REG - Alpha Bank A.E. - Annual Financial Report <Origin Href="QuoteRef">ACBr.AT</Origin> - Part 2
31/03/2017 07:07
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of Internal Models (TRIM), a
project launched by the European Central Bank with a view to fostering greater consistency and accuracy in the use of
internal models within the Single Supervisory Mechanism. Furthermore, the Bank participated in the Benchmarking Exercise
with respect to the market risk internal model, providing valuation and risk analysis to the Bank of Greece and the
European Central Bank for specific benchmarking portfolios as specified by the European Banking Authority, in order for the
competent authorities to assess the internal approaches that they have permitted institutions to use for the purpose of
calculating risk weighted exposure amounts and own fund requirements. Moreover, the Bank implemented the calculation
methodology in order to quantify the overall capital requirements according to the revised market risk framework (Minimum
Capital Requirements for Market Risk - Fundamental Review of the Trading Book) and reported such calculations to the Bank
of Greece and the European Central Bank, in the scope of participating in the Basel III monitoring exercise of the Basel
Committee on Banking Supervision
Operational Risk
In the context of the continuous improvement in the implementation of the operational risk management framework, the Bank
proceeded rigorously to the expansion of preventive measures in order to identify and evaluate risk as well as, the
enhancement of the process of collecting and analyzing operational risk events.
Specifically, the RCSA method of operational risk self-assessment has been implemented during the year in accordance with
the general plan for the Bank and Group Companies. It is noted that this method provides the recognition and assessment of
potential operational risks through the implementation of audits (residual risks). Further to the above the respective
divisions proceed with the appropriate actions in order to mitigate the potential negative impacts. In addition, a process
for the monthly production, assessment and monitoring of Key Risk Indicators (KRIs) regarding the Bank's Branches and
selected Divisions of the Bank, has been initiated.
Moreover, several projects are in progress for the improvement of the Operational Risk Management Framework, the
implementation of Advanced Techniques in Operational Risk Measurement as well as for the creation of a framework regarding
the management of specific Operational Risk sub-categories as highlighted by recent guidelines issued by the European
Banking Authority.
The operational risk events, the risk and control self-assessment results as well as, other operational risk issues are
systematically monitored by the Bank and the Group Companies by the competent Operational Risk Management Committees which
review the relevant information and ensure the implementation of Operational Risk mitigation measures.
Management Non Performing Loans (NPLs)
As a result of the sustained downturn of the Greek economy, where GDP has declined by more than 30% since 2009, the quality
of the Bank's loan book has deteriorated, and the Bank experienced increased NPLs across all business segments. However, in
a very challenging economic environment, the Bank is constantly reviewing and adjusting its strategy for the management of
NPLs.
During the past two years, the Bank has undertaken a major overhaul of its NPE Management infrastructure and Strategy,
leveraging, among others, recommendations of the Bank of Greece Troubled Asset Review as well as provisions in the Bank of
Greece Executive Committee Act 42/47.
On September 30, 2016 the Bank submitted to the SSM the NPE/NPL targets along with the NPE Strategy Explanatory Note and
the relevant Action Plan, depicting the Bank's full commitment towards the active Management and reduction of NPEs over the
Business Plan period 2016-2019.
The development and launch of targeted long-term arrangements represents a significant shift from the past, where the focus
was more on short-term arrangements. In addition, efforts for the increased collectability and improved collateral levels
remain a key aspect of the Bank's strategy.
At the same time key operating indicators were adjusted and updated accordingly:
• Organizational restructuring: Major reengineering aiming at creating and developing appropriate and independent
management structures, which in tandem with improvements in the overall governance structure, provide increased control
over governance, as well as the implementation of evidence-based practices and policies regarding the management of past
due portfolio.
• Segmentation and Portfolio Analysis: clearly defined and detailed strategies are in progress, including a strict and
well defined segmentation framework.
• Flexible and upgraded modification products and final settlement solutions (for example out of court settlements).
• Focused human resources management with specialised teams and targeted training.
• Significant IT investment and automated decision-making tools (for example NPV calculators).
These operational changes have been combined with major, recent strategic components, in particular:
• Joint Venture with Retail NPL Servicer (which is a specialized provider of loan services). This action will allow the
Bank to manage more effectively the portfolio of the non-performing loans.
• Cooperation with KKR Credit and Pillarstone on the management of selected large corporate NPL exposures (jointly with
Eurobank) in order to optimize their value and improve their recoverability.
• Loss Budget allocation framework: the Bank, in collaboration with an international consultant, has formulated a
granular loss budget allocation framework to facilitate the implementation of its strategy for the restructuring of the
portfolio of non-performing loans. This framework provides for:
- Loss allocation into sub-portfolios in order to achieve better non-performing loans management objectives.
- Control and monitoring of key performance indicators of the Bank's NPLs management strategy.
- Identification of the most suitable resolution strategies per segment.
• Property Repossession Strategy (REO): Evaluation of the existing Property Repossession strategy in order to determine
the best way to maximize their value for the Bank in the current economic environment.
Some of the above initiatives are already in place, while others have been already developed and implemented over the past
months.
