Credit exposure across all asset classes increased € 4,381,586 thousand compared to year-end 2017 to € 174,298,522 thousand. The largest decrease of € 8,106,910 thousand to € 48,378,615 thousand was reported in Central Europe, due to the sale of the core banking operations in Poland. The largest increase of € 5,167,513 thousand to € 39,683,466 thousand occurred in Austria, primarily as a result of deposits with the Austrian National Bank and credit financing. The increase was partially offset by a decline in overdraft facilities. The € 2,252,460 thousand increase in Other European Union to € 26,804,475 thousand was due to bank deposits, credit and facility financing, and money market business. However, the increase was offset in part by lower repo business in Great Britain and Germany. In France, credit and facility financing as well as money market and repo transactions led to an increase of € 1,206,287 thousand. Southeastern Europe reported a € 1,990,508 thousand increase to € 28,434,979 thousand due to increases in credit and facility financing, bonds and repo business in Romania, and to an increase in retail business in Bulgaria and Romania. However, the increase was partially offset by a decrease in the minimum reserve held at the Romanian National Bank. Despite the depreciation of the Russian ruble, an increase in the portfolio of Russian government bonds, credit and facility financing, guarantees issued, and money market business as well as the appreciation of the Ukrainian hryvnia resulted in a € 2,823,238 thousand increase in Eastern Europe to € 22,679,320 thousand.
The € 7,135,634 thousand increase in euro exposure to € 95,469,635 thousand was mainly driven by deposits with the Austrian National Bank and credit financing. With regard to Russian ruble exposure, credit financing and an increase in the bond portfolio resulted in growth of € 2,236,366 thousand to € 12,968,889 thousand. The sale of the core banking operations in Poland was responsible for the decline in Polish zloty exposure. The total exposure of RBI Poland Branch, Warsaw, mainly comprised € 2,362,449 thousand in Swiss francs, € 738,463 thousand in euros, and € 257,477 thousand in Polish zloty.
Retail trade except repair of motor vehicles 3,982,905 2.3% 3,866,195 2.3%
Electricity, gas, steam and hot water supply 3,269,289 1.9% 2,915,441 1.7%
Extraction of crude petroleum and natural gas 493,631 0.3% 594,179 0.3%
The increase in exposure was essentially fueled by an increase of € 5,728,851 thousand in banking and insurance to € 50,710,556 thousand, the main driver of that increase being greater exposure to central banks in Austria and Russia. In contrast, exposure to public administration and defense and social insurance institutions was down € 2,425,217 thousand, due mainly to the sale of the core banking operations in Poland.
The Group invests in structured products. The total exposure to structured products showed a nominal amount of € 594,999 thousand (2017: € 804,956 thousand) and a carrying amount of € 580,996 thousand (2017: € 769,650 thousand). These are mainly investments in asset-backed securities (ABS), asset-based financing (ABF), and in some cases collateralized debt obligations (CDO). A total of 53.4 per cent of the structured credit portfolio (2017: 60.3 per cent) contains loans and advances to European customers, and 13.7 per cent (2017: 41.9 per cent) has been rated A or better by external rating agencies. The yearon -year decline is attributable to expired instruments as well as rating downgrades. The downgrades were due to the rating methods used by the rating agencies rather than to a deterioration in performance.
All market risks are measured, monitored, and managed on Group level. The Market Risk Committee is responsible for strategic market risk management issues. It is responsible for managing and controlling all market risks in the Group. The Group’s overall limit is set by the Management Board on the basis of the risk-taking capacity and income budget. This limit is apportioned to sublimits in coordination with business divisions according to the strategy, business model and risk appetite.
All products in which open positions can be held are listed in the product catalog. New products are added to this list only after successfully completing the product approval process. Product applications are investigated thoroughly for any risks. They are approved only if the new products can be implemented in the bank’s front- and back-office risk management systems.
The Group uses a comprehensive risk management approach for both the trading and the banking book (total-return approach). Market risk is therefore managed consistently in all trading and banking books. The following indicators are measured and limited on a daily basis in the market risk management system: Raiffeisen Bank International | Annual Report 2018
 Value-at-Risk (VaR) – confidence level 99 per cent, risk horizon one day Value-at-risk is the main market risk steering instrument in liquid markets and normal market situations. VaR is measured based on a hybrid simulation approach in which 5,000 scenarios are calculated. The approach combines the advantages of a historical simulation and a Monte-Carlo simulation and derives market parameters from 500 days of historical data. Distribution assumptions include modern features such as volatility declustering and random time changes, which helps in accurately reproducing fat-tailed and asymmetric distributions. The Austrian Financial Market Authority has approved the VaR model for use in calculating the total capital requirement for market risk. At the end of the third quarter, the VaR calculation was supplemented to include base interest rate risk factors. Value-at-risk results are not only used for limiting risk but also in the allocation of economic capital.
Trading book VaR 99% 1d VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2018 31/12/2017
Banking book VaR 99% 1d VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2018 31/12/2017
Total VaR 99% 1d VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2018 31/12/2017
The risk measurement approaches employed are verified – besides analyzing returns qualitatively – on an ongoing basis through backtesting and statistical validation techniques. If model weaknesses are identified, then they are adatpted accordingly.
In the previous year, no hypothetical backtesting exceedings arose. The following graph compares the VaR to the theoretical gains and losses on a daily basis. The VaR represents the maximum loss which will not be exceeded within one day, with a confidence level of 99 per cent. It is compared to the respective theoretical gain or loss which would arise on the following day due to the actual market conditions at the time.
The following table shows all material open foreign exchange rate positions as at 31 December 2018 and the corresponding values for the previous year. The numbers include both trading positions as well as capital positions of the subsidiaries with foreign currency denominated statements of financial position.
Responsibility for ensuring adequate levels of liquidity lies with the overall Management Board. The functionally responsible board members are the Chief Financial Officer (Treasury/ALM) and the Chief Risk Officer (Risk). Accordingly, the processes regarding liquidity risk are run essentially by two areas within the bank: On the one side the Treasury units, which take on liquidity risk positions within the strategy, guidelines and parameters set by the responsible decision making bodies. On the other side they are monitored and supported by independent Risk Controlling units, which measure and model liquidity risk positions, set limits and supervise the compliance with those. Besides the responsible units in the line functions, there are respective asset/liability management committees (ALCOs) set up in all network banks. These committees act as decision making bodies with respect to all matters affecting the management of the liquidity position and balance sheet structure of a unit including the definition of strategies and policies for managing liquidity risks. The ALCOs take decisions and provide standard reports on liquidity risk to the Board of Management at least on a monthly basis. On group level these functions are taken by the RBI Group ALCO. Treasury-ALM operations and respective ALCO decisions are mainly based on Group-wide, standardized Group rules and their local supplements, which take specific regional factors into account.
