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ANNUAL
 
FINANCIAL
 
REPORT
FOR THE YEAR ENDED
 
31 DECEMBER 2022
According to
 
Article 4 of the Law 3556/2007
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Table
 
of Contents
A.
Corporate Governance
I.
Statements of the members of
 
the Board of Directors
II.
Report of the Directors and Corporate
 
Governance Statement
 
Appendix: Audit Committee Activity Report
B.
Auditor’s Reports and Financial Statements
I.
Ιndependent Auditor’s Report
 
(on the Consolidated Financial Statements)
II.
Consolidated Financial Statements of the Company
 
for the year
 
ended 31 December 2022
III.
Ιndependent Auditor’s Report
 
(on the Financial Statements of the
 
Company)
IV.
Financial Statements οf the Company
 
for the year
 
ended 31 December 2022
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Statements
 
of Members of the Board of Directors
(according to the article 4 par. 2 of the Law 3556/2007)
We declare that to the best of our knowledge:
 
the annual
 
financial
 
statements
 
for the
 
year
 
ended 31
 
December 2022,
 
which
 
have been
prepared in accordance with the applicable accounting standards,
 
present fairly the assets,
liabilities, equity
 
and annual
 
results of Eurobank
 
Ergasias Services
 
and Holdings
 
S.A. and
the companies included in the consolidation,
 
and
 
the annual report
 
of the Board
 
of Directors presents fairly
 
the development, the performance
and the position of the
 
Eurobank Ergasias Services and Holdings S.A
 
and of the companies
included in
 
the consolidation,
 
including the
 
description
 
of the
 
main risks
 
and uncertainties
they face.
Athens, 6 April 2023
Georgios P.
 
Zanias
I.D. No AI – 414343
CHAIRMAN
 
OF THE BOARD OF
 
DIRECTORS
Fokion C. Karavias
I.D. No ΑΙ - 677962
CHIEF EXECUTIVE
OFFICER
Stavros E. Ioannou
 
I.D. No AH - 105785
DEPUTY
 
CHIEF EXECUTIVE
OFFICER
 
 
 
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
 
REPORT OF THE DIRECTORS
1
|
Page
 
€ = Euro
 
m = million
 
bn = billion
The directors
 
present their report
 
together with
 
the financial statements
 
for the
 
year ended 31 December 2022.
General information
Eurobank Ergasias Services and Holdings S.A. (the Company or Eurobank Holdings) is a holding company listed
on the Athens Exchange, owning 100% of the share
 
capital of Eurobank S.A. (the Bank). Eurobank
 
Holdings and
its
 
subsidiaries
 
form
 
a
 
group
 
(Group),
 
consisting
 
mainly
 
of
 
Eurobank
 
Group,
 
that
 
being
 
the
 
Bank
 
and
 
its
subsidiaries. The Company’s operations principally relate to the
 
strategic planning of the non-performing loans
management and the provision
 
of services to the
 
Group entities and third
 
parties.
Financial Results Review and Outlook
1
In
 
2022,
 
the
 
economic activity
 
remained
 
strong
 
in Greece
 
and
 
the
 
other
 
countries
 
in which
 
the
 
Group
 
has
 
a
substantial presence, despite the negative impact of increased geopolitical volatility, disruption in supply chains
and persistent inflationary pressures. In
 
this environment, the Group exceeded its targets in
 
terms of profitability,
asset quality and capital strength,
 
expanded its loan portfolio
 
and improve
 
d
 
further its
 
liquidity position.
As at
 
31 December
 
2022 total
 
assets increased
 
by €3.6bn
 
to €81.5bn
 
(Dec. 2021:
 
€77.9bn)
 
with gross
 
customer
loans amounting to €43.5bn (Dec.
 
2021: €40.8bn) and investment securities reaching €13.3bn
 
(Dec. 2021: €11.3bn).
Out of the total loan portfolio, €28.2bn has been
 
originated from Greek operations (Dec. 2021: €26.5bn), €10.4bn
from international
 
operations
 
(Dec. 2021: €9.2bn)
 
and €4.9bn
 
refer
 
to senior and
 
mezzanine notes
 
of the
 
Pillar,
Cairo
 
and
 
Mexico
 
securitizations
 
(Dec.
 
2021:
 
€5.1bn).
 
Business
 
(wholesale
 
and
 
small
 
business)
 
loans
 
stood
 
at
€25bn
 
(Dec.
 
2021:
 
€22.4bn)
 
and
 
accounted
 
for
 
57%
 
of
 
total
 
Group
 
loans,
 
while
 
loans
 
to
 
households
 
reached
€13.6bn
 
(Dec.
 
2021:
 
€13.3bn),
 
of which
 
75% is
 
the
 
mortgage
 
portfolio
 
and the
 
rest
 
are
 
consumer
 
loans.
 
Group
deposits
 
reached
 
€57.2bn
 
(Dec.
 
2021:
 
€53.2bn)
 
with
 
those
 
from
 
Greek
 
operations
 
increasing
 
by
 
€2.6bn
 
to
€39.6bn
 
(Dec. 2021:
 
€37bn), while
 
international
 
operations
 
added €1.5bn
 
totalling €17.7bn
 
(Dec. 2021:
 
€16.2bn).
As a result, the (net) loan–to–deposit (L/D) ratio stood at 73.1%
 
for the Group (Dec. 2021: 73.2%) and at 79.5%
 
for
Greek
 
operations
 
(Dec.
 
2021:
 
80.1%).
 
The
 
funding
 
from
 
the
 
targeted
 
long
 
term
 
refinancing
 
operations
 
of
 
the
European Central Bank (ECB)–
 
TLTRO III programme
 
decreased by €2.9bn amounting to €8.8bn as at December
2022 (Dec. 2021:
 
€11.7bn). During the
 
year,
 
in the context
 
of the
 
implementation of
 
its medium-term
 
strategy
 
to
meet the Minimum Requirements for Eligible Own Funds and Eligible Liabilities (MREL), the Bank proceeded with
the issuance of a preferred senior note of €500m at a coupon of 4.375%
 
and maturity date on 9 March 2025
 
and
the Company
 
completed the
 
issuance of a
 
Tier 2
 
debt instrument of
 
€300m at a
 
coupon of 10% which
 
matures
in December 2032. More recently, in January
 
2023, the Bank completed the issuance of
 
a €500m senior
 
preferred
note at a
 
coupon of
 
7% which
 
matures in January
 
2029 (notes 4
 
and 34
 
of the consolidated financial
 
statements).
The
 
rise in high
 
quality liquid
 
assets of the
 
Group led
 
the respective
 
Liquidity Coverage
 
ratio
 
(LCR) to
 
173% (31
December 2021: 152%).
 
Pre-provision
 
Income
 
(PPI)
 
increased
 
to
 
€2,218m
 
or
 
€1,893m
 
excluding
 
the
 
€325m
 
gain
 
on
 
sale
 
of
 
Bank’s
merchant acquiring business (project “Triangle”) (2021: €1,024m or €1,028m excluding
 
the €5m derecognition loss
on “Mexico” loans), while core pre-provision income (Core PPI) increased by 30.6% year-on-year to €1.176m (2021:
€900m). Net interest
 
income (NII) grew
 
by 17.4%
 
to €1,550m (2021: €1,321m), mainly driven by
 
the higher
 
interest
rates,
 
the organic
 
loans growth
 
and the
 
increased income
 
from investment
 
bonds partly
 
offset by
 
higher
 
debt
issued and deposits cost. Net
 
interest margin (NIM) stood at 1.94% (2021: 1.84%) with the fourth quarter reaching
2.28%.
 
Fees
 
and
 
commissions
 
expanded
 
by
 
19.1%
 
to
 
€543m
 
(2021:
 
€456m),
 
of
 
which
 
banking
 
fees
 
and
commissions
 
by
 
25.4%
 
to
 
€449m
 
(2021:
 
€358m),
 
mainly
 
due
 
to
 
the
 
increased
 
fees
 
from
 
network
 
operations,
lending
 
activities
 
and
 
credit/debit
 
cards
 
business.
 
Fees
 
and
 
commission
 
accounted
 
for
 
68bps
 
of
 
total
 
assets
(2021:
 
64bps).
 
Operating
 
expenses
 
increased
 
by
 
4.7%
 
to
 
€917m
 
(2021:
 
€876m)
 
due
 
to
 
higher
 
costs
 
from
international
 
operations
 
amounting to
 
€273m (2021:
 
€234m), partly
 
attributed
 
to the
 
merger
 
of Eurobank
 
a.d.
Beograd with
 
Direktna Bank
 
in Serbia,
 
while in Greece
 
slightly increased
 
by 0.3% to
 
€645m (2021: €643m).
 
The
cost to
 
income (C/I)
 
ratio
 
for
 
the
 
Group
 
reached
 
32.6%, excluding
 
the
 
€325m gain
 
on project
 
“Triangle”
 
(2021:
46%),
 
while
 
the
 
international
 
operations
 
C/I
 
ratio
 
stood
 
at
 
46.1%
 
(2021:
 
47.5%).
 
Furthermore,
 
the
 
cost
 
to core
income
2
 
ratio for the Group reached
 
43.8% (2021: 49.3%), while the international operations cost to core income
2
ratio stood at
 
45.6% (2021: 47.4%).
Trading
 
and other
 
activities recorded net
 
income of €1,042m (2021:
 
€123m income) including
 
a) €550m realised
gains
 
from
 
the
 
unwinding
 
of
 
interest
 
rate
 
swaps,
 
following
 
the
 
reassessment
 
of
 
Group’s
 
hedging
 
strategies,
which are
 
mainly related
 
with the
 
upward movement
 
of the
 
euro interest
 
rate curve
 
in 2022 (notes
 
9 and 19
 
of
the
 
consolidated
 
financial
 
statements),
 
b)
 
€70m
 
gains
 
from
 
portfolio
 
hedging
 
of
 
interest
 
rate
 
risk
 
(macro
hedging) (notes
 
9 and 19 of the
 
consolidated financial statements),
 
c) €107m gains from
 
short positions in debt
instruments
 
entered
 
into
 
in
 
the
 
context
 
of
 
Group’s
 
economic
 
hedging
 
strategies
 
(notes
 
9
 
and
 
35
 
of
 
the
consolidated
 
financial
 
statements),
 
d)
 
€325m
 
gain
 
from
 
the
 
completion
 
of
 
project
 
“Triangle”
 
(note
 
30
 
of
 
the
consolidated financial
 
statements), e)
 
€34m gains from
 
changes in fair
 
value of investment
 
properties,
 
f) €34m
gain on
 
sale of
 
5.1%
 
shareholding
 
in Group’s
 
joint venture
 
Grivalia Hospitality
 
S.A. and
 
from the
 
measurement
of the retained
 
interest as a financial
 
asset at FVTPL (note 24
 
of the consolidated
 
financial statements), and
 
g)
€76m
 
loss
 
from
 
the
 
recyclement
 
of
 
currency
 
translation
 
losses,
 
previously
 
recognized
 
in
 
other
 
comprehensive
income,
 
to
 
income
 
statement
 
due
 
to
 
liquidation
 
of
 
ERB
 
Istanbul
 
Holding
 
A.S.
 
(note
 
23.1
 
of
 
the
 
consolidated
financial statements).
 
1
 
Definitions of the selected financial ratios and the source of the financial data are provided in the Appendix.
2
 
Total operating expenses divided by total
 
core income.
International Operations: Operating expenses: €273m, (2021:
 
€234m), Core income:
€598m (2021: €493m).
 
 
 
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
 
REPORT OF THE DIRECTORS
2
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Page
 
€ = Euro
 
m = million
 
bn = billion
As at 31 December
 
2022, following
 
the classification
 
of project “Solar”
 
underlying loan portfolio
 
as held for
 
sale
(note
 
20
 
of
 
the
 
consolidated
 
financial
 
statements)
and
 
other
 
initiatives,
 
the
 
Group’s
 
NPE
 
stock
 
amounted
 
to
€2.3bn
 
(31
 
December
 
2021:
 
€2.8bn)
 
driving
 
the
 
NPE
 
ratio
 
to
 
5.2%
 
(31
 
December
 
2021:
 
6.8%),
 
while
 
the
 
NPE
coverage
 
ratio
 
stood at
 
74.6% (31
 
December
 
2021: 69.2%).
 
During the
 
year,
 
the NPE
 
formation
 
was positive
 
by
€46m (fourth
 
quarter:
 
€35m positive)
 
(2021: €44m
 
positive).
 
The
 
loan provisions
 
(charge)
 
reached
 
€291m and
corresponded
 
to 0.72%
 
of average
 
net
 
loans
 
(2021:
 
€418m
 
excluding
 
the
 
impairment
 
loss
 
of
 
€72m
 
on project
“Mexico” which corresponded
 
to 1.11% of average
 
net loans).
Furthermore,
 
the Group
 
recognised in 2022 other
 
impairment losses and provisions
 
amounting to €108m (2021:
€52m),
 
which
 
are
 
analysed
 
in
 
a)
 
€21m
 
on
 
investment
 
bonds,
 
including
 
€7m
 
loss
 
attributable
 
to Russian
 
debt
exposures
 
b)
 
€15m
 
on
 
real
 
estate
 
properties
 
c)
 
€23m
 
on
 
computer
 
hardware
 
and
 
software
 
and
 
d)
 
€49m
 
for
litigations and
 
other
 
operational
 
risk events.
 
In addition,
 
it recorded
 
restructuring costs
 
of €102m (2021:
 
€25m)
consisting of
 
a) €60m
 
cost for
 
Voluntary
 
Exit Schemes
 
(VES) and
 
related
 
costs, mainly
 
referring
 
to the
 
scheme
that was launched in February
 
2022 for eligible units in Greece
and b) €42m costs mainly related to the
 
merger
and the
 
integration
 
thereafter
 
of Eurobank
 
a.d. Beograd
 
with Direktna
 
Banka in Serbia,
 
as well
 
as the
 
Group’s
transformation
 
project (note 12 of the
 
consolidated financial statements).
Profit or Loss
Overall,
 
in 2022,
 
the
 
profit
 
attributable
 
to shareholders
 
amounted to
 
€1,330m (2021:
 
€328m), as
 
set out
 
in the
consolidated
 
income
 
statement.
 
