digital whistleblower platform was established at RBI in line with regulatory and statutory guidelines. Employees throughout the Group can use this to report possible violations in their local language. All reports are investigated by RBI’s Compliance department. The investigation findings must be reported back before the case can be closed.
The RBI Group Diversity Policy describes the relevance of this issue for RBI, defines the various responsibilities, and also specifies how to implement a diversity strategy within the Group. The relevant subsidiaries, which are the subsidiary banks and Austrian credit institutions, have appointed diversity officers and adopted local strategies.
The composition of the Management Board and Supervisory Board should be structured so that the board members’ geographic origins reflect the diversity of RBI’s markets and its cultural context. With respect to the age structure of the Management Board and Supervisory Board, in order to achieve a good balance, the board members should preferably not have all been born in the same decade. The aim is for women to fill 35 per cent of positions within the Supervisory Board, Management Board and Tier 2 management of the RBI Group by no later than 2024.
RBI is convinced that having leadership teams that are diverse in terms of gender, age, geographic origin, education and professional background is essential to optimizing decision-making quality and minimizing groupthink. It thus assumes that diversity ultimately contributes positively to the company's performance. While the diversity of the management team is satisfactory in terms of age, geographic origin, education and professional background, RBI aims to further increase the proportion of women in management.
The Nomination Committee has therefore set a target for RBI AG of filling 30 per cent of the positions on the Supervisory Board, Management Board and in upper management (Tier 2 and Tier 3 management) with women by 2024. As at 31 December 2020, the corresponding proportion was 23 per cent (2019: 22 per cent). Women held the following proportions of Tier 3 management positions and higher (positions with staff responsibility) at RBI AG as at 31 December 2020: Supervisory Board, 28 per cent (2019: 28 per cent); Management Board, 0 per cent (2019: 0 per cent); Tier 2 management, 19 per cent (2019: 20 per cent) and Tier 3 management, 24 per cent (2019: 24 per cent). Female employees make up 46 per cent (2019: 47 per cent) of the total workforce. RBI AG therefore meets the legal requirement for the proportion of women on its Supervisory Board.
The third set of measures relates to the selection of upper management (first and second tier below the Management Board) and is aimed at improving the selection processes and making them more transparent. Interview transcripts and documents for interviews or hearings (for higher management positions) are anonymized and evaluated by several people in order to ensure objectivity in the selection process and to prevent possible unconscious bias. Furthermore, at least one female assessor must be involved in the hearing. The search for candidates is also an essential step in the selection process. Emphasis will be placed on the selection of suitable executive search partners and their role in finding qualified women.
The internet, particularly the company website, plays an important role for RBI with regard to open communication with shareholders, their representatives, customers, analysts, employees, and the interested public. Therefore, the website offers regularly updated information and services, including the following: annual and interim reports, company presentations, telephone conference webcasts, ad-hoc releases, press releases, investor relations releases, share price information and stock data, information for debt investors, the Sustainability Report and current sustainability news, financial calendar with advance notice of important dates, information on securities transactions of the Management Board and Supervisory Board that are subject to reporting requirements (directors’ dealings), RBI AG’s Articles of Association, the corporate governance report, analysts’ recommendations, as well as an ordering service for written information and registration for the automatic delivery of investor relations news by e-mail.
Members of the Supervisory Board must immediately report any potential conflicts of interest to the Chairman of the Supervisory Board, who is supported by Compliance when carrying out his evaluation. In the event that the Chairman himself should encounter a conflict of interest, he must report this immediately to the Deputy Chairman. Company agreements with members of the Supervisory Board that require members to perform a service for the company or for a subsidiary outside of their duty on the Supervisory Board (§ 189a 7 of the UGB) in exchange for not-insignificant compensation require the approval of the Supervisory Board. This also applies to agreements with companies in which a member of the Supervisory Board has a significant financial interest. Furthermore, related party transactions as defined by § 28 of the BWG require the approval of the Supervisory Board.
For a number of years, RBI has had internal policies that govern business transactions in detail in order to avoid conflicts of interest. The rules enacted in Austria in mid-2019 on transactions with related companies and parties (as part of the transposition of the EU Shareholder Rights Directive into Austrian law) have been reflected in a separately issued internal directive.
Preamble RBI is one of the leading banks in Austria and Central and Eastern Europe. As a financial institution, RBI actively supports the economic and social development of the countries and economies of this economically closely interwoven and globally networked region by providing access to international markets through its correspondent banking services.
2. In concrete terms, the signatories commit themselves to the following targets in their own areas of responsibility: a. Offshore clients: We will significantly and sustainably reduce the share of offshore customers in our portfolio.
b. Correspondent banking relationships: We will further follow our internally established framework, ensuring guidance on entering and continuing correspondent banking relationships. Thus, by the end of 2021 we will terminate business relationships with over 130 partners and substantially limit so called nested payments (these are payments that do not come directly from our customers, but from customers of the correspondent banks of our correspondent banks). Only a maximum of ten reputable international correspondent banks will be entitled to transfer nested payments via RBI from 2022 onwards. Moreover, we only have direct correspondent banking relationships with solid financial institutions.
4. The signatories are aware that no amount of effort of individual financial centers and individual financial institutions will be sufficient to cope with the ever-changing forms and patterns of international money laundering and terrorist financing. The signatories therefore support all measures that lead to improved cooperation between all organizations involved in the fight against money laundering and terrorist financing.
e. Support of legislative initiatives: We step up the fight against money laundering in Europe, because measures adopted by banks must be based on a sound legal framework. The aim is to prevent the proceeds of illegal transactions finding their way into the legal financial cycle.
5. The declared aim of the signatories is to achieve greater efficiency and improved proactive measures to combat money laundering and terrorist financing by cooperating closely with authorities, other financial institutions and national and international experts. This is to be achieved through an improved exchange of information on methods, suspicious transaction patterns and new types of crime that have been jointly identified.
Austrian Banking Act (BWG) 64 Research and development 65 Internal control and risk management system 66 Capital, share, voting, and control rights 69 Risk management 71 Corporate Governance 72 Consolidated non-financial report 72 Human Resources 72 Outlook 73 Events after the reporting date 75
Global economic developments amid the pandemic Economic and financial market developments in 2020 were shaped by the global spread of COVID-19 and the associated restrictions to contain the pandemic. In early spring the sharply rising number of cases led to severe restrictions on business activities. These were accompanied by an unprecedented recession which affected all areas of the economy but particularly the service sector. As the number of new cases was greatly reduced in most countries after several weeks, there was a gradual easing of the lockdown measures and a significant rebound in economic activity began in May. However, in the last quarter new infections in many countries rose above the levels recorded in the spring, leading to renewed restrictions until the end of the year, in some cases similarly severe to those imposed in the spring.
CE and SEE: impact of pandemic varies across countries, EE less severely affected Despite the lockdowns and ensuing negative effects on domestic demand and consequently on consumption, consumer prices in Central Europe (CE) rose 3.2 per cent in 2020. This once again put inflation well above the 2 per cent mark. In contrast, the Southeastern Europe (SEE) region saw comparatively mild inflationary pressure (1.9 per cent) in the face of a decline in consumer demand and a lower inflow of foreign tourists. The disinflationary tendencies resulting from the lockdowns even led to declining year-on-year inflation rates in some countries (Croatia and Bosnia and Herzegovina) in the second and third quarters. As in the previous year, inflationary pressure in SEE mainly came from Romania, but abated from the second quarter onward as well. All in all, the inflation trend enabled Central and Southeastern European central banks to somewhat mitigate the effects of the recession through expansionary monetary policy measures. Unlike during previous crises, the economic upheavals in 2020 could be responded to with monetary policy easing. This not only included interest rate cuts that nearly exhausted the conventional scope of monetary policy, but also monetary policy measures such as bond purchases in Hungary, Poland, Romania, and Croatia.
The SEE region was impacted to a greater extent than the CE and Eastern Europe regions, with economic output declining 4.2 per cent in 2020 (2019: up 3.8 per cent). In SEE the region’s dependency on tourism (Croatia: down 8.4 per cent) and remittances from nationals working abroad was especially noticeable. The strong domestic demand of previous years therefore failed to continue. Serbia experienced a comparatively mild recession (down 1.1 per cent), owing to particularly extensive fiscal and monetary stimuli and a partial recovery of private consumption.
In contrast to previous crises, such as the financial crisis in 2008/09, Eastern Europe (EE), which includes Russia, Ukraine, and Belarus, was less affected by the economic impact of the pandemic than the CE and SEE regions. The EE region’s GDP declined 3.1 per cent in 2020, following a slight increase of 2.1 per cent in the previous year. Russia only tentatively instituted lockdown measures, while the energy and commodities industries were able to continue production. The negative impact of the fall in crude oil prices in the first half of the year was partially offset by the use of budget surpluses from previous years as well as currency depreciation and interest rate cuts. In addition, there were no negative effects from renewed economic sanctions. In Ukraine, 2020 (GDP decline of 4.2 per cent) was marked by political risks in addition to the effects of the pandemic. Ambitious reform plans were not put into effect after a government reshuffle in the spring. Cooperation with the IMF proved difficult. Nevertheless, the economy and currency remained stable, due in part to a stability-oriented policy approach implemented in previous years. Belarus proved to be an exception with respect to COVID-19 policies insofar as its government did not impose a lockdown. The second half of the year was marked by protests following the presidential election. With a decline in GDP of only 0.9 per cent, economic activity surprised on the upside; moreover, the currency remained relatively stable following a devaluation in the first half of the year.
Furthermore, the EBA deemed it necessary to make changes to the Supervisory Review and Evaluation Process (SREP) guidelines (EBA/GL/2014/13) due to uncertainty relating to the COVID-19 pandemic. These should enable a flexible and pragmatic approach with regard to the implementation of SREP 2020.
In a statement on 12 March 2020, the EBA urged credit institutions to follow a prudent dividend policy. At the same time, it was emphasized that all measures provided by the supervisory authorities are intended to be used for financing a response to the crisis and not for distributions. In June, the EU’s European Systemic Risk Board (ESRB) recommended that dividend distributions be postponed until at earliest 1 January 2021.
At the end of 2017, the Basel Committee on Banking Supervision finalized the new international rules for calculating capital requirements under Pillar 1 (Basel IV). The primary objective of the new rules is to make banks’ risk calculations more comparable. To accomplish this, not only were large parts of the standard models changed, but the permitted scope of application of internal models was also reduced and the requirements for these models were revised. In addition, an output floor will be phased in by 2027, setting a future floor for capital requirements calculated using internal models at 72.5 per cent of the values calculated using the standard models.
Euro area 1.3 (6.8) 4.3 3.7 Source: Raiffeisen Research, as of 23 February 2021 (e: estimate, f: forecast); subsequent revisions may be made for prior years
In 2020 the European Banking Authority (EBA) also dealt with the development of the COVID-19 pandemic and the possible repercussions for the banking sector. Against this backdrop, it focused on three areas: credit risk (with an emphasis on concentration risk), risk management (in connection with internal governance) and data quality.
On 27 July 2020, the European Central Bank (ECB) followed these recommendations with an extension of its initial recommendation until at earliest 1 January 2021. This was due to increased economic uncertainty and the difficulty of assessing the real impact of the COVID-19 crisis. A further recommendation from the ECB on 15 December 2020 called for extreme caution with regard to the distribution of dividends. However, dividend payments up to the thresholds prescribed by the ECB will be tolerated, provided that capitalization is solid and risk provisioning levels are appropriate.
The effect of increased digitalization, development and application of new technologies as well as new business models and financial products was also apparent in the regulatory sphere in 2020. Although the supervisory authorities have concerned themselves for some time with fintechs and the implications of digitalization, the European Commission presented an extensive package relating to digital finance for the first time in 2020. This included a comprehensive digitalization strategy for the financial sector as well as a strategy for retail payment services. Furthermore, new proposals for legislation were initiated within the context of the digital finance package: firstly, for the regulation of crypto assets (MiCA) as well as pilot regulation for market infrastructure based on blockchain technology and, secondly, for the regulation and stability of digital systems relating to cybersecurity and resilience (DORA).
RBI has a Group recovery plan as required by law. It sets out measures for restoring financial stability in the event that this becomes necessary. The BaSAG also requires resolution authorities, in close collaboration with the banks, to draw up resolution plans based on the underlying resolution strategy (multiple point of entry (MPE) or single point of entry (SPE)):  The resolution plan has to facilitate the effective application of the resolution tools and describe the resolution strategy and its implementation
 RBI has adopted an MPE approach. The responsible authorities define resolution groups for those units identified as relevant to the resolution process
An effective Capital Markets Union will contribute to the rebuilding of the EU economy, by providing new sources of finance for companies and through offering investment opportunities to Europeans. The strengthening of the capital markets is a prerequisite for the European Green Deal and the digital transformation.
New developments in sustainable finance also made their mark in 2020. The European Commission's Green Deal aims to make Europe the first climate neutral continent by 2050. As a consequence, the main focus is on sustainable activities in industry, to be achieved by means of CO2 pricing rules and CO2 limits, the further development of renewable energy production, investments in green buildings, e-mobility, waste management and recycling. For the financial services sector, this is primarily to be achieved through increased transparency and disclosure requirements for financial products and the inclusion of climate and environmental risks in the EU supervisory framework. RBI took part in the voluntary 2020 EBA climate stress test, as well as in the Paris Agreement Capital Transition Assessment (PACTA) 2020, involving a climate risk assessment of its financial portfolio.
Parallel to RBI’s successful green bond issuance activity, which has been taking place since 2018, sustainable lending has also grown strongly. Since 2020, RBI has also offered financing which is already geared towards the EU Taxonomy. This relates to a European framework which details specific conditions and thresholds for economic activities (e.g., the production of aluminum, steel, cement or energy), in order to determine whether or not an activity can be rated as sustainable. If carbon-intensive industries can conduct their activities according to the conditions of the EU Taxonomy, they will materially contribute to the EU’s climate goals. For this purpose, RBI established a sustainability framework which is geared towards the aforementioned EU Taxonomy, the RBI Green Bond Framework, and corresponding guidelines from supranational banks (European Investment Bank and European Bank for Reconstruction and Development). This is to ensure that there are Group-wide quality standards for sustainable finance. On the basis of these standards, investment activities and the associated financing can be rated as either green, neutral, or not sustainable. RBI aims to assist these industries and customers in their transformation towards sustainable production and to provide support through financing. Furthermore, the establishment of the Responsible Banking Steering & Decision Body – a committee which advises the RBI Management Board and spans different functions and board areas – has strengthened the focus on sustainable finance.