Treasury units are committed to achieve KPIs and to comply to risk based principles. The current set of KPIs includes general targets (e.g. for return on risk-adjusted capital (RORAC) or coverage ratios), as well as specific Treasury targets for liquidity such as a minimum survival period in defined stress scenarios or diversification of the funding structure. While generating an adequate structural income from maturity transformation which reflects the liquidity and market risk positions taken by the bank, Treasury has to follow a prudent and sustainable risk policy when steering the balance sheet. Strategic goals comprise a reduction of parent funding within the group, a further increase of the stability of the depositor base and continuous compliance with regulatory requirements and the internal limit framework.
Regulatory and internal liquidity reports and ratios are generated based on particular modelling assumptions. Whereas the regulatory reports are calculated on specifications given by authorities, the internal reports are modelled with assumptions from empirical observations.
The cornerstones of the economic liquidity risk framework are the Going Concern (GC) and the Time to Wall (TTW) scenario. The Going Concern report shows the structural liquidity position. It covers all main risk drivers which could detrimentally affect the group in a business-as-usual scenario. The Going Concern Models are also the main input factor for the liquidity contribution to the internal Funds transfer pricing model. On the other hand, the Time to Wall report shows the survival horizon for defined adverse scenarios and stress models (market, reputational and combined crisis) and determines the minimum level of the liquidity buffer (and/or the counter-balancing capacity) of the Group and its individual units.
The liquidity position is monitored on Group level and on individual unit level and is restricted by means of a comprehensive limit system. Limits are defined both under a business as usual as well as under a stress perspective. In accordance with the defined risk appetite, each Group unit must demonstrate a survival horizon of several months (TTW) in a severe, combined stress scenario (reputational and market stress). This can be ensured either by a structurally positive liquidity profile or by a sufficiently high liquidity buffer. In a normal going concern environment, maturity transformation must be fully covered by the available liquidity buffer in the medium term. This means that the cumulative liquidity position over a period of up to one year must be positive. In the long term (one year or more), maturity transformation is permitted up to a certain level. For internal models, these limits are supplemented by limits for compliance with regulatory liquidity ratios, such as the liquidity coverage ratio (LCR). All limits must be complied with on a daily basis.
Stress tests are conducted for the individual Group units on a daily basis and on Group level on a weekly basis. The tests cover three scenarios (market, reputational and combined crisis), consider the effects of the scenarios for a period of several months and demonstrate that stress events can simultaneously result in a time-critical liquidity requirement in several currencies. The stress scenarios include the principal funding and market liquidity risks, without considering beneficial diversification effects. This means that in the stress tests of the Group, all network units are simultaneously subject to a pronounced combined crisis for all their major products. The results of the stress tests are reported to the Chief Risk Officer and the Chief Financial Officer as well as other members of management on a weekly basis; they also form a key component of the monthly ALCO meetings and are included in the bank’s strategic planning and contingency planning.
As shown by the daily liquidity risk reports, each Group unit actively maintains and manages liquidity buffers, including high quality liquid assets (HQLA) which are always sufficient to cover the net outflows expected in crisis scenarios. The Group has sizeable, unencumbered and liquid securities portfolios and favors securities eligible for Central Bank tender transactions in order to ensure sufficient liquidity in various currencies. Each Group unit ensures the availability of liquidity buffers, tests its ability to utilize central bank funds, constantly evaluates its collateral positions as regards their market value and encumbrance and examines the remaining counterbalancing capacity, including the funding potential and the sale ability of the assets.
in € thousand 2018 2017 Maturity 1 month 1 year 1 month 1 year
In the past year and to date, the Group’s excess liquidity was significantly above all regulatory and internal limits. The result of the internal time to wall stress test demonstrates that the Group would survive throughout the modelled stress phase of several months even without applying contingency measures.
The calculation of expected inflows and outflows of funds and the HQLAs is based on regulatory guidelines. In 2017, the regulatory limit for the LCR stood at 80 per cent. In 2018, it was raised to the current level of 100 per cent.
The NSFR is defined as the ratio of available stable funding to require stable funding. The regulatory limit is expected to be set at 100 per cent and to be used for the first time in 2020. Available stable funding is defined as the portion of equity and debt which is expected to be a reliable source of funds over the time horizon of one year covered by the NSFR. A bank’s required stable funding depends on the liquidity characteristics and residual maturities of the various assets and off-balance sheet positions. The RBI Group targets a balanced funding position. The regulatory provisions are currently being revised by the regulatory authorities.
Loss data is collected in a central database called ORCA (Operational Risk Controlling Application) in a structured manner and on a Group-wide basis according to the event type and the business line. In addition to the requirements for internal and external reporting, information on loss events is exchanged with international data pools to further develop operational risk management tools as well as to track measures and control effectiveness. Since 2010, The Group has been a participant in the ORX data pool (Operational Risk Data Exchange Association), whose data are currently used for internal benchmark purposes and analyses and as part of the operational risk model. The ORX data consortium is an association of banks and insurance groups for statistical purposes. The results of the analyses as well as events resulting from operational risks are reported in a comprehensive manner to the relevant Operational Risk Management Committee on a regular basis.
To reduce operational risk, business managers decide on preventive risk reduction actions such as risk mitigation or risk transfer. The progress and effectiveness of these actions is monitored by risk control. The former also define contingency plans and nominate responsible persons or departments for initiating the defined actions if losses in fact occur. In addition, several dedicated organizational units provide support to business units for reducing operational risks. An important role in connection with
RBI AG is a member of Raiffeisen-Kundengarantiegemeinschaft Austria (Raiffeisen Customer Guarantee Scheme Austria (RKÖ)). The members of this association have a contractual obligation to guarantee jointly the punctual fulfillment of the entirety of an insolvent association member’s commitments arising from customer deposits and its own issues up to the limit of the sum of the individual capacities of the remaining association members. The individual capacity of an association member is measured on the basis of its freely available reserves subject to the pertinent provisions of the Austrian Banking Act (BWG).
The following table contains the funds managed by the Group: Retail investment funds 26,042,282 26,236,924
Write-offs on unrecoverable minimum lease payments increased to € 6,915 thousand (2017: € 4,849 thousand).
Assets under finance leases break down as follows: Real estate leasing 1,042,184 1,178,682
Assets and liabilities with counterparties outside Austria pursuant to Section 64 (1) 2 of the Austrian Banking Act (BWG) were as follows: The main reason for the reduction in both assets as well as liabilities was the disposal of the Polish core banking operations.
The following table was prepared pursuant to Section 45 (2) of the Austrian Banking Act (BWG).
Transactions with related parties (companies and individuals) are limited to banking business transactions that are carried out at fair market conditions. Disclosures on related parties (individuals) are reported under (66) Relations to key management.
Loan commitments, financial guarantees and other commitments received 19,589 124 30,883 23,806
Short-term employee benefits shown in the above table contain salaries and benefits in kind and other benefits, remuneration for membership of boards in affiliated companies and those parts of the bonuses which become due in the short term. Furthermore, it also includes changes possibly arising from the difference between the bonus provision and the bonus later awarded.
Share-based payments comprises adjustments for the SIP tranches launched up to 2013 see share-based remuneration in the notes under (30) Equity.
