BC ENERGBANK SA Financial Statements For the Year Ended 31 ...energbank.com/data/reports/2016/@Rap_audit_Sit_Fin_CONS_2016_ENG.pdf · str. Grigore Ureche Nr. 69 MD-2005 Chişinău

BC ENERGBANK SA

Financial StatementsFor the Year Ended 31 December 2016

Prepared in Accordance with International Financial Reporting Standards

BC ENERGBANK SAFINANCIAL STATEMENTSFor the Year Ended 31 December 2016

CONTENTS

Auditors’ report

Statement of financial position 1Statement of comprehensive income 2Statement of changes in equity 3Statement of cash flows 4Notes to the financial statements 5-60

GrantThornton

Grant Thomton Audit S.R.L

str. Grigore Ureche Nr. 69 MD-2005 Chişinău Moldova

T + 373 22 8605 71 F + 373 22 22 74 64 [email protected] W www.grantthomton.md

Independent Auditor’s Reportto the Shareholders of BC Energbank S.A.

Opinion

We have audited the accompanying financial statements o f BC Energbank S.A. (“the Bank”), which comprise the statement o f financial position as at 31 December 2016 and the statement o f comprehensive income, the statement o f changes in equity and the statement o f cash flows for the year then ended, and notes to the financial statements, including a summary o f significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position o f the Bank as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). O ur responsibilities under those standards are further described in the Auditor’s responsibility fo r the audit of

financial statements section o f our report. We are independent o f the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESRA Code) together with the ethical requirements that are relevant to our audit o f the financial statements in the Republic o f Moldova, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit m attersKey audit matters are those matters that, in our professional judgment, were o f m ost significance in our audit o f the financial statements o f the current period. These matters were addressed in the context o f our audit o f the financial statements as a whole, and in forming our opinion thereon, and we do not provide separate opinion on these matters.

Allowancesfor impairment losses on loansAs at 31 December 2016, Bank’s management determined the allowances for impairment losses on loans o f a total amount o f MDL 33,871 thousand. These allowances were estimated based on the expected future cash flows from the sale o f pledged assets, assessed by independent and in-house experts, the probability o f default and loss given default and involve significant

This version of our report is a translation from the original, which was prepared in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation, views or opinions, the original language version of our report takes precedence over this translation.

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http://www.grantthomton.md

GrantThornton

management judgment. We identified assessment o f allowance for impairment losses on loans as a significant risk requiring special audit consideration. We have assessed the reasonability o f the future cash flows from the sale o f pledged assets and checked correctness o f the calculation o f the probability o f default and loss given default model used by management. Based on our procedures no additional significant allowance charges were identified by us. O ur audit procedures also included, testing o f internai Controls related to loans granting procedures and loans monitoring procedures, review o f loan portfolio. Based on these, we did not identify significant deficiencies in the loan impairment assessment process.

RelatedpartiesIn accordance with the requirements o f IAS 24 Related Parţy Disclosures, the Bank shall disclose the nature o f relations between related parties, and information about transactions and outstanding balances with related parties. The Bank has made such disclosures in the Note 35 o f accompanying financial statements.Due to inherent specific nature o f transactions with related parties we have identified this risk as being significant. We have performed background checks o f shareholders and other significant related parties, based on available documentai evidence and discussions with management, and tested transactions and balances with related parties applying the requirements o f ISAs. O ur audit procedures also included testing Bank’s internai Controls related to identification and disclosure of related parties and operations and balances o f related parties. Based on our procedures we have not identified significant deficiencies in the disclosures regarding related parties.

General reserves for banking risksThe Bank is required to calculate prudential assets impairment allowances in accordance with the National Bank o f Moldova Regulation on classification o f contingent assets and liabilities. For the difference between impairment allowances recorded in the financial statements and the prudential ones, the Bank creates general reserves for banking risks reserves (Note 19). The calculation o f these allowances is significant for our audit because the amount o f the general reserves for banking risks is included in the calculation o f the regulatory capital and, consequently, the risk-weighted capital adequacy ratio. In addition, the assignment o f risk-based assets requires a detailed asset analysis and significant judgement o f management. O ur audit procedures included the analysis and estimation o f the effectiveness o f internai Controls implemented by the Bank for the calculation o f prudential asset impairment allowances, asset portfolios and individual significant assets analysis for assessment o f the reasonableness o f the judgments applied by management and the appropriateness o f the asset classification. Based on our procedures, we did not identify significant adjustments.

Going ConcernThe Bank’s financial statements have been prepared using the going concern basis o f accounting. The use o f this basis o f accounting is appropriate unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. As part o f our audit o f the financial statements, we have concluded that management’s use o f the going concern basis o f accounting in the preparation o f the Bank’s financial statements is appropriate.

Management has no t identified a material uncertainty that may cast significant doubt on the Bank’s ability to continue as a going concern, and accordingly none is disclosed in the financial statements o f the Bank. Based on our audit o f the financial statements o f the Bank, we also have not identified such a material uncertainty. However, neither management nor the auditor can guarantee the Bank’s ability to continue as a going concern.

This version of our report is a translation from the original, which was prepared in Romanian. AU possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation, views or opinions, the original language version of our report takes precedence over this translation.

GrantThornton

Responsibilities o f management for the financial statem entsManagement is responsible for the preparation and fair presentation o f these financial statements in accordance with International Financial Reporting Standards, and for such internai control as management determines is necessary to enable the preparation o f financial statements that are free from material mis statement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Bank’s ability to continue as going concern, disclosing, as applicable, matters related to going concern and using the going concern basis o f accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

Management is responsible for overseeing the Bank’s financial reporting process.

Auditor’s responsibility for 'the audit o f Gnancial statem entsThe objectives o f our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level o f assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions o f users taken on the basis o f these financial statements.

As part o f an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the planning and performance o f the audit. We also:

• Identify and assess the risks o f material misstatement o f the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk o f not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override o f internai control.

• Obtain an understanding o f internai control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose o f expressing an opinion on the effectiveness o f the Banks’s internai control.

• Evaluate the appropriateness o f accounting policies used and the reasonableness o f accounting estimates and related disclosures made by management.

• Conclude on the appropriateness o f management’s use o f the going concern basis o f accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as going concern. I f we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. O ur conclusions are based on the audit evidence obtained up to the date o f our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as going concern.

This version of our report is a translation from the original, which was prepared in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation, views or opinions, the original language version of our report takes precedence over this translation.

• Evaluate the overall presentation, structure and content o f the financial statements,including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing o f the audit and significant audit findings, including any significant deficiencies in internai control that we identify during our audit.

We are also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were o f most significancq in the audit o f the financial statements o f the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences o f doing so would reasonably be expected to outweigh the public interest benefits o f such communication.

Other mattersThis report is made solely to the Bank’s shareholders, as a body. O ur audit work has been undertaken so that we might state to the Bank’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fiallest extent permitted by law, we do not accept or assume responsibility to anyone other than the Bank and the Bank’s shareholders as a body, for our audit work, for this report, or for the opinion we have formed.

</ ™ ;

G rant Thornton Audit S.R.L.Chisinau, Republic o f Moldova Licence A MMII nr.047103

21 April 2017

This version of our report is a translation from the original, which was prepared in Romanian. All possible care has been taken to ensure that the translation is an accuratc representation of the original. However, in all matters of interpretation, views or opinions, the original language version of our report takes precedence over this translation.

Emilia Popa Auditor

Licence AIF 0004

BC ENERGBANK SASTATEMENT OF FINANCIAL POSITIONAs at 31 December 2016

Notes 2016 2015MDL'000 MDL’000

ASSETSCash and balances with National Bank 3 688,738 528,344Current accounts and deposits with banks 4 132,672 356,409Financial investments, debt securities - held to maturity 5 538,037 271,970Loans, net 6 865,205 866,852Financial investments, equity securities - available-for-sale 7 1,044 1,044Investments in associates 8 3,476 3,455Investment property 9 47 47Intangible assets 10 1,969 2,426Property and equipment 11 130,808 118,098Current income tax asset 855 1,345Other assets 12 53,764 76,113

Total assets 2,416,615 2,226,103

LIABILITIESDue to banks 13 - -Due to customers 14 1,674,857 1,541,115Other borrowings 15 179,034 188,196Other liabilities 16 17,219 10,033Current income tax liability - -Deferred tax liabilities 17 2,923 2,784

Total liabilities 1,874,033 1,742,128

Shareholders’ equityOrdinary shares 18 100,000 100,000Property revaluation reserve 15,966 15,966Other reserves 19 147,111 134,210Retained eamings 279,505 233,799

Equity attributable to equity holders of the Bank 542,582 483,975

Non-controlling interest - -

Total equity 542,582 483,975

Total liabilities and shareholders’ equity 2,416,615 2,226,103

BC ENERGBANK SASTATEMENT OF COMPREHENSIVE INCOMEFor the Year Ended 31 December 2016

Interest and similar income Interest expense and similar charges Net interest income

Fee and commission income Fee and commission expense Net fee and commission income

Financial income, net Other operating expenses, net Total operating income

Impairment of loansImpairment of receivables and other assets Net operating income

Personnel expenses General and administrative expenses Depreciation and amortization Total operating expenses

Share of profit of an associate Profit before tax

Income tax expense Profit for the year

Other comprehensive incomeTotal comprehensive income for the year

Profit attributable to:Equity holders of the Bank Non-controlling interests

Total comprehensive income attributable to:Equity holders of the Bank Non-controlling interests

Notes 2016 MDL’000

2015MDL’000

23 184,863 158,84823 (78,242) (75,290)

106,621 83,558

24 50,421 43,04724 (9,390) (7,194)

41,031 35,853

25 50,292 69,97126 1,723 (1,284)

199,667 188,098

6 (7,152) (31,137)12 (13,099) (22,618)

179,416 134,343

27 (68,311) (55,619)28 (30,784) (25,928)

10, 11 (5,507) (5,318)(104,602) (86,865)

8 21 3774,835 47,515

17 (6,228) 10,45568,607 57,970

17468,607 58,144

68,607 59,405- (1,435)

68,607 57,970

68,607 59,579- (1,435)

68,607_________58,144

Eamings per share (MDL per share)

The accompanying notes are an integral part of

The financial statements were authorized by:

President

Mr. Iurii Vasilachi

33 34.30 29.70

statements.

