Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
Consolidated financial statements
December 31, 2019
FCA Bank Group
FCA Bank S.p.ARegistered office: Corso G. Agnelli, 200 - 10135 Turin – www.fcabankgroup.com - Paid-up Share Capital: Euro 700,000,000 - , Turin Companies Register n. 08349560014, - Tax and VAT Code 08349560014 - Entered in the Bank Register n. 5764 - Holding of FCA Bank Banking Group - Entered in the Banking Group Register - Cod. ABI 3445 - Entered in Single Register of Insurance Intermediaries (RUI) N. D00016456, Member of the National Interbank Deposit Guarantee Fund.
FCA Bank Group
December 31, 2019
CONSOLIDATED FINANCIAL STATEMENTS.
Consolidated financial statements December 31, 2019• 2
• 3
INTRODUCTION
The consolidated financial statements of the FCA Bank Group for the year
ended December 31, 2019 have been prepared in accordance with the Interna-
tional Accounting Standards (IAS) and the International Financial Reporting
Standards (IFRS), in keeping with Bank of Italy’s instructions laid down in
circular no. 262 of December 22, 2005 (6th update of November 30, 2018).
The formats and manner of preparation of the accounts are mandated by these
rules and standards.
The consolidated financial statements consist of the Statement of financial
position, the Income statement, the Statement of comprehensive income, the
Statement of changes in equity, the Statement of cash flows and the Notes and
are complemented by the board of directors’ report on the Group’s operating
results and financial conditions. Comments are supported by the reclassified
income statement, certain financial ratios and alternative performance indica-
tors; the tables with the relevant reconciliations are included in the report on
operations.
The consolidated financial statements were prepared with clarity and provide a
true and fair view of the financial condition, cash flows and operating results for
the financial year. In addition, they are accompanied by the Board of Statutory
Auditors’ report and the independent auditors’ opinion pursuant to Legislative
Decree no. 39 of January 27, 2010.
Disclosures of significant events, presentations to investors and public disclo-
sures pursuant to Regulation EU 575/2013 are available the website of the FCA
Bank Group (www.fcabankgroup.com).
The Consolidated Non-Financial Statement, compliant to Legislative Decree no.
254 of December 30, 2016, which illustrates environmental, social and person-
nel-related issues is attached to the consolidated financial statements.
Information on the remuneration required by art. 123-ter of the TUF and by the
Basel Third Pillar (see Pillar 3) is also published and made available on the web-
site according to the related approval procedures.
Consolidated financial statements December 31, 2019• 4
KEY FIGURES
0.25%On average portfolio
3.9%On average portfolio
28.6%Cost / Income Ratio
-293€/MLNNet operating expenses
-66€/MLNCost of risk
1,025€/MLN Net banking income andrental margin
13,730€/MLNNew retail, leasing and rental volumes
1.7MLNRetail, leasing and rental active contracts
48.1%Total commercial penetration
27.5€/MLDEnd of period portfolio
• 5
18Countries
279,628Long term, short term rental fleetand fleet management
2,280Employees
18BrandsFIAT - ALFA ROMEO - LANCIA - ABARTH - JEEPFIAT PROFESSIONAL - CHRYSLER - MASERATI - FERRARIJAGUAR - LAND ROVER - ERWIN HYMER GROUP - RAM DODGE - ASTON MARTIN - MORGAN - HARLEY DAVIDSON MV AGUSTA
14.20 % CET 1 Ratio
10.62 %Leverage Ratio
666€/MLNOperating Income
467€/MLNNet profit
Consolidated financial statements December 31, 2019• 6
ABSTRACT
GEOGRAPHICAL FOOTPRINT
• 25
GOVERNANCE• 18
CEOEDITORIAL
• 10
GROUPSTRUCTURE
• 24
• 7
CONSOLIDATEDFINANCIALSTATEMENTS
• 92
BUSINESSLINES
• 27
REPORT ONOPERATIONS
• 42
INDEPENDENTAUDITORS'REPORTON THECONSOLIDATEDFINANCIALSTATEMENTS
• 298
Consolidated financial statements December 31, 2019• 8
CONTENTS
Editorial 10
Board of directors, board of statutory auditors and external auditors 16
Fca Bank Group – Presentation and milestones 20
Profile of the Fca Bank Group 22
Group structure 24
Geographical footprint 25
The business lines 27
REPORT ON OPERATION 42
Macroeconomic scenario, the automotive market and financial markets 45
Significant events and strategic transactions 46
Commercial policies 48
Financial strategy 52
Cost of risk and credit quality 61
Results of operations 69
Equity and capital ratio 75
Organization and human resources 79
Information technology 82
Internal control systems 86
Other information 88
• 9
CONSOLIDATED FINANCIAL STATEMENTS 92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 102
Part A - Accounting policies 104
Part B - Information on the consolidated balance sheet 144
Part C - Information on the consolidated income statement 187
Part D - Consolidated comprehensive income 208
Part E - Information on risk and related risk management policies 209
Part F - Information on consolidated equity 275
Parte G - Business combinations 278
Parte H -Related-party transactions 279
Parte L - Segment Reporting 282
Parte M - Leasing reporting 284
COUNTRY BY COUNTRY REPORTING - DATA AS AT 31/12/2019 - 286
STATUTORY'S AUDITORS’ REPORT ON THE CONSOLIDATEDFINANCIAL STATEMENT 288
INDEPENDENT AUDITORS’ REPORT ON THE CONSOLIDATEDFINANCIAL STATEMENT 298
ANNEX - CONSOLIDATED NON-FINANCIAL STATEMENT AS AT DECEMBER 31, 2019 310
Consolidated financial statements December 31, 2019
Discipline and the courage of innovation. If it were possible – and maybe in a not-too-distant future it will be – a course of study should be held on these two subject matters. This because the ability to envision the future, adapting to changed life circumstances, is probably in the nature of every human being and, as such, should be developed, nurtured and stimulated. After all, over the past few years FCA Bank and Leasys have been traveling this road of innovation and adaptation with great motivation and confidence.
Change is a challenge that needs to be met head on in all the sectors in which we operate, from banking and insurance to mobility, to the development of alternative technologies. Three fronts where the FCA Bank Group is and will always be a leading force. All this can happen only if rigor and discipline in the innovative process are used as our lodestar in making hard decisions and if the flame of the courage to change deeply ingrained behaviours and habits, even when they seem efficient and well-established, is kept constantly alive. Those who cannot see opportunity in the epoch-making changes that we are experiencing, as well as those who keep focusing on the past instead of the future and are not stimulated and motivated by the challenges of modernity will inevitably fall behind.
DISCIPLINE AND THE COURAGE OF INNOVATION
"Change is a challenge that needs to be met head on in all the sectors in which we operate, from banking and insurance to mobility, to the development of alternative technologies."
GIACOMO CARELLICEO & General Manager
• 10
Editorial • 11
The easy access to our services, navigation on our websites
and use of our new Customer Portal made for pleasant, fast and, most of all,
effective customer experiences.
There are different examples in history that we could take as our inspiration, such as those of great banking and industrial groups that created systems that allowed all employees, at every level and in every sector, to indicate based on their specific experience what the best processes and products would be to be successful in the market. These company experiments, which we have been conducting for years also at FCA Bank, continue to foster growth and development.
Participation of all employees to the development of the digital bank and new and pioneering mobility services, transforming radically customer interaction processes through secure and direct online channels, is evidence that teamwork is a guarantee of future success. Our financial statements for 2019 tell the story of our positive performance. Our year-end net outstanding portfolio reached €27.5 billion while net profit for the year just ended was €467 million. Thanks to everybody’s contribution, commercial penetration (48.1%), new loan, lease and rental contracts, which totalled €13,730 million, grew. In addition, also our Group’s recognition and prestige improved, as easy access to our services, navigation on our websites and use of our new Customer Portal made for pleasant, fast and, most of all, effective customer experiences.
The new pre-scoring and digital onboarding platforms made a substantial contribution to the full digitalization of our services, while all of Leasys’s mobility services - from pay-per-use to car sharing, to the first revolutionary car subscription service in Italy with CarCoud, to all the innovative short- and long-term car rental solutions – made this company a recognized
mobility pioneer in Italy and in Europe. The new credit card dedicated to the FCA Group’s brands, and the management online of loans and leases, made customer experience even more fluid and interesting. In addition, thanks to the multiple European partnerships with insurance providers, FCA Bank will continue to provide a broad range of tailor-made services, starting precisely from the technological infrastructure represented by FCA’s connected vehicles.
Our international growth process saw the creation of FCA Capital Maroc in 2019, thanks to the partnership with Wafalasaf, to provide loan and lease financing services to customers in Morocco, where the Bank has already been active for years in dealer financing. Moreover, Leasys’s opening in Poland brought to eight the number of countries in which the rental and mobility company of the Group can provide its services.
All these initiatives are witness to a process based on solid ground, and are a clear indication that the discipline and the courage of innovation are part of our DNA.
We will try to be always one step ahead of the others, to support customers and to stand next to them in the face of future challenges, promoting the sustainability and usability of our financing solutions and accompanying the electrification of the automotive industry with innovative mobility offers.
Consolidated financial statements December 31, 2019
“The financial structure is a pillarof our development.”
FRANCO CASIRAGHIDeputy General Manager & Chief Financial Officer
FINANCIAL TRANSACTIONS: RETURN TO AN EXPANSIONARY MONETARY POLICY.
The first half of 2019 saw a return of financial markets to normalcy, as the volatility of late 2018 waned.
In a macroeconomic context still marked by the continuing trade tensions between United States and China and the Brexit uncertainty, the European economy called for the central banks to continue with their unconventional monetary policies. In particular, on March 7, 2019 the European Central Bank (ECB) announced the third series of targeted longer-term refinancing operations (TLTRO-III), which represented an opportunity for banks starting from September 2019, and on September 12, 2019 it cut the interest rate on the deposit facility by 10 basis points (to – 0.50). The ECB also announced a new Quantitative Easing phase, which calls for asset purchased for €20 billion a month, starting from November 1, 2019, thus confirming its dovish stance, in keeping with the extraordinary measures introduced since June 2014, which
• 12
Editorial • 13
In December 2019 the FCA Bank Group completed
its first TLTRO-III operation for €100 million.
proved effective in transmitting lower interest rates from the financial sector to the private sector. In parallel, starting from October 2, 2019, the ECB began the publication of a new risk-free interest rate for the euro area, known as “euro short-term rate” (€STR) and designed to replace EONIA.
The ECB’s extraordinary measures resulted in narrower spreads in the marketplace and a temporary but significant downward shift of the yield curve, which hit a record low when the entire 1-/20-year segment entered negative territory.
Against this backdrop, the FCA Bank Group JV was extended until December, 31 2024, with a clear indication of continuity and the renewed confidence of the shareholders that have started it in 2006.
In the year under review, the FCA Bank Group continued to be active in capital markets, with three public placements and three private placements of senior unsecured notes for a total of €2.9 billion under its “Euro Medium Term Note” program.In particular, starting in September 2019, the FCA Bank Group took advantage of the JV’s new time horizon by pricing a new issue under the above-mentioned program, maturing in November 2024, at a fixed rate of 0.50%, and by completing a “stand-alone” issue for CHF 125 million, maturing in 2023, thus extending its maturity profile.
In addition to relying on the lines of credit made available by the shareholder Crédit Agricole Consumer Finance, the FCA Bank Group continued to expand further its lines of credit with other banks, and for longer
durations, attesting to the Group’ strong ties with the international banking community.
The diversification of funding sources continued, thanks to both the continuing growth of Conto Deposito – the online savings product developed by FCA Bank, with total inflows amounting to €1.1 billion – and the new commercial paper issues under the ECP program, to raise short-term debt in the money market to meet limited and temporary liquidity requirements.
All these transactions allowed the FCA Bank Group to secure the funds necessary to support the business, strengthening in the meantime both the liquidity profile and the liability structure.
Regarding use of the foregoing ECB’s refinancing operations, in December 2019 the FCA Bank Group completed its first TLTRO-III operation for € 100 million.
Lastly, in November 2019 a note placement was completed for a vehicle called A-Best Seventeen S.r.l., established to securitize retail receivables in Italy, for a total amount of €912.6 million. The placement of all the classes of securities – Senior, Mezzanine and Junior minus a 5% retention required by regulations – made it possible not only to fund assets but also to reduce risk-weighted assets, in keeping with the applicable regulations.
Consolidated financial statements december 31, 2019• 14
HIGHLIGHTS
FCA BANK AND LEASYSEXPANSION IN EUROPEANMARKETSALAIN JUAN European Markets pag. 37
ALBERTO GRIPPO Chief Executive Officier Leasyspag. 41
NEW MOBILITY & CARCLOUD
GIULIO VIALEFCA Bank Italiapag. 50
E-WALLET ANDCREDIT CARDS:FCA BANK'S EXPERIENCE
THE WEB FINANCECALCULATOR, INNOVATION TOSERVE CUSTOMERS BETTERMARCELLA MERLI Sales & Marketingpag. 55
Highlights • 15
COMPLIANCE AND TRANSPARENCY:FCA BANK'S ADDED VALUEPATRIZIO LATTANZI Compliance & Supervisory Relationspag. 81
CROSS PATH PROGRAM& INNOVACTION
ANDREA BARCIOHuman Resourcespag.84
LUCA POLLANOICT, Digital & Data Governancepag. 67
DIGITALIZATION
Consolidated financial statements December 31, 2019• 16
Board of Directors, Board of Statutory Auditors and External Auditors
Board of directors • 17
Ernst & Young S.p.A.
* independent directors1 appointed on 26/11/2019² appointed on 26/11/20193 appointed on 31/01/2020
Board of Directors
Board of Statutory Auditors
External Auditors
ChairmanStéphane Priami 3
Managing Director and General ManagerGiacomo Carelli
DirectorsPaola De Vincentiis*Andrea Faina Andrea Giorio*Olivier GuilhamonBernard ManuelliDavide MeleRichard Keith PalmerValérie Wanquet
ChairmanFrancesco Pisciotta
Statutory AuditorsGiovanni Ossola Vittorio Sansonetti 1
Alternate Statutory AuditorsValter Cantino 2 Davide Chiesa
Consolidated financial statements December 31, 2019• 18
GOVERNANCE1. Giacomo Carelli: Chief Executive Officier & General Manager2. Mauro Aimetti: Internal Audit3. Andrea Barcio: Human Resources4. Simone Basili: Dealer Financing5. Olivier Broc: Credit6. Franco Casiraghi: Chief Financial Officer and Deputy General Manager7. Rolando D'Arco: Business Development8. Emanuela Demarchi: Risk & Permanent Control
22
99
31
10 11
44
12 13
Governance • 19
9. Enrico Favale: Legal Affairs & Procurement10. Alberto Grippo: Chief Executive Officier Leasys11. Alain Juan: European Markets12. Patrizio Lattanzi: Compliance & Supervisory Relations13. Stefano Leucci: Data Protection14. Marcella Merli: Sales & Marketing 15. Luca Pollano: ICT Digital & Data Governance16. Alberto Sibille: Corporate Affairs & Process Governance17. Giulio Viale: FCA Bank Italia
5 77 888
1414 15 16
66
17
4
Consolidated financial statements December 31, 2019• 20
Presentation and milestones
FCA BANK GROUP
FCA Bank S.p.A. is an equally held joint venture between FCA Italy S.p.A. (a Fiat Chrysler Automobile Group company) and CA Consumer Finance S.A. (a Crédit Agricole Group company).FCA Bank operates in 17 European markets and in Morocco and acts as the partner of reference for Fiat Chrysler Automobiles brands (Fiat, Lancia, Alfa Romeo, Fiat Professional, Abarth, Maserati, Chrysler and Jeep) for the prestigious manufacturers Ferrari, Jaguar Land Rover and the Erwin Group, Europe’s largest manufacturer of motorhomes and campervans. The FCA Bank Group has been supporting the automotive sector in Italy and Europe for over 90 years.SAVA (Società Anonima Vendita Automobili), a financial company designed to help Italian households to buy a car, was established on April 25, 1925, in Turin, when the “509” model was launched (the first Fiat car sold on credit). On 11 April of the same year Fiat took over the company.Starting January 1, 1931, in its capacity as sole shareholder, Fiat decided to provide financing only to buyers of its cars. In 1938 SAVA also began to finance sales of used cars on instalments. Over the past few decades the Company has been expanding its business beyond the national borders, in EU and non-EU countries.In 2003, SAVA was placed under Fidis Retail Italia S.p.A., whose shareholders eventually included Banca Intesa, Sanpaolo IMI, Capitalia and Unicredit with a collective 51% equity interest, on one side, and Fiat, which held the remaining 49%, on the other. In December 2006, Fiat Auto S.p.A. and Crédit Agricole S.A. established an equally-held joint venture to provide financial and rental services in Europe. Fiat Auto Financial Services S.p.A. was born.In July 2008, a cooperation agreement is signed with Jaguar Land Rover, while in 2009, the Company became the captive of all Chrysler brands in Europe (Chrysler, Jeep and Dodge). After signing a partnership agreement with Maserati in September 2013, FGA Capital started Maserati Financial Services. In November 2013, the equally-held joint venture between Fiat and Crédit Agricole was extended until December 2021. On January 16, 2015, FGA Capital obtained a banking license in Italy and changed its name
to FCA Bank S.p.A., thus becoming the parent company of an international banking group with a direct presence in 18 countries. In July of the same year, Erwin Hymer Group and FCA Bank announced a new collaboration and the creation of Erwin Hymer Group Finance.In August 2016, FCA Bank signed an agreement with Ferrari Financial Services S.p.A., the Ferrari financial services company, to acquire a controlling interest in Ferrari Financial Services GmbH, which operates in Germany, Switzerland and UK, becoming the only financial partner of the prestigious automotive brand in Europe. In October, the bank further diversified its o�ering by launching Conto Deposito, an innovative savings product available only online. 2017 is characterized by the growing internationalization of Leasys in Europe and in particular in Spain, France, Germany and Great Britain. In October, FCA Bank debuted with “Conto Deposito” in Germany.On February 15, 2018, FCA Italy S.p.A. ("FCA"), Crédit Agricole S.A. ("CASA") and Crédit Agricole Consumer Finance S.A. ("CACF") have concluded an agreement for the extension until December 31, 2022 of their Joint Venture. In the same month the partnership with Jaguar Land Rover was renewed. In March FCA Bank announces the new partnership with Aston Martin Lagonda and Morgan Motor Company. On October 1, Leasys S.p.A. acquired 100% of the share capital of Win Rent S.p.A.. FCA Bank has thus created the conditions for the development of its activity in short-term rental. Finally, before the end of the year, the partnership have been sealed with Harley Davidson, MV Agusta and Dodge and Ram European importers.June saw the birth of the Leasys Mobility Stores, the new integrated mobility system created by industry-pioneer Leasys. On July 19, 2019, FCA Italy (“FCA”) and Crédit Agricole Consumer Finance (“CACF”) entered into an agreement to extend FCA Bank, their equally-held joint venture, until December 31, 2024.In context of FCA Bank’s growth plans in Europe, among others, FCA Capital Maroc was founded to supports FCA customers with innovative financial solutions.In October LeasysCarCloud was launched, the first mobility subscription model in Italy.
FCA Bank Group • 21
1925
SAVA (Società Anonima Vendita Automobili) was founded.
2019
FCA Italy (“FCA”) and Crédit Agricole Consumer Finance (“CACF”) entered into an agreement to extend FCA Bank, their equally-held joint venture, until 2024.
2015
FGA Capital S.p.A. obtained a banking license in Italy and changed its name to FCA Bank S.p.A..
2006
Fiat Auto S.p.A. and Crédit Agricole S.A. established an equally-held joint venture to provide financial and rental services in Europe.
Consolidated financial statements December 31, 2019• 22
Profile of the FCA Bank Group
Fiat Chrysler Automobiles (FCA) designs, engineers, manufactures and sells vehicles and related post-sale services, spare parts, components and systems through 159 manufacturing facilities, 87 research and development centres worldwide, with dealers and distributors in over 140 countries. The Group operates in the automotive market under the Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram and Maserati brands and provides post-sale services and spare parts uner the Mopar brand. The Group’s businesses include Comau (production systems), Magneti Marelli (components) and
In 2006, Crédit Agricole Consumer Finance and Fiat Auto set up an equally-owned joint venture called Fiat Group Automobiles Financial Services, which was eventually renamed FGA Capital in 2009. This partnership was subsequently extended to Jaguar Land Rover, Chrysler, Dodge and Jeep. With managed outstandings of €92 billion at December 31, 2019, Crédit Agricole Consumer Finance is a leading player in the consumer credit market. It offers its customers and partners financing solutions that are flexible, responsible and tailored to their needs. With a presence in 17 countries in Europe, as well as in China and Morocco, Crédit Agricole Consumer Finance uses its know-how and expertise to ensure that the customer loyalty policies of its partners, be them vehicle manufacturers, distributors,
Fiat Chrysler Automobiles (FCA)
Crédit Agricole Consumer Finance
Teksid (ironworks). In addition, it provides, car loan, lease and rental services to support the automotive business through subsidiaries or financial partners (such as captive companies, affiliates, joint ventures with prime banking and/or financial institutions and specialized operators). The company is listed on the New York Stock Exchange (“FCAU”) and on the MTA (Mercato Telematico Azionario) (“FCA”) in Italy. FCA operates through companies located in over 40 countries and has business relationships with customers in over 140 countries.
dealers, banks or institutional organisations become a commercial success Customer satisfaction being at the heart of its strategy, Crédit Agricole Consumer Finance provides them with the means of making informed choices about their projects. The company innovates and invests in digital technologies to offer customers and partners the best solutions, thus developing a new lending experience with them.
Profile of the FCA Bank Group • 23
100%
50%
Fiat Chrysler Automobiles
FCA ITALY S.p.A.
100%
50%
Crèdit Agricole Consumer Finance
Consolidated financial statements December 31, 2019• 24
FCA Capital France S.A. (FR) (4) Leasys S.p.A. (IT)99,99%
100%
100%
100%
99,99%
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99,99%
100%
100%
FCA Leasing France SNC (FR) (5) Leasys S.p.A. (Spanish Branch)
FCA Dealer Services UK Ltd (UK) Leasys S.p.A. (Belgian Branch)
FCA Capital Hellas S.A. (GR) (2) Leasys France S.A.S. (FR) FCA Insurance Hellas S.A. (GR) (3) Leasys Nederland B.V. (NL)
Clickar S.r.l. (7) FCA Bank GmbH (AT) (1)
FCA Dealer Services Portugal S.A. (PT) FCA Leasing GmbH (AT)
FCA Capital RE DAC (IE)
Legal entity
FCA Bank GmbH (Hellenic Branch)
Branch
FCA Capital Suisse S.A. (CH)
FCA Bank Deutschland GmbH (DE)
Ferrari Financial Services GmbH (DE) (6)
Ferrari Financial Services GmbH (UK Branch)
FCA Capital Danmark A/S (DK)
FCA Capital Danmark A/S (Branch Finland)
FCA Capital Norge AS (NO)
FCA Capital Sverige AB (SE)
FCA Capital España EFC S.A. (ES)
FCA Dealer Services España S.A. (ES)
FCA Dealer Services España (Morocco Branch)
FCA-Group Bank Polska S.A. (PL)
FCA Capital Portugal IFIC S.A. (PT)
FCA Bank S.p.A. (Irish Branch)
FCA Automotive Services UK Ltd (UK) Leasys S.p.A. (German Branch)
FCA Capital Nederland B.V. (NL)
Leasys UK Ltd (UK)
Leasys Rent S.p.A. (IT)
Leasing Polska Sp.Zo.o. (PL) (8)
Note:(1) FCA Bank GmbH (AT) - Fidis S.p.A. holds 25% while the remaining 25% is held by
CA Consumer Finance S.A..(2) FCA Capital Hellas S.A. (GR) - 1 share is held by individual.(3) FCA Insurance Hellas S.A. (GR) - 1 shares is held by individual.(4) FCA Capital France S.A. (FR) - 5 shares are held by individuals.(5) FCA Leasing France SNC (FR) - Remaining shareholding interest is held by Leasys France S.A.S..(6) Ferrari Financial Services GmbH (DE) - FCA Bank holds 50% + 1share; remaining shareholding interest is held by Ferrari Financial Services S.p.A..(7) Effective 6th November 2019 Leasys S.p.A. holds 100% of share capital of the new company Clickar S.p.A..(8) Effective 21th November 2019 Leasys S.p.A. holds 100% of share capital of
Leasys Polska Sp. Zo.o. (already subsidiary of FCA Bank S.p.A. as FCA Leasing Polska Sp. Zo.o.) The company is still part of the Banking Group.
Banking Group Other Companies
FCA Bank S.p.A. (Belgian Branch)
100% 100%
100%
100%
Group structure
Geographical footprint • 25
Geographical footprint
Legal entity
Branch
Legend
FCA Bank GmbH (AT)
FCA Leasing GmbH (AT)
FCA Capital Danmark A/S (Branch Finland)
FCA Capital Norge AS (NO)
FCA Dealer Services España (Morocco Branch)
FCA Capital España EFC S.A. (ES)
FCA Dealer Services España S.A. (ES)
Leasys S.p.A. (Spanish Branch)
FCA Bank S.p.A. (IT)
FCA Capital Suisse S.A. (CH)
FCA Bank Deutschland GmbH (DE)
Ferrari Financial Services GmbH (DE)
Leasys S.p.A. (German Branch)
FCA Dealer Services UK Ltd (UK)
FCA Automotive Services UK Ltd (UK)
Leasys UK Ltd (UK)
FCA Capital Portugal IF IC S.A. (PT)
FCA Dealer Services Portugal S.A. (PT) FCA Capital Hellas S.A. (GR)
FCA Insurance Hellas S.A. (GR)
FCA Bank GmbH (Hellenic Branch)
FCA Bank S.p.A. (Irish Branch)
FCA Capital RE DAC (IE)
Ferrari Financial Services GmbH (UK Branch)
Leasys S.p.A. (IT)
Leasys Rent S.p.A. (IT)
Clickar S.r.l. (IT)
FCA Capital France S.A. (FR)
FCA Leasing France SNC (FR)
FCA Capital Nederland B.V. (NL)
FCA Bank S.p.A. (Belgian Branch)
FCA Capital Danmark A/S (DK)
FCA-Group Bank Polska S.A. (PL)
FCA Capital Sverige AB (SE)
Leasys S.p.A. (Belgian Branch)
Leasys France S.A.S. (FR)
Leasys Nederland B.V. (NL)
Leasys Polska Sp.Zo.o. (PL)
Consolidated financial statements December 31, 2019• 26
Net banking income and rental margin
Net operating expenses
Cost of risk
Operating income
Other income/ (expense)
Profit before task
Net income
OutstandingAverage
End of year
Ratio Net banking income and Rental margin(on Average Outstanding)
Cost/Income ratio
Cost of risk (on Average Outstanding)
CET1
Total Capital ratio (TCR)
Economic data (€/mln) 31/12/2019 31/12/2018
1,025
(293)
(66)
666
(28)
638
467
26,348
27,539
3.89%
28.55%
0.25%
14.20%
15.82%
954
(277)
(44)
633
(85)
548
388
24,375
26,805
3.91%
29.02%
0.18%
12.45%
14.02%
Resultsof operations
• 27
The businesslinesBANKING – WHOLESALE FINANCING
Dealer Financing Portfolio END OF YEAR (€/BLN)
The business lines
8.231.12.2018
7.331.12.2017
6.031.12.2016
31.12.2019 7.1
4.831.12.2015
Dealer Financing Portfolio END OF YEAR BY MARKET (€/MLN)
The Dealer Financing business continued to be paramount for FCA Bank, in its role as captive bank for FCA, Ferrari, Maserati, JLR, Hymer and other significant manufacturers.Still with the objective of supporting the sales of cars and commercial vehicles through different types of financing (mainly through factoring arrangements), FCA Bank has developed a product range capable of meeting all dealer requirements and of supporting effectively the sale of vehicles to “large customers” with domestic and international operations.
In terms of business performance, the credit portfolio at the end of December 2019 was 13% lower than the comparable 2018 amount, in keeping with expectations. The drop was due mainly to a optimized management of new car
inventories by the dealer network, as confirmed also by the average credit portfolio, which in 2019 amounted to €7.1 billion, in line with the comparable 2018 figure. In any case, the general trend made it possible to post positive results in terms of both net banking margin (2.80%) and net profit, amounting to €106 million, largely in line with the 2018 result.Italy continues to be the main market, thanks to the strategic importance of FCA’s distribution network, which accounts for 40% of the credit portfolio.This percentage increases to slightly less than 80% if account is taken of the volumes handled also in Germany, France and Spain.
Consolidated financial statements December 31, 2019• 28
Poland
Switzerland
Netherland
Austria
Denmark, Sweden, Norway
Portugal
Greece
United Kingdom
Belgium
Spain, Morocco
France
Germany
Finland
Italy
159
201
349
351
556
789
1,513
156
152
137
119
12
2,643
4
The business lines • 29
Retail Financing NEW ORIGINATIONS IN 2019 BY MARKET (€/MLN)
NEW ORIGINATION (€/MLN)
BANKING – RETAIL FINANCING
Retail Financing
8,000
9,000
10,000
11,000
12,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
8,642
10,495
11,588 11,659
10,660
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
Switzerland
Belgium
Portugal
Netherland
Poland
Denmark and Sweden
Austria
Spain
United Kingdom
France
Germany
Greece
Italy
289
311
328
692
1,151
1,236
2,758
193
160
144
127
57
4,213
Consolidated financial statements December 31, 2019• 30
END OF YEAR(€/BLN)
Retail Financing END OF YEAR BY MARKET (€/MLN)
Retail Financing
16.00
18.00
11.0
13.0
14.415.8
16.9
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0
Portugal
Austria
Poland
Denmark and Sweden
Netherland
Greece
Switzerland
Spain and Morocco
France
United Kingdom
Germany
Belgium
Italy
192
196
343
887
1.004
1.613
4.095
192
158
128
76
74
7.931
The business lines • 31
FCA Bank offers its customers a wide range of products: not only financial but also insurance solutions to adequately meet the needs of the end customer.
Partners’ sales network intermediation is crucial for the commercial activity and also in 2019 the search for an increasingly profitable integration between the various business lines was confirmed. To support sales FCA Bank has continued to improve a series of instruments aimed at increasing not only customer satisfaction, but also its loyalty.With particular reference to the insurance offer, FCA Bank has confirmed its willingness to collaborate with the leading companies in the market, in order to build a complete range of products, ranging from insurance coverage in case of events that personally involve the customer to those dedicated to the vehicle and its use.
The financial and insurance offer converge in a single relationship with the customer, which simplifies and helps the management and payment of the vehicle and services connected to it.
Financed Volumes by Product 2019
AUTO LOANS
LEASING
PCP
8%
24% 68%
Consolidated financial statements December 31, 2019• 32
Rental Portfolio (MLN/ €)
MOBILITY - RENTAL
Rental Portfolio by Product (thousand of units)
1,600
1,800
2,000
2,200
1,400
1,200
1,000
800
600
400
200
0
930
1,124
1,391
1,701
2,071
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
FLEET MANAGMENT
RENTAL259.3
20.3
The business lines • 33
Rental Additions (thousand of units)
1.41.7
2.2
2.8
3.5
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
69.5
85.799.8
110.8
133.6
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
120.0
140.0
100.0
80.0
60.0
40.0
20.0
0
In October Leasys CarCloud was launched, the first mobility subscription in Italy. This is a sustainable model that embraces car disownership and fosters the ability to move freely. By subscribing to a mobility services, a customer can choose at any time and throughout Italy the vehicle best suited to any situation.
Thus, the FCA Bank Group has proved once again its ability to meet the different rental and mobility requirements of all sorts of customers, from large to small and medium companies, to self-employed professionals and individuals. Sales of off lease cars continue under the Clickar trademark, through the largest online platform in Italy devoted to sector operators and private individuals.
FCA Bank operates in the Rental sector through its Leasys subsidiary. In December, Leasys made further progress in its internationalization process by setting up an operation in Poland, thus bringing to 8 the countries in which it is operational (Italy, France, Germany, Spain, the Netherlands, United Kingdom, Belgium and Poland), and continuing to pursue international growth.
June 2019 saw the launch of the new Leasys Mobility Stores, which bring to life the concept of “Living Mobility”, the new integrated mobility system that confirms Leasys’s role as a pioneer in the industry, with the objective of providing a full range of mobility services to customers who show a growing preference for tailor-made solutions.
End of Year Rental Portfolio (€/BLN)
Consolidated financial statements December 31, 2019• 34
Intermediate Insurance Gross Written Premiums (€/MLN)
INSURANCE AND SERVICING
500
600
400
300
200
100
0
415.7
496.8532.9 523.7 524.7
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
The business lines • 35
Gross Written Premiums per Insurance Product 2019 (€/MLN)
OtherInsurances
CPI
Motor Insurance Extended
Warranty
GAP
15%
15%
13%
5%52%
events, vandalism and shattered glass; • Kasko & Collision. Kasko insurance covers damages in case of collision with another vehicle, fixed and mobile object collision, vehicle overturning and roadway departure. Collision insurance kicks in only in case of collision with another identified vehicle;• Warranty Extension, which extends the manufacturer’s standard guarantee period with a range of solutions that cover customer expenses in case of vehicle breakdown. All the financing and insurance solutions described are adapted to local standards, to meet customer requirements in the various European markets in which FCA Bank operates.
In 2019 the bank sold about 2 policies per financing contract, for a total of €525 million in premiums collected.
FCA Bank provides a wide range of credit- and vehicle-protection insurance products and services in connection with financing contracts.Below, a list of the main insurance services provided in the various European markets is provided: • Credit Protection Insurance, which releases customers from the obligation to repay, in whole or in part, their debt in the presence of specific sudden and/or unexpected events; • GAP (Guaranteed Asset Protection) Insurance, which protects the value of the vehicle purchased, in case of theft or total loss, with the payment of the vehicle for the full value for a given number of years after purchase or a substantial payment, which may vary depending on the laws applicable in the country; • Glass/vehicle etching, an important anti-theft measure;• Third-party liability insurance, which may or may not be financed;• Theft and fire policy which, when it is financed throughout the term of the contract, covers theft, fire, robbery, natural events, socio-political
Consolidated financial statements December 31, 2019• 36
"IN 2019 THIS STRATEGY TRANSLATED INTO
THE LAUNCH OF A RETAIL OPERATION IN MOROCCOTHROUGH A WHITE LABEL
AGREEMENT."
The business lines • 37
FCA Bank and Leasys expansion in european markets
Over the past few years, FCA Bank began expanding its activities in Europe, and elsewhere, to better grasp the business opportunities that might materialize in supporting the business of its captive brands. In 2019 this strategy translated into, among others, the launch of a retail operation in Morocco, through a White Label Agreement with one of the most important local financial operators, Wafasalaf, which is part of the Gruppo Crèdit Agricole Consumer Finance Group.
The partnership – which was named FCA Capital Maroc, in keeping with the corporate names used in the rest of Europe - is clearly intended to support FCA Bank in its pursuit of growth in Morocco. By using FCA Bank’s know-how and experience in the provision of innovative financing products in terms of mobility, access and flexibility, the new company is designed to become a key reference for all the customers that want to finance the purchase of an FCA
vehicle and a partner for the network of dealers that it has been financing since 2017. This White Label Agreement will also allow FCA Bank to improve its know-how on the Moroccan market in terms of customer profile and risk management in view of any further steps in the future.
ALAIN JUAN European Markets
Consolidated financial statements December 31, 2019• 38
The size of the automotive market in Europe (European Union + EFTA) grew on the previous year, reaching 15.8 million vehicles. New car registrations increased in Germany (+5%), Poland (+4.5%), Greece (+10.3%) and Switzerland (+3.9%) and decreased slightly in Portugal (-2%), UK (-2.4%) and Spain (-4.8%).
AUTOMOTIVE MARKET
MARKET AND AUTOMOTIVE BRANDS DEVELOPMENT
15.8 millionnew car and
commercial vehicle registrations.
The business lines • 39
FCA registered 1.1 million vehicles, achieving 6.7% market share. Attention is called to the launch of the Alfa Romeo Giulietta MY 2019, designed to meet the requirements of every customer. Against this background, FCA Bank supported this launch with U-Go, the innovative peer-to-peer platform whereby Leasys’s customers can share their rented vehicles when they are not using them. The combination of Giulietta and U-Go are synonymous with style and mobility.
Jaguar and Land Rover sold approximately 90 thousand cars during 2019. In particular, Land Rover introduced the new Range Rover Evoque (March).
Maserati delivered approximately 5,300 vehicles and launched the new Trofeo version of its successful Levante SUV.
The FCA Bank Group’s global penetrations for these three brands were (in brackets the variation compared to 2018):• 48.1% FCA brands (+1.1 percentage points);• 49.6% JLR brands (-0.5 percentage points);• 41.1% Maserati (-2.8 percentage points)
FCA Bank’s commercial penetration regarding Ferrari registrations was nearly 25.4%, with €487 million in volumes financed (compared to €461 million in 2018, with a 6% increase).
The collaboration arrangement with the Erwin Hymer Group generated €147 million in volumes financed (up 43% on 2018).
FCA BANK’S PARTNERS
48.1% Brand FCA (+1.1%)
49.6% Brand JLR (-0.5%)
41.1% Maserati (-2.8%)
"WITH LEASYS CARCLOUD, FOR A FIXED MONTHLY FEE CUSTOMERS CAN ACCESS
DIFFERENT VEHICLES, WITH THE POSSIBILITY TO CHANGE
THEM ANYTIME, ON THE BASIS OF THEIR NEEDS."
Consolidated financial statements December 31, 2019• 40
The business lines • 41
ALBERTO GRIPPO Chief Executive Officier Leasys
New mobility & CarCloud
Disownership is the mega-trend that is driving the global mobility sector. Now more than ever, modern consumers are looking for clarity and flexibility as well as the possibility to use products and services continuously without owning them. This trend characterizes customers not for what they might own but for the experiences that they might want to live, with the result that the production and sale of goods and services now emphasize sustainability over time.
Leasys, the leader in long-term car rental in Italy, is now of the most dynamic operators in the European mobility sector and has been the first to grasp this trend, and in the most convincing manner, by emphasizing innovation. In October 2019, it launched Leasys CarCloud, the first “mobility subscription” service.
With Leasys CarCloud, for a fixed monthly fee customers can access different vehicles, with the possibility to change them anytime, on the basis of their needs. They can have a small car when they drive in the city or an SUV or a station wagon for weekend outings or the summer holidays.Thus, CarCloud is a highly innovative mobility solution that meets in full the most exacting demands for flexibility. The subscription has no time limits. Customers
can start, renew monthly or leave at any time. The activity can be managed digitally with zero bureaucracy. To use the service, all customers have to do is to purchase the subscription that best suits their requirements, register in the program online and select the desired vehicle. This vehicle can then be picked up within 48 hours at one of the 150 Leasys Mobility Stores participating in the Leasys CarCloud located throughout Italy or even delivered at home.
If customers wish to change to another model included in the subscription, they can do so by making a reservation online. The replacement can be carried out also by returning the vehicle in one’s possession to a Leasys Mobility Store and pick up another at a different Store. This is ideal for people who travel by airplane or by train and intend to use their subscription once they arrive at their destination. Leasys CarCloud has been a first in the sector, taking in the first two months since inception in Italy more than 3,000 orders. It is definitely a best practice to be exported to other Countries. Car subscription is a further step in the strategy of Leasys, the Mobility Pioneer.
REPORT ON OPERATIONSDECEMBER 31, 2019
• 42 Consolidated financial statements December 31, 2019
Report on operations • 43
Significant event and strategic transactions 46
Commercial policies 48 Financial strategy 52
Cost of risk and credit quality 61
Residual values 68
Results of operations 69
Equity and capital ratio 75
Organization and human resources 79
Information technology 82
Internal control system 86
Other information 88
Consolidated financial statements December 31, 2019• 44
• 45
Macroeconomic scenario, the automotive market and financial marketsIn 2019 global trade showed a slight recovery, with signs of improvement on the tariff front between United States and China (a first trade agreement was signed in December), even though prospects remain uncertain. The Central Banks continued to maintain an accommodative stance.
In the euro area economic activities were affected mainly by a weaker manufacturing sector, which is particularly important in Germany, while the service sector remained in a growth mode. Projections made in December by the Eurosystem estimate a 1.2% growth rate for the GDP in the euro area in 2019. Regarding monetary policy, the ECB’s Governing Council adopted a package of expansionary measures to address cyclical risks and weak price prospects. However, recent estimates call for a rate of inflation lower than the 2% threshold for the next three years.
Credit showed signs of expansion, with respect to both households and non-financial companies. In particular, business lending grew faster in France and Germany and less so in Spain and Italy. Non-performing loans fell further in the first three quarters of 2019.
Report on operations
Regarding the automotive market, new car registrations (European Union + EFTA) at the end of December 2019 rose by 1.2% on the comparable figure for 2018, to 15.8 million. Of the five most important European car markets (Germany, United Kingdom, France, Italy and Spain), Germany was up 5% on 2018, while France and Italy were up 1.9% and 0.3%, respectively. For their part, the United Kingdom and Spain posted sharp drops, with -2.4% and –4.8%, respectively.
• 46 Consolidated financial statements December 31, 2019
Significant events and strategic transactions
Renewal of Joint Venture On July 19, 2019, FCA Italy (“FCA”) and Crédit Agricole Consumer Finance (“CACF”) signed an agreement to extend their equally-held Joint Venture in FCA Bank S.p.A. until December 31, 2024. This extension will strengthen FCA Bank’s business model, enabling it to complete its commercial offering and to enhance profitability.
Bank of Italy’s Audit The Bank of Italy performed an audit of FCA Bank S.p.A.’s policies and practices in relation to transparency in banking and financial transactions and services under articles 115 et seq. of Legislative Decree 385 of September 1, 1993, which was completed January 2018. The audit, which involved also interviews with company functions, required certain adjustments to the consolidated financial statements as of December 31, 2018 and December 31, 2019. The audit resulted without significant impact on the annual result.
Italian Antitrust Authority AGCMOn May 15, 2017, the Italian Anti-Trust Authority (Autorità Garante della Concorrenza e del Mercato - AGCM) announced the launch of an inquiry into nine car financing operators, or “captives”, which represent the industry in almost its entirety, and two trade associations Assofin “Associazione Italiana del Credito al Consumo e Immobiliare” and Assilea “Associazione Italiana Leasing”) to ascertain if there was any violation of the TFEU (Article 101 of the Treaty on the Functioning of the European Union – Anti-competitive agreements) in the automotive financing industry.
FCA Bank S.p.A. (“Company”) was one of the nine operators covered by the inquiry, which was intended to investigate alleged exchanges of information. AGCM communicated that the procedure, which
was scheduled to end on July 31, 2018, was extended until December 31, 2018. The decision was served to the company on January 9, 2019 indicating that the AGCM found the company, together with the other captives, had been exchanging commercially sensitive information via direct contacts, as well as through the local industry associations Assofin and Assilea, with a view – according to the AGCM – to coordinating their commercial strategies with respect to car loans and leasing offerings, in breach of the TFEU.
The AGCM imposed a total sanction of euro 678 million to the involved parties, and specifically fined the Company euro 178.9 million. While it respects AGCM’s work, the Company feels that the accusations outlined in the decision are inaccurate. To that end, the Company thinks that the reasons to challenge that decision are pertinent and should be pursued.As such, the Company have filed an appeal with the Regional Administrative Court (“TAR”) against the decision and has requested a stay of payment of the fine.
On April 4, 2019, the TAR of the Lazio Region, accepted the request for a suspension of the enforceability of the fine with order no. 3348 and set the hearing on the merits for February 26, 2020.
Leasys – Car City Club On December 13, 2019, the liquidation of Car City Club Srl in Liquidazione was completed. As of the same date, the company ceased to exist and was stricken off the Companies Register.
FCA - PSA On October 31, 2019, FCA published a press release announcing that the Supervisory Board of Peugeot S.A. and the Board of Directors of FCA have each unanimously agreed to work towards a full combination of their respective businesses by way of a 50/50 merger.
• 47
Outlook for 2020In 2019 commercial activities were quite positive, in the context of stronger ties with the served automotive brands, and translated into significant financial results.The FCA Bank Group will continue to cooperate with the manufacturing partners, supporting them in the launch of the new products planned for 2020 and the consolidation of those already introduced in the market. In this economic context, the Board of Directors thinks that FCA Bank’s sound financial and organizational structure makes the Group ready to react to any deterioration of the conditions in which it operates as well as, on the other hand, ready to grasp any opportunity that should materialize.FCA Bank is in a position to support the commercial activities of its manufacturing partners - Fiat Chrysler Automobiles, Jaguar Land Rover, Maserati, Ferrari, Aston Martin, Morgan Motor Company and Erwin Hymer Group – as well as those of the other partner brands, promoting the financing, insurance and rental and mobility solutions best suited to meet the needs of dealers and end customers.
Merger of FCA-Group Bank Polska An agreement to carry out the cross-border merger of FCA Group Bank Polska with and into FCA Bank S.p.A. was signed on December 19, 2019 and recorded in the Turin Companies Register on December 24, 2019.
In keeping with the agreement, the merger took effect for legal, tax and accounting purposes on January 1, 2020. As of this date FCA Bank S.p.A. operates in Poland through a branch.The merger turned out to be the best tool to face effectively the competition resulting from the expansion and globalization processes under way in the banking and financial system, on one side, and to look for additional qualitative growth opportunities that would allow the bank to fulfil the existing potential, on the other.
Report on operations
Consolidated financial statements December 31, 2019• 48
Commercial policies
Thus, there are 18 brands that work with FCA Bank. Regarding the geographical scope, FCA Bank is firmly present in 17 European countries and in Morocco, where in October a partnership was also entered into with Wafasalaf to provide FCA customers with innovative financing solutions for their car purchases.
In the countries in which FCA Bank operates, total new car registrations in 2019 amounted to 16.1 million while FCA Bank disbursed financing in the amount of €13.7 billion. Regarding the brands of the FCA Group, total financing stood at €10.5 billion, with a 3% increase in respect of 2018.For the Jaguar and Land Rover brands, total financing grew by 5% compared to the previous year, to €2.4 billion.
Business development during 2019In 2019 FCA Bank firmed up the cooperation with the new commercial partners. For Aston Martin in particular, the first half of 2019 posted excellent results, with total volumes financed in the amount of €35.4 million. In April, the agreement with Morgan Motor Company for the management of loans to end customers was extended also to the United Kingdom.
In the motorcycle sector, the cooperation arrangement with Harley Davidson became operational in Spain, Poland and Portugal (in January, April and September, respectively) while June saw the start of the activity with MV Agusta in Italy, France, Germany and United Kingdom.
• 49Report on operations
Yearly Originations (€/MLN)
9,572
11,61912,052
13,28913,730
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
12,000
14,000
10,000
8,000
6,000
4,000
2,000
0
The commercial penetration for the Group brands (registrations of new financed vehicles/total new FCA Group vehicles registrations) reached 48.1% in 2019 (+1.2% in respect of 2018).
Total penetration
The penetration for JLR brands stood at 49.6%, while for Maserati at 41.1%. Total penetration for all the brands served reached 48.1%, compared to 47.1% of last year.
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
35
40
45
50
30
25
20
15
10
0
46.7%
43.3%
47.1%
48.1%45.6
%
Consolidated financial statements December 31, 2019• 50
E-Wallet and credit cards: FCA Bank’s experience
Since its transformation into a bank four years ago, FCA Bank has been constantly diversifying its offering. To that end, 2019 witnessed the bank’s entry into the complex and dynamic world of credit cards. FCA Bank’s credit card is the first milestone in a broader strategy setting that will create many contact points among the carmaker, the dealer network and the FCA Bank Group, an ideal situation to generate benefits for customers and new sales opportunities by providing competitive services. FCA Bank’s experience in this ever-changing environment – suffice to think of the recent offering of open banking platforms and the presence of new dynamic players that intensify competition – translated into the launch of the credit card, first with the Group’s employees and subsequently in the open market. Eventually, the offering was expanded to five new personalized credit cards, each with the graphics of the FCA brand to enhance the customer’s loyalty to, and identification with, the brand.The FCA Bank credit cards feature such innovative contents and functionalities as My Budget - which makes it possible to choose the favourite repayment method, whether in instalment or in a lump-sum, by customizing the amount of the instalment until the last day of the month – and My Control, which can be used to manage comfortably one’s payments, by enabling or disabling online purchases, use abroad or cash withdrawals.
Every credit card issued comes with access to the FCA Bank Club, the free-of-charge program that rewards loyalty on the basis of one’s purchases.In addition to products and services by prestigious partners, the Club makes available discount vouchers on other FCA Bank products, such as the reduction of processing fees associated with a loan or lease application or the upgrade of the interest rate on the Bank’s Conto Deposito and programs related to services such as short-term car rental.
All these functionalities and benefits can be accessed anytime in a simple and secure manner from one’s smartphone through the My FCA Bank app.
This will be the battlefield for the next challenge, create amazement in the car finance market with the launch of the closed-circuit FCA Bank loyalty card. Distributed through the dealer network, this loyalty card will allow customers to earn points that can be applied toward purchases within the FCA Bank Club by repaying the monthly loan instalment as well as to convert it into an actual Visa credit card directly from the My FCA Bank Customer Area.
The offering of banking products will include in the near future such digital payment facilities as e-Wallet and Payment Hud. In fact, the development of mega trends such as “connected vehicles”, “self-driving vehicles”
GIULIO VIALE FCA Bank Italia
• 51Report on operations
and “electrification” will lead inevitably to the creation of wide ranges of services that customers will be able to use while they travel or while they wait for their EV to charge.
These will be in addition to mobility management services (e.g. parking, fuelling, intermodal ticketing), to the new mobility access models determined by disownership (sharing of one’s vehicle, vehicle in “cloud” with fee- or subscription-based payments), and services rendered directly to the vehicle (e.g. apps downloaded over the air on one’s onboard computer, remote door opening/closing to enable third-party services).As such, we can expect that a large number of
transactions will be generated in the near future in connection with these new services, i.e. “in-vehicle payment”, and FCA Bank intends to act as an infrastructure that enables in-vehicle payments, by operating a Group Payment Hub capable of handling all these transactions at a highly competitive cost for its customers. Moreover, FCA Bank intends to develop and integrate into vehicles the e-Wallet (digital wallet that can contain different payment tools) for all Group customers, allowing them to authorize purchases in relation to the context (one click, one tap fingerprints, voice command, face-ID) and providing larger discounts as well as exclusive services through a complete and simple user experience.
Consolidated financial statements December 31, 2019• 52
Financial strategy
The Treasury function manages the Group’s liquidity and financial risks, in accordance with the risk management policies set by the Board of Directors.
The Group’s funding strategy is designed to: • maintain a stable and diversified funding source structure; • manage liquidity risk; • minimize the exposure to interest rate, currency and counterparty risks, within the scope of low and pre-set limits. In 2019, the Treasury department raised the cash necessary to fund the Group’s activity, at competitive terms and conditions so as to improve the net interest margin.
The most important activities completed in 2019 included: • three public placements of euro-denominated bonds issued by FCA Bank S.p.A. (through its Irish branch) for a total amount of €2,300 million; • three private placements of bonds issued by FCA Bank S.p.A. (through its Irish branch) for a total amount of €600 million;
• a stand-alone issue of bonds denominated in Swiss francs by FCA Capital Suisse S.A. (guaranteed by FCA Bank S.p.A.) for a total amount of CHF 125 million;• the placement of Euro Commercial Paper issued by FCA Bank S.p.A. (through its Irish branch) for a total amount of €385 million;• securitization of retail receivables in Italy, by a vehicle called A-Best Seventeen S.r.l., for a total amount of €912.6 million, with the placement in the market of Senior, Mezzanine and Junior notes (minus the 5% retention required by regulations); • renewal of securitization programs:
- Erasmus Finance DAC, relating to receivables due from German, French and Spanish dealers, for up to €1,290 million- Fast 3 S.r.l., relating to receivables due from Italian dealers, for up to €1,000 million- Nixes Six PLc, relating to receivables due from UK customers, for up to GBP 670 million- Nixes Seven B.V., relating to receivables due from German customers, for up to €540 million;
• the net increase of new bank loans provided
Interest rates trend
IRS 5 yearsIRS 3 yearsIRS 2 years
0.3%
0.2%
0.1%
0.0%
-0.1%
-0.2%
-0.3%
-0.4%
-0.5%
-0.6%01/2019 02/2019 03/2019 04/2019 05/2019 06/2019 07/2019 08/2019 09/2019 10/2019 11/2019 12/2019
Report on operations
Financial structure and funding sources
Crédit Agricole Group
Financial institutions
Securitizations
Bank deposits
MTN
Equity
Central Banks
Commercial Papers
Non-financial liabilities
Total
11%
19%
18%
4%
28%
10%
4%
1%
5%
100%
DescriptionAs a % of total
funding sources As a % of total
liabilities and equity
12%
19%
19%
4%
30%
11%
4%
1%
100%
The table below shows the financial structure and funding sources as of December, 31 2019:
• 53
to different Group companies, for a total amount of €700 million;• an increase of €200 million in deposits from the public, which brought total deposits to over €1.1 billion at December 31, 2019.
"THE YEAR AHEAD WILL SEE SIGNIFICANT IMPROVEMENTS
FOR THE FINANCE CALCULATOR, WHICH IS CONSTANTLY
CHANGING TO INCORPORATE NEW TECHNOLOGICAL
SOLUTIONS AND TO PROVIDE AN INCREASINGLY BETTER
CUSTOMER EXPERIENCE."
Consolidated financial statements December 31, 2019• 54
• 55Report on operations
MARCELLA MERLI Sales & Marketing
The Web Finance Calculator, innovation to serve customers better.
In a world where digitalization is no longer a new frontier, but a solid base on which to build integrated solutions and services, customer experience has taken centre stage and a key role in the development of new products and systems. Access and customization are the two features that consumers consider paramount in their buying process, in reaction to the many inputs that they receive and the increasingly important personal needs. FCA Bank’s Finance Calculator came to life in 2006 as a communication tool made available by Sava, which eventually became FCA Bank, on its website. Today it is a pan-European platform present in over 300 touchpoints which, in light of the 1 million daily interactions that it generates, qualifies as a shopping tool, allowing customers to research and customize the best car financing solutions. In fact, the Finance Calculator makes it possible to simulate one’s monthly payment by choosing from the range of available options – traditional loan repayable in monthly instalments, lease and solutions with guaranteed future value – including insurance and additional services and permitting a comparison among the different alternatives. The service can be accessed through the websites of the FCA Bank Group either on a stand-alone basis or on an integrated basis, with the car configurators of the Brands, the dealers and the stock locators. The service is available for all the FCA, Maserati, Jaguar and Land Rover
brands and for all the types of vehicle, whether new, used or immediate delivery. The year ahead will see significant improvements for the Finance Calculator, which is constantly changing to incorporate new technological solutions and to provide an increasingly better customer experience. The new 3.0 version will be integrated into the systems in place in every market, making it possible to release new user functionalities. New developments include the evaluation of the trade-in value of one’s car, the addition of Leasys’s rental products and the possibility to look for vehicles consistent with one’s monthly expense budget. In addition, the integration with the functionalities of the current pre-scoring platform and the future development of e-commerce tools will enable users to see their credit application approved and to reserve the offer, with a 100% digital customer journey. All this can be obtained by just accessing the Web Finance Calculator.In FCA Bank’s strategic vision innovation is a will always be at the customer’s service.
Consolidated financial statements December 31, 2019• 56
Funding sources
Equity
Third Parties
Securitisation
MTN
Crédit Agricole Group
Central Bank
Time Deposit
C Ps
The chart shows how the strategy to diversify the funding sources firmed up over the years. In particular, the banking licence obtained in 2015 made it possible to resort to the European Central Bank and to benefit from the further diversification resulting from the launch of
“Conto Deposito” in 2016 and “Euro Commercial Papers” in 2018.All these actions enabled FCA Bank to continue to secure the liquidity necessary to fund the growing business and to strengthen its liability profile.
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
24%
15%
11%
28%
17%
18%
13%
10%
34%
16%
8%5%
19%
11%
10%
35%
17%
7%
2%3%
10%
31%
20%
4%
22%
10%
19%
12%
11%
30%
19%
4%
1%4%
1%
Report on operations • 57
Consolidated financial statements December 31, 2019• 58
FINANCIAL RISK MANAGEMENT
FCA BANK’S PROGRAMS AND ISSUES
Interest-rate risk management policies, which are intended to protect net interest margin from the impact of changes in interest rates, provide for the maturities (interest reset dates) of liabilities to match the maturities of the asset portfolio. It is worthy of note that the Group’s risk management policies allows the use of interest rate derivatives only for hedging purposes. Maturity matching is achieved also through more liquid derivative instruments, such as interest rate swaps and forward rate agreements (the Group’s risk management policies do not allow the use of instruments other than “plain vanilla”, such as exotic instruments).
The strategy pursued during the year involved constant and full hedging of the risk in question, thereby offsetting the effect of interest rate and market volatility.
In terms of currency risk, the Group’s policy does not contemplate the creation of foreign currency positions. As such, non-euro portfolios are usually funded in the matching currencies; where this is not possible, risk is hedged through foreign exchange swaps (it is worthy of note that Group risk management policies allow the use of foreign exchange transactions solely for hedging purposes). Counterparty risk exposure is minimized, according to the criteria set out by Group risk management policies, by depositing excess liquidity with the central bank and performing day-to-day transactions with primary banks. Use of very-short-term investment instruments is limited to short-term deposits and repurchase agreements with European government securities as underlying. Regarding transactions in interest rate derivatives (carried out solely under ISDA standard agreements), counterparty risk is managed solely through the clearing mechanisms under EMIR.
FCA Bank’s issues are managed, as detailed in the following table, through: • the Euro Medium Term Note (EMTN) program, with FCA Bank S.p.A. as issuer (through its Irish branch). At December 31, 2019 the program had an aggregate maximum nominal amount of €12 billion and approximately €8.6 billion in notes outstanding. The notes and the program have been assigned FCA Bank S.p.A.’s long-term rating by Moody’s, Standard & Poor’s and Fitch;• stand-alone bonds denominated in Swiss francs issued by FCA Capital Suisse S.A. and guaranteed by FCA Bank S.p.A. At December 31, 2019 there were three bonds outstanding for a total amount of 400 million Swiss francs. These bonds have been assigned FCA Bank S.p.A.’s long-term rating by Moody’s and Fitch;• the Euro Commercial Paper program with FCA Bank S.p.A. as issuer (through its Irish branch). At December 31, 2019 the program had an aggregate maximum nominal amount of €750 million and approximately €230 million in commercial paper outstanding. The program has been assigned FCA Bank S.p.A.’s short term rating by Moody’s.
Report on operations • 59
ISSUER INSTRUMENT ISIN MARKETSETTLEMENT
DATEMATURITY
DATE AMOUNT
(MLN)
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
FCA Capital Suisse SA
FCA Capital Suisse SA
FCA Capital Suisse SA
FCA Bank S.p.A. - Irish Branch
FCA Bank S.p.A. - Irish Branch
Public
Public
Public
Public
Public
Public
Public
Private
Private
Public
Public
Private
Public
Private
Public
Private
Public
Public
Public
Private
Private
XS1220057472
XS1383510259
XS1435295925
XS1497682036
XS1598835822
XS1697916358
XS1753030490
XS1757829079
XS1793286664
XS1881804006
XS1954697923
XS1983383545
XS2001270995
XS2016113420
XS2051914963
XS2072086049
CH0326371413
CH0370943620
CH0498400586
XS1967698975
XS2028909898
17-Apr-15
23-Mar-16
21-Jun-16
29-Sep-16
13-Apr-17
12-Oct-17
17-Jan-18
22-Jan-18
16-Mar-18
21-Sep-18
21-Feb-19
16-Apr-19
24-May-19
20-Jun-19
13-Sep-19
24-Oct-19
29-Jun-16
25-Jul-17
23-Oct-19
20-Mar-19
12-Jul-19
17-Apr-20
23-Sep-20
21-Jan-21
29-Sep-21
15-Nov-21
12-Oct-20
17-Jun-21
22-Jan-20
16-Mar-20
21-Feb-22
21-Jun-22
16-Apr-21
24-Nov-22
20-Jul-21
13-Sep-24
24-Oct-22
29-Nov-21
24-Jul-20
23-Oct-23
18-Mar-20
10-Jul-20
700
500
500
400
800
800
850
240
240
600
650
200
800
200
850
200
100
175
125
130
100
EUR
EUR
EUR
GBP
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
CHF
CHF
CHF
EUR
EUR
FCA Bank programs and issuances
Consolidated financial statements December 31, 2019• 60
RATING SIGNIFICANT RISK TRANSFER TRANSACTIONS
TLTRO-III
On May 9, 2019, Fitch raised FCA Bank’s short term rating. The ratings assigned to FCA Bank at December 31, 2019 are as follows.