The Basel Committee on Banking Supervision has issued 14 principles for risk data aggregation and risk reporting of credit institutions (BCBS 239). They reflect the Basel Committee’s conclusions that data quality and governance play a fundamental role in bank management and the efficiency of banking operations.
As a result of the measures and severe global recession, RBI also reported a significant decline in profit. In order to better reflect the resulting loan portfolio losses, additional expected impairment losses of around € 282 million were posted in excess of the ECL model. This contributed nearly 30 basis points to the 42 basis point increase in the provisioning ratio and relates to postmodel adjustments to estimates of the expected credit losses. The adjustments were necessary as the models do not fully capture the speed of the changes and the severity of the pandemic’s economic effects. Individual sectors such as tourism (including leisure facilities), aviation (including freight transport), extraction and processing of oil and natural gas, as well as the automotive industry, have been hardest hit. Further information on the development in provisioning for impairment losses can be found in the notes to the consolidated financial statements.
Amendment to the proposal for the utilization of net profit for the 2019 financial year
In addition to the significantly higher net provisioning for impairment losses, impairments on equity investments and goodwill amounting to approximately € 95 million were recognized due to changes in medium-term planning parameters. Loan modifications due to payment moratoriums in an amount of minus € 29 million were recorded through profit/loss. Further information can be found in the notes to the consolidated financial statements.
A change in payment plans may lead to a net present value loss on an individual loan contract, which is generally recognized in the other result of RBI as a one-off adjustment to the gross carrying amount resulting from an immaterial modification of the contract. In 2020, a net present value loss of € 29 million was reflected in the result in this respect. Further effects can be expected in subsequent reporting periods.
Like many banks, RBI saw an increase in demand for loans from companies as a result of the economic consequences of the COVID-19 pandemic. This was mainly for bridge loans and refinancing, while demand for investment finance fell. In Austria, in particular, loans granted to companies had government guarantees.
In the context of the COVID-19 pandemic, both the ECB and the EBA enacted regulatory relief measures to enable banks supervised by the ECB to continue to play their central role in providing financing to households and businesses. The ECB explicitly allowed banks under its supervision to operate below the levels defined by the Pillar 2 guidance, the capital conservation buffer and the liquidity coverage ratio. Banks were also allowed to use other capital instruments in addition to common equity tier 1 capital to meet capital requirements. This particular measure would originally not have come into force until the beginning of 2021 as part of the implementation of CRD V (Capital Requirements Directive). Furthermore, the ECB is of the opinion that these measures should be supported by an appropriate relaxation of the countercyclical capital buffer by the national supervisory authorities. The EBA also expects consistent application of the rules regarding the definition of default, forbearance and IFRS 9, and calls for the use of the full flexibility provided for in the regulations.
On 16 September 2020, in line with the ECB’s recommendation on dividend payments, the Management Board decided to propose to the Annual General Meeting on 20 October 2020 that the entire € 332 million net profit for the 2019 financial year be carried forward. The proposed resolution was approved by the Annual General Meeting.
Net trading income and fair value result 94 (17) 111 –
Operating income was down 5 per cent year-on-year, or € 280 million, to € 5,195 million.
Net interest income decreased € 171 million to € 3,241 million as a result of negative currency effects and, in particular, interest rate cuts in numerous Group countries in response to the consequences of the COVID 19 pandemic. In contrast, the Group's average interest-bearing assets increased 8 per cent despite significant currency devaluations.
Earnings and financial performance Like most banks, RBI also ended the financial year below its own expectations and the previous year's results in light of the pandemic. Despite the challenging market conditions and the ongoing low interest rate environment, consolidated profit posted a comparatively moderate decline of 34 per cent, or € 423 million, to € 804 million. In addition to its direct effects, the pandemic also resulted in significant currency devaluations in some of RBI’s core markets. In particular, both the Russian ruble and the Ukrainian hryvnia fell 31 per cent while the Hungarian forint fell 10 per cent year-on-year, with a corresponding impact on total comprehensive income.
Staff expenses decreased 3 per cent, or € 45 million, to € 1,566 million, mainly due to currency developments in the Eastern European countries, with the average number of employees (full-time equivalents) falling 828 year-on-year to 46,345. Scheduled salary adjustments in certain markets resulted in some upward pressure on staff expenses. Other administrative expenses fell 10 per cent, or € 108 million, to € 986 million. In addition to currency effects, the main drivers of the reduction were lower advertising expenses, primarily at head office, in the Czech Republic, Romania and Slovakia, as well as lower deposit insurance fees in Russia (down € 14 million) and Romania (down € 6 million). The other expense items were also down due to the COVID-19 pandemic. Depreciation of tangible and intangible fixed assets rose 2 per cent, or € 9 million. As a result of optimization measures taken, the number of business outlets was further reduced year-on-year, by 183 to 1,857, with the largest reductions in Ukraine (99), Russia (22), Romania (17) and Slovakia (15).
Credit-linked provisions for litigation were allocated on a portfolio basis in an amount of € 60 million, of which € 44 million were related to the foreign-currency mortgage loan portfolio in Poland, which was below the previous year's figure of € 83 million. Provisions for property transfer taxes in Germany of € 27 million posted in the prior-year period were adjusted only slightly in the reporting period. This was in contrast to negative effects from the partial impairment on goodwill relating to Raiffeisen Kapitalanlage -Gesellschaft in the amount of € 27 million due to the revised medium-term plan as a result of the pandemic and net modification losses in the amount of € 41 million. Of this amount, € 29 million related to payment moratoriums in the lending business enacted in connection with the COVID-19 pandemic in various markets. The result from the deconsolidation of group assets decreased € 53 million after the sale of a building in Slovakia generated income of € 50 million in the comparable period of the previous year.
Expenses for levies and special governmental measures increased € 16 million to € 179 million. Due to higher assessment bases as well as additional payments, there was an increase of € 26 million in contributions to the resolution fund, primarily at head office, in Bulgaria, Romania and the Czech Republic. Bank levies, on the other hand, decreased € 7 million. This was mainly due to developments in Romania, where the new bank levy, which was introduced in 2019, was abolished again in 2020.
In the area of expected credit losses (stage 1 and 2), net impairment losses of € 315 million (an increase of € 301 million) were recognized in the reporting period due to the anticipated effects of the recession resulting from the pandemic. The industries and customer groups primarily affected were those that were most negatively impacted by the COVID-19 pandemic, particularly tourism, the hotel industry, further related sectors such as the automotive industry, air travel, oil and gas, real estate and some consumer goods sectors. This resulted in net impairment losses of € 176 million on loans to non-financial corporations and € 103 million on loans to households. Besides the modeled impairment losses, additional expected loan loss provisions of around € 282 million are included, of which € 236 million relate to non-financial corporations and € 46 million to households, as a result of adjusted macroeconomic data as well as structural effects on specific industries triggered by the COVID-19 pandemic.
Net interest income declined € 5 million quarter-on-quarter to € 765 million. Developments in the fourth quarter continued to be affected by key rate cuts in several markets and excess levels of liquidity. The most significant reduction was in Ukraine (down € 3 million), due to lower market interest rates. In Russia, net interest income decreased € 2 million due to volume and currency effects. The net interest margin was down 3 basis points to 1.97 per cent principally as a result of a significant increase in short-term investments and lower margins due to rate cuts relating to COVID-19.
Current income from investments in associates amounted to minus € 3 million in the fourth quarter compared to € 22 million in the previous quarter. The main reason for this was the negative result of UNIQA Insurance Group AG in the fourth quarter (minus € 12 million compared to € 14 million in the third quarter), which came under pressure largely because of a restructuring provision.
The other result totaled minus € 205 million in the reporting period compared with minus € 219 million in the same period of the previous year. Impairment losses on investments in companies valued at equity amounted to € 68 million, a decrease of € 29 million. In the financial year, impairment losses were recognized on investments in UNIQA Insurance Group AG and LEIPNIKLUNDENBURGER INVEST Beteiligungs AG, principally as a result of the deteriorating economic outlook caused by the pandemic. Impairment losses on other non-financial assets were € 39 million lower at € 20 million and related primarily to real estate in Russia and Slovakia.
Impairment losses on financial assets recorded a € 396 million increase in the reporting period to € 630 million as a result of the pandemic.
A lower increase was seen in relation to defaulted loans (stage 3), for which net impairment losses of € 302 million were recognized in the reporting period, an increase of € 123 million. Of this amount, € 152 million was attributable to households and € 139 million to non-financial corporations.
Income taxes fell € 78 million – largely as a result of lower earnings – to € 324 million. The tax rate increased 3 percentage points to 26 per cent, principally due to the lower contribution to earnings from head office, which partly resulted from the impairment losses described above.
Current income from investments in associates 120 (9) 31 22 (3)
Due to lower results, income taxes fell € 11 million to € 84 million, whereby the tax rate remained constant compared to the previous quarter at 27 per cent.
Statement of financial position Since the beginning of the year, RBI’s total assets rose 9 per cent or € 13,759 million to € 165,959 million. In contrast, currency movements against the euro – affected by depreciation pressure on numerous CEE currencies as a result of the crisis, especially the Russian ruble and the Ukrainian hryvnia (down 31 per cent), the Belarusian ruble (down 35 per cent), the Hungarian forint (down 10 per cent) and the US dollar (down 9 per cent) – led to a decline in total assets of 4.5 per cent or € 7,470 million. On a currency-adjusted basis, total assets grew € 21,229 million or 13.5 per cent.
The 27 per cent or € 2,517 million increase in loans to banks was mainly the result of short-term investments at commercial and central banks.
Cash balances increased € 9,371 million to € 33,660 million, principally driven by head office with an increase of € 6,859 million for liquidity management reasons, mainly in the form of balances held at the Austrian National Bank and repo transactions, together with an € 862 million increase in Romania.
Taking the ECB’s recommendation on dividend payments into account, the Management Board of RBI AG will propose to the Annual General Meeting (planned for 22 April 2021) to pay a dividend of € 0.48 per share. The total dividend paid based on shares issued would be no more than € 158 million. The Management Board reserves the right to consider a possible additional dividend payment as soon as the ECB withdraws its recommendation.
Total risk-weighted assets (RWA) increased € 898 million year-on-year to € 78,864 million. The major reasons for the increase were new loan business as well as business developments at head office, in Russia and in the Czech Republic. Organic growth and rating downgrades were offset by negative currency effects, especially from the Russian ruble, the Ukrainian hryvnia, and the Czech koruna. An increase in market risk, mainly driven by the rise in volatility caused by the COVID-19 pandemic, also led to an increase in risk-weighted assets.
Digitalization is also a key issue for corporate and institutional customers. Since the end of 2019, RBI has digitalized a series of products and services on the myRaiffeisen platform. This includes a digital KYC process (eKYC) for companies and institutional customers, digital account opening (eAccount Opening) and digital export finance (eSpeedtrack), as well as further services such as eFinance, eGateway, and eArchive. The figures for 2020 demonstrate that the digital offering has been a success with our customers – 39 per cent of new accounts at RBI in Austria were initiated digitally and 42 per cent were verified using the fully digitalized KYC process in 2020.
Equity including capital attributable to non-controlling interests rose € 523 million from the start of the year to € 14,288 million. This change was mainly due to the issuance of additional tier 1 capital (AT1) with a nominal value of € 500 million and to total comprehensive income of € 103 million.
The aim of the ICS is to provide the Management Board with the necessary means to ensure effective and continuously improving internal controls for accounting. The control system is designed to comply with all relevant guidelines and regulations and to optimize conditions for specific control measures in order to prevent any unintentional misstatements.
have a significant impact on the financial statements (such as credit risk provisions, derivatives, equity participations, provisions for personnel expenses and market risk).
The financial statement data are predominantly automatically transferred to the IBM Cognos Controller consolidation system by the end of January of the subsequent year. The IT system is kept secure by limiting access rights.
The plausibility of each Group unit’s financial statements is initially checked by the responsible key account manager within Group Accounting & Reporting. Group-level control activities comprise the analysis and, where necessary, modification of the financial statements submitted by Group units. In this process, the results of meetings with representatives of the individual companies, in which the financial statements are discussed, and comments from external reviews of the financial statements are taken into account. The discussions cover the plausibility of the individual financial statements as well as critical matters pertaining to the Group unit.
Throughout the year, consolidated monthly reports are produced for the Group’s senior management. The statutory interim reports conform to the provisions of IAS 34 and are published quarterly in accordance with the Austrian Stock Exchange Act. Before publication, the consolidated financial statements are presented to senior managers and responsible Management Board members for final approval and then submitted to the Supervisory Board’s Audit Committee. Analyses pertaining to the consolidated financial statements are also provided for management, as are forecast Group figures at regular intervals. The financial and capital planning process, undertaken by Group Planning & Finance, includes a three-year Group budget.
Financial reporting is a primary focus of the ICS framework, whereby financial reporting processes are subject to risk-based prioritization and control examinations with results regularly reported to the Management Board and the Supervisory Board for evaluation. Additionally, the Audit Committee is required to monitor the financial reporting process. The Management Board is responsible for ongoing company-wide monitoring. The internal control system is based on three lines of defense.
The first line of defense consists of individual departments, whereby department heads are responsible for monitoring their business areas and ensuring that an appropriate control environment is established. The departments conduct control activities and plausibility checks on a regular basis, in accordance with the documented processes.
(3) RLB NÖ-Wien Sektorbeteiligungs GmbH holds around 22.24 per cent of the share capital of the company. By virtue of the syndicate agreement regarding RBI AG, the directly or indirectly held voting rights attached to a total of 193,449,778 shares, corresponding to a voting interest of around 58.81 per cent, are mutually attributable to the regional Raiffeisen banks and their direct and indirect subsidiaries pursuant to §§ 130 and 133 7 of the Austrian Stock Exchange Act (BörseG) as parties acting in concert as defined in § 1 6 of the Austrian Takeover Act (ÜbG). The remaining shares of RBI AG are held in free float, with no other direct or indirect shareholdings amounting to 10 per cent or more known to the Management Board.