2017 by the Executives of the Bank represented

Chief Accountant

Mr. Sergiu Slobodean

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BC ENERGBANK SASTATEMENT OF CHANGES IN EQUITYFor the Year Ended 31 December 2016

Attributable to equity liolders of the Bank

Ordinaryshares

MDL’000

Propertyrevaluation

reserveMDL’000

Available for sale investinents

revaluation reserve

MDL’000

Otherreserves

MDL’000

Retainedearnings

MDL’000

Non-controlling

interestsMDL’000

TotalMDL’000

Balance at 1 January 2016 100,000 15,966 134,210 233,799 . 483,975Dividends - - - - (10,000) - (10,000)Transfer to reserves - - - 12,901 (12,901) - -

Transactions with owners - - - 12,901 ' (22,901) - (10,000)Profit for the year - - “ - 68,607 - 68,607

Total comprehensive income - - - - 68,607 - 68,607

Balance at 31 December 2016 100,000 15,966 - 147,111 279,505 - 542,582

Balance at 1 January 2015 100,000 15,803 145,813 167,780 1,435 430,831Dividends - - - - (5,000) - (5,000)Transfer to reserves - - - (11,603) 11,603 - -Transfer to reserves - (11) - - 11 - -

Transactions with owners - (11) (11,603) 6,614 - (5,000)Profit for the year - - - - 59,405 (1,435) 57,970Revaluation of property and equipment - 174 - _ 174

Total comprehensive income - 174 - - 59,405 (1,435) 58,144

Balance at 31 December 2015 100,000 15,966 - 134,210 233,799 - 483,975

The accompanying notes are an integral part of these financial statements.

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BC ENERGBANK SA CTATEMENT OF CASH FLOWS For the Year Ended 31 December 2016

Notes 2016 2015MDL’000 MDL’000

Cash flows from operating activitiesInterest receipts 184,509 155,138Interest payments (80,117) (73,524)Net fee and commission receipts 41,031 35,853Net financial and other operating income 50,131 82,982StafF costs paid (61,187) (51,062)Payments of general and administrative expenses (29,869) (25,529)Cash flows before working capital changes 104,498 123,858

(Increase) / decrease in operating assets:Due from NBM 11,757 (15,848)Investment debt securities over 90 days (76,244) (30,167)Loans (5,910) 104,284Other assets 15,224 48,680Increase /(decrease) in operating liabilities:Due to banks - (553)Due to customers 138,243 123,061Other liabilities (2,320) (2,530)Net cash from operating activities before income tax 185,248 350,785

Income tax paid (5,599) (7,800)Net cash from/(used in) operating activities 179,649 342,985

Cash flows from investing activitiesPurchase of intangible assets (383) (163)Purchase of property and equipment (17,783) (5,010)Proceeds from disposal of property and equipment 160 31Payments of tangible assets available for sale - (71)Proceeds from the sale of financial investments - 459Net cash used in investing activities (18,006) (4,754)

Cash flows from fînancing activitiesProceeds from loans and borrowings 90,085 174,366Repayment of loans and borrowings (99,491) (187,441)Dividends paid (10,000) (5,000)Net cash from/(used in) fînancing activities (19,406) (18,075)

Net foreign exchange difference 1,896 (11,819)

Net increase/(decrease) in cash and cash equivalents 144,133 308,337

Cash and cash equivalents at 1 January 876,269 567,932

Cash and cash equiv alents at 31 December 22 1,020,402 876,269

The accompanying notes are an integral part of these financial statements.

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BC ENERGBANK SANOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 31 December 2016

1. Corporate information

BC Energbank SA (“the Bank”) was established in the Republic of Moldova on 16 January 1997 as a closed joint stock company. The Bank is principally engaged in retail banking operations in the Republic of Moldova. The Bank operates through its head offîce located in Chisinau, 22 branches (22 branches as at 31 December 2015) and 43 agencies (44 agencies as at 31 December 2015) located throughout the country.

At year-end 2016 the Bank possessed a license granted by the National Bank of Moldova, which allows the Bank to be engaged in all banking activities.

The number of employees employed by the Bank as at 31 December 2016 was 593 (588 as at 31 December 2015).

The registered offîce of the Bank is located at 23/3 Tighina Street, Chisinau, Republic of Moldova.

As Bank’s operations do not have significantly different risks and retums and considering the regulatory environment, the nature of its services, the business process, as well as the types of customers for the products and services and the methods used to provide the services are homogenous for all Bank’s activities, the Bank operates as a single business segment unit and its activities are exclusively carried out in the Republic of Moldova.

The Board of Directors formulates policies for the operation of the Bank and supervises their implementation. The Board is composed of 6 members appointed by the General Meeting of Shareholders.

As at 31 December 2016 the Board of Directors comprised the following members:

- Mr. Vladimir Tonciuc, Chairman of the Board;- Mr.Valeriu Usatii, Energoimpex, Member of the Board;- Mr.Mihail Pop, Member of the Board;- Mrs. Natalia Cecetova, Gamaiun SRL, Member of the Board;- Mrs.Maximenco Galina, Member of the Board;- Mrs.Natalia Covanji, Member of the Board;

These financial statements were authorised for issue on 21 April 2017 by the Executives of the Bank represented by the President and the Chief Accountant.

2. Accounting policies

2.1 Basis of preparation

Statement of complianceThe financial statements of the Bank have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis of measurementThe financial statements have been prepared under the historic cost convention, except for land and buildings, investment properties and available-for-sale assets that have been re-measured at fair value.

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BC ENERGBANK SANOTES TO THE FINANCIAL STATEMENTSFor the Year Ended31 December 2016

2. Accounting policies (continued)

2.1 Basis of preparation (continued)

Funcţional and presentation currencyThe financial statements are presented in Moldovan lei (“MDL”), which is also its funcţional currency and the currency of the country in which the Bank operates. All financial information presented in MDL has been rounded to the nearest thousands, except when otherwise indicated.

Basis of consolidation - relevant for the financial year 2015The Consolidated financial statements comprise the financial statements of the Bank as at and for the year ended 31 December each year. The financial statements of the subsidiary are prepared for the same reporting year, using consistent accounting policies.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are eliminated in fiill.

Subsidiaries are fully Consolidated from the date on which control is transferred to the Bank. Control is achieved where the Bank has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the Consolidated income statement from the date of acquisition or up to the date of disposal, as appropriate.

Non-controlling interests represent the portion of profit or loss and net assets not owned, directly or indirectly, by the Bank and are presented separately in the income statement and within equity in the Consolidated balance sheet, separately from parent shareholders’ equity. Acquisitions of non-controlling interests are accounted for using the parent entity extension method, whereby, the difference between the consideration and the fair value of the share of the net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. a discount on acquisition) is recognised directly in the income statement in the year of acquisition.

2.2 Significant accounting judgments and estimates

The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of fiiture events that are believed to be reasonable under the circumstances.

(i) Impairment losses on loans and advancesThe Bank reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment loss should be recorded in the income statement, the Bank makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or naţional or local economic conditions that correlate with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

Where the final outcome of these factors is different from the amounts that were initially recorded, such differences could materially impact the provision for loan impairment in the period in which such determination is made.

6



2.2 Significant accounting judgments and estimates (continued)

(ii) Going concernThe Bank’s management has made an assessment of the Bank’s ability to continue as a going concern and is satisfied that the Bank has the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may cast significant doubt upon the Bank’s ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis.

(iii) Fair value o f financial instrumentsThe fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The management uses its judgment to select the valuation method and make assumptions that are mainly based on market conditions e’xisting at each balance sheet date.

2.3 Change in accounting policies

The accounting policies adopted are consistent with those of the previous financial year. The adoption of new standards and interpretations effective for the Bank from 1 January 2016 did not have any impact on the accounting policies, financial position or performance of the Bank.

2.4 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below.

a. - Foreign currency translation

Foreign currency transactions are translated into the funcţional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.

Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognized in profit or loss, and other changes in the carrying amount are recognized in equity.

Translation differences on non-monetary items, such as equity investments classified as available-for-sale financial assets, are included in the fair value reserve in equity.

The year-end and average rates for the year were:

2016 2015USD EURO USD EURO

Average for the period Year end

19.923819.9814

22.054820.8895

18.816119.6585

20.898021.4779

7



2.4 Summary of significant accounting policies (continued)

b. Financial assetsThe Bank classifies its financial assets in the following categories: loans and receivables, held-to-maturity investments and available-for-sale financial assets. Management determines the classification of its investments at iniţial recognition.

(i) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than: (a) those that the entity intends to sell immediately or in the short term, which are classified as held for trading, and those that the entity upon iniţial recognition designates as at fair value through profit or loss; (b) those that the entity upon iniţial recognition designates as available for sale; or (c) those for which the holder may not recover substantially all of its iniţial investment, other than because of credit deterioration.

(ii) Held-to-maturityHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Bank’s management has the positive intention and ability to hold to maturity. If the Bank were to sell other than an insignificant arnount of held-to-maturity assets, the entire category would be tainted and reclassified as available-for-sale. Included in this category are, also, treasury bills and NBM certificates.

(iii) Available-for-saleAvailable-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.

Regular way purchases and sales of financial assets at fair value through profit and loss, held-to-maturity and available-for-sale are recognized on trade-date - the date on which the Bank commits to purchase or sell the asset.

Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit and loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or where the Bank has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when they are extinguished, that is, when the obligation is discharged, cancelled or expired.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortized cost using the effective interest method. Gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise. Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognized directly in equity, until the financial asset is derecognized or impaired. At this time, the cumulative gain or loss previously recognized in equity is recognized in profit or loss.

However, interest calculated using the effective interest method and foreign currency gains and losses on monetary assets classified as available for sale are recognized in the income statement. Dividends on available- for-sale equity instruments are recognized in the income statement when the entity’s right to receive payment is established.




b. Financial assets (continued)The fair values of quoted investments in active markets are based on current bid prices, or if no such price is available, the last traded price on such day. If the market for a financial asset is not active (and for unlisted securities), the Bank establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

c. Investments in associatesAn associate is an entity in which the Bank has significant influence and which is neither a subsidiary nor a joint venture. In the separate financial statements of the Bank, investments in associates are carried at equity method.

Under the equity method, the investment in associate is carried in the balance sheet at cost plus post-acquisition changes in the Bank’s share of net assets of associate. Losses in excess of the cost of the investment in an associate are recognized when the Bank has incurred obligations on its behalf. The income statement reflects the Bank’s share of the results of operations of the associate.

