LIABILITIES

Section 1 – Due to banks – Item 10

1.1 Due to banks: breakdown by type

Type of operations/Components of group31.12.201431.12.2013
1. Due to Central banks 2.226.872 6.656.466
2. Due to banks 32.095 9.381
2.1 Current accounts and on demand deposits 95 502
2.2 Term deposits 32.000 8.879
2.3 Loans - -
  2.3.1 Repurchase agreements - -
  2.3.2 Others - -
2.4 Debt from buyback commitments on treasury equity instruments - -
2.5 Other payables - -
Total 2.258.967 6.665.847
Fair value - level 1 - -
Fair value - level 2 - -
Fair value - level 3 2.258.967 6.665.847
Total fair value 2.258.967 6.665.847
 

Payables due to central banks refer to refinancing operations with the Eurosystem carried out using the debt securities held.

The decline in Payables due to banks compared to the end of the previous year is because the Bank entered into less repurchase agreements through Eurosystem auctions compared with the use of the MTS platform and the Cassa di Compensazione e Garanzia as counterparty (classified as payables due to customers). Turning to the ECB or the MTS platform depends exclusively on which one is more convenient. The tensions observed in the liquidity market towards the end of 2013, which caused interest rates on the MTS platform to rise slightly, had made it more convenient to turn to the Eurosystem. As the tensions gradually eased, the Bank returned to operate almost exclusively on the MTS platform.

The fair value of payables due to banks is in line with the relevant carrying amount, considering the fact that interbank deposits are short- or very short-term.

Section 2 – Due to customers – Item 20

2.1 Due to customers: breakdown by type

Type of operations/Components of group31.12.201431.12.2013
1. Current accounts and on demand deposits 655.809 469.694
2. Term deposits 2.733.194 3.436.245
3. Loans 2.087.009 267.857
  3.1 Repurchase agreements 2.082.854 263.670
  3.2 Others 4.155 4.187
4. Debt from buyback commitments on treasury equity instruments - -
5. Other payables 7.462 4.480
Total 5.483.474 4.178.276
Fair value - level 1 - -
Fair value - level 2 - -
Fair value - level 3 5.484.413 4.183.908
Total fair value 5.484.413 4.183.908
 

Current accounts and on demand deposits at 31 December 2014 included funding from the on demand rendimax savings account and the contomax online current account, amounting to 567,1 million and 14,9 million Euro, respectively; term deposits included 2.732,2 million Euro in funding from the fixed-term rendimax and contomax accounts.

Repurchase agreements were entered into with Cassa di Compensazione e Garanzia as counterparty and government bonds as the underlying assets.

It should be noted that the Group does not carry out "term structured repo" transactions.

Other loans refer mainly to payables for finance leases; they are recognised by using the financial method set out in IAS 17 to measure the leased property housing the NPL area (DRL sector), as detailed in paragraph 2.5 below.

Other payables refer to payables to sellers of tax or non-performing receivables portfolios with deferred price settlement.

2.5 Payables for finance leases

 31.12.201431.12.2013
Payables for finance leases 4.155 4.187
 

The payables described above relate for 4,0 million Euro to the real estate lease the former company Toscana Finanza SpA entered into in 2009 for the property located in Florence, which housed the company's registered office and is now the headquarters of the NPL area. The term of the lease entered into with Centro Leasing S.p.A. is 18 years (from 01.03.2009 to 01.03.2027) and provides for the payment of 216 monthly instalments of 28.490 Euro, including the principal, interest and an option to buy the asset at the end of the lease for 1.876.800 Euro.

Please see part E, letter D of these Notes for details on the assignment of the lease agreement dated 13 May 2014 and why the Bank did not derecognise the relevant liability.

The rest of payables for finance leases refer to the purchase of motor vehicles by the subsidiary IFIS Finance.

