Illustrative Financial Statements - Banks - KPMG - PDF Room

IFRS
Illustrative financial
statements: Banks
December 2012
kpmg.com/ifrs
1
Contents
What’s new 2
About this publication 3
Independent auditors’ report on consolidated financial statements 5
Consolidated financial statements 7

Consolidated statement of financial position 9
Consolidated statement of comprehensive income – (single-statement approach) 13
Consolidated statement of changes in equity 17
Consolidated statement of cash flows 21
Notes to the consolidated financial statements 25
Appendices
I Consolidated income statement and consolidated statement of comprehensive income – two-statement approach 245
II Example disclosures for entities that early adopt IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure
of Interests in Other Entities 249
III Example disclosures for entities that early adopt IFRS 13 Fair Value Measurement 261
IV Example disclosures for entities that early adopt Disclosures – Offsetting Financial Assets and Financial Liabilities
(amendments to IFRS 7) 285
Technical guide 294
Other ways KPMG member firms’ professionals can help 295
© 2012 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
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What’s new?
Major changes from the January 2010 edition of Illustrative financial statements: Banks are highlighted by a double line
border running down the left margin of the text within this document. The major changes include the following:
●● Adoption of amendments to IFRS 7 Financial Instruments: Disclosures as part of Improvements to IFRSs issued in
May 2010;
●● Adoption of Disclosures – Transfers of Financial Assets (amendments to IFRS 7);
●● Disclosures related to Eurozone exposures; and
●● Three new appendices illustrating example disclosures for the early adoption of the following standards:
– IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities (May 2011), including
the related amendments arising from Consolidated Financial Statements, Joint Arrangements and Disclosure of
Interests in Other Entities: Transition Guidance (amendments to IFRS 10, 11 and 12) (June 2012);
– IFRS 13 Fair Value Measurement (2011); and
– Disclosures – Offsetting Financial Assets and Financial Liabilities (amendments to IFRS 7) (2011).
The IASB has issued several other amendments to its standards during the past year. We have introduced a new
Appendix IV in our publication Illustrative financial statements (October 2012), to help identify requirements that are
effective for the first time for annual periods beginning on 1 January 2012, and those that are available for early adoption
during the period. Cross-references to the related example disclosures are provided when appropriate. Some of the new
disclosure requirements that are of a general nature are illustrated in our publication Illustrative financial statements
issued in October 2012.
In October 2012, the Enhanced Disclosure Task Force (EDTF) established by the Financial Stability Board issued a
report, Enhancing the Risk Disclosures of Banks. The fundamental principles contained in the report apply to all banks.
However, the recommendations for enhanced disclosures have been developed specifically for large international banks
that are active participants in equity and debt markets. Adoption of the recommendations in the report is voluntary. The
recommendations do not specifically refer to financial statements, but rather to all types of risk disclosures made by
banks, including those made for regulatory purposes and other communications with stakeholders.
In preparing these illustrative financial statements, we considered the recommendations made in the EDTF report;
however, we have not provided a comprehensive illustration of how the EDTF recommendations can be implemented,
as it is likely that many of them will be published outside of financial statements. For example, recommendations
relating to capital adequacy and risk weighted assets are likely to be published as part of Pillar 3 disclosures, while many
recommendations relating to credit, market and liquidity risks may be published within the annual report but outside of
the audited financial statements. In certain cases, where we considered that EDTF recommendations enhanced the
ability of users to evaluate the significance of financial instruments for the Group’s financial position and the nature of
risks arising from those instruments, we have incorporated examples of such disclosures in these illustrative financial
statements. However, banks may reach different conclusions as to what disclosures to include in their financial
statements, depending on their particular facts and circumstances.
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About this publication

These illustrative financial statements have been produced by the KPMG International Standards Group (part of KPMG
IFRG Limited), and the views expressed herein are those of the KPMG International Standards Group.
Content
This publication helps you prepare financial statements for a bank or similar financial institution in accordance with
IFRS. It illustrates one possible format for financial statements, based on a fictitious banking group involved in a range
of general banking activities; the bank is not a first-time adopter of IFRS (see ‘Technical guide’). This publication reflects
IFRS in issue at 1 December 2012 that are required to be applied by an entity with an annual period beginning on
1 January 2012 (‘currently effective’ requirements). IFRSs that are effective for annual periods beginning after 1 January
2012 (’forthcoming’ requirements) have not been adopted early in preparing these illustrative financial statements.
However, certain forthcoming requirements have been introduced in the explanatory notes in a highlighted box.
Appendix IV in our publication Illustrative financial statements (October 2012) provides a list of standards or amendments
that are effective for the first time for annual periods beginning on 1 January 2012, and forthcoming requirements. In
addition, example disclosures for the adoption of certain new standards and amendments are included in the appendices
to these illustrative financial statements.
When preparing financial statements in accordance with IFRS, an entity should have regard to applicable legal and
regulatory requirements. This publication does not consider any requirements of a particular jurisdiction. For example,
IFRS does not require the presentation of separate financial statements for the parent entity, and this publication
includes only consolidated financial statements. However, in some jurisdictions parent entity financial information may
also be required.
This publication does not illustrate the requirements of IFRS 4 Insurance Contracts, IFRS 6 Exploration for and Evaluation
of Mineral Resources, IAS 26 Accounting and Reporting by Retirement Benefit Plans or IAS 34 Interim Financial
Reporting, nor the disclosure requirements of several standards that are not specific to banking operations. IAS 34
requirements are illustrated in our publication Illustrative condensed interim financial report.
This publication illustrates only the financial statements component of a financial report, and the independent auditors’ report
on the financial statements. However, a financial report will typically include at least some additional commentary from
management, either in accordance with local laws and regulations or at the election of the entity (see ‘Technical guide’).
In 2008, the IASB established an ‘Expert Advisory Panel’ (the Panel) to help the IASB review best practices in the area
of valuation techniques, and formulate any necessary additional guidance on valuation methods for financial instruments
and related disclosures when markets are no longer active. This publication includes certain illustrative disclosures and
explanatory notes from Part 2 of the Panel’s final report Measuring and disclosing the fair value of financial instruments
in markets that are no longer active, published in October 2008; to the extent that these disclosures are not specifically
required by IFRS 7, these additional illustrative disclosures are italicised and, depending on a reporting entity’s facts
and circumstances, may not be necessary to meet the requirements of IFRS as issued by the IASB. Some of these
disclosures have been incorporated into IFRS 13 and are illustrated in Appendix III.
On 29 October 2012, the EDTF issued a report, Enhancing the Risk Disclosures of Banks. The purpose of this report is
to help banks improve their communication with their stakeholders in the area of risk disclosures, with the ultimate aim
of improving investor confidence. The scope of the recommendations is wider than the financial statements because
they apply to all financial reports, including public disclosures required by regulators and other communications with
stakeholders. The report is the product of a collaboration between users and preparers of financial reports. It contains
32 recommendations, which are based on seven fundamental principles. The report does not specify in which financial
report the recommendations to enhance the risk disclosures might be incorporated. In some cases, recommendations
in the report may impact the manner of presentation of information that is already required to be disclosed under IFRS.
In other cases, it recommends disclosure of new information. In preparing these illustrative financial statements, we had
regard to the recommendations made in the EDTF report.
IFRS and its interpretation change over time. Accordingly, these illustrative financial statements should not be used as a
substitute for referring to the standards and interpretations themselves.
References
The illustrative financial statements are contained on the odd-numbered pages of this publication. The even-numbered
pages contain explanatory comments and notes on disclosure requirements of IFRS. The illustrative examples, together
with the explanatory notes, are not intended to be seen as a complete and exhaustive summary of all disclosure
requirements that are applicable under IFRS. In addition, an entity need not provide a specific disclosure required by an
IFRS if the information is not material. For an overview of all disclosure requirements that are applicable under IFRS, see
our publication Disclosure checklist.
To the left of each item disclosed, a reference to the relevant standard is provided. The illustrative financial statements
also include references to the 9th Edition 2012/13 of our publication Insights into IFRS.
4 | Independent auditors’ report
Explanatory note
1. The illustrative auditors’ report on the consolidated financial statements has been prepared
based on International Standard on Auditing 700 Forming an Opinion and Reporting on Financial
Statements. The format of the report does not reflect any additional requirements of the legal
frameworks of particular jurisdictions.
Independent auditors’ report | 5
Independent auditors’ report on consolidated financial statements1
[Addressee]
We have audited the accompanying consolidated financial statements of [name of company] (the
‘Company’), which comprise the consolidated statement of financial position as at 31 December
2012, the consolidated statements of comprehensive income, changes in equity and cash flows
for the year then ended, and notes, comprising a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with International Financial Reporting Standards, and for
such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on
our audit. We conducted our audit in accordance with International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on our
judgement, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, we
consider internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated
financial position of the Company as at 31 December 2012, and of its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards.
KPMG
[Date of report]
[Address]
6
This page has been left blank intentionally.
7
[Name of Bank]
Consolidated financial statements
31 December 2012
8 | Illustrative financial statements: Banks
Explanatory notes
1. IAS 1.10 IAS 1 Presentation of Financial Statements uses the title ‘Statement of financial position’. This
title is not mandatory. An entity may use other titles – e.g. ‘Balance sheet’ – as long as the
meaning is clear and they are not misleading.
2. IAS 1.45 The presentation and classification of items in the financial statements is retained from one
period to the next unless:
●● changes are required by a new standard or interpretation; or
●● it is apparent, following a significant change to an entity’s operations or a review of its financial
statements, that another presentation or classification would be more appropriate. In this case,
the entity also considers the criteria for selection and application of accounting policies in IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors.
3. IAS 1.10, 39 An additional statement of financial position and related notes are presented as at the beginning
of the earliest comparative period following a change in accounting policy, the correction of
an error, or the reclassification of items in the financial statements. The current IAS 1 provides
no further guidance in terms of how this requirement should be interpreted. In our view, the
requirement to present a ‘third’ statement of financial position should be interpreted having
regard to materiality based on the particular facts and circumstances. In our view, ‘related notes’
should be interpreted as requiring disclosure of those notes that are relevant to the reason for
which the third statement of financial position is presented – i.e. not all notes are required in
every circumstance. This issue is discussed in the 9th Edition 2012/13 of our publication Insights
into IFRS (2.1.35).
Forthcoming requirements
In Annual Improvements to IFRS – 2009-2011 Cycle, which is effective for annual periods
beginning on or after 1 January 2013, the IASB amends IAS 1 to clarify, among other things,
the requirements regarding the presentation of the third statement of financial position.
●● The third statement of financial position is required only if a retrospective change in
accounting policy, a retrospective correction of an error or a reclassification has a material
effect on the information in the statement of financial position.
●● Except for the disclosures required under IAS 8, notes related to the third statement of
financial position are no longer required.
●● The third statement of financial position to be presented is that at the beginning of the
preceding period, rather than at the beginning of the earliest comparative period presented.
This is also the case even if an entity provides additional comparative information beyond
the minimum comparative information requirements.
4. IAS 1.60–61, 63 A bank or similar financial institution usually presents a statement of financial position showing
assets and liabilities in their broad order of liquidity because such presentation provides reliable
and more relevant information than separate current and non-current classifications. For each
asset and liability line item that combines amounts expected to be recovered or settled within:
●● no more than 12 months after the reporting date; and
●● more than 12 months after the end of the reporting period,
an entity discloses in the notes the amount expected to be recovered or settled after more than
12 months.
5. IFRS 7.8 The carrying amounts of each of the categories of financial assets and financial liabilities in
paragraph 8 of IFRS 7 are required to be disclosed in either the statement of financial position or
the notes. In these illustrative financial statements this information is presented in the notes.
Illustrative financial statements: Banks | 9
Consolidated statement of financial position1, 2, 3, 4, 1 on page 10

IAS 1.10(a), 10(f), As at 31 December
38, 113
In millions of euro Note 2012 2011
Assets
IAS 1.54(i) Cash and cash equivalents 17 2,907 2,992
IAS 1.54(d), 39.37(a) Pledged trading assets5 18 540 519
IAS 1.54(d) Non-pledged trading assets5 18 16,122 15,249
IAS 1.54(d) Derivative assets held for risk management5 19 858 726
IAS 1.54(d) Loans and advances to banks5 20 5,572 4,707
IAS 1.54(d) Loans and advances to customers5 21 63,070 56,805
IAS 1.54(d) Investment securities5 22 6,302 5,269
IAS 1.54(n) Current tax assets3 on page 10 49 53
IAS 1.54(a) Property and equipment 23 409 378
IAS 1.54(c) Intangible assets 24 275 259
IAS 1.54(o) Deferred tax assets2 on page 10 25 316 296
Other assets 26 689 563
Total assets 97,109 87,816
The notes on pages 27 to 243 are an integral part of these consolidated financial statements.
Explanatory notes
1. IAS 1.55, 58 Additional line items, headings and subtotals are presented in the statement of financial position
when relevant to an understanding of an entity’s financial position. The judgement is based on an
assessment of:
●● the nature and liquidity of the assets;
●● the function of assets within the entity; and
●● the amounts, nature and timing of liabilities.
IAS 1.57 IAS 1 does not prescribe the order or format in which an entity presents items. Additional line
items are included when the size, nature or function of an item or aggregation of similar items is
such that separate presentation is relevant to an understanding of the entity’s financial position
and the descriptions used. The ordering of items or aggregation of similar items may be amended
according to the nature of the entity and its transactions to provide information that is relevant to
an understanding of an entity’s financial position.
2. IAS 12.74 Deferred tax assets and liabilities are offset if the entity has a legally enforceable right to offset
current tax liabilities and assets (see explanatory note 3 below), and the deferred tax liabilities
and assets relate to income taxes levied by the same tax authority on either:
●● the same taxable entity; or
●● different taxable entities, but these entities intend to settle current tax liabilities and assets
on a net basis, or their tax assets and liabilities will be realised simultaneously for each future
period in which these differences reverse.
3. IAS 12.71 An entity offsets current tax assets and current tax liabilities only if it has a legally enforceable
right to offset the recognised amounts and intends to realise the asset and settle the liability on a
net basis or simultaneously.
Consolidated statement of financial position (continued)

IAS 1.10(a), 10(f), As at 31 December
38, 113
Liabilities
IAS 1.54(m) Trading liabilities5 on page 8 18 7,026 6,052
IAS 1.54(m) Derivative liabilities held for risk management5 on page 8 19 828 789
IAS 1.54(m) Deposits from banks5 on page 8 27 11,678 10,230
IAS 1.54(m) Deposits from customers5 on page 8 28 53,646 48,904
IAS 1.54(m) Debt securities issued5 on page 8 29 11,227 10,248
IAS 1.54(m) Subordinated liabilities5 on page 8 30 5,642 4,985
IAS 1.54(l) Provisions 31 90 84
IAS 1.54(o) Deferred tax liabilities2 25 132 123
Other liabilities 32 450 431
Total liabilities 90,719 81,846
Equity
IAS 1.54(r) Share capital and share premium 2,725 2,695
IAS 1.54(r) Retained earnings 3,350 2,949
IAS 1.54(r) Reserves 160 198
IAS 1.54(r) Total equity attributable to equity holders of the Bank 6,235 5,842
IAS 1.54(q), 27.27 Non-controlling interest 155 128
Total equity 33 6,390 5,970
Total liabilities and equity 97,109 87,816
Explanatory notes
1. IAS 1.7, 81 Total comprehensive income is the change in equity during a period other than those changes
resulting from transactions with owners in their capacity as owners. Entities have a choice of
presenting all items of income and expense recognised in a period either in:
●● one statement – i.e. a statement of comprehensive income; or
●● two statements – i.e. a separate income statement and a statement beginning with profit or
loss and displaying components of other comprehensive income.
IAS 1.81(a) In these illustrative financial statements, the one-statement approach is illustrated. Appendix I
provides an illustration of the two-statement approach.
2. IAS 1.85 An entity presents additional line items, headings and subtotals when these are relevant to an
understanding of its financial performance.
This publication does not illustrate investments in equity accounted investees and discontinued
operations. These disclosures are illustrated in our publication Illustrative financial statements
issued in October 2012.
IAS 1.87, 97 An entity does not present any items of income or expense as extraordinary items. The nature
and amounts of material items are disclosed as a separate line item in the statement of
comprehensive income or in the notes. This issue is discussed in the 9th Edition 2012/13 of our
publication Insights into IFRS (4.1.82–86).
3. IAS 1.99, 104 An entity presents an analysis of expenses based on function or nature – whichever provides
information that is reliable and more relevant. This analysis may be presented in the statement
of comprehensive income or in the notes. Individual material items are classified in accordance
with their nature or function, consistent with the classification of items that are not material
individually. This issue is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS
(4.1.82.10–20). In these illustrative financial statements, the analysis is based on the nature of the
expenses.
4. IAS 1.82(a) IFRS does not specify whether revenue should be presented only as a single line item in the
statement of comprehensive income, or whether an entity may also present the individual
components of revenue, with a subtotal for revenue from continuing operations. In these
illustrative financial statements, the most relevant measure of revenue is considered to be the
sum of net interest income, net fee and commission income, net trading income, net income
from other financial instruments at fair value and other revenue. However, other presentations
are possible.
5. IAS 1.82(g)–(h) An entity presents each component of other comprehensive income by nature. The only
exception to this principle relates to equity-accounted investees. An entity’s share of the other
comprehensive income of an equity-accounted investee is presented as a separate line item
separately from the other components of other comprehensive income. For forthcoming
requirements see explanatory note 5 on page 14.
6. IAS 1.91 Individual components of other comprehensive income may be presented either net of related
tax effects or before related tax effects with an aggregate amount presented for tax. In these
illustrative financial statements each component of other comprehensive income has been
presented net of related tax effects.
7. IAS 1.92, 94 An entity may present reclassification adjustments directly in the statement of comprehensive
income or in the notes. In these illustrative financial statements, we have illustrated the former
approach.
Consolidated statement of comprehensive income1, 2

IAS 1.10(b), 81(a) For the year ended 31 December
4
IFRS 7.20(b) Interest income 8 3,341 3,528
IFRS 7.20(b), Interest expense3 8 (1,406) (1,686)
IAS 1.82(b)
Net interest income4
1,935 1,842
IFRS 7.20(c) Fee and commission income4 9 854 759

IFRS 7.20(c) Fee and commission expense3 9 (179) (135)
Net fee and commission income4 675 624
IFRS 7.20(a) Net trading income4 10 1,434 1,087

IFRS 7.20(a) Net income from other financial instruments at fair value
through profit or loss4 11 21 81
IFRS 7.20(a) Other revenue4 12 123 186
IAS 1.85 Revenue4

4,188 3,820
Other income 18 10
IFRS 7.20(e) Net impairment loss on financial assets3 20, 21, 22 (330) (234)
IAS 1.99 Personnel expenses3 13 (2,264) (1,974)
IAS 17.35(c) Operating lease expenses3 (344) (326)
IAS 1.99, 38.118(d) Depreciation and amortisation3 23, 24 (47) (39)
IAS 1.99 Other expenses3 14 (397) (585)
IAS 1.85 Profit before income tax

824 672
IAS 1.82(d), 12.77 Income tax expense 15 (187) (118)
IAS 1.82(f) Profit for the period
637 554
Other comprehensive income, net of income tax6

IAS 1.82(g), 21.52(b) Foreign currency translation differences for foreign operations5 (40) 23
IAS 1.82(g), 21.52(b) Net gain (loss) on hedges of net investments in foreign operations5 30 (15)
Cash flow hedges5:
IFRS 7.23(c), Effective portion of changes in fair value (17) (14)
IAS 1.82(g)
Net amount transferred to profit or loss7
IFRS 7.23(d), IAS 1.92 10 8
Fair value reserve (available-for-sale financial assets)5:
IFRS 7.20(a)(ii), Net change in fair value (238) (106)
IAS 1.82(g)
Net amount transferred to profit or loss7
IFRS 7.20(a)(ii), 217 83
IAS 1.92
Other comprehensive income for the period, net of income tax (38) (21)
IAS 1.82(i) Total comprehensive income for the period 599 533
Explanatory notes
1. IAS 33.2–3, 4A Basic and diluted earnings per share are required to be presented by entities:
●● whose ordinary shares or potential ordinary shares are traded in a public market; or
●● that file, or are in the process of filing, their financial statements with a securities commission
or other regulatory organisation to issue any class of ordinary shares in a public market.
When an entity voluntarily presents earnings per share information, that information is calculated
and presented in accordance with IAS 33 Earnings per Share.
2. IAS 33.73 Entities may also present earnings per share based on alternative measures of earnings. However,
these amounts are presented only in the notes and not in the statement of comprehensive income.
This issue is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS (5.3.370.55).
3. IAS 33.67A If an entity presents the components of profit or loss in a separate income statement (the ‘two-
statement approach’, see explanatory note 1 on page 12), then it presents the basic and diluted
earnings per share in that separate statement.
For an illustration of the two-statement approach, see Appendix I.
4. IAS 33.67, 69 Basic and diluted earnings per share are presented even if the amounts are negative (a loss per
share). Diluted earnings per share is also presented even if it equals basic earnings per share
and this may be accomplished by the presentation of basic and diluted earnings per share in one
line item. This issue is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS
(5.3.370.50).
5. Forthcoming requirements
Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) is effective for

annual periods beginning on or after 1 July 2012. The amendments:
●● require an entity to present the items of other comprehensive income that may be
reclassified to profit or loss in the future if certain conditions are met, separately from those
that would never be reclassified to profit or loss. Consequently, an entity that presents items
of other comprehensive income before related tax effects would also have to allocate the
aggregated tax amount between these sections; and
●● change the title of the statement of comprehensive income to the ‘statement of profit or
loss and other comprehensive income’. However, an entity is still allowed to use other titles.
For an illustration of the new requirements, see Appendix IV in our publication Illustrative
financial statements issued in October 2012.
Consolidated statement of comprehensive income (continued)

For the year ended 31 December
Profit attributable to:

IAS 1.83(a)(ii) Equity holders of the Bank 610 528
IAS 1.83(a)(i) Non-controlling interest 27 26
Profit for the period 637 554
Total comprehensive income attributable to:

IAS 1.83(b)(ii) Equity holders of the Bank 572 507
IAS 1.83(b)(i) Non-controlling interest 27 26
Total comprehensive income for the period 599 533
IAS 33.4 Earnings per share1, 2, 3

IAS 33.66 Basic earnings per share (euro)4 16 0.34 0.29
4
IAS 33.66 Diluted earnings per share (euro) 16 0.33 0.29
Explanatory notes
1. IAS 1.106A Entities may present the disaggregation of changes in each component of equity arising from
transactions recognised in other comprehensive income in either the statement of changes in
equity or in the notes. In these illustrative financial statements, we have illustrated the former
approach.
2. IAS 1.106(b) When a change in accounting policy, either voluntarily or as a result of the initial application of a
standard, has an effect on the current period or any prior period, an entity presents the effects
of retrospective application recognised in accordance with IAS 8 in the statement of changes in
equity. The illustrative examples to IAS 1 demonstrate this in relation to a change in accounting
policy, as does the 9th Edition 2012/13 of our publication Insights into IFRS (2.8.40.90) in relation
to an error.
3. IFRS 2 Share-based Payment does not address specifically how share-based payment
transactions are presented within equity – e.g. whether an increase in equity in connection
with a share-based payment transaction is presented in a separate component within equity or
within retained earnings. In our view, either approach is acceptable. In these illustrative financial
statements, the increase in equity recognised in connection with a share-based payment
transaction is presented within retained earnings. This issue is discussed the 9th Edition 2012/13
of our publication Insights into IFRS (4.5.1230.10–30).
Consolidated statement of changes in equity1, 2
IAS 1.10(c), 38, 108, For the year ended 31 December 2011
110(c), 113 Attributable to equity holders of the Bank
Non-
Share Share Translation Hedging Fair value Retained controlling Total
In millions of euro capital premium reserve reserve reserve earnings Total interest equity
Balance at 1 Januar y 2011 2,256 439 64 (79) 234 2,680 5,594 102 5,696
Total comprehensive income for the year

IAS 1.106(d)(i) Profit for the year - - - - - 528 528 26 554
IAS 1.106(d)(ii), 106A Other comprehensive income, net of tax

IAS 1.82(g), 21.52(b) Foreign currency translation differences for foreign operations - - 23 - - - 23 - 23
IAS 1.82(g) Net loss on hedge of net investment in foreign operations - - (15) - - - (15) - (15)
IAS 1.82(g) Cash flow hedges:
IFRS 7.23(c) Effective portion of changes in fair value - - - (14) - (14) (14)
IFRS 7.23(d) Net amount reclassified to profit or loss - - - 8 - - 8 - 8
IFRS 7.20(a)(ii), Fair value reser ve (available-for-sale financial assets):
IAS 1.82(g) Net change in fair value - - - - (106) - (106) - (106)
Net amount reclassified to profit or loss - - - - 83 - 83 - 83
Total other comprehensive income - - 8 (6) (23) - (21) - (21)
IAS 1.106(a) Total comprehensive income for the year - - 8 (6) (23) 528 507 26 533
IAS 1.106(d)(iii) Transactions with owners, recorded directly in equity

Contributions by and distributions to owners of the Group
3
Share-based payment transactions - - - - - 25 25 - 25
Dividends to equity holders - - - - - (284) (284) - (284)
Total contributions by and distributions to owners - - - - - (259) (259) - (259)
Balance at 31 December 2011 2,256 439 72 (85) 211 2,949 5,842 128 5,970
Consolidated statement of changes in equity (continued)
IAS 1.10(c), 38, 108, For the year ended 31 December 2012
110(c), 113 Attributable to equity holders of the Bank
Non-
Share Share Translation Hedging Fair value Retained controlling Total
In millions of euro capital premium reserve reserve reserve earnings Total interest equity
Balance at 1 Januar y 2012 2,256 439 72 (85) 211 2,949 5,842 128 5,970
Total comprehensive income for the year

IAS 1.106(d)(i) Profit for the year - - - - - 610 610 27 637
IAS 1.106(d)(ii), 106A Other comprehensive income, net of tax

IAS 1.82(g), 21.52(b) Foreign currency translation differences for foreign operations - - (40) - - - (40) - (40)
IAS 1.82(g) Net gain on hedge of net investment in foreign operations - - 30 - - - 30 - 30
IAS 1.82(g) Cash flow hedges:
IFRS 7.23(c) Effective portion of changes in fair value - - - (17) - - (17) - (17)
IFRS 7.23(d) Net amount reclassified to profit or loss - - - 10 - - 10 - 10
IFRS 7.20(a)(ii), Fair value reser ve (available-for-sale financial assets):
IAS 1.82(g) Net change in fair value - - - - (238) - (238) - (238)
Net amount reclassified to profit or loss - - - - 217 - 217 - 217
Total other comprehensive income - - (10) (7) (21) - (38) - (38)
IAS 1.106(a) Total comprehensive income for the year - - (10) (7) (21) 610 572 27 599
Transactions with owners, recorded directly in equity

Contributions by and distributions to owners of the Group
IAS 1.106(d)(iii) Share-based payment transactions - - - - - 75 75 - 75
Share options exercised 3 27 - - - - 30 - 30
Dividends to equity holders - - - - - (284) (284) - (284)
Total contributions by and distributions to owners 3 27 - - - (209) (179) - (179)
Balance at 31 December 2012 2,259 466 62 (92) 190 3,350 6,235 155 6,390
Explanatory notes
1. IAS 7.18–19 In these illustrative financial statements we have illustrated the presentation of cash flows from
operating activities using the indirect method, whereby profit for the year is adjusted for the effects
of non-cash transactions, accruals and deferrals, and items of income or expense associated with
investing or financing cash flows. An entity may also, and is encouraged to, present operating
cash flows using the direct method, disclosing major classes of gross cash receipts and payments
related to operating activities. For an illustration presenting the operating cash flows using the direct
method, see Appendix III of our publication Illustrative financial statements issued in October 2012.
IAS 7.50 An entity is encouraged, but not required, to disclose:
●● the amount of undrawn borrowing facilities that may be available for future operating activities
and to settle capital commitments, indicating any restrictions on the use of these facilities;
●● the aggregate amounts of the cash flows from each of operating, investing and financing
activities related to interests in joint ventures reported using proportionate consolidation;
●● the aggregate amount of cash flows that represent increases in operating capacity separately
from those cash flows that are required to maintain operating capacity; and
●● the amount of the cash flows arising from the operating, investing and financing activities of
each reportable segment, if the entity presents segment information.
2. IAS 7.22, 24 Cash flows from operating, investing or financing activities may be reported on a net basis if the
cash receipts and payments are on behalf of customers and the cash flows reflect the activities
of the customer, or when the cash receipts and payments for items concerned turn over quickly,
the amounts are large and the maturities are short. Additionally, certain cash flows for a financial
institution, such as acceptance and repayment of fixed maturity date deposits, placement
of deposits with and withdrawal of deposits from other financial institutions and cash flows
associated with loans to and repayments by customers, may be reported on a net basis.
3. IAS 7.33 Interest paid and interest and dividends received are usually classified as operating cash flows for
a financial institution.
4. IAS 7.16(c)–(d) In these illustrative financial statements gross receipts from the sale of, and gross payments to
acquire, investment securities have been classified as components of cash flows from investing
activities as they do not form part of the Group’s dealing or trading operations.
IAS 7.16(g)–(h) Receipts from and payments for futures, forwards, options and swap contracts are presented as
part of either investing or financing activities, provided that they are not held for dealing or trading
purposes, in which case they are presented as part of operating activities. However, when a
contract is accounted for as a hedge of an identifiable position, the cash flows of the contract are
classified in the same manner as the cash flows of the positions being hedged.
If hedge accounting is not applied to a derivative instrument that is entered into as an
economic hedge, then in our view derivative gains and losses may be shown in the statement
of comprehensive income as either operating or financing items depending on the nature of
the item being economically hedged. In our view, the possibilities for the presentation in the
statement of comprehensive income also apply to the presentation in the statement of cash
flows. These issues are discussed in our publication Insights into IFRS (7.8.220.80 and 7.8.225.70).
5. IAS 7.21 Major classes of gross cash receipts and gross cash payments arising from investing and
financing activities are disclosed separately, except to the extent that the cash flows are reported
on a net basis (see explanatory note 2 above).
6. In our view, to the extent that borrowing costs are capitalised in respect of qualifying assets,
the cost of acquiring those assets, which would include borrowing costs, should be split in the
statement of cash flows. This issue is discussed in the 9th Edition 2012/13 of our publication
Insights into IFRS (2.3.50.40).
Consolidated statement of cash flows1, 2

IAS 1.10(d), 38,113 For the year ended 31 December
IAS 7.18(b) Cash flows from operating activities4

Adjustments for:
– Depreciation and amortisation 23, 24 47 39
– Net impairment loss on investment securities 22 125 14
– Net impairment loss on loans and advances 20, 21 205 220
– Net interest income 8 (1,935) (1,842)
– Net gain on investment securities at fair value through
profit or loss 11 (158) (46)
– Net loss on debt securities issued at fair value through
profit or loss 11 194 137
– Net loss on sale of available-for-sale securities 12 92 69
– Dividends on available-for-sale securities 12 (13) (8)
– Equity-settled share-based payment transactions 13 75 25
– Tax expense 15 187 118
(544) (720)
Changes in:
– Trading assets 18 (894) (993)
– Derivative assets held for risk management 19 (132) (104)
– Loans and advances to banks 20 (872) (389)
– Loans and advances to customers 21 (6,463) (6,472)
– Other assets (116) (183)
– Trading liabilities 18 974 885
– Derivative liabilities held for risk management 19 39 35
– Deposits from banks 27 1,448 1,071
– Deposits from customers 28 4,742 4,245
– Other liabilities and provisions 34 194
(1,784) (2,431)
IAS 7.31, 33 Interest received3 3,341 3,528
IAS 7.31, 33 Dividends received3 13 8
IAS 7.31, 33 Interest paid3, 6 (1,415) (1,695)
IAS 7.35 Income taxes paid1 on page 22 (185) (223)
IAS 7.10 Net cash used in operating activities (30) (813)
IAS 7.21 Cash flows from investing activities4, 5

IAS 7.16(c) Acquisition of investment securities (1,690) (599)
IAS 7.16(d) Proceeds from sale of investment securities 577 444
IAS 7.16(a) Acquisition of property and equipment 23 (88) (63)
IAS 7.16(b) Proceeds from the sale of property and equipment 23 36 18
IAS 7.16(a) Acquisition of intangible assets 24 (42) (34)
2 on page 22
IAS 7.10 Net cash used in investing activities (1,207) (234)
Explanatory notes
1. IAS 7.35 Taxes paid are classified as operating activities unless it is practicable to identify them with,
and therefore classify them as, financing or investing activities. This issue is discussed in the
9th Edition 2012/13 of our publication Insights into IFRS (2.3.50.20–35).
2. IAS 7.43 An entity discloses outside the cash flow statement non-cash investing and financing
transactions in a way that provides all the relevant information about these investing and
financing activities.
3. IAS 7.34 Cash flows related to dividends paid may be classified as financing or operating.
4. IAS 7.45 When applicable, an entity presents a reconciliation of cash and cash equivalents reported in its
statement of cash flows with those presented in the statement of financial position. In these
illustrative financial statements the amounts presented in the statement of financial position
match the amounts presented in the statement of cash flows and therefore no reconciliation is
presented.
Consolidated statement of cash flows (continued)

IAS 1.10(d) For the year ended 31 December
IAS 7.21 Cash flows from financing activities4, 5 on page 20

IAS 7.17(c) Proceeds from issue of debt securities 1,018 762
IAS 7.17(d) Repayment of debt securities (233) (99)
IAS 7.17(c) Proceeds from issue of subordinated liabilities 657 651
IAS 7.17(a) Proceeds from exercise of share options 33 30 -
IAS 7.31, 34 Dividends paid3 33 (284) (284)
IAS 7.10 Net cash from financing activities2 1,188 1,030
Net increase (decrease) in cash and cash equivalents (49) (17)

Cash and cash equivalents at 1 January 17 2,992 3,040
IAS 7.28 Effect of exchange rate fluctuations on cash and cash
equivalents held (36) (31)
Cash and cash equivalents at 31 December4 17 2,907 2,992
Explanatory note
1. IAS 1.7 The notes include narrative descriptions or analyses of amounts disclosed in the primary
statements. They also include information about items that do not qualify for recognition in the
financial statements.
Notes to the consolidated financial statements1
Page Page
1. Reporting entity 27 17. Cash and cash equivalents 191
2. Basis of preparation 27 18. Trading assets and liabilities 191
3. Significant accounting policies 31 19. Derivatives held for risk
management 199
4. Financial risk management 79
20. Loans and advances to banks 201
(a) Introduction and overview 79
21. Loans and advances to customers 203
(b) Credit risk 81
22. Investment securities 207
(c) Liquidity risk 115
23. Property and equipment 211
(d) Market risks 127
24. Intangible assets and goodwill 213
(e) Operational risks 139
25. Deferred tax assets and liabilities 217
(f) Capital management 141
26. Other assets 219
5. Use of estimates and judgements 149
27. Deposits from banks 221
6. Operating segments 167
28. Deposits from customers 221
7. Financial assets and liabilities 173
29. Debt securities issued 223
8. Net interest income 177
30. Subordinated liabilities 223
9. Net fee and commission income 179
31. Provisions 225
10. Net trading income 179
32. Other liabilities 225
11. Net income from other financial
instruments at fair value through 33. Capital and reserves 231
profit or loss 181
34. Contingencies 233
12. Other revenue 181
35. Transfers of financial assets 233
13. Personnel expenses 183
36. Group entities 241
14. Other expenses 187
37. Related parties 241
15. Income tax expense 187
38. Lease commitments 243
16. Earnings per share 189
39. Subsequent event 243
Explanatory notes
1. IAS 1.36 When an entity changes its reporting period and annual financial statements are presented for a
period that is longer or shorter than one year, it discloses the reason for the change and the fact
that comparative amounts presented are not entirely comparable.
2. IAS 1.25, Taking account of specific requirements in its jurisdiction, an entity discloses any material
10.16(b) uncertainties related to events or conditions that may cast significant doubt on the entity’s
ability to continue as a going concern, whether they arise during the period or after the end of
the reporting period. See Appendix X in our publication Illustrative financial statements issued in
October 2012 for example disclosures for entities that have going concern issues.
3. IAS 1.19–20, 23 In the extremely rare circumstances in which management concludes that compliance with a
requirement of an IFRS or an interpretation would be so misleading that it would conflict with the
objective of financial statements set out in the Conceptual Framework for Financial Reporting,
an entity may depart from the requirement if the relevant regulatory framework requires or
otherwise does not prohibit such a departure. Extensive disclosures are required in these
circumstances.
4. If financial statements are prepared on the basis of national accounting standards that are modified
or adapted from IFRS, and are made publicly available by publicly traded companies, then the
International Organization of Securities Commissions (IOSCO) has recommended the following
disclosures:
●● a clear and unambiguous statement of the reporting framework on which the accounting
policies are based;
●● a clear statement of the entity’s accounting policies on all material accounting areas;
●● an explanation of where the respective accounting standards can be found;
●● a statement explaining that the financial statements comply with IFRS as issued by the IASB, if
this is the case; and
●● a statement explaining in what regard the standards and the reporting framework used differ
from IFRS as issued by the IASB, if this is the case.
This issue is discussed in Statement on Providing Investors with Appropriate and Complete
Information on Accounting Frameworks Used to Prepare Financial Statements, published by the
IOSCO in February 2008.
5. IAS 10.17 An entity discloses the date on which the financial statements were authorised for issue and who
gave that authorisation. If an entity’s owners or others have the power to amend the financial
statements after their issue, then the entity discloses that fact.
6. IAS 21.53 If the consolidated financial statements are presented in a currency that is not the parent entity’s
functional currency, then an entity discloses:
●● that fact;
●● its functional currency; and
●● the reason for using a different presentation currency.
IAS 29.39 If the functional currency of an entity is hyperinflationary, then the entity discloses:
●● the fact that the financial statements have been restated for changes in the general purchasing
power of the functional currency and as a result are stated in terms of the measuring unit
current at the end of the reporting period;
●● whether the consolidated financial statements are based on a historical cost approach or a
current cost approach; and
●● the identity and level of the price index at the end of the reporting period, and the movement in
the index during the current and the previous reporting period.
IAS 21.54 If there is a change in the functional currency of either the entity or a significant foreign operation,
then the entity discloses that fact together with the reason for the change.
IAS 1.10(e) Notes to the consolidated financial statements

IAS 1.51(a)–(c) 1. Reporting entity
IAS 1.138(a)–(b) [Name] (the ‘Bank’) is a company domiciled in [country]. The address of the Bank’s registered
office is [address]. The consolidated financial statements of the Bank as at and for the year ended
31 December 20121 comprise the Bank and its subsidiaries (together referred to as the ‘Group’
and individually as ‘Group entities’). The Group is primarily involved in investment, corporate and
retail banking, and in providing asset management services.
IAS 1.112(a) 2. Basis of preparation2

(a) Statement of compliance
IAS 1.16 The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). 3, 4
IAS 10.17 The consolidated financial statements were authorised for issue by the Board of Directors on
[date].5
IAS 1.117(a) (b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for
the following material items in the statement of financial position:
●● derivative financial instruments are measured at fair value
●● financial instruments at fair value through profit or loss are measured at fair value
●● available-for-sale financial assets are measured at fair value
●● investment property is measured at fair value
●● liabilities for cash-settled share-based payment arrangements are measured at fair value
●● recognised financial assets and financial liabilities designated as hedged items in qualifying fair
value hedge relationships are adjusted for changes in fair value attributable to the risk being
hedged
●● the liability for defined benefit obligations is recognised as the present value of the defined
benefit obligation less the net total of the plan assets, plus unrecognised actuarial gains, less
unrecognised past service cost and unrecognised actuarial losses as explained in Note 3(x)(ii).
(c) Functional and presentation currency6
IAS 1.51(d)–(e) These consolidated financial statements are presented in euro, which is the Bank’s functional
currency. All financial information presented in euro has been rounded to the nearest million,
except when otherwise indicated.
Explanatory notes
1. IAS 1.122–124 An entity discloses judgements (other than those involving estimates) that management
has made in the process of applying the entity’s accounting policies and that have the most
significant effect on the amounts recognised in the financial statements. The examples that are
provided in IAS 1 indicate that such disclosure is based on qualitative information.
IAS 1.125, 129 An entity discloses information about the assumptions about the future, and other major sources
of estimation uncertainty at the end of the reporting period, that have a significant risk of
resulting in a material adjustment to the carrying amounts of assets and liabilities within the next
reporting period. The examples that are provided in IAS 1 indicate that such disclosure is based
on quantitative data – e.g. appropriate discount rates.
2. When a change in accounting policy is the result of the adoption of a new, revised or amended
IFRS, an entity applies the specific transitional requirements in that IFRS. However, in our view
an entity nonetheless should comply with the disclosure requirements of IAS 8 to the extent that
the transitional requirements do not include disclosure requirements. This issue is discussed in
the 9th Edition 2012/13 of our publication Insights into IFRS (2.8.20).
3. IAS 1.10(f), When a change in accounting policy, either voluntarily or as a result of the adoption of a new,
8.28–29 revised or amended IFRS, has an effect on the current period or any prior period, an entity
discloses, among other things and to the extent practicable, the amount of the adjustment for
each financial statement line item affected.
IAS 8.49 If any prior period errors are corrected in the current year’s financial statements, then an entity
discloses:
●● the nature of the prior period error;
●● to the extent practicable, the amount of the correction for each financial statement line item
affected, and basic and diluted earnings per share for each prior period presented;
●● the amount of the correction at the beginning of the earliest prior period presented; and
●● if retrospective restatement is impracticable for a particular prior period, then the
circumstances that led to the existence of that condition and a description of how and from
when the error has been corrected.
If there has been a change in accounting policy, the correction of an error or the reclassification of
items in the financial statements, but a third statement of financial position is not presented on
the basis that the effect of the change is judged not to be material, then an entity should consider
whether this fact should be disclosed. This issue is discussed in the 9th Edition 2012/13 of our
publication Insights into IFRS (2.1.35.35).
4. The change in accounting policies disclosed in these illustrative financial statements reflect the
facts and circumstances of the fictitious banking group on which these financial statements
are based. It should not be relied on for a complete understanding of amendments to IFRS,
completeness of new standards applicable for the period and effects on the financial statements,
and should not be used as a substitute for referring to those standards and interpretations
themselves.
For a list of new standards that either are effective for the first time for annual periods beginning
on 1 January 2012 or are available for early adoption for the period, see Appendix IV in our
publication Illustrative financial statements issued in October 2012.
Notes to the consolidated financial statements

IAS 1.112(a) 2. Basis of preparation (continued)
(d) Use of estimates and judgements1
The preparation of the consolidated financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimates are revised and in any
future periods affected.
IAS 1.122, 125, Information about significant areas of estimation uncertainty and critical judgements in applying
129–130 accounting policies that have the most significant effect on the amounts recognised in the
consolidated financial statements are included in Notes 4 and 5.
(e) Change in accounting policy2, 3, 4
Deferred tax associated with investment property
IAS 8.28 In 2012, the Group adopted Deferred Tax: Recovery of Underlying Assets (amendments to
IAS 12) and changed its accounting policy for measuring deferred tax for investment property
accounted for under the fair value model (see Note 3(i)).
As a result of the change, the Group measures deferred tax arising from investment property
using the assumption that the carrying amount of the property will be recovered entirely
through sale. Previously, the Group measured deferred tax for investment property using a
‘blended rate’ approach that reflected the dual intention of sale and use.
IAS 8.28 The above change in accounting policy had an insignificant effect on the current period or any
prior period and is expected to have an insignificant effect on future periods.
(f) Other accounting developments
(i) Disclosures pertaining to transfers of financial assets
The Group has applied Disclosures – Transfers of Financial Assets (amendments to IFRS 7),
issued in October 2010. The amendment requires enhanced disclosures about transfers of
financial assets that enable users of financial statements:
●● to understand the relationship between transferred financial assets that are not derecognised
in their entirety and the associated liabilities; and
●● to evaluate the nature of, and risks associated with, the entity’s continuing involvement in
derecognised financial assets.
Revised disclosures in respect of transfers of financial assets are included in Note 35.
Explanatory notes
1. IAS 1.117(b) The accounting policies describe each specific accounting policy that is relevant to an
understanding of the financial statements.
IAS 8.5 Accounting policies are the specific principles, bases, conventions, rules and practices that an
entity applies in preparing and presenting financial statements.
2. The accounting policies in these illustrative financial statements reflect the facts and
circumstances of the fictitious banking group on which these financial statements are based.
They should not be relied upon for a complete understanding of IFRS and should not be used
as a substitute for referring to the standards and interpretations themselves. The accounting
policy disclosures appropriate for an entity depend on the facts and circumstances of that
entity, including the accounting policy choices that an entity makes, and may differ from the
disclosures illustrated in these illustrative financial statements. The recognition and measurement
requirements of IFRS are discussed in the 9th Edition 2012/13 of our publication Insights into
IFRS.
3. An entity may also consider a de facto control model for the basis of consolidating subsidiaries,
in which the ability in practice to control another entity exists and no other party has the power to
govern. In our view, whether an entity includes or excludes de facto control aspects in its analysis
of control is an accounting policy choice, to be applied consistently, that should be disclosed in its
accounting policies. This issue is discussed in the 9th Edition 2012/13 of our publication Insights
into IFRS (2.5.30).

IAS 1.112(a), 117 3. Significant accounting policies1, 2
The accounting policies set out below have been applied consistently to all periods presented in
these consolidated financial statements, and have been applied consistently by Group entities,
except for the change in accounting policy as explained in Note 2(e).
(a) Basis of consolidation
(i) Business combinations
IFRS 3.4 Business combinations are accounted for using the acquisition method as at the acquisition date
– i.e. when control is transferred to the Group. Control is the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In assessing control, the
Group takes into consideration potential voting rights that currently are exercisable.3
The Group measures goodwill at the acquisition date as:
●● the fair value of the consideration transferred; plus
●● the recognised amount of any non-controlling interests in the acquiree; plus
●● if the business combination is achieved in stages, the fair value of the pre-existing equity
interest in the acquiree; less
●● the net recognised amount (generally fair value) of the identifiable assets acquired and
liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing
relationships. Such amounts are generally recognised in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that
the Group incurs in connection with a business combination are expensed as incurred.
IFRS 3.58 Any contingent consideration payable is measured at fair value at the acquisition date. If the
contingent consideration is classified as equity, then it is not remeasured and settlement is
accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
If share-based payment awards (replacement awards) are required to be exchanged for awards held
by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion
of the amount of the acquirer’s replacement awards is included in measuring the consideration
transferred in the business combination. This determination is based on the market-based value of
the replacement awards compared with the market-based value of the acquiree’s awards and the
extent to which the replacement awards relate to past and/or future service.
(ii) Non-controlling interests
IFRS 3.19 For each business combination, the Group elects to measure any non-controlling interests in the
acquiree either:
●● at fair value; or
●● at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair
value.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are
accounted for as transactions with owners in their capacity as owners. Adjustments to non-
controlling interests are based on a proportionate amount of the net assets of the subsidiary. No
adjustments are made to goodwill and no gain or loss is recognised in profit or loss.
Explanatory note
1. IAS 27.41(c) If the financial statements of a subsidiary used to prepare the consolidated financial statements
are of a date or for a period that is different from that of the parent’s financial statements, then
the entity discloses:
●● the end of the reporting period of the subsidiary; and
●● the reason for using a different date or period.

3. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
(iii) Subsidiaries1
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences until the
date that control ceases.
(iv) Special purpose entities
Special purpose entities (SPEs) are entities that are created to accomplish a narrow and well-
defined objective such as the securitisation of particular assets, or the execution of a specific
borrowing or lending transaction. An SPE is consolidated if, based on an evaluation of the
substance of its relationship with the Group and the SPE’s risks and rewards, the Group
concludes that it controls the SPE. The following circumstances may indicate a relationship in
which, in substance, the Group controls and consequently consolidates an SPE:
●● The activities of the SPE are being conducted on behalf of the Group according to its specific
business needs so that the Group obtains benefits from the SPE’s operation.
●● The Group has the decision-making powers to obtain the majority of the benefits of the
activities of the SPE or, by setting up an ‘autopilot’ mechanism, the Group has delegated these
decision-making powers.
●● The Group has rights to obtain the majority of the benefits of the SPE and therefore may be
exposed to risks incident to the activities of the SPE.
●● The Group retains the majority of the residual or ownership risks related to the SPE or its
assets in order to obtain benefits from its activities.
The assessment of whether the Group has control over an SPE is carried out at inception and
normally no further reassessment of control is carried out in the absence of changes in the
structure or terms of the SPE, or additional transactions between the Group and the SPE. Day-
to-day changes in market conditions normally do not lead to a reassessment of control. However,
sometimes changes in market conditions may alter the substance of the relationship between
the Group and the SPE and in such instances the Group determines whether the change
warrants a reassessment of control based on the specific facts and circumstances. Where the
Group’s voluntary actions, such as lending amounts in excess of existing liquidity facilities or
extending terms beyond those established originally, change the relationship between the Group
and an SPE, the Group performs a reassessment of control over the SPE.
Information about the Group’s securitisation activities is included in Note 35.
(v) Loss of control
IAS 27.35 On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any
non-controlling interests and the other components of equity related to the subsidiary. Any
surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains
any interest in the previous subsidiary, then such interest is measured at fair value at the date
that control is lost. Subsequently that retained interest is accounted for as an equity-accounted
investee or in accordance with the Group’s accounting policy for financial instruments (see
Note 3(o)) depending on the level of influence retained.
(vi) Transactions eliminated on consolidation
IAS 27.21 Intra-group balances and transactions, and any unrealised income and expenses (except for
foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements. Unrealised losses are eliminated in the same
way as unrealised gains, but only to the extent that there is no evidence of impairment.

(a) Basis of consolidation (continued)
(vii) Funds management
The Group manages and administers assets held in unit trusts and other investment vehicles
on behalf of investors. The financial statements of these entities are not included in these
consolidated financial statements except when the Group controls the entity. Information about
the Group’s funds management is set out in Note 6.
(b) Foreign currency
(i) Foreign currency transactions
IAS 21.21, 23(a) Transactions in foreign currencies are translated into the respective functional currency of Group
entities at the spot exchange rates at the date of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are retranslated to the functional currency
at the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the
difference between amortised cost in the functional currency at the beginning of the year, adjusted
for effective interest and payments during the year, and the amortised cost in foreign currency
translated at the spot exchange rate at the end of the year.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are
translated to the functional currency at the spot exchange rate at the date that the fair value was
determined. Non-monetary items that are measured based on historical cost in a foreign currency
are translated using the spot exchange rate at the date of the transaction.
Foreign currency differences arising on retranslation are generally recognised in profit or loss.
However, foreign currency differences arising from the retranslation of the following items are
recognised in other comprehensive income:
●● available-for-sale equity instruments (except on impairment in which case foreign currency
differences that have been recognised in other comprehensive income are reclassified to profit
or loss);
●● a financial liability designated as a hedge of the net investment in a foreign operation to the
extent that the hedge is effective; or
●● qualifying cash flow hedges to the extent that the hedge is effective.
(ii) Foreign operations
IAS 21.39 The assets and liabilities of foreign operations, including goodwill and fair value adjustments
arising on acquisition, are translated to euro at spot exchange rates at the reporting date. The
income and expenses of foreign operations are translated to euro at spot exchange rates at the
dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and presented in the
foreign currency translation reserve (translation reserve) in equity. However, if the foreign operation
is a non-wholly owned subsidiary, then the relevant proportion of the translation difference is
allocated to non-controlling interests. When a foreign operation is disposed of such that control is
lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified
to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of
its interest in a subsidiary that includes a foreign operation while retaining control, the relevant
proportion of the cumulative amount is reattributed to non-controlling interests.
IAS 21.15 When the settlement of a monetary item receivable from or payable to a foreign operation is
neither planned nor likely in the foreseeable future, foreign currency gains and losses arising
from such item are considered to form part of a net investment in the foreign operation and are
recognised in other comprehensive income, and presented in the translation reserve in equity.
Explanatory note
1. IFRS allows significant scope for an entity to select its presentation of items of income and
expense relating to financial assets and liabilities as either interest or other line items. The
manner of presentation of components of interest income and expense in these illustrative
financial statements is not mandatory – other presentations are possible.

(b) Foreign currency (continued)
(iii) Hedge of a net investment in foreign operation
See Note 3(m)(iii).
IFRS 7.21, B5(e), (c) Interest
IAS 18.35(a)
Interest income and expense are recognised in profit or loss using the effective interest method.
The effective interest rate is the rate that exactly discounts the estimated future cash payments
and receipts through the expected life of the financial asset or liability (or, where appropriate,
a shorter period) to the carrying amount of the financial asset or liability. When calculating the
effective interest rate, the Group estimates future cash flows considering all contractual terms of
the financial instrument, but not future credit losses.
The calculation of the effective interest rate includes all transaction costs and fees and points
paid or received that are an integral part of the effective interest rate. Transaction costs include
incremental costs that are directly attributable to the acquisition or issue of a financial asset
or liability.
Interest income and expense presented in the statement of comprehensive income include:1
●● interest on financial assets and financial liabilities measured at amortised cost calculated on an
effective interest basis;
●● interest on available-for-sale investment securities calculated on an effective interest basis;
●● the effective portion of fair value changes in qualifying hedging derivatives designated in cash
flow hedges of variability in interest cash flows, in the same period that the hedged cash flows
affect interest income/expense; and
●● the effective portion of fair value changes in qualifying hedging derivatives designated in fair
value hedges of interest rate risk.
Interest income and expense on all trading assets and liabilities are considered to be incidental to
the Group’s trading operations and are presented together with all other changes in the fair value
of trading assets and liabilities in net trading income, see Note 3(e).
Fair value changes on other derivatives held for risk management purposes, and other financial
assets and liabilities carried at fair value through profit or loss, are presented in net income from
other financial instruments at fair value through profit or loss in the statement of comprehensive
income, see Note 3(f).
IFRS 7.21, (d) Fees and commission
IAS 18.35(a)
Fees and commission income and expense that are integral to the effective interest rate on a
financial asset or liability are included in the measurement of the effective interest rate.
Other fees and commission income, including account servicing fees, investment management
fees, sales commission, placement fees and syndication fees, are recognised as the related
services are performed. When a loan commitment is not expected to result in the draw-down
of a loan, the related loan commitment fees are recognised on a straight-line basis over the
commitment period.
Other fees and commission expense relate mainly to transaction and service fees, which are
expensed as the services are received.
Explanatory notes
1. In these illustrative financial statements net trading income:
●● includes the entire profit or loss impact (gains and losses) for trading assets and liabilities
(including derivatives that are held for trading); and
●● does not include the profit or loss impact of derivatives that are held for risk management
purposes.
2. In these illustrative financial statements net income from other financial instruments at fair value
through profit or loss includes:
●● the entire profit or loss impact of financial assets and financial liabilities designated as such
upon initial recognition; and
●● the realised and unrealised gains and losses on derivatives held for risk management purposes,
but not forming part of a qualifying hedging relationship.
However, other presentations are possible.
3. IFRS does not contain specific guidance on how to account for rent that was considered
contingent at inception of the lease but is confirmed subsequently. The treatment of contingent
rent is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS (5.1.390.30).

IFRS 7.21, B5(e) (e) Net trading income1
Net trading income comprises gains less losses related to trading assets and liabilities, and
includes all realised and unrealised fair value changes, interest, dividends and foreign exchange
differences.
IFRS 7.21, B5(e) (f) Net income from other financial instruments at fair value through profit or
loss2
Net income from other financial instruments at fair value through profit or loss relates to non-
trading derivatives held for risk management purposes that do not form part of qualifying hedge
relationships and financial assets and liabilities designated at fair value through profit or loss. It
includes all realised and unrealised fair value changes, interest, dividends and foreign exchange
differences.
IFRS 7.21 (g) Dividends
Dividend income is recognised when the right to receive income is established. Usually this is
the ex-dividend date for equity securities. Dividends are presented in net trading income, net
income from other financial instruments at fair value through profit or loss or other revenue based
on the underlying classification of the equity investment.
(h) Lease payments
IAS 17.33, SIC-15.3 Payments made under operating leases are recognised in profit or loss on a straight-line basis
over the term of the lease. Lease incentives received are recognised as an integral part of the
total lease expense, over the term of the lease.
IAS 17.25 Minimum lease payments made under finance leases are apportioned between the finance
expense and the reduction of the outstanding liability. The finance expense is allocated to
each period during the lease term so as to produce a constant periodic rate of interest on the
remaining balance of the liability.
Contingent lease payments3 are accounted for by revising the minimum lease payments over the
remaining term of the lease when the lease adjustment is confirmed.
IAS 12.58 (i) Tax expense
Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised
in profit or loss except to the extent that they relate to items recognised directly in equity or in
other comprehensive income.
(i) Current tax
IAS 12.46 Current tax is the expected tax payable or receivable on the taxable income or loss for the year,
using tax rates enacted or substantively enacted at the reporting date, and any adjustment to
tax payable in respect of previous years. Current tax payable also includes any tax liability arising
from the declaration of dividends.

IAS 12.58 (i) Tax expense (continued)
(ii) Deferred tax
IAS 12.22(c), 39 Deferred tax is recognised in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
●● temporary differences on the initial recognition of assets or liabilities in a transaction that is not
a business combination and that affects neither accounting nor taxable profit or loss;
●● temporary differences related to investments in subsidiaries to the extent that it is probable
that they will not reverse in the foreseeable future; and
●● taxable temporary differences arising on the initial recognition of goodwill.
IAS 12.51, 51C The measurement of deferred tax reflects the tax consequences that would follow the manner
in which the Group expects, at the end of the reporting period, to recover or settle the carrying
amount of its assets and liabilities. For investment property that is measured at fair value, the
presumption that the carrying amount of the investment property will be recovered through sale
has not been rebutted.
Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, using tax rates enacted or substantively enacted at the reporting
date.
IAS 12.71, 74 Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets
on a net basis or their tax assets and liabilities will be realised simultaneously.
Additional taxes that arise from the distribution of dividends by the Bank are recognised at the
same time as the liability to pay the related dividend is recognised.
IAS 12.56 A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against
which it can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will be realised.
(iii) Tax exposures
In determining the amount of current and deferred tax, the Group takes into account the
impact of uncertain tax positions and whether additional taxes and interest may be due. This
assessment relies on estimates and assumptions and may involve a series of judgements about
future events. New information may become available that causes the Company to change its
judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will
impact tax expense in the period that such a determination is made.
Explanatory note
1. The definition of ‘transfer’ in IAS 39 for the purpose of determining whether a financial asset
should be derecognised is different from the one in IFRS 7 for the purposes of the transfers of
financial assets disclosures. This issue is discussed in the 9th Edition 2012/13 of our publication
Insights into IFRS (7.8.412.60, 70).

IFRS 7.21 (j) Financial assets and financial liabilities
(i) Recognition
IFRS 7.B5(c), The Group initially recognises loans and advances, deposits, debt securities issued and
AG53–AG56 subordinated liabilities on the date that they are originated. Regular way purchases and sales of
financial assets are recognised on the trade date at which the Group commits to purchase or sell
the asset. All other financial assets and liabilities (including assets and liabilities designated at fair
value through profit or loss) are recognised initially on the trade date, which is the date that the
Group becomes a party to the contractual provisions of the instrument.
IAS 39.43 A financial asset or financial liability is measured initially at fair value plus, for an item not at fair
value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.
(ii) Classification
IAS 39.9 Financial assets
The Group classifies its financial assets in one of the following categories:
●● loans and receivables;
●● held to maturity;
●● available-for-sale; or
●● at fair value through profit or loss and within the category as:
– held for trading; or
– designated at fair value through profit or loss.
See Notes 3(k), (l), (n) and (o).
IAS 39.9 Financial liabilities
The Group classifies its financial liabilities, other than financial guarantees and loan commitments,
as measured at amortised cost or fair value through profit or loss. See Notes 3(l), (m), (u) and (w).
(iii) Derecognition
IAS 39.17–20, 26 Financial assets1
The Group derecognises a financial asset when the contractual rights to the cash flows from
the financial asset expire, or it transfers the rights to receive the contractual cash flows in a
transaction in which substantially all the risks and rewards of ownership of the financial asset
are transferred or in which the Group neither transfers nor retains substantially all the risks
and rewards of ownership and it does not retain control of the financial asset. Any interest in
such transferred financial assets that qualify for derecognition that is created or retained by the
Group is recognised as a separate asset or liability. On derecognition of a financial asset, the
difference between the carrying amount of the asset (or the carrying amount allocated to the
portion of the asset transferred), and the sum of (i) the consideration received (including any new
asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been
recognised in other comprehensive income is recognised in profit or loss.
IAS 39.20 The Group enters into transactions whereby it transfers assets recognised on its statement of
financial position, but retains either all or substantially all of the risks and rewards of the transferred
assets or a portion of them. If all or substantially all risks and rewards are retained, then the
transferred assets are not derecognised. Transfers of assets with retention of all or substantially all
risks and rewards include, for example, securities lending and repurchase transactions.

(j) Financial assets and financial liabilities (continued)
(iii) Derecognition (continued)
When assets are sold to a third party with a concurrent total rate of return swap on the
transferred assets, the transaction is accounted for as a secured financing transaction similar
to repurchase transactions as the Group retains all or substantially all the risks and rewards of
ownership of such assets.
IAS 39.20 In transactions in which the Group neither retains nor transfers substantially all the risks and
rewards of ownership of a financial asset and it retains control over the asset, the Group
continues to recognise the asset to the extent of its continuing involvement, determined by the
extent to which it is exposed to changes in the value of the transferred asset.
IAS 39.24 In certain transactions the Group retains the obligation to service the transferred financial asset
for a fee. The transferred asset is derecognised if it meets the derecognition criteria. An asset or
liability is recognised for the servicing contract, depending on whether the servicing fee is more
than adequate (asset) or is less than adequate (liability) for performing the servicing.
IAS 39.39 The Group securitises various loans and advances to customers and investment securities,
which generally result in the sale of these assets to special-purpose entities, which in turn
issue securities to investors. Interests in the securitised financial assets may be retained in the
form of senior or subordinated tranches, interest-only strips or other residual interests (retained
interests). Retained interests are primarily recorded in available-for-sale investment securities
and carried at fair value. Gains or losses on securitisation depend in part on the carrying amount
of the transferred financial assets, allocated between the financial assets derecognised and the
retained interests based on their relative fair values at the date of the transfer. Gains or losses on
securitisation are recorded in other operating income.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged,
cancelled or expire.
IAS 32.42 (iv) Offsetting
Financial assets and liabilities are offset and the net amount presented in the statement of
financial position when, and only when, the Group has a legal right to set off the amounts
and it intends either to settle them on a net basis or to realise the asset and settle the liability
simultaneously.
IAS 1.32–35 Income and expenses are presented on a net basis only when permitted under IFRS, or for gains
and losses arising from a group of similar transactions such as in the Group’s trading activity.
(v) Amortised cost measurement
IAS 39.9 The amortised cost of a financial asset or liability is the amount at which the financial asset
or liability is measured at initial recognition, minus principal repayments, plus or minus the
cumulative amortisation using the effective interest method of any difference between the initial
amount recognised and the maturity amount, minus any reduction for impairment.

(vi) Fair value measurement
IAS 39.9 Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction on the measurement date.
IFRS 7.27, IAS 39.48A When available, the Group measures the fair value of an instrument using quoted prices in an
active market for that instrument. A market is regarded as active if quoted prices are readily and
regularly available and represent actual and regularly occurring market transactions on an arm’s
length basis.
IAS 39.48A, AG74–76 If a market for a financial instrument is not active, the Group establishes fair value using
a valuation technique. Valuation techniques include using recent arm’s length transactions
between knowledgeable, willing parties (if available), reference to the current fair value of other
instruments that are substantially the same, discounted cash flow analyses and option pricing
models. The chosen valuation technique makes maximum use of market inputs, relies as little
as possible on estimates specific to the Group, incorporates all factors that market participants
would consider in setting a price, and is consistent with accepted economic methodologies
for pricing financial instruments. Inputs to valuation techniques reasonably represent market
expectations and measures of the risk-return factors inherent in the financial instrument. The
Group calibrates valuation techniques and tests them for validity using prices from observable
current market transactions in the same instrument or based on other available observable
market data.
IAS 39.AG72 Assets and long positions are measured at a bid price; liabilities and short positions are measured
at an asking price. Where the Group has positions with offsetting risks, mid-market prices are
used to measure the offsetting risk positions and a bid or asking price adjustment is applied only
to the net open position as appropriate. Fair values reflect the credit risk of the instrument and
include adjustments to take account of the credit risk of the Group entity and the counterparty
where appropriate. Fair value estimates obtained from models are adjusted for any other factors,
such as liquidity risk or model uncertainties, to the extent that the Group believes a third-party
market participant would take them into account in pricing a transaction.
IAS 39.AG76, AG76A The best evidence of the fair value of a financial instrument at initial recognition is the transaction
price – i.e. the fair value of the consideration given or received. However, in some cases, the
fair value of a financial instrument on initial recognition may be different to its transaction price.
If such fair value is evidenced by comparison with other observable current market transactions
in the same instrument (without modification or repackaging) or based on a valuation technique
whose variables include only data from observable markets, then the difference is recognised
in profit or loss on initial recognition of the instrument. In other cases the difference is not
recognised in profit or loss immediately but is recognised over the life of the instrument on
an appropriate basis or when the instrument is redeemed, transferred or sold, or the fair value
becomes observable.
Explanatory note
1. IAS 41.54(a)–(b) IFRS does not contain specific quantitative thresholds for ‘significant’ or ‘prolonged’. In our view,
an entity should establish criteria that it applies consistently to determine whether a decline
in a quoted market price is ‘significant’ or ‘prolonged’. This issue is discussed in the 9th Edition
2012/13 of our publication Insights into IFRS (7.6.490.40–130).
In our view, apart from significant or prolonged thresholds, an entity can establish additional
events triggering impairment. These can include, among other things, a combination of significant
and prolonged thresholds based on the particular circumstances and nature of that entity’s
portfolio. For example, a decline in the fair value in excess of 15 percent persisting for six months
could be determined by an entity to be an impairment trigger. This issue is discussed in the
9th Edition 2012/13 of our publication Insights into IFRS (7.6.490.40–50).

(vii) Identification and measurement of impairment
IFRS 7.B5(f), At each reporting date the Group assesses whether there is objective evidence that financial
IAS 39.58 assets not carried at fair value through profit or loss are impaired. A financial asset or a group of
financial assets is impaired when objective evidence demonstrates that a loss event has occurred
after the initial recognition of the asset(s), and that the loss event has an impact on the future
cash flows of the asset(s) that can be estimated reliably.
IFRS 7.B5(d), Objective evidence that financial assets are impaired can include significant financial difficulty of
IAS 39.59, 61 the borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance
by the Group on terms that the Group would not otherwise consider, indications that a borrower
or issuer will enter bankruptcy, the disappearance of an active market for a security, or other
observable data relating to a group of assets such as adverse changes in the payment status
of borrowers or issuers in the group, or economic conditions that correlate with defaults in the
group. In addition, for an investment in an equity security, a significant or prolonged decline1 in its
fair value below its cost is objective evidence of impairment. In general, the Group considers a
decline of 20 percent to be significant and a period of nine months to be prolonged. However, in
specific circumstances a smaller decline or a shorter period may be appropriate.
IAS 39.63–64 The Group considers evidence of impairment for loans and advances and held-to-maturity
investment securities at both a specific asset and collective level. All individually significant loans
and advances and held-to-maturity investment securities are assessed for specific impairment.
Those found not to be specifically impaired are then collectively assessed for any impairment that
has been incurred but not yet identified. Loans and advances and held-to-maturity investment
securities that are not individually significant are collectively assessed for impairment by
grouping together loans and advances and held-to-maturity investment securities with similar risk
characteristics.
In assessing collective impairment the Group uses statistical modelling of historical trends of
the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for
management’s judgement as to whether current economic and credit conditions are such that
the actual losses are likely to be greater or less than suggested by historical trends. Default rates,
loss rates and the expected timing of future recoveries are regularly benchmarked against actual
outcomes to ensure that they remain appropriate.
IAS 39.17, 65–66, Impairment losses on assets measured at amortised cost are calculated as the difference
AG84 between the carrying amount and the present value of estimated future cash flows discounted at
the asset’s original effective interest rate.
Explanatory note
1. IAS 39.9, 11A Financial assets or liabilities (other than those classified as held for trading) may be designated
upon initial recognition at fair value through profit or loss, in any of the following circumstances, if
they:
●● eliminate or significantly reduce a measurement or recognition inconsistency (accounting
mismatch) that would otherwise arise from measuring assets and liabilities or recognising the
gains or losses on them on different bases;
●● are part of a group of financial assets and/or financial liabilities that is managed and for which
performance is evaluated and reported to key management on a fair value basis in accordance
with a documented risk management or investment strategy; or
●● are hybrid contracts where an entity is permitted to designate the entire contract at fair value
through profit or loss.
These illustrative financial statements demonstrate this fair value option through:
●● investment securities where the Group holds related derivative positions that are not
designated in a hedging relationship, and where designation of the investment securities at fair
value through profit or loss eliminates or significantly reduces an accounting mismatch – see
Note 22;
●● assets of the investment banking segment that are managed and evaluated on a fair value
basis as part of the Group’s documented risk management and investment strategy – see Note
21; and
●● fixed rate structured notes that include an embedded derivative and where the Group has
elected to designate the entire contract at fair value – see Note 29.

(vii) Identification and measurement of impairment (continued)
If the terms of a financial asset are renegotiated or modified or an existing financial asset is
replaced with a new one due to financial difficulties of the borrower then an assessment is made
whether the financial asset should be derecognised. If the cash flows of the renegotiated asset
are substantially different, then the contractual rights to cash flows from the original financial
asset are deemed to have expired. In this case the original financial asset is derecognised and
the new financial asset is recognised at fair value. The impairment loss is measured as follows:
●● If the expected restructuring does not result in derecognition of the existing asset,
the estimated cash flows arising from the modified financial asset are included in the
measurement of the existing asset based on their expected timing and amounts discounted at
the original effective interest rate of the existing financial asset.
●● If the expected restructuring results in derecognition of the existing asset, then the expected fair
value of the new asset is treated as the final cash flow from the existing financial asset at the
time of its derecognition. This amount is discounted from the expected date of derecognition to
the reporting date using the original effective interest rate of the existing financial asset.
Impairment losses are recognised in profit or loss and reflected in an allowance account against
loans and advances or held-to-maturity investment securities. Interest on the impaired assets
continues to be recognised through the unwinding of the discount. When an event occurring after
the impairment was recognised causes the amount of impairment loss to decrease, the decrease
in impairment loss is reversed through profit or loss.
IAS 39.67–69 Impairment losses on available-for-sale investment securities are recognised by reclassifying
the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss
that is reclassified from equity to profit or loss is the difference between the acquisition cost,
net of any principal repayment and amortisation, and the current fair value, less any impairment
loss recognised previously in profit or loss. Changes in impairment provisions attributable to
application of the effective interest method are reflected as a component of interest income.
IAS 39.70 If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases
and the increase can be related objectively to an event occurring after the impairment loss was
recognised, then the impairment loss is reversed, with the amount of the reversal recognised in
profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale
equity security is recognised in other comprehensive income.
The Group writes off certain loans and advances and investment securities when they are
determined to be uncollectible (see Note 4).
(viii) Designation at fair value through profit or loss1
IFRS 7.21, B5(a) The Group has designated financial assets and liabilities at fair value through profit or loss in either of
the following circumstances:
●● The assets or liabilities are managed, evaluated and reported internally on a fair value basis.
●● The designation eliminates or significantly reduces an accounting mismatch which would
otherwise arise.
●● The asset or liability contains an embedded derivative that significantly modifies the cash
flows that would otherwise be required under the contract.
Note 7 sets out the amount of each class of financial asset or liability that has been designated
at fair value through profit or loss. A description of the basis for each designation is set out in the
note for the relevant asset or liability class.
Explanatory note
1. In these illustrative financial statements the classes of financial instruments reflect the Group’s
activities. Accordingly, derivatives are presented either as trading assets or liabilities or as
derivative assets or liabilities held for risk management purposes to reflect the Group’s two
uses of derivatives. Derivatives held for risk management purposes include qualifying hedge
instruments and non-qualifying hedge instruments held for risk management purposes rather
than for trading. However, other presentations are possible.

IAS 7.46 (k) Cash and cash equivalents
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with
central banks and highly liquid financial assets with original maturities of three months or less
from the acquisition date that are subject to an insignificant risk of changes in their fair value, and
are used by the Group in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
IFRS 7.21 (l) Trading assets and liabilities
Trading assets and liabilities are those assets and liabilities that the Group acquires or incurs
principally for the purpose of selling or repurchasing in the near term, or holds as part of a
portfolio that is managed together for short-term profit or position taking.
IAS 39.43, 46–47, Trading assets and liabilities are initially recognised and subsequently measured at fair value
50, 50B, 50D in the statement of financial position, with transaction costs recognised in profit or loss. All
changes in fair value are recognised as part of net trading income in profit or loss. Trading
assets and liabilities are not reclassified subsequent to their initial recognition, except that non-
derivative trading assets, other than those designated at fair value through profit or loss on initial
recognition, may be reclassified out of the fair value through profit or loss – i.e. trading category
– if they are no longer held for the purpose of being sold or repurchased in the near term and the
following conditions are met:
●● If the financial asset would have met the definition of loans and receivables (if the financial
asset had not been required to be classified as held for trading at initial recognition), then it
may be reclassified if the Group has the intention and ability to hold the financial asset for the
foreseeable future or until maturity.
●● If the financial asset would not have met the definition of loans and receivables, then it may be
reclassified out of the trading category only in rare circumstances.
IFRS 7.21 (m) Derivatives held for risk management purposes1 and hedge accounting
Derivatives held for risk management purposes include all derivative assets and liabilities that are
not classified as trading assets or liabilities. Derivatives held for risk management purposes are
measured at fair value in the statement of financial position.
The Group designates certain derivatives held for risk management as well as certain non-
derivative financial instruments as hedging instruments in qualifying hedging relationships.
On initial designation of the hedge, the Group formally documents the relationship between
the hedging instrument(s) and hedged item(s), including the risk management objective and
strategy in undertaking the hedge, together with the method that will be used to assess
the effectiveness of the hedging relationship. The Group makes an assessment, both at the
inception of the hedge relationship as well as on an ongoing basis, as to whether the hedging
instrument(s) is(are) expected to be highly effective in offsetting the changes in the fair value or
cash flows of the respective hedged item(s) during the period for which the hedge is designated,
and whether the actual results of each hedge are within a range of 80–125 percent. The Group
makes an assessment for a cash flow hedge of a forecast transaction, as to whether the forecast
transaction is highly probable to occur and presents an exposure to variations in cash flows that
could ultimately affect profit or loss.

(m) Derivatives held for risk management purposes and hedge accounting
(continued)
These hedging relationships are discussed below:
(i) Fair value hedges
IAS 39.89, 91–92 When a derivative is designated as the hedging instrument in a hedge of the change in fair value
of a recognised asset or liability or a firm commitment that could affect profit or loss, changes in
the fair value of the derivative are recognised immediately in profit or loss together with changes
in the fair value of the hedged item that are attributable to the hedged risk (in the same line item
in the statement of comprehensive income as the hedged item).
If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer
meets the criteria for fair value hedge accounting, or the hedge designation is revoked, then
hedge accounting is discontinued prospectively. Any adjustment up to that point to a hedged
item for which the effective interest method is used, is amortised to profit or loss as part of the
recalculated effective interest rate of the item over its remaining life.
(ii) Cash flow hedges
IAS 39.95–99, 101 When a derivative is designated as the hedging instrument in a hedge of the variability in cash
flows attributable to a particular risk associated with a recognised asset or liability or a highly
probable forecast transaction that could affect profit or loss, the effective portion of changes
in the fair value of the derivative is recognised in other comprehensive income in the hedging
reserve. The amount recognised in other comprehensive income is reclassified to profit or loss
as a reclassification adjustment in the same period as the hedged cash flows affect profit or loss,
and in the same line item in the statement of comprehensive income. Any ineffective portion of
changes in the fair value of the derivative is recognised immediately in profit or loss.
If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer
meets the criteria for cash flow hedge accounting, or the hedge designation is revoked, then
hedge accounting is discontinued prospectively. In a discontinued hedge of a forecast transaction
the cumulative amount recognised in other comprehensive income from the period when the
hedge was effective is reclassified from equity to profit or loss as a reclassification adjustment
when the forecast transaction occurs and affects profit or loss. If the forecast transaction is
no longer expected to occur, then the balance in other comprehensive income is reclassified
immediately to profit or loss as a reclassification adjustment.
(iii) Net investment hedges
IAS 39.102 When a derivative instrument or a non-derivative financial liability is designated as the hedging
instrument in a hedge of a net investment in a foreign operation, the effective portion of changes
in the fair value of the hedging instrument is recognised in other comprehensive income in
the translation reserve. Any ineffective portion of the changes in the fair value of the derivative
is recognised immediately in profit or loss. The amount recognised in other comprehensive
income is reclassified to profit or loss as a reclassification adjustment on disposal of the foreign
operation.
(iv) Other non-trading derivatives
When a derivative is not held for trading, and is not designated in a qualifying hedge relationship,
all changes in its fair value are recognised immediately in profit or loss as a component of net
income from other financial instruments at fair value through profit or loss.
Explanatory note
1. IAS 39.11 An embedded derivative is separated from the host contract and accounted for as a derivative
under IAS 39 Financial Instruments: Recognition and Measurement if, and only if, all the following
conditions are met:
●● The economic characteristics and risks of the embedded derivative are not closely related to
the economic characteristics and risks of the host contract.
●● A separate instrument with the same terms as the embedded derivative would meet the
definition of a derivative.
●● The hybrid (combined) instrument is not measured at fair value with changes in fair value
recognised in profit or loss – i.e. a derivative that is embedded in a financial asset or financial
liability at fair value through profit or loss is not separated.
IAS 39 does not specify where a separated embedded derivative component is presented in the
statement of financial position. In these illustrative financial statements, an embedded derivative
component that is separated from the host contract is presented in the same line item in the
statement of financial position as the related host contract. Net income on separated embedded
derivative components is reflected in either net income from other financial instruments at fair
value through profit or loss or in net interest income, depending on whether the derivative is
designated in a qualifying hedging relationship. However, other presentations are possible. This
issue is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS (7.4.200).

(m) Derivatives held for risk management purposes and hedge accounting
(continued)
(v) Embedded derivatives1
IAS 39.10–11 Derivatives may be embedded in another contractual arrangement (a host contract). The Group
accounts for an embedded derivative separately from the host contract when the host contract
is not itself carried at fair value through profit or loss, the terms of the embedded derivative
would meet the definition of a derivative if they were contained in a separate contract, and the
economic characteristics and risks of the embedded derivative are not closely related to the
economic characteristics and risks of the host contract. Separated embedded derivatives are
measured at fair value, with all changes in fair value recognised in profit or loss unless they
form part of a qualifying cash flow or net investment hedging relationship. Separated embedded
derivatives are presented in the statement of financial position together with the host contract.
IFRS 7.21 (n) Loans and advances
IAS 39.9 Loans and advances are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market and that the Group does not intend to sell immediately or in
the near term.
Loans and advances to banks are classified as loans and receivables. Loans and advances to
customers include:
●● those classified as loans and receivables;
●● those designated as at fair value through profit or loss; and
●● finance lease receivables.
IAS 39.43, 46 Loans and advances are initially measured at fair value plus incremental direct transaction costs,
and subsequently measured at their amortised cost using the effective interest method. When
the Group chooses to designate the loans and advances as measured at fair value through profit
or loss as described in Note 3(j)(viii), they are measured at fair value with face value changes
recognised immediately in profit or loss.
When the Group is the lessor in a lease agreement that transfers substantially all of the risks
and rewards incidental to ownership of the asset to the lessee, the arrangement is classified
as a finance lease and a receivable equal to the net investment in the lease is recognised and
presented within loans and advances.
When the Group purchases a financial asset and simultaneously enters into an agreement to
resell the asset (or a substantially similar asset) at a fixed price on a future date (reverse repo
or stock borrowing), the arrangement is accounted for as a loan or advance, and the underlying
asset is not recognised in the Group’s financial statements.
IFRS 7.21 (o) Investment securities
IAS 39.9, 43, 45–46 Investment securities are initially measured at fair value plus, in case of investment securities
not at fair value through profit or loss, incremental direct transaction costs, and subsequently
accounted for depending on their classification as either held to maturity, fair value through profit
or loss, or available for sale.
Explanatory note
1. IAS 39.9 An entity is prohibited from classifying any financial assets as held to maturity if the entity has,
during the current or two preceding financial years, sold or reclassified a more than insignificant
amount of held-to-maturity investments prior to their maturity, except for sales or reclassifications
in any of the following circumstances:
●● sales or reclassifications that are so close to maturity that changes in the market rate of
interest would not have a significant effect on the financial asset’s fair value;
●● sales or reclassifications after the entity has collected substantially all of the asset’s original
principal; or
●● sales or reclassifications attributable to non-recurring isolated events beyond the entity’s
control that could not have been reasonably anticipated.

(o) Investment securities (continued)
(i) Held-to-maturity
IAS 39.9, 46 Held-to-maturity investments are non-derivative assets with fixed or determinable payments and
fixed maturity that the Group has the positive intent and ability to hold to maturity, and which are
not designated as at fair value through profit or loss or as available for sale.
Held-to-maturity investments are carried at amortised cost using the effective interest method,
less any impairment losses (see Note 3(j)(vii)). A sale or reclassification of a more than
insignificant amount of held-to-maturity investments would result in the reclassification of all
held-to-maturity investments as available for sale, and would prevent the Group from classifying
investment securities as held to maturity for the current and the following two financial years.1
However, sales and reclassifications in any of the following circumstances would not trigger a
reclassification:
●● sales or reclassifications that are so close to maturity that changes in the market rate of
interest would not have a significant effect on the financial asset’s fair value;
●● sales or reclassifications after the Group has collected substantially all of the asset’s original
principal; and
●● sales or reclassifications attributable to non-recurring isolated events beyond the Group’s
control that could not have been reasonably anticipated.
(ii) Fair value through profit or loss
IAS 39.9 The Group designates some investment securities at fair value, with fair value changes
recognised immediately in profit or loss as described in Note 3(j)(viii).
(iii) Available-for-sale
IAS 39.9, 46 Available-for-sale investments are non-derivative investments that are designated as available-for-
sale or are not classified as another category of financial assets. Available-for-sale investments
comprise equity securities and debt securities. Unquoted equity securities whose fair value
cannot reliably be measured are carried at cost. All other available-for-sale investments are carried
at fair value.
Interest income is recognised in profit or loss using the effective interest method. Dividend
income is recognised in profit or loss when the Group becomes entitled to the dividend (see
Note 3(g)). Foreign exchange gains or losses on available-for-sale debt security investments are
recognised in profit or loss (see Note 3(b)(i)). Impairment losses are recognised in profit or loss
(see Note 3(j)(vii)).
Other fair value changes, other than impairment losses (see Note 3(j)(vii)), are recognised in other
comprehensive income and presented in the fair value reserve in equity. When the investment is
sold, the gain or loss accumulated in equity is reclassified to profit or loss.
IAS 39.50E A non-derivative financial asset may be reclassified from the available-for-sale category to
the loans and receivables category if it otherwise would have met the definition of loans and
receivables and if the Group has the intention and ability to hold that financial asset for the
foreseeable future or until maturity.
Explanatory note
1. If an entity previously adopted IFRS for the first time, and the determination of the cost of
property, plant and equipment at the date of transition to IFRS is relevant to an understanding of
the financial statements, then the entity might include the following accounting policy.
Deemed cost
Items of property, plant and equipment are measured at cost less accumulated depreciation
and accumulated impairment losses. The cost of property, plant and equipment at [the date of
transition], the Group’s date of transition to IFRS, was determined with reference to its fair value
at that date.

(p) Property and equipment
IAS 16.73(a) (i) Recognition and measurement1
IAS 16.30 Items of property and equipment are measured at cost less accumulated depreciation and any
accumulated impairment losses.
IAS 16.16 Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of
self-constructed assets includes the following:
●● the cost of materials and direct labour;
●● any other costs directly attributable to bringing the assets to a working condition for their
intended use;
●● when the Group has an obligation to remove the asset or restore the site, an estimate of the
costs of dismantling and removing the items and restoring the site on which they are located;
and
●● capitalised borrowing costs.
Purchased software that is integral to the functionality of the related equipment is capitalised as
part of that equipment.
IAS 16.45 When parts of an item of property or equipment have different useful lives, they are accounted
for as separate items (major components) of property and equipment.
IAS 16.41, 71 Any gain or loss on disposal of an item of property and equipment (calculated as the difference
between the net proceeds from disposal and the carrying amount of the item) is recognised
within other income in profit or loss.
(ii) Subsequent costs
IAS 16.13 Subsequent expenditure is capitalised only when it is probable that the future economic benefits
of the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as
incurred.
(iii) Depreciation
IAS 16.55, 73(b) Items of property and equipment are depreciated from the date they are available for use or, in
respect of self-constructed assets, from the date that the assets are completed and ready for
use. Depreciation is calculated to write off the cost of items of property and equipment less
their estimated residual values using the straight-line basis over their estimated useful lives.
Depreciation is recognised in profit or loss. Leased assets under finance leases are depreciated
over the shorter of the lease term and their useful lives. Land is not depreciated.
IAS 16.73(c) The estimated useful lives for the current and comparative periods of significant items of
property and equipment are as follows:
l buildings 40 years
l IT equipment 3–5 years
l fixtures and fittings 5–10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
Explanatory notes
1. IAS 40.75(c) If classification of property is difficult, then an entity discloses the criteria developed to
distinguish investment property from owner-occupied property and from property held for sale in
the ordinary course of business.
2. IAS 40.56, If an entity accounts for investment property using the cost model, then it discloses:
79(a)–(b), 79(e)
●● the depreciation method;
●● the useful lives or the depreciation rates used; and
●● the fair value of such investment property.

(q) Investment property
IAS 40.75(a) Investment property is property held either to earn rental income or for capital appreciation or for
both, but not for sale in the ordinary course of business, use in the production or supply of goods
or services or for administrative purposes.1 The Group holds some investment property as a
consequence of the ongoing rationalisation of its retail branch network. Other property has been
acquired through the enforcement of security over loans and advances. Investment property
is initially measured at cost and subsequently at fair value with any change therein recognised
in profit or loss in other income.2 Cost includes expenditure that is directly attributable to the
acquisition of the investment property.
IAS 16.41, 71 Any gain or loss on disposal of an investment property (calculated as the difference between the
net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
When an investment property that was previously classified as property, plant and equipment is
sold, any related amount included in the revaluation reserve is transferred to retained earnings.
When the use of a property changes such that it is reclassified as property and equipment, its fair
value at the date of reclassification becomes its cost for subsequent accounting.
(r) Intangible assets and goodwill
(i) Goodwill
IAS 28.23(a) Goodwill that arises on the acquisition of subsidiaries is presented with intangible assets. For the
measurement of goodwill at initial recognition, see Note 3(a)(i). Subsequent to initial recognition
goodwill is measured at cost less accumulated impairment losses.
(ii) Software
IAS 38.74 Software acquired by the Group is measured at cost less accumulated amortisation and any
accumulated impairment losses.
IAS 38.57, 66 Expenditure on internally developed software is recognised as an asset when the Group is able
to demonstrate its intention and ability to complete the development and use the software in
a manner that will generate future economic benefits, and can reliably measure the costs to
complete the development. The capitalised costs of internally developed software include all
costs directly attributable to developing the software and capitalised borrowing costs, and are
amortised over its useful life. Internally developed software is stated at capitalised cost less
accumulated amortisation and impairment.
IAS 38.18 Subsequent expenditure on software assets is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is
expensed as incurred.
IAS 38.118(a)–(b) Software is amortised on a straight line basis in profit or loss over its estimated useful life, from
the date that it is available for use. The estimated useful life of software for the current and
comparative periods is three to five years.
IAS 38.104 Amortisation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
Explanatory notes
1. SIC-27.10(b) An entity discloses the accounting treatment applied to any fee received in an arrangement in the
legal form of a lease to which lease accounting is not applied because the arrangement does not,
in substance, involve a lease.
2. IFRS does not specify the line item in the statement of comprehensive income in which an
impairment loss on non-financial assets is presented. If an entity classifies expenses based on
their function, then any impairment loss is allocated to the appropriate function. In our view, in
the rare case that an impairment loss cannot be allocated to a function, it should be included in
other expenses, with additional information provided in the notes. This issue is discussed in the
9th Edition 2012/13 of our publication Insights into IFRS (3.10.430.20).
In our view, an impairment loss that is recognised in published interim financial statements
should be presented in the same line item in the annual financial statements. We believe that this
applies even if the asset is subsequently sold and the gain or loss on disposal is included in a line
item different from impairment losses in the annual financial statements. This issue is discussed
in the 9th Edition 2012/13 of our publication Insights into IFRS (3.10.430.30).

(s) Leased assets – lessee1
Assets held by the Group under leases which transfer to the Group substantially all of the risks
and rewards of ownership are classified as finance leases. On initial recognition, the leased
asset is measured at an amount equal to the lower of its fair value and the present value of
the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in
accordance with the accounting policy applicable to that asset.
Assets held under other leases are classified as operating leases and are not recognised in the
Group’s statement of financial position.
(t) Impairment of non-financial assets
IAS 36.9 The carrying amounts of the Group’s non-financial assets, other than investment property and
deferred tax assets, are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is
estimated. Goodwill and indefinite-lived intangible assets are tested annually for impairment. An
impairment loss is recognised if the carrying amount of an asset or cash-generating unit (CGU)
exceeds its recoverable amount.
IAS 36.18, 80 The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU. For impairment testing, assets are
grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or CGUs. Subject to an
operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that
the level at which impairment testing is performed reflects the lowest level at which goodwill is
monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated
to groups of CGUs that are expected to benefit from the synergies of the combination.
IAS 16.102 The Group’s corporate assets do not generate separate cash inflows and are utilised by more
than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and
tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.
IAS 36.104 Impairment losses are recognised in profit or loss.2 Impairment losses recognised in respect
of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU
(group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group
of CGUs) on a pro rata basis.
IAS 36.124 An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss
is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised.
IFRS 7.21 (u) Deposits, debt securities issued and subordinated liabilities
Deposits, debt securities issued and subordinated liabilities are the Group’s sources of
debt funding.
When the Group sells a financial asset and simultaneously enters into an agreement to
repurchase the asset (or a similar asset) at a fixed price on a future date (repo or stock lending),
the arrangement is accounted for as a deposit, and the underlying asset continues to be
recognised in the Group’s financial statements.
Explanatory notes
1. The classification of financial instruments as liabilities, equity or a combination of both depends
on the contractual terms of the instruments. The issues associated with the classification of
financial instruments are discussed in the 9th Edition 2012/13 of our publication Insights into
IFRS (7.3.10). The disclosures illustrated here are not intended to be a complete description of
accounting policies that may be applicable to preference shares.
2. IFRS does not provide guidance on the specific types of costs that would be considered
unavoidable in respect of onerous contracts. This issue is discussed in the 9th Edition 2012/13 of
our publication Insights into IFRS (3.12.660.30).
3. IAS 39.2(e), An entity may account for a financial guarantee contract as an insurance contract under IFRS 4
39.103B Insurance Contracts if it has previously asserted explicitly that it regards such contracts as
insurance contracts and has used accounting applicable for insurance contracts. For other
financial guarantee contracts, an entity accounts for the financial guarantee under IAS 39 initially
at fair value, and subsequently at the higher of the amount determined under IAS 37 or the
amount initially recognised, adjusted for cumulative amortisation in accordance with IAS 18.
In these illustrative financial instruments, the Group has accounted for all financial guarantee
contracts under IAS 39 rather than IFRS 4.

(u) Deposits, debt securities issued and subordinated liabilities (continued)
The Group classifies capital instruments as financial liabilities or equity instruments in accordance
with the substance of the contractual terms of the instruments. The Group’s redeemable
preference shares bear non-discretionary coupons and are redeemable by the holder, and are
therefore included within subordinated liabilities.1
Deposits, debt securities issued and subordinated liabilities are initially measured at fair value
minus incremental direct transaction costs, and subsequently measured at their amortised cost
using the effective interest method, except where the Group designates liabilities at fair value
through profit or loss (see Note 3(j)(viii).
(v) Provisions
IAS 37.14 A provision is recognised if, as a result of a past event, the Group has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability.
The unwinding of the discount is recognised as finance cost.
(i) Restructuring
IAS 37.72(a) A provision for restructuring is recognised when the Group has approved a detailed and formal
restructuring plan, and the restructuring either has commenced or has been announced publicly.
Future operating losses are not provided for.
(ii) Onerous contracts
IAS 37.66 A provision for onerous contracts is recognised when the expected benefits to be derived by
the Group from a contract are lower than the unavoidable cost2 of meeting its obligations under
the contract. The provision is measured at the present value of the lower of the expected cost
of terminating the contract and the expected net cost of continuing with the contract. Before a
provision is established, the Group recognises any impairment loss on the assets associated with
that contract (see Note 3(t)).
IFRS 7.21, (w) Financial guarantees and loan commitments3
IAS 39.4(c), 9, BC15
Financial guarantees are contracts that require the Group to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment
when due in accordance with the terms of a debt instrument. Loan commitments are firm
commitments to provide credit under pre-specified terms and conditions.
IAS 37.36, 45, Liabilities arising from financial guarantees or commitments to provide a loan at a below-market
39.47(c)–(d) interest rate are initially measured at fair value and the initial fair value is amortised over the life
of the guarantee or the commitment. The liability is subsequently carried at the higher of this
amortised amount and the present value of any expected payment to settle the liability when a
payment under the contracts has become probable. Financial guarantees and commitments to
provide a loan at a below-market interest rate are included within other liabilities.
Explanatory note
1. The components of the statement of comprehensive income charge for defined benefit
obligations do not have to be charged or credited in the same line item. An entity should choose
an accounting policy, to be applied consistently, either to include the interest cost and expected
return on plan assets with interest and other financial income respectively, or to show the
net total as employee benefit expense. However, regardless of the accounting policy chosen,
disclosure is required of the line items in which the components of the post-employment cost are
recognised. This issue is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS
(4.4.1130).