The reporting dates of the associate and the Bank are identical and the associate’s accounting policies conform to those used by the Bank for transactions and events in similar circumstances.

d. Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asşet and settle the liability simultaneously.

e. Interest income and expenseInterest income and expense are recognized in the income statement for all instruments measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and commissions paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

Once a financial asset or a group of financial assets has been written down as a result of an impairment loss, interest income is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

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f. Fee and commission incomeFees and commissions are generally recognized on an accrual basis when the service has been provided. Loan commitment fees for loans that are likely to be drawn down are deferred (together with related direct costs) and recognized as an adjustment to the effective interest rate on the loan. Commission and fees arising from negotiating, or participating in the negotiation of, a transaction for a third party - such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses - are recognized on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognized based on the applicable service contracts, usually on a time-apportion basis.

g. Sale and repurchase agreementsSecurities sold subject to repurchase agreements (‘repos’) are classified in the financial statements as available- for-sale securities (treasury bills) and the counter party liability is included in amounts due to banks or customers, as appropriate. Securities purchased under agreements to resell (‘reverse repos’) are recorded as loans and advances to other banks or customers, as appropriate. The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest method.

Securities held by the Bank as collateral for lending activities with financial institutions are not recognized in the financial statements, unless these are sold to third parties, in which case the purchase and sale are recorded with the gain or loss included in trading income. The obligation to retum them is recorded at fair value as a trading liability.

h. De-recognition

The Bank derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Bank is recognised as a separate asset or liability.

On de-recognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset transferred), and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

The Bank derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

The Bank enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised from the statement of financial position. Transfers of assets with retention of all or substantially all risks and rewards include, for example, securities lending and repurchase transactions.

The rights and obligations retained in the transfer are recognised separately as assets and liabilities as appropriate. In transfers where control over the asset is retained, the Bank continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

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i. Impairment of financial assets

(i) Assets carried at amortized costThe Bank's assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the iniţial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria that the Bank uses to deţermine that there is objective evidence of an impairment loss include:

• Delinquency in contractual payments of principal or interest;• Cash flow difficulties experienced by the borrower (for example, equity ratio, net income percentage of sales);• Breach of loan covenants or conditions;• Initiation ofbankruptcy proceedings;• Deterioration of the borrower’s competitive position;• Deterioration in the value of collateral; and• Downgrading below investment grade level.

The estimated period between a loss occurring and its identification is determined by management for each identified portfolio. In general, the periods vary from 6 months to 12 months.

The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and thereafter individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics (i.e., on the basis of the Bank’s grading process that considers asset type, industry, geographical location, collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.

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i. Impairment of financial assets (continued)

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the Bank and historical loss experience for assets with credit risk characteristics similar to those in the Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.

Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in related observable data from period to period (for example, changes in unemployment rates, property prices, payment status, or other factors indicative of changes in the probability of losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Bank to reduce any differences between loss estimates and actual loss experience. When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognized in the income statement in impairment change for credit losses.

(ii) Assets carried at fair valueThe Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any such evidence exists for available-for- sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss - is removed from equity and recognized in the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the income statement.

(iii) Renegotiated loansWhere possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated any impairment is measured using the original Effective Interest Rate (“EIR”) as calculated before the modification of terms and the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original EIR.

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j. Impairment of non - financial assetsAssets that have an indefinite usefiil life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

k. Cash and cash equivalentsFor the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’ maturity of the assets at acquisition dates including: cash, non-restricted balances with National Bank of Moldova, treasury bills, NBM certificates, amounts due from other banks and amounts due from quick payment systems.

1. Intangible assetsAcquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized on the basis of the expected usefiil lives (three to five years) using the straight-line method.

Costs associated with developing or maintaining computer software programs are recognized as an expense as incurred.

m. Property and equipmentBuildings are stated at revalued amounts, being its fair value at the date of revaluation, less accumulated depreciation and less provision for impairment, where required. Other property and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Asset type_______________________ _____________________ YearsBuildings 25-75Fumiture and equipment 2-20Motor vehicles 7-10Other 5-20

Assets under construction are not depreciated until there are brought in use.

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m. Property and equipment (continued)

The assets’ residual value and usefiil lives are reviewed, and adjusted if appropriate, at each balance sheet date. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.

Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount. These are included in their operating expenses in the income statements.

n. Investment propertyProperty held for long-term rentai yields or for capital appreciation or both, which is not occupied by the Bank is classified as investment property.

Investment property comprises freehold land. Investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Bank uses alternative valuation method such as sales comparison method by comparing similar or substitute properties sold in the market with subject property. These valuations are reviewed annually by Directors.

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment and its fair value at the date of reclassification becomes its cost for accounting purposes of subsequent recording. Property that is being constructed or developed for future use as investment property is classified as property, plant and equipment and stated at cost until construction or development is complete, at which time it is reclassified and subsequently accounted for as investment property.

If an item of property, plant and equipment becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this item at the date of transfer is recognised in equity as a revaluation of property, plant and equipment under IAS 16. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the income statement. Upon the disposal of such investment property, any surplus previously recorded in equity is transferred to retained eamings; the transfer is not made through the income statement.

o. LeasesThe determination of whether an arrangement is a lease or it contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Bank as a lesseeLease which does not transfer to the Bank substantially all the risks and benefits incidental to ownership of the leased item are operating leases. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

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o. Leases (continued)

Bank as a lessorLeases where the Bank does not transfer substantially all the risk and benefits of ownership of the asset are classified as operating leases. Iniţial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rentai income.

p. Defined contribution planThe Bank, in the normal course of business makes payments to the Moldovan State funds on behalf of its employees for pension, health care .and unemployment benefit. All employees of the Bank are members of the State pension plan.

The Bank does not operate any other pension scheme and, consequently, has no further obligation in respect of pensions. The Bank does not operate any other defmed benefit plan or post-retirement benefit plan. The Bank has no obligation to provide further services to current or former employees.

q. ProvisionsProvisions and legal claims are recognized when the Bank has a present legal or constructive obligation to transfer economic benefits as a result of past events. It is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

r. Financial guarantee contractsFinancial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such fmancial guarantees are given to banks, fmancial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities.

Financial guarantees are initially recognized in the financial statements at fair value on the date the guarantee was given. Subsequent to iniţial recognition, the bank’s liabilities under such guarantees are measured at the higher of the iniţial measurement, less amortization calculated to recognise in the income statement the fee income eamed on a straight line basis over the life of the guarantee and the best estimate of the expenditure required to settle any financial obligation arising at the balance sheet date. These estimates are determined based on experience of similar transactions and history of past losses, supplemented by the judgment of Management. Any increase in the liability relating to guarantees is taken to the income statement under other operating expenses.




s. T axationIncome tax payable on profits, based on the applicable Moldovan tax law is recognized as an expense in the period in which profits arise. The tax effects of income tax losses available for carry forward are recognized as an asset when it is probable that future taxable profits will be available against which these losses can be utilised.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the fmancial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

The principal temporary differences arise from depreciation of equipment, provisions for loans and advances to customers, other assets and other liabilities. The rates enacted or substantively enacted at the balance sheet date are used to determine deferred income tax. However, the deferred income tax is not accounted for if it arises from iniţial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss.

Deferred tax assets are recognized where it is probable that future taxable profit will be available against which the temporary differences can be utilised.

t. BorrowingsBorrowings are recognised initially at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs incurred. Subsequently borrowings are stated at amortised cost and any difference between net proceeds and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

u. DividendsDividends are not accounted for until they have been approved at the Annual General Meeting.

v. Assets for resaleAssets for resale include foreclosed collateral on non-performing loans. They are classified as assets held for sale as their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use. The Bank considers impairment both at the time of classification as assets for resale as well as in subsequent periods. At the time of recognition as assets for resale, any impairment loss is recognised in profit or loss unless the asset had been measured at revalue d amount in accordance with IAS 16 or IAS 38, in which case the impairment is treated as a revaluation decrease.In the subsequent periods, any impairment loss is calculated based on the difference between the adjusted carrying amounts of the asset and fair value less costs to sell. Any impairment loss that arises is recognised in profit or loss, even for assets that previously carried at revalued amounts.

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2.5 New and revised standards that are effective for annual periods beginning on or after 1 January 2016

A number of new and revised standards are effective for annual periods beginning on or after 1 January 2016. These amendments had no material effect on the fmancial statements for any period presented and therefore were not presented.

2.6 Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted earlv by the Bank

At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have been published by the IASB that are not yet effective, and have not been adopted early by the B. Information on those expected to be relevant to the Bank’s financial statements is provided below.

Management anticipates that all relevant pronouncements will be adopted in the Bank’s accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either adopted or listed below are not expected to have a material impact on the Bank’s financial statements.

IFRS 9 ‘Financial Instruments’ (2014)

The IASB recently released IFRS 9 ‘Financial Instruments’ (2014), representing the completion of its project to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’. The new standard introduces extensive changes to IAS 39’s guidance on the classification and measurement of financial assets and introduces a new ‘expected credit loss’ model for the impairment of financial assets. IFRS 9 also provides new guidance on the application of hedge accounting.

The Bank’s management has yet to assess the impact of IFRS 9 on these financial statements. The new standard is required to be applied for annual reporting periods beginning on or after 1 January 2018.2. Accounting policies (continued)

IFRS 15 ‘Revenue from Contracts with Customers’

IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’, and several revenue-related Interpretations. The new standard establishes a control- based revenue recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities.

IFRS 15 is effective for reporting periods beginning on or after 1 January 2017. The Bank’s management believes that the adoption of IFRS 15 will have a non-significant impact on fmancial statements because most of Bank’s revenues are recognized in accordance with IFRS 4 “Insurance contracts”.

IFRS 16 ‘Leases’

IFRS 16 will replace IAS 17 and three related Interpretations. It completes the IASB’s long-running project to overhaul lease accounting. Leases will be recorded on the statement of financial position in the form of a right- of-use asset and a lease liability. IFRS 16 is effective from periods beginning on or after 1 January 2019. Management is yet to fully assess the impact of the Standard and therefore is unable to provide quantified information.