The
 
adjusted
 
net
 
profit,
 
excluding
 
the
 
€230.5m
 
gain
 
(after
 
tax)
 
on
 
project
“Triangle”
 
and the
 
€75m restructuring
 
costs (after
 
tax), amounted
 
to €1,174m
 
for
 
the
 
Group
 
(2021: €424m),
 
of
which €224m (2021: €148m)
 
was related to
 
international business.
After deducting the
 
significant trading
 
gains
of €727m (€516m after tax) stated above for
 
2022 (gains on derivatives and short bond positions), the
 
return on
tangible book value grew to 11.4% (2021: 8.2%).
Going forward,
 
the
 
Group, pursues
 
its objectives
 
set out
 
in the
 
business plan
 
for
 
the
 
period
 
2023-2025,
 
which
includes
 
targets
 
for
 
a)
 
loans
 
organic
 
growth,
 
b)
 
the
 
further
 
strengthening
 
of
 
the
 
core
 
profitability
 
(EPS
 
and
RoTBV),
 
c) improvement
 
of the asset quality ratios,
 
d) solid organic capital generation
 
adequate to support the
business
 
growth,
 
and
 
e)
 
the
 
initiation
 
of
 
dividend
 
distribution
 
in
 
the
 
form
 
of
 
cash
 
dividends
 
and/or
 
share
buybacks, subject to regulatory approval,
 
mainly through the
 
following initiatives
 
and actions:
a)
Higher NII
 
mainly driven by
 
the positive
 
effect
 
of the
 
interest rates’
 
increase and
 
the sustainable
 
growth
 
in
loan volumes and
 
the increase, at
 
a relatively lower
 
pace, of customer deposits
 
,
b)
Organic increase of Group’s
 
performing loans mainly through
 
business lending,
c)
Growth of
 
fee and commission
 
income in a number
 
of fee business
 
segments such as
 
lending, network and
assets under management activities,
 
bancassurance,
 
card’s issuing and investment
 
property rentals,
d)
Initiatives
 
for
 
pursuing
 
further
 
operating
 
efficiency,
 
cost
 
containment
 
of
 
“run
 
the
 
bank”
 
activities,
 
and
proceeding
 
with
 
further
 
simplification
 
and
 
digitalisation
 
in
 
Greece
 
and
 
abroad,
maintaining
 
the
 
annual
increase of the operating expenses at a low to mid-single digit %,
 
considering the inflationary pressures and
the “grow
 
the bank” needs,
e)
Maintaining low
 
NPE ratios
 
with high
 
coverage
 
levels in
 
all core
 
markets in
 
which the
 
Group has
 
presence,
which
 
may
 
be
 
challenged
 
by
 
the
 
higher
 
interest
 
rates
 
and
 
inflationary
 
pressures'
 
impact
 
on
 
households
disposable income and corporate
 
profit margins,
 
f)
Strengthening
 
core
 
markets
 
presence
 
and
 
increasing
 
earnings
 
contribution
 
by
 
international
 
activities
through organic
 
growth and the
 
exploration of potential
 
market opportunities.
g)
Major
 
transformation
 
initiatives
 
introduced
 
in
 
the
 
context
 
of the
 
Group’s
 
transformation
 
plan
 
“Eurobank
2030”,
h)
Support the
 
green
 
transition
 
and financial
 
inclusion through
 
the
 
adoption
 
of the
 
Environment,
 
Social and
Governance
 
(ESG) criteria in all Group’s
 
activities and processes.
The
 
geopolitical
 
and macroeconomic
 
risks, mainly
 
related
 
with the
 
prolongation
 
of the
 
inflationary
 
wave
 
and
the
 
impact
 
of
 
interest
 
rate
 
hikes
 
on
 
both
 
households
 
and
 
businesses,
 
combined
 
with
 
potential
 
political
uncertainty in Greece,
 
set a number of challenges
 
to the achievement
 
of the Group’s
 
2023-2025 Business Plan,
mainly
 
related
 
with
 
growth
 
potential,
 
lending
 
margins,
 
deposit
 
rates,
 
asset
 
quality
 
and
 
operating
 
costs.
 
The
headwinds
 
coming
 
from
 
the
 
geopolitical
 
upheaval
 
and
 
the
 
macroeconomic
 
environment
 
are
 
likely
 
to
 
be
mitigated by:
a)
The
 
efficient
 
mobilization
 
of
 
the
 
already
 
approved
 
EU
 
funding,
 
mainly
 
through
 
Recovery
 
and
 
Resilience
Facility (RRF),
b)
The substantial pipeline
 
of new investments,
c)
The accumulated
 
liquidity in the
 
economy mainly related
 
with the
 
extensive state
 
support measures
 
of the
pandemic period,
d)
The decrease
 
of the unemployment
 
rate in 2022 to its lowest
 
level in the
 
last twelve years,
e)
The positive
 
developments in the
 
tourism sector and the strong
 
investment inflows,
 
f)
The potential
 
upside, related with the
 
interest rates’
 
increase impact on the
 
profitability of the
 
Group.
(see also further
 
information in the
 
section “Macroeconomic Outlook
 
and Risks”)
The
 
Group
 
Management
 
and Board,
 
mindful
 
of the
 
recent
 
banking
 
turmoil across
 
some
 
markets,
 
has
 
done
 
a
proactive
 
internal
 
review
 
to
 
re-assure
 
itself
 
of
 
the
 
continued
 
resilience
 
of
 
Eurobank
 
business
 
model
 
to
 
such
possible external shocks and is pleased to report that
 
this model is well supported by sound business
 
practices,
diversified
 
activities and prudent
 
risk management
 
approaches.
 
The
 
resulting stability
 
of the
 
Group’s
 
business
 
 
 
 
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
 
REPORT OF THE DIRECTORS
3
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operating
 
model
 
and
 
the
 
strength
 
of
 
its
 
financial
 
position
 
is
 
also
 
further
 
well-reflected/
 
supported
 
by
 
the
following significant
 
aspects:
a)
an increased level of high-quality liquid assets
 
connected, inter alia, with the resilience of retail deposits and
with the
 
debt issued
 
to wholesale markets,
 
leading to an
 
LCR of
 
173%, well
 
above
 
the regulatory
 
minimum
(100%),
b)
the wide and diversified
 
deposit mix, displaying a significant deposit base from retail,
 
which accounts for c.
70% of total deposits (Bank level),
c)
a well-managed debt securities portfolio, accounting for 16% of total assets mostly invested in
 
EU Sovereign
Bonds and
 
on investment
 
grade
 
securities. This
 
portfolio
 
is to
 
a great
 
extent hedged
 
for
 
the
 
interest
 
rate
risk,
d)
low interest
 
rate
 
risk exposure
 
on its core
 
banking book,
 
since the
 
vast majority of
 
assets are
 
floating rate
loans, which bear immaterial interest rate risk and fixed rate loans, with their interest rate risk being hedged
to a large extent,
e)
the strong capital
 
adequacy, the
 
earnings generation
 
capacity and the
 
high NPE coverage
 
ratio,
f)
the MREL ratio, which, at the end of 2022 amounted to 23.1% and, proforma
 
with the €500m senior issuance
in January 2023, to 24.3%, exceeding the
 
non-binding January 1st 2024 MREL target of 22.9%,
g)
a
 
robust
 
internal
 
risk
 
management
 
and
 
governance
 
framework
 
for
 
effectively
 
monitoring
 
and
 
mitigating
risks
 
as
 
well
 
as
 
a
 
high
 
level
 
of
 
Board
 
engagement
 
for
 
the
 
alignment
 
of
 
business
 
model
 
with
 
sound
 
risk
management and control
 
functions,
h)
the comprehensive
 
regulatory and supervisory EU framework
 
applicable even to small-sized
 
banks.
Capital adequacy
As at
 
31 December
 
2022, the
 
Group’s
 
Total
 
Regulatory
 
Capital
 
amounted to
 
€8bn (31
 
Dec
 
2021: €6.4bn)
 
and
accounted for 19.2%
 
(total CAD) of Risk Weighted Assets (RWA)
 
(Dec. 2021: 16.1%), compared
 
to the CAD Overall
Capital Requirements (OCR) ratio of 14.39%
3
. Respectively, the Common Equity Tier 1 (CET1) stood at 16% of
 
RWA
(Dec.
 
2021:
 
13.7%)
 
compared
 
to
 
the
 
CET1
 
OCR
 
ratio
 
of
 
9.57%
3
.
 
At
 
the
 
same
 
date,
 
the
 
fully
 
loaded
 
CET
 
1 ratio
(based on the full implementation of the Basel III rules in 2025) would be
 
15.2% (Dec. 2021: 12.7%).
 
Pro-forma with
the completion of project
 
“Solar”, the total CAD
 
and CET1 ratios would
 
be 19% and 16% respectively.
 
In the context of the Group’s initiatives for the optimization
 
of its regulatory capital, in December 2022 the Bank
proceeded with
 
the execution of the
 
third synthetic
 
risk transfer
 
transaction (project
 
“Wave III”)
 
in the form
 
of a
financial guarantee,
 
providing
 
credit protection
 
over
 
the
 
mezzanine loss
 
of a
 
portfolio
 
of performing
 
shipping
loans amounting
 
to $1.7bn,
 
which resulted
 
in a capital
 
benefit of
 
40 bps (note
 
20 of
 
the consolidated
 
financial
statements).
As at 31 December 2022, the Bank’s MREL ratio
 
at consolidated level stands at
 
23.07% of RWAs, higher
 
than the
interim binding MREL target
 
for 2022 of 18.21%
 
but also than
 
the interim non-binding MREL target from 1
 
January
2023 of 20.48% (note
 
4 of the
 
consolidated financial statements).
 
According to the
 
2022 SREP decision, for
 
the
first quarter of
 
2023, the
 
Group is required
 
to meet a Common Equity
 
Tier 1
 
Ratio of at
 
least 9.75%
 
and a Total
Capital Adequacy
 
Ratio
 
of at
 
least 14.45%
 
(Overall
 
Capital Requirements
 
or OCR)
 
including Combined
 
Buffer
Requirement of 3.70%.
 
Pursuant to the Regulation (EU)
 
No 575/2013 (CRR),
 
the deferred tax assets (DTAs) that rely on future profitability
and
 
exceed
 
certain
 
limits
 
shall
 
be
 
deducted
 
in
 
the
 
calculation
 
of
 
the
 
CET1
 
capital.
 
This
 
deduction
 
should
 
be
applied gradually by 2025. The enactment of the article 27A of Law 4172/2013, as
 
in force, provided for the Greek
credit institutions that the eligible DTAs are accounted on a) the losses from the Private Sector
 
Involvement (PSI)
and the
 
Greek State
 
Debt Buyback
 
Program
 
and b)
 
on the
 
sum of
 
(i) the
 
unamortized part
 
of the
 
crystallized
loan losses from write-offs and disposals, (ii) the accounting debt write-offs and (iii) the
 
remaining accumulated
provisions and other
 
losses in general due to credit
 
risk recorded up to 30 June 2015 and can be converted
 
into
directly enforceable
 
claims (tax credits) against the
 
Greek State, provided
 
that the Bank’s after
 
tax accounting
result for the
 
period is a loss. This
 
legislative provision
 
enabled the Greek
 
credit institutions, including the
 
Bank,
not to deduct the eligible
 
DTAs
 
from CET1 capital but recognise
 
them as a 100% weighted
 
asset, with a positive
effect
 
on the
 
capital
 
position. As
 
at
 
31 December
 
2022, the
 
Bank’s eligible
 
DTAs
 
for
 
conversion
 
to tax
 
credits
amounted
 
to
 
 
3,402m
 
(Dec.2021:
 
€3,547m)
 
(note
 
13
 
to
 
the
 
consolidated
 
financial
 
statements).
 
A
 
potential
change in
 
the
 
regulatory
 
treatment
 
of eligible
 
DTAs
 
as tax
 
credits
 
may have
 
an adverse
 
effect
 
in the
 
Group’s
capital position.
Climate risk stress test
The
 
Group participated
 
in the
 
ECB supervisory
 
climate risk
 
stress test,
 
which was
 
conducted in
 
the first
 
half of
2022. The
 
2022 climate risk
 
stress test assessed
 
how well banks
 
are set up
 
to deal with
 
climate-related risks.
 
A
total
 
of
 
104
 
significant
 
banks
 
participated
 
in
 
the
 
test
 
consisting
 
of
 
three
 
modules,
 
in
 
which
 
banks
 
provided
information
 
on their: (i)
 
own climate stress
 
-testing capabilities,
 
(ii) reliance on carbon
 
-emitting sectors, and (iii)
performance
 
under different
 
scenarios
 
over
 
several
 
time horizons.
 
The
 
test, which
 
was part
 
of the
 
ECB’s wider
climate roadmap, was not a capital adequacy exercise but rather a learning one for banks and
 
supervisors alike,
aiming at identifying vulnerabilities and best practices and
 
providing guidance to banks for the green transition.
In this context, the Group
 
has successfully completed the
 
2022 climate risk stress test exercise.
 
3
 
The
 
‘Overall
 
capital
 
requirement
 
(OCR)’
 
is
 
the
 
sum
 
of
 
the
 
total
 
SREP
 
capital
 
requirement
 
(TSCR)
 
and
 
the
 
combined
 
capital
 
buffer
requirement.
 
 
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In July 2022, the ECB published the climate risk stress test
 
aggregated results, showing that banks must improve
their
 
focus
 
on
 
climate
 
risk.
 
Furthermore,
 
all
 
participating
 
entities,
 
including
 
the
 
Group,
 
received
 
individual
feedback and are expected to take action
 
accordingly, in line with
 
the set of good practices
 
for climate-related
and environmental
 
risk management
 
that the
 
ECB published in
 
November
 
2022 along with
 
the good
 
practices
for climate stress
 
testing published in December
 
2022. The results
 
showed that the
 
Group has made significant
progress
 
in incorporating
 
a climate
 
risk stress
 
testing framework,
 
with an
 
overall
 
performance
 
in line
 
with the
average
 
score
 
of European
 
Banks. The
 
Group
 
continues
 
to work
 
in order
 
to implement
 
its climate
 
risk action
plan, to further
 
integrate climate risks into its business strategy
 
and risk management practices
 
and to support
its clients towards climate transition
 
and sustainable business growth.
2023 EU – wide stress test
 
In January 2023, the European
 
Banking Authority (EBA) launched
 
the 2023 EU-wide stress test exercise
 
which is
designed
 
to provide
 
valuable input
 
for
 
assessing
 
the
 
resilience
 
of the
 
European
 
banking
 
sector in
 
the
 
current
uncertain and changing macroeconomic
 
environment.
This exercise
 
is coordinated by the
 
EBA in cooperation
 
with the ECB and national
 
supervisory authorities and is
conducted
 
according
 
to
 
the
 
EBA’s
 
methodology.
 
It
 
is
 
carried
 
out
 
on
 
the
 
basis
 
of
 
year-end
 
2022
 
figures
 
and
assesses
 
the
 
performance
 
of
 
EU
 
banks
 
under
 
a
 
baseline
 
and
 
adverse
 
macroeconomic
 
scenario,
 
covering
 
the
period
 
from
 
2023
 
to
 
2025.
 
