Notes to the financial statements

1. Establishment of the Bank

i Agreement Establishing the Bank

The European Bank for Reconstruction and Development (the Bank), whose principal office is located in London, is an international organisation formed under the Agreement Establishing the Bank dated 29 May 1990 (the Agreement). At 31 December 2015, the Bank’s members comprised 64 countries, together with the European Union and the European Investment Bank.

 

ii Headquarters Agreement

The status, privileges and immunities of the Bank and persons connected with the Bank in the United Kingdom are confirmed and supplemented in the Headquarters Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Bank (Headquarters Agreement). The Headquarters Agreement was signed in London at the start of the Bank’s operations on 15 April 1991.

 

2. Segment information

The Bank’s activities are primarily Banking and Treasury. Banking activities represent investments in projects that, in accordance with the Agreement, are made for the purpose of assisting the countries in which the Bank invests in their transition to a market economy, while applying sound banking principles. The main investment products are loans, share investments and guarantees. Treasury activities include raising debt finance, investing surplus liquidity, managing the Bank’s foreign exchange and interest rate risks and assisting clients in asset and liability management matters.

 

Information on the financial performance of Banking and Treasury operations is prepared regularly and provided to the chief operating decision-maker. On this basis, Banking and Treasury operations have been identified as the operating segments.

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing the performance of the operating segments, is the President.

 

Segment performance

The President assesses the performance of the operating segments based on the net profit for the year, which is measured in a manner consistent with the financial statements. The segment information provided to the President for the operating segments for the year ended 31 December 2015 and 31 December 2014 is as follows:

 

Banking 2015

€ million

Treasury

2015

€ million

Aggregated 2015

€ million

Banking 2014

€ million

Treasury 2014

€ million

Aggregated 2014

€ million

Interest income

1,127

81

1,208

1,043

109

1,152

Other (expense)/income

266

118

384

(615)

11

(604)

Total segment revenue

1,393

199

1,592

428

120

548

Less interest expense and similar charges50

(301)

161

(140)

(299)

178

(121)

Net interest expense on derivatives

-

(170)

(170)

-

(199)

(199)

Allocation of the return on capital

1

-

1

28

3

31

Less general administrative expenses

(377)

(24)

(401)

(309)

(20)

(329)

Less depreciation and amortisation

(28)

(2)

(30)

(24)

(2)

(26)

Segment result before provisions and hedges

688

164

852

(176)

80

(96)

Fair value movement on non-qualifying and ineffective hedges

-

(171)

(171)

-

(34)

(34)

Provisions for impairment of loan investments and guarantees

121

-

121

(438)

-

(438)

Net (loss)/profit for the year

809

(7)

802

(614)

46

(568)

Transfers of net income approved by the Board of Governors

 

 

(360)

 

 

(155)

Net (loss)/profit after transfers approved by the Board of Governors

 

 

442

 

 

(723)

Segment assets

 

 

 

 

 

 

Total assets

26,880

28,146

55,026

25,367

27,120

52,487

Segment liabilities

 

 

 

 

 

 

Total liabilities

360

40,080

40,440

254

38,084

38,338

Segment revenues – Geographic

The Bank’s activities are divided into six regions for internal management purposes.

 

 

Segment

revenue

2015

€ million

Segment

revenue

2014

€ million

Advanced countries51

207

175

Early/Intermediate countries52

527

443

Russia

503

(313)

SEMED

43

12

Turkey

113

111

OECD53

199

120

Total

1,592

548

 

Revenues are attributed to countries on the basis of the location in which a project operates.

 

 

3. Net interest income

 

2015

€ million

2014

€ million

Interest and similar income

 

 

Banking loans at amortised cost

1,127

1,043

Debt securities

54

64

Collateralised placements

-

1

Reverse repurchase agreements

1

5

Cash and short-term funds

26

39

Interest and similar income

1,208

1,152

Interest expense and similar charges

 

 

Debts evidenced by certificates

(111)

(83)

Amounts owed to credit institutions

(27)

(6)

Other

(1)

(1)

Interest expense and similar charges

(139)

(90)

Net interest expense on derivatives

(170)

(199)

Net interest income

899

863

 

Interest income accrued on impaired financial assets during 2015 was €30 million (2014: €13 million).54

 

4. Net fee and commission income

The main components of net fee and commission income are as follows:

 

2015

€ million

2014

€ million

Trade finance fees

14

9

Syndication and agency fees

11

3

Administration fees

4

3

Prepayment fees

3

3

Front end and commitment charges

-

1

Other

(1)

1

Equity fees

(3)

(6)

Net fee and commission income

28

14

 

Front-end and commitment fees of €104 million (2014: €101 million) received in 2015, together with related direct costs of €6 million (2014: €5 million), have been deferred on the balance sheet. They will be recognised in interest income over the period from disbursement to repayment of the related loan, in accordance with IAS 18. In 2015, €160 million (2014: €140 million) of previously deferred fees and direct costs were recognised in interest income.

 

5. Net gains/(losses) from share investments at fair value through profit or loss

 

2015

€ million

2014

€ million

Net realised gains from share investments and equity related derivatives

250

281

Net unrealised losses from share investments and equity related derivatives

(53)

(1,029)

Net (losses)/gains from share investments at fair value through profit or loss

197

(748)

 

On exit of an equity investment, the cumulative gain/loss is realised with a corresponding reversal of the cumulative unrealised gain/loss recorded prior to the exit.

 

6. Net (losses)/gains from loans at fair value through profit or loss

 

2015

€ million

2014

€ million

Loan write-off

(1)

(3)

Net unrealised gains/(losses) from changes in fair value

(43)

7

Net unrealised foreign exchange losses

-

(1)

Net (losses)/gains from loans at fair value through profit or loss

(44)

3

 

7. Net gains from Treasury assets held at amortised cost

 

2015

€ million

2014

€ million

Net realised gains from debt securities at amortised cost

4

7

Net gains from Treasury assets held at amortised cost

4

7

During the year the Bank sold €1.1 billion of debt securities held at amortised cost (2014: €3.1 billion).

 

8. Net gains from Treasury activities at fair value through profit or loss

 

2015

€ million

2014

€ million

Debt buy-backs and termination of related derivatives

8

5

Balance sheet management

99

(1)

Internally managed dealing portfolio designated at fair value

7

-

Net gains from Treasury activities at fair value through profit or loss

114

4

Treasury balance sheet management activities are primarily concerned with the management of market and currency risks across the Bank’s balance sheet together with short-term liquidity management. The financial performance of these activities is affected by the currency basis spreads used in the valuation of swaps through which Treasury funds the Bank’s rouble-denominated loan portfolio. These swaps are used for funding purposes and so will be held to maturity, therefore any unrealised valuation losses or gains caused by the volatility in currency basis spreads will reverse over time. A €24 million gain was recognised in 2015 relating to these spreads (2014: €57 million loss).

