Half-year Report -Part 3

Bank of Cyprus Holdings PLC
09 August 2023
 

 

 

17.         Fair value measurement

The following table presents the carrying value and fair value of the Group's financial assets and liabilities.

 


 30 June 2023

 31 December 2022
(restated)


Carrying value

Fair value

Carrying value

Fair value

Financial assets

 €000

 €000

 €000

 €000

Cash and balances with central banks

  9,127,429                   

   9,127,429                   

    9,567,258                   

    9,567,258

Loans and advances to banks

      431,812                   

      419,210                   

       204,811                   

       193,349

Investments at FVPL

      138,661                   

      138,661                   

       190,209                   

       190,209

Investments at FVOCI

      487,806                   

      487,806                   

       467,375                   

       467,375

Investments at amortised cost

  2,703,240                   

   2,619,189                   

    2,046,119                   

    1,953,336

Derivative financial assets

        49,302                   

        49,302                   

         48,153                   

         48,153

Loans and advances to customers

10,007,819                   

10,038,152                   

    9,953,252                   

  10,011,741

Life insurance business assets attributable to policyholders

      576,272                   

      576,272                   

       531,061                   

       531,061

Other financial assets

      423,334                   

      462,915                   

       402,462                   

       456,402


23,945,675                   

23,918,936                   

  23,410,700                   

  23,418,884

Financial liabilities

                                       

                                       

                                       

                    

Funding from central banks and deposits by banks

  2,453,193                   

   2,401,740                   

    2,484,332                   

    2,399,266

Derivative financial liabilities

        18,391                   

        18,391                   

         16,169                   

         16,169

Customer deposits

19,166,155                   

19,124,073                   

  18,998,319                   

  18,963,934

Debt securities in issue

      291,976                   

      264,738                   

       297,636                   

       254,179

Subordinated liabilities

      309,348                   

      295,475                   

       302,104                   

       265,472

Other financial liabilities and lease liabilities

      254,690                   

      254,690                   

       250,352                   

       250,352


22,493,753                   

22,359,107                   

  22,348,912                   

  22,149,372

The fair value of financial assets and liabilities in the above table is as at the reporting date and does not represent any expectations about their future value.


The Group uses the following hierarchy for determining and disclosing fair value:

Level 1: investments valued using quoted prices in active markets.

Level 2: investments valued using models for which all inputs that have a significant impact on fair value are market observable.

Level 3: investments valued using models for which inputs that have a significant impact on fair value are not based on market observable data.

For assets and liabilities that are recognised in the Consolidated Financial Statements at fair value, the Group determines whether transfers have occurred between levels in the hierarchy by re‑assessing categorisation at the end of each reporting period.

The following is a description of the determination of fair value for financial instruments which are recorded at fair value on a recurring and on a non‑recurring basis and for financial instruments which are not measured at fair value but for which fair value is disclosed, using valuation techniques. These incorporate the Group's estimate of assumptions that a market participant would make when valuing the instruments.

Derivative financial instruments

Derivative financial instruments valued using a valuation technique with market observable inputs are mainly interest rate swaps, currency swaps, currency rate options, forward foreign exchange rate contracts and interest rate collars. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves.

Credit Valuation Adjustments (CVA) and Debit Valuation Adjustments (DVA)

The CVA and DVA are incorporated into derivative valuations to reflect the impact on fair value of counterparty risk and BOC PCL's own credit quality respectively.

The Group calculates the CVA by applying the PD of the counterparty, conditional on the non‑default of the Group, to the Group's expected positive exposure to the counterparty and multiplying the result by the loss expected in the event of default. Conversely, the Group calculates the DVA by applying BOC PCL's PD, conditional on the non‑default of the counterparty, to the expected positive exposure of the counterparty to the Group and multiplying the result by the loss expected in the event of default.

The expected exposure of derivatives is calculated as per the CRR and takes into account the netting agreements where they exist. A standard Loss Given Default (LGD) assumption in line with industry norms is adopted. Alternative LGD assumptions may be adopted when both the nature of the exposure and the available data support this.

The Group does not hold any significant derivative instruments which are valued using a valuation technique with significant non‑market observable inputs.

Investments at FVPL, investments at FVOCI and investments at amortised cost

Investments which are valued using a valuation technique or pricing models, primarily consist of unquoted equity securities and debt securities. These assets are valued using valuation models which sometimes only incorporate market observable data and at other times use both observable and non‑observable data. The rest of the investments are valued using quoted prices in active markets.

Loans and advances to customers

The fair value of loans and advances to customers is based on the present value of expected future cash flows. Future cash flows have been based on the future expected loss rate per loan portfolio, taking into account expectations for the credit quality of the borrowers. The discount rate includes components that capture the risk‑free rate per currency, funding cost, servicing cost and the cost of capital, considering the risk weight of each loan. The discount rate used in the determination of the fair value of the loans and advances to customers measured at FVPL during the six months ended 30 June 2023 ranges from 6.35% to 6.82% (31 December 2022: 2.66%‑4.86%).


Customer deposits

The fair value of customer deposits is determined by calculating the present value of future cash flows. The discount rate takes into account current market rates and the credit profile of BOC PCL. The fair value of deposits repayable on demand and deposits protected by the Deposit Protection Guarantee Scheme are approximated by their carrying values.

Loans and advances to banks

Loans and advances to banks with maturity over one year are discounted using an appropriate risk‑free rate plus the appropriate credit spread. For short‑term lending, the fair value is approximated by the carrying value.

Deposits by banks and funding from central banks

Deposits by banks and funding from central banks with maturity over one year are discounted using an appropriate risk‑free rate plus the appropriate credit spread. For short‑term funding, the fair value is approximated by the carrying value.

Debt securities in issue and Subordinated liabilities

Debt securities and subordinated liabilities issuances are traded in an active market with quoted prices.

Model inputs for valuation

Observable inputs to the models for the valuation of unquoted equity and debt securities include, where applicable, current and expected market interest rates, market expected default rates, market implied country and counterparty credit risk and market liquidity discounts.

The following table presents the fair value measurement hierarchy of the Group's financial assets and financial liabilities recorded at fair value and financial assets and financial liabilities for which fair value is disclosed, by level of the fair value hierarchy:

 


Level 1

Level 2

Level 3

Total

 30 June 2023

 €000

 €000

 €000

 €000

Financial assets measured at fair value





Loans and advances to customers measured at FVPL

                   - 

                   - 

         210,385                     

        210,385

Trading derivatives

                                           

                                           

                                           

                      

Forward exchange rate contracts

                   - 

                204                     

                   - 

               204

Currency swaps

                   - 

             4,890                     

                   - 

            4,890

Interest rate swaps

                   - 

                360                     

                   - 

               360

Currency options

                   - 

                123                     

                   - 

               123

Interest rate caps/floors

                   - 

             3,699                     

                   - 

            3,699


                   - 

             9,276                     

                   - 

            9,276

Derivatives qualifying for hedge accounting

                                           

                                           

                                           

                      

Fair value hedges‑interest rate swaps

                   - 

           40,024                     

                   - 

          40,024

Net investments‑forward exchange rate contracts and currency swaps

                   - 

                    2                     

                   - 

                    2


                   - 

           40,026                     

                   - 

          40,026

Investments at FVPL

           42,828                     

           92,469                     

             3,364                     

        138,661

Investments at FVOCI

         476,228                     

                   - 

           11,578                     

        487,806


        519,056                     

        141,771                     

        225,327                     

        886,154

Other financial assets not measured at fair value

                                           

                                           

                                           

                      

Loans and advances to banks

                   - 

         419,210                     

                   - 

        419,210

Investments at amortised cost

      2,434,498                     

         175,535                     

             9,156                     

    2,619,189

Loans and advances to customers

                   - 

                   - 

      9,827,767                     

    9,827,767


     2,434,498                     

        594,745                     

     9,836,923                     

  12,866,166


For loans and advances to customers measured at FVPL categorised as Level 3, an increase in the discount factor by 10% would result in a decrease of €3,637 thousand in their fair value and a decrease in the discount factor by 10% would result in an increase of €1,888 thousand in their fair value.

For one investment included in other non‑equity securities mandatorily measured at FVPL as a result of the SPPI assessment and categorised as Level 3 with a carrying amount of €3,364 thousand as at 30 June 2023, a change in the conversion factor by 10% would result in a change in the value of the other non‑equity securities by €336 thousand.

 


Level 1

Level 2

Level 3

Total

 30 June 2023

 €000

 €000

 €000

 €000

Financial liabilities measured at fair value





Trading derivatives





Forward exchange rate contracts

                   - 

                124                     

                   - 

               124

Currency swaps

                   - 

             3,615                     

                   - 

            3,615

Interest rate swaps

                   - 

                347                     

                   - 

               347

Currency options

                   - 

                    2                     

                   - 

                    2

Interest rate caps/floors

                   - 

             3,699                     

                   - 

            3,699


                   - 

             7,787                     

                   - 

            7,787

Derivatives qualifying for hedge accounting





Fair value hedges‑interest rate swaps

                   - 

           10,604                     

                   - 

          10,604


                   - 

           10,604                     

                   - 

          10,604


                   - 

          18,391                     

                   - 

          18,391

Other financial liabilities not measured at fair value

                                           

                                           

                                           

                      

Funding from central banks

                   - 

      1,996,982                     

                   - 

    1,996,982

Deposits by banks

                   - 

         404,758                     

                   - 

        404,758

Customer deposits

                   - 

                   - 

    19,124,073                     

  19,124,073

Debt securities in issue

         264,738                     

                   - 

                   - 

        264,738

Subordinated liabilities

         295,475                     

                   - 

                   - 

        295,475


        560,213                     

     2,401,740                     

  19,124,073                     

  22,086,026


 


Level 1

Level 2

Level 3

Total

 31 December 2022

 €000

 €000

 €000

 €000

Financial assets measured at fair value





Loans and advances to customers measured at FVPL

                   - 

                   - 

         214,359                     

        214,359

Trading derivatives

                                           

                                           

                                           

                      

Forward exchange rate contracts

                   - 

                103                     

                   - 

               103

Currency swaps

                   - 

                283                     

                   - 

               283

Interest rate swaps

                   - 

                437                     

                   - 

               437

Currency options

                   - 

                287                     

                   - 

               287

Interest rate caps/floors

                   - 

             3,094                     

                   - 

            3,094


                   - 

             4,204                     

                   - 

            4,204

Derivatives qualifying for hedge accounting

                                           

                                           

                                           

                      

Fair value hedges‑interest rate swaps

                   - 

           43,939                     

                   - 

          43,939

Net investments‑forward exchange rate contacts and currency swaps

                   - 

                  10                     

                   - 

                  10


                   - 

           43,949                     

                   - 

          43,949

Investments at FVPL

           84,743                     

           96,498                     

             8,968                     

        190,209

Investments at FVOCI

         455,110                     

                   - 

           12,265                     

        467,375


        539,853                     

        144,651                     

        235,592                     

        920,096

Other financial assets not measured at fair value

                                           

                                           

                                           

                      

Loans and advances to banks

                   - 

         193,349                     

                   - 

        193,349

Investments at amortised cost

      1,871,757                     

           69,300                     

           12,279                     

    1,953,336

Loans and advances to customers

                   - 

                   - 

      9,797,382                     

    9,797,382


     1,871,757                     

        262,649                     

     9,809,661                     

  11,944,067

For loans and advances to customers measured at FVPL categorised as Level 3, an increase in the discount factor by 10% would result in a decrease of €4,538 thousand in their fair value and a decrease in the discount factor by 10% would result in an increase of €1,145 thousand in their fair value.

For one investment included in other non‑equity securities mandatorily measured at FVPL as a result of the SPPI assessment and categorised as Level 3 with a carrying amount of €8,968 thousand as at 31 December 2022, a change in the conversion factor by 10% would result in a change in the value of the other non‑equity securities by €897 thousand.


 


Level 1

Level 2

Level 3

Total

 31 December 2022

 €000

 €000

 €000

 €000

Financial liabilities measured at fair value





Trading derivatives





Forward exchange rate contracts

                   - 

                123                     

                   - 

               123

Currency swaps

                   - 

           10,316                     

                   - 

          10,316

Interest rate swaps

                   - 

                420                     

                   - 

               420

Currency options

                   - 

                  65                     

                   - 

                  65

Interest rate caps/floors

                   - 

             3,094                     

                   - 

            3,094


                   - 

           14,018                     

                   - 

          14,018

Derivatives qualifying for hedge accounting





Fair value hedges‑interest rate swaps

                   - 

             2,151                     

                   - 

            2,151


                   - 

             2,151                     

                   - 

            2,151


                   - 

          16,169                     

                   - 

          16,169

Other financial liabilities not measured at fair value

                                           

                                           

                                           

                      

Funding from central banks

                   - 

      1,944,145                     

                   - 

    1,944,145

Deposits by banks

                   - 

         455,121                     

                   - 

        455,121

Customer deposits

                   - 

                   - 

    18,963,934                     

  18,963,934

Debt securities in issue

         254,179                     

                   - 

                   - 

        254,179

Subordinated liabilities

         265,472                     

                   - 

                   - 

        265,472


        519,651                     

     2,399,266                     

  18,963,934                     

  21,882,851

The cash and balances with central banks are financial instruments whose carrying value is a reasonable approximation of fair value because they are mostly short‑term in nature or are repriced to current market rates frequently. The carrying value of other financial assets, other than the deferred purchase payment consideration (Note 20), and other financial liabilities is a close approximation of their fair value and they are categorised as Level 3.

During the six months ended 30 June 2023 and the year ended 31 December 2022 there were no significant transfers between Level 1 and Level 2.

Movements in Level 3 assets measured at fair value

Transfers from Level 3 to Level 2 occur when the market for some securities becomes more liquid, which eliminates the need for the previously required significant unobservable valuation inputs. Following a transfer to Level 2 the instruments are valued using valuation models incorporating observable market inputs. Transfers into Level 3 reflect changes in market conditions as a result of which instruments become less liquid. Therefore, the Group requires significant unobservable inputs to calculate their fair value.


The movement in Level 3 financial assets which are measured at fair value is presented below:

 


30 June 2023

 31 December 2022


Loans and advances to customers

Financial instruments

Total

Loans and advances to customers

Financial instruments

Total


 €000

 €000

 €000

 €000

 €000

 €000

1 January

     214,359                 

       21,233

     235,592                 

       281,868                 

        19,897                 

       301,765                 

Additions

               - 

               -  

               - 

               - 

        10,054                 

        10,054                 

Disposals

               - 

               -  

               - 

               - 

          (500)                 

          (500)                 

Conversion of instruments into common shares

               - 

      (6,521)

      (6,521)                 

               - 

        (4,102)                 

        (4,102)                 

Fair value gains/(losses)

               - 

            293

            293                 

               - 

        (4,133)                 

        (4,133)                 

Net (losses)/gains on loans and advances to customers measured at FVPL (Note 10)

             (9)                 

               -  

             (9)                 

          4,050                 

               - 

          4,050                 

Derecognition/repayment of loans

    (10,228)                 

               -  

    (10,228)                 

      (82,522)                 

               - 

      (82,522)                 

Interest on loans (Note 8)

         6,263                 

               -  

         6,263                 

        10,963                 

               - 

        10,963                 

Foreign exchange adjustments

               - 

           (63)

           (63)                 

               - 

               17                 

               17                 

30 June/31 December

     210,385                 

       14,942

     225,327                 

       214,359                 

        21,233                 

       235,592                 

18.         Loans and advances to customers

 


30 June
2023

 31 December 2022


 €000

 €000

 Gross loans and advances to customers at amortised cost

       9,995,335                      

        9,917,335                      

 Allowance for ECL for impairment of loans and advances to customers (Note 30.4)

       (197,901)                      

         (178,442)                      


       9,797,434                      

        9,738,893                      

 Loans and advances to customers measured at FVPL

          210,385                      

           214,359                      


     10,007,819                      

        9,953,252                      

The following tables present the Group's gross loans and advances to customers at amortised cost by staging and by geographical analysis (based on the country in which the loans are managed).

 


Stage 1

Stage 2

Stage 3

POCI

Total

 30 June 2023

 €000

 €000

 €000

 €000

 €000

Gross loans at amortised cost before residual fair value adjustment on initial recognition

         8,261,687                      

         1,365,799                      

           335,225                      

           107,622                      

     10,070,333                      

Residual fair value adjustment on initial recognition

           (63,508)                      

            (8,678)                      

            (1,433)                      

            (1,379)                      

         (74,998)                      

Gross loans at amortised cost

       8,198,179                      

       1,357,121                      

          333,792                      

          106,243                      

       9,995,335                      

Cyprus

         8,197,984                      

         1,357,121                      

           333,263                      

           106,243                      

       9,994,611                      

Other Countries

                  195                      

                    - 

                  529                      

                    - 

                 724                      


       8,198,179                      

       1,357,121                      

          333,792                      

          106,243                      

       9,995,335                      

 







 31 December 2022






Gross loans at amortised cost before residual fair value adjustment on initial recognition

         7,931,511                      

         1,586,488                      

           372,821                      

           115,544                      

     10,006,364                      

Residual fair value adjustment on initial recognition

           (64,255)                      

           (20,885)                      

            (1,803)                      

            (2,086)                      

         (89,029)                      

Gross loans at amortised cost

       7,867,256                      

       1,565,603                      

          371,018                      

          113,458                      

       9,917,335                      

Cyprus

         7,867,037                      

         1,565,603                      

           368,922                      

           113,458                      

       9,915,020                      

Other countries

                  219                      

                    - 

               2,096                      

                    - 

              2,315                      


       7,867,256                      

       1,565,603                      

          371,018                      

          113,458                      

       9,917,335                      


Residual fair value adjustment

The residual fair value adjustment on initial recognition mainly relates to the loans and advances to customers acquired as part of the acquisition of certain operations of Laiki Bank in 2013. In accordance with the provisions of IFRS 3, this adjustment decreased the gross balance of loans and advances to customers. The residual fair value adjustment is included within the gross balances of loans and advances to customers as at each balance sheet date. However, for credit risk monitoring, the residual fair value adjustment as at each balance sheet date is presented separately from the gross balances of loans and advances, as shown in the tables above.

Loans and advances to customers measured at FVPL are managed in Cyprus.

The following tables present the Group's gross loans and advances to customers at amortised cost by staging and by business line concentration.