Furthermore, these strategic initiatives and the execution of the resolution strategy will benefit from a number of changes
in the Greek legislative landscape and economic environment, including:
• Structural reforms: The structural reforms as part of the third bailout package will benefit the Bank's ability to
execute their resolution strategy, in particular the state-wide Juridical System Reform, the new Civil Procedure Code, an
expansion of the loan servicing industry, removal or alleviation of the residential real estate moratorium.
• Improved macroeconomic environment forecast: The estimated improvement of the Greek economy, in conjunction with the
eventual lifting of capital controls, is expected to improve the ability of borrowers to respect their repayment schedules.
It is also expected that they will enhance the reliability of the planned business projects, by enhancing the value of the
existing collaterals.
Administrative Structure Division - Arrears Management
Having realized the strategic need to focus on NPL management, the Bank has embarked on an effort to streamline the
monitoring functions and the management of past due exposures. Dedicated teams have been established within the Bank to
monitor the evolution of a wide range of NPL-related strategies and metrics within the Bank's pre-defined NPL Strategy.
Organizational Structure and Corporate Governance
Since 2009 discrete units for the management of Retail and Wholesale NPLs have been established and they are key pillars
for the Bank. These independent Units report directly to the Bank CEO through the Heads of each division. Moreover, they
are responsible for all the areas which are related to the loan management - such as monitoring the portfolio and the front
line services. Through those Units, the Bank has achieved the segregation of arrears management, from the Relationship
Management and the Approval Authorities, by combining automated and mass procedures for portfolio's low-risk segments and a
case by case management of the portfolio's more complex and higher-risk segments.
Furthermore, the establishment of the Troubled Assets Committee (TAC) has also contributed to the strategic alignment of
the Retail & Wholesale NPL strategy
Exposure management of arrears strategy
The reduction of the Wholesale/Retail NPE & NPL stock, taking into consideration the new flows for the period 2016-2019, is
driven by targeted resolution actions to specific segments of the Wholesale/Retail portfolio. These actions are envisaged
to deliver comprehensive NPE resolution to a broad range of portfolio segments.
Targeted loss mitigation approaches and a broad range of loan modification offerings, primarily skewed towards long-term
solutions, are designed to accommodate a wide variety of financial difficulties faced by borrowers and to deliver
sustainable and affordable solutions.
In order to successfully implement the aforementioned strategy, the Bank aims to transform its NPL operating model by
addressing the following operational areas: (i) execution strategy, (ii) organizational structure, (iii) systems, tools and
processes, and (iv) Joint Ventures (e.g. Retail NPL Servicing Platform & KKR/Pillarstone) and (v) distressed asset sales,
as also referred to in the Bank's Action Plan submitted to SSM in conjunction with the NPE Strategy.
Prospects
The future performance of the Bank will also be a function, among other parameters, of the developments in the Greek
economy, as these will largely define the potential for positive developments in terms of the management of non-performing
exposures and the restoration of a healthy liquidity profile for the Bank.
2017 is considered a turning point for the Greek economy, which is expected to return in positive growth rate. The drivers
of the economy are expected to be the fixed capital formation, the exports of goods and services and to a lesser extent
private consumption.
However, the international environment seems particularly unstable and is expected to be determined by the following
parameters:
First, the successive critical elections in some European countries along with the rise of Euroscepticism. Second, the
weakening of the economy in the Åurozone from 1.7% growth rate in 2016 to 1.6% in 2017, with significant deviations among
countries. Third, the evolution of the refugee flows that may test the resilience of the respective agreements between the
EU and Turkey. Fourth, the deterioration of security conditions and the spike of terrorism which increase uncertainty.
Fifth, the geopolitical instability in the wider region (eg. the escalation of war in Syria and the attempt of a military
coup in Turkey). Finally, the process of setting the new European landscape, as the EU-UÊ negotiations evolve in the
post-Brexit era.
Concerning Greece, the completion of the second review of the programme, the commitment regarding the medium-term debt
relief measures and subsequently the inclusion of Greek State bonds in the ECB's quantitative easing programme, are the
catalysts for investment pick-up in 2017 and job creation that will have a multiple effect on consumer spending in the
following years.
Delays in the realization of the above developments may endanger not only the strengthening of the economic recovery but
also the possibility to reach the fiscal targets. On the contrary, the above sequence of events paves the way for an
essential improvement of the indicators that reflect restoration of confidence, such as the improvement of the investment
climate, the fall of the Greek and German bonds spread, the lift of capital controls and ultimately the access of the
economy to the international markets.
Related parties
According to the corresponding regulatory framework, this report must include the main transactions with related parties.
All the transactions between related parties, the Bank and the Group companies, are performed in the ordinary course of
business, conducted according to market conditions and are authorized by corresponding management personnel. There are no
other material transactions between related parties beyond those described in the following paragraph.