 

The profit deriving from the Bank’s debt buyback activities is unpredictable as it typically occurs through the Bank responding to investors looking to exit private placement holdings of the Bank’s debt.

 

In 2015 Treasury decided to create a high quality Sovereign bond portfolio to be actively managed as part of its liquidity management strategy. The income from this portfolio is recognised at fair value through profit or loss.

 

9. Fair value movement on non-qualifying and ineffective hedges

The hedging practices and accounting treatment are disclosed under “Derivative financial instruments and hedge accounting” in the Accounting Policies section of the report.

 

The fair value movement on non-qualifying and ineffective hedges represents an accounting adjustment in respect of hedging relationships undertaken by the Bank that either do not qualify for hedge accounting or do not fully offset when measured in accordance with IFRS. This unrealised adjustment does not reflect economic substance, inasmuch as the reported losses would not be realised in cash if the hedging relationships were terminated. The adjustment will reverse over time as the underlying deals approach their maturities.

 

The Bank applies hedge accounting where there is an identifiable, one-to-one relationship between a hedging derivative instrument and a hedged cash instrument. These relationships predominantly arise within the context of the Bank's borrowing activities in which the Bank's issued bonds are combined with swaps to achieve floating-rate debt in the currency sought by the Bank. While such hedges are matched in cash flow terms, accounting rules may require different valuation methodologies to be applied to such cash flows. In particular, a pricing component of currency swaps (known as the basis swap spread) is not applied to the related hedged bond. This component is a feature of supply and demand requirements for other currencies relative to the US dollar or the euro. Such differences can create hedge ineffectiveness or hedge failures under IFRS, the combined effect of which is reported within this line of the income statement. For the year this resulted in a loss of €166 million, comprising losses of €740 million on the derivative hedging instruments and gains of €574 million on the hedged items (2014: a loss of €22 million comprising gains of €882 million on the derivative hedging instruments and losses of €904 million on the hedged items).

 

In addition to the one-to-one hedge relationships for which the Bank applies hedge accounting, the Bank also hedges interest rate risk across total assets and liabilities on a portfolio basis, for which hedge accounting is not applied. This activity results in the gains or losses arising on the hedging derivative instruments being recognised in the periods in which they occur while the offsetting impact deriving from the hedged cash instruments will accrue over a different timescale in keeping with the interest rates applicable to the specific periods for those instruments. For the year this resulted in a gain of €1 million (2014: loss of €12 million).

 

The combined effect of all the hedging activities described above was a loss of €165 million for the year (2014: loss of €34 million).

 

Cash flow hedges

The Bank hedges on an annual basis to minimise the exchange rate risk associated with incurring administrative expenses in the pound sterling. In 2015 a €6 million loss was recognised as ineffectiveness in the income statement arising from cash flow hedges (2014: nil).

10. Provisions for impairment of Banking loan investments at amortised cost

Release/(charge) for the year

2015

€ million

2014

€ million

Portfolio provisions for the unidentified impairment of loan investments55

 

 

Non-sovereign loan investments

329

(94)

Sovereign loan investments

8

(22)

Specific provisions for the identified impairment of loan investments56

(209)

(324)

Associated hedging costs57

(8)

-

Provisions for impairment of Banking loan investments at amortised cost

120

(440)

Movement in provisions

2015

€ million

2014

€ million

At 1 January

(1,209)

(807)

Release/(charge) for the year to the income statement58

128

(440)

Loans sold

20

16

Unwinding of the discount relating to the identified impairment of assets

27

13

Foreign exchange adjustments

(89)

(54)

Release against amounts written off

40

73

At 31 December

(1,083)

(1,209)

Analysed between

 

 

Portfolio provisions for the unidentified impairment of loan investments:

 

 

Non-sovereign loan investments

(252)

(538)

Sovereign loan investments

(32)

(40)

Specific provisions for the identified impairment of loan investments

(799)

(631)

At 31 December

(1,083)

(1,209)

 

11. General administrative expenses

 

2015

€ million

2014

€ million

Personnel costs

(292)

(241)

Overhead expenses

(115)

(93)

General administrative expenses

(407)

(334)

Release of deferral of direct costs related to loan origination and commitment maintenance

6

5

Net general administrative expenses

(401)

(329)

The Bank’s expenses are predominantly incurred in the pound sterling. The pound sterling equivalent of the Bank’s general administrative expenses, excluding depreciation and amortisation, totalled £308 million (2014: £279 million).

 

Direct costs of €6 million (2014: €5 million) relating to loan origination in 2015 have been deferred on the balance sheet in accordance with IAS 18. These figures will be recognised in interest income over the period from disbursement to repayment of the related loans.

 

The following fees for work performed by the Bank’s external auditor were included in overhead expenses:

Audit and assurance services

2015

€ 000

2014

€ 000

Services as auditor of the Bank

(345)

(304)

Internal controls framework assurance

(164)

(145)

Retirement plan audit

(28)

(25)

Tax recovery audit

(13)

(12)

Audit and assurance services

(550)

(486)

 

12. Placements with and advances to credit institutions

 

Analysed between

2015

€ million

2014

€ million

Cash and cash equivalents

7,533

6,435

Other current placements and advances

4,191

4,177

At 31 December

11,724

10,612

Cash and cash equivalents are those placements and advances which have an original tenor equal to, or less than, three months. “Current” is defined as those assets maturing, or liabilities due, within the next 12 months. All other assets or liabilities are “non-current”.

 

 

13. Debt securities

 

2015

€ million

2014

€ million

Debt securities at fair value through profit or loss

747

106

Debt securities at amortised cost

11,329

11,688

At 31 December

12,076

11,794

Analysed between

 

 

Current

5,178

4,226

Non-current

6,898

7,568

At 31 December

12,076

11,794

There were no impairment losses relating to debt securities in 2015 (2014: €nil).

 

14. Collateralised placements

The collateralised placement held at the end of 2015 was current (2014: all collateralised placements were non-current).

 

 

15. Other financial assets

 

2015

€ million

2014

€ million

Fair value of derivatives designated as fair value hedges

3,072

3,113

Fair value of portfolio derivatives not designated as hedges

1,035

1,359

Fair value of derivatives held in relation to the banking portfolio

489

506

Interest receivable

231

238

Paid-in capital receivable

12

11

Other

92

96

At 31 December

4,931

5,323

Analysed between

 

 

Current

1,334

1,593

Non-current

3,597

3,730

At 31 December

4,931

5,323

 

Included within “Other” above are deferred fair value amounts related to banking derivative instruments that have a determinable return. Specifically, these relate to banking derivatives that are valued using valuation techniques other than observable market data. On initial recognition, the difference between the transaction price and the value derived from the valuation technique is deferred. These amounts are recognised in profit when market data becomes observable, when the underlying equity is exited or when the derivative is exercised. At 31 December 2015, net gains of €88 million were deferred (2014: €26 million).