 

 30 June 2023

Stage 1

Stage 2

Stage 3

POCI

Total

By business line

 €000

 €000

 €000

 €000

 €000

Corporate and Large Corporate

         2,735,590                      

           659,540                      

             50,445                      

             34,094                      

       3,479,669                      

International corporate

           694,641                      

                  124                      

                   37                      

                   20                      

          694,822                      

SMEs

           852,732                      

           121,177                      

               3,161                      

               9,160                      

          986,230                      

Retail






‑ housing

         2,970,005                      

           363,472                      

             24,131                      

             11,075                      

       3,368,683                      

‑ consumer, credit cards and other

           777,635                      

           125,125                      

             11,260                      

             14,166                      

          928,186                      

Restructuring






‑ corporate

               3,615                      

             19,549                      

             20,046                      

             10,206                      

            53,416                      

‑ SMEs

             10,357                      

             12,003                      

             14,622                      

               2,806                      

            39,788                      

‑ retail housing

               5,466                      

             20,629                      

             41,537                      

               2,258                      

            69,890                      

‑ retail other

               2,062                      

               4,666                      

             16,117                      

                  954                      

            23,799                      

Recoveries






‑ corporate

                    - 

                    - 

             17,483                      

               1,154                      

            18,637                      

‑ SMEs

                    - 

                    - 

             29,414                      

               1,664                      

            31,078                      

‑ retail housing

                    - 

                    - 

             78,342                      

             12,168                      

            90,510                      

‑ retail other

                   84                      

                    - 

             26,089                      

               5,783                      

            31,956                      

International business unit

           105,910                      

             24,658                      

               1,103                      

                  177                      

          131,848                      

Wealth management

             40,082                      

               6,178                      

                     5                      

                  558                      

            46,823                      


       8,198,179                      

       1,357,121                      

          333,792                      

          106,243                      

       9,995,335                      


 

31 December 2022

Stage 1

Stage 2

Stage 3

POCI

Total

By business line

 €000

 €000

 €000

 €000

 €000

Corporate and Large Corporate

         2,502,630                      

           807,282                      

             54,259                      

             34,616                      

       3,398,787                      

International corporate

           685,099                      

                  150                      

                   35                      

                   24                      

          685,308                      

SMEs

           825,123                      

           189,825                      

               3,299                      

             10,364                      

       1,028,611                      

Retail






‑ housing

         2,982,436                      

           305,714                      

             30,071                      

             12,413                      

       3,330,634                      

‑ consumer, credit cards and other

           704,959                      

           152,815                      

             14,376                      

             15,746                      

          887,896                      

Restructuring






‑ corporate

               2,842                      

             34,246                      

             20,689                      

             10,175                      

            67,952                      

‑ SMEs

             12,643                      

             10,603                      

             23,374                      

               2,381                      

            49,001                      

‑ retail housing

               5,168                      

             22,018                      

             42,155                      

               3,292                      

            72,633                      

‑ retail other

               1,713                      

               5,364                      

             16,237                      

               1,029                      

            24,343                      

Recoveries






‑ corporate

                    - 

                    - 

             18,403                      

               1,316                      

            19,719                      

‑ SMEs

                    - 

                    - 

             29,339                      

               2,366                      

            31,705                      

‑ retail housing

                    - 

                    - 

             88,956                      

             14,039                      

          102,995                      

‑ retail other

                  108                      

                    - 

             28,569                      

               4,953                      

            33,630                      

International business unit

           104,539                      

             31,934                      

               1,254                      

                  147                      

          137,874                      

Wealth management

             39,996                      

               5,652                      

                     2                      

                  597                      

            46,247                      


       7,867,256                      

       1,565,603                      

          371,018                      

          113,458                      

       9,917,335                      

Loans and advances to customers pledged as collateral are disclosed in Note 32.

Additional analysis and information regarding credit risk and analysis of the allowance for ECL of loans and advances to customers are set out in Note 30.

19.         Stock of property

The carrying amount of stock of property is determined as the lower of cost and net realisable value. Impairment is recognised if the net realisable value is below the cost of the stock of property. During the six months ended 30 June 2023 an impairment loss of €23,206 thousand (30 June 2022: €7,364 thousand) was recognised in 'Impairment net of reversals on non‑financial assets' in the consolidated income statement. At 30 June 2023, stock of property of €510,448 thousand (31 December 2022: €529,316 thousand) is carried at net realisable value. Additionally, at 30 June 2023 stock of property with a carrying amount of €49,137 thousand (31 December 2022: €108,010 thousand) is carried at approximately its fair value less costs to sell.

The stock of property includes residential properties, offices and other commercial properties, manufacturing and industrial properties, hotels and land (fields and plots). There is no stock of property pledged as collateral for central bank funding facilities under Eurosystem monetary policy operations.

The carrying amount of the stock of property is analysed in the tables below:

 


30 June
2023

31 December
2022


 €000

 €000

Net book value at 1 January

     1,041,032                     

      1,111,604

Additions

            4,440                     

           76,851

Disposals

       (57,872)                     

       (126,797)

Net transfers (to)/from property and equipment

       (18,563)                     

                   - 

Impairment (Note 12)

       (23,206)                     

         (20,628)

Foreign exchange adjustments

                   - 

                    2

Net book value at 30 June/31 December

        945,831                     

      1,041,032

As at 30 June 2023 there are charges against stock of property of the Group with a carrying value €19,500 thousand (31 December 2022: €20,989 thousand).


 

Analysis by type and country

Cyprus

Greece

Romania

Total

 30 June 2023

 €000

 €000

 €000

 €000

Residential properties

           52,628                     

           16,354                     

                  31                     

          69,013

Offices and other commercial properties

         114,797                     

           11,129                     

                   - 

        125,926

Manufacturing and industrial properties

           27,398                     

             9,617                     

                   - 

          37,015

Hotels

           22,570                     

                417                     

                   - 

          22,987

Land (fields and plots)

         687,054                     

             3,836                     

                   - 

        690,890

Total

        904,447                     

          41,353                     

                  31                     

        945,831

 

 31 December 2022





Residential properties

           63,724                     

           16,947                     

                  32                     

          80,703

Offices and other commercial properties

         142,475                     

           11,263                     

                   - 

        153,738

Manufacturing and industrial properties

           29,172                     

           11,710                     

                  48                     

          40,930

Hotels

           24,027                     

                437                     

                   - 

          24,464

Land (fields and plots)

         736,913                     

             4,284                     

                   - 

        741,197

Total

        996,311                     

          44,641                     

                  80                     

    1,041,032

20.         Prepayments, accrued income and other assets

 


30 June
2023

 31 December 2022 (restated)


 €000

 €000

Financial assets



Debtors

          32,363                     

           29,220

Receivable relating to tax

            4,397                     

             4,536

Deferred purchase payment consideration

        320,655                     

         311,523

Other assets

          65,919                     

           57,183


        423,334                     

         402,462

Non‑financial assets



Reinsurers' share of insurance contract liabilities

          50,580                     

           46,781

Current tax receivable

          93,681                     

         124,328

Prepaid expenses

            1,426                     

                682

Retirement benefit plan assets

                850                     

                816

Other assets

          39,736                     

           33,985


        186,273                     

         206,592


        609,607                     

         609,054

There were no financial assets classified as Stage 2 as at 30 June 2023 and 31 December 2022. In addition, no financial assets were measured at FVPL as at 30 June 2023 and 31 December 2022.

On the completion date of the sale of Project Helix 2 (the 'Transaction') in June 2021, the Group recognised an amount of €381,567 thousand in other financial assets, which represented the fair value of the deferred consideration receivable from the Transaction (the 'DPP'). This amount outstanding is payable in four instalments up to December 2025 and each instalment carries interest up to each payment date. An amount of €9,098 thousand, which represents the interest income on DPP has been recognised in the Consolidated Income Statement for the six months ended 30 June 2023 (30 June 2022: €4,314 thousand) within 'Interest income‑Financial assets at amortised cost‑Other financial assets' (Note 8). There are no other conditions attached. The DPP is classified as Stage 1 as at 30 June 2023 and 31 December 2022.


During the six months ended 30 June 2023, credit losses of €6,110 thousand were recognised in relation to other financial assets. This includes ECL losses of €246 thousand (of which €35 thousand relate to a partial reversal for 12‑months ECL of the DPP) and €5,864 thousand impairment losses. During the six months ended 30 June 2022, credit losses of €705 thousand were recognised in relation to prepayments, accrued income and other financial assets. This includes ECL losses of €117 thousand (of which €188 thousand relate to 12‑months ECL of the DPP) and €588 thousand impairment losses.

21.         Funding from central banks

Funding from central banks comprises funding from the ECB under Eurosystem monetary policy operations as set out in the table below:

 


30 June
2023

 31 December 2022


 €000

 €000

Targeted Longer‑Term Refinancing Operations (TLTRO IΙI)

         2,004,480                          

           1,976,674                          

As at 30 June 2023, ECB funding amounted to €2 billion (31 December 2022: €2 billion) borrowed from various TLTRO III operations.

In recognition of the challenging credit environment during the pandemic period, the Governing Council of the ECB announced that for the counterparties whose eligible net lending reached the lending performance thresholds, the interest rate applied over the periods from 24 June 2020 to 23 June 2021 and 24 June 2021 to 23 June 2022 would be 50 basis points below the average interest rate on the deposit facility prevailing over the same period, and in any case not higher than minus 1%. BOC PCL exceeded the eligible net lending threshold applicable in the specified periods and was entitled to the beneficial rate of minus 1% for the period June 2020 to June 2022 and recognised interest at the beneficial rate over the corresponding period. Subsequently, BOC PCL updated the effective interest rate based on the contractual terms and applicable changes in terms of the operations as a change in the EIR applied prospectively.

ECB during its October 2022 meeting, announced that from 23 November 2022 onwards, the applicable interest rate would be indexed to the average applicable key ECB interest rates from that date onward.

The maturity of TLTRO III is three years from the settlement of each operation, but there is an option to early repay or reduce the amounts borrowed before their respective final maturity.

BOC PCL early repaid €1 billion of TLTRO III funding in December 2022.

Details on encumbered assets related to the above funding facilities are disclosed in Note 32.


22.         Customer deposits

 


30 June
2023

 31 December 2022


 €000

 €000

By type of deposit

                                                     

                                                     

Demand

       10,359,755                          

         10,561,724                          

Savings

         2,948,823                          

           2,840,346                          

Time or notice

         5,857,577                          

           5,596,249                          


       19,166,155                          

         18,998,319                          

By geographical area

                                                     

                                                     

Cyprus

       13,378,996                          

         13,019,109                          

Greece

         1,845,882                          

           1,933,771                          

United Kingdom

             686,916                          

              706,233                          

United States

             149,455                          

              178,962                          

Germany

             117,613                          

              168,785                          

Romania

               60,772                          

                69,514                          

Russia

             636,234                          

              700,465                          

Ukraine

             301,407                          

              290,050                          

Belarus

               81,223                          

                83,299                          

Other countries

         1,907,657                          

           1,848,131                          


       19,166,155                          

         18,998,319                          

Deposits by geographical area are based on the country of passport of the Ultimate Beneficial Owner.

 


30 June
2023

 31 December 2022


 €000

 €000

By currency

                                                     

                                                     

Euro

       17,298,147                          

         17,067,299                          

US Dollar

         1,475,065                          

           1,529,548                          

British Pound

             325,625                          

              333,458                          

Russian Rouble

                 1,825                          

                  3,466                          

Swiss Franc

               11,150                          

                11,796                          

Other currencies

               54,343                          

                52,752                          


       19,166,155                          

         18,998,319                          


 


30 June
2023

 31 December 2022


 €000

 €000

By business line



Corporate and Large corporate

         1,964,893                          

           1,915,300                          

International corporate

             131,044                          

              139,898                          

SMEs

             962,581                          

           1,007,555                          

Retail

       11,667,105                          

         11,333,783                          

Restructuring

                                                     

                                                     

- Corporate

               13,700                          

                16,017                          

- SMEs

                 6,992                          

                  6,375                          

- Retail other

               13,142                          

                10,152                          

Recoveries

                                                     

                                                     

- Corporate

                 1,155                          

                  1,262                          

International business unit

         3,848,653                          

           3,957,050                          

Wealth management

             556,890                          

              610,927                          


       19,166,155                          

         18,998,319                          

23.         Debt securities in issue and Subordinated liabilities

 




30 June 2023

31 December 2022




Nominal value

Carrying value

Nominal value

Carrying value

Subordinated liabilities

Contractual interest rate

Issuer

 €000

 €000

 €000

 €000

Subordinated Tier 2 Capital Note ‑ April 2021

6.625% up to
23 October 2026

BOCH

   300,000                 

   309,348                 

     300,000                 

     302,104                 




   300,000                 

   309,348                 

     300,000                 

     302,104                 

Debt securities in issue







Senior Preferred Notes ‑ June 2021

2.50% up to
24 June 2026

BOC PCL

   300,000                 

   291,976                 

     300,000                 

     297,636                 

 

BOCH and BOC PCL maintain a Euro Medium Term Note (ΕΜΤΝ) Programme with an aggregate nominal amount up to €4,000 million.

Subordinated Liabilities

Subordinated Tier 2 Capital Note ‑ April 2021

In April 2021, BOCH issued a €300 million unsecured and subordinated Tier 2 Capital Note under the EMTN Programme. The note was priced at par with a coupon of 6.625% per annum payable annually in arrears and resettable on 23 October 2026 at the then prevailing 5‑year swap rate plus a margin of 6.902% per annum up to 23 October 2031, payable annually. The note matures on 23 October 2031. BOCH has the option to redeem the note early on any day during the six‑month period from 23 April 2026 to 23 October 2026, subject to applicable regulatory consents. The note is listed on the Luxembourg Stock Exchange's Euro MTF market.

The fair value of the subordinated liabilities as at 30 June 2023 and 31 December 2022 is disclosed in Note 17.


Debt securities in issue

Senior Preferred Notes ‑ June 2021

In June 2021, BOC PCL issued a €300 million senior preferred note under the EMTN Programme. The note was priced at par with a fixed coupon of 2.50% per annum, payable annually in arrears and resettable on 24 June 2026. The note matures on 24 June 2027. BOC PCL has the option to redeem the note early on 24 June 2026, subject to applicable regulatory consents. The note is listed on the Luxembourg Stock Exchange's Euro MTF market. The note complies with the criteria for the minimum requirement for own funds and eligible liabilities (MREL) and contributes towards BOC PCL's MREL requirements.

The fair value of the debt securities in issue as at 30 June 2023 and 31 December 2022 is disclosed in Note 17.

24.         Accruals, deferred income, other liabilities and other provisions

 


30 June
2023

 31 December 2022
(restated)


 €000

 €000

Income tax payable and related provisions

          75,477                     

           41,420

Special defence contribution payable

                363                     

                379

Retirement benefit plans liabilities

            1,959                     

             3,694

Provisions for financial guarantees and commitments

          18,007                     

           17,429

Liabilities arising from non‑participating investment contracts

          60,029                     

           47,847

Accrued expenses and other provisions

          60,801                     

           65,734

Deferred income

          19,060                     

           18,061

Items in the course of settlement

          75,111                     

           97,585

Lease liabilities

          28,627                     

           30,190

Other liabilities

          90,151                     

           56,843


        429,585                     

         379,182

Other liabilities include an amount of €10,385 thousand (31 December 2022: €10,385 thousand) relating to the guarantee fee for the conversion of DTA into tax credits (Note 13) and an amount of €16,298 thousand (31 December 2022: €9,874 thousand) relating to card processing transactions.

25.         Share capital

 


 30 June 2023

 31 December 2022


Number of shares (thousand)

 €000

Number of shares (thousand)

 €000

Authorised

                                           

                                           

                                           

                      

Ordinary shares of €0.10 each

  10,000,000                     

     1,000,000                     

    10,000,000                     

      1,000,000

Issued

                                           

                                           

                                           

                      

1 January and 30 June/31 December

        446,200                     

          44,620                     

         446,200                     

           44,620

Authorised and issued share capital

All issued ordinary shares carry the same rights.

There were no changes to the authorised or issued share capital during the six months ended 30 June 2023 and the year ended 31 December 2022.

Share premium reserve

There were no changes to the share premium reserve during the six months ended 30 June 2023 and the year ended 31 December 2022.


Treasury shares of the Company

The consideration paid, including any directly attributable incremental costs (net of income taxes), for shares of the Company held by entities controlled by the Group is deducted from equity attributable to the owners of the Company as treasury shares, until these shares are cancelled or reissued. No gain or loss is recognised in the consolidated income statement on the purchase, sale, issue or cancellation of such shares.

The life insurance subsidiary of the Group, as at 30 June 2023, held a total of 142 thousand ordinary shares of the Company of a nominal value of €0.10 each (31 December 2022: 142 thousand ordinary shares of a nominal value of €0.10 each), as part of its financial assets which are invested for the benefit of insurance policyholders. The cost of acquisition of these shares was €21,463 thousand (31 December 2022: €21,463 thousand).

Other equity instruments

 


30 June
2023

 31 December 2022


 €000

 €000

2018 Reset Perpetual Additional Tier 1 Capital Securities (Existing Capital Securities)

          15,517                     

         220,000

2023 Reset Perpetual Additional Tier 1 Capital Securities (New Capital Securities)

        220,000                     

                   - 


        235,517                     

         220,000

In December 2018, the Company issued €220 million Fixed Rate Reset Perpetual Additional Tier 1 Capital Securities (the 'Existing Capital Securities'). The Existing Capital Securities constitute an unsecured and subordinated obligation of the Company. The coupon is at 12.50% and is payable semi‑annually. During the six months ended 30 June 2023, a coupon payment was made to the holders of a total amount of €13,750 thousand and has been recognised in retained earnings (30 June 2022: €13,750 thousand). The Existing Capital Securities are listed on the Luxembourg Stock Exchange's Euro Multilateral Trading Facility (MTF) market.

The Company, in June 2023, invited the holders of its outstanding €220 million Existing Capital Securities to tender their Existing Capital Securities for cash purchase by the Company at a price equal to 103% of the principal amount. The Company also paid accrued interest on the Existing Capital Securities, from the last coupon date, 15 June 2023 until the settlement date. 

The Company received valid tenders of approximately €204 million in aggregate nominal amount, all of which were accepted by the Company. As a result, a cost of €6,554 thousand was recorded directly in equity in June 2023, forfeiting relevant future coupon payments.

In July 2023, the Company purchased in the open market approximately €7 million, further reducing the outstanding nominal amount of the Existing Capital Securities to approximately €8 million.

At the same time, the Company on 13 June 2023, successfully launched and priced an issue of €220 million Fixed Rate Reset Perpetual Additional Tier 1 Capital Securities (the 'New Capital Securities'). The New Capital Securities constitute unsecured and subordinated obligations of the Company, are perpetual and are issued at par. They carry an initial coupon of 11.875% per annum, payable semi‑annually, and resettable on 21 December 2028 and every 5 years thereafter. The Company may elect to cancel any interest payment for an unlimited period, on a non‑cumulative basis, whereas it mandatorily cancels interest payment under certain conditions. The New Capital Securities are perpetual and have no fixed date of redemption, but can be redeemed (in whole but not in part) at the Company's option from, and including, 21 June 2028 to, and including, 21 December 2028 and on each interest payment date thereafter, subject to applicable regulatory consents and the relevant conditions to redemption. The New Capital Securities are listed on the Luxembourg Stock Exchange's Euro Multilateral Trading Facility (MTF) market.

Transaction costs of €3,530 thousand in relation to the transactions were recorded directly in equity in June 2023.


26.         Dividends

Based on the 2022 SREP decision, effective from 1 January 2023, any equity dividend distribution is subject to regulatory approval, both for the Company and BOC PCL. The requirement for approval does not apply if the distributions are made via the issuance of new ordinary shares to the shareholders which are eligible as Common Equity Tier 1 Capital nor to the payment of coupons on any AT1 capital instruments issued by the Company or BOC PCL.