Section 4 – Financial liabilities held for trading - item 40

4.1 Financial liabilities held for trading: breakdown by type

Type of operation/Components of group31.12.201431.12.2013
  NV  FV FV *  NV  FV FV * 
  Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
A. Cash liabilities                     
1. Due to banks - - - - - - - - - -
2. Due to customers  - - - - -  - - - - -
3. Debt securities - - - - - - - - - -
  3.1 Bonds - - - - - - - - - -
   3.1.1 Structured - - - - X - - - - X
  3.1.2 Others - - - - X - - - - X
   3.2 Other securities - - - -   - - - -  
   3.2.1 Structured - - - - X - - - - X
   3.2.2 Others - - - - X - - - - X
Total A - - - - - - - - - -
B. Derivative instruments                    
1. Financial derivatives - - -  - - - 130  -
  1.1 Held for trading X - - - X X - - 130 X
  1.2 Related to fv option X - - - X X - - - X
  1.3 Others X - - - X X - - - X
2. Credit derivatives   - - -     - - -  
  2.1 Held for trading X - - - X X - - - X
  2.2 Related to fv option X - - - X X - - - X
  2.3 Others X - - - X X - - - X
Total B   - - -     - - 130 -
Total (A+B) X - - - X X - - 130 X

Key

FV= fair value

FV* = Fair value calculated excluding changes in value due to changes in the issuer’s creditworthiness compared to the date of issuance.

NV = Nominal or notional value

Section 8 – Tax liabilities – Item 80

See section 14 under assets.

Section 10 – Other liabilities – Item 100

10.1 Other liabilities: breakdown

 31.12.201431.12.2013
Due to suppliers 10.197 7.876
Sums available to customers 8.931 6.056
Due to personnel 4.579 4.295
Due to the Tax Office and Social Security agencies 4.090 10.258
Accrued expenses and deferred income 1.811 2.584
Other payables 81.451 62.775
Total  111.059 93.844
 

Payables due to personnel include the bonuses for the Top Management, including those for the previous years, subject to deferred payment, as well as payables for unused annual leave.

Other payables include mainly 74,9 million Euro in amounts due to customers that have not yet been credited, and 2,9 million Euro in illiquid items to be credited to customers for banker’s drafts that have not reached their value date yet.

Section 11 – Post-employment benefits – item 110

11.1 Post-employment benefits: annual changes

 31.12.201431.12.2013
A. Opening balance 1.482 1.565
B.  Increases 206 30
B.1 Allocations for the year 20 30
B.2 Other increases 186 -
C. Reductions 70 113
C.1 Payments made 68 34
C.2 Other reductions 2 79
D.  Closing balance 1.618 1.482
Total 1.618 1.482
 

Other increases include the impact of the discounting of benefits earned up to 31 December 2006 and still held in the company, which, based on the changes introduced by the new IAS 19, are recognised through equity.

Payments made, instead, represent the benefits paid to employees during the year.

Pursuant to the requirements of the ESMA in the document “European common enforcement priorities for 2012 financial statements” of 12 November 2012, the discount rate used was the interest rate based on the market yield of a benchmark of AA-rated European corporate bonds with maturity over 10 years. The same interest rate was used for the purposes of discounting the obligations at 31 December 2013.

11.2 Other information

Under IASs/IFRSs, a company’s liabilities regarding benefits that will be paid to employees at the conclusion of the employer/employee relationship (post-employment benefits) should be recognised based on actuarial calculations of the amount that will be paid at maturity.

Specifically, these allocations must take into account the amount already earned over the period at the reporting date, projecting it into the future in order to calculate the amount that will be paid at the conclusion of the employer/employee relationship. This amount must then be discounted to take into account the time that will pass until payment.

Following the coming into force of the 2007 Budget Law, which brought the reform regarding supplementary pension plans - as per Legislative Decree no. 252 of 5 December 2005 - forward to 1 January 2007, the employee was given a choice as to whether to allocate the post-employment benefits earned as from 1 January 2007 to supplementary pension funds or to maintain them in the company, which would then transfer it to a dedicated fund managed by INPS (the Italian National Social Security Institute).

This reform has led to changes in the accounting of such benefits as for both the benefits earned up to 31 December 2006 and those earned from 1 January 2007.