On November 27, 2019 a placement was completed for the Class A, B, C, D, E and M notes issued by A-Best Seventeen S.r.l. in connection with the securitization of car loans originated in Italy by FCA Bank S.p.A..
The transaction allowed the optimization of the level of risk-weighted assets as a result of a “significant risk transfer” for prudential purposes, in keeping with Regulation (EU) no. 575/2013 (“CRR”), as subsequently amended by Regulation (EU) no. 2401/2017.
Entity OutlookLong Term
RatingShort Term
RatingLong Term
Deposits Rating
Moody’s
Fitch
Standard & Poor's
Baa1
BBB+
BBB
P-2
F1
A-2
Baa1
-
-
Stable
Stable
Negative
The ECB’s third series of targeted longer-term refinancing operations (TLTRO-III), starting from September 2019, represents an opportunity for banks and an effective tool in transmitting competitive interest rates from the financial sector to the private sector. TLTRO-III will enable banks to borrow at the interest rate applicable to the ECB’s deposit facility for up to three years.
In December 2019, the bank finalized the first transaction under the TLTRO-III program for €100 million.
Report on operations • 61
Cost of risk and credit quality
Cost of risk The FCA Bank Group’s cost of risk is a function of such factors as:• core captive activities: support to the dealer network, loans and leases and mobility offerings for end customers;• conservative credit policies: from the acceptance phase based on ratings, scores, decision engines;
31.12.2018
31.12.2019
1.21% 1.24%
1.92%31.12.2015
31.12.2016
31.12.2017
1.58%1.43%
Non performing loans
• monitoring of credit performance, with prompt detection of performance deterioration situations through early warning indicators;• effective credit collection actions.
This makes it possible to maintain a low level of non-performing loans and customers/contracts showing a risk increase.
Consolidated financial statements december 31, 2019• 62
Cost of risk and unemployement
2015 2016 2017 2018 2019
9.0%
0.4%
8.2%
0.3%
7.6%
0.2%
7.0%
0.2%
6.4%
0.3%
Cost of risk/Average portfolio Ratio Unemployement (Source Eurostat, Eu 27 countries, December 2019)
At 0.25%, the Cost of Risk was again excellent and in line with budget, despite the uncertainty
looming over the Euro area and the automotive sector.
160
140
120
100
80
60
40
20
0
83
55 43 4470 66
109116144145145
0.93%
0.30%0.44%0.57%
0.75%0.78%
0.91%0.89%
0.20% 0.18% 0.25%
2009
2010
2011
2012
2013
2014
2015
2017
2016
2018
2019
Cost of risk (€/MLN) Cost of risk (%)
Report on operations • 63
Consolidated financial statements December 31, 2019• 64
SCORING MODELS TO EVALUATE “RETAIL” CREDIT RISK
RATING MODELS TO EVALUATE “CORPORATE” RISK
the performance of such models and recommending corrective actions in the presence of a deteriorated predictive ability; • drafting the Group’s scoring procedures and policies.
To develop scoring models, FCA Bank has been using reliable partners, sector leaders with adequate professional skills and the use of rigorous and advanced statistical methodologies. In September 2019, the Board of Directors approved the insourcing of the activities to develop scoring models, under the supervision of central credit. The goal is to create a competence centre that would serve the Group companies for the development of all the scorecards use din the credit process (acceptance, anti-fraud, collection) starting from 2020.
From a quantitative point of view, during the second half of 2019 the Retail business line saw the approval of a new scorecard for private customers in Denmark while a new scorecard is being approved for private customers in Greece. The Rental business line, for its part, witnessed the approval and implementation of a new scorecard for companies in Italy while a new scorecard is being approved, still in Italy, for private and self-employed customers. It is worthy of note that in the second half of 2019, the development of a new tool began to monitor scorecards, through an automated and faster process, thereby allowing the implementation of any necessary corrective action even more rapidly.
power and probability of default.It is noted that the operational mechanisms for the use of systems to rate corporate counterparties and the development of scorecards, as well as the setting of the cut-off for retail counterparties, are matters that fall within the purview of the Board of Directors, which sets the specific guidelines to be applied by management in day-to-day operations.
The evaluation of corporate customers is based on a comprehensive combined use of two systems, developed in cooperation with the pertinent technical staff of the two shareholders. The first, which is called CRISP, is intended mainly to evaluate the counterparty’s equity. The second, which is called ANADEFI, emphasizes instead the counterparty’s earning
In assessing the creditworthiness of retail credit applicants, scorecards are one of the main decision-making drivers utilized by the FCA Bank Group.Scorecards are statistical models that identify the probability of risk associated with the customer/application and the ensuing classification in the rejection or acceptance area through the application and an approved cut-off value.The use of statistical models ensure an objective, transparent, structured and consistent assessment of all the information related to the customer and the financing required.The evaluation of a customer’s creditworthiness is based mainly on the outcome of the scorecards and the application of the rules governing credit approval (such as control over external negative events, status of internal risks, etc.).
In the cases where the input of a credit analyst is required, the final credit decision can be confirmed or revised, where necessary. Currently, the FCA Bank Group uses 32 scorecards based on country, type of customer and, where possible, type of product. FCA Bank has adopted an organizational model intended to improve the Parent Company’s level of service to Group companies. In this context, the central credit function is responsible, for all the markets, for: • supervising the development of credit evaluation models, ensuring their quality;• monitoring constantly and continuously
Report on operations • 65
CREDIT QUALITY (Item 40b - Loans and receivables with customers) (€/thousand)
DESCRIPTION
31/12/2019 31/12/2018
Grossexposure
Grossexposure
Netexposure
Netexposure
Allowance for loan and lease
Allowance for loan and lease
Bad exposures
Unlikely to pay
Non Performing Past due
Non-performing loans
Performing loans
Total
125,027
102,832
71,534
299,393
23,876,501
24,175,894
111,536
122,391
53,831
287,758
23,574,135
23,861,893
(84,544)
(35,417)
(26,854)
(146,815)
(123,990)
(270,805)
(83,607)
(38,737)
(23,836)
(146,180)
(127,705)
(273,885)
40,483
67,415
44,680
152,578
23,752,511
23,905,089
27,929
83,654
29,995
141,578
23,446,429
23,588,008
DESCRIPTION
31/12/2019 31/12/2018
Grossexposure
weight
Grossexposure
weight
Netexposure
weight
Netexposure
weight
Coverageratio
Coverageratio
Bad exposures
Unlikely to pay
Non Performing Past due
Non-performing loans
Performing loans
Total
0.52%
0.43%
0.30%
1.24%
98.76%
100.00%
0.47%
0.51%
0.23%
1.21%
98.79%
100.00%
0.17%
0.28%
0.19%
0.64%
99.36%
100.00%
0.12%
0.35%
0.13%
0.60%
99.40%
100.00%
67.62%
34.44%
37.54%
49.03%
0.52%
1.12%
74.96%
31.65%
44.28%
50.80%
0.54%
1.15%
The credit quality is confirmed at an excellent level, with non-performing loans representing 0.64% of total net exposure. The net exposure of non-performing loans amounted to euro 153 million compared to a total net exposure of euro 24 billion.
Allowance for loans and lease losses amounted to euro 271 million at the end of 2019, compared to euro 274 million at the end of 2018; gross exposure for impaired loans amounted to euro 299 million compared to euro 288 million at the end of 2018.
Consolidated financial statements December 31, 2019• 66
"CUSTOMERS NEED ONLY TO ENTER FINANCIAL
DATA TO LEARN IN REAL TIME WHETHER THE SELECTED
FINANCING PLAN IS FEASIBLE."
• 67Report on operations
LUCA POLLANO ICT, Digital & Data Governance
Digitalization
In a hyper-connected world, digital transformation plays an increasingly important role for the bank. The digital transition actually entails a paradigm change from a traditional product-centric strategy to a customer-centric one. In 2019, in agreement with the digitalization roadmap defined, FCA Bank focused on this customer-centric vision to design processes and solutions to encourage customers to establish a solid and long-standing trust-based relationship.
PRE-SCORINGKnowledge is the word at the foundation of the pre-scoring project, which came to life to add value both to the potential customer and the dealer by providing a preliminary and immediate answer on the customer’s ability to access a financing plan by FCA Bank chosen online while configuring a vehicle on the brand’s website. Once the amount of the monthly instalment is calculated online with the finance calculator, thanks to pre-scoring customers need only to enter little but necessary financial data to learn in real time whether the selected financing plan is feasible. Dealers, for their part, will receive though pre-scoring the result of the credit assessment, which will be used either to expedite completion of the credit application process or to provide customers with an alternative financing solution, in case the plan selected online is inconsistent with their repayment capabilities.In July 2019, the project was successfully launched in Germany, the pilot market; eventually this winning strategy was rolled out in Italy, Spain, Belgium, the Netherlands and Austria.
DIGITAL ONBOARDINGAs the optimal financing plan is chosen, the data entered and pre-scoring results received, customers who then go to the dealer will receive all the benefits
deriving from the digital onboarding project: digital signature, filing and dematerialization of all the documentation designed to finalize the contract. In Spain and Portugal, countries where such solution is adopted by over 80% of customers, the benefits are clear: better customer experience, thanks to a transparent and secure process, greater security and more structured communications between the dealer and the bank. The year just ended was important for this project as this solution was introduced successfully also in Greece, Belgium, the Netherlands, France and Poland, after its launch in Spain, Portugal, Italy, Germany and Austria.
CUSTOMER PORTALAs the contract is signed and the sale process completed, the bank’s objective is to set up a communication channel for customers that might be used as needed. From a smartphone, a tablet or a personal computer, customers can access FCA Bank’s Customer Portal, to obtain updated information in real time or to update their personal information by using easy and intuitive tools. Customer are provided a tool that is:
• easy: a single area to monitor closely all car financing and lease contracts signed and banking products, so as to manage them conveniently and rapidly;
• intuitive and secure: easy-to-use solution for all customers from any device and secure through the use of a one-time password to confirm any action;
• customized: customers are offered the possibility to receive personalized solutions through the portal. The project, which had already gone live in Italy, Germany, Austria and UK, was launched successfully in 2019 in France, Poland, Belgium and the Netherlands.
Consolidated financial statements December 31, 2019• 68
Residual values
Regarding long-term rentals, residual risk on rented vehicles is generally borne by the rental car company, save for specific arrangements with third parties. In this case, residual risk is represented by the difference between the market value of the vehicle at the end of the contract and the carrying amount of the vehicle. Leasys and its subsidiaries, which are not part of the banking group, and FCA Capital Danmark A/S are the Group companies operating in the long-term rental business.
Residual value is the value of the vehicle when the related loan or lease contract expires. The Bank is exposed to residual value risks in connection with loan and lease contracts with customers that can return the vehicle at the end of such contracts. Trends in the used vehicle market may entail a risk for the holder of the residual value. This risk is basically borne by the dealers throughout Europe, with the exception of the UK market, where the risk is managed, regularly monitored, mitigated with specific procedures and covered through specific provisions by the bank. FCA Bank has long adopted Group guidelines and processes to manage and monitor residual risk on an ongoing basis.
euro/mln 20182017 31/12/19
Consumer loans and leases:
Residual Risk borne by Group FCA Bank
of which UK market
Provisions for residual value
924
803
912
700
1,102
687
37
euro/mln 20182017 31/12/19
Long-Term Rental:
Residual Risk borne by Group FCA Bank
Provisions for residual value
894 1,230 1,497
24
Results of operations
Net banking income and rental margin
Net operating expenses
Cost of risk
Operating income
Other income / (expense )
Profit before tax
Net income
Outstanding
Average
End of year
Ratio
Net banking income and rental margin (on average outstanding)
Cost/Income ratio
Cost of risk (on average outstanding)
Ratio
CET1
Total Capital Ratio (TCR)
954
(277)
(44)
633
(85)
548
388
24,375
26,805
3.91%
29.02%
0.18%
12.45%
14.02%
Economic data (€/mln) 31/12/2019 31/12/2018
1,025
(293)
(66)
666
(28)
638
467
26,348
27,539
3.89%
28.55%
0.25%
14.20%
15.82%
Report on operations • 69
Consolidated financial statements December 31, 2019• 70
(+1%) compared to the previous year. FCA Bank improved its commercial penetration (which went up by 2.1% on 2018), reaching 48.1%, generating total financed volumes for the year in the amount of €13.7 billion, up 3% on 2018.
The average outstanding portfolio for the period rose by 8% on 2018, mainly thanks to the Rental business line (+27%). Also the average outstanding portfolio of the Retail financing business increased (+9%) while that of the Dealer financing business was largely stable
Cash and cash balances
Financial assets designated at fair value with effects on comprehensive income
Financial assets valued at amortized costs:
a) Loans and receivables with banks
b) Loans and receivables with customers
Hedging derivatives
Changes in fair value of portfolio hedge items
Insurance reserves attributable to reinsures
Property, plant and equipment
Intangible assets
Tax assets
Other assets
Total assets
Total liabilities
Net equity
363
10
25,745
2,157
23,588
36
27
10
2,547
247
273
1,279
30,535
27,657
2,878
Balance sheet data (€/mln) 31/12/2019 31/12/2018
585
10
25,903
1,997
23,905
37
48
13
3,197
263
300
1,350
31,705
28,534
3,171
Report on operations • 71
Outstanding End of Year (€/MLN)
Deal
erRe
tail
Rent
al
31.12.2015
17,249
20,755
23,936
26,805 27,539
31.12.2016
31.12.2017
31.12.2018
31.12.2019
21,000
24,000
27,000
30,000
18,000
15,000
12,000
9,000
6,000
3,000
0
11,016
13,002
6,047
1,706
7,319 8,226
2,239
2,818
16,889
7,142
14,378
15,760
4,827
1,406
3,508
Average Portfolio (€/MLN)
Deal
er fi
nanc
ing
Reta
il Fi
nanc
ing
Rent
al
31.12.2015
16,088
18,498
21,797
24,375
26,348
31.12.2016
31.12.2017
31.12.2018
31.12.2019
21,000
24,000
27,000
18,000
15,000
12,000
9,000
6,000
3,000
0
10,452
11,768
5,150
1,579
6,174 7,118
1,9062,317
13,71714,940
4,232
1,404
2,939
16,247
7,162
Consolidated financial statements December 31, 2019• 72
Income Rental Margin
portfolio, in line with the comparable metric at the end of 2018, thanks also to the constant cooperation with the commercial partners.
Net banking income and rental margin for the period rose by €70.9 million, to €1,024.8 million, thanks to higher volumes and a lower cost of funds. Net banking income and rental margin accounted for 3.9% of the average outstanding
800
900
1.000
1.100
700
600
500
400
300
200
100
0
667.4
731.6
840.5
953.91.024.8
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
3.9%3.9%4.0%4.1% 3.9%
Income Margin (€/MLN)
Income Margin/Average Portfolio Ratio (%)
Report on operations • 73
Net Operating Expenses
Operating e°ciency combined with the ability of profit to grow relatively faster than costs resulted in a cost/income ratio of 28.6%, continuing the improvement process under way for a number of years.
At 0.25% of the average outstanding portfolio, the cost of risk was excellent also in 2019 and was in line with budget, despite the uncertainty hanging over the euro area and the automotive sector. In absolute terms, the cost of risk
Cost of Risk
Cost of Risk (€/MLN)
Cost of Risk / Average Portfolio Ratio (%)
settled at €66 million, with an increase on the previous year also as a result of the increase in financed volumes.
In absolute terms, net operating costs rose by approximately €15.8 million on 2018, in keeping with the increase of the average outstanding portfolio and the investments made to support the Group’s growth.
Net Operating Expenses (€/MLN)
Cost income ratio (% annual basis)
300
250
200
150
100
50
0
235,7 245,0263,7
276,8 292,6
31.12.2018
31.12.2019
31.12.2017
31.12.2016
31.12.2015
31%29% 29%
33%35%
70
80
60
50
40
30
20
10
0
70.166.2
55.1
42.7 44.1
31.12.2015
31.12.2019
31.12.2016
31.12.2017
31.12.2018
0.25%
0.20%0.18%
0.30%
0.44%
Relazione e bilancio consolidato 31 Dicembre 2019• 74
In terms of net result, the period ended with a net profit of €467.1 million, up 20% on the comparable year figure.
The increase in net profit was due to the lower tax burden on Leasys S.p.A., in relation to the super-depreciation of investments in tangible assets.
Operating profit for 2019 amounts to €666 million, up to 4.4% copared to the previous year (€663 million). The pre-tax profit totals €638 million reflecting an increase of approximately €90.4 million (up 17%) on the comparable year amount.
Expenses include the contribution to the Single Resolution Fund for €7.7 million.
Profit before tax and Net profit (€/MLN)
Consolidated financial statements December 31, 2019• 74
Pre-tax Profit
Net Profit
450
500
550
600
650
400
350
300
250
200
150
50
0
249.1
311.6
416.5
521.1547.6
467.1
638.0
382.5 388.4359.4
31.12.2015
31.12.2016
31.12.2017
31.12.2018
30.06.2019
Report on operations • 75
Impieghi di fine periodo (€/MLN)
improvement, as it rose to 14.20%.Regarding the liquidity ratios, LCR reached 282% while NSFR was 106%. The profitability ratios also improved, thanks to the excellent results for the period.RONE (Return on Normative Equity) calculated considering the average Normative Equity and a 9.5% capital requirement for RWA, stood at 23.25%.
At December 31, 2019, the Total Capital Ratio was 15.82%, reflecting an improvement over the comparable metric at the end of 2018. Such improvement was in essence due to the inclusion in CET 1 of the net profit for the year ended December 31, 2019 pursuant to article 26, paragraph 2, of Regulation (EU) n. 575/2013 of the European Parliament and of the Council and Decision (EU) 2015/656 of the European Central Bank (ECB/2015/4). To this end, formal acceptance by the ECB was obtained.CET 1 (Profit Included) – which is calculated by including profit for the year after dividends, if declared, in line with the same rules as those applicable at the end of 2018 - showed an
Equity and capital ratio
Common Equity Tier 1 - CET1
Additional Tier 1 - AT1
Tier 1 - T1
Tier 2 - T2
Total Capital
Risk-weighted assets (RWA)
REGULATORY RATIOS
CET1
Total Capital ratio (TCR)
LCR
NSFR
OTHER RATIOS
Leverage Ratio
RONE (Net Profit/Average Normative Equity)
2,724,100
5,555
2,729,655
337,406
3,067,061
21,877,598
12.45%
14.02%
259%
110%
10.22%
18.69%
Own Funds and ratios(€/000) 31/12/2019 31/12/2018
3,001,472
5,584
3,007,056
337,046
3,344,102
21,142,442
14.20%
15.82%
282%
106%
10.62%
23.25%
Consolidated financial statements December 31, 2019• 76
RECONCILIATION BETWEEN RECLASSIFIED AND REPORTED FINANCIAL STATEMENT FIGURES
10. Interest income and similar revenue
20. Interest expenses and similar charges
40. Fee and commission income
50. Fee and commision expenses
80. Net income financial assets and liabilities held for trading
90.Fair value adjustments in hedge accounting
100. Profits (losses) on disposal or repurchase of
a) financial assets at amortized cost
130. Impairment losses on:
a) financial assets at amortized cost
160.Net premium earned
170. Net other operating income/ charges from insurance activities
200. Net provision for risks and charges
210. Impairment on tangible assets
230. Other operating income/charges
Net Banking Income
190. Administrative costs
200. Net provision for risks and charges
220. Impairment on intangible assets
210. Impairment on tangible assets
230. Other operating income/charges
Net operating expenses
50. Fee and commision expenses
130. Impairment losses on:
a) financial assets at amortized cost
230. Other operating income/charges
Cost of risk
200. Net provision for risks and charges
190. Administrative costs
230. Other operating income/charges
Other income/expenses
300. Tax expense related to profit or loss from continuing operations
Income taxes
Net profit
903
(242)
164
(43)
1
(2)
1
(1)
1
2
1
(361)
530
954
(270)
7
(11)
(2)
(1)
(277)
(12)
(19)
(13)
(44)
(84)
(1)
-
(85)
(159)
(159)
388
1.1
1.3
2.1
2.2
4.1
5.1
6.1
8.1
10.1
11.1
13.3
14.1
16.1
12.1
13.3
15.1
14.1
16.1
2.2
8.1
16.1
13.3
12.1
16.1
21.1
Reconciliation between reported income statement and reclassified income statement (€/mln) 31/12/2019 31/12/2018
Ref. Notes to the financial statements
Part C
930
(237)
148
(33)
(0)
(6)
1
(1)
1
(1)
2
(427)
647
1,025
(267)
(1)
(14)
(11)
0
(293)
(12)
(46)
(8)
(66)
(0)
(12)
(16)
(28)
(171)
(171)
467
With reference to the items of the above representation, when there is not a correspondence to the items of the
Consolidated Income Statement, please see the references to the Notes to the Consolidated financial statements.
Report on operations • 77
(*) The item includes assets related to the rental business
(**) The item includes the consignment for euro 147 million and receivables from customers relating to the rental business for euro 561 million.
Oustanding
90. Property, plant and equipment (*)
130. Other assets (**)
10.b) Deposits from customers
80. Other liabilities
40.b) Loans and receivables with customers not included in the outstanding
40.b) Loans and receivables with customers
Allowance for loans Management data
90. Property, plant and equipment
130. Other assets
10.b) Deposits from customers
80. Other liabilities
40.b) Loans and receivables with customers not included in the outstanding
Allowance for loans with customers Item 40.b)
Reconciliation between outstanding and loans and receivables with customers (€/mln)
31/12/2019 Ref. Notes to t
he financial statements
27,539
(3,092)
(709)
2
145
291
24,176
Part B 9.1 FS Assets
Part B 13.1 FS Assets
Part B 1.1 FS Liabilities
Part B 8.1 FS Liabilities
Part B 4.2 FS Assets
Part B 13.1 FS Assets
305
-
(34)
-
-
-
271
Consolidated financial statements December 31, 2019• 78
RECONCILIATION BETWEEN PARENT COMPANY AND CONSOLIDATED EQUITY
Equity and profit for the year of FCA Bank S.p.A.
Equity and profit of subsidiaries less non-controlling interests
Consolidation adjustments:
Elimination of carrying amount of consolidated companies
Intercompany dividends
Other consolidation adjustments
Equity and profit attributable to FCA Bank S.p.A.’s shareholders
Equity and profit attributable to non-controlling interests
Consolidated equity and net profit
443,354
283,337
(266,279)
-
(266,877)
598
460,412
6,663
467,075
Equity Of which, profit for the year
1,832,245
2,317,426
(1,033,430)
(1,010,652)
-
(22,778)
3,116,241
54,931
3,171,172
• 79Report on operations
Organization and human resources
For this section please refer to the Consolidated Non-Financial Statement.
Consolidated financial statements December 31, 2019• 80
"COMPLIANCE MEANS ADHERENCE TO RULES,
A NON-NEGOTIABLE VALUE WHICH FCA BANK PRESERVES AND
ADVANCES WITH ALL ITS ENERGIES."
• 81Report on operations
PATRIZIO LATTANZICompliance & Supervisory Relations
Compliance and transparency: FCA Bank’s added value
Compliance means adherence to rules, a non-negotiable value which FCA Bank preserves and advances with all its energies, in relation to each activity performed. This translates into confidence for its customers, who can count on a banking intermediary that treats compliance as the cornerstone of its operations. FCA Bank is convinced that, to engage in fair business practices, it is necessary to disseminate an adequate compliance culture among all the people who act in its name. To that end, during the year, the bank launched a number of initiatives involving, among other things, in-depth training activities and employees and collaborators kept constantly up to date on competition and personal data protection. In addition to the dissemination of a compliance culture, FCA Bank is convinced that it is necessary to set up a rigorous set of internal rules and regulations that might inform and guide the conduct of all employees and collaborators, so that these might abide by primary and secondary legislation.
To that end, FCA Bank kept constantly updated its own set of policies, rules and procedures, paying special attention to new regulations enacted during the year. Lastly, in keeping with its own Code of Conduct, FCA Bank upgraded its safeguards in place in the antitrust area and firmed up those established to protect the right/duty of each employee to report conduct considered inappropriate, ensuring the anonymity of the tipper.
Consolidated financial statements December 31, 2019• 82
Information technology
started in connection with the Bank of Italy’s procedure to manage collateralized loans;• lease securitization, which is intended to allow the securitization of the credit component of leased assets, excluding all the other components; • New Financial Calculator 3.0, creating a new tool, to allow potential customers to use a more effective and intuitive tool to calculate proposed long-term-rental financing and product emulator starting from a specific monthly payment. The new tool, available on all digital front-ends, will be connected with the corporate back-ends in real time;• the Pre-Scoring Project will be implemented in early 2020 also in Italy and its integration with the Financial Calculator 3.0 will start the Company’s process toward eCommerce; • the functionalities in the Customer Area of FCA Bank’s website were improved, to allow a better User experience, by activating the integration of a single digital identity (Single Sign On) with the banking product Conto Deposito;• RCA Generali project, to manage the new financing provided for connected and unconnected vehicles, with the replacement of the current provider, UK-based AM Trust, in light of Brexit (exit of UK from the European Union).
Moreover, FCA Bank has started a process to
In keeping with the Group’s digitalization process, the Information and Communication Technology firmed up its actions to upgrade the operating systems necessary to achieve the dematerialization of the sale process in Consumer Financing, making it possible to achieve the 60% digitalization target by 2019. In the second half the digitalization process involved obtaining Web Machine’s privacy consent by further strengthening the process in line with the applicable laws and regulations.
In the second half of 2019, the following projects were managed to strengthen compliance: • the IFRS 16 project was completed, to enable management of “IFRS 16 – Leases”, which governs lease agreements for entities that use international financial reporting standards;• NCB: New Corporate Backbone, i.e. the new Pan-European tool that makes it possible to manage “Credit Dossiers” through a workflow containing the approval process and automatic calculation with the new powers; • New Default Definition, which entails a new calculation of this corporate indicator.
In parallel, the Company decided to invest in projects intended to enhance its profitability:• in the second half of 2019, to support the activity of the Treasury department, the ABACO (i.e. Collateralized Bank Assets) project was
Report on operations • 83
The year just ended saw the beginning of the process to standardize the systems of Leasys Rent, the short-term rental company purchased by Leasys to meet new market requirements, in anticipation of new trends, and to meet the needs of web customers, creating new and innovative products, such as the subscription-based CarCloud platform.
Also the RPA (Robotic Process Automation) project, for automating repetitive and low-value-added corporate processes, was completed across FCA Bank. The project involved also Leasys in 2019 and will be exported to the European Markets in 2020. In 2019 the RPA project activated progressively 40 robots, covering HQ, BU and Leasys processes, thus confirming the strategic plan to automate repetitive activities in many functional areas of FCA Bank, with the resulting reduction of personnel expenses and the reallocation of Business resources to higher value-added activities. In 2020 the remaining 50 robots will be released, thus completing the last instalment of the RPA project.
The department managed the developments related to the creation of the applications for the on-line auction of used cars for private individuals and Brokers, to support Clickar, a new company.
The department released also, for the benefit of JLR, the new Pan-European Customer Portal and the new JLR Pre-Scoring system, providing customers with a user experience in line with the carmaker’s expectations.
redefine all the central Treasury systems, to upgrade and make more effective the tool to analyse the department’s benefit. In the meantime, activities began on the CFO Database project, intended to create a database containing accounting data, with a high level of detail, for all the legal entities and subsidiaries of FCA Bank and Leasys, which will enable the automated feeding of the Consolidated Financial Statements and Supervision application and the automated upload of the planning module data.
Also the BI’s new Roadmap was redefined, in view of the replacement of the Company’s DataWarehouse system with a more innovative Data Lake system, capable of hosting the most up-to-date communication tools now and in the near future. The new tool will be able to host new objects and will make it possible to perform a detail analysis to design and develop the new Customer Centricity model.
With that in mind, the Company reconsidered the Customer Care tool, by selecting in the constantly evolving market a solution better than the current one, in light of the rapid changes in corporate requirements. Thus, starting from the end of 2020, FCA Bank’s Markets and Leasys will see the implementation of the new Salesforce system, starting from the countries that do not have an integrated Customer Care tool yet.
Moreover, the Markets are working in close cooperation with the central activities for the Pan-European Pre-Scoring, Customer Portal and Residual Value projects. The Residual Value project is intended to provide a common starting base for the calculation of the residual value of corporate assets, basing the recalculation on a single provider.
In the Foreign Markets the strategy to upgrade operating and accounting systems based on the approach by cluster was still unfolding while the rollouts started in 2015 for the creation of IT platforms to cover the Retail and Long Term Rental business lines continued to take place. In 2020, there will be releases in Denmark, Portugal, Poland, France and Spain.
Consolidated financial statements December 31, 2019• 84
ANDREA BARCIO Head of Human Resources
Cross Path Program & Innovaction
In 2016 the FCA Bank Group launched Cross-Path, an international and inter-functional professional development program designed to form a pool of young talents by attracting brilliant new university graduates. An accurate selection process led to the identification of a restricted group of high-potential candidates who entered a fast-track program to foster professional growth in terms of leadership and technical skills. Key features of the program were job rotation and international breadth. Through a series of 24-month assignments, the trainees had the opportunity to test their mettle in different roles in different core areas of our industry (Credit, Finance e Sales & Marketing) and to gain experience in one of the 18 markets in which the Group operates. In this way, these rookies developed a precious knowledge of the business and its processes through constant on-the-job training, but also through group and individual training initiatives focused on soft and hard skills. A process that was definitely demanding and challenging, but one in which Management believes and invests with the intent of training future leaders, capable and competent professionals who can meet tomorrow’s challenges. To that end, one of the characteristics of “Cross-Path” was the activation of a dedicated mentoring program, where senior managers selected from among the members of the Leadership team followed trainees individually along their growth path, providing the type of guidance that supported them throughout the duration of the program.
After 4 years, those trainees have been assigned to challenging and stimulating roles, in 7 different countries (as an example:; market CFO, head of Marketing & Business Development of a Leasys market, Marketing Manager for European markets with Leasys, etc.).The positive feedback received from both the trainees and management confirmed the success of the initiative and prompted the bank to set up another inter-functional and international “Cross-Path” program. In the first quarter of 2020, the new group of high-potential candidates, with a passion for automotive and finance, will be selected. The candidates will have ambitious goals and the opportunity to be involved in different assignments. The FCA Bank Group’s commitment, and its attention to employee development themes, go also beyond the “Cross-Path” program. Since 2017 a number of training programs have been developed in Rental and Retail with the intent of giving a chance also to internal staff to prove themselves in interdisciplinary professional challenges and to participate in innovative and training initiatives (i.e. (i.e. hackaton, business games, special projects, virtual training, etc.).Following completion in 2019 of the Strategic Thinking Path program, which was started in 2017, FCA Bank launched an additional corporate initiative called InnovAction, to develop feasible and innovative business solutions that might enable it to be competitive in the market, meeting, and where possible anticipating, customer needs.
Report on operations • 85
"A PROCESS IN WHICH MANAGEMENT BELIEVES AND INVESTS WITH THE INTENT OF TRAINING FUTURE LEADERS, CAPABLE AND COMPETENT PROFESSIONALS WHO CAN
MEET TOMORROW’S CHALLENGES."
With management’s help, eight strategic areas of our business were identified and matched with specific projects with which to work. Participants are a heterogeneous and international group, made up of 48 colleagues coming from a variety of markets and with different corporate seniorities. The 8 teams identified worked on a single project, with support from an internal tutor in terms of expertise, know-how and leadership. The program consists of three main phases, a kick-off workshop held in June, involving a one-day-and-a-half gathering where participants and tutors, with help from external facilitators
and innovation experts, worked on the creation of the teams and the sharing of methods and tools to be used for the development of projects; six months of project work, during which participants worked from a remote location; and a final day to be held in early 2020, where the teams will present their projects to the Leadership Team. To overcome the geographical distance and the functional and hierarchical differences within the organization, virtual and team coaching sessions were held to enhance agile working and virtual remote collaboration capabilities.
Consolidated financial statements December 31, 2019• 86
Internal control systems
For this section please refer to the Consolidated Non-Financial Statement.
• 87
INTERNAL CONTROL FUNCTIONS
INTERNAL BOARD COMMITTEES
COMMITTEES INVOLVED IN THE INTERNAL CONTROL SYSTEM
For this section please refer to the Consolidated Non-Financial Statement.
For this section please refer to the Consolidated Non-Financial Statement.
For this section please refer to the Consolidated Non-Financial Statement.
Report on operations
Consolidated financial statements December 31, 2019• 88
Other information
The specific risks that can give rise to obligations for the Company are evaluated when the relevant provisions are made and are reported in the notes to the financial statements, together with significant contingent liabilities. In this section, reference is made to risk and uncertainty factors related essentially to the economic, regulatory and market context which can produce e²ects for the Company’s performance. The Company’s financial condition, operating performance and cash flows are a²ected first of all by the various factors that make up the macroeconomic picture in which it operates, including increases and decreases in gross domestic product, consumer and business confidence levels, trends in interest, exchange and unemployment rates.
The Group’s activity is mainly linked to the performance of the automotive sector, which is historically cyclical. Bearing in mind that it is hard to predict the breadth and length of the di²erent economic cycles, every macroeconomic event (such as a significant drop in the main end markets, the solvency of counterparties, the volatility of financial
PRINCIPAL RISKS AND UNCERTAINTIES
Brexit The exit of the United Kingdom from the European Union had been set originally for March 29, 2019. However, the UK government stumbled into a number of di�culties to have Parliament ratify the treaty signed with the European Union on 14 November 2015. In fact, the House of Commons rejected the treaty three times. This led to the resignation of Prime Minister Theresa May in June and the postponement of Brexit (which was first scheduled for October 31, 2019 and then rescheduled for January 31, 2020). With
markets and interest rates) can impact the Group’s prospects and its financial and operating results.
The FCA Group abides by the laws and regulations of every country in which it operates. Most of the legal proceedings we are involved in relate to disputes due to missed payments by customers and dealers in the course of our ordinary business activities.
Our provisions “for risks and charges”, and the close monitoring of the legal proceedings under way, allow us to assess quickly their possible eects on our accounts.
• 89Report on operations
the election of new Prime Minister Boris Johnson, on December 12, 2019, the House of Commons approved on December 20, 2019 the Withdrawal Bill proposed by the Government. This Bill calls, among others, for:• The entry into a transition period until December 31, 2020, to negotiate a new treaty for the trade of goods and services; until the end of 2020, trade relations will be governed by the rules and regulations currently in force and, in the absence of a deal, trade relations will be managed without any specific agreement;• The repeal of the Benn Act, which in the previous legislature required the government to ask Brussels for an extension of Brexit, in case of no deal.
Regarding the activities of FCA Bank, which operates in the UK through three companies engaging in retail financing, dealer financing and rental, last year a risk assessment process was undertaken in keeping with the guidelines set out in the “Opinion of the European Banking Authority on preparations for the withdrawal of the United Kingdom from the European Union” (EBA/Op/2018/05), published on June 25, 2018.The Company’s Board of Directors could, in turn, review a specific assessment prepared by management which, starting from a stress scenario defined by the Bank of England, focused on three specific themes; trends in new car registrations, residual values and the outlook for credit risk in case of hard Brexit. As of the assessment date, no significant economic impacts on the UK subsidiaries were brought to light.
FCA Bank S.p.A. is not subject to direction and coordination of other companies or entities. Companies under the control (direct or indirect) of FCA Bank S.p.A. have identified it as the entity that performs direction and coordination activities, pursuant to Article 2497-bis of the Italian Civil Code. This activity involves setting the general strategic and operating guidelines for the Group, which then are translated into the implementation of general policies for the management of human and financial resources, and marketing/ communication. Furthermore, coordination of the Group includes centralized treasury management and internal audit services. This allows the subsidiaries, which retain full management and operational autonomy, to achieve economies of scale by availing themselves of professional and specialized services with increasing levels of quality and to concentrate their resources on the management of their core business.
On December 20, 2019, an interim dividend of €180 million was distributed to the shareholders, as per resolution of the Board of Directors dated December 13. 2019
In line with Bank of Italy’s instructions on the preparation of banks’ financial statements, it is noted that:a) in the period under review the Group did not carry out any significant research and development activities;b) the Group does not hold and did not purchase and/or sell shares or interests of the controlling companies in the period under review.
DIRECTION AND COORDINATION ACTIVITIES
DIVIDEND AND RESERVE DISTRIBUTIONS
OTHER REGULATORY DISCLOSURES
Consolidated financial statements December 31, 2019• 90
10 INTEREST INCOME AND SIMILAR REVENUES
80 NET INCOME FINANCIAL ASSETS AND LIABILTIES HELD FOR TRADING
40 FEE AND COMMISSION INCOME
FINANCIAL REVENUE
of which insurance
100 PROFITS (LOSSES) ON DISPOSAL OR REPURCHASE OF FINANCIAL
ASSETS AT AMORTIZED COST
160 NET PREMIUM EARNED
170 NET OTHER OPERATING INCOME/ CHARGES FROM INSURANCE ACTIVITIES
TOTAL FINANCIAL REVENUE
20 INTEREST EXPENSES AND SIMILAR CHARGES
90 FAIR VALUE ADJUSTMENTS IN HEDGE ACCOUNTING
50 FEE AND COMMISSION EXPENSES
Fee and commission expenses
Insurance credit cost
TOTAL FINANCIAL COST
130 IMPAIRMENT LOSSES ON LOANS
Impairment losses on loans
Impairment losses on loans
180 NET PROFIT FROM FINANCIAL AND INSURANCE ACTIVITIES
190 ADMINISTRATIVE COSTS
Administrative costs
Administrative costs
200 NET PROVISIONS FOR RISKS AND CHARGES
Net provisions for risks and charges
Net provisions for risks and charges
Net provisions for risks and charges
210 IMPAIRMENT ON TANGIBLE ASSETS
Depreciation of rental assets (rental business)
Depreciation of tangibles asset
220 IMPAIRMENT ON INTANGIBLE ASSETS
230 OTHER OPERATING INCOME / CHARGES
Rental income/charges (rental business)
Eexpense recoveries and credit collection expenses
Impairment of rental receivables (rental business)
Other
240 OPERATING COSTS
290 TOTAL PROFIT OR LOSS BEFORE TAX FROM CONTINUING OPERATIONS
300 TAX EXPENSE RELATED TO PROFIT OR LOSS FROM CONTINUING OPERATIONS
330 NET PROFIT OR LOSS
340 MINORITY PORTION OF NET INCOME (LOSS)
350 HOLDINGS INCOME (LOSS) OF THE YEAR
Consolidated income statement details and reconciliation with reclassified income statement (€/mln)
31/12/2019 Reclassified Income
Statements Items
930(0)
1481,078248
11
(1)1,079(237)
(6)(46)(33)(12)
(289)(47)(46)(1)
744(279)(267)(12)
12
(1)(0)
(438)(427)(11)(14)623647
0(8)
(16)(106)638
(171)467
-467
NBI
NBI
NBI
NBI
COR
COR
NBI
NOE
OTH
NBI
NOE
OTH
NBI
NOE
NOE
NBI
NOE
COR
OTH
TAX
• 91Report on operations
Net Banking Income
Net Operating Expenses
Cost of risk
Other income / (expense)
Profit before tax
Tax expense
Net profit
Reclassified Income Statements Items (€/mln) 31/12/2019
1,025
(293)
(66)
(28)
638
(171)
467
NBI
NOE
COR
OTH
TAX
Turin, 21st February 2020On behalf of the Board of Directors
Chief Executive O�cer and General ManagerGiacomo Carelli
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statements December 31, 2019• 92
Consolidated statement of financial position 94
Consolidated income statement 96
Consolidated statement ofcomprehensive income 97
Consolidated statement ofchanges in equity 98
Consolidated statement ofcash flow 100
Reconciliation 101
Consolidated financial statements • 93
Consolidated financial statements December 31, 2019• 94
Consolidated statement of financial position
10. Cash and cash balances
30. Financial assets measured at fair value through other comprehensive income (FVOCI)
40. Financial assets measured at amortized cost
a) Loans and advances to banks
b) Loans and advances to customers
50. Hedging derivatives
60. Changes in fair value of portfolio hedge items (+/-)
70. Equity Investments
80. Insurance reserves attributable to reinsurers
90. Property, plant and equipment
100. Intangible assets
of which:
- goodwill
110. Tax assets
a) current
b) deferred
120. Non-current assets and disposal groups classified as held for sale
130. Other assets
Total assets
362,536
9,634
25,744,698
2,156,691
23,588,007
35,940
27,417
44
9,596
2,546,620
247,098
183,183
274,013
84,294
189,719
-
1,278,860
30,536,456
ASSETS (€/thousand) 31/12/2019 31/12/2018
585,272
9,807
25,903,033
1,997,944
23,905,089
36,930
48,145
44
13,159
3,196,737
262,573
183,183
299,861
98,829
201,032
-
1,350,171
31,705,732
Consolidated financial statements • 95
10. Financial liabilities at amortised cost
a) Deposits from banks
b) Deposits from customers
c) Debt securities in issue
20. Financial liabilities held for trading
40. Hedging derivatives
60. Tax liabilities
a) current
b) deferred
80. Other liabilities
90. Provision for employee severance pay
100. Provisions for risks and charges
a) committments and guarantees given
b) post-retirement benefit obligations
c) other provisions for risks and charges
110. Insurance reserves
120. Revaluation reserves
150. Reserves
155 Interim dividends
160. Share premium
170. Share capital
190. Minorities (+/-)
200. Net Profit (Loss) for the year (+/-)
Total liabilities and shareholders' equity
26,207,022
9,807,112
1,822,725
14,577,185
3,729
53,920
192,392
51,335
141,057
927,779
11,626
251,818
-
43,121
208,697
10,662
(35,608)
1,588,613
-
192,746
700,000
48,397
383,360
30,536,456
LIABILITIES AND SHAREHOLDERS' EQUITY (€/thousand) 31/12/2019 31/12/2018
26,933,628
10,278,046
1,798,752
14,856,829
3,407
91,533
238,205
55,162
183,043
1,014,431
11,726
225,504
-
49,954
175,550
16,127
(26,989)
1,970,072
(180,000)
192,746
700,000
54,931
460,413
31,705,732
Consolidated financial statements December 31, 2019• 96
Consolidated income statement
10. Interest income and similar revenues
of which: interest income calculated using effective interest method
20. Interest expenses and similar charges
30. Net interest margin
40. Fee and commission income
50. Fee and commission expenses
60. Net fee and commission
80. Net income financial assets and liabilities held for trading
90. Fair Value adjustments in hedge accounting
100. Profits (losses) on disposal or repurchase of:
a) Financial asstets valued at amortized cost
120. Operating income
130. Net impairment/reinstatement for credit risk:
a) Financial asstets valued at amortized cost
150. Net profit from financial activities
160. Net premium earned
170. Net other operating income/charges from insurance activities
180. Net profit from financial and insurance activities
190. Administrative costs:
a) payroll costs
b) other administrative costs
200. Net provisions for risks and charges
b) other net provisions
210. Impairment on property, plant and equipment
220. Impairment on intangible assets
230. Other operating income/charges
240. Operating costs
250. Profit (loss) on equity investments
290. Total profit or loss before tax from continuing operations
300. Tax expense related to profit or loss from continuing operations
310. Total profit or loss after tax continuing
330. Net profit or loss
340. Minority portion of net income
350. Holding income (loss) of the year
903,452
891,299
(242,050)
661,402
164,176
(54,986)
109,191
551
(1,801)
1,162
1,162
770,504
(20,728)
(20,728)
749,776
561
2,073
752,411
(268,189)
(169,033)
(99,156)
(75,800)
-
(75,800)
(363,518)
(11,008)
513,698
(204,819)
-
547,592
(159,228)
388,364
388,364
5,004
383,360
Item (€/thousand) 31/12/2019 31/12/2018
930,283
921,626
(236,835)
693,448
147,780
(45,893)
101,887
(45)
(6,187)
1,462
1,462
790,566
(47,388)
(47,388)
743,178
1,243
(867)
743,554
(278,443)
(175,030)
(103,413)
805
-
805
(437,816)
(13,963)
624,267
(105,149)
(400)
638,005
(170,930)
467,075
467,075
6,663
460,413
Consolidated financial statements • 97
Consolidated statement of comprehensive income10. Profit (loss) for the year
Other comprehensive income after tax not reclassified to profit or loss
70 Defined-benefit plans
Other comprehensive income after tax reclassified to profit or loss
110 Exchange rate differences
120 Cash flow hedging
170 Total other comprehensive income after tax
180 Other comprehensive income (Item 10+170)
190 Total comprehensive income (loss) attributable to non - controlling interests
200 Total comprehensive income (loss) attributable to owners of the parents
388,364
1,710
1,710
(7,369)
(4,332)
(3,037)
(5,659)
382,705
4,990
377,715
Items (€/000) 31/12/2019 31/12/2018
467,075
(6,930)
(6,930)
13,518
16,035
(2,517)
6,588
473,663
6,533
467,130
Consolidated financial statements December 31, 2019• 98
Consolidated statement of changes in equity as of 31/12/2019 and 31/12/2018
Clos
ing
bala
nce
as a
t 31/
12/2
018
Chan
ges
in o
peni
ng b
alan
ce
Bala
nce
as a
t 01
/01/
2019
ALLOCATION ON PROFIT
FROM PREVIUS YEAR
CHANGES DURING THE YEAR
Equi
ty a
s at
31/
12/2
019
Equi
ty a
ttrib
utab
le to
Par
ent
Com
pany
's s
hare
hold
ers
as a
t 31
/12/
2019
Non-
cont
rolli
ng in
tere
sts
as a
t 31
/12/
2019
Rese
rves
Divid
ends
and
othe
r allo
catio
ns
Chan
ges
in re
serv
es
Equity transactions
Cons
olid
ated
com
preh
ensi
ve
inco
me
for 3
1/12
/201
9
New
sha
re is
sues
Shar
e bu
ybac
k
Spec
ial d
ivid
ends
pai
d
Chan
ges
in e
quity
in
stru
men
ts
Othe
r cha
nges
Deriv
ative
s on
shar
es
Stoc
k op
tions
Chan
ges i
n eq
uity
in
vest
men
ts
Share capital:
a) common shares 703,389 703,389 - - - - 703,389 700,000 3,389
b) other shares - - - - - - - - - -
Share premium reserve 195,623 195,623 - - - - 195,623 192,746 2,877
Reserves:
a) retained earnings 1,625,784 - 1,625,784 388,364 (2,022) - - - - 2,012,126 1,970,072 42,053
b) other - - - - - - - - - - - - -
Valutation reserve (35,651) - (35,651) 2,022 - 6,588 (27,041) (26,990) (51)
Equity instruments - - - - - - - - - - - -
Interim dividends - - - - (180,000) - (180,000) (180,000) -
Treasury shares - - - - - - - -
Profit (loss) for the year 388,364 - 388,364 (388,364) - - - - - - - 467,075 467,075 460,413 6,663
Equity 2,877,509 - 2,877,509 - - - - (180,000) - - - - 473,663 3,171,172 - -
Equity attribut-able to parent Company's shareholders
2,829,111 - 2,829,111 - - - - (180,000) - - - - 467,130 - 3,116,241 -
Interests 48,397 - 48,397 - - - - - - - - - 6,533 - - 54,931
€/thousands
Consolidated financial statements • 99
€/thousands
Esis
tenz
e al
31/
12/2
017
Chan
ges
in o
peni
ng b
alan
ce
Bala
nce
as a
t 01
/01/
2018
ALLOCATION ON PROFIT
FROM PREVIUS YEAR
CHANGES DURING THE YEAR
Equi
ty a
s at
31/
12/2
018
Equi
ty a
ttrib
utab
le to
Par
ent C
ompa
ny's
shar
ehol
ders
as
at 3
1/12
/201
8
Non-
cont
rolli
ng in
tere
sts
as a
t 31/
12/2
018
Rese
rves
Divid
ends
and
othe
r allo
catio
ns
Chan
ges
in re
serv
esEquity transactions
Cons
olid
ated
com
preh
ensi
ve
inco
me
for 3
1/12
/201
8
New
sha
re is
sues
Shar
e bu
ybac
k
Spec
ial d
ivid
ends
pai
d
Chan
ges
in e
quity
in
stru
men
tsst
raor
dina
ria d
ivid
endi
Othe
r cha
nges
Deriv
ativ
es o
n sh
ares
Stoc
k op
tions
Chan
ges i
n eq
uity
inve
smen
ts
Share capital:
a) common shares 703,389 703,389 - - - - 703,389 700,000 3,389
b) other shares - - - - - - - - - -
Share premium reserve 195,623 (17,393) 195,623 - - - 195,623 192,746 2,877
Reserves:
a) retained earnings 1,360,856 - 1,343,463 282,528 (207) - - - - 1,625,784 1,588,613 37,171
b) other - - - - - - - - - - - - - -
Valutation reserve (29,992) - (29,992) - (5,659) (35,651) (35,608) (43)
Equity instruments - - - - - -
Interim dividends (100,000) - (100,000) 100,000 - - - - - - - - - - - - -
Treasury shares - - - - - - - -
Profit (loss) for the year 382,528 - 382,528 (382,528) 388,364 388,364 383,360 5,004
Equity 2,512,404 (17,393) 2,495,011 - - (207) - - - - - - - 382,705 2,877,509 - -
Equity attribut-able to parent Company's shareholders
2,469,082 (17,494) 2,451,588 - - 191) - - - - - - - 377,715 - 2,829,111 -
Interests 43,322 101 43,423 - - (16) - - - - - - - 4,990 - - 48,397
Consolidated financial statements December 31, 2019• 100
Consolidated statement of cash flow (direct method)
A. OPERATING ACTIVITIES
1. Business operations
- interest income (+)
- interest expense (-)
- fee and commission income (expense) (+/-)
- personnel expenses (-)
- net earned premiums (+)
- Other insurance income/expenses (+/-)
- other expenses (-)
- other revenue (+)
- taxes and levies (-)
2. Cash flows from increase/decrease of financial assets
- financial assets held for trading
- financial assets at fair value with impact on other comprehensive income
- financial assets at amortized cost
- other assets
3. Cash flows from increase/decrease of financial liabilities
- fiancial liabilities at amortized cost
- financial liabilities held for trading
- other liabilities
Cash flows generated by/(used for) operating activities
B. INVESTING ACTIVITIES
1. Cash flows generated by
- sales of property, plant and equipment
2. Cash flows used for
- purchases of property,plant and equipment
- purchases of intangible assets
Cash generated by / (used for) investing activities
C. FINANCING ACTIVITIES
- dividend and other distributions
Cash generated by / (used for) financing activities
CASH GENERATED /(USED) DURING THE YEAR
898,845
878,555
(219,085)
109,191
(169,033)
561
2,073
(71,900)
518,679
(150,195)
(3,375,375)
(3,412)
(9,634)
(2,358,765)
(1,003,563)
3,786,448
2,823,537
7,103
955,808
1,309,918
305,284
305,284
(1,253,142)
(1,232,375)
(20,767)
(947,858)
-
-
362,060
€/thousand 31/12/2019 31/12/2018
1,124,247
1,046,770
(282,470)
101,982
(160,372)
1,243
(867)
(50,731)
606,688
(137,997)
(502,530)
3,435
(173)
(340,728)
(165,064)
839,939
778,103
(3,756)
65,592
1,461,655
418,825
418,825
(1,477,745)
(1,449,225)
(28,520)
(1,058,920)
(180,000)
(180,000)
222,735
• 101Consolidated financial statements
Reconciliation
Cash and cash equivalents - opening balance
Cash generated (used) during the year
Cash and cash equivalents - closing balance
476
362,060
362,536
€/thousand 31/12/2019 31/12/2018
362,536
222,735
585,272
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statements December 31, 2019• 102
Notes to the consolidated financial statements • 103
Part A - Accounting policies 104
Part B - Information on the consolidatedbalance sheet 144
Part C - Information on the consolidatedincome statement 187
Part D - Consolidated comprehensiveincome 208
Part E - Information on risk and relatedrisk management policies 209
Part F - Information on consolidatedequity 275
Part G - Business combinations 278
Part H - Related-party transactions 279
Part L - Segment reporting 282
Part M -Leasing reporting 284
Consolidated financial statements December 31, 2019• 104
Part A - Accounting policies
Statement of compliance with International Financial Reporting Standards The consolidated financial statements as of and for the year ended December 31, 2019 have been prepared in accordance with the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the related interpretations by the International Financial Reporting Interpretations Committee (IFRIC), as endorsed by the EU Commission with Regulation no 1606 of July 19, 2002 and transposed into the Italian legal system with Legislative Decree no. 38 of February 28, 2005, up to December 31, 2017.Bank of Italy, whose powers in relation to the accounts of banks and financial companies subject to its supervision were laid down by Legislative Decree no. 87/92 and confirmed by the above-mentioned Legislative Decree, established the formats of the accounts and the notes used to prepare these financial statements through circular no. 262 of December 22, 2005, as amended.This amendment derive essentially from the mandatory application, from January 1, 2019, of the IFRS 16:• l’IFRS 16 “Leasing”. The new accounting standard issued by the IASB in January 2016 and endorsed by the European Commission through Regulation no. 1986/2017, replaced IAS 17 “Leases”, IFRIC 4 “Determining whether an arrangement contains a lease”, SIC 15 “Operating leases – Incentives” and SIC 27 “Evaluating the substance of transactions involving the legal form of a lease”, with effect from January 1, 2019, and established the requirements for accounting for lease contracts.
Basis of preparationThe consolidated financial statements consist of the Statement of financial position, the Income statement, the Statement of comprehensive income, the Statement of changes in equity, the Statement of cash flows and the Notes as well as
a board of directors’ report on Group operations.The financial statements and the notes show the amounts for the year just ended at December 31, 2019 well as the comparative figures at December 31, 2018. The FCA Bank Group’s consolidated financial statements were prepared in accordance with IAS 1 and the guidelines of Banca d’Italia’s circular no. 262 of December 22, 2005, 6th update of November 30, 2018. In particular:• Formats of the consolidated Statement of financial position, Income statement and notes.The statement of financial position and the income statement do not contain items with zero balances in the year just ended and in the previous one.• Consolidated statement of comprehensive income.The statement of comprehensive income reflects, in addition to net profit for the year, other items of income and expenses divided between those that can be reversed and those that cannot be reversed to income statement.• Consolidated statement of changes in equity.The consolidated statement of changes in equity shows the composition and changes in equity for the year under review and the comparable period. The items are allocated between the amounts attributable to the Parent Company’s shareholders and non-controlling interests.• Consolidated statement of cash flows.The Consolidated Statement of cash flows is prepared under the direct method.• Unit of account.Amounts in the financial statements and the notes are in thousands of euros.• Going concern, accrual basis of accounting and consistency of presentation of financial statements.The Group is expected to remain viable in the foreseeable future. Accordingly, the financial statements for the year ended December 31, 2019 were prepared on the assumption that the Company is a going concern, in accordance with the accrual basis of accounting and consistent with the financial statements for the previous year.There were no departures from the application of IAS/IFRSs.
SECTION 1
SECTION 2
A.1 - GENERAL INFORMATION
Notes to the consolidated financial statements • 105
Scope and methods of consolidationThe consolidated financial statements as of
SECTION 3
December 31, 2019 include the accounts of the Parent Company, FCA Bank S.p.A., and its direct and indirect Italian and foreign subsidiaries, as required by IFRS 10. They reflect also the entities, including structured entities, in relation to which the Parent Company has exposure or rights to variable returns and the ability to a�ect those returns through power over them. To determine the existence of control, the Group considers the following factors:• the purpose and design of the investee, to identify the entity’s objectives, the activities that give rise to its returns and how such activities are governed;• the power over the investee and whether the Group has contractual arrangements, which attribute it the ability to govern the relevant activities; to this end, attention is paid only to substantive rights, which provide practical governance capabilities;• the exposure to the investee to determine whether the Group has arrangements with the investee whose returns vary depending on the investee’s performance.If the relevant activities are governed through voting rights, control may be evidenced by considering potential or actual voting rights, the existence of any arrangements or shareholders’ agreements giving the right to control the majority of the voting rights, to appoint the majority of the members of the board of directors or otherwise the power to govern the financial and operating policies of the entity.Subsidiaries may include any structured entities, where voting rights are not paramount to determine the existence of control, including special purpose vehicles (SPVs). Structured entities are considered subsidiaries where: • the Group has the power, through contractual arrangements, to govern the relevant activities;• the Group is exposed to the variable returns deriving from their activities.The Group does not have any investments in joint ventures.
Risks and uncertainties related to the use of estimates In accordance with IFRSs, management is required to make assessments, estimates and assumptions which a²ect the application of IFRSs and the amounts of reported assets, liabilities, costs and revenues and the disclosure of contingent assets and liabilities. The estimates and the relevant assumptions are based on past experience and other factors considered reasonable under the circumstances and are adopted to determine the carrying amount of assets and liabilities.In particular, estimates were made to support the carrying amounts of certain significant items of the consolidated financial statements as of December 31, 2019, in accordance with IAS/IFRSs and the above-mentioned guidelines. Such estimates concerned largely the future recoverability of the reported carrying amounts in accordance with the applicable rules and based on a going concern assumption. Estimates and assumptions are revised regularly and updated from time to time. In case performance fails to meet expectations, carrying amounts might di²er from original estimates and should, accordingly, be changed. In these cases, changes are recognized through profit or loss in the period in which they occur or in subsequent years.The main areas where management is required to make subjective assessments include:• recoverability of receivables and, in general, financial assets and the determination of any impairment;• determination of the fair value of financial instruments to be used for financial reporting purposes; in particular, the use of valuation models to determine the fair value of financial instruments not traded in active markets;• quantification of employee provisions and provisions for risks and charges;• recoverability of deferred tax assets and goodwill.
Consolidated financial statements December 31, 2019• 106
NAMEREGISTERED
OFFICECOUNTRY OF
INCORPORATION (*)
TYPE OF RELATIONSHIP
(**)
PARENT COMPANY
(***)
SHARING %
FCA Bank S.p.A.
Leasys S.p.A.
Clickar S.r.l.
FCA Capital France S.A.
Leasys France S.A.S.
FCA Leasing France SNC
FCA Bank Deutschland GmbH
FCA Automotive Services UK Ltd
FCA Dealer Services UK Ltd
Leasys UK Ltd
Leasys Rent S.p.A.
FCA Capital Espaňa EFC S.A.
FCA Dealer Services Espaňa S.A.
FCA Capital Portugal IFIC S.A.
FCA Dealer Services Portugal S.A.
FCA Capital Suisse S.A.
Leasys Polska Sp.Zo.o.
FCA-Group Bank Polska S.A.
FCA Capital Nederlands B.V.
Leasys Nederland B.V.
FCA Capital Danmark A/S
FCA Bank GmbH
Ferrari Financial Services GmbH
FCA Leasing GmbH
FCA Capital Hellas S.A.
FCA Insurance Hellas S.A.
FCA Capital RE DAC
FCA Capital Sverige AB
FCA Capital Norge AS
Turin - Italy
Turin - Italy
Turin - Italy
Trappes - France
Trappes - France
Trappes - France
Heilbronn - Germany
Slough - UK
Slough - UK
Slough - UK
Bolzano - Italy
Alcala de Henares - Spain
Alcala de Henares - Spain
Lisbon - Portugal
Lisbon - Portugal
Schlieren - Switzereland
Warsaw - Poland
Warsaw - Poland
Lijnden - Netherlands
Lijnden - Netherlands
Glostrup - Denmark
Vienna - Austria
Pullach - Munchen
Vienna - Austria
Athens - Greece
Athens - Greece
Dublin - Ireland
Kista - Sweden
Barum - Norway
Rome - Italy
Rome - Italy
Fiumicino - Italy
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
Leasys S.p.A.
Leasys S.p.A.
FCA Capital France SA
Leasys S.p.A.
Leasys S.p.A.
Leasys S.p.A.
Leasys S.p.A.
FCA Capital Hellas SA
FCA Capital Danmark A/S
FCA Capital Danmark A/S
100.00
100.00
100.00
100.00
99.99
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
50.00
50.0001
100.00
99.99
99.99
100.00
100.00
100.00
1. INVESTMENTS IN CONTROLLED SUBSIDIARIES
(*) If di�erent from Registered O�ce(**) Relation Type:1 = majority of voting rights at ordinary meetings2 = dominant influence at ordinary meeting(***) If di�erent from FCA Bank S.p.A.
The table below shows the companies included in the scope of consolidation.