(x) Employee benefits
(i) Defined contribution plans
IAS 19.44 A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and has no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution plans are recognised as personnel
expenses in profit or loss in the periods during which related services are rendered. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in
future payments is available. Contributions to a defined contribution plan that are due more than
12 months after the end of the reporting period in which the employees render the service are
discounted to their present value.
(ii) Defined benefit plans
IAS 19.50, 56, 78 A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan
by estimating the amount of future benefit that employees have earned in return for their service
in the current and prior periods. That benefit is discounted to determine its present value. Any
unrecognised past service costs and the fair value of any plan assets are deducted. The discount
rate is the yield at the reporting date on corporate bonds, that have a credit rating of at least AA
from rating agency [y], that have maturity dates approximating the terms of the Group’s obligations
and that are denominated in the currency in which the benefits are expected to be paid.
IAS 19.64 The calculation is performed annually by a qualified actuary using the projected unit credit
method. When the calculation results in a benefit to the Group, the recognised asset is limited
to the total of any unrecognised past service costs and the present value of economic benefits
available in the form of any future refunds from the plan or reductions in future contributions
to the plan. In order to calculate the present value of economic benefits, consideration is given
to any minimum funding requirements that apply to any plan in the Group. An economic benefit
is available to the Group if it is realisable during the life of the plan, or on settlement of the
plan liabilities. When the benefits of a plan are improved, the portion of the increased benefit
relating to past service by employees is recognised in profit or loss on a straight-line basis
over the average period until the benefits become vested. To the extent that the benefits vest
immediately, the expense is recognised immediately in profit or loss.
IAS 19.120A(a) The Group recognises all actuarial gains and losses arising from defined benefit plans
immediately in other comprehensive income and all expenses related to defined benefit plans in
employee benefit expense in profit or loss.1
IAS 9.109 The Group recognises gains and losses on the curtailment or settlement of a defined benefit
plan when the curtailment or settlement occurs. The gain or loss on curtailment or settlement
comprises any resulting change in the fair value of plan assets, any change in the present value
of the defined benefit obligation, any related actuarial gains and losses and any past service cost
that had not previously been recognised.
(iii) Other long-term employee benefits
IAS 19.128 The Group’s net obligation in respect of long-term employee benefits other than pension plans is
the amount of future benefit that employees have earned in return for their service in the current
and prior periods. That benefit is discounted to determine its present value, and the fair value of any
related assets is deducted. The discount rate is the yield at the reporting date on corporate bonds
that have a credit rating of at least AA from rating agency [y], that have maturity dates approximating
the terms of the Group’s obligations and that are denominated in the currency in which the benefits
are expected to be paid. The calculation is performed using the projected unit credit method. Any
actuarial gains and losses are recognised in profit or loss in the period in which they arise.
Explanatory notes
1. IFRS 2.IG19 IFRS does not specify whether the remeasurement of the liability in a cash-settled share-based
payment arrangement is presented as an employee cost or as finance income or finance cost.
In our view, both presentations are permitted and an entity should choose an accounting policy,
to be applied consistently. This issue is discussed in the 9th Edition 2012/13 of our publication
Insights into IFRS (4.5.1280.10).
2. IFRS 2.47(b) When applicable, an entity discloses how it determined the fair value of equity instruments other
than share options, granted in transactions in which the fair value of goods and services received
was determined based on fair value of the equity instruments granted. Such disclosure includes:
●● if fair value was not measured on the basis of an observable market price, then how it was
determined;
●● whether and how expected dividends were incorporated into the measurement of fair value;
and
●● whether and how any other features of the equity instruments granted were incorporated into
the measurement of fair value.
IFRS 2.47(c) When applicable, an entity discloses how it determined the incremental fair value of any share-
based payment arrangements that were modified during the period.
3. IAS 32.15, 18 The issuer of a financial instrument classifies the instrument, or its component parts as a
financial liability, a financial asset or an equity instrument in accordance with the substance of the
contractual arrangements and the definitions in IAS 32.

(x) Employee benefits (continued)
(iv) Termination benefits
IAS 19.133 Termination benefits are recognised as an expense when the Group is demonstrably committed,
without realistic possibility of withdrawal, to a formal detailed plan to either terminate
employment before the normal retirement date, or to provide termination benefits as a result
of an offer made to encourage voluntary redundancy. Termination benefits for voluntary
redundancies are recognised as an expense if the Group has made an offer of voluntary
redundancy, it is probable that the offer will be accepted, and the number of acceptances can be
estimated reliably. If benefits are payable more than 12 months after the reporting date, then they
are discounted to their present value.
(v) Short-term employee benefits
IAS 19.10 Short-term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided. A liability is recognised for the amount expected to
be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or
constructive obligation to pay this amount as a result of past service provided by the employee
and the obligation can be estimated reliably.
(vi) Share-based payment transactions
IFRS 2.15, 19, 21A The grant-date fair value of share-based payment awards – i.e. stock options – granted to employees
is recognised as personnel expenses, with a corresponding increase in equity, over the period
that the employees become unconditionally entitled to the awards. The amount recognised as an
expense is adjusted to reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately recognised
as an expense is based on the number of awards that meet the related service and non-market
performance conditions at the vesting date. For share-based payment awards with non-vesting
conditions, the grant-date fair value of the share-based payment is measured to reflect such
conditions and there is no true-up for differences between expected and actual outcomes.
IFRS 2.32 The fair value of the amount payable to employees in respect of share appreciation rights that
are settled in cash is recognised as an expense with a corresponding increase in liabilities
over the period that the employees become unconditionally entitled to payment. The liability is
remeasured at each reporting date and at settlement date based on the fair value of the share
appreciation rights. Any changes in the liability are recognised as personnel expenses in profit
or loss.1, 2
IFRS 7.21 (y) Share capital and reserves
(i) Perpetual bonds3
IAS 12.52B, 58, The Group classifies capital instruments as financial liabilities or equity instruments in accordance
32.11, 15–16, 35 with the substance of the contractual terms of the instruments. The Group’s perpetual bonds
are not redeemable by holders and bear an entitlement to distributions that is non-cumulative
and at the discretion of the board of directors. Accordingly, they are presented as a component
of issued capital within equity. Distributions thereon are generally recognised in profit or loss as
they generally relate to income arising from transactions that were originally recognised in profit
or loss.
(ii) Share issue costs
IAS 32.35 Incremental costs directly attributable to the issue of an equity instrument are deducted from the
initial measurement of the equity instruments.
Explanatory notes
1. IAS 8.30 If an entity has not applied a new IFRS that has been issued but is not yet effective, then
the entity discloses this fact and any known or reasonably estimable information relevant to
assessing the potential impact that application of the new IFRS will have on the entity’s financial
statements in the period of initial application.
IAS 1.31 When new standards, amendments to standards and interpretations will have no, or no material,
effect on the consolidated financial statements of the Group, it is not necessary to list them
because such a disclosure would not be material.
IFRS 9 Financial Instruments, published by the IASB in November 2009, replaces existing
guidance on classification and measurement of financial assets in IAS 39. IFRS 9 Financial
Instruments, published by the IASB in October 2010, introduces additions relating to the
classification and measurement of financial liabilities.
For an illustration of the new requirements, see our publication Illustrative financial
statements: Banks issued in June 2011.

(z) Earnings per share
IAS 33.10, 31 The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic
EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by
the weighted average number of ordinary shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding for the effects of all dilutive potential ordinary
shares, which comprise share options granted to employees.
(aa) Segment reporting
IFRS 8.25 Segment results that are reported to the Group’s CEO (being the chief operating decision maker)
include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s
headquarters), head office expenses, and tax assets and liabilities.
IAS 8.30–31 (ab) New standards and interpretations not yet adopted1
A number of new standards, amendments to standards and interpretations are effective for
annual periods beginning after 1 January 2012, and have not been applied in preparing these
consolidated financial statements. Those which may be relevant to the Group are set out below.
The Group does not plan to adopt these standards early.
(i) IFRS 9 Financial Instruments (2010) and IFRS 9 Financial Instruments (2009)
(together IFRS 9)2
IFRS 9 (2009) introduces new requirements for the classification and measurement of financial
assets. IFRS 9 (2010) introduces additions relating to financial liabilities. The IASB currently has an
active project to make limited amendments to the classification and measurement requirements
of IFRS 9 and add new requirements to address the impairment of financial assets and hedge
accounting.
The IFRS 9 (2009) requirements represent a significant change from the existing requirements
in IAS 39 in respect of financial assets. The standard contains two primary measurement
categories for financial assets: amortised cost and fair value. A financial asset would be
measured at amortised cost if it is held within a business model whose objective is to hold
assets in order to collect contractual cash flows, and the asset’s contractual terms give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal
outstanding. All other financial assets would be measured at fair value. The standard eliminates
the existing IAS 39 categories of held to maturity, available-for-sale and loans and receivables.
For an investment in an equity instrument which is not held for trading, the standard permits an
irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair
value changes from the investment in other comprehensive income. No amount recognised in
other comprehensive income would ever be reclassified to profit or loss at a later date. However,
dividends on such investments are recognised in profit or loss, rather than other comprehensive
income unless they clearly represent a partial recovery of the cost of the investment.
Investments in equity instruments in respect of which an entity does not elect to present fair
value changes in other comprehensive income would be measured at fair value with changes in
fair value recognised in profit or loss.
The standard requires that derivatives embedded in contracts with a host that is a financial asset
within the scope of the standard are not separated; instead the hybrid financial instrument is
assessed in its entirety as to whether it should be measured at amortised cost or fair value.
Explanatory note
Disclosures – Offsetting Financial Assets and Financial Liabilities (amendments to IFRS 7),
published by the IASB in December 2011, introduces disclosures about the actual or potential
effects of netting arrangements on an entity’s financial position.
For an illustration of the new requirements, see Appendix IV.

(ab) New standards and interpretations not yet adopted (continued)
(i) IFRS 9 Financial Instruments (2010), IFRS 9 Financial Instruments (2009)
(continued)
IFRS 9 (2010) introduces a new requirement in respect of financial liabilities designated under the
fair value option to generally present fair value changes that are attributable to the liability’s credit
risk in other comprehensive income rather than in profit or loss. Apart from this change, IFRS 9
(2010) largely carries forward without substantive amendment the guidance on classification and
measurement of financial liabilities from IAS 39.
IFRS 9 is effective for annual periods beginning on or after 1 January 2015 with early adoption
permitted. The IASB decided to consider making limited amendments to IFRS 9 to address
practice and other issues. The Group has commenced the process of evaluating the potential
effect of this standard but is awaiting finalisation of the limited amendments before the
evaluation can be completed. Given the nature of the Group’s operations, this standard is
expected to have a pervasive impact on the Group’s financial statements.
(ii) Amendments to IFRS 7 and IAS 32 on offsetting financial assets and financial liabilities
(2011)1
Disclosures – Offsetting Financial Assets and Financial Liabilities (amendments to IFRS 7)
introduces disclosures about the impact of netting arrangements on an entity’s financial position.
The amendments are effective for annual periods beginning on or after 1 January 2013 and
interim periods within those annual periods. Based on the new disclosure requirements the
Group will have to provide information about what amounts have been offset in the statement
of financial position and the nature and extent of rights of set-off under master netting
arrangements or similar arrangements.
Offsetting Financial Assets and Financial Liabilities (amendments to IAS 32) clarify the offsetting
criteria in IAS 32 by explaining when an entity currently has a legally enforceable right to set-off
and when gross settlement is equivalent to net settlement. The amendments are effective for
annual periods beginning on or after 1 January 2014 and interim periods within those annual
periods. Earlier application is permitted.
Based on our initial assessment, the Group is not expecting a significant impact from the
adoption of the amendments to IAS 32. However, the adoption of the amendments to IFRS 7
requires more extensive disclosures about rights of set-off.
Explanatory notes
IFRS 10 Consolidated Financial Statements, published by the IASB in May 2011, introduces a
single control model to determine whether an investee should be consolidated.
IFRS 12 Disclosure of Interests in Other Entities, published by the IASB in May 2011, brings
together into a single standard all the disclosure requirements about an entity’s interests in
subsidiaries, joint arrangements, associates and unconsolidated structured entities.
For an illustration of the new requirements, see Appendix II.
IFRS 13 Fair Value Measurement, published by the IASB in May 2011, replaces existing
guidance on fair value measurement in different IFRSs with a single definition of fair value, a
framework for measuring fair values and disclosures about fair value measurements.
For an illustration of the new requirements, see Appendix III.

(ab) New standards and interpretations not yet adopted (continued)
(iii) IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12
Disclosure of Interests in Other Entities (2011)1
IFRS 10 introduces a single control model to determine whether an investee should be consolidated.
As a result, the Group may need to change its consolidation conclusion in respect of its investees,
which may lead to changes in the current accounting for these investees (see Notes 3(a)(iii) and (iv)).
IFRS 11 is not expected to have any impact on the Group because the Group does not have
interests in joint ventures. IFRS 12 brings together into a single standard all the disclosure
requirements about an entity’s interests in subsidiaries, joint arrangements, associates and
unconsolidated structured entities. It requires the disclosure of information about the nature,
risks and financial effects of these interests. The Group is currently assessing the disclosure
requirements for interests in subsidiaries and unconsolidated structured entities in comparison
with the existing disclosures.
These standards are effective for annual periods beginning on or after 1 January 2013 with early
adoption permitted.
(iv) IFRS 13 Fair Value Measurement (2011)2
IFRS 13 provides a single source of guidance on how fair value is measured, and replaces the
fair value measurement guidance that is currently dispersed throughout IFRS. Subject to limited
exceptions, IFRS 13 is applied when fair value measurements or disclosures are required or
permitted by other IFRSs. The Group is currently reviewing its methodologies for determining fair
values (see Note 5). Although many of the IFRS 13 disclosure requirements regarding financial
assets and financial liabilities are already required, the adoption of IFRS 13 will require the Group
to provide additional disclosures. These include fair value hierarchy disclosures for non-financial
assets/liabilities and disclosures on fair value measurements that are categorised in Level 3.
IFRS 13 is effective for annual periods beginning on or after 1 January 2013 with early adoption
permitted.
(v) IAS 19 Employee Benefits (2011)
IAS 19 (2011) changes the definition of short-term and other long-term employee benefits to
clarify the distinction between the two. For defined benefit plans, removal of the accounting
policy choice for recognition of actuarial gains and losses is not expected to have any impact on
the Group. However, the Group may need to assess the impact of the change in measurement
principles of the expected return on plan assets. IAS 19 (2011) is effective for annual periods
beginning on or after 1 January 2013 with early adoption permitted.
Explanatory notes
1. IFRS 7.31–32 An entity is required to disclose information that enables users of its financial statements to
evaluate the nature and extent of risks arising from financial instruments to which the entity is
exposed at the end of the reporting period. Those risks typically include, but are not limited to,
credit risk, liquidity risk and market risk.
IFRS 7.33 For each type of risk, an entity discloses:
(1) the exposures to risk and how they arise;
(2) its objectives, policies and processes for managing the risk and the methods used to measure
the risk; and
(3) any changes in (1) or (2) from the previous period.
IFRS 7.B6 The disclosures required by IFRS 7.31–42 in respect of the nature and extent of risks arising
from financial instruments are either presented in the financial statements or incorporated by
cross-reference from the financial statements to some other statement, such as a management
commentary or risk report, that is available to users of the financial statements on the same
terms as the financial statements and at the same time. The location of these disclosures may
be limited by local laws. In these illustrative financial statements, these disclosures have been
presented in the financial statements.
IFRS 7.4–5, IFRS 7 requires credit and market risk disclosures for financial instruments and contracts to buy
BC58A or sell a non-financial item that are within the scope of IAS 39. Liquidity risk disclosures are only
required for financial liabilities that will result in the outflow of cash or another financial asset.
Financial risk exposures from other non-financial instruments – e.g. credit risk from operating
leases – are disclosed separately if an entity chooses to disclose its entire financial risk position.
IAS 1.134 In addition, the entity discloses information that enables users of its financial statements to
evaluate the entity’s objectives, policies and processes for managing capital.
2. The Enhanced Disclosure Task Force (EDTF) report develops fundamental principles for enhanced
risk disclosures for banks. The fundamental principles contained in the report apply to all banks.
However, enhanced disclosures have been developed specifically for large international banks
that are active participants in the equity and debt markets. Adoption of the recommendations in
the report is voluntary.
The EDTF report recommends that a bank describe the key risks that arise from the bank’s
business models and activities, the bank’s risk appetite in the context of its business models and
how the bank manages such risks. This is to enable users to understand how business activities
are reflected in the bank’s risk measures and how those risk measures relate to line items in the
balance sheet and income statement. It also notes that investors have suggested that consistent
tabular presentation is particularly important to improving their understanding of the disclosed
information and facilitating comparability among banks. For the purpose of these illustrative
financial statements we have assumed that including a chart that sets out a link between the
Group’s business units and the principal risks that they are exposed to will facilitate users’
understanding of the remaining risk disclosures.

IFRS 7.31 4. Financial risk management
(a) Introduction and overview1
IFRS 7.31–32 The Group has exposure to the following risks from financial instruments:
●● credit risk
●● liquidity risk
●● market risks
●● operational risks.
The chart below provides a link between the Group’s business units and the principal risks that
they are exposed to. The significance of risk is assessed within the context of the Group as a
whole and is measured based on allocation of the regulatory capital within the Group.2
Corporate
Centre
Liquidity risk High

Central
Market risk Medium
Treasury Credit risk Low
Retail Corporate Asset Investment

Banking Banking Management Banking
Credit risk High Credit risk High Operational risk High Market risk High
Operational risk Medium Operational risk Medium Market risk Medium Operational risk Medium
Market risk Low Market risk Low Credit risk Low
IFRS 7.33 This note presents information about the Group’s exposure to each of the above risks, the
Group’s objectives, policies and processes for measuring and managing risk, and the Group’s
IAS 1.134 management of capital.

IFRS 7.31 4. Financial risk management (continued)
(a) Introduction and overview (continued)
Risk management framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight
of the Group’s risk management framework. The Board of Directors has established the Group
Asset and Liability Management committee (ALCO), which is responsible for developing and
monitoring Group risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced
by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to
limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities. The Group, through its training and management standards
and procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The Group Audit Committee oversees how management monitors compliance with the Group’s
risk management policies and procedures, and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in
its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of
risk management controls and procedures, the results of which are reported to the Group Audit
Committee.
IFRS 7.33 (b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Group’s
loans and advances to customers and other banks, and investment debt securities. For risk
management reporting purposes the Group considers and consolidates all elements of credit risk
exposure (such as individual obligor default risk, country and sector risk).
For risk management purposes, credit risk arising on trading assets is managed independently
and information thereon is disclosed below. The market risk in respect of changes in value in
trading assets arising from changes in market credit spreads applied to debt securities and
derivatives included in trading assets is managed as a component of market risk, further details
are provided in Note 4(d) below.
Explanatory note
1. IFRS 7.33 The nature and extent of information provided by an entity in this section will depend greatly on
its activities with financial instruments and exposure to credit risk.

(b) Credit risk (continued)
Management of credit risk1
The Board of Directors has delegated responsibility for the oversight of credit risk to its
Group Credit Committee. A separate Group Credit department, reporting to the Group Credit
Committee, is responsible for management of the Group’s credit risk, including:
●● Formulating credit policies in consultation with business units, covering collateral
requirements, credit assessment, risk grading and reporting, documentary and legal
procedures, and compliance with regulatory and statutory requirements.
●● Establishing the authorisation structure for the approval and renewal of credit facilities.
Authorisation limits are allocated to business unit Credit Officers. Larger facilities require
approval by Group Credit, Head of Group Credit, Group Credit Committee or the Board of
Directors as appropriate.
●● Reviewing and assessing credit risk Group Credit assesses all credit exposures in excess
of designated limits, prior to facilities being committed to customers by the business unit
concerned. Renewals and reviews of facilities are subject to the same review process.
●● Limiting concentrations of exposure to counterparties, geographies and industries (for loans
and advances, financial guarantees and similar exposures), and by issuer, credit rating band,
market liquidity and country (for investment securities).
●● Developing and maintaining the Group’s risk gradings in order to categorise exposures
according to the degree of risk of financial loss faced and to focus management on the
attendant risks. The risk grading system is used in determining where impairment provisions
may be required against specific credit exposures. The current risk grading framework consists
of eight grades reflecting varying degrees of risk of default and the availability of collateral
or other credit risk mitigation. The responsibility for setting risk grades lies with the final
approving executive/committee as appropriate. Risk grades are subject to regular reviews by
Group Risk.
●● Reviewing compliance of business units with agreed exposure limits, including those for
selected industries, country risk and product types. Regular reports on the credit quality of
local portfolios are provided to Group Credit who may require appropriate corrective action to
be taken.
●● Providing advice, guidance and specialist skills to business units to promote best practice
throughout the Group in the management of credit risk.
Each business unit is required to implement Group credit policies and procedures, with credit
approval authorities delegated from the Group Credit Committee. Each business unit has a Chief
Credit Risk officer who reports on all credit related matters to local management and the Group
Credit Committee. Each business unit is responsible for the quality and performance of its credit
portfolio and for monitoring and controlling all credit risks in its portfolios, including those subject
to central approval.
Regular audits of business units and Group Credit processes are undertaken by Internal Audit.
IFRS 7.36(c) The tables below set out information about the credit quality of financial assets and the allowance
for impairment/loss held by the Group against those assets. Allowance for impairment held
against assets classified within credit grades 1 to 5 is in respect of losses incurred but not yet
specifically identified. The carrying amount of assets with credit grades 1 to 5 that are collectively
impaired represents the estimated proportion of the total assets within these grades (rather than
individually identified assets) to which such allowance is estimated to relate.
Explanatory notes
1. IFRS 7.34, IFRS 7 requires disclosure of risk information based on the information provided internally to key
36–38 management personnel of the entity, as defined in IAS 24 − e.g. the entity’s board of directors or
chief executive.
The standard also requires specific additional disclosures to be made unless covered by the
information provided to management.
The example shown in these illustrative financial statements in relation to credit risk assumes
that the primary basis for reporting to key management personnel on credit risk is an analysis
of the value of each class of non-trading assets for each internal risk grade, and the provisions
recognised to cover impairment losses. The illustrative table of quantitative credit risk information
therefore combines a number of the specific requirements of IFRS 7.36–38 with the management
information required under IFRS 7.34. However, other presentations are possible.
2. IFRS 7.34 In these illustrative financial statements, assets that are part of a portfolio that has a collective
provision for impairment are disclosed separately, since this information is provided internally to
management. Alternatively these assets can be analysed in the “neither past due nor impaired”
category.
3. IFRS 7.36, The disclosures in respect of credit risk apply to each ‘class’ of financial asset, which is not
B1–B3 defined in IFRS 7. Classes are distinct from the categories of financial instruments specified in
IAS 39. In determining classes of financial instruments, an entity at a minimum distinguishes
instruments measured at amortised cost from those measured at fair value, and treats as a
separate class or classes those financial instruments outside the scope of IFRS 7.
IFRS 7.IG21– The IFRS 7 implementation guidance provides additional guidance on the disclosures without
IG29 specifying a minimum standard disclosure.

Exposure to credit risk1, 3
Loans and advances Loans and advances Investment
IFRS 7.36 to customers to banks securities
IFRS 7.34(a) In millions of euro Note 2012 2011 2012 2011 2012 2011
Carrying amount 20, 21, 22 63,070 56,805 5,572 4,707 5,807 4,843
Assets at amortised cost
Individually impaired:
IFRS 7.37(b) Grade 6: Impaired 2,920 2,277 15 12 - -
IFRS 7.37(b) Grade 7: Impaired 1,460 1,139 7 6 - -
IFRS 7.37(b) Grade 8: Impaired 487 380 2 2 - -
IFRS 7.37(b) Gross amount 4,867 3,796 24 20 - -
IFRS 7.37(b) Allowance for
impairment 20, 21 (1,453) (1,324) (12) (5) - -
IFRS 7.37(b) Carrying amount 3,414 2,472 12 15 - -
IFRS 7.34(a) Including accounts with
renegotiated terms 805 708 - - - -
Collectively impaired:2
IFRS 7.34(a) Grade 1-3: Low-fair risk 1,812 1,476 - - - -
IFRS 7.34(a) Grade 4-5: Watch list 389 317 - - - -
IFRS 7.34(a) Grade 6: Impaired 207 169 - - - -
IFRS 7.34(a) Gross amount 2,590 2,110 - - - -
IFRS 7.34(a) Allowance for impairment 21 (220) (198) - - - -
IFRS 7.34(a) Carrying amount 2,370 1,912 - - - -
Past due but not impaired:
IFRS 7.34(a) Grade 1-3: Low-fair risk 470 328 - - - -
IFRS 7.34(a) Grade 4-5: Watch list 202 141 - - - -
IFRS 7.34(a) Carrying amount 672 469 - - - -
Past due comprises:
IFRS 7.37(a) 30-60 days 512 461 - - - -
IFRS 7.37(a) 60-90 days 141 - - - - -
IFRS 7.37(a) 90-180 days 14 8 - - - -
IFRS 7.37(a) 180 days + 5 - - - - -
IFRS 7.37(a) Carrying amount 672 469 - - - -
Neither past due nor impaired:
IFRS 7.36(c) Grade 1-3: Low-fair risk 48,665 45,607 5,560 4,692 101 101
IFRS 7.36(c) Grade 4-5: Watch list 3,963 3,200 - - - -
IFRS 7.36(c) Carrying amount 52,628 48,807 5,560 4,692 101 101
renegotiated terms 1,132 1,048 111 94 - -
Carrying amount
– amortised cost 20, 21, 22 59,084 53,660 5,572 4,707 101 101

Exposure to credit risk (continued)
Loans and advances Loans and advances Investment
IFRS 7.36 to customers to banks securities
IFRS 7.34(a) In millions of euro Note 2012 2011 2012 2011 2012 2011
Available-for-sale (AFS)
assets
Individually impaired:
IFRS 7.37(b) Grade 6: Impaired - - - - 48 51
IFRS 7.37(b) Carrying amount - - - - 80 85
IFRS 7.37(b) Impairment losses 22 - - - - (160) (35)
Neither past due nor impaired:
IFRS 7.36(c) Grade 1-3: Low-fair risk - - - - 1,529 1,443
IFRS 7.36(c) Grade 4-5: Watch list - - - - 172 112
IFRS 7.36(c) Carrying amount - - - - 1,701 1,555
Carrying amount – fair value 22 - - - - 1,781 1,640

Assets at fair value through
profit or loss
IFRS 7.34(a) Grade 1-3: Low-fair risk 3,188 2,516 - - 2,509 2,243
IFRS 7.34(a) Grade 4-5: Watch list 399 331 - - 858 687
IFRS 7.34(a) Grade 6: Distressed 199 161 - - 172 103
IFRS 7.34(a) Carrying amount –
fair value 20, 21, 22 3,986 3,145 - - 3,925 3,102
IFRS 7.36(a) Total carrying amount 20, 22, 22 63,070 56,805 5,572 4,707 5,807 4,843
IFRS 7.36(a), B10(d) In addition to the above, the Group had entered into lending commitments of €1,883 million
(2011: €1,566 million) with counterparties graded 1 to 3.
IFRS 7.36(a), B10(c) The Group has issued financial guarantee contracts in respect of debtors graded 1 to 2 and for
which the maximum amount payable by the Group, assuming all guarantees are called on, is
€58 million (2011: €49 million).
Explanatory note
1. The EDTF report recommends that banks disclose:
●● their policies for identifying impaired or non-performing loans including how the bank defines
impaired or non-performing loans;
●● a reconciliation of the opening and closing balances of non-performing or impaired loans in the
period.
For the purpose of these illustrative financial statements we have assumed that including this
information in the financial statements will enhance the users’ understanding of the Group’s
exposure to credit risk.

Impaired loans and investment debt securities1
The Group regards a loan and advance or a debt security as impaired where there is objective
evidence that a loss event has occurred since initial recognition and such loss event has an
impact on future estimated cash flows from the asset. In addition, a retail loan is considered
impaired if it is overdue for 90 days or more. Loans that are subject to a collective provision for
losses incurred but not yet identified (IBNR) are not considered impaired. Impaired loans and
advances are graded 6 to 8 in the Group’s internal credit risk grading system (see Note 5(a)).
The table below sets out a reconciliation of changes in the carrying amount of impaired loans and
advances to customers.
In millions of euro 2012 2011
Impaired loans and advances to customers at 1 January 2,749 2,361

Change in allowance for impairment (139) (199)
Classified as impaired during the year 991 824
Transferred to not impaired during the year (115) (512)
Net repayments 409 333
Amount written off (47) -
Recoveries of amounts previously written off 21 -
Disposals (200) (150)
Other movements 84 92
Impaired loans and advances to customers at 31 December 3,763 2,749
Note 20 provides details of impairment allowance for loans and advances to banks and Note 21
for loans and advances to customers.
Set out below is an analysis of the gross and net (of allowances for impairment) amounts of
individually impaired assets by risk grade.
Loans and advances Loans and advances AFS investment
to customers to banks debt securities
In millions of euro Gross Net Gross Net Gross Net
31 December 2012
IFRS 7.37(b) Grade 6: Individually impaired 2,920 2,348 15 9 144 54
IFRS 7.37(b) Grade 7: Individually impaired 1,460 947 7 2 72 21
IFRS 7.37(b) Grade 8: Individually impaired 487 119 2 1 24 5
4,867 3,414 24 12 240 80
31 December 2011
IFRS 7.37(b) Grade 6: Individually impaired 2,277 1,786 12 10 72 59
IFRS 7.37(b) Grade 7: Individually impaired 1,139 611 6 4 36 22
IFRS 7.37(b) Grade 8: Individually impaired 380 75 2 1 12 4
3,796 2,472 20 15 120 85
Explanatory note
1. The EDTF report recommends that banks disclose their loan forbearance policies. For the
purpose of these illustrative financial statements we have assumed that including this
information in the financial statements will enhance the users’ understanding of the Group’s
exposure to credit risk.

Past due but not impaired loans and investment debt securities
Past due but not impaired loans and investment debt securities, other than those carried at fair
value through profit or loss, are those for which contractual interest or principal payments are
past due, but the Group believes that impairment is not appropriate on the basis of the level of
security / collateral available and / or the stage of collection of amounts owed to the Group.
IFRS 7.34(a) Loans with renegotiated terms and the Group’s forbearance policy1
Loans with renegotiated terms are loans that have been restructured due to deterioration in the
borrower’s financial position, where the Group has made concessions by agreeing to terms and
conditions that are more favourable for the borrower than the Group has provided initially. The
Group implements forbearance policy in order to maximise collection opportunities and minimise
the risk of default. Under the Group’s forbearance policy, loan forbearance is granted on a
selective basis in situation where the debtor is currently in default on its debt, or where there is a
high risk of default, there is evidence that the debtor made all the reasonable effort to pay under
the original contractual terms and it is expected to be able to meet the revised terms.
The revised terms usually include extending maturity, changing timing of interest payments and
amendments to the terms of loan covenants.
Both retail and corporate loans are subject to the forbearance policy. Once the loan is
restructured it remains in this category independent of satisfactory performance after
restructuring.
The Group Audit Committee regularly review reports on forbearance activities.
Write-off policy
The Group writes off a loan or an investment debt security balance, and any related allowances
for impairment losses, when Group Credit determines that the loan or security is uncollectible.
This determination is made after considering information such as the occurrence of significant
changes in the borrower’s / issuer’s financial position such that the borrower / issuer can no
longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the
entire exposure. For smaller balance standardised loans, write-off decisions generally are based
on a product-specific past due status.
Explanatory note
1. IFRS 7.36(b) An entity discloses a description of any collateral held as security and other credit enhancements
and their financial effect in respect of the amount that best represents the maximum exposure to
credit risk.
IFRS 7 does not specify how an entity should apply the term ‘financial effect’ in practice. In some
cases, providing quantitative disclosure of the financial effect of collateral may be appropriate.
However, in other cases it may be impractical to obtain quantitative information; or, if it is
available, the information may not be determined to be relevant, meaningful or reliable. This issue
is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS (7.8.370).

Collateral held and other credit enhancements, and their financial effect
IFRS 7.36(b) The Group holds collateral and other credit enhancements1 against certain of its credit exposures.
The table below sets out the principal types of collateral held against different types of financial
assets.
Type of credit exposure Percentage of exposure that
is subject to an arrangement
Principal type
that requires collateralisation
of collateral
held for secured 31 December 31 December
In millions of euro lending Note 2012 2011
Derivative trading assets Cash 18 100 100

Derivative assets held for
risk management Cash 19 100 100
Loans and advances to banks 20
Reverse sale and repurchase
agreements Marketable securities 100 100
Securities borrowing Marketable securities 100 100
Loans and advances to
retail customers 21
Mortgage lending Residential property 100 100
Personal loans None - -
Credit cards None - -
corporate customers 21
Finance leases Property and equipment 100 100
Other lending to Commercial property,
corporate customers floating charges over
corporate assets 91 92
agreements Marketable securities 100 100
Investment debt securities None 22 - -
The Group typically does not hold collateral against investment securities, and no such collateral
was held at 31 December 2012 or 2011.
IFRS 7.36(b) Residential mortgage lending
The tables below stratify credit exposures from mortgage loans and advances to retail customers
by ranges of loan-to-value (LTV) ratio. LTV is calculated as the ratio of the gross amount of the
loan – or the amount committed for loan commitments – to the value of the collateral. The
gross amounts exclude any impairment allowances. The valuation of the collateral excludes any
adjustments for obtaining and selling the collateral. The value of the collateral for residential
mortgage loans is based on the collateral value at origination updated based on changes in house
price indices.

Collateral held and other credit enhancements, and their financial effect (continued)
Residential mortgage lending
31 December 31 December
Loan to value (LTV) ratio

Less than 50% 4,780 4,385
51% to 70% 6,065 5,564
71% to 90% 2,755 2,528
91% to 100% 879 806
More than 100% 377 346
Total 21 14,856 13,629
Commitments to advance residential mortgage loans
Loan to value (LTV) ratio

Less than 50% 590 503
51% to 70% 845 679
71% to 90% 400 338
91% to 100% 48 46
More than 100% - -
Total 1,883 1,566
IFRS 7.36(b) Loans and advances to corporate customers
The Group’s loans and advances to corporate customers are subject to individual credit appraisal
and impairment testing. The general creditworthiness of a corporate customer tends to be
the most relevant indicator of credit quality of a loan extended to it. See Note 4(b). However,
collateral provides additional security and the Group generally requests corporate borrowers to
provide it. The Group may take collateral in the form of a first charge over real estate, floating
charges over all corporate assets and other liens and guarantees.
Because of the Group’s focus on corporate customers’ creditworthiness an updated valuation
of collateral is generally not carried out unless the credit risk of a loan deteriorates significantly
and the loan is monitored more closely. Accordingly, the Group does not routinely update the
valuation of collateral held against all loans to corporate customers. For impaired loans, the Group
usually obtains appraisals of collateral as the current value of the collateral may be an input to the
impairment measurement. At 31 December 2012, the net carrying amount of impaired loans and
advances to corporate customers amounts to e2,078 million (2011: e1,506 million) and the value
of identifiable collateral held against those loans and advances amounts to e1,943 million (2011:
e1,312 million).
IFRS 7.36(b) Derivatives, reverse sale and repurchase agreements and securities borrowing
The Group holds collateral in the form of cash and marketable securities in respect of derivatives,
reverse sale and repurchase transactions and securities borrowing.

Collateral held and other credit enhancements, and their financial effect (continued)
IFRS 7.36(b) Derivatives, reverse sale and repurchase agreements and securities borrowing (continued)
For derivatives it is the Group’s policy to enter into master netting and margining agreements
with all counterparties. Under such agreements, when a credit event such as a default occurs, all
outstanding transactions under the agreement are terminated and only a single amount is due
or payable in settlement of all transactions. For derivatives, collateral is held against the resulting
net positions outstanding with each counterparty and such net positions are generally fully
collateralised. At the reporting date, the Group would be entitled to offset derivative and other
liabilities of e434 million (2011: e348 million) against recorded derivative assets in the event
of counterparty defaults. The table below sets out the cash collateral obtained from derivative
counterparties at 31 December 2012 and 2011.
31 December 2012 31 December 2011
Item Net Collateral Net Collateral
In millions of euro Note asset value asset value
Derivative trading assets 18 691 688 718 715

risk management 19 711 708 617 614
Receivables relating to reverse sale and repurchase agreements and securities borrowing
transactions are usually collateralised on a gross exposure basis.
31 December 2012 31 December 2011

Item Carrying Collateral Carrying Collateral
In millions of euro Note amount value amount value
Loans and advances to banks 20

Reverse sale and repurchase agreements 988 988 807 807
Securities borrowing 512 482 471 369
Loans and advances to corporate
customers
agreements 21 6,318 6,318 6,134 6,134
The collateral values in the tables above are adjusted for any overcollateralisation.
Other types of collateral and credit enhancements
In addition to the collateral included in the tables above, the Group also holds other types of
collateral and credit enhancements such as second charges and floating charges for which
specific values are not generally available.
IFRS 7.38 Details of financial and non-financial assets obtained by the Group during the year by taking
possession of collateral held as security against loans and advances as well as calls made on
credit enhancements and held at the year end are shown below:
Property 812 794

Debt securities 107 116
Other 63 44
The Group’s policy is to pursue timely realisation of the collateral in an orderly manner. The Group
generally does not use the non-cash collateral for its own operations.
Explanatory note
1. IFRS 7.34(c) IFRS 7 Financial Instruments: Disclosures requires separate disclosure of concentrations of risk
unless readily apparent from the other information provided.
Concentration of credit risk
IFRS 7.34(c) The Group monitors concentrations of credit risk by sector and by geographic location. An analysis of concentrations of credit risk from loans and
advances, lending commitments, financial guarantees and investment securities is shown below:1
Loans and advances Loans and advances Investment Lending commitments
to customers to banks debt securities and financial guarantees
In millions of euro Note 2012 2011 2012 2011 2012 2011 2012 2011
Carr ying amount 20, 21, 22 63,070 56,805 5,572 4,707 5,807 4,843 (32) (28)
IFRS 7.34(c) Concentration by sector
Corporate: 42,414 37,987 - - 4,885 4,047 1,288 1,071
Real estate 16,966 15,574 - - 2,399 2,042 1,234 1,039
Transport 12,724 10,636 - - 2,421 1,843 54 32
Funds 9,331 8,737 - - - -
Other 3,393 3,040 - - 65 162
Government - - - - 824 709
Banks - - 5,572 4,707 - -
Retail: 20,656 18,818 - - 98 87 653 544
Mortgages 14,547 13,361 - - 98 87 630 524
Unsecured lending 6,109 5,457 - - - - 23 20
63,070 56,805 5,572 4,707 5,807 4,843 1,941* 1,615*
IFRS 7.34(c) Concentration by location

North America 12,649 11,393 1,118 944 2,374 2,246 80 67
Europe 36,238 32,656 3,139 2,652 2,443 1,761 1,803 1,499
Asia Pacific 8,188 7,356 722 664 528 446 40 33
Middle East and Africa 5,995 5,400 593 447 462 390 18 16
63,070 56,805 5,572 4,707 5,807 4,843 1,941* 1,615*
* Based on maximum amounts payable by the Group
Concentration by location for loans and advances, and for lending commitments and financial guarantees, is based on the customer’s countr y of domicile.
Concentration by location for investment securities is based on the countr y of domicile of the issuer of the security. This note includes more detailed
disclosures about the Group’s exposures to higher risk Eurozone countries.
Explanatory note
1. The EDTF report recommends that banks disclose a quantitative and qualitative analysis of the
counterparty credit risk that arises from their derivatives transactions. Recommended disclosures
include quantification of gross notional amounts of derivatives analysis between exchange traded
and over the counter (OTC) transactions and, for the latter, a description of collateral agreements
and how much is settled through central counterparties (CCP). For the purpose of these
illustrative financial statements we have assumed that disclosure of this information enhances
the user’s understanding of the Group’s credit risk exposures and so such disclosures have been
included.

Trading assets
IFRS 7.34(a) The Group held trading assets, including derivative assets held for risk management purposes,
but excluding equity securities, of €17,064 million at 31 December 2012 (2011: €16,058 million).
An analysis of the credit quality of the maximum credit exposure, based on rating agency [X]
ratings where applicable, is as follows:
IFRS 7.36(c) In millions of euro Note 2012 2011
Government bonds and treasury bills:

Rated AAA 18 213 1,567
Rated AA- to AA+ 18 4,320 3,256
Rated A- to A+ 18 5,316 4,821
Rated BBB+ and below 18 372 198
Corporate bonds:
Rated AA- to AA+ 18 2,500 3,130
Rated A- to A+ 18 1,437 814
Asset-backed securities:
Rated AA- to AA+ 18 340 372
Rated A- to A+ 18 119 46
Derivative assets:
Government counterparties 459 354
Bank and financial institution counterparties 1,157 1,193
Corporate counterparties 220 136
Fair value and carrying amount 17,064 16,058
The table below sets out the counterparty credit exposures arising from derivative transactions.
Derivative transactions of the Group are generally fully collateralised by cash.1
Over the counter
Exchange Other-bilateral
Total traded Central counterparties collateralised
Notional Fair Notional Fair Notional Fair Notional Fair
In millions of euro amount value amount value amount value amount value
2012
Derivative assets 13,318 1,836 979 261 2,885 402 9,454 1,173
Derivative liabilities 11,740 (1,236) 774 (136) 2,619 (248) 8,347 (852)
2011
Derivative assets 12,064 1,683 982 248 2,543 387 8,539 1,048
Derivative liabilities 10,452 (1,161) 636 (111) 2,153 (230) 7,663 (820)
Cash and cash equivalents

IFRS 7.34(a), The Group held cash and cash equivalents of €2,907 million at 31 December 2012 (2011:
7.36(a), (c) €2,992 million). The cash and cash equivalents are held with central banks and bank and financial
institution counterparties which are rated AA- to AA+, based on rating agency [X] ratings.
Explanatory note
1. IFRS 7.1 IFRS 7 requires that entities provide disclosures in their financial statements to enable users
to evaluate the nature and extent of risks arising from their financial instruments. Determining
what disclosures are appropriate requires consideration of what is important in the context of the
entity and its operations.
Disclosures may not be the same year-on-year as they may need to reflect specific risks and
uncertainties created by the conditions during or at the end of the reporting period.
IFRS 7.B3 For 2012 financial reporting, a focus area for many banks will be the risk resulting from direct
and indirect exposures to higher risk Eurozone exposures, and the wider political and economic
consequences of fiscal austerity programs and other government actions. Each bank will have
to determine, in light of its specific circumstances, what disclosures are appropriate. Factors to
consider when updating disclosures of exposures related to higher-risk sovereign debt include
the following.
●● The countries or exposures for which disclosures are relevant for the periods presented. This
may change over time and it would be helpful for an entity to disclose how such selection has
been made.
●● Whether it is helpful to provide explanation of the basis used for selecting and identifying
exposures for disclosure. In particular, identification of indirect exposures may involve a high
degree of judgement or they may not be capable of meaningful quantification; management
might consider explaining how they identify such exposures and their approach to managing
indirect risk.
A bank should decide how much detail to provide to satisfy disclosure requirements and how to
aggregate information to display the overall picture without combining information with different
characteristics. It is necessary to strike a balance between excessive detail that may not assist
users and too much aggregation that may obscure important information. This evaluation might
also consider the extent to which the risk exposures are appropriately captured and portrayed
within other aggregated or summary information disclosed pursuant to IFRS 7.
The example disclosures presented in these illustrative financial statements relate to a
hypothetical scenario and may not be appropriate or sufficient in other circumstances.
Transparency may be improved if all disclosures related to sovereign debt are made in one
location, or cross-referenced if made in different locations.

Settlement risk
The Group’s activities may give rise to risk at the time of settlement of transactions and trades.
Settlement risk is the risk of loss due to the failure of an entity to honour its obligations to deliver
cash, securities or other assets as contractually agreed.
For certain types of transactions the Group mitigates this risk by conducting settlements through
a settlement/clearing agent to ensure that a trade is settled only when both parties have fulfilled
their contractual settlement obligations. Settlement limits form part of the credit approval/limit
monitoring process described earlier. Acceptance of settlement risk on free settlement trades
requires transaction specific or counterparty specific approvals from Group Risk.
Exposures to higher risk Eurozone countries1
Significant concerns about the creditworthiness of certain Eurozone countries persisted during
2012 leading to speculation as to the long-term sustainability of the Eurozone. The deepening
recession in a number of countries, the wider political and economic consequences of fiscal
austerity programs and other government actions, and concerns about the viability of some
countries’ financial institutions have led to increased volatility of spreads on sovereign bonds
that have peaked at times during the past year at worrying levels. Most recently, certain actions
undertaken by the European Central Bank and European Commission have led to positive results
in terms of improving market confidence. However, the situation remains fragile.
The Group regards a Eurozone country as higher risk when such a country exhibits higher
volatility and economic and political uncertainties than other Eurozone members. The specific
factors that are taken into account in making this assessment include the ratio of sovereign
debt to GDP, seeking international financial assistance, credit ratings, levels of market yields and
concentrations of maturities.
The Group regards the following Eurozone countries as higher risk: Country A and Country B.
Both countries are subject to existing financial assistance plans from the European Union and
the International Monetary Fund. During 2012, there have been renewed concerns about the
fiscal deficit of country A and the impact of its austerity plan. Country B suffered additional credit
downgrades in the first quarter of 2012 and made a formal request to the European Union for
additional assistance for the recapitalisation of its banks. The table below provides the yields and
the credit ratings of bonds issued by countries A and B.
Country A Country B
Yield range on 31 December 2012 4.5-5.6% 6.1-7.6%

Yield range on 31 December 2011 3.8-5.1% 10.8-13.4%
Credit rating based on rating agency [X] 31 December 2012 BB- BBB-
Credit rating based on rating agency [X] 31 December 2011 BB- BBB+
Eurozone member states have asserted that they will continue to provide support to countries
under existing financial assistance programme until they have regained market access, provided
they comply with such programmes. They have also affirmed that the European Financial Stability
Fund (EFSF) will provide additional financial assistance to country B for recapitalisation of its
banks. Accordingly, the Group believes that the economic data available continue to indicate that
its exposure to sovereign bonds issued by country A and B is not impaired at 31 December 2012,
see also Note 5(a).

Exposures to higher risk Eurozone countries (continued)
IFRS 7.B9–B10 The tables below set out the Group’s direct exposure to each higher risk Eurozone country
based on the counterparty’s country of domicile. The maximum exposure to credit risk for
loans, investment securities and derivatives is the carrying amount, for financial guarantees
the maximum amount the Group could have to pay if the guarantee was called on, and for loan
commitments the full amount of the commitment. The government bonds comprise bonds
issued by governments and quasi government agencies.
The amounts in the tables below are gross exposures before taking into account the effect of
credit mitigation. The Group’s collateral arrangements in respect of these amounts are as follows:
●● No collateral or other credit enhancements are held against government bonds, and loans and
advances to banks.
●● Corporate loans and advances are usually collateralised. Collateral is principally in the form of
a charge over real estate or over the borrower’s floating assets and is generally located in the
country of domicile of the borrower. Where the Group has received guarantees in respect of
corporate loans, they are provided by guarantors located outside of countries A and B.
●● Derivative exposures are subject to master netting agreements which means that if a
credit event occurs, such as a default, all outstanding transactions under the agreement are
terminated, the termination value is assessed and only a single net amount is due or payable
in settlement of all transactions. At 31 December 2012 and 2011, in accordance with the
collateral agreements, the net derivative asset positions for each counterparty located in
countries A or B are fully covered by cash collateral received.

31 December 2012
In millions of euro Country A Country B Total
Held-to-maturity
Government bonds
Principal amount 5 2 7
Carrying amount (amortised cost) 5 2 7
Accumulated impairment loss - - -
Fair value 4 1 5
Available-for-sale
Government bonds
Carrying amount (fair value) 12 6 18
Accumulated amount in fair value reserve (4) (3) (7)
Loans and receivables
Loans and advances to banks
Fair value 9 13 22
Loans and advances to corporate customers
Accumulated impairment loss (48) (32) (80)
Fair value 98 54 152
Trading assets
Derivative assets
Total net on balance sheet exposure 151 104 255
Off-balance sheet exposures

Loan commitments to corporate customers
Amount committed 12 10 22
Financial guarantees given in respect of corporate
customers
Amount guaranteed 1 2 3

31 December 2011
Held-to-maturity
Government bonds
Fair value 4 1 5
Available-for-sale
Government bonds
Accumulated amount in fair value reserve (3) (2) (5)
Loans and receivables
Loans and advances to banks
Fair value 14 18 32
Loans and advances to corporate customers
Accumulated impairment loss (39) (34) (73)
Fair value 89 59 148
Trading assets
Derivative assets
Total net on balance sheet exposure 150 118 268
Off-balance sheet exposures

Loan commitments to corporate customers
Amount committed 15 8 23
Financial guarantees given in respect of corporate
customers
Amount guaranteed 2 1 3
The fair values of the derivative assets are categorised in Level 2 of the fair value hierarchy. The
fair values of government bonds classified as available-for-sale are categorised into the following
levels of the fair value hierarchy.