The share capital is conditionally increased (conditional capital) pursuant to § 159 (2) 1 of the AktG by up to € 100,326,584 by issuing of up to 32,893,962 ordinary bearer shares. The conditional capital increase will only be implemented to the extent that use is made of an irrevocable right of conversion into or subscription to shares which the company grants to the creditors holding convertible bonds issued on the basis of the resolution passed at the Annual General Meeting on 20 October 2020, or in the event of having to fulfil a conversion obligation set out in the convertible bonds’ terms of issuance. In both cases, the Management Board does not decide to allocate own shares. The issue price and the conversion ratio are to be calculated in accordance with recognized quantitative financial methodologies and the price of the company’s shares in a recognized pricing procedure (calculation basis of the issuance price); the issue price may not be below the proportionate amount of the share capital. The newly issued shares from the conditional capital increase are entitled to a dividend equivalent to that of the shares traded on the stock exchange at the time of issuance. The Management Board is authorized, with the approval of the Supervisory Board, to determine the further details of the implementation of the conditional capital increase.
The Annual General Meeting of 20 October 2020 also authorized the Management Board, under the provisions of § 65 (1) 7 of the AktG, to purchase own shares for the purpose of securities trading, which may also be conducted off-market, during a period of 30 months from the date of the resolution (i.e. until 19 April 2023), provided that the trading portfolio of shares purchased for this purpose does not at the end of any given day exceed 5 per cent of the company's respective share capital. The consideration for each share to be acquired must not be less than half the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition and must not exceed twice the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition. This authorization may be exercised in full or in part or also in several partial amounts by the company, by a subsidiary (§ 189a 7 UGB) or by third parties acting for the account of the company or a subsidiary.
(8) The following material agreements exist, to which the company is a party and which take effect, change or come to an end upon a change of control in the company as a result of a takeover bid:  RBI AG is insured under a Group-wide D&O policy. In the event of a merger with another legal entity, the insurance policy would automatically cease at the end of the insurance period in which the merger took effect. In such cases, insurance cover only exists for claims for damages arising from breaches of obligations that occurred before the merger, which are reported to the insurer prior to the termination of RBI’s Group-wide D&O insurance cover
The Management Board was further authorized, pursuant to § 65 (1b) of the AktG, to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender, to the full or partial exclusion of shareholders’ subscription rights, and to stipulate the terms of sale. Shareholders’ subscription rights may only be excluded if the own shares are used to pay for a contribution in kind, to acquire enterprises, businesses, operations or stakes in one or several companies in Austria or abroad. Furthermore, shareholders’ subscription rights may be excluded in the event that convertible bonds are issued in future, in order that (own) shares may be issued to such convertible bond creditors that have exercised their right of conversion into or subscription to shares in the company, and also in the event of a conversion obligation stipulated in the
Human Resources The former Group Human Resources division merged with the Strategy Development department and was renamed as the People & Organisational Innovation division (P&OI). P&OI plays an essential role in the implementation of RBI’s strategy and achievement of its corporate goals. The focus is on two main areas; firstly, the efficient execution of personnel processes such as data administration, payroll accounting, contract preparation and recruitment, and secondly, the division is responsible for personnel development and career management, as well as for professional education and training. The area of Organisational Innovation has been incorporated into the division since May 2020, thereby broadening the scope of activities to include innovation in terms of strategic direction and employee training. A key focal point in 2020 was the implementation of the new corporate Vision & Mission and the company values.
Real GDP growth in the Southeastern Europe (SEE) region is forecast to reach 4.6 per cent in 2021. At the individual country level, the expected increase of 5.1 per cent in Croatia stands out, although this should be viewed against the backdrop of the previous year's steep economic decline (down 8.4 per cent). Romania, the largest economy in the region, is expected to see the highest economic growth rate at 5.2 per cent. Key factors in the SEE region include vaccinations over the course of the year, as in other regions, and the relatively large sums the region will receive from the NextGeneration EU fiscal plan starting in the second half of the year. The involuntary reductions in consumption are likely to result in a certain degree of pent-up demand and a recovery in consumer spending.
As at 31 December 2020, RBI had 45,414 employees (full-time equivalents), which was 1,459 fewer than at the end of 2019. The largest declines occurred in Ukraine, in Slovakia, and in the Czech Republic.
Economic outlook Towards the end of 2020, a resurgence in COVID-19 cases was countered with further restrictions, some of which were very severe. A return to normality and the start of a sustained European economic recovery depends to a large extent on medical developments. Comprehensive vaccination for defined risk groups will not be available before spring of 2021. The expected subsequent easing of restrictions on businesses to a greater degree will allow economic activity to increase, which should be reflected in higher GDP growth rates. Support is expected to stem from pent-up consumer demand from 2020 and from monetary and fiscal policy stimulus (not least from EU budgetary measures/NextGeneration EU).
The Russian economy is expected to grow around 2.3 per cent in 2021, a low rate by regional standards. However, the growth forecast should be viewed in the context of the comparatively mild recession experienced in the previous year. Russia’s key interest rates are expected to remain low at 4.25 per cent while the inflation rate is expected to decline again over the course of 2021 from an elevated level at the beginning of the year. Sanction risks could rise slightly, but a strong further wave of sanctions is not expected. Real GDP in Ukraine is expected to grow just under 4 per cent. Relations with the International Monetary Fund are difficult due to Ukraine’s slower pace of reform. However, the country’s adequate currency reserves are expected to have a stabilizing effect on its currency. The Belarusian economy is expected to grow 1.5 per cent in 2021 after a comparatively mild recession in the previous year.
The extensive lockdown, which was partially eased only at the beginning of February, is expected to weigh on the Austrian economy in the first quarter as well, resulting in a decline in GDP compared to the prior quarter. As the year unfolds, however, an economic rebound can be expected as restrictions ease, and quarter-on-quarter GDP growth rates are likely to be markedly positive. It is expected that private consumption will prove to be the main driver of the economy. In contrast, capital expenditure is likely to grow at below-average rates for an economic upturn, as the increase in debt levels in the previous year is expected to result in companies having less scope for capital expenditures. Additionally, the recession was preceded by an exceptionally strong investment cycle lasting several years. The related capacity expansion should subdue the need for capital expenditures as demand rises. Due to the unfavorable conditions at the outset of the year (weak six months during the 2020/21 winter season), a partial recovery from the preceding GDP contraction is expected for 2021 as a whole, with real GDP growth of 3.5 per cent. However, the GDP level of the fourth quarter of 2019, prior to COVID-19, is only likely to be reached again during the course of 2022.
The improved economic outlook for 2021 is expected to underpin stable business development in the Austrian banking sector. Despite banks’ somewhat tighter lending standards, which tend to make it more difficult to grant credit, the development of new business is likely to be stable. Access to the ECB’s targeted longer-term refinancing operations, which will continue to provide the banking sector with favorable terms, is expected to have a supportive effect as well. In contrast, asset quality is expected to deteriorate over the course of 2021, with expiring moratoriums leading to an increase in the non-performing loan ratio. The proportion of provisions in banks’ earnings for the period will also remain elevated, which will impact the profitability of the Austrian banking sector. Nonetheless, the domestic banking sector appears to be well-prepared for the current year.
Based on this target we intend to distribute between 20 and 50 per cent of consolidated profit.
In February 2021, RBI’s subsidiary bank in the Czech Republic, Raiffeisenbank a.s., signed a referral agreement with ING Bank N.V. (ING) on the re-contracting of ING’s Czech retail customers. The transaction is subject to approval by the Czech Office for Protection of the Competition.
Loan and balance sheet growth at CEE banks are expected to be moderate over the coming 12 to 24 months. The medium-term outlook is supported by the vaccine rollout, the favorable refinancing conditions and the regulatory framework. However, the potentially ongoing challenging situation in the labor markets, an expected deterioration in the credit quality of loan applicants and the possible withdrawal of regulatory and fiscal measures initiated in 2020 could have a negative impact. Besides expectations for moderate loan growth, the low interest rate environment and sustained risk costs (e.g. a delayed rise in unemployment, expiry of moratoriums) are also negatively affecting bank profitability, even if some CEE markets show greater resilience. In this respect, the risk remains that a portion of the loans subject to repayment deferrals will become non-performing in the coming months, including in the more vulnerable SME and retail portfolios. Overall, retail loan growth (in local currency) in the CEE banking sector in 2021, should be near the median of CEE countries in 2020 (up 7 per cent p.a.), and growth in corporate lending should be between 6 and 8 per cent (median in CEE region for 2020: up 5 per cent p.a.). Furthermore, it is expected that growth in the retail sector will outpace that of corporate. Against this backdrop, the RoE ratios in CEE should fall between 5 and 9 per cent (median 2020 forecast: 9 per cent).
We expect the consolidated return on equity to improve in 2021, and we target 11 per cent in the medium term.
We confirm our CET1 ratio target of around 13 per cent for the medium term.
Events after the reporting date RBI signs agreement on the acquisition of Czech Equa bank
Raiffeisenbank a.s. (Czech Republic) signs referral agreement with ING on re-contracting of Czech retail customers
Central Europe 79 Southeastern Europe 84 Eastern Europe 89 Group Corporates & Markets 92 Corporate Center 94
This results in the following segments:  Central Europe: Czech Republic, Hungary, Poland, Slovakia, and Slovenia
 Furthermore, the following companies valued at equity have been allocated to the Group Corporates & Markets segment: NOTARTREUHANDBANK AG, Oesterreichische Kontrollbank AG, EMCOM Beteiligungs GmbH, Posojilnica Bank eGen. These were previously allocated to the Corporate Center segment.
Central Europe in € million 2020 2019 Change Q4/2020 Q3/2020 Change
 Southeastern Europe: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania, and Serbia
Current income from investments in associates 3 5 (41.0)% 1 1 (23.4)%
Levies and special governmental measures (63) (60) 6.0% (1) (1) (2.7)%
Impairment losses on financial assets (177) (38) 362.9% (57) (29) 95.1%
NPE coverage ratio 63.1% 58.6% 4.5 PP 63.1% 65.0% (1.9) PP
The net trading income and fair value result declined € 7 million year-on-year, which was attributable to € 27 million in one-off income in the previous year from the sale of equity instruments in Slovakia. In Hungary, in contrast, the net trading income and fair value result increased, mainly as a result of higher income from the valuation of interest-based derivatives.
The average number of employees in the segment fell 417 to 9,436 due to a change in the segment allocation of a Group unit (down 165) and developments in the Czech Republic (down 149) and Slovakia (down 148). The cost/income ratio decreased 1.7 percentage points year-on-year to 55 per cent.
Impairment losses amounted to € 177 million in the reporting period, compared to € 38 million in the comparable period of the previous year. In stage 1 and stage 2, net impairments of € 101 million (up € 129 million) were recognized in the reporting period. The increase was mainly due to the worsening macroeconomic outlook resulting from the COVID-19 pandemic and the related impact on the industries and individuals working in those industries within RBI’s customer base. This included impairments of € 40 million for loans to households, mainly in the Czech Republic (€ 13 million), Poland (€ 12 million) and Hungary (€ 12 million). Impairments for loans to non-financial corporations amounted to € 60 million, particularly in Hungary (€ 24 million), Slovakia (€ 19 million) and the Czech Republic (€ 16 million). In stage 3 (defaulted loans), net impairments of € 66 million were allocated (previous year: € 60 million), of which € 48 million related to non-financial corporations, particularly in the Czech Republic (€ 31 million) and Slovakia (€ 26 million), and € 19 million to households.
Employees as at reporting date (full-time equivalents) 238 227 3,580 4,029
Employees as at reporting date (full-time equivalents) 3,138 3,413 2,279 2,237
Southeastern Europe in € million 2020 2019 Change Q4/2020 Q3/2020 Change
Net fee and commission income 377 417 (9.6)% 97 101 (3.5)%
Net gains/losses from hedge accounting 0 0 (79.8)% 0 0 (87.9)%
The Southeastern Europe segment’s profit after tax declined 33 per cent, or € 137 million, year-on-year to € 273 million. This was principally due to an increase of € 108 million in risk costs, caused mainly by the macroeconomic deterioration triggered by COVID-19, by structural effects on specific industries and by higher loan defaults, mostly among households.
Return on equity before tax 9.9% 15.9% (6.1) PP 7.3% 15.4% (8.1) PP
Return on equity after tax 8.3% 13.6% (5.3) PP 5.9% 13.3% (7.4) PP
Provisioning ratio (average loans to customers) 1.11% 0.46% 0.64 PP 1.11% 0.84% 0.27 PP
The NPE ratio was down 0.2 percentage points year-on-year to 2.8 per cent. The NPE coverage ratio rose 0.8 percentage points to 70.8 per cent.
Detailed results of individual countries in the segment: Albania Bosnia and Herzegovina Bulgaria
Net trading income and fair value result 5 3 2 2 3 3
Employees as at reporting date (full-time equivalents) 1,285 1,241 1,268 1,316 2,536 2,633
Impairment losses on financial assets (10) (4) (25) (14) (31) (2)
Return on equity after tax 5.4% 10.6% 7.2% 11.2% 6.4% 15.3%
Net trading income and fair value result 3 6 20 18 7 8
Employees as at reporting date (full-time equivalents) 1,818 1,860 5,115 4,987 1,480 1,581
Net gains/losses from hedge accounting (1) 0 – (1) (1) (24.5)%
Levies and special governmental measures (3) (2) (6) (14) 0 (3)
Return on equity after tax 2.0% 9.1% 13.1% 18.7% 9.1% 10.7%
Provisioning ratio (average loans to customers) 1.00% 0.12% 1.11% 0.68% 0.74% 0.20%
Return on equity before tax 30.5% 35.7% (5.2) PP 28.9% 26.9% 1.9 PP
Return on equity after tax 24.0% 27.9% (3.9) PP 22.6% 21.2% 1.4 PP
Net fee and commission income 57 57 374 394 88 106
The net trading income and fair value result rose from € 32 million in the comparable period of the previous year to € 56 million in the reporting period. Russia reported growth of € 15 million mainly as a result of the valuation of derivatives and trading in debt securities. Belarus and Ukraine reported increases of € 8 million and € 2 million, respectively, which was primarily due to a higher net gain on currency translation.