Notes to the consolidated financial statements • 107
3. INVESTMENTS IN SUBSIDIARIES WITH SIGNIFICANT NON-CONTROLLING INTERESTS
3.1 Non-controlling interests, availability of non-controlling interests’ voting rights and dividends paid to non-controlling interests
Pursuant to IFRS 10, FCA Bank GmbH (Austria), a 50%-held subsidiary and Ferrari Financial Services GmbH a 50.0001%-held subsidiary are included in the consolidation area.
Nixes Six PLc
Nixes Seven B.V.
Fast 3 S.r.l.
Erasmus Finance DAC
A-BEST TEN S.r.l. IN LIQUIDAZIONE
A-BEST ELEVEN UG
A-BEST TWELVE S.r.l.
A-BEST THIRTEEN FT
A-BEST FOURTEEN S.r.l.
A-BEST FIFTEEN S.r.l.
A-BEST SIXTEEN UG
A-BEST SEVENTEEN S.r.l.
NAME COUNTRY
London - UK
Amsterdam - Netherlands
Milan - Italy
Dublin - Ireland
Conegliano (TV) - Italy
Frankfurt am Main - Germany
Conegliano (TV) - Italy
Madrid - Spain
Conegliano (TV) - Italy
Conegliano (TV) - Italy
Frankfurt am Main - Germany
Conegliano (TV) - Italy
The structured entities related to securitization transactions, whose details are provided below, are fully consolidated:
NAMEAVAILABILITY OF
NON-CONTROLLING INTERESTS' VOTING TIGHTS (%)
NON-CONTROLLING INTERESTS (%)
DIVIDENDS DISTRIBUTED TO NON-CONTROLLING
INTERESTS
FCA Bank GmbH (Austria)
Ferrari Financial Services GmbH (Germany)
50%
49.99%
-
-
50%
49.99%
Consolidated financial statements december 31, 2019• 108
Notes to the consolidated financial statements • 109
3.2 Investments in subsidiaries with significant non-controlling interests.
Total assets
Finacial assets
Financial liabilities
Equity
Net interest income
Net fee and commission income
Banking income
Net result from investment activities
Net result from investment and insurance activities
Operating costs
Profit (loss) before taxes from continuing operations
Net profit (loss) for the period
611,351
602,167
546,630
49,969
18,522
(147)
18,408
17,272
17,272
(8,968)
8,304
5,330
FERRARI FINANCIAL SERVICES GMBH (GERMANY) 31/12/2019 31/12/2018
681,310
671,580
607,940
58,140
21,300
329
21,332
20,069
20,069
(8,973)
11,096
8,086
Total assets
Financial assets
Financial liabilities
Equity
Net interest income
Net fee and commission income
Banking income
Net result from investment activities
Net result from investment and insurance activities
Operating costs
Profit (loss) before taxes from continuing operations
Net profit (loss) for the period
311,175
308,899
258,386
46,520
8,105
322
8,427
8,730
8,730
(2,274)
6,455
4,738
FCA BANK GMBH (AUSTRIA) 31/12/2019 31/12/2018
246,994
244,956
195,241
51,753
8,644
407
9,052
8,882
8,882
(2,260)
6,622
5,242
(amounts in thousands of euros)
(amounts in thousands of euros)
The table below provides financial and operating highlights of FCA Bank GmbH and of Ferrari Financial Services GmbH before intercompany eliminations required by IFRS 12:
Consolidated financial statements December 31, 2019• 110
In preparing the consolidated financial statements, the financial statements of the Parent Company and its subsidiaries, prepared according to IAS/IFRSs, are consolidated on a line-by-line basis by aggregating together like items of assets, liabilities, equity, income and expenses.The carrying amount of the parent’s investment in each subsidiary and the corresponding portions of the equity of each such subsidiary are eliminated. Any di²erence arising during this process – after the allocation to the assets and liabilities of the subsidiary – is recognized as goodwill on first time consolidation and, subsequently, among other reserves. The share of net profit pertaining to non-controlling interests is indicated separately, so at to determine the amount of net profit attributable to the Parent Company’s shareholders.Assets, liabilities, costs and revenues arising from
CONSOLIDATION METHODS intercompany transactions are eliminated.The financial statements of the Parent Company and those of the subsidiaries used for the consolidated financial statements are all as of the same date.For foreign subsidiaries, which prepare their accounts in currencies other than the euro, assets and liabilities are translated at the exchange rate prevailing on the balance sheet date, while revenues and costs are translated at the average exchange rate for the period.Exchange di�erences arising from the conversion of costs and revenues at the average exchange rate and the conversion of assets and liabilities at the reporting date are reported in profit or loss in the period.Exchange di�erences arising from the equity of consolidated subsidiaries are recognized in other comprehensive income and reversed to profit and loss when loss of control over the subsidiaries’ occurs. The exchange rates used to translate the financial statements at December 31, 2019 are as follows:
31/12/2019Medium
31/12/2019 31/12/2018Medium
31/12/2018
Polish Zloty (PLN)Danish Crown (DKK)Swiss Franc (CHF)GB Pound (GBP)Norwegian Krone (NOK)Moroccan Dirham (MAD)Svedish Krona (SEK)
4.2577.4721.0850.8519.864
10.74010.447
4.3007.4661.1120.8789.851
10.76410.589
4.3017.4671.1270.8959.948
10.95110.255
4.2617.4531.1550.8859.597
11.08310.258
To prepare the consolidated financial statements use was made of the following:• financial statements at December 31, 2019 of the Parent Company FCA Bank S.p.A.;• accounts as of December 31, 2019, approved by the competent bodies and functions, of the other fully consolidated companies, as adjusted to take into account the consolidation process and, where necessary, to comply with the Group’s accounting policies.
5. OTHER INFORMATION
Subsequent eventsNo events occurred after the balance sheet date which should result in adjustments of the
Other information The consolidated financial statements and the Parent Company’s financial statements were audited by EY S.p.A. pursuant to Legislative Decree no. 39 of January 27, 2010.
SECTION 4
SECTION 5
consolidated financial statements as of December 31, 2019.However, it is noted that the Group monitors closely the events in their evolution and the economic impact of the COVID-19 (Corona virus) emergency. At this moment, there is not enough evidence for a thorough assessment of the e²ects.
Notes to the consolidated financial statements • 111
IFRS 16 - LeasesThe new standard constitutes an innovation in that it established that leases be reported in entities' balance sheets, thus enhancing the visibility of their assets and liabilities.IFRS 16 repeals the distinction between operating leases and finance leases (for the lessee), requiring that all lease contracts be treated as finance leases. Short-term contracts (12 months) and those involving low value items (e.g. personal computers) are exempted from this treatment.The new standard will take effect on January 1, 2019, Early adoption is permitted provided that also IFRS 15, Revenue from Contracts with Customers, is applied.
Amendments to IFRS9Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract.The amendments specified that the early termination can result from a contractual term or from an event outside the control of the parties, such as a change in law or regulation leading to the early termination of the contract.The amendments must be applied retrospectively; earlier application is permitted.The amendment provides specific transition provisions if it is only applied in 2019 rather than in 2018 with the remainder of IFRS 9.The amendments are intended to apply when the prepayment amount approximates to unpaid amounts of principal and interest plus or minus an amount that reflects the change in a benchmark interest rate.This implies that prepayments at current fair value or at an amount that includes the fair value of the cost to terminate an associated hedging instrument, will normally satisfy the SPPI criterion only if the other elements of the change in fair value, such as the effects of credit risk or liquidity, are small.Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract.
IFRIC 23 - Uncertainty over Income Tax TreatmentThe standard clarifies the accounting treatment for uncertainties in accounting for income tax. The entity needs to evaluate the probability that the relevant tax authority accepts the accounting treatment of income tax.If it is probable that the tax authority does not accept the accounting treatment, IFRIC 23 proposes two methods to reflect the uncertainty in the calculation of income tax:- the most likely amount that the tax authority will accept
EC ENDORSEMENT REGULATION
DATE OFPUBBLICATION
DATE OFAPPLICATION
DESCRIPTIONOF STANDARD/AMENDMENT
1986/2017
498/2018
1595/2018
November 9, 2017
March 26, 2018
October 24, 2018
January 1, 2019
January 1, 2019
January 1, 2019
INTERNATIONAL FINANCIAL REPORTING STANDARDS ENDORSED BY THE EUROPEAN UNION WITH EFFECT APPLICABLE AS OF JANUARY 1, 2019 As required by IAS 8, the table below shows the new international financial reporting standards, or the amendments of standards already effective, which took effect as of January 1, 2019.
Consolidated financial statements December 31, 2019• 112
Annual Improvements to IFRS Standards 2015-2017 Cycle By Regulation (EU) 2019/412 of March 14, 2019 the Commission, in the framework of its regular activity aimed at streamlining and clarifying the standards, adopted the new provisions introduced by the IASB in its Annual Improvements to International Financial Reporting Standards 2015-2017 Cycle (annual improvements) published by the IASB on December 12, 2017. These new provisions include amendments to IAS 12 – Income Taxes, IAS 23 - Borrowing Costs, IFRS 3 - Business Combinations and IFRS 11 – Joint Arrangements.
IFRS 3 Business Combinations - The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation. An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2019. Earlier application is permitted.
IFRS 11 Joint Arrangements - A party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured. An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after January 1, 2019. Earlier application is permitted.
IAS 12 Income Taxes - The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019.Earlier application is permitted. When an entity first applies those amendments, it applies them to the income tax consequences of dividends recognized on or after the beginning of the earliest comparative period.
IAS 23 Borrowing Costs - The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments.
An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted.
412/2019 March 15, 2019 January 1, 2019
1595/2018 October 24, 2018 January 1, 2019 (e.g. in case of a binary choice – cost deduction accepted or rejected totally);- the sum of amounts weighted by the probability that the tax authority will accept each one of them (e.g. when there are different possible answers by the authority).
EC ENDORSEMENT REGULATION
DATE OFPUBBLICATION
DATE OFAPPLICATION
DESCRIPTIONOF STANDARD/AMENDMENT
Notes to the consolidated financial statements • 113
Amendment to IAS 19By the same Regulation, amendments to IAS 19 – Plan Amendment, Curtailment or Settlement have been adopted. The objective of the amendments is to clarify that, after the amendment, curtailment or settlement of the defined benefit plan, entities shall use the updated assumptions from remeasurement of their net defined liability (asset) for the remainder of the reporting period.The amendments to IAS 19 require that, upon occurrence of an amendment/curtailment of a defined benefit plan, entities are required to update the actuarial assumptions used to determine the current service cost (i.e. the amount of the present value of a defined benefit obligation resulting from employee service in the current period) and the net interest on the net liability (asset) for the remainder of the annual reporting period, that is the period between the date of the amendment/curtailment and the closing of the current annual period.The previous version of IAS 19 required - in case of amendment/curtailment of a defined benefit plan, before calculating past service costs – the remeasurement of the net liability (asset) by using the fair value of the assets held by the plan and current actuarial assumptions while it did not require explicitly the update of the actuarial assumptions underlying the current service cost and the net interest following the amendment of the plan. Given the diversity of practices adopted by entities, the amendments in question specify that the entity is required to update the actuarial assumptions following the amendment/ curtailment of the plan using the most recent information.
Amendment to IAS 28 The amendments clarify that an entity applies IFRS 9 - Financial Instruments to long-term interests in an associate or joint venture to which the equity method is not applied.In applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognized as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and Joint Ventures.To illustrate how entities apply the requirements in IAS 28 and IFRS 9 with respect to long-term interests, the IASB also published an illustrative example.The amendments are applied retrospectively, with certain exceptions. Early application of the amendments is permitted and must be disclosed.
402/2019
237/2019
March 14, 2019
February 11, 2019
January 1, 2019
January 1, 2019
EC ENDORSEMENT REGULATION
DATE OFPUBBLICATION
DATE OFAPPLICATION
DESCRIPTIONOF STANDARD/AMENDMENT
Consolidated financial statements December 31, 2019• 114
Amendment to IAS 1 and IAS 8.
The IASB clarified in IAS 1 – Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” the definition of “material” and aligned such definition with that used in the Conceptual Framework and in the IFRS.Information is material if omitting or misstating it could reasonably affect the decisions that the primary users of financial statements make on the basis of those financial statements.
Amendment to IFRS 9, IAS 39 e IFRS 7: interest rate benchmark reform.
The IASB has issued amendments to IFRS 9, IAS 39 and IFRS 7 that modifies IFRS 9 and IAS 39 hedge accounting policies.The amendment will take effect on January 1, 2020, but early adoption is permitted. The European Commission identified both EONIA and EURIBOR, which are managed by the European Money Market Institute (EMMI), as critical benchmark rates, pursuant to the BMR.
2075/2019
2104/2019
Amendment to IFRS 9, IAS 39 and IFRS 7
December 6, 2019
December 10, 2019
January 20, 2020
January 1, 2020
January 1, 2020
January 1, 2020
ACCOUNTING STANDARDS, AMENDMENTS AND IFRS AND IFRIC INTERPRETATIONS ENDORSED BY THE EUROPEAN UNION, NOT YET MANDATORILY APPLICABLE AND NOT ADOPTED EARLY BY THE GROUP AT DECEMBER 31, 2019
Amendments to References to the Conceptual Framework in IFRS Standards
The IASB issued on on 29 March 2018 a revised version of its Conceptual Framework for Financial Reporting that underpins IFRSs. This instrument helps to ensure that the Standards are conceptually consistent and that similar transactions are treated the same way, providing useful information for investors and others. The Conceptual Framework also assists companies in developing accounting policies when no IFRS Standard applies to a particular transaction; and it helps stakeholders more broadly to understand the Standards better. The revised Conceptual Framework includes: a new chapter on measurement; guidance on reporting financial performance; improved definitions and guidance - in particular the definition of a liability; and clarifications in important areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting.
EC ENDORSEMENT REGULATION
DATE OFPUBBLICATION
DATE OFAPPLICATION
DESCRIPTIONOF STANDARD/AMENDMENT
Notes to the consolidated financial statements • 115
Amendment to IFRS 3.The IASB, in the updated version of IFRS 3 - Businesscombinations, changed the definition of company.The new definition shows that the purpose of the company is to provide products and services to customers, while the previous definition focused on the purpose of producing outcome in the form of dividends, lower costs or other benefits economic for investors or others. Companies apply to business combinations the new definition starting from the operations having date of stipulation later than January 1, 2020.
IFRS 17 - Insurance contractsOn May 18, 2017, the IASB issued IFRS 17 - Insurance Contracts which applies to annual reporting periods beginning on or after 1 January 2021.The new standard, which deals with accounting for insurance contracts (previously known as IFRS 4), intends to improve the understanding of investors, among others, of insurers’ risk exposure, operating performance and financial position. The IASB published a final version after a long consultation phase. IFRS 17 is a complex standard which will include certain key differences from the current accounting treatment regarding the measurement of liabilities and the recognition of profits.IFRS 17 applies to all insurance contracts. The accounting model of reference, the General Model, is based on the present value of expected cash flows, the identification of a risk adjustment and a contractual service margin (“CSM”), which cannot be negative and represents the present value of unearned profit, to be released to profit or loss in each period with the passage of time.
Amendment to IFRS 3
IFRS 17 - Insurance contracts
October 22, 2018
May 18, 2017
January 1, 2020
January 1, 2021
ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS NOT YET ENDORSED BY THE EUROPEAN UNION
STANDARD/ AMENDMENT
DATE OFPUBBLICATION
DATE OFAPPLICATION
DESCRIPTIONOF STANDARD/AMENDMENT
Consolidated financial statements December 31, 2019• 116
Notes to the consolidated financial statements • 117
RegulationsIFRS 16 replaced IAS 17 and the relevant interpretations and will take e²ect on or after January 1, 2019. IFRS 16 lays down the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases by following a single accounting model.
The objective of IFRS 16 is to ensure that lessors and lessees report information that faithfully represents lease transactions. The information provides a basis for users of financial statements to assess the e²ects of leases on the entity’s financial condition, operating results and cash flows.
IFRS 16 introduces significant changes to manner in which lease transactions are accounted for by both lessors and lessees, in that it introduces a single accounting model for leases with a term of more than 12 months, unless the underlying asset is of low value. Specifically, the main change entails the removal of the distinction, introduced by IAS 17, between operating lease and finance lease. From now on, all lease transaction must be accounted for in the same way, with the recognition of an asset and a liability. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a liability representing its obligation to make lease payments. A lessee measures right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognizes depreciation of the right-of-use asset and interest on the lease liability. In a cash flow statement, a lessee separates the total amount of cash paid into principal (presented within financing activities) and interest (presented within the operating or financing activity) in accordance with IAS 7.
The lease asset is the right to use the underlying asset and is presented in the
ExemptionsIFRS 16 applies to all types of leases, that is contracts that convey to the lessee the right to control the use of an identified asset for a period of time (use period) in exchange for consideration.
IFRS 16 does not require a company to recognize assets and liabilities for short-term leases or for leases whose underlying asset is of low value. Short-term means a contract expiring after no more than 12 months while an underlying asset is of low value if its price, new, does not exceed €5 thousand.
In addition, the IASB decided to extend the exemption of short-term leases to include contracts for which it is not reasonably certain that their term exceeds 12 months, considering the probability of exercise of the extension or extinguishment options The FCA Bank Group decided to apply both exemptions.
TRANSITION TO IFRS 16
statement of financial position either as part of property, plant and equipment or as its own line item. IFRS 16 substantially reflects the lessor accounting requirement in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, using he same classification principle as IAS 17.
Transition method FCA Bank Group chose to carry out the first time adoption of IFRS 16 through the modified retrospective approach. Under this approach the cumulative effect of initially applying IFRS 16 is recognized at the date of initial application and comparative figures for the year preceding the first time adoption of IFRS 16 are not restated. As such, the 2019 financial statements are not comparable in terms of right of use and the corresponding lease liability.
The impacts on Own FundsThe increase in RWA resulting from the registration of the total rights of use, weighted 100%, has an impact on CET 1 of less than 1 bp.
IFRS 16 project In 2018 a working group was established within the Consolidated Accounts function of the FCA Bank Group, to identify all lease contracts, evaluate the key information contained in each of them and assess the qualitative and quantitative impacts of the new IFRS. The macro-phases of the project can be summarized in the following activities: • Preliminary analyses performed at the central level (mainly related to accounting themes); • Specific training on IFRS 16 provided to all of the FCA Bank Group companies; • Questionnaire prepared by each Group company and document gathering; • Review of results and identification of pertinent contract types; • Analysis of contractual clauses to identify the cases of inclusion/exclusion from the scope of IFRS 16; • Quantification of the impact deriving from the first time adoption of IFRS 16 at the consolidated level.
The effects of first time adoption of IFRS 16 The adjustment to the opening statement of financial position following adoption of IFRS 16 by using the modified retrospective approach resulted in an increase in total assets, as a result of the recognition of the new rights of use at Group level, of less than 1% and a total increase in liabilities (due to lessor) for the same amount.
First time adoption did not have any impact on equity. On first time adoption IFRS 16 suggests a practical expedient that allows the company not to re-determine the scope of application (IFRS 16.C3) but to apply the standard only to leases identified in accordance with the requirements of IAS 17 and IFRIC 4. Regarding the comparative data, it is noted that the Group’s choice to implement the first time adoption of IFRS 16 according to the modified retrospective approach exempts it from restating comparative data.
The tables to the side show the effect of adoption of IFRS 16.
• 118 Consolidated financial statements December 31, 2019
Notes to the consolidated financial statements • 119
30/06/2018
CONSOLIDATED FINANCIAL STATEMENT OF FINANCIAL POSITION
CONSOLIDATED INCOME STATEMENT
90. Property, plant and equipment
Total assets
10. Financial liabilities at amortised cost
b) Deposits from customers
200. Net Profit (Loss) for the year (+/-)
Total liabilities and shareholders' equity
20. Interest income and similar revenues
30. Net interest margin
120. Operating income
150. Net profit from financial activities
180. Net profit from financial and insurance activities
190. Administrative costs:
b) other administrative costs
210. Impairment on property, plant and equipment
230. Other operating income/charges
240. Operating costs
290. Total profit or loss before tax from continuing operations
310. Total profit or loss after tax continuing
330. Net profit or loss
350. Holding income (loss) of the year
Assets (€/thousand)
Liabilities and shareholders’ equity (€/thousand)
Item (€/thousand)
31/12/2019
31/12/2019
2019
51,699
51,699
51,724
51,724
(25)
51,699
(612)
(612)
(612)
(612)
(612)
8,675
8,675
(8,312)
224
587
(25)
(25)
(25)
(25)
Consolidated financial statements December 31, 2019• 120
This section shows the accounting policies adopted to prepare the consolidated financial statements as of December 31, 2019. Such description is provided with reference to the
recognition, classification, measurement and derecognition of the different assets and liabilities.
This category includes the financial assets that meet both the following conditions:• the financial asset is held under a business model whose objective is achieved both through the collection of expected contractual cash flows and through sale (Hold to Collect and Sell business model), and • the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI Test” passed).
This caption also includes equity instruments, not held for trading, for which the option was exercised upon initial recognition of their designation at fair value through other comprehensive income.In particular, this caption includes:• debt securities that can be attributed to a Hold to Collect and Sell business model and that have passed the SPPI test;• equity interests, that do not qualify as investments in subsidiaries, associates or joint ventures and are not held for trading, for which the option has been exercised of their designation at fair value through other comprehensive income;• loans that are attributable to a Hold to Collect and Sell business model and have passed the SPPI Test, including the portions of syndicated loans subscribed that are originally intended to be sold and are part of a Hold to Collect and Sell business model.
According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no
reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through other comprehensive income to one of the other two categories established by IFRS 9 (Financial assets measured at amortized cost or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In the event of reclassification from this category to the amortized cost category, the cumulative gain (loss) recognized in the valuation reserve is allocated as an adjustment to the fair value of the financial asset at the reclassification date. In the event of reclassification to the fair value through profit or loss category, the cumulative gain (loss) previously recognized in the valuation reserve is reclassified from shareholders’ equity to net income (loss).Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments and at disbursement date for loans.On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument.
After initial recognition, the Assets classified at fair value through other comprehensive income, other than equity instruments, are measured at fair value, with the recognition in profit or loss of the impact resulting from the application of the amortized cost, the impairment effects and any exchange rate effect, whereas the other
1. FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVOCI)
A.2 - MAIN ITEMS IN THE FINANCIAL STATEMENTS
Notes to the consolidated financial statements • 121
Consolidated financial statements December 31, 2019• 122
instruments classified as stage 2 (performing for which there has been a significant increase in credit risk since the initial recognition date) and as stage 3 (credit impaired exposures), a lifetime expected loss for the financial instrument is recognized. Equity instruments are not subject to the impairment process.
Financial assets are derecognized solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets.Conversely, if a significant part of the risks and rewards relative to the sold financial assets is maintained, they continue to be recorded in financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognized where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognized for the entity’s continuing involvement, measured by the exposure to changes in value of assets disposed and to variations in the relevant cash flows. Lastly, financial assets sold are derecognized if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties.
gains and losses resulting from a change in fair value are recognized in a specific shareholders’ equity reserve until the financial asset is derecognized.Upon the total or partial sale, the cumulative gain or loss in the valuation reserve is transferred, in whole or part, to the income statement.
Equity instruments, for which the choice has been made to classify them in this category, are measured at fair value and the amounts recognized in Other comprehensive income cannot be subsequently transferred to profit or loss, not even if they are sold. The only component related to these equities that is recognized through profit or loss is their dividends. Fair value is determined on the basis of the criteria already described for Financial assets designated at fair value through profit or loss.For the equities included in this category, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate.
Financial assets measured at fair value through other comprehensive income – both in the form of debt securities and loans – are subject to the verification of the significant increase in credit risk (impairment) required by IFRS 9, in the same way as Assets measured at amortized cost, with the consequent recognition through profit or loss of a value adjustment to cover the expected losses. More specifically, for instruments classified as stage 1 (i.e., financial assets at origination, when not impaired, and instruments for which there has not been a significant increase in credit risk since the initial recognition date), a 12-month expected loss is recognized on the initial recognition date and at each subsequent reporting date. For
Notes to the consolidated financial statements • 123
This category includes the financial assets (in particular loans and debt securities) that meet both the following conditions: • the financial asset is held under a business model whose objective is achieved through the collection of expected contractual cash flows (Hold to Collect business model), and • the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI Test” passed). More specifically, the following are recognized in this caption: • loans to banks in their various forms that meet the requirements referred to in the paragraph above; • loans to customers in their various forms that meet the requirements referred to in the paragraph above; • debt securities that meet the requirements referred to in the paragraph above. This category also includes the operating loans and receivables connected to the provision of financial activities and services as defined by the Consolidated Law on Banking and the Consolidated Law on Finance (e.g. for the distribution of financial products and servicing activities). According to the general rules established by IFRS 9 on the reclassification of financial assets, reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from the amortized cost category to one of the other two categories established by IFRS 9 (Financial assets measured at fair value through other comprehensive income or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. Gains and losses resulting from the difference between the amortized cost of a financial
2. FINANCIAL ASSETS MEASURED AT AMORTIZED COST
asset and its fair value are recognized through profit or loss in the event of reclassification to Financial assets measured at fair value through profit or loss and under Shareholders’ equity, in the specific valuation reserve, in the event of reclassification to Financial assets measured at fair value through other comprehensive income. Initial recognition of the financial asset occurs at settlement date for debt securities and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. In particular, for loans, the disbursement date is usually the same as the date of signing of the contract. Should this not be the case, a commitment to disburse funds is made along the subscription of the contract, which will cease to exist upon disbursement of the loan. The loan is recognized based on its fair value, equal to the amount disbursed or subscription price, inclusive of the costs/revenues directly attributable to the single loan and determinable from inception, even when settled at a later date. Costs that, even with the aforementioned characteristics, are reimbursed by the borrower or are classifiable as normal internal administrative costs are excluded.After the initial recognition, these financial assets are measured at amortized cost, using the effective interest method. The assets are recognized in the balance sheet at an amount equal to their initial carrying amount less principal repayments, plus or minus the cumulative amortization (calculated using the effective interest rate method referred to above) of the difference between this initial amount and the amount at maturity (typically attributable to costs/income directly attributable to the individual asset) and adjusted by any provision for losses. The effective interest rate is the rate that exactly discounts estimated future cash payments of the asset, as principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to that financial asset. This measurement method uses a financial approach and allows distribution of the economic effect
Consolidated financial statements December 31, 2019• 124
expected credit loss to a 12-month expected credit loss for the instrument. These financial assets, when they are performing, are subject to an assessment, aimed at establishing the value adjustments to be recognized in the financial statements, at the level of individual loan (or “tranches” of securities), according to the risk parameters consisting of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), derived from the AIRB models, and duly adjusted to take account of the provisions of IFRS 9. If, in addition to a significant increase in credit risk, there is also objective evidence of impairment, the amount of the loss is measured as the di�erence between the carrying amount of the asset – classified as “non-performing”, like all the other relationships with the same counterparty – and the present value of the estimated future cash flows, discounted using the original e�ective interest rate. The amount of the loss, to be recognized through profit or loss, is established based on individual measurement or determined according to uniform categories and, then, individually allocated to each position, and, takes account of forward-looking information and possible alternative recovery scenarios. Non-performing assets include financial assets classified as bad, unlikely-to-pay or past due by over ninety days according to the rules issued by the Bank of Italy, in line with the IAS/IFRS and EU Supervisory Regulations. The expected cash flows take into account the expected recovery times and the estimated realizable value of any guarantees. The original e�ective rate of each asset remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortized cost had no
of the costs/income directly attributable to a financial asset over its expected lifetime. The amortized cost method is not used for assets, measured at historical cost, whose short duration makes the e²ect of discounting negligible, or for assets without a definite maturity or revocable loans. The measurement criteria are closely linked to the inclusion of these instruments in one of the three stages of credit risk established by IFRS 9, the last of which (stage 3) consists of non-performing financial assets and the remaining (stages 1 and 2) of performing financial assets. With regard to the accounting representation of the above measurement e²ects, the value adjustments for this type of asset are recognized in profit or loss: • on initial recognition, for an amount equal to the 12-month expected credit loss; • on subsequent measurement of the asset, when the credit risk has not increased significantly since initial recognition, in relation to changes in the amount of adjustments for the 12-month expected credit losses; • on subsequent measurement of the asset, when the credit risk has increased significantly since initial recognition, in relation to the recognition of adjustments for expected credit losses over the contractually agreed remaining lifetime of the asset; • on subsequent measurement of the asset, where – after a significant increase in credit risk has occurred since initial recognition – the increase is no longer “significant” due to the alignment of the cumulative value adjustments to take account of the change from a lifetime
Notes to the consolidated financial statements • 125
impairment losses been recognized in previous periods. Recoveries on impairment with time value effects are recognized in net interest income. In some cases, during the lifetime of these financial assets, and of loans in particular, the original contractual conditions may be subsequently modified by the parties to the contract. When the contractual clauses are subject to change during the lifetime of an instrument, it is necessary to verify whether the original asset should continue to be recognized in the balance sheet or whether, instead, the original instrument needs to be derecognized and a new financial instrument needs to be recognized. In general, changes to a financial asset lead to its derecognition and the recognition of a new asset when they are “substantial”.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:• the rights to receive cash flows from the asset have expired; or• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Consolidated financial statements December 31, 2019• 126
Hedging derivatives are stated at fair value. Specifically:• in the case of cash flow hedges, derivatives are recognized a their fair value. Any change in the fair value of the e�ective part of the hedge is recognized through OCI, in item 120. “Valuation reserve” while any change in the fair value of the ine�ective part of the hedge is recognized through profit or loss in item 90.• in the case of fair value hedges, any change in the fair value of the hedging instrument is recognized through profit or loss in item 90. “Net result of hedging activity”. Any change in the fair value of the hedged item, attributable to the risk hedged with the derivative instrument, is recognized through profit and loss as an o�setting entry of the change in the carrying amount of the hedged item.
The fair value of derivative instruments is calculated on the basis of interest and exchange rates quoted in the market, taking into account the counterparties’ creditworthiness, and reflects the present value of the future cash flows generated by the individual contracts.Gains or losses on derivatives hedging interest rate risk are allocated either to “Interest and similar income” or “Interest and similar expenses”, as the case may be.
A derivative contract is designated for hedging activities if there is a formal document of the relationship between the hedged instrument and the hedging instrument and whether the hedge is e�ective since inception and, prospectively, throughout its life.
A hedge is e�ective (in a range between 80% and 125%) when the changes in the fair value (or cash flows) of the hedging financial instrument almost entirely o�set the changes in hedged item with regard to the risk being hedged.E�ectiveness is assessed at every year-end or interim reporting date by using:• prospective tests, to demonstrate an expectation of e�ectiveness in order to qualify for hedge accounting;• retrospective tests, to ensure that the hedging
Hedging derivatives are intended to o²set potential losses/gains on a specific item or group of items, attributable to a specific risk, through the gains/losses generated on another instrument or group of instruments in the event that the specific risk in question materializes. The FCA Bank Group hedges its exposure to the interest rate risk associated with receivables arising from instalment loans and bonds issued at fixed interest rates with derivatives designated as fair value hedges. Derivatives entered into to hedge the variable interest rate risk associated with the debt of the companies engaged in long-term rental are designated as cash flow hedges.Only derivatives entered into with a counterparty not belonging to the Group may be treated as hedging instruments.
3. HEDGING DERIVATIVES
Notes to the consolidated financial statements • 127
Macro hedging is considered highly effective if, like fair value hedges, at inception and in subsequent periods the changes in fair value of the hedged amount are offset by the changes in fair value of the hedging derivatives in the range of 80% to 125%.
relationship has been highly effective throughout the reporting period, measuring the extent to which the achieved hedge deviates from a perfect hedge.
If the tests fail to demonstrate hedge effectiveness, hedge accounting, as indicated above, is discontinued and the derivative contract is reclassified to held-for-trading financial assets or financial liabilities and is therefore measured in a manner consistent with its classification. In case of macro hedging, IAS 39 permits the establishment of a fair value hedge for the interest rate risk exposure of a designated amount of financial assets or liabilities so that a group of derivative contracts can be used to offset the changes in fair value of the hedged items as interest rates vary.
Macro hedges cannot be applied to a net position being the difference between financial assets and liabilities.
Consolidated financial statements December 31, 2019• 128
Investments in joint ventures (IFRS 11) as well as in companies subject to significant influence (IAS 28) are recognized with the equity method.The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.The statement of profit or loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.Under the equity method, the investment in an associate or a joint venture is initially recognized at cost.If there is any evidence that the value of an investment has been impaired, the recoverable value of the investment is estimated, taking account the present value of the future cash flows that it will generate, including its disposal value.If the recovery value is lower than book value, the difference is recorded in the income statement.In subsequent periods, if the reasons for the impairment cease to exist, the original value may be restored through the income statement.
This item includes furniture, fixtures, technical and other equipment and assets related to the leasing business.These tangible assets are used to provide goods and services, to be leased to third parties, or for administrative purposes and are expected to be utilized for more than one period.This item consists of:• assets for use in production• assets held for investment purposes.
Assets held for use in production are utilized to provide goods and services as well as for administrative purposes and are expected to be used for more than one period. Typically, this category includes also assets held to be leased under leasing arrangements.This item includes also assets provided by the Group in its capacity as lessor operating lease agreements.
Assets leased out include vehicles provided under operating lease agreements by the Group’s long-term car rental companies. Trade receivables to be collected in connection with recovery procedures in relation to operating leases are classified as “Other assets”. Operating lease agreements with a buyback clause are also included in “Other assets”.Tangible assets comprise also leasehold improvements, whenever such expenses are value accretive in relation to identifiable and separable assets. In this case, classification takes place in the specific sub-items of reference in relation to the asset.Asset held for investment purposes refer to investment property as per IAS 40, i.e. properties held (owned or under a finance lease) in order to receive rental income and/or an appreciation of the invested capital.Tangible assets are initially recognized at cost, inclusive of purchase price and all the incidental charges incurred directly to purchase and to put the asset in service. Costs incurred after purchase are only capitalized if they lead to an increase in the future economic benefits deriving from the asset to which they relate. All other costs are recorded in the income statement as incurred.
4. INVESTMENTS
5.PROPERTY, PLANT AND EQUIPMENT
Notes to the consolidated financial statements • 129
Subsequently, tangible assets are recognized at cost, less accumulated depreciation and impairment losses.Depreciation is calculated on a straight line basis considering the remaining useful life and value of the asset.At every reporting date, if there is any evidence that an asset might be impaired, the book value of the asset is compared with its realizable value – equal to the greater of fair value, net of any selling costs, and the value in use of the asset, defined as the net present value of future cash flows generated by the asset.
Any impairment losses and adjustments are recorded in the income statement, item 210 “Impairment/reinstatement of tangible assets”.If the reasons that gave rise to the impairment no longer apply, then the loss is reversed for the amount that would restore the asset to the value that it would have had in the absence of any impairment, less accumulated depreciation.Initial direct costs incurred in the negotiation and execution of an operating agreement are added
to the leased assets in equal instalments, based on the length of the agreement.Tangible assets are derecognized upon disposal or when they are retired from production and no further economic benefits are expected from them. Any difference between the selling price or realizable value and the carrying amount is recognized through profit or loss, item 280 “Gains (losses) from the sale of investments”.
Consolidated financial statements December 31, 2019
consistent with the function of the intangible asset.Indefinite-life intangible assets, including goodwill, are not amortized but are tested every year for impairment both individually and at the level of cash generating units. Every year (or whenever there is evidence of impairment) goodwill is tested for impairment. To this end, the cash generating unit to which goodwill is to be attributed is identified. The amount of any impairment is calculated as the difference between the carrying amount of goodwill and its recoverable value, if lower. Recoverable value is equal to the greater of the fair value of the cash generating unit, less any selling costs, and the relevant value in use.Any adjustments are recognized in the income statement, item 270. “Goodwill impairment”. No reversal of impairment is permitted for goodwill.
Intangible assets are derecognized upon disposal or when and no further economic benefits are expected from them. Any difference between the selling price or realizable value and the carrying amount is recognized through profit or loss, item 280 “Gains (losses) from the sale of investments”.
Intangible assets are non-monetary long-term assets, identifiable even though they are intangible, controlled by the Group and which are likely to generate future economic benefits.Intangible assets include mainly goodwill, software, trademarks and patents.Goodwill arising in a business combination is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests) and any previous interest held over the fair value of net identifiable assets acquired and liabilities assumed.In the case of software generated internally the costs incurred to develop the project are recognized as intangible assets provided that the following conditions are met: technical feasibility, intention to complete, future usefulness, availability of sufficient technical and financial resources and the ability to measure reliably the costs of the project.Intangible assets are recognized if they are identifiable and originated from legal or contractual rights.
Intangible assets purchased separately and/or generated internally are initially recognized a cost and, except for goodwill, are amortized on a straight line basis over their remaining useful life.Subsequently, they are measured at cost net of accumulated amortization and any accumulated impairment losses. The useful life of intangible assets is either definite or indefinite.Definite-life intangibles are amortized over their remaining useful life and are tested for impairment every time there is objective evidence of a possible loss of value. The amortization period of a definite-life intangible asset is reviewed at least once every year, at year end. Changes in the useful life in which the future economic benefits related to the asset will materialize result in changes in the amortization period and are considered as changes in estimates. The amortization of definite-life intangible asset is recognized in the income statement in the cost category
6.INTANGIBLE ASSETS
• 130
Notes to the consolidated financial statements • 131
Tax assets and liabilities are recognized in the consolidated statement of financial position in line item 110. “Tax assets” on the asset side and line item 60. “Tax liabilities” on the liability side.In accordance with the balance sheet method, current and deferred taxes are accounted for as follows:• current tax assets, that is payments in excess of taxes due under applicable national tax laws;• current tax liabilities, or taxes payable under applicable national tax laws;• deferred tax assets, that is income taxes recoverable in future years and related to:
• deductible timing di²erences;
• unused tax loss carry-forwards; and
• unused tax credits carried forward;• deferred tax liabilities, that is income tax amounts payable in future years due to the excess of income over taxable income due to timing di²erences.
Current and deferred tax assets and liabilities are calculated by applying national tax laws in force and are accounted for as an expense (income) in accordance with the same accrual basis of accounting applicable to the costs and revenues that generated them.Generally, deferred tax assets and liabilities arise in the cases where the deductibility of a cost or the taxability of a revenue is deferred with respect to their recognition.Deferred tax assets and liabilities are recognized on the basis of the tax rates that, at the balance sheet date, are expected to be applicable in the year in which the asset will be realized or the liability extinguished, on the basis of the tax legislation in force, and are periodically revised to take account of any change in legislation.Deferred tax assets are recognized, to the extent that they can be recovered against future income. In accordance with IAS 12, the probability that there is su°cient taxable income in future should be verified from time to time. If the analysis reveals that there is no su°cient future income, the deferred tax assets
7.CURRENT AND DEFERRED TAXATION
are reduced accordingly.Current and deferred taxes are recognized in the income statement, item 300 “Income tax on continuing operations”, with the exception of those taxes related to items recognized, in the current or in another year, directly through equity, such as those related to gains or losses on available-for-sale financial assets and those related to changes in the fair value of cash flow hedges, whose changes in value are recognized, on an after-tax basis, directly in the statement of comprehensive income in the “Valuation reserve”.Current tax assets are shown in the balance sheet net of current tax liabilities whenever the following conditions are met:• existence of an enforceable right to o�set the amounts recognized;• the parties intend to settle the assets and liabilities in a single payment on a net basis or to realize he asset and simultaneously extinguish the liability.
Deferred tax assets are reported in the Statement of financial position net of deferred tax liabilities whenever the following conditions are met:• existence of a right to o�set the underlying current tax assets with current tax liabilities; and• both deferred tax assets and liabilities relate to income taxes applied by the same tax jurisdiction on the same taxable entity or on di�erent taxable entities that intend to settle the current tax assets and liabilities on net basis (typically in the presence of a tax consolidation agreement).
Consolidated financial statements December 31, 2019• 132
Notes to the consolidated financial statements • 133
Post-employment benefits and similar obligationsPost-employment benefits are established in accordance with labor agreements and are qualified as defined-benefit plans.Obligations associated with employee defined-benefit plans and the relevant pension costs associated to current employment are recognized based on actuarial estimates by applying he projected unit credit method. Actuarial gains/losses resulting from the valuation of the liabilities of the defined-benefit plan are recognized through Other Comprehensive Income (OCI) in the “Valuation reserve”. Such re-measurements are not reclassified to profit or loss in subsequent periods.”The discount rate used to calculate the present value of the obligations associated with post-employment benefits changes depending on the country/currency in which the liability is denominated and is set on the basis of yields, at the balance sheet date, of bonds issued by prime corporates with an average maturity consistent with that of the liability. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.”
8.PROVISIONS FOR RISKS AND CHARGES
Other provisionsOther provisions for risks and charges relate to costs and charges of a specified nature and existence certain or probable but whose amount or date of payment is uncertain on the balance sheet date. Provisions for risks and charges are made solely whenever:a) there is a current (legal or constructive) obligation as a result of a past event;b) fulfilment of this obligation is likely to be onerous;c) the amount of the liability can be reliably estimated.When the time value of money is significant, the amount of a provision is calculated as the present value of the expenses that will supposedly be incurred to extinguish the obligation.This item includes also long-term benefits to employees whose expenses are determined with the same actuarial criteria as those of the defined-benefit plans. Actuarial gains or losses are all recognized as incurred through profit or loss.
Consolidated financial statements December 31, 2019• 134
Financial liabilities held for trading include mainly derivative contracts that are not designated as hedging instruments.These financial liabilities are recognized initially at their fair value initially and subsequently until they are extinguished, with the exception of derivative contracts to be settled with the delivery of an unlisted equity instrument whose fair value cannot be determined reliably and that, as such, are recognized at cost.
10.FINANCIAL LIABILITIES HELD FOR TRADING
11.INSURANCE ASSETS AND LIABILITIES
The items bank borrowings, Due to customers and Securities outstanding include the financial instruments (other than financial liabilities held for trading and recognized at their fair value) issued to raise funds from external sources. In particular, securities outstanding reflect bonds issued by Group companies and securities issued by the SPEs in relation to receivable securitization transactions.These financial liabilities are recognized on the date of settlement at fair value, which is normally the amount collected or the issue price, less any transaction costs directly attributable to the financial liability.Subsequently, these instruments are recognized at their amortized cost, on the basis of the e²ective interest method. The only exception is short-term liabilities, as the time value of money is negligible, which continue to be recognized on the basis of the amount collected.
Financial liabilities are derecognized when they reach maturity or are extinguished. Derecognition takes place also in the presence of a buyback of previously issued securities. The di²erence between the carrying amount of the liability and the price paid to buy it back is recognized through profit or loss, item 100.c) “Gains (Losses) on buyback of financial liabilities”.
9.FINANCIAL LIABILITIES AT AMORTISED COST
IFRS 4 defines insurance contracts as contracts under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder (or a party designated by the policyholder) if a specified uncertain future event (the insured event) adversely a�ects the policyholder.The Group’s insurance activity concerns the reinsurance of life and non-life insurance policies sold by insurance companies to customers of consumer credit companies to protect the payment of the debt.The items described below reflect, as prescribed by paragraph 2 of IFRS 4, the operating and financial e�ects deriving from the reinsurance contracts issued and held.In essence the accounting treatment of such products calls for the recognition:• in items 160. “Net premiums” and 170. “Income (losses) from insurance activities” of the income statement, (i) of the premiums, which include the premiums written for the year following the issue of contracts, net of cancellations; (ii) changes in technical provisions, reflecting the variation in future obligations toward policyholders arising from insurance contracts; (iii) commissions for the year due to
Notes to the consolidated financial statements • 135
intermediaries; (iv) cost of claims, redemptions and expirations for the period;• in item 110. “Technical provisions”, on the liability side, of the obligations toward policyholders, calculated individually for every contract with the prospective method, on the basis of demographic/financial assumptions currently used by the industry;• in item 80. “Technical provisions ceded to reinsurers”, on the asset side, the obligations attributable to reinsurers.
12. OTHER INFORMATION
• 136 Consolidated financial statements December 31, 2019
Employee Severance FundThe FCA Bank Group has established different defined-benefit and defined-contribution pension plans, in line with the conditions and practices in the countries in which it carries out its activities.In Italy, the Employee Severance Fund is treated as “post-employment benefits”, classified as:• “defined-contribution plan” for the severance amounts accrued to employees as of 1 January 2007 (effective date of Legislative Decree no. 252 on the reform of supplementary pension funds), both in case the employee exercised the option to allocate the sums attributable to him/her to supplementary pension funds and in case the employee opted for the allocation of these sums to INPS’s Treasury fund. For these sums, the amount accounted for as personnel expenses is determine on the basis of the contributions due without applying actuarial calculation methods;• “defined-benefit plan”, recognized on the basis of its actuarial value as determined by using the projected credit unit method, for the severance amounts accrued until 31 December 2006. These amounts are recognized on the basis of their actuarial value as determined by using the projected credit unit method. To discount these amounts to present value, the discount rate was determined on the basis of yields of bonds issued by prime corporates taking into account the average remaining duration of the liability, as weighted by the percentage of any payment and advance payment, for each payment date, in relation to the total amount to be paid and paid in advance until the full amount of the liability is extinguished.
Costs related to the employee severance fund are recognized in the income statement, item no. 190.a) “Administrative expenses: personnel expenses” and include, for the part relating to the defined-benefit plan (i) service costs related to companies with less than 50 employees; (ii) interest cost accrued for the year, for the defined-contribution part; (iii)
Revenue recognitionRevenue from contracts with customers is recognized, when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount can be reliably quantified. In particular, for all financial instruments measured at amortized cost, such as loans and receivables to customers and banks, and interest-bearing financial assets classified as AFS, interest income is recorded using the effective interest rate (EIR) and classified under “Interest and similar income”.Commissions receivable upon execution of a significant act or upon the rendering of a service are recognized as revenue when the significant act has been completed or when the services are provided. On the other hand, commissions related to origination fees received by the entity relating to the creation or acquisition of a financial asset are deferred and recognized as an adjustment to the effective rate of interest.Revenues from services are recognized when the services are rendered.Dividends are recognized in the year in which their distribution is approved.
the severance amounts accrued in the year and credited to either the pension funds or to INPS’s Treasury fund.On the Statement of financial position, item 90 “Employee severance fund” reflects the balance of the fund exiting at 31 December 2006, minus any payment made until December 31, 2019. Item 80 “Other liabilities” – “Due to social security institutions” shows the debt accrued at December 31, 2019 relating to the severance amounts payable to pension funds and INPS’s Treasury fund.Actuarial gains and losses, reflecting the difference between the carrying amount of the liability and the present value of the obligation at year-end, are recognized in the consolidated statement of comprehensive income without reclassification to profit or loss (that is through equity in the Valuation reserve), in accordance with IAS 19 Revised.
Notes to the consolidated financial statements • 137
Cost recognitionCosts are recognized as they are incurred. Costs attributable directly to financial instruments measured at amortized cost and determinable since inception, regardless of when the relevant outlays take place, flow to the income statement via application of the effective interest rate.Impairment losses are recognized as incurred.
Finance leasesLease transactions are accounted for in accordance with IAS 17.In particular, recognition of a lease agreement as a lease transaction is based on the substance that the agreement on the use of one or more specific assets and whether the agreement transfers the right to use such asset.A lease is a finance lease if it transfers all the risks and benefits incidental to ownership of the leased asset; if it does not, then a lease is an operating lease.
For finance lease agreements where the FCA Bank Group acts as lessor, the assets provided under finance lease arrangements are reported as a receivable in the statement of financial position for a carrying amount equal to the net investment in the leased asset. All the interest payments are recognized as interest income (finance component in lease payments) in the income statement while the part of the lease payment relating to the return of principal reduce the value of the receivable.
Foreign currency transactions Foreign currency transactions are entered, upon initial recognition, in the reference currency by applying to the foreign currency amount the exchange rate prevailing on the transaction date. At every interim and year-end reporting date, items originated in a foreign currency are reported as follows:• cash and monetary items are converted at the exchange rate prevailing at the reporting date;• non-monetary items, recognized at historical cost, are converted at the exchange rate prevailing on the date of the transaction;• non-monetary items, recognized at fair value, are converted at the exchange rate prevailing at the reporting date.
Exchange rate differences arising from the settlement of monetary items and the conversion of monetary items at exchange rates other than the initial ones, or those used to translate the previous year’s accounts, are recognized in the income statement as incurred. When a gain or a loss related to a non-monetary item is recognized through OCI, the exchange rate difference related to such item is also recognized through OCI.By converse, when a gain or a loss is recognized through profit or loss, the exchange rate difference related to such item is also recognized through profit or loss.
Consolidated financial statements December 31, 2019• 138
Use of estimates Financial reporting requires use of estimates and assumptions which might determine significant effects on the amounts reported in the Statement of financial position and in the Income statement, as well as the disclosure of contingent assets and liabilities. The preparation of these estimates implies the use of the information available and subjective assessments, based on historical experience, used to make reasonable assumptions to record the transactions. By their nature the estimates and assumptions used may vary from one year to the next and, as such, so may the carrying amounts in the following years, significantly as well, as a result of changes in the subjective assessments made.
The main cases where subjective assessments are required include:• quantification of losses on loans and receivables, investments and, in general, on financial assets;• evaluation of the recoverability of goodwill and other intangible assets;• quantification of employee provisions and provisions for risks and charges;• estimates and assumptions on the recoverability of deferred tax assets.
The estimates and assumptions used are periodically and regularly updated by the Group. Variations in actual circumstances could require that those estimates and assumptions are subsequently adjusted. The impacts of any changes in estimates and assumptions are recognized directly in profit or loss in the period in which the estimates are revised, if the revision impacts only that period, or also in future periods, if the revision impacts both the current and future periods.Following are the key considerations and assumptions made by management in applying IFRS and that could have a significant impact on the amounts recognized in the consolidated financial statements or where there is significant risk of a material adjustment to the
Recoverability of deferred tax assetsThe Group had deferred tax assets on deductible temporary differences and theoretical tax benefits arising from tax loss carryforwards. The Group has recorded this amount because it believes that it is likely to be recovered.In determining this amount, management has taken into consideration figures from budgets and forecasts consistent with those used for impairment testing and discussed in the preceding paragraph on the recoverable amount of non-current assets.
Moreover, the contra accounts that have been recognized (i.e. deferred tax assets not recognized to the extent that it is not probable that taxable profit will be available against which the unused tax losses or unused tax credits can be utilized) are considered to be sufficient to protect against the risk of a further deterioration of the assumptions in these forecasts, taking account of the fact that the net deferred assets so recognized relate to temporary differences and tax losses which, to a significant extent, may be recovered over a very long period, and are therefore consistent with a situation in which the time needed to exit from the crisis and for an economic recovery to occur extends beyond the horizon implicit in the abovementioned estimates.
carrying amounts of assets and liabilities during a subsequent financial period.
Notes to the consolidated financial statements • 139
Pension plans and other post-employment benefitsEmployee benefit liabilities with the related assets, costs and net interest expense are measured on an actuarial basis, which requires the use of estimates and assumptions to determine the net liabilities or net assets.The actuarial method takes into consideration parameters of a financial nature such as the discount rate and the expected long term rate of return on plan assets, the growth rate of salaries as well as the likelihood of potential future events by using demographic assumptions such as mortality rates, dismissal or retirement rates.
In particular, the discount rates selected are based on yields curves of high quality corporate bonds in the relevant market. The expected returns on plan assets are determined considering various inputs from a range of advisors concerning long-term capital market returns, inflation, current bond yields and other variables, adjusted for any specific aspects of the asset investment strategy. Salary growth rates reflect the Group’s long-term actual expectation in the reference market and inflation trends. Changes in any of these assumptions may have an effect on future contributions to the plans
Liabilities and contingent liabilitiesThe Group makes provisions for pending disputes and legal proceedings when it is considered probable that there will be an outflow of funds and when the amount of the losses arising therefrom can be reasonably estimated. If an outflow of funds becomes possible but the amount cannot be estimated, the matter is disclosed in the notes. The Group is the subject of legal and tax proceedings covering a range of matters which are pending in various jurisdictions. Due to the uncertainty inherent in such matters, it is difficult to predict the outflow of funds which will result from such disputes. Moreover, the cases and claims against the Group often derive from complex and difficult legal issues which are subject to a different degree of uncertainty, including the facts and circumstances of each particular case, the jurisdiction and the different laws involved. In the normal course of business the Group monitors the stage of pending legal procedures and consults with legal counsel and experts on legal and tax matters. It is therefore possible that the provisions for the Group’s legal proceedings and litigation may vary as the result of future developments of the proceedings under way.
Consolidated financial statements December 31, 2019• 140
In 2019 no inter-portfolio transfers were made.
According to IFRS 13, 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 (exit price). IFRS 7 introduces instead the definition of “fair value hierarchy”. This standard calls for fair value to be determined in accordance with a three-level hierarchy based on the significance of the inputs used in such measurement. The objective is to set the price at which the asset can be sold.
The three levels are as follows:• Level 1 (L1): quoted prices (without adjustments) in an active market – as defined by IFRS 9 – for the assets and liabilities to be measured;• Level 2 (L2): inputs other than quoted market prices included within Level 1 that are observable either directly (prices) or indirectly (derived from prices) in the market;• Level 3 (L3): inputs that are not based on observable market data.
The methods adopted by the Company to determine fair value are illustrated below:
QUALITATIVE DISCLOSURES
A.3 - INFORMATION ON TRANSFERS BETWEEN PORTFOLIOS OF FINANCIAL ASSETS
A.4 - INFORMATION ON FAIR VALUE
Notes to the consolidated financial statements • 141
• Austrian government bonds purchased by the Austrian subsidiary, quoted in regulated markets (caption: “Financial assets designated at fair value with effects on comprehensive income”);• bonds issued by FCA Bank S.p.A and the subsidiaries in Ireland and Switzerland under the Euro Medium Term Notes programme and listed in regulated markets (Caption: “Financial liabilities valued at amortized cost – c) debt certificates including bonds”);• bonds issued in connection with securitization transactions, placed with the public or with private investors, by different Group entities (Caption: Financial liabilities valued at amortized cost – c) debt certificates including bonds”). For listed bonds issued in connection with securitization transactions, reference to prices quoted by Bloomberg. Financial assets and liabilities classified as (L2), whose fair value is determined by using inputs other than quoted market prices that are observable either directly (prices) or indirectly (derived from prices) in the market, refer to: • OTC trading derivatives to hedge securitization transactions;• OTC derivatives entered into to hedge Group companies’ receivables.
Receivable portfolio (caption:”Financial assets valued at amortized cost – Loans and receivables with customers”), borrowings and other issued bonds, not quoted, are classified in L3.Derivatives are measured by discounting their cash flows at the rates plotted on the yield curves provided by Bloomberg. Receivables and payables are measured in the same way. In accordance with IFRS 13, to determine fair value, the FCA Bank Group considers default risk, which includes changes in the creditworthiness of the entity and its counterparties.
In particular:• a CVA (Credit Value Adjustment) is a negative amount that takes into account scenarios in which the counterparty fails before the company and the company has a positive exposure to the counterparty. Under these scenarios, the company incurs a loss equal to the replacement value of the derivative; • a DVA (Debt Value Adjustment) is a positive amount that takes into account scenarios in which the company fails before the counterparty and the company has a negative exposure to the counterparty. Under these scenarios, the company obtains a gain for an amount equal to the replacement cost of the derivative.
For listed bonds issued in connection with private securitization transactions, reference is provided by prime banks active in the market taking as reference equivalent transactions, or made to the nominal value of the bonds or the fair value attributed by the banking counterparty that subscribed to them. The Group uses measurement methods (mark to model) in line with those generally accepted and used by the market. Valuation models are based on the discount of future cash flows and the estimation of volatility; they are reviewed both when they are developed and from time to time, to ensure that they are fully consistent with the objectives of the valuation.
These methods use inputs based on prices prevailing in recent transactions on the instrument being measured and/or prices/quotations of instruments with similar characteristics in terms of risk profile.
Consolidated financial statements December 31, 2019• 142
A.4.5 FAIR VALUE HIERARCHYA.4.5.1 Assets and liabilities valued at fair value on a recurring basis: breakdown by fair value levels
Legend: L1 = Level 1 L2 = Level 2 L3 = Level 3
-
-
-
-
-
36,930
-
-
36,930
3,407
91,533
94,940
31/12/2019
L1 L1L2 L2L3 L3
Assets and liabilities valued at fair value 31/12/2018
1. Financial assets valued at fair value with impact on income statement
of which
a) Financial assets held for trading
b) Financial assets designated at fair value
c) Other financial assets compulsorily assessed at fair value
2. Financial assets valued at fair value with impact on overall profitability
3. Cover derivatives
4. Tangible assets
5. Intangible assets
Total
1. Financial liabilities held for trading
2. Financial liabilities designated at fair value
3. Cover derivatives
Total
-
-
-
-
9,807
-
-
-
9,807
-
-
-
-
-
-
-
-
9,634
-
-
-
9,634
-
-
-
0
-
-
-
35,940
-
-
35,940
3,729
-
53,920
57,649
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
QUANTITATIVE DISCLOSURES
Notes to the consolidated financial statements • 143
A.5 INFORMATION REGARDING “DAY ONE PROFIT/LOSS”
A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: distributions for levels of fair value
1,997,960
-
-
1,997,960
-
-
-
L1BV BV L1L2 L2L3 L3
1. Financial assets valued
at amortized cost
2. Available for sale financial
assets
3. Non current assets classified
as held for sale
Total
1. Financial liabilities measured
at amortized cost
2. Liabilites included in disposal
group classified as hfs
Total
-
-
-
-
9,439,872
-
9,439,872
25,903,033
-
-
25,903,033
26,933,628
-
26,933,628
25,744,698
-
-
25,744,698
26,207,022
-
26,207,022
-
-
-
-
7,831,589
-
7,831,589
2,156,711
-
-
2,156,711
-
-
-
23,953,234
-
-
23,953,234
18,318,466
-
18,318,466
23,615,424
-
-
23,615,424
18,585,456
-
18,585,456
BV = Book Value L1 = Leve 1 L2 = Leveo 2 L3 =Leve 3
31/12/2019Assets / Liabilities not measured at fair value or mea-sured at fair value on a non-recurring basis
31/12/2018
IFRS 7, Paragraph 28 regulates the particular case in which, in the event that the purchase of a financial instrument calculated at fair value but not listed in market the transaction cost, that generally represent the best estimate at fair value in an initial basis, diverges to the fair value determined with the evaluative technics adopted by the entity.
In this case an evaluative profit/loss is realized
and an adequate informative note for class of financial instrument must be provided at the purchase place.At December 31, 2019, in the Consolidated Financial Statement this case is not present.
Consolidated financial statements December 31, 2019• 144
Part B - Information on the consolidated balance sheet
This item includes cheques, cash and cash equivalent items.
ASSETS
SECTION 1 CASH AND CASH BALANCES - ITEM 10
1.1 Cash and cash balances: breakdown
a) Cash
b) Demand deposits with Central Banks
Total
34
362,502
362,536
Total31/12/2019
Total31/12/2018
26
585,246
585,272
Notes to the consolidated financial statements • 145
The item mainly includes a bond issued by the Austrian government and held by FCA Bank GmbH (Austria) and FCA Bank Polska S.A.; these are mandatory deposits required by the local Central Bank.
SECTION 3 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - ITEM 30
3.1 Financial assets at fair value through other comprehensive income: breakdown by product
-
-
-
-
-
-
Total31/12/2019
L1 L1L2 L2L3 L3Item/Values
Total31/12/2018
1. Debts securities
1.1 Structured securities
1.2 Other debt securities
2. Equity instruments
3. Loans
Total
9,807
-
9,807
-
-
9,807
9,634
-
9,634
-
-
9,634
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Legend: L1 = Level 1 L2 = Level 2 L3 = Level 3
Consolidated financial statements December 31, 2019• 146
3.2 Financial assets at fair value through other comprehensive income: breakdown by borrowers/issuers
1. Debt securities
a) Central Banks
b) Public sector entities
c) Banks
d) Other financial companies
of which: insurance companies
e) Non financial companies
2. Equity instruments
a) Banks
b) Other issuers:
- other financial companies
of which: insurance companies
- non financial companies
- others
3. Loans
a) Central Banks
b) Public sector entities
c) Banks
d) Other financial companies
of which: insurance companies
e) Non financial companies
f) Households
Total
9,634
-
9,634
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,634
Total31/12/2019
Items/Values Total31/12/2018
9,807
-
9,807
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,807
Notes to the consolidated financial statements • 147
3.3 Financial assets at fair value through other comprehensive income: gross value and total accumulated impairments
-
-
-
-
-
-
-
-
-
x
-
-
-
-
-
Gross value
First stage
First stage
Second stage
Second stage
Third stage
Third stage
of which: instruments
with low credit risk
Partial accumulated write-offs*
Total accumulated impairments
Debt securities
Loans
Total 31/12/2019
Total 31/12/2018
of which:
purchased or originated
creditimpaired
9,807
-
9,807
9,634
x
-
-
-
-
x
-
-
-
-
-
-
-
-
-
-
-
-
x
x
-
Note:
(*) Value shown for information purposes.
