1.1 Credit risk

Qualitative information

General aspects.

The banking group currently operates in the following fields:

  • Short-term trade receivable financing (factoring)
  • Medium-term financing for retail entrepreneurs
  • Purchases of non-performing loan portfolios
  • Purchases of tax receivables

The Treasury Department's operations complement such activities, and although they are particularly significant on certain occasions, they do not change the mission of the banking Group, which continues to be focused on providing financial and accounts receivable management support to Small and Medium-sized Enterprises.

The factoring business is characterised by the direct assumption of risks related to granting advances and loans, as well as guarantees, if any, on trade receivables of mainly small- and medium-sized enterprises, according to the growth strategies defined and pursued by the Group.

Traditional factoring operations are complemented with the business of acquiring distressed financial (Distressed Retail Loans, that is non-performing loans), trade and tax receivables. The sellers are typically banks, financial institutions, insolvency proceedings and businesses.

At the end of the first half of 2015, the Banca IFIS Group expanded its business model by adding a new product: medium-term financing supporting the trade receivables of pharmacies.

In addition, in the second half of 2015 the Banca IFIS Group expanded its portfolio of short-term trade receivable financing solutions by purchasing and managing receivables due from local administrations.

Given the particular business of the Group’s companies, credit risk is the most important element to consider as far as the general risks assumed by the Group are concerned. The maintenance of effective credit risk management is a strategic objective for the Banca IFIS Group, pursued through the adoption of integrated tools and processes that ensure correct credit risk management in all its phases (preparation, lending, monitoring and management, and intervening on troubled loans).

Vis-à-vis surplus liquidity, if any, the Banca IFIS Group carries out operations involving very short-term deposits with highly creditworthy banking counterparties. Given the counterparties, the short time frames and the modest amounts involved, the credit risk associated with this activity is particularly low.

In April 2015, the Bank's Board, in light of tactical/strategic considerations, resolved first to reclassify the HTM portfolio to AFS financial assets, and then, based on market developments, to change the portfolio's composition, extending its residual life.

The overall portfolio's average residual life is approximately thirty months and the maximum duration per individual asset is five years.

The Banca IFIS Group does not carry out any operation involving credit derivatives.

Credit risk management policies.

Organisational aspects

Credit risks in factoring operations directly arise from financing the business customers and guaranteeing them, when requested, against the account debtor’s default. Credit risk management takes place during two specific phases of the credit process: the initial credit assessment phase and, in case of a positive outcome, throughout the entire relationship with the seller/debtor counterparties. In order to increase the quality of its receivables portfolio, Banca IFIS deemed it appropriate to centralise the main phases related to risk taking and control as part of factoring operations in the Bank's Head Office, allowing for a high degree of homogeneity in lending operations and to strictly monitor individual positions through the specialisation of resources and separation of functions at all decision-making levels. In carrying out its operations, the Polish subsidiary IFIS Finance can take certain decisions independently within the operational and organisational limits defined by the Parent Company, Banca IFIS.

In the first phase of the risk management process, the responsible organisational structure shall assess the creditworthiness of the seller and debtor counterparties, the nature of the commercial relationship between them, and the quality of the receivables factored. A multi-level system of delegations and decision-making powers allows the most senior analysts to assume increasingly growing, but still modest, risks. Greater risks can be taken by service and area managers. As for higher amounts, powers are attributed solely to the General Manager, the Chief Executive Officer, the Credit Committee, and the Board of Directors.

The Bank’s branches do not have decision-making powers as for the assumption of credit risk. Rather, they have the responsibility of doing business in the local area and managing relationships with customers. Therefore, within the limits and with the procedures established by the Head Office’s competent bodies, Branches manage ordinary operations with customers under the constant monitoring of the Head Office.

Qualified and specialised staff follow all stages of a relationship: from the sale of the receivables to the granting of advances, from the administrative management of the receivables to their collection, from the identification of anomalies, if any, to the verification and definition of the most appropriate actions to recover the debt, also with support from the Legal Department, if necessary.

As already specified, the Banca IFIS Group purchases also distressed receivables in the following business areas:

  • tax receivables usually acquired from insolvency proceedings and due from tax authorities;
  • financial receivables acquired from consumer credit companies, banks and leasing companies;
  • trade receivables acquired from insolvency proceedings and companies.