Other net operating income was down € 13 million to minus € 10 million, reflecting losses on the sale of financial assets in Russia (decrease of € 10 million).
Net trading income and fair value result 11 3 30 15 15 14
Impairment losses on financial assets (15) 0 (110) (68) (14) 10
Return on equity before tax 20.3% 23.1% 28.5% 32.7% 42.4% 57.8%
Return on equity after tax 14.5% 17.1% 22.5% 25.3% 34.5% 47.5%
Provisioning ratio (average loans to customers) 1.24% (0.07)% 1.09% 0.67% 0.92% (0.64)%
Employees as at reporting date (full-time equivalents) 1,690 1,746 8,733 8,819 6,559 7,791
Group Corporates & Markets in € million 2020 2019 Change Q4/2020 Q3/2020 Change
Return on equity before tax 10.8% 12.5% (1.8) PP 9.7% 6.9% 2.8 PP
Net interest income was down 3 per cent, or € 16 million, year-on-year to € 582 million, mainly due to lower interest income at Raiffeisen Centrobank AG and Raiffeisen Bausparkasse Österreich Gesellschaft m.b.H. The segment’s net interest margin declined 16 basis points to 1.07 per cent as a consequence of increased short-term loans.
Net trading income and the fair value result improved € 58 million year-on-year. This included a positive impact from the valuation of a building society portfolio. The portfolio concerned generated a loss of € 54 million in the comparable period but was incorporated into a hedge accounting relationship in accordance with IAS 39 in the second quarter of 2019, as a result of which valuation changes have been largely neutralized since then. Results from fixed income securities trading also increased.
Other net operating income decreased € 18 million to € 112 million, partly due to higher income from residential construction in the Raiffeisen Leasing Group and to the sale of Schuldschein loans in the previous year’s period.
Current income from investments in associates 2 1 90.3% 0 (1) (89.1)%
Levies and special governmental measures (24) (21) 16.9% (6) (5) 22.6%
Impairment losses on financial assets (134) (64) 110.5% (21) (81) (74.1)%
Dividend income decreased € 8 million, due to higher dividend payments in the previous year’s period from unconsolidated subsidiaries and associates not valued at equity.
General administrative expenses declined 2 per cent, or € 12 million, to € 687 million. The reduction was driven by lower advertising expenses, security expenses and travel expenses at head office, principally because of the COVID-19 pandemic. Mainly due to increased operating income, the segment’s cost/income ratio improved to 56.5 per cent.
The NPE ratio remained constant year-on-year at 1.7 per cent. The NPE coverage ratio was 53.4 per cent.
Net fee and commission income 20 (14) – 1 7 (89.6)%
The expense for levies and special governmental measures reported in the segment increased € 15 million to € 72 million. At € 48 million, the expenses for bank levies remained almost unchanged compared to the same period of the previous year. The last installment of the one-off payment for the Austrian bank levy, totaling € 163 million spread over four years, was paid in the reporting period. The one-off payment (€ 41 million in the reporting period) is allocated to the Corporate Center segment. The head office contributions to the resolution fund allocated to the segment amounted to € 25 million.
The segment’s net interest income improved € 10 million year-on-year to minus € 77 million. The improvement was largely due to higher investment income from excess liquidity.
Dividend income, which is mainly from Group units belonging to other segments and therefore of an intra-Group nature, decreased € 97 million to € 650 million. To strengthen the equity base of credit and financial institutions in connection with COVID19, restrictions on dividend distributions were introduced in many countries either through recommendations issued by supervisory authorities or through legislation.
Current income from investments in associates was down € 129 million to € 36 million. The decrease related to a € 117 million higher contribution to profit in the previous year from Raiffeisen Informatik GmbH & Co KG, originating from a valuation gain on and sales proceeds from a listed equity interest (SoftwareONE). This interest has since been sold in its entirety, with no further material effects.
General administrative expenses increased 5 per cent, or € 17 million, to € 370 million, largely as a consequence of the change in the segment allocation of several Group units.
The other result declined € 35 million year-on-year to minus € 101 million. This was primarily caused by a € 27 million goodwill impairment in relation to Raiffeisen Kapitalanlage-Gesellschaft due to the less favorable medium-term business plan as a result of the COVID-19 pandemic and € 50 million in proceeds from the sale of a building in Slovakia in the previous year. Conversely, impairments on investments in associates were € 22 million lower at minus € 74 million. The provision of € 23 million allocated in the previous year for property transfer taxes in Germany was adjusted only by a minor amount in the reporting period.
Statement of comprehensive income 99 Statement of financial position 101 Statement of changes in equity 102 Statement of cash flows 103 Segment reporting 104 Notes 112 Notes to the financial instruments 154 Risk report 196 Other disclosures 228 Regulatory information 263 Recognition and measurement principles 268 Key figures 293 Events after the reporting date 295 Statement of all legal representatives 296 Auditor’s report 297
The disclosures required under Article 434 of EU Regulation No 575/2013 on prudential requirements for credit institutions (Capital Requirements Regulation, CRR) are published on the Internet on the Bank’s website at investor.rbinternational.com.
RBI regards Austria, where it is a leading corporate and investment bank, as well as Central and Eastern Europe (CEE) as its home market. 13 markets in the region are covered by subsidiary banks, the Group also comprises numerous other financial services providers, for instance in the field of leasing, asset management, factoring and M&A. RBI not only offers Austrian and international companies a broad range of products in corporate and investment banking, but also a comprehensive coverage in CEE. Through an extensive branch network, local companies of all sizes as well as private customers are supplied with high-quality financial products. RBI maintains representative offices and service branches in selected Asian and Western European locations to support its business activities. In total, RBI’s around 45,000 employees serve 17.2 million clients at more than 1,800 business outlets located mostly in CEE.
The consolidated financial statements are lodged with the Companies Register in accordance with Austrian disclosure regulations and published in the official journal of the Wiener Zeitung. They were signed by the Management Board on 26 February 2021 and subsequently submitted for the notice of the Supervisory Board.
Items that may be reclassified subsequently to profit or loss (817,623) 330,358
Share of other comprehensive income from companies valued at equity [20] (2,049) 1,328
Non-trading financial assets - mandatorily fair value through profit/loss [16, 32, 44] 821,695 775,937
Hedge of net investments in foreign operations [19, 27] 182,792 (51,089)
Adaptions to the cash flow hedge reserve [19, 27] (2,815) 3,324
Cash, cash balances at central banks and other demand deposits as at 1/1 [13] 24,289,265 22,557,484
Net provisioning for liabilities and charges and impairment losses on financial assets [7, 11, 28] 684,259 337,787
Changes in assets and liabilities arising from operating activities after corrections for non-cash positions: Financial assets - amortized cost [14] (4,192,766) (7,695,175)
Financial assets - fair value through other comprehensive income [15, 32] (78,644) 1,865,421
Non-trading financial assets - mandatorily fair value through profit/loss [16, 32] (45,778) (206,117)
Financial liabilities - designated fair value through profit/loss [25, 32] (186,021) (83,425)
Payments for purchase of: Tangible and intangible fixed assets [21] (435,319) (568,866)
Proceeds from sale of: Tangible and intangible fixed assets [21] 103,268 57,462
Cash, cash balances at central banks and other demand deposits as at 31/12 [13] 33,660,024 24,289,265 1 Other (net) adjustments mainly include the deduction of net interest income and dividend income; the corresponding cash flows are shown under the items interest received, interest paid and dividends received. 2 Previous year figures adjusted due to the disclosure of cash outflows for leases and cash flows from the change in the holdings of own shares in cash flows from financing activities as well as the disclosure of income taxes paid in one single line
Gains/losses from the measurement and derecognition of assets and liabilities [5, 9] (323) 272,443
The Corporate Center segment encompasses services in various areas provided by head office and joint service providers that serve to implement the Group’s overall strategy and that are allocated to this segment to ensure comparability. Therefore, this segment includes the following areas: Liquidity management and balance sheet structure management, equity participation management, the banking operations carried out by head office for financing Group units, the Austrian and international transaction and services business for financial services providers, as well as other companies outside the financial service provider business that are not directly assigned to another segment. Also companies valued at equity are assigned to this segment such as UNIQA Insurance Group AG, Vienna, and LEIPNIK-LUNDENBURGER INVEST Beteiligungs AG, Vienna (holding company with strategic participations in the flour, mill and vending segments).
This segment comprises Belarus, Russia and Ukraine. In Belarus, RBI is represented by a bank and a leasing company. Raiffeisenbank Russia is one of the leading foreign banks in Russia and services both corporate and retail customers. The branch network also offers products targeted toward affluent retail customers and small and medium-sized entities, with the focus on large cities. Furthermore, RBI is active in the issuance business. The product range in Russia is completed by the leasing business. In Ukraine, RBI is represented by a bank and a leasing company and provides a full range of financial services via a tightly knit branch network.
As of the first quarter 2020, the calculation of equity in the segments is based on the equity shown in the statement of financial position. Previously, equity was calculated according to regulatory capital requirements. The prior periods (equity as well as return on equity) have been adapted accordingly.
 Furthermore, the following companies valued at equity have been allocated to the Group Corporates & Markets segment: NOTARTREUHANDBANK AG, Oesterreichische Kontrollbank Aktiengesellschaft, EMCOM Beteiligungs GmbH, Posojilnica Bank e-Gen. These were previously allocated to the Corporate Center segment.
SSeeggmmeenntt EEaasstteerrnn EEuurrooppee:: The segment’s profit after tax declined € 96 million, or 13 per cent, year-on-year to € 639 million. While general administrative expenses were down largely as a result of currency effects, net interest income and net fee and commission income decreased and impairments on financial assets rose. As in the previous year, the Eastern Europe segment was affected by currency volatility in the reporting period. The average exchange rate of the Belarus ruble and Russian ruble depreciated 19 per cent and 14 per cent respectively, while that of the Ukrainian hryvnia fell 7 per cent.
SSeeggmmeenntt GGrroouupp CCoorrppoorraatteess && MMaarrkkeettss:: Profit in the Group Corporates & Markets segment rose € 5 million year-on-year to € 288 million. The main factors behind the improvement in profit were a € 54 million increase in the operating result and a decrease in impairment losses on non-financial assets, primarily real estate (€ 27 million reduction). These were offset by € 70 million higher risk costs, mainly caused by the COVID-19 pandemic.
SSeeggmmeenntt SSoouutthheeaasstteerrnn EEuurrooppee:: The segment’s profit after tax declined 33 per cent, or € 137 million, year-on-year to € 273 million. This was principally due to an increase of € 108 million in risk costs, caused mainly by the macroeconomic deterioration triggered by COVID-19, by structural effects on specific industries and by higher loan defaults, mostly among households.
Employees as at reporting date (full-time equivalents) 9,915 14,480 18,356 2,908
Provisions are recognized when the Group has a present obligation from a past event, where it is likely that it will be obliged to settle, and an estimate of the amount is possible. The level of provisions is the best possible estimate of expected outflow of economic benefits at the reporting date while considering the risks and uncertainties underlying the commitment to fulfill the obligation. Risks and uncertainties are taken into consideration when making estimates. In some cases, lawsuits related to the Consumer Protection Act are filed by a number of customers. In such cases, provisions are based on a statistical approach that takes into account both static data, where relevant, and expert opinions. Additional details are available under (55) Pending legal issues.
It is RBI’s view that the recognition of a financial guarantee generally depends on whether or not the financial guarantee is an integral contractual component of the financial asset. RBI considers guarantees that are assumed when the guaranteed financial assets are originated to be integral contractual components of the financial asset. The financial guarantees granted under direct government programs generally apply to new bridge financing and are therefore treated as integral contractual components.
In addition to the business model test, a test of a financial asset’s cash flows is also necessary in order to allocate it to the measurement categories at amortized cost or at fair value through other comprehensive income. In order to pass the contractual cash flow characteristics test, the asset’s contractual cash flows must consist solely of payments of principal and interest on the principal amount outstanding. This analysis of whether contractual cash flows of financial assets consist solely of interest and principal payments involves critical judgments based on the requirements of IFRS 9. At RBI, these judgments are mainly applied to loans with mismatched interest components, considering the individual contractual features of financial assets. In order to be able to assess whether a financial asset passes the cash flow characteristics test, a benchmark test is necessary. Further explanations are provided in the section on recognition and measurement principles under analysis of contractual cash flow characteristics.
Many of RBI’s markets saw the introduction of various moratoriums that can essentially be described as payment moratoriums. Borrowers receive temporary extensions to make payments toward principal, interest and fees. The payment moratoriums are structured differently depending on local legislation. Borrowers in some countries can choose whether to make use of a payment moratorium, while those in other countries are automatically granted payment moratoriums. Countries have implemented different approaches to both the duration of the payment moratorium and the capitalization of interest during the moratorium period.
According to IFRS 9, changes in payment plans may result in a loss in present value under an individual loan contract, which can generally be accounted for in RBI’s income statement by making a one-time adjustment to the gross carrying amount as a nonsubstantial modification to the contract. For such items, a total amount of minus € 29,415 thousand was posted in 2020. The modification gain or loss is equal to the difference between the gross carrying amount prior to the modification and the net present value of the cash flows of the modified asset, discounted at the original effective interest rate. The income statement shows the modification gain or loss under (9) Other result in the row entitled net modification gains/losses.
All goodwill is tested each year with respect to its future economic benefits based on cash-generating units. An impairment test is conducted as of the balance sheet date if indications of possible impairment arise during the financial year. In 2020, the COVID19 pandemic produced a significant negative change in the economic environment in which the subsidiaries operate. This indication triggered an impairment test for goodwill that arose on first consolidation. Raiffeisen Kapitalanlage-Gesellschaft’s medium-term plan was revised in response to the pandemic, resulting in a goodwill impairment of € 26,864 thousand. For additional information, see (9) Other result and (21) Tangible fixed assets and intangible fixed assets in the notes.
All financial statements of fully consolidated companies prepared in a functional currency other than euro were translated into the reporting currency euro employing the modified closing rate method in accordance with IAS 21. Equity was translated at its historical exchange rates while all other assets, liabilities and the notes were translated at the prevailing foreign exchange rates as of the reporting date. Differences arising from the translation of equity (historical exchange rates) are offset against retained earnings.