In April 2023, the Company obtained the approval of the European Central Bank to pay a dividend. Following this approval, the Board of Directors of the Company recommended to the shareholders for approval at the Annual General Meeting ('AGM') on 26 May 2023, a final dividend of €0.05 per ordinary share in respect of the earnings of the year ended 31 December 2022 ('Dividend'). The AGM on 26 May 2023 declared a final dividend of €0.05 per share. The Dividend amounts to €22,310 thousand in total and is equivalent to a payout ratio of 14% of the financial year 2022 recurring profitability adjusted for the AT1 coupon or 31% based on the financial year 2022 profit after tax (as reported in the 2022 Annual Financial Report).

27.         Provisions for pending litigation, claims, regulatory and other matters

The Group, in the ordinary course of business, is involved in various disputes and legal proceedings and is subject to enquiries and examinations, requests for information, audits, investigations, legal and other proceedings by regulators, governmental and other public bodies, actual and threatened, relating to the suitability and adequacy of advice given to clients or the absence of advice, lending and pricing practices, selling and disclosure requirements, record keeping, filings and a variety of other matters. In addition, as a result of the deterioration of the Cypriot economy and banking sector in 2012 and the subsequent restructuring of BOC PCL in 2013 as a result of the bail‑in Decrees, BOC PCL is subject to a large number of proceedings and investigations that either precede or result from the events that occurred during the period of the bail‑in Decrees.

Apart from what is described below, the Group considers that none of these matters are material, either individually or in aggregate. Nevertheless, provisions have been made where: (a) there is a present obligation (legal or constructive) arising from past events, (b) the settlement of the obligation is expected to result in an outflow of resources embodying economic benefits, and (c) a reliable estimate of the amount of the obligation can be made. The Group has not disclosed an estimate of the potential financial effect on its contingent liabilities arising from these matters where it is not practicable to do so, because it is too early or the outcome is too uncertain or, in cases where it is practicable, where disclosure could prejudice conduct of the matters. Provisions have been recognised for those cases where the Group is able to estimate probable losses (Note 6.4). Where an individual provision is material, the fact that a provision has been made is stated except to the extent that doing so would be prejudicial. Any provision recognised does not constitute an admission of wrongdoing or legal liability. There are also situations where the Group may enter into a settlement agreement. This may occur only if such settlement is in BOC PCL's interest (such settlement does not constitute an admission of wrongdoing) and only takes place after obtaining legal advice and all approvals by the appropriate bodies of management. While the outcome of these matters is inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of legal proceedings, regulatory and other matters as at 30 June 2023 and hence it is not believed that such matters, when concluded, will have a material impact upon the financial position of the Group.

27.1       Pending litigation and claims

Investigations and litigation relating to securities issued by BOC PCL

A number of institutional and retail customers have filed various separate actions against BOC PCL alleging that BOC PCL is guilty of misselling in relation to securities issued by BOC PCL between 2007 and 2011. Remedies sought include the return of the money investors paid for these securities. Claims are currently pending before the courts in Cyprus and in Greece, as well as the decisions and fines imposed upon BOC PCL in related matters by Cyprus Securities and Exchange Commission (CySEC) and/or Hellenic Capital Market Commission (HCMC).

The bonds and capital securities in respect of which claims have been brought are the following: 2007 Capital Securities, 2008 Convertible Bonds, 2009 Convertible Capital Securities (CCS) and 2011 Convertible Enhanced Capital Securities (CECS).


BOC PCL is defending these claims, particularly with respect to institutional investors and retail purchasers who received investment advice from independent investment advisors. In the case of retail investors, if it can be demonstrated that the relevant BOC PCL's officers 'persuaded' them to proceed with the purchase and/or purported to offer 'investment advice', BOC PCL may face significant difficulties.

To date, a number of cases have been tried in Greece. BOC PCL has appealed against any such cases which were not ruled in its favour. The resolution of the claims brought in the courts of Greece is expected to take a number of years.

So far four capital securities cases have been adjudicated in favour of BOC PCL and four cases have been adjudicated against BOC PCL at Areios Pagos (Supreme Court of Greece). The cases that BOC PCL has won will be retried by the Court of Appeal as per the direction of the Supreme Court. One of the said cases has already been retried by the Court of Appeal and the ruling was in favour of BOC PCL. There has been a new petition for annulment against this decision of the Court of Appeal and the case will be retried before the Supreme Court in 2023. The four cases that BOC PCL has lost will not be retried and are therefore deemed as concluded.

In Cyprus nineteen judgments have been issued so far with regards to BOC PCL capital securities. Thirteen of the said judgments have been issued in favour of BOC PCL (dismissing the plaintiffs' claims) and six of them against BOC PCL. BOC PCL has filed appeals with regards to all of the cases where the judgment was issued against it. In six of the thirteen cases that BOC PCL won, the plaintiffs have filed an appeal. It is to be noted that the statutory limitation period for filing claims with respect to this and other matters for which the cause of action arose prior and up to 31 December 2015, expired on 31 December 2021.

Provision has been made based on management's best estimate of probable outflows for capital securities related litigation.

Bail‑in related litigation

Depositors

A number of BOC PCL's depositors, who allege that they were adversely affected by the bail‑in, filed claims against BOC PCL and other parties (such as the CBC and the Ministry of Finance of Cyprus) including against BOC PCL as the alleged successor of Laiki Bank on the grounds that, inter alia, the 'Resolution Law of 2013' and the Bail‑in Decrees were in conflict with the Constitution of the Republic of Cyprus and the European Convention on Human Rights. They are seeking damages for their alleged losses resulting from the bail‑in of their deposits. BOC PCL is defending these actions.

BOC PCL has won five cases with regards to bail‑in related litigation (on failure to follow instructions). The plaintiffs have filed appeals with respect to two of the said judgments. BOC PCL lost one case with regards to bail‑in related litigation (on failure to follow instructions) and has filed an appeal.

BOC PCL also won five bail‑in decree related cases. In summary, the court ruled that the measures that the government implemented were necessary to prevent the collapse of the financial sector, which would have detrimental consequences for the country's economy. Under the circumstances the government could rely on the doctrine of necessity when it imposed the bail‑in. Up to the date of the Consolidated Financial Statements only one appeal has been filed with respect to the above mentioned judgments. BOC PCL lost one Laiki Bail‑in decree case but it is the opinion of legal advisors of BOC PCL that this case is a one‑off case which turned on its own particular facts. An appeal by BOC PCL has been filed with respect to this case.

BOC PCL won two and lost three bail‑in wrongful application related cases. The appeals that have been filed by BOC PCL are still pending with regards to this matter. With regards to the cases that BOC PCL won, the plaintiffs have not filed an appeal.

Shareholders

A number of actions for damages have been filed with the District Courts of Cyprus alleging either the unconstitutionality of the Resolution Law and the Bail‑in Decrees, or a misapplication of same by BOC PCL (as regards the way and methodology whereby such Decrees have been implemented), or that BOC PCL failed to follow instructions promptly prior to the bail‑in coming into force. As at the present date, both the Resolution Law and the Bail‑in Decrees have not been annulled by a court of law and thus remain legally valid and in effect. BOC PCL contests all of these claims.


Legal position of the Group

All of the above claims are being vigorously disputed by the Group, in close consultation with the appropriate state and governmental authorities. The position of the Group is that the Resolution Law and the Decrees take precedence over all other laws. As matters now stand, both the Resolution Law and the Decrees issued thereunder are constitutional and lawful, in that they were properly enacted and have not so far been annulled by any court.

Provident fund case

In December 2015, the Bank of Cyprus Employees Provident Fund (the Provident Fund) filed an action against BOC PCL claiming €70 million allegedly owed as part of BOC PCL's contribution by virtue of an agreement with the Union dated 31 December 2011. Based on facts currently known, it is not practicable at this time for BOC PCL to predict the resolution of this matter, including the timing or any possible impact on BOC PCL.

Employment litigation

Former employees of the Group have instituted a number of employment claims including unfair dismissals and one claim for Provident Fund entitlements against BOC PCL and the Trustees of the Provident Fund. In July 2021 the claim for Provident Fund entitlements was settled. The Group does not consider that the pending cases in relation to employment will have a material impact on its financial position. A judgment has been issued in one of the unfair dismissal cases and BOC PCL lost. BOC PCL has filed an appeal with respect to this case and similarly, the plaintiff has also filed an appeal. The facts of this case are unique and it is not expected to affect the rest of the cases where unfair dismissal is claimed.

Additionally, a number of former employees have filed claims against BOC PCL contesting entitlements received relating to the various voluntary exit plans. As at the reporting date, the Group does not expect that these actions will have a material impact on its financial position.

Swiss Francs loans litigation in Cyprus and the UK

Α number of actions have been instituted against BOC PCL by borrowers who obtained loans in foreign currencies (mainly Swiss Francs). The central allegation in these cases is that BOC PCL misled these borrowers and/or misrepresented matters, in violation of applicable law. BOC PCL is contesting the said proceedings. The Group does not expect that these actions will have a material impact on its financial position.

UK property lending claims

BOC PCL is the defendant in certain proceedings alleging that BOC PCL is legally responsible for allegedly, inter alia, advancing and misselling loans for the purchase by UK nationals of property in Cyprus. The proceedings in the UK are currently stayed in order for the parties to have time to negotiate possible settlements. The Group does not expect that these negotiations will lead to outflows for the Group.

Banking business cases

There is a number of banking business cases where the amounts claimed are significant. These cases primarily concern allegations as to BOC PCL's standard policies and procedures allegedly resulting to damages and other losses for the claimants. Further, there are several other banking claims, where the amounts involved are not as significant. Management has assessed either the probability of loss as remote and/or does not expect any future outflows with respect to these cases to have a material impact on the financial position of the Group. Such matters arise as a result of the Group's activities and management appropriately assesses the facts and the risks of each case accordingly.

General criminal investigations and proceedings

The Attorney General and the Cypriot Police (the Police) are conducting various investigations and inquiries following and relating to the financial crisis which culminated in March 2013. BOC PCL is cooperating fully with the Attorney General and the Police and is providing all information requested of it. Based on the currently available information, the Group is of the view that any further investigations or claims resulting from these investigations will not have a material impact on its financial position.


Others

An investigation is in process related to potentially overstated and/or fictitious claims paid by the non‑life insurance subsidiary of the Group. The information usually required by IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' is not disclosed on the grounds that it is expected to seriously prejudice the outcome of the investigation and/or the possible taking of legal action. Based on the information available at present, management considers that it is unlikely for this matter to have a material adverse impact on the financial position and capital adequacy of the non‑life insurance subsidiary and thereby the Group, also taking into account that it is virtually certain that compensations will be received from a relevant insurance coverage, upon the settlement of any obligation that may arise.

27.2       Regulatory matters

The Hellenic Capital Market Commission (HCMC) Investigation

The HCMC is currently in the process of investigating matters concerning the Group's investment in Greek Government Bonds from 2009 to 2011, including, inter alia, related non‑disclosure of material information in BOC PCL's CCS, CECS and rights issue prospectuses (tracking the investigation carried out by CySEC in 2013), Greek government bonds' reclassification, ELA disclosures and allegations by some investors regarding BOC PCL's non‑compliance with Markets in Financial Instruments Directive (MiFID) in respect of investors' direct investments in Greek Government Bonds.

A specific estimate of the outcome of the investigations or of the amount of possible fines cannot be given at this stage, though it is not expected that any resulting liability or damages will have a material impact on the financial position of the Group.

The Cyprus Securities and Exchange Commission (CySEC) Investigations

CySEC has concluded (in two stages) during 2013 and 2014 its investigation with respect to BOC PCL exposure to Greek Government Bonds and the non‑disclosure of material information and other corporate governance deficiencies relating to the said exposure. In this respect, CySEC has issued two decisions, coming to the conclusion that BOC PCL was in breach of certain laws regarding disclosure of information. At all times, BOC PCL had filed recourses before the Administrative Court regarding the decisions of CySEC and the fines imposed upon it.

In October 2021 the Administrative Court ruled in favour of BOC PCL in relation to the fine of €160 thousand on the ground of flawed constitution of the CySEC Board. In May 2022, the Administrative Court (under a different bench) ruled against BOC PCL in relation to the fine of €950 thousand and found that the constitution of the CySEC Board was not flawed. In May 2023 the Administrative Court ruled in favour of BOC PCL in relation to the fine of €70 thousand on the ground of flawed constitution of the CySEC Board. All cases are now pending on appeal. Relevant provisions were made in prior years for the said cases.

As at 30 June 2023 and 31 December 2022 there were no pending CySEC investigations against BOC PCL.

Central Bank of Cyprus (CBC)

The CBC has carried out certain investigations to assess compliance of BOC PCL under the anti‑money laundering (AML) legislation which was in place during years 2008‑2015 and 2015‑2018.

Following the investigations and the on‑site audit findings, the CBC concluded on 27 January 2021 that in the case of AML legislation 2008‑2015 BOC PCL was in breach of certain articles of the said legislation and prima facie, failed to act in accordance with certain provisions of the AML/counter terrorism financing (CTF) Law and the CBC AML/CTF Directive. In October 2021 a fine of €277 thousand was imposed upon BOC PCL. BOC PCL paid a discounted fine and has filed a recourse against this decision and fine.

Following the investigation and the on‑site examination, the CBC concluded with regards to the files and transactions related to years 2015‑2018, that BOC PCL was in breach of certain articles of the legislation. In December 2021, a fine of €790 thousand was imposed upon BOC PCL. BOC PCL paid a discounted fine and has filed a recourse against the decision and the fine.


The CBC had conducted an investigation in the past into BOC PCL's issuance of capital securities and concluded that BOC PCL breached certain regulatory requirements concerning the issuance of Convertible Capital Securities (Perpetual) in 2009, but not in relation to the CECS in 2011. The CBC had, in 2013, imposed a fine of €4 thousand upon BOC PCL, who filed a recourse. The Administrative Court cancelled both the CBC's decision and the fine that was imposed upon BOC PCL in a respective judgment dated in 2020. CBC decided to re‑examine this matter and to re‑open the investigation.

Commission for the Protection of Competition Investigation (CPC)

In April 2014, following an investigation which began in 2010, CPC issued a statement of objections, alleging violations of Cypriot and EU competition law relating to the activities and/or omissions in respect of card payment transactions by, among others, BOC PCL and JCC Payment Systems Ltd (JCC), a card processing business currently 75% owned by BOC PCL. BOC PCL is expecting the final conclusion of this matter and has provided for it accordingly.

There was also an allegation concerning BOC PCL's arrangements with American Express, namely that such exclusive arrangements violated Cypriot and EU competition law. On both matters, the CPC has concluded that BOC PCL (in common with other banks and JCC) has breached the relevant provisions of the applicable law for the protection of competition. In May 2017, the CPC imposed a fine of €18 million upon BOC PCL and BOC PCL filed a recourse against the decision and the fine. The payment of the fine had been stayed, pending the final outcome of the recourse. In June 2018, the Administrative Court accepted BOC PCL's position and cancelled the decision as well as the fine imposed upon BOC PCL. During 2018, the Attorney General has filed an appeal before the Supreme court with respect to such decision. Until a judgment is issued by the Supreme Court, the decision of the CPC remains annulled and there is no subsisting fine upon BOC PCL. The said appeal is still pending as at 30 June 2023.

In 2019, the CPC initiated an ex officio investigation with respect to unfair contract terms and into the contractual arrangements/facilities offered by BOC PCL for the period from 2012 to 2016. To date no charges have been put forward nor have any formal proceedings been instituted against BOC PCL in this case. The Group is not aware of any further developments in this case.

Association for the Protection of Bank Borrowers (CYPRODAT)

CYPRODAT filed a complaint with the Commission for the Protection of Competition (CPC) in January 2022, claiming that BOC PCL and another bank have concerted in practices regarding the recent revisions of their commissions and charges. In April 2022, CPC informed BOC PCL of the initiation of an investigation with respect to this matter but for which no formulation of a Statement of Objections has been received to date which would indicate the initiation of formal proceedings. 

Consumer Protection Service (CPS)

In July 2017, CPS imposed a fine of €170 thousand upon BOC PCL after concluding an ex officio investigation regarding some terms in both BOC PCL's and Marfin Popular Bank's loan documentation, that were found to constitute unfair commercial practices. Decisions of the CPS (according to rulings of the Administrative Court) are not binding but merely an expression of opinion. BOC PCL has filed a recourse before the Administrative Court against this decision. The Administrative Court has issued its judgment in 2022 in favour of BOC PCL, and the CPS decision along with the fine have been cancelled. An appeal has been submitted by CPS with regards to this judgment, which is still pending as at 30 June 2023.

In March 2020, BOC PCL has been served with an application by the director of CPS through the Attorney General seeking for an order of the court, with immediate effect, the result of which will be for BOC PCL to cease the use of a number of terms in the contracts of BOC PCL which are deemed to be unfair under the said order. The said terms relate to contracts that had been signed during 2006‑2007. Furthermore, the said application seeks for an order ordering BOC PCL to undertake measures to remedy the situation. BOC PCL will take all necessary steps for the protection of its interests. This matter is still pending before the court as at 30 June 2023.

In April 2021, the Director of CPS filed an application for the issuance of a court order against BOC PCL, prohibiting the use of a number of contractual terms included in BOC PCL's consumer contracts and requiring the amendment of any such contracts (present and future) so as to remove such unfair terms. This matter is still pending before the court as at 30 June 2023.


BOC PCL received a letter in July 2021 from CPS, initiating an ex officio investigation under the Distance Marketing of Financial Services to Consumers Law, with respect to the services and products of BOC PCL for which the contract between BOC PCL and the consumer is entered into online via BOC PCL's website.

BOC PCL received another letter in July 2021 from CPS, initiating an investigation with respect to an alleged wrong commercial practice of BOC PCL of promoting a product.

There have been no further developments on the aforementioned investigations since.

Cyprus Consumers' Association (CCA)

In March 2021, BOC PCL was served with an application filed by the CCA for the issuance of a court order prohibiting the use of a number of contractual terms included in BOC PCL's consumer contracts and requiring the amendment of any such contracts (present and future) so as to remove such terms deemed as unfair. The said contractual terms were determined as unfair pursuant to the decisions issued by the Consumer Protection Service of the Ministry of Energy, Commerce, Industry and Tourism against BOC PCL in 2016 and 2017. BOC PCL will take all necessary steps for the protection of its interests. This matter is still pending before the court as at 30 June 2023.

The new Law on Consumer Protection brings under one umbrella the existing legislation on unfair contract terms and practices with some enhanced powers vested in the Consumer Protection Service, i.e. power to impose increased fines which are immediately payable. The new Law on Consumer Protection has a retrospective effect in that it also applies to all contracts/practices entered into and/or terminated prior to this law coming into effect as opposed to contracts/practices which are only entered into/adopted as from the date of publication of the new Law on Consumer Protection.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of these matters, is unknown.