However, in order to determine the impact the Bank are in the process of:• performing a full review of all agreements to assess whether any additional contracts will now become a lease under IFRS 16’s new definition• deciding which transitional provision to adopt; either full retrospective application or parţial retrospective application (which means comparatives do not need to be restated). The parţial application method also provides opţional relief from reassessing whether contracts in place are, or contain, a lease, as well as other reliefs. Deciding which of these practicai expedients to adopt is important as they are one-off choices• assessing the additional disclosures that will be required.

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2.6 Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted earlv by the Bank (continued)

Amendments to IAS 7 Disclosure Iniţiative

The amendments require an entity to provide disclosures that enables users of financial statements to evaluate changes in liabilities arising from fînancing activities, including both changes arising from cash flows and non- cash-flows. The amendments do not prescribe a specific format to disclose fînancing activities, however a Bank may fulfill the disclosure objective by providing a reconciliation between the opening and closing balances in the statements of financial position for liabilities arising from fînancing activities.

The amendments apply prospectively for annual periods beginning on or after 1 January 2017 with earlier application permitted. Entities are not required to present comparative information for earlier periods.

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1. Cash and balances with National Bank

2016 2015MDL’000 MDL’000

Cash on hand 257,823 180,771Current account with NBM 241,784 226,685

Overnight plăcem ents 80,000 -

Included in cash and cash equivalents (Note 22) 579,607 407,456

Mandatory reserve 109,131 120,888

688,738 528,344

Current account and obligatory reservesThe National Bank of Moldova (NBM) requires commercial banks to maintain for liquidity purposes minimum reserves calculated at a certam rate of the average funds borrowed by banks during the previous month (between the 8th of the current month and the 7th of the following month), including all customer deposits. Based on the decision Nr 85 by the Administrative Council of NBM dated 15 April 2004, the method for calculation and maintaining the compulsory reserves was changed. Funds attracted in Moldovan Lei (MDL) and in non- convertible currencies are reserved in MDL. Funds attracted in freely convertible currencies are reserved in US Dollars (USD) and/or EURO (EUR). As of 31 December 2016 the rate for calculation of the minimum compulsory reserve in all currencies was in US Dollars (USD) and/or EURO (EUR) 14.0% (31 December 2015: 14.0%), in Moldovan Lei (MDL) 35.0% (31 December 2015: 35.0%).

As at 31 December 2016 the balance reserved in the current account held with the NBM amounted to MDL’000 241,784 (31 December 2015: MDL’000 226,686). This balance included compulsory reserve on funds attracted in Moldovan Lei and non-convertible currencies. The balance reserved on USD and EUR compulsory reserve accounts amounted to USD’000 2,536 and EUR’000 2,811 respectively (31 December 2015: USD’000 2,896 and EUR’000 2,977).

The interest paid by NBM on the compulsory reserves during 2016 varied between 0.20% and 0.65% per annum for reserves in foreign currency and 6.00%- 16.41% for reserves in MDL (2015: 0.27% and 0.41% for reserves in foreign currency and 7.46% - 16.50% per annum for reserves in MDL). The compulsory reserves on funds attracted in USD and EUR are placed in Nostro accounts of NBM at correspondent banks incorporated in OECD countries.

The obligatory reserves held in the current account at NBM are available for use in the Bank’s day to day operations.

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4. Current accounts and deposits with banks

2016MDL’000

2015MDL’000

Current accounts Overnight plăcem ents

46,51886,154

130,619225,790

Included in cash and cash equivalents (Note 21) 132,672 356,409

Long term bank deposits with maturity more than 90 days

132,672 356,409The major part of current accounts and deposits are held with foreign banks.As at 31 December 2016 ovemights include balances denominated in USD with Bank of New York during 2016 the interest rate on overnight deposits from 0.05% and 0.25%.

5. Financial investments, debt securities

2016MDL’000

2015MDL’000

State securitiesCertificates issued by the NBM

238,590299,447

162,353109,617

538,037 271,970

Included in cash and cash equivalents (Note 22) Debt securities with maturity over 90 days

299,447238,590

109,617162,353

538,037 271,970

State securities as at 31 December 2016 represent MDL medium term securities issued by the Ministry of Finance of the Republic of Moldova with interest rate ranging from 5.16% to 26.48% per annum (2015: 6.40% to 12.51%).

Certificates issued by the National Bank of Moldova as at 31 December 2016 are 14 days original maturity bearing with interest rate ranging from 9.0% to 19.5 % per annum (2015: from 6.5 %- to 19.5%).As of 31 December 2016 and 2015 the Bank did not hold any state securities as mortgage for loan from the NBM.

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6. Loans, net

2016 2015MDL’000 MDL’000

Loans 899,076 890,981Less: Allowance for impairment losses (33,871) (24,129)

865,205 866,852

For the year ended 31 December 2016 the interest accrued on individually impaired loans amounted toMDL’000 7,831 (31 December 2015: MDL’000 5,679).

Analysis of loan portfolio by industry is presented below:

2016 2015MDL’000 MDL’000

Manufacturing and trade 275,855 315,675Agriculture and food industry 193,725 191,955Consumer loans 151,896 99,285Loans granted to financial non-banking sector 67,640 73,654Real estate, construction and land improvement 38,492 50,502Other 171,468 159,910

—899,076 890,981

Range of loan interest rates practiced by the Bank is presented below:

2016 2015% %

Interest rate on loans (min/max) 3 .0 -2 0 .0 4.5-21.5

The movement in provision for impairment of loans during the years 2016 and 2015 are presented below:

2016 2015MDL’000 MDL’000

Balance as at 1 January 24,129 26,772Write-offs (9) (34,387)Recoveries 2,599 607Charge for the year 7,152 31,137

Balance as at 31 December 33,871 24,129

Individual impairment 23,805 12,339

Collective impairment 10,066 11,790

33,871 24,129

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6. Loans, net (continued)

Allowances for impairmentThe Bank establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loan loss allowance established for groups of homogeneous assets in respect of losses that have been incurred but have not been identified on loans subject to individual assessment for impairment.

firi te offpolicyThe Bank writes off a loan balance (and any related allowance for impairment losses) when the Bank determines that the loans are uncollectible. This determination is reached after considering information such as the occurrence of significant changes in the borrower financial position such that the borrower can no longer pay the obligation, or that proceeds from collateral will not be sufHcient to pay back the entire exposure.

7. Financial investments, equity securities - available-for-sale

Investment securities available-for-sale include unlisted equity investments in local companies. The analysis ofequity investments is as follows:

Ownership Ownership Field of activity 2016 2015 2016 2015

% % MDL’000 MDL’000

Garant In vest SRL Credit guarantee 9.92 9.92 440 440Birou de credit SRL Credit bureau 3.29 3.29 500 500Other 104 104

1,044_________ 1,044

All available-for-sale equity securities as at 31 December 2016 and 2015 are carried at cost because there is no quoted market price in an active market for them and the fair value cannot be reliably determined. No impairment was assessed in respect of these investments as at 31 December 2016 and 2015.

The movements in investment portfolio of the Bank are presented below:

2016 2015MDL’000 MDL’000

Balance as at 1 January 1,044 1,139

Additions - 69

Disposals - (164)Balance as at 31 December 1,044 1,044

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8. Investments in associates

The following table illustrates summarised fmancial informaţi on of the Bank’s investment in Electrosistem SA. Electrosistem SA is an associated company, in which the Bank owns 24.83% (2015:24.83%) of the share capital:

2016 2015MDL’000 MDL’000

Share of the associate’s balance sheet:Assets 8,612 10,089Liabilities (5,136) (6,634)

Net assets 3,476 3,455

Share of the associate’s revenue and profit:Revenue 2,235 2,568Profit 32 37

9. Investment property

Movements in investment property are as follows:

2016 2015MDL’000 MDL’000

Balance as at 1 January 47 47Net change from fair value adjustment - -

Balance as at 31 December 47 47

As at 31 December 2016, the balance of investment property comprised of a plot of land located in Onitcani (Republic of Moldova). Investment properties are stated at fair value, which has been determined based on valuations performed by Vlasercom Ltd, an independent specialist in valuing these types of investment properties. The fair value of the investment property was determined using sales comparison approach.

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10. Intangible assets

2016 2015MDL’000 MDL’000

CostBalance as at 1 January 9,547 9,387Additions 383 162

Disposals (590) (2)Balance as at 31 December 9,340 9,547

Accumulated depreciationBalance as at 1 January 7,121 6,216Charge for the year 840 907Disposals (590) (2)Balance as at 31 December 7,371 7,121

Net book value

At 31 December 1,969 2,426

The intangible assets represent computer software and workstation licenses.

As at 31 December 2016 the cost of fully amortized intangible assets amounted to MDL’000 5,293 (as at 31 December 2015: MDL’000 5,127).

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11. Property and equipment

Fur ni ture and Assets underLand and buildings equipment Motor veliicles construction Total

MDL’000 MDL’000 MDL’000 MDL’000 MDL’000Cost or valuationBalance as at 1 January 2016 104,127 32,891 5,737 399 143,154Additions 177 2,659 - 15,299 18,135Transfers 13,183 335 1,981 (15,499) -Reclassification - - * . (122) (122)Disposals (325) (920) (643) (77) (1,965)Balance as at 31 December 2016 117,162 34,965 7,075 - 159,202

Accumulated depreciationBalance as at 1 January 2016 718 21,635 2,703 - 25,056Charge for the year 1,440 2,547 680 - 4,667Disposals - (884) (445) - (1,329)Balance as at31 December 2016 2,158 23,298 2,938 - 28,394

Net book valueAt 31 December 2016 115,004 11,667 4,137 - 130,808At 31 December 2015 103,409 11,256 3,034 399 118,098

As at 31 December 2016, the cost of fully depreciated property and equipment still used by the Bank amounted to MDL’000 15,057 (as at 31 December 2015: MDL’000 12,998). On 27.07.2015 the revaluation of buildings BC ENERGBANK was performed by interdependent assessment company Vibimobil SRL. The revaluation result was recorded increase the balance sheet value of buildings amounting to MDL'000 424 and 174 MDL'000 a difference in the revaluation reserve. The evaluation was performed using comparable sales method. 31 December 2016 management has analyzed market prices and found that they approximate the levels existing at the date of revaluation report.