Non-trading financial assets - mandatorily fair value through profit/loss 24,577 15,179
Net interest margin went down by 29 basis points due to an increased short-term investment volume and negative currency effects, especially in Eastern Europe. In addition, lower interest rates related to COVID-19 in several markets, which were mainly reflected in lower asset-side-margins, resulted in a decline in net interest margin.
Non-trading financial assets - mandatorily fair value through profit/loss 108 204
Net interest income decreased – mainly due to currency effects – by € 170,723 thousand to € 3,241,344 thousand. Czech Republic posted the largest decline at € 64,555 thousand due to lower interest income from repo business and customer loans caused by key rate cuts. In Russia, the decline in net interest income of € 48,088 thousand was entirely due to currency effects, while a volume-driven increase of 7 per cent was achieved in local currency. In Belarus, lower market interest rates and higher refinancing costs in local currency resulted in a decrease in net interest income of € 20,568 thousand. In Ukraine, there was also a decline in net interest income of € 13,952 thousand due to key rate cuts. In Croatia, the decrease in net interest income of € 6,798 thousand was caused by lower interest rates, especially for corporate customers. Albania reported a decrease of € 4,219 thousand due to lower volumes and interest rates. In Bosnia and Herzegovina, net interest income fell € 4,414 thousand due to lower interest income from customer loans.
Net fee and commission income decreased € 58,631 thousand year-on-year to € 1,737,872 thousand. The main drivers were volume losses due to lockdowns triggered by the pandemic and currency devaluations. In contrast, asset management and custody business benefited from rising transactions and volumes.
Net gains/losses on non-trading financial assets - mandatorily fair value through profit or loss 7,434 41,143
The net trading income and fair value result was up € 110,858 thousand year-on-year. This was in particular due to positive valuation effects – both interest rate and currency driven – shown in the derivatives item. In the comparable period of the previous year, valuation losses of € 30,739 thousand on the interest rate risk of certificates issued had a direct effect on net gains/losses
At Raiffeisen Bausparkasse Gesellschaft m.b.H., portfolio hedge accounting was introduced in the second quarter of 2019. The fair value changes of hedging instruments covered four quarters in 2020 with minus € 75,597 thousand and just three quarters in 2019 with minus € 42,065 thousand. The negative valuation effects of the hedging instruments were recognized in net trading income of Raiffeisen Bausparkasse Gesellschaft m.b.H. in the first quarter of 2019, as at the start of the year hedging was still economic and not under IAS 39 hedge accounting. The further devaluation of the hedging instruments in the reporting year 2020 was attributable to the negative trend in long-term interest rates and is reflected by the appreciation of the hedged loans.
Net expense from allocation and release of other provisions 5,463 (20,803)
In total, gains of € 228,794 thousand were recognized on derivatives in the reporting period in net gains/losses on financial assets and liabilities – held for trading (previous-year period: losses of € 327,794 thousand). Derivatives were used above all to hedge interest rate and currency risks. In the reporting period, the gains on derivatives were largely offset by losses on equity instruments held for trading, which posted a negative change of € 168,155 thousand due to market distortions resulting from the spread of COVID-19. In contrast, the high loss reported in the comparable period of the previous year was largely driven by changes in the Russian ruble exchange rate and in foreign currency exposures at head office, offsetting a significant portion of the (net) currency translation gains.
At RBI, derivative financial instruments are used as hedging instruments for various types of hedge accounting. The current IBOR reform will replace existing benchmark interest rates (IBORs: interbank offered rates) by alternative risk-free interest rates. Currently some uncertainty about the timing and methods of this transition as well as about the continuation of certain benchmark interest rates can be observed.
Gains/losses on derecognition of financial assets and liabilities - not measured at fair value through profit/loss (802) 36,221
Net rental income from investment property incl. operating lease (real estate) 50,299 61,014
Sundry operating income/expenses 26,508 17,024 1 Previous-year figures adapted due to changed allocation
Other net operating income was down € 18,516 thousand year-on-year to € 59,782 thousand. The main reasons were declines in gains/losses from derecognition of financial assets, mainly at head office due to the sale of debt securities and loans (decrease: € 24,382 thousand) in the previous year and in Russia (decrease: € 10,138 thousand). Net income arising from non-banking activities declined € 23,004 thousand due to lower revenues from residential construction in the Raiffeisen Leasing Group. The net expense from allocation and release of other provisions improved due to the release of a provision for a legal case in Slovakia (€ 18,478 thousand), while provisions for legal cases in Romania and at head office had to be allocated in the previous year. The other non-income related taxes went down mainly at head office by € 6,191 thousand and in Hungary by € 4,896 thousand.
Expenses for other long-term employee benefits excl. deferred bonus program (17,308) (5,807)
Other administrative expenses fell 10 per cent, or € 108,492 thousand, to € 985,622 thousand. In addition to the devaluation of the Eastern European currencies, the main driver was the reduction of advertising expenses of € 28,156 thousand due to the COVID-19 pandemic, mainly at head office, in the Czech Republic, in Romania and Slovakia. There were further decreases in office space expenses of € 12,554 thousand, in traveling expenses of € 12,493 thousand, legal and consulting expenses of € 8,957 thousand and security expenses of € 6,850 thousand.
Other administrative expenses included € 11,646 thousand for short-term leases and € 4,709 thousand for leases of low-value assets in accordance with IFRS 16.
Depreciation of tangible and intangible fixed assets increased 2 per cent or € 8,586 thousand. The largest increases were reported at head office and in Hungary, mainly due to software capitalizations.
The decrease of € 32,091 thousand to € 31,124 thousand derived mainly from head office due to a restructuring provision for an optimization program built in the previous year (€ 18,208 thousand). Members of the Management Board are subject in principle to the same regulations as apply to employees. These regulations provide for a basic contribution to a pension fund from the company and an additional contribution, if the employee pays own contributions of the same amount.
Legal, advisory and consulting expenses include fees for the auditors of RBI AG and its subsidiaries which comprise expenses for the audit of financial statements amounting to € 5,532 thousand (2019: € 5,737 thousand) and tax advisory as well as other additional consulting services amounting to € 1,862 thousand (2019: € 1,631 thousand). Thereof, € 2,414 thousand (2019: € 2,667 thousand) relates to the Group auditor for the audit of the financial statements and € 747 thousand (2019: € 767 thousand ) relates to other consulting services.
The allocation to credit-linked provisions for litigation on a portfolio-based calculation amounted to € 60,146 thousand in the reporting period (previous year period: € 83,009 thousand). Poland reported an allocation of € 43,656 thousand (previous year period: € 48,827 thousand) and Croatia of € 13,547 thousand (previous year period: € 19,904 thousand) regarding pending legal issues relating to mortgage loans denominated or linked to foreign currencies. The allocation in Poland was the result of parameter updates for the calculation model. In Romania, the allocation to credit-linked and portfolio-based provisions for litigation regarding proceedings with Consumer Protection Authority related to an alleged misuse of credit terms amounted to € 2,943 thousand after € 14,278 thousand in the previous year.
hereof financial assets - fair value through other comprehensive income (2,598) 397 hereof financial assets - amortized cost (613,500) (192,480)
In the reporting period, net allocation to impairment losses in Stage 1 and 2 amounted to € 314,569 thousand, representing an increase of € 300,998 thousand. The industries most affected were tourism, hotel business, other related industries, automotive industry, air travel, oil & gas, real estate and several consumer good industries. This resulted in higher impairments on loans to nonfinancial corporations of € 176,258 thousand, predominantly in Austria (€ 54,536 thousand), Hungary (€ 23,603 thousand), Slovakia (€ 18,864 thousand), in the Czech Republic (€ 15,834 thousand) and in Bulgaria (€ 14,425 thousand), as well as on loans to households of € 103,316 thousand, primarily in Romania (€ 34,596 thousand), in the Czech Republic (€ 13,172 thousand), in Hungary (€ 12,421 thousand), Poland (€ 12,208 thousand), Bulgaria (€ 6,154 thousand) and Serbia (€ 5,101 thousand).
In the previous year, a provision of € 26,958 thousand for property transfer taxes in Germany was created. This resulted from changes in the ownership structures in previous years. These are related to the merger between Raiffeisen Zentralbank and Raiffeisen Bank International in 2017 and purchases of shares in Raiffeisen Leasing Group in 2012 and 2013. In the reporting period, the provision was slightly adapted.
The reduction in income taxes of € 78,351 thousand was attributable to lower profits in all countries, mainly to decreases of € 22,484 thousand in Russia, € 16,572 thousand in the Czech Republic, € 8,486 thousand in Romania and € 8,073 thousand in Ukraine. In addition, there was an impairment on deferred tax assets of € 25,060 thousand in Poland in the previous year since no usability was to be expected from the medium-term tax planning. Moreover, the RBI group tax allocation to non-consolidated group members increased € 5,533 thousand. In contrast, withholding taxes at head office rose € 18,000 thousand due to increased dividend income mainly from Russia.
The carrying amount of financial assets – amortized cost rose € 6,311,008 thousand compared to year-end 2019. The increase in debt securities of € 4,398,028 thousand mainly resulted from purchases of government bonds at head office and in Slovakia and the Czech Republic. The loan book also increased € 1,912,980 thousand despite large currency depreciations. The rise in short-term lending (up € 2,846,176 thousand) was primarily attributable to head office and Hungary. This increase made up for the decrease in loans to non-financial corporations of € 434,840 thousand and in loans and advances to households of € 498,357 thousand. The decline in loans to non-financial corporations was primarily attributable to the depreciation of the Russian ruble in Russia (down € 1,157,179 thousand) and the Ukrainian hryvnia in Ukraine (down € 381,322 thousand). The head office, in contrast, reported an increase of € 880,799 thousand, mainly from project and real estate financing, while Slovakia recorded an increase of € 124,238 thousand, primarily from real estate financing. Loans and advances to households declined the most in Russia (down € 948,904 thousand) due to currency factors, although this item increased in local currency terms. This item did, however, increase € 335,732 thousand at Raiffeisen Bausparkasse Gesellschaft m.b.H. and € 224,068 thousand in Slovakia. Loans and advances to households increased in local currency terms in almost all markets.
Theoretical income tax expense in the financial year based on the domestic income tax rate of 25 per cent (308,360) (441,697)
Non-recognized taxes from impairments on companies valued at equity (16,893) (24,037)
The large increase in the item other demand deposits at banks was largely driven by head office, which experienced a short-term rise in cash holdings largely due to the increase in long-term funding and utilization of the TLTRO III (Targeted Longer-Term Refinancing Operations) program.
Visa Inc., San Francisco (US), Class A Preferred Stock 23,067 12,530
Medicur - Holding Gesellschaft m.b.H., Wien (AT), company shares 22,437 21,590
Non-trading financial assets – mandatorily at fair value through profit/loss increased € 45,758 thousand largely due to an increase in the government-sponsored lending program in Hungary and in debt securities in Russia; this increase was reduced primarily by fund sales of Valida Group and Raiffeisen Bausparkasse Gesellschaft m.b.H.
The decline in the item financial assets – designated at fair value through profit/loss resulted from sales of bonds at head office as a result of the optimization of the securities portfolio.
Positive fair values of derivatives in micro cash flow hedge 0 5,120
Positive fair values of derivatives in net investment hedge 38,800 0
The change in the item positive fair values of derivatives in net investment hedge is caused by the depreciation of the Russian ruble.
Because of their minor importance in giving a view of the Group’s assets, financial and earnings position, 290 subsidiaries (2019: 309) were not included in the consolidated financial statements.
Österreichische Hotel- und Tourismusbank Gesellschaft m.b.H., Vienna (AT) 31.3% 12,470 10,980
2020 Carrying amount 2020 Carrying amount card complete Service Bank AG, Vienna (AT) 25.0% 10,360 13,631
2020 UNIQA1, 2 in € thousand POSO PSS RIZ1 R-Leasing 30/9/2020
Profit/loss after tax from discontinued operations 0 0 0 0 0
Group's interest in net assets of investee as at 1/1 25,043 83,933 183,272 13,236 374,607
Average discount interest rate (after tax) 6.2% 7.5% 9.1% 6.8% 8.0% 7.9%
Group's interest in net assets of investee as at 1/1 13,631 7,289 149,750 10,756 64,237 10,980
Total comprehensive income attributable to the Group (3,271) (2) 6,509 1,301 3,650 1,958
Group's interest in net assets of investee as at 31/12 19,503 86,680 161,015 15,901 376,014 1 Consolidated financial statements: Profit and equity is after deduction of non-controlling interests. 2 Figures as at 30 September 2020 because UNIQA is a listed company and has not yet published its full 2020 consolidated financial statements. Fair value of the shares held and based on stock exchange price as at 31 December 2020 amounted to € 215,015 thousand (2019: € 305,557 thousand). POSO: Posojilnica Bank eGen, Klagenfurt (AT) PSS: Prva stavebna sporitelna a.s., Bratislava (SK) RIZ: Raiffeisen Informatik GmbH & Co KG, Vienna (AT) R-Leasing: Raiffeisen-Leasing Management GmbH, Vienna (AT) UNIQA: UNIQA Insurance Group AG, Vienna (AT)
Planning period 3 years 5 years 5 years 3 years 5 years 5 years OeKB: Oesterreichische Kontrollbank Aktiengesellschaft, Vienna (AT) PSS: Prva stavebna sporitelna a.s., Bratislava (SK) UNIQA: UNIQA Insurance Group AG, Vienna (AT)
Planning assumptions reflect current external framework conditions and were approved by the Supervisory Board.
Office furniture, equipment and other tangible fixed assets 1,012,881 2,786 (98,025) 135,692 (74,763) 38 978,609
OeKB fulfills two essential functions for the Austrian export industry. Firstly, it is the Republic of Austria’s export credit agency. In this capacity, OeKB assumes guarantees for export transactions and provides export finance via domestic and foreign banks. Secondly, it is an issuer on the capital market. In this capacity, OeKB refinances export loans by issuing debt obligations guaranteed by the Republic of Austria. Its main subsidiaries are Österreichische Hotel- und Tourismusbank (ÖHT) and Oesterreichische Entwicklungsbank (OeEB).