 

16. Banking loan investments at amortised cost

 

 

2015 Sovereign loans

€ million

2015

Non-sovereign loans

€ million

2015

Total

loans

€ million

2014 Sovereign loans

€ million

2014

Non-sovereign loans

€ million

2014

Total

loans

€ million

At 1 January

2,920

17,438

20,358

2,801

16,657

19,458

Movement in fair value revaluation59

-

(14)

(14)

-

17

17

Disbursements

519

7,163

7,682

485

7,517

8,002

Repayments and prepayments

(485)

(6,289)

(6,774)

(455)

(6,879)

(7,334)

Foreign exchange movements

71

496

567

83

165

248

Movement in net deferral of front end

fees and related direct costs

8

49

57

6

34

40

Written off

-

(59)

(59)

-

(73)

(73)

At 31 December

3,033

18,784

21,817

2,920

17,438

20,358

Impairment at 31 December

(32)

(1,051)

(1,083)

(40)

(1,169)

(1,209)

Total net of impairment at 31 December

3,001

17,733

20,734

2,880

16,269

19,149

Analysed between

 

 

 

 

 

 

Current

 

 

2,899

 

 

3,123

Non-Current

 

 

17,835

 

 

16,026

Total net of impairment at 31 December

3,001

17,733

20,734

2,880

16,269

19,149

At 31 December 2015 the Bank categorised 85 loan investments at amortised cost as impaired, with operating assets totalling €1.2 billion (2014: 86 loans totalling €1.2 billion).

 

17. Banking loan investments at fair value through profit or loss

 

Non-sovereign loans

2015

€ million

2014

€ million

At 1 January

338

223

Movement in fair value revaluation

(44)

9

Disbursements

61

248

Repayments and prepayments

(44)

(72)

Foreign exchange movements

-

(67)

Reclassification from Equity to FVTPL

28

-

Written off

-

(3)

At 31 December

339

338

Analysed between

 

 

Current

36

34

Non-current

303

304

At 31 December

339

338

 

18. Share investments at fair value through profit or loss

 

2015

Fair value Unlisted

€ million

2015

Fair value Listed

€ million

2015

Fair value Total

€ million

2014

Fair value Unlisted

€ million

2014

Fair value Listed

€ million

2014

Fair value Total

€ million

Outstanding disbursements

 

 

 

 

 

 

At 1 January

4,120

2,065

6,185

4,410

1,949

6,359

Transfer between unlisted and listed

(77)

77

-

(296)

296

-

Disbursements

665

417

1,082

615

437

1,052

Disposals

(466)

(593)

(1,059)

(605)

(617)

(1,222)

Reclassification

(28)

-

(28)

-

-

-

Written off

(52)

-

(52)

(4)

-

(4)

At 31 December

4,162

1,966

6,128

4,120

2,065

6,185

Fair value adjustment

 

 

 

 

 

 

At 1 January

(1,165)

49

(1,116)

228

(97)

131

Transfer between unlisted and listed

39

(39)

-

(431)

431

-

Movement in fair value revaluation

58

(37)

21

(962)

(285)

(1,247)

At 31 December

(1,068)

(27)

(1,095)

(1,165)

49

(1,116)

 

 

 

 

 

 

 

Fair value at 31 December

3,094

1,939

5,033

2,955

2,114

5,069

 

Summarised financial information on share investments where the Bank owned greater than, or equal to, 20 per cent of the investee share capital at 31 December 2015 (venture capital associates), is detailed under note 31, “Related parties”.

 

19. Treasury share investments at fair value through other comprehensive income

Treasury holds two strategic share investments for the purposes of accessing hedging and risk management products in the currencies of underdeveloped markets. These are in the Currency Exchange Fund N.V. and the Frontier Clearing Fund. The Bank also has a purely nominal shareholding in SWIFT as membership is required to participate in this international payments system.

 

 

2015

€ million

2014

€ million

Share investment designated at fair value through other comprehensive income

 

 

The Currency Exchange Fund N.V.

55

62

The Frontier Clearing Fund

8

-

SWIFT

-

-

At 31 December

63

62

No dividend income was received on these share investments during 2015 (2014: €2 million).

 

20. Intangible assets

 

Computer software development

costs 2015 € million

Computer software development costs 2014 € million

Cost

 

 

At 1 January

216

195

Additions

38

21

Disposals

(152)

-

At 31 December

102

216

Amortisation

 

 

At 1 January

(173)

(156)

Charge

(18)

(17)

Disposals

152

-

At 31 December

(39)

(173)

Net book value at 31 December

63

43

 

21. Property, technology and office equipment

 

 

Property 2015

€ million

Property under construction 2015

€ million

Technology and office equipment 2015

€ million

Total

2015

€ million

Property 2014

€ million

Property under construction 2014

€ million

Technology and office equipment 2014

€ million

Total

2014

€ million

Cost

 

 

 

 

 

 

 

 

At 1 January

67

2

16

85

54

8

21

83

Additions

8

13

3

24

3

-

2

5

Transfers

-

-

-

-

11

(6)

(5)

-

Disposals

(10)

-

(1)

(11)

(1)

-

(2)

(3)

At 31 December

65

15

18

98

67

2

16

85

 

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

 

 

At 1 January

(33)

-

(12)

(45)

(27)

-

(12)

(39)

Charge

(10)

-

(2)

(12)

(7)

-

(2)

(9)

Transfers

-

-

-

-

-

-

-

-

Disposals

8

-

1

9

1

-

2

3

At 31 December

(35)

-

(13)

(48)

(33)

-

(12)

(45)

 

 

 

 

 

 

 

 

 

Net book value at 31 December

30

15

5

50

34

2

4

40

 

22. Borrowings

 

2015

€ million

2014

€ million

Amounts owed to credit institutions and other third parties

 

 

Amounts owed to credit institutions

(264)

(210)

Amounts held as collateral

(1,387)

(1,434)

Amounts managed on behalf of third parties

(939)

(890)

At 31 December

(2,590)

(2,534)

Of which current:

(2,590)

(2,534)

23. Debts evidenced by certificates

The Bank’s outstanding debts evidenced by certificates and related fair value hedging swaps are summarised below, both in the currency of the bond and the currency obtained after currency swap hedges have been taken into account.