Consolidated financial statements December 31, 2019• 148
SECTION 4 FINANCIAL ASSETS AT AMORTISED COST - ITEM 40
4.1 Financial assets at amortised cost: breakdown by product of loans and advances to banks
Total 31/12/2019Fair value Fair valueBook value Book value
Total 31/12/2018
First and second
stage
First and second
stage
of which: acquired or originated
credit
of which: acquired or originated
credit
Third stage
Third stageL1 L1L2 L2L3 L3
A. Receivables to Central Banks
1. Time deposits
2. Compulsory reserves
3. Repos
4. Others
B. Receivables to banks
1. Loans
1.1 Current accounts and demand deposits
1.2. Time deposits
1.3 Other loans:
- Repos
- Finance leases
- Others
2. Debts securities
2.1 Structured securities
2.2 Other debt securities
Total
566,008
27,867
27,884
-
510,257
1,431,935
1,431,935
1,403,493
-
28,442
26,764
1,490
188
-
-
-
1,997,944
615,449
41,233
14,433
-
559,783
1,541,242
1,541,242
1,498,680
12,142
30,420
25,367
-
5,054
-
-
-
2,156,691
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
x
x
x
x
-
-
x
x
x
x
x
x
-
-
-
-
-
x
x
x
x
-
-
x
x
x
x
x
x
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
566,008
x
x
x
x
1,431,952
1,431,952
x
x
x
x
x
x
-
-
-
1,997,960
615,449
x
x
x
x
1,541,262
1,541,262
x
x
x
x
x
x
-
-
-
2,156,711
-
x
x
x
x
-
-
x
x
x
x
x
x
-
-
-
-
-
x
x
x
x
-
-
x
x
x
x
x
x
-
-
-
-
Type of transaction/Values
Notes to the consolidated financial statements • 149
Bank deposits and current accounts include funds available on current accounts or deposited by SPVs totaling €842 million (€883 million at December 31, 2018). Liquidity is restricted as per each relevant securitization contract. A breakdown by SPV is provided below:
During the year a new securitization started: A-Best Seventeen S.r.l..The Liquidity Reserve is designed to meet any cash shortfalls for the payment of interest on senior securities and certain specific expenses.The funds held in current accounts or as bank deposits are used for:• acquisition of new portfolio of receivables/loans;• repayment of notes;• payment of interest on “senior” notes;• SPE operating costs.
SPV 31/12/2019 31/12/2018
A-Best Seventeen S.r.l.
A-Best Ten S.r.l. in liquidazione
A-Best Eleven UG
A-Best Twelve S.r.l.
A-Best Thirteen FT
A-Best Fourteen S.r.l.
A-Best Fifteen S.r.l.
A-Best Sixteen UG
Nixes Six Plc
Nixes Seven B.V.
Erasmus Finance DAC
Fast 3 S.r.l.
TOTAL
-
29,835
21,137
70,679
34,496
160,041
93,027
55,038
56,195
39,322
273,800
49,170
882,740
45,579
-
10,636
58,112
28,504
164,241
94,461
48,633
61,412
42,494
263,301
24,863
842,236
Bank deposits and current accounts also include short-term deposits held temporarily with banks and year-end current account balances resulting from ordinary operating activities.
Consolidated financial statements December 31, 2019• 150
4.2 Attività finanziarie valutate al costo ammortizzato: composizione merceologica dei crediti verso clientela
With reference to the table Reconciliation between outstanding and loans and receivables with customers, in the Outstanding are included the following items:- “Deposits from customers” for €208 million;- “Other loans” for €83 million.FactoringThis item includes:• receivables arising from sales to the dealer network for €12 million factored on a non-recourse basis by the FCA Group; however, since this amount was in excess of the lines of credit available, the associated risk was not transferred to the factors;• receivables arising from sales to the dealer network for €6.1 billion, factored on a non-recourse basis by the commercial partners to companies of FCA Bank Group; of which, assets of SPE Fast 3 S.r.l for €1.5 billion and Erasmus Finance DAC for €1.3 billion, consolidated in accordance with IFRS 10; FCA Bank
Deutschland GmbH (Germany), FCA Capital France S.A. (France) and FCA Capital Espana EFC S.A. (Spain) are the originators of Fast 3 S.r.l..
Other loansThis item includes credit financing mainly concerned with fixed instalment car loans and personal loans.The receivables comprise the amount of transaction costs/fees calculated in relation to the individual loans by including the following:• grants received in relation to promotional campaigns;• fees received from customers;• incentives and bonuses paid to the dealer network;• commissions on the sale of ancillary products.Receivables include €7.3 billion relating to SPEs for the securitization of receivables, as reported in accordance with IFRS 10.
Total 31/12/2019
Fair value Fair valueBook value Book value
Total 31/12/2018
First and second
stage
First and second
stage
of which: acquired
or originated credit impaired financial assets
Third stage
Third stageL1 L1L2 L2L3 L3
1. Loans
1.1.Current accounts
1.2. Repos
1.3. Mortgages
1.4. Credit cards, personal
loans and wage assignemnt
1.5 Finance leases
1.6. Factoring
1.7. Other loans
2. Debt securities
2.1. Structured securities
2.2. Other debt securities
Total
23,752,511
207,986
-
-
112,270
6,095,998
6,267,886
11,068,371
-
-
-
23,752,511
23,446,429
57,456
-
-
86,751
5,640,285
7,158,739
10,503,198
-
-
-
23,446,429
152,578
349
-
-
536
32,500
82,979
36,214
-
-
-
152,578
141,578
528
-
-
418
23,156
83,095
34,381
-
-
-
141,578
-
x
x
x
x
x
x
x
-
-
-
-
-
x
x
x
x
x
x
x
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
x
x
x
x
x
x
x
-
-
-
-
-
x
x
x
x
x
x
x
-
-
-
-
23,953,234
x
x
x
x
x
x
x
-
-
-
23,953,234
23,615,424
x
x
x
x
x
x
x
-
-
-
23,615,424
Type of transaction/Values of which:
acquired or originated
credit impaired financial assets
Notes to the consolidated financial statements • 151
4.3 Financial assets at amortised cost: breakdown by borrowers/issuers of loans and advances to customers
4.4 Financial assets at amortised cost: gross value and total accumulated impairments
This item includes loans granted to the FCA Group dealer network to fund network development, commercial requirements in handling used vehicles and to meet specific short/medium term borrowing requirements.
The item includes as well the loans to legal entity of retail business classified in this item in accordance with the definition of Bank of Italy of consumer credit.
-
-
-
-
-
152,578
129
524
-
113,920
38,004
152,578
Total31/12/2019
First and second
stage
First and second
stage
Third stage
Third stage
of which: acquired or
originated credit impaired financial
assets
of which: acquired
or originated credit impaired financial assets
Type of transaction / Values
Total 31/12/2018
1. Debt securities
a) Public sector entities
b) Other financial company
of which: insurance companies
c) Non financial companies
2. Loans to:
a) Public sector entities
b) Other financial company
of which: insurance companies
c) Non financial companies
d) Households
Total
-
-
-
-
-
23,752,511
21,665
267,661
40
10,124,082
13,339,102
23,752,511
-
-
-
-
-
23,446,429
2,158
187,772
18
10,009,810
13,246,689
23,446,429
-
-
-
-
-
141,578
27
164
-
101,492
39,895
141,578
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note:(*) Value shown for information purposes.
-
880,247
880,247
622,749
-
-
16,643,315
16,643,315
16,106,550
x
-
47,917
47,917
46,772
-
Gross value
First stage
First stage
Second stage
Second stage
Third stage
Third stage
of which: instruments
with low credit risk
Partial accumulated
write-offs*
Total accumulated impairments
Debt securities
Loans
Total 31/12/2019
Total 31/12/2018
of which: purchased
or originated credit impaired
-
24,994,198
24,994,198
25,103,861
x
-
76,073
76,073
76,718
x
-
146,815
146,815
145,386
-
-
299,393
299,393
286,964
-
-
344
344
303
-
Consolidated financial statements December 31, 2019• 152
SECTION 5 HEDGING DERIVATIVES - ITEM 50
5.1 Hedging derivatives: breakdown by hedging type and fair value hierarchy
35,159
1,771
-
-
-
36,930
9,834,617
416,439
-
-
-
10,251,056
7,922,166
170,758
-
-
-
8,092,924
FV 31/12/2019 FV 31/12/2018NV31/12/2019
L1 L1L2 L2L3 L3
NV31/12/2018
A. Financial derivatives
1. Fair Value
2. Cash flows
3. Net investment in foreign
subsidiaries
B. Credit derivatives
1. Fair Value
2. Cash flows
Total
-
-
-
-
-
-
-
-
-
-
-
-
35,503
437
-
-
-
35,940
-
-
-
-
-
-
-
-
-
-
-
-
This item reflects the fair value of the derivative contracts entered into the hedge interest rate and exchange rate risks.The notional amount of the cash flow hedge refers to the derivatives used to hedge the exposure to interest rate risk on long-term rental activities.
Legend:NV= Notional Value L1= Level 1 L2= Level 2 L3= Level 3
Notes to the consolidated financial statements • 153
5.2 Hedging derivatives: breakdown by hedged portfolios and hedging type
Fair Value
Micro-hedge
equity instruments
and equity indices risk
debt securities
and interest rates risk
currencies and gold
others Macro-hedge
commo-dities
Micro-hedge
Net Investments
on foreign subsidiaries
Cash-flow hedges
1. Financial assets at fair through
other comprehensive income
2. Financial assets at
amortised cost
3. Portfolio
4. Other transactions
Total assets
1. Financial Liabilities
2. Portfolio
Total liabilities
1. Expected transactions
2. Financial assets and
liabilities portfolio
-
-
x
-
-
x
-
-
23,361
x
23,361
x
x
-
3,016
x
-
3,016
-
x
-
x
x
-
x
x
-
-
x
x
-
x
x
-
x
x
-
-
x
x
-
x
x
-
-
x
-
-
-
x
-
x
x
-
-
x
-
-
-
x
-
-
x
x
x
-
x
-
x
-
-
x
1,771
x
x
x
-
-
x
x
x
x
-
x
x
8,782
x
8,782
x
-
-
x
-
Transactions / Hedging type
credit Macro-hedge
The value of the macro-hedge portfolio refers to the loan portfolio hedge, according to the Fair Value Hedge method (macrohedge).The value relating to the micro-hedge refers to the coverage of the interest rate risk on bonds issued.
Consolidated financial statements December 31, 2019• 154
SECTION 6 VALUE ADJUSTMENT OF FINANCIAL ASSETS SUBJECT TO MACRO-HEDGE - ITEM 60
SECTION 7 EQUITY INVESTMENTS - ITEM 70
6.1 Value adjustment of macro-hedged financial assets: breakdown by hedged portfolios
7.1 Equity investments: information on shareholders’ equity
1. Positive adjustment
1.1 of specific portfolios:
a) financial assets at amortised cost
b) financial assets at fair value through other comprehensive income
1.2 overall
2. Negative adjustment
2.1 of specific portfolios:
a) financial assets at amortised cost
b) financial assets at fair value through other comprehensive income
2.2 overall
Total
33,511
-
-
-
33,511
(6,094)
-
-
-
(6,094)
27,417
Total31/12/2019
Total31/12/2018
60,135
-
-
-
60,135
(11,990)
-
-
-
(11,990)
48,145
Value adjustment of macro-hedged financial assets / Values
Denominations Vote availability %Participating share %
Legal residence
B. Companies under significant influence
1. CODEFIS S.C.P.A.
2. FCA SECURITY S.C.P.A.
3. FCA SECURITY S.C.P.A.
4. OSEO S.A.
FCA BAnk S.p.A.
FCA BAnk S.p.A.
Leasys S.p.A.
FCA Capital France S.A.
30%
0,21%
0,10%
0,003%
Turin, Italy
Turin, Italy
Turin, Italy
Turin, Italy
Notes to the consolidated financial statements • 155
SECTION 8 INSURANCE RESERVES ATTRIBUTABLE TO REINSURERS - ITEM 80
8.1 Insurance reserves attributable to reinsurers: breakdown
A. No-life business
A1. Premiums reserves
A2. Claims reserves
A3. Other insurance reserves
B. Life business
B1. Mathematical reserves
B2. Reserves for amounts to be disbursed
B3. Other reserves
C. Technical reserves for investment risks to be borne by the insured
C1. Reserves for contracts with performances connected to investment
funds and market indices
C2. Reserves arising from pension fund management
D. Total insurance reserves attributable to reinsurers
5,485
4,537
948
-
4,111
3,200
911
-
-
-
-
9,596
Total31/12/2019
Total31/12/2018
4,635
3,993
642
-
8,524
2,978
5,546
-
-
-
-
13,159
Consolidated financial statements December 31, 2019• 156
TABELLA1. Owened assets
a) lands
b) buildings
c) furniture
d) electronic system
e) other
2. Leased assets
a) lands
b) buildings
c) furniture
d) electronic system
e) other
Total
of which: obtained by the enforcement of collateral
2,472,619
-
33
6,230
139
2,466,217
74,001
-
-
7
-
73,994
2,546,620
-
Total31/12/2019
Activities/Values Total31/12/2018
3,145,075
-
238
6,336
119
3,138,382
51,662
-
-
86
215
51,361
3,196,737
-
SECTION 9 PROPERTY, PLANT AND EQUIPMENT - ITEM 90
9.1 Property, plant and equipment used in the business: breakdown of assets carried at cost
Total amortization equal to €444 million is mainly due to tangible assets in relation to Operating lease.
With reference to the table above, please consider that the item “Owned assets e) others” includes €3,092 million that in the table Reconciliation between outstanding and loans and receivables with customers are represented in the Outstanding.
Notes to the consolidated financial statements • 157
9.6 Property, plant and equipment used in the business: annual changes
A. Gross opening balance
A.1 Total net reduction value
A.2 Net opening balance
B. Increases:
B.1 Purchasing
- of which business combinations
B.2 Capitalised expenditure on improvements
B.3 Write-backs
B.4 Increases in fair value allocated to
a) equity
b) profit & loss
B.5 Positive exchange differences
B.6 Transfer from investment properties
B.7 Other changes
C. Decreases:
C.1 Disposals
- of which business combinations
C.2 Amorization
C.3 Impairment losses allocated to
a) equity
b) profit & loss
C.4 Decreases in fair value allocated to
a) equity
b) profit & loss
C.5 Negative exchange difference
C.6 Transfer to:
a) property, plant and equipment held for
investment
b) non-current assets and group of assets
held for sale
C.7 Other changes
D. Net closing balance
D.1 Total net reduction in value
D.2 Final gross balance
E. Carried at cost
3,322,314
(775,693)
2,546,620
1,524,520
1,449,225
-
13,428
10,714
-
-
-
2
-
51,150
874,403
418,549
-
444,576
3,954
-
3,954
-
-
-
2
-
-
-
7,323
3,196,737
(1,213,233)
4,409,970
-
OtherElectronic systems
FurnituresBuildingsLands Total
3,279,762
(739,551)
2,540,211
1,521,974
1,447,050
-
13,428
10,714
-
-
-
-
x
50,781
872,441
417,891
-
443,588
3,954
-
3,954
-
-
-
-
-
x
-
7,008
3,189,743
(1,176,103)
4,365,846
-
2,333
(2,194)
139
332
244
-
-
-
-
-
-
2
x
86
137
-
-
89
-
-
-
-
-
-
2
-
x
-
47
334
(2,283)
2,617
-
40,104
(33,867)
6,237
1,590
1,307
-
-
-
-
-
-
-
x
283
1,405
378
-
759
-
-
-
-
-
-
-
-
x
-
268
6,422
(34,626)
41,048
-
115
(81)
33
624
624
-
-
-
-
-
-
-
-
-
420
280
-
140
-
-
-
-
-
-
-
-
-
-
-
238
(221)
459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated financial statements December 31, 2019• 158
SECTION 10 INTANGIBLE ASSETS - ITEM 100
10.1 Intangible assets: breakdown by asset type
Total31/12/2019
Finite life
Finite life
Indefinite life
Indefinite lifeAssets/Values
Total 31/12/2018
A.1 Goodwill
A.1.1 attributable to the group
A.1.2 attributable to minorities
A.2 Other intangible assets
A.2.1 Assets carried at cost
a) Intangible assets generated internally
b) Other assets
A.2.2 Assets measured at fair value
a) Intangible assets generated internally
b) Other assets
Total
79,390
79,390
-
79,390
-
-
-
79,390
63,914
63,914
-
63,914
-
-
-
63,914
183,183
183,183
-
-
-
-
-
-
-
-
183,183
183,183
183,183
-
-
-
-
-
-
-
-
183,183
Notes to the consolidated financial statements • 159
10.2 Intangible assets: annual changes
GoodwillIndefinite
LifeIndefinite
LifeFinite Life Finite Life
Other intangible assets: others
Other intangible assets: internally generated
Total
A. Opening balance
A.1 Total net reduction in value
A.2 Net opening balance
B. Increases
B.1 Purchases
- of which business combinations
B.2 Increases in intangible assets
generated internally
B.3 Write-backs
B.4 Increases in fair value
- to equity
- to P&L statement
B.5 Positive exchange differences
B.6 Other changes
C. Decreases
C.1 Disposals
- of which business combinations
C.2 Write-downs
- Amortisations
- Depreciations
+ equity
+ P&L statement
C.3 Decreases in fair value
- to equity
- to P&L statement
C.4 Transfer to non-current assets
held for sale
C.5 Negative exchange differrences
C.6 Other changes
D. Net closing balance
D.1 Total net write-down
E. Gross closing balance
F. Carried at cost
229,181
(45,998)
183,183
-
-
-
x
x
-
x
x
-
-
-
-
-
-
x
-
x
-
-
x
x
-
-
-
183,183
(45,998)
229,181
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
256,515
(192,600)
63,914
29,623
28,520
-
-
-
-
-
-
-
1,103
14,147
-
-
13,963
13,963
-
-
-
-
-
-
-
-
184
79,390
(192,601)
271,991
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
485,696
(238,598)
247,097
29,623
28,520
-
-
-
-
-
-
-
1,103
14,147
-
-
13,963
13,963
-
-
-
-
-
-
-
-
184
262,573
(238,599)
501,172
-
Consolidated financial statements December 31, 2019• 160
10.3 Other information
The item “Goodwill” includes:• €78.4 million relating to the Italian subsidiary Leasys S.p.A.;• €101.9 million of goodwill relating to dealer financing business and arising on the reorganization of the FCA Bank Group which occurred in 2006 and 2007; in particular:
• €50.1 million related to the recognition - by the subsidiary Fidis Servizi Finanziari S.p.A., which merged into the Holding FCA Bank on March 1st, 2008 - of goodwill arising on the transfer of the “Network finance and other financing” business and the acquisition of the “Holding Division” from Fidis S.p.A.;
• €15 million related to the acquisition of the Fidis Servizi Finanziari S.p.A. Group, which was eventually merged into the parent Company;
• €36.8 million related to the acquisition of certain European companies engaged in dealer financing;
• €1.5 million of goodwill as a result of the first consolidation of the company Ferrari Financial Services GmbH; on November 7, 2016 FCA Bank S.p.A. acquired a majority stake in Ferrari Financial Services GmbH (“FFS GmbH”) for a total purchase price of €18.6 million upon consummation of the share purchase agreement entered into by the parties;• €1.4 million of goodwill as a result of the first consolidation of the company Win Rent S.p.A. in the FCA Bank Group, on October 1st, 2018.
The item “Other intangible assets” mainly refers to:• licenses and software of FCA Bank for €49 million;• royalties of Leasys S.p.A. for €21 million.
The CGU’s carrying amount The carrying amount of a CGU must be determined consistently with the criteria guiding the estimation of its recoverable amount. From the standpoint of a banking firm, the cash flows generated by a CGU cannot be identified without considering the cash flows of financial assets/liabilities, given that these result the firm’s core business. Following this approach (i.e. “equity valuation”), the carrying amount
Impairment test of goodwillAccording to IAS 36 – Impairment of Assets, goodwill must be tested for impairment every year to determine its recoverable amount. Therefore, on every reporting date the Group tests goodwill for impairment, estimating the relevant recoverable amount and comparing it with its carrying amount to determine whether the asset is impaired.
Definition of CGUsTo test goodwill for impairment – considering that goodwill generates cash flows only in combination with other assets – it is necessary first of all to attribute it to an organizational unit that enjoys relative operational autonomy and is capable of generating cash flows. Such cash flows must be independent of other areas of activity but interdependent within the organizational unit, which is aptly defined as cash generating unit (CGU). IAS 36 suggests that it is necessary to correlate the level at which goodwill is tested with the level of internal reporting at which management monitors the entity’s operations. The definition of this level depends solely on the organizational models and the attribution of management responsibilities over the direction of the operational activity and the relevant monitoring. For FCA Bank Group, the CGU relevant for goodwill allocation are identified in Dealer Financing business unit, in Leasys S.p.A. and in Ferrari Financial Services GmbH business.
Notes to the consolidated financial statements • 161
Determining the discount rate to calculate the present value of cash flows In determining value in use, cash flows were discounted to present value at a rate that reflects current considerations on market trends, the time value of money and the risks specific to the business. The discount rate used – given that it was a financial firm – was estimated solely in terms of equity valuation, that is considering only the
Results of the impairment test Goodwill was tested for impairment on the reporting date, without any impairment loss.In particular, for the Dealer Financing line the test was performed by adopting the definition of CGU described above.The underlying assumptions to calculate the recoverable amounts of the CGUs reflect past experience and earnings forecasts approved by the competent corporate bodies and officers and are consistent with external sources of information, particularly:• the discount rate of 7.19% was calculated as cost of capital, considering a risk-free interest rate of -0.19%, a risk premium for the company of 6.48% and a beta of 1.14;• the estimated growth rate was 1.4%.
A sensitivity analysis was performed by simulating a change in significant parameters such as an increase in the discount rate up to 1% or a decrease in the growth rate “g”. After such analysis the recoverable amount is confirmed to be higher than the carrying amount.
Criteria to estimate the value in use of a CGU The value in use of the CGUs was determined by discounting to present value their expected cash flows over a five-year forecast period. The cash flow of the fifth year was assumed to grow in perpetuity (at a rate indicated with the notation “g”, to determine terminal value. The growth rate “g” was set on the basis of a consistent medium-term rate of inflation in the euro zone).
From the standpoint of a banking/financial company, the cash flows generated by a CGU cannot be identified without considering the cash flows of financial assets/liabilities, given that these arise from the company’s core business. In other words, the recoverable amount of the CGUs is affected by the above cash flows and, as such, must include also financial assets/liabilities. Accordingly, these assets and liabilities must be allocated to the CGU of reference.In light of the above, it would be rather fair to say that the cash flows of the individual CGUs are equivalent to the earnings generated by the individual CGUs. Accordingly, it was assumed that the free cash flow (FCF) corresponds to the Net Profit of a CGU under valuation.
of the CGU can be determined in terms of free cash flow to consolidated equity, including non-controlling interests.
cost of capital (Ke), in keeping with the criteria to determine cash flows that, as already shown, include also the inflows and outflows associated with financial assets and liabilities. The cost of capital was then calculated by using the Capital Asset Pricing Model (CAPM). Based on this model, cost of capital is calculated as the sum of a risk-free return and a risk premium, which in turn, depends on the risk specific to the business (such risk reflecting both industry risk and country risk).
Consolidated financial statements December 31, 2019• 162
SECTION 11 TAX ASSETS AND TAX LIABILITIES - ASSETS ITEM 110 AND LIABILITIES ITEM 60
11.1 Assets for anticipated levy
11.2 Deferred tax liabilities: breakdown
- P&L Exchange
- Patrimony exchange
Total
- P&L Exchange
- Patrimony exchange
Total
176,660
13,059
189,719
139,931
1,126
141,057
31/12/2019
31/12/2019
31/12/2018
31/12/2018
185,863
15,170
201,032
181,917
1,126
183,043
Notes to the consolidated financial statements • 163
11.3 Variation of deferred tax assets (balancing P&L)
1. Opening balance
2. Increases
2.1 Deferred tax assets arisen during the year
a) related to previous fiscal year
b) due to change in accounting criteria
c) write-backs
d) others
2.2 New taxes or increases in tax rates
2.3 Other increases
- of which Business combination
3. Decreases
3.1 Deferred tax assets derecognised during the year
a) reversals of temporary differences
b) write-downs of non-recoverable items
c) due to change in accounting criteria
d) others
3.2 Reduction in tax rates
3.3 Other decreases:
a) conversion into tax credit under Italian Law 214/2011
b) others
4. Closing balance
156,364
38,145
37,611
140
-
-
37,471
-
534
472
17,849
10,129
10,033
-
-
96
1,384
6,336
-
6,336
176,660
31/12/2019 31/12/2018
176,660
40,057
40,057
748
-
-
39,310
-
-
30,854
25,847
23,334
-
-
2,513
252
4,755
-
4,755
185,863
The deferred tax assets on previous tax losses, booked by the susbsidiary Leasys S.p.A., amount to €42 million as at December 31, 2019.
Consolidated financial statements December 31, 2019• 164
11.5 Deferred tax liabilities: annual changes (balancing P&L)
11.6 Variation of the anticipated levy (in exchange of Balance Sheet)
1. Opening balance2. Increases2.1 Deferred tax liabilities arisen during the year
a) related to precedent fiscal yearb) due to change in accounting criteriac) others
2.2 New taxes or increases in tax rates2.3 Other increases3. Decreases3.1 Deferred tax liabilities derecognised during the year
a) reversals of temporary differencesb) due to change in accounting criteriac) others
3.2 Reduction in tax rates3.3 Other decreases4. Closing balance
111,099 44,499 44,424
114 -
44,310 31 44
15,667 10,881 10,033
- 848
4,626 161
139,931
31/12/2019 31/12/2018
139,931 59,050 58,986 17,067
- 41,918
- 65
17,065 11,194 11,170
- 24
1,118 4,753
181,917
1. Opening balance2. Increases2.1 Deferred tax assets arisen during the year
a) related to previous fiscal yearsb) due to change in accounting criteriac) others
2.2 New taxes or increases in tax rates2.3 Other increases3. Decreases3.1 Deferred tax liabilities derecognised during the year
a) reversals of temporary differencesb) Write-downs of non-recoverable itemsc) due to change in accounting criteriad) others
3.2 Reduction in tax rates3.3 Other decreases4. Closing balance
2,620 10,882 10,822
-9,381 1,501
- -
443 401
- - -
401 -
42 13,059
31/12/2019 31/12/2018
113,059 2,111 2,111
- -
2,111 - - - - - - - - - -
15,170
The item includes deferred tax assets recognized through equity as calculated on the cash flow hedge reserve relating to the future
cash flows of hedging derivatives and the fiscal effect on the AOCI reserve.
Notes to the consolidated financial statements • 165
11.7 Deferred tax liabilities: annual changes ( balancing Net Equity)
1. Opening balance2. Increases2.1 Deferred tax liabilities arisen during the year
a) related to previous fiscal yearb) due to change in accounting criteriac) others
2.2 New taxes or increase in tax rates2.3 Other increases3. Decreases3.1 Deferred tax liabilities derecognised during the year
a) reversals of temporary differencesb) due to change in accounting criteriac) others
3.2 Reduction in tax rates3.3 Other decreases4. Closing balance
- 1,126 1,126
- 1,126
- - - - - - - - - -
1,126
31/12/2019 31/12/2018
1,126 - - - - - - - - - - - - - -
1,126
Consolidated financial statements December 31, 2019• 166
SECTION 13 OTHER ASSETS – ITEM 130
13.1 Other assets: breakdown
1. Due from employees
2. Receivables arising from sales and services
3. Sundry receivables
receivables arising from insurance services
receivables in the process of collection
security deposits
reinsurance assets
other
4. Operating lease receivables
5. Consignment Stock
6. Accrued income
Total
3,225
214,434
367,982
26,584
718
1,807
14,606
324,267
471,636
210,641
10,942
1,278,860
31/12/2019Breakdown 31/12/20183,175
153,369
502,215
25,093
1,370
1,811
13,973
459,968
527,056
147,315
17,041
1,350,171
With reference to the above representation, please consider that items “Consignment stock” and “Operating lease receivables” are represented net of provision (euro 34 million) in the table Reconciliation between outstanding and loans and receivables with customers.The item “Receivables arising from sales and services” includes receivables from incentives and services.
The item “Receivables arising from insurance services” relates mainly to the Parent Company and the subsidiary Leasys S.p.A. and includes sums due from insurance companies for the payment of commissions.“Reinsurance activities” relate to the Irish subsidiary.
“Receivables arising from operating leases” amount to €527 million and the value of the vehicles purchased by the leasing companies under buyback arrangements with the seller – thus not accounted for as non-current assets – for a total of €301 million.
The item “Goods on consignment” reflects the value of the vehicles owned by FCA Dealer Services UK Ltd., FCA Dealer Services Espana (Branch Morocco), FCA Capital Norge, FCA Capital Sverige and FCA Capital Danmark (Branch Finland). These vehicles are held by FCA dealers awaiting their sale.
Notes to the consolidated financial statements • 167
SECTION 1 FINANCIAL LIABILITIES AT AMORTISED COST ITEM 10
1.1 Financial liabilities at amortised cost: breakdown by product of deposits from banks
LIABILITIES
Totale 31/12/2019
Fair value Fair value
Totale 31/12/2018
BV BVL1 L1L2 L2L3 L3
1. Loans from central banks
2. Loans from banks
2.1 Other current accounts and
demand deposits
2.2 Time deposits
2.3 Loans
2.3.1 Repos
2.3.2 Other
2.4 Liabilitiesrelating to commitments
to repurchase own equity instruments
2.5 Lease payables
2.6 Other liabilities
Total
1,313,243
8,964,804
33,888
-
8,930,316
119,270
8,811,046
-
-
600
10,278,046
x
x
x
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
x
x
10,989,736
1,217,880
8,589,233
105,798
-
8,483,434
189,753
8,293,681
-
-
-
9,807,112
x
x
x
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
x
x
10,013,177
Type of transactions/Values
This item includes mainly borrowings from banks, of which €3,536 million from the Crédit Agricole Group at arm’s length.
Legend:BV= Book Value L1= Level 1 L2= Level 2 L3= Level 3
Consolidated financial statements December 31, 2019• 168
1.2 Financial liabilities at amortised cost: breakdown by product of deposits from customers
Total 31/12/2019
Fair value Fair value
Total 31/12/2018
BV BVL1 L1L2 L2L3 L3
1. Current accounts and demand deposits
2. Time deposits
3. Loans
3.1 Reverse repos
3.2 Other
4. Liabilities relating to commitments to
repurchase own equity instruments
5. Lease payables
6. Other liabilities
Total
259,955
843,600
403,342
-
403,342
-
51,681
240,173
1,798,752
x
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
1,793,965
266,081
742,554
320,093
-
320,093
-
-
493,997
1,822,725
x
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
1,845,591
Type of transactions/Values
Other loans include €300 million of advances factored on a non-recourse basis and retail liabilities and security deposits made by private individuals in relation to finance leases.
Other liabilities include mainly advances factored on a recourse basis for € 170 million.
With reference to the above representation, please consider that a portion of the item “Others” (€2 million) is included in the item “Outstanding” in the table Reconciliation between outstanding and loans and receivables with customers.
Legend:BV= Book Value L1= Level 1 L2= Level 2 L3= Level 3
Notes to the consolidated financial statements • 169
1.3 Financial liabilities at amortised cost: breakdown by product of debt securities in issue
1.4 Breakdown of subordinated debts/deposits
Total 31/12/2019
Fair value Fair value
Totale31/12/2018
BV BVL1 L1L2 L2L3 L3
A. Debts securities
1. Bonds
1.1 structured
1.2 other
2. Other securities
2.1 structured
2.2 other
Total
14,856,252
-
14,856,252
578
-
578
14,856,829
9,439,872
-
9,439,872
-
-
-
9,439,872
-
-
-
-
-
-
-
5,534,187
-
5,534,187
578
-
578
5,534,765
14,576,562
-
14,576,562
624
-
624
14,577,185
7,831,589
-
7,831,589
-
-
-
7,831,589
-
-
-
-
-
-
-
6,726,064
-
6,726,064
624
-
624
6,726,688
Type of securities/Values
A.1 Subordinated debts
- banks
- customers
A.2 Non subordinated debts
- banks
- customers
B.1 Subordinated deposits
- banks
- customers
B.2 Non subordinated deposits
- banks
- customers
Total
330,526
330,526
-
11,299,312
9,476,587
1,822,725
-
-
-
14,577,185
8,643,364
5,933,821
26,207,023
31/12/2019 31/12/2018
330,485
330,485
-
11,746,313
9,947,561
1,798,752
-
-
-
14,856,830
3,302,792
11,554,038
26,933,628
Legend:BV= Book Value L1= Level 1 L2= Level 2 L3= Level 3
Consolidated financial statements December 31, 2019• 170
SECTION 2 FINANCIAL LIABILITIES HELD FOR TRADING - ITEM 20
2.1 Financial liabilities held for trading: breakdown by product
Total 31/12/2019
Fair value Fair value*
Fair value*
Fair value
Total 31/12/2018
NV NV
L1 L1L2 L2L3 L3
A. Financial liabilities
1. Deposits from banks
2. Deposits from customers
3. Debt securities
3.1 Bonds
3.1.1 Structured
3.1.2 Other bonds
3.2 Other securities
3.2.1 Structured
3.2.2 Other
Total (A)
B. Derivative instruments
1. Financial derivatives
1.1 Trading
1.2 Linked to fair value option
1.3 Other
2. Credit derivatives
2.1 Trading
2.2 Linked to fair value option
2.3 Other
Totale (B)
Totale (A+B)
-
-
-
-
-
-
-
-
-
-
x
x
x
x
x
x
x
x
x
x
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,407
-
-
3,407
-
-
-
-
3,407
3,407
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
x
x
-
-
-
-
-
-
-
-
-
-
x
x
x
x
x
x
x
x
x
x
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,729
-
-
3,729
-
-
-
-
3,729
3,729
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
x
x
x
x
x
x
x
-
x
x
x
x
x
x
x
x
x
x
Type of transactions/Values
This item reflects the negative change in the derivative financial instruments hedging the securitization transactions entered into with the same banks as those involved in such transactions.
Legenda
NV = Nominal or Notional ValueL1 = Level 1L2 = Level 2L3 = Level 3(*) Fair value calculated excluding changes in credit worthiness of the issuer after issue date.
Notes to the consolidated financial statements • 171
This item reflects the fair value of the derivative contracts entered into to hedge interest rate risks. Changes in value in these contracts, according to the fair value method, are reported through profit and loss, in item 90 “Gains (losses) on hedging activities” of the income statement.
SECTION 4 HEDGING DERIVATIVES - ITEM 40
4.1 Hedging derivatives: breakdown by hedging type and by levels
Fair value 31/12/2019 Fair value 31/12/2018NV31/12/2019
NV31/12/2018
L1 L1L2 L2L3 L3
A. Financial derivatives
1) Fair value
2) Financial flows
3) Foreign investments
B. Credit derivatives
1) Fair value
2) Financial flows
Total
13,432,019
11,185,900
2,246,119
-
-
-
-
13,432,019
-
-
-
-
-
-
-
-
91,533
79,131
12,402
-
-
-
-
91,533
-
-
-
-
-
-
-
-
14,265,349
12,047,119
2,218,230
-
-
-
-
14,265,349
-
-
-
-
-
-
-
-
53,920
46,820
7,100
-
-
-
-
53,920
-
-
-
-
-
-
-
-
Legend:NV = Notional ValueL1 = Level 1L2 = Level 2L3 = Level 3
Consolidated financial statements December 31, 2019• 172
4.2 Hedging derivatives: breakdown by hedged portfolios and type of hedging
Fair Value
Debt securities
and interest rates
Equitiy instruments
and equity indcesx
Currencies and gold
Foreign invest.
Credit Commo-doties
Others
Cash flow
Micro-hedge
1. Financial assets valuated
at fair value with impact on
total profitability
2. Financial assets valued
to amortized cost
3. Portfolio
4. Other operations
Total assets
1. Financial liabilities
2. Portfolio
Total liabilities
1. Expected transactions
2. Portfolio of financial assets
and liabilities
-
-
X
-
-
19,048
X
19,048
X
X
-
X
X
-
-
X
X
-
X
X
-
2,635
X
-
2,635
-
X
-
X
X
-
-
X
-
-
-
X
-
X
X
X
X
X
-
-
-
X
-
X
X
X
X
X
-
-
-
X
-
X
X
X
X
57,449
X
57,449
X
-
-
X
1
-
-
X
-
-
361
X
361
-
X
X
X
-
X
-
X
-
-
X
12,041
X
X
X
-
-
X
X
-
X
-
Transactions/Type of hedge
The generic column shows the amount of derivative contracts hedging the retail receivable portfolio. Such contracts have been accounted for with the fair value hedge (macro hedge). The cash flow hedges refer to derivative contracts hedging interest rate risk. Such contracts, which are used for long-term rental activities, are recognized in accordance with the cash flow hedge method.
Macro-hedge
Micro-hedge
Macro-hedge
Notes to the consolidated financial statements • 173
SECTION 6 TAX LIABILITIES - ITEM 60
SECTION 8 OTHER LIABILITIES - ITEM 80
SECTION 7LIABILITIES INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE - ITEM 70
8.1 Other liabilities: breakdown
For information on this section, see section 11 of the assets.
For information on this section, see section 12 of the assets.
The item “Operating lease payables” mainly includes payables for the purchase of cars and for services rendered to the Group’s long-term-rental companies.With reference to the above representation, please consider that €145 million are represented in the item “Outstanding” of the table Reconciliation between outstanding and loans and receivables with customers.
Line item “Payables for goods and services” includes:
- the provision of administrative, tax and payment services at arm’s length by companies of the FCA Group;- incentives payable to the FCA Group’s dealer network;- charges payable to dealers and banks, mainly in connection with the Parent Company’s operations.
The item “Due to insurance companies” mainly relates to sums due by the parent company and the subsidiary Leasys.
1. Due to employees
2. Operating lease payables
3. Due to social security institutions
4. Sundry payables
- Payables for goods and services
- Due to insurance companies
- Due to customers
- Reinsurance activities
- Others
- Accrued expenses and deferred income
Total
5,808
466,078
4,666
451,227
147,719
58,958
12,335
1,195
169,676
61,344
927,779
Total31/12/2019
Total31/12/2018
6,183
536,346
4,924
466,978
147,923
62,798
11,885
-
187,352
57,020
1,014,431
Consolidated financial statements December 31, 2019• 174
SECTION 9 PREVISION FOR EMPLOYEE SEVERANCE PAYITEM 90
9.1 Provision for employee severance pay: annual changes
A. Opening balance
B. Increases
B.1 Provision of the year
B.2 Other increases
C. Decreases
C.1 Severance payments
C.2 Other decreases
D. Closing balance
Total
12,298
140
(13)
153
812
701
111
11,626
11,626
31/12/2019 31/12/2018
11,626
275
5
270
175
134
41
11,726
11,726
This item reflects the residual obligation for severance indemnities, which was required until December 31, 2006 under Italian legislation to be paid to employees of Italian companies with more than 50 employees upon termination of employment. This severance can be paid in part to employees during their working lives, if certain conditions are met.
Post-employment benefits, as reported in the statement of financial position, represent the present value of this defined benefit obligation,
as adjusted for actuarial gains and losses and for costs relating to labor services not previously recorded.
Provisions for defined benefit pension plans and the annual cost recorded in the income statement are determined by independent actuaries using the projected unit credit method.
Notes to the consolidated financial statements • 175
9.2 Other information
Changes in defined benefit obligations (IAS 19, paragraphs 140 and 141)
Defined benefit obligation as of 01/01/2019
a. Service cost
b. Interest cost
c. Curtailment
d. Other costs
e. Employer's contribution
f. Interest income on plan assets
g.1 Return on plan assets greater/(less) than discount rate
g.2 Return on plan assets greater/(less) than demographic assumptions
g.3 Net actuarial (gain)/loss: others
h. Plan participants' contributions
i. Past service costs/(income) and curtailment (gains) and losses
l. Intercompany transactions
m. Other changes
Total defined benefit obligations as of 31/12/2019
11,626
-
18
-
-
-
-
869
(14)
135
(892)
-
(22)
5
11,726
In order to complete the required assessments it is necessary to adopt the appropriate demographic and economic assumptions referred to:• mortality rates• disability
• employees leaving the company (resignation or layoff)• applications for anticipation• future employees career (hypothetical promotions to higher categories included)• purchasing power evolution
Discount rates
Estimated future salary increases rate (inflation included)
Expected inflation
Mortality rate
Yearly employees outflow average
0.63%
1.17%
1.50%
SI2018 (modified on the basis of historical data)
5.71%
Main actuarial AssumptionsITALY
TFR
Description of the main actuarial assumptions (IAS 19, paragraph 144)
Particularly, based on the FCA Bank S.p.A., following assumptions have been adopted:
Consolidated financial statements December 31, 2019• 176
SECTION 10 PROVISIONS FOR RISKS AND CHARGES - ITEM 100
10.1 Provisions risk and charges: breakdown
10.2 Provisions for risks and charges: annual changes
1. Provisions for credit risk on commitments and financial guarantees given
2. Provisions for other commitments and other guarantees given
3. Pensions and other post-retirement benefit obligations
4. Other provisions for risks and charges
4.1 legal and tax disputes
4.2 obligations for employees
4.3 others
Total
-
-
43,121
208,697
5,856
21,098
181,743
251,818
Total31/12/2019Items/Components
Total31/12/2018
-
-
49,954
175,550
5,677
22,791
147,082
225,504
Provisions for other commitments and other guarantees
given
Other provisions for risks and
charges
Pensions and other
post-retire-ment benefit
obligations
Total
A. Opening balance
B. Increases
B.1 Provisions for the year
B.2 Changes due to pass of time
B.3 Changes due to discount-rate changes
B.4 Other changes
- of which business aggregation operations
C. Decreases
C.1 Use during the year
C.2 Changes due to discount-rate changes
C.3 Other changes
- of which business aggregation operations
D. Closing balance
-
-
-
-
-
-
-
-
-
-
-
-
-
208,697
33,141
23,446
-
-
9,695
-
66,288
39,036
22,641
4,611
-
175,550
43,121
10,760
2,651
-
-
8,109
-
3,927
3,927
0
0
-
49,954
251,818
43,901
26,097
-
-
17,804
-
70,215
42,963
22,641
4,611
-
225,504
Notes to the consolidated financial statements • 177
10.5 Provision for retirement benefits and similar obligations
Description of the main actuarial assumptions
2. Changes in the year of net liabilities (assets) with defined benefits and redemption rights
3. Information on the fair value of plan assets
Changes in defined benefit obligation
Defined benefit obligation as of the prior period end date
a. Service cost
b. Interest cost
c. Curtailment
d. Other costs
e. Employer's contribution
f. Interest income on plan assets
g.1 Return on plan assets greater/(less) than discount rate
g.2 Return on plan assets greater/(less) than demographic assumptions
g.3 Net actuarial (gain)/loss: others
h. Plan participants' contributions
i. Past service costs/(income) and curtailment (gains) and losses
l. Intercompany transactions
m. Other changes
Total defined benefit obligations as of 31/12/2019
31/12/2019
80,088
1,964
1,474
-
330
-
-
9,233
(1,025)
3,293
(3,152)
13
4
332
92,555
Changes in plan assets
Fair value of plan assets as of the prior period end date
a. Interest income on plan assets
b. Employers contribution
c. Disbursements from plan assets
d. Return on plan assets greater/(less) than discount rate
e. Other changes
Total defined benefit obligations as of 31/12/2019
31/12/2019
36,967
837
1,787
(1,044)
4,395
(341)
42,601
Consolidated financial statements December 31, 2019• 178
Referring to provision for retirement benefits, the actuarial amounts of provisions for defined benefit pension plans, required according to IAS 19, are determined by independent actuaries using the projected unit credit method, as described in Part A – Accounting Policies.
This item includes provisions for pension plans set up by foreign subsidiaries for €50 million (mainly Germany and UK, for €29 million and €13 million, respectively).
The following table shows the main actuarial assumptions used for pension plans, distinguished by country (Italy and “Other countries”). The table also includes actuarial assumptions for the Italian post-employment benefits (“Trattamento di Fine rapporto – TFR”).
4. Description of the main actuarial assumptions
Discount rates
Estimated future salary increases
rate (inflation included)
Expected inflation
Mortality tables
Yearly employees outflow average
Other post-employment benefit plans
Other long-term employee benefits
Pension plans
Other post-employment benefit plans
Other long-term employee benefits
ITALY OTHER COUNTRIES
Main actuarial Assumptions
1.01%
2.78%
2.50%
1.15%
2.00%
1.80%
0.79%
2.19%
1.74%
0.63%
1.17%
1.50%
0.63%
1.17%
1.50%
5.71% 5.71% 2.87% 2.25% 3.00%
SI2018 (modified on the basis of
historical data)
AVÖ 2018-P "Angestellte"
MR/FR; BVG 2015 / GT;
RT 2018 G; TH/TF 2000-2002;
AG Prognosetafel 2018; S2PxA tables / CMI 2017 1.25% pa LTR
AVÖ 2018-P "Angestellte";
TH/TF 2000-2002; EAE21012p;
GUS 2018
RT 2018 G; GUS 2018
Notes to the consolidated financial statements • 179
10.6 Provisions for risks and charges: breakdown
1. Other provisions for employees
2. Provisions for tax risks
3. Reserves for legal disputes
4. Provisions for risks and charges related to operating leases
5. Provisions for sundry risks
Total
21,098
3,342
5,561
37,011
141,685
208,697
Total31/12/2019
Total31/12/2018
18,139
326
847
23,732
132,506
175,550
Provision for risks and charges related to operating leasesThis provision mainly consists of provisions for future maintenance and insurance costs for cars provided under operating lease contracts.
Provision for tax risksThis item refers to provisions in connection with tax ligation and related charges.
Provisions for sundry risksThis item reflects:• provisions of €37 million for risks related, in the UK market, to the remaining value of the vehicles purchased with PCP (Personal Contract Purchase) loans and the customers’ option to terminate voluntarily their contract, under local laws;
• provisions of euro €60 million for the sanction imposed by AGCM.
The balance of these provisions reflects the risks in various markets related to the residual value of the vehicles, the respect of local regulations (i.e. consumer protection and anti-trust) and, more generally, to business risks.
Consolidated financial statements December 31, 2019• 180
SECTION 11 INSURANCE RESERVES - ITEM 110
Section 11 – Insurance reserves
Direct business
Total31/12/2019
Indirect business
Total31/12/2018
A. No-life business
A.1 Premiums reserves
A2. Claims reserves
A3. Other insurance reserves
B. Life business
B1. Mathematical reserves
B2. Reserves for amounts to be disbursed
B3. Other reserves
C. Technical reserves for investment risks to be borne
by the insured
C1. Reserves for contracts with performances connected
to investment funds and market indices
C2. Reserves arising from pension fund management
D. Total technical reserves
6,656
5,691
965
-
9,471
3,308
6,163
-
-
-
-
16,127
6,656
5,691
965
-
9,471
3,308
6,163
-
-
-
-
16,127
-
-
-
-
-
-
-
-
-
-
-
-
6,094
5,041
1,053
-
4,568
3,556
1,012
-
-
-
-
10,662
Notes to the consolidated financial statements • 181
SECTION 13 GROUP SHAREHOLDERS’ EQUITY - ITEMS 120, 130, 140, 150, 160, 170 AND 180
13.1 "Share capital" and "treasury shares": breakdown
A. Share Capital
A.1 Ordinary shares
A.2 Savings shares
A.3 Preferred shares
A.4 Other shares
B. Own shares
B.1 Ordinary shares
B.2 saving shares
B.3 preferred shares
B.4 other shares
700,000
-
-
-
-
-
-
-
Total31/12/2019
Total31/12/2018
700,000
-
-
-
-
-
-
-
Consolidated financial statements December 31, 2019• 182
A. Issued shares as at the beginning of the year- fully paid-up- not fully paid-up
A.1 Treasury shares (-)A.2 Shares outstanding: opening balanceB. IncreasesB.1 New issues
- against payment:- business combination transaction- bonds converted- warrants exercised- others
- free:- to employees- to directors- others
B.2 Sales of treasury sharesB.3 Other changesC. DecreasesC.1 CancellationC.2 Purchase of treasury sharesC.3 Business tranferredC.4 Other changesD. Shares outstanding:closing balanceD.1 Treasury shares (+)D.2 Shares outstanding as at the end of the year
- fully paid-up- not fully paid-up
----------------------------
Ordinaries OthersItems/Types
700,000700,000
--
700,000------------------
700,000-
700,000700,000
-
13.2 Share capital - number of shares owned by the Parent Company: annual changes
Share capital is fully paid in. It consists of 700,000,000 shares with a nominal value of €1 each and, at year-end 2019, was unchanged from the previous year.
13.4 Net profit reserve: other informationGroup reserves amount to €1,956 million and include: legal reserve, statutory reserve, valuation reserves and other reserves.The legal reserve, set up as provided for by law, must be at least one fifth of share capital. Should the reserve decrease, it must be reintegrated by allocating at least one twentieth of net income for the year.The valuation reserves amount to negative
€27 million and include reserves of cash flow hedge derivatives for -€7 million, exchange rate valuation reserves (relating to fully consolidated investments) for +€4 million as well as legally required revaluation reserves deriving from the revaluation of property and equipment for €454 thousand and the negative reserve on actuarial profits (losses) from defined benefit pension plans for -€25 million.
Notes to the consolidated financial statements • 183
14.1 Breakdown of item 210 "Shareholders' equity: minorities"
SECTION 14 NON CONTROLLING INTERESTS - ITEMS 190Non-controlling interests is attributable to FCA Bank GmbH, Ferrari Financial Services GmbH and other minorities.
14.2 Equity instruments: breakdown and annual changes
Equity investments in consolidated companies with minority interests
1. Ferrari Financial Services GmbH
2. FCA Bank GmbH
Others investments
Total
1. Minority equity - Ordinary shares
2. Minority equity - Shares - Parent Company (-)
3. Minority equity - Equity instruments
4. Minority equity - Share premium reserve
5. Reserves
6. Valuation reserves
7. Minority equity - Net income (loss)
Total
23,260
25,106
31
48,397
3,389
2,877
37,170
(43)
5,004
48,397
31/12/2019
31/12/2019
Company name 31/12/2018
31/12/2018
29,024
25,876
31
54,931
3,389
2,877
42,053
(51)
6,663
54,931
Consolidated financial statements December 31, 2019• 184
Other information1. Commitments and financial guarantees given
Firststage
Total31/12/2018
Thirdstage
Secondstage
Total31/12/2019
Nominal value on financial releaseobligations and guarantees
Commitment to supply funds
a) Central banks
b) Public sector entities
c) Banks
d) Other financial companies
e) Non-financial companies
f) Households
Financial guarantees issued
a) Central banks
b) Public sector entities
c) Banks
d) Other financial companies
e) Non-financial companies
f) Households
4,962,089
-
-
-
-
4,960,091
1,998
120,224
-
-
120,224
-
-
-
2,675,731
-
-
-
-
2,674,866
865
120,224
-
-
120,224
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,962,089
-
-
-
-
4,960,091
1,998
120,224
-
-
120,224
-
-
-
The item refers to:• revocable commitments subblied by the Group to dealers – item e) Non financial companies;• revocable commitments supplied by the Group to credit card owners – item f) Households.
Financial guarantees issued are sureties entrusted as guarantee to Tax Office.
Notes to the consolidated financial statements • 185
3. Assets used to guarantee own liabilities and commitments
It should be noted that item 3 “Financial asset valued at amortized cost” includes assets encumbrance deriving from securitization operations.
It should also be noted that, in relation to the loans received from BCE following the involvement to the TLTRO refinancing program, were pledged as collateral senior notes for €1.4
1. Financial assets at fair value through profit or loss
2. Financial assets at fair value through other comprehensive income
3. Financial assets at amortised cost
4. Property, plant and equipment
of which:of which: inventories of property, plant and equipment
-
-
7,791,723
-
-
Total31/12/2019Portfolios
Total31/12/2018
-
-
7,961,997
-
-
billion – arising from FCA Bank securitization operations whose notes were not included in the Balance Sheet.
Consolidated financial statements December 31, 2019• 186
7. Financial liabilities aubject to accounting offsetting or under master netting agreements and similar agreements
Related amounts not subjectto accounting
offsetting
Gross amount of the financial
liabilities (a)
Financial assets offset
in balance sheet
(b)
et amount of the financial
liabilities reportes in
balance sheet
(c = a-b)Financial
instruments (d)
Cash collateral received
(e)
Net amount (f = c-d-e)
Net amount
Instrument type 31/12/2019 31/12/2018
1. Derivatives
2. Repos
3. Securities lending
4. Other operations
Total 31/12/2019
Total 31/12/2018
2,996
119,270
-
1,200,000
1,322,266
1,050,000
-
-
-
1,200,000
1,200,000
1,050,000
2,996
119,270
-
-
122,266
-
1,296
119,270
-
-
120,566
-
1,700
-
-
-
1,700
-
-
119,270
-
-
-
x
-
189,753
-
-
x
-
6. Financial assets subject to offsetting in the financial statements or subject to netting framework arrangements or similar agreements
Related amounts not subject
to accounting offsetting
Gross amount of financial assets
(a)
Amount of financial liabilities offset in
balance sheet (b)
Net amount of financial
assets reported in
balance sheet
(c = a-b)Financial
instruments (d)
Cash deposit received in guarantee
(e)
Net amount (f = c-d-e)
Net amount
Instrument type 31/12/2019 31/12/2018
1. Derivatives
2. Repos
3. Securities lending
4. Others
Total 31/12/2019
Total 31/12/2018
3,015
26,764
-
1,200,000
1,229,779
1,050,000
-
-
-
1,200,000
1,200,000
1,050,000
3,015
26,764
-
-
29,779
-
2,876
26,764
-
-
29,640
-
139
-
-
-
139
-
-
26,764
-
-
26,764
x
-
25,367
-
-
x
-
Netting refers to loans and deposits regulated under specific netting agreements which as such were presented net according to IAS 32.
Notes to the consolidated financial statements • 187
Part C - Information on the consolidated income statementSECTION 1 INTERESTS - ITEMS 10 AND 20
1.1 Interest income and similar revenue: breakdown
1. Financial assets at fair value through P&L:
1.1 Financial assets held for trading
1.2 Financial assets designated at fair value
1.3 Other financial assets mandatorily at fair value
2. Financial assets at fair value through other
comprehensive income
3. Financial assets at amortised cost:
3.1 Credits to banks
3.2 Credits to customers
4. Hedging derivatives
5. Other assets
6. Financial liabilities
Total
of which: interest income on credit impaired
of which: interest income on financial leasing
-
-
-
-
162
891,299
1,391
889,908
(13,990)
20,807
5,173
903,452
-
-
-
-
-
-
X
X
X
X
(16,838)
23,259
X
6,420
-
-
-
-
-
-
162
921,626
33,226
888,400
(16,838)
23,259
2,075
930,283
-
-
-
-
-
-
-
913,179
33,226
879,953
X
X
X
913,179
-
-
-
-
-
-
162
8,447
-
8,447
X
X
X
8,609
-
-
Totale31/12/2018
Otheroperations
Total 31/12/2019
LoansDebt securitiesItems/Technical forms
Consolidated financial statements December 31, 2019• 188
1.2 Interest and similar income: other information
1.2.1 Interest income from financial assets denominated in currency
1.2.2 Interest income from financial leases
1.3 Interest expense and similar charges: breakdown
Interest income from currency assets
Interest income from leasing
167,878
451,041
2019
2019
Items
Items
2018
2018
160,540
509,148
1. Financial liabilities at amortised cost
1.1 Debts to central banks
1.2 Debts to banks
1.3 Debts to customers
1.4 Debt securities in issue
2. Financial liabilities held for trading
3. Financial liabilities designated at fair value
4. Other liabilities and funds
5. Hedging derivatives
6. Financial assets
Total
121,151
-
83,899
37,252
X
-
-
X
X
X
121,151
113,496
X
X
X
113,496
-
-
X
X
X
113,496
X
X
X
X
X
-
-
2,774
(585)
X
2,189
234,646
-
83,899
37,252
113,496
-
-
2,774
(585)
-
236,835
250,706
69
77,494
31,772
141,371
-
347
2,930
(15,174)
3,241
242,076
Totale31/12/2018
Other transactions
Total 31/12/2019
SecuritiesDebtsItems/Technical forms
Notes to the consolidated financial statements • 189
Interest expense on liabilities held in foreign currency
Interest expense on finance lease transactions
A. Positive differentials related to hedging operations:
B. Negative differentials related to hedging operations:
C. Net differential (A-B)
(44,714)
(1)
15,174
(13,990)
1,186
2019
2019
2019
Items
Items
Items
2018
2018
2018
(42,238)
(1)
585
(16,838)
(16,254)
1.4 Interest expense and similar charges: other information
1.4.1 Interest expenses on liabilities denominated in currency
1.4.2 Interest expenses on financial lease
1.5 Differentials related to hedging operations
Consolidated financial statements December 31, 2019• 190
SECTION 2 COMMISSIONS - ITEMS 40 E 50
2.1 Fees and commissions income: breakdown
a) guarantees given
b) credit derivatives
c) management, brokerage and consultancy services:
1. securities trading
2. currency trading
3. portfolio management
3.1. individuals
3.2. collectives
4. custody and administration of securities
5. custodian bank
6. placement of securities
7. reception and transmission of orders
8. advisory services
8.1. relating to investments
8.2. relating to financial structure
9. distribution of third party services
9.1. porfolios management
9.1.1. individuals
9.1.2. collectives
9.2. insurance products
9.3. other products
d) collection and payment services
e) securitisation servicing
f) services for factoring operations
g) tax collection services
h) management of multilateral trading facilities
i) holding and management of current account
j) other services
Total
-
-
62,618
-
-
-
-
-
-
-
-
-
-
-
-
62,618
-
-
-
61,435
1,183
328
-
21,602
-
-
-
79,626
164,173
Total31/12/2019Type of services/Values
Total31/12/2018
-
-
58,159
-
-
-
-
-
-
-
-
-
-
-
-
58,159
-
-
-
56,939
1,220
1,499
2,728
15,986
-
-
-
69,408
147,780
Notes to the consolidated financial statements • 191
2.2 Fees and commissions expenses: breakdown
a) guarantees received
b) credit derivatives
c) management and brokerage services
1.trading financial instruments
2. currency trading
3. portfolios management
3.1 own portfolio
3.2 third party portfolio
4. custody and administration securities
5. placement of financial instruments
6. off-site distribution of financial instruments, products and services
d) collection and payment services
e) other services
Total
(3,431)
-
-
-
-
-
-
-
-
-
-
(12,447)
(39,108)
(54,986)
Total31/12/2019Services/Values
Total31/12/2018
(2,138)
-
-
-
-
-
-
-
-
-
-
(15,013)
(28,742)
(45,893)
With reference to the “Reconciliation between reported income statement and reclassified income statement” please see that the total of the item 50 equal to €46 millions is broken down, coherent with the mentioned managerial representation, in the following groups:• “guarantees received” in the present table also include insurance costs referred to the credit risk coverage on part of dealer financing portfolio for a total of €12 million classified as “risk cost” at the managerial representation scope;
•residual €33 million are included in “Net banking income”.
The item “Payment and collection services” mainly represents cost for the collection of finance lease payments and retail loan instalments.