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NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 31 December 2016

BC ENERGBANK SA

11. Property and equipment (continued)

Land and buildings MDL’000

Furniture and equipment MDL’000

Motor vehicles MDL’000

Assets under construction

MDL'000Total

MDL’000Cost or valuationBalance as at 1 January 2015 111,940 32,269 5,269 398 149,876Additions 623 3,633 - 836 5,092Transfers - - 571 (571) -Reclassification (348) (9) (103) - (460)Reevaluation (5,481) - - - (5,481)Disposals (2,607) (3,002) - (264) (5,873)Balance as at 31 December 2015 104,127 32,891 5,737 399 143,154

Acciimiilated dcpreciationBalance as at 1 January 2015 6,060 22,076 2,255 - 30,391Charge for the year 1,479 2,383 549 - 4,411Reclassification - - (101) - (101)Reevaluation (5,906) - - - (5,906)Disposals (915) (2,824) - - (3,739)Balance as at 31 December 2015 718 21,635 2,703 - 25,056

Net book valueAt 31 December 2015 103,409 11,256 3,034 399 118,098At 31 December 2014 105,880 10,193 3,014 398 119,485


12. Other assets

2016 2015MDL’000 MDL’000

Receivables from money transfer systems 8,676 2,787Settlements with other individuals 964 682Debtors on capital investments 61 173Assets for resale 56,136 81,385Inventory and spare parts 1,606 1,583Prepayments 750 928Other assets 4,298 4,259Less: Allowance for losses on assets taken in possession (18,727) (15,684)

53,764 76,113

Assets acquired include land and buildings, taken into possession by the Bank in exchange for repayment of loans. Management analysed and established that there are no significant indicators of impairment of acquired assets.

13. Due to banksBank does not have due to other banks nor as at 31 December 2016 neither as at 31 December 2015.

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14. Due to customers

2016 2015MDL'000 MDL’000

Corporate customersCurrent accounts 526,765 450,835Term deposits 95,653 83,598

622,418 534,433IndividualsCurrent accounts 150,429 123,198Term deposits 902,010 883,484

1,052,439 1,006,682

1,674,857 1,541,115The annual interest rates paid by the Bank for the MDL and FCY deposits of individuals and companies ranged as follows:

2016 2015MDL FCY MDL FCY

% % % % % % % %min max min max min max min max

EnterprisesDemand deposits 0.00 5.00 0.10 1.50 0 8.0 0.1 1.5Term deposits up to 3 months 0.00 10.00 0.00 0.05 0.5 16.5 0.1 0.1Term deposits >3 months< 1

0.00 16.00 0.00 2.10 0.0 17.5 0.1 4.25yearTerm deposits over 1 year 0.00 8.50 0.00 3.00 0.0 18.0 0.0 4.1

IndividualsDemand depositsTerm deposits up to 3 months 0.00 17.25 0.00 0.10 0.5 17.2 0.1 0.1Term deposits >3 months< 1

0.00 18.00 0.00 2.00 1.5 17.7 0.3 1.1yearTerm deposits over 1 year 0.00 18.50 0.00 2.70 0.3 18.5 0.1 5.5

15. Other borrowings2016 2015

Interest rate, %_________MDL’000_______ MDL’000BorrowingsRISP loans with floating rate due 1.35-6.00 70,131 84,017FIDA loans with floating rate due 1.78-6.00 56,408 56,029PAC loans with floating rate due 1.35-6.00 10,496 13,333KFW loans with floating rate due 1.78-6.00 4,411 2,659Filiera Vinului loans with floating rate due 1.06-6.00 26,720 30,460Livada Moldovei 0,9 8,927 -Interest accrued 1,941 1,698

179,034_________ 188,196

During 2016 and 2015 the Bank did not have any defaults of principal, interest or other breaches of contractual terms.

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16. Other liabilities

2016 2015MDL'000 MDL’000

Suspense accounts 3,349 193Amounts in transit 108 91Settlements with employees 6,293 4,691Settlements with other individuals and institutions 6,488 4,010Dividends payable 21 28Creditors on capital investments 460 -

Other 500 1,020

. 17,219 10,033

Suspense accounts represent balances of customers with incomplete information, which after the clearance aretransferred to customers’ accounts.

17. Taxation

The major components of tax expense and the reconciliation of the expected tax expense based on the effectivetax rate of 12% (2015: 12%) and the reported tax expense in profit or loss are as follows:

2016 2015MDL’000 MDL’000

Profit before tax 74,814 50,280Moldovan statutory income tax rate 12% 12%Expected tax expense 8,978 6,034

Effect of deductible/non-deductible expenses/revenue (2,750) (191)Impact of tax facilities application - (16,298)

Actual tax expense 6,228 (10,455)

Tax expense comprises:Current tax expense 6,089 7,002Deferred tax expense:- Origination and reversal of temporary differences 139 (17,457)

Tax expense 6,228 (10,455)

Impact of change in tax legislation refers to changing the allowance for losses on assets and condiţional commitments, which entered into force on 1 May 2015. In accordance with changing tax laws of the Republic of Moldova, fmancial institutions are allowed for deducting losses on assets and condiţional commitments, calculated according to International Fmancial Reporting Standards (IFRS). Prior to this change, it was permitted deduction for losses calculated according to regulations approved by the National Bank of Moldova (NBM).

29


17. Taxation (continued)

Deferred taxes arising from temporary differences are summarized as follows:

Recognized inDeferred tax assets (liabilities) 1 January 2016

MDL’000profit and loss

MDL’00031 December 2016

MDL’000AssetsLoans and advances to customers - - -

Property and equipment (3,347) 331 (3,678)Other assets - - -

LiabilitiesOther liabilities 563 192 755

(2,784) (139) (2,923)

Recognised as:Deferred tax asset Deferred tax liability (2,784) (139) (2,923)

Deferred tax assets (liabilities) 1 January 2015Recognized in profit and loss 31 December 2015

MDL’000 MDL’000 MDL’000AssetsLoans and advances to customers (16,298) 16,298Property and equipment (4,086) 739 (3,347)Other assets 143 (143) -

LiabilitiesOther liabilities - 563 563

(20,241) 17,457 (2,784)

Recognised as:Deferred tax asset - - -Deferred tax liability (20,241) 17,457 (2,784)

Deferred tax was calculated by applying the 2016 standard tax rate of 12% (2015 standard tax rate of 12%).

18. Ordinary shares

Share capital as at 31 December 2016 represents 2,000 thousand (31 December 2015: 2,000 thousand) ordinary shares authorized and issued. As at 31 December 2016 and 2015 the nominal value per share is MDL 50. All shares have equal voting rights and are fully paid.

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18. Ordinary shares (continued)

Shareholders with a holding of more than or equal to 5% of the issued share capital are as follows:

2016 2015% %

ICS „RED UNION FENOSA” SA 9.98 9.98Hostex Establishment 9.62 9.62Esperan Property Consultants Ltd 9.60 9.60Dima-Holding SRL 8.62 8.62Sfinx-Impex SA 6.89 6.89Enteh SA 8.10 8.10Evident-Electro SA 7.33 7.33DunavIM 6.07 6.07Other, less than 5% 33.79 33.79

100.00 100.00

There are 44 other shareholders (31 December 2015: 44) of which 34 represent individuals and 10 - (31 December 2015: 34 individuals and 10 enterprises).

- enterprises

19. Reserves

- 2016 2015MDL’000 MDL’000

Statutory reserves 10,002 10,002General reserves for banking risks 137,109 124,208

147,111 134,210

In accordance with local legislation, the Bank is required to create a legal reserve by appropriation of 5% of the net profit for the year until this reserve is equal to at least 10% of the issued and fiilly paid share capital. This is a non-distributable reserve.

General reserves for banking risks include amounts resulting from differences between assets impairment under IFRS and calculated but not provided for under prudential (NBM) norms. This reserve is non-distributable.

Revaluation reserves are made in respect of property and equipment. This reserve is non-distributable.

20. Dividends per share

In year 2016 were proposed and distributed dividends for ordinary shares in the total amount of MDL’00010,000 (MDL 5.0/share). In year 2015: MDL’000 5,000 (MDL 2.5/share).

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21. Capital management

The Bank’s objectives when managing capital are to safeguard the Bank’s ability to continue as a going concern in order to provide retums for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Bank may adjust the amount of dividends paid to shareholders, retum capital to shareholders, issue new shares or sell assets to reduce debt. No changes were made in the objectives, policies and processes from the previous years.

Capital adequacy and the use of regulatory capital are monitored by the Bank’s management, employing techniques based on the requirements developed by the National Bank of Moldova.

The NBM requires each bank or banking Bank to hold the minimum level of the regulatory capital of MDL’000 200,000 (31 December 2015: MDL’000 200,000) and maintain a ratio of total regulatory capital to the risk- weighted asset at minimum of 16% (31 December 2015: 16%).

2016 2015MDL’000 MDL’000

Weighted average assets and contingent commitments in accordance with NBM regulations 890,732 960,789Total normative capital in accordance with NBM regulations Risk weighted capital adequacy in accordance with NBM regulations, %

386,349

43.37

340,206

35.41

22. Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with lessthan three months maturity:

Notes 2016MDL’000

2015MDL’000

Cash and balances with National Bank 3 579,607 407,456Current accounts and deposits with banks 4 132,672 356,409Debt securities 5 299,447 109,617Other assets 11 8,676 2,787

1,020,402 876,269

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23. Interest and similar income and expense

2016 2015MDL'000 MDL’000

Interest and similar incomeLoans and advances to customers 100,365 110,324Available-for-sale/held to maturity investments 59,229 19,109Loans and advances to banks 25,269 29,415

184,863 158,848Interest expense and similar charges Deposits from individuals (65,696) (60,363)Deposits from corporate clients (5,232) (8,295)Deposits and loans from banks (35) (704)Other borrowings (7,279) (5,928)

(78,242) (75,290)

Net interest income 106,621 83,558

24. Net fee and commission income

•*2016 2015

MDL’000 MDL’000

Fee and commission incomeProcessing of payments by clients 44,256 38,194Commission on guarantees and letters of credit 1,352 1,853Transactions with debit cards 1,757 1,173Other 3,056 1,827

50,421 43,047Fee and commission expense Commissions on debit card services (5,006) (3,751)Payment transactions (3,887) (3,302)Other (497) (141)

(9,390) (7,194)

Net fee and commission income 41,031 35,853

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25. Financial income, net

2016 2015MDL’000 MDL’000

Gains on trading of foreign currency, net 48,396 81,790Foreign exchange losses 1,896 (11,819)

50,292 69,971

26. Other operating expenses, net

2016 2015MDL’000 MDL’000

Rent income 818 827Gains/(losses) on disposal of property and equipment 803 157Gains/(losses) on disposal of subsidiary company - (2,420)Other non-interest income 102 152

1,723 (1,284)

27. Personnel expenses

2016 2015MDL’000 MDL’000

Salaries and bonuses 42,952 36,065Social insurance and contributions 10,889 8,917Medical insurance 2,069 1,647Other personnel expenses 6,880 4,907Provision for unused vacation 5,521 4,083

68,311 55,619

The Bank makes contributions to the State pension system of the Republic of Moldova calculated as a percentage of gross salary. These contributions are charged to the income statement in the period in which the related salary is eamed by the employee.