 

Bond denominations 2015 € million

Currency after swap 2015 € million

Bond denominations 2014 € million

Currency after swap 2014 € million

Armenian dram

(4)

-

(3)

-

Australian dollar

(763)

-

(1,425)

-

Canadian dollar

(32)

-

(67)

 

Euro

(3,255)

(4,477)

(3,851)

(8,286)

Georgian lari

(29)

(29)

(22)

 

Japanese yen

(1,307)

-

(1,423)

-

Mexican peso

(140)

-

(60)

-

New Turkish lira

(1,236)

-

(1,456)

-

New Zealand dollar

(14)

-

(14)

-

Norwegian krone

(97)

-

(133)

-

Pound sterling

(3,650)

(2,727)

(3,497)

(2,479)

Romanian leu

(59)

(22)

(61)

(4)

Russian rouble

(544)

(233)

(403)

(119)

Slovak koruna

(43)

-

(42)

-

South African rand

(287)

-

(434)

-

Swiss franc

(1)

-

(1)

-

United States dollar

(22,819)

(26,792)

(20,030)

(22,034)

At 31 December

(34,280)

(34,280)

(32,922)

(32,922)

 

Where the swap counterparty exercises a right to terminate the hedging swap prior to legal maturity, the Bank is committed to exercise the same right with its issued bond.

Analysed between

2015

€ million

2014

€ million

Current

(8,714)

(8,094)

Non-current

(25,566)

(24,828)

Debts evidenced by certificates at 31 December

(34,280)

(32,922)

During the year the Bank redeemed €0.5 billion of bonds and medium-term notes prior to maturity (2014: €1.3 billion), generating a net gain of €8 million (2014: €5 million).

 

24. Other financial liabilities

 

2015

€ million

2014

€ million

Fair value of derivatives designated as fair value hedges

(2,559)

(1,990)

Fair value of portfolio derivatives not designated as hedges

(357)

(359)

Fair value of other derivatives held in relation to the banking portfolio

(77)

(81)

Interest payable

(283)

(250)

Other

(294)

(202)

Debts evidenced by certificates at 31 December

(3,570)

(2,882)

Analysed between

2015

€ million

2014

€ million

Current

(1,625)

(1,001)

Non-current

(1,945)

(1,881)

At 31 December

(3,570)

(2,882)

 

 

25. Subscribed capital

 

 

 

2015

Number

of shares

2015

Total

€ million

2014

Number of shares

2014

Total

€ million

Authorised shared capital

3,000,000

30,000

3,000,000

30,000

of which

 

 

 

 

Subscriptions by members – initial capital

993,055

9,931

993,055

9,931

Subscriptions by members – first capital increase

988,055

9,881

988,055

9,881

Subscriptions by members – second capital increase

986,325

9,862

986,325

9,862

Subscribed capital

2,967,435

29,674

2,967,435

29,674

Unsubscribed capital

32,565

326

32,565

326

At 31 December

3,000,000

30,000

3,000,000

30,000

 

 

 

 

The Bank’s capital stock is divided into paid-in shares and callable shares. Each share has a par value of €10,000. At the Bank’s Annual Meeting in May 2010, the Board of Governors approved a two-step increase in the authorised capital stock of the Bank: a €1.0 billion increase in authorised paid-in shares and a €9.0 billion increase in authorised callable capital shares, amounting to a €10.0 billion aggregate increase in the authorised capital stock of the Bank (collectively referred to as the second capital increase). Resolution No. 126 authorised the increase in authorised capital stock by 100,000 paid-in shares, each share having a par value of €10,000, taking the authorised capital stock of the Bank to €21.0 billion. Resolution No. 128 authorised the increase in the authorised capital stock of the Bank by 900,000 callable shares, each share having a par value of €10,000. These shares were originally subject to redemption in accordance with the terms of Resolution No. 128, but such provisions were removed under the terms of Resolution No. 183 approved by the Board of Governors at the 2015 Annual Meeting. The increase in callable capital became effective in April 2011.

 

Payment for the paid-in shares issued as part of the original authorised capital stock, and as part of the first capital increase and subscribed to by members, is made over a period of years determined in advance. Payment for the paid-in shares issued under the second capital increase was by way of a reallocation of net income previously allocated to surplus for other purposes, namely for the payment of such paid-in shares, pursuant to Article 36.1 of the Agreement and approved by Board of Governors Resolution No. 126, dated 14 May 2010. Article 6.4 of the Agreement states that payment of the amount subscribed to the callable capital is subject to call by the Bank, taking account of Articles 17 and 42 of the Agreement, only as and when required by the Bank to meet its liabilities. Article 42.1 states that in the event of the termination of the Bank’s operations, the liability of all members for all uncalled subscriptions to the capital stock will continue until all claims of creditors, including all contingent claims, have been discharged.

 

The Agreement allows for a member to withdraw from the Bank, in which case the Bank is required to repurchase the former member’s shares. No member has ever withdrawn its membership. The stability in the membership reflects the fact that the members are 64 countries and two inter-governmental organisations, and that the purpose of the Bank is to foster the transition process in politically qualifying countries from central Europe to Central Asia and the SEMED region.

Moreover, there is a financial disincentive to withdrawing membership. The upper limit of the amount of the repurchase price of the former member’s shares is the amount of its paid-in capital, yet a former member remains liable for its direct obligations and its contingent liabilities to the Bank for as long as any part of the loans, share investments or guarantees contracted before it ceased to be a member are outstanding. Were a member to withdraw from the Bank, the Bank would be able to impose conditions and set dates in respect of payments for shares repurchased. If, for example, paying a former member would have adverse consequences for the Bank’s financial position, the Bank could defer payment until the risk had passed, and indefinitely if appropriate. If a payment was then made to a former member, the member would be required to repay, on demand, the amount by which the repurchase price would have been reduced if the losses for which the former member remained liable had been taken into account at the time of payment.

 

Under the Agreement, payment for the paid-in shares of the initial capital stock subscribed to by members was made in five equal annual instalments. Of each instalment, up to 50 per cent was payable in non-negotiable, non-interest-bearing promissory notes or other obligations issued by the subscribing member and payable to the Bank at par value upon demand. Under Resolution No. 59, payment for the paid-in shares subscribed to by members under the first capital increase was made in eight equal annual instalments. Under Resolution No. 126, payment for the paid-in shares issued to members under the second capital increase was made in one instalment immediately following approval of Resolution No. 126.

 

A statement of capital subscriptions showing the amount of paid-in and callable shares subscribed to by each member, together with the amount of unallocated shares and votes, is set out in the following table. Under Article 29 of the Agreement, the voting rights of members that have failed to pay any part of the amounts due in respect of their capital subscription are proportionately reduced until payment is made.

