2O2O
ANNUAL REPORT
Foreword by the Chairman
of the Board of Directors
Honourable Shareholders, dear Business Partners,
For many of you, 2020 was a year full of unexpected new challenges and obstacles
caused by the coronavirus pandemic and its impacts on the domestic economy
as well as international trade. Even though the global and Czech economies
have seen a historical decrease and the supply chains have been disrupted in
an unprecedented manner, Czech export manufacturers and exporters have
made every effort to finalise the existing deals or gain new export contracts. The
Czech Export Bank continued to stand by the Czech export-oriented companies
and through its guarantee and loan products tried to contribute to resolving the
current needs of the Czech export manufacturers and exporters as users of the
state-supported system of export financing.
The high level of uncertainty affected not only the business and investment
activities of Czech exporters but especially of their foreign customers. Almost all
negotiations on contracts with a significant volume became considerably
delayed, often extending beyond the end of the calendar year. In reaction to
the uncertain situation, foreign customers of Czech exporters postponed their
investment decisions and there were major delays in negotiations. Czech exporters
reacted to the new situation by increased acquisition effort and, to support their
acquisition activities, the Czech Export Bank issued dozens of indicative offers to
over thirty countries practically from all continents, from which it expects real
demands for supported financing in 2021. More than ever before, it holds true
that the financing offers from the Czech Export Bank as a state-owned institution
increase the exporter’s credibility and their chance to gain new export contracts
in these difficult times. The number of offers issued by ČEB must be primarily
perceived as an extraordinary achievement of the Czech exporters who gained
the trust and interest of foreign customers in Czech products.
In the system of programmes of the Government of the Czech Republic for the
business sphere to support the fight against the coronavirus pandemic, the
mandate of the Czech Export Bank remained unchanged, i.e. especially the
support of Czech manufacturers and exporters with an existing export contract.
Our activities thus primarily focused on the current needs of Czech export-oriented
companies in three areas. The first area focused on ensuring the liquidity needed
for finalisation of deals in progress by accelerating the collection of finalised
deliveries through the purchase of receivables and direct supplier loans. The
second but equally important area was the support of exporters in gaining new
contracts by providing guarantees for their export contract obligations. The third
area was the standard professional assistance to Czech exporters during
negotiations and structuring of their export transactions.
The achieved numbers and volumes of finalised transactions of export financing
of the Czech Export Bank are the result of the factors described above. We consider
it a success that we provided a total of 90 loan and guarantee products in
support of export manufacturers and exporters, which represents a year-on-year
increase of approximately 11%. The achieved volume of provided products of
supported financing was historically low due to the nature of demands of the
Czech export-oriented companies.
ČESKÁ EXPORTNÍ BANKA, A.S.
The fact that an unusual situation occurred when no export customer loan was
provided in 2020 cannot be ignored. This situation was caused by significant
delays in the negotiations of volume-significant export contracts. Taking into
account the volume of supported financing realised not only in the form of bilateral
transactions of the Czech Export Bank in the volume of almost CZK 989 million but
also the entire volume of supported financing realised with the Czech Export
Bank’s participation in the club of banks, the total volume of supported financing
with the involvement of the Czech Export Bank amounts to approximately
CZK 1.1 billion. Last year, the Bank supported 18 Czech companies through financing,
which is a return to the levels from 2014 to 2017 in terms of the number of clients.
For example, the export of machine tools to the USA or tractors to Ghana are worth
mentioning here. The last year’s statistics also includes other markets important
for the diversification of Czech export: Chile, Malaysia, Rwanda, Saudi Arabia or
Israel; the total number of territories is 20. Last year, we continued to cooperate
with small and medium-sized companies. The total of 42 new loan and guarantee
contracts in the aggregate amount of CZK 356 million in this segment forms almost
a half of the total number of contracts concluded last year.
The fact that none of the newly finalised business cases show an imminent risk of
credit loss despite the impact of the pandemic confirms the quality of our work.
The total assets in the amount of CZK 41.2 billion slightly decreased compared to
2019 but the Bank generated profit before tax in the amount of CZK 436.7 million.
We are entering 2021 expecting the impact of various restrictions that will,
especially in the first half of the year, hinder the finalisation of business cases
where the ones that are significant in volume can be negotiated for months.
Nevertheless, the year-long business outlook is more optimistic than last year and
we are expecting a growth in the volume of business cases as we are very
positive about the strong efforts of our partners among Czech manufacturers for
export and exporters to gain new international contracts and finalise the ones
that are in progress. At the same time, we continue to develop closer cooperation
with the EGAP insurance company in the preparation of an ownership merger of
both companies as anticipated by the amendment of Act No. 58/1995 Coll. on
Insurance and Financing of Exports with State Support.
To conclude, allow me to thank you, our shareholders and business partners, for
your cooperation in these difficult times. I would also like to thank the employees
of the Czech Export Bank for their continuous commitment to providing high
quality services to our partners even in the difficult conditions caused by the
coronavirus pandemic.
Ing. Jaroslav Výborný, MBA
Chairman of the Board of Directors and CEO
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cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions,
and not those of each other. DTTL does not
p
rovide services to clients. Please see www.deloitte.com/about to learn more.
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To the Shareholders of
Having its registered office at: 43210-3,+*)(*0'&'*%$#"*### 21 Praha 1
Report on the Audit of the Financial Statements
Opinion
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prepared on the basis of International Financial Reporting Standards as adopted by the EU, which comprise
the statement of financial position as at 31 December 2020, and the income statement, statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements give a true and fair view of the financial position
3* -* &3*anka, a.s. as at 31 December 2020, and of its financial performance and its cash flows for the year then
ended in accordance with International Financial Reporting Standards as adopted by the EU.
Basis for Opinion
We conducted our audit in accordance with the Act on Auditors, Regulation (EU) No. 537/2014 of the European Parliament
and the Council, and Auditing Standards of the Chamber of Auditors of the Czech Republic, which are International Standards
on Auditing (ISAs), as amended by the related application guidelines. Our responsibilities under this law and regulation are
further d 1 2* 1* * 213* &31111 *3* *21* 3* * 1+1+*+ * 13*3*3* &3'* ! *+ *
independent of the Company in accordance with the Act on Auditors and the Code of Ethics adopted by the Chamber
of Auditors of the Czech Republic and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Deloitte Audit s.r.o.
Churchill I
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120 00 Prague 2 Vinohrady
Czech Republic
Tel: +420 246 042 500
DeloitteCZ@deloitteCE.com
www.deloitte.cz
Registered by the Municipal Court in
Prague, Section C, File 24349
ID. No.:49620592
Tax ID. No.: CZ49620592
Key audit matter Related audit procedures
Allowances for loans and receivables
Refer to Note 3b and Note 13 to the Financial Statements
The assessment of loss allowances for loans and receivables
from customers at amortised cost requires Bank
management to exercise a significant level of judgment,
especially with regards to identifying impaired loans and
quantifying their impairment. To assess the amount of
allowances for expected credit losses, the Bank applies
statistical models with input parameters from internal and
external sources.
In accordance with the requirements of IFRS 9 Financial
Instruments, the Bank distinguishes three stages of
impairment, where the criteria for classification to
individual stages are based on an assessment of the
objective characteristics of loans and the relevant debtors
and subjective judgments of the Bank.
The assessment of classification to impairment stages
includes:
Comparison between given rating at the initial
recognition of the receivable and at each reporting
date;
Absolute factors (such as limits set by related
regulations, 30 days past due etc.);
Other factors with internal relevance for the Bank (e.g.
breach of covenants, impacts of COVID-19 etc.).
Where no repayment difficulties have been identified for
a particular receivable, the Bank creates allowances using
the statistical model for loans (Stage 1). The expected loan
loss allowances are calculated using available historical
data and anticipated future development determined using
macroeconomic indicators. The macroeconomic indicators
were reassessed due to uncertainties related to the COVID-
19 pandemic.
The statistical model used is based on the probability
of default and the estimated amount of the loss given
default. Input data for the model and the calculation logic
and its comprehensiveness depend on the judgment of
Bank management.
Determining the amount of loan loss allowances using
individual assessment (Stage 2 & Stage 3) is based on:
a) Amount and timing of expected future cash flows;
b) Collateral value.
The loan loss allowances for expected credit losses for loans
at Stage 1 and Stage 2 amount to CZK 186 million. The loan
loss allowances for impaired loans at Stage 3 amount to CZK
1,091 million. The total recognised gross amount of loans
and receivables at amortised cost as at 31 December 2020
was CZK 34,469 million.
We assessed the adequacy of the methodology used by
the Bank to identify the material increase in credit risk, loan
impairment and to calculate allowances.
We tested the design of key internal controls management
of the Bank has established over the impairment
assessment processes.
For receivables for which the Bank has not identified any
difficulties likely to prevent the full repayment of
receivables (Stage 1), the testing focused on the correct
classification of receivables to corresponding impairment
stages.
Our credit risk experts assessed the amounts
of allowances for Stage 1 and reviewed the adequacy of
management judgments as regards the probability
of loan default and the estimated amount of loss given
default.
For loan loss allowances at Stage 2 and Stage 3,
the testing included controls related to the creation, regular
client creditworthiness review processes, management
review and approval of the impairment evaluation results.
On a sample of exposures, we evaluated the
appropriateness of the allowance creation methodologies
and their application (including exposures not classified as
impaired by management).
We formed an independent view of the classification
of selected exposures and the required amount of
allowances by examining available external and internal
information, which also included the effects of the COVID-
19 pandemic. This work involved assessing the work
performed by experts used by the Bank to value the
collateral or to assess the estimates of future cash flows.
Key audit matter Related audit procedures
Interest and fee income recognition
Refer to Note 6 and Note 7 to the Financial Statements
For the year ended 31 December 2020, the net interest
income was CZK 780 million and net fee and commission
income was CZK 13 million, the main source being loans and
deposits. These are together with the state subsidy the
main contributors to the net operating income of the Bank
s profitability.
The Bank accounts for the accruals of interest using the
effective interest rate method, with the exception of
penalty interest, interest on hedging and interest on
finance leases.
In determining the effective interest rate, the Bank
estimates cash flows considering all the contractual terms
of the financial instrument but does not consider possible
future credit losses resulting from loan default. The
calculation includes all fees and payments paid or received
between contracting parties that are an integral part of the
effective interest rate, transaction costs, commitment
commissions and all other premiums or discounts. If the
financial asset is reduced due to impairment, interest
income is recognised using the interest rate that was used
to discount cash flows in order to determine impairment.
Fees and commissions, which are not part of the effective
interest rate, are generally recognised on an accrual basis
when the service has been provided. Commitment
commissions for loans that are not likely to be drawn are
recognised as revenue on the date of the maturity of the
liability. Advisory and service fees are recognised based on
the appropriate service contracts, usually on an accrual
basis.
Revenue recognition specifics, a high volume of
transactions which depends on data quality of interest and
fee inputs and on IT solutions for their recording, resulted
in this matter being identified as a key audit matter.
We evaluated the design of the key internal controls and
focused on:
Assessment of interest/fees recognition during new
product validation;
Interest/fee inputs on customer loans and deposits,
including authorisation of the changes in the interest
and fee price list and authorisation of non-standard
interest/fees;
Recording of fee and interest income and management
oversight; and
IT controls relating to access rights and change
management of relevant IT applications with the
assistance of our IT specialists.
We performed the following procedures with regard to
interest and fees revenue recognition:
1) We evaluated the accounting treatment performed by
the Bank in respect of fees charged to clients to
determine whether the methodology complies with
the requirement of the relevant accounting standard
(IFRS 9).
We focused our testing on the correct classification of:
Fees that are identified as directly attributable to
the financial instrument;
Fees that are not identified as directly attributable
to the financial instrument.
2) We evaluated the mathematical formula used for
accruing the relevant income over the expected life of
the loan.
We have analysed the correctness of the recorded
amount of interest income and fee and commission
income using substantive analytical tests. These tests
included the determination of expected volumes of
income based on the observed historical development
over past years and the actual development of the
market, which was compared to the related amount
recorded by the Bank.
Other Information in the Annual Report
In compliance with Section 2(b) of the Act on Auditors, the other information comprises the information included in
the other information.
Our opinion on the financial statements does not cover the other information. In connection with our audit
of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. In addition, we assess whether the other information has been prepared, in all
material respects, in accordance with applicable law or regulation, in particular, whether the other information complies with
law or regulation in terms of formal requirements and procedure for preparing the other information in the context
of materiality, i.e. whether any non-compliance with these requirements could influence judgments made on the basis
of the other information.
Based on the procedures performed, to the extent we are able to assess it, we report that:
The other information describing the facts that are also presented in the financial statements is, in all material respects,
consistent with the financial statements; and
The other information is prepared in compliance with applicable law or regulation.
In addition, our responsibility is to report, based on the knowledge and understanding of the Company obtained in
the audit, on whether the other information contains any material misstatement of fact. Based on the procedures we have
performed on the other information obtained, we have not identified any material misstatement of fact.
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The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with
International Financial Reporting Standards as adopted by the EU and for such internal control as the Board
of Directors determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the !" #"
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but
to do so.
The Supervisory Board is responsible for oversee# !"#! ! #"".
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Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an "#! #" ! $#" #""#
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with the above law or regulation, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
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control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the Board of Directors.
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the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
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## # " #! # ## " "#" in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
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concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
We communicate with the Board of Directors, the Supervisory Board and the Audit Committee regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, the Supervisory Board and the Audit Committee, we determine
those matters that were of most significance in the audit of the financial statements of the current period and are therefore
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about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits
of such communication.
Report on Other Legal and Regulatory Requirements
In compliance with Article 10(2) of Regulation (EU) No. 537/2014 of the European Parliament and the Council, we provide
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of International Standards on Auditing:
Appointment of the Auditor and the Period of Engagement
We were appointed as the auditors of the Company by the General Meeting of Shareholders on 24 April 2017 and our
uninterrupted engagement has lasted for 12 years.
Consistence with the Additional Report to the Audit Committee
We confirm that our audit opinion on the financial statements expressed herein is consistent with the additional report to the
Audit Committee of the Company, which we issued on 26 March 2021 in accordance with Article 11 of Regulation (EU) No.
537/2014 of the European Parliament and the Council.
Provision of Non-audit Services
We declare that no prohibited non-audit services referred to in Article 5 of Regulation (EU) No. 537/2014
of the European Parliament and the Council were provided. In addition, there are no other non-audit services which were
provided by us to the Company and which have not been disclosed in the annual report.
Report on Related Party Transactions Report
We have reviewed the factual accuracy of the information included in the accompanying related party transactions report
'(&'(*'$&$'$'r the year ended 31 December 2020 which is included in this annual report on pages 116 to 121.
)!'(*''($*!'$ '($*("'(*!*!('!'*)('(!!!*%''*)(' $%'*$*#*%'"%'#'(!!!*%'!'to
express our view on the related party transactions report based on our review.
We conducted our review in accordance with Auditing Standard 56 issued by the Chamber of Auditors of the Czech Republic.
This standard requires that we plan and perform the review to obtain moderate assurance as to whether the related party
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personnel and analytical procedures and examination, on a test basis, of the factual accuracy of information, and thus provides
less assurance than an audit. We have not performed an audit of the related party transactions report and, accordingly, we do
not express an audit opinion.
Nothing has come to our attention based on our review that indicates that the information contained in the related party
*$$*!' (*' ' (&' (*' $&$' $' r the year ended 31 December 2020 contains material factual
misstatements.
The Company has decided not to disclose amounts under related party contracts citing business secrecy restrictions.
Report on Compliance with the ESEF Regulation
We have conducted a reasonable assurance engagement on the verification of compliance of the financial statements included
in the annual report with the provisions of the Commission Delegated Regulation (EU) 2019/815 on the European Single
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Responsibilities of the Board of Directors
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The design, implementation and maintenance of the internal controls relevant for the application of the requirements
of the ESEF Regulation;
The preparation of all financial statements included in the annual report in the valid XHTML format;
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Our task is to express a conclusion whether the financial statements included in the annual report are, in all material respects,
in compliance with the requirements of the ESEF Regulation, based on the audit evidence obtained. Our reasonable assurance
engagement was conducted in accordance with the International Standard on Assurance Engagements 3000 (Revised)
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level of assurance; however, it is not a guarantee that the examination conducted in accordance with the above standard will
always detect a potentially existing material non-compliance with the requirements of the ESEF Regulation.
As part of our work, we performed the following procedures:
We obtained an understanding of the requirements of the ESEF Regulation;
/' -+$*)/' $)' )/,+$)*)(' - ' +#/' -%.$)!' *)+/,)$"' -)+,-"s relevant for the application of the requirements
of the ESEF Regulation; and
We identified and evaluated risks of material non-compliance with the ESEF Regulation, whether due to fraud or error.
Based on this, we designed and performed procedures responsive to those risks and aimed at obtaining a reasonable assurance
for the purposes of expressing our conclusion.
The aim of our procedures was to assess whether the financial statements included in the annual report were prepared in
the valid XHTML format;
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.
Conclusion
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all material respects, in compliance with the requirements of the ESEF Regulation.
In Prague on 26 March 2021
Audit firm: Statutory auditor:
Deloitte Audit s.r.o.
registration no. 079
David Batal
registration no.2147
ČESKÁ EXPORTNÍ BANKA, A.S.
>>>
Table of Contents
Key indicators
1. Profile of Česká exportní banka, a.s.
1.1. History and Development of Česká exportní banka, a.s.
1.2. Registered Office and Legal Status of ČEB and Legal Regulations Governing its Activities
1.3. Disclosed Documents
1.4. Additional Information on ČEB
1.5. Administrative, Management and Supervisory Bodies of ČEB and their Committees
1.6. Organisational Structure
1.7. Declaration of No Conflicts of Interest
2. Report of the Board of Directors on the Bank’s Business Activities and its Assets and Liabilities in 2020
2.1. Overview of the Bank’s Business Activity
2.1.1. Export Financing
2.1.2.
Development in the Loan Portfolio Principal Volume and Structure
2.1.3.
Key Markets on which Česká exportní banka, a.s., Operates
2.1.4.
Newly Introduced Products and Activities
2.1.5.
Financial Results, balance of Assets and Liabilities
2.2.
Factors Having an Impact on ČEB’s Business and Financial Position in 2021
3. Narrative Part
3.1. Risks to Which the Bank is Exposed, Objectives and Methods of Risk Management
3.1.1. Credit Risk
3.1.2. Market Risk
3.1.3. Refinancing Risk
3.1.4. Liquidity Risk
3.1.5. Operational Risk
3.1.6. Capital Adequacy Requirements and Capital Requirements Ratios
3.2. Risk Factors Potentially Affecting the Capacity of the Bank to Meet its Liabilities to Investors
Arising from Securities
3.3. Remuneration of Persons with Managing Powers
3.4. Received Income of Directors with Managing Powers in Cash and in Kind for 2019
3.5. Information on Codes
3.6. Description of the Decision-Making Process with Regard to the Bank’s Bodies and Committees
3.6.1. General Meeting
3.6.2. Supervisory Board
3.6.3. Board of Directors
3.6.4. Audit Committee
3.6.5. Credit Committee
3.6.6. Assets and Liabilities Management Committee (ALCO)
3.6.7. Information Technologies Development Committee (ITDC)
3.6.8. Operational Risk Management Committee (ORCO)
3.7. Authorised Auditors
3.8. Court and Arbitration Proceedings
3.9. Contracts of Significance
4. Financial Part
5. Related Party Transactions Report
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117
10
Key indicators
Key indicators Unaudited data
unit 2020 2019
Financial results
1
Net interest income CZK million 780 553
Net fee and commission income CZK million 13 4
Operating income CZK million 127 51
Impairment losses on financial assets not reported at fair
value through P/L (or reversal) CZK million 159 (96)
Total operating costs CZK million (604) (357)
Income tax CZK million (273) 18
Net profit CZK million 164 66
Balance sheet
Total assets CZK million 41,236 43,876
Amounts due from parties other than credit institutions
at amortised cost CZK million 29,278 32,162
Amounts due from credit institutions at amortised cost CZK million 5,191 5,829
Financial liabilities at amortised cost to parties other
than credit institutions CZK million 2,089 2,529
Financial liabilities at amortised cost to credit institutions CZK million 6,614 1,768
Issued bonds CZK million 24,319 31,782
Total equity CZK million 7,322 7,171
Ratios
2
Return on average assets (ROAA) % 0.36 0.13
Return on average equity (ROAE) % 2.30 0.95
Total capital ratio % 106.90 86.19
Assets per employee CZK million 314.78 313.40
Administrative expenses per employe CZK million (1.96) (2.01)
Net profit per employee CZK million 1.25 0.47
Other information
Average headcount employees 137 145
Headcount (as of 31 December) employees 131 140
Guarantees issued CZK million 1,742 1,390
Loan commitments CZK million 2,881 3,373
Rating – long-term payables
Moody’s – Aa3- Aa3-
Standard & Poor’s – AA- AA-
Source: ČEB
ČESKÁ EXPORTNÍ BANKA, A.S.ČESKÁ EXPORTNÍ BANKA, A.S.
1)
Categories including the comparable period are disclosed in accordance with the definitions of the Financial Reporting Standards (FINREP).
Operating income
Net profit/loss from financial operations including state subsidies + Other operating income Source: PROFIT AND LOSS ACCOUNT
Total operating costs
Administrative expenses + Amortisation and Depreciation + Other operating costs Source: PROFIT AND LOSS ACCOUNT
2)
Ratios are published every quarter on the Bank’s website and are calculated based on the formulas stated below:
https://www.ceb.cz/kdo-jsme/povinne-zverejnovani-informace/pravidelne-ctvrtletni-informace2/
The impact resulting from the application of the new IFRS 16 accounting standard on the indicators is insignificant and is based mainly on the
decrease in net profit by CZK 1 million.
Return on average assets (ROAA)
Net profit for the reporting period divided by average total assets.
Average total assets: total of monthly amounts of total assets at the year-end X-1 to year-end X divided by 13.
Return on average equity (ROAE)
Net profit for the reporting period divided by average Tier 1 capital.
Average capital Tier 1: total of monthly amounts of Tier 1 capital at the year-end X-1 to year-end X divided by 13.
Total capital ratio
Capital at the year-end divided by risk exposures at the year-end.
Assets per employee
Total assets for the reporting period divided by average headcount.
Administrative expenses per employee
Administrative expenses for the reporting period divided by average headcount.
Net profit per employee
Net profit for the reporting period divided by average headcount.
1
ČEB’s Profile
12
1.1.
1
The banking licence replaced the permit issued by the Czech National Bank to Česká exportní banka, a.s., based on which ČEB was allowed to
perform its activities as a bank; the permit was issued on 6 February 1995 and the change was made on 27 June 1996.
2
Act No. 256/2004 Coll., on Capital Market Undertakings
1. PROFILE OF ČESKÁ EXPORTNÍ BANKA, A.S.
1
|
Profile of Česká exportní banka, a.s.
History and Development of Česká exportní banka, a.s.
Česká exportní banka, a.s. (hereinafter “ČEB” or the “Bank”) is registered in the Commercial Register maintained by
the Municipal Court in Prague, file No. B 3042. Its primary objective is to support Czech exports as stipulated by Act
No. 58/1995 Coll., on Insurance and Financing of Exports with State Support. The nature of the support has developed
from the simple provision of concessional financing to today’s comprehensive services of supported financing, the
performance of which is conditioned by the ownership of at least 2/3 of the Bank’s shares by the Czech state, as
required by the aforementioned Act. ČEB provides export support through banking services under a banking
licence.
Based on a banking licence issued by the Czech National Bank under Ref. No. 2003/3966/520 dated 19 September
1
2003, amended by the decision of the Czech National Bank under Ref. No. 2003/4067/520 dated 30 September
2003, under Ref. No. 2005/3982/530, dated 16 December 2005, under Ref. No. 2011/141/570 dated 6 January 2011
and under Ref. No. 2013/6197/570 dated 27 May 2013, the principal business activities of ČEB are defined as follows:
(i) Pursuant to Section 1 (1) of Act No. 21/1992 Coll., on Banks
a) Acceptance of deposits made by general public
b) Provision of loans
(ii) Pursuant to Section 1 (3) of Act No. 21/1992 Coll., on Banks
a) Investing in securities on the Bank’s own account, in the following scope:
l
Investing in negotiable securities issued by the Czech Republic, the Czech National Bank and foreign
governments;
l
Investing in foreign bonds and mortgage bonds; and
l
Investing in securities issued by legal entities with registered offices in the territory of the Czech Republicy
c) Payment systems and clearing;
e) Provision of guarantees;
f) Opening of letters of credit
g) Collection services
h) Investment services under special regulation
1
comprising:
l
Major investment services
– In line with Section 4 (2) (a) of the Act on Capital Market Undertakings – receiving and giving instructions on
investment instruments, specifically investment instruments pursuant to Section 3 (1) (d) of this Act;
– In line with Section 4 (2) (b) of the Act on Capital Market Undertakings – implementation of instructions
related to investment instruments on the account of clients, specifically investment instruments pursuant
to Section 3 (1) (d) of this Act;
– In line with Section 4 (2) (c) of the Act on Capital Market Undertakings – trading of investment instruments,
on the Bank’s account, specifically investment instruments pursuant to Section 3 (1) (a) of this Act, with
the exception of shares and other securities representing an equity investment in a company or another
legal entity, specifically investment instruments pursuant to Section 3 (1) (c) and (d) of the Act on Capital
Market Undertakings;
– In line with Section 4 (2) (e) of the Act on Capital Market Undertakings – investment advisory on
investment instruments, specifically instruments pursuant to Section 3 (1) (d) of this Act; and
l
Additional investment services
– In line with Section 4 (3) (a) of the Act on Capital Market Undertakings – escrow and administration
of investment instruments including the relating services, specifically investment instruments pursuant
to Section 3 (1) (a), (c) and (d) of this Act;
– In line with Section 4 (3) (c) of the Act on Capital Market Undertakings – advisory on the capital structure,
industrial strategies and related issues, advisory and services on company transformations and company
transfers.
l) Provision of banking information
m) Trading on the Bank’s own account or on the client’s account in foreign currencies that are not investment
instruments and in gold to the extent of the following:
13
1.2.
l
Trading on the Bank’s own account in foreign bonds;
l
Trading on the Bank’s own account in funds denominated in foreign currencies;
l
Trading on the Bank’s own account or on its clients’ account in negotiable securities issued by foreign governments;
l
Trading on the Bank’s own account or on its clients’ account in monetary rights and obligations derived from
the above-mentioned foreign currencies;
l
Trading on its clients’ account in funds denominated in foreign currencies; and
p) Activities directly related to the activities mentioned in Česká exportní banka’s banking licence.
Summary of Activities the Performance or Provision of which was Limited or Eliminated by the Czech National Bank
during 2020: No activities have been limited or eliminated.
Registered Office and Legal Status of Česká exportní banka, a.s. and Legal Regulations Governing its Activities
Registered office: Vodičkova 701/34, Prague 1, 111 21
Legal status: Joint Stock Company
Corporate ID: 63078333
Telephone: +420 222 841 100
Fax: +420 224 211 266
E-mail: ceb@ceb.cz
Website: www.ceb.cz
The principal Czech legal regulations under which ČEB performed its activities in 2020:
Act No. 110/2019 Coll., on Personal Data Protection;
Act No. 250/2016 Coll., on Liability on Administrative Offences and their Procedures;
Act No. 370/2017 Coll., on Payments;
Act No. 21/1992 Coll., on Banks;
Act No. 280/2009 Coll., Tax Code;
Act No. 190/2004 Coll., on Bonds;
Act No. 235/2004 Coll., on Value Added Tax;
Act No. 253/2008 Coll., on Certain Measures against Money Laundering and Terrorism Financing;
Act No. 69/2006 Coll., on the Implementation of International Sanctions;
Act No. 256/2004 Coll., on Capital Market Undertakings;
Act No. 499/2004 Coll., on Archiving and Record Management;
Act No. 563/1991 Coll., on Accounting;
Act No. 89/2012 Coll., Civil Code;
Act No. 90/2012 Coll., on Business Corporations and Cooperatives (Act on Business Corporations);
Act No. 58/1995 Coll., on Insurance and Financing of Exports with State Support;
Act No. 229/2002 Coll., on the Financial Arbiter;
Act No. 586/1992 Coll., on Income Taxation;
Act No. 589/1992 Coll., on Social Security Contributions and Contributions to the State Employment Policy;
Act No. 592/1992 Coll., on Public Health Insurance;
Act No. 93/2009 Coll., on Auditors;
Act No. 304/2013 Coll., on Public Registers of Legal and Natural Persons;
Act No. 408/2010 Coll., on Financial Collateral;
Regulation (EU) No. 2016/679, General Data Protection Regulation (GDPR);
Regulation (EU) No. 596/2014, on market abuse;
Regulation (EU) No. 575/2013, on prudential requirements for credit institutions and investment firms and related
implementing regulations of the European Commission;
Regulation (EU) No. 648/2012, on OTC derivatives, central counterparties and trade repositories (EMIR); and
Regulation (EU) No. 1233/2011 of the European Parliament and of the Council on the application of certain
guidelines in the field of officially supported export credits.
1.4.
14
1.3.
1. PROFILE OF ČESKÁ EXPORTNÍ BANKA, A.S.
These regulations represent the primary legislative base for ČEB’s activities. In addition to the aforementioned
regulations, ČEB’s activities have to comply with various other decrees, government regulations or implementing
regulations, guidelines and other documents issued by EU bodies.
Disclosed Documents
ČEB’s Articles of Association in Czech are publicly available and the hard-copy version thereof can be inspected
in the Bank’s registered office. The electronic version of the Bank’s Articles of Association in Czech is publicly
available in the Collection of Deeds of the Commercial Register file No. B 3042/SL 186/MSPH of the Municipal Court
in Prague.
On the website of the Commercial Register – Collection of Deeds, the updated version of ČEB’s Articles of Association
is available under the following address: https://or.justice.cz
In addition, ČEB’s website makes publicly available all documents and information on its activities, through which
it meets its informational obligation arising from the relevant legal regulations that the Bank is to follow in performing
its business.
Additional Information on ČEB
ČEB is not a member of any group and has no organisational branch abroad.
Act No. 58/1995 Coll., on Insurance and Financing of Exports with State Support, authorised the Bank to finance
exports with state support in line with international rules of public support applied in financing state-supported
export loans with a maturity period of at least two years (predominantly with the “OECD and WTO Consensus”).
Under Section 8 (1) (b) of Act No. 58/1995 Coll., on Insurance and Financing of Exports with State Support, the state
is held liable for the obligations of ČEB arising from payments of funds received by ČEB and for obligations arising
from other ČEB’s operations on the financial markets.
No specific event that could have a material impact on the evaluation of ČEB’s solvency has occurred since the
last publication of the Annual Report of ČEB as an issuer of securities.
When providing export loans with a maturity period of at least two years, ČEB complies with the rules for assessing
the impacts the financed export projects may have on the environment and human rights of the export destination.
ČEB complies with the procedures set out in OECD Council Recommendation on Common Approaches for Officially
Supported Export Credits and Environmental and Social Due Diligence (2016) providing guidance on the
application of some rules in state-supported export credits. ČEB does not perform any environmental activities on
its own.
ČEB’s employment relations are concluded in line with Act No. 262/2006 Coll., the Labour Code, as amended. They
include employment contracts, agreements to complete a job and agreements to perform work.
Members of the Board of Directors, the Supervisory Board and the Audit Committee perform their functions based
on contracts on holding the office concluded in line with Section 59 et seq. of Act No. 90/2012 Coll., on Business
Corporations and Cooperatives (Act on Business Corporations). ČEB’s regulation base specifies further provisions
on specific areas concerning employment relations and executive functions in its internal policies (statutory norms,
guidelines, internal policies, codes, strategies). These include in particular the following internal policies: ČEB’s
Articles of Association, Work Rules, Employee’s Code of Ethics, Organisation Code, Occupational Health and Safety
and Fire Protection, Remuneration and Work Performance Management, Business Trips and Travel Compensation,
15
Hiring and Selecting Employees, Employee Education Process, Principles of Remuneration of Members of Corporate
Bodies, Summary Principles of Remuneration of ČEB Employees (‘Risk Takers’), Human Resources Management
Principles.
ČEB does not make any research and development investments on its own account. As part of the permitted version
of the product “loan for the funding of export production”, ČEB offers financing possibilities to Czech manufacturers
for introducing new results of research and development into production, i.e. commercialisation of tangible results
of research and development with respect to export. In 2020, this version of the product “loan for the funding of
export production” was not provided. Historically, ČEB records three loans provided under this version of the product
in the aggregate nominal value of the principal of CZK 1.088 billion.
ČEB continues to fully respect the obligations arising for the Czech Republic from the OECD guidelines to combat
bribery of foreign public officials in international business transactions, specifically the “OECD Council Recommendation
on Bribery and Officially Supported Export Credits” (2019). ČEB uses this document as its primary basis when
formulating requirements for exporters and determining procedures to evaluate compliance with the conditions of
fight against corruption in specific export transactions.
In compliance with Section 41 (a) of Act No. 21/1992 Coll., on Banks, ČEB contributes to the system of insurance of
receivables from deposits and contributes to the Deposit Insurance Fund in the scope defined by law. The
contributions to the system amounted to CZK 18,000 in 2020.
ČEB, as a securities trader, is obliged to contribute to the Deposit Guarantee Fund of the Securities Traders in
compliance with Act No. 265/2004 Coll., on Capital Market Undertakings. In compliance with Section 129 (2) of the
Act, the contribution of ČEB amounted to CZK 10,000 in 2020.
Since 2016, ČEB has been obliged to contribute to the Crisis Resolution Fund in compliance with the relevant provisions
of the Act on Recovery and Resolution in the Financial Market (predominantly Sections 209 and 214). The contribution
for 2020 as stipulated by the Czech National Bank amounted to CZK 11,712,192.
Administrative, Management and Supervisory Bodies of ČEB and their Committees
General Meeting – the supreme bank body that decides by the majority of present shareholders in the issues that
are entrusted to its authority by Act No. 90/2012 Coll., and the Bank’s Articles of Association.
Supervisory Board – supervises the performance of the Board of Directors’ activities and the performance of the
Bank’s business activities and presents its opinions to the General Meeting.