34


28. General and administrative expenses

2016 2015MDL’000 MDL’000

Utilities and rent 6,698 5,744Postage and telephone 2,480 2,244Safeguarding of assets and security costs 3,775 3,351Advertising and charity 3,829 1,810Stationery and supplies 1,966 1,307Repairs and maintenance 6,527 5,543Professional services 1,639 1,459Guarantee fiind 766 668Taxes and penalties 462 486Other 2,642 3,316

30,784 25,928

29. Guarantees and other financial commitments

The aggregate amounts of outstanding fmancial guarantees, commitments, and other off-balance sheet items asat 31 December 2016 and 2015 are:

2016 2015MDL’000 MDL’000

Financial guarantees 76,960 76,739Financing commitments and other 106,426 53,204

183,386 129,943

In the normal course of business, the Bank issues guarantees and letters of credit on behalf of its customers. The credit risk on guarantees is similar to that arising from granting of loans. In the event of a claim on the Bank as a result of a customer's default on a guarantee these instruments also present a degree of liquidity risk to the Bank.

Financing commitments represent the Bank’s commitments to grant loans and advances to customers. Financing commitments do not necessarily represent future cash requirements, since many of these commitments will expire or terminate without being fimded.

30. Capital commitments

There were no capital commitments as at 31 December 2016 and 2015.

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31. Operating lease commitments

Where the Bank is lessee, the future minimum lease payments under non-cancellable building and vehicles operating leases are as follows:

2016 2015MDL’000 MDL’000

No later than 1 year 2,896 3,172Later than 1 year and no later than 5 years 3,059 4,905Later than 5 years 1,818 2,374

> 8,773 10,451

32. Contingencies

As at 31 December 2016 and 2015 the Bank is a defendant in a number of lawsuits arising out of normal corporate activities. In the opinion of Management and the Bank’s legal department, the probability of loss is remote.

33. Earnings per share

Ordinary shares Profit attributable to equity Basic earnings issued holders of the Bank per share

MDL’000 MDL

As at 31 December 2016 2,000,000 68,607 34.30As at 31 December 2015 ________ 2,000,000______________________ 59,405_____________29.70

Basic earnings per share are calculated by dividing net profit for the year attributable to ordinary equity holders by the weighted average number of ordinary shares issued during the year. As at 31 December 2016 and 2015 there were no dilutive equity instruments subscribed to by the Bank.

36


34. Fair value of financial instruments

Determination of fair value and fair value hierarchy

The Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

Financial assets Cash and balances with NBM Loans and advances to banks Investments held-to-maturity Loans and advances to customers

2016 2015

Carryingvalue Level 1

Fairvalue

Carryingvalue Level 1Level 2 Level 3 value value Level 1 Level 2 Level 3

MDL’000 MDL’000 MDL’000 MDL’000 MDL’000 MDL’000 MDL’000 MDL’000 MDL’000

688,738132,672538,037865,205

538,037

688,738132,672

831,812

688,738132,672538,037831,812

528,344356,409271,970866,852

271,970

528,344356,409

832,503

Financial liabilities

Other borrowings Due to customers

179,0341,674,857

179,0341,673,193

179,0341,673,193

188,1961,541,115

188,1961,538,286

Fairvalue

MDL’000

528,344356,409271,970832,503

188,1961,538,286

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34. Fair value of financial instruments (continued)

(i) Loans and advances to banksLoans and advances to banks include inter-bank placements and loans. The fair value of floating rate placemenu and overnight deposits approximates their carrying amount. The estimated fair value of fixed interest bearinş placements is based on discounted cash flows using prevailing money-market interest rates for debts with similai credit risk and remaining maturity.

(ii) Loans and advances to customersLoans and advances are net of impairment. The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted al current market rates to determine fair value.

(iii) Liabilities, including due to other banks, due to customers and other borrowed fundsThe fair value of floating rate borrowings approximates their carrying amount. The estimated fair value of fixed interest-bearing deposits and other borrowings without quoted market price is based on discounted cash flows using interest rates for new debts with similar remaining maturity.

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35. Related parties

During the year, a number of banking and non-banking transactions were entered into with related parties in the normal course of business. These include loans granting, deposit taking, trade finance, payment settlement, foreign currency transactions and acquisition of services and goods from related parties.

In considering each possible related party relationship, special attention is directed to the substance of the relationship, and not merely the legal form.

Details of transactions between the Bank and other related parties are disclosed below.Expenses and revenues from transactions with related parties are presented below:

Associates Key management personnel Other related parties2016 2015 2016 2015 2016 2015

MDL’000 MDL’000 MDL'000 MDL’000 MDL’000 MDL’000

Interest and similar income 1,834 2,001 363 285 629 433Fee and commission income 11 12 120 43 311 329Interest expense and similar charges - - 414 452 803 747Rent expense - - - - 239 239Personnel expenses - - 16,003 11,076 169 183

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35. Related parties (continued)

Balances and transactions with related parties are presented below:

AssetsEquity instruments Loans and advances

Associates2016 2015

MDL’000 MDL’000

2,28716,408

2,28720,098

Key management personnel2016 2015

MDL’000 MDL’000

4,286 4,435

Other related parties2016 2015

MDL’000 MDL’000

12,552 4,590

LiabilitiesDeposits 19 8,648 8,443 33,754 43,000

Commitments, guarantees and otherIssuedReceived

56,759

1,3755,565

3773,241

3953,701

79415,444

1,4796,657

The total remuneration of Board members, the Executive committee and Censor Committee of the Bank for the year ended 31 December 2016 and 31 December 2015 is represented by short-term employee benefits.

Terms and conditions o f transactions with related partiesThe above mentioned outstanding balances arose from the ordinary course of business. The interest charged to and by related parties is at normal commercial rates. Loans to employees were granted at market rates. Outstanding balances at the year-end are unsecured. There have been no guarantees received from any related parties. For the year ended 31 December 2016, the Bank has not incurred doubtful debts relating to amounts owed by related parties (2015: nil).


35. Related parties (continued)

Consolidated subsidiariesIn April 2015 the Bank sold shares in the company Oldex SA, which in prior years used to hold 51%.

36. Risk management

The Bank’s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operaţional risks are an inevitable consequence of being in business. The Bank’s aim is therefore to achieve an appropriate balance between risk and retum and minimise potential adverse effects on the Bank’s financial performance.

The Bank’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and Controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Bank regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.

Risk management is carried out by the Risk Management Committee (Risk Committee) under policies approved by the Board of Directors. The Risk Committee identifies, evaluates and hedges financial risks in close co- operation with the Bank’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments. In addition, internai audit is responsible for the independent review of risk management and the control environment. The most important types of risk are credit risk, liquidity risk, market risk and other operaţional risk. Market risk includes currency risk, interest rate and other price risk.

The Bank takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss for the Bank by failing to discharge an obligation. Credit risk is the most important risk for the Bank’s business; management therefore carefully manages its exposure to credit risk. Credit exposures arise principally in lending activities that lead to loans and advances, and investment activities that bring debt securities and other bills into the Bank’s asset portfolio. There is also credit risk in off-balance sheet financial instruments, such as loan commitments. The credit risk management and control are centralised in credit risk management team of the Risk Committee and reported to the Board of Directors and head of each business unit regularly.

The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review. Limits on the level of credit risk by product and industry sector are approved quarterly by the Board of Directors.

The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on- and off-balance sheet exposures, and daily delivery risk limits in relation to trading items such as forward foreign exchange contracts. Actual exposures against limits are monitored daily.

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Exposure to credit risk is also managed in part by obtaining collateral and corporate and personal guarantees, but a significant portion is personal lending where no such facilities can be obtained.

41


36. Risk management (continued)

36.1 Credit risk

The Bank assesses the probability of default of individual counterparties using internai rating tools tailored to the various categories of counterparty. They have been developed intemally and combine statistical analysis with credit officer judgment and are validated, where appropriate, by comparison with extemally available data. Clients of the Bank are segmented into five rating classes. The Bank’s rating scale, which is shown below, reflects the range of default probabilities defmed for each rating class. This means that, in principie, exposures migrate between classes as the assessment of their probability of default changes. The rating tools are kept under review and upgraded as necessary. The Bank regularly validates the performance of the rating and their predictive power with regard to default events.

Bank’s rating_______ Description of the grade

1 Standard2 Watch3 Sub-standard4 Doubtfiil5 Loss

Credit quality by class o f financial assets

The table below shows the credit quality by class of asset for all fmancial assets exposed to credit risk, based on the Bank’s internai credit rating system. The amounts presented are gross of impairment allowances.

2016

Notes

Neither past due nor

impaired MDL’000

Past due but not

impaired MDL’000

Individuallyimpaired

MDL’000Total

MDL’000

Balances with National Bank 3 430,915 430,915Current accounts and deposits with banks 4 132,672 132,672Financial investments, debt securities - held to maturity 5 538,037 _ _ 538,037Loans 6 707,199 101,156 90,721 899,076Other financial assets 12 11,576 - - 11,576

1,820,399 101,156 90,721 2,012,276

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36.1 Credit risk (continued)

2015

Notes

Neither past due nor

impaired MDL’000

Past due but not

impaired MDL’000

Individuallyimpaired

MDL’000Total

MDL’000

Balances with National Bank 3 347,573 347,573Current accounts and deposits with banks 4 356,409 356,409Financial investments, debt securities - held to maturity 5 271,970 _ _ 271,970Loans 6 700,361 127,072 63,548 890,981Other financial assets 12 5,428 - - 5,428

1,681,741 127,072 63,548 1,872,361

Loans and advances

Loans and advances are summarized as foliows:

2016 2015Enterprises Individuals Enterprises Individuals

MDL’000 MDL’000 MDL’000 MDL’000

Neither past due nor impairedPast due but not impaired Individually impaired

533,50082,98690,721

173,69918,170

582,840111,03963,548

117,52116,033

Gross 707,207 191,869 757,427 133,554

Less: allowances for impairment (30,461) (3,410) (21,606) (2,523)

Net 676,746 188,459 735,821 131,031

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(i) Loans and advances neither past due nor impaired

The credit quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by reference to the internai rating system adopted by the Bank.