The Annual General Meeting held on 21 June 2018 approved a new remuneration model for the Supervisory Board, beginning in the 2017 financial year. It was decided to distribute the remuneration as follows: Chairman € 120 thousand, Deputy Chairman € 90 thousand, members of the Supervisory Board € 60 thousand, plus attendance fees. As a result, remuneration of € 956 thousand was paid to the Supervisory Board for the 2017 financial year. A provision of € 1,060 thousand was recognized for the 2018 financial year.
In the 2018 financial year, no contracts subject to approval within the meaning of Section 95 (5) 12 of the Austrian Stock Corporation Act (AktG) were concluded with members of the Supervisory Board.
The Supervisory Board as at 31 December 2018 was as follows: Members of the Supervisory Board First assignment End of period
Bettina Selden (member of the Supervisory Board) resigned from the Supervisory Board with effect from 21 June 2018.
The Management Board as at 31 December 2018 was as follows: Members of the Management Board First assignment End of period
Included for the first time in the financial period 9 4
Of the 226 entities in the Group, 121 are domiciled in Austria (2017: 124) and 105 abroad (2017: 112). They comprise 29 banks, 140 financial institutions, 14 companies rendering bank-related ancillary services, 11 financial holding companies and 32 other companies.
Floreasca City Center Verwaltung Kft., Budapest (HU) 42,000 HUF 100.0% FI
FMK Fachmarktcenter Kohlbruck Betriebs GmbH, Eschborn (DE) 30,678 EUR 94.5% OT
GENO Leasing Ges.m.b.H., Vienna (AT) 36,400 EUR 100.0% FI 1 Less own shares 2 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance, SC
Raiffeisen consulting d.o.o., Zagreb (HR) 105,347,000 HRK 100.0% OT 1 Less own shares 2 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance, SC
KAURI Handels und Beteiligungs GmbH, Vienna (AT) 50,000 EUR 88.0% FI
Limited Liability Company Raiffeisen Leasing Aval, Kiev (UA) 1,240,152,866 UAH 72.3% FI
R Karpo Immobilien Linie S.R.L., Bucharest (RO) 200 RON 100.0% OT
Raiffeisen Rehazentrum Schruns Immobilienleasing GmbH, Vienna (AT) 36,400 EUR 51.0% FI
Realplan Beta Liegenschaftsverwaltung Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI
RIL XIV Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI
RZB - BLS Holding GmbH, Vienna (AT) 500,000 EUR 100.0% FI
Structured entities are consolidated when the substance of the relationship between the Group and the structured entities indicates that the structured entities are controlled by the Group.
The Group establishes securitization vehicles which purchase diversified pools of assets, including fixed income securities, company loans, and asset-backed securities (predominantly commercial and residential mortgage-backed securities and credit card receivables). The vehicles fund these purchases by issuing multiple tranches of debt and equity securities, the repayment of which is linked to the performance of the assets in the vehicles. The Group often transfers assets to these securitization vehicles and provides financial support to these entities in the form of liquidity facilities.
As in 2017, the Group has not provided financial support during the financial year to non-consolidated structured entities.
Österreichische Hotel- und Tourismusbank Gesellschaft m.b.H., Vienna (AT) 11,627,653 EUR 31.3% BA
Adular Immobilienleasing GmbH & Co. Projekt Rödermark KG, Eschborn (DE) 5,000 EUR 100.0% FI
Am Hafen" Sutterlüty GmbH & Co, Vienna (AT) 100,000 EUR <0.1% FI
Campus NBhf RBI Immobilien-Leasing Gmbh, Vienna (AT) 35,000 EUR 100.0% FI
Abutilon Immobilienleasing GmbH & Co. Projekt Autohof Ibbenbüren KG, Eschborn (DE) 5,000 EUR 100.0% FI
CP Logistikcenter Errichtungs- und Verwaltungs GmbH, Vienna (AT) 37,000 EUR 100.0% OT
Credibilis a.s., Prague (CZ) 2,000,000 CZK 100.0% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
Euro Green Energy Fejlesztő és Szolgáltató Kft., Budapest (HU) 8,100,000 HUF 100.0% OT
Faru Handels- und Beteiligungs GmbH, Vienna (AT) 80,000 EUR 100.0% OT
ICTALURUS Handels- und Beteiligungs GmbH, Vienna (AT) 36,336 EUR 100.0% OT
ISIS Raiffeisen Immobilien Leasing GmbH, Vienna (AT) 36,400 EUR 100.0% FI
Késmárk utca 11-13. Szolgáltató Korlátolt Felelősségű Társaság, Budapest (HU) 100,000 HUF 100.0% BR
Kathrein & Co. Trust Holding GmbH, Vienna (AT) 35,000 EUR 100.0% OT
Objekt Linser Areal Immobilienerrichtungs GmbH, Vienna (AT) 35,000 EUR 100.0% OT
R MORMO IMMOBILIEN LINIE S.R.L., Bucharest (RO) 50,000 RON 100.0% OT
Raiffeisen-Leasing Gesellschaft m.b.H. & Co KG, Vienna (AT) 581,383 EUR 100.0% OT
Raiffeisen Direct Investments CZ s.r.o., Prague (CZ) 200,000 CZK 100.0% FI
Raiffeisen Insurance Broker Kosovo L.L.C., Pristina (KO) 10,000 EUR 100.0% BR
Raiffeisen Invest Drustvo za upravljanje fondovima d.o.o Sarajevo, Sarajevo (BA) 559,300 BAM 100.0% FI
Real Estate Rent 4 DOO, Belgrade (RS) 40,310 RSD 100.0% OT
RIL XIII Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI
RL-Jota Sp.z o.o. w likwidacji, Warsaw (PL) 50,000 PLN 100.0% FI
RL-OPIS SPOLKA Z OGRANICZONA ODPOWIEDZIALNOSCIA, Warsaw (PL) 50,000 PLN 100.0% OT
SCT Kárász utca Ingatlankezelő Kft., Budapest (HU) 3,000,000 HUF 100.0% OT
SCTP Biatorbágy Ingatlanfejlesztő és Ingatlanhasznosító Kft., Budapest (HU) 3,000,000 HUF 75.3% OT
Accession Mezzanine Capital III L.P., Hamilton (JE) 134,125,000 EUR 3.7% OT
Agricultural Open Joint Stock Company Illintsi Livestock Breeding Enterprise, Illinci (UA) 703,100 UAH 4.7% OT
A-Trust Gesellschaft für Sicherheitssysteme im elektronischen Datenverkehr GmbH, Vienna (AT) 5,290,013 EUR 12.1% OT
Belarussian currency and stock exchange JSC, Minsk (BY) 14,328,656 BYN <0.1% OT
Cards & Systems EDV-Dienstleistungs GmbH, Vienna (AT) 75,000 EUR 45.0% OT
Central Depository and Clearing Company, Inc., Zagreb (HR) 94,525,000 HRK 0.1% FI
CULINA Grundstückvermietungs Gesellschaft m.b.H., St Pölten (AT) 36,360 EUR 25.0% FI
D. Trust Certifikacná Autorita, a.s., Bratislava (SK) 331,939 EUR 10.0% OT
Die Niederösterreichische Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 35.0% OT
EMERGING EUROPE GROWTH FUND II, L.P., Delaware (US) 370,000,000 USD 1.9% OT
K & D Progetto s.r.l., Bozen (IT) 50,000 EUR 25.0% FI
Kommunal-Infrastruktur & Immobilien Zeltweg GmbH, Zeltweg (AT) 35,000 EUR 20.0% OT
LITUS Grundstückvermietungs Gesellschaft m.b.H., St Pölten (AT) 36,360 EUR 24.5% FI
G + R Leasing Gesellschaft m.b.H. & Co. KG., Graz (AT) 72,673 EUR 50.0% FI
Hrvatski registar obveza po kreditima d.o.o., Zagreb (HR) 13,500,000 HRK 10.5% BR
Medicur - Holding Gesellschaft m.b.H., Vienna (AT) 4,360,500 EUR 25.0% OT
NÖ Raiffeisen-Leasing Gemeindeprojekte Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 1.0% FI
Oberpinzg. Fremdenverkehrförderungs- und Bergbahnen AG, Vienna (AT) 3,297,530 EUR 0.0% OT
Raiffeisen Salzburg Leasing GmbH, Salzburg (AT) 35,000 EUR 19.0% FI 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
Raiffeisen-Leasing Mobilien und KFZ GmbH, Vienna (AT) 35,000 EUR 15.0% FI
RC Gazdasági és Adótanácsadó Zrt., Budapest (HU) 20,000,000 HUF 22.2% OT