31 December 2012
Available-for-sale
Government bonds
Level 1 7 6 13
Level 2 5 - 5
Level 3 - - -
Total fair value 12 6 18
31 December 2011
Available-for-sale
Government bonds
Level 1 7 7 14
Level 2 6 - 6
Level 3 - - -
Total fair value 13 7 20
In 2011, due to a significant decrease in trading volumes, bonds issued by Country A that mature
after 2018 have been transferred from Level 1 to Level 2. However, their fair value is based on the
unadjusted quoted market prices at 31 December 2012 and 2011 because the trades that took
place represented orderly transactions.
The table below sets out the residual maturities of the carrying amount of government bonds of
Country A and Country B.
31 December 2012
Maturity of exposures to government bonds
of higher risk Eurozone countries based
on carrying amount
Less than More than
In millions of euro Classification 1 year 1-3 years 3 years Total
Government bonds Country A held-to-maturity 1.4 1.5 2.1 5

Government bonds Country A available-for-sale 3.4 3.6 5 12
Government bonds Country B held-to-maturity 0.6 0.5 0.9 2
Government bonds Country B available-for-sale 1.8 1.9 2.3 6

31 December 2011
Maturity of exposures to government bonds
of higher risk Eurozone countries based
on carrying amount
Less than More than
In millions of euro Classification 1 year 1-3 years 3 years Total
Government bonds Country A held-to-maturity 1.2 1.3 2.5 5

Government bonds Country A available-for-sale 3.3 3.4 6.3 13
Government bonds Country B held-to-maturity 0.4 0.4 1.2 2
Government bonds Country B available-for-sale 1.5 1.7 3.8 7

In addition to the direct exposures to Country A and B set out above, the Group is exposed to
risk of those countries through its portfolio of credit default swaps written on those countries.
The Group both sells and purchases such contracts as part of its trading activities. The contracts
are subject to standard terms issued by the International Swaps and Derivatives Association.
The transactions are covered by master netting agreements with net positions being fully
collateralised by cash deposits. The counterparties to these derivatives are located in Eurozone
countries other than country A and B and have credit ratings of A and above (based on rating
agency [X]).
The table below sets out the nominal amounts and fair values of credit default swaps that are
directly referenced to countries A and B’s sovereign debt and that are written and purchased by
the Group.
Credit protection sold (long position) 18

Nominal amount 12 14
Carrying amount (fair value) (2) (3)
Credit protection bought (short position) 18

Nominal amount 11 9
Carrying amount (fair value) 2 1
At 31 December 2012 and 2011, the fair values of the above credit default swaps are categorised
in Level 2 of the fair value hierarchy.
The Group also has indirect exposures to countries A and B. Such exposures arise principally
through the Group’s transactions with counterparties domiciled outside countries A and B, that
themselves are exposed to countries A and B. The Group’s process for management of credit
risk is outlined in Note 4(b). It includes consideration of indirect exposure to higher risk countries
when new transactions are entered into or existing ones are monitored. However, due to the
inter-connectedness and the multinational nature of credit markets and the wide varieties of
exposures held by the Group’s counterparties, the Group does not measure its indirect higher risk
Eurozone exposure in a comprehensive way. But, based on its investment policy and the ongoing
monitoring of its investments in unconsolidated investment entities and special purpose entities,
the Group has identified the following significant indirect exposures to country A.
●● E2 million (2011: E2 million) investment in an unconsolidated investment fund X.
Approximately 50 percent of the investment fund’s assets consist of corporate debt issued by
companies domiciled in country A.
●● E3 million (2011: E3 million) investment in a special purpose entity Y. The special purpose
entity’s underlying assets consist of credit card loans that were made to customers in
country A.
These investments are classified as available-for-sale and have not been impaired as at
31 December 2012.
Explanatory note
1. IFRS 7.34, 39(c) IFRS 7 Financial Instruments: Disclosures requires disclosure of information on each risk in a
format based on the information provided internally to key management personnel of the entity
(as defined in IAS 24 Related Party Disclosures) – e.g. the entity’s board of directors or chief
executive.
The example shown in these illustrative financial statements in relation to liquidity risk assumes
that the primary basis for reporting to key management personnel on liquidity risk is the ratio
of liquid assets to deposits from customers. The example also assumes that this is the entity’s
approach to managing liquidity risk. However, other presentations are possible.

IFRS 7.39 (c) Liquidity risk1
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated
with its financial liabilities that are settled by delivering cash or another financial asset.
Management of liquidity risk
The Group’s Board of Directors sets the Group’s strategy for managing liquidity risk and
delegates the responsibility for the oversight of the implementation of this policy to ALCO. ALCO
approves the Group’s liquidity policies and procedures. Central Treasury manages the Group’s
liquidity position on a day-to day basis and reviews daily reports covering the liquidity position of
both the Group and operating subsidiaries and foreign branches. A summary report, including any
exceptions and remedial action taken, is submitted regularly to ALCO.
IFRS 7.39(b) The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The key elements of the Group’s liquidity strategy are as follows:
●● Maintaining a diversified funding base consisting of customer deposits (both retail and
corporate) and wholesale market deposits and maintaining contingency facilities;
●● Carrying a portfolio of highly liquid assets, diversified by currency and maturity;
●● Monitoring liquidity ratios, maturity mismatches, behavioural characteristics of the Group’s
financial assets and liabilities, and the extent to which the Group’s assets are encumbered and
so not available as potential collateral for obtaining funding; and
●● Carrying out stress testing of the Group’s liquidity position.
Central Treasury receives information from other business units regarding the liquidity profile
of their financial assets and liabilities and details of other projected cash flows arising from
projected future business. Central Treasury then maintains a portfolio of short-term liquid assets,
largely made up of short-term liquid investment securities, loans and advances to banks and
other inter-bank facilities, to ensure that sufficient liquidity is maintained within the Group as a
whole. The liquidity requirements of business units and subsidiaries are met through loans from
Central Treasury to cover any short-term fluctuations and longer- term funding to address any
structural liquidity requirements.
When an operating subsidiary or branch is subject to a liquidity limit imposed by its local
regulator, the subsidiary or branch is responsible for managing its overall liquidity within the
regulatory limit in co-ordination with Central Treasury. Central Treasury monitors compliance of all
operating subsidiaries and foreign branches with local regulatory limits on a daily basis.
Regular liquidity stress testing is conducted under a variety of scenarios covering both normal
and more severe market conditions. The scenarios are developed taking into account both Group-
specific events (e.g. a rating downgrade) and market- related events (e.g. prolonged market
illiquidity, reduced fungibility of currencies, natural disasters or other catastrophes).

(c) Liquidity risk (continued)
Exposure to liquidity risk
The key measure used by the Group for managing liquidity risk is the ratio of net liquid assets
to deposits from customers. For this purpose net liquid assets are considered as including cash
and cash equivalents and investment grade debt securities for which there is an active and liquid
market less any deposits from banks, debt securities issued, other borrowings and commitments
maturing within the next month. A similar, but not identical, calculation is used to measure the
Group’s compliance with the liquidity limit established by the Group’s lead regulator, [Name of
regulator]. Details of the reported Group ratio of net liquid assets to deposits from customers at
the reporting date and during the reporting period were as follows:
2012 2011
IFRS 7.34(a), 39(c) At 31 December 22.0% 23.7%

Average for the period 22.6% 23.1%
Maximum for the period 24.2% 24.7%
Minimum for the period 18.9% 21.2%
Explanatory notes
1. IFRS 7.39(a)–(b), An entity is required to disclose a maturity analysis for:
B11B
●● non-derivative financial liabilities, including issued financial guarantee contracts, showing their
remaining contractual maturities
●● derivative financial liabilities, which should include the remaining contractual maturities
for those derivative financial liabilities for which contractual maturities are essential for an
understanding of the timing of the cash flows (e.g. loan commitments and interest rate swaps
designated in a cash flow hedge relationship).
IFRS 7.B11C(c) In the case of issued financial guarantee contracts, the maximum amount of the guarantee
should be disclosed in the earliest period in which the guarantee could be called.
2. IFRS 7.39(c), An entity should explain how it manages the liquidity risk inherent in the maturity analyses. This
B11E includes a maturity analysis for financial assets it holds as part of managing liquidity risk (e.g.
financial assets that are expected to generate cash inflows to meet cash outflows on financial
liabilities) if such information is necessary to enable financial statement users to evaluate the
nature and extent of liquidity risk.

IFRS 7.39(a)–(b) Maturity analysis for financial assets and liabilities
The tables below set out the remaining contractual maturities of the Group’s financial assets and
financial liabilities.1, 2
Gross
nominal Less More
Carrying inflow/ than 1-3 3 months 1-5 than
IFRS 7.B11 In millions of euro Note amount (outflow) 1 month months to 1 year years 5 years
31 December 2012
Liability by type
IFRS 7.39(a) Non-derivative liabilities
Trading liabilities 18 6,618 (6,882) (5,625) (926) (331) - -
Deposits from banks 27 11,678 (12,713) (10,683) (1,496) (534) - -
Deposits from customers 28 53,646 (55,340) (39,318) (741) (3,540) (11,741) -
Debt securities issued 29 11,227 (12,881) - - (201) (12,680) -
Subordinated liabilities 30 5,642 (6,660) - - - (5,499) (1,161)
IFRS 7.B11C(c) Issued financial guarantee
contracts 32 32 (58) - - (58) - -
IFRS 7.B11D(e) Unrecognised loan
commitments - (1,883) (1,883) - - - -
88,843 (96,417) (57,509) (3,163) (4,664) (29,920) (1,161)
Derivative liabilities
IFRS 7.39(b), B11B
Trading: 18 408 - - - - - -
Outflow - (3,217) (398) (1,895) (856) (68) -
Inflow - 2,789 138 1,799 823 29 -
Risk management: 19 828 - - - - - -
Outflow - (9,855) (476) (1,506) (1,458) (6,113) (302)
Inflow - 9,010 466 1,472 1,392 5,509 171
1,236 (1,273) (270) (130) (99) (643) (131)
Asset by type
Non-derivative assets
Cash and cash equivalents 17 2,907 2,920 2,550 370 - - -
Pledged trading assets 18 540 550 390 125 35 - -
Non-pledged trading assets 18 15,144 15,300 13,540 1,460 270 30 -
banks 20 5,572 5,620 4,480 450 690 - -
customers 21 63,070 77,929 10,180 5,256 14,780 25,600 22,113
Investment securities 22 6,302 6,790 2,713 234 932 2,643 268
93,535 109,109 33,853 7,895 16,707 28,273 22,381
Derivative assets
Trading: 18 978
Inflow - 6,345 654 3,890 1,723 78 -
Outflow - (5,279) (250) (3,321) (1,643) (65) -
Risk management: 19 858
Inflow - 9,302 514 1,717 1,375 5,432 264
Outflow - (8,388) (493) (1,678) (1,301) (4,765) (151)
1,836 1,980 425 608 154 680 113

IFRS 7.39(a)–(b) Maturity analysis for financial assets and liabilities (continued)
Gross
nominal Less More
Carrying inflow/ than 1-3 3 months 1-5 than
IFRS 7.B11 In millions of euro Note amount (outflow) 1 month months to 1 year years 5 years
31 December 2011
Liability by type
IFRS 7.39(a) Non-derivative liabilities
Trading liabilities 18 5,680 (6,627) (5,568) (780) (279) - -
Deposits from banks 27 10,230 (11,324) (9,516) (1,332) (476) - -
Deposits from customers 28 48,904 (50,292) (36,758) (713) (3,443) (9,378) -
Debt securities issued 29 10,248 (11,785) - - - (11,785) -
Subordinated liabilities 30 4,985 (5,898) - - - (4,782) (1,116)
IFRS 7.B11C(c) Issued financial guarantee
contracts 32 28 (49) - - (49) - -
IFRS 7.B11D(e) Unrecognised loan
commitments - (1,566) (1,566) - - - -
80,075 (87,541) (53,408) (2,825) (4,247) (25,945) (1,116)
IFRS 7.39(b), B11B
Trading: 18 372 - - - - - -
Outflow - (2,925) (381) (1,651) (835) (58) -
Inflow - 2,533 122 1,583 789 39 -
Risk management: 19 789 - - - - - -
Outflow - (7,941) (313) (1,041) (1,423) (5,125) (39)
Inflow - 7,115 299 972 1,341 4,483 20
1,161 (1,218) (273) (137) (128) (661) (19)
Asset by type
Non-derivative assets
Cash and cash equivalent 17 2,992 3,007 2,649 358 - - -
Pledged trading assets 18 519 528 375 121 32 - -
Non-pledged trading assets 18 14,292 14,450 13,410 750 265 25 -
banks 20 4,707 4,753 3,721 443 589 - -
customers 21 56,805 70,119 9,701 4,976 12,890 22,450 20,102
Investment securities 22 5,269 5,823 2,045 212 679 2,633 254
84,584 98,680 31,901 6,860 14,455 25,108 20,356
Derivative assets
Trading: 18 957
Inflow - 6,334 678 3,811 1,756 89 -
Outflow - (5,258) (270) (3,254) (1,670) (64) -
Risk management: 19 726
Inflow - 7,378 299 987 1,498 4,532 62
Outflow - (6,615) (278) (907) (1,403) (3,987) (40)
1,683 1,839 429 637 181 570 22

IFRS 7.39(a)–(b) Maturity analysis for financial assets and liabilities (continued)
IFRS 7.39(a), (c) The above tables show the undiscounted cash flows on the Group’s non-derivative financial
assets and liabilities, including issued financial guarantee contracts, and unrecognised loan
commitments on the basis of their earliest possible contractual maturity. For issued financial
guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in
which the guarantee could be called.
The Group’s expected cash flows on some financial assets and liabilities vary significantly from
the contractual cash flows. For example, demand deposits from customers are expected to
maintain a stable or increasing balance and unrecognised loan commitments are not all expected
to be drawn down immediately. Also, retail mortgage loans have an original contractual maturity
of between 20 and 25 years but an average expected maturity of six years as customers take
advantage of early repayment options.
IFRS 7.39(b)–(c), The gross nominal inflows / (outflows) disclosed in the previous table represent the contractual
B11B, B11D undiscounted cash flows relating to derivative financial liabilities and assets held for risk
management purposes. The disclosure shows a net amount for derivatives that are net settled,
but a gross inflow and outflow amount for derivatives that have simultaneous gross settlement
(e.g. forward exchange contracts and currency swaps).
Trading derivative liabilities and assets forming part of the Group’s proprietary trading operations
are expected to be closed out prior to contractual maturity. Hence, in respect of these derivative
instruments the maturity analysis in the previous tables reflects the fair values at the date of the
statement of financial position since contractual maturities are not reflective of the liquidity risk
exposure arising from these positions. These fair values are disclosed in the less than one month
column. In addition, trading derivative liabilities and assets comprise also derivatives that are
entered into by the Group with its customers. In respect of these instruments, which are usually
not closed out prior to contractual maturity, the maturity analysis in the tables above reflects
the contractual undiscounted cash flows as the Group believes that contractual maturities are
essential for understanding the timing of cash flows associated with these derivative positions.
As part of the management of its liquidity risk arising from financial liabilities, the Group holds
liquid assets comprising cash and cash equivalents, and debt securities for which there is an active
and liquid market so that they can be readily sold to meet liquidity requirements. In addition, the
Group maintains agreed lines of credit with banks and holds unencumbered assets eligible for use
as collateral with central banks.
Explanatory notes
1. The EDTF report recommends that banks provide a quantitative analysis of the components of
the liquidity reserve they hold, ideally by providing averages as well as period-end balances. The
description should be complemented by an explanation of possible limitations on the use of
the liquidity reserve maintained in any material subsidiary or currency. For the purpose of these
illustrative financial statements we have assumed that including such information will enhance
the users’ understanding of how the Group manages its liquidity risk.
2. The EDTF report recommends disclosure of encumbered and unencumbered assets in a tabular
format by balance sheet categories, including collateral received that can be rehypothecated
or otherwise redeployed. For the purpose of these illustrative financial statements we have
assumed that including this information in the financial statements will enhance the users’
understanding of the Group’s exposure to liquidity risk.

IFRS 7.39(a)–(b) Maturity analysis for financial liabilities (continued)
The table below sets out the components of the Group’s liquidity reserve:1
IFRS 7.34(a), 39(c) Liquidity reserve
2012 2012 2011 2011
Carrying Fair Carrying Fair
In millions of euro amount value amount value
Balances with central banks 118 118 128 128

Cash and balances with other banks 256 256 184 184
Other cash and cash equivalents 2,133 2,133 2,291 2,291
Unencumbered debt securities issued by
sovereigns, central banks or multilateral
development banks 10,657 10,657 10,178 10,178
Other debt securities 8,058 8,058 6,909 6,909
Undrawn credit lines granted by central banks* 250 250 231 231
Other assets eligible for use as collateral
with central banks 15,548 16,550 13,686 14,278
Total liquidity reserve 37,020 38,022 33,607 34,199
* The amount is the actual credit line available.
IFRS 7.34(a) The table below set out the availability of the Group’s financial assets to support future funding.2
2012
Encumbered Unencumbered
Pledged as Available as
In millions of euro Note collateral Other* collateral Other** Total
Cash and cash equivalents - - 2,507 400 2,907

Trading assets 18 540 60 14,553 1,509 16,662
Loans and advances 2,015 - 15,548 51,079 68,642
Investment securities - 30 5,915 357 6,302
Other financial assets - - - 858 858
Non-financial assets - - - 1,763 1,763
Total assets 2,555 90 38,523 55,966 97,134
2011
Encumbered Unencumbered
Pledged as Available as
In millions of euro Note collateral Other* collateral Other** Total
Cash and cash equivalents - - 2,603 389 2,992

Trading assets 18 519 54 13,838 1,357 15,768
Loans and advances 1,730 - 13,686 46,096 61,512
Investment securities - 26 4,922 321 5,269
Other financial assets - - - 726 726
Non-financial assets - - - 1,549 1,549
Total assets 2,249 80 35,049 50,438 87,816
* Represents assets which are not pledged but which the Group believes it is restricted from using to secure
funding, for legal of other reasons.
** Represents assets that are not restricted for use as collateral, but the Group would not consider them as ready
available to secure funding in the normal course of business.
Explanatory note
1. IFRS 7.34, IFRS 7 Financial Instruments: Disclosures requires disclosure of information on each risk in a
40–41 format based on the information provided internally to key management personnel of the entity
(as defined in IAS 24 Related Party Disclosures), e.g. the entity’s board of directors or chief
executive.
The example shown in these illustrative financial statements in relation to market risk from
interest rates illustrates value at risk and a gap analysis, two common approaches to the
measurement and management of market risk arising from interest rates. The example assumes
that the primary basis for reporting to key management personnel on market risk from interest
rates is a value at risk measure for traded portfolios and a gap and sensitivity analysis for non-
trading portfolios. In respect of foreign exchange risk, the example assumes that the primary
basis for reporting to key management personnel on market risk from foreign exchange rates is
a value at risk measure and an analysis of concentration risk in relation to individual currencies.

IFRS 7.31–32 (d) Market risks1
Market risk is the risk that changes in market prices, such as interest rates, equity prices, foreign
exchange rates and credit spreads (not relating to changes in the obligor’s / issuer’s credit
standing) will affect the Group’s income or the value of its holdings of financial instruments. The
objective of the Group’s market risk management is to manage and control market risk exposures
within acceptable parameters in order to ensure the Group’s solvency while optimising the return
on risk.
Management of market risks
The Group separates its exposure to market risks between trading and non-trading portfolios.
Trading portfolios are mainly held by the Investment Banking unit, and include positions arising
from market making and proprietary position taking, together with financial assets and liabilities
that are managed on a fair value basis.
With the exception of translation risk arising on the Group’s net investments in its foreign
operations, all foreign exchange positions within the Group are transferred by Central Treasury to
the Investment Banking unit. Accordingly, the foreign exchange positions are treated as part of
the Group’s trading portfolios for risk management purposes.
Overall authority for market risk is vested in ALCO. ALCO sets up limits for each type of risk
in aggregate and for portfolios, with market liquidity being a primary factor in determining the
level of limits set for trading portfolios. The Group Market Risk Committee is responsible for the
development of detailed risk management policies (subject to review and approval by ALCO) and
for the day-to-day review of their implementation.
The Group employs a range of tools to monitor and limit market risk exposures. These are
discussed below, separately for trading and non-trading portfolios.
Explanatory note
1. The EDTF report recommends that banks provide information that facilitates users’ understanding
of the linkages between line items in the balance sheet and income statement with positions
included in the trading market risk disclosures. For the purpose of these illustrative financial
statements we have assumed that such disclosure would facilitate users’ understanding of how
the group manages the market risk.

IFRS 7.31–32 (d) Market risks (continued)
Management of market risks (continued)
IFRS 7.34(a) The table below sets out the allocation of assets and liabilities subject to market risk between
trading and non-trading portfolios.1
31 December 2012
Market risk measure
Carrying Trading Non-trading
In millions of euro Note amount portfolios portfolios
Assets subject to market risk

Cash and cash equivalents 17 2,907 - 2,907
Trading assets 18 16,662 16,662 -
Derivatives held for risk management 19 858 - 858
Loans and advances to banks 20 5,572 - 5,572
Loans and advances to customers 21 63,070 3,986 59,084
Investment securities 22 6,302 4,420 1,882
Liabilities subject to market risk
Trading liabilities 18 7,026 7,026 -
Deposits 27, 28 65,324 - 65,324
Debt securities 29 11,227 2,409 8,818
Subordinated liabilities 30 5,642 - 5,642
31 December 2011
Assets subject to market risk
Cash and cash equivalents 17 2,992 - 2,992
Trading assets 18 15,768 15,768 -
Loans and advances to banks 20 4,707 - 4,707
Loans and advances to customers 21 56,805 3,145 53,660
Investment securities 22 5,269 3,528 1,741
Liabilities subject to market risk
Trading liabilities 18 6,052 6,052 -
Deposits 27, 28 59,134 - 59,134
Debt securities 29 10,248 2,208 8,040
Subordinated liabilities 30 4,985 - 4,985
Exposure to market risks – trading portfolios

The principal tool used to measure and control market risk exposure within the Group’s trading
portfolios is value at risk (VaR). The VaR of a trading portfolio is the estimated loss that will
arise on the portfolio over a specified period of time (holding period) from an adverse market
movement with a specified probability (confidence level). The VaR model used by the Group is
IFRS 7.41(a) based upon a 99 percent confidence level and assumes a 10-day holding period. The VaR model
used is based mainly on historical simulation. Taking account of market data from the previous
two years, and observed relationships between different markets and prices, the model
generates a wide range of plausible future scenarios for market price movements.

(d) Market risks (continued)
Exposure to market risks – trading portfolios (continued)
IFRS 7.41(b) Although VaR is an important tool for measuring market risk, the assumptions on which the
model is based give rise to some limitations, including the following:
●● A 10-day holding period assumes that it is possible to hedge or dispose of positions within
that period. This may not be the case for illiquid assets or in situations in which there is severe
general market illiquidity.
●● A 99 percent confidence level does not reflect losses that may occur beyond this level. Even
within the model used there is a one percent probability that losses could exceed the VaR.
●● VaR is calculated on an end-of-day basis and does not reflect exposures that may arise on
positions during the trading day.
●● The use of historical data as a basis for determining the possible range of future outcomes
may not always cover all possible scenarios, especially those of an exceptional nature.
●● The VaR measure is dependent upon the Group’s position and the volatility of market prices.
The VaR of an unchanged position reduces if market price volatility declines and vice versa.
The Group uses VaR limits for total market risk and specific foreign exchange, interest rate,
equity, credit spread and other price risks. The overall structure of VaR limits is subject to review
and approval by ALCO. VaR limits are allocated to trading portfolios. VaR is measured at least daily
and more regularly for more actively traded portfolios. Daily reports of utilisation of VaR limits are
submitted to Group Market Risk and regular summaries are submitted to ALCO.
A summary of the VaR position of the Group’s trading portfolios at 31 December and during the
period is as follows:
At 31
IFRS 7.41 In millions of euro December Average Maximum Minimum
2012
Foreign currency risk 12.04 10.04 15.06 7.97
Interest rate risk 27.41 22.05 39.48 17.53
Credit spread risk 9.07 6.97 9.52 5.66
Other price risk 3.28 3.01 4.02 2.42
Covariance (2.76) (3.08) - -
Overall 49.04 38.99 62.53 34.01
2011
Foreign currency risk 9.28 8.40 12.05 4.64
Interest rate risk 20.43 18.05 26.52 13.72
Credit spread risk 6.08 5.11 8.83 3.50
Other price risk 3.32 2.89 4.56 2.07
Covariance (2.24) (2.08) - -
Overall 36.87 32.37 47.64 26.68

Exposure to market risks – trading portfolios (continued)
The limitations of the VaR methodology are recognised by supplementing VaR limits with other
position and sensitivity limit structures, including limits to address potential concentration risks
within each trading portfolio. In addition, the Group uses a wide range of stress tests to model
the financial impact of a variety of exceptional market scenarios on individual trading portfolios
and the Group’s overall position. The Group determines the scenarios as follows:
●● sensitivity scenarios consider the impact of any single risk factor or set of factors that are
unlikely to be captured within the VAR models;
●● technical scenarios consider the largest move in each risk factor without consideration of any
underlying market correlation; and
●● hypothetical scenarios consider potential macro economic events, for example, periods
of prolonged market illiquidity, reduced fungibility of currencies, natural disasters or other
catastrophes, health pandemics, etc.
The analysis of scenarios and stress tests are reviewed by ALCO.
The Group VaR models are subject to regular validation by Group Market Risk to ensure that
they continue to perform as expected, and that assumptions used in model development are
still appropriate. As part of the validation process, the potential weaknesses of the models are
analysed using statistical techniques, such as back-testing.

Exposure to interest rate risk – non-trading portfolios
The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations
in the future cash flows or fair values of financial instruments because of a change in market
interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and
by having pre-approved limits for repricing bands. ALCO is the monitoring body for compliance
with these limits and is assisted by Central Treasury in its day-to-day monitoring activities. A
summary of the Group’s interest rate gap position on non-trading portfolios is as follows:
Less
Carrying than 3 3-6 6-12 1-5 More than
In millions of euro Note amount months months months years 5 years
31 December 2012
IFRS 7.34(a)
Cash and cash equivalents 17 2,907 2,907 - - - -
Loans and advances to banks 20 5,572 4,903 669 - - -
customers 21 59,084 22,162 7,760 3,259 22,256 3,647
Investment securities 22 1,882 177 442 720 442 101
69,445 30,149 8,871 3,979 22,698 3,748
Deposits from banks 27 (11,678) (11,202) (476) - - -
Deposits from customers 28 (53,646) (39,715) (1,584) (1,636) (10,711) -
Debt securities issued 29 (8,818) (5,143) - (184) (3,491) -
Subordinated liabilities 30 (5,642) - (4,782) - - (860)
(79,784) (56,060) (6,842) (1,820) (14,202) (860)
Effect of derivatives held for
risk management 19 - 3,620 1,576 - (5,196) -
(10,339) (22,291) 3,605 2,159 3,300 2,888
31 December 2011
IFRS 7.34(a)
Cash and cash equivalents 17 2,992 2,992 - - - -
Loans and advances to banks 20 4,707 4,142 565 - - -
customers 21 53,660 20,381 7,227 2,913 19,867 3,272
Investment securities 22 1,741 162 406 666 406 101
63,100 27,677 8,198 3,579 20,273 3,373
Deposits from banks 27 (10,230) (9,778) (452) - - -
Deposits from customers 28 (48,904) (38,735) (1,493) (1,065) (7,611) -
Debt securities issued 29 (8,040) (4,473) - (178) (3,389) -
Subordinated liabilities 30 (4,985) - (4,158) - - (827)
(72,159) (52,986) (6,103) (1,243) (11,000) (827)
Effect of derivatives held for
risk management 19 - 3,225 1,240 - (4,465) -
(9,059) (22,084) 3,335 2,436 4,808 2,546

Exposure to interest rate risk – non-trading portfolios (continued)
The management of interest rate risk against interest rate gap limits is supplemented by
monitoring the sensitivity of the Group’s financial assets and liabilities to various standard and
non-standard interest rate scenarios. Standard scenarios that are considered on a monthly basis
include a 100 basis point (bp) parallel fall or rise in all yield curves worldwide and a 50 bp rise or
fall in the greater than 12-month portion of all yield curves. An analysis of the Group’s sensitivity
to an increase or decrease in market interest rates, assuming no asymmetrical movement in yield
curves and a constant financial position, is as follows:
100 bp 100 bp 50 bp 50 bp
parallel parallel increase decrease
IFRS 7.40(a) In millions of euro increase decrease after 1 year after 1 year
Sensitivity of projected net interest income

2012
At 31 December (435) 461 (222) 230
Average for the period (425) 452 (220) 226
Maximum for the period (446) 485 (236) 242
Minimum for the period (394) 419 (203) 209
2011
At 31 December (394) 417 (202) 209
Sensitivity of reported equity to interest rate movements
2012
At 31 December (778) 789 (390) 398
2011
At 31 December (692) 699 (379) 383
Interest rate movements affect reported equity in the following ways:
●● retained earnings arising from increases or decreases in net interest income and the fair value
changes reported in profit or loss;
●● fair value reserves arising from increases or decreases in fair values of available-for-sale
financial instruments reported directly in equity; and
●● hedging reserves arising from increases or decreases in fair values of hedging instruments
designated in qualifying cash flow hedge relationships.
Overall non-trading interest rate risk positions are managed by Central Treasury, which uses
investment securities, advances to banks, deposits from banks and derivative instruments to
manage the overall position arising from the Group’s non-trading activities. The use of derivatives
to manage interest rate risk is described in Note 19.
Explanatory note
1. Operational risk is not a financial risk, and is not specifically required to be disclosed by IFRS 7
Financial Instruments: Disclosures. However, operational risk in a financial institution commonly
is managed and reported internally in a formal framework similar to financial risks, and may be a
factor in capital allocation and regulation.

Exposure to other market risks – non-trading portfolios
Equity price risk is subject to regular monitoring by Group Market Risk, but is not currently
significant in relation to the overall results and financial position of the Group.
The effect of structural foreign exchange positions on the Group’s net investments in foreign
subsidiaries and branches, together with any related net investment hedges (see Note 19), is
recognised in other comprehensive income. The Group’s policy is only to hedge such exposures
when not to do so would have a significant impact on the regulatory capital ratios of the Group
and its banking subsidiaries. The result of this policy is that hedging generally only becomes
necessary when the ratio of structural exposures in a particular currency to risk-weighted assets
denominated in that currency diverges significantly from the capital ratio of the entity being
considered. In addition to monitoring VaR in respect of foreign currency, the Group monitors
any concentration risk in relation to any individual currency in regard to the translation of foreign
currency transactions and monetary assets and liabilities into the functional currency of Group
entities, and with regard to the translation of foreign operations into the presentation currency of
the Group (after taking account of the impact of any qualifying net investment hedges). As at the
reporting date net currency exposures representing more than 10 percent of the Group’s equity
are as follows:
IFRS 7.34(c) Foreign currency transactions
Functional currency of Group entities
2012 2011 2012 2011
In millions Euro US$ Euro US$
Net foreign currency exposure:

Pounds Sterling (715) - - -
US$ 684 - 650 -
Euro - 703 - -
Foreign operations
Net investments
In millions
2012 2011
Functional currency of foreign operation:

Pounds Sterling 984 782
US$ 680 -
(e) Operational risks1

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes
associated with the Group’s processes, personnel, technology and infrastructure, and from
external factors other than credit, market and liquidity risks, such as those arising from legal and
regulatory requirements and generally accepted standards of corporate behaviour. Operational
risks arise from all of the Group’s operations.
The Group’s objective is to manage operational risk so as to balance the avoidance of financial
losses and damage to the Group’s reputation with overall cost effectiveness and innovation. In all
cases, the Group policy requires compliance with all applicable legal and regulatory requirements.
Explanatory note
1. IAS 1.134–136 IAS 1 Presentation of Financial Statements requires the disclosure of information on an entity’s
objectives, policies and processes for managing capital, and has specific requirements when the
entity’s capital is regulated.
The example disclosures presented in these illustrative financial statements assume that
the primary basis for capital management is regulatory capital requirements. However, other
presentations are possible.
Banks often will be subject to specific local regulatory capital requirements. The example
disclosures are not designed to comply with any particular regulatory framework.

(e) Operational risks (continued)
The Board of Directors has delegated responsibility for operational risk to its Group Operational
Committee which is responsible for the development and implementation of controls to address
operational risk. This responsibility is supported by the development of overall Group standards
for the management of operational risk in the following areas:
●● requirements for appropriate segregation of duties, including the independent authorisation of
transactions;
●● requirements for the reconciliation and monitoring of transactions;
●● compliance with regulatory and other legal requirements;
●● documentation of controls and procedures;
●● requirements for the periodic assessment of operational risks faced, and the adequacy of
controls and procedures to address the risks identified;
●● requirements for the reporting of operational losses and proposed remedial action;
●● development of contingency plans;
●● training and professional development;
●● ethical and business standards; and
●● risk mitigation, including insurance where this is effective.
Compliance with Group standards is supported by a programme of periodic reviews undertaken
by Internal Audit. The results of Internal Audit reviews are discussed with the Group Operational
committee, with summaries submitted to the Audit Committee and senior management of the
Group.
IAS 1.134 (f) Capital management1
Regulatory capital
IAS 1.135(a)(ii) The Group’s lead regulator [Name of regulator] sets and monitors capital requirements for the
Group as a whole and for the parent company. The individual banking operations are directly
supervised by their local regulators.
IAS 1.135(c) The capital requirements of the lead regulator are based on the Basel II framework. The Group
has been granted approval by its lead regulator [name of regulator] to adopt the advanced
approaches to credit and operational risk management, except in respect of the credit portfolios
of certain subsidiaries for which the standardised approach is being applied at present pending
approval for use of the advanced approach from the lead regulator. The Group calculates
requirements for market risk in its trading portfolios based upon the Group’s VaR models.
Explanatory note
1. IAS 1.135(c), (e) When applicable, an entity discloses a description of changes in quantitative and qualitative data
about its objectives, policies and processes for managing capital as compared to the prior period,
and any instances of non-compliance with any externally imposed capital requirements to which
it is subject.
IAS 1.136 When an aggregate disclosure of capital requirements and how capital is managed would not
provide useful information or would distort a financial statement user’s understanding of an
entity’s capital resources, the entity discloses separate information for each capital requirement
to which the entity is subject.

(f) Capital management (continued)
Regulatory capital (continued)
IAS 1.135(a)(i) The Group’s regulatory capital comprises two tiers:
●● Tier 1 capital, which includes ordinary share capital, share premium, retained earnings,
translation reserve and non-controlling interests after deductions for goodwill and intangible
assets, and other regulatory adjustments relating to items that are included in equity but are
treated differently for capital adequacy purposes; and
●● Tier 2 capital, which includes perpetual bonds, qualifying subordinated liabilities, collective
impairment allowances (limited to those credit portfolios where the standardised approach
is used) and the element of the fair value reserve relating to unrealised gains and losses on
equity instruments classified as available for sale.
Various limits are applied to elements of the capital base. For example, the qualifying Tier 2
capital cannot exceed Tier 1 capital; and qualifying term subordinated loan capital may not exceed
50 percent of Tier 1 capital. Other deductions from capital include the carrying amounts of
investments in subsidiaries that are not included in the regulatory consolidation, investments in
the capital of banks and certain other regulatory items.
Banking operations are categorised as either trading book or non-trading book, and risk-weighted
assets are determined according to specified requirements that seek to reflect the varying levels
of risk attached to assets and exposures not recognised in the statement of financial position.
Basel II maintains a risk-weighted asset requirement in respect of operational risk.
IAS 1.135(a)(iii) The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and
market confidence and to sustain future development of the business. The impact of the level of
capital on shareholders’ return is also recognised and the Group recognises the need to maintain
a balance between the higher returns that might be possible with greater gearing and the
advantages and security afforded by a sound capital position.
IAS 1.135(c) Due to the risks arising from sovereign debt and related uncertainties (see Note 4(b) the
regulatory agency of [Name of jurisdiction] [Name of regulatory agency] recommended that
banks comply with a minimum Tier 1 capital ratio of 9% by 30 June 2012. The minimum ratio
includes an exceptional and temporary capital buffer against sovereign debt exposures.
IAS 1.135(d) The Group and its individually regulated operations have complied with all externally imposed
capital requirements.1

Regulatory capital (continued)
IAS 1.135(b)–(c) The Group’s regulatory capital position under Basel II at 31 December was as follows:
Tier 1 capital
Ordinary share capital 33 1,759 1,756
Share premium 33 466 439
Retained earnings 33 3,350 2,949
Translation reserve 33 62 72
Non-controlling interests 33 155 128
Less intangible assets 24 (275) (259)
Less 50 percent of excess of expected losses over
accounting impairment provisions on credit portfolios (408) (352)
Less fair value losses, net of deferred tax, arising from the credit
spreads on debt securities issued designated at fair value (6) (4)
Other regulatory adjustments 9 6
5,112 4,735
Tier 2 capital
Perpetual bonds 33 500 500
Fair value reserve for available-for-sale equity securities 70 73
Collective allowances for impairment 21 22 24
Less 50 percent of excess of expected losses over
accounting impairment provisions on credit portfolios (408) (352)
Less 50 percent of securitisation positions not included in
risk-weighted assets (15) (12)
Qualifying subordinated liabilities 30 2,556 2,079
2,725 2,312
Total regulatory capital 7,837 7,047
The lead regulator’s approach to measurement of capital adequacy is primarily based on
monitoring the relationship of the Capital Resources Requirement to available capital resources.
The lead regulator sets individual capital guidance (ICG) for each bank and banking group in
excess of the minimum Capital Resources Requirement of 8%. A key input to the ICG setting
process is the Group’s Internal Capital Assessment Process (ICAP).

IAS 1.135(a) Capital allocation
Management uses regulatory capital ratios to monitor its capital base (see [name of document]
for details). The allocation of capital between specific operations and activities is, to a large
extent, driven by optimisation of the return achieved on the capital allocated. The amount of
capital allocated to each operation or activity is based primarily upon the regulatory capital, but in
some cases the regulatory requirements do not reflect fully the varying degree of risk associated
with different activities. In such cases the capital requirements may be flexed to reflect differing
risk profiles, subject to the overall level of capital to support a particular operation or activity
not falling below the minimum required for regulatory purposes. The process of allocating
capital to specific operations and activities is undertaken independently of those responsible
for the operation by Group Risk and Group Credit, and is subject to review by the Group Credit
Committee or ALCO as appropriate.
Although maximisation of the return on risk-adjusted capital is the principal basis used in
determining how capital is allocated within the Group to particular operations or activities, it is not
the sole basis used for decision-making. Account is also taken of synergies with other operations
and activities, the availability of management and other resources, and the fit of the activity
with the Group’s longer term strategic objectives. The Group’s policies in respect of capital
management and allocation are reviewed regularly by the Board of Directors.
Explanatory note
1. IAS 1.122–124 An entity discloses the judgements (other than those involving estimates) that management
has made in the process of applying the entity’s accounting policies and that have the most
significant effect on the amounts recognised in the financial statements. The examples that are
provided in IAS 1 indicate that such disclosure is based on qualitative information.
IAS 1.125, 129 An entity discloses information about the assumptions regarding the future and other major
sources of estimation uncertainty at the end of the reporting period that have a significant risk of
resulting in a material adjustment to the carrying amounts of assets and liabilities within the next
reporting period. The examples that are provided in IAS 1 indicate that such disclosure is based
on quantitative data – e.g. appropriate discount rates.

5. Use of estimates and judgements1
The preparation of the consolidated financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimates are revised and in any
future periods affected.
IAS 1.122, 125 Management discusses with the Group Audit Committee the development, selection and disclosure
of the Group’s critical accounting policies and their application, and assumptions made relating
to major estimation uncertainties. Information about assumptions and estimation uncertainties
that have a significant risk of resulting in a material adjustment within the next financial year and
about critical judgements in applying accounting policies that have the most significant effect on
the amounts recognised in the consolidated financial statements is disclosed below.
These disclosures supplement the commentary on financial risk management (see Note 4).
IAS 1.122, 125 (a) Impairment
Assets accounted for at amortised cost are evaluated for impairment on a basis described in
Note 3(j)(vii).
The specific component of the total allowances for impairment applies to financial assets
evaluated individually for impairment and is based upon management’s best estimate of the
present value of the cash flows that are expected to be received. In estimating these cash flows,
management makes judgements about a debtor’s financial situation and the net realisable value
of any underlying collateral. Each impaired asset is assessed on its merits, and the workout
strategy and estimate of cash flows considered recoverable are independently approved by the
Credit Risk function.
A collective component of the total allowance is established for:
●● groups of homogeneous loans that are not considered individually significant; and
●● groups of assets that are individually significant but that were not found to be individually
impaired (IBNR).
Collective allowance for groups of homogeneous loans is established using statistical methods
such as roll rate methodology or, for small portfolios with insufficient information, a formula
approach based on historic loss rate experience. The roll rate methodology uses statistical
analysis of historical data on delinquency to estimates the amount of loss. The estimate of loss
arrived at on the basis of historical information is then reviewed to ensure that it appropriately
reflects the economic conditions and product mix at the reporting date. Roll rates and loss rates
are regularly benchmarked against actual loss experience.
Collective allowance for groups of assets that are individually significant but that were not found
to be individually impaired (IBNR) cover credit losses inherent in portfolios of loans and advances,
and held-to-maturity investment securities with similar credit risk characteristics when there is
objective evidence to suggest that they contain impaired loans and advances, and held-to-maturity
investment securities, but the individual impaired items cannot yet be identified. In assessing
the need for collective loss allowances, management considers factors such as credit quality,
portfolio size, concentrations and economic factors. In order to estimate the required allowance,
assumptions are made to define the way inherent losses are modelled and to determine the
required input parameters, based on historical experience and current economic conditions. The
accuracy of the allowances depends on the estimates of future cash flows for specific counterparty
allowances and the model assumptions and parameters used in determining collective allowances.
Explanatory notes
1. IAS 1.122 Higher risk Eurozone exposures
The countries and exposures for which disclosure is appropriate, and the nature and extent of
information with respect to different countries, will depend on the entity’s specific facts and
circumstances.
2. IFRS 7.27, 27A IFRS 7 requires disclosures relating to fair value measurements using a three-level fair value
hierarchy that reflects the significance of the inputs used in measuring fair values and contains
the following three levels:
●● Level 1 – fair value measurements using quoted prices (unadjusted) in active markets for
identical assets or liabilities;
●● Level 2 – fair value measurements using inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly – i.e. as prices – or indirectly
– i.e. derived from prices; and
●● Level 3 – fair value measurements using inputs for the asset or liability that are not based on
observable market data – i.e. unobservable inputs.

5. Use of estimates and judgements (continued)
IAS 1.122, 125 (a) Impairment (continued)
IAS 39.61 Investments in equity securities were evaluated for impairment on the basis described in
Note 3(j)(vii). For an investment in an equity security, a significant or prolonged decline in its fair
value below its cost was objective evidence of impairment. In this respect, the Group regarded
a decline in fair value in excess of 20 percent to be significant and a decline in a quoted market
price that persisted for nine months or longer to be prolonged.
IAS 1.122 An assessment as to whether an investment in sovereign debt (see Note 4(b)) is impaired may
be complex. In making such an assessment, the Group considers the following factors.1
●● The market’s assessment of creditworthiness as reflected in the bond yields.
●● The rating agencies’ assessments of the creditworthiness.
●● The ability of the country to access the capital markets for new debt issuance.
●● The probability of debt being restructured resulting in holders suffering losses through
voluntary or mandatory debt forgiveness.
●● The international support mechanisms in place to provide the necessary support as ‘lender
of last resort’ to that country as well as the intention, reflected in public statements,
about governments’ and agencies’ willingness to use those mechanisms. This includes an
assessment as to the depth of those mechanisms and, irrespective of the political intent,
whether there is the capacity to fulfil the required criteria.
See Note 4(b) for the Group’s assessment of whether there is objective evidence of impairment
of its investments in sovereign higher risk Eurozone debt, based on the above factors.
IAS 1.122, 125 (b) Fair value
The determination of fair value for financial assets and financial liabilities for which there is no
observable market price requires the use of valuation techniques as described in Note 3(j)(vi).
For financial instruments that trade infrequently and have little price transparency, fair value is
less objective, and requires varying degrees of judgement depending on liquidity, concentration,
uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.
The Group’s accounting policy on fair value measurements is discussed in Note 3(j)(vi).
IFRS 7.27A The Group measures fair values using the following fair value hierarchy that reflects the
significance of the inputs used in making the measurements.2
●● Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
●● Level 2: Valuation techniques based on observable inputs, either directly – i.e. as prices − or
indirectly – i.e. derived from prices. This category includes instruments valued using: quoted
market prices in active markets for similar instruments; quoted prices for identical or similar
instruments in markets that are considered less than active; or other valuation techniques
where all significant inputs are directly or indirectly observable from market data.
●● Level 3: Valuation techniques using significant unobservable inputs. This category includes all
instruments where the valuation technique includes inputs not based on observable data and
the unobservable inputs have a significant effect on the instrument’s valuation. This category
includes instruments that are valued based on quoted prices for similar instruments where
significant unobservable adjustments or assumptions are required to reflect differences
between the instruments.
Explanatory note
1. The IASB Expert Advisory Panel report (the Panel report) summarises the discussions of the
Panel and provides useful information and educational guidance for measuring and disclosing
fair values and for meeting the requirements of IFRS. It does not establish new requirements for
entities applying IFRS.
The Panel report states that it would be helpful for an entity to consider disclosure of the control
environment and that a description of the entity’s governance and controls over the valuation
processes, particularly as it applies to identified classes of financial instruments for which
enhanced fair value disclosures are provided – i.e. instruments of particular interest to users,
provides useful information about the quality of reported fair values and allows users to ascertain
why management is satisfied that the values reported are representationally faithful.

IAS 1.122, 125 (b) Fair value (continued)
IFRS 7.27 Fair values of financial assets and financial liabilities that are traded in active markets are based
on quoted market prices or dealer price quotations. For all other financial instruments the Group
determines fair values using valuation techniques.
Valuation techniques include net present value and discounted cash flow models, comparison
to similar instruments for which market observable prices exist, Black-Scholes and polynomial
option pricing models and other valuation models. Assumptions and inputs used in valuation
techniques include risk-free and benchmark interest rates, credit spreads and other premia
used in estimating discount rates, bond and equity prices, foreign currency exchange rates,
equity and equity index prices and expected price volatilities and correlations. The objective of
valuation techniques is to arrive at a fair value determination that reflects the price of the financial
instrument at the reporting date, that would have been determined by market participants acting
at arm’s length.
The Group uses widely recognised valuation models for determining the fair value of common
and more simple financial instruments, like interest rate and currency swaps that use only
observable market data and require little management judgement and estimation. Observable
prices and model inputs are usually available in the market for listed debt and equity securities,
exchange traded derivatives and simple over the counter derivatives like interest rate swaps.
Availability of observable market prices and model inputs reduces the need for management
judgement and estimation and also reduces the uncertainty associated with determination of fair
values. Availability of observable market prices and inputs varies depending on the products and
markets and is prone to changes based on specific events and general conditions in the financial
markets.
For more complex instruments, the Group uses proprietary valuation models, which are usually
developed from recognised valuation models. Some or all of the significant inputs into these
models may not be observable in the market, and are derived from market prices or rates or are
estimated based on assumptions. Examples of instruments involving significant unobservable
inputs include certain over the counter structured derivatives, certain loans and securities for
which there is no active market and retained interests in securitisations. Valuation models that
employ significant unobservable inputs require a higher degree of management judgement and
estimation in the determination of fair value. Management judgement and estimation are usually
required for selection of the appropriate valuation model to be used, determination of expected
future cash flows on the financial instrument being valued, determination of probability of
counterparty default and prepayments and selection of appropriate discount rates.
The Group has an established control framework1 with respect to the measurement of fair
values. This framework includes a Product Control function, which is independent of front office
management and reports to the Chief Financial Officer, and which has overall responsibility for
independently verifying the results of trading and investment operations and all significant fair
value measurements. Specific controls include: verification of observable pricing inputs and
reperformance of model valuations; a review and approval process for new models and changes
to models involving both Product Control and Group Market Risk; calibration and back testing
of models against observed market transactions; analysis and investigation of significant daily
valuation movements; review of significant unobservable inputs and valuation adjustments
by a committee of senior Product Control and Group Market Risk personnel; and reporting of
significant valuation issues to the Group Audit Committee.
Explanatory notes
1. IFRS 7.27A The level in the fair value hierarchy within which the fair value measurement is categorised in its
entirety is determined on the basis of the lowest level input that is significant to the fair value
measurement in its entirety. For this purpose, the significance of an input is assessed against
the fair value measurement in its entirety. If a fair value measurement uses observable inputs
that require significant adjustments based on unobservable inputs, then that measurement
is a Level 3 measurement. Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors specific to the asset or
liability. In instances where multiple unobservable inputs are used, in our view the unobservable
inputs should be considered individually and in total for the purpose of determining their
significance. In instances where factors such as volatility inputs are used, an entity could apply
some form of comparability methodology – e.g. a stress test on an option’s volatility input or a
‘with and without’ comparison to assist in determining significance. This issue is discussed in the
9th Edition 2012/13 of our publication Insights into IFRS (7.8.300.60).
2. IFRS 7.27B(b) For fair value measurements recognised in the statement of financial position, an entity discloses
any significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons
for those transfers. Transfers into each level should be disclosed and discussed separately from
transfers out of each level. For this purpose, significance is judged with respect to profit or loss,
and total assets or total liabilities.