UK regulatory matters

As part of the agreement for the sale of Bank of Cyprus UK Ltd, a liability with regards to UK regulatory matters remains an obligation for settlement by the Group. The level of the provision represents the best estimate of all probable outflows arising from customer redress based on information available to management.

27.3       Οther matters

Other matters include among others, provisions for various other open examination requests by governmental and other public bodies, legal matters and provisions for warranties and indemnities related to the disposal process of certain operations of the Group.   

The provisions for pending litigation, claims, regulatory and other matters described above and provided in the tables below do not include insurance claims arising in the ordinary course of business of the Group's insurance subsidiaries as these are included in 'Insurance liabilities'.

27.4       Provisions for pending litigation, claims, regulatory and other matters

 


Pending litigation and claims
(Note 27.1)

Regulatory matters
(Note 27.2)

Other matters
(Note 27.3)

Total

 2023

 €000

 €000

 €000

 €000

1 January

           63,947                     

           14,918                     

           48,742                     

        127,607

Net increase in provisions including unwinding of discount

           14,682                     

                   - 

             4,095                     

          18,777

Utilisation of provisions

         (14,289)                     

                   - 

                   - 

      (14,289)

Release of provisions

           (4,629)                     

                   - 

                   - 

         (4,629)

Transfer

                   - 

                   - 

                767                     

               767

Foreign exchange adjustments

                   - 

                  34                     

                   - 

                  34

30 June

          59,711                     

          14,952                     

          53,604                     

        128,267


 


Pending litigation and claims
(Note 27.1)

Regulatory matters
(Note 27.2)

Other matters
(Note 27.3)

Total

 2022

 €000

 €000

 €000

 €000

1 January

           57,844                     

           16,415                     

           29,849                     

        104,108

Net increase in provisions including unwinding of discount 

             1,086                     

                950                     

                   - 

            2,036

Utilisation of provisions

                (78)                     

              (759)                     

                   - 

            (837)

Release of provisions 

              (392)                     

                   - 

              (100)                     

            (492)

Foreign exchange adjustments

                   - 

                (22)                     

                   - 

              (22)

30 June

          58,460                     

          16,584                     

          29,749                     

        104,793

Provisions for pending litigation, claims, regulatory and other matters recorded in the consolidated income statement during the six months ended 30 June 2023 amount to €14,148 thousand (30 June 2022: €594 thousand). The increase in the six months ended 30 June 2023 is driven by the revised approach on pending litigation fees and the progress on legal cases, as well as higher one‑off provisions for other matters in relation to the run‑down and disposal of the Group's legacy and non‑core operations.

Some information required by the IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' is not disclosed on the grounds that it can be expected to prejudice seriously the outcome of the litigation or the outcome of the negotiation in relation to provisions for warranties and indemnities related to the disposal process of certain operations of the Group.

An increase by 5% in the probability of loss rate for pending litigation and claims (31 December 2022: 5%) with all other variables held constant, would lead to an increase in the actual provision by €2,236 thousand at 30 June 2023 (31 December 2022: increase by €2,821 thousand).

27.5       Contingent liabilities and commitments

The Group, as part of its disposal process of certain of its operations, has provided various representations, warranties and indemnities to the buyers. These relate to, among other things, the ownership of the loans, the validity of the liens, tax exposures and other matters agreed with the buyers. As a result, the Group may be obliged to compensate the buyers in the event of a valid claim by the buyers with respect to the above representations, warranties and indemnities.

A provision has been recognised, based on management's best estimate of probable outflows, where it was assessed that such an outflow is probable.

Capital commitments for the acquisition of property, equipment and intangible assets as at 30 June 2023 amount to €22,159 thousand (31 December 2022: €10,647 thousand).

28.         Cash and cash equivalents

Cash and cash equivalents comprise:

 


30 June
2023

 31 December 2022


 €000

 €000

Cash and non‑obligatory balances with central banks

     8,988,967                     

      9,452,721

Loans and advances to banks with original maturity less than three months

        363,948                     

         133,432


     9,352,915                     

      9,586,153


Analysis of cash and balances with central banks and loans and advances to banks

 


30 June
2023

 31 December 2022


 €000

 €000

Cash and non‑obligatory balances with central banks

     8,988,967                     

      9,452,721

Obligatory balances with central banks

        138,462                     

         114,537

Total cash and balances with central banks

     9,127,429                     

      9,567,258

 

Loans and advances to banks with original maturity less than three months

        363,948                     

         133,432

Restricted loans and advances to banks

          67,864                     

           71,379

Total loans and advances to banks

        431,812                     

         204,811

Restricted loans and advances to banks include collaterals under derivative transactions of €1,750 thousand (31 December 2022: €7,380 thousand) which are not immediately available for use by the Group, but are released once the transactions are terminated.  


29.         Analysis of assets and liabilities by expected maturity

 


 30 June 2023

 31 December 2022 (restated)


Less than
one year

Over one
year

Total

Less than
one year

Over one
year

Total

Assets

 €000

 €000

 €000

 €000

 €000

 €000

Cash and balances with central banks

  8,988,967

     138,462

  9,127,429

   9,452,721                  

      114,537                  

   9,567,258                  

Loans and advances to banks

     363,948

       67,864

     431,812

      133,432                  

        71,379                  

      204,811                  

Derivative financial assets

         7,189

       42,113

       49,302

             904                  

        47,249                  

        48,153                  

Investments

     821,389

  2,508,318

  3,329,707

      460,070                  

   2,243,633                  

   2,703,703                  

Loans and advances to customers

  1,116,605

  8,891,214

10,007,819                  

      880,158                  

   9,073,094                  

   9,953,252                  

Life insurance business assets attributable to policyholders

       16,787

     571,095

     587,882

        15,486                  

      526,835                  

      542,321                  

Prepayments, accrued income and other assets

     267,403

     342,204

     609,607

      256,077                  

      352,977                  

      609,054                  

Stock of property

     202,887

     742,944

     945,831

      301,275                  

      739,757                  

   1,041,032                  

Investment properties

       14,385

       59,954

       74,339

        24,749                  

        60,350                  

        85,099                  

Deferred tax assets

       37,909

     190,044

     227,953

        37,909                  

      190,025                  

      227,934                  

Property, equipment and intangible assets

                - 

     314,956

     314,956

                - 

      305,924                  

      305,924                  


11,837,469                  

13,869,168                  

25,706,637                  

11,562,781                  

13,725,760                  

25,288,541                  

Liabilities

                   

                   

                   

                                     

                                     

                                     

Deposits by banks

     155,885

     292,828

     448,713

      191,635                  

      316,023                  

      507,658                  

Funding from central banks

  2,004,480

                - 

  2,004,480

   1,976,674                  

                - 

   1,976,674                  

Derivative financial liabilities

         4,614

       13,777

       18,391

        10,538                  

          5,631                  

        16,169                  

Customer deposits

  5,945,245

13,220,910                  

19,166,155                  

   5,893,802                  

13,104,517                  

18,998,319                  

Insurance liabilities

       87,461

     544,456

     631,917

        88,647                  

      511,345                  

      599,992                  

Accruals, deferred income and other liabilities and provisions for pending litigation, claims, regulatory and other matters

     382,818

     175,034

     557,852

      295,678                  

      211,111                  

      506,789                  

Debt securities in issue and subordinated liabilities

                - 

     601,324

     601,324

                - 

      599,740                  

      599,740                  

Deferred tax liabilities

         1,622

       32,996

       34,618

          1,207                  

        33,427                  

        34,634                  


  8,582,125

14,881,325                  

23,463,450                  

   8,458,181                  

14,781,794                  

23,239,975                  

The main assumptions used in determining the expected maturity of assets and liabilities are set out below.

Cash and balances with central banks are classified in the relevant time band based on the contractual maturity, with the exception of obligatory balances with central banks which are classified in the 'Over one year' time band.

The investments are classified in the relevant time band based on expectations as to their realisation. In most cases this is the maturity date, unless there is an indication that the maturity will be prolonged or there is an intention to sell, roll or replace the security with a similar one.

Performing loans and advances to customers in Cyprus are classified based on the contractual repayment schedule. Overdraft accounts are classified in the 'Over one year' time band. The Stage 3 Loans are classified in the 'Over one year' time band except cash flows from expected receipts which are included within time bands, according to historic amounts of receipts in the recent months.


Stock of property is classified in the relevant time band based on expectations as to its realisation.

A percentage of customer deposits maturing within one year is classified in the 'Over one year' time band, based on the observed behavioural analysis.

The expected maturity of all prepayments, accrued income and other assets and accruals, deferred income and other liabilities is the same as their contractual maturity. If they do not have a contractual maturity, the expected maturity is based on the timing the asset is expected to be realised and the liability is expected to be settled.

30.         Risk management ‑ Credit risk

In the ordinary course of its business the Group is exposed to credit risk which is monitored through various control mechanisms across all Group entities in order to prevent undue risk concentrations and to price credit facilities and products on a risk‑adjusted basis.

Credit risk is the risk that arises from the possible failure of one or more customers to discharge their credit obligations towards the Group.

The Credit Risk Management department, in co‑operation with the Credit Risk Control and Monitoring department, set the Group's credit risk policies and monitor compliance with credit risk policies applicable to each business line and the quality of the Group's loans and advances portfolio through the timely credit risk assessment of customers. The credit exposures of related accounts are aggregated and monitored on a consolidated basis.

The Credit Risk Management department, in co‑operation with the Credit Risk Control and Monitoring department, also safeguard the effective management of credit risk at all stages of the credit cycle, monitor the quality of decisions and processes and ensure that the credit sanctioning function is being properly managed.

The credit policies are complemented by the methods used for the assessment of the customers' creditworthiness (credit rating and credit scoring systems).

The loan portfolio is analysed on the basis of the customers' creditworthiness, their economic sector of activity and geographical concentration.

The credit risk exposure of the Group is diversified across the various industry sectors of the economy. Credit Risk Management department determines concentration limits for each industry sector, sets prohibited sectors and defines sectors which may require prior approval before credit applications are submitted.

The Market & Liquidity Risk department assesses the credit risk relating to exposures to Credit Institutions and Governments and other debt securities.

Models and limits are presented to and approved by the Board of Directors, through the relevant authority based on the authorisation level limits.

The Group's significant judgements, estimates and assumptions regarding the determination of the level of provisions for impairment are described in Note 6 'Significant and other judgements, estimates and assumptions' of these Consolidated Financial Statements.


30.1       Maximum exposure to credit risk and collateral and other credit enhancements

Loans and advances to customers

The Credit Risk Management department determines the level and type of collateral and other credit enhancements required for the granting of new loans to customers.

The main types of collateral obtained by the Group are mortgages on real estate, cash collateral/blocked deposits, bank guarantees, government guarantees, pledges of equity securities and debt instruments of public companies, fixed and floating charges over corporate assets, assignment of life insurance policies, assignment of rights on contracts of sale and personal and corporate guarantees.

The Group regularly monitors the changes in the market value of the collateral and, where necessary, requests the pledging of additional collateral in accordance with the relevant agreement.

Off‑balance sheet exposures

The Group offers guarantee facilities to its customers under which the Group may be required to make payments on their behalf and enters into commitments to extend credit lines to secure their liquidity needs.

Letters of credit and guarantee facilities (including standby letters of credit) commit the Group to make payments on behalf of customers in the event of a specific act, generally related to the import or export of goods. Such commitments expose the Group to risks similar to those of loans and advances and are therefore monitored by the same policies and control processes.

Other financial instruments

Collateral held as security for financial assets other than loans and advances to customers is determined by the nature of the financial instrument. Debt securities and other eligible bills are generally unsecured with the exception of asset‑backed securities and similar instruments, which are secured by pools of financial assets. In addition, some debt securities are government‑guaranteed.

The Group has chosen the ISDA Master Agreement for documenting its derivatives activity. It provides the contractual framework within which dealing activity across a full range of over‑the‑counter (OTC) products is conducted and contractually binds both parties to apply close‑out netting across all outstanding transactions covered by an agreement, if either party defaults. In most cases the parties execute a Credit Support Annex (CSA) in conjunction with the ISDA Master Agreement. Under a CSA, the collateral is passed between the parties in order to mitigate the market contingent counterparty risk inherent in their open positions. As at 30 June 2023, the majority of derivative exposures are covered by ISDA netting arrangements. A detailed analysis of derivative asset and liability exposures is available in Note 16. Information about the Group's collaterals under derivative transactions is provided in Note 28.

Settlement risk arises in any situation where a payment in cash or securities is made in the expectation of a corresponding receipt in securities or cash. The Group sets daily settlement limits for each counterparty.  Settlement risk is mitigated when transactions are effected via established payment systems or on a delivery upon payment basis.


Maximum Exposure to credit risk  

The table below presents the maximum exposure to credit risk before taking into account the tangible and measurable collateral and credit enhancements held.

 


30 June
2023

 31 December 2022
(restated)


 €000

 €000

Balances with central banks

     9,039,067                     

      9,475,541

Loans and advances to banks (Note 28)

        431,812                     

         204,811

Other non‑equity securities at FVPL (Note 15)

            3,364                     

             8,968

Debt securities classified at amortised cost and FVOCI (Note 15)

     3,178,127                     

      2,499,894

Derivative financial instruments (Note 16)

          49,302                     

           48,153

Loans and advances to customers (Note 18)

  10,007,819                     

      9,953,252

Debtors (Note 20)

          32,363                     

           29,220

Reinsurers' share of insurance contract liabilities (Note 20)

          50,580                     

           46,781

Deferred purchase payment consideration (Note 20)

        320,655                     

         311,523

Other assets (Note 20)

          65,919                     

           57,183

On‑balance sheet total

  23,179,008                     

    22,635,326

Contingent liabilities

                                                           

                             

Acceptances and endorsements

            3,034                     

             5,175

Guarantees

        696,362                     

         651,219

Commitments

                                           

                             

Documentary credits

            3,399                     

           17,624

Undrawn formal stand‑by facilities, credit lines and other commitments to lend

     1,957,084                     

      1,909,487

Off‑balance sheet total

     2,659,879                     

      2,583,505


  25,838,887                     

    25,218,831

30.2       Credit risk concentration of loans and advances to customers

There are restrictions on loan concentrations which are imposed by the Banking Law in Cyprus, the relevant CBC Directives and CRR. The Group's Risk Appetite Statement may impose stricter concentration limits which are monitored by the Group.

The credit risk concentration, which is based on industry (economic activity) and business line, as well as the geographical concentration, is presented below.

The geographical analysis, for credit risk concentration purposes, is based on the Group's Country Risk Policy which is followed for monitoring the Group's exposures. Market and Liquidity Risk department is responsible for analysing the country risk of exposures. ALCO reviews the country risk of exposures on a quarterly basis and the Board, through its Risk Committee, reviews the country risk of exposures and any breaches of country risk limits on a regular basis and at least annually.

The table below presents the geographical concentration of loans and advances to customers by country of risk based on the country of residency for individuals and the country of registration for companies.


 

 30 June 2023

Cyprus

Greece

United Kingdom

Russia

Other countries

Gross loans at amortised cost

By economic activity

 €000

 €000

 €000

 €000

 €000

 €000

Trade

       915,396                 

          337               

            38               

             - 

            38               

          915,809                      

Manufacturing

       310,474                 

      44,480               

             - 

             - 

      27,251               

          382,205                      

Hotels and catering

       962,779                 

      27,120               

      37,020               

             - 

      39,863               

       1,066,782                      

Construction

       526,060                 

        8,677               

            18               

              1               

          373               

          535,129                      

Real estate

       931,771                 

    101,245               

        1,960               

             - 

      52,189               

       1,087,165                      

Private individuals

    4,534,353                 

      11,616               

      65,551               

      15,684               

      51,257               

       4,678,461                      

Professional and other services

       547,629                 

          621               

        5,280               

          336               

      41,780               

          595,646                      

Shipping

        22,858                 

            24               

             - 

             - 

    209,886               

          232,768                      

Other sectors

       469,361                 

             - 

              1               

              3               

      32,005               

          501,370                      


  9,220,681                 

   194,120               

   109,868               

     16,024               

   454,642               

       9,995,335                      

 

 30 June 2023

Cyprus

Greece

United Kingdom

Russia

Other countries

Gross loans at amortised cost

By business line

 €000

 €000

 €000

 €000

 €000

 €000

Corporate and Large corporate

    3,450,891                 

      28,255               

             - 

          333               

          190               

       3,479,669                      

International corporate

       100,541                 

    157,853               

      43,818               

             - 

    392,610               

          694,822                      

SMEs

       982,114                 

          529               

        1,215               

             - 

        2,372               

          986,230                      

Retail

                                   

                               

                               

                               

                               

                                             

‑ housing

    3,315,768                 

        2,486               

      32,680               

            91               

      17,658               

       3,368,683                      

‑ consumer, credit cards and other

       926,010                 

          793               

          561               

             - 

          822               

          928,186                      

Restructuring

                                   

                               

                               

                               

                               

                                             

‑ corporate

        52,376                 

             - 

          975               

             - 

            65               

            53,416                      

‑ SMEs

        39,320                 

             - 

          397               

            71               

             - 

            39,788                      

‑ retail housing

        67,332                 

          101               

        2,002               

          275               

          180               

            69,890                      

‑ retail other

        23,723                 

            36               

            18               

             - 

            22               

            23,799                      

Recoveries

                                   

                               

                               

                               

                               

                                             

‑ corporate

        17,060                 

             - 

          458               

          176               

          943               

            18,637                      

‑ SMEs

        25,994                 

             - 

        1,039               

        2,147               

        1,898               

            31,078                      

‑ retail housing

        61,682                 

          210               

      17,670               

        2,981               

        7,967               

            90,510                      

‑ retail other

        29,889                 

            24               

        1,336               

          274               

          433               

            31,956                      

International business unit

        88,667                 

        1,672               

        7,607               

        9,676               

      24,226               

          131,848                      

Wealth management

        39,314                 

        2,161               

            92               

             - 

        5,256               

            46,823                      


  9,220,681                 

   194,120               

   109,868               

     16,024               

   454,642               

       9,995,335                      

 

 31 December 2022

Cyprus

Greece

United Kingdom

Russia

Other countries

Gross loans at amortised cost

By economic activity

 €000

 €000

 €000

 €000

 €000

 €000

Trade

       922,093                 

          384               

            37               

             - 

            35               

          922,549                      

Manufacturing

       323,074                 

      44,978               

             - 

             - 

      27,943               

          395,995                      

Hotels and catering

       928,346                 

      16,565               

      35,614               

             - 

      40,086               

       1,020,611                      

Construction

       545,421                 

        8,955               

            23               

              1               

        1,985               

          556,385                      

Real estate

       978,708                 

      94,823               

        1,866               

             - 

      51,617               

       1,127,014                      

Private individuals

    4,496,081                 

      11,146               

      73,120               

      19,103               

      54,985               

       4,654,435                      

Professional and other services

       551,269                 

          980               

        5,311               

          313               

      37,830               

          595,703                      

Shipping

        13,338                 

             - 

             - 

             - 

    173,830               

          187,168                      

Other sectors

       427,535                 

              2               

             - 

              3               

      29,935               

          457,475                      


  9,185,865                 

   177,833               

   115,971               

     19,420               

   418,246               

       9,917,335                      


 

 31 December 2022

Cyprus

Greece

United Kingdom

Russia

Other countries

Gross loans at amortised cost

By business line

 €000

 €000

 €000

 €000

 €000

 €000

Corporate and Large corporate

    3,380,542                 

      17,781               

            50               

          312               

          102               

       3,398,787                      

International corporate

       139,813                 

    152,143               

      42,327               

             - 

    351,025               

          685,308                      

SMEs

    1,021,950                 

        1,036               

        1,451               

             - 

        4,174               

       1,028,611                      

Retail

                                   

                               

                               

                               

                               

                                             

‑ housing

    3,272,253                 

        2,450               

      36,839               

          186               

      18,906               

       3,330,634                      

‑ consumer, credit cards and other

       885,558                 

          856               

          576               

              1               

          905               

          887,896                      

Restructuring

                                   

                               

                               

                               

                               

                                             

‑ corporate

        66,151                 

             - 

          869               

             - 

          932               

            67,952                      

‑ SMEs

        48,027                 

             - 

          432               

          158               

          384               

            49,001                      

‑ retail housing

        70,283                 

          104               

        1,841               

          291               

          114               

            72,633                      

‑ retail other

        24,093                 

            16               

            21               

          192               

            21               

            24,343                      

Recoveries

                                   

                               

                               

                               

                               

                                             

‑ corporate

        19,063                 

             - 

          452               

          172               

            32               

            19,719                      

‑ SMEs

        26,150                 

             - 

        1,117               

        2,664               

        1,774               

            31,705                      

‑ retail housing

        69,790                 

          260               

      19,778               

        3,431               

        9,736               

          102,995                      

‑ retail other

        31,967                 

            12               

        1,265               

            49               

          337               

            33,630                      

International business unit

        90,652                 

        1,722               

        8,953               

      11,964               

      24,583               

          137,874                      

Wealth management

        39,573                 

        1,453               

             - 

             - 

        5,221               

            46,247                      


  9,185,865                 

   177,833               

   115,971               

     19,420               

   418,246               

       9,917,335                      

The loans and advances to customers include lending exposures in Cyprus with collaterals in Greece with a carrying value as at 30 June 2023 of €134,730 thousand (31 December 2022: €106,701 thousand).