Risk policy is geared to securing a stable return on equity based on a conservative approach to business and operational risks. This is ensured by having an integrated risk management framework installed whose individual components are closely interlinked. Material risks are specified as market, credit, business and operational risk. Market risk is hedged, for example, by using derivatives – mainly swaps – to improve borrowing terms in the money and capital market and to hedge and manage cash flows. Credit risk is limited by strict internal requirements as to the creditworthiness of counterparties (minimum rating).
As it is exclusively engaged in building society business, the bank is exposed to lower credit risk than other credit institutions. Such risk is primarily reduced by a strict collateralization policy. The bank tax that had been introduced in Slovakia was abolished again in the course of 2020. The lowinterest phase has been used so far to actually increase net interest income by strict adjustments to deposit rates. This remains the case in the planning.
The recoverable amount was the same as the carrying amount based on the latest impairment tests of UNIQA Insurance Group AG, Prva stavebna sporitelna a.s. and Oesterreichische Kontrollbank Aktiengesellschaft. This means that changes in the valuations of these companies could result in changes to the carrying amount. If a reasonable possible downside scenario were to occur, the carrying amount of Oesterreichischen Kontrollbank Aktiengesellschaft would fall 13.2 per cent to € 46,810 thousand, Prva stavebna sporitelna a.s. 14.4 per cent to € 37,960 thousand and UNIQA Insurance Group AG 3.3 per cent to € 274,100 thousand.
Land and buildings used by the group for own purpose 531,159 609,291
Brand rights were only recognized for Raiffeisen Bank Aval JSC. The carrying value of the brand was € 7,630 thousand (2019: € 9,972 thousand) and the cumulative impairment loss € 13,565 thousand (2019: € 17,730 thousand). The change was entirely due to currency movements of the Ukrainian hryvnia.
Tangible and intangible fixed assets developed as follows: Cost of acquisition or conversion in € thousand As at 1/1/2020
Land and buildings used by the group for own purpose (456,280) 802 (45,395) 531,159
Cost of acquisition or conversion in € thousand As at 1/1/2019
Land and buildings used by the group for own purpose 1,005,756 (44,779) 29,919 42,183 (21,652) 51,438 1,062,864
Write-ups, amortization, depreciation, impairment Carrying amount in € thousand Cumulative hereof write-ups hereof depreciation/impairment As at 31/12/2019
The item software comprises acquired software amounting to € 500,743 thousand (2019: € 475,769 thousand) and internally developed software amounting to € 173,664 (2019: € 160,275 thousand).
The following table provides a summary of significant planning assumptions and a description of the management approach to identify the values that are assigned to each significant assumption under consideration of a risk assessment.
RBCZ The Czech Republic is a core market for the Group where a selective growth strategy is pursued. A steady improvement of results is assumed as market volume growth is expected at 5 per cent YoY and RBCZ is expected to outperform the market by continuous strong customer acquisition.
An improvement in results is assumed due to projected steady increases in volume and asset allocation.
Increase in discount interest rate 1.0 PP > 5.0 PP 3.6 PP 4.6 PP
Reduction of the growth rate in phase III 1.5 PP > 5.0 PP − − RBCZ: Raiffeisenbank a.s., Prague (CZ) RKAG: Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Vienna (AT)
Raiffeisen Bank International | Annual Report 2020 ware asset may be impaired, then the asset's recoverable amount is calculated. In 2020 impairment losses of € 4,793 thousand were booked for software recognized in Hungary.
Planning period 5 years 5 years 5 years 5 years RBCZ: Raiffeisenbank a.s., Prague (CZ) RKAG: Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Vienna (AT)
Other financial liabilities 434,301 491,814 hereof subordinated financial liabilities 3,005,308 2,725,517 hereof lease liabilities 454,097 453,110
The total change in deposits from banks is largely concentrated at head office. Current accounts/overnight deposits rose € 1,801,948 thousand, of which € 1,622,914 thousand were attributable to higher deposits at the regional Raiffeisen banks. Deposits with agreed maturity rose € 3,232,487 thousand at head office and € 834,682 thousand in Slovakia in particular. The increase was largely driven by the participation of RBI AG and Tatra banka, a.s. in the European Central Bank’s TLTRO III (Targeted Longer-Term Refinancing Operations) program. The carrying amount was € 5,686,263 thousand at the balance sheet date. The expiration of sale and repurchase agreements in Russia (down € 263,755 thousand) and a decrease at head office (down € 185,343 thousand) meant that this item closed the period at € 583,133 thousand.
Deposits from central banks increased, particularly at head office (up € 3,378,883 thousand) and Slovakia (up € 831,838 thousand ), due to participation in the TLTRO III program. Deposits from general governments declined € 235,500 thousand at head office and € 374,957 thousand in Russia. The decrease in Russia was attributable to a Federal Treasury Deposit maturing in February 2020. The change in deposits from banks mainly resulted from an increase in overnight deposits at head office (up € 1,470,472 thousand) and volume- and exchange rate-related declines in Russia (down € 271,404 thousand). The decrease in deposits from other financial corporations was concentrated at head office (down € 439,932 thousand) and in Slovakia (down € 362,468 thousand). In both cases, there were large reductions in deposits with agreed maturity.
Cash and non-cash effects of subordinated financial liabilities in the measurement categories of amortized cost and designated at fair value through profit/loss: in € thousand
Other debt securities issued 9,099,777 7,457,355 hereof convertible compound financial instruments 910,357 1,070,346 hereof non-convertible 8,189,420 6,387,009
Deposits from banks and customers by asset classes: Other financial corporations 9,726,375 10,929,405
Other debt securities issued 90,414 285,034 hereof convertible compound financial instruments 90,414 285,034
Negative fair values of derivatives in micro fair value hedge 42,796 41,132
Negative fair values of derivatives in portfolio hedge amounted to € 344,437 thousand (2019: € 228,311 thousand), having changed € 113,861 thousand. The increase is largely due to the portfolio hedge at Raiffeisen Bausparkasse Gesellschaft m.b.H. related to falling interest rates and rising volumes (up € 56,352 thousand), the reduction in interest rates in the Czech Republic (up € 15,315 thousand) and the implementation of a portfolio hedge in Russia (up € 32,203 thousand).
The item fair value adjustments of the hedged items in portfolio hedge of interest rate risk changed by € 59,677 thousand compared to year-end 2019, from minus € 35,616 thousand to € 24,062 thousand. This was mainly due to the fair value development of the hedged liabilities in portfolio hedges in the Czech Republic, with falling interest rates, particularly for hedged customer deposits in Czech koruna.
Pensions and other post employment defined benefit obligations 203,933 1,151 14,414 (9,435) (10,937) 4,516 203,642
Other commitments and guarantees according to IAS 37 399 0 11,400 0 0 518 12,317
Pensions and other post employment defined benefit obligations 188,567 0 28,212 (2,187) (9,962) (697) 203,933
Other long-term employee benefits 36,376 (260) 5,255 (36) (133) 864 42,066
The Group expects to pay € 365 thousand in contributions to its defined benefit plans in 2020. In the financial year 2019, the Group’s contribution to defined benefit plans was € 394 thousand.
Plan assets developed as follows: Plan assets as at 1/1 49,264 45,534
Pending legal issues and tax litigation 222,115 16 115,522 (49,394) (31,002) (10,221) 247,036 in € thousand 1/1/2019
Pending legal issues and tax litigation 88,777 504 146,716 (26,892) (5,526) 18,535 222,115
The decrease in new measurements in the reporting period resulted from the change of the discount rate and changes in salary trends.
The following table shows the actuarial assumptions used to calculate the net defined benefit obligation: in per cent 2020 2019
The weighted average duration of the net defined benefit obligation was 11.4 years (2019: 13.4 years).
Future pension increase (0.25 per cent change) 3,693 (3,560) 4,363 (4,213)
The defined investment structure is implemented in the two funds named VRG 60 and VRG 7, in which the accrued amounts for RBI are invested, with an investment concept. The weighting of predefined asset classes moves within a range according to objective criteria, which can be derived from market trends. In times of stress, hedges of the equity component are put in place.
Longevity at age 65 for current members aged 45 - males 25.8 25.7
Longevity at age 65 for current members aged 45 - females 28.1 27.9
The following table shows the actuarial assumptions used to calculate the other termination benefits: in per cent 2020 2019
The Group’s insurance business consists of pension products in Croatia. Due to the existence of insurance risk and investment risk in these products it is necessary to apply IFRS 4 for the accounting of the resulting liabilities. All assets related to the provision of pensions products are accounted for under IFRS 9. The table below presents an analysis of the change in insurance contract liabilities: in € thousand Covered by LAT test Not Covered by LAT test Total
Investment risk – The company is exposed to the risk that the return on investment will not exceed the guaranteed interest rate and that it will not be able to make a profit for the pension beneficiaries. The company manages investment risk as well as interest rate risk by actively managing its portfolio.
Parallel shift of the yield curve by 100 basis points 126,339 122,574 3,765 2019 in € thousand Covered by LAT test Scenario Difference
The development of equity is shown in section statement of changes in equity.
The Management Board was further authorized, pursuant to § 65 (1b) of the AktG, to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender, to the full or partial exclusion of shareholders’ subscription rights, and to stipulate the terms of sale. Shareholders’ subscription rights may only be excluded if the own shares are used to pay for a contribution in kind, to acquire enterprises, businesses, operations or stakes in one or several companies in Austria or abroad. This authorization may be exercised in whole, in part or in several partial amounts for one or more purposes by the company, a subsidiary (§ 189a 7 UGB) or by third parties for the account of the company or a subsidiary and remains in force for five years from the date of this resolution, i.e. until 19 October 2025.
The Group manages the risks by reasonable pricing, product design and conducting the liability adequacy test.
The following table presents the effect of a change in mortality of the insuree, an increase in the risk margin and a decrease in the yield curve on the difference between the IFRS 4 provision and the scenario.
Increase in the risk margin by 1.5 percentage points − − −
Pursuant to § 169 AktG, the Management Board has been authorized since the Annual General Meeting of 13 June 2019 to increase the share capital with the approval of the Supervisory Board – in one or more tranches – by up to € 501,632,920.50 by issuing up to 164,469,810 new voting common bearer shares in exchange for contributions in cash and/or in kind (including by way of the right of indirect subscription by a bank pursuant to § 153 (6) of the AktG) by 2 August 2024 at the latest and to fix the offering price and terms of the issue with the approval of the Supervisory Board. The Management Board is further authorized to exclude shareholders’ statutory subscription rights with the approval of the Supervisory Board (i) if the capital increase is carried out in exchange for contributions in kind, or (ii) if the capital increase is carried out in exchange for contributions in cash and the shares issued under the exclusion of subscription rights do not exceed 10 per cent of the company’s share capital (exclusion of subscription rights).
The following table contains the cumulative other comprehensive income of the consolidated equity; non-controlling interests are not included: in € thousand Remeasurements reserve acc. to IAS 19 Exchange differences Net investment hedge Cash flow hedge
Reclassification of the valuation reserve of financial assets 0 0 0 0 in € thousand At fair value OCI Fair value option At equity Total
Items that may be reclassified subsequently to profit or loss 44,576 0 1,328 314,088
Items that may be reclassified subsequently to profit or loss 10,204 0 (2,049) (764,862)
The changes in fair value resulting from changes in RBI's own default risk amounted to € 12,765 thousand in the reporting period. (2019: minus € 21,766 thousand). The difference between the current fair value of these designated liabilities and the contractually agreed payment amount for the date of final maturity amounted to € 314,834 thousand (2019: € 395,118 thousand). There were no significant transfers within equity or derecognition of liabilities measured at fair value in the reporting period.
The following table contains financial information of subsidiaries which are held by the Group and in which material non-controlling interests exist. The amounts reported below refer to the non-controlling interests that were not eliminated.
Net increase in cash and cash equivalents (55,671) (176,653) 416,677 21,786 (27,513)
IAS 19 requires remeasurements of defined benefit plans to be shown in other comprehensive income. This resulted in other comprehensive income of minus € 4,001 thousand in the reporting year (2019: minus € 19,367 thousand), which was attributable to the change in the discount rate.
Currency developments led to a negative effect in the amount of € 1,007,057 thousand in the financial year (2019: € 331,916 thousand). The 31 per cent depreciation of the Russian ruble resulted in a decrease of € 624,591 thousand, while the depreciation of the Ukrainian hryvnia, also 31 per cent, led to a further decrease of € 134,781 thousand. The 35 per cent depreciation of the Belarusian ruble resulted in an additional decline of € 103,855 thousand. The Hungarian forint’s 10 per cent depreciation resulted in a further decrease of € 69,668 thousand.
Net increase in cash and cash equivalents 182,529 85,847 151,371 6,017 (95,734)
Based on the requirements of the ECB and national supervisory authorities, there are currently payment restrictions in all markets in which RBI operates, with the exception of Russia and Ukraine.
In addition, the fair value of the embedded options is calculated for the living loan portfolio, and the method applied is based on the segment (i.e. retail and non-retail). The measurement of the embedded options in the retail segment is based on behavioral modeling (e.g. linear regression/moving twelve-month average of prepayment rates). The measurement of embedded options in loans in the non-retail segment is based on the assumption that the customer will behave in an entirely rational manner. The embedded options in non-retail loans such as prepayment, disbursement and replenishment are replicated with swaptions and measured using the trinomial tree Hull-White structural model. The Black model, which is based on the log-normal distribution of yields, is generally used to measure interest rate options (caps and floors). As we are in a negative interest rate environment, the shifted log-normal Black model is used to measure interest rate options. It is based on a displaced diffusion model (log-normal distribution with a shift in interest rates).
If a market value is used and the market cannot be considered to be an active market in view of its restricted liquidity, the underlying financial instrument is assigned to Level II of the fair value hierarchy. If no market prices are available, valuation models based on observable market data are used to measure these financial instruments. These observable market data are mainly reproducible yield curves, credit spreads and volatilities. The Group generally uses valuation models which are subject to an internal audit by the Market Risk Committee in order to ensure appropriate measurement parameters.