IAS 1.122, 125 (b) Fair value (continued)
IFRS 7.27B(a) The table below analyses financial instruments measured at fair value at the end of the
reporting period, by the level in the fair value hierarchy into which the fair value measurement is
categorised:1
In millions of euro Note Level 1 Level 2 Level 3 Total
31 December 2012
Trading assets 18 10,805 5,177 680 16,662
risk management 19 26 832 - 858
Loans and advances to customers 21 - 3,827 159 3,986
Investment securities 22 2,606 2,886 709 6,201
13,437 12,722 1,548 27,707
Trading liabilities 18 5,719 1,237 70 7,026
Derivative liabilities held for
Debt securities issued 29 1,928 481 - 2,409
7,688 2,505 70 10,263
31 December 2011
Trading assets 18 10,805 4,220 743 15,768
13,127 9,945 1,735 24,807
Trading liabilities 18 5,112 871 69 6,052
6,630 2,350 69 9,049
IFRS 7.27B(b) During the current year, due to changes in market conditions for certain investment securities,
quoted prices in active markets were no longer available for these securities. However, there was
sufficient information available to measure fair values of these securities based on observable
market inputs. Hence, these securities, with a carrying amount of e369 million, were transferred
from Level 1 to Level 2 of the fair value hierarchy.2
Explanatory notes
1. IFRS 7.27B(c) For fair value measurements in Level 3 of the fair value hierarchy, an entity discloses a
reconciliation from the beginning balances to the ending balances, disclosing separately changes
during the period attributable to the following:
●● total gains or losses for the year recognised in profit or loss, and a description of where they
are presented in the statement of comprehensive income or the separate income statement (if
presented);
●● total gains or losses recognised in other comprehensive income;
●● purchases, sales, issues and settlements (each type of movement disclosed separately); and
●● transfers into or out of Level 3 – e.g. transfers attributable to changes in the observability
of market data – and the reasons for those transfers. For significant transfers, transfers into
Level 3 should be disclosed and discussed separately from transfers out of Level 3.
2. IFRS 7.27B(d) For fair value measurements in Level 3 of the fair value hierarchy, an entity discloses the amount
of total gains or losses for the year recognised in profit or loss relating to those assets and
liabilities held at the end of the reporting period and a description of where those gains or losses
are presented in the statement of comprehensive income or the separate income statement (if
presented).
2012
Loans and
Trading advances to Investment Trading
In millions of euro assets customers securities liabilities Total
IFRS 7.27B(c) Balance at 1 January 743 119 873 (69) 1,666

Total gains or losses:
IFRS 7.27B(c)(i) in profit or loss 12 (4) (71) 5 (58)
IFRS 7.27B(c)(ii) in other comprehensive income - - (81) - (81)
IFRS 7.27B(c)(iii) Purchases 41 44 - - 85
IFRS 7.27B(c)(iii) Issues - - - (6) (6)
IFRS 7.27B(c)(iii) Settlements (51) - (6) - (57)
IFRS 7.27B(c)(iv) Transfers into Level 3 - - - - -
IFRS 7.27B(c)(iv) Transfers out of Level 3 (65) - (6) - (71)
IFRS 7.27B(c) Balance at 31 December 680 159 709 (70) 1,478
Total gains or losses included in profit or loss for the year in the above table are presented in the
statement of comprehensive income as follows:
2012
Loans and
Total gains or losses included in

IFRS 7.27B(c)(i)
profit or loss for the year:
Net trading income 12 - - 5 17
Net income from other financial
instruments carried at fair value - (4) (71) - (75)
Total gains or losses for the year
IFRS 7.27B(d)
included in profit or loss for
assets and liabilities held at the
end of the reporting year:2
Loans and
IFRS 7.27B(c) Balance at 1 January 693 119 903 (60) 1,655

IFRS 7.27B(c) Total gains or losses:
IFRS 7.27B(c)(i) in profit or loss 35 2 6 (4) 39
IFRS 7.27B(c)(ii) in other comprehensive income - - - - -
IFRS 7.27B(c)(iii) Purchases 86 - 15 - 101
IFRS 7.27B(c)(iii) Issues - - - (5) (5)
IFRS 7.27B(c)(iii) Settlements (15) (2) (32) - (49)
IFRS 7.27B(c)(iv) Transfers into Level 3 - - - - -
IFRS 7.27B(c)(iv) Transfers out of Level 3 (56) - (19) - (75)
IFRS 7.27B(c) Balance at 31 December 743 119 873 (69) 1,666
Total gains or losses included in profit or loss for the year in the above table are presented in the
statement of comprehensive income as follows.
2011
Loans and

IFRS 7.27B(c)(i)
Net trading income 35 - - (4) 31
instruments carried at fair value - 2 6 - 8
Total gains or losses for the year
IFRS 7.27B(d)
included in profit or loss for
assets and liabilities held at the
end of the reporting period:
Net trading income 28 - - (2) 26
instruments carried at fair value - 1 3 - 4
IFRS 7.27B(c)(iv) During 2011 and 2012, certain trading assets and investment securities were transferred out of
Level 3 of the fair value hierarchy when significant inputs used in their fair value measurements
such as certain credit spreads and long-dated option volatilities, which were previously
unobservable became observable.
Explanatory notes
1. The Panel report states that providing enhanced and detailed disclosures about the fair value
of financial instruments that are of particular interest to the users of financial statements will
help the users understand the techniques used and judgements made in measuring fair value.
There are a variety of factors to consider in identifying instruments that could be the focus of
enhanced disclosure and it might be helpful to include an explanation of why the entity considers
these instruments to be of particular interest to users and the criteria it has applied to identify
instruments for which additional disclosure would be useful. These instruments of particular
interest will change over time as market conditions change and are likely to include those that
are the focus of internal management reporting and are receiving external market interest. As the
internal and external focus on particular financial instruments changes over time, adjusting the
level of detail of disclosure about different financial instruments to reflect this provides users with
an appropriate level of information necessary to understand better the fair value measurements
that are of most interest. For example, if the market for a particular type of instrument has
become extremely volatile and there have been large increases in bid-offer spreads, or if there
has been a significant decrease in liquidity, then the level of risk associated with the instrument
and the difficulty in valuing the instrument are likely to have increased. Providing more detailed or
enhanced disclosures about this type of instrument is likely to help users.
2. The Panel report states that for instruments of particular interest to users, a detailed description
of the terms of the instruments gives a better understanding of what the instruments are and
facilitates comparability between entities. In addition to numerical disclosure of the carrying
amount of the instruments and the changes in their carrying amounts, numerical disclosure of
other important terms of an instrument, for example the notional amount of a debt instrument,
might give users a better understanding of the fair value measurement. If the cash flows of an
instrument are generated from or secured by specific underlying assets, then more detailed
information about factors that might affect the value of those underlying assets, such as the
maturity, vintage or location of the assets, might help users to assess better the fair value
measurement of the asset.
3. The Panel report states that it would be helpful for an entity to consider providing sufficiently
detailed disclosure about the unobservable inputs used and how these have been estimated. For
assumptions made and inputs applied in the valuation technique that are unobservable or difficult
to estimate, more detailed and transparent disclosure allows users to form educated judgements
as to the reasonableness of the valuation methodologies and the assumptions applied.
The Panel report also states that it would be helpful for an entity to consider providing an
understandable and suitably detailed description of the valuation techniques used in measuring
fair values, particularly those valuation techniques used to measure the fair value of instruments
that are of particular interest to users. In disclosing this information an entity might consider
providing a description of the risks or shortcomings (if any) of the selected valuation techniques
and whether there have been any changes in the valuation techniques used and the reasons for
these changes. An entity may also consider providing disclosure of the facts and circumstances
that lead to the determination that the market for a particular instrument is active or inactive.

IAS 1.122 (b) Fair value (continued)
Apart from the above, during the current financial year, low trading volumes continued and there
has not been sufficient trading volume to establish an active market and so the Group continued
to determine the fair value for certain asset-backed securities using valuation techniques. These
securities are backed primarily by static pools of residential mortgages and enjoy a senior claim
on cash flows. The fair value of asset-backed securities measured using significant unobservable
inputs at 31 December 2012 was €422 million (2011: €269 million) for trading securities and
€685 million for investment securities (2011: €502 million).1, 2
The Group’s valuation methodology for valuing these asset-backed securities uses a discounted
cash flow methodology that takes into account original underwriting criteria, borrower attributes
(such as age and credit scores), loan-to-value ratios, and expected house price movements and
expected prepayment rates. These features are used to estimate expected cash flows, which are
then allocated using the ’waterfall’ applicable to the security and discounted at a risk-adjusted
rate.3 The discounted cash flow technique is often used by market participants to price asset-
backed securities. However, this technique is subject to inherent limitations, such as estimation
of the appropriate risk adjusted discount rate, and different assumptions and inputs would yield
different results.
Model inputs and values are calibrated against historical data and published forecasts and, where
possible, against current or recent observed transactions in different mortgage-backed securities
and broker quotes. This calibration process is inherently subjective as different input sources
may imply different levels of expected losses and discount rates; also, adjustment is required
for the differing features of different securities. The calibration process yields ranges of possible
inputs and estimates of fair value, and management judgement is required to select the most
appropriate point in the range.
As part of its trading activities the Group enters into OTC structured derivatives, primarily options
indexed to equity prices, foreign exchange rates and interest rates, with customers and other
banks. Some of these instruments are valued using models with significant unobservable
inputs,1 principally expected long-term volatilities and expected correlations between different
underlyings.3 These inputs are estimated based on extrapolation from observable shorter-term
volatilities, recent transaction prices, quotes from other market participants, data from consensus
pricing services and historical data.
Explanatory note
1. IFRS 7.27B(e) For fair value measurements in Level 3, if changing one or more of the inputs to reasonably
possible alternative assumptions would change the fair value significantly, then the entity states
that fact and discloses, by class of financial instruments, the effect of those changes. For this
purpose, significance is judged with respect to profit or loss, and total assets or total liabilities,
or, when changes in fair value are recognised in other comprehensive income, total equity. In
our view, ‘reasonably possible alternative assumptions’ are assumptions that could reasonably
have been included in the valuation model at the end of the reporting period based on the
circumstances at the end of the reporting period. This issue is discussed in the 9th Edition 2012/13
of our publication Insights into IFRS (7.8.300.190).

IFRS 7.27B(e) Although the Group believes that its estimates of fair value are appropriate, the use of different
methodologies or assumptions could lead to different measurements of fair value. For fair value
measurements in Level 3, changing one or more of the assumptions used to reasonably possible
alternative assumptions would have the following effects:1
Effect on other
Effect on comprehensive
profit or loss income
In millions of euro Favourable (Unfavourable) Favourable (Unfavourable)
31 December 2012
Asset-backed securities – trading 38 (41) - -
Asset-backed securities – investment 28 (42) 44 (53)
OTC structured derivatives – trading
assets and liabilities 36 (16) - -
Other 12 (13) - -
Total 114 (112) 44 (53)
31 December 2011
Other 8 (8) - -
Total 78 (67) 25 (33)
IFRS 7.27B(e) The favourable and unfavourable effects of using reasonably possible alternative assumptions for
valuation of residential asset-backed securities have been calculated by recalibrating the model
values using unobservable inputs based on averages of the upper and lower quartiles respectively
of the Group’s ranges of possible estimates.1 Key inputs and assumptions used in the models at
31 December 2012 include weighted average probability of default of 10 percent (with reasonably
possible alternative assumptions of 6 percent and 14 percent) (2011: 9 percent, 5 percent and
13 percent respectively), a loss severity of 50 percent (with reasonably possible alternative
assumptions of 35 percent and 70 percent) (2011: 35 percent and 70 percent respectively) and
an expected prepayment rate of 4.8 percent (with reasonably possible alternative assumptions of
2 percent and 8 percent) (2011: 4.5 percent, 2 percent and 8 percent).
IFRS 7.27B(e) The favourable and unfavourable effects of using reasonably possible alternative assumptions for
valuation of OTC structured derivatives have been calculated by adjusting unobservable model
inputs to the averages of the upper and lower quartile of consensus pricing data or by two
standard deviations in the level of such inputs (based on the last two years’ historical daily data).1
The most significant unobservable inputs relate to correlations of changes in prices between
different underlyings and the volatilities of the underlyings. The weighted average of correlations
used in the models at 31 December 2012 is 0.47 (with reasonably possible alternative
assumptions of 0.30 and 0.58 (2011: 0.40, 0.28 and 0.49 respectively). The weighted average of
the credit spread volatilities used in the models at 31 December 2012 and 2011 is 20 percent
(with reasonably possible alternative assumptions of 5 percent and 70 percent); interest rate
volatilities: 15, 5 and 40 percent respectively; FX volatilities: 20, 5 and 50 percent respectively;
and equity indices volatilities: 40, 10 and 100 percent respectively.
Explanatory note
1. The Panel report states that entities could make the disclosures relating to the reconciliation of
movements in the fair values of instruments measured using significant unobservable inputs
more meaningful by providing detail about the actual value changes caused by unobservable
inputs. This could be achieved by disclosing those movements that are economically hedged by
movements in instruments in other levels of the hierarchy or by separating the movements into
those related to observable and unobservable inputs, if this information can be determined.

The favourable and unfavourable effects of using reasonably possible alternative assumptions for
the valuation of loans and advances and retained interests in securitisations have been calculated
by recalibrating the model values using unobservable inputs based on averages of the upper
and lower quartiles respectively of the Group’s ranges of possible estimates.1 on page 162 The most
significant unobservable inputs relate to risk adjusted discount rates. The weighted average of
the risk adjusted discount rates used in the model at 31 December 2012 is 6 percent above risk
free interest rate (with reasonably possible alternative assumptions of 4 percent and 8 percent)
(2011: 5 percent, 3 percent and 7 percent respectively).
In determining fair values, the Group does not use averages of reasonably possible alternative
inputs as averages may not represent a price at which a transaction would take place between
market participants on the measurement date. When alternative assumptions are available
within a wide range, judgement is exercised in selecting the most appropriate point in the
range, including evaluation of the quality of the sources of inputs, for example, the experience
and expertise of the brokers providing different quotes within a range, giving greater weight to
a quote from the original broker of the instrument who has the most detailed information about
the instrument, and the availability of corroborating evidence in respect of some inputs within the
range.1 on page 160
The Group’s reporting systems and the nature of the instruments and the valuation models do
not allow it to analyse accurately the total annual amounts of gains/losses reported above that
are attributable to observable and unobservable inputs. However, the losses on asset-backed
securities in 2012 are principally dependent on the unobservable inputs described above.1
(c) Financial asset and liability classification
The Group’s accounting policies provide scope for assets and liabilities to be designated at
inception into different accounting categories in certain circumstances:
●● In classifying financial assets or liabilities as ’trading’, the Group has determined that it meets
the description of trading assets and liabilities set out in Note 3(l).
●● In designating financial assets or liabilities as at fair value through profit or loss, the Group has
determined that it has met one of the criteria for this designation set out in Note 3(j)(viii).
●● In classifying financial assets as held-to-maturity, the Group has determined that it has both
the positive intention and ability to hold the assets until their maturity date as required by
Note 3(o)(i).
Details of the Group’s classification of financial assets and liabilities are given in Note 7.
(d) Qualifying hedge relationships
In designating financial instruments in qualifying hedge relationships, the Group has determined
that it expects the hedges to be highly effective over the period of the hedging relationship.
In accounting for derivatives as cash flow hedges, the Group has determined that the hedged
cash flow exposure relates to highly probable future cash flows.
Explanatory notes
1. IFRS 8.2 IFRS 8 Operating Segments applies to entities:
●● whose debt or equity instruments are traded in a public market; or
●● that file, or are in the process of filing, their financial statements with a securities commission
or other regulatory organisation to issue any class of instruments in a public market.
2. IFRS 8.IN13, Underlying IFRS 8 is a ‘management approach’ to reporting the financial performance of operating
27–28 segments, in which an entity presents segment information that is consistent with that reviewed
by an entity’s chief operating decision maker (CODM). This means that segment information
disclosed in the financial statements will not be in accordance with IFRS if this is how the
information reported to the CODM is prepared.
To help users understand the segment information presented, IFRS 8 requires an entity to disclose:
●● information about the measurement basis adopted, such as the nature of any differences
between the measurements used in reporting segment information and those used in the
entity’s financial statements, and the nature and effect of any asymmetrical allocations to
reportable segments; and
●● reconciliations of segment information to the corresponding amounts in the entity’s IFRS
financial statements.
In these illustrative financial statements, because the Group’s segment information on the basis
of internal measures is consistent with the amounts according to IFRS, the reconciling items
are generally limited to items that are not allocated to reportable segments, as opposed to a
difference in the basis of preparation of the information.
3. IFRS 8.23 An entity discloses:

●● a measure of profit or loss for each reportable segment;
●● a measure of assets and/or liabilities for each reportable segment if such amounts are provided
regularly to the entity’s CODM; and
●● the following about each reportable segment if the specified amounts are included in the
measure of profit or loss reviewed by the CODM or are otherwise provided regularly to the
CODM, even if not included in that measure of segment profit or loss:
– revenues from external customers;
– revenues from transactions with other operating segments of the same entity;
– interest revenue;
– interest expense;
– depreciation and amortisation;
– material items of income and expense disclosed in accordance with IAS 1;
– equity-accounted earnings;
– tax expense or income; and
– material non-cash items other than depreciation and amortisation.

(e) Securitisations
In applying its derecognition policies to securitised financial assets, the Group has considered
both the degree of control exercised by the Group over the other entity and the extent to which
the Group retains the risks and rewards of financial assets that are transferred.
●● When the Group, in substance, controls the entity to which financial assets have been
transferred, the entity is included in these consolidated financial statements and the financial
assets are recognised in the Group’s statement of financial position.
●● When the Group transfers financial assets to an unconsolidated entity and it retains
substantially all of the risk and rewards relating to the transferred assets, the transferred
assets are recognised in the Group’s statement of financial position.
●● When the Group transfers substantially all the risks and rewards relating to the transferred
financial assets to an unconsolidated entity, the assets are derecognised from the Group’s
statement of financial position.
●● When the Group neither transfers nor retains substantially all the risks and rewards relating to
the transferred financial assets and it retains control of these assets, the Group continues to
recognise these assets to the extent of its continuing involvement in the transferred financial
assets.
Details of financial assets that the Group transferred as part of its securitisation activities are
included in Note 35.
6. Operating segments1, 2, 3
IFRS 8.20–22, A The Group has five reportable segments, as described below, which are the Group’s strategic
divisions. The strategic divisions offer different products and services, and are managed
separately based on the Group’s management and internal reporting structure. For each of the
strategic divisions, the Group Management Committee reviews internal management reports on
at least a quarterly basis. The following summary describes the operations in each of the Group’s
reportable segments.
l Investment Banking Includes the Group’s trading and corporate finance activities.
l Corporate Banking Includes loans, deposits and other transactions and balances with
corporate customers.
l Retail Banking Includes loans, deposits and other transactions and balances with
retail customers.
l Asset Management Operates the Group’s funds management activities.
l Central Treasury Undertakes the Group’s funding and centralised risk management
activities through borrowings, issues of debt securities, use of
derivatives for risk management purposes and investing in liquid
assets such as short-term placements and corporate and
government debt securities.
Explanatory notes
1. IFRS 8.16 IFRS 8 requires that information about other business activities and operating segments that
are not reportable be combined and disclosed in an ’all other segments’ category separate from
other reconciling items in the reconciliations required by paragraph 28 of IFRS 8. The sources of
the revenue included in the ‘all other segments’ category are described. In our view, business
activities which do not meet the definition of an operating segment – e.g. corporate activities
– should not be included in the ’all other segments’ category; instead the amounts for these
activities should be reported in the reconciliation of the total reportable segment amounts to the
financial statements. This issue is discussed in the 9th Edition 2012/13 of our publication Insights
into IFRS (5.2.160.40).
2. IFRS 8.IG5, 32 As part of the required ‘entity-wide disclosures’, an entity discloses revenue from external
customers for each product and service, or each group of similar products and services,
regardless of whether the information is used by the CODM in assessing segment performance.
Such disclosure is based on the financial information used to produce the entity’s financial
statements.
In these illustrative financial statements, no additional disclosures of revenue information about
products and services are provided in this regard, because they are already provided in the overall
table of information about reportable segments. The Group’s reportable segments are already
based on different products and services, and the segment information has been prepared in
accordance with IFRS.
3. IFRS 8.23 An entity presents interest revenue separately from interest expense for each reportable
segment unless a majority of the segment’s revenues are from interest, and the CODM relies
primarily on net interest revenue to assess the performance of the segment and to make
decisions about resources to be allocated to the segment. In that situation, an entity may report
that segment’s interest revenue net of interest expense, and disclose that it has done so.
4. IFRS 8.23 IFRS 8 requires a measure of segment assets to be disclosed only if the amounts are regularly
provided to the CODM. There is an equivalent requirement for measures of segment liabilities.
evaluating the results of certain segments relative to other entities that operate within these
industries. Inter-segment pricing is determined on an arm’s length basis.
Information about reportable segments1
2012
Asset
Investment Corporate Retail Manage- Central
In millions of euro Banking Banking Banking ment Treasury Total
IFRS 8.23(a) External revenue:2

IFRS 8.23(c)–(d) Net interest income3 - 1,819 612 - (496) 1,935
IFRS 8.23(f) Net fee and commission income 169 234 202 70 - 675
IFRS 8.23(f) Net trading income 1,491 - - - (57) 1,434
IFRS 8.23(f) Net income from other financial
instruments at fair value
through profit or loss 399 - - - (378) 21
IFRS 8.23(f) Other revenue 30 25 55 - (1) 109
IFRS 8.23(b) Inter-segment revenue3 - - 699 - 1,184 1,883
IFRS 8.32 Total segment revenue 2,089 2,078 1,568 70 252 6,057
Other material non-cash items:

IFRS 8.23(i)
Impairment losses on financial
assets - 206 117 - 7 330
IFRS 8.21(b) Reportable segment profit before

income tax 47 223 448 20 81 819
4
IFRS 8.21(b) Reportable segment assets 24,968 39,248 20,908 362 10,342 95,828
IFRS 8.21(b) Reportable segment liabilities 7,026 11,453 38,199 206 32,980 89,864
2011
IFRS 8.23(a) External revenue:
IFRS 8.23(c)–(d) Net interest income - 1,679 587 - (424) 1,842
IFRS 8.23(f) Net fee and commission income 156 227 176 65 - 624
IFRS 8.23(f) Net trading income 1,094 - - - (7) 1,087
IFRS 8.23(f) Net income from other financial
instruments at fair value
through profit or loss 240 - - - (159) 81
IFRS 8.23(f) Other revenue 28 21 45 - 84 178
IFRS 8.23(b) Inter-segment revenue - - 608 - 906 1,514
IFRS 8.32 Total segment revenue 1,518 1,927 1,416 65 400 5,326
Other material non-cash items:

IFRS 8.23(i)
Impairment losses on financial
assets 105 139 86 - 4 334
IFRS 8.21(b) Reportable segment profit before
income tax (241) 332 282 22 277 672
IFRS 8.21(b) Reportable segment assets 22,641 35,558 19,049 332 9,165 86,745
IFRS 8.21(b) Reportable segment liabilities 6,052 10,703 34,086 204 29,993 81,038
Explanatory note
1. IFRS 8.31–33 An entity presents entity-wide disclosures related to the following items regardless of whether
the information is used by the CODM in assessing segment performance:
●● revenue from external customers for products and services;
●● revenue from external customers by geographical areas, both by the entity’s country of
domicile and by an individual foreign country, if it is material; and
●● non-current assets other than financial instruments, deferred tax assets, post-employment
benefit assets and rights arising from insurance contracts.
The above information is based on the financial information used to produce the entity’s financial
statements, rather than on the basis as provided regularly to the entity’s CODM.

6. Operating segments (continued)
Reconciliations of reportable segment revenues, profit or loss and assets and
liabilities
IFRS 8.28(a) Revenues

Total revenue for reportable segments 6,057 5,326
Unallocated amounts 14 8
Elimination of inter-segment revenue (1,833) (1,514)
Consolidated revenue 4,188 3,820
IFRS 8.28(b) Profit or loss
Total profit or loss for reportable segments 819 672
Unallocated amounts 5 -
Consolidated profit before income tax 824 672
IFRS 8.28(c) Assets
Total assets for reportable segments 95,828 86,745
Other unallocated amounts 1,281 1,071
Consolidated total assets 97,109 87,816
IFRS 8.28(d) Liabilities
Total liabilities for reportable segments 89,864 81,038
Other unallocated amounts 855 808
Consolidated total liabilities 90,719 81,846
Geographical areas1
In presenting information on the basis of geographical areas, revenue is based on the customers’
country of domicile and assets are based on the geographical location of the assets.
Geographical information
Middle
[Country of North Asia East and
In millions of euro domicile] America Europe Pacific Africa Other Total
2012
IFRS 8.33(a) External revenues 569 1,046 1,370 715 473 15 4,188
IFRS 8.33(b) Non-current assets* 258 141 136 113 32 63 743
2011
IFRS 8.33(a) External revenues 488 1,038 1,213 619 456 6 3,820
IFRS 8.33(b) Non-current assets* 236 128 127 121 29 67 708
* Includes property and equipment, intangible assets and investment property.
Explanatory notes
1. IFRS 7.6, B2 An entity groups financial instruments into classes that are appropriate to the nature of
the information disclosed, and that take into account the characteristics of those financial
instruments.
In these illustrative financial statements, the line items in the statement of financial position
reflect the Group’s activities and are used to group financial instruments into classes. This note
reconciles the carrying amount of each of the categories of financial assets and financial liabilities
in IAS 39 to the different classes of financial instruments identified by the Group. Therefore, for
example:
●● Derivatives are presented either as trading assets or liabilities, or derivative assets or liabilities
held for risk management purposes to reflect the Group’s two uses of derivatives. Derivatives
held for risk management purposes include qualifying hedging instruments and non-qualifying
hedging instruments held for risk management purposes rather than for trading.
●● Investment securities include financial assets categorised as held-to-maturity, available-for-sale,
and at fair value through profit or loss. Held-to-maturity investment securities, which are carried
at amortised cost are treated as a separate class from available-for-sale investment securities
and investment securities at fair value through profit or loss, which are measured at fair value.
●● Loans and advances include financial assets categorised at fair value through profit or loss.
Loans and advances, which are carried at amortised cost are treated as a separate class from
loans and advances measured at fair value.
2. IFRS 7.25–26 The fair values of each class of financial assets and financial liabilities are disclosed in a way that
permits them to be compared with their carrying amounts. In disclosing fair values, an entity
groups financial assets and liabilities into classes, but offsets them only to the extent that their
carrying amounts are offset in the statement of financial position.
3. The carrying amounts of issued financial liabilities in qualifying fair value hedging relationships
for which only the benchmark interest rate is the hedged risk, are adjusted for gains or losses
attributable to the hedged interest rate only; therefore these instruments are not carried at fair
value. Changes in the credit spread of the issuer are not included in the adjustments made to the
carrying amounts.
7. Financial assets and liabilities
IFRS 7.6, 8, 25 Accounting classifications and fair values1, 2, 3
The table below sets out the carr ying amounts and fair values of the Group’s financial assets and financial liabilities:
Other Total
Designated Held-to- Loans and Available- amortised carrying
In millions of euro Note Trading at fair value maturity receivables for-sale cost amount Fair value
31 December 2012
Cash and cash equivalents 17 - - - 2,907 - - 2,907 2,907
Pledged trading assets 18 540 - - - - - 540 540
Non-pledged trading assets 18 16,122 - - - - - 16,122 16,122
Derivative assets held for risk management 19 858 - - - - - 858 858
Loans and advances to banks 20 - - - 5,572 - - 5,572 5,602
Loans and advances to customers:
Measured at fair value 21 - 3,986 - - - - 3,986 3,986
Measured at amortised cost 21 - - - 59,084 - - 59,084 62,378
Investment securities:
Measured at fair value 22 - 4,091 - - 2,110 - 6,201 6,201
Measured at amortised cost 22 - - 101 - - - 101 106
17,520 8,077 101 67,563 2,110 - 95,371 98,700
Trading liabilities 18 7,026 - - - - - 7,026 7,026
Derivative liabilities held for risk management 19 828 - - - - - 828 828
Deposits from banks 27 - - - - - 11,678 11,678 12,301
Deposits from customers 28 - - - - - 53,646 53,646 55,696
Debt securities issued:
Measured at amortised cost 29 - - - - - 8,818 8,818 9,885
Subordinated liabilities 30 - - - - - 5,642 5,642 5,763
7,854 2,409 - - - 79,784 90,047 93,908
7. Financial assets and liabilities (continued)
IFRS 7.6, 8, 25 Accounting classifications and fair values (continued)
Other Total
Designated Held-to- Loans and Available- amortised carrying
In millions of euro Note Trading at fair value maturity receivables for-sale cost amount Fair value
31 December 2011
Cash and cash equivalents 17 - - - 2,992 - - 2,992 2,992
Pledged trading assets 18 519 - - - - - 519 519
Non-pledged trading assets 18 15,249 - - - - - 15,249 15,249
Derivative assets held for risk management 19 726 - - - - - 726 726
Loans and advances to banks 20 - - - 4,707 - - 4,707 4,729
Loans and advances to customers:
Measured at amortised cost 21 - - - 53,660 - - 53,660 55,304
Investment securities:
Measured at fair value 22 - 3,239 - - 1,929 - 5,168 5,168
Measured at amortised cost 22 - - 101 - - - 101 104
16,494 6,384 101 61,359 1,929 - 86,267 87,936
Trading liabilities 18 6,052 - - - - - 6,052 6,052
Derivative liabilities held for risk management 19 789 - - - - - 789 789
Deposits from banks 27 - - - - - 10,230 10,230 10,622
Deposits from customers 28 - - - - - 48,904 48,904 49,836
Debt securities issued:
Measured at amortised cost 29 - - - - - 8,040 8,040 8,525
Subordinated liabilities 30 - - - - - 4,985 4,985 5,078
6,841 2,208 - - - 72,159 81,208 83,110
Explanatory notes
1. IFRS 7.20(b) An entity discloses, either in the statement of comprehensive income or in the notes, total
interest income and total interest expense, calculated using the effective interest method, for
financial assets and financial liabilities that are not at fair value through profit or loss.
Presentations other than that shown in these illustrative financial statements are possible. For
example, an entity may present interest income and interest expense on financial instruments
designated at fair value through profit or loss within net interest income.
The level of detail presented in these illustrative financial statements is not always required
specifically by IFRS 7.
2. This publication does not illustrate disclosures that may be applicable to revenue sources that are
not specific to banking operations, such as service concession arrangements and construction
contracts. For an illustration of such disclosures, see the October 2012 Edition of our publication
Illustrative Financial Statements.
IFRS 7.29(b), 30, Investment securities – unquoted equity securities at cost

IAS 39.46(c) The above table includes €24 million (2011: €24 million) of equity investment securities in both
the carrying amount and fair value columns that are measured at cost and for which disclosure
of fair value is not provided because their fair value cannot be reliably measured. These are
investments in mutual entities that provide transaction processing and settlement services to
members on a pricing basis intended to recover the entities’ operating costs. The investments are
neither redeemable nor transferable and there is no market for them. The Group does not intend
to dispose of these investments.
Fair value hedging relationships
Certain subordinated liabilities and loans and advances to customers shown within other
amortised cost and loans and receivables respectively are designated in qualifying fair value
interest rate hedging relationships (2012: €3,882 million and €1,564 million; 2011: €3,058 million
and €1,438 million) and are fair valued with respect to the hedged interest rate.
IAS 18.35(b)(iii) 8. Net interest income1, 2

Interest income
Cash and cash equivalents 86 86
Derivative assets held for risk management 56 64
Loans and advances to banks 282 247
Loans and advances to customers 2,772 3,023
Investment securities 139 105
Other 6 3
Total interest income 3,341 3,528
Interest expense
Derivative liabilities held for risk management 120 60
IFRS 7.20(a)(v) Deposits from banks 54 48
IFRS 7.20(a)(v) Deposits from customers 469 897
IFRS 7.20(a)(v) Debt securities issued 343 316
IFRS 7.20(a)(v) Subordinated liabilities 410 353
Other 10 12
Total interest expense 1,406 1,686
Net interest income 1,935 1,842
IFRS 7.20(d) Included within various line items under interest income for the year ended 31 December 2012 is
a total of €14 million (2011: €8 million) relating to impaired financial assets.
IFRS 7.24(a) Included within interest income (or expense), in the line item corresponding to where the interest
income (or expense) on the hedged item is recognised, are fair value gains of €34 million (2011:
€27 million) on derivatives held in qualifying fair value hedging relationships, and €30 million
(2011: €26 million) representing net decreases in the fair value of the hedged item attributable to
the hedged risk.
IFRS 7.20(b) Total interest income and expense calculated using the effective interest method reported
above that relate to financial assets or liabilities not carried at fair value through profit or loss are
€3,283 million (2011: €3,463 million) and €1,788 million (2011: €1,626 million) respectively.
Explanatory notes
1. IFRS 7.20(c) An entity discloses, either in the statement of comprehensive income or in the notes, fee income
and expense (other than amounts included in determining the effective interest rate) arising from:
●● financial assets or financial liabilities that are not at fair value through profit or loss; and
●● trust and other fiduciary activities that result in the holding or investing of assets on behalf of
individuals, trusts, retirement benefit plans and other institutions.
2. IFRS 7.20(a)(i) An entity discloses, either in the statement of comprehensive income or in the notes, the net
gains or net losses on financial assets or financial liabilities at fair value through profit or loss
(separately for those designated upon initial recognition and those classified as held for trading in
accordance with IAS 39).
In these illustrative financial statements, net trading income:
●● includes the entire profit or loss impact (gains and losses) for trading assets and liabilities,
including derivatives held for trading; and
●● does not include the profit or loss impact of derivatives that are held for risk management
purposes.
IFRS 7.23(d), 24(b), During 2012, gains of €10 million (2011: gains of €10 million) and losses of €20 million (2011:
IAS 18.35(b)(iii) losses of €18 million) relating to cash flow hedges were transferred from equity to profit or loss
and are reflected in interest income or expense. Net ineffectiveness recognised on cash flow
hedges during 2012 was a gain of €4 million (2011: a loss of €4 million).
9. Net fee and commission income1

IFRS 7.20(c) Fee and commission income

Retail banking customer fees 240 203
Corporate banking credit related fees 199 177
Investment banking fees 133 123
Brokerage 130 120
Asset management fees 106 96
Financial guarantee contracts issued 34 30
Other 12 10
Total fee and commission income 854 759
Fee and commission expense
Brokerage 94 87
Inter bank transaction fees 38 27
Other 47 21
Total fee and commission expense 179 135
Net fee and commission income 675 624
IFRS 7.20(c)(ii) Asset management fees relate to fees earned by the Group on trust and fiduciary activities
where the Group holds or invests assets on behalf of its customers.
IFRS 7.20(c)(i) Net fee and commission income above excludes amounts included in determining the effective
interest rate on financial assets and financial liabilities that are not at fair value through profit or
loss but includes income of €651 million (2011: €523 million) and expense of €71 million (2011:
€52 million) relating to such financial assets and liabilities.
10. Net trading income2

Fixed income 1,261 1,081

Equities 70 17
Foreign exchange 90 16
Other 13 (27)
IFRS 7.20(a)(i) Net trading income 1,434 1,087
Explanatory notes
1. IFRS 7.20(a)(i) An entity separately discloses, either in the statement of comprehensive income or in the notes,
the net gains or losses on financial assets or financial liabilities at fair value through profit or loss
(separately for those designated upon initial recognition and those classified as held for trading in
accordance with IAS 39).
In these illustrative financial statements, net income from other financial instruments at fair value
through profit or loss includes:
●● the entire profit or loss impact of financial assets and financial liabilities designated as at fair
value through profit or loss upon initial recognition: and
●● the realised and unrealised gains and losses on derivatives held for risk management purposes
but not forming part of a qualifying hedging relationship.
2. The Panel report states that in addition to the required disclosure of how the movements in the
fair value of the liabilities due to changes in the entity’s own credit risk are calculated, disclosing
the source of inputs used to calculate the fair value movement provides transparency about the
uncertainty of that amount.
3. IFRS 7.20(a)(ii), An entity discloses, either in the statement of comprehensive income or in the notes, the net
20(a)(iv) gains or losses on financial assets or financial liabilities by measurement category specified in
IAS 39 including available-for-sale financial assets and loans and receivables.
In these illustrative financial statements dividends on available-for-sale equity securities and
gains on sales/transfers of available-for-sale financial assets and loans and receivables have been
included in other revenue. However, other presentations are possible.

11. Net income from other financial instruments at fair value
through profit or loss1
Other derivatives held for risk management purposes:

Interest rate (76) (48)
Credit 44 (21)
Equity (54) 42
Foreign exchange (10) 5
IFRS 7.20(a)(i) Investment securities:
IFRS 7.20(a)(i) Corporate bonds 221 210
IFRS 7.20(a)(i) Equities 68 (13)
IFRS 7.20(a)(i) Asset-backed securities (131) (151)
IFRS 7.20(a)(i) Loans and advances at fair value through profit or loss 153 194
IFRS 7.20(a)(i) Debt securities issued at fair value through profit or loss (194) (137)
21 81
IFRS 7.10(a) At 31 December 2012 the accumulated amount of the change in fair value attributable to changes
in credit risk on financial liabilities designated at fair value through profit or loss was a gain of
€9 million (2011: a gain of €4 million). During 2012 the change in fair value attributable to changes
in credit risk on financial liabilities designated at fair value through profit or loss was a gain of
€5 million (2011: a gain of €2 million).
IFRS 7.11(a) The change in fair value attributable to changes in credit risk on financial liabilities is calculated
using the credit spread observed for recent issuances of similar structured debt, adjusted for
subsequent changes in the credit spread observed on credit default swaps on the issuing Group
entity’s senior debt.2
See Note 21 for the amount of change, during the period and cumulatively, in the fair value of the
loans and advances at fair value through profit or loss that is attributable to changes in credit risk
and the method of calculation.
12.Other revenue3
IFRS 7.20(a)(ii), Net loss on sale of available-for-sale securities:

IAS 1.98(d)
Government bonds (12) (9)
Corporate bonds (60) (43)
Equities (20) (17)
IFRS 7.20(a)(ii) Dividends on available-for-sale equity securities 13 8
IFRS 7.20(a)(iv) Gain on securitisation of loans and receivables 26 19
IAS 21.52(a) Foreign exchange gain 170 188
Other 6 40
123 186
IFRS 7.24(c) Net ineffectiveness recognised for net investment hedges during 2012 was a gain of €12 million
(2011: a gain of €9 million).
Explanatory note
1. IFRS 2.52 An entity provides additional disclosures if the required disclosures in IFRS 2 are not sufficient to
enable the user to understand the nature and extent of the share-based payment arrangements,
how the fair value of services have been determined for the period, and the effect on profit
or loss.

13.Personnel expenses
Wages and salaries 1,605 1,419

Compulsory social security contributions 215 194
IAS 19.46 Contributions to defined contribution plans 265 243
IFRS 2.51(a) Equity-settled share-based payments 75 25
IFRS 2.51(a) Cash-settled share-based payments 44 35
Increase in liability for defined benefit plans 32 52 50
Increase in liability for long service-leave 8 8
2,264 1,974
Share-based payment transactions1

IFRS 2.44, 45(a) On 1 January 2010 the Group established a share option programme that entitles key management
personnel and senior employees to purchase shares in the Bank. On 1 January 2012 a further grant
on similar terms (except for exercise price) was offered to these employee groups. In accordance
with these programmes, holders of vested options are entitled to purchase shares at the market
price of the shares at the date of grant.
On 1 January 2009 and 1 January 2012 the Group granted share appreciation rights (SARs) to
other employees that entitle the employees to a cash payment. The amount of the cash payment
is determined based on the increase in the share price of the Bank between grant date and the
time of exercise.
IFRS 2.45(a) The terms and conditions of the grants are as follows; all options are to be settled by physical
delivery of shares, while share appreciation rights are settled in cash:
Contractual
In millions of instruments Number of life of
Grant date/employees entitled instruments Vesting conditions options
Option grant to senior employees 10 3 years’ service and 10 percent 10 years

at 1 January 2010 increase in operating income in
each of the 3 years
Option grant to key management 10 3 years’ service 10 years
personnel at 1 January 2010
Option grant to senior employees 25 3 years’ service and 10 percent 10 years
at 1 January 2012 increase in operating income in
each of the 3 years
Option grant to key management 10 3 years’ service 10 years
personnel at 1 January 2012
Total share options 55
SARs granted to other employees 10 3 years’ service
at 1 January 2009
SARs granted to other employees 30 3 years’ service
at 1 January 2012
Total SARs 40
Weighted Weighted
average Number average Number
exercise of exercise of
price options price options
In millions of options 2012 2012 2011 2011
IFRS 2.45(b)(i) Outstanding at 1 January €9.9 13.0 €9.5 18.0

IFRS 2.45(b)(iii) Forfeited during the period €9.5 (2.5) €9.5 (5.0)
IFRS 2.45(b)(iv) Exercised during the period €10.0 (3.0) - -
IFRS 2.45(b)(ii) Granted during the period €12.0 35.0 €10.5 -
IFRS 2.45(b)(vi) Outstanding at 31 December €10.8 42.5 €9.9 13.0
IFRS 2.45(b)(vii) Exercisable at 31 December €10.1 7.5 €9.8 -
IFRS 2.45(d) The options outstanding at 31 December 2012 have an exercise price in the range of €9.0 to
€12.0 (2011: €9.5 to €11.0) and a weighted average contractual life of 8.3 years (2011: 8.0 years).
IFRS 2.45(c) The weighted average share price at the date of exercise for share options exercised in 2012 was
€11.50 (2011: No options exercised).
IFRS 2.46–47(a)(i) The fair value of services received in return for share options granted is based on the fair value of
share options granted, measured using a binomial lattice model, with the following inputs:
Key Key
manage- manage-
ment ment Senior Senior
personnel personnel employees employees
Fair value of share options and assumptions 2012 2011 2012 2011
IFRS 2.47(a) Fair value at measurement date €4.5 €4.0 €3.9 €3.5
IFRS 2.47(a)(i) Share price €12.0 €10.5 €12.0 €10.5
IFRS 2.47(a)(i) Exercise price €12.0 €10.5 €12.0 €10.5
IFRS 2.47(a)(i) Expected volatility* 42.5% 40.9% 40.3% 39.5%
IFRS 2.47(a)(i) Expected life (weighted average) 8.6 years 8.8 years 5.4 years 5.5 years
IFRS 2.47(a)(i) Expected dividends* 3.2% 3.2% 3.2% 3.2%
IFRS 2.47(a)(i) Risk free interest rate (based on government
bonds)* 1.7% 1.7% 2.1% 2.1%
* Annual rates
Employee expenses for share-based payment transactions

IFRS 2.51(a) Share options granted in 2009 25 25

IFRS 2.51(a) Share options granted in 2012 50 -
IFRS 2.51(a) Expense arising from SARs granted in 2009 - 28
IFRS 2.51(a) Expense arising from SARs granted in 2012 30 -
IFRS 2.51(a) Effect of changes in the fair value of SARs 14 7
IFRS 2.51(a) Total expense recognised as personnel expenses 119 60
IFRS 2.51(b)(i) Total carrying amount of liabilities for cash-settled arrangements 32 44 38
IFRS 2.51(b)(ii) Total intrinsic value of liability for vested benefits - 38
The carrying amount of the liability at 31 December 2011 was settled in 2012.
Explanatory notes
1. IFRS 2.52 Disclosures of the inputs for fair value measurement for cash-settled share based payments –
e.g. share appreciation rights – are not required specifically in IFRS 2. However, they should be
provided in accordance with the general disclosure requirements in paragraphs 44 and 50 of
IFRS 2 if the cash-settled share-based payments are material to the entity either at grant date or
at the end of the reporting period. We believe that the following disclosures should be provided:
●● for awards granted during the period, disclosures on measurement of fair value at grant date
and at the end of the reporting period; and
●● for awards granted in previous periods but unexercised at the end of the reporting period,
disclosures on measurement of fair value at the end of the reporting period.
This issue is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS
(4.5.1330.10).
2. IAS 40.75(f)(iii) When applicable, an entity also discloses the direct operating expenses related to investment
property that did not generate rental income during the period.
3. IAS 12.85 The reconciliation of the effective tax rate is based on an applicable tax rate that provides the
most meaningful information to users. In these illustrative financial statements, the reconciliation
is based on the entity’s domestic tax rate, with a reconciling item in respect of tax rates applied
by the Group entities in other jurisdictions. However, in some cases it might be more meaningful
to aggregate separate reconciliations prepared using the domestic tax rate in each individual
jurisdiction.
IAS 12.81(c) In these illustrative financial statements, both a numerical reconciliation between total income
tax expense and the product of accounting profit multiplied by the applicable tax rates, and
a numerical reconciliation between the average effective tax rate and the applicable tax
rate is disclosed. An entity explains the relationship using either or both of these numerical
reconciliations and discloses the basis on which the applicable tax rate is computed.