 

 

Statement of capital subscriptions

At 31 December 2015

Members

Total shares (number)

Resulting votes61 (number)

Total

capital

€ million

Callable capital

€ million

Paid-in capital

€ million

Albania

3,001

2,511

30

24

6

Armenia

1,499

1,499

15

12

3

Australia

30,014

30,014

300

237

63

Austria

68,432

68,432

684

541

143

Azerbaijan

3,001

3,001

30

24

6

Belarus

6,002

6,002

60

47

13

Belgium

68,432

68,432

684

541

143

Bosnia and Herzegovina

5,071

5,071

51

40

11

Bulgaria

23,711

23,711

238

188

50

Canada

102,049

102,049

1,020

807

213

Croatia

10,942

10,942

109

86

23

Cyprus

3,001

3,001

30

24

6

Czech Republic

25,611

25,611

256

203

53

Denmark

36,017

36,017

360

285

75

Egypt

2,101

2,101

21

15

6

Estonia

3,001

3,001

30

24

6

European Investment Bank

90,044

90,044

900

712

188

European Union

90,044

90,044

900

712

188

Finland

37,518

37,518

375

297

78

Former Yugoslav Republic of Macedonia

1,762

1,762

17

13

4

France

255,651

255,651

2,557

2,024

533

Georgia

3,001

3,001

30

24

6

Germany

255,651

255,651

2,557

2,024

533

Greece

19,508

19,508

195

154

41

Hungary

23,711

23,711

237

188

49

Iceland

3,001

3,001

30

24

6

Ireland

9,004

9,004

90

71

19

Israel

19,508

19,508

195

154

41

Italy

255,651

255,651

2,557

2,024

533

Japan

255,651

255,651

2,557

2,024

533

Jordan

986

986

10

8

2

Kazakhstan

6,902

6,902

70

55

15

Korea, Republic of

30,014

30,014

300

237

63

Kosovo

580

580

6

5

1

Kyrgyz Republic

2,101

1,010

21

15

6

Latvia

3,001

3,001

30

24

6

Liechtenstein

599

599

6

5

1

Lithuania

3,001

3,001

30

24

6

Luxembourg

6,002

6,002

60

47

13

Malta

210

210

2

1

1

Mexico

4,501

4,501

46

35

11

Moldova

3,001

2,781

30

24

6

Mongolia

299

299

3

2

1

Montenegro

599

599

6

5

1

Morocco

1,478

1,478

15

11

4

Netherlands

74,435

74,435

744

589

155

New Zealand

1,050

1,050

11

7

4

Norway

37,518

37,518

375

297

78

Poland

38,418

38,418

384

304

80

Portugal

12,605

12,605

126

100

26

Romania

14,407

14,407

144

114

30

Russia

120,058

120,058

1,201

951

250

Serbia

14,031

14,031

140

111

29

Slovak Republic

12,807

12,807

128

101

27

Slovenia

6,295

6,295

63

50

13

Spain

102,049

102,049

1,020

807

213

Sweden

68,432

68,432

684

541

143

Switzerland

68,432

68,432

684

541

143

Tajikistan

2,101

602

21

15

6

Tunisia

986

986

10

8

2

Turkey

34,515

34,515

345

273

72

Turkmenistan

210

164

2

1

1

Ukraine

24,011

24,011

240

190

50

United Kingdom

255,651

255,651

2,557

2,024

533

United States of America

300,148

300,148

3,001

2,376

625

Uzbekistan

4,412

4,134

44

31

13

Capital subscribed by members

2,967,435

2,963,811

29,674

23,472

6,202

 

 

26. Reserves and retained earnings

 

 

2015

€ million

2014

€ million

Special reserve

 

 

At 1 January

306

306

At 31 December

306

306

 

 

 

Loan loss reserve

 

 

Loan loss reserve

738

730

Transferred from retained earnings

421

8

At 31 December

1,159

738

 

 

 

Net income allocation

 

 

At 1 January

1,952

619

Transferred (to)/from retained earnings

(1,582)

1,488

Distributions

(360)

(155)

At 31 December

10

1,952

 

 

 

General reserve – other reserve

 

 

Revaluation reserve

 

 

At 1 January

14

15

Specific provisions for the identified impairment of loan investments

(7)

(1)

At 31 December

7

14

 

 

 

Hedging reserve – cash flow hedges

 

 

At 1 January

-

4

Gains from changes in fair value of hedges recognised in equity

-

9

Gains reclassified to general administrative expenses

-

(13)

At 31 December

-

-

 

 

 

Other

 

 

At 1 January

211

205

Internal tax for the year

8

6

At 31 December

219

211

 

 

 

General reserve – other reserve at 31 December

226

225

 

 

 

General reserve – retained earnings

 

 

At 1 January

4,726

6,795

Net profit/(loss) before transfers of net income approved by the Board of Governors

802

(568)

Transferred to loan loss reserve

(421)

(8)

Transferred from/(to) net income allocation

1,582

(1,488)

Actuarial losses on defined benefit scheme

(6)

(5)

General reserve retained earnings at 31 December

6,683

4,726

 

 

 

Total reserves and retained earnings at 31 December

8,384

7,947

 

The special reserve is maintained, in accordance with Article 16 of the Agreement, for meeting certain defined losses of the Bank. The special reserve has been established, in accordance with the Bank’s financial policies, by setting aside 100 per cent of qualifying fees and commissions received by the Bank associated with loans, guarantees and underwriting the sale of securities. In 2011 the Board of Directors decided that for the foreseeable future the size of the special reserve was adequate.

 

In 2005, the Bank created a loan loss reserve (LLR) within members’ equity, to set aside an amount of retained earnings equal to the difference between the impairment losses expected over the life of the loan portfolio and the amount recognised through the Bank’s income statement on an incurred loss basis. During 2015, the Board of Directors approved an additional one-off reallocation of €660 million to the LLR following the change in the estimates used for calculating unidentified impairment losses. This amount was based on the release to the income statement of €329 million62 and the corresponding release to the LLR due to the changes in estimated lifetime portfolio losses. The impact of this one-off reallocation, together with the normal movements recognised in the year, resulted in the LLR increasing by a net total of €421 million in 2015.

 

The general reserve represents all reserves except those amounts allocated to the special and loan loss reserves and it primarily comprises retained earnings. It also includes the retention of internal tax paid in accordance with Article 53 of the Agreement. This requires that all Directors, Alternate Directors, officers and employees of the Bank are subject to an internal tax imposed by the Bank on salaries and emoluments paid by the Bank and which is retained for its benefit. At the end of the year internal tax amounted to €109 million (2014: €101 million).

 

The hedging reserve includes foreign exchange revaluation amounts on designated hedging instruments held by the Bank for the purposes of hedging its estimated future pound sterling operating expenditure. At 31 December 2015 there were no qualifying designated hedging instruments.

 

Reserves and retained earnings

2015

€ million

2014

€ million

Special reserve

306

306

Loan loss reserve

1,159

738

Net income allocation

10

1,952

Contingent liability63

81

330

Unrealised gains

955

1,445

Total restricted reserves

2,511

4,771

 

 

 

Unrestricted general reserves

5,873

3,176

 

 

 

At 31 December

8,384

7,947

The Bank’s reserves are used to determine, in accordance with the Agreement, what part of the Bank’s net income will be allocated to surplus or other purposes and what part, if any, will be distributed to its members. For this purpose, the Bank uses unrestricted general reserves.