Registry of Securities in FBH, Sarajevo (BA) 2,052,300 BAM 1.4% FI
Sarajevska berza-burza vrijednosnih papira dd Sarajevo, Sarajevo (BA) 1,967,680 BAM 10.5% FI
Society for Worldwide Interbank Financial Telekommunication scrl, La Hulpe (BE) 13,746,250 EUR 0.4% FI
Steirische Gemeindegebäude Leasing Gesellschaft m.b.H., Graz (AT) 36,336 EUR 50.0% FI
Based on an annually undertaken Supervisory Review and Evaluation Process (SREP), the ECB has instructed RBI by way of an official notification to hold additional common equity tier 1 capital to cover risks which are not or not adequately covered under Pillar I.
The so-called Pillar 2 requirement is calculated based on the business model, risk management, or the capital situation, for example. The most recent official notification from the ECB specifies that the Pillar 2 requirement must be adhered to at the level of RBI (consolidated) and the level of RBI AG (unconsolidated). In addition, the RBI Group is subject to the minimum requirements of the CRR and the combined buffer requirement. The combined buffer requirement for the RBI Group currently contains a capital conservation buffer, a systemic risk buffer, and a countercyclical buffer. As of 31 December 2018, the CET1 ratio requirement (including the combined buffer requirement) was 9.9 per cent for the RBI Group. A breach of the combined buffer requirement would induce constraints, for example in relation to dividend distributions and coupon payments on certain capital instruments. The capital requirements applicable during the year were complied with, including an adequate buffer, on both a consolidated and individual basis.
National supervisors may in principle determine systemic risk buffers (up to 5 per cent) as well as additional capital add-ons for systemic banks (up to 3.5 per cent). In the event both systemic risk buffers and add-ons for systemic banks are determined for an institution, only the higher of the two values is applicable. In September 2015, the Financial Market Stability Board (FMSB) responsible for this in Austria recommended to the Austrian financial supervisor – the FMA – that it required certain banks, including RBI, to adhere to a systemic risk buffer (SRB). The FMA consequently introduced a systematic risk buffer at the beginning of 2016 via the Capital Buffer Regulation (including subsequent amendments). The SRB for RBI was set at 0.25 per cent in 2016, was raised to 0.50 per cent as of 1 January 2017, and will increase progressively to 2 per cent by 2019.
The transitional ratios are the currently applicable ratios according to CRR requirements under consideration of the applicable transitional provisions for the current calendar year set out in Part 10 of the CRR in conjunction with the CRR Supplementary Regulation (CRR-BV) published by the FMA.
No direct transitional provisions have been used for RBI since the 31 December 2018 reporting date, for which reason they do not impact the common equity tier 1 ratio. Only the tier 1 ratio and the total capital ratio are affected due to capital instruments (in additional tier 1 capital) that are no longer eligible.
IFRS 9 contains a classification and measurement approach which is firstly based on the business model under which the assets are managed, and secondly on the cash flow characteristics of the assets. For RBI, this results in five classification categories for financial assets:  Financial assets measured at amortized cost (AC)  Financial assets measured at fair value through other comprehensive income (FVOCI)  Financial assets mandatorily measured at fair value through profit or loss (FVTPL)  Financial assets designated fair value through profit or loss (FVTPL) and  Financial assets held for trading (HFT)
All other financial assets – i.e. financial assets that do not meet the criteria for classification as subsequently measured at either amortized cost or FVOCI – are classified as subsequently measured at fair value, with changes in fair value recognized in profit or loss. In addition, RBI has the option at initial recognition to irrevocably designate a financial asset as at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency – i.e. an accounting mismatch – that would otherwise arise from measuring assets or liabilities, or recognizing the gains and losses on them, on different bases.
Once RBI determines that the business model of a specific portfolio is to hold the financial assets to collect the contractual cash flows (or to both collect contractual cash flows and sell financial assets), it must then assess whether the contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. For this purpose, interest is defined as consideration for the time value of money and for the credit risk associated with
 The risks that affect the performance of the business model (and the financial assets held within that business model) and the way those risks are managed
Financial assets that are held for trading and those that are managed and whose performance is evaluated on a fair value basis will be measured at FVTPL.
For RBI, the sale of more than 10 per cent of the portfolio (carrying amount) during a rolling three-year period will potentially be considered more than infrequent unless these sales are immaterial as a whole.
In 2018 the IASB issued an IFRS 9 amendment regarding prepayment regulations with negative compensation. Negative compensation arises where the contractual terms permit the borrower to prepay the instrument before its contractual maturity, but the prepayment amount could be less than unpaid amounts of principal and interest. However, to qualify for amortized cost measurement, the negative compensation must be reasonable compensation for early termination of the contract. RBI does not have a significant volume of prepayment regulations with negative compensation which have to be measured mandatorily at FVTPL.
Modification of the time value of money and the benchmark test
Loans and advances to customers and banks in particular are assigned to this category. Loans and advances relating to finance lease business, which are recognized in accordance with IAS 17, and securities which meet the above conditions, are also shown in this measurement category.
Recognition is at fair value. Interest income, foreign exchange gains and losses from remeasurements and impairment expenses and write-ups are recorded in the income statement and calculated in the same way as financial assets measured at amortized cost. The remaining fair value changes are recorded in other comprehensive income. On derecognition, the cumulative net gains or losses from the fair value changes which are recorded in other comprehensive income are reclassified to the income statement. In addition, the debt instruments in the category FVOCI are subject to the same impairment model (see chapter impairment general (IFRS 9)) as financial assets measured at amortized cost. The difference between the fair value and amortized cost is shown in other comprehensive income until the asset is derecognized.