The Supervisory Board as of 31 December 2020
Chairman
Ing. Rudolf Rabiňák Substitute member from 27 June 2019 to 17 December 2019
and Chairman from 1 September 2019 to 17 December 2019
(as part of the substitute membership)
Member and Chairman since 18 December 2019
Vice-Chairman
Position vacant
Members
Ing. Miroslav Zámečník since 24 April 2017
prof. PhDr. Petr Teplý, Ph.D. from 23 June 2014 to 23 June 2019,
re-appointed on 24 June 2019
Board of Directors
– as the Bank’s statutory body, manages the operations of the Bank, acts in its name, ensures the
business management including accounting, and takes decisions related to all bank issues unless otherwise
stipulated by law or by regulations defined as competences of the General Meeting or the Supervisory Board. The
Board of Directors makes decisions that may be subject to the Supervisory Board’s additional approval in
accordance with the Bank’s Articles of Association.
Board of Directors as of 31 December 2020 (with changes that occurred during 2020)
Chairman
Ing. Jaroslav Výborný, MBA Member from 1 July 2015 to 1 July 2020
Chairman of the Board of Directors/Chief Vice-Chairman from 22 September 2016 to 26 March 2018
Executive Officer in charge and Chairman from 27 March 2018 to 1 July 2020
of the Export Financing division
Re-elected member since 2 July 2020
Chairman and CEO since 2 July 2020
16
1. PROFILE OF ČESKÁ EXPORTNÍ BANKA, A.S.
1.5.
17
Vice-Chairman
JUDr. Martin Draslar, Ph.D. Member from 15 October 2015 to 22 April 2020
Vice-Chairman of the Board of Directors and Vice-Chairman from 16 August 2018 to 22 April 2020
in charge of the Finance and
Operations division
Ing. Emil Holan Member since 1 August 2018
Member of the Board of Directors, Vice-Chairman since 2 July 2020
in charge of the Risk Management division
Member
Ing. Jiří Schneller Substitute member since 4 August 2020 to 20 December 2020
Member of the Board of Directors Member since 21 December 2020
in charge of the Finance
and Operations division
Audit Committee – set up by a decision of the General Meeting of Česká exportní banka, a.s., held on 10 December
2009 and effective as of 4 January 2010. The Audit Committee focuses mostly on the process of preparing the Bank’s
financial statements, evaluates the effectiveness of the internal controls of the Bank, the internal audit and/or risk
management systems. It monitors the procedure of obligatory audit of the financial statements and recommends
the statutory auditor.
Audit Committee as of 31 December 2020 (with changes that occurred during 2020)
Chairman
Ing. Ladislav Langr Member since 23 November 2014
and Chairman from 10 December 2014 to 23 November 2018,
re-appointed as member and chairman on 19 December 2018
Members
Ing. Radovan Odstrčil from 27 April 2016 to 27 April 2020
re-elected since 29 April 2020
Ing. Stanislav Staněk since 29 April 2019
1. PROFILE OF ČESKÁ EXPORTNÍ BANKA, A.S.
18
Other Decision-Making Bodies of ČEB
Within the scope of its activities, the Board of Directors set up the following decision-making bodies:
Credit Committee – a permanent decision-making and advisory body of the Board of Directors for deciding on and
evaluating all issues related to selected transactions and credit risk management, and the advisory body of the
leading employees of ČEB. The Credit Committee is part of the management and control system of the Bank. Since
1 July 2018, this decision-making body has assumed certain competencies of the Board of Directors, such as
negotiating and approving business cases.
The composition of the Credit Committee in 2020 was as follows:
Chairman of the Credit Committee
Ing. Emil Holan
Member of the Board of Directors
in charge of the Risk Management division
Vice-Chairman of the Credit Committee
Ing. Jaroslav Výborný, MBA
Chairman of the Board of Directors/Chief
Executive Officer in charge of the Export Financing division
Members of the Credit Committee
JUDr. Martin Draslar, Ph.D until 22 April 2020
Vice-Chairman of the Board of Directors,
in charge of the Finance and Operations division
Ing. Jiří Schneller since 4 August 2020
Member of the Board of Directors,
in charge of the Finance and Operations division
Members of the Credit Committee on behalf of Risk Management
Ing. Jiří Soukup
Director of the Loan Analysis section
PhDr. Václav Fišer
Director of the Credit Risk Management section
Members of the Credit Committee on behalf of the Export Financing division
Ing. Tomáš Hadžega
Director of the Export Financing division
Ing. Miloš Welser
Deputy Director of the Export Financing division
19
Assets and Liabilities Management Committee (ALCO)
The Assets and Liabilities Management Committee operates as permanent decision-making and advisory body of the
Board of Directors for deciding on and evaluating all issues related to the management of assets and liabilities,
minimisation of market risks related to banking transactions and operations of Česká exportní banka, a.s. on financial
markets, and as an advisory body for ČEB managers. ALCO is a part of the management and control system of the
Bank.
The composition of ALCO in 2020 was as follows:
Chairman of ALCO
Ing. Jaroslav Výborný, MBA
Chairman of the Board of Directors/Chief Executive Officer
in charge of the Export Financing division
Vice-Chairman of ALCO
Ing. Emil Holan
Member of the Board of Directors, in charge of the Risk Management division
Members of ALCO
JUDr. Martin Draslar, Ph.D. until 22 April 2020
Vice-Chairman of the Board of Directors,
in charge of the Risk Management division
Ing. Jiří Schneller since 4 August 2020
Member of the Board of Directors,
in charge of the Finance and Operations division
Ing. Miloš Welser
Deputy Director of the Export Financing division
Ing. David Franta, MBA
Director of the Treasury section
Ing. Roman Somol, MBA
Head of the Banking Risk Management department
Ing. František Jakub, Ph.D.
Director of the Finance and Accounting section
Information Technologies Development Committee (ITDC)
The Information Technologies Development Committee is a permanent decision-making and advisory body of the
Board of Directors of ČEB dealing with issues in relation to ICT management. ITDC is part of the management and
control system of the Bank.
The composition of ITDC in 2020 was as follows:
Chairman of ITDC
JUDr. Martin Draslar, Ph.D. until 22 April 2020
Vice-Chairman of the Board of Directors,
in charge of the Finance and Operations division
Ing. Jiří Schneller since 4 August 2020
Member of the Board of Directors,
in charge of the Finance and Operations division
Vice-Chairman of ITDC
Ing. Emil Holan
Member of the Board of Directors,
in charge of the Risk Management division
Members of ITDC
Ing. Jan Bukovský
ICT Security Inspector
Ing. Hana Vondráčková
Credit Methodologist
Ing. Petr Jindrák
Director of the Banking IS Development section
Ing. Dagmar Zelisková
Statistics Analyst
Ing. Konstantin Jech from 1 January 2020 to 31 October 2020
Director of Banking IS Operations section
1. PROFILE OF ČESKÁ EXPORTNÍ BANKA, A.S.
20
21
Operational Risk Management Committee (ORCO)
The Operational Risk Management Committee is a permanent decision-making and advisory body of the Board of
Directors. Makes decisions and evaluates operational risks including all areas related to the information security
management of ČEB; and advisory body of the leading employees of the Bank. ORCO is part of the management and
control system of the Bank.
The composition of ORCO in 2020 was as follows:
Chairman of ORCO
Ing. Emil Holan
Member of the Board of Directors,
in charge of the Risk Management division
Vice-Chairman of ORCO
JUDr. Martin Draslar, Ph.D. until 22 April 2020
Vice-Chairman of the Board of Directors,
in charge of the Legal and Operations division
Ing. Jiří Schneller since 4 August 2020
Member of the Board of Directors,
in charge of the Finance and Operations division
Members of ORCO
Ing. Roman Somol, MBA
Head of the Banking Risk Management department
Ing. Miloš Welser
Deputy Director of the Export Financing division
Ing. František Jakub, Ph.D.
Director of the Finance and Accounting section
Mgr. Ondřej Zemina
Head of the Compliance department
Ing. Konstantin Jech, from 1 January 2020 to 31 October 2020
Director of Banking IS Operations section
22
1. PROFILE OF ČESKÁ EXPORTNÍ BANKA, A.S.
Organisational Structure of Česká exportní banka, a.s 1.6.
Banking System
Operations/4020
Facility/4021
Business Adminstration/4030
Internal Audit/0400
Risk Management/2000
Member of the Board
Enterprise Risk
Management/2010
Credit Analysis/2040
Restructuring and Debt
Recovery/1020
Accounting/4042
Export Financing/3000
Head of the Division
Export Financing I/3010
Export Financing II/3020
Trade Finance /3050
Human Resources/0120
Corporate Secretary/0101
International Relations
and Communication/0130
Procurement/0150
CEO Division/0100
Chairman of the Board
Treasury/0160
Finance/4041
Legal/0140
Payment/4002
Finance and Accounting/4040
Banking System
Development/4010
Credit Risk Management/2020
Finance and Operations/4000
Member of the Board
The Audit Committee
Supervisory Board
Board of Directors
Compliance/0500
l Division l Department l Department Organisational structure of Česká exportní banka, a.s. valid from 1 February 2021
ICT Security/4003
23
1.7. Declaration of No Conflicts of Interest
The members of the Bank’s bodies, committees and councils declare that:
(a) They have not abused their position in the Bank or the information that they had in place to gain profit that
could not otherwise have been gained, either for themselves or for other persons;
(b) They have not concluded any transactions using the investment instruments of the Bank’s clients on their own
account or on the account of a person closely related to them;
(c) They have not provided instructions or recommendations to other persons related to the transactions with
investment instruments of the Bank’s clients that could be used by the persons in trading with the investment
instruments on their own account; and
(d) They have avoided all activities that may potentially expose them to a conflict of interest.
2
Report of the
Board of Directors
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
Overview of the Bank’s Business Activity
2.1.1. Export Financing
Export financing realised through products introduced in accordance with the definitions set by Act No. 58/1995
Coll., on Insurance and Financing of Exports with State Support and on Additions to Act No. 166/1993 Coll., on the
Supreme Audit Office, as amended (Act No. 58/1995 Coll.), represents ČEB’s key business activities. The long-term
strategy of ČEB is to use its supported financing products to fill the market gap in export financing identified by
Czech companies as applicants for supported financing in their roles of manufacturers for export, exporters or
outbound investors. The nature of the demand of Czech export-oriented companies in 2020 was significantly
affected by the impacts of the COVID-19 pandemic, and in line with its role, ČEB provided maximum possible
support in a situation that brought about new, unexpected challenges for Czech companies.
Growth of global trade slowed down significantly already in 2019, primarily due to the business tensions between
the USA and China. 2020 was an exceptionally difficult year due to the global COVID-19 pandemic and its
economic impacts on national economies as well as international trade. The World Trade Organization (“WTO”)
expects that the COVID-19 pandemic will cause an unparalleled decline in global trade, additionally anticipating
unfavourable consequences of the COVID-19 pandemic for globalisation within the timeframe of several years.
As a result of the pandemic, there has been an unprecedented disruption of national and international supplier-
customer relations, growth in uncertainty of domestic and foreign companies regarding further development,
leading to conservative postponement of decisions regarding further investments. Significant restrictions in the
area of international travel decreased the possibility of face-to-face meetings, which are of an essential importance
when negotiating export orders of large volumes, affecting the number of concluded export contracts for which
ČEB’s loan and guarantee products are usually provided as part of the state support of export.
In order to mitigate the impact of COVID-19 on national economies and business entities, governments adopted
many supporting measures and started a range of programmes. The Czech government reacted to the first wave
of the pandemic by various economic measures in the form of COVID guarantee programmes implemented by
Českomoravská záruční a rozvojová banka, a.s., to support the stabilisation of companies, and with respect to
export-oriented companies through the guarantee programme COVID PLUS, provided to commercial banks by
Exportní garanční a pojišťovací společnost, a.s. (“EGAP”). ČEB was not part of these programmes and its role in 2020
remained unchanged, i.e. the support of Czech export-oriented companies through guarantee and loan products
strictly tied to the existence of a specific export contract, as stipulated by the current wording of Act No. 58/1995 Coll.
ČEB therefore responded primarily to the current needs of Czech export-oriented companies in the area of ensuring
liquidity to carry out projects already underway, stabilising their cash flows and obtaining new export contracts.
ČEB attentively evaluated and continues to evaluate the impacts of the COVID-19 pandemic on the Czech and
international economic situation in the context of the needs of Czech manufactures for export, exporters and
investors to other countries and the possibilities of their support, as well as in terms of possible effects on the quality
of the Bank’s portfolio. ČEB provides its products while applying a non-discriminatory and non-preferential policy
with respect to Czech applicants for supported financing, in combination with a conservative policy of assessing
the creditworthiness of entities and the risks of transactions, industries and territories as well as their limits.
Despite the existing restrictions in face-to-face communication, ČEB kept in touch with Czech export-oriented
companies in relation to their prepared export plans. Communication with clients took place by phone or via the
Webex application. ČEB representatives regularly participated in specialised online conferences, whose objective
in 2020 was to help exporters obtain and carry out new deals in the new conditions, as part of the continued 2019-2030
innovation strategy of the Czech Republic, Czech Republic – The Country for the Future.
Despite the completely new conditions in international trade in 2020, ČEB continued to fulfil the Strategy of Česká
exportní banka, a.s. for 2019-2020.
2.1.
2
|
Report of the Board of Directors on the Bank’s Business
Activities and its Assets and Liabilities in 2020
25
The high added value of ČEB for Czech exporters lies in its ability and readiness to provide consultations on export
contracts under preparation in an above-standard scope and quality, which was especially beneficial in 2020 for
the users of the system of state support for export. Based on the requirements of Czech export-oriented companies,
ČEB prepared dozens of indicative offers to support their acquisition negotiations. The issued indicative offers of
financing by ČEB as a Czech state financial institution increase the credibility of Czech exporters when negotiating
with their potential foreign customers in a situation where limited/non-existent international travel makes it
impossible for Czech companies to present themselves to potential customers in person. The number of offers
issued by ČEB has to be seen primarily as an exceptional success of Czech exporters, who obtained the trust and
interest of foreign customers in Czech products in the difficult conditions of 2020. In terms of commodities, they
concerned various types of engineering products, from tractors to food processing technologies to defence industry
products.
The impacts of the COVID-19 pandemic have been and still are noticeable also in the slower responsiveness of the
counterparties, which are affected by similar impacts as companies in the Czech Republic, meaning that they
respond to Czech exporters and to ČEB with significant delays. Until the measures related to the pandemic have
subsided, no significant change in this attitude can be expected. The impacts were already felt in the course of
2020 in relation to Czech exporters’ business opportunities in progress, where decisions about the realisation of
large-volume projects had to be postponed as a result of changed priorities and delays in decisions on investment
plans of foreign customers. For this reason, ČEB provided no export customer loan in 2020, which is a unique
situation in the Bank’s history.
The concurrence of the aforementioned effects of the COVID-19 pandemic was markedly reflected in ČEB’s overall
results for 2020 in the volume of export financing and in the number and type of provided guarantee and loan
products to support Czech manufacturers for export and exporters. ČEB’s task in 2020 was to provide support to
Czech manufacturers for export and exporters in resolving three key problems related to the COVID-19 impacts:
l
Ensuring liquidity to carry out projects in progress;
l
Speeding up the collection for completed supplies with a positive impact on the companies’ cash flows; and
l
Obtaining/realising contracts under negotiation.
Accelerated collection from completed supplies was achieved using the “purchase of receivables” and “direct export
supplier loan” products. ČEB’s support in obtaining/realising export contracts under negotiation in a very
complicated situation was provided through the “guarantee” (the value of the realised export then corresponds
to a multiple of the guarantee provided) and “loan for the funding of export production” products.
ČEB supported Czech manufacturers for export and exporters through a total of 90 products, which is 11.1% more
than in 2019, even though the volume of the provided supported financing products reached a historically low
value of CZK 988.92 million (figure 1), which is 73.65% less than in 2019.
26
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
Volume of signed contracts between 1996 and 2020 (CZK million) | Figure 1
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
8,702
5,813
2,770
15,413
19,213
27,736
15,626
9,813
17,281
19,164
19,933
19,415
20,513
25,109
43,787
25,766
26,249
10,049
4,039
4,299
5,609
989
3,752
2,025
8,519
Source: ČEB
27
To assess ČEB’s overall results, it is important to take into account not just the volume of new products of supported
financing, but also the total volume of transactions, after considering transactions realised through the syndication
products with ČEB’s participation in cooperation with the commercial banking sector. Of the total volume of
ČEB’s new supported financing products in 2020, approximately 11.78% represent ČEB’s risk sub-participation in
a large-volume advance payment guarantee provided in line with ČEB’s strategy in cooperation with the Czech
commercial banking sector.
Taking into account the volume of supported financing both in the form of ČEB’s bilateral transactions and the
total volume of supported financing implemented with the participation of ČEB in the banking club, the total
volume of supported financing with the involvement of ČEB was CZK 1,105.37 million.
The result for 2020 in respect of the number of Czech companies served was affected by the aforementioned
negative influences, with 18 Czech companies provided with support as applicants for supported financing, which
represents a return to 2014-2017 levels. Compared to the successful year 2019, this is a decrease of 37.93%.
The Bank’s transactions comprising insurance from Exportní garanční a pojišťovací společnosti, a.s. (hereinafter
“EGAP”) represent approximately 16.92% of the volume of ČEB’s new products and 34.44% of the number of newly
concluded contracts.
The Czech crown equivalent of the total volume drawn from loan contracts and purchased receivables amounted
to CZK 2,168.05 million in 2020.
In 2020, the Bank continued the traditional support of small and medium-sized enterprises (SME), which prioritises,
in addition to the financing and issuing of guarantees, primarily the provision of comprehensive support to business
entities. A significant role is played not only by the numbers and volumes of transactions, but also advisory in
structuring and carrying out export orders or supplies of manufacturers from the SME segment as sub-suppliers for
large Czech exporters. The importance of ČEB’s expert support as well as financing and guarantees for SMEs grew
further during the period affected by the COVID-19 pandemic.
During 2020, 42 new loan and guarantee agreements were concluded for the support of exporters and manufacturers
from the SME segment in the total volume of approximately 356.38 million.
Compared to 2019, support to Czech SMEs decreased by approximately 78.43% in 2020 in terms of the volume of
contracts, the number of contracts accounted for 63.64% of the result of 2019. Of the 42 transactions for SMEs,
transactions comprising EGAP insurance accounted for approximately 7.14% (39.32% in terms of the volume of
transactions), while transactions without EGAP insurance accounted for 92.86% (60,68% in terms of the volume of
transactions).
The number of contracts supporting SMEs accounts for 46.67% of the total number of 90 new contracts concluded
to support manufacturers for export and exporters in 2020 (Figure 2) and for 36.04% of their total volume (Figure 3).
Proportion of the number of contracts with SMEs and contracts with large entities concluded in 2020 | Figure 2
l 53.33% Large entities
l 46.67%
SMEs
Source: ČEB
Proportion of the volume of contracts with SMEs and contracts with large entities concluded in 2020 | Figure 3
l 63.96% Large entities
l
36.04%
SMEs
Source: ČEB
The remaining 53.33% of the number of contracts signed with the total volume amounting to CZK 632.54 million
relates to 48 new loan and guarantee transactions concluded to support manufacturers for export, exporters and
investors from the Mid Cap and Large Entities segments. Of these 42 transactions, transactions comprising EGAP
insurance accounted for 58.33% (4.3% in terms of the volume of transactions), while transactions without EGAP
insurance accounted for 41.67% (95.70% in terms of the volume of transactions).
The ČEB’s strategic focus is the provision of supported financing products relating to the financing of the Czech
export of goods, services and capital to countries that are of export interest to Czech exporters and outbound
investors, within the market gap of ČEB identified by exporters and investors. These include financing and
guarantees with an acceptable risk profile, to countries with higher and high territorial risk as well as low territorial
risk, every year always depending on the demand of Czech exporters and investors in relation to the direction of
their export contracts and investment plans.
The support of ČEB to Czech exporters in the successful realisation of their export contracts, which they were able
to obtain and carry out in conditions affected by the COVID-19 pandemic, results in a rather wide range of export
target countries in 2020, specifically 20 territories (Table 1).
In terms of the number of contracts, the structure of the products provided (Figure 4) shows a substantial proportion
of products supporting accelerated collection form completed supplies, thanks to which the dominant product in
frequency terms is the purchase of receivables, accounting for 58.89%, in combination with direct export supplier
loans, accounting for 12.22%.
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
28
Table 1
Share of export target countries by volume of new contracts concluded in 2020
Saudi Arabia 38.47%
Ghana 12.49%
Senegal 11.78%
Germany 10.40%
United States of America 8.42%
Iraq 4.81%
Russia 3.27%
Slovakia 3.19%
Ukraine 2.28%
Rwanda 1.84%
Israel 1.00%
Spain 0.34%
Turkey 0.29%
Egypt 0.28%
Netherlands 0.26%
Chile 0.24%
Mexico 0.22%
Malaysia 0.22%
Sweden 0.12%
Srí Lanka 0.07%
Source: ČEB
29
The dominant products in the structure of provided products in terms of volume (Figure 5) in 2020 were guarantees
with a share of 48.71%, which reflects the increased need of Czech exporters for ČEB’s support when obtaining
new contracts, as guarantees play an important role in the structure of export contracts. Products ensuring cash flow
support in the realisation of export projects (product: loan for the funding of export production) or accelerated
collection on completed export projects (product: purchase of a receivable, export supplier loan) represented
39.52% of the total volume in aggregate. 11.78% relates to ČEB’s 50% share in an advance payment guarantee for
exporters with respect to supplies to Senegal in the form of risk sub-participation for a banking institution from the
Czech Republic.
In terms of currency structure (Figure 6), the dominant currency in 2020 was EUR with the share of 90.72% followed by
USD with the share of 9.28%.
Share of the products of supported financing in the number of product provided in 2020 | Figure 4
l 58.89%
Purchase of a receivable
l 22.22% Guarantee
l 12.22%
Direct export supplier loan
l 5.56% Loan for the funding of export production
l 1.11%
Non-payment participation
Source: ČEB
Share of products of supported financing in the volume of products provided in 2020 | Figure 5
l 48.70% Guarantee
l 18.81%
Purchase of a receivable
l 13.82% Loan for the funding of export production
l 11.78%
Non-payment participation
l 6.89%
Direct export supplier loan
Source: ČEB
Currency structure of new transactions volume in 2020 | Figure 6
l 90.72%
EUR
l 9.28% USD
Source: ČEB
Year-on-year comparison of the development in the number of new contracts by products | Figure 8
60
50
40
30
20
10
0
Direct export
customer
loan
Loan for the
funding of
export
production
Purchase of
a receivable
Guarantee Direct export
supplier loan
Loan for
outbound
investments
Payment
participation
Letter of
credit
l 2019 l 2020 Number of concluded contracts Source: ČEB
02
38
53
11
5
11
23
20
2
0
30102
The year-on-year comparison (Figure 7) shows a noticeable decrease in volumes of the provided products in all
product types compared to 2019, the reasons for which are described in the commentaries and reflect the
development of the demand of Czech manufactures for export and exporters for products related to obtaining
new export contracts and stabilising cash flows. As stated above, the fact that no customer loan appears among
the provided products is historically exceptional.
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
30
Year-on-year comparison of the development in the volume of new products (CZK million) | Figure 7
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Non-payment
guarantee
Purchase of
a receivable
Direct export
supplier
loan
Direct export
customer
loan
Loan for
the funding
of export
production
Loan for
outbound
investments
Non-
payment
participation
Letter of
credit
l 2019 l 2020 Source: ČEB
481.68
170.20
8.69
68.14
10.95
186.02
136.63
821.82
0.00
5.63
0.00
1,628.66
0.00
116.45
0.00
1,106.41
31
2.1.2. Development in the Loan Portfolio Principal Balance and Structure
The total principal amount of provided loans and purchased receivables decreased year-on-year by CZK 7,125 million
to CZK 30,644 million, i.e. by 18.86%, as of 31 December 2020 (Figure 9).
As of 31 December 2020, the total principal amount of provided loans and purchased receivables represented 74% of
total assets..
In respect of the principal structure of provided loans by contractual currency, loans denominated in EUR represent
86.62% (2019: 91.03%), loans provided in USD represent 11.36% (2019: 6.28%) as of 31 December 2020 (Figure 10). The
portion of loans provided in CZK recorded only a slight year-on-year decrease to 2.02% (2018: 2.69%).
.
The total principal amount of loans provided in EUR as of the end of 2020 decreased year-on-year by approximately
EUR 341.6 million to a total of EUR 1,011 million, ie by 25.2%. Apart from continuous payment of loans and drawing of
new loans, the decrease was influenced by the write-off of receivables upon the receipt of insurance benefits or as
part of collection of high-risk receivables.
l Loan balance (principal) Source: ČEB
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Loan (balance) principal in 1996-2020 (CZK milion) | Figure 9
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
7,732
8,481
12,642
3,675
18,721
18,106
18,970
22,222
20,241
21,071
17,797
23,824
32,348
40,797
56,968
68,523
66,219
86,072
82,363
79,933
71,083
46,060
30,644
37,769
54,440
Loan portfolio – structure by currency – proportion development | Figure 10
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
2007/3
2007/6
2007/9
2007/12
2008/3
2008/6
2008/9
2008/12
2009/3
2009/6
2009/9
2009/12
2010/3
2010/6
2010/9
2010/12
2011/3
2011/6
2011/9
2011/12
2012/3
2012/6
2012/9
2012/12
2013/3
2013/6
2013/9
2013/12
2014/3
2014/6
2014/9
2014/12
2015/3
2015/6
2015/9
2015/12
2016/3
2016/6
2016/9
2016/12
2017/3
2017/6
2017/9
2017/12
2018/3
2018/6
2018/9
2018/12
2019/3
2019/6
2019/9
2019/12
2020/3
2020/6
2020/9
2020/12
l CZK l
USD l
EUR
Source: ČEB
Table 2
(in CZK mil.) 2019 2020
Total ČEB Share Total ČEB Share
banks of ČEB banks of ČEB
Total balance sheet assets 7,621,841 43,876 0.58% 8,018,098 41,236 0.52%
Source: ČEB and the Czech National bank
Loan portfolio – broken down by contractual maturity as of 31 December 2020 | Figure 11
l 97.73%
long-term (more than 5 years)
l 1.30% mediu
m-term (4-5 years)
l 0.54%
medium-term (2-4 years)
l 0.15%
medium-term (1-2 years)
l 0.28%
short-term (up to 1 year)
Source: ČEB
By contrast, the total principal amount of loans provided in USD by the end of the same period increased by USD 57.9
million to a total of USD 162.7 million, ie by 55.2%.
The total principal amount of loans provided in CZK as of the end of 2020 amounted to CZK 619.3 million, representing
a year-on-year decrease of CZK 398.4 million, ie by 39.1%.
In respect of the contractual maturity of loans, the breakdown of loan principal amounts remained almost the same
from a year-on-year perspective. This parameter is influenced by two factors: the type of exported goods financed by
the Bank and the length of maturity periods that are common on international markets. The loan portfolio structure
by loan maturity, which consists of the set of products used in financing transactions, is based on both of the factors
stated above and reflects a high degree of financed export of machinery and asset groups with long maturities
(Figure 11).
2.1.3. Key Markets on which Česká exportní banka, a.s., operates
a) The Bank’s Position in the Local Banking Sector
Compared to other banks operating in the Czech banking sector, ČEB is considered by the Czech National Bank a small
size bank. ČEB’s share of the total balance sheet assets of banks in the Czech Republic decreased year-on-year.
During 2020, the share dropped from 0.58% to 0.52%. The decrease is consistent with the Bank’s focus on the support
of exporters upon entry to new markets and export in sectors that are not easy to be financed by commercial banks.
In addition, management of the Bank continues its efforts to increase the quality of the loan portfolio.
32
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
33
The Bank’s role within the Czech banking sector is, compared to commercial banks, specific, predominantly for the
following reasons:
l
ČEB’s position in the area of supported financing is stipulated by Act No. 58/1995 Coll., on Insurance and Financing
Exports with State Support. The Act determines the supported financing methods offered by ČEB including the
provision of financial services related to exports under the conditions stipulated by this Act. In comparison with
commercial banks, the range of activities performed by ČEB is very narrow in terms of both the products provided
and their specifics and from the viewpoint of ČEB’s clients.
l
Export financing can be used by entities applying for supported financing that have a registered office in the
Czech Republic or, in the event of re-financing loans, their local banks. In addition, these exporters have to be
able to sell their goods on international markets, prevailing over their competitors through the high quality of
product and timeliness of delivery. In respect of pricing, ČEB offers financing of exports under the conditions set
out by international treaties (“OECD Consensus”) based on CIRR.
l
The Czech Republic accepted the commitment to finance exports of Czech exporters in line with international
rules, principally the OECD Consensus which stipulates the provision of medium-term and long-term export loans.
For this reason, the financing of export loans under the OECD Consensus is naturally the core segment of ČEB’s
activities. Financing of other loan types is offered by ČEB under commercial conditions.
Information on ČEB’s position in the local banking sector can be obtained from the statistical data on client loans
published by the Czech National Bank. These are compared with the nominal values of loans provided by ČEB. This
information demonstrates the fact that due to ČEB’s specific position of a dominant bank engaged in export financing,
its position on the Czech banking market is in many aspects a lot more significant than what can be inferred from the
Bank’s share in the total balance assets of all banks in the Czech Republic.
Development in the share of ČEB in the Czech banking sector (assets in 1996 = 100%) | Figure 12
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
l Total development of bank assets l Development of ČEB’s assets l Share of ČEB’s assets in total bank assets
Source: ČEB and the Czech National Bank
1,900%
1,700%
1,500%
1,300%
1,100%
900%
700%
500%
300%
100%
2.0%
1.8%
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
34
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
Table 5
2019 2020
Client loans to non-residents – by purpose Banks ČEB ČEB Banks ČEB ČEB
(in CZK’mil.) total share total share
Total in CZK + foreign currency, only non-residents ČNB ČEB ČNB ČEB
ARAD statements ARAD statements
Balance of non-resident loans and receivables
(all currencies) 319,830 36,466 11 .4 % 345,658 29,625 8.6%
Of which total other loans 276,828 36,466 13.2% 298,500 29,625 9.9%
Of which investment 116,670 1,497 1.3% 129,538 1,555 1.2%
Total current assets, seasonal costs,
export, import 85,453 34,903 40.8% 73,991 28,030 37.9%
Total other loans (financial
úand special purpose) 49,537 – 0.0% 46,360 – 0.0%
Total trade receivables 2,042 66 3.2% 2,364 41 1.7%
Source: ČEB
Table 3
2019 2020
Client loans – by maturity Banks ČEB ČEB Banks ČEB ČEB
(in CZK’mil.) total share total share
ČNB ČEB ČNB ČEB
ARAD statements ARAD statements
Balance of client loans and receivables 3,450,284 37,652 1.1% 3,595,598 30,469 0.8%
Of which in CZK 2,778,366 1,018 0.0% 2,874,037 619 0.0%
Of which short-term loans (up to 1 year) 247,856 1 0.0% 228,694 – 0.0%
Medium-term loans (1–5 years) 286,260 260 0.1% 288,685 – 0.0%
Long-term loans (over 5 years) 2,250,501 757 0.0% 2,356,659 619 0.0%
Of which in foreign currency 671,919 36,634 5.5% 721,561 29,850 4.1%
Of which short-term loans (up to 1 year)) 119,611 49 0.0% 140,127 82 0.1%
Medium-term loans (1–5 years) 183,356 319 0.2% 194,085 438 0.2%
Long-term loans (over 5 years) 368,952 36,266 9.8% 387,349
29,330 7.6%
Source: ČEB
Table 4
2019 2020
Client loans to residents – by purpose Banks ČEB ČEB Banks ČEB ČEB
(in CZK’mil.) total share total share
Total in CZK + foreign currency, only residents ČNB ČEB ČNB ČEB
ARAD statements ARAD statements
Balance of resident loans and receivables
(all currencies) 3,130,454 1,186 0.0% 3,249,940 844 0.0%
Of which total other loans 1,223,965 1,186 0.1% 1,255,843 844
0.1%
Of which investment 766,061 153 0.0% 786,390 144 0.0%
Total current assets, seasonal
costs, export, import 309,364 1,025 0.3% 308,037 695 0.2%
Total other loans (financial
and special purpose) 91,068 4 0.0% 96,455 4 0.0%
Total trade receivables 22,588 4 0.0% 25,981 – 0.0%
Source: ČEB
35
b) Breakdown of Czech export and the Bank’s state support in 2020 by territory
GDP and export
The year 2020 saw continuous growth of exports, which continues to be a very significant component in generating the
gross domestic product.
Export increased in absolute terms in 2020 only with respect to the Czech Republic’s neighbouring countries and CIS
countries, all other monitored groups of countries recorded a decrease or no change in export volume.
Based on the analysis of the Czech exporters’ performance with regard to the target countries whose share of the
aggregate Czech exports exceeds 1%, it should be noted that only minimal year-on-year changes occurred.
Indonesia, Ukraine, Ghana and Slovakia are the countries that constitute more than a 90% share of the total drawing
of all loans provided by ČEB. The share of these countries in the Czech Republic’s total exports was nearly 9%.
