LIABILITIES

Section 1 – Due to banks - Item 10

1.1 Due to banks: breakdown by type

Type of operations/Components of group 31.12.2015 31.12.2014
     
1. Due to Central banks 119.792 2.226.872
2. Due to banks 543.193 32.095
2.1 Current accounts and on demand deposits 25.241 95
2.2 Term deposits 133.727 32.000
2.3 Loans 384.225 -
2.3.1 Repurchase agreements 384.225 -
2.3.2 Others - -
2.4 Debt from buyback commitments on treasury equity instruments - -
2.5 Other payables - -
Total 662.985 2.258.967
Fair value - level 1 - -
Fair value - level 2 - -
Fair value - level 3 662.985 2.258.967
Total fair value 662.985 2.258.967

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

The significant decrease in Payables due to banks compared to the end of the previous year was due to the fact that the Bank carried out less refinancing operations on the Eurosystem, rather using the MTS platform and dealing with Cassa di Compensazione e Garanzia as counterparty. The Bank turns to the ECB or the MTS platform exclusively based on which is more convenient in light of interest rate trends.

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 group 31.12.2015 31.12.2014
     
1. Current accounts and on demand deposits 748.487 655.809
2. Term deposits 2.447.604 2.733.194
3. Loans 2.282.967 2.087.009
3.1 Repurchase agreements 2.278.983 2.082.854
3.2 Others 3.984 4.155
4. Debt from buyback commitments on treasury equity instruments - -
5. Other payables 8.418 7.462
Total 5.487.476 5.483.474
Fair value - level 1 - -
Fair value - level 2 - -
Fair value - level 3 5.491.311 5.484.413
Total fair value 5.491.311 5.484.413

Current accounts and on demand deposits at 31 December 2015 included funding from the on demand rendimax savings account and the contomax online current account, amounting to 647,2 million and 18,4 million Euro, respectively; term deposits included 2.447,6 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

  31.12.2015 31.12.2014
Payables for finance leases 3.984 4.155

The payables described above relate for 3,9 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 group31.12.201531.12.2014
 NVFVFV *NVFVFV *
  Level 1Level 2Level 3  Level 1Level 2Level 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 - - 21  - - - -  -
1.1 Held for trading X - - 21 X X - - - 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   - - 21 -   - - - -
Total (A+B) X - - 21 X X - - - 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
L1= Level 1
L2= Level 2
L3= Level 3

Section 8 – Tax liabilities – Item 80

See section 14 under assets.

Section 10 - Other liabilities - Item 100

10.1 Other liabilities: breakdown

  31.12.2015 31.12.2014
Due to suppliers 12.334 10.197
Sums available to customers 9.077 8.931
Due to personnel 5.088 4.579
Due to the Tax Office and Social Security agencies 4.902 4.090
Accrued expenses and deferred income 4.665 1.811
Other payables 168.532 81.451
Total  204.598 111.059

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 116,2 million Euro in amounts due to customers that have not yet been credited; 2,9 million Euro in illiquid items to be credited to customers for banker’s drafts that have not reached their value date; 20,7 million Euro due to one of the buyers of the sales of DRL receivables completed at the end of 2015; 25,0 million Euro due to the parent company La Scogliera S.p.A. deriving from the tax consolidation regime.

Section 11 - Post-employment benefits - item 110

11.1 Post-employment benefits: annual changes

  31.12.2015 31.12.2014
A. Opening balance 1.618 1.482
B.  Increases 20 206
B.1 Allocations for the year 20 20
B.2 Other increases - 186
C. Reductions 185 70
C.1 Payments made 150 68
C.2 Other reductions 35 2
D.  Closing balance 1.453 1.618
Total 1.453 1.618

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

Other decreases 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.

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 2014.

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/Components 31.12.2015 31.12.2014
1 Pensions and other post retirement benefit obligations - -
2. Other provisions for risks and charges 2.171 1.988
2.1 Legal disputes 1.513 1.527
2.2 Staff expenses - -
2.3 Other 658 461
Total 2.171 1.988

12.2 Provisions for risks and charges: annual changes

Items/Components 31.12.2015
  Pensions and post retirement benefit obligations Other provisions
A. Opening balance - 1.988
B. Increases - 929
B.1 Provisions for the year - 929
B.2 Changes due to the passage of time - -
B.3 Differences due to discount-rate changes - -
B 4 Other increases - -
C. Decreases - 746
C.1 Use during the year - 45
C.2 Differences due to discount-rate changes - -
C.3 Other decreases - 701
D. Closing balance - 2.171

12.4 Provisions for risks and charges – Other provisions

Legal disputes

The provision outstanding at 31 December 2015, amounting to 1,5 million Euro, refers to:

  • eleven disputes concerning the Trade Receivables segment, for which the Bank set aside 1,5 million Euro—of which 788 thousand Euro during 2014. The plaintiffs seek 4,1 million Euro in damages;
  • seven disputes concerning the DRL segment totalling 33 thousand Euro, which were partially set aside during the year.

Overall, the Bank recognises contingent liabilities amounting to 4,5 million Euro in claims, represented by 11 disputes: 9 refer to disputes concerning the Trade Receivables segment, for a total of 4,5 million Euro. The Bank, supported by the legal opinion of its lawyers, made no provisions for these positions, as the risk of defeat is considered possible.

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

Italy's Interbank Deposit Protection Fund (FITD, Fondo Interbancario di Tutela dei Depositi), of which Banca IFIS is a member, approved in a letter dated 16 September 2014 another rescue loan (in addition to the measures announced on 9 January 2014 and 17 July 2014) to Banca Tercas, based in Ascoli Piceno. The relevant potential obligation for Banca IFIS amounts to 461 thousand Euro. Therefore, in 2014 Banca IFIS allocated said amount to the provisions for risks and charges.