The loans and advances to customers reported within 'Other countries' as at 30 June 2023 include exposures of €2,2 million in Ukraine (31 December 2022: €2,6 million).

30.3       Analysis of loans and advances to customers

The movement of the gross loans and advances to customers at amortised cost by staging, (30 June 2022: including the loans and advances to customers classified as held for sale), is presented in the tables below:

 


Stage 1

Stage 2

Stage 3

POCI

Total

 30 June 2023

 €000

 €000

 €000

 €000

 €000

1 January

         7,867,256                      

         1,565,603                      

           371,018                      

           113,458                      

       9,917,335                      

Transfers to stage 1

           599,556                      

         (599,556)                      

                    - 

                    - 

                    - 

Transfers to stage 2

         (415,621)                      

           435,606                      

           (19,985)                      

                    - 

                    - 

Transfers to stage 3

            (8,755)                      

           (12,000)                      

             20,755                      

                    - 

                    - 

Foreign exchange and other adjustments

                 (25)                      

                    - 

                   21                      

                    - 

                  (4)                      

Write offs

               (188)                      

               (310)                      

           (17,728)                      

            (2,958)                      

         (21,184)                      

Interest accrued and other adjustments

           158,717                      

             26,902                      

             22,496                      

               3,339                      

          211,454                      

New loans originated or purchased and drawdowns of existing facilities

           969,848                      

             24,136                      

                  558                      

                  364                      

          994,906                      

Loans derecognised or repaid (excluding write offs)

         (974,108)                      

           (84,076)                      

           (41,624)                      

           (11,439)                      

    (1,111,247)                      

Changes to contractual cash flows due to modifications

               1,499                      

                  816                      

            (1,719)                      

               (170)                      

                 426                      

Acquisition of Velocity 2 portfolio

                    - 

                    - 

                    - 

               3,649                      

              3,649                      

30 June

       8,198,179                      

       1,357,121                      

          333,792                      

          106,243                      

       9,995,335                      


 

 


Stage 1

Stage 2

Stage 3

POCI

Total

30 June 2022

 €000

 €000

 €000

 €000

 €000

1 January

      7,418,695                     

      1,701,255                     

      1,047,802                     

         228,572                     

  10,396,324

Transfers to stage 1

         292,741                     

       (292,741)                     

                   - 

                   - 

                   - 

Transfers to stage 2

       (405,422)                     

         429,065                     

         (23,643)                     

                   - 

                   - 

Transfers to stage 3

           (4,782)                     

         (19,409)                     

           24,191                     

                   - 

                   - 

Foreign exchange and other adjustments

                (24)                     

                   - 

                905                     

                   - 

               881

Write offs

              (398)                     

              (295)                     

       (100,301)                     

         (17,522)                     

    (118,516)

Interest accrued and other adjustments

           94,167                     

           38,719                     

           37,154                     

           13,327                     

        183,367

New loans originated or purchased and drawdowns of existing facilities

      1,060,453                     

           46,984                     

                200                     

                852                     

    1,108,489

Loans derecognised or repaid (excluding write offs)

       (763,291)                     

       (103,101)                     

         (56,132)                     

         (25,008)                     

    (947,532)

Changes to contractual cash flows due to modifications

              (798)                     

             1,150                     

           (3,074)                     

              (119)                     

         (2,841)

30 June

     7,691,341                     

     1,801,627                     

        927,102                     

        200,102                     

  10,620,172

For revolving facilities, overdrafts and credit cards the net positive change in balance by stage excluding write‑offs is reported in 'New loans originated' and the net negative change is reported in 'Loans derecognised or repaid'.

The analysis of gross loans and advances to customers at amortised cost by staging and by business line concentration is included in Note 18.

During the six months ended 30 June 2023, the Group purchased back certain loans disposed in 2020 as part of Velocity 2. The loans, which relate primarily to retail unsecured facilities, were classified as POCI and have a net book value of €1,257 thousand as at 30 June 2023.


30.4       Credit losses of loans and advances to customers

The movement in ECL of loans and advances to customers (30 June 2022: including the ECL for loans and advances to customers held for sale), is as follows:

 


Stage 1

Stage 2

Stage 3

POCI

Total

 30 June 2023

 €000

 €000

 €000

 €000

 €000

1 January

             22,288                      

             27,041                      

           113,573                      

             15,540                      

          178,442                      

Transfers to stage 1

               8,441                      

            (8,441)                      

                    - 

                    - 

                    - 

Transfers to stage 2

               (933)                      

               4,583                      

            (3,650)                      

                    - 

                    - 

Transfers to stage 3

                 (62)                      

               (455)                      

                  517                      

                    - 

                    - 

Impact on transfer between stages during the period*

            (4,696)                      

               2,670                      

               2,572                      

                   (2)                      

                 544                      

Foreign exchange and other adjustments

                    - 

                     2                      

                   10                      

                    - 

                   12                      

Write offs

               (188)                      

               (310)                      

           (17,728)                      

            (2,958)                      

         (21,184)                      

Interest (provided) not recognised in the income statement

                    - 

                    - 

               1,653                      

                  464                      

              2,117                      

New loans originated or purchased*

               1,124                      

                    - 

                    - 

                     4                      

              1,128                      

Loans derecognised or repaid (excluding write offs)*

               (771)                      

               (159)                      

               (308)                      

               (241)                      

           (1,479)                      

Write offs*

                  170                      

                  244                      

               3,171                      

                  623                      

              4,208                      

Changes to models and inputs (changes in PDs, LGDs and EADs) used for ECL calculations*

            (3,514)                      

               8,466                      

             24,083                      

               5,005                      

            34,040                      

Changes to contractual cash flows due to modifications not resulting in derecognition*

               (601)                      

                  498                      

                  352                      

               (176)                      

                   73                      

30 June 2023

            21,258                      

            34,139                      

          124,245                      

            18,259                      

          197,901                      

Individually assessed

               8,928                      

             11,882                      

             58,998                      

             11,640                      

            91,448                      

Collectively assessed

             12,330                      

             22,257                      

             65,247                      

               6,619                      

          106,453                      


            21,258                      

            34,139                      

          124,245                      

            18,259                      

          197,901                      

* Individual components of the 'Impairment net of reversals on loans and advances to customers' (Note 12).

The impairment loss for the six months ended 30 June 2023 was driven mainly from additional net credit losses of €11 million recorded on NPEs as part of the Group's de‑risking activities and additional ECL charge of €9 million following the overlays applied during the period, as explained in Note 6.2.


 


Stage 1

Stage 2

Stage 3

POCI

Total

30 June 2022

 €000

 €000

 €000

 €000

 €000

1 January

             15,457                      

             29,383                      

           478,796                      

             67,781                      

          591,417                      

Transfers to stage 1

               4,837                      

            (4,837)                      

                    - 

                    - 

                    - 

Transfers to stage 2

            (1,355)                      

               5,604                      

            (4,249)                      

                    - 

                    - 

Transfers to stage 3

                 (34)                      

               (591)                      

                  625                      

                    - 

                    - 

Impact on transfer between stages during the period*

            (4,177)                      

                     2                      

               5,205                      

                 (41)                      

                 989                      

Foreign exchange and other adjustments

                    - 

                    - 

               1,406                      

                    - 

              1,406                      

Write offs

               (398)                      

               (295)                      

         (100,781)                      

           (17,522)                      

       (118,996)                      

Interest (provided) not recognised in the income statement

                    - 

                    - 

               7,697                      

               1,471                      

              9,168                      

New loans originated or purchased*

               1,985                      

                    - 

                    - 

                   27                      

              2,012                      

Loans derecognised or repaid (excluding write offs)*

               (254)                      

               (830)                      

            (7,779)                      

            (1,490)                      

         (10,353)                      

Write offs*

                  380                      

                  196                      

               6,565                      

                  734                      

              7,875                      

Changes to models and inputs (changes in PDs, LGDs and EADs) used for ECL calculations*

                  625                      

            (3,302)                      

             28,536                      

               4,162                      

            30,021                      

Changes to contractual cash flows due to modifications not resulting in derecognition*

               (158)                      

               1,685                      

            (3,755)                      

               (261)                      

           (2,489)                      

30 June 2022

            16,908                      

            27,015                      

          412,266                      

            54,861                      

          511,050                      

Individually assessed

               6,380                      

             12,327                      

             63,636                      

               4,530                      

            86,873                      

Collectively assessed

             10,528                      

             14,688                      

           348,630                      

             50,331                      

          424,177                      


            16,908                      

            27,015                      

          412,266                      

            54,861                      

          511,050                      

The analysis of credit losses of loans and advances to customers by business line is presented in the table below:

 


Stage 1

Stage 2

Stage 3

POCI

Total

 30 June 2023

 €000

 €000

 €000

 €000

 €000

Corporate and Large corporate

             12,277                      

             12,871                      

             31,053                      

               2,277                      

            58,478                      

International corporate

                  827                      

                     1                      

                   37                      

                     5                      

                 870                      

SMEs

               2,299                      

               2,741                      

                  575                      

                  285                      

              5,900                      

Retail






‑ housing

               2,111                      

               7,144                      

               4,307                      

                  557                      

            14,119                      

‑ consumer, credit cards and other

               3,231                      

               7,791                      

               5,294                      

               1,224                      

            17,540                      

Restructuring






‑ corporate

                   13                      

                  476                      

               9,157                      

               9,764                      

            19,410                      

‑ SMEs

                  229                      

               1,115                      

               6,042                      

                  732                      

              8,118                      

‑ retail housing

                  117                      

               1,245                      

             13,778                      

                  240                      

            15,380                      

‑ retail other

                   71                      

                  570                      

               8,417                      

                  610                      

              9,668                      

Recoveries






‑ corporate

                    - 

                    - 

               8,630                      

                  307                      

              8,937                      

‑ SMEs

                    - 

                    - 

             13,106                      

                  172                      

            13,278                      

‑ retail housing

                    - 

                    - 

             15,984                      

               1,241                      

            17,225                      

‑ retail other

                    - 

                    - 

               7,673                      

                  834                      

              8,507                      

International business unit

                   69                      

                  165                      

                  191                      

                     6                      

                 431                      

Wealth management

                   14                      

                   20                      

                     1                      

                     5                      

                   40                      


            21,258                      

            34,139                      

          124,245                      

            18,259                      

          197,901                      


 


Stage 1

Stage 2

Stage 3

POCI

Total

31 December 2022

 €000

 €000

 €000

 €000

 €000

Corporate and Large corporate

             13,997                      

             12,096                      

             28,951                      

               1,498                      

            56,542                      

International corporate

                  567                      

                     5                      

                   36                      

                     4                      

                 612                      

SMEs

               2,444                      

               3,009                      

               1,998                      

                  214                      

              7,665                      

Retail






‑ housing

               2,378                      

               2,738                      

               5,146                      

                  398                      

            10,660                      

‑ consumer, credit cards and other

               2,552                      

               4,794                      

               5,763                      

               1,020                      

            14,129                      

Restructuring






‑ corporate

                   22                      

               2,133                      

               7,481                      

               9,005                      

            18,641                      

‑ SMEs

                  184                      

                  706                      

               9,157                      

                  741                      

            10,788                      

‑ retail housing

                   19                      

                  682                      

               9,222                      

                  347                      

            10,270                      

‑ retail other

                   29                      

                  536                      

               7,309                      

                  513                      

              8,387                      

Recoveries






‑ corporate

                    - 

                    - 

               7,917                      

                  387                      

              8,304                      

‑ SMEs

                    - 

                    - 

             11,096                      

                  288                      

            11,384                      

‑ retail housing

                    - 

                    - 

             11,937                      

                  651                      

            12,588                      

‑ retail other

                    - 

                    - 

               7,494                      

                  465                      

              7,959                      

International business unit

                   73                      

                  332                      

                   65                      

                     5                      

                 475                      

Wealth management

                   23                      

                   10                      

                     1                      

                     4                      

                   38                      


            22,288                      

            27,041                      

          113,573                      

            15,540                      

          178,442                      

During the six months ended 30 June 2023 the total non‑contractual write‑offs recorded by the Group amounted to €11,582 thousand (30 June 2022: €98,625 thousand). The contractual amount outstanding on financial assets that were written off during the six months ended 30 June 2023 and that are still subject to enforcement activity is €100,687 thousand (31 December 2022: €972,621 thousand).

For the calculation of expected credit losses three scenarios were used; base, adverse and favourable with 50%, 30% and 20% probability respectively.

For Stage 3 customers, the base scenario focuses on the following variables, which are based on the specific facts and circumstances of each customer: the operational cash flows, the timing of recovery of collaterals and the haircuts from the realisation of collateral. The base scenario is used to derive additional favourable and adverse scenarios. Under the adverse scenario operational cash flows are decreased by 50%, applied haircuts on real estate collateral are increased by 50% and the timing of recovery of collaterals is increased by one year with reference to the baseline scenario. Under the favourable scenario, applied haircuts are decreased by 5%, with no change in the recovery period with reference to the baseline scenario. Assumptions used in estimating expected future cash flows (including cash flows that may result from the realisation of collateral) reflect current and expected future economic conditions and are generally consistent with those used in the Stage 3 collectively assessed exposures.

The above assumptions are also influenced by the ongoing regulatory dialogue BOC PCL maintains with its lead regulator, the ECB, and other regulatory guidance and interpretations issued by various regulatory and industry bodies such as the ECB and the EBA, which provide guidance and expectations as to relevant definitions and the treatment/classification of certain parameters/assumptions used in the estimation of provisions.

Any changes in these assumptions or difference between assumptions made and actual results could result in significant changes in the estimated amount of expected credit losses of loans and advances to customers.

Sensitivity analysis

The Group has performed sensitivity analysis relating to the loan portfolio in Cyprus, which represents more than 99% of the total loan portfolio of the Group with reference date 30 June 2023 and 31 December 2022.


The Group has applied sensitivity analysis to the below parameters and the impact on the ECL, for both individually and collectively assessed ECL calculations, is presented in the table below:

 


Increase/(decrease) on ECL for loans and advances to customers at amortised cost

 


30 June
2023

 31 December 2022

 


 €000

 €000

 

Increase the adverse weight by 5% and decrease the favourable weight by 5%

                1,899                        

                 1,999                        

 

Decrease the adverse weight by 5% and increase the favourable weight by 5%

             (1,874)                        

               (2,077)                        

 

Increase the expected recovery period by 1 year

                5,210                        

                 4,955                        

 

Decrease the expected recovery period by 1 year

             (4,610)                        

               (4,344)                        

 

Increase the collateral realisation haircut by 5%

                9,659                        

               11,335                        

 

Decrease the collateral realisation haircut by 5%

             (8,399)                        

               (8,930)                        

 

Increase in the PDs of stages 1 and 2 by 20%*

                7,808                        

                 7,367                        

 

Decrease in the PDs of stages 1 and 2 by 20%*

             (6,687)                        

               (6,964)                        

 

The increase/(decrease) on ECL, for loans and advances to customers at amortised cost, is further analysed, per stage, in the table below:

 


Stage 1

Stage 2

Stage 3

Total

30 June 2023

 €000

 €000

 €000

 €000

Increase the adverse weight by 5% and decrease the favourable weight by 5%

               266                   

               300                   

            1,333                   

            1,899                    

Decrease the adverse weight by 5% and increase the favourable weight by 5%

             (278)                   

             (263)                   

          (1,333)                   

         (1,874)                    

Increase the expected recovery period by 1 year

               838                   

            1,776                   

            2,596                   

            5,210                    

Decrease the expected recovery period by 1 year

             (784)                   

          (1,541)                   

          (2,285)                   

         (4,610)                    

Increase the collateral realisation haircut by 5%

            1,231                   

            2,464                   

            5,964                   

            9,659                    

Decrease the collateral realisation haircut by 5%

          (1,033)                   

          (1,966)                   

          (5,400)                   

         (8,399)                    

Increase in the PDs of stages 1 and 2 by 20%*

            2,105                   

            5,703                   

                 - 

            7,808                    

Decrease in the PDs of stages 1 and 2 by 20%*

          (1,857)                   

          (4,830)                   

                 - 

         (6,687)                    

 


Stage 1

Stage 2

Stage 3

Total

 

 31 December 2022

 €000

 €000

 €000

 €000

 

Increase the adverse weight by 5% and decrease the favourable weight by 5%

               175                   

               321                   

            1,503                   

            1,999                    

 

Decrease the adverse weight by 5% and increase the favourable weight by 5%

             (139)                   

             (435)                   

          (1,503)                   

         (2,077)                    

 

Increase the expected recovery period by 1 year

               552                   

            1,590                   

            2,813                   

            4,955                    

 

Decrease the expected recovery period by 1 year

             (495)                   

          (1,374)                   

          (2,475)                   

         (4,344)                    

 

Increase the collateral realisation haircut by 5%

            1,036                   

            2,747                   

            7,552                   

          11,335                    

 

Decrease the collateral realisation haircut by 5%

             (842)                   

          (2,021)                   

          (6,067)                   

         (8,930)                    

 

Increase in the PDs of stages 1 and 2 by 20%*

               406                   

            6,961                   

                 - 

            7,367                    

 

Decrease in the PDs of stages 1 and 2 by 20%*

          (2,217)                   

          (4,747)                   

                 - 

         (6,964)                    

 

*The impact on the ECL also includes the transfer between stages of the loans and advances to customers following the increase/decrease in the PD.