Table 6
Exports of the Czech Republic Share in exports of the
in CZK billion Czech Republic
2019 2020 2019 2020
Neighbouring countries 2,266 2,242 49.7% 50.6%
EU 15 countries 2,874 2,777 63.0% 62.6%
EU 28 countries 3,841 3 ,703 83.6% 83.5%
CiS countries 123 124 2.7% 2.8%
European transitory economies 27 24 0.6% 0.5%
Developing economies 177 171 3.9% 3.9%
Other advanced market economies 232 227 5.1% 5.1%
Source: Czech Statistical Office
Export – significant component of GDP | Figure 13
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
l Export of goods in CZK billion l GDP in CZK billion, at regular prices (forecast) l Share of export in GDP (in %)
Source: Czech Statistical Office, Ministry of Finance
6,000
5,000
4,000
3,000
2,000
1,000
0
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
61.1% 64.6% 61.6% 54.5% 64.1% 71.4% 75.7% 77.7% 86.5% 85.3%
82.6%
78.5%
81.6%
83.3%
2,144
3,507
2,476
2,474
4,015
2,139
2,533
3,954
2,870
4,022
4,048
3,063
3,175
4,086
3,889
4,495
3,973
4,657
84.8%
3,617
4,266
3,922
3,832
4,202
5,042
4,391
5,313
4,563
5,590
4,436
5,652
Risk rate by OECD (1 – lowest risk, 7 – greatest risk)
2.1%
10.1%
0.2%
2.1%
71.8%
3.5%
Not
classified
EU
1
2
3
Comparison of the Structure of the Czech Republic’s Export and ČEB’s Loan Drawing in 2020 by Export
Destination Country Risk Classification (OECD Classification as of 31 December 2020) | Figure 14
1.3%
3.3%
4
5
13.9%
1.2%
6
l ČEB loan drawing l
Czech Republic’s export
Source: ČEB, Czech Statistical Office and OECD
7.8%
77.1%
2.8%
2.1%
0.0%
0.4%
7
0.0%
0.1%
The Country Risk Classification published by the OECD remains important for the activities of the Bank. The structure
of the loan portfolio documents how the Bank fulfils its mission to finance exports mainly to the countries with medium
and high territorial risk, which are not a group of countries primarily targeted by export financing provided by
commercial banks.
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
36
Table 7
Countries with a share Czech Republic’s Czech Republic’s
Year-on-year changes in the
.
in the Czech Republic’s exports in 2019 exports in 2020 share in the Czech Republic’s
exports over 1% in 2019 in % in %
exports 2020
Germany 31.8 32.6 0.8
Slovakia 7.6 7.6 0.0
Poland 6.0 6.2 0.2
United Kingdom 4.5 4.0 (0.5)
France 5.1 4.7 (0.4)
Austria 4.3 4.2 (0.1)
Italy 3.8 3.9 0.1
Netherlands 3.8 4.1 0.3
Hungary 3.3 3.3 0.0
Spain 3.2 2.6 (0.6)
USA 2.3 2.4 0.1
Russian Federation 2.2 2.2 0.0
Belgium 2.1 2.1 0.0
Sweden 1.6 1.6 0.0
Romania 1.5 1.6 0.1
Switzerland 1.5 1.6 0.1
China 1.2 1.4 0.2
Denmark 1.0 1.1 0.1
Turkey 1.0 1,.2 0.2
Source: Czech Statistical Office
37
Situation on Financial Markets – Opportunities to Obtain Funding
To raise funds, the Bank uses the Euro Medium Term Note Programme (hereinafter the “EMTN Programme”) along with
interbank loans, which are intended for obtaining funds exceeding one year. For a short-term financing up to one year,
the Bank uses the Euro Commercial Paper Programme (hereinafter the “ECP Programme”). All options are combined
in order to always provide the Bank with sufficient funds in a convenient structure to secure its offer of financing to
Czech exporters and to settle its liabilities on a continuous basis. In addition to the required financing time, the current
situation on financial markets is taken into account.
The EMTN Programme currently amounts to EUR 4 billion and is used to refinance maturing previously obtained funding
and to cover new loans denominated in EUR, USD and CZK. In total, CZK 24.3 billion (EUR 0.9 billion) was drawn under
the EMTN Programme as of 31 December 2020. ČEB’s bonds are listed on Luxembourg Stock Exchange. A list of
individual traded and outstanding issues of ČEB’s bonds as of 31 December 2020 is disclosed in the notes to the
financial statements.
Long-term resources were obtained in 2020 through interbank loans and term deposits from clients. The Bank received
an amortised loan from Komerční banka, a.s. in the amount of USD 80 million due in 2028, and a loan repayable in
a single instalment due in 2024 from UniCredit Bank Czech Republic and Slovakia, a.s. in the amount of EUR 150 million.
In addition, the Bank received USD 80 million in the form of several term deposits maturing in 2021–2023.
In order to optimise liquidity management, in 2011 the Bank established the ECP Programme for the issuance of
short-term securities which was updated in the course of 2016. The credit facility remains at EUR 400 million. This
programme allows for very flexible coverage of short-term liquidity needs of the Bank using favourable price conditions
on the market. In 2020, two issues of such short-term bonds were placed by the Bank.
To increase the degree of diversity and prevent the dependence on limited funding resources, to a certain degree
the Bank increases the resources of funding by deposits received from other banks and its own clients. Through such
diversification, the Bank’s flexibility is secured. Moreover, the Bank’s dependency on a single type of funding resource
is limited. In this respect the Bank gradually assesses the liquidity risk, principally by monitoring the changes in the
funding structure.
The rating of ČEB and most of its issued bonds is set by Standard & Poor's Credit Market Services Europe Limited and
Moody's Investors Service Ltd on a contractual basis. ČEB acknowledges that both agencies are rating agencies
registered in accordance with Regulation (EC) 1060/2009 on credit rating agencies as amended by Regulation (EC)
No. 462/2013. The Bank decided not to authorise any rating agency with a market share below 10% to perform its
rating assessments. ČEB discloses information on the current rating of the bonds issued by it on its website. As of
31 December 2020, the Bank’s outstanding bonds have the following ratings:
2.1.4. Newly Introduced Products and Activities
ČEB’s mission, in compliance with the objectives of the economic policy of the Czech Republic, is to strengthen the
internationalisation of Czech companies and the competitiveness of Czech export. For this reason, ČEB offers products
and services to exporters and suppliers for export that allow them, under the rules of the OECD Consensus, to be part
of the competition for specific orders on the international market under the conditions comparable to those of foreign
competitors from OECD countries. The Bank offers products and services to Czech outbound investors that allow for
the internationalisation of their business activities through investments on international markets.
Table 8
Standard & Poor's Moody's
Foreign currency – long-term payables AA- Senior unsecured debt Aa3
Local currency – long-term payables AA Issuer’s rating Aa3
Short-term payables A-1+ Short-term payables P-1
Outlook stable Outlook stable
Source: ČEB
ČEB’s product palette is derived primarily from the provisions of Act No. 58/1995 Coll., on Insurance and Financing of
Exports with State Support. The discussion of the proposed amendment to Act No. 58/1995 Coll., presented to the
Chamber of Deputies of the Parliament of the Czech Republic in February 2020, may be seen as essential for the
further development of supported financing instruments and insurance of export credit risks. The objective of these
efforts is to improve the product offer to the level obtained by national exporters in the product offer of advanced
foreign Export Credit Agencies (ECA) from OECD countries and consequently increase the ability to flexibly respond
to the developing needs of Czech exporters and suppliers for export in the area of export financing, especially at a time
of major changes in international trade affected by the global COVID-19 pandemic as well as growing protectionism.
In 2020, ČEB closely cooperated in the creation of conditions for the development of new or significantly improved
supported financing products with EGAP, the Ministry of Finance, the Ministry of Industry and Trade and the Ministry of
Defence, as well as with the commercial banking sector and expert unions, chambers and associations representing the
interests of exporters.
Significant activities in this area predominantly include proposals of a systemic nature concerning:
l
Increasing cooperation with the commercial banking sector in the area of re-financing export loans;
l
Financing of investments in modernisation of export capacities;
l
Expansion of product offer in exploration of foreign markets;
l
Financing of the introduction of new results of research and development into production;
l
Review of the methodology of the required national percentage share of goods and services in the total value
of a financed export contract; and
l
Supporting Czech exporters and suppliers for export acting as nominated sub-suppliers under foreign contracts.
2.1.5. Financial Results, Balance of Assets and Liabilities
Balance of assets and liabilities
ČEB’s total assets amounted to CZK 41,236 million in 2020, which represents a year-on-year decrease of 6%. The balance
sheet structure has been stable in the long term. The balance sheet items are derived from the planned estimate of
the development in asset transactions to which liabilities are adjusted.
Funding
ČEB finances its business activities mainly through liabilities in the form of issued bonds, payables to credit institutions and
to entities other than credit institutions, which represent over 80.1% of the total volume of its funds.
The key source of funding comprised the issuance of bonds denominated in foreign currencies and in Czech crowns.
As of 31 December 2020, they amounted to CZK 24,319 million. The volume of issues decreased by 23.5% year-on-year.
The Bank repaid issued bonds amounting to EUR 300 million during the year.
In 2020, the Bank increased its funding base by loans received from financial institutions in the amount of EUR 150 million
and USD 80 million, as well as interbank deposits. At the end of 2020, funding in this form totalled CZK 6,614 million,
representing a year-on-year growth of 274%. The volume of deposits received from entities other than credit institutions
was CZK 2,089 million.
The Bank reported equity in the total volume of CZK 7,322 million. Reserve funds of CZK 2,142 million and retained earnings
of CZK 164 million are recognised as part of equity.
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
38
Liabilities and equity 2020 | Figure 15
l
59% Payables from issued debt securities
l 18%
Total equity
l
16% Payables to entities other than credit institutions
l 5% Payables to credit institutions
l 2%
Other
Source: ČEB
39
Table 9
LIABILITIES AND EQUITY 2020 2019 Year-on-year
In CZK million index in %
Derivatives held for trading 256 110 232.73
Financial liabilities at amortised cost 33,022 36,079 91.53
Of which: Payables to credit institutions 6,614 1,768 374.10
Payables to entities other than credit institutions 2,089 2,529 82.60
Payables from issued debt securities 24,319 31,782 76.52
Hedging derivatives 16 24 66.67
Other liabilities 283 294 96.26
Provisions 243 198 122.73
Current tax payable 94 – x
Total liabilities 33,914 36,705 92.40
Share capital 5,000 5,000 100.00
Revaluation reserve 16 29 55.17
Reserve funds 794 791 100.38
Other special-purpose funds from profit 1,348 1,285 104.90
Profit or loss for the reporting period 164 66 248.48
Total equity 7,322 7,171 102.11
Total equity and liabilities 41,236 43,876 93.98
Source: ČEB
Development in principal categories of liabilities and equity in 2020/2019 | Figure 16
24,319
31,782
6,614
1,768
7,322
7,171
892
626
1
2
3
4
5
1
Payables from issued debt securities
2 Payables to non-credit entities
3 Payables to credit institutions
4 Total equity
5 Other
Source: ČEB
2,089
2,529
CZK mil.
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Assets 2020 | Figure 17
l
71% Receivables from non-credit entities
l 12% Receivables from credit institutions
l
4% Debt securities at fair value
l 4% Debt securities at amortised cost
l 9%
Other
Source: ČEB
Table 10
ASSETS 2020 2019 Year-on-year
In CZK million index in %
Cash and deposits with the central banks
and other deposits due on demand 2,638 1,161 227.22
Debt securities at FVOCI 1,534 1,821 84.24
Financial assets at amortised cost 36,072 39,587 91.12
of which: Debt securities at amortised cost 1,603 1,596 100.44
Loans and receivables at amortised cost 34,469 37,991 90.73
of which: Receivables from credit institutions 5,191 5,829 89.05
Receivables from entities other than credit institutions 29,278 32,162 91.03
Hedging derivatives – – x
Tangible assets 96 124 77.42
Intangible assets 10 33 30.30
Other assets 877 965 90.88
Current tax receivablee 0 154 0,00
Deferred tax asset 9 31 29.03
Total assets 41,236 43 876 93.98
Source: ČEB
Use of Funds
Assets predominantly include loans and receivables at amortised cost which amounted to CZK 34.469 million and
account for 83.6% of total assets. Of this amount, CZK 29,278 million are receivables from entities other than credit
institutions. They decreased year-on-year by 9%. Receivables from credit institutions decreased by 11% to CZK 5,191
million in 2020.
Temporarily available funds denominated in foreign currencies that are not used for loans were placed on the
interbank market in previous years in the form of short-term deposits, a portion of which is used for funding the liquidity
reserve consisting of foreign securities. Funds from equity represent a liquidity reserve in the form of high-quality and
liquid local but also foreign securities. The volume of the liquidity reserve held in securities totalled CZK 3,137 million
at the year-end, i.e. an 8.2% decrease. In accordance with the amendment to Act No. 58/1995 Coll., on Insurance and
Financing of Exports with State Support, effective since the end of April 2020, the Bank deposits available funds
denominated in EUR and non-invested equity funds predominantly on treasury accounts maintained by the Czech
National Bank.
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
40
Generation of Profit
In 2020, ČEB generated profit before tax of CZK 437 million. After adding the preliminary income tax payable of CZK
58 million, the deferred tax of CZK 25 million and the recognition of a provision for potential additionally assessed tax
of CZK 190 million, the Bank reported a profit after tax of CZK 164 million.
In the course of its business activities in 2020, the Bank reported interest income in the aggregate amount of
CZK 1,265 million, i.e. a year-on-year decrease of 3%. The Bank raises the funds necessary for its business activities
from capital markets. In 2020, interest expenses associated with such funds amounted to CZK 485 million, which is
a year-on-year decrease of 35.4%. The year-on-year decrease in funding expenses is predominantly attributable to
decreased funding needs and the repayment of bonds. Net interest income amounted to CZK 780 million, which is
a year-on-year increase of 41.1%.
Net income from fees and commissions amounts to CZK 13 million. Other significant components of the profit include
gains from financial transactions of CZK 22 million and other operating income of CZK 105 million.
For its operations, the Bank incurred expenses in the amount of CZK 604 million, including administrative expenses of
CZK 257 million, depreciation of tangible and intangible assets in the amount of CZK 67 million and other operating
expenses in the amount of CZK 280 million.
Other operating income and expenses are affected by the settlement reached with respect to the amount of
insurance payments as part of the resolution of the insured event of non-repayment of a loan receivable, as well as
a court ruling as part of bankruptcy proceedings. The release of provisions and allowances amounted to CZK 121 million.
The loss arising from the operation of long-term supported export financing in line with Act No. 58/1995 Coll. is covered
by subsidies from the state budget. The state subsidy primarily consists of the net balance between interest income
gained from loans provided to banking and non-banking entities under conditions that are common on international
markets for officially supported export credits, and costs incurred on raising funds on the financial market, plus the
costs of provisioning for selected loan receivables. In 2020, ČEB did not assert its claim to the subsidy; instead, it
generated a profit from this activity of CZK 484.2 million, which is part of the Bank’s total profit for 2020 before tax.
41
29,278
32,162
1,534
1,821
1,603
1,596
3,630
2,468
1
2
3
4
5
Development in principal categories of assets 2020/2019 | Figure 18
1 Receivables from non-credit entities
2 Receivables from credit institutions
3 Debt securities at fair value
4 Debt securities at amortised cost
5 Other
Source: ČEB
5,191
5,829
CZK mil.
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Factors Having an Impact on the Bank’s Business and Financial Position in 2021
The Bank’s activities in 2021 and its business and financial position will be affected by the following factors:
l
2020 was significantly affected by the global pandemic of COVID-19. Practically all world economies were very
strongly impacted, including emerging growth in unemployment. The Czech economy recorded a severe drop
in GDP of 5.6% combined with a relatively high inflation of 3.2%. The economic downturn had a marked impact
on the business activity of Czech exporters (especially in the second quarter) and the business situation of the
Bank, since the volume of newly concluded transactions was significantly lower than in previous years, which
could be reflected in the Bank’s revenues in the coming years.
l
At the beginning of the pandemic in the spring of 2020, it was very difficult to estimate the economic, social and
potential other impacts on the global and Czech economy, including the impacts on the Bank’s balance sheet
and revenues. The Bank closely monitored the situation related to the virus and adopted a variety of preventive
operational measures to ensure business continuity. As the Bank was not involved in any guarantee COVID
programmes of state aid for the business sector, it expects no significant impacts on its loan portfolio and profit
in this respect. The number of debtors who asked for the repayment moratorium in line with Act No. 177/2020 Coll.
was minimal.
l
Czech exporters had, and at the beginning of 2021 still have, only limited options for face-to-face contact with
their foreign partners, which is often essential during the negotiation of new deals. The Bank’s representatives
also had to cancel a significant portion of their international trips, and trade fairs and business missions
organised by constitutional officials or business associations were called off with respect to the existing measures.
l
In its plans of business activities in 2021, the Bank therefore expects that the volume of new transactions will
continue to be negatively affected by various restrictions in the first part of 2021, since export transactions,
especially those of significant volume, often take months to negotiate. Despite that, the outlook for the year as
a whole is more optimistic and the Bank anticipates growth in the volume of export transactions with its active
participation. Firstly, there is now much more information available about the infection, and secondly, approved
vaccinations have been developed which should contribute to a gradual relaxing of restrictions, thereby
allowing economies to return to a more standard mode, including in the area of export
.
l
The Bank’s business outlook should be supported by the expected recovery of the Czech economy. Based on
the estimates of the Czech National Bank, GDP growth will amount to 2.2% in 2021 and 3.8% in 2022 with an
inflation rate of approximately 2%. Market predictions generally expect a stable two-week repo rate at the
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
42
2.2.
Table 11
PROFIT/LOSS 2020 2019 Year-on-year
In CZK million index in %
Interest income 1,265 1,304 97.01
Interest expenses (485) (751) 64.58
Net interest income 780 553 141.05
Net fee and commission income 13 4 325.00
Net profit/loss from financial transactions including state subsidy 22 45 48.89
Other operating income 105 6 1,750.00
Other operating expenses (280) (3) 9,333.33
Profit or (-) loss from operating activities 640 605 105.79
Administrative costs (257) (281) 91.46
Depreciation and amortisation (67) (73) 91.78
Modification Gains and Losses 9 (1) x
Impairment losses on financial assets not reported at FVTPL
or their (-) reversal 159 (96) (165.63)
Recognition of provisions or their reversal (47) (106) 44.34
Profit before tax 437 48 910.42
Income tax (273) 18 (1,516.67)
Net profit/loss for the period 164 66 248.48
Source: ČEB
current level of 0.25%. However, an increase in the rates cannot be ruled out in the event of more intense inflation
pressure, faster economic recovery, fiscal impulses (tax reductions) accompanied by increased consumer
demand, or an accelerating risk of bubbles on the asset market. Unlike previous years, inflation should no longer
be driven by salary requirements given the changed situation on the labour market.
l
The negative impacts of the pandemic on many companies will still be felt in 2021, especially in the most
affected economy sectors, where many entities are currently dependent on state support programmes. As a
result, an increased surge of insolvencies and gradual growth in the unemployment rate may be expected.
However, the pandemic represents a challenge that will most probably lead to a change in the structure of
Czech economy. The driving force of this change will be businesses that will flexibly react to new conditions on
world markets, leverage technological innovation, digitisation, automation, process robotisation including data
analytics, be able to bring a high added value of work, and ideally also be the end supplier of products and
services.
l
A risk factor for the export-oriented Czech Republic is any form of trade war and protectionism or lower
diversification of export territories. On the other hand, the pandemic raised many questions. One of them is the
shortening of supply chains and efforts to be strategically self-sufficient in the future with respect to some
commodities and products, possibly resulting in the return of production from cheap economies back to the
European Union, which could be an opportunity for many Czech export companies to get involved in
multinational chains.
l
During the global COVID-19 pandemic and in the post-COVID period, the role of central banks will be essential
in the recovery of world economies. Neither the American Federal Reserve nor the European Central Bank
anticipate tightening their currency policies and will probably continue with a rather massive quantitative
release based on the purchase of financial assets for their balances. Given the situation where inflation
pressures are seen to be at a tolerable level, primary interest rates in the USA and EU will probably stay relatively
unchanged.
l
A new market situation arises, where on the one hand, worldwide economic recovery is predicted for 2021
together with inflation risks, and on the other hand, there is a relaxed currency policy of central banks based
on low (in ECB’s case negative) interest rates. This phenomenon undoubtedly entails some uncertainties.
l
The EUR and USD exchange rate of CZK has no major effect on the Bank’s economic results thanks to hedging
operations, but more marked uncertainties are related to the impact on its balance sheet due to the prevalence
of foreign currency assets. After the outbreak of the COVID pandemic in 2020, we could see a significant
weakening of the Czech crown, which then strengthened somewhat towards the end of the year and further
mild strengthening is expected in 2021 as well.
l
The development in the world economy may be impacted by several risk factors, such as the prices of
commodities, primarily crude oil, which reflect the security situation in the Middle East (e.g. the growing tensions
in relation to Iran or the Armenia-Azerbaijan conflict). These tensions, affecting the economies of “oil countries”,
could transfer to the exposures that the Bank may have in these regions.
l
The winner of the presidential elections in the United States was the Democratic candidate Joe Biden. Global
markets therefore await the first steps of the new American administration, especially in the context of
international trade relations with the European Union, China and other powers, including the resolution of
conflicts in certain regions of the world.
l
After many months of persisting uncertainty regarding the specifics of the United Kingdom’s withdrawal from the
European Union, the good news of the end of 2020 is undoubtedly the achieved agreement that prevented
the so-called hard Brexit and which defines the basic parameters of the future arrangement of mutual trade
relations.
l
The final wording of the prepared amendment to Act No. 58/1995 Coll., on Insurance and Financing of Exports
with State Support, will impact the Bank’s position in instruments of state support of export. The essential aspect
in this respect will be the possibilities for expansion of products offered to Czech exporters in the context of
international competition and comparison with other ECAs (Export Credit Agencies), conditions for obtaining
funding through the Ministry of Finance, change in the shareholder structure (the sole shareholder should be
Exportní garanční a pojišťovací společnost). The amendment is subject to discussions in the Chamber of
Deputies of the Parliament of the Czech Republic, but there is a risk that the legislative process will not be
completed by the end of the current parliamentary term.
l
The Bank’s operations and role within the system of state support for exports will be affected by the final form,
focus and tasks arising from the prepared Economic Strategy of the Czech Republic until 2030 (and Export
43
Strategy of the Czech Republic until 2030) which is supposed to contain a strong emphasis on industry as well
as on the gradual increase in added value in the economic production of the Czech Republic. The bank’s
activities in 2022 may also be influenced by economic and strategic priorities set by the government established
after the parliamentary elections in October 2021.
l
The Bank will also be affected by potential new regulatory requirements imposed on the banking sector.
Goals for 2021 in the business and financial area
l
Until the publication of the Economic Strategy of the Czech Republic until 2030 and the new Export Strategy of the
Czech Republic, implement the Export Strategy of the Czech Republic for 2012-2020 and the Bank’s updated
strategy.
l
The mission of the Bank, in line with the objectives of the economic policy of the Czech Republic, involves the
strengthening of internationalisation of Czech companies and competitiveness of the Czech export. Generation
of profit is not its priority.
l
The Bank must be ready for the acceleration of demands of Czech exporters and suppliers for export for its
products after the COVID pandemic dies down, when the financial position of domestic and foreign companies
may show a temporary worsening in the parameters of financial results.
l
The Bank has to remain ready to support Czech investors penetrating new foreign markets, including credit
instruments supporting investments abroad and acquisitions of foreign companies.
l
In order to use the market gap as much as possible, the Bank’s business activity will focus on sectors, fields and
territories where Czech exporters have for various reasons no or only a limited offer of products from commercial
banks. These may be promising countries with a higher risk profile as rated by OECD; however, these must always
be profitable transactions.
l
Actively cooperate and enhance partnership with the commercial banking sector in the financing of large volume
export transactions or in the provision of refinancing loans.
l
Maximise support for Czech exporters and suppliers for export while promoting the export engagement of the
Czech Republic in territories outside of Europe with the aim to continuously expand export markets to include
namely countries in Africa, Latin America and Southeast Asia and gradually eliminate the current concentration
risks.
l
Play a significant role in sovereign risk-based transactions in regions where debtors prefer a state institution as
a counterparty.
l
Diversify client portfolio with a focus on entities to which ČEB has not provided its financial services through its
products, or it did so a long time ago.
l
Support research and development in order to increase the share of exports with higher added value and the
number of innovative exporters.
l
Stabilise the size of the balance sheet (total asset) sum and the volume of loan principals on the level allowing the
Bank to have sustainable financing for its operating needs, generating a profit.
l
Maintain the operational efficiency of the Bank on the level of the determined cost/income indicator.
l
Finalise the process of collection of the rest of risk receivables incurred between 2007 and 2011 with the aim of
maximising the volume of proceeds, thereby decreasing their share in the Bank’s overall credit exposure.
l
With respect to the state budget, minimise state subsidy needs to settle losses on provided supported financing.
l
Adhere to Government Resolution No. 839 of 25 November 2019 on ownership consolidation of institutions of the
state support for export system.
2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK’S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN 2020
44
3
Narrative Part
3.1. Risks to Which the Bank is Exposed, Objectives and Methods of Risk Management
Risk factors
The risk management concept in the Bank in all risk management segments builds on the rules of prudent operation
determined by the regulator. In its risk management, the Bank traditionally adheres to the principle of a limited risk
profile, which is based on the system of internal limits for individual types of risks, product and debtors.
The risk management process in the Bank is independent of its business units. The executive unit for risk
management is the Risk Management Division. The Credit Risk Management Department has been charged with
managing credit risk in relation to assessing the credit risk of counterparties, with the Credit Analysis Department
responsible for analysing individual transactions. The Banking Risk Management Department manages credit risk
at the portfolio level, market risks, operational risks, liquidity risks and concentration risks. The risk management
process is supervised by the Bank’s Board of Directors, which is regularly informed about risk exposures. The Board
of Directors determines and regularly assesses the acceptable level of risk, including credit risk, market risk,
operational risk, concentration risk and the risk of liquidity and excessive leverage.
In order to comply with the statutory duty in the planning and on-going maintenance of the internally determined
capital in the amount, structure and distribution that is sufficient to cover all risks to which the Bank is or may be
exposed, the Bank maintains the Internal Capital Adequacy Assessment Process (ICAAP). Methods used to assess
and measure individual risks included in the ICAAP that are used by the Bank in relation to its risk profile are
approved by the Board of Directors. Quantifiable risks are assessed in the form of internally determined capital
needs. Other risks as part of the ICAAP are covered by qualitative measures in risk management, organisation of
processes and control mechanisms (Code of Ethics, communication policy, etc.). The internal capital adequacy in
2020 was sufficient to cover the risks to which the Bank is exposed.
The Bank makes use of the Internal Liquidity Adequacy Assessment Process (ILAAP) system. The system is used to
meet the requirements for maintaining a reliable and specific framework for the management of liquidity and
financing risks, including the process of identifying, measuring and reviewing liquidity and financing risks.
During 2020, the Bank did not exceed the limit for large exposures. As of the end of 2020, the Bank did not exceed
any regulatory limit.
Individual types of risks are managed by the Bank in line with applicable legislation, the Bank’s regulations and the
best practice.
3.1.1. Credit Risk
Credit risk, i.e. the risk of losses owing to a counterparty’s default in meeting its obligations under a credit agreement
based on which the Bank has become the contractual party’s creditor, is managed by the following credit risk
evaluation system:
l
Debtor’s risk management
– Assessing and monitoring the debtor’s credit rating and determining the debtor’s internal rating;
– Monitoring the relations of entities and the structure of financially related entities;
– Determining the limit applicable to the debtor or a financially related group of entities;
– Monitoring credit exposure with respect to entities or financially- or otherwise-related groups of entities; and
– Classifying receivables, provisioning and creation of reserves.
l
Transaction risk management
– Assessing and monitoring specific transaction risks, particularly in terms of the quality of collateral and
determining the acceptable level of collateral; and
– Regular on-site visits.
3
|
Narrative Part
3. NARRATIVE PART
46
47
l
Portfolio credit risk management
– Monitoring portfolio credit risk;
– Regular stress testing of portfolio credit risk; and
– Determining limits to mitigate portfolio credit risk.
l
Credit risk concentration management
– Concentration risk in ČEB principally arises from credit risk concentration;
– Monitoring credit risk concentration in terms of the debtor’s country of the registered office and industry; and
– Determining limits to mitigate credit risk concentration.
To minimise credit risk in providing supported financing, ČEB employs standard banking credit risk mitigation
techniques, such as EGAP credit risk insurance. At present, ČEB uses no credit derivatives to minimise credit risk.
For credit risk and concentration risk, ČEB maintains an established management system that monitors the exposures
on a daily basis, comparing them against limits designated by the regulator or derived from acceptable risk levels.
The results of credit portfolio analyses, including the results of the stress testing of portfolio credit risk, ar submitted,
on a regular basis, to the senior managers in charge of risk management.
3.1.2. Market Risk
Market risk is the risk of suffering losses owing to changes in market factors, ie prices, exchange rates and interest
rates on financial markets. Market risk management in ČEB is a process that includes defining, measuring and an
on-going review of the application of limits, and analysing and regularly reporting individual risks to ČEB’s
committees and management so as to manage negative financial impacts potentially resulting from these changes
in market prices.
ČEB is not exposed to risk on shares and commodity risk. To manage foreign currency risk and interest rate risk, ČEB uses
the following methods:
l
Interest rate risk management
– GAP analysis
– Change in Net Interest Income – NII
l
Currency risk management
– Analysis of currency sensitivity factors
l
Aggregate market risk management
– Economic Value of Equity (EVE) – ČEB uses the standard method (according to the Interest rate risk in the
banking book standard of April 2016 recommended by Basel Committee on Banking Supervision), reflecting
the update to regulations issued by EBA in 2018 (Guidelines on the management of interest rate risk arising from
non-trading book activities).
To minimise currency and interest rate risks, ČEB currently uses forward and swap transactions.
To manage market risk, ČEB maintains an established management system that monitors risk exposure on a daily
basis, comparing it against limits derived from acceptable risk levels.
3.1.3. Refinancing Risk
To monitor refinancing risk, the Bank measures the impact on the Bank’s profit/loss account of increased interest
expenses arising from an increased credit spread that the Bank would have to incur to become sufficiently liquid
during the global downturn.
neauditované údaje / Table 12
31 Dec 2020 CZK million
Capital 7,153
Tier 1 (T1) capital 7,153
Common equity tier 1 (CET1) capital 7,152
CET1 capital instruments 5,000
Accumulated other comprehensive income (OCI) and other provisions 2,156
Adjustments of the CET1 capital due to the utilisation of prudential filters (2)
(-) Other intangible assets (2)
Other temporary adjustments of the CET1 capital –
Other deductions from the CET1 capital – methodology changes (transition to IFRS 9) –
zdroj: ČEB
3.1.4. Liquidity Risk
To manage liquidity risk, ČEB maintains an established management system that monitors the liquidity status and
outlook on a daily basis, comparing them against the limits set. The basic pre-condition of liquidity risk management
involves securing survival for at least two months.
l
Liquidity risk is managed by:
– Measuring and comparing the inflow and outflow of cash, ie monitoring net cash flows for a period at least
five working days in advance;
– Measuring and limiting the minimum survival period;
– Quarterly measurements using stress scenarios;
– Maintaining the liquidity coverage ratio;
– Measuring the net stable funding ratio; and
– Gap analyses that measure the maximum cumulated outflow of cash and limits in individual currencies and
time gaps;
ČEB maintains a sufficient liquidity reserve predominantly in the form of highly liquid securities and exposures to the
Czech National Bank. To deal with liquidity problems under extraordinary circumstances, ČEB has emergency plans
in place. In 2020, ČEB had no problems ensuring sufficient liquidity.
3.1.5. Operational Risk
ČEB manages the risk of losses arising from the inappropriateness or failure of internal processes, human error or
failures of systems or the risk of loss arising from external events, including the risk of losses owing to the breach of
or non-compliance with legal regulations. The key tool ČEB uses to manage its operational risk is the early warning
system, which is based on a system of risk indicators and warning limits that signal the greater probability of the
occurrence of certain operational risks.
In 2020, ČEB updated its assessment of operational risks on an on-going basis in the form of self-assessment.
The instances of operational risks were not significant in terms of the volume, amount and impact on the Bank’s
operations in 2020.
3.1.6. Capital Requirements and Capital Ratios
3. NARRATIVE PART
48
49
Risk Factors Potentially Affecting the Capacity of the Bank to Meet its Obligations to Investors Arising from Securities
The Bank’s ability to meet its obligations from issued bonds to investors is unconditionally and irrevocably guaranteed
by the state pursuant to Act No. 58/1995 Coll., on Insurance and Financing Exports with State Support.
Remuneration of Persons with Managing Powers
With regard to the application of the proportionality principle, ČEB has not set up a Remuneration Committee and
no part of remuneration is paid out in non-cash instruments to persons with managing powers.
In 2020, ČEB regarded the members of the Board of Directors and the members of the Supervisory Board as having
managing powers. The Chairman of the Board of Directors is also the CEO, and the members of the Board of
Directors also hold the positions of Deputy CEOs.
neauditované údaje / Table 13
31 Dec 2020 CZK million
Risk Capital
exposure requirements
Total 6,691 535
Total risk-weighted exposures in respect of credit risk under STA 5,232 418
Exposures in respect of central governments and central banks 470 38
Exposures in respect of institutions 1,155 92
Exposures in respect of enterprises 2,966 237
Default exposures 398 32
Other exposures 243 19
Total risk exposures in respect of position, foreign currency and
commodity risks – currency transactions – –
Total risk exposures in respect of operational risk – BIA 1,451 116
Risk exposures in respect of credit risk adjustments to
measurement total – standardised method 9 1
zdroj: ČEB
neauditované údaje /
Table 14
31 Dec 2020 CZK million
Capital ratios
CET1 capital ratio 106.90
Surplus (+) / shortage (-) of the CET1 capital 6,852
KT1 capital ratio 106.90
Surplus (+) / shortage (-) of the T1 capital 6,618
Total capital ratio 106.90
Total capital surplus (+) / shortage (-) 6,618
Total capital ratio SREP (TSCR) 15.600
TSCR – comprising CET1 capital 10.200
TSCR – comprising T1 capital 13.600
Overall capital requirement (OCR) 18.509
OCR – comprising CET1 capital 13.109
OCR – comprising T1 capital 16.509
Overall capital requirement (OCR) and the recommended capital planning reserve (P2G)) 18.509
OCR and P2G – comprising CET1 capital 13.109
OCR and P2G – comprising T1 capital 16.509
zdroj: ČEB
3.2.
3.3.
Board of Directors
The Board of Directors is the statutory body managing the activities of ČEB and acting on its behalf.
Members of the Board of Directors hold the positions of the CEO and Deputy CEOs for the respective areas of the
Bank’s activities they are entrusted with (refer to Section 1.5 Administrative, Management and Supervisory Bodies
of ČEB and Related Committees). Members of the Board of Directors perform their duties with due managerial
care, carefully and with the necessary knowledge. They are remunerated in line with the Contract on Holding the
Office of a Member the Board of Directors concluded in compliance with the relevant provisions of Act No. 90/2012
Coll., on Business Corporations and Cooperatives. The Contract on Holding the Office of a Member of the Board of
Directors (the “Contract”) is concluded for a functional period of five years. This Contract provides for the rights
and obligations of contractual parties in respect of holding the office of a member or of Board of Directors.