Consolidated financial statements December 31, 2019• 192
SECTION 4 GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING - ITEM 80
4.1 Gains and losses on financial assets and liabilities held for trading: breakdown
1. Financial assets held for trading
1.1 Debt securities
1.2 Equity instruments
1.3 Units in investment funds
1.4 Loans
1.5 Others
2. Financial liabilities held for trading
2.1 Debt securities
2.2 Debts
2.3 Others
Financial assets and liabilities: exchange differences
3. Derivatives
3.1 Financial derivatives:
- On debt securities and interest rates
- On equity securities and share indices
- On currency and gold
- Others
3.2 Credit derivatives
of which: economic hedges linked to the
fair value option
Total
-
-
-
-
-
-
-
-
-
-
x
1,892
1,892
1,892
-
x
-
-
x
1,892
-
-
-
-
-
-
(8)
-
-
(8)
x
(1,589)
(1,589)
(1,589)
-
x
-
-
x
(1,597)
-
-
-
-
-
-
-
-
-
-
x
(1,043)
(1,043)
(1,043)
-
x
-
-
x
(1,043)
-
-
-
-
-
-
(8)
-
-
(8)
(45)
8
8
8
-
-
-
-
-
(45)
-
-
-
-
-
-
-
-
-
-
x
748
748
748
-
x
-
-
x
748
Net result
[(A + B) - (C + D)]
Capital losses (C)
Losses from negotiation
(D)
Incomes from negotiation
(B)
Capital gains (A)
Transactions / P&L items
The items reflect changes in the fair value of assets and liabilities held for trading.
Notes to the consolidated financial statements • 193
SECTION 5 FAIR VALUE ADJUSTMENTS IN HEDGE ACCOUNTING ITEM 90
5.1 Fair value adjustments in hedge accounting: breakdown
A. Incomes from:
A.1 Fair value hedging instruments
A.2 Hedged financial assets (fair value)
A.3 Hedged financial liabilities (fair value)
A.4 Cash-flow hedging derivatives
A.5 Assets and liabilities denominated in currency
Total incomes on hedging activities (A)
B. Charges on
B.1 Fair value hedging instruments
B.2 Hedged financial assets (fair value)
B.3 Hedged financial liabilities (fair value)
B.4 Cash-flow hedging derivatives
B.5 Assets and liabilities denominated in currency
Totale oneri dell'attività di copertura (B)
C. Net hedging result (A-B)
of which: result of hedges on net exposures
35,116
34,181
25,531
-
3,317
98,145
(65,149)
(11,882)
(21,307)
-
(1,609)
(99,947)
(1,802)
-
Total31/12/2019P&L items/Values
Total31/12/2018
38,033
33,807
26,124
-
3,094
101,058
(69,271)
(13,089)
(19,134)
-
(5,751)
(107,245)
(6,187)
-
This item reflects the changes in fair value of derivative contracts recognized as Fair Value Hedge.
Consolidated financial statements December 31, 2019• 194
SECTION 6 GAINS AND LOSSES ON DISPOSALS/REPURCHASES ITEM 1006.1 Gains and losses on disposals/repurchases: breakdown
Total 31/12/2019
Items / P&L items
Total 31/12/2018
Losses LossesGains GainsNet profit
Net profit
Financial assets
1. Financial assets at amortised cost
1.1 Loans and receivables with banks
1.2 Loans and receivables with customers
2. Financial assets at fair value through
other comprehensive income
2.1 Debt securities
2.2 Loans
Total assets
Financial liabilities at amortised cost
1. Deposits from banks
2. Depositsfrom customers
3. Debt securities in issue
Total liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,162
-
1,162
-
-
-
1,162
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,162
-
1,162
-
-
-
1,162
-
-
-
-
-
1,462
-
1,462
-
-
-
1,462
-
-
-
-
-
Notes to the consolidated financial statements • 195
SECTION 8 NET IMPAIRMENT / REINSTATEMENT FOR CREDIT RISK - ITEM 130
8.1 Net impairment for credit risk relating to financial assets at amortised cost: breakdown
Write-downs (1) Write - backs (2)
Third stageFirst and second
stage
First and second
stage
Third stage
Write-off Others
A. Loans and advances to banks
- loans
- debt securities
of which: acquired or originated
impaired loans
B. Loans and advances to customers
- loans
- debt securities
of which: acquired or originated
impaired loans
Total
-
-
-
-
(29,390)
(29,390)
-
-
(29,390)
-
-
-
-
-
-
-
-
-
-
-
-
-
(85,331)
(85,331)
-
-
(85,331)
-
-
-
-
26,593
26,593
-
-
26,593
-
-
-
-
40,740
40,740
-
-
40,740
-
-
-
-
(47,388)
(47,388)
-
-
(47,388)
-
-
-
-
(20,728)
(21,402)
674
-
(20,728)
Transactions/P&L items
Total31/12/2019
Total 31/12/2018
With reference to the “Reconciliation between reported income statement and reclassified income statement” please see that the total of the item 130 equal to 47 millions is broken down, coherent with the mentioned managerial representation, in the following groups:• in the net banking income for €1 milion;• residual €46 million is included in the “Cost of risk”.
Consolidated financial statements December 31, 2019• 196
SECTION 10 NET PREMIUMS - ITEM 160
10.1 Net premiums: breakdown
A. Life business
A.1 Gross premiums accounted (+)
A.2 Reinsurance premiums ceded (-)
A.3 Total
B. Non-life business
B.1 Gross premiums accounted (+)
B.2 Reinsurance premiums ceded (-)
B.3 Change in gross value of premiums reserves (+/-)
B.4 Change in premium reserve ceded to reinsures (+/-)
B.5 Total
C. Total net premiums
3,618
(3,256)
362
3,463
(1,389)
(649)
(544)
881
1,243
-
X
-
-
X
-
-
-
-
3,618
(3,256)
362
3,463
(1,389)
(649)
(544)
881
1,243
3,559
(3,203)
356
1,511
(1,360)
541
(487)
205
561
Total 31/12/2018
Indirect business
Total 31/12/2019
Direct business
Premiums from insurance
Notes to the consolidated financial statements • 197
SECTION 11 OTHER NET INSURANCE INCOME/EXPENSES ITEM 170
11.1 Other net insurance income/expenses: breakdown
11.2 Breakdown of "Net change in technical reserves"
1. Net change in insurance provisions
2. Claims accrued and paid during the year
3. Other income and expenses from insurance
Total
1. Life business
A. Mathematical reserves
A.1 Gross annual amount
A.2 (-) Amount attributable to reinsurers
B. Other insurance reserves
B.1 Gross annual amount
B.2 (-) Amount attributable to reinsurers
C. Insurance reserves for investment risks to be borne by the insured
C.1 Gross annual amount
C.2 (-) Amount attributable to reinsurers
Total "life business reserves"
2. Non-life business
Change in provisions for non-life business other than claims provisions,
net of amounts ceded to reinsurers
123
(236)
2,186
2,073
55
549
(494)
-
-
-
-
-
-
55
69
Total31/12/2019
Total31/12/2019
Items
Net change in insurance reserves
Total31/12/2018
Total31/12/2018
(736)
(184)
53
(867)
(515)
(5,151)
4,636
-
-
-
-
-
-
(515)
(221)
Consolidated financial statements December 31, 2019• 198
11.3 Breakdown of Claims accrued and paid during the year
Life business: charges relating to claims, net of reinsurance ceded
A. Amounts paid
A.1 Gross annual amount
A.2 (-) Amount attributable to reinsurers
B. Change in reserve for amounts payable
B.1 Gross annual amount
B.2 (-) Amount attributable to reinsurers
Total life business claims
Non-life business: charges relating to claims, net of recoveries
and reinsurance ceded
C. Amounts paid
C.1 Gross annual amount
C.2 (-) Amount attributable to reinsurers
D. Change in recoveries net of amount ceded to reinsures
E. Change in claims reserves
E.1 Gross annual amount
E.2 (-) Amount attributable to reinsurers
Total non-life business claims
(182)
(1,822)
1,640
-
-
-
(182)
(54)
(538)
484
-
-
-
-
(54)
Total31/12/2019Charges for claims
Total31/12/2018
(152)
(1,519)
1,367
-
-
-
(152)
(32)
(320)
288
-
-
-
-
(32)
Notes to the consolidated financial statements • 199
11.4.1 Other income/expense (net) from insurance activities - Life business
11.4.2 Other income/expense (net) from insurance activities - Non life business
11.4 Breakdown of “Other income/expenses arising from insurance business”
Non-life insurance
A. Revenues
- Other technical revenues net of reinsurance ceded
- Revenues and unrealized capital gains related to investments in favor
of insured parties who bear the risk
- Change in commissions and Other acquisition costs to be amortized
- Other revenues
B. Expenses
- Other technical expenses net of reinsurance ceded
- Acquisition commissions
- Other acquisition expenses
- Collection commissions
- Other expenses
Total Non- life business (A - B)
1,138
-
-
1,138
(19)
-
-
-
-
(19)
1,119
Total 2019 Total 2018
25
-
-
25
25
Life insurance
A. Revenues
- Other technical revenues net of reinsurance ceded
- Revenues and unrealized capital gains related to investments in favour
of insured parties who bear the risk
- Change in commissions and Other acquisition costs to be amortized
- Commissions and profit-sharing received from reinsurers
- Other revenues
B. Expenses
- Other technical expenses net of reinsurance ceded
- Expenses and unrealized capital losses related to investments in favour
of insured parties who bear the risk
- Acquisition commissions
- Other acquisition expenses
- Collection commissions
- Other expenses
Total Life business (A - B)
843
-
-
-
-
843
(187)
-
-
-
-
-
(187)
656
Total 2019 Total 2018
28
-
-
-
28
28
Consolidated financial statements December 31, 2019• 200
SECTION 12 ADMINISTRATIVE EXPENSES - ITEM 190
12.1 Staff expenses: breakdown
12.2 Average number of employees by category
1) Employees
a) wages and salaries
b) social obligation
c) severance pay
d) social security costs
e) allocation to employee severance pay provision
f) provision for retirements and similar provisions
- a contribuzione definita
- a benefici definiti
g) versamenti ai fondi di previdenza complementare esterni:
- defined contribution
- defined benefit
h) costs arising from share-based payments
i) other employee benefits
2) Other staffs in activity
3) Managers and statutory auditors
4) Staffs collocated to retirement
Total
(154,730)
(103,677)
(27,078)
(3,143)
(244)
(18)
(4,536)
(1,524)
(3,012)
(2,264)
(2,259)
(5)
-
(13,770)
(19,203)
(1,096)
-
(175,030)
(149,346)
(101,253)
(26,436)
(2,733)
(4)
-
(2,439)
(1,528)
(911)
(2,377)
(2,372)
(5)
-
(14,104)
(18,766)
(919)
-
(169,033)
Total 31/12/2018
Total 31/12/2019
Type of expense/Sectors
1. Employees
a) senior managers
b) managers
c) remaining employees staff
2. Others staff
Total
2,258
30
467
1,761
-
2,258
Total 2019 Total 2018
2,280
37
478
1,765
-
2,280
Notes to the consolidated financial statements • 201
12.3 Defined benefit company retirement funds: costs and revenues
12.4 Other employee benefits
12.5 Other administrative expense: breakdown
1. Consulting and professional services
2. EDP costs
3. Rents and utilities
4. Indirect and other taxes
5. Advertising and promotion expenses
6. Other expenses
Total
(20,531)
(31,457)
(9,559)
(9,049)
(7,032)
(21,527)
(99,156)
(17,560)
(35,491)
(10,294)
(10,613)
(7,839)
(21,616)
(103,413)
With reference to pension funds, please refer to the movement shown in item 100. “Provisions for risks and charges of Liabilities”.
The balance of other benefits to employees as at December 31, 2019 amounted to euro thousand 13,770.
Item / SectorTotal
31/12/2018Total
31/12/2019
With reference to the “Reconciliation between reported income statement and reclassified income statement” please see that the total of the item 190 equal to €278 millions is broken down, coherent with the mentioned managerial representation, in the following groups:• €266 million are included in the net operating expense; • €12 million are included in the other operating expenses and income.
Consolidated financial statements December 31, 2019• 202
SECTION 13 NET PROVISIONS FOR RISKS AND CHARGESITEM 200
13.3 Net provisions for risks and charges: breakdown
On December 31, 2019 the value of provisions for risks and charges is €805 thousand, for managerial scope these provisions are aggregated as follow:• write-backs are included in Net Banking income for a total of €2 million;
• in net operating costs are included €1 million of write-backs referred to provisions to other risks and charges.
1. Provisions for risks and charges related to operating leases
1.1 Future maintenance provision
1.2 Self-insurance provision
2. Provisions to other risks and charges
3. Technical insurance reserve
4. Legal risks
Total
(13,998)
(12,579)
(1,419)
(6,047)
-
(272)
(20,317)
14,191
14,191
-
6,690
-
241
21,122
(11,496)
(10,757)
(739)
(82,998)
-
(43)
(94,537)
8,801
8,773
28
9,676
-
260
18,737
Wtite-backs
Wtite-backs
Write-downs
Write-downs
31/12/2019 31/12/2018
Notes to the consolidated financial statements • 203
With reference to “Reconciliation between reported income statement and reclassified income statement”:• in the item “Net banking income” are included Rental amortized costs for €427 million
• in “Net operating expenses” are included amortizing amortized costs referred to other fixed assets for €11 million (office furniture and fitting, electronic system and others).
SECTION 14 NET VALUE ADJUSTMENTS/WRITE- BACKS ON PROPERTY, PLANT AND EQUIPMENTITEM 210
14.1 Net value adjustments/write-backs on property, plant and equipment: breakdown
A. Property, plant and equipment
A.1 Owned
- Used in the business
- Rights of use acquired through lease
A.2 Acquired through finance lease
- Used in the business
- Rights of use acquired through lease
A.3 Inventories
Total
(444,576)
(397,241)
(47,335)
-
-
-
x
(444,576)
(3,954)
(3,954)
-
-
-
-
-
(3,954)
10,714
10,714
-
-
-
-
-
10,714
(437,816)
(390,481)
(47,335)
-
-
-
-
(437,816)
Net result
(a + b - c)
Impairment losses
(b)
Write-backs(c)
Depreciation(a)
Asset/P&L items
Consolidated financial statements December 31, 2019• 204
With reference to “Reconciliation between reported income statement and reclassified income statement” please see intangible amortized costs are included in “net operating expenses”.
SECTION 15 NET VALUE ADJUSTMENTS/WRITE-BACKS OF INTANGIBLE ASSETS - ITEM 220
15.1 Net value adjustments/write-backs on intangible assets: breakdown
A. Intangible assets
A.1 Owned
- Generated internally by the company
- Other
A.2 Rights of use acquired through lease
Total
(13,963)
(26)
(13,937)
-
(13,963)
-
-
-
-
-
-
-
-
-
-
(13,963)
(26)
(13,937)
-
(13,963)
Net risult(a + b - c)
Impairment losses
(b)
Write-backs(c)
Depreciation(a)
Asset/P&L items
Notes to the consolidated financial statements • 205
SECTION 16 OTHER OPERATING EXPENSES/INCOME - ITEM 230
16.1 Other operating expenses: breakdown
16.2 Other operating incomes: breakdown
1. Credit collection expenses
2. Information charges
3. Other expenses:
3.1 operating lease charges
3.2 finance lease charges
3.3 contract expenses
3.4 sundry charges
Total
1. Expense recoveries
2. Income from operating leases
3. Income fron finance lease
4. Sundry income
Total
(10,226)
(2,253)
(395,857)
(324,006)
(11,054)
(13,868)
(46,929)
(408,336)
32,698
862,734
94
26,508
922,034
(8,142)
(1,482)
(468,693)
(388,163)
(15,614)
(6,911)
(58,104)
(478,417)
36,720
1,046,603
712
18,649
1,102,684
Items
Items
Total 31/12/2018
Total31/12/2018
Total31/12/2019
Total 31/12/2019
With reference to “Reconciliation between reported income statement and reclassified income statement” of the report on operations please see the item 230 amount “other operating income/charges” equal to €621 million is allocated as follow:• other operating income for €647 million are allocated in the “Net banking income”;
• other operating charges for €8 million are included in “Cost of risk”;• other operating charges related to retail are included for €16 million in “Other operating income/charges”
Consolidated financial statements December 31, 2019• 206
SECTION 21 TAX EXPENSES (INCOME) FOR THE PERIOD FROM CONTINUING OPERATIONS - ITEM 300
21.1 Tax expense (income) relating to profit or loss from continuing operations: breakdown
21.2 Reconciliation of theoretical tax liability and actual tax liability recognized
1. Current taxes (-)
2. Change of current taxes of previous years (+/-)
3. Reduction of current taxes for the year (+)
3. bis Reduction of current taxes for the year due tax credit under Law 214/2011 (+)
4. Change of deferred tax assets (+/-)
5. Change of deferred tax liabilities (+/-)
6. Tax expenses for the year (-) (-1+/-2+3+ 3 bis +/-4+/-5)
(148,329)
(1,890)
-
-
19,824
(28,833)
(159,228)
(150,935)
12,722
-
-
13,958
(46,674)
(170,930)
P&L items/SectorsTotal
31/12/2018Total
31/12/2019
This item reflects taxes for the year and the change in deferred tax assets and liabilities occurred during the same period.
Profit for the year before taxes
Theoretical tax liability
Increase effect of permanent differences
Decrease effect of permanent differences
Consolidation effect
Actual tax liability (A)
IRAP - Theoretical tax liability
Increase effect of permanent differences
Decrease effect of permanent differences
Consolidation effect
IRAP - Actual tax liability (B)
Prior years tax adjustments (C)
Actual tax liability recognized A+B+C
638,005
175,451
1,323
(70,591)
44,352
150,536
35,537
1,334
(8,484)
351
28,738
(8,344)
170,930
2019
Notes to the consolidated financial statements • 207
SECTION 23 MINORITY PROFIT (LOSS) OF THE YEAR - ITEM 340
23.1 Breakdown of item 340 “Minority gains (losses)”
1. FCA Bank GmbH
2. Ferrari Financial Services GmbH
Others investments
Total
1,777
2,665
562
5,004
2,109
4,041
513
6,663
Companies name 31/12/201831/12/2019
The profit attributable to minority interests amounted to 6,663 thousand of euro, attributable to FCA Bank GmbH and Ferrari Financial Services GmbH.
The Holding capital consists of 700,000,000 share with a nominal value of euro 1 each.
SECTION 25 EARNINGS PER SHARE
25.1 Average number of ordinary shares
Consolidated financial statements December 31, 2019• 208
Part D - Consolidated comprehensive income
10. Profit (Loss) of the year
Other comprehensive income after tax not to be recycled to income statement
70. Defined benefit plans
100. Tax expenses (income) relating to items not reclassified to profit or loss
Other comprehensive income after tax to be recycled to income statement
120. Exchange differrences:
a) value change
b) transfer to the income statement
c) other changes
130. Cash flow hedges:
a) changes in fair value
b) transfer to the income statement
c) other changes
180. Tax expenses (income) relating to items reclassified to profit or loss
190. Total of other comprehensive income after tax
200. Other comprehensive income (Items 10+190)
210. Consolidated comprehensive income attributable to minorities
220. Consolidated comprehensive income attributable to Parent Company
31/12/2019 31/12/2018
467,075
(6,930)
(7,796)
866
13,518
16,035
16,035
(3,761)
(3,761)
1,244
6,588
473,663
6,533
467,130
388,364
1,710
2,111
(401)
(7,369)
(4,332)
-
-
(4,332)
(4,539)
(4,539)
-
-
1,501
(5,659)
382,705
4,990
377,715
Items
Notes to the consolidated financial statements • 209
Part E - Information on risk and related risk management policiesThe FCA Bank Group attributes significant importance to risk measurement, management and control as key conditions to ensure sustainable growth in such a highly complex and dynamic economic context as the current one.Risk monitoring and control is carried out by second- (Compliance and Risk & Permanent Control) and third-level (Internal Audit) functions.
The identification and mapping of risks is an ongoing process, to improve risk management and to update the map of risks to which the Group is exposed.The FCA Bank Group, in its capacity as a Group 2 bank with consolidated or separate assets in excess of €3.5 billion, uses standardized methods to measure all its risks. FCA Bank places great emphasis on risk management, as a condition to ensure the generation of reliable and sustainable value in a risk-controlled environment. The risk management strategy aims to attain a global and coherent overview of risks, considering both the macroeconomic scenario and the Group’s risk profile, fostering the development of a risk culture and enhancing a transparent and accurate representation of risk.The Group’s risk underwriting strategies are summarized in its Risk Appetite Framework (RAF), approved by the Board of Directors. The RAF is designed to ensure that the risks taken are in line with the shareholders’ expectations, taking into account the Group’s risk position and the current economic and business conditions. The framework sets out risk propensity limits and the controls established for the overall risk profile and the main specific risks. The RAF is an organic and structured approach, which extends from the Risk Management function to the Group as a whole to:• ensure that the Board of Directors and management are properly involved in the Group’s risk management;• combine strategic policies and business choices with risk propensity;
• ensure that shareholder value and returns are generated;• comply with all regulatory requirements;• activate a structured approach for the management, implementation and monitoring of the Risk Appetite Framework at all Group levels;• define precisely roles and responsibilities in case of breaches of risk propensity and to foster dialogue among the areas concerned at both Parent and Subsidiary level.
The above principles are applicable both at Group level and at business unit or company level. In case of external growth, these general principles will be applied considering the specific characteristics of the market and the competitive context in which growth takes place. Thus, the Risk Appetite Framework is the backdrop against which the Group manages its risks, with the definition of general risk appetite and the ensuing structure of the risk management process, the overall risk profile, and the principal specific risks of the Group. Management of the overall risk profile derives from the definition of general principles and is structured on the basis of limits, to ensure that the Group is always compliant with the minimum solvency, liquidity and profitability levels, including under severe stress conditions. In addition, the Group aims to maintain the desired operational, reputational and compliance risk profiles.
The definition of the Risk Appetite Framework is a comprehensive process driven by the Chief Risk Officer, which calls for close cooperation with the Chief Financial Officers and the heads of the various Business Units. It is developed in keeping with the ICAAP and ILAAP processes and is the key reference for the development of the budget and the business plan. In this way, consistency is established between the strategy and the risk underwriting policy, on one side, and the planning and budgeting process, on the other.The definition of the Risk Appetite Framework and the consequent operational limits on the
Consolidated financial statements December 31, 2019• 210
main specific risks, the use of risk measurement tools in the context of credit management processes and operational risk control, the useof capital-at-risk measures to report company performance and the internal capital adequacy assessment are key steps in the operational process to implement risk management strategies, defined by the Board of Directors, along the Group’s entire decision-making chain.
Current and prospective Total Internal Capital is calculated on an annual basis for regulatory purposes - with “event-based” redeterminations, in case of significant
organizational and/or strategic changes – and is otherwise monitored constantly through reviews of capital plans by Risk and Permanent Control, with the support of the Finance department.
Notes to the consolidated financial statements • 211
SECTION 1 RISKS OF THE ACCOUNTING CONSOLIDATED PERIMETERQUANTITATIVE DISCLOSURES
A. Credit quality
A.1 Performing and non-performing credit exposures: amounts, adjustments, changes, and economic breakdown
A.1.1 Breakdown of financial assets by portfolio and credit quality (carrying value)
Portfolios/quality
Unlikelyto pay
Bad exposure
TotalNon performingpast due
exposure
Performingpast due
exposure
Other performing
past due exposure
1. Financial assets at amortised cost
2. Financial assets at fair value through
other comprehensive income
3. Financial assets designated at fair value
4. Other financial assets mandatorily
at fair value
5. Financial assets as held for sale
Total 31/12/2019
Total 31/12/2018
40,546
-
-
-
-
40,546
27,930
67,415
-
-
-
-
67,415
83,656
44,679
-
-
-
-
44,679
29,995
388,497
-
-
-
-
388,497
391,712
25,361,895
9,807
-
-
-
25,371,702
25,221,042
25,903,032
9,807
-
-
-
25,912,840
25,754,332
Consolidated financial statements December 31, 2019• 212
A.1.2 Breakdown of financial assets by portfolio and credit quality (gross and net values)
Impaired Not impaired
Gross exposure
Gross exposure
Overall writedowns
of value
Overall writedowns
of value
Net exposure
Net exposure
Overall partial
write-off*
Total (net
exposition)
1. Financial assets at amortised cost
2. Financial assets at fair value through
other comprehensive income
3. Financial assets designated at fair value
4. Other financial assets mandatorily at
fair value
5. Financial assets held for sale
Total 31/12/2019
Total 31/12/2018
299,704
-
-
-
-
299,704
287,758
(147,064)
-
-
-
-
(147,064)
(146,180)
152,640
-
-
-
-
152,640
141,578
269
-
-
-
-
269
-
25,873,860
9,807
x
x
-
25,883,667
25,740,459
(123,468)
-
X
X
-
(123,468)
(127,705)
25,750,392
9,807
-
-
-
25,760,199
25,612,754
25,903,032
9,807
-
-
-
25,912,840
25,754,332
Portfolios/quality
1. Financial assets held for trading
2. Hedging derivatives
Total 31/12/2019
Total 31/12/2018
Low credit quality assets Other assets
Cumulated losses Net exposure Net exposure
-
-
-
-
-
-
-
1
-
36,930
36,930
35,940
Portfolios/quality
(*) Value shown for information purposes.
Notes to the consolidated financial statements • 213
SECTION 2 RISKS OF THE PRUDENTIAL CONSOLIDATED PERIMETER
QUALITATIVE DISCLOSURES
1.1 Credit risk
determine the exposure at default in relation to counterparty risk.To calculate capital requirements for CVA (Credit Valuation Adjustment) risk, the Group adopts the standardized method as per article 384 of Regulation (EU) n. 575/2013 (CRR).
Credit risk is the risk that unexpected changes in creditworthiness cause a borrower’s default, producing unforeseen losses in on- and off-balance-sheet exposures. Credit risk includes also counterparty risk, that is the risk that a counterparty in a transaction involving specific instruments (financial and credit derivatives, repurchase agreements, securities/commodities borrowing, margin loans) defaults before the cash flows of the transaction are finally settled. For the Group, this risk arises in its core operations, that is: • loans and leases to buyers of vehicles of its manufacturing partners (Retail business line); • loans to the dealers of the manufacturing partners (Dealer financing business); • holding and control of equity interest in commercial firms that are not part of the Banking Group in Italy and in Europe. Moreover, the bank provides funding support to its subsidiaries through lines of credit and guarantees to external lenders.
To calculate the internal capital required for credit risk, the Group, in agreement with Circular 285 of the Bank of Italy for class 2 banks, uses the standard methodology for the calculation of capital requirements under Pillar I.
Following the transformation into a bank, the regulatory classification of exposures has been set up in keeping with the legal framework of reference. With the upgrade of its information systems, the Parent Company developed in 2015 the tools for the application of the new criteria and for meeting the relevant supervisory reporting obligations. To calculate the internal capital required for counterparty risk, in the same vein as the credit risk calculated with the standard methodology, the Group applies the current value method to
2.1 Organizational aspectsThe FCA Bank Group’s credit policies are designed in essence to foster the assumption of risks that must be: • controlled;• reasonable;• contained within certain limits.
The FCA Bank Group has a specific Credit Manual intended to: • support the analysis of the parties responsible for credit approvals; • set and maintain the quality of credit standards; • meet the customers’ credit requirements; • take the commercial opportunities provided by the possibility to develop new financing products in markets and limit losses.The combination of the criteria listed must ensure the profitability of financing transactions.
1.OVERVIEW
2.CREDIT RISK MANAGEMENT POLICIES
Consolidated financial statements December 31, 2019• 214
• analysing any other matter delegated to it by the Board of Directors;• making decisions, within the scope of its powers, on requests for credit approvals coming from the Market and analysing the requests to be submitted to the Board of Directors. The Board may delegate to the Board Executive Credit Committee (BECC) when the date of the first Board meeting is not consistent with the urgency of decisions to be made in credit matters.
The HQ Internal Credit Committee is responsible for:• approving credit applications within the limits established by the delegated powers;• preparing for approval credit applications that exceed the limits set by the delegated powers;• evaluating and changing the Credit Manuals of the Parent and Local Companies within the Governance of the FCAB Group Credit Guidelines;• evaluating, approving or submitting to the competent bodies the Markets’ requests on credit policy issues in relation to the rules laid down by the Parent Company; • evaluating and approving powers delegated to the markets.
The Local Credit Committees are responsible for:• determining the application at local level of general policies and the approaches for credit approvals, control and collections by adapting the General Principles and Rules of the FCA Bank Group to the local reality; • formalizing and updating the Market’s Manual of Credit Policies; • analysing the situation of credit exposures and credit limits; • determining, within the scope of its responsibilities, the limits and the process to approve lines of credit (to be formalized in the Market’s Manual of Credit Policies);• determining the powers delegated within its own organizational structure, to be
2.2 Management, measurement and control systemsRoles and responsibilitiesIn this context, the FCA Bank Group manages credit risk through a specific allocation of roles and responsibilities involving: • the Board of Directors;• the Board Executive Credit Committee;• the Credit Committee of the Parent Company;• the HQ Internal Credit Committee• the Local Credit Committees.
Regarding credit, the Board of Directors is responsible for:• setting credit risk policies and any amendment thereto;• adopting and approving the power delegation system and any change thereof;• approving periodically the changes to the cut-off of the scorecards (matter delegated to the Credit Committee);• establishing periodically the credit approval limits attributed to the Credit Committee and the single Country Managers.
The Board Executive Credit Committee is responsible, pursuant to the authority vested in it by the Board of Director, for approving matters falling within the Board’s purview that need to be addressed urgently, before the next scheduled Board meeting.
The Parent Company’s Credit Committee is responsible for: • proposing credit policies to the Board of Directors (and possible changes thereof);• defining signatory powers within the range set periodically by the Board of Directors for each FCA Bank business; • managing and defining the changes to be made to the scorecards (with the CFO’s obligation to report every six months to the Board of Directors); • reviewing and analysing risk performances;
Notes to the consolidated financial statements • 215
submitted for approval to the HQ Internal Credit Committee of the Parent Company; • approving credit applications within the limits set by the delegated powers.
2.3 Measurement methods for expected lossesWith the introduction of IFRS 9 in the Dealer Financing and Retail businesses and with a simplified approach in the rental business line, the bank currently makes provisions for losses in view of expected credit losses in a forward-looking perspective, as well as in a historical perspective.
Expected credit losses (ECL) are measured as follows:
ECL= PDxLGDx EAD
• probability of default. Likelihood of a default by a counterparty or of a contract in a pre-established time horizon;• Loss given default. Loss that the bank would incur determined by the likelihood of a default by a counterparty or of a contract in a pre-established time horizon;• Exposure at default. Exposure at the time of default.
In order to include a forward looking impact on ECL, two satellite models have been developed, one for retail and one for dealer financing. The forward looking models output is a “calibrated PD” taking into account the forward looking aspects based on the two macroeconomic scenarios, baseline and adverse.
In order to develop the two scenarios, following a significant analysis, some macroeconomic variables (ex. GDP, euribor), have been used both for retail and dealer financing models.Furthermore, for retail model, also some “business” variables have been considered (ex. Registrations, Market share).The weight to be assigned to each scenario
2.4 Credit risk mitigation techniques The FCA Bank Group has developed its own model for managing and mitigating risks in keeping with the guidelines of the Group Credit Manual, with reference to: • monitoring of specific KRIs (Key Risk Indicators);• second-level control activities carried out by the R&PC – GRM with specific reference to Credit review, Dealer Financing review and Collection review;• Credit Risk Mitigation (CRM) policy.
Monitoring of specific KRIsThe R&PC – GRM department monitors constantly the credit portfolio, surveying for every business line (Retail, Dealer Financing and Rental) the performance of specific KRIs and compliance with the risk limits in place: • Non Performing Loans (NPL) Ratio, which is calculated as the ratio of non-performing exposures to total exposures at the end of the month; • Cost of Risk (CoR) Ratio, which is calculated
is approved by the Provisioning Committee together with the forward looking models. At current stage the weight for the baseline scenario is 80% while, the weight of the adverse scenario is 20%.
The frequency of the forward looking update is at least on half year basis. The frequency can be higher in case of significant changes of macroeconomic scenarios/business variables or following a request by the management.
The portfolio is divided in 3 buckets, with the classification of credits in stages depending on the level and change over time of the credit risk.
Changes in stages can be due both to a deteriorated credit risk or to an improved credit risk.
Consolidated financial statements December 31, 2019• 216
to provide adequate reports to the Parent Company’s Dealer Financing department.
Credit Risk Mitigation (CRM) policyBased on guidance from the Supervision Authority on the implementation, for prudential purposes, of Credit Risk Mitigation (CRM) techniques, the Parent Company, FCA Bank, designed a policy to govern such techniques. Specifically, such policy calls for contracts ancillary to the exposure or other tools and techniques that reduce credit risk in ways that affect positively the calculation of capital requirements.
Currently, FCA Bank S.p.A. adopts, for prudential purposes, credit risk mitigation techniques that include the use of the following tools:• cash collateral for derivative arrangements;• repurchase agreements – REPO;• offset accounting.
The policy is intended to define:• the general nature of credit risk mitigation (CRM) techniques;• the requirements that guarantees have to meet to be considered for credit risk mitigation purposes; • the credit risk mitigation tools used by FCA Bank.
In this case, the policy sets out the general and specific principles of credit risk mitigation as provided for by the CRR, chapter 4, section 1, articles 192 et seq. Anything not specifically provided for by the policy is governed by the CRR. The CRM techniques recognized in the calculation of capital requirements fall under two general categories:• “funded credit protection”, where the reduction of the credit risk on the exposure of an institution derives from the right of that institution, in the event of default of the counterparty or on the occurrence of other specified credit events relating to the counterparty, to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount
as the ratio of total provisions to the average exposure calculated at the end of the month; With specific reference to the Retail business, the R&PC – GRM department monitors also the performance of: • SIR n, calculated as the number of contracts of a given generation (n) with two or more instalments overdue as a share of total production for the same generation; • Collection indicators, expressed as a % of the total outstanding in collection; • Litigation indicators, expressed as a % of the total outstanding in litigation.
GuaranteesIn analysing a credit application, the bank and the other group companies may indicate that approval of the financing is subject to the posting of collateral by the customer. Risk mitigation techniques are used mainly in the Dealer Financing business. Below, a summary is provided of the guarantees allowed by the credit policies in place: • guarantees in rem: pledges, deposits, mortgages.• guarantees in personam: bank and insurance guarantees, sureties. • other types: third-party funds, comfort letters, retention of title, bank guarantees, buyback obligations. In the event that guarantees other than those allowed are offered, or guarantees are offered with characteristics other than those contemplated in the bank’s procedures, the single subsidiaries must request authorization (or ratification) from the Parent Company to set the credit limit. To ensure that guarantees are fully effective, the Parent Company has put in place specific checks to ensure that they all contain the following elements: • certainty of the issue date, which is obtained by adding a date and by complying and executing the necessary formalities; • simultaneousness with the financing; • reference to the underlying contract.Every subsidiary is responsible for managing guarantees and collateral (definition of adequate coverage contents, validity checks, checks of renewal and expiration dates) and
Notes to the consolidated financial statements • 217
of the difference between the amount of the exposure and the amount of a claim on the institution (Ref. article 4 of CRR, paragraph 58). • “unfunded credit protection” where the reduction of the credit risk on the exposure of an institution derives from the obligation of a third party to pay an amount in the event of the default of the borrower or the occurrence of other specified credit events (Ref. article 4 of CRR, paragraph 59).
Second-level control activities carried out by the R&PC – GRM departmentIn the context of second-level control activities, the R&PC – PC department is responsible for the following activities:
1. Credit Reviews, which involve a number of reviews of the activity carried out: by the Retail area to:- check compliance with the Group’s credit policies and the applicable procedures; - verify the proper input of data into the system both for the credit applications approved automatically and for the credit applications analysed by the Acceptance unit of the Retail & Corporate Underwriting department;- determine any training requirements;- identify potential concentration risks;- recommend solutions to maintain “acceptable” credit standards.
by the Dealer Financing area to:- ensure that the control plan for the wholesale business is properly implemented and executed with the required frequency;- recommend solutions to improve the control plan;- check the proper input of data into the system and their consistency with the approved lines of credit and the limits for significant transactions;- bring to light critical results of the process and consider the proper corrective actions to be planned.
2. Collection Reviews, which involve a number of reviews of the collection activity to: - ensure the proper application of the Group’s
guidelines;- recommend solutions to improve the collection process; - check the proper input of data into the system;- assess the level of application of local collection rules; - determine any training requirements.
The Stress Test on Credit risk concerns the portfolio and the relating IFRS9 parameters evolution (Retail and Corporate business lines). The starting point of the stress test is the projection of the main bank metrics and exogen variables (such as Unemployment rate, GDP per Country..), estimated with ARIMA models through a dedicated tool. The stress impact is regularly updated and included in the Pillar II Capital calculation.For details of the internal policies and rules in relation to the foregoing, reference is made to the following procedures: • Credit Review Retail Procedure;• Dealer Financing Review Procedure;• Collection Review Procedure.
Consolidated financial statements December 31, 2019• 218
3.1 Management strategies and policiesHistorically, FCA Bank has low non-performing loan (NPL) levels, significantly lower than the average for the European banking sector. As the holding company of a Group operating in different markets, FCA Bank:• sets out the NPL strategy within the RAF, the risk strategy, and the consolidated budget with subsequent allocation at the Market level;• defines the portfolio’s performance indicators and early warning indicators;• issues guidelines in the area of NPL collection within the FCA Bank Group Credit Guidelines, with reference to the various phases and possible actions for recovery. These guidelines are then implemented by the single Group companies, based on their size, local rules and regulations, their organization and their NPL levels;• defines, in keeping with domestic and European regulations, the credit classification rules for the business lines for the proper reporting and management of non-performing exposures.
Forbearance policies set out:• in keeping with the provisions of the applicable regulations, the criteria to identify forborne exposures;• eligible forbearance measures;• the rules for the implementation of forbearance measures, such as agreement with the customer, the assessment of the measures that best fit the customers, in light of their specific characteristics, counterparty analysis;• the limits for the implementation of forbearance measures; • monitoring and actions to be taken in case of unpaid sums; • the classification of these exposures as forborne and non-performing exposures.
3.2 Write-offsIn the Group Credit Guidelines, FCA Bank laid down the principle whereby exposures considered uncollectible must be promptly written off or otherwise offset by provisions equal to 100% of their amount.
3.NON-PERFORMING CREDIT EXPOSURES
4.COMMERCIAL RENEGOTIATION FINANCIAL ASSETS AND FORBORNE EXPOSURES
Notes to the consolidated financial statements • 219
QUANTITATIVE DISCLOSURES
A. Credit quality A.1 Non-Performing and performing credit exposure: amounts, writedowns, changes, distribution by business activity
A.1.1 Prudential consolidation: distribution of financial assets by past-due buckets (book values)
First stage
Portfolios / risk stages
Second stage Third stage
From 1 day to
30 days
From 1 day to
30 days
From 1 day to
30 days
Over 30 days until
90 days
Over 30 days until
90 days
Over 30 days until
90 days
Over 90
days
Over 90
days
Over 90
days
1. Financial assets at
amortized cost
2. Financial assets at fair value
through other comprehensive
income
3. Financial assets held for sale
Totale 31/12/2019
Totale 31/12/2018
236,485
-
-
236,485
275,434
600
-
-
600
7,541
923
-
-
923
217
250,146
-
-
250,146
232,182
94,992
-
-
94,992
80,002
38,105
-
-
38,105
2,737
2,727
-
-
2,727
1,939
2,317
-
-
2,317
2,145
90,221
-
-
90,221
82,560
Consolidated financial statements December 31, 2019• 220
A.1.2 Prudential Consolidation - Financial assets, loan commitments and financial guarantees given: changes in overall impairments and provisions
p.1
First stage assets
Sources / risk stages
Second stage assets
Overall write-downs
Financial assets
at amortised
cost
Financial assets
held for sale
Financial assets
held for sale
Financial assets
at amortised
cost
Financial assets at fair value
through other
comprehen-sive
income
Financial assets at fair value
through other
comprehen-sive
income
of which: individual
writedowns
of which: individual
writedowns
of which: collective
writedowns
of which: collective
writedowns
Total opening adjustments
Increases in acquired or originated
financial assets
Cancellations different from write-offs
Net value adjustments / write-backs
for credit risk
Contractual changes without
cancellation
Changes in the estimation methodology
Write-offs non recorded directly in the
income statement
Other changes
Total closing adjustments
Recoveries from financial assets
subject to write-off
Write-offs recorded directly
in the income statement
78,262
1,127
-
8,618
-
-
(126)
(12,035)
75,846
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,468
25
-
3,793
-
-
-
(2,446)
47,840
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
180
-
-
-
-
-
-
(130)
50
-
-
52
-
-
283
-
-
-
-
335
-
-
78,082
1,127
-
8,618
-
-
(126)
(11,905)
75,796
-
-
46,416
25
-
3,510
-
-
-
(2,446)
47,505
-
-
Notes to the consolidated financial statements • 221
A.1.2 Prudential Consolidation - Financial assets, loan commitments and financial guarantees given: changes in overall impairments and provisions
p.2
Third stage assets
Total value adjustments
Sources / risk stages
Total provisions on commitments to disburse funds and financial
guarantees issued
Financial assets
measured at amortized
cost
Financial assets
held for sale
Financial assets
measured at fair value
with an impact
on total profitability
of which: individual
writedowns
of which: collective
writedowns
First stage
Second stage
Third stage
Of which: impaired financial
assets acquired or originated
Total
139,080
822
(21,889)
28,791
-
-
(21,680)
16,216
141,340
245
(1,075)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,444
800
-
889
-
-
(936)
1,310
35,507
-
(623)
105,636
22
(21,889)
27,902
-
-
(20,744)
14,906
105,833
245
(452)
-
-
-
-
-
-
-
-
-
-
-
263,810
1,974
(21,889)
41,202
-
-
(21,806)
1,735
265,026
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total opening adjustments
Increases in acquired or originated
financial assets
Cancellations other than write-offs
Net value adjustments / write-backs
for credit risk
Contractual changes without cancellation
Changes in the estimation
methodology
Write-offs non recorded directly
in the income statement
Other changes
Total closing adjustments
Recoveries from financial assets
subject to write-off
Write-offs recorded directly in the
income statement
Consolidated financial statements December 31, 2019• 222
A.1.3 Financial assets, commitments to provide funds and guarantees as long as they are issued: transfers between different credit risk stages (gross and nominal values)
A.1.4 Prudential Consolidation - On- and off-balance sheet credit exposures with banks: gross and net values
Gross exposure / Par value
From second stage to
first stage
From first to second
stage
Transfers between first stage and second stage
Transfers between second stage to thirth stage
Transfer between first stage and thirth stage
From thirth to first
step
From second to third step
From thirth to second
step
From first to thirth
step
1. Financial assets valued at amortized cost
2. Financial assets at fair value through other
comprehensive income
3. Financial assets held for sale
4. Commitments to provide funds and financial
guarantees issued
Total 31/12/2019
Total 31/12/2018
444,162
-
-
-
444,162
667,197
284,402
-
-
-
284,402
888,503
36,455
-
-
-
36,455
50,853
11,603
-
-
-
11,603
10,892
70,100
-
-
-
70,100
77,122
15,241
-
-
-
15,241
46,581
Portofolios/risk stages
Exposure types /values
Gross exposure
PerformingNon
performing
Total valueadjustments
and totalprovisions
Net Exposure
Overall partial
write-off*
A. On-balance sheet credit exposures
a) Bad exposures
- of which: forborne exposures
b) Unlikely to pay
- of which: forborne exposures
c) Non-performing past due
- of which: forborne exposures
d) Performing past due
- of which: forborne exposures
e) Other performing exposures
- of which: forborne exposures
Total (A)
B. Off-balance sheet credit exposures
a) Non-performing
b) Performing
Total (B)
Total (A+B)
-
-
-
-
-
-
x
x
x
x
-
-
x
-
-
x
x
x
x
x
x
-
-
1,951,602
-
1,951,602
X
1,876
1,876
1,953,478
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,951,602
-
1,951,602
-
1,876
1,876
1,953,478
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Value shown for information purposes.
Notes to the consolidated financial statements • 223
A.1.5 Prudential Consolidation - On- and off-balance sheet credit exposures with customers: gross and net values
Exposure types /values
Gross exposures
PerformingNon
performing
Total value adjustments
and total provisions
Net exposure
Overall partial
write-off*
A. Credit exposures for cash
a) Non performing loans
- of which: forborne exposures
b) Probable defaults
- of which: forborne exposures
c) Impaired expired exposures
- of which: forborne exposures
d) Expired exposures not impaired
- of which: forborne exposures
e) Other non-impaired exposures
- of which: forborne exposures
Total (A)
B. Non-balance sheet credits exposures
a) Impaired
b) Not impaired exposures
Total (B)
Total (A+B)
117,651
2,853
102,761
14,749
71,534
530
x
x
x
x
291,946
-
x
-
291,946
x
x
x
x
x
x
425,992
194
23,372,587
3,660
23,798,579
x
-
-
23,798,579
79,084
2,733
35,403
6,042
26,854
86
37,822
16
85,863
11
265,026
-
-
-
265,026
38,567
120
67,358
8,707
44,680
444
388,170
178
23,286,724
3,649
23,825,499
-
-
-
23,825,499
269
-
-
-
-
-
-
-
-
-
269
-
-
-
269
* Value shown for information purposes.
Consolidated financial statements December 31, 2019• 224
A. 1.7 Prudential Consolidation - On-balance sheet credit exposures with customers: changes in gross non-performing exposures
A. Opening balance (gross amount)
- of which sold non-cancelled exposures
B. Increases
B.1 transfers from performing loans
B.2 Transfer from acquired or originated impaired financial assets
B.3 transfer from other non-performing exposures
B.4 contractual changes without cancellations
B.5 other increases
C. Decreases
C.1 transfers to performing loans
C.2 write-offs
C.3 collections
C.4 sales proceeds
C.5 losses on disposals
C.6 transfers to other non-performing exposures
C.7 contractual changes without cancellations
C.8 other decreases
D. Closing balance (gross amounts)
- of which sold non-cancelled exposures
53,779
782
39,321
25,266
-
258
-
13,798
21,567
2,691
-
9,457
-
-
5,375
-
4,044
71,534
8,664
Unlikely to pay
Bad exposuresSources/ categories
Non-performing past due
122,265
6,417
73,203
21,339
-
2,823
-
49,042
92,707
586
-
71,184
-
-
3,564
-
17,373
102,761
12,753
103,270
9,293
79,707
20,088
-
6,889
-
52,730
65,326
201
24,249
7,938
5,011
21,889
1,014
-
5,024
117,651
20,634
Detail statement on impaired credit exposures (Bad exposures, Unlike to pay, Non performing past due) and not impaired is provided in the tables of "Credit quality" contained in Part E of the notes to the consolidated financial statements. In this area, in line with the regulations of the Bank of Italy, specific information is also provided on the so-called exposures with measures of "forbearance". For forbearance means those concessions in terms of modification and/or refinancing of an existing credit, against a debtor solely by reason of, or to prevent, a State of financial
distress that could adversely affect its ability to fulfil contractual obligations originally assumed, and that would not have been granted to other debtor with similar risk profile not in financial distress. Concessions must be identified at the level of the individual line of credit and may cover exposures of debtors classified as performing that in non-performing status. In any case, exposures renegotiated should not be considered forborne when the debtor is not a situation of financial distress.
Notes to the consolidated financial statements • 225
A.1.7bis Prudential Consolidation - On-balance sheet exposures with customers: changes by credit quality in gross forborne
A. Opening balance (gross amount)
- of which sold non-cancelled exposures
B. Increases
B.1 transfers from performing non-forborne exposures
B.2. Transfers from performing forbone exposures
B.3. transfers from non-performing forborne exposures
B.4 transfers from non-performing non-forborne exposures
B.4 other increases
C. Decreases
C.1 Transfers to performing non-forborne exposures
C.2 transfers to performing forbone exposures
C.3 transfers to non-performing forborne exposures
C.4 write-offs
C.5 collections
C.6 sales proceeds
C.7 losses on disposals
C.8 other decreases
D. Closing balance (gross amounts)
- of which sold non-cancelled exposures
33,045
-
1,235
1,154
X
-
80
-
30,425
10
-
X
-
723
-
-
29,618
3,854
-
Forborne exposures: non-performingSources/Quality
Forborne exposures: performing
24,664
1,145
2,812
160
383
X
95
2,174
9,344
-
X
-
X
921
3
-
8,420
18,132
4,596
Consolidated financial statements December 31, 2019• 226
A.1.9 Prudential Consolidation - On-balance sheet non-performing credit exposures with customers: changes in overall write-downs
of which: forborne
exposures
Total
Bad exposures Unlikely to pay Non-performing past due
of which: forborne
exposures
Total of which: forborne
exposures
Total
A. Opening balance overall amount of writedowns
- of which sold non-cancelled exposures
B. Increases
B.1 Write-downs of acquired or originated impaired financial assets
B. 2 other write-downs
B.3 losses on disposal
B.4 transfers from other categories of non-performing exposures
B. 5 contractual changes without cancellations
B.6 other increases
C. Reductions
C.1 write-backs from valuation
C.2 write-backs from collection
C.3 gains on disposal
C.4 write-offs
C.5 transfers to other categories of non-performing exposures
C. 6 contractual changes without cancellations
C.7 other decreases
D. Closing balance overall amount of writedowns
- of which sold non-cancelled exposures
77,470
9,712
45,195
1,132
10,596
32
4,973
-
28,462
43,581
9,276
628
1,494
24,249
204
-
7,730
79,084
15,971
3,615
364
85
X
10
3
64
-
9
967
-
-
-
-
14
-
953
2,733
244
38,713
3,909
17,682
-
7,248
-
1,346
-
9,088
20,991
2,180
1,386
-
-
3,241
-
14,184
35,403
6,342
8,191
233
565
X
23
-
3
-
540
2,714
23
4
-
-
43
-
2,644
6,042
923
23,815
961
10,374
408
3,242
-
1,015
-
5,709
7,686
2,186
677
-
-
3,889
-
935
26,854
2,547
2,782
-
85
X
44
-
3
-
38
2,782
-
19
-
-
19
-
2,744
86
-
Sources/Categories
Notes to the consolidated financial statements • 227
A.2 Classification of credit exposure based on external and internal ratings
A.2.1 Distribution of financial assets, commitments to disburse funds and financial guarantees issued: for external rating classes (gross values)
External rating classes
Exposures Class 1
Class 5
Class2
Class 6
Class 3
Without rating
Class 4
Total
A. Financial assets valued at amortized cost
- First stage
- Second stage
- Third stage
B. Financial assets valued at fair value with impact on
overall profitability
- First stage
- Second stage
- Third stage
C. Financial assets held for sale
- First stage
- Second stage
- Third stage
Total (A+B+C)
of which: impaired financial assets acquired or originated
D. Commitments and financial guarantees given
- First stage
- Second stage
- Third stage
Total (D)
Total (A+B+C+D)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,032,320
24,871,757
868,617
291,946
9,807
9,807
-
-
-
-
-
-
26,042,127
-
-
-
-
-
26,042,127
26,032,320
24,871,757
868,617
291,946
9,807
9,807
-
-
-
-
-
-
26,042,127
-
-
-
-
-
26,042,127
Consolidated financial statements December 31, 2019• 228
A.3. Breakdown of guaranteed credit exposures by type of guarantee
A.3.1 Prudential Consolidation - Secured on-balance and off-balance sheet credit exposures with banks
p.1Personal guarantees (2)
Credit derivativesCollaterals (1)
Central counterparties
SecuritiesProperty Financial
leases
Gross exposure
Other collaterals
Netexposure
CLNProperty
mortgages
Other derivatives
1. Secured on-balance sheet credit exposures
1.1 totally secured
- of which non-performing
1.2 partially secured
- of which non-performing
2. Secured off-balance sheet credit exposures
2.1 totally secured
- of which non-performing
2.2 partially secured
- of which non-performing
26,764
26,764
-
-
-
-
-
-
-
-
24,044
24,044
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,039
24,039
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the consolidated financial statements • 229
A.3.1 Prudential Consolidation - Secured on-balance and off-balance sheet credit exposures with banks
p. 2Personal guarantees (2)
Credit derivatives
Other derivatives
Signature loans
BanksPublic sector
entitiesBanks
Other financial
companies
Other financial
companiesOther
entitiesOther
entitiesTotal
(1)+(2)
1. Secured on-balance sheet credit exposures
1.1 totally secured
- of which non-performing
1.2 partially secured
- of which non-performing
2. Secured off-balance sheet credit exposures:
2.1 totally secured
- of which non-performing
2.2 partially secured
- of which non-performing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,039
24,039
-
-
-
-
-
-
-
-
Consolidated financial statements December 31, 2019• 230
A.3.2 Prudential consolidation - Secured on-balance and off-balance sheet credit exposures with customers
A.3.2 Prudential consolidation - Secured on-balance and off-balance sheet credit exposures with customers
p.1
p.2
Personal Guarantees (2)
Credit derivativesCollaterals (1)
Central counterparties
SecuritiesProperty Financial
leases
Gross exposure
Other collaterals
Net exposure
CLNProperty
mortgages
Other derivatives
1. Secured on-balance sheet credit exposures:
1.1 totally secured
- of which non-performing
1.2 partially secured
- of which non-performing
2. Secured off-balance sheet credit exposures:
2.1 totally secured
- of which non-performing
2.2. partially guaranteed
- of which non-performing
12,005,672
6,199,035
63,457
5,806,637
107,627
-
-
-
-
-
11,828,073
6,092,017
32,462
5,736,056
71,079
-
-
-
-
-
45,210
-
-
45,210
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42,572
-
-
42,572
-
-
-
-
-
-
6,092,017
6,092,017
32,462
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Personal Guarantees (2)
Credit derivatives
Other derivatives
Signature loans
Banks
Public sector
entitiesBanks
Other financial
companies
Other financial
companiesOther
entitiesOther
entitiesTotal
(1)+(2)
1. Secured on-balance sheet credit exposures:
1.1 totally secured
- of which non-performing
1.2 partially secured
- of which non-performing
2. Secured off-balance sheet credit exposures:
2.1 totally secured
- of which non-performing
2.2. partially guaranteed
- of which non-performing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
474,767
-
-
474,767
16,893
-
-
-
-
-
372,899
-
-
372,899
-
-
-
-
-
-
882,214
-
-
882,214
5,631
-
-
-
-
-
7,909,680
6,092,017
32,462
1,817,663
22,524
-
-
-
-
-
Notes to the consolidated financial statements • 231
B. DISTRIBUTION AND CONCENTRATION OF CREDIT EXPOSURES
B.1 Prudential consolidation - Sectoral distribution of cash and off-balance sheet exposures to customers
p.1
Total write-downs
Net exposure
Public administration Financial companies Financial companies (of which: insurance companies)
Total write-downs
Net exposure
Total write-downs
Net exposure
A. On-balance sheet credit exposures
A.1 Non-performing loans
- of wich: forborne exposures
A.2 Unlikely to pay
- of wich: forborne exposures
A.3 Impaired past due exposures
- of wich: forborne exposures
A.4 Not impaired exposures
- of wich: forborne exposures
Total (A)
B. Off-balance sheet credit exposures
B.1 Non-performing exposures
B.2 Performing exposures
Total (B)
Total (A+B) 31/12/2019
Total (A+B) 31/12/2018
30
-
-
-
91
-
22,176
-
22,297
-
-
-
22,297
2,185
43
-
-
-
64
-
121
-
228
-
-
-
228
45
48
-
27
-
187
4
242,449
23
242,711
-
-
-
242,711
250,957
34
-
3,700
3,685
88
-
595
-
4,417
-
-
-
4,417
5,037
-
-
-
-
-
-
-
-
-
-
-
-
-
18
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exposures/Counterparts
Consolidated financial statements December 31, 2019• 232
B.1 Prudential consolidation - Sectoral distribution of cash and off-balance sheet exposures to customers
p.2Non-financial companies Families
Total write-downs
Net exposure
Total write-downs
Net exposure
A. On-balance sheet credit exposures
A.1 Non-performing loans
- of wich: forborne exposures
A.2 Unlikely to pay
- of wich: forborne exposures
A.3 Impaired past due exposures
- of wich: forborne exposures
A.4 Not impaired exposures
- of wich: forborne exposures
Total (A)
B. Off-balance sheet credit exposures
B.1 Non-performing exposures
B.2 Performing exposures
Total (B)
Total (A+B) 31/12/2019
Total (A+B) 31/12/2018
26,277
42
61,020
7,118
29,393
75
10,805,137
955
10,921,827
-
-
-
10,921,827
11,472,329
46,112
2,620
17,757
2,069
14,098
38
68,549
3
146,516
-
-
-
146,516
125,386
12,275
78
6,312
1,588
15,009
365
12,605,069
2,849
12,638,664
-
-
-
12,638,664
13,121,189
33,143
114
13,947
289
12,605
48
54,171
25
113,866
-
-
-
113,866
136,116
Exposures/Counterparts
Notes to the consolidated financial statements • 233
B.2 Prudential consolidation - Distribution of BS and Off-BS credit exp. to customers
B.2 Prudential consolidation - Distribution of BS and Off-BS credit exp. to customers
p.1
p.2
Total value
adjustments
Net exposures
Italy Other european countries United States
Net exposures
Total value
adjustments
Net exposures
A. On-balance sheet credit exposures
A.1 Non-performing loans
A.2 Unlikely to pay
A.3 Impaired past due exposures
A.4 Not impaired exposures
Total (A)
B. Off-balance sheet credit exposures
B.1 Non-performing exposures
B.2 Performing exposures
Total (B)
Total (A+B) 31/12/2019
Total (A+B) 31/12/2018
6,744
46,666
8,373
11,507,060
11,568,843
-
-
-
11,568,843
11,690,029
35,064
27,374
8,183
49,883
120,505
-
-
-
120,505
122,278
31,886
20,692
36,306
12,167,771
12,256,655
-
-
-
12,163,443
13,156,649
44,268
8,029
18,671
73,553
144,521
-
-
-
144,521
144,304
-
-
-
-
-
-
-
-
-
-
Exposures / Geographical
Total value
adjustments
Net exposures
United States Asia Rest of the world
Net exposures
Total value
adjustments
Total value
adjustments
A. On-balance sheet credit exposures
A.1 Non-performing loans
A.2 Unlikely to pay
A.3 Impaired past due exposures
A.4 Not impaired exposures
Total (A)
B. Off-balance sheet credit exposures
B.1 Non-performing exposures
B.2 Performing exposures
Total (B)
Total (A+B) 31/12/2019
Total (A+B) 31/12/2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exposures / Geographical
Consolidated financial statements December 31, 2019• 234
B.3 Prudential Consolidation - Distribution of on-balance and off-balance sheet credit exposures with banks by geographic area
B.3 Prudential Consolidation - Distribution of on-balance and off-balance sheet credit exposures with banks by geographic area
p.1
p.2
Overall write-downs
Net exposure
Italy Other european countries United states
Net exposure
Overall write-downs
Net exposure
A. On-balance sheet credit exposures
A.1 Bad exposures
A.2 Unlikely to pay
A.3 Non-performing past-due
A.4 Performing exposures
Total (A)
B. Off-balance sheet credit exposures
B.1 Non-performing exposures
B.2 Performing exposures
Total (B)
Total 31/12/2019
Total 31/12/2018
-
-
-
912,631
912,631
-
-
-
912,631
1,137,552
-
-
-
-
-
-
-
-
-
-
-
-
-
1,038,971
1,038,971
-
1,876
1,876
1,040,847
1,245,238
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Esposizioni/Aree geografiche
Overall write-downs
Net exposure
United States Asia Rest of the world
Net exposure
Overall write-downs
Overall write-downs
A. On-balance sheet credit exposures
A.1 Bad exposures
A.2 Unlikely to pay
A.3 Non-performing past-due
A.4 Performing exposures
Total (A)
B. Off-balance sheet credit exposures
B.1 Non-performing exposures
B.2 Performing exposures
Total (B)
Total 31/12/2019
Total 31/12/2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exposures / Geographical areas
Notes to the consolidated financial statements • 235
B.4 Large exposures
Based on regulatory provisions, the number large exposures was determined by the reference to unweighted exposures in excess of 10% of eligible capital as defined by EU Regulation 575/2013 (CRR). The 'exposures' are defined as the sum of on-balance sheet assets at risk and and off-balance transactions (excluding those deducted from eligible capital) with a customer or a group of related customers, without applying weighting factors.
Such presentation criteria result in the inclusion in the financial statement table for large exposures of entities that present an unweighted exposure in excess of 10% of eligible capital, for the purpose of large risk.
A. Amount (book value)
B. Amount (weighted value)
C. Number
(€/000) Total 31/12/2019
1,475,358
440,112
2
Consolidated financial statements December 31, 2019• 236
C. SECURITIZATION TRANSACTIONS
QUALITATIVE DISCLOSURES
rating agencies. On the other hand, private placements do not entail the assignment of a rating to the Securities.Mezzanine and Junior Securities are placed with a view to improving the efficiency of the risk-weighted assets associated with the securitized portfolio, as mentioned above.