In particular:

  • benefits earned as from 1 January 2007 constitute a defined-contribution plan, regardless of whether the employee has chosen to allocate them to a supplementary pension fund or to INPS’s Treasury Fund. Those benefits shall be calculated according to contributions due without applying actuarial methods;
  • benefits earned up to 31 December 2006 continue to be considered as a defined-benefit plan, and as such are calculated on an actuarial basis which, however, unlike the calculation method applied until 31 December 2006, no longer implies that the benefits be proportionally attributed to the period of service rendered: the employee’s service is considered entirely accrued due to the change in the accounting nature of benefits earned as from 1 January 2007.

Section 12 – Provision for risks and charges – Item 120

12.1 Provisions for risks and charges: breakdown

Items/Components31.12.201431.12.2013
1 Pensions and other post retirement benefit obligations - -
2. Other provisions for risks and charges 1.988 533
  2.1 Legal disputes 1.527 375
  2.2 Staff expenses - -
  2.3 Other 461 158
Total 1.988 533
 

12.2 Provisions for risks and charges: annual changes

Items/Components31.12.2014
 Pensions and post retirement benefit obligationsOther provisions
A. Opening balance - 533
B. Increases - 1.613
B.1 Provisions for the year - 1.613
B.2 Changes due to the passage of time - -
B.3 Differences due to discount-rate changes - -
B 4 Other increases - -
C. Decreases - 158
C.1 Use during the year - 158
C.2 Differences due to discount-rate changes - -
C.3 Other decreases - -
D. Closing balance - 1.988
 

12.4 Provisions for risks and charges – Other provisions

Legal disputes

The provision outstanding at 31 December 2014, amounting to 1,5 million Euro, refers to:

  • a labour dispute, which caused the Bank to set aside 45 thousand Euro at 31 December 2013 for a lawsuit brought by employees against Banca IFIS;
  • four disputes concerning the Trade Receivables segment, for which the Bank set aside 1,4 million Euro—of which 1,1 million Euro during 2014. The plaintiffs seek 2,7 million Euro in damages;
  • five disputes concerning the DRL segment totalling 33 thousand Euro, which were fully set aside during the year.

Overall, the Bank recognises contingent liabilities totalling 12,4 million Euro in claims, represented by 17 disputes; supported by the legal opinion of its lawyers, the Bank made no provisions for these positions, as the risk of defeat is low.

Other (provision for the share of the Interbank Deposit Protection Fund's intervention)

The provision outstanding at 31 December 2014 concerned the amount set aside in light of the notice dated 16 September 2014 from Italy's Interbank Deposit Protection Fund (FITD, Fondo In

terbancario di Tutela dei Depositi), informing that it had approved another rescue loan (in addition to the ones notified on 9 January 2014 and 17 July 2014) to Banca Tercas, based in Ascoli Piceno. The relevant expense for Banca IFIS is likely to amount to 461 thousand Euro. Therefore, Banca IFIS allocated said amount to the provisions for risks and charges.

In 2013, the FITD had approved a rescue loan to Banca Tercas, based in Ascoli Piceno. The relevant potential obligation for Banca IFIS amounted to up to 2,0 million Euro, of which 667 thousand Euro were certain. The Bank had recognised the part already determined under Other liabilities and allocated 158 thousand Euro, i.e. the estimate of the amount not yet determined, to the provision for risks.

Based on the due diligence of Banca Tercas' assets, made available in July 2014, the FITD announced the final amount to be paid by Banca IFIS, equal to 1,9 million Euro. Banca IFIS paid the amount requested, recognising the amount in excess of the previously recognised provision and liabilities under other operating expenses.

Other (tax proceedings)

On 25 July 2008, the Italian Revenue Agency – Regional Department of Veneto started a check relating to the tax year 2005. This inspection ended on 5 December 2008: the relevant report of verification included two challenges concerning the correct calculation of limits for the deductibility of receivables (ceiling) as per art. 106 paragraph 3 of Presidential Decree 917/86, for a total of 1,4 million Euro. Moreover, considering that the ceiling mechanism sets limits for deducting impairment losses on receivables and that the surplus (arising from the difference between the ceiling and net impairments) is deductible on a straight-line basis over the next eighteen years, the application of the criterion indicated in the aforementioned report of verification would imply a tax benefit for the Bank in the years following 2005.