The Contract was approved by the Bank’s Supervisory Board. The amount of remuneration of the members of the Board
of Directors is approved by the General Meeting.
The total annual remuneration of the members of the Board of Directors is broken down into the base component
and the variable component, which make up 50% and 50%, respectively, or 62.5% and 37.5%, respectively, for
a member of the Board of Directors in charge of the Risk Management Division. The remuneration of the CEO and
Deputy CEOs was paid out in the form of the base component, which was the remuneration for the performed
work. The amount of the remuneration was approved by the General Meeting in compliance with ČEB’s Articles of
Association. The remuneration policy for the members of the Board of Directors, referred to as the Principles of
Remunerating ČEB’s Managers and Members of ČEB’s Bodies, is defined and approved by ČEB’s General Meeting.
The variable component of the remuneration of the CEO and Deputy CEOs is derived from assessing the
performance of their activities, which is measured based on meeting the defined performance criteria. The
performance criteria are always set for the calendar year and approved by the General Meeting and subsequently
assessed by ČEB’s Supervisory Board. The performance criteria include financial indicators (for 2020: administrative
expenses and depreciation (excluding the Crisis Resolution Fund), modified cost/income ratio, amount of subsidies
for settling losses from supported financing) business indicators (for 2020: total volume of new transactions, volume
of loans drawn) and portfolio and risk indicators (for 2020: proportion of NPL to the Bank’s aggregate portfolio,
amount of provisions, and proceeds from receivables in work-out management – without insurance proceeds from
EGAP). The assessment of the performance criteria listed above is made once a year after the termination of the
assessed year, utilising the results of the assessment as of 31 December of the relevant year.
Furthermore, 50% of the variable component of the remuneration granted for the assessed year is paid out to the
members of the Board of Directors immediately whereby the payment of the other 50% of the variable component
is postponed. The deferred portion of the remuneration’s variable component is evenly distributed over the 4-year
deferral period and the same amount is paid out each year during this period. The claim for such payment always
arises from the assessment of the defined financial and non-financial indicators of ČEB’s performance and based on
the methodology for retrospective assessment of the quality of loan production (malus methodology).
Supervisory Board
The Supervisory Board is ČEB’s control body, supervising the exercise of the Board of Director’s powers in performing
ČEB’s business activities.
The Supervisory Board has five members. As of 31 December 2020, the Supervisory Board had only three members
performing their duties. Members of the Supervisory Board are elected by the General Meeting and include persons
proposed by shareholders. Members of the Supervisory Board are remunerated based on the Contract on Holding the
Office of a Member of the Supervisory Board pursuant to the relevant sections of Act 90/2012 Coll., on Business
Corporations and Cooperatives, which is concluded for five years. The Contract on Holding the Office of a Member of
the Supervisory Board was approved by ČEB’s General Meeting. The members of the Supervisory board are
remunerated in the amount approved by the General Meeting. The remuneration for performing the duties of
3. NARRATIVE PART
50
51
a member of the Supervisory Board was paid out providing that the member was not subject to the limitation specified
in Section 303 of Act No. 262/2006 Coll., the Labour Code, as amended, or a similar limitation defined in the relevant
legal regulation. The total amount of the annual remuneration of the members of the Supervisory Board in 2020
is broken down into the base component and the variable component, which make up 80% and 20%, respectively.
The remuneration of the members of the Supervisory Board was paid out in the form of the base component which was
the remuneration for the performed work. The remuneration policy for the members of the Supervisory Board, referred
to as the Principles of Remunerating ČEB’s Managers and Members of ČEB’s Bodies, is defined and approved by ČEB’s
General Meeting. The variable component of the remuneration of the members of the Supervisory Board is derived from
assessing the performance of their activities, which is measured based on meeting the defined performance criteria.
The performance criteria are always set for a calendar year and approved and subsequently assessed by ČEB’s
General Meeting. The performance criteria are divided into four areas: ČEB Strategy (for 2020: review of the
implementation of action steps for synergies of ČEB and EGAP, following the adoption of the amendment to Act No.
58/1995 Coll.), finance and business plan (for 2020: active cooperation in preparing and negotiating the FBP for 2021),
remuneration system (for 2020: active participation in negotiating the K.O. criteria, bank-wide KPIs as well as individual
KPIs of risk takers of group I and approval of KPIs of risk takers of group II in line with the Supervisory Board’s schedule
of KPI approval) and control system (for 2020: checking the fulfilment of tasks of the Board of Directors and Supervisory
Board members set by the Supervisory Board, checking the fulfilment of the Czech National Bank’s remedial measures).
The assessment of performance criteria is made once a year, after the termination of the assessed year, utilising the
results of the assessment as of 31 December of the relevant year.
50% of the variable component of the remuneration granted for the assessed year is paid out to the members of the
Supervisory Board immediately and the payment of the other 50 % of the variable component is deferred. The deferral
portion of the remuneration’s variable component is evenly distributed over the 4-year postponement period and the
same amount is paid out each year during this period; the claim for such payments always arises from the assessment
of the defined financial and non-financial indicators of ČEB’s performance.
Received Income of Directors and Members of the Bank’s Bodies in Cash and in Kind for 2020
Given that the Bank does not control any other entities, the individuals specified in the table above received no
income in cash or in kind from controlled entities.
Diversity Policy
ČEB does not formally apply a diversity policy to the Board of Directors and the Supervisory Board as the staffing of
these bodies is fully under the control of the General Meeting. The second reason is the fact that ČEB is a bank
having the state as the direct majority shareholder (84%), its shareholder rights are exercised by the Ministry of
Finance and the HR policy is entirely under the control of the state represented by the above ministry, which selects
candidates in line with the state’s idea of ČEB’s activities, involving the support of Czech export and Czech exporters
as principal business activities in accordance with Act No. 58/1995 Coll.
There is no discrimination of candidates in the recruitment process. Selection of candidates for members of the
Board of Directors or members of the Supervisory Board takes place in line with Act No. 353/2019 Coll., on the
Selection of Members of Management and Supervisory Bodies of Legal Entities with State Participation (Nomination
Act), which came into force on 1 January 2020. The selection committee, appointed by the Ministry of Finance,
3.4.
Table 15
Received income of persons with managing powers Members Members Other persons
from the issuer (ČEB) of the Board of the Supervisory with managing
(CZK ‘000) of Directors Board powers
In cash 22,162 2,104 –
In kind – – –
Total 22,162 2,104 –
Source: ČEB
assesses primarily qualifications of potential members, both in terms of professional and managerial experience
and in terms of education. Candidates must additionally adhere to general guidelines for assessing the suitability
of members of a management body and persons in key positions determined by the EBA, such as evaluation of
experience, reputation or prudential requirements. The winner of the selection process (nominee) is subsequently
presented to the government’s Committee for Personnel Nominations, which then either does or does not
recommend the proposed nomination.
Information on Codes
The Corporate Governance Code of Česká exportní banka, a.s. (KOD 01) (hereinafter the “Code”) is based on the
OECD principles. Deviations from the Code’s principles are disclosed in the text. The Corporate Governance Code
of Česká exportní banka, a.s. is publicly available in Czech on ČEB’s website:
https://www.ceb.cz/kodexy.
The Bank’s principles of corporate governance build on the OECD general principles of corporate governance
whereby neither the Bank’s legal position nor the shareholder structure are modified by the main principles. The
Bank’s governance is based on the main pillars listed below::
Shareholder Rights
The Bank’s majority shareholder is the Czech state, which exercises its shareholder rights through the Ministry of
Finance. The state exercises its shareholder rights at the Bank’s General Meeting both directly, by applying the
proportion of votes corresponding to the shares held by the Ministry of Finance, as well as indirectly by means of
Exportní garanční a pojišťovací společnost, a.s. The Bank’s shares are not tradable and are held in the registered
book-entry form. The shares are only transferrable on condition that statutory requirements as reflected in the Articles
of Association have been met.
Fair Treatment of Shareholders
The Bank honours the rule of the equal treatment of shareholders of the same class, pursuant to Act No. 90/2012
Coll., on Business Corporations and Cooperatives (the Business Corporations Act). The Bank is aware of the risk of
potential misuse of the information on its activities, particularly information on the transactions being prepared,
both by its employees and members of the Board of Directors and the Supervisory Board. The Bank has issued, and
permanently monitors adherence to, the Employee Code of Ethics (KOD 02), which is available at ČEB’s website:
https://www.ceb.cz/kodexy.
The Bank considers it crucial that the entire decision-making be not influenced by the potential interests of persons
with the decision-making powers who are engaged in the decision-making process, i.e. Board of Directors or
Supervisory Board members. Should this be the case, these persons are therefore obliged to announce, prior to
the commencement of the decision-making process, that they have an interest in its result, and abstain from taking
part in the decision-making process.
Disclosures and Transparency
The Bank meets the statutory reporting duty, under which primary emphasis is placed upon a timely, accessible, and
balanced disclosures concerning the Bank’s current activities as well as anticipated development.
The information is rendered to the business community, public administration bodies, employees and other
stakeholders. Providing the aforementioned information on a regular basis is considered by the Bank to be an
efficient instrument not only for meeting its statutory obligations but mainly for establishing a good reputation. With
respect to information disclosures, the Bank strictly adheres to the relevant statutory provisions concerning bank
and business secrets.
Responsibility of the Board of Directors and Supervisory Board of ČEB
The exact definition of the powers of the Board of Directors and the Supervisory Board is part of the Bank’s Articles
of Association, which are available in the Collection of Deeds of the Commercial Register held by the Municipal
3. NARRATIVE PART
52
3.5.
53
Court in Prague. The Board of Directors’ composition, manner of decision-making and powers are provided for by
the Bank’s Articles of Association. The Bank’s Board of Directors has the responsibility towards the shareholders for:
a) The strategic management of the Bank reflected in the security, business and HR policies, the risk management
strategy, the remuneration policy and the compliance policy, with senior managers responsible for their
implementation;
b) The establishment and assessment of the management and control system, and for permanently maintaining
its functionality, effectiveness and efficiency;
c) Statutory compliance of the management and control system and for providing related activities with due
professional care; and
d) Establishing principles of human resources management including the requirements for qualification, experience
and knowledge for individual positions and the manner in which they are to be demonstrated and verified.
The Supervisory Board’s composition, manner of decision-making and powers are provided for by the Bank’s Articles
of Association. The Supervisory Board oversees the exercise of the Board of Directors’ powers as well as realisation
of the Bank’s business activities. In particular, the Supervisory Board:
a) Supervises as to whether the management and control system is functional and efficient and performs the
system’s regular assessment;
b) Regularly debates the strategic direction of the Bank as well as matters concerning the regulation of the risks to
which the Bank is or may be exposed;
c) Participates in directing, planning and assessing the internal audit activities and assesses compliance; and
d) Approves and regularly assesses the summary remuneration principles for selected groups of employees whose
activities significantly affect the Bank’s overall risk profile.
Pursuant to Act No. 93/2009, on Auditors, the Bank has established the Audit Committee whose position and powers
are provided for by the Bank’s Articles of Association.
Description of the Decision-Making Process with Regard to the Bank’s Bodies and Committees
3.6.1. General Meeting
The General Meeting takes place at least once a year, however no later than four months from the end of the
reporting period and has a quorum if the shareholders present hold shares in the total nominal value greater than
50% of the Bank’s share capital. If the General Meeting does not have a quorum, the Board shall call a substitute
General Meeting in compliance with the relevant provisions of the special legal regulation.
The General Meeting votes by acclamation unless the General Meeting decides otherwise. The General Meeting
adopts decisions by a majority of the votes of the present shareholders, unless the special legal regulation or the
Articles require a larger majority; changes to the Articles, increases or decreases in the share capital and the
dissolution of the Bank with liquidation is decided at the General Meeting if approved by the votes of at least two-
thirds of the present shareholders. At General Meetings, proposals presented by the convenor of the General
Meeting are voted on first and subsequently other proposals and counterproposals are voted on in the order as
submitted.
The state exercises its shareholder’s rights by means of the Ministry of Finance.
3.6.2. Supervisory Board
The Supervisory Board consists of five members.
Meetings of the Supervisory Board are convened by its Chairman or Vice-Chairman as necessary. The Supervisory
Board has a quorum if at least three of its members are present, with resolutions adopted by a majority of all of its
3.6.
members. Each member has one vote. In the event of a tied vote, the Chairman does not have the casting vote.
Minutes are taken on all meetings of the Supervisory Board and are to be signed by the Chairman of the Supervisory
Board; a list of attendees is attached to the minutes.
In urgent cases that cannot be delayed the Chairman of the Supervisory Board, or the Vice-Chairman of the
Supervisory Board if the Chairman is not present, or the Chairman of the Board of Directors based on a request by the
Chairman of the Supervisory Board, or the Vice-Chairman of the Supervisory Board if the Chairman is not present,
may initiate a per rollam vote by raising a written (i.e. including fax) or an electronic query in respect of all members
of the Supervisory Board. Members of the Supervisory Board cast their votes in the written form and may use
technological devices to do so. A resolution per rollam is adopted if at least three (3) members of the Supervisory Board
agree with adopting the resolution and if at least four members of the Supervisory Board participate in the voting. Per
rollam resolutions must be recorded in the Meeting Minutes of the nearest meeting of the Supervisory Board. Members
of the Board of Directors can neither be elected nor dismissed by a per rollam resolution.
3.6.3. Board of Directors
The Board of Directors consists of three members.
Meetings of the Board of Directors are convened by its Chairman or an authorised Vice-Chairman as necessary. The
Board of Directors has a quorum, if an absolute majority of its members is present. The Board of Directors decides by
resolutions adopted by a majority of votes of its members. Each member of the Board of Directors has one vote. In the
event of a tied vote, the Chairman does not have the casting vote. Minutes are taken on the course of the Board of
Directors’ meeting and its resolutions and are to be signed by the Chairman of the Board of Directors and the minute-
taker; a list of attendees is attached to the minutes.
In urgent cases that cannot be delayed, the Chairman of the Board of Directors, or the authorised Vice-Chairman if the
Chairman is not present, may initiate a per rollam vote by raising a written (i.e. including fax) or an electronic query in
respect of all members of the Board of Directors. Members of the Board of Directors cast their votes in the written form
and may use technological devices to do so. A resolution per rollam is adopted if at least two members of the Board
of Directors agree with adopting the resolution and if at least two members of the Board of Directors participate in the
voting. Per rollam resolutions must be recorded in the Meeting Minutes of the nearest meeting of the Board of Directors.
3.6.4. Audit Committee
The Audit Committee consists of three members.
Meetings of the Audit Committee take place as necessary, at least four times a year. If necessary, the Chairman of
the Audit Committee, or the authorised member of the Audit Committee if the Chairman is not present, will
operatively convene an extraordinary meeting. The Audit Committee has a quorum if an absolute majority of its
members is present.
Resolutions of the Audit Committee are adopted by an absolute majority of the votes of all members. Each member
has one vote. In the event of a tied vote, the Chairman does not have the casting vote. Minutes are taken on all
meetings of the Audit Committee and are to be signed by the Chairman of the Audit Committee; a list of attendees
is attached to the minutes.
In urgent cases that cannot be delayed, the Audit Committee may initiate a per rollam resolution. The per rollam
resolution is adopted if an absolute majority of the Audit Committee members agree with its adoption.
3. NARRATIVE PART
54
55
3.6.5. Credit Committee
The Credit Committee consists of seven members.
Credit Committee meetings take place as necessary, usually once a week. The Credit Committee has a quorum if
at least four of its members are present, of which at least two are members of the Board of Directors and two are
members of the Risk Management Division. A resolution is adopted if approved by the votes of an absolute majority
of the members present, provided that the proposal was voted for by two members of the Board of Directors and
two members of the Risk Management Division. Each member has one vote. The Credit Committee arrives at
conclusions by the voting of its members in respect of individual items on the agenda.
In urgent cases that cannot be delayed the Credit Committee may make a per rollam resolution. The per rollam
resolution is adopted if at least four members of the Credit Committee approve it and if it was voted for by two
members of the Board of Directors and two members of the Risk Management Division.
3.6.6. Assets and Liabilities Management Committee (ALCO))
The ALCO consists of seven members.
ALCO meetings take place as needed, usually once a month. The ALCO has a quorum if at least four of its members
are present, of which one is the Chairman or the Vice-Chairman of the ALCO and, simultaneously, at least one
representative of the CEO’s Division, one representative of the Finance and Operations Division and one member
of the Risk Management Division are present. Each ALCO member has one vote.
The ALCO adopts conclusions by the voting of its members on individual issues of the agenda. A proposal presented
by the ALCO Chairman, or by the ALCO Vice-Chairman, if the Chairman is not present, is voted on first and
subsequently counterproposals are voted on in the order as submitted. A resolution is adopted if approved by an
absolute majority of the votes of the ALCO members present. If the resolution concerns selected issues specified in
the ALCO Rules of Procedure, it may be adopted only if the Head of the Banking Risk Management department
who is a member of the ALCO approves it.
In urgent cases that cannot be delayed, the ALCO Chairman, or the Vice-Chairman if the Chairman is not present,
may initiate a per rollam resolution. The per rollam resolution is adopted if it is approved by an absolute majority of
all ALCO members. If the resolution concerns selected issues specified in the ALCO Rules of Procedure, it may be
adopted only if the Head of the Banking Risk Management department who is a member of the ALCO approves it.
3.6.7. Information Technologies Development Committee (ITDC)
The ITDC consists of seven members.
ITDC meetings are convened by the ITDC’s Chairman, or the Vice-Chairman if the Chairman is not present. The
ITDC has a quorum if at least four of its members are present. Each ITDC member has one vote. A resolution is
adopted if approved by an absolute majority of the votes of the ITDC members present. In the event of a tied vote,
the Chairman has the casting vote.
In urgent cases that cannot be delayed, the ITDC Chairman, or the Vice-Chairman if the Chairman is not present,
may initiate a per rollam resolution. The per rollam resolution is adopted if at least four ITDC members agree with
its adoption.
3.6.8. Operational Risk Management Committee (ORCO)
The ORCO consists of seven members.
The ORCO has a quorum if at least four of its members are present, of which one is an ORCO member for the Risk
Management Division. Each ORCO member has one vote. Conclusions on each issue on the agenda are voted on
individually. A proposal presented by the ORCO Chairman is voted on first and subsequently counterproposals are
voted on in the order as submitted. A resolution is adopted if approved by an absolute majority of votes of the
ORCO members present and if at least one ORCO member for the Risk Management Division voted for adopting
the resolution.
In urgent cases that cannot be delayed, the ORCO Chairman, or the Vice-Chairman if the Chairman is not present,
may initiate a per rollam resolution. The per rollam resolution is adopted if at least four ORCO members approve
its adoption and if the ORCO Chairman and at least one ORCO member for the Risk Management Division voted
for adopting the resolution.
Authorised Auditors
In a 2017 tender, the Bank selected Deloitte Audit, s.r.o. to be its auditor. Deloitte Audit, s.r.o.’s registered office is located
at the following address:
Churchill I building
Italská 2581/67
Vinohrady
120 00 Prague 2
The contract was signed for the period from 2017 to 2020. In 2020, Deloitte Audit, s.r.o. charged fees for services provided
under the Audit Services Contract in the following scope:
In 2020, the Bank incurred additional costs arising from the statutory audit of CZK 90 thousand in relation to the
assessment of a structural change in subsidy claims.
Court and Arbitration Proceedings
Court and Arbitration Proceedings with ČEB’s participation as of 31 December 2020
ČEB is currently involved only in disputes related to the collection of receivables, especially legal disputes as part
of individual insolvency proceedings with ČEB’s debtors. The financial impacts of the outcomes of these
proceedings represent only potential income for ČEB (not an expense), but given their size, their effect on ČEB’s
operating profit or financial situation is insignificant. Most of the disputes that ČEB is involved in are proceedings held
on behalf of ČEB but on the account of EGAP due to the relations between ČEB and EGAP arising from insurance
agreements..
3.8.
3. NARRATIVE PART
56
Table 16
Costs in CZK thousand net of VAT 2020 2019
Statutory audit of the annual financial statements 1,590 1,560
Other assurance services 120 120
Other non-audit services – –
Total 1,710 1,680
Source: ČEB
3.7.
3.9.
57
Contracts of Significance
During 2020, the Bank concluded no significant contracts (except for the contracts concluded as part of the issuer’s
regular business activities) that could establish any liability or claim which would be significant with regard to the
issuer’s ability to meet its obligations arising from issued bonds towards securities holders.
Declaration of the Issuer’s Authorised Persons
The below-signed authorised persons of Česká exportní banka, a.s. (the issuer) declare that, to the best of their
knowledge, the annual report gives a true and fair view of the issuer’s financial position, business activities and
economic results for the past reporting period and the outlook of the development of its financial situation, business
activities and economic results.
In Prague on 26 March 2021
Ing. Jaroslav Výborný, MBA Ing. Emil Holan
Chairman of the Board of Directors and CEO Vice-Chairman of the Board of Directors
4
Financial Part
4. FINANCIAL PART
>>>
Table of Contents
60
0CONTENT OF THE FINANCIAL STATEMENTS
0
INCOME STATEMENT 62
0STATEMENT OF COMPREHENSIVE INCOME 62
0STATEMENT OF FINANCIAL POSITION 63
0
STATEMENT OF CHANGES IN EQUITY 64
0
CASH FLOW STATEMENT 65
1 GENERAL INFORMATION 66
2 ACCOUNTING POLICIES 66
(a) Basis of presentation 66
(b) Segment reporting 67
(c) Foreign currency translation 68
(d) Derivative financial instruments 68
(e) Interest income and expense 68
(f) Fee and commission income 69
(g) Financial assets 69
(h) Impairment of assets 71
(i) Sale and repurchase agreements 71
(j) Tangible and intangible assets 72
(k) Leases 72
(l) Cash and cash equivalents 72
(m) Employee benefits 72
(n) Taxation and deferred income tax 73
(o) Financial liabilities 73
(p) Share capital 73
(q) State subsidy 73
(r) Provisions 74
(s) Guarantees and loan commitments 74
(t) Collateral and guarantees received 74
3 RISK MANAGEMENT 74
(a) Strategy for using financial instruments 74
(b) Credit risk 75
(c) Market risk 90
(d) Currency risk 91
(e) Interest rate risk 91
(f) Liquidity risk 92
(g) Fair values of financial assets and liabilities 93
(h) Capital management 95
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES 96
(a) Impairment losses on financial assets, loan commitments, guarantees and contractual assets 96
(b) Assessment of the business model and contractual cash flows 96
(c) State subsidy 97
(d) Income taxes 97
5 OPERATING SEGMENTS 98
6 NET INTEREST INCOME 99
7 FEE AND COMMISSION INCOME 99
8 NET PROFIT/LOSS FROM FINANCIAL OPERATIONS INCLUDING STATE SUBSIDY 100
9 ADMINISTRATIVE EXPENSES, DEPRECIATION/AMORTISATION AND OTHER OPERATING COSTS 100
10 LOSSES (-) FROM THE IMPAIRMENT OF FINANCIAL ASSETS NOT MEASURED AT FVTPL OR THEIR REVERSAL 101
ČESKÁ EXPORTNÍ BANKA, A.S.
FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS
ADOPTED BY THE EUROPEAN UNION
FOR THE YEAR ENDED 31 DECEMBER 2020
4. FINANCIAL PART
4
|
Financial Part
11 INCOME TAX 101
12 CASH AND CASH EQUIVALENTS 102
13 LOANS AND RECEIVABLES AT AMORTISED COST 102
14 DERIVATIVE FINANCIAL INSTRUMENTS 104
15 DEBT SECURITIES 105
16 TANGIBLE FIXED ASSETS 106
17 INTANGIBLE FIXED ASSETS 107
18 OTHER ASSETS 107
19 FINANCIAL LIABILITIES AT AMORTISED COST 107
20 OTHER LIABILITIES 109
21 PROVISIONS 110
22 DEFERRED INCOME TAXES 111
23 SHARE CAPITAL 112
24 REVALUATION RESERVE 112
25 RESERVES 113
26 CONTINGENT LIABILITIES AND COMMITMENTS 113
27 RELATED-PARTY TRANSACTIONS 114
28 SUBSEQUENT EVENTS 114
61
The notes are an integral part of the financial statements.
INCOME STATEMENT
Prepared in accordance with International Financial Reporting Standards as adopted by the European Union
(CZK’m) Note 2020 2019
Interest income 1,265 1,304
of which: Interest income calculated using the effective interest rate method
1
1,126 1,301
Interest expense (485) (751)
Net interest income 6 780 553
Net fee and commission income 7 13 4
Net profit (loss) from financial operations, including state subsidy 8 22 45
Other operating income 9 105 6
Other operating expenses 9 (280) (3)
Profit (loss) from operating activities 640 605
Administrative expenses 9 (257) (281)
Amortisation and depreciation 9 (67) (73)
Modification Gains and Losses 9 (1)
Impairment losses on financial assets not reported at fair value through P/L (or reversal) 10 159 (96)
Creation (reversal) of provisions 10 (47) (106)
Profit before income tax 437 48
Income tax expense 11 (273) 18
Net profit (loss) for the year 164 66
STATEMENT OF COMPREHENSIVE INCOME
Under International Financial Reporting Standards as adopted by the European Union
(CZK’m) Note 2020 2019
Profit or (loss) of current year after tax 164 66
Total change in OCI from revaluation of financial assets 24 (13) 2
OCI from cash flow hedges (effective part) 24 – 35
Other comprehensive income (OCI) (13) 37
Total comprehensive income 151 103
62
4. FINANCIAL PART
1
Note In 2020, due to the increase in the materiality of interest income not calculated using the effective interest rate, the item Interest income
calculated using the effective interest rate has been recorded. The figure for the previous period has been reported according to the new rules.
This change does not constitute a correction of reporting according to IAS 8.
63
The notes are an integral part of the financial statements.
STATEMENT OF FINANCIAL POSITION
Prepared in accordance with International Financial Reporting Standards as adopted by the European Union
(CZK’m) Note
2020 2019
ASSETS
Cash and cash with the central bank
and other deposits repayable on demand 12 2,638 1 ,161
Debt securities at fair value recognized in the OCI 3b, 15 1,534 1,821
Financial assets at amortised cost 36,072 39,587
Debt securities at amortized cost 3b, 15 1,603 1,596
Loans and receivables at amortized cost 3b, 13 34,469 37,991
Hedging derivatives 14 – –
Property, plant and equipment 16 96 124
Intangible assets 17 10 33
Other assets 18 877 965
Current income tax assets –154
Deferred income tax assets 22 9 31
Total assets 41,236 43,876
LIABILITIES
Derivatives for trading 14 256 110
Financial liabilities at amortized cost 19 33,022 36,079
Hedging derivatives 14 16 24
Other liabilities 20 283 294
Provisions 3b, 21 243 198
Current income tax liabilities 94 –
Total liabilities 33,914 36,705
Share capital 23 5,000 5,000
Revaluation reserve 24 16 29
Statutory reserve 25 794 791
Other special funds 25 1,348 1,285
Profit or loss for the year 164 66
Total equity 7,322 7,171
Total liabilities and equity 41,236 43,876
64
The notes are an integral part of the financial statements.
STATEMENT OF CHANGES IN EQUITY
Prepared in accordance with International Financial Reporting Standards as adopted by the European Union
(CZK’m) Note Share Retained Unpaid loss Statutory Export risk Revaluation Total
capital earnings from previous reserve reserve reserve
period
At 1 January 2019 5,000 352 (127) 773 1,078 (8) 7,068
Total change in OCI from revaluation
of financial assets 24 – – – – – 2 2
Change in cash flow hedges, net of tax 24 – – – – – 35 35
Net profit/(loss) for the year – 66 – – – – 66
Total comprehensive income – 66 – – – 37 103
Transfer to other special funds 25 – (207) – – 207 – –
Transfer to statutory reserve 25 – (18) – 18 – – –
Methodical changes – implementation of IFRS 9 – (127) 127 – – – –
At 31 December 2019 5,000 66 – 791 1,285 29 7,171
Total change in OCI from revaluation
of financial assets 24 – – – – – (13) (13)
Change in cash flow hedges, net of tax 24 – – – – – – –
Net profit /(loss) for the year – 164 – – – – 164
Total comprehensive income – 164 – – – (13) 151
Transfer to other special funds 25 – (63) – – 63 – –
Transfer to statutory reserve 25 – (3) – 3 – – –
At 31 December 2020 5,000 164 – 794 1,348 16 7,322
4. FINANCIAL PART
65
The notes are an integral part of the financial statements.
CASH FLOW STATEMENT
Prepared in accordance with International Financial Reporting Standards as adopted by the European Union
(CZK’m) Note 2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received 1,365 8,264
Interest paid (585) (937)
Net fee and commission received 122 40
Net trading and other net income received 153 (87)
Recoveries on loans previously written off 2,453 3,201
Cash payments to employees and suppliers (603) (357)
Income tax paid 11 (27)
Other taxes paid (29) –
Net cash used in operating activities before changes in operating assets and liabilities 2,887 10,097
CHANGES IN OPERATING ASSETS AND LIABILITIES
Decrease (increase) in loans to banks (3,920) (2,988)
Decrease (increase) in loans to customers 4,446 (3,423)
Decrease (increase) of other assets 42 31
Decrease (increase) in other liabilities 1 95
Increase (decrease) in due to banks 5,086 (3,975)
Increase (decrease) in due to customers (3,261) 1,026
Cash used in operating activities 5,281 863
CASH FLOWS FROM INVESTMENT ACTIVITIES
Purchase of tangible and intangible fixed assets (51) (58)
Sale of tangible and intangible fixed assets –1
Purchase of securities – (25)
Proceeds from matured securities 164 248
Sale of securities 101 –
Net cash from investment activities 214 166
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts from issued bonds 1,081 9,470
Redemption of issued bonds (9,574) (16,247)
Lease payments (18) (18)
Return (receipt) of state subsidy (73) 73
Net cash from financing activities (8,584) (6,722)
Effect of exchange rate changes on cash and cash equivalents (10) (2)
Net increase in cash and cash equivalents (3,099) (5,695)
Cash and cash equivalents at the beginning of the year 12 5,868 11,563
Cash and cash equivalents at the end of the year 12 2,769 5,868
1 / GENERAL INFORMATION
Česká exportní banka, a.s. (the “Bank”) was established on 1 March 1995 and its registered address is Vodičkova 34/701, Prague 1. The
Bank does not have any branches in the Czech Republic or abroad.
The Bank is authorised to provide banking services, which predominantly comprise accepting deposits from the public and granting
loans and guarantees in Czech crowns and foreign currencies, issuing letters of credit, clearing and payment operations, trading on
its own account with financial instruments denominated in foreign currencies, with securities issued by foreign governments, with
foreign bonds and securities issued by the Czech government and the provision of investment services.
The activities of the Bank are primarily governed by Act No. 21/1992 Coll., on Banks, as amended, Act No. 256/2004 Coll., on Capital
Market, as amended, Act No. 58/1995 Coll., on Insurance and Financing Exports with State Subsidies (“Act No. 58/1995 Coll.”), and Act
No. 90/2012 Coll., on Business Corporations and Cooperatives (Act on Business Corporations), as amended. Concurrently, the Bank is
subject to the CNB’s regulatory requirements.
The principal objective of the Bank is to provide financing of Czech exports and investments abroad supported by the Czech state in
accordance with the European Union law and international rules – mainly through the provision of credit facilities and guarantees. The
General Meeting of the Bank makes decisions about profit allocation and in accordance with the Articles of Association the profit is
primarily used to contribute to the statutory reserve, export risk reserve or to other funds established by the Bank.
Pursuant to Act No. 58/1995 Coll., the provision of officially supported financing by the Bank is conditioned by the existence of collateral,
unless export credit risk is insured by Exportní garanční a pojišťovací společnost, a.s. (“EGAP”).
Pursuant to Act No. 58/1995 Coll., the Czech state is liable for the obligations of the Bank arising from the repayment of funds obtained
by the Bank and for obligations arising from other transactions by the Bank in the financial markets. The condition for providing officially
supported financing is the fact that at least two thirds of the Bank’s share capital is owned by the Czech state.
Standard & Poor’s confirmed the credit rating of “AA-” with stable outlook and Moody’s Investor Service increased the rating to “Aa3”
with stable outlook. The Bank’s issued bonds are listed on the Luxembourg Stock Exchange (Société de le Bourse de Luxembourg).
2 / ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless stated otherwise.
(a) Basis of presentation
The Bank’s financial statements have been prepared as stand-alone financial statements in accordance with International Financial
Reporting Standards as adopted by the European Union (“EU IFRS”). The financial statements have been prepared under the historical
cost convention modified for financial instruments. Financial instruments remeasured at fair value and securities pledged as collateral
are measured at fair value at the reporting date.
Newly applied amendments to the existing standards the application of which had a significant impact on the financial statements
None of the newly applied amendments to the existing standards had a significant impact on the financial statements for the year
ended 31 December 2020.
Newly applied amendments to the existing standards the application of which had no significant impact on the financial statements
l
Amendments to IAS 1 and IAS 8 – Definition of Material, effective date: 1 January 2020;
l
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform (phase 1), effective date: 1 January 2020;
l
Amendments to References to the Conceptual Framework, effective date: 1 January 2020; and
l
Amendments to IFRS 3 – Definition of a Business, effective date: 1 January 2020.
4. FINANCIAL PART
66
These amendments to the existing standards had no significant impact on the amounts or disclosures in the financial statements of
the Bank.
Amendments to the existing standards that are not yet effective and have been adopted by the European Union
At the date of approval of these financial statements, the following amendments to the existing standards were issued by IASB and
adopted by the European Union, but are not yet effective.
l
Amendments to IFRS 16 – Leases – Covid-19-Related Rent Concessions, effective date: 1 June 2021The Bank has decided not to
apply amendments to IFRS 16 – Leases before their effective date.