Purchasing the different types of receivables is a fundamental aspect of the credit process. Prior to this phase, highly-skilled analysts carry out a thorough due diligence of the portfolio being transferred and the relevant organisational impact. Once the due diligence is completed, the Group sets the terms and conditions for offering/acquiring the receivables portfolio and how to manage it (individual or collective method), assessing the relevant impact on operating structures.

In order to collect distressed retail loans (DRL), the Banca IFIS Group relies on an in-house legal office, a widespread and tested network of credit collection companies operating throughout Italy, and a network of agents. This structure, together with several lawyers located near the courts, ensures the utmost flexibility as well as effective and timely actions to recover all types of receivables.

The Banca IFIS Group pays particular attention to the concentration of credit risk with reference to all the Group’s companies, both at an individual and consolidated level. Banca IFIS’s Board of Directors has delegated the Top Management to take action to contain major risks. In line with the Board of Directors’ instructions, all positions at risk which significantly expose the Group, even if amounting to less than 10% of regulatory capital, are systematically monitored.

Management, measurement and control systems

The operational procedure governing Banca IFIS Group’s credit process within traditional factoring operations is audited during the year and expressly requires an assessment of all the counterparties (both the customer-seller and the account debtor) involved in the factoring relationship.

Within factoring operations, credit risk is constantly monitored by means of procedures and instruments allowing to rapidly identify particular anomalies.

The bank has instruments and procedures in place allowing to evaluate and monitor risks. Specifically:

  • it assesses the creditworthiness of the seller and the debtor;
  • it immediately identifies the risk in each individual cash advance or financing transaction;
  • it defines adequate pricing for each class of risk right from the initial commercial analysis of the feasibility of the operation.

Following a positive assessment and after starting to work with the customer, the bank continues to monitor the relevant credit risk using selected databases.

Protests, prejudicial events or signs of loans turning bad automatically lead to the suspension of operations. The ensuing analysis aims to assess the seriousness of the anomalies and whether the problems are permanent or temporary, so as to decide whether to maintain the relationship or reduce the exposures.

As for the activities concerning the Distressed Retail Loans business and the purchasing of tax receivables arising from insolvency proceedings, in order to ensure increasingly efficient control over the operations undertaken, the Group has continued to invest in information systems dedicated to monitoring those portfolios.

Purchases of distressed retail loans are particularly significant. Those loans are classified as from their purchase under non-performing exposures. These are financial receivables (purchased from consumer credit companies, banks and leasing companies) and, to a lesser extent, trade receivables (acquired from insolvency proceedings and companies) which, in light of the characteristics of the receivable and the invoice seller, are duly classified in portfolios homogeneous in terms of management and collection methods (judicial and non-judicial). In particular, the Bank implements the following methods:

  • collective management, characterised by non-judicial collection operations carried out mainly by specialist collection agencies, the network of professionals-agents, and the call centre;
  • individual management, characterised by judicial collection operations

As for the credit risk associated with the bond portfolio, considering that it is made up mainly of Italian government bonds and, to a lower extent, a short-term bank bond, the Banca IFIS Group constantly monitors the credit quality of the bond issuers. The Risk Management function periodically reports to the bank's Board of Directors and Top Management on the composition of the bond portfolio.

As for Basel 2 principles for calculating capital requirements against first-pillar credit risks, the Bank chose to adopt the Standardised Approach.

Credit risk mitigation techniques

Within the factoring activity, when the type and/or quality of factored receivables do not fully satisfy requirements or, more generally, the invoice seller is not sufficiently creditworthy, the bank’s established practice is to hedge the credit risk assumed by the Group by obtaining additional surety bonds from the shareholders or directors of the invoice seller.

As for the account debtors in factoring relationships, wherever the Bank believes that the elements available to assess the account debtor do not allow to properly measure/assume the related credit risk, or the proposed amount of risk exceeds the limits identified during the debtor’s assessment, the Bank adequately hedges the risk of default of the account debtor. Guarantees issued by correspondent factors and/or insurance policies underwritten with specialised operators are the main hedge against non-domestic account debtors in non-recourse operations.

As for operations concerning distressed loans (Distressed Retail Loans and purchases of tax receivables arising from insolvency proceedings) and the relevant business model, generally no action is taken to hedge credit risks.

Non-performing exposures

With reference to factoring operations, relationships with customers are constantly monitored by the competent Head Office’s department, based on both the relationship’s performance and monitoring instruments implemented for counterparties at risk (Central Credit Register, protests and prejudicial events, etc.). Should anomalous trends and/or prejudicial elements arise on the part of the counterparty, the situation is placed under watch and the dedicated units at the Head Office directly supervise the Branch’s management of the relationship until the anomalies have been overcome.