The
 
baseline
 
scenario
 
for
 
EU
 
countries
 
is
 
based
 
on
 
the
 
projections
 
from
 
the
 
EU
national
 
central
 
banks of
 
December
 
2022. The
 
adverse
 
scenario,
 
although unlikely
 
to unfold,
 
is used
 
to assess
the resilience
 
of banks to a hypothetical
 
severe
 
scenario of a significant
 
deterioration
 
in the overall
 
outlook for
the economy and financial markets in the
 
next three years. The
 
narrative
 
depicts an adverse scenario related
 
to
a
 
hypothetical
 
worsening
 
of
 
geopolitical
 
developments
 
leading
 
to
 
a
 
severe
 
decline
 
in
 
GDP
 
with
 
persistent
inflation and
 
high interest
 
rates. In
 
terms of GDP
 
decline, the
 
2023 adverse
 
scenario is the
 
most severe
 
used in
the EU wide stress up to now.
 
Eurobank Holdings
 
Group is participating
 
in the EBA-led stress test.
In parallel, the ECB will
 
conduct its own stress
 
test for a number of
 
medium sized- banks that it supervises directly
and that are not included
 
in the EBA-led stress test sample.
 
The EBA expects to publish the
 
results of the exercise
 
at the end of July 2023. The
 
stress test results will be used
to update each bank’s Pillar
 
2 Guidance in the
 
context of the SREP,
 
while qualitative findings
 
on weaknesses in
banks’ stress testing practices
 
could also affect their
 
Pillar 2 Requirements.
International Activities
The Group has a significant presence
 
in four countries apart from Greece. In Cyprus it offers Corporate
 
Banking,
Private Banking, International Business Banking, and Shipping services
 
through a network of 8 business centres.
In Luxembourg it provides
 
Private Banking and Corporate Banking services.
 
Additionally, the
 
subsidiary bank in
Luxembourg operates
 
a branch in London. In Bulgaria and
 
Serbia, it operates
 
in Retail and Corporate Banking,
Wealth Management
 
and Investment Banking through
 
a network of 306 branches
 
and business centres.
In December 2021, the merger of the Bank’s subsidiary in Serbia, Eurobank a.d. Beograd (“Eurobank Serbia”) with
Direktna Banka
 
a.d. Kragujevac
 
(“Direktna”) was
 
completed, after
 
all necessary
 
approvals
 
from the
 
competent
authorities were
 
obtained and
 
the
 
combined Bank
 
was renamed
 
to Eurobank
 
Direktna a.d.
 
On 2
 
March 2023,
the
 
Bank
 
announced
 
that
 
it
 
has
 
signed
 
binding
 
agreement
 
(share
 
purchase
 
agreement)
 
with
 
AIK
 
Banka
 
a.d.
Beograd
 
(“AIK”)
 
for
 
the
 
sale
 
of
 
Eurobank
 
Direktna,
 
the
 
Bank’s
 
subsidiary
 
in
 
Serbia
 
(the
 
“Transaction”).
 
The
Transaction
 
values 100%
 
of Eurobank
 
Direktna
 
at
 
€280m and
 
is consistent
 
with
 
Eurobank’s
 
strategy
 
to direct
capital
 
to opportunities
 
with
 
more compelling
 
RoTBV
 
and to
 
further
 
enhance
 
its presence
 
in its
 
core markets.
The
 
Transaction
 
is expected
 
to contribute ca.
 
50 bps to
 
Eurobank’s
 
CET1 ratio
 
(based on
 
third quarter
 
of 2022
ratio),
 
reflecting
 
the
 
release
 
of
 
related
 
RWAs.
 
It
 
is
 
expected
 
to
 
be
 
completed
 
within
 
year
 
2023,
 
subject
 
to
customary regulatory and other
 
approvals.
On 30 December 2022, the
 
Bank announced the
 
acquisition of a 3.2% holding in Hellenic
 
Bank Public Company
Limited (“Hellenic Bank”) thus increasing
 
its shareholding to 15.8%
 
in Hellenic Bank. Furthermore,
 
on 1 December
2022, the
 
conclusion of
 
a share
 
purchase agreement
 
(“SPA”)
 
with Wargaming
 
Group
 
Limited was
 
announced,
according
 
to which
 
the
 
Bank has
 
agreed
 
to acquire
 
an additional
 
13.41%
 
holding
 
in Hellenic
 
Bank,
 
subject
 
to
regulatory
 
approvals.
 
On
 
4
 
April
 
2023,
 
following
 
the
 
receipt
 
of
 
the
 
relevant
 
regulatory
 
approvals,
 
the
 
above
acquisition
 
was
 
completed,
 
and
 
the
 
Bank’s total
 
holding
 
in Hellenic
 
Bank reached
 
29.2%.
 
Following
 
that,
 
the
investment in Hellenic Bank
 
will be
 
accounted for as a
 
Group’s associate in the consolidated financial
 
statements
as of the second quarter of 2023. The said investment is aligned with the overall strategy
 
of the Group to further
strengthen
 
its presence
 
in its core
 
markets in which
 
retains a strategic
 
interest (further
 
information
 
is provided
in note 22 to consolidated financial statements).
 
Furthermore,
 
the
 
implementation
 
of the
 
new banking
 
system in
 
Cyprus (Temenos)
 
is progressing
 
according
 
to
plan. The
 
project is key
 
for the
 
technological transformation
 
of Eurobank
 
Cyprus, which in turn aims to enhance
functionality
 
and to
 
improve
 
efficiency
 
thus ensuring
 
the
 
best experience
 
for
 
the customers,
 
in the
 
new digital
era.
On 9
 
December
 
2022, Eurobank
 
Holdings announced
 
that
 
it had
 
reached
 
an agreement
 
for
 
the
 
acquisition of
BNP Paribas Personal Finance
 
Bulgaria (the “Business”) by
 
Eurobank’s subsidiary in Bulgaria, Eurobank
 
Bulgaria
A.D. (“Postbank”).
 
The
 
transaction is
 
in line with
 
the Group’s
 
strategy
 
to further
 
strengthen
 
Postbank’s position
in
 
the
 
Bulgarian
 
retail
 
sector
 
and
 
is
 
expected
 
to
 
burden
 
the
 
Group’s
 
regulatory
 
capital
 
ratios
 
by
 
ca.
 
25
 
bps,
 
 
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reflecting mainly the increase
 
in the Group’s
 
Risk Weighted Assets. The
 
completion of the
 
transaction is subject
to approvals by all competent
 
regulatory authorities (further information
 
is provided in note 23.1 to consolidated
financial statements).
The positive
 
prospects remain
 
valid despite the
 
war in Ukraine. Although
 
International Operations
 
do not have
a
 
direct
 
exposure
 
in
 
these
 
two
 
countries,
 
the
 
deterioration
 
of
 
the
 
key
 
macroeconomic
 
indicators,
 
both
 
at
European
 
and
 
global
 
level,
 
will
 
have
 
an
 
impact
 
on
 
the
 
local
 
economies.
 
International
 
Operations
 
solid
fundamentals though, allow for absorbing potential shocks and
 
safeguarding their profitability while supporting
the local communities.
Risk management
 
The
 
Group acknowledges
 
that
 
taking risks
 
is an
 
integral
 
part of
 
its operations
 
in order
 
to achieve
 
its business
objectives.
 
Therefore,
 
the
 
Group’s
 
management
 
sets adequate
 
mechanisms to
 
identify those
 
risks at
 
an early
stage and assesses their potential
 
impact on the achievement
 
of these objectives.
Due
 
to
 
the
 
fact
 
that
 
economic,
 
industry,
 
regulatory
 
and
 
operating
 
conditions
 
will
 
continue
 
to
 
change,
 
risk
management
 
mechanisms
 
are
 
set
 
in
 
a
 
manner
 
that
 
enable
 
the
 
Group
 
to
 
identify
 
and
 
deal
 
with
 
the
 
risks
associated with those changes. The Bank’s structure, internal processes
 
and existing control mechanisms ensure
both the
 
independence principle and the exercise
 
of sufficient supervision.
The Group's
 
Management considers effective
 
risk management as a top priority, as well as a major competitive
advantage,
 
for
 
the
 
organization.
 
As
 
such,
 
the
 
Group
 
has
 
allocated
 
significant
 
resources
 
for
 
upgrading
 
and
maintaining
 
its
 
policies,
 
methods
 
and
 
infrastructure
 
up
 
to
 
date,
 
in
 
order
 
to
 
ensure
 
compliance
 
with
 
the
requirements
 
of the
 
European
 
Central
 
Bank (ECB)
 
and of
 
the
 
Single Resolution
 
Board
 
(SRB), the
 
guidelines
 
of
the
 
European
 
Banking
 
Authority
 
(EBA)
 
and
 
the
 
Basel
 
Committee
 
for
 
Banking
 
Supervision
 
as
 
well
 
as
 
the
 
best
international banking
 
practices. The
 
Group implements
 
a well-structured
 
credit approval
 
process, independent
credit reviews
 
and effective
 
risk management policies
 
for all material
 
risks it is exposed
 
to, both in
 
Greece and
in each
 
country of
 
its international
 
operations.
 
The
 
risk management
 
policies
 
implemented
 
by
 
the
 
Group
 
are
reviewed
 
on a regular basis.
The
 
Group
 
Risk
 
and
 
Capital
 
Strategy
 
outlines
 
the
 
Group’s
 
overall
 
direction
 
regarding
 
risk
 
and
 
capital
management issues,
 
the risk
 
management mission
 
and objectives,
 
risk definitions, risk
 
management principles,
risk governance framework,
 
strategic objectives and key management initiatives for
 
the improvement
 
of the risk
management framework
 
in place.
 
Risk
 
culture
 
is
 
a
 
core
 
element
 
of
 
the
 
organisation.
 
Risk
 
management
 
function
 
provides
 
the
 
framework,
procedures and guidance
 
to enable all employees to proactively
 
identify, manage and monitor the
 
risks in their
own areas
 
and improve
 
the control
 
and co-ordination
 
of risk taking
 
across their
 
business. Ongoing
 
education,
communication and awareness takes place via dedicated learning programs,
 
monthly meetings, sharing of best
practices
 
and other
 
initiatives.
 
The
 
Group
 
has also
 
a policy
 
in place
 
to address
 
any risks
 
associated
 
with
 
the
introduction, significant
 
modifications and periodic
 
monitoring of its products and services.
The
 
maximum amount
 
of risk
 
which the
 
Group
 
is willing
 
to assume
 
in the
 
pursuit of
 
its strategic
 
objectives
 
is
articulated via a
 
set of
 
quantitative and qualitative statements for specific risk
 
types, including specific
 
tolerance
levels as described
 
in the Group’s
 
Risk Appetite Framework.
 
The objectives
 
are to support the
 
Group’s business
growth, balance
 
a strong capital position with higher
 
returns on equity and to ensure the Group’s
 
adherence
 
to
regulatory requirements.
 
The Risk appetite, that
 
is clearly communicated throughout
 
the Group determines
 
risk
culture
 
and forms
 
the
 
basis on
 
which
 
risk policies
 
and risk
 
limits are
 
established
 
at Group
 
and regional
 
level.
Within the
 
context of its Risk Appetite Framework,
 
the Bank has further
 
enhanced the risk identification
 
process
and the risk materiality
 
assessment methodology.
The
 
identification
 
and
 
the
 
assessment
 
of
 
all
 
risks
 
is
 
the
 
cornerstone
 
for
 
the
 
effective
 
Risk
 
Management.
 
The
Group aiming
 
to ensure
 
a collective
 
view on the
 
risks linked
 
to the
 
execution of
 
its strategy,
 
acknowledges the
new developments
 
at an early stage and assesses the potential
 
impact.
In
 
order
 
to
 
strengthen
 
further
 
the
 
existing
 
Operational
 
Risk
 
Framework
 
according
 
to
 
increased
 
regulatory
expectations as
 
defined in the:
 
i) EBA Guidelines
 
on Internal Governance
 
(2021) under
 
Directive
 
2013/36/EU, (ii)
BCBS Revisions to the
 
Principles for the
 
Sound Management of Operational
 
Risk (2021), (iii) BCBS Principles
 
for
Operational Resilience, and (iv) EBA
 
Guidelines on ICT
 
and security risk
 
management EBA/GL/2019/04, the Group
had
 
decided
 
to
 
move
 
towards
 
managing
 
Non-Financial
 
Risks
 
(NFRs)
 
holistically,
 
whereas
 
NFRs
 
include
 
all
operational
 
risks as
 
well as
 
specific additional
 
risks such
 
as strategic
 
and reputational
 
risk. NFR
 
management
comprises
 
risk
 
identification,
 
assessment,
 
and
 
mitigation
 
while
 
employing
 
independent
 
oversight
 
and
 
an
effective
 
risk culture to
 
ensure that
 
business objectives
 
are met
 
within the
 
NFR appetite that
 
is reflected in
 
the
Group’s Policies
 
and Guidelines.
The Board Risk Committee (BRC) is a committee of the Board of Directors (BoD) and its task is to assist the BoD
to
 
ensure
 
that
 
the
 
Group
 
has
 
a
 
well-defined
 
risk
 
and
 
capital
 
strategy
 
in
 
line
 
with
 
its
 
business
 
plan
 
and
 
an
adequate and
 
robust risk
 
appetite framework.
 
The
 
BRC assesses
 
the Group’s
 
risk profile,
 
monitors compliance
with
 
the
 
approved
 
risk
 
appetite
 
and
 
risk
 
tolerance
 
levels
 
and
 
ensures
 
that
 
the
 
Group
 
has
 
developed
 
a
 
risk
management
 
framework
 
with
 
appropriate
 
methodologies,
 
modelling tools,
 
data
 
sources
 
as well
 
as
 
sufficient
and
 
competent
 
staff
 
to
 
identify,
 
assess,
 
monitor
 
and
 
mitigate
 
risks.
 
Moreover,
 
BRC
 
is
 
conferred
 
with
 
certain
 
 
 
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approval authorities. The
 
BRC consists of five (5) non-executive directors, meets at least on a monthly basis and
reports to the BoD on a quarterly
 
basis and on ad hoc instances if it is needed.
The Management Risk Committee (MRC) is
 
a management committee established by the Chief Executive Officer
(CEO)
 
and
 
its
 
main
 
responsibility
 
is
 
to
 
oversee
 
the
 
risk
 
management
 
framework
 
of
 
the
 
Group.
 
As
 
part
 
of
 
its
responsibilities, the
 
MRC facilitates
 
reporting to
 
the
 
BRC on the
 
range of
 
risk-related
 
topics under
 
its purview.
The MRC supports
 
the Group
 
Chief Risk Officer
 
to identify material risks, to promptly
 
escalate them
 
to the BRC
and to ensure that the
 
necessary policies and procedures
 
are in place to prudently manage risks and to comply
with regulatory requirements.
In the
 
context of the
 
climate risk
 
stress testing
 
process,
 
the MRC
 
is responsible
 
to review,
 
challenge and
 
agree
on the
 
material climate
 
risks identified
 
in the
 
risk identification
 
process
 
as well
 
as the
 
transition scenarios
 
and
physical
 
risk
 
events
 
developed
 
in
 
the
 
scenario
 
design
 
process.
 
Further
 
to
 
MRC’s
 
clearance,
 
appropriate
management actions are proposed to the Executive Board Committee (“ExBo”) and consequently to the BRC for
review,
 
challenge and approval.
 