 

Article 36 of the Agreement relates to the allocation and distribution of the Bank’s net income and states: “No such allocation, and no distribution, shall be made until the general reserve amounts to at least ten per cent of the authorised capital stock”. This figure is currently €3.0 billion (2014: €3.0 billion).

 

The SEMED Investment Special Fund (ISF) was established in 2012 with a net income allocation of €1.0 billion, to be used to finance EBRD special operations in the SEMED region. This amount was ring-fenced within the Bank’s restricted reserves, to be drawn upon by the Fund as necessary to finance its operations. As each country within the SEMED region obtains recipient membership status of the Bank, the resources held within the Fund in respect of that country are to be returned to the Bank’s ordinary capital resources. On 30 October 2015 the Fund’s remaining resources were transferred back to the Bank following the granting of recipient country status to Egypt and the Fund was terminated. Under IFRS accounting rules, the resources transferred to the SEMED ISF remained on the Bank’s balance sheet at all times because the Bank did not divest itself of the risks and rewards of those resources.

 

During 2015 €230 million of the contingent liability of €330 million set aside in restricted reserves at 31 December 2014 was activated and transferred in relation to the New Safe Confinement Project in Chernobyl. The remaining €100 million contingent liability was reduced to €81 million at 31 December 2015 (as explained in note 30). In addition, the Board of Governors approved a transfer of €130 million of net income to be allocated to the EBRD Shareholder Special Fund. These amounts were reflected in the 2015 income statement, underneath net profit for the year from continuing operations.

 

27. Undrawn commitments and guarantees

Analysis by instrument

2015

€ million

2014

€ million

Undrawn commitments

 

 

Loans

10,629

9,230

Share investments

1,754

1,673

At 31 December

12,383

10,903

 

 

 

Guarantees

 

 

Trade finance guarantees64

451

500

Other guarantees65

125

128

At 31 December

576

628

 

 

 

Undrawn commitments and guarantees at 31 December

12,959

11,531

28. Operating lease commitments

The Bank leases its Headquarters building in London and some of its Resident Office buildings in the countries in which it invests. These are standard operating leases and include renewal options, periodic escalation clauses and are mostly non-cancellable in the normal course of business without the Bank incurring substantial penalties. The most significant lease is that for the Bank’s Headquarters building. Rent payable under the terms of this lease is reviewed every five years and is based on market rates. The last review was conducted in December 2011.

 

Minimum future lease payments under long-term non-cancellable operating leases and payments made under such leases during the year are shown below:

 

Payable

2015

€ million

2014

€ million

Not later than one year

35

32

Later than one year and not later than five years

119

114

Later than five years

45

66

At 31 December

199

212

Expenditure incurred in the current year

32

28

 

The Bank had entered into sub-lease arrangements for two floors of its Headquarters building, which expired on 22 January 2015.

 

Receivable

2015

€ million

2014

€ million

Not later than one year

-

-

At 31 December

-

-

Income received in the current year

-

5

 

29. Staff retirement schemes

There are two retirement plans in operation. The Final Salary Plan (FSP) is a defined benefit scheme, to which only the Bank contributes. The Money Purchase Plan (MPP) is a defined contribution scheme to which both the Bank and staff contribute, with Plan members making individual investment decisions. Both plans provide a lump sum benefit on leaving the Bank or at retirement age, such that retirement plan obligations to staff once they have left the Bank or retired are minimal (being limited to inflation adjustments on undrawn or deferred benefits under each plan).

 

Defined benefit scheme

A qualified actuary performs a full actuarial valuation of the FSP at least every three years using the projected unit method, with a more high-level interim valuation performed annually. The most recent interim valuation was carried out on 30 June 2015 which, for the purposes of IAS 19: Employee Benefits, was rolled forward to 31 December. The present value of the defined benefit obligation and current service cost was calculated using the projected unit credit method.

 

The primary risk associated with the FSP is that its assets will fall short of its liabilities. This risk, encompassing market risk and credit risk associated with its investments and the liquidity risk associated with the payment of defined obligations as they fall due is borne by the Bank as the FSP is fully funded by the Bank. Responsibility for the investment strategy of the Scheme rests with the Retirement Plan Investment Committee (RPIC).

 

The aim of investment risk management is to minimise the risk of an overall reduction in the value of the FSP assets and to maximise the opportunity for gains across the whole investment portfolio. This is achieved through asset diversification to reduce exposure to market risk and credit risk to an acceptable level. For example, the non-cash and government bond investment holdings held by the FSP are fund-based investments that diversify their exposure to a number of underlying investments.

 

The RPIC passively manages credit risk by selecting investment funds that invest in gilts rather than corporate bonds. To mitigate against market risk the RPIC meets quarterly with the FSP’s investment adviser to review the performance of all of the funds against their benchmarks. No asset-liability matching strategies are undertaken in relation to the FSP.

 

If, at the effective date of any actuarial valuation, the value of the plan’s assets is less than the liabilities, it is the Bank’s policy to review the funding status of the FSP and decide if a recovery plan should be put in place. Typically, such a recovery plan would include either anticipated investment out-performance, additional contributions from the Bank, or both. In the event that the plan assets are estimated to have fallen below 90 per cent of the defined benefit obligation (DBO), the Bank would expect to make additional contributions to restore the funding of the plan to at least 90 per cent as soon as possible.

 

Amounts recognised in the balance sheet are as follows:

 

 

2015

€ million

2014

€ million

Fair value of plan assets

390

359

Present value of the defined benefit obligation

(403)

(359)

Net defined benefit liability at 31 December

(13)

-

 

 

 

Movement in the net defined benefit liability (included in “Other liabilities”):

 

 

At 1 January

-

-

Contributions paid66

31

35

Total expense as below

(38)

(30)

Remeasurement effects recognised in other comprehensive income

(6)

(5)

At 31 December

(13)

-

 

 

 

The amounts recognised in the income statement are as follows:

 

 

Current service cost

(38)

(31)

Net finance income

-

1

Total included in staff costs

(38)

(30)

 

 

Principal actuarial assumptions used:

 

 

 

2015

2014

Discount rate

3.50%

3.20%

Expected return on plan assets

3.50%

3.20%

Price inflation

2.75%

2.75%

Future salary increases

3.75%

3.75%

Weighted average duration of the defined benefit obligation

11 years

11 years

 

Sensitivity analysis on the key actuarial assumptions:

 

 

Assumption

Sensitivity

(Decrease)/

Increase

in DBO

€ million

Discount rate

3.50%

+/- 0.5% pa

(20)/22

Price inflation

2.75%

+/- 0.25% pa

10/(10)

These sensitivity analyses have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as the assumptions may be correlated.