Capital-guaranteed products (guarantee funds and pension plans) are shown as sold put options on the respective funds to be guaranteed, in accordance with statutory requirements. The valuation is based on a Monte Carlo simulation. The Group has provided capital guarantee obligations as part of the government-funded state-sponsored pension plans according to Section 108h (1) item 3 EStG (Austrian Income Tax Act). The bank guarantees that the retirement annuity, available for the payment
amount, is not less than the sum of the amounts paid by the taxpayer plus credits for such taxable premiums within the meaning of Section 108g EStG.
Interest income is shown in net interest income, valuation results and proceeds from disposals are shown in net trading income and fair value result.
This category comprises mainly all those financial assets that are irrevocably designated as financial instruments at fair value (socalled fair value option) upon initial recognition in the statement of financial position. An entity may use this designation only when doing so eliminates or significantly reduces incongruities in measurement or recognition. These arise if the measurement of financial assets or liabilities or the recognition of resulting gains or losses has a different basis. Financial liabilities are also designated as financial instruments at fair value, to avoid valuation discrepancies with related derivatives. The fair value of financial obligations under the fair value option in this category reflects all market risk factors, including those related to the credit risk of the issuer.
For financial liabilities designated at fair value through profit or loss, changes in fair value attributable to a change in own credit risk is not reported in the income statement but in other comprehensive income.
Cash, cash balances at central banks and other demand deposits Nominal value n/a
Non-trading financial assets - mandatorily fair value through profit/loss X FVTPL
Hedge accounting X FVTPL AC: Amortized Cost FVOCI: Fair Value Through Other Comprehensive Income FVTPL: Fair Value Through Profit/Loss
Further information on measurement methods and quantitative information for determination of fair value is shown in the notes under (31) Fair value of financial instruments.
In RBI, a financial asset is derecognized on account of a modification if the underlying contract is modified substantially. Terms are substantially different if the discounted present value of the cash flows under the new terms using the original effective interest rate differs by at least 10 per cent from the discounted present value of the remaining cash flows of the original financial asset (present value test). In addition to the present value test further quantitative and qualitative criteria are considered in order to assess whether a substantial modification applies. These criteria consider the extension of the average remaining term (whereby in the case of Stage 3 loans which are restructured, this is often done to match the maximum expected payments). If this is the case then additional judgement is required to determine whether the extension is a new instrument in economic terms. RBI has defined qualitative criteria for a significant change in the terms of the contract as a change in the underlying currency and also the introduction of clauses that would normally cause the contractual cash flow criteria according to IFRS 9 to fail, or a change in the type of instrument (e.g. a bond is converted to a loan).
Hedge accounting according to IAS 39 applies to those derivatives that are used to hedge the fair values of financial assets and liabilities. The credit business is especially subject to such fair value risks if it deals with fixed-interest loans. Interest rate swaps that satisfy the prerequisites for hedge accounting are contracted to hedge against the interest-rate risks arising from individual loans or refinancing. Thus, hedges are formally documented, continuously assessed, and tested to be highly effective. Throughout the term of a hedge it can therefore be assumed that changes in the fair value of a hedged item will be nearly completely offset by a
IFRS 9 grants accounting options for hedge accounting. In 2018 RBI continues to apply the provisions on hedge accounting pursuant to IAS 39 while, however, taking into account the changes in the disclosures in the notes pursuant to IFRS 7. The changes in the disclosures are shown in the notes (47) Hedge accounting additional information.
change in the fair value of the hedging instrument and that the actual effectiveness outcome will lie within a band of 80 to 125 per cent.
Both the effect of changes in the carrying values of positions requiring hedging and the effects of changes in the clean prices of the derivative instruments are recorded under net income from hedge accounting.
Cash flow hedge accounting according to IAS 39 applies for those derivatives that are used to hedge against the risk of fluctuating future cash flows. Variable-interest loans and liabilities, as well as expected transactions such as expected borrowing or investment, are especially subject to such cash flow risks. Interest rate swaps used to hedge against the risk of fluctuating cash flows arising from specific variable interest-rate items are recognized as follows: The hedging instrument is recognized at fair value, changes in its clean price are recorded in other comprehensive income. Any ineffective portion is recognized in the income statement in net gains/losses from hedge accounting.
Hedge of a net investment in an economically independent operation (capital hedge)
According to IFRS 9, a financial guarantee is a contract under which the guarantor is obliged to make certain payments. These payments compensate the party to whom the guarantee is issued for losses arising in the event that a particular debtor does not fulfill payment obligations on time as stipulated in the original terms of a debt instrument. At the date of recognition of a financial guarantee, the initial fair value corresponds under market conditions to the premium at the date of signature of the contract. In contrast to the presentation of impairments of financial assets, expected loan defaults are shown as a provision on the liabilities side.
This item mainly includes contingent liabilities from guarantees, credit guarantees, letters of credit and loan commitments recognized at face value. Guarantees are used in situations in which the Group guarantees payment to the creditor of a third party to fulfill the obligation of the third party. Irrevocable credit lines must be reported when a credit risk may occur. These include commitments to provide loans, to purchase securities or to provide guarantees and acceptances. Loan loss provisions for contingent liabilities and irrevocable loan commitments are reported under provisions for liabilities and charges. Often, loan commitments are only partially drawn and thus comprise a drawn and an undrawn commitment. If it is not possible to separately identify the expected credit losses applicable to a drawn commitment and those to an undrawn commitment, these are shown together with the impairments for the financial asset, in accordance with IFRS 7. The total expected credit losses are shown as a provision if they exceed the gross carrying amount of the financial asset.
If the credit risk for financial instruments has significantly increased since initial recognition, then on each reporting date, the impairment for a financial instrument must be measured in the amount of the expected credit losses over the (remaining) term. If the credit risk for financial instruments has not significantly increased since initial recognition, then on each reporting date, the impairment for a financial instrument must be measured in the amount of the present value of an expected twelve-month loss. The expected twelve-month loss is that portion of the credit losses expected over the lifetime which correspond to the expected credit losses from default events possible for a financial instrument within the twelve months following the reporting date.
RBI has introduced recognition and measurement methods in order to be able to assess at the end of every reporting period whether or not the credit risk for a financial instrument has significantly increased since initial recognition. Based on the method outlined above, RBI classifies its financial instruments into Stage 1, Stage 2, Stage 3 and POCI as follows:  Stage1 essentially includes all financial instruments whose credit default risk has not significantly increased since their initial recognition. Stage 1 also includes all transactions which show a low credit risk on the reporting date, where RBI has utilized the option available under IFRS 9 to waive the assessment of a significant increase in credit risk. A low credit risk exists for all financial instruments whose internal credit rating on the reporting date is within the investment grade range (at least corresponds to Standard & Poor's BBB-, Moody's Baa3 or Fitch BBB-). On initial recognition of loans, the bank records an impairment in the amount of the expected twelve-month loss. Stage 1 also includes loans where the credit risk has improved and which have thus been reclassified from Stage 2.