The
 
Group’s
 
Risk
 
Management
 
General
 
Division
 
which
 
is
 
headed
 
by
 
the
 
Group
 
Chief
 
Risk
 
Officer
 
(GCRO),
operates independently from the business units and is responsible for the identification, assessment, monitoring,
measurement
 
and
 
management
 
of
 
the
 
risks
 
that
 
the
 
Group
 
is
 
exposed
 
to.
 
It
 
comprises
 
of
 
the
 
Group
 
Credit
General
 
Division
 
(GCGD),
 
the
 
Group
 
Credit
 
Control
 
Sector
 
(GCCS),
 
the
 
Group
 
Credit
 
Risk
 
Capital
 
Adequacy
Control
 
Sector (GCRCACS),
 
the Group
 
Market and
 
Counterparty Risk
 
Sector (GMCRS),
 
the Group
 
Operational
Risk Sector (GORS),
 
the Group Model Validation and Governance Sector (GMVGS), the Group Risk
 
Management
Strategy
 
Planning
 
and
 
Operations
 
Division
 
(GRMSPO),
 
the
 
Supervisory
 
Relations
 
and
 
Resolution
 
Planning
Sector (SRRPS), the Group
 
Climate Risk Division (GCRD) and the
 
Risk Analytics Division (RAD).
 
As part of its overall system
 
of internal controls, Eurobank
 
Ergasias Services and Holdings
 
S.A. has engaged in a
Service
 
Level
 
Agreement
 
(SLA)
 
with
 
Eurobank
 
S.A.
 
(the
 
banking
 
subsidiary
 
of
 
the
 
Group)
 
in
 
order
 
to
 
receive
supporting and advisory services in all areas
 
of risk management undertaken
 
by the Group.
The most important types of
 
risk that are addresse
 
d
 
by the risk management
 
functions of the
 
Group are:
Credit Risk
Credit risk is the
 
risk that a counterparty
 
will be unable to fulfill
 
its payment obligations
 
in full when
 
due. Credit
risk is also
 
related with country risk and
 
settlement risk. Credit risk arises
 
principally from the wholesale and retail
lending activities of the Group, as well as from credit enhancements
 
provided, such as financial guarantees and
letters of credit. The Group is also exposed to credit risk arising from other activities such as investments in debt
securities, trading,
 
capital markets
 
and settlement activities.
 
Taking
 
into account that
 
credit risk is
 
the primary
risk the Group is exposed to,
 
it is very closely managed and monitored by
 
specialised risk units, reporting to the
GCRO.
The
 
credit
 
review
 
and approval
 
processes
 
are
 
centralized
 
both
 
in Greece
 
and in
 
the
 
International
 
operations
following
 
the
 
“four-eyes”
 
principle and
 
specific
 
guidelines
 
stipulated
 
in the
 
Credit
 
Policy
 
Manual
 
and the
 
Risk
Appetite
 
Framework.
 
The
 
segregation
 
of
 
duties
 
ensures
 
independence
 
among
 
executives
 
responsible
 
for
 
the
customer relationship, the
 
approval process and the loan disbursement, as well as monitoring of the loan during
its lifecycle. The credit approval
 
process in Corporate Banking is centralized
 
through the establishment of Credit
Committees with escalating Credit
 
Approval Levels,
 
which assess and limit to the extent possible the
 
corporate
credit risk. Rating
 
models are used
 
in order to calculate
 
the credit
 
rating of corporate
 
customers, reflecting
 
the
underlying
 
credit
 
risk. The
 
most significant
 
ones
 
are
 
the
 
MRA (Moody’s
 
Risk Analyst)
 
applied
 
for
 
companies
 
-
mostly-
 
with
 
industrial
 
and
 
commercial
 
activity
 
and
 
the
 
slotting
 
rating
 
models,
 
used
 
for
 
specialised
 
lending
portfolios
 
(shipping,
 
real
 
estate
 
and
 
project
 
finance)
 
with
 
ring
 
fenced
 
transactions.
 
Credit
 
risk
 
assessment
 
is
performed
 
by
 
Group
 
Credit
 
General
 
Division
 
(GCGD),
 
which
 
assesses
 
the
 
credit
 
requests
 
submitted
 
by
 
the
Business Units, a procedure including the evaluation of the operational
 
and financial profile of the customer, the
validation of the borrower’s
 
rating and the
 
identification of potential risk factors
 
for the
 
Bank.
The credit review and approval processes
 
for loans to Small Businesses (turnover up to €5m)
 
are also centralised
following
 
specific
 
guidelines
 
and
 
applying
 
the
 
‘four-eyes’
 
principle.
 
The
 
assessment
 
is
 
primarily
 
based
 
on the
analysis
 
of
 
the
 
borrower's
 
operational
 
characteristics
 
and
 
financial
 
position.
 
The
 
same
 
applies
 
for
 
Individual
Banking (consumer
 
and mortgage
 
loans), where
 
the
 
credit
 
risk assessment
 
is based
 
on criteria
 
related
 
to the
characteristics of the
 
retail portfolio,
 
such as the financial position of the
 
borrower,
 
the payment behaviour,
 
the
existence of real estate property
 
and the type and quality of securities.
 
The
 
ongoing monitoring
 
of
 
the
 
portfolio
 
quality
 
and
 
of
 
any deviations
 
that
 
may arise,
 
lead to
 
an immediate
adjustment
 
of
 
the
 
credit
 
policy
 
and
 
procedures,
 
when
 
deemed
 
necessary.
 
The
 
quality
 
of
 
the
 
Group’s
 
loan
portfolios
 
(business, consumer
 
and mortgage
 
in Greece
 
and abroad)
 
is monitored
 
and assessed
 
by the
 
Group
Credit Control
 
Sector (GCCS) via
 
field, desktop and thematic
 
reviews in
 
order to timely
 
identify emerging
 
risks,
vulnerabilities,
 
compliance
 
to credit
 
policies and
 
consistency in
 
underwriting. Furthermore,
 
the
 
GCCS assumes
oversight
 
and
 
supervisory
 
responsibilities
 
for
 
proper
 
operation
 
of
 
corporate
 
rating
 
and
 
impairment
 
models.
Moreover,
 
GCCS regularly reviews the adequacy of provisions of all loan portfolios. Finally, the
 
sector formulates
Group’s
 
credit
 
policies
 
while at
 
the
 
same time
 
it monitors
 
regulatory
 
developments
 
proposing
 
relevant
 
policy
updates
 
when
 
necessary.
 
GCCS
 
operates
 
independently
 
from
 
all
 
the
 
business
 
units
 
of
 
the
 
Bank
 
and
 
reports
directly to the GCRO.
 
 
 
 
 
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The
 
measurement,
 
monitoring and
 
periodic
 
reporting of
 
the
 
Group’s
 
exposure
 
to counterparty
 
risk (issuer
 
risk
and market driven counterparty risk), which is the risk
 
of loss due
 
to the customer’s failure to meet its contractual
obligations
 
in
 
the
 
context
 
of
 
treasury
 
positions,
 
such
 
as
 
debt
 
securities,
 
derivatives,
 
repos,
 
reverse
 
repos,
interbank placings, etc. are performed
 
by the Group
 
Market and Counterparty Risk Sector (GMCRS). The
 
Group
sets limits on
 
the level of counterparty risk that are based mainly on
 
the counterparty’s credit rating, as provided
by international rating
 
agencies, the product
 
type and the maturity of the
 
transaction (e.g. control
 
limits on net
open
 
derivative
 
positions
 
by
 
both
 
amount
 
and
 
term,
 
sovereign
 
bonds
 
exposure,
 
corporate
 
securities,
 
asset
backed
 
securities,
 
etc.).
 
GMCRS
 
maintains
 
and
 
updates
 
the
 
limits’
 
monitoring
 
systems
 
and
 
ensures
 
the
correctness and compliance of all financial
 
institutions limits with the Bank’s policies as
 
approved by the Group’s
relevant
 
bodies.
 
The
 
utilization
 
of
 
the
 
abovementioned
 
limits,
 
any
 
excess
 
of
 
them,
 
as
 
well
 
as
 
the
 
aggregate
exposure
 
per
 
Group’s
 
entity,
 
counterparty
 
and
 
product
 
type
 
are
 
monitored
 
by
 
GMCRS
 
on
 
a
 
daily
 
basis.
 
The
Group from 2021 applies the
 
new regulatory framework
 
for the
 
counterparty risk from derivatives
 
(SA-CCR).
 
Market Risk
 
The Group
 
has exposure to market
 
risk, which is the
 
risk of potential financial
 
loss due to an adverse
 
change in
market
 
variables.
 
Changes
 
in
 
interest
 
rates,
 
foreign
 
exchange
 
rates,
 
credit
 
spreads,
 
equity
 
prices
 
and
 
other
relevant
 
factors,
 
such as
 
the implied
 
volatilities,
 
can affect
 
the Group’s
 
income or
 
the fair
 
value of its
 
financial
instruments.
 
The
 
market
 
risks, the
 
Group
 
is
 
exposed
 
to, are
 
monitored,
 
controlled
 
and
 
estimated
 
by
 
GMCRS.
GMCRS is responsible
 
for the
 
measurement,
 
monitoring, control
 
and reporting
 
of the
 
exposure on market
 
risks
including the Interest Rate Risk in the Banking Book (IRRBB) of the Group. The GMCRS reports to the GCRO. The
exposures and the utilisation
 
of the limits are reported
 
to the Board Risk Committee.
Market risk in Greece and
 
International Subsidiaries is managed and monitored
 
mainly using Value at Risk
 
(VaR)
methodology,
 
Sensitivity
 
and
 
stress
 
test
 
analysis.
 
VaR
 
is
 
a
 
methodology
 
used
 
in
 
measuring
 
financial
 
risk
 
by
estimating the potential negative
 
change in the market value of a portfolio at a given confidence level and over
a specified
 
time horizon. The
 
VaR
 
that the
 
Group measures
 
is an estimate
 
based upon a
 
99% confidence
 
level
and a holding
 
period of
 
1 day and
 
the methodology
 
used for
 
the calculation
 
is Monte Carlo
 
simulation (full
 
re-
pricing of the
 
positions is performed).
 
Since VaR
 
constitutes an integral
 
part of the
 
Group's market
 
risk control
regime, VaR
 
limits have been established
 
for all portfolios
 
(trading and investment)
 
measured at fair
 
value and
actual exposure
 
is reviewed
 
daily by
 
management. However,
 
the use
 
of this
 
approach
 
does not
 
prevent
 
losses
outside
 
of
 
these
 
limits
 
in
 
the
 
event
 
of
 
extraordinary
 
market
 
movements.
 
For
 
that
 
reason
 
the
 
Group
 
uses
additional monitoring metrics such as: Stressed
 
VaR, Expected Shortfall
 
and Stress Tests.
 
Finally, the Group
 
has
the required systems and procedures
 
for the application
 
of the new regulatory framework
 
for market risk (FRTB)
according to the regulatory
 
plan.
Interest Rate Risk in the
 
Banking Book (IRRBB)
The IRRBB
 
is defined as
 
the current
 
and the
 
prospective
 
risk of a negative
 
impact to the
 
institution’s economic
value
 
of
 
equity,
 
or
 
to
 
the
 
institution’s
 
net
 
interest
 
income,
 
taking
 
market
 
value
 
changes
 
into
 
account
 
as
appropriate, which arise from
 
adverse movements
 
in interest rates
 
affecting interest
 
rate sensitive instruments,
including gap risk, basis risk and option risk.
 
GMCRS is the
 
unit responsible
 
for the
 
monitoring, control,
 
reporting and estimation
 
of IRRBB on
 
a group
 
level.
Both
 
the
 
Economic
 
Value
 
of
 
Equity
 
(EVE)
 
and
 
NII
 
sensitivity
 
to
 
a
 
number
 
of
 
stresses
 
on
 
interest
 
rates
 
are
estimated on a
 
periodic basis
 
and are compared
 
with the
 
approved
 
by BRC limits. The
 
Group is now
 
using the
recently established
 
Asset and Liability
 
Management (ALM)
 
tool for
 
a significant
 
part of the
 
analysis on a
 
solo
level. The
 
plan is to further
 
increase the
 
use of the
 
ALM tool for
 
any analysis related
 
to IRRBB on a
 
group level.
The
 
policy
 
for
 
the
 
management
 
of
 
IRRBB
 
as
 
approved
 
by
 
BRC
 
and
 
BoD
 
provides
 
a
 
clear
 
description
 
of
 
the
methodologies, governance,
 
limits that are used for
 
the management of IRRBB.
Liquidity
 
Risk
The Group
 
is exposed on a daily basis
 
to liquidity risk due to deposits
 
withdrawals, maturity
 
of medium or long
term
 
notes,
 
maturity
 
of secured
 
or unsecured
 
funding
 
(interbank
 
repos
 
and money
 
market
 
takings), collateral
revaluation
 
as a
 
result
 
of market
 
movements,
 
loan draw
 
-downs
 
and forfeiture
 
of guarantees.
 
The
 
Board
 
Risk
Committee
 
sets
 
liquidity
 
limits
 
to
 
ensure
 
that
 
sufficient
 
funds
 
are
 
available
 
to
 
meet
 
such
 
contingencies.
 
The
Group
 
monitors
 
on
 
a
 
continuous
 
basis
 
the
 
level
 
of
 
liquidity
 
risk
 
using
 
regulatory
 
and
 
internal
 
metrics
 
and
methodologies (LCR,
 
NSFR, buffer
 
analysis, cash flow analysis, short-term
 
and medium-term stress test
 
etc.).
BRC
 
role
 
is
 
to
 
approve
 
all
 
strategic
 
liquidity
 
risk
 
management
 
decisions
 
and
 
monitor
 
the
 
quantitative
 
and
qualitative aspects of liquidity risk. Group
 
Assets and Liabilities Committee (G-ALCO) has the
 
mandate to form
and implement
 
the
 
liquidity policies
 
and guidelines
 
in conformity
 
with Group's
 
risk appetite,
 
and to
 
review
 
at
least monthly
 
the overall
 
liquidity position
 
of the
 
Group. Group
 
Treasury
 
is responsible
 
for the
 
implementation
of the
 
Group's
 
liquidity strategy,
 
the
 
daily management
 
of the
 
Group’s
 
liquidity and
 
for
 
the
 
preparation
 
and
monitoring of the
 
Group’s
 
liquidity budget, while
 
GMCRS is responsible
 
for measuring,
 
control, monitoring
 
and
reporting the liquidity
 
of the Group.
 
 
 
 
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Operational
 
Risk
Operational
 
risk is defined as the
 
risk of loss resulting from inadequate
 
or failed internal processes,
 
people and
systems or from
 
external events.
 