13.Personnel expenses (continued)
IFRS 2.52 The fair value of SARs is determined using the Black-Scholes formula. The model inputs as at the
grant date were: share price of €12.0, exercise price of €12.0, expected volatility of 41.5 percent a
year, expected dividends of 3.2 percent a year, a term of three years and a risk-free interest rate of
2.7 percent a year. The fair value for the liability is remeasured at each reporting date and at settlement
date. Expected volatility is estimated by considering historic average share price volatility.1
IAS 1.97 14. Other expenses

Software licensing and other information technology costs 47 58

Direct operating expenses for investment property that
IAS 40.75(f)(ii)
generated rental income2 1 1
IAS 1.98(b) Branch closure cost provisions 31 5 67
IAS 1.98(b) Redundancy provisions 31 2 33
IAS 1.98(g) Onerous lease provisions 31 (1) 2
IAS 1.97 Bank levy 31 12 10
Other 331 414
397 585
The amount of levy payable for each year is based on [X] percent of elements of the Group’s
consolidated liabilities and equity held at the end of the reporting period. The levy amounts to
€12 million (2011: €10 million) and is presented in other expenses in the statement of comprehensive
income. At 31 December 2012 a payable of €2 million is included in provisions (2011: €2 million).
15. Income tax expense

Current tax expense

Current year
IAS 12.80(a) 193 132
Adjustments for prior years
IAS 12.80(b) (5) (6)
188 126
Deferred tax expense
Origination and reversal of temporary differences
IAS 12.80(c) 7 (1)
Reduction in tax rate
IAS 12.80(d) (2) -
Recognition of previously unrecognised tax losses
IAS 12.80(f) (6) (7)
25 (1) (8)
Total income tax expense 187 118
IAS 12.81(c) Reconciliation of effective tax rate3
In millions of euro 2012 2012 2011 2011
Profit before tax 824 672

Tax using the domestic corporation tax rate 33.0% 272 33.0% 222
Effect of tax rates in foreign jurisdictions* -13.7% (113) -13.1% (88)
Non-deductible expenses 5.3% 50 3.9% 26
Tax exempt income -0.7% (6) -3.1% (21)
Tax incentives -0.6% (5) -1.2% (8)
Recognition of previously unrecognised
tax losses -0.7% (6) -1.0% (7)
Over-provided in prior years -0.6% (5) -0.9% (6)
Total income tax expense 22.0% 187 17.6% 118
IAS 12.81(d) * Tax rates in several foreign jurisdictions decreased in 2012.
Explanatory notes
1. IAS 1.90 An entity discloses the amount of income tax relating to each component of other
comprehensive income, either in the statement of comprehensive income, or in the notes. In
these illustrative financial statements, tax related to each component of other comprehensive
income is presented in the notes.
2. IAS 33.2 An entity is required to present earnings per share if its ordinary shares or potential ordinary
shares are publicly traded, or if it is in the process of issuing ordinary shares or potential ordinary
shares in public securities markets.
3. IAS 33.64 When earnings per share calculations reflect changes in the number of shares due to events that
happened after the reporting date, an entity discloses that fact.
4. IAS 33.73 If an entity discloses, in addition to basic and diluted earnings per share, per share amounts using
a reported component of profit other than profit or loss for the period attributable to ordinary
shareholders, such amounts are calculated using the weighted average number of ordinary
shares determined in accordance with IAS 33.
IAS 33.73 If a component of profit is used that is not reported as a line item in the statement of
comprehensive income, then an entity presents a reconciliation between the component used
and a line item that is reported in the statement of comprehensive income.
5. IAS 33.70(c) An entity discloses instruments, including contingently issuable shares, that could potentially
dilute basic earnings per share in the future, but were not included in the calculation of diluted
earnings per share because they were anti-dilutive for the periods presented.
6. In our view, the method used to determine the average market value of the entity’s shares for
the purposes of calculating the dilutive effect of outstanding share options should be disclosed,
particularly with respect to unquoted equity instruments. This issue is discussed in the 9th Edition
2012/13 of our publication Insights into IFRS (5.3.170.70).

15. Income tax expense (continued)
IAS 12.81(ab) Tax recognised in other comprehensive income1
2012 2011
Tax Tax
Before (expense) Net of Before (expense) Net of
In millions of euro tax benefit tax tax benefit tax
Cash flow hedges

IAS 1.90 (10) 3 (7) (9) 3 (6)
Available-for-sale
IAS 1.90
investment securities (31) 10 (21) (34) 11 (23)
(41) 13 (28) (43) 14 (29)
16. Earnings per share2

Basic earnings per share
The calculation of basic earnings per share at 31 December 2012 was based on the profit
attributable to ordinary shareholders of €590 million (2011: €508 million) and a weighted average
number of ordinary shares3 outstanding of 1,757.5 million (2011: 1,756.0 million), calculated as
follows.
IAS 33.70(a) Profit attributable to ordinary shareholders (basic)
Profit for the year attributable to equity holders of the Bank 610 528
Dividends on perpetual bonds classified as equity 33 (20) (20)
Net profit attributable to ordinary shareholders 590 508
Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2012 was based on profit
attributable to ordinary shareholders of €590 million (2011: €508 million) and a weighted average
number of ordinary shares outstanding after adjustment for the effects of all dilutive potential
ordinary shares of 1,770.0 million (2011: 1,764.0 million), calculated as follows.
IAS 33.70(a) Profit attributable to ordinary shareholders (diluted)4
Profit for the period attributable to ordinary shareholders 590 508
IAS 33.70(b) Weighted average number of ordinary shares (diluted)5

In millions of shares Note 2012 2011
Weighted average number of ordinary shares (basic) 33 1,757.5 1,756.0

Effect of share options in issue 12.5 8.0
Weighted average number of ordinary shares (diluted) 1,770.0 1,764.0
The average market value of the Bank’s shares for purposes of calculating the dilutive effect
of share options was based on quoted market prices for the period that the options were
outstanding.6
Explanatory notes
1. IAS 7.48 An entity discloses, together with a commentary from management, the amount of significant
cash and cash equivalent balances not available for use by the entity.
In these illustrative financial statements, cash balances with central banks that are subject
to withdrawal restrictions are disclosed as a component of other assets (see Note 26). These
balances do not form part of the Group’s cash management activities and therefore are not
disclosed as part of cash and cash equivalents.
2. IFRS 7.6, 8 An entity groups financial instruments into classes that are appropriate to the nature of
instruments.
reflect the Group’s activities. Accordingly, derivatives are presented either as trading assets
or liabilities, or derivative assets or liabilities held for risk management purposes, to reflect
the Group’s two uses of derivatives. Derivatives held for risk management purposes include
qualifying hedge instruments and non-qualifying hedge instruments held for risk management
purposes rather than for trading.
Unrestricted balances with central banks 118 128

Cash and balances with other banks 256 184
Money market placements 2,533 2,680
2,907 2,992
18. Trading assets and liabilities2

IFRS 7.8(a)(ii) Trading assets
Non- Non-
Pledged pledged Total Pledged pledged Total
trading trading trading trading trading trading
assets assets assets assets assets assets
In millions of euro 2012 2012 2012 2011 2011 2011
Government bonds 332 6,010 6,342 317 5,781 6,098

Corporate bonds 143 4,348 4,491 145 3,925 4,070
Treasury bills - 3,879 3,879 - 3,744 3,744
Equities 65 391 456 57 379 436
Asset-backed securities - 516 516 - 463 463
540 15,144 15,684 519 14,292 14,811
Derivative assets:
Interest rate - 78 78 - 91 91
Credit - 332 332 - 369 369
Equity - 84 84 - 79 79
Foreign exchange - 150 150 - 141 141
OTC structured derivatives - 334 334 - 277 277
- 978 978 - 957 957
540 16,122 16,662 519 15,249 15,768
IFRS 7.14(a), The pledged trading assets presented in the table above are those financial assets that may
IAS 39.37(a) be repledged or resold by counterparties. The total financial assets that have been pledged
as collateral for liabilities, including amounts reflected above, at 31 December 2012 was
€2,555 million (2011: €2,249 million) (see Note 35).
IFRS 7.14(b) Financial assets are pledged as collateral as part of sales and repurchases, securities borrowing
and securitisation transactions under terms that are usual and customary for such activities.
At 31 December 2012, for derivative liabilities that are classified as trading liabilities or derivatives
liabilities held for risk management, the Group has posted cash collateral with its counterparties
for which it recognised receivables to reclaim cash collateral of €793 million (2011: €807 million).
These receivables are classified as loans and advances to banks or as loans and advances to
customers.
Collateral accepted as security for assets
IFRS 7.15(a) At 31 December 2012 the fair value of financial assets accepted as collateral that the Group is
permitted to sell or repledge in the absence of default is €7,788 million (2011: €7,308 million).
IFRS 7.15(b) At 31 December 2012 the fair value of financial assets accepted as collateral that have been sold or
repledged is €5,661 million (2011: €5,205 million). The Group is obliged to return equivalent securities.
IFRS 7.15(c) These transactions are conducted under terms that are usual and customary to standard lending,
and securities borrowing and lending activities.
Explanatory note
1. IAS 39.50(a)–(c) An entity may not reclassify any financial asset into the fair value through profit or loss category
after initial recognition. An entity may not reclassify out of the fair value through profit or loss
category any derivative financial asset or any financial asset designated as at fair value through
profit or loss on initial recognition. When a financial asset is held for trading, it is included in
this category based on the objective for which it was acquired initially, which was for trading
purposes. Reclassifying such an asset out of this category would generally be inconsistent with
this initial objective.
IAS 39.50(c), However, an entity may be permitted to reclassify a non-derivative financial asset out of the
50B, 50D, held-for-trading category if it is no longer held for the purpose of being sold or repurchased in the
BC104D near term. There are different criteria for reclassifications of loans and receivables, and of other
qualifying assets. This issue is discussed in the 9th Edition 2012/13 of our publication Insights into
IFRS (7.4.220).
IFRS 7.12A If an entity has reclassified financial assets, then additional disclosures are required.

18. Trading assets and liabilities (continued)
Reclassifications out of trading assets1
IFRS 7.12A(c) With effect from 15 September 2008 and 31 March 2009, the Group reclassified certain
trading assets, for which it had changed its intent such that it no longer holds these financial
assets for the purpose of selling in the short term, to loans and advances to customers and
to available-for-sale investment securities. For reclassified trading assets that would have met
the definition of loans and receivables, the Group has the intention and ability to hold them for
the foreseeable future or until maturity. For other trading assets that were reclassified in 2008,
the Group determined that the bankruptcy of [Bank X] on 15 September 2008 in the context
of the deterioration of the financial markets during the third quarter of 2008 constituted rare
circumstances that permit reclassification out of the trading category.
IFRS 7.12A(a)–(b) The table below sets out the financial assets reclassified and their carrying and fair values:
2012 2011
Amounts Carrying Fair Carrying Fair
In millions of euro reclassified value value value value
Assets reclassified in 2009:

Trading assets reclassified to loans
and advances to customers 296 58 39 116 101
296 58 39 116 101
Assets reclassified in 2008:
and advances to customers 1,140 102 88 267 219
Trading assets reclassified to available-
for-sale investment securities 240 10 10 57 57
1,380 112 98 324 276

Reclassifications out of trading assets (continued)
IFRS 7.12A(e) The table below sets out the amounts actually recognised in profit or loss and other comprehensive
in 2012 and 2011 in respect of financial assets reclassified out of the trading category:
Reclassifications in Reclassifications in
2009 2008
Other Other Other Other
compre- compre- compre- compre-
Profit hensive Profit hensive Profit hensive Profit hensive
or loss income or loss income or loss income or loss income
In millions of euro 2012 2012 2011 2011 2012 2012 2011 2011
Trading assets
reclassified to
loans and
advances to
customers:
Interest income 3 - 6 - 5 - 10 -
Net impairment
loss on
financial assets - - (2) - - - (2) -
Trading assets
reclassified to
available-for-sale
investment
securities:
Interest income - - - - 1 - 2 -
Net impairment
loss on
financial assets - - - - - - - -
Net change in
fair value - - - - - (2) - (3)
3 - 4 - 6 (2) 10 (3)
IFRS 7.12A(e) The table below sets out the amounts that would have been recognised in profit or loss if the
financial assets had not been reclassified.
Reclassifi- Reclassifi-
cations cations
in 2009 in 2008
Profit Profit Profit Profit
or loss or loss or loss or loss

and advances to customers:
Net trading income 2 3 4 7
Trading assets reclassified to available-
for-sale investment securities:
Net trading income - - (1) (1)
2 3 3 6
Explanatory note
1. IFRS 7.28 For each class of financial instrument an entity discloses the following in respect of any difference
between the fair value at initial recognition (i.e. the fair value of the consideration given or
received unless conditions described in IAS 39.AG76 are met) and the amount that would be
determined at that date using its valuation technique:
●● its accounting policy for recognising that difference in profit or loss to reflect a change in
factors, including time, that market participants would consider in setting a price; and
●● the aggregate difference yet to be recognised in profit or loss at the beginning and end of the
period and a reconciliation of changes in this difference during the period.

Reclassifications out of trading assets (continued)
IFRS 7.12A(f) At 31 March 2009 the effective interest rates on trading assets reclassified to loans and advances
to customers ranged from 6 percent to 10 percent with expected recoverable cash flows of
€336 million.
At 15 September 2008 the effective interest rates on trading assets reclassified to loans and
advances to customers ranged from 8 percent to 12 percent with expected recoverable cash
flows of €1,345 million.
IFRS 7.12A(f) At 15 September 2008 the effective interest rates on trading assets reclassified to available-for-
sale investment securities ranged from 7 percent to 11 percent with expected recoverable cash
flows of €280 million.
IFRS 7.8(e)(ii) Trading liabilities
Short sold positions – debt 6,355 5,453

Short sold positions – equity 263 227
6,618 5,680
Derivative liabilities:
Interest rate 23 25
Credit 145 133
Equity 42 32
Foreign exchange 122 108
OTC structured derivatives 76 74
408 372
7,026 6,052
Unobservable valuation differences on initial recognition1

IFRS 7.28 Any difference between the fair value at initial recognition and the amount that would be
determined at that date using a valuation technique in a situation in which the valuation is
dependent on unobservable parameters is not recognised in profit or loss immediately but is
recognised over the life of the instrument on an appropriate basis or when the instrument is
redeemed, transferred or sold, or the fair value becomes observable.
The table below sets out the aggregate difference yet to be recognised in profit or loss at the
beginning and end of the year with a reconciliation of the changes of the balance during the year
for trading assets and liabilities:
Balance at 1 January 22 16
Increase due to new trades 24 14
Reduction due to passage of time (8) (4)
Reduction due to redemption / sales / transfers / improved observability (12) (4)
Balance at 31 December 26 22
Explanatory notes
instruments.
reflect the Group’s activities. Accordingly derivatives are presented either as trading assets
or liabilities, or derivative assets or liabilities held for risk management purposes, to reflect
the Group’s two uses of derivatives. Derivatives held for risk management purposes include
qualifying hedge instruments and non-qualifying hedge instruments held for risk management
purposes rather than for trading.
2. IFRS 7.23(b) When applicable, an entity discloses a description of any forecast transaction for which hedge
accounting had previously been used, but which is no longer expected to occur.

19. Derivatives held for risk management1
Assets Liabilities Assets Liabilities
Instrument type:
IFRS 7.22(b)
Interest rate 404 225 309 192
Credit 74 64 67 55
Equity 80 94 73 92
Foreign exchange 300 445 277 450
858 828 726 789
IFRS 7.22(a) Fair value hedges of interest rate risk

The Group uses interest rate swaps to hedge its exposure to changes in the fair values of its
fixed rate euro notes and certain loans and advances attributable to changes in market interest
rates. Interest rate swaps are matched to specific issuances of fixed rate notes or loans.
IFRS 7.22(b) The fair values of derivatives designated as fair value hedges are as follows:
Instrument type:
175 99 101 89
IFRS 7.22(a) Cash flow hedges of foreign currency debt securities issued2
The Group uses interest rate and cross-currency swaps to hedge the foreign currency and interest
rate risks arising from its issuance of floating rate notes denominated in foreign currencies.
IFRS 7.22(b) The fair values of derivatives designated as cash flow hedges are as follows:
Instrument type:
343 405 250 364
IFRS 7.23(a) The time periods in which the hedged cash flows are expected to occur and affect the
consolidated statement of comprehensive income are as below:
In millions of euro Within 1 year 1-5 years Over 5 years
31 December 2012
Cash inflows 798 2,145 115
Cash outflows 674 1,980 187
31 December 2011
Cash inflows 455 1,790 10
Cash outflows 525 2,085 12
IFRS 7.23(c) During 2012 net losses of €17 million (2011: net losses of €14 million) relating to the effective
portion of cash flow hedges were recognised in other comprehensive income.

19. Derivatives held for risk management (continued)
IFRS 7.22(a) Net investment hedges
The Group uses a mixture of forward foreign exchange contracts and foreign currency
denominated debt to hedge the foreign currency translation risk on its net investment in foreign
subsidiaries.
IFRS 7.22(b) The fair value of derivatives designated as net investment hedges is as follows:
Instrument type:
85 93 77 78
US dollar denominated debt, which is included within debt securities issued (see Note 29), is
used to hedge the net investment in the Group’s subsidiaries in the Americas with a US dollar
functional currency and has a fair value of €965 million (2011: €831 million) at the reporting date.
Other derivatives held for risk management
The Group uses other derivatives, not designated in a qualifying hedge relationship, to manage its
exposure to foreign currency, interest rate, equity market and credit risks. The instruments used
include interest rate swaps, cross-currency swaps, forward contracts, futures, options, credit
swaps and equity swaps.
20. Loans and advances to banks

Loans and advances to banks 5,584 4,712

Less specific allowances for impairment (12) (5)
5,572 4,707
IFRS 7.16 Specific allowances for impairment

Balance at 1 January 5 -
IFRS 7.20(e) Impairment loss for the year:
Charge for the year 7 5
Effect of foreign currency movements 1 -
Effect of discounting (1) -
Explanatory notes
instruments.
Loans and advances as presented in the statement of financial position include loans and
advances that are carried at amortised cost and those that have been designated on initial
recognition as at fair value through profit or loss. However, other presentations are possible.
2. IAS 39.9, 11A Financial assets or liabilities, other than those classified as held for trading, may be designated on
initial recognition as at fair value through profit or loss, in any of the following circumstances, if
they:
●● are part of a group of financial assets and/or financial liabilities that is managed and whose
with a documented risk management or investment strategy; and
●● are hybrid contracts where an entity is permitted to designate the entire contract as at fair
value through profit or loss.
This note demonstrates the fair value option for loans and advances of the Group’s investment
banking segment that are managed and evaluated on a fair value basis as part of its documented
risk management and investment strategy. However, other presentations are possible.

21. Loans and advances to customers1
Loans and advances to customers at fair value

IFRS 7.8(a)(i)
through profit or loss2 3,986 3,145
IFRS 7.8(c) Loans and advances to customers at amortised cost 59,084 53,660
63,070 56,805
IAS 1.61 At 31 December 2012 €27,137 million (2011: €24,262 million) of loans and advances to
customers are expected to be recovered more than 12 months after the reporting date.
Loans and advances to customers at amortised cost
Impair- Impair-
Gross ment Carrying Gross ment Carrying
amount allowance amount amount allowance amount
Retail customers:
Mortgage lending 14,856 (309) 14,547 13,629 (268) 13,361
Personal loans 4,164 (225) 3,939 3,621 (207) 3,414
Credit cards 2,421 (251) 2,170 2,284 (241) 2,043
Corporate customers:
Finance leases 939 (17) 922 861 (16) 845
Other secured lending 32,059 (871) 31,188 28,653 (790) 27,863
Reverse repos 6,318 - 6,318 6,134 - 6,134
60,757 (1,673) 59,084 55,182 (1,522) 53,660
Allowances for impairment

IFRS 7.16 Specific allowances for impairment

Balance at 1 January 1,324 1,133
Recoveries (18) (3)
Effect of foreign currency movements 7 9
Effect of discounting (10) (6)
Write-offs (47) -
Balance at 31 December 1,453 1,324
IFRS 7.16 Collective allowances for impairment
Impairment loss for the year:
IFRS 7.20(e) Charge for the year 22 24
Total allowances for impairment 1,673 1,522
Explanatory notes
1. IAS 17.47(c)–(e) An entity discloses, when applicable, the unguaranteed residual values accruing to its benefit,
accumulated allowance for uncollectible minimum lease payments receivable, and any contingent
rents recognised as income in the period.
2. For a more comprehensive illustration of disclosures that may be applicable when an entity is a
lessor in a finance lease, see our publication Illustrative financial statements issued in October
2012.

21. Loans and advances to customers (continued)
IAS 17.47 Finance lease receivables1, 2
IAS 17.47(f) Loans and advances to customers include the following finance lease receivables for leases of
certain property and equipment where the Group is the lessor:
IAS 17.47(a) Gross investment in finance leases, receivable:

IAS 17.47(a)(i) Less than one year 251 203
IAS 17.47(a)(ii) Between one and five years 805 741
IAS 17.47(a)(iii) More than five years 104 106
1,160 1,050
IAS 17.47(b) Unearned finance income (221) (189)
Net investment in finance leases 939 861
IAS 17.47(a) Net investment in finance leases, receivable:
IAS 17.47(a)(i) Less than one year 205 181
IAS 17.47(a)(ii) Between one and five years 650 597
IAS 17.47(a)(iii) More than five years 84 83
939 861
Loans and advances to customers at fair value through profit or loss

Loans and advances to customers held by the investment banking business have been
designated as at fair value through profit or loss as the Group manages these loans and advances
on a fair value basis in accordance with its documented investment strategy. Internal reporting
and performance measurement of these loans and advances are on a fair value basis.
IFRS 7.9(a), 9(b) At 31 December 2012 the maximum exposure to credit risk on loans and advances as at fair value
through profit or loss was €3,986 million (2011: €3,145 million). The Group has mitigated the
credit risk exposure to these loans and advances by purchasing credit risk protection in the form
of credit derivatives. At 31 December 2012 these derivative contracts provided a notional principal
protection of €3,108 million (2011: €2,325 million).
IFRS 7.9(c), 9(d) Details of changes in the fair value recognised on these loans and advances on account of credit
risk changes and fair value changes on the related derivatives are set out below.
For For
the year Cumulative the year Cumulative
Loans and advances as at fair value through

profit or loss (32) (11) 21 21
Related credit derivative contracts 38 21 (17) (17)
IFRS 7.11(a) The change in fair value attributable to changes in credit risk, as disclosed above, is determined
based on changes in the prices of credit-default swaps referenced to similar obligations of the
same borrower where such prices are observable or, where they are not observable, as the total
amount of the change in fair value that is not attributable to changes in the observed benchmark
interest rate or in other market rates.
Explanatory notes
instruments.
In these illustrative financial statements, the investment securities caption in the statement of
financial position includes available-for-sale securities, held-to-maturity securities and securities
that have been designated on initial recognition as at fair value through profit or loss. However,
other presentations are possible.
2. IAS 39.9, 11A Financial assets or liabilities, other than those classified as held for trading, may be designated on
initial recognition as at fair value through profit or loss, in any of the following circumstances, if
they:
●● eliminate or significantly reduce a measurement or recognition inconsistency ’accounting
mismatch’ that would otherwise arise from measuring assets and liabilities or recognising the
These illustrative financial statements demonstrate the fair value option for investment securities
when the Group holds related derivatives at fair value through profit or loss, and designation
therefore eliminates or substantially reduces an accounting mismatch that would otherwise
arise, and when venture capital investments are managed on a fair value basis. However, other
presentations are possible.

22. Investment securities1
Investment securities designated as at fair value through profit or loss

IFRS 7.8(a)(i) 4,091 3,239
IFRS 7.8(b) Held-to-maturity investment securities 101 101
IFRS 7.8(d) Available-for-sale investment securities 2,110 1,929
6,302 5,269
IAS 1.61 At 31 December 2012 €2,668 million (2011: €2,613 million) of investment securities are expected
to be recovered more than 12 months after the reporting date.
Investment securities designated as at fair value through profit or loss2
Corporate bonds 3,278 2,602

Asset-backed securities 647 500
Debt securities 3,925 3,102
Equities 166 137
4,091 3,239
IFRS 7.21, B5(a) Investment securities have been designated as at fair value through profit or loss upon initial
recognition when the Group holds related derivatives at fair value through profit or loss, and
designation therefore eliminates or significantly reduces an accounting mismatch that would
otherwise arise.
Also included in investment securities that have been designated as at fair value through profit or
loss are the Group’s equity investments in certain entities held by its venture capital subsidiary. These
investments (2012: €101 million; 2011: €82 million) represent equity holdings in investee companies
that give the Group between 20 percent and 45 percent of the voting rights of these venture capital
investees. The venture capital subsidiary is managed on a fair value basis by the Group.
Held-to-maturity investment securities
Government bonds 56 56
Corporate bonds 45 45
Less specific allowances for impairment - -
Debt securities 101 101
Available-for-sale investment securities

Asset-backed securities 333 358
Corporate bonds 582 542
Retained interests in securitisations 35 98 87
Debt securities 1,781 1,640
Equity securities with readily determinable fair values 305 265
Unquoted equity securities at cost 24 24
2,110 1,929
Impairment losses in respect of available-for-sale

investment securities
Effect of discounting (3) (2)
Explanatory note
1. IAS 39.50E A financial asset that is classified as available-for-sale that would have met the definition of loans
and receivables if it had not been designated as available for sale, may be reclassified out of the
available-for-sale category to the loans and receivables category if the entity has the intention
and ability to hold the financial asset for the foreseeable future or until maturity. This issue is
discussed in the 9th Edition 2012/13 of our publication Insights into IFRS (7.4.250).
IFRS 7.12A If an entity has reclassified financial assets, then additional disclosures are required.

22. Investment securities (continued)
Reclassifications out of available-for-sale investment securities1
IFRS 7.12A On 15 September 2008, the Group reclassified certain available-for-sale investment securities to
loans and advances to customers. The Group identified financial assets that would have met the
definition of loans and receivables (if they had not been designated as available-for-sale) for which
at the date of reclassification it had the intention and ability to hold them for the foreseeable
future or until maturity. There were no reclassifications of available-for-sale investment securities
to loans and advances to customers in 2009-2012.
IFRS 7.12A(a)–(b) The reclassifications were made with effect from 15 September 2008 at fair value at that date.
The table below sets out the financial assets reclassified and their carrying and fair values:
2012 2011
Amounts Carrying Fair Carrying Fair
In millions of euro reclassified value value value Value
Available-for-sale investment
securities reclassified to loans
and advances to customers 425 180 141 210 191
IFRS 7.12A(e) The table below sets out the amounts actually recognised in profit or loss and other comprehensive
income in respect of the financial assets reclassified out of available-for-sale investment securities:
Other Other
compre- compre-
Profit hensive Profit hensive
or loss income or loss income

reclassified to loans and advances to
customers:
Interest income 5 - 13 -
Net impairment loss on financial assets (2) - (24) -
Net change in fair value - - - -
Amount transferred from fair value
reserve to profit or loss - 2 - 3
3 2 (11) 3
IFRS 7.12A(e) The table below sets out the amounts that would have been recognised if the reclassifications
had not been made:
2012 2011
Other Other
compre- compre-
Profit hensive Profit hensive
In millions of euro or loss income or loss income

reclassified to loans and advances:
Interest income 5 - 13 -
Net impairment loss on financial assets (25) - (6) -
Net change in fair value - (1) - (1)
(20) (1) 7 (1)
IFRS 7.12A(f) At 15 September 2008 the effective interest rates on reclassified available-for-sale investment
securities ranged from 8 percent to 11 percent with expected recoverable cash flows of €495 million.
Explanatory notes
1. For a more comprehensive illustration of disclosures that may be applicable to property, plant and
equipment, see the October 2012 Edition of our publication Illustrative financial statements.
2. IAS 16.73(d)–(e) An entity discloses a reconciliation of the carrying amount of property and equipment from the
beginning to the end of the reporting period. The separate reconciliations of the gross carrying
amount and accumulated depreciation illustrated in these illustrative financial statements are not
required and a different format may be used. However, an entity is required to disclose the gross
carrying amount and accumulated depreciation at the beginning and at the end of the reporting
period.
3. IAS 23.26 An entity discloses the amount of borrowing costs capitalised during the period, and the
capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation.

23. Property and equipment1, 2
Land and IT Fixtures
IAS 16.73(d), (e) In millions of euro buildings equipment and fittings Total
Cost
IAS 16.73(d) Balance at 1 January 2011 234 154 78 466
IAS 16.73(e)(i) Additions 24 21 18 63
IAS 16.73(e)(ii) Disposals (14) (5) (5) (24)
IAS 16.73(d) Balance at 31 December 2011 244 170 91 505

IAS 16.73(e)(i) Additions 34 32 22 88
Accumulated depreciation and impairment losses

IAS 16.73(e)(vii) Depreciation for the year 6 9 4 19
IAS 16.73(e)(vi) Impairment loss - - - -

IAS 16.73(e)(vii) Depreciation for the year 7 10 4 21
IAS 16.73(e)(vi) Impairment loss - - - -
IAS 16.73(e), 1.78(a) Carrying amounts

Balance at 1 January 2011 197 101 54 352
Balance at 31 December 2011 205 109 64 378
IAS 23.26 There were no capitalised borrowing costs related to the acquisition of plant and equipment
during the year (2011: nil).3
Explanatory notes
1. IAS 38.122 An entity discloses the following:
●● for an intangible asset assessed as having an indefinite useful life, the carrying amount of that
asset and the reasons supporting the assessment of an indefinite useful life. In giving these
reasons, the entity describes the factor(s) that played a significant role in determining that the
asset has an indefinite useful life;
●● a description, the carrying amount and remaining amortisation period of any individual
intangible asset that is material to the financial statements;
●● for intangible assets acquired by way of a government grant and recognised initially at fair
value:
– the fair value recognised initially for these assets;
– their carrying amount; and
– whether they are measured after recognition under the cost model or the revaluation model;
●● the existence and carrying amounts of intangible assets whose title is restricted and the
carrying amounts of intangible assets pledged as security for liabilities; and
●● the amount of contractual commitments for the acquisition of intangible assets.
IAS 38.118, In presenting a reconciliation of the carrying amount of intangible assets and goodwill, an entity
IFRS 3.61, also discloses, if applicable:
B67(d)(iii)–(v)
●● assets classified as held-for-sale or included in a disposal group classified as held-for-sale in
accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and
other disposals;
●● increases and increases in the carrying amount of intangible assets during the period resulting
from revaluations and from impairment losses recognised or reversed in other comprehensive
income; and
●● adjustments to goodwill resulting from the recognition of deferred tax assets subsequent to a
business combination.
IAS 38.124 If an entity uses the revaluation model to account for intangible assets, then it discloses:
●● the effective date of the revaluation for each class of the intangible assets;
●● the carrying amount of each class of revalued intangible assets;
●● the carrying amount that would have been recognised had the revalued class of intangible
assets been measured after recognition using the cost model;
●● the amount of the revaluation surplus that relates to intangible assets at the beginning and end
of the period, indicating the changes during the period and any restrictions on the distribution
of the balance to shareholders; and
●● the methods and significant assumptions applied in estimating the assets’ fair values.
2. IAS 16.73(d)–(e) For a more comprehensive illustration of disclosures that may be applicable to intangible assets,
including goodwill and the disclosures required by IAS 36 Impairment of Assets for each material
impairment loss recognised or reversed during the period, see the October 2012 Edition of our
publication Illustrative financial statements.
3. IAS 23.26 An entity discloses the amount of borrowing costs capitalised during the period, and the
capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation.

24. Intangible assets and goodwill1, 2
IFRS 3.61, Purchased Developed
IAS 38.118(c), (e) In millions of euro Goodwill software software Total
Cost
IFRS 3.B67(d)(i),
IAS 38.118 Balance at 1 January 2011 78 94 116 288
IAS 38.118(e)(i) Acquisitions - 20 - 20
IAS 38.118(e)(i) Internal development - - 14 14
IFRS 3.B67(d)(viii),
IAS 38.118 Balance at 31 December 2011 78 114 130 322
IFRS 3.B67(d)(i),
IAS 38.118(e)(i) Acquisitions - 26 - 26
IAS 38.118(e)(i) Internal development - - 16 16
Accumulated amortisation and impairment losses

IFRS 3.B67(d)(i),
IAS 38.118(e)(vi) Amortisation for the year - 10 10 20
IAS 38.118(e)(iv) Impairment loss - - - -
IAS 38.118(c) Balance at 31 December 2011 5 30 28 63
IFRS 3.B67(d)(i),
IAS 38.118(e)(iv) Amortisation for the year - 16 10 26
IFRS 3.B67(d)(v) Impairment loss - - - -
IAS 38.118(c) Carrying amounts

Balance at 1 January 2011 73 74 98 245
IAS 23.26 There were no capitalised borrowing costs related to the internal development of software during
the year (2011: nil).3
Explanatory notes
1. IAS 36.84–85, When goodwill allocated to a cash-generating unit arose in a business combination in the
96, 133 reporting period, that goodwill is tested for impairment before the end of that reporting period.
However, when the acquisition accounting can be determined only provisionally, it also may not
be possible to complete the allocation of goodwill to cash-generating units before the end of the
annual period in which the business combination occurred. In such cases, an entity discloses
the amount of unallocated goodwill, together with the reason for not allocating the goodwill to
cash-generating units. However, the allocation of goodwill to cash-generating units should be
completed before the end of the first annual reporting period beginning after the acquisition
date. This issue is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS
(3.10.480.20).
2. IAS 36.99 Instead of calculating the recoverable amount, an entity may use its most recent previous
calculation of the recoverable amount of a cash-generating unit containing goodwill, if all of the
following criteria are met:
●● there have been no significant changes in the assets and liabilities making up the unit since the
calculation;
●● the calculation resulted in a recoverable amount that exceeded the carrying amount of the unit
by a substantial margin; and
●● based on an analysis of the events and circumstances since the calculation, the likelihood that
the current recoverable amount would be less than the current carrying amount of the unit is
remote.
The disclosures illustrated here are based on the assumption that the calculation of the
recoverable amount was prepared in the current period. If a calculation made in a preceding
period is used, then the disclosures are adjusted accordingly.
3. IAS 36.84–85, When goodwill allocated to a cash-generating unit arose in a business combination in the
96, 133 reporting period, that goodwill is tested for impairment before the end of that reporting period.
However, when the acquisition accounting can be determined only provisionally, it also may not
be possible to complete the allocation of goodwill to cash-generating units before the end of the
annual period in which the business combination occurred. In such cases, an entity discloses
the amount of unallocated goodwill, together with the reason for not allocating the goodwill to
cash-generating units. However, the allocation of goodwill to cash-generating units should be
completed before the end of the first annual reporting period beginning after the acquisition
date. This issue is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS
(3.10.480.20).
4. IAS 36.134(f) If a reasonably possible change in a key assumption on which management has based its
determination of the unit’s (group of units’) recoverable amount would cause the unit’s (group of
units’) carrying amount to exceed its recoverable amount, then an entity discloses:
●● the amount by which the unit’s (group of units’) recoverable amount exceeds its carrying
amount;
●● the value assigned to the key assumption; and
●● the amount by which the value assigned to the key assumption must change, after incorporating
any consequential effects of that change on the other variables used to measure recoverable
amount, in order for the unit’s (group of units’) recoverable amount to be equal to its carrying
amount.

24. Intangible assets and goodwill (continued)
Impairment testing for cash-generating units containing goodwill1, 2, 3, 4
For the purpose of impairment testing, goodwill is allocated to the Group’s operating divisions.
The aggregate carrying amount of goodwill allocated to each CGU is as follows:
IAS 36.134(a) In millions of euro 2012 2011
European investment banking 53 53

European retail banking 25 25
78 78
IAS 36.126(a)–(b) No impairment losses on goodwill were recognised during 2012 (2011: nil).
IAS 36.134(c)–(d), The recoverable amounts for the European investment banking and retail banking CGUs have
IAS 1.125 been calculated based on their value in use, determined by discounting the future cash flows to
be generated from the continuing use of the CGU. Value in use in 2012 was determined in a similar
manner as in 2011.
IAS 36.134(d)(i)–(v) l Key assumptions used in the calculation of value in use were the following: Cash flows were
projected based on past experience, actual operating results and the 5-year business plan in
both 2011 and 2012. Cash flows for a further 20-year period were extrapolated using a constant
growth rate of 2 percent (2011: 3.8 percent). The constant growth rate has been determined
as the lower of the nominal GDP growth rates for the countries in which the CGU operates
and the long-term compound annual growth rate in EBITDA estimated by management. The
forecast period is based on the Group’s long-term perspective with respect to the operation of
these CGUs.
●● Pre-tax discount rates of 10 percent and 6 percent (2011: 8 percent and 5 percent) respectively
were applied in determining the recoverable amounts for the investment banking and retail
banking units. These discount rates were based on the risk-free rate obtained from the yield on
10-year bonds issued by the government in the relevant market and in the same currency as the
cash flows, adjusted for a risk premium to reflect both the increased risk of investing in equities
generally and the systemic risk of the specific CGU.
The key assumptions described above may change as economic and market conditions change.
The Group estimates that reasonably possible changes in these assumptions are not expected to
cause the recoverable amount of either CGU to decline below the carrying amount.4
Explanatory notes
1. IAS 12.81(g) An entity is required to disclose, in respect of each type of temporary difference, the amount of
deferred tax assets and liabilities recognised in the statement of financial position. IFRS is unclear
on what constitutes a ‘type’ of a temporary difference. Disclosures presented in these illustrative
financial statements are based on the statement of financial position captions related to the
temporary differences. Another possible interpretation is to present disclosures based on the
reason for the temporary difference – e.g. depreciation.
In our view, it is not appropriate to disclose gross deductible temporary differences with the
related valuation allowance shown separately because, under IFRS, it is temporary differences for
which deferred tax is recognised that are required to be disclosed.
These issues are discussed in the 9th Edition 2012/13 of our publication Insights into IFRS
(3.13.1000.40–50).
2. IAS 12.82 An entity discloses the nature of the evidence supporting the recognition of a deferred tax asset
when:
●● utilisation of the deferred tax asset is dependent on future taxable profits in excess of the
profits arising from the reversal of existing taxable temporary differences; and
●● the entity has suffered a loss in either the current or the preceding period in the tax jurisdiction
to which the deferred tax asset relates.
3. IAS 12.87A An entity discloses the important features of the income tax system(s) and the factors that will
affect the amount of the potential income tax consequences of dividends.
4. IAS 12.87, 81(f) An entity discloses the aggregate amount of temporary differences associated with investments
in subsidiaries, branches and associates and joint ventures for which deferred tax liabilities have
not been recognised. Although it is not required, entities are also encouraged to disclose the
amounts of unrecognised deferred tax liabilities, where practicable. In these illustrative financial
statements, both the amounts of unrecognised deferred tax liability and temporary differences
have been disclosed.

25. Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities1, 2
IAS 12.81(g)(i) Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities Net Assets Liabilities Net
Property and equipment,

and software - (33) (33) - (21) (21)
Available-for-sale securities - (60) (60) - (70) (70)
Cash flow hedges 31 - 31 28 - 28
Allowances for loan losses 72 - 72 68 - 68
Tax loss carry-forwards 25 - 25 31 - 31
Share-based payment
transactions 150 - 150 125 - 125
Other 38 (39) (1) 44 (32) 12
Net tax assets (liabilities) 316 (132) 184 296 (123) 173
Unrecognised deferred tax liabilities3, 4

IAS 12.81(f), 87 At 31 December 2012 a deferred tax liability of €7.7 million (2011: €6.6 million) for temporary
differences of €25.3 million (2011: €22.0 million) related to an investment in a subsidiary was not
recognised because the Bank controls whether the liability will be incurred and it is satisfied that
it will not be incurred in the foreseeable future.
IAS 12.82A In some of the countries where the Group operates, local tax laws provide that gains on
the disposal of certain assets are tax exempt, provided that the gains are not distributed. At
31 December 2012, the total tax exempt reserves amounted to €0.6 million, which would result
in a tax liability of €0.2 million (2011: €0.2 million) should the subsidiary pay dividends from these
reserves.
IAS 12.81(e) Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items.
Tax losses 10 16
10 16
The tax losses relate to an overseas investment banking subsidiary and will expire in 2013.
Deferred tax assets have not been recognised in respect of these items because it is not
probable that future taxable profit will be available against which the Group can utilise the
benefits there from.
Explanatory notes
1. IAS 12.81(g)(ii) When the amount of deferred tax recognised in profit or loss in respect of each type of
temporary difference is apparent from the changes in the amounts recognised in the statement
of financial position, the disclosure of this amount is not required.
2. IAS 1.54 In these illustrative financial statements, immaterial assets held for sale, investment property
and trade receivables have not been disclosed separately in the statement of financial position,
but are disclosed separately as a component of other assets, and the disclosures in respect of
assets held for sale that may be required by IFRS 5 are not included. For a more comprehensive
illustration of the presentation and disclosures that may apply when such items are material, see
our publication Illustrative financial statements issued in October 2012.

25. Deferred tax assets and liabilities (continued)
IAS 12.81(g)(ii) Movements in temporary differences during the year1
Recognised
in other
Recognised compre-
Balance at in profit or hensive Balance at
In millions of euro 1 January loss income 31 December
2012
Property and equipment, and software (21) (12) - (33)
Available-for-sale securities (70) - 9 (61)
Cash flow hedges 28 - 3 31
Allowances for loan losses 68 4 - 72
Tax loss carry-forwards 31 (6) - 25
Share-based payment transactions 125 25 - 150
Other 12 (12) - -
173 (1) 12 184
2011
Property and equipment, and software (7) (14) - (21)
Available-for-sale securities (81) - 11 (70)
Cash flow hedges 25 - 3 28
Allowances for loan losses 62 6 - 68
Tax loss carry-forwards 38 (7) - 31
Share-based payment transactions 117 8 - 125
Other 13 (1) - 12
167 (8) 14 173
IAS 1.77 26. Other assets2

IAS 1.54 Assets held for sale 200 165

IAS 1.54(b) Investment property 59 71
IAS 1.54(h) Accounts receivable and prepayments 160 115
IAS 1.54(h) Accrued income 177 114
IAS 7.48 Restricted deposits with central banks 56 56
Other 37 42
689 563
Restricted deposits with central banks are not available for use in the Group’s day-to-day operations.
The Group holds some investment property as a consequence of the ongoing rationalisation of its
retail branch network. Other properties have been acquired through enforcement of security over
loans and advances.
IAS 40.75(d)–(e) An external, independent valuation company, having appropriate recognised professional
qualifications and recent experience in the location and category of property being valued, values
the Group’s investment property portfolio every six months. The fair values are based on market
values, being the estimated amount for which a property could be exchanged on the date of the
valuation between a willing buyer and a willing seller in an arm’s length transaction after proper
marketing wherein the parties had each acted knowledgeably.

26. Other assets (continued)
In the absence of current prices in an active market, the valuations are prepared by considering
the estimated rental value of the property. A market yield is applied to the estimated rental value
to arrive at the gross property valuation. When actual rents differ significantly from the estimated
rental value, adjustments are made to reflect actual rents.
Valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for
meeting lease commitments or likely to be in occupation after letting vacant accommodation, the
allocation of maintenance and insurance responsibilities between the Group and the lessee, and
the remaining economic life of the property. When rent reviews or lease renewals are pending
with anticipated reversionary increases, all notices, and when appropriate counter-notices, have
been served validly and within the appropriate time.
Investment property comprises a number of commercial properties that are leased to third
parties. Each lease contains an initial non-cancellable period of 10 years, with annual increases in
rents indexed to consumer prices. Subsequent renewals are negotiated with the lessee and on
average renewal periods are 4 years. No contingent rents are charged.
IAS 40.76(d) The change in fair value of investment property recorded in other income in profit or loss is a loss
of e10 million (2011: a gain of e8 million).
IAS 40.75(f)(i) Rental income from investment property of e3 million (2011: e2 million) is recognised in other
income.
27. Deposits from banks

Money market deposits 10,956 9,231

Other deposits from banks 478 762
Items in the course of collection 244 237
11,678 10,230
28. Deposits from customers

Retail customers:
Term deposits 12,209 10,120
Current deposits 26,173 24,136
Corporate customers:
Term deposits 1,412 1,319
Current deposits 10,041 9,384
Other 3,811 3,945
53,646 48,904
IAS 1.61 At 31 December 2012 €10,808 million (2011: €8,789 million) of deposits from customers are
expected to be settled more than 12 months after the reporting date.
Explanatory notes
instruments.
The carrying amounts of each of the categories of financial assets and financial liabilities
specified in IAS 39 are disclosed either in the statement of financial position or in the notes.
2. IAS 39.9, 11A Financial assets or financial liabilities, other than those classified as held for trading, may be
designated upon initial recognition at fair value through profit or loss, in any of the following
circumstances, if they:
These illustrative financial statements demonstrate the fair value option for hybrid debt securities
that contain an embedded derivative. However, other presentations are possible.
3. IAS 7.50(a) An entity is encouraged, but not required, to disclose the amount of undrawn borrowing facilities
that may be available for future operating activities and to settle capital commitments, indicating
any restrictions on the use of these facilities.
4. IFRS 7.7 An entity discloses information that enables users of its financial statements to evaluate the
significance of financial instruments for its financial position and performance.

29. Debt securities issued1, 2, 3
Debt securities issued designated as at fair value through profit or loss

IFRS 7.8(e)(i) 2,409 2,208
Debt securities issued at amortised cost
IFRS 7.8(f) 8,818 8,040
11,227 10,248
IAS 1.61 At 31 December 2012 €8,991 million (2011: €7,723 million) of debt securities issued are expected
to be settled after more than 12 months.
IFRS 7.21, B5(a), Debt securities issued have been designated at fair value through profit or loss when they
IAS 39.11A contain embedded derivatives that significantly modify the cash flows that otherwise would be
required to be separated.
IFRS 7.10(b) The carrying amount of financial liabilities designated at fair value through profit or loss at
31 December 2012 was €59 million lower than the contractual amount due at maturity (2011:
€43 million).
Debt securities at amortised cost:

Floating rate debt securities 5,143 4,473
Medium-term notes 3,675 3,567
8,818 8,040
IFRS 7.18–19 The Group has not had any defaults of principal, interest or other breaches with respect to its
debt securities during the years ended 31 December 2012 and 2011.
30. Subordinated liabilities

Redeemable preference shares 860 827

Subordinated notes issued 4,782 4,158
5,642 4,985
IAS 1.61 At 31 December 2012 the redeemable preference shares and subordinated notes issued are all
expected to be settled more than 12 months after the reporting date (2011: €4,985 million).
IFRS 7.7 The terms and conditions of the subordinated notes issued are as follows:4
Year of
In millions of euro maturity 2012 2011
€1,500 million undated floating rate primary capital notes N/A 1,315 1,494
€750 million callable subordinated floating rate notes 2024 725 743
€500 million callable subordinated notes 2012-2013 - 178
€300 million callable subordinated floating rate notes 2019 300 300
US$1,200 million undated floating rate primary capital notes N/A 744 888
US$750 million callable subordinated floating rate notes 2013 567 555
£1,000 million callable subordinated variable coupon notes 2016 1,131 -
4,782 4,158
The above liabilities will, in the event of the winding-up of the issuer, be subordinated to the
claims of depositors and all other creditors of the issuer.
IFRS 7.18–19 The Group has not had any defaults of principal, interest or other breaches with respect to its
subordinated liabilities during the years ended 31 December 2012 and 2011.
Explanatory notes
1. IAS 37.85 An entity discloses the following for each class of provision:
IAS 37.85(a) ●● a brief description of the nature of the obligation and the expected timing of any resulting
outflows of economic benefits;
IAS 37.85(b) ●● an indication of the uncertainties about the amount or timing of those outflows; when
necessary to provide adequate information, the major assumptions concerning future events;
and
IAS 37.85(c) ●● the amount of any expected reimbursement, stating the amount of any asset that has been
recognised in that regard.
2. IAS 37.92 In extremely rare cases, disclosure of some or all of the information required in respect of
provisions can be expected to seriously prejudice the position of the entity in a dispute with other
parties. In such cases only the following is disclosed:
●● the general nature of the dispute;
●● the fact that the required information has not been disclosed; and
●● the reason why.
3. IAS 37.84 There is no requirement to disclose comparative information in the reconciliation of provisions.
4. IAS 1.98(f)–(g) An entity discloses separately, the items of income and expense related to reversals of litigation
settlements and other provisions. In our view, the reversal of a provision should be presented in
the same statement of comprehensive income line item as the original estimate. This issue is
discussed in the 9th Edition 2012/13 of our publication Insights into IFRS (3.12.850).