a. The outstanding balances of the Group transactions
with key management personnel which is composed by members of the Board of Directors and the Executive Committee of the
Bank, as well as their close family members and the companies relating to them, as well as the corresponding results from
those transactions are as follows:
Amounts in thousand of Euro
Loans and advances to customers 916
Due to customers 12,302
Employee defined benefit obligations 260
Letters of guarantee and approved limits 1,500
Interest and similar income 79
Fee and commission income 76
Interest expense and similar charges 47
Fees paid to key management and close family members 3,647
b. The outstanding balances and the corresponding results of the most significant transactions of the Bank with Group
companies are as follows:
á. subsidiaries
Amounts in thousand of Euro
Name Assets Liabilities Income Expenses Letters of guarantee and other guarantees
Banks
1. Alpha Bank London Ltd 15,256 1,062 5,410 822
2. Alpha Bank Cyprus Ltd 119,462 233,656 1,313 101 58,292
3. Alpha Bank Romania S.A. 1,139,860 80,739 2,494 2,715 326,788
4. Alpha Bank AD Skopje 36
5. Alpha Bank Srbija A.D. 94,370 16,516 1,842 226 8,083
6. Alpha Bank Albania SH.A. 20,299 27,995 281 351
Leasing
1. Alpha Leasing A.E. 182,777 384 4,684 143
2. ABC Factors A.E. 402,516 71 51,470 1 39,463
Investment Banking
1. Alpha Finance A.E.P.Å.Õ. 122 11,884 862 606 56
2. SSIF Alpha Finance Romania S.A. 13
3. Alpha Á.Å. Investment Holdings 35,738 7 266
4. Alpha A.E. Ventures Capital Management - ÁÊÅS 2,193 27 15
5. Emporiki Ventures Capital Developed Markets Ltd
6. Emporiki Ventures Capital Emerging Markets Ltd 394
Asset Management
1. Alpha Asset Management Á.Å.D.Á.Ê. 2,667 33,460 18,909 336
Insurance
1. Alpha Insurance Agents Á.Å. 2,186 4,990 32
2. Alphalife A.A.E.Z. 151 6,801 13,218 1,789
Real estate and hotel
1. Alpha Astika Akinita Á.Å. 341 59,254 974 9,326
2. Ionian Hotel Enterprises Á.Å. 1,677 200
3. Oceanos Á.Ô.Ï.Å.Å. 5,129 24
4. Emporiki Development and Real Estate Á.Å. 29,031 18,137 402
5. Alpha Real Estate Bulgaria E.O.O.D.
6. Chardash Trading E.O.O.D. 290
7. Alpha Investment Property Chalandriou Á.Å. 17,451 737 354 8
8. Alpha Investment Property Attikis Á.Å. 6,214 7 169
9. Alpha Investment Property Attikis II Á.Å. 38,647 247 189 1
10. Alpha Investment Property Amaroussion É Á.Å. 1,530 18,994 25 8
11. Alpha Investment Property Amaroussion ÉÉ Á.Å. 478 63 8 5
12. Stockfort Ltd 23,629 3 450
13. AGI-RRE Zeus S.R.L. 32,988 659
14. AGI-RRE Poseidon S.R.L. 13,137 262
15. AGI-BRE Participations 1 E.O.O.D. 4,715 92
16. AGI-BRE Participations 2 E.O.O.D. 8,956 182
17. AGI-BRE Participations 2BG E.O.O.D. 7,611 91
a. Subsidiaries
Amounts in thousand of Euro
Name Assets Liabilities Income Expenses Letters of guarantee and other guarantees