Standards and interpretations that are not yet effective and have not been adopted by the European Union
At the date of approval of these financial statements, the following standards and amendments to the existing standards were issued
by the IASB but not yet adopted by the European Union:
l
IFRS 17 – Insurance Contracts, effective date: 1 January 2023;
l
IFRS 14 – Regulatory Deferral Accounts, effective date: 1 January 2016;
l
Amendments to IFRS 3 – References to the Conceptual Framework, effective date: 1 January 2022;
l
Amendments to IFRS 4 – Extension of the Temporary Exemption from Applying IFRS 9, effective date: 1 January 2021;
l
Amendments to IFRS 10 a IAS 28 – Sales or Contributions of Assets between an Investor and its Associate or Joint Venture; the effective
date has been postponed by IASB;
l
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform (phase 2), effective date: 1 January 2021;
l
Amendments to IAS 1 – Classification of Liabilities as Current or Non-Current, effective date: 1 January 2023.
l
Amendments to IAS 16 – Proceeds before Intended Use, effective date: 1 January 2022;
l
Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract, effective date: 1 January 2022; and
l
Annual improvements to IFRSs – 2018-2020 Cycle, effective date: 1 January 2022.
The Bank closely follows the issue of the interest rate benchmark reform. A large part of the Bank’s portfolio is denominated in EUR and
CZK and linked to the EURIBOR and PRIBOR rates. The new administrators approved by central banks (European Money Markets Institute,
Czech Financial Benchmark Facility s.r.o.) reformed these rates by applying new methods. The Bank’s positions in USD will be valued
at LIBOR rates administered by ICE Benchmark Administration at least until 30 June 2023. At present, there is no suitable alternative
benchmark for USD LIBOR in terms of period length and credit risks that the Bank could use to revaluate its USD portfolio. The Bank’s
positions in other currencies are immaterial. The Bank adjusts the conditions for the transition to new benchmark rates in financial
product contracts. In the area of derivatives, the Bank is ready to accede to ISDA IBOR Fallbacks Supplement, by which it will fulfil the
requirements for robust plans in terms of Article 28 of Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June
2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment
funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014. We expect that the transfer to new
benchmark rates will not have a material impact on the Bank’s statements.
The Bank anticipates that the adoption of the above standards and amendments to existing standards in the period of their first-time
adoption will have no significant impact on the financial statements of the Bank.
(b) Segment reporting
Operating segments are reported in accordance with the internal reports regularly prepared and presented to the Bank’s Board of
Directors which represents a group of managers authorised to make decisions on funds to be allocated to individual segments and
to assess their performance.
The Bank records two operating segments, which are derived from the special purpose for which it was established, i.e. the operation
of officially supported financing in accordance with Section 6 (1) of Act No. 58/1995 Coll., through independent accounting sets
(circles):
l
Separate set (circle) 001 – set of financing without ties to the state budget, operating activities and other relating activities in
accordance with the banking licence; and
l
Separate set (circle) 002 – set of officially supported financing eligible for subsidy.
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68
(c) Foreign currency translation
Functional and presentation currency
The financial statements of the Bank are presented in Czech crowns which is also the Bank’s functional currency (i.e. the currency of
the primary economic environment where the Bank operates).
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary
assets and liabilities in foreign currencies are reported in the income statement as ‘Net profit from financial operations including state
subsidy’.
The foreign exchange rates of Czech crowns to principal foreign currencies were as follows:
EUR USD
31 December 2020 26.245 21.387
31 December 2019 25.410 22.621
(d) Derivative financial instruments
In the normal course of business, the Bank enters into contracts for derivative financial instruments, including cross currency interest
rate swaps, interest rate swaps, forward rate agreements (“FRA”), currency swaps and currency forwards. The derivative financial
instruments are concluded with counterparties from the OECD countries with investment ratings granted by reliable rating agencies
or credible domestic counterparties, the rating of which is regularly assessed.
The Bank uses these financial instruments to minimise the impact of interest rate and currency risks so as not to exceed the acceptable
level of market risk.
Financial derivatives are initially recognized at fair value in the balance sheet on the date on which the derivative contract is entered
into and are subsequently measured at the current fair value through profit or loss (FVTPL). Derivatives are carried as assets when the
fair value is positive and as liabilities when the fair value is negative.
The Bank does not trade derivatives with aim of generating profit; however, in respect of certain contracts contracted as hedges, the
Bank does not apply the hedge accounting principles. This usually relates to derivative instruments whose primary goal relates to
currency risk hedging. The gains or losses from these derivatives are reported in the income statement under ‘Net profit from financial
operations including state subsidy’.
The Bank decided not to apply the hedge accounting principles pursuant to IFRS 9 and it continues to apply the guidance set out in
IAS 39. Derivatives accounted for under hedge accounting are those derivatives which also comply with hedge accounting rules: the
hedging terms are documented at the initial phase of the hedging relationship and the hedging is effective. The hedge relationship
is considered effective if changes in the fair value of the hedging and hedged instruments fluctuate between 80% and 125%. In
hedging changes in the interest rate risk, the hedged item involves interest on the portion of the instrument which bears interest and
is valued at amortised cost corresponding to the nominal value of the hedging derivative instrument. The hedged item usually includes
portions of provided loans or contributions, or received loans or issued bonds. Cash flow hedging is also used for the hedging of future
highly-probable cash flows from these financial instruments. Changes in the fair value of derivatives that have been designated and
qualify as fair value hedges are recorded in the income statement, together with the relating changes in the fair value of the hedged
assets or liabilities that are attributable to the hedged risk. The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges are recognized through equity. The gain or loss relating to the ineffective portion of the
hedge, which usually arises due to minor differences in the timing of cash flows for the hedged and hedging instruments in cash flow
hedging, is immediately recognized in the income statement under ‘Net profit from financial operations including state subsidy’.
(e) Interest income and expense
Interest income and expense for all interest-bearing financial instruments are recognized under ‘Interest income’ and ‘Interest expense’
in the income statement using the effective interest rate method, with the exception of interest on derivatives hedging interest rate risks.
4. FINANCIAL PART
Interest on financial instruments at fair value through profit or loss (FVTPL) that do not function as effective hedging instruments is part
of gains and losses arising from changes in fair value reported under ‘Net profit from financial operations including state subsidy’.
The effective interest rate method is a method of calculating the gross amortised cost of a financial asset or financial liability and
allocating the interest income or interest expense until maturity of the relevant asset or liability. The effective interest rate is the rate that
discounts estimated future cash flows over the expected lifecycle of the financial instrument, or a shorter period (if relevant), to the
gross amortised cost of the financial asset or financial liability. In determining the effective interest rate, the Bank estimates cash flows
considering all the contractual terms of the financial instrument but without reflecting credit losses. The effective interest rate is adjusted
for estimated credit losses only if a credit-impaired financial asset is acquired or originates.
Calculation of the effective interest rate includes all fees and payments made between or received by parties to the contract that are
an integral part of the effective interest rate, transaction costs, commitment commissions and all other premiums or discounts.
For credit-impaired financial assets, interest income is recognized at amortised cost using the effective interest rate adjusted for credit
risk, i.e. at gross amortised cost decreased by allowances.
(f) Fee and commission income
Fees and commissions, which are not part of the effective interest rate, are generally recognized on an accruals basis when the service
is provided. Commitment commissions for loans that are not likely to be drawn are recognized as revenue on the date on which the
liability is derecognized. Advisory and service fees are reported based on the appropriate service contracts and they are recognized
in income as the Bank fulfils its liabilities.
(g) Financial assets
The Bank classifies its financial assets upon their initial recognition based on the Bank’s business model and based on the assessment
of the contractual cash flows of the financial assets.
The Bank applies a mixed business model. The objective of the main business model is to obtain contractual cash flows, which are the
principal and interest on outstanding principal. The Bank’s supplementary strategy is the purchase and holding of an asset with the
purpose of obtaining contractual cash flows from the principal and interest as well as selling the asset.
The financial asset is measured at amortised costs (AC) if it is:
a) Held as part of the business model whose objective is to hold assets in order to obtain contractual cash flows; and
b) Contractual terms and conditions of the financial asset set specific dates of cash flows composed exclusively of payments of the
principal and interest on the unpaid portion of the principal.
The financial asset is measured at fair value through other comprehensive income (FVOCI) if it is:
a) Held as part of the business model whose objective is achieved by collecting contractual cash flows as well as by the sale of the asset; and
b) Contractual terms and conditions of the financial asset set specific dates of cash flows composed exclusively of payments of the
principal and interest on the unpaid portion of the principal.
Financial assets that do not meet the above conditions are measured at fair value through profit or loss (FVTPL). Only derivative
instruments are mandatorily measured at FVTPL by the Bank.
The Bank does not hold any equity interests in assets.
If the financial asset is part of a hybrid contract, it is assessed from the perspective of the business model, characteristics of cash flows
and valuation of the entire hybrid contract.
The assessment of the relation to the business model is based on past experience, goals to be met, the assessment method and
management of risks and expected benefits.
The characteristics of contractual cash flows are assessed in respect of whether they are solely payments of the principal and interest.
For arrangements concerning interest, it is assessed whether they are consistent with basic contractual arrangements, i.e. whether the
interest includes only credit risk, time value of money and other basic risks and profit margins.
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70
Financial assets can be reclassified only if the business model is changed.
Initial recognition of financial assets
All purchases and sales of financial assets or liabilities, except for derivatives, are recognized at the settlement date. Upon initial
recognition, financial assets are measured at fair value through profit or loss. For financial assets not measured at FVTPL, the fair value
is increased or decreased upon initial recognition by transaction costs that are directly related to the acquisition of the financial asset.
Upon the purchase of a financial asset, there is no difference arising between the recognized fair value of the financial asset
recognized by the Bank and the fair value using valuation methods.
Valuation of financial assets as of the balance sheet date
Financial assets at amortised cost (AC) predominantly include provided loans and other receivables and part of purchased bonds.
The amortised cost is increased in ‘Interest income’ using the effective interest rate. The impairment loss is presented in the income
statement.
Bonds at fair value through other comprehensive income (FVOCI) are remeasured at fair value after initial recognition. Gains and
losses arising from changes in fair values are reported directly through equity until the financial asset is derecognized. Impairment is
recognized in equity through profit or loss. However, the interest calculated using the effective interest rate method is reported in the
income statement under ‘Interest income’.
In determining the fair value of quoted investments at level 1, the Bank uses the current quoted offer prices. If the market is not active
for a specific financial asset, the Bank determines the fair value using valuation techniques (level 2). The Bank uses quoted supply and
demand market rates as input values for the measurement of the fair values of financial assets or liabilities.
As of the balance sheet date, management of the Bank assessed the used valuation techniques to ensure that they sufficiently reflect
the current market conditions including the relative liquidity of the market and credit spreads.
Modification of financial assets
If the contractual conditions of a financial asset are changed or otherwise modified, the Bank assesses whether the change was
sufficiently material to result in derecognition. Material modification is indicated by the following events:
l
Change in the loan currency;
l
Change in the debtor; and
l
Impact of a change in the present value of future cash flows after and before modification calculated using the effective interest
rate is higher than 5% (inclusive), which is often indicated by complete restructuring (e.g. division of an existing loan into several
loans with various conditions), change of interest rate from fixed to variable or vice versa, significant extension of the loan’s
contractual maturity.
In such a case, the original asset is derecognized and the Bank recognises a new financial asset measured upon initial recognition
at fair value. The difference between the amortised cost of the original asset and the fair value of the new modified asset is reported
in profit or loss.
If the modification is not material, the Bank recalculates the gross carrying amount of the financial asset by discounting modified
contractual cash flows with the original effective interest rate and the difference is reported in profit or loss (‘Modification Gains and
Losses’).
Derecognition of financial assets
Financial assets are derecognized when rights for the collection of cash flows cease to exist or when the Bank transfers all risks and
benefits arising from their ownership. The difference between the carrying amount of the financial asset (or its part) that ceased to
exist or was transferred to another party, and the payment made is recognized in profit or loss.
4. FINANCIAL PART
(h) Impairment of assets
The Bank creates allowances and provisions for expected credit losses in respect of financial assets at amortised cost or at fair value
through other comprehensive income, issued financial guarantees, provided loan commitments and receivables arising from
contractual assets.
As of the date of initial recognition the Bank assesses whether the credit risk has increased, i.e. the risk that the Bank will incur a loss
caused by a failure of the counterparty to meet its obligations. If the credit risk has not increased (stage 1), the Bank calculates
allowances and provisions in the amount of twelve-month expected credit losses (ECL) for each reporting date. Twelve-month ECL are
a part of lifetime credit losses that correspond to expected credit losses arising from a failure of the financial instrument that may
occur within 12 months from the date of recognition.
If a material increase in credit risk occurs (stage 2) from the initial recognition, the Bank recognises an allowance or provision in the
amount of lifetime expected credit losses. Lifetime expected credit losses involve estimated credit losses arising from any failure to meet
commitments during the estimated lifetime of financial assets.
Financial assets are impaired (stage 3) if one or more events occurs having an adverse impact on the expected future cash flows
related to the financial assets. For purchased or originated credit-impaired (POCI) assets, allowances are reported only as the
accumulated change in expected credit losses for the period since the initial recognition.
Allowances decrease the value of the financial asset at amortised cost (AC) in the balance sheet. Allowances against financial assets
at fair value through other comprehensive income (FVOCI) are recognized through other comprehensive income. Provisions for credit
losses are reported in the balance sheet under “Provisions”.
The calculation of expected credit loss (ECL) is based on the undistorted and probability-weighted amount that is the result of various
scenarios, includes the time value of money and is based on adequate and demonstrable information that is available without
incurring disproportionate costs. Credit losses are defined as a difference between all contractual cash flows payable to an entity
under the relevant contract and all cash flows that are expected to be collected by the entity (i.e. all cash deficits), discounted by the
original effective interest rate (or by the effective interest rate adjusted for credit risk in respect of purchased or originated credit-
impaired financial assets).
The policies and assumptions used for the quantification of expected credit loss are described in Note 3b).
Write-off
Write-off is made upon realisation of collateral or if the Bank no longer has adequate expectations that the value of the financial
asset as a whole or its part will be recovered.
(i) Sale and repurchase agreements
Financial assets sold under repurchase agreements (repos) are not derecognized and they are reported separately as pledged
collaterals in off-balance sheet. Received payment for the sale is considered a received loan.
Financial assets purchased under resale agreements (reverse repo transactions) are considered for loans granted to other banks or
customers. They are classified in accordance with the Bank's business model and the characteristics of the negotiated cash flows as
AC or, FVOCI.
The difference between the sale and repurchase prices is treated as interest and accrued over the term of repo agreements using
the effective interest rate method.
Securities borrowed are not recognized in the financial statements, unless they are sold to third parties, in which case the purchase
and sale are recorded together with the corresponding gain or loss included in income from trading. The obligation to return these
securities is recorded at fair value as a trading liability.
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(j) Tangible and intangible assets
All tangible and intangible assets are stated at historical cost less accumulated depreciation and amortisation, respectively. Historical
cost includes expenditures that are directly attributable to the acquisition of the assets.
Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.
Depreciation of tangible and intangible fixed assets is calculated using the straight-line method over their estimated useful lives, as
follows:
Technical improvements are included in the asset’s carrying amount, only when it is probable that future economic benefits associated
with the item will flow to the Bank and the cost of the item can be measured reliably. Repair and maintenance costs are charged to
the income statement when incurred.
Tangible fixed assets under construction are not depreciated until relevant assets are completed and put into use. Gains and losses
on disposals are derived from their carrying amounts and proceeds from the sale and are included in the ‘Other operating earnings’
or ‘Other operating expenses’. The net book value of assets and useful lives is monitored, and adjusted as appropriate at each balance
sheet date.
If the asset’s carrying amount is greater than its estimated recoverable amount, an allowance is created for the asset. The estimated
recoverable amount is the higher of the asset’s fair value including the costs of sale and the value in use.
(k) Leases
The Bank is involved in lease arrangements only as a lessee. The Bank does not apply the requirements of the standard concerning
the right-of-use asset and lease liability for short-term and low-value leases. In such a case, lease payments are recognized over the
lease term in the income statement. The identified fixed or material right-of-use asset is measured at cost in the value of the initial
recognition of the lease liability, payments made until the inception of the lease, direct costs and estimated costs of cancellation of
the lease. The right-of-use asset is expensed over the estimated lease term. The lease liability is measured at the inception of the lease
at the present value of the future payments, using the interest rate implicit in the lease, or the incremental borrowing rate of the lessee.
(l) Cash and cash equivalents
For the purposes of cash flow statement, cash and cash equivalents are defined as assets with less than three months’ maturity and
include current accounts and deposits.
(m) Employee benefits
The Bank regulates the provision of employee benefits by its internal policies (e.g. meal contributions, additional pension insurance
contributions, sick days, contribution to the Cafeteria system benefits, housing loan, etc.).
The Bank provides its employees with a contribution to additional pension insurance based on a defined contribution scheme.
Contributions are charged to the income statement when paid.
The Bank recognises a provision for deferred bonuses and other long-term employment benefits, i.e. retirement bonuses. This provision
is created by the sum of liabilities under these benefits at the balance sheet date. The plan of other long-term benefits does not have
any proceeds from assets. The present value of the provision is calculated on the basis of the incremental approach which takes
into account estimated employee fluctuation.
4. FINANCIAL PART
Years-
Motor vehicles 5
Furniture and fittings 2–10
Office equipment 2 – 5
Other office equipment 2–10
Software 3 – 5
(n) Taxation and deferred income tax
Deferred income tax is recognized using the full balance sheet liability method. It is determined based on temporary differences
between the tax and net book value of assets and liabilities. Deferred income tax is determined using the tax rates that have been
enacted at the balance sheet date and relate to the period in which the realisation of the deferred tax asset or settlement of the
deferred tax liability are expected.
Deferred tax related to the revaluation of items which are charged directly to equity is also charged directly to equity and subsequently
recognized in the income statement together with the deferred gain or loss.
Deferred tax assets are recognized where it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Income tax payable is recognized, pursuant to applicable tax regulations in the Czech Republic, as an expense in the period in which
taxable profits are generated.
(o) Financial liabilities
Initial recognition of financial liabilities
Upon initial recognition, financial liabilities are measured at fair value. For financial liabilities not measured at FVTPL, the fair value
upon initial recognition is increased or decreased by the transaction costs directly related to the acquisition of the financial assets.
Upon the acquisition of the financial liability, the Bank records no difference between the recognized fair value of the financial liability
and the measurement amount as of the respective date using a valuation technique.
Valuation of financial liabilities as of the balance sheet date
The category of financial liabilities at amortised cost (AC) includes payables to banks, to customers, issues of own bonds and other
financial liabilities. A derivative embedded in a contract on a financial liability is separated and recognized separately if the economic
features of the embedded derivative and the related risks are not closely related to the economic features of the host contract,
a separate instrument with the same conditions as the embedded derivative would satisfy the definition of a derivative and the hybrid
contract is not measured at fair value through profit or loss.
Derecognition of financial liabilities
Financial liabilities are derecognized as soon as they cease to exist, i.e. when the liability is cancelled, settled or ceases to be effective.
The difference between the carrying amount of the financial liability that ceased to exist or was transferred to another party and the
payment made is recognized in profit or loss.
(p) Share capital
Ordinary shares are classified as equity in the amount recorded in the Commercial Register. Other costs directly attributable to the issue
of new shares are shown as a deduction of retained earnings, net of tax.
(q) State subsidy
In accordance with Act No. 58/1995 Coll., the Bank receives subsidies from the state budget to cover losses resulting from the operations
related to supported financing.
The amount of the subsidy is calculated as the sum of:
l
The recorded interest income from operating long-term supported financing (reduced by a fixed interest mark-up);
l
Plus interest income from the current investment of available financial resources intended for supported financing;
l
Minus actual interest expense from received funds;
l
Minus relating fees paid by the Bank to acquire these funds;
73
74
l
Minus allowances and provisions; and
l
Plus/minus the difference between income from financial derivative transactions and costs related to these transactions, foreign
exchange rate differences and other costs that were incurred by the Bank on acquiring the funds.
The income from the state subsidy is recognized in the income statement in the period in which the loss occurs. The title to the state
subsidy is recognized in other receivables when the subsidy is virtually certain.
(r) Provisions
Provisions are recognized when the Bank has a present legal or constructive obligation resulting from past events, it is likely that an
outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. In addition, provisions are
recognized for expected credit losses from issued financial guarantees and provided loan commitments.
(s) Guarantees and loan commitments
The Bank also acts as an issuer of guarantees. Bank guarantee contracts are contractual relationships stipulating that the issuer will
provide a payment to the beneficiary, subject to events disclosed in the letter of guarantee. Such guarantees are granted by the Bank
based on the requirement of the exporter. Bank guarantees are initially recognized in the financial statements at fair value on the
date the guarantee was given. Subsequently, the Bank’s liabilities under such guarantees are measured at the higher of (i) expected
credit losses, or (ii) remaining unaccrued amounts upon initial recognition. Allowances are recognized against receivables from
outstanding fees.
The Bank enters into contingent financial relationships also by granting loan commitments. Loan commitments are included in the
accounting records when all conditions precedent set in the loan agreement have been met. Pursuant to the loan agreement, the
Bank is bound to provide a loan, or draw the loan for the benefit of the debtor when the conditions precedent have been met. The
conditions precedent usually include an effective insurance policy. Before the conditions precedent have been met, signed loan
agreements are recorded solely in the information system of the Bank. Loan commitments are initially measured at fair value which is
usually the present value of fees for the provision of the commitment. Assuming that the provision of the loan commitment is probable,
these fees are accrued using the effective interest rate and recognized in income over the term of the liability. Subsequently, loan
commitments are measured at the higher of expected credit losses, or the remaining unaccrued amounts reported upon first
recognition. Allowances are recognized against receivables from outstanding fees.
(t) Collateral and guarantees received
The Bank also receives guarantees issued by other banks and other collateral from other customers as a means of security. An
important component of contingent assets is the insurance of export credit risks arranged by or in favour of the Bank. The collateral is
taken into account in assessing the risks of loans.
3 / RISK MANAGEMENT
(a) Strategy for using financial instruments
The Bank funds export loans through the use of debt securities issues and long-term borrowings; short-term borrowings from the
interbank market and customer deposits are used as additional sources of funding. Bank stores available funds in bonds with low
credit risk, mainly in state bonds or bank deposits. The Bank uses financial instruments to hedge against interest rate and foreign
exchange changes.
The Bank deposits free funds in other banks at fixed rates and for various periods, and uses customers’ deposits as loan collateral and
as means of funding export loans. The Bank seeks lending opportunities to commercial borrowers with acceptable credibility. Such
exposures involve not only loans and advances, but the Bank also enters into guarantees and other commitments.
The Bank’s strategy does not involve generating profit through trading in financial instruments to take advantage of fluctuations in
interest and exchange rates. For this reason, the Bank does not create any trading portfolio.
4. FINANCIAL PART
75
The Board places trading limits on the level of exposure that can be taken in relation to all daily market positions. With the exception
of specific hedging arrangements, foreign exchange and interest rate exposures are normally offset by entering into counterbalancing
positions, thereby controlling the variability in the net cash amounts required to liquidate market positions. The Bank uses selected
derivatives for the fair value hedging to minimise the impact of changes in fair value on the income statement.
The Bank hedges part of its existing interest rate risk resulting from any potential decrease in the fair value of assets or increase in the
fair value of liabilities denominated both in CZK and foreign currencies using interest rate swaps, FX derivatives and cross currency
interest rate swaps.
In 2020 and in 2019, the Bank did not make any reclassification of securities.
(b) Credit risk
The Bank is exposed to credit risk, which is the risk that a counterparty will be unable to repay amounts in full when they fall due. The
exposure results from individual products of the Bank provided under supported export financing and from the Bank’s operations on
money and capital markets.
The Bank has established a system of approval authorities, depending on the amount of the total limit for the customer. In the
organisational structure, credit risk management and control are part of the Risk Management section for which the relevant Board
member is responsible.
Credit risk measurement
The Bank assesses the probability of default of individual counterparties on an individual basis with the use of rating models. The Bank
has developed a rating model for assessing the risk level of corporate customers, risks of banks and a model for project quality
assessment. The rating models are subject to validation and are updated as and when necessary.
Rating Level of risk
Description
Conversion
value to the rating of
Standard&Poor’s
1 Very low Entities with this rating have a very high credit quality. from AAA to -AA-
The financial situation is very stable and other economic factors are highly favourable.
The ability to meet its obligations on time is very high.
2 Low Entities with this rating have a high credit quality. from A+to A-
The financial situation is stable and other economic factors are favourable.
The ability to meet its obligations on time is high.
3 Lower Entities with this rating have a very good credit quality. from BBB+ to BBB-
The financial situation is better-than-average and other economic factors are highly
satisfactory. The ability to meet its obligations on time is very good.
4 Medium Entities with this rating have a good credit quality. from BB+ to BB-
The financial situation is acceptable and other economic factors are satisfactory.
The ability to meet its obligations on time is good.
5 Higher Entities with this rating have a lower credit quality. from B+ to B-
The financial situation is slightly deteriorated and other economic factors are
slightly below average. The ability to meet its obligations on time is lower.
6 High Entities with this rating have a lower credit quality. from CCC+ to CCC-
The financial situation is deteriorated and other economic factors are below average.
The ability to meet its obligations on time is lower.
7 Very high Entities with this rating have a low credit quality. from CC+ to C-
The financial situation is unstable and other economic factors are highly below average.
The ability to meet its obligations on time is uncertain.
D Default Entities with this rating have a very low credit quality. default
The financial situation is highly unstable and other economic factors are unfavourable.
The ability to meet its obligations on time is unlikely or impossible.
The Bank’s financial assets are classified into 3 risk stages (Stage I – III) and the special POCI category.
l
Stage I includes financial assets for initial recognition (excluding POCI) and financial assets for which the credit risk has not
significantly increased from initial recognition to the reporting date.
l
Stage II includes financial assets for which credit risk has increased significantly from initial recognition to the reporting date but
which are not credit-impaired until the reporting date.
l
Stage III includes financial assets that are credit-impaired at the reporting date (default).
l
Financial assets classified as POCI include financial assets that are impaired at the date of initial recognition, except for receivables
from invoices.
Significant increase in credit risk
At each reporting date, the Bank has to assess whether or not the credit risk related to the financial asset has significantly increased
since initial recognition.
The assessment of whether there has been a significant increase in credit risk since initial recognition is based on all reasonable and
demonstrable information available to the Bank without unreasonable expenses or effort. These include historical information,
information on future prospects and credit risk assessment over the estimated useful life of the financial asset, including information
on the circumstances that led to the potential modification. The assessment whether there has been a significant increase in credit
risk since initial recognition is based on a significant increase in the probability of default since initial recognition rather than on the
events that have occurred. In assessing the credit risk, the Bank takes into account the customer’s current projections and available
information on the anticipated market developments and the economy of the whole country. For receivables in the portfolio of assets
on the money and capital markets, the Bank anticipates that the credit risk is low due to the high rating of counterparties. This is ensured
by an extremely prudent policy applied at the decision-making level when approving credit limits, which are re-assessed every 12 months.
The portfolio of receivables from loans, loan commitments, issued guarantees and trade receivables, which arise solely from the Bank’s
customers, the Bank regularly monitors and assessed the following red flags:
l
The debtor has not complied with its non-financial contractual obligations towards the Bank for more than six months (e.g.
establishing a subsequent security, financial and non-financial covenants);
l
The beneficiary of the issued guarantee sent the Bank a request for extending a guarantee (extend or pay);
l
A modification of the financial asset (exposure) has been performed; the impact of the change (decrease) in the present value
of future cash flows after and before modification calculated using the original effective interest rate is less than 5 %;
l
Insolvency or similar bankruptcy proceedings in line with foreign legal regulations have been initiated against the debtor because
of an insignificant receivable
2
, which may lead to the declaration of bankruptcy and a petition for the commencement of such
proceedings have not been dismissed or rejected or the proceedings have not been suspended within 30 days from commencement;
l
Legal disputes (in which the Bank acts as a plaintiff or defendant) concerning material amounts (higher than 10% of the net book
value of the debtor’s assets);
l
Actual or anticipated changes that may considerably modify the debtor’s ability to pay its liabilities, such as the effect of significant
changes in macroeconomic variables (e.g. GDP development, inflation, significant change in the exchange rate, adverse
development of the prices of key commodities, decreasing the country’s rating by 2 notches or more) or other significant negative
information related to the business case or the debtor (e.g. adverse changes in market, financial, economic and technology conditions);
l
An off-balance sheet item meeting the following criteria:
– There is a performance obligation (legal or constructive) as a result of past events, it is possible to make a reasonably reliable
estimate of the performance probability;
– It is probable that the performance will occur and require an outflow of resources embodying economic benefits; “probable”
refers to probability of more than 50%.
A significant increase in credit risk (SICR) is acknowledged no later than when:
l
A receivable is past due by more than 30 days;
l
The debtor’s internal rating when compared to the initial recognition has deteriorated as follows:
76
4. FINANCIAL PART
2
Note: An insignificant receivable means a receivable whose full settlement will not result in the debtor’s bankruptcy or serious financial issues (to be assessed by
the risk management division)
Rating upon initial recognition Deterioration
1–3 by 3 notches
4–5 by 2 notches
6 by 1 notch
l
Payments are made by the guarantor but it was unknown when approving an allowance that payments would be sent by the
guarantor rather than the debtor;
l
The principal in a guarantee issued by the Bank does not meet the conditions of the guarantee, with the Bank anticipating the
beneficiary’s request to extend the guarantee (“extend or pay”); and
l
A statement of another creditor or the investigative, prosecuting and adjudicating bodies indicates that criminal proceedings have
commenced against the debtor of members of the statutory body because of a property crime committed in relation to their
business activity.
Debtor’s default
The event of default has been defined in the Bank based on historical experience for various types of financial instruments.
Debtor’s default refers to a situation when at least one of the following conditions has been met:
l
A receivable or its major portion (exceeding the amount of CZK 50 thousand) is past its due date for more than 90 days;
l
With respect to the debtor, an insolvency petition was dismissed, or the insolvency or similar proceedings were discontinued due
to insufficient debtor’s property;
l
The debtor intends to enter into, or has entered into, liquidation;
l
Bankruptcy of the debtor has been identified or declared, or the bankruptcy or similar proceedings have commenced under
foreign legislation, resulting in a loss or restriction of the debtor’s disposition rights;
l
The court has issued a decision on the invalidity or non-existence of the debtor (legal person), or the debtor (an individual) has
passed away;
l
Enforcement of a judgment concerning the sale of the debtor’s assets or distraint, including judicial lien, has been ordered based
on a final and conclusive judgment of the court or an administrative authority;
l
The Bank had to make payments for the debtor under provided guarantees; and
– The debtor has not paid such receivable within 90 days from the deadline specified by the accompanying loan agreement
concluded for performance under a guarantee (or within 90 days from the deadline for performance defined by the Bank if the
accompanying agreement is not concluded, or the deadline is not defined therein) and, simultaneously, the Bank has not agreed
on a payment schedule with the debtor in order to settle the Bank’s receivable arising in relation to payments made for the debtor
under provided guarantees; or
– probability that the debtor cannot settle such receivable without the use of security is more than 50%;
l
The Bank expects the receivable to be repaid, at least partially, from collateral liquidation.
l
An exposure under probation
3
where additional forbearance measures are granted or where the exposure becomes more than
30 days past due.
Recognition of allowances and provisions
Recognition of allowances and provisions is based on the expected credit loss (ECL), which is expressed as the weighted average of credit
losses.
For Stage I assets, the 12-month ECL is used to quantify the allowances and provisions, representing the expected credit losses incurred
as a result of a financial instrument default that may occur within twelve months from the reporting date.
In segments of receivables from loans, off-balance sheet products and trade receivables in Stage I, the Bank uses the portfolio approach
to determine the ECL. The collectively determined probability of loss determined based on an analysis of prior periods is applied to
exposure at default (EAD), where EAD is the gross carrying amount of the exposure net of all regulatory accepted collateral. The resulting
recognition of allowances and provisions is allocated to individual financial assets.
In the segment of receivables of the money and capital markets bearing low credit risk, the Bank uses an individual approach to quantify
ECL. The ECL quantification is based on three components used by the Bank: probability of default (PD), exposure at default (EAD), and
estimated loss given default (LGD). PD is an estimate of the probability of default over a given time period. EAD expresses the unsecured
portion of the receivable. LGD represents the Bank’s expected loss on the exposure, taking into account the specific characteristics of the
collateral.
For exposures with portfolio significance, the Bank’s calculation of allowances and provisions includes a coefficient expressed by
macroeconomic indicators based on the expectation of further economic developments of the country.
77
3
Note: A period of 2 years, starting from the date on which the non-performing exposure was classified as performing exposure.
For Stage 2, Stage 3 and POCI assets, the calculation of allowances and provisions uses the lifetime ECL, which are the expected credit
losses that arise from all possible failures to meet commitments over the expected life of the financial instrument. The Bank uses an
individual approach and the expected cash flow method for its determination. Estimated cash flows are determined by evaluators using
the estimated cash flow scenario.
At the same time, the following applies:
l
It is always required to use at least two scenarios with a non-zero weight, with the sum of individual weights being 100%;
l
The only exception is when the receivable is insured by a loan insurance company and the insurance company issued a statement
as regards insurance payments – in such a case, only one scenario will be used, i.e. cash flows will be based on the payments of
premium and reductions (if any) – based on a declaration of the loan insurance company;
l
If the receivable is insured by a loan insurance company, at least one scenario reflecting the possibility of insurance payments by
a loan insurance company must be used;
l
If the receivable is insured by a loan insurance company and it is estimated (probability of the scenario is >10%) that cash flows
will be composed of payments from the insurance company but the insurance company has not yet issued a statement, one of
the scenarios has to reflect the possibility of reducing insurance payments by the insurance company.
No financial asset of the Bank was arranged or originated as credit impaired (POCI).
Covid-19
In relation to the COVID-19 pandemic and the adopted government measures which affect virtually all areas of economic life, the Bank
introduced the following measures:
l
The macroeconomic forecast has been revised and an expert assessment of Stage 1 allowances/provisions has been carried out;
l
Once a week, the Credit Committee presents information on the latest the economic results of companies on the “COVID list” with
an exposure over CZK 50 million, in relation to the effects of the pandemic; and
l
In 04/2020 and 10/2020, conservative (pessimistic) scenarios were prepared for the 8 most significant exposures in the Bank in
relation to the possible effects of the pandemic.