Should the situation deteriorate or become critical, the Troubled Loans Area – Monitored Positions Service takes over the management of the relationship. Once it has duly examined the case and the relevant opportunities, it decides whether to maintain the position until the problems have been overcome or reduce the exposure. Based on available information, it also considers whether or not to classify the counterparty under bad loans or subjective substandard loans.

Managing non-performing exposures, either substandard or bad loans, normally falls under the responsibility of the Troubled Loans Area – Disputes Service, which takes the most appropriate actions to hedge and recover debts, periodically reporting to the Top Management and the Board of Directors. If it is believed that the problems encountered by the seller and/or the debtor could be successfully overcome with the Bank adequately hedging the credit risk, the position may be restructured and placed, once again, under the management and monitoring of the Monitored Positions Service or, if appropriate, the Customer Area.

Analytical impairment losses, upon proposal by the Disputes Service, are assessed by the Top Management and submitted to the Board of Directors for approval.

A similar process is formally in place also for IFIS Finance Sp. Z o. o.. Nonetheless, it should be noted that the subsidiary has only marginal exposure to non-performing exposures.

A significant portion of Distressed Retail Loans are classified under non-performing exposures. The purchase of receivables at amounts well below their par value and cash flows generally higher than the price paid minimise the risk of losses.

As for non-performing exposures purchased and not yet collected, the overall outstanding book value of the portfolio is approximately 8.161 million Euro, considering the sales completed at the end of the year. At the time of purchase, the historical book value of these receivables was approximately 8.261 million Euro, and they were acquired for approximately 340 million Euro, i.e. an average price equal to approximately 4,5% of the historical book value. In 2015, approximately 4.092 million Euro were acquired for approximately 218 million Euro, i.e. an average price equal to 5,3%. The overall portfolio of non-performing exposures purchased and not yet collected has an overall weighted average life of around 22 months compared to their purchase date.

Furthermore, it should be noted that overall at the end of 2015 there were approximately 93 million Euro in outstanding bills of exchange (the amount does not include, for instance, nearly 138 million Euro in outstanding settlement plans).

In December 2015, the bank completed three sales of portfolios to leading players whose business is purchasing NPLs. Overall, Banca IFIS sold receivables with an outstanding book value of nearly 1,4 billion Euro, consisting of approximately 137 thousand position, for an overall consideration of about 37 million Euro.

The figures at 31 December 2015 do not include the receivables involved in one of the sales completed at the end of December, when the Bank accepted the buyer's binding offer, with an outstanding par value of approximately 477 million Euro and a historical book value of nearly 489 million Euro at the purchase date. The sale was finalised on 15 January 2016.

Concerning the changes in amortised cost other than impairment related to the bad loans of the DRL segment, in 2015 the Bank started classifying them no longer under item 130 Net impairment losses/reversals on receivables, but rather under item 10 Interest income.

DRL receivables are measured at amortised cost; the expected cash flows used for calculating the amortised cost are estimated with a statistical model based on proprietary historical time series on collection operations as far as the so-called collective management is concerned, and the estimates made by the analyst as far as the so-called individual management is concerned. During 2015, the Bank introduced reviewed the cash flow simulation model, as debt collection operations have significantly changed over the years. The revised model uses updated historical time series (2000-2015) and ensures that different types of collection instruments with similar characteristics are treated consistently. In addition, it allows to greatly reduce processing times.

Quantitative information

A. Credit quality

A.1 Non-performing and performing loans: amounts, impairment losses, trend, economic and geographical distribution

A.1.1 Distribution of financial assets by portfolio and credit quality (book values)

Portfolio/quality Bad loans Unlikely to pay Past due impaired loans Past due not impaired loans Not impaired exposure Total
1. Available for sale financial assets - - - - 3.216.832 3.216.832
2. Financial assets held to maturity - - - - - -
3. Due from banks - - - - 95.352 95.352
4. Loans to customers 190.286 234.546 58.214 883.405 2.070.685 3.437.136
5. Financial assets measured at fair value - - - - - -
6. Financial assets under disposal - - - - - -
Total 31.12.2015 190.286 234.546 58.214 883.405 5.382.869 6.749.320
Total 31.12.2014 103.138 109.152 35.798 829.434 7.068.897 8.146.419

Equity securities and OEIC units are not included in this table.