Real estate and hotel
18. AGI-BRE Participations 3 E.O.O.D. 19,702 337
19. AGI-BRE Participations 4 E.O.O.D. 16,182 15,937
20. APE Fixed Assets Á.Å. 9
21. HT-1 E.O.O.D. 434 9
22. SC Carmel Residential SRL 14,463 244
23. AGI-RRE Cleopatra S.R.L. 12,558 222
24. AGI-RRE Hera S.R.L. 10,710 250
25. Alpha Investment Property Neas Kifisias Á.Å. 3,361 388 55
26. Alpha Investment Property Kallirois Á.Å. 588 757 10
27. Alpha Investment Property Livadias Á.Å. 4,483 366 160
28. Asmita Gardens S.R.L.
29. Alpha Investment Property Kefalariou Á.Å. 11
30. Ashtrom Residents S.R.L. 17,466 295
31. AGI-BRE Participations 5 E.O.O.D.
32. Cubic Center Development S.A. 33,640 637
33. Alpha Investment Property Neas Erythreas Á.Å. 10,133 1,400 169 1
34. Anaplasis Plagias Á.Å. 24,078 10,118 1,480
35. Alpha Real Estate Services S.R.L. 9
Special purpose and holding entities
1. Alpha Credit Group Plc 8,880
2. Alpha Group Jersey Ltd 21 15,277 15,542
3. Alpha Group Investments Ltd 88,420
4. Ionian Holdings Á.Å. 340,003 56,034 2,420
5. Ionian Equity Participations Ltd 5,152
6. Emporiki Group Finance Plc 1,256
7. AGI-RRE Participations 1 Ltd 935
8. Alpha Group Ltd 15,589 325,002 36
9. Katanalotika Plc 1,196
10. Epihiro Plc 1,248
11. Irida Plc 361,600 118,061 251
12. Pisti 2010-1 Plc 142
13. Alpha Shipping Finance Ltd 5 229,622 4,859 12,989
14. Umera Ltd 419,884 21,763 1,535 78 4,258
15. AGI-RRE Poseidon Ltd 35,032 594
16. AGI-BRE Participations 4 Ltd 3,334 102
17. AGI-RRE Artemis Ltd 1,747 34
18. Zerelda Ltd 998
19. AGI-Cypre Ermis Ltd 1,757,868 111,551 27,808 184 308,786
20. AGI-SRE Ariadni DOO 21,724 18,780
21. AGI-CYPRE ALAMINOS LTD 8,445 89
22. AGI-CYPRE TOCHINI LTD 1,300 13
23. AGI-CYPRE MAZOTOS LTD 7,486 76
24. Alpha Proodos DAC 289,262 153
Other
1.Kafe Alpha A.E. 227 17 283
2. Alpha Supporting Service Á.Å. 270 31,641 561 6,894
3. Real Car Rental A.E. 31
4. Evisak Á.Å. 735 1 5
5. Emporiki Management Á.Å. 15 1,956 50 14
6. Alpha Bank Notification Services Á.Å. 11 717 20 621
Â. JOINT VENTURES
1. APE Commercial Property Á.Å. 13,684 1 108
2. APE Investment Property Á.Å. 151,738 6,642 4,960 34
3. Alpha ÔÁÍÅÏ Á.Ê.Å.S. 390
4. Rosequeens Properties SRL 23,397 990
5. Aktua Hellas Holdings S.A. 6 835 5
C. ASSOCIATES
Amounts in thousand of Euro
Name Assets Liabilities Income Expenses Letters of guarantee and other guarantees
1. ÁÅDÅP Thessalias and Stereas Ellados 299
2. Banking Information Systems Á.Å. 299
3. Olganos Á.Å. 3,044 9
4. Alpha Investment Property Eleona Á.Å. 51,196 326 420
Total 5,150,294 1,901,484 556,111 40,674 780,870
c. Other related party transactions
The outstanding balances and the corresponding results are analyzed as follows:
(Amounts in thousand of Euro)
Assets Liabilities Income Expenses
Employees Supplementary Funds - TAP 296 18
Hellenic Financial Stability Fund - HFSF 10
CORPORATE RESPONSIBILITY - NON-FINANCIAL REPORT
Alpha Bank Corporate Responsibility Policy
With a view to ensuring its sustainable development, Alpha Bank is committed to operating responsibly, taking into account
of the economic, social and environmental parameters of its operation, both in Greece and in the other countries where it
is present. To this end, it promotes communication and cooperation with all its Stakeholders.
In order to enhance social responsibility and integrate it into the Group's principles and values in the best possible way,
Alpha Bank applies the law and aligns its activity with internationally recognised guidelines, principles and initiatives
on sustainable development, such as the OECD Guidelines on Responsible Business Conduct, the Principal Conventions of the
International Labour Organisation (ILO), and the United Nations' Universal Declaration of Human Rights (UDHR).
Alpha Bank's organisation and operation follow the best banking and business practices. They are governed by principles
such as integrity and honesty, impartiality and independence, confidentiality and discretion, in line with the Bank's Code
of Ethics and the principles of Corporate Governance. Particular significance is attached to the identification,
measurement and management of the undertaken risk, to the compliance with the applicable legal and regulatory frameworks,
to transparency and to the provision of full, accurate and truthful information to the Bank's Stakeholders.
The Bank's primary goals are credibility, reliability and efficiency in banking services. Its key concerns are to
continuously improve the products and services it offers and to ensure that its Customers' banking needs are addressed in a
modern and responsible manner. It examines and incorporates non-financial criteria (on issues related to the environment,
society and corporate governance) in its financing procedures, as well as in developing and placing new products and
services on the market.
Alpha Bank is responding with increased awareness to matters concerning the protection of the environment and the
conservation of natural resources and is committed to addressing the direct and indirect impacts of its activities on the
environment.
Alpha Bank implements responsible policies with regard to its Human Resources. In particular, the Bank:
• Respects and defends the diversity of its Employees (age, gender, ethnic origin, religion, disability/special
capabilities, sexual orientation etc.).
• Ensures top-quality working conditions and opportunities for advancement based on merit and equitable treatment, free
of discrimination.
• Offers fair remuneration, based on contracts which are in agreement with the corresponding national labour market and
ensure compliance with the respective national regulations on minimum pay, working hours and the granting of leave.
• Defends human rights, recognises the right to union membership and to collective bargaining, and opposes all forms of
child, forced or compulsory labour.
• Treats all Employees with respect.
• Provides Employees with continuous education and training.
• Ensures the health and safety of Employees at the workplace, and helps them balance their professional and personal
life.
The Bank's activities are directly linked to the society and the citizens. Therefore, Alpha Bank seeks to contribute to the
efforts to support the society and the citizens, giving priority to culture, education, health and the protection of the
environment.
The Bank applies the Corporate Social Responsibility principles across the entire range of its activities and seeks to
ensure that its suppliers and partners also comply with the values and business principles that govern its operation.
Business Model
The business model of Alpha Bank aims to create value for its Stakeholders. Alpha Bank invests in its employees, in its
network and infrastructures in order to develop and place on the market high quality services and products. It also works
together with its Stakeholders in order to identify their requirements in a timely manner, to ensure its responsible
operation and to support the society. Alpha Bank provides a healthy work environment, in which its employees broaden their
knowledge and skills and contribute to the development of new products and services. Alpha Bank supports the Greek economy,
enhances its electronic services, offers products and services with specific social and environmental, and also actively
contributes to the society.