 

 

Plan asset allocation

2015

Listed

€ million

2015

Unlisted

€ million

2015

Total

€ million

2014

Listed

€ million

2014

Unlisted

€ million

2014

Total

€ million

Equities

185

39

224

163

35

198

Index-linked bonds

130

-

130

128

-

128

Commodities

-

16

16

-

13

13

Other

-

20

20

-

14

14

Cash

-

-

-

-

6

6

Total

315

75

390

291

68

359

Changes in the present value of the defined benefit obligation are as follows:

2015

€ million

2014

€ million

Present value of defined benefit obligation at 1 January

(359)

(289)

Interest cost

(38)

(31)

Service cost

(12)

(13)

Effect of exchange rate movement

(20)

(20)

Actuarial gain/(loss) arising due to changes in assumptions67

13

(14)

Benefits paid

13

8

Present value of defined benefit obligation at 31 December

(403)

(359)

Changes in the fair value of plan assets are as follows:

2015

€ million

2014

€ million

Present value of plan assets at 1 January

359

289

Interest income on plan assets

12

14

Return on assets greater/(less) than discount rate

(19)

9

Effect of exchange rate movement

20

20

Contributions paid

31

35

Benefits paid

(13)

(8)

Present value of plan assets at 31 December

390

359

Experience gains and losses

2015

€ million

2014

€ million

Defined benefit obligation

(403)

(359)

Plan assets

390

359

(Deficit)/surplus

(13)

-

Experience gains/(losses) on plan assets:

 

 

Amount

-

2

Percentage of the present value of the plan assets

(0.1%)

0.6%

Actual return less expected return on plan assets:

 

 

Amount

(19)

8

Percentage of the present value of the plan assets

(4.9%)

2.3%

Defined contribution scheme

The charge recognised under the MPP was €19 million (2014: €16 million) and is included in “General administrative expenses”.

 

Other long-term employee benefits

The Bank maintains a medical retirement benefit plan to provide staff retiring from the Bank, aged 50 or over and with at least seven years’ service, with a lump sum benefit to help purchase medical insurance cover. The total charge for the year was €3 million (2014: €4 million).

 

30. Contingent liability

On 28 November 2014, the Board of Governors adopted Resolution No. 175 Net Income Reallocation for the New Safe Confinement Project in Chernobyl. The resolution pledged net income to State Specialised Enterprise Chernobyl NPP (SSE ChNPP) of up to €450 million in order to help resolve a €615 million shortfall in the finances of the Chernobyl Shelter Fund (CSF). Of this €450 million, €120 million was transferred to SSE ChNPP in 2014 and a further €230 million was transferred in 2015. These amounts were recognised in the Income Statement in 2014 and 2015 respectively.

 

Up to €100 million will be reallocated to SSE ChNPP from the Bank’s net income by 30 June 2016 (or such later date that the Board of Directors may determine, on or before that date), subject to receipts by CSF from donors other than G7 countries and the European Commission falling below €100 million. This represents a contingent liability to the Bank, dependent on CSF’s receipt of additional commitments from other donors. As at 31 December 2015, CSF had received commitments from other donors totalling €19 million, reducing the Bank’s contingent liability to €81 million.

 

It is highly unlikely that any amounts reallocated to SSE ChNPP would subsequently be reimbursed to the Bank.

 

31. Related parties

The Bank has the following related parties:

 

Key management personnel

Key management personnel comprise: members of the Bank’s Executive Committee, Managing Directors and the Director of the President’s Office.

 

In pound sterling terms, salaries and other benefits paid to key management personnel in 2015 amounted to £14 million (2014: £12 million). This comprises salary and employee benefits of £11 million (2014: £10 million) and post-employment benefits of £3 million (2014: £2 million).

 

Venture capital associates

The Bank has invested in a number of venture capital associates that it accounts for at fair value through profit or loss. At 31 December 2015, according to the 2014 audited financial statements (and where these are not available, the most recent unaudited management information) from the investee companies, these venture capital associates had total assets of €33.1 billion (2014: €34.7 billion) and total liabilities of €24.5 billion (2014: €26.2 billion). For the year ended 31 December 2015, these associates had income of €5.1 billion (2014: €6.7 billion) and made a net loss before tax of €1.0 billion (2014: net profit before tax of €784 million).

 

In addition, as at 31 December 2015, the Bank had outstanding €45 million (2014: €152 million) of financing to these companies on which it had received €1 million (2014: €16 million) of interest income during the year.

 

There were no venture capital associates deemed material to the Bank as at 31 December 2015.

 

Special Funds

Special Funds are established in accordance with Article 18 of the Agreement Establishing the Bank and are administered under the terms of the rules and regulations for each such Special Fund. At 31 December 2015 the Bank administered 18 Special Funds (2014: 18 Funds) with aggregate pledged contributions amounting to €1.6 billion (2014: €1.3 billion).

 

The Bank acts as manager and administrator of the Special Funds for which it receives management and cost recovery fees. In 2015 these fees amounted to €3.6 million (2014: €1.4 million) of which €2.3 million was payable at 31 December 2015 (2014: €0.3 million).

 

The Bank pays for guarantees from certain Special Funds in respect of specific exposures arising in its trade finance portfolios for which it paid €0.1 million in 2015 (2014: €0.1 million). In addition, the Bank also benefits from fee-free guarantee arrangements with certain Special Funds for losses which it could potentially incur in its investment activities. The provision of these guarantees qualifies such Special Funds as ‘unconsolidated structured entities’ within the meaning of IFRS 12. The Bank’s only exposure to these Special Funds would arise in the period between recognising a guarantee receivable on its balance sheet and the settlement of that receivable.

 

At 31 December 2015 the Bank had €2.0 million such exposure (2014: €1.3 million).

 

Audit fees payable to the Bank's auditor for the 2015 audits of the Special Funds totalled €0.1 million (2014: €0.1 million).

 

The financial statements of each Special Fund are approved separately by the Board of Governors at the Bank’s Annual Meeting.

 

32. Other fund agreements

Technical Cooperation and Carbon Funds

 

In addition to the Bank’s ordinary operations and the Special Funds programme, the Bank administers numerous bilateral and multilateral contribution agreements to provide technical assistance and investment support grants in the existing and potential countries in which it invests. These grants focus primarily on project preparation, project implementation (including goods and works), advisory services and training. The resources provided through these contribution agreements are held separately from the ordinary capital resources of the Bank and are subject to external audit.

 

The table below provides a summary of these Funds.

 

Plan asset allocation

2015 Cumulative contributions pledged

€ million

2015 Cumulative

contributions received

€ million

2015

Cumulative disbursements

€ million

2015 Cumulative No. of

Funds

2014 Cumulative contributions

pledged

€ million

2014 Cumulative contributions received

€ million

2014 Cumulative disbursements € million

2014 Cumulative No. of

Funds

Technical Cooperation

2,919

2,515

1,606

431

2,629

2,280

1,505

406

Carbon

231

147

102

3

231

147

102

3

Total

3,150

2,662

1,708

434

2,860

2,427

1,607

409

Nuclear Funds

Following a proposal by the G-7 countries for a multilateral programme of action to improve safety in nuclear power plants in the countries in which the Bank invests, the Nuclear Safety Account (NSA) was established by the Bank in March 1993. The NSA funds are in the form of grants and are used for funding safety improvement measures.