A.1.2 Distribution of exposures by portfolio and credit quality (gross and net amounts)

Portfolio/quality Impaired loans Not impaired loans Total (net exposure)
  Gross exposure Specific impairment losses Net exposure Gross exposure Specific impairment losses Net exposure  
               
1. Available for sale financial assets - - - 3.216.832 - 3.216.832 3.216.832
2. Financial assets held to maturity - - - - - - -
3. Due from banks - - - 95.352 - 95.352 95.352
4. Loans to customers 727.780 244.734 483.046 2.965.514 11.424 2.954.090 3.437.136
5. Financial assets measured at fair value - - - X X - -
6. Financial assets under disposal - - - - - - -
Total 31.12.2015 727.780 244.734 483.046 6.277.698 11.424 6.266.274 6.749.320
Total 31.12.2014 474.472 226.384 248.088 7.908.903 10.572 7.898.331 8.146.419

Equity securities and OEIC units are not included in this table.

In compliance with paragraph 37, letter a) of IFRS 7 “Financial Instruments: Disclosures”, here below is the maturity analysis for past due amounts relating to performing loans – Other loans.

(in thousand of Euros) 31.12.2015 31.12.2014
Overdue up to 3 months 387.750 364.696
Overdue > 3 months 6 months 1 year 224.403 236.742
Total 884.615 839.908

A.1.3 Banking group - On- and off-balance-sheet exposures to banks: gross and net amounts and past due buckets

Types of loans/values Gross exposure Specific net impairment losses Portfolio impairment losses Net exposure
         
  Impaired loans Not impaired loans      
  Up to 3 months From 3 months up to 6 months From 6 months up to 1 year Over 1 year        
A. CASH EXPOSURE                
a) Bad loans - - - - X - X -
- of which: forborne - - - - X - X -
b) Unlikely to pay - - - - X - X -
- of which: forborne - - - - X - X -
c) Past due impaired loans - - - - X - X -
- of which: forborne - - - - X - X -
d) Past due not impaired loans X X X X X - -
- of which: forborne X X X X X - -
e) Not impaired exposure - X X - 95.352 X - 95.352
- of which: forborne X X X X X -  
Total A - - - - 95.352 - - 95.352
 B. OFF-BALANCE-SHEET EXPOSURES                
a) Impaired - - - - X -  X -
b) Not impaired - X X - 3.674 X -  3.674
Total B - - - - 3.674 - - 3.674
TOTAL A+B - - - - 99.026 - - 99.026

On-balance-sheet exposures include all cash financial assets due from banks, regardless of the portfolio they are included in (held for trading, available for sale, held to maturity, loans and receivables etc.).

A.1.6 Banking group - On- and off-balance-sheet exposures to customers: gross and net amounts and past due buckets

Types of loans/values Gross exposure Specific net impairment losses Portfolio impairment losses Net exposure
         
  Impaired loans Not impaired loans      
  Up to 3 months From 3 months up to 6 months From 6 months up to 1 year Over 1 year        
A. CASH EXPOSURE                
a) Bad loans - - 108 414.632 X 224.454 X 190.286
- of which: forborne 16.320 X 885 X 15.435
b) Unlikely to pay 32.420 4.233 7.271 209.328 X 18.706 X 234.546
- of which: forborne 18.913 204 703 19.309 X 5.406 X 33.723
c) Past due impaired loans 43.398 4.246 2.128 10.016 X 1.574 X 58.214
- of which: forborne 5.444 X 144 X 5.300
d) Past due not impaired loans X X X X 884.616 X 1.211 883.405
- of which: forborne X X X X 30 X -  30
e) Not impaired exposure - X - - 5.297.730 X 10.213 5.287.517
- of which: forborne X X X X 2.947 X 18 2.929
Total A 75.818 8.479 9.507 633.976 6.182.346 244.734 11.424 6.653.968
 B. OFF-BALANCE-SHEET EXPOSURES                
a) Impaired 677 584 273 421 X -  X 1.955
b) Not impaired - X X - 326.167 X -  326.167
Total B 677 584 273 421 326.167 - - 328.122
TOTAL A+B 76.495 9.063 9.780 634.397 6.508.513 244.734 11.424 6.982.090

On-balance-sheet exposures include all cash financial assets due from customers, regardless of the portfolio they are included in (available for sale, held to maturity, loans and receivables).