Codes and procedures
The Corporate Governance Code of Alpha Bank sets out the framework and the guidelines for the governance of the Bank and is
revised by the Board of Directors. The Code also defines the duties and the allocation of responsibilities between the
Board of Directors, the Board Committees, the Executive Committee and the other Committees of the Bank, and is published on
the Bank's website.
Matters of Corporate Governance, as well as the management of matters concerning sustainability in general, are determined
by the Board of Directors based on the recommendations submitted by the competent Divisions. The Code of Ethics describes
the Bank's commitments and practices regarding its activities, its management, and the rules of conduct that apply to its
Executives and Employees not only in their interactions with each other but also with business parties and with the
Shareholders. The application of the Code of Ethics and of the principles of Corporate Governance, together with the
operation of the Audit Committee, the Risk Management Committee, the Remuneration Committee and the Corporate Governance
and Nominations Committee, have allowed Alpha Bank to enhance effectively the principles of integrity and transparency in
its operations and to ensure optimal management of risk.
In line with Alpha Bank's firm and unwavering position against corruption, during 2016 the Market and Operational Risk
Division and the Compliance Division examined, for yet another year, all cases which could represent a risk in connection
with the Bank's efforts to combat corruption and bribery. Alpha Bank conducted audits of transactions and Customers for
compliance with the regulatory framework, aiming at combating money laundering, financial crime and fraud, using the
specialised control and reporting systems it has put in place and working closely with the competent Regulatory
Authorities.
Alpha Bank has in place policies, procedures and management systems to ensure its compliance with the regulatory framework
in force, its responsible operation and the continuous improvement of its performance. When required, relevant instructions
are issued to the Bank's Branches, as well as to the Group Companies in Greece and abroad. In addition, employees attend
corresponding training programmes.
Identification of Material Issues
Alpha Bank has identified and mapped the most important issues for its responsible operation (Materiality Analysis), taking
into account the views of its Stakeholders.
Performance in 2016
The table below presents sample indicators on Alpha Bank's performance in 2016. Detailed information and additional
performance indicators for the Bank, together with information on the corporate responsibility activities of the Group's
subsidiaries, are presented in the Alpha Bank Corporate Responsibility Report 2016.
Indicators Alpha Bank
Employees (total number) 8,543
Women employees (%) 54
Donations for social purposes E 1.6 million
Increase in the use of e-statements* (%) 209
Convictions for corruption and bribery -
----------------------------------------
* Calculated on the basis of the number of deposit and mortgage loan accounts, as well as of debit, credit and prepaid
cards registered with the Alpha e-statements service.
Athens, 30 March 2017
THE CHAIRMAN
OF THE BOARD OF DIRECTORS
VASILEIOS T. RAPANOS
ID. No ÁÉ 666242
Explanatory Report of the Board of Directors of
Alpha Bank for the year 2016
The present Explanatory Report of the Board of Directors of Alpha Bank (hereinafter the "Bank") to the Ordinary General
Meeting of Shareholders of the Bank for the year 2016 contains detailed information, pursuant to the provision of article 4
par. 7 of Law 3556/2007, the reference date being 31.12.2016, in accordance with the order in which they are written in the
provision in question.
In particular:
a. 1. On 1.1.2016 the share capital of the Bank stood at the total amount of Euro 461,064,360.00 divided into 1,536,881,200
common, nominal, voting, paperless shares, of a nominal value of Euro 0.30 each. Out of the said common, nominal, voting,
paperless shares, 1,367,706,054 have been subscribed by Private Investors and 169,175,146 have been issued by the Bank and
have been subscribed by the Hellenic Financial Stability Fund, pursuant to Law 3864/2010, governed by virtue of the terms
thereof
2. On the dates of the sixth and seventh exercise processes for Titles Representing Share Ownership Rights (hereinafter
Warrants), i.e. on 10.6.2016 and 12.12.2016 respectively, no Warrants were exercised.
Following the above-mentioned under 1 and 2, on 31.12.2016 the share capital of the Bank stood at the total amount of Euro
461,064,360.00 divided into 1,536,881,200 common, nominal, voting, paperless shares, of a nominal value of Euro 0.30 each.
Out of the said common, nominal, voting, paperless shares, 1,367,706,054 have been subscribed by Private Investors and
169,175,146 have been issued by the Bank and have been subscribed by the Hellenic Financial Stability Fund, pursuant to Law
3864/2010, governed by virtue of the terms thereof.
All shares are listed for trading on the Securities Market of the Athens Exchange.
The 1,367,706,054 shares that have been subscribed by Private Investors represent 89% of the total paid-in share capital of
the Bank and embody all the rights and obligations provided for in the law and the Bank's Articles of Incorporation.
The 169,175,146 shares that have been subscribed by the Hellenic Financial Stability Fund represent 11% of the total
paid-in share capital of the Bank, they have the rights stipulated by law and are subject to the restrictions of the law.