The DVA is determined by the expected negative exposure and by RBI's credit quality and represents the value adjustment for own probability of default. The method of calculation is similar to that for the CVA, but the expected negative market value is used instead of the expected positive market value. Instead of the expected positive exposures, expected negative exposures are calculated from the simulated future aggregated counterparty market values; these represent the Group’s expected liability to the counterparty at the respective future points in time. Values implied by the market are also used to calculate RBI’s probability of default. Direct CDS quotations are used where available. If no CDS quotation is available, RBI’s probability of default is calculated by assigning the own rating to a sector and rating-specific CDS curve.
Assets 2020 2019 in € thousand Level I Level II Level III Level I Level II Level III
Financial assets - fair value through other comprehensive income 3,568,232 1,066,624 134,330 3,912,452 681,391 187,512
Financial assets - held for trading 88 0 (8) 41,589 (41,610)
Financial assets - designated fair value through profit/loss 6 0 0 11,566 0
Movements of financial instruments valued at fair value between Level I and Level II
If a market value is used and the market cannot be considered to be an active market in view of its restricted liquidity, the underlying financial instrument is assigned to Level II. Financial instruments for which no market prices are available are measured on the basis of market data such as yield curves, credit spreads and implicit volatilities as reproducible, observable market parameters.
Financial assets - held for trading 58 0 0 0 116
Financial assets - designated fair value through profit/loss 2,143 0 0 (4) 13,710
Financial liabilities - held for trading (381) 0 0 (6,838) 41
Forward foreign exchange contracts 76 DCF method Interest rate curve 10 - 30%
Sensitivity of the fair value of financial assets (Level III) and liabilities measured at fair value
The table below shows the impact of changing certain reasonably possible assumptions for Level III financial assets measured at fair value. In estimating the impact mainly changes in credit spreads for bonds and loans and market values of comparable equities are relevant. For bonds and loans an increase (decrease) in credit spread of 100 basis points (75 basis points) leads to a corresponding decrease (increase) in fair value. For unquoted equity instruments an increase (decrease) in price of 10 per cent leads to a corresponding increase (decrease) in fair value.
Financial assets 2020 Carrying amount Fair value changes in € thousand Level III Positive Negative 2020 Carrying amount Fair value changes in € thousand Level III Positive Negative
In RBI Group, no material amounts of Level III financial liabilities currently exist and as a result no sensitivity analysis is disclosed. This disclosure is intended to illustrate the potential impact of the relative uncertainty in the fair value of financial instruments for which valuation is dependent on unobservable input parameters. However, it is unlikely in practice that all unobservable parameters would be simultaneously at the extremes of their ranges of reasonably possible alternatives. Hence, the estimates disclosed above are likely to be greater than the true uncertainty in fair value at the balance sheet date. Furthermore, the disclosure is neither predictive nor indicative of future movements in fair value.
The financial instruments in the following table are not managed on a fair value basis and are therefore not measured at fair value in the statement of financial position. For these instruments the fair value is calculated only for the purposes of providing information in the notes and has no impact on the consolidated statement of financial position or on the consolidated income statement. With the introduction of IFRS 9, the calculation of the fair value of receivables and liabilities not reported at fair value was reclassified and, among other things, input factors are also used in the models which are not observable on the market, but which have a significant influence on the calculated value. A simplified fair value calculation method for retail and non-retail portfolios is applied for all short-term transactions (transactions with maturities up to three months). The fair value of these short-term transactions will be equal to the carrying amount of the product. For the other transactions the methodology as described in the section entitled Fair value of financial instruments reported at fair value is applied.
According to IFRS 13 it is necessary to disclose information that helps users of its financial statements assess recurring fair value measurements using significant unobservable inputs (Level III). The effect of these measurements on profit or loss and other comprehensive income for the period must be disclosed separately. This means for recurring fair value measurements categorized within Level III of the fair value hierarchy of financial assets and financial liabilities, if changing one or more of the unobservable inputs to reflect reasonably possible alternative assumptions would change fair value significantly, an entity shall state that fact and disclose the effect of such changes.
Deposits from banks and customers1 0 0 130,684,841 130,684,841 130,500,821 184,020
Cash, cash balances at central banks and other demand deposits 0 33,660,024 0 33,660,024 33,660,024 0
Cash, cash balances at central banks and other demand deposits 0 24,289,265 0 24,289,265 24,289,265 0
The following table was prepared in accordance with § 51 (13) BWG and shows the nominal amount and provisions for offbalance -sheet liabilities from commitments and financial guarantees under IFRS 9: 2020 Nominal amount Provisions for off-balance sheet items according to IFRS 9 in € thousand Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 2019 Nominal amount Provisions for off-balance sheet items according to IFRS 9 in € thousand Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
The category unrated includes financial assets for several retail customers for whom no ratings are available. The rating is therefore based on qualitative factors.
2019 Stage 1 Stage 2 Stage 3 Total in € thousand 12-month ECL Lifetime ECL Lifetime ECL
Nominal values of off-balance-sheet commitments by rating categories and stages: 2020 Stage 1 Stage 2 Stage 3 Total in € thousand 12-month ECL Lifetime ECL Lifetime ECL
The category unrated includes off-balance sheet commitments for several retail customers for whom no ratings are available. The rating is therefore based on qualitative factors.
Other - Credit contracts, commodities and other contracts 2,286,477 11,781 (103,799)
Financial assets - fair value through other comprehensive income1 0 4,555,355 0
Financial assets - designated fair value through profit/loss 2,275,832 0 0
Approximately two thirds of collateral which can be considered by RBI relate to loans collateralized by immovable property and of this more than 70 per cent is residential immovable property. Other sources of collateral include guarantees (15 per cent) and collateral from reverse repos and securities lending (22 per cent).
The following table shows an analysis of the default risk from derivative transactions, most of which are OTC contracts. Default risk can be minimized by the use of settlement houses and collateral in most cases.
Financial assets - fair value through other comprehensive income1 0 4,615,934 0
Non-trading financial assets - mandatorily fair value through profit/loss 820,564 0 398,214
The measurement of impairment for expected credit loss on financial assets measured at amortized cost and fair value through other comprehensive income is an area that requires the use of complex models and significant assumptions about future economic conditions and payment behavior. Significant judgments are required in applying the accounting requirements for measuring expected credit losses, inter alia:  Determining criteria for significant increase in credit risk  Choosing appropriate models and assumptions for the measurement of expected credit losses  Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated expected credit losses  Establishing groups of similar financial assets for the purposes of measuring expected credit losses.
Loan commitments, financial guarantees and other commitments 325,997 38,371 287,626 (86,777)
The definition of default used to calculate expected credit losses is the same definition of default used for internal credit risk management practices. Default is assessed by referring to quantitative and qualitative triggers. Firstly, a borrower is considered to be defaulted if they are assessed to be more than 90 days past due on a material credit obligation. No attempt is made to rebut the presumption that financial assets which are more than 90 days past due are to be shown in Stage 3. Secondly, a borrower is considered to be defaulted if they meet the unlikeliness to pay criteria, which indicate that the borrower is in significant financial difficulty and unlikely to repay any credit obligation in full. The default definition has been applied consistently to model the Probability of Default (PD), Exposure at Default (EAD) and Loss given Default (LGD) throughout RBI’s expected loss calculations. A credit obligation is considered to no longer be in default after a probation period of minimum three months (six months after a distressed restructuring in retail), where during the probation period the customer demonstrated good payment discipline and no other indication of unlikeliness to pay was observed.
In the limited circumstances where some inputs are not fully available grouping, averaging and benchmarking of inputs is used for the calculation.
In the limited circumstances where some inputs are not fully available alternative recovery models, benchmarking of inputs and expert judgment is used for the calculation.
For retail portfolios, if the borrower meets one or more of the following criteria:  Forbearance  Default of other exposure of the same customer (PI segment)  Holistic approach - Applicable for cases where new forward-looking information becomes available for a segment or portion of the portfolio and this information is not yet captured in the rating system. If such cases are identified, management measures this portfolio with lifetime expected credit losses (as a collective assessment).
 The assessment of significant increase in credit risk incorporates forward-looking information and is performed on a monthly basis at an individual transaction level for all retail portfolios held by RBI.
Different models have been used to estimate the loss given default of outstanding lending amounts and these can be grouped into the following categories:  Sovereign: The loss given default is found by using market implied sources.  Corporate customers, project finance, financial institutions, local and regional governments, insurance companies: The loss given default is generated by discounting cash flows collected during the workout process. Forward-looking information is incorporated into the loss given default using the Vasicek model.
These economic variables and their associated impact on the probability of default, loss given default and exposure at default vary by category type. Forecasts of these economic variables (the base economic scenario) are provided by Raiffeisen Research on a quarterly basis and provide the best estimate view of the economy over the next three years. The set of forward-looking information also includes the credit clock used for improvement of the regression which reproduces the current state of the credit cycle and the derived outlook of the credit cycle development. After three years, to project the economic variables for the full remaining lifetime of each instrument, a mean reversion approach has been used, which means that economic variables tend to either a long-term average rate or a long-term average growth rate until maturity. The impact of these economic variables on the probability of default, loss given default and exposure at default has been determined by performing statistical regression to understand the impact changes in these variables have had historically on default rates and on the components of loss given default and exposure at default.
In addition to the base economic scenario, Raiffeisen Research also estimates an optimistic and a pessimistic scenario to ensure non-linearities are captured. RBI has concluded that three or fewer scenarios appropriately capture non-linearity. Expert judgment on idiosyncratic risks has also been applied in this process on the level of Raiffeisen Research in coordination with RBI Group risk management, resulting in selective adjustments to the optimistic and pessimistic scenarios. In case of a potential negative or positive forecast bias of selected macroeconomic indicators a potential bias correction might be performed on a single country level. In this respect the range of possible outcomes which is representative for each chosen scenario is taken into account. The probability -weighted expected credit losses are determined by running each scenario through the relevant expected credit loss (ECL) model and multiplying it by the appropriate scenario weighting.
Unemployment Full-Year 2021 Full-Year 2022 Full-Year 2023 Scenario Q4 2019 Q4 2020 Change Q4 2019 Q4 2020 Change Q4 2020
The COVID-19 pandemic necessitated post-model adjustments, as the ECL models do not fully capture the speed of the changes and the depth of the economic effects of the virus (e.g. the collapse in GDP in the second quarter of 2020 following the outbreak of the pandemic and the measures taken by governments to tackle it). COVID-19 related post-model adjustments reflected the collective impact on the sectors that were especially hard hit by the pandemic: tourism, hotels, further related industries as well as automobile, air travel, oil and gas, real estate and some consumer goods industries. The effects were due to demand shock, supply chain disruptions and crisis containment measures. The related post-model adjustments involve a qualitative assessment of exposures for the expected significant increase in credit risk and their subsequent transfer from Stage 1 to Stage 2. The criteria for the identification of such exposures were predominantly based on the above listed industries (for SMEs) and employment industries (for households) and further refined, where relevant, with information related to the application of the specific moratorium measures. As the adjustments to the expected credit losses are temporary and designed to adequately reflect the current risk situation of customers, it will take some time before a complete picture of the impact of COVID-19 and subsequent measures on individual customers emerges.
The majority of other post-model adjustments related to Russian corporate exposures to cover possible losses in connection with future sanctions. They also reflected slightly higher expected defaults on mortgage loans due to government-imposed interest rate clauses for retail customers in the Czech Republic and model adjustments for Croatia as a result of changed market expectations regarding the debt-to-income ratio.
Czech Republic Base 3.8% 4.0% 0.2 PP 2.2% 3.0% 0.8 PP 3.0%
In the base case it is assumed that the introduction of COVID-19 vaccinations will improve the economic outlook over the year 2021, with risks of setbacks still in the first half of 2021, but more stability and growth in the second half of the year, when the vaccinations are more widely available and a degree of normalization of economic life can be achieved. However, expected growth in 2021 only partly compensates for the slump in 2020 and pre-crisis levels are reached in the base case during 2022 at the earliest for most countries.
Post-model adjustments to expected credit loss allowance estimates are adjustments which are used in circumstances where existing inputs, assumptions and model techniques do not capture all relevant risk factors. Existing inputs, assumptions and model techniques might not capture all relevant risk factors due to transient circumstances, insufficient time to appropriately incorporate relevant new information into the rating or re-segmentation of portfolios and when individual lending exposures within a group of lending exposures react to factors or events differently than initially expected. The emergence of new macroeconomic, microeconomic or political events, along with expected changes to parameters, models or data that are not incorporated in current parameters, internal risk rating migrations or forward-looking information are examples of such circumstances. In general RBI units use post-model adjustments to allowances for expected credit losses only as an interim solution. In order to reduce the potential for bias post-model adjustments are of a temporary nature and in general valid for no longer than one to two years. All material adjustments are authorized by the Group Risk Committee (GCM). From an accounting point of view all post-model adjustments are based on collective assessment, but do not necessarily result in a change in expected credit losses between the stages.
2019 Accumulated impairment (Stage 1 and 2) in € thousand Simulated pessimistic scenario Point in time component Forward looking component
The tables below show the impact of staging on RBI's accumulated impairment for financial assets by comparing the reported amounts accumulated for all performing assets subject to impairment with the special case where all accumulated impairment is measured based on twelve-month expected losses (Stage 1). For non-retail exposures a split has been made into industries which are expected to have a high, moderate or low expected loss impact due to the COVID-19 crisis. The industries which are expected to be highly impacted by COVID-19 are tourism, hotels and related industries as well as automobile, air travel, oil and gas, real estate and some consumer goods industries.
(25/50/25%) Additional amounts in Stage 2 2019 Accumulated impairment (Stage 1 and 2)
in € thousand Pessimistic scenario Weighted average Increase in provisions due to pessimistic scenario
Loans and debt securities are written-off (either partially or fully) where there is no reasonable expectation of payment or recovery. This happens when the borrower no longer has income from operations and collateral values cannot generate sufficient cash flows to repay amounts subject to impairment. For the exposure of companies in bankruptcy, loans are written down to the value of the collateral if the company no longer generates cash flows from its operating business. The retail business takes into account qualitative factors. In cases where no payment has been made for one year, the outstanding amounts are written-off even though impaired assets may remain subject to enforcement activities. For the exposure of companies in gone concern cases, loans are written down to the value of the collateral if the company no longer generates cash flows from its operating business. The retail business takes into account qualitative factors. In cases where no payment has been made for one year, the outstanding amounts are written-off.