A.1.7 Banking group - On-balance-sheet exposures to customers: trends in gross non-performing exposures

Type/Categories Bad Loans Unlikely to pay Past due loans 
A. Opening gross exposure 313.818 123.337 37.317
- of which: transferred and not  derecognised - - -
B. Increases 218.776 290.482 435.690
B.1 Inflows from performing loans 1.232 26.188 318.338
B.2 Transfers from other impaired loan categories 31.259 12.405 -
B.3 Other increases 186.285 251.889 117.352
C. Reductions 117.854 160.567 413.219
C.1 Outflows to performing loans - 4.767 239.726
C.2 Derecognitions 9.333 1.592 -
C.3 Collections 40.528 65.987 131.625
C.4 Collections from transfers 1.045 212 -
C.5 Losses on disposal - - -
C.6 Transfers to other impaired loan categories - 31.258 12.406
C.7 Other reductions 66.948 56.751 29.462
D. Closing gross exposure 414.740 253.252 59.788
- of which: transferred and not  derecognised - - -

Total net non-performing exposures amounted to 483,0 million Euro, compared to 248,1 million Euro at the end of 2014 (+94,7%).

Total bad loans to customers at 31 December 2015, net of value adjustments, were 190,3 million Euro, against 103,1 million Euro at 31 December 2014 (+84,5%). The change was essentially due to the purchases made by the DRL segment during the year; indeed, the Trade Receivables segment reported a 6,4% decline.

At 31 December 20134, unlikely to pay totalled 234,5 million Euro, compared to 109,2 million Euro in 2014 (+114,9%), of which 195,0 million Euro related to the DRL sector (65,3 million Euro at the end of 2014). The Trade Receivables segment's unlikely to pay were down 9,7%.

At 31 December 2015, net non-performing past due exposures totalled 58,2 million Euro, compared to 35,8 million Euro in December 2014 (+62,6%), mainly as a result of the inclusion in this category of some individually significant positions. Changes in non-performing past due exposures are a normal part of the Bank's business model. Net non-performing past due exposures referred for 1,2 million Euro (3,9 million Euro at the end of 2014) to receivables due from the Public Administration purchased outright as part of financing operations.

A.1.7bis Banking group - On-balance-sheet exposures to customers: trends in gross forborne exposures broken down by credit quality

Type/Categories Forbearance: impaired Forbearance: not impaired
     
A. Opening gross exposure 31.080 1.709
- of which: transferred and not derecognised - -
B. Increases 88.688 11.510
B.1 Inflows from performing not forborne loans 5.479 5.491
B.2 Inflows from performing forborne loans - -
B.3 Inflows from impaired forborne - -
B.4 Other increases 83.209 6.019
C. Reductions 58.875 10.242
C.1 Outflows to performing not forborne loans    
C.2 Outflows to performing forborne loans    
C.3 Outflows to impaired forborne   5.479
C.4 Derecognitions    
C.5 Collections 18.797 3.156
C.6 Collections from transfers    
C.7 Losses on disposal    
C.8 Other reductions 40.078 1.607
D. Closing gross exposure 60.893
- of which: transferred and not derecognised - -

A.1.8 Banking group - On-balance-sheet exposures to customers: trends in overall impairment losses/reversals

Type/Categories Bad loans  Unlikely to pay Past due loans
  Total of which: forbearance Total of which: forbearance Total of which: forbearance
 A. Opening balance of total impairment losses 210.680 - 14.201 1.783 1.503 -
- of which: transferred and not derecognised - - - - - -
B. Increases 30.132 885 20.577 3.623 71 144
B.1 Impairment losses 19.192 700 20.577 3.623 144 144
B.2 Losses on disposal - - -  - - -
B.3 Transfers from other impaired loan categories 10.940 185 - - - -
B.4 Other increases - - - - - -
C. Reductions 16.358 - 16.072  - - -
C.1 Impairment reversals from measurement 2.775 - 4.299 - 73 -
C.2 Impairment reversals from collection - - - - - -
C.3 Profit from disposal - - - - - -
C.4 Derecognitions 13.583 - 833  - - -
C.5 Transfers to other impaired loan categories - - 10.940 - - -
C.6 Other reductions - - - - - -
D. Closing balance of total impairment losses 224.454 885 18.706 5.406 1.574 144
- of which: transferred and not derecognised -  - - - - -

A.2 Classification of exposures based on external and internal ratings

A.2.1 Distribution of on- and off-balance-sheet exposures by class of external rating

For the purposes of calculating capital requirements against credit risk, the Banca IFIS Group uses the external credit assessment institution (ECAI) Fitch Ratings exclusively for the positions recognised under “Exposures to Central Governments and Central Banks”; no external ratings are used for the other asset classes. In light of the composition of the Group’s assets, external ratings are used exclusively for the portfolio of government bonds.