With regard to these shares, it is noted that the Hellenic Financial Stability Fund:
became a shareholder of the Bank, within 2013, in the context of the Recapitalisation of the Greek Credit Institutions, on
the basis of Law 3864/2010, having, however, restricted voting rights at the General Meeting.
has issued, in accordance with Law 3864/2010 and Cabinet Act 38/2012, Warrants in order to offer the shares of the Bank it
undertook to private investors. These Warrants may be exercised within the time periods referred to in the relevant
legislation.
may vote at the General Meeting only on resolutions pertaining to the amendment of the Articles of Incorporation, including
the increase or reduction of the share capital or the grant of a relevant authorisation to the Board of Directors, the
merger, split-up, conversion, revival, extension of the term of operation or winding-up of the Bank, the transfer of
assets, including the sale of Group Companies or on any other item for which an enhanced majority is required in accordance
with the stipulations of Codified Law 2190/1920.
also possesses all the other rights stipulated by Law 3864/2010, as it is each time in force.
b. The Articles of Incorporation contain no restrictions on the transfer of Bank shares, save as otherwise provided for in
the law.
c. From the Bank's records, on 31.12.2016 there are no qualified, direct or indirect, holdings within the meaning of Law
3556/2007, in its share capital, with the exception of the Hellenic Financial Stability Fund, which holds common shares
representing 11% of the total paid-in share capital of the Bank.
d. There are no shares issued by the Bank possessing special rights of control, with the exception of the common shares
held by the Hellenic Financial Stability Fund in reference to the rights that the Hellenic Financial Stability Fund enjoys
by virtue of Law 3864/2010.
e. The Articles of Incorporation contain no restrictions on voting rights and the deadlines for exercising the same on
shares issued by the Bank, save the restrictions foreseen in Law 3864/2010 with regard to the shares owned by the Hellenic
Financial Stability Fund.
f. To the knowledge of the Bank, there are no shareholder agreements providing for restrictions on share transfers or
restrictions on the exercise of voting rights on shares issued by the Bank save as otherwise provided for in the provisions
of the laws stipulating the rights of the Hellenic Financial Stability Fund.
g. There are no rules in the Articles of Incorporation for the appointment and replacement of Members of the Board of
Directors, as well as for the amendment of the Articles of Incorporation of the Bank, which are at variance with the
stipulations of the law as in force.
h. The Bank may increase its share capital by virtue of a resolution of the General Meeting of Shareholders or of
the Board of Directors, in accordance with the law and the Articles of Incorporation.
The General Meeting of Shareholders of 27.6.2014 renewed the validity of the authority (articles 13 par. 1 case (b) and 3a
par. 3 item first of Codified Law 2190/1920) granted by the General Meeting to the Board of Directors of the Bank: (i) to
increase the share capital of the Bank, through the issuance and distribution of new shares, the amount whereof shall be
paid in cash and/or by contribution in kind, and (ii) to issue a bond loan convertible into shares issued by the Bank.
For as long as the Bank participates in the programmes for the enhancement of the economy's liquidity as per Law 3723/2008,
the Bank may not purchase its own shares (article 28 par. 2 of Law 3756/2009).
Additionally, for as long as the Hellenic Financial Stability Fund participates in the share capital of the Bank, the
latter may not purchase its own shares without the former's approval.
The Bank does not hold any of its own shares.
i. The Bank has entered into no major agreement, which comes into effect, is amended or expires upon a change of control
of the Bank following a public tender offer.
j. The Bank has entered into no agreement with Members of the Board of Directors or the staff, providing for compensation
upon their resignation or dismissal without just cause, or upon termination of tenure/employment, owing to a public tender
offer, except in accordance with the provisions of the law.
Corporate Governance Report for the year 2016
Pursuant to the provision of article 43bb of Codified Law 2190/1920, the Annual Management Report of the Board of Directors
of Alpha Bank (hereinafter the "Bank") includes the Corporate Governance Report for the year 2016. The reference date of
the Corporate Governance Report is 31.12.2016.
Specifically, the required information is listed below:
a. The Bank operates within the framework of the Alpha Bank Corporate Governance Code, which is posted on the Bank's
website (http://www.alpha.gr/page/default.asp?id=120&la=2).
b. Effective Corporate Governance is not determined by a fixed programme, but rather by a continuous effort to integrate
parameters proposed each time, in conjunction with the ever increasing requirements of the institutional framework and
expectations of society. The proper corporate structure, the appropriate institutional framework and its implementation are
prerequisites for successful Corporate Governance, which promotes the recognition and reputation of the company.
The Corporate Governance practices, which are implemented by the Bank, are in accordance with the requirements of the
relevant legal, supervisory and regulatory frameworks as well as with the international best practices in Corporate
Governance and aim at the increase of the long-term value of the Bank, taking into consideration the interests of the
Shareholders, those transacting with the Bank, Employees and other Stakeholders.
The said practices are quoted in the Alpha Bank Corporate Governance Code, which sets the framework and guidelines for the
governance of the Bank and is reviewed by the Board of Directors.
The Corporate Governance Code of Alpha Bank defines the duties and allocates responsibilities among the Board of Directors,
its Committees, the Executive Committee and the other Committees of the Bank.
Alpha Bank implemented, as early as 1994, the principles of Corporate Governance, enhancing transparency in communication
with the Bank's Shareholders and keeping investors promptly and continuously informed. In this context, the Bank has
adopted the following modifications, before their establishment as regulatory and legal requirements: the separation of the
Chairman's duties from those of the Managing Director, a number of Independent Members of the Board of Directors exceeding
the minimum stipulated by law, the establishment of an Audit Committee of the Board of Directors, the monthly convocation
of the Risk Management Committee of the Board of Directors, the provision of comprehensive and detailed introductory
informational programmes for the new Members of the Board of Directors and of information seminars in the context of
constant training, when deemed necessary.