This section provides an overview of those aspects of the rules on impairment that involve a higher degree of judgement or complexity and major sources of estimation uncertainty and that resulted in a material adjustment in the financial year. Quantitative information about each of these estimates and judgements is included in the related notes together with information about the basis of calculation for each affected line item in the consolidated financial statements.
The twelve-month loss used for the recognition of impairments in Stage 1 is the portion of the lifetime expected credit loss for the financial instrument that results from default events which are expected to occur within twelve months following the reporting date. The ECL for Stage 1 and Stage 2 as well as for insignificant financial instruments in Stage 3 is determined on an individual transaction basis taking into account statistical risk parameters. These parameters have been derived from the Basel IRB approach and modified to meet the requirements of IFRS 9. The most important input parameters used by RBI for determining the expected credit losses are as follows:  PD: In RBI, the probability of default is the probability of a borrower being unable to fulfill its payment obligations either within the next twelve months or in the entire remaining lifetime of the instrument.
Further details on determining expected credit losses are provided in (35) Expected credit losses.
RBI’s rating systems combine into the PD all available quantitative and qualitative information relevant for forecasting the credit risk. This metric is based primarily on a statistical selection and weighting of all available indictors. In addition, the PD adjusted in accordance with IFRS 9 requirements takes into account not only historical information and the current economic environment, but also, in particular, forward-looking information such as the forecast for the development of macroeconomic conditions. As a consequence, RBI uses the PD only as a frame of reference for assessing whether the credit risk of a financial instrument has risen significantly since the date of its initial recognition. By anchoring the review of the relative transfer criterion in the robust processes and procedures of the bank’s Group-wide credit-risk-management framework, the bank ensures that a significant increase in the credit risk is identified in a reliable and timely manner based on objective criteria. The review to determine whether the credit default risk as at the financial reporting date has risen significantly since the initial recognition of the respective financial instrument is performed as at the reporting date. This review compares the observed probability of default over the residual maturity of the financial instrument (Lifetime-PD) against the lifetime PD over the same period as expected on the date of recognition. Further details on forward-looking information are provided in (35) Expected credit losses in the chapter significant increase in the credit risk.
RBI concludes securities lending transactions with banks or customers in order to meet delivery obligations or to conduct security sale and repurchase agreements. In RBI, securities lending transactions are shown in the same way as genuine sale and repurchase agreements. This means loaned securities continue to remain in the securities portfolio and are valued according to IFRS 9. Borrowed securities are not recognized and not valued in RBI. Cash collateral provided by RBI for securities lending transactions is shown as a claim under the item financial assets – amortized cost while collateral received is shown as financial liabilities – amortized cost in the statement of financial position.
to IAS 39. Collateral is not recorded in RBI’s statement of financial position unless it is repossessed. The fair value of collateral does, however, affect the calculation of ECLs. Generally, it is valued at least at the outset, and subject to half-yearly reviews. Some collateral such as cash or securities are assessed daily in respect of margin requirements. Further details are provided in (34) Collateral and maximum credit risk.
In principle, subsidiaries are initially integrated into the consolidated group on the date when the Group obtains control of the company and are excluded from the date on when it no longer has control of the company. The results from subsidiaries acquired or disposed of during the year are recorded in the consolidated income statement, either from the actual date of acquisition or up
If, in the case of existing control, further shares are acquired or sold without loss of control, in subsequent consolidation such transactions are recognized directly in equity. The carrying amount of the shares held by the Group and the non-controlling interests are adjusted in such a way as to reflect changes in existing shareholdings in subsidiaries. Any difference between the amount which is adjusted for the non-controlling interests and the fair value of the consideration paid or received is recognized directly in equity and is assigned to the shareholders of the parent company.
The acquisition cost of these investments including goodwill is determined at the time of their initial consolidation, applying by analogy the same rules as for subsidiaries (offsetting acquisition costs against proportional fair net asset value). If associated companies are material, appropriate adjustments are made to the carrying value in the accounts, in accordance with developments in the company’s equity. Profit or losses of companies valued at equity are netted and recognized in the item other result under the sub-item current income from investments in subsidiaries and associates. Losses attributable to companies accounted for using the equity method are only recognized up to the level of the carrying value. Losses in excess of this amount are not recognized, since there is no obligation to offset excess losses. Further, any amounts recognized by the associate through other comprehensive income will be recognized in
Group companies use brands to differentiate their services from the competition. According to IFRS 3, brands of acquired companies are recognized separately under the item intangible fixed assets. Brands have an indeterminable useful life and are therefore not subject to scheduled amortization. Brands have to be tested annually for impairment and additionally whenever indications of impairment arise. Details on impairment testing can be found in the notes (20) Tangilbe and intangible fixed assets.
On each reporting date, goodwill is examined with a view to its future economic utility on the basis of cash generating units (CGUs). A cash generating unit is defined by the management and represents the smallest identifiable group of assets of a company that generates cash inflows from operations. Within RBI, all segments according to segment reporting are determined as cash generating units. Legal entities within the segments form their own CGU for the purpose of impairment testing of goodwill. The carrying value of the relevant entity (including any assigned goodwill) is compared with its recoverable amount. This is, as a general principle, defined as the higher of the fair value less selling costs and the amount resulting from its value in use. The value in use is based on expected potential dividends discounted using a rate of interest reflecting the risk involved. The estimation of the future results requires an assessment of previous as well as future performance. The latter must take into account the likely development of the relevant markets and the overall macroeconomic environment.
Impairment tests for goodwill based on cash-generating units use a multi-year plan drawn up by the relevant management team and approved by the bodies responsible. This covers the CGU's medium-term prospects for success taking into account its business strategy, overall macroeconomic conditions (gross domestic product, inflation expectations, etc.) and the specific market circumstances. The data is then used to capture the terminal value based on a going concern concept. Discounting of the earnings relevant for the measurement, i.e. potential dividends, is undertaken using risk-adapted and country-specific equity capital cost rates determined by means of the capital asset pricing model. The individual interest rate parameters (risk-free interest rate, inflation difference, market risk premium, country-specific risks and beta factors) were defined by using external information sources. The entire planning horizon is divided into three phases with phase I covering the management planning period of three years. Detailed planning, including macroeconomic planning data, is extrapolated in phase II, which lasts another two years. The terminal
value is then calculated in phase III based on the assumption of a going concern. Details on impairment testing can be found in the notes under (20) Tangible and intangible fixed assets.
The specific structure of the above-mentioned principles results in deviations for individual group units in order to take into account the sometimes stricter national legal regulations.
 This is tenable overall based on the financial position of RBI and the financial position of RBI AG and is justified based on the performance of the Group, RBI AG, the business unit and the individual concerned.
Net fee and commission income mainly includes income and expenses arising from payment transfer business, asset management, foreign exchange business and credit business. Fee and commission income and expenses are accrued in the reporting period.