The sensitivity analysis performed on the collateral realisation haircut and its impact on the ECL by business line is presented in the table below:

 


Increase the collateral realisation haircut by 5%

 Decrease the collateral realisation haircut by 5%

Increase the collateral realisation haircut by 5%

 Decrease the collateral realisation haircut by 5%


30 June
2023

30 June
2023

 31 December 2022

 31 December 2022


 €000

 €000

 €000

 €000

Corporate and Large corporate

            2,415                    

         (2,080)                    

               2,322                      

            (1,478)                      

International corporate

               109                    

              (91)                    

                   68                      

                 (30)                      

SMEs

               401                    

            (331)                    

                  487                      

               (409)                      

Retail





‑ housing

            1,163                    

            (986)                    

               1,260                      

            (1,085)                      

‑ consumer, credit cards and other

               421                    

            (379)                    

                  527                      

               (457)                      

Restructuring





‑ corporate

               742                    

            (882)                    

               1,253                      

            (1,333)                      

‑ SMEs

               401                    

            (387)                    

                  628                      

               (633)                      

‑ retail housing

               832                    

            (728)                    

                  824                      

               (738)                      

‑ retail other

               270                    

            (238)                    

                  324                      

               (287)                      

Recoveries





‑ corporate

               511                    

            (547)                    

                  720                      

               (665)                      

‑ SMEs

               904                    

            (785)                    

                  948                      

               (819)                      

‑ retail housing

            1,027                    

            (706)                    

               1,378                      

               (690)                      

‑ retail other

               441                    

            (243)                    

                  540                      

               (255)                      

International business unit

                 21                    

              (16)                    

                   53                      

                 (49)                      

Wealth management

                   1                    

                  - 

                     3                      

                  (2)                      


            9,659                    

         (8,399)                    

             11,335                      

            (8,930)                      

30.5       Currency concentration of loans and advances to customers

The following table presents the currency concentration of the Group's loans and advances at amortised cost.

 


30 June
2023

31 December
2022

Gross loans at amortised cost

 €000

 €000

Euro

     9,502,915                     

      9,456,220

US Dollar

        369,495                     

         334,663

British Pound

          90,278                     

           89,244

Russian Rouble

                333                     

                312

Swiss Franc

          31,385                     

           35,430

Other currencies

                929                     

             1,466


     9,995,335                     

      9,917,335

30.6       Forbearance/Restructuring

Forborne/restructured loans are those loans that have been modified because the borrower is considered unable to meet the terms and conditions of the contract due to financial difficulties. Taking into consideration these difficulties, the Group decides to modify the terms and conditions of the contract to provide the borrower with the ability to service the debt or refinance the contract, either partially or fully.


The practice of extending forbearance/restructuring measures constitutes a grant of a concession whether temporarily or permanently to that borrower. A concession may involve restructuring the contractual terms of a debt or payment in some form other than cash, such as an arrangement whereby the borrower transfers collateral pledged to the Group.

Forborne/restructured loans and advances are those facilities for which the Group has modified the repayment programme (e.g. provision of a grace period, suspension of the obligation to repay one or more instalments, reduction in the instalment amount and/or elimination of overdue instalments relating to capital or interest).

For an account to qualify for forbearance/restructuring it must meet certain criteria including the viability of the customer. The extent to which the Group reschedules accounts that are eligible under its existing policies may vary depending on its view of the prevailing economic conditions and other factors which may change from year to year. In addition, exceptions to policies and practices may be allowed in specific situations in response to legal or regulatory requirements.

Forbearance/restructuring activities may include measures that restructure the borrower's business (operational restructuring) and/or measures that restructure the borrower's financing (financial restructuring).

Forbearance/restructuring options may be of a short or long‑term nature or a combination thereof. The Group has developed and deployed sustainable restructuring solutions, which are suitable for the borrower and acceptable for the Group.

Short‑term restructuring solutions are defined as restructured repayment solutions of duration of less than two years. In the case of loans for the construction of commercial property and project finance, a short‑term solution may not exceed one year.

Short‑term restructuring solutions can include the following:

i.    Suspension of capital or capital and interest: granting to the borrower a grace period in the payment of capital (i.e. during this period only interest is paid) or capital and interest, for a specific period of time.

ii.    Reduced payments: decrease of the amount of repayment instalments over a defined short‑term period in order to accommodate the borrower's new cash flow position.

iii.   Arrears and/or interest capitalisation: capitalisation of the arrears and of any unpaid interest to the outstanding principal balance for repayment under a rescheduled program.

Long‑term restructuring solutions can include the following:

i.    Interest rate reduction: permanent or temporary reduction of interest rate (fixed or variable) into a fair and sustainable rate.

ii.    Extension of maturity: extension of the maturity of the loan which allows a reduction in instalment amounts by spreading the repayments over a longer period.

iii.   Sale of Assets: Part of the restructuring can be the agreement with the borrower for immediate or over time sale of assets (mainly real estate) to reduce borrowing.

iv.   Modification of existing terms of previous decisions: In the context of the new sustainable settlement/restructuring solution, review any terms of previous decisions that may not be met.

v.   Consolidation/refinancing of existing facilities: In cases where the borrower maintains several separate loans with different collaterals, these can be consolidated and a new repayment schedule can be set and the new loan can be secured with all existing collaterals.

vi.   Hard Core Current Account Limit: In such cases a loan with a longer repayment may be offered to replace / reduce the current account limit.

vii.  Split and freeze: the customer's debt is split into sustainable and unsustainable parts. The sustainable part is restructured to a sustainable repayment program. The unsustainable part is 'frozen' for the restructured duration of the sustainable part. At the maturity of the restructuring, the frozen part is either forgiven pro rata (based on the actual repayment of the sustainable part) or restructured.

viii. Rescheduling of payments: the existing contractual repayment schedule is adjusted to a new sustainable repayment program based on a realistic, current and forecasted, assessment of the cash flow generation of the borrower.

ix.   Liquidation Collateral: An agreement between BOC PCL and a borrower for the voluntary sale of mortgaged assets, for partial or full repayment of the debt.

x.   Currency Conversion: This solution is provided to match the credit facility currency and the borrower's income currency.


i.    Additional Financing: This solution can be granted, simultaneously with the restructuring of the existing credit facilities of the borrower, to cover any financing gap.

ii.    Partial or total write off: This solution corresponds to the Group forfeiting the right to legally recover part or the whole of the amount of debt outstanding by the borrower.

iii.   Debt/equity swaps: debt restructuring that allows partial or full repayment of the debt in exchange of obtaining an equivalent amount of equity by the Group, with the remaining debt right sized to the cash flows of the borrower to allow repayment. This solution is used only in exceptional cases and only where all other efforts for restructuring are exhausted and after ensuring compliance with the banking law.

iv.   Debt/asset swaps: agreement between the Group and the borrower to voluntarily transfer the mortgaged asset or other immovable property to the Group, to partially or fully repay the debt. Any residual debt may be restructured within an appropriate repayment schedule in line with the borrower's reassessed repayment ability.

The loans forborne continue to be classified as Stage 3 in the case they are performing forborne exposures under probation for which additional forbearance measures are extended, or performing forborne exposures, previously classified as NPEs that present more than 30 days past due within the probation period.

Forbearance modifications of loans and advances that do not affect payment arrangements, such as restructuring of collateral or security arrangements, are not regarded as sufficient to categorise the facility as credit impaired, as by themselves they do not necessarily indicate credit distress affecting payment ability such that would require the facility to be classified as NPE.

The forbearance characteristic contributes in two specific ways for the calculation of lifetime ECL for each individual facility. Specifically, it is taken into consideration in the scorecard development, where, if this characteristic is identified as statistically significant, it affects negatively the rating of each facility. It also contributes in the construction through the cycle probability of default and cure curves, where, when feasible, a specific curve for the forborne products is calculated and assigned accordingly.

The below table presents the movement of the Group's forborne loans and advances to customers measured at amortised cost.

 


30 June
2023

 31 December 2022


 €000

 €000

1 January

     1,106,298                     

      1,469,182

New loans and advances forborne in the period/year

          18,467                     

         130,547

Loans no longer classified as forborne and repayments

    (418,125)                     

       (241,739)

Write off of forborne loans and advances

         (3,698)                     

         (77,357)

Interest accrued on forborne loans and advances

          28,095                     

           57,795

Foreign exchange adjustments

              (47)                     

             3,115

Derecognition of Helix 3 and Sinope portfolios

                   - 

       (235,245)

30 June/31 December

        730,990                     

      1,106,298

The forborne loans classification is discontinued when all EBA criteria for the discontinuation of the classification as forborne exposure are met. The criteria are set out in the EBA Final draft Implementing Technical Standards (ITS) on supervisory reporting and non‑performing exposures.

The below tables present the Group's forborne loans and advances to customers by staging, economic activity and business line classification, as well as the ECL allowance and tangible collateral held for such forborne loans.


 


30 June
2023

31 December
2022


 €000

 €000

Stage 1

                   - 

                   - 

Stage 2

        517,449                     

         857,356

Stage 3

        187,020                     

         215,730

POCI

          26,521                     

           33,212


        730,990                     

      1,106,298

Fair value of collateral

 


30 June
2023

31 December
2022


 €000

 €000

Stage 1

                   - 

                   - 

Stage 2

        493,444                     

         818,138

Stage 3

        147,787                     

         172,501

POCI

          24,600                     

           30,188


        665,831                     

      1,020,827

The fair value of collateral presented above has been computed to the extent that the collateral mitigates credit risk.

Credit risk concentration

 


30 June
2023

31 December
2022

By economic activity

 €000

 €000

Trade

          30,420                     

           41,038

Manufacturing

          13,612                     

           17,080

Hotels and catering

        132,823                     

         282,460

Construction

        143,637                     

         245,695

Real estate

          97,245                     

         145,840

Private individuals

        224,242                     

         279,934

Professional and other services

          62,616                     

           76,135

Shipping

                   - 

                   - 

Other sectors

          26,395                     

           18,116


        730,990                     

      1,106,298


 

 30 June 2023

Stage 1

Stage 2

Stage 3

POCI

Total

By business line

 €000

 €000

 €000

 €000

 €000

Corporate and Large corporate

                   - 

         367,669                     

           48,720                     

             2,915                     

        419,304

SMEs

                   - 

           29,320                     

             1,333                     

                631                     

          31,284

Retail

                                           

                                           

                                           

                                           

                      

‑ housing

                   - 

           54,408                     

           14,021                     

             1,721                     

          70,150

‑ consumer, credit cards and other

                   - 

           14,378                     

             5,676                     

                166                     

          20,220

Restructuring

                                           

                                           

                                           

                                           

                      

‑ corporate

                   - 

           18,975                     

             6,422                     

           10,169                     

          35,566

‑ SMEs

                   - 

             6,081                     

             8,600                     

             2,042                     

          16,723

‑ retail housing

                   - 

           18,453                     

           27,422                     

             1,935                     

          47,810

‑ retail other

                   - 

             4,385                     

             7,369                     

                387                     

          12,141

Recoveries

                                           

                                           

                                           

                                           

                      

‑ corporate

                   - 

                   - 

             5,132                     

                383                     

            5,515

‑ SMEs

                   - 

                   - 

           12,266                     

                496                     

          12,762

‑ retail housing

                   - 

                   - 

           38,193                     

             4,680                     

          42,873

‑ retail other

                   - 

                   - 

           10,830                     

                995                     

          11,825

International business unit

                   - 

             3,152                     

             1,036                     

                    1                     

            4,189

Wealth management

                   - 

                628                     

                   - 

                   - 

               628


                   - 

        517,449                     

        187,020                     

          26,521                     

        730,990

 

 31 December 2022

Stage 1

Stage 2

Stage 3

POCI

Total

By business line

 €000

 €000

 €000

 €000

 €000

Corporate and Large corporate

                   - 

         628,104                     

           50,688                     

             5,590                     

        684,382

SMEs

                   - 

           72,727                     

                869                     

                878                     

          74,474

Retail

                                           

                                           

                                           

                                           

                      

‑ housing

                   - 

           62,312                     

           20,502                     

             2,505                     

          85,319

‑ consumer, credit cards and other

                   - 

           20,207                     

             7,653                     

             1,084                     

          28,944

Restructuring

                                           

                                           

                                           

                                           

                      

‑ corporate

                   - 

           31,637                     

             6,060                     

           10,143                     

          47,840

‑ SMEs

                   - 

             7,240                     

           11,918                     

             1,844                     

          21,002

‑ retail housing

                   - 

           19,912                     

           30,649                     

             2,755                     

          53,316

‑ retail other

                   - 

             4,924                     

             9,021                     

                457                     

          14,402

Recoveries

                                           

                                           

                                           

                                           

                      

‑ corporate

                   - 

                   - 

             5,837                     

                442                     

            6,279

‑ SMEs

                   - 

                   - 

           14,449                     

             1,186                     

          15,635

‑ retail housing

                   - 

                   - 

           44,191                     

             5,049                     

          49,240

‑ retail other

                   - 

                   - 

           12,705                     

             1,278                     

          13,983

International business unit

                   - 

           10,293                     

             1,188                     

                    1                     

          11,482


                   - 

        857,356                     

        215,730                     

          33,212                     

    1,106,298


ECL allowance

 


30 June
2023

31 December
2022


 €000

 €000

Stage 1

                   - 

                   - 

Stage 2

          13,102                     

           13,939

Stage 3

          73,271                     

           68,557

POCI

          11,641                     

           11,259


          98,014                     

           93,755

31.         Risk management ‑ Market risk

Market risk is the risk of loss from adverse changes in market prices namely from changes in interest rates, foreign currency exchange rates, property and security prices. The Market and Liquidity Risk department is responsible for monitoring the risk on financial instruments resulting from such changes with the objective to minimise the impact on earnings and capital. The department also monitors liquidity risk and credit risk from counterparties and countries. It is also responsible for monitoring compliance with the various market risk policies and procedures.

Interest rate risk

Interest rate risk refers to the current or prospective risk to Group's capital and earnings arising from adverse movements in interest rates that affect the Group's banking book positions.

Interest rate risk is measured mainly using the impact on net interest income and impact on economic value. In addition to the above measures, interest rate risk is also measured using interest rate risk gap analysis, where the assets, liabilities and off‑balance sheet items are classified according to their remaining repricing period. Items that are not sensitive to rate changes are recognised as non‑rate sensitive (NRS) items. The present value of one basis point (PV01) is also calculated. Interest rate risk is managed through a 1‑Year Interest Rate Effect (IRE) limit on the maximum reduction of net interest income under the various interest rate shock scenarios. Limits are set as a percentage of the Group regulatory capital and as a percentage of the net interest income. There are overall limits as well as different limits for the Euro and the US Dollar.

Sensitivity analysis

The table below sets out the impact on the Group's net interest income, over a one‑year period, from reasonably possible changes in the interest rates of the Euro and the US Dollar, being the main currencies, using the assumption of the prevailing market risk policy for the current and the comparative period:

 


 



Impact on Net Interest Income in €000

Currency

Interest Rate Scenario

30 June
2023
(60 bps for Euro and 75 bps for US Dollar)

31 December
2022
(60 bps for Euro and 75 bps for US Dollar)

All

Parallel up

           67,248                     

           73,126

All

Parallel down

         (73,993)                     

         (77,043)

All

Steepening

         (52,944)                     

         (56,569)

All

Flattening

           55,446                     

           59,657

All

Short up

           65,839                     

           70,381

All

Short down

         (69,914)                     

         (73,896)

 

Euro

Parallel up

           66,600                     

           71,829

Euro

Parallel down

         (72,536)                     

         (75,343)

Euro

Steepening

         (52,115)                     

         (55,812)

Euro

Flattening

           55,162                     

           59,132

Euro

Short up

           65,230                     

           69,180

Euro

Short down

         (68,587)                     

         (72,216)

 

US Dollar

Parallel up

                648                     

             1,298

US Dollar

Parallel down

           (1,457)                     

           (1,700)

US Dollar

Steepening

              (829)                     

              (757)

US Dollar

Flattening

                284                     

                525

US Dollar

Short up

                609                     

             1,202

US Dollar

Short down

           (1,327)                     

           (1,680)


The above sensitivities incorporate assumptions on the pass‑through change of time deposits.

The table below sets out the impact on the Group's equity, from reasonably possible changes in the interest rates under various interest rate scenarios for the Euro and the US Dollar in line with the EBA guidelines.

 



Impact on
Equity in
€000

Currency

Interest Rate Scenario

30 June
2023
(60 bps for Euro and 75 bps for US Dollar)

 31 December 2022
(60 bps for Euro and 75 bps for US Dollar)

All

Parallel up

            16,609                      

            31,739                      

All

Parallel down

            (7,861)                      

          (68,581)                      

All

Steepening

            (6,201)                      

            11,884                      

All

Flattening

              1,122                      

                 369                      

All

Short up

              5,947                      

            27,212                      

All

Short down

         (17,438)                     

          (35,032)                      

 

Euro

Parallel up

            27,669                      

            54,878                      

Euro

Parallel down

            (1,962)                      

          (59,502)                      

Euro

Steepening

            (6,671)                      

            23,018                      

Euro

Flattening

              2,960                      

                 526                      

Euro

Short up

              7,726                      

            47,696                      

Euro

Short down

          (13,089)                      

         (28,040)

 

US Dollar

Parallel up

              5,549                      

              8,599                      

US Dollar

Parallel down

            (5,899)                      

            (9,079)                      

US Dollar

Steepening

                 940                      

                 750                      

US Dollar

Flattening

               (358)                      

                 212                      

US Dollar

Short up

              4,167                      

              6,727                      

US Dollar

Short down

           (4,349)                     

            (6,992)                      

The aggregation of the impact on equity was performed as per the EBA guidelines by adding the negative and 50% of the positive impact of each scenario.

In addition to the above fluctuations in net interest income, interest rate changes can result in fluctuations in the fair value of investments at FVPL (including investments held for trading) and in the fair value of derivative financial instruments impacting the profit and loss of the Group.

The equity of the Group is also affected by changes in market interest rates. The impact on the Group's equity arises from changes in the fair value of fixed rate debt securities classified at FVOCI.

The sensitivity analysis is based on the assumption of a parallel shift of the yield curve. The table below sets out the impact on the Group's profit/loss before tax and equity as a result of reasonably possible changes in the interest rates of the major currencies.