The credit quality of the portfolio did not deteriorate due to the pandemic. Only one of the Bank’s clients used the statutory moratorium.
Overall, the effect of the pandemic on the increased creation of allowances/provisions was immaterial.
78
4. FINANCIAL PART
The Bank decided to separately disclose a part of short-term Other receivables from debtors, the impairment of which is monitored in
accordance with IFRS 9.
Exposures by level of credit risk
(CZK’m) 2020
Book
Carrying amount (gross) Allowances
value Stage 1 Stage 2 Stage 3 Stage 1 Stageň 2 Stage 3
(net)
Debt securities at fair value recognized in OCI 1,534 1,534 –––– –
Government Institutions 1,402 1,402 – – – – –
Credit institutions 132 132 – – – – –
Financial assets at amortised cost 36,072 14,746 15 641 6,962 (20) (166) (1,091)
Debt securities at amortised cost 1,603 1,603 – – – – –
Government Institutions 1,553 1,553 – – – – –
Credit institutions 50 50 – – – – –
Loans and receivables at amortised cost 34,469 13,143 15 641 6,962 (20) (166) (1,091)
Central banks 4,988 4,989 – – (1) – –
Government Institutions 3,888 2,661 1 232 – (1) (4) –
Credit institutions 203 203 – – – – –
Other financial institutions – – – – – – –
Non-financial corporations 25,390 5,290 14 409 6,962 (18) (162) (1,091)
Other receivables 2 2 – 44 ––(44)
(CZK’m) 2019
Net
Carrying amount (gross) Allowances
book Stage 1 Stage 2 Stage 3 Stage 1 Stageň 2 Stage 3
value
Debt securities at fair value recognized in OCI 1,821 1,821 –– –– –
Government Institutions 1,640 1,640 – – – – –
Credit institutions 181 181 – – – – –
Financial assets at amortised cost 39,587 21,584 10,672 13,179 (28) (152) (5,668)
Debt securities valued at amortised cost 1,596 1,596 – – – – –
Government Institutions 1,546 1,546 – – – – –
Credit institutions 50 50 – – – – –
Loans and receivables at amortised cost 37,991 19,988 10,672 13,179 (28) (152) (5,668)
Central banks 3,502 3,502 – – – – –
Government Institutions 3,242 3,246 – – (4) – –
Credit institutions 2,327 2,294 – 37 (3) – (1)
Other financial institutions 4 4 – 1 – – (1)
Non-financial corporations 28,916 10,942 10,672 13,141 (21) (152) (5,666)
(CZK’m) 2019
Carrying amount (gross) Provisions
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Provided loan commitments total 3,373 ––(4) ––
Government Institutions 1,673 – – (1) – –
Non-financial corporations 1,700 – – (3) – –
Provided financial guarantees total 1,265 57 68 (15) (2) (11)
Non-financial corporations 1,265 57 68 (15) (2) (11)
(CZK’m) 2020
Carrying amount (gross) Provisions
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage
Provided loan commitments total 1,136 1,745 – (3) (20) –
Government Institutions 795 – – (1) – –
Credit institutions 214 – – (1) – –
Non-financial corporations 127 1,745 – (1) (20) –
Provided financial guarantees total 1,410 268 64 (35) (17) (10)
Non-financial corporations 1,410 268 64 (35) (17) (10)
79
4. FINANCIAL PART
80
Development of exposures by level of credit risk in gross amount
(CZK’m) 2020
Carrying amount of exposure (gross)
Movements during the year
Balance at 31.12.2019 Transfer to (from) Balance at 31.12.2020
Stage 1 Stage 2 Stage 3 Newly Stage 1 Stage 2 Stage 3 Sold/ Foreign Stage 1 Stage 2 Stage 3
Purchased/ repaid exchange
provided differences
Debt securities at fair value
recognized in the OCI 1,821 –– ––– –(305) 18 1,534 ––
Government Institutions 1,640 – – – – – – (249) 11 1,402 – –
Credit institutions 181 – – – – – – (56) 7 132––
Financial assets
at amortised cost 21,584 10,672 13,179 7,203 (1,299) 1,299 – (16,380) 1,091 14,746 15,641 6,962
Debt securities valued
at amortised cost 1,596 –– ––– –(7) 14 1,603 ––
Government Institutions 1,546 – – – – – – (7) 14 1,553 – –
Credit institution 50 – – – – – – – – 50 – –
Loans and receivables
at amortised cost 19,988 10,672 13,179 7,203 (1,299) 1,299 – (16,373) 1,077 13,143 15,641 6,962
Central banks 3,502 – – 4,988 –– –(3,502) 1 4,989 – –
Government Institutions 3,246 – – 1,602 (764) 764 – (834) (121) 2,661 1,232 –
Credit institutions 2,294 – 37 100 –– –(2,240) 12 203––
Other financial institutions 4 – 1 265 –– –(281) 11 –––
Non-financial corporations 10,942 10,672 13,141 248 (535) 535 – (9,516) 1 ,174 5,290 14,409 6,962
Other receivables –– – 46 (1) 1 –––2 – 44
of which transfer from category
Loans and receivables and amort. cost – – – (44) – – – – – – – –
of which move to category
Other receivables – – – 44 – – – – – – – –
Provided loan
commitments total 3,373 ––1,164 (244) 244 – (1,743) 87 1,136 1,745 –
Government Institutions 1,673 – – 636 –– –(1,554) 40 795––
Non-financial corporations 1,700 – – 314 (244) 244 – (189) 47 127 1,745 –
Provided financial
guarantees total 1,265 57 68 570 (12) 12 – (225) 7 1,410 268 64
Non-financial corporations 1,265 57 68 570 (12) 12 – (225) 7 1,410 268 64
(CZK’m) 2019
Carrying amount of exposure (gross)
Movements during the year
Balance at 31.12.2018 Transfer to (from) Balance at 31.12.2019
Stage 1 Stage 2 Stage 3 Newly Stage 1 Stage 2 Stage 3 Sold/ Foreign Stage 1 Stage 2 Stage 3
Purchased/ repaid exchange
provided differences
Debt securities at fair value
recognized in the OCI 2,033 – – 23 –– –(230) (5) 1,821 ––
Government Institutions 1,847 – – 23 – – – (227) (3) 1,640 – –
Credit institutions 186 – – – – – – (3) (2) 181 – –
Financial assets
at amortised cost 26,637 12,690 21,569 8,658 (13) (4) 17 (23,615) (504) 21,584 10,672 13,179
Debt securities valued
at amortised cost 1,635 – – – – – – (34) (5) 1,596 – –
Government Institutions 1,585 – – – – – – (34) (5) 1,546 – –
Credit institutions 50 – – – – – – – – 50 – –
Loans and receivables
at amortised cost 25,002 12,690 21,569 8,658 (13) (4) 17 (23,581) (499) 19,988 10,672 13,179
Central banks 10,984 – – 3,505 – – – (10,984) (3) 3,502 – -
Government Institutions 3,970 – – 1,250 – – – (1,945) (29) 3,246 – -
Credit institutions 682 249 116 2,302 – (236) 236 (989) (29) 2,294 – 37
Other financial institutions 6 – 3 4 – – – (8) – 4 – 1
Non-financial corporations 9,360 12,441 21,450 1,597 (13) 232 (219) (9,655) (438) 10,942 10,672 13,141
Provided loan
commitments total 4,921 55 – 297 – (54) 54 (1,829) (71) 3,373 ––
Government Institutions 2 ,087 – – – – – – (376) (38) 1,673 – –
Credit institutions 16 55 – 14 – – – (84) (1) – – –
Non-financial corporations 2,818 – – 283 – (54) 54 (1,369) (32) 1,700 – –
Provided financial
guarantees total 957 24 153 475 – – – (204) (15) 1,265 57 68
Other financial institutions – – – – – – – – – – – –
Non-financial corporations 957 24 153 475 – – – (204) (15) 1,265 57 68
81
Development of allowances and provisions by level of credit risk
(CZK’m) 2020
Allowances and provisions
Movements during the year
Balance at 31.12.2019 Transfer to (from) Balance at 31.12.2020
Stage 1 Stage 2 Stage 3 Newly Stage 1 Stage 2 Stage 3 Sold/ Foreign Stage 1 Stage 2 Stage 3
Purchased/ repaid exchange
provided differences
Debt securities at fair value
recognized in OCI ––– –––––––––
Financial assets
at amortised cost (28) (152) (5,668) (90) 29 (29) – 4,945 (284) (20) (166) (1,091)
Debt securities
at amortised cost – – – – – – – – – – – –
Loans and receivables
at amortized cost (28) (152) (5,668) (90) 29 (29) – 4,945 (284) (20) (166) (1,091)
Central banks – – – (6) –– –5– (1) ––
Government institutions (4) – – (6) 1 (1) – 5 – (1) (4) –
Credit institutions (3) – (1) (3) –– –7– –––
Other financial institutions – – (1) (5) –– –6– –––
Non-financial corporation (21) (152) (5,666) (70) 28 (28) – 4,922 (284) (18) (162) (1,091)
Other receivables –– (40) 1 (1) – (4) –––(44)
of which transfer from category
Loans and receivables
at amortised cost – – – 40 ––––––––
of which move to category
Other receivables – – – (40) – – – – – – – –
Provided loan
commitments total (4) – – (23) 18 (18) – 5 (1) (3) (20) –
Government institutions (1) – – (1) – – – 1 – (1) ––
Credit institutions – – – – –– – –(1) (1) ––
Non-financial corporation (3) – – (22) 18 (18) – 4 – (1) (20) –
Provided financial
guarantees total (15) (2) (11) (78) 7 (7) – 42 2 (35) (17) (10)
Non-financial corporation (15) (2) (11) (78) 7 (7) – 42 2 (35) (17) (10)
(CZK’m) 2019
Allowances and provisions
Movements during the year
Balance at 31.12.2018 Transfer to (from) Balance at 31.12.2019
Stage 1 Stage 2 Stage 3 Newly Stage 1 Stage 2 Stage 3 Sold/ Foreign Stage 1 Stage 2 Stage 3
Purchased/ repaid exchange
provided differences
Debt securities at fair value
recognized in OCI –– – – – – – – – – – –
Financial assets at amortised cost (12) (133) (7,026) (448) (39) 47 (8) 1,693 78 (28) (152) (5,668)
Debt securities valued
at amortised cost – – – – – – – – – – – –
Loans and receivables
at amortised cost (12) (133) (7,026) (448) (39) 47 (8) 1,693 78 (28) (152) (5,668)
Central banks (1) – – (5) – – – 6 – – – –
Government Institutions (6) – – (1) – – – 3 – (4) – –
Credit institutions – – (116) (135) – (1) 1 247 – (3) – (1)
Other financial institutions – – (3) – – – – 2 – – – (1)
Non-financial corporations (5) (133) (6,907) (307) (39) 48 (9) 1,435 78 (21) (152) (5,666)
Provided loan
commitments total (4) –– (3) –– – 3 – (4) ––
Government Institutions (1) – – – – – – – – (1) – –
Non-financial corporations (3) – – (3) – – – 3 – (3) – –
Provided financial
guarantees total (7) – (34) (15) –– – 28 – (15) (2) (11)
Non-financial corporations (7) – (34) (15) – – – 28 – (15) (2) (11)
4. FINANCIAL PART
Development of exposures by level of credit risk in net amount
(CZK’m) 2020
Carrying amount of exposure (net)
Movements during the year
Balance at 31.12.2019 Transfer to (from) Balance at 31.12.2020
Stage 1 Stage 2 Stage 3 Newly Stage 1 Stage 2 Stage 3 Sold/ Foreign Stage 1 Stage 2 Stage 3
Purchased/ repaid exchange
provided differences
Debt securities at fair value
recognized in OCI 1,821 –– ––– –(305) 18 1,534 ––
Government Institutions 1,640 – – – – – – (249) 11 1,402 – –
Credit institutions 181 – – – – – – (56) 7 132 – –
Financial assets
at amortized cost 21,556 10,520 7,511 7,113 (1,270) 1,270 – (11,435) 807 14,726 15,475 5,871
Debt securities
at amortized cost 1,596 –– ––– –(7) 14 1,603 ––
Government Institutions 1,546 – – – – – – (7) 14 1,553 – –
Credit institutions 50 – – – – – – – – 50 – –
Loans and receivables
at amortized cost 19,960 10,520 7,511 7,113 (1,270) 1,270 – (11,428) 793 13,123 15,475 5,871
Central banks 3,502 – – 4,982 – – – (3,497) 1 4,988 – –
Government Institutions 3,242 – – 1,596 (763) 763 – (829) (121) 2,660 1,228 –
Credit institutions 2,291 – 36 97 – – – (2,233) 12 203 – –
Other financial institutions 4 – – 260 – – – (275) 11 – – –
Non-financial corporations 10,921 10,520 7,475 178 (507) 507 – (4,594) 890 5,272 14,247 5,871
Other receivables –– – 6 –– –(4) – 2 ––
of which transfer from category
Loans and receivables
at amortized cost – – – (4) – – – – – – – –
of which move to category
Other receivables – – – 4 – – – – – – – –
(CZK’m) 2019
Carrying amount of exposure (net)
Movements during the year
Balance at 31.12.2018 Transfer to (from) Balance at 31.12.2019
Stage 1 Stage 2 Stage 3 Newly Stage 1 Stage 2 Stage 3 Sold/ Foreign Stage 1 Stage 2 Stage 3
Purchased/ repaid exchange
provided differences
Debt securities at fair
recognized in the OCI 2,033 ––23 –– –(230) (5) 1,821 ––
Government Institutions 1,847 – – 23 – – – (227) (3) 1,640 – –
Credit institutions 186 – – – – – – (3) (2) 181 – –
Financial assets
at amortised cost 26,625 12,557 14,543 8,210 (52) 43 9 (21,922) (426) 21,556 10,520 7,511
Debt securities valued
at amortised cost 1,635 – – – – – – (34) (5) 1,596 – –
Government Institutions 1,585 – – – – – – (34) (5) 1,546 – –
Credit institutions 50 – – – – – – – – 50 – –
Loans and receivables
at amortised cost 24,990 12,557 14,543 8,210 (52) 43 9 (21,888) (421) 19,960 10,520 7, 511
Central banks 10,983 – – 3,500 – – – (10,978) (3) 3,502 – –
Government Institutions 3,964 – – 1,249 – – – (1,942) (29) 3,242 – –
Credit institutions 682 249 – 2,167 – (237) 237 (742) (29) 2,291 – 36
Other financial institutions 6 – – 4 – – – (6) – 4 – –
Non-financial corporations 9,355 12,308 14,543 1,290 (52) 280 (228) (8,220) (360) 10,921 10,520 7,475
82
83
Movements in allowances and provisions
(CZK’m) 2020
Opening Increase Decrease Changes Changes Decrease Other Closing Write-off Write-off
balance due to due to in credit due to due to adjust- balance P/L P/L
origin derecognition risk modification write ments impact impact
(net) without off (+) (-)
derecognition
(net)
Allowances for debt instruments
Cash and cash with the central bank
and other deposits repayable on demand (2) (3) 4 ––––(1) ––
Debt securities – – – – – – – – – –
Loans and receivables at amortized cost (28) (19) 17 –––10(20) ––
Stage 1 – for assets without significant
credit risk increase (30) (22) 21 –––10(21) ––
Debt securities – – – – – – – – – –
Loans and receivables at amortized cost (152) – – (6) 9 – (17) (166) ––
Stage 2 – for debt instruments with
significant credit risk increase (152) – – (6) 9 – (17) (166) ––
Debt securities – – – – – – – – – –
Loans and receivables at amortized cost (5,668) – – 135 – 4,722 (280) (1,091) 2,175 (6,869)
Stage 3 – for credit impaired
debt instruments (5,668) – – 135 – 4,722 (280) (1,091) 2,175 (6,869)
Total (5,850) (22) 21 129 9 4,722 (287) (1,278) 2,175 (6,869)
Provisions for commitments
and financial guarantees
Stage 1 19 116 (224) – – – 127 38 ––
Stage 2 2 – – 37 – – (2) 37 ––
Stage 3 11 – – – – – (1) 10 ––
Total 32 116 (224) 37 ––124 85 ––
(CZK’m) 2019
Opening Increase Decrease Changes Changes Decrease Other Closing Write-off Write-off
balance due to due to in credit due to due to adjust- balance P/L P/L
origin derecognition risk modification write ments impact impact
(net) without off (+) (-)
derecognition
(net)
Adjustments for debt instruments
Cash and cash with the central bank
and other deposits repayable on demand – (3) 1 – – – – (2) – –
Debt securities – – – – – – – – – –
Loans and receivables at amortised cost (13) (39) 24 – – – – (28) 6 (6)
Stage 1 – for assets without significant
credit risk increase (13) (42) 25 – – – – (30) 6 (6)
Debt securities –
Loans and receivables at amortised cost (133) – – (20) (1) – 2 (152) – –
Stage 2 – for debt instruments with
significant credit risk increase (133) – – (20) (1) – 2 (152) – –
Debt securities –
Loans and receivables at amortised cost (7,025) – – (95) – 1,375 78 (5,668) 6,664 (8,004)
Stage 3 – for credit impaired
debt instruments (7,025) – – (95) – 1,375 78 (5,668) 6,664 (8,004)
Total (7,171) (42) 25 (115) (1) 1,375 80 (5,850) 6,670 (8,010)
Provisions for commitments
and financial guarantees
Stage 1 11 18 – – – – (10) 19 – –
Stage 2 – – (7) – – – 9 2 – –
Stage 3 34 – – (23) – – 1 11 – –
Total 45 18 (7) (23) – – – 32 – –
4. FINANCIAL PART
84
Classification by internal rating
(CZK’m) 2020
Internal Carriyng Carriyng amount (gross) Allowances
rating amount Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
(net)
Very low credit risk AA+ až AA- 1,553 1,553 – – – – –
Low credit risk Worse than A- 50 50 – – – – –
Debt securities valued at amortised cost 1,603 1,603 –––––
Highest credit quality 1 4,988 4,989 – – (1) – –
High credit quality 2 23 23 – – – – –
Very good credit quality 3 2,763 2,764 – – (1) – –
Good credit quality 4 3,948 3,512 445 – – (9) –
Quality requiring prudence 5 14,073 1,690 12,465 – (17) (65) –
Vulnerable 6 2,777 165 2,705 – (1) (92) –
Unsatisfactory 7 26 – 26 – – – –
Project Financing 21-24 – – – – – – –
Default of project D 5,871 – – 6,962 – – (1,091)
Loans and receivables at amortised cost 34,469 13,143 15,641 6,962 (20) (166) (1,091)
Financial assets at amortised cost 36,072 14,746 15,641 6,962 (20) (166) (1,091)
Minimal credit risk AAA 132 132 – – – – –
Very low credit risk AA+ až AA- 1 344 1,344 – – – – –
Low credit risk A+ až A- 58 58
Debt instruments at fair value recognized in OCI 1,534 1,534 –––––
(CZK’m) 2019
Internal Carriyng Carriyng amount (gross) Allowances
rating amount Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
(net)
Very low credit risk AA+ až AA- 1,546 1,546 – – – – –
Low credit risk Worse than A-- 50 50 – – – – –
Debt securities valued at amortised cost 1,596 1,596 – – – – –
Highest credit quality 1 3,534 3,535 – 1 (1) – (1)
High credit quality 2 1,893 1,895 – – (2) – –
Very good credit quality 3 1,604 1,604 – – - – –
Good credit quality 4 4,853 4,478 405 – (1) (29) –
Quality requiring prudence 5 15,496 8,442 7,118 – (24) (40) –
Vulnerable 6 3,062 34 3,111 – – (83) –
Unsatisfactory 7 38 – 38 – – – –
Project Financing 21-24 – – – – – – –
Default of project D 7,511 – – 13,178 – – (5,667)
Loans and receivables at amortised cost 37,991 19,988 10,672 13,179 (28) (152) (5,668)
Financial assets at amortised cost 39,587 21,584 10,672 13,179 (28) (152) (5,668)
Minimal credit risk AAA 128 128 – – – – –
Very low credit risk AA+ až AA- 1,576 1,576 – – – – –
Low credit risk A+ až A- 116 116 – – – – –
Debt instruments at fair value recognized in OCI 1,821 1,821 – – – – –
Performing and non-performing exposures
A non-performing exposure is an exposure that meets at least one of the criteria below:
a) It is overdue by more than 90 days;
b) The debtor has been assessed by the Bank as a client that will probably be unable to repay all its liabilities without using a collateral,
whereby the existence of an exposure past its due date or the number of days past the due date are not taken into account; and
c) The exposure is in probation period for which other forbearance is provided or which is more than 30 days overdue.
Such an exposure is always classified by the Bank as Stage 3 or POCI.
Performing and non-performing exposures with forbearance
Exposures with forbearance refer to exposures for which the debtor is facing or is likely to face difficulties in meeting its financial
obligation and, as a consequence, the Bank has changed the conditions of the loan contract. These new conditions are more
favourable towards the debtor or are more favourable than those offered to debtors with a similar risk profile at that time. The
assessment of exposures with forbearance focuses on whether the exposure has been classified as performing before granting the
forbearance or whether it would be classified as non-performing when contracting conditions have changed.
The Bank recognizes interest income on receivables with forbearance in the amount of CZK 609 million (2019: CZK 612 mil.)
85
Performing and non-performing exposures not due and overdue
(CZK’m) 2020
Book value (Net)
Total Performing exposures Non-performing exposures
Days-past-due interval =0 >30 days =0 >90 days >180 days >1 year >5 years
≤30 days ≤90 days ≤90 days ≤180 days ≤1 year ≤5 years
Debt securities valued at amortised cost 1,603 1,603 – – – – – –
Loans and receivables at amortised cost 34,469 28,598 – – – – 5,230 641
Financial assets at amortised cost 36,072 30,201 – – – – 5,230 641
Debt instruments at fair value recognized in OCI 1,534 1,534 – – – – – –
Performing and non-performing exposures in total 37,606 31,735 – – – – 5,230 641
(CZK’m) 2019
Book value (Net)
Total Performing exposures Non-performing exposures
Days-past-due interval =0 >30 days =0 >90 days >180 days >1 year >5 years
≤30 days ≤90 days ≤90 days ≤180 days ≤1 year ≤5 years
Debt securities valued at amortised cost 1,596 1,596 – – – – – –
Loans and receivables at amortised cost 37,991 30,480 – 1 – 36 6,525 949
Financial assets at amortised cost 39,587 32,076 – 1 – 36 6,525 949
Debt instruments at fair value recognized in OCI 1,821 1,821 – – – – – –
Performing and non-performing exposures in total 41,408 33,897 – 1 – 36 6,525 949
(CZK’m) 2020
Carrying
Carrying amount (gross) Allowances
value Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Financial assets at amortised cost with forbearance 18,957 1,785 11,959 5,807 – (135) (459)
(CZK’m) 2019
Carrying
Carrying amount (gross) Allowances
value Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Financial assets at amortised cost with forbearance 18,006 2,365 9,205 7,251 (1) (88) (726)
Credit risk management
The Bank structures the levels of credit risk exposures by setting limits for the volume of acceptable risk in relation to one debtor or a group
of debtors, a geographical segment, industry focus or another significant concentration with a common risk factor.
86
4. FINANCIAL PART
Proportion of exposures with forbearance to total exposure
(CZK’m) 2020 2019
Loans and Exposures Share of Loans and Exposures Share of
receivables with loans and receivables with loans and
at amortised forbearance receivables at amortised forbearance receivables
cost cost
Non-financial corporations 25,390 18,957 74.7% 28,916 18,006 62.3%
Total exposure 25,390 18,957 74.7% 28,916 18,006 62.3%
Modified contractual cash flows
(CZK’m) 2020 2019
Receivables at amortized cost in stages 2 and 3 before modification 4,631 2,487
Modification Gains and Losses 9 (1)
The gross carrying amount of receivables in stages 2 and 3 transferred to stage 1 during the accounting period – –
Maximum credit exposure
(CZK’m) 2020
Gross exposure total Allocated collateral for exposures
Balance Off-balance Exposure Balance Off-Balance Collateral Exposure
sheet sheet total sheet Sheet total value
position position position position
Cash and cash with the central bank
and other deposits repayable on demand 2,638 – 2,638 –––2,638
Debt securities at FV recognized in the OCI 1,534 – 1,534 –––1,534
Financial assets at amortised cost 36,072 4,623 40,695 24,099 4,035 28,134 12,561
Receivables from credit institutions 5,191 214 5,405 15 253 268 5,137
Receivables from other customers 29,278 4,409 33,687 24,084 3,782 27,866 5,821
Debt securities 1,603 – 1,603 ––– 1,603
Other assets 992 – 992 – – – 992
Total exposure 41,236 4,623 45,859 24,099 4,035 28,134 17,725
(CZK’m) 2019
Gross exposure total Used to ensure that exposures
Balance Off-balance Exposure Balance Off-Balance Collateral Exposure
sheet sheet total sheet Sheet total value
position position position position
Cash and cash with the central bank
and other deposits repayable on demand 1,161 – 1,161 –––1,161
Debt securities at fair value recognized in the OCI 1,821 – 1,821 –––1,821
Financial assets at amortised cost 39,587 4,763 44,350 29,813 3,812 33,625 10,725
Receivables from credit institutions 5,829 – 5,829 18 – 18 5,811
Receivables from other customers 32,162 4,763 36,925 29,795 3,812 33,607 3,318
Debt securities 1,596 – 1,596 ––– 1,596
Other assets 1,307 – 1,307 – – – 1,307
Total exposure 43,876 4,763 48 639 29 813 3,812 33,625 15,014
87
Financial derivative instruments
The credit risk resulting from open derivative positions is managed within the overall trading limits for individual debtors, by both amount
and term. The credit risk arising from these instruments usually is not subject to pledge or other guarantees. In other cases, financial
collateral is used in the form of received deposit bearing the basic interest rate of the respective currency.
The credit risk from derivative positions is minimised by the Bank by selecting credible counterparties and regularly monitoring their
financial situation. The derivatives were arranged with counterparties based in the OECD countries (or with credible domestic
counterparties) and having long-term “A” ratings or better from international rating agencies.
Other financial assets
For the purposes of credit risk management of other financial assets, the same approach is applied as in the case of credit risk
management of loans.
Off-balance sheet exposures
Off-balance sheet exposures primarily involve provided loan commitments and financial guarantees. Loan commitments represent the
unused portion of approved credit facilities in the form of loans. With regard to credit risk arising from loan commitments, the Bank is
exposed to the risk of potential loss as equal to the aggregate amount of unused loan commitments.
Concentration of credit risk
The Bank has set a system for the management of limits for individual debtors and economically connected groups of debtors with
regard to the debtor’s territory and industry to ensure that engagement limits stipulated by regulation are nor exceeded. The credit
risk is decreased by way of hedging instruments, predominantly including the insurance of export risks, cash collateral, securities
received as as a collateral in repo transactions.
88
4. FINANCIAL PART
Breakdown by geographic segment
(CZK’m) 2020
Carrying
Carrying amount (gross) Allowances
amount
%
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Czech Republic 1,553 96.88 1,553 – – – – –
Netherlands 50 3.12 50 – – – – –
Debt securities valued at amortized cost 1,603 100.00 1,603 –––––
Azerbaijan 2,980 8.65 – 2,993 – – (13) –
Czech Republic 5,742 16.66 5,065 624 161 (2) (24) (82)
Russia 6,499 18.85 3,488 2,526 944 – (78) (381)
Slovak Republic 9,657 28.02 242 9,472 209 (5) (51) (210)
Turkey 6,534 18.96 1,315 – 5,648 (11) – (418)
Others 3,057 8.87 3,033 26 – (2) – –
Loans and receivables at amortized cost 34,469 100.00 13,143 15,641 6,962 (20) (166) (1,091)
Financial assets at amortised cost 36,072 100.00 14,746 15,641 6,962 (20) (166) (1,091)
Czech Republic 1,344 87.61 1,344 – – – – –
Luxembourg 132 8.60 132 – – – – –
France – 0.00 – – – – – –
Slovak Republic 58 3.78 58 – – – – –
Debt instruments at recognized in OCI 1,534 100.00 1,534 – – – – –
(CZK’m) 2019
Carrying
Carrying amount (gross) Allowances
amount
%
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Czech Republic 1,546 96.87 1,546 – – – – –
Netherlands 50 3.13 50 – – – – –
Debt securities valued at amortized cost 1,596 100.00 1,596 – – – – –
Azerbaijan 4,010 10,56 4,015 – – (5) – –
Czech Republic 5,209 13.71 4,135 1,028 184 (1) (36) (101)
Russia 8,076 21.26 4,403 3,009 5,302 (1) (89) (4,548)
Slovak Republic 10,270 27.03 3,368 6,596 932 (7) (27) (592)
Turkey 7,559 19.90 1,273 – 6,723 (11) – (426)
Others 2,867 7.55 2,794 39 38 (3) – (1)
Loans and receivables at amortized cost 37,991 100.00 19,988 10,672 13,179 (28) (152) (5,668)
Financial assets at amortised cost 39,587 100.00 21,584 10,672 13,179 (28) (152) (5,668)
Czech Republic 1,524 83.69 1,524 – – – – –
Luxembourg 129 7.08 129 – – – – –
France 52 2.86 52 – – – – –
Slovak Republic 116 6.37 116 – – – – –
Debt instruments at recognized in OCI 1,821 100.00 1,821 – – – – –
89
Breakdown by industry
(CZK’m) 2020
Carrying
Carrying amount (gross) Allowances
amount Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
(net) %
Financial and insurance activities 50 3.12 50 – – – – –
Public administration and defense 1,553 96.88 1,553 – – – – –
Debt securities valued at amortised cost 1,603 100.00 1,603 – – – – –
Processing industry 4,459 12.94 1,729 2,705 372 (1) (92) (254)
Production and distribution electricity,
gas, heat and air 18,340 53.21 3,258 9,471 6,433 (12) (52) (758)
Transport and warehousing 1,801 5.22 22 1,788 – – (9) –
Banking and insurance industry 5 ,191 15.06 5,192 – – (1) – –
Public administration, defence 3 ,888 11.28 2,661 1,232 – (1) (4) –
Others 790 2.29 281 445 157 (5) (9) (79)
Loans and receivables at amortised cost 34,469 100.00 13,143 15,641 6,962 (20) (166) (1,091)
Financial assets at amortised cost 36,072 14,746 15,641 6,962 (20) (166) (1,091)
Public administration and defense 1,402 91.40 1,402 – – – – –
Activities of extraterritorial organizations and bodies 132 8.60 132 – – – – –
Debt instruments at fair value
recognized in OCI 1,534 100.00 1,534 – – – – –
(CZK’m) 2019
Carrying
Carrying amount (gross) Allowances
amount Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
(netto) %
Financial and insurance activities 50 3.13 50 – – – – –
Public administration and defense 1,546 96.87 1,546 – – – – –
Debt securities valued at amortised cost 1,596 100.00 1,596 – – – – –
Processing industry 5,632 14.82 2,035 3,111 1,470 – (83) (901)
Production and distribution electricity,
gas, heat and air 19,958 52.53 6,580 6,596 11,492 (14) (27) (4,669)
Transport and warehousing 2,116 5.57 2,080 38 – (2) – –
Banking and insurance industry 5,833 15.35 5,800 – 38 (3) – (2)
Public administration, defence 3,242 8.53 3,246 – – (4) – –
Others 1,210 3.18 247 927 179 (5) (42) (96)
Loans and receivables at amortised cost 37,991 100.00 19,988 10,672 13,179 (28) (152) (5,668)
Financial assets at amortised cost 39,587 21,584 10,672 13,179 (28) (152) (5,668)
Public administration and defense 1,640 90.06 1,640 – – – – –
Activities of extraterritorial organizations and bodies 181 9.94 181 – – – – –
Debt instruments at fair value
recognized in OCI 1,821 100.00 1,821 – – – – –
90
4. FINANCIAL PART
EVE values
(CZK’m) 12 months to 31 December 2020 12 months to 31 December 2019
ΔEVE Average High Low Average High Low
Interest rate risk (213.93) (53.29) (358.56) (160.72) (115.83) (303.90)
Foreign exchange risk (3.21) (0.14) (9.14) (1.96) (0.30) (7.79)
Total ΔEVE (217.14) (-55.14) (364.61) (162.68) (117.61) (305.91)
(CZK’m) 31. December 2020* 31 December 2019*
ΔEVE
Parallel up (90,29) (303,90)
Parallel down 40,04 120,57
Short rate up (48,59) (122,40)
Interest rate risk Short rate down (6,25) 42,54
Steepener (36,74) (32,17)
Flattener (22,76) (26,77)
Maximum (90,29) (303,90)
Parallel up – –
Foreign exchange risk Parallel down (3,87) (2,01)
Maximum (3,87) (2,01)
Total ΔEVE (94,17) (305,91)
* The values reported with the negative sign represent a loss while those with the positive sign represent the positive impact of shock scenarios.
(c) Market risk
The Bank is exposed to market risks. Market risks arise from open positions in interest rate and currency products, all of which are
exposed to general and specific market movements. The Bank uses GAP analysis to track the spread of interest rate risk in individual
currencies over time, estimating the impact of interest rate changes on the Bank’s short-term earnings (change in NII – Net Interest
Income) and Economic Value of Equity (EVE) to estimate the market risk of its positions and the maximum expected loss based on
standard shock market change scenarios (according to the Interest Rate Risk standard from April 2016 prepared by the Basel
Committee on Banking Supervision, reflecting amendments to regulations published by the EBA in 2018). The Board sets limits on the
acceptable value of risk, from which all market risks limits are derived. Actual utilisation of the limits is monitored on a daily basis by
risk management. The Bank uses the EVE method, which calculates the maximum possible change in the economic value of the
Bank’s capital in applying standard shock scenarios of changes in the interest rate and exchange rate. The Bank has not been exposed
to risks stemming from nonlinear instruments. All EVE changes are summarised in the table below.
The Bank conducts quarterly stress testing of the impact of material changes in financial markets on the level of market exposure.
Under the EVE method, so-called stress scenarios based on standard shock scenarios for day-to-day management of the interest rate
and currency risks are used to modify them to capture an even greater movement of market factors.