Deferred taxes are calculated and recognized in accordance with IAS 12 applying the liability method. Deferred taxes are based on all temporary differences that result from comparing the carrying amounts of assets and liabilities in the IFRS accounts with the tax bases of assets and liabilities, and which will reverse in the future. Deferred taxes are calculated by using tax rates applicable in the countries concerned. A deferred tax asset should also be recognized on tax loss carry-forwards if it is probable that sufficient taxable profit will be generated against which the tax loss carry-forwards can be utilized within the same entity. On each reporting date, the carrying amount of the deferred tax assets is reviewed and impaired if it is no longer probable that sufficient taxable income will become available in order to partly or fully realize the tax assets. Deferred tax assets and deferred tax liabilities within the same entity are netted. Income tax credits and income tax obligations are recorded under the items current and deferred tax assets and current and deferred tax liabilities.
Other comprehensive income comprises all income and expenses directly recognized in equity according to IFRS standards. Income and expenses recognized directly in equity that are reclassified in the income statement are reported separately from income and expenses recognized directly in equity that are not reclassified in the income statement. This applies to currency differences resulting from the translation of equity held in foreign currency, changes resulting from the hedging of net investments in a foreign entity (capital hedge), the effective part of a cash flow hedge, changes resulting from valuation of financial assets (debt instruments) of the category FVOCI, proportionate net income from associates accounted for at equity as well as deferred taxes on the mentioned items.
Revaluations of defined benefit plans, valuation changes of financial assets (equity instruments) of the category FVOCI, valuation changes on account of the change in the own default risk of financial liabilities at fair value, proportionate net income from associates accounted for at equity as well as deferred taxes on the mentioned items are reported in other comprehensive income and are not reclassified to the income statement.
In 2017, RBI launched a group-wide preliminary study to analyze the impact of IFRS 16 on existing leases. In the context of this preliminary study, contracts (rental and leasing contracts) were analyzed on the basis of the extent to which the existing lease agreements were to be recorded as rights of use and lease liabilities on the statement of financial position, and on the other hand, group-wide accounting guidelines were drafted. The analysis has shown that as at 1 January 2019, usage rights of around € 505 million are expected to be recognized which which relate almost entirely to leases of buildings for own purposes. A significant effect on equity is not expected.
With regard to the transitional arrangements, IFRS 16 grants RBI as lessee an accounting option concerning the transition to the new leasing provisions. IFRS 16 is either fully applied retrospectively including earlier reporting periods in accordance with the provisions in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, or the modified retrospective approach is used in which the cumulative impact of applying IFRS 16 retrospectively is accounted for under equity as an adjustment posting in the opening balance of retained earnings at the time of first application of the standard.
RBI has decided to use the modified retrospective approach, which also means that no adjustments of comparable information will be made in the 2019 reporting period. As lessee, RBI will measure the liabilities from lease contracts which in accordance with IAS 17 were to be classified as operating leases, at the present value of the remaining lease payments using its incremental borrowing rate of interest at the time of first application of IFRS 16. In addition, the rights of use must be recognized in the same amount, adjusted by previously recognized, prepaid or deferred lease payments. No adjustments are necessary for contracts which in accordance with IAS 17 were accounted for as operating leases, provided that the assets underlying the contract are low-value assets as defined by IFRS 16. The relevant option is utilized on an individual basis. In addition, RBI can, as lessee, utilize the following practical exemptions and simplifications on an individual basis. RBI as lessee can apply a uniform interest rate to portfolios with sufficiently identical characteristics and apply the exemption for short-term lease contracts to lease contracts with a remaining term of less than twelve months at the time of first application.
Annual improvements to IFRS – 2015–2017 cycle (entry into force 1 January 2019)
The amendments include in particular:  IFRS 3 Business Combinations and IFRS 11 Joint Arrangements: The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.
 IAS 12 Income Taxes: The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognized in profit or loss, regardless of how the tax arises.
 IAS 23 Borrowing Costs: The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.
As a result of the amendments to IAS 19, it will in future be a mandatory requirement that in the event of a plan amendment, curtailment or settlement of a defined benefit plan, the current service cost and the net interest for the remaining fiscal year must be redetermined using the current actuarial assumptions used for the required remeasurement of the net liability (asset). In addition, amendments were included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The application of this amendment is not expected to have any significant impact on the consolidated financial statements of RBI.
The new conceptual framework contains revised definitions of assets and liabilities as well as new guidance on measurement and derecognition, presentation and disclosure. The new conceptual framework does not constitute a substantial revision of the document as was originally intended when the project was first taken up in 2004. Instead the IASB focused on topics that were not yet covered or that showed obvious shortcomings that needed to be dealt with. The revised conceptual framework is not subject to the endorsement process.
IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows. IFRS 17 was issued in May 2017 and applies to annual reporting periods beginning on or after 1 January 2021.The application of these amendments is not expected to have any significant impact on the consolidated financial statements of RBI.
IFRS 14 (Regulatory deferral accounts; entry into force 1 January 2016)
The amendments clarify that for transactions with an associate or joint venture, the extent of recognition of gains or losses depends on whether the sold or contributed assets constitute a business. The effective date has been deferred indefinitely.
Only entities applying IFRS for the first time and who recognize regulatory deferrals according to their previous accounting standards are allowed to continue with regulatory deferrals after transition to IFRS. The standard is intended to be a short-term interim solution till the IASB concludes the long-term project relating to price-regulated business transactions. The European Commission has decided not to adopt this standard.
Romanian bank tax At the end of 2018, the Romanian Government decided to introduce a new bank tax. As there is discussion surrounding the potential negative impact on the Romanian economy, there is still a need for consultation at government level. It therefore cannot be ruled out, that the draft which was presented at the end of 2018, could still be revised and mitigate the burden on the banking sector. The impact on RBI cannot be quantified at this point in time.
Raiffeisen Bank International AG, Vienna, Austria, and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2018, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.
In the following we present the key audit matters from our point of view:  Recoverability of loans and advances to customers reported under financial assets – amortized cost  Valuation of financial liabilities at fair value through profit and loss
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2018, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, and the additional requirements pursuant to Sections 245a UGB (Austrian Commercial Code) and 59a BWG (Austrian Banking Act).
We examined the implementation of the new IFRS 9 models in connection with their first-time application by assessing the concepts for assignment of loans to the respective stages and recognition of ECL impairments. Our financial mathematicians and IFRS 9 specialists have assessed whether the ECL models are consistent with IFRS 9 requirements and provide a suitable basis for determining assignment to the respective stages and calculating ECL. We recalculated the arithmetical correctness of the impairments in ECL stages 1 and 2 for loans and advances to non-financial corporations on the basis of given parameters, the loans and advances to housholds have been examined by us on a sample basis. We also assessed the reasonableness of the parameters used (PD, LGD and macroeconomic factors), to some extent we did so on a sample basis..
In the case of non-defaulted loans (ECL stage 1 and stage 2), whose impairment was calculated on an ECL basis, we analyzed the bank’s documentation for consistency with IFRS 9 requirements. On the basis of the bank’s internal validations, we also assessed the models and their parameters to determine whether they provide a suitable basis for calculating reasonable impairments. We evaluated the reasonableness of the probabilities of default for stage 1 and stage 2 and assessed the statistical models, parameters and mathematial principles. We also analyzed the selection and calculation of forward-looking estimates and scenarios and examined how they were taken into account in stage allocation and parameter estimates. We evaluated the arithmetical correctness of impairments in ECL stage 1 and 2 for loans and advances to non-financial corporations for the entire population.. For households, we did so on a sample basis. In these audit procedures, we were supported by our financial mathematicians. In addition, we performed a control-based audit approach to assess the processes, systems and interfaces underlying the calculation models.