The aforementioned report of verification included also a notification regarding an alleged case of tax avoidance as set out in Article 37-bis of Presidential Decree 600/73 regarding the write-down in 2003 of the equity investment in Immobiliare Marocco S.p.A. (which merged into the Issuer with deed dated 19 October 2009). This investment was deducted in fifths in the following years based on the losses recognised by this company pursuant to arts. 61 and 66 of Presidential Decree 917/86 (in force up to 31 December 2003). On 2 February 2009, the Agency sent a verification notice to the Bank, requesting clarification on the write-down. The Bank promptly replied to it.

Again in reference to the notification of the alleged tax avoidance, on 3 December 2009 the Bank received a verification notice relating to the year 2004, in which the Revenue Agency revised the income for the year 2004 subject to the corporate tax (IRES), applying the anti-avoidance provision no. 26 as set out in art. 37-bis of Presidential Decree 600/73 for a total of 837 thousand Euro, with a higher tax liability relating to the tax year concerned of approximately 276 thousand Euro plus interest and penalties.

On 21 June 2010, the Bank received a verification notice referring to the following year, in which the Revenue Agency revised the income for the year 2005 subject to the corporate tax (IRES), applying the anti-avoidance provision as set out in art. 37-bis of Presidential Decree 600/73, for a total amount of 837 thousand Euro, with a higher tax liability relating to the tax year in question of approximately 276 thousand Euro plus interest and penalties. The same verification notice relating to the year 2005 treated as taxable the amount relating to the redetermination of the ceiling for deducting

losses on receivables concerning the above-mentioned findings, for a total of 1,4 million Euro, with higher taxes of around 478 thousand plus interests and penalties due in relation to the year 2005.

Subsequently, before the end of 2010, the Bank received a notice cancelling under the appeal process the verification notices issued for 2005.

On 22 February 2011, the appeal regarding the verification notice for the tax year 2004 was discussed before the first-level Provincial Tax Commission of Venice. On 29 June 2011, the Provincial Tax Commission of Venice rejected the appeal. On 7 November 2011, the Bank was served a notice of payment for the amounts enrolled on the tax register following the ruling of the court of first instance, pursuant to the laws on tax verification and collection, totalling 423 thousand Euro. Banca IFIS paid those amounts on 29 December 2011. Subsequently, the company filed an appeal with the Regional Tax Commission against this sentence. On 25 September 2012, the appeal was heard before the second-level Regional Tax Commission of Venice. On 18 October 2012, the Commission issued its ruling: it accepted the appeal by Banca IFIS S.p.A. and La Scogliera S.p.A. and, overturning the first-instance ruling, it cancelled the verification notices for 2004 that had been challenged, ordering the Revenue Agency to reimburse the costs for the two-level proceedings to the appellant.

As a consequence of the second-instance ruling, the Revenue Agency returned the sums paid by the Bank following the negative outcome of the first appeal. These had been previously recognised as a 423 thousand Euro receivable in the Bank’s accounts.

On 22 August 2012, the Bank received a verification notice for 2005 that is closely related to the notices received during 2010 and subsequently cancelled under appeal process before the end of the same year. The verification notice, besides containing the same points and therefore the sums requested (in terms of taxes and penalties) included in the previous notice that was then cancelled, considers as tax avoidance some security trading and lending transactions and challenges the deduction of sums such as non-deductible capital losses and manufactured dividends for a total of 6,3 million Euro. The higher tax overall due in relation to this latter finding totals 2,1 million Euro, plus interest and penalties.

Therefore, the overall amount subjected to taxation in the verification notice totals 8,6 million Euro, with higher taxes for the year under review of 2,8 million Euro. The verification notice, which has now passed the ordinary deadline for its issue, i.e. 31 December 2010, was sent on the basis of the Tax Office’s assumption that the doubling of the statute of limitations provided for by the law can be applied to this case, i.e. it represents a criminal offence.

In relation to this verification notice, the Bank applied for composition proceedings with the aim of finding out whether the Office was willing to reconsider its stance, but the application was rejected; the Revenue Agency preferred to continue with the dispute by appealing to the Court of Cassation regarding the verification notice for 2004, effectively forcing the Bank to file a counter-appeal with the Court on 29 January 2013, within the legal time limits; the analysis of the Revenue Agency’s appeal exposes the weakness of their case, already apparent in the previous hearings. Therefore, the tax consultants assisting the Bank in the proceedings believe the chance of defeat is unlikely, and the Bank did not make any provisions for the tax proceedings concerned.