31. Provisions1, 2, 3
Branch Onerous
In millions of euro Note Redundancy closures contracts Other Total
IAS 37.84(a) Balance at 1 January 2012 30 28 23 3 84

IAS 37.84(b) Provisions made during the year 14 2 5 - 15 22
IAS 37.84(c) Provisions used during the year - (2) - (15) (17)
IAS 37.84(d) Provisions reversed during the
year4 14 - - (1) - (1)
IAS 37.84(e) Unwind of discount 1 1 - - 2
IAS 37.84(a) Balance at 31 December 2012 33 32 22 3 90
IAS 37.85(a)–(b), Redundancy

1.87(b) In accordance with the Delivery Channel Optimisation Plan announced by the Group in November
2010, the Group is in the process of rationalising its retail branch network and related processing
functions. The remaining provision relates to the Asia Pacific and American regions and is
expected to be used during 2013.
IAS 37.85(a)–(b), Branch closures
1.87(b) In accordance with the plans announced by the Group in November 2010, the Group is in the
process of rationalising the branch network to optimise its efficiency and improve overall services
to customers. One part of this plan continues to involve the closure of some branches. 23 of the
branches outlined in the Group’s Delivery Channel Optimisation Plan were closed during 2011 and
2012. The remaining provision relates to the balance of the branches set out in that plan, which
will be completed during 2013.
IAS 37.85(a)–(b) Onerous contracts
Partly as a result of the Group’s restructuring of its retail branch network, the Group is a lessee in
a number of non-cancellable leases over properties that it no longer occupies. In some cases the
rental income from sub-leasing these properties is lower than the rental expense. The obligation
for the discounted future lease payments, net of expected rental income, has been provided for.
32. Other liabilities

IAS 1.78(d) Recognised liability for defined benefit obligations 174 158
IAS 1.78(d) Liability for long-service leave 51 44
IAS 1.78(d) Cash-settled share-based payment liability 13 44 38
IAS 1.78(d) Short-term employee benefits 62 57
IAS 1.77 Financial guarantee contracts issued 32 28
IAS 1.54(j) Creditors and accruals 51 68
Other 36 38
450 431
Explanatory notes
1. IAS 19.122 When an entity has more than one defined benefit plan, the disclosures may be made in total,
separately for each plan, or in such groupings as are considered to be the most useful; for
example, the entity may distinguish groupings by criteria such as geographical location or the
risks related to the plans.
IAS 19.120A IAS 19 requires extensive disclosures in respect of defined benefit plans, not all of which are
relevant to the example in these illustrative financial statements. For a more comprehensive
illustration of the disclosures in respect of defined benefit plans, see our publication Illustrative
financial statements issued in October 2012.
2. IAS 19.120A If applicable, an entity discloses the following in the reconciliation of the opening and closing
(c)(iii), 120A balances of the defined benefit obligations:
(c)(v), 120A(c)
●● past service cost;
(vii)–(x)
●● contributions by plan participants;
●● business combinations;
●● curtailments; and
●● settlements.
3. IAS 19.120A If applicable, an entity discloses the following in the reconciliation of the opening and closing
(e)(iii), 120A(e) balances of plan assets:
(v),
●● contributions by plan participants;
120A(e)(vii)–(viii)
●● business combinations; and
●● settlements.

32. Other liabilities (continued)
Defined benefit obligations1
IAS 19.120A(b) The Group makes contributions to two non-contributory defined benefit plans that provide
pension and medical benefits for employees upon retirement. The plans entitle a retired
employee to receive an annual payment equal to 1/60 of final salary for each year of service the
employee provided, and to the reimbursement of certain medical costs. Different benefits apply
for directors and executive officers (see Note 37).
The amounts recognised in the statement of financial position are as follows:
IAS 19.120A(d), (f) Present value of unfunded obligations 98 97

IAS 19.120A(d), (f) Present value of funded obligations 121 110
Total present value of obligations 219 207
IAS 19.120A(d), Fair value of plan assets (45) (49)
IAS 19.120A(d), (f) Present value of net obligations 174 158
IAS 19.120A(f) Recognised liability for defined benefit obligations 174 158
Plan assets
IAS 19.120A(j) Plan assets comprise:
Equity securities 13 9
IAS 19.120A(k)(ii) Property occupied by the Group 15 16
IAS 19.120A(k)(i) Bank’s own ordinary shares 5 5
45 49
IAS 19.120A(m) Actual return on plan assets 4 6
IAS 19.120A(c) Movement in the present value of defined benefit obligations2

Defined benefit obligations at 1 January 207 189

IAS 19.120A(c)(iv) Actuarial losses 5 4
IAS 19.120A(c)(vi) Benefits paid by the plan (50) (41)
IAS 19.120A(c)(i)–(ii) Current service costs and interest (see next page) 57 55
Defined benefit obligations at 31 December 219 207
IAS 19.120A(e) Movement in the fair value of plan assets3

Fair value of plan assets at 1 January 49 47

IAS 19.120A(e)(iv) Contributions paid into the plan 42 37
IAS 19.120A(e)(vi) Benefits paid by the plan (50) (41)
IAS 19.120A(e)(ii) Actuarial (losses) gains (1) 1
IAS 19.120A(e)(i) Expected return on plan assets 5 5
Fair value of plan assets at 31 December 45 49
Explanatory notes
1. IAS 19.120A If applicable, an entity discloses the total expense recognised in profit or loss for each of the
(g)(iv)–(viii), following items:
120A(m)
(g)(iv) ●● expected return on any reimbursement right recognised as an asset;
(g)(v) ●● actuarial gains and losses;
(g)(vi) ●● past service cost;
(g)(vii) ●● the effect of any curtailment or settlement; and
(g)(viii) ●● the effect of the limit in paragraph 58(b) of IAS 19.
(m) In addition, if applicable, an entity discloses the actual return on any reimbursement right
recognised as an asset.
2. IAS 19.120A An entity discloses the principal actuarial assumptions used at the end of the reporting
(n) period. This includes, if applicable, the expected rate of return on periods presented on any
reimbursement right recognised as an asset. Principal actuarial assumptions are disclosed
in absolute terms and not, for example, as a margin between different percentages or other
variables.
3. IAS 19.120A If mortality rates are considered a principal actuarial assumption in measuring a defined benefit
(n)(vi) plan, then an entity discloses the mortality assumptions used at the end of the reporting period.
Mortality rates may be significant when, for example, pension benefits are paid as annuities over
the lives of participants, rather than as lump sum payments on retirement.

32. Other liabilities (continued)
IAS 19.120A(g) Expense recognised in profit or loss1
IAS 19.120A(g)(i) Current service costs 39 41

IAS 19.120A(g)(ii) Interest on obligation 18 14
IAS 19.120A(g)(iii) Expected return on plan assets (5) (5)
13 52 50
IAS 19.120A(g) The above expense is recognised as personnel expenses, see Note 13.
Actuarial assumptions
IAS 19.120A(n) The following are the principal actuarial assumptions at the reporting date (expressed as
weighted averages).2
2012 2011
IAS 19.120A(n)(i) Discount rate at 31 December 5.0% 4.8%

IAS 19.120A(n)(ii) Expected return on plan assets at 1 January 5.8% 5.9%
IAS 19.120A(n)(iv) Future salary increases 2.5% 2.5%
IAS 19.120A(n)(v) Medical cost trend rate 4.5% 4.0%
IAS 19.120A(n)(vi) Future pension increases 3.0% 2.0%
IAS 19.120A(n)(vi) Assumptions regarding future mortality are based on published statistics and mortality tables. The
average life expectancy of an individual retiring at age 65 is 18 for males and 20 for females.3
IAS 19.120A(l) The overall expected long-term rate of return on assets is 5.75 percent. The expected long-term rate
of return is based on the portfolio as a whole and not on the sum of the returns on individual asset
categories. The expected return is based on market expectations, at the beginning of the period, for
returns over the entire life of the related obligation.
IAS 19.120A(o) Assumed healthcare cost trend rates have a significant effect on the amounts recognised in profit
or loss. A one percentage point change in assumed healthcare cost trend rates would have the
following effects:
One One
percentage percentage
point point
In millions of euro increase decrease
IAS 19.120A(o)(i) Effect on the aggregate service and interest cost 2 (1)
IAS 19.120A(o)(ii) Effect on defined benefit obligation 30 (20)
IAS 19.120A(p) Historical information
In millions of euro 2012 2011 2010 2009 2008
IAS 19.120A(p)(i) Present value of the defined benefit

obligation 219 207 189 159 154
IAS 19.120A(p)(i) Fair value of plan assets 45 49 47 44 43
IAS 19.120A(p)(i) Deficit in the plan 174 158 142 115 111
IAS 19.120A(p)(ii)(a) Experience adjustments arising on plan
liabilities (5) (4) 2 (1) 4
IAS 19.120A(p)(ii)(b) Experience adjustments arising on plan assets (1) 1 (1) (1) (1)
IAS 19.120A(q) The Group expects €60 million in contributions to be paid to its defined benefit plans in 2013.
Explanatory notes
1. IAS 1.79(a)(iii) If shares have no par value, then an entity discloses that fact.
2. IAS 1.79(a)(ii) An entity discloses the number of shares issued but not fully paid.
IAS 1.79(a)(vi) An entity discloses details of shares reserved for issue under options and sales contracts,
including the terms and amounts.

33. Capital and reserves
IAS 1.79(a)(iv) Share capital and share premium
Redeemable
Ordinary Perpetual preference
shares bonds shares
In millions of shares 2012 2011 2012 2011 2012 2011
In issue at 1 January 1,756 1,756 500 500 880 880

Exercise of share options 3 - - - - -
IAS 1.79(a)(ii) In issue at 31 December 1,759 1,756 500 500 880 880
The Group has also issued employee share options (see Note 13).
IAS 1.79(a)(i), (iii) At 31 December 2012 the authorised share capital comprised 2 billion ordinary shares (2011:
2 billion), 500 million perpetual bonds (2011: 500 million) and 880 million redeemable preference
shares (2011: 880 million). All of these instruments have a par value of e1.1 All issued shares are
fully paid.2 The redeemable preference shares are classified as liabilities.
IAS 1.79(a)(v) The holders of ordinary shares are entitled to receive dividends as declared from time to time,
and are entitled to one vote per share at meetings of the Bank. Holders of perpetual bonds
receive a non-cumulative discretionary coupon of 4.2 percent. Perpetual bonds and preference
shares do not carry the right to vote. All shares rank equally with regard to the Bank’s residual
assets, except that perpetual bondholders and preference shareholders have priority over
ordinary shareholders but participate only to the extent of the face value of the bonds/shares plus
any accrued coupon/dividends.
Nature and purpose of reserves
Translation reserve
IAS 1.79(b) The translation reserve comprises all foreign currency differences arising from the translation
of the financial statements of foreign operations as well as the effective portion of any foreign
currency differences arising from hedges of a net investment in a foreign operation.
Hedging reserve
IAS 1.79(b) The hedging reserve comprises the effective portion of the cumulative net change in the fair
value of hedging instruments used in cash flow hedges pending subsequent recognition of the
hedged cash flows.
Fair value reserve
IAS 1.79(b) The fair value reserve comprises the cumulative net change in the fair value of available-for-sale
financial assets, until the assets are derecognised or impaired.
Explanatory notes
1. IAS 1.137(b) An entity discloses the amount of any cumulative preference dividends not recognised.
2. IAS 12.81(i), An entity discloses the amount of tax consequences of dividends to shareholders that were
87A proposed or declared before the financial statements were authorised for issue, but that are
not recognised as a liability in the financial statements. An entity also discloses the important
features of the tax system(s) and the factors that will affect the amount of the potential tax
consequences of dividends.
3. IAS 37.86(c) An entity also discloses the possibility of any reimbursement with respect to contingent liabilities.
IAS 37.89 In respect of a contingent asset, an entity discloses a brief description of its nature and, when
practicable, an estimate of its financial effect.
IAS 37.91 When it is impracticable to estimate the potential financial effect of a contingent liability or a
contingent asset, an entity discloses that fact.
IAS 37.92 In extremely rare cases, disclosure of some or all of the information required in respect of
contingencies can be expected to seriously prejudice the position of the entity in a dispute with
other parties. In such cases, only the following is disclosed:
●● the general nature of the dispute;
●● the fact that the required information has not been disclosed; and
●● the reason why.
4. IFRS 7.42A An entity discloses information on:

●● transferred financial assets that are not derecognised in their entirety; and
●● transferred financial assets that are derecognised in their entirety, in which the entity retains
continuing involvement.
IFRS 7.42A, To assess what information on which financial assets needs to be disclosed, an entity
42C, determines:
IAS 39.17–20
●● which financial assets have been transferred;
●● whether it has derecognised a transferred financial asset in its entirety; and
●● whether it has continuing involvement in a transferred financial asset that it derecognised in its
entirety.
The definition of ‘transfer’ and the concept of ‘continuing involvement’ for the purposes of these
disclosures are different from those in IAS 39 for the purpose of determining whether a financial
asset should be derecognised. These issues are discussed in the 9th Edition 2012/13 of our
publication Insights into IFRS (7.8.412).
5. IFRS 7.42A, When applying the disclosure requirements, the term ‘transferred financial asset’ refers to all
42D–42E or a part of a financial asset. Therefore, when an entity transfers a part of a financial asset, its
evaluation as to whether and which disclosures are required depends on:
●● whether or not that part is derecognised in its entirety; and
●● whether the entity retains continuing involvement in that part.
6. IFRS 7.44M An entity is not required to provide disclosures for any period presented that begins before the
date of initial application of Disclosures – Transfers of Financial Assets (amendments to IFRS 7).

33. Capital and reserves (continued)
Dividends
IAS 1.107 The following dividends were declared and paid by the Group for the year ended 31 December.
e0.15 per ordinary share (2011: e0.15)

264 264
e0.04 per perpetual bond (2011: e0.04) 20 20
284 284
IAS 1.137a), 10.13, After the end of the reporting period, the following dividends were proposed by the directors. The
12.81(i) dividends have not been provided for and there are no income tax consequences.1, 2
In millions of euro
e0.15 per ordinary share 264

e0.04 per perpetual bond 20
284
34. Contingencies3
IAS 1.125, 37.86(a)–(c) A subsidiary is defending an action brought by a consumer rights organisation in Europe in
relation to the marketing of specific pension and investment products from 2003 to 2006.
Although liability is not admitted, if defence against the action is unsuccessful, then fines and
legal costs could amount to e3 million of which E250 thousand would be reimbursable under an
insurance policy. Based on legal advice, the directors do not expect the outcome of the action to
have a material effect on the Group’s financial position or performance.
35. Transfers of financial assets4, 5, 6

IFRS 7.42A, 7.42D(a), In the ordinary course of business, the Group enters into transactions that result in the transfer
IAS 39.17–20 of financial assets that consist primarily of debt and equity securities, and loans and advances
to customers. In accordance with Note 3(j)(iii), the transferred financial assets continue either
to be recognised in their entirety or to the extent of the Group’s continuing involvement, or are
derecognised in their entirety.
The Group transfers financial assets primarily through the following transactions:
●● sale and repurchase of securities;
●● securities lending;
●● sale of securities with a concurrent total return swap; and
●● securitisation activities in which loans and advances to customers or investment securities are
transferred to unconsolidated special purpose entities or to investors in the notes issued by
consolidated special purpose entities.
(a) Transferred financial assets that are not derecognised in their entirety
Sale and repurchase agreements
IAS 39.29, Sale and repurchase agreements are transactions in which the Group sells a security and
AG51(a)–(c), simultaneously agrees to repurchase it (or an asset that is substantially the same) at a fixed price
IFRS 7.42D(a)–(c) on a future date. The Group continues to recognise the securities in their entirety in the
statement of financial position because it retains substantially all the risks and rewards of
ownership. The cash consideration received is recognised as a financial asset and a financial
liability is recognised for the obligation to pay the repurchase price. Because the Group sells
the contractual rights to the cash flows of the securities it does not have the ability to use the
transferred assets during the term of the arrangement.

35. Transfers of financial assets (continued)
(continued)
Securities lending
IAS 39.29, Securities lending agreements are transactions in which the Group lends equity securities for
AG51(a)–(c), a fee and receives cash as collateral. The Group continues to recognise the securities in their
IFRS 7.42D(a)–(c) entirety in the statement of financial position because it retains substantially all the risks and
rewards of ownership. The cash received is recognised as a financial asset and a financial liability
is recognised for the obligation to repay this collateral. Because the Group sells the contractual
rights to the cash flows of the securities it does not have the ability to use the transferred assets
during the term of the arrangement.
Sale of a security with a total return swap
IAS 39.16, 29, The Group sells debt securities that are subject to a concurrent total return swap. In all cases the
AG49, AG51(o), Group retains substantially all the risks and rewards of ownership. Therefore, the Group continues
IFRS 7.42(a)–(c) to recognise the transferred securities in its statement of financial position. The cash received
is recognised as a financial asset and a corresponding liability is recognised. The Group does
not separately recognise the total return swap that prevents derecognition of the security as a
derivative because doing so would result in recognising the same rights and obligations twice.
Because the Group sells the contractual rights to the cash flows of the securities it does not have
the ability to use the transferred assets during the term of the arrangement.
Securitisations
IAS 39.15, 17–20, The Group sells loans and advances to customers and investment securities to special purpose
SIC-12.8 entities (SPEs) that in turn issue notes to investors that are collateralised by the purchased
assets. For the purpose of disclosure in this note, a transfer of such financial assets may arise in
one of two ways.
●● If the Group sells assets to a consolidated SPE, then the transfer is from the Group (that
includes the consolidated SPE) to investors in the notes. The transfer is in the form of the
Group assuming an obligation to pass cash flows from the underlying assets to investors in
the notes.
●● If the Group sells assets to an unconsolidated SPE, then transfer is from the Group (that
excludes the SPE) to the SPE. The transfer is in the form of a sale of the underlying assets to
the SPE.
IAS 27.41(a), In the first case, although the Group does not own more than half of the voting power, it controls
39.19(c), 29 these SPEs because it is exposed to the majority of ownership risks and rewards of the SPEs and
hence, these SPEs are consolidated. The SPEs that are part of the Group transfer substantially all
the economic risks and rewards of ownership of the transferred assets to investors in the notes,
derecognition of the transferred assets is prohibited because the cash flows that it collects from
the transferred assets on behalf of the investors are not passed through to them without material
delay. In these cases, the consideration received from the investors in the notes in the form of
cash is recognised as a financial asset and a corresponding financial liability is recognised. The
investors in the notes, have recourse only to the cash flows from the transferred financial assets.
Explanatory note
1. IFRS 7.42E IFRS 7 requires specific disclosures if an entity transfers financial assets that are derecognised in
(d)–(e), IG40C their entirety in which it has continuing involvement if it may be required:
●● to repurchase the derecognised financial assets; or
●● to pay other amounts to the transferee in respect of the transferred assets.
These illustrative financial statements do not illustrate these specific disclosures. Paragraph
IG40C of IFRS 7 contains an example of how an entity might meet these specific disclosure
requirements.

(continued)
Securitisations (continued)
IAS 39.19(c), 29, 31, In certain securitisations where the Group transfers loans and advances to an unconsolidated
IFRS 7.42D(a)–(c), (f) SPE, it retains some credit risk (principally through the purchase of some junior notes issued
by the SPE) while transferring some credit risk, prepayment and interest rate risk to the SPE.
The terms of the transfer agreement prevent the unconsolidated SPE from selling the loans
and advances to a third party. The total carrying amount of such loans and advances before the
transfers was e74 million. On 31 December 2012 the carrying amount of the assets that the
entity continues to recognise in respect of its continuing involvement is e31 million and the
carrying amount of the associated liabilities is e30 million.
IFRS 7.42D(c) When the Group transfers assets as part of securitisation transactions it does not have the ability
to use the transferred assets during the term of the arrangement.
IFRS 7.42D(d)–(e) The table below sets out an overview of carrying amounts and fair values related to transferred
financial assets that are not derecognised in their entirety and associated liabilities.
31 December 2012
Financial assets at Loans and
fair value through receivables
profit or loss receivables
Loans and Loans and
advances to Trading advances to
In millions of euro customers assets customers
Carrying amount of assets 781 540 1,234

Carrying amount of associated liabilities 799 542 1,236
For those liabilities that have recourse only to the
transferred financial assets
Fair value of assets 781 - 1,240
Fair value of associated liabilities 781 - 1,240
Net position - - -
(b) Transferred financial assets that are derecognised in their entirety1

Securitisations
IFRS 7.42C, 42E Certain securitisation transactions undertaken by the Group result in the Group derecognising
(a)–(f), IAS 39.15, transferred assets in their entirety. This is the case when the Group transfers substantially all
17–20, SIC-12.8 the risks and rewards of ownership of financial assets to an unconsolidated SPE and retains
a relatively small interest in the SPE or a servicing arrangement in respect of the transferred
financial assets. If the financial assets are derecognised in their entirety, then the interest
in unconsolidated SPEs that the Group receives as part of the transfer, and the servicing
arrangement represent continuing involvement with those assets.

(b) Transferred financial assets that are derecognised in their entirety
(continued)
Securitisations (continued)
IFRS 7.42C, 42E(f), In June 2012, the Group sold certain investment securities to an unconsolidated SPE and, as part
42G of the consideration, received senior notes issued by the SPE. The senior notes represent less
than 5 percent of the total issue. The Group classifies the senior notes as available-for-sale
financial assets. The Group realised a gain of e8 million on the sale of the investment securities.
During 2012, it recognised interest income of e4 million in profit or loss and a fair value gain of
e250 thousand in other comprehensive income on the senior notes. The Group does not have
continuing involvement in any assets that were transferred and derecognised in their entirety in
earlier transactions. The transfers relating to servicing contracts are discussed below.
31 December 2012
Continuing involvement Maximum
Carrying exposure
amount Fair value to loss
Investment
In millions of euro securities Assets Liabilities
Type of continuing involvement

Notes issued by unconsolidated SPEs 98 98 - 98
IFRS 7.42E(c) The amount that best represents the Group’s maximum exposure to loss from its continuing
involvement in the form of notes issued by unconsolidated SPEs is its carrying amount.
IAS 39.24, As part of certain securitisation transactions that result in the Group derecognising the
IFRS 7.42C, 42E, transferred financial assets in their entirety, the Group retains servicing rights in respect of the
42H transferred financial assets. Under the servicing arrangements the Group collects the cash flows
on the transferred mortgages on behalf of the unconsolidated SPE. In return the Group receives
a fee that is expected to compensate the Group adequately for performing the servicing of the
related assets. Consequently, the Group accounts for the servicing arrangements as executory
contracts and has not recognised a servicing asset/liability. The servicing fees are based on
a fixed percentage of the cash flows that the Group collects as an agent on the transferred
residential mortgages. Potentially, a loss from servicing activities may occur if the costs the
Group incurs in performing the servicing activity exceed the fees receivable or if the Group does
not perform in accordance with the servicing agreements.
In 2012 the Group transferred prime residential mortgage loans (while retaining the servicing
rights) to unconsolidated SPEs. The loans were classified as loans and advances to customers
and measured at amortised cost with a total carrying amount of e281 million (e148 million in
May and e133 million in November).
IFRS 7.42G In 2012 the Group realised a gain of e26 million (e14 million in May and e12 million in November)
on such transfers of residential mortgage loans. The gain is presented within other revenue.
The Group recognised income of e2 million in 2012 in respect of residential mortgage loans. On
31 December 2012 the fair value of the loans and advances to customers transferred in 2012 that
the Group still services amounts to e262 million.
Explanatory notes
1. IAS 24.13 IAS 24 requires a disclosure of the relationships between parents and subsidiaries irrespective of
whether there have been transactions between those related parties.
In our experience, many entities include a list of significant subsidiaries in their consolidated
financial statements, either to follow the requirements of a local law or regulator, or as a legacy
of a previous GAAP. These illustrative financial statements include a list of significant subsidiaries
to reflect this practice.
2. When applicable, an entity discloses the following:

IAS 27.41(d) ●● the nature and extent of any significant restrictions – e.g. resulting from borrowing
arrangements or regulatory requirements – on the ability of subsidiaries to transfer funds to
the parent in the form of cash dividends or to repay loans or advances;
IAS 27.41(b) ●● the reasons why the ownership, directly or indirectly through subsidiaries, of more than half of
the voting or potential voting power of an investee does not constitute control; and
IAS 27.41(a) ●● the nature of its relationship with a subsidiary when it does not own, directly or indirectly
through subsidiaries, more than half of the voting power.
3. IAS 1.138(c), For a more comprehensive illustration of related party disclosures, see our publication Illustrative
24.13 financial statements issued in October 2012.
4. An entity discloses the name of its parent and ultimate controlling party if that is different. It also
discloses the name of its ultimate parent if this is not disclosed elsewhere in the information
published with the financial statements. In our view, the ‘ultimate parent’ and the ‘ultimate
controlling party’ are not necessarily synonymous. This is because the definition of parent refers
to an entity. Accordingly, an entity may have an ultimate parent and an ultimate controlling party.
Therefore, if the ultimate controlling party of the entity is an individual or a group of individuals,
then the identity of that individual or group of individuals and that relationship should be
disclosed. This issue is discussed in the 9th Edition 2012/13 of our publication Insights into IFRS
(5.5.90.10).

36. Group entities
IAS 24.13 Significant subsidiaries1, 2
Country of
incorporation Ownership interest

2012 2011
Blue Banking Plc United Kingdom 100% 100%

Blue Banking (North America) United States of America 100% 100%
Blue Banking Pty Ltd Australia 80% 80%
Bleu Banking S.A. France 100% 100%
Blue Banking (Africa) Ltd South Africa 100% 100%
37. Related parties3, 4

Parent and ultimate controlling party
IAS 1.138(c), 24.13 During the year ended 31 December 2012 a majority of the Bank’s shares were acquired by
[name of new parent] from [name of old parent]. As a result the new ultimate controlling party of
the Group is [name].
IAS 24.18 Transactions with key management personnel
Key management personnel and their immediate relatives have transacted with the Group during
the period as follows:
2012 2012 2011 2011
Maximum Closing Maximum Closing
IAS 24.17(a)–(b) In millions of euro balance balance balance balance
Mortgage lending and other secured loans 7 6 6 6

Credit card 1 1 1 1
Other loans 2 2 5 2
10 9 12 9
IAS 24.17(b) Interest rates charged on balances outstanding from related parties are a quarter of the rates that
would be charged in an arm’s length transaction. The interest charged on balances outstanding
from related parties amounted to e1 million (2011: e1 million). The mortgages and secured loans
granted are secured over property of the respective borrowers. Other balances are not secured
and no guarantees have been obtained.
Explanatory notes
1. In our view, materiality considerations cannot be used to override the explicit requirements of
IAS 24 for the disclosure of elements of key management personnel compensation. This issue is
discussed in the 9th Edition 2012/13 of our publication Insights into IFRS (5.5.110.20).
2. For a more comprehensive illustration of disclosures that may be applicable to leases from
the lessee’s point of view, including finance leases and contingent rentals, see our publication
Illustrative financial statements issued in October 2012.
3. IFRS 3.59(b), When a business combination happens after the end of the reporting period but before the
B66 financial statements are authorised for issue, an entity discloses the information as prescribed
by IFRS 3 to enable users of its financial statements to evaluate the nature and financial effect
of each business combination. The disclosure requirements are the same as those required
for business combinations effected during the period. If disclosure of any information is
impracticable, then an entity discloses this fact and the reasons for it. These disclosures are
illustrated in our publication Illustrative financial statements issued in October 2012 in the
context of a business combination effected during the year, and have not been reproduced in this
publication.

37. Related parties (continued)
IAS 24.17 Transactions with key management personnel (continued)
IAS 24.17(c)–(d) No impairment losses have been recorded against balances outstanding during the period with
key management personnel, and no specific allowance has been made for impairment losses on
balances with key management personnel and their immediate relatives at the period end.
IAS 24.17 Key management personnel compensation for the period comprised:1
Short-term employee benefits 12 10

Long-service leave 2 2
Post-employment benefits 3 3
Share-based payments 4 2
21 17
AS 19.124(b) In addition to their salaries, the Group also provides non-cash benefits to directors and executive
officers, and contributes to a post-employment defined benefit plan on their behalf. In accordance
with the terms of the plan, directors and executive officers retire at the age of 60 and are entitled
to receive annual payments equivalent to 70 percent of their salary at the date of retirement until
the age of 65, at which time their entitlement falls to 50 percent of their salary at the date of
retirement.
Executive officers also participate in the Group’s share option programme (see Note 13).
38. Lease commitments2

IAS 17.35(a) At the end of the reporting period, the future minimum lease payments under non-cancellable
operating leases are payable as follows.
Less than one year 352 322

Between one and five years 1,408 1,288
More than five years 5,914 5,152
7,674 6,762
IAS 17.35(d)(i)–(ii) The Group leases a number of branch and office premises under operating leases. The leases
typically run for a period of 20 years, with an option to renew the lease after that date. Lease
payments are increased every three to five years to reflect market rentals. Some leases provide
for additional rent payments that are based on changes in a local price index.
39. Subsequent event3

Acquisition of ABC Bank
IAS 10.21, 22(a) On 22 February 2013 the Group announced its offer to acquire all of the shares of ABC Bank
for €5.0 billion. The transaction has still to be approved by the Group’s shareholders and by
regulatory authorities. Approvals are not expected until late in 2013. Due to the early stage
of the transaction, an estimate of the financial effect of this proposed acquisition cannot be
made reliably.
244 | Appendix I
Explanatory note
1. IAS 1.10, 81(b) This analysis is based on two statements: a separate income statement displaying profit or loss,
and a second statement displaying the components of other comprehensive income.
IAS 1.12 An entity may present the components of profit or loss either as part of a single statement of
comprehensive income or in a separate income statement. When an entity elects to present two
statements, the separate income statement is part of a complete set of financial statements and
is presented immediately before the statement of comprehensive income.
Appendix I | 245
Appendix I
Consolidated income statement and consolidated statement of
comprehensive income – two-statement approach1
IFRS 7.20(b) Interest income 8 3,341 3,528

IFRS 7.20(b), Interest expense 8 (1,406) (1,686)
IAS 1.82(b)
Net interest income 1,935 1,842
IFRS 7.20(c) Fee and commission income 9 854 759

IFRS 7.20(c) Fee and commission expense 9 (179) (135)
Net fee and commission income 675 624
IFRS 7.20(a) Net trading income 10 1,434 1,087

IFRS 7.20(a) Net income from other financial instruments at fair value
through profit or loss 11 21 81
IFRS 7.20(a) Other revenue 12 123 186
IAS 1.85 Revenue

4,188 3,820
Other income 18 10
IFRS 7.20(e) Net impairment loss on financial assets 20, 21, 22 (330) (234)
IAS 1.99 Personnel expenses 13 (2,264) (1,974)
IAS 17.35(c) Operating lease expenses (344) (326)
IAS 1.99, 38.118(d) Depreciation and amortisation 23, 24 (47) (39)
IAS 1.99 Other expenses 14 (397) (585)
IAS 1.85 Profit before income tax 824 672

IAS 1.82(d), 12.77 Income tax expense 15 (187) (118)
IAS 1.82(f) Profit for the period

637 554
Attributable to:
IAS 1.83(a)(ii) Equity holders of the Bank 610 528
IAS 1.83(a)(i) Non-controlling interest 27 26
IAS 33.66 Basic earnings per share (euro) 16 0.34 0.29

IAS 33.66 Diluted earnings per share (euro) 16 0.33 0.29
246 | Appendix I
Appendix I | 247
Consolidated statement of comprehensive income

IAS 1.81(b) Profit for the period

637 554
Other comprehensive income, net of income tax
IAS 1.82(g), 21.52(b) Foreign currency translation differences for foreign operations (40) 23
IAS 1.82(g), 21.52(b) Net gain (loss) on hedges of net investments in foreign operations 30 (15)
Cash flow hedges:
IFRS 7.23(c), Effective portion of changes in fair value (17) (14)
IAS 1.82(g)
IFRS 7.23(d), IAS 1.92
Net amount transferred to profit or loss 10 8
Fair value reserve (available-for-sale financial assets):
IFRS 7.20(a)(ii), Net change in fair value (238) (106)
IAS 1.82(g)
IFRS 7.20(a)(ii), Net amount transferred to profit or loss 217 83
IAS 1.92
IAS 1.85 Other comprehensive income for the period, net of income tax (38) (21)
IAS 1.82(i) Total comprehensive income for the period 599 533
Attributable to:
IAS 1.83(b)(ii) Equity holders of the Bank 572 507
IAS 1.83(b)(i) Non-controlling interest 27 26
Total recognised income and expense for the period 599 533
248 | Appendix II
Explanatory notes
1. This Appendix illustrates the disclosures in annual financial statements on adoption of IFRS 10
Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities, as
amended by Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests
in Other Entities: Transition Guidance (amendments to IFRS 10, IFRS 11 and IFRS 12). IFRS 10 and
IFRS 12 are effective for annual periods beginning on or after 1 January 2013.
This Appendix does not refer to the requirements of IFRS 11 since it is not relevant to these
illustrative financial statements.
This Appendix focuses on how the disclosures in a Bank’s annual financial statements could
change as a result of applying IFRS 10 and IFRS 12. It does not repeat other disclosures
related to interests in other entities that are not expected to be affected by the early adoption
of these standards. For example, this Appendix does not include example disclosures for the
effects on the equity attributable to owners of the parent of any changes in its ownership in
a subsidiary that do not result in a loss of control. Also, the Appendix does not include other
potential consequential changes resulting from a different consolidation conclusion, for example
disclosures relating to transferred assets.
IFRS 12.C2 If an entity applies any of IFRS 10, IFRS 11 or IFRS 12 earlier than its effective date, then it
should apply IFRS 10, IFRS 11, IFRS 12, IAS 27 Separate Financial Statements (2011) and IAS 28
Investments in Associates and Joint Ventures (2011) at the same time. However, if an entity
decides to provide some of the disclosures required by IFRS 12 ahead of the effective date,
then it is not compelled to comply with all the requirements of IFRS 12 or to apply these other
standards at the same time.
This Appendix illustrates one possible format for the disclosures required; other formats are
possible. For a more detailed illustration of the adoption of these standards, please see the
October 2012 Edition of our publication IFRS Illustrative financial statements. Further guidance
on these new standards is included in the 9th Edition 2012/13 of our publication Insights into IFRS
(2.5A and 3.6A).
2. IFRS 12.1–4, The objective of IFRS 12 is to require an entity to disclose information that enables users of its
B2–B6 financial statements to evaluate the nature of, and risks associated with, its interests in other entities
and the effects of those interests on its financial position, financial performance and cash flows.
If the disclosures required by IFRS 12, together with the disclosures required by other IFRSs, do
not meet this objective, then an entity discloses whatever additional information is necessary to
meet the objective.
An entity considers the level of detail necessary to satisfy the above disclosure objective and
how much emphasis to place on each of the requirements in IFRS 12. An entity decides, in light
of its circumstances, how it aggregates or disaggregates disclosures so that useful information is
not obscured by either the inclusion of a large amount of insignificant detail or the aggregation of
items that have different characteristics. As a minimum, an entity presents information separately
for interests in subsidiaries, joint ventures, joint operations, associates and unconsolidated
structured entities.
3. IFRS 10.C2B, For the purposes of IFRS 10, the ‘date of initial application’ is the beginning of the annual
C4–C4A, C5– reporting period for which the IFRS is applied for the first time. At this date, an entity tests
C5A whether there is a change in the consolidation conclusion for its investees. If the consolidation
conclusion does not change, then the entity is not required to make adjustments to the previous
accounting for its involvement with the investees.
On the other hand, if at this date an entity determines that the consolidation conclusion
changes and therefore it consolidates an investee not previously consolidated, then the entity
retrospectively adjusts the accounting for the investee as if the investee had been consolidated
from the date that the entity would have obtained control of that investee under IFRS 10. If
such retrospective application is impracticable, then the entity applies the requirements of
IFRS 3 Business Combinations as of the beginning of the earliest period for which retrospective
application is practicable, which may be the current period.
4. IFRS10.C4– In respect of the restatement of comparatives, an entity is only required to restate one year of
C4A, C5–C5A, comparatives. This is relevant for entities that present additional comparatives on a voluntary
C6A basis, as they may elect not to restate all comparative periods presented.
Appendix II | 249
Appendix II
Example disclosures for entities that early adopt IFRS 10
Consolidated Financial Statements and IFRS 12 Disclosure of
Interests in Other Entities1, 2, 3
2. Basis of preparation (extract)
IAS 8.28 (e) Change in accounting policy
The Group has early adopted IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure
of Interests in Other Entities, with a date of initial application of 1 January 2012.
Subsidiaries, including structured entities
As a result of the adoption of IFRS 10, the Group has changed its accounting policy with
respect to determining whether it has control over and consequently whether it consolidates its
investees. IFRS 10 introduces a new control model that is applicable to all investees, including
structured entities. See Notes 3(a)(ii) and (iii).
In accordance with the transitional requirements of IFRS 10, the Group re-assessed the control
conclusion for its investees as of 1 January 2012. As a consequence, the Group has changed its
consolidation conclusions for certain structured entities to which the Group transfers assets as
part of its securitisation programme (see Note 5). Previously these structured entities were not
consolidated, principally because the Group did not have rights to the majority of the benefits and
did not retain the majority of the residual or ownership risks related to such entities. However, as
a consequence of re-assessment, the Group has concluded that it controls those entities.
Accordingly, the Group has restated its financial statements to reflect the consolidation of these
investees.4
250 | Appendix II
Explanatory notes
1. IFRS 10.C2A, When IFRS 10 is first applied, an entity is only required to disclose the quantitative impact of the
IAS 8.28(f) change in accounting policy for the immediately preceding period. The entity may also elect to
present this information for the current period or for any earlier comparative periods, but is not
required to do so.
In these illustrative financial statements, the Group has elected to present this information only
for the immediately preceding period.
2. IAS 1.10(f), 39 Although not illustrated in these illustrative financial statements, a third statement of financial
position and related notes are also presented if the effect of the change in accounting policy is
material.
Appendix II | 251

2. Basis of preparation (extract) (continued)
IAS 8.28 (e) Change in accounting policy (continued)
Subsidiaries, including structured entities (continued)
The following table summarises the adjustments made to the Group’s statements of financial
position at 1 January 2011 and 31 December 2011, and its statements of comprehensive income
and cash flows for the year ended 31 December 2011 as a result of the consolidation of these
Statement of financial position1, 2
1 January 2011
As previously
In millions of euro reported Adjustments As restated
Cash and cash equivalents 3,040 5 3,045

Loans and advances to customers 50,548 193 50,741
Investment securities 5,128 (24) 5,104
Overall impact on total assets 174
Debt securities issued (9,448) (178) (9,626)
Other liabilities (214) (10) (224)
Overall impact on total liabilities (188)
Retained earnings (2,680) 10 (2,670)
Other comprehensive income – fair value reserve (234) 4 (230)
Overall impact on total equity 14
31 December 2011
As previously
Cash and cash equivalents 2,992 7 2,999

Loans and advances to customers 56,805 211 57,016
Investment securities 5,269 (23) 5,246
Overall impact on total assets 195
Debt securities issued (10,248) (204) (10,452)
Other liabilities (431) (10) (441)
Overall impact on total liabilities (214)
Retained earnings (2,949) 14 (2,935)
Other comprehensive income – fair value reserve (211) 5 (206)
Overall impact on total equity 19
252 | Appendix II
Explanatory note
1. IAS 8.28(f), If IAS 33 applies to the financial statements of an entity, then the entity also discloses the effect
IFRS 10.C2A of applying IFRS 10 on basic and diluted earnings per share for the annual period immediately
preceding the date of initial application of IFRS 10. The entity may also elect to present this
information for the current period or for any earlier comparative periods presented, but is not
required to do so.
Appendix II | 253

2. Basis of preparation (extract) (continued)
IAS 8.28 (e) Change in accounting policy (continued)
Subsidiaries, including structured entities (continued)
Statement of comprehensive income
For the year ended 31 December 2011
As previously
Profit for the year

Interest income 3,528 15 3,543
Interest expense (1,686) (13) (1,699)
Fee and commission income 759 (2) 757
Other revenue 186 (6) 180
Income tax expense (118) 2 (116)
Other comprehensive income, net of income tax
Fair value reserve (net) (23) (1) (24)
Overall impact on profit and total comprehensive income (5)
The change in accounting policy had no impact on earnings per share for the year ended
31 December 2011.1
Statement of cash flows
For the year ended 31 December 2011
As previously
Net cash used in operating activities (813) (198) (1,011)

Net cash from financing activities 1,030 200 1,230
Overall impact on cash and cash equivalents 2
3. Significant accounting policies (extract)

(a) Basis of consolidation
(ii) Subsidiaries
IFRS 10.6 Subsidiaries are investees controlled by the Group. The Group controls an investee when it is
exposed to, or has rights to, variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. The financial statements
of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
(iii) Structured entities
IFRS 10.B17, 12.A A structured entity is an entity designed so that its activities are not governed by way of voting
rights. In assessing whether the Group has power over such investees in which it has an interest,
the Group considers factors such as the purpose and design of the investee; its practical ability to
direct the relevant activities of the investee; the nature of its relationship with the investee; and
the size of its exposure to the variability of returns of the investee.
254 | Appendix II
Explanatory notes
1. IFRS 12.7–9, An entity discloses information about significant judgements and assumptions that it has made
IAS 1.122 in determining that it has control of another entity. Such disclosures include changes to those
judgements and assumptions, and information when changes in facts and circumstances cause a
change in the control conclusion during the reporting period.
2. An in-depth discussion of the application of IFRS 10 to fund managers is included in our

publication IFRS Practice Issues: Applying the consolidation model to fund managers.
Appendix II | 255

5. Use of estimates and judgements – Critical accounting
judgements in applying the Group’s accounting policies
(extract)
Determination of control over investees1
IFRS 12.7 The control indicators set out in Notes 3(a)(ii) and (iii) are subject to management’s judgement
that can have a significant effect in the case of the Group’s interests in securitisation vehicles and
investment funds.
Securitisation vehicles
IFRS 12.7(a), 9(b) Certain securitisation vehicles sponsored by the Group under its securitisation programme are
run according to pre-determined criteria that are part of the initial design of the vehicles. Outside
of the day-to-day servicing of the receivables (which is carried out by the Group under a servicing
contract), key decisions are required only when receivables in the vehicles go into default, and it
is the Group that makes those decisions. In addition, the Group is exposed to variability of returns
from the vehicles through its holding of debt securities in the vehicles. As a result, the Group has
concluded that it controls these vehicles and they have been consolidated as of 1 January 2012
(see Note 2(e)).
Investment funds
IFRS 12.7(a), 9(c) The Group acts as fund manager to a number of investment funds. Determining whether the
Group controls such an investment fund usually focuses on the assessment of the aggregate
economic interests of the Group in the fund (comprising any carried interests and expected
management fees) and the investors’ rights to remove the fund manager. For all funds managed
by the Group, the investors (whose number ranges from 300 to over 1,000) are able to vote by
simple majority to remove the Group as fund manager without cause, and the Group’s aggregate
economic interest is in each case less than 15 percent. As a result, the Group has concluded
that it acts as agent for the investors in all cases, and therefore has not consolidated these
funds.2 See Note X for further disclosure in respect of investment funds in which the Group has
an interest.
256 | Appendix II
Explanatory notes
1. IFRS 12.10(b)(ii), An entity discloses information that enables users of its consolidated financial statements to
15–17 evaluate the nature of, and changes in, the risks associated with its interests in consolidated
In addition to the disclosure presented in these illustrative financial statements, if during the
reporting period a parent or any of its subsidiaries has, without a contractual obligation to do so,
provided financial or other support to a consolidated structured entity, then the entity discloses:
●● the type and amount of support provided, including situations in which the parent or its
subsidiaries assisted the structured entity in obtaining financial support; and
●● the reasons for providing the support.
In addition, if the above non-contractual financial or other support was provided to a previously
unconsolidated structured entity and that provision of support resulted in the entity controlling
the structured entity, then the entity discloses an explanation of the relevant factors in reaching
that decision.
An entity also discloses any current intention to provide financial or other support to a
consolidated structured entity, including any intention to assist the structured entity in obtaining
financial support.
2. IFRS 12.10(a)(ii), An entity discloses information that enables users of its consolidated financial statements to
12(d), B17 understand the interest that non-controlling interests (NCI) have in the group activities and cash
flows.
In addition to the disclosures presented in these illustrative financial statements, an entity
discloses the proportion of voting rights held by NCI if different from the proportion of ownership
interests held.
However, if an entity’s interest in a subsidiary is classified as held-for-sale in accordance with
IFRS 5, then it is not required to present the summarised financial information for that subsidiary.
3. IFRS 12.10(b) If applicable, an entity discloses information that enables users of its consolidated financial
(i), 13 statements to evaluate the nature and extent of significant restrictions on its ability to access or
use assets, and settle liabilities, of the group. In this regard, it discloses:
●● significant restrictions on its ability to access or use the assets and settle the liabilities of the
group, such as:
– those that restrict the ability of a parent or its subsidiaries to transfer cash or other assets to
(or from) other entities within the group; or
– guarantees or other requirements that may restrict dividends and other capital distributions
being paid, or loans and advances being made or repaid, to (or from) other entities within the
group;
●● the nature and extent to which protective rights of NCI can significantly restrict the entity’s
ability to access or use the assets to settle the liabilities of the group (such as when a parent is
obliged to settle liabilities of a subsidiary before settling its own liabilities, or approval of NCI is
required either to access the assets or to settle the liabilities of a subsidiary); and
●● the carrying amounts in the consolidated financial statements of the assets and liabilities to
which those restrictions apply.
Appendix II | 257

36. Group entities (extract)
Financial support given to structured entities1
IFRS 12.14 During the year, the Group has issued guarantees of €80 million (2011: nil) to holders of notes
issued by certain structured entities that the Group consolidates. These guarantees would require
the Group to reimburse the note holders for losses that they incur if the underlying assets do not
perform up to the specified amount of their contractual cash flows.
Non-controlling interests in subsidiaries2, 3
IFRS 12.10(a)(ii), The following table summarises the information relating to the Group’s subsidiary that has
12(g), B10(b) material non-controlling interests (NCI), before any intra-group eliminations.
IFRS 12.12(a) Blue Banking Pty Ltd
IFRS 12.12(c) NCI percentage 20% 20%
Loans and advances 2,015 1,770

Other assets 120 230
Debt securities issued - -
Other liabilities 1,360 1,360
Net assets 775 640
IFRS 12.12(f) Carrying amount of NCI 155 128
Revenue 750 717
Profit (loss) 135 130
Total comprehensive income 135 130

IFRS 12.12(e) Profit (loss) allocated to NCI 27 26
Cash flows from operating activities 126 211
Cash flows from investment activities (50) (23)
Cash flows from financing activities, before dividends to NCI 12 (15)
IFRS 12.B10(a) Cash flows from financing activities – cash dividends to NCI - -
Net increase (decrease) in cash and cash equivalents 88 173
IFRS 12.12(b) Blue Banking Pty Ltd has its principal place of business in [Country].
258 | Appendix II
Explanatory notes
1. IFRS 12.C2B The disclosure requirements related to its interests in unconsolidated structured entities may
be presented prospectively as from the first annual period for which IFRS 12 is applied. This
approach is followed in these illustrative financial statements.
2. IFRS 12.24–31 The disclosure objective in respect of an entity’s interests in unconsolidated structured entities is
to provide information that helps users of its financial statements to:
●● understand the nature and extent of its interests in unconsolidated structured entities; and
●● evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated
In order to meet this disclosure objective, IFRS 12 requires extensive qualitative and quantitative
disclosures about the nature of an entity’s interests and the nature of its risks.
3. IFRS 12.24, The standard requires certain disclosures if an entity has sponsored an unconsolidated structured
B25–B26 entity for which it does not have an interest at the end of the reporting period. An entity discloses
additional information that is necessary to meet the disclosure objective.
Appendix II | 259
Note X Involvement with unconsolidated structured entities1, 2

IFRS 12.26–27(a), 29 The table below describes the types of structured entities in which the Group either holds an
interest, or does not hold an interest but is a sponsor. The Group considers itself a sponsor of a
structured entity when it facilitates the establishment of the structured entity.
Type of structured entity Nature and purpose Interest held by the Group
Securitisation Generate: Investments in senior

vehicles for loans notes issued by the
●● funding for the Group’s lending activities
and advances (see vehicles
Note 35) ●● margin through sale of assets to investors
●● fees for loan servicing.
These vehicles are financed through the
issue of notes to investors.
Investment funds Generate fees from managing assets on Investments in units
behalf of third-party investors. issued by the fund
These vehicles are financed through the
issue of units to investors.
Securitisation Created on behalf of third parties to None
vehicles for third- securitise their trade receivables.
party receivables
These vehicles are financed through loans
from third-party banks.
IFRS 12.29 The table below sets out interests held by the Group in unconsolidated structured entities. The
maximum exposure to loss is equal to the sum of carrying amount of the assets held.
31 December 2012
Carrying amount Investment
In millions of euro securities
Securitisation vehicles for loans and advances 256