This definition
 
includes legal
 
risk, but excludes
 
strategic and
 
reputational
 
risk.
Operational risk is embedded in
 
every business activity undertaken by the Group. The primary
 
aim of
 
operational
risk management is to ensure the integrity of the Group’s operations and its reputation by mitigating its impact.
To manage operational
 
risk more efficiently, the
 
Group operates
 
an Operational Risk Management
 
Framework,
which defines its approach to identifying,
 
assessing, monitoring and reporting operational
 
risks.
Governance
 
responsibility for
 
operational
 
risk management
 
stems from
 
the
 
Board of
 
Directors (BoD),
 
through
the Executive
 
Board and
 
Senior Management,
 
and passes
 
down to the
 
Heads and staff
 
of every
 
business unit.
The
 
BoD establishes
 
the
 
mechanisms used
 
by the
 
Group
 
to manage
 
operational
 
risk, by
 
setting the
 
tone and
expectations
 
at
 
top management
 
and delegating
 
relevant
 
responsibility.
 
The
 
Board
 
Risk Committee
 
and the
Audit Committee
 
monitor the
 
operational
 
risk level
 
and profile,
 
including the
 
level
 
of operational
 
losses, their
frequency and severity.
The
 
Heads of each
 
Business Unit (the
 
risk owners)
 
are primarily
 
responsible for
 
the day-today
 
management of
operational
 
risk and the adherence
 
to relevant controls.
 
To this
 
end, every business
 
unit:
a)
Identifies,
 
evaluates
 
and
 
monitors
 
its
 
operational
 
risks,
 
and
 
implements
 
risk
 
mitigation
 
controls
 
and
techniques,
b)
Assesses the efficiency
 
of control mechanisms,
c)
Reports all relevant issues,
d)
Has access and
 
uses the
 
methods and tools
 
introduced by
 
the Group
 
Operational
 
Risk Sector,
 
to facilitate
in identifying, evaluating and monitoring operational
 
risks.
Each
 
Business
 
Unit
 
has
 
appointed
 
an
 
Operational
 
Risk
 
Partner
 
(OpRisk
 
Partner)
 
or
 
an
 
Operational
 
Risk
Management Unit
 
(ORMU) depending
 
on the
 
size of
 
the
 
business unit
 
who is
 
responsible for
 
coordinating
 
the
internal
 
operational
 
risk
 
management
 
efforts
 
of the
 
business unit.
 
OpRisk Partners
 
and ORMUs
 
form
 
the
 
link
between Line 1 and
 
Line 2 of
 
the Three Lines of Defense Model for all
 
operational risk matters. In addition, OpRisk
Partners also exist at Units
 
that are part of Line 2
 
and Line 3
 
to ensure the appropriate operational risk oversight
in those functions.
Group Operational Risk Sector (GORS) has
 
been positioned as
 
an overlaying framework coordinator for all Non-
Financial
 
Risks
 
(NFRs).
 
The
 
GORS
 
overlaying
 
responsibilities
 
aim
 
to
 
harmonize
 
Two
 
Lines
 
of
 
Defense
 
(2LoD)
activities across the Group and to holistically ensure the effective,
 
consistent application of the NFR Framework.
2LoD
 
Units maintain
 
their
 
responsibilities
 
for
 
specific
 
Risk Theme(s)
 
owned.
 
NFR
 
management
 
comprises
 
risk
identification,
 
assessment, and
 
mitigation while
 
employing independent
 
oversight
 
and an effective
 
risk culture
to ensure that
 
business objectives
 
are met within
 
the NFR appetite
 
that is reflected
 
in the Group’s
 
Policies and
Guidelines. The update
 
and implementation of the
 
NFR Management Framework
 
is in progress.
Climate related risk
The
 
Group has
 
recognized climate
 
change as
 
a material
 
risk and based
 
on supervisory
 
guidelines, is
 
adapting
its policies and methodologies
 
for identifying and monitoring the
 
relevant risks.
Specifically,
 
climate
 
risk
 
is
 
the
 
risk
 
deriving
 
from
 
potential
 
loss
 
or
 
negative
 
impact
 
to
 
the
 
Group,
 
including
loss/damage
 
to physical
 
assets, disruption
 
of business
 
or system
 
failures,
 
from
 
the
 
adverse
 
effects
 
of climate
change and natural disasters.
Climate-related and environmental
 
risks are commonly understood to include the
 
following risks:
a)
Physical
 
risk, which
 
refers
 
to the
 
financial impact
 
of a
 
changing climate,
 
including more
 
frequent
 
extreme
weather
 
events and gradual changes in climate, as well as of environmental degradation,
 
such as air, water
and land pollution, water
 
stress, biodiversity
 
loss and deforestation,
b)
Transition
 
risk, which
 
refers
 
to an
 
institution’s
 
financial
 
loss that
 
can
 
result,
 
directly
 
or indirectly,
 
from
 
the
process of adjustment
 
towards a lower
 
-carbon and more environmentally
 
sustainable economy.
The
 
Group is
 
adopting a
 
strategic
 
approach towards
 
sustainability,
 
climate change
 
risk identification
 
and risk
management,
 
signifying
 
the
 
great
 
importance
 
that
 
is
 
given
 
in
 
the
 
risks
 
and
 
opportunities
 
arising
 
from
 
the
transitioning to a low-carbon
 
and more circular economy.
 
In this context, the Bank is in the
 
process of finalizing
its Financed Impact Strategy,
 
which will focus on:
 
a)
Clients’ engagement and awareness
 
to adapt their business so as to address
 
climate change challenges,
b)
Actions
 
for
 
supporting
 
customers
 
in
 
their
 
transition
 
efforts
 
towards
 
a
 
more
 
ESG-friendly
 
economic
environment,
c)
Enablers and tools such as frameworks
 
and products to underpin
 
Sustainable Financing,
d)
The risk assessment
 
of climate-related material
 
exposures.
In
 
line
 
with
 
good
 
practices
 
identified
 
by
 
the
 
ECB,
 
the
 
Financed
 
Impact
 
Strategy
 
of
 
the
 
Bank
 
will
 
focus
 
on
sustainable
 
financing
 
targets
 
/
 
commitments.
 
In
 
particular,
 
the
 
Bank
 
identified
 
total
 
portfolio
 
and
 
sectoral
targets
 
with
 
regards
 
to
 
financing
 
the
 
green
 
transition
 
of
 
its
 
clients.
 
To
 
facilitate
 
the
 
classification
 
of
sustainable/green
 
financing
 
opportunities
 
in
 
a
 
structural
 
manner,
 
the
 
Bank
 
has
 
developed
 
its
 
Sustainable
Finance
 
Framework
 
(SFF).
 
Through
 
its
 
SFF,
 
the
 
Bank
 
classifies
 
sustainable
 
lending
 
solutions
 
offered
 
to
 
its
customers,
 
specifying
 
the
 
applied
 
classification
 
approach
 
and
 
the
 
activities
 
defined
 
as
 
eligible
 
to
 
access
 
 
 
 
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sustainable financing (eligible
 
green and social
 
assets). Similar initiatives for the establishment of
 
SFF framework
is under way in the subsidiaries.
 
Furthermore,
 
the
 
Group
 
has
 
updated
 
its
 
governance
 
structure
 
by
 
introducing
 
and
 
defining
 
the
 
roles
 
and
responsibilities in relation
 
to climate related
 
and environmental
 
(CR&E) risks, embedding
 
regulatory guidelines
and market practices.
The
 
CR&E Risk
 
Governance
 
involves
 
various
 
key
 
stakeholders
 
(i.e. Business
 
functions,
 
Units, and
 
Committees).
The Group applies a model of defined roles and responsibilities regarding the management of CR&E risks
 
across
the 3 Lines of Defense.
The Group Climate Risk Division (GCRD) has the overall
 
responsibility for overseeing, monitoring, and managing
CR&E risks. Specifically,
 
the GCRD operates
 
as Project office
 
responsible for
 
the implementation
 
of the Climate
related and Environmental risks roadmap, with a
 
coordinating and supervisory role on
 
all related project streams
to
 
ensure
 
alignment
 
with
 
the
 
Bank’s
 
business
 
strategy
 
and
 
the
 
regulatory
 
authorities’
 
expectations.
 
In
 
this
context, GCRD ensures the implementation of environmental
 
and sustainability initiatives (frameworks,
 
policies,
procedures and products)
 
and compliance with existing and upcoming sustainability-related regulations,
 
under
an ongoing bank-wide program, in alignment with the supervisory agreed roadmap, which is accelerated
 
where
possible.
 
Also,
 
GCRD
 
is
 
responsible
 
for
 
the
 
co-ordination
 
with
 
Business
 
and
 
Risk
 
Units,
 
the
 
preparation
 
and
submission for
 
approval of
 
the Financed
 
Impact Strategy,
 
as well as monitors
 
its implementation.
 
Furthermore,
the
 
GCRD leads
 
the 2nd
 
Line of
 
Defense independent
 
sustainable lending
 
re-assessment
 
process.
 
Specifically,
in the
 
context of implementing
 
the approved
 
Sustainable Finance
 
Framework
 
(SFF), the
 
Division is responsible
to
 
assess
 
the
 
sustainability
 
features
 
of
 
new
 
loans
 
and
 
products
 
according
 
to
 
the
 
criteria
 
set
 
within
 
the
 
SFF.
Further information
 
on ESG risk is provided in the
 
Consolidated Pillar 3 Report on the
 
Company’s website.
The Group applies the elements of the
 
Three Lines of Defense Model for the management of all types of risk. The
Three
 
Lines
 
of
 
Defense
 
Model
 
enhances
 
risk
 
management
 
and
 
control
 
by
 
clarifying
 
roles
 
and
 
responsibilities
within the organization. Under the oversight
 
and direction of the Management Body, the responsibilities of each
of these lines of defense
 
are:
Line
 
1
 
-
 
Own
 
and
 
manage
 
risk
 
and
 
controls.
 
The
 
front
 
line
 
business
 
and
 
operations
 
are
 
accountable
 
for
 
this
responsibility as they
 
own the rewards
 
and are the primary risk generators,
Line 2
 
- Monitor
 
risk and
 
controls
 
in support
 
of Executive
 
Management,
 
providing
 
oversight,
 
challenge, advice
and group-wide direction.
 
These mainly include the
 
Risk and Compliance Units,
Line 3 - Provide
 
independent assurance
 
to the
 
Board and Executive
 
Management concerning
 
the effectiveness
of risk and control management.
 
This refers
 
to Internal Audit.
Further
 
information
 
on the
 
Group’s
 
financial risk
 
management
 
objectives
 
and policies,
 
including the
 
policy for
hedging each major type of transaction for
 
which hedge accounting is used is set out in the notes 2, 5 and 19 to
the consolidated
 
financial statements for
 
the year ended 31 December
 
2022.
Non Performing Exposures
 
(NPE) management
The
 
Group,
 
following
 
the
 
strategic
 
partnership
 
with
 
doValue
 
S.p.A.
 
and
 
the
 
transition
 
to
 
the
 
new
 
operating
model
 
for
 
the
 
management
 
of
 
NPE,
 
realizes
 
the
 
NPE
 
Strategy
 
Plan
 
through
 
its
 
implementation
 
by
 
doValue
Greece for
 
the assigned portfolio
 
and the securitization
 
transactions.
 
Troubled
 
Assets Committee
The Troubled Assets Committee (TAC) is established according to the regulatory provisions and its main purpose
is to act
 
as an independent
 
body, closely
 
monitoring the
 
Bank’s troubled
 
assets portfolio
 
and the
 
execution of
its NPE Management Strategy.
Remedial and Servicing Strategy
 
(RSS)
Remedial
 
Servicing
 
&
 
Strategy
 
Sector
 
(RSS)
 
has
 
the
 
mandate
 
to
 
devise
 
the
 
NPE
 
reduction
 
plan
 
and
 
closely
monitor the overall performance of the NPE portfolio as well as
 
the relationship of the Bank
 
with doValue Greece.
Furthermore,
 
following
 
Bank’s
 
commitments
 
against
 
the
 
significant
 
risk
 
transfer
 
(SRT)
 
monitoring
 
regulatory
requirements
 
pertaining
 
to
 
Bank’s
 
concluded
 
transactions,
 
RSS
 
has
 
a
 
pivotal
 
role
 
in
 
ensuring
 
that
 
relevant
process
 
is performed
 
smoothly and
 
in a timely
 
manner and
 
that any
 
shortcomings are
 
appropriately
 
resolved,
while
 
providing
 
any
 
required
 
clarifications
 
or
 
additional
 
material
 
required
 
by
 
the
 
regulatory
 
authorities.
 
The
Head of RSS reports to the General
 
Manager of Group Strategy.
In this context, RSS has been assigned inter alia with
 
the following
 
responsibilities:
a)
Develop and actively
 
monitor the NPE targets
 
and reduction plan,
b)
Set the
 
strategic
 
principles, priorities,
 
policy framework
 
and KPIs
 
under which
 
doValue
 
Greece
 
is servicing
the portfolio,
c)
Closely monitor
 
the
 
execution
 
of
 
the
 
approved
 
strategies,
 
as well
 
as all
 
contractual
 
provisions
 
under
 
the
relevant
 
contractual
 
agreements
 
for
 
Eurobank’s
 
portfolio
 
assigned
 
to
 
doValue
 
Greece
 
including
 
the
securitized portfolio
 
of ERB Recovery DAC,
d)
Monitoring of the performance
 
of the senior notes of the
 
securitizations in collaboration
 
with Group Risk so
as to
 
ensure compliance to
 
significant risk transfer (SRT) and
 
to the Hellenic
 
Asset Protection Scheme (HAPS),
e)
Budget and monitor the Bank’s expenses and revenues
 
associated with the
 
assigned portfolio,
f)
Cooperate closely with
 
doValue Greece
 
on a daily basis in achieving the
 
Group’s objectives,
g)
Maintain supervisory dialogue.
 
 
 
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
 
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10
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NPE Management Strategy
 
and Operational
 
targets
Ιn
 
line
 
with
 
the
 
regulatory
 
framework
 
and
 
Single
 
Supervisory
 
Mechanism’s
 
(SSM)
 
requirements
 
for
 
Non-
Performing
 
Exposures’ (NPE) management,
 
in March 2023,
 
the Group
 
submitted its NPE Management
 
Strategy
for 2023-2025,
 
along with the
 
annual NPE stock targets
 
at both
 
Bank and Group
 
level. The
 
plan envisages the
decrease of the Group’s
 
NPE ratio at 5.2% at
 
the end of 2023 and at 4.5% in 2025.
 
In the
 
context of
 
its NPE
 
management strategy,
 
the
 
Group has
 
initiated, jointly
 
with the
 
other
 
Greek systemic
banks,
 
an
 
NPE
 
securitization
 
transaction
 
of
 
a
 
wholesale
 
portfolio
 
consisting
 
of
 
common
 
borrower
 
exposures
(project ‘Solar’). The
 
Group targets to the prudential
 
and accounting derecognition of the
 
underlying corporate
loan
 
portfolio
 
from
 
its
 
balance
 
sheet
 
by
 
achieving
 
a
 
Significant
 
Risk
 
Transfer
 
(SRT)
 
and
 
including
 
‘Solar’
securitization
 
under
 
the
 
Hellenic
 
Asset
 
Protection
 
Scheme
 
(HAPS),
 
with
 
the
 
senior
 
note
 
of
 
the
 
securitization
becoming
 
entitled
 
to
 
the
 
Greek
 
State’s
 
guarantee.
 