Securitization transactions can be either revolving – where the Originator can assign from time to time additional receivables in accordance with the restrictions outlined in the securitization contract, for a pre-established period of time, so as to keep the existing portfolio at the same level as that at the time of issue – or amortizing, where the originator cannot assign additional receivables and the portfolio starts amortizing from the moment the ABSs are issued.At the end of the revolving period, or from the time the ABSs are issued in case the transaction is amortizing, ABSs are repaid in the pre-determined order as the portfolio amortizes.
Strategies and processes underlying the securitization of loans and leases Securitization transactions, undertaken pursuant to Law 130/1999, are carried out by FCA Bank to achieve four objectives:• diversification of funding sources: securitizations are a significant alternative source of funding to customer deposits for the Company;• improvement of liquidity position: the Company’s potential ability to securitize its receivables provides significant support to its liquidity position. The excellent results of the transactions carried out so far, together with the operating companies’ reputation in the role of servicers, guarantee in fact immediate access to this instrument, in case of difficulties in the other financial markets of reference;• optimization of the cost of funds: the structures used to carry out the securitizations and the quality of the receivables assigned make it possible, by receiving higher ratings, to obtain competitive funding costs;• improved efficiency of the risk-weighted assets associated with the securitized portfolio.
The securitization transactions carried out by FCA Bank pursuant to Law no. 130/1999 involve the purchase of receivable portfolios with proceeds from the placement of Asset-Backed Securities (ABSs) issued in different classes: Senior, Mezzanine and Junior.
Where permitted by market conditions, Senior but also Mezzanine and Junior Securities can be offered to European professional investors or can be placed privately, in whole or in part. Since FCA Bank obtained its banking license, Senior Securities can be used also for refinancing operations with the European Central Bank, in which case the Securities are subscribed, and therefore retained, by the Originator.In public placements, to Senior and Mezzanine Securities are assigned a rating by at least two
Revolving structure Transactions with a revolving structure, as described above, can call for the SPV to purchase, for a pre- established period of time, additional receivable portfolios with the same legal and financial structure and a similar risk profile, funding the purchase both with the proceeds from the collection of receivables in the portfolio existing at the time of issue of the ABSs, and assigned previously by the Originator, and with proceeds from the placement of additional ABSs issued within the limits of the program.
At the end of the revolving phase, the ABSs issued are repaid as the underlying receivables are collected.
The revolving structure allows the fixed costs of the transaction to be amortized over a longer period of time, thereby optimizing the cost of the transaction.
Notes to the consolidated financial statements • 237
Liquidity managementThe Originator may be required in every transaction, and in ways that can differ formally from one another, to make available a liquidity line or a cash deposit to the SPV.
The amount is established by contract and is such as to allow the vehicle to meet temporary liquidity shortfalls (typically, at payment dates) that could occur in applying the waterfall payment structure described below.
Waterfall structureThe payment waterfall identifies priorities in the allocation of the cash available within the SPV.Typically, securitization transactions have a similar waterfall structure, which calls for a pre-established payment order to be followed.In the case of transactions originated from retail receivables, where there is typically a distinction between income (i.e. the discount deriving from the receivable assignment) and principal of the receivables collected by the SPV, the waterfall provides - in a simplified way - for the following types of payment:
INCOME:a) Vehicle expenses (mainly expenses related to the service providers of the transaction);
b) Swap (required by contract to hedge the SPV against interest rate risk);
c) Servicer compensation;
d) Interest on the ABSs;
e) Liquidity line repayment/interest;
f) Provisions for past due receivables;
g) Other items.
PRINCIPAL:(a) Any payments required but not made in relation to the above income waterfall;
(b) Purchase of receivables (during the revolving period);(c) Repayment of ABS issued (at the end of any revolving period);(d) Other items.In the case of transactions originated from dealer financing receivables, given the different portfolio characteristics, cash management arrangements are in place so that upon receiptof the following:a) Current account balance;b) Release of funds from structure on the cash reserve;c) Receivable collections;d) Issue of new senior ABS, if any,e) Issue of new junior ABS, if any.
The following payments are made:a) Vehicle expenses;b) Interest on senior ABSs;c) Provision of funds in the structure on the cash reserve;d) Purchase of receivables (during the revolving period);e) Repayment of senior ABSs;f) Interest on junior ABSs;g) Any repayment of junior ABS.
Consolidated financial statements December 31, 2019• 238
Servicing activityThe Servicer of securitization transactions is always the Originator.The role of servicer of the transactions requires compliance with several qualitative standards related to the proper management of the assets underlying the notes issued by the SPV and an adequate organizational structure in terms of management and specialized personnel.
From an operational point of view, the Servicer:• manages existing contracts according to its own credit and collection policies and the law, in agreement with the SPV and the trustee/representative of noteholders of the transaction, with reporting obligations also to the rating agencies in case of significant events;• records collections and recoveries, transferring the relevant amounts. Collections by the servicer of the various transactions are transferred to the SPV according to a pre-established schedule in each transaction (typically every day) and are kept in interest-paying current accounts until the next payment date. The funds are then used to make payments in accordance with the waterfall structure or, alternatively, in case of transactions in Warehouse Phase or in ABS Revolving Phase, until when they can be used to pay for the purchase of additional receivables;• monitors, reports on and checks the transaction (the roles of Paying Agent/Calculation Agent/Agent Bank are assigned to a different bank).
The Servicer receives compensation on an arm’s length basis.
Rating agenciesThe securitization transactions have been structured in such a way as to obtain, in case of public placements, at least the AA rating for the Senior ABSs issued by the SPV. For all the existing publicly traded senior and mezzanine ABSs (excluding junior ones), ratings were obtained from at least two of the four main
Performance of securitizationsThe assigned receivable portfolios delivered excellent performances, as indicated in the reports produced by the Servicer and in the reports prepared by the Calculation Agent (for the benefit of investors, in the case of publicly traded ABSs).
This is attested also, in some cases, by the upgrade of the ratings assigned by the agencies to certain ABSs.The portfolios are well within the limits and fully compliant with the restrictions set within the different transactions and no event took place which made the portfolio non-compliant in terms of the triggers monitored.The triggers related to the portfolio are monitored, regarding the transactions originated from retail receivables, on every date of assignment (no monitoring is carried out for amortizing transactions because their portfolios are static, i.e. they are not subject to changes due to revolving assignments, and receive a rating from the rating agencies only at the beginning of the transaction. Accordingly, the monitoring of the performance is for information purposes only).
Regarding transactions originated from dealer financing receivables, triggers and portfolio performances are monitored at least once a month and the assigned receivables show a regular performance.
rating agencies (Standard&Poor’s, Moody's Investor Service, DBRS and Fitch Ratings). The ABSs placed privately may or may not receive a (if assigned, it is normally private) rating, depending on the needs of the investor. Junior ABS are not assigned a rating.
Notes to the consolidated financial statements • 239
The tables attached in the next paragraph summarize the information related to the main securitization transactions existing at December 31, 2019.It is worthy of note that these transactions, which had Group companies as originators, were completed in the year just ended or in previous years. In every case, at the end of the
QUANTITATIVE DISCLOSURES
amortization period, the Originator exercised the clean-up option, as provided for by the relevant contracts, whereby the Originator reserves the right - upon reaching a minimum portfolio amount provided for by contract - to buy back the remaining portfolio to complete the transaction:
SPV Clean-up date
FIRST Italian Auto Transaction S.p.A.
SECOND Italian Auto Transaction S.p.A.
ABSOLUTE FUNDING S.r.l.
FCC FAST
A-BEST THREE Plc
NIXES/A-BEST
QUASAR
NIXES TWO/A-BEST TWO
A-BEST SIX
STAR
A-BEST FIVE
A-BEST EIGHT
NIXES THREE
NIXES FOUR
FCT FAST 2
A-BEST SEVEN
A-BEST FOUR
NIXES FIVE
A-BEST NINE
A-BEST TEN
28/07/2006
29/09/2006
22/02/2008
27/11/2008
10/07/2009
21/04/2011
13/05/2011
01/10/2011
15/07/2013
15/01/2014
20/05/2014
16/03/2015
31/03/2015
01/06/2015
30/07/2015
15/11/2016
22/11/2016
21/09/2017
24/04/2018
23/02/2019
Consolidated financial statements December 31, 2019• 240
Characteristics of securitization transactions
EUR /000 A-BEST SIXTEEN UG A-BEST FIFTEEN S.r.l.
Start date december-18 may-17
Transaction type Public Public
Originator FCA Bank Deutschland GmbH FCA Bank S.p.A.
Servicer FCA Bank Deutschland GmbH FCA Bank S.p.A.
Arranger BAML / Crédit Agricole-CIB / LBBW Banca IMI / Unicredit / Crédit Agricole - CIB
Joint Lead Manager BAML / Crédit Agricole-CIB / LBBW Banca IMI / Unicredit / Crédit Agricole - CIB
Underlying assets German AutoLoans Italian AutoLoans
Currency (CCY) EUR EUR
Transfer of collections (frequency) daily daily
Programme Amount CCY/000 NA NA
Notes outstanding Amount % Coupon (bps) Amount % Coupon (bps)
Class A (Senior) 520,686 85.0% 1M E+40 650,954 86.2% 1M E+40
Class B (Mezzanine) 18,000 2.9% 1M E+80 5,000 0.7% 1M E+75
Class C (Mezzanine) 20,000 3.3% 1M E+150 43,000 5.7% 1M E+250
Class D (Mezzanine) 16,000 2.6% 1M E+250 15,000 2.0% 1M E+343
Class E (Mezzanine) 11,000 1.8% 1M E+350 10,000 1.3% 1M E+464
Class M/M1/Junior (Subordinated) 26,600 4.3% VR 30,900 4.1% 1M E+717
Class M2 (Subordinated) 100 0.0% VR
ABS Tranches at issue Amount % Tranche Amount % Tranche
Class A (Senior) 540,000 85.5% 5% RETAINED 911,000 89.8% 5% RETAINED
Class B (Mezzanine) 18,000 2.8% 100% RETAINED 5,000 0.5% 100% RETAINED
Class C (Mezzanine) 20,000 3.2% 100% RETAINED 43,000 4.2% 5% RETAINED
Class D (Mezzanine) 16,000 2.5% 100% RETAINED 15,000 1.5% 5% RETAINED
Class E (Mezzanine) 11,000 1.7% 100% RETAINED 10,000 1.0% 5% RETAINED
Class M/M1/Junior (Subordinated) 26,600 4.2% 100% RETAINED 30,900 3.0% 5,18% RETAINED
Class M2 (Subordinated) 100 0.0% 100% RETAINED
Current rating S&P Moody's Moody's DBRS
Class A (Senior) AAA Aaa Aa3 AAA
Class B (Mezzanine) AA Aa1 A1 AAA
Class C (Mezzanine) A A1 A2 AA
Class D (Mezzanine) BBB Baa1 Baa2 AH
Class E (Mezzanine) BB+ Ba1 Baa3 AL
Junior Tranche (Subordinated) Unrated Unrated
NOTE
(1) Programme limit funded by third counterparties
NA = Not applicabile
WAL (aa) = Weighted Average Life (years)
VR = Variable Return
1M E = Euribor 1 month
1M L = Libor 1 mese
VR = Variable Return
Coupon (bps) = base rate + margin
Notes to the consolidated financial statements • 241
EUR /000 A-BEST FOURTEEN S.r.l. A-BEST THIRTEEN FT
Start date may-16 december-15
Transaction type Public Public
Originator FCA Bank S.p.A. FCA CAPITAL España E.F.C.
Servicer FCA Bank S.p.A. FCA CAPITAL España E.F.C.
Arranger Banca IMI / Unicredit / Crédit Agricole - CIB Unicredit /Citibank
Joint Lead Manager NA Unicredit / Citibank / Crédit Agricole - CIB
Underlying assets Italian AutoLoans Spanish AutoLoans
Currency (CCY) EUR EUR
Transfer of collections (frequency) daily daily
Programme Amount CCY/000 NA NA
Notes outstanding Amount % Coupon (bps) Amount % Coupon (bps)
Class A (Senior) 1,487,000 88.7% 40 143,908 57.3% 1M E+40
Class B (Mezzanine) 50,000 3.0% 75 43,700 17.4% 1M E+140
Class C (Mezzanine) 33,300 2.0% 250 - 0.0% -
Class D (Mezzanine) 43,000 2.6% 343 - 0.0% -
Class E (Mezzanine) 18,200 0.0% 464 - 0.0% -
Class M/M1/Junior (Subordinated) 44,500 2.7% 717 63,500 25.3% VR
Class M2 (Subordinated) 100 0.0% VR - 0.0% -
ABS Tranches at issue Amount % Tranche Amount % Tranche
Class A (Senior) 1,487,000 88.7% 100% RETAINED 222,500 71.3% PUBLIC
Class B (Mezzanine) 50,000 3.0% 100% RETAINED 36,500 11.7% 100% RETAINED
Class C (Mezzanine) 33,300 2.0% 100% RETAINED - 0.0% -
Class D (Mezzanine) 43,000 2.6% 100% RETAINED - 0.0% -
Class E (Mezzanine) 18,200 1.1% 100% RETAINED - 0.0% -
Class M/M1/Junior (Subordinated) 44,500 2.7% 100% RETAINED 53,000 17.0% 100% RETAINED
Class M2 (Subordinated) 100 0.0% 100% RETAINED - 0.0% -
Current rating Fitch DBRS Fitch DBRS
Class A (Senior) AA AA AAA AAA
Class B (Mezzanine) A A AAA AAA
Class C (Mezzanine) BBB+ BBB (high) NA
Class D (Mezzanine) BB+ BBH NA
Class E (Mezzanine) BB BBL NA
Junior Tranche (Subordinated) Unrated Unrated
NOTE
(1) Programme limit funded by third counterparties
NA = Not applicabile
WAL (aa) = Weighted Average Life (years)
VR = Variable Return
1M E = Euribor 1 month
1M L = Libor 1 mese
VR = Variable Return
Coupon (bps) = base rate + margin
Consolidated financial statements December 31, 2019• 242
EUR /000 A-BEST TWELVE S.r.l. A-BEST ELEVEN UGStart date august-15 march-15Transaction type Public PublicOriginator FCA Bank S.p.A. FCA Bank Deutschland GmbHServicer FCA Bank S.p.A. FCA Bank Deutschland GmbHArranger Unicredit / Banca IMI LBBW / Crédit Agricole - CIBJoint Lead Manager Banca IMI / Unicredit / Crédit Agricole - CIB LBBW / Crédit Agricole - CIBUnderlying assets Italian AutoLoans German AutoLoansCurrency (CCY) EUR EUR Transfer of collections (frequency) daily dailyProgramme Amount CCY/000 NA NA Notes outstanding Amount % Coupon (bps) Amount % Coupon (bps)Class A (Senior) 64,200 36.4% 1M E+40 - 0.0% 1M E+45
Class B (Mezzanine) 72,000 40.9% 1M E+125 13,677 20.1% 1M E+75 Class C (Mezzanine) - 0.0% - 15,000 22.0% 200 Class D (Mezzanine) - 0.0% - 13,000 19.1% 300 Class E (Mezzanine) - 0.0% - - 0.0% - Class M/M1/Junior (Subordinated) 40,000 22.7% VR 26,500 38.9% 2.000 Class M2 (Subordinated) - 0.0% - - 0.0% - ABS Tranches at issue Amount % Tranche Amount % Tranche Class A (Senior) 688,000 86.0% PUBLIC 454,000 86.7% PUBLIC Class B (Mezzanine) 72,000 9.0% 100% RETAINED 15,000 2.9% PUBLICClass C (Mezzanine) - 0.0% - 15,000 2.9% 100% RETAINEDClass D (Mezzanine) - 0.0% - 13,000 2.5% 100% RETAINED Class E (Mezzanine) - 0.0% - - 0.0% - Class M/M1/Junior (Subordinated) 40,000 5.0% 100% RETAINED 26,500 5.1% 100% RETAINEDClass M2 (Subordinated) - 0.0% - - 0.0% - Current rating Fitch DBRS S&P Moody'sClass A (Senior) AA AAAClass B (Mezzanine) AA AAA AA+ AaaClass C (Mezzanine) NA AA Aaa
Class D (Mezzanine) NA A AaaClass E (Mezzanine) NA NAJunior Tranche (Subordinated) Unrated Unrated
NOTE
(1) Programme limit funded by third counterparties
NA = Not applicabile
WAL (aa) = Weighted Average Life (years)
VR = Variable Return
1M E = Euribor 1 month
1M L = Libor 1 mese
VR = Variable Return
Coupon (bps) = base rate + margin
Notes to the consolidated financial statements • 243
EUR /000 A-BEST SEVENTEEN S.r.l.Start date november -19Transaction type PublicOriginator FCA Bank S.p.A.Servicer FCA Bank S.p.A.Arranger Banca IMI / Unicredit / Crédit Agricole - CIBJoint Lead Manager Banca IMI / Unicredit / Crédit Agricole - CIB / SANTANDERUnderlying assets Italian AutoLoansCurrency (CCY) EUR Transfer of collections (frequency) daily Programme Amount CCY/000 NA Notes outstanding Ammontare % Coupon (bps) Class A (Senior) 810,000 88.8% 1M E+70
Class B (Mezzanine) 27,000 3.0% 1M E+125 Class C (Mezzanine) 18,000 2.0% 1M E+180 Class D (Mezzanine) 23,400 2.6% 1M E+285 Class E (Mezzanine) 9,900 0.0% 1M E+385Class M/M1/Junior (Subordinated) 24,300 2.7% 6.875 Class M2 (Subordinated) - 0.0% - ABS Tranches at issue Ammontare % Tranche Class A (Senior) 810,000 88.8% 5% RETAINED Class B (Mezzanine) 27,000 3.0% 5% RETAINEDClass C (Mezzanine) 18,000 2.0% 5% RETAINEDClass D (Mezzanine) 23,400 2.6% 5% RETAINEDClass E (Mezzanine) 9,900 1.1% 5% RETAINEDTitoli M/M1/Junior (Subordinated) 24,300 2.7% 5% RETAINED Class M2 (Subordinated) - 0.0% - Current rating Fitch DBRSClass A (Senior) AA AAAClass B (Mezzanine) A+ AAHClass C (Mezzanine) BBB+ AALClass D (Mezzanine) BB+ BBBLClass E (Mezzanine) BB+ BH
Junior Tranche (Subordinated) Unrated
NOTE
(1) Programme limit funded by third counterparties
NA = Not applicabile
WAL (aa) = Weighted Average Life (years)
VR = Variable Return
1M E = Euribor 1 month
1M L = Libor 1 mese
VR = Variable Return
Coupon (bps) = base rate + margin
Consolidated financial statements December 31, 2019• 244
NOTE
(1) Programme limit funded by third counterparties
NA = Not applicabile
WAL (aa) = Weighted Average Life (years)
VR = Variable Return
1M E = Euribor 1 month
1M L = Libor 1 mese
VR = Variable Return
Coupon (bps) = base rate + margin
Data expressed in thousand Nixes Seven B.V. Nixes Six PLc
Start date september-17 december-13
Transaction type Private Private
Originator FCA Bank Deutschland GmbH FCA Automotive Services UK Ltd
Servicer FCA Bank Deutschland GmbH FCA Automotive Services UK Ltd
Arranger Citibank / BAML/Crédit Agricole-CIB/Unicredit Citibank /Crédit Agricole-CIB/ HSBC / NATWEST
Underlying assets German AutoLoans and Leasing UK AutoLoans
Currency (CCY) EUR GBP
Transfer of collections (frequency) daily daily
Programme Amount CCY/000 540,000,000 (1) 670,000,000 (1)
Notes outstanding Amount % Coupon (bps) Amount % Coupon (bps)
Class A (Senior) 540,280 88.6% NA 655,404 68.7% NA
Class B (Mezzanine) NA 0.0% NA NA 0.0% NA
Class C (Mezzanine) NA 0.0% NA NA 0.0% NA
Class D (Mezzanine) NA 0.0% NA NA 0.0% NA
Junior Tranche (Subordinated) 65,015 11.4% VR 297,965 31.3% VR
Current rating (private)
Class A (Senior) Unrated Unrated
Class B (Mezzanine) NA NA
Class C (Mezzanine) NA NA
Class D (Mezzanine) NA NA
Class E (Mezzanine)
Junior Tranche (Subordinated) Unrated Unrated
Notes to the consolidated financial statements • 245
EUR /000 Fast 3 S.r.l. Erasmus Finance DAC
Start date december-15 june-06
Transaction type Private Private
Originator FCA Bank S.p.A. FCA BANK DEUTSCHLAND GMBHFCA CAPITAL FRANCE SA
FCA DEALER SERVICES ESPANA SA
Servicer FCA Bank S.p.A. FCA BANK DEUTSCHLAND GMBH FCA CAPITAL FRANCE SA
FCA DEALER SERVICES ESPANA SA
Arranger Crédit Agricole-CIB / Banca IMI Crédit Agricole-CIB / BAML
Underlying assets ItalianDealers' Payables
German / French / SpanishDealers' Payables
Currency (CCY) EUR EUR
Transfer of collections (frequency) daily daily
Programme Amount CCY/000 1,000,000,000 (1) 1,290,000,000 (1)
Notes outstanding Amount % Coupon (bps) Amount % Coupon (bps)
Class A (Senior) 881,658 64.9% NA 1,187,709 72.1% NA
Class B (Mezzanine) NA 0.0% NA NA 0.0% NA
Class C (Mezzanine) NA 0.0% NA NA 0.0% NA
Class D (Mezzanine) NA 0.0% NA NA 0.0% NA
Junior Tranche (Subordinated) 477,303 35.1% VR 458,749 27.9% VR
Current rating (private)
Class A (Senior) Unrated Unrated
Class B (Mezzanine) NA NA
Class C (Mezzanine) NA NA
Class D (Mezzanine) NA NA
Class E (Mezzanine)
Junior Tranche (Subordinated) Unrated Unrated
NOTE
(1) Programme limit funded by third counterparties
NA = Not applicabile
WAL (aa) = Weighted Average Life (years)
VR = Variable Return
1M E = Euribor 1 month
1M L = Libor 1 mese
VR = Variable Return
Coupon (bps) = base rate + margin
Consolidated financial statements December 31, 2019• 246
C.1 Prudential Consolidation - Exposure from the main "in-house" securitisation transaction broken down by type of securitised asset
p.1
JuniorMezzanine
On Balance-sheet exposures
Senior
Type of securitised assets/exposures Write-downs/write-backs
Write-downs/write-backs
Write-downs/write-backs
Book Value
Book Value
Book Value
A. Totally derecognised from Balance Sheet
Factoring
of which non-performing
Other loans
of which non-performing
B. Partially derecognised from Balance Sheet
Factoring
of which non-performing
Other loans
of which non-performing
C. Not derecognised from Balance Sheet
Factoring
of which non-performing
Other loans
of which non-performing
-
-
-
-
-
-
-
-
-
-
99,407
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
408,849
-
221,046
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
529,918
-
575,276
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the consolidated financial statements • 247
C.1 Prudential Consolidation - Exposure from the main "in-house" securitisation transaction broken down by type of securitised asset
p.2
JuniorMezzanine
Guarantees given
Senior
Type of securitised assets/exposures Write-downs/write-backs
Write-downs/write-backs
Write-downs/write-backs
Net exposure
Net exposure
Net exposure
A. Totally derecognised from Balance Sheet
Factoring
of which non-performing
Other loans
of which non-performing
B. Partially derecognised from Balance Sheet
Factoring
of which non-performing
Other loans
of which non-performing
C. Not derecognised from Balance Sheet
Factoring
of which non-performing
Other loans
of which non-performing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,632
-
185,638
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated financial statements December 31, 2019• 248
C.3 Prudential Consolidation - SPVs for securitisations
C.4 Prudential Consolidation - Special Purpose Vehicles for securitisation not included in the consolidation
Name of securitization/Name of vehicle
Assets Liabilities
Country of incorporation
Consolidation Credits SeniorOthers JuniorDebt securities
Mezzanine
A-BEST THIRTEEN FT
A-BEST TWELVE S.r.l.
A-BEST ELEVEN UG
A-BEST SEVENTEEN S.r.l.
A-BEST FIFTEEN S.r.l.
NIXES SIX PLc
NIXES SEVEN B.V.
FAST 3 S.r.l.
ERASMUS FINANCE DAC
A-BEST SIXTEEN UG
Line-by-line
Line-by-line
Line-by-line
Line-by-line
Line-by-line
Line-by-line
Line-by-line
Line-by-line
Line-by-line
Line-by-line
247,621
156,300
58,530
868,561
686,960
1,100,888
538,606
1,512,148
1,312,252
585,211
-
-
-
-
-
-
-
-
-
-
-
59,889
11,956
48,825
103,778
52,249
42,494
28,963
311,784
48,633
143,908
64,200
13,677
810,000
650,954
770,338
504,280
881,558
1,187,709
520,686
43,700
72,000
28,000
78,300
73,000
-
-
100
408,749
65,000
63,500
40,000
26,500
24,300
31,000
350,217
65,015
477,303
50,000
26,600
Madrid - Spain
Conegliano (TV) - ItalY
Frankfurt am Main - Germany
Conegliano (TV) - Italy
Conegliano (TV) – Italy
London – UK
Amsterdam – Netherlands
Milan - Italy
Dublin - Ireland
Francoforte sul Meno - Germania
Not applicable to the Group.
Notes to the consolidated financial statements • 249
C.6 Prudential Consolidation - Consolidated securitisation vehicles
C.5 Prudential Consolidation - Servicer activities - "In-house" securitisations: collections of securitised loans andredemptions of securities issued by the securitisation's vehicle"
Servicer
Securitised assets
(end of period)
Loans collected
during the year
Percentage of securities redeemed (end of period)Percentage of redeemed securities (end of period)
Vehicle entityNon-
performingNon-
performingImpaired Impaired ImpairedPerforming Performing In bonis In bonis In bonis
Senior Mezzanine Junior
A-BEST SEVENTEEN S.r.l.
FCA Bank S.p.A. - 868,561 66,223 2,160 - - - - - -
A-BEST TEN S.r.l.In liquidazione
FCA Bank S.p.A. - - - 7,419 - 100% - 100% - 100%
A-BEST TWELVE S.r.l.
FCA Bank S.p.A. 520 155,780 217,100 4,297 - - - - - -
A-BEST FIFTEEN S.r.l.
FCA Bank S.p.A. 1.111 685,850 465,951 6,611 - - - - - -
Fast 3 S.r.l. FCA Bank S.p.A. - 1,512,148 1,361,560 6,644,926 - - - - - -
A-BEST ELEVEN UG
FCA BANK
DEUTSCHLAND GMBH1,135 57,395 - 83,279 - - - - - -
A-BEST SIXTEEN UG
FCA BANK
DEUTSCHLAND GMBH2,605 582,606 - 237,203 - - - - - -
Nixes Seven B.V.FCA BANK
DEUTSCHLAND GMBH2,865 535,741 - 301,808 - - - - - -
Nixes Six PLcFCA AUTOMOTIVE
SERVICES UK 1,100,888 607,264
A-BEST THIRTEEN FT
FCA CAPITAL España
E.F.C.5,922 241,699 - - - - - - - -
Erasmus Finance DAC
FCA DEALER
SERVICES ESPANA S.A.2,468 287,711 2,468 1,455,062 - - - - - -
Erasmus Finance DAC
FCA CAPITAL FRAN-
CE S.A.- 340,806 - 398 - - - - - -
Erasmus Finance DAC
FCA BANK
DEUTSCHLAND GMBH466 680,801 - 3,041,417 - - - - - -
Nixes Six PLc
Nixes Seven B.V.
Fast 3 S.r.l.
Erasmus Finance DAC
A-BEST TEN S.r.l. IN LIQUIDAZIONE
A-BEST ELEVEN UG
A-BEST TWELVE S.r.l.
A-BEST THIRTEEN FT
A-BEST FOURTEEN S.r.l.
A-BEST FIFTEEN S.r.l.
A-BEST SIXTEEN UG
A-BEST SEVENTEEN S.r.l.
Country of incorporationName of vehicle
London - UK
Amsterdam – Netherlands
Milan - Italy
Dublin – Ireland
Conegliano (TV) - Italy
Frankfurt am Main - Germany
Conegliano (TV) – Italy
Madrid - Spain
Conegliano (TV) – Italy
Conegliano (TV) – Italy
Frankfurt am Main - Germany
Conegliano (TV) - Italy
Consolidated financial statements December 31, 2019• 250
D.SALES TRANSACTIONS
A. Financial assets sold and not not fully derecognised
QUANTITATIVE DISCLOSURES
Financial assets sold and fully recognised Associated financial liabilitiesof which
non-performing
Book value
Book value
of which: subject to
securitization transactions
of which: subject to
securitization transactions
of which: subject to sale
sgreements with
repurchase obligation
of which: subject to sale
sgreements with
repurchase obligation
A. Financial assets held for trading
1. Debt securities
2. Equity instruments
3. Loans
4. Derivatives
B. Other financial assets mandatorily at fair value
1. Debt securities
2. Equity instruments
3. Loans
C. Financial assets designated at fair value
1. Debt securities
2. Loans
D. Financial assets at fair value through
other comprehensive income
1. Debt securities
2. Equity instruments
3. Loans
E. Financial assets at amortised cost
1. Debt securities
2. Loans
Total 31/12/2019
Total 31/12/2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,413,053
-
7,413,053
7,413,053
7,582,095
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,067,078
-
7,067,078
7,067,078
7,130,412
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
143,711
-
143,711
143,711
198,662
x
x
x
x
x
-
-
x
-
-
-
-
-
-
x
-
17,092
-
17,092
17,092
9,355
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,674,261
-
5,674,261
5,674,261
6,029,914
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,639,858
-
5,639,858
5,639,858
5,690,160
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
119,270
-
119,270
119,270
189,753
D.1 Prudential Consolidation - Financial assets sold and fully recognised and associated financial liabilities: book value
Notes to the consolidated financial statements • 251
B. Financial assets sold and fully deleted with recognition of continuous involvement
QUALITATIVE DISCLOSURES
In addition to what has already been outlines in “C – Securitization Transactions”, to which reference is made, FCA Bank engages in sales pursuant to Law 52/1991 (Factoring) which are carried out to achieve two results:• improvement of liquidity position;• ideconsolidation of certain assets, in the event that the sale is on a non-recourse basis.
Types of transactionsTransactions are mainly of two types:• Revolving factoring transactions;• Non-revolving factoring transactions.
Revolving factoring transactions
In these transactions, the buyer (Factor) purchases receivables at a specified frequency, over a pre-defined time period.The Originator can sell, periodically, new receivables in accordance with the terms and conditions of the sale agreement.The purchase of such receivable portfolios is financed by the Factor.At the end of the sale period, the portfolio begins to amortize and the funds borrowed are repaid.
Non-revolving factoring transactions
In these transactions the Factor purchases the receivables offered by the seller. The purchase of these receivables is financed by the Factor, on the basis of the loans provided to the single borrowers sold.
Consolidated financial statements December 31, 2019• 252
1.2 Market Risks
That is the reason why derivatives do not attract capital charges for market risk (Pillar I), pursuant to the rules on supervisory returns, and are instead entered in the banking book, the portfolio which contains financial instruments that attract capital charges for credit and counterparty risks, as defined by the cited supervisory rules.
Market risk is the risk of loss from trading in financial instruments (held-for-trading portfolio), currencies and commodities due to market trends and the issuer’s situation. The types of market risk to which the FCA Bank Group is exposed are exchange rate risk and position risk.The types of market risk to which the FCA Bank group is exposed are exchange rate risk and position risk.Exchange risk is related to financial transactions towards subsidiaries adopting currency different from Euro. At December 31, 2019 the impact of this kind of risk is not relevant as net balance amount in foreign currency is below the minimum threshold.
The position risk is related to derivatives transactions. This kind of risk is entirely linked to derivatives finalized at reducing interest rate risk, as the Company doesn’t hold securities for other aims. FCA Bank doesn’t perform trading activities and, as a consequence, is not exposed to market risks.
In accordance with the definition of “Trading Book” of EU Regulation no. 575/2013 (CRR), derivative instruments held by the Group should not be classified as “held for trading” as there is no trading intent in connection with them. In fact, these derivatives were entered into to hedge the interest rate risk of collateral posted for securitization transactions. In addition, the rating agencies require the use of hedging derivatives to assign investment grade ratings.
A. GENERAL ASPECTS
E. PRUDENTIAL CONSOLIDATION Credit risk measurement models
Notes to the consolidated financial statements • 253
1.2.1 Interest rate risk and price risk - Regulatory trading book
Main management process of position risk consist in keeping exposure towards each counterparty below the threshold in coherence with a minimum credit rating as defined in ‘Asset and Liability policy’ and measured by rating stated by main rating agencies. As stated in Section A. General Aspects, the Group at the year-end closing doesn’t hold any financial instruments classified in the Regulatory Trading Portfolio.
A. OPERATIONAL PROCESSES AND METHODS FOR MEASURING INTEREST RATE RISK AND PRICE RISK
QUALITATIVE DISCLOSURES
Consolidated financial statements December 31, 2019• 254
1.2.2 Interest rate and price risk - Banking Book
The FCA Bank Group’s has an exposure to interest rate risk to the extent that changes in interest rates affect its interest spreads. More specifically, the risk lies in the mismatch or gap between the reset dates (date when the interest rate is set: for fixed-rate instruments this is the maturity date while for floating-rate instruments this is the end of the interest period) for assets and liabilities.
Regarding interest rate risk management, Treasury, which does not act in a profit center capacity, executes solely risk hedging activities, thereby minimizing the impact deriving from the volatility of interest rates. This activity is carried out also for the Group’s subsidiaries. Risk mitigation occurs through derivative transactions entered into on the basis of standard contracts (ISDA, International Swaps and Derivatives Association).To calculate interest rate risk exposure, the following methodologies have been used:• Reset Gap Analysis: this methodology is designed to determine the difference between the amount of assets and liabilities with a reset date in the same time bucket. Maturity gap is the difference between the total value of the assets and liabilities maturing/showing a reset date in a specific bucket. Maturity gaps are grouped in buckets and totaled within each such bucket. This difference in called Gap Mismatch Index. Management processes of financial risks, as defined by Group policy, establish that Gap Mismatch can’t exceed ±10% for each temporal phase;• Duration Analysis: this methodology is designed to determine the difference between the duration of assets and that of liabilities analyzed by reset date. In particular, the assets maturing/resetting in a given month are totaled and discounted to present value at the appropriate rate, as calculated on the basis of the interest rates prevailing in the market at
A. GENERAL ASPECTS, OPERATIONAL PROCESSES AND METHODS FOR MEASURING INTEREST RATE RISK AND PRICE RISK
QUALITATIVE DISCLOSURES
the end of the month under analysis. The sum of all the assets so discounted, as weighted by their effective term to maturity in months, divided by the total of all discounted assets, is called asset duration. The liabilities maturing/resetting in a given month are totaled and discounted to present value at the appropriate rate, as calculated on the basis of the interest rates prevailing in the market. The sum of all the liabilities so discounted, as weighted by their effective term to maturity in months, divided by the total of all discounted assets, is called liabilities duration. The difference between asset duration and liabilities duration as a percentage share of asset duration is called duration gap index. Financial risk management sets maximum limits for the duration gap index, which cannot deviate for more than ± 5%; To ensure compliance with the limits set at the consolidated level by the Asset & Liability Policy, Treasury uses derivative instruments, such as interest rate swaps, to remedy any mismatches by aligning the reset date profiles of assets and liabilities.
Notes to the consolidated financial statements • 255
Treasury is responsible for:• carrying out hedging transactions;• controlling the trading process;• defining the hedging strategy within the limits set by ALM Internal Committee.• carrying out on an ongoing basis, through its own staff, first-level controls on interest rate risk, exchange risk and position risk.
ALM is responsible for:• monitoring the interest rate risk and exchange risk for the currencies in which the Company’s and the Group operates;• monitoring the position risk and liquidity risks (LCR and NSFR), both at the final level and at the forecast level;• preparing reports for the ALM Internal Committee; • carrying out on an ongoing basis, through its own staff, first-level controls on interest rate hedging exchange risk and position risk;• performing the required stress tests;• carrying out B/O activities on the Treasury department’s transactions;
Risk & Permanent Control: is responsible for performs systematic controls on the proper application of Treasury/ALM & FR procedures.
Organizational structureTo manage interest rate risk in an accurate and balanced manner, the Group has established a specific corporate governance structure. To this end, certain Committees/Meetings are mainly for information purposes and are also intended to set out general strategies to hedge the financial and market risks to which the Group is exposed, particularly: • Board of Directors is responsible for managing, setting policies and reviewing the compliance, and appropriateness, of the risk management structure; • Advisory Board is responsible for monitoring the Company’s and the Group’s position on interest rate risk and liquidity risk; • Finance & Control Committee is responsible for monitoring the Company’s and the Group’s position on market risk and to define strategies to hedge significant risks;• Group Internal Risk Committee is responsible for setting policies on, and monitoring the proper working of, the Group’s internal control system and is convened whenever there is a crisis situation;
ALM Internal Committee (I.C) is responsible for:
• monitoring the consistency between the interest rate risk hedging transactions approved and those executed every month; • approving the risk hedging transactions to be carried out every month;• evaluating extraordinary financial transactions, liabilities and financial expenses;• evaluating and monitoring capitalization level.
Consolidated financial statements December 31, 2019• 256
while floatings are connected to different temporal bands on the basis of the rate negotiation date;• each temporal band includes assets and liabilities, obtaining the net position;• the net position of every band is multiplied per weighting factors, obtained as product between an theoretical rates variation and an estimate of the modified duration in relation to each bands. The result is equivalent to a parallel shock for 200 bps on rates. To calculate these elements the Group makes assumptions defined in "Attachment C – Banking portfolio tax interest rate” of the Circular 285/2013.• weighted positions, referred to different bands, are added up obtaining an estimate of the actual figures variation, in consideration of the theoretical rate shock (net total weighted position).
Stress tests to evaluate interest rate risk are performed on a quarter bais.
Interest rate risk measurement methodInterest rate risk in banking portfolio (IRRBB) refers to the risk current or perspective related to the assets and profits deriving from hostile interest rates trends. As a fact, interest rates fluctuation, implicates an actual value variation and, in future cash flows, change as a consequence the collateral of the assets, liabilities and off-balances, in addition to profits. Furthermore, interest rates variations influence the connected profits and losses elements.Interest rate risk stress tests are enclosed in the “Integrated Stress Testing Framework”, whom structure provides a quantification model of figure influenced by primitive variables, both exogenous and endogenous, on selected meters and indicators. In particular, meters identified for the interest rate stress are “Interest Rate Risk Internal Capital” and il ”Interest Rate Risk Indicator”.
Compliant with the Circular 285/2013 of the Bank of Italy (Title III, section I, enclosed C), FCA Bank Group measure the interest rate risk through the simplified method.The object of the test is to evaluate interest rate impact on the sensitive portfolio as a result of a ±200 rate basis point shock. Calculation method splits risky positions in temporal bands on the basis of the applied rate (fix or floating). Capital requirement is obtained adopting a series of compensation procedures through short and long positions belonging to different ageing bands.To achieve if the risk indicator, calculated as correlation between the sum of the net positive weighted expositions and the Own Funds (Tier 1), is within the attention threshold, 20%, (in line with requirements of the Circular 285/2013 of the Bank of Italy), following activities are performed:• portfolio assets and liabilities are classified in 14 temporal bands taking in consideration their composition. In particular fix rate assets and liabilities are classified for residual maturity
Notes to the consolidated financial statements • 257
QUANTITATIVE DISCLOSURES
1. Banking portfolio: distribution by maturity (repricing date) of financial assets and liabilities
1 to 5 years
6 months to 1 year
On demand
5 to 10 years
Up to 3 months
Over 10 years
3 to 6 months
Unspecified maturityType / Residual maturity
1. Cash assets1.1 Debt securities
- with early repayment option- others
1.2 Loans to banks1.3 Loans to customers
- c/c- others loans- with early repayment option- others
2. Cash liabilities2.1 Debts to customers
- c/c- others debts- with early repayment option- others
2.2 Debt to banks- c/c- others debts
2.3 Debt securities- with early repayment option- others
2.4 Other liabilities- with early repayment option- others
3. Financial derivatives3.1 With underlying title
- Options+ Long positions+ Short positions
- other derivatives+ Long positions+ Short positions
3.2 Without underlying title- Options
+ Long positions+ Short positions
- Others derivatives+ Long positions+ Short positions
4. Other off-balance sheet transactions+ Long positions+ Short positions
3,400,735 - - -
1,895,916 1,504,819
55,906 1,448,914
- 1,448,914
291,481 259,137 258,941
196 -
196 32,345 32,345
- - - - - - - - - - - - - - - - - - - - - - - - -
3,272,473 - - -
55,591 3,216,883
24,303 3,192,580
- 3,192,580
11,704,023 298,627
683 297,944
- 297,944
3,887,817 -
3,887,817 7,517,579
- 7,517,579
- - -
28,841,352 2,088,664
- - -
2,088,664 1,044,3321,044,332
26,752,688 - - -
26,752,688 16,749,339 10,003,349
- - -
1,856,185 - - - 6
1,856,179 -
1,856,179 -
1,856,179 2,977,974
87,297 -
87,297 -
87,297 2,190,677
- 2,190,677
700,000 -
700,000 - - -
2,857,739 - - - - - - -
2,857,739 - - -
2,857,739 1,683,500 1,174,239
- - -
5,068,331 503
- 503
12 5,067,816
- 5,067,816
- 5,067,816 2,479,170
534,839 -
534,839 -
534,839 383,100
- 383,100
1,561,231 -
1,561,231 - - -
3,896,893 - - - - - - -
3,896,893 - - -
3,896,893 1,588,089 2,308,804
- - -
11,659,882 9,305
- 9,305
77 11,650,500
- 11,650,500
- 11,650,500
6,183,337 184,926
- 184,926
- 184,926 920,968
- 920,968
5,077,443 2,897,256 2,180,187
- - -
16,690,807 - - - - - - -
16,690,807 - - -
16,690,807 5,194,193
11,496,614 - - -
519,440 - - - -
519,440 -
519,440 -
519,440 2,882 2,882
- 2,882
- 2,882
- - - - - - - - -
232,115 - - - - - - -
232,115 - - -
232,115 -
232,115 - - -
56 - - - -
56 -
56 -
56 578
- - - - - - - -
578 -
578 - - -
- - - - - -- - - - - - - - - - -
-- - - - -- -- -
27,989 27,989
- 27,989
- 27,989
- - - - - - - - - - - - - - - - - - - - - - - - - - -
Consolidated financial statements December 31, 2019• 258
1.2.3 Exchange risk
The Company’s policy doesn’t allow to detain amount in foreign currency. As a consequence, financial operations in foreign currencies are exchanged in Euro and, sometimes, made by derivatives (Foreign Exchange Swap) according to ISDA standard.
Exchange risk at the year end is not relevant as net balance amount in foreign currency is below the minimum threshold (2% of Regulatory Capital).
As stated in Section A. General Aspects, the Group at the year-end doesn’t hold any financial instruments classified in the Regulatory Trading Portfolio.
A. OVERVIEW, MANAGEMENT PROCESSES AND RISK MEASUREMENT METHODS
QUALITATIVE DISCLOSURES
1.3 Derivative instruments and hedging policies
1.3.1 Trading derivative instruments
Notes to the consolidated financial statements • 259
The Group uses IRS designated as cash flow micro hedges to manage the interest rate risk on its financial liabilities.Effectiveness is measured by comparing the change in fair value of the interest rate swaps and the change in fair value of the hedged instrument.The effectiveness test is met if the result of the hedge (percentage difference between the change in fair value of the interest rate swaps and the change in fair value of the hedged instrument) ranges from 80%-125%.The effectiveness test is met also when the value of the hedged instrument is greater than the value of the derivative instrument (in absoluteterms) at the observation date.
• the nominal amount of the portfolio and the notional value of the derivative projected from the last observation date (September 30, 2019) to the reporting date (December 31, 2019).The retrospective effective test is met is the changes in notional value of the derivative instrument are highly effective in offsetting the changes in nominal value of the hedged instruments since the last observation date (September 30, 2019).
The Group’s risk management policies only allow use of plain vanilla derivatives.The FCA Group hedges its interest rate risk on instalment loans provided and bonds issued through interes rate hedging instruments designated as fair value hedges.In particular, the Group hedges the interest rate risk on the outstanding portfolio with the fair value macro hedging methodology.
Hedge effectiveness The Group tests the effectiveness of the fair value macro hedge at the end of every reporting period, whether annual or interim, by using:• prospective tests, which justifies hedge accounting, to the extent that they show hedge effectiveness;• retrospective tests, which show the degree of effectiveness of the hedge in the period of reference. In other words, they measure the extent to which the hedge relationship deviates from perfect hedge.
Prospective tests compare: 1. the run-off of the fixed-rate Retail portfolio
outstanding at the observation date (hedged instrument);
2. the run-off of swaps outstanding at theobservation date (notional value).
Both run-offs are compared by maturity range. The effectiveness test is met if, for every maturity range, the average value of the portfolio is greater than the average value of the derivative instruments.
The retrospective test compares:• the nominal value of the portfolio and the notional value of the derivatives outstanding, whose starting date precedes the date of the last observation period (September 30, 2019);
FAIR VALUE HEDGING ACTIVITIES
CASH FLOW HEDGES, HEDGED INSSTRUMENTS
QUALITATIVE DISCLOSURES
1.3.2 Accounting hedging policies
Consolidated financial statements December 31, 2019• 260
QUANTITATIVE DISCLOSURES
A.1 Hedging financial derivatives: notional values at the end of the period
A. Hedging financial derivatives
Total 31/12/2019 Total 31/12/2018
Over the counter
Underlying assets / Type of derivatives
Over the counter
without central counterparties without central counterpartiesOrganized
marketsOrganized
marketsCentral Counterparties
Central Counterparties
with netting
agreements
with clearing
arrangements
without netting
agreements
without clearing
arrangements
1. Debt securities and
interest rates
a) Options
b) Swap
c) Forward
d) Futures
e) Others
2. Equity instruments and
stock indexes
a) Options
b) Swap
c) Forward
d) Futures
e) Others
3. Currencies and gold
a) Options
b) Swap
c) Forward
d) Futures
e) Others
4. Commodities
5. Other
Total
20,421,938
-
20,421,938
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,421,938
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
533,685
-
533,685
-
-
-
-
-
-
-
-
-
1,044,332
-
-
1,044,332
-
-
-
-
1,578,017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,509,242
-
19,509,242
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,509,242
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
997,726
-
997,726
-
-
-
-
-
-
-
-
-
641,358
-
-
641,358
-
-
-
-
1,639,084
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the consolidated financial statements • 261
A.2 Hedging financial derivatives: positive and negative fair value - breakdown by product
Types of derivatives
Positive fair value
a) Options
b) Interest rate swap
c) Cross currency swap
d) Equity swap
e) Forward
f) Futures
g) Others
Total
Negative fair value
a) Options
b) Interest rate swap
c) Cross currency swap
d) Equity swap
e) Forward
f) Futures
g) Others
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32,318
-
-
3,016
-
-
35,334
-
78,698
-
-
2,635
-
-
81,333
-
35,450
-
-
459
-
-
35,909
-
46,369
-
-
2,210
-
-
48,579
-
32,318
-
-
-
-
-
32,318
-
78,337
-
-
-
-
-
78,337
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,016
-
-
3,016
-
361
-
-
2,635
-
-
2,996
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,702
-
-
-
-
-
33,702
-
45,387
-
-
-
-
-
45,387
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,748
-
-
459
-
-
2,207
-
982
-
-
2,210
-
-
3,192
Total 31/12/2019 Total 31/12/2018
Positive and negative fair value
Over the counter Over the counter
Without central counterparties Without central counterpartiesOrganized markets
Organized markets
Changes in value used to assess hedge ineffectiveness
Total31/12/2018
Central Counterpar-
ties
Central Counter-
parties
With netting
agreements
With netting
agreements
Without netting
agreements
Without netting
agreements
Total31/12/2019
Consolidated financial statements December 31, 2019• 262
A.3 OTC hedging financial derivatives - notional values, positive and negative fair value by counterparty
Contracts included in netting agreement
1) Debt securities and interest rates
- notional value
- positive fair value
- negative fair value
2) Equity instruments and stock indexes
- notional value
- positive fair value
- negative fair value
3) Currencies and gold
- notional value
- positive fair value
- negative fair value
4) Commodities
- notional value
- positive fair value
- negative fair value
5) Others
- notional value
- positive fair value
- negative fair value
Contracts included in netting agreement
1) Debt securities and interest rates
- notional value
- positive fair value
- negative fair value
2) Equity instruments and stock indexes
- notional value
- positive fair value
- negative fair value
3) Currencies and gold
- notional value
- positive fair value
- negative fair value
4) Commodities
- notional value
- positive fair value
- negative fair value
5) Others
- notional value
- positive fair value
- negative fair value
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
20,421,938
32,317
78,337
-
-
-
-
-
-
-
-
-
-
-
-
-
533,685
-
361
-
-
-
1,044,332
3,015
2,635
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other entitiesBanks Other financial companiesUnderlyings assets
Central Counterparties
Notes to the consolidated financial statements • 263
A.4 Residual life of OTC hedging credit derivatives: notional values
TotalOver 1 year up to 5 year
Over 5 yearUnderlying / Residual maturity
Up to 1 year
A.1 Financial derivative contracts on debt securities
and interest rates
A.2 Financial derivative contracts on equity securities
and stock indexes
A.3 Financial derivative contracts on currencies and gold
A.3 Financial derivative on commodities
A.5 Other financial derivatives
Total 31/12/2019
Total 31/12/2018
6,788,561
-
1,044,332
-
-
7,832,893
7,141,582
14,108,325
-
6,317
-
-
14,114,642
15,072,600
60,000
-
(6,317)
-
-
53,683
134,242
20,956,886
-
1,044,332
-
-
22,001,218
22,348,426
Consolidated financial statements December 31, 2019• 264
1.3.3 Other information on derivatives instruments (trading and hedging)
A.1 OTC financial and credit derivatives: net fair value by counterparties
A. Financial and credit derivatives
Other entities
Banks Other financial
companies
Centralcounterparties
A. Financial derivatives
1) Debt securities and interest rates
- notional amount
- positive fair value
- negative fair value
2) Equity instruments and stock indexes
- notional amount
- positive fair value
- negative fair value
3) Currencies and gold
- notional amount
- positive fair value
- negative fair value
4) Commodities
- notional amount
- positive fair value
- negative fair value
5) Other
- notional amount
- positive fair value
- negative fair value
B. Credit derivatives
1) Hedge purchase
- notional amount
- positive fair value
- negative fair value
2) Hedge sale
- notional amount
- positive fair value
- negative fair value
20,421,938
32,318
78,337
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,343,728
1
3,767
-
-
-
1,044,332
3,015
2,635
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the consolidated financial statements • 265
1.4. Banking Group – Liquidity Risk
Liquidity risk reflects the Company’s inability to meet its obligations as they come due. Specifically, liquidity risk involves the Company’s inability to renew, extend, refinance, in whole or in part, its borrowings in its various forms, whether structured or unstructured.
To facilitate the proper identification and management of liquidity risk, it is worthy of note that:• the Group’s financial management activities are centralized at Parent Company level, where the Treasury department is responsible for the proper financial management of all the subsidiaries. Moreover, all structured finance transactions are negotiated and managed at the central level;• the Parent is the only Group company with a rating assigned by Fitch Ratings, Moody’s e Standard&Poor’s. In this sense, all bank accounts and lines of credit are managed at the central level;• all of the Group companies refer to the Parent Company for their borrowing requirements through negotiations for the most appropriate financing instruments.
The Group manages this risk by matching assets and liabilities in terms of amounts and maturities. This management activity, together with the availability of substantial lines of credit (including those by Crédit Agricole, the banking shareholder), allows the Company and its subsidiaries to reduce to a minimum their liquidity risk. Liquidity conditions are measured monthly by currency (Euro, British pound, Swiss franc, Danish krone, Swedish Krona, Norwegian Krone, Polish zloty and Moroccan Dirham).
The liquidity risk management model hinges around such key activities as:• management of operating liquidity and structural liquidity, including the use of regularly revised and updated cash flow schedules;
A. OVERVIEW, MANAGEMENT PROCESSES AND METHODS FOR MEASURING LIQUIDITY RISK
QUALITATIVE DISCLOSURES
• constant monitoring of cash flows and adoption of metrics to measure and control exposure to liquidity risk (maturity mismatch approach); • setting limits to the exposure and concentration regarding liquidity risk;• stress tests to evaluate risk exposure under stressful conditions; • preparation of the Contingency Funding Plan intended to define the roles and responsibilities, the processes, actions to undertake and the identification of risk mitigation techniques to be adopted in case a sudden liquidity crisis.
The methodological approach adopted by the FCA Bank Group to measure risk requires – with reference to both operating liquidity and structural liquidity - the calculation of the:• Maturity Ladder, which is used to calculate, monitor and control any liquidity shortfall by maturity bucket; and• Cumulative Liquidity Gap, which is used to calculate progressive cash flows and identifies the presence of any negative cash flows that would require hedging.
The Group, consistent with the Basel III framework, calculates:• the Liquidity Coverage Ratio (LCR) every month;• the Net Stable Funding Ratio (NSFR) every quarter.
With reference to the liquidity coverage ratio, the Group manages any requirements through instruments that comply with the FCA Bank Group’s liquidity policy. The high-quality liquidity assets (HQLA) necessary to meet the liquidity coverage ratio are managed, at the consolidated level, by the Treasury department of the Parent Company, the only exception being the foreign subsidiaries, which are subject to similar LCR requirements set by local supervision authorities.
Consolidated financial statements December 31, 2019• 266
To this end, it is noted that, starting November 16, 2018, FCA Bank S.p.A. opened a direct account with the Bank of Italy. As such, the level of HQLA necessary to meet the pre-established objectives is achieved through deposits with the Central Bank and through open market transactions.
Liquidity ratiosLiquidity ratios, provided by Basilea III, at December 31, 2019 are equal to:• Liquidity Coverage Ratio (LCR) 282%;• Net Stable Funding Ratio (NSFR) 106%.
Regulatory threshold have been exceeded at the year end but also in interim reporting.
Notes to the consolidated financial statements • 267
QUANTITATIVE DISCLOSURES
1.Time breakdown by contractual residual maturity of financial assets and liabilities
6 months to
1 year
3 to 6 months
7 to 15 days
1 to 7 days
On demandItems / time
1 to 5 years
15 days to
1 month
Over 5 years
1 to 3 months
Unspe-cified
maturity
On-balance sheet assets
A.1 Government securities
A.2 Other debt securities
A.3 Units in investment funds
A.4 Loans
- Banks
- Customers
On-balance sheet liabilities
B.1 Deposits and current accounts
- Banks
- Customers
B.2 Debt securities
B.3 Other liabilities
Off-balance sheet transactions
C.1 Physically settled fin. derivatives
- Long positions
- Short positions
C.2 Cash settled Fin. derivatives
- Long positions
- Short positions
C.3 Deposit to be received
- Long positions
- Short positions
C.4 Irrevocable commitments to disburse funds
- Long positions
- Short positions
C.5 Written guarantees
C.6 Financial guarantees received
C.7 Physically settled cred. derivatives
- Long positions
- Short positions
C.8 Cash settled Cred. derivatives
- Long positions
- Short positions
3,047,562
-
-
-
3,047,562
1,890,948
1,156,614
292,165
291,969
32,344
259,625
-
196
-
-
-
-
-
-
-
4,890,106
-
-
-
-
-
-
158,697
-
-
-
158,697
2,719
155,978
15,708
683
-
683
-
15,025
-
-
-
-
-
-
-
-
-
-
-
-
-
-
179,459
-
-
-
179,459
88
179,371
97,026
-
-
-
-
97,026
284,768
284,768
845
-
-
-
-
-
-
-
-
-
-
-
392,667
-
-
-
392,667
-
392,667
352,640
19,091
-
19,091
318,262
15,287
736,750
736,750
4,670
7,840
-
-
-
-
-
-
-
-
-
-
1,868,957
-
-
-
1,868,957
494,118
1,374,839
2,132,869
25,957
-
25,957
521,227
1,585,685
22,815
22,815
11,117
13,328
-
-
-
-
8,955
-
-
-
-
-
2,152,964
503
-
-
2,152,461
34,608
2,117,853
2,956,797
86,381
-
86,381
897,686
1,972,730
-
-
16,594
18,991
-
-
-
-
1,153
-
-
-
-
-
5,959,759
-
-
-
5,959,759
695,000
5,264,759
3,500,478
533,154
-
533,154
1,860,793
1,106,531
-
-
26,637
42,104
-
-
-
-
-
-
-
-
-
-
12,669,575
9,305
-
-
12,660,270
520
12,659,750
14,863,172
178,524
-
178,524
11,239,982
3,444,666
-
-
60,713
93,889
-
-
-
-
112,028
-
-
-
-
-
513,861
-
-
-
513,861
-
513,861
361,449
-
-
-
578
360,871
-
-
974
263
-
-
-
-
31,181
-
-
-
-
-
27,884
-
-
-
27,884
27,884
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Self-Securitization Transactions and European Central Bank Refinancing Operations
At the year end there was a self-securitization transactions in place – A-Best Fourteen S.r.l.. FCA Bank has subscribed all liabilities issued. Financial activities underlying securities are referred to retail portfolio. At December 31, 2019, the total amount received by FCAB through refinancing operations with the European Central Bank was euro 1.8 billion.It is worthy of note that these self-securitization transactions, used in connection with these operations, had all the requirements to be readily placed in the market.
Consolidated financial statements December 31, 2019• 268
Notes to the consolidated financial statements • 269
1.5 Banking Group – Operational Risks
Operational risk is the risk of incurring losses for inadequate or failed internal processes, people or systems or from external events, including legal risk. Operational risk covers also, among others, losses deriving from frauds, human errors, disruptions from external events, breakdowns of systems, contractual defaults, natural catastrophes. Operational risk includes legal risk (which includes money-laundering risk) but not strategic and reputational risks. With that in mind, the bank’s most significant risk is associated with the losses deriving from external frauds. To calculate the internal capital required for operational risk, FCA Bank, in keeping with the provisions of Circular 285/2013 of the Bank of Italy for class 2 banks, uses the Basic Indicator Approach (BIA) to calculate capital requirements under Pillar I.
The Organizational Model to manage operational risk implemented at Group level calls for the presence of the following players: • an Operational Risk Management function (as part of the Risk & Permanent Control department), which defines and develops the methodologies, the policies and the procedures to detect, evaluate, monitor, measure and mitigate operational risks; • single organizational units within the bank and the group companies that participate actively, with different levels of responsibility and involvement, in operational risk management processes through the identification of the principal (effective and potential) risks that might arise in day-to-day operations and ongoing risk monitoring within the scope of their duties and responsibilities.
The Organizational Model to manage operational risk unfolds in the following processes:• mapping of operational risks by company
A. OVERVIEW, MANAGEMENT PROCESSES AND METHODS FOR MEASURING OPERATIONAL RISK
QUALITATIVE DISCLOSURES
process, in their expected and unexpected nature (annual update or following structural process changes); • quarterly survey of loss events; • analysis and classification of risk and loss events and definition, where necessary, of risk management and mitigation actions.
Classification of operational risk eventsOperational risk events have been classified over the years on the basis of FCA Bank’s specific experience as follows: • internal fraud;• external fraud;• employment relationship and safety at work; • customers, products and professional practices; • damage to tangible assets;• operation disruptions and information systems breakdowns; • process execution and management.
The Risk & Permanent Control (R&PC) department monitors, on a quarterly basis, developments in KRIs, such as: • external frauds (only for Retail business):
- Fraud Trend = Number of frauds per year;- Through The Door (TTD) Frauds / whole TTD;- Frauds Avoided / Frauds Detected.
• In addition the following indicators are calculated:
- OR Cost = Total Loss Data (including frontier risk) / Net Banking Income;- "Pure" OR Cost = Total Loss Data (excluding frontier risk) / Net Banking Income.
Consolidated financial statements December 31, 2019• 270
Organizational structure The roles and responsibilities of FCA Bank S.p.A.’s structures involved in operational risk management can be summarized as follows:
Local Operational Risk ManagerPart of the Risk & Permanent Control department, this Manager is responsible for organizing and maintaining the operational risk management process in the single Market, to ensure compliance with the methodologies and standards set out by the Parent Company.In fulfilling his duties, this managerial figure interacts with counterparties identified at process level in the single operational areas. These counterparties are responsible for detecting and reporting, in agreement with their immediate supervisors, the operational loss events occurred in the period and any change in the processes monitored analysing their possible risks.