MDL’000 MDL’000 MDL’000 MDL’000

Standard 289,130 125,839 304,409 88,302Watch 232,801 45,723 270,412 29,219Sub-standard 11,569 2,137 8,019 -

Doubtful - - - -

Loss - - - -

533,500 173,699 582,840 117,521

(ii) Loans and advances past due but not impaired

Past due loans and advances are not considered impaired, unless other information is available to indicate the contrary. Gross amount of loans and advances by class to customers that were past due but not impaired were as follows:


MDL’000 MDL’000 MDL'000 MDL’000

Less than 30 days 13,332 10,049 25,799 9,21031 to 60 days 31,395 992 18,699 635More than 61 days 38,259 7,129 66,541 6,188

82,986 18,170 111,039 16,033

The Bank holds collateral against loans and advances to customers in the form of mortgage interests over property, stock of materials and equipment as well as corporate guarantees and cash deposits. Upon iniţial recognition of loans and advances, the fair value of collateral is based on valuation techniques commonly used for the corresponding assets. In subsequent periods, the fair value is updated by reference to market price or indexes of similar assets. Due to system limitations it is impracticable to report on the fair value of collateral placed against past due but not impaired loans.

(iii) Loans and advances individually impaired

As at 31 December 2016 the individually impaired loans and advances to customers before taking into consideration the cash flows from collateral held is MDL’000 90,721 (31 December 2015 - MDL’000 63,548). The fair value of collateral that the Bank holds relating to loans individually determined to be impaired at 31 December 2016 amounts to MDL’000 88,010. The collateral consists of properties and equipment

44




(iv) Loans and advances renegotiated

Restructuring activities include extended payment arrangements, approved externai management plâns, modification and deferral of payments. Following restructuring, a previously overdue customer account is reset to a normal status and managed together with other similar accounts. Restructuring policies and practices are based on indicators or criteria which, in the judgment of local management, indicate that payment will most likely continue. These policies are kept under continuous review. Renegotiated loans that would otherwise be past due or impaired amounts to MDL’000 132,755 at 31 December 2016 (2015: MDL’000 166,937).

Credit-related commitments

The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit - which represent irrevocable assurances that the Bank will make payments in the event that a customer cannot meet its obligations to third parties - carry the same credit risk as loans. Documentary and commercial letters of credit - which are written undertakings by the Bank on behalf of a customer authorising a third party to draw drafts on the Bank up to a stipulated amount under specific terms and conditions - are collateralised by the underlying shipments of goods to which they reiate and therefore carry less risk than a direct borrowing.

Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to loss in an amount equal to the total unused commitments.

However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.

45




Maximum exposure to credit risk before collateral held or other credit enhancements:

Notes 2016 2015MDL’000 MDL’000

Balances with National Bank 3 430,915 347,573Current accounts and deposits with banks 4 132,672 356,409Financial investments, debt securities 5 538,037 271,970Loans, net 6 865,205 866,852Other financial assets 12 11,576 5,428

1,978,405 1,848,232

Off-balance sheet items 29 183,386 129,943

Total credit risk exposure ___________2,161,791____________ 1,978,175

The above table represents a worst case scenario of credit risk exposure to the Bank at 31 December 2016 and 2015, without taking account of any collateral held or other credit enhancements attached. For on balance sheet assets, the exposures set out above are based on net carrying amounts as reported in the balance sheet.

Management is confident in its ability to continue to control and sustain minimal exposure of credit risk to the Bank.

Risk concentrations o f the maximum exposure to credit risk

The Bank’s concentrations of risk are managed by client/counterparty and by industry sector. The maximum credit exposure to any client or counterparty as at 31 December 2016 was MDL’000 0,00 (as at 31 December 2015: MDL’000 35,717) before taking account of collateral or other credit enhancements.

The loans granted to 20 major customers (Banks) of the Bank as at 31 December 2016 amounted at MDL’000 353,136 representing 39% of the Bank’s gross loan portfolio (as at 31 December 2015: MDL’000 417,440 or 47%). These are analyzed by industries as follows:

2016 2015MDL’000 MDL’000

Manufacturing and trade 129,103 160,3 50Agriculture and food industry 126,168 122,699Other 97,865 134,391

353,136 417,440

For significant credit risk concentration at the industry level please refer to note 6.

46



36.2 Market risk

The economy of the Republic of Moldova continues to display characteristics of an emerging market. These characteristics include, but are not limited to, the existence of a currency that is not freely convertible outside of the country; a low level of liquidity in the public and private debt and equity markets and relatively high inflation.

Additionally, the financial services sector in the Republic of Moldova is vulnerable to adverse currency fluctuations and economic conditions.

The prospects for future economic stability in the Republic of Moldova are largely dependent upon the effectiveness of economic measureg undertaken by the government, together with legal and regulatory developments.

The Bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. The Bank separates exposures to market risk into either trading or non-trading portfolios.

The market risks arising from trading and non-trading activities are concentrated in the Bank’s Treasury and monitored by two teams separately. Regular reports are submitted to the Board of Directors and heads of each business unit.

Trading portfolios include those positions arising from market-making transactions where the Bank acts as principal with clients or with the market.

47



36.2.1 Foreign exchange risk

The Bank takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The Board sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily.

Sensitivity analysis to currency risk

The Bank performed a sensitivity analysis to currency risk at which it is reasonably exposed at 31 December 2016, showing how income statement could have been affected as a result of possible changes in currency rates.

The tables below show the currencies for which the Bank has significant exposure to currency risk as at 31 December 2016 and as at 31 December 2015, for the balance sheet items that are sensitive to the currency rates’ modifications. The analysis demonstrates the effect of reasonably possible changes in currency rates against Moldovan Leu with all other variables held constant:

As at 31 December 2016 Increase in Effect on PBT Decrease in Effect on PBTcurrency rates, MDL’000 currency rates, MDL’000

% %

EUR +5% (1,547) -5% 1,547USD +5% 579 -5% (579)

As at 31 December 2015 Increase in Effect on PBT Decrease in Effect on PBTcurrency rates, MDL'000 currency rates, MDL’000

% %

EUR +5% (1,823) -5% 1,823USD +5% (337) -5% 337

The tables below summarize the Bank’s exposure to foreign currency exchange rate risk at 31 December 2016 and 31 December 2015. Included in the table are the Bank’s financial assets and liabilities at carrying amounts, categorized by currency.

48

I!



36.2.1 Foreign exchange risk (continued)

31 December 2016 TotalMDL’000

MDLMDL’000

USDMDL’000

EURMDL’000

OtherMDL’000

ASSETSCash and balances with National Bank 688,738 388,366 108,368 183,185 8,819Current accounts and deposits with banks 132,672 93,942 37,620 1,110Financial investments, debt securities - held to maturity 538,037 538,037 _ _ _

Loans, net 865,205 512,899 160,311 191,995 -

Financial investments, equity securities - available-for-sale 1,044 1,044 _ _ _

Investments in associates 3,487 3,487 - - -Other financial assets 11,576 4,556 2,198 3,480 1,342

Total assets 2,240,759 1,448,389 364,819 416,280 11,271

LIABILITIESDue to banksDue to customers 1,674,857 947,035 305,009 417,845 4,968Other borrowings 179,034 105,207 45,806 28,021 -Other financial liabilities 8,916 5,103 2,434 1,360 19

Total liabilities 1,862,807 1,057,345 353,249 447,226 4,987

GAP 377,952 391,044_______ 11,570 (30,946)________ 6,284

49



36.2.1 Foreign exchange risk (continued)


MDLMDL’000

USDMDL’000

EURMDL’000

OtherMDL’000

ASSETSCash and balances with National Bank 528,344 309,119 81,232 134,914 3,079Current accounts and deposits with banks 356,409 230,998 118,366 7,045Financial investments, debt securities - held to maturity 271,970 271,970 . .Loans, net 866,852 539,560 136,986 190,306 -

Financial investments, equity securities - available-for-sale 1,044 1,044Investments in associates 3,455 3,455 - - -

Other financial assets 5,428 2,757 987 1,359 325

Total assets 2,033,502 1,127,905 450,203 444,945 10,449

LIABILITIESDue to banks 1,541,115 694,951 383,232 455,840 7,092Due to customers 188,196 89,558 73,264 25,374 -

Other borrowings 3,509 2,859 438 197 15Other financial liabilities 528,344 309,119 81,232 134,914 3,079

Total liabilities 1,732,820 787,368 456,934 481,411 7,107

GAP 299,514 339,369 (6,731) (36,466) 3,342

Other currencies mainly include Russian Rouble, Belorussian Rouble and Ukrainian Hrivna.

50



36.2.2 Interest rate risk

Interest sensitivity o f assets, liabilities and o ff balance sheet items — repricing analysis

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a fmancial instrument will fluctuate because of changes in market interest rates. The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result of such changes but may reduce or create losses in the event that unexpected movements arise. The Board sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily.

According to the internai and externai fmancial market evolution, the Bank forecasts the evolution of interest rates for its assets and liabilities and the impact of these possible changes on the net interest income. The Bank estimates a fluctuation o f+/- 100 and +/- 50 basis points:

Increase in basis Sensitivity of Net Interest Decrease in Sensitivity of Net Interest_________points________Income. MDL’000______ basis points________Income, MDL’000

2016 +100 5,084 -100 (5,084)+50 2,542 -50 (2,542)

2015 + 100 3,506 -100 (3,506)+50 1,753 -50 (1,753)

The tables below summarize the Bank’s exposure to interest rate risks at 31 December 2016 and 31 December 2015. Included in the table are the Bank’s fmancial assets and liabilities at carrying amounts, categorized by the earlier of contractual repricing or maturity dates.