In
 
parallel,
 
the
 
Management
 
along
 
with
 
the
 
other
participating
 
banks
 
have
 
initiated
 
actions
 
towards
 
the
 
disposal
 
of
 
the
 
majority
 
stake
 
of
 
the
 
mezzanine
 
and
junior
 
notes
 
to
 
be
 
issued
 
in
 
the
 
context
 
of
 
the
 
above-mentioned
 
securitization
 
(note
 
20
 
to
 
the
 
consolidated
financial statements).
Macroeconomic Outlook
 
and Risks
2022 was marked by the war
 
in Ukraine, which gave rise
 
to a global –but
 
predominantly European–
 
energy crisis,
added
 
to
 
the
 
mounting
 
inflationary
 
pressures,
 
and
 
led
 
to
 
widespread
 
economic
 
uncertainty
 
and
 
increased
volatility in the
 
global economy and financial markets.
 
Nevertheless,
 
the post-pandemic recovery
 
continued for
a second consecutive year in
 
Greece, with its GDP growth overperforming that of most of its EU
 
peers. According
to
 
the
 
Hellenic
 
Statistical
 
Authority
 
(ELSTAT)
 
provisional
 
data,
 
the
 
Greek
 
economy
 
expanded
 
by
 
5.9%
 
on
 
an
annual
 
basis
 
in
 
2022
 
driven
 
by
 
strong
 
increases
 
in
 
household
 
consumption,
 
fixed
 
investment,
 
and
 
exports
 
of
services, with the European
 
Commission (EC) estimating the full-year
 
2022 growth rate at 5.5% and 1.2% in 2023
in its winter
 
economic forecast
 
(February
 
2023). The
 
inflation rate,
 
as measured
 
by the
 
change in the
 
12-month
average
 
Harmonized Index of Consumer Prices (HICP), increased
 
to 9.3% in 2022 according to ELSTAT,
 
primarily
as a result of supply-side
 
shocks (including the hikes in energy, food and other raw material prices, the
 
continued
disruptions in
 
the supply
 
chain and
 
the rising
 
nominal wages),
 
alongside the
 
steep post-pandemic
 
recovery
 
of
domestic and
 
external demand.
 
The
 
EC expects that
 
the inflation
 
rate
 
will decline
 
to 4.5% in
 
2023, and
 
further
de-escalate to 2.4% in 2024.
Moreover,
 
provisional ELSTAT
 
data shows that the average monthly unemployment
in
 
2022
 
decreased
 
to
 
12.4%,
 
from
 
14.8%
 
in
 
2021,
 
while
 
the
 
Organisation
 
for
 
Economic
 
Co-operation
 
and
Development (OECD)
 
in its latest report (January 2023) expects unemployment
 
to decline to 11.5% in 2023.
A significant boost to growth in Greece and in
 
other countries of presence is expected from European Union (EU)
funding,
 
mainly
 
under
 
the
 
Next
 
Generation
 
EU
 
(NGEU)
 
instrument
 
and
 
the
 
Multiannual
 
Financial
 
Framework
(MFF) 2021–2027,
 
EU’s long-term budget. Greece shall receive
 
EU funds of more than €30.5bn (€17.8bn
 
in grants
and €12.7bn
 
in loans)
 
up to
 
2026 from
 
NGEU’s Recovery
 
and Resilience
 
Facility
 
(RRF) to
 
finance
 
projects
 
and
initiatives laid down in its
 
National Recovery and Resilience Plan (NRRP) titled “Greece 2.0”.
 
The NRRP estimates
that
 
the
 
aforementioned
 
amount
 
will
 
be
 
supplemented
 
by
 
an
 
additional
 
€26.5bn
 
of
 
private
 
funds.
 
A
 
pre-
financing of €4bn was disbursed in August 2021, and the first two regular payments of €3.6bn each in April 2022
and January
 
2023 respectively.
 
Greece
 
has been
 
also allocated
 
about €40bn
 
through
 
MFF 2021–2027,
 
out of
which
 
close
 
to
 
€21bn
 
will
 
fund
 
investments
 
and
 
initiatives
 
under
 
its
 
new
 
Partnership
 
Agreement
 
for
 
the
Development Framework
 
(ESPA 2021–2027).
On the monetary policy front, although net
 
bond purchases under the temporary Pandemic Emergency Purchase
Programme (PEPP) ended in March 2022, as scheduled, the ECB will continue to reinvest principal from maturing
securities at least until
 
the end of 2024,
 
including purchases of Greek
 
Government Bonds (GGBs) over and above
rollovers
 
of redemptions. As
 
of 31 January 2023,
 
ECB net purchases
 
of GGBs under PEPP amounted
 
to €37.8bn.
Furthermore, the
 
Governing Council of the ECB, in line with its strong commitment
 
to its price stability mandate,
has proceeded with six rounds of interest rate hikes (in July, September,
 
October, December
 
2022, February and
in March 2023), raising the three
 
key ECB interest rates by 350 basis points in aggregate.
 
Moreover,
 
it approved
a
 
new
 
instrument
 
(the
 
“Transmission
 
Protection
 
Instrument”
 
 
TPI)
 
aimed
 
at
 
preventing
 
fragmentation
 
in the
sovereign
 
bonds
 
market.
 
Finally,
 
following
 
the
 
expiration
 
of the
 
special
 
terms
 
and conditions
 
applying
 
to the
TLTRO
 
III (Targeted
 
Longer-Term
 
Refinancing Operations)
 
on 23
 
June 2022,
 
the
 
ECB will
 
keep
 
assessing how
targeted lending operations
 
are contributing to its monetary policy stance.
 
On
 
the
 
fiscal
 
front,
 
the
 
general
 
government
 
balance
 
was
 
to
 
post
 
a
 
primary
 
deficit
 
of
 
1.6%
 
of
 
GDP
 
in
 
2022
according to
 
the 2023
 
Budget (latest
 
outlook point to
 
a primary
 
deficit of ca.
 
1% of GDP
 
or even
 
lower),
 
and a
primary surplus
 
of 0.7%
 
of GDP
 
in 2023
 
(2021: deficit
 
of 5%).
 
The
 
deviation
 
from
 
the
 
primary surplus
 
target of
3.5%
 
of
 
GDP
 
in
 
2022
 
shall
 
not
 
be
 
considered
 
a
 
violation
 
of
 
the
 
country’s
 
commitments
 
under
 
the
 
Enhanced
Surveillance (ES) framework, as in March 2020
 
the EC activated the so-called
 
general escape clause, which allows
for
 
non-permanent
 
deviations
 
from
 
the
 
agreed
 
fiscal
 
paths
 
of
 
the
 
member-states
 
due
 
to
 
the
 
extraordinary
health and economic distress caused by the pandemic. The EC has proposed that the clause should be
 
extended
through 2023 and be deactivated in 2024. Greece
 
exited the ES regime in August 2022, following
 
the successful
completion of
 
the
 
fourteenth
 
and final
 
quarterly review
 
(May 2022).
 
The
 
total benefit
 
between 2018
 
and 2023
exceeds €6.1bn
 
(disbursements of €5.1bn
 
and interest reductions
 
of €1bn). The gross
 
public debt-to-GDP ratio
 
is
expected
 
to
 
decline
 
to
 
168.9%
 
and
 
159.3%
 
in
 
2022
 
and
 
2023
 
respectively
 
(2021:
 
194.5%)
 
owing
 
to
 
the
 
robust
economic recovery
 
and the
 
effect
 
of the
 
sharp price
 
level
 
increase on
 
nominal GDP.
 
The
 
above
 
forecasts
 
may
change in case
 
of potential adverse international developments that could affect energy and other goods
 
prices,
interest rates,
 
external and domestic demand, and bring about the need for additional fiscal
 
support measures.
Regarding sovereign
 
rating
 
changes in
 
the past
 
12 months,
 
DBRS Morningstar
 
upgraded
 
the rating
 
of Greece
to BB (high)
 
with stable
 
outlook fro
 
m
 
BB with
 
positive
 
outlook on
 
18 March
 
2022. Similarly,
 
Standard &
 
Poor’s,
 
 
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
 
REPORT OF THE DIRECTORS
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on
 
22
 
April
 
2022,
 
and
 
Fitch
 
Ratings,
 
on
 
27
 
January
 
2023,
 
upgraded
 
their
 
rating
 
for
 
Greece
 
to
 
BB+
 
from
 
BB,
changing
 
their
 
outlook
 
to
 
stable.
 
Although
 
Greece’s
 
sovereign
 
credit
 
rating
 
remains
 
one
 
notch
 
below
 
the
investment grade according
 
to three of the four External Credit
 
Assessment Institutions (ECAIs) accepted by the
Eurosystem, the aforementioned
 
upgrades signal that the rating agencies’ view on the sustainability of Greece’s
fiscal
 
position
 
keeps
 
improving
 
despite
 
the
 
uncertain
 
economic
 
environment.
 
In
 
2022,
 
the
 
Greek
 
State
proceeded with
 
the issuance
 
of nine bonds of various
 
maturities (5-year,
 
10-year,
 
15-year and 20-year)
 
through
the Public Debt Management Agency (PDMA), raising
 
a total of €8.3bn from international financial markets.
 
On
17 January 2023, the PDMA issued a 10-year bond of €3.5bn at a yield of 4.279%
and more recently, on 29 March
2023, issued a 5-year
 
bond of €2.5bn at a yield
 
of 3.919%.
 
As of end 2022, the
 
cash reserves
 
of the Greek
 
State
stood in excess
 
of €30bn, and
 
as of early
 
February
 
2023, its
 
sovereign
 
rating
 
was one
 
notch below
 
investment
grade by
 
three of the
 
four ECAIs
 
accepted by
 
the Eurosystem
 
(DBRS Morningstar: ΒΒ (high);
 
S&P Ratings, Fitch
Ratings: BB+).
According to Bank of Greece (BoG) data, the stock of
 
credit to the non-financial private sector stood at €107.1bn
at the
 
end of
 
2022, from
 
€102.6bn at
 
the
 
end of
 
2021, marking
 
an annual
 
gross
 
increase
 
of 4.4%
 
in spite
 
of a
significant deleveraging
 
of non-performing
 
exposures through
 
the “Hercules
 
II” scheme. Adjusted
 
for write-offs,
reclassifications
 
and
 
foreign
 
exchange
 
fluctuations,
 
domestic
 
credit
 
to
 
the
 
non-financial
 
sector
 
increased
 
by
6.2%
 
in
 
2022.
 
On
 
the
 
other
 
side
 
of
 
the
 
ledger,
 
domestic
 
non-financial
 
private
 
sector
 
deposits
 
amounted
 
to
€185.1bn
 
at the end of 2022 from €175.5bn at
 
the end of 2021, increasing by 5.5%. This
 
significant annual growth
follows
 
the
 
sharp increase
 
in nominal GDP
 
and the
 
effect
 
of the
 
government’s
 
energy
 
crisis support
 
measures.
Provisional
 
BoG
 
data
 
shows
 
that
 
residential
 
real
 
estate
 
prices
 
increased
 
by
 
10.2% in
 
the
 
first nine
 
months
 
of
2022, and commercial
 
real estate prices
 
increased by 2.4%
 
in the first
 
half of 2022 compared
 
to their end-2021
levels.
In
 
2022,
 
the
 
geopolitical
 
turmoil
 
caused
 
by
 
the
 
war
 
in
 
Ukraine
 
has
 
resulted
 
in
 
the
 
deterioration
 
of
 
the
macroeconomic outlook in Central,
 
Eastern and Southeastern Europe
 
(CESEE) countries.
 
However,
 
the economic
downturn
 
in CESEE
 
region
 
has
 
not
 
been
 
that
 
sharp
 
as
 
formerly
 
anticipated,
 
given
 
the
 
resilience
 
the
 
regional
economies have
 
demonstrated
 
towards
 
the
 
war fallout.
 
Looking
 
ahead,
 
the
 
main risks
 
continue to
 
stem from
the lingering
 
geopolitical upheaval
 
and the inflationary
 
outlook. Prospects
 
over
 
inflation in the
 
region for
 
2023
have broadly
 
improved on the
 
back of energy prices
 
de-escalation. In this context,
 
regional Central Banks
 
have
embarked since mid-2021 to tightening monetary cycles by increasing the key
 
policy rates throughout 2022 and
with some of those not having
 
terminated yet the
 
restrictive policy.
In tandem with
 
the entire
 
CESEE region,
 
the Bulgarian
 
economy expanded
 
by 3.4%
 
in 2022 (2021:
 
7.6%),
 
based
on data from the
 
National Statistical
 
Institute of Bulgaria, supported by strong
 
growth in exports and by
 
wage
and social
 
transfer increases that compensated for increasing consumer prices, while inflation averaged at 15.3%
in 2022 (2021: 3.3%). According to EC’s winter economic forecasts (February 2023), real GDP is expected to grow
by 1.4% in
 
2023 and 2.5% in 2024
 
mainly due to the
 
implementation of
 
the Recovery
 
and Resilience Plan
 
which
is considered as the main factor behind the
 
expected rebound of investment growth,
 
while the HICP is expected
at 7.8%
 
in 2023.
In Cyprus,
 
according to
 
the EC’s
 
winter economic
 
forecasts
 
(February
 
2023) the
 
real GDP
 
growth
 
is forecasted
at 5.8% in 2022 and 1.6% in 2023 (2021:
 
6.6%) mainly based on stronger household consumption underpinned
 
by
government
 
measures
 
to compensate
 
for
 
high energy
 
prices, and
 
higher
 
exports of
 
services,
 
mainly in tourism
and transport,
 
which were
 
the main
 
growth
 
drivers in
 
the previous
 
three quarters.
 
Despite the
 
negative
 
effects
from
 
the
 
war
 
in
 
Ukraine,
 
the
 
tourism
 
revenues
 
expanded
 
by
 
63.2%
 
year
 
on
 
year
 
during
 
the
 
period
 
January-
November
 
2022, thus
 
the
 
role of
 
the
 
tourism sector
 
was dominant
 
for
 
economic growth
 
in 2022.
 
Respectively,
the
 
Consumer
 
Price
 
Index
 
(CPI)
 
is
 
estimated
 
at
 
8.1%
 
in
 
2022
 
and
 
4%
 
in
 
2023
 
(2021:
 
2.3%)
 
mainly
 
due
 
to
 
a
deceleration
 
in energy
 
and commodity
 
prices. Implementation
 
of the
 
Recovery
 
and Resilience
 
Plan and
 
much
stronger activity in the
 
Tourism sector in 2022 are
 
expected to boost investments in 2023.
 