The IBOR reform will have an impact on the yield curves mainly used by the Bank when quantifying the change in the economic
value of the capital. In this context, it is possible to use the yield curves provided by the Refinitive
4
system in response to the IBOR reform.
(d) Currency risk
The Bank is exposed to the effects of fluctuations in the prevailing foreign exchange rates on its financial position and cash flows.
Currency risk is managed using the currency sensitivity and EVE analyses, for which limits are defined to mitigate potential exposure.
If the total net currency position is greater than 2% of capital, the size of the open currency position is reflected in the capital adequacy
requirement which is allocated to this risk by the Bank.
The table below summarises the Bank’s exposure to currency risk. Included in the table are the Bank’s assets and liabilities at carrying
amounts, categorised by currency. The net foreign currency position also includes exposure to currency risk arising from FX derivatives
that are used primarily to reduce the balance sheet currency risk of the Bank.
4
Note: Refinitiv is a global provider of financial market data; until 2018, it was the Financial and Risk business division of Thomson Reuters.
91
(e) Interest rate risk
The Bank is exposed to interest rate risk as its interest-bearing assets and liabilities have different re-fixing or maturity dates. For floating
rate instruments, the Bank is exposed to basis risk, which arises from the differences in methods of adjusting individual types of interest
rates, primarily LIBOR, EURIBOR and, if relevant, PRIBOR. Interest rate risk is managed using interest rate GAP analysis, analysis of the
change in net interest income (NII) and change in EVE. For NII and EVE, change indicators a set of limits is defined to mitigate potential
exposure. Interest rate risk management aims at minimising the sensitivity of the Bank to interest rate fluctuations.
In accordance with the risk management strategy approved by the Board, the Bank optimises the structure of its sources of finance
comprising bond issues and syndicated loans so that no significant differences between the duration of its interest-sensitive assets
and liabilities arise.
Interest rate derivatives are used for mitigating the difference between the interest rate sensitivity of assets and liabilities. These
transactions are conducted in accordance with the risk management policies approved by the Board of Directors and the use of
hedge accounting rules approved by the ALCO to reduce the interest rate risk of the Bank.
(f) Liquidity risk
Liquidity risk arises from different types of financing the Bank’s activities and the management of its positions. It includes both the risk
of the Bank’s ability to finance its assets by way of instruments with appropriate maturity and the Bank’s ability to liquidate/sell its assets
at a favourable price in a favourable time frame.
Concentration of assets, liabilities and off-balance sheet items
(CZK’m) CZK EUR USD Other Total
At 31. December 2020
ASSETS
Cash and cash with the central bank and other deposits
repayable on demand 354 2,054 230 – 2 638
Debt securities at fair value recognized in OCI 1,202 332 – – 1 534
Financial assets at amortised cost 6,770 25,901 3,390 11 36 072
Tangible assets 96 – – – 96
Intangible assets 10 – – – 10
Tax assets 9–––9
Other assets 9 868 – – 877
Total assets 8,450 29,155 3,620 11 41,236
LIABILITIES
Derivatives held for trading 255 1 – – 256
Financial liabilities measured at amortised cost 4,654 24,861 3,496 11 33,022
Hedging derivatives – 16 – – 16
Provisions 158 54 31 – 243
Tax liabilities 94 – – – 94
Other liabilities 120 101 62 – 283
Total liabilities 5,281 25,033 3,589 11 33,914
Balance sheet position Netto 3,169 4,122 31 – 7,322
Currency forward 3,859 (4,120) – – (261)
Net currency position 7,028 2 31 – 7,061
At 31. December 2019
Total assets 7,441 32,865 3,416 154 43,876
Total liabilities 4,126 29,001 3,427 151 36,705
Balance sheet position Netto 3,315 3,864 (11) 3 7,171
Currency forward 3,675 (3,811) – – (136)
Net currency position 6,990 53 (11) 3 7,035
92
4. FINANCIAL PART
The Bank's liquidity risk management uses its own methods for measuring and monitoring net cash flows and liquidity positions. The
differences between the inflow and outflow of funds are measured by a liquidity gap analysis, which determines the liquidity positions
for different time baskets (gaps). Liquidity development in the currency structure of CZK, EUR, USD and in the total for the Bank is
monitored at several levels of market behaviour, i.e. at the level of the standard and the alternative scenarios and three stress scenarios
that quantify the impact on liquidity in the event of a reputational crisis, market crisis and combined crisis. The individual scenarios are
the basis for regular analysis of survival time. The bank has set a minimum requirement for the survival of at least two months according
to the standard scenario. The Bank has also determined a system of early warning indicators designed to capture negative trends and
to run a response to an identified situation. Sufficient liquidity is controlled by a system of limits and is managed with the help of on-
balance sheet (e.g. cash, liquid securities at FVOCI, issued bonds, loans taken from banks) and off-balance sheet transactions (FX
swaps, currency interest rate swaps). The fundraising plan is regularly reviewed by the Bank in response to the current development
of liquidity risk, financial markets, etc.
The Bank has access to diversified sources of financing. These sources comprise issued bonds, bilateral or club loans from domestic
as well as international financial markets and other deposits received from other banks and customers. This diversification gives flexibility
to the Bank and limits its dependence on one source of finance. On a regular basis, the Bank assesses the liquidity risk, predominantly
by monitoring changes in the financing structure. In compliance with its liquidity risk management strategy, the Bank also maintains
a sufficient liquidity reserve primarily composed of cash deposited with the central bank as well as highly liquid government securities
and bonds of the financial institutions of the European Union.
On 1 October 2015, a regulatory requirement for the liquidity coverage ratio (LCR) came into force, setting out the minimum required
level of 100%. As of 31 December 2020, the Bank reported LCR of 1,300% (as of 31 December 2019: 1,928%).
From the Bank’s perspective, the impact of the COVID-19 pandemic is negligible. The Bank’s liquidity is stabilised and resources due
can be easily replaced by new medium and long-term resources.
The stated values are based on non-discounted cash flows.
Maturity of non-derivative financial liabilities
(CZK’m) Up to 1 month 1–3 months 3–12 months 1–5 years Over 5 years Total
At 31 December 2020
Financial liabilities at amortized cost due to banks 963 10 5 4,501 1,176 6,655
Financial liabilities at amortized cost due to other customers 74 68 811 1,137 11 2,101
Debt securities issued at amortized cost 43 1,991 10,700 12,065 – 24,799
Total financial liabilities at amortized cost 1,080 2,069 11,516 17,703 1,187 33,555
Loan commitments 605 1,082 347 847 – 2,881
At 31 December 2019
Financial liabilities at amortized cost due to banks 63 11 1,645 61 – 1,780
Financial liabilities at amortized cost due to other customers 725 1,060 705 26 48 2,564
Debt securities issued at amortized cost 42 151 8,330 23,121 1,046 32,690
Total financial liabilities at amortized cost 830 1,222 10,680 23,208 1,094 37,034
Loan commitments 373 322 2,678 – – 3,373
Maturity of derivative financial liabilities
Derivatives to be settled in net value include liabilities arising from interest rate swaps.
(CZK’m) Up to 1 month 1–3 months 3–12 months 1–5 years Over 5 years Total
At 31 December 2020
Hedging derivatives (1) (2) (6) (6) – (15)
At 31 December 2019
Hedging derivatives (1) (2) (7) (14) – (24)
93
Derivatives to be settled in gross value include currency swaps, currency forwards and cross currency swaps.
(g) Fair values of financial assets and liabilities
The following table summarises the carrying amounts and fair values of those financial assets and liabilities not presented on the
Bank’s balance sheet at their fair values. Fair value incorporates expected future losses while the carrying amount (amortised cost and
related impairment) only includes incurred losses at the balance sheet date.
The yield curves used in calculating fair values are sourced from the Refinitiv system. The fair value of loans classified in level 2 and
level 3 is equal to the carrying amount.
Issued debt securities, government and central bank debt securities are all quoted and measured at level 1.
All other financial assets and liabilities are measured at fair value within the level 2
Loans to credit institutions
Loans to credit institutions include interbank deposits and other receivables from banks. The fair value of floating rate deposits and
overnight deposits is equal to their carrying amount. The estimated fair value of deposits with a fixed interest rate is based on discounted
cash flows based on the prevailing yield curve for the respective remaining maturity.
(CZK’m) Up to 1 month 1–3 months 3–12 months 1–5 years Over 5 years Total
At 31 December 2020
FX derivatives for trading
outflow (184) – – – – (184)
inflow 184 – – – – 184
Cross currency swaps for trading
outflow – – (3,941) –– (3,941)
inflow – – 3,695 3,695
Total outflow (184) (3,941) – (4,125)
Total inflow 184 – 3,695 –– 3,879
At 31 December 2019
Cross currency swaps for trading
outflow – – (15) (3,819) – (3,834)
inflow – – 109 3,729 – 3,838
Total outflow ––(15) (3,819) – (3,834)
Total inflow ––109 3,729 – 3,838
(CZK’m) 2020 2019 2020 2019
Carrying amount Fair value
FINANCIAL ASSETS
Balances with central bank 4,988 3,502 5,001 3,502
Deposits with credit institutions 32 2,179 32 2,182
Loans to credit institutions 171 148 260 162
Total receivables from credit institutions 5,191 5,829 5,294 5,846
Total receivables from persons other than credit institutions 29,278 32,162 31,232 34,465
Debt instruments at amortized cost 1,603 1,596 1,648 1,627
FINANCIAL LIABILITIES
Financial liabilities at amortised cost due to banks 6,614 1,768 6,728 1,774
Financial liabilities at amortised cost due to other customers 2,089 2,529 2,096 2,530
Debt securities in issue 24,319 31,782 26,771 33,887
94
4. FINANCIAL PART
Loans to other customers and securities held until maturity
The estimated fair value of loans and securities held until maturity represents the discounted amount of estimated future cash flows.
Expected cash flows are discounted using prevailing interest rates for loans and securities with similar credit risk and remaining maturity,
considering credit spreads of relevant financial instruments at year-end, including the existing credit security.
Payables to banks and customers
The estimated fair value of deposits with unspecified maturity, which includes interest-free deposits, is an amount repayable on
demand.
The estimated fair value of deposits bearing fixed interest and other borrowings without a quoted market price is based on discounted
cash flows using the prevailing yield curve for the respective remaining maturity.
Liabilities from issued bonds
For debt securities issued, market valuation based on market quotation (bid price provided by Reuters) is used.
Measurement at fair value through other comprehensive income and through P/L
The following table provides an analysis of the financial instruments which are subsequently measured at fair value after the initial
recognition and are classified at level 1 and level 2, depending on the extent to which fair value can be identified or verified:
l
Fair value measurements at level 1 are valuations that are based on (unadjusted) quoted prices for the same assets or liabilities in
active markets (the average of bid/ask prices supplied by Refinitiv is used for valuation purposes); and
l
Fair value measurements at level 2 are valuations that are based on inputs other than quoted prices used at level 1; this information
can be obtained for an asset or liability directly (i.e. prices) or indirectly (i.e. data derived from the prices).
The Bank has no assets or liabilities measured at fair value at level 3, i.e. measurements based on valuation techniques that use
information on assets or liabilities and are not derived from observable market data (non-verifiable inputs).
Fair value measurements at level 2 are performed by way of discounting future cash flows using risk-free yield curves (provided by
Refinitiv).
Offsetting of financial instruments
The Bank is entitled to present in the statement of financial position certain financial instruments (net amounts), according to the
criteria set out in Note 2d).
The following table provides information on the impact of compensation on the balance sheet and the financial impact of the netting
for instruments subject to netting or similar agreements.
(CZK’m) 2020 2019 2020 2019
Level 1 Level 2 Level 1 Level 2
Debt securities at FV recognized in OCI 1,534 – 1,821 –
Hedging derivatives – – – –
Total 1,534 – 1,821 –
Financial liabilities held for trading – 256 – 110
Hedging derivatives – 16 – 24
Total – 272 – 134
95
(h) Capital management
The aim of the Bank with respect to capital management is to comply with the regulatory requirements in the area of capital adequacy
and to maintain sufficient capital in order to support the development of officially supported financing provided pursuant to Act No.
58/1995 Coll.
The Bank uses the standardised approach based on an external rating to calculate the capital requirement for the credit risk of the
investment portfolio, i.e. to calculate risk-weighted exposures. The risk weighting is based on the exposure category and credit quality.
Credit quality is determined based on external rating, which was set by the rating agency, registered in accordance with Regulation
(EC) No. 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies and included in
the list of agencies for credit assessment maintained for this purposes by the European Securities and Markets Authority (ESMA) or by
an export credit agency, which publishes reviews and complies with OECD methodology for classifying countries. Exposure classes and
risk weights when using the standardised approach are defined by Regulation of the European Parliament and the Council (EU) No
575/2013 of 26 June 2013 on prudential requirements for banks and investment firms and amending Regulation (EU) No. 648/2012.
When calculating risk weighted exposures, the Bank considers methods of decreasing credit risk, such as pledging property as
collateral (financial collateral) or individual security of exposures (insurance and other guarantees).
The Bank created and uses a system of internally set capital (SVSK) in order to fulfil its statutory duties in the area of planning and
continuously maintaining internally set capital in the amount, structure and distribution, so that the risks, which could threaten the
Bank, are sufficiently covered.
SVSK is established to reflect the Bank’s nature of a specialised bank institution directly and indirectly owned by the state intended to
provide financing or officially supported financing and related services pursuant to Act No. 58/1995 Coll. and with respect to the scope
and complexity of activities resulting from operating officially supported financing and related services and corresponding risks.The
Board of Directors approved the SVSK concept in the form of a capital management strategy which defines the key goals, principles,
parameters and limits of SVSK, including the methods used to evaluate and measure each risk undertaken by the Bank.
(CZK’m) 2020
Gross Gross Gross financial Impact of Cash Net
amounts amounts assets Master collateral amount
of financial accounted reported in Netting
assets for the balance Agreements
sheet
Positive value of financial derivatives – – – – – –
Reverse repo – – – – – –
Total assets – – – – – –
Negative market value of derivatives 272 – 272 –(15) –
Repo – – – – – –
Total liabilities 272 – 272 – (15) –
(CZK’m) 2019
Gross Gross Gross financial Impact of Cash Net
amounts amounts assets Master collateral amount
of financial accounted reported in Netting
assets for the balance Agreements
sheet
Positive value of financial derivatives – – – – – –
Reverse repo 3,298 – 3,298 – – 3,298
Total assets 3,298 – 3,298 – – 3,298
Negative market value of derivatives 134 – 134 –(24) 110
Repo – – – – – –
Total liabilities 134 – 134 – (24) 110
96
4. FINANCIAL PART
Quantifiable risks within SVSK are assessed in the form of internally set capital requirements. Other risks within SVSK are covered by
qualitative measures in risk management and organisation of processes and controls (code of ethics, code of corporate governance, etc.).
In 2020 and 2019, the Bank met all regulatory requirements for capital adequacy.
The Bank has determined regulatory capital according to the BASEL 3 rules codified in Regulation (EU) No 575/2013 of the European
Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending
Regulation (EU) No 648/2012.
4 / CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgements are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the current circumstances
.
(a) Impairment losses on financial assets, loan commitments, guarantees and contractual assets
To measure the expected credit loss, a system was developed that included workflows, models and inputs into the information system.
Critical areas include methodologies to regulate default, significant increase in credit risk (SICR), probability of default (PD), exposure
at default (EAD), loss given default (LGD) and macroeconomic models. The Bank continuously checks and verifies these models and
inputs into information systems. For the purposes of determining impairment losses, a system is in place for ongoing and periodic
monitoring of credit exposures and reporting of changes in the credit risk to the management.
The assessment of a significant increase in credit risk leading to the recognition of allowances and provisions in the amount of lifetime
expected credit loss is subject to expert estimates and assessment by the Bank’s management. This assessment compares the change
in credit risk upon initial recognition and at the reporting date. The Bank uses various observable and verifiable events that are
available without incurring undue costs to indicate prospects for the future.
(b) Assessment of the business model and contractual cash flows
The Bank’s business model
The Bank’s business model governs the classification of financial assets. In stating the Bank’s business model, the Bank’s management
worked with the frequency, timing and value of transactions, cash flow characteristics, and expectations related to future sales.
For instruments classified as AC, the objective is to collect cash flows representing a principal and interest. It is assumed that sales will
occur rarely and in insignificant volumes, or only in situations such as:
(a) Reduction in the credit quality of the asset’s issuer, sale of assets with increased credit risk;
(b) Sales shortly (3 months) before maturity;
Regulatory capital
(CZK’m) 2020 2019
Paid-up share capital registered in the commercial register 5,000 5,000
Reserve funds 2,141 2,074
Loss for the period ––
The accumulated other comprehensive income 16 29
Deductible items from the original equity – intangible assets (2) (350)
Capital adjustment due to the use of prudential filters (2) (2)
Other transitional adjustment of capital –318
Other deductions from CET1 capital (implementation of IFRS 9) – –
Initial capital (Tier 1) 7,153 7,069
Regulatory capital 7,153 7,069
97
(c) Unforeseen urgent financial needs of the export bank as a result of the occurrence of an extraordinary event defined in the
emergency plan and/or danger to the liquidity management limits under stress scenarios, i.e. the securing of the Bank’s financial
needs in the event of an emergency situation and medium-term liquidity problems;
(d) Compliance with regulatory limits for credit risk management if these sales are infrequent, or they are frequent but their value is
not material taken separately/together.
For financial assets at fair value through other comprehensive income, the intentions of the business model are met by collecting
principal and interest as well as by sales. Sales may also occur in the event of:
(e) Reinvesting the asset in order to adjust the portfolio’s return profile or adjust the cost of holding the liquidity buffer;
(f) Adjustments to the maturity, duration or risk profile of the portfolio with respect to its diversification or currency structure;
(g) Securing the financial needs of the export bank in the event of an emergency situation and/or threats to liquidity management
limits under stress scenarios and temporary or short-term liquidity problems;
(h) Reduced need to hold the liquidity buffer with respect to compliance with the LCR regulatory limits or acceptable liquidity risk levels
for measuring the survival time;
(i) Verifying the marketability/liquidity of the asset on the market or testing the functionality of the emergency plan for extraordinary
situations in managing the liquidity of the export bank;
(j) As part of the provision of syndication products.
Contractual cash flows
When deciding on the classification of financial assets, it is important to assess whether the contract determines dates for specific cash
flow that consist solely of principal and interest payments (SPPI). In order to assess whether the contractual cash flows are in line with
the basic credit arrangement, a procedure has been developed that is performed by the Bank upon initial recognition. Exceptional
deviations from the standard model of payments of principal and interest for classifying an asset as AC or FVOCI are assessed by the
ALCO.
Instruments that do not meet the SPPI test are measured at fair value through profit or loss (FVTPL
(c) State subsidy
When recognising a state subsidy taking into account the principles of Act No. 58/1995 Coll., which was designed to support Czech
export in general rather than to promote the Bank as an entity owned by the state, the Bank assessed the subsidy in accordance with
IAS 20 as a subsidy reported in income compensating a portion of expenses rather than as a transaction with the owner with an
impact on equity.
(d) Income taxes
The Bank is subject to Czech income tax in compliance with effective regulations. The Bank recognises liabilities in the amount
of anticipated tax assessments based on estimates. Where the final tax liability differs from the anticipated amounts, the resulting
differences have an impact on the tax expense and the deferred tax liability in the period in which the assessment is made.
98
4. FINANCIAL PART
5 / OPERATING SEGMENTS
Providing supported financing is broken down into financing with and without links to the state budget. The Bank predominantly
assesses performance of its operating segments according to interest income, interest expense, impairment losses on loans and the
amount of provided/received loans.
Circle 001 includes operating activities, financing not eligible for a subsidy and other related activities in accordance with banking
licence and the resulting income and expenses. All these activities are carried out under market conditions, without direct links to the
state budget.
Circle 002 includes all activities relating to supported financing which are eligible for a subsidy from the state budget, and the resulting
income and expenses.
In the segment of finance and insurance, income of one client exceeded 10% of the aggregate segment income (one client in 2019).
In the segment of electricity generation and distribution, three clients generated income exceeding 10% of the aggregate segment
income (five clients in 2019).
Revenue from core activities of the Bank as per geographic segment
2020 2019
Interest Fee and Total Interest Fee and Total
income commisions income commisions
income income
Czech Republic 181 20 201 226 18 244
Slovak Republic 402 5 407 311 – 311
Russia 338 – 338 415 – 415
China – – – – 1 1
Turkey 164 – 164 179 – 179
Others 180 – 180 173 – 173
Total interest income and fees 1,265 25 1,290 1,304 19 1,323
(CZK’m) 2020 2019
circle 001 circle 002 Total circle 001 circle 002 Total
Interest and similar income 520 745 1,265 496 808 1,304
of which: over 10% of revenues
Financial and Insurance sectors 85 – 85 62 – 62
Electricity production and distribution 157 350 507 160 381 541
Public administration and defence 63 – 63 –– –
Manufacture of basic metals, metal processing – 116 116 –– –
Interest expense and similar charges (35) (450) (485) (5) (746) (751)
Impairment losses on loans 12 147 159 (4) (92) (96)
Creation (-) of reserves or their reversal (24) (23) (47) (119) 13 (106)
Loss/profit before income tax (47) 484 437 32 16 48
Income tax expense (273) – (273) 18 – 18
Profit for the year (320) 484 164 50 16 66
Loans and receivables at amortized cost 8,357 26,112 34,469 6,610 31,381 37,991
Total assets 13,401 27,835 41,236 10,593 33,283 43,876
Financial liabilities at amortized cost 1,266 31,756 33,022 618 35,461 36,079
Total liabilities and equity 9,063 32,173 41,236 8,159 35,717 43,876
99
6 / NET INTEREST INCOME
Interest on assets represents interest expenses from financial assets and interest on liabilities represents interest income from financial
liabilities resulting from negative interest rates. The line item ‘Other interest – leases’ includes interest expense assessed for the lease
liability using an effective interest rate of 2.12% p.a.
Interest income is calculated using the effective interest rate, with the exception of interest income on hedging derivatives at CZK
0 million (2019: CZK 2 million) and penalty interest, which is part of the item ‘Interest income from loans to other customers, amounting
to CZK 139 million (2019: CZK 1 million).
Interest expense is calculated using the effective interest rate, with the exception of interest expense on hedging derivatives at CZK
10 million (2019: CZK 58 million) and interest on financial leases amounting to CZK 2 million (2019: CZK 1 million).
7 / FEE AND COMMISSION NET INCOME
(CZK’m) 2020 2019
Interest income from loans to credit institutions 3 2
of which: Interest on non-performing loans ––
Interest income from loans to other customers 1,102 1,099
of which: Interest on non-performing loans 336 286
Interest income from interbank deposits 40 29
Interest income from CNB loans – repos 61 93
Interest income from current accounts with other banks 1 –
Interest income from loans and receivables at amortised cost 1,207 1,223
Interest on debt securities at fair value recognized in the OCI 19 31
Interest on debt securities at amortised cost 37 38
Interest on other assets – collateral –1
Interest on liabilities 29
Interest income on hedging interest derivatives –2
Other interest income 58 81
Interest income 1,265 1,304
Interest expense from received bank credits (35) (63)
Interest expense from term deposits (22) (28)
Interest expense from current accounts – –
Interest expense from interbanking operations (33) (1)
Interest expense from issued bonds (382) (593)
Interest expense from financial liabilities in amortised costs (472) (685)
Interest expense from assets (1) (7)
Interest expense on hedging iderivatives (10) (58)
Other interest – leases (2) (1)
Interest expense (485) (751)
Net interest income 780 553
(CZK’m) 2020 2019
Fees and commisions from loan agreements 1 –
Fees and commisions from payments 2 2
Fees and commisions from guarantees 22 17
Fee and commisions income 25 19
Fees and commisions from clearing and settlement – (1)
Fees for guarantees (7) (6)
Fee for security operations (1) (1)
Fees and commisions for rating (4) (7)
Fee and commisions expense (12) (15)
Net fee and commisions income 13 4
100
4. FINANCIAL PART
8 / NET PROFIT/LOSS FROM FINANCIAL OPERATIONS INCLUDING STATE SUBSIDY
Profit from financial operations
(CZK’m) 2020 2019
Profit or (-) loss on financial assets at FV through OCI 1 –
Profit or (-) loss from the derecognition of financial assets and liabilities
not carried at fair value through profit or loss 1–
Loss from derivative transactions with currency instruments (215) (25)
Income from derivative transactions with currency instruments 243 111
Profit or (-) loss from financial assets and liabilities held for trading 28 86
Profit or (-) loss from the derecognition of non-financial assets – 1
Foreign exchange gains/(losses) (7) (42)
Net profit or (-) loss from financial operations, including state subsidy 22 45
In 2020 and 2019, the Bank did not qualify for a subsidy for a loss from officially supported financing.
9 / ADMINISTRATIVE EXPENSES, DEPRECIATION/AMORTISATION AND OTHER OPERATING COSTS
2020 2019
Number of employees 131 140
Average recorded number of employees 137 145
Board and Supervisory Board 6 6
(CZK’m) Note 2020 2019
Salaries and emoluments (148) (153)
Social security and health insurance costs (43) (51)
Oher staff costs (3) (12)
Staff costs (194) (216)
Advertising (2) (4)
Advisory (5) (4)
Information technology (29) (28)
Contribution to the Financial market guarantee system (12) (8)
Other administrative expenses (15) (21)
Total administrative expenses (257) (281)
Software amortisation 17 (36) (44)
Depreciation and amortization of fixed assets 16 (31) (29)
Depreciation and amortization (67) (73)
Cost of debt collection (20) (15)
Value added tax 21 (7) 13
Other (253) (1)
Other operating costs (280) (3)
Total operating costs (604) (357)
In 2020, the income of members of the Board of Directors and the Supervisory Board amounted to CZK 24 million (2019: CZK 23 million).
Staff costs also include provisions for bonuses and employee benefits. The provision for bonuses for the employees having an influence
on the Bank’s overall risk profile, the payment of which is deferred and depends on the financial results and other criteria in future years
was (due to the use of a pro rata portion of the provision) decreased by CZK 3 million to CZK 26 million. The provision for social security
and health insurance relating to these deferred bonuses decreased (due to the use of a pro rata portion of the provision) by
CZK 1 million to CZK 9 million. The provision for employee benefits decreased by CZK 3 million to CZK 5 million.
Other operating expenses increased by CZK 251 million as a result of the payment to the bankruptcy trustee in connection with an
impaired business transaction. The expenses were partially compensated by the insurance company, which is reported under Other
operating income.
101
Depreciation/amortisation of fixed assets includes amortisation of the right-of-use assets under a lease amounting to CZK 17 million.
10 / LOSSES (-) FROM THE IMPAIRMENT OF FINANCIAL ASSETS NOT MEASURED AT FVTPL OR THEIR REVERSAL
(CZK’m) 2020 2019
Creation of allowances – Stage 1 3 (3)
Creation of allowances – Stage 3 – (1)
Creation of allowances for loans to credit institutions 3 (4)
Creation of allowances – Stage 1 6 (14)
Creation of allowances – Stage 2 (14) (20)
Creation of allowances – Stage 3 135 (94)
Creation of allowances for receivables to other customers 127 (128)
Release of allowances for losses on loans to credit institutions – 115
Release of allowances on loans to other customers 4,724 1,260
Receivables from credit institutions written off – (115)
Receivables from customers written off (6,869) (7,895)
Income from written-off receivables from customers –received insurance payments 2,169 6,667
Income from written-off receivables from other customers – other collateral liquidation 5 4
Impairment losses on loans 159 (96)
The item ‘Income from written-off receivables from customers –received insurance payments’ also includes payments relating to
receivables sold in prior periods in the amount of CZK 27 million. (2019: CZK 30 million).
11 / INCOME TAX
The tax charge from the Bank’s profit before tax can be analysed as follows:
Charge for (-) and reversal of provisions
(CZK’m) 2020 2019
Net creation Creation Reversal Net creation Creation Reversal
of reversal of reversal
Provisions for loan commitments (17) (24) 7 7 (3) 3
Provisions for financial guarantees (38) (79) 41 41 (15) 28
Reserves for litigation 126 (50) 176 176 (119) –
Provisions for penalty and default interest (118) (118) – – – –
Creation of provisions or reversal (47) (271) 224 (106) (137) 31
(CZK’m) Note 2020 2019
Income tax payable 58 –
Provision for potential additional tax assessments 190 –
Deferred tax 22 25 (18)
Income tax expense 273 (18)
Expected tax 19% (2019: 19%) (83) (9)
Effects of non-taxable expenses (966) (372)
Effects of non-taxable income 958 357
Tax liability / tax loss for the accounting period (91) (24)
Income tax for prior periods ––
Deferred tax (25) 18
Provision for potential additional tax assessments (190) –
Unutilised deferred tax asset arising from tax loss 33 24
Income tax expense (273) 18
102
4. FINANCIAL PART
Tax non-deductible expenses primarily include the write-off of receivables in the amount of CZK 5,038 million, provision for penalty and
penalty interest arising from the potential additional tax in the amount of CZK 118 million and loss from a part of payment to the bankruptcy
trustee amounting to CZK 176 million. Tax non-deductible income primarily represents income from receivables written off (insurance
proceeds received) in the amount of CZK 435 million and use of tax non-deductible allowances of CZK 4,608 million.
The tax liability for the current reporting period was applied against the remaining part of the tax loss reported in 2017.
12 / CASH AND CASH EQUIVALENTS
For cash flow reporting purposes, cash and cash equivalents include the following balances with the maturity period shorter than
three months from the date of acquisition.
For ECL calculation purposes all deposits included in cash equivalents are classified in Stage 1. The Bank recognized minimal,
immaterial allowances for credit losses on cash and cash equivalents.
Minimum obligatory reserves are set up as 2% of deposits from other customers and of debt securities held by these entities which have
a maturity shorter than two years, recorded at the end of the calendar month preceding the month in which the relevant period
commences. As these balances are available on a daily basis, these are included in cash and cash equivalents.
13 / LOANS AND RECEIVABLES AT AMORTIZED COST
At the end of 2020, the receivables written-off and in process of hard collection amounted to CZK 19,329 million (2019: CZK 15,547 million).
Generally, these receivables represent receivables where the Bank acts as an agent in process of hard collection under obligations
from insurance contracts.
(CZK’m) 2020 2019
Deposits with central bank 1,903 223
Other deposits repayable on demand 736 941
Cash and cash with the central bank and other deposits repayable on demand 2,639 1,164
Deposits with central banks 120 3,502
Deposits with other credit institutions 10 1,202
Other deposits included in cash equivalents 130 4,704
Gross cash and cash equivalents 2,769 5,868
Allowance for cash (1) (3)
Allowance for cash equivalents – (2)
Net cash and cash equivalents 2,768 5,863
(CZK’m) 2020 2019
Deposits included in cash equivalents 130 4,704
Other receivables from credit institutions 4,891 980
Loans to credit institutions 171 149
Allowances to receivables (1) (4)
Total receivables from credit institutions 5,191 5,829
Receivables from other customers 30,554 38,006
Allowances to receivables (1,276) (5,844)
Total receivables from other customers 29,278 32,162
Total loans and receivables at amortised cost 34,469 37,991
Remaining maturity:
Short-term loans and other receivables 5,773 7,081
Long-term loans and other receivables 28,695 30,910
103
Loans to credit institutions
(CZK’m) 2020 2019
Deposits with the central bank 4,989 3,502
Deposits with credit institutions 32 2,182
Total deposits 5,021 5,684
Purchase of receivables 171 149
Sale of receivables ––
Total receivables from credit institutions at amortized cost 171 149
Allowance for expected credit losses (1) (4)
Total receivables from credit institutions at amortized cost 5,191 5,829
Remaining maturity:
Short-term loans to credit institutions 5,031 5,690
Long-term loans to credit institutions 160 139
Allowances for loans to credit institutions
(CZK’m) 2020 2019
Balance at 1 January (4) (117)
Increase of allowance (12) (135)
Utilisation of allowances for receivable write-offs –115
Decrease of allowance 15 133
Net movement in allowances 3113
Foreign exchange differences ––
Balance at 31 December (1) (4)
Loans to other customers
(CZK’m) 2020 2019
Loans
Pre-export funding 677 1,035
Export funding 28,119 35,218
Investment funding 1,714 1,664
For bank guarantee 410
Trade receivables –44
Purchase of receivables 40 35
Receivables from other customers at amortized cost 30,554 38,006
Allowance for receivables (1,276) (5,844)
Receivables from other customers at amortized cost 29,278 32,162
Remaining maturity:
Short-term loans to other customers 742 1,390
Long-term loans to other customers 28,536 30,772
Allowances for loans to other customers
(CZK’m) 2020 2019
At 1 January (5,844) (7,054)
Increase in allowances (120) (308)
Utilisation of allowances for receivable write-offs 4,722 1,260
Decrease in allowances 246 180
Net movement in allowances 4,848 1,132
Foreign exchange gains or losses (280) 78
At 31 December (1,276) (5 844)
104
4. FINANCIAL PART
14 / DERIVATIVE FINANCIAL INSTRUMENTS
The Bank uses the derivative instruments exclusively for hedging. Changes in fair value or cash flows from the hedged item arising from
interest rate fluctuations are subject to the hedge. For each derivative, it is decided whether hedge accounting should be applied to
it in line with IAS 39. The 1:1 hedge ratio is set in the application of hedge accounting. The Bank did not enter into a new cash flow
hedge transaction in 2020 and 2019. The Bank enters into transactions with interest rate and FX derivatives. Counterparties include
other financial institutions.