A.2.2 Distribution of on- and off-balance-sheet exposures by class of internal rating

The Group does not use internal ratings for the purposes of calculating capital absorption. Banca IFIS implemented the New Internal Rating System for Italian businesses, which was developed using proprietary databases and consists of:

  • a “financial statement” module, to assess the company's operating/financial soundness;
  • a “central credit register” module, presenting the evolution of counterparty risk vis-à-vis the banking industry;
  • two “internal performance” modules, monitoring signs of deterioration in the relationship between the counterparty and the Bank consistently with the business model of providing working capital financing, based on whether the counterparty is a seller or a debtor;
  • a qualitative questionnaire intended to obtain “soft” information that the above modules cannot provide.

A.3 Distribution of secured credit exposures by type of security

A.3.2 Banking group - Guaranteed exposures to customers

  Net exposure Collateral guarantees (1) Personal guarantees (2)  
      Credit derivatives Endorsement credits  
            CLN Other derivatives         Total (1)+(2)
    Property mortgages Property finance leases Securities Other collateral guarantees   Governments and central banks Other public entities Banks Other subjects Governments and central banks Other public entities Banks Other entities  
1. Guaranteed cash exposure: 274.570 12.527 -   - - - - - - - -   244.365 256.892
1.1 totally guaranteed 217.544 10.824 -   - - - - - - - -   206.721 217.545
- of which impaired 31.438 10.540 - - - - - - - - - - - 20.898 31.438
1.2 partially guaranteed 57.026 1.703 - - - - - - - - - - - 37.644 39.347
- of which impaired 16.527 1.703 - - - - - - - - - - - 9.024 10.727
2. Guaranteed off-balance-sheet exposure: - - - - - - - - - - - - - - -
2.1 totally guaranteed - - - - - - - - - - - - - - -
- of which impaired - - - - - - - - - - - - - - -
2.2 partially guaranteed - - - - - - - - - - - - - - -
- of which impaired - - - - - - - - - - - - - - -

B. Concentration and distribution of exposures

B.1 Banking group - Distribution of on- and off-balance-sheet exposures to customers by segment (book value)

Exposures/counterpartiesGovernments and Central BanksOther public entities Financial institutions companiesInsurance  Non-financial companiesOther entities 
 Net exposureSpecific impairment losses/reversalPortfolio impairment losses/reversalNet exposureSpecific impairment losses/reversalPortfolio impairment losses/reversalNet exposureSpecific impairment losses/reversalPortfolio impairment losses/reversalNet exposureSpecific impairment losses/reversalPortfolio impairment losses/reversalNet exposureSpecific impairment losses/reversalPortfolio impairment losses/reversalNet exposureSpecific impairment losses/reversalPortfolio impairment losses/reversal
A. Cash exposure                                    
A.1 Bad loans - - X 3.161 51 X 94 - X - - X 38.738 215.007 X 148.293 9.396 X
       - of which: forborne - - X - - X - - X - - X 697 885 X 14.738 - X
A.2 Unlikely to pay 395 84 X 2.858 2.455 X 6.667 3.830 X - - X 33.305 11.924 X 191.321 413 X
       - of which: forborne - - X - - X 6.666 3.830 X - - X 7.985 1.576 X 19.072 - X
A.3 Past due loans 646 - X 562 - X - - X - - X 53.062 1.466 X 3.944 108 X
       - of which: forborne - - X - - X - - X - - X 5.3 144 X - - X
A.4 Non impaired exposure 3.320.920 X 32 895.162 X 761 114.927 X 47 - X - 1.824.749 X 10.487 15.164 X 97
       - of which: forborne   X - - X - - X - - X - 2.959 X 18 X  
Total  A 3.321.961 84 32 901.743 2.506 761 121.688 3.830 47 - - - 1.949.854 228.397 10.505 358.722 9.917 97
B. Off-balance-sheet exposures"                                    
B.1 Bad loans - - X - - X - - X - - X 156 - X - - X
B.2 Unlikely to pay - - X - - X - - X - - X 676 - X - - X
B.3 Other impaired loans - - X - - X - - X - - X 1.123 - X - - X
B.4 Not impaired exposure - X - 589 X - 15.523 X - - X - 309.733 X - 322 X -
Total  B - - - 589 - - 15.523 - - - - - 311.688 - - 322 - -
Total (A+B) 31.12.2015 3.321.961 84 32 902.332 2.506 761 137.211 3.830 47 - - - 2.261.542 228.397 10.505 359.044 9.917 97
Total (A+B) 31.12.2014 5.140.254 - - 664.522 7.809 88 134.1 1.362 54 100 - - 1.990.113 208.583 10.404 137.615 8.63 26