Regarding the
 
outlook for
 
the next
 
12 months the
 
major macroeconomic
 
risks and uncertainties
 
in Greece
 
and
our
 
region
 
are
 
as
 
follows:
 
(a)
 
the
 
ongoing Russia
 
- Ukraine
 
war
 
and
 
its
 
ramifications
 
on regional
 
and
 
global
stability and security,
 
as well as the
 
European and Greek
 
economy, (b) a
 
potential prolongation
 
of the ongoing
inflationary
 
wave and
 
its impact
 
on economic growth,
 
employment,
 
public finances,
 
household budgets,
 
firms’
production
 
costs,
 
external
 
trade
 
and
 
banks’
 
asset
 
quality,
 
as
 
well
 
as
 
any
 
potential
 
social
 
and/or
 
political
ramifications
 
these
 
may
 
entail,
 
(c)
 
the
 
ongoing
 
and
 
potential
 
upcoming
 
central
 
bank
 
interest
 
rate
 
hikes
worldwide,
 
and
 
in
 
the
 
euro
 
area
 
in
 
particular,
 
that
 
may
 
exert
 
upwards
 
pressures
 
on
 
sovereign
 
and
 
private
borrowing
 
costs,
 
especially
 
those
 
of
 
highly
 
indebted
 
borrowers,
 
deter
 
investments,
 
increase
 
volatility
 
in
 
the
financial markets and lead
 
economies to slow down
 
or even a temporary recession, (d) the recent banking sector
turmoil to
 
continue and
 
expand in
 
the
 
euro
 
area, affecting
 
customers’
 
confidence,
 
with a
 
potential impact
 
on
assets under management levels and on liquidity, (e) the
 
impact of a potential curtailment or discontinuation of
the government energy support measures on growth, employment and the servicing of household and corporate
debt,
 
(f)
 
the
 
persistently
 
large
 
current
 
account
 
deficits
 
and
 
the
 
prospect
 
of
 
them
 
becoming
 
once
 
again
 
a
structural
 
feature
 
of the
 
country’s growth
 
model, (g)
 
the absorption
 
capacity of
 
the NGEU
 
and MFF funds
 
and
the
 
attraction
 
of
 
new
 
investments
 
in
 
the
 
country,
 
(h)
 
the
 
effective
 
and
 
timely
 
implementation
 
of
 
the
 
reform
agenda
 
required
 
to
 
meet
 
the
 
RRF
 
milestones
 
and
 
targets
 
and
 
to
 
boost
 
productivity,
 
competitiveness,
 
and
resilience, (i) a
 
delay in the
 
implementation of
 
planned reforms,
 
projects and the
 
budget’s fiscal agenda due
 
to
the
 
possibility of
 
the 2023
 
national elections
 
resulting in
 
an inability
 
or delay
 
to form
 
a government
 
with solid
Parliament majority,
 
(j) the geopolitical
 
developments in
 
the near region,
 
(k) the evolution
 
of the pandemic and
the
 
probability
 
of
 
emergence
 
of
 
new
 
Covid-19
 
variants
 
that
 
could
 
further
 
impact
 
economic
 
growth,
 
fiscal
balances
 
and
 
international
 
trade
 
by
 
prolonging
 
the
 
disruptions
 
in
 
the
 
global
 
supply
 
chain,
 
and
 
(l)
 
the
 
 
 
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exacerbation of natural disasters due to the climate change
 
and their effect on GDP, employment, fiscal balance
and sustainable development
 
in the long run.
Materialization
 
of the
 
above
 
risks would
 
have
 
potentially
 
adverse
 
effects
 
on the
 
fiscal
 
planning of
 
the
 
Greek
government, as it could decelerate
 
the pace of expected growth and on the liquidity, asset quality, solvency
 
and
profitability of the
 
Greek banking sector. In this
 
context, the Group holds
 
non-significant exposure in Russian or
Ukrainian
 
assets
 
and
 
in
 
the
 
banks
 
that
 
have
 
recently
 
faced
 
solvency
 
or
 
liquidity
 
difficulties,
 
is
 
continuously
monitoring the
 
developments
 
on the
 
macroeconomic,
 
financial and geopolitical
 
fronts as
 
well as the
 
evolution
of its asset quality and
 
liquidity KPIs and has
 
increased its level
 
of readiness, so
 
as to accommodate
 
decisions,
initiatives
 
and policies
 
to protect
 
its capital
 
and liquidity
 
standing as
 
well
 
as the
 
fulfilment,
 
to the
 
maximum
possible degree, of its strategic
 
and business goals in accordance with
 
the business plan for
 
2023–2025.
Share Capital
As at 31 December 2022:
 
a)
The
 
total
 
share
 
capital
 
of
 
Eurobank
 
Holdings
 
amounted
 
to
 
€816,349,051.76
 
divided
 
into
 
3,710,677,508
common voting shares
 
of nominal value of €0.22 each.
 
All shares are
 
registered, listed
 
on the Athens
 
Stock
Exchange and incorporate all the
 
rights and obligations set by
 
the Greek legislation,
b)
The
 
number
 
of
 
Eurobank
 
Holdings
 
shares
 
held
 
by
 
the
 
Group’s
 
subsidiaries
 
in the
 
ordinary
 
course
 
of
 
their
business was 260,036 (31 December
 
2021: 784,540) (note 37 to the consolidated
 
financial statements),
c)
The
 
percentage
 
of the
 
ordinary voting
 
shares of
 
Eurobank
 
Holdings held
 
by the
 
Hellenic Financial Stability
Fund (HFSF) amounted to 1.40%.
On 21 July
 
2022, the Annual General Meeting (AGM) of the shareholders of Eurobank Holdings approved, among
others,
 
the
 
offsetting
 
of a)
 
the
 
total of
 
the
 
account “Corporate
 
law Reserves”
 
amounting to
 
€6,919.3m
 
and b)
part
 
of
 
the
 
account
 
“Share
 
Premium”
 
amounting
 
to
 
€6,894.4m
 
with
 
accumulated
 
losses
 
of
 
equivalent
 
value
amounting to €13,813.7m,
 
included in the
 
account “Retained earnings/(losses)”. The
 
above offsetting,
 
which was
approved
 
by the
 
competent supervisory
 
authorities in
 
October
 
2022, does
 
not affect
 
the Company’s
 
own and
regulatory capital.
By decision of the Board of Directors dated 30.08.2022, the share capital increased
 
by €333,444.32, through the
issue of 1,515,656
 
new shares
 
of a nominal value
 
of €0.22 each. This
 
increase was effected
 
through the
 
exercise
of stock options
 
granted to key
 
executives of the
 
Group at
 
the price
 
of €0.23 per share.
 
The total
 
issue price of
the above
 
shares, amounting
 
to €348,600.88,
 
was fully paid
 
up in cash.
 
The
 
total difference
 
above
 
par (before
directly attributable expenses), which amounts to €15,156.66,
 
was credited into the “Share
 
premium” account.
Share options
The
 
Annual
 
General
 
Meeting
 
of
 
the
 
shareholders
 
of
 
Eurobank
 
Holdings
 
held
 
on
 
28
 
July
 
2020
 
approved
 
the
establishment of a five-year shares award plan, starting from 2021, in the form of share
 
options rights by issuing
new shares
 
with a
 
corresponding
 
share capital
 
increase, in
 
accordance with
 
the provisions
 
of article 113
 
of law
4548/2018, awarded
 
to executives
 
and personnel of
 
Eurobank
 
Holdings and its
 
affiliated
 
companies according
to
 
article
 
32
 
of
 
law
 
4308/2014.
 
The
 
maximum
 
number
 
of
 
rights
 
that
 
can
 
be approved
 
was
 
set
 
at
 
55,637,000
rights, each of which
 
would correspond
 
to one new share.
 
The exercise
 
price of each new
 
share would
 
be equal
to €
 
0.23.
 
The
 
Annual General
 
Meeting authorized
 
the
 
Board
 
of Directors
 
of Eurobank
 
Holdings
 
to define
 
the
eligible staff and determine
 
the remaining terms and conditions
 
of the plan.
The
 
options are
 
exercisable
 
in portions,
 
annually during
 
a period
 
from
 
one to
 
five
 
years.
 
Each portion
 
may be
exercised wholly
 
or partly and converted
 
into shares at the
 
employees’ option,
 
provided they
 
remain employed
by the Group until the first available exercise date. The share options also comply with the restrictions regarding
remuneration
 
of Law 3864/2010, as each
 
time in force.
In
 
this
 
context,
 
the
 
BoD approved
 
the
 
final
 
terms
 
and
 
the
 
implementation
 
of
 
the
 
2nd
 
series
 
of
 
the
 
plan
 
and
11,654,117
 
share
 
options
 
were
 
awarded
 
to
 
executives
 
and
 
personnel
 
of
 
the
 
Group
 
in
 
December
 
2022
 
at
 
an
exercise price of € 0.23.
 
Further information
 
is provided in note 39 to
 
consolidated financial statements.
Dividends
Pursuant to the provisions
 
of the Company Law 4548/2018, companies are
 
required to pay dividends of at least
35% of
 
after-tax profit,
 
after necessary
 
deductions for
 
the formation
 
of the
 
statutory reserve
 
and other
 
credit
balances in the income
 
statement that
 
do not arise from realized
 
earnings.
For the financial year 2022, Eurobank Holdings has no profits and
 
therefore
 
will not distribute minimum
 
dividend.
Furthermore,
 
in 2023
 
the
 
Group
 
has
 
announced
 
that
 
the
 
amount earmarked
 
for
 
dividend
 
distribution
 
will be
used in an optimal way to bid for the
 
1.4% HFSF stake through
 
a share buyback scheme.
Major Shareholders
Based on the most recent notifications that
 
Eurobank Holdings has received
 
from shareholders controlling
 
5 per
cent or more of Eurobank
 
Holdings’ voting
 
rights, such significant shareholders
 
are the following:
 
a)
“Fairfax Financial Holdings Limited”, controlling
 
32.99% of Eurobank
 
Holdings’ total number of voting
 
rights,
corresponding
 
to
 
1,224,002,259
 
voting
 
rights
 
of
 
Eurobank
 
Holdings’
 
ordinary
 
shares.
 
Excluding
 
the
52,080,673
 
voting
 
rights
 
held
 
by
 
the
 
HFSF,
 
the
 
aforementioned
 
percentage
 
is
 
formed
 
to
 
33.46%
 
(the
reporting date
 
for the
 
aforementioned
 
is on 14
 
July 2021, while
 
the percentage
 
calculation is
 
based on the
new total company’s listed shares that are tradeable on the Athens Stock Exchange, following the last share
capital increase due to the
 
exercise of stock option rights),
 
 
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b)
“The Capital
 
Group Companies, Inc”,
 
controlling 5.06%
 
of Eurobank
 
Holdings’ total number
 
of voting rights,
corresponding
 
to 187,812,291
 
voting rights
 
of Eurobank
 
Holdings’ ordinary
 
shares. Excluding
 
the 52,080,673
voting rights
 
held by
 
the
 
HFSF,
 
the
 
aforementioned
 
percentage
 
is formed
 
to 5.13%
 
(the
 
reporting date
 
for
the
 
aforementioned
 
is
 
on
 
1
 
December
 
2020,
 
while
 
the
 
percentage
 
calculation
 
is
 
based
 
on
 
the
 
new
 
total
company’s listed
 
shares that
 
are tradeable
 
on the
 
Athens Stock
 
Exchange, following
 
the last
 
share capital
increase due to the exercise
 
of stock option rights),
c)
The
 
“Helikon
 
Investments
 
Limited”,
 
controlling
 
5.01%
 
of
 
Eurobank
 
Holdings’
 
total
 
number
 
of
 
voting
 
rights,
corresponding to 185,957,220
 
voting rights of Eurobank
 
Holdings’ ordinary shares.
 
Excluding the 52,080,673
voting rights
 
held by
 
the HFSF,
 
the aforementioned
 
percentage
 
is formed
 
to 5.08%
 
(the reporting
 
date for
the aforementioned
 
is on 25 January 2023).
Finally,
 
reflecting
 
the
 
HFSF’s status
 
as a
 
shareholder
 
of Eurobank
 
Holdings
 
(it currently
 
owns 1.4%
 
of Eurobank
Holdings’ shares,
 
which corresponds
 
to 52,080,673
 
ordinary shares
 
with voting
 
rights out
 
of total
 
3,710,677,508
ordinary shares
 
with voting
 
rights issued by Eurobank
 
Holdings), and following
 
the completion
 
of the demerger
of Eurobank
 
Ergasias
 
S.A., Eurobank
 
Holdings,
 
Eurobank
 
and the
 
HFSF are
 
parties to
 
a Tripartite
 
Relationship
Framework
 
Agreement (TRFA)
 
signed on 23 March 2020 and amended on 3 February 2022. The TRFA
 
allows the
HFSF to enforce against Eurobank
 
all the rights which it had against the former Eurobank
 
Ergasias S.A. under an
earlier Relationship Framework
 
Agreement (RFA)
 
between it and Eurobank
 
Ergasias S.A.
 
Accordingly,
 
the TRFA,
 
among other
 
matters, specifies
 
the way
 
HFSF’s rights, as
 
derived
 
from the
 
provisions
 
of
Law
 
3864/2010
 
(“HFSF
 
Law”),
 
were
 
to
 
be
 
implemented,
 
in
 
particular
 
on
 
issues
 
relating
 
to
 
the
 
corporate
governance
 
of
 
Eurobank
 
Holdings
 
and
 
the
 
Bank
 
and
 
the
 
implementation
 
of
 
the
 
Bank’s
 
NPEs
 
management
framework.
 
However,
 
the
 
HFSF Law
 
has been
 
recently
 
amended by
 
the
 
Law 4941/2022
 
(Government
 
Gazzette
A’113/16.06.2022)
 
and
 
a
 
number
 
of
 
provisions
 
of
 
the
 
TRFA
 
either
 
do
 
not
 
arise
 
from
 
the
 
HFSF
 
Law
 
or
 
directly
contradict
 
with
 
it,
 
therefore
 
the
 
TRFA
 
has
 
become
 
out
 
of
 
date.
 
In
 
particular,
 
under
 
the
 
current
 
HFSF
 
Law
 
as
amended by Law 4941/2022, the HFSF no longer has the right to
 
carry out evaluations of Eurobank Holdings and
the
 
Bank’s
 
corporate
 
governance
 
framework
 
or
 
the
 
right
 
to
 
establish
 
evaluation
 
criteria
 
for
 
their
 
Board
members.
 