Local Operational Risk Committee At least once a quarter, this Committee evaluates and approves mitigation actions, reviews the status of corrective action agreed-upon in the presence of operational risk events occurred.
To support the Operational Risk Management framework, FCA Bank is equipped with an IT tool that consists of two modules, one to collect operational loss data and the other to map the operational risks detected in the different company processes.
Risk & Permanent ControlDepartment reporting directly to FCA Bank S.p.A.’s CEO responsible for mapping and measuring risks as well as supervising risk management processes, managing directly permanent second-line/second-level controls.
Central Operational Risk Committee This Committee operates within the context of the quarterly meetings held by the Internal Control Committee (ICC). The ICC is responsible for monitoring the results of the activities performed by the Internal Control functions of the Company (Risk & Permanent Control; Compliance; Internal Audit). The findings of control activities are reported to and discussed within the ICC.
Central Operational Risk ManagerPart of the Risk & Permanent Control department, this Manager is responsible for organizing and maintaining the operational risk management process in all the Group companies. To that end, it develops and implements a system of permanent controls to monitor risks associated with all company processes and an adequate reporting system on the qualitative level of the operational risk management process implemented at the local level.
Notes to the consolidated financial statements • 271
Risk management frameworkThe Company has developed and implemented a risk management framework to identify and monitor areas of risk to the Company. A review of the risk management framework is undertaken at least on an annual basis.
Currency riskAll significant transactions of the Company are denominated in Euro with the exception of a small amount of business written in Poland. All bank accounts are held in Euro and Polish Zloty. The Company is not exposed to any significant currency risk.
Counterparty riskThe Company’s principal financial assets are insurance and other receivables, reinsurance assets and cash and cash equivalents.Counterparty risk related to the cash and cash equivalent balances is controlled through the setting of minimum credit rating requirements for counterparties, and by diversification requirements, set out in the investment policy of the Board.
SECTION 3 INSURANCE COMPANIES RISKS
QUALITATIVE DISCLOSURES
3.1 Insurance risks
This sub-section outlines the disclosure required by IFRS 4, paragraphs 38, 39 a), 39 b) and 39A
Liquidity riskThe Company is exposed to monthly calls on its available cash resources mainly from claims arising from reinsurance contracts. Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. The Company manages its funds to ensure that an adequate amount of funds is available to meet such calls. Accordingly, cash available is invested in highly liquid deposits and instruments with banks and counterparties with good ratings.
Insurance riskThe risk attached to the reinsurance policies written by the Company is the possibility that an insured event occurs and the uncertainty of the amount of the resulting claim.The Company has developed its reinsurance underwriting strategy to diversify the type of insurance risks and within each of the types of risk, to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. Risks covered include Life and Non-Life events with policy terms ranging from 1 month to 120 months. The Company engages an independent actuarial firm to review the technical provisions at the year-end.
Consolidated financial statements December 31, 2019• 272
SECTION 4 OTHER COMPANIES RISKS
QUALITATIVE DISCLOSURES
4.1 – Securitization risks
The risk deriving from securitization transactions is that the economic substance of the transaction is not fully incorporated in risk assessment and management decisions.
The Company feels that the risk associated with securitizations might materialize only in the event that the bank calculates its capital requirements in relation to the position in the securitization instead of the underlying assets. Only in this case can there be a risk that the capital requirements in question do not reflect in full the actual risk of the transaction.
However, the accounting treatment of securitizations is irrelevant for their recognition for prudential purposes. In keeping with IFRS 9, securitized assets continue to be reported in the accounts based on the following considerations:a) the risks and benefits related to the portfolio sold have not been fully transferred to third parties; b) the seller continues to exercise control over the portfolio sold; c) the seller acts also as servicer.
In the case of traditional securitizations, where the Company subscribes the first loss tranche (junior notes), the quantification of this risk is incorporated in the internal capital set aside to face credit risk.
In this case, considering the dual role of receivable seller and investor in the subordinated note tranche, and considering the fact that (in line with supervisory instructions on securitizations, which establish that the risk-weighted amount of all investments in the same securitization cannot exceed the risk-weighted amount of the securitized assets calculated as though these had not been securitized) capital
requirements are calculated on the underlying assets and pursuant to Regulation (EU) no. 575/2013 (CRR), the quantification of this risk is included in internal capital facing credit risk.Thus, there is no uncertainty in the assessment of the economic nature of straight-forward securitizations in terms of calculation of capital requirements. On the other hand, in the event that securitization transactions are undertaken with the derecognition of receivables, FCA Bank performs a specific assessment of securitization risk in relation to the actual transfer of the credit risk associated with the securitized assets.
Therefore, the Company will not carry out a quantitative assessment (internal capital) to face this risk but will consider the methodologies and processes implemented to oversee and mitigate such risk. In that respect, the Company’s securitizations show either capital charges equal to the charges related to the assets sold (in line with supervisory instructions on securitizations which provide that the risk-weighted amount of all the positions in a securitization cannot exceed the risk-weighted amount of all the securitized assets calculated as if such assets had not been securitized) or, as in the case of A-Best Fifteen S.r.l. and A-Best Seventeen S.r.l., capital charges equal to those calculated on the basis of the bank’s positions in these securitizations.
As to the risk deriving from securitization transactions - that is that the economic substance of the transaction is not fully incorporated in risk assessment and management decisions, given that the cited A-Best Fifteen S.r.l. and A-Best Seventeen S.r.l. transactions involved a substantial transfer of
Notes to the consolidated financial statements • 273
risk pursuant to article 243(2) of the Regulation (EU) no. 575/2013 (CRR), performing a specific assessment of the risk deriving from securitizations as well as methodologies and processes to oversee and mitigate this risk - no securitization risk is deemed to exist.
Thus, the Company feels that there is no doubt as to the economic nature of the securitizations indicated clearly as such for the calculation of capital requirements.
Organizational structureTo manage securitization risks, FCA Bank has implemented:• a comprehensive organizational model;• a process to identify, monitor and mitigate securitization risks, formalized in specific internal procedures.Every new securitization transaction structured by the Securitization and Risk Transfer unit of the Treasury department is validated by the CFO & Deputy General Manager, and is submitted for approval to the NPA Committee, chaired by the CEO & General Manager, by its first lines and the second-level internal control functions.The approval minutes and any opinions rendered by the second-level control functions of the Company are submitted, together with the product concept, to the Board of Directors for final approval.Securitization and Risk Transfer, a unit of the Treasury department, is responsible for:• structuring all of the Group’s transactions and the direct management (in Italy) and monitoring (abroad) of the servicing activities performed in connection with the securitization transactions as well as the management of relationships with rating agencies and investors;• performing 2.1-level controls. Level-1 controls are performed instead directly by the foreign markets.
Risk & Permanent Control - GRM defines and develops he methods and procedures to identify, evaluate, monitor, measure and mitigate secondlevel securitization risks. It also renders its opinion in the context of the NPA Committee.Internal Audit reviews, at least every three years, the degree of adequacy of the
Consolidated financial statements December 31, 2019• 274
internal control system and checks that the securitization transactions and the servicing activities of FCA Bank S.p.A. comply with the applicable regulations.The Company’s control instruments include the following processes:• review of all the documents and contracts of the transaction by the Treasury – Securitization and Risk Transfer department, in cooperation with internal and external counsel;• review of the fairness and financial attractiveness of the transaction overall by the Treasury - Securitization and Risk Transfer department;• second-level controls over securitization transactions fall also under the responsibility of Risk & Permanent Control.
All the transactions carried out so far have performed in line with expectations, both in terms of alignment of the cash flows with the forecasts made when the transaction was launched and in terms of compliance with the main triggers related to the portfolio.Furthermore, no implicit support techniques were applied to the transactions, no clean-up call clauses for amounts greater than 10% of the initial issue were introduced and there are no accelerated repayment provisions linked to excess spread levels.
Notes to the consolidated financial statements • 275
Part F - Information on consolidated equitySECTION 1 CONSOLIDATED EQUITY
A. QUALITATIVE DISCLOSURES
The "Banking Group" differs, for the consolidation scope, from the financial statements prepared according to IAS/IFRS. The differences are largely attributable to the line-by-line consolidation, in the IAS / IFRS financial statements, of non-banking companies (mainly companies operating in the long-term rental business) that are not included in the "Banking Group".
The Own Funds, the minimum capital requirements and the resulting banking regulatory ratios were determined in accordance with the provisions contained in the Bank of Italy Circular No. 285 of December 17, 2013 (and subsequent updates) "Supervisory provisions for banks" and n. 286 of December 17, 2013 (and subsequent updates) "Instructions for completing the prudential reporting by banks”.
Consolidated financial statements December 31, 2019• 276
B. QUANTITATIVE DISCLOSURES
B.1 Consolidated Shareholders' Equity: breakdown by type of company
703,389
195,623
1,859,115
-
-
(26,989)
-
-
-
-
-
-
(6,670)
-
3,833
-
-
(24,657)
-
454
467,075
3,171,172
1,000
9,596
60
10,656
106,278
1,626
247,037
(4,101)
-
-
-
-
-
-
-
-
-
-
-
(4,101)
-
92,805
439,545
(107,278)
(1,626)
(256,632)
-
-
4,101
-
-
-
-
-
-
-
-
-
-
-
4,101
-
-
(92,866)
(450,201)
703,389
195,623
1,859,115
-
-
(26,989)
-
-
-
-
-
-
(6,670)
-
3,833
-
-
(24,657)
-
454
467,075
3,171,172
Prudential consolidationEquity items
Other companies
TotalConsolidation adjustments
and eliminations
Insurance companies
1. Share capital
2. Share premium reserve
3. Reserves
4. Equity instruments
5. (Treasury shares)
6. Revaluation reserves:
- Equity instruments designated at fair value
through other comprehensive income
- Hedge accounting of equity instruments
designated at fair value through other comprehnsive income
- Financial assets at fair value through
other comprehensive income
- Property, plant and equipment
- Intangible assets
- Foreign investment hedges
- Cash flow hedges
- Hedging instruments [elements not designated]
- Exchange differences
- Non-current assets and disposal groups
held for sale
- Non-current assets and disposal groups held for sale
- Financial liabilities designated at fair value
through profit or loss (own creditworthiness changes)
- Actuarial gains (losses) on defined-benefit pension plan
- Portion of measurement reserves relating to
investments carried at equity
- Special revaluation laws
7. Profit (Loss) of the year (+/-) Minority interests
Total
Notes to the consolidated financial statements • 277
B.4 Revaluation reserves related to defined benefit plans: annual changes
(19,620)
944
-
944
(6,930)
(6,930)
-
(25,606)
-
-
-
-
-
-
-
-
(2,137)
-
-
-
(1,966)
(1,966)
-
(4,103)
2,137
-
-
1,966
1,966
-
4,103
(19,620)
944
-
944
(6,930)
(6,930)
-
(25,606)
Banking Group
Changes in 2019
Other companies
TotalConsolidation eliminations and
adjustments
Insurance companies
1. Opening balance
2. Increases
2.1 Increases in fair value
2.2 Other changes
3. Decreases
3.1 Decreases in fair value
3.2 Other changes
4. Closing balance
SECTION 2 OWN FUNDS AND CAPITAL RATIOSFor this section please refer to the information about on own funds and capital adequacy disclosed in “Pillar 3”.
Consolidated financial statements December 31, 2019• 278
Part G -Business combinations
SECTION 1 BUSINESS COMBINATIONS COMPLETED IN THE YEAR
SECTION 2 BUSINESS COMBINATIONS COMPLETED AFTER YEAR-END
During the year, no business combinations of companies or business units, pursuant to IFRS 3, or transactions between entities under common control were carried out or approved.
As evidenced in the Report on Operations, an agreement to carry out the cross-border merger of FCA-Group Bank Polska with and into FCA Bank S.p.A. was signed on December 19, 2019 and recorded in the Turin Companies Register on December 24, 2019.In keeping with the agreement, the merger took effect for legal, tax and accounting purposes on January 1, 2020. As of this date FCA Bank S.p.A. operates in Poland through a branch.
Notes to the consolidated financial statements • 279
Part H - Related-party transactions
1. INFORMATION ON KEY EXECUTIVE COMPENSATION
2. INFORMATION ON RELATED-PARTY TRANSACTIONS
Emoluments paid as of December 31, 2019 to the Parent Company’s directors amounted to 875 thousand of euro.Compensation paid to Parent Company’s statutory auditors as of December 31, 2019
Typically, related-party transactions take place at arm’s length. Intercompany transactions are carried out only after the mutual benefits of the parties involved are considered. In preparing the consolidated financial statements, balances arising from intercompany transactions are eliminated. The table below shows assets, liabilities, costs and revenues at December 31, 2019 by type of related party:
amounted to 263 thousand of euro.
No credits were granted to directors and statutory auditors and no guarantees were given.
Consolidated financial statements December 31, 2019• 280
Transactions with related parties: balance sheet
-
-
7,595
3,137
4,458
-
365,318
372,913
1,623,194
1,623,194
-
-
-
136,167
1,759,361
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
244,525
4,582
239,943
12,290
51,188
308,003
1,177,267
1,160,650
16,617
2,919
17,468
175,917
1,373,571
-
-
252,120
7,719
244,401
12,290
416,506
680,916
2,800,461
2,783,844
16,617
2,919
17,468
312,084
3,132,932
Shareholders
Amounts at 31/12/2019
Other related parties
TotalKey executive directors
Financial assets at FV with effects on P&L
- Financial assets held for trading
Financial assets at amortized cost
- Loans and receivables with banks
- Loans and receivables with customers
Hedging Derivatives
Other assets
Total assets
Financial liabilities at amortized cost
- Deposit from banks
- Deposit from customers
Financial liabilities held for trading
Derivatives
Other liabilities
Total liabilities
Notes to the consolidated financial statements • 281
Transactions with related parties: income statement
100,989
(22,502)
6,579
(3,340)
(6,505)
30,806
-
-
-
-
(1,096)
-
94,759
(20,729)
41,701
(21,670)
(8,345)
52,862
195,748
(43,231)
48,280
(25,011)
(15,946)
83,669
Shareholders
Amounts at 31/12/2019
Other related parties
TotalKey executive directors
Interests and similar income
Interests and similar expenses
Fee and commission income
Fee and commission income
Administrative expenses
Other operating income/expenses
Disclosure of auditing fees and fees for services other than auditing pursuant to article 2427 paragraph 16 bis of the italian civil code
Audit
Audit related
Other services
Total
Servicer provider 31/12/2019Services
EY S.p.A.
EY S.p.A.
EY Advisory S.p.A.
2,.470
271
235
2,976
Consolidated financial statements December 31, 2019• 282
Part L - Segment reporting
Asset and performance figures by segment are shown in accordance with IFRS 8 – Operating Segments, with the adoption of the “full management approach”.The FCA Bank Group operates through three operating segments: Retail, Dealer Financing and Rental.Segment assets (accurate amounts) consist solely of receivables due from customers. At the end of 2019, the Retail segment had total assets of euro 16.9 billion, up 7.2% on December 31, 2018 while the Dealer Financing segment assets were down 13.3% on the comparable amount at December 31, 2018, settling at euro 7.1 billion. Rental assets, for their part, increased by 24.5 % on December 31, 2018, reaching euro 3.5 billion. As required by IFRS 8, it is noted that the group’s business is carried out in Europe. However, no management report is prepared which breaks down performance by foreign geographical area.
ASSETS AND PERFORMANCE BY SEGMENT
Notes to the consolidated financial statements • 283
201
(38)
(1)
(2)
160
-
107
7,142
7,162
-
169
(76)
(9)
1
85
-
86
3,508
2,939
-
655
(179)
(57)
(27)
393
-
274
16,889
16,247
-
-
-
-
-
-
(171)
(171)
-
1,025
(293)
(66)
(28)
638
(171)
467
27,539
26,348
-
31/12/2019
Dealer financing
Segment reporting (€/mln) 31/12/2019
Other
31/12/2019
Total
31/12/2019
Rental
31/12/2019
Retail
Net banking income and rental margin
Net operating expenses
Total cost of risk
Other net operating income
Profit before tax
Unallocated taxes
Net profit
Data as at 31/12/2019
Assets
End of period segment assets
Average segment assets
Unallocated assets
197
(39)
5
-
163
-
163
8,226
7,118
-
140
(68)
(13)
3
62
-
62
2,818
2,317
-
617
(170)
(36)
(88)
323
-
323
15,760
14,940
-
-
-
-
-
-
(159)
(159)
-
-
-
954
(277)
(44)
(85)
548
(159)
388
26,805
24,375
-
31/12/2018
Dealer financing
Segment reporting (€/mln) 31/12/2018
Other
31/12/2018
Total
31/12/2018
Rental
31/12/2018
Retail
Net banking income and rental margin
Net operating expenses
Total cost of risk
Other net operating income
Profit before tax
Unallocated taxes
Net profit
Data as at 31/12/2018
Assets
End of period segment assets
Average segment assets
Unallocated assets
Consolidated financial statements December 31, 2019• 284
Part M - Leasing reporting
SECTION 1 - LESSEEQUALITATIVE DISCLOSURES QUANTITATIVE DISCLOSURES
In agreement with paragraphs 51-59 of IFRS 16, in the following notes additional information is provided on the lease contracts entered into by the FCA Bank Group as a lessee. Based on the analysis of the lease contracts falling within the scope of IFRS 16, the group identified as the most significant the property lease contracts that it had signed as a lessee, mainly for office space.
The group noted that at December 31, 2019 the rights to use assets under the lease contracts amounted to €51.7 million, including €8.3 million in accumulated depreciation. Lease debts as of the same date amounted to €51.7 million while interest expense on lease debts for 2019 amounted to €0.6 million.
The following table shows the maturities of the lease debts:
60 - 84 months
48 - 60 months
18 - 24 months
12 - 18 months
12 months€/000
84 - 120 months
24 - 36 months
120 - 180 months
36 - 48 months
> 180 months
Debt for leasing 8,168 2,975 2,721 4,927 4,336 4,151 7,542 8,328 8,568
There are no sub-lease contracts.
In keeping with the exemptions granted from the start, the FCA Bank Group elected not to apply IFRS 16 to contracts of up to 12 months and to contracts with the value of the
SECTION 2 – LESSOR QUALITATIVE DISCLOSURES
The FCA Bank Group provides finance and operating leases in the markets in which it operates, to support the automotive business of the FCA Group and the manufacturing partners.The FCA Bank Group engages in the car rental industry through its Leasys subsidiary, with an offering designed for large, medium and small companies as well as self-employed professionals and private individuals.
As lessor, the risk associated with the rights that FCA Bank retains on the underlying assets is managed through:
• buyback agreements;• collateral: security deposits;• personal guarantees: banking and insurance guarantees and sureties. In the case of contracts which call for FCA Bank to bear directly the residual value risk, as there is no buyback agreement in place with the dealer or the manufacturer, quarterly monitoring is performed to make provisions for such risk.
underlying asset, when such asset is new, of up to €5,000. In this case the payments related to these leases are treated as expenses, in line with the past.
-
Notes to the consolidated financial statements • 285
2.1 Classification by time bucket of the payments to be received and reconciliation with the finance leases reported as assets.
3.1 Maturity analysis of the lease payments receivables
QUANTITATIVE DISCLOSURES
1. STATEMENT OF FINANCIAL POSITION AND INCOME STATEMENT INFORMATION
2. FINANCE LEASES
3. OPERATING LEASING
Reference is made to the tables in the sections on the statement of financial position and the income statement.
Up to1 year
Over 1 year up to 2 years
Over 2 years up to 3 years
Over 3 years up to 4 years
Over 4 years up to 5 years
For over 5 years
Total
Up to 1 year
Over 1 year up to 2 years
Over 2 years up to 3 years
Over 3 years up to 4 years
Over 4 years up to 5 years
For over 5 years
Amount of the lease payments receivables
Reconciliation of the undiscounted lease payments
Not accrued gains (-)
Not guarantee residual value (-)
Lease payments
Total 31/12/2019Lease payments receivables
Total 31/12/2019Lease payments receivables
Maturity ranges
Maturity ranges
1,785,700
1,291,083
1,095,103
569,731
96,909
54,376
4,892,902
1,620,956
1,604,182
1,198,438
703,422
96,678
14,720
5,238,396
855,423
168,291
687,132
6,093,819
Turin, 21nd February 2020 On behalf of the Board of DirectorsChief Executive O�cer and General Manager
Giacomo Carelli
Consolidated financial statements December 31, 2019• 286
FCA Bank GmbH FCA Leasing GmbH
FCA Bank S.p.A. (Belgian Branch) Leasys S.p.A. (Belgian Branch)
FCA Capital Danmark A/S (DK)
FCA Capital Danmark A/S (Branch Finland)
FCA Capital France S.A. Leasys France S.A.S.
FCA Bank Deutschland GmbHFerrari Financial Services GmbHLeasys S.p.A. (German Branch)
FCA Capital Hellas S.A.FCA Insurance Hellas S.A. FCA Bank GmbH (Hellenic Branch)
FCA Capital RE DAC FCA Bank S.p.A. (Irish Branch)
FCA Bank S.p.A.Leasys S.p.A.Leasys Rent S.p.A. Clickar S.r.l.
FCA Dealer Services España (Morocco Branch)
FCA Capital Norge AS
FCA Capital Nederland B.V. Leasys Nederland B.V.
FCA-Group Bank Polska S.A. Leasys Polska Sp.Zo.o.
FCA Dealer Services Portugal S.A. FCA Capital Portugal IFIC S.A.
Ferrari Financial Services GmbH (UK Branch)FCA Automotive Services UK Ltd FCA Dealer Services UK Ltd Leasys UK Ltd
FCA Capital España EFC S.A.FCA Dealer Services España S.A. Leasys S.p.A. (Spanish Branch)
FCA Capital Sverige AB
FCA Capital Suisse S.A.
BANKFINANCIAL COMPANY
BANKNON-FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANYNON-FINANCIAL COMPANY
BANKFINANCIAL COMPANY
NON-FINANCIAL COMPANY
FINANCIAL COMPANYFINANCIAL COMPANY
BANK
INSURANCE COMPANYBANK
BANKNON-FINANCIAL COMPANYNON-FINANCIAL COMPANYNON-FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANYNON-FINANCIAL COMPANY
BANKNON-FINANCIAL COMPANY
NON-FINANCIAL COMPANYFINANCIAL COMPANY
FINANCIAL COMPANYFINANCIAL COMPANYFINANCIAL COMPANY
NON-FINANCIAL COMPANY
FINANCIAL COMPANYFINANCIAL COMPANY
NON-FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANY
COMPANYCOUNTRY BUSINESS
AUSTRIA
BELGIUM
DENMARK
FINLAND
FRANCE
GERMANY
GREECE
IRELAND
ITALY
MOROCCO
NORWAY
NETHERLAND
POLAND
PORTUGAL
UNITED KINDOM
SPAIN
SWEDEN
SWITZERLAND
Country by country reporting Data as at 31/12/2019FCA Bank Group companies by country and business:
Notes to the consolidated financial statements • 287
BANK
FINANCIAL COMPANY
BANK
NON-FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANY
NON-FINANCIAL COMPANY
BANK
FINANCIAL COMPANY
NON-FINANCIAL COMPANY
FINANCIAL COMPANY
BANK
INSURANCE COMPANY
BANK
BANK
NON-FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANY
NON-FINANCIAL COMPANY
BANK
NON-FINANCIAL COMPANY
NON-FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANY
NON-FINANCIAL COMPANY
FINANCIAL COMPANY
NON-FINANCIAL COMPANY
FINANCIAL COMPANY
FINANCIAL COMPANY
7,4006,268
9,014(154)
7,167
318
58,429(2,591)
89,2398,120(81)
5,3701,652
571806
665,579(52,881)
1,012
245
11,542(296)
8,4914,554
3,0029,727
90,667(3,342)
58,049(1,231)
3,593
22,914
1,013,153
(222,587)
790,566
22
319
32
158
259378
2819
43
670516
2
2
338
6419
539
12021
9420
1
56
2,280
5,1232,643
3,658(1,431)
2,699
120
28,5118,799
71,3294,495(2,264)
3,2771,499
69176
539,28978,785
655
0
6,776131
3,9351,499
3,7768,927
62,3093,366
47,4611,036
2,559
14,626
903,835
(265,830)
638,005
(904)(69)
(765)
(594)
(29)
(14,661)(3,782)
(22,555)(1,384)
(907)(475)
(9)(22)
(97,748)5,928
(404)
(0)
(1,679)(25)
(1,764)(473)
(632)(2,222)
(12,268)(379)
(8,562)(505)
(568)
(3,023)
(170,480)
(450)
(170,930)
COUNTRY BUSINESS
OPERATINGINCOME(figures in thousandsof euro)
FULL TIMEEQUIVALENTEMPLOYEES
INCOME OR LOSSBEFORE TAX FROMCONTINUINGOPERATIONS(figures in thousands of euro)
TAX ONINCOME OR LOSS(figures in thousandsof euro)
AUSTRIA
BELGIUM
DENMARK
FINLAND
FRANCE
GERMANY
GREECE
IRELAND
ITALY
MOROCCO
NORWAY
NETHERLAND
POLAND
PORTUGAL
UNITED KINGDOM
SPAIN
SWEDEN
SWITZERLAND
Total group companies
Consolidation adjustments
Group consolidated
Pursuant to Art. 89 of Directive 2013/36/EU of European parliament and the Council (CRD IV):
Consolidated financial statements December 31, 2019• 288
STATUTORY’S AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENT AS AT DECEMBER 31, 2019
Statutory’s auditors’ report on the consolidated financial statement
• 289
Consolidated financial statements December 31, 2019• 290
Statutory’s auditors’ report on the consolidated financialstatement
• 291
Consolidated financial statements December 31, 2019• 292
Statutory’s auditors’ report on the consolidated financialstatement
• 293
Consolidated financial statements December 31, 2019• 294
Statutory’s auditors’ report on the consolidated financialstatement
• 295
Consolidated financial statements December 31, 2019• 296
Statutory’s auditors’ report on the consolidated financialstatement
• 297
Consolidated financial statements December 31, 2019• 298
AS AT DECEMBER 31, 2019
INDEPENDENT AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENT
Independent auditors’ report on the consolidated financial statement
• 299
Consolidated financial statements December 31, 2019• 300
• 301Independent auditors’ report on the consolidated financialstatement
Consolidated financial statements December 31, 2019• 302
Independent auditors’ report on the consolidated financialstatement
• 303
Consolidated financial statements December 31, 2019• 304
Independent auditors’ report on the consolidated financialstatement
• 305
Consolidated financial statements December 31, 2019• 306
Independent auditors’ report on the consolidated financialstatement
• 307
Consolidated financial statements December 31, 2019• 308
Independent auditors’ report on the consolidated financialstatement
• 309
ANNEX CONSOLIDATED NON-FINANCIAL STATEMENTAS AT DECEMBER 31, 2019Prepared in accordance with Legislative Decree 254/16
• 310 Consolidated financial statements December 31, 2019
Consolidated non-financial statement • 311
Introduction 312 Metohdological note 313 Letter to stakeholder 314
Group profile 315
FCA Bank stakeholder 317
Materiality matrix 319
Governance and risk management 320
Environmental aspects 333
Social aspects 334
Personnel management 345
Human rights 356
Fight against corruption 358
GRI content index 360
Consolidated financial statements December 31, 2019• 312
Introduction
Legislative Decree no. 254 of December 30, 2016, which implemented Directive 2014/95/EU, requires large companies and public interest entities to report non-financial information for the financial years starting on or after January 1, 2017.
In its capacity as a public interest entity with employees, financial position and net revenues in excess of the thresholds set by article 2 del D. Lgs. n. 254, FCA Bank Group publishes every year, as Annex to the Consolidated Financial Statements, the Consolidated Non-Financial Statement.
The FCA Bank Group’s Non-Financial Statement is prepared in accordance with article 4 of the foregoing Legislative Decree and the Referenced option of the Global Reporting Initiative Sustainability Reporting Standard (GRI Standard) published in 2016 by the Global Reporting Initiative (GRI), which constitute the most common and internationally recognized model in the area of non-financial disclosure.
FCA Bank Group, in accordance with the foregoing Decree, provides communication to its stakeholders on the non financial issues identified as relevant in light of a materiality analysis of the group’s activities and characteristics, to Prepared in accordance with Legislative Decree 254/16 ensure an understanding of the organizational model, the policies, the main risks and the performance indicators. The significant material topics for the FCA Bank Group are pointed out in the materiality matrix in the specific section and concern Governance and the following theme areas identified by Legislative Decree no. 254/2016:• Environment• Employees• Social
• Fight against internal and external corruption and bribery• Respect for Human Rights
As required by Legislative Decree 254/2016, the contents of this Statement were identified and chosen to provide a full understanding of the group’s activities, performance and results and their impact, also in view of the GRI Standards of relevance, inclusiveness, sustainability and completeness.
In the first phase of the analysis, the topics potentially relevant to FCA Group and our stakeholders were identified. This was done by taking into consideration:• Context, based on Sustainable Development in the European Union published by Eurostat and Reflection Paper towards a sustainable Europe by 2030 published by the European Commission; • sector benchmarking analysis;• revision of the Materiality matrix 2018.
In order to easily find information in this report, the GRI Content Index is in the end of the document.The Non Financial Statement is subject to a limited audit by EY S.p.A.. Reporting on relevant topics is guided, where possible, by the principles outlined by the Global Reporting Initiative (GRI), which represents the international reporting standard of reference.
1 Global Reporting Initiative (GRI) is a non-profit organization based on a network involving thousands of professionals and organizations engaging in many sectors. The GRI Reporting Framework is a universally accepted model to report the economic, environmental and social performance of an organization. GRI’s mission is to turn the sustainability report into standard practice and to allow all companies and organizations to prepare a report on their performance and their economic, environmental, social and governance impacts. GRI publishes the sustainability reporting guidelines on its web site: www.globalreporting.org
Consolidated non-financial statement • 313
Methodological note
Reporting processAll the Company’s departments contributed to prepare the contents of the Consolidated Non Financial Statement 2019 and to the interaction with stakeholders. Data gathering is centralized and the procedure to prepare the Statement was established in 2018 to govern process, activities, roles and responsibilities of the group’s departments and bodies involved in the preparation, approval and publication of the document.
Reporting perimeterThe scope of the Consolidated Non-Financial Statement is the same as the scope of the Consolidated Financial Statements as of and for the year ended December 31, 2019. This is a section of the Report on Operations, forming an integral part of the documentation related to the 2019 Consolidated Financial Statements. In the reporting period, did not occur any significant changes in organizational aspects, participation and supply chain.Regarding the qualitative and quantitative data on social and environmental aspects, the scope of reporting corresponds to FCA Bank Group and its subsidiaries consolidated on a line-by-line basis. Any exceptions, with regard to the scope of this data, are clearly indicated throughout the Non Financial Disclosure.Non directly measurable quantitative data have been reported by making use of estimates, where necessary. The formulas and assumptions used to calculate quantitative indicators not expressly provided for by the GRI Standards are described in the following paragraph.
Assumptions and formulas not directly covered by gri standards Following are reported main definitions, assumptions and calculations not yet covered with GRI.• Customer Satisfaction Index• Dealer Satisfaction Index• Complaints• Leasys Mobility Stores
Customer and Dealer satisfaction indices are calculated as weghted average in respect of the answers received to the question related to the customer satisfaction in the questionnaire in a 1 to 5 range.With reference to complaints FCA Bank Group conforms to the CRD, enclosed I – Capital Requirements Directive (Legislation 2013/36/UE).
With reference to staff, the data reflect the headcount at December 31, 2019. Injuries frequency index is calculated using injuries number multiplied 1,000,000, divided per worked hours.
Consolidated financial statements December 31, 2019• 314
The 2019 results confirm the bank’s strategic choices and its ability to generate profits with a responsible business model. The FCA Bank Group is well aware that only responsible corporate growth fosters long-term development and reduces social and environmental risks.
Thus, the FCA Bank Group reiterates its commitment to the 3 dimensions of sustainability – in the environmental, social and governance areas – in keeping with the Company’s positioning inspired by its Corporate Social Responsibility philosophy.
In the environmental area, the FCA Bank Group’s e²ort is intended to minimize the negative impact on natural resources and on the global environment. The focus is constantly on the environmental performance of the group’s activities and on compliance with the applicable laws and regulations, in close cooperation with the automotive partners. In the social and human-resource development area, the objective is to allow all those who work for or with the FCA Bank Group to achieve their full potential in a safe and protected environment. The FCA Bank Group is committed to adopting all the measures necessary to provide safety and to protect the physical and mental health of its employees. A culture of injury prevention and risk awareness is promoted among workers through adequate training and information.
Still in the social area, the FCA Bank Group constantly raises the awareness of its directors, executives and sta² on non-discrimination issues. A work environment where uniqueness of all employees is kept in consideration, improves performance and increases
motivation. Aside from regulatory obligations, the FCA Group believes that diversity enhances performance and attractiveness. Advancing gender diversity means creating an open and responsible corporate culture that fosters teamwork and growth. This commitment is attested by concrete actions, such as the promotion of women to management positions and board committees or the integration of people with disabilities.
The FCA Bank Group invests energies in social programs, supporting them financially and encouraging its employees to engage in volunteer activities, to help and enliven the communities in which we live and work. The development of social initiatives and the support to di²erent associations are witness to our e²ort for the good of the community.
Lastly, our business plans are firmly rooted in the solid and sustainable creation of value, in conjunction with high levels of capitalization and the reduction of the business’s risk profile, with a focus on people and innovation.
Chief Executive O�cer and General ManagerGiacomo Carelli
Letter to stakeholder
Consolidated non-financial statement • 315
SHAREHOLDER STRUCTURE
Group profile
FCA Bank is a joint venture between FCA Italy S.p.A. and CA Consumer Finance S.A., two leaders in their respective sectors. FCA Bank provides its financing products and services in 17 European countries and in Morocco to dealers and end customers of the brands of the FCA Group and other automotive partners.
100%
50% 50%
100%
Consolidated financial statements December 31, 2019• 316
FCA Bank S.p.A. - with registered office in Corso Giovanni Agnelli 200, Turin, Italy – is the
FCA Bank GmbH FCA Leasing GmbH
FCA Bank S.p.A. (Belgian Branch) Leasys S.p.A. (Belgian Branch)
FCA Capital Danmark A/S
FCA Capital France S.A. FCA Leasing France SNCLeasys France S.A.S.
FCA Bank Deutschland GmbHFerrari Financial Services GmbHLeasys S.p.A. (German Branch)
FCA Capital Hellas S.A.FCA Insurance Hellas S.A. FCA Bank GmbH (Hellenic Branch)
FCA Capital Danmark A/S (Branch Finland)
FCA Capital RE DAC FCA Bank S.p.A. (Irish Branch)
FCA Bank S.p.A.Leasys S.p.A.Leasys Rent S.p.A. Clickar S.r.l.
FCA Capital Norge AS
FCA Capital Nederland B.V. Leasys Nederland B.V.
FCA-Group Bank Polska S.A. Leasys Polska Sp.Zo.o.
FCA Dealer Services Portugal S.A. FCA Capital Portugal IFIC S.A.
Ferrari Financial Services GmbH (UK Branch)FCA Automotive Services UK Ltd FCA Dealer Services UK Ltd Leasys UK Ltd
FCA Capital España EFC S.A.FCA Dealer Services España S.A. Leasys S.p.A. (Spanish Branch)
FCA Dealer Services España (Morocco Branch)
FCA Capital Sverige AB
FCA Capital Suisse S.A.
COMPANYCOUNTRY
AUSTRIA
BELGIUM
DENMARK
FRANCE
GERMANY
GREECE
FINLAND
IRELAND
ITALY
NORWAY
NETHERLAND
POLAND
PORTUGAL
UNITED KINDOM
SPAIN
MOROCCO
SWEDEN
SWITZERLAND
GROUP STRUCTURE AND INTERNATIONAL PRESENCE
Parent Company of the FCA Bank Group with operations in 18 countries.
Consolidated non-financial statement • 317
FCA Bank stakeholdersIn 2019 the FCA Bank Group mapped its stakeholders to promote di²erent engagement activities, on the basis of selected stakeholder categories.The group has implemented a multi-year plan of stakeholder engagement, so as to involve
gradually all the categories, in keeping with the GRI principle of Stakeholder Inclusiveness.Below, a map is provided of the FCA Bank Group’s stakeholders, as prepared in 2019:
In 2019 the following categories were involved:• Employees • Dealers• Shareholders• Suppliers
Shareholders Employees
Civil society Suppliers
Capital Marketand Investors
Public AdministrationInstitutions
Dealer Media
Business partners Retail Costumers
STAKEHOLDER
Consolidated financial statements December 31, 2019• 318
Materiality analysis
In 2019 the FCA Bank Group upgraded its materiality matrix. To that end, to identify topics considered relevant by both its stakeholders and the group itself, based on the recommendations of the GRI Standards, a structured process was implemented that took into account the perspectives of parties internal and external to the group, in accordance with the following phases and activities: • Identification of topics potentially relevant for the company and the stakeholders; • Selection and prioritization of topics and construction of the materiality matrix; • Validation of the materiality matrix by top management.
Within the context of this exercise, the materiality analysis took into account the effects of risks and opportunities related to the bank’s business. To identify the topics potentially relevant for the FCA Bank Group and its stakeholders, consideration was given to the following documents: • Sustainability reports of institutional entities;• Consolidated non financial statements of other domestic and international financial groups, to be used as benchmarks among the FCA Bank Group’s main peers;• The FCA Bank Group’s Code of Conduct for the commitments expressed and formalized therein;• The 2018 materiality matrix;• Internal interviews to the contact persons of the FCA Bank Group, who share the views of each function on topics, making it possible to focus on the key aspects and the main projects consistent with such aspects developed during the year.
The selection and prioritization of the relevant topics consists of two activities: • Direct involvement of the group’s external stakeholders; • Internal assessment by Top Management, taking into consideration the relevance of the
topics in relation to corporate activities and strategies.
Following the update of the materiality matrix for 2019, eleven topics were identified as relevant for the FCA Bank Group:• Contrasting corruption and promoting integrity in the business• Transparency in services and business, financial inclusion• Security, privacy and reliability of services• Green finance and sustainable mobility• Dealer and customer relations• Training and development of human resources• Economic performance and value creation• Innovation and digitalization• Employee health and safety• Welfare, employment and dialogue with social partners• Diversity, equal opportunities and human rights
In the following sections these topics are associated with each area of interest expressed by Legislative Decree 254/2016 (environmental aspects, social aspects, personnel management, human rights and fight against corruption).
Consolidated non-financial statement • 319
Materiality matrix 2019
The results of the materiality analysis are depicted graphically through a Cartesian coordinate plane called Materiality matrix, which shows the interest for the company on the ordinate and the interest for the stakeholders on the abscissa.
Rele
vanc
e to
sta
keho
lder
Relevance to FCA Bank groupLOW HIGH
LOW
HIGH
Diversity, equal opportunitiesand human rights
Employee health and safety
Dealer and customer relations
Training and development ofhuman resources
Economic performance and value creation
Security, privacy and reliability of services
Transparency in services and business, financial inclusion
Green finance and sustainablemobility
Innovation and digitization
Welfare, employment anddialogue with social partners
Contrasting corruption andpromoting integrity in thebusiness
5,00
4,00
3,00
2,002,00 3,00 4,00 5,00
Welfare, employment anddialogue with social partners
This depiction makes it possible to evaluate the significance (i.e. the “materiality”) of every topic on the basis of its position with respect to both axes.
Consolidated financial statements December 31, 2019• 320
Governance and risk management
Group work to ensure the healthy and prudent management of the group, in compliance with existing regulations and the development trajectories that characterise them, with the Articles of Association, as well as the corporate targets for business development. The Corporate Governance structure comprises an administration and control system founded on the existence of an administrative body (the board of directors) and of the board of auditors.
the Board of Directors oversees sustainability activities with top management’s support; • The staff meeting, gathering the CEO and top management, supervises the sustainability aspects (e.g. the reporting process, the materiality analysis, the interaction with the stakeholders) and supports the Board of Directors in defining the governance of sustainability; • The Consolidated Financial Reporting
FCA Bank adopted a comprehensive set of rules and procedures that establish the responsibilities and inspire the conduct of our company boards and officers, in order to ensure sound, prudent management that achieves profitability while taking on risk in an informed manner and doing business with integrity.
Corporate Governance and Organisational Structure The Corporate Governance system and Organisational Structure adopted by FCA Bank
In 2019 the FCA Bank Group continued the actions undertaken in 2018 to strengthen its effort in the area of sustainability. The preparation of the FCA Bank Group’s Non Financial Statement for the year ended December 31, 2019 is based on the following structured process:• The Board of Directors approves the non financial statement together with the 2019 consolidated financial statements. Moreover,
CORPORATE GOVERNANCE
SUSTAINABILITY GOVERNANCE
STÉPHANE PRIAMI*Chairman
DAVIDE MELEDirector
VALÉRIE WANQUETDirector
BERNARD MANUELLIDirector
OLIVIER GUILHAMONDirector
ANDREA FAINADirector
ANDREA GIORIOIndipendent Director
PAOLA DE VINCENTIISIndipendent Director
* appointed on January 31, 2020
RICHARD K. PALMERDirector
GIACOMO CARELLICEO
General Manager
Consolidated non-financial statement • 321
The internal control system
The Consolidated Non-Financial Statement, submitted to EY S.p.A., is published in the group’s Consolidated Annual Financial Statements on the corporate website and submitted to Consob by certified e-mail.
• First-level controls, which are carried out by the operational departments or are incorporated into the IT procedures to ensure the proper performance of day-to-day operations and the single transactions; • Second-level controls, which are designed to contribute to the definition of risk measurement methods and to check the consistency of operational activities with risk objectives. Such controls are performed by non-operational departments, particularly Risk & Permanent Control and Compliance & Supervisory Relations;• Third-level controls, which are performed by Internal Audit to identify unusual patterns, procedure and regulation breaches as well as to evaluate the functioning of the overall internal control system.
department reports to top management to define the sustainability reporting process and is responsible for coordinating the preparation of the non financial statement. The working group monitors the specific initiatives and gathers the data and information necessary for the statement.
To ensure sound and prudent management, the FCA Bank Group combines business profitability with informed risk-taking, adopting a fair conduct in operational activities. As such, the group has established an internal control system designed to detect, measure and constantly monitor the risks associated with its activity, involving directors and statutory auditors, control committees and functions, the Supervisory Board, the independent audit firm, senior management and the staff as a whole. Responsibility for the group’s internal control system rests with Internal Audit, Risk & Permanent Control, Compliance & Supervisory Relations. These functions – which are independent of one another in organizational terms – operate across the Company and the group and liaise with the corresponding functions of the subsidiaries. In particular, Compliance & Supervisory Relations and Risk & Permanent Control report to the CEO and General Manager while Internal Audit reports to the Board of Directors. From an operational point of view there are three types of control in place:
Consolidated financial statements December 31, 2019• 322
Internal AuditThe Internal Audit department reports directly to the Board of Directors and is responsible for third-level controls, reviewing, based on the annual audit plan approved by the Board of Directors, the adequacy of the system of internal control and providing the Board of Directors and management with a professional and impartial opinion on the effectiveness of internal controls.The head of Internal Audit is responsible for preparing the audit plan, on the basis of a periodic risk assessment, and coordinates the audit missions. He reports on the findings and progress of the audit plan from time to time to the Board of Directors, the Risk & Audit Committee, the Internal Control Committee and the Board of Statutory Auditors. Internal Audit is responsible for the internal review, at least once a year, of the ICAAP - to ensure that it functions properly and is compliant with the applicable rules – and the periodic examination of the process to evaluate individual risks.The internal audit process calls for each Company to map its own risks on an annual basis, by using a common methodology issued by the Parent Company. For those subsidiaries that do not have an internal audit function locally, risk mapping is performed by the Parent Company.Monitoring of the individual companies’ internal audit activities takes place through a system of quarterly reports on:• the progress of the audit plan and explanation of any deviations;• all the audits carried out during the quarter under review;• the status of implementation of the recommendations issued.
The Board of Directors is apprised regularly of the audit findings, the action plans undertaken, the progress of the plan and the level of implementation of the recommendations to the individual companies.
Risk and Permanent ControlThis function’s mission is to manage the risk control and prevention system. Risk & Permanent Control at the Parent Company level includes staff dedicated to permanent controls that are not involved in business activities. Second-level controls performed by Risk & Permanent Control concern all the risks considered peculiar in the management of Company’s day-to-day business operations, which are illustrated in the map included in the ICAAP/ILAAP Report.
The group has been upgrading its Risk Appetite Framework (“RAF”) since it was first implemented in 2015, so as to put into sharp focus the risk profile that the bank is willing to bear to pursue its strategic objectives. The RAF upgrade is approved and constantly monitored by the Board of Directors. The process to define the Risk Appetite Framework as a standard of reference to determine risk propensity, which sets in advance the risk/return targets that the group intends to achieve, fosters also the broader dissemination of a risk culture across the group.
The development of the group’s Risk Appetite Framework required the identification of therelevant risk measures considered significant by the group.Moreover, this function coordinates the consolidated ICAAP.Risk & Permanent Control (R&PC) is represented in every group company by a local contact.
The results of the second-level controls performed by Risk and Permanent Control are reported quarterly to the Internal Control Committee and described in the six-monthly and annual Internal Control Report.
THE CONTROL FUNCTIONS
Consolidated non-financial statement • 323
The function is involved in the ex-ante assessment of compliance with the applicable regulations of all innovative projects, including new products and services.
Regarding anti-money-laundering and antiterrorism, the function assesses that the Company’s procedures are consistent with the objective of preventing and combating the breach of external (laws and regulations) and internal rules on anti-money-laundering and terrorist financing.
ComplianceThe objective of the Compliance & Supervisory Relations function is to oversee Compliance and Anti-Money-Laundering risk and managing relations with the Supervision Authorities.The head of the function is in charge of anti-money laundering and responsible for the reports of suspicious transactions. This manager also chairs the supervisory body of both the Company and its subsidiary Leasys S.p.A..The Compliance & Supervisory Relations department reports directly to the Company’s CEO and General Manager.The main Compliance & Supervisory Relations responsibilities concern directly the Company and, in terms of coordination and supervision, Leasys and the foreign markets.
More specifically, to evaluate the adequacy of internal procedures in preventing non-compliance with laws, rules and self-regulation provisions, the Compliance function:• identifies, in cooperation with the departments concerned, particularly Legal Affair, the rules applicable to the Company and the group, and evaluates their impact on activities, processes and procedures;• proposes procedural and organizational changes to ensure adequate control over noncompliance risk;• prepares reports for officers and governance bodies and other internal control functions;• assesses the effectiveness of procedural and organizational adjustments suggested to prevent non-compliance risk;• coordinates the activities of the supervisory body, ensuring that the compliance program under Legislative Decree 231/01 is constantly upgraded;• participates in the identification of training requirements and in personnel training activities to disseminate a corporate culture driven by the principles of honesty, integrity and compliance with the rules.
Risk & Audit CommitteePursuant to the supervisory provisions on corporate governance, the Risk & Audit Committee (RAC) provides support to the Board of Directors on risks and the internal control system as well as the proper use of accounting standards for the preparation of the separate and consolidated financial statements. With reference to risk management and control, the Committee supports the Board of Directors in:• defining and approving risk management strategies and policies; in connection with the Risk Appetite Framework (RAF), the Committee evaluates and makes recommendations for the Board of Directors to define and approve the risk objectives (“Risk Appetite”) and the risk tolerance threshold (“Risk Tolerance”);• verifying the proper implementation of risk management strategies, policies and RAF;• defining the policies and processes to evaluate corporate activities;• the preliminary review of the audit plan, the activity plans of second-level control functions and the periodic reports of the control functions to the Board of Directors;• assessing the adequacy of corporate
BOARD COMMITTEES
Consolidated financial statements December 31, 2019• 324
risk control functions, the internal control procedures and the reports necessary to ensure that the Board of Directors is properly and exhaustively informed.
The Committee consists of two independent Directors, of whom one is its chair on an annual rotation basis. The meetings of the Committee are attended, without voting rights, by the chairman of the board of statutory auditors and the head of Internal Audit, who acts as secretary.Meetings of the Committee can also be attended, without voting rights, by two other directors and by the heads of the second-level control functions.
Nomination CommitteePursuant to the supervisory provisions on corporate governance, the Nomination Committee supports the Board of Directors in the process for the nomination and co-optation of directors, in the Board’s self-assessment and in the CEO & General Manager succession process.
In accordance with the Articles of Association, the Committee makes recommendations and provides opinions to the Board of Directors, which in turn makes available to it the resources necessary to perform its tasks with the help of external consultants, within the limits set by the budget and through the Company’s departments.
The Committee was established on March 23, 2016, pursuant to a resolution of the Board of Directors, is made up since 30 June 2017 of 3 non-executive directors, including 2 independent members.The Committee is chaired by an independent director or, in his absence, by the other independent director.
Meetings of the Committee can be attended, depending on the topics covered, without
Remuneration CommitteePursuant to the supervisory provisions on corporate governance, the Remuneration Committee acts in a consultative and advisory capacity for the Board of Directors on remuneration and incentive practices and policies of the FCA Bank Group.Specifically, the Committee submits to the Board of Directors, after consultation with the CEO & General Manager, proposals on incentives, the document on remuneration policies and a report on their application (ex-post disclosure) for the annual approval by the shareholders at the general meeting.The Committee provides regularly to the Board of Directors and the shareholders adequate information on the activity performed. The Board of Directors makes available to it the resources necessary to perform its tasks with the help of external consultants, within the limits set by the budget and through the Company’s departments.
The Committee, established on March 23, 2016, pursuant to a resolution of the Board of Directors, is made up, temporarily, since June 30, 2017 of 3 non-executive directors, including 2 independent members.The Committee is chaired by an independent director or, in his absence, by the other independent director.
Meetings of the Committee can be attended, without voting rights, by the Chairman of the Board of Statutory Auditors (or by a Statutory Auditor designated by him), the CEO & General Manager, the heads of the control functions and the members of the Board of Directors.
voting rights, by the Chairman of the Board of Statutory Auditors or by a Statutory Auditor, the CEO & General Manager, the heads of the control functions or other key management functions, and other single directors.
Consolidated non-financial statement • 325
To strengthen the Internal Control System, the group established, in addition to the above functions, the following committees.
Internal Control CommitteeThe mission of the Internal Control Committee (“ICC”) is to monitor the results of the activities performed by the Company’s functions responsible for the internal control system for the purpose of:• reviewing the findings of audit activities;• providing a progress report on action plans;• submitting the Audit Plan and related progress reports;• analyzing any problems and issues arising from the internal control system.
Moreover, it acts as the anti-fraud committee with the objective to monitor fraud events, the effectiveness of the fraud prevention systems in place and the adequacy of the control systems related to fraud detection.The ICC meets on a quarterly basis, and is attended, periodically, also by representatives from the internal control functions of both shareholders. Such meetings are a time where reports are made to senior management on the results of secondand third- level activities on progress with action plans implemented as a result of findings and recommendations, including findings and recommendations made after inspections by local supervision authorities.The involvement of the CEO and General Manager guarantees the high degree of effectiveness of the internal control system, given that he has a full and integrated overview of the findings of the audits performed, which permits implementation of the necessary corrective or remedial actions in case of flaws or anomalies.
Group Internal Risk CommitteeThe Group Internal Risk Committee (“GIRC”) engages in policy-setting and monitoring to ensure that the group’s internal control system prevents and manages risks effectively.The activity carried out is more analytical than that of the other control committees, as it explores in great detail, among others, the RAF and the Risk Strategy that every head of the group companies develops and submits to the GIRC every year, pursuant to the group Risk Management policy approved by the Board of Directors.In addition, the GIRC is convened whenever the market or the Company faces a liquidity crisis and - in its restricted form, which is referred to as NPA committee – evaluates and approves proposals of new products and activities coming from the markets.Meetings of the GIRC - which are chaired by the Managing Director and General Manager – are open to senior managers and, when called upon, to the Heads of the group companies.Attendance is also open to the heads of the three internal control functions, as observers without voting rights; in particular, Risk & Permanent Control provides an opinion on risk levels in the various areas and any hedging and mitigation thereof.In addition, in case of approval of new products and activities, Compliance & Supervisory Relations may exercise veto rights in relation to aspects falling within its purview.Participation of the control functions in this committee fosters critical interaction with the business units; accordingly such participation is both necessary and appropriate, so as to prevent the creation of an excessive distance between the control functions and the operational context, without prejudice to the indispensable professional autonomy of the control functions.The absence of voting rights for the control functions within the GIRC is further evidence, among others, to the separation between operational and control functions.
OTHER COMMITTEES INVOLVED IN THE INTERNAL CONTROL SYSTEM
Consolidated financial statements December 31, 2019• 326
Supervisory BoardWith reference to the prevention of administrative liability pursuant to Legislative Decree 231/01, the Supervisory Board has been established for the Parent Company and the Italian subsidiary Leasys S.p.A., to oversee the proper application o the Compliance Program and the Code of Conduct. The Supervisory Board: • meets at least once a quarter and reports periodically to the CEO and General Manager, the Board of Directors and the Board of Statutory Auditors;• performs periodic reviews on the ability of the Compliance Program to prevent the perpetration of offenses, relying usually on FCA Bank’s Compliance, Internal Audit and Risk &Permanent Control functions as well as the other functions as necessary from time to time. The Parent Company’s Supervisory Board is made up of the Head of Compliance and Supervisory Relations, the Head of Internal Audit and an external legal and penal expert who acts as Chair.
Board of Statutory Auditors The board is composed of three members and two alternates appointed for a period of three terms.To the Board of Statutory Auditors are assigned the tasks referred to in the first paragraph of art. 2403 of the Italian Civil Code and the rules governing banking activity.The Board of Statutory Auditors currently in office has been appointed by the Ordinary Shareholders Meeting held on 30 March 2018 for the financial years 2018 - 2020 and will expire with the approval of the financial statements of the last financial year.
Board Executive Credit CommitteeThe Board of Directors has delegated to the Board Executive Credit Committee (BECC) the credit approval decisions with which it is concerned, which, according to the current delegation of powers model, are not entrusted to the corporate bodies. This delegation is given in all cases where the date of the first scheduled.Board meeting is not compatible with the urgency of the credit decisions to be made.
FRANCESCO PISCIOTTAPresident
VITTORIO SANSONETTIAuditor*
GIOVANNI OSSOLAAuditor
DAVIDE CHIESAAlternate Auditor
VALTER CANTINOAlternate Auditor**
* appointed on July 1, 2019* * appointed on November 26, 2019
Consolidated non-financial statement • 327
Internal control and risk management
• reliability and security of corporate information and IT procedures;• averting the risk that the intermediary is involved, even involuntarily, in illegal activities – with particular reference to those connected with money laundering, usury and the financing of terrorism;• compliance of operations with the law and supervisory regulations, as well as with internal policy, regulations and procedures.
The Internal Control SystemFCA Bank has provided itself with an internal control system directed towards continuously detecting, measuring and checking the risks connected to the performance of its own activity which involves the Corporate Bodies, the control functions and committees, the Supervisory Body, the Auditing Companies, Top Management and all staff.
The internal control system comprises the sum of rules, functions, structures, resources, processes and procedures that aim to ensure the achievement of the following aims:• checking the implementation of corporate strategy and policies;• the containment of risk within the limits indicated in the reference framework for determining the intermediary’s propensity to risk - Risk Appetite Framework “RAF”; • safeguarding the value of the assets and protection against losses;• effectiveness and efficiency of corporate processes;
Consolidated financial statements December 31, 2019• 328
Management objectives and policies
company operations are carried out in keeping with sound and prudent principles, operational limits, timely reporting to pre-established hierarchical levels and that appropriate corrective actions are taken to address any criticalities.
Furthermore, the adequacy of risk management is guaranteed by the active participation of Risk and Permanent Control in specific committees:• the Internal Control Committee (ICC), which coordinates the control functions (IA, C&SR, Risk And Permanent Control), and the set of internal control mechanisms;• the Group Internal Risk Committee (GIRC), which performs analyses and assessments, drives the risk strategy in managing and monitoring global and operational credit limits;• the ALM Meeting, which monitors and controls all financial risks (market and counterparty in liquidity management transactions) as well as interest rate and currency risks;• the New Product and Activity Committee, with the task of improving the management of risks specific to new activities and products that might change the company’s risk profile;• the Risk & Audit Committee (R&AC), established by the Board of Directors on 17 September 2014 in view of the transformation into a bank and in accordance with Bank of Italy’s instructions on corporate governance. The Risk & Audit Committee supports the Board of Directors on risks and the internal control system and the assessment for the proper use of accounting standards in consolidated and separate financial reports. In particular, it is responsible for all instrumental and necessary activities for the Board of Director to determine properly and effectively the Risk Appetite Framework and risk management policies.
Every foreign company ensures a suitable level of risk management in proportion to its size and activities and in accordance with the guidelines set out every year by the Parent Company.
FCA Bank attaches great importance to the measurement, management and control of risks.
In this particular case, the parent company plays a role of guidance, management and control of risks at group level, activating operational plans of action that allow a reliable coverage of all risk contexts.
The guiding principles of the risk management and control system are:• a clear identification of responsibilities in taking risks;• measurement and control systems in line with Supervisory provisions and with the most widely adopted solutions at the international level;• organizational separation between operational functions and control functions.
FCA Bank updates every year its risk strategy, setting the risk levels that the group considers adequate to its growth strategy. Through this strategy, which is submitted for approval to the Group Internal Risk Committee, the overall limits (alert thresholds) are set, together with the limits attributable to each group entity. This limit and/or alert threshold system is submitted for approval to the Board of Directors of the Parent Company, FCA Bank.
This framework is designed to ensure consistency among the business model, the strategic and budget plan, the ICAAP and ILAAP and the internal control system, setting maximum risk levels for the different areas.
In light of the above, it is noted that the risk management processes are based on such key factors as the defined governance profiles, the stated risk propensity and the identification of risk takers and are structured in keeping with the phases required by rules and regulations and contemplated by professional practice (identification, measurement/valuation, monitoring, reporting, criticality management).
For this reason, the risk management processes are considered adequate to ensure that
Consolidated non-financial statement • 329
banking industry and are adequately tested and validated within the company.
The functioning of the internal control system is considered effective.
Such effectiveness is preserved over time thanks to maintenance and upgrading activities as well as the development of methodologies, organisational arrangements, processes, procedures, software applications and tools.
Risk and Permanent Control monitors risks through its annual control and activity plan, which includes:• the creation and upgrade of risk management procedures; • analysis and issuance of opinions on credit, financial and operational risk (e.g. NPA, Scoring, etc.);• support to HR in the development of training activities to disseminate an integrated risk culture (Claroline web platform).
FCA Bank’s risk management framework features the following aspects:• verification that company policies and strategies are implemented;• curbing of risk within the limits set out in the Bank’s Risk Appetite Framework (RAF);• protection of value of assets and against losses.
The foremost safeguard of the internal control system is the professionalism of the employees who, within the framework of the corporate organisational rules and references, are tasked with the duty of performing control activities, reviewing the relevant findings and assessing risk factors and related exposure levels prospectively. The employees assigned to Risk and Permanent Control, who are adequate in qualitative terms, have generally university level education in economics, mathematics and statistics and have a good knowledge of the regulatory and methodological aspects, suitable technical skills and professional expertise suited for the task.
The methodologies, models and software applications utilised are common in the
Non-financial risksIn addition to risks typical of the banking sector, the FCA Bank Group is also aware of the importance of monitoring non-financial risks:• strategic risk: it is the risk of incurring operating or capital losses due to inadequate company decisions, the wrong implementation of such decisions, an inappropriate allocation of resources or a lack of response to changes in the overall company context.• reputational risk: it is the current or prospective risk of operating or capital losses due to the negative perception of the bank’s image by customers, counterparts, shareholders, investors, authorities. The group considers this as an “indirect risk” in that it derives from other risk categories that can have also consequences for the bank’s image, including operational risk and compliance risk.• compliance risk: it is the risk of incurring judicial or administrative sanctions, significant financial losses or damage to the reputation after the violation of imperative norms (laws, rules, regulations) or self-regulation (e.g. articles of association, codes of conduct, codes of ethics). Thus, this risk can give rise to a reputational risk.• conduct risk: defined as the current or potential risk of losses deriving from the inadequate management of the financial services provided, including fraud or gross negligence. FCA Bank developed a method to monitor this risk, involving the survey of different indicators associated with the main dimensions related to conduct.
Specifically, Risk Management is responsible for the ongoing maintenance and upgrade of
Consolidated financial statements December 31, 2019• 330
this tool and the assessment of the relevant findings. The other corporate functions involved in the process to share the necessary data to upgrade the metrics currently used in the tool are Compliance, Internal Audit, Legal, Human Resources, Frauds Governance.