On 11 February 2013, the Bank filed the appeal against the verification notice for 2005.

Before examining in detail the individual findings and the assessment errors made by the Revenue Agency, the appeal focuses on the reasons why the judges should completely annul the notice. Serious material errors were made, to the point that they completely invalidate the act: the criminal charge, which seeks to have the statute of limitations doubled and that the Public Prosecutor com

pletely rejected by ordering a non-suit; a series of verification notices served and then cancelled under the appeal process; and several legal errors contained in the last act issued.

Besides this, the defence case, which had already been set out in the application for composition proceedings, has been expanded and explained in detail. The fragility of the challenge to the write-down on the equity investment in Immobiliare Marocco was highlighted once again, and made even more apparent by the victory in the court of second instance regarding 2004 and which, at this point, would cover all the subsequent years.

Then, the appeal sets out the reasons why the challenges to the calculations of the ceiling for the deduction of receivables are wrong, both as far as the method adopted and interpretation provided by the tax officials in the report of verification are concerned, and even more so in light of the subsequent amendments and supplements to the laws regulating the principles for determining the income of long-time and first-time adopters of IAS.

As for the claims related to securities trading, the appeal highlighted that the transactions concerned produced positive results for the Bank, net of taxes, and they were not completely risk-free or entered into guaranteeing right from the start the conditions to neutralise any profit or loss from the transaction. The cross call and put options only had the effect of limiting the risk of losses and the potential excess returns, and in any case did not rule them out completely, as was hastily claimed in the verification notice. Above all, the challenged transactions simply applied the regime in force at the time, without eluding the law or its underlying principles; in fact, the system established with the 2004 reform envisages a double regime for stock transfers. Therefore, there is nothing strange in short-term equity trading on equity investments that do not qualify for participation exemption, with dividends received partially exempt from tax and deductible capital losses.

In any case, the Bank asked to recalculate the challenged amounts, which did not take into account the positive components that, as taxable income, are included in the determination of income. In April 2013, the Bank was notified of the Revenue Agency's response to the appeal. At 31 December 2014, the date for the first instance hearing had yet to be settled.

In light of the above, the tax consultants hired to resolve the dispute have stated that they reasonably believe it possible to validly defend the Bank’s case, and that therefore the chance of defeat is unlikely.

However, it is necessary to consider the Circular dated 8 August 2012 in which the Bank of Italy clarified that intermediaries, should they have to pay the tax authorities a certain amount following the enrolment in the tax register of higher taxes and the relevant interest and penalties, must assess whether or not it represents a contingent asset as defined by IAS 37. On the basis of this accounting standard, the asset should not be recognised whenever the profit on the same is not all but certain, and the amounts paid to the tax authorities must therefore be recognised at cost and not as tax receivables.

At 31 December 2012, 159 thousand Euro were allocated to the provision for tax proceedings for higher taxes and 35 thousand Euro for interest, resulting in a total of 194 thousand Euro against the likely provisional enrolment on the tax register(1) following the appeal, pursuant to Bank of Italy's Circular dated 8 August 2012. The Bank will not make any provision for the risk of defeat in the on-going tax proceedings. At 30 September 2013, the Bank recognised an adjustment to said provision based on the amounts actually enrolled on the tax register and notified to the Bank on 9 October 2013. Compared to the provision previously made, there was a difference of 13 thousand Euro, mainly due to the reimbursement of collection costs. In October 2013, the Bank promptly paid the amount requested in light of the obligations pursuant to the law, although it expects a positive outcome.

(1) The provisional amounts enrolled on the tax register are those made on the basis of a verification notice that is not final, since it has been challenged. An appeal filed against a verification notice does not suspend its execution; pending the rulings of the courts of first and second instance, part of the verified income tax, plus interest and part of the penalties, can be collected. In particular, as regards the income tax and value added tax, after the verification notice has been served, the Office can enrol on the tax register 1/3 of the verified taxes and interests. In relation to the charges relating to the anti-avoidance provision as set out in art. 37 bis of Presidential Decree 600/73, the amounts due before the first instance ruling cannot be enrolled on the tax register (para.6, art. 37 bis, Presidential Decree 600/73). Subsequent to the rulings of the tax commissions, further fractions of the amounts due become payable, based on the grounds of the decision and the level of the judicial body.