Investment funds 238
Total 494
IFRS 12.30 During the year, the Group provided financial support of €10 million to an unconsolidated
securitisation vehicle to enable it to make payments to the holders of the notes issued by the
vehicle. Although under no contractual obligation to do so, the Group decided to provide such
support after careful consideration of its role in the set-up of the vehicle and its reputation in
providing such services. The support was provided in order to manage the short-term liquidity
needs of the entity.
IFRS 12.27(b)–(c) The table below sets out information in respect of structured entities that the Group sponsors,
but in which the Group does not have an interest.3
2012
In millions of euro
Securitisation vehicles for third-party receivables

Fee income earned from securitisation vehicles 20
Carrying amount of assets transferred by third parties to securitisation vehicles 769
260 | Appendix III
Explanatory note
1. IFRS 13.6–7, C2 This Appendix illustrates the disclosures in annual financial statements on adoption of IFRS 13
Fair Value Measurement. The standard is effective for annual periods beginning on or after
1 January 2013.
The Appendix assumes that the entity early adopted the standard on 1 January 2012 and that
the adoption of IFRS 13 does not change the fair value measurement of the Group’s assets and
liabilities. However, measurement differences may arise in practice, for example in respect of:
●● the extent to which portfolios of financial assets and financial liabilities with offsetting risks are
measured on the basis of net exposures;
●● reflecting the size of the net position in the fair value measurement of portfolios of financial
instruments; or
●● reflecting non-performance risk in measuring fair values of financial liabilities.
IFRS 13 disclosure requirements relate to assets and liabilities measured at fair value or for which
fair value disclosures are made, with limited explicit exceptions. Other currently effective IFRSs
also include some disclosure requirements on fair value measurements, e.g. IFRS 7 requires
extensive disclosures on financial instruments, and IAS 40 requires disclosures on investment
properties stated at fair value and disclosure of the fair value of properties stated at cost, which in
some cases are the same as or similar to the IFRS 13 disclosure requirements.
To avoid any duplication, this Appendix does not include many detailed disclosures, which
were already included under the current guidance but instead focuses on additional disclosures
required by IFRS 13. However, as implementation of IFRS 13 is likely to require extensive
changes to disclosures about the valuation of financial instruments, the part of Note 5 relating to
valuation of financial instruments has been reproduced in full and amended paragraphs marked
by double line in the margin. This makes it easier to see changes in their relevant context.
IFRS 13 is applied prospectively as of the beginning of the annual period in which it is initially
applied. Prospective application will mean that any changes from adjustments to valuation
techniques at the date of adoption will be recognised in the period of adoption either in profit or
loss or other comprehensive income, when a gain or loss is recognised in other comprehensive
income in accordance with the IFRS that requires or permits fair value measurement. The
disclosure requirements of IFRS 13 need not be applied in comparative information provided
for periods before its initial application. Accordingly, this Appendix does not include comparative
information for 2011.
Further guidance on IFRS 13 is included in the 9th Edition 2012/13 of our publication Insights into
IFRS (2.4A).
Appendix III | 261
Appendix III
Example disclosures for entities that early adopt
IFRS 13 Fair Value Measurement 1
2. Basis of preparation (extract)
IAS 8.28 (e) Change in accounting policy
The Group has early adopted IFRS 13 Fair Value Measurement with effect from 1 January 2012. In
accordance with the transitional provisions, IFRS 13 has been applied prospectively from that date.
As a result, the Group has adopted a new definition of fair value, as set out in Note 3(j)(vi). The
change had no impact on the measurements of the Group’s assets and liabilities. However, the
group has included new disclosures in the financial statements which are required under IFRS 13.
3. Significant accounting policies (extract)

(j) Financial assets and financial liabilities
(vi) Fair value measurement
Policy applicable from 1 January 2012
IFRS 13.9, 24, 42 Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal, or in
its absence, the most advantageous market to which the Group has access at that date. The fair
value of a liability reflects its non-performance risk.
IFRS 13.79, A When applicable, the Group measures the fair value of an instrument using the quoted price in
an active market for that instrument. A market is regarded as active if transactions for the asset
or liability take place with sufficient frequency and volume to provide pricing information on an
ongoing basis.
IFRS 13.61–62 When there is no quoted price in an active market, the Group uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
The chosen valuation technique incorporates all the factors that market participants would take
into account in pricing a transaction.
IFRS 7.28(a) The best evidence of the fair value of a financial instrument at initial recognition is normally
the transaction price – i.e. the fair value of the consideration given or received. If the Group
determines that the fair value at initial recognition differs from the transaction price and the fair
value is evidenced neither by a quoted price in an active market for an identical asset or liability
nor based on a valuation technique that uses only data from observable markets, the financial
instrument is initially measured at fair value, adjusted to defer the difference between the fair
value at initial recognition and the transaction price. Subsequently, that difference is recognised
in profit or loss on an appropriate basis over the life of the instrument but no later than when the
valuation is supported wholly by observable market data or the transaction is closed out.
IFRS 13.70–71 If an asset or a liability measured at fair value has a bid price and an ask price, the Group measures
assets and long positions at a bid price and liabilities and short positions at an ask price.
IFRS 13.48 Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk
that are managed by the Group on the basis of the net exposure to either market or credit risk,
are measured on the basis of a price that would be received to sell a net long position (or paid to
transfer a net short position) for a particular risk exposure. Those portfolio-level adjustments are
allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each
of the individual instruments in the portfolio.
IFRS 13.95 The Group recognises transfers between levels of the fair value hierarchy as of the end of the
reporting period during which the change has occurred.
262 | Appendix III
Explanatory note
1. IFRS 13.93, C3 Many of the IFRS 13 disclosure requirements regarding financial assets and financial liabilities are
already required under IFRS 7.
However, IFRS 13 includes additional disclosure requirements. These include the following in
respect of fair value measurements categorised within Level 3:
●● for recurring and non-recurring fair value measurements, quantitative information about
significant unobservable inputs (the entity is not required to create such quantitative
information if the unobservable inputs are not developed by the entity when measuring
fair value. However, when providing this disclosure, the entity does not ignore quantitative
unobservable inputs that are significant to the fair value measurement that are reasonably
available);
●● for recurring and non-recurring fair value measurement, a description of the valuation
process used by the entity. For recurring fair value measurements, a narrative description of
the sensitivity of the fair value measurements to changes in unobservable inputs and inter-
relationships between unobservable inputs;
●● for recurring fair value measurements, disclosure of gains or losses recognised in other
comprehensive income and of unrealised gains and losses.
IFRS 13 also requires disclosure of:
●● all transfers (not just significant ones) between Level 1 and Level 2 of the fair value hierarchy
and the reasons for those transfers;
●● for each class of assets and liabilities not measured at fair value in the statement of financial
position but for which the fair value is disclosed, the level of the fair value hierarchy within
which the fair value measurements are categorised;
●● when an entity concludes that transaction price was not the best evidence of fair value at initial
recognition, the reasons for this conclusion and a description of evidence that supports fair
value.
Some of the new disclosures in IFRS 13 have already been reflected in the main body of these
illustrative financial statements in response to recommendations made by the IASB Expert
Advisory Panel. Where appropriate, we have expanded these sections to illustrate additional
disclosures that would be required following the implementation of IFRS 13.
Appendix III | 263

5. Use of estimates and judgements
IAS 1.122 Critical accounting judgements in applying the Group’s accounting policies
Valuation of financial instruments1
The Group’s accounting policy on fair value measurements is set out in Note 3(j)(vi).
IFRS 13.72 The Group measures fair values using the following fair value hierarchy that reflects the
significance of the inputs used in making the measurements:
●● Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical
instruments.
●● Level 2: inputs other than quoted prices included within Level 1 that are observable either
directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments
valued using: quoted market prices in active markets for similar instruments; quoted prices
for identical or similar instruments in markets that are considered less than active; or other
valuation techniques where all significant inputs are directly or indirectly observable from
market data.
●● Level 3: Inputs that are unobservable. This category includes all instruments where the
valuation technique includes inputs not based on observable data and the unobservable inputs
have a significant effect on the instrument’s valuation. This category includes instruments that
are valued based on quoted prices for similar instruments where significant unobservable
adjustments or assumptions are required to reflect differences between the instruments.
IFRS 13.93(d) Fair values of financial assets and financial liabilities that are traded in active markets are based
on quoted market prices or dealer price quotations. For all other financial instruments the Group
determines fair values using other valuation techniques.
Other valuation techniques include net present value and discounted cash flow models,
comparison to similar instruments for which market observable prices exist, Black-Scholes and
polynomial option pricing models and other valuation models. Assumptions and inputs used in
valuation techniques include risk-free and benchmark interest rates, credit spreads and other
premia used in estimating discount rates, bond and equity prices, foreign currency exchange
rates, equity and equity index prices and expected price volatilities and correlations.
The objective of valuation techniques is to arrive at a fair value measurement that reflects
the price that would be received to sell the asset or paid to transfer the liability in an orderly
transaction between market participants at the measurement date.
The Group uses widely recognised valuation models for determining the fair value of common
and more simple financial instruments, like interest rate and currency swaps that use only
observable market data and require little management judgement and estimation. Observable
prices and model inputs are usually available in the market for listed debt and equity securities,
exchange traded derivatives and simple over the counter derivatives like interest rate swaps.
Availability of observable market prices and model inputs reduces the need for management
judgement and estimation and also reduces the uncertainty associated with determination of fair
values. Availability of observable market prices and inputs varies depending on the products and
markets and is prone to changes based on specific events and general conditions in the financial
markets.
However, where the Group measures portfolios of financial assets and financial liabilities on
the basis of net exposures, it applies judgement in determining appropriate portfolio level
adjustments such as bid-ask spread. Such adjustments are derived from observable bid-ask
spreads for similar instruments and adjusted for factors specific to the portfolio.
264 | Appendix III
Appendix III | 265

(continued)
Valuation of financial instruments (continued)
For more complex instruments, the Group uses proprietary valuation models, which usually are
developed from recognised valuation models. Some or all of the significant inputs into these
models may not be observable in the market, and are derived from market prices or rates or are
estimated based on assumptions. Example of instruments involving significant unobservable
inputs include certain over the counter structured derivatives, certain loans and securities for
which there is no active market and retained interests in securitisations. Valuation models that
employ significant unobservable inputs require a higher degree of management judgement and
estimation in the determination of fair value. Management judgement and estimation are usually
required for selection of the appropriate valuation model to be used, determination of expected
future cash flows on the financial instrument being valued, determination of probability of
counterparty default and prepayments and selection of appropriate discount rates.
IFRS 13.93(g), The Group has an established control framework with respect to the measurement of fair
13.IE65 values. This framework includes a Product Control function, which is independent of front office
management and reports to the Chief Financial Officer, and which has overall responsibility for
independently verifying the results of trading and investment operations and all significant fair
value measurements. Specific controls include:
●● verification of observable pricing;
●● re-performance of model valuations;
●● a review and approval process for new models and changes to models involving both Product
Control and Group Market Risk;
●● quarterly calibration and back testing of models against observed market transactions;
●● analysis and investigation of significant daily valuation movements;
●● review of significant unobservable inputs, valuation adjustments and significant changes to the
fair value measurement of Level 3 instruments compared to previous month, by a committee
of senior Product Control and Group Market Risk personnel.
Where third-party information, such as broker quotes or pricing services, are used to measure fair
value, Product Control assesses and documents the evidence obtained from the third parties to
support the conclusion that such valuations meet the requirements of IFRS. This includes:
●● verifying that the broker or pricing service is approved by the Group for use in pricing the
relevant type of financial instrument;
●● understanding how the fair value has been arrived at and the extent to which it represents
actual market transactions;
●● when prices for similar instruments are used to measure fair value, how these prices have
been adjusted to reflect the characteristics of the instrument subject to measurement;
●● where a number of quotes for the same financial instrument have been obtained, how fair
value has been determined using those quotes.
Significant valuation issues are reported to the Group Audit Committee.
266 | Appendix III
Explanatory note
1. IAS 39.AG76 The guidance on recognising gains or losses at initial recognition, although modified by IFRS 13,
is retained in IAS 39. However, under IAS 39 before the adoption of IFRS 13, the best evidence of
fair value at initial recognition is assumed to be the transaction price unless a different fair value
measurement is evidenced by comparison with other observable current market transactions in
the same instrument or based on a valuation technique whose variables include only data from
observable markets. Under the amended guidance, the initial measurement of the financial
instrument is based on fair value as defined in IFRS 13, but the carrying amount of the financial
instrument is adjusted to defer any difference between the transaction price and a fair value
measurement that is not evidenced by a quoted price in an active market or by a valuation
technique that uses only observable market data.
Accordingly, although we assume in this Appendix that the aggregate difference yet to be
recognised in profit or loss did not change as a result of the adoption of IFRS 13; it now
represents the difference between the transaction price and the fair value at initial recognition
under IFRS 13 while previously it represented the difference between the fair value under IAS 39
(which was the transaction price) and the amount that would have been determined at that
date using a valuation technique which is dependent on unobservable inputs. The change in the
nature of the difference does not impact the amount at which financial instruments are initially
recognised.
We assume in this Appendix that the fair value presented in note 5 for financial instruments
measured at fair value in the statement of financial position is equal to their carrying amount
although the carrying amount may also include a deferred difference as described above.
Appendix III | 267

(continued)
IFRS 13.93(b) The table below analyses financial instruments measured at fair value at the end of the
reporting period, by the level in the fair value hierarchy into which the fair value measurement
is categorised. The amounts are based on the values recognised in the statement of financial
position.1
In millions of euro Note Level 1 Level 2 Level 3 Total
31 December 2012
Trading assets 18 10,805 5,177 680 16,662
13,437 12,722 1,548 27,707
Trading liabilities 18 5,719 1,237 70 7,026
7,688 2,505 70 10,263
IFRS 13.93(c) During the current year, due to changes in market conditions for certain investment securities,
quoted prices in active markets were no longer available for these securities. However, there was
sufficient information available to measure fair values of these securities based on observable
market inputs. Hence, these securities, with a carrying amount of e369 million, were transferred
from Level 1 to Level 2 of the fair value hierarchy.
268 | Appendix III
Appendix III | 269

(continued)
IFRS 13.93(e) The following table shows a reconciliation from the beginning balances to the ending balances for
fair value measurements in Level 3 of the fair value hierarchy:
2012
Loans and
IFRS 13.93(e) Balance at 1 January 743 119 873 (69) 1,666

Total gains or losses:
IFRS 13.93(e)(i) in profit or loss 12 (4) (71) 5 (58)
IFRS 13.93(e)(ii) in other comprehensive income - - (81) - (81)
IFRS 13.93(e)(iii) Purchases 41 44 - - 85
IFRS 13.93(e)(iii) Issues - - - (6) (6)
IFRS 13.93(e)(iii) Settlements (51) - (6) - (57)
IFRS 13.93(e)(iv) Transfers into Level 3 - - - - -
IFRS 13.93(e)(iv) Transfers out of Level 3 (65) - (6) - (71)
IFRS 13.93(e) Balance at 31 December 680 159 709 (70) 1,478
Total gains or losses for the year in the above table are presented in the statement of
comprehensive income as follows
2012
Loans and

IFRS 13.93(e)(i)–(ii)
Total gains or losses recognised
in other comprehensive income
– net change in fair value of
available-for-sale financial assets - - (81) - (81)
IFRS 13.93(f) Total gains or losses for the year
included in profit or loss
attributable to the change in
unrealised gains and losses
relating to assets and liabilities
held at the end of the
reporting period:
270 | Appendix III
Appendix III | 271

(continued)
IFRS 13.93(e)(iv) During the current year, certain trading assets and investment securities were transferred out of
Level 3 of the fair value hierarchy when significant inputs used in their fair value measurements
such as certain credit spreads and long-dated option volatilities, which were previously
unobservable became observable.
Apart from the above, during the current year low trading volumes continued and there has
not been sufficient trading volume to establish an active market and so the Group continued
to determine the fair value of certain asset-backed securities using valuation techniques. These
securities are backed primarily by static pools of residential mortgages and enjoy a senior claim
on cash flows. The fair value of asset-backed securities measured using significant unobservable
inputs at 31 December 2012 was €422 million for trading securities and €685 million for
investment securities.
IFRS 13.93(d) The Group’s valuation methodology for valuing these asset-backed securities uses a discounted
cash flow methodology that takes into account original underwriting criteria, borrower attributes
(such as age and credit scores), loan-to-value ratios, expected house price movements and
expected prepayment rates. These features are used to estimate expected cash flows which are
then allocated using the “waterfall” applicable to the security and discounted at a risk-adjusted
rate. The discounted cash flow technique is often used by market participants to price asset-
backed securities. However, this technique is subject to inherent limitations, such as estimation
of the appropriate risk adjusted discount rate, and different assumptions and inputs would yield
different results.
Model inputs and values are calibrated against historical data and published forecasts and, where
possible, against current or recent observed transactions in different mortgage-backed securities
and broker quotes. This calibration process is inherently subjective as different input sources
may imply different levels of expected losses and discount rates; also, adjustment is required
for the differing features of different securities. The calibration process yields ranges of possible
inputs and estimates of fair value, and management judgement is required to select the most
appropriate point in the range.
As part of its trading activities the Group enters into OTC structured derivatives, primarily
options indexed to credit spreads, equity prices, foreign exchange rates and interest rates, with
customers and other banks. Some of these instruments are valued using models with significant
unobservable inputs, principally expected long-term volatilities and expected correlations between
different underlyings.
272 | Appendix III
IAS 1.122 Critical accounting judgements in applying the Group’s accounting policies (continued)
IFRS 13.93(d), The table below sets out information about significant unobser vable inputs used at year end in measuring financial instruments categorised as Level 3
93(h)(i), IE63, IE66 in the fair value hierarchy.
Fair values at Range of estimates

Type of financial 31 December Valuation Significant (weighted average) for
instrument 2012 technique unobservable input unobservable input Fair value measurement sensitivity to unobservable inputs
Residential asset- 1,107 Discounted Probability of default 8%-12% (10%) Significant increases in any of these inputs in isolation would result
backed securities cash flow Loss severity 40%-60% (50%) in lower fair values. Significant reduction would result in higher fair
Expected prepayment 3%-6% (4.8%) values. Generally, a change in assumption used for the probability
rate of default is accompanied by a directionally similar change in
assumptions used for the loss severity and a directionally opposite
change in assumptions used for prepayment rates.
OTC option-based 100 Option Correlations between 0.35-0.55 (0.47) Significant increase in volatility would result in higher fair value.
credit structured model credit spreads
derivatives Annualised volatility of 5%-60% (20%)
credit spreads
OTC option-based 88 Option Correlations between 0.35-0.55 (0.47) Significant increases in volatilities would result in higher fair value.
non-credit structured model different underlyings
derivatives Volatility of interest rate 5%-30% (15%)
Volatility of FX rate 10%-40% (20%)
Volatilities of equity 10%-90% (40%)
indices
Loans and advances 183 Discounted Risk adjusted discount Spread of 5%-7% (6%) Significant increase in the spread above risk free rate would result
and retained interest cash flow rate above risk free interest in a lower fair value.
in securitisations rate
Appendix III | 273
274 | Appendix III
Appendix III | 275

(continued)
IFRS 13.IE65(e) Significant unobservable inputs are developed as follows:
●● Expected prepayment rates are derived from historical prepayment trends, adjusted to reflect
current conditions.
●● Probabilities of defaults and loss severities for commercial assets are derived from the Credit
Default Swap (CDS) market. When this information is not available, the inputs are obtained
from historical default and recovery information and adjusted for current conditions.
●● Probabilities of default and loss severities for retail assets are derived from historical default
and recovery information and adjusted for current conditions.
●● Correlations between and volatilities of the underlying are derived through extrapolation of
observable volatilities, recent transaction prices, quotes from other market participants, data
from consensus pricing services and historical data adjusted for current conditions.
●● Risk adjusted spreads are derived from the CDS market (when this information is available)
and from historical defaults and prepayment trends adjusted for current conditions.
IFRS 13.93(h)(ii) Although the Group believes that its estimates of fair value are appropriate, the use of different
methodologies or assumptions could lead to different measurements of fair value. For fair value
measurements in Level 3, changing one or more of the assumptions used to reasonably possible
alternative assumptions would have the following effects:
Effect on other
Effect on comprehensive
profit or loss income
In millions of euro Favourable (Unfavourable) Favourable (Unfavourable)
31 December 2012
Other 12 (13) - -
Total 114 (112) 44 (53)
IFRS 13.93(h)(ii) The favourable and unfavourable effects of using reasonably possible alternative assumptions
for valuation of residential asset-backed securities have been calculated by recalibrating the
model values using unobservable inputs based on averages of the upper and lower quartiles
respectively of the Group’s ranges of possible estimates. Key inputs and assumptions used in
the models at 31 December 2012 include expected weighted average probability of default of
10 percent (with reasonably possible alternative assumptions of 6 percent and 14 percent), a
loss severity of 50 percent (with reasonably possible alternative assumptions of 35 percent and
70 percent) and an expected prepayment rate of 4.8 percent (with reasonably possible alternative
assumptions of 2 percent and 8 percent).
276 | Appendix III
Appendix III | 277

(continued)
IFRS 13.93(h)(ii) The favourable and unfavourable effects of using reasonably possible alternative assumptions
for valuation of OTC structured derivatives have been calculated by adjusting unobservable
model inputs to the averages of the upper and lower quartile of consensus pricing data or by
two standard deviations in the level of such inputs (based on the last two years’ historical daily
data). The most significant unobservable inputs used in the models at 31 December 2012 relate
to correlations of changes in prices between different underlyings and the volatilities of the
underlyings. The weighted average of correlations used in the models is 0.47 with reasonably
possible alternative assumptions of 0.30 and 0.58. The weighted average of the credit spread
volatilities used in the models at 31 December 2012 is 20 percent with reasonably possible
alternative assumptions of 5 percent and 70 percent; interest rate volatilities: 15, 5 and
40 percent respectively; FX rate volatilities: 20, 5 and 50 percent respectively; and equity indices
volatilities: 40, 10 and 100 percent respectively.
The favourable and unfavourable effects of using reasonably possible alternative assumptions for
valuation of loans and advances and retained interests in securitisations have been calculated by
recalibrating the model values using unobservable inputs based on averages of the upper and
lower quartiles respectively of the Group’s ranges of possible estimates. The most significant
unobservable inputs relate to risk adjusted discount rates. The weighted average of risk adjusted
discount rates used in the models at 31 December 2012 is 6 percent above risk free interest rate
(with reasonably possible alternative assumptions of 4 percent and 8 percent).
In determining fair values, the Group does not use averages of reasonably possible alternative
inputs as averages may not represent a price at which a transaction would take place between
market participants on the measurement date. When alternative assumptions are available
within a wide range, judgement is exercised in selecting the most appropriate point in the
range, including evaluation of the quality of the sources of inputs (for example, the experience
and expertise of the brokers providing different quotes within a range, giving greater weight to
a quote from the original broker of the instrument who has the most detailed information about
the instrument) and the availability of corroborating evidence in respect of some inputs within
the range.
The Group’s reporting systems and the nature of the instruments and the valuation models do
not allow it to analyse accurately the total annual amounts of gains or losses reported above that
are attributable to observable and unobservable inputs. However, the losses on asset-backed
securities in 2012 are principally dependent on the unobservable inputs described above.
278 | Appendix III
Explanatory notes
1. IFRS 13.97 IFRS 13 includes additional disclosure requirements regarding the level of the fair value hierarchy
within which the fair value measurements are categorised for financial assets and liabilities
not measured at fair value in the statement of financial position but for which the fair value is
disclosed. Consequently, these additional disclosure requirements are included as a modification
of Note 7.
2. IFRS 7.28(c), Paragraph 28 of IFRS 7, as amended by IFRS 13, now requires an explanation of why the entity
13.57–59, B4 has concluded that the transaction price was not the best evidence of fair value, including
description of evidence that supports fair value. These additional disclosure requirements are
included as a modification of the part of Note 18 discussing “unobservable valuation differences
on initial recognition”.
Appendix III | 279

7. Financial assets and liabilities (extract)1
Accounting classifications and fair values
IFRS 13.97 The following table analyses the fair values of financial instruments not measured at fair value, by
the level in the fair value hierarchy into which each fair value measurement is categorised:
31 December 2012
Total Total carrying
In millions of euro Level 1 Level 2 Level 3 fair values amount
Assets
Cash and cash equivalents - 2,907 - 2,907 2,907
Loans and advances to banks - 5,602 - 5,602 5,572
customers - 61,960 418 62,378 59,084
Held to maturity investment
securities 106 - - 106 101
Liabilities
Deposits from banks - 12,301 - 12,301 11,678
Deposits from customers - 55,696 - 55,696 53,646
Debt securities issued - 9,885 - 9,885 8,818
Subordinated liabilities - 5,763 - 5,763 5,642
18. Trading assets and liabilities (extract)2

Unobservable valuation differences on initial recognition
IFRS 7.28 The Group enters into derivative transactions with corporate clients. The transaction price in the
market in which these transactions are undertaken may be different from fair value in the Group’s
principal market for those instruments which is the wholesale dealer market. At initial recognition,
the Group estimates the fair values of derivatives transacted with corporate clients using
valuation techniques. In many cases all significant inputs into the valuation techniques are wholly
observable, for example by reference to information from similar transactions in the wholesale
dealer market. In cases where all inputs are not observable, for example because there are no
observable trades in a similar risk at the trade date, the Group uses valuation techniques that rely
on unobservable inputs – e.g. volatilities of certain underlyings.
When fair value at initial recognition is not evidenced by a quoted price in an active market or
based on a valuation technique that uses data only from observable markets, any difference
between the fair value at initial recognition and the transaction price is not recognised in profit or
loss immediately but is deferred (see Note 3(j)(vi)).
The table below sets out the aggregate difference yet to be recognised in profit or loss at the
beginning and end of the year with a reconciliation of the changes of the balance during the year
for trading assets and liabilities:
In millions of euro 2012
Balance at 1 January 22
Increase due to new trades 24
Reduction due to passage of time (8)
Reduction due to redemption / sales / transfers / improved observability (12)
Balance at 31 December 26
280 | Appendix III
Explanatory note
1. IFRS 13.93(a)–(b) IFRS 13 includes additional fair value disclosures in respect of investments properties under
the scope of IAS 40. These additional disclosure requirements are included as a modification of
Note 26.
Appendix III | 281

26. Other assets (extract)
IFRS 13.93(a)–(b) Fair value hierarchy1
The fair values of the Group’s investment properties are categorised into Level 3 of the fair value
hierarchy.
IFRS 13.93(e) The following table shows a reconciliation from the beginning balances to the ending balances for
fair value measurements of the Group’s investment properties.
Investment
In millions of euro property
IFRS 13.93(e) Balance at 1 January 2012 71

IFRS 13.93(e)(iii) Acquisitions 6
IFRS 13.93(e)(iii) Disposals (8)
IFRS 13.93(e)(iii) Reclassification from property, plant and equipment -
IFRS 13.93(e)(i) Gains and losses for the period
IFRS 13.93(f) Changes in fair value – other income – realised -
IFRS 13.93(f) Changes in fair value – other income – unrealised (10)
IFRS 13.93(e) Balance at 31 December 2012 59
282 | Appendix III
Explanatory notes
1. IFRS 13.93(d) If there has been a change in the valuation techniques applied to fair value measurements
categorised in Levels 2 or 3, then the entity discloses the reasons for the change.
2. IFRS 13.93(d) The entity is not required to create quantitative information for inputs to fair value measurements
categorised in Level 3 if the unobservable inputs are not developed by the entity when measuring
fair value. However, when providing this disclosure, the entity does not ignore quantitative
unobservable inputs that are significant to the fair value measurement that are reasonably
available.
26. Other assets (extract) (continued)
IFRS 13.93(d), The following table shows the valuation techniques used in the determination of fair values for investment properties, as well as the unobser vable inputs
93(h), 99, IE65(e) used in the valuation models.
Inter-relationship between key
Type of investment unobservable inputs and fair
property Valuation approach1 Key unobservable inputs2 value measurement
Commercial properties The fair values are determined by applying the market- ●● Prices per square metre (X The estimated fair value
when prices per square comparison approach. The valuation model is based to Y). increases the higher are
metre for comparable on a price per square metre for buildings derived from prices per square metre and
●● Premium (discount) on the
buildings and leases are observable market data from an active and transparent premiums for higher quality
quality of the building and
available market. This price is adjusted for differences in quality buildings and lease terms.
lease terms (-30% to 35%).
and lease terms between the subject property and
comparable properties.
Commercial properties In the absence of a price per square metre for similar ●● Market rents (A to B). The estimated fair value
when comparable buildings with comparable lease terms, the fair value increases the lower are yields.
●● Investment property
prices per square is determined by applying the income approach. The
yields (from 4.8% to 7.9%
metre for comparable valuation models are based on the estimated rental
depending on the location).
buildings and leases are value of the property. A market yield is applied to the
Yields are derived from
not available estimated rental value to arrive at the gross property
specialised publications
valuation. When actual rents differ materially from the
from the related
estimated rental value, adjustments are made to reflect
markets and comparable
actual rents. Valuations reflect, when appropriate, the
transactions.
type of tenants actually in occupation or responsible
for meeting lease commitments or likely to be in
occupation after letting vacant accommodation, the
allocation of maintenance and insurance responsibilities
between the Group and the lessee, and the remaining
economic life of the property.
Appendix III | 283
284 | Appendix IV
Explanatory notes
1. IFRS 7.13B, 13F, The purpose of this Appendix is to assist in the preparation of consolidated financial statements
B51–B53 on early adoption of Disclosures−Offsetting Financial Assets and Financial Liabilities
(amendments to IFRS 7). It illustrates one possible format for how an entity might present the
minimum quantitative disclosures required by IFRS 7.13C(a)–(e) by type of financial instrument.
However, other formats are possible.
Where appropriate, an entity will have to supplement the specific quantitative disclosures
required with additional (qualitative) disclosures, depending on:
●● the terms of the enforceable master netting arrangements and similar agreements, including
the nature of the rights of set-off; and
●● their actual and potential effect on the entity’s financial position.
In addition, it may be helpful if an entity considers whether any related existing disclosures – e.g.
disclosures related to collateral under IFRS 7.14–15 − should be included in the note or cross-
referred to it.
Further guidance on these Amendments is included in the 9th Edition 2012/13 of our publication
Insights into IFRS (7.8.150) and First Impressions Offsetting financial assets and financial liabilities
(February 2012).
2. IFRS 7.44R, When an entity applies an accounting policy retrospectively or makes a retrospective restatement
BC24AI, of items in its financial statements or when it reclassifies items in its financial statements,
IAS 1.10(f) IAS 1.10(f) requires an entity to provide a statement of financial position as at the beginning of the
earliest comparative period. The IASB clarifies in the Basis for Conclusions to the Amendments
that IAS 1.10(f) does not apply to the Amendments.
3. This Appendix illustrates the key changes to the financial statements. In addition, consequential
changes may be required to other parts of the financial statements, for example to Note 4(b).
Appendix IV | 285
Appendix IV
Example disclosures for entities that early adopt Disclosures –
Offsetting Financial Assets and Financial Liabilities
(amendments to IFRS 7)1, 2, 3
Offsetting financial assets and financial liabilities
IFRS 7.13A The Group has early adopted Disclosures−Offsetting Financial Assets and Financial Liabilities
(amendments to IFRS 7). The disclosures set out in the tables below include financial assets and
financial liabilities that:
●● are offset in the Group’s statement of financial position; or
●● are subject to an enforceable master netting arrangement or similar agreement that covers
similar financial instruments, irrespective of whether they are offset in the statement of
financial position.
IFRS 7.B40–B41 The similar agreements include derivative clearing agreements, global master repurchase
agreements, and global master securities lending agreements. Similar financial instruments
include derivatives, sales and repurchase agreements, reverse sale and repurchase agreements,
and securities borrowing and lending agreements. Financial instruments such as loans and
deposits are not disclosed in the tables below unless they are offset in the statement of financial
position.
IFRS 7.13E, B50 The Group’s derivative transactions that are not transacted on an exchange are entered into under
International Derivatives Swaps and Dealers Association (ISDA) Master Netting Agreements.
In general, under such agreements the amounts owed by each counterparty that are due on a
single day in respect of all transactions outstanding in the same currency under the agreement
are aggregated into a single net amount being payable by one party to the other. In certain
circumstances, for example when a credit event such as a default occurs, all outstanding
transactions under the agreement are terminated, the termination value is assessed and only a
single net amount is due or payable in settlement of all transactions.
The Group’s sale and repurchase, and reverse sale and repurchase transactions, and securities
borrowing and lending are covered by master agreements with netting terms similar to those of
ISDA Master Netting Agreements.
The above ISDA and similar master netting arrangements do not meet the criteria for offsetting
in the statement of financial position. This is because they create a right of set-off of recognised
amounts that is enforceable only following an event of default, insolvency or bankruptcy of the
Group or the counterparties. In addition the Group and its counterparties do not intend to settle
on a net basis or to realise the assets and settle the liabilities simultaneously.
The Group receives and accepts collateral in the form of cash and marketable securities in
respect of the following transactions:
●● derivatives;
●● sale and repurchase, and reverse sale and repurchase agreements; and
●● securities lending and borrowing.
Such collateral is subject to the standard industry terms of ISDA Credit Support Annex. This
means that securities received/given as collateral can be pledged or sold during the term of
the transaction but must be returned on maturity of the transaction. The terms also give each
counterparty the right to terminate the related transactions upon the counterparty’s failure to
post collateral.
286 | Appendix IV
Appendix IV | 287

Offsetting financial assets and financial liabilities (continued)
IFRS 7.13C Financial assets subject to offsetting, enforceable master netting arrangements
and similar agreements
31 December 2012
In millions of euro Related amounts not
offset in the statement
of financial position
Gross Net
amounts amounts
of recognised of financial
financial assets
Gross liabilities presented
amounts offset in the in the
of recognised statement statement Cash
financial of financial of financial Financial collateral
Types of financial assets assets position position instruments received Net amount
Derivatives-trading
assets 978 - 978 (287) (688) 3
Derivatives held for
risk management 858 - 858 (147) (708) 3
Reverse sale and
repurchase,
securities
borrowing and
similar agreements 7,818 - 7,818 (7,818) - -
Loans and advances
to customers 112 (98) 14 - - 14
Total 9,766 (98) 9,668 (8,252) (1,396) 20
Financial liabilities subject to offsetting, enforceable master netting

arrangements and similar agreements
31 December 2012
Gross Net
amounts of amounts
recognised of financial
financial liabilities
Gross assets offset presented in
amounts in the the
Types of financial liabilities liabilities position position instruments pledged Net amount
Derivatives-trading
liabilities 408 - 408 (287) (117) 4
risk management 828 - 828 (147) (676) 5
Sale and repurchase,
securities lending
and similar
agreements 387 - 387 (387) - -
Customer deposits 98 (98) - - - -
Total 1,721 (98) 1,623 (821) (793) 9
288 | Appendix IV
Appendix IV | 289

Financial assets subject to offsetting, enforceable master netting arrangements
and similar agreements
31 December 2011
Gross Net
amounts amounts
of recognised of financial
financial assets
Gross liabilities presented
amounts offset in the in the
Types of financial assets assets position position instruments received Net amount
Derivatives-trading
assets 957 - 957 (239) (715) 3
risk management 726 - 726 (109) (614) 3
Reverse sale and
repurchase,
securities
borrowing and
similar agreements 7,412 - 7,412 (7,343) - 69
Loans and advances
to customers 109 (97) 12 - - 12
Total 9,204 (97) 9,107 (7,691) (1,329) 87
Financial liabilities subject to offsetting, enforceable master netting

arrangements and similar agreements
31 December 2011
Gross Net
amounts of amounts
recognised of financial
financial liabilities
Gross assets offset presented in
amounts in the the
Types of financial liabilities liabilities position position instruments pledged Net amount
Derivatives-trading
liabilities 372 - 372 (239) (130) 3
risk management 789 - 789 (109) (677) 3
Sale and repurchase,
securities lending
and similar
agreements 412 - 412 (412) - -
Customer deposits 97 (97) - - - -
Total 1,670 (97) 1,573 (760) (807) 6
290 | Appendix IV
Appendix IV | 291

IFRS 7.B42 The gross amounts of financial assets and financial liabilities and their net amounts as presented
in the statement of financial position that are disclosed in the above tables are measured in the
statement of financial position on the following basis:
●● derivative assets and liabilities – fair value;
●● assets and liabilities resulting from sale and repurchase agreements, reverse sale and
repurchase agreements and securities lending and borrowing – amortised cost;
●● loans and advances to customers – amortised cost; and
●● customer deposits – amortised cost.
The amounts in the above tables that are offset in the statement of financial position are
measured on the same basis.
IFRS 7.B46 The tables below reconcile the ‘Net amounts of financial assets and financial liabilities presented
in the statement of financial position’, as set out above, to the line items presented in the
statement of financial position.
31 December 2012
In millions of euro Carrying Financial

amount in assets not
statement in scope of
Net Line item in statement of of financial offsetting
Types of financial assets amounts financial position position disclosures Note
Derivatives-trading Non-pledged trading

978 16,122 15,144 18
assets assets
Derivatives held for risk Derivative assets held
858 858 - 19
management for risk management
Reverse sale and
repurchase, securities
7,818
borrowing and similar Loans and advances to
agreements 63,070 55,238 21
customers
14
customers
In millions of euro Financial

Carrying liabilities
amount in not in
statement scope of
Types of financial liabilities amounts financial position position disclosures Note
Derivatives-trading
408
liabilities Trading liabilities 7,026 6,548 18
Sale and repurchase, 70
securities lending and
similar agreements 317 Deposits from banks 11,678 11,361 27
Derivatives held for risk
828 held for risk 828 - 19
management
management
Customer deposits - Customer deposits 53,646 53,646 28
292 | Appendix IV
Appendix IV | 293

31 December 2011
In millions of euro Carrying Financial

amount in assets not
statement in scope of
Types of financial assets amounts financial position position disclosures Note
Derivatives-trading Non-pledged trading

957 15,249 14,292 18
assets assets
Derivatives held for risk Derivative assets held
726 726 - 19
management for risk management
Reverse sale and
repurchase, securities
7,412
borrowing and similar Loans and advances to
agreements 56,805 49,381 21
customers
12
customers
In millions of euro Financial

Carrying liabilities
amount in not in
statement scope of
Types of financial liabilities amounts financial position position disclosures Note
Derivatives-trading
372
liabilities Trading liabilities 6,052 5,594 18
Sale and repurchase, 86
securities lending and
similar agreements 326 Deposits from banks 10,230 9,904 27
Derivatives held for risk
789 held for risk 789 - 19
management
management
Customer deposits - Customer deposits 48,904 48,904 28
294 | Technical guide
Technical guide
Form and content of financial statements
IAS 1 sets out the overall requirements for the presentation of financial statements, including their content and structure.
Other standards and interpretations deal with the recognition, measurement and disclosure requirements related to
specific transactions and events. IFRS is not limited to a particular legal framework. Therefore, financial statements
prepared under IFRS often contain supplementary information required by local statute or listing requirements, such as
directors’ reports (see below).
Choice of accounting policies

The accounting policies disclosed in these illustrative financial statements reflect the facts and circumstances of the
fictitious banking group on which these financial statements are based. They should not be relied on for a complete
understanding of the requirements of IFRS and should not be used as a substitute for referring to the standards and
interpretations themselves. The accounting policies appropriate for an entity depend on the facts and circumstances
of that entity, including the accounting policy choices an entity makes, and may differ from the disclosures presented
in these illustrative financial statements. The recognition and measurement requirements of IFRS are discussed in our
publication Insights into IFRS (9th Edition).
Reporting by directors
Generally, local laws and regulations determine the extent of reporting by directors in addition to the presentation of
financial statements. IAS 1 encourages, but does not require, entities to present, outside the financial statements,
a financial review by management. The review describes and explains the main features of the entity’s financial
performance and financial position, and the principal uncertainties it faces. Such a report may include a review of:
●● the main factors and influences determining financial performance, including changes in the environment in which
the entity operates, the entity’s response to those changes and their effect, and the entity’s policy for investment to
maintain and enhance financial performance, including its dividend policy;
●● the entity’s sources of funding and its targeted ratio of liabilities to equity; and
●● the entity’s resources not recognised in the statement of financial position in accordance with IFRS.
First-time adopters of IFRS

These illustrative financial statements assume that the entity is not a first-time adopter of IFRS. IFRS 1 First-time Adoption
of International Financial Reporting Standards applies to an entity’s first financial statements prepared in accordance with
IFRS. IFRS 1 requires extensive disclosures explaining how the transition from previous GAAP to IFRS affects the reported
financial position, financial performance and cash flows of an entity. These disclosures include reconciliations of equity and
reported total comprehensive income (or profit or loss if the entity did not previously report total comprehensive income)
at the date of transition to IFRS and at the end of the comparative period presented in the entity’s first IFRS financial
statements, explaining material adjustments to the statements of financial position, changes in equity and comprehensive
income, and identifying separately the correction of any errors made under previous GAAP. An entity that presented a
statement of cash flows under previous GAAP also explains any material adjustments to its statement of cash flows.
For more information see KPMG’s Illustrative financial statements: first-time adopters, published in February 2010 and
Illustrative condensed interim financial statements: first-time adopters, published in July 2011.
Other ways KPMG member firms’ professionals can help | 295
Other ways KPMG member firms’

professionals can help
A more detailed discussion of the accounting issues that arise from the application of IFRS can be found in the 9th Edition
2012/13 of our publication Insights into IFRS.
In addition, you may find it helpful to visit kpmg.com/ifrs to keep up to date with the latest developments in IFRS
and browse our suite of publications. Whether you are new to IFRS or a current user of IFRS, you can find digestible
summaries of recent developments, detailed guidance on complex requirements, and practical tools such as IFRS
Newsletters and checklists.
For a sector-specific or local perspective, follow the links to the IFRS resources available from KPMG member firms
around the world, which are also available on kpmg.com.
All of these publications are relevant for those involved in external IFRS reporting. The In the Headlines series provides a
high level briefing for audit committees and boards.
User need Publication series Purpose

Briefing In the Headlines Provides a high-level summary of significant accounting, auditing and
governance changes together with their impact on entities.
IFRS Newsletters Highlights recent IASB and FASB discussions on the financial
instruments, insurance, leases and revenue projects. Includes an
overview, an analysis of the potential impact of decisions, current
status and anticipated timeline for completion.
The Balancing Items Focuses on narrow-scope amendments to IFRS.
New on the Horizon Considers the requirements of due process documents such as
exposure drafts and provides KPMG’s insight. Also available for
specific sectors.
First Impressions Considers the requirements of new pronouncements and highlights
the areas that may result in a change in practice. Also available for
specific sectors.
Application issues Insights into IFRS Emphasises the application of IFRS in practice and explains the
conclusions that we have reached on many interpretive issues.
Insights into IFRS: Provides a structured guide to the key issues arising from the
An overview standards.
IFRS Practice Issues Addresses practical application issues that an entity may encounter
when applying IFRS. Also available for specific sectors – including
banking.
IFRS Handbooks Includes extensive interpretative guidance and illustrative examples to
elaborate or clarify the practical application of a standard.
Interim and annual Illustrative financial Illustrates one possible format for financial statements prepared
reporting statements under IFRS, based on a fictitious multinational corporation. Available
for annual and interim periods, and for specific sectors.
Disclosure checklist Identifies the disclosures required for currently effective requirements
for both annual and interim periods.
GAAP comparison IFRS compared to Highlights significant differences between IFRS and US GAAP. The
US GAAP focus is on recognition, measurement and presentation; therefore,
disclosure differences are generally not discussed.
296 | Other ways KPMG member firms’ professionals can help
User need Publication series Purpose

Sector-specific IFRS Sector Provides a regular update on accounting and regulatory developments
issues Newsletters that directly impact specific sectors – including banking.
Application of IFRS Illustrates how entities account for and disclose sector-specific issues
in their financial statements.
Accounting under Focuses on the practical application issues faced by entities in
IFRS specific sectors and explores how they are addressed in practice.
Impact of IFRS Provides a high-level introduction to the key IFRS accounting issues
for specific sectors – including banking – and discusses how the
transition to IFRS will affect an entity operating in that sector.
For access to an extensive range of accounting, auditing and financial reporting guidance and literature, visit KPMG’s
Accounting Research Online. This web-based subscription service can be a valuable tool for anyone who wants to stay
informed in today’s dynamic environment. For a free 15-day trial, go to aro.kpmg.com and register today.
Acknowledgements
We would like to acknowledge the efforts of the principal contributors to this publication, who include:
Ewa Bialkowska
Tal Davidson
Silvie Koppes
Chris Spall
Jim Tang
Toshi Ozawa
We would also like to thank the contributions made by other reviewers, who include other members of
the Financial Instruments Topic Team:
Charles Almeida KPMG in Brazil
Jean-François Dandé KPMG in France
Terry Harding KPMG in the UK
Caron Hughes KPMG in Hong Kong
Gale Kelly KPMG in Canada
Marina Malyutina KPMG in Russia
Patricia Stebbens KPMG in Australia
Enrique Tejerina KPMG in the US
Andrew Vials KPMG in the UK
Venkataramanan Vishwanath KPMG in India
Danny Vitan KPMG in Israel
Vanessa Yuill KPMG in South Africa
kpmg.com/ifrs
Publication name: Illustrative financial statements: Banks
Publication number: 121375
Publication date: December 2012
KPMG International Standards Group is part of KPMG IFRG Limited.
KPMG International Cooperative (“KPMG International”) is a Swiss entity that serves as a coordinating entity for a network of
independent firms operating under the KPMG name. KPMG International provides no audit or other client services. Such services
are provided solely by member firms of KPMG International (including sublicensees and subsidiaries) in their respective geographic
areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein
shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member
firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any other member firm, nor
does KPMG International have any such authority to obligate or bind any member firm, in any manner whatsoever.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual
or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information
without appropriate professional advice after a thorough examination of the particular situation.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

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IFRS

About this publication 3

Independent auditors’ report on consolidated financial statements 5

Consolidated financial statements 7

Technical guide 294

Other ways KPMG member firms’ professionals can help 295

About this publication

Independent auditors’ report on consolidated financial statements1

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Consolidated statement of financial position1, 2, 3, 4, 1 on page 10

Consolidated statement of financial position (continued)

Consolidated statement of comprehensive income1, 2

IFRS 7.20(c) Fee and commission income4 9 854 759

IFRS 7.20(a) Net trading income4 10 1,434 1,087

IAS 1.85 Revenue4

IAS 1.85 Profit before income tax

Other comprehensive income, net of income tax6

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) is effective for

Consolidated statement of comprehensive income (continued)

Profit attributable to:

Total comprehensive income attributable to:

IAS 33.4 Earnings per share1, 2, 3

Total comprehensive income for the year

IAS 1.106(d)(ii), 106A Other comprehensive income, net of tax

IAS 1.106(d)(iii) Transactions with owners, recorded directly in equity

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Total comprehensive income for the year

IAS 1.106(d)(ii), 106A Other comprehensive income, net of tax

Transactions with owners, recorded directly in equity

Consolidated statement of cash flows1, 2

IAS 7.18(b) Cash flows from operating activities4

IAS 7.21 Cash flows from investing activities4, 5

Consolidated statement of cash flows (continued)

IAS 7.21 Cash flows from financing activities4, 5 on page 20

Net increase (decrease) in cash and cash equivalents (49) (17)

Notes to the consolidated financial statements1

IAS 1.10(e) Notes to the consolidated financial statements

IAS 1.112(a) 2. Basis of preparation2

Notes to the consolidated financial statements

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