Accumulated impairment 2020 2019 in € thousand Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3
Accumulated impairment 2020 2019 in € thousand Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 1 Austria mainly includes the business of the head office and Raiffeisen Bausparkasse Gesellschaft m.b.H. Other also includes any consolidation effects.
RBI’s credit portfolio is well diversified in terms of type of customer, geographical region and industry. Single name concentrations are also actively managed (based on the concept of groups of connected customers) by limits and regular reporting. As a consequence, portfolio granularity is high. The following tables show the financial assets – amortized cost based on the respective counterparties and stages. This reveals the bank’s focus on non-financial corporations and households: Gross carrying amount 2020 2019 in € thousand Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3
ECL coverage ratio 2020 2019 Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3
The following table shows the gross carrying amount and impairment of the financial assets – amortized cost and financial assets – fair value through other comprehensive income that have moved in the reporting period from expected twelve-month losses (Stage 1) to expected lifetime losses (Stages 2 and 3) or vice versa: 2020 Gross carrying amount Impairment ECL Coverage Ratio in € thousand 12-month ECL Lifetime ECL 12-month ECL Lifetime ECL 12-month ECL Lifetime ECL
2019 Gross carrying amount Impairment ECL Coverage Ratio in € thousand 12-month ECL Lifetime ECL 12-month ECL Lifetime ECL 12-month ECL Lifetime ECL
The increase in expected credit losses arising from the measurement of the loss allowance moving from twelve-month expected credit losses to lifetime losses was € 466,633 thousand (2019: € 269,552 thousand). The decrease in expected credit losses arising from the measurement of the loss allowance moving from lifetime losses to twelve-month expected credit losses was € 59,978 thousand (2019: € 102,138 thousand).
Changes due to change in credit risk (net) (46,611) 11,938 389,105 354,432
Stage 1 Stage 2 Stage 3 Total in € thousand 12-month ECL Lifetime ECL Lifetime ECL
Loan commitments, financial guarantees and other commitments given 45,072 58,710 70,674 0 174,455 2019 Stage 1 Stage 2 Stage 3 Total in € thousand 12-month ECL Lifetime ECL Lifetime ECL
Changes due to modifications without derecognition (net) 71 (252) 77 39 (66)
2020 in € thousand Stage 1 Stage 2 Stage 3 POCI Total
Gross carrying amount of modified assets as of 31/12, which moved to Stage 1 during the year − 25,451 0 0 25,451 2019 in € thousand Stage 1 Stage 2 Stage 3 POCI Total
Some of the agreements are not set-off in the statement of financial position. This is because they create, for the parties to the agreement, a right of set-off of recognized amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Group or the counterparties or following other predetermined events. In addition, the Group and its counterparties do not intend to settle on a net basis or to realize the assets and settle the liabilities simultaneously. The Group receives and gives collaterals in the form of cash and marketable securities.
Repurchase, securities lending and similar agreements (legally enforceable) 13,116,578 0 13,116,578 12,926,414 0 190,164
In 2020, assets which were not subject to legally enforceable netting agreements amounted to € 150,678,827 thousand (2019: € 138,960,937 thousand), of which an immaterial part was accounted for by derivative financial instruments and cash balances from reverse repo business. Liabilities which were not subject to legally enforceable netting agreements totaled € 148,606,030 thousand in 2020 (2019: € 135,614,259 thousand), of which only an immaterial part was accounted for by derivative financial instruments and cash deposits from repo business.
The change since the start of the year from minus € 1,940 thousand to minus € 40,836 thousand was mainly due to the introduction of COVID-19 measures in countries in which RBI operates as of the end of March 2020. Because interest unpaid due to payment holidays permitted under the legislative measures is not allowed to result in compound interest, the gross carrying amount of the affected loans was reduced, which led to net modification losses.
Net modifications gains/losses of financial assets (25,545) (12,960) (2,032) (298) (40,836)
Amortized cost before the modification of financial assets 4,143,521 2,193,967 277,015 55,736 6,670,239
Amortized cost before the modification of financial assets 1,832,152 170,822 48,542 3,521 2,055,038
Reverse repurchase, securities lending and similar agreements (legally enforceable) 801,712 0 801,712 792,965 0 8,747
Synthetic Transaction EIF Western Balkans EDIF Croatia 1 Junior tranche held in the Group 2 Junior tranche held in the Group 3 The senior tranche has fully amortised, while the remaining contractual amount of the externally placed junior tranche is marginally larger than the amount of the securitized portfolio 4 Outstanding portfolio (securitized and retained) SME: Small and medium-sized enterprises
As part of the EaSI initiative, Raiffeisenbank S.A., Bucharest, signed a portfolio guarantee agreement which was funded by the EU and which, like the JEREMIE initiatives, is aimed at providing access to finance for small and medium-sized enterprises.
As part of the COSME initiative, Raiffeisenbank S.A., Bucharest, signed a portfolio guarantee agreement in 2017, which was funded by the EU and which, like the JEREMIE initiatives, is aimed at providing access to finance for small and medium-sized enterprises. Significant risk transfer for this transaction is being recognized from year-end 2020 onwards.
Financial assets - fair value through other comprehensive income 45,497 0 45,497 47,750 0 47,750
The synthetic transaction, ROOF CRE 2019, is split into a senior, a mezzanine and a junior tranche. The credit risk of the mezzanine tranche in the amount of € 94,700 thousand is guaranteed by an institutional investor, while the credit risk of the junior and senior tranches is retained.
Financial assets - fair value through other comprehensive income 155,025 0 155,025 153,089 0 153,089 2019 Transferred assets Associated liabilities in € thousand Carrying amount hereof securitizations hereof repurchase agreements Carrying amount hereof securitizations hereof repurchase agreements
The Group received collaterals which can be sold or repledged even if no default occurs in the course of reverse repo business, securities lending business, derivative and other transactions. For information on asset encumbrance we refer to the Group’s Pillar 3 disclosures which are published pursuant to EU 575/2013 Capital Requirements Regulation (CRR) Part 8.
Financial assets - designated fair value through profit/loss 22,068 83,295 31,812 279,423 40,570
Financial assets - held for trading 611,967 394,808 354,124 1,551,105 1,487,746
Securities and other financial assets accepted as collateral: Securities and other financial assets accepted as collateral which can be sold or repledged 14,310,273 12,095,114 hereof which have been sold or repledged 2,086,244 2,365,079
Financial assets - fair value through other comprehensive income 130,448 483,755 733,418 2,393,372 1,028,192
Non-trading financial assets - mandatorily fair value through profit/loss 262,796 28,071 26,398 82,797 421,634
RBI applies various types of hedge accounting with the aim of reducing interest rate risk and volatility in the income statement. Depending on the risk to be hedged, both fair value and cash flow hedge accounting are used. Both types may be modeled at the micro level and in portfolios. A further type of hedge accounting hedges the net investment risk against fluctuations in the rate of the Russian ruble, the Romanian leu, the Czech koruna, the Croatian kuna and the Hungarian forint.
Financial liabilities - held for trading 94,293 479,101 680,365 2,839,396 1,695,656
Change in the value of the hedging instruments recognized in other comprehensive income
Active risk management is a core competency of RBI. In order to effectively identify, measure, and manage risks the Group continues to develop its comprehensive risk management system. Risk management is an integral part of overall bank management. Particularly, in addition to legal and regulatory requirements, it considers the nature, scale, and complexity of the Group’s business activities and the resulting risks. The figures below refer to the regulatory scope of consolidation pursuant to CRR. In terms of risk, the companies in the IFRS scope of consolidation that are not included therein are covered by the participation risk.
The central Group Risk Controlling division assumes the independent risk controlling function required by banking law. Its responsibilities include developing the Group-wide framework for overall bank risk management (integrating all risk types) and preparing independent reports on the risk profile for the Supervisory Board’s Risk Committee, the Group Management Board and the heads of individual business units. It also measures the required risk coverage capital for different Group units and calculates the utilization of the allocated risk capital budgets in the internal capital adequacy framework.
The Market Risk Committee controls market risks arising from trading and banking book transactions and establishes corresponding limits and processes. Particularly, it relies on profit and loss reports, the risks calculated and the limit utilization, as well as the results of scenario analyses and stress tests with respect to market risks.
The Group Asset/Liability Committee assesses and manages the statement of financial position structure and liquidity risk and defines the standards for internal funds transfer pricing. In this context it plays an important role in planning long-term funding and hedging structural interest rate and foreign exchange risks. The Structural FX Committee is a sub-committee of the Group Asset/Liability Committee and manages the currency risk inherent in the Group’s capital position.
The Group Operational Risk Management & Controls Committee comprises representatives of the business areas (retail, market and corporate customers) and representatives from Compliance (including financial crime), Internal Control System, Operations, Security, IT Risk Management and Risk Controlling, under chairmanship of the CRO. This committee is responsible for managing the Group’s operational risk (including conduct risk). It derives and sets the operational risk strategy based on the risk profile and the business strategy and makes decisions regarding actions, controls and risk acceptance.
Quality assurance with respect to risk management refers to ensuring the integrity, soundness, and accuracy of processes, models, calculations, and data sources. This is to ensure that the Group adheres to all legal requirements and that it can achieve the highest standards in risk management-related operations.
The Group uses a confidence level of 99.90 per cent to calculate economic capital. In compliance with the ICAAP Directive published by the European Central Bank, the tier 2 capital has no longer been used to calculate the internal capital since year-end 2019.
The Risk Appetite Framework (RAF) limits the Group’s overall risk in accordance with the Group’s strategic business objectives and allocates the risk capital calculated to the different risk categories and business areas. The primary aim of the RAF is to limit risk, particularly in adverse scenarios and for major singular risks in such a way as to ensure compliance with regulatory minimum ratios. The Risk Appetite Framework is, therefore, closely linked with the ICAAP and the ILAAP (Internal Liquidity Adequacy Assessment Process) and sets the concentration risk limits for the risk types identified as significant in the risk assessment. There is also a connection to the recovery plan as the risk capacity and risk tolerance limits in the RAF are aligned with the corresponding trigger monitoring limits. In addition, the risk appetite decided by the Management Board and the Group’s risk strategy and its implementation are reported regularly to the Supervisory Board’s Risk Committee.
Regional allocation of economic capital by Group unit domicile: in € thousand 2020 Share 2019 Share
The integrated stress test focuses primarily on the capital ratios at the end of the multi-year observation period. These should not fall below a sustainable level, meaning that they should not require the bank to substantially increase capital or to significantly reduce its business activities. The current minimum amount of capital is therefore determined by the size of a potential economic downturn. The downturn scenario assumed incorporates recognition of the necessary loan loss provisions and potential pro-cyclical effects (which increase the minimum regulatory capital requirement) along with the impact of foreign exchange rate fluctuations and other valuation and earnings effects. Regulatory changes that are already known are considered for the planning period.
Cash, cash balances at central banks and other demand deposits 27,986,172 19,761,386
Non-trading financial assets - mandatorily at fair value through profit / loss 821,695 775,937
Other commitments given 3,655,626 3,297,568 1 Items on the statement of financial position contain only credit risk amounts
The detailed credit portfolio analysis shows the breakdown by rating category. Customer rating assessments are performed separately for different asset classes using internal risk classification models (rating and scoring models), which are validated by a central organizational unit. The default probabilities assigned to individual rating grades are calculated separately for each asset class. As a consequence, the default probabilities relating to the same ordinal rating grade (e.g. good credit standing 4 for corporate customers and banks and good credit standing A3 for sovereigns) are not directly comparable between asset classes.
Credit exposure by asset classes (rating models): RBI has implemented the corresponding regulatory requirements regarding moratoriums in the context of retail customers (private individuals, small and medium-sized entities). The behavioral components of the rating systems were adjusted for the duration of the moratoriums in order to limit unjustified effects from the public moratoriums (e.g. in some cases default day counters or arrears were set to 0 by the moratoriums, if no payments were foreseen for the duration of the moratoriums). For non-retail customers, rating downgrades were carried out in all cases where necessary from an economic and financial perspective. At the height, loans amounting to € 10,657,958 thousand were subject to a moratorium. While the moratoriums in some markets had already expired, a volume of just under € 2,866,436 thousand still remained as at the reporting date, primarily in Hungary, where they had been extended until the middle of 2021. Of the € 2,866,436 thousand, an amount of € 1,945,435 thousand related to non-financial corporations and € 884,692 thousand to households.
Britain. Rating grade 3 registered an increase of € 2,957,674 thousand to € 16,791,905 thousand, which in the credit business was due to the rating downgrade of customers in Austria, Germany, France and Russia from rating grade 2. This development was offset by lower amounts for credit financing in Austria and Luxembourg. In addition, repo transactions declined as a result of the rating downgrade of customers in Great Britain to rating grade 4. The increase of € 5,565,877 thousand in rating grade 4 to € 18,602,807 thousand was due to credit financing in Austria and Germany. This increase was partly offset by the depreciation of the Russian ruble. Facility financing in Austria, Russia and Germany also increased, partly due to rating migrations from rating grades 2 and 3. In addition, an increase in the bond portfolio in Russia and rating improvements of Russian, German and Austrian corporate customers from rating grade 5 were also responsible for the increase in rating grade 4. Rating grade 5 registered a € 525,864 thousand decrease to € 15,884,027 thousand, due to repo transactions in the USA, to facility financing and also guarantees issued in Russia and Slovakia. There were also rating improvements of individual Russian customers to rating grade 4. The depreciation of the Russian ruble and of the Ukrainian hryvnia also had a negative effect. In addition to rating improvements from rating grade 6, the decline in rating grade 5 was offset by credit financing in Germany and the Czech Republic as well as by documentary credits in the United Arab Emirates and Germany. Besides the aforementioned rating migrations, credit financing in Russia, the Ukraine and in the Czech Republic were responsible for the € 3,196,242 thousand decline in rating grade 6 to € 11,314,424 thousand. The currency depreciations of the Russian ruble, the Ukrainian hryvnia and the Czech koruna also had an impact on rating grade 6.
in € thousand 2020 Share 2019 Share 8 Weak credit standing/sub-standard 1,166,961 1.4% 765,700 0.9%