The key factors driven by the tool are as follows:• conduct, related to any case of inappropriate behavior by the bank (e.g. dissemination of asymmetric information, conflict of interests, fraudulent actions, unfair sale approach);• governance and strategy, that is lack of a risk culture, murky compensation and incentive system, inadequate definition of the code of conduct, lack of clarity for roles and responsibilities; • process, related to the performance of commercial activities, that is inadequate product development, poor accident management, inefficient back office operations;• external environment, related to the bank’s ability to adapt promptly to change, mainly regulatory and technological (that is lack/late learning of findings of supervision authorities, sketchy knowledge of regulatory amendments).
Monitoring these risks is a necessary condition to generate and protect sustainable value over time. This activity reflects on aspects that the group considers as a priority - such as maintenance of a high service quality and customer satisfaction, transparency of the information on products and services, innovation, multichannel engagement, digitalization and data security - to guarantee the ethics and integrity of the business and to protect the brand.
Consolidated non-financial statement • 331
Correlation material topics, potential risks and risk controls
Environmental aspects
Social aspects
Green finance and sustainable mobility
Innovation and digitalization
Security, privacy and reliability of services
Dealer and customer relations
Economic performance and value creation
Transparency in services and business, financial inclusion
Financing transactions and activities associated with negative impacts in environmental and climate change terms
This risk is mitigated by FCA Bank’s focus on the development and promotion of financing products and services with posi-tive environmental impacts, characterized by alternatives to traditional fuels and sustainable and shared mobility solutions.
An important pan-European project was started to have all the group companies operate their own portal, to provide custo-mers with a new communication channel and to manage better the information on retail financing contracts.
The group has a policy to manage pointe-dly and promptly any customer complaint, together with an internal control system aimed at intercepting and correcting potential situations of non-compliance in terms of transparency towards customers.
FCA Bank designed and implemented a solid system of IT security policies and procedures.
The group embraces the “Privacy by Desi-gn” principle, by integrating in the design and development of new products and services the data protection principle.
In-depth analyses of new threats are car-ried out regularly by applying the sector’s best practices to curb the risks detected; in addition, employees receive training on IT security.
On the web sites in the markets in which it operates, the FCA Bank Group makes avai-lable financial tools that allow customers to calculate their monthly payments and to structure autonomously the financing plans that best fit their requirements.
The FCA Bank Group distributed a digital Lead Management platform in all the countries in which it operates, integrated with the CRM processes of the Brands served.
Business sustainability and long-term value creation for all the group’s sta-keholders are the drivers of the group’s economic sustainability. Economic perfor-mance is monitored within the group RAF through different key indicators that allow Risk Management to check how value is created.
Digital solutions for customers are secure and protected by IT security systems (e.g. one-time password to confirm actions on the group’s portal).Other safeguards include: - at contractual level, specific SLAs desi-gned to ensure the availability of digital signature services 99.9% of the time. In addition, SLAs are in place to ensure that specific platform problems (for every market in scope) are addressed and solved;- detailed monthly analysis of the report sent by the supplier on contract-based SLAs;- summoning and manning of war rooms in case of problems affecting the entire market.
Provision of products unfit to meet customer needs and non-compliant with transparency rules and responsi-ble credit principles
Customer complaints on financing products and services provided
Customer data loss or theft
Risk of non-compliance with the rules and regulations on personal data pro-tection and transparency in banking and financial product distribution
Cyber attacks through e.g. malware and phishing, loss of critical assets, delays in managing IT incidents
Erroneous management of commercial offerings
Customer complaints, inadequate functioning of Customer Relationship Management processes
Credit risk, rating downgrade by rating agencies
Reputational risk due to non-compliance with applicable regulations
Service disruption and ensuing loss of business
Scope of Legislative Decree 254/2016 Material topic Potential risks Risk management
Consolidated financial statements December 31, 2019• 332
Social aspects
Training and development of human resources
Welfare, employment and dialogue with social partners
Employee health and safety
Diversity, equal opportu-nities and human rights
Contrasting corruption and promoting integrity in the business
Failure to upgrade information tech-nologies for internal operations and to meet regulatory requirements and customer expectations
Loss of knowledge and critical expe-riences for the business development; failure to upgrade skills
Loss of key staff, negative impact of turnover on business continuity, failure to attract talent
Enhanced conflict among social partners
Diminished sense of belonging and brand image
Prevention and Protection service disruption
Risk of non-compliance with rules and regulations on employee health and safety and with labour laws
Failure to provide training in health and safety
Failure to manage work-related stress
Risk of violation of equal opportunity, through discriminatory statements or behaviours
Non-compliance of the group with the rules and regulations on anti-corruption and any ineffectiveness of the Ethics Platform
Inadequate employee training and failure to upgrade company integrity skills
Plans are under way to digitalize the group’s operations.A contact person has been appointed in all the markets in scope for the digital onbo-arding project. In the course of the year, the single markets share with HQ proposals to improve the digital signature platform or to introduce new functionalities into it through surveys or specific assessments. These requests are considered by the digital ste-ering committee and, if approved, they are included in the supplier’s development plan. Starting from late 2019, different activities were started in the following areas: - Research and survey with associations, think tanks/universities on the progress of new technologies or areas of interest; - Scouting of innovations by start-ups/companies of interest and applicability for the bank.
This risk is mitigated by continuing mana-gerial and technical training of the target population, by coaching and by the leadership exercised by managers with their subordi-nates and by the professional family with its members.
This risk is mitigated through the annual Performance & Leadership Management, Ta-lent Review and Succession Plan processes.
On this topic, FCA Bank engages trade unions constantly, particularly through the imple-mentation of the commissions provided for by the Labour Agreement.
FCA Bank adopts various initiatives of Company engagement (i.e. web conference, convention, open door).
This risk is mitigated through:- The parties in charge of prevention and protection (RSPP and ASPP) can always be reached by telephone; - Fire prevention service active 24/7;- CA Security staff active whenever employe-es are at work;- Implementation of First Aid procedure in case of emergency on Saturdays, Sundays, and holidays.
On this topic FCA Bank prepared, and constantly updates, the procedures on the prevention and protection service. These pro-cedures are saved and updated in an internal repository (sharepoint) and can be consulted by all of the group’s employees.
The risk of non-compliance related to the fai-lure to provide training in health and safety is managed by monitoring the training activities recorded in the excel file, in the attendance register archives, final tests and participation certificates.
Failure to manage work-related stressThe risk of non-compliance related to work-related stress is managed through the two-year assessment of such risk (latest update December 2018). All documents related to this topic are filed both in paper form (SPP Archive) and in electronic form. The results of the assessment of work-related stress are eventually included in the risk assessment document (RAD).
A training plan has been established based on the Code of Conduct and the whistleblowing system.
This risk is mitigated by the periodic training program and the set of Internal Controls (e.g. the Code of Conduct and the Compliance Program under Legislative Decree 231/2001 for the Italian market and the group-wide anti-corruption program).
This risk is mitigated through the Mandatory Training Procedure, which entails an annual training program for FCA Bank’s employees and internal and external sale network, to disseminate a corporate culture inspired to the principles of honesty, fairness and re-spect for the spirit of the rules. The procedure is saved and updated in an internal repository (sharepoint) and can be consulted by all of the group’s employees.
Personnel management
Human rights
Fight against corruption
Consolidated non-financial statement • 333
Environmental aspects
Why the topics are relevantEven though it does not have a formal environmental policy in place, introducing environmentally sustainable solutions is a key factor in the group’s strategies.
The FCA Bank Group shares the objective of building a sustainable and eco-friendly mobility, promoting the initiatives of car manufacturers both through its financing, leasing and sharing solutions and through the dealer network. The group is aware that electric mobility can be a reliable and competitive solution only if it is supported by a financing, distribution and access system and is prepared to play a growing role in the future, in cooperation with its manufacturing partners.
Green finance and sustainable mobilityFCA Bank Group has long been developing and improving its digital identity, mindful not only of customer experience but the environment as well. In fact, in 2019, thanks to its digitalization process it not only implemented the tools available to customers but it also enabled dealers to sign 80% of their contracts in a 100% paperless manner in the countries in which it is operational. In Germany, starting 1 October 2019, for every contract signed digitally it planted a tree, undertaking an initiative that soon will be extended to other countries. Plans are being made for 2020 in Italy, with commercial promotions and financial services linked to environmental sustainability projects.
In fact, as FCA Bank believes in an increasingly sustainable business, it began to embrace a new concept of mobility.
RELEVANT TOPICS
• Green finance and sustainable mobility
The first step was the recently-established partnership with Treedom, an Italian company operating in Europe since 2010, with the only platform in the world that makes it possible to plant a tree and follow its story online. That is how the FCA Bank forest was born, with thousands of real trees available to customers and all employees to contribute to reduce CO2 emissions, for a more informed mobility. The year just ended saw Leasys develop a large number of innovations focused on shared mobility and sustainability. The mobility service company owned by FCA Bank launched different products intended to meet the sustainability requirements of its customer and the market. From the first car subscription model launched in Italy – Leasys CarCloud, which makes cars available to customers in the city where they need them – to U-Go and I-Link, two original peer-to-peer car sharing platforms, which allow users to share their cars when they do not use them. In June 2019 Leasys rolled out the Leasys Mobility Stores, a network made up of over 300 retail outlets for the provision of mobility services to customers, announcing also an electrification plan for them, that is the construction of three EV charging stations for every store, for a total of over 1,200 stations by 2020.
Introducing sustainable mobility solutions is part and parcel of the group’s strategies.
Consolidated financial statements December 31, 2019• 334
Social aspects
Transparency in services and business, financial inclusionThe first principle laid down in the FCA Bank Group’s Code of Conduct concerns “Customer relations”, as the the trust and satisfaction of its customers and shareholders are the focus of the group’s actions.
In fact, FCA Bank is committed to providing its customers clear, complete and transparent information at any time; this is why the principles and regulation on transparency have been adopted through a comprehensive set of internal rules and policies. The procedures and policies implemented by the group govern al those aspects that can affect transparency with customers. Such aspects include, among others, the information to be provided to customers before establishing the business relationship, and after; the approval process, including credit checks, communications related to costs charged to customers; the advertising process; complaint management; the governance of the product supervision. In addition, also the distribution network should be inspired by, and based on, the transparency principles and practices, given its role as first contact point between potential customers and FCA Bank. For this reason, the relevant activities are monitored and adequate and regular training is provided.
For the FCA Bank Group Transparency is not just a set of rules to be observed but a tool intended to protect the interests of its customers, through a conduct driven by the principles of openness and fairness, to establish a relationship based on trust, on one side, and to protect the company and its shareholders, on the other, reducing any fine imposed and curbing reputational risk. A business model is considered virtuous only when every phase of it is focused on the interests of its customers and is sensitive to their needs and demands, starting from the design of the product, in the marketing stage, until it is implemented, including also attention to post-sale customer needs.
Why the topics are relevantThe FCA Bank Group attributes a central role to projects intended to foster the economic, social and civil growth of the markets in which it operates. The group’s effort aims to improve on an ongoing basis the quality of the service to, and relations with, customers so as to establish mutual trust in a context of transparency and ability to listen, which is considered paramount to monitor customer needs and their satisfaction, to adapt the services offered. In addition to improving the group’s services and performance, innovation and digitalization are used to pursue customer-centricity, to ensure utmost accessibility and transparency for the bank’s services. Digital tools have been introduced to facilitate an understanding of the financial instruments offered and their management, to enable customers to monitor their position by managing their contracts in an informed and responsible manner and to ensure a balance among digitalization, automation and privacy, so that customers can have a knowledge of and manage the personal data transferred to the bank.
RELEVANT TOPICS
• Transparency in services and business, financial inclusion• Security, privacy and reliability of services• Dealer and customerrelations• Economic performance and value creation• Innovazione e digitalizzazione
Consolidated non-financial statement • 335
The FCA Bank Group bases its conduct on the customer’s perception of the Company, its products and processes, so as to separate what works properly from that which should be further improved. To that end, it is paramount to survey customer satisfaction through periodic surveys, ensuring a careful and proactive customer relation service and constantly analysing with a critical approach the complaints received. In view of this objective, in 2019 several surveys on customer satisfaction were carried out, together with a Mystery Shopping campaign focused on the duty of the dealer network to be transparent.Transparency means also to raise customers’ awareness regarding their rights and obligations. These objectives can be achieved only through a clear explanation of he characteristics of the product offered during the negotiation process, the delivery of a clear and exhaustive information package in the pre-contractual and in the contractual phases through the availability of different contact points. Digitalization and the large number of projects under way, such as the new Portal for customers, are but come examples of what FCA Bank is doing to pursue this objective.
In 2019 an important pan-European project was started, to ensue that all of the group companies have their own portal for customers. The objective is to provide customers with a new communication channel, to better manage the information related to retail financing contracts and interact more rapidly with FCA Bank’s back office, including in a self-service mode. For example, the new portal that will be activated in Italy should allow customers to check their Conto Deposito and to perform calculations, and submit any request for the early repayment of their loans. Regarding the foreign markets, the strategy to upgrade the information and accounting systems based on the approach by cluster has been consolidated. The related projects started in 2015, and currently under way, are designed to unify the different IT platforms utilized to manage the Retail financing and long-term
rental businesses. In January 2019, in France the new CRFS system was launched, to manage the retail sale process. The same initiative is under way in Italy, while a project to revise the information systems of Spain and Portugal, based on the CRFS platform, is due to begin shortly. The first phase, related to the front-end systems, is expected to go live by December 2019 while the back-end will be released in the second half of 2021.
Transparency is a central topic for the FCA Bank Group, also in light of the growing attention of the Italian and EU authorities. In fact, in the past few years the principle of transparency has been strengthened through the enactment of new rules and regulations, renewing and expanding its application to different sectors and products, such as banking, financial and insurance services. The key principle of the current regulatory framework is the provision to customers of clear and complete information, to ensure that informed choices are made, on the basis of one’s needs, with the purchase of products that meet customer requirements. Awareness and compliance must be, and will increasingly be so in the future, the drivers of a competitive approach, in line with market needs and demands, at the foundation of any conduct intended to attain leadership in the sector. For these reasons, the group will continue to be committed to achieving its objectives in the area of transparency.
Reference is made to the paragraph on “Significant events and strategic transactions” in the Report on Operations, in relation to the inquiry by the Anti-Trust Authority (AGCM) regarding the exchange of information in the car finance sector.
Consolidated financial statements December 31, 2019• 336
Transparency in commercial communication and in customer relationships
FCA Bank applies internal policies and procedures suited to ensure that the products offered to customers are consistent with their interests, objectives and characteristics. Moreover, these procedures describe the processes ad the tools implemented to prevent potential risks for customers and any conflict of interest. In particular, FCA Bank has adopted specific group policies that govern all the phases of a product lifecycle, starting from its design, offer and ongoing monitoring. In particular, attention is paid to the aspects related to the creation, launch and distribution of new products, relations with the distribution network and transparency obligations with customers.
ComplaintsIn accordance with the EBA guidelines, FCA Bank S.p.A. has adopted an internal policy for the management of complaints that aims to guarantee prompt and exhaustive responses to customers who file a complaint. Generally, a complaint means an expression of dissatisfaction presented by a natural or legal person with reference to the banking and financial services offered by the bank.The complaints shown in the table refer to the January – September 2019 period, banking scope. All complaints have been sent to the competent departments and solved within the terms set by local rules and regulations in every country (for example, local rules call for 30 days in Italy, 56 in the UK, 60 in Germany and France).
Transparency in FCA Bank S.p.A.
Banks and financial intermediaries are required to act in a fair and transparent manner with customers.
Rules and regulations on transparency in banking, financial and insurance services are designed, in keeping with the freedom of contract, to disclose to customers the key features of the contract and their changes, thus fostering competition in the financial and banking market. Adherence to transparency and fairness rules and principles in customer relations reduces legal and reputation risks and contributes to the sound and prudent management of the bank.
FCA Bank considers this a primary objective and, to provide customers with clear and transparent information, the bank provides this information in plain language, taking also concrete actions in the internal procedures that define the bank’s processes. To be as close as possible with customers, the Transparency section of FCA Bank Italia’s web site makes available, for the single Brands and products,
Consolidated non-financial statement • 337
the main information document relating to the products and services offered. In addition to the documents related to the products and services offered the Transparency section of FCA Bank Italia’s web site published also:• “Consumer credit in plain language”, a guide prepared by the Bank of Italy to provide practical tips on how to select a loan and calculate its costs, illustrating also the main customer rights;
• “The Central Credit Register in plain language”, a guide prepared by the Bank of Italy;• Guide to the Ombudsman in plain language;• Guide to the use of the ABF Portal; • The table containing the average Annual Percentage Rates (APR), a key measure for anti-usury regulations; and• Information on Privacy ad banking transparency collected by the bank.
2019Complaints by geographical area 2018
N. ITALY
% complaints out of active contracts
N. AUSTRIA
% complaints out of active contracts
N. DANMARK
% complaints out of active contracts
N. FRANCE
% complaints out of active contracts
N. GERMANY
% complaints out of active contracts
N. GREECE
% complaints out of active contracts
N. NETHERLANDS
% complaints out of active contracts
N. POLAND
% complaints out of active contracts
N. PORTUGAL
% complaints out of active contracts
N. UNITED KINGDOM
% complaints out of active contracts
N. SPAIN
% complaints out of active contracts
N. SWITZERLAND
% complaints out of active contracts
Total compliants
3,349
0.29%
17
0.10%
6
0.03%
32
0.02%
159
0.05%
14
0.07%
16
0.13%
8
0.03%
7
0.03%
613
0.33%
22
0.02%
9
0.03%
4,252
3,059
0.39%
45
0.12%
7
0.05%
43
0.04%
135
0.08%
28
0.10%
1
0.19%
15
0.03%
43
0.04%
820
0.41%
25
0.03%
18
0.04%
4,239
Complaints by geographical area
Consolidated financial statements December 31, 2019• 338
Security, privacy and reliability of servicesData protection e cyber security
In line with the results for the previous years, FCA Bank continues to pay special attention to the issues on the protection of the personal data processed within its organization and information systems, to ensure an adequate level of security for the confidentiality, integrity and availability of information and to protect the rights and interests of its customers and employees.
In keeping with the requirements of the General Data Protection Regulation 679/2016, the corporate governance model calls for: • a regulation that defines the organizational model, describing roles and responsibilities; in accordance with the Regulation, each employee is given a specific role in the area of personal data protection;• a solid system of policies and procedures, with special attention to the handling of personal data breaches to prevent, block or avoid the occurrence of this breach, indicating the activities, roles and responsibilities for the proper and quick resolution thereof; • a specific and innovative training program to disseminate, improve and enhance employee awareness of data protection issues.
The company is increasingly oriented to the proper implementation of the “Privacy by Design” principle, integrating in the design and development of new products and services the principles of data protection, including where necessary an impact assessment, in keeping with article 35, GDPR.
Moreover, to attract wide attention to personal data protection and to mitigate risks related to data confidentiality, integrity, availability and traceability, FCA Bank designed and implemented a solid system of IT security policies and procedures. In-depth analyses of new threats are performed
regularly by applying the industry’s best practices to manage the risks detected. To this end, the Company has improved employee awareness of these issues through specific training on IT security. The Company implemented internal procedures and tools to ensure that the parties concerned can exercise their rights. The group as a whole received and handled a very limited number of events recorded as potential incidents related to personal data. In particular, 13 complaints addressed by the organization were received from external sources while 1 complaint was received from regulation authorities that oversee data protection. The monitoring system and procedures also led to the identification of additional events with a potential impact on customer data, mainly in Germany and in the UK. These events did not have a significant impact on customers, in terms of leaks, thefts or losses of customer data.
To identify and prevent breaches of procedures and internal and sector rules, the architecture of the IT system and the internal control system undergo constant improvement. The group is committed to achieving its objectives in the area of transparency.
Consolidated non-financial statement • 339
Dealer and customer relationsService quality and customer satisfaction
Over the years FCA Bank has developed processes for sales, contract management during the life of the financing and re-contact in the contract renewal phase with a view to achieving customer satisfaction and constant improvement. Against this backdrop, loyalty development has been one of the pillars of FCA Bank’s commercial strategy. In the past few years, within the different available offerings, products that encourage the replacement of the car at the end of the contract, as an alternative to the final balloon payment, have become increasingly important.FCA Bank has distributed a digital platform in every country in which it operates, integrated with the Customer Relationship Management (CRM) of the brand of reference, to manage in the best possible way the time when customers with contracts near the expiration date are contacted with new financing proposals, thereby fostering brand loyalty.The financial information of every customer is handled in a secure manner through FCA Bank’s systems while the connection with the industrial partner’s system allows its integration in the standard customer re-contact process by the dealer.Thanks to these activities and the integrated CRM systems, FCA Bank’s customer retention rate in its main markets is around 52% (source: New Car Buyer Survey 2018). This means that more than half of those who purchased an FCA group vehicle, with financing from FCA Bank, has eventually bought another group vehicle. This percentage is well above the customer retention rate observed in the case of customers who used a different type of payment (45%) (source: New Car Buyer Survey 2018).FCA Bank developed a complete market research system on the entire lifecycle of the customer, to monitor constantly the quality of its offering as perceived by customers and
dealers.One such market research is the Customer Satisfaction Survey, one of the oldest tools used by FCA Bank to check on an ongoing basis its customers’ satisfaction with both FCA and Jaguar Land Rover. The survey covers a wide range of sources of information on customers’ habits and their satisfaction areas, such as: the reasons for choosing the payment method, the “shopping around”, the means of communication utilized to obtain information on the chosen car, the assessment of the seller’s behavior, the satisfaction with the financing solution adopted and the service received from FCA Bank. The survey makes it possible to have a substantial time series, with certain key areas always present and other sections constantly updated to cope with new fact-gathering analyses. The survey format is the same for all the countries involved, making it possible to monitor the markets’ performance on key issues and to compare quality levels.In 2019 about 7,200 FCA customers (+13%) and 2,000 JLR customers (+18%) were interviewed by phone.In 2018, approximately 6,400 FCA customers and about 1,700 JLR customers were interviewed by telephone. The results confirm a constant improvement of the overall evaluation. The average satisfaction for the main markets is higher than 4, in continuity with 2018, on a 1-5 scale with the positive threshold at 3.7.
Sustainability for FCA Bank Group
On the websites in the markets in which it operates, FCA Bank makes available financial instruments that allow customers to calculate loan instalments and to work out independently repayment schedules more in keeping with one’s circumstances, in relation also the vehicle selected.FCA Bank is aware that, to be highly competitive and to build long-term relationships with customers, a financial company must run its business taking into account the economic, environmental and social impact deriving from it.
Consolidated financial statements December 31, 2019• 340
In view of sustainable development, FCA Bank is committed to providing its customers access to responsible credit based on the principles of fairness, responsibility and attention and offered on adequate terms and conditions and shown in a transparent and comprehensible manner, in full compliance of the applicable rules and regulations. This approach is monitored systematically in customer satisfaction surveys, which include a special focus on the fairness and transparency of the dealer’s salespeople when the financing solution is proposed.In relation to training activities, personnel’s awareness is constantly raised on the importance of using a clear and comprehensible language in the presentation of financial and insurance products.
Relationship with business partners and dealers
FCA Bank its relations with dealers by providing financing products that support sales of the brands of reference.With that in mind, every year FCA Bank performs a Dealer Satisfaction survey of the entire dealer network, with reference to the retail and dealer financing businesses, thus monitoring the quality of the service and verifying the standards offered.In this survey the dealers have a chance to express their opinion on FCA Bank, in general and for every phase of the service process, also with reference to the main market competitors.This makes it possible to create a detailed analysis of FCA Bank’s performance vis-à-vis the competition. In addition, suggestions on new products and services are received which help to improve FCA Bank’s products and services.In 2019 about 520 FCA dealers and 160 JLR dealers were interviewed.The results confirm a constant improvement of the overall evaluation. The average satisfaction for the main markets is higher than 4, in continuity with 2018, on a 1-5 scale with the positive threshold at 3.7.Sustainable management of suppliers
The FCA Group interacts with its suppliers on the basis of transparency, fairness and equal treatment, in line with the Code of Conduct approved by FCA Bank’s Board of Directors, which sets out the principles that inspire the group’s conduct in business.Based on the contracts signed with the group, suppliers are required to abide by the group’sCode of Conduct Goods and services are purchased locally under the responsibility of each group company. At the Parent Company level, the Procurement function guides and monitors, through the group policy, the purchases of goods and services and checks compliance with local procedures.Specifically, regarding the management of suppliers, the group policy sets out specific guidelines intended to evaluate and select new suppliers and to monitor regularly the existing ones.Regarding the selection of suppliers, the group policy calls for a number of background checks, with a financial and reputational focus, based on pre-defined criteria and formalized through specific evaluation matrices.As to monitoring, the policy contemplates periodic reviews based on the analysis of existing relationships, with the ensuing resolution of possible criticalities through formal action plans, monitored over time.The group manages the purchase of goods and services through two specific centralized software applications. Of these, one is managed at the Parent Company level, for ICT purchases, and the other, which has been operational for sometime now in Italy, is being introduced in all the European subsidiaries to purchase other goods and services.The application managed at the local level, on a central platform, allows for the standardization of the purchase process, from the request for approval of the expenditure to the issue of the purchase order.
Consolidated non-financial statement • 341
Economic performance and value creationFinancial responsibility rests on the FCA Bank Group’s financial strength, a fundamental condition to ensure the long-term sustainability of the business and long-term value creation for all the group’s stakeholders. These topics are specifically referred to in the RAF and ICAAP documents.
Own funds Own funds represent the minimum capital requirements that banks are expected to meet to deal with risks under Pillar 1 (credit, market, foreign exchange, operational risk) and Pillar 2 (concentration, interest rate, liquidity, strategic, reputational risk) and are the main focus of the Supervisory Authority in judging the stability of the bank.As per the applicable regulations, the FCA Bank Group’s minimum total capital ratio required is 10.65% of risk-weighted assets. At December 31, 2019, the Total Capital Ratio was 15.82%.
Leverage ratioThe leverage ratio is a measure of a bank debt vis-à-vis its equity that was introduced to limit the level of indebtedness of the banking sector. At December 31, 2019 FCA Bank’s leverage ratio was 10.62%, above the regulatory requirements.
RatingOn May 9, 2019, Fitch raised FCA Bank’s shortterm rating. The ratings assigned to FCA Bank at December 31, 2019 are as follows:
FINANCIAL SOLIDARITY
Common equity tier 1 (CET 1) is made up of highquality components, mainly capital instruments (e.g. ordinary shares) and reserves. As per the applicable regulations, FCA Bank is expected to meet a minimum required CET 1 ratio of 7.15%. At December 31, 2019 the CET 1 ratio was 14.20%.
Entity OutlookLong Term
RatingShort Term
RatingLong Term Deposits
Rating
Moody’s
Fitch
Standard & Poor's
Baa1
BBB+
BBB
P-2
F1
A-2
Baa1
-
-
Stable
Stable
Negative
Consolidated financial statements December 31, 2019• 342
Long-term value creation
The statement of economic value generated and distributed provides an indication of how the FCA Bank Group created value for its stakeholders.
In 2019 the Group created economic value for a total of 929 million, distributing 69%.About 30% of the distributed economic value was allocated to employees, suppliers and service providers. Over 19% was allocated to shareholders, while 20% was allocated to Governments in the different jurisdictions in which the FCA Bank Group operates.
928,864
641,788
276,468
180,000
185,320
287,076
902,589
514,225
268,593
-
245,632
388,364
100.0%
69.1%
29.8%
19.4%
20.0%
30.9%
100.0%
57.0%
29.8%
0.0%
27.2%
43.0%
31/12/2019 31/12/2018(€/mln)
Economic value generated
Economic Value distributed
Employees, suppliers and service providers
Shareholders
Governments
Economic value retained by the group
Consolidated non-financial statement • 343
930,281
(236,832)
147,875
(45,893)
(45)
(6,187)
1,462
-
-
(47,248)
-
1,243
(867)
805
(437,540)
622,210
(400)
928,864
(87,326)
(13,963)
(101,289)
(175,179)
(175,179)
-
(180,000)
(180,000)
-
(11,054)
(2,500)
(836)
(138,214)
(32,716)
(185,320)
-
(641,788)
(287,076)
(287,076)
903,452
(242,050)
164,176
(54,986)
551
(1,801)
1,162
-
-
(20,728)
-
561
2,073
-
(363,518)
513,697
-
902,589
(88,552)
(11,008)
(99,560)
(169,033)
(169,033)
-
-
-
(75,800)
(10,604)
-
-
(150,195)
(9,033)
(245,632)
-
(514,225)
(388,364)
(388,364)
31/12/2019 31/12/2018VALUE-ADDED STATEMENT
10. INTEREST INCOME AND SIMILAR REVENUES
20. INTEREST EXPENSES AND SIMIALR CHARGES
40. FEE AND COMMISSION INCOME
50. FEE AND COMMISSION EXPENSES
80. NET INCOME FINANCIAL ASSETS AND LIABILTIES HELD FOR TRADING
90. FAIR VALUE ADJUSTMENTS IN HEDGE ACCOUNTING
100. GAINS (AND LOSSES) ON DISPOSAL OF:
a) Financial assets at amortized cost
b) Financial assets at fair value with impact on overall profitability
c) Financial liabilities
130. NET IMPAIRMENT / WRITE-BACKS FOR CREDIT RISK RELATED TO:
a) Financial assets at amortized cost
b) Financial assets measured at fair value with an impact on overall profitability
160. NET PREMIUM EARNED
170. NET OTHER OPERATING INCOME/ CHARGES FROM INSURANCE ACTIVITIES
200. NET PROVISIONS FOR RISK AND CHARGES
210. IMPAIRMENT ON PROPERTY, PLAN AND EQUIPMENT
230. OTHER OPERATING INCOME / CHARGES
250. GAINS (AND LOSSES) OF EQUITY INVESTMENTS
A. TOTAL ECONOMIC VALUE GENERATED
190. ADMINISTRATIVE COSTS:
b) Other administrative costs
220. IMPAIRMENT ON INTANGIBLE ASSETS
ECONOMIC VALUE DISTRIBUTED TO SUPPLIERS
190. ADMINISTRATIVE COSTS:
a) Payroll costs
ECONOMIC VALUE DISTRIBUTED TO EMPLOYEES AND COWORKERS
340. MINORITY PORTION OF NET INCOME (LOSS)
PROFIT ATTRIBUTED TO SHAREHOLDERS
ECONOMIC VALUE DISTRIBUTED TO SHAREHOLDERS
200. NET PROVISIONS FOR RISKS AND CHARGES
other administrative expenses: indirect taxes and fees
other administrative expenses: penalties
other operating expenses / income: tax costs and recoveries on tax costs
300. TAX EXPENSE RELATED TO PROFIT OR LOSS FROM CONTINUING OPERATIONS
300. TAX EXPENSE RELATED TO PROFIT OR LOSS FROM CONTINUING OPERATIONS (DEFERRED)
ECONOMIC VALUE DISTRIBUTED TO THE PUBLIC ADMINISTRATION
other administrative expenses: liberality and sponsorships
B. TOTAL ECONOMIC VALUE DISTRIBUTED
RETAINED PROFITS
C. TOTAL ECONOMIC VALUE RETAINED BY THE GROUP
Consolidated financial statements December 31, 2019• 344
Innovation and digitalization In a hyper-connected world, digital transformation plays an increasingly important role for the bank. The digital transition actually entails a paradigm change from a traditional product-centric strategy to a customer-centric one. In 2019, in agreement with the digitalization roadmap defined, FCA Bank focused on this customer-centric vision to design processes and solutions to encourage customers to establish a solid and long-standing trust-based relationship.
PrescoringKnowledge is the word at the foundation of the pre-scoring project, which came to life to add value both to the potential customer and the dealer by providing a preliminary and immediate answer on the customer’s ability to access a financing plan by FCA Bank chosen online while configuring a vehicle on the brand’s website. Once the amount of the monthly instalment is calculated online with the finance calculator, thanks to pre-scoring customers need only to enter little but necessary financial data to learn in real time whether the selected financing plan is feasible. Dealers, for their part, will receive though pre-scoring the result of the credit assessment, which will be used either to expedite completion of the credit application process or to provide customers with an alternative financing solution, in case the plan selected online is inconsistent with their repayment capabilities. In July 2019, the project was successfully launched in Germany, the pilot market; eventually this winning strategy was rolled out in Italy, Spain, Belgium, the Netherlands and Austria.
Customer portalAs the contract is signed and the sale process completed, the bank’s objective is to set up a communication channel for customers that might be used as needed. From a smartphone, a tablet or a personal computer, customers can access FCA Bank’s Customer Portal, to obtain updated information in real time or to update their personal information by using easy and intuitive tools. Customer are provided a tool that is: • easy: a single area to monitor closely all car financing and lease contracts signed and banking products, so as to manage them conveniently and rapidly; • intuitive and secure: easy-to-use solution for all customers from any device and secure through the use of a one-time password to confirm any action;• customized: customers are offered the possibility to receive personalized solutions through the portal.
The project, which had already gone live in Italy, Germany, Austria and UK, was launched successfully in 2019 in France, Poland, Belgium and the Netherlands.
Digital onboardingAs the optimal financing plan is chosen, the data entered and pre-scoring results received, customers who then go to the dealer will receive all the benefits deriving from the digital onboarding project: digital signature, filing and dematerialization of all the documentation designed to finalize the contract. In Spain and Portugal, countries where such solution is adopted by over 80% of customers, the benefits are clear: better customer experience, thanks to a transparent and secure process, greater security and more structured communications between the dealer and the bank. The year just ended was important for this project as this solution was introduced successfully also in Greece, Belgium, the Netherlands, France and Poland, after its launch in Spain, Portugal, Italy, Germany and Austria.
Consolidated non-financial statement • 345
Personnel management
Why the topics are relevant FCA Bank is a people company at the service of people. Its primary objective is to attract, retain and motivate highly qualified staff, as well as to reward those who advance, believe in and support company values with compensation structures linked to long-term value creation.
RELEVANT TOPICS
• Training and development of human resources• Welfare, employment and dialogue with social partners • Employee health and safety
ORGANIZATION AND HUMAN RESOURCES
As at December 31, 2019, the FCA Bank Group had a total headcount of 2,280, an increase of 22 employees over the end of the previous year.This increase is due mainly to the continuing internationalization process undertaken by Leasys.
The quantitative data are based on the actual headcount at December 31, 2019.
Consolidated financial statements December 31, 2019• 346
An analysis of the data shows that the two Italian companies account for 52% of total employees.At the end of December 2019 female employees represented 50.4% of the workforce, the average age of the group was 44.0 (44.4 for men and 43.6 for women), while average company seniority was 12.19 (11.27 years for men
Distribution of group employees as of December 31, 2019
35
158
304
1,186
141
4740 41 83 44116
5622 7
DK and Nordic Pole
Netherlands
Belgium
Italy
Austria
Ireland
France
Poland
Germany
Portugal
Greece
Spain and Morocco
United Kingdome
Switzerland
1,200
1.000
800
600
400
200
0
and 13.09 years for women). At the same date 6.2% of the workforce (141 employees, of whom 137 women) worked part-time.
Consolidated non-financial statement • 347
Company seniority by sex
Age by sex Less than 3 years
3 to 5
6 to 10
11 to 20
21 to 30
31 or mor e
700
800
600
500
400
300
200
100
0
M
F
Less than 31 years
31 to 40
41 to 50
51 or more
700
900
800
600
500
400
300
200
100
0
259
102
121
304
170
344
157
394
165
7114350
115
299
278
419326
449
285
109
Consolidated financial statements December 31, 2019• 348
Hierarchy managers White collars
1,000
800
600
400
200
0
183
332
800
965
MF
Hierarchy level
29% of all employees had upper management responsibilities.
Materiality threshold of the number of non-employees The materiality threshold of the number of nonemployees – who perform the same activities as employees – as a share of the total workforce is set at 15% at group level. This threshold has never been reached.
Female Male Total
Fixed-term contract
Permanent employment contract
Total
19
1,113
1,132
44
2,236
2,280
25
1,123
1,148
Total number of employees – Breakdown by employment contract and sex
Consolidated non-financial statement • 349
Turn-over
9.2
117
27
-
13
25
28
44
122
44
128
82
28
182
9.3
104
15
-
35
25
30
42
123
44
116
93
82
127
31/12/2019 31/12/2018Exits
% Termination rate
Motivation:
N. Resignations
N. Dismissal
N. Solidarity fund
N. Working contract expiration(fixed term)
N. Retirement
N. Other
By age:
N. <30 years
N. 30 - 50 years
N.>50 years
By gender:
N. Women
N. Men
By professional group:
N. Hierarchy managers
N. White collar
TrainingAlso for 2019, total training expenses for the group’s employees were adequate, even though close attention continued to be paid to costs.In addition to the usual emphasis placed on technical and Compliance training, in Italy and in the markets a specific training program was held on Code of Conduct. A total of 4,700 training days were held, with an average of 2.5 days per employee.
TRAINING AND DEVELOPMENT OF HUMAN RESOURCES
Consolidated financial statements December 31, 2019• 350
InnovactionFollowing completion in 2019 of the Strategic Thinking Path program, which was started in 2017, FCA Bank launched an additional corporate initiative called InnovAction, to develop feasible and innovative business solutions that might enable it to be competitive in the market, meeting, and where possible anticipating, customer needs. With management’s help, eight strategic areas of our business were identified and matched with specific projects with which to work. Participants are a heterogeneous and international group, made up of 50 colleagues coming from a variety of markets and with different corporate seniorities. The 8 teams identified worked on a single project, with support from an internal tutor in terms of expertise, know-how and leadership. The program consists of three main phases, a kick-off workshop held in June, involving a one-day-and-a-half gathering where participants and tutors, with help from external facilitators and innovation experts, worked on the creation of the teams and the sharing of methods and tools to be used for the development of projects; six months of project work, during which participants worked from a remote location; and a final day to be held in early 2020, where the teams will present
MANAGEMENT DEVELOPMENT TRACKS
1,923
1,001
922
6,502
3,396
3,106
38,323
18,892
19,431
16.9
16.7
17.1
2,258
1,120
1,138
9,474
4,997
4,477
39,493
21,102
18,391
17.5
18.8
16.2
31/12/2019 31/12/2018Training
N. number of employees trained
- of which women
- of which men
N. number of participation in courses (training sessions by employee)
- of which women
- of which men
N. total training hours
- of which women
- of which men
N. average training hours per employee
- of which women
- of which men
their projects to the Leadership Team. To overcome the geographical distance and the functional and hierarchical differences within the organization, virtual and team coaching sessions were held to enhance agile working and virtual remote collaboration capabilities.
CommunicationVisual identity is still a priority – FCA Bank’s magazine continued to be published in 2019. Two Institutional communication events took place, at mid-year and at year-end, where the CEO and the Management Team commented on the group’s performance and results to all employees, who participated either directly or via live stream. Mindful of the need to continue to strengthen Visual Identity and the Brand value, the Employer Branding project continued in Italy and in foreign markets, to enhance the Company’s visibility in the marketplace and to improve the selection and recruitment process through new interface channels. Closer ties were established with universities to attract promising young talent.
Consolidated non-financial statement • 351
Performance Leadership ManagementThrough the PLM process, the FCA Bank Group guarantees the engagement of individual behaviors in view of the annual and long-term objectives of the company and the Shareholders.
The idea is to establish a transparent and bilateral communication process with all employees, to show them how they can contribute to the organization’s performance, how they are working to achieve effectively the agreed-upon objectives and, lastly, to provide them adequate support for their improvement and growth.
The “Performance and Leadership Management” program rests on two planks, focusing on the objectives and related results and on the individual attitudes and behaviors, so as to make people accountable and involving them directly in their growth process.In 2019, the CEO & General Managers and all the Material Risk Takers took part in the PLM, together with the rest of the staff, to engage each employee in reaching the strategic objectives.
It is noted that the PLM process is applied to all employees who worked at least six months during the year; as such, the 2018 figure was recast for a more consistent comparison.
96.70%
96.72%
96.69%
93.71%
94.09%
93.25%
97.86%
97.52%
98.04%
93.80%
94.47%
93.03%
31/12/2019 31/12/2018People evaluated in the year
Hierarchy managers
Women
Men
White collars
Women
Men
Cross Path ProjectIn 2016, the Company launched the Cross-Path project, an international and interfunctional growth program designed to identify people with high growth potential to be groomed in terms of leadership and interdisciplinary knowledge. The program’s duration is six years and involves tens of people who, through two-year assignments, are rotated in three markets and three different functions: Credit, Finance and Sales & Marketing. In early 2018, the participants began in their second role. All the positions in the various markets were identified for the third and last two-year period.
At the end of the program, the participants will have developed a solid knowledge of FCA Bank’s business and processes, thanks to their exposure to management and the skills and competencies developed through customized training. The key features of the program are:
• people involved: international mind-set, dynamic and open to the change that is typical in our business;• rotation and mobility: an interdisciplinary path in FCA Bank’s key functions;• international exposure: international assignments in the markets in which the group operates;• training: during the program the people receive training not only on compliance and risk but also on knowledge of company activities and skill development. During the process, special attention is paid to management training;• tutoring: the trainees are assigned a mentor selected from FCA Bank’s management team, who follows them for the entire work period and guides them on their growth path;• work on projects: on themes of strategic importance for the company.
Consolidated financial statements December 31, 2019• 352
The group supports fair choices in maternity, paternity and adoption, which encourage employees to balance their responsibilities as parents with their career. While labour rights may vary from country to country, parental leaves are granted to all employees to the extent necessary to comply with local laws. In certain countries, the group exceeds local requirements with dedicated policies.
Return-to-work and retention rates after parental leaves are two key indicators of the Company’s
ability in the medium/long term to provide employees professional growth opportunities and achieve a work-life balance.Also financial health is an important aspect of work-life balance. An FCA initiative in Italy called Conto Welfare allows employees to convert part of their pre-tax salary in an expense account that can be used for a wide range of health, welfare, care, education and pension services. In addition to the tax benefit, the Company provides an additional 5-10 percent to each expense account.
2,280
33
28
24
8
1
76%
71%
7
1,629
70%
31/12/2019
Total number of employees
Number of employees who have required parental leave in 2019
- of which women
Number of employees who have returned from parental leave confirming the same position
Number of employees currently in parental leave
Number of employees returned from parental leave who changed position within the same profes-
sional family
Percentage of employees returned from parental leave
- of which women
Collective bargaining and unionization
(number of collective bargaining and unionization done during the year)
Employees covered by collective labor agreement
(number of employeed having a collective labor agreement)
Parental leave and turnover
16,728
354
7,834
2,456
259
27,630
31/12/2019
N. Sickness
N. Injury (on the way to or from work, and at work)
N. Parental leave
N. Authorised leave (family-related, special leave)
N. Other reason
Total
Absences (number of calendar days)
WELFARE, EMPLOYMENT AND DIALOGUE WITH SOCIAL PARTNERS
Consolidated non-financial statement • 353
Human resource management Regarding human resource welfare, attention is called to the following activities carried out during the year:
Organizational developmentThe year just ended saw the continuing attention paid to strengthen various human resource management processes and Governance mechanisms. Special emphasis was placed on:• the continuing implementation of the Data Protection organizational model, in accordance with the GDPR. In particular, the Data Protection Officer – appointed by the Board of Directors – is responsible for FCA Bank S.p.A. and all its branches. Furthermore, every branch has its own Data Protection Referent (BDPR). On the other hand, every subsidiary has its own autonomous Data Protection Officer and, depending on the size of the legal entity, also a Data Protection Office, to support the work of the Data Protection Officer. • the revision of FCA Bank SpA’s first-level organizational structure, with the assignment of responsibilities in the Digital, Process & Data Governance and Procurement areas to the following Functions:
• Process Governance to Corporate Affairs;• Digital and Data Governance to ICT;• Procurement to Legal Affairs.
• the launch in FCA Bank Italia of the Common Retail Financing System (CRFS) project which, in addition to Italy, concerns Spain, Morocco and Portugal. The objective of the project is to implement the new Retail Financing System, in keeping with the approved plan, benefitting from the experience of previous projects in other markets and taking into consideration the business requirements of the Markets involved in this project; • the appointment – on 22 February by the Board of Directors – of the Head of Retail & Insurance Product Development for FCA Bank
Italia and the Head of Insurance Distribution per FCA Bank S.p.A., based on the Italian Insurance Code and IVASS standard no. 40 of 2018; • the reorganization of the Sales & Marketing function, particularly with the creation of 3 units dedicated to the Brands of FCA, Jaguar & Land Rover and such other Partners as Ferrari, Aston Martin, Morgan, Harley Davidson, MV Agusta, Erwin Hymer Group; • the start and completion of the Leasys Polska project within Leasys, with the creation of the Leasys Polska subsidiary, in keeping with Leasys’s internationalization process;• the integration of Win Rent, which was acquired in October 2018, as an arm of Leasys engaged in short-term rental, with related rebranding to Leasys Rent. In particular, attention is called to the harmonization pay scales and the transition to FCA’s Specific Collective Labour Agreement (CCSL); • the start and completion in January 2020 of the cross-border merger of FCA-Group Bank Polska S.A. with and into FCA Bank S.p.A.From the standpoint of Industrial Relations, attention is called to the new Specific Collective Labour Agreement (CCSL) for the period 2019-2022, which as in the past reflects a profit-sharing rationale for employee bonuses as measured on an annual basis.
From the business point of view, the first half of 2019 saw the continuation of the “Leasys Internationalization” project, with the objective of creating shareholder value through the creation of a Europe-wide Rental group through the Leasys brand, which saw in 2017 with the creation of branches in Spain, Germany and Belgium and the rebranding of the companies operating in France and the UK; in 2018 the incorporation of the Leasys Nederland subsidiary; and in 2019 the establishment of the Leasys Polska subsidiary.
Furthermore, Leasys’s functions act as competence lines with respect to the rental branches/entities and, as such, they are responsible for providing guidelines (e.g. budgets, commercial targets, …), sharing best
WORKERS’ WELFARE AND SAFETY
Consolidated financial statements December 31, 2019• 354
practices in terms of know how, processes and systems and ensuring the monitoring and development of employee competences.
HEALTH AND SAFETY AT WORK
Work-related stressLimited the the Italian companies of the group, the assessment of stress-related work is updated every two years, except for cases of significant changes in the production process and the organization of labour to improve health and safety at work. The latest update of December 2018 placed the risk in the green area (non significant risk).
Health and safety training All employees (executives, supervisors, safety workers, workers’ safety representative, emergency and first aid staff) involved in any way in the preventive and permanent safety management system receive adequate training to fulfil their duties.They attend basic, specific and refresher courses held by the Company with internal instructors, who have in turn attended Train the Trainer courses, and external instructors. Courses are held during paid work hours and final tests are taken. All documents related to training (attendance records, final tests and certificates) are filed in paper and electronic form in the office of the Prevention and Protection Service.
In Italy, FCA Bank S.p.A. manages the risks for its employees’ health and safety as follows: • risk assessment;• identification and preparation of prevention and protection measures;• definition of an action plan in connection with a program intended to improve safety levels over time; • implementation of the actions planned in connection with the program;• definition of worker information and training plans;• residual risk management.
FCA Bank S.p.A. (in its capacity as Employer) with the cooperation of the Head of Prevention and Protection Service and the Competent Physicians, after consultation with Worker Representatives on Safety, prepares and updates the risk assessment document (latest update January 15, 2019), which contains: • the report on the assessment of all risks for health and safety at work, specifying the criteria adopted or such assessment;• a description of the prevention and protection measures adopted following the assessment;• the program of measures deemed appropriate to ensure the improvement of security levels over time.The assessment and the relevant document are updated whenever there are such significant changes in the corporate organization as to affect the exposure of workers to risk and following the two-year assessment of work-related stress risk.
Consolidated non-financial statement • 355
Work injuries In the period under review, the group witnessed 30 injuries (13 men and 17 women), of which 12 at work and 18 on the way to work in Italy and in the markets where the group operates. In the work activities performed within the
Health and safety at work
18
12
30
7.48
17
14
31
7.80
31/12/2019 31/12/2018Injury rate
Number of injures "in itinere" (on the way to work or back from work)
Number of injuries happened at work
Total number of injuries
Frequency index (number of injuries x 1.000.000)/worked hours
Type of injuries by marketTotal Women Men
UK
Spain
Belgium
Germany
Italy
Number of injuriesof which at workof which in itinerereNumber of injuriesof which at workof which in itinerereNumber of injuriesof which at workof which in itinerereNumber of injuriesof which at workof which in itinerereNumber of injuriesof which at workof which in itinerere
651110110505
175
12
541110000404743
110000110101
1019
group (VDT workers), there are no individual protection devices (IPD) and no collective protection devices (CPD).None of the injuries reported had relevant consequences for the life and health of employees.
Other markets in which the group operates are excluded as no accidents were recorded.
Consolidated financial statements December 31, 2019• 356
Human rights
Diversity, equal opportunities and human rightsAll the group companies respect, and act to guarantee, diversity and equal opportunity rights for all employees.
For the FCA Bank Group, the Code of Conduct (hereinafter the “Code”) is an important tool designed to ensure that the work environment not only takes its inspiration but is founded on the highest ethical standards of corporate conduct. In fact, the Code includes a specific section devoted to social and environmental themes, providing guidelines to prevent and denounce discrimination, to preserve diversity and gender parity and to support the fight against harassment. Moreover, two principles contained therein are specifically devoted to ensure the implementation of an environmental protection and community support strategy.
Thus, FCA Bank’s integrity system lays the groundwork for the group’s corporate governance and includes a critical framework of principles, policies and procedures.
Lastly, the whistleblowing system makes it possible to report breaches of the Code and of any other rule, law and regulation (enacted at national and EU levels) applicable to the group companies (i.e. branches and subsidiaries). In fact, in keeping with the provisions of Circular no. 285 of the Bank of Italy, this system allows employees to report actions or events that
RELEVANT TOPICS
• Diversity, equal opportunities and human rights
Why the topics are relevantRespect for people’s fundamental rights is an important driver for the FCA Bank Group, in its role as an intermediary and in the value chain involving stakeholders and, especially, employees.
might breach the bank’s rules.
The Code of Conduct of the FCA Bank Group formalizes and enshrines clearly the commitment of all the group companies in handling tips from employees, so that they are analysed with due care and adequately investigated. The staff responsible for analysing such tips consider, first of all, alleged breaches of the Code, or of all the other applicable rules and regulations, considering the information available and possibly looking for more. In addition, this staff must pay proper attention to any other expression of concern or indication of problems raised by employees as also these circumstances need to be investigated properly. Lastly, the analysis activity can be carried out by resorting, if necessary, to qualified staff or subject experts. In the presence of proven illegal behaviours, the necessary and appropriate corrective actions are taken, regardless of the level or hierarchical position of the people involved. All the cases investigated are followed through until they are finally resolved. Confidentiality is a key principle. With the exception of certain limitations set by local regulations, tips can be submitted anonymously. All the information provided and the identity of the individual that submits the tip are shares on a need-to-know basis with those responsible for assessing the tip and investigating the alleged breach and who have the power to undertake the relevant corrective actions.
Retaliation is neither accepted nor tolerated. The FCA Bank Group prohibits expressly any member of the Company from exacting revenge or discriminating against tippers or against those who cooperated during the investigation. Whoever takes retaliatory action against these individuals will be subject to disciplinary action, which can involve also employee dismissal. The fundamental principles that inspire the conduct of the FCA Bank Group prohibit in fact any type of demotion, dismissal, suspension, threat, harassment, forced action or
Consolidated non-financial statement • 357
intimidation activities against employees who reported unethical behaviours in good faith or participated in an investigation into actions or events contrary to Code. The FCA Bank Group fully respects human rights in its activities. In 2019 there were no complaints or disputes linked to discrimination against employees.
In 2019 a training program was activated and completed in relation to he new Code of Conduct and on the whistleblowing system for the group employees.
Furthermore, March saw the start of a digital communication campaign on the principles of the Code, completed in April, which was designed to strengthen further awareness of the topic for all the group employees.
Lastly, during the year the whistleblowing system was extended to France and Portugal.
In the past few years, brands of companies considered socially responsible have been receiving growing recognition, as CSR is a medium capable of enhancing customer loyalty and attracting high-level employees. In fact, these are key factors in improving profitability and achieving financial success in the long term.
The FCA Bank Group does and will make its best to abide by the highest standards of environmental and social responsibility.
The FCA Bank Group agrees with, and its Code of Conduct incorporates, the principles of the “Universal declaration of human rights” of the United Nations (“UN”), the Conventions of the International Labour Organization (“ILO”) and the Guidelines of the Organization for Economic Cooperation and Development (“OECD”).
With reference to the percentage of employees covered by a collective labour agreement, it is correct to consider it in light of the fact that the analysis is performed in contexts governed by varying labour requirements.
2,280
44
1,148
183
965
141
2,258
44
1,120
161
959
145
31/12/2019 31/12/2018
N. Total
Average age
Females
- of which Hierarchy managers
- of which White collars
Part-time (102)
N. Employees with part-time contract
Details of staff and female presence
Consolidated financial statements December 31, 2019• 358
Fight against corruption
Fight against corruption and business integrity As FCA Bank’s customers and employees can be affected, both positively and negatively, by the consequences generated by the business activities conducted, the FCA Bank Group has adopted guiding principles , to identify and apply the highest ethical standards in carrying out its business, through the adoption of the Code of Conduct (hereinafter the “Code”). This document is the milestone of the group’s conduct, which must be based on the fundamental and unquestionable principle of integrity. Integrity is the bedrock of the group’s corporate governance, which includes principles, policies and procedures resulting from the combination of the corporate experience, the constant monitoring of the regulatory framework of reference and best practices, together with the critical and comparative analysis of corporate ethics and compliance so that these might be used in a consistent and complementary manner in the approach adopted by the group.
Anti-corruption is currently included in FCA Bank’s Code of Conduct as an integral part of the inter-functional macro-context related to the prevention, control and management of
RELEVANT TOPICS
• Contrasting corruption and promoting integrity in the business
Why the topics are relevantThe group attributes utmost importance to the fight against corruption. The Code of Conduct, supported by the Ethics Platform for whistleblowing, is updated and maintained to ensure the integrity of the group and its employees, as well as the presence and management of an anonymous and secure whistleblowing channel. Also in 2019, in continuity with the previous year, no cases of corruption have been identified.
conflicts of interests. In particular, considering the fight against corruption as crucial for the pursuit of the greater of the company and the community in which we live and operate, the FCA Bank embraces and respects honesty, integrity, loyalty, transparency, and impartiality as the principles that inspire its daily conduct. The anti-corruption component incorporates all those fundamental principles underlying the application of measures intended to prevent, detect, discourage any corrupt practices, including also zero tolerance in case of proven corrupt conduct. Other areas regulated and monitored include gifts and invitations, discounts, conflicts of interests, patronage, sponsorship and lobbying activities, which are considered highly sensitive and, as such, they are duly regulated within the group’s regulatory framework and consequently integrated into the relevant processes. FCA Bank is committed to abiding constantly by the highest standards of honesty, integrity and fairness as principles that inspire the group’s conduct in its relationships within and without the bank and will not tolerate any type of corruption. In fact, corruption is prohibited, regulated and sanctioned by laws in nearly every country in which the group operates. The group Code adopted by FCA Bank establishes clearly and unequivocally that no one – directors, executives or other employees, agents or representatives – can, directly or indirectly, solicit or accept cash payments or any other gift or compensation (including gifts of any nature, with the only exception of small value commercial items, universally accepted and admitted by the applicable national laws and in accordance with the Code and all the applicable group policies and procedures) in relation to the work performed with the FCA Bank Group, under any circumstances and for any reason.
The current policies adopted together with the Governance model, the periodic Training program and the set of Internal Controls (e.g. Code of Conduct, Compliance Program for the Italian market) constitute a set of measures developed and implemented for the group to
Consolidated non-financial statement • 359
have available a set of tools intended to prevent and/or minimize the risk of corruption, as well as to monitor the most sensitive areas and processes and possibly to identify promptly corruption events.The group supports and will continue to support the fight against corruption both through the existing tools and by keeping up its guard, mindful that the risk needs to be constantly monitored so as to strengthen further the current prevention system. This guarantees the presence of increasingly strong and effective measures, also raising further the awareness of employees and developing increasingly ad hoc and in-depth controls.
It is worth noting that the risk of corruption in the FCA Bank Group is considered lower compared to other sectors, where the business model is based on direct and frequent interactions with public authorities. However, to rationalize and improve further the approach to Anti-Corruption at group level, in 2018 a specific and pointed program was implemented and is currently under way.
The group’s anti-corruption program will be based on the following 4 pillars: • self-assessment matrix for the corruption risk • anti-corruption controls• anti-corruption training• group anti-corruption policy
Considering also the growing attention of the Italian and foreign authorities on anti-corruption and the constant propagation of criminal schemes, the group will continue to monitor developments in the national and international regulatory framework and to identify best practices, so as to strengthen adequately the current prevention system applied to the group’s processes and activities.
Consolidated financial statements December 31, 2019• 360
GRI content indexPage number
GRI 102: GENERAL DISCLOSURE
GRI Standard Disclosure
Organizational profile
102-1 Name of the organization
102-2 Activities, brands, products, and services
102-3 Location of headquarters
102-4 Location of operations
102-5 Ownership and legal form
102-6 Markets served
102-7 Scale of the organization
102-8 Information on employees and other workers
102-9 Supply chain
102-11 Precautionary Principle or approach
Strategy
102-14 Statement from senior decision-maker
Ethics and integrity
102-16 Values, principles, standards, and norms of behavior
Governance
102-18 Governance structure
Involvement of stakeholder
102-40 List of stakeholder group
102-41 Collective bargaining agreements
102-42 Identifying and selecting stakeholders
102-43 Approach to stakeholder engagement
Reporting practices
102-45 Entities included in the consolidated financial statements
102-46 Defining report content and topic Boundaries
102-47 List of material topics
102-48 Restatements of information
102-49 Changes in reporting
102-50 Reporting period
102-51 Date of most recent report
102-52 Reporting cycle
102-53 Contacts to request information regarding the report
102-55 GRI content index
102-56 External assurance
315
23; 315
316
316
315
316
69; 315; 316
345
315; 339
328
314
328
320
317
352
317
317
316
313
318; 319
313; 351
313; 318
313
313
313
1
360
312
Consolidated non-financial statement • 361
Page number
GRI 200: ECONOMIC SERIES
GRI Standard Disclosure
Economic performance
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
201-1 a Direct economic value generated and distributed
Anticorruption
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
205-2 b. Communication and training on anti-corruption policies and procedures
205-3 Confirmed incidents of corruption and actions taken
Anticompetitive behavior
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
206-1 Legal actions for anticompetitive behavior, anti-trust, and monopoly practices
341
341
341
342
358
358
358
358
358
336
336
336
336
Consolidated financial statements December 31, 2019• 362
Page number
GRI 400: SOCIAL
GRI Standard Disclosure
Employment
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
401-1 b. (partial) New employee hires and employee turnover
401-3 a., b., c., e. (partial) Parental leave
Health and safety
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
403-2 a. (partial) Types of injury and rates of injury, occupational diseases, lost days, and absenteeism,
and number of workrelated
Training and education
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
404-1 a.(i) Average hours of annual training per employee
404-3 Percentage of employees who receive periodic performance and professional
development assessments
Diversity and equal opportunities
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
405-1 b. Diversity of governance bodies and employees
Non discrimination
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
406-1 Incidents of discrimination and corrective actions taken
Consumer privacy
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
418-1 Complaints regarding the violation of privacy and the loss of customer data
Socio-economic compliance
103 Management approach
419-1 Non-compliance with social and economic regulations and laws
345
345
345
349
352
353; 354
353; 354
353; 354
355
349
349
349
349; 350
351
356
356
356
357
356
356
356
357
338
338
338
338
336
336
Consolidated non-financial statement • 363
Page number
G4 - SECTOR GUIDE
GRI Standard Disclosure
Environment
103-1 Management approach
103-2 The management method and its components
103-3 Assessment of management methods
EX FS1 Policies with specific environmental and social components applied to the business lines
333
333
333
333
Page numberKey Performance Indicators non GRI
Economic performance and value creation
- Own Funds
- Leverage ratio
- Rating Moody's
Dealer and customer relations
Customer Satisfaction
Dealer Satisfaction
Transparency in services and business, financial inclusion
Number of complaints
Green finance and sustainable mobility
Leasys Mobility Stores
341
341
341
339
339
337
333
FCA Bank S.p.A.Corso G. Agnelli, 20010135 Turinwww.fcabankgroup.com