Section 15 – Equity attributable to owners of the parent company – Items 140, 160, 170, 180, 190, 200 and 220

15.1 Share capital and treasury shares: breakdown

Items  31.12.201431.12.2013
190 Share capital (in thousands of Euro) 53.811 53.811
  Number of ordinary shares 53.811.095 53.811.095
  Nominal amount of ordinary shares 1 euro 1 euro
200 Treasury shares (in thousands of Euro) 6.715 7.903
  Number of treasury shares 887.165 1.083.583
    

15.2 Share capital - number of parent company shares: annual changes

Items/ComponentsOrdinariesOthers
A. Shares held at the beginning of the year 53.811.095 -
  - fully paid-up 53.811.095 -
  - not fully paid-up - -
A.1 Treasury shares (-) 1.083.583 -
A.2 Outstanding shares: opening balance 52.727.512  -
B.  Increases 196.418 -
B.1 New issues - -
  - paid: - -
   - business combinations - -
   - conversion of bonds - -
   - exercise of warrants - -
   - Other - -
  - free: - -
   - in favour of employees - -
   - in favour of directors - -
   - Other - -
B.2 Sale of treasury shares 196.418 -
B.3 Other increases - -
C. Reductions - -
C.1 Annulments - -
C.2 Buybacks of treasury shares - -
C.3 Company sell-offs - -
C.4 Other reductions - -
D.  Outstanding shares: closing balance 52.923.930 -
D.1 Treasury shares (+) 887.165 -
D.2 Shares held at the end of the year 53.811.095 -
  - fully paid-up 53.811.095 -
  - not fully paid-up - -
 

15.3 Share capital: other information

The share capital is composed of 53.811.095 ordinary shares with a nominal value of 1 Euro each, bearing no rights, liens and obligations, including those relating to dividend distribution and capital redemption. 

15.4 Profit reserves: other information

Items/Components31.12.201431.12.2013
Legal reserve 10.762 10.762
Extraordinary reserve 178.175 124.938
Other reserves 6.984 5.546
Total income-related reserves 195.921 141.246
Buyback reserve 6.715 7.903
Future buyback reserve 33.285 12.097
Other reserves 1.953 1.809
Total item 170 reserves 237.874 163.055
 

Pursuant to art. 1, paragraph 145 of the 2014 Budget law (Law no. 147 of 27 December 2013), the Bank realigned the difference between the tax base and carrying amount of property, plant and equipment recognised at 31 December 2012 and still held at 31 December 2013.

The amount corresponding to the higher values following the realignment, net of the substitute tax, generated a 7,4 million Euro untaxed reserve.

Other information

1. Commitments and guarantees granted

Transactions31.12.201431.12.2013
1) Financial guarantees 76.078 50.350
    a) Banks 10.594 12.839
    b) Customers 65.484 37.511
2) Commercial guarantees - -
  a) Banks - -
  b) Customers - -
3) Irrevocable commitment to grant funds 40.003 20.141
  a) Banks 3.295 -
   i) Certain use 3.295 -
   ii) Uncertain use - -
  b) Customers 36.708 20.141
   i) Certain use - -
   ii) Uncertain use 36.708 20.141
4) Commitments underlying credit derivatives: Sale of protection - -
5) Assets used as collateral by third parties - -
6) Other commitments 93.463 95.462
Total 209.544 165.953
 

Financial guarantees granted to banks refer to the commitment towards Italy's Interbank Deposit Protection Fund (FITD), net of the amount set aside during the year for measures already approved. See Part B, Section 12 Provisions for risks and charges in these Notes.

Financial guarantees granted to customers essentially refer to guarantees granted in favour of invoice sellers for collected tax receivables.

Other commitments refer to unused bank overdraft facilities on customers’ current accounts.

 

Last updated on 2015-02-18