In
 
addition,
 
the
 
HFSF
 
representative
 
no longer
 
has
 
the
 
right
 
to convene
 
a
 
General
 
Assembly
 
or to
approve the
 
CFO or to veto any resolution of the Board which may jeopardise depositors' interests or materially
affect
 
liquidity,
 
solvency or,
 
in general,
 
the prudent
 
and orderly
 
operation
 
of Eurobank
 
Holdings and
 
the
 
Bank.
Moreover,
 
the facilitation
 
of the
 
management of the
 
Bank’s NPEs has also
 
been removed
 
from the
 
remit of the
HFSF which
 
has been
 
modified in
 
such a
 
way as
 
to explicitly
 
and visibly
 
envisage the
 
effective
 
disposal of
 
the
shares
 
it
 
owns
 
in
 
Eurobank
 
Holdings,
 
based
 
on
 
a
 
divestment
 
strategy,
 
with
 
a
 
specific
 
time
 
horizon
 
until
 
31
December
 
2025.
 
However,
 
under
 
the
 
current
 
HFSF Law,
 
the
 
HFSF has
 
the
 
right to
 
appoint one
 
Director
 
to the
Board
 
and this
 
representative
 
has the
 
right to
 
veto any
 
Board
 
resolutions
 
relating
 
to corporate
 
changes that
can
 
significantly
 
affect
 
HFSF’s
 
participation
 
to
 
Eurobank
 
Holdings
 
share
 
capital
 
(anti-dilution
 
protection).
Regarding the
 
right of the
 
HFSF’s representative
 
to veto any
 
Board resolution
 
related to dividend
 
distributions
or the remuneration
 
policy and proposed
 
bonuses to Board members
 
and General
 
Managers or their
 
deputies,
the current
 
HFSF Law provides
 
that this is
 
applicable to credit
 
institutions whose ratio
 
of non-performing
 
loans
to total loans exceeds 10%. Moreover,
 
the representative
 
of the HFSF has the right to request Eurobank Holdings
or the Bank’s Board to be convened
 
or any Board meeting to be adjourned for
 
up to 3 business days.
Board of Directors
The Board
 
of Directors (BoD) was elected by the Annual General
 
Meeting (AGM) of the Shareholders
 
held on 23
July 2021 for
 
a three years
 
term of office
 
that will expire
 
on 23 July 2024,
 
prolonged
 
until the end
 
of the period
the AGM for
 
the year 2024 will take
 
place.
The BoD of Eurobank
 
Holdings is set out in note 47 to the consolidated
 
financial statements. Personal details of
the Directors are
 
available on the website
 
of Eurobank Holdings
 
(www.eurobankholdings.gr).
Sundry information
 
required under Law 3556/2007
 
(article 4, par.7)
By derogation of the ordinary shares
 
held by HFSF
 
which carry special rights
 
and restrictions under the legislation
in force and
 
the TRFA
 
signed between Eurobank
 
Holdings, the Bank and the
 
HFSF on 23 March 2020, according
to the Articles of Association:
 
a)
there
 
are no restrictions on the
 
transfer
 
of the Eurobank
 
Holdings’ shares,
b)
there
 
are no shares with special controlling
 
or voting rights,
c)
there
 
are no restrictions on voting
 
rights,
d)
the
 
rules
 
related
 
to
 
the
 
appointment
 
and
 
replacement
 
of
 
directors
 
as
 
well
 
as
 
to
 
the
 
amendment
 
of
 
the
Articles of Association are in accordance
 
with the provisions
 
of company law.
The
 
Eurobank
 
Holdings is not
 
aware of
 
any shareholders’
 
agreements resulting
 
in restrictions
 
in the
 
transfer
 
of
its shares or in the exercise of the shares’ voting rights. There are no significant agreements that enter into force,
are amended
 
or expire if there
 
is change in the
 
control of the
 
Eurobank Holdings
 
following
 
a public offer.
 
There
are no agreements between the
 
Eurobank Holdings and the
 
Directors or the staff for compensation
 
in the event
of departure as a result of a public offer.
Information required
 
under Law 4548/2018 (article 97,
 
par.1
 
(b))
According to article
 
97 par.
 
1 (b) of Law 4548/2018
 
the BoD members
 
owe to disclose
 
in a timely and adequate
manner to the other
 
members of the BoD their
 
own interests, which may arise from the
 
company's transactions,
which fall
 
within their
 
duties, as
 
well as
 
any conflict
 
of their
 
interests
 
with those
 
of the
 
company or
 
its related
companies. In
 
such case
 
and in line
 
with the
 
provisions
 
of article
 
97 par
 
3 of the
 
same law,
 
the member
 
of the
 
 
 
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BoD is not entitled to vote on issues in which there is a conflict of interest with his own company
 
or persons with
whom he is a related party.
 
In these cases, decisions
 
are taken by the
 
other BoD members.
For 2022, the
 
following issues
 
were noted
 
in which there was a conflict of interest
 
with Eurobank
 
Holdings:
For
 
the
 
purposes of
 
decisions related
 
to the
 
conclusion of
 
a Share
 
Purchase Agreement
 
(SPA)
 
as well
 
as of
 
an
Amended
 
and
 
Restated
 
Shareholders’
 
Agreement
 
(SHA)
 
related
 
to
 
the
 
Bank’s
 
participation
 
in
 
the
 
company
”Grivalia
 
Hospitality
 
S.A”
 
(Grivalia
 
Hospitality
 
οr
 
GH)
 
between
 
the
 
Bank
 
and
 
1)
 
the
 
companies
 
“DEBT
INVESTMENT
 
OPPORTUNITIES
 
III
 
DESIGNATED
 
ACTIVITY
 
COMPANY”
 
(DOF
 
III)
 
and
 
“DEBT
 
INVESTMENT
OPPORTUNITIES
 
IV DESIGNATED
 
ACTIVITY
 
COMPANY”
 
(DOF IV)
 
(controlled
 
by
 
M&G), 2)
 
the
 
company
 
under
the corporate
 
name “GRIVALIA
 
MANAGEMENT COMPANY
 
SOCIETE ΑΝΟΝΥΜΕ”
 
(GRIVALIA),
 
which is a
 
related
party to both the
 
Bank within the meaning
 
of paragraph 2 (b)
 
of article
 
99 of
 
Greek Law 4548/2018
 
and Eurobank
Holdings within the
 
meaning of paragraph
 
2 (a) of article 99 of
 
Greek Law 4548/2018,
 
since the
 
Vice Chairman
of the
 
Board of Directors
 
of Eurobank
 
Holdings and the
 
Bank Mr.
 
Georgios Chryssikos
 
holds the
 
majority (68%)
of the shares of GRIVALIA and is
 
an executive member of the board of
 
directors of GRIVALIA and 3) the company
under
 
the
 
corporate
 
name
 
“Eurolife
 
FFH Life
 
Insurance
 
Single Member
 
Société Anonyme”
 
(Eurolife),
 
which is
 
a
related party of Eurobank Holdings within the
 
meaning of paragraph 2 (a) of article 99 of Greek Law 4548/2018,
as
 
a
 
related
 
party
 
of
 
Eurobank
 
Holdings
 
according
 
to
 
IAS
 
24,
 
the
 
BoD’s
 
approval
 
was
 
granted
 
based
 
on
 
a
fairness opinion report
 
provided by a certified
 
auditor in accordance with article 101 of Law 4548/2018, while
 
all
the necessary
 
disclosure procedures
 
were adhered
 
to as provided
 
for in
 
articles 100 par.
 
3 and 101 par.
 
2 and 3
of Law
 
4548/2018. Furthermore,
 
for
 
the
 
same
 
issue, a)
 
the
 
Vice
 
Chairman of
 
the
 
BoD Mr.
 
Chryssikos
 
also Vice
Chairman and
 
Chief Executive
 
Officer
 
of GRIVALIA
 
holding 68%
 
of its
 
share capital
 
and b)
 
the
 
member
 
of the
BoD Mr. Martin also Vice
 
Chairman of Strategic Investments
 
at Fairfax (a company that
 
holds the 33.47% of the
shares of Eurobank
 
Holdings), which controls
 
Eurolife’s
 
parent company “Eurolife
 
FFH Insurance
 
Group Holdings
Société Anonyme” and indirectly Eurolife
 
itself were note entitled to vote according
 
to the provisions of par.
 
3 of
Art. 97 of the Company Law 4548/2018 due
 
to conflict of interest.
For the
 
purposes of decisions related to the
 
conclusion of a Share Purchase Agreement
 
(SPA), which pertains
 
to
the
 
participation
 
of
 
“Eurobank
 
S.A.”
 
(Eurobank
 
or
 
Bank)
 
in
 
the
 
company
 
“Grivalia
 
Hospitality
 
S.A.”
 
(Grivalia
Hospitality οr GH)
 
between the Bank and “Eurolife FFH
 
Life Insurance Single Member Société Anonyme” (Eurolife),
which
 
is
 
a
 
related
 
party
 
of
 
the
 
parent
 
company
 
of
 
the
 
Bank,
 
“Eurobank
 
Ergasias
 
Services
 
and
 
Holdings
 
S.A.”
(Eurobank Holdings),
 
within the meaning
 
of paragraph
 
2 (a) of article 99 of Greek Law 4548/2018, according
 
to
IAS 24,
 
the
 
BoD’s approval
 
was granted
 
based on
 
a fairness
 
opinion report
 
provided
 
by a
 
certified
 
auditor in
accordance with article
 
101 of Law 4548/2018, while all the
 
necessary disclosure procedures
 
were adhered
 
to as
provided
 
for
 
in articles
 
100 par.
 
3 and
 
101 par.
 
2 and
 
3 of
 
Law 4548/2018.
 
Furthermore,
 
for
 
the
 
same issue,
 
the
BoD member
 
Mr.
 
Martin also
 
is Vice
 
Chairman of
 
Strategic
 
Investments
 
at Fairfax,
 
which holds
 
32.99%
 
of the
shares
 
of
 
Eurobank
 
Holdings,
 
and
 
also
 
controls
 
Eurolife’s
 
parent
 
company,
 
“Eurolife
 
FFH
 
Insurance
 
Group
Holdings Société Anonyme”,
 
and indirectly Eurolife
 
itself, was not entitled to vote
 
according to the provisions
 
of
par. 3 of Art. 97 of the
 
Company Law 4548/2018 due to conflict of interest.
For
 
the
 
purposes
 
of
 
decisions
 
relating
 
to
 
the
 
Stock
 
Options
 
plan
 
(1st
 
series
 
exercise
 
and
 
2nd
 
series
implementation) approved
 
by the Annual General Meeting of Shareholders
 
in July 2021, the CEO Mr. F.
 
Karavias
and the Deputy CEOs
 
Messrs. S.
 
Ioannou, K. Vassiliou and A.
 
Athanasopoulos were not entitled to vote, according
to the provisions
 
of par. 3 of art. 97 of the
 
Law 4548/2018, due to conflict of interests.
 
External Auditors
The Eurobank
 
Holdings’ Shareholders
 
Annual General Meeting
 
held on 21 July 2022 approved
 
the appointment
of KPMG, as
 
statutory auditor
 
for the
 
financial statements
 
(separate
 
and consolidated)
 
for the
 
year ending
 
31
December 2022.
During
 
2022,
 
the
 
Audit
 
Committee
 
reviewed
 
KPMG’s
 
independence
 
and
 
effectiveness,
 
along
 
with
 
its
 
annual
audit plan. In
 
addition, the Audit Committee ensured
 
on a
 
quarterly basis that a) the
 
non-audit services assigned
to KPMG,
 
have been
 
reviewed
 
and approved
 
as required
 
and b)
 
there
 
is a
 
proper
 
balance between
 
the
 
audit
and non-audit fees
 
paid to KPMG, in accordance
 
with the
 
relevant provisions
 
of the Group’s
 
Policy on External
Auditors’ Independence (note
 
46 of the consolidated financial statements).
NON-FINANCIAL INFORMATION
Business model
The
 
Eurobank
 
Holdings Group
 
(the
 
Group)
 
offers
 
a wide
 
range
 
of financial
 
products
 
and services
 
in retail
 
and
business
 
banking
 
and
 
has
 
a
 
significant
 
international
 
presence
 
in
 
four
 
countries
 
outside
 
Greece
 
(see
 
further
information
 
in the
 
section “International
 
Activities”).
It is
 
among the
 
leading providers
 
of banking services
 
and
credit
 
to large
 
corporates,
 
SMEs, small
 
businesses,
 
professionals
 
and households,
 
concentrating
 
its efforts
 
on
financing the growth cycle
 
of the Greek economy and the other
 
countries of presence, including an instrumental
participation in Recovery
 
and Resilience Facility (RRF) funds. In addition,
 
the Group has a strategic
 
focus in fee-
generating
 
activities, such as asset management, private banking,
 
equity brokerage,
 
treasury sales, investment
banking, factoring, real
 
estate, trade finance
 
and bancassurance.
The Group has a diversified (through business line, geography and customer) and resilient business model,
 
which
is based
 
on three
 
revenue
 
streams i.e.
 
the
 
Greek
 
banking operations,
 
the
 
international
 
activities and
 
the
 
real
 
 
EUROBANK ERGASIAS SERVICES AND HOLDINGS S.A.
 
REPORT OF THE DIRECTORS
15
|
Page
 
€ = Euro
 
m = million
 
bn = billion
estate
 
business.
 
Its
 
strategy
 
aims
 
at
 
optimizing
 
its
 
financial
 
performance,
 
maintaining
 
a
 
strong
 
capital
 
and
liquidity base, rewarding its
 
shareholders as well as contributing
 
to the economy
 
and society in
 
a holistic manner.
The Group
 
continues to implement the Transformation
 
Program “Eurobank
 
2030”, which is a material enabler in
achieving
 
the
 
bank’s
 
strategic
 
objectives
 
and
 
enhancing
 
its
 
competitive
 
position,
 
as
 
it
 
focuses
 
on
 
business
growth, sustained
 
operational resilience,
 
constantly improving operational
 
efficiencies and, ultimately,
 
ensuring
increased
 
customer
 
value
 
and
 
satisfaction.
 
In
 
tandem,
 
the
 
Bank
 
is
 
investing
 
in
 
the
 
People
 
 
Technology
 
Sustainability
 
three-fold,
 
by
 
combining
 
cutting
 
edge
 
technology
 
and
 
the
 
expertise
 
of
 
its
 
highly
 
trained
 
staff,
using best practices to contribute
 
to the effort
 
for sustainable development
 
for all.
Its operating model evolves
 
around the following
 
key pillars:
 
a)
Financing
 
landmark
 
projects
 
and
 
investments
 
of
 
large
 
and
 
medium
 
size
 
businesses,
 
mainly
 
through
investments based on ESG criteria,
b)
Fully supporting SMEs, in combination with
 
the major funding potential
 
available through European
 
and/or
Greek programmes for
 
small businesses, aiming to boost their competitiveness, gain access to international
markets, create jobs
 
and thus distribute the benefits
 
of growth across
 
society,
c)
Sustaining a leading position in Retail Banking by
 
offering
 
high quality services and innovative
 
products to
distinct client segments leveraging on advanced multi-channel strategies and tailored to customer evolving
needs,
d)
Developing a people-centred
 
‘phygital’ model, a hybrid of physical and digital, that combines state-of-the-
art technological
 
infrastructure
 
with the
 
Group’s
 
human resources,
 
offering