 

Parallel change in interest rates
((increase)/decrease in net
interest income)

Impact on profit/loss before tax

Impact on equity

30 June
2023

 €000

 €000

+0.75% for US Dollar
+0.6% for Euro
+0.4% for British Pound

                          (651)                                   

                          (402)                                   

‑0.75% for US Dollar
‑0.6% for Euro
‑0.4% for British Pound

                              651                                   

                              402                                   

 


Impact on profit/loss before tax

Impact on equity

Parallel change in interest rates
((increase)/decrease in net
interest income)

 €000

 €000

31 December
2022



+0.75% for US Dollar
+0.6% for Euro
+0.4% for British Pound

                            (466)                                   

                            (394)                                   

‑0.75% for US Dollar
‑0.6% for Euro
‑0.4% for British Pound

                              466                                   

                              386                                   

Interest rate benchmark reform

The LIBOR and the EURIBOR (collectively referred to as IBORs) have been the subject of international, national and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause such benchmarks to perform differently from the past or cease to exist entirely or have other consequences that cannot be predicted.

Regarding LIBOR reform, regulators and industry working groups have identified alternative rates to transition to. In March 2021 the Financial Conduct Authority (FCA) confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative of the underlying market they intended to measure:

i.    immediately after 31 December 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1 week and 2 month US dollar settings; and

ii.    immediately after 30 June 2023, in the case of the remaining US dollar settings.

In September 2022, the FCA confirmed that the publication of 1‑month and 6‑month synthetic GBP LIBOR will be required until the end of March 2023, after which date these settings permanently ceased. On 3 April 2023, the FCA confirmed that the 3‑month synthetic GBP LIBOR setting is expected to cease to be published at the end of March 2024.

Also, under their new use restriction power they would prohibit new use of USD LIBOR from the end of 2021, except in specific circumstances. On 3 April 2023, the FCA announced its decision to require IBA to continue to publish the 1‑month, 3‑month and 6‑month USD LIBOR settings using an unrepresentative synthetic basis and it is expected to cease to be published at the end of September 2024. They have decided to permit the use of these settings in all legacy contracts except cleared derivatives.

How the Group is managing the transition to alternative benchmark rates

BOC PCL established a project to manage the transition to alternative interest rate benchmarks with the Director of Treasury as the project owner and with oversight from a dedicated Benchmark Steering Committee. The main divisions involved in the project at the highest level are the Legal Department, Treasury, Risk Management, Finance, Information Technology (IT), Operations and the business lines. The Assets and Liabilities Committee (ALCO) monitors the project.

The Group's transition project also involved the drawing up of appropriate fallback provisions for LIBOR linked contracts and transition mechanisms in its floating rate assets and liabilities with maturities after 2021.


For the legacy non‑cleared derivatives exposures, the Group has adhered to the International Swaps and Derivatives Association (ISDA) protocol which came into effect in January 2021, while for cleared derivatives, BOC PCL adopted the market wide standardised approach to be followed by the relevant clearing house.

The Group proactively engaged with its customer base and market counterparties for the amendment of substantially all impacted LIBOR contracts for transitioning to alternative rates. Those legacy credit facilities in CHF for which the contract was not amended by the first interest period commencing in 2022 ('tough legacy'), have been transitioned to the statutory rate provided by EU legislation. The Group has also transitioned its tough legacy JPY and GBP credit facilities to alternative rates by notifying its customer base accordingly and reserving the right to use a statutory rate provided by EU legislation in case such a rate is nominated in the future.

The Group has also made the necessary arrangements to transition its tough legacy USD credit facilities to alternative rates and notified its customer base accordingly and reserving the right to use a statutory rate provided by EU legislation in case such a rate is nominated in the future.

The Group has also engaged in client communication to inform customers and ensure a smooth transition of credit facilities to RFRs. New RFR lending products have also been introduced and adopted across the Group's key currencies.

BOC PCL has dedicated teams in place to support the transition and continuously assess, monitor and dynamically manage risks arising from the transition when required.

The Group has also been actively monitoring any market and regulatory developments published by regulatory bodies, as well as by relevant Working Groups across various jurisdictions.

The Group will continue to assess, monitor and dynamically manage risks, and implement specific mitigating controls when required, progressing towards an orderly transition to alternative benchmarks.

The following table summarises the significant non‑derivative exposures impacted by interest rate benchmark reform which have yet to transition as at 30 June 2023 and as at 31 December 2022 to the replacement benchmark rate at the respective date:

 

30 June 2023

USD
LIBOR

Other LIBOR

Total

Non‑derivative financial assets

 €000

 €000

 €000

Loans and advances to customers

     210,761                 

            145                 

   210,906                 

Loans and advances to banks

              - 

         3,276                 

        3,276                 

Total

   210,761                 

        3,421                 

   214,182                 

Non‑derivative financial liabilities




Deposits by banks

              - 

            281                 

           281                 

Total

              - 

           281                 

           281                 

 

 31 December 2022

USD
LIBOR

Other LIBOR

Total

 

Non‑derivative financial assets

 €000

 €000

 €000

 

Loans and advances to customers

     283,509                 

            316                 

   283,825                 

 

Loans and advances to banks

       26,607                 

         4,297                 

     30,904                 

 

Total

   310,116                 

        4,613                 

   314,729                 

 

Non‑derivative financial liabilities




 

Deposits by banks

         7,416                 

            248                 

        7,664                 

 

Total

        7,416                 

           248                 

        7,664                 

 

EURIBOR is in compliance with the EU Benchmarks Regulation and can continue to be used as a benchmark interest rate for existing and new contracts. The Group therefore, does not consider that Group's exposure to EURIBOR is affected by the BMR reform.


For derivatives in hedging relationships subject to IBOR reform refer to Note 16.

Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates.

The impact on equity arises mainly from the impact of hedging instruments used to hedge part of the net assets of the subsidiaries. At Group level, there is an approximately equal and opposite impact on equity from the revaluation of the net assets of the foreign operations of the Group.

Price risk

Equity securities price risk

The risk of loss from changes in the price of equity securities arises when there is an unfavourable change in the prices of equity securities held by the Group as investments.

Debt securities price risk

Debt securities price risk is the risk of loss as a result of adverse changes in the prices of debt securities held by the Group. Debt security prices change as the credit risk of the issuer changes and/or as the interest rate changes mainly for fixed rate securities. The Group invests a significant part of its liquid assets in highly rated securities. The average Moody's Investors Service rating of the debt securities portfolio of the Group as at 30 June 2023 was A2 (31 December 2022: A2). The average rating excluding the Cyprus Government bonds and non‑rated transactions as at 30 June 2023 was Aa2 (31 December 2022: Aa2). 

Property price risk

A significant part of the Group's loan portfolio is secured by real estate, the majority of which is located in Cyprus. Furthermore, the Group holds a substantial number of properties mainly arising from loan restructuring activities; the enforcement of loan collateral and debt for asset swaps. These properties are held by the Group primarily as stock of properties and some are held as investment properties.

Property risk is the risk that the Group's business and financial position will be affected by adverse changes in the demand for, and prices of, real estate, or by regulatory capital requirements relating to increased charges with respect to the stock of properties held.

32.         Risk management ‑ Liquidity and funding risk

Liquidity Risk

Liquidity risk is the risk that the Group is unable to fully or promptly meet current and future payment obligations as and when they fall due. This risk includes the possibility that the Group may have to raise funding at high cost or sell assets at a discount to fully and promptly satisfy its obligations.

It reflects the potential mismatch between incoming and outgoing payments, taking into account unexpected delays in repayment and unexpectedly high payment outflows. Liquidity risk involves both the risk of unexpected increases in the cost of funding of the portfolio of assets and the risk of being unable to liquidate a position in a timely manner on reasonable terms.

In order to limit this risk, management has adopted the Liquidity Policy of managing assets, taking liquidity into consideration and monitoring cash flows and liquidity on a regular basis. The Group has developed internal control processes and contingency plans for managing liquidity risk.

Management and structure

The Board of Directors sets the Group's Liquidity Risk Appetite which defines the level of risk at which the Group should operate.

The Board of Directors, through its Risk Committee, approves the Liquidity Policy Statement and reviews at frequent intervals the liquidity position of the Group.

The ALCO is responsible for setting the policies for the effective management and monitoring of liquidity risk across the Group.


The Treasury Division is responsible for liquidity management at Group level, ensuring compliance with internal policies and regulatory liquidity requirements and providing direction as to the actions to be taken regarding liquidity needs. Treasury Division assesses on a continuous basis the adequacy of the liquid assets and takes the necessary actions to ensure a comfortable liquidity position.

Liquidity is also monitored by Market and Liquidity Risk department, to ensure compliance with both internal policies and limits, and with the limits set by the regulatory authorities. Market and Liquidity Risk department reports the liquidity position to ALCO at least monthly. It also provides the results of various stress tests to ALCO at least quarterly.

Liquidity is monitored and managed on an ongoing basis through:

(i)          Risk appetite: establishes the Group's Risk Appetite Statement together with the appropriate limits for the management of all risks including liquidity risk.

(ii)         Liquidity Policy: sets the responsibilities for managing liquidity risk as well as the framework, limits and reporting on liquidity and funding.

(iii)         Liquidity limits: a number of internal and regulatory limits are monitored on a regular basis. Where applicable, a traffic light system (RAG) has been introduced for the ratios, in order to raise flags and take action when the ratios deteriorate.

(iv)        Early warning indicators: monitoring of a range of indicators for early signs of liquidity risk in the market or specific to the Group. These are designed to immediately identify the emergence of increased liquidity risk so as to maximise the time available to execute appropriate mitigating actions.

(v)         Liquidity Contingency Plan: maintenance of a Liquidity Contingency Plan (LCP) which is designed to provide a framework where a liquidity stress could be effectively identified and managed. The LCP provides a communication plan and includes management actions to respond to liquidity stresses.

(vi)        Recovery Plan: the Group has developed a Recovery Plan (RP), the key objectives of which are, among others, to set key Recovery and Early Warning Indicators and to set in advance a range of recovery options to enable the Group to be adequately prepared to respond to stressed conditions and restore the Group's liquidity position.

Monitoring process

Daily

The daily monitoring of the stock of highly liquid assets is important to safeguard and ensure the uninterrupted operations of the Group's activities. Market and Liquidity Risk department prepares a daily report analysing the internal liquidity buffer and comparing it to the previous day's buffer. Results are made available to members of the Risk and Treasury Divisions. In addition, Treasury monitors daily and intraday the customer inflows and outflows in the main currencies used by the Group.

The liquidity buffer is made up of: Banknotes, CBC balances (excluding the Minimum Reserve Requirements (MRR)), unpledged cash and nostro current accounts, as well as money market placements up to the stress horizon, available ECB credit line and market value net of haircut of unencumbered/available liquid bonds.

Market and Liquidity Risk department also prepares daily stress testing for bank specific, market wide and combined scenarios. The requirement is to have sufficient liquidity buffer to enable BOC PCL to survive a twelve‑month stress period, including capacity to raise funding under all scenarios.

Moreover, an intraday liquidity stress test takes place to ensure that the Group maintains sufficient liquidity buffer in immediately accessible form, to enable it to meet the stressed intraday payments.

The designing of the stress tests follows guidance and is based on the liquidity risk drivers which are recognised internationally by both the Prudential Regulation Authority (PRA) and EBA. In addition, it takes into account SREP recommendations, as well as the Annual Risk Identification Process of the Group. The stress test assumptions are reviewed on an annual basis and approved by the Board through its Risk Committee. Whenever it is considered appropriate to amend the assumptions during the year, approval is requested from ALCO and the Risk Committee. The main items shocked in the different scenarios are: deposit outflows, wholesale funding, loan repayments, off balance sheet commitments, marketable securities, own issue covered bond, additional credit claims, interbank takings and cash collateral for derivatives and repos.

Weekly

Market and Liquidity Risk department prepares a report indicating the level of Liquid Assets including Credit Institutions Money Market Placements as per LCR definitions.


Monthly

Market and Liquidity Risk department prepares reports monitoring compliance with internal and regulatory liquidity ratios requirements and submits them to the ALCO, the Executive Committee and the Risk Committee. It also calculates the expected flows under a stress scenario and compares them with the  available liquidity buffer in order to calculate the survival days. The fixed deposit renewal rates, the percentage of International business unit deposits over total deposits and the percentage of instant access deposits are also presented. The liquidity mismatch in the form of the Maturity Ladder report (for both contractual and behavioural flows) is presented to ALCO and the resulting mismatch between assets and liabilities is compared to previous month's mismatch.

Market and Liquidity Risk department also reports the Liquidity Coverage Ratio (LCR) and Additional Liquidity Monitoring Metrics (ALMM) to the CBC/ECB on a monthly basis.

Quarterly

The results of the stress testing scenarios are reported to ALCO and Risk Committee quarterly as part of the quarterly Internal Liquidity Adequacy Assessment Process (ILAAP) review. Market and Liquidity Risk department reports the Net Stable Funding Ratio (NSFR) to the CBC/ECB quarterly.

Annually

The Group prepares on an annual basis its ILAAP package. The ILAAP package provides a holistic view of the Group's liquidity adequacy under normal and stress conditions. Within ILAAP, the Group evaluates its liquidity risk in the context of established policies and processes for the identification, measurement, management and monitoring of liquidity risk as implemented by the institution.

Market and Liquidity Risk department also prepares an annual liquidity report, run and submitted for five consecutive days to the ECB. The report includes information on deposits breakdown, cash flow information, survival period, LCR ratio, rollover of funding, funding gap (through the Maturity Ladder analysis), concentration of funding and collateral details. It concludes on the overall liquidity position of BOC PCL and describes the measures implemented and to be implemented in the short‑term to improve liquidity position if needed.

As part of the Group's procedures for monitoring and managing liquidity risk, there is a Group Liquidity Contingency Plan (LCP) for handling liquidity difficulties. The LCP details the steps to be taken in the event that liquidity problems arise, which escalate to a special meeting of the Crisis Management Committee for LCP (CMC‑LCP). The LCP sets out the members of this committee and a series of the possible actions that can be taken. The LCP is reviewed and tested at least annually.

Liquidity ratios

The Group LCR is calculated based on the Delegated Regulation (EU) 2015/61. It is designed to establish a minimum level of high quality liquid assets sufficient to meet an acute stress lasting for 30 calendar days. Τhe minimum requirement is 100%. The Group also calculates its NSFR as per Capital Requirements Regulation II (CRR II), with the limit set at 100%. The NSFR is the ratio of available stable funding to required stable funding. NSFR has been developed to promote a sustainable maturity structure of assets and liabilities.

Funding risk

Funding risk is the risk that the Group does not have sufficiently stable sources of funding or access to sources of funding may not always be available at a reasonable cost and thus the Group may fail to meet its obligations, including regulatory ones (e.g. MREL).

Main sources of funding

As at 30 June 2023, the Group's main sources of funding were its deposit base and central bank funding, through the Eurosystem monetary policy operations. Wholesale funding is also becoming an important source of funding, following the refinancing of the Tier 2 for €300 million in April 2021, the issuance of senior preferred debt of €300 million in June 2021, the refinancing of AT1 for €220 million in June 2023 and the issuance of senior preferred debt of €350 million in July 2023 (Note 37).

With respect to TLTRO III operations, the carrying value of the ECB funding as at 30 June 2023 (after the early repayment of €1 billion within December 2022), was €2,004 million (31 December 2022: €1,977 million).


As at 30 June 2023, the wholesale funding nominal amount was €836 million (31 December 2022: €820 million). This includes funding raised from the wholesale debt capital markets of €236 million AT1 as described in Note 25, €300 million Tier 2 issued in April 2021 and €300 million senior preferred debt issued in June 2021.

Funding to subsidiaries

The funding provided by BOC PCL to its subsidiaries for liquidity purposes is repayable as per the terms of the respective agreements.

The subsidiaries may proceed with dividend distributions in the form of cash to BOC PCL, provided that they are not in breach of their regulatory capital and liquidity requirements, where applicable.

Collateral requirements and other disclosures

Collateral requirements

The carrying values of the Group's encumbered assets as at 30 June 2023 and 31 December 2022 are summarised below:

 


30 June
2023

 31 December 2022


 €000

 €000

Cash and other liquid assets

          69,345                     

           73,557

Investments

        257,147                     

         284,343

Loans and advances

     3,334,668                     

      3,273,369


     3,661,160                     

      3,631,269

Cash is mainly used to cover collateral required for derivatives, trade finance transactions and guarantees issued. It may also be used as part of the supplementary assets for the covered bond.

As at 30 June 2023 and 31 December 2022 investments are mainly used as collateral for ECB funding or as supplementary assets for the covered bond.

Loans and advances indicated as encumbered as at 30 June 2023 and 31 December 2022 are mainly used as collateral for funding from the ECB and the covered bond.

Loans and advances to customers include mortgage loans of a nominal amount of €1,015 million as at 30 June 2023 (31 December 2022: €1,007 million) in Cyprus, pledged as collateral for the covered bond issued by BOC PCL in 2011 under its Covered Bond Programme. Furthermore, as at 30 June 2023 housing loans of a nominal amount of €2,310 million (31 December 2022: €2,287 million) in Cyprus, are pledged as collateral for funding from the ECB (Note 21).

BOC PCL maintains a Covered Bond Programme set up under the Cyprus Covered Bonds legislation and the Covered Bonds Directive of the CBC. Under the Covered Bond Programme, BOC PCL has in issue covered bonds of €650 million secured by residential mortgages originated in Cyprus. The Covered Bonds have a maturity date of 12 December 2026 and pay an interest rate of 3‑months Euribor plus 1.25% on a quarterly basis. On 9 August 2022, BOC PCL proceeded with an amendment to the terms and conditions of the covered bonds following the implementation of Directive (EU) 2019/2162 in Cyprus. The covered bonds are listed on the Luxemburg Bourse. The covered bonds have a conditional Pass‑Through structure. All the bonds are held by BOC PCL. The covered bonds are eligible collateral for the Eurosystem credit operations and are placed as collateral for accessing funding from the ECB.

Other disclosures

Deposits by banks include balances of €25,003 thousand as at 30 June 2023 (31 December 2022: €29,100 thousand) relating to borrowings from international financial and similar institutions for funding, aiming to facilitate access to finance and improve funding conditions for small or medium sized enterprises, active in Cyprus. The carrying value of the respective loans and advances granted to such enterprises serving this agreement amounts to €47,783 thousand as at 30 June 2023 (31 December 2022: €55,152 thousand).


33.         Capital management

The primary objective of the Group's capital management is to ensure compliance with the relevant regulatory capital requirements and to maintain healthy capital adequacy ratios to cover the risks of its business and support its strategy and maximise shareholders' value.

The capital adequacy framework, as in force, was incorporated through the Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD) which came into effect on 1 January 2014 with certain specified provisions implemented gradually. The CRR and CRD transposed the new capital, liquidity and leverage standards of Basel III into the European Union's legal framework. CRR establishes the prudential requirements for capital, liquidity and leverage for credit institutions. It is directly applicable in all EU member states. CRD governs access to deposit taking activities and internal governance arrangements including remuneration, board composition and transparency. Unlike the CRR, member states were required to transpose the CRD into national law and national regulators were allowed to impose additional capital buffer requirements.