51





Less than 1 month

MDL’000

From 1 niontli to 2 months

MDL’000

From 2 months to 3 months

MDL’000


MDL’000

Froin 6 months to 9 months

MDL’000

From 9 months to 12 months MDL’000

From 1 to 5 years

MDL’000

More than 5 years

MDL’000

Non-interestbearing

itemsMDL’000

ASSETSCash and balances with National Bank 688,738 428,528 260,210Current accounts and deposits with banks 132,672 86,964 45,708Financial investments, debt securities - held to maturity 538,037 343,154 27,670 40,616 76,074 28,958 21,398 167Loans, net 865,205 71,675 704,300 - - - - . - 89,230Financial investments, equity securities - available-for-sale 1,044 _ _ _ _ _ . 1,044Investments in associates 3,487 - - - - - - - - 3,487Other financial assets 11,576 - - - - - - - - 11,576

Total assets 2,240,759 930,321 731,970 40,616 76,074 28,958 21,398 167 - 411,255

LIABILITIESDue to banksDue to customers 1,674,857 1,141,034 - - - - - - - 533,823Other borrowings 179,034 41,634 - 5,097 124,253 - 4,932 - - 3,118Other financial liabilities 8,916 4,127 - - - - - - - 4,789

Total liabilities 1,862,807 1,186,795 - 5,097 124,253 - 4,932 - - 541,730

Interest gap 377,952 (256,474) 731,970 35,519 (48,179) 28,958 16,466_________167 (130,475)




31 December 2015 Total

MDL’000

Less than 1 month

MDL’000

From 1 mont li to 2 months

MDL’000

From 2 months to 3 inonths MDL’0 00


MDL’000

From 6 months to 9 nionths

MDL’000

From 9 nionths to 12 montlis MDL’00 0

From 1 to 5 years MDL’00 0

More than 5 years MDL’0 00

Non-interestbearingitemsMDL’000

ASSETSCash and balances with National Bank 528,344 304,399 - - - - - - 223,945Current accounts and deposits with banks 356,409 226,061 - - - - - - - 130,348Financial investments, debt securities - held to maturity 271,970 128,159 15,160 20,385 42,068 38,692 27,506Loans, net 866,852 105,282 696,092 - - - - - - 65,478Financial investments, equity securities - available-for-sale 1,044 1,044Investments in associates 3,455 - - - - - - - - 3,455Other fmancial assets 5,428 - - - - - - - - 5,428

Total assets 2,033,502 763,901 711,252 20,385 42,068 38,692 27,506 - - 429,698

LIABILITIESDue to banks - - - - - - - - - -

Due to customers 1,541,115 180,720 884,293 - 39 3,525 - 465 - 472,073Other borrowings 188,196 31,876 - 5,469 144,564 - - - - 6,287Other fmancial liabilities 3,509 2,248 - - - - - - - 1,261

Total liabilities 1,732,820 214,844 884,293 5,469 144,603 3,525 - 465 _ 479,621

Interest gap 299,514 549,057 (173,041) 14,916 (102,535) 35,167 27,506 (465) - (51,091)

53



36.3 Liquidity risk

The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits, loan draw-downs and guarantees. The Bank does not maintain cash resources to meet all oi these needs, as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Board sets limits on the minimum proportion of maturing funds available to meet such calls and on the minimum level of inter-bank and other borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand.

The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Bank. It is unusual for financial institutions to be completely matched, as transacted business is often of uncertainty term and different types. An unmatched position potentially enhances profitability, but also increases the risk of losses.

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature are important factors in assessing the liquidity of the Bank and its exposure to changes in interest rates and exchange rates.

Management is confident that in spiţe of a substantial portion of deposits having contractual maturity dates within three months, diversification of these deposits by number and type of deposits, and the past experience of the Bank would indicate that these deposits provide a long-term and stable source of fiinding for the Bank.

The table below summarizes the maturity profile of the Bank’s financial assets and liabilities at 31 December2016 and 31 December 2015 based on contractual undiscounted cash flows.

54



36.3 Liquidity risk (continued)

31 December 2016 TotalLess tlian 1

mont h

From 1 inonth to 2

nionths

From 2 months to 3

months

From 3 months to 6

nionths

From 6 months to 9

montlis

From 9 montlis to 12 montlis

From 1 to 5years

More tlian 5 years

MDL’000 MDL’000 MDL’000 MDL’000 MDL’000 MDL’000 MDL’000 MDL’000 MDL’000ASSETS

Cash and balances with National BankCurrent accounts and deposits with banks

688,738

132,672

688,738

132,672

- - - - - - -

Financial investments, debt securities - held to maturity 547,891 344,024 28,498 42,113 79,427 30,883 22,771 175Loans, netFinancial investments, equity securities - available-for-sale

1,019,092

1,044

98,387 43,953 42,133 127,026 88,410 90,119 500,155 28,909

1,044Investment in an associate 3,487 - - - - - - - 3,487Other financial assets 11,576 11,533 - - - - - - 43

Total assets 2,404,300 1,275,354 72,451 84,246 206,453 119,293 112,890 500,330 33,483

LIABILITIESDue to banks - - - - - - - - -Due to customers 1 ,715,400 736,944 88,575 85,579 179,940 250,040 239,251 124,625 10,446Other borrowings 199,235 4,480 978 28 15,119 6,459 21,656 134,186 16,329Other financial liabilities 8,916 8,916 - - - - - - -

Total liabilities 1,923,551 750,340 89,553 85,607 195,059 256,499 260,907 258,811 26,775Maturity gap 480,749 525,014 (17,102) (1,361) 11,394 (137,206) (148,017) 241,519 6,708

55





Less than 1monthMDL’000

From 1 niontli to 2 months MDL’000




From 9 months to 12 inouths MDL’000

From 1 to 5yearsMDL’000

More tlian 5yearsMDL'000

ASSETSCash and balances with National Bank 528,344 528,344Current accounts and deposits with banks 356,409 356,409Financial investments, debt securities - held to maturity 289,381 128,632 15,514 21,282 45,345 44,245 34,042 321Loans, net 1,004,224 115,708 43,511 44,833 138,629 108,629 103,102 425,459 24,353Financial investments, equity securities - available-for-sale 1,044 1,044Investment in an associate 3,455 - - - - - - - 3,455Other financial assets 5,428 5,385 - - - - - - 43

Total assets 2,188,285 1,134,478 59,025 66,115 183,974 152,874 137,144 425,780 28,895

LIABILITIESDue to banksDue to customers 1,595,743 653,385 87,111 60,624 191,465 237,758 234,725 119,921 10,754Other borrowings 207,792 2,136 - 16 13,025 2,002 31,744 142,954 15,915Other financial liabilities 3,509 3,509 - - - - - - -

Total liabilities 1,807,044 659,030 87,111 60,640 204,490 239,760 266,469 262,875 26,669Maturity gap 380,073 475,448 (28,086) 5,475 (20,516) (86,886) (129,325) 162,905 1,058




The tables below show the contractual expiry by maturity of the Bank’s contingent liabilities and commitments:

Less than 3 From 3 months From 1 to More than 31 December 2016 months to 1 year 5 years 5 years Total

MDL’000 MDL’000 MDL’000 MDL’000 MDL’000

Commitments and guarantees 67,188 61,712 54,486 - 183,386

67,188 61,712 54,486 - 183,386

>1 December 2015Less than 3

months MDL’000

From 3 months to 1

year MDL'000

From 1 to 5 years

MDL’000

More than 5 years

MDL’000Total

MDL’000

Commitments and guarantees 53,719 32,031 44,094 99 129,943

53,719 32,031 44,094 99 129,943

The Bank expects that not all of the contingent liabilities or commitments will be drawn before expiry of the commitments.

57




The tables below show the contractual expiry by maturity of the Bank’s assets and liabilities:

31 December 2016 Up to 12 monthsMore than 12

months TotalASSETSCash and balances with National Bank 688,738 688,738Current accounts and deposits with banks 132,672 132,672Financial investments, debt securities - held to maturity 537,870 167 538,037Loans, net 418,404 446,801 865,205Financial investments, equity securities - available-for-sale 1,044 _ 1,044Investments in associates 3,476 - 3,476Investment property - 47 47Intangible assets - 1,969 1,969Property and equipment - 130,808 130,808Current income tax asset 855 - 855Other assets 16,355 37,409 53,764

Total assets 1,799,415 617,201 2,416,616

LIABILITIESDue to customers 1,549,992 124,864 1,674,857Other borrowings 42,727 136,306 179,034Other liabilities 17,219 - 17,219Deferred tax liabilities 2,923 - 2,923

Total liabilities 1,612,862 261,171 1,874,033

Gap 186,553 356,030 542,583

58




31 December 2015

ASSETSCash and balances with National Bank Current accounts and deposits with banksFinancial investments, debt securities - held to maturity Loans, netFinancial investments, equity securities- available-for-saleInvestments in associatesInvestment propertyIntangible assetsProperty and equipmentCurrent income tax assetOther assets

Total assets

LIABILITIESDue to customers Other borrowings Other liabilities Deferred tax liabilities

Total liabilities

Gap

Up to 12 monthsMore than 12

months Total

528,344 - 528,344

356,409 - 356,409

271,678 293 271,970467,634 399,218 866,852

1,044 - 1,0443,455 - 3,455

- 47 47- 2,426 2,426- 118,098 118,098

1,345 1,34510,412 65,701 76,113

0

1,640,321 585,782 2,226,103

1,424,732 116,383 1,541,11542,890 145,306 188,19610,033 - 10,0332,784 - 2,784

1,480,439 261,689 1,742,128

159,882 324,093 483,975

59


37. Segment reporting

A segment of activity is component of the Bank which engages in business activities which may generate income and incur expenses, whose results are examined periodically by Bank’s decision factors with the purpose of allocating resources to segments and evaluating their performance and for which separate financial information is available. During 2016 and 2015 the Bank performed bank transactions that were provided only on the Moldovan market. Management considers that the inherent risks and benefits of banking activity do not differ significantly between clients’ categories as well as between different geographical regions, and therefore does not require the need for separate reporting on segments that will provide some additional benefits. The Bank does not monitor the activity on different segments because it considers it less relevant to the internai decision making process. The results are examined by the Bank only at Bank level, as a unique segment. Please refer to Note 6 for the structure of the loan portfolio and Note 14 for the deposit structure. Decision about segment reporting is made by the management of Bank.

38. Subsequent events

No subsequent events took place.

60

Documents

BC ENERGBANK SA Financial Statements For the Year Ended 31 ...energbank.com/data/reports/2016/@Rap_audit_Sit_Fin_CONS_2016_ENG.pdf · str. Grigore Ureche Nr. 69 MD-2005 Chişinău