The credit spread curve is a significant input to the fair value calculation of financial liabilities and due to the indicative nature of the price quotations leads to a risk of misstatement in the Financial Statements.
Valuation of financial Liabilities at fair value through profit and loss
As at the Balance Sheet date, financial liabilities measured at fair value amount to about EUR 1.9 billion, of which EUR 0.4 billion are subordinated. In addition to the general market risk factors, their fair value is significantly influenced by the own credit risk of the issuing entity (credit spread).
In accordance with Austrian company law, the group management report is to be audited as to whether it is consistent with the consolidated financial statements and prepared with legal requirements.
At the Annual General Meeting dated 22 June 2017, we were elected as group auditors. We were appointed by the Supervisory Board on 10 July 2017. We have been the Group’s auditors since the company´s first listing on the stock exchange in 2005.
The financial statements, together with our auditor’s opinion, may only be published if the financial statements and the management report are identical with the audited version attached to this report. Section 281 (1) of the Austrian Commercial Code (UGB) applies.
Strategy & Innovation, Group Sustainability Management, International Banking Units and Legal Services
Glossary 278 Alternative Performance Measures (APM) 278 Addresses 280 Publication details 282
Common equity tier 1 ratio (transitional) – Common equity tier 1 as a percentage of risk-weighted assets (total RWA) according to CRR/CRD IV methodology.
Earnings per share – - Profit/loss attributable to ordinary shares divided by the average number of ordinary shares outstanding in the reporting period.
Total capital ratio – Total capital as a percentage of risk-weighted assets (total RWA).
Effective tax rate (ETR) – gives a good understanding of the tax rate the company faces and simplifies comparison among companies. It will often differ from the company ś jurisdictional tax rate due to many accounting factors. The effective tax rate of a company is the average rate at which its pre-tax profits are taxed. It is calculated by dividing total tax expense (income taxes) by profit before tax. Total tax expense includes current income taxes and deferred taxes.
Net interest margin – is used for external comparison with other banks as well as an internal profitability measurement of products and segments. It is caulcauted with net interest income set in relation to average interest-bearing assets (total assets less investments in subsidiaries and associates, intangible fixed assets, tangible fixed assets, tax assets and other assets).
NPE ratio – is an economic ratio to demonstrate the proportion of non-defaulted and defaulted non-performing loans and debt securities according to the applicable EBA definition in relation to the entire loan portfolio of customers and banks (gross carrying amount) and debt securities. The ratio reflects the quality of the loan portfolio of the bank and provides an indicator for the performance of the bank’s credit risk management.
NPE coverage ratio – describes to which extent, non-defaulted and defaulted non-performing loans and debt securities have been covered by impairments (Individual loan loss provisions – Stage 3) thus expressing also the ability of a bank to absorb losses from its NPE. It is calculated with impairment losses on loans to customers and banks and on debt securities set in relation to non-defaulted and defaulted non-performing loans to customers and banks and debt securities.
NPL coverage ratio – describes to which extent defaulted non-performing loans (non-banks) have been covered by impairments (total loan loss provisions) thus expressing also the ability of a bank to absorb losses from its NPL. It is calculated with impairment losses on loans to customers set in relation to defaulted non-performing loans to customers.
Operating result – is used to describe the operative performance of a bank for the reporting period. It consists of operating income less general administrative expenses.
Operating income – It comprises net interest income, dividend income, net fee and commission income, net trading income and fair value result, net gains/losses from hedge accounting and other net operating income.
Other result – Consists of impairment/reversal of impairment on investments in subsidiaries and associates, impairment on non-financial assets, negative goodwill recognized in profit or loss, current income from investments in subsidiaries and associates, result from non-current assets and disposal groups classified as held for sale and deconsolidation.
Provisioning ratio –is an indicator for development of risk costs and provisioning policy of an enterprise. It is computed by dividing impairment or reversal of impairment on financial assets (customer loans) by average customer loans (categories: financial assets measured at amortized cost and financial assets at fair value through other comprehensive income).
Return on equity (ROE before/after tax) – provides a profitability measure for both management and investors by expressing the net profit for the period as presented in the income statement as a percentage of the respective underlying (either equity related or asset related). Return on equity demonstrates the profitability of the bank on the capital invested by its shareholders and thus the success of their investment. Return on equity is a useful measure to easily compare the profitability of a bank with other financial institutions. Return on the total equity including non-controlling interests, i.e. profit before tax respectively after tax in relation to average equity on the statement of financial position. Average equity is calculated on month-end figures including non-controlling interests and does not include current year profit.
Return on risk-adjusted capital (RORAC) – is a ratio of a risk-adjusted performance management and shows the yield on the risk-adjusted capital (economic capital). The return on risk-adjusted capital is computed by dividing consolidated profit by the risk-adjusted capital (i.e. average economic capital). This capital requirement is calculated within the economic capital model for credit, market and operational risk.
Austria Am Stadtpark 9 1030 Vienna Phone: +43-1-71 707-0 Fax: +43-1-71 707-1715 SWIFT/ BIC: RZBATWW www.rbinternational.com ir@rbinternational com communications@rbinternational.com
Croatia Raiffeisenbank Austria d.d. Magazinska cesta 69 10000 Zagreb Phone: +385-1-45 664 66 Fax: +385-1-48 116 24 SWIFT/BIC: RZBHHR2X www.rba.hr
Kosovo Raiffeisen Bank Kosovo J.S.C. Rruga UÇK, No. 191 10000 Pristina Phone: +381-38-222 222 Fax: +381-38-20 301 130 SWIFT/BIC: RBKOXKPR www.raiffeisen-kosovo.com
Russia AO Raiffeisenbank St. Troitskaya 17/1 129090 Moscow Phone: +7-495-72 1-9900 Fax: +7-495-72 1-9901 SWIFT/BIC: RZBMRUMM www.raiffeisen.ru
Kosovo Raiffeisen Leasing Kosovo LLC Rr. UCK p.n. 222 10000 Pristina Phone: +381-38-222-222-340 www.raiffeisenleasing-kosovo.com
Slovakia Tatra-Leasing s.r.o. Černyševského 50 85101 Bratislava Phone: +421-2-5919-3168 Fax: +421-2-5919-3048 www.tatraleasing.sk
Raiffeisen Centrobank AG Tegetthoffstraße 1 1010 Vienna Phone: +43-1-51 520-0 www.rcb.at
Raiffeisen Wohnbaubank Aktiengesellschaft Mooslackengasse 12 1190 Vienna Phone: +43-1-71 707-1563 www.raiffeisen-wohnbaubank.at
For Group Investor Relations inquiries Phone: +43-1-71 707-2089 E-mail: ir@rbinternational.com Internet: www.rbinternational.com → Investors