Additionally, since 2006 the Vice Chairman of the Board of Directors is a Non-Executive Independent Member, even today when
the Chairman of the Board of Directors is Non-Executive.
The Corporate Governance Code stipulates expressly the distinguished responsibilities of the Chairman of the Board of
Directors, the Vice Chairman and the Managing Director.
The Board of Directors convenes every month or more often if necessary. The Articles of Incorporation of the Bank provide
the Board of Directors with the option to meet by teleconference. The programme of the Meetings of the Board of Directors
and its Committees for every year is set and notified at the end of the previous year. The Minutes of the Meetings of the
Board of Directors and its Committees are ratified at the next regular Meeting of the Board of Directors or of the relevant
Committee. The tenure of the Members of the Board of Directors is four years while Codified Law 2190/1920 stipulates up to
six years.
Article 3 of Law 3016/2002 stipulates, inter alia, that the number of Non-Executive Members of the Board of Directors
cannot be less that 1/3 of the total number of Members. Out of a total of thirteen (13) Members of the Board of Directors
of the Bank, the number of Non-Executive Members amounts to nine (9), i.e. 69% of the total, thus exceeding by far the
minimum number for such Members set by Law 3016/2002.
In accordance with the above-mentioned article of Law 3016/2002, at least two (2) Non-Executive Members should also be
Independent. In the Board of Directors of the Bank, the respective number exceeds, as in the case mentioned above, the
minimum requirement set by law and amounts to five (5), i.e. 38% of the total.
Additionally, the Bank has adopted a Code of Ethics for the performance of duties with the purpose to implement the
standards required by modern corporate governance and effective Internal Audit. The Code of Ethics is posted on the Bank's
website (http://www.alpha.gr/page/default.asp?la=2&id=5393).
The Corporate Governance and Nominations Committee ascertained that the current composition of all the Committees of the
Board of Directors, namely the Audit Committee, the Risk Management Committee, the Remuneration Committee and the Corporate
Governance and Nominations Committee, meets the requirements of the compliance framework, is consistent with the principles
of Corporate Governance of the Bank and contributes to the effective and smooth operation of the Committees.
It also ascertained that the Members of the Board of Directors represent different business sectors and geographical areas
and are acknowledged for their character, integrity, ability of leadership, management, thought and constructive collective
operation in a team environment as well as for their financial knowledge and other professional and business experience.
The level of experience and knowledge as well as the work of all the Members of the Board of Directors and its Committees
was evaluated as very high.
Lastly, it was ascertained that the Members comply with the stipulations of article 83 of Law 4261/2014 on the combination
of directorships that Board Members may hold at the same time, that they do not have any personal or private interest, as
defined in article 2 of Law 3016/2002 and that the Non-Executive Independent Members of the Board of Directors fulfil all
the criteria for being Independent, in accordance with Law 3016/2002 and the Corporate Governance Code of the Bank.
Additionally, at the annual Meeting of the Non-Executive Members of the Board of Directors, the Non-Executive Members
recognised that the Board operations are conducted in an effective manner and that the Members of the Board of Directors
contribute to very effective and productive Board meetings. During the meetings, the Members deliberate openly in an
environment of trust and they feel free to express their views and the relevant arguments. The Meeting evaluated the
performance of the Executive Members and highlighted the contribution of each and every Member to the accomplishment of
absolutely satisfactory results during these highly volatile economic circumstances which the country is experiencing as
well as the excellent cooperation with the Non-Executive Members of the Board.
The main objective is that the Members attend more than 85% of the Board meetings. The Corporate Governance and Nominations
Committee reviewed the attendance of Members at Board Meetings and deemed that there are no Member absences without a valid
reason. The Members of the Board of Directors who were absent had informed the Bank on time of the relevant reasons and had
authorised in writing another Member of the Board of Directors to represent them at the Meeting where they were not present
due to impediment.
During the year the Bank, in response to the changing landscape in Greek banking and anticipating the recent regulatory and
legal trends in the Corporate Governance framework, proceeded to modify the composition of its Board of Directors. The
modifications pertained to the replacement of Non-Executive Members with persons who possess international experience in
banking, audit, risk management and non-performing loans.
In the context of implementing the above, in 2016 Mr. Minas G. Tanes, Ms Ioanna E. Papadopoulou, Mr. Ioannis K. Lyras and
Mr. Pavlos A. Apostolides departed from the Board of Directors of the Bank. Within the same year Messrs Jan A. Vanhevel and
Richard R. Gildea were elected as Members.
Messrs Jan A. Vanhevel and Richard R. Gildea were provided by the Bank with a comprehensive and detailed introductory
informational programme on Corporate Governance, Risk Management, Internal Audit, Compliance, Capital Adequacy, Financial
Services and Human Resources.
In order to enhance the active participation of the Shareholders in the General Meetings and the genuine interest in issues
relating to its operation, the Bank develops procedures of active communication with the Shareholders and establishes the
appropriate conditions so that the policies and strategies adopted are based on the constructive exchange of views with the
Shareholders.