 

At their Denver Summit in June 1997, the G-7 countries and the EU endorsed the setting up of the Chernobyl Shelter Fund (CSF). The CSF was established on 7 November 1997, when the rules of the CSF were approved by the Board of Directors. It became operational on 8 December 1997, when the required eight contributors had entered into contribution agreements with the Bank. The objective of the CSF is to assist Ukraine in transforming the existing Chernobyl sarcophagus into a safe and environmentally stable system.

 

In 1999, in pursuit of their policy to accede to the EU, Lithuania, Bulgaria and the Slovak Republic gave firm commitments to close and decommission their nuclear power plant units with RBMK and VVER 440/230 reactors by certain dates. In response to this, the European Commission announced its intention to support the decommissioning of these reactors with substantial grants over a period of 8 to 10 years, and invited the Bank to administer three International Decommissioning Support Funds (IDSFs). On 12 June 2000, the Bank’s Board of Directors approved the rules of the Ignalina, Kozloduy and Bohunice IDSFs and the role of the Bank as their administrator. The funds will finance selective projects to help carry out the first phase of decommissioning the designated reactors. They will also finance measures to facilitate the necessary restructuring, upgrading and modernisation of the energy production, transmission and distribution sectors and improvements in energy efficiency that are a consequence of the closure decisions.

 

In 2001, the Nordic Investment Bank hosted a meeting with participants from Belgium, Finland, Sweden, the European Commission and IFIs with activities in the Northern Dimension Area (NDA). At this meeting, participants agreed to establish the Northern Dimension Environmental Partnership (NDEP) to strengthen and coordinate financing of important environmental projects with cross-border effects in the NDA. On 11 December 2001, the Bank’s Board of Directors approved the rules of the NDEP Support Fund and the role of the Bank as fund manager.

 

In 2013 the European Commission requested the Bank to set up a multi-lateral fund for financing of the projects dealing with the uranium mining legacy in Central Asia. In May 2015, the Bank’s Board of Directors approved the Rules of the Environmental Remediation Account (ERA) and the role of the Bank as fund manager.

 

The table below provides a summary of these funds.

 

 

Plan asset allocation

2015

Contributions pledged

€ million

2015

No. of

contributors

2014

Contributions pledged

€ million

2014

No. of

contributors

Nuclear Safety Account

368

17

368

17

Chernobyl Shelter Fund

1,451

28

1,354

26

Ignalina IDSF

779

16

770

16

Kozloduy IDSF

962

11

883

11

Bohunice IDSF

654

9

623

9

NDEP70

353

12

352

12

Environmental Remediation Account

16

1

-

-

 

The cash balances belonging to each of the funds in the table above are managed by the Bank on their behalf.

 

Audit fees payable to the Bank’s auditor for the 2015 audits of these funds were €0.5 million (2014: €0.5 million).

 

33. Results from ordinary operations

The SEMED ISF, established in 2012, was terminated in October 2015 following the graduation of Egypt to recipient membership status of the Bank. While all operations undertaken by the SEMED ISF have always been recognised as part of the Bank’s financial results for IFRS reporting purposes, because of the distinction between “ordinary operations” and “special operations” contained within the ‘Agreement Establishing the Bank’, the Bank has formerly disclosed an income statement and balance sheet for “ordinary operations” only within its financial report. With the termination of the SEMED ISF during the year, this disclosure is no longer considered useful or relevant. However a final set of financial statements will be separately prepared and audited for the Fund itself.

 

34. Events after the reporting period

There have been no material events since the reporting period that would require adjustment to these financial statements.

 

Since that date, observable movements in the value of the Bank’s listed equities in 2016 have resulted in a decline of approximately €260 million while movements in the exchange rates of the Russian rouble, Turkish lira and Ukrainian hryvnia have reduced the fair value of the Bank’s unlisted equity investments and associated derivatives by approximately €100 million. These losses of €360 million will be recognised in the 2016 financial statements.

 

At 24 February 2016 there had been no other material events after the reporting period to disclose.

 

On 24 February 2016 the Board of Directors reviewed the financial statements and authorised them for issue. These financial statements will be submitted for approval to the Annual Meeting of the Board of Governors to be held on 11-12 May 2016.

 

FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

Notes to the financial statements

FOOTNOTES

50 Interest expense and similar charges and allocation of the return on capital equates to the interest expense and similar charges on the face of the income statement.

51 Advanced countries are Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic and Slovenia.

52 Early/Intermediate countries are Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Cyprus, Former Yugoslav Republic of Macedonia, Georgia, Kazakhstan, Kosovo, Kyrgyz Republic, Moldova,

Mongolia, Montenegro, Romania, Serbia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

53 Other member countries of the Organisation for Economic Co-operation and Development which are not classed as Advanced or Early/Intermediate. www.oecd.org/about/membersandpartners/

54 This interest income equates to the unwinding of the discount on expected future cash flows from impaired financial assets.

55 The net release of general provisions on sovereign and non-sovereign loan investments during the year of €337 million includes a one-off release of €329 million due to a change in estimation techniques, as highlighted in

the "Critical accounting estimates and judgements" section of these financial statements.

56 Comprised of €266 million of new provisions against €57 million of released provisions (2014: €368 million against €44 million respectively).

57 Provisions raised in the non-euro currencies create foreign exchange exposures which Treasury hedges. To the extent these hedges are transacted at different rates to the rates applied by the Bank’s accounting system to

translate the provisions into the euro equivalent amounts, the difference is recognised as part of the overall provision charge in the income statement.

58 Excludes provisions for guarantees which are recorded in other assets.

59 This movement in fair value relates to a hedge adjustment to fixed rate loans which qualify for hedge accounting for interest rate risk.

60 See note 32 for details of third parties.

61 The voting power of members who have failed to pay any part of the amount due in respect of their obligations in relation to paid-in shares has been adjusted down by a percentage corresponding to the percentage which

the unpaid amount due bears to the total amount of paid-in shares subscribed to by that member. Consequently the overall number of exercisable votes is lower than the total amount of subscribed shares.

62 These adjustments to estimates are described in the Critical accounting estimates and judgements section of the report.

63 See note 30 for detail on the contingent liability.

64 Trade finance guarantees represent stand-by letters of credit issued in favour of confirming banks that have undertaken the payment risk of issuing banks in the countries where the Bank invests.

65 Other guarantees include unfunded full or partial risk participations.

66 Contributions for 2016 are expected to be €34 million.

67 All actuarial losses relate to changes in financial assumptions.

68 The 2014 financial statements are the most recent available.

69 This excludes the SEMED Investment Special Fund. See note 33 for an explanation of this fund.

70 The NDEP includes a nuclear and non-nuclear window.

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