Other (tax proceedings)

Following a tax check for the fiscal year 2005, on 25 July 2008 the Italian Revenue Agency issued a report of verification, in which the Office alleged a tax avoidance scheme as set out in article 37-bis of Italian Presidential Decree 600/1973. This concerned the impairment loss on the equity investment in Immobiliare Marocco S.p.A. recognised in 2003, which was deducted in fifths over the following accounting periods as per articles 61 and 66 of the Consolidated Law on Income Tax in force at the time.

In addition, the tax officials also challenged the calculation of the limits for the deductibility of bad debt and impairment losses (pursuant to art. 106, para, 3, of the Consolidated Law on Income Tax), but they did not consider that the Bank would have deducted the amount assessed as taxable on a straight-line basis over the 18 following accounting periods, as required by art. 110, para. 8 of the Consolidated Law on Income Tax.

Based on the first alleged tax avoidance scheme, for the fiscal year 2004, the Italian Revenue Agency issued a verification notice assessing a higher corporate income tax liability of 276 thousand Euro, plus interest and penalties. The Bank received this notice on 3 December 2009 and challenged it before Venice's Provincial Tax Commission, which rejected the appeal. Subsequently, the Bank filed another appeal. On 18 October 2012, the Tax Commission of the Veneto Region upheld the appeal, dismissing the findings of the verification notice and ordering the Office to reimburse the court costs.

The Revenue Agency filed an appeal with the Court of Cassation. The Bank filed a counter-appeal, confident that the second-instance ruling will be upheld, since the Office's claims are baseless. At 31 December 2015, the date for the hearing had yet to be settled.

As for the fiscal year 2005, on 22 August 2012, even though the statute of limitations for assessing income taxes had expired, the Bank received a verification notice in which the Office claimed that the following items were assessed as taxable:

  • the amount related to the mentioned write-down of the equity investment in Immobiliare Marocco S.p.A., totalling 837 thousand Euro, with a higher tax liability of 276 thousand Euro, plus interest and penalties.
  • the amount related to the recalculation of the limits for the deductibility of bad debt losses, totalling 1,4 million Euro, with a higher tax liability of 478 thousand Euro, plus interest and penalties;
  • the capital losses and the so-called “manufactured dividends”, as they arose—in the Office's opinion—from tax avoidance schemes, totalling 6,3 million Euro, with a higher tax liability of 2,1 million Euro, plus interest and penalties.

Thus, the Revenue Agency assessed an additional 8,6 million Euro in income as taxable, resulting in a higher tax liability of 2,8 million Euro, plus interest and penalties.

However, such assessment lacks legitimacy. Besides the fact that the Office's claims are baseless, it is clear that the statute of limitations for the income tax assessment had expired pursuant to art. 43 of Italian Presidential Decree 600/1973.

As there is no reason for doubling the statute of limitations (which is possible only for criminal offences), the notice shall be considered null and void.

In light of these considerations, as well as the 18 October 2012 ruling of the Tax Commission of the Veneto Region (which dismissed the findings of the verification notice for the year 2004, including the alleged non-deductibility of the write-down of the equity investment in Immobiliare Marocco S.p.A.), the Bank applied for composition proceedings.

However, the Revenue Agency rejected the application, and therefore the Bank had to file an appeal with Venice's Provincial Tax Commission. This was filed on 11 February 2013.

After a series of delays, the hearing has been scheduled for 18 March 2016.

The tax advisers handling the mentioned disputes (referring to the fiscal years 2004 and 2005) believe the Bank's case is strong, and deem that the risk of defeat is possible. Therefore, in accordance with IAS 37, the Bank did not make any provisions for the tax proceedings concerned.

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

Voce   31.12.2015 31.12.2014
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) 5.805 6.715
  Number of treasury shares 739.446 887.165

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

Items/Components Ordinaries Others
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 (-) 887.165 -
A.2 Outstanding shares: opening balance 52.923.930  -
B.  Increases 147.719 -
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 147.719 -
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 53.071.649 -
D.1 Treasury shares (+) 739.446 -
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

Voci/Componenti 31.12.2015 31.12.2014
Legal reserve 10.762 10.762
Extraordinary reserve 237.553 178.175
Other reserves 8.463 6.984
Total income-related reserves 256.778 195.921
Buyback reserve 5.805 6.715
Future buyback reserve 34.195 33.285
Other reserves 2.078 1.953
Total item 170 reserves 298.856 237.874

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

Transactions 31.12.2015 31.12.2014
1) Financial guarantees 131.293 76.078
a) Banks - 10.594
b) Customers 131.293 65.484
2) Commercial guarantees - -
a) Banks - -
b) Customers - -
3) Irrevocable commitment to grant funds 65.855 40.003
a) Banks 3.674 3.295
i) Certain use 3.674 3.295
ii) Uncertain use - -
b) Customers 62.181 36.708
i) Certain use 13.766 -
ii) Uncertain use 48.415 36.708
4) Commitments underlying credit derivatives: Sale of protection - -
5) Assets used as collateral by third parties - -
6) Other commitments 91.296 93.463
Total 288.444 209.544

Financial guarantees granted to banks outstanding at 31 December 2014 referred to the commitment towards Italy's Interbank Deposit Protection Fund (FITD). Following the changes introduced during 2015 to the FITD funding mechanism, Banca IFIS does no longer recognise the commitment, as commented under significant events occurred during the year in the Directors' Report

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.