In order to ensure the reliable, secure and broad dissemination of institutional information to Shareholders, the Bank
declares the "Officially Appointed Mechanism for the Central Storage of Regulated Information" of the Hellenic Exchanges
S.A. (HELEX), which is currently managed by the Athens Exchange and operates through the "HERMES" communication system, in
accordance with the Athens Exchange Rulebook (www.helex.gr), as the means of disclosure of regulated information and
information provided by law to its Shareholders before the General Meeting. Through this disclosure, the prompt and
non-discriminatory access to the relevant information is made available to the general public and particularly to the
Shareholders, given that the above System, as recognised by law, is considered reasonably reliable for the effective
dissemination of information to the investing public and meets the national and European range requirements of the law.
c. Internal Control System
The Internal Control System, on which the Bank places great emphasis, comprises auditing mechanisms and procedures,
relating to all the activities of the Bank, aiming at its effective and secure operation.
The Internal Control System ensures:
the consistent implementation of the business strategy with an effective utilisation of the available resources,
the identification and management of all risks undertaken,
the completeness and the credibility of the data and information required for the accurate and timely determination of the
financial situation of the Bank and the generation of reliable financial statements,
the compliance with the current regulatory framework, the internal regulations, the rules of ethics,
the prevention and avoidance of erroneous actions that could jeopardise the reputation and interests of the Bank, the
Shareholders and those transacting with it,
the effective operation of the IT systems in order to support the business strategy and the secure circulation, processing
and storage of critical business information.
The evaluation of the adequacy and effectiveness of the Internal Control System of the Bank is conducted:
a) On a continuous basis through audits effected by the Internal Audit Division of the Bank, as well as by the Compliance
Division with respect to the observance of the regulatory framework.
The audit plan of the Internal Audit Division is based on the prioritisation of the audited areas by identifying and
assessing the risks and the special factors associated with them. In addition, any instructions or decisions of the
Management of the Bank, along with regulatory framework requirements and extraordinary developments in the overall economic
environment are taken into account.
The Audit Committee of the Board of Directors approves the audit plan and is updated every quarter on its implementation,
the main conclusions of the audits and the implementation of the audit recommendations, as well as on the compliance with
the regulatory framework.
b) On an annual basis by the Audit Committee of the Board of Directors, on the basis of the relevant data and information
from the Internal Audit Division, the findings and observations from the External Auditors as well as from the Regulating
Authorities.
In 2016, the Audit Committee evaluated the Internal Control System of the Bank for 2015.
c) Every three years by External Auditors, other than the regular ones.
These are highly experienced individuals in the field of internal audit (external auditors or special advisors), who are
independent of the Group and for whom there is no question of a conflict of interests.
The Audit Committee determines the criteria and the selection procedures for external auditors and approves the scope and
the content of audit operations.
The Bank has in place Policies and Procedures for the recognition of financial events and the preparation of the financial
statements.
Transactions are carried out through specialised computerised applications, per business activity of the Bank and the
Group, which support Officer authorisation limits and procedures for double-checking transactions.
The accounting system of the Bank and the Group is supported by specialised IT systems which have been adapted to the
business requirements of the Bank.
Audit and accounting reconciliation procedures have been established in order to ensure the correctness and the legitimacy
of the entries in the accounting books as well as the completeness and validity of the financial statements.
Furthermore, in order to ensure the independence of the regular audit of the financial statements of the Group, the Board
of Directors applies specific policies and procedures in order to formulate a recommendation for the General Meeting with
regard to the election of a regular auditor.
The Audit Committee of the Board of Directors supervises and assesses the drafting procedures, in accordance with the
current audit standards, for the interim and annual financial statements of the Bank and studies the reports of the
External Auditors as regards deviations from the current accounting practices.
Risk Management
The Bank places great emphasis on the identification, measurement and management of the risks undertaken and, to this end,
has assigned these tasks to the Risk Management Business Unit. The Risk Management Business Unit reports to the General
Manager and Chief Risk Officer of the Group, to the Risk Management Committee and (through the latter) to the Board of
Directors of the Bank.
The effective management of all types of risk focuses on accurate and efficient measurement using specialised methods and
calculation models, and on the adoption of policies and limits through which the Bank's exposure to various risks is
monitored.
The Operational Risk Committee convenes regularly or whenever deemed necessary by the circumstances and ensures that the
appropriate processes, methodologies and infrastructure to manage the operational risk of the Group exist and approves
recommendations to limit operational risk.
The Credit Risk Committee convenes regularly and assesses the adequacy and the efficiency of the credit risk management
policy and procedures of the Bank and the Group and resolves on the planning of the required corrective actions.
The Troubled Assets Committee (TAC) convenes regularly and examines issues related to the portfolios managed by the
Divisions under the supervision of the Non-Performing Loans - Wholesale Banking Executive General Manager and the
Non-Performing Loans - Retail Banking Executive General Manager, in order to achieve the operational goals of the Bank and
the Group, pertaining to which it may propose further decision-making to the Credit Risk Committee and subsequently to the
Board of Directors for the final approval, through the Risk Management Committee of the Board.
The Assets-Liabilities Management Committee (ALCo) convenes regularly every quarter, examines and resolves on issues
related to Treasury and Balance Sheet Management and the overall financial volumes of the Bank and the Group approving the
respective actions and policies.
The Bank has fully complied with the provisions of the institutional framework with respect to its troubled assets.
The Audit Committee and the Risk Management Committee review in a joint session every quarter the financial statements of
the Bank and the Group compiled in accordance with the
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