Total derivatives
(CZK’m)
Notional amount Fair value
Assets Liabilities Assets Liabilities
31 December 2020
Derivatives held for trading 3,859 4,120 – 256
Hedging derivatives 289 289 – 16
Total derivatives 4,148 4,409 – 272
Remaining maturity:
Short-term derivatives held for trading – – – –
Long-term derivatives held for trading 3,859 4,120 – 256
Short-term hedging derivatives – – – –
Long-term hedging derivatives 289 289 – 16
31 December 2019
Derivatives held for trading 3,675 3,811 – 110
Hedging derivatives 330 330 – 24
Total derivatives 4,005 4,141 – 134
Remaining maturity:
Short-term derivatives held for trading – – – –
Long-term derivatives held for trading 3,675 3,811 – 110
Short-term hedging derivatives – – – –
Long-term hedging derivatives 330 330 – 24
Derivatives held for trading
(CZK’m)
Notional amount Fair value
Assets Liabilities Assets Liabilities
31 December 2020
Cross-currency interest rate swap 3,859 4,120 – 256
Total derivatives held for trading 3,859 4,120 – 256
31 December 2019
Cross-currency interest rate swap 3,675 3,811 – 110
Total derivatives held for trading 3,675 3,811 – 100
105
Fair value hedging derivatives
(CZK’m)
Notional amount Fair value
Assets Liabilities Assets Liabilities
31 December 2020
Interest rate swaps 289 289 – 16
Total hedging derivatives 289 289 – 16
31 December 2019
Interest rate swaps 330 330 – 24
Total hedging derivatives 330 330 – 24
In accordance with the rules of the use of hedge accounting approved by the ALCO, the Bank has entered into interest rate swaps,
which hedge the fair value of a portion of the interest payments of the loans granted in EUR or USD (convert fixed interest payments
into variable). The testing of hedging effectiveness indicated that hedging is highly effective and complies with the requirements of
IAS 39.
15 / DEBT SECURITIES
The Bank’s debt securities represent a portfolio of predominantly state coupon bonds and bonds of international development banks.
Investment securities are fixed-rate or floating-rate debt securities issued by the Czech Ministry of Finance or by legal entities with an
investment grade rating assigned by foreign rating agencies.
All investment securities in the Bank's portfolio are, according to IFRS 9, categorized as Stage 1. The allowances recognised against them
are immaterial and cannot be reported in millions of CZK.
Classification by listing status
(CZK’m) 2020
IFRS 9
Debt securities at FV Carrying Carrying amount (brutto) Allowances
recognized in OCI amount Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
1,534 1,534 –––––
– listed 1,534 1,534 – – – – –
Debt securities at amortized cost
1,603 1,603 –––––
– listed 1,553 1,553 – – – – –
– unlisted 50 50 – – – – –
(CZK’m) 2019
IFRS 9
Debt securities at FV Carrying Carrying amount (brutto) Allowances
recognized in OCI amount Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
1,821 1,821 –––––
– listed 1,821 1,821 – – – – –
Debt securities at amortized cost
1,596 1,596 –––––
– listed 1,546 1,546 – – – – –
– unlisted 50 50 – – – – –
106
4. FINANCIAL PART
Classification by residual maturity
(CZK’m) 2020
Remaining maturity IFRS 9
Debt securities at fair value Carrying Carrying amount (brutto) Allowances
recognized in OCI amount Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
1,534 1,534 –––––
– short term 16 16 – – – – –
– long term 1,518 1,518 – – – – –
Debt securities at amortized cost
1,603 1,603 –––––
– short term 480 480 – – – – –
– long term 1,123 1,123 – – – – –
(CZK’m) 2019
Remaining maturity IFRS 9
Debt securities at fair value Carrying Carrying amount (brutto) Allowances
recognized in OCI amount Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
1,821 1,821 –––––
– short term 288 288 – – – – –
– long term 1,533 1,533 – – – – –
Debt securities at amortized cost
1,596 1,596 –––––
– short term 18 18 – – – – –
– long term 1,578 1,578 – – – – –
16 / TANGIBLE FIXED ASSETS
(CZK’m)
Right of Office Motor Assets under Total
use equipment vehicles construction
Cost
At 1 January 2019 – 125 3 8 136
Additions 86 27 – 22 135
Modifications 16 –– –16
Disposals – (15) (1) (27) (43)
At 31 December 2019 102 137 2 3 244
Additions – 5 – 4 9
Modification ––– – –
Disposals – (14) – (5) (19)
At 31 December 2020 102 128 2 2 234
Accumulated depreciation
At 1 January 2019 – (105) (3) – (108)
Additions (17) (11) (1) – (29)
Modification ––– – –
Disposals – 15 2 – 17
At 31 December 2019 (17) (101) (2) – (120)
Additions (17) (14) ––(31)
Modification ––– – –
Disposals – 13 ––13
At 31 December 2020 (34) (102) (2) – (138)
Closing net book value
At 31 December 2019 85 36 – 3124
At 31 December 2020 68 26 – 296
107
The Bank uses an operating lease with the notice period of one year and annual lease payments of CZK 18 million, which are paid
off evenly at the beginning of a quarter. The lease payments were not deferred as a result of COVID-19. As of 1 January 2020, the
estimated lease term was five years and the right of use asset was valued at CZK 68 million.
17 / INTANGIBLE FIXED ASSETS
(CZK’m) 2020 2019
Intangible fixed assets
Cost at 1 January 351 340
Additions 13 23
Disposals/transfers (3) (12)
Cost at 31 December 361 351
Accumulated amortisation at 1 January (318) (286)
Additions (36) (44)
Disposals/transfers 312
Accumulated amortisation at 31 December (351) (318)
Net book amount at 1 January 33 54
Net book amount at 31 December 10 33
18 / OTHER ASSETS
(CZK’m) 2020 2019
Estimated receivables – insurance payment 866 945
Estimated receivable from other reinsurance 11
Prepayments and accrued income 614
Value added tax 14
Receivables from various debtors 11
Other receivables 2–
Total other assets 877 965
Remaining maturity:
Current other assets 9 20
Non-current other assets 868 945
19 / FINANCIAL LIABILITIES AT AMORTISED COST
Total financial liabilities at amortised cost
CZK’m) 2020 2019
Deposits and other financial liabilities at amortized cost due to banks 6,614 1,768
Deposits and other financial liabilities at amortized cost due to other customers 2,089 2,529
Deposits, loans and other financial liabilities at amortized cost 8,703 4,297
Issued bonds at amortized cost 24,319 31,782
Total financial liabilities at amortized cost 33,022 36,079
Remaining maturity:
Short-term payables at amortized cost 14,108 11,910
ng-term payables at amortized cost 18,914 24,169
4. FINANCIAL PART
108
Financial liabilities to credit institutions at amortised cost
(CZK’m) 2020 2019
Deposits received 900 1,768
Borrowings 5,714 –
Total financial liabilities at amortized cost due to banks 6,614 1,768
Type of rate:
Fixed interest rates 4,902 182
Variable interest rates 1,712 1,586
Remaining maturity:
Total short-term payables to credit institutions 966 1,588
Total long-term payables to credit institutions 5,648 180
Financial liabilities to other customers at amortised cost
(CZK’m) 2020 2019
Current accounts 224 615
Term deposits 1,798 1,847
Escrow accounts 67 67
Total financial liabilities at amortized cost due to other customers 2,089 2,529
Type of rate:
Fixed interest rates 2,089 2,529
Interest free deposits ––
Remaining maturity:
Total short-term payables to other customers 951 2,463
Total long-term payables to other customers 1,138 66
Escrow accounts are deposits from customers held as a form of cash security for provided credit facilities.
The Bank’s financial liabilities decreased due to a reduced need for resources. Liabilities to credit institutions increased by CZK 4,846
million in 2020 (2019: decreased by CZK 4,147 million).
Liabilities from issued bonds decreased by CZK 7,463 million (2019: decreased by CZK 7,348 million). Liabilities to other customers
decreased by CZK 440 million in 2020 (2019: decreased by CZK 1,564 million).
109
Financial liabilities at amortised cost arising from debt securities in issue
(CZK’m) 2020
ISIN Currency Issue date Maturity date Amortized cost
XS0598967502 EUR 3.3.2011 3.3.2021 1,900
XS0630593233 CZK 26.5.2011 26.5.2021 1,904
XS0828623073 EUR 3.10.2012 3.10.2022 2,623
XS0849907281 EUR 5.11.2012 5.11.2024 6,567
XS0850460634 EUR 15.11.2012 15.11.2022 3,679
XS0911304326 EUR 8.4.2013 8.3.2025 1,320
XS1082830255 EUR 2.7.2014 2.7.2021 3,936
XS1121094632 EUR 16.10.2014 16.10.2024 1,318
XS1210661572 EUR 1.4.2015 3.4.2023 1,072
Issued bonds at amortized cost 24,319
(CZK’m) 2020
Remaining maturity:
Current 12,191
Non-current 12,128
During 2020, bonds XS0501185929 in the nominal value of EUR 150 million and XS0973829483 in the nominal value of EUR 150 million were
paid up.
Bonds issued by the Bank are listed on the Luxembourg Stock Exchange.
20 / OTHER LIABILITIES
(CZK’m) 2020 2019
Lease payables 69 86
Received prepayment of insurance benefits ––
Accruals and deferrals 6 75
Tax liabilities 23
Liabilities to different creditors 206 130
of which financial collateral 152 47
Total other liabilities 283 294
Remaining maturity:
Short-term other liabilities 148 285
Long-term other liabilities 135 9
Lease liabilities relate to the lease of a building based on a contract for an indefinite period with an anticipated lease term effective
until the end of 2024. At the beginning of the year, lease liabilities were measured at CZK 86 million. Liabilities from short-term leases
and leases with a low value were insignificant as of both 1 January 2020 and 31 December 2020.
4. FINANCIAL PART
110
21 / PROVISIONS
(CZK’m) Note 2020 2019
Provisions for deferred compensation including insurance payments
At 1 January 39 47
Charge for provision 96 9
Release of provision 9 – (9)
Usage of provision 9 (10) (8)
At 31 December 35 39
Provisions for employee benefits
At 1 January 82
Charge for provision 95 8
Release of provision 9 (4) (2)
Usage of provision 9 (4) –
At 31 December 58
Provision for additionally applied VAT
At 1 January – 22
Charge for provision ––
Release of provision 9 – (22)
Usage of provision ––
At 31 December ––
Provisions for financial guarantees
At 1 January 28 41
Charge for provision 10 79 15
Release of provision 10 (41) (28)
Usage of provision ––
Exchange rate gains or losses (1) –
At 31 December 65 28
Provisions for loan commitments
At 1 January 44
Charge for provision 10 24 3
Release of provision 10 (7) (3)
Usage of provision ––
Exchange rate gains or losses (1) –
At 31 December 20 4
Provision for penalties and interest on late payments
At 1 January ––
Charge for provision 10 118 –
Release of provision 10 – –
Usage of provision ––
At 31 December 118 –
Provisions for litigation
At 1 January 119 –
Charge for provision 10 50 119
Release of provision 10 (176) –
Usage of provision ––
Exchange rate gains or losses 7–
At 31 December – 119
Total provisions 243 198
The Bank created a provision for penalties and interest on late payments amounting to CZK 118 million in relation to the potential tax liability
resulting from potential findings from the ongoing tax inspection.
The provision for litigation was realised by the payment to the bankruptcy trustee.
111
22 / DEFERRED INCOME TAXES
Deferred income tax for 2020 is calculated using a tax rate for years of expected use of the deferred tax in the amount of 19% for 2020
and the following years.
The movement on the deferred income tax account is as follows:
(CZK’m) Note 2020 2019
At 1 January 31 21
Change in provisions for additionally applied VAT – (4)
Change in tangible and intangible assets 2 (1)
Change in provisions for employee benefits (4) –
Change in provisions for litigation (23) 23
Total deferred tax asset presented in the income statement 11 (25) 18
Securities
Change in the deferred tax on the debt securities at FV recognized in the OCI 24 3 –
Cash flow hedges
Change in deferred tax on hedging derivatives 24 – (8)
At 31 December 931
Deferred income tax assets and liabilities incurred for items shown below:
(CZK’m) 2020 2019
Deferred tax liabilities
Deferred tax on tangible and intangible assets – (1)
Deffered tax on debt securities at FV recognized in OCI (4) (7)
Deferred tax on hedging derivatives ––
(4) (8)
Deferred tax assets
Deferred tax assets related to the provisions for an additional application of VAT – –
Deferred tax on tangible and intangible assets 1–
Deferred tax on employee benefits reserve 12 16
Deferred tax to the provision for litigation – 23
13 39
Net deferred income tax assets/(liabilities) 931
Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset tax assets against tax liabilities.
A deferred tax asset is created for items that are expected to have a sufficient tax base for their application in subsequent taxation
periods.
4. FINANCIAL PART
112
23 / SHARE CAPITAL
Pursuant to Act No. 58/1995 Coll., the Czech Republic must own at least two thirds of the Bank's shares. Shareholder’s rights of the
Czech Republic are exercised by the Ministry of Finance of the Czech Republic. All issues of the Bank’s shares are ordinary shares and
are not associated with any special rights.
(CZK’m)
Number Nominal value Total nominal Share
of shares
per share value
(#) (%)
31 December 2020
Czech Republic 3,200 1 3,200 –
Czech Republic 100 10 1,000 –
Czech Republic total 3,300 – 4,200 84.0
EGAP 300 1 300 –
EGAP 50 10 500 –
EGAP total 350 – 800 16.0
Total 3,650 – 5,000 100.0
31 December 2019
Czech Republic 3,200 1 3,200 –
Czech Republic 100 10 1,000 –
Czech Republic total 3,300 – 4,200 84.0
EGAP 300 1 300 –
EGAP 50 10 500 –
EGAP 350 – 800 16.0
Total 3,650 – 5,000 100.0
24 / REVALUATION RESERVE
(CZK’m) Note 2020 2019
Debt securities at FV recognized in OCI
At 1 January 29 28
Changes in fair value (16) 3
Deferred income taxes 22 3 (1)
Total change (13) 2
Impact of rounding – (1)
At 31 December 16 29
Cash flow hedges
At 1 January – 35
Changes in fair value – 43
Deferred income taxes 22 – (8)
Total change – 35
Impact of rounding ––
At 31 December ––
Total revaluation difference 16 29
113
25 / RESERVES
Statutory reserve
Based on the Articles of Association, the Bank is required to set aside a statutory reserve in equity from profit or from shareholders’
contributions. The Bank allocates 5% of net profit to the statutory reserve up to 20% of share capital is achieved. This reserve can be
used exclusively to cover losses. In 2020, it increased by CZK 3 million by allocating the 2019 profit. The closing balance of the reserve
was CZK 794 million.
Other special funds
As part of other special funds from profit, the Bank primarily creates the export risk fund, which is predominantly intended for covering
the Bank’s losses. In 2020, the fund was increased by CZK 63 million, a share of the 2019 profit distribution. The balance of the fund
amounts to CZK 1,346 million. Other special funds from profit amount to CZK 2 million.
26 / CONTINGENT LIABILITIES AND COMMITMENTS
The contractual amounts of the off-balance sheet financial instruments that commit the Bank to granting credit to customers and the
related accepted guarantees and collateral are as follows:
Provided loan commitments and guarantees
2020 2019
Credit institutions Other clients Credit institutions Other clients
Provided loan commitments 214 2,667 – 3,373
Provided financial guarantees – 1,742 – 1,390
Total 214 4,409 – 4,763
Received collateral and pledge
(CZK’m) 2020 2019
Credit institutions
Received insurance ––
Financial guarantees received 1,341 1,555
Securities received in reverse repo transactions – 3 ,237
Other collateral received 77
Total 1,348 4,799
Other clients
Accepted insurance 45,306 47,771
Financial guarantees received 25,050 30,365
Other collateral received 336 212
Total 70,692 78,348
Total 72,040 83,147
Contingent assets (received irrevocable guarantees, collateral and insurance) are stated at the nominal value of the expected
performance. This is to collateralise balance sheet and off-balance sheet exposures of the Bank. Securities received in reverse repo
transactions are measured at fair value.
4. FINANCIAL PART
114
27 / RELATED PARTY TRANSACTIONS
The Bank provides specialised services supporting export activities in accordance with Act No. 58/1995 Coll. This Act also determines
the shareholders’ structure. The Bank is fully controlled by the Czech Republic, which owns 84% of the Bank’s share capital directly and
16% of the share capital indirectly via EGAP, which is fully owned by the Czech Republic.
Related-party transactions are concluded within normal business transactions. Related parties are identified based on the criteria of
IAS 24.
Transactions with related parties are entered into under arm’s length conditions. All fees related to collaterals and guarantees received,
including insurance premiums, are borne by the debtors.
Balances with entities controlled by the same controlling entity (the Czech Republic) or having significant influence
(CZK’m) 2020 2019
Receivables Balance Income Balance Income
Placements with banks
Česká národní banka (central bank) 6,890 82 3,521 94
Borrowed bonds
Ministry of Finance of the Czech Republic 2,897 75 3,070 60
Receivable arising from premium and other receivables
EGAP, a.s 866 142 950 –
State subsidy receivable
Ministry of Finance of the Czech Republic – – – –
Right of use – leasing 68 (17) 86 (17)
Total EGAP, a.s. 934 125 1,036 (17)
Total 10,721 282 7,627 137
Payables
(CZK’m) 2020 2019
Balance Income Balance Income
Due to clients
EGAP, a.s. 1,722 (22) 1,911 (24)
Ministry of Finance of the Czech Republic – – – –
Insurance prepayment received
EGAP, a.s. –– ––
State subsidy payable
Ministry of Finance of the Czech Republic – – 73 –
Lease liability
EGAP, a.s. 70 (2) 86 1
Total 1,792 (24) 2,070 (23)
The prepayment of the state subsidy from 2019 was settled with the Ministry of Finance of the Czech Republic within a due deadline
in 2020.
Salaries and bonuses paid to members of the Board of Directors and the Supervisory Board are disclosed in Note 9.
115
28 / SUBSEQUENT EVENTS
All events that occurred between the end date of the reporting period and the balance sheet date and that had a material impact
on the financial statements for the year ended 31 December 2020 were taken into consideration.
Date of preparation: 19 March 2021
Signed on behalf of the Bank’s Board of Directors:
Ing. Jaroslav Výborný, MBA Ing. Jiří Schneller
Chairman of the Board of Directors Member of the Board of Directors
and CEO and Deputy CEO
5. RELATED PARTY TRANSACTIONS REPORT
5
Related Party
Transactions Report
117
prepared in accordance with Section 82 (1) of Act No. 90/2012 Coll., on Business Corporations and Cooperatives (the Act on Business
Corporations), as amended
Company name: Česká exportní banka, a.s. (the “Bank”)
Registered office: Vodičkova 34/701, Prague 1, 111 21
Corporate ID: 63078333
Tax ID: CZ63078333
Recorded in the Register of Companies: Municipal Court in Prague, File B, Insert 3042
a/ Structure of Relations between the Controlling Entities and the Controlled Entity and Relations between the Controlled Entity
and Entities Controlled by the Same Controlling Entity
For information on other related parties, refer to Appendix 1
b/ Role of the Controlled Entity
Act No. 58/1995 Coll., on Insurance and Financing of Exports with State Support, authorises the Bank primarily to finance exports
with state support in line with international rules on state aid applied in financing export credits with maturity exceeding two
years (predominantly the “OECD Consensus”) and the WTO’s policies
In terms of Section 8 (1) (c) of Act No. 58/1995 Coll., on Insurance and Financing Exports with State Support, the state is held
liable for the Bank’s obligations arising from payments of funds received by the Bank and for obligations arising from the Bank’s
other transactions on the financial markets.
c/ Method and Means of Control
The controlling entity of the Bank is the state. The state performs its shareholder rights directly through the ministry referred to
below and indirectly through Exportní garanční a pojišťovací společnost, a.s. (Export Guarantee and Insurance Corporation).
Composition of shareholders and their share in voting rights:
Individual shareholders exercise their rights primarily through the following bodies:
General Meeting – the supreme body of the Bank that decides through the majority of present shareholders on the issues that
are entrusted into its competencies by Act No. 90/2012 Coll., on Business Corporations and Cooperatives
(the Act on Business Corporations), as amended, and the Bank’s Articles of Association; and
Supervisory Board – the control body of the Bank that supervises the activities of the Board of Directors and business activities
of the Bank and presents its statements to the General Meeting.
Česká exportní banka, a.s
Ministerstvo financí ČR 84 %
Exportní garanční a pojišťovací společnost, a.s. 16 %
5
|
Related Party Transactions Report
1. State – Czech Ministry of Finance 84% of shares
having its registered office at Letenská 15, Prague 1, 118 10, corporate ID 00006947 4,200 votes
2. Exportní garanční a pojišťovací společnost, a.s. 16% of shares
having its registered office at Vodičkova 34, Prague 1, 111 21, corporate ID 45279314 800 votes
.
d/ List of Actions Taken in the Reporting Period
The Bank took no actions regarding assets that exceed 10% of the equity of the controlled entity as identified on the basis of
the most recent set of financial statements, at the initiative or in the interest of the controlling entity or entities controlled by it.
e/ List of Mutual Contracts between the Controlled Entity and the Controlling Entity or Controlled Entities (Exportní garanční
a pojišťovací společnost, a.s.)
Agreement on the Insurance of Export Credit Risks
1. Insurance Agreement No. 202002391 of 20 July 2020
2. Insurance Agreement No. 202002389 of 23 July 2020
3. Insurance Agreement No. 202002334 of 25 May 2020
4. Insurance Agreement No. 107011441 of 11 March 2020
5. Insurance Agreement No. 135006637 of 31 March 2020
6. Insurance Agreement No. 107011272 of 11 March 2020
Amendments to Individual Insurance Agreements
1. Amendment No. 10 of 28 August 2020 to Insurance Agreement No. 107008177
2. Amendment No. 6 of 17 April 2020 to Insurance Agreement No. 107010203
3. Amendment No. 7 of 17 April 2020 to Insurance Agreement No. 107010078
4. Amendment No. 8 of 17 April 2020 to Insurance Agreement No. 107007863
5. Amendment No. 1 of 17 April 2020 to Insurance Agreement No. 107011204
6. Amendment No. 1 of 17 April 2020 to Insurance Agreement No. 107011248
7. Amendment No. 1 of 17 April 2020 to Insurance Agreement No. 107011237
8. Amendment No. 1 of 17 April 2020 to Insurance Agreement No. 107011182
9. Amendment No. 1 of 17 April 2020 to Insurance Agreement No. 107011193
10. Amendment No. 1 of 17 April 2020 to Insurance Agreement No. 107011226
11. Amendment No. 1 of 17 April 2020to Insurance Agreement No. 107011171
12. Amendment No. 1 of 17 April 2020to Insurance Agreement No. 107011259
13. Amendment No. 1 of 6 November 2020 to Insurance Agreement No. 135006637
14. Amendment No. 1 of 6 November 2020 to Insurance Agreement No. 107011272
15. Amendment No. 9 of 7 January 2020 to Insurance Agreement No. 133004813
16. Amendment No. 10 of 4 December 2020 to Insurance Agreement No. 133004813
17. Amendment No. 9 of 7 January 2020 to Insurance Agreement No. 137001915
18. Amendment No. 10 of 4 December 2020 to Insurance Agreement No. 137001915
19. Amendment No. 3 of 23 December 2020 to Insurance Agreement No. 125008188
20. Amendment No. 2 of 8 April 2020 to Insurance Agreement No. 125008188
21. Amendment No. 6 of 7 January 2020 to Insurance Agreement No. 133004824
22. Amendment No. 6 of 7 January 2020 to Insurance Agreement No. 137001926
Insurance Rulings
1. Insurance Ruling No. 002 of 4 March 2020 to Limit Insurance Agreement No. 202002064
2. Insurance Ruling No. 003 of 4 March 2020 to Limit Insurance Agreement No. 202002064
3. Insurance Ruling No. 004 of 6 March 2020 to Limit Insurance Agreement No. 202002064
4. Insurance Ruling No. 005 of 11 March 2020 to Limit Insurance Agreement No. 202002064
5. Insurance Ruling No. 006 of 23 March 2020 to Limit Insurance Agreement No. 202002064
6. Insurance Ruling No. 007 of 23 March 2020 to Limit Insurance Agreement No. 202002064
7. Insurance Ruling No. 008 of 30 March 2020 to Limit Insurance Agreement No. 202002064
8. Insurance Ruling No. 001 of 14 August 2020 to Limit Insurance Agreement No. 202002391
9. Insurance Ruling No. 002 of 16 December 2020 to Limit Insurance Agreement No. 2022002391
10. Insurance Ruling No. 001 of 27 May 2020 to Limit Insurance Agreement No. 2022002334
11. Insurance Ruling No. 4 of 7 January 2020 to Insurance Agreement No. 107008291
12. Insurance Ruling No. 5 of 12 May 2020 to Insurance Agreement No. 107008291
13. Insurance Ruling No. 6 of 9 July 2020 to Insurance Agreement No. 107008291
5. RELATED PARTY TRANSACTIONS REPORT
118
119
14. Insurance Ruling No. 7 of 10 November 2020 to Insurance Agreement No. 107008291
15. Insurance Ruling No. 9 of 4 May 2020 to Insurance Agreement No. 107009055
16. Insurance Ruling No. 10 of 9 November 2020 to Insurance Agreement No. 107009055
17. Insurance Ruling No. 6 of 11 March 2020 to Insurance Agreement No. 107009257
18. Insurance Ruling No. 7 of 14 September 2020 to Insurance Agreement No. 107009257
19. Insurance Ruling No. 9 of 5 August 2020 to Insurance Agreement No. 107007571
20. Insurance Ruling No. 11 of 13 February 2020 to Insurance Agreement No. 107006941
21. Insurance Ruling No. 13 of 4 August 2020 to Insurance Agreement No. 107006941
Amendments to Insurance Rulings
None
Other types of agreements
1. Agreement on the Settlement of Insurance Premiums of 12 March 2020 to Insurance Agreement No. 202001873
2. Agreement on the Assignment of a Receivable of 19 August 2020 to Insurance Agreement No. 107005128
3. Additional Agreement No. 1 to Assignment Agreement of 2 December 2020 to Insurance Agreement No. 107005128
4. Agreement on the Assignment of a Receivable of 13 July 2020 to Insurance Agreement No. 121000308
5. Agreement on the Assignment of a Receivable of 13 July 2020 to Insurance Agreement No. 107007525
6. Agreement on the Assignment of a Receivable of 13 July 2020 to Insurance Agreement No. 107004353
7. Agreement on the Assignment of a Receivable of 13 July 2020 to Insurance Agreement No. 107005534
8. Agreement on the Assignment of a Receivable of 13 July 2020 to Insurance Agreement No. 107004397
9. Agreement on the Assignment of a Receivable of 13 July 2020 to Insurance Agreement No. 203000322
10. Agreement on the Assignment of a Receivable of 13 July 2020 to Insurance Agreement No. 107007378
11. Conciliation Agreement SMŘ 001/3/2019 of 9 March 2020 to Insurance Agreement No. 107006941
12. Conciliation Agreement SMŘ 001/1/2019 of 9 March 2020 to Insurance Agreement No. 107006941
13. Conciliation Agreement SMŘ 001/2/2019 of 9 March 2020 to Insurance Agreements No. 107006851 and No. 107008583
Insurance agreements with ČEB effective as of 31 December 2020 (including agreements concluded in 2020)
Characteristics of the agreements Number
One-time insurance agreement, type Bf 1
One-time insurance agreement, type If 1
One-time insurance agreements, type Z 8
One-time insurance agreement, type F 1
One-time insurance agreements, type D 31
Total one-time insurance agreements effective as of 31 December 2020 42
Limit insurance agreements, type Bf, including insurance rulings on those agreements 18
Limit insurance agreements, type D, including insurance rulings on those agreements 12
Total limit insurance agreements and insurance rulings issued on the limit insurance agreements
(including rulings on limit insurance agreements of prior years) effective as of 31 December 2020 30
Total insurance agreements
(including insurance rulings on limit insurance agreements effective as of 31 December 2020 72
5. RELATED PARTY TRANSACTIONS REPORT
120
Agreements and amendments concluded with EGAP from 1 January 2020 to 31 December 2020
l
Agreement on the temporary assignment of employees (concluded under Section 1746 of Act No. 89/2012 Coll., the Civil
Code, as amended) of 28 May 2020, effective from 1 June 2020 to 30 June 2020. Subsequently, on the basis of repeated
requests from EGAP (the last one dated 11 December 2020) and with the consent of ČEB, the agreement was extended for
the temporary assignment of one employee for the period from 1 July 2020 to 28 February 2021.
l
Amendment No. 1 to the agreement on commercial current accounts No. 21684 of 10 August 2020
l
Amendment No. 2 to the agreement on commercial current accounts No. 21684 of 7 October 2020
l
Amendment No. 3 to the agreement on establishing deposit accounts and on rules and conditions for making term deposits
with an individual interest rate on deposit accounts of 30 September 2020
Other agreements with EGAP effective from 1 January 2020 to 31 December 2020
l
Agreement on the lease of non-residential premises of 1 April 1998
l
Amendment No. 11 to the agreement on the lease of non-residential premises of 29 October 2019
l
Agreement on establishing deposit accounts and on rules and conditions for making term deposits with an individual interest
rate on deposit accounts of 1 December 2005
l
Amendment No. 1 to the agreement on establishing deposit accounts and on rules and conditions for making term deposits
with an individual interest rate on deposit accounts of 15 August 2018
l
Amendment No. 2 to the agreement on establishing deposit accounts and on rules and conditions for making term deposits
with an individual interest rate on deposit accounts of 17 April 2019
l
Agreement on commercial current accounts No. 21684 of 23 April 2014
l
Framework agreement on trading on the financial market of 4 April 2014
l
Cooperation agreement in insuring business cases (pre-export loans) against the risk of being subject to default and on
bank guarantees against the risk of their utilisation, provided to SMEs of 26 June 2008
l
Agreement on the protection and non-disclosure of confidential information between ČEB, a.s. and EGAP, a.s. of 11 November
2015
l
Cooperation agreement in providing support to SMEs between ČEB, a.s., ČMZRB, a.s., EGAP, a.s. and Raiffeisenbank a.s. of
10 December 2009
l
Cooperation agreement in providing support to SMEs between ČEB, a.s., ČMZRB, a.s., EGAP, a.s. and KB, a.s. of 6 October 2009
l
Agreement on using compatible media in payments of 6 November 2000
Insurance agreements and amendments to insurance agreements with ČEB concluded from 1 January 2020 to 31 December 2020
Characteristics of the agreements/amendments Number
New one-time insurance agreements, type Bf 1
New one-time limit insurance agreements, type Bf 2
New one-time insurance agreements, type Z 1
Amendments to insurance agreements, type Z 7
Amendments to insurance agreements, type F 2
New one-time insurance agreements, type D 2
Amendments to insurance agreements, type D 13
Total new one-time insurance agreements 28
Insurance rulings on the limit insurance agreements, type Bf, issued in 2020 10
Total new insurance rulings issued on limit insurance agreements of prior years
(including rulings on limit agreements of prior years) 10
Total new insurance agreements, amendments to insurance agreements concluded in 2020
and insurance rulings to insurance agreements concluded in 2020
(including rulings on limit insurance agreements of prior years)) 38
Characteristics of the agreements/amendmentsů Number
Agreement on the settlement of insurance premiums with regard to a limit insurance agreement, type Bf 1
121
Other agreements with the Ministry of Finance of the Czech Republic concluded from 1 January 2020 to 31 December 2020
l
Agreement on rules and conditions for the provision of loans between ČEB, a.s. and the Ministry of Finance of the Czech
Republic of 17 February 2010
l
Framework agreement on trading on the financial market of 12 March 2020
All of the above agreements were concluded under arm’s length conditions and the Bank suffered no detriment arising therefrom.
f/ The state, as the controlling entity, did not adopt any measures which would cause detriment to the Bank in the most recent
reporting period. During the reporting period, the Bank did not adopt any other measures at its own will or in the interest or
at the initiative of other related parties, other than those referred to above.
g/ Benefits and Disadvantages Arising from Relations between the Controlling Entity and the Controlled Entity and between
the Controlled Entity and Entities Controlled by the Same Controlling Entity
The relations between the Bank and the shareholders give rise to clear benefits taking the following form:
l
More effective approach to the process of amending the legislation that defines the terms of supported financing in order
to meet the current needs of Czech exporters and export suppliers during export transactions;
l
Possibility of obtaining rating at the sovereign level which provides the Bank with an opportunity to gain cheaper funds on
financial markets;
l
More effective use of economic diplomacy tools in the interest of Czech exporters;
l
Close coordination of institutions within the system of state support for export and business and connecting support for
innovations and new technologies with the support for business, export and internationalisation.
In Prague on 19 March 2021
Ing. Jaroslav Výborný, MBA Ing. Emil Holan
Chairman of the Board of Directors Vice-Chairman of the Board of Directors
5. RELATED PARTY TRANSACTIONS REPORT
122
ČEPRO, a.s.
Corporate ID: 60193531
Equity investment/Share: 100.00
MERO ČR, a.s.
Corporate ID: 6019346
8
Equity investment/Share: 100.00
MUFIS a.s.
Corporate ID: 60196696
Equity investment/Share: 49.00
IMOB a.s.
1
IČ: 60197901
Equity investment/Share: 100.00
ČEZ, a.s.
Corporate ID: 45274649
Equity investment/Share: 69.78
Letiště Praha, a.s.
Corporate ID: 28244532
Equity investment/Share: 100.00
SEVEROČESKÉ MLÉKÁRNY, a.s.
TEPLICE
Corporate ID: 48291749
Equity investment/Share: 40.78
Equity investment/Share: 84.00
Equity investment/Share: 16.00
PRISKO a.s.
Corporate ID: 46355901
Equity investment/Share: 100.00
THERMAL-F, a.s.
Corporate ID: 25401726
Equity investment/Share: 100.00
GALILEO REAL, k.s.
2
Corporate ID: 26175291
Equity investment/Sharel: 100.00
Kongresové centrum Praha, a.s.
Corporate ID: 63080249
Equity investment/Share: 54.35
Výzkumný a zkušební letecký
ústav, a.s.
Corporate ID: 00010669
Equity investment/Share: 100.00
HOLDING KLADNO a.s.
v likvidaci
Corporate ID: 45144419
Equity investment/Share: 96.85
Česká exportní banka, a.s.
Corporate ID: 63078333
Equity investment/Share: 100.00
List of Joint Stock Companies Controlled by Shareholders Holding an Equity Investment between 40% and 100%
Ministry of Finance of the Czech Republic
Ministry of Finance of the Czech Republic
Corporate ID: 00006947
Exportní garanční a pojišťovací společnost, a.s.
Corporate ID: 45279314
1
IMOB a.s. – brought into liquidation; recorded in the public register on 1 December 2020
2
ALILEO REAL, k.s. – brought into liquidation; recorded in the public register on 1 December 2020
Appendix 1
www.ceb.cz