B.2 Banking group - Geographical distribution of on- and off-balance-sheet exposures to customers (book value)

Exposures/Geographic areasItaly Other European countriesAmerica Asia Rest of the World
 Net exposureOverall impairment losses/reversalsNet exposureOverall impairment losses/reversalsNet exposureOverall impairment losses/reversalsNet exposureOverall impairment losses/reversalsNet exposureOverall impairment losses/reversals
A. Cash exposure                    
A.1 Bad loans 189.432 220.374 818 4.075 20 5 3 - 13 -
A.2 Unlikely to pay 234.416 17.608 113 1.098 11 - 1 - 5 -
A.3 Past due loans 58.212 1.574 2 - - - - - - -
A.4 Non impaired exposure 6.056.673 11.053 107.964 333 764 5 4.957 30 564 3
Total A 6.538.733 250.609 108.897 5.506 795 10 4.961 30 582 3
B. Off-balance-sheet exposure"                    
B.1 Bad loans 156 - - - - - - - - -
B.2 Unlikely to pay 676 - - - - - - - - -
B.3 Other impaired loans 1.074 - 49 - - - - - - -
B.4 Non impaired exposure 256.162 - 68.901 - - - 996 - 108 -
Total B 258.068 - 68.95 - - - 996 - 108 -
Total (A+B) 31.12.2015 6.796.801 250.609 177.847 5.506 795 10 5.957 30 690 3
Total (A+B) 31.12.2014 7.950.952 231.513 113.328 5.433 20 5 1.55 3 854 2

B.3 Banking group – Geographical distribution of on- and off-balance-sheet exposures to banks (book value)

Exposures/Geographic areasItaly Other European countriesAmerica Asia Rest of the World
 Net exposureImpairment losses/reversalNet exposureImpairment losses/reversalNet exposureImpairment losses/reversalNet exposureImpairment losses/reversalNet exposureImpairment losses/reversal
A. Cash exposure                    
A.1 Bad loans - - - - - - - - - -
A.2 Unlikely to pay - - - - - - - - - -
A.3 Past due loans - - - - - - - - - -
A.4 Non impaired exposure 81.388 - 13.345 - 619 - - - - -
Total A 81.388 - 13.345 - 619 - - - - -
B. Off-balance-sheet exposure"                    
B.1 Bad loans - - - - - - - - - -
B.2 Unlikely to pay - - - - - - - - - -
B.3 Other impaired loans - - - - - - - - - -
B.4 Non impaired exposure 3.674 - - - - - - - - -
Total B 3.674 - - - - - - - - -
Total (A+B) 31.12.2015 85.062 - 13.345 - 619 - - - - -
Total (A+B) 31.12.2014 283.956 - 5.117 - 186 - - - - -

B.4 Major exposures

   31.12.2015 31.12.2014
a) Carrying amount 3.552.701 5.682.017
b) Weighted value 195.918 375.451
c) Number 5 10

The overall weighted amount of major exposures at 31 December 2015 consisted of 157,9 million Euro in loans to customers and 38,0 million Euro in tax assets.

Disclosure regarding Sovereign Debt (copiato IIT)

On 5 August 2011, CONSOB (drawing on ESMA document no. 2011/266 of 28 July 2011) issued Communication no. DEM/11070007 on disclosures by listed companies of their exposures to sovereign debt and market performance, the management of exposures to sovereign debt, and their operating and financial impact.

In compliance with the provisions of the aforementioned communication, it should be noted that at 31 December 2015 the book value of exposures to sovereign debt(1) represented by debt securities was 3.216,8 million Euro, and consisted entirely of Italian government bonds; these securities, with a par value of 3.125,5 million Euro, are classified under Available for sale (AFS) financial assets and included in the banking book; the weighted residual average life of these securities is approximately thirty months.