On 27 June 2019, the revised rules on capital and liquidity (Regulation (EU) 2019/876 (CRR II) and Directive (EU) 2019/878 (CRD V)) came into force. As an amending regulation, the existing provisions of CRR apply unless they are amended by CRR II. Certain provisions took immediate effect (primarily relating to Minimum Requirement for Own Funds and Eligible Liabilities (MREL)), but most changes became effective as of June 2021. The key changes introduced consist of, among others, changes to qualifying criteria for Common Equity Tier 1 (CET1), Additional Tier 1 (AT1) and Tier 2 (T2) instruments, introduction of requirements for MREL and a binding Leverage Ratio requirement (as defined in the CRR) and a Net Stable Funding Ratio (NSFR).

The amendments that came into effect on 28 June 2021 are in addition to those introduced in June 2020 through Regulation (EU) 2020/873, which among other, brought forward certain CRR II changes in light of the COVID‑19 pandemic. The main adjustments of Regulation (EU) 2020/873 that had an impact on the Group's capital ratio relate to the acceleration of the implementation of the new SME discount factor (lower RWAs), extending the IFRS 9 transitional arrangements and introducing further relief measures to CET1 allowing to fully add back to CET1 any increase in ECL recognised in 2020 and 2021 for non‑credit impaired financial assets and phasing‑in this starting from 2022 (phasing‑in at 25% in 2022 and 50% in 2023) and advancing the application of prudential treatment of software assets as amended by CRR II (which came into force in December 2020). In addition, Regulation (EU) 2020/873 introduced a temporary treatment of unrealized gains and losses on exposures to central governments, to regional governments or to local authorities measured at fair value through other comprehensive income which the Group elected to apply and implemented from the third quarter of 2020. This temporary treatment was in effect until 31 December 2022.

The Group and BOC PCL have complied with the minimum capital requirements (Pillar I and Pillar II).

In October 2021, the European Commission adopted legislative proposals for further amendments to the CRR, CRD and the BRRD (the '2021 Banking Package'). Amongst other things, the 2021 Banking Package would implement certain elements of Basel III that have not yet been transposed into EU law. The 2021 Banking Package is subject to amendment in the course of the EU's legislative process; and its scope and terms may change prior to its implementation. In addition, in the case of the proposed amendments to CRD and the BRRD, their terms and effect will depend, in part, on how they are transposed in each member state. The European Council's proposal on CRR and CRD was published on 8 November 2022. During February 2023, the European Parliament's ECON Committee voted to adopt Parliament's proposed amendments to the Commission's proposal, and the 2021 Banking Package is currently in the final stage of the EU legislative process. It is expected that the 2021 Banking Package will come in force on 1 January 2025; and certain measures are expected to be subject to transitional arrangements or to be phased in over time. 

The insurance subsidiaries of the Group, the General Insurance of Cyprus Ltd and EuroLife Ltd, comply with the requirements of the Superintendent of Insurance including the minimum solvency ratio. The regulated investment firm (CIF) of the Group, The Cyprus Investment and Securities Corporation Ltd (CISCO) complies with the minimum capital adequacy ratio requirements. In February 2023, the activities of the regulated UCITS management company of the Group, BOC Asset Management Ltd, were absorbed by CISCO and BOC Asset Management Ltd was dissolved without liquidation. The payment services subsidiary of the Group, JCC Payment Services Ltd, complies with the regulatory capital requirements.

Additional information on regulatory capital is disclosed in 'Risk and Capital Management Report', which is included in the Interim Financial Report 2023.


34.         Related party transactions

Related parties of the Group include associates and joint ventures, key management personnel, members of the Board of Directors and their connected persons. Connected persons for the purpose of this disclosure include spouses, minor/dependent children and companies in which the directors/key management personnel, hold directly or indirectly, at least 20% of the voting shares in a general meeting, or act as executive director or exercise control of the entities in any way.

Fees and emoluments of members of the Board of Directors and key management personnel

 


Six months ended
30 June


 2023

 2022

Directors' emoluments

 €000

 €000

Executives

                                           

                      

Salaries and other short‑term benefits

                530                     

                523

Employer's contributions

                  36                     

                  35

Retirement benefit plan costs

                  47                     

                  44

Share‑based benefits

                114                     

                   - 


                727                     

                602

Non‑executives

                                           

                      

Fees

                568                     

                663

Total directors' emoluments

            1,295                     

             1,265

Key management personnel emoluments

                                           

                      

Salaries and other short‑term benefits

            1,530                     

             1,397

Employer's contributions

                176                     

                163

Retirement benefit plan costs

                133                     

                105

Share‑based benefits

                197                     

                   - 

Total key management personnel emoluments

            2,036                     

             1,665

Total

            3,331                     

             2,930

The fees of the non‑executive Directors include fees as members of the Board of Directors of the Company and its subsidiaries, as well as fees as members of committees of the Board of Directors.

Key management personnel

The emoluments of key management personnel include the remuneration of the members of the Executive Committee since the date of their appointment to the Committee and the emoluments of other members of the Senior Management team (Extended EXCO) (prior to the change in the Group organisational structure, in 2022 the key management personnel included those members of the management team who reported directly to the Chief Executive Officer or to the Deputy Chief Executive Officer & Chief of Business).

Aggregate amounts outstanding and additional transactions

The tables below show the deposits, loans and advances and other credit balances held by the members of the Board of Directors and key management personnel and their connected persons, as at the balance sheet date.


30 June
2023

 31 December 2022

Loans and advances

 €000

 €000

‑ members of the Board of Directors and key management personnel

            2,149                     

             2,296

‑ connected persons

               653                     

                681


            2,802                     

             2,977

Deposits



‑ members of the Board of Directors and key management personnel

            4,428                     

             5,534

‑ connected persons

            3,179                     

             3,178


            7,607                     

             8,712


The above table does not include period/year‑end balances of members of the Board of Directors and key management personnel and their connected persons who resigned during the period/year, nor balances of customers that do not meet the definition of connected persons as at the reporting periods.

The aggregate expected credit loss allowance on the above loans and credit facilities is below €16 thousand as at 30 June 2023 (31 December 2022: below €6 thousand). All principal and interest that has fallen due on these loans or credit facilities has been paid.

All transactions with members of the Board of Directors and their connected persons are made on normal business terms as for comparable transactions, including interest rates, with customers of a similar credit standing. A number of loans and advances have been extended to key management personnel on the same terms as those applicable to the rest of the Group's employees and to their connected persons on the same terms as those of customers.

The table below discloses interest, commission and insurance premium income, as well as other transactions and expenses with the members of the Board of Directors, key management personnel and their connected persons for the reference period.


Six months ended
30 June


 2023

 2022


 €000

 €000

Interest income for the period

                  49                     

                  29

Interest expense for the period

                    2                     

                   - 

Commission income for the period

                    1                     

                    3

Insurance premium income for the period

               236                     

                206

Subscriptions and insurance expenses for the period

               381                     

                488

Interest income and expense are disclosed for the period during which they were members of the Board of Directors or served as key management personnel.

During the six months ended 30 June 2022 connected persons of key management personnel transacted with REMU for the purchase of a property amounting to €58 thousand. The transaction was made on normal business terms as for comparable transactions with third parties.

In addition to loans and advances, there were contingent liabilities and commitments in respect of members of the Board of Directors and their connected persons, mainly in the form of documentary credits, guarantees and commitments to lend, amounting to €141 thousand as at 30 June 2023 (31 December 2022: €120 thousand).

There were also contingent liabilities and commitments to key management personnel and their connected persons amounting to €1,429 thousand as at 30 June 2023 (31 December 2022: €1,227 thousand).

The total unsecured amount of the loans and advances and contingent liabilities and commitments to members of the Board of Directors, key management personnel and their connected persons (using forced‑sale values for tangible collaterals and assigning no value to other types of collaterals) at 30 June 2023 amounted to €1,744 thousand (31 December 2022: €1,212 thousand).

During the six months ended 30 June 2023 premiums of €89 thousand (30 June 2022: €94 thousand) and nil claims (30 June 2022: €20 thousand) were paid by/to the members of the Board of Directors of the Company and their connected persons to/from the insurance subsidiaries of the Group.

There were no other transactions during the six months ended 30 June 2023 and the six months ended 30 June 2022 with connected persons of the current members of the Board of Directors or with any members who resigned during the period/year.

35.         Group companies

The main subsidiary companies and branches included in the Consolidated Financial Statements of the Group, their country of incorporation, their activities and the percentage held by the Company (directly or indirectly) as at 30 June 2023 are:


 

Company

Country

Activities

Bank of Cyprus Holdings Public Limited Company

Ireland

Holding company

n/a

Bank of Cyprus Public Company Ltd

Cyprus

Commercial bank

100

EuroLife Ltd

Cyprus

Life insurance

100

General Insurance of Cyprus Ltd

Cyprus

Non‑life insurance

100

JCC Payment Systems Ltd

Cyprus

Card processing transaction services

75

The Cyprus Investment and Securities Corporation Ltd (CISCO)

Cyprus

Investment banking and brokerage and management administration and safekeeping of UCITS Units

100

Jinius Ltd

Cyprus

Digital Economy Platform

100

LCP Holdings and Investments Public Ltd

Cyprus

Investments in securities and participations in companies and schemes that are active in various business sectors and projects

67

Kermia Ltd

Cyprus

Property trading and development

100

Kermia Properties & Investments Ltd

Cyprus

Property trading and development

100

S.Z. Eliades Leisure Ltd

Cyprus

Land development and operation of a golf resort

70

Auction Yard Ltd

Cyprus

Auction company

100

BOC Secretarial Company Ltd

Cyprus

Secretarial services

100

Bank of Cyprus Public Company Ltd (branch of BOC PCL)

Greece

Administration of guarantees and holding of real estate properties

n/a

BOC Asset Management Romania S.A.

Romania

Collection of the existing portfolio of receivables, including third party collections

100

MC Investment Assets Management LLC

Russia

Problem asset management company

100

Fortuna Astrum Ltd

Serbia

Problem asset management company

100


In December 2022 the Company incorporated Jinius Ltd, a 100% subsidiary, which has been set up to provide and administrate a Digital Economy Platform. As at 31 December 2022 this subsidiary was inactive and in the six months ended 30 June 2023 the activities of BOC PCL in relation to the Digital Economy Platform were transferred to Jinius Ltd. Jinius Ltd is 100% subsidiary of BOC PCL as at 30 June 2023.

In February 2023, the Group proceeded with a restructuring of its investment banking and brokerage activities through the absorption by CISCO of BOC Asset Management Ltd's activities. BOC Asset Management Ltd was subsequently dissolved.

In addition to the above companies, as at 30 June 2023 BOC PCL had 100% shareholding in the companies listed below, whose activity is the ownership and management of immovable property:

Cyprus: Hamura Properties Ltd, Tolmeco Properties Ltd, Dilero Properties Ltd, Pelika Properties Ltd, Cobhan Properties Ltd, Ramendi Properties Ltd, Nalmosa Properties Ltd, Emovera Properties Ltd, Estaga Properties Ltd, Skellom Properties Ltd, Blodar Properties Ltd, Cranmer Properties Ltd, Les Coraux Estates Ltd, Natakon Company Ltd, Oceania Ltd, Dominion Industries Ltd, Ledra Estate Ltd, EuroLife Properties Ltd, Laiki Lefkothea Center Ltd, Labancor Ltd, Joberco Ltd, Zecomex Ltd, Domita Estates Ltd, Memdes Estates Ltd, Edoric Properties Ltd, Kernland Properties Ltd, Jobelis Properties Ltd, Melsolia Properties Ltd, Koralmon Properties Ltd, Spacous Properties Ltd, Calinora Properties Ltd, Marcozaco Properties Ltd, Soluto Properties Ltd, Solomaco Properties Ltd, Linaland Properties Ltd, Unital Properties Ltd, Neraland Properties Ltd, Wingstreet Properties Ltd, Nolory Properties Ltd, Lynoco Properties Ltd, Fitrus Properties Ltd, Lisbo Properties Ltd, Mantinec Properties Ltd, Colar Properties Ltd, Irisa Properties Ltd, Provezaco Properties Ltd, Hillbay Properties Ltd, Ofraco Properties Ltd, Forenaco Properties Ltd, Hovita Properties Ltd, Astromeria Properties Ltd, Regetona Properties Ltd, Camela Properties Ltd, Fareland Properties Ltd, Barosca Properties Ltd, Fogland Properties Ltd, Tebasco Properties Ltd, Valecross Properties Ltd, Altco Properties Ltd, Olivero Properties Ltd, Jaselo Properties Ltd, Elosa Properties Ltd, Flona Properties Ltd, Toreva Properties Ltd, Resoma Properties Ltd, Mostero Properties Ltd, Helal Properties Ltd, Pendalo Properties Ltd, Frontyard Properties Ltd, Bonsova Properties Ltd, Thermano Properties Ltd, Venicous Properties Ltd, Lorman Properties Ltd, Eracor Properties Ltd, Rulemon Properties Ltd, Maledico Properties Ltd, Bascone Properties Ltd, Balasec Properties Ltd, Bendolio Properties Ltd, Diafor Properties Ltd, Kartama Properties Ltd, Paramina Properties Ltd, Nouralia Properties Ltd, Resocot Properties Ltd, Soblano Properties Ltd, Talamon Properties Ltd, Weinar Properties Ltd, Zemialand Properties Ltd, Asianco Properties Ltd, Coeval Properties Ltd, Finevo Properties Ltd, Mazima Properties Ltd, Nigora Properties Ltd, Riveland Properties Ltd, Rosalica Properties Ltd, Secretsky Properties Ltd, Senadaco Properties Ltd, Tasabo Properties Ltd, Venetolio Properties Ltd, Zandexo Properties Ltd, Odolo Properties Ltd, Calandomo Properties Ltd, Molemo Properties Ltd, Samilo Properties Ltd, Sendilo Properties Ltd, Baleland Properties Ltd, Alezia Properties Ltd, Zenoplus Properties Ltd, Alepar Properties Ltd, Enelo Properties Ltd, Monata Properties Ltd, Vertilia Properties Ltd, Amary Properties Ltd, Aparno Properties Ltd, Lomenia Properties Ltd, Midelox Properties Ltd, Montira Properties Ltd, Orilema Properties Ltd and Philiki Ltd.

Romania: Otherland Properties Dorobanti SRL, Green Hills Properties SRL, Imoreth Properties SRL, Inroda Properties SRL, Zunimar Properties SRL, Allioma Properties SRL and Nikaba Properties SRL.

Further, at 30 June 2023 BOC PCL had 100% shareholding in Obafemi Holdings Ltd, Stamoland Properties Ltd, Unoplan Properties Ltd, Petrassimo Properties Ltd and Gosman Properties Ltd.

The main activities of the above companies are the holding of shares and other investments and the provision of services.

At 30 June 2023 BOC PCL had 100% shareholding in BOC Terra AIF V.C.I Plc which is a real estate alternative investment fund, currently inactive.

At 30 June 2023 BOC PCL had 100% shareholding in the companies listed below which are reserved to accept property:

Cyprus: Holstone Properties Ltd, Cramonco Properties Ltd, Carilo Properties Ltd, Gelimo Properties Ltd, Rifelo Properties Ltd, Avaleto Properties Ltd, Larizemo Properties Ltd and Olisto Properties Ltd.

In addition, BOC PCL holds 100% of the following intermediate holding companies:

Cyprus: Otherland Properties Ltd, Battersee Properties Ltd, Bonayia Properties Ltd, Janoland Properties Ltd, Imoreth Properties Ltd, Inroda Properties Ltd, Zunimar Properties Ltd, Nikaba Properties Ltd, Allioma Properties Ltd, Landanafield Properties Ltd and Hydrobius Ltd.


BOC PCL also holds 100% of the following companies which are inactive:

Cyprus: Laiki Bank (Nominees) Ltd, Paneuropean Ltd, Nelcon Transport Co. Ltd, Iperi Properties Ltd, CYCMC IV Ltd, Prodino Properties Ltd, Thryan Properties Ltd, Canosa Properties Ltd, Ensolo Properties Ltd, Hοmirova Properties Ltd and Settle Cyprus Ltd.

Greece: Kyprou Zois (branch of EuroLife Ltd), Kyprou Asfalistiki (branch of General Insurance of Cyprus Ltd), Kyprou Commercial SA and Kyprou Properties SA.

All Group companies are accounted for as subsidiaries using the full consolidation method. All companies listed above have share capital consisting of ordinary shares.

Acquisitions of subsidiaries

During the six months ended 30 June 2023 and during the year ended 31 December 2022 there were no acquisitions of subsidiaries.

Dissolution and disposal of subsidiaries

There were no material disposals of subsidiaries during the six months ended 30 June 2023. Salecom Ltd, Romaland Properties Ltd, Trecoda Properties Ltd, Weinco Properties Ltd and Cyprialife Ltd were dissolved during the six months ended 30 June 2023. Thelemic Properties Ltd, Arlona Properties Ltd, Tebane Properties Ltd and Nivamo Properties Ltd were disposed of during the six months ended 30 June 2023.

As at 30 June 2023, the following subsidiaries were in the process of dissolution or in the process of being struck off: Fantasio Properties Ltd, Demoro Properties Ltd, Bramwell Properties Ltd, Blindingqueen Properties Ltd, Fairford Properties Ltd, Sylvesta Properties Ltd, Battersee Real Estate SRL, Aktilo Properties Ltd, Stormino Properties Ltd, Tavoni Properties Ltd, Ameleto Properties Ltd, Birkdale Properties Ltd, Folimo Properties Ltd, Steparco Ltd, Thames Properties Ltd and Finerose Properties Ltd.

36.         Investments in associates and joint venture

 


Percentage holding

Investments in associates

(%)

Aris Capital Management LLC

30.0

Rosequeens Properties Limited

33.3

Fairways Automotive Holdings Ltd

45.0

The carrying values of the investments in associates are considered to be fully impaired and their value has been restricted to zero.

Rosequeens Properties SRL

During the year ended 31 December 2022 the Group disposed of its 33.3% holding in associate company Rosequeens Properties SRL.

 


Percentage holding

Investment in joint venture

(%)

Tsiros (Agios Tychon) Ltd

50.0

The carrying value of the investment in the joint venture is considered to be fully impaired and its value has been restricted to zero.


37.         Events after the reporting period

In July 2023, BOC PCL issued a €350 million senior preferred note (the 'Notes') under the EMTN Programme. The Notes were priced at par with a fixed coupon of 7.375% per annum, payable annually in arrear, until the Optional Redemption Date (i.e., 25 July 2027). The maturity date of the Notes is 25 July 2028; however, BOC PCL may, at its discretion, redeem the Notes on the Optional Redemption Date subject to meeting certain conditions (including applicable regulatory consents) as specified in the terms and conditions of the Notes. If the Notes are not redeemed by BOC PCL, the coupon payable from the Optional Redemption Date until the Maturity Date will convert from a fixed rate to a floating rate and will be equal to 3‑month Euribor plus 409.5 basis points, payable quarterly in arrears. The Notes are listed on the Luxembourg Stock Exchange's Euro MTF market. The Notes comply with the criteria for the minimum requirement for own funds and eligible liabilities (MREL) and contribute towards BOC PCL's MREL requirements.

No other significant non‑adjusting events have taken place since 30 June 2023.

 

 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
UK 100