The fair values used to measure the exposures to sovereign debt at 31 December 2015 are considered level 1, and the exposures concerned were not impaired at that date. For further details on the measurement method applied and the classification, please refer to the sections on Accounting policies and Information on the consolidated statement of financial position.

Pursuant to the CONSOB Communication, besides the exposure to sovereign debt, it is also necessary to consider receivables due from the Italian National Administration, which at 31 December 2015 totalled 1,006,8 million Euro, with 105,1 million Euro due from the “central Government” (of which 94 million Euro relating to tax receivables) and 901,7 million Euro due from “other public bodies”.

The valuation reserve, gross of the tax effect related to the overall position in Italian government bonds, went from a positive 17,4 million Euro (11,7 million Euro net of the tax effect) at the end of first half of 2015 to a positive value of approximately 13,9 million Euro at 2 February 2016 (9,3 million Euro net of the tax effect).

(1) As indicated in the ESMA document, ‘exposures to sovereign debt’ refer to bonds issued by and loans given to central and local government and governmental bodies.

D. Disclosure on structured entities (other than securitisation vehicles)

D.2 Unconsolidated structured entities

Qualitative information

During 2014, Banca IFIS bought a property in Florence to be renovated for 9,6 million Euro. It plans to move the NPL area's offices there. At the same time, the Bank sold a finance lease agreement concerning the property currently housing the NPL Area to a newco, a special purpose vehicle set up exclusively to manage said property and owned by a real estate company not related to the Banca IFIS Group. Pending completion of the renovation works, the Bank entered into a lease agreement with the newco to continue using the current offices. The rent is substantially in line with the lease payments. Following the sale of the lease agreement, Banca IFIS is jointly liable for the settlement of lease payments. To hedge the risk of insolvency on the part of the newco, Banca IFIS obtained that it set up a 1 million Euro security deposit with the Bank as well as a lien on 99% of voting shares in the newco, to be exercised in the event the newco defaults on its obligations.

In 2015, the newco regularly settled the lease payments due using the money raised from the leased property.

Since the sale of lease agreement does not meet the requirements of IAS 39 for derecognising the financial liability, Banca IFIS continues to recognise the building under property, plant and equipment, and the relevant financial liability under payables due to customers.

Quantitative information

Items/ Type of structured entityAccounting portfolios under assetsTotal assets
(A)
Accounting portfolios under liabilitiesTotal liabilities
(B)
Net book value
(C=A-B)
Maximum exposure to the risk of loss
(D)
Difference between exposure to the risk of loss and book value
(E=D-C)
1. Special purpose vehicle n.a. - Payables due to customers 787 (787) - (787)
   

The maximum risk of loss is zero, as can be seen from the qualitative information provided.

E. Sale transactions

A. Financial assets sold and not fully derecognised

Qualitative information

Financial assets sold but not derecognised refer to Italian government bonds used for repurchase agreements. Those financial assets are recognised under available for sale financial assets and held to maturity financial assets, whereas financing for repurchase agreements is recognised under payables due to customers.

Quantitative information

E.1 Financial assets sold and not derecognised: book value and full value

Banking products/portfolio Financial assets held for trading    Financial assets measured at fair value  Available for sale financial assets    Financial assets held to maturity     Due from banks   Due from customers    Total 
  A  B  C  A  B  C  A  B  C  A  B  C  A  B  C  A  B  C 31.12.1531.12.14
A. Cash assets - - - - - - 2.667.606 - -   - - - - - - - - 2.667.606 2.027.433
1. Debt securities - - - - - - 2.667.606 - -   - - - - - - - - 2.667.606 2.027.433
2. Equity securities - - - - - - - - - X X X X X X X X X - -
3. O.E.I.C.  - - - - - - - - - X X X X X X X X X - -
4. Loans - - - - - - - - - - - - - - - - - - - -
B. Derivative instruments - - - X X X X X X X X X X X X X X X - -
Total 31.12.2015 - - - - - - 2.667.606     - - - - - - - - - 2.667.606 -
of which impaired - - - - - - - - - - - - - - - - - - - -
Total 31.12.2014 - - - - - - -     2.027.433 - - - - - - - - X 2.027.433
of which impaired - - - - - - - - - - - - - - - - - - X X

A= Financial assets sold and fully recognised (book value)
B= Financial assets sold and partly recognised (book value)
C= Financial assets sold and partly recognised (full value)